ROLANDO GEOTINA, AS COMMISSIONER OF CUSTOMS, PETITIONER, VS. BROADWAY & CO., HONGKONG, AND THE HONORABLE COURT OF TAX APPEALS, RESPONDENTS.

Special civil action for annulment of respon­dent court’s
resolutions allowing the release for exportation upon bond to respondent
foreign shipper, Broadway & Co. of Hongkong, of a
cargo of 54 cases of human hair, pending said court’s review and decision on
the merits of said res­pondent’s appeal from petitioner Commissioner of
Customs’ decision affirming forfeiture of said cargo for having been imported
into the Philippines in violation of the Tariff and Customs Code.

Petitioner commissioner’s principal contention is that respondent
tax court’s resolutions, insofar as it would allow such release and exportation
pending its hearing and decision on appeal of the correctness of petitioner’s
decision decreeing the forfeiture of the cargo for having been smuggled into
the country, constitu­ted a prejudgment and therefore amounted to a grave abuse
of discretion.  Respondent company in
turn, contends that the tax court acted within its discretion and authority,
alleging that ex­portation at the most would only mean the absence of the
physical custody of the goods by the government which could be indemni­fied by
the bond of P260,000.00 representing the appraised value thereof.

This case had its origins in a shipment on October 23, 1966 of fifty-six cases of goods described
as “Dried Fruits” in the Inward Foreign Manifest and Bill of Lading,
consigned by respondent company to the Luzon Trading Corporation, Manila.  Upon examination by representatives of the
Bureau of Customs, it was found that the shipment consisted of fifty-four cases
of human hair and two cases of mongo. 
The goods were thereupon seized under Seizure Identification No. 20544
for violation of Section 2530, paragraph m (4) of the Tariff and Customs Code.^[1]
On October 14, 1966, the
collector of customs, after hearing, decreed the forfeiture of the seized goods
for violation of the said provision of law. 
Appeal was taken to petitioner commissioner of customs who, in his
decision of April 18, 1968,
affirmed the action taken by the collector of customs.

Respondent company then filed with the Court of Tax Appeals on August 14, 1968 its petition for
review of the customs commissioner’s decision. 
It sought reversal of said decision ordering the forfeiture of the
shipment on the ground that the goods were “Transit cargoes” destined
for Bangkok and not intended to be
im­ported in the Philippines.  Respondent company further alleged that the
shipment was made to “Luzon Trading Corporation, Manila,
who has absolute option to tranship to Pakshand, Bangkok”
and that one day before the arrival of the shipment, said consignee had written
to the collector of customs “to make formal our exer­cise of the said
option to tranship.” Petitioner, as respondent
in the case below, on August 28, 1968, filed his answer stressing that the
seized importation was intended for the Philippines by the use of false
documents executed by the owner, importer or consignee, in violation of the
Tariff and Customs Code, the alleged “transhipment”
being “merely a device employed to conceal the true intent to import the
goods illegally and a subterfuge to avoid apprehension.”

As of the same date, August 28, 1968, respondent company filed a
motion for the release of the 54 cases of human hair for exportation under bond
in order “to avoid undue injury to the shipper-claimant resulting from the
attendant delay in the disposition of this seizure case”, offering to put
up an amount equi­valent to 1-1/2 times their appraised value.

Petitioner commissioner’s opposition dated September 14, 1968 squarely traversed respondent
company’s motion for release on all grounds, legal and factual.  Contrary to respondent com­pany’s assertion
of the possibility of deterioration and “undue injury,” petitioner
informed the tax court that the 54 cases of human hair were in excellent
condition, adequately protected from pilferage and insects and not in a
deteriorated state, and submitted its latest report of the cargo’s examination
dated July 10, 1968 conducted in the presence of the claimant-representative,
that “the shipment was found intact both on quantity and weight.”
Petitioner commissioner, in urging the tax court to reject the motion for
release, submitted that both this Court as well as the tax court itself, had
allowed such releases of for­feited goods pending decision only for special
urgent reasons such as deterioration of the goods in order to preserve the
subject-matter of the action – a condition not present in the case at bar.  Petitioner asserted as against respondent company’s
invoking the tax court’s protection against possible pecuniary loss that
“the paramount public interest (in the government’s anti-smuggling policy)
has great bearing on the matter of the release of imported goods to protect
private rights, and the fact that an important public policy would be
prejudiced by the release of the property is a compelling reason for denying
the relief.” Petitioner also called the tax court’s attention that the 54
cases of human hair were appraised by it at a value of P258,325.00, and not
P152,000.00 alleged by respondent com­pany to have been the highest bid offered
therefore at an auction sale conducted by petitioner, which was subsequently
abandoned.

