CTA Case No. 3371 (Decision)

ttEPUBLIC 0 ; )URT 0 .. PAPER INDUSTRIES CORPORATION OF THE PHILIPPINES PICOP) , Pe titioner , - versus - C. T. A. CASE NO . 3371 THE COMMI SSIONER OF CUSTOMS , Respondent . X- - .- - .- .- .- - .x DE C I S I 0 N The pr ecise issue i n this action to enforce a c l aim for r efund of alleged overpa id cu stoms duties is noth ing more than whethe r or not the impos i t ion thereof i s in accord with the pe rtinent provisions of t he Decree as im- plemented , quoted as f ollows: "Section 1. Al l i mpor t a tions which are at present totally or partially exemp t from customs dut i es and/ o r i nternal revenue taxes under the provisions of any general or speci al la shal l be subj ect to a five (5%) per c en t internal r evenu e t ax subj ect t o the "same i- mitations and conditions prescribed under such law, if any . "In case of i mpor tation s enjoying par ti al exemp ti on s the s~id duty and t ax shall be i mposed on the exemp t portion, i n add it i on to t he du t y and tax on t he t axable portion. "The duty a nd tax i mpos ed here i n sh a 1 �be c ompu t ed in accorda nce wi t h the app l icable provis ions of the Ta rif f and C_stoms Code o f the Philippines a s amended 0 an t he a ti onal ntern~ evenue Code of 1977 as amended , respe ti ely . " (Pres iden tia DeGree o . 1 395, May 31, 1 978 ) . 245

DEC I SI ON - CTA CAS E NO. 3371 - 2- I mplementi ng Departmen t Orde No . 1 3-78 dated J une 7, 1978 , t o the e x t en a ppl i c a ble prov i des : 1' 2. The fi ve per cent customs dut y shal be based on the home consump t ion va l ue o f t he imported a rticles as dete r mined under Section 201 of th e Ta r i f f and Cus~om s Code of the Phi li pp i nes , a s amended , x x x . " 3 . The f ive pe r c ent i n t e rna l revenue t ax s hall be l evied , assessed and col l c ted i acc or dance with the pert i nen provi s i ons of t he Na t i ona l I n t e r na l Revenue Code , as amended ." As it a ppears , pet i tione r, a r eg i s ter ed pioneer e n ter - . pri s e und e r . A. No . 5186 (I nve stmen t I nc ent i ves Act ) . e n joys a par t i a l duty a nd tax e xempt ion on i mpor t a tions t o t he extent o f 75% f or the years 1979 a nd 1960 . Pr e - s i den ti a l Decree No . 139 5 , supra , subjec ted a ny s uch pr i vileged e n terpr i s es accorded f ull or parti a l exemp t ions t o add i t iona l 5% c us toms duty a nd 5%. i nter na l r evenue t ax on t he e xemp t por t i on . Pur suan t t her efor , t he Collector of 'Cus t oms of t he port o f Bi slig a ssessed and col l ec ted t he add i t ional lev i e s on t he va r i ous i mpor t ations f or t he pe r i od i n quest i on wh i ch pe titioner paid , but ~o te s te d t he paymen t of t he cor r e s ponding c ustoms duti e s al l eged to have been e rroneou s l y based on t he i' to tal l anded c o s t " plus ma rk - up a nd no on t he " home c onsumption val ue ", f orma l i zed i n' Bi s1 i g Protes t Nos .lS- 79; 16- 79; '-7-7~; 1~-79 ; 19-79;. 2 2- 7 9~ 23- 79 ; 1 - ~ 0; 5- 80 ; 10 -~ 0 ; 11- ~ 0 and l37 ~o . The Col ec t o of Cus t om dismisse t he p otes s i n ecisions dated Dec embe 27 a nd 28 , 1979 , a nd Febr uar y S a nd ay 5 , 246

