Procter & Gamble Philippine Manufacturing Corp. v. Court of Tax Appeals

[CA-G.R. SP No. 25594. May 19, 1992.] (C.T.A. Case No. 2849) PROCTER & GAMBLE PHILIPPINE MANUFACTURING CORPORATION , petitioner , vs . HON. COURT OF TAX APPEALS and COMMISSIONER OF CUSTOMS , respondents . D E C I S I O N FRANCISCO , J p : This is a very simple case involving the assessment of customs duty amounting to P33,838.00 paid on January 12, 1971 by petitioner and appellant Procter & Gamble Philippine Manufacturing Corporation (P & G (PMC) or PMC) to the Bureau of Customs, under protest formalized in a letter dated February 7, 1972 addressed to the Collector of Customs. The records disclose that a Notice of Appeal dated August 7, 1978 was filed with the Court of Tax Appeals in its C.T.A. Case No. 2849 "Procter & Gamble Philippine Manufacturing Corporation, petitioner versus Commissioner of Customs, respondent" serving notice that the petitioner is appealing the decision of the Court of Tax Appeals in said case as well as its Resolution denying petitioner's motion for reconsideration, to the Supreme Court under Rule 44 of the Rules of Court. On August 8, 1978, petitioner had filed with the Supreme Court a motion for extension of time to file petition for review docketed as G.R. No. L-48681. The petition for review was filed on September 7, 1978 and without giving due course thereto, the respondents were required to comment, not to file a motion to dismiss, within ten (10) days from notice thereof by Resolution dated September 20, 1978. The Solicitor General asked for several extensions of time to file the comment and after eighteen (18) extensions of time asked for by said office without being able to file the required comment, finally, the Honorable Supreme Court by its Resolution of May 23, 1979, give due course to the petition and required the parties to submit their simultaneous memoranda within thirty (30) days from notice (Records, p. 122). The petitioner filed its memorandum and the Office of the Solicitor General still asking for extensions of time for several times, failed to file the required memorandum and by the Resolution dated October 10, 1979, the Supreme Court resolved to declare the case submitted for decision ( id ., p. 175). On July 24, 1991, the Third Division of the Honorable Supreme Court issued the Resolution referring and transferring this case together with several other cases on appeal to it from the Court of Tax Appeals, to this Court for appropriate proceedings ( id ., 199-200). The facts appear to be as follows: Petitioner PMC imported on October 20, 1971 from the United States by air freight 5,400 tubes of toothpaste under terms contained in the Consular Invoice of Merchandise issued by the Philippine Consular Office at Los Angeles, California, U.S.A. as follow: "TERMS: FREE OF CHARGE TO CONSIGNEE FOR FREE DISTRIBUTION FOR ADVERTISING AND FOR CHARITY PURPOSES NOT FOR RESALE, BARTER OR TRADE." Said subject tubes of toothpaste were classified under four (4) different flavors, allegedly, as samples for research and trial purposes, of a size described as small and meant to be distributed for free to the public at large in order to determine if the kind including the flavor would appeal to the consuming public and if some gain could be made if manufactured and marketed in the Philippines. This tube had a dimension of 5 inches long and the quantity, 5,400, is claimed as having no appreciable commercial value. On November 24, 1971, the Central Bank of the Philippines, in a letter to the Airport Customhouse, authorized the release of the shipment as a "no dollar" importation due to the fact that the "same (were) to be used for sample research and trial purposes only". But the Collector of Customs at the Manila International Airport had a different view of the importation and assessed a duty of P33,838.00 on the said quantity of toothpaste. As aforesaid, petitioner PMC paid the duty as assessed on January 12, 1972 under protest and by a letter dated February 7, 1972 submitted a formal protest with the Collector of Customs docketed as MIA Protest No. 72-1. The Collector of Customs heard the parties and in a Decision dated August 23, 1973 dismissed the protest of PMC for lack of merit. On September 19, 1973, PMC appealed the decision of the Collector of Customs to the Commissioner of Customs and the records were correspondingly forwarded to the respondent Commissioner of Customs on October 4, 1973. For over a year, the Commissioner of Customs failed to resolve the case and PMC on January 18, 1975, filed a motion with said office to resolve the appeal followed by another motion dated July 10, 1976 seeking resolution of the appeal, followed again by another letter