Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=83180:57155&catid=1584&Itemid=566
Timestamp: 2019-04-19 10:17:00+00:00

Document:
G.R. No. 163055, June 11, 2014 - THE COMMISSIONER OF CUSTOMS & THE DISTRICT COLLECTOR OF CUSTOMS FOR THE PORT OF ILOILO, Petitioners, v. NEW FRONTIER SUGAR CORPORATION, Respondent.
THE COMMISSIONER OF CUSTOMS & THE DISTRICT COLLECTOR OF CUSTOMS FOR THE PORT OF ILOILO, Petitioners, v. NEW FRONTIER SUGAR CORPORATION, Respondent.
Before the Court is a Petition for Review on Certiorari seeking to reverse and set aside the 29 March 2004 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 48842 which affirmed the Decision and Resolution dated 19 June 1998 and 23 July 1998, respectively, of the Court of Tax Appeals (CTA)2 in C.T.A. Case No. 5347.
Petitioners are the duly appointed Commissioner of Customs, and the District Collector of Customs for the Port of Iloilo. Respondent, on the other hand, is a domestic corporation with office address at the 9th floor of Rufino Center Bldg., 6784 Ayala Avenue, Makati City. It is duly registered with the Board of Investments on a non-pioneer status and has been granted incentives to modernize and rehabilitate its sugar mill under Certificate of Registration No. 93-452 dated 28 January 1994.
On 25 September 1995, a contract of sale covering 15,000 metric tons of Thailand raw sugar was entered into by and between Ms. Margarita Chua Sia, buyer and President of respondent, and Osumo Nishihara of Maruha Corporation, a Japan based trading company, for and in behalf of the seller, Taiyo (U.K.) Limited.
On 3 October 1995, respondent applied with the United Coconut Planters Bank for a letter of credit for the above transaction and was issued L/C No. 95-61574-7 on 5 October 1995 after the payment of the advance import duty of P64,315,388.00.
Aggrieved, and following the rules on court hierarchy then prevailing, petitioners appealed to the CA by filing a Petition for Review pursuant to Rule 43 of the 1997 Rules of Civil Procedure, docketed as CA-G.R. SP No. 48842.
The CA affirmed21 both the aforesaid Decision and Resolution rendered by the CTA in C.T.A. Case No. 5347, pronouncing that seizure of goods starts with the issuance of a WSD, being a part of the procedural due process, to which respondent is entitled to. Without it, respondent will then be deprived of its right to avail of the tentative release of the shipment which is expressly allowed under the conditions set forth in CMO No. 9-95.
In addition, the appellate court ruled that respondent cannot be faulted in ordering the stop payment of its guarantee/security check because it was deposited by petitioners on 2 March 1996, or exactly six (6) days ahead of respondent’s deadline to pay the alleged 20% penalty. It failed to consider that before the lapse of the given period, the Bureau of Customs had no right to hold the value of the check against respondent. More so, since there was already the subsequent issuance of the CRF on 18 January 1996 by the SGS Manila Liaison, respondent in effect could not have violated any customs laws which would render it liable to pay for the 20% penalty.
Lastly, while it may be argued that the CRF is required to be issued before the shipment of the goods, the late issuance of the same to respondent amounts to substantial compliance with the provisions of Joint Order No. 1-91. The purpose for which the CRF is required has already been served since the imported goods were already inspected by the SGS. The CA therefore concluded that if the belated issued CRF will be ignored, then it will work against all the procedures conducted to determine the propriety of issuing the late CRF.
Not satisfied, petitioners are now in quest for redemption before this Court, raising that the CA committed serious and reversible error in ruling, that: (a) the issuance of a WSD was necessary; (b) the imposition of the 20% penalty on respondent’s shipment was not justified; (c) the later issuance of the CRF over the subject shipment had the effect of full compliance with Joint Order No. 1-91; and (d) the deposit of respondent’s check by petitioners was improper and without legal basis.
