CTA Case No. 3716 (Decision)

emJBUC OP 'fifE PHIUPPtN'-'9 COURT OF TAX 4PP�Al-fl QUftON CJrl' FRANKLIN BAKER COMPANY C.T.A. CASE NO. 3716 OF THE PHILIPPINES, Petitioner, - versus - ACTING COMMISSIONER OF CUSTOMS, Respondent. X- - - - - - - - - - X DECISION This is a petition for review of the decision of respondent Commissioner of Customs dated October 16, 1982 in Customs Case No. 79-34 which affirmed the decision of the Collector of Customs, Port of Manila, in Manila Protest No. 10744-78 holding that petitioner Franklin Baker Company of the Philippines is not entitled to drawback of duties paid on saranex liners, notwithstanding the re-exportation of the said shipment within one (1) year from its importation. The facts as narrated by respondent are as follows: It appears that Franklin Baker Company of the Philippines imported from its mother company, the General Foods Corporation, Delaware, U.S.A., 384 cases containing 96,000

DECISION - CTA CASE NO. 3716 - 2- pieces of saranex liners bags for use in packing dessicated coconut products for export to said mother company. This shipment arrived in July, 1976. For failure to present a BOI certification that sara nex liners are not loc ally manufactured, release of subject ship- ment was withheld. On Sept. 4, 1976 the BOI certified to the Current Imports and Commodity Classification Office of the Central Bank that saranex liner, "a co-extruded multi-layered t hermo- plastic firm has not been known to be locally manufactured." A memorandum to the Commissioner of Customs dated Oct. 12, 1976 from the Legal Division, this Bureau, maintained that "saranex liners bags which are vital components in containing the dessicated coconuts for export fall within the sp her e of Section 105(m) of the Tariff and Customs Code, and, therefore, be entered conditionally free upon the post- ing of the required bond and compliance with other regulations or requirements of the Bureau. On Nov. 9, 1976, the Acting Commissioner issued a memorandum to the Collector of Customs, Manila Inter- national Airport, stating that saranex liners bags are in the same category as kraft paper bags used for exporting cement, al lowed under CAD No. 11-74 and therefore could be released to the importer duty- free. On August 23, 1977 however, or nine months after the issuance of the afore- said memorandum of the Commissioner, the Collector of Customs issued a counter- memorandum stating, among other things, that "it is the position of this Office that there is no legal basis for allowing

DECISION - CTA CASE NO. 3716 - 3- the duty-free release thereof notwith- standing the memorandum dated Nov. 9, 1976 of the Acting Commissioner since it is not similarly situated." On August 3, 1977, protestant filed an ordinary re-export bond (FED BOND NO. C(9) 00746) which took quite some time to be approved by the Collector. So , on September 22, 1977, protestant, already anxious to have subject shipment released due to its urgent need thereof, paid under protest the amount of 8281,220.00 under O.R. No. 1264774 in the context of duties, taxes and other charges due there- on. Subject importation was however, finally resolved and released as one fall- ing under Section 105(m ) of the Code as conditionally free importation. It also appears that exportatio n of subject shipmen t was made on February 3, 1978 or five days after the expiration of the bond the life of which was com- puted from the time of its filing on Aug. 3 , 1977. Its six-month duration therefore expired on February 3, 1978. Hence, the exportation of the articles covered by Import Entry No. 75985-77 under Ordinary Re-export Bond No. 00746 consisting of 96,000 pieces of saranex liners bags was actually five days late per Notice of Cancellation of Bond dated July 26, 1978 issued by the Chief, Bonds Division based on the certification of the Export Coordination Division. From respondent's view of the case, the decisive question, as presented in the decision appea led from, is whether petitioner is entitled to the refund of the sum of 8281,220.00 that it paid notwithstanding

DECISION - CTA CASE NO. 37 16 - 4- the fact that re-exportation was done after the six- month period had expired. However, as posed by petitioner in its memorandum dated August 26, 1985 (pp. 38-42~ CTA records), the issue for resolution is whether or not petitioner is entitled to drawback of duties paid on saranex liners which were re- exported within one (1) year from their importation. We s ustain respondent Commissioner of Customs that petitioner is not entitled to a ref und of the sum of 8281,220.00 in duties and taxes on the import- ation of 96,000 pieces of saranex liners. As aptly stated by respondent in his answer to the petition for review as special and affirmative defenses : (pp. 16-17, CTA records.) Section lOS(m) of the Tariff and Customs Code, as amended, makes no mention about any extension of the six -month period within which to export a ny article admitted conditionally free, as distinguished from other subsections thereof where extensions are expressly provided; Respondent, therefore, maintains that peti- tioner is not entitled to a refund of 8281,220.00

DECISION - CTA CASE NO. 3716 - 5- in duties and taxes paid on the importation of 96,000 pieces of saranex liners, since petitioner failed to re-export the said liners within the six- month period; One of the conditions required in order that an article may be admitted conditionally free is the filing of "a bond in an amount equal to one and one-half times the ascertained duties, taxes and other charges thereof, condition~d for the export- ation thereof or payment of the corr esponding duties, taxes and other charge~ within six (6) months from the date of acceptance of the import entry." /See 105(m), Tariff and Customs Code; underscoring supplied? In the case at bar, the import � entry was deem~d accepted at the time of the filing of the re-export oond on August 3, 1977, and the mandatory period of six months from August 3, 1977 ran up to February 3, 1978. Since exportation was accomplished beyond that date, or on February 8, 1978, to be exact, the subject bond became inoperative and without force and effect on expiry date of the six-month period, that is, February 3, 1978. On this very date, since