dated October 6, 1976 reiterating its request to have the appeal resolved but the Commissioner of Customs still had failed to resolve the case. On December 16, 1976, the petitioner wrote a letter to the Commissioner of Customs reiterating its request for resolution of its appeal and stating in a portion thereof, that: "We shall assume that you have dismissed our appeal in the event we do not receive any resolution from you by January 5, 1977." When despite this last letter and no decision was forthcoming from the Commissioner, PMC on January 13, 1977 filed a Petition for Review with the Court of Tax Appeals (CTA, for brevity) docketed as C.T.A. Case No. 2849 entitled "Procter & Gamble Philippine Manufacturing Corporation versus Commissioner of Customs". The Commissioner of Customs filed a Motion to Dismiss under date of February 2, 1977 stating that the CTA has no jurisdiction over the case as there was no decision of the Commissioner of Customs which may be reviewed. Before the motion to dismiss could be resolved by the CTA, on February 14, 1977, the Commissioner of Customs issued a Decision affirming the ruling of the Collector of Customs and denying the protest of PMC. But in view of the said decision finally resolving PMC's protest, PMC filed a Manifestation with the CTA informing said court of the decision of the Commissioner of Customs and asked that the motion to dismiss interposed by said Commissioner of Customs be denied as his objection had become "moot and academic". The Court of Tax Appeals by its Decision dated December 13, 1977 sustained the motion to dismiss of the Commissioner of Customs and dismissed the case on the ground of lack of jurisdiction. The petitioner filed a motion for reconsideration but CTA denied the same. PMC filed on September 7, 1978 its petition for review with the Honorable Supreme Court making the following assignment of errors: "I THE RESPONDENT CTA ERRED IN HOLDING THAT IT HAD NO JURISDICTION TO TAKE COGNIZANCE OF THE INSTANT CASE. "II THE RESPONDENT CTA ERRED IN FAILING TO CONSIDER THE FACT THAT THE FAILURE OF THE RESPONDENT COMMISSIONER OF CUSTOMS TO RENDER A DECISION FOR MORE THAN THREE (3) YEARS AMOUNTS TO A DECISION OR RULING WHICH MAY BE APPEALED TO IT. "III THE RESPONDENT CTA ERRED IN FAILING TO CONSIDER THAT THE ISSUANCE OF THE RESPONDENT COMMISSIONER OF CUSTOMS' DECISION RENDERED THE RESPONDENT COMMISSIONER OF CUSTOMS' MOTION TO DISMISS MOOT AND ACADEMIC. "IV THE RESPONDENT CTA ERRED IN FAILING TO CONSIDER THE FACT THAT THE PETITIONER PMC HAS A MERITORIOUS CLAIM AND THE DISMISSAL OF SAID CLAIM DUE TO A TECHNICALITY WILL LEAVE PETITIONER PMC WITHOUT ANY REMEDY UNDER THE LAW A CLEARLY UNJUST AND INEQUITABLE SITUATION." As already alluded to above, the Office of the Solicitor General, representing the respondent, had asked for several extensions of time to file its memorandum but had never been able to do so up to now. On October 5, 1988, the Supreme Court issued a Resolution requiring the parties "to move in the premises within a non-extendible period of thirty (30) days from notice hereof, whether or not they are still interested in prosecuting this case or supervening events may have transpired which render the case moot and academic or otherwise substantially affect the same. In case the parties fail to make the proper manifestation within the required period, the Court shall consider the case closed and terminated, and entry of final judgment shall accordingly be made." Petitioner PMC manifested its continuing interest in the prosecution of the case and informed that no supervening event had transpired which render the case moot and academic or otherwise substantially affect the same and finally, on July 24, 1991, Resolution was entered forwarding this case to Us for appropriate proceedings. There are two (2) questions involved in this case. The first is the Resolution of the court of Tax Appeals dated December 13, 1977 dismissing the petition for review filed by petitioner PMC in C.T.A. Case No. 2849 on the ground that said court has no jurisdiction over the case because when the said petition was filed as yet the Commissioner of Customs had not decided on petitioner's appeal from the decision of the Collector of Customs denying petitioner's protest stating that "Without a decision of the Commissioner of Customs, this Court acquires no jurisdiction over cases arising under Customs Laws. (Sampaguita Shoe & Slipper Factory vs. Commissioner of Customs, 102 Phil. 85)." (Decision in CTA Case No. 2849, p. 6) The same decision acknowledged that the Commissioner of Customs had issued a Decision on February 14, 1977 per petitioner's Manifestation dated March 4, 1977 but disregarded said manifestation saying: " . . . by virtue of the provisions of Sections 7 and 11 of Republic Act No. 1125, it is obvious that the appellate jurisdiction of the Court of Tax Appeals clearly contemplates the review of a decision rendered by respondent before and not after an appeal therefrom is instituted to this Court by the taxpayer. . . . ." The said court said that its ruling is in accordance with the principle of exhaustion of administrative remedies and for the other reason that jurisdiction over the subject matter is conferred by law which may not be enlarged or diminished or changed by the parties. It also added that while amendments to pleadings are normally allowed but an amendment of a complaint in order to confer jurisdiction upon the court cannot be allowed, it being "elementary that the court must first acquire jurisdiction over the case in order to act validly therein" citing Rosario and Untalan vs. Carangdang, et al (96 Phil. 845). In the matter of whether or not the CTA has jurisdiction over the petition for review filed within by PMC, We are of the persuasion that the CTA under the peculiar circumstances herein obtaining may take cognizance of the case and decide it on its merits. There is no dispute concerning the requirement in the filing of petition for review with the CTA that a decision of the Commissioner on the subject protest need first be made. But as the petitioner had explained, the Commissioner of Customs for well over three (3) years and despite the requests in several letters by PMC for a resolution of the protest, said office had not acted which had caused the petitioner to file with it the letter of December 17, 1976 informing said office that petitioner would consider the Commissioner of Customs as having affirmed the action of the Collector of Customs denying the protest if no resolution is received from that office by January 5, 1977 and thus had coursed on January 13, 1977 with the Court of Tax Appeals the aforesaid petition for review. Indeed, as the petitioner has stated, it and other persons similarly situated would practically be at the mercy of respondent Commissioner of Customs who would interminably delay resolution of matters pending before him and prevent said petitioner from filing an appeal to the CTA and other courts. The situation of the petitioner in the instant case is different from the cited cases by CTA which involved the failure of the petitioners therein to follow the procedures set by law which is to file a protest with the Collector of Customs, appeal the decision of the Collector of Customs to the respondent Commissioner of Customs and finally, appeal to the Court of Tax Appeals from the decision of the Commissioner of Customs. In the case at bar, petitioner PMC had followed all the procedures provided for by law and it went to the Court of Tax Appeals despite the failure of the Commissioner of Customs to decide the case but only because it had waited for over three (3) years and had given the Commissioner of Customs an alert of what it will assume the Commissioner of Customs as having affirmed the collector's decision denying petitioner's protest and thus implicitly, that it intended to file a petition for review with the Court of Tax Appeals considering the Commissioner of Customs' assumed denial of its protest. In Republic vs. Lim Tian Teng Sons & Co., Inc. (16 SCRA 584, 591), it was held: "We will now resolve the issue of whether or not the court a quo erred in considering as final and executory the assessment contained in the letter of the Collector of Internal Revenue dated January 16, 1957. As stated, defendant received said assessment on January 30, 1957 and on the following day requested reinvestigation of its tax liability. The Collector of Internal Revenue however did not reply to the request for reinvestigation. Instead, he referred the case to the Solicitor General for collection of the tax. The lower court interpreted this action of the Collector of Internal Revenue as a denial of defendant's request for investigation. "Said court, to our mind, committed no error. For what is more indicative of the Collector's decision against reinvestigation than his insistence to collect the tax?" The principle of exhaustion of administrative remedies invoked by the CTA is subject to certain exceptions, one of which is when under the circumstances, an administrative remedy is not a plain, speedy and adequate remedy (De Lara v. Cloribel, 14 SCRA 269, 272-273), its application would result to nullification of a claim (Gravador v. Mamigo, 20 SCRA 742, 748), or would leave no other recourse (Sta. Maria v. Lopez, 31 SCRA 637, 670) or if there is unreasonable delay or official inaction (Azuelo v. Arnaldo, 108 Phil. 293, 296). The