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FIRST DIVISION

[G.R. No. 178759. August 11, 2008.]

CHEVRON PHILIPPINES, INC. , petitioner, vs . COMMISSIONER OF THE


BUREAU OF CUSTOMS , respondent.

DECISION

CORONA , J : p

This is a petition for review on certiorari 1 of the decision 2 and resolution 3 of the
Court of Tax Appeals (CTA) en banc dated March 1, 2007 and July 5, 2007, respectively,
in CTA EB Nos. 121 and 122 which reversed the decision of the CTA First Division dated
April 5, 2005 in CTA Case No. 6358. SIcEHD

Petitioner Chevron Philippines, Inc. 4 is engaged in the business of importing,


distributing and marketing of petroleum products in the Philippines. In 1996, the
importations subject of this case arrived and were covered by eight bills of lading,
summarized as follows:
ARRIVAL
PRODUCT DATE VESSEL
66,229,960 liters Ex MT
Nan Hai Crude Oil 3/8/1996 Bona Spray
6,990,712 liters Ex MT
Reformate 3/18/1996 Orient Tiger
16,651,177 liters Ex MT
FCCU Feed Stock 3/21/1996 Probo Boaning
236,317,862 liters
Oman/Dubai Ex MT
Crude Oil 3/26/1996 Violet
51,878,114 liters Ex MT
Arab Crude Oil 4/10/1996 Crown Jewel 5
The shipments were unloaded from the carrying vessels onto petitioner's oil
tanks over a period of three days from the date of their arrival. Subsequently, the import
entry declarations (IEDs) were led 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:
ENTRY PRODUCT ARRIVAL IED IEIRD
NO. DATE

606-96 66,229,960 liters 3/8/1996 3/12/1996 5/10/1996


Nan Hai Crude Oil
604-96 6,990,712 liters 3/18/1996 3/26/1996 5/10/1996
Reformate
605-96 16,651,177 liters 3/21/1996 3/26/1996 5/10/1996
FCCU Feed Stock
600-96 236,317,862 liters 3/26/1996 3/28/1996 5/10/1996
601-96 Oman/Dubai Crude
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Oil
602-96
603-96
818-96 51,878,114 liters 4/10/1996 4/10/1996 6/21/1996
Arab Crude Oil
The importations were appraised at a duty rate of 3% as provided under R.A.
8180 6 and petitioner paid the import duties amounting to P316,499,021. 7 Prior to the
effectivity of R.A. 8180 on April 16, 1996, the rate of duty on imported crude oil was
10%. TCADEc

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 importation of crude oil, thereby resulting in huge losses of revenue for the
government. This letter was endorsed to the Bureau of Customs (BOC) for
investigation on July 19, 1999. 8
On January 28, 2000, petitioner received a subpoena duces tecum/ad
testi candum from Conrado M. Unlayao, Chief of the Investigation and Prosecution
Division, Customs Intelligence and Investigation Service (IPD-CIIS) of the BOC, to
submit pertinent documents in connection 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 investigation. Atty. Roberto Madrid (of the
latter of ce) had gone to petitioner's Batangas Re nery 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 the investigation. 9
On August 1, 2000, petitioner received from the District Collector of Customs of
the Port of 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 shipments. In response, petitioner wrote the District Collector
to inform him of the pending request for the creation of a uni ed team with the
exclusive authority to investigate the matter. Furthermore, petitioner objected to the
demand for payment of customs duties using the 10% duty rate and reiterated its
position that the 3% tariff rate should instead be applied. It likewise raised the defense
of prescription against the assessment pursuant to Section 1603 of the Tariff and
Customs Code (TCC). Thus, it prayed that the assessment for de ciency customs
duties be cancelled and the notice of demand be withdrawn. 1 0
In a letter petitioner received on October 12, 2000, respondent Commissioner of
the BOC 1 1 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. 1 2
The IPD-CIIS, through Special Investigator II Domingo B. Almeda and Special
Investigator III Nemesio C. Magno, Jr., issued a nding dated February 2, 2001 that the
import entries were led 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. 1 3
Thereafter, respondent 1 4 wrote petitioner on October 29, 2001 informing it of
the ndings of irregularity in the ling 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
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pay the amount of P1,180,170,769.21 representing the total dutiable value of the
importations. 1 5 CSTEHI

This prompted petitioner to le a petition for review in the CTA First Division on
November 28, 2001, asking for the reversal of the decision of respondent. 1 6
In a decision promulgated on April 5, 2005, the CTA First Division ruled that
respondent was correct when he af rmed the ndings 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 de ciency
customs duties in the amount of P105,899,569.05. 1 7
Petitioner sought reconsideration of the April 5, 2005 decision while respondent
likewise led his motion for partial reconsideration. Both motions were denied in a
resolution dated September 9, 2005. 1 8
After both respondent and petitioner had led 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 ling of
the IEIRDs that constituted entry under the TCC. Since these were led 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
petitioner's actual knowledge of the arrival of the shipments. It likewise agreed with the
CTA Division's nding that petitioner committed fraud when it failed to le 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. 1 9
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;TSacCH

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 OF THE
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,
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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
led by a party other than the importer, said importer shall himself be required
to declare under oath and under the penalties of falsi cation 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 le 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 led such entry, fails to claim his importation
within fteen (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 R.A. 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 importer's willingness to complete the importation and to pay the
proper taxes, duties and fees. Conversely, the non- ling of the entry within the period
connotes the importer's 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 P.D. 1853, 2 0 it suf ces as an entry under
Sections 1301 and 1801 of the TCC. 2 1 TaEIAS

We disagree.
The term "entry" in customs law has a triple meaning. It means (1) the documents
led at the customs house; (2) the submission and acceptance of the documents and
(3) the procedure of passing goods through the customs house. 2 2
The IED serves as basis for the payment of advance duties on importations
whereas the IEIRD evidences the nal 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, de nes 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 speci ed entry form is properly led and
accepted , together with any related documents regained by the provisions of
this Code and/or regulations to be led with such form at the time of entry, at
the port or station by the customs of cial 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 of cial designated to receive such monies, provided that the article
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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 ling and acceptance of the "speci ed entry form" together with the
other documents required by law and regulations. There is no dispute that the
"speci ed entry form" refers to the IEIRD. Section 205 de nes 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, 2 3 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 led by the appellee, to remove the cases of eggs from the
customhouse. TSHEIc

This court is of the opinion that certainly the application, Exhibit A,


cannot be considered as a nal 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 le 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 veri cation
by the customhouse examiner, it cannot be considered fraudulent for the
purpose of imposing a surcharge of customs duties upon the importer. 2 4
(Emphasis supplied)
The congressional deliberations on House Bill No. 4502 which was enacted as
R.A. 7651 2 5 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 2 6 and 1301 of the [TCC], Mr. Speaker, import
entries for imported articles must be led within ve days from the date of
discharge of the last package from the vessel. The ve-day period, however, Mr.
Speaker, is subject to an inde nite 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
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extending the ve-day period to thirty days, which will no longer be
extendible , within which import entries must be led for imported articles.
Moreover, to give the importer reasonable time, the bill prescribes a period of
fteen days which may not be extended within which to claim his importation
from the time he led the import entry. Failure to le 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. TEDAHI

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 le 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 le an import entry, an appeal of fteen 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. 2 7 (Emphasis supplied)
The ling of the IEIRDs has several important purposes: to ascertain the value of
the imported articles, collect the correct and nal amount of customs duties and avoid
smuggling of goods into the country. 2 8 Petitioner's interpretation would have an
absurd implication: the 30-day period applies only to the IED while no deadline is
speci ed for the submission of the IEIRD. Strong issues of public policy militate
against petitioner's interpretation. It is the IEIRD which accompanies the nal 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 signi cant 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. 2 9 Hence, their prompt and certain availability is an imperative need 3 0 and
they must be collected without unnecessary hindrance. 3 1 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, 3 2 both the IED
and IEIRD should be led 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 ling of
IEIRDs was allegedly due to the late arrival of the original copies of the bills of lading
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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. IcAaSD

Petitioner's 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 con dence justly reposed, resulting in the damage to another, or
by which an undue and unconscionable advantage is taken of another". 3 3 It is a
question of fact and the circumstances constituting it must be alleged and proved in
the court below. 3 4 The nding 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. 3 5 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 le 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 petitioner's 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. 3 6

It was not by sheer coincidence that, by the time petitioner led 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 ling) untruthful. The bills of lading and corresponding invoices covering the
shipments were accomplished immediately after loading onto the vessels. 3 7 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 . 3 8 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 ling were extremely serious. In addition,
these supporting documents were not conclusive on the government. 3 9 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 nality of
liquidation under Section 1603 was inapplicable:
Section 1603. Finality of Liquidation. — When articles have been entered
and passed free of duty or nal 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 nal payment of duties, in
the absence of fraud or protest or compliance audit pursuant to the
provisions of this Code, be nal and conclusive upon all parties, unless the
liquidation of the import entry was merely tentative. 4 0
EcSaHA

THE IMPORTATIONS WERE ABANDONED


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IN FAVOR OF THE GOVERNMENT
The law is clear and explicit. It gives a non-extendible period of 30 days for the
importer to le 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
le 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 ( ling of the IEDs and paying advance
duties) revealed any intention to abandon the importations. 4 1
Unfortunately for petitioner, it was the law itself which considered the
importation abandoned when it failed to le 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 le the import entry within fteen 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. 4 2
After it was amended by R.A. 7651, there was an indubitable shift in language as
to what could be considered implied abandonment: AcICTS

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 le 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 . . .
From the wording of the amendment, R.A. 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 le 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. 4 3 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
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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 . . .
(Emphasis supplied)
Furthermore, it claims that notice and abandonment proceedings were required
under the BOC's guidelines on abandonment (CMO 15-94): IDETCA

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 le 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 le 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 led
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 of ce so
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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
certi cate must be encoded by Data Monitoring Unit in the
Manifest Clearance System. THaDEA

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 le entry within the
prescribed period and with certi cation that per records
available, the thirty (30) day period within which to le the
entry therefore has lapsed without the consignee/importer
ling the entry and that the proper posting of notice as
required has been complied with.
xxx xxx xxx
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 shipment enumerated 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 4 4 (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 led in 1996.
However, respondent discovered the fraud which attended the importations and their
subsequent release from the BOC's 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 of cials and employees.
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Consequently, it was impossible for respondent to comply with the requirements under
the rules. AcTDaH

By the time respondent learned of the anomaly, the entries had already been
belatedly led 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 le 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:
xxx xxx xxx
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 suf cient to . . . suf cient 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 rst
wondering whether this would be necessary in order to provide for due process.
I'm 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 I'm thinking, Mr. Chairman. I'm 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 . cIEHAC

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, ve days


[extendible] to another ve 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
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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 le entry. And
therefore, the ve day extendible to another ve 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 le the
entry even before the arrival of the shipment. That's why we have a procedure in
the bureau whereby importers can le their entries even before the shipment
arrives in the country. 4 5 (Emphasis supplied)

xxx xxx xxx

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 le 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, le 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. EcAISC

The purpose of posting an "urgent notice to le 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
super uous. Besides, the entries had already been led, 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 de ned as "by the very act itself" or "by mere act".
Probably a closer translation of the Latin term would be "by the fact itself". 4 6 Thus,
there was no need for any af rmative 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 facto be 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 R.A. 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 importer's failure to le the required entries within
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the mandated period.
Under the former Administrative Code, Act 2711, 4 7 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.
aATCDI

Thereafter, R.A. 1937 4 8 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 le the import entry within fteen 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.
P.D. 1464 4 9 did not amend the provisions of the TCC on abandonment. The
latest amendment was introduced by Section 1802 of R.A. 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, R.A. 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 R.A.
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. 5 0
Petitioner claims it is arbitrary, harsh and con scatory to deprive importers of
their property rights just because of their failure to timely le 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: TIESCA

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. 5 1 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. . . . The
settled rule is that courts will not anticipate a question of constitutional law in
advance of the necessity of deciding it. 5 2
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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:
xxx xxx 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 nally
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.
IESTcD

THE CHAIRMAN. In other words, Commissioner, there'll be no need for


a seizure in the case of abandonment because under the proposed bill
it's considered to be government property . 5 3
xxx xxx xxx

CONCLUSION
Petitioner's failure to le 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
speci cally 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 ndings
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 nality. Upon
nality of this decision, the sum so awarded shall bear interest at the rate of twelve
percent (12%) per annum until its full satisfaction. cDTIAC

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Costs against petitioner.
SO ORDERED.
Puno, C.J., Carpio, Austria-Martinez * and Leonardo-de Castro, JJ., concur.
Footnotes

1. Under Rule 45 of the Rules of Court in relation to Rule 16 of the Revised Rules of the Court of
Tax Appeals. EASIHa

2. Penned by Associate Justice Juanito C. Castañeda and concurred in by Associate Justices


Erlinda P. Uy, Caesar A. Casanova and Olga Palanca-Enriquez. Presiding Justice Ernesto
D. Acosta and Associate Justice Lovell R. Bautista dissented. Rollo, pp. 86-133.
3. Id., pp. 134-138.

4. Formerly known as Caltex (Philippines), Inc.

5. Rollo, p. 88.
6. Otherwise known as the Downstream Oil Industry Deregulation Act of 1996.

7. Rollo, p. 121.
8. Id., p. 89.

9. Id.

10. Id., pp. 89, 142-145.


11. Through Commissioner Renato A. Ampil.

12. Rollo, pp. 90, 146. IACDaS

13. Id., pp. 90-93. The name of this former District Collector does not appear in the rollo.
14. Through Commissioner Titus B. Villanueva.

15. Rollo, pp. 93, 147.


16. Id., pp. 93, 149-157. The October 29, 2001 demand letter is a decision within the purview of
Section 7, R.A. 1125 (An Act Creating the CTA [1954]). According to the decision of the
CTA First Division, the BOC sent another letter, dated December 28, 2001, demanding
payment of the de ciency customs duties. Since petitioner did not pay, the BOC
instituted a civil case for collection of a sum of money docketed as civil case no. 02-
103239 in the Regional Trial Court, Manila, Branch 25 on April 11, 2002. (Id., p. 167.)
17. This includes a 25% surcharge due to fraud; id., p. 180.

18. Id., pp. 236-240.


19. The total amount of duties paid amounting to P316,499,021 was subtracted from the total
dutiable value of the shipments amounting to P1,210,280,789.21; id., p. 121. ISCDEA

20. P.D. 1853 was the law that took effect on January 1, 1983, requiring deposits of duties
upon the opening of letters of credit to cover imports. Section 2 thereof states:
"Section 2. The amount of the duties due shall be based on the declaration of the applicant for
the letter of credit/importer, subject to the penalties prescribed under Sec. 2503 of the
[TCC] of 1978, as amended."
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21. Rollo, pp. 32-36.
22. Rodriguez v. CA, G.R. No. 115218, 18 September 1995, 248 SCRA 288, 297, citing the Tariff
and Customs Code, Section 1201 and IV Tejam, Commentaries on the Revised Tariff and
Customs Code 2230 [1987].

23. 64 Phil. 64 (1937).


24. Id., pp. 66-67. See Commissioner of Internal Revenue v. Hantex Trading Co., Inc. , G.R. No.
136975, 31 March 2005, 454 SCRA 301, 304.

25. An Act to Revitalize and Strengthen the Bureau of Customs, Amending for the Purpose
Certain Sections of the Tariff and Customs Code of the Philippines, as Amended
(Approved on June 4, 1993).
26. Section 1210. — Disposition of Imported Articles Remaining on Vessel After Time for
Unlading. — Imported articles remaining on board any vessel after the expiration of the
said period for discharge and not reported for transshipment to another port, may be
unladen by the customs authorities and stored at the vessel's expense.
Unless prevented by causes beyond the vessel's control, such as port congestion, strikes, riots
or civil commotions, failure of vessel's gear, bad weather, and similar causes, articles so
stored shall be entered within thirty (30) days, which shall not be extendible, from the
date of discharge of the last package from the vessel or aircraft and shall be claimed
within fteen (15) days, which shall not likewise be extendible from the date of posting
of the notice to claim in conspicuous places in the [BOC]. If not entered or not claimed, it
shall be disposed of in accordance with the provisions of this Code.

27. Sponsorship Speech of Exequiel B. Javier, March 22, 1993.

28. Rollo, p. 176. DcSEHT

29. Commissioner of Internal Revenue v. Court of Tax Appeals, G.R. No. 106611, 21 July 1994,
234 SCRA 348, 356; Commissioner of Customs v. Makasiar, G.R. No. 79307, 29 August
1989, 177 SCRA 27, 34. According to then Senator Gloria Macapagal-Arroyo (now
President of the Republic of the Philippines):
"The [BOC] is one of the premier revenue collecting arms of the Government, who together with
the Bureau of the Internal Revenue accounts for the collection of more than eighty
percent (80%) of government revenue." (March 29, 1993, Explanatory Note of Senate Bill
No. 451, p. 14)

30. Commissioner of Internal Revenue v. Goodrich International Rubber Co. , G.R. No. L-22265,
27 March 1968, 22 SCRA 1256, 1257; Commissioner of Internal Revenue v. Pineda, G.R.
No. L-22734, 15 September 1967, 21 SCRA 105, 110. cIaCTS

31. Philex Mining Corporation v. Commissioner of Internal Revenue, G.R. No. 125704, 28 August
1998, 294 SCRA 687, 696.
32. Sections 205, 1301 and 1801.

33. Commissioner of Internal Revenue v. Estate of Benigno P. Toda, Jr. , G.R. No. 147188, 14
September 2004, 438 SCRA 290, 300, citing Commissioner of Internal Revenue v. CA,
327 Phil. 1, 33 (1996).
34. Commissioner of Internal Revenue v. Ayala Securities Corporation, G.R. No. L-29485, 31
March 1976, 70 SCRA 205, 209.

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35. Id., pp. 209-210, citations omitted.

36. Rollo, p. 178.


37. Id., pp. 108-109.

38. Id., p. 68.

39. Caltex (Philippines), Inc. v. CA, G.R. No. 104781, 10 July 1998, 292 SCRA 273, 284-285.
40. Before it was amended by R.A. 9135 (An Act Amending Certain Provisions of P.D. 1464,
Otherwise Known as the TCC of The Philippines, as Amended, and for Other Purposes
[2001]).

41. Rollo, p. 40.


42. R.A. 1937 entitled "An Act to Revise and Codify the Tariff and Customs Laws of the
Philippines" (Approved on June 22, 1957).

43. See Parras v. Land Registration Commission, 108 Phil. 1142, 1146 (1960) and Phil. Packing
Corp. v. Coll. of Internal Rev., 100 Phil. 545, 553 (1956).
44. Dated April 29, 1994; rollo, pp. 49-51. CaATDE

45. October 21, 1992, pp. II-1 to II-4, III-2.


46. Words and Phrases, Permanent Edition, Volume 22A (1958), p. 446.

47. An Act Amending the Administrative Code (March 10, 1917).

48. Supra note 42.


49. A Decree to Consolidate and Codify All Tariff and Customs Laws of the Philippines
(Approved on June 11, 1978).

50. In the Sponsorship Speech of Senator Herrera, he stated:


"Speci cally, [Senate Bill No. 451] seeks to speed up the movement of the imported goods by
clarifying when imported articles are being abandoned. . . ." (March 29, p. 20.)

51. Tan v. Bausch & Lomb, Inc. , G.R. No. 148420, 15 December 2005, 478 SCRA 115, 123-124,
citing Olsen and Co., v. Aldanese, 43 Phil. 259 (1922); San Miguel Brewery v. Magno, 128
Phil. 328 (1967).

52. Philippine National Bank v. Palma, G.R. No. 157279, 9 August 2005, 466 SCRA 307, 323,
citations omitted.
53. Minutes of the Deliberations in the House of Representatives Committee on Ways and
Means, October 21, 1992, pp. I-2 to I-3.

* As replacement of Justice Adolfo S. Azcuna who is on of cial leave per Special Order No.
510. cdasia2005

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THIRD DIVISION

[G.R. No. 181007. November 21, 2016.]

COMMISSIONER OF CUSTOMS, petitioner, vs. WILLIAM SINGSON


AND TRITON SHIPPING CORPORATION, respondents.

