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G.R. No.

209830 June 17, 2015

MITSUBISHI MOTORS PHILIPPINES CORPORATION, Petitioner,


vs.
BUREAU OF CUSTOMS, Respondents.

Taxation; Courts; Court of Tax Appeals; Jurisdiction; The Court of Tax Appeals (CTA) has exclusive appellate
jurisdiction over tax collection cases originally decided by the Regional Trial Court (RTC).The CTA has
exclusive appellate jurisdiction over tax collection cases originally decided by the RTC. In the instant case,
the CA has no jurisdiction over respondents appeal; hence, it cannot perform any action on the same
except to order its dismissal pursuant to Section 2, Rule 50 of the Rules of Court. Therefore, the act of the
CA in referring respondents wrongful appeal before it to the CTA under the guise of furthering the
interests of substantial justice is blatantly erroneous, and thus, stands to be corrected. In Anderson v. Ho,
688 SCRA 8 (2013), the Court held that the invocation of substantial justice is not a magic wand that
would readily dispel the application of procedural rules.

Remedial Law; Civil Procedure; Appeals; It is settled that the perfection of an appeal in the manner and
within the period set by law is not only mandatory, but jurisdictional as well, and that failure to perfect an
appeal within the period fixed by law renders the judgment appealed from final and executory.In view of
respondents availment of a wrong mode of appeal via notice of appeal stating that it was elevating the
case to the CA instead of appealing by way of a petition for review to the CTA within thirty (30) days
from receipt of a copy of the RTCs August 3, 2012 Order, as required by Section 11 of RA 1125, as
amended by Section 9 of RA 9282 the Court is constrained to deem the RTCs dismissal of respondents
collection case against petitioner final and executory. It is settled that the perfection of an appeal in the
manner and within the period set by law is not only mandatory, but jurisdictional as well, and that failure
to perfect an appeal within the period fixed by law renders the judgment appealed from final and
executory.

The Facts

The instant case arose from a collection suit4 for unpaid taxes and customs duties in the aggregate
amount of 46,844,385.00 filed by respondent against petitioner Mitsubishi Motors Philippines
Corporation (petitioner) before the Regional Trial Court of Manila, Branch 17 (RTC),

docketed as Civil Case No. 02-103763 (collection case).

Respondent alleged that from 1997 to1998, petitioner was able to secure tax credit certificates (TCCs)
from various transportation companies; after which, it made several importations and utilized said TCCs
for the payment of various customs duties and taxes in the aggregate amount of 46,844,385.00.5
Believing the authenticity of the TCCs, respondent allowed petitioner to use the same for the settlement
of such customs duties and taxes. However, a post-audit investigation of the Department of Finance
revealed that the TCCs were fraudulently secured with the use of fake commercial and bank documents,
and thus, respondent deemed that petitioner never settled its taxes and customs duties pertaining to the
aforesaid importations.6 Thereafter, respondent demanded that petitioner pay its unsettled tax and
customs duties, but to no avail. Hence, it was constrained to file the instant complaint.7

In its defense,8 petitioner maintained, inter alia, that it acquired the TCCs from their original holders in
good faith and that they were authentic, and thus, their remittance to respondent should be considered
as proper settlement of the taxes and customs duties it incurred in connection with the aforementioned
importations.9
Initially, the RTC dismissed10 the collection case due to the continuous absences of respondents counsel
during trial.11 On appeal to the CA,12 and eventually the Court,13 the said case was reinstated and trial
on the merits continued before the RTC.14

After respondents presentation of evidence, petitioner filed a Demurrer to Plaintiffs Evidence15 on


February 10, 2012, essentially contending that respondent failed to prove by clear and convincing
evidence that the TCCs were fraudulently procured,16 and thus, prayed for the dismissal of the
complaint.17 In turn, respondent filed an Opposition18 dated March 7, 2012 refuting petitioners
contentions.

The RTC Ruling

In an Order19 dated April 10, 2012, the RTC granted petitioners Demurrer to Plaintiffs Evidence, and
accordingly, dismissed respondents collection case on the ground of insufficiency of evidence.20 It found
that respondent had not shown any proof or substantial evidence of fraud or conspiracy on the part of
petitioner in the procurement of the TCCs.21 In this connection, the RTC opined that fraud is never
presumed and must be established by clear and convincing evidence, which petitioner failed to do, thus,
necessitating the dismissal of the complaint.22

Respondent moved for reconsideration,23 which was, however, denied in an Order24 dated August 3,
2012. Dissatisfied, it appealed25 to the CA.

The CA Ruling

In a Resolution 26dated June 7, 2013, the CA referred the records of the collection case to the CTA for
proper disposition of the appeal taken by respondent.1wphi1 While the CA admitted that it had no
jurisdiction to take cognizance of respondents appeal, as jurisdiction is properly lodged with the CTA, it
nevertheless opted to relax procedural rules in not dismissing the appeal outright.27 Instead, the CA
deemed it appropriate to simply refer the matter to the CTA, considering that the government stands to
lose the amount of 46,844,385.00 in taxes and customs duties which can then be used for various public
works and projects.28

Aggrieved, petitioner filed a motion for reconsideration29 on June 23, 2013, arguing that since the CA
does not have jurisdiction over respondents appeal, it cannot perform any action on it except to order its
dismissal.30 The said motion was, however, denied in a Resolution31 dated November 4, 2013, hence,
this petition.

The Issue Before the Court

The core issue for the Courts resolution is whether or not the CA correctly referred the records of the
collection case to the CTA for proper disposition of the appeal taken by respondent.

The Court's Ruling

The petition is meritorious.

Jurisdiction is defined as the power and authority of a court to hear, try, and decide a case.32 In order for
the court or an adjudicative body to have authority to dispose of the case on the merits, it must acquire,
among others, jurisdiction over the subject matter.33 It is axiomatic that jurisdiction over the subject
matter is the power to hear and determine the general class to which the proceedings in question belong;
it is conferred by law and not by the consent or acquiescence of any or all of the parties or by erroneous
belief of the court that it exists.34 Thus, when a court has no jurisdiction over the subject matter, the only
power it has is to dismiss the action.35

Guided by the foregoing considerations and as will be explained hereunder, the Court finds that the CA
erred in referring the records of the collection case to the CTA for proper disposition of the appeal taken
by respondent.

Section 7 of Republic Act No. (RA) 1125,36 as amended by RA 9282,37 reads:

Sec. 7. Jurisdiction. The CTA shall exercise:

xxxx

c. Jurisdiction over tax collection cases as herein provided:

xxxx

2. Exclusive appellate jurisdiction in tax collection cases:

a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax collection
cases originally decided by them in their respective territorial jurisdiction.

xxxx

Similarly, Section 3, Rule 4 of the Revised Rules of the Court of Tax Appeals, as amended,38 states:

Sec. 3. Cases within the jurisdiction of the Court in Divisions. The Court in Divisions shall exercise:

xxxx

c. Exclusive jurisdiction over tax collections cases, to wit:

xxxx

2. Appellate jurisdiction over appeals from the judgments, resolutions or orders of the Regional Trial
Courts in tax collection cases originally decided by them within their respective territorial jurisdiction.

Verily, the foregoing provisions explicitly provide that the CTA has exclusive appellate jurisdiction over tax
collection cases originally decided by the RTC.

In the instant case, the CA has no jurisdiction over respondents appeal; hence, it cannot perform any
action on the same except to order its dismissal pursuant to Section 2, Rule 5039 of the Rules of Court.
Therefore, the act of the CA in referring respondents wrongful appeal before it to the CTA under the
guise of furthering the interests of substantial justice is blatantly erroneous, and thus, stands to be
corrected. In Anderson v. Ho,40 the Court held that the invocation of substantial justice is not a magic
wand that would readily dispel the application of procedural rules,41 viz.:

x x x procedural rules are designed to facilitate the adjudication of cases. Courts and litigants alike are
enjoined to abide strictly by the rules.1wphi1 While in certain instances, we allow a relaxation in the
application of the rules, we never intend to forge a weapon for erring litigants to violate the rules with
impunity. The liberal interpretation and application of rules apply only in proper cases of demonstrable
merit and under justifiable causes and circumstances. While it is true that litigation is not a game of
technicalities, it is equally true that every case must be prosecuted in accordance with the prescribed
procedure to ensure an orderly and speedy administration of justice. Party litigants and their counsels are
well advised to abide by rather than flaunt, procedural rules for these rules illumine the path of the law
and rationalize the pursuit of justice.42 (Emphasis and underscoring supplied)

Finally, in view of respondents availment of a wrong mode of appeal via notice of appeal stating that it
was elevating the case to the CA instead of appealing by way of a petition for review to the CTA within
thirty (30) days from receipt of a copy of the RTCs August 3, 2012 Order, as required by Section 11 of RA
1125, as amended by Section 9 of RA 928243 the Court is constrained to deem the RTC's dismissal of
respondent's collection case against petitioner final and executory. It is settled that the perfection of an
appeal in the manner and within the period set by law is not only mandatory, but jurisdictional as well,
and that failure to perfect an appeal within the period fixed by law renders the judgment appealed from
final and executory.44 The Court's pronouncement in Team Pacific Corporation v. Daza45 is instructive on
this matter, to wit:46

Although appeal is an essential part of our judicial process, it has been held, time and again, that the right
thereto is not a natural right or a part of due process but is merely a statutory privilege. Thus, the
perfection of an appeal in the manner and within the period prescribed by law is not only mandatory but
also jurisdictional and failure of a party to conform to the rules regarding appeal will render the judgment
final and executory. Once a decision attains finality, it becomes the law of the case irrespective of
whether the decision is erroneous or not and no court - not even the Supreme Court - has the power to
revise, review, change or alter the same. The basic rule of finality of judgment is grounded on the
fundamental principle of public policy and sound practice that, at the risk of occasional error, the
judgment of courts and the award of quasi-judicial agencies must become final at some definite date fixed
by law.

WHEREFORE, the petition is GRANTED. Accordingly, the Resolutions dated June 7, 2013 and November 4,
2013 of the Court of Appeals (CA) in CA-G.R. CV No. 99594 are hereby REVERSED and SET ASIDE.
Accordingly, a new one is entered DISMISSING the appeal of respondent Bureau of Customs to the Court
of Appeals.

SO ORDERED.

G.R. Nos. 209353-54 July 6, 2015

REPUBLIC OF THE PHILIPPINES, rep. by the COMMISSIONER OF CUSTOMS, Petitioner,


vs.
PHILIPPINE AIRLINES, INC.(PAL), Respondent.

x-----------------------x

G.R. Nos. 211733-34

COMMISSIONER OF INTERNAL REVENUE, Petitioner,


vs.
PHILIPPINE AIRLINES, INC. (PAL), Respondent.
Taxation; Tax Exemptions; Court had already settled the issue of whether or not there was a need
for the actual payment of tax, either the basic corporate income tax or the 2% franchise tax, before therein
respondent Philippine Airlines (PAL) could avail itself of the in lieu of all other taxes provision under its
Charter.It is clear from the foregoing that this Court had already settled the issue of whether or not
there was a need for the actual payment of tax, either the basic corporate income tax or the 2% franchise
tax, before therein respondent PAL could avail itself of the in lieu of all other taxes provision under its
Charter. This Court finds no cogent reason to deviate from the ruling in the said case.
Same; Same; Philippine Airlines (PALs) franchise exempts it from paying any tax other than the option it
chooses: either the basic corporate income tax or the two percent gross revenue tax.Petitioner
contends that since P.D. No. 1590 does not provide for an exemption from the payment of taxes, any
claim of exemption from the payment thereof must be strictly construed against the taxpayer. Said
position is, however, dispelled by Commissioner of Internal Revenue v. Philippine Airlines, 504 SCRA 90
(2006), where this Court ruled: While the Court recognizes the general rule that the grant of tax
exemptions is strictly construed against the taxpayer and in favor of the taxing power, Section 13 of the
franchise of respondent leaves no room for interpretation. Its franchise exempts it from paying any tax
other than the option it chooses: either the basic corporate income tax or the two percent gross
revenue tax.

Same; Same; Respondent Philippine Airlines (PAL) is exempt from the 10% Overseas Communications Tax
(OCT) and therefore, entitled to the refund requested.Given the foregoing, and the fact that the 10%
OCT properly falls within the purview of the all other taxes proviso in P.D. No. 1590, this Court holds
that respondent PAL is exempt from the 10% OCT and, therefore, entitled to the refund requested.

The case stemmed from a claim for a refund by respondent Philippine Airlines, Inc. (PAL) of the amount of
4,469,199.98 representing the alleged erroneously paid excise tax for the period covering July 2005 to
February 2006. On 18 January 2007, PAL filed written claims for a refund with the Bureau of Internal
Revenue (BIR). For failure of the BIR to act on the administrative claim, PAL filed two separate Petitions
for Review with the CTA on 30 July 2007 and 21December2007, docketed as C.T.A. Case Nos. 7665 and
7713, respectively.

The CTA consolidated the two Petitions and tried them jointly. On 17 April 2012, the CT A Second Division
rendered a Decision granting the Petitions and ordered the CIR and the Commissioner of Customs (COC)
to refund PAL in the total amount of 4,469,199.98.

On 23 April 2012 and 4 May 2012, the CIR and the COC filed their respective Motions for Reconsideration,
which were both denied in a Resolution dated 28 June 2012.

C.T.A. EB No. 920

The CIR, in its Petition for Review before the CT A en bane, raised the issue of whether PAL is entitled to a
tax refund of the alleged erroneously paid excise tax. The CIR argued that Presidential Decree (P.D.) No.
1590,3 particularly Section 13 thereof, had already been expressly amended by Republic Act (R.A.) No.
9334.4 Moreover, PAL failed to prove that the alleged commissary supplies were not locally available in
reasonable quantity, quality and price considering that no independent credible evidence was presented
but merely PAL' s own employee where testimony was self-serving and not comprehensive.

C.T.A. EB No. 922


A separate Petition for Review was filed before the CT A en bane by the COC. The latter argued that the
case should have been dismissed outright, as it stated no cause of action against petitioner, which merely
acted as a collecting agent for the CIR. The COC further alleged that PAL had also failed to exhaust the
latter's administrative remedies with the former. Finally, like the CIR, the COC maintained that Sections 6
and 10 of R.A. 9334 had repealed Sections 13 and 24 of P.D. 1590.

THE RULING OF THE CTA En Banc

The appeals were consolidated. The CT A en banc denied both Petitions and ruled that R.A. 9334 was not
expressly repealed by P.D. 1590. The tax court also emphasized that P.D. 1590 is a special law that
governs the franchise of PAL, while R.A. 9334 is a general law, and therefore P.D. 1590 must prevail. The
CT A held that reliance by petitioners on Cagayan Electric Power Light Co. Inc. v. CIR5 is also misplaced. In
that case, there was an express repeal of R.A. 5431, as all corporate taxpayers not expressly exempted
under that law and under Section 27 of the Tax Code were subjected to income tax.

The CTA ruled that respondent PAL was entitled to a refund of excise taxes paid on the latter's
commissary supplies. The appellate court explained that the exemption granted to PAL under P.D. 1590
was not expressly repealed by R.A. 9334. The CTA found that PAL had opted to pay the latter's basic
corporate income tax for the fiscal year ending 31 March 2006. The court also found that the articles
imported were intended for the operations of PAL and were not locally available in reasonable quantity,
quality or price. The latter is therefore entitled to a refund of erroneously paid excise tax in the total
amount of 4,469,199.98.

THE PETITIONS

The COC, instead of filing a motion for reconsideration with the CTA, directly filed a Petition before this
Court. The COC assailed the Decision of the CTA en bane in C.T.A. EB Nos. 920 and 922, herein docketed
as G.R. Nos. 209353-54.

On the other hand, the CIR appealed the Decision dated 9 September 2013 and Resolution dated 10
March 2014 on its Motion for Reconsideration herein docketed as G.R. Nos. 211733-34.

ISSUE

Both Petitions raise similar issues, which boil down to the principal one of whether Sections 6 and 10 of
R.A. 9334 repealed Section 13 of P .D. 1590.

THE COURT'S RULING

We find no merit in the Petitions.

The controversy before the Court is not novel. In CIR v. PAL,6 the Court has already passed upon the very
same issues raised by the same petitioners. The only differences are the taxable period involved and the
amount of refundable tax.

We have held in that case that it is a basic principle in statutory construction that a later law, general in
terms and not expressly repealing or amending a prior special law, will not ordinarily affect the special
provisions of the earlier statute. A reading of the pertinent provisions of P.D. 1590 and R.A. 9334 shows
that there was no express repeal of the grant of exemption: PRESIDENTIAL DECREE N0.15907

xxxx
SECTION 13. In consideration of the franchise and rights hereby granted, the grantee shall pay to the
Philippine Government during the life of this franchise whichever of subsections (a) and (b) hereunder will
result in a lower tax:

(a) The basic corporate income tax based on the grantee's annual net taxable income computed in
accordance with the provisions of the National Internal Revenue Code; or

b) A franchise tax of two per cent (2%) of the gross revenues derived by the grantee from all sources,
without distinction as to transport or nontransport operations; provided, that with respect to
international air-transport service, only the gross passenger, mail, and freight revenues from its outgoing
flights shall be subject to this tax.

The tax paid by the grantee under either of the above alternatives shall be in lieu of all other taxes, duties,
royalties, registration, license, and other fees and charges of any kind, nature, or description, imposed,
levied, established, assessed, or collected by any municipal, city, provincial, or national authority or
government agency, now or in the future, including but not limited to the following:

xxxx

(2) All taxes, including compensating taxes, duties, charges, royalties, or fees due on all importations by
the grantee of aircraft, engines, equipment, machinery, spare parts, accessories, commissary and catering
supplies, aviation gas, fuel, and oil, whether refined or in crude form and other articles, supplies, or
materials; provided, that such articles or supplies or materials are imported for the use of the grantee in
its transport and nontransport operations and other activities incidental thereto and are not locally
available in reasonable quantity, quality, or price; x x x x

SECTION 24. This franchise, as amended, or any section or provision hereof may only be modified,
amended, or repealed expressly by a special law or decree that shall specifically modify, amend, or repeal
this franchise or any section or provision thereof. (Emphasis supplied)

REPUBLIC ACT NO. 93348

xxxx

SECTION 6. Section 131 of the National Internal Revenue Code of 1997, is amended, is hereby amended to
read as follows:

SEC. 131. Payment of Excise Taxes on Imported Articles.

(A) Persons Liable. Excise taxes on imported articles shall be paid by the owner or importer to the
Customs Officers, conformably with the regulations of the Department of Finance and before the release
of such articles from the customs house, or by the person who is found in possession of articles which are
exempt from excise taxes other than those legally entitled to exemption.

In the case of tax-free articles brought or imported into the Philippines by persons, entities, or agencies
exempt from tax which are subsequently sold, transferred or exchanged in the Philippines to nonexempt
persons or entities, the purchasers or recipients shall be considered the importers thereof, and shall be
liable for the duty and internal revenue tax due on such importation.

The provision of any special or general law to the contrary notwithstanding, the importation of cigars and
cigarettes, distilled spirits, fermented liquors and wines into the Philippines, even if destined for tax and
duty-free shops, shall be subject to all applicable taxes, duties, charges, including excise taxes due
thereon. This shall apply to cigars and cigarettes, distilled spirits, fermented liquors and wines brought
directly into the duly chartered or legislated freeports of the Subic Special Economic and Freeport Zone,
created under Republic Act No. 7227; the Cagayan Special Economic Zone and Freeport, created under
Republic Act No. 7922; and the Zamboanga City Special Economic Zone, created under Republic Act No.
7903, and such other freeports as may hereafter be established or created by law: Provided, further, That
importations of cigars and cigarettes, distilled spirits, fermented liquors and wines made directly by a
government-owned and operated duty-free shop, like the Duty-Free Philippines (DFP), shall be exempted
from all applicable duties only: Provided, still further, That such articles directly imported by a
government-owned and operated duty-free shop, like the Duty-Free Philippines, shall be labeled 'duty-
free' and 'not for resale': Provided, finally, That the removal and transfer of tax and duty-free goods,
products, machinery, equipment and other similar articles other than cigars and cigarettes, distilled
spirits, fermented liquors and wines, from one freeport to another freeport, shall not be deemed on
introduction into the Philippine customs territory.

xxxx

SECTION 10. Repealing Clause. All laws, decrees, ordinances, rules and regulations, executive or
administrative orders, and such other presidential issuances as are inconsistent with any of the provisions
of this Act are hereby repealed, amended or otherwise modified accordingly. (Emphasis supplied)

The Court has exhaustively discussed all issues similar to those in the present case in this wise: Indeed, as
things stand, PD 1590 has not been revoked by the NIRC of 1997, as amended. Or to be more precise, the
tax privilege of PAL provided in Sec. 13 of PD 1590 has not been revoked by Sec. 131 of the NIRC of 1997,
as amended by Sec. 6 of RA 9334. We said as much in Commissioner of Internal Revenue v. Philippine Air
Lines, Inc.:9

That the Legislature chose not to amend or repeal [PD] 1590 even after PAL was privatized reveals the
intent of the Legislature to let PAL continue to enjoy, as a private corporation, the very same rights and
privileges under the terms and conditions stated in said charter. x x x

To be sure, the manner to effectively repeal or at least modify any specific provision of PAL' s franchise
under PD 1590, as decreed in the aforequoted Sec. 24, has not been demonstrated. And as aptly held by
the CT A en bane, borrowing from the same Commissioner of Internal Revenue case:

While it is true that Sec. 6 of RA 9334 as previously quoted states that "the provisions of any special or
general law to the contrary notwithstanding, " such phrase left alone cannot be considered as an express
repeal of the exemptions granted under PAL' s franchise because it fails to specifically identify PD 1590 as
one of the acts intended to be repealed .... (Emphasis supplied)

Noteworthy is the fact that PD 1590 is a special law, which governs the franchise of PAL. Between the
provisions under PD 1590 as against the provisions under the NIRC of 1997, as amended by 9334, which is
a general law, the former necessary prevails. This is in accordance with the rule that on a specific matter,
the special law shall prevail over the general law, which shall be resorted only to supply deficiencies in the
former. In addition, where there are two statutes, the earlier special and the later general - the terms of
the general broad enough to include the matter provided for in the special - the fact that one is special
and other general creates a presumption that the special is considered as remaining an exception to the
general, one as a general law of the land and the other as the law of a particular case.10

In other words, the franchise of PAL remains the governing law on its exemption from taxes.1wphi1 Its
payment of either basic corporate income tax or franchise tax - whichever is lower - shall be in lieu of all
other taxes, duties, royalties, registrations, licenses, and other fees and charges, except only real property
tax. The phrase "in lieu of all other taxes" includes but is not limited to taxes, duties, charges, royalties, or
fees due on all importations by the grantee of the commissary and catering supplies, provided that such
articles or supplies or materials are imported for the use of the grantee in its transport and nontransport
operations and other activities incidental thereto and are not locally available in reasonable quantity,
quality, or price. However, upon the amendment of the 1997 NIRC, Section 2211 of R.A. 933712 abolished
the franchise tax and subjected PAL and similar entities to corporate income tax and value-added tax
(VAT). PAL nevertheless remains exempt from taxes, duties, royalties, registrations, licenses, and other
fees and charges, provided it pays corporate income tax as granted in its franchise agreement.
Accordingly, PAL is left with no other option but to pay its basic corporate income tax, the payment of
which shall be in lieu of all other taxes, except VAT, and subject to certain conditions provided in its
charter.

In this case, the CT A found that PAL had paid basic corporate income tax for fiscal year ending 31 March
2006.13 Consequently, PAL may now claim exemption from taxes, duties, charges, royalties, or fees due
on all importations of its commissary and catering supplies, provided it shows that 1) such articles or
supplies or materials are imported for use in its transport and nontransport operations and other
activities incidental thereto; and 2) they are not locally available in reasonable quantity, quality, or price.

As to the issue of PAL' s noncompliance with the conditions set by Section 13 of P.D. 1509 for the
imported supplies to be exempt from excise tax, it must be noted that these are factual determinations
that are best left to the CT A. The appellate court found that PAL had complied with these conditions.14
The CTA is a highly specialized body that reviews tax cases and conducts trial de nova. Therefore, without
any showing that the findings of the CT A are unsupported by substantial evidence, its findings are binding
on this Court.15

In view thereof, we find no cogent reason to reverse or modify the findings of the CT A en bane.
WHEREFORE, premises considered, both Petitions are DENIED for lack of merit.

SO ORDERED.

G.R. No. 160206, July 15, 2015

M/V "DON MARTIN" VOY 047 AND ITS CARGOES OF 6,500 SACKS OF IMPORTED RICE, PALACIO
SHIPPING, INC., AND LEOPOLDO "JUNIOR" PAMULAKLAKIN, Petitioners, v. HON. SECRETARY OF
FINANCE, BUREAU OF CUSTOMS, AND THE DISTRICT COLLECTOR OF CAGAYAN DE ORO CITY,
Respondents.

Criminal Law; Tariff and Customs Code; Seizure and Forfeiture; Smuggling; Under Section 2530(a)
and (k) of the Tariff and Customs Code of the Philippines (TCCP), the forfeiture of a vehicle, vessel or
aircraft is anchored on its being used unlawfully in the transport of contraband or smuggled articles into or
from any Philippine port.Under Section 2530(a) and (k) of the TCCP, the forfeiture of a vehicle, vessel or
aircraft is anchored on its being used unlawfully in the transport of contraband or smuggled articles into
or from any Philippine port. Consequently, the determination of the legality of the forfeiture of the M/V
Don Martin was necessarily contingent on whether the customs authorities had validly and properly
seized the shipment of 6,500 sacks of rice on account of the rice being smuggled. Given this logical
correlation, the CTA could not be divested of its jurisdiction to determine the legality of the forfeiture of
the rice.

Taxation; Courts; Court of Tax Appeals; The Court of Tax Appeals (CTA) is a highly specialized body
specifically created for the purpose of reviewing tax cases; hence, its findings of fact are to be accorded
utmost respect.It is true that the CTA is a highly specialized body specifically created for the purpose of
reviewing tax cases; hence, its findings of fact are to be accorded utmost respect. Indeed, the factual
findings of the CTA, when supported by substantial evidence, are not to be disturbed on appeal unless
there is a showing that the CTA committed gross error or abuse in the appreciation of facts.

Petitioner Palacio Shipping, Inc. (Palacio) was the owner of the M/V Don Martin, a vessel of Philippine
registry engaged in coastwise trade.5 On January 25, 1999, the M/V Don Martin docked at the port of
Cagayan de Oro City with its cargo of 6,500 sacks of rice consigned to petitioner Leopoldo "Junior"
Pamulaklakin (Pamulaklakin).6 According to the petitioners, the vessel left Calbayog City on January 24,
1999 loaded with the 6,500 sacks of rice purchased in Sablayan, Occidental Mindoro. 7

Based on an intelligence report to the effect that the cargo of rice being unloaded from the M/V Don
Martin had been smuggled, the Economic Intelligence and Investigation Bureau (EIIB), with the assistance
of the Bureau of Customs (BOC), apprehended and seized the vessel and its entire rice cargo on January
26, 1999.8 The District Collector of Customs in Cagayan de Oro City then issued a warrant of seizure and
detention pursuant to Section 23019 of the Tariff and Customs Code of the Philippines (TCCP).

At the hearing on the seizure, the petitioners represented that the vessel was a common carrier; and that
the 6,500 sacks of rice had been locally produced and acquired.10 In substantiation, they submitted
several documents, as follows:cralawlawlibrary

1. Certificate of Ownership - to prove that Palacio Shipping, Inc. is the owner of M/V "Don Martin",

2. Coastwise License - to prove that Palacio Shipping, Inc. is duly licensed to engage in coastwise
Trading and as such, is a common carrier and is financially capable to engage in shipping
business;ChanRoblesVirtualawlibrary

3. Mintu Rice Mill Official Receipt No. 2753 dated January 18, 1999 - to prove that the origin of the
rice is Sablayan, Occidental Mindoro and also to show that the rice is of regular mill and not
smuggled;ChanRoblesVirtualawlibrary

4. NFA, Sablayan, Occidental Mindoro Clearance - to show that the bags of rice purchased under
Exhibit "3" has been cleared for shipment by the National Food Authority of Sablayan, Occidental
Mindoro;ChanRoblesVirtualawlibrary

5. Old NFA License of Godofredo Mintu

5-A - Renewal of the NFA License of Godofredo Mintu expiring May 31, 1999 - to show that the
purchased rice came from a duly licensed Grains Trader;ChanRoblesVirtualawlibrary

6. NFA License of Florentino J. Palacio, owner of the EMP Commercial, the shipper - to prove that
the shipper is a duly Licensed NFA wholesaler;ChanRoblesVirtualawlibrary

6-1 Renewal Receipt for NFA License for Fiscal Year 1998-1999;ChanRoblesVirtualawlibrary

7. NFA Clearance of Catbalogan, Western Samar to prove that the cargo of M/V "DON MARTIN"
was cleared for Cagayan de Oro City;ChanRoblesVirtualawlibrary
7-1 PPASeal

7-2 Coast Guard Seal

7-3 Page 2 of NFA Clearance

8. Bill of Lading - to prove that the cargo was duly covered with a Bill of Lading, a requirement in
coastwise shipping;ChanRoblesVirtualawlibrary

9. Coasting Manifest - to prove that the cargo of rice was duly reflected in its manifest - also a
requirement for coastwise shipping;ChanRoblesVirtualawlibrary

10. Birth Certificate and photo of Leopoldo "Junior" Pamulaklakin

10-A Residence Certificate of Leopoldo "Junior" Pamulaklakin - to prove that the consignee is a
living person and not fictitious person.

10-B Picture of Leopoldo "Junior" Pamulaklakin - to prove that the consignee is a living person
and not a fictitious person.11

chanrobleslaw

On March 24, 1999, District Collector of Customs Marietta Z. Pacasum rendered her ruling whereby she
concluded that in the absence of a showing of lawful entry into the country the 6,500 sacks of rice were of
foreign origin and thus subject to seizure and forfeiture for violation of Section 2530 (f) and (1) No. 1 of
the TCCP, as amended; that the presentation of the supporting documents by the claimants was a
strategy to conceal the true nature and origin of the rice cargo in order to mislead the Customs
authorities into believing that the rice was locally produced and locally purchased; and that considering
that the evidence to support the seizure and forfeiture of the carrying vessel was insufficient, the release
of the vessel was to be ordered. Pertinent portions of the ruling follow:cralawlawlibrary

The results of the Laboratory Analysis of samples of the subject rice by the NFA and the Philippine Rice
Institute reveal that the grain length is unusually long with 7.2 mm. for both Orion and Platinum 2000 rice
samples as compared to the grain length of most Philippine Varieties which ranges from 5.8 to 6.9 mm.
only. It was also found out that rice with grain length of more than 7.0 mm. are more common in the
countries of Brazil, Bolivia, Guatamala and Thailand, (Exhibit "J-3" and "K-l"), although the said imported
variety could be purchased locally through the NFA.

Furthermore, it also appears that some white sacks/containers were marked with Premium Rice whereas
per Philippine Grains Standardization, yellow color is for premium while white color is for ordinary rice.
(Exhibit I).

On the basis of the above findings, it can be safely concluded that the 6,500 sacks of rice subject of this
proceedings are of foreign origin and therefore subject to seizure and forfeiture for violation of Section
2530 (f) and (1) no. 1 of the TCCP, as amended, in the absence of showing of its lawful entry into the
country. The presentation of the supporting documents by respondents/claimants was a strategy to
conceal the true nature and origin of the cargoes and to mislead the Customs Authorities into believing
that subject rice are locally produced and locally purchased. Hence, said documents have no probative
value whatsoever insofar as the subject cargoes are concerned.
Section 2530 provides: Property Subject to Forfeiture Under Tariff and Customs Law. x x x

(L) Any article sought to be imported or exported:


1. Without going through a Customhouse, whether the act was consummated, frustrated or
attempted.

Since the subject rice was established to be of the imported variety and considering that the said cargoes
are not covered by proper import documents, the importation of the same fall squarely on the above
quoted provision of the TCCP.

With respect to the carrying vessel, MV "DON MARTIN", which is a common carrier, no evidence
sufficient enough to warrant its forfeiture in favor of the government was presented to satisfy the
provision of Section 2530 paragraph a and k of the TCCP. On the other hand, respondent/claimant was
able to show proof to defeat a forfeiture decree, by presentation of pertinent documents relative to the
following requirements, viz:

1. That the owner is engaged in the business for which the conveyance is generally
used;ChanRoblesVirtualawlibrary

2. That the owner is financially in a position to own such conveyance and

3. That the vessel has not been used for smuggling at least twice before. (Exhibit 1 & 2) in
compliance with the provision of Section 2531 oftheTCCP.

WHEREFORE, in light of the foregoing and by virtue of the authority vested in the undersigned under
Section 2312 of the Tariff and Customs Code of the Philippines, as amended, it is hereby ordered and
decreed that the 6,500 sacks of imported rice subject of this seizure proceedings be, as they are hereby
decreed forfeited in favor of the Government of the Republic of the Philippines to be disposed of in the
manner provided by law. It is further ordered and decreed that the carrying vessel MV "DON MARTIN" be
released to the owner/claimant and be cleared for its next destination, for insufficiency of evidence.

xxxx

SO ORDERED.12
chanrobleslaw

Pamulaklakin appealed, but BOC Deputy Commissioner Emma M. Rosqueta, in her decision dated April
19, 1999, upheld District Collector Pacasum, holding thusly:cralawlawlibrary

This Office is convinced that the 6,500 sacks of rice subject matter of this case are of foreign growth and
origin. No evidence of lawful entry of the said rice into the country as well as payment of duties and taxes
has been presented, hence, the said cargo is liable to forfeiture under Section 2530 (a), (f) and (I) - 1 of
the Tariff and Customs Code.

WHEREFORE, the decision of the District Collector of Customs, Port of Cagayan de Oro, ordering the
forfeiture of the 6,500 sacks of rice discharge (sic)/ seized from the M/V "DON MARTIN" is AFFIRMED. It is
further ordered and decreed that the said rice be immediately disposed of in accordance with law.

xxxx

SO ORDERED.13
chanrobleslaw

Meanwhile, the order to release the vessel, being adverse to the interest of the Government, was
elevated to the Secretary of Finance for automatic review pursuant to Section 2313 of the TCCP. In his 3rd
Indorsement dated May 11, 1999, then Secretary of Finance Edgardo B. Espiritu reversed the order for the
release of the vessel based on the finding that "the operator of the vessel is the shipper of the smuggled
goods.14

Consequently, on June 21, 1999, the petitioners brought a petition for review in the CTA (CTA Case No.
5890) to seek the nullification of the May 11, 1999 3rd Indorsement of the Secretary of Finance,15 and to
obtain the release of the rice shipment and the vessel. 16

Pending the resolution of the appeal, the CTA issued its resolution dated November 8, 1999 ordering the
release of the vessel and the rice cargo upon the petitioners' filing of GSIS Surety Bond 032899 and GSIS
Surety Bond 032900 in the respective amounts of P5,550,000.00 and P6,682,000.00 in favor of the BOC. 17

On May 22, 2001, the CTA rendered its decision in favor of the petitioners, disposing
thusly:cralawlawlibrary

IN LIGHT OF ALL THE FOREGOING, the decisions of the Respondents are hereby REVERSED and SET
ASIDE. Accordingly, the GSIS Surety Bonds in the total amount of PI2,232,000.00, which were earlier
posted by Petitioners for the release of the subject cargo of rice and its carrying vessel are hereby
ORDERED RELEASED for reasons aforestated. No costs.

SO ORDERED.18chanrobleslaw

The respondents filed their Motion for Partial Reconsideration,19 citing the sole ground that the April 19,
1999 decision by BOC Deputy Commissioner Rosqueta upholding the forfeiture of the 6,500 sacks of rice
had already attained finality; and arguing that the CTA lacked the jurisdiction to resolve the issue on the
forfeiture of the 6,500 sacks of rice because the appeal to the CTA had been limited to the forfeiture of
the vessel.

After the CTA denied the Motion for Partial Reconsideration on August 30, 2001,20 the respondents
appealed to the CA, reiterating that the CTA did not acquire jurisdiction over the issue of the forfeiture of
the 6,500 sacks of rice.21

The petitioners countered that the April 19, 1999 decision of BOC Deputy Commissioner Rosqueta did not
yet attain finality because they had been belatedly furnished a copy of it; and that the respondents raised
the issue of jurisdiction only after receiving the adverse decision of the CTA.

Pending resolution of the appeal, the CTA issued its resolution dated February 19, 2003 granting the
petitioners' Manifestation and Motion to Release/Cancel GSIS Surety Bonds. 22 Upon motion of the
respondents, however, the CA issued a 60-day temporary restraining order to enjoin the CTA from
implementing its February 19, 2003 resolution.23

On July 29, 2003, the CA promulgated its assailed decision,24 disposing:cralawlawlibrary

WHEREFORE, finding merit in the instant petition, the same is GIVEN DUE COURSE. The Decision and the
Resolution of the Court of Tax Appeals ordering the release of the 6,500 sacks of rice and its carrying
vessel M/V "Don Martin" is REVERSED and SET ASIDE and the same is hereby ORDERED forfeited in favor
of the Government. Costs against private respondents.

SO ORDERED.25chanrobleslaw

On September 25, 2003, the CA denied the petitioners' Motion for Reconsideration .26

Issues
In this appeal, the petitioners focus on the following issues, namely:cralawlawlibrary

A.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN DECLARING THE SUBJECT ARTICLES FORFEITED IN
FAVOR OF THE GOVERNMENT CONSIDERING THAT RICE SHIPMENT WAS PRODUCED AND PURCHASED
LOCALLY.

B.

WHETHER OR NOT THE FACTUAL DETERMINATION OF THE COURT OF TAX APPEALS CAN BE REVERSED BY
THE COURT OF APPEALS DESPITE THE FACT THAT THE DECISION OF THE TAX COURT IS SUPPORTED BY
SUBSTANTIAL EVIDENCE.27chanrobleslaw

In other words, to be determined are the following legal questions, namely: (1) the jurisdiction of the CTA
on the forfeiture of the 6,500 sacks of rice; and (2) the propriety of the forfeiture of the 6,500 sacks of rice
and its carrying vessel.

Ruling

The appeal is meritorious.

1.

The CTA had jurisdiction to resolve the issue on the


forfeiture of the 6,500 sacks of rice and of the vessel

At the time of the filing on June 21, 1999 in the CTA of the petition for review, 28 the jurisdiction of the CTA
was defined and governed by Section 7 of Republic Act No. 1125 (An Act Creating the Court of Tax
Appeals), which relevantly states:cralawlawlibrary

Section 7. Jurisdiction. - The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review
by appeal, as herein provided.

xxxx

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

x x x xchanrobleslaw

The TCCP contained a counterpart provision that reads:cralawlawlibrary

Section 2402. Review by Court of Tax Appeals. - The party aggrieved by a ruling of the Commissioner in
any matter brought before him upon protest or by his action or ruling in any case of seizure may appeal to
the Court of Tax Appeals, in the manner and within the period prescribed by law and regulations.

Unless an appeal is made to the Court of Tax Appeals in the manner and within the period prescribed by
laws and regulations, the action or ruling of the Commissioner shall be final and conclusive.chanrobleslaw
Conformably with the foregoing provisions, the action of the Collector of Customs was appealable to the
Commissioner of Customs, whose decision was subject to the exclusive appellate jurisdiction of the CTA,
whose decision was in turn appealable to the CA.29

Nonetheless, the respondents contend that the petitioners did not appeal the April 19, 1999 decision of
BOC Deputy Commissioner Rosqueta on the forfeiture of the 6,500 sacks of rice; and that in accordance
with Section 11 of R.A. No. 1125 the decision consequently became final and executory 30 days from their
receipt of the decision.

The respondents' contention is bereft of merit.

The April 19, 1999 decision of BOC Deputy Commissioner Rosqueta on the forfeiture of the 6,500 sacks of
rice would become final and immutable if the petitioners did not appeal it in the CTA within 30 days from
receipt thereof. Such period of appeal was expressly set in Section 11 of R.A. No. 1125, which relevantly
declares:cralawlawlibrary

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 the receipt of such decision or ruling.

xxx
chanrobleslaw

The petitioners insisted in their Comment/Opposition (To Respondents Motion for Partial
Reconsideration), however, that they were not furnished a copy of the decision of BOC Deputy
Commissioner Rosqueta; and that they only learned of the decision on June 1, 1999 after the issuance of
the May 11, 1999 3rd Indorsement of the Secretary of Finance.30 Considering that the respondents did not
dispute such insistence of the petitioners, and did not present evidence showing the contrary, the 30-day
period for filing the appeal in the CTA commenced to run for the petitioners only after June 1, 1999,
which was the date when they unquestionably acquired notice of the adverse decision. Accordingly, they
had until July 1, 1999 within which to appeal. With their petition for review being filed on June 21, 1999,
which was well within the 30-day period provided in Section 11, supra, their appeal was timely.

