TARIFF AND CUSTOMS CODE OF THE PHILIPPINES (TCCP)

PART I. GENERAL PRINCIPLES AND BASIC CONCEPTS OF TAXATION

A. FUNDAMENTAL POWERS OF THE STATE; POWER TO TAX

1. POWER OF TAXATION IS AN INHERENT ATTRIBUTE OF SOVEREIGNTY; LIFEBLOOD DOCTRINE; NECESSITY THEORY

The power of taxation is an inherent attribute of sovereignty; the government chiefly relies on taxation to obtain the means to carry on its operations. Taxes are essential to its very existence; hence, the dictum that "taxes are the lifeblood of the government." Commissioner of Internal Revenue vs. Eastern Telecommunications Phils., Inc., G.R. No. 163835, July 7, 2010, 624 SCRA 340.

Taxes are the lifeblood of the government, for without taxes, the government can neither exist nor endure. A principal attribute of sovereignty, the exercise of taxing power derives its source from the very existence of the state whose social contract with its citizens obliges it to promote public interest and common good. The theory behind the exercise of the power to tax emanates from necessity; without taxes, government cannot fulfill its mandate of promoting the general welfare and well-being of the people.

In recent years, the increasing social challenges of the times expanded the scope of state activity, and taxation has become a tool to realize social justice and the equitable distribution of wealth, economic progress and the protection of local industries as well as public welfare and similar objectives. National Power Corporation vs. City of Cabanatuan, G.R. No. 149110, April 9, 2003, 401 SCRA 259.

2. TAXATION IS ESSENTIALLY LEGISLATIVE

It is a power that is purely legislative. Essentially, this means that in the legislature primarily lies the discretion to determine the nature (kind), object (purpose), extent (rate), coverage (subjects) and situs (place) of taxation. It has the authority to prescribe a certain tax at a specific rate for a particular public purpose on persons or things within its jurisdiction. In other words, the legislature wields the power to define what tax shall be imposed, why it should be imposed, how much tax shall be imposed, against whom (or what) it shall be imposed and where it shall be imposed.

As a general rule, the power to tax is plenary and unlimited in its range, acknowledging in its very nature no limits, so that the principal check against its abuse is to be found only in the responsibility of the legislature (which imposes the tax) to its constituency who are to pay it. Nevertheless, it is circumscribed by constitutional limitations. Chamber of Real Estate and Builders’ Association, Inc. vs. Alberto Romulo, et al. GR. No. 160756, March 9, 2010, 614 SCRA 605.

3. PRIMARY PURPOSE OF TAXATION IS REVENUE GENERATION

While it is true that the power of taxation can be used as an implement of police power, the primary purpose of the levy is revenue generation. If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is properly called a tax. Planters Products, Inc. vs. Fertiphil Corp., GR No. 166006, March 14, 2008, 548 SCRA 485.

In distinguishing tax and regulation as a form of police power, the determining factor is the purpose of the implemented measure. If the purpose is primarily to raise revenue, then it will

be deemed a tax even though the measure results in some form of regulation. On the other hand, if the purpose is primarily to regulate, then it is deemed a regulation and an exercise of the police power of the state, even though incidentally, revenue is generated. Chevron Phil., Inc. vs. Bases Conversion Development Authority, et. al., G.R. No. 173863, September 15, 2010, 630 SCRA 519.

Meanwhile, in the case of Garcia vs. Executive Secretary, G.R. No. 101273, July 3, 1992, 211 SCRA 219, the Executive Order Nos. 475 and 478 issued by the President which imposed additional duty of 9% ad valorem and special duty to crude oil and other imported oil products were held by the Supreme Court to be substantially moved by the desire to generate additional public revenues and at the same time have some “protective” impact upon indigenous oil production:

xxx customs duties which are assessed at the prescribed tariff rates are very much like taxes which are frequently imposed for both revenue-raising and for regulatory purposes. Thus, it has been held that "customs duties" is "the name given to taxes on the importation and exportation of commodities, the tariff or tax assessed upon merchandise imported from, or exported to, a foreign country." The levying of customs duties on imported goods may have in some measure the effect of protecting local industries — where such local industries actually exist and are producing comparable goods. Simultaneously, however, the very same customs duties inevitably have the effect of producing governmental revenues. Customs duties like internal revenue taxes are rarely, if ever, designed to achieve one policy objective only. Most commonly, customs duties, which constitute taxes in the sense of exactions the proceeds of which become public funds — have either or both the generation of revenue and the regulation of economic or social activity as their moving purposes

and frequently, it is very difficult to say which, in a particular instance, is the dominant or principal objective. In the instant case, since the Philippines in fact produces ten (10) to fifteen percent (15%) of the crude oil consumed here, the imposition of increased tariff rates and a special duty on imported crude oil and imported oil products may be seen to have some "protective" impact upon indigenous oil production. For the effective price of imported crude oil and oil products is increased. At the same time, it cannot be gainsaid that substantial revenues for the government are raised by the imposition of such increased tariff rates or special duty.

B. LIMITATIONS OF THE TAXING POWER (CONSTITUTIONAL AND INHERENT)

Article II. Section 2. The Philippines renounces war as an instrument of national policy, adopts the generally accepted principles of international law as part of the law of the land and adheres to the policy of peace, equality, justice, freedom, cooperation, and amity with all nations.

Article VI. Section 24. All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills, shall originate exclusively in the House of Representatives, but the Senate may propose or concur with amendments.

Article VI. Section 28.(1) The rule of taxation shall be uniform and equitable.

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The Congress shall evolve a progressive system of taxation.

Section 28(2). The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government.

4. SOVEREIGNTY LIMITED BY INTERNATIONAL LAW AND TREATIES

The 1987 Constitution in its Declaration of Principles and State Policies "adopts the generally accepted principles of international law as part of the law of the land, and adheres to the policy of peace, equality, justice, freedom, cooperation and amity, with all nations." By the doctrine of incorporation, the country is bound by generally accepted principles of international law, which are considered to be automatically part of our own laws. One of the oldest and most fundamental rules in international law is pacta sunt servanda — international agreements must be performed in good faith. With the treaties entered into by the Philippines, it has effectively agreed to limit the exercise of its sovereign powers of taxation, eminent domain and police power. Tañada vs. Angara, G.R. No.118295, May 2, 1997, 272 SCRA 18.

5. NON-DELEGATION OF THE POWER TO TAX; EXCEPTION TO THE RULE

As a general rule, the power of taxation being essentially legislative in nature, cannot be exercised by anyone. An exception to this is the delegation of legislative powers to the President

under Section 28(2) of Article VI of the Constitution. One of the relevant statutes to execute this provision is The Tariff and Customs Code particularly the flexible tariff clause.

In the case of Executive Secretary vs. Southwing Heavy Industries, Inc., G.R. Nos. 164171, 164172 & 168741, February 20, 2006, 482 SCRA 673, the consolidated petitions seek to annul and set aside the Decisions of the RTC of Olongapo City which declared Article 2, Section 3.1 of Executive Order No. 156 issued by then President GMA unconstitutional. The said EO prohibited the importation into the country, inclusive of the Freeport, of all types of used motor vehicles with some exceptions. On appeal, the CA affirmed the decision of the RTC and invalidated EO 156 for lack of statutory basis for the President to issue the same. With respect to the basis for the President to issue EO 156, the Supreme Court ruled that the Constitution explicitly authorizes the President to issue the same. It held:

Contrary to the conclusion of the Court of Appeals, EO 156 actually satisfied the first requisite of a valid administrative order. It has both constitutional and statutory bases.

Delegation of legislative powers to the President is permitted in Section 28(2) of Article VI of the Constitution. It provides:

(2) The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government. 19 (Emphasis supplied)

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The relevant statutes to execute this provision are:

1) The Tariff and Customs Code which authorizes the President, in the interest of national economy, general welfare and/or national security, to, inter alia, prohibit the importation of any commodity. Section 401 thereof, reads:

Sec. 401. Flexible Clause. —a. In the interest of national economy, general welfare and/or national security, and subject to the limitations herein prescribed, the President, upon recommendation of the National Economic and Development Authority (hereinafter referred to as NEDA), is hereby empowered: . . . (2) to establish import quota or to ban imports of any commodity, as may be necessary; . . . Provided, That upon periodic investigations by the Tariff Commission and recommendation of the NEDA, the President may cause a gradual reduction of protection levels granted in Section One hundred and four of this Code, including those subsequently granted pursuant to this section. (Emphasis supplied)

6. LIMITATIONS ON THE PRESIDENT’S DELEGATED LEGISLATIVE POWER TO IMPOSE TARIFFS AND IMPOSTS

Philcemcor, an association of domestic cement manufacturers filed with the DTI a petition, seeking the imposition of safeguard measures on imported gray Portland cement, in accordance with Republic Act No. 8800, the Safeguard Measures Act ("SMA"). The case was referred to the Tariff Commission which subsequently issued a negative finding. DTI promulgated its Decision with an expressed disagreement with the conclusions of the Tariff Commission, but at the same time, ultimately denying Philcemcor's application for safeguard measures. Philcemcor appealed the said decision with the Court of Appeals which partially granted the petition. The CA held that the DTI Secretary was not bound by the factual findings of the Tariff Commission since such findings are merely recommendatory and they fall within the ambit of the Secretary's discretionary review. Based on the CA’s decision, DTI reversed itself and issued another Decision imposing safeguard measures on the importation of Portland cement.

The Supreme Court ruled otherwise and accordingly set aside the CA and DTI’s decision. It held that Section 5 of the SMA, which requires that there should first be a positive final determination of the Tariff Commission before the DTI can impose safeguard measures, is restriction on the executive power to impose safeguard measures. “Section 5 plainly evinces legislative intent to restrict the DTI Secretary's power to impose a general safeguard measure by preconditioning such imposition on a positive determination by the Tariff Commission. Such legislative intent should be given full force and effect, as the executive power to impose definitive safeguard measures is but a delegated power — the power of taxation, by nature and by command of the fundamental law, being a preserve of the legislature. Section 28(2), Article VI of the 1987 Constitution confirms the delegation of legislative power, yet ensures that the prerogative of Congress to impose limitations and restrictions on the executive exercise of this power. Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation, G.R. No. 158540, July 8, 2004, 434 SCRA 65.

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xxx The SMA provides an exceptional instance wherein it is the DTI or Agriculture Secretary who is tasked by Congress, in their capacities as alter egos of the President, to impose such measures. Certainly, the DTI Secretary has no inherent power, even as alter ego of the President, to levy tariffs and imports.

Concurrently, the tasking of the Tariff Commission under the SMA should be likewise construed within the same context as part and parcel of the legislative delegation of its inherent power to impose tariffs and imposts to the executive branch, subject to limitations and restrictions. In that regard, both the Tariff Commission and the DTI Secretary may be regarded as agents of Congress within their limited respective spheres, as ordained in the SMA, in the implementation of the said law which significantly draws its strength from the plenary legislative power of taxation. Indeed, even the President may be considered as an agent of Congress for the purpose of imposing safeguard measures. It is Congress, not the President, which possesses inherent powers to impose tariffs and imposts. Without legislative authorization through statute, the President has no power, authority or right to impose such safeguard measures because taxation is inherently legislative, not executive.

When Congress tasks the President or his/her alter egos to impose safeguard measures under the delineated conditions, the President or the alter egos may be properly deemed as agents of Congress to perform an act that inherently belongs as a matter of right to the legislature. It is basic agency law that the agent may not act beyond the specifically delegated powers or disregard the restrictions imposed by the principal. Southern Cross Cement Corporation vs. Cement Manufacturers Association of the Philippines, G.R. No. 158540, Resolution dated August 3, 2005, 465 SCRA 532.