DECISION

REYES , J : p

This appeal by Petition for Review on Certiorari 1 under Rule 45 of the Rules of
Court seeks to reverse and set aside the Decision 2 dated November 16, 2006 and the
Resolution 3 dated November 29, 2007 of the Court of Appeals (CA) in CA-G.R. SP No.
83282 a rming the Decision 4 dated November 18, 2003 and the Resolution 5 dated
March 22, 2004 of the Court of Tax Appeals (CTA) in CTA Case No. 6406, which
recalled and set aside the Warrant of Seizure and Detention (WSD) issued against the
vessel M/V Gypsy Queen and its cargo of 15,000 bags of rice. CAIHTE

The Facts
Triton Shipping Corporation (TSC) is the owner of M/V Gypsy Queen. The vessel
was loaded with 15,000 bags of rice shipped by Metro Star Rice Mill (Metro Star) of
Bocaue, Bulacan and consigned to William Singson (Singson). On September 5, 2001,
the elements of the Philippine Navy (PN) apprehended and seized the vessel and its
entire rice cargo somewhere in Caubayan Island, Cebu, for allegedly carrying suspected
smuggled rice. 6
During the inspection, the master of M/V Gypsy Queen presented the following
documents: (1) Master's Oath of Safe Departure dated August 14, 2001; (2) Coasting
Manifest indicating that the vessel was loaded with 15,000 bags of rice with Metro Star
of Bocaue, Bulacan as the shipper and Raybrig Marketing of Cebu City/Singson as
consignee; and (3) Roll Book showing that the vessel was cleared by the Philippine
Ports Authority (PPA), North Harbor O ce, Manila on August 14, 2001 and received by
a certain PO3 Fernandez of the Philippine Coast Guard (PCG) in Manila. 7
However, the PCG Station Commander in Manila, Jose G. Cabilo issued a
Certi cation stating that: (1) there was no vessel named M/V Gypsy Queen that logged
in or submitted any Master's Oath of Safe Departure on August 15, 2001; and (2) no
personnel by the name of PO3 Fernandez of the PCG was detailed at Pier 18, Mobile
Team, on August 15, 2001. 8 These matters were then conveyed to the District
Collector of Customs (DCC) by Captain Alvin G. Urbi (Capt. Urbi), Commander, Naval
Forces Central, PN in his letter dated September 12, 2001. Thereafter, Special
Investigator Alejandro M. Bondoc of the Bureau of Customs (BOC) in Cebu, issued a
memorandum dated September 17, 2001 recommending the issuance of a WSD
against the vessel and the 15,000 bags of rice loaded therein. 9
Accordingly, on September 18, 2001, the DCC of Port of Cebu, issued a WSD
against M/V Gypsy Queen and the 15,000 bags of rice for violating the Tariff and
Customs Code (TCC). Afterwards, forfeiture proceedings were conducted where both
parties submitted their respective evidence. 1 0
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On December 18, 2001, the DCC rendered a Decision 1 1 in favor of TSC and
Singson (respondents) and ordered the release of M/V Gypsy Queen and the said cargo
on the ground that there was no evidence to establish a cause of action, thus:
WHEREFORE, premises considered, and by virtue of the powers vested in
me by law, the [WSD] in the above[-]captioned case is hereby ordered RECALLED
and SET ASIDE. Accordingly, the subject 15,000 bags of rice and the vessel
"M/V GYPSY QUEEN" are ordered RELEASES [sic] to their respective claimants
or their duly authorized representative upon proper identi cation and
compliance with applicable laws, rules and regulations. 1 2
On December 19, 2001, the DCC issued a 1st Indorsement of the said decision
and forwarded the entire records of the case to the Commissioner of Customs
(petitioner), through its Legal Service, BOC, Manila. On January 29, 2002, the BOC, Legal
Service referred the decision of the DCC for approval to the petitioner. 1 3
On March 11, 2002, the petitioner issued the 2nd Indorsement 1 4 reversing and
setting aside the decision of the DCC and ordered the forfeiture of M/V Gypsy Queen
and its cargo. DETACa

The respondents led a motion for reconsideration of the said indorsement but
the same was denied. On March 12, 2002, the respondents led a petition for review 1 5
with the CTA, and the petitioner submitted its Comment 1 6 on April 16, 2002. 1 7
On November 18, 2003, the CTA reversed and set aside 1 8 the 2nd Indorsement
issued by the petitioner and adopted the ndings of the DCC. In arriving at the said
decision, the CTA found that the documents submitted by the respondents were
su cient to prove that the 15,000 bags of rice apprehended on board M/V Gypsy
Queen were locally sourced and were the same rice that were withdrawn from the
National Food Authority (NFA) of Zambales. 1 9
Undaunted, the petitioner moved for reconsideration 2 0 but it was denied; 2 1
hence, it filed a petition for review 2 2 under Rule 43 before the CA.
On November 16, 2006, the CA a rmed the CTA's decision on the ratiocination
that the certi cation issued by PCG Station Commander in Manila cannot create a
presumption that M/V Gypsy Queen was involved in an illegal activity in violation of the
TCC. The said certi cation standing alone and by itself cannot prove the alleged
violation of the TCC. The record clearly showed that the vessel originated and sailed
from Manila to Cebu and that the 15,000 bags of rice on board the vessel were not
imported but locally purchased or sourced from NFA Zambales. 2 3 More so, the CA
expressly pointed out that: aDSIHc

Furthermore, it is an undisputed fact that, on February 7, 2002, BOC


Deputy Commissioner Gil A. Valera wrote a letter to the [NFA] Administrator,
Atty. Anthony R. Abad, requesting con rmation of the genuineness and
authenticity of the NFA documents issued by NFA Zambales which were
submitted by the respondents in the forfeiture proceedings. On February 15,
2002, the NFA con rmed the authenticity and genuineness of the documents as
certi ed to by Manager Absalum R. Circujales, NFA, Iba, Zambales. It is well to
note that petitioner failed to assail and rebut these pieces of evidence presented
by respondents during the forfeiture proceedings which were con rmed as
genuine and authentic which showed that the rice withdrawn from NFA
Zambales were the same rice apprehended on board the vessel M/V "Gypsy
Queen." 2 4
Disagreeing with the CA's decision, the petitioner led a motion for
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reconsideration 2 5 which was also denied; 2 6 hence, the petitioner now seeks recourse
to this Court via a petition for review on certiorari.
The Issue
The main issue in this case is whether or not the CA erred in a rming the CTA's
decision ordering the release of the 15,000 bags of rice and its carrying vessel. 2 7
Ruling of the Court
The petition is bereft of merit.
The Court adopts the above-mentioned ndings of fact of both the CTA and the
CA. It is settled that the factual ndings of the CTA, as a rmed by the CA, are entitled
to the highest respect and will not be disturbed on appeal unless it is shown that the
lower courts committed gross error in the appreciation of facts. 2 8
In the main, the petitioner argues that the 15,000 bags of rice were unlawfully
imported into the Philippines; hence, there was legal ground for the forfeiture of the rice
and its carrying vessel. The petitioner solely rely its argument on the certification issued
by the PCG Station Commander in Manila, which was included in the parties' Joint
Stipulation filed with the CTA, to wit: ETHIDa

1.3 That [Capt. Urbi], Commander, Naval Forces Central, [PN], in his
letter to the [DCC] of Cebu dated 12 September 2001, stated among others, that
veri cation made by his o ce with the O ce of the Station Commander, Coast
Guard Station, Manila, show that there was no vessel named MV "Gypsy Queen"
that logged-in or submitted any Master's Oath of Safe Departure on 15 August
2001. It also found that no personnel by the name [of] PO3 Fernandez, PCG, was
detailed at Pier 18, Mobile Team on said date. 2 9
This judicial admission, according to the petitioner, is more than enough to
establish that the rice shipment was illegally transported. 3 0
Clearly, this evidence does not su ce. The said certi cation is not su cient to
prove that the respondents violated the TCC. A reading of the said certi cation plainly
shows that if there is something which was admitted, it is nothing more than the fact
that Capt. Urbi sent a communication to the DCC of Cebu stating the information that
he gathered from the PCG Station Commander in Manila, and not the truthfulness or
veracity of those information.
The certi cation presented by the petitioner does not reveal any kind of
deception committed by the respondents. Such certi cation is not adequate to support
the proposition sought to be established which is the commission of fraud. It is
erroneous to conclude that the 15,000 bags of rice were smuggled simply because of
the said certi cation which is not conclusive and cannot overcome the documentary
evidence of the respondents showing that the subject rice was produced and acquired
locally.
Moreso, at the time the vessel and its cargo were seized on September 25, 2001,
the elements of the PN never had a probable cause that would warrant the ling of the
seizure proceedings. In fact, the petitioner ordered the forfeiture of the rice cargo and
its carrying vessel on the mere assumption of fraud. Notably, the 2nd Indorsement
issued by the petitioner failed to clearly indicate any actual commission of fraud or any
attempt or frustration thereof. cSEDTC

The Court has constantly pronounced that the policy is to place no unnecessary
hindrance on the government's drive, not only to prevent smuggling and other frauds
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upon Customs, but more importantly, to render effective and e cient the collection of
import and export duties due the State to enable the government to carry out the
functions it has been instituted to perform. 3 1
Nonetheless, the TCC requires the presence of probable cause before any
proceeding for seizure and/or forfeiture is instituted. The relevant provision governing
the present case is Section 2535 which provides as follows:
Sec. 2535. Burden of Proof in Seizure and/or Forfeiture. — In all
proceedings taken for the seizure and/or forfeiture of any vessel, vehicle,
aircraft, beast or articles under the provisions of the tariff and customs laws, the
burden of proof shall lie upon the claimant: Provided, That probable cause shall
be rst shown for the institution of such proceedings and that seizure and/or
forfeiture was made under the circumstances and in the manner described in
the preceding sections of this Code. SDAaTC

Based on the afore-quoted provision, before forfeiture proceedings are


instituted, the law requires the presence of probable cause which rests on the
petitioner who ordered the forfeiture of the shipment of rice and its carrying vessel.
Once established, the burden of proof is shifted to the claimant.
Guided by the foregoing provision, to warrant the forfeiture of the 15,000 bags of
rice and its carrying vessel, there must be a prior showing of probable cause that: (1)
the importation or exportation of the 15,000 bags of rice was effected or attempted
contrary to law, or that the shipment of the 15,000 bags of rice constituted prohibited
importation or exportation; and (2) the vessel was used unlawfully in the importation or
exportation of the rice, or in conveying or transporting the rice, if considered as
contraband or smuggled articles in commercial quantities, into or from any Philippine
port or place. 3 2
Still, the petitioner contends that the probable cause was established by the said
certi cation that no vessel by the name of M/V Gypsy Queen logged in or submitted a
Master's Oath of Safe Departure on August 15, 2001.
This assertion is erroneous and irrational. It was heedless on the part of the
petitioner to institute forfeiture proceeding on the basis of that certi cation alone. A
review of the records of the case shows that there was no probable cause to justify the
forfeiture of the rice cargo and its carrying vessel. To prove that the rice shipment was
imported, the respondents submitted the following pieces of evidence supporting the
validity and regularity of the shipment:
1. For the vessel:
a) the Master's Oath of Safe Departure dated August 14, 2001
(Exhibits "G", "G-1", and "G-2");
b) the Roll Book showing that M/V Gypsy Queen was cleared by the
PPA, North Harbor Office, Manila on August 14, 2001 (Exhibits "P");
c) O cial Receipt No. 44191451 issued by the PPA for payment of
port and other charges upon the said vessel dated August 14, 2001
in the amount of P3,300.00 (Exhibit "5"); and
d) the Bill of Lading showing that the vessel loaded with 15,000 bags
of rice sailed from Manila to Cebu for the consignee, Ray Brig
Marketing/Singson (Exhibit "4").
2. For the cargo:
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a) O cial Receipt No. 0703 issued by the Harbour Centre Port
Terminal, Inc. dated August 14, 2001 in the amount of P65,160.00,
and another O cial Receipt evenly dated August 14, 2001 in the
amount of P3,030.26 showing that proper usage and other port
charges upon the said cargo were duly paid (Exhibits "10" and "11").
Besides, the records showed that the 15,000 bags of rice were of local origin,
having been purchased from NFA Zambales pursuant to the Open Sale Program of the
NFA. The findings of fact of the CTA on this matter are informative:
Pursuant to the Open Sale Program of the NFA wherein the NFA would
openly sell its imported stocks to interested individual retailers and encourage
these retailers to buy the stocks in order that the older stocks can be disposed of
in the warehouses to accommodate the incoming imported rice, Memorandum
No. RO3-140 No. 01-06-010 dated June 4, 2001 was issued by the Regional
Manager II of NFA endorsing to the NFA Manager of Zambales the accredited
individual retailers of NFA Nueva Ecija. Among the accredited individual retailers
were Jose Navarro and Emmanuel Jacinto. Emmanuel Jacinto was able to buy
from the open sale 7,000 bags of NFA rice. He likewise purchased NFA rice from
Jose Navarro and Manuel Sevilla, a retailer from Bulacan. Emmanuel Jacinto
then sold 17,000 bags of NFA rice to [Metro Star]. The parties admit that all
documents issued by the NFA Zambales, relative to the said Open Sale Program
such as the Certi cations issued by the NFA Zambales Senior Grains
Operations O cer, the O cial Receipts, the NFA Authority to Issue and the NFA
Warehouse Stocks Issue were duly con rmed as genuine by then NFA
Administrator R.A. Abad in his letter dated February 15, 2002 to Customs Deputy
Commissioner Gil Valera. EcTCAD

Subsequently, Metro Star sold 15,000 bags of rice to Raybrig Marketing


owned by [Singson] in the amount of P12,050,000.00. [Singson] is duly
registered to engage in Wholesaling/Importing Rice under Grains Business
License issued by the NFA. Emmanuel Jacinto testi ed that these 15,000 bags
of rice were taken from the 17,000 bags of imported NFA rice sold by him to
[Metro Star]. It was Metro Star that delivered the 15,000 bags of NFA rice sold
from its warehouse in Bocaue, Bulacan to Manila for loading. It was the
charterer who arranged for the shipment of the 15,000 bags of rice on board
M/V "Gypsy Queen" from Manila to Cebu. The shipment of the said 15,000 bags
of rice was covered by a Bill of lading with [Metro Star] of Bulacan as Shipper
and [Singson] of Raybrig Marketing in Cebu City as Consignee. And M/V "Gypsy
Queen" paid the proper charges and other fees to the [PPA] in the amount of
P3,030.00 as shown by O cial Receipt No. 44191451 relative to said shipment.
3 3 (Citations omitted)

From the foregoing, it is clear that the respondents had su ciently established
that the 15,000 bags of rice were of local origin and there were no other circumstances
that would indicate that the same were fraudulently transported into the Philippines. As
such, the release of the rice cargo and its carrying vessel is warranted. HSAcaE

WHEREFORE , the petition is DENIED . The Decision dated November 16, 2006
and the Resolution dated November 29, 2007 of the Court of Appeals in CA-G.R. SP No.
83282 are AFFIRMED .
SO ORDERED.
Velasco, Jr., Perez and Jardeleza, JJ., concur.
Peralta, * J., is on official leave.
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Footnotes
* On official leave.
1. Rollo, pp. 19-34.
2. Penned by Associate Justice Isaias P. Dicdican, with Associate Justices Romeo F. Barza
and Priscilla Baltazar-Padilla concurring; id. at 36-43.
3. Id. at 44.
4. Penned by Associate Judge Lovell R. Bautista, with Presiding Judge Ernesto D. Acosta and
Associate Judge Juanito C. Castañeda, Jr. concurring; id. at 97-106.
5. Id. at 115.
6. Id. at 36-37.
7. Id. at 37.
8. Id.
9. Id.
10. Id. at 37-38.
11. Id. at 45-60.
12. Id. at 59-60.
13. Id. at 38.
14. Id. at 61.
15. Id. at 62-85.
16. Id. at 86-95.
17. Id. at 39.
18. Id. at 97-106.
19. Id. at 104.
20. Id. at 107-113.
21. Id. at 115.
22. Id. at 116-131.
23. Id. at 40-41.
24. Id. at 42.
25. Id. at 194-199.
26. Id. at 44.
27. Id. at 26.
28. Filinvest Development Corporation v. Commissioner of Internal Revenue , 556 Phil. 439,
446 (2007).
29. Rollo, p. 27.
30. Id.
31. Agriex Co., Ltd. v. Villanueva , G.R. No. 158150, September 10, 2014, 734 SCRA 533, 555-
556, citing Subic Bay Metropolitan Authority v. Rodriguez, et al. , 633 Phil. 196, 211
(2010).
32. See M/V "Don Martin" Voy 047 and its Cargoes of 6,500 Sacks of Imported Rice, Palacio
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Shipping, Inc., and Leopoldo "Junior" Pamulaklakin v. Hon. Secretary of Finance,
BOC, and the District Collector of Cagayan De Oro City, G.R. No. 160206, July 15,
2015.
33. Rollo, pp. 103-104.

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THIRD DIVISION

[G.R. No. 195876. December 5, 2016.]

PILIPINAS SHELL PETROLEUM CORPORATION , petitioner, vs.


COMMISSIONER OF CUSTOMS , respondent.

DECISION

PEREZ , J : p

Before the Court is a Petition for Review on Certiorari seeking to reverse and set
aside the 13 May 2010 Decision 1 and the 22 February 2011 Resolution 2 rendered by
the Court of Tax Appeals (CTA) Former En Banc in C.T.A. EB No. 472 which dismissed
petitioner's petition, and accordingly af rmed with modi cation as to the additional
imposition of legal interest the 19 June 2008 Decision 3 of the CTA Former First
Division (CTA in Division) ordering petitioner to pay the amount of P936,899,883.90,
representing the total dutiable value of its 1996 crude oil importation, which was
considered as abandoned in favor of the government by operation of law.
The Facts
The factual antecedents of the case are as follows:
On 16 April 1996, Republic Act (R.A.) No. 8180, 4 otherwise known as the
"Downstream Oil Industry Deregulation Act of 1996" took effect. It provides, among
others, for the reduction of the tariff duty on imported crude oil from ten percent (10%)
to three percent (3%). The particular provision of which is hereunder quoted as follows:
Section 5. Liberalization of Downstream Oil Industry
and Tariff Treatment. — . . .
b) Any law to the contrary notwithstanding and starting
with the effectivity of this Act, tariff shall be imposed and
collected on imported crude oil at the rate of three percent (3%)
and imported re ned petroleum products at the rate of seven
percent (7%), except fuel oil and LPG, the rate for which shall be
the same as that for imported crude oil Provided, That beginning
on January 1, 2004 the tariff rate on imported crude oil and
re ned petroleum products shall be the same: Provided, further,
That this provision may be amended only by an Act of Congress.
Prior to its effectivity, petitioner's importation of 1,979,674.85 U.S. barrels of
Arab Light Crude Oil, thru the Ex MT Lanistels, arrived on 7 April 1996 nine (9) days
earlier than the effectivity of the liberalization provision. Within a period of three days
thereafter, or speci cally on 10 April 1996, said shipment was unloaded from the
carrying vessels docked at a wharf owned and operated by petitioner, to its oil tanks
located at Batangas City.
Subsequently, petitioner led the Import Entry and Internal Revenue Declaration
and paid the import duty of said shipment in the amount of P11,231,081.00 on 23 May
1996.
More than four (4) years later or on 1 August 2000, petitioner received a demand
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letter 5 dated 27 July 2000 from the Bureau of Customs (BOC), through the District
Collector of Batangas, assessing it to pay the de ciency customs duties in the amount
of P120,162,991.00 due from the aforementioned crude oil importation, representing
the difference between the amount allegedly due (at the old rate of ten percent (10%) or
before the effectivity of R.A. No. 8180) and the actual amount of duties paid by
petitioner (on the rate of 3%).
CAIHTE

Petitioner protested the assessment on 14 August 2000, 6 to which the District


Collector of the BOC replied on 4 September 2000 7 reiterating his demand for the
payment of said deficiency customs duties.
On 11 October 2000, 8 petitioner appealed the 4 September 2000 decision of the
District Collector of the BOC to the respondent and requested for the cancellation of
the assessment for the same customs duties.
However, on 29 October 2001, 9 ve years after petitioner paid the allegedly
de cient import duty' it received by telefax from the respondent a demand letter for the
payment of the amount of P936,899,885.90, representing the dutiable value of its 1996
crude oil importation which had been allegedly abandoned in favor of the government
by operation of law. Respondent stated that Import Entry No. 683-96 covering the
subject importation had been irregularly led and accepted beyond the thirty-day (30)
period prescribed by law. Petitioner protested the aforesaid demand letter on 7
November 2001 1 0 for lack of factual and legal basis, and on the ground of
prescription.
Seeking clari cation as to what course of action the BOC is taking, and
reiterating its position that the respondent's demand letters dated 29 October 2001
and 27 July 2000 have no legal basis, petitioner sent a letter to the Director of Legal
Service of the BOC on 3 December 2001 for said purpose.
On 28 December 2001, 1 1 BOC Deputy Commissioner Gil A. Valera sent
petitioner a letter which stated that the latter had not responded to the respondent's 29
October 2001 demand letter and demanded payment of the amount of
P936,899,885.90, under threat to hold delivery of petitioner's subsequent shipments,
pursuant to Section 1508 1 2 of the Tariff and Customs Code of the Philippines (TCCP),
1 3 and to file a civil complaint against petitioner.

