Seoul Administrative Court 2005Guhap42146 ( October 10, 2007)

National Tax Service Review Division 2005-0490 (Law No. 25, 2006)

An input tax amount of a gold bullion exporter who has undergone a bomb shall not be deducted in violation of the principle of good faith.

In light of the transaction behavior, distribution channel, transaction period, volume and value of gold bullion, etc., the Plaintiff is deemed to have known or failed to know by gross negligence that there was a malicious business operator who makes an illegal transaction for the purpose of evading the output tax amount in the transaction process. Therefore, the Plaintiff’s assertion of input tax deduction and refund is not permissible against the principle of good faith.

Article 15 (Good Faith and Sincerity)

2011Nu18054 Revocation of Disposition of Corporate Tax Imposition

XXD Co., Ltd.

Head of the tax office;

Seoul Administrative Court Decision 2005Guhap42146 decided Oct. 10, 2007

Seoul High Court Decision 2007Nu29248 Decided September 2, 2008

Supreme Court Decision 2008Du16995 Decided December 11, 2008

Judgment before re-return

Seoul High Court Decision 2008Nu37064 Decided August 14, 2009

[Judgment of re-return]

Supreme Court Decision 2009Du1555 Decided May 26, 201

August 17, 2011

October 5, 2011

1. The plaintiff's appeal is dismissed.

2. The costs of appeal shall be borne by the Plaintiff.

The decision of the first instance court is revoked. The defendant, on September 1, 2005, sought revocation of the disposition of imposition of value-added tax of KRW 1,574,238,050 for the second period of value-added tax in 2003, value-added tax of KRW 502,122,710 for the first period of 204, value-added tax of KRW 235,483,00 for the second period of 204, and the disposition of rejection of imposition of KRW 47,096,60 for the second period of value-added tax (from the first instance court to 271, value-added tax of KRW 32,962,570 for the second period of 204, and revised the purport of the disposition at the first instance court as above. However, as examined in the reasons, the purport of the claim of the first instance was inappropriate, and the revised purport of the disposition was sought from the beginning, and thus, it does not belong to both the additional tax or modified form of corporate tax for the business year.

1. Details of the disposition and the scope of adjudication of the party concerned after the return;

A. The Plaintiff is a legal entity entity that had engaged in gold bullion wholesale business, etc. from April 3, 2003 to Jongno-gu Seoul Metropolitan Government, Jongno-gu, 000-1. The Plaintiff purchased gold bullion (hereinafter “instant gold bullion”) as follows (hereinafter “instant transaction”) in 2003 and 2004, and received a tax invoice (see attached Form 1, e.g., tax invoice; hereinafter “instant tax invoice”).

(1) On August 11, 2003, - on December 23, 2003, the Exchange purchased gold bullion equivalent to the total value of 10,627,481,00 won from the supply, and received a tax invoice under Chapter 36.

(2) On March 11, 2004 - on March 22, 2004, the amount of gold bullion equivalent to KRW 3,733,532,00,000, shall be purchased from the supply value and received nine copies of the tax invoice accordingly.

③ On September 9, 2004, the OF purchased gold bullion equivalent to KRW 2,354,830,000 in total from the supply value of △△D and received three copies of the tax invoice thereafter.

The gold bullion of this case was exported to two enterprises located in Hong Kong, including YY.

B. The Plaintiff reported the tax base and tax amount for the second term portion in 2003, the second term value-added tax in 2004, and the second term value-added tax in 2004, and the corporate tax base and tax amount for the business year 2003 and 2004. The director of the Seoul Regional Tax Office determined that the instant tax invoice was different from the facts (specificly, the actual supplier and the supplier are different) after undergoing a criminal investigation against the Plaintiff. The Defendant, on September 1, 2005, notified the Plaintiff of the rectification and tax amount of the value-added tax and the corporate tax as follows (hereinafter “instant disposition”).

