CTA Case No. 3088

DECISION -

- 2 - The pertinent facts as gathered from the records and the evidence adduced by the parties are as follows:

Sometime in May 1975, a shipment from Kaohsiung, Taiwan of "One (1) Complete Set Rotary Flying Cut-Off Machine 4" to 16" with Roll and Tools and One (1) Complete Set Forming Tools (Ductile Rolls)" arrived at the Port of Manila on board the v e s s e 1 " t-fi n g R en E s tab 1 i s h me n t " , R e g .

No. 885, covered by Bill of Lading No. KM-29 for the account of petitioner, Mayer Steel Pipe Corpora tion.

The same was declared under Import Entry No.

39590, series of 1975, and the corresponding duties and taxes due thereon totalling P13,289.00 were paid under Order of I Payment No.

435099, dated May 8, 1975, and Central l Bank o f the Philippines (CB) Official Receipt No. 424727, dated May 12, 1975. CB Release Certificate No. 2093 was issued on the same date and the merchandise was delivered to its plant. It appears that based on a letter request, dated July 22, 1975, of the Chairman of the Anti- Smuggling Action Center (ASAC) (page 2, Customs Records), a Warrant of Seizure and Detention No.

14728, dated July 31, 1975, was issued against above - mentioned articles for alleged violation of

- 3 - Section 2530(m) -3 , 4 and 5, in relation to Section 2503 and 2536, of the New Tariff and Customs Code of the Philippines, as amended.

Said warrant was served on August 5, 1975 and a return was made on the next day (page 132, Customs Record). A Motion to Amend Warrant of Seizure and Detention was filed by ASAC's counsel ~n August 11, 1975 with the violations/imputations to read as follows: Section 2530(m)-3, 4 and 5;

Section 2503 and 2536 of the T C C as amende d .::i:..:.n:..._--=.r..::ec..:l:..:a=-t=i-=o'""'n:..,_t=o ___ --=P~. D=-=-. --=2=-7"--=-2-L;--=R.:..:.... A:..:..:... 5186 and R.A.

6142, including the implementing rules, regulations and circulars (underscoring supplied).

Petitioner filed a Motion to Quash Warrant of Seizure and Detention No.

14728 ori August 12, 1975 on the following grounds, to wit: (1) That the said Warrant of Seizure and Detention l was issued contrary to law, and therefore is null and void;

(2) That all duties and taxes on the merchandise subject of the Warrant of Seizure ana Detention were duly paid before its release from the Bureau of Customs and that claimant has the corresponding evidence to support and prove such payment; (3) That the figures declared by the claimant are true and correct as passed upon by the customs appraiser and the same is conclusive; and that there is no fraud whatsoever in the claimant's

DECISION -

C.T.A. CASE NO . 3088 - 4 - importation.

Opposition to the Motion to Quash Warrant of Seizure and Detention No. 14728 (pages 35-45, Customs Records) was filed by ASAC's counsel on August 18, 1975.

Opposition to the Motion to Amend Warrant of Seizure and Detention (page s 46- 47, Customs Re cords) and Reply to Opposition to Quash Warrant of Seizure and Detention (pages 52- 55, Customs Records) were both filed by herein petitioner's counsel on September 8, 1975. Again, in a letter dated November 11, 1975 (page 124, Customs Record s ), the Vice - Chairman of ASAC requested the Collector of Customs, Port of Manila, to amend Warrant of Seizure and Detention No. 14728 based on the following and we quote: "Inasmuc h as the violations mentioned therein (W.S .D. No. 14728) are not fully descriptive of the offense committed, ( request that the previous Warra nt be amended to include the underlined statement: xxx in relation to P.D.

No. 272, R.A. 5186 and R.A. 6142 including the implementing rules, regulations and circulars." Consequent!~ Warrant of Seizure and Detention No.

14728- A, dated November 11, 1975, (page 121, Customs Records), was issued.

Said Warrant was served on December 9, 1975 and a return was made on the same day.

