Procter and Gamble Philippine Manufacturing Corporation vs. Gommissioner of Internal Revenue

DECISION

CTA CASE NO. 2323 The basic question in this suit for recovery of overpaid advance sales tax alleged to have been erron- eously or illegally collected is whether the commercial and consular i mport invoice value of an imported article as attested by the consular certification may be disre- garded on the strength of a mere credit invoice of the exporter/supplier, crediting the importer with the price difference of the attested import invoice vciue and the price appea~ing in the credit invoice.

Petitioner Procter & Gamble Philippine Manufactur-

ing Corporation, an affiliated company of the Procter & Gamble Manufacturing Company ., Cincinnati , Ohio, U. S.A., is a domestic corporation organized and existing under the laws of the Philippines .

(Exh . "E" , p. 30, CIA re- cords . )

With the Procter & Gamble Manufacturing Com-

pany of Cincinnati , Ohio , as the exporter/ supplier, pet- itioner imported eleven (11) drums of industrial essen- tial oil , weighing 4, 100 pounds from the United States , which arrived in Manila on September 1, 1969 on board the SS "Clara Maersk" under Bill of Lading No. 38 and declared and entered under Customs Entry No . 84577-69Q (Exh . "A" ; Exh . "1" , Po 27 , CIA records.) .... ""

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DECISICW ...

CTA CASE NO. 2323 ~ 2 ...

The Consular Invoice of Merchandise issued by the Consulate General of the Philippines in New York , duly attested by consular certification, as well as the Com- bined Commercial Invoice & Packing List of the supplier/ export er , the Procter & Gamble Manufacturing Company / of Cincinnati, Ohio, shows that the imported industrial essential oil had a CIF , Manila, value of US$17 , 007~98 , with an invoice price of US$4 . 006 per pound. (Exhs~o "B" & 11 C"; Exhs,.

11 211 & 11 3", pp. 28- 29, CTA recordso) On the basis of these shipping documents submitted by pet ~ itioner to the Bureau of Customs , the importation in

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question was duly examined and appraised by the Customs authorities , and petitioner made a total payment to the Bureau of .Customs, prior to the withdrawal of the import ~ ed article from Customs custody , in the amount of P38, - 283.00, covered by Central Bank of the Philippines Of- fi cial Receipt No . 72202 dated September 15, _1969 (Exh. 110 11 ; Exh. n4 11 , p. 29, CTA records), representing : Customs duty ••••• P29,849. 00

Advance Sales Tax • •

8,429 . 00

Wharfage Fee

o 0 ..

..

• T o t a 1 • "' • o • • P38 , 283 , 00 By letter dated October 13, ~969 , petitioner re- quested respondent th e refund of the sum of P7, 035, 00 on the ground that, through inadvertence~ there was an erroneous billing made by the supplier of the shipment in question. (Exh.

11 F11

1 pp. 31- 32, CTA records.)

DECISICN ~

CTA CASE NO. 2323 - 3 - Because the parties are not in dispute with respect to the basis , computation and amount of advance sales tax paid by , or r Efundable to, petitioner as the case may be, the contents of said letter are quoted in full as follows :

This is to request for the refund of P7,035.00 representing overpayment of advance sales tax on subject shipment$ Through inadvertence, the above shipment of eleven (11) drums industrial essential oil weighing 4,100 lbs, was erroneously priced by the supplier, the Procter & Gamble Manufactur- ing Company , with address at P,o. Box 599, Cincinnati, Ohio , at $4 , 006 per pound ·instead of the correct price of only about $.572 per· pound. This erroneous billing has resulted in our overpayment of customs duty and advance sales tax as follows :

1. Customs duty and advance sales tax actually paid by Procter & Gamble PMC under Central Bank Official Receipt No, 72202 for ~38,283.00 dated September 15, 1969:

Customs Duty

j~ vance Sales Tax

Wharfage

;"I

Total

~29,849.00 8 , ~29 0 00 . 5,00 2o The proper amount that Procter & Gamble PMC should have paid based on the correct price shQuld be:

Customs Duty

Advance Sales Tax

V\taa rfage

Total

~4,924.00 1,394.00 5 , 00 3, There is, therefore, an overpayment of customs duty in the amount of P24, 925 . 00 and ad-

DECISIQ\J -

CIA CASE NO. 2323 - 4 - vance sal es tax in the amount of !"7, 035"00 com- puted as follows :

a)

Duty Paid

Correct Duty

j)29, 849.00 - 4,924o00 Overpayment P24 , 925, 00 b)

Advance Sales

Tax Paid

Correct 1-\.dvance

Sales Tax

Overpayment

P8 ,429,.00 -1,.394,00 We are filing a claim for refund on the overpay- ment of customs duty directly with the Collector of Customs ,.

It appears that up to the date when the present pet- ition for review was filed on September 8, 1971 , respond- ent Commissioner of Internal Revenue has not rendered any deci~on on the claim for the refund of the ~verpaid advance salr!s tax filed by petitioner . And in view of the period of limitation provided by law for the recov- ery of any internal r evenue tax alleged to have been er- roneously or illegally assessed or collected, which, under Section 306 of the National Internal ~venue Code, ~ is two (2) years from date of payment of the tax ,· or September 15, 1969, petitioner considered the failure of respondent to render his decision on its claim for re- fund as denial thereof which would entitle it to appeal to this Court .

Hence the instant appeal .

As to whether or not petitioner is entitled to the refund of the amount of P7p035. 00, representing alleged overpayment of the advance sales tax on its importation of industrial essential oil » would depend on the quest - ' .,

DECISION -

CTA CASE NO<>, 2323 - 5 - ion of what i~ the correct value of the imported artic- le for purposes of computing and collecting the advance sales tax.

If the correct price of the shipment in question is US$4 . cf,;6 per poond as shown in the shipping documents submitted by petitioner to the Bureau of Cus- toms , then there is no overpayment by petitioner of the advance sales tax on its importation and , thereforeg is not entitled to the refund of P7,035oOO.. On the other hand, if the correct price of the imported industrial es- sential oil is US$.572 per pound as alleged by petition- e~ , then the adv~nce sales tax due on the s~ipment would only amount to P1 , 394.00, and petitioner vvould be enti- tled to the refund of P7,035. oo.

Under Section 183(b) of the National Internal Re- venue Code, the sales tax on i mported articles (or ad- vance $ales tax) shall be "based on the import invoice value thereof , certified to as cor:r;-ect by the Philip- pine Consul at the port of origin if there is any, includ- ing freight , postage, insurance, commission, customs duty, and all similar charges", plus the corresponding mark-up thereof .

The ildvance sales tax on importe<;l art- icles is based on the landed cost thereof plus the cor- responding mark - up o The landed cost of an imported art- icle is the import invoice value thereofi certified to as correct by the Philippine Consul at the port of or- igin , if there is any , including freight , postage, ins- urance, commission , customs duty , r"';and all similar charges .. (Genato Commercial Corporation vs. Court of Tax Appeals ,

DECISIQ\J -

CTA CASE NO. 2323 , - 6 - 104 Phil. 615; Philippine American Drug vs o Collector of Internal Revenue, 106 Phil. 161; Caltex vs. Acting Commissioner of Customs , L- 24619 , February 22, 1968, 22 SCRA 779; Commissioner of Customs and Commissioner of Int ernal Revenue vs. Miguel Fortich Celdran and Court of Tax Appeals, L-23425 , February 26, 1968, 22 SCRA . 742.)

The law applicable seems clear and specific .

It

merely calls for application as thus worded, leaving no room for interpretation. It says the advanc e sales tax shalJ. be 11 based on the import invoice value there- of, certified to as correct by the Philippine Consul at the port of origin if there is any, including freight , postage, insurance, commission, cu stoms duty , and all similar charges" , plus the corresponding mark-up. In its controlling portion, the accent is on the words - "import invoice value thereof , certified to as correct by the Philippine Consul."

Accordingly, the import in- voice value of an imported article may not be disregard- ed in the absence of an affirmative showing that the same does not represent the true value.

(The Coca Cola

Export Corporation vs . Commissioner of Int ernal Revenue , L- 23604, March 15, 1974, 56 SCRA 5; See also Procter & Gamble Philippine Manufacturing Corporation vs. Commis- sioner of Internal Rev enue, CTA Case No . 2357 ~ May 9, 1978.)

Here~ ~n the instant case, the import invoice value or price of petitioner 's importation of industrial es-

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DECISIGJ -

CIA CASE NO. 2323 - 7 - sential oil as. specified in the Con9..llar Invoice of Merchandise issued by the Consulat? General of the Philippines in New York and duly attested by consular certification (Exhi 9 11 B11 & 11 211 ) is US$17,007.98 or US$4o006 per pound.

The same US$17 , 007.98 or US$4.- 006 per pound is also the value or price indicated in • the Combined Commercial Invoice and Packing List of the exporter/supplier, the Procter & Gamble Manufacturing Company, Cincinnati, Ohio, to which petitioner is af- filiatedo

(Exhso "C" & "3 11 1>)

And on the basis of these documents whi ch petitioner itself submitted to the Bureau of Customs to prove the correct and true vaille of its importation , which apparently adhered lit- erally to the applicable provision of Section 183(b) of the National Internal Revenue Code, the advance sales tax was computed and collected.

·Nonetheless, alleging that its shipment of eleven

(11) drums of industrial essential oil was erroneously vaued by the parent company at US$4.006 per pound ins- tead of the ~rice of about US$ . 572 per pound, petitioner would W?nt to deny its own documents the faith and ere- dence normally· due thereto, and now requests for refund of alleged overpaid customs duty and advance sales tax. As proof thereof, petitioner presented copies of the Credit Invoices of the exporter/supplier, the Procter & Gamble Manufacturing Company of Cincinnati, Ohio , dated September 24, 1969 and February 26, 1974, credit- ing petitioner the amount of P"l4,202.40; the price dif-

DECISICN -

CTA CASE NO. 2323 •'

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- . 8 - ference of US$4 o006 and US$. 572 per pound (Exhs . "E" and 11 K" . ); and a copy of a commercial invoice of a previous shipment of the same item (industrial essen- tial oil) from Procter & Gamble Manufacturing Company of Cincinnati , Ohio , reflecting the price of US$. 527 per pound.

(Exhs. "J" & "J- 1 11 . )

We find no merit in petitioner ' s cause . 1.

It is true that the import invoice value in the commercial and consul ar invoices as attested by con- . sular certification may be disregarded if the same does not represent the true value (The Coca Cola Export Cor- poration vs . Commis~oner of Internal Revenue, L- 23604, arch 15, 1974, 56 SCRA 5) , but in the cas·e at bar, it ma be considered conclusive upon petitioner for purp~s­ es of computing and .collecting the advance sales tax on its own importation since the documents adverted to were the very evidence presEnted by ~t to the Bureau of Cus- toms to prove the true and actual value of its shipment. The applicable pro vision makes clear that the landed : cost / of an imported article is the import invoice value there- of , certified to as correct by the Philippine Consul at the port of origin, includiQg certain cba~ges , plus the corresponding mark-up, and tq the extent that there was full and unconditional compli~nce with thB language of the law by petitioner to prove the t+~~ and correct val- ue of its importation , petitioner shoGld not be allowed to as ~ ail such value as erroneous on the strength of a mere credit or commercial invoice of a previous sim-

DECISION -

CTA CASE NO. 2323 - 9 - ilar shipment ~ 0hich is not certified to as correct by the Philippihe Consul at the port of origin ; otherwise, the requiremffit of the cqnsular certification would make 2o The Supreme Court has long held consistently that the value of merchandise ' fixed by the appraiser and .affirmed by the Collector of Customs is conclusive in the absence of an affirmative showing that the ap- praiser, in assessing the value, proceeded upon a wrong erinciple and c ontrar~ to law ~ {Lim Quim vs . Collector of Customs , 23 Phil . 509o) The Supreme Court has like- wise consistently held as a necessary corollary that the ya lue of import~d barticles as fixed by the customs au- thorities in the discharge of their function of assessing and collscting the lawful revenues justly due on import- ed articles and cdnfirmed by the Customs Commissioner and/or respondent Revenue Commissioner ~ho in this case directly confirmed the Customs Collector's determinat - ion since the matter involved advance sales tax on im- ported articles imposed by the National Internal Reve- nue Code and collected by the Customs Collector as his agent) that such valuation is presumed to be correct and therefore conclusive in the absence of fraud or il- legality or of an affirmative showing by the protest- ing importer that the cu stoms authorities in fixing or assessing the value of the importation proceeded upon a wrong principle and contrary to law. (Te Chin Boo vso Collector of Customs , 32 Phil . 76,. and cases cited.)

DECISION -

CTA CASE NO. 2323 - 10 - Since there is no affirmative showing , much less the presence of fraud or illegality , in the instant case that the appraiser, in assessing th~ value of the imported industrial essential oil, proceeded upon a wrong principle and contrary 1 aw, the value of_ the mer- chandise as fixed by the customs authorities and con- _ firmed by respondent Commissioner of Internal Revenue should be conclusive upon petitioner. As a matter of fa ct , the records of the case show that in computing and collecting the advance sales tax on the imported article, the Bureau of Customs adhered strictly to the requirement s of the law.

There being fidelity .to what is required by the legal provision applicable, there is no basis therefore for an assertion that the customs authorities in fixing or assessing the value of the im- portation in question proceeded upon a wrong principle and contnary to law.

3.

Section 201 of the Tariff and Customs Code, as amended by Presidential Decree No . 34, cited by pet- i tLnner to support its cc:ruse, is not in point .

Section

201; in its textual completeness , deals with the deter- mi nation of the basis of the dutiable value of an im- ported article subject to an ad val orem rate of duty for purposes of computing customs duties , but not to the basis of the advance sales tax on imported articles , which as discussed above, is governed by Section 183(b) of the National Internal Revenue Code. Further, the value or price declared in the consular, commercial , r "v / trade or sales invoice as the basis of the dutiable vaTue of

DECISION

CIA CASE NO. 2323 - 11 - an imported article subject to an ad valorem rate of duty under Section 201 of the Tariff and Customs Code was intr oduced only as an amendment to the law by Pres- idential Decree No o 34 upon its promulgation in 1972. Si nce the importation in question occurred in 1969, it is not therefore applicable to the instant case . Nevertheless, it can never be said that the value or price declared in the consular, commercial, trade or sales invoice , provided in Section 201 as the home con- sumption value, was not used as the basis in the comput- at i on and collection of the advance sales tax on the imported industrial essential oil of petitioner because, as has already been discussed above, the advance sales tax t hereon was based on the import i nvoice value spe ~ cified in th~ Combined Commercial Invoice and Packing List and the Consular Irwoiceg certified to as correct by the Philippine Consul at New York. 4 o There is no valid reason for us not to apply to petitioner the well - seitled rule that this suit being for the refund of tax , it partakes of the nature of an exemption , and the same cannot be al lowed unless grant - ed in the most explicit and categorical lang uage. (Re- sins , Inc . vs .. Auditor Gener al , L- 17888, October 29, 1968, 25 SCRA 754 . )

So, when exemption is claimed, it must be shown indubitably to exist , for every presumpt - ion is against it , and a well- founded doubt is fatal to the claim. (Farrington vs. Tennessee & Country of Shel- by, 95 U.S. 679; See Asiatic Petroleum vs . Llanes , 46

DECISIQ\1 -

CIA CASE NO. 2323 - 12 - Phil o 466 . )

·vHEREFORE, we f ind no merit in this Petition for H~v iew and t he same is hereby dismissed at petitioner ' s costs o

I CQ'JCUR:

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AMANTE F~

Acting ~£esiding Judge