GOOD DAY TRADING CORPORATION, PETITIONER, VS. BOARD OF TAX APPEALS, RESPONDENT.

The facts in this case are not disputed. The petitioner Good Day
Trading Corporation imported 238 cases of Chesterfield cigarettes on
February 18, 1952. The corresponding surety bond was filed in its favor
to secure the payment of the sum of P52,360, the amount of specific
taxes due on the cigarette importation, and pursuant to existing law,
the shipment was stored in a bonded warehouse under the custody of the
Bureau of Customs. On September 23, 1952, while the cigarettes were
still in storage, petitioner sold them to one Buenaventura Isleta for a
total sum of P32,000, exclusive of specific taxes, the sale being
conditioned on the buyer paying all the specific taxes or filing a
surety bond with the Bureau of Internal Revenue to guarantee payment
thereof, within 15 days from the sale agreement, besides paying all the
storage fees, fire insurance premium and other expenses from the date
of Bale until the cigarettes have been withdrawn by the buyer.

A few days after the sale agreement Isleta informed petitioner that
he bought the cigarettes not for himself but on behalf of his
companions who intended to pay the specific taxes with their backpay
certificates or certificates of indebtedness. Petitioner then wrote a
letter to the Collector of Internal Revenue advising him of the sale,
at the same time requesting that should the certificates of
indebtedness with which the buyers intend to pay the specific taxes on
the cigarettes be approved and accepted, the surety bond previously
filed toy petitioner be ordered cancelled. This letter was duly
received by the Collector of Internal Revenue.

Afterwards, when despite several, extensions given to Isleta and his
companions they failed to show evidence that they had either paid the
specific taxes or filed the corresponding surety bond, petitioner to
avoid deterioration of the cigarettes, decided to rescind the sale and
on December 8, 1952, on account of the specific taxes, it made an
initial payment of P8,800 to the Collector of Internal Revenue and
thereafter attempted to withdraw from storage 40 cases of cigarettes,
covered by the initial payment. The warehouseman, however, refused
delivery saying that Isleta and companions claimed ownership of the
whole shipment because they already had submitted with the Bureau of
Internal Revenue certificates of indebtedness (Back Pay) for payment of
all the specific taxes, which according to them have already been
approved and accepted by the Bureau. At the same time Isleta came to
petitioner’s office with a letter requesting the suspension of the
withdrawal of the cigarettes by petitioner, with the condition that
should he (Isleta and companions) fail to comply with the sale
agreement on or before December 15, 1952, then petitioner may withdraw
the whole shipment and Isleta and companions Would pay P10,000 as
liquidated damages.

Eventually, the Bureau of Internal Revenue approved or accepted the
certificates of indebtedness tendered by the buyers as payment of the
specific taxes on the cigarettes, the issuance of the certificates of
indebtedness having been approved by the National Treasurer of the
Philippines. The Bureau of Internal Revenue also authorized the Bureau
of Customs to release to the buyers the whole shipment; the buyers
filed their entries with the Bureau of Customs, and withdrew all the
cigarettes and allegedly sold the same.

Thereafter, petitioner asked for the refund of the P8,800 paid by it
in cash, in view of the full payment of the specific taxes on the
cigarettes by the buyers. The Collector of Internal Revenue granted the
refund and his action was approved by the Secretary of Finance. No
appeal was taken from said decision; but because the amount involved
was more than P5,000 the case was brought before the Board of Tax
Appeals for final resolution under the provisions of Executive Order
No. 401-A, section 9, particularly the second paragraph thereof. Said
section 9 reads as follows:

“SEC. 9. In all cases involving an original
assessment of P5,000 or less, the action of the Collector of Internal
Revenue pursuant to his authority to compromise cases and make refunds
under section 309 of the National Internal Revenue Code, and that of
the Commissioner of Customs pursuant to similar authority under section
1369 of the Revised Administrative Code, shall in no case become
effective unless approved by the Secretary of Finance. Copies of the
action of the Collector of Internal Revenue or of the Commissioner of
Customs, as the case may be, and of the approval thereof by the
Secretary of Finance shall be promptly- furnished the Board of Tax
Appeals, and within sixty days from the receipt of copy thereof, the
Board may, for justifiable reasons, review the case motu proprio.

“But
in cases involving an original assessment of more than P5,000, the
approval by the Secretary of Finance of the action taken as aforesaid
by the Collector of Internal Revenue or of the Commissioner of Customs
shall not become effective until and unless the same is approved by the
Board of Tax Appeals.”

The case was set for hearing before the Tax Board and memoranda were
filed after which, the. Board issued its resolution dated January 31,
1953. The Board not only reversed the decision of the Collector of
Internal Revenue granting the refund of P8,800 but it also rejected the
payment of the entire amount of specific taxes in certificates of
indebtedness, and ordered petitioner to pay the balance of P43.560 in
cash. In other words, the Good Day Trading Corporation which originally
imported the cigarettes whose specific taxes amounted to P52,360 was
held liable and was ordered to pay the whole of said specific taxes.

Petitioner asked for reconsideration claiming that the payment of
P8,800 in cash amounted to a double payment because the corresponding
amount was later paid with certificates of indebtedness, accepted by
the Collector of Internal Revenue and approved by the Secretary of
Finance ; being double payment petitioner was entitled to a refund ;
moreover, assuming that petitioner was not entitled to refund, the Tax
Board had neither authority nor jurisdiction to order petitioner to pay
the balance of P43.560 because it was not involved nor was it an issue
in the matter submitted to the Tax Board for review. Acting upon the
motion for reconsideration the Tax Board denied the same, saying that
said motion was filed out of time; that the resolution had become
final, and that even if the resolution were still subject to
modification and that the Board were to admit that it had no
jurisdiction to order the petitioner to pay the balance of the specific
taxes due, still petitioner would gain nothing by it because the Tax
Board may yet and could reverse the decision of the Collector of
Internal Revenue and enjoin him to collect from petitioner the said
amount of the balance, pursuant to the Board’s ruling that the
petitioner is the importer of the cigarettes and so was bound to pay
said taxes. Petitioner is now appealing from the resolution and order
of the Board of Tax Appeals.

Incidentally, and to avoid any possible confusion, we might state
that, presumably due to a ruling by this Tribunal (University of Santo
Tomas vs. Board of Tax Appeals, 93 Phil., 376; that the Board of Tax
Appeal was illegally established (because by mere Executive Order) for
the reason that the jurisdiction assigned to it deprived the Courts of
First Instance of their jurisdiction to entertain and pass upon cases
taken to them from actions and decisions of the Collector of Customs
and the Collector of Internal Revenue regarding taxes, assessments,
refunds, etc., Republic Act 1125 was subsequently passed. Said Act
abolished the Board of Tax Appeal, created what is now known as the
COURT OF TAX APPEALS with practically the same jurisdiction and
functions of the former Board of Tax Appeals, and although it repealed
Executive Order No. 40J.-A nevertheless it provided that all cases
decided by the former Board of Tax Appeals and appealed to the Supreme
Court pursuant to Executive Order No. 401-A shall be decided by the
Supreme Court on the merits, to all intents and purposes as if said
Executive Order 401-A had been duly enacted by Congress. We are,
therefore, deciding this case pursuant to the provisions of said
Executive Order 401-A.

The main ground on which the Tax Board based its resolution is that
petitioner Good Day Trading Corporation is the importer of the shipment
of cigarettes and therefore is the one called upon to pay the specific
taxes, and consequently, should pay the same in cash, and the Tax Board
proceeds to cite authorities defining what is meant by an importer,
namely, that the importer is the primary consignee to whom the goods
are sent and who himself presents the invoices, makes the entry,
receives the bill of lading, and gets the goods, as distinguished from
one who may be the ultimate consignee, and that it does not include a
person who purchases the goods from the importer after they have been
brought within the jurisdiction of the United States. On the other
hand, petitioner claims that under section 1248 of the Revised
Administrative Code which reads as follows:

“SEC. 1248. When importation by sea begins and ends.—Importation
by sea begins when the importing vessel enters the jurisdictional
waters of the Philippines with intention to unlade therein, and is not
completed until the duties due upon the merchandise have been paid or
secured to be paid at a port of entry and the legal permit for
withdrawal shall have been granted, or, in case said merchandise is
free of duty, until it has legally left the jurisdiction of the
customs.” importation is not completed until the duties due upon the
merchandise have been paid and legal permit for withdrawal shall have
been granted; so that the person or entity paying the duties due and
receiving the legal permit for withdrawal and actually withdrawing the
goods becomes the importer.

