Ku'Uih.H' of I I Ti' I'Hiupplnzi Court of Tat'\ Appeals Ol~£7.0N Citv Enjay, Inc. vs. Honorable Ral'-'Lon J. Farolan

DECISION -

CTA CASE NO 3010

- 2 - Upon arrival, the shipment was immediately stored in the cold storage room of the Philippine Skylanders Incorporated, a customs bonded warehouse at the Manila International Airport.

The shipment was declared under Formal Entry No. 89608 by petitioner's authorized customs broker, the Forbes Customs Bro- kerage Corporation.

On September 30, 1977, after the release papers were duly processed by the entry processing section of the office of t~e district collector of customs, the corresponding customs duties, taxes and other charges amounting to ~20,450.00 were paid by peti- tioner under Official Receipt No . 7879162 . The sh i pment remained in the Philippine Skylanders Incorporated until it was withdrawn on October 3 , 1977 , without exception by the Forbes Customs Bro- ~ kerage Corporation.

It was delivered directly to the warehouse of the Hotel Intercontinental Manila , Makati, Metro Manila, covered by Delivery Receipt No. 1003:

"Subject for final inspection."

It

appears that the Hotel Intercontinental Manila did not accept de livery of the shipment because the executive chef of the hotel, after inspection, allegedly found the cheese to be spoiled and unfit for human consumption.

1G9

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DECISION -

CTA CASE NO ::!010 - .3 - The record s reveal that immediately upon discovery of the spoilage, petitioner hi red the services of the Authorized Adjusters, Inc., a duly registered and licensed marine and cargo surveyor, to ascertain a nd determine the nature and extent of the loss and/or damage sustained by the shipmen t . The marine cargo warehouse survey report dated October 19, 1977 prepared by the adjuster states that the "damages sustained by the shipment may be attributed to irnpr<?per handling anywhere in transit." Consequently, petitioner was advised to file claims against all parties concerned to conform with the stipulation of the policy.

(Last paragraph of the report, p. 25, Customs records.)

Formal protest was ther e fore immediately filed with the Philippine Skylanders Incorporated. The latter however denied its liab ility for the reason that the shipment was store~ in the same c ondition as it was received from t he carrier and accepted by the customs broker for petitioner Hotel Intercon- tinental Manila in the same good condition that it was received from the airline.

Upon denial by the Philippine Skylanders Incorporated of its claim for reimbu r sement for the value of the spoiled shipment of cheese, peti- ..

DECISION -

CTA CASE NO. 3010 - 4 - tioner , thru counsel, filed with t he Collector of Customs, Manila International Airport, on Sept ember 13, 1978 , after almost one year from t he release of the goods from customs custody , a formal claim for abatement of duties and taxes paid on the importation on the ground that the various cheese deteriorated and spoiled after their arrival and while remaining in the customs bonded warehouse.

The claim for abatement was however den i ed by the Collector for the reason that the · importation did not deteriorate and become spoiled atter its arrival and while remaining under customs custody.

After resort to t he Commissioner of Customs proved unavailing, peti- tioner Enjay, Inc. , licensee of the Hotel Intercon- tinental Manila, appealed to this Court . The lone question tendered for resolution is whether or n6t petitioner is legally entitled to abatement or refund of the customs duty and sales tax (advance s.ales tax) _assessed and collected on its importation of various cheese under Airway Bill No. 160-976279-3.

Under Section 1704(b) _of the Tar i f f and Customs Code, "a Co llector may a bate or refund the amount of duties accruing or paid, x x x x x upon satis- f actory proof of injury, destruction x x x x of ..

DECISION -

CTA CASE NO. 3010 - 5 ·- any article x x x x while remaining in customs custody after unlading."

It is qu ite apparent that the importer's right to abatement or refund of customs duties under Section 1704(b) is planted upon sati s factory proof of injury or destruction of the article while remaining in customs custody after unloading. The statute employs the term s atisfactory proo f of injury , destruction.

The law therefore casts upon petitioner the burden of establishing by sufficient and competent evidence that its shipment of cheese deteriorated and become spoiled after 1ts arr ival and while remaining in t he customs bonded warehouse. The question then is whether under all the e v 1dence pet1tione r has s 1s t ained the burden placed upon it by the applicable law.

Respondent commissioner of Customs found that the shipment d1d not spoil wh1le 1n customs cu stody and that none of tne circumstances enumercttea unaer Section 1704 of the Tarift and Customs Code, as amendea, aLlowing abatement are present. We agree with this conclusion.

Tu bel:lin wi tu, as a l r eady stated above, imme- diately upon discove r y oy the executive cnef of the Ho t el Intercontinental ManiLa tna t the var1ous DE~..-ISlON - CTfi CA~E Nv.

~010 - 6 - cheese were found to be spoiled a nd unfit for human consumption, petitioner hired the services of the Authorized Adjus ter s, Inc., a duly regis- tered and licensed marine car go surveyor, "in order to ascertain and determine the nature and extent of loss and/or damage sustained by the ship• ment reportedly received with twenty-one (21) cartons in damaged condition ."

(p. 28, Customs records., In Its marine cargo warehouse survey report dated October 19, 1~77, the Authorized Adjusters , Inc . found out that the sh1pment was witndrawn rrorn th~ Ph1lippine Skylanders Incorporated by tne Forbes Customs ~roKerage, forwarding agent of petitioner, on October 5, 19,7 w1thuut exception and airectly delivered to the consignee's warehouse covereu by Keceipt No.

~OOJ. wnile it was subJect to tinal inspect1on, the damages sustained by the shipment, according to the report , may be attributea to Improper hand li~g anyWhere in transit. (pp. 25-28, Customs records.)

It should be noted that according to the findings of the marine adj uster, which may be considered as skilled in the trade, the damages may be attributed to j~£roper handling anywhere i~ transit- not while rem~ining in customs custody after unloading.

Al

~~ ") ' ,_) ..

uECISIUN - ~TA cAS~ NO. 30.0 cecondly, the only direct evidence of peti- tioner that the subject shipment was spoiled or destroyed while remaining in customs custody is the testimony of Cesar Mendoza, its purchasing manager, that "based on my opinion , the cheeses were really spoiled in the Skylander because of the poor refrigeration."

(t.s.n ., p. 49, hearing on January 9, 1980 . )

The opinion of a witness is not however admissible .unless he is an e xpert or skilled in the trade or matter under question. (Sees. 42, 43, 44, Rule 130, Rules of Court . )

Witness Mendoza

has not been qualified and presented as an expert or skilled in refrigeration .

As a matter of f act , Cesar Mendo za declared , when as ked where exactly the spoi lage of t he cheese occur, that "I can not tell you where the cheese were spoiled." (t.s . n. ,

p. 50, hearing on January 9 , 1980.) While he has tened to add that "I was s ur: e the cheeses \ver e spoiled in the Skylanders the same as I experienced with meats" (ibid)~ the f act that petitione r allowed the ship- ment to remain in t he Philippine Skylanders cold storage for twelve (12) .days in effect negates this assertion.

Thirdly, if the subject importation of cheese ac~u ally nnd really da~e rior ate d and became spoiled ..

DECISION -

CTA CASE NO 3010

- 8 - in the cold storage room of the Philippine Sky- landers Incorporated because of poor refrigeration, why is it that petitioner did not present sufficient and competent evide nce to this effect rather than relying on the opinion of its purchasing manager who is incompetent to testify on this matter, and whose testimony is self-servin9?

Then too, why is it that the marine cargo war e house survey report pre- pared and submitted by the marine adjuster hired by petitioner states that the damage sustained by the shipment "may be attributed to i mproper handling anyHhere in transit" and not to the poor refrigeration of the cold storage of the Philippine Skylanders Incor- porate~? And again, since petitioner knew that the cold storage of t he Philippine S kylanders Incorporated had poor refrigeration, why is it that it still stored its per ishable shipment of cheese in that place, and for a period of twelve (12) ·_day_s? Morebver, since th is action is a claim for refund of duties and taxes , it partakes of the nature of an exemption, and the same canno t be allowed unless granted in t he most explicit a nd categorical l ang uage .

(Resins, Inc. vs. Auditor General, L- 1.7 888 , October 29, 1968, 25 SCRA 7 54.) Claims for refund are construed str i c tly against.

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DECISION -

CTA CASE NO 3010

- 9 - claimants sinc e a cla i m fo r refund is in the na ture of an exemption from taxation .

(Commissioner of

Internal Revenue vs . Ledesma, L-17509 , January 30 , 1970 , 31 SCRA 95 . )

As stressed by the Supreme Court in Acting Commissioner of Customs vs . Manila Electric Company and Court of Tax Appeals , L-23632, June 30, 1977, 77 SCRA 469, an exe mption from taxation must be justified by words too clear to be misread .

From

1906, in Catholic Church vs. Hastings to 1966 , in Esso Standard Eastern, Inc. vs. Acting Commissioner ~f Customs , it has been the constant and uniform holding that exemption from taKation is not favored and is never presumed , so t hat if granted it must be strictly construed against the taxpayer .

Affirm-

atively put, the law frowns on e xemption from taxation, hence, an exempting provision should be construed strictissimi juris.

(Catholic Church vs. Hastings, 5 Phil. 701; Esso Standard ~astern, Inc. vs . Acting Commissioner of Customs, L-21841, October 28, 1966, 18 SCRA 488 . )

Last, but not least, with regard to the request for al:aement or refund of advance sales tax (in the amount of P3,638.00, per Bxh. "A-8", p. 49, CTA records)~ the same c an not even be passed upon by the Court in view of the fact that nothing in the- ..

DECISION -

CTA CASE NO. 3010 - 10 - records show that petitioner had fil ed its written claim for refund thereof with the Commissioner of Internal Revenue and that the latt.er Vias made a party to t hi s case.

Withou t satisfying these juris- dictional requirements , which in the instant case are lacking, the same is fatal to the claim of petitioner for the abatement or refund of the advance sales tax paid on the importation in question. (Wi se & Company vs. Commissioner 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 Customs , CTA Case No. 2826, June 30, 1980; Campos Rueda Corporation vs . Commissioner of Customs , CTA Case No. 28~9, July 28, 1980~ Jardine Davies, Inc. vs. Commiss ioner of Customs, CTA Case No . 2634, October 16, 1980~ Procter & Gamble Philippine-Manufactur ing Corporation vs. Commissioner of Customs, CTA Case No . 2786, Febr uary 27, 1981.)

Even more, adverting to the terms of Section 1704 of the Customs and Tariff Code , supra, it is quite clear and explicit that a Collector of Customs may abate or refund only the amount of duties accruing or paid. The statute employs the word duties - _wi t hout more .

Nothing-

DECISION -

CTA CASE NO . 3010 - 11 - there said speaks of t~xe ~ or internal r evenue taxes paid on the impor tation.

Where the l aw applicable does not include the advance s ales tax paid on an importation as subject to a batemen t or refund by a c ollec t or o f c ustoms , such tax should not be read in t o the law.

WHEREFORE , the decis ion appealed from should be , as it is hereby affirmed, with costs of thi s instance a gainst petitioner .

I CONCUR :

CONSTANTE C. ROAQUI N

Associate Judge

Dissents Qnd concu~s i ~ a se ))ara tc~ opi:1 Lon

Presiding Judge

~ Associ a te J udge 1 ~s 4 \ .. ,. -·... ... - " ' . ......... .

RRPUBLtC OF TU~ PHH~ JPPlN~S .

COURT OF TAX APPF..AU QC!:ZON ClYl' ENJAY • INC.

(I~ i cens ee of u t 1 Intercontinental Manila) nO e Plai ntiff-Appellant, - versus - HONORAB'LE Rf MON J .

1-"'.i'.\.RCLAN i n his capacity as Acti ng Comrnissior;er of Customs .

Defendant-Appellee .

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C.T. A ~ CASE NO. 3010

DISSENTI NG AND CONCURRING OPINION

The Authorized Adjusters .

Inc~ through Jacint o J . a:ttuin. manager, Marine Department, stated in its "Marine Cargo \'la rehousQ Survey Report" dated Octobe:.:.· 19, 1917 that 1'XXJC damages auetaintlld by th shipment (cheese) may be attx·ibuted to improper handling anywhere in transit."

(pp. 25-28, Cus toms rec . )

Petitioner, th~refore, on t hat basis, filed a form 1 claim f e r abatemen t of duties and taxe s it had paid on the import.at~on of the spoiled boxee of cheeae but which was denied by ·the Collector of Customs. and waB later eustained, on appeal, br respondent Commias.ioner of Customs# on t he CJrcund that the! i mported cheea<"l in question did not dete- riorate ~ or otherwise becamE! spoil(!d at. the time . of its unloadi g in the Customs 0 Zone, or while under the custody of the Bureau of Customs. If the cheese had deteriorated while under the

DISSENTING & CONCURRING

OPINION

CTA CASE NO. 3010 ~- 2 «= custody of the Bureau of Customs, petitioner would definitely be legally entitled to the abatement or refund of the customs duty assessed and collected on the importation of the spoiled cheese under the provisicns of Section 1704 (b) of the Tariff and Customs Code.

The majcrity decision of my colleagues is anchored on the finding of fact that petitioner has not shown, by satisfactory proof, that the 21 cartoons of cheese were in Customs® custody when the same were spoiled and this finding was based upon the only single authority that per petitioners authcrized adjuster, the Authorized Adjusters, Inc. and as aforesaid, the “damages sustained by the shipment (cheese) may be attributed to improper handling anywhere in transit.” The majority decision seems to convey the view that there was, in this ins- tant case, doubt that the spoilage of the cheese occurred at the time these were still under the customs custody. However, from the very majority decision itself, insofar as the abatement of the customs duties is concerned and from the evidence it is quite clear that the Executive Chef, Henry Blin, of the Hotel Intercontinental Manila, licensee of petitioner, categorically testified to the fact that upon release and arrival of the cheese in the warehouse of the Hotel Intercontinental Manila, 180 DI.:.iSENTING & COfJCU i:~RlNG

OPINIC:N

CTA CA ;.;E NO .

3010 - 3 - a id che .se "x x x were f ound t o be S i~ 1led and un- fit for human consumpt ion x x x. u (pp . 37-3B,.

t.s.n . 0 Jan . 9. 1960.)

In ads ition. another wi tness of petiti ne r , one Ces ar Mendoza,. who was its purchasing manage r ,. unequivocally stated t hat "based on (his) my opinion,. the cheese were r eally s poiled in the Skylander becaus e of th e poor refri- geration o" Since Mendoza was the purchasing manager of the Hotel Intercontinental Manila. and cons i deri ng his pos i t i on an~ experienc e 6 he " X X X was s ur e the cheeses (sic) were spo iled in the Sl<yl anders tha s am as (he) experienced with meata ." Furthermore ,. it "VUl ts t estified t o b y Frankl in Galacgac ,. m·rine adjuste r ,. o f the Authc rized Adjusters ,. Inc. , that efter the releas~ from the CJst oms area and i mmed i atel y upon arrival and un- loading of the cheese in ques t i on f r om tt:e del ver·y truck on October l. 1977 i n the premise s of the Hc tel Intercontinental Haniln , the cheese "x x x ( ) j • emit ted } foul odcr: "that it had turned i n t o black \'th!ch and greenish cc lor and covered \"'ith moldsu , · .· -.: ..

was corrobor ated by Cesar Mendozae purcha sing manager of the hotel Inte!i~· o ntin en tal Hanila., t.hat tl1e molds in the ch -~ ese · re ·~ris ible to the na}a-Jd eyf.!.

and that. consequently. t he :Sxecutive Ch £. Henry Blin. testified tha t on that basts. h e did not accept the c heese as they were not good or rotten. - •.) 1

DISSENTING & CONCURRING

OP! NICN CTA CASE NO . 3010 - 4 - (pp 0 57- 59 q 62 - 6 4 ~ t ~ s . n . ~ March 18. 1980; PP e 37-39 ; 43- 45* t . s on . , Jan . 9 . 1 980 ; pp . 4 - 7~ 15 -16~ t . s . n ., Jul y 23, 1 979 .)

I nas much a s t h e w, r ehouse in wh ich th e cheese were t empor a r ily stored , t he Ph i lippine Sky landers Cold St o r age, p e nd i ng wi thdrawa l to p e t itioner ' s storag e \>Jar e ho s.e , is within the cus t oms custody, it is no t d i ff i c ul t f or a p e rsc n o f even the lea s t of i ntell i genc e t o r a tionalize that t h e spoi l age mus t h a ve t a ken place in the c us t oms zone . There is , the re f ore, suff i cient and convincing evidence t o es t ablish t he f act th a t i t ~as s po iled while und er the customs cus t ody o Th is fac t h aving been eo established by c l ear, convinc ing a nd uncontr adicted evioence , the purden o f proof to show c thenvise t hen shifted t the gcvernment t o she w that he chees e were not spoil e d while und e r the custGms custody but becane rott en in the wa r ehous e of the Hot.e Inte rn- cont inental Hanila ., vthic h the Burca.u of Customs has not done in this c as e .

In view of the above, I vote for th~ r efund of the corres~onding c us toms dut ies a i d by petitioner Enjay , Inc .

(Licens e $ o f Hote l I ntercontinental M ~n il a) to t.he Bureau of Cus t oms in the sum of · 16, 815 . 00 No . 787 9162, 9/ 30/77, p age 29 <.."us t oms rec . ) Wi th r espect t o the refund o f t he adv anc e aa l es t ax, I concur with th e ma j ority opinion that t his · Court has no juri sdict ion to entertain th e l a im f or

DISSENTING & CCNCURRING

OPINICN

CTA CASE NO. 3010 — § an the refund of the advance sales tax in the amount of P3,638.00 (should be P3,635.00 as shown in the zercx copy of O.R. No. 7879162).

QGuezon City, May 29, 1981.

oan CCNSTANT: /C. ROCAVLUIN poscciate Judge /