G.R. No. 17435. June 29, 1963
SILVER SWAN MANUFACTURING COMPANY, INC., PETITIONER, VS. THE COMMISSIONER OF CUSTOMS AND COURT OF TAX APPEALS, RESPONDENTS.
CONCEPCION, J.:
granting a motion to dismiss of respondent Commissioner of Customs and
dismissing a petition filed by the Silver Swan Manufacturing Company,
Inc., with said Court.
The main facts are set forth in the aforementioned resolution from which we quote:
“The petitioner, a corporation duly organized under the laws of the
Philippines with offices located at 209 A. del Mundo St., Grace Park,
Caloocan, Rizal, was granted tax exemption in the manufacture of soy
sauce by the Secretary of Finance pursuant to the provisions of
Republic Act No. 901 (Annexes ‘A’ & ‘B’, Petition). The grant
commenced August 27, 1957, and limited the materials to be imported
only to cellulose bands, soy beans, monosodium glutamate, and
preservatives. (See Annex ‘3’, and par. 5, Petition for Review).
“At various times between March 5 and September 30,
1957, the petitioner imported raw materials for use in its manufacture
of soy sauce, on which it paid duties and taxes on the dates indicated
below:
Customs
O.R. No.1. 3/ 5/57 Soy Beans 2. 3/ 6/57 Soy Beans 3. 4/16/57 Soy Beans 4. 4/17/57 Cellulose Bands 5. 5/14/57 Sodium Benzoate 6. 5/14/57 Cellulose Bands 7. 6/21/57 Cellophane Paper 8. 8/ 2/57 Soy Beans 9. 8/22/57 Vinyl Bags 10. 9/16/57 White Beans 11. 9/30/57 Soy Beans
(Annex ‘C’ Petition for Review)
“On
October 28, 1958, the petitioner, thru its counsel, filed with the
respondent a written request for refund of the sums of P18,035.52 and
P6,045.81 paid as customs duties and special import tax on its
importations. (Annex A, Petition.) The request was based upon the
theory that the Secretary of Finance has no right to grant a limited
exemption1. (Par. 7, Petition.) Accordingly, said request was referred
to the Secretary of Finance, who, in a 2nd Indorsement of January 2,
1959 (p. 7, Annex ‘W, Petition), disallowed the claims for refund of
the amounts paid on items Nos. 1 to 9 which were imported from March
23, 1957 to July 25, 1957, and cleared from customs custody prior to
August 27, 1957 (the date when the grant was made effective); and the
amount paid on item No. 10 (white beans), for not being included in the
list of raw materials granted tax exemption. He allowed only the claims
for the refund of the respective amounts of P2,849.00 and Pl,204.00
paid as duties and special import tax on item No. 11 (Annex ‘E’,
Petition for Review).“In a letter dated January 22, 1960, to
which was attached a copy of the said 2nd Indorsement, the respondent
Commissioner of Customs advised the petitioner that only the amount of
P4,053.00 out of your (petitioner’s) total claim has been authorized by
the Secretary of Finance to be refunded to that company. And on
February 2, 1960, the petitioner filed before this Court his petition
for review, which the respondent seeks to dismiss on the grounds
afore-stated.”
The grounds upon which said motion to dismiss was predicated were:
1) that Court of Tax Appeals had no jurisdiction over the case, and 2)
that the petition of the Silver Swan Manufacturing Company, Inc., in
said Court, for a review of the movant’s decision, states no cause of
action.
The Court of Tax Appeals overruled the first contention, but
sustained the second, and, accordingly, dismissed the aforementioned
petition. Said the Court of Tax Appeals in this connection:
“It is also contended by the respondent that ‘the
petition for review states no cause of action, hence it should be
dismissed,’ under Section 1 (f), Rule 8, of the Rules of Court. The
reason advanced is that the petitioner failed to comply with the
procedural law on refund and exhaust all the administrative remedies
provided for in Sections 1370, 1371, 1372, 1373, 1379 and 1380 of the
Revised Administrative Code (now Sections 2308, 2309, 2310, 2311, 2312
and 2313 of the Tariff & Customs Code). As provided for in the
cited provisions of the Revised Administrative Code, the importer or
person who wants a refund of customs duties paid must comply with the
following procedural remedies, to wit: (1) The importer or person who
is adversely affected by any ruling or decision of the Collector in
cases involving liability for duties, fees, or other money charge
(excepting fixing of fines in seizure cases) may file a written, protest
with the Collector at the time when payment is made, or within 30 days
thereafter, setting forth his objections to the ruling or decision in
question together with the reasons therefor. But no protest shall be
received or considered unless payment of the amount claimed to be due
.has first been made (Sec. 1370, Revised Administrative Code, now Sec.
