1) EN BANC He contends that since the Constitution vests the authority to enact revenue bills in

Congress, the President may not assume such power by issuing Executive Orders Nos.
475 and 478 which are in the nature of revenue-generating measures.
G.R. No. 101273 July 3, 1992

Petitioner further argues that Executive Orders No. 475 and 478 contravene Section 401 of the
CONGRESSMAN ENRIQUE T. GARCIA (Second District of Bataan), petitioner,
Tariff and Customs Code, which Section authorizes the President, according to petitioner, to
vs.
increase, reduce or remove tariff duties or to impose additional duties only when necessary to
THE EXECUTIVE SECRETARY, THE COMMISSIONER OF CUSTOMS, THE NATIONAL
protect local industries or products but not for the purpose of raising additional revenue for the
ECONOMIC AND DEVELOPMENT AUTHORITY, THE TARIFF COMMISSION, THE
government.
SECRETARY OF FINANCE, and THE ENERGY REGULATORY BOARD, respondents.

FELICIANO, J.:
On 27 November 1990, the President issued Executive Order No. 438 which imposed, in addition
to any other duties, taxes and charges imposed by law on all articles imported into the
Philippines, an additional duty of five percent (5%) ad valorem. This additional duty was
imposed across the board on all imported articles, including crude oil and other oil products
imported into the Philippines. This additional duty was subsequently increased from five percent
(5%) ad valorem to nine percent (9%) ad valorem by the promulgation of Executive Order No.
443, dated 3 January 1991.
On 24 July 1991, the Department of Finance requested the Tariff Commission to initiate the
process required by the Tariff and Customs Code for the imposition of a specific levy on crude
oil and other petroleum products, covered by HS Heading Nos. 27.09, 27.10 and 27.11 of
Section 104 of the Tariff and Customs Code as amended. Accordingly, the Tariff Commission,
following the procedure set forth in Section 401 of the Tariff and Customs Code, scheduled a
public hearing to give interested parties an opportunity to be heard and to present evidence in
support of their respective positions.
Thus, petitioner questions first the constitutionality and second the legality of Executive Orders
Nos. 475 and 478, and asks us to restrain the implementation of those Executive Orders. We
will examine these questions in that order.
Before doing so, however, the Court notes that the recent promulgation of Executive Order No.
507 did not render the instant Petition moot and academic. Executive Order No. 517 which is
dated 30 April 1992 provides as follows:
Sec. 1. Lifting of the Additional Duty. — The additional duty in the nature
of ad valorem imposed on all imported articles prescribed by the provisions
of Executive Order No. 443, as amended, is hereby lifted; Provided,
however, that the selected articles covered by HS Heading Nos. 27.09 and
27.10 of Section 104 of the Tariff and Customs Code, as amended, subject
of Annex "A" hereof, shall continue to be subject to the additional duty of
nine (9%) percent ad valorem.
Under the above quoted provision, crude oil and other oil products continue to be
subject to the additional duty of nine percent (9%) ad valorem under Executive Order
No. 475 and to the special duty of P0.95 per liter of imported crude oil and P1.00 per
liter of imported oil products under Executive Order No. 478.

Meantime, Executive Order No. 475 was issued by the President, on 15 August 1991 reducing
Turning first to the question of constitutionality, under Section 24, Article VI of the Constitution,
the rate of additional duty on all imported articles from nine percent (9%) to five percent
the enactment of appropriation, revenue and tariff bills, like all other bills is, of course, within
(5%) ad valorem, except in the cases of crude oil and other oil products which continued to be
the province of the Legislative rather than the Executive Department. It does not follow,
subject to the additional duty of nine percent (9%) ad valorem.
however, that therefore Executive Orders Nos. 475 and 478, assuming they may be
characterized as revenue measures, are prohibited to the President, that they must be enacted
Upon completion of the public hearings, the Tariff Commission submitted to the President a instead by the Congress of the Philippines. Section 28(2) of Article VI of the Constitution
"Report on Special Duty on Crude Oil and Oil Products" dated 16 August 1991, for consideration provides as follows:
and appropriate action. Seven (7) days later, the President issued Executive Order No. 478,
dated 23 August 1991, which levied (in addition to the aforementioned additional duty of nine
(2) The Congress may, by law, authorize the President to fix within
percent (9%) ad valorem and all other existing ad valorem duties) a special duty of P0.95 per
specified limits, and subject to such limitations and restrictions as it may
liter or P151.05 per barrel of imported crude oil and P1.00 per liter of imported oil products.
impose, tariff rates, import and export quotas, tonage and wharfage dues,
and other duties or imposts within the framework of the national
In the present Petition for Certiorari, Prohibition and Mandamus, petitioner assails the validity of development program of the Government. (Emphasis supplied)
Executive Orders Nos. 475 and 478. He argues that Executive Orders Nos. 475 and 478 are
violative of Section 24, Article VI of the 1987 Constitution which provides as follows:
There is thus explicit constitutional permission 1 to Congress to authorize the President "subject
to such limitations and restrictions is [Congress] may impose" to fix "within specific limits" "tariff
Sec. 24: All appropriation, revenue or tariff bills, bills authorizing increase of rates . . . and other duties or imposts . . ."
the public debt, bills of local application, and private bills shall originate
exclusively in the House of Representatives, but the Senate may propose or
The relevant congressional statute is the Tariff and Customs Code of the Philippines, and
concur with amendments.
Sections 104 and 401, the pertinent provisions thereof. These are the provisions which the
President explicitly invoked in promulgating Executive Orders Nos. 475 and 478. Section 104 of
the Tariff and Customs Code provides in relevant part:
Sec. 104. All tariff sections, chapters, headings and subheadings and the
rates of import duty under Section 104 of Presidential Decree No. 34 and all
subsequent amendments issued under Executive Orders and Presidential
Decrees are hereby adopted and form part of this Code.
There shall be levied, collected, and paid upon all imported articles the rates
of duty indicated in the Section under this section except as otherwise
specifically provided for in this Code: Provided, that, the maximum rate
shall not exceed one hundred per cent ad valorem.
The rates of duty herein provided or subsequently fixed pursuant to Section
Four Hundred One of this Code shall be subject to periodic investigation by
the Tariff Commission and may be revised by the President upon
recommendation of the National Economic and Development Authority.
xxx xxx xxx
(Emphasis supplied)
Section 401 of the same Code needs to be quoted in full:
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: (1) to increase,
reduce or remove existing protective rates of import duty (including any
necessary change in classification). The existing rates may be increased or
decreased but in no case shall the reduced rate of import duty be lower
than the basic rate of ten (10) per cent ad valorem, nor shall the increased
rate of import duty be higher than a maximum of one hundred (100) per
cent ad valorem; (2) to establish import quota or to ban imports of any
commodity, as may be necessary; and (3) to impose an additional duty on
all imports not exceeding ten (10) per cent ad valorem, whenever
necessary; 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.
b. Before any recommendation is submitted to the President by the NEDA
pursuant to the provisions of this section, except in the imposition of an
additional duty not exceeding ten (10) per cent ad valorem, the Commission
shall conduct an investigation in the course of which they shall hold public
hearings wherein interested parties shall be afforded reasonable opportunity
to be present, produce evidence and to be heard. The Commission shall
also hear the views and recommendations of any government office, agency
or instrumentality concerned. The Commission shall submit their findings
and recommendations to the NEDA within thirty (30) days after the
termination of the public hearings.
c. The power of the President to increase or decrease rates of import duty
within the limits fixed in subsection "a" shall include the authority to modify
the form of duty. In modifying the form of duty, the corresponding ad
valorem or specific equivalents of the duty with respect to imports from the
principal competing foreign country for the most recent representative
period shall be used as bases.
d. The Commissioner of Customs shall regularly furnish the Commission a
copy of all customs import entries as filed in the Bureau of Customs. The
Commission or its duly authorized representatives shall have access to, and
the right to copy all liquidated customs import entries and other documents
appended thereto as finally filed in the Commission on Audit.
e. The NEDA shall promulgate rules and regulations necessary to carry out
the provisions of this section.
f. Any Order issued by the President pursuant to the provisions of this
section shall take effect thirty (30) days after promulgation, except in the
imposition of additional duty not exceeding ten (10) per cent ad
valorem which shall take effect at the discretion of the President. (Emphasis
supplied)
Petitioner, however, seeks to avoid the thrust of the delegated authorizations found in Sections
104 and 401 of the Tariff and Customs Code, by contending that the President is authorized to
act under the Tariff and Customs Code only "to protect local industries and products for the
sake of the national economy, general welfare and/or national security." 2 He goes on to claim
that:
E.O. Nos. 478 and 475 having nothing to do whatsoever with the protection
of local industries and products for the sake of national economy, general
welfare and/or national security. On the contrary, they work in reverse,
especially as to crude oil, an essential product which we do not have to
protect, since we produce only minimal quantities and have to import the
rest of what we need.
These Executive Orders are avowedly solely to enable the government to
raise government finances, contrary to Sections 24 and 28 (2) of Article VI
of the Constitution, as well as to Section 401 of the Tariff and Customs
Code. 3 (Emphasis in the original)
The Court is not persuaded. In the first place, there is nothing in the language of either Section
104 or of 401 of the Tariff and Customs Code that suggest such a sharp and absolute limitation
of authority. The entire contention of petitioner is anchored on just two (2) words, one found in
Section 401 (a)(1): "existing protective rates of import duty," and the second in the proviso
found at the end of Section 401 (a): "protection levels granted in Section 104 of this Code . . . .
" We believe that the words "protective" and ''protection" are simply not enough to support the
very broad and encompassing limitation which petitioner seeks to rest on those two (2) words.
In the second place, petitioner's singular theory collides with a very practical fact of which this
Court may take judicial notice — that the Bureau of Customs which administers the Tariff and
Customs Code, is one of the two (2) principal traditional generators or producers of
governmental revenue, the other being the Bureau of Internal Revenue. (There is a third
agency, non-traditional in character, that generates lower but still comparable levels of revenue
for the government — The Philippine Amusement and Games Corporation [PAGCOR].)
In the third place, customs duties which are assessed at the prescribed tariff rates are very
much like taxes which are frequently imposed for both revenue-raising and for regulatory
purposes. 4 Thus, it has been held that "customs duties" is "the name given to taxes on the
importation and exportation of commodities, the tariff or tax assessed upon merchandise
imported from, or exported to, a foreign country." 5 The levying of customs duties on imported
goods may have in some measure the effect of protecting local industries — where such local
industries actually exist and are producing comparable goods. Simultaneously, however, the
very same customs duties inevitably have the effect of producing governmental revenues.
Customs duties like internal revenue taxes are rarely, if ever, designed to achieve one policy
objective only. Most commonly, customs duties, which constitute taxes in the sense of exactions
the proceeds of which become public funds 6 — have either or both the generation of revenue
and the regulation of economic or social activity as their moving purposes and frequently, it is
very difficult to say which, in a particular instance, is the dominant or principal objective. In the
instant case, since the Philippines in fact produces ten (10) to fifteen percent (15%) of the
crude oil consumed here, the imposition of increased tariff rates and a special duty on imported
crude oil and imported oil products may be seen to have some "protective" impact upon
indigenous oil production. For the effective, price of imported crude oil and oil products is
increased. At the same time, it cannot be gainsaid that substantial revenues for the government
are raised by the imposition of such increased tariff rates or special duty.
In the fourth place, petitioner's concept which he urges us to build into our constitutional and
customs law, is a stiflingly narrow one. Section 401 of the Tariff and Customs Code establishes
general standards with which the exercise of the authority delegated by that provision to the
President must be consistent: that authority must be exercised in "the interest of national
economy, general welfare and/or national security." Petitioner, however, insists that the
"protection of local industries" is the only permissible objective that can be secured by the
exercise of that delegated authority, and that therefore "protection of local industries" is the
sum total or the alpha and the omega of "the national economy, general welfare and/or national
security." We find it extremely difficult to take seriously such a confined and closed view of the
legislative standards and policies summed up in Section 401. We believe, for instance, that the
protection of consumers, who after all constitute the very great bulk of our population, is at the
very least as important a dimension of "the national economy, general welfare and national
security" as the protection of local industries. And so customs duties may be reduced or even
removed precisely for the purpose of protecting consumers from the high prices and shoddy
quality and inefficient service that tariff-protected and subsidized local manufacturers may
otherwise impose upon the community.
It seems also important to note that tariff rates are commonly established and the
corresponding customs duties levied and collected upon articles and goods which are not found
at all and not produced in the Philippines. The Tariff and Customs Code is replete with such
articles and commodities: among the more interesting examples are ivory (Chapter 5,
5.10); castoreum or musk taken from the beaver (Chapter 5, 5.14); Olives (Chapter 7,
Notes); truffles or European fungi growing under the soil on tree roots (Chapter 7,
Notes); dates (Chapter 8, 8.01); figs (Chapter 8, 8.03); caviar (Chapter 16,
16.01); aircraft (Chapter 88, 88.0l); special diagnostic instruments and apparatus for human
medicine and surgery (Chapter 90, Notes); X-ray generators; X-ray tubes;
X-ray screens, etc. (Chapter 90, 90.20); etc. In such cases, customs duties may be seen to be
imposed either for revenue purposes purely or perhaps, in certain cases, to discourage any
importation of the items involved. In either case, it is clear that customs duties are levied and
imposed entirely apart from whether or not there are any competing local industries to protect.
Accordingly, we believe and so hold that Executive Orders Nos. 475 and 478 which may be
conceded to be substantially moved by the desire to generate additional public revenues, are
not, for that reason alone, either constitutionally flawed, or legally infirm under Section 401 of
the Tariff and Customs Code. Petitioner has not successfully overcome the presumptions of
constitutionality and legality to which those Executive Orders are entitled. 7
The conclusion we have reached above renders it unnecessary to deal with petitioner's
additional contention that, should Executive Orders Nos. 475 and 478 be declared
unconstitutional and illegal, there should be a roll back of prices of petroleum products
equivalent to the "resulting excess money not be needed to adequately maintain the Oil Price
Stabilization Fund (OPSF)." 8
WHEREFORE, premises considered, the Petition for Certiorari, Prohibition and Mandamus is
hereby DISMISSED for lack of merit. Costs against petitioner.
SO ORDERED.
Narvasa, C.J., Gutierrez, Jr., Cruz, Paras, Padilla, Bidin, Griño-Aquino, Medialdea, Regalado,
Davide, Jr., Romero, Nocon and Bellosilo, JJ., concur.
Footnotes
1 This provision also existed in substantially identical terms in the 1973
Constitution (Article VIII, Section 17[2]), and the 1935 Constitution (Article
VI, Section 22[2]).
2 Petition, p. 11; Rollo, p. 12; underlining in the original.
3 Rollo, pp. 13-14.
4 Lutz v. Araneta, 98 Phil. 148 (1955); Republic v. Bacolod-Murcia Milling
Co., Inc., et al., 17 SCRA 632 (1966); Progressive Development Corp. v.
Quezon City, 172 SCRA 629 (1989).
5 U.S. v. Sischo, 262 Fed. 1001 (1919); Flint v. Stone Tracey Company, 220
US 107 (1910); Keller-Dorian Corp. v. Commissioner of Internal Revenue,
153 F 2d 1006 (1946). The close affinity of "customs duties" and "taxes"
was stressed almost a century ago in the following excerpt from Pollock v.
Farmers' Loan and Trust Company (158 US 601; 39 Law Ed. 1108 [1895]):
"Cooley, on Taxation, p. 3, says that the word 'duty' ordinarily 'means an
indirect tax, imposed on the importation, exportation, or consumption of
goods;' having 'a broader meaning than custom, which is a duty imposed
on imports or exports;' that 'the term impost also signifies any tax, tribute
or duty, but it is seldom applied to any but the indirect taxes. An excise
duty is an inland impost, levied upon articles of manufacture or sale, and
2) SECOND DIVISION
G.R. No. 183664, July 28, 2014
AIRLIFT ASIA CUSTOMS BROKERAGE, INC. AND ALLAN G.
BENEDICTO, Petitioners, v. COURT OF APPEALS, COMMISSIONER OF THE BUREAU OF
CUSTOMS, AND THE SECRETARY OF FINANCE,Respondents.
DECISION
BRION, J.:
Through a petition for certiorari under Rule 65 of the Rules of Court filed before the Court, the
petitioners – Airlift Asia Customs Brokerage, Inc. and Allan G. Benedicto – assail the decision
dated February 28, 20081 and the resolution dated May 27, 20082 of the Court of
Appeals (CA) in CA-G.R. CV No. 88291.3 These CA rulings reversed and set aside the decision
dated September 6, 20064 of the Regional Trial Court (RTC) of Manila, Branch 8, in Civil Case
No. 06-115029, which upheld the validity of Customs Administrative Order No. 3-
2006 (CAO 3-2006).
The Facts
CAO 3-2006 was issued by the then Commissioner of the Bureau of Customs (BOC) Napoleon L.
Morales, with the approval of then Secretary of Finance Margarito B. Teves, on March 2, 2006.
It covers the Rules and Regulations Governing the Accreditation of the Customs Brokers
Transacting with the BOC and essentially requires the accreditation by the BOC of customs
brokers who intend to practice before the BOC.
Part I of CAO 3-2006 defines accreditation as “the process for registration and/or listing of
customs brokers desiring to engage in customs brokers practice.”5 Accordingly, the accreditation
process is included in the issuance’s definition of a “custom broker”:chanroblesvirtuallawlibrary
2.1. “Customs Broker” refers to any bona fide holder of a valid Certificate of
Registration/Personal Identification Card issued by the Professional Regulatory Board and the
Professional Regulatory Commission, who is accredited to practice in the Bureau of
Customs. [emphasis supplied]
Thus, CAO 3-2006 requires “customs brokers desiring to practice their profession at
the BOC [to] apply for accreditation and [to] obtain a Certificate of Accreditation
before they may engage in customs brokerage practice.”6 Once accredited, customs
brokers are entitled to practice their profession in any port of entry in the Philippines.7
The petitioners assailed the validity of CAO 3-2006 through an action for declaratory relief
before the Regional Trial Court of Manila, Branch 8.8 They primarily claimed that CAO 3-2006
was issued without authority, contravenes Republic Act No. 9280 (RA 9280) or the Customs
Brokers Act of 2004, and violates their right to practice the customs broker profession.
The RTC upheld the petitioners’ contentions and nullified CAO 3-2006. It found that
9
the BOC Commissioner had no authority to issue rules governing the practice of the customs
brokerage profession.10 This power, initially lodged with the Commissioner of the Civil Service
under Section 3409 of the Tariff and Customs Code of the Philippines (TCCP), had been
transferred upon the passage of RA 9280 to the Professional Regulatory Board for Customs
Brokers (PRBCB), which is under the supervision and administrative control of the Professional
Regulation Commission (PRC).11
The trial court also held that the required accreditation amounted to a licensing requirement
prohibited under Section 19 of RA No. 9280. This provision states that customs brokers who
have been issued certificates of registration by the PRBCB shall be allowed to practice the
profession in any collection district without the need of securing another license from the BOC.
By requiring accreditation, CAO 3-2006 imposed an additional qualification not found in the
law.12
On appeal, the CA reversed the RTC ruling finding its construction of CAO 3-2006 rigid and
crippling on the BOC’s efforts to ensure efficient customs administration and collection of taxes
and duties. Although the accreditation requirement was an added burden to customs brokers, it
nevertheless bore a reasonable connection to the BOC’s aim to ensure accountability and
integrity in the transactions involving customs duties and tariff laws.13 Accordingly, the CA
reversed the RTC ruling and declared CAO 3-2006 valid. It also denied the petitioners’
motion for reconsideration.
The petitioners assail the CA rulings through the present certiorari petition with the Court.
The Court’s Ruling
The Court finds the petition meritorious.
RA No. 9280 expressly repealed
Sections 3401 to 3409 of the TCCP
and transferred the supervision and
regulation of the customs brokerage
profession from the Board of
Examiners to the PRBCB.
Prior to the passage of RA 9280, the TCCP (specifically, Sections 3401 to 3409 thereof)
governed the entry, regulation, and supervision of the customs broker profession.
Sections 3401 and 3402 of the TCCP required all applicants for customs brokers’ certificates to
pass a written examination given by the Board of Examiners for Customs Brokers14 under the
supervision of the Civil Service Commission (CSC).15 The Board of Examiners was composed of
the BOC Commissioner as ex-officio chairman, the Tariff Commissioner, and three other
members appointed by the President.16 An examinee who passes the exam would be issued a
certificate as customs broker signed by the members of the Board of Examiners and the Civil
Service Commissioner. If the certified customs broker would like to establish a customs
brokerage business in any port in the Philippines, he/she must secure an annual license from
the Collector of Customs of the port concerned.17
A complaint for suspension or revocation of the custom broker’s certificate is filed with the
Board of Examiners, which conducts the investigation and submits its findings and
recommendations with the Civil Service Commissioner who makes the final decision. If the
charge involves smuggling, the BOC Commissioner may likewise revoke his/her license.18
Considering the BOC Commissioner’s functions as ex-officio Chairman of the Board of
Examiners, the TCCP has effectively allowed him to exercise control over the customs broker
profession. The enactment of RA 9280, however, brought about significant changes.
Section 39 of RA 9280 expressly repealed the TCCP provisions (Section 3401 to
3409) on the customs brokers profession. Section 39 of RA 9280 further declared that “all
laws…and parts thereof which are inconsistent with [RA 9280] are [deemed] modified,
suspended, or repealed accordingly.”
In lieu of the Board of Examiners, RA 9280 created the PRBCB19 whose members are appointed
by the President from a list of recommendees submitted by the PRC which has supervisory and
administrative control over the PRBCB. Significantly, RA 9280 excluded the BOC
Commissioner as member of the PRBCB. The exclusion of the BOC Commissioner as a
member of the PRBCB evinces the legislative intent to remove any power he previously
exercised over custom brokers, and to transfer the supervision, control and regulation of this
profession to the PRBCB. This intent is likewise apparent from a reading of the powers granted
to the PRBCB:chanroblesvirtuallawlibrary
Section 7. Powers and Functions of the Board. – x x x
(b) Supervise and regulate the licensure, registration, and practice of customs
brokers profession;
xxxx
(e) Register successful examinees in the licensure examination and issue the corresponding
Certificate of Registration and Professional Identification Card;
xxxx
(g) Look into the conditions affecting the practice of customs brokerage, adopt measures for
the enhancement of the profession and the maintenance of high professional,
technical, and ethical standards, and conduct ocular inspection of places where customs
brokers practice their profession; [emphasis supplied]
By conferring these powers on the PRBCB, the declared policy of RA 9280 to professionalize the
practice of the customs broker profession is executed and fulfilled.20
The assailed CA decision, however, declared that the passage of RA 9280 did not divest the BOC
Commissioner of his authority over customs brokers. The BOC Commissioner retains the
general power “to regulate the activities of licensed customs brokers insofar as the enforcement
of tariff laws and prevention of smuggling and other illegal schemes to defraud the government
of lawful revenues.”21 It adds that “[t]o strip the BOC [Commissioner] of any disciplinary and
supervisory authority over license customs brokers… would not only cripple the [BOC’s]
intensified drive to combat smuggling and derail the all-out program…to increase collection
targets.”22
Although we cannot deny that the BOC Commissioner has the mandate to enforce tariff laws
and prevent smuggling, these powers do not necessarily include the power to regulate and
supervise the customs broker profession through the issuance of CAO 3-2006.
The BOC Commissioner’s power under Section 608 of the TCCP is a general grant of power to
promulgate rules and regulations necessary to enforce the provisions of the TCCP. Under the
rules of statutory construction, this general rule-making power gives way to the specific grant of
power to promulgate rules and regulations on the practice of customs brokers profession to the
CSC Commissioner under Section 3409 of the TCCP.23 Indeed, in the exercise of this specific
power, the Board of Examiners (of which the BOC Commissioner serves as ex-officio chairman)
was to perform only a recommendatory role. With the repeal of Section 3409 of the TCCP by
RA 9280, this specific rule-making power was transferred to the PRBCB to complement its
supervisory and regulatory powers over customs brokers. Section 37 of RA 9280
provides:chanroblesvirtuallawlibrary
SEC. 37. Implementing Rules and Regulations. – The [PRBCB], subject to the approval by the
Commission, in coordination with the accredited professional organization, shall issue and
promulgate the rules and regulations, including the Code of Ethics for customs broker profession
needed to implement the provision of this Act.
The BOC, like the Bureau of Internal Revenue (BIR), performs a critical role in government
revenue collection. The integrity and efficiency of transactions before both these agencies is
important, and all persons dealing with them must strictly adhere to their respective rules and
regulations. The similarity in the functions and concerns of the BOC and the BIR, however, does
not support a grant of power to accredit customs brokers to the BOC Commissioner. Unlike the
BOC Commissioner whose power over customs brokers was – at the very least – implied and
indirect, the BIR Commissioner was given express and specific powers to accredit and register
tax agents under Section 6(G) of the National Internal Revenue Code
(NIRC):chanroblesvirtuallawlibrary
SEC. 6. Power of the Commissioner to Make assessments and Prescribe additional
Requirements for Tax Administration and Enforcement. – x x x
(G) Authority to Accredit and Register Tax Agents. - The Commissioner shall accredit and
register, based on their professional competence, integrity and moral fitness, individuals and
general professional partnerships and their representatives who prepare and file tax returns,
statements, reports, protests, and other papers with or who appear before, the Bureau for
taxpayers. x x x
CAO 3-2006 amounts to a licensing
requirement that restricts the practice
of profession of customs brokers and is
prohibited by RA 9280
Attempts to uphold the validity of CAO 3-2006 were made by arguing that CAO 3-2006 intends
to regulate only the practice before the BOC, which is claimed to be one aspect of the multi-
faceted brokerage profession. The accreditation requirement being limited only to a particular
facet of the practice of the profession, CAO 3-2006 purportedly does not preclude licensed
customs brokers from pursuing other areas of practice even without having been accredited by
the BOC.
We find this view misplaced for several reasons.
The practice of customs brokers admittedly involves a variety of activities as enumerated in
Section 6 of RA 9280:chanroblesvirtuallawlibrary
SEC. 6. Scope of the Practice of Customs Brokers. – Customs Broker Profession involves services
consisting of consultation, preparation of customs requisite document for imports and exports,
declaration of customs duties and taxes, preparation signing, filing, lodging and processing of
import and export entries; representing importers and exporters before any government agency
and private entities in cases related to valuation and classification of imported articles and
rendering of other professional services in matters relating to customs and tariff laws its
procedures and practices.
A customs brokers and shall be considered in the practices of the profession if the nature and
character of his/her employment in private enterprises requires professional knowledge in the
field of customs and tariff administration. He/She is also deemed in the practice of custom
Broker profession if he/she teaches customs and tariff administration subjects in any university,
college or school duly recognized by the government.

