CTA Case No. 2746 (Decision)

q<, P f lBl , , , OF "Jlll! rlHLJPPI'l}'~~ :-OUP.T Of' TAX APPEALS / RFH CORPORATION 1 C.T.A. CASE NO. 2 7 4 6 Petitioner, - versus - COI:v1MISS lONER OF CUSTOMS, Re spondent. X- - - - - - - - - - - X DE C I S I 0 N 'r his is an a ppe�al from the� dec�i si on of the: Commissioner of Custom s dated September 4' , 1975. affirming that of the Collector of Custom s imposing an additional c u stoms du ty and advance sales tax , in th e amount of ~59,021 . 00 and P3,689. 0 0 , re spect ivel y , on th e 3 00 bag s of Ethoxyquin Powd er , de:c:lar e d by petitioner unde r Entry No. 108751-74 and cl ass ified under Tar iff Headin g No . 2 9. 35 at 10 %, bu t upon ex ami nation a nd appraisal was finally r ecla ssifie d by respomdent un de r Tariff Heading No. 38.19- B at 50% ad valorem. The facts are not in dispute . It appears that petitioner RF'M Corporation import e d into t he Philippin es Ethoxyquin Powder on November 25 , 1974 contained in 300 bags: on board th e ves s.e:l "Yushin Maru" fr o m Yokohama, Japan, under Import Entry and Int er nal Reven ue Decla- ration No. 1Q8 7 51 and wi t h Regis try No . 2023. As com- puted in the Impo rt Ent~y an~ Internal Revenue Decla- ration at 10 % ad ~alorem under Tariff Heading No. 29.35 263

DECI SI ON - CTA CASE NO. 274~ - 2- of the Tariff and Customs Code , and under an Order of Payment , the c ustoms duty , sales tax and Import Wharfage tax in t h e total amoun t of ~24,293.00 was paid by petitioner as s hown by Cen tral Bank Official Receipt No . 279549. After payment of the afo r esaid taxes and Deli- very Permit No . 37 6 089 had been i ssued , howe ver, the Customs appraiser re-classified the shipment of Ethoxyquin Powder and made� it fa ll under Tariff Beading No. 3,8 .19 at 5J0% ad valort~�m . On the basis of the re - classification of the shipment in question, additional import duty of ~59,021.00 and advance sales ta x of ~ 3,68 9.00 were asse ssed a nd imposed thereon. Petitioner paid under prote�st said amount on March 12, 197~ under Official Receipt No. 60286 . (Exhs . "A" and " B" , pp. 7 & 8 respectively, CTA rec .) On March 2 4, 1975, petitioner wrote the Collector of Customs of the Port o f Manil a a l ette~ r p1rote sti n9J the irnpo s.i tion of additional import duty in the sum of ~5>9,021.00 and advance sale s tax of P 3,68 9 .00 on said s:hipme nt (Exh . "C", pp. 9-11, C'I'A rec:.) whic:h letter was al le91ec.U y r.e'ceived by the: Co1lector o f Cu s toms: on March 2 5 , 19 75> . The Collector of Cu stoms rendered a decision on May 20, 1975! .dir~missing the: pro test of petitioner , a copy o f wh ic:h was alle:gedly ~erved on pe:t .i tion er on

DECISION - CTA CAS E NO. 2746 - - ), June� 2, 1 9 7 S. (E:-r. h . "D", pp. 12-14, CTA rec:.) On app eal made by petitione1, the Commi ssioner of Customs r endered a dec i s ion on September 4,, 197:� (Exh . "D -2" , pp . 16�-1 7, CTA re:c: .) af f irming that of the Collector of Customs and was r eceived by petitioner on September 8 , l97 5l . Hence, this ap peal to this Court. The sole issue to be resolved is wh et he r or not subject ethoxyquin powd er is. a compound fal lin g, und e .lf Tariff He ading No. 2 9.3,0, s ubj ec t t o d u ty at 10 % ad valorem , or a mixture falling under Tariff Heading No . 38.19B, at SO% ~d valo rem. Petitioner claims that subj ect importation is a c:ompoun d since th e re: wa s; no c:h e,mic:a l blending in the mixtur e of ve rmiculite and ethoxyquin liquid. It is asserted that while there is here a physical c hange , the compound however remained unchanged. R spondent , on the o t h er hand, ma i ntain s th e opposite view. He insists that ethoxyquin powder is a mixture a nd should be c~assified und e r Tariff He a di ng No. l8.19B at ~ 0% ad valorem as "che mi cal pro du cts xxx not else\'lhe�re speGified or included . " We find th e view of r espond ent wel l ta ken . The noun mixtu re is defined as that which is mixed or mingled o r a mass or c ompound c onsisting of different i ngr edients blende~d togethe�r. ( 2 7 ~lords and Phr a�?-es 26~