Moreover, the records indicated that the petitioners' appeal in the CTA raised the following issues, to
wit:chanRoblesvirtualLawlibrary

It is respectfully submitted that respondents erred:cralawlawlibrary

A.

IN DECLARING THAT THE SUBJECT VESSEL M/V "DON MARTIN" BE FORFEITED IN FAVOR OF THE
GOVERNMENT FOR VIOLATION OF SECTION 2530 (a) and (k) (sic) THE TARIFF AND CUSTOMS CODE OF THE
PHILIPPINES.

B.

IN DECLARING THAT THE SUBJECT CARGO OF RICE BE FORFEITED IN FAVOR OF THE GOVERNMENT
DESPITE THE TESTIMONIAL AND DOCUMENTARY EVIDENCE OF PETITIONERS INDISPUTABLY SHOWING
THAT THE SAME WAS PRODUCED AND ACQUIRED LOCALLY.31chanrobleslaw

and that they prayed for the release of both the vessel and its cargo of rice. They also extensively
presented in their petition for review their arguments on the illegality of the forfeiture of the rice. 32 Under
the circumstances, the issue on the legality of the forfeiture of the rice was fully raised and submitted in
the CTA, which thus had adequate basis to resolve it.

Lastly, under Section 2530 (a) and (k)33 of the TCCP, the forfeiture of a vehicle, vessel or aircraft is
anchored on its being used unlawfully in the transport of contraband or smuggled articles into or from
any Philippine port. Consequently, the determination of the legality of the forfeiture of the M/V Don
Martin was necessarily contingent on whether the customs authorities had validly and properly seized the
shipment of 6,500 sacks of rice on account of the rice being smuggled. Given this logical correlation, the
CTA could not be divested of its jurisdiction to determine the legality of the forfeiture of the rice.

In this regard, we hold it fitting to reiterate that:cralawlawlibrary

Once a court acquires jurisdiction over a case, it has wide discretion to look upon matters which, although
not raised as an issue, would give life and meaning to the law. Indeed, the Rules of Court recognize the
broad discretionary power of an appellate court to consider errors not assigned.

xxxx

Thus, an appellate court is clothed with ample authority to review rulings even if they are not assigned
as errors in the appeal in these instances: (a) grounds not assigned as errors but affecting jurisdiction
over the subject matter; (b) matters not assigned as errors on appeal but are evidently plain or clerical
errors within contemplation of law; (c) matters not assigned as errors on appeal but consideration of
which is necessary in arriving at a just decision and complete resolution of the case or to serve the
interests of justice or to avoid dispensing piecemeal justice; (d) matters not specifically assigned as
errors on appeal but raised in the trial court and are matters of record having some bearing on the issue
submitted which the parties failed to raise or which the lower court ignored; (e) matters not assigned as
errors on appeal but closely related to an error assigned; and (f) matters not assigned as errors on
appeal but upon which the determination of a question properly assigned, is dependent.34 (Emphasis
supplied.)
chanrobleslaw

2.
The CA did not reverse the
factual findings of the CTA

The petitioners argue that the CA should not have reversed the factual findings of the CTA because such
findings were supported by substantial evidence; that the CA should not have favored the assumption by
the Secretary of Finance that the operator of the vessel was also the shipper of the smuggled goods; and
that the cargo of rice should not have been found as unlawfully imported considering that all the
documents they had presented to prove the contrary had been verified and uncontested.

The petitioners' arguments are unfounded.

It is true that the CTA is a highly specialized body specifically created for the purpose of reviewing tax
cases; hence, its findings of fact are to be accorded utmost respect.35 Indeed, the factual findings of the
CTA, when supported by substantial evidence, are not to be disturbed on appeal unless there is a showing
that the CTA committed gross error or abuse in the appreciation of facts.36

Here, however, it was obvious that the CA did not modify or alter any of the factual findings of the CTA,
but only re-assessed the findings because of the conflicting conclusions reached by the CTA and the BOC.
After its re-assessment, the CA declared that the conclusions by the BOC and the Secretary of Finance
were more sustainable and convincing than those of the CTA.37 By so declaring, the CA did not change the
factual findings of the CTA but only arrived at a different interpretation of the findings that tilted its
appellate resolution in favor of the respondents. The CA thereby simply exercised its power of appellate
review. Indeed, the CA, as the appellate court, had the authority to either affirm, or reverse, or modify the
appealed decision of the CTA. To withhold from the CA its power to render an entirely new decision would
trench on its power of review, and would, in effect, render it incapable of correcting the patent errors of
the lower court.38

3.
The 6,500 sacks of rice were not unlawfully imported
Into the Philippines; hence, there was no legal ground
for the forfeiture of the rice and its carrying vessel

In resolving the issue whether the rice shipment constituted smuggling or unlawful importation, the CTA
observed that cralawlawlibrary

xxx [I]n order that a shipment be liable (to) forfeiture, it must be proved that fraud has been committed
by the consignee/importer to evade the payment of the duties due. This is clear under Section 2530 (1)
and (1) of the TCCP. To establish the existence of fraud, the onus probandi rests on the Respondents who
ordered the forfeiture of the shipment of rice and its carrying vessel M/V "DON MARTIN."

xxxx

The Special and Affirmative Defenses of the Respondents generally averred that the subject 6,500 bags of
rice are of imported variety which are not covered by proper import documents, hence should be
declared forfeited in favor of the government.

We do not agree. The said ratiocination of Respondents did not clearly indicate any actual commission of
fraud or any attempt or frustration thereof. As defined, actual or intentional fraud consist of deception
wilfully and deliberately done or resorted to in order to induce another to give up some right (Hon
Farolan, Jr. vs. Court of Tax Appeals, 217 SCRA 293). It must amount to intentional wrong-doing with the
sole object of avoiding the tax. (Aznar vs. Court of Tax Appeals, 58 SCRA 543).

The circumstances presented by the Respondents in their Answer do not reveal to us any kind of
deception committed by Petitioners. Such circumstances are nothing more than mere half-baked
premises that fail to support the proposition sought to be established which is the commission of fraud in
accordance with Section 2530 (f) and (1) of the TCCP, as amended.

xxxx

The Court is in total acquiescence with the argument of Petitioners that it is non sequitur to conclude that
the subject rice was imported simply because its grain length is more common in other foreign countries.
Firstly, the said laboratory analysis by both the NFA and Philippine Rice Research Institute are not
conclusive. In fact, the Head of the Rice Chemistry and Food Science Division of the Philippine Rice
Research Institute, Mr. James Patindol, admitted that it is premature to conclude that the samples are
indeed imported by simply relying on the grain length (Annex "H"). Secondly, these inconclusive findings
do not and cannot overcome the documentary evidence of Petitioners that show that said rice was
produced, milled and acquired locally. And thirdly, at the time the vessel M/V "DON MARTIN" and its
cargo of rice were seized on 26 January 1999, the agents of the EIIB and the Bureau of Customs never had
a probable cause that would warrant the filing of the seizure proceedings. The Government agents only
made their inquiries about the alleged smuggling only three (3) days after the seizure. This is a gross
violation of Section 2535 in relation to Section 2531 of the Tariff and Customs Code of the Philippines x x
x.39chanrobleslaw
The CA reversed the CTA, and adopted the findings by the District Collector Pacasum and the Secretary of
Finance to buttress its conclusion that the rice was of imported variety and origin; that there were no
proper import documents that accompanied the importation as required by law; and that the forfeiture of
the vessel was in order because its operator was also the shipper of the 6,500 sacks of rice. 40

To warrant forfeiture, Section 2530(a) and (f) of the TCCP requires that the importation must have been
unlawful or prohibited. According to Section 3601 of the TCCP: "[a]ny person who shall fraudulently
import or bring into the Philippines, or assist in so doing, any article, contrary to law, or shall receive,
conceal, buy, sell, or in any manner facilitate the transportation, concealment, or sale of such article after
importation, knowing the same to have been imported contrary to law, shall be guilty of smuggling."41

Was the rice cargo the product of smuggling or unlawful importation?

The resolution of this query requires the re-examination of the evidence. Ordinarily, the Court, not being
a trier of facts, does not do the re-examination, but in view of the conflicting conclusions reached by the
CTA and the CA on the matter, the Court should review and re-assess the evidence in order to resolve the
issues submitted in this appeal.42

After careful review, the Court upholds the CTA.

To warrant the forfeiture of the 6,500 sacks of rice and the carrying vessel, there must be a prior showing
of probable cause that the rice cargo was smuggled.43 Once probable cause has been shown, the burden
of proof is shifted to the claimant.44

The M/V Don Martin and its cargo of rice were seized and forfeited for allegedly violating Section 2530
(a), (f), (k) and (1), paragraph (1), of the TCCP, to wit:cralawlawlibrary

Section 2530. Properly Subject to Forfeiture Under Tariff and Customs Laws. - Any vehicle, vessel or
aircraft, cargo, articles and other objects shall, under the following conditions, be subject to
forfeiture:chanRoblesvirtualLawlibrary

a. Any vehicle, vessel or aircraft, including cargo, which shall be used unlawfully in the importation or
exportation of articles or in conveying and/or transporting contraband or smuggled articles in commercial
quantities into or from any Philippine port or place. The mere carrying or holding on board of contraband
or smuggled articles in commercial quantities shall subject such vessel, vehicle, aircraft or any other craft
to forfeiture; Provided, That the vessel, or aircraft or any other craft is not used as duly authorized
common carrier and as such a carrier it is not chartered or leased; x x x

xxxx

f. Any article the importation or exportation of which is effected or attempted contrary to law, or any
article of prohibited importation or exportation, and all other articles, which, in the opinion of the
Collector have been used, are or were entered to be used as instruments in the importation or
exportation of the former; x x x

xxxx

k. Any conveyance actually being used for the transport of articles subject to forfeiture under the tariff
and customs laws, with its equipage or trappings, and any vehicle similarly used, together with its
equipage and appurtenances including the beast, steam or other motive power drawing or propelling the
same. The mere conveyance of contraband or smuggled articles by such beast or vehicle shall be sufficient
cause for the outright seizure and confiscation of such beast or vehicle, but the forfeiture shall not be
effected if it is established that the owner or the means of conveyance used as aforesaid, is engaged as
common carrier and not chartered or leased, or his agent in charge thereof at the time has no knowledge
of the unlawful act;ChanRoblesVirtualawlibrary

1. Any article sought to be imported or exported:chanRoblesvirtualLawlibrary

(1) Without going through a customhouse, whether the act was consummated, frustrated or attempted; x
x x.

x x x xchanrobleslaw

Conformably with the foregoing, therefore, the respondents should establish probable cause prior to
forfeiture by proving: (1) that the importation or exportation of the 6,500 sacks of rice was effected or
attempted contrary to law, or that the shipment of the 6,500 sacks of rice constituted prohibited
importation or exportation; and (2) that the vessel was used unlawfully in the importation or exportation
of the rice, or in conveying or transporting the rice, if considered as contraband or smuggled articles in
commercial quantities, into or from any Philippine port or place.

A review of the records discloses that no probable cause existed to justify the forfeiture of the rice cargo
and the vessel.

To prove that the rice shipment was imported, rice samples were submitted to and examined by the
Philippine Rice Research Institute (PRRI), which, however, could not reach a definitive conclusion on the
origin of the rice shipment, and even deemed itself inadequate to reach such conclusion, opining that: "It
is premature to conclude though that your samples are indeed imported, by simply relying on the grain
length data. More thorough analyses need to be done." PRRI explained:cralawlawlibrary

xxx We are sorry to inform you, however, that our institute does not have the capability yet to identify
local milled rice from imported ones. Routine grain quality analysis in our institute only includes: grain size
and shape, % chalky grains, % amylose, % protein, gel consistency, gelatinization temperature, and
cooked rice texture. Based on experience, these parameters are not reliable enough to be used as criteria
in identifying local from imported cultivars.

The samples submitted to us are indica types. This further complicates the identification since our local
cultivars are indica types as well. However, based on our initial analysis, we noticed that the grain length
of your samples is unusually long. It is 7.2 mm for both Orion and Platinum 2000. Milled rice grain length
of most Philippine varities (sic) usually ranges from 5.8 to 6.9 mm only. We seldom encounter local
cultivars with milled rice grain length of more than 7.0 mm. I tried to browse the Handbook on Grain
Quality of World Rices (by Juliano and Villareal, 1993) and I found out that cultivars with grain length
above 7.0 mm are more common in the countries of Brazil, Bolivia, Guatemala, and Thailand. It is
premature to conclude though that your samples are indeed imported, by simply relying on the grain
length data. More thorough analyses need to be done.45 (Emphasis supplied.)chanrobleslaw

The National Food Authority (NFA) made a separate laboratory analysis of the rice grain samples, and
concluded that the samples resembled "NFA imported rice."46 It issued a certification dated January 29,
199947 to the effect that -cralawlawlibrary

xxx per Philippine Grains Standardization Program there was a mislabelling of the rice stocks samples
confiscated by Economic Intelligence and Investigation Bureau (EIIB) last January 27, 1999 unloaded
from MV Don Martin at Cagayan de Oro City port.

Observed defeciencies (sic) are as follows:


1. Some white sacks/containers were marked with Premium Rice (per PGS yellow color is for
premium variety while white color is for ordinary rice).

2. No information available on the quality parameters such as classification, grade, milling degree,
date of milling and its miller/packer on all containers used (with logo, Platinum 2000 and Orion).

chanrobleslaw

The results of the laboratory analyses of the rice samples were rendered by the PRRI and the NFA only on
February 4, 1999 and February 5, 1999, respectively.48 It is clear, therefore, that the evidence offered by
the respondents to establish that the 6,500 sacks of rice were smuggled or were the subject of illegal
importation was obtained only after the forfeiture of the 6,500 sacks of rice had been effected on January
26, 1999.

Moreover, there is no question that the proof of the rice being smuggled or the subject of illegal
importation was patently insufficient. Although the rice samples from the shipment dominantly bore
foreign rice characteristics as compared with the Philippine varieties, the PRRI itself opined that further
analysis was necessary to turn up with a more concrete result. But no additional analysis was made. There
was also no proof to establish that the petitioners had been responsible for the mislabelling in the
packaging of the rice shipment, or that the mislabelling had been intentionally done to evade the
payment of customs duties.

In contrast, the records showed that the 6,500 sacks of rice were of local origin, having been purchased
from Sablayan, Occidental Mindoro from a licensed grains dealer. The local origin was substantiated by
the official receipts, business license and certificate of registration issued by the NFA in favor of the
source in Sablayan, Occidental Mindoro, Mintu Rice Mill, and its proprietor, Godofredo Mintu.49

The petitioners likewise submitted a copy of the Coastwise License50 issued to the M/V Don Martin,
proving that the vessel had been registered only for coastwise trade. A craft engaged in the coastwise and
interisland trade was one that carried passengers and/or merchandise for hire between ports and places
in the Philippine Islands51 Under Section 902 of the TCCP, the right to engage in the Philippine coastwise
trade was limited to vessels carrying a certificate of Philippine registry,52 like the M/V Don Martin.53 To
legally engage in coastwise trade, the vessel owner must further submit other documents, like the bill of
lading and coastwise manifest,54 documents that were also presented by the petitioners during the
forfeiture proceedings.55 In the absence of any showing by the respondents that the vessel was licensed
to engage in trade with foreign countries and was not limited to coastwise trade, the inference that the
shipment of the 6,500 sacks of rice was transported only between Philippine ports and not imported from
a foreign country became fully warranted.

Here, the importation of rice was not among the prohibited importations provided under Section 101 56 of
the TCCP. Nor was there any other law that prohibited the importation of rice.

Still, the respondents insist that the 6,500 sacks of rice were unlawfully imported because the shipment
was not accompanied by the necessary import documents.

The insistence was unreasonable and unwarranted.

The law penalizes the importation of any merchandise in any manner contrary to law. 57 Yet, the shipment
of the 6,500 sacks of rice was clearly not contrary to law; hence, it did not constitute unlawful importation
as defined under Section 3601 of the TCCP. The phrase contrary to law in Section 3601 qualifies the
phrases imports or brings into the Philippines and assists in so doing, not the word article.
The respondents' insistence was based on the premise that the rice shipment was imported. The premise
was plainly erroneous. With the petitioners having convincingly established that the 6,500 sacks of rice
were of local origin, the shipment need not be accompanied by import documents. Nor was it shown that
the shipment did not meet other legal requirements. There were no other circumstances that indicated
that the 6,500 sacks of rice were fraudulently transported into the Philippines; on the contrary, the
petitioners submitted documents supporting the validity and regularity of the shipment.

It then becomes unavoidable to address the fate of the M/V Don Martin. The penalty of forfeiture could
be imposed on any vessel engaged in smuggling, provided that the following conditions were present, to
wit:cralawlawlibrary

(1) The vessel is "used unlawfully in the importation or exportation of articles into or from" the
Philippines;ChanRoblesVirtualawlibrary

(2) The articles are imported to or exported from "any Philippine port or place, except a port of entry"; or

(3) If the vessel has a capacity of less than 30 tons and is "used in the importation of articles into any
Philippine port or place other than a port of the Sulu Sea, where importation in such vessel may be
authorized by the Commissioner, with the approval of the department head." 58chanrobleslaw

With the absence of the first and second conditions, the M/V Don Martin must be released.

WHEREFORE, the Court GRANTS the petition for review on certiorari; REVERSES and SETS ASIDE the
decision promulgated on July 29, 2003 by the Court of Appeals in CA-G.R. SP No. 66725; REINSTATES the
decision rendered on May 22, 2001 by the Court of Tax Appeals; RELEASES and DISCHARGES GSIS Surety
Bond 032899 and GSIS Surety Bond 032900 in the total amount of P12,232,000.00; and CONSIDERS this
case CLOSED AND TERMINATED, without pronouncement on costs of suit.

SO ORDERED.

G.R. No. 209331, April 24, 2015

DEPARTMENT OF FINANCE, REPRESENTED BY HON. CESAR V. PURISIMA IN HIS OFFICIAL CAPACITY AS


SECRETARY, AND THE BUREAU OF CUSTOMS, REPRESENTED BY HON. ROZZANO RUFINO B. BIAZON, IN
HIS OFFICIAL CAPACITY AS COMMISSIONER OF CUSTOMS, Petitioners, v. HON. MARINO M. DELA CRUZ,
JR., IN HIS CAPACITY AS EXECUTIVE JUDGE, REGIONAL TRIAL COURT, MANILA, HON. FELICITAS O.
LARON-CACANINDIN, IN HER CAPACITY AS PRESIDING JUDGE, REGIONAL TRIAL COURT, MANILA,
BRANCH 17, RONNIE C. SILVESTRE, EDWARD P. DELA CUESTA, ROGEL C. GATCHALIAN, IMELDA D.CRUZ,
LILIBETH S. SANDAG, RAYMOND P. VENTURA, MA. LIZA S. TORRES, ARNEL C. ALCARAZ, MA. LOURDES V.
MANGAOANG, FRANCIS AGUSTIN Y. ERPE, CARLOS T. SO, MARIETTA D. ZAMORANOS, CARMELITA M.
TALUSAN,1 AREFILES H. CARREON,2 AND ROMALINO G. VALDEZ, Respondents.

Administrative Agencies; Civil Service Commission; Jurisdiction; The Civil Service Commission (CSC) has
jurisdiction over all employees of government branches, subdivisions, instrumentalities, and agencies,
including government-owned or -controlled corporations with original charters.The CSC has jurisdiction
over all employees of government branches, subdivisions, instrumentalities, and agencies, including
government-owned or controlled corporations with original charters. The CSC is the sole arbiter of
controversies relating to the civil service. The rule is that disciplinary cases and cases involving personnel
actions, including appointment through certification, promotion, transfer, reinstatement, reemployment,
detail, re-assignment, demotion, and separation, are within the exclusive jurisdiction of the CSC. This rule
is embodied in Section 1, Rule V of the Omnibus Rules Implementing Book V of Executive Order No. 292
and Other Pertinent Civil Service Laws (Omnibus Rules) which states: SECTION 1. x x x. As used in these
Rules, any action denoting movement or progress of personnel in the civil service shall be known as
personnel action. Such action shall include promotion, transfer, reinstatement, reemployment, detail,
secondment, reassign-ment, demotion and separation.

Detail; Words and Phrases; Under Section 8, Rule VII of the Omnibus Rules, [a] detail is the
movement of an employee from one department or agency which is temporary in nature, which does not
involve a reduction in rank, status or salary and does not require the issuance of another appointment.
Under Section 8, Rule VII of the Omnibus Rules, [a] detail is the movement of an employee from one
department or agency which is temporary in nature, which does not involve a reduction in rank, status or
salary and does not require the issuance of another appointment. CPO 189-2013 is an order detailing
personnel from the BOC to CPRO under the DOF.

Remedial Law; Civil Procedure; Exhaustion of Administrative Remedies; The doctrine of exhaustion of
administrative remedies allows administrative agencies to carry out their functions and discharge their
responsibilities within the specialized areas of their respective competence.The doctrine of exhaustion of
administrative remedies allows administrative agencies to carry out their functions and discharge their
responsibilities within the specialized areas of their respective competence. The doctrine entails lesser
expenses and provides for the speedier resolution of controversies. Therefore, direct recourse to the trial
court, when administrative remedies are available, is a ground for dismissal of the action. The doctrine,
however, is not without exceptions. Among the exceptions are: (1) where there is estoppel on the part of
the party invoking the doctrine; (2) where the challenged administrative act is patently illegal, amounting
to lack of jurisdiction; (3) where there is unreasonable delay or official inaction that will irretrievably
prejudice the complainant; (4) where the amount involved is relatively so small as to make the rule
impractical and oppressive; (5) where the question involved is purely legal and will ultimately have to be
decided by the courts of justice; (6) where judicial intervention is urgent; (7) where the application of the
doctrine may cause great and irreparable damage; (8) where the controverted acts violate due process;
(9) where the issue of non-exhaustion of administrative remedies had been rendered moot; (10) where
there is no other plain, speedy and adequate remedy; (11) where strong public interest is involved; and
(12) in quo warranto proceedings.

Executive Order No. 140; Section 9 of Executive Order (EO) No. 140 provides that the order shall
take effect immediately upon publication in two (2) newspapers of general circulation. EO No. 140 was
published in Manila Bulletin and Philippine Star on 17 September 2013. As such, EO No. 140 took effect on
17 September 2013.Respondents allege that EO No. 140 took effect only on 2 October 2013, fifteen
days after its publication in two newspapers of general circulation. Hence, respondents argue that when
CPO 189-2013 was issued, EO No. 140 was not yet effective. Article 2 of the Civil Code of the Philippines,
as amended by Executive Order No. 200, is clear on this issue. It states: Art. 2. Laws shall take effect after
fifteen days following the completion of their publication either in the Official Gazette, or in a newspaper
of general circulation in the Philippines, unless it is otherwise provided. The proviso unless it is otherwise
provided refers to an effectivity date other than after fifteen days following the completion of the laws
publication. Thus, it is within the discretion of the legislature, or the Executive Department in this case,
whether to shorten or extend the fifteen-day period as long as there is compliance with the requirement
of publication. Here, Section 9 of EO No. 140 provides that the order shall take effect immediately upon
publication in two (2) newspapers of general circulation. EO No. 140 was published in Manila Bulletin
and Philippine Star on 17 September 2013. As such, EO No. 140 took effect on 17 September 2013.
Detail; Under Section 8, Rule VII of the Omnibus Rules, a detail is temporary in nature. In fact, detail of
employees is only allowed for a maximum period for those occupying professional, technical, and scientific
positions.Under Section 8, Rule VII of the Omnibus Rules, a detail is temporary in nature. In fact, detail
of employees is only allowed for a maximum period for those occupying professional, technical, and
scientific positions.

Same; Section 2 of Civil Service Commission (CSC) Resolution No. 021181, dated 13 September
2002, clarified the maximum period of detail of employees; The detail shall be allowed only for a maximum
period of one (1) year. Details beyond one (1) year may be allowed provided it is with the consent of the
detailed employee.Section 2 of CSC Resolution No. 021181, dated 13 September 2002, clarified the
maximum period of detail of employees. It states: Section 2. Duration of the detail.The detail shall be
allowed only for a maximum period of one year. Details beyond one year may be allowed provided it is
with the consent of the detailed employee. The extension or renewal of the period of the detail shall be
within the authority of the mother agency. If the employee believes that there is no justification for the
detail, he/she may appeal his/her case to the proper Civil Service Commission Regional Office. Pending
appeal, the detail shall be executory unless otherwise ordered by said regional office. Decision of said
regional office may be further appealed to the Commission En Banc. In this case, CPO 189-2013 did not
provide for the period of respondents detail. It only provided that the order shall be effective
immediately and valid until sooner revoked, making the detail of respondents indefinite. There was
nothing to show that respondents were occupying professional, technical, and scientific positions that
would have allowed their detail for the maximum period provided under Section 8, Rule VII of the
Omnibus Rules. Further, CSC Resolution No. 021181 did not distinguish between an ordinary employee
and an employee occupying professional, technical, and scientific position. Hence, it should have been
specified that the maximum period of respondents detail should not exceed one year.

The case stemmed from the issuance of Executive Order No. 140 (EO 140) on 2 September 2013, which
created the Customs Policy Research Office (CPRO) in the Department of Finance (DOF). EO 140 states
that the CPRO "shall be responsible for reviewing the customs administration policies, rules and
procedures, and thereafter providing sound recommendations for the improvement of the same." Section
3 of EO 140 provides that "CPRO shall be composed of its organic personnel, as approved by the
Department of Budget and Management (DBM) upon recommendation of the DOF Secretary, augmented
and reinforced by DOF and BOC personnel as well as those detailed or seconded from other agencies,
whether attached to the DOF or not. x x x." Section 9 of EO 140 states that it shall "take effect
immediately upon publication in two (2) newspapers of general circulation." EO 140 was published in
Manila Bulletin and Philippine Star on 17 September 2013. On the same day of the publication of EO 140,
Bureau of Customs (BOC) Commissioner Rozzano Rufino B. Biazon (Commissioner Biazon) issued Customs
Personnel Order No. B-189-2013 (CPO 189-2013) detailing 27 BOC personnel holding the positions of
Collector of Customs V and VI, including respondents in this case, to CPRO "effective immediately and
valid until sooner revoked." CPO 189-2013 was approved by DOF Secretary Cesar V. Purisima (Secretary
Purisima). On 30 September 2013, respondents filed an action for Declaratory Relief with Application for
Temporary Restraining Order and/or Writ of Preliminary Injunction before the Regional Trial Court (RTC)
of Manila. On 1 October 2013, Executive Judge Dela Cruz issued a TRO for a period of 72 hours enjoining
petitioners or any person acting for and in their behalf from implementing CPO 189-2013. Thereafter, the
case was raffled to the sala of Judge Laron-Cacanindin. In the assailed Order of 4 October 2013, Judge
Laron-Cacanindin extended Executive Judge Dela Cruz's 72-hour TRO for 20 days or until 21 October 2013.
She then set the hearing for the issuance of a preliminary injunction on 18 October 2013. On 21 October
2013, petitioners filed a Petition for Certiorari and Prohibition before this Court, with prayer for the
issuance of a TRO or a writ of preliminary mandatory injunction. Petitioners alleged that the case involves
personnel action affecting public officers which is under the exclusive jurisdiction of the Civil Service
Commission (CSC). Petitioners also alleged that respondents failed to exhaust all administrative remedies
available to them before filing the petition before the RTC. Petitioners also alleged that CPO 189-2013 is
an internal personnel order with application that is limited to and only within BOC and as such, it cannot
be the subject of an action for declaratory relief. In their Comment, respondents alleged that the case
involves the validity and constitutionality of CPO 189-2013, and thus, it is beyond the jurisdiction of the
CSC. Respondents further alleged that EO 140 violated Article 2 of the Civil Code when it became effective
immediately after its publication. In their Reply, petitioners alleged that respondents only assailed the
validity of EO 140 to justify their filing of an action for declaratory relief. As regards its effectivity,
petitioners alleged that EO 140 states that it shall "take effect immediately upon publication in two (2)
newspapers of general circulation." In an Order dated 21 October 2013, Judge Laron-Cacanindin denied
respondents' application for the issuance of a writ of preliminary injunction. In an Order dated 5
November 2013, Judge Laron-Cacanindin inhibited herself from further hearing the case.

The Issues

The issues for determination by this Court are the following:

1. 1. Whether the RTC has jurisdiction over the action for declaratory relief filed by respondents;
2. 2. Whether respondents failed to exhaust administrative remedies in filing the action before the
RTC;
3. 3. Whether EO 140 violated Article 2 of the Civil Code when it became effective immediately
after its publication; and
4. 4. Whether CPO 189-2013 was validly issued.

The Ruling of this Court

Jurisdiction over the Petition

The CSC has jurisdiction over all employees of government branches, subdivisions, instrumentalities, and
agencies, including government-owned or controlled corporations with original charters.5 The CSC is the
sole arbiter of controversies relating to the civil service.6 The rule is that disciplinary cases and cases
involving personnel actions, including "appointment through certification, promotion, transfer,
reinstatement, reemployment, detail, reassignment, demotion, and separation," are within the exclusive
jurisdiction of the CSC.7 This rule is embodied in Section 1, Rule V of the Omnibus Rules Implementing
Book V of Executive Order No. 292 and Other Pertinent Civil Service Laws (Omnibus Rules) which states:
SECTION 1.x x x. As used in these Rules, any action denoting movement or progress of personnel in the
civil service shall be known as personnel action. Such action shall include promotion, transfer,
reinstatement, reemployment, detail, secondment, reassignment, demotion and separation, x x x.

Under Section 8, Rule VII of the Omnibus Rules, "[a] detail is the movement of an employee from one
department or agency which is temporary in nature, which does not involve a reduction in rank, status or
salary and does not require the issuance of another appointment." CPO 189-2013 is an order detailing
personnel from the BOC to CPRO under the DOF. A reading of the petition filed before the RTC shows that
respondents were questioning their mass detail and reassignment to CPRO. According to respondents,
their detail was carried out in bad faith and was meant to remove them from their permanent positions in
the BOC. The action appears to be a personnel action under the jurisdiction of the CSC. However, the
petition went beyond questioning the detail of respondents. Respondents further assailed the validity and
constitutionality of CPO 189-2013. Respondents alleged that CPO 189-2013 was issued even before EC)
140, pursuant to which CPO 189-2013 was issued, became effective. Respondents alleged that CPO 189-
2013 was issued to beat the deadline of the Commission on Elections' ban on personnel movement from
28 September 2013 to 20 October 2013 due to the scheduled barangay elections. When respondents
raised the issue of validity and constitutionality of CPO 189-2013, the issue took the case beyond the
scope of the CSC's jurisdiction because the matter is no longer limited to personnel action. Thus, the RTC
did not abuse its discretion in taking cognizance of the action.

Failure to Exhaust Administrative Remedies


Petitioners allege that respondents failed to exhaust their administrative remedies before filing the case
with the RTC. The doctrine of exhaustion of administrative remedies allows administrative agencies to
carry out their functions and discharge their responsibilities within the specialized areas of their
respective competence.8 The doctrine entails lesser expenses and provides for the speedier resolution of
controversies.9

Therefore, direct recourse to the trial court, when administrative remedies are available, is a ground for
dismissal of the action. The doctrine, however, is not without exceptions. Among the exceptions are: (1)
where there is estoppel on the part of the party invoking the doctrine; (2) where the challenged
administrative act is patently illegal, amounting to lack of jurisdiction; (3) where there is unreasonable
delay or official inaction that will irretrievably prejudice the complainant; (4) where the amount involved
is relatively so small as to make the rule impractical and oppressive; (5) where the question involved is
purely legal and will ultimately have to be decided by the courts of justice; (6) where judicial intervention
is urgent; (7) where the application of the doctrine may cause great and irreparable damage; (8) where
the controverted acts violate due process; (9) where the issue of non-exhaustion of administrative
remedies had been rendered moot; (10) where there is no other plain, speedy and adequate remedy; (11)
where strong public interest is involved; and (12) in quo warranto proceedings. 10

In this case, respondents allege that CPO 189-2013 is contrary to law and unconstitutional. Respondents
assail CPO 189-2013 as patently illegal, arbitrary, and oppressive. This case clearly falls within the
exceptions where exhaustion of administrative remedies need not be resorted to by respondents.

Effectivity of EO 140

Respondents allege that EO 140 took effect only on 2 October 2013, fifteen days after its publication in
two newspapers of general circulation. Hence, respondents argue that when CPO 189-2013 was issued,
EO 140 was not yet effective. Article 2 of the Civil Code of the Philippines, as amended by Executive Order
No. 200,11 is clear on this issue. It states:

Art. 2. Laws shall take effect after fifteen days following the completion of their publication either in the
Official Gazette, or in a newspaper of general circulation in the Philippines, unless it is otherwise provided.
The proviso "unless it is otherwise provided" refers to an effectivity date other than after fifteen days
following the completion of the law's publication.
12
Thus, it is within the discretion of the legislature, or the Executive Department in this case, whether to
shorten or extend the fifteen-day period13 as long as there is compliance with the requirement of
publication. Here, Section 9 of EO 140 provides that the "order shall take effect immediately upon
publication in two (2) newspapers of general circulation." EO 140 was published in Manila Bulletin and
Philippine Star on 17 September 2013. As such, EO 140 took effect on 17 September 2013. In addition, the
Court already ruled that "[interpretative regulations and those merely internal in nature, that is,
regulating only the personnel of the administrative agency and not the public, need not be published." 14
EO 140 is an internal regulation that affects primarily the personnel of the DOF and the BOC. It remains
valid even without publication.

Validity of CPO 189-2013

Respondents assail the validity of CPO 189-2013. Respondents allege that under EO 140, CPRO shall be
composed of its organic personnel, as approved by the DBM upon recommendation of the DOF Secretary.
The organic personnel was supposed to be augmented and reinforced by DOF and BOC personnel.
Respondents allege that they were detailed to CPRO even before its organic personnel could be
constituted. We rule for respondents. Section 3 of EO 140 provides:
SECTION 3. Personnel and Staffing Complement. The CPRO shall be composed of its organic personnel, as
approved by the Department of Budget and Management (DBM) upon recommendation of the DOF
Secretary, augmented and reinforced by DOF and BOC personnel as well as those detailed or seconded
from other agencies, whether attached to the DOF or not. In addition, the CPRO, upon approval of the
DOF Secretary, may hire or engage technical consultants to provide necessary support in the performance
of its mandate.

Respondents were supposed to augment and reinforce the existing organic personnel of CPRO. Yet, at the
time of respondents' detail, CPRO had not been formally organized. CPRO had no organic personnel that
had been approved by the DBM upon recommendation of the DOF Secretary. The DOF Secretary had yet
to promulgate rules and regulations and to prescribe procedures and processes to enable CPRO to
effectively exercise its powers and duties, as required by Section 4 of EO 140. In addition, under Section 8,
Rule VII of the Omnibus Rules, a detail is temporary in nature. In fact, detail of employees is only allowed
for a maximum, period for those occupying professional, technical, and scientific positions. 15

Section 8, Rule VII of the Omnibus Rules provides:

SEC. 8. A detail is the movement of an employee from one department or agency to another which is
temporary in nature, which does not involve a reduction in rank, status or salary and does not require the
issuance of another appointment. The employee detailed receives his salary only from his mother
unit/agency. Detail shall be allowed only for a maximum period in the case of employees occupying
professional, technical and scientific position. If the employee believes that there is no justification for the
detail, he may appeal his case to the Commission. Pending appeal, the decision to detail the employee
shall be executory unless otherwise ordered by the Commission.
Section 2 of CSC Resolution No. 021181, dated 13 September 2002, 16 clarified the maximum period of
detail of employees. It states:
Section 2. Duration of the detail. The detail shall be allowed only for a maximum period of one year.
Details beyond one year may be allowed provided it is with the consent of the detailed employee. The
extension or renewal of the period of the detail shall be within the authority of the mother agency. If the
employee believes that there is no justification for the detail, he/she may appeal his/her case to the
proper Civil Service Commission Regional Office. Pending appeal, the detail shall be executory unless
otherwise ordered by said regional office. Decision of said regional office may be further appealed to the
Commission en banc.
In this case, CPO 189-2013 did not provide for the period of respondents' detail. It only provided that the
order "shall be effective immediately and valid until sooner revoked," making the detail of respondents
indefinite. There was nothing to show that respondents were occupying professional, technical, and
scientific positions that would have allowed their detail for the maximum period provided under Section
8, Rule VII of the Omnibus Rules. Further, CSC Resolution No. 021181 did not distinguish between an
ordinary employee and an employee occupying professional, technical, and scientific position. Hence, it
should have been specified that the maximum period of respondents' detail should not exceed one year.
Petitioners assert, and we quote:
There is a cancer of corruption we must extinguish. The drive to rid the government of graft and
corruption deserves the support of everyone. The principle of good governance cannot, should not, be
trivialized nor oversimplified by tenuous whimpering and individualism intended to detract from the
urgent need to cleanse the Republic from a mainstream culture of unabated corruption, perpetuated with
impunity and sense of self-entitlement. The issue at hand is not about who, but what; it is not about
individual loss, but about national gain. Whether from the birth pains of reform, this nation can gain a
foothold, nay, a stride into restoring this nation into its prideful place from the clutches of a "kleptocratic
mafia" that had gained a strangehold into one of the nation's primary sources of revenue. 17

Indeed, we commend and support the reforms being undertaken in the different agencies of the
government. However, we cannot allow department heads to take shortcuts that will undermine and
disregard the basic procedures of the law.
WHEREFORE, we PARTIALLY GRANT the petition. We sustain the validity of Executive Order No. 140. We
rule that the Regional Trial Court has jurisdiction over the action for declaratory relief filed by
respondents. We further rule that Customs Personnel Order No. B-189-2013 was not validly issued.

SO ORDERED.

Peralta,*Del Castillo, and Mendoza, JJ., concur. Leonen, J., see separate dissenting opinion.

G.R. No. 193253, September 08, 2015

BUREAU OF CUSTOMS, Petitioner, v. THE HONORABLE AGNES VST DEVANADERA, ACTING SECRETARY,
DEPARTMENT OF JUSTICE; HONORABLE JOVENCITO R. ZUO, PEDRITO L. RANCES, ARMAN A. DE
ANDRES, PAUL CHI TING CO, KENNETH PUNDANERA, MANUEL T. CO, SALLY L. CO, STANLEY L. TAN,
ROCHELLE E. VICENCIO, LIZA R. MAGAWAY, JANICE L. CO, VIVENCIO ABAO, GREG YU, EDWIN
AGUSTIN, VICTOR D. PIAMONTE, UNIOIL PETROLEUM PHILIPPINES, INC., AND OILINK, INTERNATIONAL,
INC., Respondents.

Remedial Law; Civil Procedure; Courts; Jurisdiction; It is the duty of the courts to consider the
question of jurisdiction before they look into other matters involved in the case, even though such question
is not raised by any of the parties.Although the question of jurisdiction over the subject matter was not
raised at bench by either of the parties, the Court will first address such question before delving into the
procedural and substantive issues of the instant petition. After all, it is the duty of the courts to consider
the question of jurisdiction before they look into other matters involved in the case, even though such
question is not raised by any of the parties. Courts are bound to take notice of the limits of their authority
and, even if such question is neither raised by the pleadings nor suggested by counsel, they may recognize
the want of jurisdiction and act accordingly by staying pleadings, dismissing the action, or otherwise
noticing the defect, at any stage of the proceedings. Besides, issues or errors not raised by the parties may
be resolved by the Court where, as in this case, the issue is one of jurisdiction; it is necessary in arriving at
a just decision; and the resolution of the issues raised by the parties depend upon the determination of
the unassigned issue or error, or is necessary to give justice to the parties.

Same; Same; Same; Same; Court of Tax Appeals; Republic Act No. 9282; With the enactment of Republic
Act (RA) No. 9282, amending RA No. 1125 by expanding the jurisdiction of the Court of Tax Appeals (CTA),
enlarging its membership and elevating its rank to the level of a collegiate court with special jurisdiction, it
is no longer clear which between the Court of Appeals (CA) and the CTA has jurisdiction to review through
a petition for certiorari the Department of Justice (DOJ) resolution in preliminary investigations involving
tax and tariff offenses.The elementary rule is that the CA has jurisdiction to review the resolution of the
DOJ through a petition for certiorari under Rule 65 of the Rules of Court on the ground that the Secretary
of Justice committed grave abuse of his discretion amounting to excess or lack of jurisdiction. However,
with the enactment of Republic Act (R.A.) No. 9282, amending R.A. No. 1125 by expanding the jurisdiction
of the CTA, enlarging its membership and elevating its rank to the level of a collegiate court with special
jurisdiction, it is no longer clear which between the CA and the CTA has jurisdiction to review through a
petition for certiorari the DOJ resolution in preliminary investigations involving tax and tariff offenses.

