PILIPINAS SHELL PETROLEUM CORPORATION v. COMMISSIONER OF CUSTOMS, GR No.

195876,
2016-12-05

Facts:

On 16 April 1996, Republic Act (R.A.) No. 8180,[4] otherwise known as the "Downstream Oil Industry
Deregulation Act of 1996" took effect. It provides, among others, for the reduction of the tariff duty
on imported crude oil from ten percent (10%) to three percent (3%).

Prior to its effectivity, petitioner's importation of 1,979,674.85 U.S. barrels of Arab Light Crude Oil,
thru the Ex MT Lanistels, arrived on 7 April 1996 nine (9) days earlier than the effectivity of the
liberalization provision

More than four (4) years later or on 1 August 2000, petitioner received a demand letter[5] dated 27
July 2000 from the Bureau of Customs (BOC), through the District Collector of Batangas, assessing it
to pay the deficiency customs duties in the amount of P120,162,991.00

Petitioner protested the assessment on 14 August 2000

Seeking clarification as to what course of action the BOC is taking, and reiterating its position that
the respondent's demand letters dated 29 October 2001 and 27 July 2000 have no legal basis,
petitioner sent a letter to the Director of Legal Service of the BOC on 3 December 2001 for said
purpose.

On 11 April 2002, the BOC filed a civil case for collection of sum of money against petitioner,
together with Caltex Philippines, Inc. as co-party therein, docketed as Civil Case No. 02103239,
before Branch XXV, Regional Trial Court (RTC), of the City of Manila.

Consequently, on 27 May 2002, petitioner filed with the Court of Tax Appeals (CTA) a Petition for
Review, raffled to the Former First Division (CTA in Division)

CTA in Division ruled to dismiss the Petition for Review on C.T.A. Case No. 6485 for lack of merit and
accordingly ordered petitioner to pay the entire amount of P936,899,883.90

CTA Former En Banc affirmed the CTA in Division's ruling pertaining to the implied abandonment
caused by petitioner's failure to file the Import Entry and Internal Revenue Declaration within the 30-
day period, and transfer of ownership by operation of law to the government of the subject shipment
in accordance with Sections 1801 and 1802, in relation to Section 13.01, of the TCCP... judicial no

Issues:

that the subject Memorandum dated 2 February 2001 was neither identified nor offered in evidence
by respondent during the entire proceedings before the CTA in Division.

CTA likewise cannot motu proprio justify the existence of fraud committed by petitioner by applying
the rules on judicial notice.

Ruling:

Unless any of the party formally offered in evidence said Memorandum, and accordingly, admitted by
the court a quo, it cannot be considered as among the legal and factual bases in resolving the
controversy presented before it.

it would also be an error for the CTA in Division to even take judicial notice of the subject
Memorandum being merely a part of the BOC Records submitted before the court a quo, without the
same being identified by a witness, offered in and admitted as evidence, and effectively, depriving
petitioner, first and foremost, an opportunity to object thereto. Hence, the subject Memorandum
should not have been considered by the CTA in Division in its disposition.

Principles:
evidence

A formal offer is necessary because judges are mandated to rest their findings of facts and their
judgment only and strictly upon the evidence offered by the parties at the trial. Its function is to
enable the trial judge to know the purpose or purposes for which the proponent is presenting the

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evidence. On the other hand, this allows opposing parties to examine the evidence and object to its
admissibility. Moreover, it facilitates review as the appellate court will not be required to review
documents' not previously scrutinized by the trial court.
evidence

The Court in Constantino v. Court of Appeals ruled that the formal offer of one's evidence is deemed
waived after failing to submit it within a considerable period of time. It explained that the court
cannot admit an offer of evidence made after a lapse of three (3) months because to do so would
''condone an inexcusable laxity if not non-compliance with a court order which, in effect, would
encourage needless delays and derail the speedy administration of justice."

