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PILIPINAS SHELL PETROLEUM CORPORATION v. COMMISSIONER OF CUSTOMS

FACTS:

In this case, petitioner Pilipinas Shell Petroleum Corporation (Pilipinas Shell) filed an Omnibus Motion (For Reconsideration and Referral to the Court En banc) dated January 20, 2017, which was denied by the court for lack of merit. The motion sought to apply the doctrine laid down in Chevron Philippines, Inc. v. Commissioner of the Bureau of Customs (Chevron) to the current case. However, the court declined to apply the Chevron doctrine as the facts and circumstances of the two cases are different. In Chevron, fraud was established, while there was no finding of fraud on the part of Pilipinas Shell. The dissenting opinion claimed that fraud was committed by Pilipinas Shell by deliberately delaying the filing of certain documents, but the court found that this claim lacked evidentiary value as the relevant document was not formally offered as evidence during the trial. The absence of fraud is important because it affects the one-year prescriptive period and the requirement of due notice prior to ipso facto abandonment. Under Section 1603 of the Tariff and Customs Code of the Philippines (TCC), in the absence of fraud, the finality of liquidation is after one year from the final payment of duties. Pilipinas Shell filed its Import Entry and Internal Revenue Declaration (IEIRD) and paid the import duty in 1996, but it received a demand letter from the Commissioner of Customs in 2000, which was beyond the one-year prescriptive period. The government argued that it was exercising its ownership right over the shipments, which were deemed abandoned due to Pilipinas Shell's failure to timely file the IEIRD. However, the court disagreed, stating that the absence of fraud requires strict observance of the requirements for the doctrine of ipso facto abandonment to apply.

ISSUES:

  1. Whether the failure to file the Import Entry and Internal Revenue Declaration (IEIRD) within 30 days from entry is the only requirement for the doctrine of ipso facto abandonment to apply.

  2. Whether due notice demanding compliance is necessary before the imported articles can be deemed abandoned.

  3. Whether or not CMO 15-94 is an interpretation of the law and is therefore valid.

  4. Whether or not the ipso facto abandonment doctrine can be applied in this case despite the absence of fraud.

RULING:

  1. The Supreme Court held that 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. Due notice demanding compliance must also be served upon the owner, importer, consignee, or interested party. The law categorically requires that this be preceded by due notice demanding compliance.

  2. The Supreme Court ruled that the government failed to comply with the requirement of due notice before the imported articles could be deemed abandoned. The notice in this case was only served upon the petitioner four years after it has already filed its IEIRD. 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, the government cannot deem the imported articles as abandoned without due notice.

  3. The Court held that CMO 15-94 is a valid interpretation of the law. It is considered an executive edict that implements Section 1801(b) of the Tariff and Customs Code (TCC). The Court recognized that unless the rule appears to be clearly unreasonable or arbitrary, it is entitled to the greatest weight and binding effect of law. Considering that CMO 15-94 promotes a more efficient and cost-effective administration of the Bureau of Customs (BOC), it is deemed reasonable and valid.

  4. The Court ruled that the ipso facto abandonment doctrine cannot be applied in this case because fraud is absent. The notice requirement as mandated in CMO 15-94 cannot be excused unless fraud is established. Since there is no fraud on the part of petitioner Pilipinas Shell, the ipso facto abandonment doctrine cannot operate. The Court emphasized that the doctrine can only be applied under specific factual circumstances, and its application should be justified based on those circumstances.

PRINCIPLES:

  • The failure to file the IEIRD within 30 days from entry is not the sole requirement for the doctrine of ipso facto abandonment to apply. Due notice demanding compliance must also be served upon the owner, importer, consignee, or interested party. (Section 1801(b) of the TCC)

  • The government cannot deem imported articles as abandoned without due notice. (Section 1801(b) of the TCC)

  • Due notice requirement before imported articles can be deemed abandoned may be dispensed with in cases of fraud. (Chevron ruling)

  • CMO 15-94 is considered an executive edict that implements a provision of the law. It is entitled to the greatest weight and binding effect of law, unless it appears to be clearly unreasonable or arbitrary.

  • The ipso facto abandonment doctrine can only be applied when fraud is established. Absence of fraud renders the doctrine inapplicable.