CTA Case No. 2788 (Decision)

,J'lPUDUC (No.V THS PHILJPPINit~ ~r:.�.?.l~ OF �rAX APPEA.LS U:"~ON CJTY PROCTER & GAMBLE PHILIPPINE MMWFACTURING CORPORATION, Petitioner, - versus - C.T.A. CASE NO. 2788 COHHISSIONER OE' CUSTOHS, Respondt~nt. X- - - - -X DE C I S I 0 N In this petition for review of the decision of respondent Commissioner of Customs dated March 9, 1976, affirming the decision of the Collector of Customs of Manila dismissing for lack of merit Manila Protest No. 9659, petitioner Procter & Gamble Philippine Manufacturing Corporation seeks the refund of the sum of ~34 , 680vOO, plus int e rest thereon from date of payment until date of refund, representing alleged overpaid customs duty and internal revenue taxes on a phipment of 5,000 bags of Soda Ash Dense. There is no controversy as to the facts of the case. As alleged by petitioner in its petition for review and adm itted by respondent in his answer: 1. Petitioner is a corporation duly organized and existing under the laws of the Republic of the Philippines. Respondent Commissioner of Customs

DECISION - CTA CASE NO. 2788 - 2- may be served \'lith processes at the Bureau of Customs, Port Area, Ma n ila. 2. In April 1975, 5,00 0 bags of Soda Ash Dense (200 metric tons) _consigned to petitioner were landed in the port of Manila and declared under Entry No. 33511, series of 1975. 3. Petitioner'~ importation , per supplie r '~ invoice and the Consular Invoice of Merchandise covering the same, had a valuation of US$37,606 . 16, or US$188.0306 per metric ton (FOB Japan). Accord- ingly, petitioner paid to the Bureau of Customs the total sum of ~59,753.00 in duties and taxes Said payment was covered by Official Receipt No. 62797, dated April 10 , 1975. 4 . B~fore final liquidation, however, the Bureau of Cus t oms reappraised petitioner's shipment and, app l ying the Bureau's. RVIC No. 4-438 dated April 14, 1975, assessed pet~tioner's shipment at US$307.00 per metric ton, or a total of US$61,400.00 for the entire shipment. Petitioner was thereafter required to pay P34,680.00 in additional duties and taxes. Under protest, petitioner paid to the Bureau of Customs the said sum of ~34,680 . 00. The payment was covered by Official Receipt No . 63747, dated April 21, i975. 120

DECISION CTA CASE NO. 2788 - 3- 5. On April 23, 1975, petitioner formally protested the payment of additional duties and taxes on its importation. The pr otest was docketed as Manila Customs Protest Case No. 9659. b. The Collector of Customs, in a decision dated Jun~ 20, 1975, dismissed petitioner'~ protest for alleged lack of merit. 7. Petitioner seasonably appealed the Collec- tor's decision to the Commissioner of Customs. In a decision elated March 9, 1976, the Commissioner of Customs affirmed in full the Collector'~ decision. Petitione: received notice and copy of the Commis- sioner'~ decision on March 24, 1976. 8. In determining the dutiable value of petitioner�s. importati.on, � the Collector of Customs relied on the Bureau's RVIC No. 4-438, altogether disregarding the value or price of petitioner's. shipment as co~taine d in the supplier's sales invoice as well as that indic~ted in the Consular Invoice of Merchandise covering the importation. 9. Under Section 201 of the Tariff and Customs Code of the Philippines, as amended by Presidential Decree No. 34, the dutiable value of an imported article subject to ad valorem rate of duty shall be based on the "home consumption value" of such article. The same provision defines "home consumption value"