7. EXTENT OF THE POWER OF THE PRESIDENT TO FIX TARIFF RATES

The President may increase tariff rates as authorized by law even for revenue purposes solely. In determining the validity of Executive Orders Nos. 475 and 478 issued by the President which imposes additional duty of 9% ad valorem and special duty to crude oil and other imported oil products, the Supreme Court held that:

“There is thus explicit constitutional permission to Congress to authorize the President "subject to such limitations and restrictions as [Congress] may impose" to fix "within specific limits" "tariff rates . . . and other duties or imposts . . . ."

The relevant congressional statute is the Tariff and Customs Code of the Philippines, and Sections 104 and 401, the pertinent provisions thereof. These are the provisions which the President explicitly invoked in promulgating Executive Orders Nos. 475 and 478.

The Court was NOT persuaded by the argument that the President is authorized to act under the Tariff and Customs Code only "to protect local industries and products for the sake of the national economy, general welfare and/or national security." Instead, it held that there is nothing in the language of either Section 104 or of 401 of the Tariff and Customs Code that suggest such a sharp and absolute limitation of authority. xxx The Court believed that Executive Orders Nos. 475 and 478 which may be conceded to be substantially moved by the desire to generate additional public revenues, are not, for that reason alone, either constitutionally flawed, or legally infirm under Section 401 of the Tariff and Customs Code. Garcia vs. Executive Secretary, supra.

8. EQUAL PROTECTION CLAUSE; UNIFORMITY AND EQUITABILITY IN TAXATION

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RA 9337 was declared constitutional, not violative of the constitutional limitations on equal protection clause and uniformity in taxation. The equal protection clause under the Constitution means that "no person or class of persons shall be deprived of the same protection of laws which is enjoyed by other persons or other classes in the same place and in like circumstances." The power of the State to make reasonable and natural classifications for the purposes of taxation has long been established. xxx The equal protection clause does not require the universal application of the laws on all persons or things without distinction. This might in fact sometimes result in unequal protection. What the clause requires is equality among equals as determined according to a valid classification. By classification is meant the grouping of persons or things similar to each other in certain particulars and different from all others in these same particulars.

Uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. Different articles may be taxed at different amounts provided that the rate is uniform on the same class everywhere with all people at all times. Abakada Guro Party List vs. Ermita, supra.

Meanwhile, the Supreme Court upheld the constitutionality of Republic Act (RA) 9335 (Attrition Act of 2005) with the exception of Section 12 of the said law. The classification and treatment accorded to the BIR and the BOC under RA 9335 fully satisfy the demands of equal protection. Since the subject of the law is the revenue-generation capability and collection of the BIR and the BOC, the incentives and/or sanctions provided in the law should logically pertain to the said agencies. Moreover, the law concerns only the BIR and the BOC because they have the common distinct primary function of generating revenues for the national government through the collection of taxes, customs duties, fees and charges. xxx They principally perform the special function of being the instrumentalities through which the State exercises one of its great inherent functions — taxation. Indubitably, such substantial distinction is germane and intimately related to the

purpose of the law. Abakada Guro Party List vs. Purisima, G.R. No. 166715, August 14, 2008, 562 SCRA 251.

9. REVENUE OR TARIFF BILLS SHALL ORIGINATE EXCLUSIVELY IN THE HOUSE OF REPRESENTATIVES

Article VI, Section 24 of the 1987 Constitution provides that all appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills shall originate exclusively in the House of Representatives, but the Senate may propose or concur with amendments.

Republic Act No. 7716 was held constitutional notwithstanding the bill from which it originated underwent extensive changes in the Senate. It is not the law — but the revenue bill — which is required by the Constitution to "originate exclusively" in the House of Representatives. A bill originating in the House may undergo such extensive changes in the Senate that the result may be a rewriting of the whole. Tolentino vs. Secretary of Finance, G.R. Nos. 115455, 115525, 115543, 115544, 115754, 115781, 115852, 115873, 115931, August 25, 1994, 235 SCRA 630.

In the exercise of this power, the Senate may propose an entirely new bill as a substitute measure. xxx because revenue bills are required to originate exclusively in the House of Representatives, the Senate cannot enact revenue measures of its own without such bills. After a revenue bill is passed and sent over to it by the House, however, the Senate certainly can pass its own version on the same subject matter. Tolentino vs. Secretary of Finance, supra. Resolution dated October 30, 1995, 249 SCRA 628.

PART II. TARIFF AND CUSTOMS DUTIES

A. MEANING AND PURPOSE FOR ITS IMPOSITION

10.CUSTOMS DUTIES

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"Customs duties" is "the name given to taxes on the importation and exportation of commodities, the tariff or tax assessed upon merchandise imported from, or exported to, a foreign country." The levying of customs duties on imported goods may have in some measure the effect of protecting local industries — where such local industries actually exist and are producing comparable goods. Simultaneously, however, the very same customs duties inevitably have the effect of producing governmental revenues. Customs duties like internal revenue taxes are rarely, if ever, designed to achieve one policy objective only. Most commonly, customs duties, which constitute taxes in the sense of exactions the proceeds of which become public funds — have either or both the generation of revenue and the regulation of economic or social activity as their moving purposes and frequently, it is very difficult to say which, in a particular instance, is the dominant or principal objective. Garcia vs. Executive Secretary, supra.

C. CLASSIFICATION OF IMPORTATIONS (SECTIONS 100, 101 & 105 OF THE TCCP)

SEC. 100. IMPORTED ARTICLES SUBJECT TO DUTY

All articles, when imported from any foreign country into the Philippines, shall be subject to duty upon each importation, even though previously exported form the Philippines, except as otherwise specifically provided for in this Code or in other laws.

SEC. 101. PROHIBITED IMPORTATIONS

1. Firearms and explosives2. Subversive/seditious materials3. Obscene/immoral articles4. Abortive articles/drugs/substances5. Gambling apparatus/devices

6. Lottery/sweepstakes tickets except authorized by the government

7. Articles made of precious metal which do not indicate the actual fineness of said metals

8. Adulterated/misbranded articles of food/drug in violation of Food and Drugs Act

9. Articles which are habit-forming e.g. marijuana, coca leaves, etc.

10. Opium pipes and parts11. Other prohibited importations

SEC. 105. CONDITIONALLY-FREE IMPORTATIONS

1. Aquatic products gathered by vessels of Philippine registry2. Equipment for use in the salvage of vessels or aircrafts upon posting of bond3. Cost of repairs in foreign countries upon Philippine vessels or aircraft;4. Articles for repair upon posting of bond5. Medals, badges, or those received or accepted as honorary distinction6. Personal and household effects belonging to residents of the Philippines returning from abroad7. Wearing apparel, articles of personal adornment and similar effects of travelers, or tourists upon posting of bond8. Personal and household effects and vehicles of foreign consultants and experts hired by the government upon posting of bond9. Professional instruments and implements of Overseas Filipinos who come to settle in the Philippines10. Articles used exclusively for public entertainment and for display in public expositions upon posting of bond

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11. Articles for making or recording motion picture films in the Philippines upon posting of bond12. Importations for the official use of foreign embassies13. Donated articles14. Containers for re-export upon posting of bond15. Supplies of vessel or aircraft16. Salvaged articles17. Coffins or urns except vehicles of the deceased person18. Samples/models upon posting of bond19. Animals except race horses for scientific, experimental, national defense, etc purposes20. Books for scientific, philosophical, etc purposes21. Articles previously exported from the Philippines22. Aircraft, equipment, spare parts for the use of airlines with congressional franchise23. Machineries and equipment for use of mines24. Spare parts of vessel for use as replacements or emergency repair25. Articles exported from the Philippines for repair and subsequently reimported26. Trailer chassis upon posting of bond

11.DOCTRINE OF CLASSIFICATION BY USE

Parts of machines, apparatus of appliances which are suitable for use solely or principally with a particular kind of machine or with a number of machines falling within a specific heading, as a rule, are to be classified with the machines in the same heading (See Montano A. Tejam, Commentaries on the Revised Tariff and Customs Code of the Philippines, p. 1140, Vol. II, 1984 Revised Edition). There being a clear showing that the subject imported flashers are to be used solely and principally to signal or indicate a right or left hand turn in front and at the rear of motor vehicles, they should be classified under Tariff Heading No. 85.09 as electrical lighting and signalling equipment. The Supreme

Court citing La Compaña General de Tobacos de Filipinas v. United States, 8 Phil. 438, it ruled:

"The general purpose for which an article is used must govern the assessment of duty; any other rule would lead to confusion and injustice. It is the general use to which articles are chiefly adopted and for which they are chiefly used that determine their character within the meaning of the Tariff laws. It is the predominating use to which articles are generally applied or used that determines their character for the purpose of fixing the duty, and not the specific or special use which any particular importer may make of the articles imported (Hartranft v. Langfeld, 125 U.S., 128).

Commissioner of Customs vs. Campos Rueda Corp., G.R. No. 55020, August 20, 1990, 188 SCRA 613.

C. CLASSIFICATION OF DUTIES1. ORDINARY/REGULAR DUTIES

a. Ad valorem

Section 201, TCCP substantially provides:

(1) – Transaction value – the price actually paid or payable for the goods when sold for export to the Philippines adjusted by adding commissions and brokerage fees (except buying commissions); cost of containers; cost of packing, whether for labor or materials; value of the goods and services incorporated in the goods; amount of royalties and license fees; value of the proceeds of any subsequent sale of the imported goods; cost of transport; handling charges and insurance cost.

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(2) – Transaction value of Identical goods. – the transaction value of identical goods sold for export to the Philippines and exported at or about the same time as the goods being valued. "Identical goods" shall mean goods which are the same in all respects, including physical characteristics, quality and reputation. Minor differences in appearances shall not preclude goods otherwise conforming to the definition from being regarded as identical.

(3) – Transaction value of Similar goods – the transaction value of similar goods sold for export to the Philippines and exported at or about the same time as the goods being valued. "Similar goods" shall mean goods which, although not alike in all respects, have like characteristics and like component materials which enable them to perform the same functions and to be commercially interchangeable.

(4) – Deductive value – the unit price at which the imported goods or identical or similar imported goods are sold in the Philippines, in the same condition as when imported subject to deductions of commissions; costs of transport and insurance and associated costs incurred within the Philippines; costs and charges referred to in subsection (A) (3), (4) and (5); and the customs duties and other national taxes payable in the Philippines

by reason of the importation or sale of the goods.

(5) – Computed value – computed value which shall be the sum of the cost or the value of materials and fabrication or other processing employed in producing the imported goods; the amount for profit and general expenses equal to that usually reflected in the sale of goods of the same class or kind as the goods being valued which are made by producers in the country of exportation for export to the Philippines; the freight, insurance fees and other transportation expenses for the importation of the goods; and the cost of containers and packing.

(6) – Fallback value - If the dutiable value cannot be determined under the preceding methods described above, it shall be determined by using other reasonable means and on the basis of data available in the Philippines.

b. Specific –

Sec. 202, TCCP substantially provides:

(1) gross weight - the dutiable weight shall be the weight of same, together with the weight of all containers, packages, holders and packing, of any kind, in which said articles are

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contained, held or packed at the time of importation.

(2) legal weight - legal weight thereof shall be the weight of same, together with the weight of the immediate containers, holders and/or packing in which such articles are usually contained, held or packed at the time of importation and/or, when imported in retail packages, at the time of their sale to the public in usual retail quantities

(3) net weight - the actual weight of the articles at the time of importation, excluding the weight of the immediate and all other containers, holders or packing in which such articles are contained, held or packed.

(4) When affixed to a holder - dutiable together with the weight of such holders.

(5) When a single package contains imported articles dutiable according to different weights, or to weight and value, the common exterior receptacles shall be prorated and the different proportions thereof treated in accordance with the provisions of this Code as to the dutiability or non-dutiability of such packing.

