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354 Phil. 283


[ G.R. No. 104781, July 10, 1998 ]




Caltex, a corporation engaged in the oil industry, imported on various dates in 1982 light/medium mix special oil and heavy crude oil for which it was assessed the following ad valorem duties by the Collector of Customs:
1. P 97,697.143 - for the importation which arrived on April 10, 1982

2. P119,572.319 - for the importation which arrived on June 7, 1982

3. P 60,769.00 - for the importation which arrived on July 19, 1982
The basis of the assessments was a memorandum dated January 26, 1971, issued by then Acting Commissioner of Customs which provided that the duties and taxes in the importation of crude oil shall be based on the gross actual receipt without deducting the basic sediment and water (BSW). The full text of the memorandum[1] reads as follows:

“The Collector of Customs
Port of Manila
Port of Batangas
Subport of Limay, Bataan

Effective February 1, 1971, Customs duties and taxes on importation of crude oil shall be based on the gross actual receipts without deducting the BSW as has been previously done.

In determining the freight, the amount indicated in the bill of lading or as certified by the ship agent shall be used as basis. However, if it is found by the examiner that the actual receipt is more than the manifested weight, the freight shall be adjusted accordingly.

Please see to it that all the personnel concerned in your respective ports are informed of these instructions.

Acting Commissioner of Customs”

The assessments were timely protested by Caltex before the Collector of Customs on June 9, 1982, July 21, 1982 and September 8, 1982,[2] respectively, on the ground that the BSW contents should have been deducted before imposing the assessable ad valorem duties. The protests were, however, disregarded in a decision dated December 19, 1983.

Caltex then elevated the case to the Commissioner of Customs, who affirmed the Collector’s finding in a decision dated October 23, 1984, disposing as follows:
“WHEREFORE, finding no cogent reason to disturb the decision of the Collector of Customs, Port of Batangas, the same is hereby affirmed.

Undaunted, Caltex filed a petition for review with the Court of Tax Appeals (CTA) raising the same argument. On August 9, 1991,[3] the CTA ruled in favor of Caltex and reversed the decisions of both the Collector of Customs and Commissioner of Customs, the dispositive portion of the decision reads:
“WHEREFORE, the petition is GRANTED. Respondent [Commissioner of Customs] should and is hereby ordered to refund or credit to petitioner the following amounts: P212,959.00 under Entry No. 163/82; P759,385.00 under Entry No. 204/82; P532,732.00 under Entry No. 293/82.”[4]
Disagreeing with the CTA decision, the Commissioner of Customs filed a petition for review with the Court of Appeals questioning the decision. On February 12, 1992, the appellate court set aside the CTA’s decision and reinstated the ruling of the Commissioner of Customs.[5] In reversing the CTA’s decision, the Court of Appeals justified its ruling in this wise:
“The ad valorem duties should thus be based on the price paid by the importer as shown in the sales invoice. In this case, apparently the sale invoices do not indicate a distinct and separate price or value for the crude oil alone without the basic sediment and water contents or BSW. This is so because, as already stated, the BSW naturally occur in crude oil. In the case at bar, the BSW was only formed and produced during transit which should be considered an accession. Therefore, it should be included in the delivery of crude oil as part of what was actually purchased by the importer. (Civil Code, Art. 1166).

In computing the ad valorem duties on the basis of the sales invoice, (it becomes irrelevant whether the volume of crude oil increased while in transit by reason of BSW and other impurities, because the law mandates that the tax should be based on the home consumption value which is the price indicated in the sales invoice or the value of the importation. (Commissioner of Customs v. Proctor & Gamble, 169 SCRA 693 [1989]; Commissioner of Customs v. Court of Tax Appeals, 162 SCRA 730 [1988]; Commissioner of Customs v. Court of Tax Appeals, supra). Even if BSW contents are deducted from the actual gross barrels received by respondent Caltex, the price in the sales invoice would remain unaltered.”
The decretal portion of the decision reads:[6]
“WHEREFORE, the decision appealed from is REVERSED and the decision of the Collector of Customs as affirmed by the Commissioner of Customs is REINSTATED.”
Dismayed by the sudden turn of events, Caltex filed a motion for reconsideration which was, however, denied by the Court of Appeals in a resolution dated March 19, 1992.[7] Hence, this petition.

The basic issue for resolution is whether the Basic Sediment and Water, as impurities, should have been deducted from the gross actual receipts to determine the proper imposable ad valorem duties.