Same; Same; Same; Same; Same; By virtue of Section 1, Article VIII of the 1987 Constitution, vesting
judicial power in the Supreme Court (SC) and such lower courts as may be established by law, to determine
whether or not there has been a grave abuse of discretion on the part of any branch or instrumentality of
the Government, in relation to Section 5(5), Article VIII thereof, vesting upon it the power to promulgate
rules concerning practice and procedure in all courts, the SC thus declares that the Court of Appeals (CAs)
original jurisdiction over a petition for certiorari assailing the Department of Justice (DOJ) resolution in a
preliminary investigation involving tax and tariff offenses was necessarily transferred to the Court of Tax
Appeals (CTA) pursuant to Section 7 of Republic Act (RA) No. 9282, and that such petition shall be
governed by Rule 65 of the Rules of Court, as amended.Concededly, there is no clear statement under
R.A. No. 1125, the amendatory R.A. No. 9282, let alone in the Constitution, that the CTA has original
jurisdiction over a petition for certiorari. By virtue of Section 1, Article VIII of the 1987 Constitution,
vesting judicial power in the Supreme Court and such lower courts as may be established by law, to
determine whether or not there has been a grave abuse of discretion on the part of any branch or
instrumentality of the Government, in relation to Section 5(5), Article VIII thereof, vesting upon it the
power to promulgate rules concerning practice and procedure in all courts, the Court thus declares that
the CAs original jurisdiction over a petition for certiorari assailing the DOJ resolution in a preliminary
investigation involving tax and tariff offenses was necessarily transferred to the CTA pursuant to Section 7
of R.A. No. 9282, and that such petition shall be governed by Rule 65 of the Rules of Court, as amended.
Accordingly, it is the CTA, not the CA, which has jurisdiction over the petition for certiorari assailing the
DOJ resolution of dismissal of the BOCs complaint-affidavit against private respondents for violation of
the TCCP.

Same; Same; Verification; Certification Against Forum Shopping; Despite the Bureau of Customs (BOCs)
failed attempt to comply with the requirement of verification and certification against forum shopping, the
Supreme Court (SC) cannot simply ignore the Court of Appeals (CAs) perfunctory dismissal of the petition
on such sole procedural ground vis--vis the paramount public interest in the subject matter and the
substantial amount involved.Faced with the issue of whether or not there is a need to relax the strict
compliance with procedural rules in order that the ends of justice may be served thereby and whether
special circumstances or compelling reasons are present to warrant a liberal interpretation of such
rules, the Court rules after a careful review of the merits of the case in the affirmative. Despite the
BOCs failed attempt to comply with the requirement of verification and certification against forum
shopping, the Court cannot simply ignore the CAs perfunctory dismissal of the petition on such sole
procedural ground vis--vis the paramount public interest in the subject matter and the substantial
amount involved, i.e., the alleged illegal withdrawal of oil products worth P181,988,627.00 with
corresponding duties and taxes worth P35,507,597.00. Due to the presence of such special circumstances
and in the interest of justice, the CA should have at least passed upon the substantive issue raised in the
petition, instead of dismissing it on such procedural ground. Although it does not condone the failure of
BOC to comply with the said basic requirement, the Court is constrained to exercise the inherent power to
suspend its own rules in order to do justice in this particular case.

Same; Same; Doctrine of Hierarchy of Courts; The Supreme Court (SC) stressed in The Diocese of Bacolod v.
Commission on Elections, 747 SCRA 1 (2015), that the doctrine of hierarchy of courts is not an iron-clad
rule, and that it has full discretionary power to take cognizance and assume jurisdiction over special civil
actions for certiorari filed directly with it for exceptionally compelling reasons or if warranted by the
nature of the issues clearly and specifically raised in the petition.Be that as it may, the Court stressed
in The Diocese of Bacolod v. Commission on Elections, 747 SCRA 1 (2015), that the doctrine of hierarchy of
courts is not an iron-clad rule, and that it has full discretionary power to take cognizance and assume
jurisdiction over special civil actions for certiorari filed directly with it for exceptionally compelling reasons
or if warranted by the nature of the issues clearly and specifically raised in the petition. Recognized
exceptions to the said doctrine are as follows: (a) when there are genuine issues of constitutionality that
must be addressed at the most immediate time; (b) when the issues involved are of transcendental
importance; (c) cases of first impression where no jurisprudence yet exists that will guide the lower courts
on the matter; (d) the constitutional issues raised are better decided by the Court; (e) where exigency in
certain situations necessitate urgency in the resolution of the cases; (f) the filed petition reviews the act
of a con- stitutional organ; (g) when petitioners rightly claim that they had no other plain, speedy, and
adequate remedy in the ordinary course of law that could free them from the injurious effects of
respondents acts in violation of their right to freedom of expression; and (h) the petition includes
questions that are dictated by public welfare and the advancement of public policy, or demanded by the
broader interest of justice, or the orders complained of were found to be patent nullities, or the appeal
was considered as clearly an inappropriate remedy. Since the present case includes questions that are
dictated by public welfare and the advancement of public policy, or demanded by the broader interest of
justice, as well as to avoid multiplicity of suits and further delay in its disposition, the Court shall directly
resolve the petition for certiorari, instead of referring it to the CTA.

Same; Same; Policy of Non-Interference; The settled policy of noninterference in the prosecutors
exercise of discretion requires the courts to leave to the prosecutor and to the Department of Justice (DOJ)
the determination of what constitutes sufficient evidence to establish probable cause.On the substantive
issue of whether the Acting Secretary of Justice gravely abused her discretion in affirming the dismissal of
the BOCs complaint-affidavit for lack of probable cause, the settled policy of non-interference in the
prosecutors exercise of discretion requires the courts to leave to the prosecutor and to the DOJ the
determination of what constitutes sufficient evidence to establish probable cause.
Same; Criminal Procedure; Probable Cause; Words and Phrases; Probable cause for purposes of filing a
criminal information is defined as such facts as are sufficient to engender a well-founded belief that a
crime has been committed and the respondent is probably guilty thereof, and should be held for trial.
Probable cause for purposes of filing a criminal information is defined as such facts as are sufficient to
engender a well-founded belief that a crime has been committed and the respondent is probably guilty
thereof, and should be held for trial. As explained in Sy v. Secretary of Justice, 511 SCRA 92 (2006), citing
Villanueva v. Secretary of Justice, 475 SCRA 495 (2005): x x x [Probable cause] is such a state of facts in the
mind of the prosecutor as would lead a person of ordinary caution and prudence to believe or entertain
an honest or strong suspicion that a thing is so. The term does not mean actual or positive cause; nor
does it import absolute certainty. It is merely based on opinion and reasonable belief. Thus, a finding of
probable cause does not require an inquiry into whether there is sufficient evidence to procure a
conviction. It is enough that it is believed that the act or omission complained of constitutes the offense
charged. Precisely, there is a trial for the reception of evidence of the prosecution in support of the
charge.

Criminal Law; Smuggling; In unlawful importation, also known as outright smuggling, goods and
articles of commerce are brought into the country without the required importation documents, or are
disposed of in the local market without having been cleared by the Bureau of Customs (BOCs) or other
authorized government agencies, to evade the payment of correct taxes, duties and other charges.In
unlawful importation, also known as outright smuggling, goods and articles of commerce are brought into
the country without the required importation documents, or are disposed of in the local market without
having been cleared by the BOC or other authorized government agencies, to evade the payment of
correct taxes, duties and other charges. Such goods and articles do not undergo the processing and
clearing procedures at the BOC, and are not declared through submission of import documents, such as
the import entry and internal revenue declaration.

Same; Technical Smuggling; Words and Phrases; In various fraudulent practices against customs revenue,
also known as technical smuggling, the goods and articles are brought into the country through
fraudulent, falsified or erroneous declarations, to substantially reduce, if not totally avoid, the payment of
correct taxes, duties and other charges.In various fraudulent practices against customs revenue, also
known as technical smuggling, on the other hand, the goods and articles are brought into the country
through fraudulent, falsified or erroneous declarations, to substantially reduce, if not totally avoid, the
payment of correct taxes, duties and other charges. Such goods and articles pass through the BOC, but
the processing and clearing procedures are attended by fraudulent acts in order to evade the payment of
correct taxes, duties, and other charges. Often committed by means of misclassification of the nature,
quality or value of goods and articles, undervaluation in terms of their price, quality or weight, and
misdeclaration of their kind, such form of smuggling is made possible through the involvement of the
importers, the brokers and even some customs officials and personnel.

Same; Smuggling; The Court holds that private respondents cannot be charged with unlawful
importation under Section 3601 of the Tariff and Customs Code of the Philippines (TCCP) because there is
no allegation in the Bureau of Customs (BOCs) complaint-affidavit to the effect that they committed any
of the following acts: (1) fraudulently imported or brought into the Philippines the subject petroleum
products, contrary to law; (2) assisted in so doing; or (3) received, concealed, bought, sold or in any
manner facilitated the transportation, concealment or sale of such goods after importation, knowing the
same to have been imported contrary to law.The Court holds that private respondents cannot be
charged with unlawful importation under Section 3601 of the TCCP because there is no allegation in the
BOCs complaint-affidavit to the effect that they committed any of the following acts: (1) fraudulently
imported or brought into the Philippines the subject petroleum products, contrary to law; (2) assisted in
so doing; or (3) received, concealed, bought, sold or in any manner facilitated the transportation,
concealment or sale of such goods after importation, knowing the same to have been imported contrary
to law.

Same; Same; Neither could private respondents be charged with various fraudulent practices against
customs revenue under Section 3602 of the Tariff and Customs Code of the Philippines (TCCP) as the above
allegations do not fall under any of the acts or omissions constituting such crime/s.Neither could private
respondents be charged with various fraudulent practices against customs revenue under Section 3602 of
the TCCP as the above allegations do hot fall under any of the following acts or omissions constituting
such crime/s: (1) making or attempting to make any entry of imported or exported article: (a) by means of
any false or fraudulent invoice, declaration, affidavit, letter, paper or by any means of any false
statement, written or verbal; or (b) by any means of any false or fraudulent practice whatsoever; or (2)
knowingly effecting any entry of goods, wares or merchandise, at less than the true weight or measures
thereof or upon a false classification as to quality or value, or by the payment of less than the amount
legally due; or (3) knowingly and wilfully filing any false or fraudulent entry or claim for the payment of
drawback or refund of duties upon the exportation of merchandise; or (4) making or filing any affidavit,
abstract, record, certificate or other document, with a view to securing the payment to himself or others
of any drawback, allowance or refund of duties on the exportation of merchandise, greater than that
legally due thereon.
Remedial Law; Special Civil Actions; Certiorari; While it is true that the sole office of the writ of certiorari is
the correction of errors of jurisdiction, including the commission of grave abuse of discretion amounting to
lack of jurisdiction, and does not include a correction of the public respondents evaluation of the evidence
and factual findings thereon, it is sometimes necessary to delve into factual issues in order to resolve the
allegations of grave abuse of discretion as a ground for the special civil action of certiorari.While it is
true that the sole office of the writ of certiorari is the correction of errors of jurisdiction, including the
commission of grave abuse of discretion amounting to lack of jurisdiction, and does not include a
correction of the public respondents evaluation of the evidence and factual findings thereon, it is
sometimes necessary to delve into factual issues in order to resolve the allegations of grave abuse of
discretion as a ground for the special civil action of certiorari.

Private respondent UNIOIL Petroleum Philippines, Inc. is engaged in marketing, distribution, and sale of
petroleum, oil and other products, while its co-respondent OILINK International, Inc. is engaged in
manufacturing, importing, exporting, buying, selling, or otherwise dealing in at wholesale and retails of
petroleum, oil, gas and of any and all refinements and byproducts thereof. Except for respondent Victor
D. Piamonte who is a Licensed Customs Broker, the following private respondents are either officers or
directors of UNIOIL or OILINK:ChanRoblesvirtualLawlibrary

1. Paul Chi Ting Co - Chairman of UNIOIL and OILINK


2. Kenneth Pundanera - President/Director of UNIOIL
3. Manuel T. Co - Officer/Director of UNIOIL
4. Sally L. Co - Officer/Director of UNIOIL
5. Stanley L. Tan - Officer/Director of UNIOIL
6. Rochelle E. Vicencio - Corporate Administrative Supervisor of UNIOIL
7. Liza R. Magaway - President of OILINK
8. Janice L. Co - Director of OILINK
9. Vivencio Abao - Director of OILINK
10. Greg Yu - Director of OILINK
11. Edwin Agustin - Corporate Secretary of OILINK

On January 30, 2007, Commissioner Napoleon L. Morales of petitioner Bureau of Customs (BOC) issued
Audit Notification Letter (ANL) No. 0701246,3 informing the President of OILINK that the Post Entry Audit
Group (PEAG) of the BOC will be conducting a compliance audit, including the examination, inspection,
verification and/or investigation of all pertinent records of OILINK's import transactions for the past three
(3)-year period counted from the said date.

On March 2, 2007, a pre-audit conference was held between the BOC Audit Team4 and the
representatives of OILINK.5 During the conference, the Audit Team explained to OILINK representatives
the purpose of the post-entry audit and the manner by which it would be conducted, and advised it as to
the import documents required for such audit.

On March 14, 2007, OILINK submitted to the Audit Team the following documents: Post-Entry Audit
Group General Customs Questionnaire, General Information Sheet for the year 2006, SEC Registration,
Articles of Incorporation, Company By-laws, and Audited Financial Report for the year 2005.

On April 20, 2007, the Audit Team requested OILINK to submit the other documents stated in the List of
Initial Requirements for Submission, namely: 2004 Audited Financial Report, 2004-2006 Quarterly VAT
Returns with the accompanying schedule of importations, Organizational chart/structure, and List of
foreign suppliers with details on the products imported and the total amount, on a yearly basis.

On May 7, 2007, OILINK expressed its willingness to comply with the request for the production of the
said documents, but claimed that it was hampered by the resignation of its employees from the
Accounting and Supply Department. OILINK also averred that it would refer the matter to the
Commissioner of Customs in view of the independent investigation being conducted by the latter.

On June 4, 2007, OILINK sent a letter stating that the documents which the Audit Team previously
requested were available with the Special Committee of the BOC, and that it could not open in the
meantime its Bureau of Internal Revenue (BIR) - registered books of accounts for validation and review
purposes.

In a letter dated July 11, 2007, the Audit Team informed OILINK of the adverse effects of its request for
the postponement of the exit conference and its continuous refusal to furnish it the required documents.
It advised OILINK that such acts constitute as waiver on its part to be informed of the audit findings and
an administrative case would be filed against it, without prejudice to the filing of a criminal action.

On July 24, 2007, Commissioner Morales approved the filing of an administrative case against OILINK for
failure to comply with the requirements of Customs Administrative Order (CAO) No. 4-2004.6 Such case
was filed on July 30, 2007.

On September 20, 2007, an Order was issued by the Legal Service of the BOC, submitting the case for
resolution in view of OILINK's failure to file its Answer within the prescribed period.

On December 14, 2007, the Legal Service of the BOC rendered a Decision finding that OILINK violated
Section IV.A.2(c) and (e) of CAO 4-20047 when it refused to furnish the Audit Team copies of the required
documents, despite repeated demands. The dispositive portion of the Decision
states:ChanRoblesvirtualLawlibrary

WHEREFORE, in view of the foregoing, this Office finds herein respondent liable for violating Sections
IV.A.2 (c) and (e) of Customs Administrative Order No. 4-2004, and a DECISION is hereby
rendered:cralawlawlibrary
1. Ordering OILINK INTERNATIONAL CORPORATION to pay the equivalent of twenty percent (20%) ad
valorem on the article/s subject of the Importation for which no records were kept and maintained as
prescribed in Section 2504 of the Customs Code in the amount of Pesos: Two Billion Seven Hundred
Sixty-Four Million Eight Hundred Fifty-Nine Thousand Three Hundred Four and 80/100 (Php
2,764,859,304.80);

2. Ordering the Bureau of Customs to hold the delivery or release of subsequent imported articles to
answer for the fine, any revised assessment, and/or as a penalty for failure to keep records.
This is without prejudice to the filing of a criminal case or any appropriate legal action against the
importer in order to protect the interest of the government and deter other importers from committing
the same offense.

SO ORDERED8

Pursuant to the Decision dated December 14, 2007, Commissioner Morales, in a letter9 of even date,
directed the President of OILINK to pay the BOC the administrative fine of P2,764,859,304.80 for violation
of CAO No. 4-2004, in relation to Section 2504 of the TCCP. Copy of the said Decision and letter were
served to OILINK through personal service on December 28, 2007. 10cralawrednad

On March 13, 2008, Atty. Noemi B. Alcala, Officer-in-Charge, Collection Service, Revenue and Monitoring
Group, sent a final demand letter for OILINK to settle the administrative fine, otherwise, the BOC will be
compelled to file the necessary legal action and put in force Section 150811 of the TCCP against its
succeeding shipments to protect the government's interest. 12cralawrednad

On April 23, 2008, a Hold Order13 was issued by Horacio P. Suansing, Jr., District Collector, Port of Manila,
against all shipments of OILINK for failure to settle its outstanding account with the BOC and to protect
the interest of the government pursuant to Section 1508 of the TCCP.

On May 2, 2008, Rochelle E. Vicencio, Corporate Administrative Supervisor of UNIOIL, citing the existing
Terminalling Agreement dated January 2, 2008 with OILINK for the Storage of UNIOIL's aromatic process
oil and industrial lubricating oils (collectively, "base oils"), requested District Collector Suansing Jr. to allow
it to withdraw base oils from OILINK's temporarily closed Terminal.

On May 6, 2008, Commissioner Morales granted the request of UNIOIL to withdraw its base oils stored at
OILINK's terminal/depot based on the Terminalling Agreement between the two companies, subject to
the following conditions:ChanRoblesvirtualLawlibrary

1. Only Unioil products shall be withdrawn subject to proper inventory by the BIR and BOC.
2. Appropriate duties and taxes due on the products to be withdrawn are fully paid or settled.
3. The company should allow the operation/withdrawal to be closely monitored and continuously
underguarded by assigned Customs personnel.14

On May 9, 2008, a Warrant of Seizure and Detention (WSD), docketed as Seizure Identification (S.I.) No.
2008-082, was issued by District Collector Suansing Jr., directing the BOC officials to seal and padlock the
oil tanks/depots of OILINK located in Bataan.
On May 12, 2008, Kenneth C. Pundanera, Operations Manager of UNIOIL, requested Zaldy E. Almoradie,
District Collector of Mariveles, Bataan, for permission to release UNIOIL-owned products from OILINK's
storage terminal. Pertinent portion of the request letter reads:ChanRoblesvirtualLawlibrary

Unioil is a licensed importer of various Petroleum Products by virtue of its import license LTAD-0-021-
2002 issued on March 26, 2002 which was revised to include all other petroleum products in 2007
through LTAMII (P) 001-10-07-13639. To pursue its line of business, Unioil has an existing Terminalling
Agreement with Oilink for the storage of various Unioil products at the Oilink terminal located at Lucanin
Pt, Mariveles, Bataan.

In view of the said temporary closure of Oilink's terminal, Unioil is currently unable to fully utilize its
leased tanks as well as make use of the products contained therein. We understand that there is still an
unresolved issue between Oilink and the Bureau of Customs. However, with all due respect, said issue
should not affect Unioil because it is not a party to the same, furthermore there is a legal and binding
terminalling agreement between Oilink and Unioil which should be honored.

Last May 8, 2008, an asphalt importation for Unioil Petroleum Philippines, Inc. arrived in Mariveles,
Bataan. This was issued the corresponding discharging permit by the Bureau of Customs. All duties, excise
taxes and value added taxes for this product have already been settled. However, we are still unable to
withdraw these products in order to serve our customers who are using the product to supply major
government infrastructure projects in the country.

In line with the endorsement coming from the Bureau of Customs Commissioner Napoleon D. Morales
issued last May 6, 2008, Unioil has complied with the conditions stipulated therein which
are:ChanRoblesvirtualLawlibrary

1. Only Unioil products shall be withdrawn subject to proper inventory by the BIR and BOC.

2. Appropriate duties and taxes due on the products to be withdrawn are fully paid or settled.

3. The company (Unioil) should allow the operation/withdrawal to be closely monitored and continuously
underguarded by assigned Customs personnel.

In this regard, may we respectfully request your good office to please allow Unioil to withdraw from
Oilink's terminal its products which are stored in the following tanks[:] 15cralawrednad

TANK PROD CONTENTS (Liters)


2 diesel 2,171,670.00
6 rexo 1,862,846.00
10 asphalt 4,573.14
13 gasoline 809,345.00
14 gasoline 746,629.00
17 diesel 360,097.00
19 sn500 203,659.00
20 sn500 643,236.00

In the same request letter, District Collector Almoradie approved the release of the above petroleum
products through a handwritten note dated May 12, 2008: "All concerned: Pls. allow the release of the
Unioil-owned products from the Oilink Storage Terminal per this request. Thanks."16cralawrednad

On May 15, 2008, Pundanera wrote a clarificatory letter pursuant to the verbal instruction of District
Collector Almoradie to explain the withdrawal of products from the Terminal of OILINK, to
wit:ChanRoblesvirtualLawlibrary

As far as Unioil is concerned, we affirm to your good office that the products withdrawn/loaded at the
Terminal are entirely Unioil products. Unioil owns these products pursuant to its supply and terminalling
agreements with Oilink. (We shall be submitting to you copies of these documents as soon as they arrive
from our office in Manila.) In addition, due to the issue involving Oilink and the Bureau of Customs, Unioil
was forced to secure its petroleum products from local sources in order to comply with its valid
contractual commitments.

Unioil intended to withdraw these products because it believed in good faith and based on documents in
its possession that it is allowed to do so. Unioil based its intention pursuant to the Indorsements of the
Collector of the Port of Manila as well as the Office of the Commissioner that allowed the withdrawal of
Unioil products subject to compliance with the three (3) conditions specified in the abovementioned
Indorsements.

This being the precedent, we believe in good faith that, since Unioil owns the products, and it is
considered a stranger to the issue between Oilink and the Bureau, then Unioil is allowed to withdraw the
products it owns subject to the compliance with the three (3) stated conditions. Besides, any withdrawal
is covered by an appropriate delivery receipt, which would clearly indicate that Unioil owns the products
being withdrawn.17

In a complaint-affidavit dated December 15, 2008, Atty. Balmyrson M. Valdez, a member of the petitioner
BOC's Anti-Oil Smuggling Coordinating Committee that investigated the illegal withdrawal by UNIOIL of oil
products consigned to OILINK, valued at P181,988,627.00 with corresponding duties and taxes in the
amount of P35,507,597.00, accused the private respondents of violation of Sections 360118 and 3602,19 in
relation to Sections 250320 and 2530,21 paragraphs f and 1 (3), (4) and (5), of the TCCP.

In a letter22 dated December 15, 2008, Commissioner Morales referred to the Office of Chief State
Prosecutor Jovencito R. Zuno the said complaint-affidavit, together with its annexes, for preliminary
investigation. During the said investigation, BOC's counsel appeared and all of the private respondents
submitted their respective counter-affidavits.

In a Resolution23 dated May 29, 2009, public respondent Arman A. De Andres, State Prosecutor of the
Department of Justice (DOJ), recommended the dismissal of the complaint-affidavit for lack of probable
cause. The Resolution was approved by public respondents Assistant Chief State Prosecutor Pedrito L.
Ranees and Chief State Prosecutor Zuflo. On automatic review, the Resolution was affirmed by then
Secretary of Justice Raul M. Gonzales.24cralawrednad

Dissatisfied, the BOC filed a motion for reconsideration which was denied by the public respondent, the
Acting Secretary of Justice Agnes VST Devanadera, in a Resolution 25cralawred dated December 28, 2009.

On March 11, 2010, the BOC filed a petition for certiorari with the CA.

In the Resolution dated March 26, 2010, the CA dismissed outright the petition due to procedural
defects:ChanRoblesvirtualLawlibrary

The instant petition (i) contains no explanation why service thereof was not done personally (Sec. 11, Rule
13, 1997 Rules of Civil Procedure); (ii) shows that it has no proper verification and certification against
forum shopping and (iii) the docket and other lawful fees payment is short by P1,530.00 26
In the Resolution dated August 4, 2010, the CA denied the private respondents' motion for
reconsideration of the March 26, 2010 Resolution, as follows:ChanRoblesvirtualLawlibrary

We made a cursory examination of the petition filed in this case as well as the whole rollo of the case. It is
our finding that, up to the date hereof, the petitioner has not duly submitted to this Court another set of
petition with a certification against forum shopping embodied therein or appended thereto. Thus, the
petition really suffers from a fatal defect until now, and so, the petitioner has to bear the consequence
thereof.27

The CA stressed that procedural rules are not to be belittled or dismissed simply because their non-
observance may have resulted in prejudice to a party's substantive rights. Like all rules, they are required
to be followed except only when, for the most persuasive of reasons, they may be relaxed to relieve a
litigant of an injustice not commensurate with the degree of thoughtlessness in not complying with the
procedure prescribed.

While it is true that litigation is not a game of technicalities, this does not mean that Rules of Court may
be ignored at will and at random to the prejudice of the orderly presentation and assessment of the issues
and their just resolution.

Aggrieved, the BOC filed the instant petition for review on certiorari, raising the following
issues:ChanRoblesvirtualLawlibrary

WHETHER THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT DENIED PETITIONER'S
MOTION FOR RECONSIDERATION SOLELY ON THE GROUND THAT, ALLEGEDLY, IT DID NOT RECEIVE THE
SECOND AND COMPLETE COPY OF THE PETITION, CONTAINING THE VERIFICATION AND CERTIFICATION
AGAINST FORUM SHOPPING.

WHETHER THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN LAW AND JURISPRUDENCE WHEN
IT AFFIRMED ITS 26 MARCH 2010 RESOLUTION, DISMISSING THE PETITION ON ACCOUNT OF MERE
TECHNICALITIES.

WHETHER THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT DID NOT LOOK
INTO THE MERITS OF THE CASE, WHERE IT WAS CLEARLY ESTABLISHED THAT THERE IS PROBABLE CAUSE
TO INDICT RESPONDENTS FOR TRIAL FOR VIOLATION OF SECTION 3601 AND 3602 IN RELATION TO
SECTION 2530, PARAGRAPHS (E), AND SECTION 3604 (D), (E), (F), AND (H) OF THE TCCP, AS AMENDED. 28

The petition is partly meritorious.

Although the question of jurisdiction over the subject matter was not raised at bench by either of the
parties, the Court will first address such question before delving into the procedural and substantive
issues of the instant petition. After all, it is the duty of the courts to consider the question of jurisdiction
before they look into other matters involved in the case, even though such question is not raised by any
of the parties.29 Courts are bound to take notice of the limits of their authority and, even if such question
is neither raised by the pleadings nor suggested by counsel, they may recognize the want of jurisdiction
and act accordingly by staying pleadings, dismissing the action, or otherwise noticing the defect, at any
stage of the proceedings.30 Besides, issues or errors not raised by the parties may be resolved by the
Court where, as in this case, the issue is one of jurisdiction; it is necessary in arriving at a just decision; and
the resolution of the issues raised by the parties depend upon the determination of the unassigned issue
or error, or is necessary to give justice to the parties.31cralawrednad

On the issue of whether or not the CA has certiorari jurisdiction over the resolution of the Acting
Secretary of Justice, affirming the dismissal of the complaint-affidavit for violation of provisions of the
TCCP due to lack of probable cause, the Court rules in negative.

The elementary rule is that the CA has jurisdiction to review the resolution of the DOJ through a petition
for certiorari under Rule 65 of the Rules of Court on the ground that the Secretary of Justice committed
grave abuse of his discretion amounting to excess or lack of jurisdiction.32 However, with the enactment33
of Republic Act (R.A.) No. 9282, amending R.A. No. 1125 34 by expanding the jurisdiction of the CTA,
enlarging its membership and elevating its rank to the level of a collegiate court with special jurisdiction, it
is no longer clear which between the CA and the CTA has jurisdiction to review through a petition for
certiorari the DOJ resolution in preliminary investigations involving tax and tariff offenses.

Apropos is City of Manila v. Hon. Grecia-Cuerdo35 where the Court en banc declared that the CTA has
appellate jurisdiction over a special civil action for certiorari assailing an interlocutory order issued by the
RTC in a local tax case, despite the fact that there is no categorical statement to that effect under R.A. No.
1125, as well as the amendatory R.A. No. 9282. Thus:ChanRoblesvirtualLawlibrary

x x x Section 5 (1), Article VIII of the 1987 Constitution grants power to the Supreme Court, in the exercise
of its original jurisdiction, to issue writs of certiorari, prohibition and mandamus. With respect to the
Court of Appeals, Section 9 (1) of Batas Pambansa Blg. 129 (BP 129) gives the appellate court, also in the
exercise of its original jurisdiction, the power to issue, among others, a writ of certiorari, whether or not in
aid of its appellate jurisdiction. As to Regional Trial Courts, the power to issue a writ of certiorari, in the
exercise of their original jurisdiction, is provided under Section 21 of BP 129.

The foregoing notwithstanding, while there is no express grant of such power, with respect to the CTA,
Section 1, Article VIII of the 1987 Constitution provides, nonetheless, that judicial power shall be vested in
one Supreme Court and in such lower courts as may be established by law and that judicial power
includes the duty of the courts of justice to settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government.

On the strength of the above constitutional provisions, it can be fairly interpreted that the power of the
CTA includes that of determining whether or not there has been grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of the RTC in issuing an interlocutory order in cases falling within
the exclusive appellate jurisdiction of the tax court. It, thus, follows that the CTA, by constitutional
mandate, is vested with jurisdiction to issue writs of certiorari in these cases.

Indeed, in order for any appellate court to effectively exercise its appellate jurisdiction, it must have the
authority to issue, among others, a writ of certiorari. In transferring exclusive jurisdiction over appealed
tax cases to the CTA, it can reasonably be assumed that the law intended to transfer also such power as is
deemed necessary, if not indispensable, in aid of such appellate jurisdiction. There is no perceivable
reason why the transfer should only be considered as partial, not total.

xxxx

Furthermore, Section 6, Rule 135 of the present Rules of Court provides that when by law, jurisdiction is
conferred on a court or judicial officer, all auxiliary writs, processes and other means necessary to carry it
into effect may be employed by such court or officer.

If this Court were to sustain petitioners' contention that jurisdiction over their certiorari petition lies with
the CA, this Court would be confirming the exercise by two judicial bodies, the CA and the CTA, of
jurisdiction over basically the same subject matter - precisely the split-jurisdiction situation which is
anathema to the orderly administration of justice. The Court cannot accept that such was the legislative
motive, especially considering that the law expressly confers on the CTA, the tribunal with the specialized
competence over tax and tariff matters, the role of judicial review over local tax cases without mention of
any other court that may exercise such power. Thus, the Court agrees with the ruling of the CA that since
appellate jurisdiction over private respondents' complaint for tax refund is vested in the CTA, it follows
that a petition for certiorari seeking nullification of an interlocutory order issued in the said case should,
likewise, be filed with the same court. To rule otherwise would lead to an absurd situation where one
court decides an appeal in the main case while another court rules on an incident in the very same case.

Stated differently, it would be somewhat incongruent with the pronounced judicial abhorrence to split
jurisdiction to conclude that the intention of the law is to divide the authority over a local tax case filed
with the RTC by giving to the CA or this Court jurisdiction to issue a writ of certiorari against interlocutory
orders of the RTC but giving to the CTA the jurisdiction over the appeal from the decision of the trial court
in the same case. It is more in consonance with logic and legal soundness to conclude that the grant of
appellate jurisdiction to the CTA over tax cases filed in and decided by the RTC carries with it the power to
issue a writ of certiorari when necessary in aid of such appellate jurisdiction. The supervisory power or
jurisdiction of the CTA to issue a writ of certiorari in aid of its appellate jurisdiction should co-exist with,
and be a complement to, its appellate jurisdiction to review, by appeal, the final orders and decisions of
the RTC, in order to have complete supervision over the acts of the latter.

A grant of appellate jurisdiction implies that there is included in it the power necessary to exercise it
effectively, to make all orders that will preserve the subject of the action, and to give effect to the final
determination of the appeal. It carries with it the power to protect that jurisdiction and to make the
decisions of the court thereunder effective. The court, in aid of its appellate jurisdiction, has authority to
control all auxiliary and incidental matters necessary to the efficient and proper exercise of that
jurisdiction. For this purpose, it may, when necessary, prohibit or restrain the performance of any act
which might interfere with the proper exercise of its rightful jurisdiction in cases pending before it.

Lastly, it would not be amiss to point out that a court which is endowed with a particular jurisdiction
should have powers which are necessary to enable it to act effectively within such jurisdiction. These
should be regarded as powers which are inherent in its jurisdiction and the court must possess them in
order to enforce its rules of practice and to suppress any abuses of its process and to defeat any
attempted thwarting of such process.

In this regard, Section 1 of RA 9282 states that the CTA shall be of the same level as the CA and shall
possess all the inherent powers of a court of justice.

Indeed, courts possess certain inherent powers which may be said to be implied from a general grant of
jurisdiction, in addition to those expressly conferred on them. These inherent powers are such powers as
are necessary for the ordinary and efficient exercise of jurisdiction; or are essential to the existence,
dignity and functions of the courts, as well as to the due administration of justice; or are directly
appropriate, convenient and suitable to the execution of their granted powers; and include the power to
maintain the court's jurisdiction and render it effective in behalf of the litigants.

Thus, this Court has held that "while a court may be expressly granted the incidental powers necessary to
effectuate its jurisdiction, a grant of jurisdiction, in the absence of prohibitive legislation, implies the
necessary and usual incidental powers essential to effectuate it, and, subject to existing laws and
constitutional provisions, every regularly constituted court has power to do all things that are reasonably
necessary for the administration of justice within the scope of its jurisdiction and for the enforcement of
its judgments and mandates." Hence, demands, matters or questions ancillary or incidental to, or growing
out of, the main action, and coming within the above principles, may be taken cognizance of by the court
and determined, since such jurisdiction is in aid of its authority over the principal matter, even though the
court may thus be called on to consider and decide matters which, as original causes of action, would not
be within its cognizance.
Based on the foregoing disquisitions, it can be reasonably concluded that the authority of the CTA to take
cognizance of petitions for certiorari questioning interlocutory orders issued by the RTC in a local tax case
is included in the powers granted by the Constitution as well as inherent in the exercise of its appellate
jurisdiction.36

Since the Court ruled in City of Manila v. Hon. Grecia-Cuerdo31 that the CTA has jurisdiction over a special
civil action for certiorari questioning an interlocutory order of the RTC in a local tax case via express
constitutional mandate and for being inherent in the exercise of its appellate jurisdiction, it can also be
reasonably concluded based on the same premise that the CTA has original jurisdiction over a petition for
certiorari assailing the DOJ resolution in a preliminary investigation involving tax and tariff offenses.

If the Court were to rule that jurisdiction over a petition for certiorari assailing such DOJ resolution lies
with the CA, it would be confirming the exercise by two judicial bodies, the CA and the CTA, of jurisdiction
over basically the same subject matter - precisely the split-jurisdiction situation which is anathema to the
orderly administration of justice. The Court cannot accept that such was the legislative intent, especially
considering that R.A. No. 9282 expressly confers on the CTA, the tribunal with the specialized competence
over tax and tariff matters, the role of judicial review over local tax cases without mention of any other
court that may exercise such power.38cralawrednad

Concededly, there is no clear statement under R.A. No. 1125, the amendatory R.A. No. 9282, let alone in
the Constitution, that the CTA has original jurisdiction over a petition for certiorari. By virtue of Section 1,
Article VIII of the 1987 Constitution, vesting judicial power in the Supreme Court and such lower courts as
may be established by law, to determine whether or not there has been a grave abuse of discretion on
the part of any branch or instrumentality of the Government, in relation to Section 5(5), Article VIII
thereof, vesting upon it the power to promulgate rules concerning practice and procedure in all courts,
the Court thus declares that the CA's original jurisdiction39 over a petition for certiorari assailing the DOJ
resolution in a preliminary investigation involving tax and tariff offenses was necessarily transferred to the
CTA pursuant to Section 7 of R.A. No. 9282,40 and that such petition shall be governed by Rule 65 of the
Rules of Court, as amended. Accordingly, it is the CTA, not the CA, which has jurisdiction over the petition
for certiorari assailing the DOJ resolution of dismissal of the BOC's complaint-affidavit against private
respondents for violation of the TCCR

On the procedural issue of whether the CA erred in dismissing the petition for certiorari on the sole
ground of lack of verification and certification against forum shopping, the Court rules in the affirmative,
despite the above discussion that such petition should have been filed with the CTA.

In Traveno, et al. v. Bobongon Banana Growers Multi-Purpose Cooperative, et al.,41 the Court restated the
jurisprudence on non-compliance with the requirements on, or submission of defective, verification and
certification against forum shopping:ChanRoblesvirtualLawlibrary

1) A distinction must be made between non-compliance with the requirement on or submission of


defective verification, and non- compliance with the requirement on or submission of defective
certification against forum shopping.

2) As to verification, non-compliance therewith or a defect therein does not necessarily render the
pleading fatally defective. The court may order its submission or correction or act on the pleading if the
attending circumstances are such that strict compliance with the Rule may be dispensed with in order
that the ends of justice may be served thereby.

3) Verification is deemed substantially complied with when one who has ample knowledge to swear to
the truth of the allegations in the complaint or petition signs the verification, and when matters alleged in
the petition have been made in good faith or are true and correct.
4) As to certification against forum shopping, non-compliance therewith or a defect therein, unlike in
verification, is generally not curable by its subsequent submission or correction thereof, unless there is a
need to relax the Rule on the ground of "substantial compliance" or presence of "special circumstances or
compelling reasons."

5) The certification against forum shopping must be signed by all the plaintiffs or petitioners in a case;
otherwise, those who did not sign will be dropped as parties to the case.' Under reasonable or justifiable
circumstances, however, as when all the plaintiffs or petitioners share a common interest and invoke a
common cause of action or defense, the signature of only one of them in the certification against forum
shopping substantially complies with the Rule.

6) Finally, the certification against forum shopping must be executed by the party-pleader, not by his
counsel. If, however, for reasonable or justifiable reasons, the party-pleader is unable to sign, he must
execute a Special Power of Attorney designating his counsel of record to sign on his behalf. 42

While it admittedly filed a petition for certiorari without a certification against forum shopping on March
11, 2010, the BOC claimed to have subsequently complied with such requirement by filing through
registered mail a complete set of such petition, the following day which was also the last day of the
reglementary period. The problem arose when the CA failed to receive such complete set of the petition
for certiorari with the verification and certification against forum shopping. In support of the motion for
reconsideration of the CA's March 26, 2010 resolution which dismissed outright the petition, the BOC
asserted that it filed a complete set of petition by registered mail. It also submitted an affidavit of the
person who did the mailing as required by Section 12,43 Rule 13 of the Rules of Court, including the
registry receipt numbers, but not the receipts themselves which were allegedly attached to the original
copy mailed to the CA. Instead of ordering the BOC to secure a certification from the postmaster to verify
if a complete set of the petition was indeed filed by registered mail, the CA -after examining the whole
case rollo and finding that no other set of petition with a certification against forum shopping was duly
submitted - denied the motion for reconsideration.

Faced with the issue of whether or not there is a need to relax the strict compliance with procedural rules
in order that the ends of justice may be served thereby and whether "special circumstances or compelling
reasons" are present to warrant a liberal interpretation of such rules, the Court rules -after a careful
review of the merits of the case - in the affirmative.

Despite the BOC's failed attempt to comply with the requirement of verification and certification against
forum shopping, the Court cannot simply ignore the CA's perfunctory dismissal of the petition on such
sole procedural ground vis-a-vis the paramount public interest in the subject matter and the substantial
amount involved, i.e., the alleged illegal withdrawal of oil products worth P181,988,627.00 with
corresponding duties and taxes worth P35,507,597.00. Due to the presence of such special circumstances
and in the interest of justice, the CA should have at least passed upon the substantive issue raised in the
petition, instead of dismissing it on such procedural ground. Although it does not condone the failure of
BOC to comply with the said basic requirement, the Court is constrained to exercise the inherent power to
suspend its own rules in order to do justice in this particular case.

