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Republic of the Philippines SECOND
DIVISION
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COMMISSIONER OF CUSTOMS and the DISTRICT COLLECTOR OF THE
PORT OF SUBIC, Petitioners, - versus - HYPERMIX FEEDS CORPORATION, Respondent. |
G.R. No. 179579 Present: CARPIO, J., Chairperson, BRION, PEREZ, SERENO, and REYES, JJ. Promulgated: February
1, 2012 |
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Decision
SERENO, J.:
Before
us is a Petition for Review under Rule 45,[1]
assailing the Decision[2]
and the Resolution[3] of
the Court of Appeals (CA), which nullified the Customs Memorandum Order (CMO) No.
27-2003[4]
on the tariff classification of wheat issued by petitioner Commissioner of
Customs.
The
antecedent facts are as follows:
On
7 November 2003, petitioner Commissioner of Customs issued CMO 27-2003. Under
the Memorandum, for tariff purposes, wheat was classified according to the
following: (1) importer or consignee; (2) country of origin; and (3) port of
discharge.[5]
The regulation provided an exclusive list of corporations, ports of discharge,
commodity descriptions and countries of origin. Depending on these factors,
wheat would be classified either as food grade or feed grade. The corresponding
tariff for food grade wheat was 3%, for feed grade, 7%.
CMO
27-2003 further provided for the proper procedure for protest or Valuation and
Classification Review Committee (VCRC) cases. Under this procedure, the release
of the articles that were the subject of protest required the importer to post a
cash bond to cover the tariff differential.[6]
A
month after the issuance of CMO 27-2003, on 19 December 2003, respondent filed
a Petition for Declaratory Relief[7]
with the Regional Trial Court (RTC) of Las Pias City. It anticipated the
implementation of the regulation on its imported and perishable Chinese milling
wheat in transit from China.[8]
Respondent contended that CMO 27-2003 was issued without following the mandate of
the Revised Administrative Code on public participation, prior notice, and
publication or registration with the University of the Philippines Law Center.
Respondent
also alleged that the regulation summarily adjudged it to be a feed grade
supplier without the benefit of prior assessment and examination; thus, despite
having imported food grade wheat, it would be subjected to the 7% tariff upon
the arrival of the shipment, forcing them to pay 133% more than was proper.
Furthermore,
respondent claimed that the equal protection clause of the Constitution was
violated when the regulation treated non-flour millers differently from flour
millers for no reason at all.
Lastly,
respondent asserted that the retroactive application of the regulation was
confiscatory in nature.
On
19 January 2004, the RTC issued a Temporary Restraining Order (TRO) effective
for twenty (20) days from notice.[9]
Petitioners
thereafter filed a Motion to Dismiss.[10]
They alleged that: (1) the RTC did not have jurisdiction over the subject
matter of the case, because respondent was asking for a judicial determination
of the classification of wheat; (2) an action for declaratory relief was
improper; (3) CMO 27-2003 was an internal administrative rule and not
legislative in nature; and (4) the claims of respondent were speculative and
premature, because the Bureau of Customs (BOC) had yet to examine respondents
products. They likewise opposed the application for a writ of preliminary
injunction on the ground that they had not inflicted any injury through the
issuance of the regulation; and that the action would be contrary to the rule
that administrative issuances are assumed valid until declared otherwise.
On
28 February 2005, the parties agreed that the matters raised in the application
for preliminary injunction and the Motion to Dismiss would just be resolved
together in the main case. Thus, on 10 March 2005, the RTC rendered its
Decision[11] without
having to resolve the application for preliminary injunction and the Motion to
Dismiss.
The
trial court ruled in favor of respondent, to wit:
WHEREFORE, in view of the foregoing, the Petition
is GRANTED and the subject Customs Memorandum Order 27-2003 is declared INVALID
and OF NO FORCE AND EFFECT. Respondents Commissioner of Customs, the District
Collector of Subic or anyone acting in their behalf are to immediately cease
and desist from enforcing the said Customs Memorandum Order 27-2003.
SO
ORDERED.[12]
The
RTC held that it had jurisdiction over the subject matter, given that the issue
raised by respondent concerned the quasi-legislative powers of petitioners. It
likewise stated that a petition for declaratory relief was the proper remedy, and
that respondent was the proper party to file it. The court considered that
respondent was a regular importer, and that the latter would be subjected to
the application of the regulation in future transactions.
With
regard to the validity of the regulation, the trial court found that
petitioners had not followed the basic requirements of hearing and publication
in the issuance of CMO 27-2003. It likewise held that petitioners had substituted
the quasi-judicial determination of the commodity by a quasi-legislative
predetermination.[13]
The lower court pointed out that a classification based on importers and ports
of discharge were violative of the due process rights of respondent.
Dissatisfied
with the Decision of the lower court, petitioners appealed to the CA, raising
the same allegations in defense of CMO 27-2003.[14]
The appellate court, however, dismissed the appeal. It held that, since the
regulation affected substantial rights of petitioners and other importers,
petitioners should have observed the requirements of notice, hearing and
publication.
Hence,
this Petition.
Petitioners
raise the following issues for the consideration of this Court:
I.
THE COURT OF APPEALS DECIDED A QUESTION
OF SUBSTANCE WHICH IS NOT IN ACCORD WITH THE LAW AND PREVAILING JURISPRUDENCE.
II.
THE COURT OF APPEALS GRAVELY ERRED IN
DECLARING THAT THE TRIAL COURT HAS JURISDICTION OVER THE CASE.
The Petition has no merit.
We
shall first discuss the propriety of an action for declaratory relief.
Rule
63, Section 1 provides:
Who may file
petition.
Any person interested under a deed, will, contract or other written
instrument, or whose rights are affected by a statute, executive order or
regulation, ordinance, or any other governmental regulation may, before breach
or violation thereof, bring an action in the appropriate Regional Trial Court
to determine any question of construction or validity arising, and for a
declaration of his rights or duties, thereunder.
The requirements of an action for
declaratory relief are as follows: (1) there must be a justiciable controversy;
(2) the controversy must be between persons whose interests are adverse; (3)
the party seeking declaratory relief must have a legal interest in the
controversy; and (4) the issue involved must be ripe for judicial
determination.[15]
We find that the Petition filed by respondent before the lower court meets
these requirements.
First,
the subject of the controversy is the constitutionality of CMO 27-2003 issued
by petitioner Commissioner of Customs. In Smart
Communications v. NTC,[16]
we held:
The
determination of whether a specific rule or set of rules issued by an
administrative agency contravenes the law or the constitution is within the
jurisdiction of the regular courts.
Indeed, the Constitution vests the power of judicial review or the power to
declare a law, treaty, international or executive agreement, presidential
decree, order, instruction, ordinance, or regulation in the courts, including
the regional trial courts. This is within the
scope of judicial power, which includes the authority of the courts to
determine in an appropriate action the validity of the acts of the political
departments. Judicial power includes the duty
of the courts of justice to settle actual controversies involving rights which
are legally demandable and enforceable, and to determine whether or not there
has been a grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the Government.
(Emphasis supplied)
Meanwhile, in Misamis Oriental
Association of Coco Traders, Inc. v. Department of Finance Secretary,[17]
we said:
xxx [A]
legislative rule is in the nature of subordinate legislation, designed to
implement a primary legislation by providing the details thereof. xxx
In addition such rule must be published. On the other hand, interpretative rules are designed to provide guidelines to the law which the administrative agency is in charge of enforcing.
Accordingly, in considering a
legislative rule a court is free to make three inquiries: (i)
whether the rule is within the delegated authority of the administrative
agency; (ii) whether it is reasonable; and (iii) whether it was
issued pursuant to proper procedure. But the court is not free
to substitute its judgment as to the desirability or wisdom of the rule for the
legislative body, by its delegation of administrative judgment, has committed
those questions to administrative judgments and not to judicial
judgments. In the case of an interpretative rule, the inquiry is not into
the validity but into the correctness or propriety of the rule. As a matter
of power a court, when confronted with an interpretative rule, is free to (i)
give the force of law to the rule; (ii) go to the opposite extreme
and substitute its judgment; or (iii) give some intermediate degree of
authoritative weight to the interpretative rule. (Emphasis supplied)
Second,
the controversy is between two parties that have adverse interests. Petitioners
are summarily imposing a tariff rate that respondent is refusing to pay.
Third,
it is clear that respondent has a legal and substantive interest in the
implementation of CMO 27-2003. Respondent has adequately shown that, as a regular
importer of wheat, on 14 August 2003, it has actually made shipments of wheat
from China to Subic. The shipment was set to arrive in December 2003. Upon its arrival,
it would be subjected to the conditions of CMO 27-2003. The regulation calls
for the imposition of different tariff rates, depending on the factors
enumerated therein. Thus, respondent alleged that it would be made to pay the
7% tariff applied to feed grade wheat, instead of the 3% tariff on food grade
wheat. In addition, respondent would
have to go through the procedure under CMO 27-2003, which would undoubtedly toll
its time and resources. The lower court correctly pointed out as follows:
xxx As
noted above, the fact that petitioner is precisely into the business of
importing wheat, each and every
importation will be subjected to constant disputes which will result into (sic) delays in the delivery, setting aside of
funds as cash bond required in the CMO as well as the resulting expenses
thereof. It is easy to see that business uncertainty will be a constant
occurrence for petitioner. That the sums involved are not minimal is shown by
the discussions during the hearings conducted as well as in the pleadings filed.
It may be that the petitioner can later on get a refund but such has been
foreclosed because the Collector of Customs and the Commissioner of Customs are
bound by their own CMO. Petitioner cannot get its refund with the said agency.
We believe and so find that Petitioner has presented such a stake in the
outcome of this controversy as to vest it with standing to file this petition.[18]
(Emphasis supplied)
Finally,
the issue raised by respondent is ripe for judicial determination, because litigation
is inevitable[19]
for the simple and uncontroverted reason that respondent is not included in the
enumeration of flour millers classified as food grade wheat importers. Thus, as
the trial court stated, it would have to file a protest case each time it
imports food grade wheat and be subjected to the 7% tariff.
It
is therefore clear that a petition for declaratory relief is the right remedy
given the circumstances of the case.
Considering
that the questioned regulation would affect the substantive rights of respondent
as explained above, it therefore follows that petitioners should have applied
the pertinent provisions of Book VII, Chapter 2 of the Revised Administrative
Code, to wit:
Section
3. Filing. (1) Every agency shall
file with the University of the Philippines Law Center three (3) certified
copies of every rule adopted by it. Rules in force on the date of effectivity
of this Code which are not filed within three (3) months from that date shall
not thereafter be the bases of any sanction against any party of persons.
xxx xxx xxx
Section 9. Public Participation. - (1) If not otherwise required by law, an agency shall, as far as practicable, publish or circulate notices of proposed rules and afford interested parties the opportunity to submit their views prior to the adoption of any rule.
(2) In the fixing of rates, no rule or final order shall be valid unless the proposed rates shall have been published in a newspaper of general circulation at least two (2) weeks before the first hearing thereon.
(3) In case of opposition, the rules on contested cases shall be observed.
When an administrative rule is
merely interpretative in nature, its applicability needs nothing further than
its bare issuance, for it gives no real consequence more than what the law
itself has already prescribed. When, on the other hand, the administrative rule
goes beyond merely providing for the means that can facilitate or render least
cumbersome the implementation of the law but substantially increases the burden
of those governed, it behooves the agency to accord at least to those directly
affected a chance to be heard, and thereafter to be duly informed, before that
new issuance is given the force and effect of law.[20]
Likewise,
in Taada v. Tuvera,[21]
we held:
The clear object
of the above-quoted provision is to give the general public adequate notice of
the various laws which are to regulate their actions and conduct as citizens.
Without such notice and publication, there would be no basis for the
application of the maxim ignorantia
legis non excusat. It would be the
height of injustice to punish or otherwise burden a citizen for the
transgression of a law of which he had no notice whatsoever, not even a
constructive one.
Perhaps
at no time since the establishment of the Philippine Republic has the
publication of laws taken so vital significance that at this time when the
people have bestowed upon the President a power heretofore enjoyed solely by
the legislature. While the people are kept abreast by the mass media of the
debates and deliberations in the Batasan
Pambansa and for the diligent ones, ready access to the legislative
records no such publicity accompanies the law-making process of the
President. Thus, without publication,
the people have no means of knowing what presidential decrees have actually
been promulgated, much less a definite way of informing themselves of the
specific contents and texts of such decrees. (Emphasis supplied)
Because petitioners failed to follow the
requirements enumerated by the Revised Administrative Code, the assailed
regulation must be struck down.
Going
now to the content of CMO 27-3003, we likewise hold that it is unconstitutional
for being violative of the equal protection clause of the Constitution.
The
equal protection clause means that no person or class of persons shall be
deprived of the same protection of laws enjoyed by other persons or other
classes in the same place in like circumstances. Thus, the guarantee of the
equal protection of laws is not violated if there is a reasonable
classification. For a classification to
be reasonable, it must be shown that (1) it rests on substantial
distinctions; (2) it is germane to the purpose of the law; (3) it is not
limited to existing conditions only; and (4) it applies equally to all members
of the same class.[22]
Unfortunately,
CMO 27-2003 does not meet these requirements. We do not see how the quality of wheat
is affected by who imports it, where it is discharged, or which country it came
from.
Thus, on the
one hand, even if other millers excluded from CMO 27-2003 have imported food
grade wheat, the product would still be declared as feed grade wheat, a
classification subjecting them to 7% tariff. On the other hand, even if the
importers listed under CMO 27-2003 have imported feed grade wheat, they would
only be made to pay 3% tariff, thus depriving the state of the taxes due. The
regulation, therefore, does not become disadvantageous to respondent only, but even
to the state.
It is also
not clear how the regulation intends to monitor more closely wheat
importations and thus prevent their misclassification. A careful study of CMO
27-2003 shows that it not only fails to achieve this end, but results in the
opposite. The application of the regulation forecloses the possibility that
other corporations that are excluded from the list import food grade wheat; at
the same time, it creates an assumption that those who meet the criteria do not
import feed grade wheat. In the first case, importers are unnecessarily
burdened to prove the classification of their wheat imports; while in the
second, the state carries that burden.
Petitioner
Commissioner of Customs also went beyond his powers when the regulation limited
the customs officers duties mandated by Section 1403 of the Tariff and Customs
Law, as amended. The law provides:
Section 1403. Duties of Customs
Officer Tasked to Examine, Classify, and Appraise Imported Articles. The
customs officer tasked to examine, classify, and appraise imported articles shall determine whether the packages designated
for examination and their contents are in accordance with the declaration in
the entry, invoice and other pertinent documents and shall make return in such
a manner as to indicate whether the articles have been truly and correctly
declared in the entry as regard their quantity, measurement, weight, and tariff
classification and not imported contrary to law. He shall submit samples to
the laboratory for analysis when feasible to do so and when such analysis is
necessary for the proper classification, appraisal, and/or admission into the
Philippines of imported articles.
Likewise,
the customs officer shall determine the
unit of quantity in which they are usually bought and sold, and appraise the
imported articles in accordance with Section 201 of this Code.
Failure
on the part of the customs officer to comply with his duties shall subject him
to the penalties prescribed under Section 3604 of this Code.
The provision mandates that the
customs officer must first assess and determine the classification of the
imported article before tariff may be imposed. Unfortunately, CMO 23-2007 has
already classified the article even before the customs officer had the chance
to examine it. In effect, petitioner Commissioner of Customs diminished the
powers granted by the Tariff and Customs Code with regard to wheat importation
when it no longer required the customs officers prior examination and assessment of the proper classification of
the wheat.
It
is well-settled that rules and regulations, which are the product of a
delegated power to create new and additional legal provisions that have the
effect of law, should be within the scope of the statutory authority granted by
the legislature to the administrative agency. It is
required that the regulation be germane to the objects and purposes of the law;
and that it be not in contradiction to, but in conformity with, the standards
prescribed by law.[23]
In
summary, petitioners violated respondents right to due process in the issuance
of CMO 27-2003 when they failed to observe the requirements under the Revised
Administrative Code. Petitioners likewise violated respondents right to equal
protection of laws when they provided for an unreasonable classification in the
application of the regulation. Finally, petitioner Commissioner of Customs went
beyond his powers of delegated authority when the regulation limited the powers
of the customs officer to examine and assess imported articles.
WHEREFORE,
in view of the foregoing, the Petition is DENIED.
SO ORDERED.
MARIA
Associate Justice
WE CONCUR:
Associate Justice
Chairperson
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ARTURO
D. BRION |
JOSE
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|
Associate Justice |
Associate Justice |
BIENVENIDO
L. REYES
Associate Justice
A T T
E S T A T I O N
I attest that the
conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.
Chairperson,
Second Division
Pursuant to Section 13, Article VIII of the
Constitution and the Division Chairpersons Attestation, I certify 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 Courts Division.
RENATO C. CORONA
[1] Rollo, pp. 124-142.
[2] Id. at
33-46.
[3] Id. at
47.
[4] Records, pp. 16-18.
[5] SUBJECT: Tariff
Classification of Wheat
In order to monitor more closely
wheat importations and thus prevent their misclassification, the following are
hereby prescribed:
1.
For
tariff purposes, wheat shall be classified as follows:
1.1
Under
HS 1001.9090 (Food Grade) when all the following elements are present:
1.1.1
the
importer/consignee of the imported wheat is a flour miller as per attached list
(Annex A), which shall form as integral part of this Order
1.1.2
the
wheat importation consists of any of those listed in Annex A according to the
country of origin indicated therein
1.1.3
the
wheat importation is entered/unloaded in the Port of Discharge indicated
opposite the name of the flour miller, as per Annex A
1.2
Under
HS 1001.9010 (Feed Grade)
1.2.1
When
any or all of the elements prescribed under 1.1 above is not present.
1.2.2
All
other wheat importations by non-flour millers, i.e., importers/consignees NOT
listed in Annex A
[6] SUBJECT: Tariff Classification of Wheat
xxx xxx xxx
2. Any issue arising from this
Order shall be resolved in an appropriate protest or VCRC case.
3. In case of a VCRC case, the
following applies:
3.1
The
shipment may qualify for Tentative Release upon payment of the taxes and duties
as per declaration and the posting of cash bond to cover the tariff
differential.
3.2
The
Tentative Release granted by the VCRC shall, prior to the release of the
shipment from Customs custody, be subject to representative. For this purpose,
the District/Port Collector concerned shall forward to the Office of the
Commissioner the Tentative Release papers, together with all pertinent shipping
and supporting documents, including, but not limited to, contract of sale,
phytosanitary certificate and certificate of quality.
In the
case of Outports, the required documents shall be faxed to the Office of the
Commissioner of Customs to any of these numbers: 527-1953/527-4573.
3.3
In resolving the classification issue, the VCRC shall consider the
import/consignee, type/source of wheat and port of discharge of the wheat
importation, as indicated in Annex A, and require the proofs/evidences (sic),
including, but not limited to, proofs of sale or consumption of said wheat
importation, certificate of quality issued by manufacturing country and
contract of sale.
3.4
Any VCRC decision adverse to the government shall be subject to automatic
review by the Commissioner of Customs.
[7] Rollo pp. 158-168.
[8] Records,
p. 12.
[9] Rollo, pp. 58-59.
[10] Id. at 60-78.
[11] Id. at 108-114; penned
by Judge Romeo C. De Leon.
[12] Id. at 114.
[13] Id. at 112.
[14] Id. at 117-122.
[15] Tolentino v. Board of Accountancy, 90 Phil. 83 (1951).
[16] 456 Phil. 145 (2003).
[17] G.R. No.
108524, 10 November 1994, 238
SCRA 63, 69-70.
[18] Rollo, p. 112.
[19] Office of the Ombudsman v. Ibay, 416 Phil. 659 (2001).
[20] CIR v. Michel J. Lhuiller Pawnshop Inc., 453 Phil. 1043 (2003).
[21] 220 Phil. 422 (1985).
[22] Philippine Rural Electric Cooperatives Association, Inc. v. DILG, 451
Phil. 683 (2003).
[23] Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles v. Home
Development Mutual Fund, 389 Phil.
296 (2000).