Republic of Thhk Philippines Court of Tax Appeals Quezon Clty James A. ‘Tluseco, Pellilioner, ~ vs. C.F.A Case No. 4380 Vicente Jalme

DECISION -

C.T.A Case No. 4&380 P400,250.00 (or P5.00 per kilo). (A plrolLocopy ot the indorsement is hereto attached as Annex "BE" ) . "

9, several days later, Gonmissiouer Salvador Mison was appointed to take the place ot Commissioner Padilla alter the latler’s resignation was accepted.

10. E.L. Reyes tollowed-up release of the shipment with the dillerent olticials of the Bureau ol Customs but the release could nol be had.

Li. Un June 13, Luyy, the H.L. keyes wrote collector Ampil for the POM requesting that a recomputation of the duties, taxes and other charges due on Lhe subject shipment be made as suggested by responsible oflicials of the Bureau of Customs. (A photocopy ot the request is hereto attached as Annex "EF").

12. Accordingly, the recotds ol the inlLormatliou were relerved Lo the special Appraiset’ s Group (SAG) by Atty. Jimenez, chiel ol the Ruling and Research Division, tor the desired computation relative to the “request for implementation ol the tepotiated sale approved and sivned ly Lhen Commissioner ” Padilla. (A photocopy of the incdorsement is hereto attached as Annex "G")

3. Acting on the relerral, the SAG assessed the amount of P5053,957.0L tepresenlLing duties, tLaxes and other chatges on the subject atLicles. (A photocopy of the memorandam of the SAG is hereto attached as Annex “H" hereol).

: ba. Meanwhile, another indorsement. signed by Atty. Woudrow Kurges, Chiel of the Customs Legal Service, dated September O06, 1988 was addressed to the District Golleetor of Manila “Lot appropriate action inviting the altention of thal office Lo the computation ol the duties and Laxes made by the SAG otf the olfice ol the Lommissioner.” (A photocopy -of the indorsement is hereto attached as Annex "L".)

641 - -

DECISION -

G.T.A Case No. 4380 - 4 - 1 5 • When Hr. Rolando Ha.nuel, Chief of the ACUD, received the indorsement, he conferred with his immediate supervisor, Collector Ampil, regarding the matter.

The latter decided to make the E.L.

Reyes Merchandise pay for the goods.

TlJus, Hr.

Hauuel wrote a Memorandum dated tieptemuer 1~, 1YHU to the Chief ui the Cash D i v i s i u n u r de r i n g the 1 a t t e r t u 1· e c e i v e from E.L. Heyes Geuetal Netcltaudise the sum oi 1'503,457.01 representing the price of 59,2~5 kgs. low density polyethelene r·e~;in and 20,825 kgs of polypropylene te::>in. A photocopy oi the Hemorandum, is hereto attached as Annex "J". 16.

Payment was thereafter made on September 12, 19H8 under BCOR No.

2158312.

Gate .l:'ass Nus. 5YUO and 5Y81 were also issued ou the same dale.

Photocopies of the HCOR and the gate passes are hereto attached as AnuexeB "K" and "L", A storage lee in the amount of Pl5U,UOU.UU was also paid prior to the issuance of the gale passes.

17.

Meanwhile, in a Memorandum dated August 02, 1988 addressed to Commissioner Mison, Atty. Edgardo Lopez of the Legal Service o p i ned t it a t E x e c u t i v e U r de r N o .

1 0 7 3 i nq.Jl i e u 1 y amended Section 2610 ol Lhe Tariff and Customs Code o t t he Ph i 1 i p p in e s ('l' C C P ) w h i c h p 1· o v ides tor the holding ot public auctions before goods cau be sold via negotiated sale. The same E.O.

also di::;peused with the reyuirements of s e c u 1· i n g L h e p r i o t' a p p 1· u v a l h y I. h e S e c r e t A r y o f Finance as a condition tor a valid negotiated sale.

In order to further justify thE' sale, ~tty;··~. i.oiJeZ. ~~piued that Whi f~ q1ere is llO show,ing LhaV lL L. Heyes General Nen.:hauuise aiul Cunlractut· is a local pl'tH.lucer oi polyetheleue resin, t.her·e .will. ue uo·,· ha.un Lu Lhe local market it. the resins wel.·e so1Q to E.L.

Reyes General . Merchandise (A photocopy of the Memo r au d u Ill .· i s here to a L Lache d ~ s A uu ex "H'' ) .

IlL.: (Jespite all these, huwPver, the said articles' WAre not released for J:he reason that the Commissioner himself inter·veqed and objecteu to the 1·elease thet·eoi.

