CTA Case No. 2058 (Decision)

�. ., rt.tlJLl( Of lu ~~; r UJLIPPl~)~::.. ..~ OURl' 0}:1 TAX A.i"~PE lJJ ~H'It'f.Yif (D.,.. ALTO SALES CORPORATION , Petitioner , - .versus. - C.T.A. CASE NO. 205:8 COMMISSIONER OF CUSTOMS, Respondent. X- - ---X DEC I S I 0 N 'I'his is an appeal by pe:t .itioner Alto Sales Corporation from the dec:ision of .l[espondent. Com- missioner of Customs dated April 10, 196i8, de~c:ree- ing; the� forfeitUJre� of petitioner's importation of 75.,000 kilos of foreig1n Virginia leaf tobac:co for alleged ~iolation of se~ction 25;30 (f) .of the Tariff and Customs Code~, in rel ation to Sex::::tion 4.: of Republic: Act No. 415,5>. This c:as;e� was submitted for de:c:is;ion on the bas.is of the pleadings, custom s re:cordi.s., and the memoranda .of the parties. As. reg,ards. the issue of j ulL.isdic:tion, peti- tione�r presenterl evidence to support i ts contention that this Court has jurisdiction over the instant . petition for review. On April 15, 198 2, the Court issued a resolution that the jurisdic:tional question raise~d shall be: r.e:solve~d tog,ether: with the merits of this c:ase. 42 8

DECISION - CTA CASE NO. 2058 - 2- The facts of this case are briefly as follows: Sometime on Septembe:r 17, 1965, petitioner, a corporation duly organiz.ed and e~xis.ting under the laws of the Philippines , e:nt.ererl into a contract with the Philippine Virginia Leaf Tobacco Adiminis;- tration, hereinafter re: fe~rred to as PVTA for shor�t, whereby said PVTA was; to s.e:ll to peti tbne:r , for purposes. of expor.tat ion, 8,000 ,000 kilos; of locally produc~d Virginia tobacco (Anne:~ "A", Petition for Review, pp. 8 - 11 , CTA r.ec.) _thereby entitling pe:ti- tioner, as a consequence, per the provisions of the pertinent. laws, to i mpor.t 2,000,000 kilos. of fore~ ig.n Vir.gJinia leaf tobac:co for blending purpose~s. Accord- ing1ly, said PVTA have entered into an agr.e:ement with petitioner, under date of Oc.tober 29, 1965-, author:- iz.ing the latte:r to pur.c:hase: and impor t the abov�e . s .ta te'd qua. ntity of foreign Virginia leaf tobac:c�o. (Annex "B" 1 Petition for Re~v.ie:w, pp. 12-1.4, CTA re:c-.) These two agre ements were: duly approved by the Off ice of the President of the Republic of the Philippines.� (Par. 2, Petition for Rev.ie�w, p. 1, CTA rec.) As. a conseque~nc:e: / petitioner placed an import.- ation of foreign Vkg.inia tobac�co leaves and, on 42~

DECISION - CTA CASE NO. 2058 -3 - February 7, 19 67 , a shipment of foreign Virginia tObac:co weighing 75 , 600 kilos (126 hogs;head of unmanufactured leaf tobac:c:o and 42. hogshead of Barley leaf tobacco) .arr:ive:d at the Port of Mani la on board the vess.el the: SS 11 Toreador 11 � But in view of the alleged lack of license or authority of peti- tioner to i mport the said shipment coming from t he PVTA as pr:.ovided f or. i n Republic Act 4155�, the Bure�au of Customs issued a warrant of seizure and detention of said shipment on July 17, 1967. (pp. 1-2, 195,- . 199, Customs rec.; Annex. C 11 11 pp. 17-19, CTA rec:.) 1 Af t.er the admin is.tr ati ve proceeding,s. held in connection with forfeiture of the subj ect shipment in violation of Section 2530(f ) ?f the Tariff and Customs Code, taken in relation to Republic Act No. 4155, the Collector of Customs of the Port of Manila rendered a decision on Fe~bruary 7, 1968 decre:eing the forfeiture of the above-mentioned shipmento (par. 15,, Petiti on for Review, p. 4, CTA rec:.) Petitioner, on February 16, 1968, filed a motion f or reconsideration of the Coll ector's decision alleg ing that said decision is contrary t.o law and the facts of this case and, ther.efore�, the same should be re cons.ideTed. (p. 186, Cus.toms rec.) However., the motion was denied by the Collector of Customs in his order dated February 20, 1968. 43 0

