SECOND DIVISION

[G.R. No. 132929. March 27, 2000]

COMMISSIONER OF CUSTOMS, petitioner, vs. COURT OF TAX APPEALS and PHILIPPINE CASINO OPERATORS CORPORATION, respondents. Calrky

D E C I S I O N

MENDOZA, J.:

The issue for decision in this case is whether the Philippine Casino Operators Corporation (PCOC) is, by virtue of its concessionaire's contract with the Philippine Amusement and Gaming Corporation (PAGCOR), exempt from the payment of duties, taxes and other imposts on importations. Both the Court of Appeals and the Court of Tax Appeals ruled in the affirmative. Hence this petition.

The facts are as follows:

PAGCOR is a government corporation with exclusive franchise to operate and maintain gambling casinos. On July 5, 1977, it entered into a contract with PCOC for the operation of its floating casino off Manila Bay. This establishment was, however, gutted by fire in 1979, for which reason, PAGCOR shifted its operations to land-based casinos and entered into another contract with PCOC for the management of a casino at the Provident International Resources Corporation (PIRC) building on Imelda Avenue, Parañaque City. Both contracts contained the following stipulation:[1]

Section 2(e). The CONCESSIONARE shall be authorized in behalf of the FRANCHISE[E] to…procure either local or imported equipment and facilities from foreign sources as may be required in the casino operation….

From 1982 to 1984, PCOC imported various articles and equipment which, on the strength of indorsements of exemption it had procured from the Ministry of Finance, were released from the Bureau of Customs free of tax.

Sometime in May 1988, the Customs Bureau received confidential information that PCOC had been able to obtain tax exemption through fraud and misrepresentation. Accordingly, the District Collector of Customs issued a warrant for the seizure of the imported articles. On

March 12, 1989, agents of the Bureau served the warrants at the PIRC building, where the articles were kept, and several auto parts, escalators, elevators, power systems, kitchen equipment and other heavy equipment were seized or detained.[2]

After hearing, the District Collector of Customs ordered on February 22, 1990 the forfeiture of the imported articles. PCOC appealed, but the Commissioner of Customs, on February 12, 1991, affirmed the ruling. PCOC elevated the case to the CTA, which, on May 28, 1997, reversed the ruling of the Commissioner of Customs and ordered the release of the articles to PCOC.

On June 20, 1997, the Commissioner filed a motion for reconsideration but his motion was denied on the ground that it was filed late. The CTA, therefore, ordered the entry of its judgment.

The Commissioner then filed a petition for certiorari. But in its decision dated March 3, 1998, the Court of Appeals dismissed the petition. Hence, this petition for review on certiorari. Petitioner contends that the Court of Appeals[3] ¾

I. ERRONEOUSLY AFFIRMED THE DECISION OF THE COURT OF TAX APPEALS THAT SERVICE TO THE LEGAL SERVICE DIVISION OF THE BUREAU OF CUSTOMS IS BINDING ON THE OSG.

II. [ERRONEOUSLY] DISMISSED THE PETITION FOR CERTIORARI AS, ALLEGEDLY, THE PROPER REMEDY IS AN APPEAL.

III. ERRONEOUSLY AFFIRMED THE ORDER TO RELEASE THE SEIZED ARTICLE ILLEGALL IMPORTED.

First. Petitioner was represented in the CTA by the Office of the Solicitor General which deputized lawyers in the Legal Service Division of the Bureau of Customs to serve as collaborating counsels. In accordance with this arrangement, lawyers in both offices (Bureau of Customs and the OSG) were served copies of decisions of the CTA. The lawyers at the Bureau received a copy of the decision of the CTA on May 30, 1997, while the OSG received its own on June 5, 1997. As earlier stated, the OSG filed its motion for reconsideration on June 20, 1997. Counted from this date, the motion was seasonably filed, but if the period for appealing or filing a motion for reconsideration were reckoned from the date of receipt of the decision by the lawyers of the Bureau of Customs, then the motion was filed five days late. The Court of Appeals ruled that service of the copy of the CTA decision on the lawyers

of the Bureau of Customs was equivalent to service on the OSG, and, therefore, the motion for reconsideration was filed late.[4]Mesm

This is error. In National Power Corp. v. NLRC,[5] it was already settled that although the OSG may have deputized the lawyers in a government agency represented by it, the OSG continues to be the principal counsel, and, therefore, service on it of legal processes, and not that on the deputized lawyers, is decisive. It was explained:

...The lawyer deputized and designated as "special attorney-OSG " is a mere representative of the OSG and the latter retains supervision and control over the deputized lawyer. The OSG continues to be the principal counsel . . . , and as such, the Solicitor General is the party entitled to be furnished copies of the orders, notices and decisions. The deputized special attorney has no legal authority to decide whether or not an appeal should be made.

As a consequence, copies of orders and decisions served on the deputized counsel, acting as agent or representative of the Solicitor General, are not binding until they are actually received by the latter. We have likewise consistently held that the proper basis for computing reglementary period to file an appeal and for determining whether a decision had attained finality is service on the OSG. . . .[6]

In ruling that it is service of the adverse decision on the deputized lawyers and not that on the OSG which is decisive, the CA cited the cases of Republic v. Soriano[7] and National Irrigation Administration v. Regino.[8]

These cases are not in point. In Soriano, the Court dismissed the petition of the OSG not because it was bound by the earlier service of its orders on the deputized counsel but because, counted from the OSG’s receipt of the questioned orders, its Motion for Reconsideration was filed late. Thus, it was stated:[9]

The three . . . Orders in question were received by the OSG on October 14, 1986 having been referred to it by the Insurance Commissioner on that same day . . . . Applying the Interim Rules and Guidelines of the Rules of Court, the OSG had until October 29, 1986 to file its appeal from the questioned Orders. Consequently, the Motion for Reconsideration filed on November 10, 1986 was filed out of time. . . .

On the other hand, the case of National Irrigation Administration v. Regino is different because there the OSG did not deputize any special counsel. The other counsel of record, Atty. Basuil, was deputized by the NIA. Thus, the Court's ruling therein that the service of the

lower court's order (denying motion for reconsideration) to Atty. Basuil was also deemed service to the OSG was based on Rule 13, §2 of the Rules of Court.[10] The Court itself impliedly recognized that had Atty. Basuil been a deputized special counsel of the OSG, he would have no authority to decide on his own what action to take on any incident regarding the case. The Court stated: "[A]s aptly noted by the private respondent, the Solicitor General did not appoint Atty. Basuil a special attorney or his deputy."[11]

Second. The Court of Appeals ruled that petitioner should have filed an appeal and not a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure because even assuming that the CTA erred in ruling that PCOC is exempt from the payment of importation-related taxes, its error would be an error of judgment committed in the exercise of its jurisdiction.[12]

We disagree. In its order of August 14, 1997, the CTA denied petitioner's motion for reconsideration and ordered the entry of judgment. As far as petitioner was concerned, there was no longer any appeal and execution of the decision was in order, whereas the prime specification of petition for certiorari is that there is no appeal, nor any other plain, speedy, adequate remedy in the ordinary course of law.

Third. Coming now into the merits of the case, the CTA ruled that the importations of PCOC were exempt from tax pursuant to §4(2)(b) of B.P. Blg. 1067-B, as amended by P.D. No. 1399,[13] which provides: MisÓ spped

Sec. 4. EXEMPTIONS.¾

. . . .

(2) Income and other taxes.¾

. . . .

(b) Others: The exemption herein granted for earnings derived from the operations conducted under the franchise, specifically from the payment of any tax, income or otherwise, as well as any form of charges, fees, or levies, shall inure to the benefit of and extend to corporation/s, association/s agency/ies, or individual/s with whom the Franchise [PAGCOR] has any contractual relationship in connection with the operations of the casino/s authorized to be conducted under the franchise and to those receiving compensation or

other remuneration from the Franchise Holder as a result of essential facilities furnished and/or technical services rendered to the Franchise Holder.

This provision is not applicable because it refers to income tax exemption. As PCOC claims to be exempt from the payment of duties, taxes, and other imposts from imported articles, the CTA should have applied instead the provision of the first paragraph of §4(1), to wit:

SEC. 4. EXEMPTIONS.¾

(1) Duties, taxes and other imposts on importations – All importations of equipment, vehicles, automobiles, boats, ships, barges, aircraft and such other gambling paraphernalia, including accessories or related facilities, for the sole and exclusive use of the casinos, the proper and efficient management and administration thereof, and such other clubs, recreation or amusement places to be established under and by virtue of this Franchise shall be exempt from the payment of duties, taxes and other imposts, including all kinds of fees, levies, or charges of any kind or nature.

Vessels and/or accessory ferry boats imported or to be imported by any corporation having existing contractual arrangements with the Franchisee, for the sole and exclusive use of the casino or to be used to service the operations and requirements of the casino, shall likewise be totally exempt from the payment of all taxes, duties and other imposts, including all kinds of fees, levies, assessments or charges of any kind or nature, whether National or local.

Under the first paragraph above, full exemption from the payment of importation-related taxes is granted to PAGCOR - and no other - irrespective of the type of article imported. On the other hand, while the second paragraph grants exemption not only to PAGCOR but also to "any corporation having existing contractual arrangements with [it]," the exemption covers only the importation of vessels and/ or accessory ferry boats, whereas the imported articles involved in this case consisted of auto parts, elevators, escalators, power systems, kitchen equipment and other heavy equipment. PCOC admittedly did not import vessels or accessory ferry boats so as to be exempt from the payment of customs duties.