petitioner cited two (2) cases with rulings relevant to the instant case, which We quote: ". . . when petitioners wrote to the Commissioner of Civil Service and to the Secretary of Education, and they failed to obtain the relief sought, and instead the Director of Public Schools threatened to replace them, they had already given an opportunity to these high officials to act upon their petition for relief, which practically, in our opinion, is equivalent to an exhaustion of the administrative remedies provided by law. (Gonzales vs. Aldana, 107 Phil. 754, 759 [1960]) ". . . . It would seem, therefore, that in the particular circumstances of the present case, petitioner had sufficient cause of action at the same time of the filing of his petition on June 11, 1958, and a report to the court without awaiting for the final decision of the administrative officers is not, in view of the special situation, premature. (Alzate vs. Aldana, 107 Phil. 298, 303 [1960])." In Gravador vs. Mamigo ( supra at page 748), it was held: "Still it is argued that the petitioner's action was prematurely brought because he had not availed of all administrative remedies. This argument is without merit. Suits for quo warranto to recover a public office must be brought within one year. (E.g., De la Maza vs. Ochave, G.R. L-22336, May 23, 1967; Unabia vs. City Mayor, 99 Phil. 253 [1956]). Before filing this case the petitioner waited for eight months for the school officials to act on his protest. To require him to tarry a little more would obviously be unfair to him since on April 13, 1965, when this case was filed, he had only four months left within which to bring the case to court. There was neither manner nor form of assurance that the decision of the Director of Public Schools would be forthcoming. The rule on exhaustion of administrative remedies does not apply where insistence on its observance would result in the nullification of the claim being asserted. (Alzate vs. Aldana, G.R. L-14407, Feb. 29, 1960)." We may also consider the CTA as having adequate jurisdiction over the case by the fact that, after the petition for review was filed with the CTA, in a Manifestation dated March 4, 1977 of PMC, the CTA was informed that the Commissioner of Customs had already issued a decision affirming the decision of Collector of Customs with the prayer that the decision of the respondent Commissioner of Customs be incorporated in the said petition for review. By the issuance of a decision by the Commissioner of Customs, whatever was the fault in the petition for review is deemed cured. As the petitioner had argued, the respondent Commissioner of Customs by issuing its decision affirming denial of the protest of PMC, had impliedly withdrawn its motion and thus had voluntarily submitted himself to the jurisdiction of the CTA and the objections of the Commissioner of Customs may thus be considered moot and academic. In Young Men Labor Union Stevedores v. Court of Industrial Relations, 13 SCRA 285-288, the Supreme Court ruled: ". . . . Moreover, petitioner is now estopped to question the jurisdiction of the lower court for it is undisputed that it withdrew its motion to dismiss raising that issue and voluntarily submitted to its jurisdiction and presented its evidence. And so it has been held that 'One who subjects himself to the jurisdiction of a court, even where he would not otherwise be subject to suit, becomes subject to any valid claim asserted against him directly relating to the subject matter of his voluntarily initiated proceedings. . . . To permit one to invoke the exercise of jurisdiction within the general powers of the court and then to reverse its orders upon the ground that it had no jurisdiction would be to allow one to trifle with courts. The principle is one of estoppel in the interest of a sound administration of the laws . . . closes the mouth of the complainant (Perkins v. Benguet Consolidated Mining company, et al., L-1981-82, May 28, 1954)'." The second question to resolve deals with the real meat and substance of the case involving the question of whether or not the duty which the petitioner had paid under protest had been correctly imposed on the tubes of toothpaste, subject matter of the case. Section 105 of the Tariff and Customs Code is quoted: "Sec. 105. Conditionally Free Importation . The following articles shall be exempt from the payment of import duties . . .: xxx xxx xxx (q) Samples of the kind, in such quantity and of such dimension or construction as to render them unsaleable or of no appreciable commercial value; models not adopted for practical use; and samples of medicines, properly marked 'sample sale punishable by law, for the purpose of introducing a new