Chevron told to pay Customs P894M for abandoned goods

BY PAUL C.H. HOW, BusinessWorld Reporter The Court of Tax Appeals has ordered Chevron Philippines, Inc., formerly Caltex Philippines Inc., to recompense the Customs bureau for oil shipments that the company failed to retrieve. The court, in an en banc decision dated March 1, ruled that imported articles whose entries are not filed within 30 days are considered abandoned and deemed government property. Thus, Chevron Philippines was held liable for P893.8 million in dutiable articles that the bureau had retained but had since disposed of. The March 1 decision reversed an April 5, 2005 decision of the tax court’s first division which had ordered Chevron to pay only P105.9 million in deficiency duties rather than the total value of five oil shipments which arrived from March 8 to April 10, 1996. The en banc cited Sec. 1801 of the Tariff and Customs Code of the Philippines, which provides that imports are deemed abandoned when an interested party "fails to file an entry within 30 days, which shall not be extendible, from the date of discharge of the last package from the vessel or aircraft." Such abandonment, the provision states, will mean that a person renounces all interests and property rights in the imported goods. Sec. 1802, meanwhile, states that an abandoned article is deemed to be government-owned. "When Caltex withdrew the crude oil shipments for consumption, it appropriated for itself a property that is already owned by the government. Unfortunately, the shipments of crude oil were taken and have long been disposed of by respondent," the decision, penned by Associate Justice Juanito C. Castañeda, Jr., said. Chevron, in a statement issued on Thursday, said it will seek reconsideration of the ruling. The total dutiable value of the shipments amounted to P1.21 billion, but Chevron had already paid P316.5 million in duties when it filed its import entries in 1996, leaving P893.8 million to be paid. The tax court also ordered a 6% annual interest beginning March 1, 2007 to be tacked on the amount, pending finality of the decision, to be raised to 12% upon finality of the decision until full payment. Presiding Justice Ernesto D. Acosta and Associate Justice Lovell R. Bautista issued a dissenting opinion, maintaining that Chevron had not abandoned the goods and should only be liable for unpaid duties. The justices pointed out that the oil firm had paid tentative import and special duties and other fees upon discharging of the shipments, and that Customs officers had authorized the release of the imported goods. "If there was indeed an implied abandonment in this case, no abandonment proceedings were instituted against Caltex," the magistrates added. In 1996, Caltex had paid import duties on the five oil shipments at a 3% duty rate, pursuant to the Downstream Oil Industry Deregulation Act made effective on April 16, 1996, instead of the previous 10% rate. The Bureau of Customs sent a letter dated Oct. 29, 2001 to Caltex, informing the company on the findings of irregularity in the filing and acceptance of the import entries, and directing it to pay the entire worth of the shipments, since the entries were filed beyond 30 days from arrival of the goods. Caltex filed a petition for review with the Court of Tax Appeals, which found on April 5, 2005 that fraud was committed in order to evade the duty rate of 10%. The court’s first division, which includes Messrs. Acosta and Bautista, ordered the payment of P105.9 million representing unpaid duties, since the shipments arrived in the country prior to effectivity of the Oil Deregulation Act. At the time, first division Associate Justice Caesar A. Casanova issued his dissenting opinion that the shipments had been abandoned.