CTA Case No. 4114 (Decision)

. REPUBLIC OF THE PHILIPPINES COURT OF TAI APPEALS QUEZON CITY NESTLE PHILIPPINES. INC., (formerly FILIPRO, INC.), Petitioner, - versus - C.T.A. CASE NO. 41 I 4. THE COMMISSIONER OF lNTERNAL REVENUE. Respondent. X- - - - - - - - - - - - - - - X DECISIO N Tllis cas~ involves petitioner's claim for refund of overpaid Adv:3.nce Sales T(L.es on various importation �of milk powder for the year 19()4 amounting t1) ~4,5 6 4, 179.30. Tl1e pertinent provision of the Tariff and Customs Code on the dutiable value of articles imported is Section 201, to T"'ll.t: �sEC. 2 o L Basis of Dutiable Value. - The duti�� ble value of an imported article subject to an ad V8.lorem rate of duty shall be based on the home (:Onsumption value or price (excluding internal excise t:.mes) of samr:?, lil~e or sinular articles, as bought and :;()ld or offered for sale freely in the usual wholesale quantities in t11e ordinary' course of trade, in the

DECISION C.T.A. CAS_;_ AO. 4114 - Page 2- principal marl-.:ets of the country from where exported on the date of the exportation to tl1e Philippines, or vv�here there is none on such elate, then on the home �.>)nsurnption value or price nearest to the date of exportation including tlle value of all containers, coverings an(l expenses incident to placing the article in a condition ready ior shipment to the Philippines, plus ( 10) p,p~- (>PJJt of such home consumption value or price . The home consumption value or price under tl1is section shall be the value or price declared in the consular, commerciat trade or sales invoice. Where tlwre exists a reasonable doubt as to the value or price of the imported article declared in the entry, the correct (lutiable 'Ta.lue of the article shall be ascertained from the reports of tl1e Revenue Attache or Commercial Attache (Foreign Trade Promotion Attache), pursuant t{) Republic Act Numbered Fifty- four hundred and sixty-six or other Philippine diplomatic officers and from such other information that may be available to the Bureau of Customs. From the data t.hus gathered, t11e Commissioner of C:u.stont3 shall ascertain and establish the home consumption values of articles exported to the Philippines and shall publish such lists of value from tirne to time. X X X." Petitioner is a domestic corporation engaged in the manuf3ct.ure. distribution and sale of milk products in the Philippines. The records disclose that from August to November 1984, petitioner imported various milk powder consisting of Canadian spray process skim mill~ powder from Canada, Australian Skim milk powder high -heat from Aust.ralia, anhydrous milkfat povoTder from France and Belgium, sweet buttermilk powder from

DECISION - C.T.A.CASENO. 4114 - Page 3 - France , sc,dium t~aseinate po'"'der from New Zealand and Holland, ( ;:;ldlJtn caseinate spray dried po'ih.rder from Holland. all to be used as rav\r nnt~rials in the manufacture of milk products. Upon their arrival, the impc�rted milk powd~?r were declared under Import Entry Nos. 2064 7, 2 136 1,2 1844, 225 16, 22907, 21 694, 46217, 462 H\ 469 88, 52041 4 ~>764, 48367, 51 1 8~t 45763, 45799 and taxes were r~ollect~d and paid by petitioner on the basis of the published h':-tn~ CNlsumptirJn vatu~ as indicated in the Bureau of Custom:3 Revision Orders. On October 14, 19<36. petitioner filed a claim for refund with t11~ Bureau of Int.~rn3.1 Revenue amounting to P4,564. 179.30, repre�3enting alleged overpaid advatKe sales taxes covering said irnportation. Petitioner alleged that the overpayment arose from an et-rNwous declaration of the home consumption value at the time of importation b;:t3ed on the published value appearing in the Revision Orders. Petitir)ner ma.intains that the correct basis s lF>u.ld be th<?. h (�tn<?. ( Onsumption v<.~.lue appearing in the r::c�mm<:>rcial invr:>k e The ern:-.neous declaration rendered t11e base for computing the 10% Advance Sales Taxes overstated thereby resulting to ;Jn overpayrnent thereof in t11e tJ)tal amount of P-4.564_179..?;.0. In the same manner, the customs or import r:lutie:; v.rere alleqe(ilV erroner)Uslv assessed and collected in theI ' -' # sum ')f R':J,00(VJ25.00 for ';1'!hich petitioner filed the (.Orresponding protests�wit.h t.he Commissioner of Customs. Up to the present time, both the C<1rnmissioner of Internal and the ��3