Under our view of the case, whether or not petitioner is the
importer of the cigarettes in question, is of little import because
under section 125 of the National Internal Revenue Code which provides—

“SEC. 125. Payment of specific tax on imported articles.—Specific
taxes on imported articles shall be paid by the owner or importer to
the customs officers, conformably with regulations of the Department of
Finance and before the release of such articles from the customhouse.”
either; the owner or importer shall pay the specific
taxes on imported articles. So that if the sale of the cigarettes by
the importer to the owners of the certificates of indebtedness was
valid, then said purchasers become the owners of the shipment and could
pay the specific taxes. We, therefore, believe and hold that the Tax
Board erred in holding that only petitioner Good Day Trading
Corporation was called upon and could pay the specific taxes on the
cigarette shipment.

What about the payment of the balance of P43,560 ordered by the Tax
Board to be paid by petitioner in spite of the paying of the entire
specific tax in certificates of indebtedness? We agree with the
petitioner that only the question of the refund of P8,800 was in issue
and was involved in the matter considered and decided by the Tax Board.
It will be remembered that there was no appeal from the decision of the
Collector of Internal Revenue approving the refund, which decision was
approved by the Secretary of Finance. If it was brought to the Tax
Board at all, it was because of the provisions of section 9 of
Executive Order No. 401-A already reproduced at the first part of this
decision. Under said section, in cases of original assessments
involving P5,000 or less, in one case and involving more than P5,000 in
another it is the action of the Collector of Internal Revenue pursuant
to his authority to compromise cases and make refunds under section 309
of the National Internal Revenue Code, that is subject to review and
approval by the Tax Board. So that the assessment and payment of the
specific tax of P52.360 in themselves, where there was neither dispute
nor appeal, was not subject to review by the Tax Board. What was
subject to review and what: was in issue here was the refund of P8,800
approved by the Collector of Internal Revenue and approved by the
Secretary of Finance because that was an action taken by the Collector
of Internal Revenue pursuant to his authority to compromise cases and
make refunds under section 309 of the National Internal Revenue Code.
Consequently, the consideration and resolution by the Tax Board should
be confined to that amount and to the propriety of the refund, nothing
more.

One of the reasons if not the main consideration behind the action
of the Tax Board in ordering the payment of the whole of the specific
taxes by the petitioner, and in: cash, is reflected in a portion of its
resolution which we quote:

“* * *. It is apparent that interested parties
wanted to negotiate their backpay certificates by circumventing the law
and as wisely recommended by the Collector of Internal Revenue in his
memorandum ‘as a measure of sound fiscal policy, the acceptance of
applications for issuance of certificates of indebtedness for the
payment of specific tax on imported articles, should be disapproved.’
To allow the purchasers the payment of specific tax on imported goods
in backpay certificates will open a way to unscrupulous dealers to
speculate in the negotiation of backpay certificates.”

The Tax Board in its resolution added that “it is highly improper
for the Government to accept certificates of indebtedness in lieu of
cash.” We can well understand the point of view of the Tax Board. There
is reason to suspect that the 29 alleged purchasers of the cigarettes
whose certificates of indebtedness (back pay) were used to pay the
specific taxes, were not bona-fide purchasers; that they were not
interested in the cigarettes imported but were solely concerned with
getting their backpay liquidated by any one who may have bought the
same at a discount and later used them to pay the specific taxes by
making it appear that 29 persons who had nothing in common but their
ownership of backpay certificates, and who heretofore were never
importers, dealers or buyers of foreign cigarettes, all of a sudden
were drawn and banded together to invest in a commodity they never
dealt in or were interested in, and became purchasers and owners of the
entire shipment of cigarettes.

The interest taken and solicitude shown by the Tax Board for the
Government and the public, is commendaible indeed. However, the present
appeal has to be decided solely on the basis of the pertinent
provisions. Whether or not owners of backpay certificates should be
given certificates of indebtedness ostensibly to be used to pay taxes
but in reality to be speculated upon and negotiated by some
unscrupulous persons, is wholly the legal concern of the Treasurer of
the Philippines and the Department to be affected later by the use of
said certificate of indebtedness. The attitude of the Tax Board
intended to minimize this anomalous practice may be of great interest
to the department or departments of the Government charged with the
issuance of certificates of indebtedness based on backpay, and the
acceptance of the same in payment of taxes.

In view of the foregoing, the resolution of the Tax Board denying
the refund of the P8,800 and ordering petitioner to pay the balance of
P43,560 is reversed. No costs. Let copies of this decision be furnished
the Treasurer of the Philippines and the Secretary of Finance.

Paras, C. J., Pablo, Bengzon, Reyes A., Jugo, Bautista Angelo, Labrador, Concepcion and Reyes, J. B. L., JJ., concur.