THE COMMISSIONER OF CUSTOMS, PETITIONER, VS. FRUCTUOSO NEPOMUCENO, RESPONDENT.

Fructuoso Nepomuceno was the consignee of 83 and 100 packages of
Garlic which were shipped by Sun Kwong Hong of Hongkong, and which
arrived in Manila on August 27 and 31, 1954, per S.S. Hervar and S.S.
Templar as shown by Custom’s Entry Declarations Nos. 68225 and 69502,
both series of 1954, covered by invoices issued by the shipper and the
corresponding bills of lading. The goods were declared subject for
Seizure and Forfeiture by the Collector of Customs Seizure
Identification Nos. 1843 and 1885).

After the Seizure Proceedings, the acting Collector of Customs rendered the following judgment:—

“WHEREFORE, by authority of Section 1379 of the
Revised Administrative Code, it is ordered and decreed that the
merchandise covered by Seizure Identification Nos. 1848 and 1885 be, as
they are hereby declared forfeited in favor of the Government of the
Republic of the Philippines. As the subject shipments had been released
under Surety Bonds Nos. A-SP-54/574 and A-SP-54/575 of the Visayan
Surety and Insurance Corporation, dated September 1 and September 6,
1954, respectively, filed for the release of the same, it is hereby
ordered that the claimant be required to pay in cash the amount of
SIXTY THOUSAND FOUR HUNDRED TWENTY-SIX PESOS and SEVENTY SIX CENTAVOS
(P60,426.76) Philippine currency, covered by the bonds, and if said
amount is not paid within thirty (30) days from the date of demand for
payment, action should be filed in court to effect collection thereof.”

The above decision was affirmed by the Commissioner of Customs on
March 31, 1955. Nepomuceno filed a Petition for Review with the Court
of Tax Appeals, wherein he questioned the legality of the Seizure,
contending that the Central Bank Circulars Nos. 44 and 45, upon which
the seizure was based did not contemplate importations .where no
foreign exchange is involved, and that the Merchandise do not come
within the scope of Section 1363 (f) of the Revised Administrative
Code. In Answer, the Commissioner and Collector of Customs, interposed
the Special Defenses that said Circulars have the force of law; that
the respondents Customs’ officials conducted the seizure in accordance
with the law then enforce (Sec. 1363 [f] and Sec. 1250); that the
merchandise which involves no-dollar remittance must have been paid
for, thru the blackmarket, which is an evasion of the payment of the
special excise tax on foreign exchange and against the objectives of
Republic Act No. 265, the Central Bank Charter.

The case was submitted to the Court of Tax Appeals on an Agreement of Facts, the pertinent stipulations of which are —

“x x x x x x x x x

“4. That the two shipments of garlic are no-dollar remittance importations;

5. That both shipments of garlic were not covered by
   any consular-invoice or Central Bank Release Certificates issued by the
   Central’ Bank or any of its agent banks;
6. That the above
   stated garlic shipments were seized by the respondents on the basis of
   Section 1363 (f) of the Revised Administrative Code in relation with
   Central Bank Circulars No. 44 and 45, as shown by the Seizure Reports
   Nos. 1848 and 1885;
7. That the 83 and 100 packages of garlic
   were released to the petitioner-importer by virtue of two separate
   orders of the Court of First Instance of Manila, issued in Civil Cases
   Nos. 23868 and 23920, both entitled Fructuoso Nepomuceno versus
   Edilberto David, et al., under Surety Bonds Nos. A-SP-54/573 and
   A-SP-54/575;

“x x x x x x x x x

11. That only questions of law are left in
    controversy, to wit: (a); Whether or not circulars No. 44 and No. 45 of
    the Central Bank may legally be the basis of seizure; and (b) whether
    the seizure and forfeiture were legal and valid or not.” The Court of
    Tax Appeals, on July 26, 1956, rendered judgment, pertinent portions of
    which follow .”

The Court of Tax Appeals, on July 26, 1956, rendered judgment, pertinent portions of which follow: —

“x x x x x x x x x

“Central Bank Circulars Nos. 44 and 45 were
promulgated by authority of Republic Act No. 265. These circulars
perforce operate within the limits circumscribed by the basic law and
therefore cannot legally be wider and more comprehensive in scope than
the latter. Powers sought to be exercised by virtue of these circulars
must have justification in statutory law: ‘Derivative, potestas non
potest esse major primitiva.”

“x x x x x x x x x

“In conclusion, we reiterate ‘our considered opinion
that the Central Bank of the Philippines has no power to issue Central
Bank Circulars Nos. 44 and 45 in order to regulate imports which do not
involve the sale of foreign exchange, and we, therefore, declare said
circulars as without force and effect insofar as they govern imports
for which no foreign exchange is required or will be required’. (See
Leuterio vs. The Commissioner of Customs, C.T.A. Case No. 25, April 18,
1955).

“WHEREFORE, the decision on appeal of the respondent
Commissioner of Customs is hereby reversed. We decree the cancellation
of Surety Bonds No. A-SP-54/573 for the sum of P22,934,16 No.
A-SP-54/574 for the sum of P27,882.58, and No. A-SP-54/575 for the sum
of f4,805.01, all of the Visayan Surety and Insurance Corporation,
which were filed for the release of the two importations of garlic in
question. Without pronouncement as to costs.”

The above decision is now before Us on Petition for Review
interposed by the Commissioner of Customs, and the dominant issue
raised is “whether Circulars 44 and 45 of the Central Bank cover
importations designated as ‘no-dollar imports”.

The basis of the seizure proceedings at bar are section 74 of Act
No. 265, Central Bank Charter and Central Bank Circulars Nos. 44 and
45, implementing said section. The pertinent portion of section 74
provides:—

“x x x in order to protect the international reserve
of the Central Bank x x x the Monetary Board x x x may temporarily
suspend or restrict sales of exchange by the Central Bank and may
subject all transactions in gold and foreign exchange to license by the
Central Bank.”

Circular No. 44 of the Central Bank, dated June 12, 1953, entitled
“Guiding principles governing the licensing of foreign exchange for the
payment of imports” (49 Off. Gaz., No. 6, June 1953, pp. 2189-2191),
states in paragraph 14, the following —

“No item of import shall be released by the Bureau
of Customs without the presentation of a release certificate issued by
the Central Bank or any Authorized Agent Bank in a form prescribed by
the Monetary Board.”

Circular No. 45, contains the following provisions—

“x x x x x x x x x

“NOW THEREFORE, the Monetary Board, in pursuance of
Central Bank Circular No. 20 and other circulars and notifications
issued in pursuance thereto, hereby requires any person or entity who
intends to import or receive goods from any foreign country for which
no foreign exchange is required or will be required of the banks, to
apply for a license from the Monetary Board to authorize such import. x
x x”.

During the pendency of the appeal, We have had occasions to decide
the issue involved herein. Thus, in the case of Pascual vs. Comm. of
Customs, 105 Phil., 1039, and Comm. of Customs vs. F. Pascual, 106
Phil., 188. We declared:—

“Section 74, Republic Act No. 265, authorizes the
Monetary Board, with the approval of the President, to temporarily
suspend or restrict sales of exchange and to subject all transactions
in gold and foreign exchange to license 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. Circular No. 44, prohibiting the release by the
Commissioner of Customs of any item of import without the presentation
of a release certificate issued by the Central Bank or any authorized
agent bank in a form prescribed by the Monetary Board, and Circular No.
45, requiring ‘any person or entity who intends to import or receive
goods from any foreign country from which no foreign exchange is
required or will be required of the banks, to apply for a license from
the Monetary Board to authorize such import,’ are measures taken to
check the unregulated flow of foreign exchange from the country and are
¦”‘¦ within the powers of the Monetary Board.

“Appellant’s
contention is that Congress has not authorized the Central Bank to
issue regulations governing imports that do not require the sale of
foreign exchange, because according to him, it would not have enacted
into law Republic Act No. 1410. The contention assumes that the
importations do not require the sale of foreign exchange, a fact which
he failed to establish.

“Appellant contends that assuming
that the importations in question require the sale of foreign exchange
in violation of Circular No. 44, yet they may not be forfeited under
the said Circular because it does not expressly provide for the penalty
of forfeiture. Circular No. 45 in part requires ‘any person or entity
who intends to import or receive goods from any foreign country for
which no foreign exchange is required or will be required of the banks,
to apply for a license from the Monetary Board to authorize such
import. Circular No. 44 requires the presentation of release
certificate issued by the Central Bank or any authorized agent bank in
a form prescribed by the Monetary Board for the release of import by
the Bureau of Customs. Section 1363 (f) of the Revised Administrative
Code provides :-

‘Vessels, cargo, merchandise and other
subjects and things shall, under the conditions hereinbelow specified,
be subject to forfeiture:

“x x x x x x x x x

(f)
Any merchandise of prohibited importation or exportation, the
importation or exportation of which is effected or attempted contrary
to law and all other merchandise 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.

“As already stated, Circular Nos. 44 and 45 were issued by the Monetary Board within the scope of its powers.
They were published in the Official Gazette in June 1953. Appellant
failed to present to the Commissioner of Customs. release certificates
issued by the Central Bank or its duly authorized agent banks for the
importations in question. The Commissioner of Customs may, there fore,
seize, them and order their forfeiture under the aforequoted provisions
of the Revised Administrative Code. It is true that neither of the
Circulars provide for the penalty of forfeiture. But 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’s 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 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 crisis,”
(Italics supplied.)

Again, in the case of The Commissioner of Customs and the Collector
of Customs vs. Eastern Sea Trading, 113 Phil., 333, the facts of which
are identical to the ones obtaining in the case at bar, We said—

“The latter (decision of the Court of Tax Appeals),
is based upon the following premises, namely: that the Central Bank has
no authority to regulate transactions not involving foreign exchange;
that the shipments in question are in the nature of ‘no-dollar*
imports; that, as such, the aforementioned shipments do not involve
foreign exchange; that insofar as a Central Bank license and a
certificate authorizing the importation or release of the goods under
consideration are required by Central Bank Circulars No. 44 and 45, the
latter are null and void. x x x.

The authority of the Central
Bank to regulate no-dollar imports and the validity of the
aforementioned Circulars Nos. 44 and 45 have already been passed upon
and repeatedly upheld by this Court (Pascual vs. Commissioner of
Customs, 105 Phil., 1039; 56 Off. Gaz., [47] 7169; Acting Commissioner
of Customs vs. Leuterio, L-9142″ (Oct. 17, 1959); Commissioner of
Customs vs. Pascual, 106 Phil., 488; Commissioner of Customs vs. Serree
Investment Co., 108 Phil., 1; 58 Off. Gaz., [32] 5413, Commissioner of
Customs vs. Serree Investment 59 Off. Gaz., [6] 900, for the reason
that the broad powers of the Central Bank, under its charter, to
maintain our monetary stability and to preserve the international
value of our currency, under section 2 of Republic Act 265, in relation
to section 14 of said Act—authorizing the bank to issue such rules and
regulations as it may consider necessary for the effective discharge of
the responsibilities and the exercise of the powers assigned to the
Monetary Board and to the Central Bank—connote the authority to regulate no dollar imports,
owing to the influence and effect that the same may and have upon the
stability of our pesos and its international value” (See also the Comm.
of Customs vs. F. C. Santos, G.R. No. L-11911, March 1962).

The fact that the Commissioner failed to prove that there was actual
payment for the goods and that the proceeds thereof would allegedly be
part of the investment of the shipper in the company of Nepomuceno, did
not detract from the fact that payment, and/or remittances will have to
be made somehow and someday, which will eventually involve the sale of
foreign exchange.

“The fact that, as claimed by the respondent, the
merchandise that Tai Fong Hong, a business concern doing business in
Hongkong, would ship to it for sale in Manila and that the proceeds
thereof would be invested in any business that it might decide to
engage in (Exhibit J), does not alter the conclusion that the
importation would involve a future demand for the safe of foreign
exchange. The proceeds of the sale of the imported merchandise or the
earnings of such proceeds, if invested locally, would be or would have
to be remitted, if not immediately, sometime in the future, to the
shipper of the merchandise, an alien-owned business concern doing
business in Hongkong” (The Coll. of Customs vs. Seree Investment
Company, supra).

“x x x Even granting that the importations
in question do not require an immediate sale of foreign exchange, their
importation into the Philippines from another country will ultimately
require the sale of such exchange. The currency of one country is not
legal tender in another. To pay for imports, traders have to avail
themselves of foreign exchange, which is the conversion of an amount of
money or currency of one country into an equivalent amount of money or
currency of another. Every import of goods, or merchandise requires an
immediate or future demand for foreign exchange.” (Pascual vs. Comm. of
Customs, supra).

IN VIEW OF ALL THE FOREGOING, the decision appealed from is hereby
reversed, and another entered affirming that of the Commissioner of
Customs. Costs against the respondent-appellee Fructuoso Nepomuceno.

Padilla, Bautista Angelo, Labrador, Concepcion, Barrera, Dizon, and De Leon, JJ., concur.
Bengzon, C.J., took no part.