TAX 2: Atty.

Raymond Ong Abrantes, CPA

Please take note that the Tariff and Customs Code (PD 1416) is now amended by the Customs Modernization Tariff Act (Republic Act No. 10863) which took effect
on June 16, 2016 - kasabay ng Philippine Competition Act.

The repealing clause of the CMTA provides that:

Sec. 1803. Repealing Clause. – Presidential Decree No. 1464, otherwise known as the Tariff and Customs Code of the Philippines of 19785 as amended,
and Presidential Decree No. 1853 which require any applicant for letter of credit covering imports to deposit the full amount of duties due on the importation , are hereby
expressly repealed. All other laws, acts, presidential decrees, executive orders, rules and regulations or parts thereof inconsistent with the provisions
of this Act are hereby expressly repealed, amended or modified accordingly.

So is the Tariff and Customs code frequently asked in the bar? Actually, hindi masyado. Kung meron man, just one question or two. Pero tinatanong parin. Talagang 50% of
the questions usually are tax remedies, 30% income tax.

Q: What is a Tariff and Customs?

When we talk about Tariff and Customs, typically it’s CMTA. Kumbaga sa tax - siya ang tax code. But take note there are other laws like the Anti-Dumping Law.

Q: What is the Anti-Dumping Law?

A: In the Anti-Dumping Law, there are importations in the Philippines which are voluminous and is just for the purpose of just dumping it in the Philippines. So that’s what it
seeks to address.

So this, the Anti-Dumping Law, is also considered as a Tariff and Custom Laws. Basically, the tariff and customs laws include not only the CMTA but all other laws
under the jurisdiction and are enforced by the Bureau of Customs.

Q: What’s the Bureau of Customs?

A: You have your Department of Finance, may BIR.

Now, BoC is usually engaged in the regulation of taxes in the importation and exportation.

Aside from the repealing clause, there is this saving clause.

SEC 1802. Saving Clause. – All other laws, acts, executive orders, and Customs Administrative Orders (CAOs), Customs Memorandum Orders (CMOs), orders,
memoranda, circulars, rules and regulations issued by the Bureau, under the provisions of Presidential Decree No. 1464, otherwise known as the Tariff and Customs Code
of the Philippines of 1978, as amended, not inconsistent with the provisions of this Act, shall remain valid unless the same will be repealed or amended
accordingly, pursuant to the provisions of this Act.
So it only repealed those which were expressly inconsistent with the CMTA. But if not inconsistent, it remains valid. Let’s go to the definition of terms.

Goods, defined.
(Sec. 102(x), CMTA)
Sec. 102 (x) Goods refer to articles, wares, merchandise and any other items which are subject of importation or exportation;

So take note, importation and exportation. But why only goods? Why is there no services?

Q: Can you export services? Is that regulated by the customs?

A: They can’t. They only regulate goods.

So what is an article? In the definition of goods, it states “article.”

“Article” defined for the purposes of tariff and customs laws

An article is something considered by itself, a particular object or substance; a material thing of a particular class or kind. (Customs Law Digest, Vol. 5, p. 184)

So that is under your customs law digest. Let’s go to the definition of a tariff.

Q: What is tariff? Are tariff duties and customs duties synonymous?

Generally, tariff is a tax that is imposed and made payable upon wares, articles, merchandise that are imported into or exported from a specific State.

It is the list or schedule of articles in which a duty is imposed upon the importation into the country with the rates at which they are severally taxed. It is the system of
imposing duties or taxes on the importation of foreign merchandise.

It includes customs duties, toll or tribute payable upon merchandise to the general government; rate of customs; or list of articles liable to duties. [UST Golden Notes
2017]

Tariff is synonymous to customs duties insofar as it means the taxes imposed on articles that are imported into or exported from a country. So if you order a delivery from
outside the Philippines, it sometimes has customs duties, right? So that is an example of a tariff. There are different definitions of tariff. Hindi lang naman yun yung specific
definition. Diba, taripa - tawag din sa listahan ng plete, diba? Diba - it could be that. It could also be the barrier in the importation or exportation between countries.

REGULAR CUSTOMS DUTIES

Q: What is the purpose of the imposition of customs duties?
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A: Purpose of imposing regular customs duties
a) Imposed for the purpose of raising revenues
b) They may also be imposed to serve as protective barriers which would prevent the entry of merchandise that would compete with locally manufactured items.

Thus, they are also referred to as tariff barriers or protective tariffs. High tariffs on exports may also serve to discourage the exportation of certain articles, usually
raw materials, in order to promote their domestic manufacture into finished products. (Based on the Book of Abelardo Domondon [2018 ed])

There are several purposes aside from the fact that the said duties are used to raise revenues, it is supposed to be imposed a protective barriers that would prevent the
entry of merchandise that would compete with locally manufactured or produced items. This is referred to as tariff barriers or protective tariffs.

For example, there was a political crisis that happened between the US and Cuba or Argentina (Atty was not sure with this), they banned the importation of beef.

Another is what happened with States, they tried to impose tariffs on steel. There was a car manufacturer in the US that was not utilizing the materials from the US. Trump,
then, imposed tariffs in the importation of the materials. Trump said, “Let’s regulate it, because we should create jobs within the States” This is why tariffs were imposed so
that when the materials are imported, it be more expensive. So the company will be forced to use the local resources. This is one of the purpose of tariffs. So what did that
company do? They exited from the US and just put up a factory where there is less production expenses. This could be used as a protective barrier for the local industry at
the same time, and at the same time this could be used for political purposes.

Another as an external pressure, as what happened in China, they used to have a ban on dairy milk because the Chinese only use imported dairy milk. So they tried to ban it
or impose tariff or import bans as a protective barrier for local industry.

SPECIAL CUSTOMS DUTIES

Q: What are the purposes for imposing special customs duties?
A:
1) Sumptuary or regulatory purpose to implement police power objectives in the protection of health, safety or morals.

Notes: (Based on Domondon’s book [2018 ed])

The state increases tariffs or customs duties on imported harmful substances, making them more expensive, thus, limiting their consumption. The sumptuary
purpose of taxation is to promote general welfare to protect the health, safety or morals of the inhabitants. It is the joint exercise of the power of taxation and police
power where regulatory taxes are collected.

The so called “sin taxes” on alcohol and tobacco manufacturers help dissuade the consumers from excessive intake of these potentially harmful products which would
affect their health. (Southern Cross Cement Corp. vs Cement Manufacturers Assoc. of the Phils, et al, GR No. 158540, August 3, 2005).

2) Compensatory purpose, to promote the general welfare through economic development.

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 Notes: (Based on Domondon’s book [2018 ed])
The power to impose tariffs or custom duties may be exercised in order to maintain a high level of employment. Exemption from the payment of customs duties on
certain production inputs or equipment may impel the establishment of manufacturing concerns which would take advantage of lower costs of production materials
and equipment. In the alternative, the imposition of high tariffs on finished imported articles may encourage the establishment of manufacturing companies that
would produce import substitutes. Higher levels of employment would result.

Kinds or Classification of Duties

1) Ordinary, regular tariffs or regular customs duties
a) Ad valorem custom duties
It is based on the value.

b) Specific custom duties

It is based on a certain unit of measure.

This is similar to what we have discussed in excise tax.

2) Special tariffs or special customs duties

a) Dumping duties
b) Countervailing duties
c) Marking duties
d) Retaliatory/discriminatory duties
e) Other Safeguard measures

So there are ordinary duties which is imposed when you import and export goods. Now, if your product or the article that you are going to export falls within the five (5)
special tariffs or special customs duties, you have an additional customs duties or it can be subjected to a different rate based on the purpose of your importation.

Q: What is your basis for computing duties?

A: Your basis is your transactional VAT.

Imported goods shall be valued in accordance with the Transaction Value System Method One of the Customs Modernization and Tariff Act (CMTA).

Please take note of that, there are different values to that there are total landing costs etc. When you import goods, you have a CIF (or Cost Insurance Freight). You CIF all
of that to make all of it FOB Destination. This will be the cost. There are also landed cost where you should consider the stevedoring, arrastre.

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But the basis for the Customs is the Transactional VAT. They have particular rates for the Transactional VAT. Whatever is the declared Transactional value, that would be the
basis for the Customs duties.

Let’s go to the SPECIAL DUTIES.

First. – Dumping duties.

Q: What are dumping duties?

A: Whenever any product, commodity or article of commerce imported into the Philippines at an export price less than its normal value in the ordinary course of trade for the
like product, commodity or article destined for consumption in the exporting country is causing or is threatening to cause material injury to a domestic industry, or materially
retarding the establishment of a domestic industry.

Export price means the price of the exporting State.

Please take note: It is a dumping duty. The prices of the products that are imported to the Philippines are too low that it would have the effects of:
1. causing or is threatening to cause material injury to a domestic industry, or materially retarding the establishment of a domestic industry; or
2. materially retarding the establishment of a domestic industry producing the like product

Classic example: Rice.

Example: The prices of rice in Vietnam and Thailand are cheaper. If it is imported, the price is low and it is even lower than the normal value to the point that if we buy
there, it would hurt our rice industry. That’s why it’s called dumping.

Q: What does the government do to prevent that?

A: They impose a dumping duty so that the local price will be competitive. Hence, if you are a consumer in the Philippines, there is no more difference to you between the
imported rice and the local rice because the prices are the same.

Q: What would happen if there are no Tariff or Special Custom duties?

A: As a consumer, you would patronize the lower price (mas masarap pa nga yung sa kanila eh!). This is an example of the government stepping in as an act of police power
in order to help the local industry.

Q: Who imposes the Anti-Dumping duty? Who determines the rates?

Section 3(L) of RA No. 8752.

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 Imposition of the Anti-Dumping Duty.- The Secretary shall, within ten (10) days from receipt of the affirmative final determination by the Commission, issue a Department
Order imposing an anti-dumping duty on the imported product, commodity, or article, unless he has earlier accepted a price undertaking from the exporter or foreign
producer. He shall furnish the Secretary of Finance with the copy of the order and request the latter to direct the Commissioner of Customs to collect within three (3) days
from receipt thereof the definitive anti-dumping duty.

Under the Tariff and Customs Law, we have what we call “Tariff Commission”.

Tariff Commission – is the principal and independent authority on tariff and trade remedies, and a key adviser on non-tariff measures and international trade issues.

They will recommend if there is a need to impose a dumping duty on a particular product.

Please take note: The Customs only acts as an enforcer. It is the Tariff Commission that really imposes the dumping duty since they conduct a study. Then, the Commission
will recommend to the Secretary.

Q: Who is this Secretary?

A: It depends.
● If the product is agricultural → Secretary of Department of Agriculture.
● If the product is not agricultural → Secretary of Department of Industry (DTI Secretary).

They will issue the department order that the Tariff Commission conducted a study which they should impose and that they will submit a copy to Secretary of Finance. Then,
the Secretary of Finance will say to the Customs to enforce the department order. That is the mechanism for this dumping duty.

Go to the Secretary of Department of Trade and Industry (DTI) in case of non-agricultural products. And go to the Secretary of Department of Agriculture (DA) in case of
agricultural products.

ANTI-DUMPING DUTY

SEC. 301. Anti-Dumping Duty. –

(a) Whenever any product, commodity or article of commerce imported into the Philippines at an export price less than its normal value in the ordinary course of trade for
the like product, commodity or article destined for consumption in the exporting country is causing or is threatening to cause material injury to a domestic industry, or
materially retarding the establishment of a domestic industry, or materially retarding the establishment of a domestic industry producing the like product, the Secretary of
Trade and Industry, in the case of non-agricultural product, commodity or article, or the Secretary of Agriculture, in the case of agricultural product, commodity or article
(both of whom are hereinafter referred to as the Secretary, as the case may be), after formal investigation and affirmative finding of the Tariff Commission (hereinafter

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 referred to as the Commission), shall cause the imposition of an anti-dumping duty equal to the margin of dumping on such product, commodity or article and on like
product, commodity or article thereafter imported to the Philippines under similar circumstances, in addition to ordinary duties, taxes and charges imposed by law on the
imported product, commodity or article. However, the anti-dumping duty may be less than the margin if such lesser duty will be adequate to remove the injury to the
domestic industry. Even when all the requirements for the imposition have been fulfilled, the decision whether or not to impose a definitive anti-dumping duty remains the
prerogative of the Commission. It may consider, among others, the effect of imposing an anti-dumping duty on the welfare of consumers and/or the general public, and
other related local industries.

In the case where products are not imported directly from the country of origin but are exported to the Philippines from an intermediate country, the price at which the
products are sold from the country of export to the Philippines shall normally be compared with the comparable price in the country of export. However, comparison may
be made with the price in the country of origin, if for example, the products are merely transshipped through the country of export, or such products are not produced in
the country of export, or there is no comparable price for them in the country of export.

(s) Definition of Terms . – For purposes of this Act, the following definitions shall apply:

(1) Anti-dumping duty refers to a special duty imposed on the importation of a product, commodity or article of commerce into the Philippines at less than its normal
value when destined for domestic consumption in the exporting country, which is the difference between the export price and the normal value of such product, commodity
or article.

(2) Export price refers to (1) the ex-factory price at the point of sale for export; or (2) the F.O.B. price at the point of shipment. In cases where (1) or (2) cannot be used,
then the export price may be constructed based on such reasonable basis as the Secretary or the Commission may determine.

Q: What is the amount of the Anti-Dumping duty?

A: The amount imposed shall be equal to the margin of dumping on such product, commodity or article and on like product, commodity or article thereafter imported to the
Philippines under similar circumstances, in addition to ordinary duties, taxes and charges imposed by law on the imported product, commodity or article

The Anti-Dumping duty is equivalent to the margin of dumping on such product, commodity or article and on like product, commodity or article thereafter imported to the
Philippines under similar circumstances, in addition to ordinary duties, taxes and charges imposed by law on the imported product, commodity or article.

In addition to your ordinary duties, taxes and charges imposed on the imported product, commodity or article, you will pay the Anti-Dumping duty. Anti-Dumping duty is the
difference between the export price and the normal price.

