G.R. No. 135253 - Commissioner of Customs vs. Milwaukee Industries Corp.

Milwaukee Industries Corporation, a domestic corporation engaged in the importation and processing of steel billets, imported 11,985 pieces of secondary steel billets weighing 9,500 metric tons.
On November 5, 1993, Far East Bank and Trust Company issued a commercial letter of credit in favor of Klockner & Co. of Germany for the transaction amounting to US$2,071,000.00.
The company filed the Import Entry Declaration along with an advance deposit payment of P1,863,598.00 for customs duties and taxes, for which the Bureau of Customs issued Official Receipt No. 30277274.

The shipment arrived at the port of Manila on February 1, 1994, aboard the vessel S/S SOLSYN.
Customs personnel, including Inspector Jimmy Pastoriza and guards Generoso Mirallo and Lucas Almendras, supervised the unloading.
Jose Garcia of Schmitz, the customs broker’s representative, presented a Permit to Discharge Shipside, authorizing the movement of cargo from the vessel to barges/lighters.
Discharge of the shipment took six days (February 1–6, 1994) during which Inspector Pastoriza issued thirteen Boat Notes.

The Boat Notes specifically instructed that the shipment remain under the continuous custody (guarding) of the Customs authorities until released upon presentation of a valid delivery permit.

The Customs Intelligence and Investigation Division (CIID) received information questioning the transfer process as the shipment was moved to Milwaukee’s warehouse without filing an Import Entry and without payment of duties and taxes.
On March 14, 1994, the CIID initiated the issuance of a warrant of seizure and detention for the cargo (Seizure Identification No. 94-055), and the warrant was issued the following day.
Despite the seizure, respondent’s consultant, Alfredo S. Gloria, coordinated with the Commissioner of Customs leading to the submission of the requisite Import Entry document and two checks for full payment of duties and taxes (amounting to P5,000,000.00 and P4,944,864.00) on March 16, 1994.
On March 17, 1994, instructions were given by the Customs Commissioner’s Special Assistant, Atty. Aaron Redubla, to process the payment and facilitate the release of the shipment; District Collector Oscar Brillo noted the directive but maintained the seizure proceedings.
On August 3, 1994, District Collector Brillo rendered a Decision ordering the forfeiture of the shipment on the ground that it was discharged from the vessel and moved to the warehouse without completing the legal documentation and payment process as required, thereby violating Sections 2530(f) and (l) along with related provisions of the Tariff and Customs Code.

Respondent appealed the forfeiture order to the Customs Commissioner, but Deputy Commissioner Evangelista’s Decision on September 8, 1994, confirmed the seizure; respondent’s motion for reconsideration was denied.
Subsequently, respondent filed a petition for review with the Court of Tax Appeals (CTA) in C.T.A. Case No. 5160.

On April 8, 1997, the CTA reversed the seizure decision, ruling that the shipment was not “released” but merely transferred under continuous customs guard, and that full payment should have led to its release.
The CTA’s Decision also ordered the cancellation of petitioner’s Surety Bond.

The Court of Appeals affirmed the CTA Decision with a Decision dated July 8, 1998, followed by the denial of petitioner’s motion for reconsideration on August 24, 1998.
The Commissioner of Customs then filed a petition for review before the Supreme Court.

Petitioner (Commissioner of Customs) argued that the shipment was released to respondent and not merely transferred under customs guard, and that respondent failed to comply with customs requirements, rendering the importation unauthorized or illegal.
Respondent maintained that the shipment was only transferred under continuous customs guarding and that, upon full payment, the shipment should have been released, leading to the legal termination of the importation.

Whether the shipment was, in fact, released to Milwaukee Industries Corporation from the custody of the Customs authorities or merely transferred/discharged under continuous customs guarding.
Whether respondent’s alleged failure to comply with customs requirements justified the seizure and forfeiture of the shipment, notwithstanding its full payment of duties and taxes and subsequent order for release.