CTA Case No. 4679 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS Quezon City VARIOUS FOREIGN CURRENCIES WITH A TOTAL CONVERSION OF SIX MILLION FOUR HUNDRED FORTY EIGHT THOUSAND FOUR HUNDRED NINETEEN & 52/100 PESOS <P6,448,419.52> LO CHI FAI, Petitioner, - versus- C. T. A. CASE NO. 4679 THE HON. COMMISSIONER OF CUSTOMS, Respondent. K- - - - - - - - - - - - - - - - K o �.:. ~- _J;_ s _ x_ g _ ~ This is a petition for review of the decision of respondent Commissioner of Customs <Case No. 9 1-03)' dated October 21, 1991' affirming the decision of the District Collector of Customs, NAIA, in Seizure Investigation (5. I.) No. 1253-86. The records show that on July 9, 1986, claimant La Chi Fai, a Manila visitor from Hongkong and holder of a British passport No. A-922623, was a departing passenger on Philippine Airlines Flight PR-300 bound for Hongkong, was intercepted by Customs and PAFSECOM personnel in

- DECISION- CTA CASE NO. 4G79 - 2- possession and about to brin g out of the country various currenc ie s ( in check s and cash> as invento rie d in a Seizure Receipt prepared by Eduardo Pike, Cus toms Examiner, and checked and verified by Rt t y. Rustum Pacardo, Flight Supervisor at the Customs District Office, NRIR, on even date, to wit: CURH E NCY ... . . . . ������ ... �-��~ AM_O!Jf\II Japan ese Yen y 32,800 , 000 . 00 Swiss Franc 5,900. 00 Australian Dollar SW Fr Singa p or.e Dollal�' 17 ,4 2 5.00 De u t s c h e Ma~- ~< (:!$ 9 , 9 4 5 . 00 Canadian Dollal- Hongkong Dollar S$ 18,595 . 00 HFL Guilde r 01'1 13 , 330. 00 French Fr'C:\nC C$ 15 , 530 . 00 US Doll ar- En gli s h f'ound HK $ t..Jo . oo Malay s ian Dollar HFL 5 ,850 . 00 Fl 73 , '350 . 00 US $ 5 , 3 18. 00 tH l't, 750 . 00 Va rious F o reign Curre ncy Checks Au s t ral ia n Do ll ar A$ 7 , 750 . 00 Bri ti s h Pound 700 . 00 U. S . Dol l ar US $ Canadian Do ll at- C$ 17 , 530 . 00 990 . 00 The total a mount of these foreign currencies in the posses sion of passenger Lo Chi Fai was valued in peso s at P6 ,448,419. 52 per conversion made by the Ce nt ral Bank. The above-listed foreign curre ncie s we re deposited at the Central Bank.

- DECISION -- CTA CASE NO. 4G79 - 3- Per report and initial investigation by customs e><aminers, the passenger "could not show any valid au thorization to take out the currencies he had in his possession." In view of the apprehension of Lo Chi Fai, a corresponding warr~ ant of seizure and detention <S. I. No. 1 253 - 85) was issued by the Acting Collector of Customs on these various currencies in violation of Central Bank Circular No. 1028 in relation to Section 2530 (f) of the Tariff and Customs Code. In the meantime, the National Customs Police referred this matter to the Office of the City Fiscal of Pasay for "proper disposition and guidance." On July 1 0 , 1985, an Information was filed against Lo Chi Fai for violation of Section 5, Central Bank Circular No. 950 before the Regional Trial Court in Criminal Case No. 85-10125- P. On the part of the Bureau of Customs, the District Collector initiated forfeiture proceedings in Seizure Identification <S.I.> No. 1253- 85 versus wha t i s now known as ' "Various Foreign Currencies with a total conversion of Si>< Million Four Hundt~ ed Forty -E ight Thousand Four 111 -

