Seoul Administrative Court 2010Guhap4322 ( October 15, 2011)

National Tax Service Review Division 2009-0049 ( November 04, 2009)

An exporter of gold bullion via a malicious business operator shall not be allowed to receive input tax deduction under the principle of good faith.

At the time when the Plaintiff received the instant tax invoice, it is recognized that a malicious entrepreneur engaged in illegal transactions for the purpose of evading value-added tax exists in the course of the transaction, or without being aware of the existence of gross negligence, and thus, the Plaintiff’s claim for deduction and refund of input tax pursuant to the instant tax invoice is not permissible in violation of the principle of good faith.

Article 15 of the Framework Act on National Taxes

Article 17 of the Value-Added Tax Act

2011Nu26901. Revocation of imposition of value-added tax, etc.

XX Co., Ltd

The director of the tax office.

Seoul Administrative Court Decision 2010Guhap4322 decided July 15, 2011

March 6, 2012

April 6, 2012

1.The judgment of the first instance shall be modified as follows:

A. Of the instant lawsuit, the Defendant against the Plaintiff on January 2, 2009, the part exceeding KRW 000 of the imposition disposition of KRW 000 of the second value-added tax for the year 2003, the part exceeding KRW 000 of the imposition disposition of KRW 000 of the first value-added tax for the year 2004, the part exceeding KRW 000 of the imposition disposition of KRW 00 of the first value-added tax for the year 2004, the disposition of KRW 000 of the corporate tax for the business year 203, and the disposition of imposition of KRW 00 of the corporate tax for the

B. The plaintiff's remaining claims are dismissed.

2. All costs of the lawsuit shall be borne by the Plaintiff.

The judgment of the first instance shall be revoked.

The Defendant imposed on the Plaintiff on January 2, 2009, the second value-added tax of 2000 won on 2003, the imposition of △△△△△ in 2004, the imposition of the first value-added tax of 100 won in 2004, the imposition of the corporate tax of 000 won in 2003, and the imposition of the corporate tax of 000 won in 204 business year, respectively, shall be revoked.

Ⅰ. Basic facts

In full view of the purport of the entire pleadings, the following facts are recognized in each entry of Gap evidence 1 to 31 (including each number), Eul evidence 1 to 21 (including each number):

[1]

The plaintiff, while engaging in the export business of gold bullion from October 6, 2003 to May 6, 2004, received a tax invoice for gold bullion amounting to KRW 000,000 in total of supply values during the 2nd VAT taxable period of the 2nd value added tax in 2003, and received a tax invoice for gold bullion amounting to KRW 000 in total of supply values during the 1st value added tax period of the 2nd value added tax in 2004 (hereinafter referred to as "the tax invoice in this case"). The plaintiff reported the second value added tax in 2003 and the first value added tax in 204, and deducted the input tax amount under the tax invoice in this case from the output tax amount.

[2]

O) On January 2, 2009, the Defendant, on the ground that the instant tax invoice is a tax invoice different from the fact, imposed an input tax amount under the instant tax invoice, and imposed an pertinent additional tax, upon the Plaintiff on January 2, 2009, imposed an imposition of KRW 000 in total of the value-added tax and its additional tax for the second period of 2003, and imposed an imposition of KRW 100 in total of the value-added tax and its additional tax for 2004.

O In addition, the Defendant imposed an additional tax on January 2, 2009 on the Plaintiff on the ground that the instant tax invoice is a tax invoice different from the fact, and imposed an additional tax of KRW 000 on the Plaintiff for the business year 2003, and imposed an additional tax of KRW 00 on the Plaintiff for the business year 2004, and imposed an additional tax of KRW 00 on the Plaintiff for the business year 200

(hereinafter referred to as the above, the defendant's disposition of this case is "the disposition of this case" that was taken against the plaintiff on January 2, 2009.

§ 20.

[3]

O The second penalty tax imposed by the Defendant in 2003 was KRW 000, such as failure to submit a list of the total tax invoices for △△, KRW 000, additional tax on the return of insufficient and excessive refund, and KRW 00,000, additional tax on the payment and refund of △△△△.