Nonetheless, the CTA ruled that PAGCOR's exemption under the first paragraph of §4(1) extends to PCOC by virtue of the concessionaire's contract under which PCOC was allowed to import equipment and facilities for the use of PAGCOR's casinos.[14] This is not correct. It is settled that tax exemptions should be strictly construed against those claiming to be qualified thereto.[15]

The CTA's ruling in Philippine Casino Operators Corporation v. Commissioner of Internal Revenue,[16] which it cited in deciding this case, is not in point. The sole issue posed in that case, which it answered in the affirmative using §4(2)(b), was whether PCOC was exempt from paying income tax, surtax of improperly accumulated profits, and business tax. Slx

Fourth. Prescinding from what has been said, we hold that the forfeiture of the illegally released equipment was proper under §2530, pars. (f) and (l), sub-paragraphs 3, 4 and 5 of the Tariff and Customs Code, as amended.[17] Contrary to private respondent's contention, the forfeiture proceedings were not barred by prescription as the one year prescriptive period under Sec. 1603[18] of the Tariff and Customs Code, as amended, applies only in the absence of fraud. In this case, PCOC's importations were released by the Bureau of Customs free of tax by virtue of indorsements issued by the Ministry (now Department) of Finance. These, in turn, were issued on certain misrepresentations of Constancio Francisco, an interlocking officer of PCOC and PIRC,[19] to the effect that the importations were exempt from taxes and duties. The following letter[20] is typical of the requests he made:[21]

PHILIPPINE AMUSEMENT & GAMING CORPORATION

METRO MANILA

April 22, 1983

THE HONORABLE MINISTER

Ministry of Finance

Manila

Sir:

Re: Shipment of 62 Packages Containing five units Traction Geared Elevators Per Eastern B/L No. YMA-20

From: Nippon Otis Elevator Company, Tokyo

This is in connection with the above-captioned importation consisting of 62 packages traction geared elevator shipped per Eastern B/L No. YMA-20 by Nippon Otis Elevator Co. relating shipping documents of which are hereto attached.

In as much as the said shipment shall be for the sole and exclusive use of the Casino, we are requesting for an authority to secure release of said shipment, tax-free and duty-free, under the provisions of P.D. No. 1067-B and quoted herein-below as follows:

Section 4. Exemptions -

"1) Duties, taxes and other imposts on Importations -

All importations of equipment, vehicles, boats, ships, aircrafts and other recreations or amusement places to be established under and by virtue of this Franchise shall be exempt from the payment of duties, taxes and other imposts."

Likewise, we are requesting that the proper [i]ndorsement be addressed to the Commissioner of Customs and then to the Collector of Customs, South Harbor, Manila, allowing release from Customs the above-mentioned shipment. Scslx

Very truly yours,

PHILIPPINE AMUSEMENT & GAMING CORP.

(SGD.)

CONSTANCIO D. FRANCISCO

The corresponding indorsement[22] for such request reads:

REPUBLIKA NG PILIPINAS

MINISTRI NG PANANALAPI

MAYNILA

1st Indorsement

April 26, 1983

Respectfully referred to the Commissioner of Customs, Manila.

In view of the representation of Mr. Constancio D. Francisco of the Philippine Amusement and Gaming Corporation in his herein . . . letter dated April 22 . . ., 1983, the shipments consigned to the said Corporation for the exclusive use of the Philippine Casino Operators Corporation consisting of:

Sixty two (62) packages of five (5) units Geared Traction Elevators covered by Bill of Lading No. YMA-20 of the vessel "EASTERN METEOR" and Proforma Invoice dated My 18, 1982

. . . .

may be released without the pre-payment of duties and taxes required by Section 23 of PD No. 1177, pursuant to the Joint Circular Issued by the Budget Commission and the Ministry of Finance dated May 9, 1978. . . .

By Authority of the Minister:

(SGD.)

IGNACIO D. RAMIREZ

Chief Local Tax Adviser

and concurrently Officer-In-Charge

Finance Revenue ServiceSc-lex

However, during the hearings conducted by the Collector of Customs, Francisco admitted that he was not an employee, much less an officer, of PAGCOR.[23] Despite this, Francisco used PAGCOR's official stationery and signed his name below the printed words "Philippine Amusement and Gaming Corporation " in his letters to the Ministry of Finance. He thus gave the false impression that he was connected to PAGCOR and that it was PAGCOR which asked for the release of the imported equipment without paying tax.

Nor can we give merit to Francisco's claims that his representations were sanctioned under the concessionaire's contract between p PAGCOR and PCOC.[24] In light of Francisco's own admission that he is not in any way connected with PAGCOR and the fact that the former Ministry of Finance favorably acted on the requests for exemptions on the basis of such

misrepresentations, thereby causing enormous losses to the government in the form of uncollected taxes, the Collector of Customs' finding of fraud on the part of PCOC, as affirmed by petitioner, was therefore well founded. The essence of fraud is the intentional and willful employment of deceit deliberately done or resorted to in order to induce another to give up some right.[25]

WHEREFORE, the decision of the Court of Appeals is REVERSED and the decision of the Commissioner of Customs, dated February 12,1991, is REINSTATED.

SO ORDERED.

[10] SEC. 2. Papers to be filed and served. ¾ Every order required by its terms to be served, every pleading subsequent to the complaint, every written motion other than one which may be heard ex parte, and every written notice, appearance, demand, offer of judgment or similar papers shall be filed with the court, and served upon the parties affected thereby. If any of such parties has appeared by an attorney or attorneys, service upon him shall be made upon his attorneys or one of them, unless service upon the party himself is ordered by the court. Where one attorney appears for several parties, he shall only be entitled to one copy of any paper served upon him by the opposite side. (Retained under the 1997 RULES OF CIVIL PROCEDURE).

[15] Esso Standard Eastern, Inc. v. Acting Commissioner of Customs, 124 Phil. 1063 (1966); Commissioner of Internal Revenue v. Guerrero, 128 Phil. 197 (1967); E. Rodriguez, Inc. v. Collector of Internal Revenue, 139 Phil. 354 (1969); Commissioner of Internal Revenue v. Mitsubishi Metal Corporation, 181 SCRA 214 (1990).

[16] CTA Case No. 4341, April 12, 1995.

[17] SEC. 2530. Property Subject to Forfeiture Under Tariff and Customs Law. ¾

. . . .

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

. . . .

1. Any article sought to be imported or exported:

. . . .

(3) On the strength of a false declaration or affidavit executed by the owner, importer, exporter or consignee concerning the importation of such article;

(4) On the strength of a false invoice or other document executed by the owner, importer, exporter or consignee concerning the importation or exportation of such article; and

(5) Through any other practice or device contrary to law by means of which such articles [were] entered through a customhouse to the prejudice of the government.

[18] SEC. 1603. Finality of liquidation. ¾ When articles have been entered and passed free of duty or final adjustment of duties made, with subsequent delivery, such entry and passage free of duty or settlement of duties will, after the expiration of one year, from the date of the final payment of duties, in the absence of fraud or protest, be final and conclusive upon all parties, unless the liquidation of the import entry was merely tentative. (emphasis added)

SECOND DIVISION

[G.R. No. 134114. July 6, 2001]

NESTLE PHILIPPINES, INC., (FORMERLY FILIPRO, INC.) petitioner, vs. HONORABLE COURT OF APPEALS, COURT OF TAX APPEALS and COMMISSIONER OF CUSTOMS, respondents.

D E C I S I O N

DE LEON, JR., J.:

Challenged in this petition for review on certiorari is the Decision in CA-G.R. SP. No. 43188 dated September 23, 1997 of the Court of Appeals which affirmed the Decision dated May 30, 1995 of the Court of Tax Appeals in C.T.A. Case No. 4478 dismissing petitioner’s petition for review to compel the Commissioner of Customs to grant it a refund of allegedly overpaid import duties, on its various importations of milk and milk products, amounting to Five Million Eight Thousand and Twenty-Nine Pesos (P5,008,029.00).

Petitioner’s motion for reconsideration thereof was denied by the Court of Appeals in a Resolution dated June 9, 1998.

The antecedent facts are as follows.

Petitioner is a duly organized domestic corporation engaged in the importations of milk and milk products for processing, distribution and sale in the Philippines. Between July and November 1984, petitioner transacted sixteen (16) separate importations of milk and milk products from different countries. Petitioner was assessed customs duties and advance sales taxes by the Collector of Customs of Manila for each of these separate importations on the basis of the published Home Consumption Value (HCV) indicated in the Bureau of Customs Revision Orders. Petitioner paid the same but seasonably filed the corresponding protests before the said Collector of Customs from October 25 to December 5, 1984, uniformly alleging therein that the latter erroneously applied higher home consumption values in determining the dutiable value for each of these separate importations. In the said protests, petitioner claims for refund of both the alleged overpaid import duties amounting to Five Million Eight Thousand and Twenty-Nine Pesos (P5,008,029.00) and advance sales

taxes aggregating to Four Million Five Hundred Sixty-Four Thousand One Hundred Seventy-Nine Pesos and Thirty Centavos (P4,564,179.30).

On October 14, 1986, petitioner formally filed a claim for refund of allegedly overpaid advance sales taxes with the Bureau of Internal Revenue (BIR) amounting to Four Million Five Hundred Sixty-Four Thousand One Hundred Seventy-Nine Pesos and Thirty Centavos (P4,564,179.30) covering the same sixteen (16) importations of milk and milk products from different countries. Not long after, on October 15, 1986 and within the two-year prescriptive period provided for under the National Internal Revenue Code (NIRC) for claiming a tax refund, petitioner filed the corresponding petition for review with the Court of Tax Appeals (CTA) which was docketed therein as C.T.A. Case No. 4114. On January 3, 1994, the tax court ruled in favor of petitioner and forthwith ordered the BIR to refund to the petitioner the sum of Four Million Four Hundred Eighty-Nine Thousand Six Hundred Sixty-One Pesos and Ninety-Four Centavos (P4,489,661.94) representing the overpaid Advance Sales Taxes on the aforesaid importations.

On the other hand, the sixteen (16) protest cases for refund of alleged overpaid customs duties amounting to Five Million Eight Thousand Twenty-Nine Pesos (P5,008,029.00) were left with the Collector of Customs of Manila. However, the said Collector of Customs failed to render his decision thereon after almost six (6) years since petitioner paid under protest the customs duties on the said sixteen (16) importations of milk and milk products and filed the corresponding protests.

Consequently, in order to prevent these claims from becoming stale on the ground of prescription, petitioner immediately filed a petition for review docketed as C.T.A. Case No. 4478, with the Court of Tax Appeals on August 2, 1990 despite the absence of a ruling on its protests from both the Collector of Customs of Manila and the Commissioner of Customs.

