Republic of the Philippines SUPREME COURT Manila

EN BANC

G.R. No. 164171

February 20, 2006

HON. EXECUTIVE SECRETARY, HON. SECRETARY OF THE DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS (DOTC), COMMISSIONER OF CUSTOMS, ASSISTANT SECRETARY, LAND TRANSPORTATION OFFICE (LTO), COLLECTOR OF CUSTOMS, SUBIC BAY FREE PORT ZONE, AND CHIEF OF LTO, SUBIC BAY FREE PORT ZONE, Petitioners, vs. SOUTHWING HEAVY INDUSTRIES, INC., represented by its President JOSE T. DIZON, UNITED AUCTIONEERS, INC., represented by its President DOMINIC SYTIN, and MICROVAN, INC., represented by its President MARIANO C. SONON, Respondents.

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G.R. No. 164172

February 20, 2006

HON. EXECUTIVE SECRETARY, SECRETARY OF THE DEPARTMENT OF TRANSPORTATION AND COMMUNICATION (DOTC), COMMISSIONER OF CUSTOMS, ASSISTANT SECRETARY, LAND TRANSPORTATION OFFICE (LTO), COLLECTOR OF CUSTOMS, SUBIC BAY FREE PORT ZONE AND CHIEF OF LTO, SUBIC BAY FREE PORT ZONE, Petitioners, vs. SUBIC INTEGRATED MACRO VENTURES CORP., represented by its President YOLANDA AMBAR, Respondent.

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G.R. No. 168741

February 20, 2006

HON. EXECUTIVE SECRETARY, HON. SECRETARY OF FINANCE, THE CHIEF OF THE LAND TRANSPORTATION OFFICE, THE COMMISSIONER OF CUSTOMS, and THE COLLECTOR OF CUSTOMS, SUBIC SPECIAL ECONOMIC ZONE, Petitioners, vs. MOTOR VEHICLE IMPORTERS ASSOCIATION OF SUBIC BAY FREEPORT, INC., represented by its President ALFREDO S. GALANG, Respondent.

DECISION

YNARES-SANTIAGO, J.:

The instant consolidated petitions seek to annul and set aside the Decisions of the Regional Trial Court of Olongapo City, Branch 72, in Civil Case No. 20-0-04 and Civil Case No. 22-0-04, both dated May 24, 2004; and the February 14, 2005 Decision of the Court of Appeals in CA-G.R. SP. No. 83284, which declared Article 2, Section 3.1 of Executive Order No. 156 (EO 156) unconstitutional. Said executive issuance prohibits the importation into the country, inclusive of the Special Economic and Freeport Zone or the Subic Bay Freeport (SBF or Freeport), of used motor vehicles, subject to a few exceptions.

The undisputed facts show that on December 12, 2002, President Gloria Macapagal-Arroyo, through Executive Secretary Alberto G. Romulo, issued EO 156, entitled "Providing for a comprehensive industrial policy and directions for the motor vehicle development program and its implementing guidelines." The challenged provision states:

3.1 The importation into the country, inclusive of the Freeport, of all types of used motor vehicles is prohibited, except for the following:

3.1.1 A vehicle that is owned and for the personal use of a returning resident or immigrant and covered by an authority to import issued under the No-dollar Importation Program. Such vehicles cannot be resold for at least three (3) years;

3.1.2 A vehicle for the use of an official of the Diplomatic Corps and authorized to be imported by the Department of Foreign Affairs;

3.1.3 Trucks excluding pickup trucks;

1. with GVW of 2.5-6.0 tons covered by an authority to import issued by the DTI.

2. With GVW above 6.0 tons.

3.1.4 Buses:

1. with GVW of 6-12 tons covered by an authority to import issued by DTI;

2. with GVW above 12 tons.

3.1.5 Special purpose vehicles:

1. fire trucks

2. ambulances

3. funeral hearse/coaches

4. crane lorries

5. tractor heads and truck tractors

6. boom trucks

7. tanker trucks

8. tank lorries with high pressure spray gun

9. reefers or refrigerated trucks

10. mobile drilling derricks

11. transit/concrete mixers

12. mobile radiological units

13. wreckers or tow trucks

14. concrete pump trucks

15. aerial/bucket flat-form trucks

16. street sweepers

17. vacuum trucks

18. garbage compactors

19. self loader trucks

20. man lift trucks

21. lighting trucks

22. trucks mounted with special purpose equipment

23. all other types of vehicle designed for a specific use.

The issuance of EO 156 spawned three separate actions for declaratory relief before Branch 72 of the Regional Trial Court of Olongapo City, all seeking the declaration of the unconstitutionality of Article 2, Section 3.1 of said executive order. The cases were filed by herein respondent entities, who or whose members, are classified as Subic Bay Freeport Enterprises and engaged in the business of, among others, importing and/or trading used motor vehicles.

G.R. No. 164171:

On January 16, 2004, respondents Southwing Heavy Industries, Inc., (Southwing) United Auctioneers, Inc. (United Auctioneers), and Microvan, Inc. (Microvan), instituted a declaratory relief case docketed as Civil Case No. 20-0-04,1 against the Executive Secretary, Secretary of Transportation and Communication, Commissioner of Customs, Assistant Secretary and Head of the Land Transportation

Office, Subic Bay Metropolitan Authority (SBMA), Collector of Customs for the Port at Subic Bay Freeport Zone, and the Chief of the Land Transportation Office at Subic Bay Freeport Zone.

Southwing, United Auctioneers and Microvan prayed that judgment be rendered (1) declaring Article 2, Section 3.1 of EO 156 unconstitutional and illegal; (2) directing the Secretary of Finance, Commissioner of Customs, Collector of Customs and the Chairman of the SBMA to allow the importation of used motor vehicles; (2) ordering the Land Transportation Office and its subordinates inside the Subic Special Economic Zone to process the registration of the imported used motor vehicles; and (3) in general, to allow the unimpeded entry and importation of used motor vehicles subject only to the payment of the required customs duties.

Upon filing of petitioners answer/comment, respondents Southwing and Microvan filed a motion for summary judgment which was granted by the trial court. On May 24, 2004, a summary judgment was rendered declaring that Article 2, Section 3.1 of EO 156 constitutes an unlawful usurpation of legislative power vested by the Constitution with Congress. The trial court further held that the proviso is contrary to the mandate of Republic Act No. 7227 (RA 7227) or the Bases Conversion and Development Act of 1992 which allows the free flow of goods and capital within the Freeport. The dispositive portion of the said decision reads:

WHEREFORE, judgment is hereby rendered in favor of petitioner declaring Executive Order 156 [Article 2, Section] 3.1 for being unconstitutional and illegal; directing respondents Collector of Customs based at SBMA to allow the importation and entry of used motor vehicles pursuant to the mandate of RA 7227; directing respondent Chief of the Land Transportation Office and its subordinates inside the Subic Special Economic Zone or SBMA to process the registration of imported used motor vehicle; and in general, to allow unimpeded entry and importation of used motor vehicles to the Philippines subject only to the payment of the required customs duties.

SO ORDERED.2

From the foregoing decision, petitioners sought relief before this Court via a petition for review on certiorari, docketed as G.R. No. 164171.

G.R. No. 164172:

On January 20, 2004, respondent Subic Integrated Macro Ventures Corporation (Macro Ventures) filed with the same trial court, a similar action for declaratory relief docketed as Civil Case No. 22-0-04,3 with the same prayer and against the same parties4 as those in Civil Case No. 20-0-04.

In this case, the trial court likewise rendered a summary judgment on May 24, 2004, holding that Article 2, Section 3.1 of EO 156, is repugnant to the constitution.5 Elevated to this Court via a petition for review on certiorari, Civil Case No. 22-0-04 was docketed as G.R. No. 164172.

G.R. No. 168741

On January 22, 2003, respondent Motor Vehicle Importers Association of Subic Bay Freeport, Inc. (Association), filed another action for declaratory relief with essentially the same prayer as those in Civil Case No. 22-0-04 and Civil Case No. 20-0-04, against the Executive Secretary, Secretary of Finance, Chief of the Land Transportation Office, Commissioner of Customs, Collector of Customs at SBMA and the Chairman of SBMA. This was docketed as Civil Case No. 30-0-2003,6 before the same trial court.

In a decision dated March 10, 2004, the court a quo granted the Associations prayer and declared the assailed proviso as contrary to the Constitution, to wit:

WHEREFORE, judgment is hereby rendered in favor of petitioner declaring Executive Order 156 [Article 2, Section] 3.1 for being unconstitutional and illegal; directing respondents Collector of Customs based at SBMA to allow the importation and entry of used motor vehicles pursuant to the mandate of RA 7227; directing respondent Chief of the Land Transportation Office and its subordinates inside the Subic Special Economic Zone or SBMA to process the registration of imported used motor vehicles; directing the respondent Chairman of the SBMA to allow the entry into the Subic Special Economic Zone or SBMA imported used motor vehicle; and in general, to allow unimpeded entry and importation of used motor vehicles to the Philippines subject only to the payment of the required customs duties.

SO ORDERED.7

Aggrieved, the petitioners in Civil Case No. 30-0-2003, filed a petition for certiorari8 with the Court of Appeals (CA-G.R. SP. No. 83284) which denied the petition on February 14, 2005 and sustained the finding of the trial court that Article 2, Section 3.1 of EO 156, is void for being repugnant to the constitution. The dispositive portion thereof, reads:

WHEREFORE, the instant petition for certiorari is hereby DENIED. The assailed decision of the Regional Trial Court, Third Judicial Region, Branch 72, Olongapo City, in Civil Case No. 30-0-2003, accordingly, STANDS.

SO ORDERED.9

The aforequoted decision of the Court of Appeals was elevated to this Court and docketed as G.R. No. 168741. In a Resolution dated October 4, 2005,10 said case was consolidated with G.R. No. 164171 and G.R. No. 164172.

Petitioners are now before this Court contending that Article 2, Section 3.1 of EO 156 is valid and applicable to the entire country, including the Freeeport. In support of their arguments, they raise procedural and substantive issues bearing on the constitutionality of the assailed proviso. The procedural issues are: the lack of respondents locus standi to question the validity of EO 156, the propriety of challenging EO 156 in a declaratory relief proceeding and the applicability of a judgment on the pleadings in this case.

Petitioners argue that respondents will not be affected by the importation ban considering that their certificate of registration and tax exemption do not authorize them to engage in the importation and/or trading of used cars. They also aver that the actions filed by respondents do not qualify as declaratory relief cases. Section 1, Rule 63 of the Rules of Court provides that a petition for declaratory relief may be filed before there is a breach or violation of rights. Petitioners claim that there was already a breach of respondents supposed right because the cases were filed more than a year after the issuance of EO 156. In fact, in Civil Case No. 30-0-2003, numerous warrants of seizure and detention were issued against imported used motor vehicles belonging to respondent Associations members.

Petitioners arguments lack merit.

The established rule that the constitutionality of a law or administrative issuance can be challenged by one who will sustain a direct injury as a result of its enforcement11 has been satisfied in the instant case. The broad subject of the prohibited importation is "all types of used motor vehicles." Respondents would definitely suffer a direct injury from the implementation of EO 156 because their certificate of registration and tax exemption authorize them to trade and/or import new and used motor vehicles and spare parts, except "used cars."12 Other types of motor vehicles imported and/or traded by respondents and not falling within the category of used cars would thus be subjected to the ban to the prejudice of their business. Undoubtedly, respondents have the legal standing to assail the validity of EO 156.

As to the propriety of declaratory relief as a vehicle for assailing the executive issuance, suffice it to state that any breach of the rights of respondents will not affect the case. In Commission on Audit of the Province of Cebu v. Province of Cebu,13 the Court entertained a suit for declaratory relief to finally settle the doubt as to the proper interpretation of the conflicting laws involved, notwithstanding a violation of the right of the party affected. We find no reason to deviate from said ruling mindful of the significance of the present case to the national economy.

So also, summary judgments were properly rendered by the trial court because the issues involved in the instant case were pure questions of law. A motion for summary judgment is premised on the assumption that the issues presented need not be tried either because these are patently devoid of substance or that there is no genuine issue as to any pertinent fact. It is a method sanctioned by the Rules of Court for the prompt disposition of a civil action in which the pleadings raise only a legal issue, not a genuine issue as to any material fact.14

At any rate, even assuming the procedural flaws raised by petitioners truly exist, the Court is not precluded from brushing aside these technicalities and taking cognizance of the action filed by respondents considering its importance to the public and in keeping with the duty to determine whether the other branches of the government have kept themselves within the limits of the Constitution.15

We now come to the substantive issues, which are: (1) whether there is statutory basis for the issuance of EO 156; and (2) if the answer is in the affirmative, whether the application of Article 2, Section 3.1 of EO 156, reasonable and within the scope provided by law.