O) However, on December 22, 2009 and February 24, 2011, the Defendant revoked all additional tax of 000 won, including failure to submit a list of the total tax invoices at △△△△, and revoked all of the aforementioned payment and refund additional tax of 00 won.

O Accordingly, the imposition of KRW 000 on the aggregate of the value-added tax and the additional tax for the second period of 2003 is remaining, and only the total amount of the value-added tax and the additional tax for the excessive refund is remaining, and the disposition exceeding this is extinguished.

O) Meanwhile, the first penalty tax imposed by the Defendant in 2004 was KRW 000, such as failure to submit a list of the total tax invoices for △△△, KRW 000, additional tax on the return of insufficient and excessive refund, and KRW 000, additional tax on the payment and refund of △△△△△.

O However, on February 24, 2011, the Defendant revoked all additional tax amounting to KRW 000, such as failure to submit a list of total tax invoices.

O Accordingly, the imposition of KRW 000 on the aggregate of the value-added tax and the additional tax for the first time in 2004 is remaining, and only the total amount of the value-added tax and the additional tax for the return on excess and refund, and the additional tax for the payment and refund in good faith has been extinguished.

O The defendant also revoked the entire amount of the penalty tax imposed on February 24, 2011 for the business year 2003 and the penalty tax for the business year 2004.

Ⅱ. The cancellation part of the instant disposition

The plaintiff sought revocation of the disposition of this case by the lawsuit of this case. According to the above basic facts, following the revocation by the defendant, the disposition of this case remains more than KRW 000,00,000,000,000,000,0000,000,0000,000,0000,000,000,000,000,000,000,000,000,000,000,000,000,000,000

Thus, the part seeking the cancellation of the remaining disposition exceeding the remaining part of the lawsuit of this case is unlawful as there is no benefit of lawsuit, seeking the cancellation of the already extinguished disposition.

Ⅲ The remaining part of the disposition of this case

1. The plaintiff and defendant's assertion

A. The plaintiff's assertion

Since the Plaintiff actually purchased gold bullion from XX, the instant tax invoice is not a false tax invoice. Therefore, the instant disposition that imposed value-added tax and its additional tax on the Plaintiff on the ground that the instant tax invoice is a false tax invoice is unlawful.

B. Defendant’s assertion

The tax invoice of this case is a false tax invoice because there was no corresponding transaction actually conducted.

In addition, the Plaintiff’s assertion of deduction and refund of input tax pursuant to the instant tax invoice violates the principle of good faith, since the Plaintiff was aware or was unaware of the fact that there was an illegal transaction at the pre-transaction stage.

2. Facts of recognition;

The following facts are acknowledged in full view of the overall purport of each evidence presented above.

[1]

O The Plaintiff is a stock company established on October 21, 2002, and the lowest AA is merely a stock company with no experience in gold bullion-related business, and the bank has invested more than KRW 2 billion upon the recommendation of the former representative director ParkB that the bank would be better than its owner, and was appointed as the representative director of the Plaintiff on December 26, 2002.

O The representative of the plaintiff's representative director importing gold bullion at the early stage, and the special taxation system of value-added tax was implemented on July 1, 2003, and exported gold bullion from that time.

O) On the other hand, KimCC, using the special taxation system of value-added tax, converted the gold bullion traded as tax-free goods into a taxable, made a so-called so-called so-called so-called precious metal and △△△△△△△, △△△, and XX, etc. After which KimCC sold gold bullion in sequence to the so-called so-called floor enterprise including the Plaintiff through so-called conduit companies, such as the Plaintiff, and during that process, tax evasion did not pay value-added tax using a bombane company.

O The Plaintiff received the instant tax invoice from XX during the period from October 6, 2003 to May 6, 2004. This was to purchase the gold bullion traded through Domind, Domind, SDR, and XX after converting KimD, etc. into taxation after having been imported by Domind, precious metals, △△△△, etc., and then converting it into taxation, Domind, Domind, Domind, and so forth.

“O The Plaintiff, through TTphc and LL, entered into an export agency contract with the Plaintiff, 'THEK OF NN in Hong Kong.

