G.R. No. L-33500. August 30, 1971
ROLANDO E. GEOTINA, IN HIS CAPACITY AS COMMISSIONER OF CUSTOMS, PETITIONER, VS. THE COURT OF TAX APPEALS AND UNITRADE, INC., RESPONDENTS.
TEEHANKEE, J.:
Petitioner commissioner of customs has filed the instant petition
either as an original action for certiorari or as an appeal via certiorari
by way of challenging the validity of the decision of the Court of Tax Appeals
dated April 23, 1971 and of its resolution of May 3, 1971 granting the private
respondent’s petition in the case below[1]
and ordering petitioner commissioner to release on P550,00.00 bond an alleged
no-dollar shipment of 37,042 cartons of fresh apples without the corresponding
Central Bank release certificate.
The Court accepted the petition as an original action, requiring
an answer thereto which was filed in due course, and issued, as prayed for, the
order restraining until further orders the enforcement and execution of the
tax court’s question decision and resolution.
The material facts are undisputed, having been stipulated and
documented in the proceedings below. The
tax court thus restated the facts in its decision (referring to herein
respondent importer as petitioner before it and to herein petitioner
commissioner as respondent before it):
“(P)etitioner is a domestic corporation
duly organized and existing under and by virtue of the laws of the Philippines. On December
22, 1970, the vessel M/V ‘Mindanao
Sea’ arrived at the Port
of Manila carrying 37,042 cartons
of fresh apples consigned to herein petitioner.
After payment of the taxes and duties on the portion of the shipment
consisting of 10,000 cartons of fresh apples, covered by Bills of Lading Nos.
PM-1, PM-2, PM-3 and PM-4, the necessary transfer permits were issued by the
Collector of Customs of Manila. Thile this portion of the importation as being unloaded
from the carrying vessel and transported to the designated cold storage house,
the Collector of Customs, on December 22, 1970, issued warrants of seizure and
detention (S.I. Nos. 11993 to 11996) ordering the seizure of a portion of the
goods already unloaded and their detention for allegedly having been imported
in violation of Central Bank Circulars Nos. 289, 294 and 295, in relation to
Section 2530 (f) of the Tariff and Customs Code ‘pending termination of the
seizure proceedings hereof and/or until further orders.’ Before the entire
shipment could be unloaded, the Collector of Customs apparently changed his
mind and ordered that the goods already unloaded be returned to the vessel.
“On December 23,
1970, petitioner, through its broker, requested the discharge of
said articles from the carrying vessel and their delivery to it under
bond. This was denied by the Collector
of Customs on the same day on the ground that ‘the matter is under advisement
by the proper government authorities, and therefore, this Office regrets that
for the moment, it can not grant (its) request.’ On appeal from this decision
of the Collector, the Commissioner, in his letter dated January 20, 1971, refused to render a decision
until the Collector shall have rendered a ‘definite ruling on the matter.’
“On January 22,
1971, petitioner again requested the Collector of Customs to have
the goods discharged from the vessel and their delivery to it under bond. In his letter of January 26, 1971, the Collector denied the
request on the ground that the importation of said goods is prohibited under
Circulars Nos. 289, 294 and 295 of the Central Bank and are, therefore,
articles of prohibited importation under Section 102(k) of the Tariff and
Customs Code. For convenience, the
pertinent portions of the said decision of the Collector are reproduced below.
‘The subject shipment, undoubtedly, belongs to a commodity
classification of merchandise the importation of which is prohibited under
Central Bank Circular Nos. 289, 294 and 295.
Since CB circulars form part of the Tariff and Customs Law (Sec. 3514,
R.A. 1937, as amended); the aforementioned importation may be considered
prohibited under Section 102 (k) of the Tariff and Customs Code.
“‘In this connection, the pertinent provision of the Tariff
and Customs Code on the matter is quoted hereunder:
“Sec. 1207. Jurisdiction
of Collector Over Articles of Prohibited Importation. – Where articles are of prohibited
importation or subject to importation only upon conditions prescribed by law,
it shall be the duty of the Collector to exercise such jurisdiction in respect
thereto as will prevent importation or otherwise secure compliance with
all legal requirements.’ (Underscoring supplied.)
“Under this particular section, it is obvious, that where the
importation is prohibited, or subject to the conditions prescribed by law, the
Collector is duty bound to exercise two options – either to prevent the
importation of the cargo or require compliance with all the requirements. It appearing that the latter alternative is
not feasible under the circumstances now prevailing, this Office is constrained
to enforce the former by not allowing the discharge of the shipment in
question.
“‘In view of the foregoing, and in pursuance of the strict
policy of the Central Bank of the Philippines relative to the importation of
commodities of this nature, the request of your client regarding the discharge
of the cargo from the vessel ‘Mindanao Sea’ is hereby denied, thus,
rendering the request for an authority to release the same under bond
premature.’
“Respondent Commissioner of Customs, on appeal from said
decision of the Collector of Customs, sustained the decision of the latter in
an order dated January 29, 1971. Hence, this appeal.
“It will be noted that the principal issue raised in this
appeal is the decision of the Collector, sustained by respondent, to the effect
that the goods in question are articles of prohibited importation under Section
102(k) of the Tariff and Customs Code.
Since importation of such articles is prohibited, delivery thereof to
the importer can not be authorized. For
this reason, the Collector took the necessary steps to prevent their entry or
importation by authority of section 1207 of the Tariff and Customs Code by
ordering the portion of the goods previously unloaded returned to the carrying
vessel. The effect of this order is the
abandonment of the seizure proceedings which were started previously by the
issuance of warrants of seizure and detention.” (pp. 46-50 CTA
record.)
Upon respondent’s filing on February 2, 1971 of its appeal with
the lower court from the customs commissioner’s decision affirming that of the
Manila customs collector denying said respondent’s request for the discharge
of the shipment of 37,042 cartons of fresh apples with a stated value of U. S.
$66,675.60 from the vessel M/V “Mindanao Sea” and their release to
respondent under bond, it renewed its move, through motion for a preliminary
injunction, for immediate discharge from the carrying vessel and release under
bond of the said shipment. The tax
court, per its resolution of February
16, 1971, correctly denied respondent’s motion, “for to do so
would be to prejudge the main issue raised in this appeal.”
Respondent’s motion for reconsideration of the denial order was
denied anew by the tax court per its resolution of February 26, 1971, wherein
expounding on its first resolution abjuring a prejudgment of the main issue,
it ruled that “(S)ince articles of prohibited
importation are not subject to the right of redemption by the claimant or
owner,[2]
it is obvious that the motion of [respondent company] to have said goods
delivered to it pending final determination of its appeal is without merit, for
to do so would in effect be a declaration that the goods are not articles of
prohibited importation.”
On another urgent motion of respondent alleging malfunctioning
of the reefer machinery of the carrying vessel, however, the tax court per its
order of March 4, 1971, allowed the immediate discharge of the fruits and
their deposit in a customs bonded warehouse “under conditions as to
prevent or arrest spoilage or deterioration pending final determination of the
case on the merits.” The fruits were thus deposited since March 19, 1971[3]
at the refrigerated storage compartments of the Ice & Cold Storage
Corporation at Plaza Lawton, Manila.
After the parties’ submittal of their stipulation of facts and
respective memoranda, the tax court rendered its decision, wherein after
upholding its challenged jurisdiction over the case, it ruled that:
“We are, therefore, of the opinion that the fresh apples in
question are not absolutely prohibited to be imported into the Philippines
under the aforesaid Circulars of the Central Bank, in relation to Section 102
of the Tariff and Customs Code. However,
while said goods are not articles of prohibited importation, they may be
held liable for forfeiture for failure of petitioner to secure a release
certificate from the Central Bank, which liability may be determined in an
appropriate seizure proceeding to be conducted by the Collector of Customs,
pursuant to Sections 2301, et seq. of the Tariff and Customs Code. In the meantime, considering the perishable
nature of said goods, and in the interest both of petitioner and the
Government, the goods should be released to petitioner under bond to secure payment
of the appraised value thereof in case they are finally declared forfeited in
favor of the Government.”
and rendered judgment as follows:
“WHEREFORE, respondent is hereby ordered to release to
petitioner the 37,042 cartons of fresh apples in question, now deposited with
the Ice & Cold Storage Corporation at Plaza Lawton, Manila, after
petitioner shall have filed a sufficient bond to guarantee payment of the
appraised value thereof.”
The tax court thereafter issued its resolution of May 3, 1971 for the immediate release
of the apples, on the basis of respondent’s surety bond for P550,000.00
“to guarantee payment of the appraised value of said goods in case the
same are finally declared forfeited in favor of the Government.” As
already stated, such release was enjoined by the Court’s restraining order. Pursuant to the hearing held on May 21, 1971, the parties filed on May 27, 1971 their joint
manifestation to the effect that some of the apples had been found totally
rotten and the rest in various stages of deterioration. In respondent’s last urgent motion of July 20, 1971, it prayed for
resolution of the case at bar “for the reason that the fresh fruits .. are
already in grave danger of totally deteriorating.”
I. The preliminary
issue of jurisdiction raised by petitioner may readily be disposed of. The tax court correctly overruled petitioner
commissioner’s contention that his ruling denying release under bond of the
fresh apples partook of the nature of an interlocutory order “pending
seizure proceedings against said importation” which was not appealable to and could not be taken cognizance of by the
tax court, in this wise: “(T)his is
not correct. What is being appealed is
the decision declaring the articles in question as ‘articles of prohibited
importation’ and the order prohibiting entry thereof. This is a final decision and is in no sense
an interlocutory order because it was not issued in connection with a pending
case. As stated heretofore, and as shown
by the records of the case, the seizure proceeding which was at first started
by the Collector of Customs of Manila was discontinued, the Collector having
elected to prevent importation of said articles under Section 1207 of the
Tariff and Customs Code.”