The main thrust of the petition is that EO 156 is constitutional because it was issued pursuant to EO 226, the Omnibus Investment Code of the Philippines and that its application should be extended to the Freeport because the guarantee of RA 7227 on the free flow of goods into the said zone is merely an exemption from customs duties and taxes on items brought into the Freeport and not an open floodgate for all kinds of goods and materials without restriction.

In G.R. No. 168741, the Court of Appeals invalidated Article 2, Section 3.1 of EO 156, on the ground of lack of any statutory basis for the President to issue the same. It held that the prohibition on the importation of used motor vehicles is an exercise of police power vested on the legislature and absent any enabling law, the exercise thereof by the President through an executive issuance, is void.

Police power is inherent in a government to enact laws, within constitutional limits, to promote the order, safety, health, morals, and general welfare of society. It is lodged primarily with the legislature. By virtue of a valid delegation of legislative power, it may also be exercised by the President and administrative boards, as well as the lawmaking bodies on all municipal levels, including the barangay.16 Such delegation confers upon the President quasi-legislative power which may be defined as the authority delegated by the law-making body to the administrative body to adopt rules and regulations intended to carry out the provisions of the law and implement legislative policy.17 To be valid, an administrative issuance, such as an executive order, must comply with the following requisites:

(1) Its promulgation must be authorized by the legislature;

(2) It must be promulgated in accordance with the prescribed procedure;

(3) It must be within the scope of the authority given by the legislature; and

(4) It must be reasonable.18

Contrary to the conclusion of the Court of Appeals, EO 156 actually satisfied the first requisite of a valid administrative order. It has both constitutional and statutory bases.

Delegation of legislative powers to the President is permitted in Section 28(2) of Article VI of the Constitution. It provides:

(2) The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government.19 (Emphasis supplied)

The relevant statutes to execute this provision are:

1) The Tariff and Customs Code which authorizes the President, in the interest of national economy, general welfare and/or national security, to, inter alia, prohibit the importation of any commodity. Section 401 thereof, reads:

Sec. 401. Flexible Clause.

a. In the interest of national economy, general welfare and/or national security, and subject to the limitations herein prescribed, the President, upon recommendation of the National Economic and Development Authority (hereinafter referred to as NEDA), is hereby empowered: x x x (2) to establish import quota or to ban imports of any commodity, as may be necessary; x x x Provided, That upon periodic investigations by the Tariff Commission and recommendation of the NEDA, the President may cause a gradual reduction of protection levels granted in Section One hundred and four of this Code, including those subsequently granted pursuant to this section. (Emphasis supplied)

2) Executive Order No. 226, the Omnibus Investment Code of the Philippines which was issued on July 16, 1987, by then President Corazon C. Aquino, in the exercise of legislative power under the Provisional Freedom Constitution,20 empowers the President to approve or reject the prohibition on the importation of any equipment or raw materials or finished products. Pertinent provisions thereof, read:

ART. 4. Composition of the board. The Board of Investments shall be composed of seven (7) governors: The Secretary of Trade and Industry, three (3) Undersecretaries of Trade and Industry to be chosen by the President; and three (3) representatives from the government agencies and the private sector x x x.

ART. 7. Powers and duties of the Board.

xxxx

(12) Formulate and implement rationalization programs for certain industries whose operation may result in dislocation, overcrowding or inefficient use of resources, thus impeding economic growth. For this purpose, the Board may formulate guidelines for progressive manufacturing programs, local content programs, mandatory sourcing requirements and dispersal of industries. In appropriate cases and upon approval of the President, the Board may restrict, either totally or partially, the importation of any equipment or raw materials or finished products involved in the rationalization program; (Emphasis supplied)

3) Republic Act No. 8800, otherwise known as the "Safeguard Measures Act" (SMA), and entitled "An Act Protecting Local Industries By Providing Safeguard Measures To Be Undertaken In Response To Increased Imports And Providing Penalties For Violation Thereof,"21 designated the Secretaries22 of the Department of Trade and Industry (DTI) and the Department of Agriculture, in their capacity as alter egos of the President, as the implementing authorities of the safeguard measures, which include, inter alia, modification or imposition of any quantitative restriction on the importation of a product into the Philippines. The purpose of the SMA is stated in the declaration of policy, thus:

SEC. 2. Declaration of Policy. The State shall promote competitiveness of domestic industries and producers based on sound industrial and agricultural development policies, and efficient use of human, natural and technical resources. In pursuit of this goal and in the public interest, the State shall provide safeguard measures to protect domestic industries and producers from increased imports which cause or threaten to cause serious injury to those domestic industries and producers.

There are thus explicit constitutional and statutory permission authorizing the President to ban or regulate importation of articles and commodities into the country.

Anent the second requisite, that is, that the order must be issued or promulgated in accordance with the prescribed procedure, it is necessary that the nature of the administrative issuance is properly determined. As in the enactment of laws, the general rule is that, the promulgation of administrative

issuances requires previous notice and hearing, the only exception being where the legislature itself requires it and mandates that the regulation shall be based on certain facts as determined at an appropriate investigation.23 This exception pertains to the issuance of legislative rules as distinguished from interpretative rules which give no real consequence more than what the law itself has already prescribed;24 and are designed merely to provide guidelines to the law which the administrative agency is in charge of enforcing.25 A legislative rule, on the other hand, is in the nature of subordinate legislation, crafted to implement a primary legislation.

In Commissioner of Internal Revenue v. Court of Appeals,26 and Commissioner of Internal Revenue v. Michel J. Lhuillier Pawnshop, Inc.,27 the Court enunciated the doctrine that when an administrative rule goes beyond merely providing for the means that can facilitate or render less cumbersome the implementation of the law and substantially increases the burden of those governed, it behooves the agency to accord at least to those directly affected a chance to be heard and, thereafter, to be duly informed, before the issuance is given the force and effect of law.

In the instant case, EO 156 is obviously a legislative rule as it seeks to implement or execute primary legislative enactments intended to protect the domestic industry by imposing a ban on the importation of a specified product not previously subject to such prohibition. The due process requirements in the issuance thereof are embodied in Section 40128 of the Tariff and Customs Code and Sections 5 and 9 of the SMA29 which essentially mandate the conduct of investigation and public hearings before the regulatory measure or importation ban may be issued.

In the present case, respondents neither questioned before this Court nor with the courts below the procedure that paved the way for the issuance of EO 156. What they challenged in their petitions before the trial court was the absence of "substantive due process" in the issuance of the EO.30 Their main contention before the court a quo is that the importation ban is illogical and unfair because it unreasonably drives them out of business to the prejudice of the national economy.

Considering the settled principle that in the absence of strong evidence to the contrary, acts of the other branches of the government are presumed to be valid,31 and there being no objection from the respondents as to the procedure in the promulgation of EO 156, the presumption is that said executive issuance duly complied with the procedures and limitations imposed by law.

To determine whether EO 156 has complied with the third and fourth requisites of a valid administrative issuance, to wit, that it was issued within the scope of authority given by the legislature and that it is

reasonable, an examination of the nature of a Freeport under RA 7227 and the primordial purpose of the importation ban under the questioned EO is necessary.

RA 7227 was enacted providing for, among other things, the sound and balanced conversion of the Clark and Subic military reservations and their extensions into alternative productive uses in the form of Special Economic and Freeport Zone, or the Subic Bay Freeport, in order to promote the economic and social development of Central Luzon in particular and the country in general.

The Rules and Regulations Implementing RA 7227 specifically defines the territory comprising the Subic Bay Freeport, referred to as the Special Economic and Freeport Zone in Section 12 of RA 7227 as "a separate customs territory consisting of the City of Olongapo and the Municipality of Subic, Province of Zambales, the lands occupied by the Subic Naval Base and its contiguous extensions as embraced, covered and defined by the 1947 Philippine-U.S. Military Base Agreement as amended and within the territorial jurisdiction of Morong and Hermosa, Province of Bataan, the metes and bounds of which shall be delineated by the President of the Philippines; provided further that pending establishment of secure perimeters around the entire SBF, the SBF shall refer to the area demarcated by the SBMA pursuant to Section 1332 hereof."

Among the salient provisions of RA 7227 are as follows:

SECTION 12. Subic Special Economic Zone.

xxxx

The abovementioned zone shall be subject to the following policies:

xxxx

(a) Within the framework and subject to the mandate and limitations of the Constitution and the pertinent provisions of the Local Government Code, the Subic Special Economic Zone shall be developed

into a self-sustaining, industrial, commercial, financial and investment center to generate employment opportunities in and around the zone and to attract and promote productive foreign investments;

(b) The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital within, into and exported out of the Subic Special Economic Zone, as well as provide incentives such as tax and duty-free importations of raw materials, capital and equipment. However, exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines;

The Freeport was designed to ensure free flow or movement of goods and capital within a portion of the Philippine territory in order to attract investors to invest their capital in a business climate with the least governmental intervention. The concept of this zone was explained by Senator Guingona in this wise:

Senator Guingona. Mr. President, the special economic zone is successful in many places, particularly Hong Kong, which is a free port. The difference between a special economic zone and an industrial estate is simply expansive in the sense that the commercial activities, including the establishment of banks, services, financial institutions, agro-industrial activities, maybe agriculture to a certain extent.

This delineates the activities that would have the least of government intervention, and the running of the affairs of the special economic zone would be run principally by the investors themselves, similar to a housing subdivision, where the subdivision owners elect their representatives to run the affairs of the subdivision, to set the policies, to set the guidelines.

We would like to see Subic area converted into a little Hong Kong, Mr. President, where there is a hub of free port and free entry, free duties and activities to a maximum spur generation of investment and jobs.

While the investor is reluctant to come in the Philippines, as a rule, because of red tape and perceived delays, we envision this special economic zone to be an area where there will be minimum government interference.

The initial outlay may not only come from the Government or the Authority as envisioned here, but from them themselves, because they would be encouraged to invest not only for the land but also for the buildings and factories. As long as they are convinced that in such an area they can do business and reap reasonable profits, then many from other parts, both local and foreign, would invest, Mr. President.33 (Emphasis, added)

With minimum interference from the government, investors can, in general, engage in any kind of business as well as import and export any article into and out of the Freeport. These are among the rights accorded to Subic Bay Freeport Enterprises under Section 39 of the Rules and Regulations Implementing RA 7227, thus

SEC. 39. Rights and Obligations.- SBF Enterprises shall have the following rights and obligations:

a. To freely engage in any business, trade, manufacturing, financial or service activity, and to import and export freely all types of goods into and out of the SBF, subject to the provisions of the Act, these Rules and other regulations that may be promulgated by the SBMA;

Citing, inter alia, the interpellations of Senator Enrile, petitioners claim that the "free flow or movement of goods and capital" only means that goods and material brought within the Freeport shall not be subject to customs duties and other taxes and should not be construed as an open floodgate for entry of all kinds of goods. They thus surmise that the importation ban on motor vehicles is applicable within the Freeport. Pertinent interpellations of Senator Enrile on the concept of Freeport is as follows:

Senator Enrile: Mr. President, I think we are talking here of sovereign concepts, not territorial concepts. The concept that we are supposed to craft here is to carve out a portion of our terrestrial domain as well as our adjacent waters and say to the world: "Well, you can set up your factories in this area that we are circumscribing, and bringing your equipment and bringing your goods, you are not subject to any taxes and duties because you are not within the customs jurisdiction of the Republic of the Philippines, whether you store the goods or only for purposes of transshipment or whether you make them into finished products again to be reexported to other lands."

xxxx

My understanding of a "free port" is, we are in effect carving out a part of our territory and make it as if it were foreign territory for purposes of our customs laws, and that people can come, bring their goods, store them there and bring them out again, as long as they do not come into the domestic commerce of the Republic.

We do not really care whether these goods are stored here. The only thing that we care is for our people to have an employment because of the entry of these goods that are being discharged, warehoused and reloaded into the ships so that they can be exported. That will generate employment for us. For as long as that is done, we are saying, in effect, that we have the least contact with our tariff and customs laws and our tax laws. Therefore, we consider these goods as outside of the customs jurisdiction of the Republic of the Philippines as yet, until we draw them from this territory and bring them inside our domestic commerce. In which case, they have to pass through our customs gate. I thought we are carving out this entire area and convert it into this kind of concept.34

However, contrary to the claim of petitioners, there is nothing in the foregoing excerpts which absolutely limits the incentive to Freeport investors only to exemption from customs duties and taxes. Mindful of the legislative intent to attract investors, enhance investment and boost the economy, the legislature could not have limited the enticement only to exemption from taxes. The minimum interference policy of the government on the Freeport extends to the kind of business that investors may embark on and the articles which they may import or export into and out of the zone. A contrary interpretation would defeat the very purpose of the Freeport and drive away investors.

It does not mean, however, that the right of Freeport enterprises to import all types of goods and article is absolute. Such right is of course subject to the limitation that articles absolutely prohibited by law cannot be imported into the Freeport.35 Nevertheless, in determining whether the prohibition would apply to the Freeport, resort to the purpose of the prohibition is necessary.

