Taxation Cases – 2nd Exam

Compiled by Kimberly Benazir May R. Codilla

Case Facts Issue Ruling

Local Government Code Cases – Real Property Taxation
Fels Energy vs NPC entered into a lease agreement with Whether or not The barge is considered as a movable property, but
Province of Polar Energy. Subsequently, Polar assigned a barge is a for purpose of taxation it is an immovable property
Batangas its rights to FELS. NPC and FELS claim that movable that is subject to tax.
they are exempt from paying taxes. They property not
contend that NPC is exempt from taxes and subject to FELS owns the barge, it cannot escape its liability
the machineries are actually, directly and taxation? by invoking Section 234 c of RA 7160. NAPOCOR is
exclusively used by NPC. not the actual, direct and exclusive user of the
WON Fels is barge required by Sec. 234 c
Instead of appealing to the LBAA, NPC opted exempt from
to file a motion for reconsideration of the tax ➢ Notice of Assessment is the last action of
Provincial Assessor’s decision, notwithstanding the assessor which gives the owner of the
that it assumed property the right to appeal to LBAA
the rights of ➢ If the taxpayer fails to appeal in due course,
Polar Energy. the right of the LGU to collect the taxes due
becomes absolute upon the expiration of
the period to appeal

Section 226. Local Board of Assessment Appeals. - Any

owner or person having legal interest in the property who is not
satisfied with the action of the provincial, city or municipal
assessor in the assessment of his property may, within sixty
(60) days from the date of receipt of the written notice of
assessment, appeal to the Board of Assessment Appeals of
the provincial or city by filing a petition under oath in the form
prescribed for the purpose, together with copies of the tax
declarations and such affidavits or documents submitted in
support of the appeal.

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 Taxation Cases – 2nd Exam
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NPC vs CBAA Implication of Build Operate and transfer.
FPPC entered a BOT with NAPOCOR. BPPC
will own, manage and operate and will
convert the fuel supplied by NAPOCOR into
electricity and deliver the said product to
NAPOCOR. Municipal assessor taxed the
machineries and equipment of BPPC.
WON BOT No. _same ruling with FELS_
exempts BPPC - The owner, operation of the project is the
from paying its actual user of its machineries and
taxes? equipment. NAPOCOR’s use is contingent
and the BOT Agreement is not sufficient to
support its claim for tax exemption

BPPC claims exemption. Section

234. Exemptions from Real Property Tax. -
The following are exempted from payment of
the real property tax:

(c) All machineries and equipment that

are actually, directly and exclusively
used by local water districts and
government owned or controlled
corporations engaged in the supply
and distribution of water and/or
generation and transmission of electric
power;

Meralco vs CBAA Storage tanks, not embedded in the land. WON Storage Though they are not embedded in the land, they
tanks are may nevertheless, be considered as taxable
taxable improvements on the land, enhancing its utility
and rendering it useful to the oil industry as
defined under Section 3 K of the Real Property Tax
Code. It was installed with some degree of
permanence

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 Taxation Cases – 2nd Exam
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Real property for purposes of taxation may

include things generally regarded as personal
property.
Board of Mining company built a road on a property WON taxable? Road constructed by the lessee on public land
Assessment they leased with the government (part of exempt from realty tax.
Appeals v Samar the timberland). Upon expiration of the concession, the said road
Mining would ultimately pass on to the national
government.

Realty tax to be paid by the owner and not by the

usufructuary.

Dikes and gates built by lessee on swamp lands,

exempt from realty tax. – In one case the SC held
that the lessee who introduced improvements
consisting of dikes, gates and guard-houses on
swamp lands leased to him by the Bureau of
Fisheries in converting the swaps into fishponds is
exempt from payment of realty taxes on those
improvements.

Court of Tax Appeals have exclusive appellate

jurisdiction over cases involving legality of real
property tax assessment.

Board of Assessment Appeals – The only question

that may be brought before the City or Provincial
Board of Assessment Appeals is the question which
relates to the reasonableness or legality of the
realty tax that is assessed against the taxpayer.

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 Taxation Cases – 2nd Exam
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Caltex vs CBAA WON the gas Yes. Improvements on land are commonly taxed as
station realty even though for some purposes they might
equipment and be considered as personality
machinery
permanently
affixed by
Caltex to its gas
station and
pavement
should be
subject to realty
tax?
Capitol Wireless WON cable In dispute involving real property taxation, the
Inc vs Province wires are general rule is to require the taxpayer to first avail
Treasurer of taxable? – administrative remedies and pay the tax under
Batangas protest before allowing any resort to judicial
action, except when the assessment itself is alleged
to be illegal or is made without legal authority.

Prior resort to administrative action – erroneous

assessment (when the amount is challenged)

Direct court action is permitted – legality, power,

validity, or authority of the assessment itself is in
question

Submarine cables - akin to electric communication

lines that are no longer exempted from real
property tax. It fits the description of machinery
subject to real property tax under the LGC

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 Taxation Cases – 2nd Exam
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Lopez vs City of General revisions of the Real Property
Manila Assessment pursuant to Sec 219 of the LGC
- Lopez failed to exhaust
administrative remedies
WON the tax is Date of effectivity of assessment of reassessment
excessive, Section 221. Date of Effectivity of Assessment or Reassessment. - All
assessments or reassessments made after the first (1st) day of
oppressive, or January of any year shall take effect on the first (1st) day of January
confiscatory. of the succeeding year: Provided, however, That the reassessment
of real property due to its partial or total destruction, or to a major
change in its actual use, or to any great and sudden inflation or
deflation of real property values, or to the gross illegality of the
assessment when made or to any other abnormal cause, shall be
made within ninety (90) days from the date any such cause or
causes occurred, and shall take effect at the beginning of the
quarter next following the reassessment.

Remedies of the taxpayer with regard to

questions on legality of a tax ordinance under RA
7160

Section 187 – A taxpayer may question the legality

of a tax ordinance on appeal within 30 days from
the effectivity thereof to the Secretary of Justice

Section 226 - Owner of real property not satisfied

with assessment may, withing 60 days from notice
of assessment, appeal to the Board of Assessment
Appeals

Section 252 – Should the taxpayer question the

effectiveness of the amount of tax. He must first
pay the amount due. Then, he must request that it
be annotated with “paid under protest” and then
appeal to the Board of Assessment Appeals.
Province of Nueva Mineral land leased by a private person Actual use even if the user is not the owner
Ecija vs Imperial
Mining

5

Testate Estate of Lim failed to pay the loan and the mortgage
Lim s City of was extrajudicially foreclosed. The subject
Manila property was sold to GSIS at public auction.
In 1979 the estate of lim through its
Taxation Cases – 2nd Exam
Compiled by Kimberly Benazir May R. Codilla
Actual use - shall refer to the purpose for which
the *- property is principally or predominantly
utilized by the person in possession of the
property. [Sec. 3(a).]
Actual Use of Real Property as Basis for
Assessment.-Real property shall be assessed on
the basis of its actual use regardless of where
located and whoever uses it
The above policy declaration is given substance in
various provisions of the new law. Thus, Section 40
of Presidential Decree 464 specifies the
exemptions from real property tax.
SEC. 40. Exemption from Real Property Tax. — The exemption shall
be as follows:
a) Real property owned by the Republic of the Philippines or any of
its political subdivisions and any government owned corporation so
exempt by its charter: Provided, however, That this exemption shall
not apply to real property of the abovenamed entities the beneficial
use of which has been granted, for consideration or otherwise, to a
taxable person.
xxx xxx xxx
e) Land acquired by grant, purchase or lease from the public domain
for conversion into dairy farms for a period of five years from the
time of such conversion . . .
WON the estate No. Beneficial user should pay
of lim is liable?
RTC has jurisdiction to try cases involving the right
to recover sums of money under Section 64 of the
Real Property Code which provides that a “ court
6

administatrix repurchase the foreclosed
property.
City Treasurer of Manila required the estate
of lim to pay real estate taxes covering the
years that the property was foreclosed.
Chavez vs Ongpin Chavez contends that the EO 73 accelerated
the application of the general revision of
assessment to Jan 1 thereby mandating an
excessive increase in real property taxes by
100 to 400%
Taxation Cases – 2nd Exam
Compiled by Kimberly Benazir May R. Codilla
shall entertain a suit assailing the validity of a tax
assessed” after the taxpayer has paid in protest
Section 30 does not apply here (administrative acts
of listing and valuation of property) What is
questioned here is the imposition of the tax
assessed and who shall shoulder the burden of the
tax
The estate of Lim can recover the amount to the
City of Manila, but not reimbursement from GSIS
because GSIS is exempt from payment of the real
property tax under Sec 33 of the Revised Charter of
the GSIS.
Exemption of GSIS from real estate tax does not
cover properties that the beneficial use was
granted to taxable persons
Payment by protest
- Contested amount will be held in trust by
the treasurer and the difference shall be
treated as revenue
If in favor of the protestant – it will be refunded or
applied as a tax credit
Procedure of Board of Tax Appeals
Fiscal adequacy, which is one of the characteristics
of a sound tax system, requires that sources of
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 Taxation Cases – 2nd Exam
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revenues must be adequate to meet government

expenditures and their variations.
City Assessors of Clinics leased by the hospital. Whether or not We hold that the new building is an integral part of
Cebu vs the new the hospital and should not be assessed as
Association of Benevolent de Cebu contended that the building is liable commercial.
Benevolent de building is used ACTUALLY, DIRECTLY AND to pay at the
Cebu EXCLUSIVELY part of the hospital and should 35% assessment Being a TERTIARY HOSPITAL, it is mandated to be
have an assessment level of 10% as it was level? fully departmentalized and be equipped with the
currently imposed. service capabilities needed to support certified
medical specialists and other licensed physicians.

The fact that they are holding office in a separate

building does not take away the essence and
nature of their services vis-à-vis the overall
operation of the hospital and to patients.

Under the Local Government Code, Sec. 26: “ALL

BUILDINGS AND OTHER IMPROVEMENTS THEREON
actually, directly, and exclusively used for hospitals,
cultural or scientific purposes and those owned and
used by local water districts.. shall be classified as
SPECIAL (NOT COMMERCIAL).

The exemption extends to facilities which are

incidental to and reasonably necessary for the
accomplishment of said purpose, such as, in the
case of hospitals, “a school for training nurses,
home to provide housing facilities to interns.

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Being hundred meters away from CHH main

building, does not denigrate from its being an
integral part of the latter.
National NDC reselling for a consideration to qualified NDC is not exempt from payment or Real estate tax
Development tenants. since it is not devoted for public use but acquired it
company vs for resale.
Province of Nueva
Ecija NDC contains no provision exempting if rom the
payment of RET on properties it may acquire

NDC is not a municipal or public corporation,

neither the Government of the Republic nor a
subdivision thereof, but a government-owned and
controlled corporation which does not exercise
sovereign powers.
Philippine Fisheries Leased portions of their property,. Is a GOCC WON leased Yes. Philippine Fisheries Development Authority is
Development portions are not a GOCC but an instrumentality of the national
Authority vs CA subject to tax? government which is generally exempt from
payment of real property taxes.

However, said exemption does not apple to the

portions IFPC which the Authority leased to private
entities. With respect to these properties, the
Authority is liable to pay real property tax.

IFPC being property of public dominion cannot be

sold at public auction to satisfy tax delinquency
MIAA vs MIAA is an instrumentality of the MIAA’s airport lands and building are exempt from
Paranaque City government vested with corporate powers real estate tax imposed by the City of Paranaque
to perform efficiently its governmental
functions

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 Taxation Cases – 2nd Exam
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Section 234. Exemptions from Real Property Tax. -

The following are exempted from payment of the
real property tax:

(a) Real property owned by the Republic of the

Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted,
for consideration or otherwise, to a taxable person;

(b) Charitable institutions, churches, parsonages or

convents appurtenant thereto, mosques, non-profit
or religious cemeteries and all lands, buildings, and
improvements actually, directly, and exclusively
used for religious, charitable or educational
purposes;

(c) All machineries and equipment that are

actually, directly and exclusively used by local
water districts and government owned or
controlled corporations engaged in the supply and
distribution of water and/or generation and
transmission of electric power;

(d) All real property owned by duly registered

cooperatives as provided for under R.A. No. 6938;
and

(e) Machinery and equipment used for pollution

control and environmental protection.

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Except as provided herein, any exemption from

payment of real property tax previously granted to,
or presently enjoyed by, all persons, whether
natural or juridical, including all government-
owned or controlled corporations are hereby
withdrawn upon the effectivity of this Code.
MWSS vs LGU of MWSS is a GOCC and under Republic Act 10149 or
Quezon City the GOCC Governance Act, MWSS is exempt from
the payment or real property tax

Hence, MWSS is not liable to Quezon City for real

property taxes, except if the beneficial use of its
properties has been extended to a taxable person

To be categorized as GOCC, a government agency

must meet two requirements prescribed in Article
XII, Section 16 of the Constitution: common good
and economic viability
LRTA v CBAA Under the Real Property Tax Code, real property is
classified for assessment purposes on the basis of
actual use, which is defined as “the purpose for
which the property is principally or predominantly
utilized by the person in possession of the property

LRT is accessible only to those who pay the

required fare,

Thought the creation of LRTA was impelled by

public service – to provide mass transportation to
alleviate the traffic situation in Metro Manila – its

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NPC vs CA NAPOCOR contends they are exempted from
LGU Taxes as PD only revoked their
exemption as to the National government
Victorias Milling vs By the doctrine of the primacy of
CA administrative remedy, the Provincial Board
of Assessment Appeals had jurisdiction over
the dispute to the exclusion of the Court of
First Instance
Taxation Cases – 2nd Exam
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operation undeniably partakes of ordinary
business.
The grant of tax privilege to any government
owned controlled corporation and all other units of
the government has been expressly repealed by
the PD 1177
NPC is liable to pay real property taxes
When the assessment is illegal and void, the
remedy of the taxpayer who has already paid the
tax under protest is to sue for refund in the
competent Court of First Instance.
Where the assessment is merely erroneous, his
recourse is to file an appeal in the Provincial Board
of Assessment Appeals within 60 days from receipt
of assessment
Depreciation
Fixed percentage of diminishing book value
method – the book value upon which the rate is
applied diminishes from year to year
Straight line method – the rate and the base – the
cost are constant
Illegal – the assessor has no power at all
Erroneous – the assessor has the power but errs in
the exercise of that power
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Tan vs Bantegui No proper notice to the delinquent tax The auction sale of real property for the collection
payer, although preceded by proper of delinquent taxes is in personam, not in rem.
advertisement and publication Publication of delinquency will not suffice,
considering that the procedure in tax sales is in
personam. An auction sale is void absent an actual
notice to delinquent taxpayer.

Notice of sale to a delinquent landowners and to

the public in genera, is an essential and
indispensable requirement of law, the non-
fulfillment of which vitiates the sale.

Any balance of the proceeds of the sale left after

deducting the amount of the taxes and penalties
due and the cost of sale, shall be returned to the
owner or his representative.
Estate of Jacob vs (abroad – renter and owner not notified) Notification of the right person is essential and
CA indispensable requirement. One who is no longer
the lawful owner of the land cannot be considered
the present registered owner – one who is not the
owner of the property is not a delinquent tax
payer.
Ramies Textiles vs The company paid the real estate tax of the WON protest is Protest is not a requirement who paid under
Mathay machineries at their own will without a condition mistake.
knowing that the machineries are exempt precedent or a
from taxes sine qua non Protest is necessary for a taxpayer with knowledge
requirement for of erroneous or illegal assessment.
the recovery of
real estate Prescriptive period is 6 years
taxes paid
under the

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erroneous Commonwealth Act 470 does not apply to

belief that the petitioner which could conceivably not have been
claimant was expected to protest a payment it honestly believed
liable therefor, to be due.
and if so, what
is the The same refers only to the case where the
prescriptive taxpayer despite his knowledge of the erroneous
period or illegal assessment, still pays and fails to make
the proper protest, for in such case, he should
manifest an unwillingness to pay, and failing so,
the taxpayer is deemed to have waived his right to
claim a refund

Illegal and void assessment – assessor has no

power to make the assessment
- If you paid, the remedy is not with the
Board of Assessment Appeal but with the
Regular Courts

If erroneous assessment – Appeal is before the

Board of Assessment Appeals
Juna Luna Subd vs Paid their taxes before determination of the The balance was in the nature of a deposit held in
Sarmiento total amount due trust by the city treasurer and for this reason.
Plaintiff’s taxes are to be regarded as still due and
payable only to the extent of the balance. The
amount which had been verified later on had been
applied to the second half of plaintiff’s tax and
becomes part of the general funds of the city
treasurer.
Customs and Tariff Code

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Viduya vs Berdiago Under declaration of car. Was kept at a
dwelling house
Duty of Customs
The Bureau of Customs has the duties,
powers and jurisdiction among others:
1. To assess and collect all lawful
revenues from imported articles, and
all other dues, fees, charges. Fines
and penalties. Accruing under the
tariff and customs laws
2. Prevent and suppress smuggling and
other frauds upon the customs
3. To enforce tariff and customs laws
Taxation Cases – 2nd Exam
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WON search Persons with police authority under the Tariff and
warrant is Customs Code may affect search and seizure
required? without a search warrant in enforcement of
customs laws (search any land, enclosure,
When does warehouse, store or building). And also inspect,
importation search and examine any vessel or aircraft and any
begin and when trunk, package box or envelope or any person on
does it end? board, or stop and search and examine any vehicle,
beast or person suspected of holding or conveying
any dutiable or prohibited article introduced into
the Philippines contrary to law.
Exception: dwelling house
A dwelling house may be entered and searched
only upon warrant issued by a judge
When importation deemed terminated?
If the importation has not been terminated the
imported goods remain under the jurisdiction of
the Bureau of Customs.
Importation is deemed terminated only upon the
payment of the duties, taxes, and other charges
upon the articles, or secured to be paid, at the port
of entry and the legal permit for withdrawal shall
have been granted. The payment of duties, taxes,
fees and other charges must be in full.
The importation of a merchandise contrary to law
is subject to forfeiture, and the goods released
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Commissioner of No notice of hearing
Customs vs
Alikpala Fruits imported in violation of Central Bank
Sec 253 of the Tariff and Customs Code
Petitioners have not been heard on the
seizure proceedings and the imported cargo
have already been advertised for sale
Pilipinas Shell Ipso facto abandonment doctrine
Petroleum
Company vs Pilipinas Shell filed its Import Entry and
Commissioner of Internal Revenue Declaration and paid the
Customs import duty of its shipments on 1996. After
more than 4 years they received a demand
letter from Commissioner of Customs
*no due notice
(Read operational provisions)
Taxation Cases – 2nd Exam
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contrary to law are subject to seizure and
forfeiture.
WON Customs Due notice and hearing besides being an inherent
acted in element of due process is provided for in Sec 2303
accordance of the Tariff and Customs Code, which requires the
with the Collector to give the owner or importer the
scheduling of property written notice of the seizure and an
the sale opportunity to be heard in relation to the
delinquency which was the occasion for such
seizure, as well as Sec 2601, which directs that the
seized property, other than contraband, shall be
subject to sale after liability to sale shall have been
established by proper administrative or judicial
proceedings in conformity with the provisions of
the said Code
WON Pilipinas Section 1603. Finality of Liquidation. When articles
Shell defrauded have been entered and passed free of duty or final
the public adjustments of duties made, with subsequent
respondent? delivery, such entry and passage free of duty or
WON ipso facto settlements of duties will, after the expiration of
abandonment one (1) year, from the date of the final payment of
doctrine duties, in the absence of fraud or protest or
operates? compliance audit pursuant to the provisions of this
Code, be final and conclusive upon all parties,
unless the liquidation of the import entry was
merely tentative.
Pursuant to the above-quoted provision, the
attendance of fraud would remove the case from
the ambit of the statute of limitations, and would
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consequently allow the government to exercise its

power to assess and collect duties even beyond
the one-year prescriptive period, rendering it
virtually imprescriptible.

The absence of fraud not only allows the finality

of the liquidations, it also calls for the strict
observance of the requirements for the doctrine
of ipso facto abandonment to apply. Sec. 1801 of
the TCC pertinently provides:
Section 1801. Abandonment, Kinds and Effect of -
An imported article is deemed abandoned under
any of the following circumstances:
x x xx
b. When the owner, importer, consignee or
interested party after due notice, fails to file an
entry within thirty (30) days, which shall not be
extendible, from the date of discharge of the last
package from the vessel or aircraft, or having filed
such entry, fails to claim his importation within
fifteen (15) days, which shall not likewise be
extendible, from the date of posting of the notice
to claim such importation. (emphasis supplied)

As expressly provided in Sec.1801(b) of the TCC,

the failure to file the IEIRD within 30 days from
entry is not the only requirement for the doctrine
of ipso facto abandonment to apply. The law
categorically requires that this be preceded by
due notice demanding compliance.

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Yaokasin vs The party seeks to question the Automatic
Commissioner of review of the Commissioner of Customs
Customs over the decision of the Collector of
Customs in protest and seizure cases
--
Section 12 of the Plan and Section 2313 of
the Tariff and Customs Code do not conflict
with each other. They may co-exist. Section
2313 of the Code provides for the procedure
for the review of the decision of a collector
Taxation Cases – 2nd Exam
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To recapitulate, the notice in this case was only
served upon petitioner four (4) years after it has
already filed its IEIRD.1âwphi1 Under this
circumstance, the Court cannot rule that due notice
was given, for when public respondent served the
notice demanding payment from petitioner, it no
longer had the right to do so.
By that time, the prescriptive period for liquidation
had already elapsed, and the assessment against
petitioner's shipment had already become final and
conclusive. Consequently, Sec. 1801(b) failed to
operate in favor of the government for failure to
demand payment for the discrepancy prior to the
finality of the liquidation. The government cannot
deem the imported articles as abandoned without
due notice.
There is automatic review by the Commissioner of
Customs and the Secretary of Finance when the
collector’s decision is adverse to the government
Taxes being the lifeblood of the Government,
Section 12, which the Commissioner of Customs in
his Customs Memorandum Order No. 20-87,
enjoined all collectors to follow strictly, is intended
to protect the interest of the Government in the
collection of taxes and customs duties in those
seizure and protest cases which, without the
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in seizure and protest cases upon appeal by
the aggrieved party, i.e., the importer or
owner of the goods. On the other hand,
Section 12 of the Plan refers to the general
procedure in appeals in seizure and protest
cases with a special proviso on automatic
review when the collector's decision is
adverse to the government. Section 2313
and the proviso in Section 12, although they
both relate to the review of seizure and
protest cases, refer to two different
situations — when the collector's decision is
adverse to the importer or owner of the
goods, and when the decision is adverse to
the government.
Two situations:
➢ Adverse to the importer
➢ Adverse to the government –
automatic review
Barge Cherry Ann MV Jacob was running low on fuel (towed
vs Commissioner of MC Cherry Ann).
Customs Carrying goods
No evidence to defraud the government
Section 2351 Properties not Subject to
Forfeiture in absence of Prima Facie
Evidence – The forfeiture of vehicle, veseel,
Taxation Cases – 2nd Exam
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automatic review provided therein, neither the
Commissioner of Customs nor the Secretary of
Finance would probably ever know about. Without
the automatic review by the Commissioner of
Customs and the Secretary of Finance, a collector in
any of our country's far-flung ports, would have
absolute and unbridled discretion to determine
whether goods seized by him are locally produced,
hence, not dutiable or of foreign origin, and
therefore subject to payment of customs duties and
taxes.
His decision, unless appealed by the aggrieved
party (the owner of the goods), would become final
with 'the no one the wiser except himself and the
owner of the goods. The owner of the goods cannot
be expected to appeal the collector's decision when
it is favorable to him. A decision that is favorable to
the taxpayer would correspondingly be unfavorable
to the Government, but who will appeal the
collector's decision in that case certainly not the
collector.
When does Mere intent to unload is sufficient to
importation commence an importation. Intent, being a
begin? state of mind, is rarely susceptible of direct
proof, but must ordinarily inferred from the
facts, and therefore, can only be proved by
unguarded expressions, conduct and
circumstances generally.
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or aircraft shall not be effected if it is Jacob 1 entered the jurisdiction of the

established that the owner thereof or his
agent in charge of the means of conveyance
used aforesaid has no knowledge of or
participation in the unlawful act.
Provided, however, That a prima facie
presumption shall exist against the vessel,
vehicle or aircraft under any of the following
circumstances:
Philippines for an emergency bunkering.
Cheryl Ann is non-motorized and only towed by
Jacob 1 making the tugboat the principal and the
barge a mere accessory, necessarily has no means
of controlling the route.
The element of intent is wanting on the part of the
barge Cheryl Ann

1. If the conveyance has been used for

smuggling at least twice before
2. If the owner is not in the business for
which the conveyance is generally
used
3. If the owner is not financially in a
position to own such convenyance
Property subject of forfeiture under Tariff
and Customs Code
Any vehicle, vessel or aircraft including
cargo, which shall be used unlawfully in the
importation or exportation of articles or in
conveying and/or transporting contraband
or smuggled articles commercial quantities
into or from any Philippine Port or place.

The mere carrying and holding on board of

contraband and smuggled articles in
commercial quantities shall subject such
vessel, vehicle, aircraft or any other craft of

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forfeiture: Provided, that the vessel, or

aircraft or any other craft is not used as
duly authorized common carrier and such
carrier it is not chartered or leased

Island Shipping Vessel was imported When the undervaluation, misdescription,

Corp vs Secretary misclassification or misdeclaration in the
of Finance import entry is intentional, the importer shall
be subject to the penal provision under Section
3602 of this Code. [Emphasis supplied.]

The 80% drop in valuation existing in this case

renders the consideration and application of
Section 2503 unavoidable

Depreciation not factor in determining

dutiable value

Neither can the respondent hide behind the excuse that the
vessel's dutiable value at P1,100,000.00 was approved by
MARINA via the Authority to Import, taking into consideration
the vessel's depreciation brought about by its ordinary wear
and tear. In the first place, we observe that nowhere in the
TCCP does it state that the depreciated value of an imported
item can be used as the basis to determine an imported
item's dutiable value. Section 201 of P.D. No. 1464 (the Tariff
and Customs Code of 1978)17 in this regard provides:

Sec. 201. - Basis of Dutiable Value. - The

dutiable value of an imported article subject to
an ad valorem rate of duty shall be based on
the cost (fair market value) of same, like or
similar articles, as bought and sold or offered
for sale freely in the usual wholesale quantities
in the ordinary course of trade in the principal
markets of the exporting country on the date

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of exportation to the Philippines (excluding

internal excise taxes to be remitted or
rebated) or where there is none on such date,
then on the cost (fair market value) nearest to
the date of exportation, including the value of
all container, covering and/or packings of any
kind and all other expenses, costs and charges
incident to placing the article in a condition
ready for shipment to the Philippines, and
freight as well as insurance premium covering
the transportation of such articles to the port
of entry in the Philippines.

Where the fair market value or price of

the article cannot be ascertained thereat or
where there exists a reasonable doubt as to
the fairness of such value or price, then the
fair market value or price in the principal
market in the country of manufacture or
origin, if it is not the country of exportation, or
in a third country with the same stage of
economic development as the country of
exportation shall be used.

When the dutiable value of the article cannot

be ascertained in accordance with the
preceding paragraphs or where there exists a
reasonable doubt as to the cost (fair market
value) of the imported article declared in the
entry, the correct dutiable value of the article
shall be ascertained by the Commissioner Of
Customs from the reports of the Revenue or
Commercial Attaché (Foreign Trade Promotion
Attaché), pursuant to Republic Act Numbered
Fifty-four Hundred and Sixty-six or other
Philippine diplomatic officers or Customs

22

Commissioner of Rice locally bought (NFA)
Customs vs Was alleged as illegally imported
Singson Signatory is non-existent
No info regarding the boat (Manila) –
certification was issued by the PGC Station
Commander in Manila
Taxation Cases – 2nd Exam
Compiled by Kimberly Benazir May R. Codilla
Attaches and from such other information that
may be available to the Bureau of Customs.
Such values shall be published by the
Commissioner of Customs from time to time.
When the dutiable value cannot be ascertained
as provided in the preceding paragraphs, or
where there exists a reasonable doubt as to
the dutiable value of the imported article
declared in the entry, it shall be domestic
wholesale selling price of such or similar article
in Manila or other principal markets in the
Philippines or on the date the duty become
payable on the article under appraisement, on
the usual wholesale quantities and in the
ordinary course of trade, minus:
(a) not more than twenty-five (25) per cent
thereof for expenses and profits; and cralawlibrary
(b) duties and taxes paid thereon. (as
amended by E.O. 156) [Emphasis supplied.
WON CA erred No. The certification presented by the petitioner
in affirming the does not reveal any kind of deception committed
CTA’s decision by the respondents. Such certification is not
ordering the adequate to support the proposition sought to be
release of the established which is the commission of fraud.
15k bags of rice
and its carrying Before forfeiture proceedings are instituted, the
vessel law required the presence of probable cause
which rests on the petitioner who ordered the
forfeiture of the shipment of rice and its carrying
vessel. Once established the burden of proof is
shifted to the claimant.
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Pacis vs Averio -Philippine Navy pursued a fishing boat
-Exchange of fires
-Boat was carrying untaxed foreign made
cigarettes
-Boat was confiscated to Philippine naval
base
-Cigarettes delivered to Bureau of Customs
-Collector of Customs of Manila commenced
seizure and forfeiture proceeding
-Same day, owner of the boat filed Civil Case
(replevin) against Flag Officer of the
Philippine Navy
Administrative Procedure
Collector of Customs has jurisdiction not the
CFI. Replevin cases should not be entertained
for it will defeat the purpose of forfeiture
proceedings
Taxation Cases – 2nd Exam
Compiled by Kimberly Benazir May R. Codilla
Burden of Proof in Seizure and Forfeiture - In all
proceedings taken from the seizure and/or
forfeiture of the vessel, aircraft beast or articles
under the provisions of Tariff and Customs laws,
the burden of proof shale lie upon the claimant.
Provided, that the probable cause shall be first
shown for the institution of such proceedings and
that seizure and or forfeiture was made under the
circumstances and in the manner described in the
preceding sections of this code.
The CFI should yield to the jurisdiction of the
Collector of Customs.
The Collector of Customs decision is appealable to
the -> Commissioner of Customs whose decision is
in turn appealable to the Court of Tax Appeals. An
aggrieved party may appeal from a judgement of
the CTA directly to the Supreme Court
24

Republic vs CFI and The articles were declared as machinery for
Mayer Streel Pipe steel pipe manufacture.
It was grossly misdeclared, misclassified and
undervalued, the Collector of Customs
issued a warrant of seizure and detention
against the subject machinery.
Was authorized provisional release
Taxation Cases – 2nd Exam
Compiled by Kimberly Benazir May R. Codilla
The question of seizure and forfeiture is for the
Collector of Customs to determine the first
instance and then the Commission of Customs.
This is a field where the doctrine of primary
jurisdiction controls.
Thereafter, an Appeal to the Court of Tax Appeals
may be taken.
A court of first instance is devoid of competency to
act on the matter.
The Collector of Customs when sitting in forfeiture
proceeding, constitutes a tribunal upon which the
law confers jurisdiction to hear and determine all
question touching the forfeiture and further
disposition of the subject matter
Exclusive jurisdiction in seizure and forfeiture
cases vested in the Collector of Customs precludes
a court of first instance from assuming cognizance
over such matter. The Bureau of Customs acquires
exclusive jurisdiction over imported goods, for the
purpose of enforcement of the customs laws, from
the moment the goods are actually in its
possession or control, even if no warrant of
seizure or detention had previously been issued by
the Collector of Customs in connection with
seizure and forfeiture proceedings
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Agriex Co Ltd vs WON Collector The Collector of Customs was authorized to

Hon Titus of Customs institute seizure proceedings and to issue Warrant
Villanueva have the of Seizure and Detentions in the Subic Bay Freeport
authority to subject to the review of the Commissioner of
issue warrant of Customs.
seizure and
detention in the Both SBMA and BOC have the power to seize and
Subic Bay forfeit goods or articles entering the State Bay
Freeport Freeport, except that SBMA’s authority to seize
and forfeit goods and articles entering the SBF has
been limited only to cases involving violations of
RA 7227 or its IRR.

There is no question that the authority of the BOC

is larger in scope because it covers cases
concerning violations of the customs laws.

The authority of the BOC does not contravene the

nature of the Subic Bay Freeport as a separate
customs authority.

The treatment of Subic Bay Freeport as a separate

customs territory cannot completely divest the
Government of its right to intervene in the
operations and management of the Subic Bay
Freeport, especially when patent violations of the
customs and tax laws are discovered.

Sec 602 of the Tariff and Customs Code vests

exclusive original jurisdiction in the Bureau of

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Customs over seizure and forfeiture cases in the

enforcement of the tariff and customs laws.

From the moment imported goods are actually in

the possession or control of the Customs
authorities, even if no warrant for seizure or
detention had previously been issued by the
Collector in connection with the seizure and
forfeiture proceedings, the BOC acquires exclusive
jurisdiction over such imported goods for the
purpose of enforcing the customs laws, subject to
appeal to the Court of Tax Appeals whose decisions
are appealable to the Supreme Court
Tomas Salvador vs - PAL employees In the case of Papa vs Mago the Supreme Court
People of the - Watch, jewelries etc were discovered clearly recognized the power of the State to foil
Philippines by authorities any fraudulent schemes resorted by importers who
- No search warrant evade payment of customs duties. The
- Surveillance governments policy to combat the serious malady
- In line with the enforcement of of smuggling cannot be reduced to futility and
customs laws importance in the ground that dutiable articles on
which the duty has not been paid are entitled to
the same Constitutional protection as an
individual’s private papers and effects.

➢ The search of moving vehicle is recognized

in this jurisdiction as a valid exception to
the requirements for a search warrant.
No search warrant is required for moving vehicle
when the search and seizure is related to Customs
Search

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Dela Fuente vs De the M/V Lucky Star I, owned by the private
Veyra respondent Lucky Star Shipping Co.,
unloading cargo to several small water-
crafts alongside the vessel off the coast of
Zambales approximately thirty (30) nautical
miles east of Scarborough Shoal or twenty-
three (23) miles east of the International
Treaty Limits.
- Cigarettes
Taxation Cases – 2nd Exam
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Papa vs Mago - law enforcers who are tasked to
effect the enforcement of the customs and tariff
laws are authorized to search and seize, without a
search warrant, any article, cargo or other movable
property when there is reasonable cause t o
suspect that the said items have been introduced
to the Philippines in violation of the Tariff and
Customs Code.
The sole issue is Contends that the seizure was made outside the
whether or not territorial jurisdiction of the Philippines should be
the Court of raised before Collector of Customs and not by a
First Instance separate actions before CFI
has jurisdiction
to take Collector of Customs with jurisdiction to hear and
cognizance determine whether or not a vessel was seized
of the complaint within the territorial waters of the Philippines;
filed by the Claim that seizure of vessel by the Customs
private Collector was made outside the territorial
respondents for jurisdiction of the Philippines should be raised as a
the release of defense before the Collector of Customs, not by a
the vessel M/V separate action before the CFI; Case at bar.—The
Lucky Star I, Collector of Customs when sitting in forfeiture
which is the proceedings constitutes a tribunal expressly vested
subject of a by law with jurisdiction to hear and determine the
seizure and subject matter of such proceedings without any
forfeiture interference from the Court of First Instance.
proceedings (Auyong Hian v. Court of Tax Appeals, et al., 19
before the SCRA 10). The Collector of Customs
Collector of of Sual-Dagupan in Seizure Identification No. 14-F-
Customs of the 72 constituted itself as a tribunal to hear and
determine
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port of Sual- among other things, the question of whether or not

Dagupan. the M/V Lucky Star I was seized within

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