PILIPINAS SHELL PETROLEUM VS COMMISSIONER OF CUSTOMS G.R. NO.

195876

PILIPINAS SHELL PETROLEUM

CORPORATION VS COMMISSIONER OF
CUSTOMS G.R. NO.195876

A Case Digest

Holy Angel University

In Fulfillment
Of the Requirement of the Course
Strategic Tax Management

Submitted to:

Mr. John Elson T. Baguipo

Submitted by:

Nichole G. Tumulak
MA - 435

November 16, 2021

PILIPINAS SHELL PETROLEUM VS COMMISSIONER OF CUSTOMS G.R. NO. 195876

PILIPINAS SHELL PETROLEUM VS.

COMMISSIONER OF CUSTOMS

INTRODUCTION

Pilipinas Shell Petroleum Corporation (the “Company”)

was incorporated in the Philippines and registered with the
Securities and Exchange Commission (SEC) on 9 January 1959
primarily to engage in the marketing of petroleum products.
On 5 December 2008, the SEC approved the extension of the
corporate term of the Company for another fifty (50) years
from 9 January 2009 to 8 January 2059.

The Company once operated an oil refinery in Tabangao,

Batangas (choice to convert to import). On August 12, 2020,
a terminal was built. The company continues to run a number
of oil depots and refineries. Installations scattered
throughout the Philippines as of 30 June 2021 (31 December
2020 - 606), the Company has 490 regular employees.

Certain of the Company's operations were registered

with the Board of Investments (BOI)and eligible to Income
Tax Holiday (ITH) provided under Republic Act 8479,
otherwise known as the Downstream Oil Deregulation Act of
1998 (see Note 29).

The laws consider an imported article abandoned if the

relevant Import Entry and Internal Revenue Declaration are
not filed within the time frame specified. When articles
have been entered and passed duty-free or final adjustments
to duties have been made, with subsequent delivery, such
entry and passage duty-free or final adjustment of duties
will, in the absence of fraud or protest, be successfully
complete upon so many parties after the end date of one year
PILIPINAS SHELL PETROLEUM VS COMMISSIONER OF CUSTOMS G.R. NO. 195876

by the date of the full settlement of duties, unless the

insolvency of the import entry was merely tentative.

Therefore, the Commissioner of Customs initiated a

complaint against the corporation in 1996, claiming that it
failed to pay customs and taxes on its petroleum imports on
time. As of June 30, 2016, the Company had made provisions
in the amount of P1,360,000.4 to cover its financial risk if
the ultimate judgement is not in favor of the Company.

And, the Supreme Court granted the Company's Petition

in a Decision issued on 5 December 2016 (a copy of which was
served on the Company on 9 January 2017) and therefore
reversed and set aside the lower courts' decisions (i.e.,
the Decision dated 13 May 2010 and Resolution dated 22
February 2011 of the Court of Tax Appeals Former En Banc in
CTA EB 472).
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FACTS

The case's factual antecedents are as follows:

On April 7, 1996, the purchase of barrels of Arab Light

Crude by Pilipinas Shell Petroleum Corporation (Shell)
arrived. After the shipment was unloaded from carrying
vessels to its oil tanks located in Batangas. Shell paid the
Import Entry and Internal Revenue Declaration and Republic
Act (R.A.) No. 8180 took effect by lowering the customs tax
on imported crude oil from 10% to 3%. After four years, the
Bureau of Customs (BOC) sent a demand letter to Shell
through the District Collector of Batangas due to the
aforementioned crude oil imports, indicating the difference
between the supposedly due (10%) and the actual amount paid
(3%). A year later, another demand letter was received, this
time for the dutiable value of BOC's 1996 crude oil
importation, which BOC claimed had been abandoned in favor
of the government since the subject importations had been
filed and approved after the law's 30-day deadline had
expired. On December 28, 2001, BOC Deputy Commissioner Gil
A. Valera sent a letter declaring that the latter had failed
to answer the respondent's inquiry for the demand letter and
demanded the payment for the dutiable value of BOC's 1996
crude oil importation. Threatened to hold the delivery of
the following shipment and filed a civil complaint against
Shell, as provided in Section 1508 of the Philippine Tariff
and Customs Code (TCCP). On April 11, 2002, the BOC filed a
civil case for collection of payment against Shell along
with Caltex Philippines, Inc. as a co-party, file as Civil
Case No. 02103239, Branch XXV of the City of Manila Regional
Trial Court (RTC). After a month, CTA a Petition for Review
filed by Shell consideration for the civil complaint of BOC.
PILIPINAS SHELL PETROLEUM VS COMMISSIONER OF CUSTOMS G.R. NO. 195876

Because of lack of jurisdiction and failure to a state, a

cause of action as its ground CTA in Division denied and
also the respondent's motion for reconsideration also
denied.

ISSUES

Here are the issues

Whether or not the claim of the COMMISSIONER OF CUSTOMS

prosper?

What should have caused the failure to file an entry to

abandon the imported article? Is the importer liable for
negligence?

Any manifestation of fraud?

The BOC accused Petitioner of Fraud based on a

Memorandum that was not presented in evidence. Will the BOC
accusation succeed?

