Commissioner of Customs v. Court of Tax Appeals

TENTH DIVISION [CA-G.R. SP No. 44496. July 8, 1998.] COMMISSIONER OF CUSTOMS , petitioner , vs . COURT OF TAX APPEALS AND MILWAUKEE INDUSTRIES CORPORATION , respondents . D E C I S I O N ABAD SANTOS , JR. , J p : This is a Petition for Review filed by petitioner Commissioner of Customs seeking to reverse and set aside the Decision of public respondent Court of Tax Appeals (CTA) in C.T.A. Case No. 5160 promulgated on April 8, 1997 and to order the forfeiture of the imported shipment of steel billets of private respondent Milwaukee Industries Corporation ("Milwaukee"). The antecedent facts as aptly summarized by public respondent CTA are as follows: LexLib "On November 5, 1993, a Commercial Letter of Credit was issued by the Far East Bank and Trust Company (FEBTC) to herein petitioner 1 in the amount of US$2,071,000.00 in favor of Klockner & Co. AG of Germany for the importation of 9,500 metric tons of secondary steel billets. At about the same time, petitioner through its customs broker. Schmitz Transport and Brokerage Corporation ('Schmitz' for brevity), filed with FEBTC the required Import Entry Declaration and deposited the amount of P1,863,598.00 representing the estimated duty thereon. An official receipt of the Bureau of Customs with number 30277274 was issued correspondingly on said deposit. Upon arrival of the shipment of steel billets in Manila on February 1, 1994, Customs Inspector Jimmy Pastoriza and Customs Guards Generoso Mirallo and Lucas Almendras were assigned to board the carrying vessel S/S 'Solsyn' with the task of supervising the unloading of the said billets. On the same date, Mr. Jose Garcia, a supervisor of Schmitz, boarded said vessel and presented to Mr. Pastoriza a copy of a Permit to Discharge Shipside, otherwise known as the Shipside Permit, authorizing the discharge of the subject shipment to the barges of Transport Venture, Inc. On account of said permit, the entire shipment was issued thirteen (13) Boat Notes by Mr. Pastoriza and based on them, the shipment was allowed to be discharged. The discharging took six days from February 1 to February 6, 1994. Soon after that, allegedly by authority of said Boat Notes according to the petitioner, the shipment, upon unloading at BASECO, was loaded to trucks of Schmitz and later transported to the factory of the petitioner in Apalit, Pampanga. Afterwards, on the strength of a derogatory information allegedly received by the Customs Intelligence and Investigation Division (CIID) of respondent's Bureau, an investigation on the circumstances attendant to the transfer of the subject shipment to the premises of petitioner was initiated. The CIID discovered that the subject shipment was delivered without the filing of an import entry and the payment of the customs duty and taxes due thereon. Hence, on March 14, 1994, an application for the Issuance of a Warrant of Seizure and Detention was filed and the warrant was subsequently issued the following day, March 15, 1994, with the return thereof, as shown on the face of the warrant, made on March 17, 1994 at 5:30 in the afternoon (Exhibit 'G'). Facts show, however, that prior to the return of the warrant, a certain Mr. Alfredo S. Gloria a consultant of the petitioner, conferred with the respondent and explained the circumstances surrounding the transfer of the shipment to the premises of petitioner's factory before the payment of duty and taxes due thereon. Thereafter, Mr. Gloria wrote the respondent a letter, dated March 16, 1994 (Exhibit 'M'), thanking the latter for receiving and listening to him and attached therewith a customs entry covering the importation and two checks, one for the amount of P5,000,000.00 and another in the amount of P4,944,864.00 representing the duty and taxes due on the subject shipment. Subsequent events reveal that on March 17, 1994, a certain Atty. Aaron Redubla, an assistant of the respondent, placed a note on said letter (Exhibit 'M-1') instructing Mr. Oscar Brillo, the Collector of Customs of the Port of Manila to further process and release the shipment upon payment of duties and taxes, to quote: 'Coll. Brillo/Sir. Per Instruction, pls. for further processing and release upon payment of T/D. Thanks.' On the same letter, Collector Brillo also placed a note ordering the continuation of the processing of the customs entry on the subject shipment and the acceptance of the payment of duties and taxes by checks (Exhibit 'M-2', Answer, par. 9. p. 4). The latter checks were duly received by respondent's Bureau on March 17, 1994 (Exhibits 'H' and 'I'). Notwithstanding the acceptance of the payment of duties and taxes on the subject shipment, however, the Collection proceeded with the hearing of the seizure and forfeiture proceeding on the shipment under S.P. No. 94-055. On August 5, 1994, petitioner received a copy of the Decision of the Collector, dated August 3, 1994, ordering the forfeiture of the subject shipment. Consequently, a notice of appeal from said decision was filed before the respondent on the same date. On September 13, 1994, petitioner received a copy of respondent's decision affirming the decision of the Collector. Petitioner filed a motion for reconsideration of said decision but was eventually denied by the respondent in an Order dated October 4, 1994." 