In reply thereto, petitioner sent a letter dated 4 January 2002 1 4 to the BOC
Deputy Commissioner and expressed that it had already responded to the aforesaid
demand letter through the letters dated 7 November 2001 and 3 December 2001 sent
to respondent and to the Director of Legal Service of the BOC, respectively.
On 11 April 2002, the BOC led a civil case for collection of sum of money
against petitioner, together with Caltex Philippines, Inc. as co-party therein, docketed as
Civil Case No. 02103239, before Branch XXV, Regional Trial Court (RTC), of the City of
Manila. 1 5
Consequently, on 27 May 2002, petitioner led with the Court of Tax Appeals
(CTA) a Petition for Review, raf ed to the Former First Division (CTA in Division), and
docketed as C.T.A. Case No. 6485, upon consideration that the civil complaint led in
the RTC of Manila was the final decision of the BOC on its protest. 1 6
Respondent led on 2 August 2002 a motion to dismiss the said petition raising
lack of jurisdiction and failure to state a cause of action as its grounds, which the CTA
in Division denied in the Resolution dated 17 January 2003. Likewise, respondent's
motion for reconsideration led on 14 February 2003 was denied on its 16 June 2003
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Resolution. 1 7
Subsequently, respondent, through the Of ce of the Solicitor General, led on 13
August 2003 before the Court of Appeals (CA) a Petition for Certiorari and Prohibition
with Prayer for the Issuance of a Temporary Restraining Order and Writ of Preliminary
Injunction, docketed as CA-G.R. SP No. 78563, praying for the reversal and setting aside
of the CTA in Division's Resolutions dated 17 January 2003 and 16 June 2003. 1 8
In the interim, respondent led his Answer to the petition in C.T.A. Case No. 6485
on 20 October 2003 which reiterated the lack of jurisdiction and failure to state a cause
of action. Thereafter, trial on the merits ensued.
On 15 February 2007, the Former First Division of the CA dismissed respondent's
petition in CA-G.R. SP No. 78563. Similarly, respondent's motion for reconsideration of
the 15 February 2007 Decision was denied in its 24 July 2007 Resolution. 1 9
The Ruling of the CTA in Division
In a Decision dated 19 June 2008, 2 0 the CTA in Division ruled to dismiss the
Petition for Review on C.T.A. Case No. 6485 for lack of merit and accordingly ordered
petitioner to pay the entire amount of P936,899,883.90 2 1 representing the total
dutiable value of the subject shipment of Arab Light Crude Oil on the ground of implied
abandonment pursuant to Sections 1801 and 1802 of the TCCP.
Relevant thereto, the CTA in Division made the following factual and legal
ndings: (a) that petitioner led the speci ed entry form (Import Entry and Internal
Revenue Declaration) beyond the 30-day period prescribed under Section 1301 of the
TCCP; 2 2 (b) that for failure to le within the aforesaid 30-day period, the subject
importation was deemed abandoned in favor of the government in accordance with
Sections 1801 and 1802 of the TCCP; 2 3 (c) that petitioner's excuses in the delay of
ling its Import Entry and Internal Revenue Declaration were implausible; 2 4 (d) that
since the government became the owner of the subject shipment by operation of law,
petitioner has no right to withdraw the same and should be held liable to pay for the
total dutiable value of said shipment computed at the time the importation was
withdrawn from the carrying vessel pursuant to Section 204 of the TCCP; 2 5 (e) that
there was fraud in the present case considering that "the District Collector, in
conspiracy with the officials of Caltex and Shell acted without authority or [with] abused
(sic) [of] authority by giving undue bene ts to the importers by allowing the processing,
payment and subsequent release of the shipments to the damage and prejudice of the
government who, under the law is already the owner of the shipments . . .;" thus,
prescription under Section 1603 of the TCCP does not apply herein; 2 6 and (f) that the
ndings of facts of administrative bodies charged with their speci c eld of expertise,
are afforded great weight by the courts; and in the absence of substantial showing that
such ndings are made from an erroneous estimation of the evidence presented, they
are conclusive, and in the interest of stability of the government structure, should not be
disturbed. 2 7
On 24 February 2009, the CTA in Division denied petitioner's Motion for
Reconsideration for lack of merit citing Section 5 (b), 2 8 Rule 6 of the 2005 Revised
Rules of the CTA, as sole legal basis in considering the Memorandum dated 2 February
2001 issued by the Customs Intelligence & Investigation Service, Investigation &
Prosecution Division (CIIS-IPD) of the BOC as evidence to establish fraud, and the case
o f Chevron Phils., Inc. v. Commissioner of the Bureau of Customs , 2 9 as the
jurisprudential foundation therein. 3 0

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Aggrieved, petitioner appealed to the CTA Former En Banc by ling a Petition for
Review on 31 March 2009, under Section 3 (b), Rule 8 of the 2005 Revised Rules of the
CTA, as amended, in relation to Rule 43 of the 1997 Rules of Civil Procedure, as
amended, docketed as C.T.A. EB No. 472. HEITAD

The Ruling of the CTA Former En Banc


In the 13 May 2010 Decision, 3 1 the CTA Former En Banc af rmed the CTA in
Division's ruling pertaining to the implied abandonment caused by petitioner's failure to
le the Import Entry and Internal Revenue Declaration within the 30-day period, and
transfer of ownership by operation of law to the government of the subject shipment in
accordance with Sections 1801 and 1802, in relation to Section 1301, of the TCCP, and
with the pronouncements made in the Chevron case. Notably however, the ponente of
the assailed Decision declared therein that the existence of fraud is not controlling in
the case at bench and would not actually affect petitioner's liability to pay the dutiable
value of its imported crude oil, pertinent portion of which are quoted hereunder for
ready reference, to wit:
As regards the issue on the existence of fraud, it
should be emphasized that fraud is not controlling in this
case. Even in the absence of fraud, petitioner Shell is still
liable for the payment of the dutiable value by operation
of law. The liability of petitioner Shell for the payment of the
dutiable value of its imported crude oil arose from the moment it
appropriated for itself the said importation, which were already a
property of the government by operation of law. Absence of
fraud in this case would not exclude petitioner Shell from
the coverage of Sections 1801 and 1802 of the TCCP . 3 2
(Emphasis supplied)
Furthermore, citing the case of Eastern Shipping Lines, Inc. v. Court of Appeals
and Mercantile Insurance Company, Inc. , 3 3 the CTA Former En Banc imposed an
additional legal interest of six percent (6%) per annum on the total dutiable value of
P936,899,883.90, accruing from the date said decision was promulgated until its
nality; and afterwards, an interest rate of twelve percent (12%) per annum shall be
applied until its full satisfaction. 3 4
Not satis ed, petitioner led a motion for reconsideration thereof which was
denied in the assailed Resolution dated 22 February 2011.
Consequently, this Petition for Review wherein petitioner seeks the reversal and
setting aside of the aforementioned Decision and Resolution dated 13 May 2010 and
22 February 2011, respectively, and accordingly prays that a decision be rendered
nding: (a) that petitioner has already paid the proper duties on its importation and
therefore not liable anymore; and (b) that petitioner is not deemed to have abandoned
its subject shipment; or, in the alternative, (c) that respondent's attempt to collect is
devoid of any legal and factual basis considering that the right to collect against
petitioner relating to its subject shipment has already prescribed.
In support of its petition, petitioner posits the following assigned errors:
I
THE CTA FORMER EN BANC ERRED WHEN IT HELD IN THE QUESTIONED
DECISION THAT PETITIONER PSPC IS DEEMED TO HAVE IMPLIEDLY
ABANDONED THE SUBJECT SHIPMENT AND, THUS, IS LIABLE FOR THE
ENTIRE VALUE OF THE SUBJECT SHIPMENT, PLUS INTEREST, DESPITE THE
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FACT THAT SUCH CLAIM, IF ANY AT ALL, HAS ALREADY PRESCRIBED,
ESPECIALLY BECAUSE PETITIONER PSPC DID NOT COMMIT ANY FRAUD.
II
THE CTA FORMER EN BANC ERRED WHEN IT FAILED TO RECOGNIZE THAT
THE GOVERNMENT DID NOT SUFFER ANY DAMAGE OR REVENUE LOSS SINCE
ALL TARIFF DUTIES IMPOSABLE ON THE SUBJECT SHIPMENT WERE
ALREADY PAID TO THE GOVERNMENT, SUCH THAT TO ALLOW RESPONDENT
COMMISSIONER TO RECOVER THE ENTIRE VALUE OF THE SUBJECT
SHIPMENT WOULD BE CONFISCATORY AND AMOUNT TO UNJUST
ENRICHMENT ON THE PART OF THE GOVERNMENT.
III
THE CTA FORMER EN BANC ERRED WHEN IT CONSIDERED THE SUBJECT
SHIPMENT AS IMPLIEDLY ABANDONED, DEPRIVING PETITIONER PSPC OF ITS
RIGHT TO DUE PROCESS AND EQUAL PROTECTION OF THE LAW,
CONSIDERING:
A. RESPONDENT COMMISSIONER DID NOT OBSERVE THE DUE NOTICE
REQUIREMENT UNDER SECTION 1801 OF THE TCCP OR COMPLIED WITH
THE RULES THAT BOC HAD PROMULGATED, WHICH DUE NOTICE IS
MANDATORY IN THE ABSENCE OF FRAUD AS HELD IN THE CHEVRON
CASE. ATICcS

B. THE DUE NOTICE REQUIRED UNDER SECTION 1801 OF THE TCCP


ACTUALLY REFERS TO THE NOTICE TO FILE ENTRY FOR IMPORTED
ARTICLES AND NOT THE ARRIVAL THEREOF.
C. PETITIONER PSPC's ADVANCE FILING OF ITS IED WHICH, BY LAW,
ALREADY CONSTITUTES A VALID AND EFFECTIVE IMPORT ENTRY FORM,
AND ITS CLEAR ACTUATIONS SHOWED AN INTENTION NOT TO
ABANDON THE SUBJECT SHIPMENT, ESPECIALLY SINCE IT HAD
ALREADY FULLY PAID THE TARIFF DUTY DUE ON THE SHIPMENT IN
ADVANCE.
D. RESPONDENT COMMISSIONER DID NOT CONSIDER PETITIONER PSPC'S
REASONABLE AND JUSTIFIABLE REASONS FOR THE SLIGHT DELAY IN
FILING ITS IEIRD.
E. TO SUSTAIN THE CTA FORMER EN BANC IS TO TREAT PETITIONER PSPC
WORSE THAN SMUGGLERS AND COMMON CRIMINALS, AS TO DEPRIVE
IT OF ITS RIGHT TO EQUAL PROTECTION OF THE LAW.
IV
THE CTA [FORMER] EN BANC ERRED IN FAILING TO RECOGNIZE THAT THE
IMPOSITION OF A NINE HUNDRED THIRTY-SIX MILLION EIGHT HUNDRED
EIGHTY-NINE THOUSAND EIGHT HUNDRED EIGHTY-THREE AND 90/100
PESOS (P936,889,883.90) PENALTY BY REASON OF IMPLIED ABANDONMENT
AGAINST PETITIONER PSPC, DESPITE ITS FULL PAYMENT OF THE TARIFF
DUTY DUE ON THE SHIPMENT AND THE JUSTIFIABLE SLIGHT DELAY IN THE
LATTER's SUBMISSION OF ITS IEIRD, IS IN VIOLATION OF INTERNATIONAL
LAW UNDER THE REVISED KYOTO CONVENTION.
V
THE CTA [FORMER] EN BANC ERRED IN FAILING TO RECOGNIZE THAT THERE
IS NO STATUTORY PROVISION EMPOWERING RESPONDENT COMMISSIONER
TO SUBSTITUTE ITS CLAIMS FOR THE ABANDONED GOODS WITH THE VALUE
THEREOF. ETHIDa

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VI
THE CTA [FORMER] EN BANC GROSSLY MISAPPRECIATED THE FACTS AND
MISAPPLIED THE RULING OF THE HONORABLE COURT IN THE CHEVRON
CASE WHEN IT HELD THAT PRESCRIPTION IS NOT A DEFENSE AND THAT THE
NOTICE REQUIREMENT UNDER SECTION 1801 OF THE TCCP AND THE BOC's
OWN RULES AND REGULATIONS DO NOT APPLY EVEN IN THE ABSENCE OF
FRAUD. QUITE THE CONTRARY, THE CHEVRON CASE CLEARLY RECOGNIZED
THAT THE PRESCRIPTIVE PERIOD OF THE FINALITY OF THE LIQUIDATION
UNDER SECTION 1603 OF THE TCCP IS A DEFENSE IN THE ABSENCE OF
FRAUD AND THE NOTICE REQUIREMENT WAS SET ASIDE DUE TO THE
FINDING OF FRAUD AGAINST CHEVRON. MOREOVER, UNLIKE IN THE
CHEVRON CASE WHERE THE HONORABLE COURT FOUND CHEVRON TO HAVE
BENEFITED FROM ITS DELAY AND WAS GUILTY OF FRAUD, THE QUESTIONED
DECISION AND RESOLUTION BOTH DID NOT FIND FRAUD ON THE PART OF
PETITIONER PRPC. 3 5
Petitioner asseverates that: (a) in the absence of fraud, the right of respondent to
claim against petitioner, assuming there is any, has already prescribed since an action
involving payment of customs duties demanded after a period of one (1) year from the
date of nal payment of duties shall not succeed, relying on Section 1603 of the TCCP;
(b) the alleged Memorandum dated 2 February 2001 issued by the Investigation and
Prosecution Division (IPD) of the BOC, which served as the court a quo's basis in finding
fraud on the part of petitioner, was never presented, authenticated, marked, identi ed,
nor formally offered in evidence; hence, inadmissible and cannot be the basis of any
nding of fraud; (c) even if the Memorandum dated 2 February 2001 is legally admitted
in evidence, it still does not constitute clear and convincing proof to establish any fraud
on the part of petitioner since, unlike in the Chevron case, it was entitled to avail of the
reduced three percent (3%) rate under R.A. No. 8180, which was already in effect as
early as 16 April 1996; thus, petitioner did not gain any undue advantage or benefit from
its justi able delay in ling the Import Entry and Internal Revenue Declaration within the
30-day mandatory period; and (d) the evidence on record and the acts of petitioner
[ ling of Import Entry Declaration (IED) and paying advance duties] disclose honest and
good faith on its part showing clear absence of any fraudulent intent to evade the
payment of the proper customs duties and taxes due at the time of the entry of its
imported crude oil in the Philippines. 3 6
Petitioner further argues that the government suffered or lost nothing when
petitioner led its Import Entry and Internal Revenue Declaration thirteen (13) days
beyond the period allowed by law, considering that the former did not lose any tax
collection when petitioner had allegedly paid in advance the amount of P71,923,285.00
for the regular tariff duty of 10% then prevailing, notwithstanding its entitlement to the
reduced 3% rate under RA No. 8180. Consequently, by ordering petitioner to pay for the
entire dutiable value amounting to P936,899,883.90, the government shall be guilty of
unjust enrichment, and such would result to deprivation of property on the part of
petitioner without due process of law. 37
Moreover, it is petitioner's contention that the principles enunciated in the
Chevron case were misapplied in the case at bench. It explained that the reason for
such ruling establishing the "ipso facto abandonment" doctrine was because there was
a nding of fraud on the part of Chevron, being the importer. The existence of fraud was
a critical and essential fact in the disposition on the issues in the Chevron case that
justi ed the goods to be deemed impliedly abandoned in favor of the government.
Corollarily, in the absence of fraud, goods cannot be deemed impliedly abandoned and
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ipso facto owned by the government arising from a mere delay in the submission of the
Import Entry and Internal Revenue Declaration, such as in the present case. In other
words, petitioner is convinced that the provisions of Sections 1801 and 1802 cannot be
applied blindly which may cause goods to be impliedly abandoned in favor of the
government, without even recognizing the peculiar circumstances of the case and
without allowing the importer (petitioner herein) to provide justi cations for the delay in
the submission of its Import Entry and Internal Revenue Declaration. Allegedly, both
notices to the importer to le entry and for its failure to le an entry within the non-
extendible period of 30 days are essential before a shipment can be considered
impliedly abandoned. Otherwise, to do so would constitute violation of the basic
substantial constitutional rights of petitioner. cSEDTC

Petitioner explains that, in issuing Customs Administrative Order (CAO) No. 5-93
dated 1 September 1993 and Customs Memorandum Order (CMO) No. 15-94 dated 29
April 1994, respondent even recognized the signi cance of the due notice requirement
before any goods may be deemed impliedly abandoned articles. Such notice
purportedly refers to notice to le entry, and not notice of arrival as mistakenly
interpreted by the CTA Former En Banc. Thus, in the absence of such notice in the
present case, there could have been no implied abandonment in favor of the
government of the said imported crude oil by petitioner pursuant to Section 1801 of
the TCCP.
Lastly, petitioner believes that af rmance of the ruling a quo, would be
tantamount to a clear violation of international laws, i.e. the Revised Kyoto Convention,
which generally prohibit the imposition of substantial penalties for errors when there is
no fraud or gross negligence on the part of an importer. Consequently, such current and
reasonable trend in the international and uniform application of customs rules and laws
shows how unreasonable, unjust, con scatory, iniquitous and incongruent the
disposition made against petitioner in the instant case; hence, the very need to set
aside the assailed Decision and Resolution of the CTA Former En Banc in C.T.A. EB No.
472, in order to prevent the creation of a legal precedent which contravenes State
commitments.
Respondent, on the other hand, counters that petitioner's failure to le its Import
Entry and Internal Revenue Declaration within the non-extendible period of 30 days was
fatal to its cause of action. Resultantly, the subject imported crude oil is deemed
abandoned in favor of the government by reason of such non- ling of the imported
entries within said prescriptive period. 3 8
Our Ruling
The submissions of the parties to this case bring to fore two timelines and the
consequences of the lapse of the prescribed periods. Petitioner appears to be covered
by Section 1801, in relation to Section 1301, which respectively states:
Sec. 1801. Abandonment, Kinds and Effects of . — An
imported article is deemed abandoned under any of the following
circumstances:
(a) When the owner, importer or consignee of the imported article expressly
signi es in writing to the Collector of Customs his intentions to abandon;
or
(b) When the owner, importer, consignee or interested party after due notice, fails
to le 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,
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or having led such entry, fails to claim his importation within fteen (15)
days which shall not likewise be extendible, from the date of posting of the
notice to claim such importation. (Emphasis supplied)
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.
xxx xxx xxx
Sec. 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
the 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 led by a party other than the importer, said importer shall
himself be required to declare under oath and under the penalties
of falsi cation 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 violations against
applicable provisions of this Code when the importation is found
to be unlawful.
Tersely put, when an importer after due notice fails to le an Import Entry and Internal
Revenue Declaration within an unextendible period of thirty (30) days from the
discharge of the last package, the imported article is deemed abandoned in favor of the
government.
Upon the other hand, respondent is covered in a manner likewise mandatory, by
the provisions of Section 1603 which states that:
Sec. 1603. Finality of Liquidation. — When articles have
been entered and passed free of duty or nal adjustment of duties
made, with subsequent delivery, such entry and passage free of
duty or settlement of duties will, after the expiration of one
year, from the date of the nal payment of duties, in the absence
of fraud or protest, be nal and conclusive upon all parties, unless
the liquidation of the import entry was merely tentative. (Emphasis
supplied) SDAaTC