Given that the petition for certiorari should have been filed with the CTA, the mistake committed by the
BOC in filing such petition before the CA may be excused. In this regard, Court takes note that nothing in
R.A. No. 1125, as amended by R.A. No. 9282, indicates that a petition for certiorari under Rule 65 may be
filed with the CTA. Despite the enactment of R.A. No. 9282 on March 30, 2004, it was only about ten (10)
years later in the case of City of Manila v. Hon. Grecia-Cuerdo44 that the Court ruled that the authority of
the CTA to take cognizance of such petitions is included in the powers granted by the Constitution, as well
as inherent in the exercise of its appellate jurisdiction. While the rule on perfection of appeals cannot be
classified as a difficult question of law,45 mistake in the construction or application of a doubtful question
of law, as in this case, may be considered as a mistake of fact, excusing the BOC from the consequences of
the erroneous filing of its petition with the CA.

As the CA dismissed the petition for certiorari solely due to a procedural defect without resolving the
issue of whether or not the Acting Secretary of Justice gravely abused her discretion in affirming the
dismissal of the BOC's complaint-affidavit for lack of probable cause, the Court ought to reinstate the
petition and refer it to the CTA for proper disposition. For one, as a highly specialized court specifically
created for the purpose of reviewing tax and customs cases,46 the CTA is dedicated exclusively to the
study and consideration of revenue-related problems, and has necessarily developed an expertise on the
subject.47 For another, the referral of the petition to the CTA is in line with the policy of hierarchy of
courts in order to prevent inordinate demands upon the Court's time and attention which are better
devoted to those matters within its exclusive jurisdiction, and to prevent further overcrowding of its
docket.48cralawrednad

Be that as it may, the Court stressed in The Diocese of Bacolod v. Commission on Elections49 that the
doctrine of hierarchy of courts is not an iron-clad rule, and that it has full discretionary power to take
cognizance and assume jurisdiction over special civil actions for certiorari filed directly with it for
exceptionally compelling reasons or if warranted by the nature of the issues clearly and specifically raised
in the petition. Recognized exceptions to the said doctrine are as follows: (a) when there are genuine
issues of constitutionality that must be addressed at the most immediate time; (b) when the issues
involved are of transcendental importance; (c) cases of first impression where no jurisprudence yet exists
that will guide the lower courts on the matter; (d) the constitutional issues raised are better decided by
the Court; (e) where exigency in certain situations necessitate urgency in the resolution of the cases; (f)
the filed petition reviews the act of a constitutional organ; (g) when petitioners rightly claim that they had
no other plain, speedy, and adequate remedy in the ordinary course of law that could free them from the
injurious effects of respondents' acts in violation of their right to freedom of expression; and (h) the
petition includes questions that are dictated by public welfare and the advancement of public policy, or
demanded by the broader interest of justice, or the orders complained of were found to be patent
nullities, or the appeal was considered as clearly an inappropriate remedy. 50 Since the present case
includes questions that are dictated by public welfare and the advancement of public policy, or demanded
by the broader interest of justice, as well as to avoid multiplicity of suits and further delay in its
disposition, the Court shall directly resolve the petition for certiorari, instead of referring it to the CTA.

On the substantive issue of whether the Acting Secretary of Justice gravely abused her discretion in
affirming the dismissal of the BOC's complaint-affidavit for lack of probable cause, the settled policy of
noninterference in the prosecutor's exercise of discretion requires the courts to leave to the prosecutor
and to the DOJ the determination of what constitutes sufficient evidence to establish probable cause. As
the Court explained in Unilever Philippines, Inc. v. Tan:51cralawrednad

The determination of probable cause for purposes of filing of information in court is essentially an
executive function that is lodged, at the first instance, with the public prosecutor and, ultimately, to the
Secretary of Justice. The prosecutor and the Secretary of Justice have wide latitude of discretion in the
conduct of preliminary investigation; and their findings with respect to the existence or non-existence of
probable cause are generally not subject to review by the Court.

Consistent with this rule, the settled policy of non-interference in the prosecutor's exercise of discretion
requires the courts to leave to the prosecutor and to the DOJ the determination of what constitutes
sufficient evidence to establish probable cause. Courts can neither override their determination nor
substitute their own judgment for that of the latter. They cannot likewise order the prosecution of the
accused when the prosecutor has not found a prima facie case.

Nevertheless, this policy of non-interference is not without exception. The Constitution itself allows (and
even directs) court action where executive discretion has been gravely abused. In other words, the court
may intervene in the executive determination of probable cause, review the findings and conclusions, and
ultimately resolve the existence or non-existence of probable cause by examining the records of the
preliminary investigation when necessary for the orderly administration of justice. 52

Probable cause for purposes of filing a criminal information is defined as such facts as are sufficient to
engender a well-founded belief that a crime has been committed and the respondent is probably guilty
thereof, and should be held for trial.53 As explained in Sy v. Secretary of Justice,54 citing Villanueva v.
Secretary of Justice:55cralawrednad

x x x [Probable cause] is such a state of facts in the mind of the prosecutor as would lead a person of
ordinary caution and prudence to believe or entertain an honest or strong suspicion that a thing is so. The
term does not mean "actual or positive cause"; nor does it import absolute certainty. It is merely based on
opinion and reasonable belief. Thus, a finding of probable cause does not require an inquiry into whether
there is sufficient evidence to procure a conviction. It is enough that it is believed that the act or
omission complained of constitutes the offense charged. Precisely, there is a trial for the reception of
evidence of the prosecution in support of the charge.56

To find out if there is a reasonable ground to believe that acts or ommissions complained of constitute the
offenses charged, the Court must first examine whether or not the allegations against private respondents
in the BOC's complaint-affidavit constitute the offenses of unlawful importation under Section 3601 and
various fraudulent practices against customs revenue under Section 3602 of the TCCP.

In Jardeleza v. People,57 the Court discussed the concepts of unlawful importation under Section 3601 of
the TCCP, and various fraudulent practices against customs revenue under Section 3602 thereof,
thus:ChanRoblesvirtualLawlibrary

Section 3601 of the TCC was designed to supplement the existing provisions of the TCC against the means
leading up to smuggling, which might render it beneficial by a substantive and criminal statement
separately providing for the punishment of smuggling. The law was intended not to merge into one and
the same offense all the many acts which are classified and punished by different penalties, penal or
administrative, but to legislate against the overt act of smuggling itself. This is manifested by the use of
the words "fraudulently" and "contrary to law" in the law.

Smuggling is committed by any person who: (1) fraudulently imports or brings into the Philippines any
article contrary to law; (2) assists in so doing any article contrary to law; or (3) receives, conceals, buys,
sells or in any manner facilitate the transportation, concealment or sale of such goods after importation,
knowing the same to have been imported contrary to law.

The phrase "contrary to law" in Section 3601 qualifies the phrases "imports or brings into the Philippines"
and "assists in so doing," and not the word "article." The law penalizes the importation of any
merchandise in any manner contrary to law.

The word "law" includes regulations having the force and effect of law, meaning substantive or legislative
type rules as opposed to general statements of policy or rules of agency, organization, procedures or
positions. An inherent characteristic of a substantive rule is one affecting individual rights and obligations;
the regulation must have been promulgated pursuant to a congressional grant of quasi-legislative
authority; the regulation must have been promulgated in conformity to with congressionally-imposed
procedural requisites.

xxxx

Section 3602 of the TCC, on the other hand, provides:cralawlawlibrary


Sec. 3602. Various Fraudulent Practices Against Customs Revenue. Any person who makes or attempts
to make any entry of imported or exported article by means of any false or fraudulent invoice,
declaration, affidavit, letter, paper or by any means of any false statement, written or verbal, or by any
means of any false or fraudulent practice whatsoever, or knowingly effects any entry of goods, wares or
merchandise, at less than the true weight or measures thereof or upon a false classification as to quality
or value, or by the payment of less than the amount legally due, or knowingly and wilfully files any false or
fraudulent entry or claim for the payment of drawback or refund of duties upon the exportation of
merchandise, or makes or files any affidavit, abstract, record, certificate or other document, with a view
to securing the payment to himself or others of any drawback, allowance or refund of duties on the
exportation of merchandise, greater than that legally due thereon, or who shall be guilty of any wilful act
or omission shall, for each offense, be punished in accordance with the penalties prescribed in the
preceding section.
The provision enumerates the various fraudulent practices against customs revenue, such as the entry of
imported or exported articles by means of any false or fraudulent invoice, statement or practice; the entry
of goods at less than the true weight or measure; or the filing of any false or fraudulent entry for the
payment of drawback or refund of duties.

The fraud contemplated by law must be intentional fraud, consisting of deception, willfully and
deliberately dared or resorted to in order to give up some right. The offender must have acted knowingly
and with the specific intent to deceive for the purpose of causing financial loss to another; even false
representations or statements or omissions of material facts come within fraudulent intent. The fraud
envisaged in the law includes the suppression of a material fact which a party is bound in good faith to
disclose. Fraudulent nondisclosure and fraudulent concealment are of the same genre.

Fraudulent concealment presupposes a duty to disclose the truth and that disclosure was not made when
opportunity to speak and inform was present, and that the party to whom the duty of disclosure as to a
material fact was due was thereby induced to act to his injury. Fraud is not confined to words or positive
assertions; it may consist as well of deeds, acts or artifice of a nature calculated to mislead another and
thus allow one to obtain an undue advantage.58

In unlawful importation, also known as outright smuggling, goods and articles of commerce are brought
into the country without the required importation documents, or are disposed of in the local market
without having been cleared by the BOC or other authorized government agencies, to evade the payment
of correct taxes, duties and other charges. Such goods and articles do not undergo the processing and
clearing procedures at the BOC, and are not declared through submission of import documents, such as
the import entry and internal revenue declaration.

In various fraudulent practices against customs revenue, also known as technical smuggling, on the other
hand, the goods and articles are brought into the country through fraudulent, falsified or erroneous
declarations, to substantially reduce, if not totally avoid, the payment of correct taxes, duties and other
charges. Such goods and articles pass through the BOC, but the processing and clearing procedures are
attended by fraudulent acts in order to evade the payment of correct taxes, duties, and other charges.
Often committed by means of misclassification of the nature, quality or value of goods and articles,
undervaluation in terms of their price, quality or weight, and misdeclaration of their kind, such form of
smuggling is made possible through the involvement of the importers, the brokers and even some
customs officials and personnel.

In light of the foregoing discussion, the Court holds that private respondents cannot be charged with
unlawful importation under Section 3601 of the TCCP because there is no allegation in the BOC's
complaint-affidavit to the effect that they committed any of the following acts: (1) fraudulently imported
or brought into the Philippines the subject petroleum products, contrary to law; (2) assisted in so doing;
or (3) received, concealed, bought, sold or in any manner facilitated the transportation, concealment or
sale of such goods after importation, knowing the same to have been imported contrary to law.
The said acts constituting unlawful importation under Section 3601 of the TCCP can hardly be gathered
from the following allegations in the BOC's complaint-affidavit:ChanRoblesvirtualLawlibrary

19.1 From May 23, 2007 to February 10, 2008, UNIOIL is not an accredited importer of the BOC;
19.2 From the time UNIOIL was accredited on February 11, 2008 until the time of its request to withdraw
its oil products on 02 May 2008, they did not import Gasoil (diesel) and Mogas Gasoline;
19.3 The Terminalling Agreement allegedly executed between OILINK and UNIOIL was obviously for the
purpose of circumventing the Warrant of Seizure and Detention issued against the shipments of OILINK
aside from the fact that it was only executed on 02 January 2008 after the decision of the Commissioner
finding OILINK liable to pay an administrative fine of Two Billion Seven Hundred Sixty-Four Million Eight
Hundred Fifty-Nine Thousand Three Hundred Four Pesos and 80/100 (Php2,764,859,304.80);
19.4 Only base oil should have been withdrawn by UNIOIL since it is the only product subject of its request
and approved by the Commissioner;
19.5 UNIOIL withdrew Gasoil (Diesel) and Mogas which were not covered by importations;
19.6 Finally, the illegal release/withdrawal of the oil products deprived the government of the supposed
partial payment on the Php2.7 billion liability of OILINK in the" approximate amount of Phpl81,988,627
representing the customs value of the released/withdrawn oil products and estimated duties and taxes of
Php35,507,597 due thereon or the total amount of Php217,496,224.00.59cralawrednad

xxxx

21.1 When UNIOIL withdrew Gasoil (Diesel) and Mogas without filing the corresponding Import Entry, the
shipment becomes unlawful per se and thus falls under unlawful importation under Section 3601 of the
Tariff and Customs Code of the Philippines, as amended;

21.2 The fact that UNIOIL and OILINK executed a belated Terminalling Agreement after the issuance of the
Warrant of Seizure and Detention showed the fraudulent intent of the respondents whereby UNIOIL can
still withdraw the oil products stored at OILINK's depot likewise in clear violation of section 3601 and 3602
of the Tariff and Customs Code of the Philippines, as amended;

21.3 The fact that the UNIOIL make [sic] it appear that they are the owner of Gasoil (Diesel) and Mogas
when in truth and in fact they did not import said products make them liable for [violation of] Section
3602 of the Tariff and Customs Code of the Philippines, as amended and falsification;60

Since the foregoing allegations do not constitute the crime of unlawful importation under Section 3601 of
the TCCP, the Acting Secretary of Justice did not commit grave abuse of discretion when she affirmed the
State Prosecutor's dismissal the BOC's complaint-affidavit for lack of probable cause.

Neither could private respondents be charged with various fraudulent practices against customs revenue
under Section 3602 of the TCCP as the above allegations do hot fall under any of the following acts or
omissions constituting such crime/s: (1) making or attempting to make any entry of imported or exported
article: (a) by means of any false or fraudulent invoice, declaration, affidavit, letter, paper or by any
means of any false statement, written or verbal; or (b) by any means of any false or fraudulent practice
whatsoever; or (2) knowingly effecting any entry of goods, wares or merchandise, at less than the true
weight or measures thereof or upon a false classification as to quality or value, or by the payment of less
than the amount legally due; or (3) knowingly and wilfully filing any false or fraudulent entry or claim for
the payment of drawback or refund of duties upon the exportation of merchandise; or (4) making or filing
any affidavit, abstract, record, certificate or other document, with a view to securing the payment to
himself or others of any drawback, allowance or refund of duties on the exportation of merchandise,
greater than that legally due thereon.

Related to various fraudulent practices against customs revenue by means of undervaluation,


misclassification and misdeclaration in the import entry is the following provision of R.A. No. 7651 - An Act
to Revitalize and Strengthen the Bureau of Customs, Amending for the Purpose Certain Sections of the
Tariff and Customs Code of the Philippines, as amended: 61cralawrednad

Sec. 2503. Undervaluation, Misclassification and Misdeclaration in Entry. - When the dutiable value of the
imported articles shall be so declared and entered that the duties, based on the declaration of the
importer on the face of the entry, would be less by ten percent (10%) than should be legally collected, or
when the imported articles shall be so described and entered that the duties based on the importer's
description on the face of the entry would be less by ten percent (10%) than should be legally collected
based on the tariff classification, or when the dutiable weight, measurement or quantity of imported
articles is found upon examination to exceed by ten percent (10%) or more than the entered weight,
measurement or quantity, a surcharge shall be collected from the importer in an amount of not less than
the difference between the full duty and the estimated duty based upon the declaration of the importer,
nor more than twice of such difference: Provided, that an undervaluation, misdeclaration in weight,
measurement or quantity of more than thirty percent (30%) between the value, weight, measurement,
or quantity declared in the entry, and the actual value, weight, quantity, or measurement shall
constitute a prima facie evidence of fraud penalized under Sec. 2530 of this Code: Provided, further, that
any misdeclared or undeclared imported articles/items found upon examination shall ipso facto be
forfeited in favor of the Government to be disposed of pursuant to the provisions of this Code.

When the undervaluation, misdescription, misclassification or misdeclaration in the import entry is


intentional, the importer shall be subject to the penal provision under Sec. 3602 of this Code.62

A careful reading of the BOC's complaint-affidavit would show that there is no allegation to the effect that
private respondents committed undervaluation, misdeclaration in weight, measurement or quantity of
more than thirty percent (30%) between the value, weight, measurement, or quantity declared in the
entry, and the actual value, weight, quantity, or measurement which constitute prima facie evidence of
fraud. Nor is there an allegation that they intentionally committed undervaluation, misdescription,
misclassification or misdeclaration in the import entry. Since the allegations in the BOC's complaint-
affidavit fall short of the acts or omissions constituting the various fraudulent acts against customs
revenue under Section 3602 of the TCCP, the Acting Secretary of Justice correctly ruled that there was no
probable cause to believe that they committed such crime/s.

While it is true that the sole office of the writ of certiorari is the correction of errors of jurisdiction,
including the commission of grave abuse of discretion amounting to lack of jurisdiction, and does not
include a correction of the public respondents' evaluation of the evidence and factual findings thereon, it
is sometimes necessary to delve into factual issues in order to resolve the allegations of grave abuse of
discretion as a ground for the special civil action of certiorari63 In light of this principle, the Court reviews
the following findings of the Acting Secretary of Justice in affirming the State Prosecutor's dismissal of the
BOC's complaint-affidavit for lack of probable cause:ChanRoblesvirtualLawlibrary

Respondents are being charged for unlawful importation under Section 3601, and fraudulent practices
against customs revenues under Section 3602, of the TCCP, as amended. For these charges to prosper,
complainant must prove, first and foremost, that the subject articles were imported. On this score alone,
complainant has miserably failed.

Indeed, except for complainant's sweeping allegation, no clear and convincing proof was presented to
show that the subject petroleum products (gasoil and mogas) withdrawn by Unioil from the oil
depot/terminal of Oilink were imported. For, only when the articles are imported that the
importer/consignee is required to file an import entry declaration and pay the corresponding customs
duties and taxes. The fact that complainant's record fails to show that an import entry was filed for the
subject articles does not altogether make out a case of unlawful importation under Section 3601, or
fraudulent practices against customs revenue under Section 3602, of the TCCP, without having first
determined whether the subject articles are indeed imported. Thus, in this case, complainant still bears
the burden of proof to show that the subject petroleum products are imported, by means of documents
other than the import entry declaration, such as but not limited to, the transport documents consisting of
the inward foreign manifest, bill of lading, commercial invoice and packing list, all indicating that the
goods were bought from a supplier/seller in a foreign country and imported or transported to the
Philippines. Instead[,] complainant merely surmised that since the subject products were placed under
warrant of seizure and detention[,] they must necessarily be imported. Regrettably, speculation and
surmises do not constitute evidence and should not, therefore, be taken against the respondents, x x x
Taken in this light, we find more weight and credence in respondent Unioil's claim that the subject
petroleum products were not imported by them, but were locally purchased, more so since it was able to
present local sales invoices covering the same.

Even assuming gratia argumenti that the subject petroleum products were imported, it still behooves the
complainant to present clear and convincing proof that the importation was unlawful or that it was
carried out through any fraudulent means, practice or device to prejudice the government. But again,
complainant failed to discharge this burden.

As can be culled from the records, the warrant of seizure and detention docketed as Seizure Identification
No. 2008-082, which covers various gas tanks already stored at Oilink's depot/terminal located at Lucanin
Pt, Mariveles, Bataan, was issued pursuant to Section 2536, in relation to Section 1508, of the TCCP
because of Oilink's failure to pay the administrative fine of P2,764,859,304.80 that was previously meted
against the company for its failure/refusal to submit to a post entry audit. In fact, the delivery of all
shipments consigned to or handled directly or indirectly by Oilink was put on hold as per order of the
Customs Commissioner dated April 23, 2008 pursuant to Section 1508 of the TCCP, also for the same
reason. There was nothing on record which shows, or from which it could be inferred, that the warrant of
seizure and detention or hold order were imposed pursuant to Section 2530 of the same Code which
relates, among others, to unlawfully imported articles or those imported through any fraudulent practice
or device to prejudice the government, much less due to non-payment of the corresponding customs
duties and taxes due on the shipments/articles covered by the warrant of seizure and detention. Again,
what complainant's evidence clearly shows is that Oilink's failure to pay the administrative fine
precipitated the issuance of the warrant of seizure and detention and hold order.64

After a careful review of records, the Court affirms the dismissal of the BOC's complaint-affidavit for lack
of probable cause, but partly digresses from the reasoning of the Acting Secretary of Justice in arriving at
such conclusion. While the Acting Secretary of Justice correctly stated that the act of fraudulent
importation of articles must be first proven in order to be charged for violation of Section 3601 of the
TCCP, the Court disagrees that proof of such importation is also required for various fraudulent practices
against customs revenue under Section 3602 thereof.

As held in Jardeleza v. People,65 the crime of unlawful importation under Section 3601 of the TCCP is
complete, in the absence of a bona fide intent to make entry and pay duties when the prohibited article
enters Philippine territory. Importation, which consists of bringing an article into the country from the
outside, is complete when the taxable, dutiable commodity is brought within the limits of the port of
entry.66 Entry through a customs house is not the essence of the act.67 On the other hand, as regards
Section 3602 of the TCCP which particularly deals with the making or attempting to make a fraudulent
entry of imported or exported articles, the term "entry" in customs law has a triple meaning, namely: (1)
the documents filed at the customs house; (2) the submission and acceptance of the documents; and (3)
the procedure of passing goods through the customs house.68 In view thereof, it is only for charges for
unlawful importation under Section 3601 that the BOC must first prove that the subject articles were
imported. For violation of Section 3602, in contrast, what must be proved is the act of making or
attempting to make such entry of articles.

The Court likewise disagrees with the finding of the Acting Secretary of Justice that the BOC failed to
prove that the products subject of the WSD were imported. No such proof was necessary because private
respondents themselves presented in support of their counter-affidavits copies of import entries which
can be considered as prima facie evidence that OILINK imported the subject petroleum products. At any
rate, the Acting Secretary of Justice aptly gave credence to their twenty (20) sales invoices 70 covering the
dates October 1, 2007 until April 30, 2008 which tend to prove that UNIOIL locally purchased such
products from OILINK even before the BOC rendered the Decision dated December 14, 2007 imposing a
P2,764,859,304.80 administrative fine, and holding the delivery or release of its subsequently imported
articles to answer for the fine, any revised assessment and/or penalty for failure to keep records.

The Court also finds as misplaced the BOC's reliance on the Terminalling Agreement dated January 2, 2008
and the Certification71 that UNIOIL made no importation of Gasoil (diesel) and Mogas gasoline from
January 2007 up to June 2008 in order to prove that it illegally imported the said products. Such
documentary evidence tend to prove only that UNIOIL was engaged in the importation of petroleum
products and that it did not import the said products during the said period. Such documents, however,
do not negate the evidence on record which tend to show that OILINK was the one that filed the import
entries,72 and that UNIOIL locally purchased from OILINK such products as indicated in the sales invoices.73
Not being the importer of such products, UNIOIL, its directors and officers, are not required to file their
corresponding import entries. Hence, contrary to the BOC's allegation, UNIOIL's withdrawal of the Gasoil
(Diesel) and Mogas gasoline without filing the corresponding import entries can neither be considered as
unlawful importation under Section 3601 of the TCCP nor as a fraudulent practice against customs
revenue under Section 3602 thereof.

Moreover, the fact that private respondent Paul Chi Ting Co is both the Chairman of UNIOIL and OILINK is
not enough to justify the application of the doctrine of piercing the corporate veil. In fact, mere
ownership by a single stockholder or by another corporation of a substantial block of shares of a
corporation does not, standing alone, provide sufficient justification for disregarding the separate
corporate personality.74 In Kukan International Corporation v. Hon. Judge Reyes, et al.,75 the Court
explained the application of the said doctrine in this wise:ChanRoblesvirtualLawlibrary

In fine, to justify the piercing of the veil of corporate fiction, it must be shown by clear and convincing
proof that the separate and distinct personality of the corporation was purposefully employed to evade a
legitimate and binding commitment and perpetuate a fraud or like wrongdoings. To be sure, the Court
has, on numerous occasions, applied the principle where a corporation is dissolved and its assets are
transferred to another to avoid a financial liability of the first corporation with the result that the second
corporation should be considered a continuation and successor of the first entity.

In those instances when the Court pierced the veil of corporate fiction of two corporations, there was a
confluence of the following factors:cralawlawlibrary
1. A first corporation is dissolved;
2. The assets of the first corporation is transferred to a second corporation to avoid a financial liability of
the first corporation; and
3. Both corporations are owned and controlled by the same persons such that the second corporation
should be considered as a continuation and successor of the first corporation. 76

Granted that the principle of piercing the veil of corporate entity comes into play only during the trial of
the case for the purpose of determining liability,77 it is noteworthy that even the BOC itself virtually
recognized that OILINK and UNIOIL are separate and distinct entities when it alleged that only the base oil
products should have been withdrawn by UNIOIL, since they were the only products subject of its request
and approved by the Customs Commissioner. As discussed above, however, private respondents were
able to present sales invoices which tend to show that UNIOIL locally purchased Gasoil (diesel) and Mogas
gasoline products from OILINK. Hence, the BOC cannot invoke the doctrine of piercing the veil of
corporate entity in this case.

On a final note, the Court stresses that OILINK, its directors or officers, and Victor D. Piamonte, the
Licensed Customs Broker, may still be held liable for various fraudulent practices against customs revenue
under Section 3602 of the TCCP, if the final results of the post-entry audit and examination would show
that they committed any of the following acts or omissions: (1) making or attempting to make any entry
of imported or exported article: (a) by means of any false or fraudulent invoice, declaration, affidavit,
letter, paper or by any means of any false statement, written or verbal; or (b) by any means of any false or
fraudulent practice; or (2) intentional undervaluation, misdescription, misclassification or misdeclaration
in the import entries; or (3) undervaluation, misdeclaration in weight, measurement or quantity of more
than thirty percent (30%) between the value, weight, measurement, or quantity declared in the entries,
and the actual value, weight, quantity, or measurement. This is consistent with Section 2301 78 (Warrant
for Detention of Property-Cash Bond) of the TCCP which states that nothing therein shall be construed as
relieving the owner or importer from any criminal liability which may arise from any violation of law
committed in connection with the importation of articles, which in this case were placed under a WSD for
failure of the importer, OILINK, to submit the required post-entry audit documents under CAO No. 4-2004.

In addition, OILINK and its directors or officers may be held liable under Section 16 of R.A. No.
9135:79cralawrednad

SEC. 16. A new section to be known as Section 3611 is hereby inserted in Part 3, Title VII of the Tariff and
Customs Code of the Philippines, as amended, which shall read as follows:cralawlawlibrary
SEC. 3611. Failure to Pay Correct Duties and Taxes on Imported Goods. - Any person who, after being
subjected to post-entry audit and examination as provided in Section 3515 of Part 2, Title VII hereof, is
found to have incurred deficiencies in duties and taxes paid for imported goods, shall be penalized
according to three (3) degrees of culpability subject to any mitigating, aggravating or extraordinary
factors that are clearly established by the available evidence:ChanRoblesvirtualLawlibrary

(a) Negligence - When the deficiency results from an offender's failure, through an act or acts of omission
or commission, to exercise reasonable care and competence to ensure that a statement made is correct,
it shall be determined to be negligent and punishable by a fine equivalent to not less than one-half (1/2)
but not more than two (2) times the revenue loss.

(b) Gross Negligence - When a deficiency results from an act or acts of omission or commission done with
actual knowledge or wanton disregard for the relevant facts and with indifference to or disregard for the
offender's obligation under the statute, it shall be determined to be grossly negligent and punishable by a
fine equivalent to not less than two and a half (2 1/2) but not more than four (4) times the revenue loss.

(c) Fraud - When the material false statement or act in connection with the transaction was committed or
omitted knowingly, voluntarily and intentionally, as established by clear and convincing evidence, it shall
be determined to be fraudulent and be punishable by a fine equivalent to not less than five (5) times but
not more than eight (8) times the revenue loss and imprisonment of not less than two (2) years but not
more than eight (8) years.
The decision of the Commissioner of Customs, upon proper hearing, to impose penalties as prescribed in
this Section may be appealed in accordance with Section 2402 hereof.80

With respect to the directors or officers of OILINK, they may further be held liable jointly and severally for
all damages suffered by the government on account of such violation of Sections 3602 and 3611 of the
TCCP, upon clear and convincing proof that they willfully and knowingly voted for or assented to patently
unlawful acts of the corporation or was guilty of gross negligence or bad faith in directing its corporate
affairs.

WHEREFORE, the petition is PARTLY GRANTED. The Court of Appeals Resolutions dated March 26, 2010
and August 4, 2010, in CA-G.R. SP No. 113069, are REVERSED and SET ASIDE. The Resolution dated
December 28, 2009 of the Acting Secretary of Justice Agnes VST Devanedera, which upheld the State
Prosecutor's dismissal of the complaint-affidavit filed by the Bureau of Customs for lack of probable
cause, is AFFIRMED. This is without prejudice to the filing of the appropriate criminal and administrative
charges under Sections 3602 and 3611 of the Tariff and Customs Code of the Philippines, as amended,
against private respondents OILINK, its officers and directors, and Victor D. Piamonte, if the final results of
the post-entry audit and examination would show that they violated the said provisions.

SO ORDERED.chanrobles virtuallawlibrary

G.R. No. 209324, December 09, 2015

REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE BUREAU OF CUSTOMS, Petitioner, v. PILIPINAS


SHELL PETROLEUM CORPORATION, Respondent.

Remedial Law; Civil Procedure; Appeals; Section 2, Rule 41 of the 1997 Rules of Civil Procedure, as
amended, provides for two (2) remedies from the final orders or judgments of the Regional Trial Court
(RTC) in the exercise of its original jurisdiction.Section 2, Rule 41 of the 1997 Rules of Civil Procedure, as
amended, provides for two remedies from the final orders or judgments of the RTC in the exercise of its
original jurisdiction, viz.: Section 2. Modes of appeal.(a) Ordinary appeal.The appeal to the Court of
Appeals in cases decided by the Regional Trial Court in the exercise of its original jurisdiction shall be
taken by filing a notice of appeal with the court which rendered the judgment or final order appealed
from and serving a copy thereof upon the adverse party. No record on appeal shall be required except in
special proceedings and other cases of multiple or separate appeals where the law or these Rules so
require. In such cases, the record on appeal shall be filed and served in like manner. (b) Petition for
review.The appeal to the Court of Appeals in cases decided by the Regional Trial Court in the exercise of
its appellate jurisdiction shall be by petition for review in accordance with Rule 42. (c) Appeal by
certiorari.In all cases where only questions of law are raised or involved, the appeal shall be to the
Supreme Court by petition for review on certiorari in accordance with Rule 45. (Emphasis supplied) Thus,
when an appeal raises only pure questions of law, it is this Court that has the sole jurisdiction to entertain
the same. On the other hand, appeals involving both questions of law and fact fall within the exclusive
appellate jurisdiction of the CA.

Same; Same; Same; Question of Law and Question of Fact, Distinguished.A question of law
arises when there is doubt as to what the law is on a certain state of facts, while there is a question of fact
when the doubt arises as to the truth or falsity of the alleged facts. For a question to be one of law, the
same must not involve an examination of the probative value of the evidence presented by the litigants or
any of them. The resolution of the issue must rest solely on what the law provides on the given set of
circumstances. Once it is clear that the issue invites a review of the evidence presented, the question
posed is one of fact. Thus, the test of whether a question is one of law or of fact is not the appellation
given to such question by the party raising the same; rather, it is whether the appellate court can
determine the issue raised without reviewing or evaluating the evidence, in which case, it is a question of
law; otherwise it is a question of fact.
Same; Same; Judgments; Summary Judgments; When the pleadings on file show that there are no genuine
issues of fact to be tried, the Rules allow a party to obtain immediate relief by way of summary judgment,
that is, when the facts are not in dispute, the court is allowed to decide the case summarily by applying the
law to the material facts.Under Rule 35 of the 1997 Rules of Civil Procedure, as amended, except as to
the amount of damages, when there is no genuine issue as to any material fact and the moving party is
entitled to a judgment as a matter of law, summary judgment may be allowed: Section 1. Summary
Judgment for claimant.A party seeking to recover upon a claim, counterclaim, or cross-claim or to
obtain a declaratory relief may, at any time after the pleading in answer thereto has been served, move
with supporting affidavits, depositions or admissions for a summary judgment in his favor upon all or any
part thereof. Summary judgment is a procedural device resorted to in order to avoid long drawn out
litigations and useless delays. When the pleadings on file show that there are no genuine issues of fact to
be tried, the Rules allow a party to obtain immediate relief by way of summary judgment, that is, when
the facts are not in dispute, the court is allowed to decide the case summarily by applying the law to the
material facts. Even if on their face the pleadings appear to raise issues, when the affidavits, depositions
and admissions show that such issues are not genuine, then summary judgment as prescribed by the
Rules must ensue as a matter of law. The determinative factor, therefore, in a motion for summary
judgment, is the presence or absence of a genuine issue as to any material fact.

Same; Same; Same; Same; For a full-blown trial to be dispensed with, the party who moves for
summary judgment has the burden of demonstrating clearly the absence of genuine issues of fact, or that
the issue posed is patently insubstantial as to constitute a genuine issue.For a full-blown trial to be
dispensed with, the party who moves for summary judgment has the burden of demonstrating clearly the
absence of genuine issues of fact, or that the issue posed is patently insubstantial as to constitute a
genuine issue. Genuine issue means an issue of fact which calls for the presentation of evidence as
distinguished from an issue which is fictitious or contrived.

Fraud; Fraud is a question of fact and the circumstances constituting it must be alleged and proved
in the court below.Fraud, in its general sense, is deemed to comprise anything calculated to deceive,
including all acts, omissions, and concealment involving a breach of legal or equitable duty, trust or
confidence justly reposed, resulting in the damage to another, or by which an undue and unconscionable
advantage is taken of another. It is a question of fact and the circumstances constituting it must be
alleged and proved in the court below. Petitioners allegations of fraud and irregularity in the issuance to
FWI and eventual transfer to PSPC of the subject TCCs require presentation of evidence in a full-blown
trial. PSPC, in turn, can present its own evidence to prove the status of a purchaser or transferee in good
faith and for value. The solidary liability of PSPC and FWI for the amount covered by the TCCs depends on
the good faith or lack of it on the part of PSPC.

Good Faith; Good faith connotes an honest intention to abstain from taking undue advantage of another,
even though the forms and technicalities of law, together with the absence of all information or belief of
facts, would render the transaction unconscientious.In ascertaining good faith, or the lack of it, which is
a question of intention, courts are necessarily controlled by the evidence as to the conduct and outward
acts by which alone the inward motive may, with safety, be determined. Good faith connotes an honest
intention to abstain from taking undue advantage of another, even though the forms and technicalities of
law, together with the absence of all information or belief of facts, would render the transaction
unconscientious. The ascertainment of good faith, or lack of it, and the determination of whether due
diligence and prudence were exercised or not, are questions of fact.

Remedial Law; Civil Procedure; Judgments; Stare Decisis; When a court has laid down a principle of law as
applicable to a certain state of facts, it will adhere to that principle and apply it to all future cases in which
the facts are substantially the same.The doctrine of stare decisis is based on the principle that once a
question of law has been examined and decided, it should be deemed settled and closed to further
argument. Accordingly, when a court has laid down a principle of law as applicable to a certain state of
facts, it will adhere to that principle and apply it to all future cases in which the facts are substantially the
same. Thus, where the same questions relating to the same event have been put forward by the parties
similarly situated as in a previous case litigated and decided by a competent court, the rule of stare decisis
is a bar to any attempt to relitigate the same issue.

Remedial Law; Civil Procedure; Forum Shopping; Under prevailing jurisprudence, forum shopping can be
committed in three (3) ways.Under prevailing jurisprudence, forum shopping can be committed in three
ways, to wit: (1) filing multiple cases based on the same cause of action and with the same prayer, the
previous case not having been resolved yet (litis pendentia); (2) filing multiple cases based on the same
cause of action and [with] the same prayer, the previous case having been finally resolved (res judicata);
or (3) filing multiple cases based on the same cause of action but with different prayers (splitting of causes
of action, where the ground for dismissal is also either litis pendentia or res judicata).

Same; Same; Same; There is forum shopping when a party seeks a favorable opinion in another
forum, other than by an appeal or by certiorari, as a result of an adverse opinion in one (1) forum, or when
he institutes two (2) or more actions or proceedings grounded on the same cause, hoping that one or the
other court would make a favorable disposition on his case.There is forum shopping when a party seeks
a favorable opinion in another forum, other than by an appeal or by certiorari, as a result of an adverse
opinion in one forum, or when he institutes two or more actions or proceedings grounded on the same
cause, hoping that one or the other court would make a favorable disposition on his case. In other words,
[f]orum shopping exists when a party repeatedly avails himself of several judicial remedies in different
courts, [either] simultaneously or successively, all [of which are] substantially founded on the same
transactions and the same essential facts and circumstances, and all raising substantially the same issues
either pending in or already resolved adversely by some other court.

Same; Same; Same; Elements of.To constitute forum shopping the following elements must be present:
(1) identity of the parties or, at least, of the parties who represent the same interest in both actions; (2)
identity of the rights asserted and relief prayed for, as the latter is founded on the same set of facts; and
(3) identity of the two preceding particulars, such that any judgment rendered in the other action will
amount to res judicata in the action under consideration or will constitute litis pendentia.

Factual Antecedents

Pilipinas Shell Petroleum Corporation (PSPC), a domestic corporation registered with the Board of
Investments (BOI), is engaged in the importation, refining and sale of petroleum products in the country.
For its importations, PSPC was assessed and required to pay customs duties and internal revenue taxes.

Under Deed of Assignment4 dated May 7, 1997, Filipino Way Industries (FWI) assigned the following Tax
Credit Certificates5 (TCCs) to PSPC:

TCC# 006889 P 2,542,918.00

TCC # 006977 2,573,422.00

TCC# 006978 2,559,493.00

TCC # 006979 2,413,079.00

TOTAL P10,088,912.006

On the belief that the TCCs were actually good and valid, the Bureau of Customs (BOC) accepted and
allowed PSPC to use the above TCCs to pay the customs duties and taxes due on its oil importations.

The One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center7 ("center") undertakes the
processing of TCCs and approval of their transfers. It is composed of a representative from the
Department of Finance (DOF) as its chairperson; and the members thereof are representatives of the BOI,
BOC and Bureau of Internal Revenue (BIR).
On November 3, 1999 the Center, through then Finance Secretary Edgardo B. Espiritu, informed BIR
Commissioner Beethoven L. Rualo that pursuant to EXCOM Resolution No. 03-05-99, it has cancelled
various Tax Debit Memos (TDMs) issued to PSPC and Petron Corporation against their TCCs which were
found to have been fraudulently issued and transferred. These include the subject TCCs sold by FWI to
PSPC. The Center thus advised that it will be demanding from the said oil companies payment
corresponding to the amount of the TCCs as evidenced by the TDMs, and accordingly directed the BIR to
collect the amount utilized on the TCCs, including the related penalties, surcharges and interests. 8 A
similar letter was sent to Customs Commissioner Nelson Tan regarding the cancellation of TDMs issued to
PSPC based on the Center's finding that the TCCs utilized by PSPC have been fraudulently issued and
transferred.9

On April 3, 2002, the Republic of the Philippines represented by the BOC filed the present collection suit in
the RTC (Civil Case No. 02-103191) for the payment of P10,088,912.00 still owed by PSPC after the
invalidation of the subject TCCs.

Meanwhile, PSPC filed with the Court of Tax Appeals (CTA Case No. 6484) a petition for review
questioning the factual and legal bases of BOC's collection efforts.

Subsequently, PSPC moved to dismiss Civil Case No. 02-103191 on the ground that the RTC had no
jurisdiction over the subject matter and that the complaint for collection was prematurely filed in view of
its pending petition for review in the CTA. The RTC denied the motion to dismiss and PSPC eventually filed
its answer questioning the RTC's jurisdiction. When the RTC issued a notice of pre-trial, PSPC moved for
reconsideration of the order denying its motion to dismiss. The RTC denied the motion for
reconsideration, prompting PSPC to elevate the matter to the CA via a petition for certiorari (CA-G.R. SP
No. 71756). On October 23, 2003, the CA rendered decision denying PSPC's petition. With the denial of its
motion for reconsideration, PSPC sought recourse from this Court in a petition for review on certiorari
(G.R. No. 161953). In a Decision10 dated March 6, 2008, this Court denied PSPC's petition, viz.:
Inasmuch as the present case did not involve a decision of the Commissioner of Customs in any of the
instances enumerated in Section 7(2) of RA 1125, the CTA had no jurisdiction over the subject matter. It
was the RTC that had jurisdiction under Section 19(6) of the Judiciary Reorganization Act of 1980, as
amended:chanRoblesvirtualLawlibrary

xxxx

In view of the foregoing, the RFC should forthwith proceed with Civil Case No. 02-103191 and determine
the extent of petitioner's liability.

We are not unmindful of petitioner's pending petition for review in the CTA where it is questioning the
validity of the cancellation of the TCCs. However, respondent cannot and should not await the resolution
of that case before it collects petitioner's outstanding customs duties and taxes for such delay will unduly
restrain the performance of its functions. Moreover, if the ultimate outcome of the CTA case turns out to
be favorable to petitioner, the law affords it the adequate remedy of seeking a refund.

