CTA Case No. 4399

Republ i c of the Philippines

COURT OF

T~X ~PPE~LS

Qw?zon City

REDSON TEXTILE MANUFACTURING CORP.,

Petit i OlHH',

·-

Vet'SUS ·-

C.T.A. CASE NO. 4399

COMMISSIONER OF CUSTOMS,

He s pond£~nt.

X - ------------ - - -----------

X

D

E

C

I

I

Cl

N

This

is an appeal from the decision

of

the

Commissioner

of

Customs d ated Se ptember

6 ,

1989

affirming the decis io n of the District Collector of

Customs of the Port of Manil a dated August 3,

1988

decreei ng

the

forfeiture of

petitioner's

goods,

consisting

of

thread a nd

knitted

sweaters,

for

alleged violation of Secti on 2530 (e ) of the Tariff

and

Cu stoms

Code

of the

Philippi n es

<TCCP)

in

rela·tio n to Customs IY! e morandum Ot•der No. 11--80 <CMO

11-80) and the Gar ments and Texti le Export

Board' s

<GTEB> rules and regulations.

Petitionet'

Reds on

Textile

Mam.t fact uri n g

Corporation <RTMC> is registe red with the Board

of

Investments

<BOI>

as exp ort prod ucer

of

knitted

68 7

,.

"

/

C.T.A. Case No. 4399

-

D E C I S I 0 N -

a nd

as

such

Manufacturi n g

Ware h ouse

<BMW No .

a

Bonde d

6(1 3 ) •

I n

i t s

ma n 1.1 fact

IJ t~ i n g

b usi ne ss ,

i t

is

s upplie d

wi th

semi-finished

or fi n ish ed product

<thread,

and accessories) as it s material in p uts of product s

mi::mufact ured

export

consistit,g

of

sweate r s

a nd

These

products are supplied by Cont inental

Manufacturi n g

<CMC> ,

a s ister co mpany o f

RTMC

and

likewis ~

a

BOI

re g istered

e xport

producer~

a nd

operator of a bond ed manu f acturing warehouse.

0 n

No v e m be r~ 1 L~,

1 '3 8 E.,

a g e n t s o f

t h ~

C us t om s

Int el lig ence

and

In v es t igation

Division

<CIID>

apprehended

two

vehicles lo a de d with

thread

and

knitt e d sweate r s wh ile th ey are a bout to leave

t h e

of

p~t i t i on et~

at

Bri xt on

St. , .

Mandaluyong,

lnvegtigati on

showed

the

good s

were

b o und

for

its

sub-contractors,

Pagawa,

lnc.

t';\nd E. S .

Needle c raft ,

fen~

washi ng

embroid ery

and knitting.

Said c ontractors do

not

appear to be accredited with the Bureau o f

Custo ms

and tho GTEB when

verifi~d.

Furt her,

t tH~

was

neither

co ver~d by an y boatnote

nor

was

i t

und erg uarde d

by

customs guards .

Accordingly, t h e

CIID

in

a

me morandum

d a ted

December

3,

1'386

688

•'

>\' .,

C.T.A. Case No. 4 399

-

D E C I S I 0 N -

3

recommend e d

to the Colle c tor of Cu s tom s,

Port

of

Manila

that a warr ant of seizure and detention

be

issued

a gainst

the

aforementi on ed

goods

fat~

v iol a tion

of

Section

2530 Ce> of

th e

TCCP,

as

a mended i n rel ation to CMO 11 - 80 and GTEB r ules and

regule.'\tions.

( p. 2 0, Ct..1stoms

F~eccn~ds.)

Petitioner

prayed for the dismissal

of

the

s eizure

pro c eeding s and

or the immediat e

release

of

the goods

1.1 n de~~

11 s e i z tn- e 11 ,

th ey being

c:n~t i c 1 e s

not

of

p r ohibit•~d

impo t~t atio n

or

export~lt io n

("Motion

to Di $ !Tiism ", p.

2 9 - 32, Cu s tom s

Records>.

