G.R. No. 246343 - Bureau of Customs vs. Jade Bros. Farm and Livestock, Inc.

Case Summary (G.R. No. 246343)

Factual Background

Sometime in 2013, JBFLI entered into several rice importation transactions. Upon the arrival of the rice shipments at the MICP, petitioners refused to release the shipments to JBFLI on the asserted ground that JBFLI had no import permit from the NFA. JBFLI challenged this refusal and contended that the import permit requirement lacked legal basis. It argued that special treatment under the World Trade Order Agreement allowing quantitative restrictions on rice imports had already expired after June 30, 2012, and that the NFA issuances relied upon to impose a permit requirement had no statutory basis. JBFLI further maintained that the presence or absence of a permit was, at most, relevant only to determine the applicable tariff rate.

Because of the refusal to release the shipments, JBFLI initiated the RTC proceeding and, while that proceeding was pending, petitioners proceeded with seizure and auction-related steps before the BOC/MICP, which later drove JBFLI to the CTA.

RTC Proceeding: Declaratory Relief and Permanent Injunction

On February 13, 2014, JBFLI filed with the RTC of Manila a Petition for Declaratory Relief and Permanent Injunction with prayer for a Temporary Restraining Order and/or Preliminary Injunction, docketed as Civil Case No. 14-131418 and assigned to Branch 41. JBFLI sought relief aimed at restraining petitioners from requiring import permits for rice, from seizing and holding its incoming rice shipments, and from implementing alert or hold orders prejudicial to JBFLI pending judicial determination of the validity of petitioners’ actions.

JBFLI’s requested relief also included requests for the issuance of injunctive writs that would ultimately declare that NFA issuances imposing import permits were irregular or illegal and that JBFLI had the right to import rice without needing import permits.

During the pendency of the RTC case, JBFLI wrote the MICP District Collector. On June 2, 2014, it requested the lifting of alert orders and the immediate release of its rice shipments. If release was not feasible, JBFLI requested the issuance of Warrants of Seizure and Detention (WSDs) and the release of shipments upon submission of a cash bond, or otherwise the auction of the shipments. On July 11, 2014, JBFLI again followed up and preferred the issuance of a WSD and release under cash bond over public auction, citing purported authority in existing rulings.

Seizure Identification Cases and the Auction of Perishable Rice

In response, the District Collector issued four identical WSDs, all dated July 21, 2014, instituting Seizure Identification Case (SIC) Nos. 356-2014, 357-2014, 358-2014, and 359-2014. The WSDs ordered seizure of the articles and their turnover to the Auction and Cargo Disposal Division pending termination of seizure proceedings.

After the issuance of the WSDs, JBFLI filed a Consolidated Motion for Release Under Cash Bond before the District Collector, seeking authorization to release the goods upon posting of a sufficient cash bond, payment of duties and charges, and compliance with relevant rules. JBFLI also sought recall or quashal of the WSDs, arguing lack of factual and legal basis for requiring an import permit for rice in light of the legal landscape it asserted and the need to harmonize related national laws and agreements.

Despite this motion, petitioners posted a Notice of Public Auction dated August 20, 2014, setting the auction for August 28, 2014. JBFLI requested cancellation or postponement in a letter dated August 22, 2014, and asked that if immediate resolution of the motion for release was not granted, it be admitted as a participant and the proceeds be placed in escrow. The District Collector did not respond directly. A new notice was then issued on September 1, 2014, rescheduling the auction to September 11, 2014.

CTA Proceeding: Petition for Review with Application for TRO and Release Under Bond

The September 1, 2014 Notice of Public Auction led JBFLI, on September 3, 2014, to file with the CTA a Petition for Review with application for a Temporary Restraining Order, Status Quo Ante Order, and/or Writ of Preliminary Injunction, as well as Release Under Bond, docketed as CTA Case No. 8886 and assigned to the CTA Third Division. JBFLI invoked an exception to the exhaustion of administrative remedies, asserting that the BOC denied it due process and should have allowed release, even if under cash bond. JBFLI also justified resort to the CTA because it sought to stop the imminent auction.

