CTA Case No. 3177 (Decision)

_, .... ! UBLIC OP THE PHI-LilftNE~ COURT OF TAX APP.E.A1...3 QllUON ClTY ~LOVSTED & CO., INC., C.T.A. CASE NO. 3177 Petitioner, - versus - COMMISSIONER OF CUSTOMS, Respondent. X- - - - - - - - - - - X LOVSTED & CO., INC., C.T.A. CASE NO. 3178 Petitioner, 7/oo/r;~ - ,versus - COMMISSIONER OF CUSTOHS, Re spo ndent. X- - - - - - - - - - - X DE C I S I 0 N Inasmuch as these two cases are app e ~l~: from a consolidated decis i on o f respondent Commiss i oner of Customs in Manila Protests Nos. 9741 and 9742 and in- volve the same parties and raise the same issue, they . are jointly submitted for decision. The facts are not disputed, the parties having submitted in each case an agreed stateme nt of facts as follows: CTA Case No. 3177 Stipulation of Facts PETITIONER and RESPONDENT, by the i r undersigned attorney s herein respectfully stipulate on t he following f acts: 1. That Petitioner is a corporation duly organized and existing under the laws 1 2 '1

DECISION - CTA CASES NOS. 3177 & 3178 - 2- of the Philippines, with principal office at c/o Smith, Bell & Co., Inc.; Km. 13, Manila South Expressway, Paranaque, Metro ~ Manila; and that respondent is the duly appointed qualified and incumbent Commis- sioner of Customs and may be served with Summons at the Bureau of Customs, Manila; 2. That sometime in July 1975, the S/S "Mar cnen Maersk", Reg. No . 1059, arrived at the Port- of Manila and dis - charged a shipment consisting of 17 pack- ages of refrigera ting machinery par ts , consigned to herein petit ione r covered by Bill of Lading No. CFS-39 a nd declared under Entry No . 05487 1 , consisting of fifteen (15) Model HGC 1000 compressor valued at $6i.35 each as appearing in the Consular Invoice. 3. That upon appraisal of the afore- mentioned imported spare parts, the Collec tor of Customs by reason of an alleged "alert notice", increased the value of the same from $62.35 to $ 70.24 each resulting ~o ~ an additional payment by petitioner of duties and taxes in the amount of ~459.00 as p e r O.R. No. 447463, dated July 8, 1 975; 4. That in a letter, dated July 22, 1975, xerox copy of which is Annex "A" of the Petition for Review and docketed as Manila Protest No. 97 41, petitioner protested the additional assessment and collection of customs duties, and taxes stating, among others , that inasmuch as the questioned articles do not have yet an established . and published home consumption value deter- mined by the Commission of Customs, the same should have been assessed the customs duties and taxes based on the value appearing in the consular in vo i ce of �mer chandise in accordance with pa ragraph 2, Section 201 of the Tariff and Customs Code as amended by Presidential Decree No. 34} 5. That on April 14, 1978, the Collector of Cu s toms, relying solely on the values mentioned in the alleges "alert notice", rendered a decision dismissing Marrila Protest No. 9741 (and 9742) '� notice

-- - - - . ��- ------~ DECISION - CTA CASES NOS. 3177 & 3178 - 3- and copy received on May 3, 1978, by Petitioner which ..is Annex "B" of the Peti tion; 6. On May 17, 1978 , petitioner appealed the aforementioned decision of respondent pursuant to Section 2313 of the Tariff and Customs Case, as amended, which appe al was docketed as Customs Code No. 79-13; 7. That on November 20, 1980, peti- tioner received the decision of respondent in the aforementioned Case No. 79-13, dated October 1, 1980, aff i rffi i ng the decision of the Collec t or of Customs in Manila, which is Annex "C" of the Petition; 8. That the only issue to be litig a ted, in the case at bar, is whether or not respondent is correct in determining the horne consumption value of the goods imported based on an "alert notice" instead of that appearing in the consular invoice of merchandise. CTA Case No. 3178 Stipulation of Facts PETITIONER and RESPONDENT, by their undersigned at.torneys , herein respectfully stipulate on the following facts: l. That petitioner is a corporation duly organized and existing under the laws of the Philipp i nes, with principal office at c /o Smith, Bell & Co., Inc., Krn . 13, � Manila South Expressway, Paranaque, Metro Ma nila; and that Respondent is the duly appointed qualified and incumbent Cqrnrnissioner of Customs and may be served with Summons at the Bureau of Customs, Manila; 2. That a shipment of 11 cartons of Te cumse h Compressor a nd spare parts arrived at the Port of Manila aboard the S/S "Traviata" with Registr~ No. 905 , c overed by Bill of Lading No. 29, and declared under

