ABS-CBN Broadcasting Corporation and Scan, Inc. vs. ~ Commissioner of Custons

DECISION

CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 -~ 2-

ABS-CBN BROADCASTING

CORPORATION, Petitioner, COMMISSIONER OF CUSTOMS, Respondent.

x — we eee om =e SS SS a

ABS-CBN BROADCASTING

CORPORATION, Petitioner, - versus ~ C.T.A. CASE NO. 3167 COMMISSIONER OF CUSTOMS, : Respondent.

D &F Cc rts FF O MN These Cases, involving similar factual antecedents and the same issues, were consolidated and are jointly decided herein.

Fetitioners ABRS-CRBN, formerly (known as the Bolinan Electronics Corporation, and SCAN, Inc., are corporations duly erganized and existing under the laws of the Philippines, respectively. ABS~-CRN was granted temporary permits under Repulic Acts Nos. Sil and Sle as amended by Republic Acts Nos. S730 and S731, respectively, to: (1) construct, maintain and operate stations for international telecommunications and television stations in the Philippines; and (2) to construct, maintain and operate radio broadcasting station also in the Philinpines for a period af fifty KX 333 DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 - 3- years. The permits oranted sy Republic Mets Nos. Sil and Sie, to operate radin anc television stations were convart ac into regular franchises hy the amendatory acts and the name of the orantes yas changed fo "ARS--CAN Rroacdcastinn Corporation", Section 4 of Republic Met No. Sli and Section a of Republic Art Now & contain an ipsse facto clause which reads:

"In the avent af any competing individual, partnership ar carnporation receiving from the Congress a similar temporary gpermit ain which there shall tbe herein granted or tanding to piace the herein grantee ab any cdisadvantage, then such tern ar terms shall, ipso facto, hecome a part of the terms hereof anc shall operate equally in favor of the individual, nartnershin or corporation. ” (Emphasis Durs) Subsequently, Congress enacted Republic Act No. OSG geanting the Radio Communication of the Fhiliopines, Ine. (ROePT), ai franchise toe 'astahlish radio stations for domestic telecommunication which was later amended by Renudtlic Acts “Sos. SOAS and 454, Section 1 of Republic Act No. £0536, as amended by Republic Act No. 2962, provides:

"SECTION 1. Subject ta the orovisions of the Constitution, and to the provisions, nok inconsistent herawith, of Act numbered those thousand eight hundred and forty-six, entitled "Ory Act providinn For the remiulat ion of radio stations ard radio communications in the Philinpine Islands, and for other nmurnosess Commonwerlth fort numbered one hundred ferty-sisx, Knawn ae DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 —- & — the Public Service Aet, and their amerncdmerits, and other applicable laws, there is hereby £ Ss Ties “ibs SUCCESSars or assigns, right ard privilege of ceaerstructing, installing, establishing and operating in the Fhilippines, at such places as the said corporation may select and the Secretary of Fublic Works and Communications may apprave, radia stations for the receptican and transmissicor at wireless messages cyt radiatelegraphy and/or radiatelephory, inelucting bath caastal and marine teleccommunications, each station ta consist of two radio appratus camprising of a receiving and sending radio apparatus, stations for international telecammunicatians and statians fior breadcasting, including television. "

(Emphasis Ours) And Section 114 of the same Act, as amended Republic Ack No. 4054, reads:

“SECTION 14. In coansideration of the franchise and rights hereby granted and any pravision mF law te the cemtrary notwithstanding, the ograntee shall pay the same taxes as are now oar may hereafter he required lay law Fram ather individual, copartrnerships, private, public on Quasi- public asscaviations, corporat ians, or joint stmck comparties, ern real estate, buildings and ather persoaral property except _radia ied as well as those properties declared exempt in this sectian. In consideratian af the franchise, a tax equal to ome and onechalf. per centum of all grass receipts fram the business transacted under this franchise by the grantee shall be paid ta the Treasurer af the Fhilippines each year, within ter days after the audit and appreval af the acceunts as prescribed in this Act. Said tax. shall be in lieu of any and all taxes 2 oor description levied, _ecllected by any authority DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 - 5 - whatsoever, ooo Municipa neha national, from which taxes the orantee is hereby expressly exempted.” (Emphasis Ours) Tt aopears that AAS-COBN started Importinn television broadcasting equipment from 1966 when it was still Belinao Broadcasting Carporation. Upon conversion of the temporary permits into regular franchise, and the name of the grantee was changed to "ARS -CAN Broadcasting Corporation", it naid the franchise taxes oan its operations of Jo oaivec&”~ of its nrass recerot without paying customs cuties anc taxes on the importation of television enuipment, Spare parts and machineries.

Shortly after the cdeclarbion of Martial Law (under Froclamatian Ma, 1oaa, dated September mt, 1972) the Department of Finance Formed a Joint Custams/BIR Taam to investigate allened bax deficiency of ABS CRN in the importatians of television equipment.

In A memorandum renort to the Commissioner of Customs dated July Gy 1973, Heractleo PaAnQtanact, Supervising Gpecial iInvestinator, a member of the Joint Team, ‘indicated that the Department of Finance committed errors when it allowed the release of the imporftations of television equipment af ABS-CAN tax free.