DECISION CTA CASE NO. 2788 - 4- as the "value or price declared in the consular, commercial, trade or sales invoice." In his answer to petitioner'~ petition for review, respondent alleges by way of affirmative and special defenses that: 5. The only issue posed for resolution in the instant appeal is the determination of the correct home consumption value (HCV) _of the ship- ment in question, whether under RVIC No. 4-438 when there exists a reasonable doubt as to the dutiable value of the imported articles declared in the entry, and which fixes the HCV thereof at $307.00 per metric ton, or on the value shown by th~ Consular Invoice which is $168.0308 per metric ton FOB, Japan~ 6. Petitioner's contentions that the dutiable value of the shipment in question should be based on the value appearing in the Consular Invoice duly autlten �ticated by the Philippine Consul and that the appraiser is duty bound to rely on the value appearing therein as the cor rect home consumption value, are untenable because Section 1405 of the Tariff and Cu s toms Code provides: "Sec. 1405. Proceedings and Reports of Appraisers. - Appraisers, shall by all reasonable ways and means, ascertain, estimate and determine the value or price of the articles as required by law, ~ invoice or affidavit thereto or statement ,9f coc:>t , or of c9.st of producfion to the _�ontrary notwithstanding, x x x." (Under- scoring supplied)~ 1 '/).. (,)-...

DECISION - CTA CASE NO. 2788 - 5- 7. The Supreme Court, applying the above provision of the Code, aptly stated: "If the Customs authority were bound by the invoice value, it is evident that they w0uld be, to a considerable extent, at the mercy of foreign merchants ard �importers x x x .�� (The Coca-Cola Export Corporation vs. The Commissioner of Internal Revenue and the Collector of Customs, Manila G.R. No. 123604, March 15, 1974 , 56 SCRA 7) . 8. Petitioner should know that the home consumption values published and circulated by the respondent Bureau like RVIC No. 4-~38 is a product of a careful and a thorough compilation of values for articles of the same nature and kind exported at a particular time and date. The parties are not in dispute on the com- putation of the customs duty and internal revenue tax (advance sales tax) ~ayable by, or the amount refundable to, petitioner as the case may be. The deci sive question to be ~esolved in this case is the determination of the dutiable value of petitioner'~ shi pme nt of 5,000 bags of Soda Ash Dense. Is it the value established by the Bureau of Customs for soda ash dense under RVIC No. 4-438 dated April 14, 1975 at US$307.00 per metric ton, as applied by respondent, or the value/ price indi~ated on the covering Consular Invoice of Merchandise as well as the supplier's sales

.. DECISION - CTA CASE NO. 2788 - 6- invoice at US$188.0308 per metric ton, FOB Japan, as contended by petitioneF? The controlling statute is Section 201 of the Tariff and Customs Code, which textually reads: Sec. 201. Basis of Dutiable Value. - The dutiable value of an imported article subject to an ad valorem rate of duty shall be based on the home consumption value or price (excluding internal excise taxes) of same, like or similar articles, as bought and sold or offered for sale freely in the usual wholesale quantities in the ordinary course of trade, in the princip~l markets of the country from where exported on the date of exportaion to the Philippines, or where there is none on such date, then on the home consumption value or price . nearest to the date of exportation including the value of all containers, coverings and/or packings of any kind and all other costs, charges and expenses i ncident to placing the article in a condition ready for shipment to the Philippines, plus ten (10) per cent of such home consumptio? value or ~rice. The home consumption value or price under this section shall be the value or price declared in the consular , commercial, trade or sales invoice . Where there exists a reasonable doubt as to the value or price of the imported articl~ declared in the entry, the correct du~iable value of the article shall be a scertained from the reports of the Reve nue Attache or Commer- cial Attache (Foreign Trade Promotion Attache)~ pursua nt u1 tnod r Re publ ic Act Num- o r y-four h ed and bered Fift sixty-~ix other Philippine diplomatic officers and from s uch other information that may be available to the Bureau of Customs . � From the data thus gathered, the Commissioner of Customs shall ascertain and establish the home consumption values of articles exported to the Philippines and shall publ i sh such lists of values from time to time.

DECISION CTA CASE NO. 2788 - 7- When the dutiable value provided for in the preceding paragraphs cannot be ascertained for failure of the im- . porter to produce the documents mentioned in the second paragraph, or where there exists a r easonable doubt as to dutiable value of the imported article declared in the entry, it shall be the domestic wholesale selling price of such or similar article in Manila or other principal markets in the Philippines on the date the duty becomes payable on the article under appraisement, in the usual wholesale quantities and in the ordinar y course of trade, minus - . (a) Twenty (20) per cent thereof for expenses and profits; and (b) Duties� and taxes paid thereon. Adverting to t he terms of the statute, it is quite clear that the dutiable value of an imported article subject to an ad valorem rate of duty, like the shipment in question which is at 10% ad valorem under Tariff Heading No. 28.42, is based on its home consumption value or price (excluding internal excise taxes)~ as freely offered for sale in the usual wholesale quantities �n the ordinary course of trade, in the principal markets of the country from where exported on the date of exportation to the Philippines, including the value of all con- tainers, coverings and/or packings and incidental expenses to placing the article for shipment , plus ten (10) ~ c~nt of ,such home cons umption value. And the home consumption value or price is the

