Secretary of Finance v. M/V "Don Martin" Voy 047

FIRST DIVISION [CA-G.R. SP No. 66725. July 29, 2003.] THE SECRETARY OF FINANCE, DEPARTMENT OF FINANCE, BUREAU OF CUSTOMS AND THE DISTRICT COLLECTOR CUSTOMS OF CAGAYAN DE ORO CITY , petitioners , vs . M/V "DON MARTIN" VOY 047 AND ITS CARGO OF 6,500.00 OF IMPORTED RICE, PALACITO SHIPPING, INC. AND LEOPOLDO PAMULAKLAKIN , respondent . D E C I S I O N DEL CASTILLO, M. , J p : This is a Petition for Review from the Decision 1 dated May 22, 2001 of the respondent Court of Tax Appeals in C.T.A. Case No. 5890, insofar as it ordered the release of the vessel M/V "Don Martin" and its cargo of 6,500 sacks of rice and the Resolution 2 dated August 30, 2001 denying petitioner's motion for reconsideration filed thereto. The Facts On January 25, 1999, M/V "DON MARTIN," a vessel of Philippine registry and engaged in coastwise trade arrived at the Port of Cagayan de Oro City, with the 6,500 sacks of rice. Its cargo of rice was intended to be unloaded from the vessel except that same was discovered to be smuggled. Some sacks in fact, have been unloaded and transferred to a warehouse at Lapasan, Cagayan de Oro City. On January 26, 1999, acting on an intelligence report that the sacks of rice were smuggled, the operatives of the Economic Intelligence Bureau and Investigation Bureau (EIIB) and the Bureau of Customs apprehended said seized both the vessel and its cargo of 6,500.00 sacks of rice. Thereafter, a Warrant of Seizure and Detention (WSD) was issued by the District Collector of Customs-Cagayan de Oro City against the vessel and its shipment for violation of Section 2530 (a), (f), (k) and (l) of the Tariff and Customs Code (TCC). Docketed as Seizure Identification No. 03-99, said seizure case was heard before the District Collector of Customs, Cagayan de Oro City. At the hearing held on February 22 and 23, 1999, private respondents claimed that private respondent-claimant vessel is a common carrier engaged in business and that the rice subject of the seizure proceedings was locally produced and locally acquired. In support of its claim, private respondents presented the following exhibits: 1. Certificate of ownership to prove that Palacio Shipping, Inc. is the owner of M/V "Don Martin"; 2. Coastwise License to prove that Palacio Shipping, Inc. is duly licensed to engage in coastwise trading and as such, is a common carrier and is financially capable to engage in shipping business; 3. Mintu Rice Mill Official Receipt No. 2753 dated January 18, 1999 to prove that the origin of the rice is Sablayan, Occidental Mindoro and to show that the rice is of regular mill and not smuggled; 4. NFA Sablayan, Occidental Mindoro Clearance to show that the bags of rice purchased under Exhibit "3" has been cleared for shipment by the National Food Authority of Sablayan, Occidental Mindoro; 5. Old NFA License of Godofredo Mintu 5.A Renewal of the NFA License of Godofredo Mintu expiring May 31, 1999 to show that the purchased rice came from a duly licensed grains trader; 6. Commercial, the shipper to prove that the shipper is a duly licensed NFA wholesaler; 6.1 NFA License of Florentino J. Palacio, owner of the EMP A Renewal Receipt of NFA License for Fiscal Year 1998-1999; 7. NFA Clearance of Catbalogan, Western Samar to prove that the cargo of M/V "Don Martin" was cleared for Cagayan do Oro City. 7.1 PPA Seal 7.2 Coast Guard Seal 7.3 Page 2 of NFA Clearance; 8. Bill of Lading to prove that the cargo was duly covered with a bill of lading which is a requirement in coastwise shipping; 9. Coasting Manifest to prove that the cargo of rice was duly reflected in its manifest which is likewise a requirement in coastwise shipping; 10. Birth Certificate of Leopoldo "Junior" Pamulaklakin. 