AVON PRODUCTS MANUFACTURING, INC.

, PETITIONER,
V. THE COMMISSIONER OF THE INTERNAL REVENUE,
RESPONDENT.

G.R. Nos. 201418-19

October 3, 2018

FACTS

Avon filed its VAT Returns and Monthly Remittance Returns of Income Tax
Withheld for the taxable year 1999. Avon signed 2 waivers of the defense of
prescription, on July 14, 2004, Avon was served a Collection Letter. It was
required to pay Php 80,246,459.15.

The Commissioner prepared the Formal Letter of Demand and Final

Assessment Notices all dated 28 February 2003, received by Avon on April
11, 2003. Avon filed a letter protesting against the Final Assessment Notice.

A Conference was held where the revenue officers allegedly expressed that
they would cancel the assessments resulting from the alleged discrepancy in
sales if Avon would pay part of the assessments. Thus, on January 30, 2004,
Avon paid the Fringe Benefit Tax and Withholding Tax on Compensation
portions of the Final Assessment Notices. However, the BIR officers still
recommended the enforcement and collection of the assessments.

ISSUE

First, whether or not the Commissioner of Internal Revenue failed to observe

administrative due process, and consequently, whether or not the
assessments are void;

Second, whether or not Avon Products Manufacturing, Inc., by paying the

other tax assessments covered by the Waivers of the Defense of Prescription,
is estopped from assailing their validity;

Finally, whether or not Avon Products Manufacturing, Inc. is liable for

deficiency income tax, excise tax, value-added tax, withholding tax on
compensation, and expanded withholding tax for the taxable year 1999.

RULING

The facts demonstrate that Avon was deprived of due process. It was not
fully apprised of the legal and factual bases of the assessments issued against
it. The Details of Discrepancy attached to the Preliminary Assessment
Notice, as well as the Formal Letter of Demand with the Final Assessment
Notices, did not even comment or address the defenses and documents
submitted by Avon. Thus, Avon was left unaware on how the Commissioner
or her authorized representatives appreciated the explanations or defenses
raised in connection with the assessments. There was clear inaction of the
Commissioner at every stage of the proceedings.

Here, Avon claimed that it did not receive any benefit from the
waivers.[158] On the contrary, there was even a drastic increase in the assessed
deficiency taxes when the Commissioner increased the alleged sales
discrepancy from P15,700,000.00 in the preliminary findings to
P62,900,000.00 in the Preliminary Assessment Notice and Final Assessment
Notices. Furthermore, Avon was compelled to pay a portion of the
deficiency assessments "in compliance with the Revenue Officer's condition
in the hope of cancelling the assessments on the non-existent sales
discrepancy. Under these circumstances, Avon's payment of an insignificant
portion of the assessment cannot be deemed an admission or recognition of
the validity of the waivers.

Taxpayers cannot be left in quandary by the Commissioner's inaction on the

protested assessment. It is imperative that the taxpayers are informed of the
Commissioner's action for them to take proper recourse to the Court of Tax
Appeals at the opportune time. Furthermore, this Court had time and again
expressed the dictum that "the Commissioner should always indicate to the
taxpayer in clear and unequivocal language what constitutes his [or her]
final determination of the disputed assessment. That procedure is demanded
by the pressing need for fair play, regularity and orderliness in
administrative action.

While indeed the government has an interest in the swift collection of taxes,
its assessment and collection should be exercised justly and fairly, and
always in strict adherence to the requirements of the law and of the Bureau
of Internal Revenue's own rules.