- DECISION -- CTA CnSE NO. ~Gyg Hundred Nineteen and 52/100 Pesos <P5,448,419.52) , Lo Chi Fai, Claimant." In an undated Decision <the notice of Decision dated September 25, 1990) , the D i strict Collector of Customs, NAJA, "ordered and decreed that the above - described currencies covered by Seizure Identific a tion No. 1253- 85 be, as it is hereby decl ared , forfeited in favor of the government, the same to be disposed of in accordance with law." Claimant, through counsel, appealed the Decision of the District Collector of Customs to t 'he Commissioner of Customs in his letter of October 25, 1990. In the review conducted by the Commissioner of Customs in said case (now denominated as Customs Case No. 91 - 03), the then Commissioner Salvador Mi son, affirmed in -t�-�o����--t�-��o���-��� the Decision of the District Collector of Customs, NAJA, finding "no t"eas on to disturb the decision of the Distri ct Collector of Customs, Ninoy Aquino International Ai r port Petitioner timely filed the present Petition for Review on December 19, 1991. Before this Court, respond e nt requested for several extensions within wh ich to file his

- DECISION- CTR CASE NO. 4679 - 5- Answer. The last request for extension, dated March 13, 1992, but filed on March 17, 1992, was filed beyond the time within which respondent was to have filed his Answer <March 13, 1992>. The Court, in its Order of March 25, 1992 denied said motion. Nonetheless, respondent, without leave of court, filed ,an Answer on March 30, 1992 (a date even beyond the time requested in his last Motion for Extension of Time to File Answer, dated March 13, 1992). On April 4, . 1992, respondent filed a Motion for Reconsideration of the Order denying his Motion for Extension of Time to File Answer, dated March 13, 1992, alleging that he already filed his Answer on March 23, 1992 or within the extension of ten ( 10) days requested and prayed that the Answer filed be admitted. Petitioner opposed the Motion for Reconsideration stating, among others, that the motion is P .~9.. . that the Court no less than 45 previou s ly granted respondent days to file an Answer and what was ostensibly produced was an Answer of "four pages of general averments." Petitionet~ then prayed t h a t the admissi o n o f the Answer be denied and expunged from t h e re c ords." The Co u r t in its Resolution

-� UEC IS 1ON C rn CriSE NlL tf( ) 1'"1 . 6� of N ovember� t 3'32 , denied the Moti on for Recon s idet-- at ion . Du rin g the h ear i n g of this ca se on January 14, 1'3'33 fo r petitioner to p res ent hi s evidence , he orally mo ved that t~espondent be decl ared in / ~t'e fa u 1 t . This was outright g ra nted by the Court. Petitioner then manifested that he will just adopt the e Hhibits and pl~ oceedin g s in the administrati ve le ve l as hi s ev idence in -- c h ie f. The p etitioner 's motion and gave petitione r days wit hin which to file his memo ran d um in support of hi s case. Curiously, on thi s hearing d a te, there was no appea ra nce of counse l for respondent in s pite of due not ice. N e itheY' did res pondent at any time thel~ e after f i l e any pleading to l i f t or set as ide the Order of def a ult. "An answet" filed after the expiration of the reglem e nta ry p er iod should be i d s l~ egarded o r deemed not pre sen t ed and the defenses i nco rpur-�at e d therei n shou ld be consi d ere d as non - existent. De fend.3n t cannot escape the consequen ces of his default by filing an answer CJ. f t er~ t he e><pit~a tion of the re glementary period, u nles s it is filed with lea ve of court and before th e e ntr y of the default, otherwise defendant

- DECISION- eTA CASE NO. 4679 - 7- would be entitled to prove the allegation of his answer notwithstanding that he is already in default." (49 C.J.S., 245; Leus and Bautista vs. Mart in, 43 0. G. 1572). As adverted to earlier, the last motion of respondent for e><tension which he filed on March 17' 1992 was already beyond the e><piry date for him to file his Answer <due on March 13, 1992>. This motion was denied by the Court in its Order of March 25, 1992. Respondent nonetheless filed his Answer on March 30, 1992 without leave of Court. It will be noted that the date of filing ! of his Answer was even beyond the time requested even if his last motion was granted. The denial of respondent's motion for reconsideration followed and subsequently the order of default on motion of the petitioner. When a defendant is declared in default (a) he loses his standing in or is considered out of the court, and consequently cannot , appear in court, adduce evidence and be hea r d; and (b) he is not entitled to notice of the proceeding until the final termination of the case <Lim Taco vs. Go Fay, BO Phi 1. 155>. A defendant who has been declared in default loses his standing in court as party litigant.