Before discussing the crux of the petition, a preliminary matter to be threshed out is Caltex’s assertion that the Collector of Customs should have published the memorandum which increases the imposable duties for importation of oil, for in the absence of publication, the same would be violative of due process and Section 3502[8] of the Tariff and Customs Code.[9] At this juncture, it is important to note that the non-publication of the memorandum was not denied by the Commissioner of Customs.[10]

There is no doubt that issuances by an administrative agency have the force and effect of law.[11] Corollarily, when the issuances are of “general applicability,” publication is necessary as a requirement of due process.[12] In this regard, Commonwealth Act No. 638,[13] mandates that besides legislations and resolutions of public nature of the Congress of the Philippines, executive and administrative orders and proclamations which have general applicability must also be published.

It cannot be disputed that the questioned memorandum increases the imposable duties for the importation of oil, a departure from the previous practice. To be sure, the increase invariably interferes with the property rights of oil importers. Hence, the statutory norm of publication is necessary, not only for effectivity, but also to apprise those affected. Since the assailed memorandum was never published, it follows the same cannot be upheld.[14]

We, however, are not unmindful of the possible effect of this ruling upon our country’s tax revenue, in light of the fact that the genesis of instant petition took place some 16 years ago. Likewise, we cannot close our eyes to the fact that the collections were done in reliance on the validity of the memorandum. Thus, we are constrained to adopt a practical and realistic solution for after all, custom duties are taxes on import and export of goods, hence, it is the lifeblood of the nation.[15] Undoubtedly, to accept Caltex’s belated protestations will necessarily prejudice the public interest.

In Fernandez v. Cuerva,[16] which explained the effect of a declaration of invalidity of an assailed legislative or executive act, we declared:
“The growing awareness of the role of the judiciary as the governmental organ which has the final say on whether or not a legislative or executive measure is valid leads to a more appreciative attitude of the emerging concept that a declaration of nullity may have legal consequences which the more orthodox view would deny. That for a period of time such a statute, treaty, executive order, or ordinance was in ‘actual existence’ appears to be indisputable. What is more appropriate and logical then than to consider it as ‘an operative fact.”
In addition to the preceding discussion, a more glaring act which must be emphasized is that the importations occurred in 1982 or eleven (11) years after said memorandum was issued, hence, Caltex cannot feign ignorance as to the existence of such memorandum. Certainly, it is safe to assume that Caltex, as a regular importer of crude oil, had knowledge that, from 1971 the procedure for determining the ad valorem duties on crude oil importation was that the BSW content were to be included in imposing the duties due. However, from 1971 to 1982, Caltex made no move to question the validity of the memorandum nor did it assail the duties being charged on its shipment before the proper forum. In fact, it would not be unwarranted to conclude that during this period, Caltex continued importing crude oil under the procedures laid down by the Memorandum. To compound matters, Caltex offered no plausible explanation nor justifiable reason for its delay or omission in taking timely action against the memorandum which was already in existence for a period of nine years prior to the importations in question. The time-honored rule anchored on public policy is that relief will be denied to a litigant whose claim or demand has become “stale,” or who has acquiesced in the prevailing situation for an unreasonable length of time, or who has not been vigilant or who has slept on his rights either by negligence, folly or inattention.[17] Caltex has no one to blame but itself.

With respect to the decisive issue posed by the instant petition, the axiomatic rule is that the dutiable value of an imported article subject to ad valorem is based on its home consumption value or price as freely offered for sale in wholesale quantities in the ordinary course of trade in the principal market of the country from where exported on the date of exportation to the Philippines. The home consumption value is the price declared in the consular, commercial, trade or sales invoice. Thus, in the leading case of Commissioner of Customs v. Court of Tax Appeal,[18] we held:
“(t)he law is clear and mandatory. The dutiable value of an imported article subject to an ad valorem rate of duty is based on its home consumption value or price as freely offered for sale in wholesale quantities in the ordinary course of trade in the principal markets of the country from where exported on the date of exportation to the Philippines. That home consumption value or price is the value or price declared in the consular, commercial, trade or sales invoice.”
The above doctrine has consistently been applied by this Court in subsequent cases.[19]

