Commissioner of Customs v. Court of Tax Appeals
REITERATIONFacts
The Antecedents: In 1973, NCR Corporation (Philippines) imported ten cases of adding machines from NCR Corporation (Japan). The importation was declared with a value of $62.34 per unit, and customs duty and advance sales tax were paid based on this declared value. Procedural History: A Customs Appraiser reassessed the value based on the Home Consumption Value (HCV) of $77.55 per unit listed in Customs Valuation Circular (CVC) No. 32-72. This resulted in a demand for additional customs duty, advance sales tax, and surcharge. The private respondent paid the additional amounts but protested the collection. The Collector of Customs and the Commissioner of Customs affirmed the reassessment. The Court of Tax Appeals (CTA) found merit in the private respondent's contention that the declared value in the consular invoice should be the basis, but only allowed a refund of the additional customs duty, denying refunds for advance sales tax and surcharge. The Petition: The Commissioner of Customs filed a petition for review, questioning the CTA's ruling that the declared value in the consular invoice should be the basis for the dutiable value, instead of the published HCV in the CVC.
Issue(s)
Whether the declared value in the consular invoice or the published Home Consumption Value (HCV) in the Customs Valuation Circular (CVC) should be the basis for determining the dutiable value of imported commodities. Whether a marked difference between the declared value and the published HCV, coupled with the fact that the importer is the exclusive distributor of the goods, constitutes sufficient reasonable doubt to disregard the declared value; and the burden of proof required to establish the declared value.
Ruling
The petition is granted. The decision of the Court of Tax Appeals is reversed and set aside. The decision of the Commissioner of Customs, affirming the decision of the Collector of Customs, is reinstated. The case is immediately executory.
Ratio Decidendi
On the basis for determining dutiable value: Section 201 of the Tariff and Customs Code, as amended, provides that the dutiable value of an imported article subject to an ad valorem rate of duty shall be based on the home consumption value or price. This home consumption value or price is generally the value declared in the consular, commercial, trade, or sales invoice. However, the law also states that where there exists a reasonable doubt as to the value or price declared in the entry, the correct dutiable value shall be ascertained from reports of the Revenue Attaché or Commercial Attaché and other available information. The Commissioner of Customs is mandated to publish lists of these home consumption values from time to time. The Court reiterated the well-established rule that the value of merchandise fixed by the appraiser and affirmed by the Collector of Customs is conclusive in the absence of an affirmative showing that the appraiser proceeded upon a wrong principle and contrary to law. The purpose of appraisers is to prevent fraud and protect government revenues. The determination of tax deficiency by the government has prima facie validity, and the burden is on the taxpayer to overcome this presumption and show that the determination was incorrect. On the existence of reasonable doubt and burden of proof: The Supreme Court held that a marked difference between the declared value ($62.34 per unit) and the published HCV ($77.55 per unit) is sufficient to engender reasonable doubt as to the veracity of the declared price, especially considering the importation of 120 units. Furthermore, the fact that the imported goods were obtained from a sister company and that the private respondent is the exclusive distributor of these machines in the Philippines constitutes sufficient ground for questioning the correctness of the declared value. Such a situation suggests a potential for a special price accorded between related companies or to an exclusive distributor, which cannot be considered the free home consumption value. The Court clarified that a special price accorded by a company to a sister company or an exclusive distributor cannot be considered the home consumption value, which is defined as the price freely bought and sold or offered for sale in the ordinary course of trade in the principal markets. It was therefore not an error for the Customs Appraiser to disregard the declared value and use the published HCV. The burden rests upon the importer to prove that the declared value is the true and correct home consumption value, especially when a question on its veracity has been raised by a reassessment affirmed by customs authorities. The private respondent failed to discharge this onus by not providing certifications or affidavits to support its declared value.
Main Doctrine
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. Where there is a reasonable doubt as to the value declared in the entry, the correct dutiable value is to be ascertained from reports of the Revenue Attaché or Commercial Attaché and other available information, and the Commissioner of Customs is required to publish lists of home consumption values. A marked difference between the declared value and a published home consumption value, especially in transactions between related companies or exclusive distributors, can constitute reasonable doubt, shifting the burden to the importer to prove the declared value is the true and correct home consumption value.