Notably, with the exception of consulting with clients, and teaching tariff and customs
administration, most of the above-enumerated activities involve dealing with the BOC. In other
words, a large part of a custom brokers’ work involves practice before the BOC, and
CAO 3-2006 practically compels all customs brokers – already certified by the PRC –
to comply with the accreditation requirement for them to practice their profession.
This is contrary to the terms of Section 19 of RA 9280, which provides that a customs broker
“shall be allowed to practice the profession in any collection district without the
need of securing another license from the [BOC].”
We are unconvinced by the BOC Commissioner’s claim that CAO 3-2006’s accreditation
requirement is not a form of license. A license is a “permission to do a particular thing, to
exercise a certain privilege or to carry on a particular business or to pursue a certain
occupation.”24 Since it is only by complying with CAO 3-2006 that a customs broker can practice
his profession before the BOC, the accreditation takes the form of a licensing requirement
proscribed by the law. It amounts to an additional burden on PRC-certified customs brokers and
curtails their right to practice their profession. Under RA 9280, a successful examinee of the
customs brokers examinations acquires a Certificate of Registration, which entitles him to
practice the profession as a customs broker with all the benefits and privileges
appurtenant thereto.25
Moreover, a reading of CAO 3-2006 does not appear to be restricted only to “practice before the
BOC.” Pars. 1 and 2, Part IV of CAO 3-2006 requires custom brokers to maintain complete
records covering their professional practice. Par. 11, Part IV of the same issuance governs the
custom broker’s role in advising clients. Although it may be argued that these duties/activities
have reasonable connection with practice before the BOC as to be within the scope of CAO 3-
2006, this reasoning only reinforces the position that the practice by the customs broker of his
profession is mainly tied with practice before the BOC.
WHEREFORE, we hereby GRANT the petition. The assailed Decision dated February 28, 2008
and Resolution dated May 27, 2009 of the Court of Appeals in CA-G.R. CV No. 88291
are REVERSED and SET ASIDE, and the Decision dated September 6, 2006 of the Regional
Trial Court of Manila, Branch 8, in Civil Case No. 06-115029 is REINSTATED. No costs.
SO ORDERED.
Carpio, (Chairperson), Del Castillo, Perez, and Perlas-Bernabe, JJ., concur.
Endnotes:
1
Rollo, pp. 83-110.
2
Id. at 111.
3
Penned by then Court of Appeals Justice Martin S. Villarama, Jr. (now Associate Justice of this
Court), with Associate Justices Noel G. Tijam and Sesinando E. Villon, concurring.
4
Rollo, pp. 61-82; penned by Presiding Judge Felixberto T. Olalia, Jr.
5
Part I – 3 Accreditation of Customs Brokers Required with the Bureau of Customs, CAO 3-
2006.
6
Id.
7
Part II – 4.2, CAO 3-2006.
8
Civil Case No. 06-115029.
9
Decision dated 6 September 2006.
10
Rollo, pp. 78-79.
11
Section 5, RA 9280.
12
Rollo, pp. 79-81.
13
Id. at 108.
14
SEC. 3401. Qualifications of Applicants for Customs Broker's Certificate. - All applicants for
customs broker's certificates shall pass a written examination for the purpose x x x
15
SEC. 3402. Examination by the Board of Examiners for Customs Brokers. - Examinations for
customs broker shall be given by the Board of Examiners for customs broker under the
supervision of the Civil Service Commission. Application for admission to such examination -shall
be filed with the Civil Service Commission x x x
16
SEC. 3403. The Board of Examiners. - The board of Examiners for Customs Brokers shall be
composed of the Commissioner of Customs, as ex-officio chairman, the Tariff Commissioner and
three (3) others members who shall be appointed by the President upon the recommendation of
the Commissioner of Civil Service. x x x.
17
SEC. 3406. Annual License Fee. - Any person who is a holder of a customs broker's certificate,
desiring to establish a customs brokerage business at any port in the Philippines shall apply for
an annual cense from the Collector of the port concerned x x x.
18
SEC. 3407. Issuance, Revocation and Suspension of Certificate. – x x x A complaint for the
suspension or revocation of the certificate of a customs broker shall be filed with the Board of
Examiners for Customs Brokers which shall investigate the case and shall submit its findings and
recommendations to the Commissioner of Civil Service and shall immediately furnish the
respondent customs broker with a copy of his decision.
Any person who files an entry or facilitates the processing or release of any shipment shall be
liable for smuggling if the ostensible owner, importer or consignee and/or the ostensible given
address of the owner, importer or consignee is fictitious and the shipment is found to be
unlawful. If the violator is a customs broker, his license shall be revoked by the Commissioner of
Customs.
19
SEC. 5. Creation and Composition of the Professional Regulatory Board for Customs Brokers. –
There is hereby created a Professional Regulatory Board for Customs Brokers, hereinafter
referred to as the Board, under the supervision and administrative control of the Professional
Regulation Commission, hereinafter referred to as the Commission, to be composed of a
chairman and two (2) members who shall be appointed by the President of the Philippines from
among the list of three (3) recommended for each position submitted by the commission from a
list of five (5) nominees for each position submitted by the accredited professional organization
of customs brokers. The new Board shall be constituted within three (3) months from the
effectivity of this Act.
3) THIRD DIVISION
G.R. No. L-47884 July 30, 1990
COMMISSIONER OF CUSTOMS, petitioner,
vs.
COURT OF TAX APPEALS and EVERETT STEAMSHIP CORPORATION (As Owner of the
SS "Fernando Everett"), respondents.
Bito, Misa & Lozada for private respondent.
RESOLUTION
FELICIANO, J.:
The "Fernando Everett", a vessel owned by private respondent Everett Steamship Corporation
arrived on 23 April 1969 in the Port of Manila and there discharged a shipment of fifty (50) bales
of assorted textile remnants. The gross weight of the shipment as declared in the vessel's
Manifest and in Bill of Lading No. N-20-M was 17,500 pounds. Upon examination and appraisal
by Customs authorities, the actual weight of the shipment was found to be 62,869 pounds, or
45,369 pounds more than the declared weight.
In a letter dated 9 July 1969, the Chief of the Law Division of the Bureau of Customs informed
the Everett Steamship Corporation of the discrepancy between the actual weight and the
declared weight of the shipment of textile remnants, said discrepancy being more than twenty
percent (20%) of the declared weight, and required the shipowner to explain the discrepancy in
writing within five (5) days from receipt of the letter and to show cause why no administrative
fine should be imposed upon the "Fernando Everett" for violation of Section 2523 of the Tariff
and Customs Code. The shipowner replied that the "Fernando Everett" was not liable for
violation of the Tariff and Customs Code because the particulars of the subject shipment,
including the weight thereof, were supplied by the shipper.
Obviously dissatisfied with the shipowner's explanation, the Bureau of Customs initiated an
administrative proceeding (Administrative Case No. 493-49) against the "Fernando Everett".
Upon termination of this proceeding, the Collector of Customs rendered a decision on 8
November 1974 finding the "Fernando Everett" or its owner liable for a fine of P22,617.00
representing fifteen percent (15%) of the total value of the shipment, for violation of Section
2523 of the Tariff and Customs Code. Section 2523 reads as follows:
Sec. 2523. Discrepancy between actual & declared weight of manifested
article. — If the gross weight of any article or package described in the
manifest exceed by more than twenty per centum the gross weight as
declared in the manifest or bill of lading thereof, and the Collector shall be
of the opinion that such discrepancy was due to the carelessness or
incompetency of the master or pilot in command, owner or employee of the
vessel or aircraft, a fine of not more than fifteen per centum of the value of
the package or article in respect to which the discrepancy exists, may be
imposed upon the importing vessel or aircraft. (Emphasis supplied)
On appeal by the shipowner, the Commissioner of Customs affirmed in toto the decision of the
Collector of Customs.
The Everett Steamship Corporation then went to the Court of Tax Appeals. In a decision dated
23 January 1978, the Court of Tax Appeals agreed with the Commissioner of Customs that the
shipowner had violated Section 2523 of the Tariff and Customs Code, but reduced the fine from
P22,617.00 to P5,000.00.
The petitioner Commissioner of Customs is now before us on a Petition for Review
on certiorari asking for modification of the decision of the Court of Tax Appeals and for
reinstatement of the fine of P22,617.00 imposed by the Commissioner of Customs against
private respondent shipowner. Examination of the record reveals that three (3) issues are raised
in this Petition:
(a) Whether or not there is a duty on the part of the captain of a vessel or
of a shipowner to determine the true weight of cargo to be loaded on board
the vessel;
(b) Whether or not the discrepancy in the instant case between the actual
and the declared weight of the shipment involved was due to the
carelessness or incompetency of the captain of the vessel; and
(c) What is the proper scope of the authority of the Commissioner of
Customs to determine the amount of the fine imposable under Section 2523
of the Tariff and Customs Code.
In respect of the first issue, private respondent shipowner argues that Articles 612 and 632 of
the Code of Commerce specifying the duties of the captain, the second mate and chief engineer
of a vessel, do not require the checking of the actual weight of the cargo loaded on board the
vessel. The shipowner, moreover, insists that the Tariff and Customs Code similarly does not
impose such a duty upon the captain of the vessel or the shipowner.
These arguments do not persuade; they have already been considered and rejected by this
Court. In Commissioner of Customs v. Court of Tax Appeals and Delgado Shipping
Agencies, 1 this Court held that a duty of verifying the correct weight of a cargo shipment is
imposed by Section 2523 of the Tariff and Customs Code itself:
5. Finally, contrary to respondent's contention, the vessel's master, owner
or employee are duty bound under the cited codal section under pain of the
penalty of fine therein provided to check and verify the correct weight of
the cargo or shipment so as to prevent a misdeclaration or underdeclaration
of weight. The vessel master's discharge of such obligation imposed by law
to properly determine and verify the weight of cargos carried by it is
certaintly pertinent to and important for the proper assessment of the
collectible custom duties and taxes, and is not a burdensome task in the
present era of containerized cargos. . . . 2 (Emphasis supplied)
In Commissioner of Customs v. Delgado shipping Agency and the Court of Tax Appeals, 3 the
Court reiterated very recently that a vessel's master, owner or employees are indeed burdened
with the duty "to check and verify the correct weight of its cargo.
Turning to the second issue, the Everett Steamship Corporation contends that for a violation of
Section 2523 to arise, two (2) elements must occur, namely: (a) that the actual gross weight of
any article or package must exceed the declared gross weight by more than twenty percent
(20%) of the stated weight; and (b) the discrepancy must be affirmatively shown to have been
due to the carelessness or incompetency of the master, owner or employees of the vessel. 4
It appears to the Court that private respondent shipowner has selectively read Section 2523.
What Section 2523 does provide is this: "[A]nd the Collector shall be of the opinion that such
discrepancy was due to the carelessness or incompetency of the master or pilot in command,
owner or employee of the vessel or aircraft." A difference of more than twenty percent (20%)
between the actual gross weight of a shipment and its declared gross weight is not a de
minimis matter; on the contrary, it is sufficiently substantial so as reasonably to give rise to a
presumption juris tantum that some negligence or failure to exercise some technical duty had
occurred. The actual practice of the Commissioner of Customs in cases of this kind may be seen
to be based upon such presumption; where a discrepancy of more than twenty percent (20%)
of the stated weight is shown, the Collector of Customs requires, as noted earlier, the vessel, its
captain or owner to show cause why an administrative fine should not be imposed upon the
offending vessel under Section 2523 of the Tariff and Customs Code. The greater the
discrepancy between declared gross weight and actual gross weight of a shipment, the stronger
that presumption becomes until at some point it is well-nigh conclusive. In the case of the
"Fernando Everett", the discrepancy amounted to 259 per centum of the declared gross weight.
Given that level of discrepancy, there must have been either gross negligence amounting to bad
faith, or obvious incompetence, on the part of the captain of the vessel or the shipowner or its
employees in failing to detect the gross underdeclaration of the weight of the shipment. In the
situation at hand, it is incumbent upon the captain of the vessel or the shipowner to show the
presence of some adequate exculpatory circumstance, rather than for the Customs authority to
prove affirmatively that there was carelessness or professional or technical ineptness on the part
of the ship captain or the shipowner or its employees. In the case of the "Fernando Everett", no
exculpatory circumstances were shown. Private respondent shipowner sought to shift the blame
to the shipper who had supplied the declared weight of the shipment. To permit the shipowner
to absolve itself of responsibility on that basis, would be effectively to render Section 2523 quite
inutile. 5
Addressing the third issue relating to the authority of the Commissioner of Customs to
determine the amount of fine imposable under Section 2523, the Court would stress that that
authority is lodged in the Collector of Customs and the Commissioner of Customs and not either
in the Court of Tax Appeals or this Court. The Commissioner of Customs required the Everett
Steamship Corporation to pay the maximum imposable fine amounting to fifteen percent (15%)
of the value of the shipment involved — i.e., P22,617.00. The public respondent Court of Tax
Appeals was not warranted in substituting its judgment for that of the Commissioner of Customs
as to the amount of the fine properly imposable in the circumstances of this case, unless, of
course, a grave abuse of discretion on the part of the Commissioner of Customs had been
shown. In the instant case, no such grave abuse of discretion — no merely arbitrary and
capricious exercise of power — on the part of the Commissioner of Customs was shown. The
Court of Tax Appeals simply felt that the fifteen percent (15%) fine was "harsh and
unreasonable" stating that this was the first offense of the "Fernando Everett" under Section
2523. But, no mitigating circumstances were pleaded by the Everett Steamship Corporation that
would rationally have justified the Commissioner of Customs in imposing a fine less than the
maximum statutory fine.
In reaching this conclusion, we have taken particular account of the vitally important nature of
the public policy which is sought to be promoted by Section 2523 of the Tariff and Customs
Code. That public policy, which should be reinforced and strengthened rather than eroded and
enfeebled, was underscored by the Court in Commissioner of Customs v. Court of Tax Appeals
and Delgado Shipping Agencies in the following manner:
3. The clear purpose of the codal provision requiring vessels to declare the
correct weight of their cargo is to curb smuggling due to such
underdeclarations. Hence, imposing the maximum fine on vessels which
grossly fail to comply with the obligation to declare the true weight of their
cargo promotes the spirit and purpose of the law, since imposing a
minimum fine would only embolden would be smugglers and foster gross
negligence on the part of the master of the vessel as in this case in
checking the true weight of the cargo. Respondents' claim that there could
be no evasion of duties here since textile remnants are imposed duties ad
valorem or on the basis of the dutiable value of the merchandise
irrespective of the weight is untenable, since an underdeclaration of the
weight of the remnants by more than 400% would make it much easier to
underdeclare the dutiable value of the remnants. 6(Emphasis supplied)
WHEREFORE, the Court Resolved to GRANT due course to the Petition for Review and to
MODIFY the Decision of the Court of Tax Appeals dated 23 January 1978 by reinstating the
administrative fine of P22,617.00 imposed by the petitioner Commissioner of Customs upon the
private respondent shipowner. No pronouncement as to costs.
Fernan, (C.J.,) Gutierrez, Jr., Bidin and Cortes, JJ., concur.
Footnotes
1 91 SCRA 258 (1979).
2 91 SCRA at 262-263.
3 G.R. No. L-49298, 26 April 1990.
4 Comment of Private Respondent, Rollo, p. 80.
5 Under Section 3 (3) (b) of the Carriage of Goods by Sea Act (Public Act
No. 521, 74th Congress of the United States; made applicable to the
Philippines by Commonwealth Act No. 65), the shipowner issues to the
shipper a bill of lading showing, among other things, "either the number of
packages or pieces, or the quantity or weight, as the case may be, as
furnished in writing by the shipper." Under Section 3 (5), Id., the shipper is
deemed to have guaranteed to the shipowner the accuracy at the time of
shipment of the weight (and other details) of such shipment as furnished by
the shipper and the shipper is required to indemnify the carrier against loss,
damages and expenses arising from inaccuracies in such particulars. The
provision, however, goes on to state that: "the right of the carrier to such
indemnify shall in no way limit his responsibility and liability under the
contract of carriage to any person other than the shipper."
6 91 SCRA 262. See also Commissioner of Customs v. Delgado Shipping
Agency and Court of Tax Appeals, supra.
5) SECOND DIVISION
G.R. No. 115218 September 18, 1995
ANGEL O. RODRIGUEZ, EULOGIO O. RODRIGUEZ, JOSE O. RODRIGUEZ, and TOMAS
NGO, petitioners,
vs.
THE HON. COURT OF APPEALS and THE PEOPLE OF THE PHILIPPINES, respondents.
PUNO, J.:
This is a petition to review the Decision dated February 28, 1990 and the Resolution dated
November 9, 1993 of respondent Court of Appeals in CA-G.R. CR No. 06220.
In an information dated October 11, 1985, petitioners Angel O. Rodriguez, Eulogio O. Rodriguez,
Jose O. Rodriguez and Tomas Ngo, together with Manuel S. Pena and Alfredo Fiesta were
charged with a violation of Section 3602 in relation to Section 3601 of the Tariff and Customs
Code of the Philippines committed as follows:
That on or about September 12, 1983, in the City of Manila, Philippines, the
said accused, conspiring and confederating together and helping one
another with evident intent to defraud the Government of the Republic of
the Philippines of the legitimate taxes and duties accruing to it from
merchandise imported into this country, did then and there wilfully and
unlawfully, by means of fraudulent practice, that is, by presenting a fake
and false Special Permit to Transfer (MICP) No. 01703 with Serial No.
150387 covering a 40-footer container (BENU-2899509) containing 100%
cotton dyed fabric consigned to Inter-Fashion, Inc., attempt and/or made
an attempt to make an entry of said articles in the manner above set forth,
they knowing fully well that the said goods have not been properly declared
and the duties thereon have not been paid to the corresponding proper
authorities, in violation of said Section 3602 in relation to Section 3601 of
