CTA Case No. 4371 (Decision)

l REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUE ZON CI TY GELMART INDUSTR I ES PHILIPPINES, INC . , Petition�~t~, C.T.A. Case No. 4371 COMMISSIONER OF CUSTOMS, lie s pondent. X- - - - - - - - - - - - - - - X .DECISION This is a fot~feittwe case of 1 x 40 ' containe t~ No . SEAU L~E..4909-�E. containing cat~tons of nylon filamen t ya t~ n con s i g n e d t o t h e Pet i t i o n e t~ , for al l eged violatio n o f . Sec. 25:3 0 (e), (f), and (l) -5 of the Tat~iff i3.nd Cus tom s Code, as amended. D�.tt~i ng the heat~ in!;,l of the custo ms pr oceeding s, the parties entered into stipulation of facts which is nan~ated in the Decisio n of th e Collec tot~ of Custo ms, as follo ws : II l. That, GELMART INDUSTRIES, INC. is t h e consignee of a s h ip ment de sct~i bed as l X 40' containet~ No. SEAU-4E.49--E. co nt ai n i n g 400 cat~tons nylon filament yat~n ( t�� a w ) ex 11 MI V Seal and L i b e t~ at o t~ 11 , Reg. No. 242 , E. No. 28885- 87; II " C:: .. 1-hat, He mi s ph et~ e Bro k erage and Transport Corp. is the d u ly autho rize d 468

DECISION - C.T.A. Case No. 4371 2 bt~ol-<et~ f'r~ ept~ esentative of the consignee fat~ the pur--pose of ~n~ocessing and effecti ng t~elease of t h e afot~esaid impot~tation ft~om t h e But~eau of Customs, IY!anila;" "3. That, in the aftet~ noon of (~ugust 3, 1'387 at about 5:30 o'clock in the aftet-�noon, the cogsigne�~' s bt~ cd<et~Jt~ept~esentative, tht~u Not�'bet~ to f'r1aula, Jt~. and Oscat~ Y. Mat~ inas, tt~ied to effect the t�'elease of the afot~esaid importation by inserting the description of the afot~ esaid ship ment in the boatnote covet~ing another ship ment of si milar kind of merchandise and J. i k e w i s e con s i g n e d t o Ge 1 mat~ t I n d us t t~ i e s , Inc. ; 11 " '+. That, when conf t~onted, Not~bet~to Maula, Jr. and Oscar Marinas told the inv estigatot~s that they included the 1 x 40' van in the othet~ shipment because they wanted to save time and to be able to delivet~ both s hipments to theit ~ pt~ incipal, Gelmat~t In d tt s t t"' i e s, Inc:;. ; �� "5. That, the customs police did not allow the shipment to be t~eleased and instead, the s hipment was detained and subsequently ordered fully opened, examined to determine its actual contents;" "6 . That, at the time the afot~esaid s hipm ent was being bt~ought out ft~om the Bm~eau of Customs as nat~ t~at ed in pat~agt~aph 3 h et~e of, the pertinent document s covering the aforementioned s hipment were already duly f i 1 ed, pt�oce s sed, BC pet�f ot�at ed and appt'O v ed as follows: A. Original Warehouse Entry ~o. 28886 - 87 B. Pt� ofot~mc.~ Chat�'~}eabl e Bond C. Importer Sworn Statement D. Co mmuni cation to the Collector E. SGS clean report of findings F. Packing list G. Commercial Invoice H. Bill landing I. Warehousing Permit white copy <BC Fot~ m 198) J. Cet�t if i catio n of Availability of Impot�t Li ce nse;" 469

