Shell gets new TRO to prevent Customs seizure of shipments

Pilipinas Shell Petroleum Corp. has obtained a reprieve from the threatened seizure of its fuel imports, securing another temporary restraining order (TRO) from a Batangas court. The Court of Tax Appeals on Tuesday rejected Pilipinas Shell’s petition for a permanent injunction, paving the way for the Customs bureau to go ahead with a plan to seize incoming shipments as payment for P7.3 billion in back taxes. The oil firm, however, yesterday said it had secured a three-day restraining order from a Batangas court. Customs chief Napoleon L. Morales, for his part, said he was giving Shell five days to negotiate payment terms. A Palace official, meanwhile, said the bureau had been asked to wait for a Supreme Court decision. "Right now, out of respect, the [Customs bureau,] with advice of [the] Finance [department], has to await the decision of the Supreme Court. Everything is status quo (sic) while waiting for the decision," Executive Secretary Eduardo R. Ermita told reporters covering a presidential sortie in Malolos, Bulacan. Officials of Pilipinas Shell, however, said the company had not yet asked for relief from the high court, although they said this was being considered following Tuesday’s tax appeals court ruling. Ermita said officials of Pilipinas Shell, Customs and the Trade department had met with President Gloria Macapagal-Arroyo last week to discuss the issue. He said the President had ordered government officials to "immediately come up with a decision that is fair to everyone." Customs' Morales told reporters on the sidelines of a briefing on free trade he would give Pilipinas Shell "five days starting today… to compromise, to pay in full or stagger the payment. I am amenable at least for staggered payments until the May elections." Finance Secretary Margarito B. Teves, he said, had recommended the payment period. Later, in a telephone interview, Morales said Customs was still verifying whether Pilipinas Shell had actually secured the restraining order from the Batangas regional trial court. The restraining order, signed by Executive Judge Ruben Galvez, barred Customs from entering Pilipinas Shell’s Batangas refinery "to hold, seize, confiscate and forcibly take possession of the import shipments of Shell." Galvez said allowing the government to seize Shell’s goods would "cause irreparable injury and grave injustice to [Shell]." Pilipinas Shell lawyer John Jericho Balisnomo said the petition did not constitute forum shopping. "The subject matter for the Batangas court... pertains to properties [that] are already in the possession of Shell," Balisnomo said in a telephone interview. Section 1508 of the Tariff and Customs Code, he said, only allows Customs to hold incoming shipments, not those already in the possession of the importer. Pilipinas Shell, said Balisnomo, would apply for a longer 20-day restraining order. In a statement, the oil firm said Customs officials had gone to its Batangas refinery to serve notice of the intended seizure. Shell Tabangao refinery General Manager Arnel Santos, however, refused to accept the notice, saying the case had not beed decided by the courts. Customs, on behalf of the Bureau of Internal Revenue, is forcing Shell to pay P7.34 billion in excise taxes on shipments of what the oil firm claims are raw materials from 2004 to 2009. Shell claims duties for the imports, which it uses to produce unleaded premium gasoline, have been paid with Customs. And being raw materials, they are not subject to excise taxes. But Customs claims the shipments were really finished goods and had been misdeclared. Shell has criticized the BIR for reversing its position in the tax dispute. The Court of Tax Appeals issued on December 12 a 60-day temporary restraining order to prevent Customs from seizing imports of Shell worth $400 million to cover for the alleged tax deficiency. The court has declined to extend the order, which expired early this week, saying damages to the oil firm were insignificant. Shell claims to have paid billions of pesos in excise taxes on all unleaded premium gasoline withdrawn from its refinery. The company insists taxing imported raw materials and the finished product constitutes double taxation. Morales said the bureau would hold off from going after Shell if the firm elevated its legal appeal. "If they appeal to higher courts, then the status quo [will prevail]. I won’t block their shipments," he said. "Their threat of closure is purely blackmail. The law may be harsh but it is the law. We have to apply it whoever you are," he said. "Chevron, Total, Petron and other small players are paying the tax," Morales said. Ermita said other industry players had given assurances that they would be able to fill the void amid concerns of a fuel shortage if Shell shipments are seized. "I was told by Customs that the other players [had] told them they will be able to supply the needs of the consuming public," he said. Meanwhile, the Consumer Oil Price Watch said it supported the tax court's ruling. "To put to rest this issue Shell should no longer arouse the emotions of the people and just ask that penalties be waived and accept payment on a staggered basis within a five- to seven-year period and borrow at reasonable rates of interest," the group's chairman Raul T. Concepcion said in a statement. — reports from Jessica Anne D. Hermosa, Gerard S. dela Peña, Ira P. Pedrasa and Jose Bimbo F. Santos, BusinessWorld