G.R. No. 168668 , December 16, 2009
Philippine Economic Zone Authority (PEZA) and Philippine Economic Zone Authority Board, represented by its Director General Lilia B. de Lima, Petitioners, vs. Pearl City Manufacturing Corporation, Bernardino Abala, Rogina Abala, Jovelyn Abellana, Catherine Agapay, Joseph Agapay, Rolando Agapay, Vivencia Alangilan, Conchita Albaracin, Leonor Amodia, Wilson Arcilla, Joan Aying, Ma. Rebecca Bayon, Mary Ann Besteis, Marifi Cabardo, Hazel Cala, Carmen Castil, Leonard Castil, Jicardo Castro, Esther Ceballos, Eusebio Ceniza, Gemma Ceniza, Merchu Chua, Leonarda Cueva, Victoria Dacay, Estrellita Deiparine, Dexter del Castillo, Maurino Devibar, Josephine Dizon, Ian Dizon, Lorna Dupit, Rizza Durano, Lucita Fernandez, Godofredo Gac-ang, Thelma Gallardo, Ma. Lourdes Git-gano, Sonny Go, Juliet Gutierrez, Samuel Gutierrez, Melba Hermosi-sima, Juvane Into, Josefina Isagan, Louie Isagan, Fe Jaron, Judy Jaron, Florencia Labiste, Josefina Lamanilao, Jimmy Latonio, Marifi Lavinna, Jonjon Layos, Lolit Libres, Renfel Almeda, Raul Barbosa, Alfie Durado, Noel Go, Lorena Lomactod, Sulpicio Mabug-at, Rodrigo Malazarte, Rosalina Mangubat, Dario Mansay, Arlene Mariot, Melchor Matos, Vergenia Matos, Ponsito Maturan, Robinson Mejos, Guadalupe Miao, Adoracion Opong, Roger Pagal, Zena Pantonial, Librada Pareja, Ariel Patalinghug, Teresa Patalinghug, Edesa Patigayon, Lucita Payac, Jona Pejana, Benjamin Pepito, Josephine Pepito, Flordelina Peres, Ramel Pogado, Anastacia Ponce, Yves Reyes, Ma. Dolores Rivera, Rubelita Rosacina, Michelle Rosaroso, Eleuterio Saberon, Jr., Zenaida Sague, Aida Satierra, Ma. Salome Senoc, Rhodelyn Senoc, Ma. Victoria Sususco, Jimmy Sy, Israel Tejero, Roger Tejero, Alcide Tuico, Franklin Ty, Larry Uy, Rodina Ybalane and Vilma Zapanta, Respondents.

FACTS

Respondent Pearl City Manufacturing Corporation (PCMC) is a PEZA-registered Ecozone Export Enterprise located at the Mactan Economic Zone I in Lapu-Lapu City, Cebu, engaged in recycling and processing used clothing for export. In March 2004, PEZA conducted a physical inventory on PCMC and discovered an unaccounted importation of 8,259,645 kilograms of used clothing for the period January 2003 to March 2004. PCMC was instructed to submit an explanation and was subjected to a special audit. Based on the results, the PEZA Board passed Resolution No. 04-236 canceling PCMC’s PEZA registration. PCMC filed an administrative appeal with the Office of the President (OP), which affirmed the PEZA Board’s resolution. PCMC’s motion for reconsideration was denied. PCMC then filed a petition for review with the Court of Appeals (CA), which reversed the OP’s decision, declared the PEZA Board resolution null and void, and ordered the reinstatement of PCMC’s ecozone privileges. PEZA and the PEZA Board filed the instant petition for review on certiorari.

ISSUE

1. Whether or not respondent PCMC was afforded due process.
2. Whether or not there is substantial evidence to support PEZA Board Resolution No. 04-236 and the OP Decision and Order.
3. Whether or not the cancellation of respondent PCMC’s PEZA accreditation is proper.

RULING

The Supreme Court found the petition meritorious.
1. On the first issue, the Court ruled that PCMC was afforded due process. PCMC was properly informed of the discrepancy, given ample opportunity to explain its side through letters, an affidavit, and submissions from its plant manager and other persons, and was subsequently informed of the PEZA Board’s decision. The essence of procedural due process in administrative proceedings is the opportunity to explain one’s side, which was accorded to PCMC. The Court held that the CA erred in requiring the PEZA Board itself to conduct interrogations, as the primary authority to conduct inquiries is vested in the PEZA Director General under Section 14(g) of Republic Act No. 7916 , and a full-blown audit had already been conducted.
2. On the second issue, the Court ruled that there was substantial evidence to support the PEZA Board’s resolution and the OP’s decision. Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. The physical inventory and special audit conducted by PEZA established a significant unaccounted shortage in PCMC’s import-export liquidation. PCMC’s explanations attributing the shortage to wastage were found insufficient and unsupported by credible evidence. The Court noted that PCMC failed to comply with PEZA’s documentation requirements and that its claimed wastage rate was inconsistent with industry standards and its own prior submissions.
3. On the third issue, the Court ruled that the cancellation of PCMC’s PEZA accreditation was proper. The Court cited Section 3 of the Revised PEZA Rules and Regulations, which requires a prior PEZA permit to bring goods out of the ecozone, and Section 2, which provides that a failure to account for shortages constitutes prima facie proof that goods were illegally sent out of the restricted area. Given the substantial unaccounted shortage, PEZA was justified in canceling PCMC’s registration for violating the terms of its accreditation and the relevant rules. The Court reversed the CA Decision and reinstated the Decision of the Office of the President affirming the cancellation of PCMC’s PEZA registration.