COMMISSIONER
OF CUSTOMS, G.R. No. 169352
Petitioner,
Present:
QUISUMBING,
J.,
Chairperson,
-
versus - CARPIO
MORALES,
TINGA,
VELASCO,
JR., and
BRION,
JJ.
GELMART
INDUSTRIES
PHILIPPINES,
INC.,
Respondent. Promulgated:
February 13, 2009
x----------------------------------------------------------------------------x
Tinga,
J.:
The
Commissioner of Customs assails the Decision[1]
of the Court of Tax Appeals (CTA) dated August 15, 2005, which reversed the
decree of forfeiture issued by petitioner, lifted the Warrants of Seizure and
Detention (WSD) issued by petitioner, and ordered the release to Gelmart Industries
Philippines, Inc. of its imported fabrics on the condition that the correct
duties, taxes, fees and other charges thereon be paid to the Bureau of Customs.
The
narration of facts by the CTA, although rather lengthy, is quoted hereunder for
its accuracy:
Petitioner is a corporation
established in the year 1953 and is duly registered in accordance with
Philippine laws, with office address at Km. 15 South Superhighway,
It is primarily engaged in the
manufacturing of embroidery and apparel products for the export market. It is, likewise,
authorized to operate a Bonded Manufacturing Warehouse (BMW), BMW No. 39, as
evidenced by the Certification dated
Since the start of its operations, petitioner has manufactured several product lines. It started manufacturing embroidered handkerchiefs’ branched out to infants’ and children’s wear, knitted blouse and apparel products, shirts, ladies dresses, night gown, pajama, swim wear, nylon stockings, brassieres and intimate ladies’ underwear. For the year 1999, petitioner stopped manufacturing some of the lines which were not viable anymore. It, however, maintained the manufacturing of brassieres and related intimate ladies garments, children’s and infants’ wear products, knitted gloves, socks and the like.
During the year 1999, petitioner, in the course of its operations and on three (3) different occasions in 1999, received consignments of various textile materials and accessories from its supplier, to be manufactured into finished products for subsequent exportation to principals abroad.
The three shipments of imported various textile materials and accessories were declared in the BOC Entry, Internal Declaration and the attached Bill of Lading, Commercial Invoice and/or Packing List, detailed as follows:
|
1. Entry No. |
44780-99 PO2A |
|
Date of Arrival |
|
|
Number and Kind |
2x40’ Container S.T.C. 646
Rolls of 100% Polyester Knitted Fabrics Weight: 265-270 GM/M2 Width: 60” Usable, 62” Edge to Edge PIO#99K668 |
|
Color Color |
Midnite -
2,253.30 lbs. Royal Blue - 5,573.20 lbs. Midnite - 6,069.10 lbs. Royal Blue - 7,390.00 lbs. Royal Blue - 1,840.30 lbs. Midnite -
4,330.30 lbs. AND 100% Polyester Knitted
Fabrics Weight: 130-140 GM/M2 Width: 60” Usable, 62”
Edge to Edge Royal Blue - 507.70 lbs, Cardinal - 591.40 lbs. Midnite - 676.20 lbs. |
|
2. Entry No. |
46269-99, PO2A |
|
Date of Arrival |
|
|
Number and Kind |
1x40’ Container S.T.C. 276
Rolls of 100% Polyester Knitted Fabric Weight: 265-270 GM/M2 Width: 60” Usable, 62”
Edge to Edge |
|
Color |
Midnite – 3,752.70 lbs. Cardinal – 8,625.80 lbs. |
|
3. Entry No. |
46297-99, PO2A |
|
Date of Arrival |
|
|
Number and Kind |
1x20’ Container S.T.C. 142
packages, 20 Rolls of 100% Cotton Knitted Fabric Weight 813.90 lbs. Thread Cones - 4,833.00 Cones Elastic - 553.00 GR Velcro - 8,333.00 Yds. Poly Tape - 9000
Yds. Woven Tape (ST73) - 23400
Yds. Neck Tape (TCP 507) 12020
Yds. Main Label - 6,147.50
Doz. Care Label - 2,060.00
Doz. Price Ticket - 75.00 K Carton Sticker -
3,127.00 PR |
On
On
During the ocular inspection, it was discovered that petitioner was operating the Bra and Lace Division as well as the Auxiliary Division. It was likewise found that only machineries for the two divisions exist and that there were no facilities for the other lines of products.
