Authority of Customs Commissioner to Compromise Basic Duties and Taxes

DOJ OPINION NO. 016 , s. 2008 March 17, 2008 Hon. Napoleon L. Morales Commissioner Bureau of Customs Manila Sir : This has reference to your request for legal opinion on certain issues regarding the authority of the Commissioner of the Bureau of Customs to compromise basic duties and taxes in the case of Golden Dragon Apparel, Inc. (GDAI). We take it that you want to be clarified on: 1. Whether the Commissioner of Customs may validly accept a compromise payment in a judicial proceeding involving an amount less than the basic duties being assessed and collected; and 2. Whether the said acceptance may be validly made even without the concurrence of the Secretary of Finance and under what circumstances. AHaETS You state that GDAI requested that they be allowed to pay, by way of compromise, ten percent (10%) of its alleged Php33,939,761.00 obligation to the Bureau arising from duties to be paid on forty (40) warehousing entries, or only Php3,393,976.00; and that GDAI cites financial reverses which led to the cessation of its operation in 2006 and incapability to pay the whole amount being collected as reasons for its request. You say that under Section 2316 of the Tariff and Customs Code of the Philippines (TCCP), as amended, the Commissioner is authorized to compromise any case arising under the said code involving the imposition of fines, surcharges and forfeitures, unless otherwise specified by law, but subject to the approval of the Secretary of Finance. You state, however, that the foregoing authority is limited to administrative compromises. You also aver that unlike the clear authority given the Commissioner of the Bureau of Internal Revenue (BIR) under Section 204 of the National Internal Revenue Code (NIRC) to accept a compromise payment in an amount even less than the basic tax being assessed conditioned on the existence of certain factors, one of which is the financial incapability of the taxpayer to pay the whole amount being assessed, even without the concurrence from the Secretary of Finance, you point out that the TCCP is silent as to the power of the Commissioner of Customs to accept a compromise payment in a judicial proceeding. Relative thereto, you quote Secretary of Justice Opinion No. 89, series of 2002, wherein this Department opined that: IDaCcS "After considering the provisions of law involved and established jurisprudence, this Department is of the opinion that the Bureau of Customs, through its Commissioner, may enter into a compromise agreement or agreements in civil cases for collection of the taxes and duties due to the Government, subject to the approval of the Secretary of Finance and of the court where the case is pending. The Bureau of Customs, which is headed and subject to the management and control of the Commissioner of Customs, is empowered to assess and collect the lawful revenues from imported articles and all other dues, fees, charges, fines and penalties accruing under the tariff and customs laws. . . . xxx xxx xxx In civil cases or proceedings, amicable settlements and compromises are not only allowed but actually encouraged. Article 2028 of the Civil Code expressly provides that "A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced." Article 2029 of the Civil Code also states that "The court shall endeavor to persuade the litigants in a civil case to agree upon some fair compromise." These legal provisions are complemented by the Rules of Court, as amended, which makes pre-trial in civil actions mandatory, whereupon the court shall consider the "possibility of an amicable settlement or of a submission to alternative modes of dispute resolution." Thus, unless there is a law that prohibits the Bureau of Customs from entering into amicable settlements and compromise agreements in civil cases, it is believed that the Bureau of Customs may conclude settlements in such cases. cACEaI It is your position that the concurrence of the Secretary of Finance should no longer be required in judicial compromises inasmuch as the Commissioner of Customs is already guided by the relevant provisions of the Civil Code and the Rules of Court on the matter; and that since the authority to file customs cases in court is solely lodged with the Commissioner under Section 2401 of the TCCP, as amended, it stands to reason that any judicial compromise entered into and accepted by the said official in such cases filed, absent any showing of abuse of authority, should already be valid and binding and accorded regularity despite the absence of any concurrence from the Secretary of Finance. It bears stress, at the outset, that the resolution of the issue raised herein clearly pertains to the primary jurisdiction of the Department of Finance (DOF),which is mandated by law to be "primary responsible for the sound and efficient management of the financial resources of the Government, its subdivisions, agencies and instrumentalities of the government." 