We rule that in this case, Section 1603 is squarely applicable. The nality of
liquidation which arises one (1) year after the date of the nal payment of duties, which
is in this case 23 May 1996, renders inoperable the provisions of Section 1801.
Discussion
At the outset, it bears emphasis that the determination of the issues presented in
this case requires a comprehensive assessment of the pronouncements made in the
case of Chevron Philippines, Inc. v. Commissioner of the Bureau of Customs ; 3 9 thus,
we nd it imperative to reproduce hereunder the points there considered which are
germane to the controversy under review.
THE IMPORTATION WERE ABANDONED
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IN FAVOR OF THE GOVERNMENT
The law is clear and explicit. It gives a non-
extendible period of 30 days for the importer to le 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 le 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
( ling of the IEDs and paying advance duties) revealed any
intention to abandon the importations.
Unfortunately for petitioner, it was the law itself
which considered the importation abandoned when it
failed to le 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
le the import entry within fteen 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.
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
signi es in writing to the Collector of Customs his intention to
abandon;
b . When the owner, importer, consignee or interested party after
due notice, fails to le 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 . . . .
From the wording of the amendment, RA 7651 no
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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 le 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. It would be error on
our part to continue applying the old law despite the clear changes
introduced by the amendment. 4 0 (Emphasis and underlining
supplied) acEHCD

Based on the foregoing, it appears that in the Chevron case, the Court simply
applied the clear provision of Section 1801 (b), in relation to Section 1301, of the TCCP,
as amended, which categorically provides that mere failure on the part of the owner,
importer, consignee or interested party, after due notice, to le an entry within a non-
extendible period of 30 days from the date of discharge of the last package (shipment)
from the vessel, would mean that such owner, importer, consignee or interested party is
deemed to have abandoned said shipment. Consequently, abandonment of such
shipment (imported article) constitutes renouncement of all his interests and property
rights therein.
The rationale of strict compliance with the non-extendible period of 30 days
within which import entries (IEIRDs) must be led for imported articles are as follows:
(a) to prevent considerable delay in the payment of duties and taxes; (b) to compel
importers to le import entries and claim their importation as early as possible under
the threat of having their importation declared as abandoned and forfeited in favor of
the government; (c) to minimize the opportunity of graft; (d) to compel both the BOC
and the importers to work for the early release of cargo, thus decongesting all ports of
entry; (e) to facilitate the release of goods and thereby promoting trade and commerce;
and (f) to minimize the pilferage of imported cargo at the ports of entry. 4 1 The
aforesaid policy considerations were signi cant to justify a rm observance of the
aforesaid prescriptive period.
It was observed that it is the law itself that considers an imported article
abandoned for failure to le the corresponding Import Entry and Internal Revenue
Declaration within the allotted time. No acts or omissions to establish intent to
abandon is necessary to effectuate the clear provision of the law. Since Section 1801
(b) does not provide any quali cation as to what may have caused such failure in ling
said import entry within the prescriptive period in order to render the imported article
abandoned, this Court shall likewise make no distinction and plainly apply the law as
clearly stated. Hence, upon the lapse of the aforesaid non-extendible period of 30 days,
without the required import entry led by the importer within said period, its imported
article is therefore deemed abandoned.
Moreover, Section 1802 of the same Code states to whom said abandoned
imported articles belong as a consequence of such renouncement by the owner,
importer, consignee or interested party. It 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.
xxx xxx xxx (Emphasis supplied)
In the Chevron case, we explained that the term "ipso facto" is de ned as "by the
very act itself" or "by mere act." Hence, there is no need for any af rmative act on the
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part of the government with respect to abandoned imported articles given that the law
itself categorically provides that said articles shall ipso facto be deemed the property
of the government. By using the term "ipso facto" in Section 1802 of the TCCP, as
amended by R.A. No. 7651, 4 2 the legislature removed the need for abandonment
proceedings and for any declaration that imported articles have been abandoned
before ownership thereof can be effectively transferred to the government. In other
words, ownership over the abandoned imported articles is transferred to the
government by operation of law.
The rulings in Chevron was generously applied by CTA Former En Banc in the
present case. Thus:
Petitioner Shell's failure to le the required entries,
within the prescribed non-extendible period of thirty (30)
days from the date of discharge of the last package from
the carrying vessel, constitutes implied abandonment of
its oil importation. This means, that from the precise
moment that the non-extendible thirty-day period had
lapsed, the abandoned shipment was deemed the property
of the government. Therefore, when petitioner withdrew the oil
shipment for consumption, it appropriated for itself properties
which already belonged to the government. . . .
Petitioner Shell's contention that the belated ling of its
import entries is justi ed due to the late arrival of its
import documents, which are necessary for the proper
computation of the import duties, cannot be sustained. SDHTEC

xxx xxx xxx


The [CTA Former En Banc] cannot also accept such
excuses, as the absence of supporting documents should
not have prevented petitioner Shell from complying with
the mandatory non-extendible period, since the law
prescribes an extremely serious consequence for delayed
filing. If this kind of excuse was to be accepted, then the
collection of customs duties would be at the mercy of importers,
which our lawmakers try to avoid.
For all the foregoing, we rule that the late ling of the
IEIRDs alone, which constituted implied abandonment, makes
petitioner Shell liable for the payment of the dutiable value of the
imported crude oil. . . . 4 3 (Emphasis supplied)
Since it is undisputed that the Import Entry and Internal Revenue Declaration was
belatedly led by petitioner on 23 May 1996, or more than 30 days from the last day of
discharge of its importation counted from 10 April 1996, the importation may be
considered impliedly abandoned in favor of the government. Petitioner argues that
before Section 1802 can be applied and the ipso facto provision invoked, the
requirement of due notice to le entry and the determination of the intent of the
importer are essential in order to consider the subject imported crude oil of petitioner
impliedly abandoned in favor of the government. It further asserts that, in the Chevron
case, it was conceded that as a general rule, due notice is indeed required before any
imported article can be considered impliedly abandoned, but Chevron's non-entitlement
to such prior notice was legally justi ed because of the nding of fraud established
against it, rendering it impossible for the BOC to comply with the due notice
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requirement under the prevailing rules. Consequently, it is petitioner's conclusion that
such nding of fraud is indispensable in order to waive the "due notice requirement,"
that would eventually consider the subject imported crude oil impliedly abandoned in
favor of the government.
In Chevron, we observed that:
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
t h a t 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 :
xxx xxx xxx
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 suf cient
to . . . suf cient 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 rst
wondering whether this would be necessary in order to provide for
due process. I'm thinking of certain cases, Mr. Chairman, where
t h e owner might not have known . This is now on implied
abandonment not the express abandonment.
xxx xxx xxx
HON. QUIMPO. Because I'm thinking, Mr. Chairman. I'm
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. AScHCD

xxx xxx xxx


MR. PARAYNO. Your Honor, I think as a general rule, ve
days [extendible] to another ve days is a good enough period of
t i m e . 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
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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 le entry. And therefore, the
ve day extendible to another ve 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 le the entry even before the arrival of the shipment.
That's why we have a procedure in the bureau whereby importers
can le their entries even before the shipment arrives in the
country. (Emphasis supplied)
xxx xxx xxx
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 le 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, le 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 le
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 super uous. Besides, the entries had
already been led, albeit belatedly. It would have been
oppressive to the government to demand a literal
implementation of this notice requirement . 4 4 (Emphasis
and underlining supplied)
Therefrom, it is without a doubt that the requirement of due notice contemplated
under Section 1801 (b) of the TCCP, as amended, refers to the notice to the owner,
importer, consignee or interested party of the arrival of its shipment and details
thereof. The legislative intent was clear in emphasizing the importance of said notice of
arrival, which is intended solely to persons not considered as knowledgeable importers,
or those who are not familiar with the governing rules and procedures in the release of
importations. We as much as said that the due notice requirement under Section 1801
(b), do not apply to knowledgeable importers, such as Chevron in the above-cited case,
for having been considered as one of the regular, large-scale and multinational
importers of oil and oil products, familiar with said rules and procedures (including the
duty and obligation of ling the IEIRD within a non-extendible period of 30 days) and
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fully aware of the arrival of its shipment on its privately owned pier or wharf in the Port
of Batangas. Applying Chevron, the decision assailed here said:
The due notice required under Section 1301 is the
notice of the arrival of the shipment. In this case, pursuant to
the Chevron case, notice to petitioner Shell is not required under
the peculiar circumstances of the case. Petitioner Shell, like
Chevron, is a regular, large-scale and multinational
importer of oil and oil products, who falls under the
category of a knowledgeable importer, familiar with the
governing rules and procedures in the release of
importations.
More importantly, petitioner Shell even admitted that it
led an application for Special Permit to Discharge and
paid the corresponding advance duties on March 22, 1996
(Exhibits "K" and "P") , which undeniably proved knowledge
on the part of petitioner Shell of the arrival of the
shipment. Likewise, upon arrival of the shipment, they were
unloaded from the carrying vessels docked at the wharf
owned by petitioner Shell at Tabangao, Batangas City;
thus, petitioner Shell was fully aware that their
importation had already arrived . 4 5 (Emphasis supplied)
The foregoing having been said, we must with equal concern, go to the other
timeline which is provided for in Section 1603 of the TCCP, to wit:
Sec. 1603. Finality of Liquidation. — When articles have
been entered and passed free of duty or nal adjustment of duties
made, with subsequent delivery, such entry and passage free of
duty or settlement of duties will, after the expiration of one year,
from the date of the nal payment of duties, in the absence of
fraud or protest, be nal and conclusive upon all parties, unless
the liquidation of the import entry was merely tentative.
AcICHD

Petitioner insists that, in the absence of fraud, the right of respondent to claim
against it has already prescribed considering that an action involving the entry and
payment of customs duties involving imported articles demanded after a period of one
(1) year from the date of nal payment of duties, shall not succeed, pursuant to the
clear provision of Section 1603. It therefore contends that even if the subject imported
crude oil of petitioner is by law deemed abandoned by operation of law under Sections
1801 (b), in relation to Section 1301, of the Code, respondent's right to claim
abandonment had already lapsed since fraud is wanting in this case. On the other hand,
respondent counters that since there was a factual nding of fraud committed by
petitioner in the ling of its Import Entry and Internal Revenue Declaration beyond the
30-day period prescribed under Section 1301 of the TCCP, the 1-year prescriptive
period under Section 1603 therefore does not apply.
At this point, it bears emphasis that in a petition for review on certiorari under
Rule 45 of the Rules of Court, only questions of law may be raised. 4 6 The Court is not a
trier of facts and does not normally undertake the re-examination of the evidence
presented by the contending parties during the trial of the case considering that the
ndings of facts of the CA are conclusive and binding on the Court 4 7 — and they carry
even more weight when the CA af rms the factual ndings of the trial court. 4 8
However, it is already a settled matter that, the Court had recognized several
exceptions to this rule, to wit: (1) when the ndings are grounded entirely on
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speculation, surmises or conjectures; (2) when the inference made is manifestly
mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when
the judgment is based on a misapprehension of facts; (5) when the findings of facts are
con icting; (6) when in making its ndings the Court of Appeals went beyond the
issues of the case, or its ndings are contrary to the admissions of both the appellant
and the appellee; (7) when the ndings are contrary to the trial court; (8) when the
ndings are conclusions without citation of speci c evidence on which they are based;
(9) when the facts set forth in the petition as well as in the petitioner's main and reply
briefs are not disputed by the respondent; (10) when the ndings of fact are
premised on the supposed absence of evidence and contradicted by the
evidence on record; and (11) when the Court of Appeals manifestly overlooked
certain relevant facts not disputed by the parties, which, if properly considered,
would justify a different conclusion. 4 9
Records of this case reveal that the CTA in Division in its 19 June 2008 Decision
5 0 made a pronouncement that there was indeed fraud committed by petitioner based
on the factual nding contained in the Memorandum dated 2 February 2001 issued by
Special Investigator II Domingo B. Almeda and Special Investigator III Nemesio C.
Magno, Jr. of the CIIS-IPD of the BOC. Consequently, since such memorandum made
such factual nding of fraud against petitioner, the court a quo ruled that prescription
does not set in even if respondent's claim was made beyond the 1-year reglementary
period.
Upon an assiduous review of the factual nding of fraud, we nd petitioner's
contention meritorious. Hence, the instant case falls among the exceptions to the
general rule previously mentioned which would require this Court's judicial prerogative
to review the court a quo's findings of fact.
Generally, fraud has been de ned as "the deliberate intention to cause damage or
prejudice. It is voluntary execution of a wrongful act, or a willful omission, knowing and
intending the effects which naturally and necessarily arise from such act or omission.
5 1 For fraud to exist, it must be intentional, consisting of deception willfully and
deliberately done or resorted to in order to induce another to give up some right. 5 2 It is
never presumed and the burden of proof to establish lies in the person making such
allegation since every person is presumed to be in good faith. 5 3 To discharge this
burden, fraud must be proven by clear and convincing evidence. 5 4 Also, fraud must be
alleged and proven as a fact where the following requisites must concur: (a) the fraud
must be established by evidence; and (b) the evidence of fraud must be clear and
convincing, and not merely preponderant. Upon failure to establish these two (2)
requisites, the presumption of good faith must prevail.
Section 3611 (c) of the TCCP, as amended, de nes the term fraud as the
occurrence of a "material false statement or act in connection with the transaction
which was committed or omitted knowingly, voluntarily and intentionally, as established
by clear and convincing evidence." Again, such factual nding of fraud should be
established based on clear, convincing, and uncontroverted evidence.
Relevant thereto, in the landmark case of Aznar v. Court of Tax Appeals , 5 5 we
explained the general concept of fraud as applied to tax cases in the following fashion:
TAIaHE

The fraud contemplated by law is actual and not


constructive. It must be intentional fraud, consisting of
deception willfully and deliberately done or resorted to in
order to induce another to give up some legal right.
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Negligence, whether slight or gross, is not equivalent to the fraud
with intent to evade the tax contemplated by the law. It must
amount to intentional wrong doing with the sole object of avoiding
the tax. It necessarily follows that a mere mistake cannot
be considered as fraudulent intent, and if both petitioner
and respondent Commissioner of Internal Revenue
committed mistakes in making entries in the returns and
in the assessment, respectively, under the inventory
method of determining tax liability, it would be unfair to
treat the mistakes of the petitioner as tainted with fraud
and those of the respondent as made in good faith. 5 6
(Emphasis supplied)
In the case at bench, a perusal of the records reveals that there is neither any iota
of evidence nor concrete proof offered and admitted to clearly establish that petitioner
committed any fraudulent acts. The CTA in Division relied solely on the Memorandum
dated 2 February 2001 issued by the CIIS-IPD of the BOC in ruling the existence of fraud
committed by petitioner. However, there is no showing that such document was ever
presented, identi ed, and testi ed to or offered in evidence by either party before the
trial court.
Time and again, this Court has consistently declared that cases led before the
CTA are litigated de novo, party-litigants must prove every minute aspect of their cases.
5 7 Section 8 of R.A. No. 1125, 5 8 as amended by R.A. No. 9282, 5 9 categorically
described the CTA as a court of record. Indubitably, no evidentiary value can be given to
any documentary evidence merely attached to the BOC Records, as the rules on
documentary evidence require that such documents must be formally, offered before
the CTA. Pertinent is Section 34, Rule 132 of the Rules of Court which reads:
Section 34. Offer of evidence. — The court shall consider
no evidence which has not been formally offered. The purpose for
which the evidence is offered must be specified.
From the foregoing provision, it is clear that for evidence to be considered by the
court, the same must he formally offered. Corollarily, the mere fact that a particular
document is identi ed and marked as an exhibit does not mean that it has already been
offered as part of the evidence of a party. In Interpacific Transit, Inc. v. Aviles, 6 0 We had
the occasion to make a distinction between identi cation of documentary evidence and
its formal offer as an exhibit. We said that the rst is done in the course of the trial and
is accompanied by the marking of the evidence as an exhibit while the second is done
only when the party rests its case and not before. A party, therefore, may opt to
formally offer his evidence if he believes that it will advance his cause or not to do so at
all. In the event he chooses to do the latter, the trial court is not authorized by the Rules
to consider the same. 6 1
The Rule on this matter is patent that even documents which are identi ed and
marked as exhibits cannot be considered into evidence when the same have not been
formally offered as part of the evidence, but more so if the same were not identi ed
and marked as exhibits, such as in the present case. An assay of the records reveals
that the subject Memorandum dated 2 February 2001 was neither identified nor offered
in evidence by respondent during the entire proceedings before the CTA in Division.
Consequently, this is fatal to respondent's cause in establishing the existence of fraud
committed by petitioner since the burden of proof to establish the same lies with the
former alone. cDHAES

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As a matter of fact, even if the aforesaid documentary evidence was included as
part of the BOC Records submitted before the CTA in compliance with a lawful order of
the court, 6 2 this does not permit the trial court to consider the same in view of the fact
that the Rules prohibit it. The reasoning forwarded by the CTA in Division in its
Resolution dated 24 February 2009, that the apparent purpose of transmittal of the
records is to enable it to appreciate and properly review the proceedings and ndings
before an administrative agency, is misplaced. Unless any of the party formally offered
in evidence said Memorandum, and accordingly, admitted by the court a quo, it cannot
be considered as among the legal and factual bases in resolving the controversy
presented before it.
By analogy, in Dizon v. CTA, 6 3 this Court underscored the importance of a formal
offer of evidence and the corresponding admission thereafter. We quote:
While the CTA is not governed strictly by technical rules of
evidence, as rules of procedure are not ends in themselves and are
primarily intended as tools in the administration of justice, the
presentation of the BIR's evidence is not a mere procedural
technicality which may be disregarded considering that it is the
only means by which the CTA may ascertain and verify the truth
of BIR's claims against the Estate. The BIR's failure to
formally offer these pieces of evidence, despite CTA's
directives, is fatal to its cause. Such failure is aggravated by
the fact that not even a single reason was advanced by the BIR to
justify such fatal omission. This, we take against the BIR.
Per the records of this case, the BIR was directed to present
its evidence in the hearing of February 21, 1996, but BIR's counsel
failed to appear. The CTA denied petitioner's motion to consider
BIR's presentation of evidence as waived, with a warning to BIR
that such presentation would be considered waived if BIR's
evidence would not be presented at the next hearing. Again, in the
hearing of March 20, 1996, BIR's counsel failed to appear. Thus, in
its Resolution dated March 21, 1996, the CTA considered the BIR
to have waived presentation of its evidence. In the same
Resolution, the parties were directed to le their respective
memorandum. Petitioner complied but BIR failed to do so. In all of
these proceedings, BIR was duly noti ed. Hence, in this case, we
are constrained to apply our ruling in Heirs of Pedro Pasag v.
Parocha:
A formal offer is necessary because judges are
mandated to rest their ndings of facts and their
judgment only and strictly upon the evidence offered by
the parties at the trial. Its function is to enable the trial
judge to know the purpose or purposes for which the
proponent is presenting the evidence. On the other hand,
this allows opposing parties to examine the evidence and
object to its admissibility. Moreover, it facilitates review
as the appellate court will not be required to review
documents not previously scrutinized by the trial court.
Strict adherence to the said rule is not a trivial matter. The
Court in Constantino v. Court of Appeals ruled that the formal
offer of one's evidence is deemed waived after failing to
submit it within a considerable period of time. It explained
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that the court cannot admit an offer of evidence made
after a lapse of three (3) months because to do so would
"condone an inexcusable laxity if not non-compliance with
a court order which, in effect, would encourage needless
delays and derail the speedy administration of justice."
Applying the aforementioned principle in this case, we nd
that the trial court had reasonable around to consider that
petitioners had waived their right to make a formal offer of
documentary or object evidence. Despite several extensions of
time to make their formal offer, petitioners failed to comply with
their commitment and allowed almost ve months to lapse before
nally submitting it. Petitioners' failure to comply with the
rule on admissibility of evidence is anathema to the
ef cient, effective, and expeditious dispensation of
justice. (Emphasis and underlining supplied)
Clearly therefore, evidence not formally offered during the trial cannot be used
for or against a party litigant by the trial court in deciding the merits of the case. Neither
may it be taken into account on appeal. Since the rule on formal offer of evidence is not
a trivial matter, failure to make a formal offer within a considerable period of time shall
be deemed a waiver to submit it. Consequently, any evidence that has not been offered
and admitted thereafter shall be excluded and rejected. ASEcHI

