G.R. No.

42204 January 21, 1993

HON. RAMON J. FAROLAN, JR., in his capacity as Commissioner of

Customs, petitioner,
vs.
COURT OF TAX APPEALS and BAGONG BUHAY TRADING, respondents.

The Solicitor General for petitioner.

Jorge G. Macapagal counsel for respondent.

Aurea Aragon-Casiano for Bagong Buhay Trading.

ROMERO, J.:

This is a petition for review on certiorari which seeks to annul and set aside the decision
of the Court of Tax Appeals dated December 27, 1974 (CTA Case No. 2490) reversing
the decision of the Commissioner of Customs which affirmed the decision of the
Collector of Customs.1

The undisputed facts are as follows:

On January 30, 1972, the vessel S/S "Pacific Hawk" with Registry No. 170 arrived at the
Port of Manila carrying, among others, 80 bales of screen net consigned to Bagong
Buhay Trading (Bagong Buhay).

Said importation was declared through a customs broker under Entry No. 8651-72 as 80
bales of screen net of 500 rolls with a gross weight of 12,777 kilograms valued at
$3,750.00 and classified under Tariff Heading No. 39.06-B of the Tariff and Customs
Code2 at 35% ad valorem.

Since the customs examiner found the subject shipment reflective of the declaration,
Bagong Buhay paid the duties and taxes due in the amount of P11,350.00 which was
paid through the Bank of Asia under Official Receipt No. 042787 dated February 1,
1972.

Acting on the strength of an information that the shipment consisted of "mosquito net"
made of nylon dutiable under Tariff Heading No. 62.02 of the Tariff and Customs Code,
the Office of the Collector of Customs ordered are-examination of the shipment.

A report on the re-examination revealed that the shipment consisted of 80 bales of

screen net, each bale containing 20 rolls or a total of 1,600 rolls.

Re-appraised, the shipment was valued at $37,560.00 or $10.15 per yard instead of
$.075 per yard as previously declared.

Furthermore, the Collector of Customs determined the subject shipment as made of

synthetic (polyethylene) woven fabric classifiable under Tariff Heading No. 51.04-B at
100% ad valorem.

Thus, Bagong Buhay Trading was assessed P272,600.00 as duties and taxes due on
the shipment in question.

Since the shipment was also misdeclared as to quantity and value, the Collector of
Customs forfeited the subject shipment in favor of the government.
Private respondent then appealed the decision of the Collector of Customs by filing a
petition for review with the Commissioner of Customs.

On November 25, 1972 the Commissioner affirmed the Collector of Customs.

Private respondent moved for reconsideration but the same was denied on January 22,
1973.7

From the Commissioner of Customs, private respondent elevated his case before the
Court of Tax Appeals.

Upon review, the Court of Tax Appeals reversed the decision of the Commissioner of
Customs.

It ruled that the Commissioner erred in imputing fraud upon private respondent because
fraud is never presumed and thus concluded that the forfeiture of the articles in question
was not in accordance with law.

Moreover, the appellate court stated that the imported articles in question should be
classified as "polyethylene plastic" at the rate of 35% ad valorem instead of "synthetic
(polyethylene) woven fabric" at the rate of 100% ad valorem based upon the results
conducted by the Bureau of Customs Laboratory.

Consequently, the Court of Tax Appeals ordered the release of the said article upon
payment of the corresponding duties and taxes. (C.T.A. Case No. 2490).

Thereafter, the Commissioner of Customs moved for reconsideration.

On November 19, 1975, the Court of Tax Appeals denied said motion for
reconsideration.9

On August 20, 1976, private respondent filed a petition asking for the release of the
questioned goods which this Court denied.

After several motions for the early resolution of this case and for the release of goods
and in view of the fact that the goods were being exposed to the natural elements, we
ordered the release of the goods on June 2, 1986.

Consequently, on July 26, 1986, private respondent posted a cash bond of P149,443.36
to secure the release of 64 bales out of the 80 bales originally delivered on January 30,
1972. Sixteen bales remain missing.

Private respondent alleges that of the 143,454 yards (64 bales) released to Bagong
Buhay, only 116,950 yards were in good condition and the 26,504 yards were in bad
condition.

Consequently, private respondent demands that the Bureau of Customs be ordered to

pay for damages for the 43,050 yards it actually lost.

