SECOND
DIVISION
|
SECRETARY
OF FINANCE,
Petitioner, - versus - ORO MAURA
SHIPPING LINES,
Respondent. |
G.R. No. 156946 Present: Quisumbing, J., Chairperson,
CARPIO-MORALES, *CHICO-NAZARIO, **LEONARDO-DE CASTRO, and brion, JJ.
Promulgated: July
15, 2009 |
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D
E C I S I O N
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BRION, J.:
We
resolve the petition[1]
filed by the Secretary of Finance (petitioner),
assailing the Decision dated
FACTUAL ANTECEDENTS
On
On
On
P1,952,000.00, conditioned on the
re-export of the vessel within a period of one (1) year from March 22, 1993, or, in case of default, to pay customs duty,
tax and other charges on the importation of the vessel in the amount of P1,296,710.00.
On P6,171,092.00 and its estimated
customs duty to be P1,296,710.00.
On
Since the re-export bond was not
renewed, the Collector of the P1,952,000.00; thereafter,
it sent Glory Shipping Lines several demand letters dated
Unknown to the Collector of the P1,100,000.00.
On December 2, 1994, Haruna Maritime S.A. and Glory Shipping Lines sold
the M/V “HARUNA” to the respondent without informing or notifying the Collector
of the
On
December 13, 1994, Kariton and Company (Kariton), representing the
respondent, inquired with the DOF if it could pay the duties and taxes due on
the vessel, with the information that the vessel was acquired by Glory Shipping
Lines through a bareboat charter and was previously authorized by the DOF to be
released under a re-export bond. The DOF referred Kariton’s letter to the Commissioner of Customs for
appropriate action, per a 1st Indorsement dated
On
the basis of these indorsements and the P1,100,000.00 and assessed duties
and taxes amounting to P149,989.00,
which the respondent duly paid on
On
November 5, 1997, after discovering that the vessel M/V “HARUNA” had been sold
to the respondent, the Collector of the Port of Mactan sent the respondent a
demand letter for the unpaid customs duties and charges of Glory Shipping Lines.
When the respondent failed to pay, the Collector of the
In
his September 1998 Decision,[5] the
Collector of the Port of Mactan ordered the forfeiture of the vessel in favor
of the Government, after finding that both Glory Shipping Lines and the respondent
acted fraudulently in the transaction.
The
Cebu District Collector, acting on the respondent’s appeal, reversed the decision
of the Collector of the Port of Mactan in his December 1, 1998 decision, concluding
that while there appeared to be fraud in the sale of the vessel M/V “HARUNA” by
Haruna Maritime S.A. and Glory Shipping Lines to the respondent, there was no
proof that the respondent was a party to the fraud.[6] Moreover, the Cebu District Collector gave
weight to
On
In a 4th Indorsement dated
On
Dissatisfied
with this outcome, the petitioner sought its review through a petition filed with
the CA; he claimed that the CTA erred when it held that the petitioner no longer
had authority to order the re-assessment of the vessel. [11]
The
CA affirmed the findings of the CTA in its decision dated
The CA subsequently denied petitioner’s
Motion for Reconsideration in its resolution of
THE PETITION
The
petitioner submits three issues for our resolution:
I
WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT THE
ASSESSMENT MADE BY THE
II
WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT
RESPONDENT WAS AN “INNOCENT PURCHASER.”
III
WHETHER THE COURT OF APPEALS ERRED IN NOT HOLDING THAT
A LIEN IN FAVOR OF THE GOVERNMENT AND AGAINST THE VESSEL EXISTS.
The petitioner mainly argues that the
CA committed a reversible error when it held that the assessment of the Customs
Collector of the
The respondent, on the other hand, claims
that the appraisal of the Collector can only be altered or modified within a
year from payment of duties, per Sections 1407 and 1603 of the TCCP; it is only
when there is fraud or protest or when the import entry was merely tentative
that settlement of duties will not attain finality. The petitioner’s allegation
that there was misdeclaration or undervaluation of the vessel is not supported
by the evidence and is contrary to the findings of the District Collector of
the P1,100,000.00,
pursuant to the appraisal of the
The core legal issue for our
resolution is whether the Secretary of Finance can order a re-assessment of the
vessel M/V “HARUNA.”