On May 30, 1995, the CTA rendered judgment dismissing C.T.A. Case No. 4478 for want of jurisdiction. The subsequent motion for reconsideration filed by the petitioner on July 11, 1995 was denied for lack of merit in a Resolution dated January 6, 1997.

Aggrieved, petitioner appealed on February 10, 1999 the said judgment and resolution of the CTA in C.T.A. Case No. 4478 to the Court of Appeals by way of petition for review on certiorari under Rule 45 of the Rules of Court. However, this appeal was later dismissed by the appellate court on September 23, 1997 for lack of merit. The Court of Appeals opined,

inter alia, that the CTA’s jurisdiction is not concurrent with the appellate jurisdiction of the Commissioner of Customs since there was no decision or ruling yet of the Collector of Customs of Manila on the matter; that the petition does not fall under any of the recognized exceptions on exhaustion of administrative remedies to justify petitioner’s immediate resort to the CTA; that the petitioner failed to move for the early resolution of its claims for refund nor was there any notice given that the said Collector of Customs’ continued inaction on its claims would be deemed a denial of its claims; and that petitioner also neglected to cite any law or jurisprudence which prescribes a period for filing an appeal in the CTA even if there was no action yet by the Commissioner of Customs.

On June 9, 1998, the appellate court issued a Resolution denying petitioner’s motion for reconsideration for lack of merit.

Hence, this petition.

Petitioner assigns the following as errors, to wit:

1. RESPONDENT COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION IN HOLDING THAT THE FILING OF PROTEST CASES BEFORE THE COLLECTOR OF CUSTOMS HAD EFFECTIVELY INTERRUPTED THE RUNNING OF THE SIX-YEAR PRESCRIPTIVE PERIOD;

2. RESPONDENT COURTS COMMITTED FUNDAMENTAL ERRORS AND ACTED WITH GRAVE ABUSE OF DISCRETIONS IN HOLDING THAT PETITIONER HAD FAILED TO EXHAUST ADMINISTRATIVE REMEDIES, NOTWITHSTANDING ALMOST 6 YEARS OF PROCTRACTED HEARINGS OF THE 16 PROTEST CASES WITH THE CUSTOMS COLLECTOR, AND FILING OF THE PETITION ONLY WHEN THE SIX-YEAR PRESCRIPTIVE PERIOD WAS ABOUT TO EXPIRE TO AVOID NULLLIFICATION OF CLAIMS ON GROUND OF PRESCRIPTION;

3. THE RESPONDENT COURTS GRAVELY ERRED IN DISMISSING ON SHEER TECHNICALITIES PETITIONER’S CLAIMS FOR THE REFUND OF P5,008,029.08 (SIC) OVERPAID DUTIES, WHEN THE FACTS OF OVERPAYMENTS HAD BEEN EARLIER RESOLVED IN CTA CASE NO. 4114, HOLDING THAT THE WRONG APPLICATION OF THE HIGHER HOME CONSUMPTION VALUES RESULTED IN THE OVERPAYMENTS OF DUTIES AND TAXES, AND UPON WHICH, IT ORDERED THE REFUND OF P4,489,661.94 IN OVERPAID TAXES. THERE IS NO VALID REASON THEREFORE WHY THE CORRESPONDING OVERPAYMENTS IN CUSTOMS DUTIES CAN NOT ALSO BE REFUNDED TO ITS RIGHTFUL OWNER, THE PETITIONER HEREIN.

In this petition, petitioner asserts that tax refunds are based on quasi-contract or solutio indebiti, which under Article 1145 of the Civil Code, prescribes in six (6) years. Consequently, the pendency of its protest cases before the office of the Collector of Customs of Manila did not interrupt the running of the prescriptive period under the aforesaid provision of law considering that it is only an administrative body performing only quasi-judicial function and not a regular court of justice. Thus, in like manner the thirty-day period for appealing to the CTA must be made within the six-year prescriptive period.

Petitioner further contends that the fact of overpayment of customs duties has been duly established and resolved with finality by the Court of Tax Appeals on January 3, 1994 in C.T.A. Case No. 4114. In that case, the tax court found that the Bureau of Customs erroneously used the wrong home consumption value in assessing the petitioner the Advance Sales Tax on its subject sixteen (16) importations. The tax court then ordered the Commissioner of Internal Revenue to refund to the petitioner the sum of Four Million Four Hundred Eighty-Nine Thousand Six Hundred Sixty-One Pesos and Ninety-Four Centavos (P4,489,661.94), representing overpaid advance sales tax covering the same sixteen (16) importations. It is also from the same 16 separate importations of milk and milk products that petitioner based its claims for refund of overpayment of customs duties. Thus, petitioner avers that its claims for refund of overpaid customs duties must likewise be granted and awarded in its favor.

In lieu of Comment, the Solicitor General manifested that there is merit in petitioner’s argument considering that petitioner’s cause of action to recover a tax erroneously paid is based on solutio indebiti which is expressly classified as a quasi-contract under the Civil Code; that petitioner’s cause of action would have prescribed on August 2, 1990 if it did not bring the matter before the CTA; and that the Collector of Customs has not even acted or resolved the petitioner’s several protests it had filed before his office within six (6) years after it made the earliest payment of advance customs duties on its importations.

There was also no violation of the principle of exhaustion of administrative remedies in this case. This doctrine does not apply to the case at bar since its observance would only result in the nullification of the claim for refund being asserted nor would it provide a plain, speedy and adequate remedy under the circumstances. This notwithstanding, however, the Solicitor General further opined that this case should be remanded to the CTA in order for the tax court to determine the veracity of petitioner’s claim.

On the other hand, respondent Commissioner of Customs, in his Comment dated August 21, 2000, admitted with regret, their official inaction adverted to by the petitioner. Respondent Commissioner expressed the view that petitioner’s claim for refund of customs duties should not outrigthly be denied by virtue of the strict adherence to the rules to prevent grave injustice to hapless taxpayers; that this does not justify, however, an outright award of the refund of alleged overpayment of customs duties in favor of petitioner; and that there is no definite factual determination yet that the customs duties and taxes in question were overpaid and refundable, and if refundable how much is the refundable amount. The fact that the Collector of Customs of Manila failed to act or decide on the petitioner’s protest cases filed before his Office does not relieve the petitioner of its burden to prove that it is entitled to the refund sought for. Thus, respondent Commissioner of Customs, thru his special counsel, recommended that this case be remanded to the court of origin, namely, the CTA.

The recommendations of both the Solicitor General and the respondent Commissioner of Customs are well taken. After a meticulous consideration of this case, we find that the recommended remand of this case to the CTA is warranted for the proper verification and determination of the factual basis and merits of this petition and in order that the ends of substantial justice and fair play may be subserved. We are of the view that the said recommendation is in accord with the provisions of the Tariff and Customs Code as hereinafter discussed.

The right to claim for refund of customs duties is specifically governed by Section 1708 of the Tariff and Customs Code, which provides that -

“Sec. 1708. Claim for Refund of Duties and Taxes and Mode of Payment. – All claims for refund of duties shall be made in writing and forwarded to the Collector to whom such duties are paid, who upon receipt of such claim, shall verify the same by the records of his Office, and if found to be correct and in accordance with law, shall certify the same to the Commissioner with his recommendation together with all necessary papers and documents. Upon receipt by the Commissioner of such certified claim he shall cause the same to be paid if found correct.”

It is clear from the foregoing provision of the Tariff and Customs Code that in all claims for refund of customs duties, the Collector to whom such customs duties are paid and upon receipt of such claim is mandated to verify the same by the records of his Office. If such claim is found correct and in accordance with law, the Collector shall certify the same to the

Commissioner with his recommendation together with all the necessary papers and documents. This is precisely one of the reasons why the Court of Appeals upheld the dismissal of the case on the ground that the CTA’s jurisdiction under the Tariff and Customs Code is not concurrent with that of the respondent Commissioner of Customs due to the absence of any certification from the Collector of Customs of Manila. Accordingly, petitioner’s contention that its claims for refund of alleged overpayment of customs duties may be deemed established from the findings of the tax court in C.T.A. Case No. 4114 on the Advance Sales Tax is not necessarily correct in the light of the above-cited provision of the Tariff and Customs Code.

“Customs duties” is ‘the name given to taxes on the importation and exportation of commodities, the tariff or tax assessed upon merchandise imported from, or exported to, a foreign country.’ Any claim for refund of customs duties, therefore, take the nature of tax exemptions that must be construed strictissimi juris against the claimants and liberally in favor of the taxing authority. This power of taxation being a high prerogative of sovereignty, its relinquishment is never presumed. Any reduction or diminution thereof with respect to its mode or its rate must be strictly construed, and the same must be couched in clear and unmistakable terms in order that it may be applied.

Thus, any outright award for the refund of allegedly overpaid customs duties in favor of petitioner on its subject sixteen (16) importations is not favored in this jurisdiction unless there is a direct and clear finding thereon. The fact alone that the tax court, in C.T.A. Case No. 4114, has awarded in favor of the petitioner the refund of overpaid Advance Sales Tax involving the same sixteen (16) importations does not in any way excuse the petitioner from proving its claims for refund of alleged overpayment of customs duties. We have scrutinized the decision rendered by the tax court in C.T.A. Case No. 4114 and found no clear indication therein that the tax court has ruled on petitioner’s claims for alleged overpayment of customs duties.

The petitioner is mistaken in its contention that its claims for refund of allegedly overpaid customs duties are governed by Article 2154 of the New Civil Code on quasi-contract, or the rule on solutio indebiti, which prescribes in six (6) years pursuant to Article 1145 of the same Code.

Sections 2308 and 2309 of the Tariff and Customs Code provide that:

“Sec. 2308. Protest and Payment upon Protest in Civil Matter. – When a ruling or decision of the collector is made whereby liability for duties, taxes, fees, or other charges are determined, except the fixing of fines in seizure cases, the party adversely affected may protest such ruling or decision by presenting to the Collector at the time when payment of the amount claimed to be due the government is made, or within fifteen (15) days thereafter, a written protest setting forth his objection to the ruling or decision in question, together with the reasons therefor. No protest shall be considered unless payment of the amount due after final liquidation has first been made and the corresponding docket fee, as provided for in Section 3301.”

