Cho High-2013-Seoul Government-0459 ( October 14, 2013)

The amount returned after termination of the contract shall not be deducted from the input tax for the issue of the revised tax invoice.

Where goods are returned and the price is refunded in accordance with the recommendation for settlement after the termination of a contract for supply of goods, the price concerned shall be subject to the issuance of the revised tax invoice by returning the price of goods, not the compensation for damages

Article 32 of the Value-Added Tax Act

Seoul Administrative Court-2013-Gu Partnership-2628

AA

aa

2014.02.13

2014.03.20

1. AA’s claims are dismissed.

2. Litigation Costs shall be borne by AA.

The same shall apply to the order.

1. Details of the disposition;

A. AA is a business entity that engages in construction and internal food-raising business with the trade name of ○○○○○○○-dong 164-5, 501 (○○ Dong 4), 'bbb'.

B. On May 20, 2005, AA entered into a contract with the Public Procurement Service for the purchase of procurement commodities (hereinafter referred to as "the instant contract for the purchase of procurement commodities") to supply human turfs required for "the construction of auxiliary stadiums for the steel sources", and subsequently, on May 25, 2005 for the supply under the said contract for the supply, a special agreement was added to the effect that on July 16, 2005, the contract for the supply of human turfs (hereinafter referred to as "the instant contract for the supply") with the non-party CC Co., Ltd. (hereinafter referred to as "CC") was made with the price of KRW 170 million,000,000 for the delivery under the said contract, and that on July 16, 2005 (hereinafter referred to as "the instant contract for the supply"), the contract shall compensate two times the down payment (50,000 won)."

C. AA supplied Sc with Sc and supplied Sc to the Public Procurement Service (hereinafter “AA”), and paid cc. the amount of KRW 165,00,000 (including value-added tax) discounted from 170,000 to 5 million as the price for the goods under the instant supply contract.

D. CC filed a value-added tax return on the total amount of KRW 154,545,455 in accordance with the instant supply contract during the first and second period of 2005, and AA filed a value-added tax return on KRW 154,545 in value-added tax for the first and second period of 2005, and the subsequent input tax return was filed after deducting KRW 15,454,545 in value-added tax amount.

E. On August 26, 2005, the Public Procurement Service determined that the human typists supplied by AA after being supplied by Ccc is human typists that do not meet the requirements for specifications under the above contract for purchase of the procurement commodities. On August 26, 2005, the Public Procurement Service made a declaration of intent to cancel the instant contract for the procurement of this case to AA and imposed sanctions against the illegal business entity for six months.

F. On July 3, 2007, AA attached a claim against cc's garnishee on a third party debtor, and thereby received 34 million won from cc on September 3, 2007.

G. On October 2, 2007, AAA filed a lawsuit seeking the payment of the instant supply contract against cC and its representative at ○○○○○○ District Court, and accordingly, 251,000,000 won (in accordance with the instant supply contract, 165,000,000 won for the supply price paid by AA according to the instant supply contract and 120,000,000 won for the damages claimed by AA, less the above 34,000,000 won for the compensation amount claimed by CC to AA) and damages for delay (the instant case involving ○○○○○○ District Court △△△△△△△△△△△△△△△). On March 28, 2008, the said court made a decision of recommending a compromise as follows (hereinafter referred to as “the instant settlement recommendation”) and became final and conclusive by both parties around that time.

The contents of the advice of compromise.

1. C and Mym fever shall be jointly and severally paid to AA KRW 100,00,000 to 2.5 million until May 31, 2008, KRW 2.5 million until July 31, 2008, KRW 2.5 million until September 30, 2008, KRW 2.5 million until September 30, 2008, and KRW 2.5 million until November 30, 208.

If c and 10% of the payment of the said money is delayed at any one time, the payment of the said money shall lose the benefit of time and division, and shall be paid by adding 20% interest per annum to the total amount due from delay to the day of full payment.

2. By May 31, 2008, AA shall deliver to cc and △△△△ to the instant human turdy (the “Belgium”), which was supplied by cc and △△△, the instant human turdy (the “Belgium”), but the expenses for delivery shall be borne by c and △△△△△△△.

H. According to the above decision of the Reconciliation recommendation, CC paid 100 million won to AA, and AA returned this case to CC.

I. CC issued revised tax invoices that reduced the supply price of 154,54,45,45 won on May 31, 2008 and reported the value-added tax for the first time in 2008. AA filed a value-added tax return without deducting the corresponding input tax amount. On July 19, 2012, the Defendant issued a corrective notice and disposition (hereinafter referred to as the “instant disposition”) that imposed value-added tax on AA for the first time in 2008, after deducting 15,454,54,545 won from the input tax amount for the first time in 2008 of AAA, and adding 8,207,908 won to the additional tax and KRW 23,662,453 won (=15,454,545 won +8,207,908 won).