FORMULA

EXPORT PRICE – NORMAL PRICE

= ANTI-DUMPING DUTY

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NOTE: If a large quantity of goods were imported from a foreign country into the Philippines at a very low price, much lesser than the normal value of such goods, and such
importation threatens to cause material injury to our domestic industry, the remedy is to impose anti-dumping duty in addition to the ordinary duties, taxes and charges on
the imported goods.

Q: Is there any other law for this?

Yes. The Anti-Dumping Act of 1999 or Republic Act No. 8752.

Export price refers to

(1) the ex-factory price at the point of sale for export; or

(2) the Free on Board (F.O.B.) price at the point of shipment.

In cases where (1) or (2) cannot be used, then the export price may be constructed based on such reasonable basis as the Secretary or the Commission may determine.

The Tariff Commission will conduct a study kung ang export price ba ay masyadong mababa for us to impose an Anti-Dumping due.

1978 Bar Question

Q: What do you understand by dumping?

A: Dumping duties are special duties imposed by the Secretary of Finance upon recommendation of the Tariff Commission when it is found that the price of the imported
articles is deliberately or continually fixed at less than the fair market value or cost of production, and the importation would cause or likely cause an injury to local industries
engaged in the manufacture or production of the same or similar articles or prevent their establishment.

Dumping is the act of imposing, on the imported articles, prices that are less than the fair market value or cost of production, and the importation would cause or likely
cause an injury to local industries engaged in the manufacture or production of the same or similar articles or prevent their establishment.

Take note of the procedure!

Let’s now go to the CUSTOMS.

Q: May directive na, na process na. Anong gagawin ng Customs?

Upon determination of the anti-dumping duty, the Commissioner of Customs shall submit to the Secretary, through the Secretary of Finance, certified reports on the
disposition of the cash bond and the amounts of the anti-dumping duties collected.

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The Department Order will come either from the Secretary of Agriculture or the Secretary of DTI. The Commissioner of Customs will then submit a report through the
Secretary of Finance. I re-report kung na enforce talaga yung Department Order.

Under the Anti-Dumping Act of 1999, the importer’s license or charter to do business shall be revoked for those found guilty of dumping. Further, its officers shall be
disqualified from holding official positions in corporations of other business entities in the Philippines. A fine equal to twice the definitive anti-dumping duty shall be imposed.

Take note of this penal provision of the Anti-Dumping Law.

Q: If you are the importer and an Anti-Dumping duty was imposed, can you question the department order? In short, what is your remedy to question
the anti-dumping rates?

A: Any interested party with substantial positive information may also petition the Secretary for a review of the continued imposition of the anti-dumping duty:
Provided, That a reasonable period of time has elapsed since the imposition of the anti-dumping duty. Interested parties shall have the right to request the Secretary to
examine:
1) whether the continued imposition of the anti-dumping duty is necessary to offset dumping; and
2) whether the injury would likely continue or recur if the anti-dumping duty were removed or modified, or both.

- You file a petition for review before the respective Secretaries.

(p) Judicial Review . - Any interested party in an anti-dumping investigation who is adversely affected by a final ruling in connection with the imposition of an anti-
dumping duty may file with the Court of Tax Appeals, a petition for the review of such ruling within thirty (30) days from his receipt of notice of the final
ruling: Provided, however, That the filing of such petition for review shall not in any way stop, suspend, or otherwise hold the imposition or collection, as the case may
be, of the anti-dumping duty on the imported product, commodity or article. The rules of procedure of the court on the petition for review filed with the Court of Tax
Appeals shall be applied.

Lahat ng mga remedies na napag-usapan natin, napupunta lahat sa Court of Tax Appeals (CTA). Pero paulit ulit rin naman ang kanilang decision because they have limited
jurisdiction.

Again, your remedy is to appeal before the Secretary. If the Secretary rendered an adverse decision then you appeal to the CTA by petition for review.

COUNTERVAILING DUTIES

Q: What is Countervailing Duty?

A: Section 302 of PD 1464 as amended by RA 8751

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 SEC. 302. Countervailing Duty. -

"Whenever any product, commodity or article of commerce is granted directly or indirectly by the government in the country of origin or exportation, any kind or form of
specific subsidy upon the production, manufacture or exportation of such product, commodity or article, and the importation of such subsidized product, commodity or
article has caused or threatens to cause material injury to a domestic industry or has materially retarded the growth or prevents the establishment of a domestic industry
as determined by the Tariff Commission (hereinafter referred to as the "Commission") the Secretary of Trade and Industry, in the case of non-agricultural product,
commodity or article, or the Secretary of Agriculture, in the case of agricultural product, commodity or article (both of whom are hereinafter simply referred to as ‘the
Secretary,' as the case may be) shall issue a department order imposing a countervailing duty equal to the ascertained amount of the subsidy. The same levy shall be
imposed on the like product, commodity or article thereafter imported to the Philippines under similar circumstances. The countervailing duty shall be in addition to any
ordinary duties, taxes and charges imposed by law on such imported product, commodity or article.

Similar. But, instead of the Anti Dumping which is the purpose is to dump the goods here, in the countervailing, there is a government specific subsidy which be the price
when mababa. In that case, we countervail that. So that it would not threaten the industry domestically.

Q: What is the process?

A: Same. The Tariff Commission will investigate. They will give a recommendation to the Secretary of Agriculture and Secretary of Trade and Industry. The Secretary of
Agriculture and Secretary of Trade and Industry will issue a Department Order to the Secretary of Finance saying that the Bureau of Customs will collect this much
countervailing duties for a particular product. The only difference is the purpose.

Q: What kind of government subsidy are we talking about?

A: We have 3 kinds: Bounty; Subsidy; and Subvention

1. Bounty- these are cash award paid to an exporter or manufacturer for the manufacture of goods for export
a. EXAMPLE: China will export to the Philippines cellphones, tapos malaki man ang cost nyan, bibigyan siya ng Chinese government ng 50M cash para lang
mababa ang cost mo, lower ang presyo ng pag-export mo

2. Subsidy- financial incentives not in the form of direct or cash award to encourage manufacturers or exporters.
a. EXAMPLE: Hindi kita bibigyan ng cash but if you produce that product, bibigyan kita ng income tax handy (?) for 10 years.

3. Subvention- any assistance other than a bounty or subsidy given by the government for the manufacture and/or exportation of an article.
a. EXAMPLE: I will give you free license to export kapag magproduce ka ng ganitong product.

MARKING DUTIES

Q: What are marking duties?

A: Marking duties are additional 5% ad valorem customs duties.
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Please take note that you have ordinary customs duties. These special duties are in addition to your ordinary customs duties.

Marking duties are imposed by the Commissioner of Customs

Sec. 303. Marking of Imported Articles and Containers. —

a. Marking of Articles. — Except as hereinafter provided, every article of foreign origin (or its container, as provided in subsection "b" hereof) imported into the
Philippines shall be marked in any official language of the Philippines and in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or
container) will permit in such manner as to indicate to an ultimate purchaser in the Philippines the name of the country of origin of the article. The Commissioner of
Customs shall, with the approval of the department head, issue rules and regulations to —

(1) Determine the character of words and phrases or abbreviations thereof which shall be acceptable as indicating the country of origin and prescribe any reasonable
method of marking, whether by printing, stenciling, stamping, branding, labeling or by any other reasonable method, and a conspicuous place on the article or container
where the marking shall appear;

(2) Require the addition of any other words or symbols which may be appropriate to prevent deception or mistake as to the origin of the article or as to the origin of any
other article with which such imported article is usually combined subsequent to importation but before delivery to an ultimate purchaser; and

(3) Authorize the exception of any article from the requirements of marking if —

(a) Such article is incapable of being marked;

(b) Such article cannot be marked prior to shipment to the Philippines without injury;

(c) Such article cannot be marked prior to shipment to the Philippines, except at an expense economically prohibitive of its importation;

(d) The marking of a container of such article will reasonably indicate the origin of such article;

(e) Such article is a crude substance;

(f) Such article is imported for use by the importer and not intended for sale in its imported or any other form;

(g) Such article is to be processed in the Philippines by the importer or for his account otherwise than for the purpose of concealing the origin of such article and
in such manner that any mark contemplated by this section would necessarily be obliterated, destroyed or permanently concealed;

(h) An ultimate purchaser, by reason of the character of such article or by reason of the circumstance of its importation, must necessarily know the country of
origin of such article even though it is not marked to indicate its origin;

(i) Such article was produced more than twenty years prior to its importation into the Philippines; or

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 (j) Such article cannot be marked after importation except at an expense which is economically prohibitive, and the failure to mark the article before importation
was not due to any purpose of the importer, producer, seller or shipper to avoid compliance with this section.

In other words ang marking duties, walang mark kung saan galing yung import mo kaya mag-iimpose sila ng marking dues. Because ultimately, they would want to know
kung saan galing yung inimport mo.

Baka pala nag-import ka ng meat tapos you’ve imported it from a country who has suffered swine epidemic, so you have to indicate. Pag hindi mo nalagyan, imposed to you
is what we call marking duties. So failure to mark lang talaga.

b. Marking of Containers. — Whenever an article is excepted under subdivision (3) of subsection "a" of this section from the requirements of marking, the immediate
container, if any, of such article, or such other container or containers of such article as may be prescribed by the Commissioner of Customs with the approval of the
department head, shall be marked in such manner as to indicate to an ultimate purchaser in the Philippines the name of the country of origin of such article in any
official language of the Philippines, subject to all provisions of this section, including the same exceptions as are applicable to articles under subdivision (3) of subsection
"a".

c. Marking Duty for Failure to Mark. — If at the time of importation any article (or its container, as provided in subsection "b" hereof), is not marked in accordance with
the requirements of this section, there shall be levied, collected and paid upon such article a marking duty of 5 per cent ad valorem, which shall be deemed to have
accrued at the time of importation, except when such article is exported or destroyed under customs supervision and prior to the final liquidation of the corresponding
entry.

d. Delivery Withheld until Marked. — No imported article held in customs custody for inspection, examination or appraisement shall be delivered until such articles
and/or their containers, whether released or not from customs custody, shall have been marked in accordance with the requirements of this section and until the
amount of duty estimated to be payable under subsection "c" of this section shall have been deposited. Nothing in this section shall be construed as excepting any
article or its container from the particular requirements of marking provided for in any provisions of law.

e. The failure or refusal of the owner or importer to mark the articles as herein required within a period of thirty days after due notice shall constitute as an act of
abandonment of said articles and their disposition shall be governed by the provisions of this Code relative to abandonment of imported articles.

Q: Are there exception of the marking requirements? May mga goods ba na hindi kailangan i-mark?
A: Yes.

Q: Are there exceptions to the marking requirement.?

A: Yes

Q: Are there goods that don't need to be marked?

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A: Yes. Under CMTA, Section 710, Paragraph A (3)

Sec. 710. Marking of Imported Goods and Containers. – (A) Marking of Goods, – Except as hereinafter provided, all goods of foreign origin imported into the
Philippines or their containers, as provided in subsection (B) hereof shall be conspicuously marked in any official language of the Philippines as legibly, indelibly and
permanently as the nature of the goods or container will permit and in such manner as to indicate to an ultimate purchaser in the Philippines the name of the country of
origin of the goods.

Pursuant thereto, the Commissioner shall, with the approval of the Secretary of Finance:

(1) Determine the character of words and phrases or abbreviation thereof which shall be acceptable as indicating the country of origin and prescribe any reasonable
method of marking, whether by printing, stenciling, stamping, branding, labeling or by any other reasonable method, and in a conspicuous place on the goods or
container where the marking' shall appear;

(2) Require the addition of other words or symbols which may be appropriate to prevent deception or mistake as to the origin of the goods or as to the origin of any other
goods with which such imported goods is usually combined subsequent to importation but before delivery to an ultimate purchaser; and

(3) Authorize the exception of any goods from the requirements of marking if:

(i) Such goods are incapable of being marked;

(ii) Such goods cannot be marked prior to shipment to the Philippines without injury;

(iii) Such goods cannot be marked prior to shipment to the Philippines, except at an expense economically prohibitive of their importation;

(iv) The marking of a container of such goods will reasonably indicate the origin of such goods;

(v) Such goods are crude substances;

(vi) Such goods are imported for use by the importer and not intended for sale in their imported or any other form;

(vii) Such goods are to be processed in the Philippines by the importer or for the importer's account other than for the purpose of concealing the origin of such
goods and in such manner that any mark contemplated by this section would necessarily be obliterated, destroyed, or permanently concealed;

(viii) An ultimate purchaser, by reason of the character of such goods or by reason of the circumstances of their importation, must necessarily know the country
of origin of such goods even though they are not marked to indicate their origin;

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 (ix) Such goods were produced more than twenty (20) years prior to their importation into the Philippines; or

(x) Such goods cannot be marked after importation except at an expense which is economically prohibitive, and the failure to mark the goods before importation
was not due to any purpose of the importer, producer, seller or shipper to avoid compliance with this section.

Q: Are there goods incapable of being marked?

A: Yes

(ii) Such goods cannot be marked prior to shipment to the Philippines without injury

Atty: When the importation is very urgent

(iii) Such goods cannot be marked prior to shipment to the Philippines, except at an expense economically prohibitive of their importation

Atty: What does it mean?

It means that if I mark the goods, the cost is already excessive to the point that I will no longer import. It's prohibitive of importation.

(iv) The marking of a container of such goods will reasonably indicate the origin of such goods

Atty: So kung ang container lang ang lalagyan ko ng mark di na kailangan yung goods pwede na yun

(v) Such goods are crude substances

(vi) Such goods are imported for use by the importer and not intended for sale in their imported or any other form

Atty: This is the very common exception for marking. If the importation is for use by the importer and not for sale, nag import ako for use at di ako magre-resell
then I don’t need to follow the marking.

Q: What is value of the marking duties?

A: It's 5 percent of dutiable value.

Sec. 710. Marking of Imported Goods and Containers.