“Sec. 2309. Protest Exclusive Remedy in Protestable Case.—In all cases subject to protest, the interested party who desires to have the action of the collector reviewed, shall make a protest, otherwise, the action of the collector shall be final and conclusive against him, x x x.”

“SEC. 2312. Decision or Action by the collector in Protest and Seizure Cases. - When a protest in a proper form is presented in a case where protest is required, the collector shall issue an order for hearing within fifteen (15) days from receipt of the protest and hear the matter thus presented. Upon termination of the hearing, the Collector shall render a decision within thirty (30) days, and if the protest is sustained, in whole or in part, he shall make the appropriate order, the entry reliquidated necessary. x x x .”

In the light of the above-cited provisions of the Tariff and Customs Code, it appears that in all cases subject to protest, the claim for refund of customs duties may be foreclosed only when the interested party claiming refund fails to file a written protest before the Collector of Customs. This written protest which must set forth the claimant’s objection to the ruling or decision in question together with the reasons therefor must be made either at the time when payment of the amount claimed to be due the government is made or within fifteen (15) days thereafter. In conjunction with this right of the claimant is the duty of the Collector of Customs to hear and decide such protest in accordance and within the period of time prescribed by the law.

Accordingly, once a written protest is seasonably filed with the Collector of Customs the failure or inaction of the latter to promptly perform his mandated duty under the Tariff and Customs Code should not be allowed to prejudice the right of the party adversely affected thereby. Technicalities and legalisms, however exalted, should not be misused by the government to keep money not belonging to it, if any is proven, and thereby enrich itself at

the expense of the taxpayers. If the State expects its taxpayers to observe fairness and honesty in paying their taxes, so must it apply the same standard against itself in refunding excess payments, if any, of such taxes. Indeed the State must lead by its own example of honor, dignity and uprightness.

Here, it is undisputed that the inaction of the Collector of Customs of Manila for nearly six (6) years on the protests seasonably filed by the petitioner has caused the latter to immediately resort to the CTA. The petitioner did so on the mistaken belief that its claims are governed by the rule on quasi-contract or solutio indebiti which prescribes in six (6) years under Article 1145 of the New Civil Code.

This belief or contention of the petitioner is misplaced. In order for the rule on solutio indebiti to apply it is an essential condition that petitioner must first show that its payment of the customs duties was in excess of what was required by the law at the time when the subject sixteen (16) importations of milk and milk products were made. Unless shown otherwise, the disputable presumption of regularity of performance of duty lies in favor of the Collector of Customs.

In the present case, there is no factual showing that the collection of the alleged overpaid customs duties was more than what is required of the petitioner when it made the aforesaid separate importations. There is no factual finding yet by the government agency concerned that petitioner is indeed entitled to its claim of overpayment and, if true, for how much it is entitled. It bears stress that in determining whether or not petitioner is entitled to refund of alleged overpayment of customs duties, it is necessary to determine exactly how much the Government is entitled to collect as customs duties on the importations. Thus, it would only be just and fair that the petitioner-taxpayer and the Government alike be given equal opportunities to avail of the remedies under the law to contest or defeat each other’s claim and to determine all matters of dispute between them in one single case. If the State expects its taxpayers to observe fairness and honesty in paying their taxes, so must it apply the same standard against itself in refunding excess payments, if truly proven, of such taxes. Indeed, the State must lead by its own example of honor, dignity and uprightness.

The ratiocination of the Court of Appeals is in accord with a ruling of this Court which is applicable to the case at bar, to wit:

“As stated by the respondent court in its Resolution dated January 6, 1997, the petitioner’s claim cannot be deemed to prescribe because the Collector of Customs has not acted on

the protest, and the period for filing an appeal to the Commissioner of Customs has not commenced to run. Moreover, delay or inaction of a subordinate official, does not constitute an exception to the afore-cited principle as the delay should be brought to the attention of a superior administrative officer for immediate adjudication (Commissioner of Immigration vs. Vamenta, Jr., 54 SCRA 342; Barte vs. Dichoso, 47 SCRA 77).”

WHEREFORE, the assailed Decision dated September 23, 1997 of the Court of Appeals in CA-G.R. SP. No. 43188 is hereby SET ASIDE; and C.T.A. Case No. 4478 is REINSTATED and REMANDED to the Court of Tax Appeals for hearing and reception of evidence relative to petitioner’s claims for refund of alleged overpayment of customs duties. The Court of Tax Appeals is directed to dispose of the said case with dispatch.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, and Buena, JJ., concur.

SYNOPSIS

The Collector of Customs seized two machines found installed inside petitioner's compound pursuant to Section 2530 (e) of the Tariff and Customs Code (TCC) for illegal removal of articles from the warehouse. These articles were included in the sale at public auction of Lot 15 consisting of abandoned imported machineries conducted by the Bureau of Customs to Engr. Policarpio. Petitioner presented two notarized deeds of sale allegedly executed by Jaina Lopez in its favor. Its offer to settle the case amicably under Article 2307 of the TCC was refused. The Collector of Customs, for failure of petitioner to present evidence of payment of duties and taxes, declared the machineries forfeited in favor of the government. Appeal was made to the Court of Tax Appeals when resort to the Commissioner of Customs gave a negative result. The Tax Court, in affirming the authority of the Customs Commissioner, held that the jurisdiction of the Collector of Customs in forfeiture proceedings extends to all questions incidental thereto, including the authority to determine the true ownership of the forfeited property and that petitioner is a buyer in good faith. The ruling of the Tax Court was sustained by the Court of Appeals. Petitioner's motion for reconsideration was denied for failure to state the material dates showing that it was filed on time. Hence, the instant petition, petitioner contending that it had substantially complied with the requirement of Section 1, Rule 9 of the Revised Internal Rules of the Court of Appeals; that the Bureau of Customs had no jurisdiction over the res because importation had terminated; that there is no justifiable reason for denying its offer of compromise; and that the Bureau of Customs had no authority to decide questions of ownership.

Motions for reconsideration of decisions of the Court of Appeals may be denied for failure to state the material dates showing that it was filed on time as required by Section 1, Rule 9 of the Revised Internal Rules of the Court of Appeals and that the subsequent compliance therewith did not cure the defect.

Factual findings of the Court of Tax Appeals, affirmed by the Court of Appeals, are entitled to the highest respect and are well-nigh conclusive upon the Court.

The Tariff and Customs Code authorizes the forfeiture of any article which is removed contrary to law from any public or private warehouse under customs supervision, or released irregularly from Customs custody.

The government's right to recover the machineries proceeds from its right as lawful owner and possessor thereof and such right may be asserted no matter into whose hands the property may have come.

Compromise of customs duties, taxes and charges cannot be allowed where the machineries subject thereof had already been awarded to the highest bidder in a sale at public auction conducted by the Bureau of Customs.

SYLLABUS

1. REMEDIAL LAW; COURT OF APPEALS; MATERIAL DATE RULE; DENIAL OF MOTION FOR RECONSIDERATION FOR FAILURE TO COMPLY. - Petitioner cannot find fault with the denial of its motion for reconsideration. It admitted non-compliance with the requisites of Section 1, Rule 9 of the Revised Internal Rules of Procedure of the Court of Appeals, for indeed nothing in the motion indicated that it was filed on time. Its Compliance anteriorly filed did not cure the defect. It must be stressed that the rule was designed to save the Court of Appeals from reviewing the record to determine whether the motion was indeed filed on time.

2. TAXATION; TARIFF AND CUSTOMS CODE; FORFEITURE; REMOVAL OF ARTICLES FROM CUSTOM'S CUSTODY WITHOUT PAYMENT OF DUTIES. - The Tariff and Customs law subjects to forfeiture any article which is removed contrary to law from any public or private warehouse under customs supervision, or released irregularly from Customs custody. Before forfeiture proceedings are instituted the law requires the presence of probable cause. Once established, the burden of proof is shifted to the claimant. Under Section 2536 of the TCC, the Commissioner of Customs, Collector of Customs or any other customs officer, with prior authorization in writing by the Commissioner, may demand evidence of payment of duties and taxes on foreign articles openly offered for sale or kept in storage; and if no such evidence can be produced, such articles may be seized and subjected to forfeiture proceedings; provided, however, that during such proceedings the person or entity from whom such articles were seized shall be given an opportunity to prove or show the source of such articles and the payment of duties and taxes thereon.

3. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACTS OF COURT OF TAX APPEALS AFFIRMED BY COURT OF APPEALS, ENTITLED TO GREAT RESPECT. - It is settled that the factual findings of the CTA, as affirmed by the Court of Appeals, are entitled to the highest respect and are

well-nigh conclusive upon this court. Based on the findings of the CTA, the subject machineries were liable to forfeiture under customs law. Upon demand for evidence of payment of duties and taxes, petitioner failed to present receipts. What it presented were two notarized deeds of sale executed in 1985 and 1986 between petitioner as buyer and Jaina Perez as seller. Despite ample opportunity to discharge the burden of proof, petitioner failed to prove its claim over the machineries. Jaina Perez, the supposed seller, was subpoenaed to substantiated petitioner's claim; but she never appeared. The notaries public before whom the deed of sale were notarized were not presented either. More importantly, there was no intervening transaction between Perez and the Bureau of Customs concerning the subject machineries that would have transferred their ownership to Perez and thereafter to petitioner. That the goods were allegedly sold to petitioner in 1985 and 1986 while they were still under Customs custody and prior to the auction sale is legally untenable and unacceptable.

4. TAXATION; TARIFF AND CUSTOMS CODE; FORFEITURE; NOT PREMISED ON TERMINATION OF IMPORTATION BUT ILLEGAL WITHDRAWAL OF GOODS; CASE AT BAR. - The forfeiture of the subject machineries however, is not dependent on whether or not the importation was terminated; rather it is premised on the illegal withdrawal of goods from Customs custody.

5. ID.; ID.; IMPORTATION; WHEN TERMINATED. - Importation is deemed terminated upon payment of duties, taxes and other charges due or secured to be paid upon the articles at a port of entry, and upon the grant of a legal permit for withdrawal; or in case said articles are free of duties, taxes and other charges, until they have legally left the jurisdiction of the customs.