the Tariff and Customs Code of the Philippines.1
Accused Manuel S. Pena died before the information was filed in court while accused Alfredo
Fiesta was at large. Only Tomas Ngo and the brothers Angel, Eulogio and Jose Rodriguez
appeared and were tried before the trial court.
The prosecution established that on September 9, 1983, the vessel S/S Neptune Agate arrived
at the Manila International Port from Hongkong carrying, among others, one 40-foot container
van containing 29,000 kilos consisting of 44,885,015 yards of 100% cotton-dyed fabric. The
fabric had a home consumption value of U.S. $93,809.68 and a dutiable value of P1,032,047.10
and was consigned to "Philippine Inter-Fashion, Inc., 5th Floor, Vernida I Condominium,
Amorsolo St., Legaspi Village, Makati, Metro Manila," a domestic corporation engaged in the
manufacture of garments for export.2
Meanwhile, one Ernesto M. Ereno, Import-Export Manager of the EME Customs Brokerage, Inc.,
filed with the Bureau of Customs Special Permit to Transfer No. 1703 with Serial No.
1503873 seeking to transfer the said container van from the Manila International Container Port
to Customs Bonded Warehouse No. 725 of the Philippine Inter-Fashion, Inc. at Bagong Bayan,
Dasmariñas, Cavite. The permit appeared to have been approved and signed by the proper
Customs authorities on the basis of which a gate pass was issued by the Customs wharfinger for
the release of said container. At 5:00 P.M. of September 12, 1983, the container was loaded on
a truck and in accordance with Customs rules, escorted by Customs guard accused Alfredo
Fiesta, until its receipt at the Customs Bonded Warehouse at Dasmariñas, Cavite.4 Once outside
the Customs zone, the truck did not proceed to Cavite but went to Quezon City to the White
Plains Subdivision thereat.
The truck entered the said subdivision towards the direction of Interior 56 Queensville
Compound, accused Manuel Pena's residence. The vehicle was maneuvering inside when it hit
the perimeter wall at the other end of the subdivision, causing it to stop. Forthwith, Manuel
Pena informed his son-in-law, Eulogio Rodriguez, who lived in the same compound, to remove
the cargo from the stalled vehicle and transfer the same to their compound. Eulogio acceded to
this request and finished transferring the cargo after midnight.5
The following morning, September 13, 1983, Eulogio called his brothers, Angel and Jose
Rodriguez, to help him transport the textile from White Plains to Paranaque, Metro Manila. They
came over and were able to deliver some eighty (80) rolls of the textile to No. 25 9th Street,
United Paranaque Subdivision, the residence of their co-petitioner Tomas Ngo. They made
another delivery in the afternoon of the same day.6
The next day, September 13, 1983, at around 1:30 P.M., Jose and Angel were on their way to
make a third delivery when they were intercepted by agents of the Customs Intelligence and
Investigation Division.
Earlier, Colonel Guillermo Parayno, Jr., then Chief of the Customs Intelligence and Investigation
Division, noticed that the container van consigned to the Philippine Inter-Fashion, Inc., was
missing from the container yard. On inquiry, the President of the said company denied ordering
any shipment from abroad and claimed that they were not expecting any such cargo.
Immediately, Colonel Parayno formed teams to trace the movement of the container and finally
located it at the White Plains Subdivision in Quezon City.
One team of agents was on its way to the said subdivision when their attention was called to
the delivery van along White Plains Avenue. The team chased the van and ordered the driver to
stop. The van stopped and the agents found the two petitioners, Angel and Jose Rodriguez, one
driver and one helper. They opened the door of the van and found it full of textile which,
according to the driver and helper, came from the residence of Manuel Pena at the White Plains
Subdivision. They disclosed that they were taking their cargo to No. 25 9th Street, Paranaque.7
The team proceeded to Manuel Pena 's residence where Colonel Parayno informed Pena that
they were going to search his house for the textile. Pena denied possessing or keeping any
textile and invited Colonel Parayno and his men inside his house. The Customs agents looked
around and found behind Pena's house a structure that appeared to be a stock room.8 They
opened the room and found nothing. They noticed another room behind, opened it and found it
full of the same textile as those they saw in the delivery van.9
Mr. Pena informed the agents that the stock room belonged to Eulogio who also owned the
house behind it. Pena likewise claimed that the textile belonged to a certain "Rolly" whose truck
happened to hit the subdivision wall near his (Mr. Pena's) house and that the textile was being
stored in his compound until delivery to its final destination at Paranaque. 10
The next day, September 15, 1983, the Customs agents were armed with a search warrant and
went to Tomas Ngo's residence in Paranaque. They discovered in his bodega several rolls of the
same textile they found in the delivery van and in Pena's compound. 11
The agents seized all the textile they found in the delivery van, in Pena's compound and in
Tomas Ngo's residence. They conducted an investigation and discovered that the container van
did not belong to the consignee and that it was released from the container port by virtue of a
Special Permit to Transfer in which all signatures of the approving Customs personnel, except
for one, were forged.
For their defense, the Rodriguez brothers sought to establish the fact that the textile belonged
to one "Rolly" who asked Manuel Pena for help to transport it after his truck met an accident
near Mr. Pena's residence. Eulogio claimed that Mr. Pena in turn asked him to transfer the
textile from the stalled truck and keep them safe in his servants' quarters. 12 Rolly returned the
following morning and again requested him, through Manuel Pena, to transport the textile to
Paranaque for a consideration of P4,000.00. Eulogio agreed because his father-in-law must have
wanted him to earn extra money. 13 He however was not feeling very well, so he called up his
brother, Jose, and requested him to deliver the cargo to Paranaque. 14 Their other brother,
Angel, happened to be in Jose's house and so they proceeded to White Plains and with some of
their helpers loaded some textile into one of Manuel Pena's delivery vans. They followed Rolly,
who was in his car, to the residence of Tomas Ngo in Paranaque. Tomas Ngo met them and the
cargo was unloaded in his house. The brother and their helpers returned to White Plains without
Rolly and made another delivery in the afternoon. They were on their way to make a third
delivery the following day when they were intercepted by the Customs agents.
Tomas Ngo, for his defense, claimed that he merely purchased the textile from Rolly who
offered 30,000 yards to him in Divisoria on September 12, 1983. Rolly allegedly assured him
that he got the textile from an auction sale at the Bureau of Customs and that all customs duties
and taxes thereon had already been paid. 15
The trial court rendered a decision on September 28, 1988 finding the accused guilty of the
crime as charged and sentencing them as follows:
WHEREFORE, the Court finds the accused Eulogio O. Rodriguez, Angel
Rodriguez Jose Rodriguez and Tomas Ngo guilty beyond reasonable doubt
of a violation of Sections 3601 and 3602 of the Tariff and Customs Code of
the Philippines and accordingly sentences each of them to pay a fine of
P8,000.00 and to suffer imprisonment for an indeterminate period of eight
(8) years and one (1) day, as minimum, to twelve (12) years, as maximum,
and to pay proportionate costs, de oficio.
The court dismisses the case as against accused Manuel S. Pena who had
died even before the filing of the information.
The case as against accused Alfredo Fiesta is ordered archived until his
arrest.
SO ORDERED. 16
On appeal, the decision was affirmed by the Court of Appeals on February 28, 1990 17
and in a
resolution dated November 9, 1993, denying reconsideration. 18
Hence, this petition where it is contended:
I
THE LOWER COURT ERRED IN CONVICTING ACCUSED-APPELLANTS
EULOGIO O. RODRIGUEZ, ANGEL O. RODRIGUEZ AND JOSE O.
RODRIGUEZ, BECAUSE THEY WERE MERELY INNOCENT SUBSTITUTE
TRUCKERS OF THE TEXTILE GOODS.
II
THE LOWER COURT ERRED IN CONVICTING THE ACCUSED-APPELLANT
TOMAS NGO, BECAUSE HE WAS MERELY AN INNOCENT PROSPECTIVE
BUYER OF THE TEXTILE GOODS, WHICH PURCHASE DID NOT EVEN
MATERIALIZE.
III
THE LOWER COURT ERRED IN CONVICTING THE ACCUSED OF THE CRIME
CHARGED, BECAUSE THE ALLEGED FAKE SPECIAL PERMIT TO TRANSFER
APPEARED GENUINE.
Petitioners were charged in the information with a violation of Sections 3601 and 3602 of the
Tariff and Customs Code which provide:
Sec. 3601. Unlawful Importation. — Any person who shall fraudulently
import or bring into the Philippines, or assist in so doing, any article,
contrary to law, or shall receive, conceal, buy, sell, or in any manner
facilitate the transportation, concealment, or sale of such article after
importation, knowing the same to have been imported contrary to law, shall
be guilty of smuggling and shall be punished with:
1. A fine of not less than fifty pesos nor more than two hundred pesos and
imprisonment of not less than five days nor more than twenty days, if the
appraised value, to be determined in the manner prescribed under this
Code, including duties and taxes, of the article unlawfully imported does not
exceed twenty-five pesos;
2. A fine of not less than eight hundred pesos nor more than five thousand
pesos and imprisonment of not less than six months and one day nor more
than four years, if the appraised value, to be determined in the manner
prescribed under this Code, including duties and taxes, of the article
unlawfully imported exceeds twenty-five pesos but does not exceed fifty
thousand pesos;
3. A fine of not less than six thousand pesos nor more than eight thousand
pesos and imprisonment of not less than five years and one day nor more
than eight years, if the appraised value, to be determined in the manner
prescribed under this Code, including duties and taxes, of the article
 unlawfully imported is more than fifty thousand pesos but does not exceed
one hundred fifty thousand pesos.
4. A fine of not less than eight thousand pesos nor more than ten thousand
pesos and imprisonment of not less than eight years and one day nor more
than twelve years, if the appraised value, to be determined in the manner
prescribed under this Code, including duties and taxes, of the article
unlawfully imported exceeds one hundred fifty thousand pesos.
5. The penalty of prision mayor shall be imposed when the crime of serious
physical injuries shall have been committed and the penalty of reclusion
perpetua to death shall be imposed when the crime of homicide shall have
been committed by reason or on the occasion of the unlawful importation.
In applying the above scale of penalties, if the offender is an alien and the
prescribed penalty is not death, he shall be deported after serving the
sentence without further proceedings for deportation; if the offender is a
government official or employee, the penalty shall be the maximum as
hereinabove prescribed and the offender shall suffer an additional penalty
of perpetual disqualification from public office, to vote and to participate in
any public election.
When, upon trial for violation of this section the defendant is shown to have
had possession of the article in question, possession shall be deemed
sufficient evidence to authorize conviction unless the defendant shall
explain the possession to the satisfaction of the court: Provided, however,
That payment of the tax due after apprehension shall not constitute a valid
defense in any prosecution under this section.
Sec. 3602. Various Fraudulent Practices Against Customs Revenue. — Any
person who makes or attempts to make any entry of imported or exported
article by means of any false or fraudulent invoice, declaration, affidavit,
letter, paper or by any means of any false statement, written or verbal, or
by any means of any false or fraudulent practice whatsoever, or knowingly
effects any entry of goods, wares or merchandise, at less than the true
weight or measures thereof or upon a classification as to quality or value, or
by the payment of less than the amount legally due, or knowingly and
wilfully files any false or fraudulent entry or claim for the payment of
drawback or refund of duties upon the exportation of merchandise; or
makes or files any affidavit, abstract, record, certificate or other document,
with a view to securing the payment to himself or others of any drawback,
allowance or refund of duties on the exportation of merchandise, greater
than that legally due thereon, or who shall be guilty of any wilful act or
omission, shall, for each offense be punished in accordance with the
penalties prescribed in the preceding section. (Emphasis supplied)
Under Section 3601 of the Tariff and Customs Code, smuggling is committed by any
person who: (1) fraudulently imports or brings into the Philippines or assists in
importing or bringing into the Philippines any article, contrary to law; or (2) receives,
conceals, buys, sells, or in any manner facilitates the transportation, concealment or
sale of such article after importation, knowing the same to have been imported
contrary to law. Importation begins when the carrying vessel or aircraft enters the
jurisdiction of the Philippines with intention to unload and is deemed terminated upon
payment of the duties, taxes and other charges due upon the articles and the legal
permit for withdrawal shall have been granted. If the articles are free of duties, taxes
and other charges, importation is terminated until the articles shall have legally left
the jurisdiction of the customs. 19
After importation, the act of facilitating the transportation, concealment or sale of the unlawfully
imported article must be with the knowledge that the article was smuggled. However, if upon
trial the defendant is found to have been in possession of such article, this shall be sufficient to
authorize conviction unless the defendant explains his possession to the satisfaction of the
court. 20
Section 3602 of the Code enumerates the various fraudulent practices against customs revenue
such as the entry of imported or exported articles by means of any false or fraudulent invoice,
statement or practice; the entry of goods at less than the true weight or measure; or the filing
of any false or fraudulent entry for the payment of drawback or refund of duties. The term
"entry" in Customs law has a triple meaning. It means (1) the documents filed at the Customs
house; (2) the submission and acceptance of the documents; and
(3) the procedure of passing goods through the Customs house. 21
In the instant case, the textile from the Manila International Container Port was passed through
the Customs house and released by means of the Special Permit to Transfer purportedly
accomplished and signed by the authorized Customs personnel. The permit form was genuine
but all the signatures thereon, except for one, were forged. The trial court found that the one
genuine signature of Deputy Collector of Customs Juan P. Calabig was affixed on the belief that
the permit had been regularly signed by the other authorized personnel. 22 The fraudulent entry
of the textile makes it fall under Section 3602 of the Tariff and Customs Code. The receipt,
concealment, sale, purchase or the facilitation thereof after the unlawful importation with the
knowledge that the textile is smuggled becomes punishable under Section 3601 of the Code.
Petitioners do not dispute the appellate court's finding that the textile was imported and that it
passed through the Customs house under fraudulent circumstances. 23 They, however, claim
that it erred in convicting them when, by its own finding, petitioners had no actual participation
in the release of said textile and the diversion of the container van to Quezon City. 24
While it is true that the evidence does not show their participation in the release of the
smuggled cargo, petitioners were actually found to have been in possession of the textile after
its release. Some of the textile materials were found in Eulogio's stock room and in Tomas
Ngo's bodega and the others in the delivery van where Jose and Angel were riding. Petitioners
have never disputed but in fact admitted their possession of the textile and as a result of this
admission, they are presumed to have been engaged in smuggling pursuant to the last
paragraph of Section 3601 of the Code. The burden of proof shifted to them. To rebut this
presumption, it is not enough for petitioners to claim good faith and lack of knowledge of the
unlawful source of textile. Petitioners should have presented evidence to support their claim and
satisfy the court of their non-complicity.
Petitioners failed to sufficiently explain how they came into possession of the smuggled textile.
They ascribe all their acts to Mr. Pena who has long since died and to Rolly who has since
disappeared, if he ever existed. The testimony of a witness as to what he heard other persons
say about certain facts in dispute is hearsay evidence and cannot be admitted. 25 Moreover,
petitioners' version of their participation is self-serving, strains the imagination and taxes our
credulity.
On the contrary, the evidence shows that the truck carrying the container van with the textile 4 TSN of April 25, 1986, pp. 13-15; TSN of November 26, 1986,
left the container port for Mr. Pena's residence at White Plains, Quezon City. The truck was pp. 16-17; Records, p. 250, Exhibit B.
allowed to enter the private subdivision because Mr. Pena was a registered homeowner and he
sought permission for it to go to his house. 26 Clearly, the truck and its cargo did not just
5 TSN of March 9, 1988, p. 10.
happen to pass through White Plains. The container was actually intended for delivery at Mr.
Pena's compound. Mr. Pena was said to have been engaged in the trucking business 27 but he
passed on the job transporting the cargo to Eulogio who in turn passed it on to his brothers 6 TSN of March 9, 1988, p. 49; TSN of April 13, 1988, p. 27; TSN
Jose and Angel. It is difficult to comprehend why the Rodriguez brothers went out of their way of May 13, 1988, p. 43.
to help Rolly whom they never knew when Mr. Pena provided the delivery van and Rolly himself
had some helpers to load and unload the cargo. The three brothers were businessmen. Eulogio 7 TSN of September 15, 1986, pp. 13-14.
and Angel were engaged in general merchandise and had their own stores at the Zaragosa
Shopping Center, Zaragosa Street, Tondo, Manila. 28 Eulogio said that Mr. Pena gave him the job
because he wanted him to earn extra money. This claim he made incredible by the fact that the 8 TSN of May 26, 1986, p. 63.
brothers were to transport the textile for a fee of P4,000.00. If they needed the extra money,
they never bothered to ask for it or any portion thereof from Rolly or Mr. Pena. Rolly did not 9 Id., pp. 63-64.
return to White Plains after the first delivery 29 but Jose and Angel continued to work and even
intended to finish the job without exerting any effort to ensure payment therefor.
10 TSN of July 28, 1986; pp. 3-4; Records, pp. 256-257, Exhibit
F.
Tomas Ngo's claim that he never knew of the textile's illegal origin cannot likewise be given
credence. Tomas Ngo testified that he asked Rolly if the taxes on the textile had been paid, and
that Rolly answered in the affirmative and in fact assured him that he would present the tax 11 TSN of September 15, 1986, pp. 14-15.
receipts later.30 After the first delivery, Rolly said that he needed the receipts to show the
authorities during the delivery. 31 And yet Tomas Ngo, who was engaged in the buy and sell 12 TSN of March 9; 1988, pp. 6-7, 9-10.
business of plastic materials and textile, never bothered to check or glance at these tax
receipts. 32 Rolly disappeared without leaving any receipts with Jose and Angel and neither did
the brothers ask for said receipts. 13 Id., p. 8.