Consequently, Caltex, in an effort to prove that the BSW contents should have been omitted in the purchase price, submitted the sales invoices provided by its seller in Saudi Arabia[20] indicating a net barrel computation, that is, crude oil without BSW.[21] Paradoxically, the Import Entry permit declaration it submitted before the Collector of Customs showed otherwise, that is the BSW contents were not deducted in the purchase price.[22]

Obviously, there is a discrepancy between the sales invoice and the Import Entry permit submitted by Caltex. Faced with this fact, we must uphold the latter as more conclusive. In the early case of Murphy, Morris & Co. v. Collector of Customs,[23] we held that in the absence of any compelling reason, sworn statements made before customs officials concerning an importation would render said declarations conclusive upon the party. Furthermore, under the Tariff and Customs Code, declarations and statements contained in the Import Entry Permit are presumed to be true and correct under the penalties of falsification and perjury.[24] Moreover, descriptions in entries and other documents are admissions against interest and presumptively correct.[25]

Our conclusion is premised on the fact that sales, commercial or consular invoices are not conclusive on the government. Our customs laws should not be at the mercy of importers who may avail of schemes and other arrangements to lower and reduce the face value of the articles covered by such invoices.[26] Noteworthy is the fact that: “If the customs authorities were bound by the invoice value, it is evident that they would be, to a considerable extent, at the mercy of foreign merchants and importers. The purpose of Congress in providing for an appraiser was to prevent fraud upon the customs, and thus protect the revenues of the Government.”[27]

Conformably with the above discussion, a scrutiny of Caltex’s Import Entry declaration covering the importation dated April 10, 1982, stated that it had paid a total purchase price of $53,055,905, broken down as follows
(Including BSW)
Arabian Heavy
$ 6,533,131


It is important to note that in arriving at the total purchase price, the barrels representing the BSW were included in the computation. In other words, the 1,765 barrels of BSW of Arabian light/medium mix crude oil, as well as the 1,852 barrels of BSW for Arabian heavy, were declared by Caltex as part of the total purchase price.

If Caltex wanted to prove that, at the outset, the BSW contents were to be excluded from the original purchase price, then it should have declared in the Import Entry permit that it had only paid for the Arabian Light/Medium crude oil the amount of $46,464,241, computed as follows:
Gross Barrels  
1,765 (BSW content)
Net Barrels
Multiplied by  
$ 32.964 per barrel
$ 46,464,241

On the other hand, with respect to the Arabian heavy crude oil, Caltex should have paid the amount of $6,475,624, computed as follows:
Gross Barrels  
1,852 (BSW content)
Net Barrels 
Multiplied by  
$ 31.030 per barrel
$ 6,475,624
The importation dated June 7, 1982, as reflected in the Import Entry permit, would reveal that Caltex paid $55,554,053 for Arabian light/medium crude oil and $8,835,300 for Arabian light crude oil. The respective BSW contents of both importations were included for the purpose of determining the total purchase price.[28] Likewise, for the importation dated July 19, 1982, the basis of the purchase price paid by petitioner was without any deductions representing the BSW contents.[29]

Considering the foregoing, the Collector of Customs did not err in imposing a 20% ad valorem duty on Caltex’s importations on the basis of the purchase price in the Import Entry permit instead of the sales invoices.

Caltex, however, insists that BSW contents, being impurities, are not subject to ad valorem taxes.[30] To support its contention, Caltex argues that:
“x x x, the BSW is destined to be thrown away as they are in fact thrown away (TSN, April 14, 1986, pp. 21 and 22 at the CTA). To petitioner, the thing of value is the crude oil while BSW has no value whatsoever. Thus, when it is considered that the rate of duty is based according to value (ad valorem as contrasted to ‘specific’ which is imposed as a fixed sum on each article of a class without regard to value (Black’s Law Dictionary, Fifth Edition), such a duty cannot attach to BSW, BSW having no value at all.”
It is important to emphasize that Caltex in contending that the BSW, as impurities, should be deducted from the purchase price, has the burden of proof to establish the validity of the claimed deduction.[31] A party challenging an appraiser’s finding of value is required to prove not only that the appraised value is erroneous but also what the proper value is.[32]

Evidently, the issue to be resolved is whether BSW contents are impurities usually found in crude oil. The resolution of this query is important since under customs law no deductions are permitted for impurities except those not usually found in or upon such similar merchandice.[33]

Caltex asserts that these impurities are not an integral part of crude oil. This position was sustained by the Court of Tax Appeals, thus:

“It is clarified under Rule 3(b) that the application of Section 203 is premised on the condition that before articles can be classified as forming part of the essential article, the other article should be a ‘composite’ part or ‘component’ of the essential article. This is clear from the phrase ‘Mixture and composite articles which consist of different materials or are made of different components.’ It appears that basic sediment and water are not ‘components’ or ‘composites’ of crude oil.”[34]
In reversing the above finding, the Court of Appeals ruled that BSW naturally occurs in crude oil, especially during transit, hence:
“Thus, even the value of coverings and packing materials, which when destroyed upon opening after arrival of the shipment has no value except perhaps as scrap, is included in determining the home consumption value. There is no reason then why the BSW elements, which naturally occur in oil, should be deducted from the gross receipt.”[35]
We sustain the observation of the Court of Appeals.

The principal physical composition of oil are carbon and hydrogen.[36] However, this is not to detract from the fact that other fundamental substances are properties of crude oil. One of this substance is water. As one authority observes:
“The presence of water in the rocks is a controlling factor in the accumulation of oil and gas. Its effect in driving these substances from the finer to the coarser pores in the rock has been noticed.”[37]
Another substance is sand.
“Although most of the oil produced in the Salt Creek field, Wyo., comes from sands, some oil has been produced in commercial quantities from crevices in the shale strata that lie above the First Wall Creek sand. Oil is also produced from fissured shale in a few fields in California, at Florence, Colo., and in several small fields in Pennsylvania.”[38]
As can be gleaned from the foregoing, there seems to be no dispute that BSW, as impurities, are part of crude oil. In fact, we agree with the observation of the Court of Appeals that these impurities could have been formed during the trip from Saudi Arabia to the Philippines.

Because of the paucity of local precedents squarely in point, we find occasion here to state the rule as enunciated by the United States Customs Court[39] that prohibited the deduction for “dirt” or “impurities” other than those not usually found in or upon the goods, thus:
“Appellant conceded that no application for allowance was made under customs regulations. Such application must be made within 10 days after the return of the weight by customs officials, and compliance is mandatory as a condition precedent to recovery. The judgment of the Customs Court sustaining Collector’s rejection of the protest claim was properly rendered in accordance with established law. Appellant failed to establish that the dirt and other impurities in the feathers were of an unusual quantity deemed to be excessive in crude imported feathers.”
Consequently, the Court of Appeals did not err in concluding BSW as an integral part of crude oil, which must be included in the computation of the assessable duties.

Finally, Caltex avers that it failed to receive a copy of the Commissioner of Customs petition within the 15-day period to file a petition for review. Hence, the Court of Appeals erred in not dismissing the petition outright as provided for in Circular No. 1-91 in relation to Circular No. 28-91.

Circular No. 1-91 issued on February 27, 1991 and pertinently provides:

“x x x                                x x x                            x x x

5.       HOW APPEAL TAKEN. - Appeal shall be taken by filing a verified petition for review in six (6) legible copies, with the Court of Appeals, a copy of which shall be served on the adverse party and on the court or agency a quo. Proof of service of the petition on the adverse party and on the court of agency a quo shall be attached to the petition.”

While Circular 28-91 reads as follows:
“A petition filed under Rule 45, or under Rule 65, or a motion for extension may be denied outright if it is not clearly legible, or there is no proof of service on the lower court, tribunal, or office concerned and on the adverse party in accordance with Section 3, 5 and 10 of Rule 13, attached to the petition or motion for extension when filed.” (Underscoring supplied)
Reviewing the records of the case, while it seems that the petition for certiorari was indeed not served upon Caltex within the 15-day reglementary period, the same was, however, furnished the very next day. Hence, the proximity of the service of petition for review to Caltex may be pleaded as substantial compliance therewith. Our pronouncement is not without any precedent. In Gabionza v. Court of Appeals,[40] we explicitly stated:
“It is scarcely necessary to add that Circular No. 28-91 must be so interpreted and applied as to achieve the purposes projected by the Supreme Court when it promulgated that Circular. Circular No. 28-91 was designed to serve as an instrument to promote and facilitate an orderly administration of justice and should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective or the goal of all rules of procedure - which is to achieve substantial justice as expeditiously as possible.

The fact that the Circular requires that it be strictly complied with merely underscored its mandatory nature in that it cannot be dispensed with or its requirements altogether disregarded, but it does not thereby interdict substantial compliance with its provisions under justifiable circumstances.”

