Mayer Steel Pipe Corp. v. Court of Tax Appeals

TWELFTH DIVISION [CA-G.R. SP No. 23518. December 15, 1993.] (C.T.A. Case No. 2823) MAYER STEEL PIPE CORPORATION , petitioner , vs . COURT OF TAX APPEALS AND HON ALFREDO PIO DE RODA, IN HIS CAPACITY AS ACTING COMMISSIONER OF CUSTOMS , respondents . D E C I S I O N MARTIN , JR ., J p : This petition for review on certiorari was originally filed with the Supreme Court where it was docketed as G.R. No. 87588 but the same was referred to this Court for adjudication pursuant to its resolution dated November 14, 1990 (p. 145, Rollo). Assailed in this petition for review is the decision of the Court of Tax Appeals in C.T.A. Case No. 2823 entitled "Mayer Steel Pipe Corporation, petitioner versus, Hon. Alfredo Pio de Roda, in his capacity as Acting Commissioner of Customs, respondent", affirming the decision of the Commissioner of Customs which, in turn, affirmed the decision of the Collector of Customs decreeing the seizure and forfeiture of the shipment by petitioner Mayer Steel Pipe Corporation of eleven (11) packages of machinery parts for steel pipe manufacturing for alleged violation of Sections 2503 and 2530 (M[5]) of the Tariff and Customs Code, as amended, in relation to Presidential Decree No. 272 and Central Bank Circulars Nos. 315 and 371 respectively, which implement Republic Acts Nos. 5186 and 6142 as well as the rules and regulations issued thereunder. The antecedent as culled from the records of the case are as follows: The controversy stemmed from the importation of eleven (11) packages of machinery parts for steel pipe manufacturing by Mayer Steel Pipe Corporation (MSPC for brevity) from Bryard Kenwest Engineering Limited of Liverpool, England, pursuant to the former's application for foreign credit with a home consumption value of $170,000.00 guaranteed by a letter of credit from the authorized agent bank of the Central Bank of the Philippines, the Consolidated Bank and Trust Corporation (CBTC for short) (Exhibits H to H-10; pp. 1233-1239, Customs Original Records, Annexes A to A-4, B to B-1, Memorandum of the Petitioner; pp. 1753-1789, id .). Upon arrival on March 23, 1975 of the aforequoted machinery parts thru SS "Puerto Princesa" at the Port of Manila, the MSPC declared in its Import Sworn Statement the composition of machinery parts incorporated under Import Entry No. 26946 including the decoiler forming cut off equipment with home consumption value of $76,600.00 as covered by Central Bank Commodity Code Classification EP-716-13.99 in relation to Tariff Heading No. 84.45 at 10% ad valorem rate of duty. After assessment, the MSPC paid the corresponding customs duties and other charges thereon in the sum of P267,028.00 as evidenced by Official Receipt No. 415001 dated April 2, 1975 and the said machinery parts were released to MSPC the following day of April 3, 1975 (Exhibit E-4; p. 1272, id .; Exhibit 8-B; pp. 1270-1271, id .; Exhibits 8-g to h; pp. 1265-1266, id .; p. 6, Petition; p. 6, Rollo; p. 2, CTA Decision; p. 34. Rollo; p. 2, Comment of the Respondent; p. 89, Rollo). Acting upon reliable information it received, the then Acting-Smuggling Action Center (ASAC for brevity)notified the Collector of Customs of the illegal release of the aforesaid importation from customs custody and immediately requested for the issuance of a warrant of seizure and detention against the machinery parts in question. Armed with the search warrant dated May 9, 1975 issued by Acting Collector of Customs Alfredo Francisco, elements of the ASAC in the company of MPIS-Metrocom Agents seized the subject importation at the MSPC's compound located at Barrio Canunay, Valenzuela, Bulacan and accordingly, the ASAC instituted seizure proceedings against the MSPC before the district Collector of Customs claiming substantially that the shipment violated certain provisions of the Tariff and Customs Code of the Philippines; (pp. 1-2, Petition; pp. 6-7, Rollo; 2, CTA Decision; p. 34, Rollo; p. 2. Comment of the Respondent; p. 89, Rollo; p. 2, Decision of Collector of Customs; pp. 2116-2133, id .; pp. 1-2, Memorandum of Hearing Officer Joaquin, pp. 1848-1849, id .). During the pendency of the proceedings, the MSPC filed a memorandum-letter with the collector of Customs seeking the release of the subject importation under bond pursuant to Section 2301 of the Tariff and Customs Code. The relief prayed for was granted and even after ASAC interposed its motion for reconsideration dated August 11, 1975 (pp. 1922-1940, id .), the Collector of Customs in his order dated August 19, 1975 (pp. 1943-1945, id .) restated the ruling in his earlier order dated July 31, 1975 which provisionally granted the aforesaid release subject to the conditions that the machinery parts would be under continuous guarding by designated custom guards and in the event that the shipment is finally declared forfeited in favor of the government, the same was subject to immediate dismantle at the MSPC's expense, or that MSPC would undertake payment of the appraised value as well as the fines, expenses and costs thereof (pp. 1894-1897, id .). On account of several postponements mostly from the MSPC, the Collector of Customs finally ordered that the instant case was deemed submitted for decision on the basis of the pleadings and other documents attached to the records because of the continued failure of MSPC to present its evidence. Hence, the collector of Customs handed down his decision on September 25, 1975, decreeing, among others, that the machinery in question, at present installed in the compound of Mayer Steel Pipe Corporation at Barrio Canunay, Valenzuela, Bulacan, having been imported, seized and forfeited for reasons, among others, for violation of the implementing rules and regulations on overcrowded industries, is ordered forfeited in favor of the Government, and that subsequently, the person or entity acquiring the same shall execute an undertaking to re-export the subject machinery abroad within a reasonable period of time (pp. 11-18, Decision of Collector of Customs; pp. 2116-2117, ibid .). On October 10, 1975, the MSPC moved to reconsider the above decision but the plea was denied by the Collector of Customs in his order dated November 4, 1975 for lack of merit (p. 2805, id .). On appeal, the Commissioner of Customs issued a final order dated June 1, 1976 affirming the decision of the Collector of Customs, the decretal portion of which reads: "WHEREFORE, this Office finds and so holds that no cogent reason exists to disturb the Decision of the Collector of Customs, Port of Manila, dated September 25, 1975. SO ORDERED." (p. 3, Order of Commissioner of Customs; p. 2333, id .) On June 16, 1976 the MSPC filed its motion for reconsideration but the Commissioner of Customs, in his order dated July 14, 1976, denied the same (pp. 2378-2383, id .; p. 2384, id .). Dissatisfied, the MSPC filed a petition for review of the decisions of the Collector of Customs and the Commissioner of Customs with the Court of Tax Appeals, praying that the declaration of forfeiture be set aside and that the bond posted by MSPC for the release of the subject machinery parts be cancelled. On February 18, 1987, the Court of Tax Appeals rendered its decision, the dispositive portion of which reads as follows: "WHEREFORE, we find no merit in the petition for review and the same is hereby dismissed with costs against the petitioner. SO ORDERED." (p. 20, CTA Decision; p. 52, Rollo) From the denial of its motion for reconsideration of the above decision, MSPC interposed the instant petition contending that the Court of Tax Appeals erred in holding that MSPC violated Section 2503 in relation to Section 2530 (M[5] of the Tariff and Customs Code, as amended, as well as P.D. 272 including Central Bank Circulars Nos. 315 and 371 which implement Republic Act Nos. 6142 and 5186 respectively, and that the decision of the Collector of Customs is violative of due process. After a thorough review of the records and the evidence, we find the instant petition not impressed with merit. Considering that the assigned errors posed by petitioner MSPC are interrelated, they will be discussed together. Petitioner MSPC avers that its importation of eleven (11) machinery parts for steel pipe manufacturing from Liverpool, England, did not violate Sections 2503 and 2530 (M (5)) of the Tariff and Customs Code, as amended, including the pertinent provisions set forth under Presidential Decree No. 272 as well as Central Bank Circulars Nos. 315 and 371 in relation to the implementing rules and regulations of Republic Acts Nos. 6142 and 5186, respectively. The contention deserves scant consideration. Section 2503 of the Tariff and Customs Code provides: "When the dutiable value of the imported articles shall be so declared and entered that the duties, based on the declaration of the importer on the face of the entry, would be less by ten per cent (10%) than should be legally collected, or when the imported articles shall be so described and entered that the duties based on the importer's description on the face of the entry would be less by ten per cent (10%) than should be legally collected based on the correct tariff classification, or when the dutiable weight measurement or quantity of imported articles is found upon examination to exceed by ten percent (10%) or more than the entered weight, measurement or quantity, a surcharge shall be collected from the importer in an amount of not less than the difference between the full duty and the estimated duty based upon the declaration of the imported nor more than twice of such difference: Provided, That, an undervaluation, misdeclaration in weight, measurement or quantity of more than 50% between the value, weight, measurement or quantity declared in the entry, and the correct value, weight, quantity or measurement, shall constitute a prima facie evidence of fraud penalized under Section 2530 of this Code. When the undervaluation, misdescription, misclassification or misdeclaration in the import entry is intentional the importer shall be subject to the penal provision under Section 3602 of this Code." There is no dispute that the petitioner MSPC declared in its Import Entry Revenue Declaration that its importation had an entered value of merely $76,600.00 (Exhibits E and E-3) contrary to its application for letter of credit with the CBTC and submitted to the Central Bank on July 3, 1974 wherein it sought authority to import the machinery in question and to avail of foreign credit in the amount of $170,000.00 under Rep. Act. 6142 as implemented by CB Circulars No. 315 and 371. The justification alleged for the reduced value was predicated on its claim that the machinery parts imported from Liverpool, England thru its supplier Bryard Kenwest Engineering Limited, did not constitute the complete standard basic spiral pipe mill but were merely component parts of a spiral pipe making machine. However, the petitioner's assertion is belied by the records which disclose that the subject spiral pipe making machine consisting of eleven (11) machinery parts imported by the petitioner MSPC abroad is complete by itself (Exhibits G to G-1; Exhibits K-1 to K-3). This fact was substantiated by Customs Examiners Calzado in his testimony taken during the seizure proceedings, thus: "Q. Do you remember having examined spiral pipe machines? A. I conducted a re-examination of the shipment covered by Entry No. 026946-75 consigned to Mayer Steel Pipe on May 17, 1975, and I submitted by report on May 23, 1975. Q. Why do you term now this finding of yours as re-examination. A. Well, this shipment has been previously examined by a Customs Examiner and the same was release from customs custody. Now, upon request of the Honorable Hearing Officer. I was assigned to re-examine this particular shipment in question. Q. In Exhibit "G-1", in the last paragraph thereof of your report states that, and I quote: "As compared to the attached brochure describing a complete Spiral Weld Pipe Machine the items contained in the eleven (11) packages subjected to re-examination appear to be a complete set of components for one (1) machine. is that correct? A. What I mean when I said in my finding that the items contained in the 11 packages subject to re-examination appears to be complete components for one machine, what I mean is that one particular machine is complete in itself . A. I will show you a brochure which is marked as Exhibit "K", will you please tell the Honorable Hearing Officer whether there is the same which you used in the re-examination. A. Yes sir." (Emphasis Supplied; pp. 116-117, TSN of S.I. No. 14665, June 25, 1975; pp. 558-589, id .) Even if the affidavit executed by Mr. Sy Ka Khieng, Vice-President of the petitioner MSPC, it is stated that the articles mentioned in the packing list of their importation were knock-down parts and accessories of a complete set of machinery for steel pipe manufacturing (Exhibit F; p. 1243, id .). Given these factual circumstances, it is very clear that petitioner MSPC committed a violation of customs laws when it undervalued its shipment of machinery by Placing in the Import Entry Revenue Declaration the entered value of $76,600.00 when said shipment had a correct home consumption value of $170,000.00 as reflected in the letter of credit applied for by it with the Central Bank of the Philippines thru its agent bank (CBTC) (Leuterio vs. Commissioner of Customs, 101 Phil. 223, 227). The petitioner cannot argue that it made a re-negotiation with its supplier Byard Kenwest Engineering Limited for such reduction of the home consumption value because as previously stated, the alleged accessories and knock-down parts were not included in the amount $170,000.00 and if MSPC were to import the items, it would have to purchase them at distinct prices (p. 5, Exhibit K; p. 16, Decision of Collector of Customs; p. 2118, id .). We find the position taken by the office of the Solicitor General in its Comment to the Petition more consistent with the law, and we quote with approval, to wit: "It is claimed that there was re-negotiation of the contract between the foreign supplier and importer (petitioner) which resulted in a reduction of the value of the importation. This claim is hard to believe, because: i) In its Petition before the lower court petitioner alleged that the supplier and petitioner agreed to take out five (5) parts of the machinery involved, namely: a) Side trimmer or strip edge machine b) Hydrostatic testing machine c) Socket forming machine d) Pickling tank e) Bevelling ultra-sonic testing machine However, in its Memorandum dated February 26, 1988 in support of its motion for Reconsideration, petitioner alleged, per the letter of its supplier dated August 30, 1984, that the agreement was for the deletion of only three (3) items, namely: (a) Edge trimmer equipment (b) Hydrostatic tester (c) End forming Besides, whether five or three, these items are accessories or optionals which are not included in the basic price of the machinery itself ($170,000.00), but constitute separate items with distinct prices (Description through the brochure, Exh. "K"; Testimony of Customs Examiner Oscar Calsado, pp. 114-127. TSN, S.I. No. 14665, June 25, 1975). ii) While alleging in its Motion for Reconsideration (as well as in the Petition before the lower court) that, as a result of the renegotiation, the importation contract was reduced in value to $105,000.00 , including interest, petitioner asserted in its Memorandum dated December 2, 1985 and its Memorandum dated February 26, 1988 that the reduction was from $170,000.00 to $108,225.00 including interest. This zigzagging on the part of petitioner is fatal to its credibility. Even granting arguendo the truth of petitioner's claim in its Memorandum dated February 26, 1988 that "the basis of the home consumption value cannot be $170,000.00 but for a lesser value of $108,225.00". still, there was undervaluation, because petitioner declared an entered value of only $76,600.00." (pp. 7-9, Comment of the Respondent; pp. 94-96, Rollo) In addition to the undervaluation committed by the petitioner in violation of Section 2503 of the Tariff and Customs Code, as amended, the evidence likewise discloses not only a misdeclaration of the imported machinery as mere parts of a spiral pipe making machine but also a misclassification of the same under Tariff Heading No. 84.59 at 10% ad valorem import duty. As discussed earlier, petitioner MSPC attempted to show that the subject machinery does not constitute a complete standard basic spiral pipe mill and thus reduced the purchase price to $87,280.00 as reflected in the sales and pro-forma invoice. The pretense was uncovered by the declaration of petitioner's own witness. John Keenan, who conceded that the accessories/optional equipment of steel pipe machineries are not included in the basic purchase price. Likewise, no less than the vice-president of Petitioner MSPC, Mr. Sy Ka Khieng, stated in his affidavit that the goods mentioned in the packing list of their importation "are knock-down parts and accessories of a complete set of machinery for steel pipe manufacturing" (Exhibit "F"; p. 1243, ibid .) Moreover, Customs Examiner Oscar Calzado testified that the subject machinery when compared with that in the brochure furnished him by the importer (Exhibits "K-1" to "K-3"), in the light of the description of said machinery in the Project Study (Exhibits "J-20" to "J-22"), as well as Exhibits "KK" to "KK-5", is a complete spiral pipe mill capable in itself of producing marketable pipes. That petitioner cause similar accessories or machine parts to be fabricated/manufactured for it by the Acme Machinery and Engineering Works (Exhibit "X") does not overturn the fact established by preponderant evidence that its imported machinery was a complete standard spiral pipe mill. It must be noted that during the pendency of the seizure proceedings. Tariff Researcher Edgardo R. Maralit reported that the subject spiral pipe making machine is classified under Tariff Heading 84.59 of the Tariff Law, as amended by P.D. No. 34 with a rate of duty of thirty (30) per cent ad valorem a matter confirmed in the interpretative rulings. Likewise, Atty. Ernesto Felix, Assistant Chief of the Valuation and Clarification Division of the Bureau of Customs, testified that the correct classification of the petitioner's imported machinery was under Tariff Heading No. 84.59 at 30% ad valorem duty (Tsn, pp. 387-392, S.I. No. 14665). Respondent court found the facts relied upon by the Collector of Customs and the Commissioner of Customs borne by the evidence on record. In our own careful review we found no compelling reason to depart from the elementary principle that findings of fact of the Court of Tax Appeals and similar quasi-judicial agencies are entitled to great respect absent a clear showing of gross error or an abuse or improvement exercise of its authority (Commissioner of Internal Revenue vs. Ayala Securities Corporation and Court of Tax Appeals, 70 SCRA 204) and can only be disturbed on appeal if not supported by substantial evidence (Commissioner of Internal Revenue vs. Cadwallander Pacific Company, 73 SCRA 59, 75; Parag. No. 8, Supreme Court Circular No. 1-91). It should be mentioned also that petitioner MSPC likewise did not comply with the pertinent provision of Presidential Decree No. 272 which requires it to secure a prior authority to import the subject machinery for steel pipe manufacturing from the Iron and Steel Authority (ISA for short). Under said decree, prior authority from the ISA in the importation of subject machinery is mandatory. We have gone over the records of the case and we found nothing which would show that petitioner MSPC obtained the requisite approval from the ISA. What the petitioner MSPC merely alleged is that it did not secure the said requirement because it presumed that there was already a tacit approval from the ISA when it filed its amended application for authority to secure foreign credit with the Central Bank through its agent bank, CBTC, for the importation of one (1) complete standard basic spiral pipe mill, attaching therein the documents required by the Management of External Debt and Investment Accounts Department (MEDIAD) of the Central Bank. Petitioner further contends that MEDIAD of Central Bank advised its agent bank, CBTC, that the Central Bank had approved the petitioner's re-negotiated application for authority to secure a foreign supplier's credit in the amount of $108,225.00, including interest. The fact stands out, however, that the Board of Investments formally notified petitioner MSPC that its request for favorable endorsement of its application to import a complete spiral pipe mill had been denied by the said board. The circumstance that the importation arrived at the Port of Manila on March 23, 1975, was issued a Release Certificate by the Central Bank on April 2, 1975 after payment of duties and taxes in the amount of P257,028.00 and was released to the petitioner, did not bar the government from correcting the error of some of its officials and did not estop it to go after the petitioner for violation of Central Bank Circulars Nos. 315 and 317. Well, entrenched is the principle that the State cannot be put in estoppel by the mistakes or errors of its officials or agents (Republic vs. Intermediate Appellate Court, 209 SCRA 90); Commissioner of Internal Revenue vs. Procter and Gamble Philippines, 204 SCRA 377; Gonzalo Sy Trading vs. Central Bank, 70 SCRA 570; Auyong Hian vs. Court of Appeals, 59 SCRA 110), considering that the erroneous application and enforcement of the law by public officers do not block the subsequent correct application of the statute (PLDT vs. Collector of Internal Revenue, 90 Phil. 674, 680). What is clear from the evidence is that as a result of the coordination between ISA and the Board of Investments (BOI) acting pursuant to the provisions of Republic Act No. 5186 in relation to Central Bank Circulars Nos. 315 and 317, respectively, as well as the rules and regulations under Republic Act. No. 6142, which disauthorized applications for foreign credits if the proposed project would only expand the capacity of overcrowded industries, it has been clearly established that petitioner MSPC was not able to show that its subject importation will conform to the utilization of existing capacity of the steel industry and thus was unable to secure favorable approval from the BOI. Petitioner next argues that the Warrant of Seizure and Detention issued did not mention the petitioner's alleged violations of P.D. No. 272, Rep. Act No. 5186 and its implementing rules and regulations and therefore suffers from a legal infirmity. The argument is without merit. Pursuant to the powers vested upon him by Section 1207 of the Tariff and Customs Code, as amended, the Collector of Customs possesses all the authority to take such action as will prevent the importation or exportation of articles which are prohibited or the importation or exportation of which is contrary to customs laws, rules and regulations. Accordingly, even particles seized by mistake are liable for forfeiture if a good cause for forfeiture existed at the time of the seizure but without knowledge of the seizing officer (Comment of respondent Com. of Customs, p. 17, citing Wood vs. U.S. 1842, 41 U.S. (15 Pet.) 342, 10 L. Ed. 987). Turning now to the last issue raised, petitioner cannot claim it was denied due process of law by the Collector of Customs. The record shows beyond any doubt that petitioner MSPC was given its day in court. It must be noted that despite petitioner's legal maneuvers and several postponements, the continuation of the hearing was finally set on September 22 and 27, 1975, both settings being intransferable in nature pursuant to the Order dated September 11, 1975. During the hearing of September 22, 1975, the claimant again sought another postponement notwithstanding that its last witness, Manuel Sy, was then present. When claimant's counsel walked out of the hearing room, the ASAC prosecutor was left with no choice but to move that the case be submitted for resolution on the basis of the evidence on record. While it may be true that the hearing officer provisionally set the case again for hearing on October 7, 1975, the then Acting Collector of Customs reversed the former's order resetting the case and directed the Law Division to prepare the corresponding decision (pp. 2-3, Memorandum of the Hearing Officer Joaquin, Jr.; pp. 2299-2300, id .; pp. 3-6, CTA Decision; pp. 35-37, Rollo). Such action was neither arbitrary nor oppressive to the petitioner. As respondent court said in its decision dated February 18, 1987, which we quote with approval: "Based on the foregoing facts, claimant therefore can not claim denial of due process because their refusal to present their last witness when directed by the Hearing Officer to do so during the hearing of September 22, 1975 amounted to a waiver of their right to adduce further evidence, hence the case can be decided on the basis of the pleadings and other documents already on record. As a matter of fact, the more than 800 pages of the transcript of stenographic notes will show that while we have conducted weekly hearing, morning and afternoon session, in the instant case counsels for the claimant, after seeing the release order of July 31, 1975, resorted to those dilatory tactics, requesting postponement after postponement only to delay the disposition of the case. We could not have consumed these voluminous transcript if they were denied their day in court." (p. 6 CTA Decision; p. 38, Rollo) Settled is the rule that were opportunity to be heard, either through oral arguments or pleadings is accorded, there is no denial of procedural due process (Abierra vs. NLRC, 215 SCRA 476; Gonzales vs. Court of Appeals, 212 SCRA 595; CDCP Tollways Operators Employees and Workers Union vs. De Villa, 200 SCRA 80; Jaculina vs. NLRC, 200 SCRA 489). WHEREFORE, finding no error of fact or law committed by respondent court that will warrant a reversal or modification or the decision sought to be reviewed., the petition for review is DENIED DUE COURSE and is DISMISSED for lack or merit. No pronouncement as to costs. SO ORDERED. Chua and Guerrero , JJ ., concur.