DECISION - CTA CASE NO, 337 - 3- ' 1 980 . On appea l, unde r Consolidate Cu stoms Case os . 80 - 0.5 ; 80 - 1.0 ; and 31- 6.0 , r esponden t Commissioner of Cus t oms sustai ned the Collec t or ' s. i n a dec i s i on r ender ed on Oc tober 14, 980. Hence this pe ti t ion for review . Peti tione r wr aps up i t s position this wi s e : "The Collector of Customs i mposed and col l ected t he 5\ customs duty (pe r PD 1 395) .on t he exempt portion of the subject i mportat i on ba s ed on the to t a l l ande d cost plus mar up the r eof and no on t he home consumption value of t he s ub- . j ect i mpor t a tion as de t ermined unde r Section 201 of t he Tari f f and Customs Code in r e lation to PD 1395 a s i mple- mente d by Depar tmen t Order No. 13-7.8 . The Coll ec t or of Customs rel i ed on t he pr ovisions of Section. 3 of Depa rtment . Or der No . 13-7.8 and of Section 1 9 3 of the Nation a I nter na l Reve� n ue Code which provisions of l aw have no a pplica t i on to the case at ba r because wha t is involved here is ot the 5i i nt e rn a l r evenue tax but t he 5\ c us toms �dutie s per PD 1395. " The r e spondent ave r s , "The c onten tion of appe llan . . (herein peti t i oner ) tha the comput a tion of the 5% tax should be bas ed me r e ly on t he home consumption va lue as de termined under Secti on 20 1 of the Tari ff and Cus t oms Code is evoid of any l egal basis in t he ligh of all th ore uo e rev i sions of aw imp emen ting regulat i ns and PD 1 395 . When we speak of interna l revenue t a advance 247

DECISIO CTA CASE O. 3371 - 4- sales t ax i n these cases , specifica l ly ) '� the afore-cited provision of th revenue code and Reven e Regulatio s o . S- 78 should a pply whi ch i nva ri a bl y i nclude the mark- up . And as ordained unde r PD 13. 95, the 5% tax should be levied , assessed and collected in accordance with the per tinent provisions of such code , which is what t he Collector corre ctly did . " And , as e a rlie r ma i n tai ned by the Col lecto of Cus toms , "Section 201 of the Tariff and Customs Code of 1978 invok ed by protestant (herein petitioner ) ~ a s positively no applicable basis to the case at bar cons idering that said Secti on 201 r e l a tes to the computation of ' dut i a ble va lue ' f o r purpose s o f i mposing ' c.ustoms duty' .a nd not 'tax ' .beca use in a r iving at the ' t .axable value � as i n t his instant protests t he pertinent provisions of Nationa I n ternal Revenue Code of 1977 is the l aw applic able . n More- over , "The q uestion or is sue of t he assessment a nd paymen t of 'customs duty' i s settled i nasmuch as protestant (he r e in pe titioner ) .i s r equired by l aw to pay i n f ull said cus toms duty on the en tr ies nder protest. ha is lef t a t i s sue then i s the assessment and pa yme nt of fiv e (5%) .t ax which is to be imposed on the exempt portion , in addition to the tax du e on the t axable portion . The a rgument then that t his Of fice erred i c omputing the f ive (5% ) .Pe r c en t tax based on the t ota l l anded cost a nd no o the home c'onsumpticn f valu s erroneo , i being devoid of any l egal author i t y 248

DECISION - CTA CASE NO. 3371 - .s - .. s ince Sec ti on 201 o f the Tarif f and Cus toms Code is not applicable ." Give n the quir ky particula rs of the ci rcums t ances obtaining the parties seem to have s ubst an tially di ffered and di ver ged mo s t sharply on the materi a l fac t ual i ssue . But the only point ur ged upon ou con sidera ti on of why t he deci sion appeal ed from s hould be reversed i s the alle ged i ncorrectly based impos ition and col l ec tion of customs du ti es by virtue of Presidential Decr ee 395 o the exempt portion of the subject impor t a tions which c on- sequence proved onerous to the petitioner by such ove r - � p a yment of ~18 4 , 94 1. 9 2 outlined as foll ows : Bislig Protes t No. 15-79 = p 498 . 00 Bisl ig Prote s t o . 1 6- 7.9 3u835. 0 Bislig Protest No . 17-7.9 5,392 . 09 Bislig Pro test o . 18- 7.9 3, 177 . 00 Bi s ig r otes t o . 19-7.9 4"6 ,419.00 "' Bis l ig Pro te s t No. 22-79 46 ,542 . 37 Bislig Pro tes t No . 23-7.9 8 , 954 . 58 Bislig Protest o . 1-8.0 6,386 . 37 Bislig Protest No . 5-80 55, 951.04 Bislig Pro test No. 10-8.0 420. 68 Bislig Protest No. 11- 8..0 92 . 19 Bisli g Protest No . 3-8.0 1,682. 56 T 0 TAL � � � 1118 4, 941 . 92 (s ic) Responden t must ave lost the fore s t f o r the tr ees so to speak by assuming a question relative to an incorrec tness of t he computation of t he in ternal revenue tax based on t he t otal l anded cost plus mark up " since Section 201 of the Ta iff nd Customs Code i s no t applicable. ' ;���. 249