DECISION - C.T .A. Case No. 4371 11 7. That, the afot~ementioned impot~tation is exempt fl�~ om payment of advance sales taxes or compensating sales taxes and other sales duties because it is a duly approved met�-chandi s e f01�~ t~ e -- expot~t by the GTEB. 11 and adopted as common exhibits the following: Exhibits ll(.)ll/11111 Warehousing Entry No. 28886 87 "B"/ 2" Proforma, Chargeable Bond " C " / �~II Importer's Sworn Statement ��J l i D " / L,. ~~ Communication to the Collector "E"/ 5" SGS clean report of findings IIF"/ 611 Pe:\C~< i ng L..i st "Gil/ 7" Commercial Invoice Bill of Lading IIHII/ 8" Warehousing Permit Certificate of Availability "I"/ '3I II ".J 11 / 11 10 "I-< II I I 1 1 Certificate of Mr. Mardela "LII/ l. .c-:�.. Gate Pass No. 052840 IIIYI"/ 13 Gate Pass No. 052849 "0"/ 1 L~ S/S of Mr. Jose C. Corpus IIPII/ 15 S/S of Mr. Norberta Maula, Jr. IIQ"/ 16 S/S of Mr. Oscar Marinas "H 11 1 17 Boatnote No. 240703 II F~ - 1 !" 8" - Ins et~t ion of 1 x 40' van in "S"/"1'3 11 Boatnote No. 240703 Investigation re~ort of Mr. 11 T 11 /"20 11 Sot~i na Endorsement of Lt. Honoria .Juan to the Collector of Custom, MICP 11 U"/ 11 2 l 11 �-.. 1-J S D vII II j l l ;:;~;::::It 2nd Endorsement of Collector Mendoza Counsel for the government likewise admitted as propo s ed by claimant, the existence of the following documents forming part of the t~ ecot~ ds, to wit: (a) Memorandum of Principal Appraiser Aurelio Marcelo stating that a 100% examination showed no di~>ct~ epancy and that there ar~ e no findings to show that consignee and/or its bt~ol-<et~ tt~ied t o c o n c e a l ot~ deft~ aud govet~nment r~ ev~?l'li.H? <Exh s . 11 1�\" and 11 11"). 47 0

DECISION - C.T.A. Case No. 4371 -- '+ -� (b) 1 s t Endor se ment signed by Buenventura C. tr1ani e go, Rc t i ng Collector~ of Customs dated Rugu s t 6, 1987 <Exhs. "L" and "1 2 "). ( c ) Gate Pa ss No. 0 52849 i ss ued by the at�� t�� as tt�' e c ontt~ a c tot~ (Exhs. "N" and "1'�">. (d) 2 nd E ndot~s ernent dated August 17,1.987 of Mt�'. Raymundo R. Me ndo za , OIC, MICP <Exhs. " 22 " and "V"). ( e ) Th E~ imputed violation s cited in the Wa r rant a r e: (1) That the art i cles are fr a udentl y removed c ontrary to law fro m a c on ta iner~ yat~ d under~ c u s toms supet~ vision (Sec. 2 5 :30 <~? > ; <;::~ ) T h at t h e i rn p o ..~ t at i on o f t h e a ..~ t i c 1 e s wet~ e e f f e c t e d con t t~ a ..~ y t o 1 a w ( Sec. 2530 (f); a nd (3 ) Th a t the a t~ti c les wet~ e impot~ ted tht~ ough a pt~ acti c e ot~ d e v i c e contt~ at~y to la\.'J by me a ns of \o'Jhi c h the at~ ticles wet~e entet~ e d thr~ ough a c u s tomhou s e to the pt~ ejudice of th e Go v et~ nment <S e c . 253 0 ( 1) 5 ). <E xh. X> In sai d De c i s ion, the l a dy Acting Collector of Custom s forf e ited t he s ubje c t s hipment only on the ground th a t "th e t~ e was a n attempt to deft~ aud the govet~ nme n t th t~ough th e u se o f a f a l si f i ed bo a tnote." She said, thu s ly: On t h e fir s t c harg e of the fraudulent remov a l ft~ om the c ont ai ner~ yat~ d, i t h as been s hown th a t a genuine gate pa ss ha s been is s ued <Ex h s. "N"/"1 ' �", TS N, p. E,). (-=is t~ egat~ ds the s econd v i olation, sufficient pt~ oofs have been addu c ed to s how that all 1 t~ elated do c uments fil e d with the entry and the declaration t a l l i e d wi t h the examiner~ ' s findings <Exh. "A" to "I">, and th a t s u c h impot~ tation of t~aw matet~i a l s is duly authot~ized by the GT E B <Exh. " ,J") . With t~ e s pect to the third violation, the pa r~ tie s hav e s tipulated th a t the inset~ tion of the wo t' d s " S ERU 464909 - 6 1 x 40 Van Yat~ n" in the boatnote was delibet' ately made by Not' bet' to 47 1

