G.R. No. L-19337 September 30, 1969
ASTURIAS SUGAR CENTRAL, INC., petitioner, vs. COMMISSIONER OF CUSTOMS and COURT OF TAX APPEALS, respondents.

FACTS

Petitioner Asturias Sugar Central, Inc., engaged in milling sugar for export, imported jute bags in 1957 as containers. The first shipment of 44,800 bags entered under a Re-exportation and Special Import Tax Bond, conditioned for export within one year. The second shipment of 75,200 bags entered under a similar bond with the same condition. Only 33,647 bags were exported within the one-year period; the remaining 86,353 bags were exported after one year but within three years. Petitioner requested an extension of the bond period, citing typhoons, floods, picketing of a railroad line, and delay in vessel arrival. The Commissioner of Customs denied the request. Due to failure to export within one year, the Collector of Customs required payment of P28,629.42 in duties and taxes, which petitioner paid under protest. Petitioner demanded a refund, arguing force majeure justified the delay and the Commissioner had discretion to extend the period. Alternatively, it claimed entitlement to a drawback refund under the Tariff and Customs Code. The Collector, Commissioner, and Court of Tax Appeals denied the claim.

ISSUE

1. Whether force majeure is a sufficient justification for failure to export the jute bags within the one-year period required by the bonds.
2. Whether the Collector of Customs or Commissioner of Customs has the power to extend the one-year period for exportation.
3. Whether petitioner is entitled to a refund by way of a drawback under Section 106(b) of the Tariff and Customs Code.

RULING

1. The Court did not expressly rule on the force majeure argument as the Court of Tax Appeals made no mention of it in its decision, implying it was not credited. The Court emphasized that the one-year period is mandatory and non-extendible.
2. No. The Commissioner of Customs does not have discretion to extend the one-year period. Section 23 of the Philippine Tariff Act of 1909 (and its successor, Section 105(x) of the Tariff and Customs Code) fixes a one-year period for re-exportation but is silent on extension. Customs Administrative Orders 389 and 66, issued to implement the law, explicitly state that bonds for re-exportation of containers are “good for 12 months without extension” and are “not extendible.” This administrative construction is entitled to judicial respect, especially since Congress, in enacting the new Tariff Code, did not amend the provision to overrule this long-standing interpretation. Tax exemptions are construed strictly against the taxpayer.
3. No. Petitioner is not entitled to a drawback refund. A drawback under Section 106(b) requires that duties were “paid upon importation.” Here, the jute bags entered free of duties under bond. The Court cited U.S. v. Passavant, which held that the drawback provision applies only when duties are actually paid on importation, not when goods enter under bond without payment. The term “paid” means actual payment, not a contingent liability under bond. Since no duties were paid upon importation, the drawback remedy is unavailable.
The decision of the Court of Tax Appeals was affirmed.