(page 120, Customs Records). Motion to Order Withdrawal of Amended Warrant of Seizure 28o

- 5 - and Detention a nd/or to Declare the Same Null and Void and Without Force and Effect, dated January 3, 1976, (pages 80-83, Customs Records), was then filed by petitioner claimant. Without resolving the foregoing motions but af ter hearing and submission of the respective memorandum of both parties, the Collector of Customs, Port of Manila, decreed the forfeiture of subject articles (page s 294 - 300, Customs Records).

The same was affirmed by the Acting Commissioner of Customs, (pages 369 - 373 , Customs Record s ), hence, this appeal. Petitioner and respondent are in agreement that the issues brought in this case which shou ld be resolved by this Court are the following: Whether or not the subject shipment violated the provisions of the foLlowing laws, to wit:

(1) Section 2503 of the Tariff and Customs Code, in relation to Section 2530(m)-3, 4 and 5 of the same Code; (2) P.D. No.

272 - An Act Creating the Iron and Steel Authority; and (3) R.A.

No.

5186 (An Act Prescribing Incentives and Guarantees To Investments in the Philippines, creating a Board of Investments, Appropriating the Necessary Funds Therefore and for Other Purposes ) in relation to Central Bank Memorandum to Authorized Agent Bank dated September 4, 1973.

rs- ~ 0

- 6 - For reference, Section 2503 and 2530(m) - 3, 4, 5 of the Tariff a nd Customs Code are here under quoted:

"Section 2503.

Undervalu a tion, lfi s c lass if ica t ion and Mi sdec larat.ion in Entry. - When the dutiable value of the imported articles shall be so declar e d and entered that the duties, based on the declarati on of the importer on the face of the entry, would be less by t e n per cen t (10 %) than should be legally collected, or when the imported articl es shall be so described and entered that the duties based on the importer's description o n the fa ce of the e ntry wo uld be less by ten per cent (10%) or mor e than the entered weight, me as urement or quantity, a surcharge shall be col lected f r om the importer in an amount of not les s than twice the differenc e between the full duty a nd the esti mated duty based upon the declaration of the importer, nor more than five times of such differe nce .

( a ) Whe n the value dec lared in th e entry is less than 'the dutiable valu e ascertain ed pursuant to Section 201 and the underv a lu a tion is ten ( 10 ) to thirty per cent ( 30% ) of the latter va lu e , a surcharge e qual to twice the duty on the am ount of undervaluation s h a ll be i mposed:

Provided, however, Th a t wh e n the underva luat i on is over thirty per ce nt (30 %) of the latter, a su r c harge equal to five time s the duty on th e amount of undervaluation shall be imposed:

Provided, further, That an undervaluation of over fifty per cent (50%) of the latter value, s hall constitute a prima fa cie evidence of fraud penalized under Section 25309 of this Code.

(b) Misdeclaration of wei gh t , measurement or quantity shall likewise b e subject to t he corresponding pen a lty.

- 7 - When undervaluation, misdes c ription, misclassification or m'sd~ c lQr a tion n the import entry is intentional the importer sha ll b e subject to the penal provision under S~ction 3602 of this Code as amended by Republic Act No. 4712. Section 2530.

Prop ~rty Subject to Forfeiture Under Tariff a nd Customs Law. - Any vehicle, vessel or aircraft, cargo, article and other object shall, under the following conditions be subjected to forfeiture:

XXX XXX {m) Any article imported or exported: XXX XXX XXX sought to be XXX (3) On the strength of a false declaration or affidavit executed by the owner, importer, exporter or consignee concerning the importation of . such article;

(4) On the strength of a false invoice or other document executed by the owner, importer, exporter or consignee concerning the importati on or exportation of such arti c let; and (5) Through any other pract ice or d evice contrary to law by means of which such articles we re entered through a customhouse to the prejudice of the government." At the outset, it should be stated that forfeitures are impose d by th e seizure an d subsequent institution of seizure proceeding s pursuant to section 2532 of the Tariff and Customs Code.

In seizure cases, one important aspect of the proce edings in the consideration of the issues J

- 8 - involved, is the duty on the part of the governm ent o f p rese nting ev idence which indica t es p robab le cause for instituting such proceedings.

(Sanchez

v. Commissioner of Customs, B.T.A. Case No. 185,- decided by the Court of Tax App ea l s on November 2 , .)

1954, ci ting U.S. v. One Bag of Paradise and Choura Theaters, N.Y., 356, Commissioner of Customs, et al., C. T.A.

Case No.

2448, Augu s t 6 , 1976;

Metropolitan Ga rment Corporation v.

Ramon J.

Farolan, Acting Commissioner of Customs, C. T.A .

Case No.

3959, April 6 , 1986;

Mayer Steel Pipe Corporation v.

Alfredo Pio De Roda, as Acting Commissioner of Customs, C.T.A.

Case No.

2823 ,

Fe bruary 18, 1987) .

The term "p IJbRble cause", mea n s less than the evidence which will justi fy condemnation.

It imports a seizure made u nd er circums tance s whic h warrant suspiciiJn. (Sanchez v.

Co mmissio ner of Customs, supra, citi ng Fooke v.

United States, 7 Cranch [u.s .

339 ];

Ass oc iated Banking Corporation v.

Commissioner of Customs, supra; Metropolitan Garment Corporation v. Ramon J. Farolan, as Acting Commissioner of Customs, supra; Mayer Steel Pipe Corporation v.

Alfredo Pio De Roda, as Acting Commissioner of Customs, supra. )

Th e l aw places upon the petiti oner the burden to

- 9 - over c 0mP the e ff ~~ t ther eo f.

SP c ti o n 2 5 5 0f the Tariff and Cust oms Code, as a mend e d provides: "Se c ti o n 2535.

Burden of Proof in Se izure a nd/or Forfeiture.

In all proceedings taken for the seizure and/or forfeiture of any vehicle, vessel, aircraft, beast or articles under the provisions of the tariff a nd customs 1 a~,, s , the b u r d e n o f pro o f s h a 11 1 i e upon the c l aimant;

Provided, That probable cause shall first be s h o wn for the "nstitution of suc h proceedings a nd that seizure and/or forfeiture was made under the circumstances and in the manner descr ib ed on the preceding sect i ons of this Code."

We shall now turn up on the issues ra'sed by the pa ties to this case . A.

As to the alleged violat ' on o f the Tariff and Customs Code in re l ation to Section 2530(m)-3, 4, and 5 of the same Code . Comparing the reported c urrent domestic va lue of scrap iron and steel at.

P750.00/H.T.

or P0.75 /kg. with the converted

C &

F va lu e of the forming rolls ( a finished product ) of approximate ly PO. 53/kg., the Col le ctor noted that the cur rent value of the former is therefor e higher by 41.05%. This was comput ed as follow s :

Of the total net weight of the importation per Packing List of 58, 100 kgs. , 42, 100 kgs. , more or l ess , are forming rolls with a C & F value of $3,000.00. Using the c u rre n t rate of exchange of P7.45 to $1.00, a total

- 10 - value of P2 2,35 0 .00 for the 42,100 kgs.

or.

approximate ly P0.53/kg. is arrived at. Noting also th e differen ce in the average C & F value of imported iron or stee l products from Japan in th e year 1975 of $250.00 to $300.00/MT vis-a-vis the subject importation o f 58,100 kgs. at $10,000.00 C & F Manila or a unit pri ce of $128.22/M.T., the Collector's conclusion was that th e latter would s till be lower by 100 %. Further, u si ng the testim ony of Mr.

Hu Pai ,John, President of the company su plyjng the machinery in question and who is a l so a ma jor foreign invest.or/owner of t.he importing corporation, that the import pri ce exc lude the 40% age nt and on serv ice fee, t h e Colle c t or came to the conclusion that there was delibera t e underv aluati o n to t h e p re judi ce of the government. We failed to comprehend from the foregoing the reasoning as well as the conclusions mad e by thi Collector and Acting Commissioner of Customs.

There is no legal basis for the comparison of the value of forming rolls, a machine component and that of scrap iron and steel, which is waste and scrap metal fit only for the recovery of metal or for use in the manufacture of c hemi ca ls (Note 6, Schedule XV, Tariff and Customs Code, as amended ). 29.i

- 11 - Section 201 r,f the same Cod~ provjnP.s th~t '' The duti ab le valu e of an imported arti c le subj~ct to an a d valor~m rate of duty s hall he based on th e home consumption value or pri ce ( e .c ludi.ng internal revenue taxes) -=-o-=f=----:s=-a=mc.::e'-''----=-1-=io..:k.:..e, o r s i m i 1 a r a r t i c 1 e s , as bought and sold or offered for s ale freely in the usual wholesale quantities in the ordinary course of trade, in the principal market of the country from where exported o n the date of expor.tntion to the Philippines, xx" (und ersc-ori ng snppliP.d).

We are a t a l oss ~s to uhere the figures 42,100 kgs. and the alleg e d value of scrap of P750.00/H.T.

ci'lme from, except th Rt the l atter was t Ake n from the Memorandum of the Prose c uti on . With a diffRrent touch, th e en tire impor.tatio~ was then compared with the C & F va ue of imported iron And steel produc ts from Japan wh e n it is well- established that the subject articles ca m~ from Tai ~TR n.

Thi s ts contrary to thP.

provisions of Sect ion 201 of the Tariff and Customs Code Rbove - cit~d.

Again, where did the figures $250.00 to $300.00/M.T. c ome from and by what kind of formula was $128,22/M.T. arrived at? The conclusion made from the testimony of supplier, Mr.

Hu Pai John was a l so mispla c~d.

A

DECISION -

C.T .A. CASE NO.

3 088 - 12 - reading of the transcript of s~id testimony hel i ~ such c laim as c~n be gleaned in the following:

X X

X X X X X X X X X X X X X X X X X X

Al so the estimate h ere 'nclud es the 40% agent's fee and out-service fee, whi l e the price indi cated in E:-:hj bi t "5" (in vo i ce ) Hhich I supplied Hayer Steel Pipe Corporation is a pri ~~ f or semi - finished cost iron and no commiss ion, no out-servicP, fee and for only o ne set - of 3" .

(p age 7, T.S.N. of: Customs Hearing o n Harc h 2 8, 1976, page 267 Custom s Records)" Other th an t he d oc umentary evidences p ese nted by t.he ASAC prosecutor in the administrat ive hear ing , respondent did not introduce any evidence bef ore this Co11rt.

The origin<1l uork shee t of t h e customs De c l are~ t, ion rtncl Entry i'lC' r::o mplishPd by the Customs ExaminPr WRR nPver presented insrite of repeated requests made by petitioner and subpoe nR du ces tecum issu e d (Exhibit L & Ex hibit K, page 89 ( Rnd page 139 respectively of Customs Records). In cont rast, petiti o ner formally offered as evide nce Central Bank Release Certificate issued for t h e re l ease of the i mp orted merchRndise (E xhibi t "A"), Offi cia l Rec e ipt, dated May 15, 1975, for the payment of the corresponding duties and taxes (E xhibit "B"), Bill of Lading of the imp o rted articles ( Exhib it "C"), Consular Invoices of t he importation (Exhibits "D" & "D - A"), Commercia l Invoi ce of the s hipment (Exhihit "P. "), Letter of

- 13 - Credit (Exhibit "F" ), Hargin al Deposit Release (E xh ibit.

"G"), and copy of the Impor~ Entry (E xhibit "J" ).

These were to pr ov~ that subject importation was regularly processed and released by the Bureau of Customs . Accordingly, find in favor of the petitioner in so far as th e alleged violation of section 2503 of the Tariff and Customs Code in relation to Se~tion 2530( m) -3 , 4 ~nrl R of thP same Code i s based on the foregoing groun ~s.

Pet itioner has sustained the hurden the law places upon it to overcome the ef fect of alleged 11nclervaluatjon, misclassification rtrld misdecl21r.<1tion of the imported arti c les whereas, respondent miserably· failed to s h ow by convincing evjdence the imputed violations .

B.

As to alleged v i o lation of Presidential Dec ree No. 272 . It is un c ontroverted t hat petitioner failed to obtai n t.he approval of the Iron and Stee l Anthority ( ISA) before importing the shipment covered by the cnse at bar.

A certification to this effect was issued by the acting Secretary of the ISA on Septe mb er 3, 1975 (Exhibit "L").

Tn a s imilar case, (Mayer Steel Pipe Corporation v. Hon. Alfredo Pio De Roda, as Acting Commissioner of Cus toms, f

DECISION -

C.T.A. CASE NO.