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 (C) Pine for Failure to Mark. – If, at the time of importation any good or its container, as provided in subsection (B) hereof, is not marked in accordance with the
requirements of this section, there shall be levied, collected, and paid upon such good a marking duty of five percent (5%) of dutiable value, which shall be deemed to
have accrued at the time of importation.

Q: What if you failed to mark?

A: It is considered as Abandonment of goods.

Sec. 710. Marking of Imported Goods and Containers.

(E) The failure or refusal of the owner or importer to mark the goods as herein required within a period of thirty (30) days after due notice shall constitute as an act of
abandonment of said goods and their disposition shall be governed by the provisions of this Act relative to abandonment of imported goods.

Atty: Please take note kung ayaw mo ng i-mark for 30 days after notice, it is considered to be abandoned. Inabandon mo na yung import mo. Meaning di mo na yan
makukuha. That will be escheated in favor of the Government

DISCRIMINATORY OR RETALIATORY DUTIES

Sec. 714. Discrimination by Foreign Countries. – Without prejudice to the Philippine commitment in any ratified international agreements or treaty, the following
recourse shall be applicable in case of discrimination by foreign countries:

(a) When the President finds that the public interest will be served thereby, the President shall, by proclamation, specify and declare new or additional duties in an
amount not exceeding one hundred percent (100%) ad valorem upon goods wholly or in part the growth or product of, or imported in a vessel of any foreign country
whenever the President shall find as a fact that such country.

Atty: We talked about dumping and countervailing (different secretaries), marking (customs), now discriminatory duties is with the President. If for example we
import meat from China, and China on the other hand import rice from us. If we feel that our products are discriminated in China, the President may impose
discriminatory customs on all importations from China. It is a political mechanism to avoid discrimination.

Q: What is the extent of discriminatory duties?

A: It extends to the whole of any foreign country or may be confined to any subdivision or subdivisions thereof

14
 Sec. 714. Discrimination by Foreign Countries.

(c) Any proclamation issued by the President under this section shall, if the President deems it consistent with the interest of the Philippines, extend to the whole of
any foreign country or may be confined to any subdivision or subdivisions thereof: Provided, That the President may, whenever the public interest requires,
suspend, revoke, supplement or amend any such proclamation.

Q: What is the manner of discrimination which merits the imposition of discriminatory duties
A: Sec. 714 (A) (1)

If the President finds as a fact that a foreign country, imposes, directly or indirectly, upon the disposition or transportation in transit or through reexportation from such
country of any goods wholly or in part the growth or product of the Philippines, any unreasonable charge, exaction, regulation or limitation which is not equally enforced
upon the like goods of every foreign country;

Why: Because there are instances during their target customs kung nakalagay doon all importations in the building shall be charged 100 percent. So that is the time na may
discrimination na sa products. Kasi wala ng mag-import from our country.

Kung pagdating doon, he will double the price. If the president will see that, that’s a discrimination, anong gawin niya?
He will also do the same. Magiimpose din siya ng proscription, customs duties on all importations from that particular country. That is the extent of the power of the
president.

Lastly, we talk about safeguard measures.

SAFEGUARD MEASURES
The temporary return of certain barriers to trade that were removed in compliance with the obligations of the Republic of the Philippines under the General Agreement of
Tariff and Trade (GATT) and the World Trade Organization (WTO) Agreement.

These emergency measures, include tariffs, to protect domestic industries and producers from increased imports which inflict or could inflict serious injury on them.
(Southern Cross Cement Corporation v Cement Manufacturers Association of the Philippines, et al., 465 SCRA 532 citing Tanada v Angara, 338 Phil 546, 556; 272 SCRA 18,
40 (1997),

Q: What are the examples of safeguard measures?

A: We have tariff rate quotas or quantitative restrictions on the importation of a product into the country..

Cuba, there is war against US. Walang canned goods na pwedeNG i-import from US to Cuba because of the barrier because they were at war for the longest time. Yun ang
ginamit ni Cuba to curtail the export production of goods.
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 FLEXIBLE TARIFF CLAUSE
The flexible tariff clause is an authorization by the Constitution to the Congress to delegate certain taxing power to President such as the power to increase or decrease, or
remove protective tariff rates, ban or impose tariff quotas.

This is the only delegated taxing power given by the Constitution to the President.

PART 1:
We have the FLEXIBLE TARIFF CLAUSE.

The power then to fix tariff rates and other taxes clearly belongs to Congress, and is exercised by the President only by delegation of that body, it has long been recognized
that the power to enter into treaties is vested directly and exclusively in the President, subject only to the concurrence of at least two-thirds of all the Members of the Senate
for the validity of the treaty.

Please take note. Usually, what is being asked is: How far or what is the extent of the power of the president to fix the tariff rates. It is the congress which authorizes the
president to impose the tariff rates.

The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and
export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government.

(1) It is Congress which authorizes the President to impose tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts. Thus, the
authority cannot come from the Finance Department, the National Economic Development Authority (NEDA), or the World Trade Organization (WTO), no matter how
insistent or persistent these bodies may be.

(2) The authorization granted to the President must be embodied in a law. Hence, the justification cannot be supplied simply by inherent executive powers. It cannot arise
from administrative or executive orders promulgated by the executive branch or from the wisdom or whim of the President.

(3) The authorization to the President can be exercised only within the specified limits set in the law and is further subject to limitations and restrictions which Congress
may impose. Consequently, if Congress specifies that the tariff rates should not exceed a given amount, the President cannot impose a tariff rate that exceeds such
amount. If Congress stipulates that no duties may be imposed on the importation of corn, the President cannot impose duties on corn, no matter how actively the local corn
producers lobby the President. Even the most picayune of limits or restrictions imposed by Congress must be observed by the President.

Q: What is the purpose why the president is given the right to prescribe the rate of tariffs and imports?
A: It is for general welfare and national policy.

Limitations on the exercise (we already discussed that in your Tax 1).

Very important question:

Q: When does the importation begin and when does it end? Why is it important to know?
16
A: It is important because this gives the jurisdiction to the Commission on Customs. Therefore, pag wala ka dun sa beginning and end, it means that the Customs has no
jurisdiction.

Under the Customs Modernization and Tariff Act (CMTA):

Section 103. When Importation Begins and Deemed Terminated.—

Importation begins when the carrying vessel or aircraft enters the Philippine territory with the intention to unload therein.

Importation is deemed terminated when:

(a) The duties, taxes and other charges due upon the goods have been paid or secured to be paid at the port of entry unless the goods are free from duties, taxes and
other charges and legal permit for withdrawal has been granted; or

(b) In case the goods are deemed free of duties, taxes and other charges, the goods have legally left the jurisdiction of the Bureau.

Q: So, when does it start?

A: When it enters the Philippine territory, with the intention to unload. Hence, if there is no intention to unload, Customs has no jurisdiction.

Q: Is it allowed?
A: Yes, if in transit only, dumaan lang.

With the intention of unloading – that is the time when the importation begins. Therefore, what is the implication of that? The Customs can actually seize or forfeit any goods
even if it was not really unloaded if it enters the PH territory with the intention of unloading. The Customs can actually seize it.

Q: When does it end/terminate?

A: It ends if you pay your charges. OR even if you don’t pay your charges but you filed a bond as a security to pay for the charges.

But if the goods are duty-free, when it has left the jurisdiction of the bureau customs. Usually, it is placed in a bonded warehouse. If it has been already cleared, you can
actually claim.

Application of Tariff and Customs Code (TCC)

● The laws on Tariff and Customs applies only after importation has begun BUT before importation is terminated.

VERY IMPORTANT: If wala siya doon sa period when importation begins and ends, therefore, TCC will not apply.

Thus, the jurisdiction of the Bureau of Customs over articles, wares, merchandise and any other items which are subject of importation or exportation attaches only after
importation has begun which is retained up to the time that importation has been terminated.

Please take note of the meaning of “importation”.

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Q: What is importation?

Importation refers to the act of bringing in of goods from a foreign territory into Philippine territory, whether for consumption, warehousing, or admission as defined in
this Act.

Section 102 (z) of RA No. 10863

There are different types of importation:

1. Actual importation – refers to physical importation to the goods being brought to the Philippine territory. This is the type of importation being referred to in
Section 103 of the TCC.

2. Constructive Importation – involves the sale or any other mode of conveyance and delivery of raw materials, finished, or semi-finished products from a CMBW,
PEZA/Economic Zone, Freeport to a CBW.

*Illustration*

This is PEZA. It is considered as different territory. For example, if you buy goods from a business here, e.g. selling microchip, an entity bought outside the PEZA/economic
zone, then that is considered as constructive importation. There is no actual jurisdiction to talk but you are actually importing based on the premise under the law, an
economic zone is a separate territory – a separate customs territory.

Q: What is the meaning of “Admission”?

Admission refers to the act of bringing imported goods directly or through transit into a free zone.

Section 102 (c) of RA No. 10863

So that is an admission. You bring imported goods, bumili ka sa foreign jurisdiction, and you bring it in transit or directly into an economic zone.

Other area of Economic/Free Foreign Entity

the Philippines Zone

So technically, if ikaw si Pilipnas, and, by provision of law, this is a separate customs territory, tapos ito si foreign -

Kung ikaw si Philippines, hindi mo sasabihin na nag import si economic zone, kasi different customs territory ito. This is what you call an admission.

So kung foreign entity with imported goods, dumaan or pumunta kay PEZA, an economic zone, that is admission.

Pag ito, pumunta dito, ano ang tawag? (no diagram) Export.

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Pag ito, ano tawag? Export? Are you sure? Basta, you have that.

Economic zones are also separate customs territories. These are managed by the PEZA as a separate customs territory.

Sec. 120 (w) Free Zone refers to special economic zones registered with the Philippine Economic Zone Authority (PEZA) under Republic Act No. 7916, as amended, duly
chartered or legislated special economic zones and freeports such as Clark Freeport Zone; Poro Point Freeport Zone; John Hay Special Economic Zone and Subic Bay
Freeport Zone under Republic Act No. 7227, as amended by Republic Act No. 9400; the Aurora Special Economic Zone under Republic Act No. 9490, as amended; the
Cagayan Special Economic Zone and Freeport under Republic Act No. 7922; the Zamboanga City Special Economic Zone under Republic Act No. 7903; the Freeport Area
of Bataan under Republic Act No. 9728; and such other freeports as established or may be created by law

What are the different types of economic zones? See provision. In fact, I believe they planned to have Tagum as an economic zone. But I doubt they pushed it through.

INTENTION TO UNLOAD
Sec. 103. When Importation Begins and Deemed Terminated. – Importation begins when the carrying vessel or aircraft enters the Philippine territory with the
intention to unload therein. Importation is deemed terminated when:

(a) The duties, taxes and other charges due upon the goods have been paid or secured to be paid, at the port of entry unless the goods are free from duties,
taxes and other charges and legal permit for withdrawal has been granted: or

(b) In case the goods are deemed free of duties, taxes and other charges, the goods have legally left the jurisdiction of the Bureau.

Again, the intention to unload. Importation begins when the carrying vessel or aircraft enters the Philippine territory with the intention to unload therein. So how do you
prove that? Intent is a state of mind which may be express or implied.

Example:
Express - if the cargo to be unloaded is listed in the cargo manifest for final discharge.

Kasi, diba, may mga manifest yan when you ride a plane. Kaya even if hindi ka naka check-in sa check in time tapos nandyan pa ang plane, hindi ka na ipapa-pasok, kasi na
submit na ang manifest. That’s the reason - you cannot say nandyan pa naman ang eroplano! Kung hindi ka umabot sa check in time, then your name was not submitted for
purposes of tax and other legal purposes. Same goes with the cargo.

So again, how do you know if there is an intention to unload the cargo? Look at the manifest. If it provides that the point of destination is the Philippines, then there’s an
intention to unload. When the vessel or aircraft goes into the Philippine territory, that is already the beginning of importation.

So if illegal yun - smuggling - it can already be seized by the customs.

Q: So when does it terminate?

A: Importation is deemed terminated when:

19
 (a) The duties, taxes and other charges due upon the goods have been paid or secured to be paid, at the port of entry unless the goods are free from duties, taxes
and other charges and legal permit for withdrawal has been granted: or

(b) In case the goods are deemed free of duties, taxes and other charges, the goods have legally left the jurisdiction of the Bureau.

So it is terminated upon the payment of the duties - pwede hindi ka mag bayad but you have to secure a bond for the payment -

And if it’s duty-free, when it is left to the jurisdiction of the customs.

Usually naman, pag labas sa warehouse nila. That’s the usual time the importation ends. So just take note of the periods.

Let’s not discuss the applications of an importer - that has already been discussed in your transportation law.

Let’s discuss IMPORT ENTRY DECLARATION / GOODS DECLARATION.

(y) Goods Declaration refers to a statement made in the manner prescribed by the Bureau and other appropriate agencies, by which the persons concerned indicate the
procedure to be observed in the application for the entry or admission of imported goods and the particulars of which the customs administration shall require;

This is now computerized. Before it used to be Import Entry Declaration. Sa una, manual-manual ang pagpirma, but now it is computerized in order to avoid corruption.

Liability of payment of duties

So you have a list of articles - diba we’ve discussed the kinds of duties - you have a list also of goods which are subject to duties and taxes.

Usually those items that the government would not to be consumed in the Philippines for general welfare, economic development. Those are the things that are subjected to
additional duties.

LIQUIDATION OF DUTIES
You declare the goods, some are based on its weight while some are based on the specific value.

Liquidation, meaning
Now, the final computation and ascertainment by the collector of the duties on imported merchandise, based on official reports as to the quantity, character, and value
thereof, and the collector’s own finding as to the applicable rate of duty. It is akin to an assessment of internal revenue taxes under the NIRC where the tax liability of the
taxpayer is definitely determined. (Pilipinas Shell Petroleum Corp. vs. Commissioner of Customs, GR No. 176380, June 18, 2009)

Therefore, a liquidation is similar to an assessment in the income tax. Remember, an assessment is the final determination of what is your obligation to pay. A liquidation is
akin to an assessment but when it comes to imported goods. So bibigyan ka ng liquidation, and ang nakalagay dun, based on the assessment ng collector of customs, kung
magkano talaga ang babayaran based on the applicable rate.