This was denied by the Collector of Customs in

his

d c:d; ed

May

7,

l.987

fi ndi ng

that

the

allegation s and grounds cit~d ha ve no legal leg

to

stand

on.

Cus tom s

Records>

After

hearing

on

the merits,

the

Co ll ector

of

Customs

decreed that the arti cles subject of

this

case

be

forfei t ed

in

favor

of

the

government

<"Decis i Cin",

P·

99- 101'

Customs

Petitioner

subm it ted said decisio n for

revie w

by

the Commissi on er of Customs on the ground th at

the

sam e is co ntt~c.,t~y to l r-.lw an d jurisprud ence.

<p. 107,

•

Customs

Recot~ds.)

The

Commissioner

of

Customs

affirmed

the d e cision of the Colle c tor of

Customs

on

S eptember 6, 1989, finding no reason to reverse

68 ~1

·:

c.T.A. Case No. 4399

- DECISION -

it. ("Decision"”, p. 109-110, Customs “-Recurdws)

Hence, the instant petition for review was filed

with this Court on October 27, 1989 ("Appeal

Brief", p. 1-10, CTA records. )

Initially, it was not clear as to which

provision of the Tariff & Customs Code was

supposedly violated —- Section 2530 (e) or Section

2530 (f) but the same was, however, threshed = out

from the records and determined to be the former,

quoted below:

Section 2530. Property Subject ta

Forfeiture Under Tariff and Customs

Law.~ Any vehicle, vessel or aircraft,

cargo, article and other objects shall,

under the following conditions be

subject to forfeiture:

xx xx xxx

e. Any article which is

fraudulently concealed in or

any. public or private

warehouse, container yard or

container freight station

under customs supervisions

(Underscoring supplied. )

xxx xXx KKK

Interrelated to the above and claimed as not

having been complied with were CMO 11-80 and GTEB

Rules and Regulations. Cited below are the

requirements under CMD 11-80:

xKxX xR KX

C.T.A. Case No.

4399

-DECISION-

B. WITHDRAWAL OF RAW MATERIALS

BONDED WAREHOUSE

KK

=

r=4

Ae

xx xxx

‘ Subcontracting

The Qperator shall seek the

approval first of the

Commissioner for subcontracting

to another bonded manufacturing

warehouse orto any custom’s

duly-accredited subcontractor

by writing a request stating

the names of the subcontractor

and the work/process to be

done.

Before the transfer is made,

inventory and identification of

the materials to be

subcontracted ~ shall be

conducted by the CBW officer.

A form (Annex B) as in

requisition shall be prepared

containing the description of

materials to he transferred,

quantity and the requisition

ship number(s) that cover them.

The Document Processor (BMWD)

handling the logbook of the

warehouse shall be duly

furnished with a copy for

recording purposes.

The transfer shall be covered

by a boatnote and shall be

underguarded until received by

the CBW Officer/Subcontractor

concerned.

Return of the finished products

to the original warehouse shall

. %

be in the same manner, duly

covered by a boatnote, and

shall be subject to

identification and re-inventory

of the CBW Officer.

FROM THE

C.T. A. Case No. 4399

-

D E C I S I 0 N -

·-

E. ·-

e. All

matet~ i a ls,

including

wa s tages,

if

any

shall

be

returned

to

the BMWD

of

a ll

sub- contracting jobs and

th e ir

status. ( Un de t' scot' in g sup p 1 i e d. >

XXX XXX XXX

The aforecited legal requirements spelled out

in

CMO 11-80 and GTEB Rules and

Regulations

were

not

by

petitionet'.

petitioner

assailed

the

factual

bases

of

the

decisions

and

insisted

on

its

exemption

ft'om

observing customs rules and regulations .

The appeal of petitioner raised t h e

argument

that no evidence allegedly support the respondent's

findings that the subcontt'actot'S <Pagawa, Inc.

and

E.S. Needlecraft) were not accredited wit h the GTEB

and

the

Bureau of Customs and that

t h e

at' t i c 1 e s

subject

of

this

being

shipped

by

petitioner to the subcontractors without guard

and

boat notes.

