ASTURIAS SUGAR CENTRAL, INC., PETITIONER, VS. COMMISSIONER OF CUSTOMS AND COURT OF TAX APPEALS, RESPONDENTS.

This is a petition for review of the decision of the Court of Tax
Appeals of November 20, 1961, which denied recovery of the sum of P28,629.42,
paid by the petitioner, under protest, in the concept of customs duties and
special import tax, as well as the petitioner’s alternative remedy to recover
the said amount minus one per cent thereof by way of a drawback under sec.
106(b) of the Tariff and Customs Code.

The petitioner Asturias Sugar Central, Inc. is engaged in the
production and milling of centrifugal sugar for export, the su­gar so produced
being placed in containers known as jute bags. 
In 1957 it made two importations of jute bags.  The first shipment con­sisting of 44,800 jute
bags and declared under entry 48 on January 8, 1957, entered free of customs
duties and special import tax upon the petitioner’s filing of Re-exportation
and Special Import Tax Bond no. 1 in the amounts of P25,088 and P2,464.50,
condi­tioned upon the exportation of the jute bags within one year from the
date of importation.  The second shipment
consisting of 75,200 jute bags and declared under entry 243 on February 8,
1957, like­wise entered free of customs duties and special import tax upon the
petitioners filing of Re-exportation and Special Import Tax Bond no. 6 in the
amounts of P42,112 and P7,984.44, with the same conditions as stated in bond
no. 1.

Of the 44,800 jute bags declared under entry 48, only 8,647 were
exported within one year from the date of importation as con­tainers of
centrifugal sugar. Of the 75,200 jute bags declared under entry 243, only
25,000 were exported within the said period of one year.  In other words, of the total number of
imported jute bags on­ly 33,647 bags were exported within one year after their
importation.  The remaining 86,353 bags
were exported after the expiration of the one-year period but within three
years from their importation.

On February 6, 1958 the petitioner, thru its agent Theo. H.
Davies & Co., Far East, Ltd., requested the Commissioner of Customs for a
week’s extension of Re-exportation and Special Im­port Tax Bond no. 6 which was
to expire the following day, giving the following as the reasons for its
failure to export the remaining jute bags within the period of one year:  (a) typhoons and severe floods; (b) picketing
of the Central railroad line from November 6 to December 21, 1957 by certain
union elements in the employ of the Philippine Railway Company, which hampered
normal opera­tions; and (c) delay in the arrival of the vessel aboard which the
petitioner was to ship its sugar which was then ready for loading.  This request was denied by the Commissioner
per his letter of April 15, 1958.

Due to the petitioner’s failure to show proof of the exporta­tion
of the balance of 86,353 jute bags within one year from their importation, the
Collector of Customs of Iloilo, on March 17, 1958, required it to pay the
amount of P28,629.42 representing the customs duties and special import tax due
thereon, which amount the petitioner paid under protest.

In its letter of April 10, 1958, supplemented by its letter of
May 12, 1958, the petitioner demanded the refund of the amount it had paid, on
the ground that its request for extension of the period of one year was filed
on time, and that its failure to export the jute bags within the required
one-year period was due to delay in the arrival of the vessel on which they
were to be loaded and to the picketing of the Central railroad line.  Alternatively, the petitioner asked for
refund of the same amount in the form of a drawback un­der section 106(b) in
relation to section 105(x) of the Tariff and Cus­toms Code.

After hearing, the Collector of Customs of Iloilo rendered
judgment on January 21, 1960 denying the claim for refund.  From his action, appeal was taken to the
Commissioner of Customs who upheld the decision of the Collector.  Upon a petition for review the Court of Tax
Appeals affirmed the decision of the Commissioner of Customs.

The petitioner imputes three errors to the Court of Tax Ap­peals,
namely:

“1.  In not declaring that
force majeure and/or fortuitous event is a sufficient
justification for the failure of the petitioner to export the jute bags in
question within the time required by the bonds.

“2.  In not declaring that it
is within the pow­er of the Collector of Customs and/or the Commis­sioner of
Customs to extend the period of one (1) year within which the jute bags should
be exported.

“3.  In not declaring that
the petitioner is en­titled to a refund by way of a drawback under the pro­visions
of section 106, par. (b), of the Tariff and Customs Code.”

1. The basic issue tendered for resolution is whether the
Commissioner of Customs is vested, under the Philippine Tariff Act of 1909, the
then applicable law, with discretion to extend the period of one year provided
for in section 23 of the Act.  Section 23
reads:

“Sec. 23.  That
containers, such as casks, large metal, glass, or other receptacles which are,
in the opinion of the collector of customs, of such a character as to be
readily identifiable may be de­livered to the importer thereof upon
identification and the giving of a bond with sureties satisfactory to the
collector of customs in an amount equal to double the estimated duties thereon,
conditioned for the exportation thereof or payment of the corresponding duties
thereon within one year from the date of importation, under such rules and regulations
as the Insular Collector of Customs shall provide.”^[1]

To implement the said section 23 Customs Administrative Order 389
dated December 6, 1940 was promulgated, paragraph XXVIII of which provides that
“bonds for the re-exportation of cy­linders and other containers are good
for 12 months without exten­sion,” and paragraph XXXI, that “bonds
for customs brokers, com­mercial samples, repairs and those filed to guarantee
the re-exportation of cylinders and other containers are not extendable.”

And insofar as jute bags as containers are concerned, Cus­toms
Administrative Order 66 dated August
25, 1948 was issued, prescribing rules and regulations governing
the importation, ex­portation and identification thereof under section 23 of
the Philip­pine Tariff Act of 1909.  Said
administrative order provides:

“That importation of jute bags intended for use as containers
of Philippine products for expor­tation to foreign countries shall be declared
in a regular import entry supported by a surety bond in an amount equal to
double the estimated duties, conditioned for the exportation or payment of the
corresponding duties thereon within one year from the date of
importation.”

It will be noted that section 23 of the Philippine Tariff Act of
1909 and the superseding sec. 105(x) of the Tariff and Customs Code, while
fixing at one year the period within which the contain­ers therein mentioned
must be exported, are silent as to whether the said period may be
extended.  It was surely by reason of
this silence that the Bureau of Customs issued Administrative Orders 389 and
66, already adverted to, to eliminate confusion and pro­vide a guide as to how
it shall apply the law,^[2]
and, more specifical­ly, to make officially known its policy to consider the
one-year pe­riod mentioned in the law as non-extendible.

Considering that the statutory provisions in question have not
been the subject of previous judicial interpretation, then the application of
the doctrine of “judicial respect for administrative construction,”^[3]
would, initially, be in order.

“Only where the court of last resort has not previously
interpreted the statute is the rule appli­cable that courts will give
consideration to construc­tion by administrative or executive departments of
the state.”^[4]

“The formal or informal interpretation or practical
construction of an ambiguous or uncer­tain statute or law by the executive
department or other agency charged with its administration or en­forcement is
entitled to consideration and the highest respect from the courts, and must be
accorded appropriate weight in determining the meaning of the law, especially
when the construction or inter­pretation is long continued and uniform or is
con­temporaneous with the first workings of the statute, or when the enactment
of the statute was suggested by such agency.”^[5]

The administrative orders in question appear to be in consonance
with the intention of the legislature to limit the period within which to
export imported containers to one year, without extension, from the date of
importation.  Otherwise, in enacting the
Tariff and Customs Code to supersede the Philippine Tariff Act of 1909,
Congress would have amended section 23 of the latter law so as to overrule the
long-standing view of the Commissioner of Customs that the one-year period
therein mentioned is not extendible.

“Implied legislative approval by failure to change a
long-standing administrative construction is not essential to judicial respect
for the construc­tion but is an element which greatly increases the weight
given such construction.”^[6]

“The correctness of the interpretation given a statute by the
agency charged with administering its provision is indicated where it appears
that Con­gress, with full knowledge of the agency’s interpre­tation, has made
significant additions to the statute without amending it to depart from the
agency’s view.”^[7]

Considering that the Bureau of Customs is the office charged with
implementing and enforcing the provisions of our tariff and cus­toms code, the
construction placed by it thereon should be given con­trolling weight.

“In applying the doctrine or principle of respect for
administrative or practical construction, the courts often refer to several
factors which may be regarded as bases of the principle, as factors leading the
courts to give the principle controlling weight in particular instances, or as
independent rules in themselves.  These
factors are the respect due the governmental agencies charged with admi­nistration,
their competence, expertness, experience, and informed judgment and the fact
that they frequently are the drafters of the law they interpret; that the
agency is the one on which the legislature must rely to advise it as to the
practical working out of the statute, and practical application of the statute
presents the agency with unique opportuni­ty and experiences for discovering
efficiencies, in­accuracies, or improvements in the statute; x x x“^[8]

If it is further considered that exemptions from taxation are not
favored,^[9]
and that tax statutes are to be construed in stric­tissimi
juris against the taxpayer and
liberally in favor of the taxing authority,^[10]
then we are hard put to sustain the petitioner’s stand that it was entitled to
an extension of time within which to export the jute bags and, consequently, to
a refund of the amount it had paid as customs duties.

In the light of the foregoing, it is our considered view that the
one-year period prescribed in section 23 of the Philippine Ta­riff Act of 1909
is non-extendible and compliance therewith is man­datory.

The petitioner’s argument that force majeure
and/or for­tuitous events prevented it from exporting the jute bags within the
one-year period cannot be accorded credit, for several reasons.  In the first place, in its decision of
November 20, 1961, the Court of Tax Appeals made absolutely no mention of or
reference to this argument of the petitioner, which can only be interpreted to
mean that the court did not believe that the “typhoons, floods and picket­ing”
adverted to by the petitioner in its brief were of such magni­tude or nature as
to effectively prevent the exportation of the jute bags within the required
one-year period.  In point of fact
nowhere in the record does the petitioner convincingly show that the so-called
fortuitous events or force majeure referred to by it
pre­cluded the timely exportation of the jute bags.  In the second place, assuming, arguendo, that the one-year period is extendible,
the jute bags were not actually exported within the one-week extension the
petitioner sought.  The record shows that
although of the re­maining 86,353 jute bags 21,944 were exported within the
period of one week after the request for extension was filed, the rest of the
bags, amounting to a total of 64,409, were actually exported only during the
period from February 16 to May 24, 1958, long af­ter the expiration of the
ore-week extension sought by the petitio­ner. 
Finally, it is clear from the record that the typhoons and floods which,
according to the petitioner, helped render impossi­ble the fulfillment of its
obligation to export within the one-year period, assuming that they may be
placed in the category of for­tuitous events or force majeure,
all occurred prior to the execu­tion of the bonds in question, or prior to the
commencement of the one-year period within which the petitioner was in law
requir­ed to export the jute bags.

2. The next argument of the petitioner is that granting that
Customs Administrative Order 389 is valid and binding, yet “jute
bags” cannot be included in the phrase “cylinders and other con­tainers”
mentioned therein.  It will be noted,
however, that the Phi­lippine Tariff Act of 1909 and the Tariff and Customs
Code, which Administrative Order 389 seeks to implement, speak of
“containers” in general.  The
enumeration following the word “containers” in the said statutes
serves merely to give examples of containers and not to specify the particular
kinds thereof.  Thus sec. 23 of the
Philippine Tariff Act states, “containers such as casks, large me­tals,
glass or other receptacles,” and sec. 105(x) of the Tariff and
Customs Code mentions “large containers,” giving as exam­ples
“demijohn, cylinders, drums, casks and other similar recep­tacles
of metal, glass or other materials.” (emphasis supplied) There is,
therefore, no reason to suppose that the customs autho­rities had intended, in
Customs Administrative Order 389, to cir­cumscribe the scope of the word
“container,” anymore than the sta­tutes sought to be implemented
actually intended to do.

3. Finally, the petitioner claims entitlement to a drawback of the
duties it had paid, by virtue of section 106(b) of the Tariff and Customs Code,^[11]
which reads:

“Sec. 106. 
Drawbacks:  x x
x

“b.  On Articles Made
from Imported Mate­rials or Similar Domestic Materials and Wastes Thereof. –
Upon the exportation of articles manu­factured or produced in the Philippines,
including the packing, covering, putting up, marking or la­beling thereof,
either in whole or in part of import­ed materials, or from similar domestic
materials of equal quantity and productive manufacturing qua­lity and value,
such question to be determined by the Collector of Customs, there shall be
allowed a drawback equal in amount to the duties paid on the imported materials
so used, or where similar do­mestic materials are used, to the duties paid on
the equivalent imported similar materials, less one per cent thereof:  Provided, That the exportation shall
be made within three years after the impor­tation of the foreign material used
or constituting the basis for drawback x x x“

The petitioner argues that not having
availed itself of the full ex­emption granted by sec. 105(x) of the Tariff and
Customs Code due to its failure to export the jute bags within one year, it is
never­theless, by authority of the above-quoted provision, entitled to a 99%
drawback of the duties it had paid, averring further that sec. 106(b) does not
presuppose immediate payment of duties and taxes at the time of importation.

This contention is palpably devoid of merit.

The provisions invoked by the petitioner (to sustain his claim
for refund) offer two options to an importer. 
The first, un­der sec. 105(x), gives him the privilege of importing,
free from import duties, the containers mentioned therein as long as he ex­ports
them within one year from the date of acceptance of the im­port entry, which
period, as shown above, is not extendible. 
The second, presented by sec. 106(b), contemplates a case where im­port
duties are first paid, subject to refund to the extent of 99% of the amount
paid, provided the articles mentioned therein are ex­ported within three years
from importation.

It would seem then that the Government would forego col­lecting
duties on the articles mentioned in section 105(x) of the Ta­riff and Customs
Code as long as it is assured, by the filing of a bond, that the same shall be
exported within the relatively short period of one year from the date of
acceptance of the import entry.  Where an
importer cannot provide such assurance, then the Go­vernment, under sec. 106(b)
of said Code, would require payment of the corresponding duties first.  The basic purpose of the two pro­visions is
the same, which is, to enable a local manufacturer to compete in foreign
markets, by relieving him of the disadvantages resulting from having to pay
duties on imported merchandise, thereby building up export trade and
encouraging manufacture in the country.^[12]
But there is a difference, and it is this: 
under sec­tion 105(x) full exemption is granted to an importer who
justifies the grant of exemption by exporting within one year.  The petitioner, having opted to take
advantage of the provisions of section 105(x), may not, after having failed to
comply with the conditions imposed thereby, avoid the consequences of such
failure by being allowed a drawback under section 106(b) of the same Act
without having com­plied with the conditions of the latter section.

For it is not to be supposed that the legislature had intended to
defeat compliance with the terms of section 105(x) thru a refuge under the
provisions of section 106(b).  A construction
should be avoided which affords an opportunity to defeat compliance with the
terms of a statute.^[13]
Rather courts should proceed on the theory that parts of a statute may be
harmonized and reconciled with each other.

“A construction of a statute which creates an inconsistency
should be avoided when a reason­able interpretation can be adopted which will
not do violence to the plain words of the act and will carry out the intention
of Congress.

“In the construction of statutes, the courts start with the
assumption that the legislature inten­ded to enact an effective law, and the
legislature is not to be presumed to have done a vain thing in the enactment of
a statute.  Hence, it is a general prin­ciple,
embodied in the maxim, ‘ut res
magis valeat quam pereat,’ that the courts
should, if reasonably possible to do so without violence to the spirit and
language of an act, so interpret the statute to give it efficient operation and
effect as a whole.  An in­terpretation
should, if possible, be avoided, under which a statute or provision being
construed is de­feated, or as otherwise expressed, nullified, des­troyed,
emasculated, repealed, explained away, or rendered insignificant, meaningless,
inoperative, or nugatory.”^[14]

ACCORDINGLY, the judgment of the Court of Tax Appeals of November 20, 1961 is affirmed, at
petitioner’s cost.

Concepcion, C.J., Dizon,
Zaldivar, Fernando, Capistrano, Teehankee,
and Barredo,
JJ., concur.

Makalintal and Sanchez, JJ., did not take
part.

Reyes, JBL, J., on official
leave.

^[1]
This section was superseded by sec. 105(x) of the Tariff and Cus­toms Code
which took effect on July 1, 1957.  Section 105(x) provides:

“Large containers (e.g.
demijohns, cylinders, drums, casks and other similar receptacles of metal,
glass or other material) which are, in the opinion of the Collector of Customs,
of such a character as to be readily identifiable may be delivered to the
importer thereof upon identification and the giving of a bond in an amount
equal to one and one-half times the ascertained duties, taxes and other charges
thereon, conditioned for the ex­portation thereof or payment of the
corresponding duties, taxes and other charges within one year from the date of
acceptance of the import entry.”

^[2] Magruder v. W.B. & A. Realty Corp., 316 U.S.
69; Skidmore v. Swift & Co., 323 U.S.
134; see 2 Am. Jur. 2d 61, 63.

^[3]
In applying this doctrine courts often refer generally to the
“administrative practice,” a term taken to include any formal or
informal act of the administrative agency by which it construes, interprets, or
applies the law (2 Am. Jur. 2d 69).

^[4] Ahlers v. Farmers Mut.
Ins. Co., 264 NW 894.

^[5]
Am. Jur. 2d, 66-67.

^[6] 2
Am. Jur. 2d, 70, footnote 11, par. 2

^[7] 2
Am. Jur. 2d 70, footnote 11, par. 3; see also Phil.
Sugar Cen­trals Agency v. Collector of Customs, 51 Phil. 131, cited in Cia. Gen. de Tabacos de Filipinas
v. Actg. Commissioner of Customs, 23 SCRA 600, wherein this Court held
that the very fact that Congress has not seen fit to repeal or change the law
is a very potent argument in favor of sustaining a construction given to it by
courts.

^[8] 2
Am. Jur. 2d 69-70.

^[9]
Com. of Int. Rev. v. Visayan Electric
Co., 23 SCRA 715, 726, citing Esso Standard Eastern,
Inc. v. Actg. Comm. of Cus­toms, 18 SCRA 488; Farm Implement &
Machinery Co. v. Corn. of Customs, 24 SCRA 905.

^[10] Esso Standard Eastern, Inc. v. Actg. Com. of
Customs, supra; La Carlota Sugar Central v. Jimenez,
L-12436, May 31, 1961; Phil. Int’l Fair, v. Collector, L-12928 & L-
12932, March 31, 1962.

^[11]
Which is a substantial reproduction of sec. 22 of the Philippine Tariff Act of
1909, the law in force at the time the impor­tations of the jute bags in
question were made.

^[12]
25 C.J.S. 530-531; U.S.
v. Passavert, 169 U.S.
16; U.S. v.
Whidden, 28 F. Cas. No. 10,
670 cited in 25 C.J.S. 530; Tidewater Oil v. U.S.,
171 U.S. 210,
219; U. S. Code Congressioal News, Vol. 2, p. 3577
(85th Congress, 2nd Ses­sion).

^[13]
State v. Lipkin, 84 SE 340, LRA 1915F 1018,
cited in 50 Am. Jur. 366.

^[14]
50 Am. Jur. 358-359.