Indeed, petitioners' claim of good faith and lack of knowledge of the origin of the textile cannot 14 Id., p. 11.
stand in the light of contrary evidence. As the lower courts well found, petitioners have
miserably failed to rebut the presumption that they were engaged in smuggling at the time they 15 TSN of May 13, 1988, p. 40.
were apprehended. Evidence, to be believed, must proceed not only from the mouth of a
credible witness but must be credible in itself as when it conforms to the common experience
16 Id., p. 270.
and observation of mankind. 33

17 Rollo, pp., 29-41.

IN VIEW WHEREOF, the petition is DENIED and the Decision dated February 28, 1990 and the
Resolution dated November 9, 1993 of the Court of Appeals in CA-G.R. CR No. 06220 are hereby
affirmed. Costs against petitioners. 18 Rollo, pp., 43-44.

SO ORDERED. 19 Tariff and Customs Code, Section 1202; Llamado v.

Commissioner of Customs, 122 SCRA 118 [1983].
Narvasa, C.J., Regalado, Mendoza and Francisco, JJ., concur.
20 Ramos, Jr. v. Pamaran, 60 SCRA 327 [1974].
Footnotes
21 Tariff and Customs Code, Section 1201; IV Tejam,
Commentaries on the Revised Tariff and Customs Code 2230
1 Records, p. 1.
[1987].

2 Id., pp. 248, 249, Exhibit A.

22 Records, p. 250, Exhibit B.

3 Id., p. 248, Exhibit A.

6) SECOND DIVISION
G.R. No. 187425 March 28, 2011
COMMISSIONER OF CUSTOMS, Petitioner,
vs.
AGFHA INCORPORATED, Respondent.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the
February 25, 2009 Decision1 of the Court of Tax Appeals En Banc (CTA-En Banc), in CTA EB
Case No. 136, which affirmed the October 18, 2005 Resolution2 of its Second Division (CTA-
Second Division), in CTA Case No. 5290, finding petitioner, the Commissioner of
Customs (Commissioner), liable to pay respondent AGFHA Incorporated (AGFHA)the amount of
US$160,348.08 for the value of the seized shipment which was lost while in petitioner’s custody.
On December 12, 1993, a shipment containing bales of textile grey cloth arrived at the Manila
International Container Port (MICP). The Commissioner, however, held the subject shipment
because its owner/consignee was allegedly fictitious. AGFHA intervened and alleged that it was
the owner and actual consignee of the subject shipment.
On September 5, 1994, after seizure and forfeiture proceedings took place, the District Collector
of Customs, MICP, rendered a decision3 ordering the forfeiture of the subject shipment in favor
of the government.
AGFHA filed an appeal. On August 25, 1995, the Commissioner rendered a decision4 dismissing
it.
On November 4, 1996, the CTA-Second Division reversed the Commissioner’s August 25, 1995
Decision and ordered the immediate release of the subject shipment to AGFHA. The dispositive
portion of the CTA-Second Division Decision5 reads:
WHEREFORE, in view of the foregoing premises, the instant Petition for Review is hereby
GRANTED. Accordingly, the decision of the respondent in Customs Case No. 94-017, dated
August 25, 1995, affirming the decision of the MICP Collector, dated September 5, 1994, which
decreed the forfeiture of the subject shipments in favor of the government, is hereby REVERSED
and SET ASIDE. Respondent is hereby ORDERED to effect the immediate RELEASE of the
subject shipment of goods in favor of the petitioner. No costs.
SO ORDERED.
On November 27, 1996, the CTA-Second Division issued an entry of judgment declaring the
above-mentioned decision final and executory.6
Thereafter, on May 20, 1997, AGFHA filed a motion for execution.
In its June 4, 1997 Resolution, the CTA-Second Division held in abeyance its action on AGFHA’s
motion for execution in view of the Commissioner’s appeal with the Court of
Appeals (CA), docketed as CA-G.R. SP No. 42590 and entitled "Commissioner of Custom v. The
Court of Tax Appeals and AGFHA, Incorporated."
On May 31, 1999, the CA denied due course to the Commissioner’s appeal for lack of merit in a
decision,7 the dispositive portion of which reads:
WHEREFORE, the instant petition is hereby DENIED DUE COURSE and DISMISSED for lack of
merit. Accordingly, the Commissioner of Customs is hereby ordered to effect the immediate
release of the shipment of AGFHA, Incorporated described as "2 x 40" Cont. No. NYKU-6772906
and NYKU-6632117 STA 197 Bales of Textile Grey Cloth" placed under Hold Order No.
H/CI/01/2293/01 dated 22 January 1993.
No costs.
SO ORDERED.
Thereafter, the Commissioner elevated the aforesaid CA Decision to this Court via a petition for
review on certiorari, docketed as G.R. No. 139050 and entitled "Republic of the Philippines
represented by the Commissioner of Customs v. The Court of Tax Appeals and AGFHA, Inc."
On October 2, 2001, the Court dismissed the petition.8
On January 14, 2002, the Court denied with finality the Commissioner’s motion for
reconsideration of its October 2, 2001 Decision.
On March 18, 2002, the Entry of Judgment was issued by the Court declaring its aforesaid
decision final and executory as of February 5, 2002.
In view thereof, the CTA-Second Division issued the Writ of Execution, dated October 16, 2002,
directing the Commissioner and his authorized subordinate or representative to effect the
immediate release of the subject shipment. It further ordered the sheriff to see to it that the
writ would be carried out by the Commissioner and to make a report thereon within thirty (30)
days after receipt of the writ. The writ, however, was returned unsatisfied.
On July 23, 2003, the CTA-Second Division received a copy of AGFHA’s Motion to Show Cause
dated July 21, 2003.
Acting on the motion, the CTA-Second Division issued a notice setting it for hearing on August
1, 2003 at 9:00 o’clock in the morning.
In its August 13, 2003 Resolution, the CTA-Second Division granted AGFHA’s motion and
ordered the Commissioner to show cause within fifteen (15) days from receipt of said resolution
why he should not be disciplinary dealt with for his failure to comply with the writ of execution.
On September 1, 2003, Commissioner’s counsel filed a Manifestation and Motion, dated August
28, 2003, attaching therewith a copy of an Explanation (With Motion for Clarification) dated
August 11, 2003 stating, inter alia, that despite diligent efforts to obtain the necessary
information and considering the length of time that had elapsed since the subject shipment
arrived at the Bureau of Customs, the Chief of the Auction and Cargo Disposal Division of the
MICP could not determine the status, whereabouts and disposition of said shipment.
Consequently, AGFHA filed its Motion to Cite Petitioner in Contempt of Court dated September
13, 2003. After a series of pleadings, on November 17, 2003, the CTA-Second Division denied,
among others, AGFHA’s motion to cite petitioner in contempt for lack of merit. It, however,
stressed that the denial was without prejudice to other legal remedies available to AGFHA.
On August 13, 2004, the Commissioner received AGFHA’s Motion to Set Case for Hearing, dated
April 12, 2004, allegedly to determine: (1) whether its shipment was actually lost; (2) the cause
and/or circumstances surrounding the loss; and (3) the amount the Commissioner should pay or
indemnify AGFHA should the latter’s shipment be found to have been actually lost.
On May 17, 2005, after the parties had submitted their respective memoranda, the CTA-Second
Division adjudged the Commissioner liable to AGFHA. Specifically, the dispositive portion of the
resolution reads:
WHEREFORE, premises considered, the Bureau of Customs is adjudged liable to petitioner
AGFHA, INC. for the value of the subject shipment in the amount of ONE HUNDERED SIXTY
THOUSAND THREE HUNDRED FORTY EIGHT AND 08/100 US DOLLARS (US$160,348.08). The
Bureau of Custom’s liability may be paid in Philippine Currency, computed at the exchange rate
prevailing at the time of actual payment, with legal interests thereon at the rate of 6% per
annum computed from February 1993 up to the finality of this Resolution. In lieu of the 6%
interest, the rate of legal interest shall be 12% per annum upon finality of this Resolution until
the value of the subject shipment is fully paid.
The payment shall be taken from the sale or sales of the goods or properties which were seized
or forfeited by the Bureau of Customs in other cases.
SO ORDERED.9
On June 10, 2005, the Commissioner filed his Motion for Partial Reconsideration arguing that (a)
the enforcement and satisfaction of respondent’s money claim must be pursued and filed with
the Commission on Audit pursuant to Presidential Decree (P.D.) No. 1445; (b) respondent is
entitled to recover only the value of the lost shipment based on its acquisition cost at the time
of importation; and (c) taxes and duties on the subject shipment must be deducted from the
amount recoverable by respondent.
On the same day, the Commissioner received AGFHA’s Motion for Partial Reconsideration
claiming that the 12% interest rate should be computed from the time its shipment was lost on
June 15, 1999 considering that from such date, petitioner’s obligation to release their shipment
was converted into a payment for a sum of money.
On October 18, 2005, after the filing of several pleadings, the CTA-Second Division promulgated
a resolution which reads:
WHEREFORE, premises considered, respondent Commissioner of Customs’ "Motion for Partial
Reconsideration" is hereby PARTIALLY GRANTED. The Resolution dated May 17, 2005 is hereby
MODIFIED but only insofar as the Court did not impose the payment of the proper duties and
taxes on the subject shipment. Accordingly, the dispositive portion of Our Resolution, dated May
17, 2005, is hereby MODIFIED to read as follows:
WHEREFORE, premises considered, the Bureau of Customs is adjudged liable to petitioner
AGFHA, INC. for the value of the subject shipment in the amount of ONE HUNDRED SIXTY
THOUSAND THREE HUNDRED FORTY EIGHT AND 08/100 US DOLLARS
(US$160,348.08), subject however, to the payment of the prescribed taxes and duties, at the
time of the importation. The Bureau of Custom’s liability may be paid in Philippine Currency,
computed at the exchange rate prevailing at the time of actual payment, with legal interests
thereon at the rate of 6% per annum computed from February 1993 up to the finality of this
Resolution. In lieu of the 6% interest, the rate of legal interest shall be 12% per annum upon
finality of this Resolution until the value of the subject shipment is fully paid.
The payment shall be taken from the sale or sales of the goods or properties which were seized
or forfeited by the Bureau of Customs in other cases.
SO ORDERED.
Petitioner AGFHA, Inc.’s "Motion for Partial Reconsideration" is hereby DENIED for lack of merit.
SO ORDERED.10
Consequently, the Commissioner elevated the above-quoted resolution to the CTA-En Banc.
On February 25, 2009, the CTA-En Banc promulgated the subject decision dismissing the
petition for lack of merit and affirming in toto the decision of the CTA-Second Division.
On March 18, 2009, the Commissioner filed his Motion for Reconsideration, but it was denied by
the CTA-En Banc in its April 13, 2009 Resolution.
Hence, this petition.
ISSUE
Whether or not the Court of Tax Appeals was correct in awarding the respondent the amount of
US$160,348.08, as payment for the value of the subject lost shipment that was in the custody
of the petitioner.
In his petition, the Commissioner basically argues two (2) points: 1] the respondent is entitled
to recover the value of the lost shipment based only on its acquisition cost at the time of
importation; and 2] the present action has been theoretically transformed into a suit against the
State, hence, the enforcement/satisfaction of petitioner’s claim must be pursued in another
proceeding consistent with the rule laid down in P.D. No. 1445.
He further argues that the basis for the exchange rate of its liability lacks basis. Based on the
Memorandum, dated August 27, 2002, of the Customs Operations Officers, the true value of the
subject shipment is US$160,340.00 based on its commercial invoices which have been found to
be spurious. The subject shipment arrived at the MICP on December 12, 1992 and the peso-
dollar exchange rate was ₱20.00 per US$1.00. Thus, this conversion rate must be applied in the
computation of the total land cost of the subject shipment being claimed by AGFHA or
₱3,206,961.60 plus interest.
The Commissioner further contends that based on Executive Order No. 688 (The 1999 Tariff and
Customs Code of the Philippines), the proceeds from any legitimate transaction, conveyance or
sale of seized and/or forfeited items for importations or exportations by the customs bureau
cannot be lawfully disposed of by the petitioner to satisfy respondent’s money judgment. EO
688 mandates that the unclaimed proceeds from the sale of forfeited goods by the Bureau of
Customs (BOC) will be considered as customs receipts to be deposited with the Bureau of
Treasury and shall form part of the general funds of the government. Any disposition of the said
unclaimed proceeds from the sale of forfeited goods will be violative of the Constitution, which
provides that "No money shall be paid out of the Treasury except in pursuance of an
appropriation made by law."11
Thus, the Commissioner posits that this case has been transformed into a suit against the State
because the satisfaction of AGFHA’s claim will have to be taken from the national coffers. The
State may not be sued without its consent. The BOC enjoys immunity from suit since it is
invested with an inherent power of sovereignty which is taxation.
To recover the alleged loss of the subject shipment, AGFHA’s remedy here is to file a money
claim with the Commission on Audit (COA) pursuant to Act No. 3083 (An Act Defining the
Condition under which the Government of the Philippine Island may be Sued) and
Commonwealth Act No. 327 (An Act Fixing the Time within which the Auditor General shall
render his Decisions and Prescribing the Manner of Appeal therefrom, as amended by P.D. No.
1445). Upon the determination of State liability, the prosecution, enforcement or satisfaction
thereof must still be pursued in accordance with the rules and procedures laid down in P.D. No.
1445, otherwise known as the Government Auditing Code of the Philippines.
On the other hand, AGFHA counters that, in line with prevailing jurisprudence, the applicable
peso-dollar exchange rate should be the one prevailing at the time of actual payment in order to
preserve the real value of the subject shipment to the date of its payment. The CTA-En Banc
Decision does not constitute a money claim against the State. The Commissioner’s obligation to
return the subject shipment did not arise from an import-export contract but from a quasi-
contract particularly solutio indebiti under Article 2154 of the Civil Code. The payment of the
value of the subject lost shipment was in accordance with Article 2159 of the Civil Code. The
doctrine of governmental immunity from suit cannot serve as an instrument for perpetrating an
injustice on a citizen. When the State violates its own laws, it cannot invoke the doctrine of state
immunity to evade liability. The commission of an unlawful or illegal act on the part of the State
is equivalent to implied consent.
THE COURT’S RULING
The petition lacks merit.
The Court agrees with the ruling of the CTA that AGFHA is entitled to recover the value of its
lost shipment based on the acquisition cost at the time of payment.
In the case of C.F. Sharp and Co., Inc. v. Northwest Airlines, Inc. the Court ruled that the rate
of exchange for the conversion in the peso equivalent should be the prevailing rate at the time
of payment:
In ruling that the applicable conversion rate of petitioner's liability is the rate at the time of
payment, the Court of Appeals cited the case of Zagala v. Jimenez, interpreting the provisions of
Republic Act No. 529, as amended by R.A. No. 4100. Under this law, stipulations on the
satisfaction of obligations in foreign currency are void. Payments of monetary obligations,
subject to certain exceptions, shall be discharged in the currency which is the legal tender in the
Philippines. But since R.A. No. 529 does not provide for the rate of exchange for the payment of
foreign currency obligations incurred after its enactment, the Court held in a number of cases
that the rate of exchange for the conversion in the peso equivalent should be the
prevailing rate at the time of payment.12 [Emphases supplied]
Likewise, in the case of Republic of the Philippines represented by the Commissioner of Customs
v. UNIMEX Micro-Electronics GmBH,13 which involved the seizure and detention of a shipment of
computer game items which disappeared while in the custody of the Bureau of Customs, the
Court upheld the decision of the CA holding that petitioner’s liability may be paid in Philippine
currency, computed at the exchange rate prevailing at the time of actual payment.
On the issue regarding the state immunity doctrine, the Commissioner cannot escape liability for
the lost shipment of goods. This was clearly discussed in the UNIMEX Micro-Electronics
GmBH decision, where the Court wrote:
Finally, petitioner argues that a money judgment or any charge against the government requires
a corresponding appropriation and cannot be decreed by mere judicial order.
Although it may be gainsaid that the satisfaction of respondent's demand will ultimately fall on
the government, and that, under the political doctrine of "state immunity," it cannot be held
liable for governmental acts (jus imperii), we still hold that petitioner cannot escape its liability.
The circumstances of this case warrant its exclusion from the purview of the state immunity
doctrine.
As previously discussed, the Court cannot turn a blind eye to BOC's ineptitude and
gross negligence in the safekeeping of respondent's goods. We are not likewise
unaware of its lackadaisical attitude in failing to provide a cogent explanation on the
goods' disappearance, considering that they were in its custody and that they were
in fact the subject of litigation. The situation does not allow us to reject
respondent's claim on the mere invocation of the doctrine of state immunity.
Succinctly, the doctrine must be fairly observed and the State should not avail itself
of this prerogative to take undue advantage of parties that may have legitimate
claims against it.
In Department of Health v. C.V. Canchela & Associates, we enunciated that this Court, as the
staunch guardian of the people's rights and welfare, cannot sanction an injustice so patent in its
face, and allow itself to be an instrument in the perpetration thereof. Over time, courts have
recognized with almost pedantic adherence that what is inconvenient and contrary to reason is
not allowed in law. Justice and equity now demand that the State's cloak of invincibility against
suit and liability be shredded.1awphi1
Accordingly, we agree with the lower courts' directive that, upon payment of the necessary
customs duties by respondent, petitioner's "payment shall be taken from the sale or sales of
goods or properties seized or forfeited by the Bureau of Customs."
WHEREFORE, the assailed decisions of the Court of Appeals in CA-G.R. SP Nos. 75359 and
75366 are hereby AFFIRMED with MODIFICATION. Petitioner Republic of the Philippines,
represented by the Commissioner of the Bureau of Customs, upon payment of the necessary
customs duties by respondent Unimex Micro-Electronics GmBH, is hereby ordered to pay
respondent the value of the subject shipment in the amount of Euro 669,982.565. Petitioner's
liability may be paid in Philippine currency, computed at the exchange rate prevailing at the
time of actual payment.

