CTA Case No. 1013 (Decision)

REPUBL I C OJ? 'rHE PHILI PPIN~S COU.,T OF' 'rAX APPE.t LS quszm: CI'1'Y DONATA SAI{ 1.UGU7L C. T. A. and K~'NITO CHUA , C SE NO . 1013 Peti t ioners , - versus - THE CQ1'.1NI SSI ONER OF CUSTOH:S and THE COLLECTOR OF CUSTOMS OF Iv NI LA, Respondents . x- - - - - - - - - - - - -x DEC I S I 0 N This is an appeal from the decisioh of. respon- dent Commissioner of Customs affirming that of the Collector of Customs of !"!anila decreeing the seizure and f orfeiture of "31 0 Bales Cereal Fo od (Sautang- hon)" for violation of Central Bank Circular No . 44 , in relation to section 2530 (f) of the Tariff and Cust oms Code . The part i es have agreed and stipul.a ted on the fa ctual issues , the pertinent port:lons of vlhich are quoted hereinbel ovr, as follmvs : X X X X X 11 2. That pe titioner Donata San Niguel is an importer of a shipment of 310 bales of sotanghon, weighing approxi- mately 37 , 200 kilos , gr oss 1:Jei ght , ,,Jhich she i mp orted from Hongkong under her firm name 1 DONATAS THADI NG 1 and 1vhich shipment arrived a t the port of Nanila on ugust 25 , 1960 on board the vessel S/S SHOHO HAH.U . "3. That prior to the a ctual ship- ment and impor tation of t he subj,e ct shi p- ment of sotanghon , petitioner applied I�Tit h the Central Bank of the Philippines through its authorized agent bank , the Pa cific Banking Corporation , 1'-Canila ,

DECISION - C. T. A. CASE NO . 1013 2- for the opening of commercial ~etter of credit in the amount of US $2 , 498 . 00 to cover a shipment of -11APPROXH.!.ATELY 310 BALES CEREAL FOOD (SAUTANGHON) .t. x x. X X X 11lt . Tha t the corresponding letter of credit vias opened by the Pacific Bank- ing Corporation on July 13 , 1960 in favor of the National Handleshan...lt , N. Yo ., 15 Queen ' s Road Central , Hongkong , :Ln the amount of US ~~2 , 498 . 00 , to cover :tAl? out 310 Bales Cereal Fo od (Sautangnon) ~NEC- 048- 01 . 03) fro m Honglj:ong to Nanila . �1 x X X X X. "5. That the subject shipment of 310 bales of sotanghon arrived in the Port of Hanila and was declared for Cus - toms purposes under Entry 1/-066039 . The sh ipment \vas duly examined and appraised and the amount of r22 , 529 . 00 was deposited by the petitioner under Official I eceipt No. 60781 to cover payrnent of the taxes and duties on the shipment . x x X X X. "6 . That shortly prior to the arrival of the subject shipment in Hanila, the petitioners applied for and vrere issued by the Central Bank of the Philip - pines , through its authorized agent Bail1t , the Pacific Banking Corporation, JI.Ianila , Central Bank - elease Certificate No. 11450 covering the shipment in question . x x X X X. "7 . I'hat the petitioners thereupon submitted the said Central Ballit Release Certificate , Exhibit 'D~, to the Central Bank representatives in the Bureau of Customs and said official approved and validated t he said CB � Release Certificate. x. X X x. X X X X "9 . That the subject shipment of 310 bales of Sotanghon vras seized and in hi s Decision , dated January 18 , 1961 (Annex 'G' of the Petition ), the Collector of Customs of l�~anila decreed the forfei - ture of said shipment . On appeal , the r espondent Commissioner of Customs , in his Order (Annex ' H' of the Petition ) /