As a consequence thereof, seizure proceedings were instituted against the alectranies arc DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 -~-§ - televicion eqninzvent of ARS-CAN with the collectors of customs of Manile, Davao, Batangas, ITIlailo, Cebu and San Fernando, La Union where said equipment were releasec, Meanwhile, the eanionment in questian were subjected to seizure in the ABS-CAN stations where they were lomated., After due hearings, the respective collectors cf customs, randered the following decisionss

i. The Collector of Customs af the Bort of Manila ardered that all seized articles of ABS-CRAN under G.I. Nos. L4093, 14098-f and 14093-B, he released only after payment’ in full of the assessed duties (PA, AR4, 411,00) and the internal revenue taxes (Pa, 31,217.90), exclusive of other charges, plus ai fine equal to twice the Amount of . the ahave assessed duties (FL 7, Gad, Dee, oO) ar a grand total of Pea, 94, BOO, 00 exclusive of other charges, fine and other charges; (CTA SitGm) re The Collector af Custame of ne Fort of ftloilo ordered that the articles seized under 1. Noe ?a-735 be released anly after oayment in full of the assessed customs duties (PSA, 148, 00) and the internal revenue baves (PG9, 511.00), exolusive of other charges, plus aio fine equivalent ta twice the amount of the ahova assessed duties af (P1.,162, 296.90) oe grand total of FI,91LE, 935.00, exclusive of other charnes; (CTA Case Mo. S163) oe The Collector of Customs of the Fort of Batangas ordered that the articles seirecl under S.1. No. 4-76 be released, only after mayment in full of the assessed customs cuties (P40, 726.00) and internal revenue taxes (P415,658.00), exclusive of other charges; (CTA fase No, 3164) 4a The Collector of Customs of the Port of Davao arcdered that the articles seized under &. 17, Na, 2-009 be released, anty after maymant fo Full oof the asceased md mustoms rubies (Pet 94, 475, OO) anct + Soe DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 -~ 7- internal revenhke TAKES (POS. SP. OO), exclusive of oather charges, plus a fine eauivalent to twice the amount af the ahove assessed cubies (PS98,484.00) “or aiosrand tobal oof O88, 745,00, exrlusive af other charges; (CTA Case No. S1GE) hn The Collecter of Customs af the Port of Cebu ordered that the articles seized under the unnumbered seizure indentification he released only after full payment of the assessed customs duties (PEG69.8254.,00) and internal revenue taxes (RA71.046,00), exclusive af other charnes, and a fine equivalent toa twice the amount oF the above assessed duties (Pe 1, £38, SOR, OO) or a grand total of Pil, 878, 808.00, exclusive of other charnes; (C$TA Case No. 2166) and &. The Collector of Customs of the Fort af San Fernando, ta Union, ordered that the articles seized uncer S. I. No. 7-76 be released only. after nayment in Fuld of the aAssessecl customs duties (Pe48,959.00) and internal revenue taxes (29,494.90), exclusive af other charges, and a fine ecuivalent to twice the amount af the ahoave assessed duties (F497, 9178.90), or A grand total of FBOG, 371.900 exclusive of other charges, (C$TA Case No. S1G7) Not satisfied with the ruling of the differert callecntors of ovstoms, petitioners appealed ta the Commissioner af Mustoame, On Oetober 8, 1990, the Acting Commissioner cf Customs rendered a decision in Customs Case No. 79-44 affirming the decisions of the different collectors and decreed the release, mot to forfeit the articles involved in the seizure proceedings, subject however, te the full payment by the claimants~appellants cf the morresponding duties, taxes and Fines.

Henee, the sebitians for review.

3360 ' .

DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 - 8 Set the issues discussions thereof : our 1.

Whether or not petitioners are exempt from taxes and customs duties. In assailing the decision appealed from, ABS-CBN ir.vat~iab l y asserts that under Rep ub lic Act No.

511, as amended by Republic Act No.

5731 in t~elation to Republic Act No.

E~035, as arner.ded by Republic Act No.

4054, its impcwtatior.s of television equipment and pat~ts at~e ta>< ar.d customs duty ft~ee .

Respr.:.r.der.t on the other hand, contends otherwise. Basically, ABS-CBN at~gues that the ipso facto clause contained in Sect i o:•r• 14 of Hepublic Act No.

511, as amended, is deemed to have ir.corpot~ated ir.to its ft~anchise ar.y pt~ivilege or• privileges fotmd in t h e franchise of RCPI under Rep u blic Act No. 2036, as amer.ded.

The ft~ar. chise tax it pays is thet~efore de sc t~ipt ior, levied, established c•t~ cc•llected by any aut h o t• it y what soevet·, mtmicipal, pt~ovincial r.at ior.al."

Hence, ABS-CBN caY'Ir•c•t be subjected to:• taxes and customs duties on its importations of television equipment and parts. It must be pc•i r•ted out that the claim of petitioners lacks legal and factual basis. t~eference, We are agai Y• quot i r•g Section 4 of Republic Act No. 522 conta ining the ipso _, DECISION CTA CASES NOS. 3162, 3163, 3164 316S, 3166 & 3167 - 9 facto clause which clairn predicated, to wit:

"Ir, the event of any con1pet i rog individ ual, part nership or corporation t~eceivirog ft~ o rn th e Cor.gress a similar tempot~at~y pet~r,lit iro which there shall be any terrn or terms rnore favorable than those herein granted or tending to place the herein grantee at a ny disadvantage, then such terrn shall, i pso fac to, becom§ a part of the terms hereof and shall operate egually iro favo t~ c•f the grarotee a?__i12._the ~.ase of ~ aid corf!.Q_et i .ng i nd i vi d ua 1 ,_ ~t~ t roet~sh i p ot~ co::• rpc• t~at i r.:•ro. " ( Underscc•t~ i rog supplied) is while the provisions of Section 3 and 14 ·of Republic Act 2036, as amended, in part pertinent read: "SECTION 1.

Sectioro tht~ee of Republic Act Nurnbet~erJ . Twenty Hundt~ed Thit~ty-six, as amended, i s het~eby fm~t het~ amended to t~e ad as follr.:•ws:

'SEC.

3.

l "hi s frartchi s e s hall ceont i roue fat~ a pet~ i od of fifty yeat~s xxx.