SO ORDERED.14 [Emphases supplied]

In line with the ruling in UNIMEX Micro-Electronics GmBH, the Commissioner of Customs should
pay AGFHA the value of the subject lost shipment in the amount of US$160,348.08 which
liability may be paid in Philippine currency computed at the exchange rate prevailing at the time
of the actual payment.

WHEREFORE, the February 25, 2009 Decision of the Court of Tax Appeals En Banc, in CTA EB
Case No. 136, is AFFIRMED. The Commissioner of Customs is hereby ordered to pay, in
accordance with law, the value of the subject lost shipment in the amount of US$160,348.08,
computed at the exchange rate prevailing at the time of actual payment after payment of the
necessary customs duties.

SO ORDERED.
7) FIRST DIVISION were filed and 90% of the total customs duties were paid. The import entry and internal
revenue declarations (IEIRDs) of the shipments were thereafter filed on the following dates:
CHEVRON PHILIPPINES, INC., G.R. No. 178759
Petitioner,
Present: ENTRY PRODUCT ARRIVAL IED IEIRD
NO. DATE
PUNO, C.J., Chairperson, 606-96 66,229,960 liters 3/8/1996 3/12/1996 5/10/1996
CARPIO, Nan Hai Crude Oil
- v e r s u s - AUSTRIA-MARTINEZ,* 604-96 6,990,712 liters 3/18/1996 3/26/1996 5/10/1996
CORONA and Reformate
LEONARDO-DE CASTRO, JJ. 605-96 16,651,177 liters 3/21/1996 3/26/1996 5/10/1996
FCCU Feed Stock
COMMISSIONER OF THE
600-96 236,317,862 liters 3/26/1996 3/28/1996 5/10/1996
BUREAU OF CUSTOMS,
601-96 Oman/Dubai Crude Oil
Respondent. Promulgated:
602-96
603-96
August 11, 2008
818-96 51,878,114 liters 4/10/1996 4/10/1996 6/21/1996
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x Arab Crude Oil

The importations were appraised at a duty rate of 3% as provided under RA 8180 [6] and
DECISION petitioner paid the import duties amounting to P316,499,021.[7] Prior to the effectivity of RA
8180 on April 16, 1996, the rate of duty on imported crude oil was 10%.
CORONA, J.: Three years later, then Finance Secretary Edgardo Espiritu received a letter (with
annexes) dated June 10, 1999 from a certain Alfonso A. Orioste denouncing the deliberate
concealment, manipulation and scheme employed by petitioner and Pilipinas Shell in the
This is a petition for review on certiorari[1] of the decision[2] and resolution[3] of the Court of Tax importation of crude oil, thereby resulting in huge losses of revenue for the government.This
Appeals (CTA) en banc dated March 1, 2007 and July 5, 2007, respectively, in CTA EB Nos. 121 letter was endorsed to the Bureau of Customs (BOC) for investigation on July 19, 1999.[8]
and 122 which reversed the decision of the CTA First Division dated April 5, 2005 in CTA Case
No. 6358. On January 28, 2000, petitioner received a subpoena duces tecum/ad testificandum from
Petitioner Chevron Philippines, Inc.[4] is engaged in the business of importing, Conrado M. Unlayao, Chief of the Investigation and Prosecution Division, Customs Intelligence
distributing and marketing of petroleum products in the Philippines. In 1996, the importations and Investigation Service (IPD-CIIS) of the BOC, to submit pertinent documents in connection
subject of this case arrived and were covered by eight bills of lading, summarized as follows: with the subject shipments pursuant to the investigation he was conducting thereon. It
appeared, however, that the Legal Division of the BOC was also carrying out a separate
ARRIVAL investigation. Atty. Roberto Madrid (of the latter office) had gone to petitioners Batangas
PRODUCT DATE VESSEL Refinery and requested the submission of information and documents on the same
shipments. This prompted petitioner to seek the creation of a unified team to exclusively handle
66,229,960 liters Ex MT the investigation.[9]
Nan Hai Crude Oil 3/8/1996 Bona Spray
6,990,712 liters Ex MT On August 1, 2000, petitioner received from the District Collector of Customs of the Port of
Reformate 3/18/1996 Orient Tiger Batangas (District Collector) a demand letter requiring the immediate settlement of the amount
of P73,535,830 representing the difference between the 10% and 3% tariff rates on the
16,651,177 liters Ex MT shipments. In response, petitioner wrote the District Collector to inform him of the pending
FCCU Feed Stock 3/21/1996 Probo Boaning request for the creation of a unified team with the exclusive authority to investigate the
matter. Furthermore, petitioner objected to the demand for payment of customs duties using
236,317,862 liters the 10% duty rate and reiterated its position that the 3% tariff rate should instead be applied. It
Oman/Dubai Ex MT likewise raised the defense of prescription against the assessment pursuant to Section 1603 of
Crude Oil 3/26/1996 Violet the Tariff and Customs Code (TCC). Thus, it prayed that the assessment for deficiency customs
duties be cancelled and the notice of demand be withdrawn.[10]
51,878,114 liters Ex MT In a letter petitioner received on October 12, 2000, respondent Commissioner of the
Arab Crude Oil 4/10/1996 Crown Jewel[5] BOC[11] stated that it was the IPD-CIIS which was authorized to handle the investigation, to the
exclusion of the Legal Division and the District Collector.[12]

The shipments were unloaded from the carrying vessels onto petitioners oil tanks over a period The IPD-CIIS, through Special Investigator II Domingo B. Almeda and Special Investigator III
of three days from the date of their arrival. Subsequently, the import entry declarations (IEDs) Nemesio C. Magno, Jr., issued a finding dated February 2, 2001 that the import entries were
filed beyond the 30-day non-extendible period prescribed under Section 1301 of the TCC. They
concluded that the importations were already considered abandoned in favor of the
government. They also found that fraud was committed by petitioner in collusion with the
former District Collector.[13]
Thereafter, respondent[14] wrote petitioner on October 29, 2001 informing it of the
findings of irregularity in the filing and acceptance of the import entries beyond the period
required by customs law and in the release of the shipments after the same had already been
deemed abandoned in favor of the government. Petitioner was ordered to pay the amount
of P1,180,170,769.21 representing the total dutiable value of the importations.[15]
This prompted petitioner to file a petition for review in the CTA First Division on November 28,
2001, asking for the reversal of the decision of respondent.[16]
In a decision promulgated on April 5, 2005, the CTA First Division ruled that respondent was
correct when he affirmed the findings of the IPD-CIIS on the existence of fraud. Therefore,
prescription was not applicable. Ironically, however, it also held that petitioner did not abandon
the shipments. The shipments should be subject to the 10% rate prevailing at the time of their
withdrawal from the custody of the BOC pursuant to Sections 204, 205 and 1408 of the
TCC. Petitioner was therefore liable for deficiency customs duties in the amount
of P105,899,569.05.[17]
Petitioner sought reconsideration of the April 5, 2005 decision while respondent
likewise filed his motion for partial reconsideration. Both motions were denied in a resolution
dated September 9, 2005.[18]
After both respondent and petitioner had filed their petitions for review with the
CTA en banc, docketed as CTA EB No. 121 and CTA EB No. 122, respectively, the petitions were
consolidated.
In a decision dated March 1, 2007, the CTA en banc held that it was the filing of the
IEIRDs that constituted entry under the TCC. Since these were filed beyond the 30-day period,
they were not seasonably entered in accordance with Section 1301 in relation to Section 205 of
the TCC. Consequently, they were deemed abandoned under Sections 1801 and 1802 of the
TCC. It also ruled that the notice required under Customs Memorandum Order No. 15-94 (CMO
15-94) was not necessary in view of petitioners actual knowledge of the arrival of the
shipments. It likewise agreed with the CTA Divisions finding that petitioner committed fraud
when it failed to file the IEIRD within the 30-day period with the intent to evade the higher
rate. Thus, petitioner was ordered to pay respondent the total dutiable value of the oil
shipments amounting to P893,781,768.21.[19]
Hence this petition.
There are three issues for our resolution:
1. whether entry under Section 1301 in relation to Section 1801 of the TCC
refers to the IED or the IEIRD;
2. whether fraud was perpetrated by petitioner and
3. whether the importations can be considered abandoned under Section
1801.
ENTRY IN SECTIONS 1301 AND 1801 OFTHE TCC
REFERS TO BOTH THE IED AND IEIRD
Under Section 1301 of the TCC, imported articles must be entered within a non-extendible
period of 30 days from the date of discharge of the last package from a vessel.Otherwise, the
BOC will deem the imported goods impliedly abandoned under Section 1801. Thus:
Section 1301. Persons Authorized to Make Import Entry. –
Imported articles must be entered in the customhouse at
the port of entry within thirty (30) days, which shall not be
extendible from date of discharge of the last package from the
vessel or aircraft either (a) by the importer, being holder of the bill of
lading, (b) by a duly licensed customs broker acting under authority from a
holder of the bill or (c) by a person duly empowered to act as agent or
attorney-in-fact for each holder: Provided, That where the entry is filed by a
party other than the importer, said importer shall himself be required to
declare under oath and under the penalties of falsification or perjury that
the declarations and statements contained in the entry are true and
correct: Provided, further, That such statements under oath shall
constitute prima facie evidence of knowledge and consent of the importer of
violation against applicable provisions of this Code when the importation is
found to be unlawful. (Emphasis supplied)
Section 1801. Abandonment, Kinds and Effect of. - An imported article
is deemed abandoned under any of the following circumstances:
xxx xxx xxx
b. When the owner, importer, consignee or interested party after
due notice, fails to file an entry within thirty (30) days, which shall
not be extendible, from the date of discharge of the last package
from the vessel or aircraft, or having filed such entry, fails to claim his
importation within fifteen (15) days, which shall not likewise be extendible,
from the date of posting of the notice to claim such importation. (Emphasis
supplied)
Petitioner argues that the IED is an entry contemplated by these sections. According to it, the
congressional deliberations on RA 7651 which amended the TCC to provide a non-extendible 30-
day period show the legislative intent to expedite the procedure for declaring importations as
abandoned. Filing an entry serves as notice to the BOC of the importers willingness to complete
the importation and to pay the proper taxes, duties and fees. Conversely, the non-filing of the
entry within the period connotes the importers disinterest and enables the BOC to consider the
goods as abandoned. Since the IED is a BOC form that serves as basis for payment of advance
duties on importation as required under PD 1853,[20] it suffices as an entry under Sections 1301
and 1801 of the TCC.[21]
We disagree.
The term entry in customs law has a triple meaning. It means (1) the documents filed
at the customs house; (2) the submission and acceptance of the documents and (3) the
procedure of passing goods through the customs house.[22]
The IED serves as basis for the payment of advance duties on importations whereas
the IEIRD evidences the final payment of duties and taxes. The question is: was the filing of the
IED sufficient to constitute entry under the TCC?
The law itself, in Section 205, defines the meaning of the technical term entered as
used in the TCC:
Section 205. Entry, or Withdrawal from Warehouse, for
Consumption. - Imported articles shall be deemed entered in the
Philippines for consumption when the specified entry form is
properly filed and accepted, together with any related documents
regained by the provisions of this Code and/or regulations to be filed with
such form at the time of entry, at the port or station by the customs official
 designated to receive such entry papers and any duties, taxes, fees and/or
other lawful charges required to be paid at the time of making such entry
have been paid or secured to be paid with the customs official designated
to receive such monies, provided that the article has previously arrived
within the limits of the port of entry.
xxx xxx xxx
(Emphasis supplied)
Clearly, the operative act that constitutes entry of the imported articles at the port of
entry is the filing and acceptance of the specified entry form together with the other documents
required by law and regulations. There is no dispute that the specified entry form refers to the
IEIRD. Section 205 defines the precise moment when the imported articles are deemed entered.
Moreover, in the old case of Go Ho Lim v. The Insular Collector of Customs,[23] we
ruled that the word entry refers to the regular consumption entry (which, in our current
terminology, is the IEIRD) and not the provisional entry (the IED):
It is disputed by the parties whether the application for the
special permit. Exhibit A, containing the misdeclared weight of the 800
cases of eggs, comes within the meaning of the word "entry" used in
section 1290 of the Revised Administrative Code, or said
word "entry" means only the "original entry and importer's declaration."
The court below reversed the decision of the Insular Collector of Customs
on the ground that the provisions of section 1290 of the Revised
Administrative Code refer to the regular consumption entry and not
to a provisional declaration made in an application for a special permit,
as the one filed by the appellee, to remove the cases of eggs from the
customhouse.
This court is of the opinion that certainly the application, Exhibit
A, cannot be considered as a final regular entry of the weight of the 800
cases of eggs imported by the appellee, taking into account the fact that
said application sought the delivery of said 800 cases of eggs "from the pier
after examination," and the special permit granted, Exhibit E, provided for
"delivery to be made after examination by the appraiser." All the foregoing,
together with the circumstance that the appellee had to file the regular
consumption entry which he bound himself to do, as shown by the
application, Exhibit A, logically lead to the conclusion that the declaration of
the weight of the 800 cases of eggs made in said application, is merely a
provisional entry, and as it is subject to verification by the customhouse
examiner, it cannot be considered fraudulent for the purpose of imposing a
surcharge of customs duties upon the importer.[24] (Emphasis supplied)
The congressional deliberations on House Bill No. 4502 which was enacted as RA
7651[25] amending the TCC lay down the policy considerations for the non-extendible 30-day
period for the filing of the import entry in Section 1301:
MR. JAVIER (E.).
xxx xxx xxx
Under Sections 1210 and 1301 of the [TCC], Mr. Speaker,
[26]
import entries for imported articles must be filed within five days from the
date of discharge of the last package from the vessel. The five-day period,
however, Mr. Speaker, is subject to an indefinite extension at the
discretion of the collector of customs, which more often than not
stretches to more than three months, thus resulting in considerable
delay in the payment of duties and taxes.
This bill, Mr. Speaker, seeks to amend Sections 1210 and
1301 by extending the five-day period to thirty days, which will no
longer be extendible, within which import entries must be filed for
imported articles. Moreover, to give the importer reasonable time, the bill
prescribes a period of fifteen days which may not be extended within
which to claim his importation from the time he filed the import
entry. Failure to file an import entry or to claim the imported articles
within the period prescribed under the proposed measure, such imported
articles will be treated as abandoned and declared as ipso facto the
property of the government to be sold at public auction.
Under this new procedure, Mr. Speaker, importers will be
constrained under the threat of having their importation declared
as abandoned and forfeited in favor of the government to file import
entries and claim their importation as early as possible thus
accelerating the collection of duties and taxes. But providing for a
non-extendible period of 30 days within which to file an import entry, an
appeal of fifteen days within which to claim the imported article, the bill
has removed the discretion of the collector of Customs to extend such
period thus minimizing opportunity for graft. Moreover, Mr. Speaker, with
these non-extendible periods coupled with the threat of declaration of
abandonment of imported articles, both the [BOC] and the importer are
under pressure to work for the early release of cargo, thus decongesting
all ports of entry and facilitating the release of goods and thereby
promoting trade and commerce.
Finally, Mr. Speaker, the speedy release of imported cargo coupled with
the sanctions of declaration of abandonment and forfeiture will minimize
the pilferage of imported cargo at the ports of entry.[27] (Emphasis
supplied)
The filing of the IEIRDs has several important purposes: to ascertain the value of the
imported articles, collect the correct and final amount of customs duties and avoid smuggling of
goods into the country.[28] Petitioners interpretation would have an absurd implication: the 30-
day period applies only to the IED while no deadline is specified for the submission of the IEIRD.
Strong issues of public policy militate against petitioners interpretation. It is the IEIRD which
accompanies the final payment of duties and taxes.These duties and taxes must be paid in full
before the BOC can allow the release of the imported articles from its custody.
Taxes are the lifeblood of the nation. Tariff and customs duties are taxes constituting
a significant portion of the public revenue which enables the government to carry out the
functions it has been ordained to perform for the welfare of its constituents.[29] Hence, their
prompt and certain availability is an imperative need[30] and they must be collected without
unnecessary hindrance.[31] Clearly, and perhaps for that reason alone, the submission of the
IEIRD cannot be left to the exclusive discretion or whim of the importer.
We hold, therefore, that under the relevant provisions of the TCC,[32] both the IED and
IEIRD should be filed within 30 days from the date of discharge of the last package from the
vessel or aircraft. As a result, the position of petitioner, that the import entry to be filed within
the 30-day period refers to the IED and not the IEIRD, has no legal basis.