DECISION - CTA CASES NOS. 3177 & 3178 - .5 - accordance with paragraph 2, Section 201 of the Tariff an4 Customs Code as amended by Presidential Decree No. 34. Likewise, it was further stressed that the invoiced values declared were lower by 30% of the list price which regular discount is allowed by herein respondent under Customs Tariff Decision Circular No. 5-73, dated May 4, 1973 . 6. That on April 14, 1978, the Collector , of Customs, retying solely on the values mentioned in the alleged "alert notice", rendered a decision dismis s ing Manila Protest No. 9742 (and 97 41 ), neti c~ ;:md copy receipt on May 3 1 1 973 which is Annex "B" of the Petition; 7. On May 17, 1978, petitioner appealed the aforementioned decision of responde nt pursuant to Section 2313 of the Tariff and Customs Code, as amended, which appeal was docketed as Customs Case No. 79-13; 8. That on November 20, 1980, petitioner received the decision of respondent in the aforementioned Case No. 79-13 , dated Ociober 1, 1 980, affirming the deciiion of the Collector of Customs of Manila, copy of which is Annex "C" of this Petition; 9. That the only issue to be litigated, in the case at bar, is wh e t her or not respondent is correct in determining the horne consumption value of the goods imported based on an "alert notice" instead of that appearing in the� consular invoice of merchandise. � In CTA Case No. 3177, as stated by the parties. in their stipulation of facts, upon appraisal of the imported spare parts consisting of 17 packages of refrigerating machinery parts involved therein, the Collector of Customs by reason of an alleged "alert notice", increased the value of the same from $62.35

DECISION - CTA CASES NOS. 3177 & 3178 - 4- Entry No. 047434 and broken down as follows : a) Ten (10) units of Model VFTL open type compressor with flywh~el and valves valued at US$198.38 each; b) Five (5) BNK 585-1~0 valve assy at US$15;34 each; and c) Five (5) BNK 512-~ shaft seal kit assy �at. US$14.29 each; 3 . That in the appra i s a l to dete rmi ne the Home Co nsumption value for d Lties and/or taxes purposes, the Collector of Customs by reason of an alleged "alert notice" increased the values of the aforementioned imported ar ticles, as follovlS: a) The VFTL compressors were valued at US$223.8.1 each instead of 'che duly authenticated valu~ o f US$198.83; b) The valve as s y BNK 505-~0 to US$20.17 each initead of the invoiced value of U&$15.35; c) The seal kits (5) to US$19.21 each, instead �of the US~l4.92 in~oiced value; 4. T6at due to the aforementioned increased appraisal, the Collector of Customs of Manila, assessed, levied and collec ted from petitioner additional duties and taxes, including a fine in the total amount of ~3,570.00, as per Official Receipt No. 6915, dated July 11, 1975; 5. That in a letter, dated July 22~ 1975, which is Annex "A" of the Petition for Review � and docketed as� Manila Protest No. 9742, herein petitioner protested the .additional.assessment and collection of customs duties, taxes and fine stating, among others, that inasmuch as the questioned articles do not have yet an established and published home consumption value determined by the Commissioner o f Customs, the same should have been assessed the customs duties and taxes based on the value appearing in the consular invoice of merchandise in

