CTA Case No. 4605 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY AS IAN TRANSMISSION CO R PORATION~ Petitioner ~ - versus - C.I .A . CASE NO. 4605 COMMISSIONER OF CUSTOMS~ \ 1\ I C1._3 Re s p onde n t . jZ- JZ-1 ' X- - - - - - - - - - - - - - - - - X DECISION This is a petition for review which seeks to annul and set aside the decision of respondent Commissioner of Customs dated t�Aarch 20, 199 1 affirming the decision of the Collector of Customs dated December 4, 1990 in the protest case filed by petitioner. The undisputed facts are as follovvs: Petitioner, Asian Transmission Corporation, is a BOI registered industry engaged in the manufacture of motor vehicle transmission units and components and parts of Mitsubishi vehicles partly for local consumption and the bulk for export to Japan .

DECISlON - C.T.A. CASh J. 4/Jffi - Page2- ,I Sometime in 19&6, petitioner imported from Tokyo, Japan one ( 1) container of Trichloroethylene consisting of 55 iron drums 'With gross weight oi 17,765 kg . or 16.5 mt. covered by Bill of � Lading No. 941-12 251 (Exh. D, p. 61, Customs records.) On July 18, 1956, the shipment arrived at the Port of Manila on board the I vessel S/S "Lipper Ace" (Registry No . POL 009). On July 22, 1986, a Formal Import Entry and Internal Revenue Declaration (No. 40727-86) was filed by Assurance Customs Brokerage, petitioner's customs broker, ~eclar~ng 55 iron drums ( 17,765 kgs .) or 16.5 mt. of trichloroethylene "With a Home Consumption Value (HCV) of US$570.00 per metric ton or a total of $9,405.00 (Exhs. A and 1, p. 51, ibid.). On the same date, petitioner paid the customs (import) duty of P2 1,959.00 (O.R. No. 706052 ); advance sales tax of P48,711.00 (O.R. No. 1842 42 2) and the import processing fee of P250.00 (O.R. No. 746206) or the sum of P70,920.00 for the corresponding shipment based on the HCV of US$570.00 per metric ton (Exh. C, p . 62, id.) as indicated in the Import Entry Declaration and Invoice. The shipment was examined and was found to be as declared by petitioner. However, the customs appraiser applied the published value of � 144.00 per kilo or equivalent to US $887.76 per metric ton based on Revision Order No. 5-86 instead of the dedared HCV of US $570.00 per metric ton. Having boon appraised at a higher value, petitioner paid the additional Import Duty of P 11,922.00 and Advance Sales Tax of P26,257.00 ot the sum of P38)79.00 (O.R. No. 187191 0, dated August 14, 1986). ,I

DF.CISION- C.T.A. CASE NO. 4lHi - Page 3- Petitioner verified from its supplier by means of telex and overseas calls the export price of trichlorethylene at the time of exportation. As per request, petitioner received a Certification dated August 7, 1986 issued by Nissho Iwai Corporation Philippine Branch to the effect that the current export price of Tricholorethylene from Japan is US$570.00 per metric ton C&F lvianila. Thereafter, petitioner requested its broker to file on its behalf a protest (dated August 26, 1986) requesting for the refund of P31:\ 179.00, epresenting additional . payment of customs duties and advance sales tax. On January 11, 199 C petitioner received a copy of the . Decision of Acting District Collector of Customs Titus B. Villanueva, dated December 4. 1990, dismissing the protest for lack of merit. The rationale behind said Decision -was stated as follo-ws : "It is to be noted that when there is a published value for the articles imported and doubt is cast on its applicability, what should be done is to resort to the last paragraph of Section 20 1 which is the adaption of the domestic \h!holesale selling price. If the published value becomes of doubtiul applicability, this Office do not simply revert and accept the invoice value of the importer because it too, is considered of doubtiul applicability because of the existence of the published value. It must be emphasized that any invoice value -vvhich pro,lides for a value different from the published value al~Nays rests on doubtful footing hence, it could not be applied . Inasmuch as both the invoice value and the published value may be considered doubtful, the resort in on the last paragraph of Section 201 of the TCCP for adoption of t11e wholesale domestic price. As earlier stated, tax . assessment are presumed correct because of the presumption of good faith on the part of the tax assessor an�j on the validity of their action. The