JBFLI prayed for the CTA to cease and desist the conduct of the public auction scheduled for September 11, 2014, and to enjoin any sale or disposition that would deprive it of the shipments. It likewise sought an order directing release upon posting of a bond equivalent to the value as assessed by the BOC and payment of specified tariff and related charges, emphasizing that the goods were highly perishable.

While the RTC case proceeded, the RTC issued, on September 10, 2014, an order granting JBFLI’s motion to withdraw its prayer for injunctive relief. The CTA Third Division, meanwhile, issued a September 11, 2014 Resolution granting a TRO: it ordered the BOC and the Commissioner and their officers and agents to cease and desist from conducting the auction scheduled for the second time on September 11, 2014 concerning the rice shipments under the WSDs.

The TRO lapsed without a writ of preliminary injunction. Consequently, the District Collector issued an October 7, 2014 Notice of Public Auction, rescheduling auction to October 17, 2014. The auction proceeded, and the rice shipments subject of the SIC cases were sold.

CTA Third Division’s Rulings

In CTA Case No. 8886, petitioners argued that the case had become moot due to the October 17, 2014 auction and that JBFLI had engaged in forum shopping given the pendency of Civil Case No. 14-131418 before the RTC. After due proceedings and submissions, the CTA Third Division issued, on September 21, 2016, its Resolution. It held that it had jurisdiction to entertain JBFLI’s petition for review, that JBFLI had not engaged in forum shopping, and that JBFLI’s rice importations did not require a permit and were therefore not illegal. It granted the petition and declared the rice shipments covered by specific bills of lading as having been legally imported. Given that the shipments had been auctioned, it ordered the BOC and the Commissioner to release to JBFLI the auction proceeds held in trust, less applicable ordinary duties, taxes, penalties, government fees, and assessments that might be assessed over the importations. Petitioners sought reconsideration, but the CTA Third Division affirmed its ruling in a November 25, 2016 Resolution.

CTA En Banc: Jurisdiction, Forum Shopping, and Affirmance by Vote Requirement

Petitioners filed a petition for review before the CTA en banc, docketed as CTA EB Case No. 1566, seeking reversal of the CTA Third Division’s September 21, 2016 and November 25, 2016 resolutions. The CTA en banc focused first on whether the CTA Third Division properly had jurisdiction to entertain JBFLI’s petition for review, and second on whether JBFLI engaged in forum shopping.

In addressing jurisdiction, the CTA en banc pointed out that the Third Division mistakenly relied on Allied Banking Corporation v. Commissioner of Internal Revenue, which, the en banc explained, involved a formal letter of demand of a tax deficiency assessment constituting a final decision, thereby rendering exhaustion of administrative remedies unnecessary. The CTA en banc distinguished the present controversy as involving seizure and forfeiture, where recourse must first be sought with the Commissioner.

As to forum shopping, the CTA en banc found that JBFLI engaged in it because the parties, reliefs, and facts involved were identical between the RTC declaratory relief petition and the CTA petition for review.

However, the CTA en banc still dismissed the petition because the required affirmative vote to overturn the Third Division was not achieved. It applied Section 2 of R.A. No. 1125, as amended by R.A. No. 9503, in relation to Section 3 of Rule 2 of the Revised Rules of the Court of Tax Appeals, and held that, absent the required five-member affirmative vote, the Third Division’s resolutions stood affirmed. The en banc nonetheless maintained the declaration that the rice shipments were legally imported and ordered the release of auction proceeds held in trust, less applicable charges.

Petitioners moved for reconsideration but abandoned the issue on legality of the imports and argued only the questions of jurisdiction and forum shopping. The CTA en banc reaffirmed its decision in its April 2, 2019 Resolution, again citing the failure to obtain the required voting threshold.