- DECISION �- crn cnsc No. ~G 7~ - 1:3 Before the o r d P. t' of default i s vacated, said defend a nt ha s no right to expect that his pleading ~-.Jould be acted upon by the court, nor has the right to be heard or file memorandum on the case <Tan v s- Dimayuga, et. a 1. No. L - 15241, July 31' 1<35 2 ; Lim Taco vs Go Fay, 80 Phi 1. 155). Claimant, Lo Chi Fa i, is no stranger to the country in the s ense that h e has been in and out of the Philippine s on s e ver al occasions. He is a busines s man fy� om Hongkong engaged in the garment business. He is a holder of a British passport. With known business associates, namely, Sze Kai Kwan, Lee Hsiang Ping, Kobayashi Nabuo and Wakita Nabuyul-<i, they decided to form a partnership to go into an a g r i -- b u s i n e s s venture in the Philippines. As pat' t of their partnership agreement for � g e d i n 1-1 on g k on g , each part n e r wa s t o contribute a max i mum of U.S. $200,000.00 . On Apt~ i 1 2 , 1<385, Lo Chi Fai brought to the Philippines fifty thousand u.s. dollars <US $ 50 , 0 00) and eight million five hundred thousand Japanese yen (�8,500,000.00) as evidenced by hi s Ba ggage a nd Currency Declaration F orm No. 84 ld58 of e v en date. On May 4, 1<385, he a gain brought into the country thirty nine 1 1 ) -:.

- DE:CISIDN - CTA COSE NO. ~G1 9 -- 9 -- thousand U.S. dollars <U.S. $39,000.00) and four million Japanese yen C�4,000,000.00> as evidenced by Central Bank Declaration For� m No. 05048. On arlo the r trip to t he Philippines on June 28, 1985 , he b r ought in six million S i H hundred thous a nd Jap a n~se y e n C�5,500,000.0 0 ) as decla red by him in Centra l Bank Currency Declaration For~ m No. 05345 . A 1 1 i n a 1 1 , L o Ch i Fai brought into the cou ntry eighty nin e thousand u.s. dollars (u.s. $89,000.00) and nin etee n million on e h u n d re d t h o u s a nd i n Japan e s e c u ,~ y� en c y C�19, 100,000 . 00> . Sze Kai Kwan, a business as s ociate of Lo Chi Fa i, came to the Philippine s on Ma�-~ ch 2 8 , 1985 and brought wit h him th i rty thousand U. S. dollars (u. s. $ 30 ,000.00) and eight million Japanese yen C�8,000,000. 00> as evidenced by Central Bank Currency Form No. 0421 9 . He entrusted these amounts which he brought into the to Wakita designated manager of their business venture in the Philippines. Lee Hsi a ng Ping, the man in the busine ss venture, i s a lso a businessman from Hongkong and a business associate of Lo Chi Fai. H e ha s been in and out of the Philippines. On Apri 1 2 3 , 1985, he a nd his w ife, Lily Sui ,

- DECISION - eTA CASE NO. 4 679 -- 10 - brought to the Philippines the following foreign currency: Le e Hs iang Ping - s iMty five thousand U.S. do l l cw s <U . ~) . i� 5 5 , 000 . (' 0) d e c 1 at��e d u n de t" C en t t' a l Ban I{ L u t" t' en c y De c l a t"a t i on r or m No . 0't 753 . Lily Sui - s i Mty th ousan d U. S . doll at�s <U S S50 , 000 . 00 ) as show n b y Cent ra l Bani< Currency Declat"at ion Form No . 01~7 55. Kobayashi Nabuo is a Japanese busines sman from Tokyo, Japa n. He is one of the business associates and long-time friend of Lo Chi Fai. He first came to the Philippines on December 30, 1985. Detailed hereunder are the foreign currencies in cash and in traveller's checks which he brought to the country on various dates: DATE CURRENCY CB DECL ARA TION Feb. 27 '85 FORM NO. S i><ty - one thou sa nd 03748 sev en hundred five U. S . do ll ar� s <U. s . $51 , 705 . 00 ) Three mill ion fi ve h un d re d fifty t hou - san d Japanese yen <�3 , 550 , 000 . 00 ) Fourte en thou sand 0392 9 s 1 >< h u n d r � e d U. S . dol l cns <U.S. 4(1~, f:/ H) . 0 0) 1 , ") ::-�

- DECISION- eTA CASE NO. 4679 -11 - Fourteen thousand five hundred U.S . dollars in traveller's checks <US$14,500> Four hundred thousand Japanese yen <�400, 000 . 00> . Mar. 19 '85 Fifty thousand U.S. 04071 dollars <US$50,000> Eight thousand five hundred U.S. dollars in traveller's checks <US $8,500) Mar. 21 '85 Fifty thousand U.S. 04108 dollars <US$50,000> May 15 '85 Sixt y five thousand 05316 U.S . dollars <US $55,000.00) Five thousand One Hundred Malaysian dollars (M$5, 100> Nabuyuk i Wakita, a Japanese national and partner of Ko bayashi Nabuo in a nightclub � business in Tokyo, is a long time friend of Lo Chi Fai. He was a l so brough t in to do business in the Philippines. He came to the Philippines on several dates bringing with him various �' foreign currencies to be invested in the country, to wit: DATE CURRENCY CB CURRENCY DECLARATION NO. OCT. 21 '85 Fifteen thousand U.S. 01772 dollars <US$1 5 ,000) = 1 1 .~,

-DECISION- eTA CASE NO. 4679 -12- NOV. 9 '85 Twelve thousand three 02078 hundred US dollars <US$12,300.00) NOV. 21 '85 Fourteen thousand 02305 US dollars <US$14,000> DEC. 05 '85 Fourteen thousand 02535 U.S. dollars <US$14,000.00> Three hundred forty Thousand Japanese yen <�340,000) DEC. 28 '85 . Twenty thousand U.S. 02866 do 11 ars <US$20, 000) APR. 02 '86 Six thousand U.S. 03520 dollars <US$6,000) Three million Japanese yen <�3,000,000 ) JUN. 02 '86 Thirty thousand 03543 U.S. dollars <US$30, 000. 00> To summarize, Lo Chi Fai and his business colleagues, namely, Sze Kai Wan, Lee Hsiang Ping, and his wife, Lily Sui, Kobayashi Nabuo and . Wakita Nabuyuki brought to the Philippines on various dates foreign currencies which were all properly documented totalling u.s. $620, 205, 000; Japanese yen �39,390,000.00 and Malaysian dollars M$5, 100.00. Apparent 1 y, the projected agri-business venture of these foreign businessmen did not push through allegedly due to the then unstable

- DECISION- eTA CASE NO. 4679 - 13- political situation in the country which was marked by an aborted coup d'etat that took place on Ju 1 y 6, 1986. The business partners then decided to pull out and in the process bring out of the country the remaining foreign currencies they brought to the country on various dates. Lo Chi F ai, the principal promoter of this aborted business venture) was bringing with him various curre.ncies which he himself brought to this country and that of his business associates when he was accosted and apprehended at the Manila International Airport while waiting for his flight to Hongkong on July 9, 1986. Admittedly, Lo Chi Fai did not surrender his Currency Declaration Forms Nos. 05048 and 06346 to Central Bank authorities but he later on did at the time of his apprehension. The only issue to be decided is whether or not the subject foreign currencies with a total conversion of si>< million four hundred forty eight thousand four hundred nineteen and 52/100 <P6,448,419.52> in Philippine pesos violated Central Bank Circular Nos. 960 and 1028 to warrant forfeiture in favor of the government pursuant to Section 2530 (f) of the Tariff and Customs Code, as amended.