E~r:~~vi_geg __ hr.:•w_ev_gr:, That the stations for international ceommunications, breoadcasting a nd television be eoperated within four yeat~s ft~mn the appt~oval of the amendatory Act.' SECTION 2 .

Sect ion fom~teen of the same Act is hereby repealed and in li e u thereof a new section i s hereby inserted to t~ea d as fo 11 ows:

'SEC.

14.

Iro ceorrsideratiorr o f the franchise and rights hereby granted and any provisieon of law teo the corott~at~y rro::otwithstarodirrg, the gt~arrtee shall pay the sarne taxes as are now or may hereaft e r be required by law frorn eother individual s , co-partnership, private, public or quasi-public associations, corpeorati ons , or joint stock com parries, O::•n t~ea 1 estate, bu i 1 rl i ngs arrd ot het~ pet~sona 1 pt~opet~t y ~__?:<ce_p!_ C9.9.J c~_!_?._g_•,tl . .PJ!!_~!..!..h _______ r!:l_~ ~hi_Y'...!.. f?..!.:y_ a r1 d ~-at~ e 3 0 DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 those properties declared exemnt in this section. In consideration of Fram the businers transacted wander this franchise hy the mrantee shall he paic to the Treasurer of bre Philippines each year, within ten days after he audit and approval of the accounts as prescribed in this - on descriotion levied, established ar collected By AMY Ss whatsoever, municipal, provincial Ss axemotecd, " (Underscoring supplied) Tt i565 to he stressed that under the foregoing provision of Gaction 14 of Renublicn Art No. S036, as amendad, what are axennted From customs: cuties, tariffs and other baka Ae "radio ePouioment, machinery and snare parts needed in connection with the business cf the orantee. Said provision is significantly important for the reason that RCET is engaged ain the “operations of racic statians for domestic telecommunications while ARS-CAN are both engaged in radio and television operations. ALthough the mandatory Act in Section 1 amended Section 2 of Renublic Act No. BOGE and under its provisa authorizes RCET to estatlish stations for international communications, broadcasting and television be operated within Four yoars From the anprayal oof the amendatory Act or on June 18, ae, DECISION CTA CASES NOB. 3162, 3163 , 3164 316~, 3166 & 3167 11 - it does 1'"10t appeat~ that RCPI has ever ey-,gaged i Y"l opet~atil'"I Q television statioy-,s, li k.e ABS- CBN.

Thus, it cannot be cons idered as competing corporation with respect to the operat ion of television stat i o ns. To extend the tax exemption privilege of

RCP I

under Sect ion 1'+ of Republic Act No. 2 036, as a me r.ded, t o ABS- CBN when their businesses are not the same, would seem t o be stretching th e grant of exemption t~o far tc• iY"1cl ude televisic•Y"I eq u iprner.t ay-,d pat~ ts tmder said law beyond its scope, in cont ravention of the rule of stri ct construct ion of tax exemptions.

lY"• other wc•rd s , exempt i r.:.n s from taxat ioY"1S highly di sfavot'ed and wi1 1 not be pet~mitted to at~ise from mere implication <As iat ic Pe tro l eun Co. v. L lanes, 4 9 Phi 1..

466) .

It i s also well set tled that exempt ic•Y"• from ta xation should be cons trued in strictissim i j uri s aga inst the taxpayer and libe ra lly in favor of the tax ing authot~ ity <Esso Standard Eas tern Inc . v .

Ac ting Commis sioner o f Customs, 18 SCRA 488 [1966] >. Li kewise, this is also the interpretation made by the Department of Fi nance, the agency primarily in charge of 1.mplementing the Tariff c:md Customs Cc•de, whi ch cat~t~ies a great weight aY"•d for ou t~ p Lwpose is cited bel•::.w:

"August 29, 1'366 Rtty. Loren zo R. Tanada, Jr. P. 0. Bc•x 1344 M a n i 1 a ·' DECISION

CTA CASES

a 7 % hehalf to he application NOS. 3162, 3165, 32 Tn connection of Bolinao extended of conferred to Radin Amended, in the 3163, 3164 3166 & 3167 12 - certain prasantly enjoyed hy the Communicatians virtue af Republic conditions in Acts that the view No, wot) and your this Department Office dated insofar as pertinent, 1The Cornorat ian Communications of 14 competing oF its terms which those Electronics ly, the Raclio FPhilippines of the Revente in his end with your request for in Electronics Corparation an equal treatment in the tax conressians of the FPhiliippines by Aest No. COS, AS 1S August light of the terms and nrant under Republic please he advised in full aceord with Commissioner of Internal Indorsement to this 14, 1966, which, reads as follows:

Bolinag considers the Radio the Flectronic Fhilippines as carporation anc Gectian franchise contained im granted 1S:

are more favorable than to the Doalinao Corporation. Specifical- Communications of the

(a) Exemot fram duties, tariffs and compensating tax on radin equipment, machinery and spare parts needed in connection with the business of the nrantees (b>) Exempt other taxes description ' from the operation oross transacted (See Answer in ©. 7. A, rec. ), Hence, taxes and egripment on from of any the

(c) Gubject to XK receipts und ei tks Clase eustoms duties and parts, shoal Na netitioners’ income tax and of kind, nature or receipts derived its franchise;

the franchise tax of one and one-half per centum of all from HK Na.

on ) es hea the business Franchise.’

xxx" SiGe, po. ti5-116, CTA Claim for exemption from the imported television re jected.

DECISION CTA CASES NOS. 3162, 3163, 3164 316S, 3166 & 3167 13 - 2.

Whether ther e was lega l basi s for the seizure o f the i mported television equi pment and parts in question.

