CTA Case No. 3498

DECISION

- 2 petitioner to pay the face va 1 ue of said bond in the amount of P4~250~919.00. The material facts as nar·r-·ated by respondent in his answer and which are not disputed or denied by petitioner in his reply dated 5 July 1983 are: On or about September 29~ 1980, a shipment of one (1) unit Beecher-aft King Air 200 with S.N. BB- 692 including optional equipment and avionics, consigned to Liberty Aviation Corporation, arrived at the Manila International Airport. Said Aircraft imported by petitioner· "for demonstration flight only";

That upon the her-ein peti ticmer r-·equested the Collector .. of Customs o ·f the Manila In tern a tiona 1 Airport for the conditional re 1 ease of said air·craft. free ·fr .. om duties pursuant to the provisions of Section 105(1) of the Tariff and Customs Code, as amended, posting the required re- export bond as provided for by law; Upon posting of Ordinar-y Re- E:·:pot- t.

Bond No.

C(9) 00913 dated September 30~ 1980 (PN Bond No. 80/ 12471) duly issued by the Phi l.i. ppine Arner ican Genet·-al Insurance Co.~ Inc. in the total amount of P4~250~919.00, and pursuant. to the pr-·ovisions of DECISION CTA CASE NO . 3 498 --· "":'!" ·-·' Section 10~5( 1) of the Tariff and Customs Code, ,3.s amended, the Collector of Cus toms approved s aid r·equest for the cond i tiona 1 r·e 1 ease of the said aircraft free from customs duty; Under the ter·ms and cond .i tions of Re- E:·: port Bond No.

C ( 9)

00913, petitioner Li ber·ty Av ii:l. ticm Corpot··a t.ion, as pr-inc .i pa J. .impor-ter and Phil i pp.ine American Gener-a l Insurance Co., Inc., ,3.s sun2ty, are jointly a n d severally bound to strictly observed a n d f o ll o w the conditions, to wit: NOW, THEREFORE, the condition of this ob l igation is such that if the afor-r,~mentioned me r .. chandise shall in good faith be actually exported beyond the 1 imi ts of t he Phi li pp.ines w.i. t h i n si :-: ( 6) months and t he ex port papers as evidence of sue h e:·: por-ta tion sa tisfac tor·y to the Collector of Customs be produced and pres en ted to him, if the duties, ta:·:es accruing upon said good shall be paid promptly o n or· befor·e the e:-:pir·ation of this bond, then t.hi s ob 1 iga tion sha 11 be nu 11 and void, otherwise, to r·emain in full force and effect." In addition to the conditions set forth in the Section 105 of the Tariff and Customs Code, as amended, specific ally prohibits the sale, amon g others, of articles conditionally free under said provision of law prior to the payment of duties, ta:·:es and other charges due thereon;

411

-- 4 - ":·:

: ·:: -:;Pr-ovided~ That any ar-ticle sold~ bar-ter-ed, hir-ed or- used for pur-poses other- than th<:\ t they wer-e intended for- without pr-ior- payment of duty~ ta:-:

or- ot her ch.::\r-ges which would have been due and payable at the time of en tr-y if the ar-tie 1 es have been en ten::'d without the benefit of this section~ shall be subject to for·f€·?itur-e and the impor-tation shall constitute a fr-audulent pr-actice against customs r-evenue punishable under- Section Thir-ty Si:-:

hundr-ed and two~ as ame nded by this Code~ ,, II ,., The subject Beecher-aft King Air- Model 200~ including optional equipment and avionics~ was never r-e-ex por-ted by petitioner dur-ing the lifetime of Re-Expor-t Bond No.

C(9) 00913~ as no paper-s evidencing exportation ther-eon were ever pr-esented to the Collector- of Cus toms.

the con-es pond ing duties~ ta:-:es and other- char-ges due thet-eon wer-e never- paid to the Bur·eau of Customs dur-ing the lifetime of the r-e- expor-t bond. It appear-s fur-ther- that although cover-ed by a re-expor-t bond posted pur-suant to the provisions of Section 105 of the Tar-iff and Cus toms Code, the subject plane was sold to the Univer-sal Equity Cor-por·ation ~ a domestic company.

The sale was e ffected without the payment of customs duties~ ta:-:es <:md other- char-qes which ~AJould have

-- 5 - been due and payable at the time of entry of said air·cr-aft had it not been enter-ed pursuant to the provisions of Section 105(i) of the Tariff and Customs Code, as amended.

The corr-esponding duties~ taxes and other charges due on the subject aircraft remain unpaid up to the present. Recor-ds show that it was the Beech Ai rc t-aft Corporation~ a United States corporation~ which ~;o ld the subjE?ct aircraft to the Universal Equity Corporation.

On April 2~ 1981~ petitioner requested the Collector- of Customs at the Manila Inter-national Airport (now Ninoy Aquino International Airport) for- the ex tension o ·f the r-e-e:·: port bond cover-ing the aircr-aft but the same 1-.Jas denied for lack of legal basis on April 15~ 1981.

The Deputy Collector for Assessment then demanded the payment of the taxes and duties due on the aircraft.

Thereafter~ petitioner sought the di sc harge of the bond but the same was denied.

Instead, the Collector of Customs at the NAIA demanded from petitioner·· the payment of the amount reprE?sen ting the face value of the re-export bond~ alleging that petitioner violated the terms thereof. In a final 413

·- 6 ··-· demand dated June 1982~ the then Acting Commissioner of Customs directed petitioner to remit the amount of P4~258~919.00 representing the face v;;~.lue of the Re·- E:-:port Bond No.

