Commissioner of Customs vs. Singson

Probable cause must first be established before forfeiture proceedings may be instituted under Section 2535 of the Tariff and Customs Code, requiring evidence that (a) the importation or exportation was effected or attempted contrary to law, or constituted prohibited importation or exportation; and (b) the vessel was used unlawfully in such importation or exportation, or in conveying contraband or smuggled articles in commercial quantities; a mere certification regarding administrative logging discrepancies, without evidence of actual fraud or illegal importation, is insufficient to satisfy this requirement.

Triton Shipping Corporation owned the vessel M/V Gypsy Queen, which transported 15,000 bags of rice shipped by Metro Star Rice Mill of Bocaue, Bulacan and consigned to William Singson. On September 5, 2001, Philippine Navy elements apprehended the vessel at Caubayan Island, Cebu, allegedly for carrying smuggled rice. During inspection, the master presented documents including a Master's Oath of Safe Departure dated August 14, 2001, a Coasting Manifest, and a Roll Book showing clearance by the Philippine Ports Authority in Manila. However, the Philippine Coast Guard Station Commander in Manila certified that no vessel by the name of M/V Gypsy Queen logged in or submitted a Master's Oath on August 15, 2001, and that no personnel named PO3 Fernandez was detailed at Pier 18 on that date.

• The Seizure: On September 5, 2001, Philippine Navy personnel apprehended M/V Gypsy Queen and its cargo of 15,000 bags of rice at Caubayan Island, Cebu, on suspicion of smuggling. The vessel was transporting the cargo from Manila to Cebu.
• Documents Presented: The master of the vessel presented: (a) Master's Oath of Safe Departure dated August 14, 2001; (b) Coasting Manifest indicating Metro Star of Bocaue, Bulacan as shipper and Raybrig Marketing/Singson as consignee; and (c) Roll Book showing clearance by the Philippine Ports Authority (PPA), North Harbor Office, Manila on August 14, 2001, and receipt by PO3 Fernandez of the Philippine Coast Guard (PCG) in Manila.
• PCG Certification: PCG Station Commander Jose G. Cabilo issued a Certification stating that: (1) no vessel named M/V Gypsy Queen logged in or submitted a Master's Oath of Safe Departure on August 15, 2001; and (2) no personnel by the name of PO3 Fernandez was detailed at Pier 18, Mobile Team, on August 15, 2001. This information was conveyed to the District Collector of Customs (DCC) by Captain Alvin G. Urbi, Commander of Naval Forces Central, in a letter dated September 12, 2001.
• Forfeiture Proceedings: On September 18, 2001, the DCC of Port of Cebu issued a Warrant of Seizure and Detention (WSD) against the vessel and cargo for alleged violations of the Tariff and Customs Code. Forfeiture proceedings were conducted where both parties submitted evidence.
• DCC Decision: On December 18, 2001, the DCC rendered a Decision in favor of respondents, recalling the WSD and ordering the release of the vessel and the 15,000 bags of rice on the ground that there was no evidence to establish a cause of action.
• Commissioner's Reversal: On March 11, 2002, the Commissioner of Customs issued a 2nd Indorsement reversing the DCC decision and ordering the forfeiture of the vessel and cargo based on the PCG certification. Respondents' motion for reconsideration was denied.
• CTA Proceedings: On March 12, 2002, respondents filed a petition for review with the Court of Tax Appeals (CTA). On November 18, 2003, the CTA reversed the 2nd Indorsement and adopted the DCC's findings, ordering the release of the vessel and cargo. The CTA found that respondents' documents proved the rice was locally sourced from the National Food Authority (NFA) of Zambales under the Open Sale Program. The NFA Administrator confirmed the authenticity of the NFA documents in a February 15, 2002 letter to the Customs Deputy Commissioner. The CTA denied the Commissioner's motion for reconsideration on March 22, 2004.
• CA Proceedings: The Commissioner filed a petition for review with the Court of Appeals. On November 16, 2006, the CA affirmed the CTA decision, holding that the PCG certification alone could not create a presumption of illegal activity or prove a violation of the Tariff and Customs Code. The CA noted that records showed the vessel originated from Manila and the rice was locally purchased from NFA Zambales. The CA denied the Commissioner's motion for reconsideration on November 29, 2007.

• Illegal Importation: The Commissioner argued that the 15,000 bags of rice were unlawfully imported into the Philippines, providing legal ground for the forfeiture of both the rice and the carrying vessel.
• PCG Certification as Probable Cause: The Commissioner maintained that the certification by the PCG Station Commander in Manila, which was included in the parties' Joint Stipulation, constituted sufficient probable cause to establish that the rice shipment was illegally transported. The certification allegedly proved that the vessel did not log in at Manila on August 15, 2001, and that PO3 Fernandez indicated in the Roll Book was not assigned to Pier 18 on that date.
• Judicial Admission: The Commissioner contended that this certification amounted to a judicial admission sufficient to establish illegal transportation of the cargo.

• Insufficient Evidence: Respondents countered that the PCG certification was insufficient to prove a violation of the Tariff and Customs Code, as it merely relayed information gathered by the PCG Station Commander without establishing the truthfulness or veracity of such information.
• Local Origin: Respondents argued that they had submitted sufficient documentary evidence—including NFA certifications, official receipts, bills of lading, and PPA clearances—proving that the 15,000 bags of rice were locally sourced from NFA Zambales under the Open Sale Program and lawfully transported from Manila to Cebu.
• Lack of Probable Cause: Respondents maintained that no probable cause existed at the time of seizure to warrant forfeiture proceedings, and that the Commissioner ordered forfeiture based merely on an assumption of fraud without clear indication of actual fraud or attempt thereof.

• Probable Cause: Whether the Court of Appeals erred in affirming the Court of Tax Appeals' decision ordering the release of the vessel and its cargo despite the alleged existence of probable cause for forfeiture under Section 2535 of the Tariff and Customs Code.
• Sufficiency of PCG Certification: Whether the certification by the PCG Station Commander, standing alone, was sufficient to establish probable cause for forfeiture proceedings.

• Probable Cause: The affirmation of the release order was proper because the Commissioner failed to establish the probable cause required by Section 2535 of the Tariff and Customs Code before instituting forfeiture proceedings. Probable cause requires a prior showing that (a) the importation or exportation was effected or attempted contrary to law, or constituted prohibited importation or exportation; and (b) the vessel was used unlawfully in such importation or exportation, or in conveying contraband or smuggled articles in commercial quantities. The 2nd Indorsement failed to indicate any actual commission of fraud or attempt or frustration thereof, relying instead on mere assumption.
• Sufficiency of PCG Certification: The PCG certification was insufficient to prove respondents violated the Tariff and Customs Code or to establish probable cause. The certification merely showed that Captain Urbi sent a communication to the DCC stating information gathered from the PCG Station Commander, not the truthfulness of such information. Standing alone, it could not overcome the documentary evidence submitted by respondents showing the rice was produced and acquired locally.
• Documentary Evidence: Respondents sufficiently established the local origin of the rice through: (a) Master's Oath of Safe Departure dated August 14, 2001; (b) Roll Book showing clearance by PPA North Harbor Office, Manila; (c) Official Receipts for port charges; (d) Bill of Lading; and (e) NFA documents confirmed authentic by the NFA Administrator showing the rice was purchased from NFA Zambales under the Open Sale Program by accredited retailers, sold to Metro Star, and subsequently to Singson.

• Section 2535, Tariff and Customs Code (Burden of Proof in Seizure and Forfeiture): In all proceedings for seizure and/or forfeiture under tariff and customs laws, the burden of proof lies upon the claimant; however, probable cause must first be shown for the institution of such proceedings and that seizure was made under the circumstances and in the manner described in the Code. The requirement of probable cause demands a prior showing that: (1) the importation or exportation was effected or attempted contrary to law, or constituted prohibited importation or exportation; and (2) the vessel was used unlawfully in the importation or exportation, or in conveying or transporting contraband or smuggled articles in commercial quantities into or from any Philippine port or place. Only upon such showing does the burden shift to the claimant.
• Weight of Factual Findings: Factual findings of the Court of Tax Appeals, when affirmed by the Court of Appeals, are entitled to the highest respect and will not be disturbed on appeal absent gross error in the appreciation of facts.

• "In all proceedings taken for the seizure and/or forfeiture of any vessel, vehicle, aircraft, beast or articles under the provisions of the tariff and customs laws, the burden of proof shall lie upon the claimant: Provided, That probable cause shall be first shown for the institution of such proceedings..." — Section 2535, Tariff and Customs Code, as quoted in the decision.
• "This judicial admission, according to the petitioner, is more than enough to establish that the rice shipment was illegally transported. Clearly, this evidence does not suffice."
• "The said certification is not sufficient to prove that the respondents violated the TCC. A reading of the said certification plainly shows that if there is something which was admitted, it is nothing more than the fact that Capt. Urbi sent a communication to the DCC of Cebu stating the information that he gathered from the PCG Station Commander in Manila, and not the truthfulness or veracity of those information."
• "It is erroneous to conclude that the 15,000 bags of rice were smuggled simply because of the said certification which is not conclusive and cannot overcome the documentary evidence of the respondents showing that the subject rice was produced and acquired locally."

• Filinvest Development Corporation v. Commissioner of Internal Revenue, 556 Phil. 439 (2007) — Cited for the principle that factual findings of the Court of Tax Appeals, as affirmed by the Court of Appeals, are entitled to the highest respect and will not be disturbed on appeal unless gross error in the appreciation of facts is shown.
• Agriex Co., Ltd. v. Villanueva, G.R. No. 158150, September 10, 2014, 734 SCRA 533 — Cited for the policy that the government must prevent smuggling and other frauds upon Customs, but such policy requires the presence of probable cause before any proceeding for seizure and/or forfeiture is instituted.
• M/V "Don Martin" Voy 047 and its Cargoes of 6,500 Sacks of Imported Rice, Palacio Shipping, Inc., and Leopolda "Junior" Pamulaklakin v. Hon. Secretary of Finance, BOC, and the District Collector of Cagayan De Oro City, G.R. No. 160206, July 15, 2015 — Cited for the elements required to warrant forfeiture under Section 2535 of the Tariff and Customs Code.

• Section 2535, Tariff and Customs Code (Republic Act No. 1937, as amended) — Governs the burden of proof in seizure and forfeiture proceedings, requiring a prior showing of probable cause before the burden shifts to the claimant, and defining the scope of such probable cause regarding illegal importation/exportation and the use of vessels in conveying contraband.

Velasco, Jr. (Chairperson), Perez, and Jardeleza, JJ., concurred. Peralta, J., was on official leave.