BIR asks CTA to reverse its injunction on seized fake cigarettes

MANILA, Philippines — The Bureau of Internal Revenue (BIR) has asked the Court of Tax Appeals to reverse its decision to grant a preliminary injunction on the seizure of illicit cigarettes and manufacturing equipment of a cigarette company at the Angeles Industrial Park in Pampanga.

In a motion for reconsideration, the BIR told the court that acted within legal bounds when it padlocked on July 29, 2020, the facility of GB Global Exprez Inc. and confiscated its illegal cigarette products because of several violations.

The raid yielded 4,786 mastercases — or 238,300 cigarette packs — of Two Moon and Soho, which are non-BIR registered and non-compliant brands.

The cigarettes were also had no tax stamps as proof of excise tax payment in violation of the Sin Tax Reform Law, (Republic Act No. 10351) and BIR Revenue Regulations 7-2014 and 9-2015.

According to the BIR, the company claimed that the cigarettes were for exports.

But the BIR said the packs did not have the printed destination country, the name and address of the manufacturer, and the BIR assessment number of the manufacturer and exporter — all of which are required by law.

The BIR said the seizure of the cigarettes was legitimate, conducted with a valid mission order.

The raid was conducted by a team of composed of members of the BIR and the National Bureau of Investigation (NBI) on the factory of GB Global in Angeles City.

The CTA granted the petition of GB Global for an injunction on the seizure of its products and equipment. It also ordered the return of all the seized articles that included illicit cigarette packs allegedly for export but did not bear details required by law.

Because of such violations, the BIR ordered the seizure of three cigarette-making lines and two cigarette-packing lines at GB Global.

In its motion for reconsideration, the BIR argued that the jurisdiction of the CTA could order the suspension of tax collection but not a prohibition against BIR personnel in the exercise of its police powers as stated in the Act Creating the Court of Tax Appeals (Republic Act  No. 1125).

BIR pointed out that the enforcement involves an administrative action and the exercise of its regulatory function and that no tax assessment was involved in this case.

“This is an offshoot of BIR’s effort to curtail the proliferation of the illicit cigarette trade,” the BIR said in its petition.

The BIR noted that Section 15 of the National Internal Revenue Code (NIRC) gave revenue officers the authority to make arrests and seizures. So in this case, the BIR said it was simply enforcing its regulatory function.

Prior to the CTA case, the law enforcers discovered that Two Moon cigarettes intended for exports were prevalently sold around Central Luzon.

On Oct. 2, 2020, the BOC conducted an enforcement operation against an illegal printing facility of cigarette packs in Cabanatuan City. And the BOC found printouts of illicit Two Moon packs in the facility.

The BOC said non-documented Chinese nationals were operating the machines when the raid was conducted. It was also reported that several Filipino factory workers were allegedly prevented from going out of the facility.

The BOC discovered that GB Global was ordering its Two Moon labels from this printing facility as shown by purchase orders.

An affiliate company of GB Global, GB-BEM Cigarette Company Inc. located at the Pampanga Economic Zone was also raided on Feb. 5, 2020.

The BIR seized a total of 21 cigarette-making machines, 12 mastercases of Two Moon cigarettes, and two (2) warehouses full of Two Moon and D&B, and assorted packaging materials.

BIR totaled the seizure to 1,656,880 cigarette packs which were not registered with the revenue agency and not having the proper license to operate.

A statement by the Department of Finance (DOF) last April 6 said the BIR shut down the factory of GB-BEM because it was manufacturing cigarettes without a permit to operate.

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