VELASCO, JR., J.:

Acting on the Omnibus Motion (For Reconsideration and Referral to the Court En bane) dated January 20, 2017 filed by
public respondent Commissioner of Customs, the Court DENIES the same for lack of merit. The arguments raised by
respondent in this pending incident are the very same arguments raised in the petition, which have already been evaluated,
passed upon, and considered in the assailed December 5, 2016 Decision. Ergo, the Court rejects these arguments on the
same grounds discussed in the challenged Decision, and denies, as a matter of course, the pending motion.

Unlike in Chevron, petitioner

The Omnibus Motion is anchored primarily on the alleged applicability of Chevron Philippines, Inc. v. Commissioner of the
Bureau of Customs 1 (Chevron) to the case at bar. However, the Court desisted from applying the doctrine laid down
in Chevron considering that the facts and circumstances therein are not in all fours with those obtaining in the instant case.
Thus, Chevron is not a precedent to the case at bar.

A "precedent" is defined as a judicial decision that serves as a rule for future determination in similar or substantially similar
cases. Thus, the facts and circumstances between the jurisprudence relied upon and the pending controversy should not
diverge on material points. But as clearly explained in the assailed December 5, 2016 Decision, the main difference
between Chevron and the case at bar lies in the attendance of fraud.

In Chevron, evidence on record established that Chevron committed fraud in its dealings. On the other hand, proof that
petitioner Pilipinas Shell Petroleum Corporation (Pilipinas Shell) was just as guilty was clearly wanting. Simply, there was no
finding of fraud on the part of petitioner in the case at bar. Such circumstance is too significant that it
renders Chevron indubitably different from and cannot, therefore, serve as the jurispn1dential foundation of the case at bar.

In his dissent, Associate Justice Diosdado M. Peralta (Justice Peralta) claims that fraud was committed by Pilipinas Shell
when it allegedly deliberately incurred delay in filing its Import Entry and Internal Revenue Declaration in order to avail of the
reduced tariff duty on oil importations, from ten percent (10%) to three percent (3%), upon the effectivity of Republic Act No.
8180 (RA 8180), otherwise known as the Oil Deregulation Law. Justice Peralta cites the February 2, 201 I Memorandum to
support the allegation of fraud, but as exhaustively discussed in Our December 5, 2016 Decision, the document was never
formally offered as evidence before the Court of Tax Appeals, and is, therefore, bereft of evidentiary value. Worse, it was not
even presented during trial and no witness identified the same.

What value can the Court then accord to the document? The Court finds its answer in Heirs of Pasag v. Sps.
Parocha, 2 which teaches that:

x x x Documents which may have been identified and marked as exhibits during pre-trial or trial but which were not formally
offered in evidence cannot in any manner be treated as evidence. Neither can such unrecognized proof be assigned any
evidentiary weight and value. It must be stressed that there is a significant distinction between identification of documentary
evidence and its formal offer. The former is done in the course of the pre-trial, and trial is accompanied by the marking of the
evidence as an exhibit; while the latter is done only when the party rests its case. The mere fact that a particular document is
identified and marked as an exhibit does not mean that it has already been offered as part of the evidence. It must be
emphasized that any evidence which a party desires to submit for the consideration of the court must formally be offered by
the party; otherwise, it is excluded and rejected. (emphasis added)

Resultantly, no scintilla of proof was ever offered in evidence by respondent Commissioner of Customs to substantiate the
claim that Pilipinas Shell acted in a fraudulent manner. At best, the allegation of fraud on the part of Pilipinas Shell is mere
conjecture and purely speculative. Settled is the rule that a court cannot rely on speculations, conjectures or guesswork, but
must depend upon competent proof and on the basis of the best evidence obtainable under the circumstances. We
emphasize that litigations cannot be properly resolved by suppositions, deductions, or even presumptions, with no basis in
evidence, for the truth must have to be determined by the hard rules of admissibility and proof. 3

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The absence of fraud and its effects
on the one-year prescriptive period,
and on the due notice requirement
prior to ipso facto abandonment