Petitioners contend that there was no legal basis for the seizure of the imported television equi pmer.t and because said articles were released from customs custody pursuant to the release certificate issued by t h e o•partment of Finance.

Respor.dent at'gued cotherwise, allegir•g that ft' aud ar.d misrepresentation were committed in securing the t'elease of said equipmer.t and parts, hence, subject to seizure undet' Sect ior• 2530 (m) 3, 4 ar.d 5 o.f the Tariff and Customs Code. We at'e not impt'essed by the ccor.tent ion of both petitioners and respondent. The records reflect that on March 28, 1966, ABS-CBN, ther.

Bol ir.ao Electronics Corporation addt'essed a letter to the Secretar y of Finance seek.ir•g exemptior• ft'om customs d uties ar.d taxes or. all its importation and from income tax.

Said request was indorsed to the Commissioner of Interna) Revenue who:- that Bo l inao Electror.ics Corporation is entitled to the same tax exemption as t hose gt'anted the RCPI but subject teo the franchise tax of one and one-half per centum of its gross receipts derived from the operation of its franchise. Dr. August 2'3, 1966, the opi rlior. was affit'rned by the DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 ~ 14 - r Asking Geeretbary of “inance Tuan Fance Puri bea whys Advi ged Aolbinag leo PORTS Corporation wt Fujlo ooamenrd with the voew af hha in he ” deacarkmenk is Llammissioner of Internal Revenue to the effect thas ROT 16 & competing corporation ane Boalinag Clactranios Copporation was entitled to the same tax exenpbian nrivilenqe, specifically, Fram eustoms duties and compensating tax on radio aquioment., machinery and anare narts needed in connection with its business (reh, Let, Joint Stipulation of Pacts, pd. Sil.

Bundle -FIt, Folder fT, SMatons rem), However, ait anrears that OBS -CAN wae subsenuently informed by Georstary Enrile that Seection %14 #nf Republinm fet Mos, Sid and Sit prant ib axemntbion aniy on importation of radio eyhinment machinery and snares 2a? (fax. (083, pe G7, Bundle Vy Folder tf, Customs reco. ). This notwithstancdinn, it requastad and cantinue Eo recuest releases rf the immortation fre; qf datines and taéxes, ineluding televisian aquintens and parts which are not clearly within the catenory of articles ain reapact toa the importation of which have heen ranted exemobion., Be that as it may, the imoorbatian and valeass af the equipment in auestion may pot be considered within the contemnmlstion of Sechion Jémy oF, 4 and ™, sans the oresentation of evidence of frauc by wesnondent., gur mired, bhs pba OF sae act eee abit DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 —~ 15 - Violakion of eustoms law by OAS-CBN herauas ‘aves and ddibieas theron have nak oaeen maid, Tm thous connection, we are of the opinion that the situation is moverned by Section %204 of the Tariff ane Custans Code. Under Section 1f04, Liability fore custons dubies, baxes and other charges attaching om the importation constitute personal debt and Lien whirch ean he enforced until paid, Ae ta the contention thet responceant has shifted the burcen to ABS-CRN boa show that the g2ired equipment were irpnorted lanaily, suffirs it to statbhe That ain seizure praceedings, when weasapoendank has estalilishecd its - rase, it heacomes incunmhant HOON petitioner to shaw the innocence of the inmsortation by fair preponcerancea of evidence (Ses Sanches vv. Commissioner of Customs, A. 7. A, Cane Ao. 185, November i, LOS4). ot “his moint netitioners likewise failed. Cangecuentiy, We Find suffirient leqal HAG Ls for bh es Se Laue oF che Lmparted television eaquinmenk anu pests. ‘

3. Whether there has been proper identification of the articles allened to have been illegally imported.

Petitioners pastidate that in SeLzure proceedinnos, if ie the chuby of the Bureau of Customs to identify the particular articles which it clains tq beve been dllanalty immenapkecd ant tiehert ir bha AG aie £e DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 - 16 - warrank4 of nergieon and nobheantioan,. Tt cmannot, an was done in these cases, just make an inventory of all nm @BS-CBN hroadcast the broadcast aquinment found stations and praclaim that all oor those articles are subjenmt bo s M1 RUere mroeeecdinns.

We are not convinced.

-“ Tt must be noted that when the Joint Team made and inventory of all the equipment arc machineries found in the television statians af ABS-CBN, imported etochl inventories wore inolbucded.,. Existing ferilities of Bolinao as well as items which were locally procured ware considered ancl excluded in the inventories (See RBundie Vy, Falder J, Customs rer.). We are of the pevsuacian that reenondent?s cuty to identify the equlomernt in question has nean satisfied.

4. Whether or not failure of the Bureau of Customs to take actual custody of seized equipment invalidate seizure.

Petitioners olaim that the sa@lized articles were never turned over to the Auction and Carno Disposal Division, Instead, said articles which have already been installed in the different stations of RBS-CEN were Left im the custody af KBS, a broadcasting cornoration owned by Roberta Benedicto, hence, ro valid seizure has been effected pursuant to Geetinon ZSG0O7 nf the Tarif ®& amet Mustome: ade, ‘ 2A, es DECISION CTA CASES NOS. 3162, 3163, 3154 3165, 3166 & 3167 - i7- We clisanrerc.

This Caurt notes that when the VAT ONS mollectars of custome decreed the seizure oF the imported articles far violation of Section 4{ and & af the Tariff and Customs Cocle, under the Warrants of Oelzure and Detention ree Warrants attached to the corresponding petitions), said articles were subjected to canstructive distraint.

