CTA Case No. 3494 (Decision)

REPUBLIC OF THE PH IL IPPINES COURT OF TAX APPEALS QUEZON CITY LIBERTY AVIATION CORPORATION, F'eti t.ioneF� ~ versus C.T . A. CASE NO. 3494 THE ACTING COMMISSIONER OF CUSTOMS, H~2sponden t . ~�- -- - �-- -- -- /{ DEC I s I 0 N This case involves the for� �f eiture of aRe - Export Bond poste d on an i mportation conditionally entered ta x free pursuant to the provi sion of Section 105(i) of the Tariff and Cus toms Code. A s h ip ment of Vinq Air E-- 90 including optimum equipment and avionic s consigned to petitioner by Bee ch Aircraft Corporation o f Wi c h ita, Kar a s ~ U.S.A.~ arrived at the Manila In tern a tion.:~ 1 AirpoF�t on Ma r�c: h 2 4, 1980. Ma nif ested for� "Demcmstr� aticm �flight. only" the s a me was f I'""Offi Customs ' custody under an Or-dinar-y Re - E>:poF�t Bond PH No. 20/12024 with the petition er as t h e principal importer~ and the 27

DECI S I ON CTA CASE NO. 3494 2 P h ilippine Home Assurance Cor porati on as Surety in the amount of P3"560~594.(H) under such ter-ms and condition~ ~ � wit: NO J(, THE R.EFORE .� the condi tion of this Obligation i s :.:::uch that i f th e aforementioned mer c h andise :::: hall in good faith be ac tu a 11 y e ..,�por ted /ley on d t l?e limit s o �( t h e Philipp i ne :::: N.ithin :..=:.ix (6) mon t h s an d t I>e expo r t paper :.::: a :.=: e v i den c: e of :.:::u~-:h e .">;� portat .ion ::::ati s factory to th e Collector of Custom:.::: b e pr oduc ed and pre :.:;: ented to him .� i f the duties_, taxe s accruing upon :.:::c1 id g oo,."l s :;: ha l l be paid promptly on or before the e.!fpirat.ion o 'f t" h i :.=: bon d .� t I>en t" h i :.=: o b 1 .i g a t i on :.=: h a 1 1 be null and vo .id, otherNi :.::: e, t�o re ma i n in full fo c e and effect. In add i t.icm ~ Section 105 n�f t he Tariff a nd Customs Code speci f ica lly prohib i t s the s al e ~ a mong other- s ~ of ar�tic l es ent e r-e d ccmd.i..tionally free under- said pr�ovision o f l.':H'I pr- ior. t. n t h e p ay me nt of dutie s~ ta:-:es and other- c: h .::H-g es ~ thu c; -- u x x x. Provided , that a n y art.i c l P 2..QJ.{/.... bar t e :r e d .� h i r e d or u :.; e d for pur po :.=: e :.=: other than that they Ner e intended for ~Ltb. <}...Y..L ..P t .L <?t......_P..~Y.. Jll.~_r.:,_ .t.__ g(__ thf'. 9..1.J..f.Y..s..........f..i;l_,"!,:........Q..L... ......!.l ttU?. .r:.......-~::,.1? ~!....9 R.;..~ .� N h i C h No U 1 d have been due and pay able at" t"l?e time o f entry .if the article:::; had be e n ent e ret.".f Nithout the benefi t of thi ~ � :::; e ction ~ :.:::hall be :..=:ubject to forfe .i tur e and th e importation :.:::hall con:.:::titut"e a fra u dulent practice again :.::: t c u :.::: t"om :.::: revenu e puni:::;hable under Section 3602 , a:::; amended of thi :::; Code: .,. .,. x" (E mpha :::;i :.:.:: :.::: upplied) During the l ifeti me of the bond ( extend ed for 28

DECISION CTA CASE NO. 3494 another si:-: (6) months) the subject. aircra �ft was never re-exported nor the cor r esponding duties, taxes and oU1er c h <?.rges l e gal. 1 y d ur:> t.h ~::~- r-- eDn paid notwithstanding the sale thereof 'few $1,1.07, '75 7.00 to the National. Sugar- Trading Corpor a tion ( NA Fl lJTRA) on October 1980 by the petitiDner. Ccmsequen tl y on November .l3 ' .1981 the Co 11 ector of l"lani 1 a In t e n1 a t. :i on a l Airport demanded the payment from petiti o ne r the amount of F'3~560~9 5 4.00 or the face value of the re -p:-:pnr- t bond for- the no~-complianc:e of the ter-- ms and condition tl--lE?I"' !~ D�f and bn-:> ac: h o f f.�. h e a f f .i. l i. .:\ t ing provision o'f Section 105~ ibid. The r-e sp o ndent Commissioner o'f Customs gave f i nality tn the demand on June 3~ 1982. Hence this instant petition. Petitioner seeks the discharge of the Re- E:-: port Bond ear-lier posted �f'or- the r-e 1 ease of the aircraft co �1 r:l i t ion a 11 y entered t.a :-: free under Section 105(i) of the Tariff and Customs Code, which was ~;old on October, .1980 to a ta:{ e>:empt governmental entity. I t avr.:'!r�s "Thu~;, there was in fact no taxes and duties due from the purchaser or 29

DECISION CTA CASE NO. 3494 - 4 -� importation by NASUTRA f rom BAC (Beec h Aircraft Corporati o n). I n accordance t.he r� ew.i. th, t he Ministry of Finan ce i ssu ed its First I n dorsement o n 18 May 1981 autho r i zi ng the Commission er of Customs to release th e a i rcra f t 'covered b �f Beec h Aircraft Corporation Invoi c e No . A28923-1 d~te d Ja n uary 1 3 , 1981 x x x witho ut t h e prepayment of du ties, tax e s , fees and o ther c h arg es r e quin?d by Sec ticm 2 3 o f Presidential De ere!? No. 11.7'7 ' ' ,If Hence, "Under s u c h c i rc ums tance, ther� e "' at .. e� n o t .7:1.~�:P. s and duties a cc ruirHJ upon the airc r�aft wh ic h need be paid by petitioner b e for e it is en t itled t o a disch c:.u� g e o f i ts b o nd . " Re s pond ~;~ n t ' s unva r y i ng ar:;; <:;E~~�- t inn i s "th i~1-. t h f?. sale between L i bE!rty Cot"� pora t.i.cm a nd NASUTRA took pl ac e in October� , .1.980, w ithout th e knowledge and con s ent of the Bu reau an d t h e su b j e c t plane wa s turned ove r and d e l ivered to NASU TF: A on November 2 0, 19EIO. On the other hand, the e~�:emption c: e r t i f ic: a t.e cited ther-ein was i s sued to NASUTRA by � l-)e Mini s tr-y only o n May 18, 1981. I t must be emphasized that s a id e ~�:emp t ion dated May 18, 1981 o f that Office, s p eci �f ica lly ref ers t o 30

DECISION CTA CASE NO. 3494 - 5 .... The Beechcraft plane cove red by t hi s case~ however~ n:>fers to ' .impor�� t ;::d : io n of L.:i. tJerty Aviation "~td.c h waS' conditiona ll y re 1 eased puns uan t t o the p r o v i s j CHlS of S ec: tion 105(i) of the Tar .lff and Ctistorn s Coci e '. This being the case~ it. can safely be co n c luded th at the e>:emption certi fi t: ate does not re �fer to the p 1 ane under consideration. Nowher�e in the recor�ds wi 11 show that tl ~ e Min is try int en d s thi s e:�:e mpt ion to b e applied to the Beechcraft plane i mp orted by Liberty Aviation Cor� por ,:!\ tion." A c: c:: ordingly~ "that s ,:!\le to ta :�:-e:�:empt entity will not <"\bsolve Libe rty Aviation Cor-poration of its l iab.i 1 i ty �f or� violation of the terms and conditions of the bon d~ as we ll as the provision of Section 105 of the Tariff and Customs Code. As the prin cipal imp o rter~ i t is hi s prime obligation to fulfill fait h fully the ter-ms and ccmdi tion s of the bond~ that is~ to re - e:�:port the plane or pay the duti es and t ax es due thereon prior to the sale and any breach thereof will result on the duty of thi s Bureau to collect the face value the bond and/or pros~cute th e impor-ter for v io 1""tion o f :Jec tion 105 in re 1a ticm 31

DECISION CTA CASE NO. 3494� - 6 -- to Section 3602 of the Tariff and Customs Code~ as 7 amended. Stripped to i t s essen ce the c ;:>.s e pn~sr~ n ts a disquieting qui bb 1 e on the partic:u 1 ar 11 shipment. 11 contemplated and referred to in thR c ertificate of tax e:�: emption issued by th e M.i.nistxy of Finance on May 18, 1981, whic: h reads: The :::: hipment ot" the National Sugar Trading Corpor� ation an e.~ffil.iate o1c th e Philippine Sugar Comm.i :::: :::: ion under PD 1.1.'.'~2 c on s isf-.ing of one (1) 1'.':J81) S t and<'lrd Beech c 1 -'ft King Ai r E- 20 an d other optiona J. equipment and a ~' .ioni c.s: . co ~1 ered by Bee c hcraft Corporation Invoice No. A128'.~' 2 .3 - 1 cla'f:ed ~7anuary .t.3 .� 198.t .� may be relea s ed Nithout the prep ay ment of d u t i e :::: .� t' a .Y e :'; an d o th e r c h a r g ! ' :::: r e q u i r e cf by Section :'2 .3 of Pre si dential Decree No . 1 1 7 7 pur s u an t to the ~7 o i n t� C .i r �=u I a r i :::::.:::ued by the Budget Commission and th e 1�1in.i stry ot- Finan c e dated Nay 9 .� .197 8 X X X. Far from a comedy of er r�o r� s ~ t: ht:� afor-e sai d t:a >: e:�:emption gr-ant cannot be n aive ly vi e? wed C~s of such br�oad scopE~ and spec::tn.un ,,, i. t. h ope;�n -�- e nded feature as would an impor.. tatio n w hi c t1 petition er may proff er to attac h. The ce r.. t i fica te of exemption is not. mere legal l e gerdemain but finds confinement to "sh ip me nt of th e National Sugar the rule II Settl e d 1s Trading Corporation . 32

DECISION CTA CASE NO. 3494 - 7 -� that exemption from a common burden cannot be permitted to e :-:ist upon in fer� enc e o r� va gue implications because the law "doe r; not l ook with favor on tax exemptions and that h~ who would seek to be thus privill:c>g e d must justify it b y wo rds "too plain to be mistaken and tno ca t egori cal to be m i s i n t e r� p n ; : ; > t e d . " The of the questioned aircraft cannot simply be piggy- backed to the privilege made available to N~SUTRA. "T o req uir e less would sanction an e x p~di ~ nt ~ rr ange men t unsusta .i.nable by opera tir:m or applicable settlecf pr�.inc.i.pl es. The s e prosc ripti ons of securing the integrity o f the lawful dues are no mere ingenuou s so phistri es conjur~d out of so me quirky insights bu t ar�e ti.ngE~d with stn:mq i~ss w?.s of public poli cy to preven t �f r�a ud u pc>n the t-evenu es lest the cornerstone of e ffectiv e c ollection be p 1 aced in the qui cksa nd o �f se 1 f - .i.n 1�. p r��est" Corporation Ltd. vs. CoJtJt issioner of Custo� s. CTA Case No. 3099, July 31, 1981). We then? �fore find _i llog ic t he sp r ou ting impression precipi.tately broached b y t he petitioner that the tax exemption authorized the Na ti onal 33

DECI S ION CTA CASE NO. 3 494 - n -- Sug~r Cor�� pol'- ~ t i o n be t~c:ked t.o the pr�eviously .i. mpcwted ~ircra �ft. sold on November� 20, 1980. The in tend men t in the ta:�: pr.i. vi 1. ege is of deliber~te c hoi ce ~nd the ~vailment thereof cannot easily titillate to as si mpl e as "What 's in a n~me? That which we ca ll a rose in any other name would smell as sweet "~ so to s peak. We are less impressed by what petiticmer- alle:~ged than what i t failed compliance. Su �f"fic~:-: i t to statE?~ in~ 2nd Indor-se ment to the Commissir.:mer- of Customs dated March 9, 1982 ~ the Ministry of Finance concurTed "with the stand taken by that Bureau on the recommendation of the Collector of Customs o"f the M~nila International Airpor-t to ho 1 d the re 1 ease o"f a 11 ship men t.s of Liberty Aviation Corporation in view of its fa ilure to pay its obligation arising "from the importation o�f one ( .1.) Beech cr�~ ft plane" and nrdered, "That o"f"fic:e is hereby directe d to enforce the immediate collection of the duti es and ta xes due on the said plane and the corresponding penalties attached thereto in view of the patent vi nlation of the T~r- i.f"f Coclr::~." 34

DECISION CTA CASE NO. 3494 - 9 ��- So i t ~ppears and We so hold that there is no error in the res p ondent's demand f or�� peti ticmer to pay the tota 1 a mou nt of F' 3 ~ 360,95 5 .00 repre senting the face value o f the Re-Export Bond No. 80/12024. WHEREFORE, peti~ion is hereby d i smissed at petitioner's cost~. SO ORDERED. Ouezon City , Metr-o Manila~ ,J<mu a r,-y Tl~ 1. 9 8 9. ~YES~~~ ?l ssoc: iat e Judq e WE CONCUR: . --ROAQUIN 35

DECISION CTA CASE NO. 3494 - 10 - CERT I F I C AT I 0 N I hereby cr:rti fy that t hi s decision was reached after due consult2 tio n among t he members of the Court of Ta x Appeals in Acc ordance with Section 13, Article VIII of the Con st itution . AMf\NT FILLER Pr� e s.i. d ~ng Judqe Court of Tax Appea ls 36