As extensively discussed in the assailed Decision, whether or not petitioner Pilipinas Shell defrauded the public respondent
becomes pivotal because of Section 1603 of the Tariff and Customs Code of the Philippines (TCC), which reads:

Section 1603. Finality of Liquidation. When articles have been entered and passed free of duty or final adjustments of duties
made, with subsequent delivery, such entry and passage free of duty or settlements of duties will, after the expiration of one
(1) year, from the date of the final payment of duties, in the absence of fraud or protest or compliance audit pursuant to the
provisions of this Code, be final and conclusive upon all parties, unless the liquidation of the import entry was merely
tentative. (emphasis added)

Pursuant to the above-quoted provision, the attendance of fraud would remove the case from the ambit of the statute of
limitations, and would consequently allow the government to exercise its power to assess and collect duties even beyond the
one-year prescriptive period, rendering it virtually imprescriptible. 4

In the case at bar, petitioner Pilipinas Shell filed its Import Entry and Internal Revenue Declaration (IEIRD) and paid the
import duty of its shipments in the amount of P 11,231, 081 on May 23, 1996. However, it only received a demand letter from
public respondent on July 27, 2000, or more than four (4) years later. By this time, the one-year prescriptive period had
already elapsed, and the government had already been barred from collecting the deficiency in petitioner's import duties for
the covered shipment of oil.

In an attempt to remove the instant case from the purview of the provision, Justice Peralta and the respondent claim that the
government is no longer collecting tariff duties. Rather, it is exercising its ownership right over the shipments, which were
allegedly deemed abandoned by petitioner because of the latter's failure to timely file the IEIRD. It is their postulation then
that Sec. 1603 cannot find application in the case at bar.

We respectfully disagree.

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.

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.

Public respondent cannot harp on the Chevron ruling to excuse compliance from the due notice requirement before the
imported articles can be deemed abandoned, for to do so would only downplay the Court's finding anent the non-attendance
of fraud. To be clear, the element of fraud in Chevron was a key ingredient on why notice was deemed unnecessary: 5

Under the peculiar facts and circumstances of this case, due notice was not necessary. The shipments arrived in 1996. The
IEDs and IEIRDs were also filed in 1996. However, respondent discovered the fraud which attended the importations and
their subsequent release from the BOC's custody only in 1999. Obviously, the situation here was not an ordinary case of
abandonment wherein the importer merely decided not to claim its importations. Fraud was established against petitioner; it
colluded with the former District Collector. Because of this, the scheme was concealed from respondent. The government
was unable to protect itself until the plot was uncovered. The government cannot be crippled by the malfeasance of its

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officials and employees. Consequently, it was impossible for respondent to comply with the requirements under the rules. By
the time respondent learned of the anomaly, the entries had already been belatedly filed and the oil importations released
and presumably used or sold. It was a fait accompli. Under such circumstances, it would have been against all logic to
require respondent to still post an urgent notice to file entry before declaring the shipments abandoned. (emphasis added)

Hence, it does not suffice that petitioner is a multinational, large scale importer presumed to be familiar with importation rules
and procedures for the ipso facto abandonment doctrine to apply. Under the peculiar facts and circumstances
of Chevron, the existence of fraud was the primary element established to warrant the application of the doctrine. Without
this element, Chevron cannot be treated at par with the case at bar. The statutorily required due notice should still have been
timely served upon petitioner before the imported oil shipments could have been deemed abandoned.

Under public respondent's Customs Memorandum Order No. (CMO) 15-94, otherwise known as the Revised Guidelines on
Abandonment in force at that time, due notice is served upon the importer through the following measures:

SUBJECT: REVISED GUIDELINES ON ABANDONMENT

xxxx

B. ADMINISTRATIVE PROVISIONS

xxxx

B.2 Implied abandonment occurs when:

B.2.1 The owner, importer, consignee, interested party or his authorized broker/representative, after due notice, fails to file
an entry within a nonextendible period of thirty (30) days from the date of discharge of last package from the carrying vessel
or aircraft.

xxxx

Due notice to the consignee/importer/owner/interested party shall be by means of posting of a notice to file entry at the
Bulletin Board seven (7) days prior to the lapse of the thirty (30) day period by the Entry Processing Division listing the
consignees who/which have not filed the required import entries as of the date of the posting of the notice and notifying them
of the arrival of their shipment, the name of the carrying vessel/aircraft, Voy. No. Reg. No. and the respective BIL No./AWB
No., with a warning, as shown by the attached form, entitled: URGENT NOTICE TO FILE ENTRY which is attached hereto
as Annex A and made an integral part of this Order.

x x xx

C. OPERATIONAL PROVISIONS

xxxx

C.2 On Implied Abandonment:

C.2.1 When no entry is filed

C.2.1.1 Within twenty-four (24) hours after the completion of the boarding formalities, the Boarding Inspector must
submit the manifests to the Bay Service or similar office so that the Entry Processing Division copy may be put to use by
said office as soon as possible.

C.2.1.2 Within twenty-four (24) hours after the completion of the unloading of the vessel/aircraft, the Inspector
assigned in the vessel/aircraft, shall issue a certification addressed to the Collector of Customs (Attention: Chief, Entry
Processing Division), copy furnished Chief, Data Monitoring Unit, specifically stating the time and date of discharge of the
last package from the vessel/aircraft assigned to him. Said certificate must be encoded by Data Monitoring Unit in the
Manifest Clearance System.

C.2.1.3 Twenty-three (23) days after the discharge of the last package from the carrying vessel/aircraft, the Chief, Data
Monitoring Unit shall cause the printing of the URGENT NOTICE TO FILE ENTRY in accordance with the attached form,
Annex A hereof, sign the URGENT NOTICE and cause its posting continuously for seven (7) days at the Bulletin Board
for the purpose until the lapse of the thirty (30) day period.

C.2.1.4 The Chief, Data Monitoring Unit, shall submit a weekly report to the Collector of Customs with a listing by vessel,
Registry Number of shipments/ importations which shall be deemed abandoned for failure to file entry within the prescribed

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period and with certification that per records available, the thirty (30) day period within which to file the entry therefore has
lapsed without the consignee/importer filing the entry and that the proper posting of notice as required has been complied
with.

xxxx

C.2.1.5 Upon receipt of the report, the Collector of Customs shall issue an order to the Chief, Auction and Cargo Disposal
Division, to dispose of the shipment enumerated in the report prepared by the Chief, Data Monitoring Unit on the ground
that those are abandoned and ipso facto deemed the property of the Government to be disposed of as provided by law.
(emphasis supplied)

CMO 15-94 is an executive edict that implements Section 180l (b) of the TCC. It is an interpretation given to a statute by
those charged with its execution, and is intended for the guidance of subordinate executive officials to promote a more
efficient and cost effective administration of the BOC. Unless the rule appears to be clearly unreasonable or arbitrary, it is
entitled to the greatest weight by the Court, 6 if not accorded the similar force and binding effect of law. 7

Coupled with the earlier quotation from Chevron, it becomes abundantly clear that the notice requirement as mandated in
CMO 15-94 cannot be excused unless fraud is established. Resultantly, fraud being absent on the part of petitioner
Pilipinas Shell, the ipso facto abandonment doctrine cannot operate within the factual milieu of the instant case. Be that as it
may, in view of the substantial differences between the facts of Chevron and the peculiarities of the instant case, and just
as Chevron was justified "under the peculiar facts and circumstances" obtaining therein, the Decision dated December 5,
2016 in the case at bar ought to be considered as a judgment pro hac vice.

WHEREFORE, premises considered, the Court DENIES WITH FINALITY the Omnibus Motion (For Reconsideration and
Referral to the Court En bane) dated January 20, 2017 filed by public respondent Commissioner of Customs for lack of merit.

No further pleadings or motions will be entertained.

Let entry of judgment be issued.

SO ORDERED.