2. SPECIAL DUTIES IN ADDITION TO THE REGULAR DUTIES

SECTIONS 301-304, TCCP substantially provides:

SEC. 301. Anti-Dumping Duty – Whenever any article of commerce imported into the Philippines at an export price less than its normal value in the ordinary course of trade for the like article destined for consumption in the exporting country is causing or is threatening to cause material injury to a domestic industry, or materially retarding the establishment of a domestic industry, the anti-dumping duty shall be imposed which is equal to the margin of dumping on such product, commodity or article and on like product, commodity or article thereafter imported to the Philippines under similar circumstances, in addition to ordinary duties, taxes and charges imposed by law on the imported product, commodity or article. (As amended by RA 8752)

SEC. 302. Countervailing Duty - Whenever any article of commerce is granted directly or indirectly by the government in the country of origin, any kind or form of specific subsidy upon the production, manufacture or exportation of such article, and the importation of such subsidized article has caused or threatens to cause material injury to a domestic industry or has materially

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retarded the growth or prevents the establishment of a domestic industry as determined by the Tariff Commission the countervailing duty shall be imposed which is equal to the ascertained amount of the subsidy. (As amended by RA 8751)

SEC. 303. Marking Duty - If at the time of importation any article (or its container, as provided in subsection "b" hereof), is not marked in accordance with the requirements of this section, there shall be levied, collected and paid upon such article a marking duty of 5 per cent ad valorem, which shall be deemed to have accrued at the time of importation, except when such article is exported or destroyed under customs supervision and prior to the final liquidation of the corresponding entry.

SEC. 304. Discriminatory Duty - The President may impose new or additional duties in an amount not exceeding one hundred (100) per cent ad valorem upon articles wholly or in part the growth or product of, or imported in a vessel of, any foreign country whenever he shall find that such country imposes unreasonable charge and discriminates against the commerce of the Philippines.

PART III. IMPORTATION IN GENERAL

A. ENTRY OF ARTICLES THROUGH CUSTOMHOUSE

(SECTIONS 1201, 1202 & 1302, TCCP)

Section 1201. Article to Be Imported Only Through Customhouse. — All articles imported into the Philippines whether subject to duty or not shall be entered through a customhouse at a port of entry. 

Sec. 1202. When Importation Begins and Deemed Terminated. — Importation begins when the carrying vessel or aircraft enters the jurisdiction of the Philippines with intention to unlade therein. Importation is deemed terminated upon payment of the duties, taxes and other charges due upon the articles, or secured to be paid, at a port of entry and the legal permit for withdrawal shall have been granted, or in case said articles are free of duties, taxes and other charges, until they have legally left the jurisdiction of the customs. 

Sec. 1302. Import Entries. — All imported articles, except importations admitted free of duty under Subsection "k", Section one hundred and five of this Code, shall be subject to a formal or informal entry. Articles of a commercial nature intended for sale, barter or hire, the dutiable value of which is Two thousand pesos (P2,000.00) or less, and personal and household effects or articles, not in commercial quantity, imported in passenger's baggage, mail or

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otherwise, for personal use, shall be cleared on an informal entry whenever duty, tax or other charges are collectible. The Commissioner may, upon instruction of the Secretary of Finance, for the protection of domestic industry or of the revenue, require a formal entry, regardless of value, whatever be the purpose and nature of the importation. A formal entry may be for immediate consumption, or under irrevocable domestic letter of credit, bank guarantee or bond for:

(a) Placing the article in customs bonded warehouse;

(b) Constructive warehousing and immediate transportation to other port of the Philippines upon proper examination and appraisal; or

(c) Constructive warehousing and immediate exportation. Import entries under irrevocable domestic letter of credit, bank guarantee or bond shall be subject to the provisions of Title V, Book II of this Code.

All importations entered under formal entry shall be covered by a letter of credit or any other verifiable document evidencing payment.

B. ABANDONMENT

Sec. 1801. Abandonment, Kinds and Effects of . — An imported article is deemed abandoned under any of the following circumstances: 

(a) When the owner, importer or consignee of the imported article expressly signifies in writing to the Collector of Customs his intentions to abandon; or (b) When the owner, importer, consignee or interested party after due notice, fails to file an entry within thirty (30) days, which shall not be extendible, from the date of discharge of the last package from the vessel or aircraft, or having filed such entry, fails to claim his importation within fifteen (15) days which shall not likewise be extendible, from the date of posting of the notice to claim such importation. Any person who abandons an article or who fails to claim his importation as provided for in the preceding paragraph shall be deemed to have renounced all his interests and property rights therein.

Sec. 1802. Abandonment of Imported Articles. — An abandoned article shall ipso facto be deemed the property of the Government and shall be disposed of in accordance with the provisions of this Code.

Nothing in this section shall be construed as relieving the owner or importer from any criminal liability which may arise from any

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violation of law committed in connection with the importation of the abandoned article. 

Any official or employee of the Bureau of Customs or of other government agencies who, having knowledge of the existence of an abandoned article or having control or custody of such abandoned article, fails to report to the Collector within twenty-four (24) hours from the time the article is deemed abandoned, shall be punished with the penalties prescribed in Paragraph 1, Section 3604 of this Code.

12.WHEN IMPORTATION BEGINS AND ENDS

Section 1202 of the Tariff and Customs Code provides that importation begins when the carrying vessel or aircraft enters the jurisdiction of the Philippines with intention to unload therein. It is clear from the provision of the law that mere intent to unload is sufficient to commence an importation. And "intent," being a state of mind, is rarely susceptible of direct proof, but must ordinarily be inferred from the facts, and therefore can only be proved by unguarded, expressions, conduct and circumstances generally. In this case, petitioner is guilty of illegal importation, there having been an intent to unload, is amply supported by substantial evidence. Feeder International Line, Pte., Ltd. vs. Court of Appeals, G.R. No. 94262, May 31, 1991, 197 SCRA 842 citing People vs. Court of First Instance of Rizal, etc., et al., 101 SCRA 86.

Importation takes place when merchandise is brought into the customs territory of the Philippines with the intention of unloading the same at port. An exception to this rule is transit cargo entered for immediate exportation under Section 2103 of

the TCCP. xxx For an entry for immediate exportation to be allowed under this provision, the following must concur:

(a) there is a clear intent to export the article as shown in the bill of lading, invoice, cargo manifest or other satisfactory evidence;

(b) the Collector must designate the vessel or aircraft wherein the articles are laden as a constructive warehouse to facilitate the direct transfer of the articles to the exporting vessel or aircraft;

(c) the imported articles are directly transferred from the vessel or aircraft designated as a constructive warehouse to the exporting vessel or aircraft and

(d) an irrevocable domestic letter of credit, bank guaranty or bond in an amount equal to the ascertained duties, taxes and other charges is submitted to the Collector (unless it appears in the bill of lading, invoice, manifest or satisfactory evidence that the articles are destined for transshipment).

None of the requisites above was present in this case. While respondents insist that the shipment was sent to the Philippines only for temporary storage and warehousing, the bill of lading clearly denominated "South Manila, Philippines" as the port of discharge. This not only negated any intent to export but also contradicted LIFFC's representation. Moreover, the shipment was unloaded from the carrying vessel for the purpose of storing the same at LIFFC's warehouse. Importation therefore took place and the only logical conclusion is that the refined sugar was truly intended for domestic consumption. Commissioner of Customs vs. Court of Tax Appeals, G.R. Nos. 171516-17, Resolution dated February 13, 2009, 579 SCRA 289.

Where the transfer of the shipment was made by virtue of the Boat Notes issued by the Customs Inspector giving specific instruction that the shipment should be “under continuous guarding” by the Customs guard “until released by the Customs authorities,” the physical and legal custody over the shipment remained with the Customs authorities.  Acceptance by the Bureau

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of Customs of the importer’s payment of the customs duties and taxes on the shipment legally terminates the importation of goods or articles. Commissioner of Customs vs. Milwaukee Industries Corporation, G.R. No. 135253, December 9, 2004, 445 SCRA 604.

When the Vessel was allowed to be released tax and duty-free subject to bond and re-exportation, its subsequent sale without paying the duties and taxes never completed and terminated the importation. In order for an importation to be deemed terminated, the payment of the duties, taxes, fees and other charges of the item brought into the country must be in full. For as long as the importation has not been completed, the imported item remains under the jurisdiction of the BOC. Secretary of Finance vs. Oro Maura Shipping Lines, G.R. No. 156946, July 15, 2009, 593 SCRA 14.

13. MEANING OF “ENTRY” IN CUSTOMS LAW; FILING OF BOTH IED AND IEIRD ARE NECESSARY TO CONSTITUTE ENTRY UNDER TCCP; WHAT CONSTITUTES ABANDONMENT

The term "entry" in customs law has a triple meaning. It means (1) the documents filed at the customs house; (2) the submission and acceptance of the documents and (3) the procedure of passing goods through the customs house. The operative act that constitutes "entry" of the imported articles at the port of entry is the filing and acceptance of the "specified entry form" together with the other documents required by law and regulations. Both the Import Entry Declaration (IED) and Import Entry and Internal Revenue Declaration (IEIRD) should be filed within a non-extendible period of thirty (30) days from the date of discharge of the last package from the vessel or aircraft.

In delaying the filing of IEIRDs to take advantage of the reduction in import duties on petroleum products from 10% to 3% under Republic Act (RA) No. 8180, which took effect on April 16,

1996, the importer petroleum company is deemed to have abandoned the imported products, resulting in forfeiture; the abandoned articles shall ipso facto be deemed the property of the government. Chevron Philippines, Inc. vs. Commissioner of the Bureau of Customs, G.R. No. 178759, August 11, 2008, 561 SCRA 710.

PART IV. TAX REMEDIES

I. REMEDIES AVAILABLE TO THE GOVERNMENT

A. SEARCH, SEIZURE AND ARREST

Sec. 2203. Persons Having Police Authority. — For the enforcement of the tariff and customs laws, the following persons are authorized to effect searches, seizures and arrests conformably with the provisions of said laws: 

a. Officials of the Bureau of Customs, district collectors, deputy collectors, police officers, agents, inspectors and guards of the Bureau of Customs;

b. Officers of the Philippine Navy and other members of the Armed Forces of the Philippines and national law enforcement agencies when authorized by the Commissioner;

c. Officials of the Bureau of Internal Revenue on all cases falling within the regular performance of their duties, when payment of internal revenue taxes are involved;

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d. Officers generally empowered by law to effect arrests and execute processes of courts, when acting under direction of the Collector. 

In order to avoid conflicts, and insure coordination among these persons having authority to effect searches, seizures and arrests for the effective enforcement of, and conformably with tariff and customs laws, the Secretary of Finance, shall, subject to the approval of the President of the Philippines, define the scope, areas covered, procedures and conditions governing the exercise of such police authority including custody and responsibility for the goods seized. The rules and regulations to this effect shall be furnished to all the government agencies and personnel concerned for their guidance and compliance, and shall be published in a newspaper of general circulation.

Sec. 2208. Right of Police Officer to Enter Inclosure. — For the more effective discharge of his official duties, any person exercising the powers herein conferred, may at anytime enter, pass through, or search any land or inclosure or any warehouse, store or other building, not being a dwelling house. 

A warehouse, store or other building or inclosure used for the keeping or storage of articles does not become a dwelling

house within the meaning hereof merely by reason of the fact that a person employed as watchman lives in the place, nor will the fact that his family stays there with him alter the case. 

14. MERE FLAGGING DOWN OF VEHICLE DOES NOT CONSTITUTE SEARCH

Petitioners were members of the Philippine National Police (PNP)-Criminal Investigation and Detection Group (CIDG). Petitioners, upon the order of Police Senior Superintendent Boac, but without the authority from and coordination with the Bureau of Customs (BOC), flagged down three container vans consigned to Kakiage Surplus. The Sandiganbayan found the petitioners guilty beyond reasonable doubt for violation of Section 2203 of the Tariff and Customs Code.

