CTA Case No. 3162 (Decision)

_, REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ABS-CBN BROADCAST ING C.T.A. CASE NO. 3162 CORPORATION and SCAN, INC., C.T.A. CASE NO. 3163 C.T.A. CASE NO. 3164 Petitioner , C.T.A. CASE NO. 3165 - versus - COMMISSIONER OF CUSTOMS~ Respondent. X- - - - - - - - - - - - X ABS - CBN BROADCASTING CORPORATION, Petitioner, - versus - COMMISSIONER OF CUSTOMS, Respondent. X- - - - - - - - ~ - - - X ABS - CBN BROADCAST ING CORPORATION, Petitioner , - versus - . COMMISSIONER OF CUSTOMS, Respondent . X- - - - - - - - - - - - X ABS - CBN BROADCASTING CORPORATION, Petitioner, - versus - COMMISSIONER OF CUSTOMS, Respondent. X- - - - - - - - - - - - X 332

DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 2 ABS-CBN BROADCASTING CORPORATION, P etit i on et", vers us - C.T.A. CASE NO. 3166 COMMISSIONER OF CUSTOMS, Re s pondent . X- - - - - - - - - - - - X ABS-CBN BROADCASTING C.T.A. CASE NO. 3167 CORPORATION, P et it i on et~ , COMMISSIONER OF CUSTOMS, Res pon de nt . X- - - - - - - - - - - - X D E C Xs X0 N These cases, involving s:i. mila. t~ fact �.1al antecedent ". an d the same issue s, w e t~~!) conso l idate d and are jointly d~ci d ed herein. P e t i t i o n e t~ s ABS �--CB N, !~no wn � as B o l in i:\ o E 1 e ct t~ o n i c s Cor~ p o r~ at i on, and SC(-)N, Inc. , ;::n~ e c o t' p a t' '"' t i o n c; d u 1 y o 1�' g an i z !? d an rl e x i s t i. n g 1.1n d e t' t h e 1 a ws o f �I�; h P. Ph i. J. i p p i n e s , t' e s p e c t i v e l y � ABS-CBN was gt�anted tempot'at'Y pet'mits u.ndet' Rep u lic nets Nos. 511 and 512 a s amended by Republ i c Ac t s No s . 5 7 30 and 573l, t' espect:i.vely, to~ (1) constr'uct, mai ntain a n c.l operate st ation s for in t e rnational te l e co mmun icati o n s and television stations i n t t,e Philippines; a nd ( 2 ) st a tion e1ls o in the Philin ines fat' a pPt'ior of fi.ft:-y 333

DECISION CTA CASES NOS. 3162, 3163 , 3 164 3165, 3166 & 3 167 3 The pet~mits r:p~an-ted by Republic Acts Nos. 511. and 5lC::, t o o pet~ at e t~ ad i o and t e 1 e v i s i. on s t at i on s were in to y�egulat~ ft~anch i s e s by the amendatory acts and the name of the grantee was ,I chan9 Pel to "ABS --CP.N Bt~ oadci::\s tin q Cor~por~at ion". Sectio n L~ of Republic Act No. 511 and Section 3 of Rep1.1bl ic Act l\lo. 5:LC:: contain an ips o fact o clau~:;e which t~eads: "In the evPnt o�f any competing individual, partnership or corporati o n t~ec,~ivinq ft~om the Con~p~ ess a similar~ tempor~ar~y per~mit in which there shall be an y t_y t~ m_.....9..!:':......! .e r:..l)'!.2_._'!1_.9_.!:.~-f ~-v or~ a tU:JE. t h an t h o s e herein granted or tending to p .ace the herein grantee at any di sadvan tag e, then such tet~m 01 �~ tel�~ms sh.::\11, i p so facto, become a part of the terms hereof and shall o p e t~ at e e I.JI..l a 1 l y i. n fa v o r~ o f t h e i n d i v i d u i::\ 1 , p ,::n~ tner~ship at~ cot�pot~ation." <Emphasis Our~ ~; ) Su Jsequent ly, Congr-ess enacted Republ'c Act 1\lo. f:035 gr��;:mti.ng the F~adio Communication of the Phi 1 i pp in e s, Inc. r~adio s t a t i o n s �f 01�~ domestic t ~ lecommunication which was later a me nded by Republic Acts Nos. 2'353 and Sect ion 1 of Republic Act No. 20,"35 , as amended by Republic Act No. 2953, provides: "SE CTION 1. Subject to the pt~ ovisions of the Constitution, and to the pt~ovisions, not inc on s i s t en t her�� e with, of Act number~ e d three thousand eight hundred and forty-six, entitled "An Act pr~oviding fat~ the regulati o n of radio stations and radio communications in the Philippine Islands, and for other nurpoc;es; Commonwealth A~t numhered one hundred f rty-six, known as

DECISION CTA CASES NOS. 3162, 3163, 3 16 4 3165, 3166 & 3167 -4 the Public Ser~ vi ce Act, arHj their~ ame n dments, and other~ applicable laws, :!:...t~�? r~~.__j,_s__b~!::.eqy YJ:.:?1r1tg.Q_____~.~2____t..!J.~.-fi.~d i~2..- Cf.;!.!f!J:Il u r_1. i cat igr� of t he E:.!::lJ,J_j_Q.R.Lr~g~,.___.l_nc;..!'__, i t s .successor~s or~ assigns, the r~ ight '"' nd pt~ivilege C�f co r 1structir1g, i r 1st a lU. r1~], est a b 1 ish i ng ar1d C�perat i ng in the Philippir1es , at such places as the said cot'por"at i or. may se 1 ect ar.d the Sec t~et ar~y of Public W ot~ks ar1d Communicat ic�r�s rll <'-Y appro ve, t'adio stat ic�r�s fc�t~ t he refcept ic�n ar1d trans mi ssion of wireless messages on radiotelegraphy and/or radiotelephony, i r .c 1 ud i r .g both coast a 1 and mat~ i ne telecommunica tions , each station to consist of two r~ad i o app t~at us cornpt~ising o f a r~eceivir�g and s ending radio apparat us, stations for inter"nat ior.al teleco r11mur1icat io n s and s tat ions f(:;.r' br~ oadca s tin~.:J, including tel evision. " ( Er11 phas is Otws) And Section 14 of the same Act, as ame n ded by Republic Act No. 4054, reads: "SECTION l'+. IY� cons idet' at ion of the fr~ anch i se aY�d r~ i ght s her~eby gr~ant ed and any provision of law to the contrary notwithst~nding, the grantee s ha l l pay the s<::~. me taxes as ar"e r 10W or~ may her~ eafter' be required by law f r om other individual, copar~ tner�ships, private, publ. ic or quasi - publi c associations , corporations, or joint stock compa~ies , on real esta te, buildings an d other' pe r��so!'1a 1 pr~opet't y exc;,g.QL_ .._,__r_? d i c� f?_q!_:~j,_J.?l!l�.!:'.!....~_, ,,_J!!_i~~5;:b.i.r!..~J:.~Y--..~..Y.:1.!1..._�.fLSl.L~.-_pAt::.:~5-......!2~-~9 eg___i .D S.!.::.!.!."..l.!.':t~.sj;J,.f.~�--~...t t.t.L.....tb..~. ._.t~!:-~.?.J._~'1 ~..2-?.._._gf___:t...b.�?__g.!::.~.!'!t.~.1.. _, ~J::~.tc;_b____~b..:.'!.Ll:... . _.!:?.g.___~>:.<-f?.!Jl.P~---�-f t'..!:."-.!!!L......�!-t!;;,:t orrL~~;_,_.Q~,!; i e s ,_ t~r:.Lf f~- ar.!f!__s~tb. et_~ _ t a xes, as well as those p r~ope t� ties declar~ed P.xempt in t h i s sectic�n. I r�� cons idet~ c.':l.t ioY1 c�f the fr-anchi se , a ~..�...>!...~9.!::!.~!.. :t;o c�.r.:~�' ar.d one --ha l f .....P.er~ ce r.tLtm �:�f a l l gr~c�ss rece ipts from the business transacted under this franchise by t h e grant ee shall be paid t o the Tr~ e as m~er' of thE~ Philippi n es each year , wit h i 1'1 ten days after�� the audit ar1d appr~ova 1 of t h e accour.t s as pr~ escri bed in this Act. 9..?..A.st. J!. �..?L.E-':L9.LL..Qg._.._tr..~..__~ i e u of a r�v ? ~'!..9 a 1 1 t .a_~.�_2. o f::___S\XlY k. i r .d , n a t.~.t~ e m~ d E?:.?S.:: r~ i ..f!!j_o n _1 e "(i_~Q_,- ___ g.�t.�.t?...1: i 5..!:'1 e g___s~:__ . _c.s:~-1.~..� .:t_~g__ J?..L ._�.!.:!Y.__au tb�!:i t_y 33

DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 5 ~.!.~t~.Q..P..Y.? t~.'L------I!!.~.D....!...~. .:iP..a !-_,L___Q!::..C.l. v i n c i a 1 o.r.:. a... !J.�~...:L.Q D~l__.,_____f_~~q__ll!__~lJ._:i._c l::l.~ ~-~~j; h -~-........9 1�:�?\....D t e ~-! s h e_!:_e_Q.y_ e x_p_r:.~__!;;_<,?_ly____g ~_g_!T)_p_t..E?.fl.!_ '' <Emp has is Qut� s > It a ppear�s th;=~. t ABS -C BN television b t�o adcasting equ ipment ft�om 1'3CE.. when ~- t was still Bolinao Broadcasting Corporation. Upon conversion of the temporary pet�mits into fra n chise, and the nam e of the grantee was changed to "ABS- CBI\1 Bt�oadca sting Cot�p t�at ion" , it paid the f r�� an c h i s e t ax e s on i t s o p e ,.�;;~. t i on s o f 1 1 /2 i1. o f i t s gr o ss receipt without paying customs duties ~nd taxPs �' on the importation � of television equipment, parts and machineries. Shortl y aft,r the d eclart io n of Mar�t ial L..:\w ( under Procla mat io n No . 1080, dated September .-, ~ t::... ' the De pat�t ment of Finance for� me d i:3. Joint Customs/BIR Team to investig ate alleged deficiP.ncy of f-mS-Cl~ N i. n the impor�tati o ns of television equipment. I n a me m01�� '"' n d u m ,.., e p a t' t t o t h e C o mmi s s i o n e t' o f Customs dated July E,, 1.'373, Heracleo Par:_ tani:\c, Supervi si ng Special Invest iqat cw, a member of the Joint Team, �indicated that the Depat�tment of Finance committed et�t�ot�s when it a llowed the t�e lease of the i mpm�tations of tele v ision equipme nt of ABS-CBN tf.\x As a consequence thet�eof, seizure proceedings we r�e institu.ted ,3gai n st the a r .d 33b

DECISION CTR CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 �' 6 televi�;inn e qr.tirment of ABS-�CB I\I with the collector"s of custom s of Manila, Davao , Batangas, Iloilo, Cetu and San Fet"na ndo, L.=-. Uni o n whet"e said equ .ipment wet�e t'elea sec. !Yieanwhile, t:he equipment in question were subj ect ed to se i:zut"e in the ABS-CBN stations whet��e they were located. After d ue hearings , the respective col lectors of customs, rendered the f ollowin decis io ns: 1. Th e CoJlPctot" of Custom s of the Port of Manila ordered that all seized at"t icles of ADS �-� CBN undP.t" S. I. Nos. 14093, :1. '+<Y:J3���A and 14093�- P., be t' e 1 eased only aft e t' P�"'-Y!Tient i n full of th e a ssessed duties <PB,824,4:1.1.00 l and the i nternal r ev enue t a><P~; (P C:~ .; 3;?1, 2~.7. ( H)), exclusive of othet' rh at' g f? s, p 1 us '"' f :i. n e e qua 1 to twice the amou n t of . t h e .bo ve assessed duties <P17,G'i� 8,9 C'~;:::�.oo> ot" a gt"an d total of r:o ;=�B, CJ~"i'i�: E,O O. 00 exclusive of othet' ch at"ges, fj ne and ot let" chat'ges; <CTA 31 E�i~) f.~. T h e Co 1 1 e c t o t' o f C us t o ms o f t h e Po1�'t of Iloi lo ot'det'ed t hat the ar t).cles s e i 7. e d u n c1 e t' S. I . No. 15..... 7 3 be t' e 1 eased on 1 y af t el' pa yment i f u ll of the assessed custo ms duties CP5B1, 148.00) and the intet'nal t'e ven ue taxes <P G'3, 51.1. (l!)), e >< c 1. u s i v e o f o t h e t' c h at' g E! s , p l u s ;;~ f :i. n e F.!!"JI.livalent to twice th e amount of the above assessed duties of <Pl, 152,296.00) or a !]t"a nc1 total of 1=:01, 9 :l 2, ':355 . 00, excl�..1s ive of othet�� cha t' g e s; <CTA Case f\l o . 3163) 3. The Collectot' of Customs of the Port of Batangas ordered that the articles seized un de r S. I. No. 4 - 76 be r eleas ed, only a f tet' pa yment jn f ull of the assessed cu s t o ms d rxties <P't0,72E.. OO> and intet'nal t~ e v en u e t ax es ( P l5 , 538 . (l!) ) , e >< c 1 us i v e of oth er ch a rges; <CT A 8Qse No. 3\64) '+. The C o ll.ectot' of Customs of the Port of Dava o ordered th at the articles sej. zed undtH' S. I.. No. 73-(H)9 be t'eleased, on 1 y '"' f t e t ' nay men t :i r1 f 'J 1 1 o f t h e as s e s s e d cus~nms dutie s <P 2 94,472.00) and the �' 3 31

DECISION CTR CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 7 inter�n ;:al t'e v enue taxes (P'35 , 519. 00), e><clusive of othet' chal�'ges, plus a fine equiv~len t to twice the amou n t of the above assess e d duties (P59B,484.00 ) or a grand t o t a l o f P'3BB,745.00, exclusive of other chat�'IJ"'S; <CTA Case 1\lo. 3155) 5. The Col l ect or' of Customs of the Port of Cebu ordered that the articles seized under the unnumb e red seizure indentification be released only after full payment of the ass~ssed customs duties (P569,254.00 ) and internal revenue taxes <P171 ,0'+6.00 >, exclusive of othet' ch<::\t'ges , and a fine equivalent to twice the amoun t of the abo v e assessed duties CP1, 138, 508.00) or a gran d total of P1,B7B,B08.00, exclusive of othet' c harg e s; CCTA Case No. 3166) and 5. The Collector' of Custom s of the Port o f San Fernando, La Uni on, ordered that the articles seized under S . I. No. 7-75 be t�eleased only . aft et' payment in full of the assessed customs duties CP248!'359 .00 ) a n d internal reven u e taxes CP5'3,494.00 ) , exclu si v e of o t her charges, and a. f i n e e q I_\ i v a 1 en t t o t w i c e t h e am o �.1n t of the abovP. assessed d ut ies <P4'37, 918. (H)), a t' a . gt�and t otal of P806, 371.00 exclusive of other charges. <C T A Case 1\lo. 3167) !\lot satisf:i.' ed with the t'uli n g of the diffet'eflt �' c o l l e c t o t�� s o f c '-' s t o Ill s , � p e t i t i o n e t~ s '"' p p e a 1 e d t o t h e Com missioner of Customs. On October' B, 1.990, the Acti ng Commissioner' cf C us t o ms t' end e t' e d a d e c i s i on i n C us t o ms Ca s e No � 7 9- Lt-4 affh� ming the decisions of the di f fet�ent collectors and d e c t' e e d t 1�1 e ' e l e as e , n o t t o f o t' f e i t t h e at' t i c 1 e s i nv olved in the se i zure proceedings, . subject however, to the f u ll payment b y the claimants -appellants of t h e correspondin g dut iP.s, t~x ~s and fines. HencP, th e petitions for review. 33o

.' DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 -8 Set the issues our discussions thereof : 1. Whether or not petitioners are exempt from taxes and customs duties. _, In assailing the decision appealed from, ABS-CBN ir.vat~iab l y asserts that under Rep ub lic Act No. 511, as amended by Republic Act No. 5731 in t~elation to Republic Act No. E~035, as arner.ded by Republic Act No. 4054, its impcwtatior.s of television equipment and pat~ts at~e ta>< ar.d customs duty ft~ee . Respr.:.r.der.t on the other hand, contends otherwise. Basically, ABS-CBN at~gues that the ipso facto clause contained in Sect i o:�r� 14 of Hepublic Act No. 511, as amended, is deemed to have ir.corpot~ated ir.to i t s ft~anchise ar.y pt~ivilege or� privilege s fotmd in t h e franchise of RCPI under Rep u blic Act No. 2036, as amer.ded. The ft~ar. chise tax i t pay s i s thet~efore de sc t~ipt ior, levied, established c�t~ cc�llected by any aut h o t� it y what soevet�, mtmicipal, pt~ovincial r.at ior.al." Hence, ABS-CBN caY'Ir�c�t be su bjected to:� taxes and customs duties on its importations of television equipment and parts. It must be pc�i r�ted out that the claim of petitioners lacks legal and factual basis. t~eference, We are agai Y� quot i r�g Section 4 of Republic Act No. 522 conta ining the ipso

DECISION CTA CASES NOS. 31 62, 3163, 3164 316S, 3166 & 3167 -9 facto clause which clairn is predicated, to wit: "Ir, the event of any con1pet i rog individ ual, part nership or corporation t~eceivirog ft~ o rn th e Cor.gress a similar tempot~at~y pet~r,lit iro which there shall be any terrn or terms rnore favorable than those herein granted or tending to place the herein grantee at a ny disadvantage, then such terrn shall, i pso fac to, becom� a part of the terms hereof and shall operate egually iro favot~ c�f the grarotee a?__i12._the ~.ase of ~ aid corf!.Q_et i .ng i nd i vi d ua 1,_ ~t~ t roet~sh i p ot~ co::� rpc� t~at i r.:�ro. " ( Underscc�t~ i rog supplied) while the provisions of Section 3 and 14 �of Republic Act 2036, as amended, in part pertinent read: "SECTION 1. Sectioro tht~ee of Republic Act Nurnbet~erJ . Twenty Hundt~ed Thit~ty-six, as amended, i s het~eby fm~t het~ amended to t~e ad as follr.:�ws: 'SEC. 3. l "hi s frartchi s e s hall ceont i roue fat~ a pet~ i od of fifty yeat~s xxx. E~r:~~vi_geg__hr.:�w_ev_gr:, That the stations for international ceommunications, breoadcasting a nd television be eoperated within four yeat~s ft~mn the appt~oval of the amendatory Act.' SECTION 2 . Sect ion fom~teen of the same Act is hereby repealed and in li e u thereof a new section i s hereby inserted to t~ea d as fo 11 ows: 'SEC. 14. Iro ceorrsideratiorr o f the franchise and rights hereby granted and any provisieon of law teo the corott~at~y r ro::otwithstarodirrg, the gt~arrtee shall pay the sa rne taxes as are now or may hereaft e r be required by law frorn eother individual s , co-partnership, private, public or quasi- public associations, corpeorati ons , or jo int stock com parries, O::�n t~ea 1 estate, bu i 1 rl i ngs arrd o t het~ pet~sona 1 y pt~opet~t ~__?:<ce_p!_ C9.9.J c~_!_?._g_�,tl..PJ!!_~!..!..h_______r!:l_~~hi_Y'...!..f?..!.:y_a r1 d ~-at~ e 30

DECISION CTA CASES NOS. 3162 , 3163, 3164 3165, 3166 & 3167 10 - g_a t' t ~-....!:!~..f: .r:Lg_Q___j,_!J.~- ~-9..l.l.r.'.f:...c t i qn__~j..!:_tL_...:!:..D~ !?..!L?...irJY:5.r~___q_f__:th_~__Jl.t::i:\.Il:.le e_'J__wh j, c !!......?J.l~.1.1 Q .~-------g-~-~.!l:lfLt___f.X:.Q..!!!........__f~~~~-2~~ om s____Q!=Lt i e_?-..L t.S..':~!.f f s __S\_!J_g ___q_:th.~.!:.~____t ax_!"...?.., as we 1 1 as those r:n�'op erties decla t�'ed exempt in this section. tn cons iderat ion of th e f.~ n cJ:l i s rg_L__:7-.__~ al�.._�~CU:L_~.:t_Q.__.Q..D..~ . 1~_?.1L ..P..~.!:::..._-~gfl.t.!::!..~ o f a 1 1 !~ r o s s t' e c e i p t s from the busine ss transact ed under this ft'a nchi se by the !;lt'antee shall be paid t o th e Teasurer o f the Philippines each ye ar, wit h i n te n d~"'l.ys aftet' the au.dit and appt'o v al of the accounts as prescribed in this nc t . �.~J. d____t;__~~---? h.9..!J._ __Q.�...__i..!1__...!..i..E.!..~-:!.____.9_f_ ~.D..Y__f\_TJ_c;l_E.l..l t a ~_g_~__g_:f CU!.Y.____!:U,_Tlf!..L......D. _at u t'g Q .!~-~-2..�r:.J.:E:ti.9_TJ__l_~-~-i e.9. .~-..l? s t _a b t i s f1.~.9. ......Q..t::. ~ o..U.~c~_g_______~?.Y_____f\ n y_ a ~:1_!; h_p_r:_!__t_~ ~l!..�.i..2..9..!E..Y..g__!:_,_____I!!.!::Ln i ..~.~..P..~_!__,____ QCQ..Y..~..fl..�J..c:l]_ __Q..t~. D. ?�t ..L~l.!1_<=.'..! ,__________fr:. P.rn._______~!J.J..~_t__l _____:t_~-~--~5..........- . .:t..b..~. 9.t~-~n..t .~--~---�-------L~-------- �---'"lg_r:_~.P~----g__t<_p_t.~....? sJ_y_ g)5.�...~pted. " (lJndet'SCOt'i n g suppl ie d) I t i s t o be s t t ' e s s e d t hat �.m d e r t h e f' 01' e g o i n g pt'ovir:;i.on of Se cti on :l it� of' Rep ubl ic Act No. C.::035, as amended, what at'e e ><emoted ft'Om ' cu stoms- d uties, tc:wiffs ;:~.nd othet' ta><es at'e "radio e q 1.1 i p me n t , machi. n e l�'y a nd l5p.::l.t'e pc:n'ts needed i n connection with the bu si ness of the !;lt"antee . Said p ro vision is sig nific a ntl y impo t't ant fot' the t'eason the1t RCPI is in the opet' i:tt ions of radio stations fo t' domestic telecomm u nications while RBS-CBN are both engage d in radio a nd television operations. R l though t h e mandat ot'Y Ret in Section l amended Secti on 3 of Rep ub lic Act No. 2035 and u nd et' its pt'oviso <:tut hot'i zes RCPI to establis h stations fo t' co mm 1..1n ic at i ons , bt'oadcast ing a nd tel ev ision be operated within four y Pars fro m the .::~.ppt' ov;:~.l of the amend;:~.tot'Y Act or on Ju ne 1. 8, 1'7JEA, 041