The tax court properly maintained its jurisdiction over the case
which, as it pointed out, “precisely involves seizure, detention or
release of property belonging to [respondent company] consisting of fresh
apples imported from abroad, which property is under detention by [the
commissioner] who refuses to release the same to [respondent].” As
reaffirmed by the Court in the latest case of Señeres
vs. Frias, L-32921-40, June 10, 1971, in customs
cases, “(T)he collector’s decision may be appealed to the commissioner of
customs, whose decision, inter alia, in cases
involving seizure, detention or release of property affected, may in
turn be reviewed only by the Court of Tax Appeals under the exclusive
appellate jurisdiction conferred on said Court under section 7 of Republic
Act 1125.”
II. We thus come to
grips with the linchpin issue: did the
tax court act within its authority and in accordance with the applicable law
and jurisprudence in ordering the release under bond of the questioned shipment
of fresh apples – admittedly imported on a “no dollar” basis –
notwithstanding the lack of the required Central Bank release certificate?
Petitioner commissioner submits that since the importation of
fresh apples and other goods similarly classified by the Central Bank as
non-essential consumer (NEC) products is prohibited under Central Bank
Circulars Nos. 289, 294 and 295, the questioned importation is considered a
prohibited importation under Section 102 (k) of the Tariff and Customs Code,[4]
and he was but complying with his mandate under section 1207 of the same Code,
quoted supra, page 3, “to exercise such jurisdiction in respect
thereto as will prevent importation” by refusing to allow the
discharge of the said shipment.
Respondent importer in turn contends quite naturally that the tax
court “committed no error when it found that the imported fresh apples are
not absolutely prohibited importation and therefore may be released to the
(importer) under bond.”
The issue reduces itself quite simply and essentially to whether
or not the fresh apples in question are “articles of prohibited
importation.” If so, as the Court holds, then the tax court acted in
excess of its jurisdiction in overturning the customs authorities’ proper
exercise of their jurisdiction under section 1207 of the Customs Code, in preventing
importation and refusing to allow the discharge of the shipment of apples,
which admittedly is not covered by the required Central Bank permit or release
certificate. By the same token,
since the importation of said apples is banned under the cited Central Bank
circulars which have the force and effect of law, the tax court acted without
authority of law in ordering the commissioner to release the apples to the
importer under bond, for under the very section 2301 of the customs code
invoked by it, “articles the importation of which is prohibited by law
shall not be released under bond.”
1. The huge shipment of 37,042 cartons of fresh
apples, with a stated value of $66,675.60 and a total weight of about 671,942
kilos,[5]
is concededly one of fruits classified as NEC goods, the importation of which
is barred under Central Bank Circular No. 289 dated February 21, 1970.[6]
As for “no-dollar” imports, Central Bank Circular No. 247 dated July
21, 1967, after referring to previous circulars which required release
certificates from the Central Bank for certain “no-dollar”
importations, expressly enumerates the items which are exempt from the
requirement of such release certificates, e.g. personal effects in reasonable
quantities, gifts sent from abroad not exceeding $100.00 unless there is
evidence of abuse in the use of the privilege, etc. Central Bank Circular No. 295, amending
Circular No. 294, promulgated on March 20 and 10, 1970, respectively,[7]
reiterates the exemption of the “no-dollar” imports covered by
Circular No. 247 from the release certificate requirements, but imposes an
express ban on all other “no-dollar” imports, as follows:
“No-dollar imports not covered by Circular No. 247 shall not
be issued any release certificates and shall be referred to the Central Bank
for official transmittal to the Bureau of Customs for appropriate seizure
proceedings.
“x x x x.”
Section 2 of said Circular No. 295,
however, provides certain conditions for the issuance of release certificates
for “no-dollar imports which arrived on or before February 21, 1970“, the
date that the floating rate system and foreign exchange restrictions were
instituted under Circular No. 289 of the same date.
The customs authorities clearly acted then within their authority
and mandate under section 1207 of the customs code, quoted supra,[8]
in “preventing importation” and entry of the shipment of
apples by not allowing its discharge from the carrying vessel. As noted by the Court in the recent case of Señeres, supra, “When the goods are
challenged as being of prohibited importation and the collector questions the
legality of the importation … the law expressly imposes upon the collector
the obligation ‘to exercise such jurisdiction in respect thereto as will
prevent importation.'” The second alternative granted by the cited section
to the port collector of “securing compliance with all legal
requirements” with respect to “articles subject to importation only
upon conditions prescribed by law” was patently not available, for under
the categorical terms of Circular No. 295 above quoted, no release certificate
could be issued for the apples in question and the questioned import could only
be “referred to the Central Bank for official transmittal to the Bureau of
Customs for appropriate seizure proceedings.”