Moreover, even if not submitted as a contention herein, We nd it apropos to rule


that the CTA likewise cannot motu proprio justify the existence of fraud committed by
petitioner by applying the rules on judicial notice.
Judicial notice is the cognizance of certain facts which judges may properly take
and act on without proof because they already know them. 6 4 Under the Rules of Court,
judicial notice may either be mandatory or discretionary. Pertinent portions of Rule 129
of the Rules of Court provide as follows:
RULE 129
What Need Not Be Proved
Section 1. Judicial notice, when mandatory . — A court
shall take judicial notice, without the introduction of evidence, of
the existence and territorial extent of states, their political history,
forms of government and symbols of nationality, the law of
nations, the admiralty and maritime courts of the world and their
seals, the political constitution and history of the Philippines, the
of cial acts of legislative, executive and judicial departments of
the Philippines, the laws of nature, the measure of time, and the
geographical divisions.
Section 2. Judicial notice, when discretionary . — A court
may take judicial notice of matters which are of public knowledge,
or are capable to unquestionable demonstration, or ought to be
known to judges because of their judicial functions.
Section 3. Judicial notice, when hearing necessary . —
During the trial, the court, on its own initiative, or on request of a
party, may announce its intention to take judicial notice of any
matter and allow the parties to be heard thereon.
After the trial, and before judgment or on appeal, the proper
court, on its own initiative or on request of a party, may take
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judicial notice of any matter and allow the parties to be heard
thereon if such matter is decisive of a material issue in the case.
xxx xxx xxx
In relation thereto, it has been held that the doctrine of judicial notice rests on the
wisdom and discretion of the courts; however, the power to take judicial notice is to be
exercised by the courts with caution; care must be taken that the requisite notoriety
exists; and every reasonable doubt upon the subject should be promptly resolved in the
negative. 6 5
As a general rule, courts are not authorized to take judicial notice of the contents
of the records of other cases, even when such cases have been tried or are pending in
the same court, and notwithstanding the fact that both cases may have been tried or
are actually pending before the same judge. 6 6 However, this rule is subject to the
exception that in the absence of objection and as a matter of convenience to all
parties, a court may properly treat all or any part of the original record of the case led
in its archives as read into the records of a case pending before it, when with the
knowledge of the opposing party, reference is made to it, by name and number or
in some other manner by which it is suf ciently designated. 6 7 Thus, for said exception
to apply, the party concerned must be given an opportunity to object before the court
could take judicial notice of any record pertaining to other cases pending before it.
Such being the case, it would also be an error for the CTA in Division to even take
judicial notice of the subject Memorandum being merely a part of the BOC Records
submitted before the court a quo, without the same being identi ed by a witness,
offered in and admitted as evidence, and effectively, depriving petitioner, rst and
foremost, an opportunity to object thereto. Hence, the subject Memorandum should
not have been considered by the CTA in Division in its disposition. ITAaHc

It is well-settled that procedural rules are designed to facilitate the adjudication


of cases. Courts and litigants alike are enjoined to abide strictly by the rules. While it is
true that litigation is not a game of technicalities, it is equally true that every case must
be prosecuted in accordance with the prescribed procedure to ensure an orderly and
speedy administration of justice. Party litigants and their counsel are well advised to
abide by, rather than aunt, procedural rules for these rules illumine the path of the law
and rationalize the pursuit of justice. 6 8
The claim of respondent against petitioner has already prescribed
Since we have already laid to rest the question on whether or not there was fraud
committed by petitioner, the last issue for Our resolution is whether respondent's claim
against petitioner has already prescribed.
This Court rules in the affirmative.
There being no evidence to prove that petitioner committed fraud in belatedly
ling its Import Entry and Internal Revenue Declaration within the 30-day period
prescribed under Section 1301 of the TCCP, as amended, respondent's rights to
question the propriety thereof and to collect the amount of the alleged de ciency
customs duties, more so the entire value of the subject shipment, have already
prescribed. Simply put, in the absence of fraud, the entry and corresponding payment of
duties made by petitioner becomes nal and conclusive upon all parties after one (1)
year from the date of the payment of duties in accordance with Section 1603 of the
TCCP, as amended:
Section 1603. Finality of Liquidation. — When articles have
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been entered and passed free of duty or nal adjustments of
duties made, with subsequent delivery, such entry and passage
free of duty or settlements of duties as well, after the
expiration of one (1) year, from the date of the nal
payment of duties, in the absence of fraud or protest or
compliance audit pursuant to the provisions of this Code,
b e nal and conclusive upon all parties , unless the
liquidation of the import entry was merely tentative. (Emphasis
and underscoring supplied)
The above provision speaks of entry and passage free of duty or settlements of
duties. Generally, in customs law, the term "entry" has a triple meaning, to wit: (1) the
documents led at the customs house; (2) the submission and acceptance of the
documents and (3) the procedure of passing goods through the customs house. 6 9 As
explained in the Chevron case, it speci cally refers to the ling and acceptance of the
Import Entry and Internal Revenue Declaration of the imported article. Simply put, the
entry of imported goods at the custom house consists in submitting them to the
inspection of the revenue of cers, together with a statement or description of such
goods, and the original invoices of the same, for the purpose of estimating the duties to
be paid thereon. 7 0 The term "duty" used therein denotes a tax or impost due to the
government upon the importation or exportation of goods. It means that the duties on
imports signify not merely a duty on the act of importation, but a duty on the thing
imported. It is not con ned to a duty levied while the article is entering the country, but
extends to a duty levied after it has entered the country. 7 1
Based on the foregoing de nitions, it is commonsensical that the nality of
liquidation referred to under Section 1603 covers the propriety of the submission and
acceptance of the Import Entry and Internal Revenue Declaration covering the imported
articles being brought in the country for the sole purpose of determining whether it is
subject to tax or not; and if it is, whether the computation of the tax or impost to be
paid to the government was properly made. These shall include, among others, the
declarations and statements contained in the entry, made under oath and under the
penalties of falsi cation or perjury that such declarations and statements contained
therein are true and correct, which shall constitute prima facie evidence of knowledge
and consent of the importer of violation against applicable provisions of the TCCP
when the importation is found to be unlawful. 7 2 CHTAIc

Indubitably, the matters which become nal and conclusive against all parties
include the timeliness of ling the import entry within the period prescribed by law, the
declarations and statements contained therein, and the payment or non-payment of
customs duties covering the imported articles by the owner, importer, consignee or
interested party. Since the primordial issue presented before us focuses on petitioner's
non-compliance in ling its Import Entry and Internal Revenue Declaration within a non-
extendible period of 30 days from the date of discharge of the last package from the
vessel, respondent may only look into it within a limited period of one (1) year in
accordance with the above-quoted provision.
In the case at bench, it is undisputed that petitioner led its IEIRD and paid the
remaining customs duties due on the subject shipment only on 23 May 1996. Yet, it
was only on l August 2000, or more than four (4) years later, that petitioner received a
demand letter from the District Collector of Batangas for the alleged unpaid duties
covering the said shipment. Thereafter, on 29 October 2001, or after more than ve (5)
years, petitioner received another demand letter from respondent seeking to collect for
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the entire dutiable value of the same shipment amounting to P936,899,855.90.
Consequently, applying the foregoing provision and considering that we have
determined already that there is no factual nding of fraud established herein, the
liquidation of petitioner's imported crude oil shipment became nal and conclusive on
24 May 1997, or exactly upon the lapse of the 1-year prescriptive period from the date
of payment of nal duties. As such, any action questioning the propriety of the entry
and settlement of duties pertaining to such shipment initiated beyond said date is
therefore barred by prescription.
Since time immemorial, this Court has consistently recognized and applied the
statute of limitations to preclude the Government from exercising its power to assess
and collect taxes beyond the prescribed period, and we intend to abide by our rulings
on prescription and to strictly apply the same in the case of petitioner; otherwise, both
the procedural and substantive rights of petitioner would be violated. After all,
prescription is a substantive defense that may be invoked to prevent stale claims from
being resurrected causing inconvenience and uncertainty to a person who has long
enjoyed the exercise. Thus, symptomatic of the magnitude of the concept of
prescription, this Court has elucidated that:
The law prescribing a limitation of actions for the collection
of the income tax is bene cial both to the Government and to its
citizens; to the Government because tax of cers would be obliged
to act promptly in the making of assessment, and to citizens
because after the lapse of the period of prescription
citizens would have a feeling of security against
unscrupulous tax agents who will always nd an excuse
to inspect the books of taxpayers, not to determine the
latter's real liability, but to take advantage of every
opportunity to molest peaceful, law-abiding citizens.
Without such legal defense taxpayers would furthermore
be under obligation to always keep their books and keep
them open for inspection subject to harassment by
unscrupulous tax agents. The law on prescription being a
remedial measure should be interpreted in a way conducive to
bringing about the bene cient purpose of affording protection to
the taxpayer within the contemplation of the Commission which
recommend (sic) the approval of the law. 7 3 (Emphasis supplied)
Basic is the rule that provisions of the law should be read in relation to other
provisions therein. A statute must be interpreted to give it ef cient operation and effect
as a whole avoiding the nulli cation of cognate provisions. Statutes are read in a
manner that makes it wholly operative and effective, consistent with the legal maxim ut
res magis valeat quam pereat. EATCcI

This maxim applied, we read Sections 1301, 1801, and 1802, together with
Section 1603 of the TCCP. Thus, should there be failure on the part of the owner,
importer, consignee or interested party, after due notice of the arrival of its shipment
(except in cases of knowledgeable owners or importers), to le an entry within the non-
extendible period of 30 days from the date of discharge of the last package (shipment)
from the vessel, such owner, importer, consignee or interested party is deemed to have
abandoned said shipment in favor of the government. As imperative, however, is the
strict compliance with Section 1603 of the TCCP, which should be read as we have
ruled. Any action or claim questioning the propriety of the entry and settlement of
duties pertaining to such shipment made beyond the 1-year prescriptive period from
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the date of payment of nal duties, is barred by prescription. In the present case, the
failure on the part of respondent to timely question the propriety of the entry and
settlement of duties by petitioner involving the subject shipment, renders such entry
and settlement of duties nal and conclusive against both parties. Hence, respondent
cannot any longer have any claim from petitioner. Sections 1301, 1801, and 1802 of the
TCCP have been rendered inoperable by reason of the lapse of the period stated in
Section 1603 of the same Code.
Indeed, if the prescriptive period of one year speci ed in Section 1603 of the
TCCP is not applied against the respondent, the reality that the shipment has been
unloaded from the carrying vessels to petitioner's oil tanks and that import duty in the
amount of P11,231,081.00 has been paid would be obliterated by the application of the
principle of deemed abandonment four years after the occurrence of the facts of
possession and payment, as a consequence of which application, the petitioner would
be made to pay the government the entire value of the shipment it had as vendee of the
shipper already paid.
WHEREFORE, the petition is GRANTED . Accordingly, the Decision dated 13 May
2010 and Resolution dated 22 February 2011 of the Court of Tax Appeals Former En
Banc in C.T.A. EB No. 472 are hereby REVERSED and SET ASIDE on the ground of
prescription.
No costs.
SO ORDERED.
Reyes, J., concurs.
Velasco, Jr., J., see concurring opinion.
Peralta, J., pls. see dissenting opinion.
Jardeleza, J., I join the dissent of J. Peralta

Separate Opinions
VELASCO, JR. , J., concurring :
I register my concurrence with the ponencia.
The Latin maxim stare decisis et non quieta movere means stand by the thing
and do not disturb the calm — a bar from any attempt at relitigating the same issues. It
requires that high courts must follow, as a matter of sound policy, their own
precedents, or respect settled jurisprudence absent compelling reason to do
otherwise. 1 As a recognized exception, the salutary doctrine cannot be invoked when
the facts and circumstances in the succeeding case have so changed as to have
robbed the old rule of significant application or justification.
There is truth to the claim that the instant case bears striking resemblance to
that of Chevron Philippines v. Commissioner of the Bureau of Customs (Chevron) . 2 As
observed by Associate Justice Diosdado M. Peralta (Justice Peralta) in his dissent: 3
. . . As in Chevron, the imported crude oil subject of the
present case arrived in the Philippines and was discharged from
the carrying vessels prior to the effectivity of RA 8180. The import
entries in both cases were led beyond the 30-day period required
under Section 1301 of the [Tariff and Customs Code of the
Philippines]. In fact, it is on the bases of the facts obtaining in
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these importations of petitioner and Chevron (then known as
Caltex Phils., Inc.) that only one civil suit for collection of the
dutiable value of the imported articles was led by the [Bureau of
Customs] against these two corporations as defendants. It is from
this factual backdrop and the ensuing demand by the [Bureau of
Customs] to collect the dutiable value of the importations that the
case of Chevron reached this Court and was ultimately decided in
favor of the [Bureau of Customs]. . . .
Notwithstanding these glaring similarities, it cannot hastily be concluded that
Chevron is on all fours with the case at bar; the two cases are diametrically
opposed insofar as the issue of fraud on the part of the importer is
concerned . While the Court's ruling in Chevron was that the existence of fraud therein
was suf ciently established, no clear and convincing evidence was presented herein to
justify arriving at the same conclusion.
Whether or not petitioner Pilipinas Shell Petroleum Corporation (Pilipinas Shell)
defrauded the Bureau of Customs (BOC) becomes pivotal in this case because of Sec.
1603 of the Tariff and Customs Code (TCC), to wit:
Section 1603. Finality of Liquidation. — When articles have
been entered and passed free of duty or nal 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 nal payment of
duties, in the absence of fraud or protest or compliance audit
pursuant to the provisions of this Code, be nal and conclusive
upon all parties , unless the liquidation of the import entry was
merely tentative. (emphasis added)
Pursuant to the above-quoted provision, the attendance of fraud would remove
the case from the ambit of the statute of limitations, and would consequently allow the
government to exercise its power to assess and collect duties even beyond the one-
year prescriptive period, rendering it virtually imprescriptible.
Exhaustively discussed by the ponencia was that no scintilla of proof was ever
offered in evidence by respondent Commissioner of Customs to reinforce the claim
that Pilipinas Shell acted in bad faith, then a fortiori, in a fraudulent manner, in its
settlement of duties on its imported crude oil. The February 2, 2001 Memorandum on
which the Court of Tax Appeals (CTA), both in division and en banc, chie y anchored the
nding of fraudulent intent was never formally offered, but was instead merely
included in the records of the proceedings before the Bureau of Customs. CAacTH

Respondent was remiss in presenting this crucial piece of evidence in the de


novo proceeding before the CTA. Much has already been said by the ponencia about
the adverse effect of the procedural lapse on the admissibility of the Memorandum and
on its probative value. If I may inject: regardless of whether the document adverted to
was marked during pre-trial, or was otherwise identi ed during trial proper, it cannot be
accorded any evidentiary weight in nally resolving the case. As held in Heirs of Pasag
v. Sps. Parocha: 4
. . . Documents which may have been identified and marked
as exhibits during pre-trial or trial but which were not formally
offered in evidence cannot in any manner be treated as
evidence. Neither can such unrecognized proof be
assigned any evidentiary weight and value. It must be
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stressed that there is a signi cant distinction between
identi cation of documentary evidence and its formal offer. The
former is done in the course of the pre-trial, and trial is
accompanied by the marking of the evidence as an exhibit; while
the latter is done only when the party rests its case. The mere
fact that a particular document is identi ed and marked
as an exhibit does not mean that it has already been
offered as part of the evidence. It must be emphasized
that any evidence which a party desires to submit for the
consideration of the court must formally be offered by the
party; otherwise, it is excluded and rejected. (emphasis
added)
It is this lack of proof of fraud that substantially alters the terrain of the case,
thereby precluding the applicability of the doctrine of stare decisis. Though the
circumstance appears to be merely tangential, it is nevertheless the critical element in
resolving the issue on prescription. Absent fraud, the government, through the BOC, is
under legal compulsion to assess and collect customs duties within a strict one-year
period. As brought to fore by the ponencia, respondent was regrettably remiss in
complying with the statutory mandate of Sec. 1603 of the TCC: 5
It is undisputed that petitioner led its [Import Entry and
Internal Revenue Declaration] and paid the remaining customs
duties on the subject shipment only on 23 May 1996 . Yet, it was
only on 1 August 2000 , or more than four (4) years later , that
petitioner received a demand letter from the District Collector of
Batangas for the alleged unpaid duties covering the said
shipment. Thereafter, on 29 October 2001 , or after more than
ve (5) years , petitioner received another demand letter from
respondent seeking to collect for the entire dutiable value of the
same shipment amounting to P936,899,855.90. (emphasis added)
Upon expiration of the prescriptive period, respondent was barred from further
collecting from petitioner the dutiable value of its imported crude oil. The hands of the
Court are then constrained. There is no other course of action for us to take other than
to grant the instant petition.
Notably, Justice Peralta never questioned the nding of the ponencia as regards
respondent's procedural lapse. However, it is his postulation that the presence or even
the absence of fraud is irrelevant since Sec. 1603 of the TCC does not nd application
in cases wherein the government exercises its right over abandoned imported articles,
rather than its power to assess and collect taxes.
Unfortunately, I cannot join the dissent. I am perplexed at the contradiction of
how the argument is raised in the same breath as the invocation of stare decisis. The
irony lies in the discussion in Chevron of the very same issue of prescription and the
coverage of Sec. 1603.
Aside from the presence or absence of fraud, it is admitted that there is
signi cant identity as to the factual milieu of Chevron and the case at bar. Both are
concerned with the treatment of abandoned imported articles, and the collection by the
Commissioner of Customs of the dutiable value pertaining thereto. In Chevron, we have
categorically ruled that "due to the presence of fraud, the prescriptive period of the
nality of liquidation under Section 1603 was inapplicable." The converse should,
therefore, likewise hold true — in the absence of fraud, the one-year prescriptive period
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under Sec. 1603 shall nd application. Hence, even if stare decisis is then to be applied,
it could only operate to sustain the dismissal of the case on the ground of prescription.
Only then could the ruling of the ponencia not possibly be considered as a deviation
from a settled norm.
PERALTA, J., dissenting :
The doctrine of stare decisis is one of policy grounded on the necessity for
securing certainty and stability of judicial decisions. 1 Under this doctrine, when the
Supreme Court has once laid down a principle of law as applicable to a certain state of
facts, it will adhere to that principle, and apply it to all future cases. 2 With all due
respect to my colleagues, it is on this settled principle and in this context that I register
my dissent from the ponencia.
At the outset, a brief account of the undisputed factual and procedural
antecedents that transpired and led to the filing of this case is in order.
Petitioner Pilipinas Shell Petroleum Corporation is a domestic corporation
engaged in the business of importing crude oil, of processing it into different nished
petroleum products and, thereafter, distributing and marketing these finished products.
On April 7, 1996, petitioner's importation of 1,979,674.85 US barrels of Arab
Light Crude Oil arrived in the Philippines through vessels which docked at a wharf it
owns and operates.
On April 10, 1996, three days after the arrival of its importation, the shipments
were unloaded and brought to petitioner's oil tanks in Batangas City.
On May 23, 1996, forty-three (43) days from the date of discharge of its
importation, petitioner led the required Import Entry and Internal Revenue Declaration
(IEIRD) and paid import duty in the amount of P11,231,081.00.
In the meantime, on April 16, 1996, Republic Act No. 8180 (RA 8180), otherwise
known as the Downstream Oil Industry Deregulation Act of 1996 , took effect, which,
among others, provided for the reduction of the tariff duty on imported crude oil from
ten percent (10%) to three percent (3%).
On August 1, 2000, petitioner received a demand letter from the Bureau of
Customs (BOC), coursed through the District Collector of Batangas, assessing it the
amount of P120,162,991.00, representing de ciency customs duties resulting from the
difference between the customs duties due computed at the old rate of 10% (prior to
the effectivity of RA 8180) and the actual amount of duties paid by petitioner at the rate
of 3%. CTIEac