Respondent court nonetheless issued its resolution of October 11, 1968 granting respondent
company’s motion for release, upon the latter’s filing of “a surety bond
in the amount of P260,000.00 to guarantee payment of the appraised value of
said goods.” It premised its action on the apprehension that a prolonged
storage of the goods was likely to cause deterioration, loss or damage; that
the importation is not absolutely prohibited, and that the filing of the surety
bond would adequately protect the government’s interest.

Petitioner filed his motion for reconsideration, asserting that
the release and exportation granted by the tax court before final adjudication
on the merits of the case would violate the provisions of section 1907 of the
Tariff and Customs Code which requires that the exporter first present a
warehousing entry for withdrawal of articles stored inside a customs bonded
warehouse (where the articles were placed after their seizure for the purpose
of the forfeiture proceedings), since respondent company could not present any
such warehousing entry for immediate exportation as the human hair cargo is not
covered by either a consumption entry or a warehousing entry.  The tax court denied reconsideration per its
resolution of December 26, 1968 and turned down petitioner’s counter-proposal
for the sale at public auction of the cargo, ruling that “anent (petitioner
commissioner’s) sugges­tion that the subject importation be sold at public
auction, the pro­ceeds thereof to be deposited with the Bureau of Customs or
with any person to be designated by this Court, and the amount to be disposed
of in accordance with the final decision in this case, it cannot legally be
done because (respondent company) has the right, before final judgment, to ask
for the release of the goods not of prohibited importation for transhipment to Bangkok under a sufficient bond to answer for
the appraised value thereof in case of forfeiture.” It subsequently issued
on January 7, 1969 its order
approving the surety bond filed by respondent company and order­ing the release
and delivery to respondent company of the 54 cases of human hair.  Hence, this petition.

On January 29, 1969,
the Court adopted a resolution requiring respondents to answer, at the same
time granting the writ of preliminary injunction against enforcement of the tax
court’s questioned resolutions as prayed for by petitioner.  In the res­pondent company’s answer filed on February 19, 1969, there was no
denial of the substantial facts as above alleged but the Court’s attention was
invited to what it considered “vital facts” which in its opinion
would suffice for the dissolution of the preliminary injunction issued as well
as the dismissal of the petition.  It
would stress that a day before the arrival of the vessel where the cargo of
human hair was shipped, the Luzon Trading Corpor­ation as consignee named in
the covering manifest as well as in the covering bill of lading addressed a
letter to the Collector of Customs for the Port of Manila giving formal notice
that it was exercising its “absolute option to tranship
to Pokshand, Bangkok”, and that on the day of
the arrival of the vessel but before it docked, such application for transhipment was approved by the Collector for South
Harbor, Jose Viduya. 
Respondent would argue then that there was no valid cause for seizure,
the same being “transit cargo” and not imported goods, its transhipment to its ultimate port of destination, Bangkok,
having been already authorized by the competent officials of the Bureau of
Customs.  Respondent would thus insist on
the regularity and legality of the shipment and that no grave abuse of discretion,
it is submitted by them, could thus be imputed to the tax court in issuing the
order for the exportation under bond of the cargo.

The petition was heard on the merits on May 5, 1969, and respondent was given a period of
thirty days within which to submit a memorandum in lieu of oral argument.  Petitioner was likewise granted leave to
submit a reply within thirty days from receipt of such memorandum.  Accordingly, the memorandum for respondents
was duly filed on June 23, 1969, and respon­dent stressed its contentions that
there was a legal basis for the issuance of the release order by the Court of
Tax Appeals, that the provisions of the Tariff and Customs Code alleged to have
been violated did not apply to the case at bar, that there is no prejudgment made
by the tax court in allowing the release of the goods in question, and that
while human hair may not be perishable it was subject to deterioration.  On the other hand, petitioner reiterated his
counter-arguments in refutation thereof in his memorandum submitted on August 25, 1969.