- DECISION- eTA CASE NO. 4679 - 14- It is not disputed that Lo Chi F ai a nd his busines s c onfederates bro u ght i nto the country on several o c casions v ar io us foreign curr e nc i es which we r e properly do cu ment ed in Central Bank Declaration Form s and one Ba ggage and Cur rency Declarat i on Form and mar ked a s E xhibit s i n the seizure proceedings before the Collector of Customs . Their gen ui nene ss , authe n t ici ty and validit y we r e e v en co nf ir me d by rep rese ntati v es of the Cent ral Bank who t e s t ified dur in g the seizure p r oce e d i ng s. T he y are su mm arize d a s follows and were co r r espondingly mar ked as exhibit s during th e seizure pr o ceedi ngs: CENTRAL BANK CUR RENCY DECLARATION NO. No. 05048 <Exhibit 1) No. OE>34E> <Ex hibi t 2> No. 04219 <E xhi bit 5-R > No . 047>8 <Exh i bit 5-P> No . 04765 <Ex hi b it 5 - Q) No. 03748 <Exhibi t 5-H > No. 03929 <Ex hi bit 5 - G> No . 0 4 071 <E x h ibi t 5 - F > No . 04 108 <E x hibit 5 - E> No. 0531> <Exhibi t 5 - D> No . 01772 <Ex hibit 5 - 0) No. 02078 <E xh i b it 5 - N> No . 0 23 0 5 (Ex h ibit 5- M> No. 02595 <Ex hi bi t 5- L> No. 02 86> <E x h i bit 5-K> No . 03520 <Ex hib it 5 - J) No. 03543 <Ex h ibit 5- I> The ma t t e r o f t he Bagga ge and C ur ren cy Declara ti o n N o ~ 8 4 41 58 <Ex h . 5-B>, attributabl e c, .~)

- DECISION- eTA CASE NO. 4679 - 15- to Lo Chi Fai was in effect authenticated as valid by Customs Examiner Celina de la Roca who testified during the Criminal Case against Lo Chi Fai <Case No. 85-10125-P> which form part of the record of this case. The seizure proceedings is anchored on violations of Section 52 of Central Bank Circular No . 1028, in relation to Section 2530 (f) of the Tariff and Customs Code of the Philippi nes. Section 62 of CB Circular No. 1028 provides thus: "Sec. 62. for_gi_QD.. Curr_~!1.�.Y.� No person sha ll take out or transmit or attempt to take out for eign exchange in any form out of the Philippines, direct ly, th r o ugh other persons, through the mails, or th rough international carriers except with specific authority by the. Central Bank or when allow ed under existing international agreements or by these rules." <underscoring supplied> The section following , that is, Section 53) refers exclusively to tourists/non-resid ents which provides: a. Tourists and no n -resident visitors may take out or send out from the Philippines foreign currency in amounts not exceeding such amounts of foreign exch ange brought in by them. For the purpose of establishing the amount of foreign exchange brought in, tourists, or non- residents, or temporary visitors bringing with them more than US $3,000.00 or its equivalent in other foreign currencies, sha l l declare their fo rei gn exchange in the form prescribed by th e

- DECISION- eTA CASE NO. 4679 -16- Central Bank at point s of entry upon arrival in the Philippines." (under scoring supplied) Section 2530 (f) of the Tariff and Customs Code provides that: Section 2530. Property Subject to Forfeiture under Tariff and Custo�s Law. X X X X <f> Any article the importat ion or exportation of which is effected or attempted contrary to law, or any article of prohibited importation or exportation, and all other art i cl es of prohibited importation or exportatio n, and all other articles which, in the opinion of the Collector, have been used, or were entered to be used as instrument in the importation or exportation of the former. On the record of the case, it has been indub itably established that: 1> Lo Chi Fai , together with his busi nes s confederates Sze Kai Kwan, Lee Hsiang Ping with his wife , Lily Sui, Kobayashi Nabuo, Wakita Nabuyuki entered the Philippines on various dates as transient visitors bringi ng with them foreign currencies which were all properly documented upon arrival; 2> La Chi Fai and his business collea g ues came to the Philippines for a legitimate p urpose and that is, to establish a business and to invest the monies they brought i n for such purpose; 3> That there is no evidence on record that at any time prior to July 9, 1986 when Lo Chi Fai was apprehended at the Manila International Airport on a flight back to Hongkong) did any of them, that is Lo Chi Fai himself, Sze Kai Kwan, Lee �Hsiang Ping a nd his wife Lily Sui, Kobayashi Nabuo, Wakita Nabuyuki, send or bring out any foreign currency they brought in as documented. It