(1) Disposition for imposition of value-added tax for the second period of 203 KRW 1,574,238,050 (additional tax for denied the refunded tax amount, KRW 1,062,747,30, and KRW 212,549,620, additional tax for failure to file a return, and KRW 106,274,730, additional tax for failure to file a return, and KRW 192,66,406, and additional tax for failure to file a return)

(2) Disposition for imposition of value-added tax for the first period of 2004 (373,353,200 won denied the refunded tax amount and 37,335,320 won additional tax for failure to file a return, and 37,335,320 won additional tax for failure to file a return, and 54,098,878 won for failure to file a return)

③ At the time the Plaintiff filed a return of value-added tax for the second period of 2004 (23,548,548,300 won, additional tax 23,548,70 won, additional tax 23,770 won (23,548,70 won, additional tax 23,548,30 won, additional tax 23,548,70 won, additional tax for failure to file a return). Upon notifying the details of each of the above dispositions, the Defendant notified 13,748 won, which added 13,748 won, to the amount of refund tax for the first period of 235,483,00 won (the sales tax amount of 80,00 won - the purchase tax amount of 15,067,770 won).

(4) Disposition of imposition of the corporate tax which reverts to the business year 2003 KRW 209,549,620 (additional tax for collecting evidence)

(5) Disposition of imposition of the corporate tax belonging to the business year 2004 KRW 121,767,240 (additional tax for collecting evidence)

C. In filing the instant lawsuit within the filing period through the pre-trial procedure, the Plaintiff stated on September 1, 2005 that “the Defendant’s claim for the value-added tax claim for the 271 minute 2004 on the basis of the notified tax amount in the tax notice shall be revoked the imposition disposition of value-added tax for the 271 minute 32,962,570, which the Plaintiff reported to the Plaintiff on September 1, 2005, and that “the input tax amount reported by the Plaintiff is not based on a false tax invoice.”

D. The first instance court all dismissed the Plaintiff’s claim, and the first instance court prior to remand dismissed the Plaintiff’s appeal.

The Supreme Court accepted the Plaintiff’s appeal and reversed and remanded the judgment of the first instance prior to remand. The Plaintiff: (a) extended the scope of revocation to the first instance court prior to remand (before re-return) on June 3, 2009 upon the application for amendment of the purport of the claim submitted on June 3, 2009; and (b) changed the part of the second-term value-added tax claim in 2004 and the second-term additional value-added tax in 235,483,000, respectively; and (c) revoked the disposition of refusal to pay the second-term additional value-added tax in 2004. After remand, the Supreme Court dismissed the part of the Plaintiff’s appeal and the second-term additional tax in 204 with the exception of the amount of the value-added tax return and the amount of the second-term additional tax in 204 (excluding the amount of the value-added tax return and the amount of the second-term additional tax in 204).

[Reasons for Recognition: Facts without dispute, Gap 1-24, 29-31, Eul 1, the whole purport of pleading]

2. Determination on the Defendant’s defense of this case

The defendant added a new claim for revocation of the disposition rejecting the refund of value-added tax for the second period of 2004 through the application for amendment of the purport of the claim in the previous trial prior to the re-transmission. This asserts that it is unlawful since it was filed without going through the procedure of the previous trial without going through the procedure.

Although it is not clear whether a party’s claim contains a subject matter of lawsuit, the claim should be deemed to have been filed from the time of the filing of the lawsuit, if it is apparent that the claim at issue is asserted as the subject matter of lawsuit from the original point of lawsuit, considering the cause of the claim as the cause of the claim. Ultimately, the party’s filing of the application for modification of the purport of the claim clearly identified the subject matter of lawsuit by arranging the claim in accordance with the original purport of the claim and not from the time of the addition of the claim. In such a case, whether the period of lawsuit is complied with should be determined at the time of submission of the written claim, not at the time of modification of the purport of the claim

The plaintiff's 32,962,570 plaintiff's 32,962,570 tax amount notified as deduction against the plaintiff is combined with the disposition of refusal of refund and the disposition of additional tax imposition. The plaintiff's 'the disposition of revocation of the disposition of imposition of value-added tax 32,962,570 won for the second period of 2004' is not merely seeking partial revocation of the disposition of imposition of additional tax, but also seeking revocation of the disposition of imposition of additional tax and the disposition of rejection of refund. The plaintiff's 'the disposition of revocation of the disposition of imposition of additional tax for the second period of 2004's 'the disposition of revocation of the disposition of imposition of additional tax for the second period of 32,962,570' can not be deemed a new addition to the plaintiff's request for revocation of the disposition

3. Determination as to whether the instant tax invoice is “other tax invoice than the fact”

This Court's assertion. (b) The reasons why this Court is to use for the plaintiff's argument. (c) related laws and regulations are the corresponding part of the judgment of the court of first instance (the second 8th th th th th th st st st st st st st st st st st st st st st st th).