The Supreme Court reversed the ruling of the Sandiganbayan. The act of flagging down the vehicles is not among those proscribed by Sec. 2203 of the Tariff and Customs Code.  Mere flagging down of the container vans is not punishable under the said law. Coordination between BOC and PNP is emphasized in the laws. Should the PNP suspect anything, it should coordinate with the BOC and obtain the written authority from the Collector of Customs in order to conduct searches, seizures, or arrests.  Boac vs. People, G.R. No. 180597, November 7, 2008, 570 SCRA 533.

15. NO SEARCH OR SEIZURE SHALL BE MADE WITHOUT A WARRANT; EXCEPTION TO THE RULE; VALIDITY OF SEARCH, SEIZURE AND ARREST IN CUSTOMS CASES

Petitioner was arrested and charged of smuggling of blue-seal cigarettes. He assailed the validity of his arrest contending that the Arrest Search and Seizure Order (ASSO) No. 4754 was invalid.

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Thus, he asserted, any evidence obtained pursuant thereto is inadmissible in evidence. He maintained his lack of knowledge of the illegal nature of goods.

The Supreme Court affirmed the decision of the lower court which found the Petitioner guilty as charged. Warrantless search and seizure in customs search can be made, without violation of the constitutional provision, as it is one of the exceptions to the rule. “xxx the search and seizure of goods, suspected to have been introduced into the country in violation of customs laws, is one of the seven doctrinally accepted exceptions to the constitutional provision. xxx Under the Tariff and Customs Code, a search, seizure and arrest may be made even without a warrant for purposes of enforcing customs and tariff laws.

Persons found to be in possession of smuggled items are presumed to be engaged in smuggling, pursuant to the last paragraph of Section 3601 of the Tariff and Customs Code; claim of good faith and lack of knowledge of the unlawful source of the cigarettes is not enough to rebut the presumption. Rieta vs. People, G.R. No. 147817, August 12, 2004, 436 SCRA 273.

16. CUSTOMS SEARCH; WARRANTLESS SEARCH; WHO MAY EXERCISE POLICE AUTHORITY UNDER CUSTOMS LAW

Intelligence operatives of the Philippine Air Force (PAF) were tasked to conduct a surveillance operation to verify reports of drug trafficking and smuggling by certain PAL personnel when they apprehended petitioner for alleged smuggling of jewelries. Petitioner contented that the warrantless search and seizure was illegal. The Supreme Court denied the petition. The search made by PAF team while petitioner was on board a moving PAL aircraft tow truck within the vicinity of the airport was in the nature of a customs search. PAF properly effected the search and seizure without a search warrant since it exercised police authority under the customs law. Salvador vs. People, G.R. No. 146706, July 15, 2005, 463 SCRA 489.

B. ADMINISTRATIVE PROCEEDINGSSec. 2532. Conditions Affecting Forfeiture of Article. — As regards imported or exported article or articles whereof the importation or exportation is merely attempted, the forfeiture shall be effected only when and while the article is in the custody or within the jurisdiction of the customs authorities or in the hands or subject to the control of the importer, exporter, original owner, consignee, agent of other person effecting the importation, entry or exportation in question, or in the hands or subject to the control of some persons who shall receive, conceal, buy, sell or transport the same or aid in any such acts, with knowledge that the article was imported, or was the subject of an attempt at importation or exportation, contrary to law. 

Sec. 2533. Enforcement of Lien, Administrative Fines, and Forfeitures. — Administrative fines and forfeitures shall be enforced by the seizure of the vehicle, vessel or aircraft or other property subject to the fine or forfeiture and by subsequent proceedings in conformity with the provisions of Parts 2 and 3, Title VI, Book II, of this Code. For the purpose of enforcing the lien for customs duties, fees and other charges on any seized or confiscated article in the custody of the Bureau of Internal Revenue, the Bureau of Internal Revenue is hereby authorized to impose and enforce the said lien.

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Sec. 2534. Seizure of Vessel or Aircraft for Delinquency of Owner or Officer. — When the owner, agent, master, pilot in command or other responsible officer of any vessel or aircraft becomes liable to be fined under the tariff and customs laws on account of a delinquency in the discharge of a duty imposed upon him with reference to the said vessel or aircraft, the vessel or aircraft itself may be seized and subjected in an administrative proceeding for the satisfaction of the fine for which such person would have been liable. 

17. NATURE OF FORFEITURE PROCEEDINGS, NOT CRIMINAL IN NATURE; PROOF BEYOND REASONABLE DOUBT IS NOT REQUIRED

The vessel MT “ULU WAI” and its cargoes were declared forfeited by the Commissioner of Customs whose Decision was affirmed by both the CTA and CA. The owner of the vessel assailed the Decision contending that the forfeiture proceeding was not justified as the Decision was not supported by proof beyond reasonable doubt. The Supreme Court affirmed the decision in toto. "xxx A forfeiture proceeding under the tariff and customs laws is not criminal in nature since they do not result in the conviction of the wrongdoer nor in the imposition upon him of a penalty, proof beyond reasonable doubt is not required in order to justify the forfeiture of the goods; xxx the degree of proof required is merely substantial evidence which means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.”

“xxx seizure proceedings, such as those instituted in this case, are purely civil and administrative in character, the main purpose of which is to enforce the administrative fines or forfeiture incident to unlawful importation of goods or their deliberate

possession. The penalty in seizure cases is distinct and separate from the criminal liability that might be imposed against the indicted importer or possessor and both kinds of penalties may be imposed. xxx the decision of the Collector of Customs, as in other seizure proceedings, concerns the res rather than the persona.” Feeder International Line, Pte., Ltd. vs. Court of Appeals, supra. citing People vs. Court of First Instance of Rizal, etc., et al., 101 SCRA 86.

xxx forfeiture retroacts to the date of the commission of the offense; Thus, when the vessel and its cargo are ordered forfeited, the effect will retroact to the moment the vessel entered Philippine waters. Commissioner of Customs vs. Court of Appeals, G.R. Nos. 111202-05, January 31, 2006, 481 SCRA 109.

18. NATURE OF FORFEITURE, PROCEEDING IN REM; LACK OF KNOWLEDGE OF ILLEGAL IMPORTATION IS A PERSONAL DEFENSE, BUT CANNOT ABSOLVE THE VESSEL FROM FORFEITURE

CTA modified the Decision of petitioner Commissioner of Customs by ordering only the payment of a fine in lieu of the forfeiture of the vessel M/B "Maria Victoria-P" used in the illegal importation. The CTA anchored its Decision on the owner’s lack of knowledge of the vessel’s involvement in illegal importation. The Supreme Court set aside the assailed Decision and held that “forfeiture proceedings are in the nature of proceedings in rem (Vierneza vs. Commissioner of Customs, 24 SCRA 394) and are directed against the res. The fact that private respondent has allegedly no actual knowledge that M/B "Maria Victoria-P" was used illegally does not render the vessel immune from forfeiture. This is so because the forfeiture proceedings (sic) in this case was instituted against the vessel itself. Private respondent's defense that he has no actual knowledge that the vessel was used illegally is personal to him but cannot absolve the vessel from liability of forfeiture.” Commissioner of Customs vs. Court of Tax Appeals, No. L-31733, September 20, 1985, 138 SCRA 581.

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“It bears stressing that the forfeiture of seized goods in the Bureau of Customs is a proceeding against the goods and not against the owner. It is in the nature of a proceeding in rem, i.e., directed against the res or imported articles and entails a determination of the legality of their importation. In this proceeding, it is, in legal contemplation, the property itself which commits the violation and is treated as the offender, without reference whatsoever to the character or conduct of the owner. Asian Terminals, Inc. vs. Bautista-Ricafort, supra.

19. ENFORCEMENT OF A TAX LIEN

Vessel M/V “HARUNA’ with declared dutiable value of P6,171,092 and estimated customs duty of P1,296,710 was allowed to be released tax and duty-free to Glory Shipping Lines (GSL) upon posting of a bond and conditioned on re-exportation upon termination of 5-year bareboat charter. After the expiration of the bond, GSL failed to pay the duties and taxes. It instead sold the vessel to Oro Maura Shipping Lines who applied for Authority to Import, based on acquisition cost of P1,100,000 with assesses duties and taxes of P149,989. At this point, bad faith already intervened. Oro Maura Shipping Lines joined GSL in attempt to evade payment of customs duties & charges demanded by Mactan Collector by pushing through with purchase without notification to Mactan Collector. Mactan Collector subsequently instituted seizure proceedings. Undervaluation resulting in decrease of 80% (more than 30%) pursuant to Section 2503 TCCP. Without the renewal of the vessel's re-export bond, the obligation to pay customs duties, taxes and other charges on the importation in the amount of P1,296,710.00 arose and attached to the vessel. The obligation is a tax lien that attaches to imported goods, regardless of ownership. Oro Maura was ordered to pay the duties and taxes without considering depreciation in determining dutiable value. Secretary of Finance vs. Oro Maura Shipping Lines, supra.

C. COMPROMISE AGREEMENT

Sec. 2316. Authority of Commissioner to make Compromise. – Subject to the approval of the Secretary of Finance, the Commissioner of Customs may compromise any case arising under this Code or other laws or part of laws enforced by the Bureau of Customs involving the imposition of fines, surcharges and forfeitures unless otherwise specified by law.

20. WHO CAN COMPROMISE TAX CASES; COMPROMISE ENTERED INTO BY DEPUTY COMMISSIONER WITHOUT PROPER AUTHORITY IS WITHOUT EFFECT

Deputy Commissioner Valera filed in the RTC of Manila, for an on behalf of the Bureau of Customs a collection case for the collection of P37,195,859.00 in unpaid duties and taxes against Steel Asia Manufacturing Corporation (SAMC). Valera and SAMC entered into a compromise agreement wherein the latter offered to pay on a staggered basis through thirty (30) monthly equal installments the P37,195,859.00 duties and taxes sought to be collected in the civil case. The Supreme Court ruled that there is no conflict between Section 2316 (Authority of Commissioner to make Compromise) and Section 2401 (Supervision and Control over Criminal and Civil Proceedings) of the TCCP. Section 2401 covers the matter of the institution and filing of civil and criminal actions by customs officers, which is subject to the approval of the Commissioner if filed for the recovery of duties or the enforcement of any fine, penalty or forfeiture under the Code.  It does not cover the compromise of such civil or criminal actions, while Section 2316 is the provision that deals with such a situation.  In fact, the latter is categorical in providing an encompassing scope for the strict conditions for any compromise.  Its coverage includes “any

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case arising under this code or other laws or part of laws enforced by the Bureau of Customs involving the imposition of fines, surcharges and forfeitures unless otherwise specified by law.”  xxx E.O. No. 156, as amended by E.O. No. 38, is clear in its requirement that in cases involving tax credit scams the favorable recommendation for approval by the Special Task Force and the approval by the President of the Republic are both required.  The approval by the Chairmen of the Special Task Force is still subject to approval of the President.  Prior presidential approval is the highest form of check and balance within the Executive branch of government and cannot be satisfied by mere failure of the President to reverse or reprobate the acts of subordinates. Valera vs. Office of the Ombudsman, G.R. No. 167278, February 27, 2008, 547 SCRA 42.

D. JUDICIAL ACTION AGAINST THE TAXPAYER

Sec. 2401. Supervision and Control Over Criminal and Civil Proceedings. - Civil and criminal actions and proceedings instituted in behalf of the government under the authority of this Code or other law enforced by the Bureau shall be brought in the name of the government of the Philippines and shall be conducted by customs but no civil or criminal action for the recovery of duties or the enforcement of any fine, penalty or forfeiture under this Code shall be filed in court without the approval of the Commissioner.

Sec. 2402. Review by Court of Tax Appeals. — The party aggrieved by the ruling of the Commissioner in any matter brought before him upon protest or by

his action or ruling in any case of seizure may appeal to the Court of Tax Appeals, in the manner and within the period prescribed by law and regulations. 

Unless an appeal is made to the Court of Tax Appeals in the manner and within the period prescribed by laws and regulations, the action or ruling of the Commissioner shall be final and conclusive. 