OF.CISION- C.T.A. CASE NO. 4114 - Page 4 - Comrnissioner of Cust.-)ms hav~ not aded on the claims for refund filed by petitioner. Hence, a pc:>tition for reviE>V�l was filed with this Court on October 1~~.. 19f,6 regarding petitioner's claim for refund of a.llE>ged ov~rpaid adv'anr::e sales taxes subject matter of this case. Witll rE>spect to the claim for refund of alleged overpaid customs 1) f import duties petitioner filed a separate petition fo.r review on August 2., 1990 docketed as C.T.A. CasE> No. 4478. For simplicity We have grouped t.he importations made by petiti,)ner cvxording to the items of milk products imported, their (('rresp,>nding import entry, the home consumption value (HCV) as (:OtnpB.red to the published value per the Bureau. of Customs Revision Orders (used in computing the Advance Sales Taxes p:~1.id) and their quantity in terms of weight by kilogram or metric ton. CANADIAN SPRAY PROCESS SX:IM MILI:: (from Canada) Import Published Value Entry Re vision Or,jer No . 8-84 A<ivence Sales Tax Paid No .. HCV/Invoi<:e dated A'qgust L 1984 Weight 20617 US$667 .00/MT US$993 .00 IMT lJlJ MT P3 ,6~>7:H8 .00 21361 US$667.00 /MT US:{;993 .00 /MT 21i344 US$667.00 / MT US$993 .00 /MT SJO MT 1_742,574.00 FS$667.00 / MT L742,574 .00 22516 US$662.00/MT US$993 .00 /MT 5'30 MT 22907 } H .SMT u 30,861.00 US$99'3 .00 /MT 495 MT L630,618.00 AUSTRALIAN SI:IM MILI: POVDER HIGH-HEAT: (from Australia.) Import Publishe Value Entry Revision Ot'det� No . 9-84 Advance � No.. HCV /Inv�oic:e dated September, 1984 Weight Sales Tax Pai<1 21691 US$70Y 101!J..H US$817 .077/J�AT 255 MT p 688,665 .00

lJF.CISION - C.T.A. CASE NO. 4114 - Pa~5- ANHYDROUS MILI:fAT: {from ~france and Belgium) Import Published V8lue Entry Revision Order No . ~>-84 Advance No .. HCV /Invok:e dated May 1. 1984 Weight Sales Tax Paiq . 4~�217 *US:t1 .56325/l�U US$2. 000 00 / MT 210 MT PL322..2"39.00 ,I 4621i3 us$1 .432 .97 nu US$1 .693 .00 / MT 225.15 MT 1.287.120 .00 46988 US$1 . 432 .97/M:T . us$1 .693 oon.n 193.1'H.H 1..128,}97.00 ~;204'3 US$1 .4;.1.07 /MT US$1 .69'3 .00 /MT 210.14 MT 1'331 .827.00 BUTTERMILK: POVDER: (from france) Imr-ort Published Volue Entry Revision On:ler No . 5-84 Advance No .. HCV/InYoic:e dated May L 1934 ~7eight Sales Tax Paid 45764 US$696.5"3/MT US$1 . 039.91 /MT "306 MT P- 953.390.00 SVEET BUTTERMILK: POYDER: {from france) Import Published Value Entry P.e�rision Order No . 10-84 Adv-ance No .. HCV /Invoice dated O�;:;tober 1, 1984 Weight Sales Tax Paid 4:3 367 US$689 .13/ MT US$1 .039 .91/MT 102 MT 35'3.099 .00 ~� 1183 US$689 .13/MT US$1.0.39 .91/MT '34 MT 117,620.00 . SODIUM CASEINATE: (from ~Nev Zealand and Holland) Import PuNish e�1 Velue Entry Revision Order No. 6-84 Qtl8ntity Advance No .. HCV /Invoke cla.ted June L 1984 ~!eight Sales Tax Paid 13 il��'T ~ T�-Tc'--'$� -�:u>..'u) t�:.:J._::J . � ,�1 US$],}75 .00/MT 50 l>ags 11,778 .00 U"..)$. 1 .�4'))�t;... .q'..I, llT I/J1\'1 U,~.,$..1� �'�iq-FJ ."J4/'"~ xT 8,025 kg . 90,414 .00 CALCIUM CASEINATE : {from Holland) Import P1 bUshed Value Entry Re~t �..ion Order No. 5-81 Quan it)r Advance No.. HCV/ In"roice dated May t 1984 'Weight Sales Tax Paid 52540 u s:t.2 52 1/ ~~ g . US$}29/kg. 24,075 kg . p 287'941.00

