Publishing R.A. No. 5436, Providing for Confiscations and Forfeitures in Internal Revenue Violations

December 18, 1968 REVENUE MEMORANDUM CIRCULAR NO. 02-69 SUBJECT : Publishing R.A. No. 5436, Providing for Confiscations and Forfeitures in Internal Revenue Violations TO : All Internal Revenue Officers and Others Concerned For the information and guidance of all concerned there is published below R.A. No. 5436, viz: LibLex "SECTION I. Title XI of Commonwealth Act Numbered Four hundred and sixty-six, otherwise known as the National Internal Revenue Code, as amended, is hereby further amended by inserting between Sections three hundred and fifty-two and three hundred and fifty-three thereof, a new section to read as follows: "SEC. 352-A. Confiscation and Forfeiture of the proceeds or instruments of crime . In addition to the penalty imposed for the violation of the provisions of Title IV, Sections 184, 185, 185-A, 185-B, and the first paragraph of Section 186 of Title V, and Chapter V and Chapter VII and Title VIII, all of this Code, the same shall carry with it the confiscation and forfeiture in favor of the government of the proceeds of the crime or value of the goods, and the instruments or tools with which the crime was committed: Provided, however , That if, in the course of the proceeding, it is established that the instruments or tools used in the illicit act belong to a third person, the same shall be confiscated and forfeited after due notice and hearing in a separate proceeding in favor of the government if such third person leased let chartered, or otherwise entrusted the same to the offender: Provided, further , That in case the lessee subleased, or the borrower, charter or trustee allowed the use of the instruments or tools to the offender, such instruments or tools shall, likewise, be confiscated and forfeited: Provided, finally, That property of common carriers shall not be subject to forfeiture when used in the transaction of their business as such common carrier, unless the owner or operator of said common carrier was, at the time of the illegal act, a consenting party or privy thereto, without prejudice to the owner's right of recovery against the offender in a civil or criminal action. Articles which are not subject of lawful commerce shall be destroyed. "SEC. 2. This Act shall take effect upon its approval. "Approved, September 9, 1968." Features of the Amendment I. Confiscation and forfeitures under the Tax Code before Republic Act No . 5436 . (a) All articles subject to specific tax which are stored or allowed to remain in a distillery, distillery warehouse, bonded warehouse, or other place where made, after the tax thereon had been paid (Sec. 172, Tax Code); (b) All articles subject to specific tax unlawfully removed from the place of production or storage or from customs custody or received in this country not thru the Bureau of Customs without payment of tax (Sec. 172, Tax Code); (c) All chattels, machinery, and removable fixtures of any sort used in the production of articles subject to specific tax when the required tax has not been paid for such business (Sec. 173, Tax Code); LLpr (d) Dies used for the printing or making of any internal revenue stamps, label, or tag which is in imitation of or purports to be a lawful stamp, label, or tag (Sec. 173, Tax Code); (e) The factory and the ground upon which it stands, including the machinery and apparatus used in and about the business if the owner or manufacturer, for the second or subsequent offense, removes on his own or with his connivance articles subject to specific tax without prepayment of the tax thereon (Sec. 175, Tax Code); (f) Spirituous or fermented liquors, wines, or tobacco or any manufactured products of tobacco shipped, transported or removed under any name other than the proper name or brand known to the trade as designating the kind and quality of the contents of the cask or package containing them (Sec. 176, Tax Code); When a person produces or manufactures articles subject to specific without paying the corresponding privilege tax therefor (g) All manufactured or produced articles found in the premises of the place of production or manufacture (Sec. 208, Tax Code); (h) All personal property found in the premises of the place of production (Ibid.) (i) All the right, title, and interest of such person in the lot or tract of land in which the producing or manufacturing establishment is situated (Ibid.); and (j) All the right, title, and interest therein of every person who knowingly or with negligence has suffered or permitted the business to be there carried on or has connived at the same. (Ibid.). II. Confiscation and forfeitures under R . A . No . 5436-R . A . No . 5436 provides additional confiscation and forfeitures as follows : A. Articles produced, manufactured or imported or sold It is to be observed that confiscation and forfeitures covered by paragraph I are connected only to businesses and articles subject to specific tax, R.A. No. 5436 now extends the scope of confiscation and forfeitures to articles subject to the sales tax, forest charges, and the firearms tax. Accordingly, all articles subject to these taxes which are duly established to be untaxpaid or the sources of which cannot legitimately be established by the possessors thereof may now be confiscated and forfeited to the government. Specifically, the following articles are covered by amendatory law; (1) Articles sold in the open market specially household items, such as refrigerators, electrical appliances, TV sets, phonographs, stereo, tape recorders, and others the sources of which cannot be established by the owners or possessors by the corresponding sales invoices of the manufacturers or dealers thereof or import papers, as the case may be, may be presumed to have come from illegitimate sources and may, therefore, be confiscated and forfeited; cdpr (2) Firearms, explosives and ammunitions in the possession of dealers thereof who have not been duly licensed as such or if duly licensed have not paid the dealer's annual fees prescribed by Section 291 of the Tax Code; (3) Firearms under personal licenses to possess, the licenses of which have not paid the license fee prescribed by Section 292 of the Tax Code; (4) Firearms used by licensees thereof in hunting without a hunting permit or without having paid the annual hunting permit fee prescribed by Section 292 of the Tax Code; (5) Timber and all forest products, the forest charges on which cannot be duly substantiated as paid as in sub-paragraph (1); (6) Forest products cut without license or if under license in violation of the terms thereof; (7) Forest products removed without invoice or discharged without permit. B. Tools and instruments used in the violation . In addition to the confiscation and forfeitures covered in paragraph A above, R.A. No. 5436 also provides for the confiscation and forfeitures of the tools and instruments used in the commission of the violation. The tools and instruments mentioned by the law include motor vehicles and vessels of all types except vehicles and vessels owned by common carriers. However, vehicles and vessels owned by common carriers may also be confiscated and forfeited if it can be established that the owner or operator of said common carrier was at the time of the illegal act a consenting party or privy thereto. If the tools and instruments belong to third persons, confiscation and forfeiture shall only ensue after due notice and hearing in a separate proceeding and it is shown that such third person leased, let, chartered, or otherwise entrusted said tools and instruments to the offender. Confiscation and forfeiture shall likewise ensue if the lessee subleased said tools and instruments to the offender, or if the borrower, charterer, or trustee of said tools and instruments allowed the use thereof to the offender. Effectivity R.A. No. 5436 took effect on September 9, 1968, the date it was approved by the President of the Philippines. Enforcement All internal revenue officers and others charged with the enforcement of the internal revenue law are enjoined to be guided accordingly and to give this circular as wide publicity as possible. prll (SGD.) MISAEL P. VERA Commissioner of Internal Revenue APPROVED: (SGD.) EDUARDO Z. ROMUALDEZ Secretary of Finance