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SC affirms cancellation of firm's PEZA registration

CEBU, Philippines - The Supreme Court has affirmed the decision of the Philippine Economic Zone Authority and the Office of the President to cancel the registration of one of the locators at the Mactan Export Processing Zone after it was found that a volume of its importation could not be accounted for.

In a 16-page decision penned by Associate Justice Diosdado Peralta promulgated last December 16, the high tribunal affirmed the PEZA resolution dated September 7, 2004 and the decision of the Office of the President dated January 20, 2005 canceling the registration of Pearl City Manufacturing Corporation as an Ecozone Export Enterprise at MEZ I in Lapu-Lapu City.

The SC reversed the Court of Appeals decision that declared the PEZA resolution and that of the Office of the President decision as null and void.

The case stemmed from a petition for certiorari filed by the PEZA through its director general, Lilia De Lima, assailing the appellate court decision on June 22, 2005 that set aside their cancellation of the registration of the Pearl City Manufacturing Corporation.

Pearl City Manufacturing Corporation is engaged in the business of recycling and processing for export of used clothing into wool, fiber, cotton fiber, polyester fiber, useable clothing and industrial rags.

Sometime in March 2004, the officials of Pearl City, along with two other PEZA-registered companies importing used clothing, was informed of a physical inventory to be conducted by the PEZA officers in their respective zones on their businesses.

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After the physical inventory, PEZA officers discovered that Pearl City had an unaccounted importation of 8,259,645 kilograms of used clothing for the period of 15 months covering January 2003 up to March 2004.

Peza instructed the company to submit its explanation regarding the said unaccounted shortage in its import-export liquidation. After submitting the required explanation, Pearl City was subjected to a special audit conducted by PEZA to determine the amount of wastage generated by the company.

Based on the result of the physical inventory and the special audit, the PEZA Board passed a resolution canceling the company’s PEZA registration.

Pearl City made an administrative appeal with the Office of the President but the appeal was denied. Pearl City then elevated the matter before the Court of Appeals and successfully had the two decisions reversed, thus, the petition for certiorari filed by PEZA before the Supreme Court. 

The management of Pearl City contended that they were not afforded due process by the PEZA before issuing a resolution canceling their registration. However, the Supreme Court ruled that due process have already been afforded.

But SC said Pearl City was properly informed of the supposed discrepancy in its import and export liquidations, that it was given ample opportunity by the PEZA management to be heard or to explain its side in relation to its unaccounted imported materials, and that it was subsequently informed of the decision of the PEZA Board to cancel its registration on the basis of its assessment of the evidence presented.

The Court also agreed with the PEZA’s contention that the power and authority to conduct inquiries is lodged with the PEZA Director General and not with the PEZA Board. 

The high tribunal granted PEZA’s petition and affirmed the cancellation of the registration of Pearl City. — Fred P. Languido/JMO

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