6. ID.; ID.; FORFEITURE; RETROACTS FROM DATE OF ILLEGAL WITHDRAWAL OF GOODS. - Regardless of the termination of importation, Customs authorities may validly seize goods which, for all intents and purposes, still belong to the government. This is so because forfeiture takes effect immediately upon the commission of the offense. The forfeiture of the subject machineries, therefore, retroacted to the date they were illegally withdrawn from Customs custody. The governments right to recover the machineries proceeds from its right as lawful owner and possessor thereof upon abandonment by Filipinas Marble. Such right may be asserted no matter into whose hands the property may have come, and the condemnation when obtained avoids all intermediate alienations. To sanction petitioner's possession of the property would be to close our eyes to acts of defraudation practiced upon the government.

7. ID.; ID.; ID.; BASIS DIFFERENT FROM GOVERNMENT'S OBLIGATION TO DELIVER GOODS TO HIGHEST BIDDER. - The forfeiture of the subject machineries rests on a different statutory basis from Policarpio's right to receive the property as winning bidder in the auction sale. The forfeiture proceedings were based upon the government's right to recover property illegally withdrawn from its custody. On the other hand, Policarpio's right stems from the government's contractual obligation to deliver the machineries to Policarpio as buyer in good faith at the public auction sale.

8. CIVIL LAW; SPECIAL CONTRACTS; SALES; THING TO BE SOLD MUST BE LICIT AND VENDOR WITH RIGHT TO TRANSFER OWNERSHIP; CASE AT BAR. - Before such machineries were allegedly sold to petitioner they formed part of the mass of Customs property stored inside the Mina Amapola CY-CFS in Taguig. Records of the Bureau of Customs indicated no transactions concerning the subject machineries except the abandonment by Filipinas Marble and the auction sale to Policarpio. Contrary to petitioners contention, it is the sale of the subject machineries to petitioner by Jaina Perez, not the sale to Policarpio, that is ineffective. The government never dealt with Jaina Perez; hence Perez, having no right over the property, had nothing to transfer to petitioner even if petitioner's alleged acquisition of the property was in good faith and for value.

9. ID.; ID.; MACHINERIES AWARDED TO HIGHEST BIDDER; NO LONGER SUBJECT OF COMPROMISE. - Lastly, as opined by the Collector of Customs, compromise could not be allowed anymore, since the subject machineries had already been awarded to Policarpio, being the highest bidder in the public auction sale conducted by the Bureau of Customs.

FIRST DIVISION

[G.R. No. 129680. September 1, 1999]

CARRARA MARBLE PHILIPPINES, INC., petitioner, vs. COMMISIONER OF CUSTOMS, respondent.

D E C I S I O N

DAVIDE, JR., C.J.:

In this petition for review on certiorari, petitioner urges us to set aside the decision and resolution of the Court of Appeals in CA-G.R. SP No. 42976 affirming the decision of the Court of Tax Appeals (CTA). The CTA upheld the legality of the forfeiture proceedings conducted by the Collector of Customs of articles illegally withdrawn from Customs custody, and ordered their delivery to the winning bidder in the auction sale.

As summarized by the Court of Appeals, the antecedents of the case are as follows:

On April 10, 1987, the Collector of Customs conducted a public auction sale of various articles duly declared abandoned after appropriate proceedings. Included in the sale was Lot 15 advertised as “15 tons more or less, of marble processing machine and grinding machine, rusty and in junk condition,” stored at the Mina Amapola CY-CFS, Taguig, Metro Manila, since 1979. Lot 15 was awarded to Engr. Franklin G. Policarpio as the highest bidder thereof, after payment of P61, 250.00.

On April 21, 1987, after Engr. Policarpio had taken delivery of said lot, he wrote the Collector of Customs informing him that the following items supposed to be part of Lot 15 were missing: a Special Circular Saw (for vertical and horizontal cutting of strips Model Block Tailor BK-1200 with switch gear and contractor control and reinforcement main motor) and a Diamond Sawing Machine (Model TBS 500D, including switch gear cabinet with contractor for all motors).

The missing machineries were later found installed in the compound of petitioner Carrara Marble Philippines, Inc., Lipa City, Batangas, true to the information furnished by Engr. Policarpio himself.

Consequently, for alleged violations of Section 2536 (non-payment of duties and taxes) and Section 2530[e] (illegal removal of articles from the warehouse) of the Tariff and Customs Code (TCC), the aforesaid machineries were seized (per Warrant of Seizure and Detention dated May 29, 1991) from the compound of petitioner at Banay-banay, Lipa City.

During the seizure and forfeiture proceedings, Carrara Marble Philippines, Inc., failed to present evidence of payment of duties and taxes on the subject machineries. In its defense, it claimed, that the machineries were purchased locally from a certain Jaina Perez as evidenced by two notarized deeds of absolute sale dated December 20, 1985 (for the trimming machine) and October 28, 1986 (for the high speed blocksaw). Meanwhile, Engr. Policarpio intervened in said proceedings, claiming ownership over the subject machineries

as the successful bidder in the public auction sale conducted by the Bureau of Customs wherein said machineries were part of Lot 15.

In a letter dated November 14, 1992, petitioner offered to settle the case in accordance with Article 2307 of the TCC. However, said offer was refused by the District Collector of Customs on the ground that said articles were already auctioned off and awarded to Engr. Policarpio.

Thereafter, the Collector of Customs on June 24, 1992, declared the machineries forfeited in favor of the government. Petitioner appealed from the Collector of Customs’ decision to the Commissioner of Customs who, on July 2, 1993, affirmed said decision.

From said Decision of the Commissioner of Customs, appeal by way of a petition for review was further taken by herein petitioner Carrara Marble Philippines, Inc., to the Court of Tax Appeals. Engr. Franklin Policarpio, as intervenor, also appealed the same decision of the Commissioner of Customs to the Tax Court, which was docketed as CTA Case No. 5057, and entitled “Engineer Franklin Policarpio vs. The Honorable Commissioner of Customs and Deputy Commissioner of Customs Licerio Evangelista.”

The CTA allowed Mary Ann Luz Puno and other individuals claiming to be minority stockholders and receivers of petitioner to intervene in the proceedings. The intervenors’ prayer for possession of the machineries was granted conditioned upon the posting of a cash bond. However, they submitted the case for decision on 4 March 1996 without posting the bond.

On 7 May 1996, the CTA dismissed the petition for review filed by petitioner; affirmed the authority of the Customs Commissioner to seize the machineries; and ordered the Commissioner to deliver the articles to Policarpio as the highest bidder in accordance with its decision in CTA Case No. 5057.

The intervenors moved for the reconsideration of the CTA’s decision. On 8 October 1996, the CTA denied the motion for reconsideration.

On appeal, the Court of Appeals sustained the CTA and dismissed the petition for lack of merit, capitalizing on the contract of sale between the Bureau of Customs and Policarpio, which allows a refund in case of loss or short-delivery. In case a refund is made, it is as if duties, taxes and charges on the articles remained unpaid. Consequently, importation could

not be considered terminated, and the Collector of Customs was still authorized to seize the articles pursuant to Section 2530(e) of the Tariff and Customs Code (TCC).

The Court of Appeals noted that petitioner’s argument that with the termination of importation the Bureau of Customs lost its jurisdiction over the res was premised upon Policarpio’s ownership of the property. Such premise conflicted with petitioner’s pretension of being a buyer in good faith and for value, and foreclosed the possibility of a compromise. The notarized deeds of sale were merely prima facie evidence of ownership which failed to prove petitioner’s claim over the property. Section 2535 of the TCC laying the burden of proof on the claimant still applied. The Court of Appeals concluded that the jurisdiction of the Collector of Customs in forfeiture proceedings extends to all questions incidental thereto including the authority to determine the true ownership of forfeited property.

Petitioner then filed on 6 June 1997 a motion for reconsideration of the decision of the Court of Appeals. That motion was, however, denied for failure to state the material dates showing that it was filed on time, as required by Section 1, Rule 9, of the Revised Internal Rules of the Court of Appeals.

Hence this petition.

Petitioner insists that the purpose of Section 1, Rule 9 of the Revised Internal Rules of the Court of Appeals requiring motions for reconsideration to state material dates is to show that they were filed on time. It had substantially complied with that requirement because its Compliance dated 28 May 1997 indicated that it received the challenged decision on 23 May 1997; thus, its filing of the motion for reconsideration was well within the reglementary period prescribed by law.

Petitioner likewise contends that the Bureau of Customs had no jurisdiction over the res because importation had terminated. Forfeiture as a remedy of the government is authorized under Section 2530 of the TCC only when and while the articles are in the custody or within the jurisdiction of customs authorities or in the hands or subject to the control of the importer. When the articles were awarded to Policarpio as the winning bidder in the auction sale, taxes, duties and charges due on them were considered paid; the government was compensated, and so it no longer stood to suffer damages from the importation. Furthermore, with the legal permit for withdrawal of the articles having been granted, the government lost its lien over the property. The “possibility” of a refund in case of short

delivery under the warranty in Policarpio’s deed of sale only extends the definition of importation.

Asserting its “prior right” over the machineries, petitioner also argues that the Bureau of Customs was without authority to seize the same. There was no probable cause that would warrant seizure and forfeiture of the subject articles. Neither was there evidence that the articles were part of Lot 15. Petitioner acquired the machineries in good faith and for value, as confirmed by two notarized deeds of sale; and it was unaware that they were imported. Hence, resort should have been through judicial process under Article 433 of the Civil Code. Besides, before forfeiture proceedings can be instituted as provided for in Section 2530 of the TCC, there must be fraud upon the government. Fraud cannot be presumed; and without evidence that petitioner acquired the machineries fraudulently, it must be presumed the owner of the articles.

Moreover, petitioner maintains that no justifiable reason existed for denying its offer of a compromise in accordance with Section 2307 of the TCC. There was no fraud in the importation of the property. Neither did petitioner’s offer signify that it waived previous defenses and admitted liability.

Finally, petitioner reiterates that the Bureau of Customs had neither authority to seize the articles to determine their true ownership nor jurisdiction to decide questions of ownership.

