Republic v. Court of Tax Appeals

[CA-G.R. SP No. 22069. February 22, 1991.] (C.T.A. Case No. 3728) REPUBLIC OF THE PHILIPPINES (Represented by the Commissioner of Customs) , petitioner , vs . THE HONORABLE COURT OF TAX APPEALS and ELECTRONIC POWER SYSTEMS CORPORATION , respondents . D E C I S I O N LUNA , J p : In this petition for certiorari , mandamus , prohibition with preliminary injunction and/or restraining order, filed with the Supreme Court (G.R. No. 84323), and referred to this Court for proper determination and disposition, the Republic of the Philippines, represented by the Commissioner of Customs, seeks the annulment of a Resolution dated July 6, 1988 of respondent court, in CTA Case No. 3728, entitled: "Electronic Power System Corporation vs. The Actg. Commissioner of Customs", granting the Motion of private respondent Electronic Power System Corporation for ". . . Leave of Court to avail of Executive Order No. 38, pursuant to the terms and conditions laid down therein." Sometime in July, 1980, the private respondent imported aircon parts, consisting of 1,600 compressors, 1,100 precision rotary switches, 1,000 thermostats and 6,100 door mechanisms which arrived in Manila on July 29 and stored at the Raymundo's Trading CY-CFS. On December 3, the shipment was withdrawn thereat and brought to private respondent's warehouse at Libis, Quezon City, on the strength of Delivery Permit 005395380, Central Bank Official Receipt 971886 dated December 1, 1980 and Central Bank Release Certificate 59475948. Afterwards, the Bureau of Customs discovered that the documents aforesaid were fake or falsified and that the duties and taxes due on the shipment in the amount of P1,876,469.00 have not been paid. On January 8, 1981 the Collector of Customs issued a warrant of seizure and detention. On January 10, the Customs' authorities located the shipment at the corporate's warehouse, seized it and brought it back and deposited it at warehouse No. 10 of the Bureau of Customs at the South Harbor, Manila. Then the Bureau of Customs instituted Seizure Proceedings, ID No. 6-81, against the shipment for illegal withdrawal, as defined under Section 2530(a) of the Tariff and Customs Code. During the hearing, a representative of the corporation appeared. On April 29, 1983 the Collector of Customs rendered a decision ordering the forfeiture of the shipment in favor of the Government. Upon an appeal by the private respondent, the Commissioner of Customs rendered a Decision dated January 18, 1984 affirming the decree of forfeiture from which private respondent filed a Motion for the Release of the Shipment under bond, to which the petitioner filed an Answer and opposition to the Motion. The private respondent filed a reply and the petitioner filed a rejoinder. On August 6, the respondent court issued a resolution granting the motion for release the shipment under bond. On October 15, the respondent court denied petitioner's motion for reconsideration, approved a surety bond of P2,500.00 and directed the Commissioner of Customs to release the shipment. The petitioner then elevated the respondent court's resolutions of August 6 and October 15 to the Supreme Court by way of a petition for certiorari , prohibition, mandamus with prayer for preliminary injunction and/or restraining order, docketed as G.R. No. 69297. During the pendency of G.R. No. 69297, the private respondent filed the Motion dated March 10, 1988 praying that it be given leave to avail of Executive Order, dated August 6, 1986, amending Section 2307 of the Tariff and Customs Code of the Philippines, allowing settlement with the Bureau of Customs under the conditions specified therein. On March 17, the Republic of the Philippines filed an Opposition to the motion, on the ground that since the withdrawal of the subject shipment was effected through fraud, the settlement of the case under EO 38 may not be allowed. On July 6, 1988 respondent court issued the resolution in question. Hence, this petition. Petitioner contends that respondent court acted with grave abuse of discretion amounting to lack or in excess of jurisdiction in allowing the private respondent to avail of EO 38 for the purpose of effecting settlement of the seizure and forfeiture case effecting subject shipment on the ground that the importation/withdrawal of the shipment was attended with fraud, citing EO 38, which reads: "Sec. 2307. Settlement of Case by Payment of Fine or Redemption of Forfeiture Property . Subject to approval of the Commissioner, the district Collector may, while the case is still pending, except when there is fraud , accept the settlement of any seizure case provided that the owner, importer, exporter, or consignee or his agent shall offer to pay to the Collector a fine imposed by him upon the property, or in case of forfeiture, the owner, exporter, shall offer to pay for the domestic market value of the seized article. The Commissioner may accept the settlement of any seizure case on appeal in the same manner." Petitioner insists that while EO 38 allows settlement of cases with the Bureau of Customs by paying a fine or redemption of forfeited property, yet the EO does not apply to cases where there is fraud in the importation or withdrawal of the shipment sought to be redeemed, which is covered by the proviso in the EO, " except when there is fraud ", that while it is stated in the respondent court's resolution that the decision of the Commissioner of Customs in the seizure proceedings is under appeal, and, therefore, respondent court "should not prejudge the case by stating that fraud is employed by herein movant", petitioner strongly maintains that the very use of the fake and falsified documents to effectuate the withdrawal and release of the shipment without the payment of the duties, taxes and other charges is a fraudulent scheme resorted to by private respondent to evade the payment of the taxes, duties and other charges and to defraud the Government of P1,867,469.00 representing the duties and taxes due on the shipment; that by allowing private respondent to avail of EO 38, respondent court had prejudged the main case even before the appeal and the evidence of fraud have been considered on their merit; and that since the release of the shipment was fraudulently effected, the private respondent cannot avail of the settlement under EO 38. Private respondent, however, maintains that the importation of the shipment was legal since the Commissioner of Customs have so declared in its decision that such "importation is legal per se , it being duly covered by a regular letter of credit . . . supported by genuine commercial and shipping documents . . ."; and that on the question of withdrawal of the shipment thru falsified documents, private respondent maintains that it is not a party to such withdrawals, as in fact it issued a check for P1.9 million to cover the taxes and charges due thereon, but the amount was misappropriated and misapplied by its two (2) officials; that while Section 2307 of the Tariff and Customs Code, which was amended by EO 38, provides for "except when there is fraud", the word "fraud" mentioned in the EO refers to those matters attendant to the importation and not to an irregularity after the goods have been landed; and that insofar as the applicability of the EO to the case at bar is concerned, since the very findings of the Customs' Commissioner is that the importation of the shipment is not illegal per se , the respondent court exercised its sound judicial discretion in allowing private respondent to avail of the provisions of the EO. We do not agree with the contention of private respondent that the word "fraud" in EO refers only to fraud committed in connection with the importation of the shipment and does not apply to the fraud committed by the use of falsified and fake documents in facilitating the release of the shipment. Rivera vs. Litam & Company, Inc ., L-16954, April 25, 1962, 4 SCRA 1072, 1083, had this to say about the word fraud, in that "fertility of man's invention in devising new schemes of fraud is so great that courts have declined to define it, reserving to themselves the liberty to deal with it under whatever form it may present itself;" and that "our jurisprudence abounds with cases where fraud had been held to exist but we have found none in which all the circumstances above indicated are present, the circumstances being varied as the men who schemed the fraud in each case." It has also been held that importation is deemed terminated only upon the payment of the duties, taxes and other charges upon the shipment, or secured to be paid at the port of entry and the legal permit for withdrawal shall have been granted ( Viduya vs. Berdiago , 73 SCRA 553, 558-559). In that case, the Supreme Court, after finding that the "correct amount" of taxes and other fees have not been paid, ruled that the Bureau of Customs was justified in subjecting therein shipment to seizure and forfeiture. So, the ponente , the late Mr. Justice Labrador, reasoned out: "It is merely a recognition of the state's power to assure that fraudulent schemes resorted to by importer would be doomed to failure", a sound recognition that illegal importation under the Tariff and Customs Code, includes "other frauds upon the customs", and may well embrace within its coverage the withdrawal and release of shipment based on illegal/falsified/fake documents and without having paid in full the duties, fees, charges, fines and penalties due thereon. The seizure/forfeiture taken, conducted and decided by the Bureau of Customs in this case, were effected precisely because the withdrawal and release of the shipment was based on the falsified/fake documents and without paying the taxes/customs due thereon. This seizure/forfeiture proceedings are pending consideration before respondent court. It is called upon to resolved the question whether the seizure/forfeiture is in order. The respondent court has not yet decided the case, including the question of whether or not there was fraud in connection therewith. Prudence, therefore, dictates that the motion of private respondent for leave to avail of EO 38, be held in check until the case has been resolved. Observedly, this could be the reason why respondent court made a reservation in its resolution, that "the settlement is subject to the approval of the Commissioner of Customs" and who has shown that he is not amenable to such a settlement with private respondent. WHEREFORE, the Resolution of respondent court dated July 6, 1988 is hereby ANNULLED and SET ASIDE. SO ORDERED. Javellana and Marigomen, JJ ., concur.