DECISION - CTA CASE NO. 2058 - 4- (p. 189, Customs r_.e:c.; Pe:titionervs Memo., p. 91, CTA rec.) On February 27, 1968, petitioner appealed the decision of th e~ Colle�ctor of Customs. to the Commis.s .ioner of Customs (p. 194, Customs. rec:. ; Petitioner's. Memo., p. 91, CTA :r-e:c.) _who, on April 10, 1968 1 rendered a decision affirming that of the former. (pp. 195-1,99 1 Cus.toms rec., Petitione:r-' ~ Memo. I Po 91, CTA reco ) . The Clfores.aid decis.ion of the Commissioner was received by petitioner on May 13, 1968. (Par. 16, Petition for Review, p. 4, CTA rec .. ; see ret.urn card, p . 202, Customs rec.) On June 10, 1968 1 petitione r filed a motion for :r-ec:on s ide:r-at ion. {Petitioner's Memo., p. 91, CTA rec.) However, the said motion was denied by the Commissioner in his order dated Augus.t 7, 1968, and the s.ame was sent to the petitione:r sometime in Novembe:r-, 1969. (p. 206 1 Customs rea:..) On Dec:ember 18 , 196:9 1 pe�titioner through its counsel, received the order of denial of the r_.equest for recons.ide-ration. (Par. 18 1 Petition for Review, PPo 5-~, CTA rec.) . On December 22, 1969, petitione:r- interposed its appeal to this Court by way of Petition for Review. (p.. 1, CTA re:c .. ) On June 9 1 1975, the parties as aforesaid, submitted this case - for de:cis.ion on the basis of 43 1

DECISION - CTA CASE NO. 2058 5 the: pleadings, cus.toms re'Cor:ds, and their res- pective memoranda. (p. 86, CTA rec.) On December 15, 1976, the: Court re:nder.:ed a decision distniss:ing the instant case for lack of jurisdiction. (pp. 171- 177, CTA rec.) Howevex:, the: said decision dated De�cember 15, 1976 dismissing this ca se was set as:ide and a r.esolut.ion dated Apr:il 15�, 1982 was rendered t::o the effect that the jurisdic.tional ques.tion in this case shall be :r.esolved together with the is:s.ues on the meri tS�o (pp. 2.90-291, CTA re:c-.) The issues. posed be:fore this Court are: as. follows: 1. Whether or not this Court has. jurisdiction over the instant Petition for Review; and 2~ Whether or not forfeiture of the subject shipme~nt of 76,6.00 kil o s of forei gn Virg:inia leaf tobacc:o is. valid and justified. With r:e91ards to the first is.sue, petitioner contends that this Court has jurisdiction over the instant case. Federico c. Rosal, an employee of pet:i t.ioner 's counsel, had tes.tified on the tech- nical issue of jurisdiction that the filing o f the petition for review w~s to be made on the last day of appeal which fell on a Saturday, or December 20, 1969 . During tha t day, he arriued in the Court of Tax. Appeals but he as serted that the Court was.

DECISDN - . CTA CASE NO. 2058 closed and that there were- no personnel pre-s.ent to receive- the Petition for Rev.iew. Petitioner, on this score, claimed that the filing of the� pe:ti- tion for r.e:view on Monday, Dec:ember 22, 1969, should, therefore, be considered as. in compliance with Se-ction 11 of Republic Act No. ll25o (Petitioner's Motion for Reconsideration, pp. 180-1.87, CTA rec.} This Court is not fully convinced by the state- ment of the said witness, Federico c. Rosal., It is to be note:d that duringi Saturdays, the re gular office hours observed in the Court of Tax Appeals is from 8:00 AaM . to 1:00 P.M. It cannot be seriously said, therefore, by petitioneJ: that the Court of Tax Appe:als is closed during; the: s.aid hours when Federico c. Rosal came to file the petition for review. At any rate, taking into conside�ration the fact that Federico c. Rosal may not have seen anyone of the employees then assigned and believing that substan- tial justic:e is better served by our takingi juris- diction over: the case and it not being indubi table, and that the interest of both parties can be�st be obtained by deciding this c:ase on the me�r its, we: � are, there�fore-, taking cognizanc.e: of the ins;t ant petition for review. With regards to the second issue,petitioner 43 3

DECISION - CTA CASE NO. 2058 7 contends (1 ) that the� PVTA has refused, without any legal and factual basis, to comply with its oblig,ation under: the contract to sell to petitioner local Virg1inia tobacco thereby pre�v.enting petitioner to comply with its obligation, without its fault to secure a license to import said foreign Virginia tobacco; (2) _that the importation of foreig,n Virginia tobacco by petitio ner is not absolutely illegal but. only relatively prohibited; (3 ) _that petitioner could not effect the exportation of the local Vir-ginia tobacco before the arrival of said im- ported foreign Virginia tobacco because PVTA had arbitrarily cancelled the aforesaid contract with petitioner long before the prohibited shipment of tobacco has arrived in the Port of Manila; and (4) .that undet: the law, on the matter of exportation of local Virginia tobacco, the sole: licensing1 autho- rity is vested with the PVTA which� is either empowered to permit or not to permit exportations and import- ations thereof; and that petitioner is powerless. to do anything) without the cooperation of PVTA which had continuously refused, without valid reason, to honor its commitments �with petitioner under the con- trac t entered into between the� latter and the herein PVTA ; (5) that under P.Do 62 date d Nov ember 2 0,

DECISION - CTA CASE NO. 20~8 - .8 1972 , the export.at.ion of loca l Virginia tobacco is no longer a pre1r:equisi te: to the importa.tion of fore~ign Virginia tobacco; and lastly, (6,) _the: 9JO'Jernment had alreacdiy collected the �taxe:s and duties on the que~st ioned importation so -that i t would be unjust t.6 hold the forfeiture of the tobacco in question a nd deny the: pe~t:.i tione:r frrom re:co'l:ner ingi the: amount. of ~6: 04,000.00, whic:h is the resulting balanc:e afte~r de~duc.ting the dutie:s and taxes which had be:en paid. (Petiti oner's. Hemo.r.and.um, pp. 99-1.09 , CTA re~c:.) . We find petitione:r's contention without me:rit. The per tine:n t prov:is ions. of the law applicable is Sec:t~ion 253-0 (f) _of the Tariff and Customs Code:, in re:lation to Sec.tion 4 of Rep ubli c Act No. 415.i5, which provides: "Sec. 25,30. Property Subje:ct to Forfeiture. Under Tariff and Customs. Laws. - Any vessel or aircxaft, cargo , articles .and other objects shall under the follow- ing c onditions, be subject t~ forfeiture: XXX XXX XXX (f) Any articles of prohibited importat:lon, the: import.at.ion or export- ation of whic:h is e:ffec ted or attempted con trary to law, and all other articles which, in the� opinion of the� Colle:c:tor, hav.e been us.ed, are: or. were' in te�nded to be used as; an instr ument in the import- ation or exportation of the forme�r." Section 4 of said Rep ubl i c Act No. 415;5, s .tates.:

DECISION - CTA CASE NO. 20 5,8 9 "Sec. 4. Importation of Foreign Leaf Tobac:c:o Only For Ble ndin91 Purpose~. No person shall import leaf tobac:co ex.- . cept as he�re:in prov.ided. When the Philippine� Virginia To bacco P.dministration Board believe�s that it is ne'Ces�.sary to improv.ed the quality of locally made: Virg,inia c:igar.e:tte:s, the Philippine Virginia Tobac:co Administ r ation BoaJ:d may authorize any Filipino citizen or Filipino controlled corporation or company to import, subject to rules and r e:9t.i1:tions, promulg;ate:d by the Philippine Virginia Tobacco Administration , foreign le:af for blending; purposes; PI:ov.ided , that the importer is required to purc:has.e local Virg,inia leaf tobacco from the Philippine Virginia Tobacco 1-.dministration and export the: same at the r atio of not more than one k ilog1r:am of imported foreign leaf tobacco to e:ve:ry four kilogJrams: of expor t ed local Virginia leaf tobac:c:o purchased by the: impo rter f 1:om the Philip- pine Vi r g,inia Tobacco Administration, which should be: exported s .imultaneous:ly or earlier than the impor:tation o Provided, further 1 that no othe:r tariff or taxes shall be imposed on high g r ade foreign l eaf tobacco so imported e�xcept an amount equiv.alent to one hundred per centum of its l anded costs." The above-quoted provision of the law is clear and e;xplicit. It clearly provides. that any c:arg.o, a r ticles and other objects s:hall be subject to for- feiture , if said cargo, articles and objects are impor ted or exported contr a ry to law. In the instant case:, the importation of 75,000 kilos. of foreigin . Virg1inia tobacco by p(Ctitioner i s no doubt done contrary to the existing, law because it did not comply with the requiremen t o f Se ction 4 of Repub l ic Ac:t No . 415.5, i.e . , the i mporter (petitioner) mus t 43G ~

DECISION CTA CASE NO. 205.8 - 10 - purchas.e local Virg1inia leaf tobac:co from PVTA and eX.pox:�t the same at the ratio of not: more than one kilogram of import:e~ foreign leaf tobac:co to ever.y four kilog,r.ams of exported loc:al Virginia leaf tobacco simultaneously or e:arlier than the date of importation. Petit.ioner did not dispute the fact that when the said shipment of 7~ 1 000 kilos of foreign Virginia tobac�co aJCrived at the: Port: of Manila, this import- ation was: n o t c:overerl with authority or lic:e'ns:e: to import the same. The absence of license~ or au thor i ty to import the said tobacco in question is on account of petitioner'~ failure to comply with the said requirement: of Sec:tion 4 of Re.public Act 415�5i. Sum- ming, up peti t:ioner 's asse:r ti::>ns, however, the: non- compliance. by petitioner. of the r.equirement.s in Section 4 of Republic Act: 4155 has been attr ibute:d t:o the: PVTA' S: fault or due to the iat.ter' s. alluded failu:rre' t o comply relig:iously with the terms and/or conrliitions. set forth in the c:ontract entere'd into be�twe�en them, i.e., to sell to it local Virg.inia leaf tobacco. Hence, due to PVTA'~ actuations, pe:ti tioner was then compelled. to file a c:ivil action for spec:i fic pe�r.formanc:e before the' Court of First 437

DECISION - CTA CASE NO. 2058 - 11 - Instance: of Riz.al in which the que:s.tion of whether.� there was; a vi olation of c:ontrac:t by the� PVTA, by the cance�lla ti on of the~ c on tract with peti tione~r in question, was apparently rais.e'd and litig1ate:d. Fi nally, a dec:is.ion (pp. 151-15.9, CTA rec.) _was penne:d by Judge Guard son R. Lood dated Apr i 1 8, 1974, dismissing1 the case o f specific perf ormanc:e', decidedly favoring the� PVTA, and holding there in that petitione~ had not complied with its obligation to secure an export license fr om the Central Bank . It now being1 plain that the cancellation made by the PVTA of the contract with petitioner being val id , the subject shipme nt of imported Virginia tobacc.o le:af which arrived at the Port o f Hanila on February 7 , 1967, imported by Alto Sales Corporation did not possess the re:quisite license or authority for its importation , thus justifying the f orfeitu re of the afores.aid sh ipment. Petitioner also claims that it would be un j ust to forfeit the tobacco in question and at the same time deny the petitioner from recovering the amount qf �1604,000.00, which ~mount is allegedly the balance resulting after the duties and taxes due� the g,overn- ment had been deducted from the value of the s.hip- ment. I n s h ort, petitione~ in justifying the release 43~

DECISION - CTA CASE NO. 205,8 12 - of the� toba<1::'CO in question has based its arguments on the pEinciple of equity and justicea It is worth noting, that the� r:e�c:ords do not s:how t ha t there was payment. made as: re~a.r.ds. the aforesaid duties: and. taxes on the subject importation. There is no way by which we c�an "J1er ify the ass:erted balance� of fi604,000.00, aftex. crediting the duties and taxes. paid, proof of ~Jthic:h we dio not have on hand, from the total value of the~ importati on of fore�i gn Virg;i nia tobacco leaves.. At any rate, as�.suming1 that payment on said duties: and: taxes we�re~ made�, this:, however, doe�s. not jus:t.ify the Jreleas;e of said shipment which was illeg1ally imported from the beg1inn ing1. Further- more, this: principle~ of equity andl justic:e is� appli- cable only in the~ absence� of specific. provis.ion of law 91ove-rning1 the� matte~r in is.sue. In the~ ins:tant case�, since� the][e~ exist a proVJis:ion of law, i.e., Sec:tion 25�3;0 (f)'� in relati on to Section 4, of Republic Act No. 41515 1 which has not been complied with by here�in petitione~r, the forfeiture of the: tobac:c:o in _question is, therefore, valid and justified. Also petitioner c:ontends that, granting the importation of foreign Virginia tobacco is illegal, it is., however, not absolute but only relative and ' 4 3 !'

DECISION - CTA CASE NOo 2058 - 13. - � he~nce permits a cure or reme~dy. Ag;ain, we cannot s.ubscr ibed to the said argument. In the case of Auyong Hian usa Court of Tax Appeals, et al ., No. L-28782, September 12, 1974 , 59 SCRA 126, the Supreme Court held: "Although the illegal imported subject t obac co may not. be absolute�ly prohibited, but only qualified by prohibition under: Sec. 102(k) of the Tariff and Customs Code, for ft may be imported subject to certain conditions, it is nonetheless prohibited and is a contraband (Comm. of Customs vs. CTA & Dic:hoso, L-3.3471, J an . 31, 1972), and the legal effects of the importafion qualifiedly prohibited articles are the s.ame as those of ab solu tely prohibited articles. (Geotina vs. Cour t of Tax Appeals, No. L- 33500, August 30, 1971, 40 SCRA 362, 379, 38 3; Comm. of Customs vs.� CTA & Dichoso, supra.)". Lastly , petitioner claims that Presidential Decree 62 allows the importation of foreign leaf tobacco for blending, purpose:s at the ratio of not more than one (1) .kj. logram of local Virg,inia tobac:co purchased without the necessity of 'e�xpor ting the la tter. And that time while it is under the said decree, the local Virg,inia tobacc:o purc�hased need no t be exported, this does not , howe'ller, a utomatic�- ally legalize the importation made by petitioner of the� 75,, 000 kilos of fo reign Virg,inia tobacco. As we have� note-d, nothing in the� reco rds will �show that petitioner pu rchased local Virgin ia tobacco as 4 4 ()

DECISION - CTA CASE NO. 2058 14 prerequisites under said P.D. 62. Assuming that p~rchases were made of local Virginia tobacco, it does not, howeve~r, follow that th e consequent importation of Virginia t obacco illegally done from the~ outset c�an be legalized with the promulgration of P.D. 62. To enforce P.D. 62 on petitioner's. importation of the subject shipment made in the year 1967 would be i n effect giving a retroactive application of the aforesaid law to the case at bar, which to our mind can not legally be done. WHEREFORE, finding no error i n the decision of respondent Commissioner of Customs. appealed from, the same should be, as it is hereby affirmed. With costs against peti t-'ioner. SO ORDERE D. Quezon City, Metro I CONC UR: '-14. ~-