DECISION - ...... C. T. A. CASE NO . ~013 -3- affir med the De cision of respondent Col- lector of Customs . "10. That release certifica te of t he CP, EY..hibi t ' D' was -vd thdra\m. by the r-.m on September 9 , 1960. x x x. 1111 . That under CB Statistical Clas - s ification of Commodities , revised as of July 1, 1957 , implementing Circular No. 44 , the classification of 1sautanghon ' was under Commodity Code No. VI- 048- 03 , not No. VI- 048- 01 . 03. 1112 . That the sub ject s hipment of sotanghon has been seized and ordered f orfeited by the r esp ond ents , allegedly f or violation of Centnal Bank Cir cular No. l.J-4 in relation to Se c. 2350 of the Tariff and gustoms Code . 1113 . That the petitioners have sea- sonably appealed from t he decisions of the Collector of Customs and the Commis - sioner of Customs , to the Court of Tax Appeals ." ( Stipulat i~n of Fa c ts ~ Oct . 10 , 1964 , pp . 90- 94 , ~ . T � � rec .J. I ~ Pending final determina t i on of t he case , an orde r \va s issued for the release of t he 310 bales of sotanghon t o the petitioners upon their filing of a surety bond i n the amount of P5o , ooo. oo to guaran tee payment of the balance of the redemption price of said goods in the event that f orfeiture t hereof is f inally upheld (pp . 66 - 67 , C. T. A. rec .). The case �was submitted for dec is ion wi thout I memorandum of both parties . Petitioners assail the le gality of t he for - feiture of said goods on the fo llowing grow1ds , to

DECISION - C. T. A. CASE NO. 1013 . - 4- 1 . Tha t Central Bank Qircular No . 44 is beyond t he p o',<Jer of the Central Bank to is sue and promulgate under Republic Act No . 265 ; 2 . 1'hat Central Bank Circular No . 44 -vras not I approved by the President of the Philippines; 3 . That Central Bank Statistical Classifica- tion of CoJTI.modi ties vlh ich i mplements Central Bank ti r cula r No . 44 is arbitrary , ca p r icious and vn1im- sical ; and 4 . 11ha t t he pm�mr to regulate and c cnntrol importations are vested on other a gencies of the / government and not 1.dt h the Central Bank . (Se e p . 6- 8, "Petition for _eview. " ). The issue as to the legality of Central Bank Circular No . 44 is not nell/ and decisions on cases si~ilarly situated are more or less uniform . It appears that a commercia l letter o!S credit ( 1.�ras opened to cover a s h ipment of "31 Bales Cereal :B'ood (Sautanghon ) 11 classif ied under- Corrmwdi ty Code No . :N~C - Qlf-8 - 01 . 03 l.vhich means "Cereal Foods , ready t o eat . " Thereupon , Central Banlc Release Certifi- c a te No . 11450 vra s is sued and later val idated to cove r said shipment . Due hovJever to a protest lodged by Baguio Fo od 1'-:anufacturing Co . against said s h ip - ment , a re - exam.ination conducted s h O\�ls that Central Bank ~1elease Certif icate No . 11450 did not correctly cover the questioned s h ipment . Under Central Bank

DECISION - C. T. A. CASE NO . 1013 - 5- Statistical Classification of Commodities , revised as of ..Tuly 1 , 1957 , "Sautanghon" falls under Commo- dity Code No . U;t-Ott-8- 03 . 00 which covers ttcereal paste (macaroni , spaghetti , no odles , sautanghon , vermicelli and similar preparations )". There being a discrepan- cy between the commodity code classification found in 2elease Certif icate No . 11450 and the shipment involved , the Central Bank , t hru the H' onetar ~r Board , vii thdrevr the release certifica te . Hespondent Collec t; or of Customs ordered the seizure and forfeiture of said commodity for failure of t he petitioners to pre - sent the proper release certificate , amendatory or otherwise , to correct the discrepancy in the commo- dity classification of t he subje c t shipment . To our mind , 1�rhen t he Central Bank issued a release certificate for 111\fEC- 048 . 01 . 03 , Cereal Foods , ready to eat ," it '\vas not intended t o cover "sautanghon" '\vhich comes 1..mder a different commodity classification as UI- 048- 03 . 00. (See Phil . Planters & Investment Co . V o CornEl . of Customs , CTA Case No . 549 , Dec . 29 , 1959.) Petitioners , therefore , are without release certi- ficate for the said shipment of 11 sautanghon11 and its forfeiture for violation of C. B. Circular No o 44 , in relation to section 2530 (f) of the Tariff and Customs Code is in or der , petitioners having attempted to effect the i mp ortation of the same contrary to lavlo 'I'he validity of Central Bank Circular No . 44 promulgated under authority of section 74 , Republic Act No . 265 , has been passed upon and repeatedly up- /I