The core issue for the Court’s consideration is whether or not respondent has violated paragraph 12 of Joint Order No. 1-91, in relation to paragraph (f), Section 2530 of the TCCP, as amended, for failure to submit the subject raw cane sugar shipment to pre-shipment inspection and to present the corresponding CRF resulting therefrom. Consequently, if respondent indeed violated said provision, the question of the imposition of the 20% penalty pursuant to CAO No. 4-94, on respondent’s subject shipment, then arises.
We find the petition unmeritorious.
Thereafter, upon inspection and determination that the subject shipment is in order, a corresponding CRF shall be issued by the SGS. Only then may the imports be allowed in our country for release, after compliance with other equally significant requirements, such as but not limited to, filing of import entry and payment of duty.
Sec. 2303. Notification to Owner or Importer. – The Collector shall give the owner or importer of the property or his agent a written notice of the seizure and shall give him an opportunity to be heard in reference to the delinquency which was the occasion of such seizure.
x x x x (Emphasis supplied).
Applying the foregoing principles herein, paragraph 12 of Joint Order No. 1-91 should be read in relation to Sections 2301 and 2303 of the TCCP, as amended, in order to effectuate the purposes of which they were enacted, particularly as to the procedural requirements set forth in conducting seizure proceedings. Thus, in the 19 June 1998 Decision in C.T.A. Case No. 5347, the CTA correctly articulated that a WSD is a condition precedent, before any seizure proceeding can be formally initiated. It therefore emphasized the constitutionally enshrined right to procedural due process of any person, natural or juridical, under investigation especially if it will cause the person his/its life or property. As previously mentioned, the above-quoted sections clearly laid down the mandatory procedures to be observed in a seizure case, to wit: (1) that a WSD must first be issued upon making any seizure; and (2) that a written notice of such seizure must be served upon the owner or importer or his agent. Failure to comply with the foregoing procedural requirements would negate the propriety of having the subject shipment of respondent seized and forfeited in favor of the Government in all cases. Hence, even if the phrase “subject to automatic seizure” was used under paragraph 12 of Joint Order No. 1-91, the same must be construed together and harmonized with other related provision of law, i.e. Sections 2301 and 2303 of the TCCP, as amended, in order to form a uniform system of jurisprudence on seizure proceedings.
Likewise, it would be improvident not to state at this juncture that the subject shipment could not be deemed liable for seizure or even forfeiture on the ground of violation of Section 2530(f) of the TCCP, as amended, for it must be proven first that fraud has been committed by or there was bad faith on the part of the importer/consignee to evade payment of the duties due and demandable.
Time and again, and consistently, this Court has ruled that the onus probandi to establish the existence of fraud is lodged with the Bureau of Customs which ordered the forfeiture of the imported goods. Fraud is never presumed. It must be proved. Failure of proof of fraud is a bar to forfeiture. The reason is that forfeitures are not favored in law and equity.29 The fraud contemplated by law must be intentional fraud, consisting of deception willfully and deliberately done or resorted to in order to induce another to give up some right.30 Absent fraud, the Bureau of Customs cannot forfeit the shipment in its favor.
Significantly, based on the records of the present case, it was determined during the administrative proceedings before the petitioner Collector, that there was no intentional circumvention of the said CISS requirement on the part of respondent because the failure to subject the shipment to SGS pre-shipment inspection was purely attributable to the fault of the shipper; hence, respondent acted in good faith. In other words, since there was no deliberate circumvention of the CISS, the same therefore cannot be recommended for seizure and/or forfeiture. As a matter of fact, pursuant to CMO No. 9-95, it was no other than the petitioner Collector who recommended and thereafter allowed that the subject shipment be tentatively released, and that the imposition of the penalty against it be dispensed with unless the SGS will not issue the required CRF.31 These factual circumstances further strengthened the position taken by respondent that it had indeed sufficiently proven its claim of good faith on the non-production of CRF, which likewise established lack of fraudulent intent to evade payment of duties on its part. Clearly, petitioners’ failure to comply with the procedural requirements set forth under the applicable provisions of the TCCP, as amended, in pursuing for the seizure of the subject shipment under paragraph 12 of Joint Order No. 1-91, was fatal to their cause.