DF.CISION- C.T.A.CASENO. 4lffi - Pa.ge4- burden of proof is on the taxpayer to show clearly that the assessment is erroneous in order to be relieved from it. In the instant case, Protestant through counsel failed to show any proof of what is the correct market price and relied solely on the Certification from the supplier as well as the invoice. On this score~ this Office aware of the inherent possibility of collusions between suppliers and importers and the fact that they would go to all extends in devision ..,Nay and means just to lessen the collectible levies on the importations. Because of this, there is always the great possibility of spurios invoices and arranged certifications being sub~itted. In view of all the foregoing and in the absence of competent proof therefore on value, the upgrade value based on RO 5-86 in the amount of US$887.76 is in Order." On January 24, 1991, petitioner filed an appeal with the . Commissione of Customs questioning th~ D~cision of the Coilector of cu.stmns. P~titionar �aut)g~d that if the Collector himself � consid~rs Ute publish value of doubtfUl applicability then he should not hav~ affirm0d the application thereof by the customs apprais~r in asS&ssing p~titioner for additional customs duties . and advance sales tax. The last paragraph of Section 201 of the Tariff and Customs Code provides "wher~ ther~ is reasonable doubt as to the dutiable value of the impor~d article declared in the entry, it shall be thG domestic wholesale selling price of such or similar article in Manila or other principal markets in the Philippines on the daoo the duty becom~ payabl~ on the articl~ under appraisement, on the usual whole-sale quantities and.in the . ordinary cours~ of trade, minus 20% theroof for expenses and profits and duties and taxes paid thereon:� It is therefore evident

DF.CISION - C.TA. CASE NO. 46ffi - Page5- that where there is doubt as to the dutiable value of the goods in question the rec()urse should be the domestic Wholesale selling price of such good in Manila. The customs appraiser instead applied the publishf-d value of Trichloroethylene in Japan Which is � 144.00/kg., tlle price indicated in Revision Order No. S-86 prepared by the Valuation and Classification Division of the Bureau of Customs. Furthermore, the Acting Collector of Customs insinua~d collusion or fraud betw~0n th~ imporre~-petitioner and the s 1pplier (Nissho l"'!ai Corporation, Japan). This was not proven as a mat~r of fact considering that th&re 'W'aS no evidence to support said accusation. On 1v1arch 20~ 199 t respondent Commissioner of Customs rendered a Decision. affirming thtl Decision of Titus B. Villanueva, Acting Coll~ct�r of cu~ ms, ertin~nt portions thereof are hereunder quoted: "Jvioreov~ r , it is to ' note-d that wh()n ther() is a be published -v:alue for th~ articles imported and doubt is cast on its applicability, what should be done is to resort to the last paragraph of Section 201 of the Tariff and Customs Code which is the adoption of the domestic Tvv�holesale selling price. If the published value becomes f doubtful applicability, this Office do not simply revert and accept the invoice value of the importer because same is considered of doubtful applicability because of Ule eidstence of the pUblished value. It must be emphasized that any invoice value v\tllich pro".rides for a value different from the published value a.l'ways sets on a doubtful footing, hence! it could not be applied. In as much as both the invoice value and the published value may be considered do1Jbtfu1~ resort is on the last paragraph of Section 2o1 of tlle T9.riff and Customs Code.

DF.CISION - C.T.A. CASE NO. 4lffi - Pa.~6- Considering that protestant failed �to show clear a.nd convincing proof that the assessment is erroneous and considering further that there is no competent proof of the value of the shipment in question, the upgraded value based on RO 5-&6 in the amount of US$887.76 is in order." The Decision of respondent Commissioner of Customs was ) receiv~Jd b}'" p~titioner on April 3, 1991 . On April 23. 1991. petitioner filed tlle instant petition for review praying for the reversal of th@ D~cision of r �s. ondent dated March 20, 1991 and the n�fnnd of P38, 179.00, repr~senting ~rroneously paid addit�onal customs duties nd advance sales tax. Petitioner maintains that Revision Order No. 5-86 having been based on a tvo1o -y~ar old issue of Japan Chemical Week (published sometime on S~pternber 20, 1984) plac~s a doubt as to the applicabili y of the .Published value of � 144.00/kg. or US$ 887 .00/MT of Trichloroethylene. Since the declared value of US$)70.00 / MT is higher: than the published value of Trichloroethylene in China (US$)47.98/MT), Spain (US$5 32.27/MT), Beguim (US$375.77/MT) and Germany (US$312 .47/MT), countries with the same stage of economic development as the country of exportation - Japan, the doubt placed on the declared value was therefore erased. Therefore, the declared HCV as indicated in the Import Entry Declaration ~ = and Invoice should prevail. Respondent answered that the upgraded value of � 144.00/kg. (published value) or US$887.00/MT of Trichloroethylene is in the nature of a tax assessment. Tax assessments are presumed correct and made in good faith. The