DECISION CTA CASE NO. 2788 - 8 -� value or price declared in the consular, commercial, trade or sales invoice. Where there exists a reasonable doubt as to the value or price of the imported article declared in the entry, the correct dutiable value of the article should be ascertained from the repor t s of the Revenue Attache or Commercial A!,:tache, pursuant to Republic Act No . 5466 or other Philippine diplomatic officers and from such other infor ma tion that may be available. The Commissioner of Customs is required however to publish from time to time the horne consumption values of articles exported to the Philippines as ascertained and established fr om the data gathered. Now, t o t he case at bar . Here, petitioner in April 1975 impo rted from 0apan a s hipment of five thousand (5 ,0 0 0 ) _bags of soda ash dense for its manufacturing business which was declared under Entry No. 33511, series of 1975. The law is clear and specific. What was the market value or price at which, at the time of exportation, soda ash dense was freely offered for sale in the principal markets of Japan for exportation to the Philippines , in the usual wholesale quantities and in the ollinary course of trade? As shown in the April 3, 1975 issue of the Japan Chemical Week, the price of soda ash de nse as bought and sold or offered for sale freely in 12G

DECISION - CTA CASE NO. 2788 - 9- the t1sual wholesale quantity in the ordinary course of trade, in the principal markets of Japan on or about the date of the exportation of petitioner'~ shipment was 40 yen/kg. or US$137.40 per metric ton. (Exhs. "F" & "F-~", pp . 73-75, CTA records~ See also Exhibit "G", certified true copy of the Daily Bulletin on Exchange Rates on April 3, 1975 of the Central Bank; and Exhibit "H", certification of Amado B. Santos , tracer clerk, foreign traffic of petitioner, that the value of soda ash dense on or about the date of importation on April 3, 1975 at 40 Yen per kilogram as indicated in the Japan Chemical Week, in accordance with the exchange rate . of Yen to US Dollar per Central Bank Daily Bulletin on Exchange Ra t es dated April 3, 1975, was US$137.40 per metric ton, FOB Japan, pp. 76-77, CTA records.) And going back to the applicable law, it further provides that the home consumption value or price shall be the value or price declared in the consular, commercial, trade or sales invoice. What is the home consumption value or price of the shipment of soda ash dense declared in the consular, commercial, trade or sales invoice? The Consular Invoice of Merchardi.se dated April 1, 1975 (Exh. "A", p. 66, CTA records) and Sales Invoice dated April 1, 1975 issued by c. Itoh & Co. Ltd. (Exh. "B", p. 67, CTA / -,.. 127

DECISION CTA CASE NO. 2788 - 10 - records} ~overing the importation in question show that the 5,000 bags of sodamh dense has a "home consumption value"of US$37,606.16 or US$188.0308 per metric ton (FOB Japan). Accordingly, petitioner paid to the Bureau of Customs the total amount of P59,753.00 in customs duties and internal revenue taxes. (par. 3, Petition for Review; admitted, par. 1, Answer.) Given however that there existed a reasonable doubt on the part of the Bureau of Customs as to the correct value or price of the shipment of soda ash dense declared by petitioner, was the application by said Bureau of its RVIC (Request for Value Importation Classification) ~o. . -438 dated April 14, 1975, which fixed the home con- sumption value of soda ash dense at US$307.00 per metric ton, in accordance with law? The same applicable statute provides that, in ' such case, the correct dutiable value of the imported article shall be ascertained from the reports of the Revenue Attache or Commercial Attache (Foreign Trade Promotion Attache)~ pursuant to Republic Act No. 5466 or other Philippine diplomatic officers and from such other information that may be avai~able to the Bureau of Customs. From the data thus gathered , the Commissioner of Customs shall ascertain and establish the home

