Title
Steel Corporation of the Philippines vs. Bureau of Customs
Case
G.R. No. 220502
Decision Date
Feb 12, 2018
STEELCORP sought tax waiver under FRIA during rehabilitation; SC ruled RTC lacked jurisdiction, CTA proper forum, waiver inapplicable to future importations.
steel corporation
bureau of customs
bureau of internal revenue
A

Case Summary (G.R. No. 220502)

Factual Background

STEELCORP was a domestic corporation engaged in steel manufacture and distribution with its principal place of business in Balayan, Batangas. On September 11, 2006, Equitable PCI Bank, Inc. filed a petition for rehabilitation of STEELCORP, and the RTC issued an order on September 12, 2006 directing a stay of all claims against STEELCORP pursuant to the Interim Rules on Corporate Rehabilitation. While rehabilitation proceedings were pending, R.A. No. 10142 lapsed into law in July 2010 and took effect August 31, 2010; Section 19 of that statute provided that upon issuance of a Commencement Order and until approval of a rehabilitation plan or dismissal, imposition of all taxes and fees due to the national government or LGUs shall be considered waived. Municipal representatives and STEELCORP agreed on December 16, 2010 that the Municipality of Balayan would waive municipal taxes due from STEELCORP from 2011 until approval of a rehabilitation plan.

Administrative Acts and Initial Agency Positions

STEELCORP sought to avail itself of the waiver under Section 19 by letter to BOC Commissioner Angelito A. Alvarez dated October 1, 2010. The BOC assessed import duties and taxes amounting to P41,206,120.00 on STEELCORP’s raw materials. Commissioner Alvarez issued a Memorandum dated October 26, 2010 recommending waiver of all taxes and fees due to STEELCORP, but the release of that memorandum was held pending DOF clearance. DOF Undersecretary Carlo A. Carag issued a 2nd Indorsement dated May 26, 2011 disapproving the BOC recommendation on two grounds: the Stay Order was not the Commencement Order required by R.A. No. 10142, and Section 19 did not cover taxes and customs duties on importations made after issuance of the Commencement Order. DOF also asserted that review of the BOC decision was within the exclusive appellate jurisdiction of the CTA under Section 2315 of the Tariff and Customs Code and Section 7 of R.A. No. 1125, as amended.

Trial Court Proceedings and Interim Relief

STEELCORP filed a civil complaint for injunction with application for immediate issuance of a temporary restraining order on September 14, 2011, docketed as Civil Case No. 5042 before the RTC, Branch 10, Balayan. The RTC issued a 72-hour TRO on September 15, 2011, later extended pending hearing on a preliminary injunction. On November 9, 2011, the RTC entered a Status Quo Order extending the TRO’s effects. The OP deferred resolution of the administrative appeal pending resolution of Civil Case No. 5042. On January 12, 2012, the RTC ordered the Manila International Container Port District Collector of Customs to refrain from imposing customs duties and taxes on STEELCORP’s importations and to release raw materials without payment of duties. The Office of the Solicitor General (OSG), representing the BIR, BOC, DOF, and OP, filed a Motion to Dismiss on January 12, 2012, challenging the RTC’s jurisdiction and contending the relief sought implicated matters exclusively reviewable by the CTA.

RTC Disposition on Motions and Injunctive Relief

On March 5, 2012, the RTC denied the Motion to Dismiss and directed issuance of a writ of preliminary injunction enjoining the defendants from assessing or collecting taxes and customs duties until final disposition of the case; the writ issued March 8, 2012. The respondents thereafter filed motions and motions for reconsideration. In an Order dated June 6, 2012 the RTC granted the OSG’s motion for reconsideration of the January 12, 2012 Order, granted the BIR’s omnibus motion and the OSG’s motion to dissolve the writ of preliminary injunction, set aside the orders of January 12 and March 5, 2012, denied STEELCORP’s motion for execution, and dissolved the preliminary injunction. The RTC reasoned that the agencies charged with collecting taxes and customs duties must determine what is collectible and who is exempt and that STEELCORP’s claim under R.A. No. 10142 should have been raised before the CTA after denial by the BOC.

Court of Appeals Proceedings and Ruling

STEELCORP appealed the RTC Orders to the Court of Appeals under Rule 41, raising procedural objections to the notices of hearing for the OSG’s and BIR’s motions and contending that the controversy presented a legal question cognizable by the RTC concerning the interpretation of Sections 19 and 146 of R.A. No. 10142. The CA dismissed the appeal on November 19, 2014 and denied reconsideration on September 15, 2015. The CA found no procedural infirmity in the notices because STEELCORP had ample opportunity to oppose and respond, and held that the RTC lacked jurisdiction over the subject matter because the complaint sought to enjoin collection of customs duties and taxes — matters within the exclusive appellate jurisdiction of the CTA under Section 7, as amended by R.A. No. 9282, and subject to appeal pursuant to Section 2315 of the Tariff and Customs Code.

Issues Presented to the Supreme Court

STEELCORP’s petition for review under Rule 45, Rules of Court, renewed two principal contentions: that the CA erred in sustaining the RTC’s giving due course to the OSG’s and BIR’s motions despite alleged procedural defects in notice and setting of hearings; and that the substance of the controversy — whether a corporation under rehabilitation may avail itself of the waiver under R.A. No. 10142, Sec. 19 — raised a legal question properly cognizable by the RTC and appealable to the CA or Supreme Court rather than to the CTA.

Parties’ Contentions at the Supreme Court

STEELCORP argued that the CA should have reversed because the motions were set for hearing on a national holiday and beyond reglementary periods under Rule 15, and because the action sought compliance with Section 19 rather than a challenge to the collectibility of specific duties or an assessment that falls within CTA jurisdiction. The respondents, through OSG, maintained that the CA correctly affirmed the RTC’s orders because the motions were substantially compliant with procedural rules and because tax and customs matters invoked the CTA’s exclusive jurisdiction under R.A. No. 1125, as amended by R.A. No. 9282.

Supreme Court Ruling

The Supreme Court denied the petition and affirmed the November 19, 2014 Decision and September 15, 2015 Resolution of the Court of Appeals. The Court held that the notices and scheduling of the motions substantially complied with Rule 15, Rules of Court, and that STEELCORP was afforded the opportunity to be heard and to file oppositions. The Court further held that the RTC lacked subject matter jurisdiction to enjoin collection of taxes and customs duties where the controversy implicated decisions and appeals reviewable exclusively by the Court of Tax Appeals under R.A. No. 1125, as amended by R.A. No. 9282.

Legal Basis and Reasoning

The Court applied the doctrine of liberal construction of procedural rules, citing Section 6, Rule 1, Rules of Court, and prior jurisprudence such as Philippine National Bank v. Judge Paneda and Maturan v. Araula, to conclude that deviations f

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