FINALITY OF LIQUIDATION

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Sec. 1603, TCCP as amended by RA No. 9135, reads:

Under the old TCCP, the period is one (1) year. [This was what Atty. discussed, the old TCCP. However, I posted the amendment in RA. 9135 as well as what was
provided in the CMTA)

"Sec. 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 three (3) years 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." (as amended by RA No. 9135)

CMTA PROVISION
Sec. 430. Period of Limitation. – In the absence of fraud and when the goods have been finally assessed and released, the assessment shall be conclusive upon all
parties three (3) years from the date of final payment of duties and taxes, or upon completion of the post clearance audit.

So once bigyan ka ng importation and then, you pay or you are duty free or wala kang babayaran, paglabas niya sa customs, that’s the one year (or three years) na hindi ka
na pwedeng balikan. After that, hindi ka na pwedeng balikan. Unless, ang ginagawa ng customs, is tentative lagi ang liquidation.

Kasi ang nangyayari, when you import, example if your goods are perishable (i.e yogurt) and the customs refuse to sign, what happens is that you file a bond, since there is
no final determination of taxes, so that the goods will be released. So when the customs release that, the liquidation is tentative. It would be the basis for the value of your
bond.

In that case, pwede ka paring balikan after the lapse of one (1) year. So that is what they usually do especially if their goods are perishable.

Recap
Q: How long is the period of limitation under the tax code?
A: Under the Tax Code, the period is 3 years. But under the old Customs Code (TCCP), it is one year. But because of the CMTA (Customs Modernization and Tariff Act [RA
No. 10863]), it is also three (3) years. Take note of that.

Q: How do you know if the period is 1 or 3 years?

A: Look at the dates.
This is just like the TRAIN Law. Note that the CMTA became effective on June 16, 2016, if the importation began before that date, you apply the 1 year period. If after that,
apply the three (3) years. So it is already consistent with the TRAIN Law.

-----------------OFF TOPIC DISCUSSION----------------

21
Discussion on Law updates

Tax Amnesty

There’s three amnesty:

(1) Estate tax amnesty - so if you know persons whose estate has not yet been settled and died prior to 2017, they can settle their estate and pay only 6% across the
board without surcharges and penalties.
(2) Tax on deficiency
(3) Tax on delinquency - so if there is a current tax case and the tax payments are already delinquent, you can avail of the tax amnesty which would require you to pay
40% (Atty. was not sure with the percentage).

So those were the updates.

As for the Tax 2 package, they are already initiating the proposal but in my opinion, I don’t think that would become a law because of what happened to TRAIN Law where
there are a lot of issues.

Bu there are also a lot of laws that were enacted the past February 2019, which are the following:
(1) Revised Corporation Code
a) The 25-25-25 was removed. But is still applied when there is an increase of ACS.

What are the only two instances where the 25-25-25 would be applied based on the previous Corporation Code?
● Initial Registration and Increase in ACS.
Kasi akala ninyo, if you buy shares, kailangan yung 25% ang babayaran. But that does not apply since it only applies on the initial registration and increase in ACS.

But because of the revision, tinanggal na siya for initial registration, but surprisingly, it was maintained in the increase in ACS. In my opinion, nakalimutan lang
siyang tanggalin because it’s an anomaly. Okay lang pala na magstart tayo in a million because I am not required to file a 25-25-25. But if I am going to increase it
later on, I have to pay the 25-25-25.

b) One Person Corporation (OPC)

Take note, on the OPC, it may seem very attractive but you have to consider that the burden of proof in proving that there is a separate juridical personality
or limitation of liability is now upon the single stockholder.

So you have you have your corporation whose default is that it has a separate entity and you can invoke the limited liability. But in the OPC, you have the
burden of proof that you used the corporation not for the purposes of fraudulent activities.

22
 So the burden shifts. Kasi before, there is the presumption of separate personality, so there is limited liability, then, hindi hahabulin ang separate assets mo.
But if you are the OPC, the burden shifts. The presumption is ginamit mo siya to avoid liability. Now, you have to prove that it is adequately capitalized that
you can invoke separate personality. In effect, it really renders to the court the essence of having a corporation, it may seem attractive but in my opinion, it’s
really not.

Another thing is, if the basis of establishing a OPC is for purposes of enjoying the benefits of a corporation that has a separate personality, that has a limited
liability, why not just put a juridical personality for sole proprietorship? Bakit kailangan pa i-amend ng Corporation Code to include the OPC kung ang essence
naman is to make a separate personality? Bakit hindi nalang bigyan ng separate juridical personality ang mga sole proprietorship? Di ba ang mga sole
proprietorship needs only to be registered with DTI. So bakit di nalang bigyan ng separate personality and limited liability ang mga sole proprietorships?
Bakit di nalang tinulad sa partnerships and corporations with separate personalities and limited liabilities? What the inclusion of the OPC in the Corporation
Law rather than giving the benefits of a corporation to a sole proprietorship? So those are my two cents.

-----------------END OF OFF TOPIC DISCUSSION----------------

Prohibited Importation

There are two categories of prohibited importations:

1) Prohibited importation and exportation under Sec. 118 of CMTA; and
2) Restricted importation and exportation. (Sec. 119, CMTA)
Note:
Sec. 118 is prohibited.
Sec. 119 is restricted.
This means it is not necessarily “bawal” but you need to have a special permit to do this.

Sec. 118. Prohibited Importation and Exportation. – The importation and exportation of the following goods are prohibited:

(a) Written or printed goods in any form containing any matter advocating or inciting treason, rebellion, insurrection, sedition against the government of the Philippines,
or forcible resistance to any law of the Philippines, or written or printed goods containing any threat to take the life of, or inflict bodily harm up on any person in the
Philippines;

(b) Goods, instruments, drugs and substances designed, intended or adapted for producing unlawful abortion, or any printed matter which advertises, describes or gives
direct or indirect information where, how or by whom unlawful abortion is committed;

(c) Written or printed goods, negatives or cinematographic films, photographs, engravings, lithographs, objects, paintings, drawings or other representation of an obscene
or immoral character;

(d) Any goods manufactured in whole or in part of gold, silver or other precious metals or alloys and the stamp, brand or mark does not indicate the actual fineness of

23
 quality of the metals or alloys;

(e) Any adulterated or misbranded food or goods for human consumption or any adulterated or misbranded drug in violation of relevant laws and regulations;

(f) Infringing goods as defined under the Intellectual Property Code and related laws; and

(g) All otter goods or parts thereof which importation and exportation are explicitly prohibited by law or rules and regulations issued by the competent authority.

Sec. 119. Restricted Importation and Exportation. – Except when authorized by law or regulation, the importation and exportation of the following restricted goods
are prohibited:

(a) Dynamite, gunpowder, ammunitions and other explosives, firearms and weapons of war, or parts thereof;

(b) Roulette wheels, gambling outfits, loaded dice, marked cards, machines, apparatus or mechanical devices used in gambling or the distribution of money, cigars,
cigarettes or other goods when such distribution is dependent on chance, including jackpot and pinball machines or similar contrivances, or parts thereof; (c) Lottery and
sweepstakes tickets, except advertisements thereof and lists of drawings therein;

(d) Marijuana, opium, poppies, coca leaves, heroin or other narcotics or synthetic drugs which are or may hereafter be declared habit forming by the President of the
Philippines, or any compound, manufactured salt, derivative, or preparation thereof, except when imported by the government of the Philippines or any person duly
authorized by the Dangerous Drugs Board, for medicinal purposes;

(e) Opium pipes or parts thereof, of whatever material; and

(f) Any other goods whose importation and exportation are restricted.

The restriction to import or export the above stated goods shall include the restriction on their transit.

Q: Why was marijuana and opium placed only under restricted and not prohibited?

A: Because it may be used for the purpose of its medical value.

Marijuana, opium, poppies, coca leaves, heroin or other narcotics or synthetic drugs which are or may hereafter be declared habit forming by the President of the Philippines,
or any compound, manufactured salt, derivative, or preparation thereof, except when imported by the government of the Philippines or any person duly authorized by the
Dangerous Drugs Board, for medicinal purposes.

It is only restricted, but not prohibited, because it may be used for its medical value. In essence naman talaga, anti-cancer pills have marijuana in them.

DE MINIMIS IMPORTATION
24
These are called small value importation. Since they are small value, they are considered as tax exempt. But not all.

ASSESSMENT AND RELEASE

SEC. 423. Determination of the De Minimis Value. - No duties and taxes shall be collected on goods with an FOB or FCA value of Ten Thousand 5 pesos
(P10,000.00) or below. The Secretary of Finance, upon recommendation of the Commissioner shall review and adjust the de minimis value as provided herein, every
three (3) years after the effectivity of this Act. The value hereinstated shall be adjusted to its present value using the Consumer Price Index (CPI), as published by the
Philippine Statistics Authority (PSA)

If your goods are 10,000 and below, there should be no duties and taxes.

It is specific in its meaning not to include the insurance and freight of the 10,000 de minimi. So just the value itself of the goods.

Thus the non inclusion of freight in insurance results to lower customs revenue yield while the inclusion of insurance and yield may results to higher tax collection .

Every 3 years, this shall be adjusted based on the recommendation of the Secretary of Finance.

CONDITIONALLY TAX AND/OR DUTY-EXEMPT IMPORTATION

Q: What are conditionally free importations?

A:

Sec. 800. Conditionally Tax and/or Duty-Exempt Importation. – The following goods shall be exempt from the payment of import duties upon compliance with
the formalities prescribed in the regulations…...

It is conditional. You have to comply for it to be free.

Q: IF you will not comply, what is the effect?

A: You have to pay the taxes.

Q: What if you did not pay the taxes?

A: Then the Bureau of Customs has the power to forfeit and cease the goods

RETURNING RESIDENTS

- Balikbayan, marami kang dalan

25
RETURNING RESIDENTS

Q: What’s the rule for balikbayan boxes?

- shall refer to nationals who have stayed in a foreign country for a period of at least six (6) months (Sec. 800[f], CMTA).

Q: Is an alien a returning resident?

A: ( no clear answer); wala puy clear answer sa internet.

FROM THE BOC Website (FAQs)

Chapter II. Privileges

Who are entitled to duty- and tax-free privileges?

Section 105 of the Tariff and Customs Code of the Philippines as amended by Executive Order No. 206 provides duty- and tax-free privileges to the following individuals,
the extent of which depends on their particular status:

Returning Resident. A Returning Resident is a Filipino national who has gone abroad and is now returning. Only those Returning Residents who have an uninterrupted
stay abroad for at least six (6) months prior to their return to the Philippines are entitled to duty- and tax-free privileges.

Overseas Filipino Worker (OFW) is a Filipino national who worked in a foreign country under an employment contract. Only OFWs who have an uninterrupted stay
abroad for more than six (6) months are entitled to duty- and tax-free privileges.

Former Filipino. A Filipino national who has acquired foreign citizenship abroad and is now returning. Only former Filipinos who are coming to settle permanently in the
Philippines and have stayed abroad for at least six months are entitled to the duty and tax exemption privileges.

Q: What could the returning citizens bring back to the country?

A: (Sec. 800[f], CMTA)

(f) Personal and household effects belonging to returning residents including household appliances, jewelry, precious stones, and other goods of luxury which were formally
declared and listed before departure and identified under oath before the District Collector when exported from the Philippines by such returning residents upon their
departure therefrom or during their stay abroad; personal and household effects including wearing apparel, goods of personal adornment, toilet goods, instruments related
to one's profession and analogous personal or household effects, excluding luxury items, vehicles, watercrafts, aircrafts and animals purchased in foreign countries by
residents of the Philippines which were necessary, appropriate, and normally used for their comfort and convenience during their stay abroad, accompanying them on their
return, or arriving within a reasonable time which, barring unforeseen and fortuitous events, in no case shall exceed sixty (60) days after the owner's return.

These are conditionally free, not automatic. You have to declare (clearance in the Customs).

If it can be argued that the articles you brought in are in a quantity where it can be used for personal purposes and not for commercial purposes, then it could be free.
26
Others are sometimes pretending that it’ for personal use pero ibebenta pala, then that’s the time that it will be subject to tax.

It is conditionally free because you have to declare because the Customs might check on your box.

Q: Is the Balikbayan box exempt from duties and taxes?

A:

Under the Tax Code:

Sec. 109. Exempt Transactions.—

(1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax:

(C) Importation of personal and household effects belonging to the residents of the Philippines returning from abroad and nonresident citizens coming to resettle in the
Philippines: Provided, That such goods are exempt from customs duties under the Tariff and Customs Code of the Philippines

Therefore, balikbayan boxes are considered as exempt for purposes of customs, it is automatically exempted for purposes of your NIRC.

In other words, if the Customs would say that you are not exempt, then there would be VAT because importations are subject to VAT.

Exports are zero-rated. When it comes to balikbayan boxes, pag sinabi ng Customs Code that it is exempt, automatic it is exempt from importation VAT.

SEC 800, CMTA

(l) For purposes of this Act, OFWs refer to holders of valid passports duly issued by the Department of Foreign Affairs (DFA) and certified by the Department of Labor and
Employment (DOLE) or the Philippine Overseas Employment Administration (POEA) for overseas employment purposes. They cover all Filipinos, working in a foreign
country under employment contracts, regardless of their professions, skills or employment status in a foreign country; and (2) Calendar Year refers to the period from
January 1 to December 31

CONTENTS OF BALIKBAYAN BOXES

SEC 800, CMTA

(g) Residents of the Philippines, OFWs or other Filipinos while residing abroad or upon their return to the Philippines shall be allowed to bring in or send to their families
or relatives in the Philippines balikbayan boxes which shall be exempt from applicable duties and taxes imposed under the NIRC of 1997, as amended: Provided, That
balikbayan boxes shall contain personal and household effects only and shall neither be in commercial quantities nor intended for barter, sale or for hire
and that the FCA value of which shall not exceed one hundred fifty thousand pesos (P150,000.00): Provided, further, That every three (3) years after the
effectivity of this Act, the Secretary of Finance shall adjust the amount herein stated to its present value using the CPI as published by the PSA: Provided, finally, That
27
 residents of the Philippines, OFWs or other Filipinos can only avail of this privilege up to three (3) times in a calendar year. Any amount in excess of the allowable non-
dutiable value shall be subject to the applicable duties and taxes;

Any amount in excess of the allowable non-dutiable value shall be subject to the applicable duties and taxes. That is under the Free Carrier Act. The value of the contents
of the Balikbayan Box at the time of the loading of the carrier whether vessel or airplane. Therefore if you are asked:

Q: Is the balikbayan box exempt from duties and taxes?

