[1] Whether a business operator’s completion of reclamation of public waters and acquisition of part of the reclaimed land’s ownership constitutes supply of services subject to value-added tax (affirmative)

[2] The principle of good faith or the requirements for the application of the principle of retroactive taxation prohibition under Article 18(3) of the Framework Act on National Taxes, and the burden of proof for the existence of non-taxable practice (=taxpayer)

[1] Articles 1 and 7(1) of the Value-Added Tax Act, Article 14(1) (see current Article 26(1)) of the former Public Waters Reclamation Act (Amended by Act No. 5337, Apr. 10, 1997) / [2] Articles 15 and 18(2) and (3) of the Framework Act on National Taxes

[1] Supreme Court Decision 2002Du172 Decided October 25, 2002, Supreme Court Decision 2002Du5924 Decided September 5, 2003 / [1] Supreme Court Decision 90Nu727 decided March 12, 1991 (Gong1991, 1199), Supreme Court Decision 90Nu9247 decided August 27, 1996 (Gong1991, 2459), Supreme Court Decision 95Nu15308 decided March 12, 196 (Gong1996Sang, 1298), Supreme Court Decision 98Du9301 decided July 4, 200, Supreme Court Decision 209Du97949 decided March 29, 209

The administrator of the Han Steel Industry Co., Ltd. (Attorney Byung-soo et al., Counsel for the plaintiff-appellant)

Samsung Head of Samsung Tax Office

Seoul High Court Decision 2001Nu3633 delivered on November 9, 2001

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

1. Whether reclamation of public waters falls under the supply of services under the Value-Added Tax Act

If an entrepreneur, who obtained a license from the State under the Public Waters Reclamation Act along with another entrepreneur, acquired the ownership of part of the land created by reclamation in accordance with the relevant statutes and the agreement between the parties after obtaining authorization on the completion of the reclamation work, it is reasonable to deem that the entrepreneur provided the State with the above land reclamation service and acquired the ownership of part of the reclaimed land in return for the provision of the service, and that there is an economic and substantial price relationship between the entrepreneur’s provision of service and the acquisition of ownership of part of the reclaimed land, and thus, constitutes a supply of service subject to value-added tax (see Supreme Court Decisions 95Nu15308, Mar. 12, 1996; 2002Du172, Oct. 25, 2002).

In the same purport, the court below is just in holding that the reorganization company Han Steel Industries Co., Ltd. obtained a license for reclamation of public waters in the area of Songjin-gun, Chungcheongnam-gun, Chungcheongnam-gun, Chungcheongnam-do, and acquired the ownership of the remainder of the reclaimed land except for the public land among the reclaimed land as of December 30, 193, and that the completion of reclamation work after obtaining authorization of completion on March 2, 1995 and obtaining the authorization of completion on March 2, 1995 that part of the reclaimed land corresponding to the project cost it invested constitutes the supply of services subject to value-added tax, and there is no error in the misapprehension of legal principles as to the supply of services under the Value-Added Tax Act in relation to the reclamation of public waters.

We cannot accept this assertion in the grounds of appeal.

2. As to whether it violates the principle of good faith or the principle of prohibition of retroactive taxation

The principle of good faith or the principle of retroactive taxation prohibition stipulated in Article 18(3) of the Framework Act on National Taxes shall apply only to cases where there are special circumstances that, even if the principle of legality is sacrificeed, the protection of taxpayer's trust is deemed to conform to the justice. The interpretation of tax-related Acts or the practice of national tax administration generally accepted by taxpayers pursuant to such provision refers to a case of erroneous interpretation or practice, which is accepted by a general taxpayer, who is not a specific taxpayer, without any objection, to the extent that it is not unreasonable for a taxpayer to trust such interpretation or practice. It cannot be deemed that there was a public opinion on the standard of interpretation of tax-related Acts. The burden of proof for such interpretation or practice is the taxpayer (see, e.g., Supreme Court Decisions 91Nu13670, Sept. 8, 1992; 2002Du172, Oct. 25, 2002).

The lower court determined that the instant disposition on the imposition of value-added tax does not violate the principle of good faith and the principle of prohibition of retroactive taxation, on the ground that the Plaintiff’s expression of opinion presented on the grounds that the practice of non-taxation was constituted, alone, cannot be deemed as being generally accepted by the taxpayer, in view of the fact that there were many cases where the Public Waters Reclamation Corporation imposed value-added tax on the grounds that it constitutes a cost supply of services until

In comparison with the evidence of the record, the above recognition and decision of the court below are justified, and there is no error in the misapprehension of legal principles as to the principles of good faith and the principle of non-taxation or the principle of prohibition of retroactive taxation under the Framework Act on National Taxes, or there is no error in the misapprehension of legal principles as to mistake of facts in violation

We cannot accept the allegation in the grounds of appeal.

3. Conclusion

Therefore, the plaintiff's appeal is dismissed, and all costs of appeal are assessed against the plaintiff. It is so decided as per Disposition by the assent of all Justices who reviewed the appeal.

Justices Lee Hong-hoon (Presiding Justice)