Hence, this petition, the issues being;

a) whether or not the shipment in question is subject to forfeiture under Section 2530-M
subparagraphs (3), (4) and (5) of the Tariff and Customs Code;

b) whether or not the shipment in question falls under Tariff Heading No. 39.06-B
(should be 39.02-B) of the Tariff and Customs Code subject to ad valorem duty of 35%
instead of Tariff Heading No. 51.04-B with ad valorem of 100% and
 c) whether or not the Collector of Customs may be held liable for the 43,050 yards
actually lost by private respondent.

Petitioner contends that there has been a misdeclaration as to the quantity in rolls of the
shipment in question, the undisputed fact being that the said shipment consisted of
1,600 rolls and not 500 rolls as declared in the import entry.

We agree with the contention of the petitioner. In declaring the weight of its shipment in
an import entry, through its customs broker as 12,777 kilograms when in truth and in
fact the actual weight is 13,600 kilograms, an apparent misdeclaration as to the weight
of the questioned goods was committed by private respondent.

Although it is admitted that indeed there was a misdeclaration, such violation, however,
does not warrant forfeiture for such act was not committed directly by the owner,
importer, exporter or consignee as set forth in Section 2530, paragraph m,
subparagraph (3), and/or (4).

In the case at bar, although it cannot be denied that private respondent caused to be
prepared through its customs broker a false import entry or declaration, it cannot be
charged with the wrongful making thereof because such entry or declaration merely
restated faithfully the data found in the corresponding certificate of origin, 17 certificate of
manager of the shipper,18 the packing lists 19 and the bill of lading20 which were all
prepared by its suppliers abroad.

If, at all, the wrongful making or falsity of the documents above-mentioned can only be
attributed to Bagong Buhay's foreign suppliers or shippers.

Since private respondent's misdeclaration can be traced directly to its foreign suppliers,
Section 2530, paragraph m, subparagraphs (3) and (4) cannot find application.

Applying subparagraph (5), fraud must be committed by an importer/consignee to evade

payment of the duties due.

We support the stance of the Court of Tax Appeals that the Commissioner of Customs
failed to show that fraud had been committed by the private respondent.

The fraud contemplated by law must be actual and not constructive. It must be
intentional fraud, consisting of deception willfully and deliberately done or resorted to in
order to induce another to give up some right.

As explained earlier, the import entry was prepared on the basis of the shipping
documents provided by the foreign supplier or shipper.

Hence, Bagong Buhay Trading can be considered to have acted in good faith when it
relied on these documents.

Proceeding now to the question of the correct classification of the questioned

shipments, petitioner contends that the same falls under Tariff Heading No. 51.04 being
a "synthetic (polyethylene) woven fabric."

On the other hand, private respondent contends that these fall under Tariff Heading No.
39.06 (should be 39.02), having been found to be made of polyethylene plastic.

Mr. Norberto Z. Manuel, an Analytical Chemist of the Bureau of Customs and an

Assistant to the Chief of the Customs Laboratory, testified that a chemical test was
conducted on the sample and "the result is that the attached sample submitted under
Entry No. 8651 was found to be made wholly of Polyethylene plastic."26
A similar result conducted by the Adamson University Testing Laboratories

Consequently, the Court of Tax Appeals, relying on the laboratory findings of the
Bureau of Customs and Adamson University correctly classified the questioned
shipment as polyethylene plastic taxable under Tariff Heading No. 39.02 instead of
synthetic (polyethylene) woven fabric under Tariff Heading 51.04

On the third issue, we opine that the Bureau of Customs cannot be held liable for actual
damages that the private respondent sustained with regard to its goods.

Otherwise, to permit private respondent's claim to prosper would violate the doctrine of
sovereign immunity. Since it demands that the Commissioner of Customs be ordered to
pay for actual damages it sustained, for which ultimately liability will fall on the
government, it is obvious that this case has been converted technically into a suit
against the state.

On this point, the political doctrine that "the state may not be sued without its consent,"
categorically applies.

As an unincorporated government agency without any separate juridical personality of

its own, the Bureau of Customs enjoys immunity from suit.

Along with the Bureau of Internal Revenue, it is invested with an inherent power of
sovereignty, namely, taxation. As an agency, the Bureau of Customs performs the
governmental function of collecting revenues which is definitely not a proprietary
function. Thus, private respondent's claim for damages against the Commissioner of
Customs must fail.

WHEREFORE, the decision of the respondent Court of Tax Appeals is AFFIRMED. The
Collector of Customs is directed to expeditiously re-compute the customs duties
applying Tariff Heading 39.02 at the rate of 35% ad valorem on the 13,600 kilograms of
polyethylene plastic imported by private respondent.

SO ORDERED.

Gutierrez, Jr., Bidin, Davide, Jr. and Melo, JJ., concur.