GR 29466; (May, 1978) (Digest)
G.R. No. L-29466 May 18, 1978
ABOITIZ AND CO., INC., ET AL., plaintiffs-appellees, vs. THE COLLECTOR OF CUSTOMS OF CEBU, ET AL., defendants-appellants.
FACTS
The plaintiffs, several export corporations, challenged the legality of arrastre and checking charges collected on export cargo at the Port of Cebu. The statutory basis for arrastre charges is found in the Tariff and Customs Code. However, Sections 3103 and 3105 of the Code, governing the Ports of Cebu and Davao respectively, as originally enacted, contained provisions for arrastre charges on import cargo but were silent on export cargo. To remedy this legislative gap, the Commissioner of Customs, with the Secretary of Finance’s approval, issued Customs Administrative Order (CAO) No. 1-66, which prescribed arrastre charges for export cargo in Cebu and Davao by adopting the rates specified for the Port of Iloilo. This order was later incorporated into a management contract with Cebu Port Terminal, Inc. The plaintiffs contended that such charges could only be validly imposed through statutory amendment, not by administrative regulation, and thus filed an action in the Court of First Instance of Cebu seeking a declaration of the charges’ illegality and a refund of payments made.
ISSUE
The primary issue was whether the Court of First Instance had jurisdiction over the action challenging the legality of the arrastre charges, or whether exclusive appellate jurisdiction resided in the Court of Tax Appeals, and whether the plaintiffs had exhausted their required administrative remedies before seeking judicial relief.
RULING
The Supreme Court reversed the lower court’s decision and dismissed the complaint. It held that the case fell within the exclusive appellate jurisdiction of the Court of Tax Appeals. The legality of the arrastre charges depended on the interpretation and application of the Tariff and Customs Code, a matter administered by the Bureau of Customs. Following the precedent in Southwest Agricultural Marketing Corporation vs. Secretary of Finance, the Court ruled that such disputes must first be appealed to the Commissioner of Customs, with subsequent appeal to the Court of Tax Appeals. The plaintiffs failed to exhaust their administrative remedies by not seeking a ruling from the Commissioner of Customs on the validity of the charges before filing the court action. This failure constituted a lack of cause of action. The Court emphasized that the administrative process allows the Commissioner to correct errors and provides a necessary record for any subsequent judicial review by the specialized Tax Court. Consequently, the suit was premature, and the proper forum for the substantive challenge was the Court of Tax Appeals, but only after an appealable decision from the Commissioner of Customs was obtained.