Case Summary (G.R. No. 261065)
Petitioner
Commissioner of Internal Revenue, acting through its assessment officers who conducted the audit and issued the PAN, FLD, FAN, and FDDA.
Respondent
Maxicare Healthcare Corporation, a domestic corporation engaged in prepaid health care delivery, which challenged the deficiency value-added tax (VAT) and compromise penalty assessments for calendar year 2012.
Key Dates
• August 28, 2014 – Letter of Authority issued for tax period January–December 2012
• August 25, 2015 – Preliminary Assessment Notice (PAN) assessing P618,251,527.72 in deficiency VAT
• October 8, 2015 – Formal Letter of Demand (FLD) and Final Assessment Notice (FAN) assessing P419,774,484.21
• November 6, 2015 – Maxicare’s letter of protest to FLD/FAN, requesting reinvestigation and pledging to submit documents within 60 days
• December 9, 2015 – FDDA confirming deficiency VAT and compromise penalty
• January 20, 2016 – Maxicare’s petition for review filed with the Court of Tax Appeals (CTA)
• January 16, 2020 – CTA First Division decision withdrawing and setting aside FDDA, FLD, and FAN
• November 25, 2021 – CTA En Banc decision affirming the First Division
• April 26, 2022 – CTA En Banc resolution denying motion for reconsideration
Applicable Law
• Section 228, National Internal Revenue Code of 1997, as amended: prescribes notice, protest periods, and submission deadlines for assessments
• Revenue Regulations No. 12-99, as amended by RR No. 18-2013: implements Section 228, detailing PAN, FLD/FAN procedures, and the 60-day period for supporting documents in a reinvestigation request
Factual Background
Pursuant to a Letter of Authority, the CIR examined Maxicare’s 2012 books and issued a PAN on August 25, 2015. Maxicare protested, and upon receipt of the FLD/FAN on October 8, 2015, filed a letter on November 6, 2015, expressly requesting reinvestigation and promising to submit supporting documents within 60 days. Despite this, the CIR issued the FDDA on December 9, 2015—only 30 days after Maxicare’s protest—thereby precluding Maxicare from furnishing the promised documents.
Lower Court Decisions
The CTA First Division held that issuing the FDDA before the 60-day submission period violated Maxicare’s due process rights under Section 228 and RR No. 12-99, rendering the assessments void. The CTA En Banc affirmed that ruling, enjoining the CIR from collecting the disputed VAT and penalties.
Issue
Whether the CTA En Banc erred in finding that the CIR’s premature issuance of the FDDA violated Maxicare’s right to due process—thus voiding the FLD, FAN, and FDDA.
Analysis and Ruling
The Supreme Court affirmed the CTA En Banc. It held that Section 228 and RR No. 12-99 strictly require: (1) a 30-day period to protest the FLD/FAN; and (2) for requests for reinvestigation, a 60-day period from the filing of that protest to submit all relevant supporting documents. By issuing the FDDA within 30 days of Maxicare’s protest, the CIR denied the additional 30 days guaranteed for document submission, violating the taxpayer’s due process right to a genuine opportunity to be h
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Facts of the Case
- Maxicare Healthcare Corporation is a domestic corporation organized to operate a prepaid group practice health maintenance organization.
- On August 28, 2014, the Commissioner of Internal Revenue (CIR) issued Letter of Authority No. 126-2014-00000060 authorizing examination of Maxicare’s books for all internal revenue taxes covering January 1 to December 31, 2012.
- On August 25, 2015, the CIR issued a Preliminary Assessment Notice (PAN) assessing Maxicare for deficiency value-added tax (VAT) and penalties totaling ₱618,251,527.72 for calendar year 2012.
- Maxicare protested the PAN by letter dated September 10, 2015, filed September 14, 2015.
- On October 8, 2015, the CIR issued a Formal Letter of Demand and Final Assessment Notice (FLD/FAN) reducing the VAT assessment to ₱419,774,484.21, inclusive of penalties and surcharges.
- Maxicare filed a letter protest dated November 6, 2015 (received November 9, 2015), explicitly requesting reinvestigation and committing to submit supporting documents within sixty days.
- The CIR prematurely issued the Final Decision on Disputed Assessment (FDDA) on December 9, 2015, reiterating the VAT deficiency and compromise penalty; Maxicare received it on December 21, 2015.
- On January 20, 2016, Maxicare filed a Petition for Review with the Court of Tax Appeals (CTA), docketed as CTA Case No. 9246.
CTA First Division Ruling
- The CTA First Division, in its Decision dated January 16, 2020, GRANTED Maxicare’s petition.
- It WITHDREW and SET ASIDE the FDDA dated December 9, 2015, and CANCELLED the FLD and FAN dated October 8, 2015.
- The court found that the CIR violated Maxicare’s right to due process by issuing the FDDA before the sixty-day period lapsed for submitting supporting documents under Section 228 of the NIRC and RR No. 12-99.
- The court deemed any deficiency tax assessment issued under such procedural violation null and void without need to address