SAMPAGUITA SHOE AND SLIPPER FACTORY, PETITIONER, VS. COMMISSIONER OF CUSTOMS, COLLECTOR OF CUSTOMS OF CEBU AND COURT OF TAX APPEALS, RESPONDENTS.

Sampaguita Shoe and Slipper Factory versus Commissioner of Customs

The Case

This is a petition to review by certiorari brought by the Sampaguita Shoe and Slipper Factory against the Commissioner of Customs, the Collector of Customs of Cebu, and the Court of Tax Appeals. The importer asks the Supreme Court to reverse the resolution of the Court of Tax Appeals dismissing its petition for want of jurisdiction. The case matters because it settles two questions every customs practitioner must know: whether an aggrieved importer may go straight to the Court of Tax Appeals from a ruling of the Collector of Customs, and whether the Commissioner's mere conformity with that ruling counts as an appealable decision. The answer to both is no.

Procedural History

The Collector of Customs of Cebu first ruled that the five cases of leather should be released to the importer upon payment of taxes and charges. He later amended that decision, declaring the goods confiscated and forfeited to the Government. The importer did not appeal to the Commissioner of Customs within the fifteen-day period. Instead, it filed a petition to set aside the amended decision, which the Collector referred to the Commissioner, who reiterated his concurrence. The importer then filed a notice of appeal and a petition for review with the Court of Tax Appeals, later amended. The Commissioner moved to dismiss on the ground that the Collector's decision had already become final. The Court of Tax Appeals issued a resolution holding that it had no jurisdiction to entertain the case because of the importer's failure to appeal to the Commissioner of Customs. Its motion for reconsideration having been denied, the importer came to the Supreme Court on a petition to review by certiorari.

Facts

In the latter part of 1953, the Sampaguita Shoe and Slipper Factory, a business concern in Cebu, ordered from the Colonial Tanning Company of Boston, Massachusetts, ten thousand square feet of patent leather valued at three thousand three hundred dollars. On March 30, 1954, the goods arrived at the port of Cebu. The papers for their release were found in order, but when the five cases were opened for examination and appraisal, the customs authorities declared the contents to be upper leather and not patent leather. Seizure proceedings were instituted, although the goods were released upon the consignee's filing a bond of ten thousand pesos.

On May 19, 1954, the Collector of Customs of Cebu rendered a decision ordering the release of the leather to the importer upon payment of taxes and charges. The decision was sent to the manager with a letter of transmittal informing him that it would not become final and executory until approved by the Commissioner of Customs. In June of the same year, the Collector amended his decision, reversing himself and holding that the leather was primarily intended as uppers of shoes and should not be classified as patent leather. The five cases were declared confiscated and forfeited to the Government. This amended decision was sent by registered mail with notice that an appeal should be interposed with the Commissioner within fifteen days from receipt, otherwise the decision would become final. The registered mail appeared to have been received by an employee of the establishment on June 10, 1954. The Commissioner was furnished a copy and affirmed the amended decision.

On September 14, 1954, the importer received a letter from the Collector demanding surrender of the goods or payment of ten thousand pesos in cash. This prompted the importer to file a petition to set aside the amended decision, claiming that the employee who received the copy failed to give it to the manager, who was then in Mindanao, and that the manager actually got hold of the decision only on September 14, 1954. The petition was referred to the Commissioner, who in a second indorsement dated December 3, 1954 reiterated his concurrence. The importer received the denial on December 29, 1954, and then filed its notice of appeal and petition for review with the Court of Tax Appeals.

Issues

• Whether or not only decisions of the Commissioner of Customs, in cases involving customs laws, may be brought on appeal to the Court of Tax Appeals.
• Whether or not the opinion of the Commissioner of Customs, or his approval of the Collector's decision, is itself a decision that may be appealed to the Court of Tax Appeals.
• Whether or not the Court of Tax Appeals has jurisdiction to entertain the petition for review, and whether it erred in dismissing the same.

Applicable Provisions

Section 1380 of the Revised Administrative Code provides:

Section 1380. Review by Commissioner. The person aggrieved by the decision of the Collector of Customs in any matter presented upon protest or by his action in any seizure may, within fifteen days after notification in writing by the Collector of his action or decision, give written notice to the Collector signifying his desire to have the matter reviewed by the Commissioner. Thereupon, the collector of customs shall forthwith transmit all the papers in the cause to the Commissioner, who shall approve, modify, or reverse the action of his subordinate and shall take such steps and make such order or orders as may be necessary to give effect to his decision.