2. The pertinent and applicable provisions of
the tariff and customs code quite indubitably prohibit the importation of the
apples in question as “prohibited importations” since their
importation is “prohibited by law” under section 102, while
section 1207, quoted, supra,[9]
expressly enjoins the port collector “to exercise such jurisdiction in
respect thereto as will prevent importation.” Sections 2301 et seq.
make the apples liable to seizure and detention; they may not be released
under bond since they are “articles the importation of which is prohibited
by law” but they may be subjected to forfeiture in the specific
appropriate cases provided in section 2530:
“Sec. 102. Prohibited
Importations. — The importation
into the Philippines
of the following articles is prohibited:
x x x x
“All other articles the importation of which is prohibited by
law.”
x x x x
“Sec. 2301. Warrant
for Detention of Property Bond.
— Upon making any seizure, the Collector shall issue a warrant for the
detention of the property; and if the owner or importer desires to secure the
release of the property for legitimate use, the Collector may surrender it upon
the filing of a sufficient bond, in an amount to be fixed by him, conditioned
for the payment of the appraised value of the article and/or any fine,
expenses and costs which may be adjudged in the case: Provided, That articles the importation of
which is prohibited by law shall not be released under bond.”
“Sec. 2307. Settlement
of Case by Payment of Fine or Redemption of Forfeited Property. – x x x
x x x x
“Redemption of forfeited property shall not be allowed
in any case where the importation is absolutely prohibited or where the
surrender of the property to the person offering to redeem the same would be
contrary to law.”
x x
x x
“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
“f. Any article of prohibited importation or
exportation, the importation or exportation of which is effected or attempted
contrary to law, and all other articles which, in the opinion of the
Collector, have been used, are or were intended to be used as instrument in the
importation or exportation of the former.
“x x x x
“m. Any article sought to be imported or exported:
“(1) Without going through a custom-house,
whether the was consummated, frustrated or attempted;
“(2) By failure to mention to a customs official,
articles found in the baggage of a person arriving from abroad.
“(3) On the strength of a false declaration or
affidavit executed by the owner, importer, exporter or consignee concerning
the importation or exportation of such article.
“(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.
“(5) Through any other fraudulent practice or
device by means of which such article was entered through a customhouse to
the prejudice of the government.”
Section 3514, defining the words and phrases used in the code,
further expressly declares that “‘tariff and customs law’ includes not
only the provisions of this Code and regulations pursuant thereto but all other
laws and regulations which are subject to enforcement by the Bureau of Customs
or otherwise within its jurisdiction.”
Accordingly, for the administrative information and guidance of
all customs personnel, Customs Administrative Order No. 19-70 dated October 20,
1970 was issued by the then acting commissioner of customs and duly approved by
the Secretary of Finance, as follows:
“Pursuant to Section 608 of the Tariff and Customs Code in
relation to Section 2307 of the same Code and in order to give force and effect
to Central Bank Circular No. 289, all importations seized and forfeited for
violation of Central Bank Circulars shall not be allowed to be released under
bond, either surety or cash, nor allowed to be redeemed.
“All previous orders inconsistent with or contrary to the
foregoing are hereby superseded and/or revoked.
“This Order shall take effect upon approval by the Secretary
of Finance.
“(SGD.) ALFREDO PIO DE RODA, JR.
‘Acting Commissioner of Customs
“APPROVED:
“(SGD.) CESAR VIRATA
“Secretary of Finance”
3. The tax court, however, erroneously justified
its decision overruling the commissioner’s denial of importation of the apples
and instead ordering their release under bond in this wise:
“x x respondent seeks to prevent
importation of the goods in question and the delivery thereof to petitioner on
the ground that said goods, having been imported in violation of Central Bank
Circulars Nos. 289, 294 and 295, are considered ‘articles of prohibited
importation’ which may be banned under Section 1207, in relation to Section
102, of the Tariff and Customs Code. We
have examined said Circulars, and we find nothing therein which declares that
fresh apples are articles which are prohibited to be imported into the Philippines. It is true that the Circulars provide that
no release certificate may be issued for such goods coming from abroad, yet the
Central Bank may issue such release certificate under exceptional
circumstances, the prohibition not being absolute. In fact, the Collector of Customs authorized
the release and delivery to the importer of a shipment of fresh apples on December 1, 1970, after the effectivity of said Circulars. It may be added that by Executive Order of
the President (Executive Order No. 282, dated January 4, 1971) the tariff duty
on apples was increased.
“x x x x
“Executive Order No. 282 is proof
enough that it has never been the intention to classify fresh apples as
articles of prohibited importation.
