The Bureau of Internal Revenue (BIR) has raised alarm over the security of seized fake cigarettes and manufacturing equipment which were ordered by a court to be returned to a suspected illicit trader.
The agency was slapped with an injunction by the Court of Tax Appeals following its raid of GB Global Exprez Inc., a cigarette company located at the Angeles Industrial Park in Pampanga which is supposedly engaged in the export of cigarettes.
With the injunction, the court ordered the BIR to return all seized items from the raid including 238,300 cigarette packs of Two Moon and Soho, export products that did not contain markings to indicate the country of destination, details of the manufacturer, and BIR tax stamps as proof of excise tax payment, which are all requirements by law.
The court also ordered the withdrawal of security personnel from the office of the BIR commissioner stationed at the padlocked factory.
The BIR recently filed a motion for reconsideration to overturn the injunction.
“We are concerned over the possible tampering of evidence. The seized products and equipment form part of the body of evidence to support our case in court,” a BIR field official said.
The BIR and the Department of Finance foiled an illicit cigarette operation that resulted in billions of pesos in lost revenues for the government a few years back.
This turned out to be the biggest settled tax evasion case in Philippine history with the cigarette company Mighty Corp. paying a P30 billion tax settlement with the government and eventually sold its interest to a cigarette multinational.
The BIR enforcement team noted that in the records of the Securities and Exchange Commission, ex-Mighty General Manager Greg Lim and Benson Chua are the biggest shareholders and both are directors of GB-BEM and GB Global.
Finance Secretary Carlos Dominguez had pushed for an intensified campaign against illegal cigarette trade, saying he expects illicit trade to soar due to higher excise taxes. He said the BIR and BOC must “intensify surveillance and enforcement” against the manufacture and sale of illegal local cigarettes and smuggling of imported counterfeit products.
The Two Moon and Soho brands contained health warnings in Thai but a BIR check showed that these products are not available in Thailand. Instead, the brands were widely available in Central Luzon and some parts of Mindanao.
The GB Global facilities were raided by a joint BIR-National Bureau of Investigation (NBI) Composite Team on July 29, 2020.
The raid yielded 4,786 master cases or 238,300 cigarette packs of non-BIR registered and non-compliant Two Moon and Soho brands. The illicit cigarettes were also without tax stamps as proof of excise tax payment in violation of Republic Act 10351 and BIR Revenue Regulations 7-2014 and 9-2015.
GB Global claimed the cigarettes in question were for exports, yet the product packs did not have the printed the destination market, the name and address of manufacturer, and the BIR assessment number of the manufacturer and exporter.
Because of these 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 said the CTA’s jurisdiction is to issue suspension of collection of taxes and not to issue prohibition against BIR personnel in the exercise of its police powers as stated in Section 11 of Republic Act 1125, An Act Creating the Court of Tax Appeals.
The BIR stated that the enforcement involves an administrative action and the exercise of the agency’s 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 in the country in response to the government’s all-out campaign to go after illicit traders, the BIR said in its filing.
The BIR cited Section 15 of the National Internal Revenue Code (NIRC) that vested revenue officers with the authority to make arrests and seizures, thus, in this case, was simply enforcing its regulatory function.
An affiliate company of GB Global, GB-BEM Cigarette Company Inc., located at the Pampanga Economic Zone, was also raided on February 5, 2020. The BIR seized a total of 21 cigarette-making machines, twelve (12) master cases of Two Moon cigarettes, and two (2) warehouses full of Two Moon and D&B, and assorted packaging materials. The 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 DOF last April 6 said the BIR shut down the factory of GB-BEM because it was manufacturing cigarettes without the necessary permit to operate.