Title
Commissioner of Internal Revenue vs. Avon Products Manufacturing, Inc.
Case
G.R. No. 201398-99
Decision Date
Oct 3, 2018
Avon contested BIR's 1999 tax assessments, citing invalid waivers and due process violations. CTA upheld partial cancellation, ruling waivers defective and assessments void, except for valid income tax deficiency. SC affirmed.

Case Summary (G.R. No. 201398-99)

Issuance of Preliminary and Final Assessment Notices

On November 29, 2002, the BIR issued a Preliminary Assessment Notice (PAN) proposing deficiency assessments. Avon protested by letter dated February 13, 2003 and submitted supporting documents. Without ruling on the protest, the CIR issued Final Assessment Notices and Formal Letters of Demand on February 28, 2003, which Avon also protested on May 9, 2003.

Collection Letter and Partial Payment

Following unsuccessful conferences in June and August 2003—where Avon presented ledgers to dispute under-declared sales—the BIR issued a Collection Letter on July 9, 2004, demanding payment of roughly ₱80 million. Avon made partial payments on January 30, 2004 under protest, but the Collection Letter nonetheless included those amounts. Avon sought reconsideration on July 27, 2004, which went unanswered.

CTA Special First Division Decision

On May 13, 2010, the CTA Special First Division partially granted Avon’s petition: it cancelled deficiency assessments for excise tax, VAT, and withholding taxes, but upheld and ordered payment of deficiency income tax of ₱357,345.88 plus interest. The court found Avon had opportunity to present evidence, that the waivers were invalid under RMO 20-90, and confirmed several factual adjustments in Avon’s favor.

CTA En Banc Ruling

On November 9, 2011, the CTA En Banc denied both the CIR’s and Avon’s petitions, affirming the Special Division. It held that the waivers were defective for failure to furnish Avon copies, that it had jurisdiction based on Avon’s timely appeal from the Collection Letter, and that the CIR’s appreciation of Avon’s evidence did not amount to denial of due process. A subsequent resolution on April 10, 2012 denied motions for reconsideration.

Issues on Appeal

  1. Whether the CIR violated Avon’s administrative due process rendering the assessments void;
  2. Whether Avon’s partial payment estops it from challenging the waivers’ validity;
  3. Whether Avon’s right to appeal has prescribed or the assessments have become final;
  4. Whether Avon is liable for deficiency income, excise, VAT, withholding, and expanded withholding taxes for 1999.

Supreme Court’s Due Process Analysis

The Court reaffirmed that Section 228 of the NIRC and RR 12-99 mandate written notice of legal and factual bases at each stage—Informal Conference, PAN, Formal Demand, and final decision—and require the BIR to consider taxpayer submissions. Drawing on Ang Tibay and subsequent jurisprudence, the Court held that Avon was denied due process because the CIR never addressed Avon’s rebuttals or explained the basis for rejecting its evidence at any stage. Assessments issued in such manner are null and void.

Supreme Court’s Estoppel Ruling

The CIR argued that Avon’s partial payment demonstrated acceptance of the waivers. The Court distinguished this case from RCBC, noting Avon received no benefit from the waive

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