Geotina vs. Court of Tax Appeals

Goods imported without the required Central Bank release certificates are "articles of prohibited importation" under Section 102(k) of the Tariff and Customs Code, and under Section 2301, articles the importation of which is prohibited by law shall not be released under bond. The prohibition applies whether the articles are absolutely prohibited (contraband) or qualifiedly prohibited (importable subject to restrictions), as the legal effects of an unauthorized importation of qualifiedly prohibited articles are the same as those of contraband.

The case involves the importation of fresh apples by Unitrade, Inc., a domestic corporation, on a "no-dollar" basis. Central Bank Circular No. 289, dated February 21, 1970, instituted a floating rate system and foreign exchange restrictions, classifying certain goods as non-essential consumer (NEC) products whose importation was barred. Central Bank Circular No. 295, amending Circular No. 294, imposed an express ban on "no-dollar" imports not covered by Circular No. 247, providing that no release certificates shall be issued for such imports. These circulars have the force and effect of law, and Section 3514 of the Tariff and Customs Code provides that "tariff and customs law" includes all laws and regulations subject to enforcement by the Bureau of Customs.

On December 22, 1970, the vessel M/V "Mindanao Sea" arrived at the Port of Manila carrying 37,042 cartons of fresh apples consigned to Unitrade, Inc., a domestic corporation. After payment of taxes and duties on a portion of the shipment consisting of 10,000 cartons covered by Bills of Lading Nos. PM-1 through PM-4, transfer permits were issued by the Collector of Customs. While this portion was being unloaded, the Collector issued warrants of seizure and detention (S.I. Nos. 11993 to 11996) over a portion of the goods already unloaded, alleging importation in violation of Central Bank Circulars Nos. 289, 294, and 295, in relation to Section 2530(f) of the Tariff and Customs Code. The Collector then changed his mind and ordered the goods already unloaded returned to the vessel.

On December 23, 1970, Unitrade, through its broker, requested discharge of the articles and delivery under bond, which the Collector denied on the ground that the matter was under advisement. On appeal, the Commissioner of Customs, in a letter dated January 20, 1971, refused to decide until the Collector rendered a "definite ruling." On January 22, 1971, Unitrade again requested discharge and delivery under bond. In his letter of January 26, 1971, the Collector denied the request, ruling that the importation was prohibited under Central Bank Circulars Nos. 289, 294, and 295, and therefore constituted articles of prohibited importation under Section 102(k) of the Tariff and Customs Code. The Collector invoked Section 1207, which imposes a duty to prevent importation or secure compliance with legal requirements, and concluded that since compliance was not feasible, he was constrained to prevent the discharge of the shipment. The Commissioner sustained this decision on January 29, 1971.

Unitrade appealed to the Court of Tax Appeals on February 2, 1971, and renewed its motion for preliminary injunction. The CTA denied the motion on February 16, 1971, and again on reconsideration on February 26, 1971, ruling that articles of prohibited importation are not subject to the right of redemption. On another urgent motion alleging malfunctioning of the vessel's reefer machinery, the CTA on March 4, 1971 allowed the immediate discharge of the fruits and their deposit in a customs bonded warehouse to prevent spoilage. The fruits were deposited on March 19, 1971 at the Ice & Cold Storage Corporation at Plaza Lawton, Manila.

The shipment had a stated value of U.S. $66,675.60 and a total weight of about 671,942 kilos. The apples were classified as NEC goods, the importation of which was barred under Central Bank Circular No. 289. Central Bank Circular No. 295 expressly provided that "no-dollar imports not covered by Circular No. 247 shall not be issued any release certificates and shall be referred to the Central Bank for official transmittal to the Bureau of Customs for appropriate seizure proceedings." Unitrade contended that its contract with the Hongkong supplier was entered into on March 26, 1969, before the circulars were issued, but the contract's term was "six months period after signing of this agreement" on May 22, 1969, and had expired by the end of 1969. The CTA rendered its decision on April 23, 1971, holding that the apples were not absolutely prohibited importations but could be held liable for forfeiture, and ordered their release under bond. The CTA issued its resolution of May 3, 1971 for immediate release upon filing of a P550,000.00 surety bond. The Supreme Court issued a restraining order enjoining the release. By May 27, 1971, the parties jointly manifested that some apples had been found totally rotten and the rest in various stages of deterioration.

• Prohibited Importation: Petitioner Commissioner of Customs argued that since the importation of fresh apples and other goods classified as non-essential consumer (NEC) products is prohibited under Central Bank Circulars Nos. 289, 294, and 295, the questioned importation is considered a prohibited importation under Section 102(k) of the Tariff and Customs Code.
• Duty to Prevent Importation: Petitioner maintained that he was complying with his mandate under Section 1207 of the Tariff and Customs Code "to exercise such jurisdiction in respect thereto as will prevent importation" by refusing to allow the discharge of the shipment.
• No Release Under Bond: Petitioner argued that under Section 2301 of the Tariff and Customs Code, "articles the importation of which is prohibited by law shall not be released under bond," and that the tax court acted in excess of its jurisdiction in ordering release under bond.
• Jurisdiction: Petitioner contended that his ruling denying release under bond was an interlocutory order "pending seizure proceedings" not appealable to the Court of Tax Appeals.

• Not Absolutely Prohibited: Respondent Unitrade, Inc. contended that the tax court "committed no error when it found that the imported fresh apples are not absolutely prohibited importation and therefore may be released to the (importer) under bond."
• Contract Predates Circulars: Respondent argued that since its contract with the Hongkong supplier was entered into on March 26, 1969, before Central Bank Circulars 289, 294, and 295 were issued, the shipment should not be deemed covered by the Central Bank ban.
• Validity of Customs Administrative Order: Respondent sought judgment declaring Customs Administrative Order No. 19-70 null and void as an alleged unauthorized and arbitrary modification or amendment of Section 2301 of the Tariff and Customs Code.

• Jurisdiction of the CTA: Whether the Court of Tax Appeals had jurisdiction over the appeal from the Commissioner of Customs' decision denying the release under bond of the shipment.
• Prohibited Importation: Whether the fresh apples imported without the required Central Bank release certificate are "articles of prohibited importation" under Section 102(k) of the Tariff and Customs Code.
• Release Under Bond: Whether the Court of Tax Appeals acted within its authority in ordering the release under bond of the questioned shipment notwithstanding the lack of the required Central Bank release certificate.

• Jurisdiction of the CTA: Yes. The CTA correctly maintained jurisdiction over the case, as the Commissioner's decision declaring the articles as "articles of prohibited importation" and ordering prohibition of entry was a final decision, not an interlocutory order, since the seizure proceeding was discontinued when the Collector elected to prevent importation under Section 1207.
• Prohibited Importation: Yes. The fresh apples are "articles of prohibited importation" under Section 102(k) of the Tariff and Customs Code, since their importation is "prohibited by law" under Central Bank Circulars Nos. 289, 294, and 295, which have the force and effect of law.
• Release Under Bond: No. The tax court acted in excess of its jurisdiction in ordering the release under bond, because under Section 2301 of the Tariff and Customs Code, "articles the importation of which is prohibited by law shall not be released under bond."

• Jurisdiction of the CTA: The tax court correctly overruled the Commissioner's contention that his ruling was an interlocutory order. The decision declaring the articles as "articles of prohibited importation" and ordering prohibition of entry was a final decision, not issued in connection with a pending case, because the seizure proceeding was discontinued when the Collector elected to prevent importation under Section 1207. Under the Court's ruling in Seneres vs. Frias, in customs cases involving seizure, detention, or release of property affected, the collector's decision may be appealed to the Commissioner of Customs, whose decision may be reviewed only by the Court of Tax Appeals under its exclusive appellate jurisdiction under Section 7 of Republic Act 1125.