DECISION - C.TA.CASENO. 4fDi - Page7- _, ~urden of proof lies '{'lith the petitioner to show that the assessment is erroneous. The issue raised is whether or not the appraisal based on tlle published value, not the declared value indicated in the commercial invoice,� vvas proper. The 1 w applicable in this case is Section 201 of the Tariff and Customs Code. Section 201provides: �sse, 2o1. JJ.asis ()f DutiabJ Valtle. ~ The dutiable vatu@ of an impor~d article subj~ct to an .?. d v~~k>ft?l':ti ratt of duty shall b19' based on the home consumption value or price (excluding internal excise t.a. es) of sam~. like or similar artl<:les, as bought and -s 1 or off~r&d for sale fr ely in the usual v-molesale qu: nr � ti~~ in the ordinary course of trade, in the principal mark~ts of Ule country from wh&re exported on U1e dat.~ of exportation to the Ptlilippines, or where there is none on such date, then on the home consurnptlon value �or price nearest to the dai� of exportation, including tll~ value of all ~ontainers, coverings ancl/r)r packing$ of any kind and all other costs, <;harges and expenses incident to placing the article in a co 1dition ready for shipment to the Philippines, plus ten ( 10) p9r (:~nt of such home consumption value or price. Th~ home consumption value or price under this section sll 11 be the value or price declared in the consular, commercial, tra.de or sates invoice. Where there eXist.s a reasonable doubt as to the value or price of the imported article declared in the entry; the correct dutiable value of the article shall be ascertained fr m the r~port of th Revenue Attache (Foreign Trade Promotion Attach+>), pursuant to Republic Act Numbered Fifty-four hundred and sixty- six or other Philippine �:iiplomatic officers and from s1 ch other information that may be available to the Bureau <)f Customs. _,

DECJSION - C.T.A. CASE NO. 4lffi - Page8- ,I From tile data ti1us gatilered, tile Commissioner of Customs shall ascertain and establish the home consumption values of articles exported to the Philippines and shall publish such lists of values from time to time. When, t11e dutiable value provided for in tile preceding paragraphs cannot be ascertained for failure of tiw importer to produce the documents mentioned in the second paragraph, or where there exists a reasonable doubt as to dutiable value of the imported article declared in the entry, it shall be the dometic ~..v110lesale selling price of such � or similar article in J\.fanila or other principal markets 'in tile Philippines on the date tile duty becomes payable on the article under appraisement, on the usual wholesale quantities and in the ordinary course of trade, minus - (a) Twenty (20) ~f cent thereof for expenses and profits; and (b) Duties ~nd taxes paid thereon.� The: Supr~mt~ Court in ~rpreted this provision to mean as it is so '"rorded~ thus : ''Th~ law Is. clear and mandatory. The dutiable value of an imported article subject to an ad valorem raoo of duty is ba.sed on its hom~ consumption value or price as freely offered for sale in Wholesale quantities in the ordinary course of trade in tile principal markets of the countt'Yfrom Where exported on the date of exportation to the Philippines. That home consumption value or price is the value or price declared in tlle consular, comm~rcial, trad~ or sales invoice. But where ther' is a r'asonable doubt as to the vatu~ of the import~d article d&clared in th& ~tryJ the ,I