Issues Before the Supreme Court

Petitioners’ Petition for Review on Certiorari raised two issues. First, whether the CTA Third Division could entertain JBFLI’s petition for review under the circumstances. Second, whether JBFLI committed forum shopping by filing the petition for review before the CTA despite the pendency of Civil Case No. 14-131418 before the RTC.

The Court’s Ruling and Reasoning

The Court denied the petition and resolved both issues in favor of JBFLI. It treated the auction of perishable rice shipments and the legality of the imports as distinct subjects, even though they arose from the same seizure context.

Distinctions Between SIC Cases and Auction of Perishable Goods

The Court distinguished the principal seizure proceedings from the provisional auction measure. It explained that the SIC cases were instituted by the District Collector pursuant to Section 1207 of the TCCP to determine the legality of the rice imports for which WSDs had been issued pursuant to Section 2301 of the TCCP. By contrast, the auction of perishable goods had statutory basis under Section 2607 of the TCCP, and it was implemented through CMO No. 042-1993 and CAO No

Case Syllabus (G.R. No. 246343)

The case arose from customs actions involving Warrants of Seizure and Detention (WSDs) issued on rice importations, followed by a public auction of the seized perishable goods.
The petitioners were the Bureau of Customs and the Commissioner of Customs (collectively, petitioners).
The respondent was Jade Bros. Farm and Livestock, Inc. (JBFLI).
The petitioners sought reversal of a July 4, 2018 Decision and an April 2, 2019 Resolution of the Court of Tax Appeals (CTA) en banc in CTA EB Case No. 1566.
The Supreme Court denied the petition and affirmed the CTA en banc disposition ordering the release to JBFLI of the auction proceeds held in trust.

Parties and Procedural Posture

JBFLI first litigated in the Regional Trial Court (RTC) of Manila through Civil Case No. 14-131418, filing a Petition for Declaratory Relief and Permanent Injunction with prayers for injunctive relief.
While the RTC case was pending, JBFLI also initiated proceedings before the CTA Third Division through CTA Case No. 8886, seeking review and injunctive relief related to the impending public auction.
The CTA Third Division granted JBFLI’s petition and declared the rice shipments legally imported, then ordered release of the auction proceeds to JBFLI.
The petitioners moved for reconsideration, but the CTA Third Division affirmed its ruling in a November 25, 2016 Resolution.
The petitioners elevated the matter to the CTA en banc via CTA EB Case No. 1566.
The CTA en banc dismissed the petition for review due to the failure to obtain the required affirmative vote to reverse the CTA Third Division under Republic Act No. 1125, as amended by Republic Act No. 9503, in relation to the Revised Rules of the Court of Tax Appeals.
On motion for reconsideration, the CTA en banc again affirmed its prior disposition in view of the same voting requirement.
The Supreme Court then reviewed and resolved two issues: the CTA Third Division’s jurisdiction to entertain JBFLI’s petition, and whether JBFLI engaged in forum-shopping.

Key Factual Allegations

JBFLI, a domestic corporation engaged in trading agricultural products, entered into several rice importation transactions in 2013.
Upon arrival of the rice shipments at the Manila International Container Port (MICP), the customs authorities refused release to JBFLI on the theory that JBFLI had no import permit from the National Food Authority (NFA).
The controversy spawned parallel proceedings: an RTC case by JBFLI and an administrative customs track that culminated in seizure, detention, and auction processes.
JBFLI asked the MICP District Collector to lift alert orders and release the shipments, and alternatively to issue WSDs with release upon submission of a cash bond and, failing that, allow disposition by auction.
The District Collector issued four identical WSDs, each dated July 21, 2014, instituting Seizure Identification Case (SIC) Nos. 356-2014 to 359-2014.
JBFLI filed a consolidated motion for release under cash bond before the District Collector, invoking procedural and statutory authorities and seeking quashal or recall of the WSDs.
JBFLI’s motion for release did not receive a direct favorable action, while auction notices were issued and auction dates were set.
A September 1, 2014 Notice of Public Auction rescheduled the auction to September 11, 2014, and later the auction proceeded on October 17, 2014, resulting in the sale of the seized rice shipments covered by the SIC cases.
The auction sale occurred despite JBFLI’s CTA application that obtained only a 20-day TRO which lapsed without a preliminary injunction.