Likewise challenged by

petitioner

is

the

capability of the Bureau of Custo ms to

assign

customs

guard

for

every

request

of

bonded

wat'ehouse.

Despite

these

however,

petitioner failed to show the accreditation of

the

subcontractors

with

the GTEB and

t h e

But'eau

of

Customs and

also failed to

produce

a n y

document

G92

.'!

C.T.A. Case No. 4399

- DECISION -

indicating that the transfer was covered by a

boatnote and underguarded by a Customs guard. On

the other hand, the sworn statements. of

petitioner’s warehouseman-in-charge, Rodolfo Madla

(Annex "B", p. 14-15, CTA records), its export-

import manager, Samuel C. Genove (Annex "B-1", p.

16-18, CTA records) and driver of the truck, Reggie

B. Valete (p. 12, Customs records) were presented

by respondent to refute petitioner's charge that

there is mo evidence to support its findings.

There is likewise no basis for petitioner's claim

that the Bureau of Customs has no capability to

field a customs guard for every bonded warehouse

since petitioner did not even attempt to request

the Bureau to provide it a guard.

Exemption from observing customs rules and

regulations claimed by petitioner was premised on

the Endorsement dated January 28, 1974 by then

Secretary of Finance (Cesar Virata) to the

Commissioner of Customs which states:

xxx xxx xxx

“J,eee this Department (Finance)

will interpose no objection to the

approval of the within representation of

Continental Manufacturing Corporation, or

any other BOI registered export producer

693

C. T.A. Case No. 4399

-

D E C I S I 0 N -

-

8 ·-

for

that ma tter, that its s ale o f

yarn s

Cor

any

manufactured

product)

to

its

sister

companies Cor an y company )

wh ich

are likewise registered export producer s ;

s h£111 be conside t~ed as

" e><po t~t sale"

and

that

the

transaction

meets

the

requirements

for the liquidation of

the

warehousing

entries and cancellation

of

the

corresponding

surety

bonds

covering

the products subject

of

sa l e,

which

proposition

may be effected under

eith e r of the following arrangement:

1.

That the sale by the vendor

the

vendee

of

yarns

or

manufactured

product

considtn~e d

"exp t1rt

sa le"

therefore

exempt

from

to

any

is

and

the

payment of sales ta x .

Howeve r ,

the bond s po ste d by the

ve n dor

on the import ed materials

th a t

went

into manu facture

of

the

products subject o f sa le

shall

re main

su b s isti ng

until

suc h

time

when the vendee can

show

proof of a ctua l ex portation

of

the registere d export

product;

ot··

2.

That th e sale by th e vendor

to

th~

vDndee

of

tha

product s

l·'l?ft~ t' r~e d

to

.:~bo ve is

1 il<ewi se

c on s idtlred

"t? xport

sale"

and

free

fro m

sales tax

and

the

bonds

posted

y the vendor

on

the imported r a w materials us ed

in

the

ma n ufacture

of

the

products s old cancel ed provided

the vendee posts a n

equivalent

bond

to

s ubsists

until

the

registered manufactured product

s hall

have

been

actually

expor~t ed. "

'I

C. T. A. Case No. 4399

-

D E C I S I 0 N -

·- 9 -

Either of the foregoing alternative

that may be availed of is subject to the

prior

appro val

of

the

Board

of

Inv!?stments

und~?r

such

rules

and

regulation s

established by

sa id

Board

implementing the provisions of Section 3

(b)

of Republic Act No. 5135

and

that

the transactions shall be maintained

in

separate

records

of acco unts

of

both

vendor and

Vl?nd~?e."

)()(}(

X><><

><X><

The

statutory basis of the said

Endorseme n t

accot'd in g

to

petit i OIH?t'

is

Section

,:,

(b)

F~epubl ic

Act

No.

