G.R. No. 220502 - Steel Corporation of the Philippines vs. Bureau of Customs

Equitable PCI Bank, Inc. initiated a petition for rehabilitation on September 11, 2006, against Steel Corporation of the Philippines (STEELCORP), a domestic corporation engaged in manufacturing and distributing various steel products.
The petition was docketed as SP. Proc. No. 06-7993 and was pending before the RTC of Batangas City.
The RTC, finding the petition sufficient in both form and substance, issued an Order on September 12, 2006, which included a stay on all claims against STEELCORP until further notice under the Interim Rules of Procedure on Corporate Rehabilitation.

While the rehabilitation proceedings were pending, Republic Act (R.A.) No. 10142 (the Financial Rehabilitation and Insolvency Act or FRIA of 2010) was enacted.
Section 19 of R.A. No. 10142 provided that upon issuance of the Commencement Order by the court, all taxes and fees, including penalties and interests, would be waived until the approval of the rehabilitation plan or dismissal of the petition.

On December 16, 2010, representatives of STEELCORP and the Municipality of Balayan, Batangas met and agreed that the municipal government would waive taxes and other fees due from STEELCORP from 2011 until a final rehabilitation plan was approved.
On October 1, 2010, STEELCORP formally communicated with the Bureau of Customs (BOC) by letter to avail the privileges of Section 19, arguing that imposing import duties and fees would contravene the said provision.
Subsequently, on October 26, 2010, BOC Commissioner Angelito A. Alvarez, upon recommendation and concurrence of his legal staff, approved the waiver of all taxes and fees due to STEELCORP.

On March 8, 2011, Commissioner Alvarez deferred releasing the waiver memorandum and sought clearance from the DOF due to anticipated revenue loss, highlighting ongoing importations by STEELCORP.
The DOF, through Undersecretary Carlo A. Carag on May 26, 2011, disapproved the waiver recommendation for two reasons:

The Stay Order was not equivalent to the requisite Commencement Order necessary for waiving taxes and customs duties.
Even if considered the same, the waiver under Section 19 did not extend to duties on imports or shipments made after the issuance of the Commencement Order.

Escalation to the Office of the President and the Involvement of Quasi-Judicial Functions

STEELCORP elevated the matter to the Office of the President (OP) under docket O.P. No. 11-F-211, contesting the DOF’s disapproval.
Undersecretary Carag moved to dismiss the appeal for lack of jurisdiction, asserting that the issues involved customs matters which, under Section 2315 of the Tariff and Customs Code of the Philippines (TCCP), are subject to automatic review and fall within the exclusive appellate jurisdiction of the Court of Tax Appeals (CTA).
STEELCORP contended that Section 2315 was inapplicable because no assessment had been made and emphasized the quasi-judicial function of the OP under Administrative Order No. 18, Series of 1987.

On September 14, 2011, STEELCORP filed a Complaint for injunction (Civil Case No. 5042) to restrain respondents (BOC, BIR, DOF, OP, and the Municipality of Balayan) from assessing and collecting taxes, customs duties, and fees from it during the rehabilitation period.
The RTC initially issued a 72-hour Temporary Restraining Order (TRO) on September 15, 2011, which was later extended until a hearing on a writ of preliminary injunction could be conducted.
On November 9, 2011, a Status Quo Order was issued by the RTC, further extending the effect of the TRO while affording respondents an opportunity to be heard.
On January 12, 2012, the RTC ordered the Manila International Container Port (MICP) District Collector of Customs to comply with the Status Quo Order by refraining from imposing customs duties and taxes on STEELCORP’s imported raw materials.
On the same day, motions by the Office of the Solicitor General (OSG) on behalf of BOC, BIR, DOF, and OP were filed to dismiss the complaint.

On March 5, 2012, the RTC denied the Motion to Dismiss and ordered the issuance of a writ of preliminary injunction (WPI) against the defendants.
Various motions followed before the RTC, and on June 6, 2012, the RTC simultaneously resolved key issues, including:

Denial of STEELCORP’s motion to strike Answer by the BIR, based on the Memorandum of Agreement (MOA) validating the BIR lawyer’s appearance.
Denial of STEELCORP’s urgent ex-parte motion for execution of the January 12, 2012 Order.
Granting the motions filed by the OSG for reconsideration of earlier orders, effectively dissolving the WPI and dismissing STEELCORP’s complaint for lacking jurisdiction.

When STEELCORP appealed before the Court of Appeals (CA), it raised two main issues regarding the procedural aspects of the motions and the jurisdictional validity of the preliminary injunction.
The CA dismissed the appeal on November 19, 2014, and later a motion for reconsideration was denied on September 15, 2015, prompting the present petition for review on certiorari.

Although the petition was initially denied on November 11, 2015, it was reinstated on June 15, 2016 after STEELCORP’s motion for reconsideration was granted.
Despite these developments, the petition for review on certiorari was eventually denied, and the CA decisions were affirmed.

Whether the trial court erred by giving due course to the separate motions of the BOC and the BIR which were filed with alleged procedural defects in the notice of hearing (i.e.,:

Filing on a national holiday or non-working day.
Scheduling beyond the ten-day period mandated under Section 5, Rule 15 of the Rules of Court).

Whether such technical or formal infirmities, once substantially complied with, suffice to affect the merits of the motions and the opportunity of the respondents to be heard.

Whether the trial court’s decision to lift the preliminary injunction and dismiss STEELCORP’s complaint was erroneous.
Whether the issue, predominantly concerning the interpretation of Sections 19 and 146 of R.A. No. 10142 (waiver of taxes and customs duties), falls under the exclusive jurisdiction of the RTC (and subsequently appealable to the CA) rather than the CTA, despite the respondents’ assertions regarding the proper forum for challenging customs matters.