The Court finds the petition more than warranted, and accordingly
nullifies and sets aside the resolutions of the tax court allowing the release
under bond of the goods in question for exportation.

On the factual premise of the tax court’s resolutions, to wit,
“that although said goods may not yet have deteriorated, a prolonged
storage is likely to cause deterioration, loss or damage,” the Court finds
that since admittedly there was in fact no deterioration of the cargo of human
hair, there did not exist sufficient urgent and compelling reason for the tax
court to order the release and exportation of the cargo, pending its review and
decision on the merits of respondent’s appeal from petitioner commissioner’s
decision affirming the forfeiture of said cargo under section 2530, paragraph m
(4) of the Tariff and Customs Code.  At
the initial stage in which the appeal was then before the tax court, the issues
just having been joined, and in the absence of arbitrariness or oppression on
the part of petitioner commissioner in the forfeiture of the cargo – none
having been averred or found by the tax court – the subject matter of the
appeal before it was the said cargo of human hair which must be taken to have
been duly forfeited by decision of petitioner customs commissioner.  Such decision of forfeiture stands unless
duly overturned after hearing by the tax court and necessarily the forfeited
goods should be allowed to remain in the custody of pe­titioner commissioner
and should not be ordered disposed of, much less released, pending the appeal,
absent any overriding reason to do so. 
The certification of January 21, 1969,^[2]
sub­mitted with the petition, that the forfeited shipment of human hair
“is still in the same condition and quantity as reported in the
re-examination report dated September 11, 1968” shows that the said goods
have been well preserved and stands unrefuted by
respondent, who invokes the loss that the government would incur from a
depreciation in value of the forfeited goods, even if the seized articles are
finally forfeited to the government, in view of the length of time it takes to
finally decide such proceed­ings.  The
non-perishable nature of human hair appears to be in fact stressed by both
contending parties, with respondent stat­ing in its answer of February 18, 1969
that “it could not believe that human hair, which is the most durable part
of the human body, could have deteriorated by its storage, especially consi­dering
that the said human hair was treated by chemical preser­vative”,^[3]
and leading petitioner to comment on March 24, 1969 in opposition to
respondent’s motion to dissolve preliminary injunction on “the uncontroverted fact that there is no urgent nec­essity of
releasing the 54 cases of human hair, since both parties agree that these
articles are not perishable.”

On the legal issues of the tax court’s resolutions, the Court
finds that the question of releasing the forfeited cargo for exportation and transhipment to Bangkok under the facts at hand is so meshed
with the legal issues on the merits of the appeal yet to be decided by the tax
court that it is premature and amounts to grave abuse of discretion at this
stage to allow the cargo’s release and exportation.

The forfeiture by petitioner of the cargo of human hair was
predicated on his finding that such goods were imported to the Philippines
contrary to the applicable provisions of the Tariff and Customs Code.  Respondent would challenge such a ruling by
elevating the matter to the tax court. 
It would insist that there was no such importation, such cargo in fact
being destined for Bangkok.  It would thus challenge the validity of the
forfeit­ure.  The tax court in the
disposition of the petition for review, was called upon to rule squarely on the
matter.  If petitioner’s decision would
be supported by the facts as found by it, then the forfeiture stands.  On the other hand, if respondent could with
reason justify its assertion that such goods were in fact intended to be transhipped to Bangkok
and that there was no im­portation, then such a declaration of forfeiture
should be set aside.  It would thus
appear that there is no middle ground. 
The parties stand on opposite poles. 
The issue posed calls for a clear-cut determination and certainly it is
at best premature to allow without such a decisive resolution thereof the
release for exportation and transhipment of the
goods.