WHEREFORE, this petition is hereby DENIED. The Regional Trial Court of Manila, Branch 19 is ordered to
proceed expeditiously with the pre-trial conference and trial of Civil Case No. 02-103191.

Costs against petitioner.

SO ORDERED.11 (Emphasis supplied)


As to CTA Case No. 6484, the CTA denied BOC's motion to dismiss on the ground of prescription. When
the CTA denied the BOC's motion for reconsideration, the BOC appealed to the CA, which reversed the
questioned CTA resolutions. PSPC again sought recourse from this Court via a petition for review on
certiorari (G.R. No. 176380). By Decision 12 dated June 18, 2009, we denied the petition and held that the
present case does not involve a tax protest case within the jurisdiction of the CTA to resolve. Citing our
previous ruling in Pilipinas Shell Petroleum Corporation v. Republic13 we ruled that the appropriate forum
to resolve the issues raised by PSPC before the CTA, which were all related to the fact and efficacy of the
payments made, should be the collection case before the RTC where PSPC can put up the fact of its
payment as a defense.

With the resumption of proceedings in the RTC, the BOC filed an Amended Complaint, to which PSPC filed
a Second Amended Answer. Pre-trial was terminated and the RTC summarized the issues in its Pre-Trial
Order14 dated September 9, 2009, to wit:
The following issues raised by the plaintiffs:

a. Whether or not plaintiff Republic has cause of action against defendants;

b. Whether or not defendant Pilipinas Shell is [a] transferee in good faith [of] Tax Credit Certificates;

c. Whether or not defendants are liable to pay the Republic the amount of Phpl0,088,912.00
represents unpaid taxes;

d. Whether or not the Tax Credit Certificate was spurious and fraudulent.

The following issues raised by the defendant Pilipinas Shell:

a. Whether the defendants PSPC is liable for the amount of Php10,088,912.00 in customs duties
and taxes covered by cancelled subject Tax Credit Certificates, However, there are sub-issues.
These are include[d] in our pre-trial brief;

b. Whether or not plaintiff is liable for moral and exemplary and Attorney's fees; and

c. Whether or not defendant Filipino Way is liable to defendant PSPC in case of successful
collection of customs taxes against PSPC.15

On November 16, 2009, PSPC filed a motion for summary judgment arguing that there is no basis for the
Republic's claims considering that the subject TCCs were already fully utilized for the payment of PSPC's
customs duties and taxes, and that EXCOM Resolution No. 03-05-99, the basis of the cancellation of the
TCCs, was declared void and invalid in Pilipinas Shell Petroleum Corporation v. CIR,16 where this Court
likewise ruled that the subject TCCs cannot be cancelled on the basis of post-audit since a post-audit is not
allowed and not a suspensive condition. PSPC further contended that the Republic's cause of action had
already prescribed when it attempted to collect PSPC's customs duties and taxes only four years later,
beyond the one-year prescriptive period to file a collection case. Lastly, PSPC asserted that even assuming
the TCCs were fraudulently obtained by FWI, an innocent purchaser for value like PSPC cannot be
prejudiced as held in the aforementioned case.

In its Comment/Opposition, BOC argued that rendition of summary judgment is inappropriate in this case
in view of disputed facts that necessitate a full-blown trial where both parties can present evidence on
their respective claims. BOC pointed out that PSPC cannot rely on the Deed of Assignment as proof that it
had no participation in the issuance of the TCCs. PSPC should prove at the trial that there was a valid
transfer in good faith and for value of the subject TCCs. As to the rulings in the case of Pilipinas Shell
Petroleum Corporation v. CIR,17 these are inapplicable here because first, what is involved therein are
taxes owed to the BIR and there was no finding of fraud against PSPC whereas in the present case the BOC
can readily prove during trial that PSPC committed fraud.

On February 22, 2010, the RTC denied the motion for summary judgment in view of factual disputes
which can only be resolved by trial on the merits. Specifically, it stated that presentation of evidence is
necessary to determine if PSPC is a mere transferee in good faith and for value of the subject TCCs and
that there was a valid transfer/assignment between PSPC and FWI. 18

However, on motion for reconsideration by PSPC, the RTC reversed its earlier ruling and granted the
motion for summary judgment under its Order19 dated April 28, 2010. The RTC cited Pilipinas Shell
Corporation v. Republic20 which supposedly settled factual and legal issues raised by BOC in its pleadings
and arguments, specifically PSPC's not having committed fraud. As there are no more disputed matters,
the RTC held that there is no more need for a trial to prove that the subject TCCs have been fully utilized
by PSPC and that they were cancelled due to an invalid post-audit under the authority of EXCOM
Resolution No. 03-05-99.

The RTC thus decreed:


WHEREFORE, premises considered, the Order dated February 22, 2010 is hereby REVERSED and SET
ASIDE. The instant case against defendant PSPC is DISMISSED. However, the case against defendant
Filipino Way still SUBSISTS.

Let the trial of this case continue against the other Defendant namely, Filipino Way Industries, as
previously scheduled on May 19, 2010 at 1:00 o'clock in the afternoon.

SO ORDERED.21ChanRoblesVirtualawlibrary
With the denial of its motion for reconsideration, BOC appealed to the CA. By Decision dated February 13,
2013, the CA denied the appeal and affirmed the questioned orders of the RTC. BOC's motion for
reconsideration was likewise denied by the CA.

According to the CA, BOC adopted a wrong mode of appeal because whether the RTC erred in rendering
summary judgment is purely a legal issue, jurisdiction over which is vested only in this Court. Even
assuming that the CA can entertain BOC's appeal, the CA said it found no genuine issues raised by the
parties' pleadings and arguments that necessitate a fullblown trial. The CA further held that the rule on
stare decisis applies in the present case considering that the legal and factual issues have been previously
discussed and resolved by this Court in Pilipinas Shell Petroleum Corporation v. CIR.22

Issues

The following issues clearly emerge from the present controversy: (1) Does the Republic's (petitioner)
appeal involve purely questions of law and hence a wrong remedy from the assailed RTC orders?; (2)
Wliether or not summary judgment is proper; (3) Does the ruling in Pilipinas Shell Petroleum Corporation
v. CIR23 apply to this case under the doctrine of stare decisis; and (4) Whether or not petitioner's claim is
barred by prescription.

Petitioner's Arguments

Citing the cases of Nocom v. Camerino24 and Heirs of Baldomero Roxas v. Garcia25 petitioner argues that
since a summary judgment has the effect of adjudication on the merits, appeal under Rule 41 of the Rules
of Court is the proper remedy.

As to the propriety of summary judgment rendered by the RTC, petitioner underscores that the collection
case it filed against PSPC is founded on the fact that the latter utilized the fraudulently-secured TCCs for
payment of customs duties and taxes that arose from its various oil importations, and their cancellation
did not extinguish its liability to the government. The matter of whether or not PSPC is a transferee in
good faith and for value is a genuine issue to be resolved, and must be ventilated in a full trial. The issue
of whether or not PSPC is guilty of fraud likewise calls for the presentation of evidence at the trial.
Petitioner mentions other factual inquiries which it said arose in this case, such as the manner by which
FWI acquired the subject TCCs; the legality of their transfer to PSPC; the results of the post-audit
conducted on the subject TCCs; whether PSPC claimed a return of the consideration from FWI upon the
cancellation of the TCCs; the veracity of the letter from Equitable Banking Corporation stating that the
credit memos, supposedly used by FWI in securing the TCCs, do not conform to the bank's records; and
what are the company papers and export documents submitted for the claim of tax credits.

Petitioner also argues that Pilipinas Shell Petroleum Corporation v. CIR26 is not applicable as said case
involves the assessment of deficiency taxes which was filed before the CTA, hence a tax case, whereas
here it is a civil case for collection of sum of money which was filed in a regular court. More important,
the facts in the aforesaid case did not clearly establish the fraudulent acts committed by the original
grantees of tax credits in the procurement of TCCs from the Center, whereas in the present case,
petitioner can sufficiently prove that the documents submitted by the original grantee (FWI) for the claim
of tax credits were forgeries and the TCCs subsequently issued had absolutely no monetary value to back
up their issuance. Thus, where the facts in the two cases under consideration are different, stare decisis
finds no application.

On other legal issues that were previously settled in Pilipinas Shell Petroleum Corporation v. CIR,27
petitioner submits there is an extreme urgency to revisit this Court's ruling
x x x because of the great danger and prejudice it had caused to the several collection cases filed by the
government which are pending before several regular courts involving TCCs in the hundreds of millions of
pesos. Most defendants in these cases assert to be "buyers or transferees in good faith" and capitalize on
the ruling of this Honorable Court in the Shell case. However, if the only basis for finding good faith on the
part of the transferee of TCCs is the mere approval of the transfer by the DOF One Stop Shop Center, then
all these pending cases, as above-mentioned, must be dismissed, since all the transfers of the TCCs were
approved by the Center. This is precisely the very reason why the government filed several cases before
the Office of the Ombudsman against the personnel and officers of the One Stop Shop Center, including
private individuals, because of the collusion and conspiracy they contrived in order to defraud the
government of several billions of pesos involving the issuance and transfers of TCCs. This is now
infamously known as the "tax credit scam" because it was committed in grandiose style by a crime
syndicate.

In the final analysis, the ultimate victim in this scheme is not the Republic but the Filipino people who did
not commit mistake or wrongdoing, but rather, its agents. Hence, the State cannot be made to bear the
loss of revenues on account of scheming individuals or entities that are out to defraud the government or
evade the payment of tax liabilities.28ChanRoblesVirtualawlibrary
Respondent's Arguments

PSPC contends that the assailed orders of the RTC granting summary judgment has already attained
finality since petitioner availed of the wrong remedy before the CA. It asserts that the CA did not err in
upholding the RTC's ruling that there exists no genuine issues of fact in the present case.

On the alleged fraudulent issuance of the subject TCCs, PSPC maintains that it cannot be prejudiced by
such fraud which, by petitioner's own admission, was committed by FWI. Being a transferee in good faith
and for value of the subject TCCs, these matters raised by petitioner are thus irrelevant. That PSPC is a
transferee in good faith and for value was admitted by petitioner during the pre-trial hearing held on
September 9, 2009.

PSPC argues that, contrary to petitioner's claims, the CA correctly applied this Court's rulings in Pilipinas
Shell Petroleum Corporation v. CIR29 under the doctrine of stare decisis. In any event, it asserts that
petitioner's cause of action had already prescribed since the subject TCCs were already fully utilized as
payment for PSPC's customs duties and taxes on November 17, 1997, while petitioner attempted to
collect only on February 15, 2002 or four years later, beyond the one year period to file the present case.
Our Ruling

The petition is meritorious.

Propriety of Summary Judgment a Question of Law, hence, the Remedy is a Petition for Review Under
Rule 45

Section 2, Rule 41 of the 1997 Rules of Civil Procedure, as amended, provides for two remedies from the
final orders or judgments of the RTC in the exercise of its original jurisdiction, viz.:
Section 2. Modes of appeal. -

(a) Ordinary appeal. - The appeal to the Court of Appeals in cases decided by the Regional Trial Court in
the exercise of its original jurisdiction shall be taken by filing a notice of appeal with the court which
rendered the judgment or final order appealed from and serving a copy thereof upon the adverse party.
No record on appeal shall be required except in special proceedings and other cases of multiple or
separate appeals where the law or these Rules so require. In such cases, the record on appeal shall be
filed and served in like manner.

(b) Petition for review. - The appeal to the Court of Appeals in cases decided by the Regional Trial Court in
the exercise of its appellate jurisdiction shall be by petition for review in accordance with Rule 42.

(c) Appeal by certiorari. - In all cases where only questions of law are raised or involved, the appeal shall
be to the Supreme Court by petition for review on certiorari in accordance with Rule 45.

(Emphasis supplied)
Thus, when an appeal raises only pure questions of law, it is this Court that has the sole jurisdiction to
entertain the same. On the other hand, appeals involving both questions of law and fact fall within the
exclusive appellate jurisdiction of the CA.30

A question of law arises when there is doubt as to what the law is on a certain state of facts, while there is
a question of fact when the doubt arises as to the truth or falsity of the alleged facts. For a question to be
one of law, the same must not involve an examination of the probative value of the evidence presented
by the litigants or any of them. The resolution of the issue must rest solely on what the law provides on
the given set of circumstances. Once it is clear that the issue invites a review of the evidence presented,
the question posed is one of fact. Thus, the test of whether a question is one of law or of fact is not the
appellation given to such question by the party raising the same; rather, it is whether the appellate court
can determine the issue raised without reviewing or evaluating the evidence, in which case, it is a
question of law; otherwise it is a question of fact. 31

We have held that the question of whether the RTC erred in rendering summary judgment is one of law,
thus:
Any review by the appellate court of the propriety of the summary judgment rendered by the trial court
based on these pleadings would not involve an evaluation of the probative value of any evidence, but
would only limit itself to the inquiry of whether the law was properly applied given the facts and these
supporting documents. Therefore, what would inevitably arise from such a review are pure questions of
law, and not questions of fact, which are not proper in an ordinary appeal under Rule 41, but should be
raised by way of a petition for review on certiorari under Rule 45.32ChanRoblesVirtualawlibrary
Petitioner raised as sole issue in its brief filed with the CA the RTC's erroneous grant of summary
judgment in favor of PSPC based on its finding that there exists no genuine factual issue. Obviously, it
availed of the wrong mode of appeal when it filed a notice of appeal in the RTC under Section 2(a), Rule
41, instead of a petition for review on certiorari in this Court under Rule 45.

Relaxation of the Rule on Appeal


However, despite such lapse, a relaxation of the rule on appeal is justified under the circumstances. The
CA found no reversible error in the grant of summary judgment in favor of PSPC. Accordingly, it affirmed
the assailed orders of the RTC.

Considering the Republic's stake in the outcome of the proceedings in Civil Case No. 02-103191, among
the several collection suits it has instituted in the drive to recover huge revenue losses from spurious tax
credit certificates that proliferated in the 1990s, we cannot accede to PSPC's contention that petitioner's
erroneous appeal has rendered the Orders dated April 28, 2010 and July 2, 2010 of the RTC final and
executory.

In Barangay Sangalang v. Barangay Maguihan33 we ratiocinated:


In any case, as in the past, this Court has recognized the emerging trend towards a liberal construction of
the Rules of Court. In Ong him Sing, Jr. v. FEB Leasing and Finance Corporation, this Court stated:
Courts have the prerogative to relax procedural rules of even the most mandatory character, mindful of
the duty to reconcile both the need to speedily put an end to litigation and the parties' right to due
process. In numerous cases, this Court has allowed liberal construction of the rules when to do so would
serve the demands of substantial justice and equity. In Aguam v. Court of Appeals, the Court explained:
The court has the discretion to dismiss or not to dismiss an appellant's appeal. It is a power conferred on
the court, not a duty. The "discretion must be a sound one, to be exercised in accordance with the tenets
of justice and fair play, having in mind the circumstances obtaining in each case." Technicalities, however,
must be avoided. The law abhors technicalities that impede the cause of justice. The court's primary duty
is to render or dispense justice. "A litigation is not a game of technicalities." "Lawsuits, unlike duels, are
not to be won by a rapier's thrust. Technicality, when it deserts its proper office as an aid to justice and
becomes its great hindrance and chief enemy, deserves scant consideration from courts." Litigations must
be decided on their merits and not on technicality. Every party-litigant must be afforded the amplest
opportunity for the proper and just determination of his cause, free from the unacceptable plea of
technicalities. Thus, dismissal of appeals purely on technical grounds is frowned upon where the policy of
the court is to encourage hearings of appeals on their merits and the rules of procedure ought not to be
applied in a very rigid, technical sense; rules of procedure are used only to help secure, not override
substantial justice. It is a far better and more prudent course of action for the court to excuse a technical
lapse and afford the parties a review of the case on appeal to attain the ends ol" justice rather than
dispose of the case on technicality and cause a grave injustice to the parties, giving a false impression of
speedy disposal of cases while actually resulting in more delay, if not a miscarriage of justice.
Thus, notwithstanding petitioner's wrong mode of appeal, the CA should not have so easily dismissed the
petition, considering that the parties involved are local government units and that what is involved is the
determination of their respective territorial jurisdictions. x x x34ChanRoblesVirtualawlibrary
Summary Judgment Not Proper

Under Rule 35 of the 1997 Rules of Civil Procedure, as amended, except as to the amount of damages,
when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a
matter of law, summary judgment may be allowed:
Section 1. Summary Judgment for claimant. - A party seeking to recover upon a claim, counterclaim, or
cross-claim or to obtain a declaratory relief may, at any time after the pleading in answer thereto has
been served, move with supporting affidavits, depositions or admissions for a summary judgment in his
favor upon all or any part thereof.
Summary judgment is a procedural device resorted to in order to avoid long drawn out litigations and
useless delays. When the pleadings on file show that there are no genuine issues of fact to be tried, the
Rules allow a party to obtain immediate relief by way of summary judgment, that is, when the facts are
not in dispute, the court is allowed to decide the case summarily by applying the law to the material
facts.35 Even if on their face the pleadings appear to raise issues, when the affidavits, depositions and
admissions show that such issues are not genuine, then summary judgment as prescribed by the Rules
must ensue as a matter of law. The determinative factor, therefore, in a motion for summary judgment, is
the presence or absence of a genuine issue as to any material fact. 36

For a full-blown trial to be dispensed with, the party who moves for summary judgment has the burden of
demonstrating clearly the absence of genuine issues of fact, or that the issue posed is patently
insubstantial as to constitute a genuine issue. Genuine issue means an issue of fact which calls for the
presentation of evidence as distinguished from an issue which is fictitious or contrived. 37

Petitioner's complaint is premised mainly on the alleged fraudulent issuance and transfer of the subject
TCCs. As stated in the pre-trial order, petitioner submitted for trial the issue of whether or not PSPC is a
transferee in good faith.

In Pilipinas Shell Petroleum Corporation v. CIR,38 we ruled that "[t]he transferee in good faith and for value
may not be unjustly prejudiced by the fraud committed by the claimant or transferor in the procurement
or issuance of the TCC from the Center."
A transferee in good faith and for value of a TCC who has relied on the Center's representation of the
genuineness and validity of the TCC transferred to it may not be legally required to pay again the tax
covered by the TCC which has been belatedly declared null and void, that is, after the TCCs have been fully
utilized through settlement of internal revenue tax liabilities. Conversely, when the transferee is party to
the fraud as when it did not obtain the TCC for value or was a party to or has knowledge of its fraudulent
issuance, said transferee is liable for the taxes and for the fraud committed as provided for by
law.39ChanRoblesVirtualawlibrary
The RTC found no genuine factual issue as far as PSPC's status as innocent purchaser in good faith and for
value, relying on the following underlined portion of this Court's decision in Pilipinas Shell Petroleum
Corporation v. Republic40 (March 6, 2008):
THE FILING OF THE COLLECTION CASE WAS A PROPER REMEDY

Assessments inform taxpayers of their tax liabilities. Under the TCCP, the assessment is in the form of a
liquidation made on the face of the import entry return and approved by the Collector of Customs.
Liquidation is the final computation and ascertainment by the Collector of Customs of the duties due on
imported merchandise based on official reports as to the quantity, character and value thereof, and the
Collector of Customs' own finding as to the applicable rate of duty. A liquidation is considered to have
been made when the entry is officially stamped "liquidated."

Petitioner claims that it paid the duties due on its importations. Section 1603 of the old TCCP stated:
Section 1603. Finality of Liquidation. When articles have been entered and passed free of duty or final
adjustments of duties made, with subsequent delivery, such entry and passage free of duty or settlement
of duties will, after the expiration of one year from the date of the final payment of duties, in the absence
of fraud or protest, be final and conclusive upon all parties, unless the liquidation of the import entry was
merely tentative.
An assessment or liquidation by the BoC attains finality and conclusiveness one year from the date of the
final payment of duties except when:
(a) there was fraud;

(b) there is a pending protest or

(c) the liquidation of import entry was merely tentative.


None of the foregoing exceptions is present in this case. There was no fraud as petitioner claimed (and
was presumed) to be in good faith. Respondent does not, dispute this. Moreover, records show that
petitioner paid those duties without protest using its TCCs. Finally, the liquidation was not a tentative one
as the assessment had long become final and incontestable. Consequently, pursuant to Yabes and
because of the cancellation of the TCCs, respondent had the right to file a collection case. (Underscoring
supplied)
Upon reading the entire text of the above decision, it can be gleaned that PSPC (petitioner therein) had
questioned the jurisdiction of the RTC, arguing that said court has no jurisdiction over Civil Case No. 02-
103191 (collection case) in view of the pendency of PSPC's petition for review in the CTA challenging the
BOC's assessment of the customs duties and taxes covered by the same TCCs involved in this case. Citing
Yabes v. Flojo,41 PSPC contended that the RTC acquires jurisdiction over a collection case only if an
assessment made by the CIRhas become final and incontestable.

Addressing the issue of prematurity of BOC's collection case in the RTC, we cited three exceptions from
the rule that an assessment becomes final and conclusive one year from the date of final payment of
duties: among which is when there is fraud. The decision then declares that none of the cited exceptions
are present, specifically stating that there was no fraud as petitioner claimed (and was presumed) to be in
good faith, and the BOC does not dispute it. It is this statement which the RTC deemed as establishing
PSPC's status as transferee in good faith and for value of the subject TCCs. However, we find the RTC's
reliance on this statement in the earlier case involving the issue of jurisdiction of the RTC as misplaced
and erroneous. Such statement pertained to fraud in the computation or accuracy of the customs duties
and taxes due on the subject importations, which concerns the correctness of the quantity and class of
goods declared by the importer PSPC as basis for the assessment by the BOC. There may have been
preconceived courses of action purposely adopted by importers to evade the payment of the correct
customs duties. Clearly, the fraud mentioned in the said decision does not refer to the fraud in the
issuance and transfer of TCCs for which the petitioner seeks to recover unpaid customs duties and taxes,
subject matter of the present controversy. The latter has to do with presentation of spurious documents
that would render the TCCs worthless, resulting in non-payment of the assessed customs duties and
taxes.

It bears stressing also that the collection case is not based on any revised or new assessment of customs
duties and taxes on PSPC's oil importations. As we noted in Pilipinas Shell Petroleum Corporation v.
Commissioner of Customs42 BOC's demand letters to PSPC merely reissued the original assessments that
were previously settled by it with the use of the TCCs. But since the TCCs were cancelled, the tax liabilities
of PSPC under the original assessments were considered unpaid; hence, the demand letters and actions
for collection.

Moreover, it would be absurd to interpret such statement in our decision in Pilipinas Shell Petroleum
Corporation v. Republic43 (March 6, 2008) as a judicial declaration of PSPC's status as a transferee in good
faith and for value of the subject TCCs when in the same decision we ordered the case remanded to the
RTC for proceeding with the pre-trial where issues for trial still have to be determined by the parties.
Neither should such statement be regarded as an admission by petitioner because the latter's complaint
was anchored chiefly on the alleged fraud and irregularity in the issuance and transfer of the TCCs, with
both the transferee (PSPC) and transferor (FWI) impleaded as defendants.

In its Comment, PSPC claims that during the pre-trial hearing, the Solicitor General's representative
admitted that PSPC had no participation in the issuance of the subject TCCs. However, perusal of the
transcript of stenographic notes (TSN) reveals that what was admitted by petitioner was only the fact of
issuance and eventual transfer/assignment to PSPC of the TCCs. The succeeding portions of the TSN,
omitted in the Comment, clearly showed that Sr. State Solicitor Bustria repeatedly denied Atty. Lopez's
(PSPC's counsel) proposed stipulations on the valuable consideration for the TCCs, the approval by the
concerned agencies of the deed of the said assignment/transfer and related matters. 44

Fraud, in its general sense, is deemed to comprise anything calculated to deceive, including all acts,
omissions, and concealment involving a breach of legal or equitable duty, trust or confidence justly
reposed, resulting in the damage to another, or by which an undue and unconscionable advantage is
taken of another. It is a question of fact and the circumstances constituting it must be alleged and proved
in the court below.45 Petitioner's allegations of fraud and irregularity in the issuance to FWI and eventual
transfer to PSPC of the subject TCCs require presentation of evidence in a full-blown trial. PSPC, in turn,
can present its own evidence to prove the status of a purchaser or transferee in good faith and for value.
The solidary liability of PSPC and FWI for the amount covered by the TCCs depends on the good faith or
lack of it on the part of PSPC.

In ascertaining good faith, or the lack of it, which is a question of intention, courts are necessarily
controlled by the evidence as to the conduct and outward acts by which alone the inward motive may,
with safety, be determined.46 Good faith connotes an honest intention to abstain from taking undue
advantage of another, even though the forms and technicalities of law, together with the absence of all
information or belief of facts, would render the transaction unconscientious. 47 The ascertainment of good
faith, or lack of it, and the determination of whether due diligence and prudence were exercised or not,
are questions of fact.48

Trial courts have limited authority to render summary judgments and may do so only when there is clearly
no genuine issue as to any material fact. When the facts as pleaded by the parties are disputed or
contested, proceedings for summary judgment cannot take the place of trial. 49 As certain facts pleaded
are contested by the parties in this case, rendition of summary judgment is not proper.

Prescription

As already mentioned, BOC's collection suit is not based on any new or revised assessment because the
original assessments which had long become final and uncontestable, were already settled by PSPC with
the use of the subject TCCs.

With the cancellation of the TCCs, the tax liabilities of PSPC under the original assessments were
considered unpaid, hence BOC's demand letters and the action for collection in the RTC. To repeat, these
assessed customs duties and taxes were previously assessed and paid by the taxpayer, only that the TCCs
turned out to be spurious and hence worthless certificates that did not extinguish PSPC's tax liabilities.

The applicable provision is Section 1204 of the Tariff and Customs Code, which states:
Section 1204. Liability of Importer for Duties. Unless relieved by laws or regulations, the liability for
duties, taxes, fees and other charges attaching on importation constitutes a personal debt due from the
importer to the government which can be discharged only by payment in full of all duties, taxes, fees
and other charges legally accruing. It also constitutes a lien upon the articles imported which may be
enforced while such articles are in the custody or subject to the control of the government. (Emphasis
supplied)
As we held in Pilipinas Shell Petroleum Corporation v. Republic50:
Under this provision, import duties constitute a personal debt of the importer that must be paid in full.
The importer's liability therefore constitutes a lien on the article which the government may choose to
enforce while the imported articles are either in its custody or under its control.

When respondent released petitioner's goods, its (respondent's) lien over the imported goods was
extinguished. Consequently, respondent could only enforce the payment of petitioner's import duties in
full by filing a case for collection against petitioner.51ChanRoblesVirtualawlibrary
Stare Decisis

The doctrine of stare decisis is based on the principle that once a question of law has been examined and
decided, it should be deemed settled and closed to further argument. 52 Accordingly, when a court has laid
down a principle of law as applicable to a certain state of facts, it will adhere to that principle and apply it
to all future cases in which the facts are substantially the same. Thus, where the same questions relating
to the same event have been put forward by the parties similarly situated as in a previous case litigated
and decided by a competent court, the rule of stare decisis is a bar to any attempt to relitigate the same
issue.53
The RTC and CA both ruled that Pilipinas Shell Petroleum Corporation v. CIR54 applies to the present case,
stating that the legal issues have already been settled by this Court such as the ineffective cancellation by
the Center of TCCs which have been fully utilized by the importer/taxpayer and the sole responsibility
under the Liability Clause in the TCC of the original grantee for its fraudulent issuance by the Center.

We disagree.

Pilipinas Shell Petroleum Corporation v. CIR55 involved TCCs used by PSPC that were also cancelled for
alleged fraud in their issuance and transfer. However, in the said case, there was a finding, on the basis of
evidence presented before the CTA, that PSPC is a transferee in good faith and for value and that no
evidence was adduced that it participated in any way in the issuance of the TCCs to the corporations who
in turn conveyed the same to PSPC.

PSPC's status as transferee in good faith of the TCCs assigned to it by FWI is yet to be established or
proven at the trial. In fact, this Court in upholding the jurisdiction of the RTC directed it to proceed with
the pre-trial and trial proper. Petitioner should be given the opportunity to substantiate its allegations of
fraud in the issuance and transfer of the TCCs which PSPC used to pay for the customs duties and taxes
due on its oil importations. Whether Pilipinas Shell Petroleum Corporation v. CIR56 applies squarely to the
present case may be determined only after such trial. If it is shown that PSPC was a party to the fraud as
when it did not obtain the TCC for value or has knowledge of its fraudulent issuance, it will be liable for
the taxes and for the fraud committed as provided for by law.

As to the full utilization of the TCCs being claimed by PSPC, our ruling in Pilipinas Shell Petroleum
Corporation v. CIR is clear that the taxpayer must have no participation in the fraud, viz.:
Sec. 3, letter 1. of AO 266, in relation to letters a. and g., does give ample authority to the Center to cancel
the TCCs it issued. Evidently, the Center cannot carry out its mandate if it cannot cancel the TCCs it may
have erroneously issued or those that were fraudulently issued. It is axiomatic that when the law and its
implementing rules are silent on the matter of cancellation while granting explicit authority to issue, an
inherent and incidental power resides on the issuing authority to cancel that which was issued. A caveat
however is required in that while the Center has authority to do so, it must bear in mind the nature of the
TCCs immediate effectiveness and validity for which cancellation may only be exercised before a
transferred TCC has been fully utilized or cancelled by the BIR after due application of the available tax
credit to the internal revenue tax liabilities of an innocent transferee for value, unless of course the
claimant or transferee was involved in the perpetration of the fraud in the TCCs issuance, transfer, or
utilization. The utilization of the TCC will not shield a guilty party from the consequences of the fraud
committed.57 (Emphasis supplied)
In sum, the CA erred in affirming the RTC orders granting summary judgment in favor of PSPC considering
that there exists a genuine issue of fact and that stare decisis finds no application in this case.

WHEREFORE, the petition is GRANTED. The Decision dated February 13, 2013 and Resolution dated June
3, 2013 of the Court of Appeals in CA-G.R. CV No. 95436 are REVERSED and SET ASIDE.

The case is hereby REMANDED to the Regional Trial Court of Manila, Branch 49 for the conduct of trial
proceedings in Civil Case No. 02-103191 with utmost DELIBERATE DISPATCH.

No pronouncement as to costs.

SO ORDERED.chanroblesvirtuallawlibrary

Velasco, Jr., (Chairperson), Peralta, Bersamin,* and Reyes, JJ., concur.


G.R. No. 205002

COMMISSIONER OF CUSTOMS, COLLECTOR OF CUSTOMS OF THE PORT OF BATANGAS, and THE BUREAU
OF CUSTOMS, Petitioners,
vs.
PILIPINAS SHELL PETROLEUM CORPORATION (PSPC), WILLIE J. SARMIENTO, PSPC Vice-President for
Finance and Treasurer and ATTY. CIPRIANO U. ASILO, Respondents.

Remedial Law; Civil Procedure; Forum Shopping; Under prevailing jurisprudence, forum shopping can be
committed in three (3) ways.Under prevailing jurisprudence, forum shopping can be committed in three
ways, to wit: (1) filing multiple cases based on the same cause of action and with the same prayer, the
previous case not having been resolved yet (litis pendentia); (2) filing multiple cases based on the same
cause of action and [with] the same prayer, the previous case having been finally resolved (res judicata);
or (3) filing multiple cases based on the same cause of action but with different prayers (splitting of causes
of action, where the ground for dismissal is also either litis pendentia or res judicata).

Same; Same; Same; There is forum shopping when a party seeks a favorable opinion in another
forum, other than by an appeal or by certiorari, as a result of an adverse opinion in one (1) forum, or when
he institutes two (2) or more actions or proceedings grounded on the same cause, hoping that one or the
other court would make a favorable disposition on his case.There is forum shopping when a party seeks
a favorable opinion in another forum, other than by an appeal or by certiorari, as a result of an adverse
opinion in one forum, or when he institutes two or more actions or proceedings grounded on the same
cause, hoping that one or the other court would make a favorable disposition on his case. In other words,
[f]orum shopping exists when a party repeatedly avails himself of several judicial remedies in different
courts, [either] simultaneously or successively, all [of which are] substantially founded on the same
transactions and the same essential facts and circumstances, and all raising substantially the same issues
either pending in or already resolved adversely by some other court.

Same; Same; Same; Elements of.To constitute forum shopping the following elements must be present:
(1) identity of the parties or, at least, of the parties who represent the same interest in both actions; (2)
identity of the rights asserted and relief prayed for, as the latter is founded on the same set of facts; and
(3) identity of the two preceding particulars, such that any judgment rendered in the other action will
amount to res judicata in the action under consideration or will constitute litis pendentia.

Factual Antecedents

Respondent Pilipinas Shell Petroleum Corporation (PSPC) is a domestic corporation engaged in the
business of manufacturing and selling petroleum products for distribution in the Philippines.5

On January 30, 2009, petitioner District Collector Juan N. Tan, the Collector of Customs of the Port of
Batangas, issued a demand letter6 asking respondent PSPC to pay the excise tax and value-added tax
(VAT), plus penalty on its importation of catalytic cracked gasoline (CCG) and light catalytic cracked
gasoline (LCCG) for the years 2006 to 2008 in the total amount of P21,419,603,310.00.

Respondent PSPC, however, refused to heed the demand and, instead, issued a letter dated February 13,
2009 questioning the factual or legal basis of the demand.7

On February 18, 2009, petitioner District Collector issued another letter8 reiterating the demand for the
payment of the said unpaid taxes.
On March 5, 2009, respondent PSPC appealed the matter to petitioner Commissioner of Customs (COC)
Napoleon Morales.9 Pending the resolution of the said appeal, petitioner COC ordered petitioner District
Collector to observe status quo.10

On November 11, 2009, petitioner COC denied the appeal and ordered respondent PSPC to pay the
unpaid taxes to avoid the application of Section 150811 of the Tariff and Customs Code of the Philippines
(TCCP).12

Unfazed, respondent PSPC moved for reconsideration13 but petitioner COC denied the same in his
letter14 dated November 26, 2009.

On December 3, 2009, respondent PSPC filed with the CTA a Petition for Review15 docketed as CTA Case
No. 8004 assailing the Letter-Decisions dated November 11 and 26, 2009 of petitioner COC. Respondent
PSPC likewise filed a Verified Motion for the issuance of a Suspension Order against the collection of taxes
with a prayer for immediate issuance of a Temporary Restraining Order (TRO).16

On December 9, 2009, the CTA First Division issued a Resolution granting respondent PSPCs application
for a TRO for a period of 60 days or until February 7, 2010.17

On February 9, 2010, after due hearing on the Verified Motion, the CTA First Division issued a
Resolution18 denying respondent PSPCs request for a suspension order.

In light of the denial of the Verified Motion, petitioner District Collector issued a Memorandum dated
February 9, 2010 ordering the personnel of petitioner Bureau of Customs (BOC) in the Port of Batangas to
hold the delivery of all import shipments of respondent PSPC to satisfy its excise tax liabilities.19

On February 10, 2010, respondent PSPC filed with the Regional Trial Court (RTC), Fourth Judicial Region,
Batangas City, Branch 3, a Complaint for Injunction with prayer for the ex-parte issuance of a 72-hour
TRO,20 docketed as Civil Case No. 8780, to enjoin the implementation of the Memorandum dated
February 9, 2010. In the Verification and Certification21 attached to the Complaint for Injunction,
respondent Vice President for Finance and Treasurer Willie J. Sarmiento (Sarmiento) declared that there is
a pending case before the CTA, however, it involves different issues and/or reliefs.

On the same day, the RTC issued a 72-hour TRO, which it later extended to 17 more days.22

On March 19, 2010, petitioners filed with the CTA a Motion to Cite respondents PSPC, Sarmiento, and
Atty. Cipriano U. Asilo for Direct Contempt of Court.23 As per the Resolution dated July 7, 2010, the said
Motion, docketed as CTA Case No. 8121, was consolidated with the main case, CTA Case No. 8004.24

Meanwhile, petitioner District Collector filed a Complaint-Affidavit25 for Perjury under Article 183 of the
Revised Penal Code (RPC) against respondent Sarmiento in relation to the Verification and Certification he
filed before the RTC of Batangas City, where he declared that the Petition for Review PSPC filed with the
CTA does not involve the same issues and/or reliefs.

On April 8, 2010, an Information26 for Perjury against respondent Sarmiento, docketed as Criminal Case
No. 52763, was filed before Branch 1 of the Municipal Trial Court in Cities (MTCC), Batangas City.1wphi1

On August 9, 2010, the MTCC rendered a Resolution27 dismissing the case for Perjury for lack of probable
cause, which later became final and executory.28

Ruling of the Court of Tax Appeals Division


On October 18, 2010, the CTA Third Division rendered a Resolution29 denying the Motion to Cite
respondents in Direct Contempt of Court. Although the parties in the CTA case and the Batangas
injunction case are the same, the CTA found that the rights asserted and the reliefs prayed for are
different.30 It pointed out that the CTA case assails the Letter-Decisions dated November 11 and 26,
2009, while the Batangas injunction case opposes the Memorandum dated February 9, 2010.31 The CTA
also opined that a decision in one case would not result in res judicata in the other case.32 Thus, it ruled
that the filing of the Batangas injunction case does not constitute forum shopping.33 And since no forum
shopping exists, the CTA found no reason to cite respondents in direct contempt of court.

Feeling aggrieved, petitioners moved for reconsideration34 but the CTA Third Division denied the same in
its Resolution35 dated March 9, 2011.

Ruling of the Court of Tax Appeals En Banc

Unfazed, petitioners elevated the matter to the CTA En Banc via a Petition for Review.36

On June 11, 2012, the CTA En Banc rendered a Decision affirming the Resolutions dated October 18, 2010
and March 9, 2011 of the CTA Third Division.

Petitioners sought reconsideration of the Decision.

On August 28, 2012, the CTA En Banc rendered a Resolution denying petitioners motion for
reconsideration.

Issue

Hence, petitioners filed the instant Petition for Review on Certiorari raising the sole issue of whether the
CTA committed a reversible error when it ruled that respondents did not commit willful and deliberate
forum shopping.37

Petitioners Arguments

Petitioners contend that the CTA seriously erred in finding respondents not guilty of willful and deliberate
forum shopping considering that the Verified Motion filed before the CTA and the Complaint for
Injunction filed before the RTC of Batangas involve exactly the same parties, the same rights, and the
same reliefs.38 Petitioners claim that the material allegations in both pleadings are based on the same set
of facts;39 that both cases substantially raise the same issues;40 and that both seek to enjoin the
enforcement of Section 1508 of the TCCP.41 Petitioners further claim that the phrase "to refrain or stop
from exercising any action described in, under or pursuant to, Section 1508 of the TCCP" in the prayer of
the Verified Motion is all-encompassing as it includes whatever relief respondent PSPC sought in the
Complaint for Injunction filed before the RTC.42 Moreover, petitioners allege that the filing of the
Complaint for Injunction was done in utter disrespect of the CTA exclusive jurisdiction;43 that it was a
calculated maneuver of respondents to undermine the CTAs denial of their prayer for the issuance of a
suspension order;44 and that it should not be allowed, as it constitutes forum shopping.45 Finally,
petitioners assert that the dismissal of the perjury case against respondent Sarmiento does not estop
them from claiming that respondents are guilty of forum shopping, as the elements of perjury are not the
same as that of contempt via willful forum shopping.46

Respondents Arguments
Respondents, on the other hand, argue that the issue of forum shopping may no longer be re-opened or
re-litigated, as this has long been resolved with finality in the criminal case for perjury filed against
respondent Sarmiento. They

insist that the dismissal of the criminal complaint for perjury against respondent Sarmiento on the ground
that there is no forum shopping for which reason the third element of perjury is wanting, is binding on the
CTA.47 Thus, petitioners are barred by prior judgment48 and by the principle of conclusiveness of
judgment.49 In addition, respondents maintain that the Batangas injunction case is different from the
case pending before the CTA as the former pertains to importations already released and transferred to
the possession of respondent PSPC while the

latter pertains to "future importations" of respondent PSPC.50

Our Ruling

The Petition must fail.

In a nutshell, petitioners contend that respondents should be cited for direct contempt of court pursuant
to Section 5,51 Rule 7 of the 1997 Rules of Civil Procedure, as amended, which states that the submission
of a false certification on non-forum shopping constitutes indirect or direct contempt of court, and that
the willful and deliberate commission of forum shopping constitutes direct contempt of court.

We do not agree.