DECISION - C.T.A. CASE NO. 4114 - Page6 - In ansv.rer to the petition, respondent alleged that the advance sales taxes paW on tl1e subject importation are presumed to have been collected in accordance ~.,.;th la�w. The burden is on the petitioner to shOV�l that said taxes v.rere erroneously collected. Clairns for refund are in the nature of a tax exemption. Therefore, failure on the part of petitioner to sustain the burden l)f pr�)Of v.rould be fatal to the action for refund. The issue posed is v.rhether or not petitioner is entitled to its ct::lim for refund of alleged overpaid ad':.rance sales taxes. The la.V�l controlling in cornputing the dutiable value of itnp�.)rted goods is Section 20 1 of tlle Tariff and Customs Code. The rule as elucidated in the case of Actin g Commissioner of Customs v_ Wise & Company. Inc_, and Honorable Court of Tax Appeals. G_R_ No_ 47890. October 16. 1992. 2 14 SCRA 597. is clear on this point> "Tlle laV�l is clear and mandatory . The dutiable VCJ.lue of an imported article subject to an ad valorem ra.te of duty is based on its home consumption value or prk:e as freely offered for sale in wholesale quantities in the ordinary course of trade in the principal martets of the country from ~.\There e..rport,e.d on the elate of exportation to the Philippines . Tlla home consumption value or price is t11e value or p ice eclar d in the consular, commerdal, tr de or sales invoic~. Bu.t where U1�� re is r' r easonable doubt as to the value of the imported a.rtkle declared in the entry, the corn~ct dutiable va.lue is to b(t ascertained from tlle reports ot the Re~renu~ Attache or Commerdal Att8d1e 0.nd from such other il!fornw.tlon tl1a.t m~~y t)e available to the Bureau of Customs. The Commissioner of Customs is required,

OELISION - C.T.A. CASE NO. 4114 - Page 7 - hov>.Te.ver. to publi:3h from time to time the list.s of the lv)r!l>:? �~onsumption Yalues." (Commissioner of Customs v _Court of Tax Appeals and Lovsted & Company, Inc.� G_R_ Nos _ l-72069 and 72070. May 21. 1988. 161 SCRA 376J "Th~ dutia.bl~ v�aJue of a.n im~orted article subject to an ad v3.1ort?>m E\te of dut) is: based on either (a) its home consumption va.lue, ~N'hicli i�:: the V8.1ue or Qfit;-2 ge~1ared in t11e consular. commercial. trade <lr s les invoice. or (b) price as freely offered for sale in ,.vnotesale tU ntiti&s in l1e ordinary course of trade in the principal ma.rl{.ets of the co1ntry f om �1here exporwd on the date oi exportation to t11e Philippines." (The Commissioner of Customs v _ Court of Tax Appeals and Bell Robart Manufacturing, Inc.. G_R_ Nos_ L-48 144- 47. June 28. 1988, 162 SCRA 73 L) It mu::t be t}::.ted t11at as a rule tlle value of imported .3.rticl.:� E:l1ould l)e tlw home consumption value appearing in the conunercial or sa.les invoice. The home consumption value is (!efine(l by Section 20 1 of the Tariff and Customs Code, as the "price �.)f tlle same, like or similar articles as bought and sold or c�ff ered for sale freely in the usual Tv\7holesale quantities in the oriclinary c:ou.rse of trade, in the principal markets of tile country fn::.m ~N1lere exportecl ()11 the (late of e}illortation to tile Philippines x x x " (Commissioner of Customs v _ Hon_ Court of Tax Appeals and NCR Corporation (Philippines). G_R_ No_ 48027. March 11. 1991. 195 SCRA 12J The exception is ..~...rtwre U1ere is a reasonable cl oubt as to the value of the importe(l ::uticle declare(! in tlw entry, the correct dutiable value

