G.R. No. 208465 - Bureau of Customs vs. Bush Boake Allen , Inc.

Bush Boake Allen (Phils.) Inc., a Board of Investments–registered corporation engaged in the manufacture, importation, and exportation of chemical fragrances and flavors, used a Tax Credit Certificate (TCC) to settle its customs duties and tax liabilities.
Filipino Way Industries, Inc. had originally been the grantee of TCC No. 004334, which was purportedly issued as a refund for taxes/duties paid on raw materials amounting to P2,462,650.00.

TCC No. 004334 was issued by the One Stop Shop Tax Credit and Duty Drawback Center (the Duty Drawback Center) on March 19, 1996, as a result of an administrative mechanism set up under Administrative Order No. 266.
On April 11, 1996, Filipino Way Industries, Inc. assigned the TCC to Bush Boake as a form of payment for chemicals supplied, which Bush Boake later used to discharge its customs duties and tax liabilities.

A post‐audit conducted by the Duty Drawback Center revealed that the export declarations and bank credit memos submitted were forgeries.
Further, it was discovered that Filipino Way Industries, Inc. – the transferor – was a nonexistent company.
Consequently, TCC No. 004334 was cancelled on September 26, 2001.

The Bureau of Customs filed a complaint for collection of P2,462,650.00 (plus interest) before the Regional Trial Court (RTC) of Manila after Bush Boake refused to pay following the cancellation of the TCC.
In response, Bush Boake filed a third-party complaint against Filipino Way Industries, Inc., which was eventually declared in default.
On March 5, 2007, the RTC rendered a Decision in favor of the Bureau of Customs, holding Bush Boake liable for the unpaid obligations and dismissing its counterclaim, on the basis that Bush Boake failed to prove it acquired the TCC in good faith and for value.

Bush Boake appealed the RTC Decision before the Court of Appeals, where the Special Twelfth Division granted its appeal.
The Court of Appeals held that Bush Boake was a transferee in good faith and for value, relying heavily on the Pilipinas Shell Petroleum Corporation ruling.
Based on this reasoning, the appellate court reversed and set aside the RTC Decision, concluding that Bush Boake could not be required to pay customs duties again despite the fraud committed by the original grantee.

The Bureau of Customs then elevated the matter by filing a Petition for Review, contesting both the CA Decision granting Bush Boake’s appeal and the denial of its motion for reconsideration.
The petitioner argued that acceptance of the TCC did not amount to a valid payment because no actual money changed hands.
It further contended that respondent’s liability remained based on the provisions of the Civil Code.
A major contention was that the appeal should have been filed with the Court of Tax Appeals (CTA) under Republic Act No. 9282, which grants the CTA exclusive appellate jurisdiction over tax collection cases, not with the Court of Appeals.

The case involved not only substantive issues on the validity of the tax credit certificate but also questions regarding proper jurisdiction.
Republic Act No. 1125, as amended by Republic Act No. 9282, clearly delineates that tax collection cases that involve final and executory assessments should be handled either originally or on appeal by the CTA.
The Court discussed how previous cases, notably Pilipinas Shell Petroleum Corporation v. Commissioner of Customs, addressed similar jurisdictional matters in relation to tax credit certificates and collection actions.

Whether the petitioner’s (Bureau of Customs’) acceptance of the allegedly worthless TCC produced the legal effect of valid payment, thereby extinguishing respondent’s (Bush Boake’s) obligation, despite the later discovery of forgery.

Whether Bush Boake, as a purported transferee in good faith and for value, can be protected from bearing the consequences of the fraud committed by the original grantee.
The issue involves distinguishing whether respondent’s acceptance of the TCC was made on the proper reliance of representations by the Duty Drawback Center.

Whether the appeal from the RTC Decision should have been filed with the Court of Tax Appeals, given the relevant amendments in Republic Act No. 9282, which now furnishes the CTA with exclusive appellate jurisdiction over tax collection cases.
Whether the Court of Appeals’ decision, being outside its jurisdiction, is therefore void.

Whether the proper judicial remedy for the fraud in the procurement of the TCC is a tax protest action before the CTA or a collection case before the RTC.
How the erroneous transfer and subsequent cancellation of the TCC affected the parties’ liabilities and available legal remedies.