DECISION - CTA CASES NOS. 3177 & 3178 - 6- to $70.24 each resulting to an additional payment by petitioner of duties and taxes in the amount of ~459.00 as per Official Receipt No. 447463 dated July 8, 1975. And in CTA Case No. 3178, as again stipulated by the parties , in the appraisal to determine the home consumption value for duties and/or taxes purposes, t he Collector of Customs by reason of an alleged "alert notice" increased the values of the aforementioned imported articles, as follows : a) The VFTL c omp ressors were valued at US$223.81 each instead of the duly authenticated value of US$198.83; b) . The valve assy BNK 505-10 to US$20 .17 each instead of the invoiced value of CS$15.35; C) The s eal kits (5) to US$19.21 each, instead of the US$14.92 ,invoiced value. Due to the aforementioned increased appraisal, the Collector of Customs of Manila assessed, levied and collected from petitioner additional duties and taxes, including a fine in the total amount of P3,570.00, as per Official Receipt No . 6915 dated July 11, 1975. The law on th~ determination of the basis of the dutiable value of an imported article is Section 201 of the Tariff and Customs Code, as amended by Presidential Decree No. 34, now Sect i on 201 of Presidential De cree No. 1464 , otherwise known as the "Tar iff and Customs Code of 1978". The applicable law clearly and unequivocally 11 I U {..,

DECISION - . CTA CASES NOS. 3177 & 3178 -7 - states that the dutiable value of an impo rted rticle subject to an ad valorem rate of duty, like the shipments in question, is based on its home consumption value o~ price (excluding i nternal exci ee taxes)~ as freely offered for sale in the usual wholesale quant i tie s in the ordinary course o f trade , in the pr ircipal markets of the country from where exported on the date of exportation to the Philippines, including the value of a ll containers, cover ing,s and/or packings and incidental expenses to placing the article for shipment, plus ten (10) .��E. cent of such home consumption value. And the home consumption value or price is the value or price declared in the consular, commercial, trade or sales invoice. Where there exists a reasonable doubt as to the value or price of the imported article declared in the entry, the correct dutiable value of the article should be ascertained from the repo~ts of the Revenue Attache or Commercial Attache, pursuant to Republic Act No. 5466 or other Philippine diplomatic officers 1 and from such othe~ informat i on that may be availab].e. The Commissione r o f Customs is ~equired ~owever to publish from time to time the home consumption values of articles exported to the Philippines as ascertained and esta blished from the data gathered. S i nce the provision of the law applicable is clear and specific that the "home consumpt.ion value"

DECISION - . CTA CASES NOS. 3177 & 3178 - 8- upon which the dutiable value of an i~ported article ~; should be baoed is the value or price declare~ in the consular, commercial, trade or sales invoice, the home consumption value of the refrigerating mac hine parts involved in CTA Case No. 3177 should therefore be at $62.35 each based on the consular invoice; and the (a) .ten units of Model VFTL open type compressor with fly whe el and va J.v�=s should be Qt $198.83 each; (b) five BNK 505-10 va lve assembly, at $15.34 each; and (c) five BNK 612-8 shaft seal ki t a ssembly, at $14.92 each, cover ed in CTA Ca se No. 3178, ba s ed on the consular invoice.. The law seems clear and mandatory. It mer ely calls f or application as worded. Given however that there existed a reasonable doubt on the part of the Bureau of Customs as to t he correct values or prices of the shipments in question as declared by petitioner based on the consular invoices, was the appraisal of such importations made by the said Bur eau based on an alleged "alert notice" p~opeF? As . st.a:ed earlier, the s ame applicable statute provides that; in such case, the corr ect dutiabl ~alue of the imported article shall be ascerta i ned from the reports of the Revenu e Attache or Commerci al Attache (Foreign Tr ade Promot ion Attache) ~ pursuant to Repu bl ic Act No. 5466 or other Philippi ne diplomatic officers and f rom suc h