In issuing EO 156, particularly the prohibition on importation under Article 2, Section 3.1, the President envisioned to rationalize the importation of used motor vehicles and to enhance the capabilities of the Philippine motor manufacturing firms to be globally competitive producers of completely build-up units and their parts and components for the local and export markets.36 In justifying the issuance of EO 156, petitioners alleged that there has been a decline in the sales of new vehicles and a remarkable growth of the sales of imported used motor vehicles. To address the same, the President issued the questioned EO to prevent further erosion of the already depressed market base of the local motor vehicle industry and to curtail the harmful effects of the increase in the importation of used motor vehicles.37

Taking our bearings from the foregoing discussions, we hold that the importation ban runs afoul the third requisite for a valid administrative order. To be valid, an administrative issuance must not be ultra vires or beyond the limits of the authority conferred. It must not supplant or modify the Constitution, its enabling statute and other existing laws, for such is the sole function of the legislature which the other branches of the government cannot usurp. As held in United BF Homeowners Association v. BF Homes, Inc.:38

The rule-making power of a public administrative body is a delegated legislative power, which it may not use either to abridge the authority given it by Congress or the Constitution or to enlarge its power beyond the scope intended. Constitutional and statutory provisions control what rules and regulations may be promulgated by such a body, as well as with respect to what fields are subject to regulation by it. It may not make rules and regulations which are inconsistent with the provisions of the Constitution or a statute, particularly the statute it is administering or which created it, or which are in derogation of, or defeat, the purpose of a statute.

In the instant case, the subject matter of the laws authorizing the President to regulate or forbid importation of used motor vehicles, is the domestic industry. EO 156, however, exceeded the scope of its application by extending the prohibition on the importation of used cars to the Freeport, which RA 7227, considers to some extent, a foreign territory. The domestic industry which the EO seeks to protect is actually the "customs territory" which is defined under the Rules and Regulations Implementing RA 7227, as follows:

"the portion of the Philippines outside the Subic Bay Freeport where the Tariff and Customs Code of the Philippines and other national tariff and customs laws are in force and effect."39

The proscription in the importation of used motor vehicles should be operative only outside the Freeport and the inclusion of said zone within the ambit of the prohibition is an invalid modification of RA 7227. Indeed, when the application of an administrative issuance modifies existing laws or exceeds the intended scope, as in the instant case, the issuance becomes void, not only for being ultra vires, but also for being unreasonable.

This brings us to the fourth requisite. It is an axiom in administrative law that administrative authorities should not act arbitrarily and capriciously in the issuance of rules and regulations. To be valid, such rules and regulations must be reasonable and fairly adapted to secure the end in view. If shown to bear no

reasonable relation to the purposes for which they were authorized to be issued, then they must be held to be invalid.40

There is no doubt that the issuance of the ban to protect the domestic industry is a reasonable exercise of police power. The deterioration of the local motor manufacturing firms due to the influx of imported used motor vehicles is an urgent national concern that needs to be swiftly addressed by the President. In the exercise of delegated police power, the executive can therefore validly proscribe the importation of these vehicles. Thus, in Taxicab Operators of Metro Manila, Inc. v. Board of Transportation,41 the Court held that a regulation phasing out taxi cabs more than six years old is a valid exercise of police power. The regulation was sustained as reasonable holding that the purpose thereof was to promote the convenience and comfort and protect the safety of the passengers.

The problem, however, lies with respect to the application of the importation ban to the Freeport. The Court finds no logic in the all encompassing application of the assailed provision to the Freeport which is outside the customs territory. As long as the used motor vehicles do not enter the customs territory, the injury or harm sought to be prevented or remedied will not arise. The application of the law should be consistent with the purpose of and reason for the law. Ratione cessat lex, et cessat lex. When the reason for the law ceases, the law ceases. It is not the letter alone but the spirit of the law also that gives it life.42 To apply the proscription to the Freeport would not serve the purpose of the EO. Instead of improving the general economy of the country, the application of the importation ban in the Freeport would subvert the avowed purpose of RA 7227 which is to create a market that would draw investors and ultimately boost the national economy.

In similar cases, we also declared void the administrative issuance or ordinances concerned for being unreasonable. To illustrate, in De la Cruz v. Paras,43 the Court held as unreasonable and unconstitutional an ordinance characterized by overbreadth. In that case, the Municipality of Bocaue, Bulacan, prohibited the operation of all night clubs, cabarets and dance halls within its jurisdiction for the protection of public morals. As explained by the Court:

x x x It cannot be said that such a sweeping exercise of a lawmaking power by Bocaue could qualify under the term reasonable. The objective of fostering public morals, a worthy and desirable end can be attained by a measure that does not encompass too wide a field. Certainly the ordinance on its face is characterized by overbreadth. The purpose sought to be achieved could have been attained by reasonable restrictions rather than by an absolute prohibition. The admonition in Salaveria should be heeded: "The Judiciary should not lightly set aside legislative action when there is not a clear invasion of personal or property rights under the guise of police regulation." It is clear that in the guise of a police

regulation, there was in this instance a clear invasion of personal or property rights, personal in the case of those individuals desirous of patronizing those night clubs and property in terms of the investments made and salaries to be earned by those therein employed.

Lupangco v. Court of Appeals,44 is a case involving a resolution issued by the Professional Regulation Commission which prohibited examinees from attending review classes and receiving handout materials, tips, and the like three days before the date of examination in order to preserve the integrity and purity of the licensure examinations in accountancy. Besides being unreasonable on its face and violative of academic freedom, the measure was found to be more sweeping than what was necessary, viz:

Needless to say, the enforcement of Resolution No. 105 is not a guarantee that the alleged leakages in the licensure examinations will be eradicated or at least minimized. Making the examinees suffer by depriving them of legitimate means of review or preparation on those last three precious days when they should be refreshing themselves with all that they have learned in the review classes and preparing their mental and psychological make-up for the examination day itself would be like uprooting the tree to get rid of a rotten branch. What is needed to be done by the respondent is to find out the source of such leakages and stop it right there. If corrupt officials or personnel should be terminated from their loss, then so be it. Fixers or swindlers should be flushed out. Strict guidelines to be observed by examiners should be set up and if violations are committed, then licenses should be suspended or revoked. x x x

In Lucena Grand Central Terminal, Inc. v. JAC Liner, Inc.,45 the Court likewise struck down as unreasonable and overbreadth a city ordinance granting an exclusive franchise for 25 years, renewable for another 25 years, to one entity for the construction and operation of one common bus and jeepney terminal facility in Lucena City. While professedly aimed towards alleviating the traffic congestion alleged to have been caused by the existence of various bus and jeepney terminals within the city, the ordinance was held to be beyond what is reasonably necessary to solve the traffic problem in the city.

By parity of reasoning, the importation ban in this case should also be declared void for its too sweeping and unnecessary application to the Freeport which has no bearing on the objective of the prohibition. If the aim of the EO is to prevent the entry of used motor vehicles from the Freeport to the customs territory, the solution is not to forbid entry of these vehicles into the Freeport, but to intensify governmental campaign and measures to thwart illegal ingress of used motor vehicles into the customs territory.

At this juncture, it must be mentioned that on June 19, 1993, President Fidel V. Ramos issued Executive Order No. 97-A, "Further Clarifying The Tax And Duty-Free Privilege Within The Subic Special Economic And Free Port Zone," Section 1 of which provides:

SECTION 1. The following guidelines shall govern the tax and duty-free privilege within the Secured Area of the Subic Special Economic and Free Port Zone:

1.1. The Secured Area consisting of the presently fenced-in former Subic Naval Base shall be the only completely tax and duty-free area in the SSEFPZ. Business enterprises and individuals (Filipinos and foreigners) residing within the Secured Area are free to import raw materials, capital goods, equipment, and consumer items tax and dutry-free. Consumption items, however, must be consumed within the Secured Area. Removal of raw materials, capital goods, equipment and consumer items out of the Secured Area for sale to non-SSEFPZ registered enterprises shall be subject to the usual taxes and duties, except as may be provided herein.

In Tiu v. Court of Appeals46 as reiterated in Coconut Oil Refiners Association, Inc. v. Torres,47 this provision limiting the special privileges on tax and duty-free importation in the presently fenced-in former Subic Naval Base has been declared valid and constitutional and in accordance with RA 7227. Consistent with these rulings and for easier management and monitoring of activities and to prevent fraudulent importation of merchandise and smuggling, the free flow and importation of used motor vehicles shall be operative only within the "secured area."

In sum, the Court finds that Article 2, Section 3.1 of EO 156 is void insofar as it is made applicable to the presently secured fenced-in former Subic Naval Base area as stated in Section 1.1 of EO 97-A. Pursuant to the separability clause48 of EO 156, Section 3.1 is declared valid insofar as it applies to the customs territory or the Philippine territory outside the presently secured fenced-in former Subic Naval Base area as stated in Section 1.1 of EO 97-A. Hence, used motor vehicles that come into the Philippine territory via the secured fenced-in former Subic Naval Base area may be stored, used or traded therein, or exported out of the Philippine territory, but they cannot be imported into the Philippine territory outside of the secured fenced-in former Subic Naval Base area.

WHEREFORE, the petitions are PARTIALLY GRANTED and the May 24, 2004 Decisions of Branch 72, Regional Trial Court of Olongapo City, in Civil Case No. 20-0-04 and Civil Case No. 22-0-04; and the February 14, 2005 Decision of the Court of Appeals in CA-G.R. SP No. 63284, are MODIFIED insofar as they declared Article 2, Section 3.1 of Executive Order No. 156, void in its entirety.

Said provision is declared VALID insofar as it applies to the Philippine territory outside the presently fenced-in former Subic Naval Base area and VOID with respect to its application to the secured fenced-in former Subic Naval Base area.

SO ORDERED.

CONSUELO YNARES-SANTIAGO Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN Chief Justice

REYNATO S. PUNO Associate Justice Asscociate Justice ANGELINA SANDOVAL-GUTIERREZ Associate Justice Asscociate Justice MA. ALICIA AUSTRIA-MARTINEZ Associate Justice Asscociate Justice CONCHITA CARPIO-MORALES Associate Justice ROMEO J. CALLEJO, SR. RENATO C. CORONA ANTONIO T. CARPIO LEONARDO A. QUISUMBING

Asscociate Justice ADOLFO S. AZCUNA Associate Justice Asscociate Justice MINITA V. CHICO-NAZARIO Associate Justice Asscociate Justice CERTIFICATION CANCIO C. GARCIA DANTE O. TINGA

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

ARTEMIO V. PANGANIBAN Chief Justice

Republic of the Philippines SUPREME COURT Manila

FIRST DIVISION

G.R. No. L-35385

January 31, 1983

ALFREDO DE LA FUENTE, as Collector of Customs, Port of Sual, ROLANDO GEOTINA, as Commissioner of Customs, HILARIO RUIZ, as Flag Officer In Command, Philippine Navy, and GIL FERNANDEZ, as Commandant, Philippine Coast Guard, petitioners, vs. HON. JESUS DE VEYRA, in his capacity as Judge of the Court of First Instance of Manila, Branch XIV, LUCKY STAR SHIPPING COMPANY, and TENG BEE ENTERPRISES CO. (HK) LTD., respondents.

GUTIERREZ, JR., J.:

On June 16, 1972, at 6:00 o'clock in the afternoon, the crew of a Q-boat of the Philippine Coast Guard spotted a vessel, the M/V Lucky Star I, owned by the private respondent Lucky Star Shipping Co., unloading cargo to several small watercrafts alongside the vessel off the coast of Zambales approximately thirty (30) nautical miles east of Scarborough Shoal or twenty-three (23) miles east of the International Treaty Limits.

As the Q-boat was approaching the M/V Lucky Star I, it was met by gunfire from the smaller watercrafts which immediately fled from the scene. Only the M/V Lucky Star I was apprehended.

Upon boarding the vessel, the Philippine Coast Guard officers discovered 3,400 cases of foreign made "Champion, menthol, filter-tipped, king-size cigarettes" allegedly owned by Teng Bee Enterprises Co. (HK) Ltd., co-respondent herein. The coast guard officers, also saw on board a certain Deogracias Labrador, Filipino Captain of the domestic watercraft, M/L Sangbay, one of the boats seen alongside the M/V Lucky Star I.

The captain of the Lucky Star I, Li Tak Sin, was not able to present documents or papers for the "Champion" cigarettes. He and the crew were arrested for smuggling. The boarding officers also seized the Lucky Star I and ordered its complement, including Labrador, to proceed to Manila on board said vessel.

The Lucky Star I arrived in Manila on June 17, 1972, at 11:00 p.m On June 18, 1972, Labrador gave a statement before the personnel at the Philippine Navy Headquarters to the effect that his presence on board the Lucky Star I was because of an attempt to smuggle blue seal cigarettes into the country.

On June 20, 1972, a warrant of seizure and detention was issued by the Collector of Customs of the Port of Sual-Dagupan in Seizure Identification No. 14-F-72 against the vessel and articles seized for violation of Section 2530 (a) of the Tariff and Customs Code as to the vessel and Section 2530 (g) and (m-1) as to the cigarettes.