[Ground for Recognition: Facts without dispute, Gap's 1 through 5, 7, 8, 10 through 12, each entry of evidence No. 1, and the purport of whole pleadings]

2. Whether the dispositions of the instant case are legal.

(a) AA’s assertion

1) The cancellation of the instant supply contract between AA and C is true, but it is unlawful for the Defendant to exclude the input tax pursuant to the instant supply contract in calculating the AA’s value, not the refund of the purchase price but the compensation for damages that the AA received from CC (i.e., KRW 134,00,000,000 which was already received by the AA from CC). In particular, the instant turf returned to CC by the AA cannot be deemed to constitute “where the goods or services are not supplied due to the cancellation of the contract” or “where the goods or services are not supplied due to the cancellation of the contract” under the Enforcement Decree of the Value-Added Tax Act.

2) Even if the cancellation of the instant supply contract ought to be deducted from the input tax deduction of AA corresponding thereto due to the cancellation, AA received only KRW 135 million from among the total price paid by AA to CC, and thus, only KRW 165,000,000,000 from among the total price paid by AA to Cc, the input tax deduction for the corresponding portion should be deducted.

(b) Related Acts;

Attached Form is as shown in the attached Form.

C. Determination

1) If a contract for the supply of goods is rescinded by agreement, and all proceeds from the supply of goods are returned, the validity of the contract for the supply of goods shall be retroactively extinguished and thus the supply of goods shall not be deemed to have existed from the beginning. Thus, the imposition of value-added tax, which is the cause of taxation, shall not be conducted (see, e.g., Supreme Court Decision 96Nu13941, Mar. 10, 1998). In this case, insofar as the supply of goods is deemed to have never existed from the beginning, the corresponding

2) In light of the above legal principles, return to the instant case was examined, AA made a decision of recommending reconciliation in the instant civil procedure that was filed by AAA against CC, which became final and conclusive at that time. Accordingly, CC issued revised tax invoices that reduce the output tax amount under the instant supply contract as seen earlier. Thus, AA and CC had agreed to cancel the instant supply contract through the high settlement order of the right to compromise. Thus, the instant supply contract was terminated and its effect was retroactively terminated. Accordingly, AA received KRW 100 million from Cc and AA returned to Cc, and as such, AA also should not be liable for the payment under the instant supply contract, and AA shall not be deemed as entitled to input tax deduction corresponding thereto, and the value-added tax should not be deemed as entitled to receive value-added tax deduction corresponding thereto, and the disposition of AA to be lawful since Ac and C had been made by reflecting the obligation to receive the revised tax invoice in the taxable period belonging to AcC.

3) AA asserts to the effect that the input tax deduction should be revoked only for the portion of KRW 134,00,000, which is the total amount actually paid by AAC, as the KRW 100,000,000 received from Cc, not the return of the purchase price paid under the instant supply contract, but the compensation for damages, and even if not, the above input tax deduction should be maintained. However, as long as the instant supply contract terminated retroactively and the effect of the instant supply contract terminated retroactively, and the remaining portion supplied by AAC was returned by cc, it cannot be deemed that AA is not liable to pay value-added tax on the grounds of the instant supply contract regardless of the name or amount of the money received from B B, and thus, this part of the argument by AA cannot be accepted.

4) AAA는 AAA가 ccc에게 반환한 이 사건 잔디는 원물 그대로가 아니고 잔존가치가 거의 없는 것이므로 매입세액공제 역시 유지되어야 한다는 취지로도 주장하나, 앞서 살펴본 증거들에 의하면 AAA가 이 사건 화해권고결정이 확정된 이후인 2008. 5. 20. ccc에게 "귀사에서 납품한 인조잔디가 철원공설운동장내(귀사에서 납품한 곳)에 수량(5,981㎡)이 보관되어 있으니, 귀사에서 2008. 5. 31. 이전에 회수 해 가기 바랍니다."라는 취지의 내용증명 우편을 보낸 사실, 반면 ccc는 2008. 5. 28. AAA에게 "서울남부지방법원의 화해권고결정에 따라 당사는 2008. 5. 31. 까지 금 2,500만 원의 지급(1억 원의 일부)을 충실히 이행할 것이나 2008. 5. 27. 협의한 바에 의하면, AAA측에서 인조잔디를 당사에 인도하지도 않으면서 대금만 지급하라는 귀측의 요구는 판결문 내용과 맞지 않는다고 생각합니다. 따라서 피고 당사는 대급 지급을 할 것이니, 귀측도 2008. 5. 31.까지 아래의 장소에서 당사가 인조잔디를 인도 받을 수 있도록 속히 조치해주기 바라며, 인도비용(용달비)은 당사가 지불할 것입니다. 그리고 인조잔디 수량 확인은 첨부내역과 같이 인도 장소에서 당사자인 ♡♡♡씨가 확인해 주시면 좋겠습니다. 부득이한 사정이 있다면 봉영연의 대리인도 가능합니다."라는 취지의 내용증명 우편을 보낸 사실, 이후 AAA는 ccc로부터 이 사건 화해권고결정에 따른 1억 원을 모두 지급받은 사실을 각 인정할 수 있는바, 위 인정사실에 따르면 AAA와 ccc 사이에 이 사건 잔디의 반환과 관련하여 다툼이 있었으나, 그 후 AAA가 이 사건 화해권고결정의 취지에 따라서 ccc에게 이 사건 잔디를 정상적으로 인도하자 ccc 역시 AAA에게 이 사건 화해권고결정에 따른 1억 원을 모두 지급한 것으로 판단될 뿐만 아니라, 설령 AAA의 주장과 같이 AAA가 ccc에게 반환한 잔디가 이 사건 잔디의 원물과 동일성을 상실하여 잔존가치가 거의 없는 물품이었다고 가정하더라도 이 사건 화해권고결정에 따라 AAA가 ccc에게 이 사건 잔디를 그대로 반환할 의무를 부담하는 이상 실제로 반환된 잔디의 상태에 따라서 ccc의 AAA에 대한 '재화의 공급'이 그대로 유지되고 있다고 볼 여지는 없다. 따라서 AAA의 이 부분 주장 역시 받아들일 수 없다.