This is the first phase of the appeal, and the importer failed to observe it.

Section 11 of Republic Act Number 1125 provides:

Section 11. Who may appeal; effect of appeal. Any person, association or corporation adversely affected by a decision or ruling of the Collector of Internal Revenue, the Collector of Customs, or any provincial or city Board of Assessment Appeals may file an appeal in the Court of Tax Appeals within thirty days after receipt of such decision or ruling.

The importer relies on this provision to argue that a direct appeal from the Collector is allowed.

Section 7 of the same statute provides:

Section 7. Jurisdiction. The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein provided. x x x. (2) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money charges; seizure, detention or release of property affected; fines, forfeitures or other penalties imposed in relation thereto, or other matters arising under the Customs Law or other law or part of law administered by the Bureau of Customs.

This is the provision that fixes the jurisdiction of the Tax Court over decisions of the Commissioner, not the Collector.

Ruling

The Court resolved the first issue against the importer. While the language of a statute that is plain and unambiguous needs no construction, the apparent inconsistency between Section 11 and Section 7 of Republic Act Number 1125 created a vagueness that required the Court to step in and ascertain the intent of Congress. Examining the explanatory note and the discussions on the bill, the Court found that reference was consistently made to decisions of the Commissioner of Customs. It also noted that the Court of Tax Appeals merely took over the functions previously exercised by the defunct Board of Tax Appeals and the Courts of First Instance, which had jurisdiction to review decisions of the Commissioner of Customs. Following its earlier ruling in Rufino Lopez and Sons versus Court of Tax Appeals, the Court held that the Legislature meant and intended to say Commissioner of Customs instead of Collector of Customs in Section 11, and in effect rectified a clerical error. It would be illogical, the Court said, to confine the Tax Court's jurisdiction to decisions of the Commissioner and then allow aggrieved parties to appeal directly from the Collector.

On the second issue, the Court held that the Commissioner's concurrence in the second indorsement was not an appealable decision. A decision must be in writing, personally and directly prepared by the judge or person lawfully authorized to issue it, signed by him, and stating clearly and distinctly the facts and the law on which it is based. The Commissioner, as head of the Bureau, exercises supervision and control over his subordinates. His action on matters referred to him by the Collector was only supervisory in nature, and his conformity or disagreement did not transform the Collector's decision into his own. Independently of the Commissioner's opinion, the parties still had the right to appeal the controversy to him for proper determination.

On the third issue, the Court laid down the two phases of the appeal available to an aggrieved importer. First, under Section 1380 of the Revised Administrative Code, the party is given fifteen days from receipt of the adverse ruling to give written notice to the Collector signifying his desire to have the matter reviewed by the Commissioner. Second, if still dissatisfied, he may appeal to the Court of Tax Appeals under Section 7 of Republic Act Number 1125 within thirty days from receipt of notice of the decision sought to be reviewed. Since the importer failed to observe the procedure under Section 1380, the Collector's decision became final and executory, and the Court of Tax Appeals properly dismissed the petition for failure to exhaust administrative remedies. The Court stressed that the doctrine of exhaustion of administrative reliefs is a sound rule that favors a preliminary administrative sifting process and prevents attempts to swamp the courts by a resort to them in the first instance.

Doctrine

An importer aggrieved by a decision of the Collector of Customs must first appeal to the Commissioner of Customs within fifteen days from notice under Section 1380 of the Revised Administrative Code. Only after the Commissioner rules may the party appeal to the Court of Tax Appeals within thirty days under Section 7 of Republic Act Number 1125. The reference to the Collector of Customs in Section 11 of Republic Act Number 1125 is a clerical error and must be read as Commissioner of Customs. The Commissioner's mere conformity with or approval of the Collector's ruling is supervisory and does not convert that ruling into an appealable decision of the Commissioner. Failure to exhaust the administrative remedy of appeal to the Commissioner renders the Collector's decision final and executory and bars recourse to the Tax Court.

Disposition

The Supreme Court affirmed the resolution of the Court of Tax Appeals dismissing the petition, with costs against the petitioner.

Remember This

Memorize the two-phase appeal: fifteen days to the Commissioner under Section 1380, then thirty days to the Court of Tax Appeals under Section 7. Examiners use this case to test the exhaustion of administrative remedies in customs seizure cases and the statutory construction that reads Collector as Commissioner in Section 11 of Republic Act Number 1125.