• Prohibited Importation: The Court rejected the tax court's ground that the importation of fresh apples was "not absolutely prohibited" under the Central Bank circulars. The contention that to be deemed articles of prohibited importation, the questioned articles must partake of the same nature as those specifically declared prohibited in Section 102 (such as explosives) was discarded in Tong Tek vs. Commissioner of Customs, which held that the term "merchandise of prohibited exportation" is broad enough to embrace goods that may be the subject of activities undertaken in violation of subsequent laws. Since Central Bank circulars have the force and effect of law, transactions without complying with their requirements are illegal, and the articles involved become prohibited and subject to forfeiture. The Court also cited Pascual vs. Commissioner of Customs, which held that importations made without the necessary import license and release certificates fall within the class of "merchandise of prohibited importation." The Court noted that articles of prohibited importation under Section 102 are of two categories: those absolutely prohibited or contraband, and those qualifiedly prohibited, referring to those which may be imported subject to certain restrictions. The legal effects of an unauthorized importation of qualifiedly prohibited articles are the same as those of contraband. The Court further held that the President's Executive Order No. 282 increasing tariff duty on apples did not serve to bring down the barrier against importation, as the increased duty would apply only to lawful importations made in compliance with Central Bank requirements.

• Release Under Bond: The Court held that since the importation of the apples was banned under the Central Bank circulars, the tax court acted without authority of law in ordering release under bond. Under Section 2301, "articles the importation of which is prohibited by law shall not be released under bond." The Court found it "utterly fallacious" to assume that it is to the interest of the Government to release perishable banned goods to the importer under bond, since the code expressly prohibits such release. The Government expects no revenue from banned articles, and allowing release under bond would render the law's prohibition nugatory, as smugglers would have the greatest profit motive to import high-profit luxury items, and if caught, could put up a bond and still realize substantial profit. The Court also upheld Customs Administrative Order No. 19-70, which declared that "all importations seized and forfeited for violation of Central Bank circulars shall not be allowed to be released under bond, either surety or cash, nor allowed to be redeemed," as a valid reiteration of the express prohibition in Section 2301.

• Articles of Prohibited Importation — Goods imported without the required Central Bank release certificates are "articles of prohibited importation" under Section 102(k) of the Tariff and Customs Code. The term is broad enough to embrace not only those articles specifically declared prohibited in Section 102 but also goods imported in violation of subsequent laws, including Central Bank circulars which have the force and effect of law. Articles of prohibited importation are of two categories: (a) those absolutely prohibited or contraband, and (b) those qualifiedly prohibited, referring to those which may be imported subject to certain restrictions or limitations. The legal effects of an unauthorized importation of qualifiedly prohibited articles are the same as those of contraband.

• Prohibition Against Release Under Bond — Under Section 2301 of the Tariff and Customs Code, "articles the importation of which is prohibited by law shall not be released under bond." This prohibition applies to all articles of prohibited importation, whether absolutely or qualifiedly prohibited. The Government expects no revenue from banned articles since they are not allowed to be imported; otherwise, the law's prohibition would be rendered totally nugatory.

• Force and Effect of Central Bank Circulars — Central Bank circulars issued for the implementation of the law authorizing their issuance, although by themselves are not statutes, have the force and effect of law. Transactions carried out without complying with the requirements of such circulars are illegal, and the articles involved in such unauthorized ventures become prohibited and subject to forfeiture.

• "To our mind the term 'merchandise of prohibited exportation' used in the code is broad enough to embrace not only those already declared prohibited at the time of its adoption but also goods, commodities or articles that may be the subject of activities undertaken in violation of subsequent laws." — This passage from Tong Tek vs. Commissioner of Customs, quoted by the Court, establishes the broad interpretation of "prohibited importation" that includes goods imported in violation of Central Bank circulars.

• "since the importations in question were made without the necessary import license issued by the Monetary Board pursuant to Circular No. 45 and the release certificates issued by the Central Bank or its authorized agent bank in the prescribed form pursuant to Circular No. 44, they fall within the class of 'merchandise of prohibited importation' or merchandise 'the importation ... of which is effected ... contrary to law' that the Commissioner of Customs may seize and order forfeited." — This passage from Pascual vs. Commissioner of Customs establishes that importations without required Central Bank release certificates are prohibited importations subject to seizure and forfeiture.