2 Undaunted, herein private respondent Milwaukee assailed the decision of the Commissioner of Customs affirming the decision of the Collector before public respondent Court of Tax Appeals (CTA) which subsequently reversed and set aside the said decision of herein petitioner Commissioner of Customs. The dispositive portion of public respondent CTA's decision reads: "WHEREFORE, in view of the foregoing, the instant Petition for Review is hereby GRANTED. The assailed decision of the respondent in Customs Case No. 94-09 (Manila Seizure Identification No. 94-055) is hereby REVERSED and SET ASIDE. Accordingly, the Surety Bond (PGA Bond No. HQ 34515-95/G[16] No. 17997 as amended under Endorsement No. HQ-E-09398-96 in the total amount of P75,000,000.00) posted by the petitioner is ordered CANCELLED. SO ORDERED." 3 Petitioner Commissioner of Customs moved for the reconsideration of the said CTA's decision but the same was denied. 4 prLL Hence, this petition for review filed by petitioner Commissioner of customs claiming that: "THE COURT OF TAX APPEALS ERRED IN DISREGARDING THE FOLLOWING PROPOSITIONS: I ACCEPTANCE OF PAYMENT OF TAXES AND DUTIES DOES NOT EXTINGUISH THE BLATANT VIOLATIONS COMMITTED BY RESPONDENT IN THE IMPORTATION OF THE SUBJECT SHIPMENT. II THERE WAS NO COMPROMISE UNDER SECTION 2316 OF THE TARIFF AND CUSTOMS CODE." 5 In his petition, the Commissioner of Customs does not dispute the fact that private respondent Milwaukee filed the required import entry and paid in full the taxes and duty due on the subject shipments of steel billets after the same were transferred from the carrying vessel to the latter's factory in Apalit, Pampanga and after the seizure proceedings on the said shipments were initiated. 6 however, it is the contention of petitioner, as can be gleaned from his arguments, that when the subject shipments were transferred to private respondent's factory the said shipments were in fact " released " from the customs' custody and at that point in time the taxes and duties due thereon were not paid, the import entry filed, and the legal permit of withdrawal or release obtained, by Milwaukee, in violation of the Customs and Tariff Code. 7 In its Comment, private respondent Milwaukee disputes petitioner's contention and asserts, among others, that the subject shipments were not "released" at that time but were only transferred under "continuous customs guarding." 8 The petition is devoid of merit. In the decision under review, public respondent CTA found and held, inter alia , that at the time of the transfer of the subject shipment to Milwaukee's factory the same were not "released" but merely transferred or discharged under "continuous customs guarding". 9 The said factual finding of public respondent CTA was based, among others, on the following corroborating evidence which belie said petitioner's claim: (a) Boat notes (Exhibits "S" to "S-12" and their sub-markings) 10 signed by then Discharging Customs Inspector Pastoriza, majority of which contain a remark, to wit: "NOTE: Shipside discharge unto lighter underguard. Guard to remained (sic) in continuous duty until released by Customs Proper Authorities or upon presentation of a valid Delivery Permit or PDIG." (b) Bill and/or statement demanding payment of overtime services rendered by customs guards in guarding the subject shipments of steel billets submitted by Customs Guard-In-Charge Oscar Almendras and certified to by Discharging Inspector Pastoriza; 11 and (c) Copy of Solidbank check No. 08275 issued to Almendras (Exhibit 'O') and the dorsal part thereof showing the encashment and receipt of the check (exhibit 'O-1'). 12 This court is not inclined to disturb public respondent CTA's factual finding not only because the same is clearly and sufficiently supported by the above-enumerated evidence but more importantly, said finding was categorically admitted by petitioner Commissioner of Customs in its motion for reconsideration to the CTA's decision, to wit: "It is not enough that duties and taxes are paid so that an importation may be considered legally terminated: it is also required that a legal Permit for withdrawal shall have been granted. Such situation does not obtain in the case at bar. On the contrary, customs guards were posted at petitioner's premises in Apalit, Pampanga, thereby showing that respondent never 'released' the shipment to petitioner ." 