THE EXISTENCE OF FRAUD
WAS ESTABLISHED
Petitioner also denies the commission of fraud. It maintains that it had no
predetermined and deliberate intention not to comply with the 30-day period in order to evade
the payment of the 10% rate of duty. Its sole reason for the delayed filing of IEIRDs was
allegedly due to the late arrival of the original copies of the bills of lading and commercial
invoices which its suppliers could send only after the latter computed the average monthly price
of crude oil based on worldwide trading. It claims that the BOC required these original
documents to be attached to the IEIRD.
Petitioners arguments lack merit.
Fraud, in its general sense, is deemed to comprise anything calculated to deceive,
including all acts, omissions, and concealment involving a breach of legal or equitable duty, trust
or confidence justly reposed, resulting in the damage to another, or by which an undue and
unconscionable advantage is taken of another.[33] It is a question of fact and the circumstances
constituting it must be alleged and proved in the court below.[34] The finding of the lower court
as to the existence or non-existence of fraud is final and cannot be reviewed here unless clearly
shown to be erroneous.[35] In this case, fraud was established by the IPD-CIIS of the BOC. Both
the CTA First Division and en banc agreed completely with this finding.
The evidence showed that petitioner bided its time to file the IEIRD so as to avail of a
lower rate of duty. (At or about the time these developments were taking place, the bill lowering
the duty on these oil products from 10% to 3% was already under intense discussion in
Congress.) There was a calculated and preconceived course of action adopted by petitioner
purposely to evade the payment of the correct customs duties then prevailing. This was done in
collusion with the former District Collector, who allowed the acceptance of the late IEIRDs and
the collection of duties using the 3% declared rate. A clear indication of petitioners deliberate
intention to defraud the government was its non-disclosure of discrepancies on the duties
declared in the IEDs (10%) and IEIRDs (3%) covering the shipments.[36]
It was not by sheer coincidence that, by the time petitioner filed its IEIRDs way
beyond the mandated period, the rate of duty had already been reduced from 10% to 3%.Both
the CTA Division and en banc found the explanation of petitioner (for its delay in filing)
untruthful. The bills of lading and corresponding invoices covering the shipments were
accomplished immediately after loading onto the vessels.[37] Notably, the memorandum of a
district collector cited by petitioner as basis for its assertion that original copies were required by
the BOC was dated October 30, 2002.[38] There is no showing that in 1996, the time pertinent
in this case, this was in fact a requirement.
More importantly, the absence of supporting documents should not have prevented
petitioner from complying with the mandatory and non-extendible period, specially since the
consequences of delayed filing were extremely serious. In addition, these supporting documents
were not conclusive on the government.[39] If this kind of excuse were to be accepted, then the
collection of customs duties would be at the mercy of importers.
Hence, due to the presence of fraud, the prescriptive period of the finality of
liquidation under Section 1603 was inapplicable:
Section 1603. Finality of Liquidation. When articles have been
entered and passed free of duty or final adjustments of duties made, with
subsequent delivery, such entry and passage free of duty or settlements of
duties will, after the expiration of one (1) year, from the date of the final
payment of duties, in the absence of fraud or protest or compliance audit
pursuant to the provisions of this Code, be final and conclusive upon all
parties, unless the liquidation of the import entry was merely tentative.[40]
THE IMPORTATIONS WERE
ABANDONED
IN FAVOR OF THE
GOVERNMENT
The law is clear and explicit. It gives a non-extendible period of 30 days for the importer to file
the entry which we have already ruled pertains to both the IED and IEIRD. Thus under Section
1801 in relation to Section 1301, when the importer fails to file the entry within the said period,
he shall be deemed to have renounced all his interests and property rights to the importations
and these shall be considered impliedly abandoned in favor of the government:
Section 1801. Abandonment, Kinds and Effect of. -
xxx xxx xxx
Any person who abandons an article or who fails to claim his
importation as provided for in the preceding paragraph shall be deemed
to have renounced all his interests and property rights therein.
According to petitioner, the shipments should not be considered impliedly abandoned because
none of its overt acts (filing of the IEDs and paying advance duties) revealed any intention to
abandon the importations.[41]
Unfortunately for petitioner, it was the law itself which considered the importation
abandoned when it failed to file the IEIRDs within the allotted time. Before it was amended,
Section 1801 was worded as follows:
Sec. 1801. Abandonment, Kinds and Effect of. Abandonment is
express when it is made direct to the Collector by the interested party in
writing and it is implied when, from the action or omission of the
interested party, an intention to abandon can be clearly
inferred. The failure of any interested party to file the import entry within
fifteen days or any extension thereof from the discharge of the vessel or
aircraft, shall be implied abandonment. An implied abandonment shall not
be effective until the article is declared by the Collector to have been
abandoned after notice thereof is given to the interested party as in seizure
cases.
Any person who abandons an imported article renounces all his
interests and property rights therein.[42]
After it was amended by RA 7651, there was an indubitable shift in language as to what could
be considered implied abandonment:
Section 1801. Abandonment, Kinds and Effect of. - An imported
article is deemed abandoned under any of the following circumstances:
a. When the owner, importer, consignee of the imported article expressly
signifies in writing to the Collector of Customs his intention to abandon; or
b. When the owner, importer, consignee or interested party after due
notice, fails to file an entry within thirty (30) days, which shall not
 be extendible, from the date of discharge of the last package from
the vessel or aircraft xxxx
From the wording of the amendment, RA 7651 no longer requires that there be other
acts or omissions where an intent to abandon can be inferred. It is enough that the importer
fails to file the required import entries within the reglementary period. The lawmakers could
have easily retained the words used in the old law (with respect to the intention to abandon)
but opted to omit them.[43] It would be error on our part to continue applying the old law
despite the clear changes introduced by the amendment.
NOTICE WAS NOT NECESSARY
UNDER
THE CIRCUMSTANCES OF THIS
CASE
Petitioner also avers that the importations could not be deemed impliedly abandoned because
respondent did not give it any notice as required by Section 1801 of the TCC:
Sec. 1801. Abandonment, Kinds and Effect of. - An imported
article is deemed abandoned under any of the following circumstances:
xxx xxx xxx
b. When the owner, importer, consignee or interested party after due
notice, fails to file an entry within thirty (30) days, which shall not be
extendible, from the date of discharge of the last package from the vessel
or aircraft xxx (Emphasis supplied)
Furthermore, it claims that notice and abandonment proceedings were required under
the BOCs guidelines on abandonment (CMO 15-94):
SUBJECT: REVISED GUIDELINES ON ABANDONMENT
xxx xxx xxx
B. ADMINISTRATIVE PROVISIONS
xxx xxx xxx
B.2 Implied abandonment occurs when:
B.2.1 The owner, importer, consignee, interested party or his authorized
broker/representative, after due notice, fails to file an entry within a non-
extendible period of thirty (30) days from the date of discharge of last
package from the carrying vessel or aircraft.
xxx xxx xxx
Due notice to the consignee/importer/owner/interested party
shall be by means of posting of a notice to file entry at the Bulletin
Board seven (7) days prior to the lapse of the thirty (30) day
period by the Entry Processing Division listing the consignees who/which
have not filed the required import entries as of the date of the posting of
the notice and notifying them of the arrival of their shipment, the
name of the carrying vessel/aircraft, Voy. No. Reg. No. and the respective
B/L No./AWB No., with a warning, as shown by the attached form,
entitled:URGENT NOTICE TO FILE ENTRY which is attached hereto as
Annex A and made an integral part of this Order.
xxx xxx xxx
C. OPERATIONAL PROVISIONS
xxx xxx xxx
C.2 On Implied Abandonment:
C.2.1 When no entry is filed
C.2.1.1 Within twenty-four (24) hours after the completion of the
boarding formalities, the Boarding Inspector must submit
the manifests to the Bay Service or similar office so that the Entry
Processing Division copy may be put to use by said office as soon as possible.
C..2.1.2 Within twenty-four (24) hours after the completion of the
unloading of the vessel/aircraft, the Inspector assigned in the
vessel/aircraft, shall issue a certification addressed to the Collector of
Customs (Attention: Chief, Entry Processing Division), copy furnished Chief,
Data Monitoring Unit, specifically stating the time and date of discharge of
the last package from the vessel/aircraft assigned to him. Said certificate
must be encoded by Data Monitoring Unit in the Manifest Clearance System.
C.2.1.3 Twenty-three (23) days after the discharge of the last
package from the carrying vessel/aircraft, the Chief, Data Monitoring Unit
shall cause the printing of the URGENT NOTICE TO FILE ENTRY in
accordance with the attached form, Annex A hereof, sign the URGENT
NOTICE and cause its posting continuously for seven (7) days at the
Bulletin Board for the purpose until the lapse of the thirty (30) day
period.
C.2.1.4 The Chief, Data Monitoring Unit, shall submit a weekly report to
the Collector of Customs with a listing by vessel, Registry Number of
shipments/ importations which shall be deemed abandoned for failure to file
entry within the prescribed period and with certification that per records
available, the thirty (30) day period within which to file the entry therefore
has lapsed without the consignee/importer filing the entry and that the
proper posting of notice as required has been complied with.
xxx xxx xx
C.2.1.5 Upon receipt of the report, the Collector of Customs shall issue
an order to the Chief, Auction and Cargo Disposal Division, to dispose of
the shipmentenumerated in the report prepared by the Chief, Data
Monitoring Unit on the ground that those are abandoned and ipso
facto deemed the property of the Government to be disposed of as provided
by law.
xxx xxx xxx[44] (Emphasis supplied)
We disagree.
 Under the peculiar facts and circumstances of this case, due notice was not
necessary. The shipments arrived in 1996. The IEDs and IEIRDs were also filed in
1996.However, respondent discovered the fraud which attended the importations and their
subsequent release from the BOCs custody only in 1999. Obviously, the situation here was not
an ordinary case of abandonment wherein the importer merely decided not to claim its
importations. Fraud was established against petitioner; it colluded with the former District
Collector. Because of this, the scheme was concealed from respondent. The government was
unable to protect itself until the plot was uncovered. The government cannot be crippled by the
malfeasance of its officials and employees. Consequently, it was impossible for respondent to
comply with the requirements under the rules.
By the time respondent learned of the anomaly, the entries had already been
belatedly filed and the oil importations released and presumably used or sold. It was a fait
accompli. Under such circumstances, it would have been against all logic to require respondent
to still post an urgent notice to file entry before declaring the shipments abandoned.
The minutes of the deliberations in the House of Representatives Committee on Ways
and Means on the proposed amendment to Section 1801 of the TCC show that the phrase after
due notice was intended for owners, consignees, importers of the shipments who live in rural
areas or distant places far from the port where the shipments are discharged, who are
unfamiliar with customs procedures and need the help and advice of people on how to file an
entry:
xxxxxxxxx
MR. FERIA. 1801, your Honor. The question that was raised here
in the last hearing was whether notice is required to be sent to the
importer. And, it has been brought forward that we can dispense with the
notice to the importer because the shipping companies are notifying the
importers on the arrival of their shipment. And, so that notice is sufficient
to . . . sufficient for the claimant or importer to know that the
shipments have already arrived.
Second, your Honor, the legitimate businessmen always have . . . they have
their agents with the shipping companies, and so they should know the
arrival of their shipment.
xxx xxx xxx
HON. QUIMPO. Okay. Comparing the two, Mr. Chairman, I cannot help but
notice that in the substitution now there is a failure to provide the phrase
AFTER NOTICE THEREOF IS GIVEN TO THE INTERESTED PARTY, which
was in the original. Now in the second, in the substitution, it has been
deleted. I was first wondering whether this would be necessary in order to
provide for due process. Im thinking of certain cases, Mr. Chairman, where
the owner might not have known. This is now on implied abandonment
not the express abandonment.
xxx xxx xxx
HON. QUIMPO. Because Im thinking, Mr. Chairman. Im thinking of certain
situations where the importer even though, you know, in the normal course
of business sometimes they fail to keep up the date or something to
that effect.
THE CHAIRMAN. Sometimes their cargoes get lost.
HON. QUIMPO. So just to, you know . . . anyway, this is only a notice to
be sent to them that they have a cargo there.
xxx xxx xxx
MR. PARAYNO. Your Honor, I think as a general rule, five days
[extendible] to another five days is a good enough period of time. But we
cannot discount that there are some consignees of shipments
located in rural areas or distant from urban centers where the
ports are located to come to the [BOC] and to ask for help
particularly if a ship consignment is made to an individual who is
uninitiated with customs procedures. He will probably have the
problem of coming over to the urban centers, seek the advice of
people on how to file entry. And therefore, the five day extendible
to another five days might really be a tight period for some. But
the majority of our importers are knowledgeable of
procedures. And in fact, it is in their interest to file the entry even before
the arrival of the shipment. Thats why we have a procedure in the bureau
whereby importers can file their entries even before the shipment arrives in
the country.[45] (Emphasis supplied)
xxxxxxxxx
Petitioner, a regular, large-scale and multinational importer of oil and oil products, fell
under the category of a knowledgeable importer which was familiar with the governing rules
and procedures in the release of importations.
Furthermore, notice to petitioner was unnecessary because it was fully aware that its
shipments had in fact arrived in the Port of Batangas. The oil shipments were discharged from
the carriers docked in its private pier or wharf, into its shore tanks. From then on, petitioner had
actual physical possession of its oil importations. It was thus incumbent upon it to know its
obligation to file the IEIRD within the 30-day period prescribed by law. As a matter of fact,
importers such as petitioner can, under existing rules and regulations, file in advance an import
entry even before the arrival of the shipment to expedite the release of the same. However, it
deliberately chose not to comply with its obligation under Section 1301.
The purpose of posting an urgent notice to file entry pursuant to Section B.2.1 of
CMO 15-94 is only to notify the importer of the arrival of its shipment and the details of said
shipment. Since it already had knowledge of such, notice was superfluous. Besides, the entries
had already been filed, albeit belatedly. It would have been oppressive to the government to
demand a literal implementation of this notice requirement.
AN ABANDONED ARTICLE
SHALL IPSO FACTO BE
DEEMED THE PROPERTY OF
THE GOVERNMENT
Section 1802 of the TCC provides:
Sec. 1802. Abandonment of Imported Articles. - An abandoned
article shall ipso facto be deemed the property of the
Government and shall be disposed of in accordance with the provisions of
this Code. (Emphasis supplied)
 The term ipso facto is defined as by the very act itself or by mere act. Probably a
closer translation of the Latin term would be by the fact itself.[46] Thus, there was no need for
any affirmative act on the part of the government with respect to the abandoned imported
articles since the law itself provides that the abandoned articles shall ipso factobe deemed the
property of the government. Ownership over the abandoned importation was transferred to the
government by operation of law under Section 1802 of the TCC, as amended by RA 7651.
A historical review of the pertinent provisions of the TCC dispels any view that is
contrary to the automatic transfer of ownership of the abandoned articles to the government by
the mere fact of an importers failure to file the required entries within the mandated period.
Under the former Administrative Code, Act 2711,[47] Section 1323 of Article XV thereof
provides:
Sec. 1323. When implied abandonment takes effect Notice An
implied abandonment shall not take effect until after the property shall be
declared by the collector to have been abandoned and notice to the party in
interest as in seizure cases.
Thereafter, RA 1937[48] was enacted. Section 1801 thereof provides:
Sec. 1801. Abandonment, Kinds and Effect of. Abandonment is
express when it is made direct to the Collector by the interested party in
writing and it is implied when, from the action or omission of the interested
party, an intention to abandon can be clearly inferred. The failure of any
interested party to file the import entry within fifteen days or any extension
thereof from the discharge of the vessel or aircraft, shall be implied
abandonment. An implied abandonment shall not be effective until the
article is declared by the Collector to have been abandoned after notice
thereof is given to the interested party as in seizure cases.
Any person who abandons an imported article renounces all his
interests and property rights therein.
PD 1464[49] did not amend the provisions of the TCC on abandonment. The latest
amendment was introduced by Section 1802 of RA 7651 which provides:
Sec. 1802. Abandonment of Imported Articles. An abandoned
article shall ipso facto be deemed the property of the Government and shall
be disposed of in accordance with the provisions of this Code.
The amendatory law, RA 7651, deleted the requirement that there must be a
declaration by the Collector of Customs that the goods have been abandoned by the importers
and that the latter shall be given notice of said declaration before any abandonment of the
articles becomes effective.
No doubt, by using the term ipso facto in Section 1802 as amended by RA 7651, the
legislature removed the need for abandonment proceedings and for a declaration that the
imported articles have been abandoned before ownership thereof can be transferred to the
government.[50]
Petitioner claims it is arbitrary, harsh and confiscatory to deprive importers of their
property rights just because of their failure to timely file the IEIRD. In effect, petitioner is
challenging the constitutionality of Sections 1801 and 1802 by contending that said provisions
are violative of substantive and procedural due process. We disallow this collateral attack on a
presumably valid law:
We have ruled time and again that the constitutionality or validity
of laws, orders, or such other rules with the force of law cannot be attacked
collaterally. There is a legal presumption of validity of these laws and rules.
Unless a law or rule is annulled in a direct proceeding, the legal
presumption of its validity stands.[51]
Besides,
[a] law is deemed valid unless declared null and void by a
competent court; more so when the issue has not been duly pleaded in the
trial court. The question of constitutionality must be raised at the earliest
opportunity. xxx The settled rule is that courts will not anticipate a question
of constitutional law in advance of the necessity of deciding it.[52]
Be that as it may, the intent of Congress was unequivocal. Our policy makers wanted
to do away with lengthy proceedings before an importation can be considered abandoned:
x x x x x x xxx
MR. PARAYNO. Thank you, Mr. Chairman. The proposed amendment to
Section 1801 on the abandonment, kinds and effects. This aimed to
facilitate, Mr. Chairman, the process by which this activity is being acted
upon at the moment. The intention, Mr. Chairman, is for the Customs
Administration to be able to maximize the revenue that can be derived from
abandoned goods, and the problem that we are encountering at the
moment is that we have to go through a lengthy process similar to a seizure
proceedings to be able to finally declare the cargo, the abandoned cargo
forfeited in favor of the government and therefore, may be disposed of
pursuant to law. And that therefore, the proposed amendment
particularly on the implied abandonment as framed here will do
away with the lengthy process of seizure proceedings and therefore,
enable us to dispose of the shipments through public auction and other
modes of disposal as early as possible.
THE CHAIRMAN. In other words, Commissioner, therell be no
need for a seizure in the case of abandonment because under the
proposed bill its considered to be government property.[53]
x x x xxx xxx
CONCLUSION
Petitioners failure to file the required entries within a non-extendible period of thirty
days from date of discharge of the last package from the carrying vessel constituted implied
abandonment of its oil importations. This means that from the precise moment that the non-
extendible thirty-day period lapsed, the abandoned shipments were deemed (that is, they
became) the property of the government. Therefore, when petitioner withdrew the oil shipments
for consumption, it appropriated for itself properties which already belonged to the
government. Accordingly, it became liable for the total dutiable value of the shipments of
imported crude oil amounting to P1,210,280,789.21 reduced by the total amount of duties paid
amounting to P316,499,021.00 thereby leaving a balance of P893,781,768.21.
 By the very nature of its functions, the CTA is a highly specialized court specifically
created for the purpose of reviewing tax and customs cases. It is dedicated exclusively to the
study and consideration of revenue-related problems and has necessarily developed an
expertise on the subject. Thus, as a general rule, its findings and conclusions are accorded great
respect and are generally upheld by this Court, unless there is a clear showing of a reversible
error or an improvident exercise of authority. There is no such showing here.

WHEREFORE, the petition is hereby DENIED. Petitioner Chevron Philippines, Inc.

is ORDERED to pay the amount of EIGHT HUNDRED NINETY THREE MILLION SEVEN
HUNDRED EIGHTY ONE THOUSAND SEVEN HUNDRED SIXTY EIGHT PESOS AND TWENTY-ONE
CENTAVOS (P893,781,768.21) plus six percent (6%) legal interest per annum accruing from the
date of promulgation of this decision until its finality. Upon finality of this decision, the sum so
awarded shall bear interest at the rate of twelve percent (12%) per annum until its full
satisfaction.

Costs against petitioner.