Now this Court proceeds to determine whether or not the imposition of the 20% penalty on respondent’s subject shipment is justified under the present factual and legal circumstances of this case.
Schedule of fines to be imposed in the settlement of seizure cases pending hearing pursuant to Section 2307 of the Tariff and Customs Code, as amended by Executive Order No. 38.
Sec. 2307. Settlement of Case by Payment of Fine of Redemption of Forfeited Property. – Subject to approval of the Commissioner, the district collector may while the case is still pending, except when there is fraud, accept the settlement of any seizure case provided that the owner, importer, exporter, or consignee or his agent shall offer to pay to the collector a fine imposed by him upon the property, or in case of forfeiture, the owner, exporter, importer or consignee or his agent shall offer to pay for the domestic market value of the seized article. The Commissioner may accept the settlement of any seizure case on appeal in the same manner.
Clearly from the foregoing, the law presupposes a pending seizure proceeding legally initiated against the shipment intended to be seized in accordance with the pertinent provisions of the TCCP, as amended. Absence of such pending proceeding against respondent’s shipment renders CAO No. 4-94 and Section 2307 inapplicable in the present case. Consequently, there would be no legal basis to hold the subject shipment liable for the aforesaid 20% penalty on the sole ground of lack of CRF.
It is to be readily observed that the aforequoted subject of said CAO pertains to fines imposed on seizure cases. Inasmuch as the instant case has not been put under a valid seizure as adverted to above, the imposition of the 20% penalty under CAO 4-94 is outright improper and without legal basis. The problem with [petitioners] is that in its desire to give more teeth to the administrative requirement for the production of a Clean Report of Findings (CRF) from the SGS, it overlooked one fundamental principle in law – that no fine, surcharge, forfeiture or any penalty may be imposed except in pursuance of a provision of law. In the instant case, the closest provision [petitioners] could cite is [S]ection 2307 of the Tariff and Customs Code as implemented by CAO 4-94, without realizing that the same pertains only to seizure cases. Under the provisions imposing fine found in Sections 2505 to 2529 of the same Code, not one pertains to non-production of CRF. The Secretary of Finance, Secretary of Trade and Industry and the Governor of the Central Bank in issuing the Joint Order No. 1-91, which serves as the basis of the requirement for the production of a CRF, did not provide for the imposition of fine or other penalties maybe because they realize that the imposition of penalties is a legislative prerogative.
Lastly, granting arguendo that this Court considers applying the provisions of CAO No. 4-94 in the present case, we find that substantial compliance by respondent in the provisions of CMO No. 9-95 has rendered the issue on the imposition of the 20% penalty for lack of CRF moot.
CMO No. 9-95 categorically provides the revised procedures on the tentative release of shipments lacking the required CRF. Its objectives are as follows: (1) to avoid delays in the processing and releasing of shipments arising from the lack of SGS-CRF in relation to Joint Order No. 1-91, as amended; (2) to further facilitate trade and provide adequate security to government revenue; and (3) to enable the prompt collection of revenue due the government.35 Simply put, the aforesaid Order provides a remedy for importers or consignees who have failed to undergo their shipments to pre-shipment inspections under the CISS which arrived in the country and entered in a customs house without the requisite CRF. More importantly, Part V(1), Step 5 of CMO No. 9-95 clearly states that the processing of the SGS-CRF by the SGS affiliate in the country of exportation shall be deemed “as if inspection has taken place” and that the issuance of the SGS-CRF shall be done by SGS-Manila Liaison Office.
Verily, it was proper for the CTA and CA to rule that the subsequent issuance of the CRF over respondent’s subject shipment pursuant to the provisions of CMO No. 9-95 substantially complied and satisfied the mandatory inspection and corresponding CRF required under paragraph 12 of Joint Order No, 1-91. Therefore, the subsequent issuance of the CRF on 18 January 1996 cleared the shipment from the alleged automatic seizure and 20% penalty imposable under CAO No. 4-94. The eventual issuance of the required CRF covering respondent’s shipment had indeed cured all deficiencies; thus, leaving petitioners no right whatsoever in demanding for the value of the guarantee/security check previously issued by respondent for the sole purpose it was made.
