COMMISSIONER OF CUSTOMS, PETITIONER, VS. COURT OF TAX APPEALS AND EVERETT STEAMSHIP CORPO­RATION (AS OWNER OF THE SS “FERNANDO EVERETT”), RESPONDENTS.

The “Fernando Everett”, a vessel owned by private
respondent Everett Steamship Corporation arrived on 23 April 1969 in the Port
of Manila and there discharged a shipment of fifty (50) bales of assorted
textile remnants.  The gross weight of
the shipment as declared in the vessel’s Manifest and in Bill of Lading No.
N-20-M was 17,500 pounds.  Upon
examination and appraisal by Customs authorities, the actual weight of the
shipment was found to be 62,869 pounds, or 45,369
pounds more than the declared weight.

In a letter dated 9 July 1969, the Chief of the Law Division of
the Bureau of Customs informed the Everett Steamship Corporation of the
discrepancy between the actual weight and the declared weight of the shipment
of textile remnants, said discrepancy being more than twenty percent (20%) of
the declared weight, and required the shipowner to
explain the discrepancy in writing within five (5) days from receipt of the
letter and to show cause why no administrative fine should be imposed upon the
“Fernando Everett” for violation of Section 2523 of the Tariff and
Customs Code.  The shipowner
replied that the “Fernando Everett”
was not liable for violation of the Tariff and Customs Code because the
particulars of the subject shipment, including the weight thereof, were
supplied by the shipper.

Obviously dissatisfied with the shipowner’s
explanation, the Bureau of Customs initiated an administrative proceeding
(Administrative Case No. 493-49) against the “Fernando Everett”.  Upon termination of this proceeding, the
Collector of Customs rendered a decision on 8 November 1974 finding the “Fernando Everett”
or its owner liable for a fine of P22,617.00
representing fifteen percent (15%) of the total value of the shipment, for
violation of Section 2523 of the Tariff and Customs Code.  Section 2523 reads as follows:

“Sec. 2523.  Discrepancy between
actual & declared weight of manifested article.  — If the gross weight of any article
or package described in the manifest exceed by more than twenty per centum
the gross weight as declared in the manifest or bill of lading thereof, and
the Collector shall be of the opinion that such discrepancy was due to the
carelessness or incompetency of the master or pilot
in command, owner or employee of the vessel or aircraft, a fine of not
more than fifteen per centum of the value of the package or article in
respect to which the discrepancy exists, may be imposed upon the importing
vessel or aircraft.” (Underscoring supplied)

On appeal by the shipowner, the
Commissioner of Customs affirmed in toto
the decision of the Collector of Customs.

The Everett Steamship Corporation then went to the Court of Tax
Appeals.  In a decision dated 23 January 1978, the Court of Tax
Appeals agreed with the Commissioner of Customs that the shipowner
had violated Section 2523 of the Tariff and Customs Code, but reduced the fine
from P22,617.00 to P5,000.00.

The petitioner Commissioner of Customs is now before us on a
Petition for Review on Certiorari asking for modification of the
decision of the Court of Tax Appeals and for reinstatement of the fine of P22,617.00 imposed by the Commissioner of Customs against
private respondent ship­owner.  Examination of the record reveals that three
(3) issues are raised in this Petition:

(a)  Whether or not there is a duty on the part of
the captain of a vessel or of a shipowner to
determine the true weight of cargo to be loaded on board the vessel;

(b)  Whether or not the discrepancy in the instant
case between the actual and the declared weight of the shipment involved was
due to the carelessness or incompetency of the
captain of the vessel; and

(c)  What is the proper scope of the authority of
the Commissioner of Customs to determine the amount of the fine imposable under
Section 2523 of the Tariff and Customs Code.