1 Thus, this Department cannot render an authoritative opinion on your query. We also note that the DOF, which has jurisdiction over the enforcement and collection of taxes has as yet to express a ruling or opinion on the questions herein presented. We submit that the DOF should first be accorded the opportunity to consider the aforestated questions which involve matters within its policy-sphere and jurisdiction. This time-honored policy is dictated not only by practical considerations but by a sincere respect for the expertise on, and familiarity with, the policies relating to the subject, and the rightful exercise of jurisdiction by a co-equal and coordinate government office. 2 Lastly, the issues raised herein undeniably involve the substantive rights of a private party, i.e. ,the GDAI, upon which the opinion of the Secretary of Justice, which is merely advisory, would have no binding effect, and which might, in all probability, be litigated judicially. This is in consonance with long established precedents to the effect that the Secretary of Justice, as Attorney General, should not render an opinion on questions which, as in this case, are judicial in nature or might subsequently be litigated judicially. 3 However, for your information and guidance only, we call your attention to Section 2315 of the TCCP which provides: Sec. 2315. Supervisory Authority of Commissioner and of Secretary of Finance in Certain Cases . If any case involving the assessment of duties, the Collector renders a decision adverse to the government, such decision shall automatically be elevated to, and reviewed by, the Commissioner, and if the Collector's decision would be affirmed by the Commissioner, such decision shall be automatically elevated to, and be finally reviewed by, the Secretary of Finance: Provided, however, that if within thirty (30) days from receipt of the record of the case by the Commissioner or by the Secretary of Finance, as the case may be, no decision is rendered by either of them, the decision under review shall become final and executory. ... DCASIT Except as provided in the preceding paragraph, the supervisory authority of the Secretary of Finance over the Bureau of Customs shall not extend to the administrative review of the ruling or decision of the Commissioner in matters appealed to the Court of Tax Appeals. The supervision and control over judicial proceedings given to the Commissioner of Customs, does not extend to modifying final decisions of the Court, in the sense that he may accept on behalf of the Government anything different or less than what is awarded to said Government in the decision. 4 In addition, Section 2316 of the same Code provides that "subject to the approval of the Secretary of Finance, the Commissioner of Customs may compromise any case arising under this Code or other laws or part of laws enforced by the Bureau of Customs involving the imposition of fines, surcharges and forfeitures unless otherwise provided by law." ITCHSa The jurisdiction of Customs officials over administrative cases involving seizures, appraisals, forfeiture and fines imposed, ends with appeal of their decisions to the courts, and the final judgment of said courts; thereafter, the remaining functions of said officials is to carry out the terms of said final court decisions, and in so doing, naturally guarding and protecting the interests of the government they represent. The power of the Commissioner to compromise any case or proceedings under the Customs law refers only to cases appealed to the courts and finally decided by them. 5 Article 2028 of the New Civil Code define a COMPROMISE as a contract whereby the parties in interest by giving, promising or retaining something or otherwise making reciprocal concessions, avoid a litigation or terminate one already commenced. In other words, it is an agreement between two or more persons, who, for preventing or putting an end to a lawsuit, adjust their difficulties by mutual consent in the manner which they agree on, and which every one of them prefers to the hope of gaining, balanced by the danger of losing. Hence, we see no reason to abandon our former opinion ( i.e. Opinion No. 89, s. 2002), in as much as we opined that approval of the Secretary of Finance is needed when entering in compromises. Since the Department of Finance still has to issue its opinion regarding this issue, we suggest that you raise your matter to the DOF which is the appropriate agency which could assist you in your query. Very truly yours, (SGD.) RAUL M. GONZALEZ Secretary Footnotes 1. Section 1, Chapter 1, Title II, Book IV, Executive Order No. 292 (Administrative Code of the Philippines). 2. Secretary of Justice Opinion No. 1, series of 1983 citing opinions. 3. Ibid., No. 2, series 2006. 4. Rovero vs. Amparo, G.R. No. L-5482, May 5, 1952. 5. Tejam, Montano A. Commentaries on the Revised Tariff and Customs Code of the Philippines, Volume IV, page 2316, 1981.