In a letter dated
On
a. Polyester, acrylic, cotton and other natural or synthetic piece-goods
b. Various types of yarns and threads, nylon, polyester, wool and other synthetic or natural piece-good
c. All types of leather and synthetic leathers
d. Non-woven fabrics and similar items
e. Various types of staple fibers (synthetic and natural)
f. Various drystuffs and chemical
g. Various accessories and supplies
On
September 14, 1999, a certification was likewise issued by the Garments/Textile
Mfg. Bonded Warehouse Division-Port of
On
1. The subject shipments which actually contained cotton fabrics with 3% spandex for shirtings and 100% spun polyester polar fleece with one side anti-pilling, 2 side brush are not needed in the operation of the existing divisions of GIPI, namely: the bra and lace divisions.
2. Upon the closure of the Infant’s Wear Division, Children’s Wear Division, Swimwear Division, Knit Glove Division, all of GIPI, the import licenses on articles not consistent in the operation of its remaining divisions for bra and lace are deemed cancelled. In short, the importations of the subject shipments were made without authority.
3. In renewing its license to operate a customs manufacturing bonded warehouse, GIPI submitted documents misrepresenting that it has machineries and operating a division capable of manufacturing the questioned shipments into finished products.
4. GIPI has no facilities to comply with Rule VIII, Section1(d) of the GTEB Rules and Regulations, i.e., the requirement on the “production, capacity geared for export of at least 70%.” With this, GIPI would be transferring 100% of these subject materials to third parties under the guise of subcontracting, a practice violative of the GTEB and Customs regulations.
5. GIPI abused the privileges given to operate a manufacturing, bonded warehouse by unjustly interpreting the phrase “fabrics” in the import license issued by the GTEB to cover any kind of fabrics or textile materials even though not consistent in the operations of its existing bra and lace divisions.
6. Observations 1, 2, 3, 4 and 5 constitute prima facie evidence that without authority, GIPI is allowing third parties to utilize its import license and consequently its export quota.
7. Misrepresentations and/or use of false or fraudulent entries and details in all document applications, papers submitted to the Board for consideration and approval as well as unauthorized importations and transfer of export quotas, all are classified as major violations of GTEB rules and regulations.
8. Importation of raw materials such as knitted or woven fabrics, yarn, leather, ribbings, interlining, pocket lining, polyfill, thread, collars, cuffs and laces with the width of more than 10 inches shall require an import license from the GTEB. In short these are regulated raw materials that would require import license.
Furthermore, Atty. Tugday of the WAMU questioned petitioner’s authority to manufacture the particular garments for which the imported articles may be used on the ground that most of the production processes for these garments would be done outside the bonded warehouse by petitioner’s subcontractors. WAMU is of the opinion that this act would contravene Rule VIII, Section1.d of the GTEB Rules, which provides that:
SECTION 1. REQUIREMENTS.
The following are the requirements for the application for operation of
a bonded manufacturing warehouse (BMW):
x x x
d. Production capacity
geared for export of at least 70%.
In
a letter dated
On
Please be informed that said provision requires that the production capacity of the applicant for bonded manufacturing warehouse is at least 70% for export and 30% is allowed for local market, subject to payment of taxes and duties. Further, said provision does not relate to the limit that the applicant for bonded warehouse may produce in-house and through subcontractors.
On
Meanwhile,
a letter dated
On
We agree with your position that re-shipment may be allowed to a country other than the country of origin. We believe that it is the right of the Principal to determine where his shipment should go unless it would violate our laws or any rule or regulation. In fact we allow said re-shipment under CMO 85-91. It states:
2.1 Bonded manufacturing warehouse operators may request for re-shipment of raw materials and accessories to its foreign supplier in cases where they are defective, sub-standard or not in accordance with given specification. Likewise, return shipment may be allowed if the said raw materials are no longer required for production.
On
A
Memorandum dated
In a Decision dated August 9, 2001, and which was received by petitioner on August 20, 2001, the District Collector of Customs ordered that the shipments be forfeited in favor of the government for alleged violation of Section 2530 paragraphs (f) and (l) subparagraphs 3, 4 and 5 of the TCCP, as amended.