2308, Tariff & Customs Code); (2) In any protestable case, the
party interested adversely to the Government is required to make
protest, if he desires to have the action of the Collector reviewed;
otherwise such action shall be final and conclusive, unless the matter
be correctable for manifest error in the manner prescribed in Section
1300 of the Revised Administrative Code, now Section 1707 of the Tariff
& Customs Code. (Section 1371, ID, now Section 2389, Tariff &
Customs Code); (3) The protest shall indicate the particular decision
or ruling objected to, the ground or grounds relied upon, and its scope
must be limited to a single adjustment or independent transaction.
(Section 1372, ID., now Section 2310, Tariff & Customs Code); (4)
Upon filing of the proper protest in a protestable. case, the Collector
shall re-examine the matter and render his decision accordingly
(Section 1379, ID., now Section 2312, Tariff & Customs Code) ; (5)
Within fifteen days after notification in writing by the Collector of
his action or decision, the aggrieved party may file a written notice
with the Collector of his desire to have the case reviewed by the
Commissioner (Section 1380, ID., now Section 7313, Tariff & Customs
Code); and (6) Within thirty days after receipt of the decision of the
Commissioner of Customs, the aggrieved party, if he so desires, may
file his petition for review with this Court. (Section 11, Republic Act
No. 1125).“Undoubtedly, the present case is a protestable
case within the provisions of Section 1370 of the Revised
Administrative Code, for it is a civil matter involving the
determination of duties, fees, or money charge. However, the petitioner
did not file a written protest with the Collector at the time of making
payment or within 3D days thereafter, stating the particular portion of
the ruling or decision objected, and the ground or grounds relied upon.
Likewise, he did not signify to the Collector, within fifteen days
after modification of the action or decision, his desire to have the
case reviewed by the Commissioner of Customs. Consequently, for
petitioner’s failure to exhaust the administrative remedies provided
for by law. It is proper for this Court to dismiss the appeal (see
Sampaguita Shoe & Slipper Factory vs. Commissioner of Customs, 102
Phil., 860, January 14, 1958). – As impliedly stated in the case of
Rufino Lopez & Sons, Inc. vs. Court of Tax Appeals,. 100
Phil., 850; 53 Off. Gaz., No. 10, p. 3065, and restated in the case of
Sampaguita Shoe & Slipper Factory vs. Commissioner of
Customs, supra, the doctrine of exhaustion of administrative remedies
as formulated in Sections 1370, 1371, 1373, 1379 and 1380 of the
Revised Administrative Code (now Sections 2308 to 2313 inclusive of the
Tariff & Customs Code) is a condition sine qua non before one can
resort to the Courts because it is ‘indeed a sound rule for it provides
for a policy of orderly procedure which favors a preliminary
administrative shifting process, and serves to prevent attempts to
swamp the courts by a resort to them in the first instance (citing
United States vs. Sing Tuck, 194 U.S. 161, 48 L.Ed. 917, 24 St. Ct. 621; Oklahoma Pub. Welfare Commission vs.
State, 136 Okla. 654, 105 P(d) 547, 130 ALR 873). ‘Respondent’s
contention that the petition for review states no cause of action is
well taken.'”
It is urged by petitioner that these findings of the Court of Tax
Appeals are erroneous, for the protest mentioned in Section 1370 of the
Revised Administrative Code could not possibly be intended to be
required when, as in the case at bar, the exemption from taxation—and,
hence, the only ground upon which the protest could have properly been
made in this case—did not come into existence until after the duties
and taxes in question had been paid. Respondent argues, however, that
petitioner could have made the payments under protest, invoking its
application for exemption filed on February 7, 1957—or almost a month
before the first payment had taken place—with the request that action
on the protest be held in abeyance until after-said application had
been passed upon. A similar issue was raised in Stonehill Steel
Corporation vs. Commissioner of Customs, 103, Phil, 170, decided on
March 24, 1958, in which we held:
The Court of Tax Appeals dismissed the appeal on two
grounds: First, the petitioner herein failed to comply with the
provisions of Sections 1370-1373 and 1380 of the Revised Administrative
Code; and second, that under Republic Act No. 901, petitioner is not
entitled to refund for the reason that the exemption provided in
Republic Act No. 901 refers only to the period after the passage of
said Act.“With regard to Sections 1370-1373 and 1380 of the
Revised Administrative Code, said sections apparently refer to a ruling
or decision of a collector of customs wherein liability for customs
duties, fees, or other money charges is determined, in which case, the
party adversely affected by such ruling, after paying the amount of the
assessment, may make a protest and the Collector shall re-examine the
matter, and should he overrule the protest and sustain his previous
ruling, the party aggrieved is required to appeal said ruling to the
Commissioner of Customs, within 15 days after notification, otherwise
the ruling of the Collector becomes final and conclusive. After
examining the aforecited sections of the Administrative Code, we are