On June 22, 1972, the Acting Provincial Fiscal filed before the Court of First Instance of Zambales, Branch II, an information against Li Tak Sin, the crew of Lucky Star I, Deogracias Labrador, and other persons for violation of Section 101 of the Tariff and Customs Code and penalized under Section 3601 of Republic Act 1937, as amended by Republic Act 4712:

Meanwhile, on June 21, 1972, the private respondents Lucky Star Shipping Company and Teng Bee Enterprises Company (HK) Ltd. filed before the Court of First Instance of Manila, Branch XIV, presided over by respondent judge, the Hon. Jesus de Veyra. a complaint for injunction and recovery of personal property against the petitioners praying for the return of the goods seized and the release of the M/V Lucky Star I. The case was docketed as Civil Case No. 87435.

On June 23, 1972, the respondent judge issued an order which reads as follows:

With regard to the petition for mandatory preliminary injunction, this Court must declare itself without jurisdiction, with reference to the alleged blue seal cigarettes whose forfeiture is exclusively within the jurisdiction of the Bureau of Customs. With regard to the vessel, as admittedly it is more than 30 tons dead weight and the vessel may not be forfeited but the remedy of the Bureau of Customs would only be the imposition of a fine, the Bureau of Customs is given until June 29, 1972 within which to inform this Court the maximum fine that may be imposed on the vessel, and this shall be the basis for a bond that would entitle Plaintiff to repossess the vessel. In the meantime, until the vessel is released the members of the crew of the vessel are in need of provisions and medicines and the Philippine Navy is ordered to permit Plaintiff, under proper escort of Philippine Navy Guards, to furnish provisions and medicines to the members of the crew.

The petitioners asked for a reconsideration of the aforequoted order insofar as it required them to inform the respondent court of the maximum fine that may be the basis for a bond that would entitle the private respondents to repossess the vessel. The petitioners contended that the court had no jurisdiction over the subject matter of the, complaint inasmuch as the M/V Lucky Star I was being subjected to forfeiture under Section 2530-A of the Tariff and Customs Code. It was further contended that the court was devoid of jurisdiction to issue a writ of replevin or release order for goods under the custody of the Bureau of Customs.

The respondent judge denied the petitioners' motion for reconsideration in his order of August 7, 1972 as follows:

Respondents question the jurisdiction of this Court, as well as the order of this Court holding that as the vessel in question is less than 30 tons dead weight capacity, it may not be the subject of forfeiture. The issue involves Sec. 2530 of the Tariff and Customs lode. Respondents claim that any vessel engaged in smuggling may be forfeited and add that this also includes a vessel less than 30 tons lead weight capacity, because of a semicolon that separates the two phrases. The interpretation of Respondents does not make sense for why should any semicolon appear when regardless of dead weight capacity, according to Respondents, a vessel may be forfeited? The only reasonable interpretation of this section is that if the vessel is of more than 30 tons dead weight capacity, it may not be forfeited and only fined. This stand of this Court is strengthened by a decision of the Court of Tax Appeals making the same ruling and even the Bureau of Customs recently bewailed the defect in the law in the case of the M/V Don Isidro, found carrying smuggled cigarettes and fined the paltry maximum sum of P10,000.00. As this vessel cannot be forfeited legally and Respondents seek to do so, this Court has jurisdiction to grant relief.

The motion for reconsideration is, therefore, denied for lack of merit.

Hence, this petition for certiorari and prohibition filed by Alfredo de la Fuente, in his capacity as Collector of Customs; Rolando Geotina, as Commissioner of Customs; Hilario Ruiz, as Flag Officer in Command, Philippine Navy; and Gil Fernandez, as Commandant of the Philippine Coast Guard.

The sole issue is whether or not the Court of First Instance has jurisdiction to take cognizance of the complaint filed by the private respondents for the release of the vessel M/V Lucky Star I, which is the subject of a seizure and forfeiture proceedings before the Collector of Customs of the port of SualDagupan.

We find for the petitioners. It is well-settled that the exclusive jurisdiction over seizure and forfeiture cases vested in the Collector of Customs precludes a Court of First Instance from assuming cognizance over such cases. We, therefore, set aside the assailed orders of the respondent judge.

In Hadji Mohamad Daud v. Collector of Customs of the Port of Zamboanga City (68 SCRA 157) this Court ruled:

As early as June 30, 1955, the Court had already announced in Millarez v. Amparo (97 Phil. 284-85 (1955) that 'Republic Act No. 1125, Section 7, effective June 16, 1954 gave the Court of Tax Appeals exclusive appellate jurisdiction to review an appeal decisions of the Commissioner of Customs, involving 'seizure, detention or release of property affected * * * or other matter arising under the Customs Law or other law administered by the Bureau of Customs'. Specifically, in Caltex (Philippines) Inc. v. City of Manila (L-30734, July 28, 1969, 25 SCRA 840; see also Collector of Customs v. Arca, L-21389, July 17, 1964, 11 SCRA 537) it was held that the law affords the Collector of Customs sufficient latitude in determining whether or not a certain article is subject to seizure or forfeiture and his decision on the matter is appealable to the Commissioner of Customs and then to the Court of Tax Appeals, not to the Court of First Instance. The fundamental reason is that the Collector of Customs constitutes a tribunal when sitting in forfeiture proceedings (Commissioner of Customs v. Cloribel L-20266, January 31, 1967, 19 SCRA 234; Auyong Hian v. Court of Tax Appeals, L-25181, January 11, 1967, 19 SCRA 10; Auyong Hion v. Court of Tax Appeals, L-28782, September 12, 1974, Second Division, per Zaldivar, J., 59 SCRA 130) beyond the interference of the Court of First Instance. (Lopez v. Commissioner of Customs, L-28235, January 30, 1971, 37 SCRA 33-34) As expressed in Pacis v. Averia, (L-22526, November 29, 1966, 18 SCRA 907; see also Ponce Enrile v. Vinuya, L-19043, January 30, 1971, 37 SCRA 38687) * * * the Court of First Instance should yield to the jurisdiction of the Collector of Customs.1wph1.t The Jurisdiction of the Collector of Customs is provided for in Republic Act 1937 which took effect on July 1, 1957, much later than the Judiciary Act of 1948. It, is axiomatic that a later law prevails over a prior statute. Moreover, on grounds of public policy, it is more reasonable to conclude that the legislators intended to divest the Court of First Instance of the prerogative to replevin a property which is a subject of a seizure and forfeiture proceedings for violation of the Tariff and Customs Code, Otherwise, actions for forfeiture of property for violation of Customs laws could easily be undermined by the simple device of replevin.' The judicial recourse of the owner of a personal property which has been the subject of a seizure and forfeiture proceedings before the Collector of Customs is not in the Court of First Instance but in the Court of Tax Appeals, and only after exhausting administrative remedies in the Bureau of Customs. (Collector of Customs v. Torres, L-22977, May 31, 1972, 45 SCRA 281, and cases cited). If the property owned believes that the Collector's conclusion was erroneous, the remedy is by appeal to the Commissioner of Customs, and then to the Court of Tax Appeals should the Commissioner uphold the Collector's decision. The Court of Tax Appeals exercises exclusive appellate jurisdiction to review the

ruling of the Commissioner in seizure and confiscation cases. and that power is to the exclusion of the Court of First Instance, which may not interfere with the Commissioner's decisions even in the form of proceedings for certiorari, prohibition or mandamus, which are in reality, attempts to review the Commissioner's actuations. (General 'Travel Service, Ltd, v. David, L-19259, September 23, 1966, 18 SCRA 66-67, citing cases).

In Republic v. Bocar (93 SCRA 79) Chief Justice Enrique M. Fernando, speaking for the Court asserted the doctrine anew:

The Congress of the Philippines was vested with the power to define, prescribe, and apportion the jurisdiction of the various courts' of the Philippines Article VIII, Section I of the 1935 Constitution) Now it is the National Assembly. (Article X, Section I of the present Constitution, insofar as pertinent provides: The National Assembly shall have the power to define, prescribe, and apportion the jurisdiction of the various courts, but may not deprive the Supreme Court of its jurisdiction over cases enumerated in Section five hereof.') Where the matter involved is a 'seizure and forfeiture proceeding, a court of first instance is devoid of power to act. The customs authorities possess such competence with an appeal to the Court of Tax Appeals. In appropriate cases, there may be further judicial review by this Court in the exercise of its certiorari jurisdiction. The jurisdictional limits thus defined and apportioned, according to the Constitution, must be respected. Respondent judges clearly did not do so. No deference was paid to a host of cases that left no doubt as to their lack of authority to assume jurisdiction. (Cf. Pascual v. Commissioner of Customs, 105 Phil. 1039 (1959); Commissioner of Customs v. Serree Investment Company, 108 Phil, 1 (1960); Commissioner of Customs v. Eastern Sea Trading Co., 113 Phil. 333 (1961); Commissioner of Customs v. Santos, 114 Phil. 589 (1962); Commissioner of Customs v. Nepomuceno, 114 Phil. 702 (1962) Pascual v. Commissioner of Customs, 114 Phil. 953 (1962); Serree Investment Co. v. Commissioner of Customs, L-19564, Nov. 28, 1964, 12 SCRA 493; Bombay Department Store v. Commissioner of Customs, L- 20489, June 22,1965,14 SCRA 331; Yupangco and Sons v. Collector of Customs, L-22259, Jan. 19, 1966, 16 SCRA 1; Chan Kian v, Collector of Customs, L-20803, Jan. 31, 1966, 16 SCRA 133; Capulong v. Aseron, L- 22989, May 14, 1966, 17 SCRA 11; Lazaro v. Commissioner of Customs, L-22511, May 16, 1966, 17 SCRA 36; Capulong v. Acting Commissioner of Customs, L-22990, May 19, 1966, 17 SCRA 61; Gigare v. Commissioner of Customs, L-21376, Aug. 29,1966,17 SCRA 1001.);

To sustain the assailed orders of the respondent judge, the private respondents would impress upon this Court that the seizure of the M/V Lucky Star I was illegal and against the accepted principles of international law for the following reasons: 1) the M/V Lucky Star I is a foreign vessel registered under the laws of the Republic of Panama and flies the Panamian flag; 2) the crew of said vessel is composed of aliens; and 3) the M/V Lucky Star I was seized by the Philippine Coast Guard at a distance of eightyfive (85) miles to the nearest land point along the western coast of Luzon. It is contended that inasmuch as the eighty five (85) mile distance where the Lucky Star I was seized is outside the territorial

jurisdiction of the Philippines, the Bureau of Customs is without power to enforce the Philippine Customs law. Consequently, it is argued that the proper forum for the private respondents to obtain relief for the release of the vessel is the ordinary court, more specifically, the Court of First Instance.

The petitioners contend, on the other hand, that the M/V Lucky Star I was apprehended at a point 23 miles east of the International Treaty Limits, well within the territory of the Philippines as defined in Article I of the 1935 Constitution, the Treaty of Paris, and Republic Act No. 3046. The petitioners state that the vessel was caught in the act of smuggling. Deogracias Labrador, left behind by the boat M/L Sangbay of which he was captain, stated he was instructed by Paquito Bacolod of Capipisa, Cavite to meet the Lucky Star I, unload from it cases of blue seal Champion cigarettes together with two other small boats-Pagdila and Nanding-owned Avelino Bocalan. He admitted that on an earlier date, he had unloaded from the Lucky Star 1,500 cases of blue seal cigarettes which he brought to Capipisa.

The contentions of the private respondents are untenable. The Collector of Customs when sitting in forfeiture proceedings constitutes a tribunal expressly vested by law with jurisdiction to hear and determine the subject matter of such proceedings without any interference from the Court of First Instance. (Auyong Hian v. Court of Tax Appeals, et al, 19 SCRA 10). The Collector of Customs of SualDagupan in Seizure Identification No. 14-F-72 constituted itself as a tribunal to hear and determine among other things, the question of whether or not the M/V Lucky Star I was seized within the territorial waters of the Philippines. If the private respondents believe that the seizure was made outside the territorial jurisdiction of the Philippines, it should raise the same as a defense before the Collector of Customs and if not satisfied, follow the correct appellate procedures. A separate action before the Court of First Instance is not the remedy.

WHEREFORE, the petition is hereby granted.1wph1.t The questioned orders of the respondent court are set aside. The preliminary injunction dated August 24, 1972 is made permanent and the respondent court is ordered to desist from further proceeding in Civil Case No, 87435.

SO ORDERED.

Teehankee (Chairman), Melencio-Herrera, Vasquez and Relova, JJ., concur.

Plana, J., is on leave.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines SUPREME COURT Manila

SECOND DIVISION

G.R. No. L-62636 April 27, 1984

ACTING COMMISSIONER OF CUSTOMS, petitioner, vs. COURT OF TAX APPEALS and CHARLES ANDRULIS, respondents.