DECISION - C.T.A.CASE NO. 4fffi - Page9- correct dutiable value is to be ascertained from the reports of the Revenue Attache or Commercial Attache and from such other information that may be available to the Bur~au of Customs. The Commissioner � of Customs is required, how~ver, to publish from time to time the lists of the home consumption values.u [Commissioner of Customs v _ Court of Tax Appeals, 161 SCRA 376, ( 1988)_] In this case, the customs appraiser used the published value instead of the HCV as declared in the invoice. The upgraded value used was based on Revision Order No. 5-86 Which was merely a republication of the prices of Trichloroethylene in the Japan Chemical Week published sometime September 20, 19i)4. The general rule embodied under Section 201 of the TCCP is that the basis of the dutiable value of an imported article is its HCV as appearing in the consular or commercial invoice. In case of reasonable doubt, the exception is that the correct dutiable value is to be ascertained from the reports of the Revenue Attache or Commercial Attache and from such other information that may be available to the Bureau of Customs. The Commissioner of Customs is required to publish from time to time the lists of the home consumption values. In this case, the only n~ason relied upon by respondent's appraiser in upgrading the value was the fact tbat the published value of trichloroethylene was higher than tbe HCV as declared in the c(.)mmercial invoice. For its partJ petitioner presented and offered evidence to support its claim that the doubt eXisting �due

DF.OSION - C.T.A. CASE NO. 4lai - Pa~to - to the discrepancy in price was overcome by the following evidence: 1. Commercial Invoice issued by Nissho Iwai Corporation shov�Ting that the unit price C&F Manila per M/T of Trichloroethylene ls US$570.00/MT or the total price of US$9,405.00 (Exhs. C, C- 1 and C-2); "�'") Import Entry and Inwrnal Revenue Declaration (N0.0613553) showing the HCV of Trichloroethylene at US$570 . 00/~.�1T (E}ffi. A); 3- Published HCV' of Trichloroethylene based on Revision Order No. 5, dated May 1, 1986 in the following countries of exportation: (Exhs . B, B- 1 to B-7) a. England $276 .00 /MT b . Singapore $491.67/ MT C. China $547 .98/MT d . Spain $532 .27/MT e. Japan � 144.00/kg. f . Germany $312.47/MT g. Belgu.im $375 .77/MT will show that. tp& d~clared HCV of US$570.00/MT is still higher compared to the published HCV of Trichloroethylene in England, Singapore, China, Spain. Germany and Belguim except that of Japan which is� 144.00/kg or US$887.00/MT. 4. Certification dated August 6, 1986 issued by Nissho IV\13.i Corporation, petitioner's supplier, to the effect that the current export price of Trichloroethylene from Japan is US$570.00iMT, the price prevailing from September� li 1985 up to the date of exporation to the Philippines (Exh. E); and

DECISION- C.T.A. CASE NO. WE -Pagett- 5. Certification dated January 7, 1987 issued by Traders Royal Bank to shov..r U1at U1e exchange rate of one Japanese Yen to a US Dollar has appreciated from 0.004070 on September 20, 1984 as compared to 0.006263 on July 13. 1986 (Exh . 1). 'N'hile it is true that petitioner in filing for a claim for refund has the burden of proving entitlement thereto, it is our opinion that the onus have been overcome by sufficient evidence presented by petitloner. In tne case of Commissioner of �' Customs v. Court of Tax Appeals, 195 SCRA 12 (1991), the Supreme Cou t thru Justice Marcelo Fernan had the occasion to rule : ''A higher assessment on its imported goods having been made, it became incumbent upon private respondent to show that the value declared in its consular .invoice vvas the true and correct home consumption value thereof. It cannot simply rely on tlle consular invoice, precisely oocause a question on the veracity of the figure contained therein had been raised by the re -assessment made by the Customs appraisec vl.b.ich re -assessment was affirmed by the Collector and the Commissioner of Customs. Private respondent could have easily obtained a certification or affidavit from its siswr company that the price d~clared in the consular invoice is the price customarily given to customers in open market transactions. x x x." In the <;ase at bar/ petitioner \hlaS able to present a Certification issued by its supplier showing the current export .. price of Trichloroethylene in Japan to be the same as that deda.red in the commercial invoice. The imputation made by the