The warrants were sgerved on Mr. Aladino Apuirre df Padio Philippines Network, Ine. (Exh. iF PIA.

vn tn Joint Stinvlation of Facts June 23, LO76). Tt is esouch that claimants be notified tharenf, hacause whoever 2S ar are ino om essession af tha articles in question is/are legally beune and obligated ta bold and preserve the articlas for the Govarnment. This, spinure has heen duly effected, Anent tye argument that no report has heen made to the Commissier on Audit as reaquired andar Beotion egO3 of the Tariff anc Customs Cade, ait may not be amiss toa point oub trat such provisions which are intendec to gramote tisgpaeteh, method, syshem or designed merely for information ar direction of officers, or to serve methocical and syetematic modes oF proceedings, are merely directory ‘Roxas Va Rafferty, 37 Phil. 58). Non-comolicance therefore + in reporting be the Commission on Aurchit in thease wars Cc:

DECISION CTA CASES NOS. 3162, 3163 , 3164 3165, 3166 & 3167 18 - cases does not render the seizure of the e qui pment in question invalid.

5 .

Whet her or not f ina l 1 iquidat i on has already set in.

Petitioners insist that when t h e warrants of cus t oms custody.

Invoking Section 1603 of the Tariff artd Customs Code, petitioners at~gue that wh e n the articles were re l eased free of duty , such release would after th e expiration of one year from said date , in t h e absence o f fra ud , be cortclusive upon all p at~ ties, unless the liquidatic•n became final with respect to the importation . Again, We disagree.

The fact that the televis ion e quipment and parts h ave already beer. ir.stalled ar.d at~ e being us ed by ABS-CBN is r::• f no cor. seq uer.ce.

a s i Y"td i cat e d that when ABS-CBN was subsequently advised by Secretary Enrile that Section 14 o f Republi c Act No. 51 1 and 512 grant it ex emption o nly o n i mportation of radio equipme nt, machi nery and s p at~e the of te l evision equi pment free of d uty is contrary to law, because t he same does not come within the category of articles in r espect to the im portation of which h ave 34S ·' ) DECISION CTA CASES NOB. 3162, 3163, 3164 316S, 3166 & 3167 19 - beer• ~p~anted exempt i o r •. The Supreme Cotwt has held that the of which is effected contrary to law is subject to forfeiture and that gc•ods rel eased contt~at~y to l a w at~ e su b ject t•:• sei zm~e ar.d fot~fei t twe <Papa v.

Mago, 22

SCRA 857

[1'358]).

the t e 1 ev is i on eq u i pmer.t and pa t~t s wet~e er.t ered ar.d t~e l eased "ft~ ee of duty", thet~e could have been YIO "liquidati •::OY•", a s thet~e was Y•C• asce t~t ·air.ment · o:•f the duties due eon th e said i mportations. Besides, it is cleat~ ft~om Section 120;~ of the Tariff ar.d Custc•rns Co:•de, that iy·, cas e •:·f taxable articles c o mi ng ft~orn abroad, i s Y"10t t errni r.at ed tmt i 1 the duties, taxes a nd bther charges due thereon h ave been paid or secured to be p~id at the port of entry (C.F. Sharp & Company, Inc. v.

Romualdez , C. T. A.

Case No.

130'3, August :1.7' 1 !Sit' in 2 2 SCRA 750 [1 '358] ) • It appearing that the taxes and duties due eon said i mportations of televis ion equ ipment have not been paid, We fi Y"ld ur.tenable the contention that t h ere has been a final liquidation of said importation s.

6.

Whether the warrants of seizure and detention were valid. ar1d d e ter.tioY• iss tted agains t ABS-·CBN wet~ e Ytull and '1 5U .J DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 - 20 - void hecausea these was no sawing of probable onusa For their issuance, asc cetermined hy a resnansih?e afficer authorized hy Lan, much Leas was an examination conducted under oath oar affirmatian af the comolainant eric the witnesses, pertiaubariy describing the solace to be searched and thinns to he seized, as mandated under the L973 Constitution, enforced at the time of the seizure, On the contrary, respondent asserts Hhat the warrants of S@irure and debentinn isauec, were vali, Petitiangsrs? assertion is flawed.

at Whak they seem to overlook is that in seizure eases, ane important asnent of the proceedings in consideration af the issue involved, is the duty oon the part oof the opovernvtenb of mresenting evicdeannte whieh indicate probable cause for instituting such mroceedingas (See LS. v. One Bag of Paradise and Ghoura Feathers, .Y. Fo SO, 167 C.0.8. A478), ¥Yhe term "“norohable cause’, means Less than evidence which will justify candemnation. Tt imports a BALZUrE made uncer circumstances which warrart Lt suspicion (Locke v. United States, 7 Crank fU.&.

BSD). Vinen therafere, the respondent in these cases ordered the seizure of the television anuipment arc parts for viglation af certain provisions 2f law, it is therehy incumbent pon him to an aw by orenenderance af evirence beabo beere war geahab le DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167

~ PL -

canse For the seizure, The muanbion be Nea wenntlyved therefore, bails down ko whether ths Facisa warrant prohatble cause fe smi muie, From the records, what created sucpinmion and impelled respondent ta 1Ssue warrants UR the Memorancdum for the Commissioner of (Customs cdatad August i4, 1973 of Pedro ©. Mendoza, fr., Oecting Deputy Commissioner of Customs (See on. misty SE Ty Bundle VV, Folder FS, Customs rerc.), based onmn the Firndinns of Heractleon Paqtanac on the “ianvestinatbioan canduecterl For alleged non~onayment of taxes onu cuties on aimporkations af television equinmment oare spare parts, staking amonn others, thats Aa ABS~CBN aimnerted bhelevision equtoment ane spare marke and ethers 4 , a The Fmmoartatians are definitely rut radio equipment. machinery anc spare parte;

cl. ABS man Lm rare racdia eruaomard machinery and enaere marks neaced ain eactnertion with thre operatian af Lee Business oF radio telecommunicat ion: and

d. ABS-CRM with Full knowledge af specific articles cavyvared by the exemption, through miscvepnresentatian availert i the inportatlion or Helevisiton eonicment, machinery and spare parts.

