Pilipinas Shell Petroleum Corporation vs.

Commissioner of Customs
G.R. No. 195876; June 19, 2017
Velasco, Jr., J.
FACTS:
The court resolves in this case an Omnibus Motion for Reconsideration and referral to the Court En Banc
filed by respondent Commissioner of Customs assailing the December 5, 2016 SC Decision.
The factual antecedents are as follows: On April 16, 1996, the Downstream Oil Industry Deregulation Act
of 1996 took effect providing for the reduction of the tariff duty on imported crude oil from 10% to 3%.
Petitioner's importation arrived on April 7, 1996 or nine days earlier than the effectivity of the liberalization
provision and was unloaded on April 10. Subsequently, petitioner filed the Import Entry and Internal
Revenue Declaration and paid the import duty of said shipment on May 23, 1996.
More than four (4) years later, petitioner received a demand letter from the BOC assessing it to pay the
deficiency customs duties due from the crude oil importation, representing the difference between the
amount allegedly due (at the old rate often percent (10%) or before the effectivity of R.A. No. 8180) and
the actual amount of duties paid by petitioner (on the rate of 3%)
Petitioner protested the assessment. However, petitioner received from respondent a demand letter for
the payment of the amount representing the dutiable value of its 1996 crude oil importation which had
been allegedly abandoned in favor of the government by operation of law. Respondent stated that Import
Entry No. 683-96 covering the subject importation had been irregularly filed and accepted beyond the
thirty-day (30) period prescribed by law.
The BOC then filed a civil case for collection of sum of money against petitioner. Consequently, petitioner
filed with the CTA a Petition for Review, upon consideration that the civil complaint filed in the RTC of
Manila was the final decision of the BOC on its protest. The Former 1st Division of the CA dismissed
respondent's petition. Petitioner appealed to the CTA Former En Banc which affirmed the CTA Division's
ruling
Petitioner filed a petition for review before the SC. The SC granted the petition reversing and setting aside
the CTA Former En Banc decision.
Hence, this Omnibus Motion for Reconsideration and referral to the Court En Banc filed by respondent
before the SC anchored primarily on the applicability of Chevron Philippines, Inc. v. Commissioner of the
Bureau of Customs to the case at bar.
ISSUE:
Whether or not the Chevron Case is a precedent to the case at bar.
RULING: No. Chevron is not a precedent to the case at bar. The Court desisted from applying the
doctrine laid down in Chevron considering that the facts and circumstances therein are not in all fours with
those obtaining in the instant case. As clearly explained in the assailed December 5, 2016 Decision, the
main difference between Chevron and the case at bar lies in the attendance of fraud.
In Chevron, evidence on record established that Chevron committed fraud in its dealings. On the other
hand, proof that petitioner Pilipinas Shell was just as guilty was clearly wanting. Simply, there was no
finding of fraud on the part of petitioner in the case at bar. Such circumstance is too significant that it
renders Chevron indubitably different from and cannot, therefore, serve as the jurisprudential foundation
of the case at bar. Resultantly, no scintilla of proof was ever offered in evidence by respondent
Commissioner of Customs to substantiate the claim that Pilipinas Shell acted in a fraudulent manner.
As extensively discussed in the assailed Decision, whether or not petitioner Pilipinas Shell defrauded the
public respondent becomes pivotal because of Section 1603 of the Tariff and Customs Code, which reads
that “When articles have been entered and passed free of duty or final adjustments of duties made, with
subsequent delivery, such entry and passage free of duty or settlements of duties will, after the expiration
of one (1) year, from the date of the final payment of duties, in the absence of fraud or protest or
compliance audit pursuant to the provisions of this Code, be final and conclusive upon all parties, unless
the liquidation of the import entry was merely tentative.” Pursuant to said provision, the attendance of
fraud would remove the case from the ambit of the statute of limitations, and would consequently allow
the government to exercise its power to assess and collect duties even beyond the one-year prescriptive
period, rendering it virtually imprescriptible. 
In the case at bar, petitioner Pilipinas Shell filed its Import Entry and Internal Revenue Declaration (IEIRD)
and paid the import duty of its shipments on May 23, 1996. However, it only received a demand letter
from public respondent on July 27, 2000, or more than four (4) years later. By this time, the one-year
prescriptive period had already elapsed, and the government had already been barred from collecting the
deficiency in petitioner's import duties for the covered shipment of oil.
The absence of fraud not only allows the finality of the liquidations, it also calls for the strict observance of
the requirements for the doctrine of ipso facto abandonment. As expressly provided in Sec.1801(b) of the
TCC, 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. The law categorically requires that this be preceded by due notice
demanding compliance.
To recapitulate, the notice in this case was only served upon petitioner four (4) years after it has already
filed its IEIRD. Under this circumstance, the Court cannot rule that due notice was given, for when public
respondent served the notice demanding payment from petitioner, it no longer had the right to do so. 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, Sec. 1801(b) failed to
operate in favor of the government for failure to demand payment for the discrepancy prior to the finality
of the liquidation. The government cannot deem the imported articles as abandoned without due notice.
Public respondent cannot harp on the Chevron ruling to excuse compliance from the due notice
requirement before the imported articles can be deemed abandoned, for to do so would only downplay
the Court's finding anent the non-attendance of fraud. To be clear, the element of fraud in Chevron was a
key ingredient on why notice was deemed unnecessary.
Hence, it does not suffice that petitioner is a multinational, large scale importer presumed to be familiar
with importation rules and procedures for the ipso facto abandonment doctrine to apply. Under the
peculiar facts and circumstances of Chevron, the existence of fraud was the primary element established
to warrant the application of the doctrine. Without this element, Chevron cannot be treated at par with the
case at bar. The statutorily required due notice should still have been timely served upon petitioner before
the imported oil shipments could have been deemed abandoned.
The notice requirement as mandated in CMO 15-94 cannot be excused unless fraud is
established. Resultantly, fraud being absent on the part of petitioner Pilipinas Shell, the ipso
facto abandonment doctrine cannot operate within the factual milieu of the instant case.
The court denies with finality the Omnibus Motion filed by public respondent Commissioner of Customs
for lack of merit.