3088 - 14 - C.T.A. Case No. 282.3, February 18, 1987), it was held that prior authorit.y of the 1SA iR m21nd.=ttory. Presid~ntial D~ cree No.

272 was promulga~~d by reason of the exis ting recurrent imh~lan c es between demand and supply of iron and steel prodtcts that necessitate the orde rly regulation of t h e market thereof and the existing capacity in ~everal sectors of th~ iron a nd steel induntry while other sectnrR suffer from deficiency o f investment.

As corn~ct. ly st<J.tf'rl by respondent, th e s np erv i s inn and reg uJ 21tion of th~? Jron i'lTH'I St.eel 1\nthori ty is t lus tmper.=ttivP to the en~ that these kinks in the ' ron and steel industry be controlled and straightened out . c.

As to n.cpublic re l ation .=tlleged violation 1\ct No.

5186 to Central of in Bank memorandum to Authorized Agent Bank dat ed September 4, 1973. Re cords of the case furtlu~r reveal ·t-.hat the importation of the articles in question were not favorably endorsed by the Board of Investments (BOI).

It appears that the industry to which petitioner intends to engage in hi'ls been listed as one of the crowded industries or industries with excess capac ity as early as January 28, 1970, and remain unc han ged as of Ha y 23, 1975. (Exhibits "H" n n d ·• H - 1 " . )

This Court has alrPady ruled that .)

.·

DECISION -

C.T.A . CASE NO. 30 88 - 15 - importation of artic l es intend~d for cro~-V d~d j_ndustries or industries Hith excess capacity Hithout BOI Cert ification is a violation of Republic Act No.

5186.

P-layer Steel Pipe Corporation v.

He n . Alfredo P'o De Ro d a , as Acting Commissioner of Custo ms , supra.) As to the amend me nt of t h P. WRrrant o f S~izure a nd De tention to include violat'ons of Presid~ntia l Decre e No.

2 7 2 and Re publi c Act No. 5186 and it s i mpl e me nti ng rules a nd regulations, se ttl ed is the r ul e that goods seiz~d by m istak~ ar~ liabl e for forfeiture if a good cause for f orfe 'ture existed at th e time of the seizure but without knowledge of ) the seizing officer (Wood

v. U.S. 1842, 41 u.s.

[15 Pet] 342 , 10 L.

Ed .

987.).

It is an establis hed pre ce dent t h at t h e Collector of I Customs, co n comittant Hith his powers un d er Sectio n 1207 of the Tariff and Cu sto ms Code, has al l the powers and jurisdict ' on to take such a c tion as will pr~vent. the importation or exportation of artic les whi c h are prohibited or the importation or exportation of which is contrary to existing laws, rules and regulations (Mayer Steel Pipe Corporation

v. Hon . Alfredo Pic De Rod a , as Act ing Commissioner o f C u s tom s , §..!!P.!: a ) . 2vu --

DECISION -

C.T.A : CASE NO . 3088 - 16 - Th e attend~nt facts and circumsta n ces of this case taken together with the applica bl e law s as a mply discussed suppor t t h e conclusion that th e subje ct importation vio la te Presidentia l Decree No. 2 7 2 and Republic Act No. 5186 and its impl eme nting rules and r e gu lations, t o warrant the forfeiture in favor o f the Government of the subject art i c les pursu an t t o Sec tion 253D (m) - 5 nf the TRri f f a nd Customs Code, as amended .

WHEREFORE, t h e decision of re~po nden t Acting Commissioner of Cu stoms, is st1sta ined.

Th e petjti o n f or rev i ew is h ereby ~ismi sse d with costs against petiti oner.

WE CONCUR:

<{~~~ ERNESTO D. ACOSTA Presiding Judge L ~arch 3 1 , 1993.

~~ , ~~ ~w Rl\HON 0. DE VEY Assoc iat e Jud .)

o*

CERTIFICATION certify that this decision was I hereby due consultation among the members of reached after the Court of Tax Appeals in accordance with Section Article VIII of the Constitution.

Rugs @ Guna ERNESTO D. ACOSTA Fresiding Judge Court of Tax Appeals 13, Jo DO