Petitioner
filed its Memorandum of Appeal with the Customs Commissioner on
As
previously mentioned, the CTA reversed the decree of forfeiture issued by
petitioner and lifted the latter’s WSDs.
It also ordered the release of respondent’s importation subject to the
condition that the correct duties, taxes, fees and other charges shall be paid
to the Bureau of Customs. The
dispositive portion of the decision states:
WHEREFORE, the decree of forfeiture of respondent Commissioner of Customs is hereby REVERSED and the Warrants of Seizure and Detention Nos. 99-279, 99-280 and 99-281 are hereby LIFTED. Accordingly, the subject importation covered by Import Entry Nos. 44780-99; 46269-99 and 46297-99 are hereby RELEASED to petitioner subject to the condition that the correct duties, taxes, fees and other charges thereon be paid to the Bureau of Customs based on the actual quantity and condition of the articles at the time of filing of the corresponding import entry in compliance with this decision.
SO ORDERED.[3]
Upon respondent’s motion, the CTA amended its
decision and directed the release of the subject shipments without the payment
of duties and taxes on the ground that the same were imported tax and duty-free
subject to the condition that the imported materials will subsequently be
re-exported as finished products. The dispositive
portion of the Resolution of the CTA dated
WHEREFORE,
the Court hereby GRANTS petitioner’s “Motion for Clarification.” Accordingly,
the dispositive portion of the decision promulgated on
“WHEREFORE, the decree of forfeiture of respondent Commissioner of Customs is hereby REVERSED and the Warrants of Seizure and Detention Nos. 99-279, 99-280 and 99-281 are hereby LIFTED. Accordingly, the subject importation covered by Import Entry Nos. 44780-99; 46269-99 and 46297-99 are hereby RELEASED to petitioner sans the payment of duties and taxes.
SO ORDERED.[4]
In the
instant Petition[5]
dated October 4, 2005, petitioner, through the Office of the Solicitor General,
argues that the subject shipments were misdeclared as “100% polyester knitted
fabrics” and “100% cotton knitted fabrics” when they were, in fact, 100%
polyester polar fleece, fleece textile materials, and cotton fabrics with 3%
spandex skirtings.[6] The shipments were allegedly correctly
forfeited in favor of the government in accordance with Sec. 2503 of the Tariff
and Customs Code. Moreover, the subject
shipments which allegedly consisted of regulated items violated or exceeded the
import permits of respondent.
Petitioner
also asserts that although respondent is allowed to subcontract a portion of
the manufacturing process (involving the subject shipments), it violated the
rules of the Garment and Textile Export Board (GTEB) and the Bureau of Customs
which allegedly allowed respondent to subcontract only a small or incidental
portion of the manufacturing process.
In its
Comment[7]
dated February 10, 2006, respondent points out that the instant petition
questions the decision of a division of the CTA in contravention of Republic
Act No. 9282 (R.A. No. 9282),[8]
which provides that this Court exercises appellate jurisdiction over en banc decisions or rulings of the CTA.
Respondent avers that petitioner does not have standing to appeal the judgment
of the CTA as it had been declared in default by the latter. The decision of
the CTA had allegedly attained finality as petitioner failed to move for the
reconsideration thereof or to file a petition for review with the CTA en banc. Further, the instant petition
allegedly raises factual questions beyond the province of the Court to review.
On the
substantive issues, respondent claims that the goods contained in the subject
shipments correspond to the articles described in the import entries and are
covered by respondent’s import licenses.
Respondent insists that the GTEB rules do not prevent it from engaging
the services of sub-contractors. On the contrary, the rules allegedly allow it
to perform a portion of the manufacturing process within its premises while the
other processes to complete the finished products are permitted to be done
through sub-contractors.
Petitioner
filed a Reply[9]
dated
In its
Rejoinder[10]
dated
Petitioner
had indeed committed procedural missteps on his way to this Court.
First. Under Sec. 9 of R.A. No. 9282, “…A
party adversely affected by a ruling, order or decision of a Division of the
CTA may file a motion for reconsideration or new trial before the same Division
of the CTA within fifteen (15) from thereof…”[11] In this case, no motion was filed by
petitioner to seek the reconsideration of the assailed decision of the
CTA.