C(9) 00913 since petitioner v io 1 a ted the conditions of said bond and the provisions of Section 105 of the Tariff and Customs Code. Hence~ this appea l.

The issue in this case is ~"hether peti ticmer violated the terms and conditions of Re- Export Bond No.

C(9) 00913~ as well as the provisions of Section 105 of the Tariff and Customs Code~ and thus liable for·· the payment of the face value of said bond in the amount of P4~258,919.00. As thus shown above, there seems to be no dispute that:

(l) The subject Beechcraft King Air Model 200~ including optional equipment and avionics, was never re- exported by petitioner during the lifetime of Re-Export Bond No. C(9) 00913. (2) The corresponding duties, taxes and other cha r·ges due thE?reon were never paid by petitioner as importer· or· consignee to the Bureau of Customs during the lifetime of the re- export bond . ,411

- 7 - ( 3) Although covered by a re-export bond posted pur·suant to the provisions of Section 105 of the Tar·i·ff and Customs Code, the subject plane was sold to the Universal Equity Corporation, a domestic corporation. ( 4) The sa 1 e was ef ·fee: ted without the pr· ior payment of customs duties, taxes and other charges which would have been due and payable at the time of entry if said aircraft had not been entered pursuant to the provisions of Section 105(1) of the Tariff and Customs Code, as amended. (5) The corresponding duties, taxes and other charges due em the subject ai rc r·a ·f t remain unpaid up to the present.

Against.

th.is backdrop, and whatever the dialectics e mployed, it seems clear that: (1) Petitioner clearly violated the terms and conditions set ·fo rth in the r·e-e :-:port bond pt-ev ious 1 y posted for· the conditional re 1 ease of the subject airct-aft ·free from customs duties and ta:-:es.

(2) The sale of the aircraft violated the provisions of Section 105 of the Tariff and Customs Code, as amended, which specifically prohibits the

- 8 - sale~ among other-s, of ar-ticles enter-ed conditionally fr-ee under- said pr-ovision of law pr-ior- to the payment of duties~ ta:-(es and other- char-ges due ther-eon. (3) The sale of the aircraft in question which was conditionally r-eleased fr-om customs custody pur-suant to the pr-ovisions of Section 105 of the Tar-iff and Cu~;toms Code~ as amended, will not absolve petitioner- of the 1 iabi 1 i ty under- the bond~ consider-ing that said sale was effected without pr-ior- payment of the cor-responding duties, taxes and other- char-ges due ther-eon. By suc h sale, petitioner- v io 1 a ted the pt·-ov is ions of Section 105 of the Tar-iff and Customs Code which pr-ovides that subject air-cr-aft should not be sold~ bar·· te r-ed ~ hir-ed or used for pur-poses other- than that it was intended for- without pr-ior- payment of dutie s~ taxes and other-· char-ges ~'"-lh ic h would have been due and payable at the time of entr-y if the said air-cr-aft has been enter-ed ~'"-li thou t the ben e fit s of Section 105(i) of the Tar-iff and Customs Code. (4) Such being the case~ the sa le constitutes a fr-audulent.

pr-actice against customs r-evenue punishable under the penal pr-ovisions of the Tariff 41G

-· 9 -· and Customs Code.

(Section 105 in relation to (Section 3602, both of the Tariff and Customs Code.)

As aptly stated by respondent, "the r·e-e:·: port bond duly posted by petitioner for the c onditional release of the air .. cr·aft free from payment of customs duty and ta:·: e~; pur·suant. to Section 105( 1) of the Tariff and Customs Code, as a mended, is a contract between the Bureau of Customs and the petitioner an d her sur·ety, wher·ein the latter guaranteed to faithfully fulfill the terms and conditions of said re- export bond, to wit: to re- export the said aircraft within t he lifetime of the bond or to pay the corresponding duties, taxes and other charges due thereon during the 1 i fe~: ime of the bond.

The fact t hat. petitioner· failed to r·e- export the sai d aircraft during t he lifetime of the bond and petitioner likewise f ailed to pay the corres ponding duties, ta:·:es and othe r .. chat-ges due thet-eon during the 1 i ·fetime of said bond c 1 ear 1 y show that petitioner violated the terms and conditions of the re- export bond. In view of the patent violation of the terms and conditi o n s of the re-export bond as well as the provisions of Section 41 1

·- 10 -·· 105 of the Tar· iff and Customs Code, petitioner is liable to pay the cash value of said bond, and not mere 1 y the duties and ta:-:es due thereon." We therefore find petitioner Liberty Aviation Corporation guilty of violating the terms and condition of Re-Export Bond No. C(9)00913, as well as the provisions of Section 105 of the Tariff and Customs Code, as amended. Acc:c:wd ing 1 y, pet.i t.ioner· is het··eby d i r· ec ted to pay r·esponden t Commissioner of Customs the face value of said bond in the amount of P4,258,919.00, and the customs duties and ta:-:es due o n the subject aircraft.

WHEREFORE, the de:?c i sicm appealed .is hereby affirmed at petitioner 's costs.

WE CONCUR :

(on leave ) CONSTANTE C. ROAQUIN Associate Judge - 11 -· CERTIFICATION I hereby certify that this decision was reached after due consultation among the members of the Court of Tax Appeal s in accordance with Section 13~ Article VIII of the Constitution. F'r·es idi 1g ,Judge Court of Tax Appeals 4 1~