He ·insisted that the negotiated sale should iirsL ue approved by the Secretary ui Finance. 642

DECISION -

G.T.A Case No. 4380 - 5 -

19. Realizing that the Commissioner could not be convinced to change his view on the matter, the petitioner, thru E.L. Reyes General Merchandise, wrote a letter-request to the Honorable Undersecretary. of Finance Marcelo Fernando tor the release of the subject guods (A photocopy of the letter request is hereto attached as Annex "N").

2U. Several Follow-up letters were thereafter sent to the Department.

21. The Honorable Undersecretary. indorsed the request to the legal division of the Department for Comment (The indorsement is hereto attached as Annex "Q").

22. Acting on the indorsement, the legal division, LtLhrotgh HE. Cesista, sent a Memorandum to the Undersecretary recommending the immediate release olf the goods in tavor of E.L. Reyes General Merchandise (The Memurandum is hereto attached as Annex "P").

23. On May 22, 1989, the Honorable Undersecretary of Finance, in his first dndorsement, returned flor appropriate action the request of E.L. Reyes General Merchandise, "attention being invited to the provisions of Sec. 9 of Executive Order No. 1073 x x x" (A photocopy of the indorsement is hereto attached as Annex "Q").

24. In a letter dated June O1, 1989, the legal Counsel of the Petitioner, the undersigned law firm of Ongkiko Bucoy = and “Associates, .‘tequested the © Commissioner of Customs to release the., three thousand two ‘hundred two | (3,202), bags ol Low density ‘polyethelene oon ‘the. basis of the ‘Undersecretary’s indorsenent: (The letler is thereto attached as Annex "R"). 9° 25..° dn veply, the Commissioner sent a letter dated June 07, 1989 to the undersigned law firm and attached thereto a copy. of the 2nd indorsement dated June 08, 1989. In his haste to inlorm the undersigned of his intention not Lo release the goods, the Commissioner tailed 643

DECISION -

C.T.A Case No. 4380 - 6 - to note the disl}arity in the dates aforementioned.

(Photocopy ot the June 07, 1989 letter are attached as Annex "S"). 26.

Neanwhile, while all this events were taking place, another party in the name of Alvino Tan has filed a request for the release of subject goods in his favor. 27.

ln a letter dated July 05, 1989 and received by the undersigned on July 14, 1989, the Houoralde Uude1·sec1·etary i"larcelo Fernando stated that the Department concurs with the findings ui the Customs Commissioner.

(Annex ~ hereof).

(Petition for Review, pp. 3-9) Hence, this appeal.

On November 28, 1989, Petitioner filed a Motion for Re 1 ease U ude 1· Hond saying that: 4.

The con t inuuus de tent ion of said bags of Polypruphelene and Polyetheleue resins since March 1988 has caused them to deteriorate due to exposure to elements and will become yellowish.

ln tact, the continuous deterioration ol the aforementioned bags of Polyprophelene and Polyethelene resins may render the same virtually worthless and valueless to the damage and prejudice of herein P e t i t i o u e 1· • 5.

indubitably, unless said imported bags o i 1' u 1 y p r o he 1 en e au d Po 1 y e the 1 e u e 1· e s i us are released lrom customs custody upon posting ol a bond, PeLitiouet· will coutinue to suffer g rea L au d i r rep a r a b 1 e i n j u 1' i e s .

b.

Petitioner is willing and able to post. a bond in such amount to be fixed by this Hounrnble Court t;or the release ot the said ;~,lOl ~Hgs'i:~t Polyprqpheleue and Polyethelene t: e s i H H Jh~ u d til g a i.J j u 4 i c t1 ti o u u l t h i s case .

The lJOlld wi 11 cqtswer it.n· Lite Httl.>j~cL imporlatiuu a H d t h e J t· . ; c o 1· u~ H p u 1l d i ll g L a X~ !=1 , li 11 t i e s a uli 644

DECISION -

G.'.A Case No. 4380 charges in the event that the decision in this case would be adverse to the Petitioner.

(CTA Records, pp. 79-80) On January 8, 199U, Respondent, instead of disputing the above-narrated facts, filed a Motion To Dismiss And Opposition To The Motion For Release Under Bond on the following grounds:

1. Petitioner is uot the real party iu interest and/or he has uo legal personality Lo Lile the petition;

2, Petitionev tot being the real party im inlerest is not entitled to the release of the goods in question;

3. The alleged negotiated contract of sale over the subject matter of the Petition is huil and void.

(GTA Records p. 9Q) Opposition and Reply to. Motion to Dismies and GQppoasition to the Motion Lor Release Under Bond wags submitted by Petitioner on February 5, 199U) Maintaining, on the other hand, Chats

a. PeLitioner, being the assignee of the goods in yuestion is the real party in interest aud has legal personality to tile the petition;

b. Petitioner is entitled lo the releuse of the poods being the assignee and real party in interest;

c. The negotiated contract of sale of Lhe articles in this case is perlectly legal, valid and binding.