DECISIO~ C.T.A. CASH NO. 4lJlti - PaW!12- Collector of Customs that there vvas collusion between petitioner and its supplier has no basis since the burden of evidence is on the part of respondent to show that indeed there was collusion. Fraud is a question of fact and the circumstances constituting fraud must be alleged and proved. Fraud is never lightly to be 'presumed because it is a serious charge. (Commissioner of Internal Revenue v. Ayala Securities Corporation, 70 SCRA 204J Fraud must be supported by clear and convincing evid~ncE!. Tbe m~r<t imputation of fraud or collusion Will not lie without thEt proof required to establish said fact. In this case, th~re 'VY"aS no showitlg whatsoever that collusion between the supplier and petitioner eXisted . Therefore, the burden of evidence was not shifted to petitioner to disprove said claim � made by the Collector of Customs. It is in fact the duty of _, Collec.:tor of Customs to prove his claim. The ~,.?.tJUs pP..?b..!f.tJtli rests on 'Nhoever invokes fraud and must prove it by clear and positive evidence. By far then~ is nothing that can be imputed from the Certification issued by Nissho IV"~mi Corporation except the fact that thE?. current export price of Trichloroethylene on the date of exportation from Japan was US$570.00/MT. Then again, the basis of Revision Order No. 5-86 was the September 20, 19o4 issue of Japan Chemical Week. Undisput~dly, Revision Orde-r No. 5-86 was a republished copy from a two-year old publication of Japan Chemical Week. Thus, at the time the Trichl()rowthylene were imported on July 181 1986 the-re is no doubt that th~ Yen to a Dollar has appreciated for a period of t.v�ro years. Admittedly, the published HCV was also

DF.Cl<aON � C.T.A.CASENO. 4lffi - Pa~t3- considered to be of doubtful applicability. Similarly, the Court of Appeals in the case of Republic of the Philippines, represented by Alfredo Pio De Roda, Jr_v _Hon . Court ~~ Tax Appeals and Procter & Gamble Philippines .I Corporation, CA:_G.R. SP No. 25438~ February 2 1.. 1992.. decided in line with this reasoning that the HCV as declared in th~ (t)nsula.r or commercial invoice should prevail, which we quote- : "For one, it is not dispuood that CIVCC Circular �Nos. 2ao:-76 and 270-'76 were issued mor" than two (2) years before the importation subject hereof was effected on October 2, 1978. In short, the HCV's in the d rc:ulars were n~ithet� the valu&s "on the date of the exportation to the Philippines" or values "nearest to the date of exportation", as required under Section 20 Csupra. of the Tariff a.nd Customs Code. It may be so that on December 1, 1978, Revision Order No. 12 w�as published. Significant it is to note, however, that the Revision Order merely maintained the same HCVs in CIVCC Circulars Nos. 280-76 and 270-76. Between the issuance of the ,CIVCC circulars in midyear 1976 and the publication of Revision Order No. 12 on December 1, 1978 is a span of more than two (2) years . It is simply unlikely that during tl1e interregnum, the value of the imported products in dispute did not fluctuate or change either in the dovvn\o\ra.rd or up\A!ard level. In fact, no less than the Collector of Customs in his decision of May 12, 1980 (Annex "C", Petition), found that the HCVs in CIVCC Circulars Nos. 280-76 and 270-76 'were a stale published value' ." In view of the fact that the published HCV is of doubtful applicability and considering that petitioner have proven beyond reasonable doubt that the HCV declared in the invoice was the

' . .. OF.CISION - C.TA. CAS.t:. ;.--10. 4fJffi - Page14- current export price of Trichloroethylene at the time of exportation, the reasons relied by respondent in affirming the decision of the Collector of Customs has no valid ground to stand on. The burden of proof having been overcome by clear and convincing.evidence, petitioner is therefore entitled to the refundI o,..; claimed . WHEREFORE, the respondent, COMMISSIONER OF CUSTOivlS is hereby ordered to REFUND in favor of petitioner, ASIAN TRANSMI SION CORPORATION, the sum of P33, 179.00, representing erroneously paid additional customs duties and �' advance sales tax. No pronouncement as to costs. SO ORDERED. Quezon City, Meh�o Manila, Dec~mber 2 4, 199 -~U .GRUBA Associaoo Judge WE CONCUR: E ESTO D. ACOSTA . Presiding ;zug.d. ~~..~ RAMON 0 . D V RA Associate Jud. e

DF.CISION C.T.A. CMh: NO. 46ffi - Pa~15- CERTIFICATION I he-reby CE\rtify that this decision was reached after due consultation b~tw~en the members of the Court of Tax Appeals in accordance Vv'itll Section 13, Article VI II of the Constitution. c;!~Q.~ ERNHSTO D. ACOSTA Presiding judge Court of Tax Appeals