DECISION - CTA CASES NOS. 3177 & 3178 - 9- other information that may be available to the Bureau t:. of Customs. From the data thus gathered, the Commissioner of Customs shall ascertain and establish the home consumption value of the article exported to the Philippines and shall publish s uch list of value from time to time. Here, in the cases at bar, the valuations of the shipments of petitioner were ba ~e( on an alleged "alert notice", not on the established and published value s thereof as mandated by the law applicable. As a matter of fact, the records of the cases do not s how, as required by law, from what data the alleged "alert notice" w2 s ga t hered, how the Commissioner of Customs ascertained at1d esta blished the home consumption values of t~e imported �a rticle s, and where and when was such alleged 'alert notice" published. Even more, no such "alert notice" or value , or evidence thereof, was presented or offered by respondent. The bare averment tha t the basis of the appraisal of subject shipments � is an alleged "alert notice", un- . ., . accompanied by adequate evidence as to the existenc~ of such notice, the basis of the values or prices stated therein, as well as the publica tion thereof,' would seem to suggest that there were no established and published home consumpt ion value s deter mined by the Commissioner of Customs of the s ubject shipments a s required by the law. Speci0lly so when the parties in their stipulations

..� DECISION - CTA CASES NOS. 3177 & .. 3178 - 10 - of facts merely stated that the appraisal was based on ~; an alleged "alert notice". Clearly, the~efore, the bcsi.s of the appraisal of the dutiable values of pet.i- tioner's shipments was not in accordance with the provisions of Section 201 of the Tariff and Customs Code. Ther e being no fidelity to what are required by the legal provisions applicable, th j s Court could not look with approval on the appraisal by the Bureau of Customs of petitioner's importa tions based on an alleged "alert notice" . Where, as here, there is no adherence to the language of the statute, there is no basis for the assertion that there exists a reasonable doubt as to the values or prices of the shipments in question -declared in the entries. Considering the mandate of the law that the home con sumption value or price shall be the value or price declared in the consular, comme~cial, trade or sales invoice, and the official character of these invoices, certified to as correct by the Philippine Consul at the port of origin~ and there being no reasonabl~ ground to deny to th2se documents the faith or credence normally due thereto, the home consumption values declared in the consular invoices of the shipments in question, should be the bases of the dutiable values of the i mported articles. (Commissioner of Customs vs. Celdran, 1b I

DECISION - . CTA CASES NOS. 3177 & 3178 - 11 - L-23425, February 26, 1968, 22 SCRA 743.) The language of the law , which expresses a definite and sensible me aning, is the safest guide as to the statutory policy, to which compliance is due. (See Procter & Gamble Philippine Manufac turing Corporation vs. Commissioner of Customs, CTA Case No. 2788, February 27 , 1981.) The pronouncements in Bell Hobart Manufacturing Incorporated vs. Commissioner o f Customs , CTA Cases Nos. 2750, 2751, 2752 and 2753, March 10, 1978; Procter & Gamble Philippine Manufacturing Corporation vs. Commissioner of Internal Revenue, CTA Case No. 2357, May 9, 1978; Hiap Hong Trading Co., Inc. vs. Alfredo Pio de Roda, Jr., CTA Case No. 2804, June 27, 1980, which we, r~��.- subsequently affirmed and reaffirmed in other cases, the latest of which is Procter & Gamble Philippine Manufacturing Corporation vs. Commissioner of Customs, CTA Case No. 2788, February 27, 1981, are controlling in the cases at bar. We quote from Bell Hobart and P rocter & Gamble: "Nonetheless, assuming arguendo that there� exists a reasonable doubt as to the value or price of the imported trichloro- . carbanilide declared in the consular, com- mercial and sales invoic es, as well. as in the entry, and the correct dutiable value of the article should be ascertained from the reports of the Revenue Attache, Com- mercial Attache (Foreign Trade Promotion Attache) or other Philippine diplomatic officers "and from such other information that may be available to the Bureau of Customs, pursuant to Section 201 of the 1l