Petitioner protested the assessment but was denied by the District Collector.
Petitioner appealed the District Collector's decision to herein respondent
Commissioner of Customs.
Thereafter, on October 29, 2001, petitioner received from respondent a demand
letter for the payment of the amount of P936,899,885.90, representing the dutiable
value of the subject crude oil importation which was held to be abandoned for
petitioner's failure to file the required import entry on time.
On November 7, 2001, petitioner led a protest contending that the demand
letter has no factual and legal basis, and that such demand has already prescribed.
Subsequently, on April 11, 2002 the BOC filed a civil action for collection of a sum
of money against petitioner and Caltex Philippines, Inc., which also made crude oil
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importations like petitioner, for their refusal to pay the dutiable value of their
importations which they have consumed. 3
On May 27, 2002, petitioner led a petition for review with the Court of Tax
Appeals (CTA) questioning the BOC's demand letters which required petitioner to pay
de ciency customs duties as well as the dutiable value of its 1996 crude oil
importation. The case was raffled to the CTA First Division.
On June 19, 2008, the CTA First Division promulgated its Decision 4 dismissing
petitioner's petition for review for lack of merit. Petitioner's motion for reconsideration
was denied in a Resolution 5 issued by the CTA First Division on February 24, 2009.
Petitioner then filed a petition for review with the CTA Former En Banc.
On May 13, 2010, the CTA Former En Banc promulgated its Decision 6 dismissing
petitioner's petition for review and af rming with modi cation the CTA First Division's
assailed Decision and Resolution by imposing 6% interest on the sum awarded from the
date of promulgation until nality of the decision and 12% interest from nality of the
decision until full satisfaction.
Aggrieved, petitioner led a motion for reconsideration which was, however,
denied for lack of merit by the CTA Former En Banc in its Resolution 7 dated February
22, 2011.
Hence, the present petition for review on certiorari.
The basic issue that needs to be resolved in the instant petition is whether or not
respondent may still recover from petitioner the dutiable value of the latter's crude oil
importation which it has consumed despite its having been deemed abandoned by
operation of law.
T h e ponencia rules that "there being no evidence to prove that petitioner
committed fraud in belatedly ling its [Import Entry and Internal Revenue Declaration]
(IEIRD) within the 30-day period prescribed under Section 1301 of the [Tariff and
Customs Code of the Philippines] (TCCP), as amended, respondent's right to question
the propriety thereof and to collect the amount of the alleged de ciency customs
d ut ies, more so the entire value of the subject shipment, have already
prescribed." 8
I take exception to the above pronouncement as it is my considered view that it
runs counter to the pertinent provisions of the TCCP and of this Court's ruling in the
leading case of Chevron Philippines, Inc. v. Commissioner of the Bureau of Customs
(Chevron). 9
It bears stressing that the basic facts of the present case and those of Chevron,
which the Court follows as precedent, are practically the same. As in Chevron, the
imported crude oil subject of the present case arrived in the Philippines 1 0 and was
discharged from the carrying vessels prior to the effectivity of RA 8180. 1 1 The import
entries in both cases were led beyond the 30-day period required under Section 1301
of the TCCP. In fact, it is on the basis of the facts obtaining in these importations of
petitioner and Chevron (then known as Caltex Phils., Inc.) that only one civil suit for
collection of the dutiable value of the imported articles was led by the BOC against
these two corporations as defendants. It is from this factual backdrop and the ensuing
demand by the BOC to collect the dutiable value of the importations that the case of
Chevron reached this Court and was ultimately decided in favor of the BOC. Thus, since
the present case and the case of Chevron basically arise from the same factual
circumstances, it is the Court's duty to apply the ruling in Chevron to the present case.
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I n Chinese Young Men's Christian Association of the Philippine Islands v. Remington
Steel Corporation, 1 2 this Court ruled as follows: SaCIDT

Time and again, the Court has held that it is a very


desirable and necessary judicial practice that when a court has
laid down a principle of law as applicable to a certain state of
facts, it will adhere to that principle and apply it to all future cases
in which the facts are substantially the same. Stare decisis et non
quieta movere. Stand by the decisions and disturb not what is
settled. Stare decisis simply means that for the sake of certainty, a
conclusion reached in one case should be applied to those that
follow if the facts are substantially the same, even though the
parties may be different. It proceeds from the rst principle of
justice that, absent any powerful countervailing considerations,
like cases ought to be decided alike. Thus, where the same
questions relating to the same event have been put forward by the
parties similarly situated as in a previous case litigated and
decided by a competent court, the rule of stare decisis is a bar to
any attempt to relitigate the same issue. 1 3
Nonetheless, petitioner contends that the ruling in Chevron does not apply to the
present case and relies on the provisions of Section 1603 of the TCCP, which provides
as follows:
Section 1603. Finality of Liquidation. — When articles have
been entered and passed free of duty or nal 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 nal payment of duties, in the
absence of fraud or protest or compliance audit pursuant to the
provisions of this Code, be nal and conclusive upon all parties,
unless the liquidation of the import entry was merely tentative.
On the other hand, Sections 1301, 1801 and 1802 of the TCCP, as amended by
Republic Act No. 7651 (RA 7651), 1 4 also provide:
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 led by a party other than the
importer, said importer shall himself be required to declare under
oath and under the penalties of falsi cation 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.
Section 1801. Abandonment, Kinds and Effect of . — An
imported article is deemed abandoned under any of the
following circumstances:
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a. When the owner, importer, consignee of the imported article expressly signi es
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 le 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 led such entry, fails to claim his
importation within fteen (15) days which shall not likewise be extendible,
from the date of posting of the notice to claim such importation.
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.
Section 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.
xxx xxx xxx 1 5
It is clear that, under the abovequoted provisions of Section 1301, in relation to
Sections 1801 and 1802, when the importer fails to le the entry within the required 30-
day 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.
From the wording of the above provisions of Section 1801, as amended by RA
7651, it was held in Chevron that the law "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 le 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. It would be error on our part to continue applying the
old law despite the clear changes introduced by the amendment." 1 6 cHECAS

From these pronouncements, it is clear that abandonment sets in once an


importer fails to le the required import entry within the 30-day period provided by law
after due notice of the arrival of its shipment (except in cases of knowledgeable
owners or importers), without regard to any other act which may or may not have been
committed by such importer with respect to the entry of and payment of duties of the
imported articles.
The necessary consequence of such abandonment is the transfer of ownership
of the imported articles in favor of the government. Thus, as quoted above, Section
1802 of the TCCP provides as follows:
Section 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. 1 7
Chevron ruled that, "[n]o 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. "
18

It was also held in the same case that "[p]etitioner's failure to le the required
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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, ipso facto, (that is, they
became) the property of the government." 1 9
The term ipso facto is de ned as by the very act itself or by mere act. Probably a
closer translation of the Latin term would be by the fact itself. 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 facto be 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[P], as amended by RA 7651.
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
[its] imported crude oil. 2 0
It becomes apparent from the above discussions, that the issue of whether or
not an importer is guilty of fraud in the ling of its import entry is immaterial insofar as
its liability for the payment of the dutiable value of its abandoned importation is
concerned. As applied to the present case, petitioner becomes liable to pay the
dutiable value of its importation, regardless of whether or not it is guilty of fraud,
especially since it consumed or used its imported crude oil despite losing ownership
thereof. Thus, the CTA Former En Banc correctly held that:
As regards the issue on the existence of fraud, it should be
emphasized that fraud is not controlling in this case. Even in the
absence of fraud, petitioner Shell is still liable for the payment of
the dutiable value by operation of law. The liability of petitioner
Shell for the payment of the dutiable value of its imported crude
oil arose from the moment it appropriated for itself the said
importation, which were already a property of the government by
operation of law. Absence of fraud in this case would not exclude
petitioner Shell from the coverage of Sections 1810 and 1802 of
the TCCP. 2 1
The ponencia sustains petitioner's contention and rules that the provisions of
Sections 1301, 1801 and 1802 of the TCCP should be read in relation to Section 1603
to make the whole statute wholly operative and effective. I agree that a statute must be
read or construed as a whole or in its entirety and that all parts, provisions, or sections,
must be read, considered or construed together, and each must be considered with
respect to all others, and in harmony with the whole. 2 2 However, it would be error to
rely on petitioner's fallacious premise that, under Section 1603 of the TCCP, the
government's right to claim abandonment and recover the dutiable value of the
abandoned importation is dependent on whether or not it (petitioner) is guilty of fraud,
and its subsequent position that, if it is not guilty of fraud, the government's right to
claim abandonment will lapse after a period of one (1) year. How can the government's
right to claim abandonment lapse if the government's ownership over the abandoned
articles is already transferred to it by operation of law from the moment that petitioner
failed to le its import entry within the non-extendible 30-day period? In other words,
after the expiration of the 30-day period, the government, ipso facto, becomes the
owner of the abandoned articles and, being the owner, the government's exercise
of its rights of ownership over the abandoned imported article, which
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includes the right to recover the value of such abandoned article, which was
already consumed by the importer, is not conditioned upon any prior act or
proceeding nor is it subject to the prescriptive period provided under Section
1603.
Contrary to what has been stated in the ponencia, the government, in the present
case, is not exercising its power to assess and collect taxes. What it exercises is its
right of ownership over abandoned imported articles. AHDacC

Petitioner's strained and stretched interpretation of Section 1603, as maintained


by the ponencia, to the effect that it would preclude the government from exercising its
right of ownership over the abandoned imported articles, would, in effect, render the
provisions of Section 1801 and 1802 nugatory. A careful reading of the provisions of
Sections 1801 and 1802, as well as the Congressional deliberations on policy
considerations 2 3 for the non-extendible 30-day period for the ling of the import entry
in Section 1301, do not make any mention of nor reference to the provisions of Section
1603 as an exception to the application of the provisions of Sections 1801 and 1802.
Particularly, the law does not make the absence of fraud on the part of the importer, nor
questions or issues regarding the propriety of the importer's entry and settlement of
duties, as factors which would prevent the government from subsequently considering
the imported article as abandoned and of recovering its value in case the said article is
consumed by the importer despite losing ownership thereof.
If the Court were to follow petitioner's interpretation, it would, in effect, impose
an additional condition on the government's right to exercise its ownership over the
abandoned imported article, a condition which is not provided by law.
Also, insofar as petitioner's liability for the payment of the dutiable value of its
imported crude oil is concerned, the provisions of Section 1603 of the TCCP are not
applicable. Aside from the reasons discussed above, it is observed that Section 1603
falls under Part V, Title IV of the TCCP which is entitled "Liquidation of Duties." A
cursory reading of the related Sections (1601, 1602 and 1604), which fall under this
heading, would show that what becomes nal and conclusive after the expiration of one
(1) year from the nal payment of duties is only the determination of the total amount
and settlement as well as adjustment of duties, taxes, surcharges, wharfage, and/or
other charges to be paid on entries. Nothing in the provisions under this heading
excuses an importer from its liability to pay the dutiable value of the importation it
consumed despite having abandoned the same in the eyes of the law.
Moreover, as discussed above, it would be grossly disadvantageous to the
government if the Court were to follow petitioner's interpretation that, in the absence of
fraud and after the lapse of one (1) year from the date of its payment of duties, the
government is already precluded from recovering the dutiable value of the subject
imported crude oil which the government already owns by operation of law but which
was, nonetheless, appropriated and consumed by petitioner.
To recapitulate, the ruling in Chevron is clear and simple. There, it was held that
the petitioner's failure to le the required entries within a non-extendible period of thirty
(30) days from date of discharge of the last package from the carrying vessel
constituted implied abandonment of its oil importations, which means that from the
precise moment that the non-extendible thirty-day period lapsed, the abandoned
shipments became the property of the government. As a consequence, when the
petitioner withdrew the oil shipments for consumption, it appropriated for itself
properties which already belonged to the government and, thus, became liable for the
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total dutiable value of the shipments of imported crude oil, without regard to whether
or not the importer was guilty of fraud in ling its import entries and in the settlement
of its duties pertaining to such importation.
In addition, it is not amiss to point out that in Chevron, the Court ruled that the
importer's liability to pay the total dutiable value of its shipments of imported crude oil
should be reduced by the total amount of duties it had paid thereon. I submit that the
same rule should be applied in the present case.
Finally, it is my opinion that this case should have been referred to the Court en
banc as the ruling in this case runs contrary to the principle established in Chevron.
Accordingly, I vote to DENY the petition and AFFIRM the Decision dated May 13,
2010 and Resolution dated February 22, 2011 of the CTA Former En Banc in C.T.A. EB
No. 472, subject to the modi cation that petitioner should be made to pay the total
dutiable value of its shipment of imported crude oil reduced by the total amount of
duties it had already paid to the government for such importation.

Footnotes
1. Rollo, pp. 131-156; Penned by Associate Justice Olga Palanca-Enriquez with Presiding
Justice Ernesto D. Acosta, Associate Justices Juanito C. Castañeda, Jr., Lovell R.
Bautista and Erlinda P. Uy concurring.
2. Id. at 157-186; Penned by Associate Justice Juanito C. Castañeda, Jr. with Associate
Justices Erlinda P. Uy and Caesar A. Casanova concurring with a Dissenting Opinion
penned by Associate Justice Olga Palanca-Enriquez with Presiding Justice Ernesto D.
Acosta and Associate Justice Lovell R. Bautista concurring.
3. Id. at 341-353; Penned by Associate Justice Caesar A. Casanova with Presiding Justice
Ernesto D. Acosta and Associate Justice Lovell R. Bautista.

4. R.A. No. 8180 was declared unconstitutional in the consolidated cases of Tatad v. The Sec.
of the Dept. of Energy, 346 Phil. 321 (1997). However, the events and transactions
(importations) involved in the present case occurred when R.A. No. 8180 was still in
effect.

5. Rollo, p. 452.
6. Id. at 453-457.
7. Id. at 458-459.

8. Id. at 460-465.
9. Id. at 466.
10. Id. at 467-471.

11. Id. at 472.


12. Sec. 1508. Authority of the Collector of Customs to Hold the Deliver or Release of
Imported Articles. — Whenever any importer, except the government, has an
outstanding and demandable account with the Bureau of Customs, the Collector
shall hold the delivery of any article imported or consigned to such importer unless
subsequently authorized by the Commissioner of Customs, and upon notice as in
seizure cases, he may sell such importation or any portion thereof to cover the
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outstanding account of such importer; Provided, however, That at any time prior to
the sale, the delinquent importer may settle his obligations with the Bureau of
Customs, in which case the aforesaid articles may be delivered upon payment of the
corresponding duties and taxes and compliance with all other legal requirements.
13. Presidential Decree No. 1464 (The Tariff and Customs Code of 1978 — A Decree to
Consolidate and Codify All the Tariff and Customs Laws of the Philippines), as
amended by R.A. No. 1937 (An Act to Revise and Codify the Tariff and Customs
Laws of the Philippines), and by R.A. No. 7651 (An Act to Revitalize and Strengthen
the Bureau of Customs, Amending for the Purpose Certain Sections of the Tariff and
Customs Code of the Philippines, as Amended).
14. Rollo, p. 473.
15. Id. at 136.

16. Id.
17. Id. at 136-137.
18. Id. at 137.

19. Id.
20. Id. at 341-353.
21. Note that, as contained in the demand letters dated 29 October 2001 and 28 December
2001 sent by respondent to petitioner, the amount being collected was
P936,899,885.90.
22. Rollo, pp. 346-347.

23. Id. at 347-350.


24. Id. at 350.
25. Id. at 350-351.

26. Id. at 351-352; Citing pertinent portion of the Memorandum dated 2 February 2001 issued
by the Investigation and Prosecution Division (IPD) of the BOC.
27. Id. at 352.
28. SEC. 5. Answer. —
xxx xxx xxx

(b) Transmittal of records . — The respondent . . . Commissioner of Customs, . . . within ten


days after his answer, . . . shall certify and forward to the Court all the records or the
case in their possession, with the pages duly numbered, and, if the records are in
separate folders, then the folders will also be numbered. If there are no records, such
fact shall be manifested to the Court within the same period of ten days. The Court
may, on motion, and for good cause shown, grant an extension of time within which
to submit the aforesaid records of the case. Failure to transmit the records within the
time prescribed herein or within the time allowed by the Court may constitute indirect
contempt of court.

29. 583 Phil. 706 (2008).


30. Rollo, pp. 354-358.
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31. Id. at 131-156.

32. Id. at 152-153.


33. G.R. No. 97412, 12 July 1994, 234 SCRA 78, 95-97.
34. Rollo, pp. 153-154.
35. Id. at 43-45.

36. Id. at 55-62.


37. Id. at 63-64.
38. Id. at 1101-1147.

39. Supra note 29.


40. Id. at 725-727.
41. Id. at 720-721; Citing the congressional deliberations on House Bill No. 4502 which was
enacted as R.A. No. 7651, amending the Tariff and Customs Code of the Philippines,
including relevant portion of the Sponsorship Speech of Exequiel B. Javier, 22 March
1993.
42. An Act to Revitalize and Strengthen the Bureau of Customs, Amending for the Purpose
Certain Sections of the Tariff and Customs Code of the Philippines, as Amended,
which was approved on 4 June 1993. This amendatory law, particularly Section 1 of
RA No. 7651, deleted the requirement under Section 1802 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.
43. Rollo, pp. 149-151.

44. Chevron Phils., Inc. v. Commissioner of the Bureau of Customs, supra note 29 at 731-733.
45. Rollo, pp. 148-149.
46. Salcedo v. People, 400 Phil. 1302, 1304 (2000).

47. The Insular Life Assurance Co., Ltd. v. Court of Appeals, 472 Phil. 11, 22 (2004).
48. Borromeo v. Sun, 375 Phil. 595, 602 (1999).
49. The Insular Life Assurance Co., Ltd. v. Court of Appeals, supra note 47 at 22-23.
50. Rollo, pp. 341-353.

51. International Corporate Bank v. Guenco, 404 Phil. 353, 364 (2001).
52. Transglobe International, Inc. v. Court of Appeals, 361 Phil. 727, 739 (1999).
53. Astroland Developers, Inc. v. GSIS , 481 Phil. 724, 748 (2004).

54. Republic v. CTA, 418 n Phil. 758, 767 (2001).


55. 157 Phil. 510 (1974).
56. Id. at 535.

57. Dizon v. CTA, 576 Phil. 111, 128 (2008); and Atlas Consolidated Mining and Dev't. Corp. v.
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Commissioner of Internal Revenue, 547 Phil. 332, 339 (2007); and Commissioner of
Internal Revenue v. Manila Mining Corp., 505 Phil. 650, 664 (2005).
58. An Act Creating the Court of Tax Appeals.
59. An Act Expanding the Jurisdiction of the Court of Tax Appeals (CTA), Elevating Its Rank to
the Level of a Collegiate Court with Special Jurisdiction and Enlarging Its
Membership, Amending for the Purpose Certain Sections or Republic Act No. 1125, as
Amended, Otherwise Known as the Law Creating the Court of Tax Appeals, and for
Other Purposes.
60. 264 Phil. 753, 759 (1990).
61. Mato v. CA, 320 Phil. 344, 349 (1995).

62. Section 5(b), Rule 6 of the Revised Rules of the Court of Tax Appeals requires, among
others, the Commissioner of Customs, within ten days after his answer, to certify and
forward to the court all the records of the case in their possession. Failure to transmit
the records within the time prescribed herein or within the time allowed by law by the
court may constitute indirect contempt of court.

63. Supra note 57 at 131-132 citing Heirs of Pasag v. Parocha, 550 Phil. 571, 578-579 (2007).
64. People v. Tundag, 396 Phil. 873, 887 (2000).
65. Rep. of the Phils. v. CA, 194 Phil. 476, 495 (1981).

66. Tabuena v. CA, 274 Phil. 51, 57 (1991).


67. Id. citing U.S. v. Claveria, 29 Phil. 527, 532 (1915).
68. Toshiba Information Equipment (Phils.), Inc. v. Commissioner of Internal Revenue, 628
Phil. 430, 451 (2010).
69. Rodriguez v. CA, 318 Phil. 313, 325 (1995).