13 (Emphasis supplied) In view of such admission on the part of petitioner, there is no question by now that at the time the subject shipments of steel billets were transferred to the factory of private respondent Milwaukee, said shipments were not released but allowed only to be transferred under "continuous customs guarding" to the premises of private respondent by authority of the boatnotes signed by Discharging Inspector Pastoriza. Simply put, since the said shipments were merely transferred "underguard," not released, the same then remained under the custody of the Bureau of Customs (Bureau) for all legal intents and purposes. This tends to explain why petitioner Commissioner of Customs instructed his assistant Atty. Aaron Redubla to "direct Customs Collector Brillo to further process the importation of the subject shipments and to release the same upon payment of taxes and duties due " 14 despite knowledge of the physical transfer thereof to private respondent's premises. 15 If petitioner Commissioner of Customs believed that the shipments had been released why would he instruct his assistant to "direct Customs Collector Brillo to release the subject shipments upon payment of the required taxes and duties "? How can the petitioner order the release of shipments already released? In the light of the foregoing discussions, it is indubitable that at the time private respondent Milwaukee filed the required import entry and paid in full the taxes and duties due on the subject shipments, the said shipments were not "released" yet but still under the custody of the Bureau. Hence, it is clear that private respondent Milwaukee did not commit the alleged violation of the Tariff and Customs Code imputed upon it by said petitioner that of obtaining the " release " of the subject shipments without filing an import entry and paying the required taxes and duties. On the contrary, private respondent Milwaukee fully satisfied the requirements for valid termination of importation of goods and/or articles as provided under Section 1202 of the Tariff and Customs Code, viz: cdlex "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 legal permit for withdrawal shall 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." (Emphasis supplied) There is no dispute that the duties and taxes due on the subject shipments were paid. As regards the legal permit for withdrawal, petitioner Commissioner of Customs' "order of release upon payment of taxes and duties due on the subject shipments" which is reflected in the notation (Exhibit "M-1") 16 made by petitioner's assistant, Atty. Redubla, is certainly a sufficient legal permit for the official release of the said shipments already transferred to the premises of private respondent Milwaukee. All thus told, there is no valid ground whatsoever for the forfeiture of the subject shipments. WHEREFORE, the decision subject of this petition for review is AFFIRMED and the petition of the Commissioner of Customs is hereby DISMISSED for lack of merit. SO ORDERED. Vasquez, Jr . and Regino, JJ . , concur. Footnotes 1. "Petitioner" in the above-quoted facts refers to herein private respondent "Milwaukee Industries Corporation." 2. pp. 2-5, CTA Decision; pp. 23-26, Rollo . 3. pp. 55-56, Rollo . 4. pp. 724-727 and 736-737, CTA Records (Case No. 5160.) 5. pp. 7-8, Petition for Review; pp. 12-13, Rollo . 6. pp. 4-5 and 8-9, Petition for Review; pp. 9-10 and 13-14, Rollo . 7. Ibid . 8. pp. 4-6, Comment on the Petition for Review; pp. 145-147, Rollo . 9. pp. 28-34, CTA Decision; pp. 49-55, Rollo . 10. pp. 218-230, CTA Records. 11. pp. 31-32, CTA Decision; pp. 52-53, Rollo . 12. Ibid . 13. p. 3, Motion for Reconsideration dated April 29, 1997; p. 726, CTA Records. 14. "COUNSEL: On the left lower margin of this letter is a notation which says "Coll. Brillo/Sir, Per instruction please for further processing and release upon payment of T/D. Thanks. Aaron, 3/17. Kindly look to that notation if the notation is made by you. WITNESS: Yes. COUNSEL: And the signature appearing in this notation is it yours? WITNESS: Yes. COUNSEL: And whose instruction was referred? WITNESS: From Commissioner Parayno." ( pp . 3-4 , TSN . May 31 , 1994 , Hearing in Connection with S . I . No . 94-055 ; pp . 455-456 , Folder of " Milwaukee SI No . 94-055 TSN ") See also Exhibit "M-1"; p. 189, CTA Records. 15. Exhibit "M"; p. 189, CTA Records. 16. p. 189, CTA Records.