DECISION - CTA CASE NO. 274~ - 4- 409 ) ~ Ethoxyquin powder, the shipme nt in question, is compo s ed of� a mixture of ethoxyquin a n d mineral powd er or vermic ulite as diluent, a nd, hence, s hould be classi- fied under Ta r iff Heading No. 38.198 at 50% ad valorem "a s chem i cal p.roduc�ts xxx.: n o t el se wh e r e spec i fied or included". Ethoxyquin in its pure state i s a viscous liquid and is a pure c:hemical compou n d, while� ethoxyquin powder is. not a pure� chemical comp ound. That e thoxyquin powder is a mixture was admitted by petitio ner's own witness, Oscar Enriquez, who testified (t.s.n., Ma y 10, 1977, pp.27-29 ) _on cros.s . e~x.arni n ation thus- Q. Just one or two re�cr.oss.-examination questions. Now , you admit, Mr. Wi tne'ss, that there was a physical change when this plain ethoxyquin and ve:rmic.uli te powder were mix.ed tog:ethe�r, is i t no _t? A. Th e re was �; a physical chan ge of the ethox:y quin liquid. Q. And thi s is due to the mix t ure of the plain ethoxyquin a nd vermiculite powder, is it no~? A. Yes.� Q. And , in fact, as pointed out by your c ounse l, there was extracted certain substance which you termed as plain ethoxyq uin , and this clearly s hows that ther e was a previ ous mixture so that yqu were able to extract this ethoxyquin from the etho� yq uin powder , is it not? A. Yes. 26 l>

DECISION - CTA CASE NO. 2746 - s- '-. Q. This plain ethoxyquin includes, claimed to be i mported separately, is a chemically separate organic corn- pound, is i t no~? A. Vermicul i te powder. Q. It is compound? A. It is an inert material. Q. I t is a cornpoun~? A. That is a compound. Q. As compound, inert compound. And when these two compounds were mixed together you formed a mixture, is it not? You created, or the re- sult ~hereof is a mixture? A. Mixture. The addition of the diluent is not for convenience and ease in handling, nor acts as a preservative or stabilizer, but rc;ther for ease in the manufacturing process in the preservation of animal feed. (Ex h. I, Resp . p.3.0, Customs r ec . ) We cannot adhere to petitioner's gratuitous state- rnent that there was no chemical blending in the mixture of vermiculite and ethoxyquin liquid. Precisely, the purpose in mixing ethoxyqu in 1 iqu i d and mineral pm-1der: or vermiculite as dilue nt i s foE the easy mixing and even distribution of the powder with the ?nirnal feed. Eve'n petitioner hims e lf admits that the reason r1>1hy it imports ethoxyquin in powder form is that it is easier to mix and to ev~~ distribute the powder wi t h the 2C 'I I

DECISION - CTA CASE NO. 2746 - &- animal feed (Memo of Pet., p. 1~3, CTA rec. ) ~thereby bolstering .the stand of respondent that it is not a pure chemical compound. Furthermore, petitioner's witness Oscar Enriquez, not only admitted one~ but on several instances (t.s.n., ibid, pp. 17 �& 20, respectively.) .on c .ross. examination, that ethoxyquin powder is a mixture. Q. No. Yo u mentioned a while ago , Mr. Witness that there ar e three types, or three classification of substances, that is, e lement, compound, and mixture . This etho- xyquin powder which you import how would you classi fy that? Is it an element, compound, o~ a mixtur e? A. That is a misture? XXX XXX. XXX Q. Is it not true that there are three clas- sifications of matter, and the substances mainly are: element, compound, and mixture? A. Yes . Q. And yet you contend that the mixture can be compound and vice versa? A. Well, I was saying - to the best of knowledge; yes. Q. But you admit that this ethoxyquin powder that wa s imported by your company into the Philippines in the state that it was brought in is a mixture, is it not? A. Ye s . Q. Because it is a co~bination of etho- xyquin in its plain form and vermiculite which is another substance intimately jumbled to- ge t her, is it no~? 26d

DECISION - CTA CASE NO. 27 4 6 - 7- A. Yes . Moreover , i n a laborator y analysis of ethoxyquin imported by Sarmi n to Agri cultu ral and De velopment Corporation , it h as been s hown that said chemica l ha s been class ifie d and subject to duty unde r Tariff !leading No . 38 . 19-B at th e rate of 50% a d valor em . (E xh. 2 , Resp . , p. 3 0 , Cu s toms r ec .) IN VIEW OF THE FO REG OI NG , the decision appealed from is hereby affirmed. With costs a g,a i11st petiti o :1er. SO ORDEHE D. Quezon City , October '> , 1983. / \.--{2-c"'~ COt~ANTE -" ~/--;~AQU IN / As soc ia te Judge WE CON CUR: a..,~mv AMANTE ~z~;-� Presiding Judge 7tO Pr~~. i&L YES ~1. /~ Associate J ud g: e 2G J