The Solicitor General for petitioner.

Alentajan & Associates for respondents.

MELENCIO-HERRERA, J.:+.wph!1

A proceeding for review on certiorari of the Decision of respondent Court of Tax Appeals in CTA Case No. 3201, which reversed the Decision of petitioner, the Acting Commissioner of Customs, decreeing the forfeiture of various foreign currencies found in the possession of private respondent (Charles Joseph Andrulis) for violation of Central Bank Circular No. 534, in relation to section 2530(f) of the Revised Tariff and Customs Code.

On 20 February 1980, Andrulis representing himself as an American businessman "on joint ventures with his Filipino counterparts", arrived in Manila and checked in at the Century Park Sheraton Hotel. Two days later, or on 22 February 1980, he left the hotel surreptitiously without paying for his bills in the amount of P2,000.00. Col. Felix Zerrudo, Chief Security Officer of the Hotel, timely discovered the scheduled departure of Andrulis on that same day, and immediately tipped-off the Customs authorities on Andrulis' intention to abscond. At the Manila International Airport (MIA), the Customs authorities looked for Andrulis from among the passengers who were already on board Philippine Airlines Flight No. 501 bound for Singapore. Apprehensive, Andrulis locked himself inside the airplane's comfort room. In the course of negotiations for him to come out, he slipped through an opening bills worth US$300.00. Andrulis finally yielded to the authorities and surrendered the luggage he was carrying which, when opened by the authorities, contained various foreign currencies consisting of US$59,639.00; 53,100 Indonesian Rupiah, and Singapore $308.00.

A criminal charge was filed before the Office of the City Fiscal, Pasay City, for violation of CB Circular No. 534 in relation to RA 265, the Central Bank Charter. On 10 March 1980, the Assistant City Fiscal dismissed the charge on the rationalization that the Government had failed to present evidence that the currencies were not brought in by Andrulis.

Proceedings for the seizure of the foreign currencies were also commenced at the Customs Office of the MIA in Pasay City, docketed as Seizure Identification No. 416280.

During the hearing, Andrulis submitted the case for resolution on the basis of the following documentary evidence:t.hqw

1. Sworn Affidavit of Charles Joseph Andrulis, stating that the foreign exchange in question are owned by claimant;

2. Resolution of the City Fiscal of Pasay City in I.S. No. 80-94112, entitled MIA Customhouse vs. Charles Joseph Andrulis, dismissing the alleged charge of violation of Central Bank Circular No. 534, in relation to Central Bank Circular No. 265, to show that there was no violation as charged. 1

For its part, the prosecution submitted the case on the basis of the following:t.hqw

A. Affidavit of Col. Felix A. Zerrudo (Ret.) Chief Security Officer of the Century Park SheratonManila Hotel, executed on February 29, 1980;

B.

Certification issued by Col. Felix A. Zerrudo (Ret.) dated February 29, 1980;

C. Certification of Mr. Domingo J. Galicia, Acting Credit Manager of the Manila Hotel dated February 28, 1980;

D. Letter of Demand dated July 9, 1979 issued by Robert L. Maniquiz, Credit and Collection Manager of the Resort Hotels Corporation addressed to Mr. Charles Andrulis;

E. Sworn statement dated February 22, 1980 of Mr. Ramonchito Liongson, a Customs Officer, who apprehended the various foreign currencies herein subject to seizure." 2

Items "C" and "D" above-listed tended to show that Andrulis had, on previous occasions, also tried to abscond without payment of his bills from the Manila Hotel and the Pines Hotel in Baguio.

On 3 June 1980, the Acting District Collector of Customs rendered a Decision, which found Andrulis to have violated Central Bank Circular No. 534 in relation to section 2530(f) of the Tariff and Customs Code, and decreed:t.hqw

WHEREFORE, by authority of law vested in this Office, it is ordered and decreed that the various foreign currencies confiscated from herein claimant, covered by SID No. 4162-80 be, as they are hereby declared forfeited in favor of the Government of the Republic of the Philippines, the same to be turned over to the Central Bank of the Philippines and exchanged with their equivalent in Philippine pesos which shall be deposited with the National Treasury and accounted for as Customs receipts.

Let copies of this Decision be furnished all offices and parties concerned for their information and guidance.

The Chief, Auction and Cargo Disposal Division, this Customhouse, shall inform this Office of the action taken thereon.

SO ORDERED. 3

Andrulis appealed to the Acting Commissioner of Customs, who affirmed the same.

On 23 January 1981, Andrulis filed a Notice of Appeal and on 16 February 1981, a Petition for Review with the Court of Tax Appeals, docketed as CTA Case No. 3201. On 30 June 1982, respondent Court reversed the appealed Decision on the theory that the legal presumption of ownership has to be accorded the possessor of the res, who need not be obliged to show or prove it pursuant to Section 5(j) of Rule 131 of the Rules of Court and Article 541 of the Civil Code. The dispositive portion of the CTA Decision decreed:t.hqw

WHEREFORE, the decision appealed from is reversed and respondent ordered to effect the restitution of the forfeited currencies to petitioner. No pronouncement as to costs.

SO ORDERED. 4

On 10 September 1982, petitioner filed a Motion for Reconsideration on the principal ground that respondent Court had failed to consider that claimant Andrulis had the burden of proof to show that the foreign currencies seized from him were brought into the Philippines by him. The motion was denied on

2 December 1982. Hence, the instant Petition for Review on certiorari by the Acting Commissioner of Customs represented by the Solicitor General.

The pertinent legal provisions provide:t.hqw

Section 3. Unless specifically authorized by the Central Bank or allowed under existing international agreements or Central Bank regulations, no person shall take or attempt to take or transmit foreign exchanges, in any form, out of the Philippines, directly, through other persons, through mails, or through international carriers;

The provisions of this section shall not apply to tourists and non-resident temporary visitors who are taking or sending out of the Philippines their own foreign exchange brought in by them. (CB Circular No. 534)

Section 2530. Property Subject to Forfeiture Under Tariff and Customs Law. Any vehicle, vessel or aircraft, cargo, article and other objects shall, under the following condition be subject to forfeiture;

xxx

xxx

xxxt.hqw

(f) Any article the importation or exportation of which is effected or attempted contrary to law, or any article of prohibited importation or exportation, and au other articles which, in the opinion of the Collector, have been used, are or were entered to be used as instruments in the importation or exportation of the former. 5 (Emphais supplied)

In his defense, private respondent seeks refuge behind the exception in the aforequoted CB Circular No. 534 giving tourists the right to take out of the Philippines their own foreign exchange brought in by them. Private respondent also relies heavily on his acquittal in the criminal charge filed against him for violation of CB Circular No. 534.

The core issue is who has the burden of proof in seizure or forfeiture proceedings? The applicable law, Section 2535 of the Tariff and Customs Code, is explicit in this regard.t.hqw

SEC. 2535. Burden of Proof in Seizure and/or Forfeiture. In all proceedings taken for the seizure and/or forfeiture of any vehicle, vessel, aircraft, beast or articles under the provisions of the tariff and customs laws, the burden of proof shall lie upon the claimant: Provided, That probable cause shall be first shown for the institution of such proceedings and that seizure and/or forfeiture was made under the circumstances and in the manner described in the preceding sections of this Code 6 (Emphais ours).

Upon the facts of the case, the requirement of the law that the existence of probable cause should first be shown before firing of the forfeiture proceedings, had been fully met. When Andrulis was apprehended at the MIA and was found to have in his possession the various foreign currencies, he could not produce the required Central Bank authorization allowing him to bring them out of the country. This constituted prima facie evidence of infringement of the provisions of CB Circular No. 534 and provided sufficient basis for the seizure 'of the said foreign exchange. Probable cause having been shown, the burden of proof was upon Andrulis to establish that he fell within the purview of the exception prescribed in the second paragraph of the aforequoted Section 3 of CB Circular No. 534 in that he actually brought into the country the foreign currencies and was just taking them out. 7 This burden, Andrulis had failed to satisfactorily discharge. The legal presumption in Section 5(j), Rule 131 of the Rules of Court and Article 541 of the Civil Code, relied upon by respondent Court, are of a general character and cannot prevail over the specific provisions of the Tariff and Customs Code.

Aside from Andrulis' suspicious actuations when about to be apprehended on board the plane, which cast doubt on his alleged bona fide possession of the foreign currencies, his bare assertion in his Affidavit, claiming that "he came into the country with the intention of investing here and of going into joint ventures with local counterparts" 8, has not been corroborated by other convincing evidence. The observations of the Solicitor General on this point finds relevance:t.hqw

If it was really his intention to invest, he could have presented documents to support his assertion. He could have produced papers required by the Government of foreigners intending to invest in the Philippines. He could have presented as witnesses Filipino businessmen with whom he entered into joint ventures or at least discussed the prospects thereof. He could at the least have revealed the nature of the business he intended to engage in, the capital requirements thereof, the situs of the business, the form of the entity he intended to form to carry on the business, etc. He had done none of these.

Private respondent implies that the foreign currencies seized from him were intended to be invested in business ventures in the Philippines. If this is so, why was it necessary for him to have three kinds of

currencies: US dollars, Indonesian Rupiah and Singapore dollars. Besides, businessmen usually do not personally carry the cash which they intend to invest. They remit them through the banks. 9

Andrulis' acquittal in the criminal charge before the City Fiscal's Office does not operate as res judicata in a seizure or forfeiture proceeding. A distinction exists between the proceedings before the Fiscal which are in personam since they are directed against the owner or holder of the thing, whereas, a forfeiture proceeding is one in rem directed against the thing itself.t.hqw

There is a split of authority as to whether a former conviction of a criminal offense based upon the same facts amounts to a bar. ... The authorities are by no means agreed, however, that a prior conviction for a Criminal charge bars an action for a forfeiture of property. Thus, it has been held that since the forfeiture proceedings is one in rem under which the offense is attached primarily to the thing rather than the offender, the forfeiture proceedings stands independent of, and wholly unaffected by, any criminal proceeding in personam and is not barred by a conviction of the individual under a criminal charge. 10

In a similar vein, it was also held in C.F. Sharp & Co., Inc. vs. Commissioner of Customs, 22 SCRA 765 (1968) that the result of criminal proceedings in a separate case before a different tribunal, being dependent upon the evidence adduced therein, would not necessarily influence the judgment in a forfeiture proceeding.

Finally, Andrulis contends that no foreign currency declaration is required of any incoming or outgoing passenger and that it is not the intention of the Government to entrap unwary foreigners. True, Resolution No. 594, dated 14 April 1969, of the Monetary Board, provides:t.hqw

Henceforth, no currency declaration of any kind shall be required either from outgoing or incoming passengers. 11

However, tourists are not precluded from submitting proof, other than a currency declaration, to show the legitimate source of the currency in their possession. Besides, Resolution No. 594 must be deemed superseded by Resolution No. 1412, dated 16 July 1976, which requires that persons taking or transmitting or attempting to take or transmit foreign exchange out of the Philippines must have authorization from the Central Bank allowing them to do so.

WHEREFORE, the Decision of respondent Court of Tax Appeals, promulgated on 30 June 1982, is hereby reversed and set aside, and the Decision of the Acting Commissioner of Customs, dated 15 December 1980, hereby ordered reinstated. No costs.

SO ORDERED.1wph1.t

Teehankee, (Chairman), Plana, Relova, Gutierrez, Jr. and De la Fuente, JJ., concur.

Footnotest.hqw

1 pp. 53-54, Rollo.

2 p. 54, Ibid.

3 p. 52, Ibid.

4 p. 65, Ibid.

5 Revised Tariff and Customs Code.

6 Tariff and Customs Code, as amended by P.D. No. 34.

7 Lee Co Liong Ha vs. Court of Tax Appeals, et al., G.R. No. 65235, February 28, 1984.

8 p. 184, Rollo.

9 p. 185, Ibid.

10 23 Am. Jur., p. 618.

11 CB Circular No. 270, 65 O.G. No. 17, p. 4290.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines SUPREME COURT Manila

SECOND DIVISION

G.R. No. 126634

January 25, 1999

TRANSGLOBE INTERNATIONAL, INC., petitioner, vs. COURT OF APPEALS and COMMISSIONER OF CUSTOMS, respondents.

BELLOSILLO, J.:

On 27 April 1992 a shipment from Hongkong arrived in the Port of Manila on board the "S/S Sea Dragon." Its Inward Foreign Manifest indicated that the shipment contained 1,054 pieces of various hand tools. Acting on information that the shipment violated certain provisions of the Tariff and Customs Code as amended, agents of the Economic Intelligence and Investigation Bureau (EIIB) seized the shipment while in transit to the Trans Orient container yard-container freight station. An examination thereof yielded significant results

1. The 40 ft. van was made to appear as a consolidation shipment consisting of 232 packages with Translink Int'l. Freight Forwarder as shipper and Transglobe Int'l., Inc. as consignee;

2. There were eight (8) shippers and eight (8) consignees declared as co-loaders and co-owners of the contents of the van, when in truth the entire shipment belongs to only one entity;

3. Not one of the items declared as the contents of the van, i.e., various hand tools, water cooling tower g-clamps compressors, bright roping wire and knitting machine w(as) found in the van. Instead the van was fully stuffed with textile piece goods. 1

On those accounts, which were deemed to constitute a violation of Sec. 2503 in relation to Sec. 2530, pars. (f) and (m), subpars. 3, 4 and 5, of the Tariff and Customs Code, the EIIB recommended seizure of the entire shipment. On 21 May 1992 District Collector of Customs Emma M. Rosqueta issued the corresponding warrant of seizure and detention.