(GIA Records, pp. FlJ-tiby) 645 DEGISlON - G.T.A Gase No. 4300 - u - la their Hejoinder liled on February lt,J, 1990, Hespontleuts reite1.·atetl their atorementioned position and ela!Jot:ating that the provisions oJ: law applicable to the case at !Jar should be ::lections £bUl to 2610 o1 the J'l,lriff and Customs Code and not Executive O!'der No.

1013 as e r ron eo us l y v i ewe d by t he P e 1- u- i on P r . On ,ftJHP :!.6, 1992, t:his Court in resolving the above- said issues ruleu, thns: uu the 4uestiou ol the legal pen~HJualit.Y Ui petitionet· to Jile the _IJeliLion anu/ut· llir4 nut: being the real pFlrty iu interest, the !Jeed oi Assi~nment suiJnlitted by petitiotlet' as evidence and su!JsetjUt:HLLly admitted by thi('§ Court apvears to work in petitioner's favor.

1 t may be no ted that t•esponden ts fa i 1 ed to put any objection to the admission of the Deed of Assignment as evidence.

{..Je deem that the failure ui vetitiouer to include said Ueed in its petition was mere inauvertence on its part, !Jut cureu by the subseqUeiLL admission ol the Deed as eviuence.

The same Deed of A~signment cou t a ins L he ans wet' to res pouuen t s' contention that petitioner did uot play any rule in the negotiAtions, nor that his name was never meutioued as an interested or affected party, a~ it is indicated in the Deed that:

the assignee (petitioner) "has J:iuanceu Lhe acquisitjou and purchase ol the aloremeutioned re!,;ins Lt·um the Hureau of Customs".

111 acconlauce with law, Llterelore, Lhe JJeed and Assigument effected to tt·ansmit all the rights, u lJ j e c L o 1 l h e c o n L r a c L , o t t~h e a s s i g no t·

l. o l h e Hsoiguee, petitiuue1.· iu the case. Hence, the pPtition Lo n.>.l ease under bond subject 3,l.Ul bags Polyethelene resins the and PolypropheleHP p~sins was thPrehy GRANTED. rn l:lct, th 1.r;

646

DECISION -

G.T.A Case No. L•::HW - <) - Cutnl UJ-W.EH.J::U ol said guuds under boud was nul actually released to the .Petitioner for alleged reason that the same can tto longer be found. The only issue left tn be resolved therefore Whether or nut .Petitioner is entitled to the release ul the goods in 4uesLiuu. ln denyiug the release ol the suuject good, Respondent Commissioner of Customs ruled that: XXX XXX XXX Executive Order No. 1073 was issued Lo prescribe saieguards tor domestic ittdustries upon the lifting ul import licensing tot.· certain products.

It:

did not Hmend the provisions nt the Tat.·i ff and Customs Code ot the Phil i{JJJines un Lite mauuer ul dispusiug !Jl'upet·ty in custody uuder Sections 2601 Lo 2612 ::iecLiutt 4uuted lor veriiicat:ion:

Y ul

E • U •

clarity Nu.

1013 is hereunder and to lacilit:ate "Sec. y.

Any {JroducL suuj ect to import licensittg UUt iiii{JU1'l:ed Without prior clearauce of the designated import regulating or monitoring agency, as provided tor it1 SPction l 1H1 d 2 of t h is Exec tJ t i v P 0 nl e r , s h a I 1 be seized by the Hu1·eau ul Customs, which shctll then exvurl. such !Jruduct d i r e c t 1 y u 1· L h r o u g h t h e a lJ lJ r u !J r i a l e guveuuneut ageucy ur sell the product with {Jrele1·ence to an injured party (local vroducer) at a negotiated price taking intu consideration p o Leu L i a l t: eve u u e s L u L he g u v e nun e u l aiHl ~he damage due t:o lost:

lll'(H.fuc ~ i Ull ~" 647 but the i S I final the

DECISION -

C.T.A Case No. 4380 - 10 - The provision oi fLU.

1073 auout negotiated price must:

be reconciled with Section 2610 ol the TCCP where the approval of the Secretary of Finance must be obtained by Ute Customs Commissioner before a negotiated private sale can be under~aken tu the best interest uf the guvenuueut.