Under prevailing jurisprudence, forum shopping can be committed in three ways, to wit:

(1) filing multiple cases based on the same cause of action and with the same prayer, the
previous case not having been resolved yet (litis pendentia);

(2) filing multiple cases based on the same cause of action and [with] the same prayer, the
previous case having been finally resolved (res judicata); or

(3) filing multiple cases based on the same cause of action but with different prayers (splitting of
causes of action, where the ground for dismissal is also either litis pendentia or res judicata).52

Corollarily, there is forum shopping when a party seeks a favorable opinion in another forum, other than
by an appeal or by certiorari, as a result of an adverse opinion in one forum, or when he institutes two or
more actions or proceedings grounded on the same cause, hoping that one or the other court would
make a favorable disposition on his case.53 In other words, "[f]orum shopping exists when a party
repeatedly avails himself of several judicial remedies in different courts, [either] simultaneously or
successively, all [of which are] substantially founded on the same transactions and the same essential
facts and circumstances, and all raising substantially the same issues either pending in or already resolved
adversely by some other court."54

Hence, to constitute forum shopping the following elements must be present:

(1) identity of the parties or, at least, of the parties who represent the same interest in both
actions;

(2) identity of the rights asserted and relief prayed for, as the latter is founded on the same set of
facts; and
(3) identity of the two preceding particulars, such that any judgment rendered in the other action
will amount to res judicata in the action under consideration or will constitute litis pendentia.55

In this case, a careful reading of the Verified Motion in the CTA case vis-vis the Complaint for Injunction
filed with the RTC of Batangas reveals that although both cases have the same parties, originated from
the same factual antecedents, and involve Section 1508 of the TCCP, the subject matter, the cause of
action, the issues involved, and the reliefs prayed for are not the same.

The subject matter and the causes of


action are not the same.

The subject matter in the CTA case is the alleged unpaid taxes of respondent PSPC on its importation of
CCG and LCCG for the years 2006 to 2008 in the total amount of P21,419,603,310.00, which is sought to
be collected by petitioners. On the other hand, the subject matter of the Batangas injunction case is the
13 importations/shipments of respondent PSPC for the period January to February 2010, which
respondent PSPC claims are threatened to be seized by petitioners pursuant to the Memorandum dated
February 9, 2010 issued by petitioner District Collector.

Also, the cause of action in the CTA case is based on the Letter-Decisions of petitioner COC, finding
respondent PSPC liable for excise taxes and VAT; while the cause of action in the Batangas injunction case
is the Memorandum

dated February 9, 2010, ordering the personnel of petitioner BOC in the Port of Batangas to hold the
delivery of all import shipments of respondent PSPC.

The issues raised are not the same.

Furthermore, the issues raised are not the same. Respondent PSPC filed the CTA case to assail the Letter-
Decisions of petitioner COC, finding it liable to pay excise taxes and VAT on its importation of CCG and
LCCG. Thus, in the Petition for Review, the main issue involved is the validity of the Letter-Decisions; while
in the Verified Motion, the issue raised is respondent PSPCs entitlement to a suspension order pending
the resolution of the validity of the Letter-Decisions.

On the other hand, respondent PSPC filed the Batangas injunction case to question the validity of the
Memorandum dated February 9, 2010 and to oppose the seizure of the 13 importations/shipments on the
ground that petitioners no

longer have jurisdiction over the subject importations/shipments as these have been discharged and
placed in its Batangas refinery since 90% of the import duties due on the said shipments have been paid.
To support its case, respondent PSPC interposed that Section 1508 of the TCCP is available only if
petitioner BOC has actual physical custody of the goods sought to be held, a situation not present in the
case of the said importations/shipments; that petitioners have no reason to seize the 13
importations/shipments, as only two were CCG and only one was LCCG;

and that the Memorandum dated February 9, 2010 deprives respondent PSPC of its property without due
process of law. From the arguments interposed by respondent PSPC in the Batangas injunction case, it is
clear that the issue to be resolved by the RTC is limited to the validity of the Memorandum dated
February 9, 2010.

The reliefs prayed for are not the same.


Likewise, a comparison of prayers in the CTA case and Batangas injunction case shows that the reliefs
prayed for are not the same.

PETITION FOR REVIEW VERIFIED MOTION COMPLAINT FOR


(CTA) (CTA) INJUNCTION (RTC)

WHEREFORE, it is respectfully prayed that the WHEREFORE, it is respectfully prayed that the WHEREFORE, it is respectfully prayed that the
Honorable Court: Honorable Court: Honorable Court:

a. Give due course to the instant Petition for a. Immediately upon the filing of the instant 1) Upon filing of the instant complaint, a 72-
Review; and Petition and Verified Motion, ISSUE, a [TRO] hour [TRO] be issued ex parte RESTRAINING
effective for such number of days as sufficient [petitioners], their assigns, agents,
b. Upon due consideration, reverse and nullify for the Honorable Court to hear, consider and employees, representatives or any person
the Letter-Decision dated 11 November 2009 issue a Suspension Order, ordering, under their direction and/or control from
and Letter-Decision dated 26 November 2009 commanding and directing [petitioners], their entering the Refinery or property of
issued by [petitioner] COC and render a officers, subordinates, personnel and agents, [respondent] PSPC and/or seize, confiscate,
Decision finding [respondent] PSPC not liable and/or any other person acting on their behalf or forcibly take possession of the imported
for any of the excise taxes and the VAT or authority, to refrain or stop from exercising shipments of [respondent] PSPC that are
thereon demanded by [petitioner] COC, and any action described in, under, or pursuant to, already in the latters physical custody
permanently enjoining [petitioners], their Section 1508 of the TCCP, including holding and/or possession;
officers, subordinates, personnel and agents, delivery or release of imported articles,
or any other person acting on their behalf or and/or from performing any act of collecting 2) After due notice and hearing, that a [TRO]
authority, from demanding and/or collecting the disputed amounts by distraint, levy, and/or writ of preliminary injunction be
by any manner from [respondent] PSPC any seizure, impounding, or sale of the ISSUED on such bond as the Honorable Court
and all duties and excise taxes, including any importations of [respondent] PSPC, and/or may require; and
VAT thereon, on the subject CCG and LCCG from collecting excise taxes and VAT on future
importations, as well as from collecting importations of CCGs and LCCGs by 3) After hearing on the merits, render
excise taxes and VAT on future importations [respondent] PSPC; and judgment making the writ of injunction
of CCGs/LCCGs by [respondent] PSPC.56 PERMANENT.58
b. Thereafter, after due proceedings, ISSUE a
SUSPENSION ORDER ordering, commanding,
and directing [petitioners], their officers,
subordinates, personnel and agents, and/or
any other person acting on their behalf or
authority, to refrain or stop from exercising
any action described in, under, or pursuant
to, Section 1508 of the TCCP, including
holding delivery or release of imported
articles, and/or from performing any act of
collecting the disputed amounts by distraint,
levy, seizure, impounding, or sale of
importations of [respondent] PSPC, and/or
from collecting excise taxes and VAT on
future importations of CCGs and LCCGs by
[respondent] PSPC, during the pendency of
the instant case.57

In the CTA case, respondent PSPC seeks the reversal of the Letter- Decisions of petitioner COC in order to
prevent petitioners from imposing payment of excise tax and VAT for importations of CCG and LCCG for
the years 2004 to 2009. Pending the resolution of the said case, respondent PSPC filed a Verified Motion
praying for the issuance of a suspension order to prevent petitioners from exercising any action pursuant
to Section 1508 of the TCCP based on the Letter-Decisions of petitioner COC. While in the Batangas
injunction case, respondent PSPC seeks to prevent petitioners from entering its refinery and from seizing
its importations pursuant to Section 1508 of the TCCP by virtue of the Memorandum dated February 9,
2010.

Since the subject matter, the cause of action, the issues raised, and the reliefs prayed for are not the
same, respondents are not guilty of forum shopping. Accordingly, the CTA did not err in denying the
Motion to Cite respondents in Direct Contempt of Court.

WHEREFORE, the Petition is hereby DENIED. The assailed Decision dated June 11, 2012 and the
Resolution dated August 28, 2012 of the Court of Tax Appeals in C.T.A. EB Case No. 744 are hereby
AFFIRMED.

SO ORDERED.

G.R. No. 181007, November 21, 2016

COMMISSIONER OF CUSTOMS, Petitioner, v. WILLIAM SINGSON AND TRITON SHIPPING CORPORATION,


Respondents.

DECISION

REYES, J.:

This appeal by Petition for Review on Certiorari1 under Rule 45 of the Rules of Court seeks to reverse and
set aside the Decision2 dated November 16, 2006 and the Resolution3 dated November 29, 2007 of the
Court of Appeals (CA) in CA-G.R. SP No. 83282 affirming the Decision4 dated November 18, 2003 and the
Resolution5 dated March 22, 2004 of the Court of Tax Appeals (CTA) in CTA Case No. 6406, which recalled
and set aside the Warrant of Seizure and Detention (WSD) issued against the vessel M/V Gypsy Queen
and its cargo of 15,000 bags of rice.chanroblesvirtuallawlibrary

The Facts

Triton Shipping Corporation (TSC) is the owner of M/V Gypsy Queen. The vessel was loaded with 15,000
bags of rice shipped by Metro Star Rice Mill (Metro, Star) of Bocaue, Bulacan and consigned to William
Singson (Singson). On September 5, 2001, the elements of the Philippine Navy (PN) apprehended and
seized the vessel and its entire rice cargo somewhere in Caubayan Island, Cebu, for allegedly carrying
suspected smuggled rice.6

During the inspection, the master of M/V Gypsy Queen presented the following documents: (1) Master's
Oath of Safe Departure dated August 14, 2001; (2) Coasting Manifest indicating that the vessel was loaded
with 15,000 bags of rice with Metro Star of Bocaue, Bulacan as the shipper and Raybrig Marketing of Cebu
City/Singson as consignee; and (3) Roll Book showing that the vessel was cleared by the Philippine Ports
Authority (PPA), North Harbor Office, Manila on August 14, 2001 and received by a certain PO3 Fernandez
of the Philippine Coast Guard (PCG) in Manila.7

However, the PCG Station Commander in Manila, Jose G. Cabilo issued a Certification stating that: (1)
there was no vessel named M/V Gypsy Queen that logged in or submitted any Master's Oath of Safe
Departure on August 15, 2001; and (2) no personnel by the name of PO3 Fernandez of the PCG was
detailed at Pier 18, Mobile Team, on August 15, 2001. 8 These matters were then conveyed to the District
Collector of Customs (DCC) by Captain Alvin G. Urbi (Capt. Urbi), Commander, Naval Forces Central, PN in
his letter dated September 12, 2001. Thereafter, Special Investigator Alejandro M. Bondoc of the Bureau
of Customs (BOC) in Cebu, issued a memorandum dated September 17, 2001 recommending the issuance
of a WSD against the vessel and the 15,000 bags of rice loaded therein. 9

Accordingly, on September 18, 2001, the DCC of Port of Cebu, issued a WSD against M/V Gypsy Queen
and the 15,000 bags of rice for violating the Tariff and Customs Code (TCC). Afterwards, forfeiture
proceedings were conducted where both parties submitted their respective evidence. 10

On December 18, 2001, the DCC rendered a Decision11 in favor of TSC and Singson (respondents) and
ordered the release of M/V Gypsy Queen and the said cargo on the ground that there was no evidence to
establish a cause of action, thus:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, and by virtue of the powers vested in me by law, the [WSD] in the
above[-]captioned case is hereby ordered RECALLED and SET ASIDE. Accordingly, the subject 15,000 bags
of rice and the vessel "M/V GYPSY QUEEN" are ordered RELEASES [sic] to their respective claimants or
their duly authorized representative upon proper identification and compliance with applicable laws, rules
and regulations.12
On December 19, 2001, the DCC issued a 1st Indorsement of the said decision and forwarded the entire
records of the case to the Commissioner of Customs (petitioner), through its Legal Service, BOC, Manila.
On January 29, 2002, the BOC, Legal Service referred the decision of the DCC for approval to the
petitioner.13

On March 11, 2002, the petitioner issued the 2nd Indorsement14 reversing and setting aside the decision of
the DCC and ordered the forfeiture of M/V Gypsy Queen and its cargo.

The respondents filed a motion for reconsideration of the said indorsement but the same was denied. On
March 12, 2002, the respondents filed a petition for review 15 with the CTA, and the petitioner submitted
its Comment16 on April 16, 2002.17

On November 18, 2003, the CTA reversed and set aside18 the 2nd Indorsement issued by the petitioner and
adopted the findings of the DCC. In arriving at the said decision, the CTA found that the documents
submitted by the respondents were sufficient to prove that the 15,000 bags of rice apprehended on board
M/V Gypsy Queen were locally sourced and were the same rice that were withdrawn from the National
Food Authority (NFA) of Zambales.19

Undaunted, the petitioner moved for reconsideration20 but it was denied;21 hence, it filed a petition for
review22 under Rule 43 before the CA.

On November 16, 2006, the CA affirmed the CTA's decision on the ratiocination that the certification
issued by PCG Station Commander in Manila cannot create a presumption that M/V Gypsy Queen was
involved in an illegal activity in violation of the TCC. The said certification standing alone and by itself
cannot prove the alleged violation of the TCC. The record clearly showed that the vessel originated and
sailed from Manila to Cebu and that the 15,000 bags of rice on board the vessel were not imported but
locally purchased or sourced from NFA Zambales.23 More so, the CA expressly pointed out
that:chanRoblesvirtualLawlibrary
Furthermore, it is an undisputed fact that, on February 7, 2002, BOC Deputy Commissioner Gil A. Valera
wrote a letter to the [NFA] Administrator, Atty. Anthony R. Abad, requesting confirmation of the
genuineness and authenticity of the NFA documents issued by NFA Zambales which were submitted by
the respondents in the forfeiture proceedings. On February 15, 2002, the NFA confirmed the authenticity
and genuineness of the documents as certified to by Manager Absalum R. Circujales, NFA, Iba, Zambales.
It is well to note that petitioner failed to assail and rebut these pieces of evidence presented by
respondents during the forfeiture proceedings which were confirmed as genuine and authentic which
showed that the rice withdrawn from NFA Zambales were the same rice apprehended on board the vessel
M/V "Gypsy Queen."24
Disagreeing with the CA's decision, the petitioner filed a motion for reconsideration 25 which was also
denied;26 hence, the petitioner now seeks recourse to this Court via a petition for review on
certiorari.chanroblesvirtuallawlibrary

The Issue

The main issue in this case is whether or not the CA erred in affirming the CTA's decision ordering the
release of the 15,000 bags of rice and its carrying vessel. 27

Ruling of the Court

The petition is bereft of merit.

The Court adopts the above-mentioned findings of fact of both the CTA and the CA. It is settled that the
factual findings of the CTA, as affirmed by the CA, are entitled to the highest respect and will not be
disturbed on appeal unless it is shown that the lower courts committed gross error in the appreciation of
facts.28

In the main, the petitioner argues that the 15,000 bags of rice were unlawfully imported into the
Philippines; hence, there was legal ground for the forfeiture of the rice and its carrying vessel. The
petitioner solely rely its argument on the certification issued by the PCG Station Commander in Manila,
which was included in the parties' Joint Stipulation filed with the CTA, to wit:chanRoblesvirtualLawlibrary
1.3 That [Capt. Urbi], Commander, Naval Forces Central, [PN], in his letter to the [DCC] of Cebu dated 12
September 2001, stated among others, that verification made by his office with the Office of the Station
Commander, Coast Guard Station, Manila, show that there was no vessel named MV "Gypsy Queen" that
logged-in or submitted any Master's Oath of Safe Departure on 15 August 2001. It also found that no
personnel by the name [of] PO3 Fernandez, PCG, was detailed at Pier 18, Mobile Team on said date. 29
This judicial admission, according to the petitioner, is more than enough to establish that the rice
shipment was illegally transported.30

Clearly, this evidence does not suffice. The said certification is not sufficient to prove that the respondents
violated the TCC. A reading of the said certification plainly shows that if there is something which was
admitted, it is nothing more than the fact that Capt. Urbi sent a communication to the DCC of Cebu
stating the information that he gathered from the PCG Station Commander in Manila, and not the
truthfulness or veracity of those information.

The certification presented by the petitioner does not reveal any kind of deception committed by the
respondents. Such certification is not adequate to support the proposition sought to be established which
is the commission of fraud. It is erroneous to conclude that the 15,000 bags of rice were smuggled simply
because of the said certification which is not conclusive and cannot overcome the documentary evidence
of the respondents showing that the subject rice was produced and acquired locally.

Moreso, at the time the vessel and its cargo were seized on September 25, 2001, the elements of the PN
never had a probable cause that would warrant the filing of the seizure proceedings. In fact, the petitioner
ordered the forfeiture of the rice cargo and its carrying vessel on the mere assumption of fraud. Notably,
the 2nd Indorsement issued by the petitioner failed to clearly indicate any actual commission of fraud or
any attempt or frustration thereof.

The Court has constantly pronounced that the policy is to place no unnecessary hindrance on the
government's drive, not only to prevent smuggling and other frauds upon Customs, but more importantly,
to render effective and efficient' the collection of import and export duties due the State to enable the
government to carry out the functions it has been instituted to perform.31

Nonetheless, the TCC requires the presence of probable cause before any proceeding for seizure and/or
forfeiture is instituted. The relevant prov1s1on governing the present case is Section 2535 which provides
as follows:chanRoblesvirtualLawlibrary
Sec. 2535. Burden of Proof in Seizure and/or Forfeiture. - In all proceedings taken for the seizure and/or
forfeiture of any vessel, vehicle, aircraft, beast or articles under the provisions of the tariff and customs
laws, the burden of proof shall lie upon the claimant: Provided, That probable cause shall be first shown
for the institution of such proceedings and that seizure and/or forfeiture was made under the
circumstances and in the manner described in the preceding sections of this Code.
Based on the afore-quoted provision, before forfeiture proceedings are instituted, the law requires the
presence of probable cause which rests on the petitioner who ordered the forfeiture of the shipment of
rice and its carrying vessel. Once established, the burden of proof is shifted to the claimant.

Guided by the foregoing provision, to warrant the forfeiture of the 15,000 bags of rice and its carrying
vessel, there must be a prior showing of probable cause that: (1) the importation or exportation of the
15,000 bags of rice was effected or attempted contrary to law, or that the shipment of the 15,000 bags of
rice constituted prohibited importation or exportation; and (2) the vessel was used unlawfully in the
importation or exportation of the rice, or in conveying or transporting the rice, if considered as
contraband or smuggled articles in commercial quantities, into or from any Philippine port or place. 32

Still, the petitioner contends that the probable cause was established by the said certification that no
vessel by the name of M/V Gypsy Queen logged in or submitted a Master's Oath of Safe Departure on
August 15, 2001.

This assertion is erroneous and irrational. It was heedless on the part of the petitioner to institute
forfeiture proceeding on the basis of that certification alone. A review of the records of the case shows
that there was no probable cause to justify the forfeiture of the rice cargo and its carrying vessel. To prove
that the rice shipment was imported, the respondents submitted the following pieces of evidence
supporting the validity and regularity of the shipment:chanRoblesvirtualLawlibrary
1. For the vessel:cralawlawlibrary

a) the Master's Oath of Safe Departure dated August 14, 2001 (Exhibits "G", "G-1", and "G-2");

b) the Roll Book showing that M/V Gypsy Queen was cleared by the PPA, North Harbor Office Manila
on August 14, 2001 (Exhibits "P");

c) Official Receipt No. 44191451 issued by the PPA for payment of port and other charges upon the
said vessel dated August 14, 2001 in the amount of P3,300.00 (Exhibit "5"); and

d) the Bill of Lading showing that the vessel loaded with 15,000 bags of rice sailed from Manila to
Cebu for the consignee, Ray Brig Marketing/Singson (Exhibit "4").

2. For the cargo:cralawlawlibrary

a) Official Receipt No. 0703 issued by the Harbour Centre Port Terminal, Inc. dated August 14, 2001 in
the amount of P65,160.00, and another Official Receipt evenly dated August 14, 2001 in the
amount of P3,030.26 showing that proper usage and other port charges upon the said cargo were
duly paid (Exhibits "10" and "11").

Besides, the records showed that the 15,000 bags of rice were of local origin, having been purchased from
NFA Zambales pursuant to the Open Sale Program of the NFA. The findings of fact of the CTA on this
matter are informative:chanRoblesvirtualLawlibrary
Pursuant to the Open Sale Program of the NFA wherein the NFA would openly sell its imported stocks to
interested individual retailers and encourage these retailers to buy the stocks in order that the older
stocks can be disposed of in the warehouses to accommodate the incoming imported rice, Memorandum
No. R03-140 No. 01-06-010 dated June 4, 2001 was issued by the Regional Manager II of NFA endorsing to
the NFA Manager of Zambales the accredited individual retailers of NFA Nueva Ecija. Among the
accredited individual retailers were Jose Navarro and Emmanuel Jacinto. Emmanuel Jacinto was able to
buy from the open sale 7,000 bags of NFA rice. He likewise purchased NFA rice from Jose Navarro and
Manuel Sevilla, a retailer from Bulacan. Emmanuel Jacinto then sold 17,000 bags of NFA rice to [Metro
Star]. The parties admit that all documents issued by the NFA Zambales, relative to the said Open Sale
Program such as the Certifications issued by the NFA Zambales Senior Grains Operations Officer, the
Official Receipts, the NFA Authority to Issue and the NFA Warehouse Stocks Issue were duly confirmed as
genuine by then NFA Administrator R.A. Abad in his letter dated February 15, 2002 to Customs Deputy
Commissioner Gil Valera.

Subsequently, Metro Star sold 15,000 bags of rice to Raybrig Marketing owned by [Singson] in the amount
of P12,050,000.00. [Singson] is duly registered to engage in Wholesaling/Importing Rice under Grains
Business License issued by the NFA. Emmanuel Jacinto testified that these 15,000 bags of rice were taken
from the 17,000 bags of imported NFA rice sold by him to [Metro Star]. It was Metro Star that delivered
the 15,000 bags of NFA rice sold from its warehouse in Bocaue, Bulacan to Manila for loading. It was the
charterer who arranged. for the shipment of the 15,000 bags of rice on board MN "Gypsy Queen" from
Manila to Cebu. The shipment of the said 15,000 bags of rice was covered by a Bill of lading with [Metro
Star] of Bulacan as Shipper and [Singson] of Raybrig Marketing in Cebu City as Consignee. And M/V "Gypsy
Queen" paid the proper charges and other fees to the [PPA] in the amount of P3,030.00 as shown by
Official Receipt No. 44191451 relative to said shipment.33 (Citations omitted)
From the foregoing, it is clear that the respondents had sufficiently established that the 15,000 bags of
rice were of local origin and there were no other circumstances that would indicate that the same were
fraudulently transported into the Philippines. As such, the release of the rice cargo and its carrying vessel
is warranted.

WHEREFORE, the petition is DENIED. The Decision dated November 16, 2006 and the Resolution dated
November 29, 2007 of the Court of Appeals in CA-G.R. SP No. 83282 are AFFIRMED.

SO ORDERED.ChanRoblesVirtualawlibrary

G.R. No. 210588, November 29, 2016

SECRETARY OF FINANCE CESAR B. PURISIMA AND COMMISSIONER OF INTERNAL REVENUE KIM S.


JACINTO-HENARES, Petitioners, v. REPRESENTATIVE CARMELO F. LAZATIN AND ECOZONE PLASTIC
ENTERPRISES CORPORATION, Respondents.

DECISION

BRION, J.:
This is a direct recourse to this Court from the Regional Trial Court (RTC), Branch 58, Angeles City, through
a petition for review on certiorari1 under Rule 45 of the Rules of Court on a pure question of law. The
petition seeks the reversal of the November 8, 2013 decision 2 of the RTC in SCA Case No. 12-410. In the
assailed decision, the RTC declared Revenue Regulation (RR) No. 2-2012 unconstitutional and without
force and effect.

The Facts

In response to reports of smuggling of petroleum and petroleum products and to ensure the correct taxes
are paid and collected, petitioner Secretary of Finance Cesar V. Purisima - pursuant to his authority to
interpret tax laws3 and upon the recommendation of petitioner Commissioner of Internal Revenue (CIR)
Kim S. Jacinto-Henares signed RR 2-2012 on February 17, 2012.

The RR requires the payment of value-added tax (VAT) and excise tax on the importation of all petroleum
and petroleum products coming directly from abroad and brought into the Philippines, including Freeport
and economic zones (FEZs).4 It then allows the credit or refund of any VAT or excise tax paid if the
taxpayer proves that the petroleum previously brought in has been sold to a duly registered FEZ locator
and used pursuant to the registered activity of such locator. 5

In other words, an FEZ locator must first pay the required taxes upon entry into the FEZ of a petroleum
product, and must thereafter prove the use of the petroleum product for the locator's registered activity
in order to secure a credit for the taxes paid.

On March 7, 2012, Carmelo F. Lazatin, in his capacity as Pampanga First District Representative, filed a
petition for prohibition and injunction6 against the petitioners to annul and set aside RR 2-2012.

Lazatin posits that Republic Act No. (RA) 94007 treats the Clark Special Economic Zone and Clark Freeport
Zone (together hereinafter referred to as Clark FEZ) as a separate customs territory and allows tax and
duty-free importations of raw materials, capital and equipment into the zone. Thus, the imposition of VAT
and excise tax, even on the importation of petroleum products into FEZs (like Clark FEZ), directly
contravenes the law.

The respondent Ecozone Plastic Enterprises Corporation (EPEC) sought to intervene in the proceedings as
a co-petitioner and accordingly entered its appearance and moved for leave of court to file its petition-in-
intervention.8

EPEC claims that, as a Clark FEZ locator, it stands to suffer when RR 2-2012 is implemented. EPEC insists
that RR 2-2012's mechanism of requiring even locators to pay the tax first and to subsequently claim a
credit or to refund the taxes paid effectively removes the locators' tax-exempt status.

The RTC initially issued a temporary restraining order to stay the implementation of RR 2-2012. It
eventually issued a writ of preliminary injunction in its order dated April 4, 2012.

The petitioners questioned the issuance of the writ. On May 17, 2012, they filed a petition for certiorari9
before the Court of Appeals (CA) assailing the RTC's order. The CA granted the petition 10 and denied the
respondents' subsequent motion for reconsideration.11

The respondents stood their ground by filing a petition for review on certiorari before this Court (G.R. No.
208387) to reinstate the RTC's injunction against the implementation of RR 2-2012, and by moving for the
issuance of a temporary restraining order and/or writ of preliminary injunction. We denied the motion
but nevertheless required the petitioners to comment on the petition.
The proceedings before the RTC in the meanwhile continued. On April 18, 2012, petitioner Lazatin
amended his original petition, converting it to a petition for declaratory relief.12 The RTC admitted the
amended petition and allowed EPEC to intervene.

In its decision dated November 8, 2013, the RTC ruled in favor of Lazatin and EPEC.

First, on the procedural aspect, the RTC held that the original petition's amendment is allowed by the
rules and that amendments are largely preferred; it allowed the amendment in the exercise of its sound
judicial discretion to avoid multiplicity of suits and to give the parties an opportunity to thresh out the
issues and finally reach a conclusion.13

Second, the RTC held that Lazatin and EPEC had legal standing to question the validity of RR 2-2012.
Lazatin's allegation that RR 2-2012 effectively amends and modifies RA 9400 gave him standing as a
legislator: the amendment of a tax law is a power that belongs exclusively to Congress. Lazatin's
allegation, according to the RTC, sufficiently shows how his rights, privileges, and prerogatives as a
member of Congress were impaired by the issuance of RR 2-2012.

The RTC also ruled that the case warrants a relaxation on the rules on legal standing because the issues
touched upon are of transcendental importance. The trial court considered the encompassing effect that
RR 2-2012 may have in the numerous freeport and economic zones in the Philippines, as well as its
potential impact on hundreds of investors operating within the zones.

The RTC then held that even if Lazatin does not have legal standing, EPEC's intervention cured this defect:
EPEC, as a locator within the Clark FEZ, would be adversely affected by the implementation of RR 2-2012.

Finally, the RTC declared RR 2-2012 unconstitutional. RR 2-2012 violates RA 9400 because it imposes taxes
that, by law, are not due in the first place.14 Since RA 9400 clearly grants tax and duty-free incentives to
Clark FEZ locators, a revocation of these incentives by an RR directly contravenes the express intent of the
Legislature.15 In effect, the petitioners encroached upon the prerogative to enact, amend, or repeal laws,
which the Constitution exclusively granted to Congress.

The Petition

The petitioners anchor their present petition on two arguments: 1) respondents have no legal standing,
and 2) RR 2-2012 is valid and constitutional.

The petitioners submit that the Lazatin and EPEC do not have legal standing to assail the validity of RR 2-
2012.

First, the petitioners claim that Lazatin does not have the requisite legal standing as he failed to exactly
show how the implementation of RR 2- 2012 would impair the exercise his official functions. Respondent
Lazatin merely generally alleged that his constitutional prerogatives to pass or amend laws were gravely
impaired or were about to be impaired by the issuance of RR 2-2012. He did not specify the power that
he, as a legislator, would be encroached upon.

While the Clark FEZ is within the district that respondent Lazatin represents, the petitioners emphasize
that Lazatin failed to show that he is authorized to file a case on behalf of the locators in the FEZ, the local
government unit, or his constituents in general.16 To the petitioners, if RR 2- 2012 ever caused injury to
the locators or to any of Lazatin's constituents, only these injured parties possess the personality to
question the petitioners' actions; respondent Lazatin cannot claim this right on their behalf.17
The petitioners claim, too, that the RTC should not have brushed aside the rules on standing on account of
transcendental importance. To them, this case does not involve public funds, only a speculative loss of
profits upon the implementation of RR 2-2012; nor is Lazatin a party with more direct and specific interest
to raise the issues in his petition.18 Citing Senate v. Ermita,19 the petitioners argue that the rules on
standing cannot be relaxed.

Second, petitioners also argue that EPEC does not have legal standing to intervene. That EPEC will
ultimately bear the VAT and excise tax as an end-user, is misguided.20 The burden of payment of VAT and
excise tax may be shifted to the buyer21 and this burden, from the point of view of the transferee is no
longer a tax but merely a component of the cost of goods purchased. The statutory liability for the tax
remains with the seller. Thus, EPEC cannot say that when the burden is passed on to it, RR 2-2012
effectively imposes tax on it as a Clark FEZ locator.

The petitioners point out that RR 2-2012 imposes an "advance tax" only upon importers of petroleum
products. If EPEC is indeed a locator, then it enjoys tax and duty exemptions granted by RA 9400 so long
as it does not bring the petroleum or petroleum products to the Philippine customs territory. 22

The petitioners legally argue that RR 2-2012 is valid and constitutional.

First, petitioner submit that RR 2-2012's issuance and implementation are within their powers to
undertake.23 RR 2-2012 is an administrative issuance that enjoys the presumption of validity in the
manner that statutes enjoy this presumption; thus, it cannot be nullified without clear and convincing
evidence to the contrary.24

Second, petitioners contend that while RA 9400 does grant tax and customs duty incentives to Clark FEZ
locators, there are conditions before these benefits may be availed of. The locators cannot invoke
outright exemption from VAT and excise tax on its importations without first satisfying the conditions set
by RA 9400, that is, the importation must not be removed from the FEZ and introduced into the Philippine
customs territory.25

These locators enjoy what petitioners call a qualified tax exemption. They must first pay the
corresponding taxes on its imported petroleum. Then, they must submit the documents required under
RR 2-2012. If they have sufficiently shown that the imported products have not been removed from the
FEZ, their earlier payment shall be subject to a refund.

The petitioners lastly argue that RR 2-2012 does not withdraw the locators' tax exemption privilege. The
regulation simply requires proof that a locator has complied with the conditions for tax exemption. If the
locator cannot show that the goods were retained and/or consumed within the FEZ, such failure creates
the presumption that the goods have been introduced into the customs territory without the appropriate
permits.26 On the other hand, if they have duly proven the disposition of the goods within the FEZ, their
"advance payment" is subject to a refund. Thus, to the petitioners, to the extent that a refund is
allowable, there is in reality a tax exemption.27

Counter-arguments

Respondents Lazatin and EPEC, maintaining that they have standing to question its validity, insist that RR
2-2012 is unconstitutional.

Respondents have standing as


lawmaker and FEZ locator.
The respondents argue that a member of Congress has standing to protect the prerogatives, powers, and
privileges vested by the Constitution in his office. 28 As a member of Congress, his standing to question
executive issuances that infringe on the right of Congress to enact, amend, or repeal laws has already
been recognized.29 He suffers substantial injury whenever the executive oversteps and intrudes into his
power as a lawmaker.30

On the other hand, the respondents point out that RR 2-2012 explicitly covers FEZs. Thus, being a Clark
FEZ locator, EPEC is among the many businesses that would have been directly affected by its
implementation.31

RR 2-2012 illegally imposes taxes


on Clark FEZs.

The respondents underscore that RA 9400 provides FEZ locators certain incentives, such as tax- and duty-
free importations of raw materials and capital equipment. These provisions of the law must be
interpreted in a way that will give full effect to law's policy and objective, which is to maximize the
benefits derived from the FEZs in promoting economic and social development. 32

They admit that the law subjects to taxes and duties the goods that were brought into the FEZ and
subsequently introduced to the Philippine customs territory. However, contrary to petitioners' position
that locators' tax and duty exemptions are qualified, their incentives apply automatically.

According to the respondents, petitioners' interpretation of the law contravenes the policy laid down by
RA 9400, because it makes the incentives subject to a suspensive condition. They claim that the condition
the removal of the goods from the FEZ and their subsequent introduction to the customs territory is
resolutory; locators enjoy the granted incentives upon bringing the goods into the FEZ. It is only when the
goods are shown to have been brought into the customs territory will the proper taxes and duties have to
be paid.33 RR 2-2012 reverses this process by requiring the locators to pay "advance" taxes and duties first
and to subsequently prove that they are entitled to a refund, thereafter. 34 RR 2-2012 indeed allows a
refund, but a refund of taxes that were not due in the first place. 35

The respondents add that even the refund mechanism under RR 2-2012 is problematic. They claim that RR
2-2012 only allows a refund when the petroleum products brought into the FEZ are subsequently sold to
FEZ locators or to entities that similarly enjoy exemption from direct and indirect taxes. The issuance does
not envision a situation where the petroleum products are directly brought into the FEZ and are
consumed by the same entity/locator.36 Further, the refund process takes a considerable length of time to
secure, thus requiring cash outlay on the part of locators;37 even when the claim for refund is granted, the
refund will not be in cash, but in the form of a Tax Credit Certificate (TCC). 38

As the challenged regulation directly contravenes incentives legitimately granted by a legislative act, the
respondents argue that in issuing RR 2-2012, the petitioners not only encroached upon congressional
prerogatives and arrogated powers unto themselves; they also effectively violated, brushed aside, and
rendered nugatory the rigorous process required in enacting or amending laws.39

Issues

We shall decide the following issues:

I. Whether respondents Lazatin and EPEC have legal standing to bring the action of declaratory
relief; and
II. Whether RR 2-2012 is valid and constitutional.

The Court's Ruling

We do not find the petition meritorious.

I. Respondents have legal


standing to file petition for
declaratory relief.

The party seeking declaratory relief must have a legal interest in the controversy for the action to
prosper.40 This interest must be material not merely incidental. It must be an interest that which will be
affected by the challenged decree, law or regulation. It must be a present substantial interest, as opposed
to a mere expectancy or a future, contingent, subordinate, or consequential interest.41

Moreover, in case the petition for declaratory relief specifically involves a question of constitutionality,
the courts will not assume jurisdiction over the case unless the person challenging the validity of the act
possesses the requisite legal standing to pose the challenge.42

Locus standi is a personal and substantial interest in a case such that the party has sustained or will
sustain direct injury as a result of the challenged governmental act. The question is whether the
challenging party alleges such personal stake in the outcome of the controversy so as to assure the
existence of concrete adverseness that would sharpen the presentation of issues and illuminate the court
in ruling on the constitutional question posed.43

We rule that the respondents satisfy these standards.

Lazatin has legal standing as


a legislator.

Lazatin filed the petition for declaratory relief before the RTC in his capacity as a member of Congress. 44
He alleged that RR 2-2012 was issued directly contravening RA 9400, a legislative enactment. Thus, the
regulation encroached upon the Congress' exclusive power to enact, amend, or repeal laws. 45 According
to Lazatin, a member of Congress has standing to challenge the validity of an executive issuance if it tends
to impair his prerogatives as a legislator.46

We agree with Lazatin.

In Biraogo v. The Philippine Truth Commission,47 we ruled that legislators have the legal standing to ensure
that the prerogatives, powers, and privileges vested by the Constitution in their office remain inviolate. To
this end, members of Congress are allowed to question the validity of any official action that infringes on
their prerogatives as legislators.48

Thus, members of Congress possess the legal standing to question acts that amount to a usurpation of the
legislative power of Congress.49 Legislative power is exclusively vested in the Legislature. When the
implementing rules and regulations issued by the Executive contradict or add to what Congress has
provided by legislation, the issuance of these rules amounts to an undue exercise of legislative power and
an encroachment of Congress' prerogatives.
To the same extent that the Legislature cannot surrender or abdicate its legislative power without
violating the Constitution,50 so also is a constitutional violation committed when rules and regulations
implementing legislative enactments are contrary to existing statutes. No law can be amended by a mere
administrative rule issued for its implementation; administrative or executive acts are invalid if they
contravene the laws or to the Constitution.51

Thus, the allegation that RR. 2-2012 an executive issuance purporting to implement the provisions of
the Tax Code directly contravenes RA 9400 clothes a member of Congress with legal standing to
question the issuance to prevent undue encroachment of legislative power by the executive.

EPEC has legal standing as a


Clark FEZ locator.

EPEC intervened in the proceedings before the RTC based on the allegation that, as a Clark FEZ locator, it
will be directly affected by the implementation of RR 2-2012.52

We agree with EPEC.

It is not disputed that RR 2-2012 relates to the imposition of VAT and excise tax and applies to all
petroleum and petroleum products that are imported directly from abroad to the Philippines, including
FEZs.53

As an enterprise located in the Clark FEZ, its importations of petroleum and petroleum products will be
directly affected by RR 2-2012. Thus, its interest in the subject matter a personal and substantial one
gives it legal standing to question the issuance's validity.

In sum, the respondents' respective interests in this case are sufficiently substantial to be directly affected
by the implementation of RR 2-2012. The RTC therefore did not err when it gave due course to Lazatin's
petition for declaratory relief as well as PEC's petition-in-intervention.

In light of this ruling, we see no need to rule on the claimed transcendental importance of the issues
raised.

II. RR 2-2012 is invalid and


unconstitutional.

On the merits of the case, we rule that RR 2-2012 is invalid and unconstitutional because: a) it illegally
imposes taxes upon FEZ enterprises, which, by law, enjoy tax-exempt status, and b) it effectively amends
the law (i.e., RA 7227, as amended by RA 9400) and thereby encroaches upon the legislative authority
reserved exclusively by the Constitution for Congress.

FEZ enterprises enjoy tax- and


duty-free incentives on its
importations.

In 1992, Congress enacted RA 7227 otherwise known as the "Bases Conversion and Development Act of
1992" to enhance the benefits to be derived from the Subic and Clark military reservations. 54 RA 7227
established the Subic Special economic zone and granted such special territory various tax and duty
incentives.
To effectively extend the same benefits enjoyed in Subic to the Clark FEZ, the legislature enacted RA 9400
to amend RA 7227.55 Subsequently, the Department of Finance issued Department Order No. 3-200856 to
implement RA 9400 (Implementing Rules).

Under RA 9400 and its Implementing Rules, Clark FEZ is considered a customs territory separate and
distinct from the Philippines customs territory. Thus, as opposed to importations into and establishments
in the Philippines customs territory,57 which are fully subject to Philippine customs and tax laws,
importations into and establishments located within the Clark FEZ (FEZ Enterprises)58 enjoy special
incentives, including tax and duty-free importation.59 More specifically, Clark FEZ enterprises shall be
entitled to the freeport status of the zone and a 5% preferential income tax rate on its gross income, in
lieu of national and local taxes.60

RA 9400 and its Implementing Rules grant the following:

First, the law provides that importations of raw materials and capital equipment into the FEZs shall be tax-
and duty-free. It is the specific transaction (i.e., importation) that is exempt from taxes and duties.

Second, the law also grants FEZ enterprises tax- and duty-free importation and a preferential rate in the
payment of income tax, in lieu of all national and local taxes. These incentives exempt the establishment
itself from taxation.

Thus, the Legislature intended FEZs to enjoy tax incentives in general whether with respect to the
transactions that take place within its special jurisdiction, or the persons/establishments within the
jurisdiction. From this perspective, the tax incentives enjoyed by FEZ enterprises must be understood to
necessarily include the tax exemption of importations of selected articles into the FEZ.