It must be borne in mind that as stated above, the cover­ing
documents of the shipment expressly indicate that it is the consignee, Luzon
Trading Corporation, Manila, that has the “absolute option” and
claims to have exercised a day before the shipment’s arrival such option to tranship the cargo to Bangkok yet it is the consignor and
shipper, respondent Broadway & Co., Hongkong who
is solely prosecuting the petition for review of the petitioner
commissioner’s decision of forfeiture. 
The ques­tion of respondent’s personality and interest to prosecute the
petition may have to be resolved as a prejudicial question.  Peti­tioner commissioner’s decision pending
review by the tax court makes certain findings in this regard which require
prior clari­fication and resolution, viz:  the first place, why did the owner have to
declare the cargo as ‘dried fruits’ and not human hair, which is not a contraband?  Again, if the intention was to tranship the goods to Bangkok,
why did the owner have to con­sign them to a Manila firm
(Luzon Trading Corporation) which had no legal existence?”^[4]
Petitioner commissioner further concluded in his decision, from his failure to
see, and that of respondent company to supply, plausible answers to
“intriguing questions” posed by him^[5]
that respondent’s questioned acts “are traces of their frantic effort to
exculpate the cargo from the penalty of forfeiture by sheltering under the
argument of transhipment to camouflage their dubious
intention to illegally introduce the cargo into the country.” Until such
seemingly well-grounded finding of petitioner that the right of transhipment assert­ed by respondent company was but an illegal
device shall have been fully explained away by respondent to the satisfaction
of the tax court, said court’s resolution in denying petitioner’s motion for
reconsideration that respondent company “has the right, be­fore final
judgment, to ask for the release of the goods not of prohibited importation for
transhipment to Bangkok under a suffucient* bond” must perforce be set aside as
pre-judging the very issue of the autenticity**
and existence of such alleged right of transhipment
which the tax court has yet to decide.

The desirability of the tax court avoiding the issuance of such
an order that would have the effect of prejudging the matter is thus
evident.  Under the circumstances what
was most appropriate was for it to rule squarely on the merits of the appeal
before it.  Nothing would have been lost
and certain­ly this certiorari proceeding could have been avoided if
such a course were followed.  Then there
would have been no question at all of any imputation that there was a grave
abuse of discre­tion on the part of respondent court.  At any rate, more than two years having
elapsed from the challenged ruling, it is not beyond the realm of probability
that such a definitive disposal of the matter and decision on the merits would
be forthcoming from respondent court.

WHEREFORE, the writ of certiorari prayed for is
granted and the writ of preliminary in­junction issued on January 29, 1969 is hereby made permanent.  Respondent court’s resolu­tions of October 11, 1968 and December 26, 1968 as well as its
implementing order of January 7, 1969
are hereby annulled and declared to be of no force and effect.  With costs against respondent Broadway &
Co.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Fernando,
and Villamor, JJ., concur.

Barredo
and Makasiar, JJ., did not take part.

^[1]
“Sec. 2530.  Property subject to
forfeiture under tariff and customs laws. – Any vessel or aircraft, cargo,
articles and other objects shall, under the following conditions, be subject to
forfeiture:

x x x x x x

m. Any article sought to be imported
or exported:

xxxx

(4)  On the strength of a false invoice or other
document executed by the owner, importer, exporter or consignee concerning the
importation or exportation of such article.”

^[2]
Annex “I”, Petition.

^[3] Rollo, pp. 45, 68.

^[4] Rollo, p. 20.

^[5]
“The clear intention of the claimant is further manifest­ed by other
established circumstances of the case which will conclusively prove that the
shipper-claimant and the consignee had pre-arranged the legal argument of transhipment as their defense in case their scheme to de­fraud
the revenue is exposed and detected.  For
what could have been the valid reason in giving the consignee the option to tranship the cargo to Bangkok
when the shipper-claimant could have shipped the cargo directly to Bangkok?  It would appear unbelievable and highly
insensible for a businessman engaged in the business of imports and exports to
adopt a circuitous route in transporting his cargo and spend more for shipping
and handling charges, when he has the full knowledge and opportunity to
transport his cargo in a more speedy and less expensive way.  If the intention was to tran­ship
the cargo to Bangkok on board the
M/V “LINDOS”, why was there no shipping order obtained for the
purpose?  And, again, if such intention
was really true, why did the consignee request, in se­curing the amended permit
to transfer, that the cargo be transhipped on board
the M/V “PRES. ROXAS” when the said vessel was not bound for Bangkok
but for the United States?  And, lastly, why must the shipping documents
misrepresent the true contents of the shipment?” Commissioner’s decision, Rollo, p. 23.

*
Editor’s Note: Should be read “sufficient.”

** Editor’s Note: Should be read “authenticity.”