DEC I SI ON - CTA CASE NO . 371 - - 6 . . Putting aside the apparent uibble, it is hardly necessary to observe tha t he terms of PD 1395 , supra , as i mplemented , the add i tional 5% c ustoms d uty is direct y t acked on the home con sumpt i on value wh ile the 5' i n t ernal � r evenu~ tax i s essentially addressed t o the tota l anded cost of t he i mported articles . Section 201 of t he Tari ff and Customs Code determines the first and Section 193 b) of the National In ternal Revenue Code , the l atter, quoted respecti vely as follows: "Section 201. Basis of Dut iable Va lue . -The duti able value of an i mpor ted article subjec t o an ad valorem rat e of duty shall be based o t he home consumption value or price (excl uding i nterna exc i se t axes) of same , l ike or similar ar tie es , x includ ing t he value of all contai ners, co- . verings and/or packings of any kind and all other c osts , charge s and ex.penses i nciden t to placing t he artic le in a condition r eady f or s hipmen to the Phi lipp ines , plus ten (10%) per cen of s uch home consumption value or p rice : " � . "Sect i on 1 93 e {b ) Sales t ax on imported ar tic l es . x x the percen tage t axe s x -x s hall be pa id in a ance by the i mporter , x x x base on the home consumption val ue or price (excluding i nternal r evenue exci se taxes) thereof , plus ten (1 0% ) per cent of such home consumption value 0 price ; i ncluding postage , commission , customs duty and all simi lar charges , x . " We f ind no threa~ of ambiguity fr om the language of the s a i d p rov i sions i nsofar as the s ame i s brought t bear upon the circumstances of t he petitioner i n t he case at bar . The t e r ms a re amply suffici en to dispe l any pall c e tain ty cast o e r the pet i t ione g c a i o The part icul ar i mpos i tion of ei ther a duty or tax appears 250

DEC ISION - CTA CASE NO . 3371 - 7- c~llirig ly exp licit and severely cons t rai ned . The requir e- ments f or effective i mpleme n tation t he r eof are o clea r impor t and one may no t be nard put t o r e s t a c hoice of the ba sis f or t he l ev i es. As had ha ppened , t he re spondent no only fai led to in fuse va l id cogn i zance , but would have t he f oc us i ng question exped ientl y t reated as ne ither here nor there , 11 For, � n stead of basing the 5% c us toms d uty on t he home c onsumption value of the subjec i mpo rtation as deter - mi ned unde r Section 201 of the Ta riff and Cus t oms Code the Col lector of Customs i mposed the 5% cu stoms du ty on t he ba s is of the t ota l l a nded cos t p lus ma rk up of t he impo t e d art i c l es. " We think the r espondent ha s f umb l e d i nto a rever sible error . � Unde r th e cir cums t ances , we are pe r su aded to e x tend t he r e lief s ough t by the pe t i tioner r elati ve to i ts claim for r efund of the amou.n t r epresent i ng ove r paymen ts �o f the 5% customs duties on the exemp t por ti on o sub j ec t i mport- ations c onditioned �however upon a r e iquidation of t he c orre spondi ng i mpor t ~ntr i es covered by the pro tests . WHEREFORE , as a bove qua li f i ed , the r e sponden t is hereby dir ect ed t o ran t the r efund withou pronouncemen t as to cos ts . 251

I� DEC ISION - CTA C SE NO . 3371 - 8- SO ORDERED. Que zon City, Metro Man ila, October 31, 1984e WE CONCUR : ~~~ Presidi 9 J udge 252