21. COLLECTION OF OUTSTANDING CUSTOMS DUTIES AND TAXES MAY PROCEED WITHOUT AWAITING THE RESOLUTION OF PETITION WITH THE CTA

Pilipinas Shell Petroleum Corporation’s (Shell) tax debit memos (TDMs) and tax credit certificates (TCCs) were cancelled due to fraud. The Commissioner of Customs demanded immediate payment of unpaid customs duties and taxes. Shell protested, however, the BOC did not act on the protest. It then filed a petition for review in the CTA questioning the legality of the cancellation of the TCCs. Pending petition, BOC filed a complaint for collection in RTC Manila. Shell moved for the dismissal of the collection case but RTC denied the motion. The Supreme Court upheld the RTC and ruled that “We are not unmindful of petitioner's pending petition for review in the CTA where it is questioning the validity of the cancellation of the TCCs. However, respondent cannot and should not await the resolution of that case before it collects petitioner's outstanding customs duties and taxes for such delay will unduly restrain the performance of its functions. Moreover, if the ultimate outcome of the CTA case turns out to be favorable to petitioner, the law affords it the adequate remedy of seeking a refund.” Pilipinas Shell Petroleum Corporation vs. Republic, G.R. No. 161953, March 6, 2008, 547 SCRA 701.

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22. GOVERNMENT NEED NOT AWAIT THE RESULT OF THE CRIMINAL PROCEEDINGS BEFORE IT CAN COLLECT THE TAXES; INVALID PAYMENT

The BOC instituted a Complaint for Collection of Money with Damages against Proton Pilipinas Corporation (Proton) seeking the payment of customs duties and taxes which remain unpaid by reason of cancellation of the Tax Credit Certificates (TCCs) for being spurious. Prior to the collection case, a criminal case against the officers of Proton was pending with the Sandiganbayan. Proton moved for the dismissal of the collection case arguing, among others, that the collection case is the civil aspect of the criminal case pending with the Sandiganbayan, hence, it is deemed instituted in the latter, and; the determination of the validity of the TCCs was a prejudicial issue. The Supreme Court sustained the government’s right to collect unpaid customs duties and taxes, TCCs being found to be fake and spurious notwithstanding validation by the Department of Finance. It held:

“The payment of taxes is a duty which the law requires to be paid. Said obligation is not a consequence of the felonious acts charged in the criminal proceeding nor is it a mere civil liability arising from crime that could be wiped out by the judicial declaration of non-existence of the criminal acts charged. Hence, the payment and collection of customs duties and taxes in itself creates civil liability on the part of the taxpayer. xxx the determination of the validity or invalidity of the TCCs cannot be regarded as a prejudicial issue that must first be resolved with finality in the Criminal Cases filed before the Sandiganbayan. The Government should not and must not await the result of the criminal proceedings in the Sandiganbayan before it can collect the outstanding customs duties and taxes of the petitioner for such will unduly restrain the Government in doing its functions. The machineries of the Government will not be able to function well if the collection of taxes will be delayed so much so if its collection will depend on the outcome of any criminal proceedings

on the guise that the issue of collection of taxes is a prejudicial issue that need to be first resolved before enforcing its collection.” Proton Pilipinas Corporation vs. Republic, G.R. No. 165027, October 16, 2006, 504 SCRA 528.

23. THE PARTICIPATION OF BOC IN CRIMINAL AND CIVIL ASPECT OF THE CASE IS LIMITED TO THAT OF A WITNESS; OSG HAS THE PRIMARY RESPONSIBILITY TO APPEAR FOR THE GOVERNMENT

The BOC filed a criminal complaint before the Department of Justice against the officers of Mark Sensing Philippines, Inc. (MSPI) for unlawful importation. An Information was filed with the CTA after determination of probable cause. While the case was pending, the Secretary of Justice reversed the State Prosecutor’s Resolution and accordingly directed the withdrawal of the Information. CTA granted the motion to withdraw. BOC assailed the CTA’s resolution. The Supreme Court dismissed BOC’s petition. It ruled that public prosecutor has control and supervision over the cases.   The participation in the case of a private complainant, like BOC, is limited to that of a witness, both in the criminal and civil aspect of the case.

Also, the Supreme Court noticed that BOC was not represented by the Office of the Solicitor General (OSG) in instituting the petition, which contravenes established doctrinethat “the OSG shall represent the Government of the Philippines, its agencies and instrumentalities and its officials and agents in any litigation, proceeding, investigation, or matter requiring the services of lawyers.” Bureau of Customs vs. Peter Sherman, et. al., G.R. No. 190487, April 13, 2011.

By the Solicitor General – On appeal in criminal cases & in all civil cases. Section 35, Chapter 12, Title III, the Revised Administrative Code of 1987 (1987 RAC); CIR v. La Suerte Cigar and Cigarette Factory, GR 144942, June 28, 2001

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By the Secretary of Justice, through the Chief State Prosecutor & Provincial/City Prosecutors in original criminal cases - Section 8(2), Chapter 2, Title III, the 1987 RAC.

I. REMEDIES AVAILABLE TO THE TAXPAYER

A. ADMINISTRATIVE REMEDIESSec. 2301. Warrant for Detention of Property-Cash Bond. — Upon making any seizure, the Collector shall issue a warrant for the detention of the property; and if the owner or importer desires to secure the release of the property for legitimate use, the Collector shall, with the approval of the Commissioner of Customs, surrender it upon the filing of a cash bond, in an amount to be fixed by him, conditioned upon the payment of the appraised value of the article and/or any fine, expenses and costs which may be adjudged in the case: Provided, That such importation shall not be released under any bond when there is a prima facie evidence of fraud in the importation of article: Provided, further, That articles the importation of which is prohibited by law shall not be released under any circumstance whatsoever: Provided, finally, That nothing in this section shall be construed as relieving the owner or importer from any criminal liability which may arise from any violation of law committed in connection with the importation of the article.

Sec. 2308. Protest and Payment upon Protest in Civil Matters. —

When a ruling or decision of the Collector is made whereby liability for duties, taxes, fees, or other charges are determined, except the fixing of fines in seizure cases, the party adversely affected may protest such ruling or decision by presenting to the Collector at the time when payment of the amount claimed to be due the Government is made, or within fifteen (15) days thereafter, a written protest setting forth his objection to the ruling or decision in question, together with the reasons therefore. No protest shall be considered unless payment of the amount due after final liquidation has first been made and the corresponding docket fee, as provided for in Section 3301.

Sec. 2309. Protest Exclusive Remedy in Protestable Case. — In all cases subject to protest, the interested party who desires to have the action of the Collector reviewed, shall make a protest, otherwise, the action of the Collector shall be final and conclusive against him, except as to matters collectible for manifest error in the manner prescribed in section one thousand seven hundred and seven hereof. 

Sec. 2312. Decision or Action by Collector in Protest and Seizure Cases. — When a protest in proper form is presented in a case where protest is required, the Collector shall issue an order for hearing within fifteen (15) days

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from receipt of the protest and hear the matter thus presented. Upon termination of the hearing, the Collector shall render a decision within thirty (30) days, and if the protest is sustained, in whole or in part, he shall make the appropriate order, the entry reliquidated necessary. 

In seizure cases, the Collector, after a hearing shall in writing make a declaration of forfeiture or fix the amount of the fine or take such other action as may be proper. 

Sec. 2313. Review by Commissioner. — The person aggrieved by the decision or action of the Collector in any matter presented upon protest or by his action in any case of seizure may, within fifteen (15) days after notification in writing by the Collector of his action or decision, file a written notice to the Collector with a copy furnished to the Commissioner of his intention to appeal the action or decision of the Collector to the Commissioner. Thereupon the Collector shall forthwith transmit all the records of the proceedings to the Commissioner, who shall approve, modify or reverse the action or decision of the Collector and take such steps and make such orders as may be necessary to give effect to his decision: Provided, That when an appeal is filed beyond the period herein prescribed, the same shall be deemed dismissed. 

If in any seizure proceedings, the Collector renders a decision adverse to the Government, such decision shall be automatically reviewed by the Commissioner and the records of the case elevated within five (5) days from the promulgation of the decision of the Collector. The Commissioner shall render a decision of the automatic appeal within thirty (30) days from receipt of the records of the case. If the Collector's decision is reversed by the Commissioner, the decision of the Commissioner shall be final and executory. However, if the Collector's decision is affirmed, or if within thirty (30) days from receipt of the records of the case by the Commissioner no decision is rendered or the decision involves imported articles whose published value is Five million pesos (P5,000,000) or more, such decision shall be deemed automatically appealed to the Secretary of Finance and the records of the proceedings shall be elevated within five (5) days from the promulgation of the decision of the Commissioner or of the Collector under appeal, as the case may be: Provided, further, That if the decision of the Commissioner or of the Collector under appeal, as the case may be, is affirmed by the Secretary of Finance, or if within thirty (30) days from receipt of the records of the proceedings by the Secretary of Finance, no decision is rendered, the decision of the Secretary of Finance, or of the Commissioner, or of the Collector under

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appeal, as the case may be, shall become final and executory.

In any seizure proceeding, the release of imported articles shall not be allowed unless and until a decision of the Collector has been confirmed in writing by the Commissioner of Customs.

24. POSTING OF BOND; SEIZED ARTICLES MAY NOT BE RELEASED UNDER BOND IF THERE IS PRIMA FACIE EVIDENCE OF FRAUD; WHEN IMPORTATION TAKES PLACE, EXCEPTION TO THE RULE

The Commissioner of Customs affirmed the decision of the Collector of Customs which ordered the forfeiture of the imported refined sugar for failure of its importer to secure the required import allocation from the Sugar Regulatory Administration (SRA). While on appeal to the CTA, the importer filed a motion to release cargo for exportation upon filing of a surety bond. The CTA granted the motion and ordered the release of the shipment subject to the filing of a continuing surety bond. The Supreme Court reversed the CTA’s resolution and ruled that “seized articles may not be released under bond if there is prima facie evidence of fraud in their importation. xxx” Section 2301 of the Tariff and Customs Code of the Philippines (TCCP) prohibits the release under bond of seized importation in such case. Commissioner of Customs vs. Court of Tax Appeals, supra.

25. TAX PROTEST; LIQUIDATION

On account of the cancellation of the fraudulently issued TCCs, the BOC thru its Deputy Commissioner for Revenue Collections

Monitoring Group sent collection letters demanding payment from Pilipinas Shell Petroleum Corporation (Shell) of the amount covered by the cancelled TCCs it paid in 1997 and 1998. Three collection cases against Shell were filed before RTC Manila. Shell then filed with the CTA a Petition for Review questioning the BOC collection efforts. The parties argue over which act serves as the decision of the Commissioner that, under the law, can be the subject of an appeal before the CTA, and from which act the 30-day period to appeal shall be reckoned.

The Supreme Court denied Shell’s petition. The CTA has no jurisdiction, the case did not involve a tax protest case, but payment and collection issues. The decisions of the Commissioner which is appealable to the CTA involving customs duties specifically refer to his decisions on administrative tax protest cases in relation to Section 2402 of the TCCP.

A tax protest case, under the TCCP, involves a protest of the liquidation of import entries. A liquidation is the final computation and ascertainment by the collector of the duties on imported merchandise, based on official reports as to the quantity, character, and value thereof, and the collector's own finding as to the applicable rate of duty; it is akin to an assessment of internal revenue taxes under the National Internal Revenue Code where the tax liability of the taxpayer is definitely determined. Pilipinas Shell Petroleum Corporation vs. Commissioner of Customs, G.R. No. 176380, June 18, 2009, 589 SCRA 574.