Thet·e is uu such approval.

The price offered uy E.L.

REYES

GENERAL MERCHANDISE

was initially P400,250,0U, but later unilaterally increased to J:l50J,Y57.Ul.

These r:esiuo can ue sold al a much hi.gher price.

Jn fact, the Bureau received several of[ers to purchase the resin~ for at least ONE Mti.LION PESOS.

For this reason, the ofter of E.L.

REYES was not favorably iudorseu by the uudet·sigued to the S e c r e t a 1· y u 1 F i lH:lll c e u e cause i t w a B disadvantageous to guvet·umeul iutet·eot. The provisiou ol E.O.

lOlJ wahl tw.L complied with since lL L.

REYES GENEHAL M~HCUANDlSE tailed to establish itsell a!!fJ au injured party, thereby havi.ug preference ov~r the other domestic ltLduslt·les. Fot· this reasotl alone, E.L. REYES cannot avail of E.O. No. 1073 lo acquire the resins. Finally, it is auumitted that the requirement ol two (:l) lailed puulic auctioH~ m us t i i 1' s L.

be com p 1 i e d w i L h u e 1 u t· e the t· e s i us can be sold iu a private negotiated oale, The r·esins were never sold at public auction. We agree.

'l'u Out· mind, the applicable law iu the case at bat· is Section lblU oi the T<:~ri1t and Customs Code which provides, thus:

Sec. 2610.

Ui.sposition of Unsold Articles tor Want oi Bidders. - XXX XXX ll the Article suitaule ~:~ither lot· then the SftlliP may be XXX ollered lor sale is tJ.oL ullicial use or charity, re-exported a::;

guvertuneuL 648

DECISION -

C.T.A Case No. 4300 Note -

1 L -

prnperty through the Ninistry of Trade or any other government. entity through barter: or sale.

lf t-he article cannot l>e disposed ol as provided above, the Collector shall t·eport the m a L t e t' i 111111 e u i a t e 1 y to t he Corum i s s i o u e r who 1~ subject to the approval of the Minister ol Finance, dispose of the article to the best advantage of the sovernment in a negotiated private sale which shall be consummated in the presence oL a representative of the Commissioner ou Audit, in the manner provided for by this Code. (Underscoring supplied) should be taken on the underscored phrase collector shall report the matter immediately to _C_o_n_t_m_i_s_· _s_i_o_t_l_e_t_· __ w_l_t_u_n_t~2 .

sub j e c t to the approval ul Minister oi Finance, Llispose uL the article to the "the the the best advant:aJ1e ot the govenunent in a negotiated private sale ..

" particularly 011 the word "may" which gave ample discretiuu Lo the Commissioner uu whether or uot he would d is pose Llt e a 1' l i. c l1~ S i II a uegoLiaLed sale.

And it he would Lhus submit them ill a uegoLiated sale, there should be prior approval ther~~._!~¥._ the Minister (now Secretary) of Finance.

the case HL bat·, such uegutiated sale lell short.

uJ i Ls legality.

Hence, _null and void. Executive Order 1073 is tiOL applicable to the instant case as the Petitiouer l<:~i led Lu establish that the articleA in queHt_iCIIt are r:;ubjPct "t.u import liceTtsing !Jut JmpotLed · wi LII!JuL p 1· i o l' c 1 e a n-t 11 c e u_l Lh1~ designated 649 ---...._...--

DECISION -

C.T.A Case No. 4380 - 12 - Section 1 and '1.

of this Executive Order. .. " (Sec.

9 ' thereof) Let it be recalled that E.O.

1073 was promulgated to protect particular industries in the Philippines lor a period ol oue (1) year (Sec. 1, E.O.

1073).

Thus, where the articles are brought into the country without prior clearance from the monitoring agency whet:e such clearance is needed the articles in question may be disposed oi pursuant to fLO.

particularly No. Vll, Sections 8 aud Y thereof provided, thus:

Vll UlSPOSAL Of AUANUONEU ANU SElZEU PROUU~TS Sec. 8 Where an importer abaudous a shipment of the product which is the subject o.f anti-dumping protest, the Bureau of Customs shall export such product directly or through the appropriate govenunent agency or sell the product with pt.·eierence to an iujured party (local producer) at a negotiated {..ll'ice, takiug i n t o cons i de 1' a t i on p o t: e n t i a 1 r e v e n u e t o t he governmeuL aud the damages due to lost production.

Sec. Y.