DECISION - C.T.A. Case No. 4371 -- 5 -- Maula, Jr~. \-'Jho is le~~itimately einployed as a checker of the brokerage firm servicing the impor~tation of the claimant in or~der~ to save time and to be able to deliver~ both shipmerits to the claimant. It is worthy to note, in this conn e c t i on , t hat c 1 a i mant i s an o per~ at or~ o f a c ustom s bonded warehouse engaged in the manufactur~ e o f r~ aw mater~ials f o r r~e-expor~t a s finished pr~ oducts on consignment basis. Its importation of such materials are duty-free and t ax- exempt and that it has a timetable to follow in cn~ der~ to meet the deadlines of its export commitments abroad. There is no dispute that Maula indeed committed falsification punishable under our criminal law. As a matter of fa c t , Mr~. Maula together~ with Mr~. Mar~inas were both cri minally charged before the Fiscal's Office of Manila of the crime of theft, f a ls'ification of official docu ment and violation of sections 3609 and 3602 of the TCCP docl-<eted as I. S. No. 87 -2 1559 <Exhs. 11 8 - 1 11 and II 1 '3 - n II � In vie\-'J ther~eof and i t appear~ing that the inser~t ion was deliber~ate, the conclusion would be that ther~ e \-'Jas an attempt to defr~aud the government through the use of falsified boatnote. Consequently, this Office finds and so holds that the ar~ticles in question have incurred the liability of forfeiture. (ibid.) The is s 1.1e then is nar~ r~owed down on whet h er~ or~ not the Government was indeed defrauded of the needed duties and r�' e venue s to war~ r~a nt on the subject s hipment. We answer in the negativ~. We have another ca s e which shows utter the disregard by t h e for~ me r~ Co mmi s s i on e r~ o f C us t o ms Sa 1 v ad or~ Mi s o n o f t h e 1 e g a 1 pro c e d u r~ e p r~ o v i d e d for~ by 1 a w i n for~ f e i t i n g goods. Thi s , of cour~se, is not the only t i me t h at h e 472

DECISION - C.T.A. Case No. 4371 -- 6 -- c.iispl ,:.-~yed s u c h a t t i t u d e . In the vet~y t�ecent case of Nusselts Industries Corporation vs. Co11missioner of Customs, <C . T. ~). Case No. '+ '+49, May �?.7, 1'3'33), this Com~t commented: Sut�pt~isingly, howevet�, in s pite of the evidence s pre s ented, both documentary and testimonial, c oupled with the accompanying rec o mmendation s from the Appellat~ and Legal Servi c e Divisions a s well as the endot�sements ft~om the Di s tt~ ict Collector~ and the Assistant Commi s sioner of Cu s toms for the qualified r e 1 e a s e o f t h e at~ t i c 1 e s i n q u e s t i on , h e t~ e i n respondent t~ ejected all of these and instead, arbitrarily ordered Di s trict Collector Titus Villi::muev a to fot�' feit <all the at�ticles in que s tion. S adly, the Di s trict Collector in r' e v e t' s i n !;,1 h i s o t~ c:l e t' , b 1 i n d 1 y o be y e d an d c o p i e d almo s t verbatim the 3 rd Endorsement of the t��espondent dated July 25 , 1 '38'3 (Annex K). In th e c ase at t he following pet�t in ent document s c ov e ring the questioned s hipment were duly filed, proces s ed, BC perforated and approved: A. Or i ginal Warehous e Entry No. 28886- 87 B. P r oforma Char geable Bond <Exh. B> C . Impot~ tet� ' s Swot' n Statement <Exh. C> D. Communi c ation to the Collector <E xh.Dl E . S GS c le a n report of findings <Exh. E> F. Pacldng List <Exh . F) G. Commet�cial Invoi c e <Exh. G) H. Bill of Ladin~] <Exh. H> I � Wa t~ ~ h o u s i n g P e t' mi t ( BC F o t' m 1 '38 ) ( E x h � I ) J. Ce rtifi c ation of Availability of Import Li c en s e <E xh. J") K. Gate Pa s s No. 052 84'3 <Exh. M> s uch s hipment t-J as exempt ft�om payment of a dv a n c e sa le s taxes or c ompen sating sa le s taxe s a nd other dutie s s in ce it i s in t ended t o be t' e - expot� ted a s duly 473

