G.R. No. 201398-99 - Commissioner of Internal Revenue vs. Avon Products Manufacturing, Inc.

Petitioner in G.R. Nos. 201398-99: Commissioner of Internal Revenue (CIR); Respondent: Avon Products Manufacturing, Inc. (Avon). In G.R. Nos. 201418-19: roles are reversed.
Consolidated Rule 45 petitions assailing the CTA En Banc Decision (Nov. 9, 2011) and Resolution (Apr. 10, 2012) affirming the CTA Special First Division (SFD) Decision (May 13, 2010) and Resolution (July 12, 2010) on Avon’s 1999 deficiency assessments.

Avon filed its 1999 VAT returns and monthly withholding tax returns on various dates between Feb. 25, 1999 and Jan. 25, 2000.
Avon signed two Waivers of the Defense of Prescription dated Oct. 14, 2002 (expiring Jan. 14, 2003) and Dec. 27, 2002 (expiring Apr. 14, 2003).

Notice for Informal Conference and initial audit findings: Avon submitted a detailed Reply dated Nov. 26, 2002 with supporting documents; BIR revenue examiner admitted receipt and that the Reply should inform the PAN.
PAN dated Nov. 29, 2002 (received Dec. 23, 2002) covered deficiency income tax, excise tax, VAT, withholding tax on compensation (WTC), and expanded withholding tax (EWT). The alleged “under-declared sales” item was increased from ~P15.7M (informal findings) to ~P62.9M in the PAN, without addressing Avon's rebuttals.
Avon protested the PAN via letter dated Feb. 13, 2003 (filed Feb. 14, 2003), explaining that the supposed third quarter VAT “sales discrepancy” arose from cumulative year-to-date presentation of export sales; attached were the Q3 VAT return and general ledger pages.
Without resolving the PAN protest, the CIR issued a Formal Letter of Demand (FLD) and Final Assessment Notices (FANs), all dated Feb. 28, 2003 (received Apr. 11, 2003), largely mirroring the PAN figures (interest updated), again without addressing Avon's explanations.

Avon protested the FANs on May 9, 2003, resubmitting its PAN protest and attachments; it also complied with BIR directions to present further documents.
Conferences: June 26, 2003 (minutes handwritten) and Aug. 4, 2003 (Avon presented the original 1999 General Ledger and additional documents). Avon reiterated that “under-declared sales” were illusory due to reporting format; BIR officers allegedly indicated possible cancellation if Avon paid other items.
Partial payments on Jan. 30, 2004: (a) Disallowed taxes and licenses/FBT adjustment: P153,559.37; (b) WTC late remittance: P32,829.28.

BIR internal Memorandum (May 27, 2004) recommended enforcement solely on the ground that Avon failed to submit supporting documents within the 60-day window under Sec. 228 NIRC.
Collection Letter dated July 9, 2004 (served July 14, 2004) demanded P80,246,459.15 across income, excise, VAT, WTC, and EWT; did not credit Avon’s partial payments; warned of summary remedies.
Avon sought reconsideration/withdrawal on July 27, 2004, arguing lack of legal/factual basis and prematurity (no action on FAN protest). No action by CIR; Avon treated the collection letter as a denial.

Petition for Review filed Aug. 13, 2004; urgent motion to suspend collection filed Aug. 24, 2004.
CTA SFD Decision (May 13, 2010):

Cancelled FANs for excise tax, VAT, WTC, and EWT; held waivers invalid (no furnished accepted copies per RMO 20-90) causing prescription on VAT, EWT, and WTC; found no due process deprivation as to income tax but ruled that Avon had opportunities to explain.
As to income tax: no undeclared sales of P62,911,619.58; variance in ending inventories due to standard-to-actual cost allocation; allowed only P140,505.28 of claimed tax credits (others unsupported); deemed liability of P153,559.37 extinguished by payment; nonetheless adjudged Avon liable for P357,345.88 deficiency income tax with 20% deficiency and delinquency interest.
Excise tax assessment deemed cancelled due to abatement application and payment.

CTA SFD Resolution (July 12, 2010) denied both parties’ partial reconsiderations.
CTA En Banc Decision (Nov. 9, 2011):

Affirmed SFD; held waivers defective; prescription applied to VAT, EWT, WTC assessments; RMO 20-90 furnishing requirement is substantive, not a mere formality.
Jurisdiction: Avon chose the “await decision” option under Sec. 228—petition timely filed within 30 days from receipt of the July 9, 2004 collection letter treated as the CIR’s final decision.
No denial of due process; BIR’s failure to accept Avon’s documents did not ipso facto violate due process absent proof of irregularity.

CTA En Banc Resolution (Apr. 10, 2012): denied both motions; rejected reliance on RCBC; applied Kudos Metal.

CIR’s petition (G.R. Nos. 201398-99): argued estoppel bars Avon from assailing waivers due to partial payment; claimed Avon's appeal was late; insisted assessments final; and that Avon liable on the merits.
Avon’s petition (G.R. Nos. 201418-19): asserted assessments void for denial of administrative due process at all stages; BIR ignored protests, evidence, and even partial payments; collection letter premature and baseless.
SC issues framed:

Whether the BIR denied due process and whether that voids the assessments.
Whether Avon is estopped from questioning waiver validity due to partial payment.
Whether Avon’s CTA appeal prescribed; whether the assessments attained finality.
Whether Avon is liable for deficiency income tax, excise tax, VAT, WTC, and EWT for 1999.

Did the CIR and BIR officers violate Avon's right to administrative due process under Sec. 228 NIRC and RR 12-99 by failing to state factual and legal bases and by failing to consider Avon's submissions at each stage (informal conference, PAN, FLD/FAN, decision/collection)?

Is Avon estopped from assailing the Waivers of the Defense of Prescription because it made partial payments on assessments covered by the waivers?
Were the waivers defective for non-compliance with RMO 20-90 (failure to furnish Avon accepted, signed copies), and can estoppel cure such defects?

Did Avon timely appeal to the CTA under Sec. 228 NIRC and Rule 4, Sec. 3(a)(2) of the 2005 CTA Rules given CIR’s inaction beyond 180 days?
Did the July 9, 2004 Collection Letter constitute a final, appealable decision; if not, did assessments attain finality?

Assuming procedural regularity, is Avon liable for the alleged 1999 deficiencies in income tax, excise tax, VAT, WTC, and EWT?