Auy product subject to import licensing but imported \vithout prior clearance cJ f t he des i g 11 a ted i m p o r t reg u 1 a t in g o r fllonitoring agency, as provided lor ln Section 1 and 2 o[ this Executive Order, studl be seized by' the Bureau ui ~ustomH, which shall then eX p 0 r L such p l' 0 d u c L d .i r e c L 1 y 0 r L"lll' 0 ugh L he app rop 1· i ate go v e rumen t agency o 1· se 11 Lhe p~·qtJu,:.::L wi~h preference to an injured party (local prollubel") at a uegotiatetf price taking into cuur:;ideratiou potential J:eveuues to the governmeut and the damage due to lust product.iuu.

650 1073 which D~ClSlON - G.T.A Case No. 4380 - 13 - b u t w h i c h i s u o L s u in L h i s p a 1· L i c u 1 a r case . Bence, E.O.

1073 should nut apply. Noreover, Petitioner also failed to establish that E.L. Reyes was "an inj_ured party" much --------~--------------------~· less having any preference over other domestic industries pursuant to above Section Y, lL 0.

1U7:J.

lu iacl, Petitioner in effect admitted that E.L. f:{eyes was not "an injured party" wheu he stated, thus: 33.3.

On the allegation that E.:.L.

Reyes General Nerchandise tailed t.o establish itself as an injured party (local producer), sulJ::ice it.

to mention that there are no local p rod u c e r s of l he a r t i c 1 e s s u b j e c t m a l t e 1· o f the case.

Were these grouud cousidered, there woulu be uo local entity which may be allowed.

to acquire the said goods (Petition, CTA Records p. 15) Such being the case, ~.U.

1U7J is again inapplicable.

Hence, uispositiou thereol nuder said provisiou is null and void.

Lastly, the f:inal bJow that will put Petitioner's a rgumenl to J"PSt comes 1 rom Sect ion

I 0

oJ t.hP same 1073 which pr:oviues, thus: s~c.

LU.

Suppletory Provisiou.

The provisions ol Sections H and 9 notwithstanding, the Hureau ol Customs ·may apply Section 2603 aud relevant provisions ol the 'farill and Customs Code on the disposal ol abandoned and se .i zed produc; ts when it deems it H more appropriate procedure under the circumstances.

(Emphasis suppJi.ed) 651 E.O.

DECLSION -

G.T.A Gase No. 4380 This is, precisely, what the Respondents did. They, thus, applied "Section 2603 and relevant provisions (namely, Section 2610) of the Tariff and Customs on the disposal of abandoned and seized products when it deens it a more appropriate procedure under Lhe circumstances". Accordingly, in the light ot the above expJanations, it can now be sately concluded that where the goods entering the country are not those subject to regulation by Lhe monitoring agency as contemplated by Sections $1] and 2 of E£.0O. 1073, such importation is nothing more than ordinary importation, and the disposition thereof is governed by Section Z61LU0 of Lhe tavilt and Customs Code - ~~ i.e, a negotiated private sale can only be - valid subject to the approval olf the Minister of Finance. Records of the case, however, reveal that herein Petitioner, through an Reyes General Mads. and Contractor paid the Respondent the sum of P503,957.01 as evidenced hy Official Receipt No. SER-2158312 dated September 13, 1988, the refund of the same amount is but proper and is in accordance wilh justice and- equity.

WHEREFORE, iu all the Loregoing, the Decision ol the Respondents not to release the polyethelene tesins to Lhe Petitioner is hereby AFELRMED. Respondents, lowever, are hereby ORDERED to REFUND to PelLilioner the sun olf 652 DJ::ClS.LON - C.T.A CaHe No. 4)00 - 15 - P5UJ,Y57.0J which the latter· previously paid to and accepted by the tonner·.

The surety bond posted by the Pet.iliouer is herei.Jy ordered CANCELLED, the same having I.Jeen unulilized.

SU ORDJ::REU.

WE CUNCUl\:

(Uu leave) MAN EL K. GHUUA A;~~~~,'"1fle RMIUN 0. JH! VEYJ Assuciale .Judg" ~10.-C2 ... -.cA ERNJ::STU U. ACOSTA Presiding .JucJge C .f:i.: .. H T J .F J _ C A '.L' _L U N he 1-' e by c e r 1: i 1 y l tw t this decision was reached alter cine consultation amuug the members oi the Court of in accurdauce with Secliuu 13, Atlicle Vlli ul Lhe CuusLiLuliun.

653 -~-\O~c~ ERNJ::STO U. AGOSTA l'resiuiug Juuge CuurL ui ~ax Appeals