DECISION CTA CASE NO. 2788 - ll - consumption value of the article exported to the Philippines and shall publish such list of value from time to tims. Here, in the instant case, the valuation of the shipmen t of petitioner of soda ash dense was based on the established value, not on the publisbed value thereof as required by law. As clearly and explicitly stated by respondent Commissioner of Customs in his decision appealed from dated March 9, 1976 in Customs Case No. 75-117 (Manila Protest No. 9659) ~ "The Collector of Customs appraised the article on the basis of the estab- lished value for Soda Ash Dense at the rate of $307.00 per metric ton." (P. 4, CTA records.) This was cOnfirmed by respondent's witness, Ms. Noemi Rebaya, supervising valuation and c lassifi- cation officer of the Bureau of Customs, who testified that the value indicated in RVIC 4-438 dated April 14, 1975 (Exhs. "1" & "1-A", p. 87, CTA records) ~as the "established" or "info rmation " value of Soda Ash Dense. (pp. 5-6, t.s~n., July 31, 1980.) While Ms. Noem i Rebaya testified that she "passed upon" RVIC No. 4-~38, she does not have personal o~ official knowledge of the publication of said RVIC. As stated therein, RVIC No. 4-4,38 129

DECISION CTA CASE NO. 2788 - 12 - merely "replaces page 18, CIVCC # 7-A-75"; it is not signed; neither it is sealed. E~en more, it is dated April 14, 1975 and approved, as stated therein, on June 20, 1975, that is, aft~ the arrival of petitioner'~ shipment of soda ash dense and payment of the customs duties and taxes due there- on on April 10, 1975. The records of the case do not show from where the data stated therein were gathered, how the home consumption values of the articles listed therein were ascertained o~ established by t~ e Bureau of Customs and when such list was published, although all of these should be apparent on the record. Clearly, therefore, there was no compliance with the terms of the law. There �being no fidelity to what are required by the legal provisions ~plicable, this Court could not look with approval on the application by the Bureau of Customs of the value for soda ash dense at the rate of US$307.00 per metric ton fixed under RVIC No. 4-4)8, and the assessment and collection of ~34 , 680.00 as additional customs duty and taxes on petitioner'~ importation. Where, as here, there is no adherence to the language of t he statute, there is no basis for the assertion that there exists a reasonable doubt as to the value or price of the imported soda ash dense declared in the entry. 130

DECISION - CTA CASE NO. 2788 .� 13 - Considering the mandate of the law that the home consumption value or price shall be the value or price declared in the consular or sales invoice, and the official character of these invoices, certified to as correct by the Philippine Consul a t the port of origin; and there being no reasonable ground to deny to these documents the faith and credence normally due thereto, the home consumption value declared in the consular invoice of merchandise and the supplier'~ sales invoice of the importation in question should be the basis of the dutiable value of the imported soda ash dense. (Commissioner of Customs vs. Celdran, L-23425, February 26, 1968, 22 SCRA 743.) The language of the law, which expresses a definite and sensible meaning, is the safest guide as to the statutory policy, to which compliance is due. The pronouncements in Bell Hobart Manufacturing Incorporated vs. Commissioner of Customs, CTA Cases Nos. 2750, 2751, 2752 and 2753, March 10, 1978; and Procter & Gamble Philippine Manufacturing Corporation vs. Commissioner of Internal Revenue, CTA Case Noe 2357, May 9, 1978, which were subsequently affirmed and reaffirmed in other cases, the latest of which is Hiap Hong Trading Co., Inc. vs . Alfredo Pio de Rod a, Jr., CTA Case No. 2804, J une 27, 1980, are . control l ing in the case at bar. We quote from Bell "J Al 0 i 0 l