Respondent sees the matter differently. It accuses petitioner of forum-shopping and of employing delaying tactics and maneuvers which hamper the ends of justice. Respondent contends that petitioner’s substantial compliance with Section 1, Rule 9 of the Revised Internal Rules of the Court of Appeals notwithstanding, the law allows dismissal of the motion for reconsideration for failure to comply with the material data rule.

Respondent also insists that the Bureau of Customs had jurisdiction over the machineries. As held by the CTA and the Court of Appeals, the loss of the machineries would mean their non-delivery to Policarpio, thus creating an obligation on the part of the government to refund a proportionate amount of the purchase price paid by Policarpio. Fraudulent removal of the machineries from the warehouse under Customs supervision made Section 2530 of the TCC applicable.

Respondent further points out that petitioner was unable to prove that the subject items were indeed sold to it by Jaina Perez. The latter and the notaries public who notarized the

alleged deeds of sale were not presented as witnesses. Besides, said items were stolen; so the alleged seller had no right to pass on to petitioner as buyer. Likewise, petitioner’s failure to present receipts validating its ownership of the property was sufficient cause for instituting seizure and forfeiture proceedings. Pursuant to Section 2535 of the TCC, the burden of proof was shifted to petitioner, who, however, failed to substantiate its good faith and lack of knowledge of the importation.

Finally, respondent claims that settlement of seizure cases is not allowed under Section 2307 of the TCC where the importation is absolutely prohibited or the release of the property is contrary to law, which is what obtains in this case. Petitioner’s offer of compromise puts it in estoppel and negates its argument questioning the jurisdiction of the Bureau of Customs.

The questions for our resolution are the following:

(1) Was the dismissal of the petition by the Court of Appeals under Section 1, Rule 9 of its Revised Internal Rules of Procedure correct?

(2) Was the forfeiture of articles in the possession of a third party made after the sale at public auction proper?

(3) Has the importation been terminated?

(4) Who has the right to retain possession over the machineries?

Petitioner cannot find fault with the denial of its motion for reconsideration. It admitted non-compliance with the requisites of Section 1, Rule 9 of the Revised Internal Rules of Procedure of the Court of Appeals, for indeed nothing in the motion indicated that it was filed on time. Its Compliance anteriorly filed did not cure the defect. It must be stressed that the rule was designed to save the Court of Appeals from reviewing the record to determine whether the motion was indeed filed on time.

And now on the substantive issues.

The Tariff and Customs law subjects to forfeiture any article which is removed contrary to law from any public or private warehouse under customs supervision, or released irregularly from Customs custody. Before forfeiture proceedings are instituted the law requires the presence of probable cause. Once established, the burden of proof is shifted to the

claimant. Under Section 2536 of the TCC, the Commissioner of Customs, Collector of Customs or any other customs officer, with prior authorization in writing by the Commissioner, may demand evidence of payment of duties and taxes on foreign articles openly offered for sale or kept in storage; and if no such evidence can be produced, such articles may be seized and subjected to forfeiture proceedings; provided, however, that during such proceedings the person or entity from whom such articles were seized shall be given an opportunity to prove or show the source of such articles and the payment of duties and taxes thereon.

The findings of fact of the CTA on this matter is informative.

So it remains undisputed that after the auction sale and before delivery to Mr. Policarpio, as the winning bidder, the subject articles were carted away mysteriously from customs custody and reappeared thereafter in the premises of herein petitioner. There is no question that before delivery of these items to Mr. Franklin Policarpio, these items were under the custody of the Bureau of Customs and when they were about to be handed over to Mr. Policarpio, the latter discovered the said items to be missing.

It is settled that the factual findings of the CTA, as affirmed by the Court of Appeals, are entitled to the highest respect and are well-nigh conclusive upon this court. Based on the findings of the CTA, the subject machineries were liable to forfeiture under customs law. Upon demand for evidence of payment of duties and taxes, petitioner failed to present receipts. What it presented were two notarized deeds of sale executed in 1985 and 1986 between petitioner as buyer and Jaina Perez as seller.

Despite ample opportunity to discharge the burden of proof, petitioner failed to prove its claim over the machineries. Jaina Perez, the supposed seller, was subpoenaed to substantiate petitioner’s claim; but she never appeared. The notaries public before whom the deed of sale were notarized were not presented either. More importantly, there was no intervening transaction between Perez and the Bureau of Customs concerning the subject machineries that would have transferred their ownership to Perez and thereafter to petitioner. That the goods were allegedly sold to petitioner in 1985 and 1986 while they were still under Customs custody and prior to the auction sale is legally untenable and unacceptable.

Contrary to the CTA’s rationale for sanctioning the forfeiture, importation was terminated after Policarpio signed Gate Pass No. 5136 on 10 April 1987 evidencing withdrawal of Lot No.

15 from customs custody. Importation is deemed terminated upon payment of duties, taxes and other charges due or secured to be paid upon the articles at a port of entry, and upon the grant of a legal permit for withdrawal; or in case said articles are free of duties, taxes and other charges, until they have legally left the jurisdiction of the customs. The forfeiture of the subject machineries however, is not dependent on whether or not the importation was terminated; rather it is premised on the illegal withdrawal of goods from Customs custody.

Thus, regardless of the termination of importation, Customs authorities may validly seize goods which, for all intents and purposes, still belong to the government. This is so because forfeiture takes effect immediately upon the commission of the offense. The forfeiture of the subject machineries, therefore, retroacted to the date they were illegally withdrawn from Customs custody. The government’s right to recover the machineries proceeds from its right as lawful owner and possessor thereof upon abandonment by Filipinas Marble. Such right may be asserted no matter into whose hands the property may have come, and the condemnation when obtained avoids all intermediate alienations. To sanction petitioner’s possession of the property would be to close our eyes to acts of defraudation practiced upon the government.

Incidentally, the forfeiture of the subject machineries rests on a different statutory basis from Policarpio’s right to receive the property as winning bidder in the auction sale. The forfeiture proceedings were based upon the government’s right to recover property illegally withdrawn from its custody. On the other hand, Policarpio’s right stems from the government’s contractual obligation to deliver the machineries to Policarpio as buyer in good faith at the public auction sale.

Petitioner’s contention of being a buyer in good faith and for value with a prior right over the property is likewise untenable. Petitioner allegedly derived its right over the property through the deeds of sale executed by and between it, as buyer, and a certain Jaina Perez, as seller, prior to the auction sale. The following, however, is worthy to note:

[T]he subject pieces of machinery were part of lot 15 which was sold in an auction sale to satisfy the unpaid taxes, duties and other charges. Such machineries were imported but later abandoned by Filipinas Marble in favor of the government. The fact that this shipment formed part of lot 15 is undisputed by both parties to this case.

Before such machineries were allegedly sold to petitioner they formed part of the mass of Customs property stored inside the Mina Amapola CY-CFS in Taguig. Records of the Bureau

of Customs indicated no transactions concerning the subject machineries except the abandonment by Filipinas Marble and the auction sale to Policarpio. Contrary to petitioner’s contention, it is the sale of the subject machineries to petitioner by Jaina Perez, not the sale to Policarpio, that is ineffective. The government never dealt with Jaina Perez; hence Perez, having no right over the property, had nothing to transfer to petitioner even if petitioner’s alleged acquisition of the property was in good faith and for value.

Lastly, as opined by the Collector of Customs, compromise could not be allowed anymore, since the subject machineries had already been awarded to Policarpio, being the highest bidder in the public auction sale conducted by the Bureau of Customs.

WHEREFORE, the instant petition is hereby DISMISSED, for lack of merit, and the challenged decision of the Court of Appeals is AFFIRMED.

SO ORDERED.

Puno, Kapunan, Pardo, and Ynares-Santiago, JJ., concur.

SYNOPSIS

On April 27, 1992, a shipment from Hongkong arrived in the port of Manila on board the S/S Sea Dragon. Acting on information that the shipment violated certain provisions of the Tariff and Customs Code, agents of the Economic Intelligence and investigation Bureau seized the shipment while in transit to the Trans Orient yard-container station. On May 21, 1992, District Collector of Customs Emma M. Rosqueta issued the corresponding warrant of seizure and detention. Accordingly, the case was set for hearing but herein petitioner failed to appear and was declared in default. The case was submitted for decision and on August 26, 1992, District Collector Rosqueta decreed the forfeiture of the shipment in favor of the government to be disposed of in accordance with law. Thereafter, petitioner filed a petition for redemption of the shipment which was, however, denied by respondent Commissioner Parayno Jr. The case was brought to the Court of Tax Appeals (CTA) which ruled that since no fraud was found on the part of the redemptioner, petitioner be allowed the petitioner to redeem the shipment upon payment of its computed domestic market value, however, respondent Court of Appeals sustained the denial of the redemption by respondent Commissioner of Customs and set aside the ruling of the CTA. Hence, this petition.

The Court found the petition impressed with merit. It ruled that respondent Court of Appeals committed reversible error in rendering the assailed decision. The findings of the respondent Commissioner of Customs which provided the bases for denying petitioner’s offer of redemption were his own, not of the EIIB, and were merely stated in his 1st endorsement with no evidence whatsoever to substantiate them. Moreover, taking into consideration the circumstances obtaining in the present case, namely, the absence of fraud, the importation is not absolutely prohibited and the release of the property would not be contrary to law, the Court deemed it proper to allow the redemption of the forfeited shipment by petitioner upon payment of its computed domestic market value. Doing so is definitely in keeping with the two-way intent of E.O. 38. Accordingly, the petition was granted and the decision of respondent CA was set aside.

SYLLABUS

1. POLITICAL LAW; ADMINISTRATIVE LAW; FINDINGS OF FACT OF AN ADMINISTRATIVE AGENCY MUST BE RESPECTED SO LONG AS THEY ARE SUPPORTED BY SUBSTANTIAL EVIDENCE; CASE AT BAR. — We rule that respondent Court of Appeals committed reversible error in rendering the assailed decision. The findings of respondent Commissioner of

Customs which provided the bases for denying petitioner’s offer of redemption were his own, not of the EIIB, and were merely stated in his 1 st Indorsement with no evidence whatsoever to substantiate them. These findings prompted petitioner to seek reconsideration and dispute them with these claims – x x x x First x x x x the shipment was not destined for stripping. It was then being transported to a CY-CFS operator where it would be examined by a customs appraiser who would determine the proper taxes and duties to be paid on the shipment. Second x x x x the petitioner is a legitimate corporation registered with the Securities and Exchange Commission in accordance with the laws of the Philippines x x x x On petitioner’s second motion for reconsideration, District Collector Rosqueta was silent on the first claim but upheld the second claim. According to her, petitioner is a juridical person duly organized in accordance with the laws of the Philippines and is qualified as a consignee; it is not fictitious as evidenced by its Articles of Incorporation registered with the Securities and Exchange Commission. Despite these, respondent Commissioner of Customs maintained his denial of the redemption based on his previous unsubstantiated findings. It is settled that findings of fact of an administrative agency must be respected so long as they are supported by substantial evidence or that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. Lacking support, the factual findings of respondent Commissioner of Customs cannot stand on their own and therefore not binding on the courts.

2. TAXATION LAW; FRAUD; FRAUD CONTEMPLATED BY LAW MUST BE ACTUAL AND NOT CONSTRUCTIVE; CASE AT BAR. — In Aznar, as reiterated in Farolan, we clarified that the fraud contemplated by law must be actual and not constructive. It must be intentional, consisting of deception willfully and deliberately done or resorted to in order to induce another to give up some right. The misdeclarations in the manifest and rider cannot be ascribed to petitioner as consignee since it was not the one that prepared them. As we said in Farolan, if at all, the wrongful making or falsity of the documents can only be attributed to the foreign suppliers or shippers. Moreover, it was not shown in the forfeiture decision that petitioner had knowledge of any falsity in the shipping documents. District Collector Rosqueta’s comment on petitioner’s second motion for reconsideration is enlightening. “While the shipment was misdeclared in the rider and the manifest, the consignee is innocent to the facts stated therein as it had no hand in their preparation or issuance.” We mention in passing that in having thus stated, she in effect nullified her prior finding that petitioner violated the cited provisions of the Tariff and Customs Code as amended. Consequently, we agree with the finding of the CTA that fraud was not committed by petitioner in the importation of the shipment. Taking into consideration the circumstances obtaining in the present case, namely, the absence of fraud, the importation is not

absolutely prohibited and the release of the property would not be contrary to law, the Court deems it proper to allow the redemption of the forfeited shipment by petitioner upon payment of its computed domestic market value. Doing so is definitely in keeping with the two-way intent of E. O. No. 38, to wit, to expedite the collection of revenues and hasten the release of cargoes under seizure proceedings to the end that importers and exporters will benefit in the form of reduction in expenditures and assurance of return of their investments that have been tied up with their importations.

3. ID.; CUSTOMS AND TARIFFS CODE; FORFEITURE OF SEIZED GOODS IS A PROCEEDING AGAINST THE GOODS AND NOT AGAINST THE OWNER; CASE AT BAR. — The argument surfs on a wrong premise. Forfeiture of seized goods in the Bureau of Customs is a proceeding against the goods and not against the owner. It is in the nature of a proceeding in rem, i.e., directed against the res or imported articles and entails a determination of the legality of their importation. In this proceeding, it is in legal contemplation the property itself which commits the violation and is treated as the offender, without reference whatsoever to the character or conduct of the owner. The issue here is limited to whether the imported goods should be forfeited and disposed of in accordance with law for violation of the Tariff and Customs Code. Hence, the ruling of District Collector Rosqueta in the forfeiture case, insofar as the aspect of fraud is concerned, is not conclusive; nor does it preclude petitioner from invoking absence of fraud in the redemption proceedings. Significantly, while District Collector Rosqueta decreed the forfeiture of the subject goods for violation of the Tariff and Customs Code, she nevertheless recommended the approval of petitioner’s offer of redemption, and categorically acknowledged that as consignee there was no fraud on its part.

Puno, J., dissenting opinion:

1. TAXATION; TARIFF AND CUSTOMS CODE; FORFEITURE OF SEIZED PROPERTY; REDEMPTION, WHEN NOT ALLOWED.— Under Section 2307 of the Tariff and Customs Code, redemption is not allowed in three instances: (1) when there is fraud; (2) when the importation is absolutely prohibited; and (3) when the surrender of the property to the person offering the redemption would be contrary to law.

2. ID.; ID.; ID.; ID.; FRAUD UNDER CUSTOMS MEMORANDUM ORDER NO. 87-92; RULE .— Respondent Commissioner of Customs has shown by clear and convincing evidence the existence of fraud in connection with the documentation of the seized goods. The undisputed facts reveal that the documents covering the shipment in question were

falsified. The EIIB thus concluded that the shipment was made to appear to be an innocuous consolidation shipment destined for stripping at an outside Customs Yard-Customs Freight Services in order to conceal the textile fabrics. These falsities constitute fraud as defined in Section 1 of Customs Memorandum Order No. 87-92, thus: FRAUD — the following cases herein enumerated demonstrate the presence of fraud: l.a. the use of forged or spurious documents; 1.b. prima facie evidence of fraud under Section 2503 of the TCCP on undervaluation, misclassification, and misdeclaration in entry; l.c. the use of false machinations, misrepresentation, concealment of facts that resulted in loss of revenues reaching levels that is unconscionable and unbecoming of a law-abiding taxpayer and citizen; 1.d. other cases similarly situated. Thus, under the circumstances, petitioner may not be allowed to redeem the seized goods under Section 2307 of the Tariff and Customs Code.

APPEARANCES OF COUNSEL

Soo Gutierrez Leogardo Lee for petitioner.

The Solicitor General for respondents.

SECOND DIVISION

[G.R. No. 126634. January 25, 1999]

TRANSGLOBE INTERNATIONAL, INC., petitioner, vs. COURT OF APPEALS and COMMISSIONER OF CUSTOMS, respondents.

D E C I S I O N

BELLOSILLO, J.:

On 27 April 1992 a shipment from Hongkong arrived in the Port of Manila on board the "S/S Sea Dragon." Its Inward Foreign Manifest indicated that the shipment contained 1,054 pieces of various hand tools. Acting on information that the shipment violated certain provisions of the Tariff and Customs Code as amended, agents of the Economic Intelligence and Investigation Bureau (EIIB) seized the shipment while in transit to the Trans Orient container yard-container freight station. An examination thereof yielded significant results -

1. The 40 ft. van was made to appear as a consolidation shipment consisting of 232 packages with Translink Int'l. Freight Forwarder as shipper and Transglobe Int'l., Inc. as consignee;

2. There were eight (8) shippers and eight (8) consignees declared as co-loaders and co-owners of the contents of the van, when in truth the entire shipment belongs to only one entity;

3. Not one of the items declared as the contents of the van, i.e., various hand tools, water cooling tower g-clamps compressors, bright roping wire and knitting machine w(as) found in the van. Instead the van was fully stuffed with textile piece goods.

On those accounts which were deemed to constitute a violation of Sec. 2503 in relation to Sec. 2530, pars. (f) and (m), subpars. 3, 4 and 5, of the Tariff and Customs Code, the EIIB recommended seizure of the entire shipment. On 21 May 1992 District Collector of Customs Emma M. Rosqueta issued the corresponding warrant of seizure and detention.

The case was set for hearing on 2 June 1992 but petitioner Transglobe International, Inc., or its duly authorized representative, failed to appear despite due notice. Resetting was ordered to 19 June 1992, yet, for the same reason was further reset to 8 July 1992. Still petitioner or its representative was unable to appear which thus led to its being declared in default. The case was then considered submitted for decision based on existing documents. On 26 August 1992 after finding that a violation of the cited provisions was indeed committed, District Collector Rosqueta decreed the forfeiture of the shipment in favor of the government to be disposed of in accordance with law.

Thereafter petitioner filed a petition for redemption of the shipment. On 2 October 1992 Hearing Officer Geoffrey G. Gacula recommended that the petition be given due course and that petitioner be allowed to effect the release of the shipment upon payment of P1,300,132.04 representing its domestic market value. Hearing Officer Gacula took into consideration the following -

Record shows that the shipment consists of goods which are in legal contemplation not prohibited, nor the release thereof to the claimant contrary to law x x x x the spirit and intent of Executive Order No. 38, to increase and accelerate revenue collection by the government thru redemption of forfeited cargoes, which would also benefit importers by giving them the chance to recover portions of their investment x x x x

Chief of the Law Division Buenaventura S. Tenorio concurred in the recommendation. On the same day, District Collector Rosqueta recommended approval thereof and forwarded the case to respondent Commissioner of Customs Guillermo L. Parayno Jr. through Deputy Commissioner Licerio C. Evangelista. On 7 October 1992 the latter likewise recommended favorable action thereon. However respondent Commissioner Parayno Jr. denied the offer of redemption in his 1st Indorsement dated 27 November 1992 for these reasons -

1. The shipment was made to appear to be an innocuous consolidation shipment destined for stripping at an outside CY-CFS in order to conceal the textile fabrics;

2. The eight (8) co-loaders/consignees of the shipment are all fictitious;

3. Under Section 3B, CMO 87-92, offers of redemption shall be denied when the seized shipment is consigned to a fictitious consignee.

Thus respondent Commissioner Parayno Jr. instructed the Auction and Cargo Disposal Division of the Port of Manila to include the shipment in the next public auction. On 8 February 1993 reconsideration was denied. Petitioner moved for another reconsideration which was referred to District Collector Rosqueta for comment. Even after further review, she maintained her previous recommendation allowing redemption -

1. Since no entry has been filed so far, the consignee could not be faulted for misdeclaration under Section 2503 of the Tariff and Customs Code. While the shipment was misdeclared in the rider and the manifest, the consignee is innocent of the facts stated therein as it had no hand in their preparation or issuance. Law and regulation allow the amendment of the manifest at any time before the filing of entry in order to protect the innocent consignee.

2. Transglobe International, Inc., is a juridical person duly organized in accordance with the laws of the Philippines and is qualified as a consignee. It is not fictitious as evidenced by its Articles of Incorporation registered with the Securities and Exchange Commission.

3. The shipment consists of goods which are in legal contemplation not prohibited, nor the release thereof to the Claimant contrary to law, and the redemption offer is well within the purview of Executive Order No. 38.