DECISI ON - C. T. A. C1 SE NO. 1013 - 6- held by the Hi ghest Tribunal . (Pas cual v . Comm . of Cus - toms , L- 10979 , June 30 , 1959 ; Actg . Comm . of Customs v . Leuterio , L- 91~2 , Oct . 17 , 1 959 ; Comm . of Customs v . Serree Investment Co ., 1- 12007 , Nay 16 , 1960; Comm. of Customs v . Nepomuceno , L- 11126 , 1�1arch 31 , 1962 ; Serree Investment Co . v . Comm. of Customs , L- 1956~ , Nov . 28 , 19 6~ ~. As to the claim t ha t Central Bank Ci r cular No . 4~ is invalid fo' r laclr o.f presidential signa ture , the Supreme Court in a similar vein held : "Appellant ' s claim that Circulars Nos . lt�Lt� and 4�5 were promulgated by the Monetary Board without c oncur rence of at least five of its members and without the approval of the President , is not supported by evidence . They have been published in the Official Gazette and the pre- sumption that an official duty has been regularly performed , the ordinary course of business follm:Jed , and the law complied \�lith , is on the appellee ' s side . 11 (F . Pascual v . Comrn . of Customs , supra) . Similarly , petitioners are now estopped from impugning the - r easonableness of the classifica tion of comrnodi ties made in pursuance of Central Bank Circular No. ~~ , it appea r j.ng t hat they had acted thereon , or invoked the benefits thereof , �when th' ey applied for release cer - tif icate under it . (See Comn1. of Customs v . Santos , et . al ., L- 11911 , Narch 30 , 1962 .) Petitioners argue furt he r tha t the Centra1 Bank lmder its charter (Rep . � ct 265) has no po\ver to regu-

DECISION - C. T. A. CASE 'NO . 1013 - 7- late and control imports . On the contrary , \ole are of the opinion that the Central Balli~ possesses such power and this is cor ollary to its main functions of main- taining our monetary stability (Sec . 2(a ), ~ ep . ct 265 ) and protecting the countr;y ' s international reserve . ( Sec . 74 , id .) The last issue pertains to petitioners ' allega- t ,ion that the subject importation vlas made in go od faith . The fa c tS of record , ho-vrever , ne gate petitioners ' contention. In the first place , when petitionemapplied for ~he opening of a commercial letter of credit i:rith ~ the Pacific Banking Corporation, they f urnlshed the i tern sought to be imported as 11310 Bales Cereal Food ( Sautanghon ) 11 classifying the same under Commodity Code No . " NEC- 048 . 01 . 03 . 11 The bank mistakenly approved the application and opened a l etter of credit in favor of the petitioners not realizing th<ft under Central Bank Statistical Cl assification of Commodi- ties , Commodity Code No . NEC-0~-8 . 01 . 03 applies only to tt Cereal Foods , ready to eatu and not to " sautang- hon" which properly falls 1.mder Commodity Code No . UI-048. 03 . 00 covering "Cereal paste (macaroni , spag- hetti , noodles , sautanghon , vermicelli and simil ar preparations ). " Petitioners , therefore , misdeclared or mi s represented to the bank the true classification of their importation to facilitate its entry into I

DECISION C. T. A. CASE NO. 1013 - 8- I the Philippines . Petitioners ' a ctuation i s understand- able . "Sautanghon" , although not totally banned , is allowed to be imported only in limited quantities due to the policy of our government to protect local manufacturers . In the second place , petitioners can- no t claim that they \�rere mistaken in their class;Lfi- dation of t he commodity I.�Jhen the y applied for a letter of credit . 'l'he fact tha t they requested and vrere all ovJed to vii thdraw the shipment under bond conclu- sively s hovJS tha t petitioners intended f rom the out- set to import t he commodity they applied for (which is sautanghon) and nothing else . In t he t hird place , petitioners , through their cou..'Ylsel , in t ne seizure proceedings before the Collector of Customs , admit t h o.t the subject importation is ban..ned and indicated ti1eir disavo\val ,of an intention to further contest the move of the government to forfeit t he s~Je . This only shows tha t petitj_oners all along kne "~:J tha t the item is banned or its importation restricted , thus , their I.�Jillingness to \vaive any inter est they had over it . At any r ate , good f a ith can not legalize an otherwise ille gal importa tion. I N VI m� Qli' ALL THE FOREGOI NG, the decision ap pealed from is affirmed . Inasmuch as t he commodity in ques - t j_ on \�las released under bond , pe ti t ione rs and I ndus - tria l Insurance Co ., Inc ., are hereby ordered to pay , jointly and seve rally , to the Bureau of Customs t he surL

DECISION - C. T. A. C1SE NO. 1013 - 9- of � 50 , 000 . 00 representing the balance o:.(' the redemp - tion price of said cornmodi ty , i�li th costs against petitioners . SO OiWEREJJ. uezon City , ~ebruary 2 , 196 ~ . RONAN H. ill1ALI Associate Judge I COHCUR : 'W Judge I