Second. Sec. 11 of the same law provides
that, “x x x A party adversely affected by a resolution of a Division of the
CTA on a motion for reconsideration or new trial may file a petition for review
with the CTA en banc.” In turn, “A party adversely affected by a
decision or ruling of the CTA en banc may
file with the Supreme Court a verified petition for review on certiorari
pursuant to Rule 45 of the 1997 Rules of Civil Procedure” as ordained under
Sec. 12 of R.A. No. 9282.
Again, this
procedure was not followed by petitioner and no adequate explanation was
offered to justify his disregard of the rules.
Petitioner vaguely suggests that filing a petition for review with the
CTA en banc would have been futile
because the assailed decision was concurred in by three (3) associate
justices. This is obviously not a
defensible argument considering that the affirmative vote of four (4) members
of the CTA en banc is necessary for
the rendition of a decision.[12] Even if three (3) members had already
concurred in the assailed decision, it cannot be predicted how the
deliberations of the CTA en banc could
have gone had petitioner rid himself of his blasé attitude towards the rules and
followed the tiered appeals procedure laid out in the law.
Third. Sec. 2, Rule 4 of the Revised Rules
of the Court of Tax Appeals reiterates the exclusive appellate jurisdiction of
the CTA en banc relative to the review
of decisions or resolutions on motion for reconsideration or new trial of the court’s
two (2) divisions in cases arising from administrative agencies such as the
Bureau of Customs.[13] Hence, the Court is without jurisdiction to
review decisions rendered by a division of the CTA, exclusive appellate
jurisdiction over which is vested in the CTA en banc.
Petitioner’s
failure to file a motion for reconsideration of the assailed decision of the
CTA First Division, or at least a petition for review with the CTA en banc, invoking the latter’s exclusive appellate jurisdiction to review
decisions of the CTA divisions, rendered the assailed decision final and
executory. Necessarily, all the
arguments professed by petitioner on the validity of the seizure, detention and
ultimate forfeiture of the subject shipments have been foreclosed. [14]
It should
be noted at this juncture, however, that the order of default against
petitioner (which had not been lifted) did not result in depriving him of
standing to file a petition for review. A defaulted party’s right to appeal
from a judgment by default on the ground that the amount of the judgment is
excessive, or is different in kind from that prayed for, or that the plaintiff
failed to prove the material allegations of his complaint, or that the decision
is contrary to law, has been consistently acknowledged by the Court.[15]
Nonetheless,
let it be reiterated that the instant petition is so procedurally flawed that
its outright denial is warranted. Furthermore, after a review of the argued
merits of the case, the Court is all the more convinced that the petition is
truly a lost cause.
Petitioner claims
that the subject shipments as described in their import entries do not
correspond to those as found by the Bureau of Customs upon examination. The “100% polyester knitted fabrics” declared
under Warehousing Entry Nos. 44780-99 and 46269-99, and “100% cotton knitted
fabrics” declared under Warehouse Entry No. 46297-99 are allegedly not the same
as the “100% polyester polar fleece” (for the shipment covered by Warehousing
Entry No. 44780-99), “fleece textile materials” (for the shipment under
Warehousing Entry No. 46269-99), and “cotton fabrics with 3% spandex for
skirtings” (for Warehousing Entry No. 46297-99) as discovered upon examination. However, petitioner did not present any
evidence to substantiate the variance between the subject shipments as declared
and those as actually found.
At any
rate, the matter was settled by a letter from the Philippine Textile Research
Institute presented by respondent, showing that “100% PES knitted fabric” and
“polar fleece fabric” are both classified as “100% polyester.” This letter was given full faith and credence
by the CTA and we have no reason, again absent any evidence presented by
petitioner, to hold otherwise.
We cannot
overlook the fact that respondent had been granted two licenses to import tax
and duty-free materials and accessories for re-exportation under License to
Import No. 077-99 dated
import
licenses authorize respondent to import “FABRICS/YARNS/LEATHERS/SUBMATERIALS”
from various foreign principals with the limitation that these licenses do not
entitle respondent to import finished and semi-finished goods,
cut-to-panel/knit-to shape materials, and cut-piece goods.
In a
Certification dated September 6, 1999, the GTEB itself clarified that
respondent is authorized to import polyester, acrylic, cotton and other
natural or synthetic piece-goods; various types of yarns and threads,
nylon, polyester, wool and other synthetic or natural piece-goods; all types of
leather and synthetic leathers; non-woven fabrics and similar items; various
types of staple fibers (synthetic and natural); various drystuffs and
chemicals; and various accessories and supplies.[16]
The goods
contained in the subject shipments undoubtedly fall under the category of raw
materials which respondent is authorized to import under the licenses which it
had indubitably obtained prior to the importation of the subject shipments. As such, there is no basis for the forfeiture
of the subject shipments on the ground of misdeclaration.
As regards
the contention that respondent had unlawfully sub-contracted a part of the
manufacturing process for which the subject shipments were intended, Republic
Act No. 3137 (R.A. No. 3137),[17]
which governs respondent’s operations as a bonded manufacturing warehouse, as
well as the pertinent rules of the GTEB, allow respondent to manufacture
garments and apparel articles intended for exportation in whole or in part in
its bonded manufacturing warehouse.
Sec. 2(A),
Rule VIII of the GTEB Rules and Regulations provides:
Sec. 2. Conditions. The following are the conditions for the operation of a BMW:
A.
All garment and apparel articles manufactured in whole or in part out of bonded
raw materials and intended for exportation may be manufactured in whole or in
part in a bonded manufacturing warehouse; Provided that the
manufacturer-exporter of such articles has secured a permit from the Board to
operate such warehouse and has posted a bond in the amount of Two Hundred
Thousand Pesos (P200,000.00) from a reputable bonding company acceptable
to the Bureau of Customs guaranteeing faithful compliance with all laws, rules
and regulations applicable thereto.
Sec. 1(19),
Part 1 of the Rules and Regulations of the GTEB defines a manufacturer as a
firm manufacturing textile and/or garments for export and provides that, “Manufacturers under R.A. No. 3137 may
perform a portion of the manufacturing processes within the premises while
other processes to complete his finished products may be done through
subcontractors and/or homeworkers.”
Thus, unlike other manufacturers who are required to have at least one
complete production line within his manufacturing premises, which Gelmart
nonetheless had complied with because it has a complete manufacturing line for
its lace and bra divisions, Gelmart is actually required only to ensure that
the goods released from its bonded manufacturing warehouse for embroidery had been previously stamped or cut in
accordance with the pattern to be manufactured in accordance with Sec. 4,
par. XI of R.A. No. 3137. Moreover, note
should be taken of the fact that the sub-contractors engaged by Gelmart were
also duly certified by the GTEB.
In sum, the
procedural infirmities and insubstantial legal argumentation in the petition combine
to defeat petitioner’s claims.
WHEREFORE, the Petition dated
SO ORDERED.
DANTE O. TINGA Associate Justice
WE CONCUR:
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
CONCHITA CARPIO MORALES PRESBITERO J.
VELASCO, JR.
Associate Justice Associate Justice
ARTURO D. BRION
Associate Justice
ATTESTATION
I attest that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
LEONARDO A. QUISUMBING
Associate
Justice
Chairperson,
Second Division
CERTIFICATION
Pursuant to Section 13, Article VIII
of the Constitution, and the Division Chairperson’s Attestation, it is hereby
certified that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
REYNATO S. PUNO
Chief Justice
[1]Rollo, pp. 48-73; penned by Associate Justice Lovell R. Bautista with the concurrence of Associate Justices Ernesto D. Acosta and Caesar A. Casanova.
[8]Entitled, “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 the Purpose Certain Sections of Republic Act No. 1125, as Amended, Otherwise Known as the Law Creating the Court of Tax Appeals, and For Other Purposes,” which took effect on April 23, 2004.
[13]The
provision, which was left unchanged by the Resolution promulgated by the Court
on
Sec. 2. Cases within the jurisdiction of the Court en banc.—The Court en banc shall exercise exclusive appellate jurisdiction to review by appeal the following:
(a) Decisions or resolutions on motions for reconsideration or new trial of the Court in Divisions in the exercise of its exclusive appellate jurisdiction over:
(1) Cases arising from administrative agencies—Bureau of Internal Revenue, Bureau of Customs, Department of Finance, Department of Trade and Industry, Department of Agriculture;…
[14]Rizal Commercial Banking Corporation v.
Commissioner of Internal Revenue, G.R. No. 168498,
[15]