SO ORDERED.
8) SECOND DIVISION
G.R. No. 168137 August 7, 2013
SECRETARY OF THE DEPARTMENT OF FINANCE, PETITIONER,
vs.
COURT OF TAX APPEALS (SECOND DIVISION) AND KUTANGBATO CONVENTIONAL
TRADING MULTI-PURPOSE COOPERATIVE,1 RESPONDENTS.
RESOLUTION
PERLAS-BERNABE, J.:
Assailed in this petition for certiorari2 are the Resolutions dated December 21, 20043 and April
18, 20054 of the Court of Tax Appeals - Second Division (CTA) in C.T.A. Case No. 7028, granting
private respondent Kutangbato Conventional Trading Multi-Purpose Cooperative’s (KCTMPC)
Motion to Release Goods Under Bond5 (motion to release).
The Facts
On the strength of a Warrant of Seizure and Detention issued on January 31, 2003 (seizure
warrant) by the Bureau of Customs, 4th Collection District, Batangas (BoC), 73 container vans
loaded with 29,796 bags of imported rice (subject goods) were seized and detained for alleged
violation of Section 25306 of Republic Act No. (RA) 1937,7otherwise known as the "Tariff and
Customs Code of the Philippines" (TCCP).8 The shipment, which came from Polloc, Cotabato,
was destined for Manila on board the inter-island vessel M/V Nossa Senhora de Fatima and was
initially intercepted on January 30, 2003 in the Batangas Bay area by the combined elements of
the Philippine Coast Guard, Presidential Security Guard, Batangas Customs Police-Enforcement
and Security Service, and Customs Intelligence & Investigation Service. Upon inspection, it was
discovered that the shipment did not have the required import permit and that the shipment
was declared in the Coasting Manifest and Bill of Lading of the vessel as "corn grits," instead of
rice, in violation of the TCCP.9 The seizure was thereafter, docketed as Batangas Seizure
Identification No. 02-03.10
On February 7, 2003, KCTMPC, claiming ownership over the foregoing shipment, moved to
intervene in the seizure proceedings and further sought the quashal of the seizure warrant.11 In
an Order dated March 18, 2003, the BoC granted KCTMPC’s motion to intervene but denied its
motion to quash seizure warrant.12
The Proceedings Before the BoC and the Department of Finance
After the formal hearing of the case, District Collector of Customs Edward P. Dela Cuesta (Dela
Cuesta), rendered a Decision13 dated April 4, 2003 in favor of KCTMPC, ordering the release of
the 73 container vans loaded with the subject goods.
Dela Cuesta found that KCTMPC did not transgress Section 2503 of the TCCP since there was no
importation involved but only a transport of local commodities which is beyond the ambit of the
TCCP.14 This is due to the fact that KCTMPC’s importation of assorted commodities, including the
subject goods, from Labuan, Malaysia for the period of November 10, 2002 to January 26, 2003,
had already been cleared under different Informal Import Declarations and Entry Numbers and
that the corresponding leviable duties and taxes due thereon had likewise been paid.15 The
subject goods had also been released from the customhouse and hence, had already left the
jurisdiction of the BoC.16 Dela Cuesta also pointed out that KCTMPC was issued a special
permit/authority by the Regional Secretary of the Department of Trade and Industry, Cotabato
City (DTI) and by the Department of Agriculture, inter alia, to engage in conventional trading via
the Labuan, Malaysia-Singapore-Polloc-Maguindanao trading route for products like grains. The
National Food Authority (NFA) equally granted a Grains Business License to KCTMPC, allowing it
to engage in the retailing, wholesaling, warehousing, and importing of rice.17 Considering the
foregoing reasons, Dela Cuesta found no sufficient ground to engender a well-founded belief
that the 73 container vans containing the subject goods are liable for forfeiture and, as such,
ordered them to be released.18
As Dela Cuesta’s ruling was adverse to the government, then BoC Commissioner, Antonio M.
Bernardo, forwarded the case for automatic review to petitioner Secretary of the Department of
Finance (petitioner).19 In the 4th Indorsement20 dated November 21, 2003 (4th Indorsement) of
then Undersecretary of Finance, Maria Gracia M. Pulido-Tan (Pulido-Tan), Dela Cuesta’s ruling
was reversed and the BoC was ordered to "determine the possible violations or applicable
customs rules and regulations, and institute such actions, criminal or otherwise, against the
person found to be responsible."21
Nonetheless, on January 23, 2004, KCTMPC filed a Motion for Execution,22 contending that the
Decision of Dela Cuesta had already become final and executory in accordance with Section
231323 of the TCCP, as amended by RA 7651. Pulido-Tan denied the said motion through a 9th
Indorsement24 dated April 1, 2004 (9th Indorsement), instructing the BoC to strictly abide by
and comply with the 4th Indorsement. Aggrieved, KCTMPC filed a Petition for Review with
Prohibition25 (petition for prohibition) before the CTA, docketed as C.T.A. Case No. 7028.
The Proceedings Before the CTA
In its petition for prohibition, KCTMPC contended that the subject goods are not subject to
seizure and forfeiture because the legal requisites for the same are absent and that, pursuant to
Section 1202 of the TCCP, the importation of the rice shipment was already terminated upon
payment of the duties and taxes due thereon.
Meanwhile, pending resolution of its petition, KCTMPC filed a motion to release26 which
petitioner opposed27 on the ground that the importation in question demonstrates badges of
smuggling since: (a) KCTMPC had no clear license to undertake the importation of the subject
goods; (b) the subject goods were misdeclared as corn grits; (c) there is a strong indication that
KCTMPC was just being used as a dummy or conduit for Agro Farm, Las Buenas Farm, and SCC
Farm that had also laid claim to the rice shipment; (d) the subject goods were not imported by
KCTMPC itself but by persons who do not possess any authority or license therefor; and (e) M/V
Nossa Senhora de Fatima curiously deviated from its intended route and attempted to dock at
Batangas Port.28 Also, citing the case of Geotina v. CTA29 (Geotina), petitioner argued that the
subject goods should be considered as prohibited under Section 102(k) of the TCCP and, as
such, should not be released pending final determination of KCTMPC’s petition for prohibition.30
On December 21, 2004, the CTA issued a Resolution31 which granted KCTMPC’s motion to
release. Petitioners moved for reconsideration which was, however, denied in a
Resolution32 dated April 18, 2005.
The CTA ruled that petitioner’s reliance on Geotina was misplaced since the importation of the
articles therein, i.e., apples, were barred under Central Bank Circular (CB Circular) No. 289
dated February 21, 1970. This is, however, untrue for rice and corn products which are mere
"regulated" and not "prohibited" commodities.33 It further found that the government agency
tasked to supervise the importation of the subject goods already confirmed its allowance. In
addition, the CTA noted that KCTMPC may, under Section 2301 of the TCCP, secure the release
of the subject goods in detention by the filing of a cash bond.34 Dissatisfied with the CTA’s
ruling, petitioner filed the instant petition for certiorari.
Subsequently, or on August 6, 2008, the CTA rendered a Decision (August 6, 2008 Decision) in
C.T.A. Case No. 7028, annulling the 9th Indorsement for having been issued beyond the
reglementary period allowed by law. As a result, Dela Cuesta’s ruling lifting the seizure warrant
had become final and executory. Thereafter, or on August 27, 2008, the CTA’s August 6, 2008
Decision had also become final and executory.35
commodities.42 Therefore, owing to this divergence, the CTA properly pronounced that the
Geotina ruling is inapplicable.
It is a standing jurisprudential rule that not every error in the proceedings, or every erroneous
conclusion of law or fact, constitutes grave abuse of discretion.43 An act of a court or tribunal
can only be considered to be tainted with grave abuse of discretion when such act is done in a
capricious or whimsical exercise of judgment as is equivalent to lack of jurisdiction.44 In order to
be qualified as "grave," the abuse of discretion must be so patent or gross as to constitute an
evasion of a positive duty or a virtual refusal to perform the duty or to act at all in
contemplation of law.45 Finding that this characterization does not fit the CTA’s exercise of
discretion in this case, the Court holds that no grave abuse of discretion attended its grant of
KCTMPC’s motion to release.

The Issue Before the Court WHEREFORE, the petition is DISMISSED.

The essential issue in this case is whether or not the CTA committed grave abuse of discretion SO ORDERED.
when it granted KCTMPC’s motion to release.

The Court’s Ruling

The petition is denied.

At the outset, it bears to stress that the issues raised in the instant petition have already been
rendered moot and academic by virtue of petitioner’s own manifestation that the CTA had
already rendered a decision on the main case,36 of which the matter on the propriety of the
CTA’s grant of KCTMPC’s motion to release is but an incident.1âwphi1

Records disclose that based on the Entry of Judgment37 attached to petitioner’s Manifestation,
the 9th Indorsement was annulled by the CTA for having been issued beyond the reglementary
period allowed by law. In effect, Dela Cuesta’s ruling lifting the seizure of warrant was declared
to be final and executory.38 More pertinently, the CTA’s August 6, 2008 Decision had also
become final and executory last August 27, 2008.39 Therefore, C.T.A. Case No. 7028, including
all of the incidents therein, has been laid to rest, altogether barring petitioner to contest the
same. Consequently, no practical relief can be granted to petitioner by resolving the instant
petition as it only revolves around the CTA’s grant of KCTMPC’s motion to release, which, as
earlier mentioned, is but an incident of the main case. In fine, the petition is deemed as moot.40

In any event, the Court finds that the CTA did not gravely abuse its discretion when it granted
KCTMPC’s motion to release since there lies cogent legal bases to support its conclusion that the
subject goods were merely "regulated" and not "prohibited" commodities.

Among others, the CTA correctly observed that the Geotina ruling was inapplicable due to the
classification of the goods involved therein. As cited by the CTA, CB Circular No. 1389 dated
April 13, 1993 classified imports into three (3) categories, namely: (a) "freely importable
commodities" or those commodities which are neither "regulated" nor "prohibited" and the
importation of which may be effected without any prior approval of or clearance from any
government agency; (b) "regulated commodities" or those commodities the importation of
which require clearances/permits from appropriate government agencies; and (c) "prohibited
commodities" or those commodities the importation of which are not allowed by law.41 Under
Annex 1 of the foregoing circular, rice and corn are enumerated as "regulated" commodities,
unlike the goods in the Geotina case, which were, at that time, classified as "prohibited"
9) EN BANC
G.R. No. 84111 December 22, 1989
JIMMY O. YAOKASIN, petitioner,
vs.
THE COMMISSIONER OF CUSTOMS, SALVADOR M. MISON and the DISTRICT
COLLECTOR OF THE PORT OF TACLOBAN, VICENTE D. YUTANGCO, respondents.
GRIÑO-AQUINO, J.:
This petition questions the power of automatic review of the Commissioner of Customs over the
decision of the Collector of Customs in protest and seizure cases.
On May 27, 1988, the Philippine Coast Guard seized 9000 bags/ sacks of refined sugar, which
were being unloaded from the M/V Tacloban, and turned them over to the custody of the
Bureau of Customs.
The petitioner presented a sales invoice from the Jordan Trading of Iloilo (Annex A, Petition) to
prove that the sugar was purchased locally. The District Collector of Customs, however,
proceeded with the seizure of the bags of sugar.
On June 3 and 6, 1988, show-cause hearings were conducted. On June 7, 1988, the District
Collector of Customs ordered the release of the sugar as follows:
WHEREFORE, premises considered subject Nine Thousand (9,000)
sacks/bags of refined sugar are hereby ordered released to Mr. Jimmy O.
Yaokasin, consignee/claimant and the immediate withdrawal of Customs
Guard within its bodega's premises. (p. 276, Rollo.)
On June 10, 1988, the decision, together with the entire records of the case, were transmitted
to, and received by, the Commissioner of Customs (Annex H, Petition, p. 277, Rollo).
On June 14, 1988, without modifying his decision, the District Collector of Customs ordered the
warehouse, wherein the bags of sugar were stored, to be sealed.
On June 19, 1988, the Economic Intelligence and Investigation Board (EIIB) filed a Motion for
Reconsideration (Annex I, Petition, p. 278, Rollo), for "further hearing on the merits" (p. 279,
Rollo), based on evidence that the seized sugar was of foreign origin. Petitioner opposed the
motion for being merely pro forma and/or that the same was, in effect, a motion for new trial.
Hearing Officer Paula Alcazaren set the Motion for reconsideration for hearing on July 13, 1988.
But before that, or on July 4, 1988, the Commissioner of Customs by "2nd Indorsement"
returned to the District Collector of Customs the:
... folder of Tacloban S.I. No. 06-01 (R.P. vs. 9000 bags/sacks of refined
sugar, MR. JIMMY YAOKASIN, consignee/claimant), together with
the proposed decision, for hearing and/or resolution of the government is
motion for reconsideration ... . (p. 437, Rollo, Emphasis Ours.)
On the same date, July 4, 1988, petitioner applied for and secured a writ of replevin from the
Regional Trial Court of Leyte (CC 7627, Branch VII), through a Petition/Complaint for certiorari
Prohibition with Replevin and Damages with Preliminary Injunction and/or Restraining Order
(Annex L, Petition, p. 288, Rollo).
On July 12, 1988, respondent District Collector of Customs filed an Answer assailing the court's
jurisdiction. On the same day, the District Collector and the Commissioner of Customs filed in
the Court of Appeals a Petition for certiorari and Prohibition with Application for a Writ of
Preliminary Injunction and/or Restraining Order to annul the July 4, 1988 — "Order Granting
Replevin with Temporary Restraining Order" (CA-G.R. SP NO. 15090; p. 396, Rollo).
On July 15, 1988, the Collector of Customs reconsidered his June 7, 1988 decision, as follows:
WHEREFORE, the undersigned hereby reconsiders his Decision, finds that
the 9,000 bags/sacks of refined sugar in question are of foreign origin,
smuggled into the country, and declares them forfeited in favor of the
government.
Considering the provision in the quoted Customs Memorandum Order,
especially the latter part thereof prohibiting the release of the articles in
question to the claimant, and considering also that the said sacks of sugar
are presently stored in the bodega of claimant, and considering further that
there are no facilities for storage in Tacloban City, for security reasons, the
Honorable Commissioner of Customs is respectfully and earnestly urged to
order the immediate transfer of the sugar from the said bodega to any
Customs Warehouse, preferably in Manila and to this end to order the
setting aside of such sum of money in order to effectively accomplish this
purpose." (p. 11, Rollo.)
Also, on the same day, the Court of Appeals: (a) gave due course to respondent's petition; and
(b) restrained Judge Pedro S. Espina, Regional Trial Court, Leyte, from further proceeding in
Civil Case No. 7627, and from enforcing his Order of July 4, 1988.
It is petitioner's contention that the June 7, 1988 decision of the District Collector of Customs
became final and executory, in view of the absence of an appeal therefrom by the "aggrieved
party" (himself) within the 15-day period provided for in Sec. 2313 of the Tariff and Customs
Code. Hence, the release of the 9,000 bags of sugar must be upheld.
On the other hand, the District Collector and the Commissioner of Customs argue that since the
June 7, 1988 decision is adverse to the government, the case should go to the Commissioner of
Customs on automatic review, pursuant to Memorandum Order No. 20-87, dated May 18, 1987,
of former Acting Commissioner of Customs Alexander Padilla, which provides:
CUSTOMS MEMORANDUM ORDER
NO. 20-87
 TO: All Collectors of Customs and Others Concerned
Effective immediately, you are hereby directed to implement strictly the
following —
Decisions of the Collector of Customs in seizure and
protest cases are subject to review by the
Commissioner upon appeal as provided under existing
laws; provided, however, that where a decision of the
Collector of Customs in such seizure and protest cases
is adverse to the government it shall automatically be
reviewed by the Commissioner of Customs. (PD. No. 1,
Annex C.)
In view thereof, no releases in any seizure or like cases may be effected
unless and until the decision of the Collector has been confirmed in writing
by the Commissioner of Customs.
For immediate and strict compliance. (p. 436, Rollo; Emphasis Ours)
The memorandum order implements Section 12 (Art. IV, Part. IV, Vol. I) of the Integrated
Reorganization Plan (hereafter, "PLAN") which provides:
12. The Collector of Customs at each principal port of entry shall be the
official head of the customs service in his port and district responsible to the
Commissioner. He shall have the authority to take final action on the
enforcement of tariff and customs laws within his collection district and on
administrative matters in accordance with Chapter III, Part II of this Plan.
Decisions of the Collector of Customs in seizure and protest cases are
subject to review by the Commissioner upon appeal as provided under
existing laws; provided, however, that where a decision of a Collector of
Customs in such seizure and protest cases is adverse to the government, it
shall automatically be reviewed by the Commissioner of Customs which, if
affirmed, shall automatically be elevated for final review by the Secretary of
Finance; provided, further that if within thirty days from receipt of the
records of the case by the Commissioner of Customs or the Secretary of
Finance, no decision is rendered by the Commissioner of Customs or the
Secretary of Finance, the decision under review shall become final and
executory. (Emphasis supplied)
In Presidential Decree No. 1, dated September 24, 1972, former President Marcos decreed and
ordered that the Plan be (4 adopted, approved, and made as part of the law of the land." Under
the 1987 Constitution, "[a]ll existing laws, decrees, executive orders, proclamations, letters of
instruction, and other executive issuances not inconsistent with this Constitution shall remain
operative until amended, repealed, or revoked" (Sec. 3, Art. XVIII). While some provisions of
the Plan have ceased to be operative because of subsequent reorganizations, other provisions,
such as Section 12 have not been repealed by subsequent legislation.
Section 12 of the Plan applies to petitioner's shipment of 9,000 bags of sugar. Taxes being the
lifeblood of the Government, Section 12, which the Commissioner of Customs in his Customs
Memorandum Order No. 20-87, enjoined all collectors to follow strictly, is intended to protect
the interest of the Government in the collection of taxes and customs duties in those seizure
and protest cases which, without the automatic review provided therein, neither the
Commissioner of Customs nor the Secretary of Finance would probably ever know about.
Without the automatic review by the Commissioner of Customs and the Secretary of Finance, a
collector in any of our country's far-flung ports, would have absolute and unbridled discretion to
determine whether goods seized by him are locally produced, hence, not dutiable or of foreign
origin, and therefore subject to payment of customs duties and taxes. His decision, unless
appealed by the aggrieved party (the owner of the goods), would become final with 'the no one
the wiser except himself and the owner of the goods. The owner of the goods cannot be
expected to appeal the collector's decision when it is favorable to him. A decision that is
favorable to the taxpayer would correspondingly be unfavorable to the Government, but who
will appeal the collector's decision in that case certainly not the collector.
Evidently, it was to cure this anomalous situation (which may have already defrauded our
government of huge amounts of uncollected taxes), that the provision for automatic review by
the Commissioner of Customs and the Secretary of Finance of unappealed seizure and protest
cases was conceived to protect the government against corrupt and conniving customs
collectors.
Section 12 of the Plan and Section 2313 of the Tariff and Customs Code do not conflict with
each other. They may co-exist. Section 2313 of the Code provides for the procedure for the
review of the decision of a collector in seizure and protest cases upon appeal by the aggrieved
party, i.e., the importer or owner of the goods. On the other hand, Section 12 of the Plan refers
to the general procedure in appeals in seizure and protest cases with a special proviso on
automatic review when the collector's decision is adverse to the government. Section 2313 and
the proviso in Section 12, although they both relate to the review of seizure and protest cases,
refer to two different situations — when the collector's decision is adverse to the importer or
owner of the goods, and when the decision is adverse to the government.
The decision of the Court in the case of Sy Man vs. Jacinto (93 Phil. 1093 [19531]), which the
petitioner invokes as precedent, is riot in point. In the present case the Acting Commissioner, in
issuing the memorandum circular, was directing strict compliance with an existing provision of
law, which mandates automatic review of decisions of collectors in seizure and protest cases
which are adverse to the government. On the other hand, in Sy Man, the memorandum order of
the Insular Collector of Customs directed the elevation of records in seizure and forfeiture cases
for automatic review even if he had not been expressly granted such power under the then
existing law.
The objection to the enforcement of Section 12 of the Plan and CMO No. 20-87 on the ground
that they had not been published in the Official Gazette, is not well taken. The Plan, as part of
P.D. No. 1, was "adopted, approved and made as part of the law of the land" and published in
Volume 68, No. 40, p. 7797 of the Official Gazette issue of October 2, 1972.
Article 2 of the Civil Code, which requires laws to be published in the Official Gazette, does not
apply to CMO No. 20-87 which is only an administrative order of the Commissioner of Customs
addressed to his subordinates. the customs collectors.
Commonwealth Act No. 638 (an Act to Provide for the Uniform Publication and Distribution of
the Official Gazette) enumerates what shall be published in the Official Gazette besides
legislative acts and resolutions of a public natureof the Congress of the Philippines. Executive
and administrative orders and proclamations, shall also be published in the Official
Gazette, except such as have no general applicability." CMO No. 20-87 requiring collectors of
customs to comply strictly with Section 12 of the Plan, is an issuance which is addressed only
to particular persons or a class of persons (the customs collectors). "It need not be published,
on the assumption that it has been circularized to all concerned" (Tanada vs. Tuvera, 136 SCRA
27).