DECISION - . CTA CASES NOS. 3177 & 3178 - 12 - Tariff and Custo ms Code , as amended by Presidential Dec~ee No. 34, as alleged by respondent, it is to be s t r e ssed that the Commissioner of Customs is required by law� to publish such list of values from time to time. He does not only have to ascertain and establish the home consumption value, but must also publish such lists of values from time to time. Public pol icy would seem to require that importers be informed in advance of the home consumption values, or information values, of articles exported to the Philippin~s. This would prevent unc er t 2 tn ~ y, let alone the exercise ~f purely personal discretion, specially on the part of customs appraisers, in the matter of the ascertainment and deter- mination of the price or value of imported articles. Furthermore, if impor ters are informed in advance of the home consumption values or information values o f articles exported to the Philippines, they can properly declare the dutiable values of their shipments and thus avoid t he heavy penalties imposed for misdeclaration, if not delays in�th~ release of goods from customs cu:tody wh:lch entail lose of time, money and energy~" Accordingly, the home c onsumption values or prices as bases of the dutiable values of the shipments under � consideration c onsigned to petitioner should be the values or p r ices declared in the consular invoices of the subject shipments. The protests of petitioner 1 against the asse s sment and collect i on of additional customs duty and advance sales tax on it~ shipments under consideration are therefore meritorious. We note howeve r that with regard to the cl a ims for refund of the amou nts of fl37�.oo and fl93.00 in CTA Ca s e No. 3177 and CTA Case No. 3178, respectively, as additional

DECISION - .. CTA CASES NOS. 3177 & 3178 - 13 - advance sales tax paid by petitioner on the appraisal of the subject shipments; the same can not be pa ssed upon by the Court in view of the fact that nothing in the records show that petitioner had filed its wri tten claims for refund ther e of with the Commissioner of Inter nal Revenue within two years from dates of payment and that the latter was made a party to these cases. Further, the action for rec overy must be in r:o.ti >uted in court also within two years af t e r payment. Without satisfying these jurisdictional requirements provided in Section 306 (now Section 292) _of the National Internal Revenue Code, which in the instant cases are lacking, the same i8 f a tal to the claims of petitioner for the refund of the overpaid advance sales tax on the importations in quest icn. (Wise & Company vs. Commissioner of Customs, CTA Case No. 2717, Decembe r 29 1 1977; see also res:iution dated January 15, 1979, certiorari denied in G.R. No. L-51242, March 7, 1980 ; National Dental Supply Incorporated vs. Commissioner of Customs, CTA Case No. 2826, June 30, 1980; Campos Rueda Corporation vs. Commissioner of Customs, CTA Case No. 2829, July 28, 1980; Jardine Davies, Inc. vs. Commissioner of Customs, CTA Case No. 2 634, October 16, 1980; Procter & Gamble Ph i lippine Manufacturing Corporation vs. Corn- missioner of Cus t oms, CTA Case No. 2788, February 27, 1981, Campos Rueda Corporation vs. The Honorable Commissioner of Cu stoms, CTA Case No. 2828, Auglst 15, 1974, cer-

DECISION - CTA CASES NOS. 3177 & 3178 - 14 - tiorari denied in G. R. L-68 995, Feb. 11, 1985 . ) There being no con troversy be tween the parties that the additional amounts of ~422.00 anc Fl ,06 0 . 00 in CTA Case No . 3177 a nd C'I'A Case No. 3178, res p2 ctively, asse~; sed and collected from petitioner repre s ent additional customs duty because of the appraisal of its shipments, only said amounts o f P422.00 and ~1,066.00 are r e fundable to peti t ioner. And there being no more legal ba sis for the impo sition of the f i ne of ~2,1 8 6.00 in CTA Case No. A, 3178 1 the same is also refundab le to pe ti tOner. WHEREFORE, the decision a p pealed from is modified as indica ted in the above opinion of the Court. P.es- pendent Commissioner o f Customs is her ~by ordered to grant a tax credit to petitioner Lovsted & Co., Inc., the amounts of P422.00, Pl,060.00 and ~2,l8~.oo. Without prono u nce ment as to c osts. SO ORDERED. Quezon City, Me t ro Manil 2, July 30, 1985. ~f?./ Pres i d it~~f~~~ WE CONCUR: CON TANTE �;;R~UIN ssociate Judge ~!,_.! ~J? ~- z~ R~;v ssoc ate Ju ~.\ g e 1 4lJ