CTA Case No. 2782

DECISION -

CTA CASE NO. 2762 legal basis“ end considering instead the ap- plication of the eld rate of duty (204) “then existing at the time of arrival and peyment (imitial deposit) of eustoms duties and taxes;

ax» &K xxx xR ‘ At any rate, responcent in his answer to the petition fcr review explicitly admits the allega- tions in paragraphs 1, 2, 3, 4 and 5 thereof; and da hia decision appealed from (Exhibit “I", vr. 22-23, Customs gecords), he apecifically states that:

dmitial] entry for the said shipment vas filed on August 22, 1974 after making a 90 deposit of customs duty, taxes and other es in the amount ef P4,783,979,00 under O,R, 1149119 dated August 22, 1974.

Said vessel arrived om Sugust 25, 1974 and completed discharging ker cargoes on August 27, 1974, after which the final entry was entered and accepted on September ili, 1974 and finel release effected on the same Gate after payment of the balance in customs duty, taxes end other charges in the awount of #556,652,00 under OR 1149775 dated Sep- tember 11, 1974, As indicated above, the initial entry for the said shipment was filed on August 22, 1974 after peyment of 90% deposit of cus- tema duties, taxes and other charges at 40% a@ valorem under Teriff Heating 27,09 which was the rete of duty at thet time, Inciden- tally it was only the balancer of 10% which was paid at the time /.0. SSl wes promulgated reducing the rate from 20% to 10% ad valorem, Considering that the shipment in question errived om August 2%, 1974, prior to the then existing at the time of arrivel and pey- ment of customs duties ond texes shall apply. Despite the seemingly conflicting arguments ASmvoked by the parties, there is no resi dispute between them on the fundamental principles by which

DECISION «

-~ 6 « petitioner's importation of cyrus crude o1] was G@eened enteced in the Philippines fur consumption. A Let of ground can at once be covered, and at will greetiy help simplify mettera, if the meterial end relevent allegations of the parties which are admitted or deemed admitted by them, and which ere borme out by the records, are reduced to basic factual situations that are Seyond coutroversy, to wits

1. Om Awgust 22, 1974, anticipating the ar- rive of @ shipment of 310,440 net berrelsof cyrus exede o11, petitioner filed with the Coilector of Customa of the Port of Satengas ipitis) entry for the said shipment after making a 90% deposit ef the estimated custome duty, taxes and other charges fa the amount of P4,783,979.00, The amount depo sited was computed et 20% gd valogem rate of duty under Tariff Neading Nei 27,09, Section 104 of the Tariff and Customs Code, and received by the» Port Collecter under Cust ms Cilicieal Receipt Ho, 1149139 dated August 22, 1974,

2. m Auguet 25, 1974, petitioner's shipvent arrived at the Port of Sctaenges on board tenker G/T *Attice", with Segietry be. 115/74, covered by B11 of Leading No. A-C74-12 MER, supperted by aAmoce Invoice Ro. 188, Consuler Inwolice No. 2203, Central Benk Release Certificate No. Ic-4]0 and 978

DECISION =

CTA CASE BOe 2782

~TF=-

Geclared under Entry eo. 413/74.

3. Petitioner's crude 01] shipment was com- pletely diechar ed from the carrying vessel on August 27, 1974, after which the necessery sounding and geuging of the crude oi] in the receiving storage tenks of petitioner and taking of technical eil data vere conducted under customs supervision and eontr<é] and underguerding in ordex to determine, fer a@uty ond tax purposes, the accurate outturn of sald erude ef1 shipment,

4. Om September 1), 1574, after the necessary technical oil data were taken and the complete ard accurate cutturrm of the O11 carge determined, the final entry «es entered and accepted by the frert Collector of Satengas who finally released said o41 shipment from custome custody to petitioner on the seme date after payment by the latter cf the balance of ten per cent (16%) in customs duty, taxes and other charges fa the emount of »$56,652.00, as ftinaliy determined by the Sureau of Customs, vader Customs {ficial Receipt wo, 1145775 dateé September li, 1974 at 20% a6 valogam under Taritf Heading ie. 27.09, S$. Gn September 11, 1974, Presidentia] Decree Ho. SSL took efiect. This Decree lewered “the tariff on fuel eile for the generation of electric pewer by public utilities", specifically by amending 579

BECISICN «

CTA CASE BO. 2782

» Ba

Tariff NWeading No, 27,09 cf Section 164 of the Variff£ and Customs Cece, reducing the tarifé rate QR petroleum oils end oils obtained from bituminous minersls, crude, from 20% to 20% aq valorem, (sec- tion 3, Presidential Decree Bo, $$1.)

6, On February 4, 197%, petitioner filed with respondent, thrceugh the Port Collector of Satengas, @ Cleim for refund of ovarpeid customs duty amounting to 22,192,033,00, pursuant to Sections 1707 and 1708 of the Tariff and Customs Code, The said claim for refund reads es fellows: (Sah. “U", pp. 2-3, Customs records.)

The Comsissicner of Customs

KBanila

Thru is The Collector of Customs

Subject : Claim for Refund of Overpaid

Sire:

we refer to our shipment of 310,609 Gxoss barreis of cyrus crude ©1411 which arxived om August 25, 1974, aboard the G/T “ATTICA”, Registry No. 115/74, Bill of heading No. A-C74—-12 MER and declared in Satry Ne, 413/74, Please be informed that we heave ine advertentiy declared the aforesaid ship- ment under Teriff Heading No, 27,09 and erconecusily peid the amount of P4, 384,066 . Customs duty at the ad veilorem rate of 208 om August 22, 1974 (initial) and Sep- tember 11, 1974 (finel) under Customs | Otficiei Bo agg Ho, haeuaas and 1149775, « Photocopies of which are re apt pe Baty in wiew of the enect- . ment on September 11, 1974 of Presidential Decree No, 551, amending Tariff Neading Ke, 980

DECISION «

CTA CASE NO, 2782 ~ 9 = 27,09 of Section 104 of the Tariff and Customs Code and implemented b, Pinance Department Order No. 35-74 dated Sep- tember 16, 1974, Section 2 of which provides:

“gection 2.. Tariff Meading No, 27.09 of Section 104 of the Tariff and Customs Cede, as emencded, is hereby further amended as follewss Tariff Description aAate of 27,09 Petroleum oils and oils oh- tained from bi- tuminous mine~ sels, crude,

a. for use as fuel otls for the ge-

Nneration of

electric pover in- ported by electric utilities AG Val. 10% », Others AG Val, 20% For your ready reference, we likewise enclose tcocopy each of the. dokiovsie

1. Finance Department Order Wo, 35-74, implementing provision of }.P. 5S$l; end

2. Import Entry end Internal

Revenue Declaration Serial

No, 9193055, in view of the foregoing, ve hereby request that Entry No. 413/74 be reliquidated ané the excess customs duties paid in the sum of P2,152,933 be refunded to, or tex credited in Saver of, Menile Electric Company, pursuant te Sections 1707 and 1708 of the Tarift and Customs Code, ag amended,

7. On August 7, 1975, the Port Collector of Batangas endersed petitioner's ciaim fog refund to 981 CTA CASE NO. 2762 = 16 «= respondent, with the certification that the smcunt of ©2,192,933.900, which was found to have been over- paid, was received by the Customs Cashier of the Port under official receipts No, 1149119 dated August 22, 1974 and 1149775 dated September 11, 1974, and with the recommendation of the approval of the Cleim, (Exh. "0", p. 9, Customs racorde.)

6. In a letter-decision deted Femruery 13, 1976, respondent denied petitioner’s ciaim for refund, “Consi¢ering that the shipment in question arrived on August 2%, 1974, orfior to the effectivity of P.D. $81, the old rate of duty than existing at the time of arrival and payment of customs duties and tases shall apply.” (xh, “I", pp. 22-23, Customs records.)

9. The parties are in agreement on the pre- visions of lew, legel principles and computations of customs duty, taxes end cther charges payable (and paid) by petitioner on the e11 shipment in question, or the amount of customs duty refundable to petitioner, {nm case its claim for refund is legeli anc meritorious.

Should the old rute of 20% ad valogem be applied on petitioner’s shipment of 310,440 net berrels of eyrus crude eil, or the reduced rate of 162 effective on September 11, 19747 In their controlling provisions, Section 20% 982

DECISION =

CTA CASE BRO. 2782 - ]] «= and Section 206 of the Tariff and Customs Code of the Philippines textuelly reads - articles s ect to rate or rates of import duty existing at the time of entry, or withdrawal from warehouse, in the Philippines, fer con- sumption, xx xX x xx xx‘e SBC. 206, withd = rt articles enter in the Philippines for consumption when the specified entry form is properly filed and accepted, together with any related documents required by the provi- sions of this Code and/or regulations to be filed with such form at the time of entry, at the port or stetion by the Custome efficial designated tc receive such entry pepers and any duties, taxes, fees and/er other lawful charges required to be paid at the time of making such entry having been paid er secured to be paid with the Customs officer desig- nated to receive such monies, provided that the article hes previously arrived within the limits of the port of entry, Adverting to the terms of the statute, the parties are agreed, and it is quite apparent, thet in order to be deemed es “entered” in the Philippines for consumption, an imported merchandise must meet these conditions, namely, (1) that it must have pre- wiously arrived within the limits of the port of entry, (2) that the specified entry form together with its releted documents shall have been filed and accepted by the appropriate Customs officer, and

(3) that duties, taxes, fees and/or other lewful cherges shall have been paid or secured to be paid at the time of entry. All three factors must be 983

DECISIW -

CTA CASE NO. 2762 ~ 12 < present for any imported merchandise tc be considered as entered, The rate or rates of duty applicable to the merchandise entered under any such entry is the rate or rates in effect when the waking of the entry as stated above ise completed. (See Tejem,

Commentaries on the Revised Tariff and Customs Code

of the Philippines, Vol. IV, 1973 ed., p. 2194.)

The lew seems clear end specific, it ealis for application as thus worded, There ia neo room for construction, The applicable previsicns make clear that imported erticles shall be subject to the rate or rates of import duty existing at the time of entry in the Philippines for consumption, And imported articles shall be deemed “entered” in the Philippines for consumption (1) “when the specified entry form ie properly filed and accepted, together with seny related éecumente” required by law and regulations, et the port by the proper cus- tome official; (2) “any duties, taxes, fees and/er ether lawful charges required to be paid at the time ef making such entry heave been paid or secured to be paid"; and (3) the “article hae previcuszly arzgivead within the limits of the port of entry." Nothing there said speaks of imported articles shali be deemed to have neon entered in the Philippines for consumption on the "date that the shipment appears to have arrived within the limits of its port of 984

DECISION =

CTA CASE MO. 2782 ~ 13 - entry." (at page 6 of respondent's memoradun,) Now, to the case at bar, ‘then did the ship- ment of 310,440 net barrels of cyrus crude of1 consigned to petitioner arrive at the Port of Batangas on board tanker G/T "Attica"? Respondent Commissicner of Customs, in his decision appealed from, gives the ready answer, He seyss “Said wessel arrived on August 2%, 1974 anc completed @ischarging her cargoes on August 27, 1974," (Beh. "I", op. 23, Custems records.) When wes the specified entry form, together with its related documents, filed and sccepted by the Collector of Customs of the Port of Sateiges? Respondent Com missioner of Customs, in his deeision appealed fron Gated February 13, i976, agein specifies: “final entry was entered an accepted on September 11, 1974." (Exh, "1", pe 23, Customs records.) And when were the duties, taxes, fees and/or other Law ful Charges required to be paid at the time of making the entry peid? Likewise, respondent Com- missioner of Customs specifically states im his decision that “final release (of the shipment was) effected on the same date (September 11, 1974) after payment of the balance in customs duty, taxes and ether charges in the swount of #556,652,00 under ©.R./ 1149775 dated September 11, 1974. (Exh. “X", Pe 23, Customs records; also at p. %, CTA records.)

585

DECISION «

CTA CASK NO. 2762 ~ 14 = It thus results that it was on September 11, 1974, after the necessary ei] data were taken and the complete and eccurate outturn of the oil cargo determined, end petitioner finally filed Entry No, 423/74 which was entered and accepted by the Fort Collector vf Batangas, who finally released said shipment from customs custody on the sane dete, efter petitioner paid the balance of ten per cent (10%) im customs duties, texes and other charges, totelling °556,652.00, as finally determined by the Bureau of Customs, that the subject importation should be deemed “entered” in the Philippines for consumption, And since on the sawe date, September 11, 1974, Presidential Decree Ne. 351 lowered "the tarif= on fuel oils for the generetion of electric power by public utilities" from 20% to 10% ad valorem, by specifically amending Tariff Nesding No. 27.09 of Section 104 of the Tariff and Customs Code, the reduced rate of Guty now existing at that time should apply.

Not much need be said on respondent's thesis that petitioner may be considered to heve paid the Guties, texes, fees and/or other lawful charges on the shipment in question on August 22, 1974, when Entry Bo, 413/74 was filed; so thet “ultimately, petitioner's shipment of crude oi] should be deemed to heve been entered in the Philippines fer con- 586 CTA CASE BO. 2782

=» AS »

sumption on August 25, 1974, because it was on that Gate that the shipment appeers to have arrived with- in the limits of its port of entry, Batangas." (p. 6, respendent’s memorandum.) By Section 206 of the fariff and Customs Code, gupra, imported articles are not deemed entered in the Philippines for con- sumption on the date of their arrival within the limite of the port of entry. And by respondent's own decision, at the very least, only the initial entry for the said shipment wes filed (not yet ac~- cepted) on August 22, 1974 after payment of 9067 Gepesst of customs duties, texes and other charges. (Exh. "2", gupra.)

The situation here presented would not, there- fore, create entry in the Philippines for consumption on August 25, 1974 of the subject importetion, As correctly pointed out by petitioner, the eaking or filing of Entry No, 413/74 on August 22, 1974 is not complete for the following reasons: Firstly, at the time of its filing, the imported merchandise has act yet errived within the limits of the Port of BSetangas; Secondly, when the imported article arrived in port on August 2%, 1974, the related shipping ané customs documents such as the bill of lading, consular anc commercial invoices, 4s well as the Central Sank release certificate, the Bureau of internal Revenue authority to release imported goods, were not yet 087

DECISION «

CTA CASE WO, 2782 - 16 - attacned to the initial entry filed on Auguat 22, 1974) and Thirdly, when the imported cargo arrived at the Port of Setangrs on August <5, 1974, there was ho Complete payment yet tor duties, taxes, fees and/fer other lewful charges due on the shipment, Culy 90% of customs cuty, taxes and other charges was aecceptrd’ by the Port Collector merely as 2 Geposit on August 7272, 1974, pending the gathering of the technical deta, the gevging and sourcing of the @41 carge ond the determination of its complete outtura, 2 stancderc operating procedure icr handling this kind of chipment after discharge from the Carrying vere), (pp. 30-31, CEA records.)

l. This was confirmed by Jaime FM, Peren, the Customs Examiner of the Port of satangas, when he stated that: (kxh, "7", p. 6, Customs records)

MEMORANDUNH Eors

The Colisctcr of Customs

Pert of Batenges

SUBIJUCT: Claime for Refund of

Overpaid Customs Duty by Manila Llectric

Company.

This has refecencs with the claims for refund of overpaid Customs Duty by the. Maniia Electric Company on cyrus crude oil Gischarged ex. 8. &. “ATTICA” Reg. Neo. 115/ 74 under Ontiry No. 413/74.

initial entry for said Shipment was filed on August 22, 1974 after payment of 90% deposit of Customs Duty, taxes and other in the amount of P4, 783,979.00 undee ©8 1149115 dated Auguet i2, 1975.

988

DECLSION =

CTA CALE NO. 2782 - 37 = Said vessel arrived on August 25, 1974 and completed discharging her cargees on August 27, 1974, after whieh the finel entry wae entered end accepted on September 11, 1974 and released on the same dete after pay- ment of the balance in customs duty, taxes and other erie ia the amount of 586,652,090 under ©R 1149775 dated September 11, 1474.

2. Sustained by the Collector of Customs of the Port of Batangas in hie 2nd Indorsement dated August 7, 1975 to respondent, recommending approval of petitioner*s claim for refund of overpaid cus tomes duty in the amount of *2,192,933.00, saying: (Exh. “D", p. 9, Custome records), It may be noted that Finance Oepartment Orger No, 35-74 was issued only on September 16, 1974 or five days (September il, 1974) efter the importation may be deemed to have been completed with the filing of the corres- pending entry end the final payment of customs @uties, x x xX.

3. Amd concurred in by respondent himself when he stated in his decision appeeied from.

Initial ent for the said shipment wae filed on August 22, 1974 after making a 90% : of customs duty, teres and other e6 in the a#ount of P4,783,979.,00 under O.%. 1149119 Geted August 22, 1974.

Said vessel arrived on “4ugust 245, 1994

a. ro Sapa pager arenes her a yi on eepees Ae indiceteé above, the initisl entry for the said shipment was filed on August 22, 1974 efter payment of 90x o£ customs duties, taxes and otner cherges at 20% ad velorem under 989

DECISION =

CTA CASE WO. 2782 - 18 « Tariff Neading 27.09 which wes the rate of duty at that time. Incidentally it was only the balance of 10% which was paid at the time ©.». $31 was promulgeted reducing the rate from 20% to 10% ad valorem. (gupga; emphasia supplied) Respondent atteupts, however, to drew support from Customs Administrative Order No, 7-70 dated December 19, 1969, which requires a consignee upon filing his entry to pay the emount of duty payable on the shipment prior to the examination cf the inm- portation, unless the goods are intended for trensg- pertation, for warehousing, or under bond, Hence, petitioner should heve paid the total of the duties, texes, fees and/or other lawful charges on the shipment on August 22, 1974, when Entry Wo, 413/74 wee filed, not just 90% thereof, in this position, respondent now finds comfort in the supposition thet petitioner's payment of °556,652.00 on September 11, 19374, may be seen to be but a liquidation of Entry No, 413/74 under Section 1601 of the Yeriff end Cus- Gf course, respondent could not have overlocked his finding in his decision appesied from, which is the result of investigation, that what was filed on August 22, 1974 by petitioner, after making « 99% Gevosit of customs duty, taxes end other charges, was the initial entry for the shipment, The final Sntry was entered and acceoted by the Bureay of Cyus~ goms_ on September 1), _1974 and final relense of the 990

DECISION -

CTA CASE NO, 2782 - 19 ~- shipment in question was effected on the sane date, We understand that since eil carge involves techni-~ cal processes to finally ascertain the duty and tax esseesable which cennot be determined upon arrival, the Bureau of Customs requires the jnjtial filing % of the estimated duties and taxes payeble, It is only after sounding and gauging the e011] in the storage tanks end ascer- taining the complete outturn thereof, which process usually takes from 12 to 15 deys to accomplish, that the Collector of Customs collects the balance of 10% of the duty end teres payable, The gathering ef the technical data on the crude eil for duty and tax purposes is still part of the entry ané appreisal processes and not liquidation es the term is unders- tood, (p. 48, CTA records) But as expressly and explicitly etaeted therein, Customs Administrative Order No, 7~70, as amended by Customs Administrative Order Bo. 10-70 and Customs Administrative Order No, 17-70, refers to the “Immediate Payment System and Collection of Impert Duties and Taxes in the Port ef Manila through the Banks," To quote Section 21 thereof:

This order is to implement Executive Order 9914

- 20 - Bo. 2 of the President of the Philippines dated January 5, 1966 directing that customs duties, taxes and other levies on imported articles be collected by the Central Sank of the Philippines through ite authorized agent banks, and in line with Central Bank Circular No. 217, Series of 1966, to further hasten the delivery of merchandise. (p. 47, CIA records.) Wothing there said speaks of the con- signee or importer being required to pay in full the duty and taxes upon filing of the jnitial entry. Ne justification can be found for reading something into the Customs Administrative Order which is not expressly or Clearly intended to be sc included there- in, especially when there is no agent bank of the Central Sank in the Pert of Batengas and the Order ve find ne merit, therefere, in respondent's supposition thet petitioner's payment ef PF 556,652.00 on September 11, 1974 may be seen to be but a li- quidation of Entry No. 413/74 under Section 1601 ef ferifi and Customs Code so that, ultimately, peti- tioner's shipment of crude 011 should be deemed to have been entered in the Philippines for consumption

i. August 25, 1974 because it was on thet date that the shipment appears to heve arrived within the ji- mits of its port of entry, Batangas.

592

DECISION «

- 21 + The net rasult is that fertember 1), 3574 is the date when petitioner's shipment of 320,440 net barrels of cyrus of] was entered in the Fhilippines fer consumption, It was on this date when Entry No. 413/74 was properly filed and accepted, together with the related shipping and customs documents, auch es the bill cf lading, consular and commercial invoices, Central BSenk release certificate and Bureau of Interne] Revenue suthcority te release imperted goods, by the Fort Cellector uf batangas, the preper Customs official designated to receive such papers, and final release effected ion the same date) after ooyment in full of the beiance in customs duty, taxes and other cherges in the amount of ©$56,652,00 under Customs Official Reesipt No. 1149775 dated September 11, 1974, the shipment in question having previcusly arrived withia the li-~ mite of the Port of.Batanyas, Since the rete of duty applicable te petitioner's importation had already been reduced te 10% gf valores eiiective September 11, 1974, the date when Presidential Decree No, 581 took effect, petitioner Aanila Blectrie Company is therefore entitled te the re- fund, or tax credit, of the amount of 72,192,033,00 as overpaid customs duty on ite crude o11 shipment covered by Entry No, 413/74, as reliquidated by the Port Collector of Batenges, 993

ADRCISION «

CTA CASE RO. 2782 ~- 22 - WHEREPORE, the decision appealed from is hereby reversed and respondent Commicaioner of Cus- toms is ordered to refund te, or grent a tax credit in favor of, petitioner Marils Kleetric Company the smount of ©2,192,033,00, Wwitheut pronouncement as to corte.

SO QRDERED, Queton City, November 29. 1978.

Acting Pres Aine Judge

XI CONCUR:

asaceiate ea 994 aki Tete) = — un?) Gee com) ty BT