School Foundation Eul Private Teaching Institute (Attorney Han-young et al., Counsel for the defendant-appellant)

Head of Nowon Tax Office (Law Firm, Attorneys Lee Jae-sin et al., Counsel for the plaintiff-appellant)

Seoul Administrative Court Decision 2010Guhap47527 decided June 16, 2011

September 28, 2012

1. The judgment of the first instance on the part of the Plaintiff’s conjunctive claim shall be revoked.

2. The imposition of additional tax by the Defendant against the Plaintiff is revoked in all of the imposition dispositions stated in the separate taxation list.

3. The plaintiff's remaining appeal is dismissed.

4. Of the total litigation costs, 70% is borne by the Plaintiff, and the remainder is borne by the Defendant, respectively.

The judgment of the first instance court is revoked. In the first instance court, it is confirmed that each disposition of imposition of the principal tax and additional tax stated in the separate tax list against the plaintiff by the defendant is invalid. In the first instance, the imposition of each principal tax and additional tax

1. Details of disposition;

The reason for this part of the judgment is as stated in the corresponding part of the judgment of the court of first instance. It shall be quoted in accordance with Article 8(2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

2. The plaintiff's assertion

A. The main claim

The instant food supply is naturally incidental to the supply of funeral services subject to value-added tax exemption, and is subject to value-added tax exemption under the Value-Added Tax Act. Therefore, the instant disposition imposing an excessive tax is deemed to violate the statutes, and its defect is serious and obvious and null and void.

B. Preliminary Claim

Even if the above defect in the disposition of this case cannot be deemed null and void because it is not clear, the disposition of this case should be revoked as it is unlawful due to the above defect (in the case of the part of the disposition of this case, the illegality of the above part of the principal tax is combined or succeeded as it is, and the above unlawful cause of the principal tax portion constitutes an independent cause of revocation of the portion of the principal tax, and thus, the penalty tax portion should

In addition, even if the above defects cannot be acknowledged in the disposition of this case, there are justifiable grounds for the Plaintiff’s failure to know that the food supply of this case does not constitute an object of value-added tax exemption in light of the overall circumstances in the case of additional tax in the disposition of this case. Therefore, the additional tax portion among the disposition of this case should be revoked illegally.

In addition, until 2000, there was a customs duty-free practice on food services supplied at a funeral hall for a period of 20 years, such practice was generally accepted by taxpayers, and the National Tax Service has expressed its public opinion that it constitutes a tax-free object. In light of the fact that the penalty in this case’s disposition violates the principle of prohibition of retroactive taxation derived from the principle of good faith (Article 18(3) of the Framework Act on National Taxes).

3. Whether the supply of food in this case is naturally incidental to the supply of funeral services exempt from value-added tax and exempt from value-added tax.

In full view of the following circumstances, it is reasonable to interpret that the instant food supply constitutes the supply of goods or services exempt from value-added tax under Article 12(1)4 of the former Value-Added Tax Act (Amended by Act No. 9915, