CTA Case No. 4454 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QlEZON CITV WATSON INDUSTRIAL BALES, INC. , C. T. A. CASE NO. 44S4 Petitioner', COMMISSIONER OF CUSTOMS, Respondent. M- - - - - - - - - - - - - - H DEC I 0N Petitioner Watson IYrdustrial Sales Incorporated seeks the refund of allegedly excess payments of taxes arrd duties made on the import at i OY'r of polypropylene synthetic resins. At issue here is the application of the third couYrtry valuatioYr as basis for the determi Yrat ic�Yr of the dutiable value of the subject shipments. Petitioner imported 18 x 20' containers (251 MT> and 7 x 20' containers (97 MT> of polypropylene synthetic resins in granule form. The shipments arrived at the Manila International Container Port on March 18, 1989, aboard the vessel S/S NADEZHDS � OBUKHOVA from Czechoslovakia. [Admitted in the Answer, par. 2, p. 21, Rollo.J Import Entry and I Yrt erna 1 Revenue Dec 1a rat i OY'r No. 14710 <with t~espect 511 .�

DECISION C. T. A. CASE NO. 44:54 - 2- to the 97 MT shipment) [Exh. "B", p. 33, Customs record] and Import ar.d Interr.al Revenue Declaration No. 14711 (251 MT shipmer.t> [Exh. "8", p. 10, Customs record] covering the importations showed the Home Consumption Value <HCV> of the shipments at US$230.00/MT. The imported goods were forwarded to the Office of the Commissioner of Customs for: clearance. The clearance was grar.ted with the condition that additional duties and taxes amounting to P130,840.00 for the 251 MT shipment and P50,564.00 for the 97 MT shipment be paid. The additional duties and taxes were based on a third country valuation of the shipments, i.e. Hungary, at US$474.00/MT summarized as follows: [Exhs. "L", p. 67, Rollo, and "M",1 p. 68, Rollo. J As Found As Dec 1 at~ed <US$474/MT> <US$230/MT> Difference '37 MT Shipment Customs Duty 2'31,000.00 2'31,000.00 Tax - VAT 165,6'36.00 115,132.00 50,564.00 I PF 250.00 250.00 p 456,946.00 p 406,382.00 p 50,564.00 251 MT Sh i pmer.t C�..tstoms Duty 753,000.00 753,000.00 Tax - VAT I PF 428, 501. 00 2'37,661.00 130,840.00 250.00 250.00 p 1' 181 ' 751 � 00 P1,050,911.00 P130,840.00 Tot a 1 P181,404.00 512

DECISION C.T.A. CASE NO. 44S4 - 3- Petit iorrer paid orr Apri 1 3, 1989 said add it iorral duties and taxes r..mder protest. [Exhs. F 11 11 p. 50, , Customs record; and K 11 11 p. 30, Customs record. J It , quest iorrs the Commissioner's decision to use Hungary's HCV, at US$474.00/MT, as the basis for requiring petitioner to pay additional taxes and duties, inst ead of US$230.00/MT, the value i Y't Cz chog lovakia, the courrtry export at iorr. Pet it ion.er insists that the disputed assessment is arbitrary and contrary to respondent's published valuation of the subject items originating from Czechoslovakia. Acting on petitioner's protest in MICP Protest Case No. 085-89 and 085- A-89, the District Colle~tor of Customs of the Manila International Container Port I decreed, on December 11' 1989, the refund of additional payments made by petitioner. On automatic review, the � t"esporrdeY'lt Commissioner reversed the Collector's decision OYt Januat"Y 26, 1990. Petitioner's motioY'l for reconsideratioY'l filed OY'l Febrr..tary cW, 1990 was denied by the Commissiorrer iY'l an Order dated April 4, 1990 and t"eceived by petitioner April 19, 1990. [Admitted in the Answer, pat". 4, p �. 22, Rollo. J Orr May 15, 1990, petitioner filed hereiY'l petition for review. 513

DECISION C. T. A. CASE NO. ~~S4 - ~- The dutiable value c�f the impcorted article is based con the published HCV of the p c�rt of ot~igirr cor country of exportation. The only issue to be resolved, in this case, is the determirratiorr of the country of ex pot~ t at ion. Is it Hlll"rgary or Czechc�s 1oval< i a? The answer to this questioYr will determine the base of the dutiable value of the imported polypropylene synthetic resins. If its Hungary, the base would be US$474. 00/MT as stressed by respoYrdent. But if its Czechoslovakia, theYr the base should be US$230.00/MT as pointed out by petitioner. Sect ioYr 201 of the Tariff and Custcoms Code, as amended, provides "that the dutiable value of an irnpot~ted article subject to an ad valorem rate of duty is based on its home consumption value or price as freely offered for sale in wholesale quantities in the ordinary course of trade in the principal markets of the country from where exported on the date of export at ioYr tc� the Philippines. That home consumption value or price is the value or price declared in the consular, commercial, trade or sales invoice." [Commissioner o'f Customs v. Court o'f Tax Appeals, 161 SCRA 376; Commissioner o'f Customs v. Hon. Court o'f Tax Appeals and NCR Corporation <Philippines>, G. R. No. L-48027, March 11, 1991. J 51 4

DECISION C.T.A. CASE NO. 44S4 - s- Customs Mernorar-.durn Order No. 32-87, dated July 2 0, 1'387, 1 i sted the i terns i Y�C 1 uded in deterrni r-d ng the dutiable value of imported articles. The dutiable val Lte of an imported article shall be the surn of the followir-.g iterns, to wit: II lo Cost The cdst or domestic wholesale value <excluding internal excise taxes> as bought aY�d sold or offered for sale freely in the ordinary course of trade, in the principal markets of the country .of exportation on the date 6f exportation � to the Philippines or where there is Y�one OY� such date, on the date nearest to the date of export at ion. In case such value cannot be ascertained or where there exists a reasonable doubt as to the fairness thereof, it shall be ascertained in the following order of preferences: <Underling Ours.> a. The domestic wholesale value (fair value> of the articles in the principal markets of the cour-.try of manufacture or cori gin; b. The dornest ic whc�lesale value (fair value> in the principal rnarket of a third country with the same stage of economic development as the country of eof exportation, as listed in Annex "A" het~eof; The above mentioned values shall be ascertained by the Comrnissior-.et~ of Customs from the repc�rt of the Rever-.ue or Cornrnercial Attaches or other Philippine Diplomatic Officers or Customs Attaches and frorn such information as may be available to the Bureau of Customs. 515

DECISION C.T.A. CASE NO. 44S4 - 6- c. Where the domestic wholesale value cannot be ascertained as stated ir� the preceding paragraphs, the value t 'c� be used shall be the domestic wholesale selling price of such or similar article in the principal markets of the Philippir.es or. the date the duty becomes payable on the articles under appraisemment and in the ordinat"'Y course of trade, mir.us not more than twenty five percent (25~) thereof for expenses and profits, and duties an~ taxes paid thereon. 2. Freight and Other Charge and Fees XXX XXX X X X. 3. Insurance XXX XXX X X x. II It is clear from the abovequoted provision that the dutiable value of imported articles shall be th~ sum of the domestic value obtaining in the country of expc�t"'t at ion, freight ar.d insurance charges. In case the domestic value can r.ot be ascertained and where there exists reasonable doubt as to its fairness, the value obtaining in a third country with the same stage of economic development as the country of exportation shall be used. A review of the Customs records shows that the Comrn iss i onet"' established the port of export at ion to be Hamburg, Germar.y. He based this finding on the entries in the Bills of Lading Ep. 22 516

DECISION C.T.A. CASE NO. 44S4 - 7- and p. 42, Customs recordJ which show Hamburg as the port of loading. According to respondent, the port c�f loadir�g shall be considered to be the port of exportation unless the contrary is proven. The Commissior.er also took note that the wot~ds "Hamburg, Czech." appearing in box no. 9 with printed words "PORT/COUNTRY OF EXPORTATION" in the Import Entry Forms, are erroneous. He concluded that in case there is conflict between the Bill of Lading which is prepared by the shipping agency and the Import Entry which is prepared by the consignee the former must ~ ecessarily prevail. Havir.g established Germany to be the cour.try of exportation, � the respondent Commissioner, adopting the third cotmtry valuatior., used US$474.00/MT, the urlit HCV obtaining in Htmgat~y [Anr.ex "A", Petition; p. 5, RolloJ, a country with the same stage of ecor.ornic development as Germany [Anr.ex "A" to Customs Memorandum Order No. 32-87]' as his base for computing the dutiable value of the subject imported polypropylene resins. We do not agree with respondent Commissioner of Customs. The published HCV <US$230.00/MT> in Czechoslovakia should prevail. A reading of the Bills of Lading dc�es not show the co�.mtry of export at ior. but the pc�t~t of loadi r.g. 517

DECISION C.T.A. CASE NO. 4454 - 8- Th e claim of respondent that the Bills of Lading show the country of exportation to be Hamburg is therefor not correct . What the Bills of Lading say is that the "Port of Loading" was Hamburg. Said documents never mentioned the country of exportation. Furthermore, nothing in the Bills of Lading or in the records indicates that the articles were products of Germany or that they were imported from another country into . Germany and forming a part of the mass of products therein and afterwards exported to the Philippines. As regards the words "Hamburg, Czech." appearing in box no. 9 of the Import Entry Forms, the same are not erroneous and should not cause doubt in the mind of the respondent as to the origin of the goods. The printed words in box no. 9 shows "PORT/COUNTRY OF EXPORTATION". Therefore, the words "Hamburg/Czech." indicates . Hamburg as the port of loading and Czechoslovakia as the country of exportation. Note that box no. 10, in the same Import Entry Form, has printed words "COUNTRY OF ORIGIN" and under it was written Czechoslovakia as the country of origin. As pointed out by petitioner, Czechoslovakia is a landlocked country. Goods exported from that country must be transhipped overland to a seaport and then loaded to a ship. 518

/ DECISION C.T.A. CASE NO. 44S4 - 9- The the evidence presented by petitioner clearly show that the goods originated from Czechoslovakia; transhipped overland to Hamburg, Germany; arrd loaded orr a ship irr Hamburg for exportation to the Philippines. The evidence: a) Letters of Ct~edits 89-0136 [Exhs. "I" artd "I-1", p. 66, Rollo] and 89-0180 [Exhs. "D" and "D- 1", p. 65, Rollo] opened by petitioner, coverir�g the subject articles, in favot~ of Petrimex Foreign Trade Co., Ltd., of Bratislava, Czechoslovakia; b) Certtral Bartk Release Certificates Nos. BR 89-1428 [Exhs. "E" arrd "E-1", p. 47, Customs record] and BR 89-1429 [Exh. "J", p. 27, Customs record] showir�g "Petrimex" as the supplier and "Bratislava" as the country of origin; c) Commercial invoices coverir.g the shipmer.ts [Exhs. "C"; "C-1" and "C-2", p. 38, Customs t~ ecc�rd; Exhs. "H"; "H- 5" artd "H-6", p. 19, Customs record] s .howirtg the names Petrimex Foreign Trade Co., Ltd., and the correspondent barrk in Bratislava and the cost of irrlarrd freight paid. What rtow is the dutiable value of the imported To reiterate: CMO Order No. 32-87 provides that the cost component of the dutiable value of the imported article shall be the domestic wholesale 519

DECISION C.T.A. CASE RO. 4454 - 10 - value of the articles in the country of exportation. Resort to a third country valuation can only be made once such value (i.e., the value in the country of exportation) can not be ascertained or where there exists reasonable doubt as to the fairness thereof. Following the law, the value that should be used, in the instant case, is � the HCV in f..?,:..~..9..h.:<:>..~. !.9...Y..~-~.!.~. .t..- ..........~.h.~. ....9..9...~.!!.~.E.Y......,..._.Q.f......~.?.C.P...9..:t.:.!=:..~.~.!.9..!!., wh i c h i s US$230.00/MT. In fact, respondent admitted in his Answer that the "shipments arrived in Manila � International Container Port on board the vessel SIS NADEZHDS OBUKHOVA" from Czekoslovakia (~ic)." [Answer, par. 2, p. 21, Rollo]. Customs records show that US$230.00/MT was the published unit value for polyporpylene resins in granule form from Czechoslovakia. It has also been established that the Philippine consulate officers in Vienna and Berlin supplied a value information on said articles from said country at US$230.00/MT. [Exh. "3-B", p. 79, Customs record.] From the foregoing, it is clear that the decision of respondent, to use US$474.00/MT, the alleged . HCV in Hamburg, Germany, instead of US$230.00/MT, the HCV of Czechoslovakia, the country of exportation, is therefore erroneous. 52-0

DECISION C. T. A. CASE NO. 4454 - 11 - With respect to petitioner's prayer for � the same may be awarded only if the collection of the tax is attended with arbitrariness. Arbitrariness presupposes inexcusable or obstinate disregard of legal provisions. [Victorias Milling Co., Inc. v. Commissioner of' Internal Revenue, et. al., 19 SCRA 430.] In this case, respondent's reversal of the Collector's decision is not by itself arbitrary. His finding that Hamburg, Germany � is the country to be reckoned with as the country of exportation is not per se inexcusable. A mistake in appreciation of the evidence on record is not per se arbitrary. Thus, the Court cannot award inter~st in favor of petitioner. WHEREFORE, the petition for review is hereby BRANTED and Judgment is hereby rendered reversing the 1990. Sales, Inc::., the amounts of P~O, ~64. 00 <under Entry No. 14710) and P130,840.00 (under Entry No. 14711) or a total of P181,404.00. Without cost�. 521

-- DECISION C.T.A. CASE NO. 4454 - 12 - SO ORDERED. Quezon City, Metro Manila, July 20, 1992. ~-~T~D~~t Presiding Judge I CONCUR1 ST~..._... Acting Associate CERT:EF:ECAT:EON I hereby certify that this decision was reached after due consul tat ion between the members of the Court of TaM Appeals in accordance with Sect ion 13, Article VIII of the Constitution. ~Q.. ~ ERNESTO D. ACOSTA Presiding Judge Court of TaM Appeals 522