A: First consider if the person bringing the balikbayan box can be considered as a returning resident or OFW. If yes, then it should not exceed 100,000 and should not be in
commercial quantities.

So those are the conditions for the balikbayan boxes to be free from duties and taxes.

Q: How about animal and plants? Can you bring them in?

A: Customs are very critical with live meats. You cannot them in without approval of the Foreign Affairs Department because of swine flu, etc. As to plants, dried plants are
allowed however, live plants have bacteria hence they are not allowed.

So let's talk about the remedies of the taxpayer. (BREAK)

Assessment and Payment Duties

Sec. 102. Definition of Terms. - As used in this Act:

(f) Assessment refers to the process of determining the amount of duties and taxes and other charges due on imported and exported goods;

Sec. 429. Final Assessment. – Assessment shall be deemed final fifteen (15) days after receipt of the notice of assessment by the importer or consignee.

Q: As compared with your Income Tax, which is how many days is required for it to be final?

A: 30 days for Income Tax.

Q: What if you don’t have all the information yet to file a goods declaration? Can you file a provisional goods declaration?

A: Yes.

Sec. 403. Provisional Goods Declaration. – Where the declarant does not have all the information or supporting documents required to complete the
goods declaration, the lodging of a provisional goods declaration may be allowed: Provided, That it substantially contains the necessary information required
by the Bureau and the declarant undertakes to complete the information or submit the supporting documents within forty-five (45) days from the filing of
28
 the provisional goods declaration, which period may be extended by the Bureau for another forty-five (45) days for valid reasons.

If the Bureau accepts a provisional goods declaration, the duty treatment of the goods shall not be different from that of goods with complete declaration. Goods under
a provisional goods declaration may be released upon posting of any required security equivalent to the amount ascertained to be the applicable duties and taxes.

NOTE: What is important here is that the Customs can already assess the amount that you need to pay for the goods that you want to import.

Let's define Misdeclaration and Misclassification in your goods declaration.

Q: Is it possible that you misdeclare or misclassify or undervalue your goods declaration?

A: Yes, because sometimes your customs duty is based on the value that you declare.

Q: More often than not, importers undervalue their goods to have lower or minimal taxes. Is it punishable under the CMTA?

A: Yes.

Sec. 1400. Misdeclaration, Misclassification, Undervaluation, in Goods Declaration. – Misdeclaration as to quantity, quality, description, weight, or measurement
of the goods, or misclassification through insufficient or wrong description of the goods or use of wrong tariff heading resulting to a discrepancy in duty and tax to be paid
between what is legally determined upon assessment and what is declared, shall be subject to a surcharge equivalent to two hundred fifty percent (250%) of the duty and
tax due. No surcharge shall be imposed when the discrepancy in duty is less than ten percent (10%), or when the declared tariff heading is rejected in a formal customs
dispute settlement process involving difficult or highly technical question of tariff classification, or when the tariff classification declaration relied on an official government
ruling.

There is undervaluation when: (a) the declared value fails to disclose in full the price actually paid or payable or any dutiable adjustment to the price actually paid or
payable; or (b) when an incorrect valuation method is used or the valuation rules are not properly observed, resulting in a discrepancy in duty and tax to be paid between
what is legally determined as the correct value against the declared value. When the undervaluation is established without the need to go through the formal dispute
settlement process provided for in this Act, a surcharge shall be imposed equivalent to two hundred fifty percent (250%) of the duty and tax due. No surcharge shall be
imposed when the discrepancy in duly is less than ten percent (10%); or the declared value is rejected as a result of an official ruling or decision under the customs dispute
settlement process involving difficult or highly technical question relating to the application of customs valuation rules.

A discrepancy in duty and tax to be paid between what is legally determined and what is declared amounting to more than thirty percent (30%) shall constitute a prima
facie evidence of fraud.

When the misdeclaration, misclassification or undervaluation is intentional or fraudulent, such as when a false or altered document is submitted or when false statements or
information are knowingly made, a surcharge shall be imposed equivalent to five hundred percent (500%) of the duty and tax due and that the goods shall be subject to
seizure regardless of the amount of the discrepancy without prejudice to the application of fines or penalties provided under Section 1401 of this Act against the importer
and other person or persons who willfully participated in the fraudulent act.

MISDECLARATION
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 Sec. 1400. Misdeclaration, Misclassification, Undervaluation, in Goods Declaration.

Misdeclaration is insufficiency of information as to quantity, quality, description, weight, or measurement of the goods.

Atty: In other words, the misdeclaration is premised on the fact that you would want to evade taxes. So if you misdeclared something but later on corrected it and
the taxes you paid are the same, then that is not the misdeclaration contemplated by the CMTA. The Misdeclaration under the CMTA presupposes that you would
want to evade the taxes. If it would provide for differences in the amount of taxes that you are required to legally pay then that is MISDECLARATION

MISCLASSIFICATION

Sec. 1400. Misdeclaration, Misclassification, Undervaluation, in Goods Declaration

There is Misclassification when there is insufficient or wrong description of the goods or use of wrong tariff heading resulting to a discrepancy in duty and
tax to be paid between what is legally determined upon assessment and what is declared. Essentially it's the same, it would result to different taxes.

Q: But what is the difference between Misdeclaration and Misclassification?

A: The nature of the offense. Misdeclaration is insufficient or wrong description or quantity, quality, weight, or measurement of the goods. Misclassification is
insufficient or wrong description of the goods or use of wrong tariff heading.

UNDERVALUATION

Sec. 1400. Misdeclaration, Misclassification, Undervaluation, in Goods Declaration.

There is undervaluation when:

(a) the declared value fails to disclose in full the price actually paid or payable or any dutiable adjustment to the price actually paid or payable; or

(b) when an incorrect valuation method is used or the valuation rules are not properly observed, resulting in a discrepancy in duty and tax to be paid between what is
legally determined as the correct value against the declared value.

What are the distinctions between the three- Misdeclaration, misclassification and undervaluation?

The Penal Provision of CMTA ay sobrang taas.

Q: What is the surcharge for your income tax?

A; 25%/ 30 %

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But when you try to look up CMTA, the penal provision, the scale of tax of CMTA, it is very high. The purpose of that is to avoid undervaluation and misdeclaration.

A. Under the CMTA, misdeclaration shall be subject to a surcharge equivalent to 250% of duty and tax due?
Again, misdeclaration is subject to 250% of duty and tax due.

B. Misclassification naman, also 250% of the duty and and tax due.

C. Pag undervaluation, if it is established, without a need to go for a formal dispute settlement process provided in this Act, the surcharge will be imposed equivalent to
250% of the duty and tax due.

Instances when there is no misdeclaration and misclassification:

→ When the discrepancy in duty is only less than 10%.

Please take note: if 10% lang ang difference, pwedeng hindi ka bigyan ng surcharge. But if it is more than that, you are liable to pay 250% of your duty and tax due.

And this 10% threshold is only applicable for misdeclaration and misclassification. It is NOT applicable to undervaluation.

Please take note: If your undervalue is less than 10%, you CANNOT invoke this provision, Section 1400 because this provision only applies when there is misdeclaration or
misclassification.

Criminal aspects of Misdeclaration and Misclassification, Undervaluation:

A discrepancy in duties and taxes to be paid between what is determined and what is declared amounting to more than 30% constitute prima facie evidence of fraud
(Section 1400).

Q: Does it sound familiar?

Remember the income tax when there is undervaluation of expenses. Undervaluation of income for more than 30% or overvaluation of expenses for more than 30%, that is
presumed fraudulent. That is similar to CMTA provision.

SMUGGLING

This is a very important BAR question.

Q: WHAT IS SMUGGLING or IS IT SMUGGLING?

Smuggling under the Act (RA 10683):

Section 101, (nn) Smuggling refers to the fraudulent act of importing any goods into the Philippines, or the act of assisting in receiving, concealing, buying, selling,
31
 disposing or transporting such goods, with full knowledge that the same has been fraudulently imported, or the fraudulent exportation of goods. Goods referred to under
this definition shall be known as smuggled goods

Yung mga prohibited articles, tapos yung consigning, pinapangalan lang, if you receive that consigning, you will also be liable for smuggling. Yung mga ukay2, smuggled
goods.

Q: Who are guilty of smuggling?

Section 1401. Unlawful Importation or Exportation.— Any person who shall fraudulently import or export or bring into or outside of the Philippines any goods, or assist
in so doing, contrary to law, or shall receive, conceal, buy, sell, or in any manner facilitate the transportation, concealment, or sale of such goods after importation, or
shall commit technical smuggling… is guilty of unlawful importation or exportation.

Q: What is technical smuggling?

There are two types of smuggling: Outright and Technical.

1. Outright smuggling

(ff) Outright Smuggling refers to an act of importing goods into the country without complete customs prescribed importation documents, or without being cleared by
customs or other regulatory government agencies, for the purpose of evading payment of prescribed taxes, duties and other government charges;

In other words, outright smuggling is based on the premise of evading taxes, duties and fees.

2. Technical smuggling

(pp) Technical Smuggling refers to the act of importing goods into the country by means of fraudulent, falsified or erroneous declaration of the goods to its nature,
land, quality, quantity or weight, for the purpose of reducing or avoiding payment of prescribed taxes, duties and other charges;

In other words, if you misdeclare or undervalue your goods, you can be liable for technical smuggling.

Also, technical smuggling- the goods and articles brought into the country for fraudulent, falsified, or misdeclaration.

Usually, that’s being asked in the Bar Exams.

GOVERNMENT REMEDIES

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The Customs can also search, seizure, forfeit or even arrest smugglers or any violations of CMTA.

Automatic Review. This is very important. This is peculiar to the Customs- the automatic review process.

This applies when the decision of the Collector of Customs is adverse to the Government. This is similar to your automatic review yung kapag mag government subordinate
official, kapag decided against the Government, there’s automatic review of superior officials). That is because of the premise that it is for the protection of the government.
So you can’t say that the subordinate official should have appealed that. That is automatic review. That is peculiar in CMTA as against the Tax Code.

PROTEST – it is a formal written statement objects into the imposition and collection of additional customs, duties and taxes to preserve the importers rights to a refund in
case it turns out that additional taxes are not legally due.

Q: When can you file it?

A: When a protest is filed in proper form, the Commissioner shall render a decision within thirty (30) days from receipt of the protest. In case the protest is sustained, in
whole or in part, the appropriate order shall be made, and the entry reassessed, if necessary. (Section 1110, RA 10863)

After 30 days, you file an appeal to the CTA.

Example:
1. You file in the Collector of Customs, where the wharf belongs.
2. If the Collector of Customs has a finding, you protest their decision.
3. Then they will decide and you have that 15 days period.
4. If denied, you can appeal to the Commissioner.
5. But if there is inaction (by the Collector or Commissioner), you can elevate your case to the CTA, because that would be a deemed denial.

ABANDONMENT - in customs is the renunciation by an importer of all his interests and property rights in the importer article.

Q; When is there abandonment?

A: (Please memorize this provision) ^_^

Section 1129. Abandonment, Kinds and Effects of.— Imported goods are deemed abandoned under any of the following circumstances;

(a) When the owner, importer, or consignee of the imported goods expressly signifies in writing to the District Collector the intention to abandon the same; or

(b) When the owner, importer, consignee, or interested party after due notice, falls to file the goods declaration within the prescribed period in Section 407 of this Act;
Provided, That the term goods declaration shall include provisional or incomplete goods declaration deemed valid by the Bureau as provided in Section 403 of this Act. For
this purpose, it is the duty of the District Collector to post a list of all packages discharged and their consignees, whether electronically or physically in the District Office,
or send a notice to the consignee within five (5) days from the date of discharge; or

(c) Having filed such goods declaration, the owner, importer, consignee or interested party after due notice, fails to pay the assessed duties, taxes and other charges
33
 thereon, or, if the regulated goods failed to comply with Section 117 of this Act, within fifteen (15) days from the date of final assessment: Provided, That if such
regulated goods are subject of an alert order and the assessed duties, taxes and other charges thereof are not paid within fifteen (15) days from notification by the
Bureau of the resolution of the alert order, the same shall also be deemed abandoned; or

(d) Having paid the assessed duties, taxes and other charges, the owner, importer or consignee or interested party after due notice, fails to claim the goods within thirty
(30) days from payment. For this purpose, the arrastre or warehouse operator shall report the unclaimed goods to the District Collector for disposition pursuant to the
provisions of this Act; or

(e) When the owner or importer fails to claim goods in customs bonded warehouses within the prescribed period.

NOTES:
● Failure to file good declaration deemed the goods abandoned.
● Failure to pay taxes and duties leads to abandonment.
● There is a 30 day period to claim after paying the taxes. Otherwise, it will really be considered abandoned.

Q: What happens if the goods are abandoned?

A: The goods will be ipso facto deemed the property of the government.

DUE PROCESS

The due notice requirement under this section may be provided by the Bureau through electronic notice or personal service; Provided, That for non-regular importers,
notification shall be by registered mail or personal service. For tins purpose, the accreditation of importers, exporters, and other third parties shall indude provision for
mandatory receipt of electronic notices. (SECTION 1129, RA 10863 )

Q: Is the sudden forfeiture valid, if there is no notice?

A: The forfeiture is invalid and you can question that on the grounds of due process.

ABATEMENT and REFUND

Refund is the same with the refund in income tax.

Section 913. Claims for Refund.— All claims and application for refund of duties and taxes shall be made in writing and filed with the Bureau within twelve (12) months
from the date of payment of duties and taxes.

If as a result of the refund of duties, a corresponding refund of internal revenue taxes on the same importation becomes due, the Bureau shall cause the refund of
internal revenue taxes in favor of the importer after issuance of a certification from the Commissioner of Internal Revenue, when applicable.
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 The importer may file an appeal of a denial of a claim for refund or abatement, whether it is a full or partial denial, with the Commissioner within thirty (30) days from the
date of the receipt of the denial. The Commissioner shall render a decision within thirty (30) days from the receipt of all the necessary documents supporting the
application. Within thirty (30) days from receipt of the decision of the Commissioner, the case may also be appealed to the CTA.

Notwithstanding the provisions in the preceding paragraphs, the filing of claims for refund of national internal revenue taxes shall be governed by the provisions provided
under the NTRC of 1997, as amended.

You have a one year reckoning from the date of payment.

Take note: Within 15 days, your assessment will be considered final. Then you pay and after, you can file a refund.

Q: You imported and paid VAT. Where will you pay VAT and subsequently file refund?

A: You file refund for VAT in the BIR and BoC, the duties and customs only. BIR has this internal arrangement with BoC, that they can ask for your Articles of Importation
and plot in in the system. This is to verify that what you declared with them is consistent with your importation.

Q; Where do you apply for refund?

A: Apply for refund in the BIR but you need the Official Receipt (OR) from the BoC.

Before it was an IDRD, now it is goods declaration. IDRD, it is a form that it has to be stamped and sealed by BoC.

The right to collect of BoC refers to duties, fees and other charges. BoC has no right to collect VAT because VAT is under the jurisdiction of the BIR.

Let’s go to JUDICIAL REMEDIES.

We have discussed the different remedies with the different laws.

- NIRC/Tax Code like refund/protest
- Local Government Remedies for the taxpayer; the question of constitutionality of an ordinance; refund; assessment of the city treasurer or city assessor, etc.

Now, we have Tariff to question the imposition of the different kinds of duties.

We are now going to discuss the Judicial level, particularly the CTA

Please have a copy of:

- RA No. 1225 (An act creating the CTA)
- RA No. 9503 (An act enlarging the organizational structure of the CTA, amending for the purpose certain sections of the law creating the court of tax appeals, and for
other purposes)
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 - These are all consolidated under the Revised Rules of the CTA under A.M. No. 05-11-07-CTA [September 16, 2008].

Just read the A.M. but this has been revised. 2008 was the proposed revisions and 2009 was the approved revisions but the revisions are more on the procedural grounds.

Let’s discuss the CTA’s organization and its functions.

Under A.M. No. 05-11-07-CTA:

RULE 2. – THE COURT, ITS ORGANIZATION AND FUNCTIONS

Section 1. Composition of the Court. – The Court is composed of a presiding justice and five associate justices appointed by the President of the Philippines. In
appropriate cases, the Court shall sit en banc, or in two Divisions of three justices each, including the presiding justice, who shall be the Chairman of its First Division

SEC. 2. Exercise of powers and functions. – The Court shall exercise its adjudicative powers, functions and duties en banc or in Divisions.

The Court shall sit en banc in the exercise of its administrative, ceremonial and non-adjudicative functions

In other words, there are 6 justices in CTA. They could either sit en banc OR in two divisions.

They always sit in division. They sit en banc only when in the exercise of its:
1. Administrative,
2. ceremonial; and
3. non-adjudicative functions.

That’s the only time when they take cognizance in its original jurisdiction because initially, it is in division.

Q: What about the Quorum and Voting requirements?

● Sec. 3 – en banc
● Sec. 4 – in division

SEC. 3. Court en banc; quorum and voting. – The presiding justice or, in his absence, the most senior justice in attendance shall preside over the sessions of the
Court en banc. The attendance of four justices of the Court shall constitute a quorum for its sessions en banc. The presence at the deliberation and the affirmative vote of
four justices of the Court en banc shall be necessary for the rendition of a decision or resolution on any case or matter submitted for its consideration. Where the
necessary majority vote cannot be had, the petition shall be dismissed; in appealed cases, the judgment or order appealed from shall stand affirmed; and on all incidental
matters, the petition or motion shall be denied.

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 No decision of a Division of the Court may be reversed or modified except by the affirmative vote of four justices of the Court en banc acting on the case.

Interlocutory orders or resolutions shall be acted upon by majority vote of the justices present constituting a quorum.

Please take note: In en banc, for there to have a quorum, there has to be presence of at least 4 justices. The affirmative vote of 4 justices is required. When we talk about
en banc, we are talking about the 6 justices.
- In division – 3 justices
- En banc – 6 justices

This is similar to your Civil Procedure under the Rules of Court.

Let’s talk about the CTA sitting in division.

SEC. 4. The Court in Divisions; quorum and voting. – The chairman of the Division or, in his absence, its senior member shall preside over the sessions of the Court in
Divisions. The attendance of at least two justices of the Court shall be necessary to constitute a quorum for its sessions in Divisions. The presence at the deliberation and
the affirmative vote of at least two justices shall be required for the pronouncement of a judgment or final resolution of the Court in Divisions. (n)

Again, you have first division and second division. The attendance of at least two justices of the Court shall be necessary to constitute a quorum, because remember, there
are 3 justices in a division so the majority is 2. The affirmative vote of 2 justices is required, otherwise, status quo.

SUMMARY

No. of Justices Quorum

CTA en banc 6 4

CTA in division 3 2
(2 divisions)

SEC. 5. Hearings. – not discussed

SEC. 6. Disqualification of justices. – not discussed; amended in 2009 but this is more on administrative topic.

SEC. 7. Motion to inhibit a justice – not discussed; no amendments

Note: RA No. 9282 is actually the charter that created the CTA. This is the enabling law which created CTA and granted jurisdiction on certain matters. Get a copy of that.

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(An act expanding the jurisdiction of the CTA, elevating its rank to the level of a collegiate court with special jurisdiction and enlarging its membership, amending for the
purpose certain sections or RA No. 1125, as amended, otherwise known as the law creating the CTA, and for other purposes.)

(This was the part when Atty. asked Ms. Baucan/Cagampang to read the jurisdiction of CTA)
RULE 4
JURISDICTION OF THE COURT

SECTION 1. Jurisdiction of the Court. – The Court shall exercise exclusive original jurisdiction over or appellate jurisdiction to review by appeal the cases specified in RA No.
1125, Section 7, as amended by RA No. 9282, Section 7. (n)

SEC. 2. Cases within the jurisdiction of the Court en banc. – The Court en banc shall exercise EXCLUSIVE APPELLATE JURISDICTION to review by appeal the
following:

(a) Decisions or resolutions on motions for reconsideration or new trial of the Court in Divisions in the exercise of its exclusive appellate jurisdiction over:

(1) Cases arising from administrative agencies – Bureau of Internal Revenue, Bureau of Customs, Department of Finance, Department of Trade and Industry, Department
of Agriculture;

(2) Local tax cases decided by the Regional Trial Courts in the exercise of their original jurisdiction; and

(3) Tax collection cases decided by the Regional Trial Courts in the exercise of their original jurisdiction involving final and executory assessments for taxes, fees, charges
and penalties, where the principal amount of taxes and penalties claimed is less than one million pesos;

(b) Decisions, resolutions or orders of the Regional Trial Courts in local tax cases decided or resolved by them in the exercise of their appellate jurisdiction;

(c) Decisions, resolutions or orders of the Regional Trial Courts in tax collection cases decided or resolved by them in the exercise of their appellate jurisdiction;

(d) Decisions, resolutions or orders on motions for reconsideration or new trial of the Court in Division in the exercise of its exclusive original jurisdiction over tax collection
cases;

(e) Decisions of the Central Board of Assessment Appeals (CBAA) in the exercise of its appellate jurisdiction over cases involving the assessment and taxation of real
property originally decided by the provincial or city board of assessment appeals;

(f) Decisions, resolutions or orders on motions for reconsideration or new trial of the Court in Division in the exercise of its exclusive original jurisdiction over cases
involving criminal offenses arising from violations of the National Internal Revenue Code or the Tariff and Customs Code and other laws administered by the Bureau of
Internal Revenue or Bureau of Customs;

(g) Decisions, resolutions or orders on motions for reconsideration or new trial of the Court in Division in the exercise of its exclusive appellate jurisdiction over criminal
offenses mentioned in the preceding subparagraph; and

38
 (h) Decisions, resolutions or orders of the Regional trial Courts in the exercise of their appellate jurisdiction over criminal offenses mentioned in subparagraph (f).

So the CTA en banc has appellate jurisdiction over the cases of which the first division has appellate jurisdiction.

Kasi ito, i-aappeal mo siya sa CTA - petition for review within thirty (30) days. Now, you can actually appeal that decision of the first division to the CTA en banc, because it
has an appellate jurisdiction over the appellate jurisdiction of its division.

So hindi ito original. Kapag original yan, sa iba na yan mafa-fall. But please take note about this particular provision. So let’s discuss this when we go to the jurisdiction of the
division.

Jurisdiction of the Court in Division

So the court in division shall exercise exclusive original or appellate jurisdiction by appeal of the following:

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

(a) Exclusive original or appellate jurisdiction to review by appeal the following:

(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in
relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue;

(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in
relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National
Internal Revenue Code or other applicable law provides a specific period for action: Provided, that in case of disputed assessments, the inaction of the Commissioner of
Internal Revenue within the one hundred eighty day-period under Section 228 of the National Internal revenue Code shall be deemed a denial for purposes of allowing
the taxpayer to appeal his case to the Court and does not necessarily constitute a formal decision of the Commissioner of Internal Revenue on the tax case; Provided,
further, that should the taxpayer opt to await the final decision of the Commissioner of Internal Revenue on the disputed assessments beyond the one hundred eighty
day-period abovementioned, the taxpayer may appeal such final decision to the Court under Section 3(a), Rule 8 of these Rules; and Provided, still further, that in the
case of claims for refund of taxes erroneously or illegally collected, the taxpayer must file a petition for review with the Court prior to the expiration of the two-year period
under Section 229 of the National Internal Revenue Code;

(3) Decisions, resolutions or orders of the Regional Trial Courts in local tax cases decided or resolved by them in the exercise of their original jurisdiction;

(4) 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 of other penalties in relation thereto, or other matters arising under the Customs Law or other laws administered by the Bureau of Customs;

(5) Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from decisions of the Commissioner of Customs adverse to the
Government under Section 2315 of the Tariff and Customs Code; and

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 (6) Decisions of the Secretary of Trade and Industry, in the case of nonagricultural product, commodity or article, and the Secretary of Agriculture, in the case of
agricultural product, commodity or article, involving dumping and countervailing duties under Section 301 and 302, respectively, of the Tariff and Customs Code, and
safeguard measures under Republic Act No. 8800, where either party may appeal the decision to impose or not to impose said duties;

(b) Exclusive jurisdiction over cases involving criminal offenses, to wit:

(1) Original jurisdiction over all criminal offenses arising from violations of the National internal Revenue Code or Tariff and Customs Code and other laws administered by
the Bureau of Internal Revenue of the Bureau of Customs, where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is one million pesos
or more; and

(2) Appellate jurisdiction over appeals from the judgments, resolutions or orders of the Regional Trial Courts in their original jurisdiction in criminal offenses arising from
violations of the National Internal Revenue Code or Tariff and Customs Code and other laws administered by the Bureau of Internal Revenue or Bureau of Customs, where
the principal amount of taxes and fees, exclusive of charges and penalties, claimed is less than one million pesos or where there is no specified amount claimed;

(c) Exclusive jurisdiction over tax collections cases, to wit:

(1) Original jurisdiction in tax collection cases involving final and executory assessments for taxes, fees, charges and penalties, where the principal amount of taxes and
fees, exclusive of charges and penalties, claimed is one million pesos or more; and

(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. (n)

Let’s go one by one.

CIR when it comes to assessments

(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation
thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue;

Q: How do you protest an assessment? Kailan ka magfa-file ng protest?

Let’s go back to the:

LOA -> PAN -> Reply -> FAN -> Protest [Rein/Recon]
● 60 days submission of documents + 180 days
● 180 days

If made-deny, appeal ka to the division. Now if the division denies it, you can file an appeal with the en banc, because again, it has appellate jurisdiction. Kuha?

40
Inaction
(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation
thereto, or other matters arising under the National Internal Revenue Code

Now, what if in-action? 180 days inaction - after that lapse, you can appeal. What’s your third remedy again? Wait for the decision, even after the lapse of the 180 days.

Refund
Still at par. (2)

Q: When can you file a refund?

A: Depends if it’s income tax or input VAT.

If input VAT - within two (2) years from the close of the taxable quarter from when the sale was made

You file from there, and then? Before, it was 120 days to decide + 30 days to appeal to the division.

But now? Under the TRAIN law, it’s 90 days + 30 days nalang. But take note - it is conditioned upon the establishment of the VAT refund system (which is ngayon,
wala pa).

So between the 120 and the 90 days - as to what you will apply, take a look if meron na ba nitong refund system. Kasi it is conditioned on its establishment.

If income tax -

Q: Under the NIRC, what was provided?

A: You have two years to file.

Q: When will you appeal to the CTA if there refunds not involving VAT? This is for refunds of illegally or erroneously collected income tax.

A: Within two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: So kailangan magfile ka na ng
judicial remedy.

Review
Period Reckoning
Point

Input VAT Two (2) years From the close

41
 Refund + 120 days + of the quarter
30 days where the sales
was made

General Tax Two (2) years From the date

Refund (Sec. of payment
229)

If it involves income tax, the two years is not administrative level. The two years is already judicial level.

If you file for a refund, it should be within 2 years. For example next month and the two years has lapsed, even if there is no resolution, you need to appeal or file a case in
the CTA. That’s the peculiarity with input vat and refund under Sec. 229, NIRC.

LOCAL TAXATION

Q: How do you protest?

A:
1) You have 60 days period to file a protest to the local treasure
2) The local treasurer has 60 days to decide
3) You have 30 days from receipt of decision to file an appeal to a court of competent jurisdiction which is either the RTC or MTC.