“We are, therefore, of the opinion that the fresh apples in
question are not absolutely prohibited to be imported into the Philippines
under the aforesaid Circulars of the Central Bank, in relation to Section 102
of the Tariff and Customs Code.”
(a) The tax court’s first stated ground that the
importation of fresh apples was “not absolutely prohibited” under the
Central Bank circulars and that therefore the apples could not be deemed
“articles of prohibited importation” as envisaged by section 102 of
the tariff and customs code has been long rejected by the settled doctrine and
jurisprudence of the Court. The
contention that to be deemed articles of prohibited importation, the
questioned articles must partake of the same nature as those specifically
declared prohibited in said section 102 (formerly section 3 of the Philippine
Tariff Act of 1909) such as explosives, etc. was discarded by the Court in the 1959
case of Tong Tek vs. Commissioner of Customs:[10]
“Petitioners alleged that the term ‘merchandise of prohibited
exportation’ used in Section 1363-(f) of the Revised Administrative Code (now
Section 2530-f of the tariff and customs code) has its own fixed and definite
meaning; that it refers exclusively to those articles specifically declared
prohibited by Section 3 of the Philippine Tariff Act of 1909, such as firearms
and explosives, obscene and subversive articles, gambling outfits, falsely
marked gold and silver articles, adulterated foods, lottery tickets, opium and
opium pipes, and as gold bars do not fall under any of the enumeration, they
conclude that the aforementioned codal provision can
not be invoked in ordering the forfeiture of the articles in question. We entertain a different view.
“It must be remembered that the Revised Administrative Code is
a general legislation. As such, it must
have been intended to meet not only the peculiar conditions obtaining at the
time of its enactment but also designed to comprehend those that may normally
arise after its approval. To our
mind, the term ‘merchandise of prohibited exportation’ used in the code is
broad enough to embrace not only those already declared prohibited at the time
of its adoption but also goods, commodities or articles that may be the subject
of activities undertaken in violation of subsequent laws. Considering that the Central Bank circulars,
issued for the implementation of the law authorizing their issuance although by
themselves are not statutes, have the force and effect of law (People vs. Que Po Lay, 94 Phil., 640; 50 Off. Gaz.,
No. 10, p. 4850), the carrying out of transactions or undertakings without
complying 20, 21 and 42 makes these undertakings illegal. And as a natural consequence thereof, the
articles involved in such unauthorized ventures become prohibited and,
therefore, subject to forfeiture under, Section 1363-(f) of the Revised
Administrative Code.”
(b) In another 1959 case of Pascual
vs. Commissioner of Customs,[11]
the Court, in upholding the penalty of forfeiture for such importations made
without the required Central Bank release certificates, stressed that
“since the importations in question were made without the necessary import
license issued by the Monetary Board pursuant to Circular No. 45 and the release
certificates issued by the Central Bank or its authorized agent bank in the
prescribed form pursuant to Circular No. 44, they fall within the class of
‘merchandise of prohibited importation’ or merchandise ‘the importation x x x of which is effected x x x contrary to law’ that the
Commissioner of Customs may seize and order forfeited. To sustain the appellant theory of the case
would render nugatory the aim and purpose of the law when it authorizes the
Central Bank to temporarily suspend or restrict the sale of foreign exchange
and subject all transactions in gold and foreign exchange to licensing during an
exchange crisis in order to protect the international reserve and to give the
Monetary Board and the Government time in which to take constructive measures
to combat such a crisis.” The Court emphasized therein that “every
import of goods or merchandise requires an immediate or future demand for
foreign exchange” and that the Central Bank circulars in question
requiring its permit and release certificates for so-called
“no-dollar” imports were “measures taken to check the unregulated
flow of foreign exchange from the country and are within the powers of the
Monetary Board.”
(c) Numerous cases thereafter have elevated the
Court’s initial 1959 rulings to settled doctrine. Thus, ten years later, in the 1969 case of Sare vs. Commissioner of Customs,[12]
the Court, through the Chief Justice, declared that “it is now well
settled that goods imported without the release certificates required in
Circulars Nos. 44 and 45 are ‘merchandise of prohibited importation’ as this
expression is used in said section No. 1363 (f).[13]
Similarly, in another 1969 case of Sare Enterterprises vs. Commissioner of Customs,[14]
the Court, per Mr. Justice Castro, in reiterating the same doctrine, noted that
“the ruling in Capulong[15]
has been reiterated and reaffirmed in numerous decisions of this Court[16]
and it is now too late in the day to suggest that it should be reexamined which
of course the petitioner does not do.”