WHEREFORE, the petition for review is denied for lack of merit. The temporary restraining order
which we issued in this case is hereby made permanent. Cost against the petitioner.

SO ORDERED.

Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Bidin, Sarmiento and Cortes, JJ.,
concur.

Padilla, Jr., took no part.

10) [G.R. No. 134114. July 6, 2001]
NESTLE PHILIPPINES, INC., (FORMERLY FILIPRO, INC.) petitioner, vs. HONORABLE
COURT OF APPEALS, COURT OF TAX APPEALS and COMMISSIONER OF
CUSTOMS, respondents.
DECISION
DE LEON, JR., J.:
Challenged in this petition for review on certiorari is the Decision[1] in CA-G.R. SP. No.
43188[2] dated September 23, 1997 of the Court of Appeals which affirmed the Decision[3] dated
May 30, 1995 of the Court of Tax Appeals in C.T.A. Case No. 4478 [4] dismissing petitioners
petition for review to compel the Commissioner of Customs to grant it a refund of allegedly
overpaid import duties, on its various importations of milk and milk products, amounting to Five
Million Eight Thousand and Twenty-Nine Pesos (P5,008,029.00).
Petitioners motion for reconsideration thereof was denied by the Court of Appeals in a
Resolution[5] dated June 9, 1998.
The antecedent facts are as follows.
Petitioner is a duly organized domestic corporation engaged in the importations of milk
and milk products for processing, distribution and sale in the Philippines. Between July and
November 1984, petitioner transacted sixteen (16) separate importations of milk and milk
products from different countries. Petitioner was assessed customs duties and advance sales
taxes by the Collector of Customs of Manila for each of these separate importations on the basis
of the published Home Consumption Value (HCV) indicated in the Bureau of Customs Revision
Orders. Petitioner paid the same but seasonably filed the corresponding protests before the said
Collector of Customs from October 25 to December 5, 1984, uniformly alleging therein that the
latter erroneously applied higher home consumption values in determining the dutiable value for
each of these separate importations. In the said protests, petitioner claims for refund of both
the alleged overpaid import duties amounting to Five Million Eight Thousand and Twenty-Nine
Pesos (P5,008,029.00) and advance sales taxes aggregating to Four Million Five Hundred Sixty-
Four Thousand One Hundred Seventy-Nine Pesos and Thirty Centavos (P4,564,179.30).
On October 14, 1986, petitioner formally filed a claim for refund of allegedly overpaid
advance sales taxes with the Bureau of Internal Revenue (BIR) amounting to Four Million Five
Hundred Sixty-Four Thousand One Hundred Seventy-Nine Pesos and Thirty Centavos
(P4,564,179.30) covering the same sixteen (16) importations of milk and milk products from
different countries. Not long after, on October 15, 1986 and within the two-year prescriptive
period provided for under the National Internal Revenue Code (NIRC) for claiming a tax refund,
petitioner filed the corresponding petition for review with the Court of Tax Appeals (CTA) which
was docketed therein as C.T.A. Case No. 4114. On January 3, 1994, the tax court ruled in favor
of petitioner and forthwith ordered the BIR to refund to the petitioner the sum of Four Million
Four Hundred Eighty-Nine Thousand Six Hundred Sixty-One Pesos and Ninety-Four Centavos
(P4,489,661.94) representing the overpaid Advance Sales Taxes on the aforesaid importations.
On the other hand, the sixteen (16) protest cases for refund of alleged overpaid customs
duties amounting to Five Million Eight Thousand Twenty-Nine Pesos (P5,008,029.00) were left
with the Collector of Customs of Manila. However, the said Collector of Customs failed to render
his decision thereon after almost six (6) years since petitioner paid under protest the customs
duties on the said sixteen (16) importations of milk and milk products and filed the
corresponding protests.
Consequently, in order to prevent these claims from becoming stale on the ground of
prescription, petitioner immediately filed a petition for review docketed as C.T.A. Case No. 4478,
with the Court of Tax Appeals on August 2, 1990 despite the absence of a ruling on its protests
from both the Collector of Customs of Manila and the Commissioner of Customs.
On May 30, 1995, the CTA rendered judgment dismissing C.T.A. Case No. 4478 for want
of jurisdiction.[6] The subsequent motion for reconsideration filed by the petitioner on July 11,
1995 was denied for lack of merit in a Resolution[7] dated January 6, 1997.
Aggrieved, petitioner appealed on February 10, 1999 the said judgment and resolution of
the CTA in C.T.A. Case No. 4478 to the Court of Appeals by way of petition for review on
certiorari under Rule 45 of the Rules of Court. However, this appeal was later dismissed by the
appellate court on September 23, 1997 for lack of merit. The Court of Appeals opined, inter alia,
that the CTAs jurisdiction is not concurrent with the appellate jurisdiction of the Commissioner of
Customs since there was no decision or ruling yet of the Collector of Customs of Manila on the
matter; that the petition does not fall under any of the recognized exceptions on exhaustion of
administrative remedies to justify petitioners immediate resort to the CTA; that the petitioner
failed to move for the early resolution of its claims for refund nor was there any notice given
that the said Collector of Customs continued inaction on its claims would be deemed a denial of
its claims; and that petitioner also neglected to cite any law or jurisprudence which prescribes a
period for filing an appeal in the CTA even if there was no action yet by the Commissioner of
Customs.
On June 9, 1998, the appellate court issued a Resolution[8] denying petitioners motion for
reconsideration for lack of merit.
Hence, this petition.
Petitioner assigns the following as errors, to wit:
1. RESPONDENT COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION
IN HOLDING THAT THE FILING OF PROTEST CASES BEFORE THE COLLECTOR
OF CUSTOMS HAD EFFECTIVELY INTERRUPTED THE RUNNING OF THE SIX-
YEAR PRESCRIPTIVE PERIOD;
2. RESPONDENT COURTS COMMITTED FUNDAMENTAL ERRORS AND ACTED WITH
GRAVE ABUSE OF DISCRETIONS IN HOLDING THAT PETITIONER HAD FAILED
TO EXHAUST ADMINISTRATIVE REMEDIES,
NOTWITHSTANDING ALMOST 6 YEARS OF PROCTRACTED HEARINGS OF THE
16 PROTEST CASES WITH THE CUSTOMS COLLECTOR, AND FILING OF THE
PETITION ONLY WHEN THE SIX-YEAR PRESCRIPTIVE PERIOD WAS ABOUT TO
EXPIRE TO AVOID NULLLIFICATION OF CLAIMS ON GROUND OF
PRESCRIPTION;
3. THE RESPONDENT COURTS GRAVELY ERRED IN DISMISSING ON SHEER
TECHNICALITIES PETITIONERS CLAIMS FOR THE REFUND OF P5,008,029.08
(SIC) OVERPAID DUTIES, WHEN THE FACTS OF OVERPAYMENTS HAD BEEN
EARLIER RESOLVED IN CTA CASE NO. 4114, HOLDING THAT THE WRONG
APPLICATION OF THE HIGHER HOME CONSUMPTION VALUES RESULTED IN
THE OVERPAYMENTS OF DUTIES AND TAXES, AND UPON WHICH, IT ORDERED
THE REFUND OF P4,489,661.94 IN OVERPAID TAXES. THERE IS NO VALID
REASON THEREFORE WHY THE CORRESPONDING OVERPAYMENTS IN
CUSTOMS DUTIES CAN NOT ALSO BE REFUNDED TO ITS RIGHTFUL OWNER,
THE PETITIONER HEREIN.
In this petition, petitioner asserts that tax refunds are based on quasi-contract or solutio
indebiti, which under Article 1145[9] of the Civil Code, prescribes in six (6) years. Consequently,
the pendency of its protest cases before the office of the Collector of Customs of Manila did not
interrupt the running of the prescriptive period under the aforesaid provision of law considering
that it is only an administrative body performing only quasi-judicial function and not a regular
court of justice.[10] Thus, in like manner the thirty-day period for appealing to the CTA must be
made within the six-year prescriptive period.
Petitioner further contends that the fact of overpayment of customs duties has been duly
established and resolved with finality by the Court of Tax Appeals on January 3, 1994 in C.T.A.
Case No. 4114.[11] In that case, the tax court found that the Bureau of Customs erroneously
used the wrong home consumption value in assessing the petitioner the Advance Sales Tax on
its subject sixteen (16) importations.The tax court then ordered the Commissioner of Internal
Revenue to refund to the petitioner the sum of Four Million Four Hundred Eighty-Nine Thousand
Six Hundred Sixty-One Pesos and Ninety-Four Centavos (P4,489,661.94), representing overpaid
advance sales tax covering the same sixteen (16) importations. It is also from the same 16
separate importations of milk and milk products that petitioner based its claims for refund of
overpayment of customs duties. Thus, petitioner avers that its claims for refund of overpaid
customs duties must likewise be granted and awarded in its favor.
In lieu of Comment,[12] the Solicitor General manifested that there is merit in petitioners
argument considering that petitioners cause of action to recover a tax erroneously paid is based
on solutio indebiti which is expressly classified as a quasi-contract under the Civil Code; that
petitioners cause of action would have prescribed on August 2, 1990 if it did not bring the
matter before the CTA; and that the Collector of Customs has not even acted or resolved
the petitioners several protests it had filed before his office within six (6) years after it made the
earliest payment of advance customs duties on its importations.
There was also no violation of the principle of exhaustion of administrative remedies in
this case. This doctrine does not apply to the case at bar since its observance would only result
in the nullification of the claim for refund being asserted nor would it provide a plain, speedy
and adequate remedy under the circumstances. This notwithstanding, however, the Solicitor
General further opined that this case should be remanded to the CTA in order for the tax court
to determine the veracity of petitioners claim.
On the other hand, respondent Commissioner of Customs, in his Comment[13] dated
August 21, 2000, admitted with regret, their official inaction adverted to by the
petitioner. Respondent Commissioner expressed the view that petitioners claim for refund of
customs duties should not outrigthly be denied by virtue of the strict adherence to the rules to
prevent grave injustice to hapless taxpayers; that this does not justify, however, an outright
award of the refund of alleged overpayment of customs duties in favor of petitioner; and that
there is no definite factual determination yet that the customs duties and taxes in question were
overpaid and refundable, and if refundable how much is the refundable amount. The fact that
the Collector of Customs of Manila failed to act or decide on the petitioners protest cases filed
before his Office does not relieve the petitioner of its burden to prove that it is entitled to the
refund sought for. Thus, respondent Commissioner of Customs, thru his special counsel,
recommended that this case be remanded to the court of origin, namely, the CTA.
The recommendations of both the Solicitor General and the respondent Commissioner of
Customs are well taken. After a meticulous consideration of this case, we find that the
recommended remand of this case to the CTA is warranted for the proper verification
and determination of the factual basis and merits of this petition and in order that the ends of
substantial justice and fair play may be subserved. We are of the view that the said
recommendation is in accord with the provisions of the Tariff and Customs Code as hereinafter
discussed.
The right to claim for refund of customs duties is specifically governed by Section 1708 of
the Tariff and Customs Code, which provides that -
Sec. 1708. Claim for Refund of Duties and Taxes and Mode of Payment. All claims for refund
of duties shall be made in writing and forwarded to the Collector to whom such duties
are paid, who upon receipt of such claim, shall verify the same by the records of his
Office, and if found to be correct and in accordance with law, shall certify the same to the
Commissioner with his recommendation together with all necessary papers and
documents. Upon receipt by the Commissioner of such certified claim he shall cause the same to
be paid if found correct.
It is clear from the foregoing provision of the Tariff and Customs Code that in all claims
for refund of customs duties, the Collector to whom such customs duties are paid and upon
receipt of such claim is mandated to verify the same by the records of his Office. If such claim is
found correct and in accordance with law, the Collector shall certify the same to the
Commissioner with his recommendation together with all the necessary papers and
documents. This is precisely one of the reasons why the Court of Appeals upheld the dismissal
of the case on the ground that the CTAs jurisdiction[14] under the Tariff and Customs Code is not
concurrent with that of the respondent Commissioner of Customs due to the absence of any
certification from the Collector of Customs of Manila. Accordingly, petitioners contention that its
claims for refund of alleged overpayment of customs duties may be deemed established from
the findings of the tax court in C.T.A. Case No. 4114 on the Advance Sales Tax is not necessarily
correct in the light of the above-cited provision of the Tariff and Customs Code.
Customs duties is the name given to taxes on the importation and exportation of
commodities, the tariff or tax assessed upon merchandise imported from, or exported to, a
foreign country.[15] Any claim for refund of customs duties, therefore, take the nature of tax
exemptions that must be construed strictissimi juris against the claimants and liberally in favor
of the taxing authority.[16] This power of taxation being a high prerogative of sovereignty, its
relinquishment is never presumed. Any reduction or diminution thereof with respect to its mode
or its rate must be strictly construed, and the same must be couched in clear and unmistakable
terms in order that it may be applied.[17]
Thus, any outright award for the refund of allegedly overpaid customs duties in favor of
petitioner on its subject sixteen (16) importations is not favored in this jurisdiction unless there
is a direct and clear finding thereon. The fact alone that the tax court, in C.T.A. Case No. 4114,
has awarded in favor of the petitioner the refund of overpaid Advance Sales Tax involving the
same sixteen (16) importations does not in any way excuse the petitioner from proving its
claims for refund of alleged overpayment of customs duties. We have scrutinized the decision
rendered by the tax court in C.T.A. Case No. 4114 and found no clear indication therein that the
tax court has ruled on petitioners claims for alleged overpayment of customs duties.
The petitioner is mistaken in its contention that its claims for refund of allegedly overpaid
customs duties are governed by Article 2154[18] of the New Civil Code on quasi-contract, or the
rule on solutio indebiti, which prescribes in six (6) years pursuant to Article 1145 of the same
Code.
Sections 2308 and 2309 of the Tariff and Customs Code provide that:
Sec. 2308. Protest and Payment upon Protest in Civil Matter. When a ruling or decision of
the collector is made whereby liability for duties, taxes, fees, or other charges are
determined, except the fixing of fines in seizure cases, the party adversely affected may
protest such ruling or decision by presenting to the Collector at the time when
payment of the amount claimed to be due the government is made, or within fifteen (15)
days thereafter, a written protest setting forth his objection to the ruling or decision
in question, together with the reasons therefor. No protest shall be considered
unless payment of the amount due after final liquidation has first been made and the
corresponding docket fee, as provided for in Section 3301.
Sec. 2309. Protest Exclusive Remedy in Protestable Case.In all cases subject to protest, the
interested party who desires to have the action of the collector reviewed, shall make a
protest, otherwise, the action of the collector shall be final and conclusive against The ratiocination of the Court of Appeals is in accord with a ruling of this Court which is
him, x x x. applicable to the case at bar, to wit:

SEC. 2312. Decision or Action by the collector in Protest and Seizure Cases. - When a protest in
a proper form is presented in a case where protest is required, the collector shall issue
an order for hearing within fifteen (15) days from receipt of the protest and hear the
matter thus presented. Upon termination of the hearing, the Collector shall render a
decision within thirty (30) days, and if the protest is sustained, in whole or in part, he shall
make the appropriate order, the entry reliquidated necessary. x x x .
As stated by the respondent court in its Resolution dated January 6, 1997, the petitioners
claim cannot be deemed to prescribe because the Collector of Customs has not acted
on the protest, and the period for filing an appeal to the Commissioner of Customs
has not commenced to run. Moreover, delay or inaction of a subordinate official, does not
constitute an exception to the afore-cited principle as the delay should be brought to the
attention of a superior administrative officer for immediate adjudication (Commissioner of
Immigration vs. Vamenta, Jr., 54 SCRA 342; Barte vs. Dichoso, 47 SCRA 77).

In the light of the above-cited provisions of the Tariff and Customs Code, it appears that WHEREFORE, the assailed Decision dated September 23, 1997 of the Court of Appeals in
in all cases subject to protest, the claim for refund of customs duties may be foreclosed only CA-G.R. SP. No. 43188 is hereby SET ASIDE; and C.T.A. Case No. 4478 is REINSTATED and
when the interested party claiming refund fails to file a written protest before the Collector of REMANDED to the Court of Tax Appeals for hearing and reception of evidence relative to
Customs. This written protest which must set forth the claimants objection to the ruling or petitioners claims for refund of alleged overpayment of customs duties. The Court of Tax
decision in question together with the reasons therefor must be made either at the time when Appeals is directed to dispose of the said case with dispatch.
payment of the amount claimed to be due the government is made or within fifteen (15) days
thereafter. In conjunction with this right of the claimant is the duty of the Collector of Customs SO ORDERED.
to hear and decide such protest in accordance and within the period of time prescribed by the
law. Bellosillo, (Chairman), Mendoza, and Buena, JJ., concur.
Quisumbing, J., on official leave.
Accordingly, once a written protest is seasonably filed with the Collector of Customs the
failure or inaction of the latter to promptly perform his mandated duty under the Tariff and
Customs Code should not be allowed to prejudice the right of the party adversely affected
thereby. Technicalities and legalisms, however exalted, should not be misused by the
government to keep money not belonging to it, if any is proven, and thereby enrich itself at the
expense of the taxpayers. If the State expects its taxpayers to observe fairness and honesty in
paying their taxes, so must it apply the same standard against itself in refunding excess
payments, if any, of such taxes. Indeed the State must lead by its own example of honor,
dignity and uprightness.

Here, it is undisputed that the inaction of the Collector of Customs of Manila for nearly six
(6) years on the protests seasonably filed by the petitioner has caused the latter to immediately
resort to the CTA. The petitioner did so on the mistaken belief that its claims are governed by
the rule on quasi-contract or solutio indebiti which prescribes in six (6) years under Article 1145
of the New Civil Code.

This belief or contention of the petitioner is misplaced. In order for the rule on solutio
indebiti to apply it is an essential condition that petitioner must first show that its payment of
the customs duties was in excess of what was required by the law at the time when the subject
sixteen (16) importations of milk and milk products were made. Unless shown otherwise, the
disputable presumption of regularity of performance of duty lies in favor of the Collector of
Customs.

In the present case, there is no factual showing that the collection of the alleged overpaid
customs duties was more than what is required of the petitioner when it made the aforesaid
separate importations.There is no factual finding yet by the government agency concerned that
petitioner is indeed entitled to its claim of overpayment and, if true, for how much it is
entitled. It bears stress that in determining whether or not petitioner is entitled to refund of
alleged overpayment of customs duties, it is necessary to determine exactly how much the
Government is entitled to collect as customs duties on the importations. Thus, it would only be
just and fair that the petitioner-taxpayer and the Government alike be given equal opportunities
to avail of the remedies under the law to contest or defeat each others claim and to determine
all matters of dispute between them in one single case.[19] If the State expects its taxpayers to
observe fairness and honesty in paying their taxes, so must it apply the same standard against
itself in refunding excess payments, if truly proven, of such taxes. Indeed, the State must lead
by its own example of honor, dignity and uprightness.