In the export of gold bullion, the whole amount of the gold bullion was exported at a price lower than the domestic wholesale price in comparison with the domestic wholesale price. The Plaintiff, in addition to the tax invoice in this case, was convicted of the violation of the Punishment of Tax Evaders Act, which was committed on April 16, 2003, from the tax invoice 1, April 29, 2003 to September 17, 2003, from the tax invoice 6, May 11, 2004, and May 12, 2004, respectively. The above amount was convicted of the violation of the Punishment of Tax Evaders Act, which was committed by the operator GG and the representative director of △△△△D, by the public invitation and participation in the tax evasion of heavy coal.

[2]

O On July 1, 2006, the Defendant imposed value-added tax, etc. on the Plaintiff on the grounds that the tax invoice received from the Plaintiff, △△D, and XX was false, and imposed value-added tax on the Plaintiff as the representative director of the Plaintiff who did not pay it.

O The Seoul Administrative Court 2008Guhap36340 rendered a judgment revoking the above disposition of taxation by filing an administrative suit seeking the revocation of the above disposition of taxation against the principal. The defendant's appeal was dismissed in Seoul High Court 2009Nu15328, and the above judgment of the appellate court was reversed in Supreme Court 2009Du23594.

After the reversal, the Seoul High Court Decision 2011Nu7108 decided that the Plaintiff was unable to assert the input tax deduction and refund on the ground that the Plaintiff was aware of, or was unaware of, the circumstance that there was a malicious business operator engaged in illegal transactions for the purpose of evading value-added tax in each transaction with △ Bank, etc., and that such determination was maintained as it is in the Supreme Court Decision 2011Du22099.

O The Plaintiff received the instant tax invoice from XX from October 6, 2003 to May 6, 2004. The Plaintiff as seen earlier, from April 16, 2003, from △△D between April 29, 2003 and September 17, 2003, from △△D, and from △△ on May 11, 2004 and 12, 2004, the time of receiving the instant tax invoice is considerably adjacent to the time of receiving the instant tax invoice, and from that other party, the date of receiving the tax invoice is the same as that of the other party receiving the instant tax invoice.

3. A false tax invoice.

A. Article 1(1)1 of the Value-Added Tax Act provides that "the supply of goods as taxable subject to value-added tax" and Article 6(1) provides that "the supply of goods shall be a delivery or transfer of goods on all contractual or legal grounds." In light of the fact that value-added tax has characteristics as multi-stage transaction tax, "delivery or transfer" under Article 6(1) of the Value-Added Tax Act includes all acts of causing the transfer of the right to use and consume goods, regardless of the actual profits gained (see Supreme Court Decision 9Du9247, Mar. 13, 2001). In this case, the issue of whether a specific transaction constitutes the supply of goods under the Value-Added Tax Act shall be determined by comprehensively taking into account the purpose and circumstances of each transaction party, how and manner of the transaction, the subject of profits, and the payment relationship of prices, etc., and the tax invoice provided for in Article 6(2)4 of the Value-Added Tax Act in the course of a transaction that no actual transaction is delivery or transfer of the goods.

B. According to the above facts, the gold bullion exported by the Plaintiff was distributed as tax-free gold after undergoing a series of transactions through various stages of companies until it was imported and exported, and then converted into tax-free gold. The existence of an enterprise closed without paying the value-added tax in the transaction process, and the Plaintiff’s export price of gold bullion was acknowledged as having been lower than the domestic market price, but the Plaintiff actually exported gold bullion, so long as it is acknowledged that the Plaintiff actually exported gold bullion, it is difficult to readily conclude that the Plaintiff’s gold bullion transaction does not constitute the supply of goods subject to value-added tax as a nominal transaction, and there is no other evidence to acknowledge it otherwise.

Therefore, the tax invoice of this case cannot be viewed as a false tax invoice, and this part of the plaintiff's assertion is with merit.

4. Principle of good faith

A. Article 15 of the Framework Act on National Taxes (amended by Act No. 9911, Jan. 1, 2010; hereinafter the same) provides that “A taxpayer shall faithfully and faithfully perform his/her duty in a case where he/she performs his/her duty. The same shall apply to a tax official performing his/her duty.” This principle is naturally applicable to legal relations concerning value-added tax (Article 1 and Article 3(1) main text of the Framework Act on National Taxes).

If a malicious business operator in bad faith in any of the series of consecutive transactions intends to evade value-added taxes from the beginning and attempt to make an abnormal transaction that only causes losses if he/she does not evade value-added taxes (hereinafter referred to as "illegal transaction"), and he/she did not pay the full amount of value-added taxes, if he/she knew that there was an illegal transaction in the whole phase, such an exporter’s claim for deduction and refund of input tax amount is not permissible as contrary to the principle of good faith as stipulated in Article 15 of the Framework Act on National Taxes (see Supreme Court en banc Decision 2009Du13474, Jan. 20, 201). The same applies to cases where the exporter did not know that there was such an illegal transaction due to gross negligence (see Supreme Court en banc Decision 2009Du134

B. In full view of the purport of the argument in the above facts, the △△ representative director of the Plaintiff made an investment of 2 billion won in gold bullion transactions without having experienced experience in the business related to gold bullion, and then imported gold bullion in the early stage and exported gold bullion from July 1, 2003 when the special taxation system of value-added tax was implemented on July 1, 2003. Although the Plaintiff did not have experience in the transaction of gold bullion, it was reasonable for the Plaintiff to receive the tax invoice of this case from △△ to KRW 15 billion in total and trade amount, and there was a large amount of trade for the purpose of the evasion of value-added tax in the process of the Plaintiff’s gold bullion transaction by △△△, and all gold bullion purchased from △△ was all gold bullion purchased from △△, and the Plaintiff exported the entire amount of gold bullion purchased from △, which was the domestic wholesale price lower than the domestic wholesale price.

In accordance with the Act on Special Cases Concerning the Refund of Customs Duties, etc. Levied on Raw Materials for Export, the fact that the Plaintiff withdraws from any procedure, such as the issuance of a certificate of installment for the purpose of refund of customs duties, or does not seem to have been refunded, and in the administrative litigation instituted by the second taxpayer as the representative director of the Plaintiff at △△△, the judgment became final that the Plaintiff was grossly negligent because the Plaintiff knew or was unaware of the fact that there was a malicious business that was engaged in fraudulent transactions for the purpose of evading value-added tax when receiving the tax invoice from the Plaintiff, and that the △△△△ was considerably close to the time when the Plaintiff received the tax invoice from △△, etc., and that the other party to the receipt is identical to the other party to the tax invoice

In light of the above circumstances, at the time of receiving the instant tax invoice XX, the Plaintiff’s claim for deduction and refund of the input tax amount pursuant to the instant tax invoice is not permissible in violation of the principle of good faith, since it is recognized that the Plaintiff was aware of the existence of a malicious business operator engaging in illegal transactions for the purpose of evading value-added tax or without being aware of gross negligence.

5. Remaining value-added taxes and additional taxes;

As seen earlier, following the Defendant’s revocation, only the second-year value-added tax and the excess and excess refund return tax in 2003, the first-year value-added tax and the excess and excess refund return tax in 2004, and the first-year penalty tax and the additional tax for payment and refund in excess are remaining, and all of the above dispositions were extinguished.

As seen earlier, the Defendant issued the instant disposition by deducting the input tax amount pursuant to the instant tax invoice from the output tax amount on the ground that the instant tax invoice is false, and imposing the relevant additional tax, and both the value-added tax, the tax return on excess and refund, and the additional tax on tax payment and refund in good faith corresponding to the remaining portion are based on the input tax deduction as above.

However, as seen earlier, the Plaintiff cannot seek the deduction and refund of the input tax amount under the tax invoice of this case in accordance with the principle of good faith. Accordingly, the Plaintiff cannot seek the revocation of the remaining portion of the disposition of this case, which is based on the non-deduction of the input tax amount.

6. Conclusion

Thus, the plaintiff's lawsuit regarding the part exceeding the remaining part of the lawsuit in this case is dismissed as it is unlawful and the remaining claim seeking the cancellation of the remaining part shall be dismissed as it is without merit. The judgment of the court of first instance is unfair as it is in part of this conclusion, and it is so decided as per Disposition by the assent of all participating Justices.