70. Black's Law Dictionary, 6th Edition, p. 369.


71. Id. at 349.
72. See Section 1301 of the TCCP.

73. Rep. of the Philippines v. Ablaza, 108 Phil. 1105, 1108 (1960).

VELASCO, JR., J., concurring:


1. Ting v. Velez-Ting, G.R. No. 166562, March 31, 2009, 582 SCRA 694.
2. G.R. No. 178759, August 11, 2008, 561 SCRA 710.
3. Dissenting Opinion, p. 4.
4. G.R. No. 155483, April 27, 2007, 522 SCRA 410.

5. Decision, p. 30.

PERALTA, J., dissenting:


1. Ty v. Banco Filipino Savings and Mortgage Bank, 689 Phil. 603, 613 (2012).
2. Chinese Young Men's Christian Association of the Philippine Islands v. Remington Steel
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Corporation, 573 Phil. 320, 336 (2008).
3. The BOC's Complaint was led with the Regional Trial Court of Manila, Branch 25 and was
docketed as Civil Case No. 02-103239; rollo, pp. 724-730.
4. Penned by Associate Justice Caesar A. Casanova, with the concurrence of Presiding
Justice Ernesto D. Acosta and Associate Justice Lovell R. Bautista; rollo, pp. 341-353.
5. Id. at 354-358.

6. Penned by Associate Justice Olga Palanca-Enriquez, with the concurrence of Presiding


Justice Ernesto D. Acosta and Associate Justices Juanito C. Castañeda, Jr., Lovell R.
Bautista and Erlinda P. Uy; id. at 131-156.
7. Penned by Associate Justice Juanito C. Castañeda, Jr., with the concurrence of Associate
Justices Erlinda P. Uy and Caesar A. Casanova; id. at 157-171, Associate Justice
Olga Palanca-Enriquez dissented and she was joined by Presiding Justice Ernesto D.
Acosta and Lovell R. Bautista; id. at 172-186.
8. Emphasis supplied.
9. 583 Phil. 706 (2008). The ponencia was penned by former Chief Justice Renato C. Corona,
with the concurrence of former Chief Justice Reynato S. Puno and Associate Justices
Antonio T. Carpio, Ma. Alicia Austria-Martinez and Teresita J. Leonardo-de Castro.
10. Chevron's importations arrived separately on March 8, 1996, March 18, 1996, March 21,
1996, March 26, 1996 and April 10, 1996, while petitioner's importation arrived on
April 7, 1996.

11. Chevron's and petitioner's importations were unloaded from the carrying vessels three (3)
days after their arrival.
12. Supra note 2.
13. Id. at 337.
14. An Act to Revitalize and Strengthen the Bureau of Customs, Amending for the Purpose
Certain Sections of the Tariff and Customs Code of the Philippines, As Amended.
15. Emphasis ours.
16. Supra note 9, at 727.
17. Emphasis ours.

18. Supra note 9, at 735. (Emphasis ours)


19. Id. at 736-737.
20. Id. at 733.

21. Rollo, pp. 152-153.


22. Atty. Valera v. Office of the Ombudsman, et al., 570 Phil. 368, 390 (2008).
23. As discussed in the ponencia, the following are the policy considerations in imposing the
30-day non-extendible period within which import entries must be led: (a) to prevent
considerable delay in the payment of duties and taxes; (b) to compel importers to
le import entries and claim their importation as early as possible under
the threat of having their importation declared as abandoned and forfeited
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in favor of the government ; (c) to minimize the opportunity of graft; (d) to compel
both the BOC and the importers to work for the early release of cargo, thus
decongesting all ports of entry; (e) to facilitate the release of goods and thereby
promoting trade and commerce; and (f) to minimize the pilferage of imported cargo
at the ports of entry. (Emphasis ours)
n Note from the Publisher: Written as “458” in the original document.

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FIRST DIVISION

[G.R. No. 158150. September 10, 2014.]

AGRIEX CO., LTD., petitioner, vs. HON. TITUS B. VILLANUEVA,


Commissioner, Bureau of Customs (now replaced by HON.
ANTONIO M. BERNARDO), and HON. BILLY C. BIBIT, Collector
of Customs, Port of Subic (now replaced by HON. EMELITO
VILLARUZ), respondents.

DECISION

BERSAMIN, J : p

The Court affirms the exclusive jurisdiction of the Bureau of Customs over
seizure cases within the Subic Freeport Zone.
The Case
This appeal by petition for review on certiorari is brought by Agriex Co., Ltd. to
reverse the decision promulgated on November 18, 2002 in CA-G.R. CV No.
67593, 1 whereby the Court of Appeals (CA) dismissed its petition for certiorari
and prohibition to nullify and set aside the Notice of Sale dated October 18, 2001
issued by respondent Billy C. Bibit as the Collector of Customs in the Port of
Subic.
Antecedents
On July 19, 2001, the petitioner, a foreign corporation whose principal office was
in Bangkok, Thailand, entered into a contract of sale with PT. Gloria Mitra
Niagatama International of Surabaya, Indonesia (PT. Gloria Mitra) for 180,000
bags (or 9,000 metric tons) of Thai white rice. 2 Later on, it entered into another
contract of sale with R&C Agro Trade of Cebu City (R&C Agro Trade) for 20,000
bags of Thai white rice. On July 27, 2001, it chartered the vessel MV Hung Yen to
transport the 200,000 bags of Thai white rice to the Subic Free Port for
transshipment to their designated consignees in the Fiji Islands and Indonesia
(for the 180,000 bags), and in Cebu City (for the 20,000 bags). 3 The MV Hung
Yen left Bangkok, Thailand on August 15, 2001 and arrived at the Subic Free Port
on August 20, 2001 with the inward foreign manifest indicating the final
destinations of the shipment. However, the Sea Port Department of the Subic
Bay Metropolitan Authority (SBMA) allowed the vessel to berth only 22 days
later, or on September 11, 2001. SBMA advised the vessel agent to secure from
the National Food Authority (NFA) an amendment of the import permit issued in
favor of R&C Agro Trade to change the discharging port from the Port of Cebu to
the Port of Subic. CDAHIT

Due to the delay in the berthing and unloading of the cargo from the vessel, the
petitioner, through its agent in Subic, applied for a vessel exit clearance to allow
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the MV Hung Yen to sail for the Labuan Free Port in Malaysia. On August 24,
2001, the Bureau of Customs issued a Clearance of Vessel to a Foreign Port,
granting the petitioner's request to allow the MV Hung Yen and cargo to exit for
Malaysia. 4 Despite the issuance of the clearance, the MV Hung Yen did not set
sail for the Labuan Free Port on August 26, 2001.
On September 10, 2001, the petitioner requested permission from the Bureau of
Customs to unload the entire shipment of 200,000 bags of Thai white rice
because the MV Hung Yen must return to Vietnam. 5 Upon the recommendation
of Atty. James F. Enriquez and Atty. Clemente P. Heraldo, as indicated in their
After Mission Report dated September 4, 2001, 6 respondent Commissioner Titus
B. Villanueva issued his 1st Indorsement on September 11, 2001 directing
respondent Collector of Customs Billy C. Bibit to issue a Warrant of Seizure and
Detention (WSD) against the 20,000 bags of Thai white rice consigned to R&C
Agro Trade. 7
Accordingly, Collector Bibit issued WSD No. 2001-13 dated September 12, 2001
against the 20,000 bags of Thai white rice consigned to R&C Agro Trade
notwithstanding that no bag of rice had yet been unloaded from the vessel. 8
After the unloading, transfer and storage of the rice shipment at SBMA's
warehouse, Collector Bibit issued amended WSDs on September 27, 2001 to
cover the MV Hung Yen and the remaining 180,000 bags of Thai white rice
intended for transshipment. 9
On October 4, 2001, the petitioner filed with the Bureau of Customs in the Port
of Subic an Urgent Motion to Quash Warrant of Seizure, inclusive of WSD No.
2001-13 (20,000 bags consigned to R&C Agro Trade), WSD No. 2001-13A (MV
Hung Yen) and WSD No. 2001-13B (180,000 bags for transshipment). 10 cDIaAS

On October 26, 2001, Collector Bibit quashed WSD No. 2001-13A over the MV
Hung Yen on the ground that the vessel was not chartered or leased. 11
Pending hearing of the seizure proceedings vis-à-vis the rice shipments, Collector
Bibit issued a Notice of Sale on October 18, 2001, setting therein the auction sale
of the 200,000 bags of Thai white rice on November 22, 2001 and November 23,
2001. 12
The petitioner filed a Manifestation and Urgent Motion for Reconsideration on
October 19, 2001, but Collector Bibit did not act on the motion. 13
Consequently, the petitioner instituted the petition for certiorari and prohibition
in the CA on November 12, 2001 (with prayer for the issuance of a temporary
restraining order and/or writ of injunction), alleging grave abuse of discretion on
the part of the respondents for issuing the October 18, 2001 Notice of Sale
notwithstanding that they had no jurisdiction over the 180,000 bags of Thai
white rice intended for transshipment to other countries. 14
Accordingly, Commissioner Villanueva issued his memorandum dated November
19, 2001 directing Collector Bibit not to proceed with the scheduled auction of
the 180,000 bags of Thai white rice until further orders from his office. 15
On November 22, 2001, the CA issued a temporary restraining order enjoining
the respondents to desist from holding the scheduled public auction. 16
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The respondents did not file their Comment vis-à-vis the petition for certiorari
and prohibition. Instead, they filed a Manifestation and Motion dated December
3, 2001, whereby they prayed for the dismissal of the petition on the ground of
mootness due to Commissioner Villanueva's November 19, 2001 memorandum.
17 cSHATC

In the resolution promulgated on April 2, 2002, 18 the CA denied the respondents'


Manifestation and Motion dated December 3, 2001.
Meanwhile, on November 14, 2001, Collector Bibit denied the motion for the
quashal of the warrant of seizure issued against the rice shipments, and ordered
their forfeiture in favor of the Government. 19
The petitioner appealed the November 14, 2001 ruling by Collector Bibit to
Commissioner Villanueva, 20 who resolved the appeal through the Consolidated
Order of February 4, 2002, disposing thusly:
WHEREFORE, the ORDER Appealed from is hereby MODIFIED, granting
the Motion for Settlement under S.I. No. 2001-13 and accordingly ORDER
the release of the 20,000 bags of Thai rice to claimants, R&C AGRO
TRADE or to its duly authorized representative, upon payment of the
settlement value of EIGHT MILLION FOUR HUNDRED THOUSAND PESOS
(Php8,400,000.00) and AFFIRMING the FORFEITURE under S.I. No. 2001-
13-B of the 180,000 bags of Thai rice consigned to different non-existing
consignees in Indonesia and the denial of ownership by B.I. Naidu and
Sons Ltd. of Fiji Island.

Let copies of this Order be furnished to all parties and offices concerned
for information and guidance.

SO ORDERED. 21

On February 20, 2002, the petitioner filed in the CA its Comment on the
respondents' Manifestation and Motion dated December 3, 2001, arguing that
the issue concerning the October 18, 2001 Notice of Sale had not been rendered
moot and academic but merely suspended; that it would move for the
reconsideration of the February 4, 2002 Consolidated Order of Commissioner
Villanueva; and that should its motion for reconsideration be denied, it would
elevate the issues relative to the injunctive relief to the Court of Tax Appeals
(CTA) by petition for certiorari. 22 aTCAcI

On April 2, 2002, the CA denied the respondents' Manifestation and Motion dated
December 3, 2001. 23
On July 22, 2002, Commissioner Antonio M. Bernardo, who had meanwhile
succeeded Commissioner Villanueva, released the 2nd Indorsement directing the
sale of the 180,000 bags of Thai white rice at public auction. 24 Accordingly,
District Collector Felipe Bartolome issued a Notice of Sale scheduling the public
auction on July 29, 2002 and July 30, 2002. 25 The public auction was reset to
August 5, 2002 and August 6, 2002, however, following the CA's promulgation of
its resolution on July 29, 2002 granting the petitioner's motion for the issuance
of a writ of preliminary injunction. 26
Eventually, the auction sale went on as scheduled on August 5, 2002 and August
6, 2002, and the proceeds amounting to P116,640,000.00 were deposited in the
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Land Bank of the Philippines, Subic Branch, under Bureau of Customs Trust Fund
II Account No. 1572100800.
Judgment of the CA
On November 18, 2002, the CA rendered its assailed judgment on the petition for
certiorari and prohibition, viz.:
Although it is true that the Port of Subic is a free zone, being a portion of
the Subic Special Economic Zone, and as such, it shall be operated and
managed as a separate customs territory ensuring free flow or
movement of goods and capital within, into and exported out of the Subic
Special Economic Zone under Republic Act No. 2779 (sic), particularly
Section 12 thereof, yet, when probable cause is shown that the foreign
goods are considered as contraband or smuggled goods, the
Commissioner of Customs has the primary jurisdiction to have the goods
seized through the issuance of a warrant of seizure and detention order,
which is the situation obtaining in this instant case because when public
respondent Collector Billy C. Bibit as District Collector of Customs, Port of
Subic, issued an amended warrant of seizure and detention order S.I. No.
2001-13-B, dated September 27, 2001 to include in the seizure
proceeding the subject 180,000 bags of rice, it was done due to the
information supplied by the Directorate General of Customs and Excise
Directorate of Prevention and Investigation of the Ministry of Finance of
the Republic of Indonesia and the information obtained from the Director
for Enforcement of the Fiji Revenue and Customs Authorities of Fiji Island
Customs Service, that the alleged consignees in Indonesia are not actually
existing and that B.I. Naidu and Sons, Ltd. of Fiji Island is not engaged in
the importation of rice.AHEDaI

In accordance with Section 2535 of the Tariff and Customs Code, as


amended, since the government has already complied with the two (2)
conditions set forth therein, the burden of proof now lies upon the
complainant, who in this case is the petitioner, to prove otherwise.
Moreover, contrary to the contention of the petitioner that it was denied
due process of law when the amended Warrant of Seizure and Detention
Order S.I. No. 2002-13B dated September 27, 2001 was issued, because
it was done without giving them an opportunity to be heard and explain
their side, suffice it to say that "the essence of due process is simply to
be heard or as applied to administrative proceedings, to explain one's side
or an opportunity to seek reconsideration of an action or ruling
complained of" (National Police Commission v. Bernabe, 332 SCRA 74) and
"due process does not necessarily require conducting an actual hearing
but simply giving the party concerned due notice and affording an
opportunity or right to be heard" (Ramoran v. Jardine CMG Life Insurance
Company, Inc.) which opportunity was given to the petitioner since it was
able to file an Urgent Motion to Quash Warrant of Seizure dated October
1, 2001 and Manifestation and Urgent Motion for Reconsideration dated
October 19, 2001 which were all denied in a decision dated November 14,
2001 by the Collector of Customs and instead ordered the forfeiture of
the subject bags of rice in favor of the government.

Furthermore, on appeal to the Commissioner of Customs of the Order


forfeiting the 180,000 bags of Thai rice seized under S.I. No. 2001-13B,
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the same was affirmed, per Consolidated Order dated February 4, 2002.

Consequently, it is not correct as claimed by the petitioner that the notice


(auction) sale dated October 18, 2001, as well as, the subsequent notices
of auction sale are invalid because they were issued pursuant to a valid
Warrant of Seizure and Detention Order S.I. No. 2001-13B, dated
September 27, 2001.
Finally, since the jurisdiction to determine the validity or regularity of the
seizure and forfeiture proceedings is lodged or vested on the Collector of
Customs and then, to the Commissioner of Customs, which has already
been done in this case before the actual conduct of the auction sale of
the subject 180,000 bags of rice, the next move that petitioner should
have done is to appeal the Consolidated Order dated February 4, 2002 to
the Court of Tax Appeals and afterward, if unsatisfied, to this Court, by
filing a petition for review under Rule 43 of the 1997 Rules of Civil
Procedure, as amended. ECDaAc

WHEREFORE, foregoing premises considered, this petition, being filed


prematurely, is DENIED.

SO ORDERED. 27

The petitioner moved for reconsideration, but the CA denied the motion on May
8, 2003. 28
Issues
In its petition for review, the petitioner contends that:
1. THE COURT OF APPEALS ERRED IN NOT DECLARING THE SEIZURE
PROCEEDINGS NULL AND VOID FOR LACK OF JURISDICTION OVER
PETITIONER'S RICE SHIPMENT.

2. THE COURT OF APPEALS ERRED IN NOT DECLARING THE


RESPONDENTS TO HAVE GRAVELY ABUSED THEIR DISCRETION IN
THE SALE OF PETITIONER'S RICE SHIPMENT.
3. THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONER'S
REMEDY IS AN APPEAL TO THE COURT OF TAX APPEALS. 29

We note that a few days after the petitioner instituted the certiorari proceedings
in the CA on November 12, 2001, Commissioner Villanueva countermanded
Collector Bibit's October 18, 2001 Notice of Sale through his November 19, 2001
memorandum. Thereupon, the October 18, 2001 Notice of Sale could no longer
be enforced, thereby rendering the resolution of the validity of the October 18,
2001 Notice of Sale moot and academic. A moot and academic case is one that
ceases to present a justiciable controversy by virtue of supervening events, so
that a declaration thereon would be of no practical use or value. 30 DEIHSa

As matters stand, WSD No. 2001-13A issued against the MV Hung Yen was
quashed by the October 26, 2001 order of Collector Bibit; while WSD No. 2001-
13 issued against the 20,000 bags of rice consigned to R&C Agro Trade had been
effectively lifted by Commissioner Villanueva's Consolidated Order dated
February 4, 2002 following R&C Agro Trade's payment of the settlement value of
P8,400,000.00.
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The pending seizure proceedings under WSD No. 2001-13B of the 180,000 bags
of rice remained, and became the basis for the issuance of the subsequent notice
of sale by Collector Bartolome. Consequently, the controversy on the jurisdiction
of the Bureau of Customs over the seizure and forfeiture of goods and articles
entering the free port area lingers and requires the Court's intervention.
Ruling
The appeal lacks merit.
The Subic Special Economic Zone, or the Subic Bay Freeport, was established
pursuant to Section 12 of Republic Act No. 7227 (The Bases Conversion and
Development Act of 1992), to be operated and managed as a special customs
territory. On the other hand, the Subic Bay Metropolitan Authority (SBMA) was
created under Section 13 of RA No. 7227 to serve "as an operating and
implementing arm of the Conversion Authority" within the SBF.
The concept of a Freeport as a separate customs territory was described during
Senator Enrile's interpellations during the sponsorship of the bill that later on
became RA No. 7227, to wit: DEAaIS

Senator Enrile: Mr. President, I think we are talking here of sovereign


concepts, not territorial concepts. The concept that we are supposed to
craft here is to carve out a portion of our terrestrial domain as well as our
adjacent waters and say to the world: "Well, you can set up your factories
in this area that we are circumscribing, and bringing your equipment and
bringing your goods, you are not subject to any taxes and duties
because you are not within the customs jurisdiction of the Republic of the
Philippines, whether you store the goods or only for purposes of
transshipment or whether you make them into finished products again to
be reexported to other lands."
xxx xxx xxx
My understanding of a "free port" is, we are in effect carving
out a part of our territory and make it as if it were foreign
territory for purposes of our customs laws, and that people can
come, bring their goods, store them there and bring them out
again, as long as they do not come into the domestic commerce
of the Republic.
We do not really care whether these goods are stored here. The only
thing that we care is for our people to have an employment because of
the entry of these goods that are being discharged, warehoused and
reloaded into the ships so that they can be exported. That will generate
employment for us. For as long as that is done, we are saying, in effect,
that we have the least contact with our tariff and customs laws and our
tax laws. Therefore, we consider these goods as outside of the customs
jurisdiction of the Republic of the Philippines as yet, until we draw them
from this territory and bring them inside our domestic commerce. In
which case, they have to pass through our customs gate. I thought we
are carving out this entire area and convert it into this kind of concept. 31