DECISION - C.T.A. Case No. 4371 -- 7 -- appt~ oved by the GTEB . In fa ct, i t was covet~ed by an E mb roidery Bond ( i. e . the re - export bond) <Exh. I I) � A l s o , t h e t~ e was a n e ><am i nat i on o f t h e s h i p men t by t h e Pt~incipal Appt~ais et~ (as dit~ected by t h e Commissionet~ of Customs) who confit~ med that, aftet~ a "100'1- e><aminaticm ", the s h ip ment confot~ nr s a nd t a l l i e s with that de c lat~ ed in the entries and there wa s no showi ng that the petitioner or the custo ms broker tried to conceal anything ot~ deft~a ud t h e govet~nnrent o f t~eve nues, stt~o ngly t~ ecommended the release of the questioned shipment to the Petitioner. <Exh. 1�0 The fot~egoing led the MI CP Collector of Custo ms 1'1 a n iego to "stt~o ngly t~ ecommend the immediate t~e lease" of t h e s h i p men t t o t h e Pet i t i on e t~ ( Ex h � AA). The same t~ ecommendation was by the succeeding MICP Co ll ectot~ of C u s toms Em m.3. Rosqueta <Exh. W>. The Legal Office of the Co mmi ss ion et~ of Custo ms in a pt~epa t~ ed 2 nd End ot~s em ent elated Decem bet~ 9, 1987 d�Je I "giving cout~se " to the MI CP Col le ctor of Custo m's "pt~oposed decision to release t h e ship ment in question it appearing t h at i t s i mpot~ t at i on s u f f e t~ s n o i n f t~ act i on o f t h e T ;:n~ i f f and Customs Code wh e:\t soevet~ " <Exh. DD >. This was followed by the t~ e c o mmend at i on of the Legal a nd Intelligence Services to the Commissi oner of Customs that the pt~ oposed Decision of the l"t1ICP Collectot~ of Custo ms

DECISION - C.T.A. Case No. 4371 � - B -� " be i n g 1 e g a 1 and vJ e 1 1 t a I<en may n ow be en f o t~ c e d " ( Ex h � FF>. It is interesting to note that the one who prepared suc h favot~able t~eco mmendati on i s the pt~esent counsel of the Respondent, f~t t y. Magdalena Soriano. The above recommendation was concurt~ed by no less than Deputy Commissionet"� of Cus toms Vicente n. Fet~ia, Jt~ . <Exhs. FF-1 and FF-<::>. Not s a t i s f i e d with the fit~st t~ecommendation, the Custom s Set~ vice Chief of the Le~1al and Intelligence Set~ v i c e s t~ e i t e t~ at e d t o t h e Co mmi s s i on e t~ o f C us t o ms i t s "pt~ ev i 01..1s t~ e co mm end at i on fat~ appt~ov i ng Collectot~ Roqueta' s proposed decision releasing containers SEAU- 4EA'30 '3 - 6" <Exh. GG>. Again, it was pt~epat~ed by the same present counsel of the Re spo ndent. How ever, despite the findings and recommendations of t h e f o t~ e g o i n g o f f i c e s a nd aut h o t~ :i. t i e s o f t h e But~ e au o f C us t o ms , t h en Co mmi s s i on e t~ o f C us t o ms Sa 1 v ad o t~ lVI. Mi s on ref used to have the ship ment released and instead ordered its fot~feittwe only be ca u se "I wa nt this shipment seized" <Exh. HH>. Sad 1 y, the Co lle cto t~ blindly This s hould not be so. "It is not too mu c h to point out that it is an elementary rule in procedure that a dec i s i on of the Co 11 e ct o t~ of C us to 111 s ju st 1 i I< e that of a judge (Ol"' a pet~son or a body lawfully authot~ ized to i s sue decisions) must be in wt~ :i. ting pet~sonally, independently, and dit~ ectly pt�' epa t~ ed by him (Sec. 1, Rule 36, Revised F~ule s 47

DECISION - C.T.A. Case No. 4371 - 9 --� o f C o tn~ t ) . F o t~ t h e C o mmi s s i o n e t~ t o s u mma r~ i 1 y dismi ss or overturn whatever recommendations and dictate the Collector of Customs to decide whatever is in conformity to his whims and capt~ ices is a blatant usm~pation of the latter's power s under Section 2312 of the Revised Tariff and Customs Code. The Commi ss ioner~ can not hide undet~ the cloak of e x er c ising the power of supervision and contro.l o v e ...~ h i s s u b o t~ d i n at e s f o ..~ i t w i l 1 t~ en d e r~ t h e doctrine of exhaustion of administrative remedies and due process for naught. The palpabl y flagt~ant anomaly of the Commissionel"' of Cu s toms reviewing the decision of the Collectol"' of Customs, <which actually was that o f t h e f o t' me t' ) i s a mo c ~< e t' y o f ad mi n i s t t' at i v e justi c e. In order that the review of the decision of a subordinate officer might not ttn~ n out to be fcn~ ce, must pel"'fOt'Ce not dictate his own vievJ on the officet~ whose decision is under' his t' eview; othet~ wise, thet' e could be no ..~ e a 1 t~ e v i e w o f t h e ca s e . T h e d e c i s i on o f t h e reviewing officer would be biased view ��� (see r~ elated cases of Zaatba le s Chromite Min i ng Co., e t. al. v s . Go z on , G.R. No. L- L�9711, Novembel"' 7, 1979). In such case, needless to say, the appeal becomes a useless formality . It is ..~ e d u c e d t o an i d 1 e c e ,., e mon y � T h e l"' e wo u 1 d t h us be a denial of procedural due process <New Fi 1 i pi n o Mari t i � e Ag e n c ie s , I n c. v s . Rivera, L- 4535':1 --E.O, June 15, 1978). Hence, in the inte r est of justice and fait' play, this prac ti c e of the Commissioner dictating h is Collector what to decide must be stopped. An y 1--1 a y , h e can a f f i t' m m~ d en y t h <~ d e c i s i on o f his subordinate Collector when the proper time comes a s provided under Section 2313 of the Revi s ed Tat' iff and Customs Code . Emphasis Supplied ) ( Nu s s e 1t s I n d u s t t' i e s , i n f t'a ) We find no merit in the Respondent's Decision. Such Decision was v1ithout rhyme ot' t' eason and found to be as c an be gleaned ft' o m the fot'ego i ng discus s ion s . 476

