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CALTEX v. CA

FACTS:

The case involves Caltex, a corporation engaged in the oil industry, which imported various shipments of light/medium mix special oil and heavy crude oil in 1982. The Collector of Customs assessed ad valorem duties on these importations based on a memorandum issued by the Acting Commissioner of Customs on January 26, 1971. Caltex protested the assessments on the grounds that the BSW contents should have been deducted before imposing the duties. The protests were disregarded, and the assessments were affirmed by both the Commissioner of Customs and the Court of Appeals.

Caltex then filed a petition for review with the Court of Tax Appeals (CTA), which ruled in favor of Caltex and ordered the Commissioner of Customs to refund or credit the assessed amounts. The Commissioner of Customs appealed the CTA's decision to the Court of Appeals, which set aside the CTA's decision and reinstated the ruling of the Commissioner of Customs. Caltex filed a motion for reconsideration, which was denied.

The case before the Supreme Court raises the issue of whether the BSW should have been deducted from the gross actual receipts to determine the proper imposable ad valorem duties. Additionally, Caltex raises the issue of whether the non-publication of the memorandum violates due process and the Tariff and Customs Code.

The Court recognizes the possible effect of ruling against the memorandum on tax revenue and the collections made in reliance on its validity. The Court also notes that the importations occurred 11 years after the issuance of the memorandum, implying that Caltex, a regular importer of crude oil, had knowledge of its existence. However, Caltex did not question it or challenge the duties being charged during that period. Caltex offered no explanation for its delay or omission in taking timely action against the memorandum.

The Court applies the time-honored rule that relief will be denied to a litigant who has slept on their rights for an unreasonable length of time. The Court also discusses the axiomatic rule 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 country of exportation to the Philippines.

ISSUES:

  1. Whether Caltex should be relieved from the obligation to pay ad valorem taxes due to the omission of the BSW contents in the purchase price.

  2. Whether the sales invoices or the Import Entry permit should be considered as the basis for determining the dutiable value of the imported articles.

  3. Whether the basic sediment and water (BSW) in crude oil can be considered as impurities.

  4. Whether the BSW elements should be deducted from the gross receipts for the purpose of computing assessable duties.

  5. Whether the failure to serve the petition for review within the 15-day reglementary period should result in the dismissal of the petition.

  6. Whether or not the strict compliance rule should be applied to Circular No. 28-91.

RULING:

  1. Caltex is not relieved from the obligation to pay ad valorem taxes. The omission of the BSW contents in the purchase price was considered as an error on the part of Caltex. Caltex failed to provide a plausible explanation or 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. Relief will be denied to a litigant who has not been vigilant or who has slept on his rights either by negligence, folly, or inattention.

  2. The Import Entry permit should be considered as the basis for determining the dutiable value of the imported articles. Declarations and statements contained in the Import Entry Permit are presumed to be true and correct under the penalties of falsification and perjury. Furthermore, descriptions in entries and other documents are admissions against interest and presumptively correct.

  3. The Court of Appeals ruled that BSW is not considered as impurities since they naturally occur in crude oil.

  4. The Court agreed with the Court of Appeals that BSW should be included in the computation of assessable duties because they are an integral part of crude oil.

  5. The Court held that the proximity of the service of the petition for review to the petitioner constitutes substantial compliance with the rules, and therefore, the failure to serve the petition within the 15-day reglementary period does not result in the dismissal of the petition.

  6. The Court held that Circular No. 28-91 should not be interpreted and applied with absolute literalness. While it must be strictly complied with, substantial compliance with its provisions under justifiable circumstances is permitted.

PRINCIPLES:

  • 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.

  • The dutiable value of an imported article subject to ad valorem tax 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.

  • Declarations and statements contained in the Import Entry Permit are presumed to be true and correct under the penalties of falsification and perjury.

  • Descriptions in entries and other documents are admissions against interest and presumptively correct.

  • Under customs law, no deductions are permitted for impurities except those not usually found in or upon similar merchandise.

  • BSW, as impurities, are considered as an integral part of crude oil and must be included in the computation of assessable duties.

  • The failure to serve the petition within the reglementary period may be excused if there is substantial compliance with the rules.

  • The purpose of Circular No. 28-91 is to promote and facilitate an orderly administration of justice and achieve substantial justice as expeditiously as possible.

  • The requirement of strict compliance in the circular does not mean that its provisions can be altogether disregarded. However, it allows for substantial compliance under justifiable circumstances.