The case was set for hearing on 2 June 1992 but petitioner Transglobe International, Inc., or its duly authorized representative, failed to appear despite due notice. Resetting was ordered to 19 June 1992, yet, for the same reason was further reset to 8 July 1992. Still petitioner or its representative was unable to appear which thus led to its being declared in default. The case was then considered submitted for decision based on existing documents. On 26 August 1992 after finding that a violation of the cited provisions was indeed committed, District Collector Rosqueta decreed the forfeiture of the shipment in favor of the government to be disposed of in accordance with law. 2

Thereafter petitioner filed a petition for redemption of the shipment. On 2 October 1992 Hearing Officer Geoffrey G. Gacula recommended that the petition be given due course and that petitioner be allowed to effect the release of the shipment upon

payment of P1,300,132.04 representing its domestic market value. Hearing Officer Gacula took into consideration the following

Record shows that the shipment consists of good which are in legal contemplation not prohibited, nor the release thereof to the claimant contrary to law . . . . the spirit and intent of Executive Order No. 38, to increase and accelerate revenue collection by the government thru redemption of forfeited cargoes, which would also benefit importers by giving them the chance to recover portions of their investment . . ..3

Chief of the Law Division Buenaventura S. Tenorio concurred in the recommendation. On the same day, District Collector Rosqueta recommended approval thereof and forwarded the case to respondent Commissioner of Customs Gulliermo L. Parayno Jr. through Deputy Commissioner Licerio C. Evangelista. 4 On 7 October 1992 the latter likewise recommended favorable action thereon. 5 However respondent Commissioner Parayno Jr. denied the offer of redemption in his 1st Indorsement dated 27 November 1992 for these reasons

1. The shipment was made to appear to be an innocuous consolidation shipment destined for stripping at an outside CY-CFS 6 in order to conceal the textile fabrics;

2.

The eight (8) co-loaders/consignee of the shipment are all fictitious;

3. Under Section 3B, CMO 87-92, offers of redemption shall be denied when the seized shipment is consigned to a fictitious consignee. 7

Thus respondent Commissioner Parayno Jr. instructed the Auction and Cargo Disposal Division of the Port of Manila to include the shipment in the next public auction. 8 On 8 February 1993 reconsideration was denied. 9 Petitioner moved for another reconsideration which was referred to District Collector Rosqueta for comment. Even after further review, she maintained her previous recommendation allowing redemption

1. Since no entry has been filed so far, the consignee could not be faulted for misdeclaration under Section 2503 of the Tariff and Customs Code. While the shipment was misdeclared in the rider and the manifest, the consignee is innocent of the facts stated therein as it had no hand in their preparation or issuance. Law and regulation allow the amendment of the manifest at any time before the filing of entry in order to protect the innocent consignee.

2. Transglobe International, Inc., is a juridical person duly organized in accordance with the laws of the Philippines and is qualified as a consignee. It is not fictitious as evidenced by its Articles of Incorporation registered with the Securities and Exchange Commission.

3. The shipment consists of goods which are in legal contemplation not prohibited, nor the release thereof to the Claimant contrary to law, and the redemption offer is well within the purview of Executive Order No. 38. 10

Nevertheless, reconsideration was again denied on 1 July 1993. 11 On 4 August 1993 the forfeiture of the shipment and denial of the request for redemption were affirmed by respondent Commissioner Parayno Jr. 12

In the appeal which was solely concerned with the propriety of redemption, the Court of Tax Appeals (CTA) expressed a different view. Relying on Sec. 1 of Executive Order No. 38, as applied in Gazzingan v. Commissioner of Customs 13 since no fraud was found on the part of the redemptioner, the CTA directed on 27 June 1995 that petitioner be allowed to redeem the shipment upon payment of its computed domestic market value. 14

However respondent Court of Appeals sustained the denial of the redemption by respondent Commissioner of Customs. On 28 June 1996 it set aside the ruling of the CTA 15 on the ratiocination that

The findings of the Economic Intelligence and Investigation Bureau: "that the shipment was made to appear to be an innocuous consolidation shipment destined for stripping at an outside CY-CFS in order to conceal the textile fabrics," and "that the eight (8) coloaders/consignees were all fictitious" had not been refuted during the seizure proceedings by respondent Transglobe International, Inc. The failure of respondent Transglobe to refute this fact negates its claim that no violation of the above cited provisions (Sec. 2503 in relation to Sec. 2530, pars. (f) and (m), subpars. 3, 4 and 5 of the Tariff and Customs Code as amended) had been committed. The findings of the EIIB above referred to remain unassailed and uncontradicted. Said findings clearly show badges of fraud . . . The seizure of the property in question was made upon findings that the documents covering the said shipment were forged, thus:

FRAUD the following cases herein enumerated demonstrate the presence of fraud: 1.a. The use of forged or spurious documents . . . (Section 1, CMO-87-92). 16

On 3 September 1996 reconsideration was denied. 17

We now resolve the issue of whether petitioner should be allowed to redeem the forfeited shipment.

Petitioner asserts that it is not guilty of fraud because, as held in Farolan Jr. v. Court of Tax Appeals 18 and Aznar v. Court of Tax Appeals, 19 the fraud referred to is one that is intentional with the sole object of avoiding payment of taxes. While petitioner admits that it is the only consignee of the cargo and that the van contains textiles, contrary to those declared in the manifest and rider, it avers that these discrepancies do not evince deliberate evasion of taxes or payment of duties, especially considering that it is a duly registered domestic corporation, and that it has no knowledge or participation in the execution of the manifest and the rider thereon.

A violation of Sec. 2503 in relation to Sec. 2530, pars. (f) and (m), subpars. 3, 4 and 5, of the Tariff and Customs Code as amended was found by the Bureau of Customs. Section 203 deals with undervaluation, misclassification and misdeclaration in entry. On the other hand, Sec. 2530, pars. (f) and (m), subpars. 3, 4 and 5 provides

Sec. 2530. Property Subject to Forfeiture Under Tariff and Customs Law. Any vehicle, vessel or aircraft, cargo, article and other objects shall, under the following conditions be subject to forfeiture . . . .

f. Any article the importation or exportation of which is effected or attempted contrary to law, or any article of prohibited importation or exportation, and all other articles which, in the opinion of the Collector, have been used, are or were entered to be used as instruments in the importation or exportation of the former . . . .

m.

Any article sought to be imported or exported . . . .

(3) On the strength of a false declaration or affidavit executed by the owner, importer, exporter or consignee concerning the importation of such article;

(4) On the strength of a false invoice or other document executed by the owner, importer, exporter or consignee concerning the importation or exportation of such article; and

(5) Through any other practice or device contrary to law by means of which such article was entered through a customhouse to the prejudice of the government.

From the decision of the District Collector of Customs decreeing forfeiture, petitioner Transglobe International, Inc., filed a petition for redemption pursuant to Sec. 2307 of the Tariff and Customs Code as amended by Sec. 1 of E.O. No. 38 20 which states

Sec. 2307. Settlement of Case by Payment of Fine or Redemption of Forfeited Property. Subject to approval of the Commissioner, the District Collector may, while the case is still pending except when there is fraud, accept the settlement of any seizure case provided that the owner, importer, exporter, or consignee or his agent shall offer to pay to the collector a fine imposed by him upon the property, or in case of forfeiture, the owner, exporter, importer or consignee or his agent shall offer to pay for the domestic market value of the seized article. The Commissioner may accept the settlement of any seizure case on appeal in the same manner (emphasis supplied) . . . Settlement of any seizure case by payment

of the fine or redemption of forfeited property shall not be allowed in any case where the importation is absolutely prohibited or where the release of the property would be contrary to law.

As a means of settlement, redemption of forfeited property is unavailing in three (3) instances, namely, when there is fraud, where the importation is absolutely prohibited, or where the release of the property would be contrary to law. Respondent Commissioner of Customs disallowed the redemption on the ground of fraud which consisted of the following: "The shipment was made to appear to be an innocuous consolidation shipment destined for stripping at an outside CY-CFS in order to conceal the textile fabrics; the eight (8) co-loaders/consignees of the shipment are all fictitious; and, under Section 3B, CMO 87-92, offers of redemption shall be denied when the seized shipment is consigned to a fictitious consignee." 21 Respondent court sustained this ruling which it considered based on undisputed findings of the EIIB.

We rule that respondent Court of Appeals committed reversible error in rendering the assailed decision. The findings of respondent Commissioner of Customs which provided the bases for denying petitioner's offer of redemption were his own, not of the EIIB, and were merely stated in his 1st Indorsement with no evidence whatsoever to substantiate them. These findings prompted petitioner to seek reconsideration and dispute them with these claims

. . . First . . . . the shipment was not destined for stripping. It was then being transported to a CY-CFS operator where it would be examined by a customs appraiser who would determine the proper taxes and duties to be paid on the shipment. Second . . . . the petitioner is a legitimate corporation registered with the Securities and Exchange Commission in accordance with the laws of the Philippines . . . . 22

On petitioner's second motion for reconsideration, District Collector Rosqueta was silent on the first claim but upheld the second claim. According to her, petitioner is a juridical person duly organized in accordance with the laws of the Philippines and is qualified as a consignee; it is not fictitious as evidenced by its Articles of Incorporation registered with the Securities and Exchange Commission. 23 Despite these, respondent Commissioner of Customs maintained his denial of the redemption based on his previous unsubstantiated findings. It is settled that findings of fact of an administrative agency must be respected so long as they are supported by substantial evidence 24 or that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. 25 Lacking support, the factual findings of respondent Commissioner of Customs cannot stand on their own and therefore not binding on the courts.

In the appeal before the CTA, respondent Commissioner of Customs contended that the seizure of the shipment was made also upon a finding that the documents covering it were forged, thus constituting fraud as defined in Sec. 1, par. 1.a. CMO-87-92. This Section is of the same tenor as Sec. 2530, pars. (f) and (m), subpars. 3, 4 and 5, which for emphasis deals with falsities committed by the owner, importer, exporter or consignee or importation/exportation through any other practice or device. In Aznar, as reiterated in Farolan, we clarified that the fraud contemplated by law must be actual and not constructive. It must be intentional, consisting of deception willfully and deliberately done or resorted to in order to induce another to give up some right. The misdeclarations in the manifest and rider cannot be ascribed to petitioner as consignee since it was not the one that prepared them. As we said in Farolan, if at all, the wrongful making or falsity of the documents can only be attributed to the foreign suppliers or shippers. 26 Moreover, it was not shown in the forfeiture decision that petitioner had knowledge of any falsity in the shipping documents. District Collector Rosqueta's comment on petitioner's second motion for reconsideration is enlightening: "While the shipment was misdeclared in the rider and the manifest, the consignee is innocent of the facts stated therein as it had no hand in their preparation or issuance." 27 We mention in passing that in having thus stated, she in effect nullified her prior finding that petitioner violated the cited provisions of the Tariff and Customs Code as amended. Consequently, we agree with the finding of the CTA that fraud was not committed by petitioner in the importation of the shipment.

Taking into consideration the circumstances obtaining in the present case, namely, the absence of fraud, the importation is not absolutely prohibited and the release of the property would not be contrary to law, the Court deems it proper to allow the redemption of the forfeited shipment by petitioner upon payment of its computed domestic market value. Doing so is definitely in keeping with the two-way intent of E. O. No. 38, to wit, to expedite the collection of revenues and hasten the release of cargoes under seizure proceedings to the end that importers and exporters will benefit in the form of reduction in expenditures and assurance of return of their investments that have been tied up with their importations. 28

Finally, one may be tempted to argue that for failure to appear in the forfeiture proceedings despite due notice, petitioner was in default and deemed to have admitted its violation of Sec. 2503, in relation to Sec. 2530, pars. (f) and (m), as found by District Collector of Customs Rosqueta, interpreted by the Court of Appeals as "badges of fraud," and, as a consequence, petitioner is now estopped from claiming that in the proceedings for redemption there was no fraud on its part.

