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COMMISSIONER OF CUSTOMS v. MARINA SALES

FACTS:

Marina Sales, Inc. (Marina), a company engaged in the manufacture of Sunquick juice concentrates, imports raw materials for its manufacturing operations. In the past, the Bureau of Customs (BOC) assessed the importations under Tariff Heading H.S. 2106.90 10 with a 1% import duty rate.

However, the BOC examiners contested the tariff classification of Marina's importations, recommending a reclassification to Tariff Heading H.S. 2106.90 50 with a 7% import duty rate. In order to release the goods, Marina signed an undertaking under the Tentative Release System and attended deliberations to justify the original classification.

The Valuation and Classification Review Committee (VCRC) eventually reclassified Marina's importations under Tariff Heading H.S. 2106.90 50 at a 7% import duty rate. Marina appealed the decision before the Commissioner of Customs, who modified the ruling to classify the importations under different tariff headings with varying duty rates.

Marina filed a petition for review with the Court of Tax Appeals (CTA) challenging the reclassification. The CTA Second Division ruled in favor of Marina, setting aside the VCRC's decision and affirming the original classification under Tariff Heading H.S. 2106.90 10 with a 1% duty rate.

The Commissioner appealed the CTA Second Division's decision to the CTA en banc, but the petition was dismissed for failure to file a motion for reconsideration before the CTA Second Division, as required by the Revised Rules of the Court of Tax Appeals.

The Commissioner sought reconsideration of the dismissal.

ISSUES:

  1. Whether the dismissal of the petition based on a mere technicality will result in injustice and unfairness to the petitioner.

  2. Whether the challenged decision of the Court of Tax Appeals' Second Division holding that the respondent's importations are classified under Tariff Harmonized System Heading H.S. 2106.90 10 with an import duty rate of 1% is correct.

  3. Whether the imported compounds of the petitioner have lost their original character as concentrated fruit juice due to the addition of ingredients, thus warranting a reclassification.

  4. Whether the petitioner's manufacturing process qualifies as "manufacture" under the law.

RULING:

  1. The dismissal of the petition before the Court of Tax Appeals En Banc is in accordance with the mandatory provisions of Rule 8, Section 1 of the Revised Rules of the Court of Tax Appeals. The petitioner failed to file a timely motion for reconsideration or new trial with the Second Division as required by the rules. Procedural rules are not to be trifled with, and non-compliance may result in prejudicing a party's substantive rights. Rules are meant to be followed, and they may only be relaxed for exigent and persuasive reasons to relieve a litigant from an injustice not commensurate with their failure to observe the rules.

  2. The Court finds that the import duty rate of 1% determined by the Court of Tax Appeals' Second Division is correct. The importations fall under Tariff Harmonized System Heading H.S. 2106.90 10, which covers flavoring materials and other food preparations used as raw material for making beverages. The importations are not yet ready for human consumption and must be mixed with other additives before they can be marketed as Sunquick juice products.

  3. The imported compounds of the petitioner have lost their original character as concentrated fruit juice due to the addition of ingredients. The compounds only comprise 12% of the total compound and have been transformed into a beverage ready to drink. Therefore, the proper classification is Tariff Heading H.S. 2106.90 10 at 1% for entries filed under the old regime and AHTN 2106.90 51 at 1% for those filed under the new regime.

  4. The petitioner's manufacturing process qualifies as "manufacture" under the law. The petitioner transforms the raw materials into a substance suitable for human consumption through a laborious method. Therefore, the 1% tariff import duty rate under Tariff Heading H.S. 2106.90 10 was correctly applied to the subject importations.

PRINCIPLES:

  • The word "must" in a rule or provision of law indicates a mandatory requirement that must be complied with and cannot be treated as merely directory.

  • Procedural rules must be followed, and non-compliance may prejudice a party's substantive rights. They may only be relaxed for exigent and persuasive reasons.

  • For an importation to fall under a Tariff Harmonized System Heading with a higher import duty rate, it must not have lost its original character despite the addition of certain constituents or standardizing agents.

  • "Manufacture" is to transform raw materials into another form suitable for its intended use.

  • Imported compounds that have lost their original character due to the addition of ingredients may be subject to reclassification.

  • The proper classification of imported goods determines the applicable import duty rate.