26. PROTEST REQUIREMENT

The change in tariff classification by Customs-Société Générale de Surveillance (SGS) Imports Valuation and Classification Committee resulting in higher valuation leading to petitioner’s liability for additional duties and taxes is protestable. Accordingly, failure to protest the demand of the Collector adopting valuation is fatal. For failure of petitioner to pay under protest, the action of the Collector to collect additional duties became final and conclusive. GST Philippines, Inc. vs. Commissioner of Customs & Sec. of Finance, CTA EB No. 449,

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June 15, 2009, Supreme Court denied with finality petitioner’s Petition for Review and Motion for Reconsideration in Resolutions dated October 26, 2009 and January 27, 2010. Entry of Judgment dated February 24, 2010.

27. BOC HAS EXCLUSIVE ORIGINAL JURISDICTION ON SEIZURE AND FORFEITURE OF GOODS; THE RULE THAT THE RTC MUST DEFER TO BOC’S JURIDICTION IS ABSOLUTE

RTC of Olongapo City issued an Order rendering Seaport Department General Manager Canlas and two other lawyers guilty of indirect contempt for refusing to honor the TRO issued by the RTC which restrained them to interfere on the withdrawal and release of the imported rice consigned to WIRA International Trading, Inc.

The Supreme Court declared the Order void. “It is well settled that the Collector of Customs has exclusive jurisdiction over seizure and forfeiture proceedings, and regular courts cannot interfere with his exercise thereof or stifle or put it at naught. The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods. Regional trial courts are devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the BOC and to enjoin or otherwise interfere with these proceedings. Regional trial courts are precluded from assuming cognizance over such matters even through petitions for certiorari, prohibition or mandamus.

xxx from the moment imported goods are actually in the possession or control of the Customs authorities, even if no warrant for seizure or detention had previously been issued by the Collector of Customs in connection with the seizure and forfeiture proceedings, the BOC acquires exclusive jurisdiction over such imported goods for the purpose of enforcing the customs laws, subject to appeal to the Court of Tax Appeals whose decisions are appealable to this Court. Subic Bay Metropolitan Authority vs.

Rodriguez, G.R. No. 160270, April 23, 2010, 619 SCRA 176, citing Jao vs. Court of Appeals, G.R. Nos. 104604 and 111223, October 6, 1995, 249 SCRA 35.

28. RTC HAS NO REVIEW POWER OVER SEIZURE AND FORFEITURE PROCEEDINGS CONDUCTED BY THE BOC

Importers of right hand drive buses filed a complaint with the RTC of Parañaque City for replevin with prayer for the issuance of a writ of preliminary and mandatory injunction and damages. The RTC granted the application for a writ of replevin. In a subsequent order issued by the RTC, it dismissed the complaint on the ground of lack of jurisdiction while Asian Terminal, Inc. (ATI), a custom bonded warehouse where the vehicles were previously stored, questioned the said Order alleging that it had a lien on the vehicles.

The Supreme Court sustained the dismissal. It held that RTCs are devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the Bureau of Customs and to enjoin or otherwise interfere with these proceedings. It is the Collector of Customs, sitting in seizure and forfeiture proceedings, who has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods. The RTCs are precluded from assuming cognizance over such matters even through petitions of certiorari, prohibition or mandamus. xxx actions of the Collector of Customs are appealable to the Commissioner of Customs, whose decision, in turn, is subject to the exclusive appellate jurisdiction of the Court of Tax Appeals xxx Asian Terminals, Inc. vs. Bautista-Ricafort, G.R. No. 166901, October 27, 2006, 505 SCRA 748 citing Jao vs. Court of Appeals, G.R. Nos. 104604 and 111223, October 6, 1995, 249 SCRA 35, 42.

RTC has no jurisdiction to entertain a replevin suit involving an article subject of customs seizure and forfeiture proceeding. BOC has exclusive jurisdiction in seizure and forfeiture cases even if it

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be assumed that in the exercise of such exclusive competence a taint of illegality may be correctly imputed. Ponce Enrile vs. Vinuya, No. L-29043, January 30, 1971, 37 SCRA 381.

29. DETERMINATION OF PROBABLE CAUSE IN SEIZURE CASE IS NOT FOR THE RTC TO DETERMINE

A Warrant of Seizure and Detention of 25,000 bags of rice was issued by the District Collector of Customs of Cebu. The consignee of the sacks of rice and his buyer filed a complaint for injunction in the RTC of Cebu City. The RTC ruled that the Warrant of Seizure and Detention issued by the Bureau of Customs cannot divest the court of jurisdiction since its issuance is without legal basis as it was anchored merely on suspicion that the items in question were imported or smuggled. CA affirmed the RTC. It stated that regular courts still retain jurisdiction "where, as in this case, for lack of probable cause, there is serious doubt as to the propriety of placing the articles under Customs jurisdiction through seizure/forfeiture proceedings." The Supreme Court reversed both the RTC and CA. It was held that “the question of whether probable cause exists for the seizure of the subject sacks of rice is not for the Regional Trial Court to determine. The customs authorities do not have to prove to the satisfaction of the court that the articles on board a vessel were imported from abroad or are intended to be shipped abroad before they may exercise the power to effect customs searches, seizures, or arrests provided by law and continue with the administrative hearings. Bureau of Customs vs. Ogario, G.R. No. 138081, March 30, 2000, 329 SCRA 289.

30. BOC HAS JURISDICTION OVER THE GOODS SEIZED; WHERE TO APPEAL THE DECISION OF COLLECTOR OF CUSTOMS

Upon effecting the seizure of the goods, the Bureau of Customs acquired exclusive jurisdiction NOT only over the case but also over the goods seized for the purpose of enforcing the tariff and customs laws.

A party dissatisfied with the decision of the Collector may appeal to the Commissioner of Customs, whose decision is appealable to the Court of Tax Appeals in the manner and within the period prescribed by law and regulations. The decision of the Court of Tax Appeals may be elevated to the Supreme Court for review. Chia vs. Acting Collector of Customs, G.R. No. L-43810, September 26, 1989, 177 SCRA 755.

31. COLLECTOR’S DECISION IN SEIZURE PROCEEDINGS WHEN ADVERSE TO THE GOVERNMENT IS SUBJECT TO AUTOMATIC REVIEW BY COMMISSIONER OF CUSTOMS, BY SECRETARY OF FINANCE

The Decision of the Collector of Customs when adverse to the government shall be automatically reviewed by the Commissioner of Customs. The Commissioner shall render a decision on the automatic appeal within thirty (30) days from receipt of the records of the case. In case the BOC Commissioner fails to decide on the automatic appeal of the Collector's Decision within 30 days from receipt of the records thereof, the case shall again be deemed automatically appealed to the Secretary of Finance. (Section 2313, TCCP), El Greco Ship Manning and Management Corporation vs. Commissioner of Customs, G.R. No. 177188, December 4, 2008, 573 SCRA 70.

32. JURISDICTION OF COLLECTOR OF CUSTOMS OVER ABANDONMENT PROCEEDINGS

The District Collector of Customs initiated Abandonment Proceedings on overstaying cargoes located at the customs-

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bonded warehouse. Before the goods can be inventoried and sold at public auction, part of the warehouse containing the shipment was burned including that of the private respondent’s shipments. Private respondent filed a complaint for damages before the RTC of Pasig City claiming the value of the shipment. The RTC ruled ineffective the BOC’s declaration of abandonment. The Supreme Court reversed the decision of the RTC. The resolution of the issue of abandonment and ownership of the shipment (Sections1801 & 1802 TCC) is within the exclusive competence of the District Collector of Customs, the Commissioner of Customs and within the appellate jurisdiction of the CTA. The District Collector of Customs did not lose jurisdiction over the abandonment proceedings notwithstanding the loss of the cargo nor render functus oficio her declaration that the subject shipment had been abandoned. RTC was incompetent to pass upon and nullify seizure and abandonment proceedings as well as the issue on ownership over the goods seized. R.V. Marzan Freight, Inc. vs. Court of Appeals, G.R. No. 128064, March 4, 2004, 424 SCRA 596.

B. JUDICIAL REMEDIES33. LIABILITY OF THE GOVERNMENT IN CASE OF LOSS OF

ARTICLES WHILE IN CUSTODY; EXCEPTION TO STATE IMMUNITY; NON-LIABILITY FOR INTEREST

As an exception to the principle of state immunity from suit, due to gross negligence in the loss of imported goods in its custody, the Bureau of Customs was held liable to pay the value of the shipment, payment to be taken from the sale or sales of goods or properties seized or forfeited, upon payment of the necessary customs duties; liability may be paid in Philippine currency, computed at the exchange rate prevailing at the time of actual payment. Republic of the Philippines, Represented by the Commissioner of Customs v. Unimex Micro-Electronics (GMBH), G.R. No. 166309-10, March 9, 2007, 518 SCRA 19, as cited in the recent case of Commissioner of Customs vs. Agfha Incorporated, G.R. No. 187425, March 28, 2011.

In addition to the value of the shipment lost while in the custody of BOC, respondent UNIMEX was awarded legal interest of 6% p.a. from September 5, 2001 (date of judicial demand by filing the petition for revival of the June 15, 1992) until the finality of the March 9, 2007 SC decision. Thereafter, the rate of legal interest shall be 12% p.a. until the BOC fully pays its obligation. Republic of the Philippines, Represented by the Commissioner of Customs v. Unimex Micro-Electronics (GMBH), G.R. No. 166309-10, Resolution dated December 10, 2007.

C. CLAIM FOR REFUNDSec. 1708. Claim for Refund of Duties and Taxes and Mode of Payment. — All claims for refund of duties shall be made in writing and forwarded to the Collector to whom such duties are paid, who upon receipt of such claim shall verify the same by the records of his Office, and if found to be correct and in accordance with law, shall certify the same to the Commissioner with his recommendation together with all necessary papers and documents. Upon receipt by the Commissioner of such certified claim he shall cause the same to be paid if found correct. 

If as a result of the refund of customs duties there would necessarily result a corresponding refund of internal revenue taxes on the same importation, the Collector shall likewise certify the same to the Commissioner who shall cause the said taxes to be paid, refunded, or tax credited in favor of the importer, with

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advice to the Commissioner of Internal Revenue.

Sec. 2308. Protest and Payment upon Protest in Civil Matters. – see A. Administrative remedies available to the taxpayer

Sec. 2309. Protest Exclusive Remedy in Protestable Case. - see A. Administrative remedies available to the taxpayer

34. PERIOD TO FILE REFUND; APPEAL TO CTA WAS ALLOWED EVEN WITHOUT DECISION OF THE COMMISSIONER OF CUSTOMS

The right to claim for refund of customs duties is specifically governed by Section 1708 of the Tariff and Customs Code which provides that in all claims for refund of customs duties, the Collector to whom such customs duties are paid and upon receipt of such claim is mandated to verify the same by the records of his Office. If such claim is found correct and in accordance with law, the Collector shall certify the same to the Commissioner with his recommendation together with all the necessary papers and documents. (Note: No specific period for filing the claim for refund was provided under the said section.)

Meanwhile, Sections 2308 and 2309 finds application in all cases subject to protest, the claim for refund of customs duties shall be preceded by a protest before the Collector of Customs either at the time when payment of the amount claimed to be due the government is made or within fifteen (15) days thereafter a written protest shall be made. In conjunction with this right of the claimant is the duty of the Collector of Customs to hear and decide such protest within thirty (30) days upon termination of the hearing. (Section 2312, TCCP)

Appeal to CTA on protest cases was allowed even without decision of the Collector as well as Commissioner of Customs due to inaction by Collector for an unreasonable length of time (almost 6 years). Nestle Philippines, Inc. vs. Court of Appeals, G.R. No. 134114, July 6, 2001, 360 SCRA 575.

CTA acquires jurisdiction in a refund of customs duties even in the absence of the decision of the Commissioner of Customs; tax official’s silence is a denial of its claim; the two (2)-year prescriptive period under Section 230 (now Section 229) of the NIRC was applied. Commissioner of Customs and Commissioner of Internal Revenue vs. The Honorable Court of Tax Appeals and Planters Products, Inc., G.R. No. 82618, March 16, 1989.