The argument surfs on a wrong premise. Forfeiture of seized goods in the Bureau of Customs is a proceeding against the goods and not against the owner. It is in the nature of a proceeding in rem, i.e., directed against the res or imported articles and entails a determination of the legality of their

importation. 29 In this proceeding, it is in legal contemplation the property itself which commits the violation and is treated as the offender, without reference whatsoever to the character or conduct of the owner. 30 The issue here is limited to whether the imported goods should be forfeited and disposed of in accordance with law for violation of the Tariff and Customs Code. Hence, the ruling of District Collector Rosqueta in the forfeiture case, insofar as the aspect of fraud is concerned, is not conclusive; nor does it preclude petitioner from invoking absence of fraud in the redemption proceedings. Significantly, while District Collector Rosqueta decreed the forfeiture of the subject goods for violation of the Tariff and Customs Code, she nevertheless recommended the approval of petitioner's offer of redemption, 31 and categorically acknowledged that as consignee there was no fraud on its part. 32

WHEREFORE, the petition is GRANTED. The Decision of respondent Court of Appeals of 28 June 1996 sustaining the denial of the redemption of the forfeited shipment and the Resolution of 3 September 1996 denying reconsideration are SET ASIDE. The Decision of the Court of Tax Appeals of 27 June 1995 ordering respondent Commissioner of Customs to allow petitioner Transglobe International, Inc., to redeem the forfeited shipment upon payment of its domestic market value amounting to P1,300,132.04 is REINSTATED.

SO ORDERED.

Mendoza, Quisumbing and Buena, JJ., concur.

Puno, J., Pls. see Dissent.

Separate Opinions

PUNO, J., dissenting opinion;

The petition at bar seeks to reverse the Decision of the Court of Appeals in CA-GR SP No. 37866 which, in effect, barred herein petitioner Transglobe International, Inc. from redeeming its shipment from Hongkong which was seized by the Bureau of Customs after finding that the entries in its covering documents were false and fictitious.

It is respectfully submitted that the petition should be denied as petitioner failed to show that the Court of Appeals committed a reversible error in its ruling.

Sec. 2307 of the Tariff and Customs Code provides:

Subject to the approval of the Commissioner, the District Collector may, while the case is still pending except when there is fraud, accept the settlement of any seizure case provided that the owner, importer, exporter, consignee or his agent shall offer to pay to the collector a fine imposed by him upon the property or in case of forfeiture, the owner, exporter, importer or consignee or his agent shall offer to pay for the domestic value of the seized article. The Commissioner may accept the settlement of any seizure case on appeal in the same manner.

xxx

xxx

xxx

Redemption of forfeited property shall not be allowed in any case where the importation is absolutely prohibited or where the surrender of the property to the person offering the same would he contrary to law.

Under the foregoing provision, redemption is not allowed in three instances: (1) when there is fraud; (2) when the importation is absolutely prohibited; and (3) when the surrender of the property to the person offering the redemption would be contrary to law.

This case fails under the first instance. Respondent Commissioner of Customs has shown by clear and convincing evidence the existence of fraud in connection with the documentation of the seized goods. The undisputed facts reveal that the documents covering the shipment in question were falsified. The investigation conducted by the agents of the Economic Intelligence and Investigation Bureau (EIIB) yielded the following result:

1. The 40-foot van was made to appear as consolidation shipment consisting of 232 packages with Translink International Freight Forwarder as shipper and Transglobe International, Inc. as consignee;

2. There were eight (8) shippers and eight (8) consignees declared as co-loaders and co-owners of the contents of the van, when in truth the entire shipment belonged to only one consignee, petitioner Transglode International, Inc. The other consignees were fictitious.

3. Not one of the items declared as the contents of the van, i.e., various hand tools, water cooling, tower G-clamps compressors, bright roping wire and knitting machines was found in the van. Instead, the van was fully stuffed with textile goods.

These were not refuted, and therefore deemed admitted, by petitioner. The EIIB thus concluded that the shipment was made to appear to be an innocuous consolidation shipment destined for stripping at an outside Customs Yard-Customs Freight Services in order to conceal the textile fabrics. These falsities constitute fraud as defined in Section 1 of Customs Memorandum Order No. 87-92, thus:

FRAUD the following cases herein enumerated demonstrate the presence of fraud:

1.a.

the use of forged or spurious documents;

1.b. prima facie evidence of fraud under Section 2503 of the TCCP on undervaluation, misclassification, and misdeclaration in entry;

1.c. the use of false machinations, misrepresentation, concealment of facts that resulted in loss of revenues reaching levels that is unconscionable and unbecoming of a law-abiding taxpayer and citizen;

1.d.

other cases similarly situated.

Thus, under the circumstances, petitioner may not be allowed to redeem the seized goods under Section 2307 of the Tariff and Customs Code.

I am not impressed by petitioner's pretension that it is innocent of the use of forged documents. Petitioner has admitted that it is the only consignee of the smuggled goods. It does not explain who else could have been responsible for the use of the forged documents. It is far fetched to assume that the criminal act can be attributed to the foreign suppliers or shippers for they do not have any motive to commit the falsification. Petitioner was summoned to shed light on the use of these forged documents in the seizure proceedings. Petitioner never appeared to explain.

I appreciate the majority's concern on the need for government to collect more taxes. But more important than this desideratum is the need to curb smuggling in our Bureau of Customs. The facts of the case at bar show an out and out attempt to smuggle highly dutiable textiles thru the use of forged documents. The use of forged documents is fraud under any habiliment. These textiles should be confiscated and sold at public auction. To allow their redemption is to sanction the circumvention of laws.

IN VIEW WHEREOF, I vote to DENY the petition.

Separate Opinions PUNO, J., dissenting opinion;

The petition at bar seeks to reverse the Decision of the Court of Appeals in CA-GR SP No. 37866 which, in effect, barred herein petitioner Transglobe International, Inc. from redeeming its shipment from Hongkong which was seized by the Bureau of Customs after finding that the entries in its covering documents were false and fictitious.

It is respectfully submitted that the petition should be denied as petitioner failed to show that the Court of Appeals committed a reversible error in its ruling.

Sec. 2307 of the Tariff and Customs Code provides:

Subject to the approval of the Commissioner, the District Collector may, while the case is still pending except when there is fraud, accept the settlement of any seizure case provided that the owner, importer, exporter, consignee or his agent shall offer to pay to the collector a fine imposed by him upon the property or in case of forfeiture, the owner, exporter, importer or consignee or his agent shall offer to pay for the domestic value of the seized article. The Commissioner may accept the settlement of any seizure case on appeal in the same manner.

xxx

xxx

xxx

Redemption of forfeited property shall not be allowed in any case where the importation is absolutely prohibited or where the surrender of the property to the person offering the same would he contrary to law.

Under the foregoing provision, redemption is not allowed in three instances: (1) when there is fraud; (2) when the importation is absolutely prohibited; and (3) when the surrender of the property to the person offering the redemption would be contrary to law.

This case fails under the first instance. Respondent Commissioner of Customs has shown by clear and convincing evidence the existence of fraud in connection with the documentation of the seized goods. The undisputed facts reveal that the documents covering the shipment in question were falsified. The investigation conducted by the agents of the Economic Intelligence and Investigation Bureau (EIIB) yielded the following result:

1. The 40-foot van was made to appear as consolidation shipment consisting of 232 packages with Translink International Freight Forwarder as shipper and Transglobe International, Inc. as consignee;

2. There were eight (8) shippers and eight (8) consignees declared as co-loaders and co-owners of the contents of the van, when in truth the entire shipment belonged to only one consignee, petitioner Transglode International, Inc. The other consignees were fictitious.

3. Not one of the items declared as the contents of the van, i.e., various hand tools, water cooling, tower G-clamps compressors, bright roping wire and knitting machines was found in the van. Instead, the van was fully stuffed with textile goods.

These were not refuted, and therefore deemed admitted, by petitioner. The EIIB thus concluded that the shipment was made to appear to be an innocuous consolidation shipment destined for stripping at an outside Customs Yard-Customs Freight Services in order to conceal the textile fabrics. These falsities constitute fraud as defined in Section 1 of Customs Memorandum Order No. 87-92, thus:

FRAUD the following cases herein enumerated demonstrate the presence of fraud:

1.a.

the use of forged or spurious documents;

1.b. prima facie evidence of fraud under Section 2503 of the TCCP on undervaluation, misclassification, and misdeclaration in entry;

1.c. the use of false machinations, misrepresentation, concealment of facts that resulted in loss of revenues reaching levels that is unconscionable and unbecoming of a law-abiding taxpayer and citizen;

1.d.

other cases similarly situated.

Thus, under the circumstances, petitioner may not be allowed to redeem the seized goods under Section 2307 of the Tariff and Customs Code.

I am not impressed by petitioner's pretension that it is innocent of the use of forged documents. Petitioner has admitted that it is the only consignee of the smuggled goods. It does not explain who else

could have been responsible for the use of the forged documents. It is far fetched to assume that the criminal act can be attributed to the foreign suppliers or shippers for they do not have any motive to commit the falsification. Petitioner was summoned to shed light on the use of these forged documents in the seizure proceedings. Petitioner never appeared to explain.

I appreciate the majority's concern on the need for government to collect more taxes. But more important than this desideratum is the need to curb smuggling in our Bureau of Customs. The facts of the case at bar show an out and out attempt to smuggle highly dutiable textiles thru the use of forged documents. The use of forged documents is fraud under any habiliment. These textiles should be confiscated and sold at public auction. To allow their redemption is to sanction the circumvention of laws.1wphi1.nt

IN VIEW WHEREOF, I vote to DENY the petition.

Footnotes 1 Court of Tax Appeals Records, Vol. I, pp. 147-148.

Id., p. 149.

Id., p. 150.

Id., p. 151.

Id., p. 152.

Container Yard-Container Freight Station.

CTA Records, Vol, I, p. 153.

Ibid.

Id., p. 159.

10

Id., p. 33.

11

Id., p. 163.

12

Id., pp. 38 and 39.

13

CTA Case No. 4428, 15 September 1994.

14 Decision penned by Presiding Judge Ernesto D. Acosta with the concurrence of Associate Judges Manuel K. Gruba and Ramon O. de Veyra; CTA Records, Vol. I, p. 198.

15 Decision penned by Justice Jose C. de la Rama with the concurrence of Justices Emeterio C. Cui and Eduardo G. Montenegro; Rollo, pp. 64-65.

16

Id., pp. 62-64.

17

Id., p. 67.

18

No. L-42204, 21 January 1993, 217 SCRA 298.

19

No. L-20569, 23 August 1974, 58 SCRA 519.

20

Issued on 8 August 1986.

21

See Note 7.

22

CTA Records, Vol. I, pp. 4-5, 24-25.

23

See Note 10.

24

Rubenecia v. Civil Service Commission, G.R. No. 115942, 31 May 1996, 244 SCRA 640.

25

Reno Foods, Inc. v. NLRC, G.R. No. 116462, 18 October 1995, 249 SCRA 379.

26 Citing Farm Implement and Machinery Co. v. Commissioner of Customs, No. L-22212, 30 August 1968, 24 SCRA 905.

27

See Note 10.

28

Spelled out in the Whereas clauses.

29

Vierneza v. Commissioner of Customs, No. L-24348, 30 July 1968, 24 SCRA 394.

30 See United State v. Steamship "Rubi", 32 Phil. 228 (1915); Commissioner of Customs v. Pascual, L-31733, 20 September 1985, 138 SCRA 581.

31

Exh. "D."

32

See Note 10.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines SUPREME COURT Manila

EN BANC

G.R. No. 104604

October 6, 1995

NARCISO O. JAO and BERNARDO M. EMPEYNADO, petitioners, vs. COURT OF APPEALS; COMMISSIONER OF CUSTOMS; COLLECTOR OF CUSTOMS, Port of Manila; Col. SINDULFO R. SEBASTIAN, Director, Enforcement and Security Services, Bureau of Customs; and Maj. JAIME MAGLIPON, Chief, Operations and Intelligence Staff, Enforcement and Security Services, Bureau of Customs, respondents.

G.R. No. 111223

October 6, 1995

NARCISO O. JAO and BERNARDO M. EMPEYNADO, petitioners, vs.

THE HONORABLE OMBUDSMAN CONRADO M. VASQUEZ, and SINDULFO SEBASTIAN, JAIME MAGLIPON; JOSE YUCHONGCO; RICARDO CORONADO; VICTOR BARROS; DENNIS BANTIGUE; ROY LARA; BENJAMIN SANTOS; RODOLFO GONDA; ADONIS REJOSO; DANIEL PENAS; NICANOR BONES; ABUNDIO JUMAMOY; ARTEMIO CASTILLO; ANDRESITO ABAYON; RUBEN TAGUBA; JAIME JAVIER; HERBERT DOLLANO, all with the Bureau of Customs; JOVY GUTIERREZ of the Makati police, and 'JOHN DOES', respondents.

ROMERO, J.:

G.R. No. 104604 is a petition for certiorari of the decision 1 of the Court of Appeals, the dispositive portion of which states:

WHEREFORE, the petition is hereby GRANTED. The orders issued by the respondent judge dated November 20, 1990, December 10, 1990, January 3, 1991 and all subsequent orders in the Civil Case No. 90-2382 of the Regional Trial Court of Makati are SET ASIDE. Having no jurisdiction over the case, the respondent judge is hereby enjoined from proceeding with Civil Case No. 90-2382 and further, Case No. 90-2382 is hereby DISMISSED.

