Bureau of Customs files P24-billion smuggling case vs Shell

MANILA, Philippines - The Bureau of Customs (BOC) yesterday filed before the Department of Justice (DOJ) a P24-billion technical smuggling case against one of the major oil players in the country, Pilipinas Shell Petroleum Corp. (PSPC), for alleged “intentional” misclassification and misdeclaration of oil importations for four years.

Customs Commissioner Angelito Alvarez branded this as the biggest smuggling case ever filed by the bureau.

The P24 billion misclassification and misdeclaration was accumulated between the period of August 2005 and May 2009.

The eight persons named respondents in the technical smuggling suit were PSPC country tax manager Nigel Avila; employees Brian Khriz Acosta, Carolyn Francisco, Ma. Cristina Rago and Janice de los Reyes who reportedly signed the entry documents; and customs brokers Diosdado Bagon, Jorge Pascual Jr., and Mary Grace Maleon.

There were also several unidentified persons, including Customs employees, who reportedly colluded with others to defraud the government of income. They have yet to learn the identities of these people.

Alvarez said only one PSPC official was named as a respondent because they have yet to establish the participation of other officials. The eight respondents were the only names that they saw on the documents.

He explained that PSPC incurred a P2.3-billion misclassification case and a P380-million misdeclaration case. The biggest chunk, P21.7 billion, represents an 800-percent surcharge. Thus, the BOC is demanding a total of P24 billion from the oil firm.

The Tariffs and Customs Code of the Philippines (TCCP) stipulates that fraudulent

acts and practices could be meted a fine of as much as 800 percent.

In the case of misclassification, it appeared that there were 52 import entries filed in three consecutive years 2007, 2008 and 2009, and respondents reportedly misclassified the shipments of unleaded gasoline (CGG) under Harmonized System (HS) Code 2710.1130 that is said to be intended for tetrapropylene.

The BOC chief said tetrapropylene is not listed under Section 48 of the National Internal Revenue Code as subject to excise tax.

“Those acts of deception in 52 entries effectively deprived the government of lawful revenues from excise tax and value added tax (VAT) estimated at P2.4 billion,” Alvarez said.

As for the second offense, misdeclaration, the bureau learned that the respondents allegedly made importations between August 2005 and December 2008 as merely catalytic cracked gasoline (CCG) or light CCG (LCCG).

But he explained that there were supporting documents such as invoice, bill of lading and inward foreign manifest that would prove that these were finished products.

“In truth, the corresponding invoices issued by Shell International Eastern Trading Co. (SIETC) as well as the documents provided by the shipping companies described those shipments as containing unleaded premium gasoline,” said Alvarez.

The Customs official also clarified that the case they filed against PSPC was a separate from the pending tax collection case between the two parties which remains pending at the Court of Tax Appeals. It is reportedly valued at P7.3 billion.

Alvarez said the government lost P20 billion to P30 billion last year in oil smuggling. The three biggest items prone to smuggling are oil, rice, and sugar.

During the Arroyo administration, then Presidential Adviser on Revenue Enhancement Narciso Y. Santiago Jr. led and inter-agency efforts to collect unpaid excise taxes from 2004 to 2009 from Pilipinas Shell Petroleum Corporation on their unleaded gas importations. Said unpaid excise taxes amounted to P7 billion as of 2009.

Shell was previously paying excise taxes on its unleaded gas importations prior to 2004. However, in 24 March 2004, former BIR Deputy Commissioner Jose Mario C. Buñag issued a ruling exempting Shell from paying said excise taxes effective April 20, 2004. Buñag’s ruling was affirmed by former BIR Commissioner Sixto Esquivias IV.

But in a ruling dated Dec. 15, 2009, the BIR, under Commissioner Joel Tan-Torres, held that Shell is liable for more than P7 billion in unpaid taxes on its unleaded gas importations from 2004 to 2009.

Santiago coordinated with former Customs Commissioner Napoleon Morales and former Tan-Torres to collect the unpaid taxes from Shell. Shell threatened to stop the production and importation of petroleum products bound for the Philippines if the government persists in its collection efforts. When the government did not budge, Shell filed a case with the Court of Tax Appeals to restrain the government from collecting the unpaid taxes.