RTC Declaratory Relief Proceedings

JBFLI filed on February 13, 2014 with the RTC a Petition for Declaratory Relief and Permanent Injunction, impleading the customs authorities.
JBFLI argued that the import permit requirement had no legal basis because the relevant special treatment under the World Trade Order Agreement had expired after June 30, 2012.
JBFLI further argued that the NFA issuances relied upon to require import permits lacked statutory basis and, at most, were relevant only to determine applicable tariff rates.
JBFLI sought injunctive relief against the requirement of import permits, seizure and holding of rice shipments, and related “alert” or “hold” actions.
While the RTC case was pending, JBFLI later withdrew its prayers for injunctive relief upon issuance of an RTC September 10, 2014 Order.
The withdrawal became significant in the Supreme Court’s evaluation of forum-shopping and in the allocation of competence between the RTC and the CTA.

Customs SIC and Perishable Auction Track

The District Collector’s SIC actions were tied to Section 1207 and Section 2301 of the Tariff and Customs Code of the Philippines (TCCP), relating to prohibited importations or importations conditioned by law, and to the issuance of warrants for detention and possible release on bond.
The motion for release invoked the District Collector’s ability to release seized property under conditions, and it challenged the legal basis for imposing the import permit requirement.
JBFLI’s invocation of Sections 2607 and 2601 of the TCCP and related customs issuances aimed to frame the auction as either provisional due to perishability or as requiring distinct legal prerequisites when treating seizure as finalized.
The Supreme Court stressed distinctions between the SIC cases, which focused on legality of imports, and the auction of perishable goods, which operated as a provisional measure to prevent loss of value.
The auction’s statutory and regulatory basis was Section 2607 of the TCCP, and it was implemented through Customs Memorandum Order (CMO) No. 042-1993 and Customs Administrative Order (CAO) No. 10-2007.
The Court described the auction procedure for perishable goods as proceeding upon certification of perishability and as entailing escrow of proceeds pending case outcomes under CMO 042-1993.

CTA Third Division Proceedings

After JBFLI received the auction notice, it filed on September 3, 2014 a Petition for Review with Application for TRO, Status Quo Ante Order, and/or Writ of Preliminary Injunction as well as Release Under Bond with the CTA.
The petition was docketed as CTA Case No. 8886 and was assigned to the CTA Third Division.
JBFLI justified immediate recourse to the CTA as an exception to exhaustion of administrative remedies, alleging denial of due process and asserting that the BOC should have allowed release even under bond.
JBFLI sought to stop the auction scheduled for September 11, 2014, and it also prayed for release upon posting a bond and paying applicable charges, emphasizing the perishable nature of the goods.
The CTA Third Division granted a TRO ordering customs authorities to cease and desist from conducting the scheduled public auction, but the TRO expired without issuance of a preliminary injunction.
JBFLI’s petition before the CTA later confronted the fact that the auction had proceeded on October 17, 2014 and the rice shipments were sold.
The CTA Third Division held that it had jurisdiction to entertain JBFLI’s petition and that JBFLI did not engage in forum-shopping.
The CTA Third Division ruled that the rice imports did not require a permit and thus were not illegal, leading to a declaration that the shipments were legally imported.
Because the shipments had already been auctioned, the CTA Third Division ordered release to JBFLI of the auction sale proceeds held in trust, less applicable duties, taxes, penalties, fees, and assessments.

CTA En Banc Decision

The petitioners challenged the CTA Third Division’s jurisdiction an