10.1 Residence Certificate of Leopoldo Pamulaklakin, Jr. 10.2 Picture of Leopoldo "Junior" Pamulaklakin to prove that the consignee is a living person and not fictitious. On the other hand, the laboratory analysis of samples of the subject rice by the NFA and the Philippine Rice Research Institute reveal that its grain length is unusually long with 7.2 mm. for both Orion and Platinum 2000 rice samples as compared to the grain length of most Philippine varieties which ranges from 5.8 to 6.9 mm. only. The same laboratory analysis also states that rice grains of more than 7.0 mm. are more common in the countries of Brazil, Bolivia, Guatemala and Thailand, although the said imported varieties could be purchase locally through the NFA. The District Collector of Customs also found that some white sacks/containers were marked with "Premium Rice" whereas per the Philippine Grains Standardization, yellow is for premium rice while white is for ordinary rice. On March 24, 1999, the District Collector of Customs, Cagayan de Oro City, rendered a Decision holding that the 6,500 sacks of rice are of foreign origin and therefore, subject to seizure and forfeiture for violation of Section 2530(f) and (l) no. 1 of the TCC as amended, the dispositive portion of which states: "WHEREFORE, in the light of the foregoing and by virtue of the authority vested in the undersigned under Section 2312 of the Tariff and Customs Code of the Philippines, as amended, it is hereby ordered and decreed that the 6,500 sacks of imported rice subject of this seizure proceedings be, as they hereby are decreed forfeited in favor of the government of the Republic of the Philippines to be disposed of in the manner provided by law. It is further ordered and decreed that the carrying vessel MV "DON MARTIN" be released to the owner/claimant and be cleared for its next destination, for insufficiency of evidence. Let a copy of this Decision (sic) the concerned parties at their given address. SO ORDERED." 3 On appeal by private respondent Leopoldo Pamulaklakin, the Deputy Commissioner, by authority of the Commissioner, affirmed the aforesaid decision on April 19, 1996. 4 On May 11, 1999, petitioner Secretary of Finance modified the decision of the Commissioner of Customs as regards the release of the vessel M/V "Don Martin", thus: "Respectfully returned to the Acting Commissioner of Customs, Port Area Manila, the within records of S.I. No. 03-99, PALACIO SHIPPING INC. and LEOPOLDO "JUNIOR" PAMULAKLAKIN, CLAIMANTS, with respect to MV "Don Martin," Voy 047 and its cargoes of 6,500 sacks of rice. The District Collector of Customs decreed the forfeiture of the 6,500 sacks of rice in favor of the government but ordered the release of the carrying vessel MV "Don Martin" for insufficiency of evidence. This decision was affirmed by the Deputy Commissioner of Customs. Pursuant to Section 2313 of the TCCP, the decision with respect to the order to release MV "Don Martin" is subject to automatic review by this Department. Upon review of the facts and supporting documents, we find that the operator of the vessel is the shipper of the smuggled goods. We cannot thus agree with the decision of the Bureau of Customs. Premises considered, the decision of the Collector of Customs concerning the order to release the MV "Don Martin" is hereby reversed and set aside pursuant to Section 2530(a) and (k) of the TCCP." 5 On June 21, 1999, private respondents filed their Petition for Review 6 with the Court of Tax Appeals, pursuant to Rule 5 of the Rules of the said court. In a resolution promulgated on November 8, 1999, respondent court ordered the release of M/V "Don Martin" and its cargo of 6,500 sacks of rice to private respondents, after the latter posted a GSIS Surety Bond in favor of the Bureau of Customs in the total amount of P12,232,000.00. On January 7, 2000, both parties filed with the said court a Joint Motion and Manifestation to Submit Memorandum and the Case for Decision. 7 On May 22, 2001, respondent court rendered its Decision 8 ordering the release of the 6,500.00 sacks of rice and the vessel M/V "Don Martin". Thereto, petitioners filed their motion for reconsideration which was denied by respondent court in its Resolution 9 dated August 30, 2001. Thus, the instant petition for review. In the meantime, on April 11, 2002, despite the pendency of the instant petition before this Court, private respondents filed before the respondent Court of Tax Appeals a manifestation and motion to release/cancel GSIS Surety Bonds, which motion, was timely opposed by the petitioners. In a Resolution 10 promulgated on February 19, 2003, the respondent court granted said motion, relying on the provision of Section 12, Rule 43 of the 1997 Rules of Civil Procedure, as amended. Thereto, petitioners filed their Motion for Reconsideration 11 which was however denied by the respondent court in a Resolution 12 promulgated on June 5, 2003, with Judge Juanito C. Castaeda., Jr, dissenting. 