THE COURT’S RULING
We find the petition meritorious and rule that the petitioner can order
the re-assessment of the vessel M/V “HARUNA.”
The Collector of the
Factual findings of the lower courts,
when affirmed by the CA, are generally conclusive on the Court.[15] For
this reason, the Rules of Court provide that only questions of law may be
raised in a petition for review on certiorari. We delve into factual
issues and act on the lower courts’ factual findings only in exceptional
circumstances, such as when these findings
contain palpable errors or are attended by arbitrariness.[16]
After a review of the records of the present case, we
find that the CTA and the CA overlooked and misinterpreted factual
circumstances that, had they been brought to light and properly considered,
would have changed the outcome of this case. In particular, a closer scrutiny of the surrounding circumstances of
the case and the respondent’s actions reveal the existence of fraud that
deprived the State of the customs duties properly due to it.
A Critical Look at the Facts
Our examination of the facts tells us
that there are four significant phases that should be considered in
appreciating the present case.
The first phase is the original tax and duty-free entry of the MV
Haruna when Glory Shipping Lines filed Import Entry No. 120-93 with the
Collector of the P6,171,092.00 and the estimated
customs duty was P1,296,710.00. It
was allowed conditional entry on the basis of a one-year re-export bond that
lapsed and was not renewed. Despite a
letter of guarantee subsequently issued by Glory Shipping Lines and repeated
demand letters, no customs duties and charges were paid. The vessel remained in the
The second significant phase occurred when Glory Shipping Lines offered
to sell the vessel to the respondent in October 1994. At that point, the respondent applied for an
Authority to Import the vessel, based on the proposed acquisition cost of P1,100,000.00.
From the first to the second phase, bad faith already intervened as Glory
Shipping Lines, instead of paying in accordance with its commitment, simply
turned around, disregarded the demand letters of the Collector of the
The respondent, for its part, already
knew of the status of the vessel (as it in fact subsequently manifested before
the DOF); in fact, what it asked for was an authority to import, although the
vessel was already in the
The
third phase came when the
respondent’s representative asked the DOF if it could pay the duties and taxes
due on the vessel, knowing fully well the vessel’s history of entry into the
country. The respondent’s declared value in the request was P1.1 Million
based on the lower appraisal that it secured from P1.1 Million and assessed duties and
taxes amounting to P149,989.00.
The respondent thus paid the customs duties as approved by the Collector
of the
The fourth phase started on
Evidence of Fraud
The tie-up between Glory Shipping
Lines and the respondent in the four phases identified above can better be
appreciated if the surrounding facts are considered.
An undisputed given in the narration
of the four phases is the valuation of P6,171,092.00 that Glory Shipping
Lines gave when the vessel first entered the country under Import Permit No.
120-93 on March 22, 1993. When the respondent
made its request with the P1,100,000.00. Consistent with this proposal, the
respondent, through Kariton, gave the vessel the same declared value in its own
Import Entry No. 179260 filed with the Collector of the P5,000,000.00, or an astonishing 80% of its original price. We find
this drop in value within a short period of 19 months to be too fantastic to be
accepted without question, even allowing for depreciation. Equally fantastic is the change in the
customs duties, taxes and other charges due which fell from P1,296,710.00 in March 1993 to P149,989.00 in
January 1995, all because of the sale, the new application by the vendee,
and the change in the Port where the assessment and collection were made.
The
drop alone from the undisputed original entry valuation of P6,171,092.00 to the respondent’s new
valuation of P1,100,000.00 (or a decrease of 80% from the original
valuation) is already a prima facie
evidence of fraud that the rulings below did not properly appreciate simply
because they disregarded the records of the original entry of the vessel
through the Port of Mactan. Section 2503 of the TCCP provides in this regard
that:
Section 2503. Undervaluation, Misclassification and Misdeclaration of Entry. – When the dutiable value of the imported articles shall be so declared and entered that the duties, based on the declaration of the importer on the face of the entry, would be less by ten percent (10%) than should be legally collected, or when the imported articles shall be so described and entered that the duties based on the importer’s description on the face of the entry would be less by ten percent (10%) than should be legally collected based on the tariff classification, or when the dutiable weight, measurement or quantity of imported articles is found upon examination to exceed by ten percent (10%) or more than the entered weight, measurement or quantity, a surcharge shall be collected from the importer in an amount of not less than the difference between the full duty and the estimated duty based upon the declaration of the importer, nor more than twice of such difference: Provided, That an undervaluation, misdeclaration in weight, measurement or quantity of more than thirty percent (30%) between the value, weight, measurement, or quantity declared in the entry, and the actual value, weight, quantity, or measurement shall constitute a prima facie evidence of fraud penalized under Section 2530 of this Code: Provided, further, That any misdeclared or underdeclared imported articles/items found upon examination shall ipso facto be forfeited in favor of the Government to be disposed of pursuant to the provision of this Code.
When the undervaluation, misdescription, misclassification or misdeclaration in the import entry is intentional, the importer shall be subject to the penal provision under Section 3602 of this Code. [Emphasis supplied.]
The 80% drop in valuation existing in
this case renders the consideration and application of Section 2503
unavoidable.
Significantly, the respondent never
explained the considerable disparity between the dutiable value declared by
Glory Shipping Lines and the dutiable value it declared – difference of P5,000,000.00 – so as to overturn or contradict this
prima facie finding of fraud. We note
that the exercise of due diligence alone would have alerted it to Glory
Shipping Lines’ acquisition cost and the vessel’s declared value at its first entry. The respondent, being in the shipping
business, should have known the standard prices of vessels and that the value
it proposed to
Depreciation
not factor in determining dutiable value
Neither can the respondent hide behind
the excuse that the vessel’s dutiable value at P1,100,000.00 was
approved by MARINA via the Authority
to Import, taking into consideration the vessel’s depreciation brought about by
its ordinary wear and tear. In the first place, we observe that nowhere in the TCCP does it state that the
depreciated value of an imported item can be used as the basis to determine an
imported item’s dutiable value. Section 201 of P.D. No. 1464 (the Tariff and
Customs Code of 1978)[17] in
this regard provides:
Sec. 201. — Basis
of Dutiable Value. — The dutiable value of an imported article subject
to an ad valorem rate of duty shall be based on the cost (fair market value) of same, like or similar articles, as bought and sold or offered for sale
freely in the usual wholesale quantities in the ordinary course of trade in
the principal markets of the exporting country on the date of exportation to
the Philippines (excluding internal excise taxes to be remitted or rebated) or
where there is none on such date, then on the cost (fair market value) nearest to the date of exportation,
including the value of all container, covering and/or packings of any kind and
all other expenses, costs and charges incident to placing the article in a
condition ready for shipment to the Philippines, and freight as well as
insurance premium covering the transportation of such articles to the port of
entry in the Philippines.
Where the fair market value or price of the
article cannot be ascertained thereat or where there exists a reasonable doubt
as to the fairness of such value or price, then the fair market value or price in the principal market in the country of
manufacture or origin, if it is not the country of exportation, or in a
third country with the same stage of economic development as the country of
exportation shall be used.
When the dutiable value of the article cannot be
ascertained in accordance with the preceding paragraphs or where there exists a
reasonable doubt as to the cost (fair market value) of the imported article
declared in the entry, the correct
dutiable value of the article shall be ascertained by the Commissioner Of
Customs from the reports of the Revenue or Commercial Attache (Foreign Trade
Promotion Attache), pursuant to Republic Act Numbered Fifty-four Hundred
and Sixty-six or other Philippine diplomatic officers or Customs Attaches and
from such other information that may be available to the Bureau of Customs.
Such values shall be published by the Commissioner of Customs from time to
time.
When the dutiable value cannot be ascertained as
provided in the preceding paragraphs, or where there exists a reasonable doubt
as to the dutiable value of the imported article declared in the entry, it
shall be domestic wholesale selling
price of such or similar article in Manila or other principal markets in the
Philippines or on the date the duty become payable on the article under
appraisement, on the usual wholesale quantities and in the ordinary course of
trade, minus:
(a) not more than twenty-five (25) per cent thereof for expenses
and profits; and
(b) duties and taxes paid thereon. (as amended by
E.O. 156) [Emphasis supplied.]
Even
assuming that the depreciated value of the vessel can be considered in
determining the vessel’s dutiable value, still, we find that the decrease of
80% from the original price after the passage of only 19 months cannot be
believed and thus should not be accepted.
Assuming further that MARINA merely
committed a mistake in approving the vessel’s proposed acquisition cost at P1,100,000.00,
and that the Collector of the Port of Manila similarly erred, we reiterate the
legal principle that estoppel generally finds no application against the State
when it acts to rectify mistakes, errors,[18]
irregularities, or illegal acts,[19]
of its officials and agents, irrespective of rank. This ensures efficient
conduct of the affairs of the State without any hindrance on the part of the
government from implementing laws and regulations, despite prior mistakes or
even illegal acts of its agents shackling government operations and allowing
others, some by malice, to profit from official error or misbehavior. The rule holds true even if the
rectification prejudices parties who had meanwhile received benefits.[20]
This principle is
particularly true when it comes to the collection of taxes. As we stated in Intra-Strata Assurance Corporation v.
Republic of the
It
has long been a settled rule that the government is not bound by the errors
committed by its agents. Estoppel does not also lie against the government or
any of its agencies arising from unauthorized or illegal acts of public
officers.[22] This
is particularly true in the collection of legitimate taxes due where the
collection has to be made whether or not there is error, complicity, or plain
neglect on the part of the collecting agents.[23] In CIR
v. CTA, we pointedly said:
It is axiomatic that the government
cannot and must not be estopped particularly in matters involving taxes. Taxes
are the lifeblood of the nation through which the government agencies continue
to operate and with which the State effects its functions for the welfare of
its constituents. Thus, it should be
collected without unnecessary hindrance or delay. [Emphasis supplied.]
The Respondent’s Complicity
That the respondent fully
participated in moves to defraud the BOC, as shown by the recital of the four
phases above, is further supported by another factual circumstance – the
respondent’s acknowledgment to the DOF that
the vessel M/V “HARUNA” conditionally entered the country under a re-export
bond filed with the BOC. This is plain
from the 1st Indorsement of the DOF dated
1st Indorsement
Respectfully forwarded to the Commissioner of Customs, Manila, for appropriate action, the herein letter of even date of Kariton & Company, requesting in behalf of their client, ORO MAURA SHIPPING LINE to pay the corresponding duties and taxes due on the vessel MV “HARUNA” (ex. Shinsu Maru No. 8) which was acquired by Glory Shipping Lines thru bareboat charter under P.D. No. 760, as amended and previously authorized by this Department to be released under a re-export bond pursuant to Section 1 of P.D. No. 1711 amending P.D. No. 760 under our 1st Indorsement dated December 29, 1992, copy attached, subject to pertinent import laws, rules and regulations.
With the knowledge that the vessel
was released under a re-export bond, the respondent should have known that this
original entry was subject to specific conditions, among them, the obligation to
guarantee the re-export of the vessel within a given period, or otherwise to
pay the customs duties on the vessel. It should have known, too, of the conditions
of the vessel’s release under the re-export bond and of the state of Glory
Shipping Lines’ status of compliance.
There was an original but incomplete importation
by Glory Shipping Lines that the respondent could not have simply disregarded proceeds
from knowledge of the vessel’s history and the application of the relevant law. In this respect, Section 1202 of the TCCP
provides:
Importation
begins when the carrying vessel or aircraft enters the jurisdiction of the
In order for an importation to be
deemed terminated, the payment of the duties, taxes, fees and other charges of
the item brought into the country must be in full. For as long as the
importation has not been completed, the imported item remains under the
jurisdiction of the BOC.[24] From the perspective of process, the
importation that originally started with Glory Shipping Lines was therefore never
completed and terminated, so that the respondent’s present importation is
merely a continuation of that original process.
Saddled with knowledge of the
underlying facts that preceded its purchase, the conclusion that the respondent
fully cooperated with Glory Shipping Lines in avoiding the original charges and
duties due is unavoidable; the respondent provided the medium (1) to disregard
the original duties due on the vessel’s first entry; and (2) to avoid the Port
of Mactan where demands for payment of overdue custom duties already
existed. In the process, it of course acted
for its own interest by securing for itself lower dutiable values and lesser
duties due. The fact that the respondent did all these confirms that it
participated in the moves to defraud the BOC of the legitimate taxes due as
originally assessed.
Finality of the
Our finding of fraud leads us to
conclude that the assessment of the Collector of the
Section
1603. Finality of Liquidation. – When articles have been entered and
passed free of duty or final adjustments of duties made, with subsequent
delivery, such entry and passage free of duty or settlements of duties will,
after the expiration of one (1) year, from the date of the final payment of
duties, in the absence of fraud or protest or
compliance audit pursuant to the provisions of this Code, be final and
conclusive upon all parties, unless the liquidation of the import entry was
merely tentative.
Nature of a tax lien
An important factual circumstance that
the CTA and the CA appear to have completely overlooked is that the vessel
first entered the Philippines through the Port of Mactan and it was the
Collector of the Port of Mactan who first acquired jurisdiction over the vessel
when he approved the vessel’s temporary release from the custody of the BOC,
after Glory Shipping Lines filed Ordinary Re-Export Bond No. C(9) 121818.
When this re-export bond expired on P1,296,710.00 arose and attached to
the vessel. Undoubtedly, this lien was
never paid by Glory Shipping Lines, thus it continued to exist even after the
vessel was sold to the respondent. Section
1204 of the TCCP in this regard states:
Section 1204. Liability of Importer for Duties. – Unless relieved by laws or regulations, the liability for duties, taxes, fees and other charges attaching on importation constitutes a personal debt due from the importer to the government which can be discharged only by payment in full of all duties, taxes, fees and other charges legally accruing. It also constitutes a lien upon the articles imported which may be enforced while such articles are in custody or subject to the control of the government.
As defined by Black’s Law Dictionary,
a lien is a claim or charge on property for payment of some debt, obligation or
duty.[25] In
this particular instance, the obligation is a tax lien that attaches to
imported goods, regardless of ownership.[26]
Consequently, when the respondent bought the vessel from Glory Shipping Lines on P1,296,710.00 as customs duties had already
attached to the vessel and the non-renewal of the re-export bond made this
liability due and demandable. The subsequent transfer of ownership of the
vessel from Glory Shipping Lines to the respondent did not extinguish this liability.
Therefore, while it is true that the
respondent had already paid the customs duties assessed by the Collector of the
Port of Manila, this payment did not have the effect of extinguishing the lien given
the tax lien that had attached to the vessel and the fact that what had been
paid was different from what was owed.
From the point of amount alone, the customs duties paid to the Collector
at the P149,989.00,
while the lien which had attached to the vessel based on the unpaid assessment
by the Collector of the P1,296,710.00.
Finally, we deem it necessary to
reiterate our pronouncement in Chevron Philippines v. Commissioner of the
Bureau of Customs,[27]
where we discussed the importance of tariff and customs duties in the following
manner:
Taxes are the lifeblood of the nation. Tariff and customs duties are taxes constituting a significant portion of the public revenue which enables the government to carry out the functions it has been ordained to perform for the welfare of its constituents.[28] Hence, their prompt and certain availability is an imperative need[29] and they must be collected without unnecessary hindrance.[30] [Emphasis supplied.]
In
keeping with this and other cited rulings, we find in favor of the petitioner
and uphold his order for the re-assessment of the value of the vessel based on
the entered value, which in this case should follow the unpaid assessment made
by the Collector of Customs of the
WHEREFORE, we REVERSE the decision of the Court of Appeals dated
SO ORDERED.
ARTURO
D. BRION
Associate Justice
|
WE CONCUR: LEONARDO A. QUISUMBING
Associate Justice Chairperson |
|
|
CONCHITA CARPIO-MORALES Associate
Justice |
MINITA V. CHICO-NAZARIO Associate Justice |
TERESITA J. LEONARDO-DE CASTRO
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
CERTIFICATION
REYNATO
S. PUNO
Chief
Justice
* Designated
additional Member of the Second Division effective
** Designated additional Member of the Second Division effective
[1] For Review on Certiorari under Rule 45; rollo, pp. 10-24.
[2] Penned by Associate Justice Renato C. Dacudao, and concurred in by Associate Justice Ruben Reyes (retired member of this Court) and Associate Justice Amelita Tolentino; id, pp. 26-34.
[3] Id, p. 35.
[4] Penned by Associate Judge Amancio Q. Saga, and concurred in by Presiding Judge Ernesto D. Acosta; id, pp. 58-70.
[5]
[6]
[7]
[8]
[9]
[10] Supra note 4.
[11] Rollo, pp. 36-55.
[12] Supra note 1.
[13] Supra note 2.
[14] Per Republic Act No. 9135, Section 1603 has been amended such that the liquidation becomes final after the expiration of three (3) years from the date of the final payment of duties. However, this amendment does not apply to the present case since it took effect only in 2001.
[15] Philippine Airlines, Inc. v. Court of Appeals, G.R. No. 120262, July 17, 1997, 275 SCRA 621.
[16] This Court may review the factual findings of the lower courts where (1) the conclusion is a finding grounded entirely on speculation, surmise and conjecture; (2) the inference made is manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) the Court of Appeals went beyond the issues of the case and its findings are contrary to the admissions of both appellant and appellees; (7) the findings of fact of the Court of Appeals are contrary to those of the trial court; (8) said findings of fact are conclusions without citation of specific evidence on which they are based; (9) the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not disputed by the respondents; and (10) the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and contradicted by the evidence on record; Sarmiento v. Court of Appeals, G.R. No. 110871, July 2, 1998, 291 SCRA 656.
[17] The law applicable at the time the dutiable value of the vessel was assessed in 1994.
[18] Republic v. Intermediate Appellate Court,
G.R. No. 69138,
[19] Sharp International Marketing v. Court of
Appeals, G.R. No. 93661,
[20] Kapisanan ng Manggagawa sa Government Service Insurance System v. COA, G.R. No. 150769, August 31, 2004, 437 SCRA 371; Baybay Water District v. COA, G.R. Nos. 147248-49, January 23, 2002, 374 SCRA 482.
[22] Republic of
the
[23] Caltex
[24] See: Papa
v. Mago, G.R. No. L-27360,
[25] 5th ed., 1979, p. 832.
[26] See: 51 Am. Jur. 857.
[27] G.R. No. 178759,
[28] Commissioner of Internal Revenue v. Court of Tax Appeals, G.R. No.
106611, July 21, 1994, 234 SCRA 348; Commissioner of Customs v. Makasiar,
G.R. No. 79307, August 29, 1989, 177 SCRA 27. According to then Senator Gloria
Macapagal-Arroyo (now President of the Republic of the
“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)
[29] Commissioner of Internal
Revenue v. Goodrich International Rubber Co., G.R. No. L-22265, March 27, 1968, 22 SCRA 1256; Commissioner
of Internal Revenue v. Pineda, G.R. No. L-22734,
[30] Philex Mining
Corporation v. Commissioner of Internal Revenue, G.R. No. 125704,