AFtar carat] ahundy of the aforacihac juvianriucdence, Arnel monsitderatian oF he Pant w~ DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 - 22 - surrounding th e importations and release of the at't icles ir• quest ior,, this Co:•urt is of the opirli.on that "pr•:•bable cause" fo t' se izure ar•d deter.ti or• h .::~.s been established.

On the allegat ior, of that the r.ot followed, it must be noted that said mar.date dr.::•es not . , l.)t"' bat' havir1g pol ice under Section 2203 of the Tariff and Customs Code to effect seat'ches, seizure ar.d at't'est fo:•t' the enfot'cemer.t of customs law. The Tariff ar.d Custo:oms Co:ode was ir·,tet' pt'eted to r11ean that except ir• the cas e of search of a dwelling house, pet'SOY"IS exercising authority under the customs law may effect seat'ch a1'1d seizut'e without a seat'ch (Papa v.

Mag•:•, supra ; Viduya v. Berd iago, 73 SCRA 553 E1975J). 7.

Whether the appra isal of the value of the seized articles and the assessment of taxes were correct.

Petitir.::•net'S impugr1 the appraisal and assessmer,t on the grounds, among others: <1. > That the inventory was erroneous because it included items r.ot i !legally impot'ted 1 ike equi pr11er1t wh ich could be used fen' both radio and televisi•:•n 353 _, DECISION CTA CASES NOS. 3162, 3163, 3164 316S, 3166 & 3167 - 23 - bt'C•adcas ting, television equipmer•t locally fabt'icated or purchased; and (2. ) That the assessment of taxes due was faulty because:

a.

There was double counting, appraisal and assessment of taxes on many items; b.

The appt'aisal ar.d assessrner.t was based instead c•f the domestic value as by Sebtion 2 01 o f the Tariff and Customs Code; c.

There was erroneous classification of d.

Wrong foreign exchange rate and wrong tariff rates were used. Her.ce, the assessment of taxes rnade shc•uld be r11.t 1 l i f i ed.

Respondent, or. the othet' har.d, rnair.tains that petit ione1·'s failed to subs tar.t iate the allegat ior•s with evidence.

of his posit ior., preser.ted Mat' ci a 1 P1·~i nci pal Hppt'a iset' of the But' eau of Customs, wh o testified on his role as a membet' of the ir.ter-- agency committee which investigated the importations of television eq u i pmer.t of ABS-CBN.

On cross e xamination 6ouns el for petitioners, he testified as follows: "Q.

Now, wi 11 you p t'ocee d e d task with tell u s t ·=• pet' form res pect to h c•w you yc•Ut' own ·the it ems Ot' eq u l. pment found in the Bohol 354 by ) DECISION CTA CASES NOS. 32162, 3163, 3164 AM.

3165, 3166 & 3167

- P4 -

Qeoadcags: Center at Bohol fivenue, Gueran City? f We went to Bahol Avenne tonether with the reoresentative of the racio control office, BIR and ASAT at thak hime, anc we were briefed how we are going to proceed with Khe inventory. Now, when we went bo all the television breeadcasting stations and we toot the inventory of all the errtinment, we Found in that station then that’s it, that is in all relay station throughout the country, Did I get you rarrectly when you said khak when you went to a narticular QEBS-CBAN statian you just inventoried all the items:

ae Found in that station? Qniy in the television station. Yee, Al’ the items found there? ALL thea television equipment, sir.

And that WAS thre basis of your apnraisal?

Yes, sir.

You cid not make any distinetion as to whether the items is used far radio anmrl television?

Well, the fact that they are found in the television and broadcasting station and they Rave separate atation for racio, we presume that is a part af Ehe TY station.

So, you presumed Ehat that is a television equipment. You don’t know that a certain item can be used for both television and radio broadcast?

I think so, sir.

‘ 4 Vee } C!

C DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167

- PS -

QO. And you dic not cansider thal soma at those items you fForunct in tha television stations were lorally fabricated?

A. Well, we are inclined to believe that some of them are locally Fabricated but we aseure tha renresentative of the gshatian that the moment you can prova that these are locally Fabricated, then we are going to take that out of the inventory.

Gl. Yes. And the representative of the gtation presented you items which were Jooally fabricated?

A. Yes, sir.

fl. And did you remeive those items from your worksheet ?

A. . Well, - am not a member, sir, of the soveening committee, but To think all the items that are there, we presumed that they are television Priiinmert- O, No, no.

A. There were items that were deleted.

QQ, In yous workesheek?

A. In the sereening committee, we have Eine technical man from the racis cantrol, and then the BIR, then the renresantative from ABS-CAN they went aver wm QO. But, the fasis of your assessment wag your worksheet?

A. After they have been screened. ATTY. GUTAZON Can we ask for the worksheet? (Panas in the proceedings.)

QM, OYod even iF they are already ino the warkshaah, we assure them that Ou Ge DECISION CTA CASES NOS. 3162, 3163 , 3164 3165, 3166 & 3167

2G -

th~ moment you can show proof that they are locally manufacture d , even if they are already assessed, we can still delete them from the list. Q.

f.~nd yout~ i ventm~y i ncluded :items rn~ A.

rather you d i d not consider items which were locall y purchased? Well, I th ink they tha-t;.

have considered Q.

No, you, yo ut~ :inventory.

A.

I did not consider~, sit~, I:Jeca.use I presumed that the moment they wer~e pt~ e sen ted to me fat~ appt·aisal~ I just ---- Q.