On the basis of the concept, the petitioner claims that the Collector of Customs
had no jurisdiction to issue WSD No. 2001-13B and the October 18, 2001 Notice
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of Sale concerning the 180,000 bags of Thai white rice, which had entered the
SBF only for transshipment to other countries. 32 It insists that the auction sale
of the 180,000 bags was null and void for failing to comply with Executive Order
No. 272, which required presidential approval when the amount to be generated
from the sale was at least P50 Million; 33 that the sale disregarded the
memorandum of agreement between the Bureau of Customs and the NFA; 34
that the rice was sold at P785.00 per 50-kilo bag instead of P1,100.00, the price
established by the Bureau of Agricultural Statistics; 35 and that no notice of
auction sale was sent to the NFA or its accredited dealers. 36 acADIT

In contrast, the respondents sought the dismissal of the petition on the ground of
lack of jurisdiction, maintaining that an appeal to the Court of Tax Appeals (CTA)
was the proper remedy to assail the decision of the Commissioner of Customs,
which the petitioner itself expressly recognized in its February 20, 2002
Comment vis-à-vis their Manifestation and Motion dated December 3, 2001; and
that because the petitioner did not appeal to the CTA within the prescribed
period, the February 4, 2002 Consolidated Order of Commissioner Villanueva
became final and executory, and could no longer be the subject of review in the
present proceedings. 37
The Court declares that the Collector of Customs was authorized to institute
seizure proceedings and to issue WSDs in the Subic Bay Freeport, subject to the
review by the Commissioner of Customs. Accordingly, the proper remedy to
question the order or resolution of the Commissioner of Customs was an appeal
to the CTA, not to the CA.
Although RA No. 7227 is silent as to the person or entity vested with the
authority to seize and forfeit or detain goods and articles entering the Subic Bay
Freeport, the implementing rules and regulations (IRR) of R.A. No. 7227
contained the following provisions, to wit:
Sec. 11. Responsibilities of the SBMA. — Other than the powers and
functions prescribed in Section 10 of these Rules, the SBMA shall have
the following responsibilities:
xxx xxx xxx
f. Consistent with the Constitution, the SBMA shall have the following
powers to enforce the law and these Rules in the SBF: TAEcCS

xxx xxx xxx


(4) to seize articles, substances, merchandise and records
considered to be in violation of the law and these Rules, and to
provide for their return to the enterprise or person from whom
they were seized, or their forfeiture to the SBMA; . . .
B. Transactions with the Customs Territory
xxx xxx xxx
Sec. 52. Seizure of Foreign Articles. — Foreign articles withdrawn
transported or taken in commercial quantities from the SBF to the
Customs Territory without payment of duties and taxes, shall be subject
to seizure and forfeiture proceedings pursuant to the pertinent
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provisions of the Tariff and Customs Code and the National Internal
Revenue Code of the Philippines, without prejudice to any criminal and/or
administrative actions that may be instituted against the person/persons
liable/responsible therefor.
C. Taxes and Fiscal Obligations

xxx xxx xxx


Sec. 60. Search, Arrest, and Seizure by Customs Officials. — Persons,
baggage, vehicles and cargo entering or leaving the SBF are subject to
search by Customs officials as a condition to enter or leave the SBF.
Customs officials are authorized to examine any merchandise held by the
SBF Enterprises during regular business hours.
Customs officers may seize any article found during a Customs
search upon entering or leaving the SBF to be in violation of any
provision of the customs laws for which a seizure is authorized,
and such seizure shall be disposed of according to the customs
laws. Articles which are prohibited or excluded from the SBF under the
rules and regulations of the SBMA which are found by the Customs
officials during an audit, examination or check within the SBF may be
seized by them and turned over to the SBMA for disposition. HDIaST

The SBMA may secure the assistance of and/or coordinate with Customs
officers to arrest persons in the SBF for violations of the customs laws
for which arrest is authorized concerning articles in the Customs Territory
destined to the SBF or articles which have been removed from the SBF to
the Customs Territory. (Bold underscoring supplied for emphasis)

Customs Administrative Order No. 4-93 (CAO 4-93), also known as the Rules and
Regulations for Customs Operations in the Subic Special Economic and Freeport
Zone, similarly provides the following:
CHAPTER II. GENERAL PROVISIONS
xxx xxx xxx

B. AUDIT, SEARCH, SEIZURE AND ARREST IN ZONE


xxx xxx xxx
3. SEIZURE
Any prohibited or excluded articles found upon search, or
through any examination, audit or check of articles in the
Zone by Customs may be seized by Customs for violations
of Tariff and Customs Code of the Philippines as amended
and disposed of in accordance with law. 38

Under these statutory provisions, both the SBMA and the Bureau of Customs
have the power to seize and forfeit goods or articles entering the Subic Bay
Freeport, except that SBMA's authority to seize and forfeit goods or articles
entering the Subic Bay Freeport has been limited only to cases involving
violations of RA No. 7227 or its IRR. There is no question therefore, that the
authority of the Bureau of Customs is larger in scope because it covers cases
concerning violations of the customs laws.
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The authority of the Bureau of Customs to seize and forfeit goods and articles
entering the Subic Bay Freeport does not contravene the nature of the Subic Bay
Freeport as a separate customs authority. Indeed, the investors can generally and
freely engage in any kind of business as well as import into and export out goods
with minimum interference from the Government. 39 The Court has thus
observed in Executive Secretary v. Southwing Heavy Industries, Inc.: 40
The Freeport was designed to ensure free flow or movement of goods
and capital within a portion of the Philippine territory in order to attract
investors to invest their capital in a business climate with the least
governmental intervention. The concept of this zone was explained by
Senator Guingona in this wise: DcHaET

Senator Guingona. Mr. President, the special economic zone is


successful in many places, particularly Hong Kong, which is a free
port. The difference between a special economic zone and an
industrial estate is simply expansive in the sense that the
commercial activities, including the establishment of banks,
services, financial institutions, agro-industrial activities, maybe
agriculture to a certain extent.
This delineates the activities that would have the least of
government intervention, and the running of the affairs of
the special economic zone would be run principally by the
investors themselves, similar to a housing subdivision,
where the subdivision owners elect their representatives
to run the affairs of the subdivision, to set the policies, to
set the guidelines.
We would like to see Subic area converted into a little
Hong Kong, Mr. President, where there is a hub of free
port and free entry, free duties and activities to a
maximum spur generation of investment and jobs.

While the investor is reluctant to come in the Philippines, as a rule,


because of red tape and perceived delays, we envision this special
economic zone to be an area where there will be minimum
government interference.
The initial outlay may not only come from the Government or the
Authority as envisioned here, but from them themselves, because
they would be encouraged to invest not only for the land but also
for the buildings and factories. As long as they are convinced that
in such an area they can do business and reap reasonable profits,
then many from other parts, both local and foreign, would invest,
Mr. President.cda

Yet, the treatment of the Subic Bay Freeport as a separate customs territory
cannot completely divest the Government of its right to intervene in the
operations and management of the Subic Bay Freeport, especially when patent
violations of the customs and tax laws are discovered. After all, Section 602 of
the Tariff and Customs Code vests exclusive original jurisdiction in the Bureau of
Customs over seizure and forfeiture cases in the enforcement of the tariff and
customs laws.
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In this case, an examination of the shipment by the customs officials pursuant to
Mission Order No. 06-2001 initially revealed no cause to hold the release of the
180,000 bags of rice. In their September 4, 2001 After Mission Report, Atty.
Enriquez and Atty. Heraldo pertinently stated:
FINDINGS:
Prescinding from the foregoing factual environment, we find no reason to
hold the departure of the 180,000 bags of rice and the vessel unless we
could establish the falsity of the transhipment manifest of this shipment,
e.g., the alleged ultimate consignees are non-existing entities or if they
are existing, that they did not order for the shipment thereof. . . .
xxx xxx xxx
RECOMMENDATION:

xxx xxx xxx


With respect to the 180,000 bags of rice allegedly for transshipment, we
should expedite the verification of the ultimate consignees. Should they
really exist and in fact ordered this shipment, we should allow the
transshipment thereof of let it remain on board the subject vessel which
will transport the same, per advise of the shipping agent, to the Free Port
of Labuan Malaysia, its next foreign fort pursuant to the clearance to be
issued therefor in order to allow the lawful departure of the vessel.
Conversely, if after verification, the contrary is found, we should amend
the Warrant to include the latter portion of the shipment in question for
having been imported contrary to law or at least an attempt at
importation in violation of law. . . . 41

However, further investigation led to the discovery that the consignees of the
180,000 bags of rice in Indonesia were non-existent, and the consignee in the Fiji
Islands denied being involved in the importation of rice. These findings were
summarized in Commissioner Villanueva's Consolidated Order, to wit:
. . . The information supplied by the Directorate General of Customs and
Excise Directorate of Prevention and Investigation of the Ministry of
Finance of the Republic of Indonesia, and the information supplied by the
Director for Enforcement of the Fiji Revenue and Customs Authorities of
Fiji Island Customs Service, that the alleged consignees in Indonesia are
not actually existing and that B.I. Naidu and Sons Ltd. of Fiji Island is not
engaged in the importation of rice to be a solid ground to hold the
remaining shipment of 180,000 bags of rice forfeited as charged.
Moreover it should be stressed that during the hearing on the Motion to
Quash the WSD issued against the carrying vessel, the witness who is
the General Manager of Overseas Vietnam Shipping testified that that
prefix BKK/PLP on the Bills of Lading stands for Bangkok/Philippines.
Stated differently, if indeed the 180,000 bags of rice were for
transhipment to Indonesia and Fiji Island, then why they were prefixed like
the 20,000 bags of rice covered by B/L No. BKK/PLP-01? The said Bills of
Lading should have been prefixed as BKK/IND for those shipments bound
for Indonesia and BKK/FJI for those bound for Fiji Island or in any similar
manner. Likewise, the TSN would bear us out that the witness for the
vessel also confirmed during his testimony that there were alterations
made on the Mate's Receipt of the cargo which were used as the basis in
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made on the Mate's Receipt of the cargo which were used as the basis in
the preparation of the questionable Bills of Lading. 42 CHIaTc

The findings constituted sufficient probable cause, as required by Section 2535 of


the Tariff and Customs Code, 43 that violations of the customs laws, particularly
Section 102 (k) and Section 2530, (a), (f) and (l), pars. 3, 4, and 5 of the Tariff
and Customs Code, 44 had been committed. For that reason, the institution of the
seizure proceedings and the issuance of WSD No. 2001-13B by the Collector of
Customs were well within the jurisdiction of the Bureau of Customs.
In Subic Bay Metropolitan Authority v. Rodriguez, 45 the Court has already
recognized the exclusive jurisdiction of the Bureau of Customs and its officials
over seizure cases although the articles were within the Freeport zone, holding:
Petitioner alleges that the RTC of Olongapo City has no jurisdiction over
the action for injunction and damages filed by respondents on 11 June
2002 as said action is within the exclusive original jurisdiction of the BOC
pursuant to Section 602 of Republic Act No. 1937, otherwise known as
the "Tariff and Customs Code of the Philippines," as amended. Section 602
provides, thus:
Sec. 602. Functions of the Bureau. — The general duties, powers
and jurisdiction of the bureau shall include:
xxx xxx xxx
g. Exercise exclusive original jurisdiction over seizure and forfeiture
cases under the tariff and customs laws. aATEDS

Petitioner contends that the imported 2,000 bags of rice were in the
actual physical control and possession of the BOC as early as 25 October
2001, by virtue of the BOC Subic Port Hold Order of even date, and of
the BOC Warrant of Seizure and Detention dated 22 May 2002. As such,
the BOC had acquired exclusive original jurisdiction over the subject
shipment, to the exclusion of the RTC.

We agree with petitioner.


It is well settled that the Collector of Customs has exclusive jurisdiction
over seizure and forfeiture proceedings, and regular courts cannot
interfere with his exercise thereof or stifle or put it at naught. The
Collector of Customs sitting in seizure and forfeiture proceedings has
exclusive jurisdiction to hear and determine all questions touching on the
seizure and forfeiture of dutiable goods. Regional trial courts are devoid
of any competence to pass upon the validity or regularity of seizure and
forfeiture proceedings conducted by the BOC and to enjoin or otherwise
interfere with these proceedings. Regional trial courts are precluded from
assuming cognizance over such matters even through petitions for
certiorari, prohibition or mandamus.
Verily, the rule is that from the moment imported goods are actually in
the possession or control of the Customs authorities, even if no warrant
for seizure or detention had previously been issued by the Collector of
Customs in connection with the seizure and forfeiture proceedings, the
BOC acquires exclusive jurisdiction over such imported goods for the
purpose of enforcing the customs laws, subject to appeal to the Court of
Tax Appeals whose decisions are appealable to this Court. As we have
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clarified in Commissioner of Customs v. Makasiar, the rule that RTCs have
no review powers over such proceedings is anchored upon the policy of
placing no unnecessary hindrance on the government's drive, not only to
prevent smuggling and other frauds upon Customs, but more
importantly, to render effective and efficient the collection of import and
export duties due the State, which enables the government to carry out
the functions it has been instituted to perform. 46
DTSaHI

The issuance of the October 18, 2001 Notice of Sale was merely an incident of
the seizure proceedings commenced by the Collector of Customs. Consequently,
the correctness of its issuance was necessarily subsumed to the determination of
the propriety of the seizure proceedings, a matter that was within the exclusive
jurisdiction of the Bureau of Customs. In that context, the proper recourse of the
petitioner from the February 4, 2002 Consolidated Order of Commissioner
Villanueva, which reviewed the November 14, 2001 action of Collector Bibit, 47
was an appeal in due course to the CTA, in accordance with Section 7 (4) of RA
No. 1125, as amended, 48 in relation to Section 2402 of the Tariff and Customs
Code, 49 within 30 days after the receipt of the order. 50 Without the appeal
having been timely filed in the CTA, the February 4, 2002 Consolidated Order
became final and executory.
WHEREFORE, the Court DENIES the petition for review on certiorari; AFFIRMS
the decision promulgated on November 18, 2002 in CA-G.R. CV No. 67593; and
ORDERS the petitioner to pay the costs of suit.
SO ORDERED.
Velasco, Jr., * Leonardo-de Castro, ** Perez and Perlas-Bernabe, JJ., concur.
Footnotes
* In lieu of Chief Justice Maria Lourdes P.A. Sereno, who is on Wellness Leave, per
Special Order No. 1772.
** Per Special Order No. 1771 dated August 28, 2014.

1. Rollo, pp. 29-39; penned by Associate Justice Mercedes Gozo-Dadole (retired) with
Associate Justice B.A. Adefuin-De La Cruz (retired) and Associate Justice
Mariano C. Del Castillo (now a Member of this Court), concurring.

2. CA rollo, p. 23.

3. Id. at 26-27.
4. Id. at 30.

5. Id. at 31.

6. Id. at 34-39.
7. Id. at 33.

8. Id. at 40.
9. Id. at 41.

10. Id. at 42-47.

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11. Id. at 56-65.
12. Id. at 22.

13. Id. at 66-68.


14. Id. at 4-21.

15. Rollo, p. 47.

16. CA rollo, pp. 100-103.


17. Rollo, p. 44.

18. CA rollo, pp. 130-131.


19. Id. at 118-119.

20. Id. at 118.

21. Id. at 122.


22. Id. at 113-114.

23. Id. at 124-125.


24. Id. at 167.

25. Id. at 145.

26. Id. at 169-170.


27. Rollo, pp. 36-38.

28. Id. at 41.


29. Id. at 17.

30. Funa v. Ermita, G.R. No. 184740, February 11, 2010, 612 SCRA 308, 319.

31. RECORDS, SENATE 8TH CONGRESS, SESSION (JANUARY 14, 1992), cited and
quoted in Executive Secretary v. Southwing Heavy Industries, Inc. , G.R. Nos.
164171/164172/168741, February 20, 2006, 482 SCRA 673, 696.

32. Rollo, pp. 17-23.

33. Id. at 23-24.


34. Id. at 24-25.

35. Id. at 25.


36. Id.

37. Id. at 92-107.

38. CA rollo, p. 83.


39. IRR of RA No. 7227 provides:

Section 39. Rights and Obligations. — SBF Enterprises shall have the following
rights and obligations:
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a. To freely engage in any business, trade, manufacturing, financial or service
activity, and to import and export freely all types of goods into and out of the
SBF, subject to the provisions of the Act, these Rules and other regulations that
may be promulgated by the SBMA; . . .

40. Supra note 31, at 694-695.


41. CA rollo, pp. 37-38.

42. CA rollo, pp. 121-122.


43. Section 2535. Burden of Proof in Seizure and/or Forfeiture. — In all
proceedings taken for the seizure and/or forfeiture of any vessel, vehicle,
aircraft, beast or articles under the provisions of the tariff and customs laws,
the burden of proof shall lie upon the claimant: Provided, That probable cause
shall be first shown for the institution of such proceedings and that seizure
and/or forfeiture was made under the circumstances and in the manner
described in the preceding sections of this Code.
44. Section 102. Prohibited Importations. — The importation into the Philippines of
the following articles is prohibited:

xxx xxx xxx


k. All other articles the importation of which is prohibited by law.

Section 2530. Property Subject to Forfeiture under Tariff and Customs Laws . — Any
vehicle, vessel or aircraft, cargo, article and other objects shall, under the
following conditions be subjected to forfeiture:
a. Any vehicle, vessel or aircraft, including cargo, which shall be used unlawfully
in the importation or exportation of articles or in conveying and/or transporting
contraband or smuggled articles in commercial quantities into or from any
Philippine port or place. The mere carrying or holding on board of contraband
or smuggled articles in commercial quantities shall subject such vessel, vehicle,
aircraft, or any other craft to forfeiture:

xxx xxx xxx

f. Any article the importation or exportation of which is effected or attempted


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

xxx xxx xxx


1. Any article sought to be imported or exported

xxx xxx xxx

(3) On the strength of a false declaration or affidavit executed by the owner,


importer, exporter or consignee concerning the importation of such article;

(4) On the strength of a false invoice or other document executed by the owner,
importer, exporter or consignee concerning the importation or exportation of
such article; and
(5) Through any other practice or device contrary to law by means of which
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such articles was entered through a customhouse to the prejudice of the
government.

45. G.R. No. 160270, April 23, 2010, 619 SCRA 176.
46. Id. at 189-191.

47. See Tariff and Customs Code, viz.:


Section 2313. Review by Commissioner. — The person aggrieved by the decision
or action of the Collector in any matter presented upon protest or by his action
in any case of seizure may, within fifteen (15) days after notification in writing
by the Collector of his action or decision, file a written notice to the Collector
with a copy furnished to the Commissioner of his intention to appeal the action
or decision of the Collector to the Commissioner. Thereupon the Collector shall
forthwith transmit all the records of the proceedings to the Commissioner, who
shall approve, modify or reverse the action or decision of the Collector and take
such steps and make such orders as may be necessary to give effect to his
decision: Provided, That when an appeal is filed beyond the period herein
prescribed, the same shall be deemed dismissed. . . .

48. Section 7. Jurisdiction. — The CTA shall exercise:


a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

xxx xxx xxx

4. Decisions of the Commissioner of Customs in cases involving liability for


customs duties, fees or other money charges, seizure, detention or release of
property affected, fines, forfeitures or other penalties in relation thereto, or
other matters arising under the Customs Law or other laws administered by
the Bureau of Customs.

49. Section 2402. Review by Court of Tax Appeals. — The party aggrieved by the
ruling of the Commissioner in any matter brought before him upon protest or
by his action or ruling in any case of seizure may appeal to the Court of Tax
Appeals, in the manner and within the period prescribed by law and regulations.

Unless an appeal is made to the Court of Tax Appeals in the manner and within the
period prescribe by laws and regulations, the action or ruling of the
Commissioner shall be final and conclusive.

50. Section 11. Who May Appeal; Mode of Appeal; Effect of Appeal. — Any party
adversely affected by a decision, ruling or inaction of the Commissioner of
Internal Revenue, the Commissioner of Customs, the Secretary of Finance, the
Secretary of Trade and Industry or the Secretary of Agriculture or the Central
Board of Assessment Appeals or the Regional Trial Courts may file an appeal
with the CTA within thirty (30) days after the receipt of such decision or ruling
or after the expiration of the period fixed by law for action as referred to in
Section 7 (a) (2) herein. . . .

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