DECISION 3162, 3163 , 3164 CTA CASES NOB. 316~, 3166 & 3167 - 11 it doe s 1'"1 0t appeat~ that RCPI has ever ey-,gaged i Y"l opet~atil'"I Q television statioy-,s, li k.e ABS - CBN. Thus, it cannot be cons idered as competing corporation with respect to the operat ion of television stat i o ns. To extend the tax exemption privilege of RCP I under Sect ion 1'+ of Republic Act No. 2 036, as a me r.ded, t o ABS- CBN when their businesses are n ot the same, would seem t o be stretching th e grant of exemption t~o far tc� iY"1cl ude televisic�Y"I eq u iprner.t ay-,d pat~ ts tmder said law beyond its scope, in cont ravention of the rule of stri ct construct ion of tax exemptions. lY"� other wc�rd s , exempt i r.:.n s from taxat ioY"1S highly di sfa vot'ed and wi1 1 n ot be pet~mitted to at~ise from mere implication <As iat ic P e tro l eun Co. v. L lanes, 4 9 Phi 1.. 466) . It i s also well set tled that exempt ic�Y"� from ta xation should be cons trued in st rictissim i j uri s aga inst the taxpayer and libe ra lly in favor of the tax ing authot~ ity <Esso S tandard Eas tern Inc . v . Ac ting Commi s sioner o f Customs, 18 SCRA 488 [1966] >. Li kewise, this is also the inter pretation made by the �' Department of Fi nance, the agency primarily in charge of 1. mple menting the Tariff c:md Custom s Cc�de, whi ch cat~t~ies a great weight aY"�d for ou t~ p Lwpos e is cited bel�::.w : "August 29, 1'366 Rtty. Lo ren zo R. Tanada, Jr. P. 0. Bc�x 1344 Ma n i 1 a

DECISION CTR CRSES NOS. 3162, 3163, 3164 3165, 3166 & 3167 12 - s i )�' : In connection wi th your request for in beh a lf of Bolinao El ectr�onics Cot� pot�ation to be extended an equal tr�eatment in the a p p 1 i c <::1 t :i. o n o f c e t' t a i n t ax c n n c e s s i on s conferred - to a pre s ently enjoyed by the Radi o Communications of the Phili i ppines by vit� tue of Republi c Ac t No. 2 035 , as amended, in the li g ht of the ter�ms a nd conditions in your c rant under Republic ) Acts No . 5 1 1 and 51 2, please be ac:l v i s ed th a t this Department is in full accord with the view of the Cornmis s ioner of Inter�nal Revenue in his 2 nd Indorsement tci this Office dated f:)ugust 18, 1'355, which, insofar as pertinent, reads as follows: 'Th e Bol inao E le ct ron i c Cor p ora tion con sid er s the Radio Com munication s of th f? Philippin e s as a compet i ng cor poration an d S ect io n '+l o f i t s �franc h i s e con t a :i. n e d i n t er� ms which ar�e mot�e favo r�able t h an t hose gr�anted to the Bolinao E 1 e c t r� on i c s Cot' pot' at i on � Spec i f i c a 1 - ly, the Radio Communications o1= the Philipp i nes is: (a) E x empt f1�� o m duties, and compensating tax on t�a.d i a par�t s equipment, machiner� y and s par�e the needed in connection with business of the g r a ntee; (b) E xempt ft�om inc~o me ta>< and othet� taxes o"f any ~<ind , natut�e or descr�ipt ion on th e 1��eceipts der� :i.ved from the operat i on of its franchise; ( c ) Subject t o th e franchise tax of one and one-half per centum of all g r� oss receipts fr�om t he bu s iness transacted under i t s franchis�.' XXX ><XX xxx" (See Answet� in C. T. A. C.:-\ se No . 31 5 2 , pp . 115 -115, CTA t� ec. ) � Hence, pe t i tionet� s ' cla i m fat� exemption fr~om taxes and cu s toms duties on the im pot~t ed television e qu ipme n t and parts, s hou ld be r e jec ted.

DECISION CTA CASES NOS. 3162, 3163, 3164 316S, 3166 & 3167 13 - 2. Whether ther e was lega l basi s for the seizure o f the i mported television equ i pment and parts in question. Petitioners contend that there was no legal basis for the seizure of the imported television equi pmer.t and because said articles were released from customs custody pursuant to the release certificate issued by t h e o�partment of Finance. Respor.dent at'gued cotherwise, allegir�g that ft' aud ar.d misrepresentation were committed in securing the t'elease of said equipmer.t and parts, hence, subject to seizure undet' Sect ior� 2530 (m) 3, 4 ar.d 5 o.f the Tariff and Customs Code. We at'e not impt'essed by the ccor.tent ion of both petitioners and respondent. The records reflect that on March 28, 1966, ABS-CBN, ther. Bol ir.ao Electronics Corporation addt'essed a letter to the Secretar y of Finance seek.ir�g exemptior� ft'om customs d u ties ar.d taxes or. all its importation and from income tax. Said request was indorsed to the Commissioner of Interna) Revenue wh o:- that Bo l inao Electror.ics Corporation is entitled to the same tax exemption as t h ose g t'anted the RCPI but subject teo the franchise tax of one and one-half per centum of its gross receipts derived from the operation of its franchise. Dr. August 2'3, 1966, the opi rlior. was affit'rned by the

DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 14 - Bolinao C lectt~on:i. c s Cot~pot~at ion hi �; d e p <=� ,.~ t me n t i s i n f u 1 J. n c c o t'' cl t ~,o.d. h t h e v i ,., w o f t; h '? C omm issioner' of Intet~n;~l Re v enu e to the effect tha��; _, i. s competing COt''P Ol~at io n and Bo J. i n.:to E l ect roni ~s C o rpora t ion was entitled to the samP ta~ exemption p1�~ i v i 1 e g e, spec i.fi cally, ft'O m CIJ S t 0 m<; duties and c o mpensati ng t r.\ >< o n t~ad i o equipment ., m achinet~y and spa t~e p art s nee ded in connection with its busines s <E xh. L - C , Jo :i. nt S tipulati on of F acts ., pp. 511 ..�� 500 , B �..1n d J. e I I I , F o 1 d e t~ I ~ C u s t o ms t�' e c. ) .. Howe vet', it appears that ~BS- CBN was subsequently in f Dl'med by !:-Je ct~ et al'Y E m~ i 1 e that Sectio n 14 of Reptlblic Act Nos .. 511. .:md 51.;::: grant it exemption onl �; on import ation of radio equipme nt m~ c h inery ~nd spar8 pa r~ t s ( E >< h � 0 �- 2 3 , p � 3 7 , B u n d 1 e V , F o 1 d e l�' I , C u s t o ms t' e c . ) � Th :i. s notwith sta n di ng, it t'e q uested and c n n t; i n u e t o ~~ e q u. P s t t' e 1 e a s e o f t h e i mp o t~ t ""'� t :i. o n f t~ e �~ o f d �.1 t i e s and t a>< e s , i.ncl u :ling tele v isi on equipmen�; Cl.nd pat~ts which .:n~e not cle;::n-l y within the categor �; of at'ticles in t'P.spect to the i m por~tat:ion of which have been granted exempti o n. Be t h at .?Is it m<:l. y, thr? i m rJot~ �t;Cl. l.;ior an d ~~ elease of the eq u ipment i. n qu estion may not be con sid et' ed within the contempl atio n of SectiDn c~530( m) ~, L~ ~nd 5, <; r.\ nS t he pt'I?.Senta i on of e v i ri e n c (:1 0 f f t' c::\ IJ cl b y y�� ., s p 0 n d e n t . To out' m:i.n d, th �"? t ' p 1. . �"' ~;; p of :-? q �.: ~. p 11 e 1t st i .l co n stitu ..~e .~

DECISI ON CTA CASES NOS . 3162, 3163, 3164 3165, 3166 & 3167 15 - viol a t in~ of customs law by ABS -C BN becaus~ t axes a nd duties theY'on have n ot be en paid. In th:i.s c o n n e r:~ t i c n , we a 1' e o f t h P. o p i n i o n t h at t h e s i t u at i o n is g ove rn ed by Section .204 of the Tar if f a nd Customs Cod e .. Undet' Flec ~ ion 1 20/f' l i a b i l i t y f o t'' c us t tJ ~ ~ s d t_l t ie s , taxes and othel�' chi:\ r!;:Jes � attaching on the i mp o 1�' t at i on c on s t i t u t e pet's on a 1 d e b t a nd 1 i en wh i c h c a n be enforced until paid. As t n t he contention that re spondent h as s h i ftm d th e hut'den to ABS--CB N to s .how th~.t the s e i zt~d equipme n t wet�� e i iT'p o t'ted le 1Ji3.l l y , S'-lf f i ce it t o s tate t h at in s e i z IJt��e pt' oceed ings , when respo n dent establ i �:; h ed i ts �cas e, j t beco mes i n cumbent upon peti tinnPl' to ~;how the i n noce n ce of the j mp ot' tati n n by f ait�' p t'e ponc:let'ance of evidence <See Sanche s ''� C o mmiss i one r o f Custo ms, B. T. A. C .:~ se No . Nov embet' 2, t 95'~ ) " t his poi nt p e t i t i o n e t' s like wise f ailed . Consequ ently, We f in d suffici ent leg~J. f (J t' the s e i z ut' e th e te l ev ision equipmen t an d par ts. 3. Whether there h as be en propP.r ) i d entif'icat ion of th e articl e s a lleg ed to have been i llegall y imported . po;:-, t; ula te that in s e i z 1_\l'e p t'O c t0ec:lings, i t is the duty of the Bm- eau of C u sto 1~s t o i. d e n t i f y t h e pat' t i c u l at' at' t i c 1 e s wh i. c h i t c 1 a :i. ms t o ~ .:.w e b R en i 1 1 e q a l y i. mr t (l t'' e d ,3 n 1 isted in tt e 346

DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 16 - w~rrants of seizure and dete ntion. It can not .1 as was done in these case s, just make an inventor~y of all the broadcast equipment found in ABS-CBN broadcast station s and f.H' oclaim th at a l l o -F those at' t i cles are subject to seizure proceedings. We are not conv i nced. It mus t bP. noted tt1 i:;\t when the Jo i. nt Team made and inventcn�y o-F al l th(~ equipment and mach in er~ies found in the television s t a t ions of ABS-CBN, imp ort~d s to c k i nventorie s were i nclud ed. Existing fa cil ities of BoU. nao as well as i t e~ ms which l ocally c ons i d et�ed a n d excl �..tded in t h e in vent o 1�' i <e s ( f3 e e �Bun d l e V, F o 1 de t~ I, Custo ms t' e c .. ) � We ar~e of the p e r�s u a!:", ion that t~es po ndent' s duty to identify the equioment i n questi o n ha s b een satisfied. 4. Whether or not failure of the Bureau of Customs to take act ual custody o f se ized equipment i nvalidate seizure. Pet i t i on e t' s c 1 a i m t hat t h e s e i z e d at' t i c l e s wet� e n e v e t' t 1..w n e d o v f.H' t o t h P Au c t i on and Car~ g o D i s p o s"" 1 Divisi on,. In stead, s a id at�ticles which have ait~ead y been installed in the d iff er�ent stations of ABS-CBN we~�e left in the c us to d y of KBS, a . bJ�'oadcasting corporation owned by Roberto Benedicta, hence, no valid se.i.zm~e h as be en effec ted pursuant to Se ct ion

DECISION CTA CASES NOS. 3162, 3163 , 3 16 4 316 5, 31 6 6 & 316 7 17 - Th i c.; notes when the va t�ious collect ors of customs decreed the seizure of the ... . impot'ted at�ticles f01�� violatj. on of S e ction 2 530(m} 3, 'l� and ~3 o f t h e T at' i f f and C us t o ms Cod e , &J n e t' t h e of Se i z �Jt'e Dete n t i o n <See att,:\chf~d to the cot't'El s pond :in g peti.ti. ons).1 said . articles were subj ected tn const r uctiv e distraint . Rarli.o Philippin~s Network, Inc. <Exh. U".: , p a 1�' . .-,.-. .-1 C. a::.. L~~:,, J o i n t S t i p ul at i a ri o f Fac t s J 1.1 n e 2 3, 1'37�,). It is en o �J g h t hat c l '"' i mr.m t s b e n o t i f i e d t h e t��e o f, b ecause whoevel ' i s Ol' r.n'e i n p o ssession of t h P- at� ticles i n q �J e s t i o n i s I at' e 1 e g a 1 l y b ou nd and obliga.ted to hold and preserve t he arti c le s f o ~ the Go vernment. Thus , seizure has been duly e ffected. Anent the argument th a t no report ha s been ma de to the Commission on Audit ~s required under Section c~303 of the Ta r�iff and Customs Code, it may not be amiss to point out that s .(C'h p l�' o v i sions whic h are i ntend ec1 to p1��omote dis p a t c h, method, s ystem at' fat' in f ot�mat ion ot' d i r�ect io n of ~ffi c ers, or to ser v e methodical and syste matic modes of rrnceedi n gs, ( Rox a s v . Raffe rty , 37 Phil. 358). 1\lon-�c o mp l i cance there fore i n t' e p o 1�' t i n g -t tJ t h e C o mmi s s i o n o n A 1.1 cl i t in thP.se 3 46

�' DECISION CTA CASES NOS. 3162, 3163 , 3164 3165, 3166 & 3167 18 - cases does not render the seizure of the e qui pment in question invalid. 5. Whet her or n ot f ina l 1 iquidat i on has already set in. Petitio n ers insist that whe n t h e warrants of cus t oms custody. Invoking Section 1603 of the Tariff artd Customs Code, petitioners at~gue that wh e n the articles were re l eased free of duty , such release would after th e expiration of one year from said date , in t h e absence o f fra ud , be cortclusive upon all p at~ ties, u nless the liquidatic�n became final with respect to the importation . Again, We disagree. The fact that the televis ion e quipment and parts h ave already beer. ir.stalled ar.d at~ e being u s ed by ABS -C BN is r::�f no cor. seq uer.ce. a s i Y"td i cat e d that when ABS-CBN was subsequently advised by Secretary Enrile that Section 14 o f Republi c Act No. 51 1 and 512 gran t it ex em ption o nly o n i mportatio n of radio equipme n t, machi n ery and s p at~e the of te l evision equi pment free of d uty is contrary to law, ) because t he same does not come within the category of articles in r espect to the im portation of which h ave 34S

DECISION CTA CASES NOB. 3162, 3163, 3164 316S, 3166 & 3167 19 - beer� ~p~anted exempt i o r �. The Supreme Cotwt has held that the of which is effected contrary to law is subject to forfeiture and that gc�ods rel eased contt~at~y to l a w at~ e su b ject t�:� sei zm~e ar.d fot~fei t twe <Papa v. Mago , 22 SCRA 857 [1'358]). the t e 1 ev is i on eq u i pmer. t and pa t~t s wet~e er.t ered ar.d t~e l eased "ft~ ee of duty", thet~e could have been YIO "liquid a t i �::OY�", a s thet~e wa s Y�C� asce t~t �air.ment � o:�f the duties due eon th e said i mportations. Besides , it is cleat~ ft~o m Section 120;~ of the Tariff ar.d Custc�rns Co:�de, that iy�, ca s e �: �f taxable articles c o mi ng ft~orn .J abroad, i s Y"10t t errni r.at ed tm t i 1 the duties, taxes a nd bther charges due thereon h ave been paid or secured to be p~id at the port of entry (C.F. Sharp & Company, Inc. v. Romualdez , C. T. A. Case No. 130'3, August :1.7' 1!Sit' in 2 2 SCRA 750 [1 '358] ) � It appearing that the taxes and duties due eon said i mportations of televis ion equ ipment ha ve not been paid, We fi Y"ld ur.tenable the contention that t h ere has been a final liquidation of said importation s. 6. Whether the warrants of seizure and detention were valid. ar1d d e ter.tioY� iss tted again s t ABS -� CBN wet~ e Ytull and '1 5U