• "it is now well settled that goods imported without the release certificates required in Circulars Nos. 44 and 45 are 'merchandise of prohibited importation' as this expression is used in said section No. 1363 (f)." — This passage from Sare vs. Commissioner of Customs confirms the settled doctrine that goods imported without required release certificates are prohibited importations.

• "For the code expressly prohibits the release under bond of such articles of prohibited importation. The Government expects no revenue from such banned articles, since they are not allowed to be imported. Otherwise, the law's prohibition would be rendered totally nugatory, since such banned articles, which are mostly luxury items, are in great demand and command sky-high prices assuring great profit to the smuggler." — This passage articulates the policy rationale for the absolute prohibition against releasing banned articles under bond.

• Tong Tek vs. Commissioner of Customs, 105 Phil. 1071 (1959) — Controlling precedent establishing that the term "merchandise of prohibited exportation" (now "prohibited importation") is broad enough to embrace goods imported in violation of subsequent laws, including Central Bank circulars.
• Pascual vs. Commissioner of Customs, 105 Phil. 1039 (1959) — Followed, holding that importations made without the necessary import license and release certificates fall within the class of "merchandise of prohibited importation" subject to seizure and forfeiture.
• Sare vs. Commissioner of Customs, 28 SCRA 715 (1969) — Followed, declaring it "now well settled" that goods imported without required release certificates are "merchandise of prohibited importation."
• Sare Enterprises vs. Commissioner of Customs, 29 SCRA 112 (1969) — Followed, reiterating the settled doctrine and noting it is "too late in the day to suggest that it should be reexamined."
• Seneres vs. Frias, L-32921-40, June 10, 1971 — Followed, confirming the exclusive appellate jurisdiction of the Court of Tax Appeals over customs cases involving seizure, detention, or release of property affected.
• Romualdez vs. Arca, 28 SCRA 828 (1969) — Followed, upholding the validity of administrative orders that reiterate statutory prohibitions without requiring publication.

• Section 102(k), Tariff and Customs Code (R.A. 1937) — Defines prohibited importations to include "all other articles the importation of which is prohibited by law." Applied to classify fresh apples imported without Central Bank release certificates as articles of prohibited importation.
• Section 1207, Tariff and Customs Code — Imposes upon the Collector the duty to exercise jurisdiction over articles of prohibited importation "as will prevent importation or otherwise secure compliance with all legal requirements." Applied to uphold the Collector's refusal to allow discharge of the shipment.
• Section 2301, Tariff and Customs Code — Provides for warrant for detention of property and allows release under bond, with the proviso that "articles the importation of which is prohibited by law shall not be released under bond." Applied to prohibit the release of the apples under bond.
• Section 2307, Tariff and Customs Code — Provides that redemption of forfeited property shall not be allowed where importation is absolutely prohibited or where surrender would be contrary to law. Cited to support the prohibition against release of prohibited articles.
• Section 2530(f), Tariff and Customs Code — Subjects to forfeiture any article of prohibited importation the importation of which is effected or attempted contrary to law. Applied to make the apples liable to seizure and forfeiture.
• Section 3514, Tariff and Customs Code — Defines "tariff and customs law" to include all other laws and regulations subject to enforcement by the Bureau of Customs. Applied to include Central Bank circulars as part of tariff and customs law.
• Central Bank Circular No. 289 (February 21, 1970) — Instituted the floating rate system and foreign exchange restrictions, barring importation of NEC goods. Applied to classify fresh apples as barred imports.
• Central Bank Circular No. 295 (March 20, 1970) — Imposed an express ban on "no-dollar" imports not covered by Circular No. 247, providing that no release certificates shall be issued. Applied to prohibit the issuance of release certificates for the apples.
• Customs Administrative Order No. 19-70 (October 20, 1970) — Declared that all importations seized and forfeited for violation of Central Bank circulars shall not be released under bond nor redeemed. Upheld as a valid reiteration of Section 2301's prohibition.

Concepcion, C.J., Reyes, J.B.L., Zaldivar, Castro, Fernando, Barredo, Villamor, and Makasiar, JJ., concurred. Dizon and Makalintal, JJ., reserved their votes.