G.R. No. L-10624; March 24, 1916
THE MANILA RAILROAD COMPANY, plaintiff-appellee, vs. THE INSULAR COLLECTOR OF CUSTOMS, defendant-appellant.

FACTS:
The Manila Railroad Company imported a locomotive on February 11, 1914. It was granted free entry under Section 10 of Act No. 1510 , which exempts from duty materials imported for the construction and equipment of railways covered by the company’s concession. The locomotive was assembled, underwent a trial trip on April 28, 1914, and was placed in regular service on May 1, 1914. It initially operated on the Manila-Antipolo line until June 15, 1914, and was thereafter continuously used on the Manila-San Pablo-Lucena line. In September 1914, the Insular Collector of Customs ordered a reliquidation of the entry and assessed customs duties on the locomotive under the Tariff Law of 1909, arguing that the lines where it was used were already in full commercial operation and thus “constructed and equipped.” The Railroad Company paid the duties under protest and, after the Collector denied its protest, appealed to the Court of First Instance.

ISSUE:
Whether the imported locomotive is entitled to free entry under Section 10 of Act No. 1510 , considering it was placed in service on railway lines that were already operational, but within the overall time limit for the construction and equipment of the entire railway system as provided in the company’s concession.

RULING:
Yes. The Supreme Court affirmed the decision of the Court of First Instance, which ordered the refund of the duties paid. The Court agreed with the lower court’s reasoning that the railway lines referred to in Act No. 1510 , as amended, constituted an entire system. The privilege of free entry for equipment applies to the system as a whole and is not confined to specific, uncompleted sections. Since the overall time limit for the construction and equipment of the entire railway system had not expired when the locomotive was placed in service, and as the locomotive was necessary for handling the system’s traffic, it was properly admitted free of duty. The Court held that the rolling stock could be transferred and used on any section of the system without incurring duty liability, provided the importation was for original equipment and not for replacement. The judgment of the lower court was affirmed.