DECISION CTA CASES NOS. 3162, 31 6 3, 3164 3165, 3166 & 3167 20 - void hecF.\use thet��e las no s '1o win~J of pt�ot.abl e cau!;e f ot' . t h e i r' i s s u e.n c e , a s cl e t e t' mj_ n e d b y a t' e s p o n s i b ~- e officet' author� i zecl by J. i'�\W, mu ch l e ss was c\ n E:><aminati. on co n ducted u nder-� oath Ol�' affir�matio n of th e complain an t and the wit nes s e s, pi:Tt i cul ar� :. y d es cr�ibing the place teo be seat��ched and things to be seized, as mandated under the 1973 Constitution, enfor� c e d at t i me r.lf the seizure. On the cont t'at' y, t� espondent asset�ts 1~hat th e 'l'lat'rants o f s e i z l..ll' e an d rl e t e n t i o n i s s '.l P d , we t' e v a 1 :i. cl � Petiti.one1��s' asser�tion i s flawed. vJhat they sf-'Pm to ovet�look is th at in sei zur�e cases, one i mpor�tant aspect of the pt�oceedings i.n con s i d e 1�' at i. o n o f t h e i s s u e i n v (J 1 v e d , i s t h e d �J t y C� n the par't of t h e govet�nrnent of pt'esenting evidence wh i c h i n d i cat e p t' o b a b 1 e c 21. u s e f or i n s t i t u t i n g s u c h pt�oce ed i. n q :.; (~3ee U.S . v. One Ba g o f Paradi se an d Gho ura F eat he r s ? !\. Y. ;::::5G F -o 1, 1E,7 C. C.~). 473). ThP te1�'m "p1��obabJ.e c::?.t..tse'', rneans less than ev~. denc:e which will justify cond P JT!Tlat ;_on. It a made unci et�� c i t' cu mst .::~.nee s which s uspic i on <Locke v. Uni t ed States , 7 Cra nk [U.S.J 33'3) . J..J h en t h e t' e f o 1�' e , t h e t' e s po nd en t i n t h e s e c <:~. s e s Ot"det�ed t he sP.i.zm�e of t he tele visjon equipme n t and pa1�� t s fa t' violatio n of' cet'tain pt'ovisions of law, i t is thet'e hy i n c- 1.1 mbent upon him to show by prP80l1dP.r~r1CP of evidence t h at there war probatle 351

DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 21 c;::tuse fat' the seiztn'e>. t h e l' e f (Jl"' e ~ b o i 1 s d o ~m t o wh e t h e t' t h e fact s wat' t' an t From the record s, what cre ated suspicion and impelled t��e s pond ent to issue Wi3.l''t'ant s i. s the Memorandum for the Co mm issi oner of Customs dC"l.ted 1g73 of Peclt'O C. Mendoza, Acting Deputy Co mm issioner of C1Jst oms (See pp . 5E,0 �-5E. 1 , .B1..1nri 1 e V, F o 1 d et' 5, Customs t'ec. ) , based on the findings of Het��ar.leo Pagtan<?.c on the i nv estigati on conducted f o r alleged non-payment of taxPs Bnd duties on i mp 01't at i on s of te evis ion equipment arrl sparg pat'ts, stating amon~1 othet'~, th;::\t: a. ABS --C BN impot'ted tel evision equ~.omen+.: 21nd b. T h e j mp o t' t at i n n s "" t' P d e f i n i t e 1 y n n t t' ad i n ) equipme n t, mach inery and spare parts; c. ABG �--CBI\I can equipment mach i n e l'' y and s p a.t' e p a~�� t s n e e d e d i n co n e c t i on w i i; h �t h P. oreration of its busi ne ss of t' ad i o telec ommunication; and d. ABS �-�CBN ~>'J i t h full ~<nowl edge of specific at't i c l e s by the exempti on, t t'OUgh mt s� epr~sentation availed or the im pot'tat ion of ~\l is:i.on equ ipment, machinel���y a.nd spat'e pr.3.t ts. After careful stud y of the aforecite~ j u t ' i s f. t' � t rl P n c e , and r.ons id ~~��at 1 on of ":he fact<.: 352

DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 - 22 - surrounding th e importations and release of the at't icles ir� quest ior,, this Co:�urt is of the opirli.on _, that "pr�:�bable cause" fo t' se izure ar�d deter.ti or� h .::~.s been established. On the allegat ior, of that the r .ot followed, it must be noted that said mar.date dr.::�es not . , l.)t"' bat' havir1g pol ice under Section 2203 of the Tariff and Customs Code to effect seat'ches, seizure ar.d at't'est fo:�t' the enfot'cemer.t of customs law. The Tariff ar.d Custo:oms Co:ode was ir�,tet' pt'eted to r11ean that except ir� the ca s e of search of a dwelling house, pet'SOY"IS exercising authority under the customs law may effect seat'ch a1'1d seizut'e without a seat'ch (Papa v. Mag�:�, supra ; Viduya v. Berd iago, 73 SCRA 553 E1975J). 7. Whether the appra isal of the value of the seized articles and the assessment of taxes were correct. Petitir.::�net'S impugr1 the appraisal and assessmer,t on the grounds, among others: <1. > That the inventory was erroneous because it included items r.ot i !legally impo t'ted 1 ike equi pr11er1t wh ich could be used fen' both radio and televisi�:�n 353

DECISION CTA CASES NOS. 3162, 3163, 3164 316S, 3166 & 3167 - 23 - bt'C�adcas ting, television equipmer�t locally fabt'icated or purchased; and (2. ) That the assessment of taxes due was faulty because: a. There was double counting, appraisal and assessment of taxes on many items; b. The appt'aisal ar.d assessrner.t was based instead c�f the domestic value as by Sebtion 2 01 o f the Tariff and Customs Code; c. There was erroneous classification of d. Wrong foreign exchange rate and wrong tariff rates were used. Her.ce, the assessment of taxes rnade shc�uld be r11.t 1 l i f i ed. Respondent, or. the othet' har.d, rnair.tains that petit ione1�'s failed to sub s tar.t iate the allegat ior�s with evidence. of his posit ior., preser.ted Mat' ci a 1 P1�~i nci pal Hppt'a iset' of the But' eau of Customs, wh o testified on his role as a membet' of the ir.ter-- agency committee which investigated the importations of television eq u i pmer.t of ABS-CBN. On cross e xamination by 6ouns el for petitioners, he testified as follows: "Q. Now, wi 11 you tell u s h c�w you p t'o cee d e d t �=� pet' form yc�Ut' own task with re s pect to �the it ems Ot' eq u l. pment found in the Bohol 354 )

DECISION CTA CASES NOS. 3 162, 3163, 3164 3165, 3166 & 3167 24 - Broadcast Center at Bo h o l Avenue, Quezon City? ( A. We wen t to Bohol Ave n u e t o geth er~ with t h e r~ e p r~ e s en t at i v e a f t h e t ' ad i a c on tt�ol of fi c e , BIR a nd ASA C at that t i me, and we we re briefed h ow we .;:n�e goi n g to p r~ o ce e d witt t;h~ i n ventor y . Now, wh en we wen t to all the te lev isio n broadcasti n g stations a n d we took the inven tor~y of all te equipment, we fo1..1nd in that station t h e n th at's i t , that is in all t�elay s t.:1t i o n t h1�~aug ho ut t h e c o u n t r~ y � fl . D id I get you r.an~ ect 1 y wh en y o u s.:i.id th at when y ou we nt to a particul~r ABS - CBN s ta tion you just in ventorie d a l l the items � found i n that stat ion ? A. Onl y in th e television stati o n. 0. Yes. All th e i.tf?ms found t h et�e'J A. All th e television equipm e nt , sit". Q. And t ha.t wa s the b as is of yo ut~ aprn�a i sal? A. Yes, si1�~. Q. Yo u did n ot make any dis tin ction as to whether t he it e ms i s used for radio and televisi on ? A. Well, the f Cl.ct that t he y at'e fo u n d in the t e l e v ision and b t~aadcasting station and they ha ve separate s tation f a t~ t'ad i o, we pt~e s ume that is a pat�t of the TV station. Q. So , you pt�esu med tha t that is a t elevisi on equip me n .t . You don't 1-.:now that a r.et~ta in i t em c a n be us e d f o t~ bot h t e 1 e v i s i on and 1��� ;:.\ cl i o l:w oadcast ? 355

DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 25 - Q. Anrl you di d not consider th at some o f _, thosP i te ms you found in the t ele visi o n statio ns wer~e locally fabr~icated') A. Well, �J'Ie ar~e inclined to be~ie ve that some of the m are locally fab't~ic<Olted but we as sure the r~ P p r~ e s en t at i v e (J f t h e s t at i on that the mo me n t you can prove that thes e are loca l ly fa.b r~ i cat e d , t h en we a r~ e g o i n g t o take that out of the inventor y . Q. Yes. And the 1�~e pt~e s e nt at i ve of the station pt~es ented you i t ems wh ic h were locally fabric a ted? A. Ye s, sit~. Q. And did you r~ecei ve those items fr~om y o '-It~ wo r~ ~< s h e e t ? A. . We 11 , I am not a membe't~ , sit~, oF the sc't�'eenin g co mm i ttee, but I th inl-< all t he items that are th er~e, we rresume d that they are te levi sion P.'lUipme n t . G~. No , nn. A. Ther e were items that were deleted . A. In thP. scl~eening committe e, ~-.Je have thP. techn i c<:ll mal'"l f r~o m the r~ adio cf"lntr~oJ., and th en the BIR, then the representative from ABS-CBN they went over --- Q. But , the basis of your asse ss men t was y o m~ wo ,.~ 1-< s h e e t ? A. Afte r the y have bee n screened. ATTY. GlUHUON Can we ask for the worksheet? <Pats e in t 1e p r~o c eedings.) A. even i f they en~ e a 1 r~ e a d y i n th ~? wo ~ksheet, we assure them that 356 _,

DECISION CTA CASES NOS. 3162, 3163 , 3164 3165, 3166 & 3167 2G - th~ moment you can show proof that they are locally manufactured , even if they are already assessed, we can still delete them from the list. Q. f.~nd yout~ i ventm~y i ncluded :items rn~ rather you d i d not consider items which were locall y purchased? A. Well, I th ink they have considered tha-t;. Q. No, you, yo ut~ :inventory. A. I did not consider~, sit~, I:Jeca.use I presumed that the moment they wer~e pt~ e sen ted to me fat~ appt�aisal~ I j u s t ---- Q. You just assumed tha t they wet��e i mpor~t ecP (.~ � Y e s , s i t~ � Q. And I noticed that some of the items there the y were purchased from Secretary Jo se Concepcion Industries. Did you not come acro ss tho se items? A. The t~er:we c; ent at i v e of the sta tion r.wesent ed invoice!s and document s ) to ve pt~o th a t t hey a t��e t~eally locally ptwchased and lo cal ly fatn-icated. Q. B�Jt inspite of that, those i t ems wet~e not deleted ft�o m yout~ wol�'~< s heet . A. As far' as I know, sit~ , they deleted. Q. Okay, We can checl-< th.:t t later~ on. How .:\bout tele v ision i tems ~�h ic h wet~t" acquired from the old Bol inao Br-o a dca sting Cot~pot�at ion and old Alto Broadcasting Corporat ion, did you also include those in y o u t' i n v f.! n t o t~ y ? A .. I cannot t~emembet~ th.:~t anymore, sit~ .. n r.:. f.=n� t:l. c:; I ~<n twl , only those ~-~ f? f n �.m<.l in Boh ol Avenue and othQ't~

DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 27 - tr.J.evi~;ion 1��� ela y st iO\tio n in the oc (11 .\l1t t'y. Q, Jc>t' S IJD to the .::t.pp t' c::d.sr\ . . L-lh .::t.t l�!<�'l r, the b <1 s �i. s f cw a p p t' a i s i n g t h c~ S l..l f. C' DSPd tax ancl dutie s on thP. d j_ f f "" t' e n t items i ncluded in yout' inventory and workshe e t ? A. Th o s e items covet��ed by commet'cial j_nvni.cP., we hased that on thE� c o mmP. r' C' i a l i n v o i c e � T h 6 s e i. t e ms f o u nd in ~~~-H? television s �L::\ t i o n which we do not h a ve any val ue , we u s ed th e v a lue s tated in t heir b o o ~< � T h e y h a v e a n i n v en t o t'' y n f all th .s e items and with t he v a lue s t a t P rl t he re~ n. L1 .. n n d t h e i. n v en t m' y <~ n d t h e v a J. �- i"l t i. on use~ i n th~ books of ABS - CBN werP on ap pra i~ed or c urrent value? n. I thin!-< th::>.t Wc::\S ,;.~.ppraised by r.nnrpP.tP.nt Q. Cu s toms appraiser? A� Ye s , s j_,., � 0. And they us ed th e r P producti on co~t? n. l,~e ll 1 inasmuch 0s we h.":\ve n o val ue '"" ' ' .';"\ i l .:::'1 h l e f o t' t; hat u n cl !? t ' o �..1t ' 'L"' r�� i f f CD d e , w f ! can us e . t h e domestic wholPsa]e value m1nus i n c i r1 p n t n. l e >< p e n s e s <:"\ n d ot h e t' dut:ie e: c"\!'ld "\; i:\Hes. Q. And under' the Ct..t stoms and Tat'i ff c~~rl p enf ot'cecl at th l? time of the imp o t��t A. t i on s, how did t h e Customs d !~ t e t' mi n e the Ct\S t oms dutj.es tiJ b~-? assessed on the i mpot��t ed ite ms ? R. The y�at e of duties, sit"'? (] . ~\ (J ' the basis. Is it cons�.t . a t' n v oi c P., is i t home con su mpt i o v <-.>. J�. te ot~ what; nC'lt ? 358

DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 28 - n. the it' is by co n s ul~r invoice. I t i s con ~; ular� i. n �; o i c e , I t h i n k � G!. But: in thi s c;::\se, ~�~h a t you '.Js e d is tl-� e f ;:~ i 1 , m'"' t' k e t valu e, not the c o n s u l. ,, 1�� j n v o i c t-~ ':> R. Becau se there was no consul a r i nvoice . Q. Why are there no consular . . ") J.nVOl. CE!: A. Be c au. s e t h e y <:n' e a lr' e ad y i n s t a l 1. e d � " <Sr~e T.s.n., p p. l-Jitnes!s fu l''thet' testifie d not thP. importations are covered by cons u lar invoice . This Cou t��t feels it to discus!; f u t' t h e r�� g t' o u n d <1) ' i. P.. tha t th e :i. n vent ot'Y wa!'; Team made inventory of all the equipment .::'lnd rn ach in e 1��� i e �:. fou.nrl i. '1 the te lE'vision stations ABS - CBN, imported s tnck inventories wer ~ i ncluded an~ We at' e s 2.t :i. s f i e d t ha1 t h e e.1�" t i c l e s i n q u e s t i o n 11-1 e 1�� P ,; i c1entifi Pd . du e Y.Jas faulty, ~..~~~ 'find '='.fte1�" c.:n"e f ul s tudy of thr~ t' ~? s p e r; t :i. v 10 p o s i t i o n o f t h e p i:H' t i e s , a n d o n t h e b a s :i ~� o f t h e 'J TW' e f u t e cl t e s t i rn o n y o f 1�" e s p o n d e n t ' s wi t n e s s , wi th petition ers failure to s ho w that the method us e d b y t h e a p rw a i s e t' i s n n t p t�� o p e t" , w e a~~ e c o n v i n c e d t h R 1; t: h P. a p p J�' a i sa 1 of the value � of the and -"'Sses�::;ment of the taxes due were Th!? p , e s u mr t i o n i s t h i':' �\: o f f i c i a 1 d u t y i s p e t' f o t " me d '.l n t i l 355