Parenthetically, this Court finds no abusive or improvident exercise of authority on the part of the CTA. Since there is no showing of gross error or abuse on the part of the CTA, and its findings are supported by substantial evidence which were thoroughly considered during the trial, there is no cogent reason to disturb its findings and conclusions – and they carry even more weight when the CA affirms its factual and legal findings.
WHEREFORE, the petition is hereby DENIED for lack of merit. No costs.
Carpio, (Chairperson), Brion, Del Castillo, and Perlas-Bernabe, JJ., concur.
1Rollo, pp. 27-35; Penned by Associate Justice Elvi John S. Asuncion with Associate Justices Godardo A. Jacinto and Lucas P. Bersamin (now a member of this Court) concurring.
2 Id. at 118-143; Chaired by Presiding Judge Ernesto D. Acosta with Associate Judges Ramon O. De Veyra and Amancio Q. Saga as members.
3 Id. at 119-125; CTA Decision dated 19 June 1998. Id. at 28-30; CA Decision dated 29 March 2004.
5 Id. at 28; CA Decision dated 29 March 2004.
10 Id. at 118; CTA Decision dated 19 June 1998.
11 Id. at 30; CA Decision dated 29 March 2004.
13 Id. at 126; CTA Decision dated 19 June 1998.
14 Id. at 118-142; Penned by Associate Judge Ramon O. De Veyra with Presiding Judge Ernesto D. Acosta and Associate Judge Amancio Q. Saga concurring.
20 Id. at 143; CTA Resolution dated 23 July 1998.
SECTION 14. Comprehensive Import Supervision Scheme (CISS). – Goods destined for importation into the Philippines shall be subject to inspection by the inspector(s) duly authorized by the Government in the countries of supply, as to the quality, quantity, price/HCV, verification of Tariff and Customs Code, classification and verification of Tariff rate, under a Comprehensive Import Supervision Scheme (CISS).
Goods sold and/or supplied from all countries with FOB value of US$500.00 and above.
Goods invoiced or declared in the shipping documents as off-quality under such descriptive terms as stocklots, side-runs, call rolls, seconds, mill lots, scraps, off-grade, reconditioned, used, junk or similar terms conveying or purporting to convey the condition of the article as not being brand-new or first quality, regardless of value.
23 This Order was promulgated by the Secretary of Finance, the Secretary of Trade and Industry, and the Governor of the Central Bank of the Philippines for the implementation of the Comprehensive Import Supervision Scheme (CISS).
24Bureau Veritas v. Office of the President, G.R. No. 101678, 3 February 1992, 205 SCRA 705, 708.
25http://www.sgs.ph/en/Logistics/Transportation/Containers/Pre-Shipment-Inspection-PSI/Pre Shipment-Inspection-Philippines.aspx last visited 26 March 2014.
26http://www.sgs.ph/En/Public-Sector/Valuation-Services/Pre-Shipment-Inspection-PSI.aspx last visited 26 March 2014.
28Civil Liberties Union v. Executive Secretary, G. R. No. 83896, 22 February 1991, 194 SCRA 317, 331.
29Rep. of the Phils. v. Ker and Co., 124 Phil. 822, 831 (1966); Yu Phi Khim v. Amparo, 86 Phil. 441, 446 (1950); and Farm Implement and Machinery Co. v. Commissioner of Customs, 133 Phil. 836, 848 (1968).
30Farolan v. Court of Tax Appeals, G.R. No. 42204, 21 January 1993, 217 SCRA 298, 304.
31 CTA exhibits folder; Memorandum dated 15 January 1996, Exhibit “AQ” to “AQ-2,” inclusive.
32 Subject: Schedule of fines to be imposed in the settlement of seizure cases pending hearing pursuant to Section 2307 of the Tariff and Customs Code, as amended by Executive Order No. 38.
35 Id. at 199; Part I, CMO No. 9-95.

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