DECISION - C.T.A. Case No. 4371 - 10 --� The Respondent advanced the that the shipment was forfeited since the broker falsified the boatnote to effect in violation of Section 2530<e> , (f) and (1)-5 of the Tariff and Customs Code, as amended does not hold water. As aptly put in our F~esolution dated July L~, 1'3'30, thus: On the incident that the inser'tion of the 11-JOr' ds "SEAU L~EAr::l09-6, 1 x L~O Van Yar'n" in the boat not e 11-1 as d e 1 i be r' at e 1 y mad e by on e Not' be r' t o Maula, Jr., which act should be seen as an atte mpt to defr' aud the gover'nment, it appear'S that only IY!aula, ,It' . and Oscar Y. Mar'inas have been chat'ged by the Br.weau of Customs of the cri me s of Theft, Falsification of Official Document ancl violation of Sections 3602, 360'3 and 3610 of the Tariff and Customs Code. These person s have also, by themselves, confessed th at they mad e the inset'tions in the boatnote on their' own. It thus appear' that petitioner' did not consent, had no kno~t-Jledge nor' did i t par' ticipate in t he acts of Maula, Jr'. and tr1ar~ inas. Cr~i minal r~es pcmsibility being per'sonal, we ar' e not now t~eady to impute any upon petitioner~. XXX XXX X X>< Upon the other hand, assuming arguendo that the pr'inciples of agency ar~e contr~olling i n t h i s case , i t i s not en o r_fg h f o t' the t~ espondent to mer~ ely al lege that the illegal act!; of Maula, Jr~. and IYI,:n~inas at~e co nsider~ed the acts of the petitioner. It is also t~ue in agency that the agent is pet~sonally l ia ble for' acts beyond the scope of his author'ity except when the principal ratifies the acts expressly or~ tacitly ((.h~t. 1 '310, NCC>. Consider~ing t h a t here, these customs broker employees were obviously not a cti ng within their~ power~s when they made the inser' tion in the bo atnote which act they eventually ad mitted to be theit~ own, unsupported allegations of the respondent would not suffice. Failing to supp ly the necessat~ y

DECISION - C.T.A. Case No. 4371 - l1. --� pr~ oof to his allegations that could have put hi s case at leas t within the bounds of the exception s to the r~ ule above stated , r�' e s pond ent' s posj,tion beco me s even les s tenable. <C. T. A. Re c or~ ds, pp. 115-1.1.7) WHEREFORE , in all the fot~ e~loing we het~eby RESOLVE to ANNUL t h e Dec i s i on of the Co mmi s s i one r~ of Cus t oms d at e d October~ 5, 1'388 a nd ORDER the per~ manent RELEASE of the shipment subject of thi s case. The surety bond posted by the Petitioner for the temporary release of the ship ment is hereby canc elled. SO ORDERED. 1 Quezon City, Metro Manila, 24 June 19'34. ~NU GRUBA ~1sso Judge WE CONCUR: n ss ociat~? I CERTIFICATION jI I het~ eby cer~ tify that this decision was r~eached after due consultation a mong the membe rs of t he Court of Tax Appe a ls in accordance with Section 13 Article VIII of the Con st itut i on. G-Q. ~ ERNESTO D. ACOSTA Presiding .Judge Co urt of Tax Appeals 4?8