In respect of the first issue, private respondent shipowner argues that Articles 612 and 632 of the Code of
Commerce specifying the duties of the captain, the second mate and chief
engineer of a vessel, do not require the checking of the actual weight of the
cargo loaded on board the vessel.  The shipowner, moreover, insists that the Tariff and Customs
Code similarly does not impose such a duty upon the captain of the vessel or
the shipowner.

These arguments do not persuade; they have already been
considered and rejected by this Court. 
In Commissioner of Customs v. Court of Tax Appeals and Delgado
Shipping Agencies,^[1]
this Court held that a duty of verifying the correct weight of a cargo shipment
is imposed by Section 2523 of the Tariff and Customs Code itself:

“5.     Finally, contrary
to respondent’s contention, the vessel’s master, owner or employee are duty
bound under the cited codal section under pain of
the penalty of fine therein provided to check and verify the correct weight
of the cargo or shipment so as to prevent a misdeclaration
or underdeclaration of weight.  The vessel master’s discharge of such obligation
imposed by law to properly determine and verify the weight of cargos carried by
it is certainly pertinent to and important for the proper assessment of
the collectible customs duties and taxes, and is not a burdensome task in
the present era of containerized cargos. 
x x x“^[2]
(Underscoring supplied)

In Commissioner of Customs v. Delgado
Shipping Agency and the Court of Tax Appeals,^[3]
the Court reiterated very recently that a vessel’s master, owner or employees
are indeed burdened with the duty “to check and verify the correct weight
of its cargo”.

Turning to the second issue, the Everett Steamship Corporation
contends that for a violation of Section 2523 to arise, two (2) elements must
occur, namely:  (a) that the actual gross
weight of any article or package must exceed the declared gross weight by more
than twenty percent (20%) of the stated weight; and (b) the discrepancy must be
affirmatively shown to have been due to the carelessness or incompetency
of the master, owner or employees of the vessel.^[4]

It appears to the Court that private respondent shipowner has selectively read Section 2523.  What Section 2523 does provide is this:  “[A]nd the
Collector shall be of the opinion that such discrepancy was due to the careless­ness
or incompetency of the master or pilot in command,
owner or employee of the vessel or aircraft”.  A difference of more than twenty percent
(20%) between the actual gross weight of a shipment and its declared gross
weight is not a de minimis matter; on
the contrary, it is sufficiently substantial so as reasonably to give rise to a
presumption juris tantum
that some negligence or failure to exercise some technical duty had
occurred.  The actual practice of the
Commissioner of Customs in cases of this kind may be seen to be based upon such
presumption; where a discrepancy of more than twenty percent (20%) of the
stated weight is shown, the Collector of Customs requires, as noted earlier,
the vessel, its captain or owner to show cause why an administrative fine
should not be imposed upon the offending vessel under Section 2523 of the
Tariff and Customs Code.  The greater the
discrepancy between declared gross weight and actual gross weight of a shipment,
the stronger that presumption becomes until at some point it is well-nigh
conclusive.  In the case of the
“Fernando Everett”, the discrepancy amounted to 259 per centum
of the declared gross weight.  Given that
level of discrepancy, there must have been either gross negligence amounting to
bad faith, or obvious incompetence, on the part of the captain of the vessel or
the shipowner or its employees in failing to detect
the gross underdeclaration of the weight of the
shipment.  In the situation at hand, it
is incumbent upon the captain of the vessel or the shipowner
to show the presence of some adequate exculpatory circumstance, rather than for
the Customs authority to prove affirmatively that there was carelessness or
professional or technical ineptness on the part of the ship captain or the shipowner or its employees. 
In the case of the “Fernando Everett”, no exculpatory
circumstances were shown.  Private
respondent shipowner sought to shift the blame to the
shipper who had supplied the declared weight of the shipment.  To permit the shipowner
to absolve itself of responsibility on that basis,
would be effectively to render Section 2523 quite inutile.^[5]

Addressing the third issue relating to the authority of the
Commissioner of Customs to determine the amount of fine imposable under Section
2523, the Court would stress that that authority is lodged in the Collector of
Customs and the Commissioner of Customs and not either in the Court of
Tax Appeals or this Court.  The
Commissioner of Customs required the Everett Steamship Corporation to pay the
maximum imposable fine amounting to fifteen percent (15%) of the value of the
shipment involved — i.e., P22,617.00.  The public respondent Court of Tax Appeals
was not warranted in substituting its judgment for that of the Commissioner of
Customs as to the amount of the fine properly imposable in the circumstances of
this case, unless, of course, a grave abuse of discretion on the part of the
Commissioner of Customs had been shown. 
In the instant case, no such grave abuse of discretion — no merely
arbitrary and capricious exercise of power — on the part of the Commissioner
of Customs was shown.  The Court of Tax
Appeals simply felt that the fifteen percent (15%) fine was “harsh and
unreason­able” stating that this was the first offense of the
“Fernando Everett” under Section 2523.  But, no mitigating circumstances were pleaded
by the Everett Steamship Corporation that would rationally have justified the
Commissioner of Customs in imposing a fine less than the maximum statutory
fine.

In reaching this conclusion, we have taken particular account of
the vitally important nature of the public policy which is sought to be
promoted by Section 2523 of the Tariff and Customs Code.  That public policy, which should be reinforced
and strengthened rather than eroded and enfeebled, was underscored by the Court
in Commissioner of Customs v. Court of Tax Appeals and Delgado Shipping
Agencies in the following manner:

“3.     The clear
purpose of the codal provision requiring vessels to
declare the correct weight of their cargo is to curb smuggling due to such underdeclarations. 
Hence, imposing the maximum fine on vessels which grossly fail to
comply with the obligation to declare the true weight of their cargo promotes
the spirit and purpose of the law, since imposing a minimum fine would
only embolden would-be smugglers and foster gross negligence on the part of the
master of the vessel as in this case in checking the true weight of the cargo.  Respondents’ claim that there could be no
evasion of duties here since textile remnants are imposed duties ad valorem or on the basis of the dutiable value of the
merchandise irrespective of the weight is untenable, since an underdeclaration of the weight of the remnants by more than
400% would make it much easier to underdeclare the
dutiable value of the remnants.”^[6]
(Underscoring supplied)

WHEREFORE, the Court Resolved to GRANT due course to the
Petition for Review and to MODIFY the Decision of the Court of Tax Appeals dated
23 January 1978 by reinstating the administrative fine of P22,617.00 imposed by
the petitioner Commissioner of Customs upon the private respondent shipowner.  No
pronouncement as to costs.

Fernan, C.J., (Chairman), Gutierrez,
Jr., Bidin, and
Cortes, JJ., concur.

^[1] 91 SCRA 258 (1979).

^[2]
91 SCRA at 262-263.

^[3] G.R. No. L-49298, 26
April 1990.

^[4]
Comment of Private Respondent, Rollo, p. 80.

^[5]
Under Section 3 (3) (b) of the Carriage of Goods by Sea Act (Public Act No.
521, 74th Congress of the United States; made applicable to the Philippines by
Commonwealth Act No. 65), the shipowner issues to the
shipper a bill of lading showing, among other things, “either the number
of packages or pieces, or the quantity or weight, as the case may be, as
furnished in writing by the shipper.” Under Section 3 (5), id.,
the shipper is deemed to have guaranteed to the shipowner
the accuracy at the time of shipment of the weight (and other details) of such
shipment as furnished by the shipper and the shipper is required to indemnify
the carrier against loss, damages and expenses arising from inaccuracies in
such particulars.  The provision,
however, goes on to state that:  “the
right of the carrier to such indemnity shall in no way limit his responsibility
and liability under the contract of carriage to any person other than the
shipper.”

^[6] 91
SCRA at 262.  See also Commissioner of Customs
v. Delgado Shipping
Agency and Court of Tax Appeals, supra.