Iq Repurlic of the Puilippines Court of Tax Appeals Ouvezon City Campgs Rueda Corporation vs. The Honorable Commissioner of Customs

DECISION -

CT~ CASE NO . 282 9 - 2 - to $18,949 .00 as evidenced by the firm offer (Pu r chase Order) ~o . F-73893 dated July 6, 1973. (par. III-1, Pet i tion; par. 1 , Answer.) .

2.

E.B. Schwinger & Co. finally sold to petitioner the aforedescri bed electrical lighting and signalling parts (flashers Tungsol Products) for $18,200.10 as evidenced by E . B. Schwinger & Co. Invoice No. 42287 and Consul~r Invoice of Merchandise No. NY 65675 E. (par. III-2, Petition; par. 1, Answer.) .

3 .

That on Fe b~ua ry 8, 1974, petitio !er filed with the Collector of Customs of Manila a request for value information (No. 9750) _for the declar ation of t he above - im?orted goods unde r Tar if f He adi ng No . 85.09 of the Tariff and Customs Code at 30 % ad valorem duty for class- ification purposes.

The a bove imported goods, however, were re-classif i e d under Tariff Heading ~ ' J . 85 .19 of the Tariff and Cu ~torn s Code at 50% ad valorem. (par. III-3, Petiti o~ ; par. 1, Answer.)

4.

r~ he afor eme ntioned impc:: ted goods arrived a: the port of Manila v i a S/S 11 Luna Maersk" on February 12, 1974 under Bill of Lading No. CFS-9, for which petitioner immediately fi l ed Customs Import Entry and Internal Revenue Declar a tion No. 010 3185 under Entr y No . 26867 under Tariff He ad ing N o ~ 85.19 of the Tariff and Customs Code at 50% ad val o rem, under protest. (par. III-4., Petition; par. 1, Answer.)

DECISION -

CTA CASE NO . 2829 - .3 - 5.

That on Mar c h 26, 1974, petitioner paid the duties and taxes on the above imported go0ds i n the sum of ~134, 3 77 . 00 under protest as evidenced by Customs Order of Payment No. 296146 and Central Bank Official Receipt No. 287246 dated March 26, 1974. (par. III-5, Petition; par . 1, Ans wer.) .

6 .

That on April 4, 1974, petitic ·0r filed a timely protest against the aforementioned re-~lassifi- cation under Tariff · Heading No. 85.19 at 50% ad valorem instead of Tari f f Heading No. 85 . 09 at 30% ad valorem resulting in the payment o f additional customs duty of P26,258.00 and advance sales tax of ~2,297.00 or a total dif erence of ~2~555.00 and prayed for t he refund of the sa i d diffe rence.

(par. III-6, Petition; par. 1, Answer.)

7.

The Collector of Customs of Manila i n a decision dated October 18, 1974 r ~ n d ered a decision di smissing petitioner ' s protest . (par. III-7, Petition7 pars. 1 & 2, Answe r .)

8.

Petitioner appealed the above decision to the Commissione r of Customs, who, on July 30, 1976 rendered a decision af f irming L 1at of the Collector of Customs of Manila, a nd which decision is now the subject of this pre sent f 8 t ition .

(par. III-8, Petition; par. 1 , Answer.)

The parties are not in dispute on the computations ') (I c I~,VI)

DECISION -

CTA ChSE NO. 2829 - 4 - of customs duti0s and taxes payable by , or amount refundable to, peti t ~ o ner as the case maybe. The only issue for resolution is the correct tariff classification of the imported Tungsol Prod ucts (27,000 pieces of flashers)~ that is, whether they should fall under Tariff Heading No. 85 .09 at 30% ad valorem or unde r Tariff Heading No. 85.19 at 50% ad valorem , both of the Tariff and Cus toms Code.

Under Chapter 85 -

ELECTRICAL HACHINERY AND F,;WIP- M:SNT; PARTS 'l,HEREOF - of the Tar iff and Customs Code, Tariff Heading No . 85.09 states:

85.09 Electrical lighting and signalling equipment and electrical windscreen wipers, defrosters and demisters, for cycles or motor vehicles-~~ .ad v ~ :. 30% while Tariff Haading No. 85.19 provides: 85.19 Electr i cal apparatus fo r mak ing and breaking electrical circuits, for the protection of electr ical circuits, or f or making connections to or in electric circuits (for example, switches, relays, fuses, lighting arresters, e ., : g e suppres- sors, plugs, lampholder s ,and junction boxes); resistors, fixed or variable (including potentio- meters), other than heating resistors; p1:inted ·circuits; s •1 .:. tchboards (other than telep i1one switchboards) and con- trol panels:

· A.

Component parts of magnetic starters and circuit breakers imported with prior authoriza- .

tion of the Board of Investments under a progressive manufac- tuzing program ••• •••••••• ad val. 10% B.

Other • •• ••• ••• •• • •••• •••• ad val. 50% .

. 1 ( ) ' • t-1 "",.:., I

DEC I SION -

CTA CASE NO. 2829 - 5 - Quoting Section 203, Rule 3(a} of the Tarif f and Customs Code,which reads:

SEC. 20 3 .

General Rules of Classifi- .

c ation.- . The i nterpretat i on a nd applica t ion of t he provisions of this Code relating to the classif i c ation o f articles impo rt ~ d into the Phil i ~ ?· i nes shall be governed by the following principles:

XXX

XXX

XXX

XXX

XXX

Rule 3.

When articles are prima facie, classifiable under two or more headings or subhe adings, or imported in sets consisting of several artic l es, clas sificd t ion s hall be effected as follows:

(a} The heading or subheading which provides the most sp ecifi ~ des- c ription shall be preferred to a ny other heading or subheading providing a more gene r al descr iption.

XXX

XXX

XXX

XXX

XXX

petitioner submits that Tariff Heading No. 65. 09, which stat es "Electrical lighting and s igna lling equipment x x x x x for motor vehicles" provides a more ape- --------------------

I

cific descrip tion than Tariff Heading No. 85.19.

Further-

mor e, t he Exp l anatory Notes to the Brussels Nomencl~ ture states:

"This heading (85 .09 } covers electrical apparatus and appliances specialized f or use on cycles or ~o tor ve hicles for lighting or signall ing pu~ ~os"es."

and the itemc wh ich petitione r i mported (T~ng s ol Flashers} ar e elec t rical a pparatus use d on motor vehicles f or sig- nalling purposes, t ha t is, to signal a right or left hand turn by means of electrical f l ashe s in front ( . ') 0 ,..., , .., r .. )

..

t~ D :.~ :ISION - CTA CASE NO. 2829 - 6 - and at the rear of motor vehicles.

Likewise, according to petitioner , the Explanatory Notes to the Brussels N011encla ture under Tar iff Heading No. 85. 09 s~ates t~at it includes, 2mong others, direct i on indication lig hts and parts thereof.

Since the Tungsol

Flashers it impor ted are parts of the direction indication l ight se t or system and signalling equipment, petitioner asserts that the items ~ h ould fall under Tariff Heading No. 85. 09.

Respondent, on the other hand, allege s as affi ~- . mat ive defense in h i s answer that: 5.

That flashers, when imported by themselves, fall squar~ly within the con text of Customs Tariff Circular No. 26-74 which specifically classify "flashers" under Tariff Paragraph 85 .19, the pertinent portion o ~ which is hereby quoted ~s ful lows:

"For being imported alone subject article (Flashers) can not be prope~ ly deemed as electrical s ignal equipment f o r motor vehicle but should be treated more as a device for clos i ng or op2ning on elect ~ ical circuit."

Tar iff Par. No. 85-19 - nElectr ica l apparatus for making and break i ng elec- trical circui t s x x x - ad valorem - 50% 6 .

Th~t : ~ om the clear J . angua 0~ of the above provi s ion of law , the item "flas hers", if imported alone, can not be class ified unde r Ta r iff Heading 85.09 at 30% ad va l.orem but must fal:.. under Tar iff Head ing 85:'i9a·t- 50% ad valore r:l;

The general purpose for which an article is used must govern the assessment of duty; any other rule would

DECISION -

CTA CASE NO. 2829 - 7 - lead to confusion and injustice.

It is the general use to which articles are chiefly ~dapted and for which they are chiefly used that de t ermine their character within the meaning of the tariff laws. It is the pre- dominating use to which articles are generally applied or used that determines their character for the purpose of fixing the duty, and not the specific or special use which any particular importer may make o f the articles importedo

(La Campana General de Tabacos de Filipinas

vs. United States, 8 Phil. 438; citing Hartranft vs. Langfeld, 125 u.s. 128; See also, Chester Industries, Inc. vs . Commissioner of Customs, CTA Case No. 2560 , May 9, 1974; Domingo s. Jose, Inc. vs. Commissioner o f Cus toms, CTA Case No. 2568, May 6, 1977; National De ntal Supply, Inc. vs. Commissioner of Customs , CTA Case No. 2757; May 16, 19 79 .)

Here in the case at bar, the evidence adduced by petitione r, both oral and documentary, and t he records of the Bureau of Customs pertaining to this case on the basis of which respondent submitted this case for decision, definitely establish t he fact that the general purpose or predominating use to which the Tungsol Products (flashers) are applied or employed, a :;; d for which petitioner imported them, is precisely as electrical e quipment f or signalling purposes for motor vehicles ; that is, ~o signal or indicate a right or lef t hand turn by means of electrical flashes ' ) () ( \ ,., J. 'v'

DECISIOlJ -

CTA CASE NO. 2829 - 8 - in front and at the rea~ of motor vehicles. The import entry and internal revenue declaration of the shipment {p. l.O, Customs records; Exh. "F", pp. 16-17, CTA record ,, ,' i. consular invoice of merchandise NY 65075 E (pp. 12-13, Customs records; Exh. "D", p. 14 , CTA records)~ bill of lading (p. 16, Customs records)~ c o~ill ercial invoice of merchan ~i se issued by E.B. Schwingc:: & Company (p. 18, Customs records; Exh. "C", p . 13, CTA r e cords)~ Prudential Bank & Trust Company'~ adv i ce of letter of credit (p. 19, Customs records)~ E. B. Schwinger Philippine s firm order (p. 20, Customs records; Exh. "B", p. 11, CTA records) i. order of payment dated March 2, 1974 issued by the Bureau of Customs (p. 22, Customs records; Exh. "G", p. 18, CTA recor ds) i. and Central Bank Official Receipt No. 287240 dated March 26, 1974 (p. 23, Customs records; Exh.

~H", p. 18, CTA records) ~ all show that the Tungsol Produ~ts (flashers) .are electrical l ight:i.ng and signalling_ parts; and petitioner imported them as electrical appa- . ratus to be used on motor vehicles for signalling purposes,

J

to signal a right or left turn by means of eicctrical f lashes in front and at t he rear oi motor vehicles. (pp. 24-26, Customs r ecords.)

This is confirmed and cor r oborated by the testimony of peti tione&'s purchasing manager and the brochure (or literature) .of the Tung sol Product issued by t he manufacturer, Wagner Electric Corporation, 1 Summer Avenue, Newark, New Jersey, U.S.A.,

DECISION -

CTA CASE NO. 23 29 - 9 - describing the uses - .FOR AUTOMOTIVE DIRECTION SIGNALS...; .

HAZARD

~1ARNI N G CONDITION ALERT AND ACCESSORY APPLICATIONS - and operating principl es, pe rformance characteristics, manufac ~ ~ ri n g standards, mechan i cal specific2tions, application spec ificat i ons and effect of circuit con- ditions, which are all ind icative o f its use and adapt- ability as e l ectrical lighting and signalling appara t us for motor v e ~ icles. Absolutely no proof whatsoever was presen t e d by respondent to controve rt or dispute the evidence adduced by petitioner that the Tungsol flash e : s in questi on are ~ctrical apparatu s f o r use on motor vehicles for lis hting or s i gnalling purposes. Since it is the gener a l purpose or p r edominating use for which or to wh i ch i mported articles are adapted or applied that governs the ass ess ment of duty (La Campana General de Tabacos de Fil i pinas vs. United States, supra)~ there seems to be no doubt that the Tungsol flashers should fall under Tariff Heading No. 85.09 at 30 % ad valorem, which explic i tly includes electrical lighting and signalling equipment for motor von icles.

~!.' he Explanatory Notes to the Brussels Nomencla- ture, upon which our Tariff Law i s based, states under Tariff Head ing No. 85.09 that:

"This head~ng cove rs electrical a pparatus aud appliances special i sed for use on cycles or moto r vehicles for lighting or signalling purposes."

The heading also includes, i n t er alia, 'l • ,, .

' -

DECISION -

CTA CASE NO. 28 29 - 10 - "braking lights , direction indication lights , reversing lamps and the like.

11 (pp.

1672-~673, Tejam, Montano, Co2mentaries of the Revised Tariff and Customs Code o f the Phi lippines, Vol. III, 1973 Edition.). Worthwhile noti ng is the fact t h3t the importations made by petit ioner of the same Tungsol flashe rs i n 1972 and 1973 were classi f ied and assessed of cus toms dut i es by the Bureau of Customs unde ~ Tari ff Heading No. 85.09 at 10% and 30~ ad valorem, respective ly . ~:S xhs . L, L-1.

to L-8; M, M-1 to M-8; N, N-1 to N-8; and O, 0 - ~ to 0-6.) . A portion o ~ the testimony of petitioner's wit- ness, Mr. Daniel P . Inciong , in his capacity as manager, purchasing department of the Campos Rueda Cor poration, on cross examination by Soiicitor Kilayco , counsel for respondent, together with the shipping documents of the previous importations marked as Exhibits L, L-~ to L-~; M, M-1 to M-8 ; N, N-~ to N-8; and o, o-~ to 0-6, suffi- ciently established th i s fact .

To quote :

(L.s.n . , pp.

34 - ~6, hearing on November ~7, 1978.)

Q

Mr. Inciong, you said that previ ous impor-

A

Yes.

tation- of the petitioner of Flashers were ~ · 3Sified by the Bur eau of Customs under Tariff Heading 85.09?

Q

Do you have any document to show that the Bureau of Customs classi fied your previous importations o f

Fl 2

.~ ers unde r Ta ri ~ f Heading 85.0 ~ ?

A

Right now, I don't have the documents but if required, I c an submit.

DECISION -

CTA CASE NO. 2829 - 11 -

SOLICITOR KILAYCO

No further questions, Your :1onor.

JUDGE FE .LER Re-direct?

.

.

ATTY. SANTOS If Your Honor please - .I have no re- . direct examination but may I reserve for the presentation of the documents showing that the previous impor tations of the corporation wer e asse ssed under Tariff Heading 85.0~?

JUDGE FILLER

When have you been importing this Tung-sol Flasher from the United States?

A

I don't have the exact date, Your Honor , but I suppose even before I started as Purchasing Manager in 1970.

J UDG:C FI LLER

And at that t i me these articles we re classi- fied at 30 % ad valorem?

A

Correct, Your Honor.

JUDGE FILLER

Since when c'~ · 1 the Bureau of Customs begin imposi n ~ a ~ 50% these Flashers?

A

I t h in k , since 1973.

JUDGE FILLER

So that, previous to t hat, your importa- tions of these Flasher s had always been classified under Tariff Heading 85.09 at 30% ad valorem?

·

A

Yes, Your Honor.

While, as stated ea r lier, res pondent admitted in his answer (paragraph 1) that the imported Tungso1

DECISION -

C T~ CASE NO. 2829 - 12 - Products are electrical lighting and signalling parts, he however aver s as aff irmative defense ( i n his answe r ) that "for being i rnp o r t~.d alone subj ect article (f1:tshe r s ) c 2 ~ not be properly deemed as electrical signal equip- ment for motor vehicles but should be tr eated mor e as a device f or closing or opening on electrical c i rcu it" classified as "electr i cal apparatus f or making and breaking electrical .; ircuits" under Tariff Heading No. 85.19 at 50% ad v .~~lorem .

Flasl: er s, if~ or ted alone, can not therefore be clas8ified unde r Tariff Headin0 No . 85 .09 at 30% ad valorem , accord ing to respondent, but must fall under Tariff Heading No. 85.19 at 50 % ad valorem. Undou~ t ed ly, r ~s p ond e nt admits t hat the Tungsol flashers in question 2re "electrical lighting c.:nd signal- ling equipment f or motor vehicles" falling under Tar iff Heading No. 85.09 at 30 % ad valorem. However, if ii!!J2ort ::::d e ~ . .:_:n ~, following re spondent's. t heory to i ts logical con- elusion, t hat would change the nature and use of the Tungsol flashers from "e lec t r ica:. lighting and signalling equipment for motor vehicles" into "electrical apparatu s for making and b r~ akin g e l ectric a l circuits" under Tar if£ Heading No . 80 .19.

The Tar iff Law employs th~ words "electr i cal lighting and s ignall i ng equipment x x x x x x x ~ o r motor vehicles" - wi thout more, ~n d respondent admits tha t the Tungsol flasher s in question are elec t rical •. "'i

DECISION -

CTA CASE NO. 2829 - 13 - lighting and signalling equipmen t for motor vehicles. Nothing t h~ re speaks of "for being imported alone", an article fa l ling under Tariff Heading No. 85.09 as electrical appa r~t us for use on motor vehicles for lighting and signalling purposes shall be treated as a device for making and b r eakin g _~ lectrical circui t s under Tariff Heading No. 85.19.

Where the law does not provide that an article imported for electr i c al lighting and sig ~2 lling equipment for motor vehicles fallin g under Tariff Heading No. 85.09, j i impor ted a l one, shall be classified under T ~ r iff Heading No. 85.19 as "electrical apparatus for making ~ nd breaking electrical circui t s," that pr c •·ision should not be read into the l aw. The law is clear and our plain duty is to apply the law as it is written.

We are not to include within, or qualify , the classification of subjects to be taxed anything which is not clearly intendud by the law to be so included or qualified.

Revenue laws should never be extended by implication beyond the clear import of the language used . (Kuttne r vs. Collector, 18 Phil. 461; Stevedor ing vs. Trinidad, 439 Phil. 803.)

But we look in r etrospect at the criterion laid down by the Supreme Court in determining the tariff classification of imported articles for purposes of the asse ssment of duties.

As stated earlier, in Compana General de Tabacos de Filipinas, it is the general ') ". G 1-w ,_, '

DECISION -

CTA CASE NO. 2829 14 - purpose or p=edominating use to which articles are generally applied or used that determi ~ es their c harac- ter f or the purpose of fix ing the duty. And we have already explained above that the uncontroverted evidence pr e sented by petitioner sufficiently establishe d the fact that the Tungsol flashers in question are to be applied or used on motor vehicles for signalling purposes~ that is, to indicate a right turn or left turn by means of electrical flash ~s in front and at the rear of motor vehicles.

It thus results that such Tungsol flashers were not imported for making and breaking elec trical circuits but for electrical signal purposes for motor v0hicles.

And it can not be said that the determinative tes t is lacking simply because the subject article forms part of a signc,lling equipment of motor vehicles because the pertinent Explanatory Notes to the Brussels Nomencla-. ture upon which our Tar iff Law we;;; based e xplicitly states under Tariff Head ing No. 85. 09 that "parts of the goods of t he present heading are al s o classified here."

(p. l6 74 , Tejam, M., Commentar ies on the Revised Tariff a nd Customs Code of the Philippines, Vol. I II, 1973 Edition .)

In line with the fore :oing, we 9re therefore of the opin ion and so hold that the protest of petitioner against the asse s sment and collection of additional customs duty and advanc e sales tax on its shipment of

DECISION -

CTA CASE NO. 2829 - 15 - 46 cartons of Tu ~ g sol Products (flasher s ) ~nder Entry No. 26876 i n th2 amounts o f ~26,258.00 and ~2,297.00, respectively, togethe r with its related c laim for refund thereof, is mer itorious.

However, with r egard to the advance sales ~a x of ~2,297.00, t he same c an no t be refunded in v iew of the fact that nothing in the records s hovs that petitioner had filed its writ ~ : '2 n claim for refund thereof with t~ e Commissioner of Internal Revenue an~ that the latter was made a party to this case.

Without sati sfying these jurisdictional requirements, '.;hich in th2 instant case are lacking, the same is fat a l to the cla im of petitioner for the r ~ fu nd of the advance sales tax.

(Wise & Company vs.

Cc mrniss ioner of Customs, CTA Case No. 2717, December 29, 1977, see also resolution dated January 15, 1979, certiorari denied in G.R. No. L-51242, March 7, 1980; National Dental Supply Incorporated vs. Commissioner of Cus ~ oms, CTA Case No. 2826, June 30, 1980.)

Accor-

dingly , only the additional customs duty in the amount of ~26,258.00 is refundable to petitioner Campos Rueda Corporation.

WHEREFORE , the decision appealed from is modified . Respondent Commissioner of Customs is hereby ordered to refund to petitioner the s um of P26,258.00.

Without

pronouncement as to costs.

DECISION -

CTA CASE NO . 2829 - 16 -

I CONCUR:

CON

ANTE c/_ ;OAQU I N ssociate Judge

~(Mr~L~~

AMANTE F~;;;_,~R Ac ting Presiding Judge