You just assumed that they wet··e i m por~t ecP (.~ • Y e s , s i t~ • Q.

And I noticed that some of the items there the y were purchased from Secretary Jo se Concepcion Industries.

Did you not come acro ss tho se items? A.

The t~er:we c; ent at i v e of the station r.wesent ed invoice!s and document s to pt~o ve th a t t hey a t·•e t~eally locally ptwchased and local ly fatn-icated.

Q.

B•Jt inspite of that, those it ems wet~e not deleted ft·o m yout~ wol·'~< s heet . A.

As far' as I know, sit~ , they deleted.

Q.

Okay, We can checl-< th.:tt later~ on.

How A ..

I .:\bout tele v ision i tems ~·h ic h wet~t" acquired from the old Bol inao Br-o a dcasting Cot~pot•at ion and old Alto Broadcasting Corporat ion, did you also include those in y o u t' i n v f.! n t o t~ y ? cannot t~emembet~ th.:~t anymore, sit~ ..

n r.:. f.=n· t:l. c:;

I ~<n twl , only those ~-~ f?

f n •.m<.l in Boh ol Avenue and othQ't~ ) DECISTON CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 television wvelay station ain the mount, "., Now, Jlebter one to the annraisat. Lihatk viaast the basis Fer anpraising the muceaged bax anc duties nr the different ttbtems ineliuded in your inventory ancd worksheet?

A, Those items moverad hy commercial IMvo ne, we hased that oan the commeroial invoice. Those items “se belevision station which we cdo not have any valra, wea ued the value stated in their hyoole, They have an inventory of ail these is+ems and with thie Value stated therein, Formed oon , Ard one inventory end the ve Puat tan roe dn hhe Books cf ARS-OPt wera an apnradard cos muprerk vwaluin?

AY. 1 think that Wes anpraigead hy et comnoahoarnk it frustoms aompraisar?

0. And thay usec the renrodichion onet?

A, Wadd, inasmuch at owe have nn valse Le For that wonder our Ar itt Cede, we can wee tha domoatin whateanals value MERS FH dey ny ineicdects] PwHenses anc ather dubies and baxeas, {. Ond under the Custems and Tariff Corde enfarcernt at bhe hime of the imooartations, baw did the Customs Cokermine the customs dutias ka he assessed an the import ec thems?

on The rate of dubies, sir?

{2 . Ma, hha hasit. Ts it Canmsnyd ae rime, ase it home consumption yodie ar what not?

i f vd :

om DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 ~-~ 2a - A, Well, wala shipmant is @naverad hy capiniplar invaLee. It is corpculdar insadieme, tT think.

tf, Rut oan thit case, whekb you user as bho Prva market value, net the vy Konak Fnyvegee Ve Because truers was no coansular invoices, Qi, Why are there mo consular invoice? ef. Because they are already installed." (See T.g.0., pp. i 4eFh. Teme 21, ioe.) MWiknecs Ferok hap bestified that nat at the importbations es covered by consular invoice.

This Moret Feats at umnecessary to dilecuss Further qround Ch), Le B, that the inventory wan erronedus, For ac cadvertead te earlier, when tha Toint, Team made oan inventory of all the equinmert oaned nachiners ies Forunec wr the television Stat pans oF ABS CRAM, imparted stock inventories were anelucdoecd and thre We are 4 in cnestion were Identifier, Me be gran’ €3, thak ths assearment of tawes aue wan faulty, We find #Fber careful ctucy of tha resnecfLive mosition of tha marties, anc oom bliin basis pf the ounvefibecd testimony of respondent’?s witness, with petitioners Failure ta show that the method used Py the annpraiser is not oroanear, we are canvinced that the arpraisal of ths valve of tha artirolies and the haxes due were correct, Thea official fuby rs marfornad orbit C we we DECISION CTA CASES NOS. 2162, 3165, 3163, 3166 & 31 3164 67 wt We contrary 8s mravan PRid. m7eG), upheld

8. Whether oar not the fraud penalty is mroper.

Patbikioners state ASAUT different Finance GCecpoevariasg Ealeyvision eaubioment ooand Q equipment ware exempt, the brane of fraud oan justify tee dimme sitter aff Poa On Vine oather fand, the Tariff acd Corstoms Onoda, predicates the inmnarition of ett es part perbtnent,

CT TON

Any arbiecle yeagel other conditions and ahpeot Following FroeTe dh sae 9 t

KM XMM

1. firiy imported or saxportec, articles xR CS) Mr the stren declaration oar by the ae Consilynes imnerbakian af

OWT AY 4

C4) Gin thie stren tape per a mocermerbaoed by tis Goering ays ee Co . SoU ‘MeCarthy v.

Thus, weonmondentis.

the ARS EUAN s Section ApnraAisal imposition ing oarnmuends that arpred Vy owe!

when art s anly error cdoas not a penalty.

SS EOC) 3, * and ander whitch fraud the a 3 § shall, under be nub iaet torn EY sought van) hie HMM goth of A affidavit importer, concerning such articles False axyemutect axporter the Ath oT a Faloe otis ais demamornt ce AWE, Pmnmarmbarr, Nsignee moneesniry Aldanese, emouted of the pot a u ai ws 4 4 roa importations as oat penalty, e464 “~ So-% peapondens DECISION CTA CASES NOS. 3162, 3163, 3164 316~, 3166 & 3167 - 30 - the i rnpor~ t at i o r 1 of such ar··t i c 1 e ;

ar1d (5) Through any other practice or d e vice c ont r~.:n~ y to 1 aw by rnear1 s of which such article was entered thr~ ough a customhouse to the pr~ e j ud ice of the gover'r.rner.t. " to:• be within the a mbit of s ubpat'agraphs (3) ar1d (4), the requisites are:

<1> t here must be wrongful by the i n1 pot' t e r~ COY"1Si gnee of any declat' ation or~ affidavit or~ the Wt'OY"1gful rnak.ing C•r~ del ivet' Y by the sa r11e per~son s of any invoice, letter or' paper' all touchir1g or1 the impor' tat ion o f the and u:: > , that such dec 1 at~ at ion, affidavit, invoice i s false. But there is not hing of this s or~ t in the s e cases .

