Plaintiff church (Attorney Jeong-won, Counsel for the plaintiff-appellant)

Head of the Do Tax Office

may 12, 2006

Seoul Administrative Court Decision 2004Guhap34254 decided September 20, 2005

1. The part of the judgment of the first instance against the plaintiff falling under the subsequent part of the order of revocation shall be revoked.

With respect to the corporate tax attributed to the non-party corporation in 1996 on December 2, 2003, the part (including additional tax) exceeding KRW 629,90,640 among the disposition imposing corporate tax of KRW 715,98,940 (including additional tax) designated by the non-party corporation as the second taxpayer and the amount exceeding KRW 86,08,640 (including the portion of additional tax of KRW 86,08,30) and the disposition imposing special surtax of KRW 498,617,380 (including additional tax) shall be revoked.

2. The plaintiff's remaining appeal is dismissed.

3. The costs of the lawsuit are assessed against the plaintiff, and the remainder are assessed against the defendant, with five minutes added to the first and second trials.

The decision of the court of first instance is revoked. On December 2, 2003, the defendant designated the plaintiff as the secondary taxpayer and revoked the disposition of imposition of KRW 1,214,606,320 on corporate tax of the non-party corporation in 196.

1. Quotation of judgment of the first instance;

The reasoning for the court’s explanation on the instant case is as follows, except for the following changes, Article 8(2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act: (a) of the Administrative Litigation Act and Article 1120 of the Civil Procedure Act are cited on the grounds of the judgment of the court of first instance.

2. Whether the imposition of additional tax is justifiable;

(a) Details about the increase of additional tax;

(1) On March 15, 2001, the Defendant designated the Plaintiff, who is an oligopolistic shareholder of the nonparty company, as the secondary taxpayer, and imposed and notified the Plaintiff’s totaling KRW 775,780,300, including corporate tax, etc. (see attached specifications).

(2) The Plaintiff paid the above taxes within the time limit for payment in accordance with the above disposition.

(3) After the Plaintiff paid taxes, while the Seoul High Court continued a lawsuit seeking revocation of the above disposition, the Defendant revoked the above disposition against the Nonparty Company and the Plaintiff on December 1, 2003 on the grounds of the defect in the service of the notice of tax payment, and at the same time refunded KRW 851,16,310 to the Plaintiff.

(4) On December 2, 2003, the Defendant again designated the Plaintiff as a secondary taxpayer and imposed and notified the Plaintiff’s total amount of KRW 1,214,606,320, including corporate tax, etc. (see attached specifications). The reason for the increase in the tax amount of the above disposition is that the additional tax, etc. was increased from the initial tax amount. The specific details are 125,747,780, the increase in the unpaid additional tax amount is the 125,747,780, and the remainder is the non-reported and non-reported additional tax, and the additional tax

[Reasons for Recognition] Each entry in Gap's Evidence Nos. 2, 3, 6, 9, 15, 16, 19, and the purport of the entire pleadings

(b) Procedures and problems for refund;

(1) In a case where the previous taxation is revoked and the tax amount already paid is refunded, the tax authority shall pay the already paid tax amount by adding the amount calculated according to the interest rate prescribed by the Presidential Decree to the already paid tax amount (Article 52 of the Framework Act on National Taxes). In this case, even in this case, the Defendant refunded the Plaintiff KRW 851,16,310 in total by adding the interest rate on refund to the already paid tax amount to the Plaintiff.

(2) In general, in cases where a tax authority issues an increase or decrease for the same object of taxation after a taxpayer’s tax payment, the amount of principal and additional taxes shall be calculated based on the new tax assessment date. However, in this case, the second disposition of the same content was rendered after the revocation of the initial tax payment despite the Plaintiff’s tax payment. After returning the amount of tax paid in accordance with the initial disposition, the Plaintiff returned the amount of tax paid again, and calculated and imposed additional taxes retroactively to the initial tax payment date, deeming the total amount of tax unpaid as the amount of tax payable. Therefore, the issue of an increase in the amount of penalty taxes resulting from the increase in the amount of unpaid penalty taxes. This is because, in the event of revocation of the initial disposition, the amount of additional refund to the already paid tax amount is returned, but the rate of additional

(3) Even in the case of this case, the Plaintiff received KRW 75,386,010 as additional dues, but the additional dues due to the second disposition increase in the amount of KRW 125,747,780, rather than the additional dues, the Plaintiff actually bears a larger amount of additional dues than the initial disposition.

C. Determination

(1) In a case where the tax authority revokes the initial disposition due to procedural defects and makes the secondary disposition identical to that of the same content, in principle, the initial disposition becomes retroactively null and void, and thus, the timing for calculating the additional tax on the second disposition shall be deemed to have run from the time when the initial tax liability period expired.

However, even in cases where a taxpayer has already paid taxes due to the initial disposition, if such interpretation is made, the taxpayer is not only in an unstable position for the procedural illegal acts of the tax authority, but also the liability for the result of the illegal acts is attributed to the taxpayer and unreasonable.

The purpose of additional tax is to realize smooth tax administration and fair tax burden by removing incentives for tax nonperformance and treating those who faithfully perform their duties and those who perform their duties differently. However, as long as a taxpayer performs its duties according to the disposition of the tax authority, it is difficult for the taxpayer to know if there is a procedural defect in the taxation decision process, regardless of the requirements for the establishment of substantial tax obligation, which is merely a procedural defect in the taxation decision process, and the liability arising therefrom should be attributed to the tax authority. Therefore, imposing additional tax on the taxpayer on this ground is excessively harsh to the taxpayer, and thus, it goes against the fundamental purpose of the additional tax system.

(2) In the event the tax authority revokes the initial tax payment, the amount of additional tax on the already paid tax amount shall be refunded to the person liable for tax payment. The taxpayer’s already paid tax amount may be deemed to be a result of non-existence of the already paid tax amount by adding the additional tax on the refund (see Supreme Court Decision 87Nu266, Oct. 13, 1989). This is also based on the opinion that in principle, the defective disposition in the procedure for imposing tax should be revoked (see Supreme Court Decision 82Nu420, Jul. 26, 1983). In other words, even though the tax payment disposition itself is subject to revocation due to the defect in the procedure for notice of tax payment, even if the latter is subject to the duty to pay taxes, it cannot be said that the revocation of unlawful tax disposition is considerably inappropriate solely on the ground that the latter causes economic, time, and mental waste only by making the tax payment disposition, and that it does not infringe on the rights and legal interests of the parties, even if there is any defect in administrative dance.

However, in the case of a tax case, the existence of the disposition of taxation is an administrative disposition that infringes on the rights or interests of the people, and thus recognizing the cure of the defective disposition is in itself infringing on the rights or interests of the people. In particular, if the defect of the disposition of taxation is in a substantive aspect, it would be very difficult to acknowledge the cure or conversion thereof. However, if the defect is in a procedural aspect, the possibility of allowing the cure or conversion of the defect is relatively large.

In the instant case, the Defendant revoked the initial and secondary disposition on the ground of procedural defect. If the Plaintiff’s assertion on the substantive aspect is rejected and the conclusion that recognizes the legality of the initial disposition is reached, it would be a way to reduce the Plaintiff’s tax burden in terms of the amount of penalty for unpaid tax. On the other hand, if deemed on the premise of the conclusion that the Plaintiff’s assertion on the substantive aspect is accepted, recognizing the correction or conversion of the initial disposition’s defect would infringe upon the procedural rights and interests in the Plaintiff’s tax payment, thereby making it difficult to accept as the Plaintiff. In other words, depending on the substantive legality of the disposition, it is determined whether the Plaintiff’s substantial infringement of rights due to the cure or conversion of procedural defect is determined. Accordingly, in such a case, it is difficult to accept the matter that should be otherwise assessed on the basis of the substantive legality of the disposition.

In the end, the defect in the taxation procedure should be judged separately according to strict standards without relation to the existence of substantive legality, and in the case of illegality, it should be returned to the taxpayer by adding the refund and additional dues to the already paid tax amount, thereby recovering the loss of the taxpayer due to the unlawful procedure.

(3) However, in light of the fact that even a defective administrative act may be recognized within the scope that does not infringe upon the rights and interests of the public for the sake of the legal stability of the parties, in a case where the revocation of a tax disposition on the grounds of procedural defect is scheduled to take the same tax disposition without any modification to the substantive reason, it should not be allowed for a taxpayer to impose an unpaid additional tax on the grounds of a taxpayer’s breach of his/her duty of cooperation in tax payment procedures even though he/she has fulfilled his/her duty of tax payment according to the initial disposition. If a tax disposition is revoked on the grounds of procedural defect, a taxpayer may in fact prevent a taxpayer from asserting procedural defect within the exclusion period under the logic that it is impossible to re-disposition within the exclusion period. In other words, even if a tax disposition is accepted on the grounds of procedural defect, if the taxpayer is in a more unfavorable position through the re-assessment disposition, then the taxpayer’s assertion would be nonexistent, and ultimately, this would undermine the framework of protecting fundamental rights through due process.

This also applies to the case where the Framework Act on National Taxes revokes the initial disposition, which provides that the amount of additional dues to the already paid tax amount shall be returned to the person liable for tax payment. Since additional dues were established to maintain the amount of additional dues to be collected in addition to the case where the person liable for tax payment fails to pay the tax, the refund due to the defect in the procedure for imposition is for compensating for the damages suffered by the person liable for tax payment due to the unlawful act committed by the tax authority, and the cooperation under the tax law

(4) Meanwhile, with respect to the Plaintiff’s assertion on the remainder of the additional tax except the above increased additional tax amount, it is merely correct to correct the omitted tax amount from the second disposition due to the Plaintiff’s failure to perform its duty from the beginning, and there is no evidence to deem otherwise that the imposition of additional tax on the above portion violates the good faith principle, or that there was a circumstance under which the duty to pay is not possible. Therefore, the Plaintiff’s assertion is without merit.

D. Sub-committee

Therefore, from among the disposition of this case, the portion exceeding KRW 629,90,640 of the disposition of imposition of corporate tax (including the additional tax) as the increased amount of corporate tax (including the amount of the additional tax) and the portion exceeding KRW 458,957,90 of the disposition of this case (including the additional tax) in excess of KRW 458,957,90 of the disposition of imposition of special surtax (including the additional tax) shall be revoked since the portion exceeding KRW 39,659,470 of the disposition of this case is unlawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is justified within the above scope of recognition, and the remainder is dismissed as it is without merit. Since the judgment of the court of first instance is unfair with different conclusions, the additional tax corresponding to the above part of the disposition of this case is revoked, and the remaining appeal of the plaintiff is dismissed as it is without merit. It is so decided as per Disposition.

[Attachment Form omitted]

Judges Kim Jong-soo (Presiding Judge)