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BIR seeks reversal of injunction on confiscated fake cigarettes

BIR raid

THE Bureau of Internal Revenue (BIR) has filed a motion for reconsideration before the Court of Tax Appeals (CTA) seeking to reverse a preliminary injunction over the seizure of illicit cigarettes and manufacturing equipment of GB Global Exprez Inc. operating inside the Angeles Industrial Park, Pampanga.

BIR raidThe case stemmed from a raid conducted by BIR-National Bureau of Investigation (NBI) Composite Team on the factory of GB Global on July 29, 2020. The court has granted GB’s request for an injunction and ordered the return of all those seized in the raid including suspected fake cigarettes supposedly for export but do not carry the destination country and the details of the manufacturer on the pack as required by law.

The raid yielded 4,786 mastercases 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 export, yet the product packs did not have the printed destination market, the name and address of manufacturer, and the BIR assessment number of the manufacturer and exporter.

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 of the October 27, 2020 injunction, 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 otherwise known as An Act Creating the Court of Tax Appeals.

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, BIR said in its filing.

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

The revenue agency explained that the case does not stem from a disputed assessment nor was any collection effort made against GB Global for the matter to be brought to the CTA.

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

On October 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 February 5, 2020. The BIR seized a total of 21 cigarette-making machines, twelve mastercases of Two Moon cigarettes, and two 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 the necessary permit to operate.