D. Determination

Article 1(1)1 of the Value-Added Tax Act provides for “supply of goods subject to value-added tax.” 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 is multi-level transaction tax, “delivery or transfer” under Article 6(1) of the Value-Added Tax Act includes all acts causing the transfer of authority to use and consume goods, regardless of the profit actually acquired (see, e.g., Supreme Court Decisions 85Nu286, Sept. 24, 1985; 9Du9247, Mar. 13, 2001; 99Du9247, Mar. 16, 201). In such cases, the issue of whether a specific transaction among the continuous trading processes constitutes the supply of goods prescribed in the Value-Added Tax Act shall be determined by comprehensively taking account of various circumstances, such as the purpose and background of each transaction, ownership of profits, and payment relationship, etc., which constitute a specific transaction under Article 2816(2).2.

In this case, in light of the fact that gold bullion was actually distributed from the importer to the exporter company, and the Plaintiff purchased and delivered the gold bullion on August 11, 2003 through two wholesalers, including OF, etc., and received the tax invoice of this case by fully paying the price, and the Plaintiff exported the gold bullion to two Hong Kong enterprises located in Hong Kong, such as prior entry, and has earned considerable profits, it is difficult to recognize that the instant transaction, which is a part of the entire transaction, was merely a nominal transaction. This is because a series of entire transactions continued until the gold bullion was imported and exported, were conducted within the short period of time. The Plaintiff purchased the gold bullion exempted from value-added tax at the intermediate stage, and supplied it to the person who did not receive the recommendation for tax exemption, and then prepared and delivered tax invoices, and received the amount equivalent to value-added tax. The Plaintiff’s assertion that the instant gold bullion constitutes a false tax invoice based on the premise that the instant tax invoice constitutes a false tax invoice.

4. Judgment on the assertion of violation of good faith

A. Defendant’s assertion

In light of the distribution channel, etc. of the gold bullion of this case, the Defendant’s filing of an input tax deduction or refund cannot be permitted against the principle of good faith.

B. Determination

Article 15 of the former Framework Act on National Taxes (amended by Act No. 9911, Jan. 1, 2010; hereinafter “Framework Act on National Taxes”) provides that “where a taxpayer performs his/her duty, he/she shall faithfully and faithfully perform his/her duty.” This principle applies as a matter of course to legal relations pertaining to value-added tax (Article 1 and Article 3(1) main text of the Framework Act on National Taxes). In a series of series of transactions, where a malicious entrepreneur is willing to evade value-added tax from the beginning at any stage, and only if he/she fails to evade value-added tax, he/she is aware that there was an abnormal transaction that only damages were incurred if he/she did not pay the value-added tax (hereinafter “illegal transaction”), seeking deduction and refund of the input tax amount by such exporter is contrary to the principle of trust and good faith as stipulated in Article 15 of the Framework Act on National Taxes. This doctrine also applies to the case where the exporter did not know that there was an illegal transaction by gross negligence (see, e.g., Supreme Court en banc Decision 20014Do14.

The instant tax invoice is related to all export transactions. In light of the transaction behavior, distribution channel, the period of the Plaintiff’s transaction, volume and value of the pertinent gold bullion, etc., the Plaintiff should be deemed to have known or failed to know by gross negligence that there was a malicious business operator who makes an illegal transaction for the purpose of evading the output amount in the series of transactions at the time of the instant transaction. The Plaintiff’s assertion of deduction or refund of the pertinent input tax amount is not permissible against the principle of trust and good faith as stipulated under Article 15 of the Framework Act

5. Conclusion

The Plaintiff’s claim is without merit, including the disposition of refusal to refund value-added tax amounting to KRW 235.483.00 for the second term of 2004. The first instance court that dismissed the Plaintiff’s claim is ultimately justifiable. The Plaintiff’s appeal is dismissed.