article in the Philippine market and imported only in a quantity sufficient for such purpose by a person duly registered and identified to be engaged in that trade : . . . .'" (emphasis supplied). An authority on Tariff and Customs Code, Tejam, made the observation: ". . . The word 'unsaleable' was not intended to be strictly construed and must be held modified by the alternative expression 'or of no appreciable commercial value.' In other words, the paragraph differentiates between intrinsic value and commercial value. That the combs have an intrinsic value is past all questions; that they have a commercial value, however, is open to doubt, and the idea of the legislators, seems to have been that only those goods have a commercial value which are susceptible of barter and sale by wholesale houses in the ordinary course of legitimate commerce. (T.D.C. 729)" (IV Tejam, Commentaries on the Revised Tariff and Customs Code, 1978 ed., p. 2157) (Note "T.D.C." refers to Philippine Tariff Decision Circulars). Further, Tejam ( id .) citing American authorities, said: "'Commercial purposes' is a matter of intent. Intent being a state of mind is rarely susceptible of direct proof but must ordinarily be inferred from the facts. (State vs. Wales, 154 S.E. 666, 867, 107 W. Va 351 quoted in G.R. No. L-12519, April 29, 1959)." We uphold as correct that the tubes of toothpaste involved, while having an intrinsic value, have no appreciable commercial value for the very simple reason that the shipment will be used for research purposes only per the expressed intent of the petitioner which We have no reason to doubt not only because of the small size of the tubes but also because of the rather limited quantity, 5,400 units or tubes, and for the other facts indicative of said intent as hereinafter enumerated. The Central Bank itself authorized the release of the shipment which was a no dollar importation, no doubt on its own studied perception of the importation. Consider the following facts, as correctly listed by the petitioner in its Memorandum (Records, p. 153) admitted by the Collector of Customs himself, which are: 1) The tubes of toothpaste were not marked by any product label. 2) The tubes of toothpaste were imported only once in a non-commercial quantity sufficient for research purposes only. 3) 3,200 of the 5,400 tubes were actually distributed by petitioner PMC as samples to housewives for trial. The remainder were stored in a warehouse to test how long they would keep in a tropical climate. 4) At the time the importation was made, petitioner PMC did not sell any toothpaste product in the open market. Still on the matter of whether or not the CTA has jurisdiction over the case, We have to consider that, under the circumstances, petitioner can no longer appeal the written decision of the Commissioner of Customs dated February 14, 1977 which petitioner received on March 1, 1977. The CTA could have resolved the motion to dismiss of Commissioner of Customs filed on February 2, 1977 before March 31, 1977 and by then petitioner PMC could still have appealed said decision to the CTA, but the CTA issued its decision dismissing petitioner's petition for review on December 13, 1977 when petitioner could no longer appeal from said written decision of the Commissioner of Customs. So, by the foregoing narrated turn of events, petitioner is left without a remedy. The Supreme Court in Alonso vs. Villamor (16 Phil. 315, 321-322) had ruled in vivid and clear language, thus: "The error in this case is purely technical, to take advantage of it for other purposes than to cure it, does not appeal to a fair sense of justice. Its presentation as fatal to the plaintiff's case smacks of kill rather than right. A litigation is not a game of technicalities in which one, more deeply schooled and skilled in the subtle art of movement and position, entraps and destroys the other. It is, rather, a contest in which each contending party fully and fairly lays before the court the facts in issue and then, brushing aside as wholly trivial and indecisive all imperfections of form and technicalities of procedure. Lawsuits, unlike duels, are not to be won by a rapier's thrust. Technicality, when it deserts its proper office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant consideration from courts. There should be no vested rights in technicalities. . . . ." WHEREFORE, the Decision of the Court of Tax Appeals dated December 13, 1977 is REVERSED and the respondent Commissioner of Customs is REQUIRED to refund to the petitioner P & G (PMC) the customs duties amounting to P33,838.00 which the Collector of Customs illegally collected on the subject importation. SO ORDERED. Martinez and Cui, JJ ., concur.