Nevertheless, reconsideration was again denied on 1 July 1993. On 4 August 1993 the forfeiture of the shipment and denial of the request for redemption were affirmed by respondent Commissioner Parayno Jr.

In the appeal which was solely concerned with the propriety of redemption, the Court of Tax Appeals (CTA) expressed a different view. Relying on Sec. 1 of Executive Order No. 38, as applied in Gazzingan v. Commissioner of Customs since no fraud was found on the part of the redemptioner, the CTA directed on 27 June 1995 that petitioner be allowed to redeem the shipment upon payment of its computed domestic market value.

However respondent Court of Appeals sustained the denial of the redemption by respondent Commissioner of Customs. On 28 June 1996 it set aside the ruling of the CTA on the ratiocination that -

The findings of the Economic Intelligence and Investigation Bureau: 'that the shipment was made to appear to be an innocuous consolidation shipment destined for stripping at an outside CY-CFS in order to conceal the textile fabrics,' and 'that the eight (8) coloaders/consignees were all fictitious' had not been refuted during the seizure proceedings by respondent Transglobe International, Inc. The failure of respondent Transglobe to refute this fact negates its claim that no violation of the above cited provisions (Sec. 2503 in relation to Sec. 2530, pars. (f) and (m), subpars. 3, 4 and 5 of the Tariff and Customs Code as amended) had been committed. The findings of the EIIB above referred to remain unassailed and uncontradicted. Said findings clearly show badges of fraud x x x x The seizure of the property in question was made upon findings that the documents covering the said shipment were forged, thus:

FRAUD - the following cases herein enumerated demonstrate the presence of fraud: 1.a. The use of forged or spurious documents x x x x (Section 1, CMO-87-92).

On 3 September 1996 reconsideration was denied.

We now resolve the issue of whether petitioner should be allowed to redeem the forfeited shipment.

Petitioner asserts that it is not guilty of fraud because, as held in Farolan Jr. v. Court of Tax Appealsand Aznar v. Court of Tax Appeals, the fraud referred to is one that is intentional with the sole object of avoiding payment of taxes. While petitioner admits that it is the only

consignee of the cargo and that the van contains textiles, contrary to those declared in the manifest and rider, it avers that these discrepancies do not evince deliberate evasion of taxes or payment of duties, especially considering that it is a duly registered domestic corporation, and that it has no knowledge or participation in the execution of the manifest and the rider thereon.

A violation of Sec. 2503 in relation to Sec. 2530, pars. (f) and (m), subpars. 3, 4 and 5, of the Tariff and Customs Code as amended was found by the Bureau of Customs. Section 2503 deals with undervaluation, misclassification and misdeclaration in entry. On the other hand, Sec. 2530, pars. (f) and (m), subpars. 3, 4 and 5 provides -

Sec. 2530. Property Subject to Forfeiture Under Tariff and Customs Law. - Any vehicle, vessel or aircraft, cargo, article and other objects shall, under the following conditions be subject to forfeiture x x x x

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

m. Any article sought to be imported or exported x x x x

(3) On the strength of a false declaration or affidavit executed by the owner, importer, exporter or consignee concerning the importation of such article;

(4) On the strength of a false invoice or other document executed by the owner, importer, exporter or consignee concerning the importation or exportation of such article; and

(5) Through any other practice or device contrary to law by means of which such article was entered through a customhouse to the prejudice of the government.

From the decision of the District Collector of Customs decreeing forfeiture, petitioner Transglobe International, Inc., filed a petition for redemption pursuant to Sec. 2307 of the Tariff and Customs Code as amended by Sec. 1 of E. O. No. 38 which states -

Sec. 2307. Settlement of Case by Payment of Fine or Redemption of Forfeited Property. - Subject to approval of the Commissioner, the District Collector may, while the case is still

pending except when there is fraud, accept the settlement of any seizure case provided that the owner, importer, exporter, or consignee or his agent shall offer to pay to the collector a fine imposed by him upon the property, or in case of forfeiture, the owner, exporter, importer or consignee or his agent shall offer to pay for the domestic market value of the seized article. The Commissioner may accept the settlement of any seizure case on appeal in the same manner (underscoring supplied) x x x x Settlement of any seizure case by payment of the fine or redemption of forfeited property shall not be allowed in any case where the importation is absolutely prohibited or where the release of the property would be contrary to law.

As a means of settlement, redemption of forfeited property is unavailing in three (3) instances, namely, when there is fraud, where the importation is absolutely prohibited, or where the release of the property would be contrary to law. Respondent Commissioner of Customs disallowed the redemption on the ground of fraud which consisted of the following: "The shipment was made to appear to be an innocuous consolidation shipment destined for stripping at an outside CY-CFS in order to conceal the textile fabrics; the eight (8) co-loaders/consignees of the shipment are all fictitious; and, under Section 3B, CMO 87-92, offers of redemption shall be denied when the seized shipment is consigned to a fictitious consignee." Respondent court sustained this ruling which it considered based on undisputed findings of the EIIB.

We rule that respondent Court of Appeals committed reversible error in rendering the assailed decision. The findings of respondent Commissioner of Customs which provided the bases for denying petitioner's offer of redemption were his own, not of the EIIB, and were merely stated in his 1st Indorsement with no evidence whatsoever to substantiate them. These findings prompted petitioner to seek reconsideration and dispute them with these claims -

x x x x First x x x x the shipment was not destined for stripping. It was then being transported to a CY-CFS operator where it would be examined by a customs appraiser who would determine the proper taxes and duties to be paid on the shipment. Second x x x x the petitioner is a legitimate corporation registered with the Securities and Exchange Commission in accordance with the laws of the Philippines x x x x

On petitioner's second motion for reconsideration, District Collector Rosqueta was silent on the first claim but upheld the second claim. According to her, petitioner is a juridical person duly organized in accordance with the laws of the Philippines and is qualified as a consignee;

it is not fictitious as evidenced by its Articles of Incorporation registered with the Securities and Exchange Commission. Despite these, respondent Commissioner of Customs maintained his denial of the redemption based on his previous unsubstantiated findings. It is settled that findings of fact of an administrative agency must be respected so long as they are supported by substantial evidence or that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. Lacking support, the factual findings of respondent Commissioner of Customs cannot stand on their own and therefore not binding on the courts.

In the appeal before the CTA, respondent Commissioner of Customs contended that the seizure of the shipment was made also upon a finding that the documents covering it were forged, thus constituting fraud as defined in Sec. 1, par. 1. a., CMO-87-92. This Section is of the same tenor as Sec. 2530, pars. (f) and (m), subpars. 3, 4 and 5, which for emphasis deals with falsities committed by the owner, importer, exporter or consignee or importation/exportation through any other practice or device. In Aznar, as reiterated in Farolan, we clarified that the fraud contemplated by law must be actual and not constructive. It must be intentional, consisting of deception willfully and deliberately done or resorted to in order to induce another to give up some right. The misdeclarations in the manifest and rider cannot be ascribed to petitioner as consignee since it was not the one that prepared them. As we said in Farolan, if at all, the wrongful making or falsity of the documents can only be attributed to the foreign suppliers or shippers. Moreover, it was not shown in the forfeiture decision that petitioner had knowledge of any falsity in the shipping documents. District Collector Rosqueta's comment on petitioner's second motion for reconsideration is enlightening: "While the shipment was misdeclared in the rider and the manifest, the consignee is innocent of the facts stated therein as it had no hand in their preparation or issuance." We mention in passing that in having thus stated, she in effect nullified her prior finding that petitioner violated the cited provisions of the Tariff and Customs Code as amended. Consequently, we agree with the finding of the CTA that fraud was not committed by petitioner in the importation of the shipment.

Taking into consideration the circumstances obtaining in the present case, namely, the absence of fraud, the importation is not absolutely prohibited and the release of the property would not be contrary to law, the Court deems it proper to allow the redemption of the forfeited shipment by petitioner upon payment of its computed domestic market value. Doing so is definitely in keeping with the two-way intent of E. O. No. 38, to wit, to expedite the collection of revenues and hasten the release of cargoes under seizure proceedings to the end that importers and exporters will benefit in the form of reduction in expenditures and assurance of return of their investments that have been tied up with their importations.

Finally, one may be tempted to argue that for failure to appear in the forfeiture proceedings despite due notice, petitioner was in default and deemed to have admitted its violation of Sec. 2503, in relation to Sec. 2530, pars. (f) and (m), as found by District Collector of Customs Rosqueta, interpreted by the Court of Appeals as “badges of fraud,” and, as a consequence, petitioner is now estopped from claiming that in the proceedings for redemption there was no fraud on its part.

The argument surfs on a wrong premise. Forfeiture of seized goods in the Bureau of Customs is a proceeding against the goods and not against the owner. It is in the nature of a proceeding in rem, i.e., directed against the res or imported articles and entails a determination of the legality of their importation. In this proceeding, it is in legal contemplation the property itself which commits the violation and is treated as the offender, without reference whatsoever to the character or conduct of the owner. The issue here is limited to whether the imported goods should be forfeited and disposed of in accordance with law for violation of the Tariff and Customs Code. Hence, the ruling of District Collector Rosqueta in the forfeiture case, insofar as the aspect of fraud is concerned, is not conclusive; nor does it preclude petitioner from invoking absence of fraud in the redemption proceedings. Significantly, while District Collector Rosqueta decreed the forfeiture of the subject goods for violation of the Tariff and Customs Code, she nevertheless recommended the approval of petitioner’s offer of redemption, and categorically acknowledged that as consignee there was no fraud on its part.

WHEREFORE, the petition is GRANTED. The Decision of respondent Court of Appeals of 28 June 1996 sustaining the denial of the redemption of the forfeited shipment and the Resolution of 3 September 1996 denying reconsideration are SET ASIDE. The Decision of the Court of Tax Appeals of 27 June 1995 ordering respondent Commissioner of Customs to allow petitioner Transglobe International, Inc., to redeem the forfeited shipment upon payment of its domestic market value amounting to P1,300,132.04 is REINSTATED.

SO ORDERED.

Mendoza, Quisumbing, and Buena, JJ., concur.