This is where the CTA jurisdiction comes in.

RA No. 1125, Section 7, as amended by RA No. 9282, Section 7. (n)

RULE 4
JURISDICTION OF THE COURT
xxx
(b) Decisions, resolutions or orders of the Regional Trial Courts in local tax cases decided or resolved by them in the exercise of their appellate jurisdiction;

(c) Decisions, resolutions or orders of the Regional Trial Courts in tax collection cases decided or resolved by them in the exercise of their appellate jurisdiction;
xxx

If the original jurisdiction is vested in the MTC, it must first be appealed to the RTC. Then, from RTC to the CTA.

CUSTOMS

Q: Where do you file protests?

42
A: Customs first. Then, the customs is given 30 days to decide. Then after which, you file with the CTA.

Q: What is the automatic review of the Secretary of Finance?

A: As what I have discussed before, may mga protests in the customs where you won against them, or in effect natalo ang government. There’s an automatic review in
those case. Automatic review means the case is elevated to the Secretary of Finance. Then, if pag-akyat ng kaso sa Secretary of Finance, natalo ka dun. You can appeal it to
the CTA.

Department of Trade and Industry (DTI) and Department of Agriculture (DA)

Remember the DTI and the DA conducts the study on whether the product is prohibited or anti-competitive with our own products. So we should impose countervailing
duties or dumping duties. So when the DTI recommends it, it will issue it. Then, if you are against the imposition of the additional duties, then you question it to the CTA.
Remember the different kinds of duties.

CRIMINAL OFFENSES
There are criminal cases that you can file in the RTC
● If collection is involves 1M or more, the government can file it to the CTA. If less than, then the court with competent jurisdiction

RA No. 9282 [Sec. 7 (b) (1)]

"Sec. 7. Jurisdiction. - The CTA shall exercise:
xxx
"b. Jurisdiction over cases involving criminal offenses as herein provided:

"1. Exclusive original jurisdiction over all criminal offenses arising from violations of the National Internal Revenue Code or Tariff and Customs Code and other laws
administered by the Bureau of Internal Revenue or the Bureau of Customs: Provided, however, That offenses or felonies mentioned in this paragraph where the principal
amount of taxes and fees, exclusive of charges and penalties, claimed is less than One million pesos (P1,000,000.00) or where there is no specified amount
claimed shall be tried by the regular Courts and the jurisdiction of the CTA shall be appellate. Any provision of law or the Rules of Court to the contrary
notwithstanding, the criminal action and the corresponding civil action for the recovery of civil liability for taxes and penalties shall at all times be simultaneously instituted
with, and jointly determined in the same proceeding by the CTA, the filing of the criminal action being deemed to necessarily carry with it the filing of the civil action, and
no right to reserve the filling of such civil action separately from the criminal action will be recognized.

Usually, it is the government that files this because they are the ones interested in the collection of taxes.

RA No. 9282 [Sec. 7 (b) (2.c)]

"Sec. 7. Jurisdiction. - The CTA shall exercise:
xxx
"c. Jurisdiction over tax collection cases as herein provided:

"1. Exclusive original jurisdiction in tax collection cases involving final and executory assessments for taxes, fees, charges and penalties: Provided,

43
 however, That collection cases where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is less than One million pesos (P1,000,000.00)
shall be tried by the proper Municipal Trial Court, Metropolitan Trial Court and Regional Trial Court.

"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.
xxx

So the government can ask the help of the CTA to collect the taxes,

Pag si admin sinabi na this one is okay for collection kasi final na, the government can ask the help of the CTA to collect.

(c) Exclusive jurisdiction over tax collections cases, to wit:

(1) Original jurisdiction in tax collection cases involving final and executory assessments for taxes, fees, charges and penalties, where the principal amount of taxes and
fees, exclusive of charges and penalties, claimed is one million pesos or more; and

(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. (n)

44
 PROCEDURE IN CIVIL CASES
RULE 8
PROCEDURE IN CIVIL CASES

SECTION 1. Review of cases in the Court en banc. – In cases falling under the exclusive appellate jurisdiction of the Court en banc, the petition for review of a decision or
resolution of the Court in Division must be preceded by the filing of a timely motion for reconsideration or new trial with the Division. (n)

Before you can elevate it to the CTA en banc, you should file motion for reconsideration or new trial with the CTA Division. After that you file a petition for review before the
Supreme Court.

Pag sa CTA, 30 days talaga yan. Take note of that period.

Q: Now what is the period in filing before the CTA en banc?

A: An appeal from a decision or resolution of the Court in Division on a motion for reconsideration or new trial shall be taken to the Court by petition for review as provided
in Rule 43 of the Rules of Court. The Court en banc shall act on the appeal.
➔ Therefore, 15 days.

SEC. 2. Review of cases in the Court in Division. – In appealed cases falling under the jurisdiction of the Court in Division in Sections 3(a)(1) to 3(a)(6) and 3(c)(2) of
Rule 4, the party filing the case shall be called the Petitioner and the party against whom the case is filed shall be called the Respondent. The pleading shall be entitled
Petition for Review.

In tax collection cases originally filed with the Court under Section 3(c)(1) of Rule 4, the party filing the case shall be called the Plaintiff and the party against whom the
case is filed shall be called the Defendant. The pleading shall be entitled Complaint. In appealed tax collection cases, the original captions shall be retained. The party
filing the appeal shall be called the Appellant and the party against whom the appeal is filed shall be called the Appellee. (RCTA, Rule 5, Sec. 1a)

SEC. 3. Who may appeal; period to file petition. –

(a) A party adversely affected by a decision, ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments or claims for refund of internal
revenue taxes, or by a decision or ruling of the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry, the Secretary of Agriculture, or a
Regional Trial Court in the exercise of its original jurisdiction may appeal to the Court by petition for review filed within thirty days after receipt of a copy of such decision
or ruling, or expiration of the period fixed by law for the Commissioner of Internal Revenue to act on the disputed assessments. In case of inaction of the Commissioner of
Internal revenue on claims for refund of internal revenue taxes erroneously or illegally collected, the taxpayer must file a petition for review within the two-year period
prescribed by law from payment or collection of the taxes. (n)

(b) A party adversely affected by a decision or resolution of a Division of the Court on a motion for reconsideration or new trial may appeal to the Court by filing before it
a petition for review within fifteen days from receipt of a copy of the questioned decision or resolution. Upon proper motion and the payment of the full amount of the
docket and other lawful fees and deposit for costs before the expiration of the reglementary period herein fixed, the Court may grant an additional period not exceeding

45
 fifteen days from the expiration of the original period within which to file the petition for review. (Rules of Court, Rule 42, sec. 1a)

(c) A party adversely affected by a decision or ruling of the Central Board of Assessment Appeals and the Regional Trial Court in the exercise of their appellate jurisdiction
may appeal to the Court by filing before it a petition for review within thirty days from receipt of a copy of the questioned decision or ruling. (n)

SEC. 4. Where to appeal; mode of appeal. –

(a) An appeal from a decision or ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments or claim for refund of internal revenue taxes
erroneously or illegally collected, the decision or ruling of the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade & Industry, the Secretary of
Agriculture, and the Regional Trial Court in the exercise of their original jurisdiction, shall be taken to the Court by filing before it a petition for review as provided in Rule
42 of the Rules of Court. The Court in Division shall act on the appeal. (n)

(b) An appeal from a decision or resolution of the Court in Division on a motion for reconsideration or new trial shall be taken to the Court by petition for review as
provided in Rule 43 of the Rules of Court. The Court en banc shall act on the appeal. (n)

(c) An appeal from a decision or ruling of the Central Board of Assessment Appeals or the Regional Trial Court in the exercise of their appellate jurisdiction shall be taken
to the Court by filing before it a petition for review as provided in Rule 43 of the Rules of Court. The Court en banc shall act on the appeal. (n)

SUSPENSION OF COLLECTION OF TAX

Q: Kapag ako in-assess and I appealed to the CTA, can the CTA suspend the collection of taxes? Kailangan ba na mag bayad parin ako kahit na nag
appeal ako? Would the remedy of appealing to the CTA suspend the collection of taxes?

A: No appeal taken to the Court shall suspend the payment, levy, distraint, or sale of any property of the taxpayer for the satisfaction of his tax liability as provided under
existing laws, except as hereinafter prescribed.

➔ So YES. You can file a motion for suspension of collection of tax.

Requisites for SUSPENSION OF COLLECTION of tax:

1. There is an appeal to the CTA from a decision of the CIR;
2. In the opinion of the CTA, the collection may jeopardize the interest of the government and/or the taxpayer;
3. The taxpayer may be required to deposit the amount claimed or to file a surety bond for not more than double the amount with the Court (R.A. 1125, Sec. 11); and
4. That the appeal is not frivolous or dilatory.

NOTE: The motion for the suspension of the collection of tax shall be verified and shall state clearly and distinctly the facts and the grounds relied upon in support of the
motion (RRCTA, Rule 10, Sec. 4).

46
 RULE 10
SUSPENSION OF COLLECTION OF TAX

SECTION 1. No suspension of collection of tax, except as herein prescribed. – No appeal taken to the Court shall suspend the payment, levy, distraint, or sale of any
property of the taxpayer for the satisfaction of his tax liability as provided under existing laws, except as hereinafter prescribed. (n)

SEC. 2. Who may file. – Where the collection of the amount of the taxpayer’s liability, sought by means of a demand for payment, by levy, distraint or sale of any
property of the taxpayer, or by whatever means, as provided under existing laws, may jeopardized the interest of the Government or the taxpayer, an interested party
may file a motion for the suspension of the collection of the tax liability. (RCTA, Rule 12, sec. 1a)

SEC. 3. When to file. – The motion for the suspension of the collection of the tax may be filed together with the petition for review or with the answer, or in a separate
motion filed by the interested party at any stage of the proceedings. (RCTA, Rule 12, sec. 2)

Ang ginagawa nyan is you have your petition for review, meron kang pleading, i-attach mo yung motion for suspension of collection of tax. But this is subject to the
approval of the CTA Division. You have to have a justifiable reason for the court to grant your motion for suspension of collection of the tax levy.

In other words, the mere filing of appeal before the CTA does not suspend the collection. However, it can be suspended if you will file a motion for suspension of collection
of the tax levy.

SEC. 4. Contents and attachments of the motion. – The motion for the suspension of the collection of the tax shall be verified and shall state clearly and distinctly the
facts and the grounds relied upon in support of the motion. Affidavits and other documentary evidence in support thereof shall be attached thereto, which, if
uncontroverted, would be admissible in evidence as proof of the facts alleged in the motion. (RCTA, Rule 12, sec. 3a)

SEC. 5. Opposition. – Unless a shorter period is fixed by the Court because of the urgency of the motion, the adverse party shall, within five days after receipt of a copy
of the motion, file an opposition thereto, if any, which shall state clearly and distinctly the facts and the grounds relied upon in support of the opposition. (RCTA, Rule 12,
sec. 4)

SEC. 6. Hearing of the motion. – The movant shall, upon receipt of the opposition, set the motion for hearing at the next available motion day, and the Court shall give
preference to the motion over all other cases, except criminal cases. At the hearing, both parties shall submit their respective evidence. If warranted, the Court may grant
the motion if the movant shall deposit with the Court an amount in cash equal to the value of the property or goods under dispute or filing with the Court of an acceptable
surety bond in an amount not more than double the disputed amount or value. However, for the sake of expediency, the Court, motu proprio or upon motion of the
parties, may consolidate the hearing of the motion for the suspension of the collection of the tax with the hearing on the merits of the case. (RCTA, Rule 12, sec. 5a)

SEC. 7. Corporate surety bonds. – In the selection and qualification of surety companies, the parties and the Court shall be guided by Supreme Court Circular A.M. No.
04-7-02-SC, dated July 20, 2004. (n)

Again, if there is a motion filed there will be hearing.

47
Let’s now go to the cases.
CIR vs CA

[G.R. No. 104151. March 10, 1995.]

This case talks about the value of a CTA decision.

In the case at bar, the Commissioner based his findings on a previous decision rendered by the Court of Tax Appeals itself.

The Court of Tax Appeals is not a mere superior administrative agency or tribunal but is a part of the judicial system of the Philippines. It was created
by Congress pursuant to Republic Act No. 1125, effective June 16, 1954, as a centralized court specializing in tax cases. It is a regular court vested with
exclusive appellate jurisdiction over cases arising under the National Internal Revenue Code, the Tariff and Customs Code, and the Assessment Law.

Although only the decisions of the Supreme Court establish jurisprudence or doctrines in this jurisdiction, nonetheless the decisions of subordinate courts have a
persuasive effect and may serve as judicial guides. It is even possible that such a conclusion or pronouncement can be raised to the status of a doctrine if, after it has
been subjected to test in the crucible of analysis and revision the Supreme Court should find that it has merits and qualities sufficient for its consecration as a rule of
jurisprudence.

Furthermore, as a matter of practice and principle, the Supreme Court will not set aside the conclusion reached by an agency such as the Court of Tax Appeals, which is,
by the very nature of its function, dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on
the subject, unless there has been an abuse or improvident exercise of authority on its part.

Probative Value of a CTA decision: CTA decisions have persuasive effect.

What is the probative value of a CTA decision? Is it similar to a Supreme Court decision?

- CTA decisions have persuasive effect.

What happened here was that, previously there was a court decision saying that the current Commissioner can overturn a decision or ruling of a previous Commissioner.
Yun din ang ginawa in this particular case. But in this case, it wasn’t the ruling of a previous Commissioner that was overturned, but a decision of the CTA.

The Court said na magkaiba yun. The CTA is just like any other courts, it has persuasive effect.