We have ruled in the past that FEZ enterprises' tax exemptions must be interpreted within the context
and in a manner that promotes the legislative intent of RA 722761 and, by extension, RA 9400. Thus, we
recognized that FEZ enterprises are exempt from both direct and indirect internal revenue taxes.62 In
particular, they are considered VAT-exempt entities.63

In line with this comprehensive interpretation, we rule that the tax exemption enjoyed by FEZ enterprises
covers internal revenue taxes imposed on goods brought into the FEZ, including the Clark FEZ, such as VAT
and excise tax.

RR 2-2012 illegally imposes VAT and excise


tax on goods brought into the FEZs.

Section 3 of RR 2-2012 provides the following:

First, whenever petroleum and petroleum products are imported and/or brought directly to the
Philippines, the importer of these goods is required to pay the corresponding VAT and excise tax due on
the importation.

Second, the importer, as the payor of the taxes, may subsequently seek a refund of the amount previously
paid by filing a corresponding claim with the Bureau of Customs (BOC).

Third, the claim shall only be granted upon showing that the necessary condition has been fulfilled.
At first glance, this imposition a mere tax administration measure according to the petitioners
appears to be consistent with the taxation of similar imported articles under the Tax Code, specifically
under its Sections 10764 and 14865 (in relation with Sections 12966 and 13167) .

However, RR 2-2012 explicitly covers even petroleum and petroleum products imported and/or brought
into the various FEZs in the Philippines. Hence, when an FEZ enterprise brings petroleum and petroleum
products into the FEZ, under RR 2-2012, it shall be considered an importer liable for the taxes due on
these products.

The crux of the controversy can be found in this feature of the challenged regulation.

The petitioners assert that RR 2-2012 simply implements the provisions of the Tax Code on collection of
internal revenue taxes, more specifically VAT and excise tax, on the importation of petroleum and
petroleum products. To them, FEZ enterprises enjoy a qualified tax exemption such that they have to pay
the tax due on the importation first, and thereafter claim a refund, which shall be allowed only upon
showing that the goods were not introduced to the Philippine customs territory.

On the other hand, the respondents contend that RR 2-2012 imposes taxes on FEZ enterprises, which in
the first place are not liable for taxes. They emphasize that the tax incentives under RA 9400 apply
automatically upon the importation of the goods. The proper taxes on the importation shall only be due if
the enterprises can later show that the goods were subsequently introduced to the Philippine customs
territory.

Since the tax exemptions enjoyed by FEZ enterprises under the law extend even to VAT and excise tax, as
we discussed above, it follows and we accordingly rule that the taxes imposed by Section 3 of RR 2-2012
directly contravene these exemptions. First, the regulation erroneously considers petroleum and
petroleum products brought into a FEZ as taxable importations. Second, it unreasonably burdens FEZ
enterprises by making them pay the corresponding taxes an obligation from which the law specifically
exempts them even if there is a subsequent opportunity to refund the payments made.

Petroleum and petroleum products brought


into the FEZ and which remain therein are

not taxable importations.

RR 2-2012 clearly imposes VAT and excise tax on the importation of petroleum and petroleum products
into FEZs. Strictly speaking, however, articles brought into these FEZs are not taxable importations under
the law based on the following considerations:

First, importation refers to bringing goods from abroad into the Philippine customs jurisdiction. It begins
from the time the goods enter the Philippine jurisdiction and is deemed terminated when the applicable
taxes and duties have been paid or the goods have left the jurisdiction of the BOC.68

Second, under the Tax Code, imported goods are subject to VAT and excise tax. These taxes shall be paid
prior to the release of the goods from customs custody.69 Also, for VAT purposes,70 an importer refers to
any person who brings goods into the Philippines.

Third, the Philippine VAT system adheres to the cross border doctrine.71 Under this rule, no VAT shall be
imposed to form part of the cost of the goods destined for consumption outside the Philippine customs
territory.72 Thus, we have already ruled before that an FEZ enterprise cannot be directly charged for the
VAT on its sales, nor can VAT be passed on to them indirectly as added cost to their purchases.73
Fourth, laws such as RA 7227, RA 7916, and RA 9400 have established certain special areas as separate
customs territories.74 In this regard, we have already held that such jurisdictions, such as the Clark FEZ,
are, by legal fiction, foreign territories.75

Fifth, the Implementing Rules provides that goods initially introduced into the FEZs and subsequently
brought out therefrom and introduced into the Philippine customs territory shall be considered as
importations and thereby subject to the VAT.76 One such instance is the sale by any FEZ enterprise to a
customer located in the customs territory, which the VAT regulations refer to as a technical importation.77

We find it clear from all these that when goods (e.g., petroleum and petroleum products) are brought into
an FEZ, the goods remain to be in foreign territory and are not therefore goods introduced into Philippine
customs territory subject to Philippine customs and tax laws.78

Stated differently, goods brought into and traded within an FEZ are generally beyond the reach of national
internal revenue taxes and customs duties enforced in the Philippine customs territory. This is consistent
with the incentive granted to FEZs exempting the importation itself from taxes and duties.

Therefore, the act of bringing the goods into an FEZ is not a taxable importation. As long as the goods
remain (e.g., sale and/or consumption of the article within the FEZ) in the FEZ or re-exported to another
foreign jurisdiction, they shall continue to be tax-free.79 However, once the goods are introduced into the
Philippine customs territory, it ceases to enjoy the tax privileges accorded to FEZs. It shall then be
considered as an importation subject to all applicable national internal revenue taxes and customs duties.

The tax exemption granted to FEZ


enterprises is an immunity from tax liability
and from the payment of the tax.

The respondents claim that when RR 2-2012 was issued, petroleum and petroleum products brought into
the FEZ by FEZ enterprises suddenly became subject to VAT and excise tax, in direct contravention of RA
9400 (with respect to Clark FEZ enterprises). Such imposition is not authorized under any law, including
the Tax Code.80

On the other hand, the petitioners argue that RR 2-2012 does not withdraw the tax exemption privileges
of FEZ enterprises. As their tax exemption is merely qualified, they cannot invoke outright exemption.
Thus, FEZ enterprises are required to pay internal revenue taxes first on their imported petroleum under
RR 2-2012. They may then refund their previous payment upon showing that the condition under RA 9400
has been satisfied that is, the goods have not been introduced to the Philippines customs territory. 81 To
the petitioners, to the extent that a refund is allowable, there is still in reality a tax exemption. 82

We disagree with this contention.

First, FEZ enterprises bringing goods into the FEZ should not be considered as importers subject to tax in
the same manner that the very act of bringing goods into these special territories does not make them
taxable importations. We emphasize that the exemption from taxes and duties under RA 9400 are
granted not only to importations into the FEZ, but also specifically to each FEZ enterprise. As discussed,
the tax exemption enjoyed by FEZ enterprises necessarily includes the tax exemption of the importations
of selected articles into the FEZ.

Second, the essence of a tax exemption is the immunity or freedom from a charge or burden to which
others are subjected.83 It is a waiver of the government's right to collect84 the amounts that would have
been collectible under our tax laws. Thus, when the law speaks of a tax exemption, it should be
understood as freedom from the imposition and payment of a particular tax.

Based on this premise, we rule that the refund mechanism provided by RR 2-2012 does not amount to a
tax exemption. Even if the possibility of a subsequent refund exists, the fact remains that FEZ enterprises
must still spend money and other resources to pay for something they should be immune to in the first
place. This completely contradicts the essence of their tax exemption.

In the same vein, we cannot agree with the view that FEZ enterprises have the duty to prove their
entitlement to tax exemption first before fully enjoying the same; we find it illogical to determine whether
a person is exempted from tax without first determining if he is subject to the tax being imposed. We
have reminded the tax authorities to determine first if a person is liable for a particular tax, applying the
rule of strict interpretation of tax laws, before asking him to prove his exemption therefrom. 85 Indeed, as
entities exempted on taxes on importations, FEZ enterprises are clearly beyond the coverage of any law
imposing those very charges. There is no justifiable reason to require them to prove that they are
exempted from it.

More importantly, we have also recognized that the exemption from local and national taxes granted
under RA 7227, as amended by RA 9400, are ipso facto accorded to FEZs. In case of doubt, conflicts with
respect to such tax exemption privilege shall be resolved in favor of these special territories. 86

RR 2-2012 is unconstitutional.

According to the respondents, the power to enact, amend, or repeal laws belong exclusively to
Congress.87 In passing RR 2-2012, petitioners illegally amended the law a power solely vested on the
Legislature.

We agree with the respondents.

The power of the petitioners to interpret tax laws is not absolute. The rule is that regulations may not
enlarge, alter, restrict, or otherwise go beyond the provisions of the law they administer; administrators
and implementors cannot engraft additional requirements not contemplated by the legislature. 88

It is worthy to note that RR 2-2012 does not even refer to a specific Tax Code provision it wishes to
implement. While it purportedly establishes mere administration measures for the collection of VAT and
excise tax on the importation of petroleum and petroleum products, not once did it mention the pertinent
chapters of the Tax Code on VAT and excise tax.

While we recognize petitioners' essential rationale in issuing RR 2-2012, the procedures proposed by the
issuance cannot be implemented at the expense of entities that have been clearly granted statutory tax
immunity.

Tax exemptions are granted for specific public interests that the Legislature considers sufficient to offset
the monetary loss in the grant of exemptions.89 To limit the tax-free importation privilege of FEZ
enterprises by requiring them to pay subject to a refund clearly runs counter to the Legislature's intent to
create a free port where the "free flow of goods or capital within, into, and out of the zones" is ensured. 90

Finally, the State's inherent power to tax is vested exclusively in the Legislature. 91 We have since ruled
that the power to tax includes the power to grant tax exemptions.92 Thus, the imposition of taxes, as well
as the grant and withdrawal of tax exemptions, shall only be valid pursuant to a legislative enactment.
As RR 2-2012, an executive issuance, attempts to withdraw the tax incentives clearly accorded by the
legislative to FEZ enterprises, the *petitioners have arrogated upon themselves a power reserved
exclusively to Congress, in violation of the doctrine of separation of powers.

In these lights, we hereby rule and declare that RR 2-2012 is null and void.

WHEREFORE, we hereby DISMISS the petition for lack of merit, and accordingly AFFIRM decision of the
Regional Trial Court dated November 8, 2013 2001 in SCA Case No. 12-410.

SO ORDERED.

G.R. No. 195876,

December 05, 2016

PILIPINAS SHELL PETROLEUM CORPORATION, Petitioner, v. COMMISSIONER OF CUSTOMS, Respondent.

DECISION

PEREZ, J.:

Before the Court is a Petition for Review on Certiorari seeking to reverse and set aside the 13 May 2010
Decision1 and the 22 February 2011 Resolution2 rendered by the Court of Tax Appeals (CTA) Former En
Banc in C.T.A. EB No. 472 which dismissed petitioner's petition, and accordingly affirmed with
modification as to the additional imposition of legal interest the 19 June 2008 Decision3 of the CTA Former
First Division (CTA in Division) ordering petitioner to pay the amount of P936,899,883.90, representing the
total dutiable value of its 1996 crude oil importation, which was considered as abandoned in favor of the
government by operation of law.

The Facts

The factual antecedents of the case are as follows:

On 16 April 1996, Republic Act (R.A.) No. 8180, 4 otherwise known as the "Downstream Oil Industry
Deregulation Act of 1996" took effect. It provides, among others, for the reduction of the tariff duty on
imported crude oil from ten percent (10%) to three percent (3%). The particular provision of which is
hereunder quoted as follows:

Section 5. Liberalization of Downstream Oil Industry and Tariff Treatment. - x x x

b) Any law to the contrary notwithstanding and starting with the effectivity of this Act, tariff shall be
imposed and collected on imported crude oil at the rate of three percent (3%) and imported refined
petroleum products at the rate of seven percent (7%), except fuel oil and LPG, the rate for which shall be
the same as that for imported crude oil Provided, That beginning on January 1, 2004 the tariff rate on
imported crude oil and refined petroleum products shall be the same: Provided, further, That this
provision may be amended only by an Act of Congress.
Prior to its effectivity, petitioner's importation of 1,979,674.85 U.S. barrels of Arab Light Crude Oil, thru
the Ex MT Lanistels, arrived on 7 April 1996 nine (9) days earlier than the effectivity of the liberalization
provision. Within a period of three days thereafter, or specifically on 10 April 1996, said shipment was
unloaded from the carrying vessels docked at a wharf owned and operated by petitioner, to its oil tanks
located at Batangas City.

Subsequently, petitioner filed the Import Entry and Internal Revenue Declaration and paid the import
duty of said shipment in the amount of P11,231,081.00 on 23 May 1996.

More than four (4) years later or on 1 August 2000, petitioner received a demand letter 5 dated 27 July
2000 from the Bureau of Customs (BOC), through the District Collector of Batangas, assessing it to pay the
deficiency customs duties in the amount of P120,162,991.00 due from the aforementioned crude oil
importation, representing the difference between the amount allegedly due (at the old rate often percent
(10%) or before the effectivity of R.A. No. 8180) and the actual amount of duties paid by petitioner (on
the rate of 3%).

Petitioner protested the assessment on 14 August 2000, 6 to which the District Collector of the BOC replied
on 4 September 20007 reiterating his demand for the payment of said deficiency customs duties.

On 11 October 2000,8 petitioner appealed the 4 September 2000 decision of the District Collector of the
BOC to the respondent and requested for the cancellation of the assessment for the same customs duties.

However, on 29 October 2001,9 five years after petitioner paid the allegedly deficient import duty' it
received by telefax from the respondent a demand letter for the payment of the amount of
P936,899,885.90, representing the dutiable value of its 1996 crude oil importation which had been
allegedly abandoned in favor of the government by operation of law. Respondent stated that Import Entry
No. 683-96 covering the subject importation had been irregularly filed and accepted beyond the thirty-
day (30) period prescribed by law. Petitioner protested the aforesaid demand letter on 7 November
200110 for lack of factual and legal basis, and on the ground of prescription.

Seeking clarification as to what course of action the BOC is taking, and reiterating its position that the
respondent's demand letters dated 29 October 2001 and 27 July 2000 have no legal basis, petitioner sent
a letter to the Director of Legal Service of the BOC on 3 December 2001 for said purpose.

On 28 December 2001,11 BOC Deputy Commissioner Gil A. Valera sent petitioner a letter which stated that
the latter had not responded to the respondent's 29 October 2001 demand letter and demanded
payment of the amount of P936,899,885.90, under threat to hold delivery of petitioner's subsequent
shipments, pursuant to Section 150812 of the Tariff and Customs Code of the Philippines (TCCP), 13 and to
file a civil complaint against petitioner.

In reply thereto, petitioner sent a letter dated 4 January 200214 to the BOC Deputy Commissioner and
expressed that it had already responded to the aforesaid demand letter through the letters dated 7
November 2001 and 3 December 2001 sent to respondent and to the Director of Legal Service of the BOC,
respectively.

On 11 April 2002, the BOC filed a civil case for collection of sum of money against petitioner, together
with Caltex Philippines, Inc. as co-party therein, docketed as Civil Case No. 02103239, before Branch XXV,
Regional Trial Court (RTC), of the City of Manila.15

Consequently, on 27 May 2002, petitioner filed with the Court of Tax Appeals (CTA) a Petition for Review,
raffled to the Former First Division (CTA in Division), and docketed as C.T.A. Case No. 6485, upon
consideration that the civil complaint filed in the RTC of Manila was the final decision of the BOC on its
protest.16

Respondent filed on 2 August 2002 a motion to dismiss the said petition raising lack of jurisdiction and
failure to state a cause of action as its grounds, which the CTA in Division denied in the Resolution dated
17 January 2003. Likewise, respondent's motion for reconsideration filed on 14 February 2003 was denied
on its 16 June 2003 Resolution.17

Subsequently, respondent, through the Office of the Solicitor General, filed on 13 August 2003 before the
Court of Appeals (CA) a Petition for Certiorari and Prohibition with Prayer for the Issuance of a Temporary
Restraining Order and Writ of Preliminary Injunction, docketed as CA-G.R. SP No. 78563, praying for the
reversal and setting aside of the CTA in Division's Resolutions dated 17 January 2003 and 16 June 2003. 18

In the interim, respondent filed his Answer to the petition in C.T.A. Case No. 6485 on 20 October 2003
which reiterated the lack of jurisdiction and failure to state a cause of action. Thereafter, trial on the
merits ensued.

On 15 February 2007, the Former First Division of the CA dismissed respondent's petition in CA-G.R. SP
No. 78563. Similarly, respondent's motion for reconsideration of the 15 February 2007 Decision was
denied in its 24 July 2007 Resolution.19

The Ruling of the CTA in Division

In a Decision dated 19 June 200820, the CTA in Division ruled to dismiss the Petition for Review on C.T.A.
Case No. 6485 for lack of merit and accordingly ordered petitioner to pay the entire amount of
P936,899,883.9021 representing the total dutiable value of the subject shipment of Arab Light Crude Oil on
the ground of implied abandonment pursuant to Sections 1801 and 1802 of the TCCP.

Relevant thereto, the CTA in Division made the following factual and legal findings: (a) that petitioner filed
the specified entry form (Import Entry and Internal Revenue Declaration) beyond the 30-day period
prescribed under Section 1301 of the TCCP;22 (b) that for failure to file within the aforesaid 30-day period,
the subject importation was deemed abandoned in favor of the government in accordance with Sections
1801 and 1802 of the TCCP;23 (c) that petitioner's excuses in the delay of filing its Import Entry and
Internal Revenue Declaration were implausible24; (d) that since the government became the owner of the
subject shipment by operation of law, petitioner has no right to withdraw the same and should be held
liable to pay for the total dutiable value of said shipment computed at the time the importation was
withdrawn from the carrying vessel pursuant to Section 204 of the TCCP; 25 (e) that there was fraud in the
present case considering that "the District Collector, in conspiracy with the officials of Caltex and Shell
acted without authority or [with] abused (sic) [of] authority by giving undue benefits to the importers by
allowing the processing, payment and subsequent release of the shipments to the damage and prejudice
of the government who, under the law is already the owner of the shipments x x x;" thus, prescription
under Section 1603 of the TCCP does not apply herein;26 and (f) that the findings of facts of administrative
bodies charged with their specific field of expertise, are afforded great weight by the courts; and in the
absence of substantial showing that such findings are made from an erroneous estimation of the evidence
presented, they are conclusive, and in the interest of stability of the government structure, should not be
disturbed.27

On 24 February 2009, the CTA in Division denied petitioner's Motion for Reconsideration for lack of merit
citing Section 5(b),28 Rule 6 of the 2005 Revised Rules of the CTA, as sole legal basis in considering the
Memorandum dated 2 February 2001 issued by the Customs Intelligence & Investigation Service,
Investigation & Prosecution Division (CIIS-IPD) of the BOC as evidence to establish fraud, and the case of
Chevron Phils., Inc. v. Commissioner of the Bureau of Customs,29 as the jurisprudential foundation
therein.30

Aggrieved, petitioner appealed to the CTA Former En Banc by filing a Petition for Review on 31 March
2009, under Section 3(b), Rule 8 of the 2005 Revised Rules of the CTA, as amended, in relation to Rule 43
of the 1997 Rules of Civil Procedure, as amended, docketed as C.T.A. EB No. 472.

The Ruling of the CTA Former En Banc

In the 13 May 2010 Decision31, the CTA Former En Banc affirmed the CTA in Division's ruling pertaining to
the implied abandonment caused by petitioner's failure to file the Import Entry and Internal Revenue
Declaration within the 30-day period, and transfer of ownership by operation of law to the government of
the subject shipment in accordance with Sections 1801 and 1802, in relation to Section 13.01, of the
TCCP, and with the pronouncements made in the Chevron case. Notably however, the ponente of the
assailed Decision declared therein that the existence of fraud is not controlling in the case at bench and
would not actually affect petitioner's liability to pay the dutiable value of its imported crude oil, pertinent
portion of which are quoted hereunder for ready reference, to wit:

As regards the issue on the existence of fraud, it should be emphasized that fraud is not controlling in
this case. Even in the absence of fraud, petitioner Shell is still liable for the payment of the dutiable
value by operation of law. The liability of petitioner Shell for the payment of the dutiable value of its
imported crude oil arose from the moment it appropriated for itself the said importation, which were
already a property of the government by operation of law. Absence of fraud in this case would not
exclude petitioner Shell from the coverage of Sections 1801 and 1802 of the TCCP.32 (Emphasis supplied)

Furthermore, citing the case of Eastern Shipping Lines, Inc. v. Court of Appeals and Mercantile Insurance
Company, Inc.,33 the CTA Former En Banc imposed an additional legal interest of six percent (6%) per
annum on the total dutiable value of P936,899,883.90, accruing from the date said decision was
promulgated until its finality; and afterwards, an interest rate of twelve percent (12%) per annum shall be
applied until its full satisfaction.34

Not satisfied, petitioner filed a motion for reconsideration thereof which was denied in the assailed
Resolution dated 22 February 2011.

Consequently, this Petition for Review wherein petitioner seeks the reversal and setting aside of the
aforementioned Decision and Resolution dated 13 May 2010 and 22 February 2011, respectively, and
accordingly prays that a decision be rendered finding: (a) that petitioner has already paid the proper
duties on its importation and therefore not liable anymore; and (b) that petitioner is not deemed to have
abandoned its subject shipment; or, in the alternative, (c) that respondent's attempt to collect is devoid of
any legal and factual basis considering that the right to collect against petitioner relating to its subject
shipment has already prescribed.

In support of its petition, petitioner posits the following assigned errors:

THE CTA FORMER EN BANC ERRED WHEN IT HELD IN THE QUESTIONED DECISION THAT PETITIONER PSPC
IS DEEMED TO HAVE IMPLIEDLY ABANDONED THE SUBJECT SHIPMENT AND, THUS, IS LIABLE FOR THE
ENTIRE VALUE OF THE SUBJECT SHIPMENT, PLUS INTEREST, DESPITE THE FACT THAT SUCH CLAIM, IF ANY
AT ALL, HAS ALREADY PRESCRIBED, ESPECIALLY BECAUSE PETITIONER PSPC DID NOT COMMIT ANY
FRAUD.
II

THE CTA FORMER EN BANC ERRED WHEN IT FAILED TO RECOGNIZE THAT THE GOVERNMENT DID NOT
SUFFER ANY DAMAGE OR REVENUE LOSS SINCE ALL TARIFF DUTIES IMPOSABLE ON THE SUBJECT
SHIPMENT WERE ALREADY PAID TO THE GOVERNMENT, SUCH THAT TO ALLOW RESPONDENT
COMMISSIONER TO RECOVER THE ENTIRE VALUE OF THE SUBJECT SHIPMENT WOULD BE CONFISCATORY
AND AMOUNT TO UNJUST ENRICHMENT ON THE PART OF THE GOVERNMENT.

III

THE CTA FORMER EN BANC ERRED WHEN IT CONSIDERED THE SUBJECT SHIPMENT AS IMPLIEDLY
ABANDONED, DEPRIVING PETITIONER PSPC OF ITS RIGHT TO DUE PROCESS AND EQUAL PROTECTION OF
THE LAW, CONSIDERING:

A. RESPONDENT COMMISSIONER DID NOT OBSERVE THE DUE NOTICE REQUIREMENT


UNDER SECTION 1801 OF THE TCCP OR COMPLIED WITH THE RULES THAT BOC HAD
PROMULGATED, WHICH DUE NOTICE IS MANDATORY IN THE ABSENCE OF FRAUD AS
HELD IN THE CHEVRON CASE.

B. THE DUE NOTICE REQUIRED UNDER SECTION 1801 OF THE TCCP ACTUALLY REFERS TO
THE NOTICE TO FILE ENTRY FOR IMPORTED ARTICLES AND NOT THE ARRIVAL THEREOF.

C. PETITIONER PSPC'S ADVANCE FILING OF ITS IED WHICH, BY LAW, ALREADY


CONSTITUTES A VALID AND EFFECTIVE IMPORT ENTRY FORM, AND ITS CLEAR
ACTUATIONS SHOWED AN INTENTION NOT TO ABANDON THE SUBJECT SHIPMENT
ESPECIALLY SINCE IT HAD ALREADY FULLY PAID THE TARIFF DUTY DUE ON THE
SHIPMENT IN ADVANCE.

D. RESPONDENT COMMISSIONER DID NOT CONSIDER PETITIONER PSPC'S REASONABLE


AND JUSTIFIABLE REASONS FOR THE SLIGHT DELAY IN FILING ITS IEIRD.

E. TO SUSTAIN THE CTA FORMER EN BANC IS TO TREAT PETITIONER PSPC WORSE THAN
SMUGGLERS AND COMMON CRIMINALS, AS TO DEPRIVE IT OF ITS RIGHT TO EQUAL
PROTECTION OF THE LAW.

IV

THE CTA [FORMER] EN BANC ERRED IN FAILING TO RECOGNIZE THAT THE IMPOSITION OF A NINE
HUNDRED THIRTY-SIX MILLION EIGHT HUNDRED EIGHTY-NINE THOUSAND EIGHT HUNDRED EIGHTY-
THREE AND 90/100 PESOS (P936,889,883.90) PENALTY BY REASON OF IMPLIED ABANDONMENT AGAINST
PETITIONER PSPC, DESPITE ITS FULL PAYMENT OF THE TARIFF DUTY DUE ON THE SHIPMENT AND THE
JUSTIFIABLE SLIGHT DELAY IN THE LATTER'S SUBMISSION OF ITS IEIRD, IS IN VIOLATION OF
INTERNATIONAL LAW UNDER THE REVISED KYOTO CONVENTION.

THE CTA [FORMER] EN BANC ERRED IN FAILING TO RECOGNIZE THAT THERE IS NO STATUTORY PROVISION
EMPOWERING RESPONDENT COMMISSIONER TO SUBSTITUTE ITS CLAIMS FOR THE ABANDONED GOODS
WITH THE VALUE THEREOF.

VI
THE CTA [FORMER] EN BANC GROSSLY MISAPPRECIATED THE FACTS AND MISAPPLIED THE RULING OF THE
HONORABLE COURT IN THE CHEVRON CASE WHEN IT HELD THAT PRESCRIPTION IS NOT A DEFENSE AND
THAT THE NOTICE REQUIREMENT UNDER SECTION 1801 OF THE TCCP AND THE BOC'S OWN RULES AND
REGULATIONS DO NOT APPLY EVEN IN THE ABSENCE OF FRAUD. QUITE THE CONTRARY, THE CHEVRON
CASE CLEARLY RECOGNIZED THAT THE PRESCRIPTIVE PERIOD OF THE FINALITY OF THE LIQUIDATION
UNDER SECTION 1603 OF THE TCCP IS A DEFENSE IN THE ABSENCE OF FRAUD AND THE NOTICE
REQUIREMENT WAS SET ASIDE DUE TO THE FINDING OF FRAUD AGAINST CHEVRON. MOREOVER, UNLIKE
IN CHEVRON CASE WHERE THE HONORABLE COURT FOUND CHEVRON TO HAVE BENEFITED FROM ITS
DELAY AND WAS GUILTY OF FRAUD, THE QUESTIONED DECISION AND RESOLUTION BOTH DID NOT FIND
FRAUD ON THE PART OF PETITIONER PRPC.35

Petitioner asseverates that: (a) in the absence of fraud, the right of respondent to claim against petitioner,
assuming there is any, has already prescribed since an action involving payment of customs duties
demanded after a period of one (1) year from the date of final payment of duties shall not succeed,
relying on Section 1603 of the TCCP; (b) the alleged Memorandum dated 2 February 2001 issued by the
Investigation and Prosecution Division (IPD) of the BOC, which served as the court a quo's basis in finding
fraud on the part of petitioner, was never presented, authenticated, marked, identified, nor formally
offered in evidence; hence, inadmissible and cannot be the basis of any finding of fraud; (c) even if the
Memorandum dated 2 February 2001 is legally admitted in evidence, it still does not constitute clear and
convincing proof to establish any fraud on the part of petitioner since, unlike in the Chevron case, it was
entitled to avail of the reduced three percent (3%) rate under R.A. No. 8180, which was already in effect
as early as 16 April 1996; thus, petitioner did not gain any undue advantage or benefit from its justifiable
delay in filing the Import Entry and Internal Revenue Declaration within the 30-day mandatory period; and
(d) the evidence on record and the acts of petitioner [filing of Import Entry Declaration (JED) and paying
advance duties] disclose honest and good faith on its part showing clear absence of any fraudulent intent
to evade the payment of the proper customs duties and taxes due at the time of the entry of its imported
crude oil in the Philippines.36

Petitioner further argues that the government suffered or lost nothing when petitioner filed its Import
Entry and Internal Revenue Declaration thirteen (13) days beyond the period allowed by law, considering
that the former did not lose any tax collection when petitioner had allegedly paid in advance the amount
of P71,923,285.00 for the regular tariff duty of 10% then prevailing, notwithstanding its entitlement to the
reduced 3% rate under RA No. 8180. Consequently, by ordering petitioner to pay for the entire dutiable
value amounting to P936,899,883.90, the government shall be guilty of unjust enrichment, and such
would result to deprivation of property on the part of petitioner without due process of law. 37

Moreover, it is petitioner's contention that the principles enunciated in the Chevron case were misapplied
in the case at bench. It explained that the reason for such ruling establishing the "ipso facto
abandonment" doctrine was because there was a finding of fraud on the part of Chevron, being the
importer. The existence of fraud was a critical and essential fact in the disposition on the issues in the
Chevron case that justified the goods to be deemed impliedly abandoned in favor of the government.
Corollarily, in the absence of fraud, goods cannot be deemed impliedly abandoned and ipso facto owned
by the government arising from a mere delay in the submission of the Import Entry and Internal Revenue
Declaration, such as in the present case. In other words, petitioner is convinced that the provisions of
Sections 1801 and 1802 cannot be applied blindly which may cause goods to be impliedly abandoned in
favor of the government, without even recognizing the peculiar circumstances of the case and without
allowing the importer (petitioner herein) to provide justifications for the delay in the submission of its
Import Entry and Internal Revenue Declaration. Allegedly, both notices to the importer to file entry and
for its failure to file an entry within the non-extendible period of 30 days are essential before a shipment
can be considered impliedly abandoned. Otherwise, to do so would constitute violation of the basic
substantial constitutional rights of petitioner.
Petitioner explains that, in issuing Customs Administrative Order (CAO) No. 5-93 dated 1 September 1993
and Customs Memorandum Order (CMO) No. 15-94 dated 29 April 1994, respondent even recognized the
significance of the due notice requirement before any goods may be deemed impliedly abandoned
articles. Such notice purportedly refers to notice to file entry, and not notice of arrival as mistakenly
interpreted by the CTA Former En Banc. Thus, in the absence of such notice in the present case, there
could have been no implied abandonment in favor of the government of the said imported crude oil by
petitioner pursuant to Section 1801 of the TCCP.

Lastly, petitioner believes that affirmance of the ruling a quo, would be tantamount to a clear violation of
international laws, i.e. the Revised Kyoto Convention, which generally prohibit the imposition of
substantial penalties for errors when there is no fraud or gross negligence on the part of an importer.
Consequently, such current and reasonable trend in the international and uniform application of customs
rules and laws shows how unreasonable, unjust, confiscatory, iniquitous and incongruent the disposition
made against petitioner in the instant case; hence, the very need to set aside the assailed Decision and
Resolution of the CTA Former En Banc in C.T.A. EB No. 472, in order to prevent the creation of a legal
precedent which contravenes State commitments.

Respondent, on the other hand, counters that petitioner's failure to file its Import Entry and Internal
Revenue Declaration within the non-extendible period of 30 days was fatal to its cause of action.
Resultantly, the subject imported crude oil is deemed abandoned in favor of the government by reason of
such non-filing of the imported entries within said prescriptive period.38

Our Ruling

The submissions of the parties to this case bring to fore two timelines and the consequences of the lapse
of the prescribed periods. Petitioner appears to be covered by Section 1801, in relation to Section 1301,
which respectively states:

Sec. 1801. Abandonment, Kinds and Effects of. - An imported article is deemed abandoned under any of
the following circumstances:

(a) When the owner, importer, or consignee of the imported article expressly signifies in writing to the
Collector of Customs his intentions to abandon; or

(b) When the owner, importer, consignee or interested party after due notice, fails to file an entry within
thirty (30) days, which shall not be extendible, from the date of discharge of the last package from the
vessel or aircraft, or having filed such entry, fails to claim his importation within fifteen (15) days which
shall not likewise be extendible, from the date of posting of the notice to claim such importation.
(Emphasis supplied)

Any person who abandons an article or who fails to claim his importation as provided for in the preceding
paragraph shall be deemed to have renounced all his interests and property rights therein.

xxxx

Sec. 1301. Persons Authorized to Make Import Entry.- Imported articles must be entered in the
customhouse at the port of entry within thirty (30) days, which shall not be extendible, from the date of
discharge of the last package from the vessel or aircraft either (a) by the importer, being holder of the bill
of lading, (b) by a duly licensed customs broker acting under authority from a holder of the bill or (c) by a
person duly empowered to act as agent or attorney-in-fact for each holder: Provided, That where the
entry is filed by a party other than the importer, said importer shall himself be required to declare under
oath and under the penalties of falsification or perjury that the declarations and statements contained in
the entry are true and correct: Provided, further, That such statements under oath shall constitute prima
facie evidence of knowledge and consent of the importer of violations against applicable provisions of this
Code when the importation is found to be unlawful.

Tersely put, when an importer after due notice fails to file an Import Entry and Internal Revenue
Declaration within an unextendible period of thirty (30) days from the discharge of the last package, the
imported article is deemed abandoned in favor of the government.

Upon the other hand, respondent is covered in a manner likewise mandatory, by the provisions of Section
1603 which states that:

Sec. 1603. Finality of Liquidation. - When articles have been entered and passed free of duty or final
adjustment of duties made, with subsequent delivery, such entry and passage free of duty or settlement
of duties will, after the expiration of one year, from the date of the final payment of duties, in the
absence of fraud or protest, be final and conclusive upon all parties, unless the liquidation of the import
entry was merely tentative. (Emphasis supplied)

We rule that in this case, Section 1603 is squarely applicable. The finality of liquidation which arises one
(1) year after the date of the final payment of duties, which is in this case 23 May 1996, renders
inoperable the provisions of Section 1801.

Discussion

At the outset, it bears emphasis that the determination of the issues presented in this case requires a
comprehensive assessment of the pronouncements made in the case of Chevron Philippines, Inc. v.
Commissioner of the Bureau of Customs;39 thus, we find it imperative to reproduce hereunder the points
there considered which are germane to the controversy under review.

THE IMPORTATION WERE ABANDONED


IN FAVOR OF THE GOVERNMENT

The law is clear and explicit. It gives a non-extendible period of 30 days for the importer to file the entry
which we have already ruled pertains to both the IED and IEIRD. Thus under Section 1801 in relation to
Section 1301, when the importer fails to file the entry within the said period, he "shall be deemed to
have renounced all his interests and property rights" to the importations and these shall be considered
impliedly abandoned in favor of the government:

Section 1801. Abandonment, Kinds and Effect of. -

xxxx

Any person who abandons an article or who fails to claim his importation as provided for in the
preceding paragraph shall be deemed to have renounced all his interests and property rights therein.

According to petitioner, the shipments should not be considered impliedly abandoned because none of its
overt acts (filing of the IEDs and paying advance duties) revealed any intention to abandon the
importations.
Unfortunately for petitioner, it was the law itself which considered the importation abandoned when it
failed to file the IEIRDs within the allotted time. Before it was amended, Section 1801 was worded as
follows:

Sec. 1801. Abandonment, Kinds and Effect of. - Abandonment is express when it is made direct to the
Collector by the interested party in writing and it is implied when, from the action or omission of the
interested party, an intention to abandon can be clearly inferred. The failure of any interested party to
tile the import entry within fifteen days or any extension thereof from the discharge of the vessel or
aircraft, shall be implied abandonment. An implied abandonment shall not be effective until the article is
declared by the Collector to have been abandoned after notice thereof is given to the interested party
as in seizure cases.

Any person who abandons an imported article renounces all his interests and property rights therein.

After it was amended by RA 7651, there was an indubitable shift in language as to what could be
considered implied abandonment:

Section 1801. Abandonment, Kinds and Effect of. - An imported article is deemed abandoned under any
of the following circumstances:

a. When the owner, importer, consignee of the imported article expressly


signifies in writing to the Collector of Customs his intention to
abandon;ChanRoblesVirtualawlibrary

b. When the owner, importer, consignee or interested party after due notice,
fails to file an entry within thirty (30) days, which shall not be extendible,
from the date of discharge of the last package from the vessel or aircraft x x x.

From the wording of the amendment, RA 7651 no longer requires that there be other acts or omissions
where an intent to abandon can be inferred. It is enough that the importer fails to file the required
import entries within the reglementary period. The lawmakers could have easily retained the words used
in the old law (with respect to the intention to abandon) but opted to omit them. It would be error on our
part to continue applying the old law despite the clear changes introduced by the amendment. 40
(Emphasis and underlining supplied)

Based on the foregoing, it appears that in the Chevron case, the Court simply applied the clear provision
of Section 1801(b), in relation to Section 1301, of the TCCP, as amended, which categorically provides that
mere failure on the part of the owner, importer, consignee or interested party, after due notice, to file an
entry within a non-extendible period of 30 days from the date of discharge of the last package (shipment)
from the vessel, would mean that such owner, importer, consignee or interested party is deemed to have
abandoned said shipment. Consequently, abandonment of such shipment (imported article) constitutes
renouncement of all his interests and property rights therein.

The rationale of strict compliance with the non-extendible period of 30 days within which import entries
(IEIRDs) must be filed for imported articles are as follows: (a) to prevent considerable delay in the
payment of duties and taxes; (b) to compel importers to file import entries and claim their importation as
early as possible under the threat of having their importation declared as abandoned and forfeited in
favor of the government; (c) to minimize the opportunity of graft; (d) to compel both the BOC and the
importers to work for the early release of cargo, thus decongesting all ports of entry; (e) to facilitate the
release of goods and thereby promoting trade and commerce; and (f) to minimize the pilferage of
imported cargo at the ports of entry.41 The aforesaid policy considerations were significant to justify a firm
observance of the aforesaid prescriptive period.

It was observed that it is the law itself that considers an imported article abandoned for failure to file the
corresponding Import Entry and Internal Revenue Declaration within the allotted time. No acts or
omissions to establish intent to abandon is necessary to effectuate the clear provision of the law. Since
Section 1801(b) does not provide any qualification as to what may have caused such failure in filing said
import entry within the prescriptive period in order to render the imported article abandoned, this Court
shall likewise make no distinction and plainly apply the law as clearly stated. Hence, upon the lapse of the
aforesaid non-extendible period of 30 days, without the required import entry filed by the importer
within said period, its imported article is therefore deemed abandoned.

Moreover, Section 1.802 of the same Code states to whom said abandoned imported articles belong as a
consequence of such renouncement by the owner, importer, consignee or interested party. It provides:

Sec. 1802. Abandonment of Imported Articles. An abandoned article shall ipso facto be deemed the
property of the Government and shall be disposed of in accordance with the provisions of this Code.

x x x x (Emphasis supplied)

In the Chevron case, we explained that the term "ipso facto" is defined as "by the very act itself or "by
mere act." Hence, there is no need for any affirmative act on the part of the government with respect to
abandoned imported articles given that the law itself categorically provides that said articles shall ipso
facto be deemed the property of the government. By using the term "ipso facto" in Section 1802 of the
TCCP, as amended by R.A. No. 7651,42 the legislature removed the need for abandonment proceedings
and for any declaration that imported articles have been abandoned before ownership thereof can be
effectively transferred to the government. In other words, ownership over the abandoned imported
articles is transferred to the government by operation of law.

The rulings in Chevron was generously applied by CTA Former En Banc in the present case. Thus:

Petitioner Shell's failure to file the required entries, within the prescribed non-extendible period of
thirty (30) days from the date of discharge of the last package from the carrying vessel, constitutes
implied abandonment of its oil importation. This means, that from the precise moment that the non-
extendible thirty-day period had lapsed, the abandoned shipment was deemed the property of the
government. Therefore, when petitioner withdrew the oil shipment for consumption, it appropriated for
itself properties which already belonged to the government. x x x

Petitioner Shell's contention that the belated filing of its import entries is justified due to the late arrival
of its import documents, which are necessary for the proper computation of the import duties, cannot
be sustained.

xxxx

The [CTA Former En Banc] cannot also accept such excuses, as the absence of supporting documents
should not have prevented petitioner Shell from complying with the mandatory non-extendible period,
since the law prescribes an extremely serious consequence for delayed filing. If this kind of excuse was
to be accepted, then the collection of customs duties would be at the mercy of importers, which our
lawmakers try to avoid.
For all the foregoing, we rule that the late filing of the IEIRDs alone, which constituted implied
abandonment, makes petitioner Shell liable for the payment of the dutiable value of the imported crude
oil. x x x43 (Emphasis supplied)

Since it is undisputed that the Import Entry and Internal Revenue Declaration was belatedly filed by
petitioner on 23 May 1996, or more than 30 days from the last day of discharge of its importation
counted from 10 April 1996, the importation may be considered impliedly abandoned in favor of the
government. Petitioner argues that before Section 1802 can be applied and the ipso facto provision
invoked, the requirement of due notice to file entry and the determination of the intent of the importer
are essential in order to consider the subject imported crude oil of petitioner impliedly abandoned in
favor of the government. It further asserts that, in the Chevron case, it was conceded that as a general
rule, due notice is indeed required before any imported article can be considered impliedly abandoned,
but Chevron's non-entitlement to such prior notice was legally justified because of the finding of fraud
established against it, rendering it impossible for the BOC to comply with the due notice requirement
under the prevailing rules. Consequently, it is petitioner's conclusion that such finding of fraud is
indispensable in order to waive the "due notice requirement," that would eventually consider the subject
imported crude oil impliedly abandoned in favor of the government.