5) Meanwhile, Article 59 subparag. 1 and subparag. 2 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 23595, Feb. 2, 2012) asserts that the cancellation of the instant supply contract does not fall under “where the goods or services supplied are returned,” or “where the goods or services are not supplied due to the cancellation of the contract,” and thus, the input tax amount under the instant supply contract should be maintained. However, the above provision of the former Enforcement Decree of the Value-Added Tax Act is newly established only on February 28, 2007, after the instant supply contract was supplied to AA, and the above provision of the former Enforcement Decree of the Value-Added Tax Act also provides that “from the partial supplement at the time of the enactment of the above provision, the aforementioned provision applies to the portion supplied or received after the enforcement of this Decree,” and thus, Article 29 subparag. 29 of the Addenda of the former Enforcement Decree of the Value-Added Tax Act does not apply to the instant case, as alleged otherwise.

3.In conclusion

Therefore, the claim of AA is dismissed as it is without merit. It is so decided as per Disposition.

Related Acts and subordinate statutes

former Value-Added Tax Act (amended by Act No. 8142 of Dec. 30, 2006)

Article 16 (Tax Invoice)

(1) Where an entrepreneur registered as a person liable for tax payment supplies goods or services, he/she shall deliver an invoice stating the following matters (hereinafter referred to as a "tax invoice") to the person who receives the supply in accordance with the Presidential Decree at the time provided for in Article 9: Provided, That in cases prescribed by Presidential Decree,

former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 19892 of Feb. 28, 2007)

In case where any cause for error or correction occurs in connection with the items entered therein after a tax invoice is issued under Article 16 (1) of the Act, a tax invoice may be issued by modifying the tax invoice under the conditions as prescribed by the Commissioner of the National Tax Service before the notice after correcting the tax base of value-added tax or the amount of refundable tax amount: Provided, That in case where any amount added to the original value of supply or deducted has occurred, the tax invoice may be issued by modifying it at the time of the occurrence

National Tax Service Notice No. 99-40 ( September 8, 1999)

A public notice of the method of preparation and delivery of revised tax invoices (No. 81-56, December 31, 1981) notified by the Commissioner of the National Tax Service under Article 59 of the Enforcement Decree of the Enforcement Decree of the National Tax Service shall be made as follows:

1. Where any error or correction occurs in the descriptions after the issuance of a tax invoice, the head of the competent district tax office having jurisdiction over the place of business, the head of the competent regional tax office having jurisdiction over the place of business, or the Commissioner of the competent National Tax Service, or the Commissioner of the National Tax Service, may prepare and deliver the tax invoice in writing, and the revised tax invoice in black papers, respectively, before notifying the correction of the tax base of value-added tax or the amount of refundable tax for the taxable period: Provided, That where only the original supply price is added or deducted, the tax invoice may be issued in black papers for the amount

2. In the case of receipts, the original receipts shall be recovered, revised, and issued again. In this case, when the receipts have not been recovered, they may be returned again.

former Enforcement Decree of the Value-Added Tax Act (Amended by Presidential Decree No. 23595, Feb. 2, 2012)

Article 59 (Reasons and Procedures for Issuance of Revised Tax Invoice)

A revised tax invoice referred to in the latter part of Article 16 (1) of the Act may be issued in accordance with the following grounds and procedures:

1. Where goods supplied initially are returned: The date on which the goods are returned shall be stated as the date of their return, and the date on which the initial tax invoice is written in the remarks column shall be stated, and the goods shall be issued with red or negative marks written in red;

2. Where goods or services are not supplied due to the cancellation of a contract: At the time of termination of a contract, the preparation date shall be stated on the date of preparation of the original tax invoice and stated additionally in the remarks column the date of cancellation of the contract, and shall be written or delivered in red color or with a load indicated thereon.