DECISION - CTA CASE NO. 2788 - .14 - Hobart and Procter & Gamble: "Nonetheless, assuming E_F_guendo that there� exists a reasonable doubt as to the value or price of the imported tr i chloro- . carbanilide declared in the consular, c om- mercial and sales invoices, as well as ~n the entry, and the correct dutiable value of the article should be apcertained from the reports of the Revenue Attache, Com- mercial Attache (Foreign Trade Promotion Attache) or other Philippine diplomatic officers �and from such other information that may be available to the Bureau of Customs, pursuant to Section 201 of the Tariff and Customs Code, as amended by Presidential Decree No. 34, as alleged by respondent, it is to be stressed that the Commissioner of Customs is required by law to publish such list of values from time to time . He does no t only have to ascertain and estab- lish the home consumption value, but must also publish such lists of values from time to time. Publ:c policy would seem to require that importers be informed in advance of the home consumption values, or information values, of articles exported. to the Philippines. This would prevent uncertainty, let alone the exercise of purely personal discretion, specially on the part of customs appraisers, in the matter of the ascertainment and deter- mination of the price or value of imported articles. Furthermore, if importers are informed in advance of the home consumption values or information values of articles exported t o the Philippines, they can pro- . perly declare the dutiable values of their shipments and thus avoid the heavy penalt~ imposed for misdeclaration, if not delays in the release of goods from customs custody which entail lose of time, money and energy. Accordingly, the home consumption val ue or price as basis of the dutiable value of the 5,000 bags of s oda ash den s e (200 metric tons) ~ons i gned to petitioner and declared under Entry No. 33511,

.. DECHON CTA CASE NO . 2788 - .15 - series of 1975, should be the value or price shown in the Consular Invoice of Merchandise and the Supplier'~ Invoice covering the importation at a valuat ion of US$37,606.16, or US$188 . 0308 per metric ton. We note however that with regard to the claim for refund of internal revenue taxes (advance sales tax) _in the amount of ~16,228 .00 (Exh .. "C", pp. 68- 69, CTA records)~ the same can not be passed upon by the Court in view of the fact that nothing in th e records s how that petitioner had filed its written claim for refund thereof with the Commis- sioner of Internal Revenue and that the latter was made a party to this c ase. Without satisfying these jurisdicti6nal requiremerits, which in the ins tant case are lacking, the same is fatal to the claim of petitioner for the refund of the overpaid internal revenue tax on t he importai~n in question. (Wise & Company vs. Commissioner of Customs , CTA Case No. 2717, December 29, 1977; see also resolution dated January 15, 1979, certiorari denied in G.R. No. L-51242 , March 7, 1980; National Dental Supply Incorporated vs. Commissioner of Customs, CTA Case No. 2826, June 30, 1980; Campos Rueda Corporation vs. Commissioner of Customs, CTA Case No. 2829, July 28, 1980; Jardine Dav i es, Inc. vs. 133

DECISION '. CTA CASE NO . 2788 - 16 - Commissioner of Customs, CTA Case No. 2634, October 16, 1980.) It appearing from Exh1b1t "C" (pp. 68-69, CTA records) _th at of the additional ~34,680.00 assessed and collected from petiti ~ ner, Pl8,453.00 represents overpaid customs duty because of the reappr aisal of its shipment of 5,000 bags of soda ash dense at the rate of US$307.00 per metric ton fixed by RVIC No. 4-438 of the Bureau of Customs, only said amount of Pl8,453.00 is refundable to petitioner. Not muc h need be said on petitioner 1 B claim f o r interest thereon from date of payment to date of refund. Interest may be awarded only if the collection of a tax is attended with arbitrarine s s. (Collector of Internal Revenue vs. 2rieto, L-~1976~ September 26 , 1961, 112 Phil. 907~ Commissioner of Internal Revenue vs. Asturias Sugar Central, L-15013, August 3, 1961, 2 SCRA 1 ~40.) Arbitrariness presupposes inexcusable or obstinate disregard of legal provisions . Reversal of a ruling previously rendered is not per se evidence of arbitrariness~ neither is the fact that the administrative ruling is found by the courts not in accordance with law. (VictoriaSMilling vs . Commissione r of Inte rna l Revenue, L-~4785 & L-~4779, February 2 5 1 1967, 19 SC ~A 430.) \'JHEHEFORE, the dec is ion appeale d from is modified o Respondent Commissioner of Customs is her e by ordered

DECISION .. CTA CASE NO. 2788 - 17 -� to refund to pe ~itioner Procter & Gamble Philippine Manufacturing Corporation the amount of ~18,453.00. Without pronouncement as to costs. SO ORDERED. Qu ezon City, Metro Manila, Februa~y 27, 1981~ WE CONCUI{: {j~4eX~})~ fR;E)YE~t{~n? Associate ,Judge 135