In Chevron, we observed that:

The minutes of the deliberations in the House of Representatives Committee on Ways and Means on
the proposed amendment to Section 1801 of the TCC show that the phrase "after due notice" was
intended for owners, consignees, importers of the shipments who live in rural areas or distant places
far from the port where the shipments are discharged, who are unfamiliar with customs procedures
and need the help and advice of people on how to file an entry:

xxxx

MR. FERIA. 1801, your Honor. The question that was raised here in the last hearing was whether notice is
required to be sent to the importer. And, it has been brought forward that we can dispense with the
notice to the importer because the shipping companies are notifying the importers on the arrival of
their shipment. And, so that notice is sufficient to ... sufficient for the claimant or importer to know that
the shipments have already arrived.

Second, your Honor, the legitimate businessmen always have ... they have their agents with the
shipping companies, and so they should know the arrival of their shipment.

xxxx

HON. QUIMPO. Okay. Comparing the two, Mr. Chairman, I cannot help but notice that in the substitution
now there is a failure to provide the phrase AFTER NOTICE THEREOF IS GIVEN TO THE INTERESTED PARTY,
which was in the original. Now in the second, in the substitution, it has been deleted. I was first
wondering whether this would be necessary in order to provide for due process. I'm thinking of certain
cases, Mr. Chairman, where the owner might not have known. This is now on implied abandonment not
the express abandonment.

xxxx

HON. QUIMPO. Because I'm thinking, Mr. Chairman. I'm thinking of certain situations where the importer
even though, you know, in the normal course of business sometimes they fail to keep up the date or
something to that effect.
THE CHAIRMAN. Sometimes their cargoes get lost.

HON. QUIMPO. So just to, you know . . . anyway, this is only a notice to be sent to them that they have
a cargo there.

xxxx

MR. PARAYNO. Your Honor, I think as a general rule, five days [extendible] to another five days is a good
enough period of time. But we cannot discount that there are some consignees of shipments located in
rural areas or distant from urban centers where the ports are located to come to the [BOC] and to ask
for help particularly if a ship consignment is made to an individual who is uninitiated with customs
procedures. He will probably have the problem of coming over to the urban centers, seek the advice of
people on how to file entry. And therefore, the five day extendible to another five days might really be
a tight period for some. But the majority of our importers are knowledgeable of procedures. And in fact,
it is in their interest to file the entry even before the arrival of the shipment. That's why we have a
procedure in the bureau whereby importers can file their entries even before the shipment arrives in the
country. (Emphasis supplied)

xxxx

Petitioner, a regular, large-scale and multinational importer of oil and oil products, fell under the
category of a knowledgeable importer which was familiar with the governing rules and procedures in
the release of importations.

Furthermore, notice to petitioner was unnecessary because it was fully aware that its shipments had in
fact arrived in the Port of Batangas. The oil shipments were discharged from the carriers docked in its
private pier or wharf, into its shore tanks. From then on, petitioner had actual physical possession of its
oil importations. It was thus incumbent upon it to know its obligation to file the IEIRD within the 30-day
period prescribed by law. As a matter of fact, importers such as petitioner can, under existing rules and
regulations, file in advance an import entrv even before the arrival of the shipment to expedite the
release of the same. However, it deliberately chose not to comply with its obligation under Section
1301.

The purpose of posting an "urgent notice to file entry" pursuant to Section B.2.1 of CMO 15-94 is only
to notify the importer of the "arrival of its shipment" and the details of said shipment. Since it already
had knowledge of such, notice was superfluous. Besides, the entries had already been filed, albeit
belatedly. It would have been oppressive to the government to demand a literal implementation of this
notice requirement.44 (Emphasis and underlining supplied)

Therefrom, it is without a doubt that the requirement of due notice contemplated under Section 1801(b)
of the TCCP, as amended, refers to the notice to the owner, importer, consignee or interested party of the
arrival of its shipment and details thereof. The legislative intent was clear in emphasizing the importance
of said notice of arrival, which is intended solely to persons not considered as knowledgeable importers,
or those who are not familiar with the governing rules and procedures in the release of importations. We
as much as said that the due notice requirement under Section 1801(b), do not apply to knowledgeable
importers, such as Chevron in the above-cited case, for having been considered as one of the regular,
large-scale and multinational importers of oil and oil products, familiar with said rules and procedures
(including the duty and obligation of filing the IEIRD within a non-extendible period of 30 days) and fully
aware of the arrival of its shipment on its privately owned pier or wharf in the Port of Batangas. Applying
Chevron, the decision assailed here said:
The due notice required under Section 1301 is the notice of the arrival of the shipment. In this case,
pursuant to the Chevron case, notice to petitioner Shell is not required under the peculiar circumstances
of the case. Petitioner Shell, like Chevron, is a regular, large-scale and multinational importer of oil and
oil products, who falls under the category of a knowledgeable importer, familiar with the governing
rules and procedures in the release of importations.

More importantly, petitioner Shell even admitted that it filed an application for Special Permit to
Discharge and paid the corresponding advance duties on March 22, 1996 (Exhibits "K" and "P"),, which
undeniably proved knowledge on the part of petitioner Shell of the arrival of the shipment. Likewise,
upon arrival of the shipment, they were unloaded from the carrying vessels docked at the wharf owned
by petitioner Shell at Tabangao, Batangas City; thus, petitioner Shell was fully aware that their
importation had already arrived.45 (Emphasis supplied)

The foregoing having been said, we must with equal concern, go to the other timeline which is provided
for in Section 1603 of the TCCP, to wit:

Sec. 1603. Finality of Liquidation. - When articles have been entered and passed free of duty or final
adjustment of duties made, with subsequent delivery, such entry and passage free of duty or settlement
of duties will, after the expiration of one year, from the date of the final payment of duties, in the absence
of fraud or protest, be final and conclusive upon all parties, unless the liquidation of the import entry was
merely tentative.

Petitioner insists that, in the absence of fraud, the right of respondent to claim against it has already
prescribed considering that an action involving the entry and payment of customs duties involving
imported articles demanded after a period of one (1) year from the date of final payment of duties, shall
not succeed, pursuant to the clear provision of Section 1603. It therefore contends that even if the subject
imported crude oil of petitioner is by law deemed abandoned by operation of law under Sections 1801(b),
in relation to Section 1301, of the Code, respondent's right to claim abandonment had already lapsed
since fraud is wanting in this case. On the other hand, respondent counters that since there was a factual
finding of fraud committed by petitioner in the filing of its Import Entry and Internal Revenue Declaration
beyond the 30-day period prescribed under Section 1301 of the TCCP, the 1-year prescriptive period
under Section 1603 therefore does not apply.

At this point, it bears emphasis that in a petition for review on certiorari under Rule 45 of the Rules of
Court, only questions of law may be raised. 46 The Court is not a trier of facts and does not normally
undertake the re-examination of the evidence presented by the contending parties during the trial of the
case considering that the findings of facts of the CA are conclusive and binding on the Court 47 and they
carry even more weight when the CA affirms the factual findings of the trial court.48 However, it is already
a settled matter that, the Court had recognized several exceptions to this rule, to wit: (1) when the
findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is
manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the
judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when
in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary
to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial
court; (8) when the findings are conclusions without citation of specific evidence on which they are based;
(9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not
disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of
evidence and contradicted by the evidence on record; and (11) when the Court of Appeals manifestly
overlooked certain relevant facts not disputed by the parties, which, if properly considered, would
justify a different conclusion.49
Records of this case reveal that the CTA in Division in its 19 June 2008 Decision50 made a pronouncement
that there was indeed fraud committed by petitioner based on the factual finding contained in the
Memorandum dated 2 February 2001 issued by Special Investigator II Domingo B. Almeda and Special
Investigator III Nemesio C. Magno, Jr. of the CIIS-IPD of the BOC. Consequently, since such memorandum
made such factual finding of fraud against petitioner, the court a quo ruled that prescription does not set
in even if respondent's claim was made beyond the 1-year reglementary period.

Upon an assiduous review of the factual finding of fraud, we find petitioner's contention meritorious.
Hence, the instant case falls among the exceptions to the general rule previously mentioned which would
require this Court's judicial prerogative to review the court a quo's findings of fact.

Generally, fraud has been defined as "the deliberate intention to cause damage or prejudice. It is
voluntary execution of a wrongful act, or a willful omission, knowing and intending the effects which
naturally and necessarily arise from such act or omission.51 For fraud to exist, it must be intentional,
consisting of deception willfully and deliberately done or resorted to in order to induce another to give up
some right.52 It is never presumed and the burden of proof to establish lies in the person making such
allegation since every person is presumed to be in good faith.53 To discharge this burden, fraud must be
proven by clear and convincing evidence.54 Also, fraud must be alleged and proven as a fact where the
following requisites must concur: (a) the fraud must be established by evidence; and (b) the evidence of
fraud must be clear and convincing, and not merely preponderant. Upon failure to establish these two (2)
requisites, the presumption of good faith must prevail.

Section 3611(c) of the TCCP, as amended defines the term fraud as the occurrence of a "material false
statement or act in connection with the transaction which was committed or omitted knowingly,
voluntarily and intentionally, as established by clear and convincing evidence." Again, such factual finding
of fraud should be established based on clear, convincing, and uncontroverted evidence.

Relevant thereto, in the landmark case of Aznar v. Court of Tax Appeals,55 we explained the general
concept of fraud as applied to tax cases in the following fashion:

The fraud contemplated by law is actual and not constructive. It must be intentional fraud, consisting of
deception willfully and deliberately done or resorted to in order to induce another to give up some
legal right. Negligence, whether slight or gross, is not equivalent to the fraud with intent to evade the tax
contemplated by the law. It must amount to intentional wrong doing with the sole object of avoiding the
tax. It necessarily follows that a mere mistake cannot be considered as fraudulent intent, and if both
petitioner and respondent Commissioner of Internal Revenue committed mistakes in making entries in
the returns and in the assessment, respectively, under the inventory method of determining tax
liability, it would be unfair to treat the mistakes of the petitioner as tainted with fraud and those of the
respondent as made in good faith.56 (Emphasis supplied)

In the case at bench, a perusal of the records reveals that there is neither any iota of evidence nor
concrete proof offered and admitted to clearly establish that petitioner committed any fraudulent acts.
The CTA in Division relied solely on the Memorandum dated 2 February 2001 issued by the CIIS-IPD of the
BOC in ruling the existence of fraud committed by petitioner. However, there is no showing that such
document was ever presented, identified, and testified to or offered in evidence by either party before
the trial court.

Time and again, this Court has consistently declared that cases filed before the CTA are litigated de novo,
party-litigants must prove every minute aspect of their cases.57 Section 8 of R.A. No. 1125,58 as amended
by R.A. No. 9282,59 categorically described the CTA as a court of record. Indubitably, no evidentiary value
can be given to any documentary evidence merely attached to the BOC Records, as the rules on
documentary evidence require that such documents must be formally offered before the CTA. Pertinent is
Section 34, Rule 132 of the Rules of Court which reads:

Section 34. Offer of evidence. - The court shall consider no evidence which has not been formally offered.
The purpose for which the evidence is offered must be specified.

From the foregoing provision, it is clear that for evidence to be considered by the court, the same must be
formally offered. Corollarily, the mere fact that a particular document is identified and marked as an
exhibit does not mean that it has already been offered as part of the evidence of a party. In Interpacific
Transit, Inc. v. Aviles,60 We had the occasion to make a distinction between identification of documentary
evidence and its formal offer as an exhibit. We said that the first is done in the course of the trial and is
accompanied by the marking of the evidence as an exhibit while the second is done only when the party
rests its case and not before. A party, therefore, may opt to formally offer his evidence if he believes that
it will advance his cause or not to do so at all. In the event he chooses to do the latter, the trial court is
not authorized by the Rules to consider the same. 61

The Rule on this matter is patent that even documents which are identified and marked as exhibits cannot
be considered into evidence when the same have not been formally offered as part of the evidence, but
more so if the same were not identified and marked as exhibits, such as in the present case. An assay of
the records reveals that the subject Memorandum dated 2 February 2001 was neither identified nor
offered in evidence by respondent during the entire proceedings before the CTA in Division.
Consequently, this is fatal to respondent's cause in establishing the existence of fraud committed by
petitioner since the burden of proof to establish the same lies with the former alone.

As a matter of fact, even if the aforesaid documentary evidence was included as part of the ROC Records
submitted before the CTA in compliance with a lawful order of the court, 62 this does not permit the trial
court to consider the same in view of the fact that the Rules prohibit it. The reasoning forwarded by the
CTA in Division in its Resolution dated 24 February 2009, that the apparent purpose of transmittal of the
records is to enable it to appreciate and properly review the proceedings and findings before an
administrative agency, is misplaced. Unless any of the party formally offered in evidence said
Memorandum, and accordingly, admitted by the court a quo, it cannot be considered as among the legal
and factual bases in resolving the controversy presented before it.

By analogy, in Dizon v. CTA,63 this Court underscored the importance of a formal offer of evidence and the
corresponding admission thereafter. We quote:

While the CTA is not governed strictly by technical rules of evidence, as rules of procedure are not ends in
themselves and are primarily intended as tools in the administration of justice, the presentation of the
BIR's evidence is not a mere procedural technicality which may be disregarded considering that it is the
only means by which the CTA may ascertain and verify the truth of BIR's claims against the Estate. The
BIR's failure to formally offer these pieces of evidence, despite CTA's directives, is fatal to its cause.
Such failure is aggravated by the fact that not even a single reason was advanced by the BIR to justify such
fatal omission. This, we take against the BIR.

Per the records of this case, the BIR was directed to present its evidence in the hearing of February 21,
1996, but BIR's counsel failed to appear. The CTA denied petitioner's motion to consider BIR's
presentation of evidence as waived, with a warning to BIR that such presentation would be considered
waived if BIR's evidence would not be presented at the next hearing. Again, in the hearing of March 20,
1996, BIR's counsel failed to appear. Thus, in its Resolution dated March 21, 1996, the CTA considered the
BIR to have waived presentation of its evidence. In the same Resolution, the parties were directed to file
their respective memorandum. Petitioner complied but BIR failed to do so. In all of these proceedings, BIR
was duly notified. Hence, in this case, we are constrained to apply our ruling in Heirs of Pedro Pasag v.
Parocha:

A formal offer is necessary because judges are mandated to rest their findings of facts and their
judgment only and strictly upon the evidence offered by the parties at the trial. Its function is to enable
the trial judge to know the purpose or purposes for which the proponent is presenting the evidence. On
the other hand, this allows opposing parties to examine the evidence and object to its admissibility.
Moreover, it facilitates review as the appellate court will not be required to review documents' not
previously scrutinized by the trial court.

Strict adherence to the said rule is not a trivial matter. The Court in Constantino v. Court of Appeals ruled
that the formal offer of one's evidence is deemed waived after failing to submit it within a considerable
period of time. It explained that the court cannot admit an offer of evidence made after a lapse of three
(3) months because to do so would ''condone an inexcusable laxity if not non-compliance with a court
order which, in effect, would encourage needless delays and derail the speedy administration of
justice."

Applying the aforementioned principle in this case, we find that the trial court had reasonable ground to
consider that petitioners had waived their right to make a formal offer of documentary or object
evidence. Despite several extensions of time to make their formal offer, petitioners failed to comply with
their commitment and allowed almost five months to lapse before finally submitting it. Petitioners'
failure to comply with the rule on admissibility of evidence is anathema to the efficient, effective, and
expeditious dispensation of justice. (Emphasis and underlining supplied)

Clearly therefore, evidence not formally offered during the trial cannot be used for or against a party
litigant by the trial court in deciding the merits of the case. Neither may it be taken into account on
appeal. Since the rule on formal offer of evidence is not a trivial matter, failure to make a formal offer
within a considerable period of time shall be deemed a waiver to submit it. Consequently, any evidence
that has not been offered and admitted thereafter shall be excluded and rejected.

Moreover, even if not submitted as a contention herein, We find it apropos to rule that the CTA likewise
cannot motu proprio justify the existence of fraud committed by petitioner by applying the rules on
judicial notice.

Judicial notice is the cognizance of certain facts which judges may properly take and act on without proof
because they already know them.64 Under the Rules of Court, judicial notice may either be mandatory or
discretionary. Pertinent portions of Rule 129 of the Rules of Court provide as follows:

RULE 129

What Need Not Be Proved

Section 1. Judicial notice, when mandatory. - A court shall take judicial notice, without the introduction of
evidence, of the existence and territorial extent of states, their political history, forms of government and
symbols of nationality, the law of nations, the admiralty and maritime courts of the world and their seals,
the political constitution and history of the Philippines, the official acts of legislative, executive and
judicial departments of the Philippines, the laws of nature, the measure of time, and the geographical
divisions.
Section 2. Judicial notice, when discretionary. - A court may take judicial notice of matters which are of
public knowledge, or are capable to unquestionable demonstration, or ought to be known to judges
because of their judicial functions.

Section 3. Judicial notice, when hearing necessary. -During the trial, the court, on its own initiative, or on
request of a party, may announce its intention to take judicial notice of any matter and allow the parties
to be heard thereon.

After the trial, and before judgment or on appeal, the proper court, on its own initiative or on request of a
party, may take judicial notice of any matter and allow the parties to be heard thereon if such matter is
decisive of a material issue in the case.

xxxx

In relation thereto, it has been held that the doctrine of judicial notice rests on the wisdom and discretion
of the courts; however, the power to take judicial notice is to be exercised by the courts with caution;
care must be taken that the requisite notoriety exists; and every reasonable doubt upon the subject
should be promptly resolved in the negative. 65

As a general rule, courts are not authorized to take judicial notice of the contents of the records of other
cases, even when such cases have been tried or are pending in the same court, and notwithstanding the
fact that both cases may have been tried or are actually pending before the same judge. 66 However, this
rule is subject to the exception that in the absence of objection and as a matter of convenience to all
parties, a court may properly treat all or any part of the original record of the case filed in its archives as
read into the records of a case pending before it, when with the knowledge of the opposing party,
reference is made to it, by name and number or in some other manner by which it is sufficiently
designated.67 Thus, for said exception to apply, the party concerned must be given an opportunity to
object before the court could take judicial notice of any record pertaining to other cases pending before
it.

Such being the case, it would also be an error for the CTA in Division to even take judicial notice of the
subject Memorandum being merely a part of the BOC Records submitted before the court a quo, without
the same being identified by a witness, offered in and admitted as evidence, and effectively, depriving
petitioner, first and foremost, an opportunity to object thereto. Hence, the subject Memorandum should
not have been considered by the CTA in Division in its disposition.

It is well-settled that procedural rules are designed to facilitate the adjudication of cases. Courts and
litigants alike are enjoined to abide strictly by the rules. While it is true that litigation is not a game of
technicalities, it is equally true that every case must be prosecuted in accordance with the prescribed
procedure to ensure an orderly and speedy administration of justice. Party litigants and their counsel are
well advised to abide by, rather than flaunt, procedural rules for these rules illumine the path of the law
and rationalize the pursuit of justice. 68

The claim of respondent against petitioner has already prescribed

Since we have already laid to rest the question on whether or not there was fraud committed by
petitioner, the last issue for Our resolution is whether respondent's claim against petitioner has already
prescribed.

This Court rules in the affirmative.


There being no evidence to prove that petitioner committed fraud in belatedly filing its Import Entry and
Internal Revenue Declaration within the 30-day period prescribed under Section 1301 of the TCCP, as
amended, respondent's rights to question the propriety thereof and to collect the amount of the alleged
deficiency customs duties, more so the entire value of the subject shipment, have already prescribed.
Simply put, in the absence of fraud, the entry and corresponding payment of duties made by petitioner
becomes final and conclusive upon all parties after one (1) year from the date of the payment of duties in
accordance with Section 1603 of the TCCP, as amended:

Section 1603. Finality of Liquidation. - When articles have been entered and passed free of duty or final
adjustments of duties made, with subsequent delivery, such entry and passage free of duty or
settlements of duties as well, after the expiration of one (1) year, from the date of the final payment of
duties, in the absence of fraud or protest or compliance audit pursuant to the provisions of this Code,
be final and conclusive upon all parties, unless the liquidation of the import entry was merely tentative.
(Emphasis and underscoring supplied)

The above provision speaks of entry and passage free of duty or settlements of duties. Generally, in
customs law, the term "entry" has a triple meaning, to wit: (1) the documents filed at the customs house;
(2) the submission and acceptance of the documents and (3) the procedure of passing goods through the
customs house.69 As explained in the Chevron case, it specifically refers to the filing and acceptance of the
Import Entry and Internal Revenue Declaration of the imported article. Simply put, the entry of imported
goods at the custom house consists in submitting them to the inspection of the revenue officers, together
with a statement or description of such goods, and the original invoices of the same, for the purpose of
estimating the duties to be paid thereon.70 The term "duty" used therein denotes a tax or impost due to
the government upon the importation or exportation of goods. It means that the duties on imports signify
not merely a duty on the act of importation, but a duty on the thing imported. It is not confined to a duty
levied while the article is entering the country, but extends to a duty levied after it has entered the
country.71

Based on the foregoing definitions, it is commonsensical that the finality of liquidation referred to under
Section 1603 covers the propriety of the submission and acceptance of the Import Entry and Internal
Revenue Declaration covering the imported articles being brought in the country for the sole purpose of
determining whether it is subject to tax or not; and if it is, whether the computation of the tax or impost
to be paid to the government was properly made. These shall include, among others, the declarations and
statements contained in the entry, made under oath and under the penalties of falsification or perjury
that such declarations and statements contained therein are true and correct, which shall constitute
prima facie evidence of knowledge and consent of the importer of violation against applicable provisions
of the TCCP when the importation is found to be unlawful. 72

Indubitably, the matters which become final and conclusive against all parties include the timeliness of
filing the import entry within the period prescribed by law, the declarations and statements contained
therein, and the payment or non-payment of customs duties covering the imported articles by the owner,
importer, consignee or interested party. Since the primordial issue presented before us focuses on
petitioner's non-compliance in filing its Import Entry and Internal Revenue Declaration within a non-
extendible period of 30 days from the date of discharge of' the last package from the vessel, respondent
may only look into it within a limited period of one (1) year in accordance with the above-quoted
provision.

In the case at bench, it is undisputed that petitioner filed its IEIRD and paid the remaining customs duties
due on the subject shipment only on 23 May 1996. Yet, it was only on 1 August 2000, or more than four
(4) years later, that petitioner received a demand letter from the District Collector of Batangas for the
alleged unpaid duties covering the said shipment. Thereafter, on 29 October 2001, or after more than five
(5) years, petitioner received another demand letter from respondent seeking to collect for the entire
dutiable value of the same shipment amounting to P936,899,855.90.

Consequently, applying the foregoing provision and considering that we have determined already that
there is no factual finding of fraud established herein, the liquidation of petitioner's imported crude oil
shipment became final and conclusive on 24 May 1997, or exactly upon the lapse of the 1-year
prescriptive period from the date of payment of final duties. As such, any action questioning the propriety
of the entry and settlement of duties pertaining to such shipment initiated beyond said date is therefore
barred by prescription.

Since time immemorial, this Court has consistently recognized and applied the statute of limitations to
preclude the Government from exercising its power to assess and collect taxes beyond the prescribed
period, and we intend to abide by our rulings on prescription and to strictly apply the same in the case of
petitioner; otherwise, both the procedural and substantive rights of petitioner would be violated. After
all, prescription is a substantive defense that may be invoked to prevent stale claims from being
resurrected causing inconvenience and uncertainty to a person who has long enjoyed the exercise. Thus,
symptomatic of the magnitude of the concept of prescription, this Court has elucidated that:

The law prescribing a limitation of actions for the collection of the income tax is beneficial both to the
Government and to its citizens; to the Government because tax officers would be obliged to act promptly
in the making of assessment, and to citizens because after the lapse of the period of prescription citizens
would have a feeling of security against unscrupulous tax agents who will always find an excuse to
inspect the books of taxpayers, not to determine the latter's real liability, but to take advantage of
every opportunity to molest peaceful, law-abiding citizens. Without such legal defense taxpayers would
furthermore be under obligation to always keep their books and keep them open for inspection subject
to harassment by unscrupulous tax agents. The law on prescription being a remedial measure should be
interpreted in a way conducive to bringing about the beneficient purpose of affording protection to the
taxpayer within the contemplation of the Commission which recommend (sic) the approval of the law. 73
(Emphasis supplied)

Basic is the rule that provisions of the law should be read in relation to other provisions therein. A statute
must be interpreted to give it efficient operation and effect as a whole avoiding the nullification of
cognate provisions. Statutes are read in a manner that makes it wholly operative and effective, consistent
with the legal maxim ut res magis valeat quam pereat.

This maxim applied, we read Sections 1301, 1801, and 1802, together with Section 1603 of the TCCP.
Thus, should there be failure on the part of the owner, importer, consignee or interested party, after due
notice of the arrival of its shipment (except in cases of knowledgeable owners or importers), to file an
entry within the non-extendible period of 30 days from the date of discharge of the last package
(shipment) from the vessel, such owner, importer, consignee or interested party is deemed to have
abandoned said shipment in favor of the government. As imperative, however, is the strict compliance
with Section 1603 of the TCCP, which should be read as we have ruled. Any action or claim questioning
the propriety of the entry and settlement of duties pertaining to such shipment made beyond the 1-year
prescriptive period from the date of payment of final duties, is barred by prescription. In the present case,
the failure on the part of respondent to timely question the propriety of the entry and settlement of
duties by petitioner involving the subject shipment, renders such entry and settlement of duties final and
conclusive against both parties. Hence, respondent cannot any longer have any claim from petitioner.
Sections 1301, 1801, and 1802 of the TCCP have been rendered inoperable by reason of the lapse of the
period stated in Section 1603 of the same Code.

Indeed, if the prescriptive period of one year specified in Section 1603 of the TCCP is not applied against
the respondent, the reality that the shipment has been unloaded from the carrying vessels to petitioner's
oil tanks and that import duty in the amount of P11,231,081.00 has been paid would be obliterated by the
application of the principle of deemed abandonment four years after the occurrence of the facts of
possession and payment, as a consequence of which application, the petitioner would be made to pay the
government the entire value of the shipment it had as vendee of the shipper already paid.

WHEREFORE, the petition is GRANTED. Accordingly, the Decision dated 13 May 2010 and Resolution
dated 22 February 2011 of the Court of Tax Appeals Former En Banc in C.T.A. EB No. 472 are hereby
REVERSED and SET ASIDE on the ground of prescription.

No costs.

SO ORDERED.

Velasco, Jr., (Chairperson) and Reyes, JJ., concur.


Peralta, J., see dissenting opinion.
Jardeleza, J., join the dissent of J. Peralta.

June 19, 2017

G.R. No. 195876


PILIPINAS SHELL PETROLEUM CORPORATION, Petitioner
vs.
COMMISSIONER OF CUSTOMS, Respondent

RESOLUTION

VELASCO, JR., J.:

Acting on the Omnibus Motion (For Reconsideration and Referral to the Court En bane) dated January 20,
2017 filed by public respondent Commissioner of Customs, the Court DENIES the same for lack of merit.
The arguments raised by respondent in this pending incident are the very same arguments raised in the
petition, which have already been evaluated, passed upon, and considered in the assailed December 5,
2016 Decision. Ergo, the Court rejects these arguments on the same grounds discussed in the challenged
Decision, and denies, as a matter of course, the pending motion.

Unlike in Chevron, petitioner


herein is not guilty of fraud

The Omnibus Motion is anchored primarily on the alleged applicability of Chevron Philippines, Inc. v.
Commissioner of the Bureau of Customs 1 (Chevron) to the case at bar. However, the Court desisted from
applying the doctrine laid down in Chevron considering that the facts and circumstances therein are not in
all fours with those obtaining in the instant case. Thus, Chevron is not a precedent to the case at bar.

A "precedent" is defined as a judicial decision that serves as a rule for future determination in similar or
substantially similar cases. Thus, the facts and circumstances between the jurisprudence relied upon and
the pending controversy should not diverge on material points. But as clearly explained in the assailed
December 5, 2016 Decision, the main difference between Chevron and the case at bar lies in the
attendance of fraud.

In Chevron, evidence on record established that Chevron committed fraud in its dealings. On the other
hand, proof that petitioner Pilipinas Shell Petroleum Corporation (Pilipinas Shell) was just as guilty was
clearly wanting. Simply, there was no finding of fraud on the part of petitioner in the case at bar. Such
circumstance is too significant that it renders Chevron indubitably different from and cannot, therefore,
serve as the jurispn1dential foundation of the case at bar.

In his dissent, Associate Justice Diosdado M. Peralta (Justice Peralta) claims that fraud was committed by
Pilipinas Shell when it allegedly deliberately incurred delay in filing its Import Entry and Internal Revenue
Declaration in order to avail of the reduced tariff duty on oil importations, from ten percent (10%) to
three percent (3%), upon the effectivity of Republic Act No. 8180 (RA 8180), otherwise known as the Oil
Deregulation Law. Justice Peralta cites the February 2, 201 I Memorandum to support the allegation of
fraud, but as exhaustively discussed in Our December 5, 2016 Decision, the document was never formally
offered as evidence before the Court of Tax Appeals, and is, therefore, bereft of evidentiary value. Worse,
it was not even presented during trial and no witness identified the same.

What value can the Court then accord to the document? The Court finds its answer in Heirs of Pasag v.
Sps. Parocha, 2 which teaches that:

x x x Documents which may have been identified and marked as exhibits during pre-trial or trial but which
were not formally offered in evidence cannot in any manner be treated as evidence. Neither can such
unrecognized proof be assigned any evidentiary weight and value. It must be stressed that there is a
significant distinction between identification of documentary evidence and its formal offer. The former is
done in the course of the pre-trial, and trial is accompanied by the marking of the evidence as an exhibit;
while the latter is done only when the party rests its case. The mere fact that a particular document is
identified and marked as an exhibit does not mean that it has already been offered as part of the
evidence. It must be emphasized that any evidence which a party desires to submit for the consideration
of the court must formally be offered by the party; otherwise, it is excluded and rejected. (emphasis
added)

Resultantly, no scintilla of proof was ever offered in evidence by respondent Commissioner of Customs to
substantiate the claim that Pilipinas Shell acted in a fraudulent manner. At best, the allegation of fraud on
the part of Pilipinas Shell is mere conjecture and purely speculative. Settled is the rule that a court cannot
rely on speculations, conjectures or guesswork, but must depend upon competent proof and on the basis
of the best evidence obtainable under the circumstances. We emphasize that litigations cannot be
properly resolved by suppositions, deductions, or even presumptions, with no basis in evidence, for the
truth must have to be determined by the hard rules of admissibility and proof. 3

The absence of fraud and its effects


on the one-year prescriptive period,
and on the due notice requirement
prior to ipso facto abandonment

As extensively discussed in the assailed Decision, whether or not petitioner Pilipinas Shell defrauded the
public respondent becomes pivotal because of Section 1603 of the Tariff and Customs Code of the
Philippines (TCC), which reads:

Section 1603. Finality of Liquidation. When articles have been entered and passed free of duty or final
adjustments of duties made, with subsequent delivery, such entry and passage free of duty or settlements
of duties will, after the expiration of one (1) year, from the date of the final payment of duties, in the
absence of fraud or protest or compliance audit pursuant to the provisions of this Code, be final and
conclusive upon all parties, unless the liquidation of the import entry was merely tentative. (emphasis
added)

Pursuant to the above-quoted provision, the attendance of fraud would remove the case from the ambit
of the statute of limitations, and would consequently allow the government to exercise its power to
assess and collect duties even beyond the one-year prescriptive period, rendering it virtually
imprescriptible. 4

In the case at bar, petitioner Pilipinas Shell filed its Import Entry and Internal Revenue Declaration (IEIRD)
and paid the import duty of its shipments in the amount of P 11,231, 081 on May 23, 1996. However, it
only received a demand letter from public respondent on July 27, 2000, or more than four (4) years later.
By this time, the one-year prescriptive period had already elapsed, and the government had already been
barred from collecting the deficiency in petitioner's import duties for the covered shipment of oil.

In an attempt to remove the instant case from the purview of the provision, Justice Peralta and the
respondent claim that the government is no longer collecting tariff duties. Rather, it is exercising its
ownership right over the shipments, which were allegedly deemed abandoned by petitioner because of
the latter's failure to timely file the IEIRD. It is their postulation then that Sec. 1603 cannot find
application in the case at bar.

We respectfully disagree.

The absence of fraud not only allows the finality of the liquidations, it also calls for the strict observance
of the requirements for the doctrine of ipso facto abandonment to apply. Sec. 1801 of the TCC pertinently
provides:

Section 1801. Abandonment, Kinds and Effect of - An imported article is deemed abandoned under any of
the following circumstances:

x x xx

b. When the owner, importer, consignee or interested party after due notice, fails to file an entry within
thirty (30) days, which shall not be extendible, from the date of discharge of the last package from the
vessel or aircraft, or having filed such entry, fails to claim his importation within fifteen (15) days, which
shall not likewise be extendible, from the date of posting of the notice to claim such importation.
(emphasis supplied)

As expressly provided in Sec.1801(b) of the TCC, the failure to file the IEIRD within 30 days from entry is
not the only requirement for the doctrine of ipso facto abandonment to apply. The law categorically
requires that this be preceded by due notice demanding compliance.

To recapitulate, the notice in this case was only served upon petitioner four (4) years after it has already
filed its IEIRD.1wphi1 Under this circumstance, the Court cannot rule that due notice was given, for when
public respondent served the notice demanding payment from petitioner, it no longer had the right to do
so. By that time, the prescriptive period for liquidation had already elapsed, and the assessment against
petitioner's shipment had already become final and conclusive. Consequently, Sec. 1801(b) failed to
operate in favor of the government for failure to demand payment for the discrepancy prior to the finality
of the liquidation. The government cannot deem the imported articles as abandoned without due notice.
Public respondent cannot harp on the Chevron ruling to excuse compliance from the due notice
requirement before the imported articles can be deemed abandoned, for to do so would only downplay
the Court's finding anent the non-attendance of fraud. To be clear, the element of fraud in Chevron was a
key ingredient on why notice was deemed unnecessary: 5

Under the peculiar facts and circumstances of this case, due notice was not necessary. The shipments
arrived in 1996. The IEDs and IEIRDs were also filed in 1996. However, respondent discovered the fraud
which attended the importations and their subsequent release from the BOC's custody only in 1999.
Obviously, the situation here was not an ordinary case of abandonment wherein the importer merely
decided not to claim its importations. Fraud was established against petitioner; it colluded with the
former District Collector. Because of this, the scheme was concealed from respondent. The government
was unable to protect itself until the plot was uncovered. The government cannot be crippled by the
malfeasance of its officials and employees. Consequently, it was impossible for respondent to comply with
the requirements under the rules. By the time respondent learned of the anomaly, the entries had already
been belatedly filed and the oil importations released and presumably used or sold. It was a fait accompli.
Under such circumstances, it would have been against all logic to require respondent to still post an
urgent notice to file entry before declaring the shipments abandoned. (emphasis added)

Hence, it does not suffice that petitioner is a multinational, large scale importer presumed to be familiar
with importation rules and procedures for the ipso facto abandonment doctrine to apply. Under the
peculiar facts and circumstances of Chevron, the existence of fraud was the primary element established
to warrant the application of the doctrine. Without this element, Chevron cannot be treated at par with
the case at bar. The statutorily required due notice should still have been timely served upon petitioner
before the imported oil shipments could have been deemed abandoned.

Under public respondent's Customs Memorandum Order No. (CMO) 15-94, otherwise known as the
Revised Guidelines on Abandonment in force at that time, due notice is served upon the importer through
the following measures:

SUBJECT: REVISED GUIDELINES ON ABANDONMENT

xxxx

B. ADMINISTRATIVE PROVISIONS

xxxx

B.2 Implied abandonment occurs when:

B.2.1 The owner, importer, consignee, interested party or his authorized broker/representative, after due
notice, fails to file an entry within a nonextendible period of thirty (30) days from the date of discharge of
last package from the carrying vessel or aircraft.

xxxx

Due notice to the consignee/importer/owner/interested party shall be by means of posting of a notice to


file entry at the Bulletin Board seven (7) days prior to the lapse of the thirty (30) day period by the Entry
Processing Division listing the consignees who/which have not filed the required import entries as of the
date of the posting of the notice and notifying them of the arrival of their shipment, the name of the
carrying vessel/aircraft, Voy. No. Reg. No. and the respective BIL No./AWB No., with a warning, as shown
by the attached form, entitled: URGENT NOTICE TO FILE ENTRY which is attached hereto as Annex A and
made an integral part of this Order.

x x xx

C. OPERATIONAL PROVISIONS

xxxx

C.2 On Implied Abandonment:

C.2.1 When no entry is filed

C.2.1.1 Within twenty-four (24) hours after the completion of the boarding formalities, the Boarding
Inspector must submit the manifests to the Bay Service or similar office so that the Entry Processing
Division copy may be put to use by said office as soon as possible.

C.2.1.2 Within twenty-four (24) hours after the completion of the unloading of the vessel/aircraft, the
Inspector assigned in the vessel/aircraft, shall issue a certification addressed to the Collector of Customs
(Attention: Chief, Entry Processing Division), copy furnished Chief, Data Monitoring Unit, specifically
stating the time and date of discharge of the last package from the vessel/aircraft assigned to him. Said
certificate must be encoded by Data Monitoring Unit in the Manifest Clearance System.

C.2.1.3 Twenty-three (23) days after the discharge of the last package from the carrying vessel/aircraft,
the Chief, Data Monitoring Unit shall cause the printing of the URGENT NOTICE TO FILE ENTRY in
accordance with the attached form, Annex A hereof, sign the URGENT NOTICE and cause its posting
continuously for seven (7) days at the Bulletin Board for the purpose until the lapse of the thirty (30)
day period.

C.2.1.4 The Chief, Data Monitoring Unit, shall submit a weekly report to the Collector of Customs with a
listing by vessel, Registry Number of shipments/ importations which shall be deemed abandoned for
failure to file entry within the prescribed period and with certification that per records available, the
thirty (30) day period within which to file the entry therefore has lapsed without the consignee/importer
filing the entry and that the proper posting of notice as required has been complied with.

xxxx

C.2.1.5 Upon receipt of the report, the Collector of Customs shall issue an order to the Chief, Auction and
Cargo Disposal Division, to dispose of the shipment enumerated in the report prepared by the Chief, Data
Monitoring Unit on the ground that those are abandoned and ipso facto deemed the property of the
Government to be disposed of as provided by law. (emphasis supplied)

CMO 15-94 is an executive edict that implements Section 180l (b) of the TCC. It is an interpretation given
to a statute by those charged with its execution, and is intended for the guidance of subordinate
executive officials to promote a more efficient and cost effective administration of the BOC. Unless the
rule appears to be clearly unreasonable or arbitrary, it is entitled to the greatest weight by the Court, 6 if
not accorded the similar force and binding effect of law. 7

Coupled with the earlier quotation from Chevron, it becomes abundantly clear that the notice
requirement as mandated in CMO 15-94 cannot be excused unless fraud is established. Resultantly,
fraud being absent on the part of petitioner Pilipinas Shell, the ipso facto abandonment doctrine cannot
operate within the factual milieu of the instant case. Be that as it may, in view of the substantial
differences between the facts of Chevron and the peculiarities of the instant case, and just as Chevron was
justified "under the peculiar facts and circumstances" obtaining therein, the Decision dated December 5,
2016 in the case at bar ought to be considered as a judgment pro hac vice.

WHEREFORE, premises considered, the Court DENIES WITH FINALITY the Omnibus Motion (For
Reconsideration and Referral to the Court En bane) dated January 20, 2017 filed by public respondent
Commissioner of Customs for lack of merit.

No further pleadings or motions will be entertained.

Let entry of judgment be issued.

SO ORDERED.

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