inclined to agree with counsel for petitioner that said sections,
referring as they do to assessments made by a Collector of Customs of
customs duties, fees, or other money charges, cannot refer to a case of
refund, and that consequently, it was not necessary for the petitioner
to appeal from the denial by the Collector of its petition for refund,
to the Commissioner of Customs, within 15 days. ,“It is hard
to imagine a case of a petition for refund being filed with the
Collector of Customs. Supposing that a collector commits mistake in the
classification of merchandise imported and makes an illegal or
erroneous assessment. The party aggrieved files a protest but pays the
amount assessed on it, and upon considering the protest the Collector
realizes his mistake and finds that he had collected an amount more
than he should, and amends or changes his original assessment. In that
case, all that he has to do is to pay or return to the aggrieved party
the excess amount and the case is finished. But supposing that the
Collector insists in his original erroneous assessment and the
aggrieved party appeals his ruling to the Commissioner of Customs who,
discovering the mistake in the classification of the merchandise,
modifies the ruling of the Collector, and decides that there was an
excess amount illegally uncollected by the Collector. In that case, his
ruling or decision would also provide for refund to the aggrieved party
and the case will then be terminated. But these two cases or examples
above-mentioned really refer to assessments protested by the aggrieved
party, and they are covered by Section 1370-1373 and 1380. The law
apparently has not provided for a case like the present wherein an
assessment was validly made and the amount voluntarily paid by the
importer, and naturally, no protest was made, but that a law passed
years later provided for some sort of exemption for the payment of
customs duties, and invoking said new law, the importer who had
previously paid customs duties voluntarily and without protest now asks
for refund of said duties covered by the exemption. This part of the
Customs Law would appear to need clarification, and the Commissioner of
Customs or Hie Department Head might possibly call the attention of the
Legislature.”
The Court of Tax Appeals erred, therefore, in holding that
petitioner has no cause of action for want of the protest provided for
in Section 1370 of the Revised Administrative Code. This,
notwithstanding, we find no merit in the present appeal, because the
certificate of tax exemption granted petitioner herein was subject to
the qualification that “the exemption shall commence August 27, 1957,
the date your request for reconsideration which served as basis of this
decision was received in this Department, and because, of the articles
entitled to said exemption, only those covered by the last item among
those enumerated above had been “cleared from customs’ custody” after
said date.
Petitioner assails the validity of the aforementioned qualification
upon the ground that the Secretary of Finance has no authority to
impose it, for section 4 of Republic Act No. 901 provides:
“The benefits of exemption of new and necessary
industries from the payment of all taxes under this Act shall, upon the
approval of the application for exemption by the Secretary of Finance,
retroact as of the date of the filing of the application for exemption.”
It appears, however, that on February 7, 1957, petitioner applied
for tax exemption as manufacturer of soy sauce and Worcestershire
sauce, which was disapproved in its entirety. A reconsideration was
sought by petitioner in a communication dated August 27, 1957. Acting
thereon, the Secretary of Finance, in a letter dated October 15,1957,
granted the request for exemption “in respect to the manufacture of soy
sauce only,” but not as regards “the manufacture of Worcestershire
sauce * * * as the same does not qualify for tax exemption under
Republic Act No. 901.”
It should be noted, also, that the reconsideration “in respect to
the manufacture of soy sauce only” was granted in view of the
representations made, not in the application filed on February 7, 1957,
but in the aforementioned petition for reconsideration dated August 27,
1957. Neither communication is before us, but the tenor of said letter
of October 15, 1957, indicates that there were “representations” or new
facts set forth in the aforementioned petition for reconsideration of
August 27, 1957, which induced the Secretary of Finance to regard the
same as the “basis” for his final “decision” and, accordingly, as a new
application, and to grant the exemption as regards “the manufacture of
soy sauce only” effective from the date of said petition for
reconsideration. Under the circumstances, we are not prepared to hold
that the Secretary of Finance had violated said Section 4 of Republic
Act No. 901 or otherwise exceeded his authority in acting as he did.
Wherefore, with the modification adverted to above, regarding the
applicability of Section 1370 of the Revised Administrative Code to the
present case, the resolution appealed from is hereby affirmed, in all
other respects, with costs against petitioner appellant, Silver Swan
Manufacturing Company, Inc. It is so ordered.
Padilla, Reyes, J. B. L., Barrera, Dizon, Regala, and Makalintal, JJ., concur.