13 Consequently, on June 20, 2003, petitioners filed before this Court an Urgent Motion for the Issuance of a Temporary Restraining Order/Writ of Preliminary Injunction. On July 1, 2003, this court, in order not to forestall the issues raised in the petition from becoming moot and academic, granted said motion and enjoined the respondent Court of Tax Appeals from implementing its Resolution dated February 19, 2003 ordering the release/cancellation of the GSIS Surety Bonds in the total amount of Twelve Million Two Hundred Thirty Two Thousand Pesos (P12,232,000.00) posted by private respondents for the release of the vessel M/V "Don Martin" and its cargo of 6,500 sacks of rice earlier declared and forfeited in favor of the government. 14 The Issues Before us, petitioners contend that: "I THE COURT OF TAX APPEALS HAD NO JURISDICTION OVER THE 6,500 SACKS OF RICE CONSIDERING THAT THE APRIL 19, 1990 DECISION OF DEPUTY COMMISSIONER OF CUSTOMS ORDERING ITS FORFEITURE WAS NEVER THE SUBJECT OF APPEAL BEFORE IT. II THE FINDING OF THE COLLECTOR OF CUSTOMS, AS AFFIRMED BY THE COMMISSIONER OF CUSTOMS, THAT THE RICE WAS IMPORTED AND NOT COVERED BY PROPER IMPORT DUTY, HAVING BECOME FINAL AND EXECUTORY, THE RICE MAY NO LONGER BE RELEASED, THE SAME IS TRUE WITH REGARD TO THE VESSEL." 15 Our Ruling The petition is meritorious. We shall pass upon the two (2) assigned errors jointly. Indeed, it is a basic rule in taxation that the factual findings of the CTA, when supported by substantial evidence, will not be disturbed on appeal unless it is shown that the said court committed gross error in the appreciation of facts, 16 and it is sufficiently shown that there has been no evidence to support such findings. 17 In the instant case, the assessment of the respondent court needs to be scrutinized in the light of the fact that the Court of Tax Appeals reversed and set aside the findings of the Collector of Customs whose findings was affirmed by the Commissioner of Customs. It bears stressing here, that, seizure and forfeiture proceedings under the tariff and customs law are not criminal in nature, hence, proof beyond reasonable doubt is not required to justify forfeiture of the goods. 18 The records do appear that the findings of the Collector of Customs and the Commissioner of Customs find that of the Secretary of Finance are sustainable, being supported by substantial and convincing evidence, as compared to the findings and conclusions made by the respondent court. The 6,500 sacks of rice were established to be of imported variety and origin and that the same goods are not covered by proper importation documents as required by law. The findings of the Collector of Customs and affirmed by the Commissioner of Customs, states that the 6,500 sacks of rice were found to have been imported without proper import documents. Such, that, they are now categorized as smuggled items. The Collector of Customs aptly found that: "The results of Laboratory Analysis of samples of the subject rice by the NFA and the Philippine Rice Institute reveal that the grain length is unusually long with 7.2 mm. for both Orion and Platinum 2000 rice samples as compared to the grain length of most Philippine Varieties which ranges from 5.8 to 6.9 mm. only. It was also found out that rice with grain length of more than 7.0 mm. are more common in the countries of Brazil, Bolivia, Guatemala and Thailand, (Exhibit "J-3 and "K-1"), although the said variety could be purchased locally through the NFA. Furthermore, it also appears that some white sacks/containers were marked with Premium Rice whereas per Philippine Grains