RULING/HELD

Ruling on A Petition for Review on Certiorari before

the Court, seeking to overturn and set aside the 13 May 2010
Decision and the 22 February 2011 Resolution issued by the
PILIPINAS SHELL PETROLEUM VS COMMISSIONER OF CUSTOMS G.R. NO. 195876

Court of Tax Appeals dismissing petitioner's petition, and

to affirm with modification as to the imposition of legal
interest the 19 June 2008.

The following are the case's factual antecedents: On

April 16, 1996, Republic Act (R.A.) No. 8180, often known as
the "Downstream Oil Industry Deregulation Act of 1996," went
into force. It includes provisions for tax reduction, among
other things.

It calls for a decrease in the tariff levy on imported

crude oil from ten percent to three percent, among other
things (3 percent). Section 5 is the specific provision of
which is hereafter quoted: Downstream Oil Liberalization in
the U.S.

Regardless of any law to the contrary, beginning with

the effective date of this Act, a tariff of three percent
(3%) and seven percent (7%) will be imposed and collected on
imported crude oil and refined petroleum products, except
fuel oil and LPG, for which the rate will be the same as for
imported crude oil; provided, however, that beginning
January 1, 2004, the tariff rate on imported crude oil and
refined petroleum products will be the same as for imported
crude oil.

Petitioner's importation of 1,979,674.85 US barrels of

Arab Light Crude Oil via the Ex-MT Lanistels arrived nine
(9) days before the liberalization provision went into
effect on April 7, 1996, nine (9) days before the
liberalization provision went into effect.

Petitioner protested the assessment on 14 August 2000,

[6] to which the District Collector of the BOC replied on 4
PILIPINAS SHELL PETROLEUM VS COMMISSIONER OF CUSTOMS G.R. NO. 195876

September 2000[7] reiterating his demand for the payment of

said deficiency customs duties.

Unless one of the parties publicly put the Memorandum

in evidence and the court a quo accepted it, it cannot be
regarded one of the legal and factual reasons for deciding
the disagreement before it.

It would also be an error for the CTA in Division to

take judicial notice of the subject Memorandum being merely
a part of the BOC Records submitted before the court a quo,
without the same being identified by a witness, offered in,
and admitted as evidence, effectively depriving petitioner
of the opportunity to object thereto. As a result, the CTA
in Division should not have considered the subject
Memorandum in its decision.

vii. Implications

CONCLUSIONS/RE-APPEAL

The claim of respondent against petitioner has already

prescribed

Since we have already laid to rest the question on

whether or not there was fraud committed by the petitioner,
the last issue for Our resolution is whether the
respondent's claim against petitioner has already been
prescribed.
PILIPINAS SHELL PETROLEUM VS COMMISSIONER OF CUSTOMS G.R. NO. 195876

This Court rules in the affirmative. There being no

evidence to prove that petitioner committed fraud in
belatedly filing its Import Entry and Internal Revenue
Declaration within the 30-day period prescribed under
Section 1301 of the TCCP, as amended, respondent's rights to
question the propriety thereof and to collect the amount of
the alleged deficiency customs duties, more so the entire
value of the subject shipment, have already prescribed.

Indubitably, the matters which become final and

conclusive against all parties include the timeliness of
filing the import entry within the period prescribed by law,
the declarations and statements contained therein, and the
payment or non-payment of customs duties covering the
imported articles by the owner, importer, consignee or
interested party. Since the primordial issue presented
before us focuses on petitioner's non-compliance in filing
its Import Entry and Internal Revenue Declaration within a
non-extendible period of 30 days from the date of discharge
of' the last package from the vessel, respondent may only
look into it within a limited period of one (1) year in
accordance with the above-quoted provision.

In the case at bench, it is undisputed that the

petitioner filed its IEIRD and paid the remaining customs
duties due on the subject shipment only on 23 May 1996. Yet,
it was only on 1 August 2000, or more than four (4) years
later, that petitioner received a demand letter from the
District Collector of Batangas for the alleged unpaid duties
covering the said shipment. Thereafter, on 29 October 2001,
or after more than five (5) years, petitioner received
another demand letter from respondent seeking to collect for
PILIPINAS SHELL PETROLEUM VS COMMISSIONER OF CUSTOMS G.R. NO. 195876

the entire dutiable value of the same shipment amounting to

P936,899,855.90.

Consequently, applying the foregoing provision and

considering that we have determined already that there is no
factual finding of fraud established herein, the liquidation
of petitioner's imported crude oil shipment became final and
conclusive on 24 May 1997, or exactly upon the lapse of the
1-year prescriptive period from the date of payment of final
duties. As such, any action questioning the propriety of the
entry and settlement of duties pertaining to such shipment
initiated beyond said date is therefore barred by
prescription.

WHEREFORE, the petition is GRANTED. Accordingly, the

Decision dated 13 May 2010 and Resolution dated 22 February
2011 of the Court of Tax Appeals Former En Banc in C.T.A. EB
No. 472 are hereby REVERSED and SET ASIDE on the ground of
prescription.