DECISION CTA CASES NOS . 3 16 2 , 3 163, 3164 3165, 3166 & 3167 the con t t':\'r'y 29 - Phil. 57C). <McCarthy v. Aldane se.1 uph e l d . 8. Whe th e r or no t the i mpo s ition of the 50% fraud penalty is proper. Pet i t i on e l' s ste~te th?. d i ffet� ent Finance SecTPt .":l.t' i e s eY't' ed in l'' e 1 easing th?. televi s ion equipment ,"\ nd when only equipment ~,>H:!t'' e t ;:;.H exempt, th e et'rOI�' does not stam :J t h e b ,.� an c:l o f f t' a u d n (J (.:m S �-- r, B1\l ' s i mp o t' t at i o n s ,:; s t �') justify the i mpo s' tion nf f r aud penalty. lln t h f.! ot h et' h,":l. nd, SE>ct io n ,:=.: 530 ( L.) .....3, f.. anrJ 5 of the Ta1���if f .::~n d C �..rstomc.; Code, ,_mdet�' wh ich :��espond en �~ p t' e d i cat e s �t; h e i mp o "'� i t i o n o f t h e f t' a u c:l p e n a l t y , j �"' f.JriXt pe t.. t::i. nent, st<:1te~ I I SE CT I (]t,f ;::~53(> . ~~l:.9..Q�_ t~~.Y..__�~~.t-lJ_.:..~:L___t.f~- l:~9. ):.:.f. ~~.i.:t::!.C ~........ ...L.lm:L~!:~--.~L�l!:..!. t L__~!JQ_ C!:~2.~~-9JT..!..?_ _l::..�.~.� Any vehicle, v r:>sse l o~� .:dt� ct�a ft , r::-;:\t�gn, a t�'ticle and othe1�' objects sh al l , undet� thP. follo~'ling co n di tio ns b 1? subject tn fi'Jl''ff'l i '\; IJl''j:l ~ XXX X X>< ><X){ 1. Any arti cles �s o ught to be imported or exported . X X>< ><X X XXX C3) !Jn the stt~e n g th of a false d e c l .:n� at i o n o t' a. f f i d a v i t e x e cu t e cJ by t h e nvm et�, i mpot�t et~, e >< p o t' t et~ nr c o nsignee concerning the importatinn o f such article; Dn t h P s b' en g t h of a f,-aJ. sf! invoice document or o th er j m nt~t et�, P.HI-?C�J.tP.d co nce ~� n in � by thP. 0\o'Jn F.!t', e >< :) o t ' t P. t'' en� c o n s :i. r~ n e e ' 38 0

DECISION CTA CASES NOS. 3162, 3163, 3164 316~, 3166 & 3167 - 30 - the i rnpor~ t at i o r 1 of such ar��t i c 1 e ; ar1d (5) Through any other practice or d e vice c on t r~.:n~ y to 1 aw by rnear1 s of which such article was entered thr~ ough a customhouse to the pr~ e j ud ice of the gove r'r.rner.t. " to:� be within the a mb i t of s ubpat'agraphs (3) ar1d (4), the requisites are: <1> t here must be wrongful by the i n1 pot' t e r~ COY"1Si gnee of any declat' ation or~ affidavit or~ the Wt'OY"1gful rnak.ing C�r~ del ivet' Y by the sa r11e per~son s of any invoice, letter or' paper' all touchir1g or1 the impor' tat ion o f the and u:: > , that such dec 1 at~ at ion, affidavit, invoice i s false. But there is not hing of this s or~ t in the s e case s . Ir1 fact, as aclwitted by r~ e s p o ndent, ever~yt i rne a s hi pment of t e l e vis i o:�r� eq u i prn e nt ar'r' i ved , ABS - CBN had to r~ eq ue s t i r1 wr~ i t i ng for�� the t' elease of t h e ar~ t icles, attaching th e �' corres ponding comme r c ial invoice and a ll pertinent docume nt s for th e s crutiny of t he Financ e and Customs authot' i t ies ( See Jcoi nt St ipulaic�r1 of Facts, This only indicates, that ABS- CBN is i r 1 good faith. <5>, to be applicable, thet'e F o t' subpar'a~waph payme nt of duties and tax~s due . But, We found n o thin g in t h ese ca ses whi c h would labe l petitioners w i t h ft'a ud. Wh i l e ther~ e we t' e claims that AB S-CBN J 6i

DECISION CTA CASES NOS. 3162, 3163, 3164 316S, 3166 & 3167 - 31 - of televi sion equipment and parts, not a si ngle piece of evidence was presented by respondent to s h o w th at a specific impot~t at ion was fraudulently made by AB S-CBN. Fra u d is never pres u med . It must be proven <Farm Impleme nt and Machinery Co. v. Commi ss ion er o f Customs, 2 4 SCRA 9 0 5 [1968]) . While the appli cation fot~ tax ft��e e t~ele a s e f i l e d with the Depat~trner. t of Finar.ce includes a t~eq uest fot~ television equipmer.t as well , this fact Wi!:\ S r �o:�t h idden ft�orn the officials of the Department of Finance ar�d Cust�:�ms. maxim i Z<? what you b e 1 i eve yout~ f i r~m o t~ c 1 i er.t wo u ld be ent i t l ed tm det' the law but i t ' s up to:� the agency to evaluate the Hence, We justification for the impos i tion of frau d penalty. 9. Whether respondent c an comply with the decision should the s eizure proceedings be u pheld . Pet i t ionet~s in theit' rne m o t~ar. dum filed on July 29, 1991, t'a ised new issue to t he e ff ect that in the event that t h e said seiztwe pt' oceedi n gs at'e upheld, car. t'es ponder.t Commissior.et' of Cus t o ms com p ly with the dec ision o rder ing t he release of the seized articles to ABS - CBN upon payment of taxe s and duti~s asses sed, co:�ns i det~ i ng that most of the se i zed articles have been lost or d estroyed. ~62

DECISION CTA CASES NOS. 3162, 3 163 , 3164 3165, 3166 & 3167 - 32 - This is s ue is hardly a po i nt fot~ e x t e r.ded di s cu ss j. on it appeat~ ing that said que s tion wa s n o t raised in the petition fo r rev i ew but merely for the fit~st time in thett~ mem.:n~ar.durn <See Re pub l i c Flour Mill s , Inc . v. Co mmissioner o f Customs , C. T. A. Case No . 1844, Novernbet~ 27, 1'3&7 , affit~med ir� 3'3 SCHA 2& '3 [1'371J); Maco ndray & Co. , I nc . v. Co mmissi o ner of Cus toms, C. T. A. Case No . 2 07'3, Se p te m bet~ 2'3, 1 '372). Nevet~ th e les s fot~ the satisfaction of petitio:�r.ers, it is w ot~ th to cite, the comment under Sect iorl 1 2 04 o:�f the Tat~ i ff ar.d Customs Code, that "Duties at~e t axe s paid on a ccount of the act of bringing f oreign good s ar.d s ectn~ it y of t~ ever.ue , t h i s tax i s made a lien o n the goods a nd goods itself i s liable for its pay ment, but the payment itself is a paymer.t f ew the ac t of 'bt�� ing i ng in'; i t is only s ecor.dat~ ily a t a x on the; y p t~o:o pet~�t: The s ubsequent loss co �f the government' s lien which, like all c�th e t~ liens, i s dependent upon pos s e ssion, d o es not free th e importer the debt which acct~�.1ed by t~ eaSOYI of the importation <Ker & Co. v. Ce bu Collector of Cus toms, T. D. C. &7'3) � II (See Tej am, Commen taries on the Hevised T a t~ iff and Cu sto r.1s Code , p. 2311, Vol. IV>. Heroce, We find fot~ the t~e s ponde r.t Commmis s ionet' o:�f Cu <:;. t om s . :363

DECISION CTA CASES NOS. 3162, 3163, 3 164 3165, 3166 & 3167 33 - IN VIEW OF THE FOREGOING , the de c is io n ap pealed from is MODIFI ED. Judgment is hereby rendered -� Affirm ing the decision of the Acting Co mmi ssi on e r of Cu s toms in Custom s Case No. 7'3- 44 t"end et"ed on Oct ob en" B, 1'380 exc ept the impositio n of the SO')t ft"altd penalty . No c o s t s. SO ORDERED. ~~"'. G_4 ERNESTO D. ACOSTA P t" e s i d i n ~1 J u d g e WE CONCUR: ~t~~ CON ANTEfC. ROAQUIN ().,soci ,:;~.te J ud ge STEL~DRDIVRS-FRRRREep n"': n C 1�: :i. T1 q (.:) ~i <; t1 C i. '" t e ,J I.) C} CER- IFlCATION I heYeby certi f y that t ~is decis io n was r e acherl afte r du e c onsultation amonq t he members of th e Court o f Tax Appeals in accordance wi t h Section 1~, ~ rt t cl g VIII of th e Const:tution. . e~cQ ~ ERNESTO D. ACOSTA P ~p s.".c.~ in ~l ,J�1 d qe Court of T B~ nnpFa s 36 4