A duly registered enterprise under the EPZA (now PEZA) Law was allowed refund of erroneously or mistakenly paid customs duties applying the provision of the Civil Code on solutio indebiti (within 6 years from date of payment). Commissioner of Customs vs. Philippine Phosphate Fertilizer Corporation, G.R. No. 144440, September 1, 2004, 437 SCRA 452.

35. PERIOD TO FILE REFUND; CAO 5-92; PAYMENT OF REFUND PROCESSING FEE

Whether or not the failure to pay the refund processing fee with the BOC is fatal to a claim for tax refund of advance deposit for customs duties and taxes arising from unused Letter of Credit (LCs) for the supposed importation which did not materialize. Customs Administrative Order (CAO) No. 5-92, period to file claim for refund. Grandteq Industrial Steel Products, Inc. herein represented by its President, Abelardo Gonzalez vs. Hon. Secretary of the Department of Finance, CTA Case No. 8201.

PART IV. CTA’S JURISDICTION OVER CUSTOM CASESA. CTA’S JURISDICTION –SPECIAL AND LIMITEDTCCP

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Sec. 2401. Supervision and Control Over Criminal

and Civil Proceedings. See Judicial Action

against the taxpayer.

Sec. 2402. Review by Court of Tax Appeals. See

Judicial Action against the taxpayer.

AN ACT CREATING THE COURT OF TAX APPEALS, RA 1125 AS AMENDED BY RA 9282

SEC. 7. Jurisdiction. — The CTA shall exercise:

(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:

xxx xxxxxx

(4) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money charges, seizure, detention or release of property affected, fines, forfeitures or other penalties in relation thereto, or other matters arising under the Customs Law or other laws administered by the Bureau of Customs;

xxx xxxxxx

(6) Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from decisions of the Commissioner of Customs which are adverse to the Government under Sec. 2315 of the Tariff and Customs Code;

(7) Decisions of the Secretary of Trade and Industry, in the case of nonagricultural product, commodity or article, and the Secretary of Agriculture in the case of agricultural product, commodity or article, involving dumping and countervailing duties under Sections 301 and 302, respectively, of the Tariff and Customs Code, and safeguard measures under Republic Act no. 8800, where either party may appeal the decision to impose or not to impose duties.

xxx xxxxxx

Sec. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. — Any party adversely affected by a decision, ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture or the Central

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Board of Assessment Appeals or the Regional Trial Courts may file an appeal with the CTA within thirty (30) days after the receipt of such decision or ruling or after the expiry of the period fixed by law for action as referred to in Section 7(a)(2) herein.

Appeal shall be made by filing a petition for review under a procedure analogous to that provided for under Rule 42 of the 1997 Rules of Civil Procedure with the CTA within thirty (30) days from the receipt of the decision or ruling or in the case of inaction as herein provided, from the expiration of the period fixed by law to act thereon. A Division of the CTA shall hear the appeal: xxx xxx

xxx

All other cases involving rulings, orders, or decisions filed with the CTA as provided for in Section 7 shall be raffled to its Divisions. A party adversely affected by a ruling, order or decision of a Division of the CTA may file a motion for reconsideration or new trial before the same Division of the CTA within fifteen (15) days from notice thereof: Provided, however, That in criminal cases, the general rule applicable in regular Courts on matters of prosecution and appeal shall likewise apply.

No appeal taken to the CTA from the decision of the Commissioner of Internal Revenue or the Commissioner of

Customs xxx or the Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture, as the case may be, shall suspend the payment, levy, distraint, and/or sale of any property of the taxpayer for the satisfaction of his liability as provided by existing law: Provided, however, That when in the opinion of the Court the collection by the aforementioned government agencies may jeopardize the interest of the Government and/or the taxpayer the Court at any stage of the proceeding may suspend the said collection and require the taxpayer either to deposit the amount claimed or to file a surety bond for not more than double the amount with the Court.

xxx xxxxxx

Sec. 18. Appeal to the Court of Tax Appeals En Banc. – No civil proceeding involving matters arising under the National Internal Revenue Code, the Tariff and Customs Code or the Local Government Code shall be maintained, except as here in provided, until and unless an appeal has been previously filed with the CTA and disposed of in accordance with the provisions of this Act.

A party adversely affected by a resolution of a Division of the CTA on a motion for reconsideration or new trial, may file a petition for review with the CTA en banc.

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Sec. 19. Review by Certiorari. – A party adversely affected by a decision or ruling of the CTA en banc may file with the Supreme Court a verified petition for review on certiorari pursuant to Rule 45 of the 1997 Rules of Civil Procedure.

36. CTA–LIMITED JURISDICTION

The Court has long recognized the legislative determination to vest sole and exclusive jurisdiction on matters involving internal revenue and customs duties to such a specialized court. By the very nature of its function, the CTA is dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on the subject. At the same time, since the CTA is a court of limited jurisdiction, its jurisdiction to take cognizance of a case should be clearly conferred and should not be deemed to exist on mere implication. The acts of other bodies that were granted some powers by the Safeguard Measures Act, such as the Tariff Commission, are not subject to direct review by the CTA. Even prior to R.A. 9282, the CTA, not the CA, has jurisdiction over the non-imposition of safeguard measures, citing rule against split jurisdiction. Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation, supra.

The One Stop Shop Inter-Agency Tax Credit and Duty Drawback Center (the Center)- cancelled the Tax Credit Certificates assigned to Pilipinas Shell. CTA has no jurisdiction over decisions of the Center. Pilipinas Shell Petroleum Corporation vs. Commissioner of Customs, G.R. No. 176380, June 18, 2009, 589 SCRA 574.

37. DECISION/ORDER OF THE COLLECTOR OF CUSTOMS IS NOT APPEALABLE TO THE CTA

An Order issued by the District Collector of the Port of Manila ordering the forfeiture in favor of the Government of the subject importation shipments of flour by petitioner is not the decision appealable before the CTA. To properly invoke the jurisdiction of the CTA, the "decisions" mentioned in Section 7 (a) (4) of RA 1125, as amended by RA 9282 pertain to decisions of the Commissioner of Customs involving liability for customs duties, fees or other money charges, seizure, detention or release of property affected, fines, forfeitures or other penalties in relation thereto, or other matters arising under the Customs Law or other laws administered by the Bureau of Customs. The decision or order of the Collector of Customs, as such in this case, is not the decision being contemplated by the provision of law. CTA is a court of special appellate jurisdiction, it can only try cases permitted by statute. Rubills International, Inc. et. al. vs. Napoleon L. Morales, et al., CTA EB No. 471 (CTA Case No. 7782), July 29, 2009.

38. MERE REFERRAL LETTER ISSUED BY THE COMMISSIONER OF CUSTOMS DOES NOT CONSTITUTE DECISION APPEALABLE TO THE CTA

The CTA Court in Division has exclusive appellate jurisdiction to review by appeal the decisions of the Commissioner of Customs. Settled is the rule that the decision or order which is appealable to the CTA, is that which has resolved the case with finality, and in effect terminates or finally disposes of a case, as it leaves nothing to be done by the Commissioner of Customs, as the case has been decided on the merits. A mere referral letter issued by the Commissioner of Customs referring the case to the OIC-District Collector for appropriate action is not a decision appealable to the CTA. Unioil Petroleum Philippines, Inc. vs. Napoleon Morales, et. al., CTA EB No. 503 (CTA Case No. 7879), April 15, 2010.

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39. CTA HAS NO APPELLATE JURISDICTION OVER AN ACTION TO COLLECT ON A BOND USED TO SECURE THE PAYMENT OF TAXES, SUCH ACTION IS NOT A TAX COLLECTION CASE BUT A SIMPLE ENFORCEMENT OF CONTRACTUAL LIABILITY

The Republic of the Philippines represented by the Bureau of Customs (BOC) filed a Collection of Money with Damages before the Regional Trial Court (RTC) against Philippine British Assurance Company, Inc. (PBAC) for the outstanding unliquidated customs bonds issued by the latter to its clients to secure the release of imported goods with the BOC. The RTC ruled in favor of the Republic. PBAC appealed the decision to the Court of Appeals (CA). Thereafter, CA dismissed the appeal for lack of jurisdiction. According to CA, the case is rooted on the payment of taxes and duties, one which involves a collection of taxes where the jurisdiction is with the CTA. The SC reversed the CA and ruled that “an action based upon a surety bond cannot be considered a tax collection case. Rather, such action would properly be a case based on a contract.” Philippine British Assurance Co. Inc. vs. Republic of the Philippines represented by the Bureau of Customs, G.R. No. 185588, February 2, 2010.

40. JURISDICTION OF THE CTA; ISSUES OF OWNERSHIP OVER GOODS IN THE CUSTODY OF CUSTOM OFFICIALS ARE WITHIN THE POWER OF CTA TO DETERMINE

In order to enforce a maritime lien over the subject of a seizure and detention proceeding in customs cases, several cases where filed both in the RTC and the CA raising, among others, the issue of ownership over the subject of seizure. The CA enjoined the CTA from exercising jurisdiction over the case. This was reversed by the Supreme Court. “While the party contended that the Commissioner of Custom's custody was illegal, such fact, even if

true, does not deprive the Commissioner of Customs of jurisdiction thereon. This is a question that ought to be resolved in the seizure and forfeiture cases, which are now pending with the CTA, and not by the regular courts as a collateral matter to enforce his lien. xxx “the CA was clearly in error when it issued an injunction against it from deciding the forfeiture case on the basis that it interfered with the subject of ownership over the vessel which was, according to the CA, beyond the jurisdiction of the CTA. xxx allegations of ownership neither divest the Collector of Customs of such jurisdiction nor confer upon the trial court jurisdiction over the case. Ownership of goods or the legality of its acquisition can be raised as defenses in a seizure proceeding. The actions of the Collectors of Customs are appealable to the Commissioner of Customs, whose decision, in turn, is subject to the exclusive appellate jurisdiction of the CTA. Clearly, issues of ownership over goods in the custody of custom officials are within the power of the CTA to determine.” Commissioner of Customs vs. Court of Appeals, supra.

B. APPEAL

41. PERIOD TO APPEAL; PERFECTION OF AN APPEAL IN THE CTA EN BANC IS NOT ONLY MANDATORY BUT ALSO JURISDICTIONAL

The assailed Resolution dated January 5, 2010 issued by the CTA First Division dismissing the criminal case for failure to prosecute was received by the Department of Justice and Bureau of Customs (BOC) on January 15, 2010. Petitioner BOC filed the Petition for Review in the CTA En Banc on February 2, 2010. An appeal to the Court En Banc in criminal cases shall be taken by filing a petition for review within fifteen (15) days from receipt of a copy of the decision or resolution appealed from. However, for good cause, the time for filing the petition may be extended for an additional period not exceeding fifteen days. [Section 9 (b), Rule 9 of the 2005 Revised Rules of the Court of Tax Appeals (RRCTA)]

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Petition was filed out of time. The period for filing is mandatory unless good cause is shown. Perfection of an appeal in the manner and within the period laid down by law is not only mandatory but also jurisdictional. People of the Philippines vs. Allan Francisco, et. al., CTA EB Crim Case No. 007 (CTA Crim Case No. O-098), February 15, 2011 citing Commissioner of Internal Revenue vs. Fort Bonifacio Development Corporation, G.R. No. 167606, August 11, 2010.

42. CTA EN BANC HAS EXCLUSIVE APPELLATE JURISDICTION OVER DECISIONS AND RESOLUTIONS OF CTA DIVISION; FAILURE TO FILE MOTION FOR RECONSIDERATION SHALL RENDER THE DECISION OF THE CTA DIVISION FINAL AND EXECUTORY

The Commissioner of Customs (COC) assailed the Decision of CTA First Division, reversing the former’s decree of forfeiture, lifting the Warrants of Seizure and Detention (WSD), and ordering the release to Gelmart Industries Philippines, Inc. of its imported fabrics. As found by the Supreme Court, COC committed procedural missteps when if failed to observe Sections 9 and 11 of RA 9282 as well as the Revised Rules of the Court of Tax Appeals. A party adversely affected by a ruling, order or decision of a Division of the CTA may file a motion for reconsideration or new trial before the same Division of the CTA within fifteen (15) from thereof. (Sec. 9 of R.A. No. 9282)

Sec. 11 of the same law provides that, ". . . A party adversely affected by a resolution of a Division of the CTA on a motion for reconsideration or new trial may file a petition for review with the CTA en banc." In turn, "A party adversely affected by a decision or ruling of the CTA en banc may file with the Supreme Court a verified petition for review on certiorari pursuant to Rule 45 of the 1997 Rules of Civil Procedure." (Sec. 12 of R.A. No. 9282)

Sec. 2, Rule 4 of the Revised Rules of the Court of Tax Appeals (RRCTA) reiterates the exclusive appellate jurisdiction of

the CTA en banc relative to the review of decisions or resolutions on motion for reconsideration or new trial of the court's two (2) divisions in cases arising from administrative agencies such as the Bureau of Customs. xxx Petitioner's failure to file a motion for reconsideration of the assailed decision of the CTA First Division, or at least a petition for review with the CTA en banc, invoking the latter's exclusive appellate jurisdiction to review decisions of the CTA divisions, rendered the assailed decision final and executory. Commissioner of Customs vs. Gelmart Industries Philippines, Inc., G.R. No. 169352, February 13, 2009, 579 SCRA 272.

A Petition for Review En Banc filed by the Commissioner of Customs before the CTA En Banc was dismissed for failure to file a Motion for Reconsideration before the CTA Division. The Supreme Court agrees with the CTA En Banc that the Commissioner failed to comply with the mandatory provisions of Rule 8, Section 1 of RRCTA requiring that "the petition for review of a decision or resolution of the Court in Division must be preceded by the filing of a timely motion for reconsideration or new trial with the Division." The word "must" clearly indicates the mandatory — not merely directory — nature of a requirement." Commissioner of Customs vs. Marina Sales, Inc., G.R. No. 183868, November 22, 2010.

C. SUSPENSION OF COLLECTION OF TAXES43. SUSPENSION OF COLLECTION OF TAXES; FILING OF

PETITION DOES NOT SUSPEND THE COLLECTION OF TAXES

No appeal taken to the CTA from the decision of the Commissioner of Internal Revenue or the Commissioner of Customs or the Regional Trial Court, provincial, city or municipal treasurer or the Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture, as the case may be, shall suspend the payment, levy, distraint, and/or sale of any property of the taxpayer for the satisfaction of his tax liability as provided by existing law: Provided, however, That when in the opinion of

32

the Court the collection by the aforementioned government agencies may jeopardize the interest of the Government and/or the taxpayer the Court at any stage of the proceeding may suspend the said collection and require the taxpayer either to deposit the amount claimed or to file a surety bond for not more than double the amount with the Court. (Sec. 11, RA 1125, amended by Sec. 9, RA 9282)

[Association of Pilipinas Shell Dealers, et al. vs. Cesar V. Purisima, et al. & Francis Joseph G. Escudero, et al. vs. Cesar V. Purisima, et al., G.R. Nos. 168461 & 168463, Resolution, July 1, 2005, issuing TR0 on enforcement and implementation of RA 9337, Expanded VAT Act of 2005 and consolidating cases with ABAKADA Guro Party List [Formerly AASJS] Officers Samson S. Alcantara, et al. vs. Hon. Executive Secretary Eduardo R. Ermita, et al., G.R. No. 168056 & Aquilino Q. Pimentel, et al. vs. Executive Secretary Eduardo R. Ermita, et al., G.R. No. 168207, Decision September 1, 2005 upholding constitutionality and lifting TRO upon finality; Filipino Metals Corp. vs. Secretary of the Department of Trade and Industry, G.R. No. 157498, July 15, 2005, writ of injunction issued by RTC sustained] Exception, (Sec. 2301, TCCP) Commissioner of Customs v. CTA, Las Islas Filipinas Food Corporation and Pat-Pro Overseas Co., Ltd., GR 171516-17, Res. February 13, 2009.

Section 29 of RA No. 8800 (the “Safeguard Measure Act”) provides that: “Any interested party who is adversely affected by the ruling of the Secretary in connection with the imposition of a safeguard measure may file with the Court of Tax Appeals, a petition for review of such ruling within thirty (30) days from receipt thereof: Provided, however, That the filing of such petition for review shall not in any way stop, suspend or otherwise toll the imposition or collection of the appropriate tariff duties or the adoption of other appropriate safeguard measures, as the case may be.” Petitioner’s prayer for a Temporary Restraining Order and/or Preliminary Injunction was denied for failure to prove that the collection of safeguard duties shall jeopardize their interest. Comglasco Aguila Corporation, San Francisco Mirror

Corporation, All Plus Corporation, And Ghani Float Glass, Limited vs. Secretary of the Department of Trade and Industry, et. al., CTA Case No. 7453, Resolution dated August 29, 2006.

Petitioner’s “Motion to Suspend Collection of Disputed Tax Liability,” with allegation that the collection of the subject taxes would cause serious prejudice and irreparable damage leading to bankruptcy and closure of business, was granted subject to the filing of a bond. It appearing that the collection of deficiency taxes will seriously jeopardize not only the interest of petitioner but also of the government’s. International Pharmaceuticals Inc. vs. Commissioner Lillian Hefti in her capacity as Commissioner of Internal Revenue, et al., CTA Case No. 7736, Resolution dated May 7, 2008.

D. OTHER SIGNIFICANT ISSUES

44. NO GRAVE ABUSE OF DISCRETION WHEN THE COURT’S CONCLUSION IS SUPPORTED BY LEGAL BASES

FACTS: A certiorari case was filed against CTA for alleged grave abuse of discretion in granting the Motion to Release Goods Under Bond. The goods subject of seizure for alleged violation of Section 2530 of the TCCP consisted of bags of rice loaded in container vans.

RULING: While this case was pending before the SC, the CTA decided the main case which rendered this petition moot and academic. At any rate, the SC dismissed the petition as there was no grave abuse of discretion and the assailed Resolution was backed by legal bases, i.e., the subject goods were merely “regulated” and not “prohibited” commodities. “An act of a court or tribunal can only be considered to

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be tainted with grave abuse of discretion when such act is done in a capricious or whimsical exercise of judgment as is equivalent to lack of jurisdiction. In order to be qualified as “grave,” the abuse of discretion must be so patent or gross as to constitute an evasion of a positive duty or a virtual refusal to perform the duty or to act at all in contemplation of law.” Secretary of The Department of Finance v. CTA (2nd Div.) and Kutangbato Conventional Trading Multi-Purpose Cooperative, G.R. No. 168137, Aug. 7, 2013.

45. MERE SUBSTANTIAL EVIDENCE IS NECESSARY TO JUSTIFY FORFEITURE IN CUSTOMS CASES; VESSELS MAY BE CONSIDERED DUTIABLE ARTICLES

The subject vessel M/V Coco Explorer 2, a.k.a. 7107 Islands Cruise entered the Philippines allegedly for purposes of repair. However, what was proven was its sale prior to repair. Section 105 of the TCCP allows as “conditionally free importations” articles brought into the Philippines for repair subject to re-exportation and posting of bond. There was no showing of compliance with the requirements, hence, the vessel was forfeited. Forfeiture proceeding under tariff and customs laws is not penal in nature since it does not result in the conviction of the wrongdoer nor in the imposition upon him of a penalty; proof beyond reasonable doubt is not required in order to justify the forfeiture of the goods. The degree of proof required is merely substantial evidence, which means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion citing Feeder International Line, PTE., LTD., et al. vs. CA, et al., G.R. No. 94262, May 31, 1991. 7107 Islands Shipping Corp. vs. Sec. of Finance, CTA Case No. 7955, Mar. 6, 2012. When used with reference to importation and exportation, articles include goods, merchandise and in general anything that may be made the subject of

importation or exportation. Ships, boats and floating structures such as the subject vessels are dutiable articles under Heading 89.04-.05 of Chapter 89 of the TCCP. Vessels may be considered articles subject of importation. Cornelio Q. Casido vs. RP, et al., CTA Case No. 8087, Feb. 8, 2012.

46. THE PARTICIPATION OF BOC IN CRIMINAL AND CIVIL ASPECT OF THE CASE IS LIMITED TO THAT OF A WITNESS; OSG HAS THE PRIMARY RESPONSIBILITY TO APPEAR FOR THE GOVERNMENT

The BOC filed a criminal complaint before the Department of Justice against the officers of Mark Sensing Philippines, Inc. (MSPI) for unlawful importation. An Information was filed with the CTA after determination of probable cause. While the case was pending, the Secretary of Justice reversed the State Prosecutor’s Resolution and accordingly directed the withdrawal of the Information. CTA granted the motion to withdraw. BOC assailed the CTA’s resolution. The Supreme Court dismissed BOC’s petition. It ruled that public prosecutor has control and supervision over the cases.   The participation in the case of a private complainant, like BOC, is limited to that of a witness, both in the criminal and civil aspect of the case.

Also, the Supreme Court noticed that BOC was not represented by the Office of the Solicitor General (OSG) in instituting the petition, which contravenes established doctrine that “the OSG shall represent the Government of the Philippines, its agencies and instrumentalities and its officials and agents in any litigation, proceeding, investigation, or matter requiring the services of lawyers.” Bureau of Customs vs. Peter Sherman, et. al., G.R. No. 190487, April 13, 2011.

By the Solicitor General – On appeal in criminal cases & in all civil cases. Section 35, Chapter 12, Title III, the Revised Administrative Code of 1987 (1987 RAC); CIR v. La Suerte Cigar and Cigarette Factory, GR 144942, June 28, 2001

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By the Secretary of Justice, through the Chief State Prosecutor & Provincial/City Prosecutors in original criminal cases - Section 8(2), Chapter 2, Title III, the 1987 RAC.

47. REGULAR COURTS AND NOT CTA HAS THE JURIDICTION TO RULE ON THE CONSTITUTIONALITY OR VALIDITY OF A LAW, RULE OR REGULATION ISSUED BY COC/CIR

SC sustained the RTC when the latter struck down Customs Memorandum Order (CMO) No. 27-2003 on the tariff classification of wheat issued by Commissioner of Customs (COC) for being invalid and of no force and effect. SC sustained the ruling upon finding that COC violated taxpayer’s right to due process in the issuance of CMO 27-2003 when they failed to observe the requirements of notice and hearing under the Revised Administrative Code. COC likewise violated respondent’s right to equal protection of laws when they provided for an unreasonable classification in the application of the regulation. Finally, COC went beyond his powers of delegated authority when the regulation limited the powers of the customs officer to examine and assess imported articles. COC and the District Collector of the Port of Subic vs. Hypermix Feeds Corp., G.R. No. 179579, Feb. 1, 2012.

It is not within the jurisdiction of the CTA to determine the validity of Customs Administrative Order No. 7-92 (Rules and Regulations Governing the Overtime Pay and Other Compensations Related Thereto Due to Customs Personnel at the NAIA). The jurisdiction over the validity and constitutionality of rules and regulations issued by the COC by virtue of its rule making power under Section 608, TCCP lies before the regular courts. Sergio I. Carbonilla, et al vs. Board of Airlines Representative (BAR), et al, G.R. No. 193247, OP, represented by Hon. Paquito N. Ochoa, et al vs. BAR, et al, G.R. No. 194276, Sept. 14, 2011. CTA’s jurisdiction to resolve tax disputes excludes the power to rule on the constitutionality or validity of a law, rule of regulation, which is vested in the regular

courts citing British American Tobacco vs. Jose Isidro Camacho, et al, G.R. No. 163583, Aug. 20, 2008.

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