6135, otherwise

1-<nown

as

" Expot' t

Incentive f-kt of 1970" quoted below:

){ )(X

)()()(

)( )( )(

< b )

11 R e g i s t e t' e d

e x p o t' t

r.:w o d u c e t'

11

shal l

me an

any

person,

corporation,

pat' t TH! t' !'". h i p o t' o t h rn·'

£! n t i t y o t' ~1 an i z e d

<HI d

~~><i s t ing

1..mder

Philippinl?

la\l'ls,

(.l)

registered

with the Board in

accordance

with

this Act,

(2) engaged or

proposing

to

engage

in

the

manufacture

or

processing

of

export

products

as

h e t' P i 11 b e 1 ow

d e f i n e d ,

an d

< 3 )

d i t' e c t 1 y

exporting its export products , or selling

th~m

(a) to a registered

export

trader

th~t

subs equently

exports

the

said

fW'oducts,

Ot'

(b)

to

other'

expot't

producers

who utilize said

products

as

rlirrct

inputs in

products

subsequently

man u factured

or

processed by

them

and

thereafter exported.

XXX

)()()(

)(><X

695

of

t h e

'!

C.T.A. Case No. 4399

-

D E C I S I 0 N -

-

1 (I ·-

In

said

Act

was

intended

to

invigo rate the co untry's export trade as a means of

economic growth by

granting

certain

inc~~ntive~;

and

exemptions to

registered

pr-oducer-s ,

export trader s and

ser-vice

e ><por-ter-s .

The

bent~fits

and incentive s by

which

registered

pr-oducer's

are entitled

are:

ta><

cr-edit,

r-educed

incomt?

tax

exemption

on

impor-ted

capital

equipment, tax credit on domestic

capital

equipment,

and

t?xempt ion

from

tax.

(Sect ion 7,

Rl:."t E.135.)

The issue before Us is whether the decree

of

for-feiture

of petitioner's goods for violation

of

Section 2530 (e) of the Tariff and Customs Code

in

relation

to

CMO

11 - 80 and

the

GTEB

rules

and

regulations was valid in view of petitioner's claim

of e><empt ion from complyi ng with customs rules

and

regulations.

The familiar and settled rule is that in

all

proce e dings take n for the seizure and/or fo r feiture

of any v essel , vehicle, ait'Ct'aft, beast Ot' ar-ticles

under the provisions of the tariff and custom laws,

I

the

burden of proof shall lie upon

the

claimant.

<Section 2535, Tariff and Customs Code .)

Howe vet',

the

Bureau of Customs must establish two

'I

..

C.T. A. Case No. 4399

-

D E C I S I 0 N -

··-

11 -

namely:

<l> that a

t~ea~.; onable gt'' CJI .. Ifld of presumption

exist s th a t

a charge is well founded , and

( 2 )

that

t h e seizure and/or forfeiture proceedings was

made

under the c onditions and along the line s

described

in the Tariff an d Customs Code.

In

the case at bar, the art i c l es subject

of

se i z ut' e

and/or forfeiture were f ound v iolative

of

Section 2530 (e) of the TCCP in r elation to CMO

11 -

80 and GTEB Rules and Regulations.

The

pr o vided under the law in such cas es were

likewise

duly

obs erved

as

disc u ssed

e.:n~lier .

Petitioner/clai mant

was not h eard to claim and

to

£! Vidence that it has

c omplied

ther e with,

rely ing heavily o n t he alleged exemptio n s .

By

no

of

the

i ma gi nat i 011

can

a

of the Endor s ement d ate d Jan uary 28,

1974

.:'\nd it s sta tutrH"' Y basis, Sec:ti. oll 3

<b> of R.n. G135

I nct?nt i v t?

Act

of

1 '::)73 ) '

conclu~;ion

that

petit i OIHit~

is

e><empt ed

ft~om

o b s e t' v i n [~

customs

rule s and regu l ations.

To

be

e><clud ecl

ambit of

the

law,

one

mu s t

c.'nd

point

to

a

s t c:\t ut ot~y

•

pt~ ovi s iclll

whi c h

say

so

in

unequ ivocal

Othe r wise, a ll fair doubts will be resolved agai nst

him .

687

-·

.

'

C.T.A. Case No . 4399

-

D E C I S I 0 N -

·- u :: -

WHEREFORE, the instant petition for review is

hereby

dis missed

for l ac k of

merit.

We

af fit•m

Commissioner~ of

Custo ms '