G.R. No. 44226 -44228; February 27, 1937
PACIFIC COMMERCIAL COMPANY, plaintiff-appellee, vs. THE INSULAR COLLECTOR OF CUSTOMS, defendant-appellant.

FACTS

The Pacific Commercial Company imported fifty-four Chevrolet truck chassis. The Collector of Customs classified all chassis under paragraph 195(b) of the Philippine Tariff Act of 1909 (“Other” automobiles) and levied a 20% ad valorem duty. The importer protested, claiming the chassis were for transporting merchandise and should be classified under paragraph 195(a) at 15%. The Collector later conceded that thirty-four chassis were used for merchandise and refunded the duty difference. The dispute concerns the remaining twenty chassis, which the importer later converted into passenger autobuses. The importer presented evidence that all chassis were specifically constructed, ordered, and imported for use in merchandise transport and that essential changes were required to convert them for passenger use.

ISSUE

Whether the twenty chassis, later converted for passenger transport, should be classified for duty purposes under paragraph 195(a) (for merchandise transport) or paragraph 195(b) (other automobiles).

RULING

The Supreme Court affirmed the judgment ordering a refund. The classification of imported articles for duty assessment is based on their character at the time of importation. The chassis were constructed, ordered, and imported solely for transporting merchandise. Their subsequent conversion for a different use, which required essential alterations, does not change their original tariff classification. Therefore, all fifty-four chassis, including the twenty later converted, were correctly classifiable under paragraph 195(a) at 15% duty.

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