4. The tax court thus failed to take note that
articles of prohibited importation under section 102 of the code are of two categories,
viz, those which are absolutely prohibited
or more commonly known as contraband, such as explosives or prohibited
drugs, and other articles which are considered qualifiedly prohibited
referring to those which may be imported subject to certain restrictions or
limitations. But as has been observed,
the legal effects of an unauthorized importation of qualifiedly prohibited
articles are the same as those of an importation of contraband: “an article imported or attempted to be
imported in violation of regulations of the Central Bank is considered an
article of prohibited importation and is subject to forfeiture in like manner
as an article the importation of which is absolutely prohibited under Section
102 of the Tariff & Customs Code.”[17]
None of the above-cited pertinent provisions of the tariff and
customs code requires that the questioned importation be of articles of absolutely
prohibited importation for the customs authorities to prevent their entry
or importation or enforce their seizure and forfeiture.
Indeed, it will be noted that even as to articles of absolutely
prohibited importation under section 102 of the code, e. g. explosives or
prohibited drugs, their limited importation is nevertheless permitted
“when authorized by law” in the case of dynamite and other
explosives, and by duly authorized persons “for medicinal purposes
only” in the case of prohibited drugs.
The granting of limited importation of such absolutely prohibited articles
in the “exceptional circumstances” authorized by law (to use the tax
court’s own phrase) no more nullifies the standing prohibition against their
importation than the release on December 1, 1970, cited by the tax court, of a
small shipment of 100 cartons of fresh apples with a dollar value of $897.50
and a total weight of 2,087 kilos)[18]
to the Savoy Philippines Hotel would serve to annul the Central Bank’s
subsisting ban against such so-called “no-dollar” imports; neither
may it be used as a lever to allow the release under bond of the present enormous
shipment of 37,042 cartons of apples.
5. The President’s Executive Order No. 282,
dated January 4, 1971,
increasing the tariff duty on apples, as cited in the tax court’s decision,
does not serve in law to bring down the barrier against the importation of
fresh apples as “no-dollar” imports under Circular No. 295. It is obvious that the increased tariff duty
thereby imposed on fresh apples would be applicable and collectible only on
lawful and valid importations thereof duly made in accordance with law, more
specifically, after full compliance with Central Bank requirements. In this regard, the Court has taken note that
it is stated in the pertinent Central Bank circulars that “no-dollar
imports not covered by Circular No. 247, shall not be issued any release
certificates” (per Circular No. 295, quoted supra.[19])
Yet, respondent takes the Central Bank to task for having in some instances
disregarded “its own circulars by granting “prior specific
approvals” for banned “no-dollar imports” or by issuing release
certificates therefor as exceptions for “favored
parties”, as in the Savoy Hotel importation of fresh apples. The clearance granted Savoy Hotel for the
small shipment of fresh apples may be readily justifiable as one having been
given to a tourist hotel as a dollar earner catering to the country’s tourist
industry. But it might perhaps be desirable
that the Central Bank spell out such exceptions and the cases where it will
grant “prior specific approvals” as against the standing prohibition
for the guidance of all concerned, so that it may not be charged with acting
arbitrarily and without any definite set of rules and guidelines that assures
equal treatment and equal application of its circulars to all.
Respondent importer in its answer at bar contends that since its
contract with the Hongkong supplier for the
importation of fresh apples was entered into since March 26, 1969, when
Central Bank Circulars 289, 294 and 295 had not yet been issued (the earliest
thereof instituting the floating rate system having been issued and taken
effect on February 21, 1970), that the alleged shipment thereof which arrived
at Manila one year and seven months later on December 22, 1970 should
not be deemed covered by the Central Bank ban.
The tax court gave no credit to this contention, since the contract
presented covering assorted goods and foodstuffs with a total value of US
$2,288,977.00 called by its own terms for payment “by letters of credit
from the Philippines or from other countries” and provided a “life or
term of contract” of “six months period after signing of this
agreement” on May 22, 1969, within which the importer
had to order the commodities and the supplier had to have the goods ordered
available.[20]
Clearly, the term of the alleged contract of May 26, 1969 had expired seven months thereafter by
the end of the year 1969.
7. The tax court in fact rejected the importer’s
contention and ruled that while the apples “are not articles of prohibited
importation, they may be held liable for forfeiture for failure of
petitioner to secure a release certificate from the Central Bank, which
liability may be determined in an appropriate seizure proceeding”,
ordering in the meantime the release of the fruits to the importer under bond
in view of their “perishable nature.”
The tax court, however, incurred itself in contradiction in that
under our settled doctrine and jurisprudence, supra, goods imported
without the corresponding release certificates required by Central Bank
circulars are “articles of prohibited importation” as the term is
used in section 2530-f of the Customs Code (formerly section 1363-f of the
Revised Administrative Code), which subjects them to forfeiture. No Central Bank permit or release certificate
could be issued for the apples by virtue of the express ban against them in
Circular 295[21]. Hence, they fell under the explicit
prohibition in the proviso of the very section cited by the tax
court, viz, Section 2301, “that articles the
importation of which is prohibited by law shall not be released under bond.”[22]
8. The tax court had noted at the beginning of
its decision that the customs authorities had opted to act under the authority
of section 1207 and prevent the entry or importation of the shipment of apples
by refusing to allow its discharge from the carrying vessel, thus
abandoning in effect the seizure proceedings started previously by the issuance
of warrants of seizure and detention.[23]
Respondent importer however did not take advantage thereof and instead insisted
on effecting entry and importation and on the unloading, storage and release
under bond of the fruits pending these proceedings. If the apples have deteriorated in storage,
the importer has only itself to fault for its wrongful insistence on the entry
and release of the shipment, notwithstanding its being prohibited and contrary
to law.
9. The case at bar presents a timely occasion
for the Court to clear certain past misconceptions and fallacies in regard to
the release under bond of seized or detained properties, “conditioned for
the payment of the appraised value of the article and/or any fine, expenses and
costs which may be adjudged in the case”, as provided in section 2301 of
the code.[24]
The first two functions of the customs bureau are “a. the assessment and collection of the
lawful revenues from imported articles and all other dues, fees, charges,
fines and penalties accruing under the tariff and customs laws” and
“b. the prevention and
suppression of smuggling and other frauds upon the customs.”[25]
The lawful revenues are to be assessed and collected upon
articles properly and lawfully imported into the Philippines.
“Where articles are of prohibited importation”, section 1207 of the
code imposes the primary duty upon the collector “to exercise such
jurisdiction in respect thereto as will prevent importation.” Articles
of prohibited importation, which cover not only contraband or absolutely
prohibited articles but also qualifiedly prohibited articles which
are sought to be imported, more precisely smuggled, in violation of Central
Bank circulars, supra, are expressly made subject to seizure and
forfeiture under section 2530-f and section 2301 expressly enjoins that
“articles the importation of which is prohibited by law shall not be released
under bond.”
It is utterly fallacious, therefore, when such banned goods are
nevertheless sought to be imported in violation of law, to assume that it is to
the interest of the Government, where the goods are perishable, to release them
to the importer under bond to secure payment of the appraised value thereof in
case they are finally declared forfeited in favor of the Government.
For the code expressly prohibits the release under bond of such
articles of prohibited importation. The
Government expects no revenue from such banned articles, since they are not
allowed to be imported. Otherwise, the
law’s prohibition would be rendered totally nugatory, since such banned
articles, which are mostly luxury items, are in great demand and command
sky-high prices assuring great profit to the smuggler. The smuggler would have the greatest profit
motive to wreak havoc upon our currency by purchasing dollars at the highest
black market rates to purchase and bring in these high-profit luxury
items. Should he succeed in smuggling
them in, his venture is a complete success.
If he is caught, then all he has to do is put up a bond for the release
of the goods “to secure payment of the appraised value thereof” to the
Government, and he can still realize a substantial profit from the sale of the
banned goods thus released to him. All
the measures designed by the Central Bank to strengthen and stabilize our peso
and to check the unregulated flow of foreign exchange from the country with the
ultimate end of setting aright the country’s economy and financial position
would thereby be set at naught.
10. The Government’s finance secretary and customs
authorities appear to have realized the deleterious consequences of the
hitherto ambivalent attitude of customs officials in permitting release under
bond of banned articles contrary to the express prohibition of section 2301,
when they issued Customs Administrative Order No. 19-70 dated October 20,
1970, supra, declaring that “all importations seized and
forfeited for violation of Central Bank circulars shall not be allowed to be
released under bond, either surety or cash, nor allowed to be redeemed.”
Such an outright ban on release of seized goods in accordance with the law’s
mandate further removes occasion and opportunity for corruption of customs
officials in seeking the exercise of their “discretion” in granting
exceptions and authorizing release of banned articles to favored parties.
Respondent importer’s petition before the tax court was filed to
seek judgment “sustaining [the importer’s] right to the discharge of its
importation from the carrying vessel and its release under bond to it and
declaring Customs Administrative Order No. 19-70 null and void” as an
alleged unauthorized and arbitrary modification or amendment of the provisions
of section 2301 of the tariff and customs code. As already shown above, the said
administrative order is merely an administrative reiteration of the express
prohibition of the cited section against the release under bond of prohibited
articles seized and held for forfeiture by the customs authorities. The tax court of course made no pronouncement
of alleged nullity of the said administrative order, the validity of which
cannot be gainsaid, under the ruling of Romualdez
vs. Arca,[26]
wherein in upholding the memorandum therein issued by the finance secretary to
guide customs appraisers in appraising the value of imported remnants, the
Court held that: “since the
memorandum is neither a law (statute), nor an implementation of a law authorizing
its issuance, and does not prescribe any penalty for its violation, publication
thereof is not necessary.”
ACCORDINGLY, judgment is hereby rendered annulling and
setting aside the decision dated April
23, 1971 and the resolution dated May 3, 1971 of the court of tax appeals. The decision of petitioner commissioner of
customs appealed from by private respondent is instead affirmed and the
petition of said respondent in the lower court is dismissed, with costs in both
instances against said respondent.
Concepcion, C.J., Reyes, J.B.L., Zaldivar, Castro, Fernando, Barredo,
Villamor, and Makasiar, JJ., concur.
Dizon, and
Makalintal, JJ., reserve
their votes.
[1]
CTA Case No. 2207 entitled “Unitrade, Inc. vs.
Commissioner of Customs.”
[2]
In its footnote, the tax court thus cited the pertinent customs code
provision: “Sec. 2307
provides: ‘Redemption of forfeited
property shall not be allowed in any case where the importation is absolutely
prohibited or where the surrender of the property to the person offering to
redeem the same would be contrary to law.'”
[3]
Record, p. 199.
[4]
“Sec. 102. Prohibited
Importations. — The importation
into the Philippines
of the following articles is prohibited:
“x x x
“(k) All other articles the
importation of which is prohibited by law.
(Rep. Act No. 1937).
[5]
At 18.14 kilos per carton, per Annexes B to B-3, respondent importer’s
petition, which state a weight of 45,350 kilos per 2,500 cartons of the
shipment.
[6]
Sec. 5 thereof provides that “Authorized agent banks may sell foreign
exchange for imports except those falling under the UC, SUC and NEC
categories, without prior specific approval of the Central Bank. x x” (66 O. G.
No. 9, p. 2122).
[7]
Published in 66 O. G., Nos. 12 and 11, pp. 2867 and 2609, respectively.
[8]
at page 3.
[9]
Idem.
[10] 105
Phil. 1071, 1076-77 (June 30, 1959);
note in parentheses and emphasis furnished.
[11]
105 Phil. 1039, 1947.
[12]
28 SCRA 715, (June 30, 1969), citing Commissioner vs. Eastern Sea
Trading (L-14279, Oct. 31, 1961); Com. vs. Santos (L-11911, March 30,
1962); Com. vs. Nepomuceno, (L-11126, March
31, 1962); Pascual vs. Com. of Customs,
(L-12219, April 25, 1961); Serree Investment Co. vs.
Com. of Customs, (L-19564, Nov. 28, 1964); Serree
Investment Co. vs. Com. of Customs, (L-21217, Nov. 29, 1965); Lazaro vs. Com. of Customs (L-22511 & 22513, May
16, 1966); Sare vs. Aseron,
L-22380, Aug. 15, 1967; Felipe Yupangco & Sons,
Inc. vs. Commissioner of Customs, L-22259, Jan. 19, 1966; Bombay Dept.
Store vs. Com. of Customs, L-20460, Sept. 30, 1965; Bombay Dept. Store vs.
Com. of Customs, L-20489, June 22, 1965; and Litton & Co., Inc. vs.
Com. of Customs, L-22516, August 17, 1967.
[13]
Referring to the Revised Administrative Code, now superseded by the identical
provisions of section 2530 of the tariff and customs code.
[14] 29
SCRA 112 (August 28, 1969).
[15] Capulong vs. Aseron, 17
SCRA 11 (May 14, 1966).
[16]
Citing De la Cruz vs. Court of Tax Appeals, L-23335 & L-23452, Feb.
29, 1968, 22 SCRA 886; De la Cruz v. Court of Tax Appeals, L-23334 &
L-23451, Feb. 29, 1968, 22 SCRA 891; Capulong v.
Acting Comm’r, L-22991, Jan. 16, 1968, 22 SCRA 32,
citing other cases; Leuterio v. Commissioner
of Customs, L-21800, June 22, 1968; 23 SCRA 1055; Lazaro
v. Commissioner of Customs, L-22511 & 22343, May 16, 1966, 17 SCRA
36; see also Papa v. Mago, L-27360; Feb. 28,
1968, 22 SCRA 857.
[17] Umali’s 1971 Ed. Reviewer on Taxation, p. 441.
[18]
CTA Record, pp. 75-79.
[19]
At Page 8.
[20]
Exhibit A, Record, pp. 64-68.
[21] Supra,
page 8.
[22] Supra,
at page 9.
[23] Supra,
at page 3. See General Travel
Service, Ltd. vs. David, 18 SCRA 59 (Sept. 23, 1966), per Makalintal, J. recognizing the customs collector’s broad
authority and discretion in the exercise of the powers and functions vested by
law in the Customs Bureau to prevent smuggling.
[24]
Quoted supra at page 9.
[25]
Section 602, Rep. Act 1937; see General Travel Service, Ltd. vs. David, supra,
fn. 23.
[26]
27 SCRA 828 (Apr. 18, 1969).