SO ORDERED.

G.R. No. 111223 is a petition for certiorari of the resolution of the Ombudsman 2 dismissing the case filed before it by herein petitioner.

The above-docketed cases were consolidated per resolution of the Court on August 26, 1993, as the facts in both cases were the same.

These facts are the following:

On August 10, 1990, the Office of the Director, Enforcement and Security Services (ESS), Bureau of Customs, received information regarding the presence of allegedly untaxed vehicles and parts in the premises owned by a certain Pat Hao located along Quirino Avenue, Paranaque and Honduras St., Makati. After conducting a surveillance of the two places, respondent Major Jaime Maglipon, Chief of Operations and Intelligence of the ESS, recommended the issuance of warrants of seizure and detention against the articles stored in the premises.

On August 13, 1990, District Collector of Customs Titus Villanueva issued the warrants of seizure and detention.

On the same date, respondent Maglipon coordinated with the local police substations to assist them in the execution of the respective warrants of seizure and detention. Thereafter, the team searched the two premises.

In Makati, they were barred from entering the place, but some members of the team were able to force themselves inside. They were able to inspect the premises and noted that some articles were present which were not included in the list contained in the warrant.. Hence, on August 15, 1990, amended warrants of seizure and detention were issued by Villanueva.

On August 25, 1990, customs personnel started hauling the articles pursuant to the amended warrants. This prompted petitioners Narciso Jao and Bernardo Empeynado to file a case for Injunction and Damages, docketed as Civil Case No. 90-2382 with prayer for Restraining Order and Preliminary Injunction before the Regional Trial Court of Makati Branch 56 on August 27, 1990 against respondents. On the same date, the trial court issued a Temporary Restraining Order.

On September 7, 1990, respondents filed a Motion to Dismiss on the ground that the Regional Trial Court has no jurisdiction over the subject matter of the complaint, claiming that it was the Bureau of Customs that had exclusive jurisdiction over it.

On November 20, 1990, the trial court denied respondents' motion to dismiss.

On November 29, 1990, petitioners' application for preliminary prohibitory and mandatory injunction was granted conditioned upon the filing of a one million peso bond.

The Court also prohibited respondents from seizing, detaining, transporting and selling at public auction petitioners' vehicles, spare parts, accessories and other properties located at No. 2663 Honduras St., San Isidro, Makati and at No. 240 Quirino Avenue, Tambo, Paranaque, Metro Manila. Respondents were further prohibited from disturbing petitioners' constitutional and proprietary rights over their properties located at the aforesaid premises. Lastly, respondents were ordered to return the seized items and to render an accounting and inventory thereof.

On December 13, 1990, respondents filed a motion for reconsideration based on the following grounds:

a) the lower court having no jurisdiction over the subject matter of the complaint, it has no recourse but to dismiss the same; and

(b)

the lower court had no legal authority to issue an injunction therein.

On January 3, 1991 the motion for reconsideration was denied. Respondents then went to the Court of Appeals on the ground that the judge acted with grave abuse of discretion in denying their motion to dismiss and in granting petitioners' application for preliminary injunction. They argued that the Regional Trial Court had no jurisdiction over seizure and forfeiture proceedings, such jurisdiction being exclusively vested in the Bureau of Customs.

The Court of Appeals set aside the questioned orders of the trial court and enjoined it from further proceeding with Civil Case No. 90-2382. The appellate court also dismissed the said civil case.

On May 2, 1992, petitioners filed a petition with this Court to review the decision of the Court of Appeals docketed as G.R. No. 104604.

As regards G.R. No. 111223, petitioners filed criminal charges against respondents, other officers and employees of the Bureau of Customs and members of the Makati Police before the Office of the Ombudsman for Robbery, Violation of Domicile and Violation of Republic Act No. 3019, docketed as OMB Case No. 0-90-2027.

Respondent Ombudsman summarized the case before it as follows:

This is an affidavit-complaint filed by the complainants against the respondents, Officers and Employees of the Bureau of Customs and members of the Makati Police allegedly for violation of Domicile and Robbery defined and penalized under Articles 128, 293 and 294 of the Revised Penal Code and for violation of R.A. 3019 committed as follows, to wit:

That on August 11, 1990, after receiving intelligence information of the presence of smuggled goods, some of the respondents headed by Jaime Maglipon posed themselves as Meralco inspectors and entered complainants' stockyards and residence located at 2663 Honduras Street, Makati, Metro Manila and at 240 Quirino Avenue, Tambo Paranaque for the purpose of searching smuggled goods found therein without the consent of the owner thereof;

That after the search, respondents on August 13, 1990 up to August 25, 1990, this time clothed with a Warrant of Seizure and Detention, with the aid of the Makati Police and several heavily armed men entered complainants stockyard located at 2663 Honduras St., Makati, Metro Manila, and pulled out therefrom several machineries and truck spare parts without issuing the corresponding receipts to the complainants to cover all the items taken.

Respondents claimed in their consolidated and verified comment that they are not liable for violation of domicile because the places entered and searched by them appear not to be the residences of the complainants but only their warehouses. As proof of this allegation, the respondents presented the pictures of said warehouses, which are attached to their comment as Annexes "6", "6-A" to "6-C" and the Sheriff's return likewise attached to their verified comments as Annex "7". According to the respondents, a charge for violation of domicile may apply only if the place entered into against the will of the owner is used exclusively for dwelling. In the case at bar, the place entered into was used more of a warehouse than a dwelling place.

Further respondents also claimed not liable for robbery (sic) because the complainants appear not to be the owners of the properties taken. Moreover, the respondents claimed that the taking is lawful because the same proceeded from a warrant of Seizures and Detention; there was no violence or intimidation of person committed and that there was no intent to gain on the part of the respondents,

the purpose of the seizure of the subject goods being to collect customs duties and taxes due the government.

Lastly, the respondents disclaimed liability for a violation of R.A. 3019 because they deny having demanded from the complainants the sum of P100,000.00. Instead according to the respondents, it was the complainants who offered them P70,000.00 to delay the hauling of the seized goods as attested to in the joint affidavit of CPSGT, Ricardo Coronado and Dennis Bantequi.

A preliminary investigation was conducted and on May 31, 1991, another hearing was held to give the parties a chance to submit further evidence to support their respective claims.

On March 15, 1993 respondent Ombudsman issued a Resolution recommending that the case be dismissed for lack of merit.

On May 17, 1993, petitioners moved for the reconsideration of said resolution, but the same was denied on July 8, 1993.

Hence, the petition in G.R. No. 111223, which was filed on August 16, 1993.

In G.R. No. 111223, petitioners claim that respondent Ombudsman gravely abused his discretion in dismissing the case and in denying petitioners' motion for reconsideration.

They allege that respondent Ombudsman ignored evidence incriminatory to the raiders; that the receipts did not tally with petitioners' receipts nor with the Commission on Audit's inventory; that the respondents are guilty of robbery and of violating petitioners' constitutional right against violation of domicile. For these reasons, petitioners pray that the Ombudsman's resolution be reversed and that the Court direct the Ombudsman to cause the filing of criminal charges as may be warranted against respondents.

We find the petition in G.R. No. 111223 devoid of merit.

The Court, recognizing the investigatory and prosecutory powers granted by the Constitution to the Office of the Ombudsman and for reasons of practicality, declared, in an En Banc resolution dated August 30, 1993, issued in G.R. Nos. 103446-47 3 that the Court will not interfere nor pass upon findings of public respondent Ombudsman to avoid its being hampered by innumerable petitions assailing the dismissal of investigatory proceedings conducted by the Office of the Ombudsman with regard to complaints filed before it, and that it will not review the exercise of discretion on the part of the fiscals or prosecuting attorneys each time they decide to file an information in court or dismiss a complaint by a private complainant. The dismissal by the Ombudsman of petitioners' complaint, therefore, stands.

We will now discuss G.R. No. 104604.

Petitioners contend: (1) that the Court of Appeals erred in not holding that the Collector of Customs could no longer order the seizure for the second time of items previously seized and released after amnesty payments of duties and taxes; (2) that the Bureau of Customs has lost jurisdiction to order the seizure of the items because the importation had ceased; (3) that the seizure of the items deprived the petitioners of their properties without due process of law; and (4) that there is no need to exhaust administrative remedies.

We find no merit in petitioners' contentions.

There is no question that Regional Trial Courts are devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the Bureau of Customs and to enjoin or otherwise interfere with these proceedings 4 The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods. The Regional Trial Courts are precluded from assuming cognizance over such matters even through petitions of certiorari, prohibition or mandamus. 5

It is likewise well-settled that the provisions of the Tariff and Customs Code and that of Republic Act No. 1125, as amended, otherwise known as "An Act Creating the Court of Tax Appeals," specify the proper fora and procedure for the ventilation of any legal objections or issues raised concerning these proceedings. Thus, actions of the Collector of Customs are appealable to the Commissioner of Customs, whose decision, in turn, is subject to the exclusive appellate jurisdiction of the Court of Tax Appeals and from there to the Court of Appeals.

The rule that Regional Trial Courts have no review powers over such proceedings is anchored upon the policy of placing no unnecessary hindrance on the government's drive, not only to prevent smuggling and other frauds upon Customs, but more importantly, to render effective and efficient the collection of import and export duties due the State, which enables the government to carry out the functions it has been instituted to perform. 6

Even if the seizure by the Collector of Customs were illegal, which has yet to be proven, we have said that such act does not deprive the Bureau of Customs of jurisdiction thereon.

Respondents assert that respondent Judge could entertain the replevin suit as the seizure is illegal, allegedly because the warrant issued is invalid and the seizing officer likewise was devoid of authority. This is to lose sight of the distinction between the existence of the power and the regularity of the proceeding taken under it. The governmental agency concerned, the Bureau of Customs, is vested with exclusive authority. Even if it be assumed that in the exercise of such exclusive competence a taint of illegality may be correctly imputed, the most that can be said is that under certain circumstances the grave abuse of discretion conferred may oust it of such jurisdiction. It does not mean however that correspondingly a court of first instance is vested with competence when clearly in the light of the decisions the law has not seen fit to do so. 7

The allegations of petitioners regarding the propriety of the seizure should properly be ventilated before the Collector of Customs. We have had occasion to declare:

The Collector of Customs when sitting in forfeiture proceedings constitutes a tribunal expressly vested by law with jurisdiction to hear and determine the subject matter of such proceedings without any interference from the Court of First Instance. (Auyong Hian v. Court of Tax Appeals, et al., 19 SCRA 10). The Collector of Customs of Sual-Dagupan in Seizure Identification No. 14-F-72 constituted itself as a tribunal to hear and determine among other things, the question of whether or not the M/V Lucky Star I was seized within the territorial waters of the Philippines. If the private respondents believe that the seizure was made outside the territorial jurisdiction of the Philippines, it should raise the same as a defense before the Collector of Customs and if not satisfied, follow the correct appellate procedures. A separate action before the Court of First Instance is not the remedy. 8

WHEREFORE, the petitions in G.R. No. 104604 and in G.R. No. 111223 are hereby DISMISSED for lack of merit.

SO ORDERED.

Feliciano, Padilla, Regalado, Davide, Jr., Bellosillo, Puno, Vitug, Kapunan, Mendoza, Francisco and Hermosisima, Jr., JJ., concur.

Narvasa, C.J. and Melo, J., are on leave.

Footnotes

G.R. No. 104604, Rollo p. 21, Torres, ponente, Francisco and Santiago, JJ. concurring.

G.R. No. 111223, Rollo, p. 91.

Ocampo v. Ombudsman, 225 SCRA 725 (1993).

Commissioner of Customs v. Makasiar, 177 SCRA (1989).

5 General Travel Service v. David, G.R. No. L-19259, September 23, 1966, 18 SCRA 59; Pacis v. Averia, G.R. No. L-22526, November 29, 1966, 18 SCRA 907; De Joya v. Lantin, G.R. No. L-24037, April 27, 1967, 19 SCRA 893; Ponce Enrile v. Vinuya, G.R. No. L-29043, January 30, 1971, 37 SCRA 381; Collector of Customs v. Torres, G.R. No. L-22977, May 31, 1972, 45 SCRA 272; Pacis v. Geronimo, G.R. No. L-24068, April 23, 1974, 56 SCRA 583; Commissioner of Customs v. Navarro, G.R. No. L-33146, May 31, 1977, 77 SCRA 264; Republic v. Bocar, G.R. No. L-35260, September 4, 1979, 93 SCRA 78; De la Fuente v. De Veyra, G.R. No. L-35385, January 31, 1983, 120 SCRA 451.

Commissioner of Customs v. Makasiar, supra.

Ponce Enrile v. Venuya, supra.

De la Fuente v. de Veyra, supra.

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