DECISION- C.T.A.CASENO. 4114 - Page 8 - i�:: to be a.sc~rt:.;.ined frt)t11 the reports of the Revenue Attache or (r)tnn:1erdal Attache and from such other information that may be av:.;.il::J.ble to the Bureau of Customs ." _In this ca.se, tJ1e bases used for computing the customs duties ::md advatKe sales t.ax were the published values appearing in the Revi:;ion Orders issued by the Bureau of Customs from r�.,~Iay to October 1964. The 16 importations made by petit.iotwr ~.\rere from the period August to November 1984. A d ose s.:::rutiny of the Revision Orders ~Nill shovv- that the published Vi3.lu.es used Vfere a fevv' months earlier (one to four months) than the d::t.te oi exportation appea.ring in the Bill of Lading or Itwoice. This does not exactly t.:J.lly V�Tith the date of eh-portation to the Philippines . It is only v..rhere there i<.:: no price freely offered for �3e.1e <)11 the date of e~�::port:J.ti:)n 'Nill the home consumption value t)r pric~ n<?.ar~st tQ t.h11 d� te of AXf.!<'f tion be used . Here, the pri<::e on the date of exportation can easily b' ascertained in the invoice a.nd the bill of lading. Emphasis should a.l~:o be pointed on the fact that some of the Revi:::ion Orders v.rere later changed to conform to tlie home corr::umption value :3.s declared in the invoice. A good exa.mple is Revision t:)rder No. 5-(i4, Ivlay 1, 1984. ~Arith a published value of US$1 ,6�;1}00/lviT of Anhydrous lvlilkfat from Belgium V-la.S sub:::equ.ently changed to Revision Order No. 1-85, January 1. 19(>5, v..rith a published value of US$1,455.97/lviT of Anhydrous rvHlti::.l.t V�lhich is quite near the home consumption value of �us$1,43.2.97/ MT of Anhydrous lvlilkf;::t.t imported on August 28, 19()4 . i�.nother is Revision Order No . 10-54, October 1, 1984, with

IJECISION- C.TA.CASENO. 4114 - Page 9 - ;J published value oi US$l,O.Yl9 1/MT of Sweet Buttermilk from Fr;l-t�1(~P- ,,..'1'":1-�:-:; l;:-;,�t-.P- r c.lv1-�1w�=��ed- o. n Dec- embP-r .~_.) 1q-54 to Revision Order No. 12. V�.rith a published vaJue oi US$689.13/MT similar to the HC'l oi sv..reet. bu.t.t.en;nilk on the da.te of importation on September 26, 19 �~.4 . This only proves to show that Revision Order Nos. 5-84 and 10-64 v..Tere later changed to conform to the HCV as declared in the Invoice of petitioner . Petitioner formally offered in evidence documents, sho"~.ving that the home consumption value in the invoice is the coned. dutiable value of the articles imported and that no reasotE~. ble doubt existed in order ior respondent to adopt the published value, munely : the commercial invoices, Bil1s of Lading, the Prote:3ts filed V-lith the Bureau of Customs, and the computations oi the corre(~.t Advance Sales Taxes prepared by � petitioner 's broterage. Respondent did not object to the admission of petitioner's exhibits except for their purpo:3e . When it Vv'aS respondent's turn to pre-:;E�nt her evidence, her O)Unsel instead submitted U1e case for decision. Respondent did not controvert the evidence presented by petitioner. Respondent may thus be considered as not questioning seriously petitioner 's entitlement to t11e refund (:1;3.imed especially ~Nhen petitioner �v\r-a.s able to substantiate its daim. As the records will show, petitioner has substantially proven ;:.l. v;::1.lid claim for refund of overpaid advance sales taxes. Hov.,rever. the Court after e~v.unining all of petitioner's exhibits found that it is only entitled to tlle amount of P4,489,661.94, computed as follov.rs:

IJECJSION - C.T.A. CASL L '<10. 4114 - Page10 - Import Advan(:e Advance Sales Amount Refundable Ent.rv No . Sales Tax P:3.id Taxes Should Be 20647 p. 2,50.)_,(-)g:\. 2 0 p. 1,148,722 .72 542 , 2 8 4 .40 21 -~. 61 1,742,:;:.74 .0 0 1, 2 0 0 , 2 8 9 .6 0 ~. 542,28 4.40 1,742 . :.;74.00 1_. 2oo.2e,9 _6o 355, 148.29 2 1c344 1_, 1~)0,86 1.00 498,636 .95 "-~"J_}, c_.,, 1f..l.. 775,712 .71 22907 l.6 .30,61'(\00 90,404.49 l, 1.31.98 1.05 272 ,7 14.99 2 1694 6"" /�-)t�)-}.f,,(-..). C-�l�.(-)(.1., 174,081.07 59(3_,260.5 1 152 , 6 1 3 . 4 0 46217 1,.32 2,239.00 167,608.00 46216 1,049,524 .01 299,431.00 469of� 1,207, 120.00 113,332 .00 52043 1,11 3,038.93 1. 12 0..397.00 3 c.)O (pel 7 PJ� 37,721.00 4:.~764 1,331,027 .00 �. I ../ J I � .f.. .3,669.43 't' A �-� ._H) �-�~7I 9:.13. ?:.90.00 1, 164,2 19.00 24,89 1.80 51li:i3 66.118.00 4576) 353. 099 .00 653..9:.,�}00 l l 7'}6- 20-C. -H-) 2 -~q 767 .00 -F 4,489,661.91 4~>799 ll,77(i.(H) �- � � I :>2540 90,414 .00 79,899 .00 2()7,941.00 t), 108.57 6:,,,522.20 221,82.3.00 TOTAL AivlOUNT REFUNDABLE ACCORDING Y, the respondent, COMMI SSI ONER OF INTERNAL RE~lENUE is h~t~by order~d to REFUND in favor of pet.iti � ner, ITESTLE HI LIPPINE S. INC., (forn erly FILIPRO, INC.), the sum of P4,4 �~9,66 1. 94 , repr~senting ov~rpaid Advance Sales Taxes (:overing Import Et try Nos. 20647, 2 136 1.. 21844, 225 16, 2290 ?. 2 1694, 46217, 46218. 4698,3, 52043, 45764, 48367, 511,3.). 4576.3. 457 :9 and 52540 for the period August to November 1984. No pronouncement as to costs. SO ORDERED _ Quezon City, Metro Manil>, jan~ - )3), ~19( 4. / ;RlluE K. GRUBA Assoc Judge

.. DECISION - C.T .A. CASE NO. 4114 - PaiJ! 11 - WE CONCUR: q_~Q,~ residing Judge R�A2MAsO~sNocm0Pt.~D~.JEuc~~;gy.An. / CERTIFICATION I h0rel'Y c~rtif y tll Uus dBodsion was rea<;hed after due cons lltat.ion b~t'.-,re~n th~ tn (}tub~rs of t.h~ Co rt of Tax Appeals in accordance Vvitll S~ct.ion 15, Artlde VIII of the Constitution. ~ Lp;t,\1.~ ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals 11