Standardization, yellow color is for premium while white color is for ordinary rice. (Exhibit I). On the basis of the above findings, it can be easily concluded that the 6,500 sacks of rice subject of this proceedings are of foreign origin and therefore, subject to seizure and forfeiture for violation of section 2530(f) and (l) of the TCCP, as amended, in the absence of showing of its lawful entry into the country. The presentation of the supporting documents by respondents/claimants was a strategy to conceal the true nature and origin of the cargoes and to mislead the Customs Authorities into believing that subject rice are locally produced and locally purchased. Hence, the said documents have no probative value." 19 The Tariff and Customs Code provides: "Section 2530. Property Subject to Forfeiture . . . (1) any article sought to be imported or exported: 1. Without going through a customhouse, whether the act was consummated, frustrated or attempted." As regards the carrying vessel, M/M "Don Martin," the above Section 2530, paragraphs (a) and (k) of the same Code authorizes its forfeiture. Thus: "Section 2530. Property Subject to Forfeiture . . . (a) Any vehicle, vessel or aircraft, including cargo, which shall be used unlawfully in the importation or exportation of articles or in conveying and/or transporting contraband or smuggled articles in commercial quantities into from any Philippine port or place. The mere carrying or holding on board of contraband or smuggled articles in commercial quantities shall subject such vessel, vehicle, aircraft or any other craft to forfeiture: Provided, That the vessel, or aircraft or any other craft is not used as duly authorized common carrier and as such carrier is not chartered or leased; xxx xxx xxx (k) Any conveyance actually being used for the transport of articles subject to forfeiture under the tariff and customs laws, with its equipage or trappings, and any vehicle similarly used, together with its equipage and appurtenances including the beast, steam or other motive power drawing or propelling the same. The mere conveyance of contraband or smuggled articles by such beast or vehicle, but the forfeiture shall not be effected if it is established that the owner of the means of conveyance used as aforesaid, is engaged as common carrier and not chartered or leased, or his agent in charge thereof at the time, has no knowledge of the unlawful act." Considering that the operator of the vessel is also the shipper of the smuggled goods, the forfeiture of the carrying vessel is thus in order. In fine, we hold that the Court of Tax Appeals erred in issuing its Decision dated May 22, 2001 and its Resolution dated August 30, 2001. aSTHDc WHEREFORE, finding merit in the instant petition, the same is GIVEN DUE COURSE. The Decision and the Resolution of the Court of Tax Appeals ordering the release of the 6,500 sacks of rice and its carrying vessel M/V "Don Martin" is REVERSED and SET ASIDE and the same is hereby ORDERED forfeited in favor of the Government. Costs against private respondents. SO ORDERED. Garcia and Bello, Jr . , JJ . , concur. Footnotes 1. Annex A to the Petition, pp. 3749, Rollo. 2. Annex B to the Petition, pp. 5051, Rollo. 3. P. 3, Decision, Seizure Identification No. 03-99, Annex C to the Petition, pp. 5254, Rollo. 4. Annex D to the Petition, pp. 5556. 5. Annex E to the Petition, p. 57, Rollo. 6. Annex F to the Petition, pp. 5875, Rollo . 7. Annex G to the Petition, pp. 7678, Rollo . 8. Annex A to the Petition, pp. 3749, Rollo. 9. Annex B to the Petition, p. 50, Rollo. 10. Pp. 174177, Rollo. 11. Pp. 178181, Rollo. 12. Pp. 187190, Rollo. 13. Pp. 191195, Rollo. 14. p. 198, Rollo. 15. p. 8, Petition, pp. 794, Rollo. 16. Commissioner of Internal Revenue v. Court of Appeals, G.R. No. 124043, October 14, 1998, 298 SCRA 83. 17. Republic of the Philippines v. Court of Tax Appeals, G.R. No. 139050, October 2, 2001, 366 SCRA 489. 18. Feeder International Line, Pte., Ltd. v. Court of Appeals, G.R. No. 94262, May 31, 1991, 197 SCRA 842. 19. Pp. 23, Decision, Seizure Identification No. 03-99, Annex C to the Petition, Supra.