- DEC I S I ON- CTA CASE NO. 4 679 - 17- is likewise of record as reflected in their passports that these businessmen, tran sients as they were in this country, hav e b een in and out of the country on various da t es. 4) That the total Philippine peso co n version of all foreign currencies confiscat ed from La Chi Fai which he was bringing out of the country for himself and his bus i ness partners on July 9, 1986 is much less t h an the total Philippine peso conversi on of the t._QJ!~.l.. foreign currencies legally brought in by Lo Chi Fai, Sze Kai Kwan, Lee Hsiang Ping and his wife, Lily Sui, Kobayashi Nabuo and Wakita Nabuyuki ~ut together. That Sec�t ion 53 of CB Circular No . 1 028 does n o t specific lly provide how nd in what manner such tourists o r non - resident visitors from the Philippines forei gn e><change they brou gh t i n legally. The o n ly condition i s that th foreign currency brou ght in, which i s more t h an $ 3 ,000.00 or its equivalent i oth r for ign c urrency, must be properly d c l red upo n entry end documente d i n t h e fot"m prescribed by the Central Bank an d what is brought out does not e><ceed the a mounts b r o ug h t in. Pet i .t i oner and his associates have ass i duously complied with these condition s and subs t antially comp l ied with a l l req u ir ements p r o vided for by l aw and -regu lations. Th e ordeal of Lo Chi Fai did not e n d wi th hi s a ppr e h e n sion and administrative se i z ure p roc e edings ini t iated by the Bureau of Custo ms .

- DECISION- eTA CASE NO. 4679 - 18- As adverted to, Lo Chi Fai was charged criminally before the Region al Trial Court in Pasay City in Criminal Case No. 85-10125-P for "viol a tion of Section 5, Central Bank No. 950 . " In a judgment rende red by Judge Baltazar Dizon on September 25, 1985, accused Lo Chi Fai was acquitted of the charge (pp. 534-557, Customs record >. In a supplem ntal Memorandum filed by petition er, through couns e l, he cited two current r eso lutions of res pondent which are "similar" to the present case . 1) Execution of a Decision of the Court of Appeals in CA-GR Sp. No. 24039 promulgated on July 1o, 1991 wherein the Court ordered the return to claimant Ro bert Warren Nielsen or his representative the sum of Fifty Three Thousand ($53, 000) u.s. dollars; 2> Implementation of a Decision of the District Collector of Customs , dated Dece mber 17, 1991, in NAIA Seizure Identificatio n No . 037 - 88 as affirme d by the Commissioner of Customs in his Decision, dated January 7, 1992, directing the return of foreign currencies in the total convert ed sum of Ele ven Mi l lion Nine Hundred Twenty Five Thousand Six Hundred Sixty Pesos <P11,925,660.00) less U.S. dollars $78,000.00 to Brian Gerard On g. What make these ci ted cases similar to the p resent ca se is the fact that 1 ) th e persons involv ed are transients ; 2> that they were able to pr ove t hat the foreign currenc ie s s ought to be

- DECISION- eTA CASE NO. 4679 - 19- brought out of the country were br,ought in by them; and 3) that these foreign visitors were all acquitted by the Regional Trial Courts. WHEREFORE, having firmly established on record that no violation of Central Bank regulations and existing laws was deliberately committed by Lo Chi Fai in taking out foreign currencies be�longing to him and his business partners and which they brought in legally, default judgment is hereby rendered granting the relief applied for by the petitioner, thereby reversing the Decision of the Commissioner of Customs, dated October 21, 1991, and, as prayed for, ordering the release of the confiscated foreign currencies per acknowledgement receipts issued by the Central Bank of the Philippines, or its equivalent in Philippine pesos in the amount of P5,448,419.52, based on the conversion rates as computed by the latter, in favor of petitioner. No pronouncement as to costs. 1 , () f...

... - DECISION- eTA CASE NO. 4679 - 20- SO ORDERED. Quezon City, Me t r o Man i l a , 25 November 1993 . WE CONCUR: --L_/' ,;),_.' tl-. ~Q.G:~ !:AMON 0 . DE VEYttf ERNES TO D. ACO I Ass ociat e Judge J udge / C RT l: FICATION I hereby certiry that this decision was reached arter due c onsultation among the members of th e Court of Tax Appeals in accordance with Section 13 , Article VIII, or the Constitution. Q~Q.~ ERNESTO D. ACOSTA Presid i ng Judge Court of Tax Appeals