Ir1 fact, as aclwitted by r~ e s p o ndent, ever~yt i rne a s hi pment of t e l e vis i o:•r• eq u i prne nt ar'r' i ved , ABS - CBN had to r~ eq ues t i r1 wr~ it i ng for·· the t' elease of t h e ar~ t icles, attaching th e corres ponding comme r c ial invoice and a ll pertinent docume nt s for th e s crutiny of t he Finan c e and Customs authot' it ies ( See Jcoi nt St ipulaic•r1 of Facts, This only indicates, that ABS- CBN is i r 1 good faith.

F o t' subpar'a~waph <5>, to be applicable, thet'e payment of duties and tax~s due .

But, We found n o thin g in t h ese ca ses whi c h would labe l petitioners wit h ft'aud.

Wh il e ther~ e we t' e claims that ABS-CBN J 6i ·' DECISION CTA CASES NOS. 3162, 3163, 3164 316S, 3166 & 3167 - 31 - of televi sion equipment and parts, not a si ngle piece of evidence was presented by respondent to s h o w that a specific impot~t at ion was fraudulently made by ABS-CBN.

Fra u d is never pres u med . It must be proven <Farm Impleme nt and Machinery Co. v. Commissioner o f Customs, 2 4

SCRA 9 0 5

[1968]) .

While the appli cation fot~ tax ft··ee t~ele a s e filed with the Depat~trner. t of Finar.ce includes a t~eq uest fot~ television equipmer.t as well , this fact Wi!:\ S r •o:•t h idden ft•orn the officials of the Department of Finance ar•d Cust•:•ms.

maxim i Z<? what you b e 1 i eve yout~ f i r~m o t~ c 1 i er.t wo u ld be entit l ed tmdet' the law but it's up to:• the agency to evaluate the Hence, We justification for the impos i tion of frau d penalty. 9.

Whether respondent c an comply with the decision should the s eizure proceedings be upheld . Pet it ionet~s in theit' rne m o t~ar. dum filed on July 29, 1991, t'a ised new issue to t he e ff ect that in the event that t h e said seiztwe pt' oceedi n gs at'e upheld, car.

t'es ponder.t Commissior.et' of Cust o ms com p ly with the dec ision o rder ing t he release of the seized articles to ABS- CBN upon payment of taxes and duti~s assessed, co:•ns i det~ i ng that most of the se i zed articles hav e been lost or d estroyed. ~62 DECISION CTA CASES NOS. 3162, 3 163 , 3164 3165, 3166 & 3167 - 32 - This iss ue is hardly a po i nt fot~ e x t e r.ded di s cuss j.on it appeat~ ing that said ques tion was n o t raised in the petition fo r rev i ew but merely for the fit~st time in thett~ mem.:n~ar.durn <See Re pub l i c Flour Mill s , Inc .

v.

Co mmissioner o f Customs, C. T. A.

Case No .

1844, Novernbet~ 27, 1'3&7 , affit~med ir• 3'3 SCHA 2&'3 [1'371J);

Maco ndray & Co. , Inc.

v.

Co mmissio ner of Cus toms, C. T. A.

Case No .

2 07'3, Se p te m bet~ 2'3, 1 '372).

Nevet~ th e les s fot~ the satisfaction of petitio:•r.ers, it is w ot~ th to cite, the comment under Sect iorl 12 04 o:•f the Tat~ i ff ar.d Customs Code, that "Duties at~e t axes paid on a ccount of the act of bringing f oreign good s ar.d s ectn~ it y of t~ ever.ue , this tax i s made a lien o n the goods a nd goods itself i s liable for its pay ment, but the payment itself is a paymer.t f ew the act of 'bt··ing i ng in'; it is only s ecor.dat~ ily a t a x on the;

p t~o:o pet~·t: y The s ubsequent loss co ·f the government' s lien which, like all c•th e t~ liens, i s dependent upon pos s e ssion, d o es not free th e importer the debt which acct~•.1ed by t~ eaSOYI of the importation <Ker & Co. v. Cebu Collector of Cus toms, T. D. C.

&7'3) • II

(See Tej am, Commen taries on the Hevised T a t~ iff and Custor.1s Code, p.

2311, Vol.

IV>.

Heroce, We find fot~ the t~e s ponde r.t Commmiss ionet' o:•f Cu <:.;t oms .

:363 DECISION CTA CASES NOS. 3162, 3163, 3164 3165, 3166 & 3167 -~ 33 - IN VIEW OF THE FOREGOING, the decision appealed from is MODIFIED. Judament is hereby rendered Affirming the decision of tha Acting Commissioner af Customs in Customs Case No. 79-44 rendered an October 8, 1980 except the imposition of the S0*) fraud penalty. No costs.

WE CONCUR:

CONSYANTE/C. ROAQUIN PH¥sociata Judas sTevLa] DADTVAS-FARRALEp Hekinn Oesemista Sucdaer LE RTT ROOT LNs AoRhereby cerkify bhst this dereteionm wee pepachoer after cue tvonsulbtation amonn the members cf the Caurs “ VEE oot the Coanshabakioar, Fue 2 Gow ERNESTO D. ACOSTA Mesa st coamrp Toebre fore oF Toe Pierrot: