Republic v. Court of Tax Appeals

TWELFTH DIVISION [CA-G.R. SP No. 25438. February 21, 1992.] REPUBLIC OF THE PHILIPPINES, represented by ALFREDO PIO DE RODA, JR ., petitioner vs . HON COURT OF TAX APPEALS and PROCTER & GAMBLE PHILIPPINES CORPORATION , respondents . D E C I S I O N GARCIA , J p : Thru this petition for review by way of an appeal by certiorari, petitioner Republic of the Philippines seeks to nullify and set aside the decisions dated September 26, 1990 of the respondent Court of Tax Appeals reversing an earlier decision of the then Deputy Minister of Finance on the amount of liability for taxes and duties of private respondent Procter & Gamble Philippines Manufacturing Corporation in connection with the latter's importation of certain chemical products, and the resolution of the same court, dated July 1, 1991, the denying the Deputy Minister's motion for reconsideration. The facts are well laid out in the decision under review, thus: "Petitioner (now private respondent) Procter & Gamble Philippines Manufacturing Corporation had imported 15 drums of Geraniol BJ and 15 drums of Citronellol AJ, which arrived on November 6, 1978 in Manila and where exported from Savannah, Georgia, U.S.A. on October 2, 1978." As per covering Consular Invoice No. 304406 dated October 10, 1978 and Commercial Invoice No. 25280-34, the shipment had the home consumption values as follows: Geraniol bj at $2.21/lb. and Citronnellol aj at $2.79/lb. Before the filing of the entry of the shipment, petitioner through its broker, filed with the Bureau of Customs, Port of Manila, an RVI (Request for Value Information) dated October 18, 1978. Upon the processing of the RVI by the Customs Officers, the HCV (Home Consumption Values were upgraded as follows: 1. Geraniol bj from $2.21/lb. to $2.70/lb. based on CIVCC (Customs Information Valuation and Classification Circular) No. 280-76. page 156, July 1, 1976, (Exh. F) 2. Citronellol aj from $2.79/lb. to $6.00/lb. based on CIVCC (Customs Information Valuation and Classification Circular) No. 270-76, page 155, dated October 1, 1976, (Exh. G) Article Geraniol, as published in CIVCC No. 280-76 (Exh. F) was published as Geraniol Extra (p. 19, CTA rec.) at $2.70/lb. Citronellol, as published in CIVCC No. 270-76 (Exh. G) was published as Citronellol only (p. 19, CTA rec.) at $6.00/lb. Procter and Gamble Philippines Manufacturing Corporation entered the higher values in their Entry No. 11615-78 in order to avoid imposition of surcharges on the shipment in question pursuant to Section 2503 of the Customs Law and at the same time protesting the purported upgrading by the Customs official who processed RVI No. 11-114 and the appraisal made by the appraiser at the upgraded published HCVs pursuant to RVI No. 11-114, thereby requiring petitioner to pay the duty and tax amounting to P104,000.00, which petitioner paid under protest, as evidenced by Official Receipt No. 698168 dated November 28, 1978. The Collector of Customs decided in favor of petitioner order the reliquidation of the entry on the basis of $2.21/lb. for the 15 drums Geraniol bj and at $2.70/lb. for the 15 drums citronellol aj, and the excess amount refunded in the form of tax credit. In a list endorsement dated September 15, 1980 of the Commissioner of Customs, Ramon V. Farolan, he concurred with the findings of the Collector sustaining the protest and refund of the duties and taxes paid by petitioner stating thus The shipment consisting of 15 drums of geraniol bj and 15 drums of citronellol aj has an entered value of $2.21/lb. for geraniol bj and $2.79/lb. for citronellol aj based on the consular and commercial invoices attached to the entry. However, VCD upgraded the value at $2.70/lb. for geraniol bj and $6.00/lb. for citronellol aj. Chemical Engineer Victorio Mejia, the Vice-President of the Indent Division, Migra Trading Corporation, testified that he worked as an indentor for the SCM International Ltd., Cleveland, Ohio, U.S.A., covering all kinds of perfumery products exported into this country; that he was the one who mediated in the consummation of the sale of the subject shipment between the SCM International Ltd. and the protestant company; that he was also the one who wrote a letter dated November 16, 1978, addressed to the protestant stating, among other things, that he received a letter of the same date from a certain Mr. Nagai, the Marketing Manager of the Glidden Organics, which was the manufacturer of the shipment in question, and that attached to the said letter was the photostat copy of the telex of Mr. Nagai certifying that the Glidden Organics was and still is not engaged in the manufacture of the geraniol extra; that there were two kinds of geraniol, namely (1) geraniol extra; and (2) geraniol bj; that if the geraniol extra will be manufactured in the future, Glidden Organics will produce the same with a higher purity of 85%, 95% and 99% than the current geraniol bj which has only a purity of 70%; and that the same letters 'bj' and 'aj' are the secret codes of the manufacturer of the perfumery products which differentiates the purity of the subjects shipment from the other. In view of the foregoing and other basis appearing on the decision, this Office concurs with the findings of the Collector sustaining the protest and the refund of duties and taxes paid by the herein protestant. But in a 2nd Indorsement dated October 15, 1980 of the Deputy Minister of Finance, Alfredo P. De Roda, Jr., he denied the protest and refund of the duties and taxes paid stating as follows: It appears that the entered values of the shipment based on the consular and commercial invoices were $2.21/lb. for geraniol-bj and $2.79/lb. citronellol-aj. However, the customs appraiser assessed the shipment at the higher rates of $2.70/lb. and $6.00/lb. for geraniol-bj and citronellol-aj, respectively, based on the respective CIVCC No. 280-76 dated July 1, 1976 and CIVCC No. 270-76 dated April 1, 1977. As a consequence, protestant was required to pay duties and taxes on the shipment amounting to One Hundred Four Thousand One pesos (P104,001.00) under Official Receipt No. 298168 dated November 28, 1978. Protestant impugns that correctness of the assessment made by the appraiser concerned on the ground that it was not based on the home consumption value indicated in the commercial and consular invoices. Protestant contended that the articles described as 'geraniol extra' in CIVCC No. 280-76 and 'citronellol' in CIVCC No. 270-76, upon which the upgraded values were based, were different from the articles comprising the shipment which are known as 'geraniol-bj' and citronellol-aj. It is further argued that since the HCV appearing in the commercial and consular invoices were the prices on or about the date of exportation, the said HCV should be correctly applied on the shipment. It may be stated, in this connection, that CIVCC Nos. 280-76 and 270-76 are the implementing circulars of Section 201 of the Tariff and Customs Code, in relation to Section 602-A of the said Code. They are in full force and effect and therefore enforceable. Records show that the shipment in question was exported from Savannah, Georgia, U.S.A. on October 2, 1978 and Revision Order No. 12, upon which the appraisal of the subject articles was based, has been issued on December 1, 1978. Considering the nearness of the date of exportation and the issuance of the said Revision Order No. 12, it is believed that the use of the published value in the instant protest is tenable. The use of the published value in the assessment and appraisal of duties and taxes has been consistently upheld by this Ministry, except in cases when such value becomes stale and obsolete and necessitates revision. This Ministry is not inclined to adhere to the testimony of Chemical Engineer Victorio Mejia that the imported geraniol-bj is different from that listed in the CIVCC No. 280-76. Engineer Mejia's testimony could only be considered as self-serving and lacks evidentiary proof. (p. 9, CTA, rec.) From the aforequoted decision of the Deputy Minister of Finance, herein private respondent filed a petition for review with the respondent court. In the questioned decision of September 26, 1990, the respondent court reversed the appealed decision of the Deputy Minister. The latter's motion for reconsideration having been denied by the same court in its subsequent resolution of July 1, 1991, petitioner Republic represented by the then Finance Deputy Minister, has filed the present petition on the submission that "IN APPRAISING PRIVATE RESPONDENT'S LIABILITY FOR TAXES AND DUTIES, RESPONDENT COURT GRIEVOUSLY DISREGARDED THE EXPLICIT PROVISION OF LAW MANDATING THAT IN CASE OF REASONABLE DOUBT, SUCH APPRAISAL SHOULD BE BASED ON THE PUBLISHED HOME CONSUMPTION VALUE OF SUBJECT ARTICLES EFFECTIVE AT THE TIME OF EXPORTATION OR A DATE NEAREST TO IT". As correctly formulated in the decision under review, the issue is "whether or not the imported 'Geraniol bj' and 'Citronellol aj' home consumption values should be based on the values shown by the commercial or the consular invoices at $2.21/lb. and $2.79/lb., respectively, or the CIVCC (Customs Information Valuation and Classification Circular) Nos. 280-76 (Exh. F) dated July 1, 1976 and 270-76 (Exh. G) dated October 1, 1976 at $2.71/lb. and $6.00/lb., respectively". Section 201 of the Tariff and Customs Code, as amended, provides: "Sec. 201. Basis of Dutiable Value . The dutiable value of an imported article subject to an ad valorem rate of duty shall be based on the home consumption value or price (excluding internal excise taxes) of the same, like or similar articles, as bough and sold or offered for sale freely in the ordinary course of trade, in the principal markets of the country from where exported on the date of exportation to the Philippines, or where there is none on such date, then on the home consumption value of price nearest to the date of exportation including the value of all containers, coverings and expenses incident to placing the article in a condition ready for shipment to the Philippines, plus ten (10) percent of such home consumption value or price. The home consumption value or price under this section shall be the value or price declared in the consular, commercial, trade or sales invoice. Where there exists a reasonable doubt as to the value or price of the imported article declared in the entry, the correct dutiable value of the article shall be ascertained from the reports of the Revenue Attache or Commercial Attache (Foreign Trade Promotion Attache), pursuant to Republic Act numbered Fifty-four hundred and sixty-six or other Philippine diplomatic officers and from such other information that may be available to the Bureau of Customs. From the date thus gathered, the Commissioner of Customs shall ascertain and establish the home consumption value of articles exported to the Philippines and shall publish such lists of value from time to time". Petitioner concedes that under the aforequoted statutory provision which defines "home consumption value (HCV) or price" as "the value or price declared in the consular, trade or sales invoice", the dutiable value of an imported article subject to an ad valorem rate of duty "is based on its HCV or price as freely offered for sale in wholesale quantities in the ordinary course of trade in the principal markets of the country from where exported on the date of exportation to the Philippines" (Petition, p. 8). Petitioner contends, however, that there exists in this case reasonable doubt as to the value of the questioned shipment as declared in the respective consular and commercial invoices and therefore resort to their published HCVs in Customs Information Valuation Classification Circulars (CIVCC) Nos. 280-76 and 270-76, as reiterated in a subsequently published Revision Order No. 12 dated December 1, 1978, is proper. Petitioner cites the following why the HCVs appearing in the consular and commercial invoices of the disputed shipment could not serve as valid bases for determining the proper rate of duties: " First . Consular Invoice No. 304406 (not 2960 as claimed by private respondent) dated October 10, 1978 (Annex 'F') was prepared and submitted by the exporting company, SCM International Ltd. through its representative, Ruben Orozco, and not by the Philippine Consul to New Orleans as required by law . If at all, the Consul's participation insofar as this document is concerned, was limited to attesting that he or she had ' seen and noted' the same. There is no showing, however, that the needed verification as to the truth and correctness of the entries in said document was in fact accomplished. Second . It is contrary to standard procedure that the consular invoice was issued only 8 days after the articles were actually exported from the country of origin. Ordinarily, a consular invoice is issued before exportation . Such irregular procedure was not explained by private respondent. Third . It is virtually impossible for the Bureau of Customs to appraise the HCV of 'Citronellol AJ' based on the consular invoice, because, in truth, no such HCV was entered therein . Fourth . Commercial Invoice No. 25280-4 dated October 2, 1978, (Annex 'G') indicates that the HCV for 'Geraniol BJ' is $2.21/lb. or a total of $13,260.00 for 15 drums. This HCV is certainly different from the HCV appearing on the consular invoice, which is $27,999 . 40 " (Emphasis by the petitioner). We are not prepared to hold that the foregoing considerations warrant a departure from the basic rule announced in Section 201, supra, of the Tariff and Customs Code that the basis of the dutiable value of an imported article is its HCV as appearing in its consular or commercial invoice. To begin with, not much may be attached to the circumstance that Consular Invoice No. 304406 (Annex "F", Petition) was not prepared by the Philippine Consul to New Orleans and that the latter merely attested to having "seen or noted" the same. Our attention has not been called to any specific provision of law mandating the preparation of consular invoices by the consul himself personally . In all likelihood, the practice is for the exporter to prepare the entries in the consular invoice and thereafter submit the filled invoice from to the proper consular official for evaluation and appropriate action. True the invoice (Annex "F", Petition) was merely "seen and noted" by the consul. Again, we see no reason why this must be taken against the importer. If it is the duty of the consul to verify the document, there is neither rhyme nor reason to pass the effect of the consul's omission in this respect to the importer. After all, if the consul is not agreement with what he had "seen and noted" in the invoice, he is not without power to withhold his signature thereon. Petitioner likewise imputes irregularity on the fact that the consular invoice was issued only several days after the exportation. The question of the late issuance of the invoice was never raised by the Customs officials at the time the entry of shipment was made by the private respondent. Neither was it also raised during the hearing of the protest case in the offices below. Hence, said issue may not be raised for the first time in this appeal. In any event, there is no showing that the late issuance of the consular invoice effectively prevented the Customs from assessing the shipment at a higher HCV had it been proven that the higher assessment is correct. Thirdly, petitioner argues that is impossible for Customs to appraise the HCV of "Citronellol AJ" based on the consular invoice as no such HCV was entered therein. Assuming this to be so, Customs is not without other basis for computing the HCV. For, as correctly pointed out by the private respondent, "[T]he FOB value (C & F less freight) appearing in the consular invoice can be adopted as the HCV if the Customs has not established or published HCV in pursuance of Section 201" of the Tariff and Customs Code (Comment, fifth page). Lastly, petitioner finds it queer that the total HCV for the 15 drums of "Geraniol BJ" as appearing in Commercial Invoice No. 252804-A, dated October 2, 1978, is only $ 13,260.00 while the HCV appearing in the consular invoice is $27,999.40. The perceived discrepancy does not exist at all. The HCV of $13,260.00 in the commercial invoice (Annex "G", Petition) refers to "Geraniol BJ" only while the HCV of $27,999.40 in the consular invoice (Annex "F", Petition) refers to the HCV of both "Geraniol BJ" and Citronellol AJ". This is very evident from the face of the two (2) documents. The foregoing considered, we cannot see our way clear on how respondent court could be faulted for appraising private respondent's liability for taxes and duties on its importation of the chemical products in question on the basis of their HCVs as appearing in their respective commercial and consular invoices rather than on the basis of the HCVs in CIVCC Circulars Nos. 280-76 and 270-76. Indeed, it would have been an error for the respondent court had it applied to this case the HCVs in said circulars. For one, it is not disputed that CIVCC Circulars Nos. 280-76 and 270-76 were issued more than two (2) years before the importation subject hereof was affected on October 2, 1978. In short, the HCVs in the circulars were neither the values "on the date of the exportation to the Philippines" or values "nearest to the date of exportation" as required under Section 201, supra, of the Tariff and Customs Code. It may be so that on December 1, 1978, Revision Order No. 12 was published. Significant it is to note, however, that the Revision Order merely maintained the same HCVs in CIVCC Circulars Nos. 280-76 and 270-76. Between the issuance of the CIVCC circulars in midyear 1976 and the publication of Revision Order No. 12 on December 1, 1978 is a span of more than two (2) years. It is simply unlikely that during the interregnum, the value of the imported products in dispute did not fluctuate or change either in the downward or upward level. In fact, no less than the Collector of Customs in his decision of May 12, 1980 (Annex "C", Petition), found that the HCVs in CIVCC Circulars Nos. 280-76 and 270-76 "were a stale published value". For another, it is not disputed that the imported products described in their corresponding commercial and consular invoices as "Geraniol BJ" and "Citronellol AJ" were listed in CIVCC Circular Nos. 280-76 and 270-76 as "Geraniol Extra" and plain "Citronellol", respectively. It was proven during the hearing of the protest case that the purity and chemical content of "Geraniol BJ" and "Citronellol AJ" were much lower than that of "Geraniol Extra" and plain "Citronellol". It may not, therefore, be said that the HCVs appearing in CIVCC, Circulars Nos. 280-76 and 270-76 refer to the "same, like or similar articles" as again required under Section 201 of the Tariff and Customs Code. WHEREFORE, the instant petition is hereby DISMISSED and the decision under review AFFIRMED. No costs. Herrera and Benipayo , JJ ., concur.