BANCO DE ORO vs. REPUBLIC

FACTS: This case involves P35 billion worth of 10-year zero-coupon treasury bonds issued by the Bureau of Treasury (BTr) denominated as PEACe Bonds. These PEACe
Bonds would initially be purchased by a special purpose vehicle on behalf of (CODE-NGO). CODE-NGO wrote a letter to the BIR to inquire as to whether the PEACe Bonds

48
will be subject to withholding tax of 20%. The BIR issued several rulings. The rulings basically say that in determining whether financial assets such as a debt instrument
are deposit substitute, the “20 or more individual or corporate lenders rule” should apply. Likewise, the “at any one time” stated in the rules should be construed as “at
the time of the original issuance.”

ISSUE: Whether or not resort to the Supreme Court in the first instance is proper considering petitioner’s failure to exhaust administrative remedies

DOCTRINE:

Under Republic Act No. 1125 (An Act Creating the Court of Tax Appeals), as amended by Republic Act No. 9282,such rulings of the Commissioner of Internal Revenue are
appealable to that court, thus:

SEC. 7.Jurisdiction.- The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as

herein provided:

1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in
relation thereto, or other matters arising under the National Internal Revenue or other laws administered by the Bureau of Internal Revenue;
....
SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. - Any party adversely affected by a decision, ruling or inaction of the Commissioner of Internal Revenue, the
Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture or the Central Board of Assessment Appeals or
the Regional Trial Courts may file an appeal with the CTA within thirty (30) days after the receipt of such decision or ruling or after the expiration of the period fixed by
law for action as referred to in Section 7(a)(2) herein.
....
SEC. 18. Appeal to the Court of Tax Appeals En Banc. - No civil proceeding involving matters arising under the National Internal Revenue Code, the Tariff and Customs
Code or the Local Government Code shall be maintained, except as herein provided, until and unless an appeal has been previously filed with the CTA and disposed of in
accordance with the provisions of this Act.

In Commissioner of Internal Revenue v. Leal,citing Rodriguez v. Blaquera, this court emphasized the jurisdiction of the Court of Tax Appeals over rulings of the Bureau of
Internal Revenue, thus:

While the Court of Appeals correctly took cognizance of the petition for certiorari, however, let it be stressed that the jurisdiction to review the rulings of the
Commissioner of Internal Revenue pertains to the Court of Tax Appeals, not to the RTC.
The questioned RMO No. 15-91 and RMC No. 43-91 are actually rulings or opinions of the Commissioner implementing the Tax Code on the taxability of pawnshops.. . .
....
Such revenue orders were issued pursuant to petitioner's powers under Section 245 of the Tax Code, which states:
"SEC. 245. Authority of the Secretary of Finance to promulgate rules and regulations. — The Secretary of Finance, upon recommendation of the Commissioner, shall
promulgate all needful rules and regulations for the effective enforcement of the provisions of this Code.

The authority of the Secretary of Finance to determine articles similar or analogous to those subject to a rate of sales tax under certain category enumerated in Section
163 and 165 of this Code shall be without prejudice to the power of the Commissioner of Internal Revenue to make rulings or opinions in connection with the
49
 implementation of the provisions of internal revenue laws, including ruling on the classification of articles of sales and similar purposes." (Emphasis in the original)
.

Q: What did they file?

A: They filed a petition for review on certiorari

Q: What is the precondition for certiorari?

A: It should be the remedy of last resort.

This pertains to a BIR ruling,

Q: What is a BIR Ruling?

A: A BIR ruling is an administrative interpretation of the Revenue Law as applied and implemented by the Bureau. They can be relied upon by taxpayers and are valid until
otherwise determined by the courts or modified or revoked by a subsequent ruling or opinion. They are accorded great weight and respect, but not binding on the courts
(Commission v. Ledesma, L-17509, January 30, 1970).

IN OTHER WORDS, these are opinions of the BIR regarding the interpretation of the Tax Code.

Q: What are BIR Rulings?

A: These are OPINIONS of the BIR regarding the interpretation of the Tax Code.

Atty: In other words it's similar to a declaratory relief. Di mo maintindihan if it's applicable to you or not so you apply for Declaratory Relief. In BIR Rulings there's
actually no disputed assessment yet. Adjudicatory powers is not required. What is required is the OPINION.

Q: What if the BIR Ruling is adversed to your case? Where can you Appeal?

A: Secretary of Finance.

Atty: Now after SoF where do you go? Is it part of the jurisdiction of the Court of Tax Appeals (CTA)? That's the issue in this case. Here they filed before the SC a
Special Civil Action under Rule 65 (Certiorari) claiming that there is no other available remedy. The Supreme Court said no because if you try to look at the definition
under RA 9282, Section 7.

Sec. 7. Jurisdiction. - The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

50
 1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties
in relation thereto, or other matters arising under the National Internal Revenue or other laws administered by the Bureau of Internal Revenue;

Atty: Other matters! So this is where the BIR Rulings fall under. In other words,

BIR Ruling > Secretary of Finance > CTA

Q: Now in this case, why didn't the petitioner appeal to the Secretary of Finance?

A: Precisely because in this case, an appeal to the Secretary of Finance from the questioned 2011 BIR Ruling would be a futile exercise because it was upon the request of
the Secretary of Finance that the 2011 BIR Ruling was issued by the Bureau of Internal Revenue. It appears that the Secretary of Finance adopted the Commissioner of
Internal Revenue’s opinions as his own.

So if you appeal it to the Secretary of Finance, then his decision will be the same. That's why they went to the CTA.

We have the City of Manila vs Hon.Grecia-Cuerdo. This came out in the 2014 Bar Exam.

(Recital of Facts. Questions in between. Please see case digest)

Atty: The order is about what?

A: Grant of Preliminary Injunction

Atty: What's their petition before the CA?

A: Certiorari

What's the issue in this case?

Issue: Whether the CTA has jurisdiction over a special civil action for certiorari assailing an interlocutory order issued by the RTC in a local tax case.

Atty: What is an interlocutory order?

A:
Under Section 1 (c) of Rule 41 of the Rules of Court, no appeal may be taken from an interlocutory order. An interlocutory order is one that does not dispose of the
case completely but leaves something to be decided upon.

51
 An order that is interlocutory is temporary in nature and, hence, not appealable. Instead, the proper remedy is to file a Petition for Certiorari and/or Prohibition under Rule
65.

Atty: What is the nature of an interlocutory order?

A: Temporary in Nature

Atty: So what did the court say?

A: This case has become moot and academic, however, the SC found it necessary to resolve the issue on jurisdiction due to its significance and for future guidance of the
bench and the bar. It is a settled principle that courts will decide questions otherwise moot and academic if it is capable of repetition, yet evading review.)

The Legislature passed into law RA No. 9282, expanding the jurisdiction of the CTA. Sec. 7 of the said law provides:

Sec. 7. Jurisdiction – The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
xxx
3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by them in the exercise of their original or appellate
jurisdiction; xxx

It was clearly stated that the CTA has exclusive appellate jurisdiction over decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or
resolved by them, there is no categorical statement under RA 1125 as well as the amendatory RA 9282 which provides that the CTA has jurisdiction over petitioners for
certiorari assailing interlocutory orders issued by the RTA in local taxes filed before it.

City of Manila vs Hon.Grecia-Cuerdo 726 Phil, 24 (2014)

(Please see Case Digest)

Please take note of that. This is a stretch actually.

Sabi nila since it pertains to the application of the tax laws, CTA has a power. This came out in the bar.

CIR vs KEPCO ILIJAN Corporation G.R.No.199422

(Please see Case Digest)

This is very interesting. You read this case.

Nagdecide ang First Division.

52
Q: Has the period to appeal already lapsed?
A: Yes.

Q: So, it is already executory. In your CivPro, can you annul a judgment that is final and executory? Let’s compare the ordinary rules of Civil Procedure with the Tax Rules on
Procedure. Is a final and executory decision, really final? Or are there grounds where you can have them annulled and reopen the case?

A: Rule 47 of Rules of Court

Section 2. Grounds for annulment. — The annulment may be based only on the grounds of extrinsic fraud and lack of jurisdiction.

CIR vs KEPCO ILIJAN Corporation

FACTS: KEPCO ILIJAN Corporation filed with the BIR its claim for refund for input tax incurred for the first and second quarters of the calendar year 2000 from its
importation and domestic purchases of capital goods and services preparatory to its production and sales of electricity to the National Power Corporation.

For failure of CIR to act upon KEPCO’s claim for refund or issuance of tax credit certificate, KEPCO filed a Petition for Review.

In her Answer, CIR alleged:

(1) KEPCO is not entitled to the refund of the amounts prayed for;
(2) the petition was prematurely filed for KEPCO's failure to exhaust administrative remedies;
(3) KEPCO failed to show that the taxes paid were erroneously or illegally collected; and
(4) KEPCO has no cause of action.

Thereafter, KEPCO filed its Memorandum, but CIR failed to file its Memorandum despite notice, thus, the case was submitted for decision.

Subsequently, CTA First Division rendered a Decision, holding that KEPCO is entitled to a refund of ₱443,447,184.50, for its unutilized input VAT paid. There being no
motion for reconsideration filed by the CIR, the said decision became final and executory.

Aggrieved, CIR filed a petition for annulment of judgment with the CTA en banc but the same was dismissed, and its MR was likewise denied. CIR elevated the case to the
SC via petition for review.

HELD: As earlier explained, the silence of the Rules may be attributed to the need to preserve the principles that there can be no hierarchy within a collegial court
between its divisions and the en banc, and that a court's judgment, once final, is immutable.

53
Q: Is a final and executory decision, really final? Or there are grounds that you can annul them? Can you file a motion for new trial if it is final?
A: No. Under Rule 47 of the Rules of Court on the grounds of extrinsic fraud and lack of jurisdiction.

Rules of Court, Rule 47: Annulment of Judgments of Final Orders and Resolutions

Section 2.Grounds for annulment. — The annulment may be based only on the grounds of extrinsic fraud and lack of jurisdiction.

Extrinsic fraud shall not be a valid ground if it was availed of, or could have been availed of, in a motion for new trial or petition for relief. (n)

Q: What is extrinsic fraud?

A: It is a fraud that induces one not to present a case in court or deprives one of the opportunity to be heard or is not involved in the actual issues.More broadly, it is defined
as:
fraudulent acts which keep a person from obtaining information about his/her rights to enforce a contract or getting evidence to defend against a lawsuit. This could include
destroying evidence or misleading an ignorant person about the right to sue.

If the grounds is based on extrinsic fraud, the action must be filed within four (4) years from the discovery of the fraud.

The burden of proof to grant an annulment of judgement is the discovery of fraud.

Q: Can the RTC annul the decision of the MTC base on extrinsic fraud?
A: YES.

Q: Can the CA annul the decision of the RTC base on extrinsic fraud?
A: YES.

Q: Can the Supreme Court annul the decision of the CA base on extrinsic fraud?
A: YES.

Q: So why can’t CTA En Banc cannot annul the decision of a division?

A: Because it is a collegial body. The Supreme Court En Banc cannot annul the decision of a division of the Supreme Court. This goes for the CTA, because there is no
express authority under the Revised Rules of the CTA and even the Rules of Court which apply suppletorily thereto provide for no instance in which the en banc may reverse,
annul or void a final decision of a division.

If you are a collegial body, you act as one and the En Banc is not a superior court compared to the division. In the same way that the Supreme Court sitting en banc is not
an appellate court vis-a-vis its divisions.

54
 RE: COLLEGIAL BODY

It is the same situation among other collegial courts. To illustrate, the Supreme Court or the Court of Appeals may sit and adjudicate cases in divisions consisting of only a
number of members, and such adjudication is already regarded as the decision of the Court itself. It is provided for in the Constitution, Article VIII, Section 4(1) and BP
Blg. 129, Section 4, respectively. The divisions are not considered separate and distinct courts but are divisions of one and the same court; there is no hierarchy of courts
within the Supreme Court and the Court of Appeals, for they each remain as one court notwithstanding that they also work in divisions. The Supreme Court sitting en
banc is not an appellate court vis-a-vis its divisions, and it exercises no appellate jurisdiction over the latter. As for the Court of Appeals en banc, it sits as such only for
the purpose of exercising administrative, ceremonial, or other non-adjudicator/functions.

Thus, it appears contrary to these features that a collegial court, sitting en banc, may be called upon to annul a decision of one of its divisions which had become final and
executory, for it is tantamount to allowing a court to annul its own judgment and acknowledging that a hierarchy exists within such court. In the process, it also betrays
the principle that judgments must, at some point, attain finality. A court that can revisit its own final judgments leaves the door open to possible endless reversals or
modifications which is anathema to a stable legal system.

Thus, the Revised Rules of the CTA and even the Rules of Court which apply suppletorily thereto provide for no instance in which the en banc may reverse, annul or void
a final decision of a division. Verily, the Revised Rules of the CTA provide for no instance of an annulment of judgment at all. On the other hand, the Rules of Court,
through Rule 47, provides, with certain conditions, for annulment of judgment done by a superior court, like the Court of Appeals, against the final judgment, decision or
ruling of an inferior court, which is the Regional Trial Court, based on the grounds of extrinsic' fraud and lack of jurisdiction. The Regional Trial Court, in turn, also is
empowered to, upon a similar action, annul a judgment or ruling of the Metropolitan or Municipal Trial Courts within its territorial jurisdiction. But, again, the said Rules
are silent as to whether a collegial court sitting en banc may annul a final judgment of its own division.

In this case, you are not comparing MCTC vs RTC. It is not the same banana kasi collegial body ito. You cannot say na mas superior ang SC en banc kasi mas marami sila
compared sa SC in division kasi mas konti sila.

NO, again this is a collegial body. Same as CTA, you cannot say na CTA en banc is superior over CTA in division kasi collegial body to.

Thus, even if there is a right for you to annul, being Rule 47 is give, you cannot file it to the en banc to annul its decision in division kasi hindi naman siya superior court.

BUREAU OF CUSTOMS, Petitioner, v. THE HONORABLE AGNES VST DEVANADERA

ISSUE:
Whether CTA can issue writ of certiorari?

HELD:

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Yes, the CTA has the right to issue writ of certiorari, so if the CIR or the Secretary of Collector of Customs committed grave abuse of his discretion amounting to excess or
lack of jurisdiction, you can actually file a writ of certiorari with the CTA.

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