WHEREFORE, in view of the foregoing, the instant petition is DISMISSED and the appealed decision of the Court of Appeals dated February 12, 1992, is AFFIRMED. No costs.

Narvasa, C.J., (Chairman), Kapunan, and Purisima, JJ., concur.

[1] Rollo, p. 125.

[2] Commission of Customs Record, pp. 84-89.

[3] Rollo, pp. 62-73.

[4] Ibid., pp. 62-73.

[5] Id., pp. 27-38.

[6] Id., pp. 37-38.

[7] Id., p. 41.

[8] Sec. 3502. Application of Established Ruling or Decision. - A ruling or decision of the Commissioner of Customs which determines the construction or application of any provision of law decreeing forfeiture of imported articles or imposing customs duties, fines, fees and surcharges and which changes any existing established appraisal, interpretation or practice shall not take effect until after thirty days public notice shall have been given in the form of a published customs decision. When such ruling or decision favors the taxpayer it shall become effective immediately.

[9] Reply, Rollo, pp. 185-187.

[10] CTA Records, pp. 221-222.

[11] Hijo Plantation, Inc. v. Central Bank, 164 SCRA 192 (1988).

[12] Tañada v. Tuvera, 146 SCRA 446 (1986).

[13] An Act to Provide for the Uniform Publication and Distribution of Official Gazette.

[14] Pesigan v. Angeles, 129 SCRA 174 (1984).

[15] Commissioner of Internal Revenue v. Court of Appeals, 234 SCRA 348 (1994).

[16] 21 SCRA 1095 (1967).

[17] Catholic Bishop of Balanga v. Court of Appeals, 264 SCRA 181 (1996); Vda. de Cabrera v. Court of Appeals, 267 SCRA 339 (1997); Chavez v. Bonto-Perez, 242 SCRA 73 (1995).

[18] 161 SCRA 376 (1988).

[19] Acting Commissioner of Customs v. Cuise’s Company, 214 SCRA 597 (1992); Commissioner of Customs v. Court of Tax Appeal, 195 SCRA 12 (1991); Commissioner of Customs v. Proctor and Gamble Mfg. Corp., 169 SCRA 693 (1989).

[20] Rollo, pp. 93, 97, 101.

[21] Rollo, p. 14.

[22] CTA Records, Annex “A,” “D,” “F.”

[23] 16 Phil. 35 (1910).

[24] Tarriff and Customs Code, Sec. 1301. “Persons Authorized to Make Import Entry. - Imported articles must be entered in the customhouse at the port of entry within five (5) days from the date of discharge of the last package from the vessel either (a) by the importer, being holder of the bill of lading, (b) by a duly licensed customs broker acting under authority from a holder of the bill or (c) by a person duly empowered to act as agent or attorney-in-fact for each holder; Provided, That the Collector may grant an extension of not more than five (5) days: Provided, further, That where the entry is filed by a party other than the importer, said importer shall himself be required to declare under oath and under the penalties of falsification or perjury that the declarations and statements contained in the entry are true and correct: Provided, finally, that such statements under oath shall constitute prima facie evidence of knowledge and consent of the importer of violation against applicable provisions of this Code should the importation turn out to be unlawful or irregular.”

[25] Swifts Co. v. U.S., 14 CCR 171.

[26] Coca Cola Export Corporation v. Commissioner of Internal Revenue, 56 SCRA 5 (1974).

[27] Lim Quim v. Collector of Customs, 23 Phil. 509 (1912).

[28] CTA Record, Annex “D.”

[29] CTA Record, Annex “F.”

[30] Rollo, pp. 14-16.

[31] Commissioner of Internal Revenue v. Algue, Inc., 158 SCRA 9 (1987).

[32] Kobe Import Co. v. U.S., 31 CCR 456; Frank P. Dow v. U.S., 32 CCR 547.

[33] 21 Am Jur 2d § 87 citing Earnshaw v. Cadwalder, 145 U.S. 247.

[34] Rollo, p. 67.

[35] Rollo, p. 34.

[36] Summers, Oil and Gas, 2 ed., 1954, p. 2.

[37] Sinder, Oil and Gas in the Mid- Continent Field, 1920, p. 16.

[38] Ibid.

[39] York Feather and Down Corp. v. U.S., 26 CCR 231 (1952).

[40] 234 SCRA 192 (1994). 

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