DECISION - CTA CASE NO. 3716 - 6- there was still no exportation, the alternative con- dition to pay the corresponding duties, taxes and other charges arose and began to operate against petitioner. Thus, to allow refund despite such failure and/or delay would amount to extending the six-month period which is not legally permissible. Petitioner submitted the case on the basis of the records and the pleadings, and it is hardly neces- sary to state the rule that the party who prays for judgment on the pleadings without proof as to the truth of his own allegations and without giving the opposing party an opportunity to introduce evidence, must be understood to admit the truth of all the material and relevant allegations of the opposing party. (Bauermann vs. Casas, et. al., 10 Phil. 386; Evangelista vs. De la Rosa, 70 Phil. 115.) Even more, the Supreme Court has already ruled in Asturias Sugar Central, Inc. vs. Commissioner of Customs, L-19337, September 20, 1969, 29 SCRA 617: It will be noted that section 23 of the Philippine Tariff Act of 1909 and the superseding sec. 105(x) of the Tariff and Customs Code (now sec. 105/ml) while fix- ing at one year (now 6 months ) the period within which the containers therein men- tioned must be exported, are silent as to

DECI SI ON - CTA CASE NO. 3716 - 7- whether the said period may be extended. It was surely by reason of this silence that the Bureau of Customs issued Adminis- trative Orders 389 and 66, * * * to eli- minate confusion and provide a guide as to how it shall a pply the law, and, more specifically, to make officially known its policy to consider the one-year (six- month per iod) period mentioned in the law as non-e xtendible. Considering that the statutory pro- visions in question have not been the subject of previous judicial interpret- ation, then the application of the doc- trine of 'judicial respect for adminis- trative construction, 1 would, initially, be in order. (Asturias Sugar Central, Inc. v. Commissioner of Customs, 29 SCRA 617, 621-622 /l96 97 *** *** *** If it is further considered that exemptions from taxation are not favored, and that tax statutes are to be construed in ~trictissimi juris against the tax- payer and liberally in favor of the ta x- ing authority, then we are hard put to sustain the petitioner's stand that it was entitled to an extension of time within which to export the jute bags and, consequently, to a refund of the amount it had paid as customs duties. In the light of the foregoing, it is our considered view that the one-year period (six-month period) prescribed in section 23 of the Philippine Tariff Act of 1909 (section 105/rnl of the Tariff and Customs Code ) is-non-e xte ndible and compliance therewith is mandatory. /supra, at pp. 623-6247

DECISION - CTA CASE NO. 3716 - 8- However, as posed by petitioner: Is petitioner Franklin Bake r Company of the Philippines entitled to drawback of duties paid on the saranex liners which were re-exported within one (1) year from their importation, under Section 106 of the Tariff and Customs Code? Again, the question is not one of first impres- sian. In Asturias Sugar Central, Inc. vs. Commis- sioner of Customs, L-19337, September 30, 1969, 29 SCRA 617, where the factual setting is similar to that in the case at bar, the Supreme Court like- wise ruled unequivocably that when exemption is claimed under Section 105, importer cannot resort to drawback under Section 106 without complying with the conditions imposed thereby. We quote: The petitioner argues that not having availed itself of the full exemption granted by sec. 105(x) of the Tariff and Customs Code (sec. 105/m/) due to its failure to export the }Ute bags within one year (within six months), it is nevertheless, by authority of the above-quoted provision, entitled to a 99% drawback of the duties it had paid, averring further that sec. 106(b) does not presuppose immediate payment of duties and taxes at the time of import- ation. The contention is palpably devoid of merit.

DECISION - CTA CASE NO. 3716 - 9- The provisions invoked by the peti- tioner (t o sustain his claim for refund) offer two options to an importer. The first, under sec. 1D5(x), gimes him the privilege of importing, free from import duties, the containers mentioned therein as long as he exports them within one year from the date of acceptance of the import entry, which period, as shown above, is not extendible. The second, presented by sec. 106(b), co ntemplates a case where import duti~s ~~~ fi~st paid, subject to refund to the -extent of 99% of the amount paid, provided the articles mentioned therein are exported within three years from importation. It would seem then that the Govern- ment would forego collecting ~ uties on / the articles mentioned in section 105(x) of Tariff and Customs Code as long as it is assured, by the filing of a bond, that the same shall be exported within the relatively short period of one year from the date of acceptance of the import entry. Where an importer cannot provide such assurance, then the Government, under sec. 106(b) of said Code, would require payment of the corresponding duties first. The basic purpose of the two provisions is the same, which is, to enable a local manufacturer to compete in foreign markets, by relieving him of the disadvantages resulting from having to pay duties on imported merchandise, thereby building up export trade and encouraging manufacture in the country. But there is a difference, and it is this: under section 105(x) full exemp- tion is granted to an importer who justifies the grant of exemption by exporting within one year. The peti- tioner, having opted to take advantage of the provisions of section 105(x),

DECISION - CTA CASE NO. 3716 - 10 - may not, after having failed to comply with th e conditions imposed thereby, avoid the consequences of such failure by being allowed a drawback under sec- tion 106(b) of the same Act without having complied with the conditions of the latter section. (supra, at pp. 626- 627) ACCORDINGLY, the decision dated October 16, 1982 of respondent Commissioner of Customs is affirmed, at petitioner's costs. SO ORDERED. Quezon City, Metro Manila, September 16, 1987. AMANTE Presidi WE CONCUR: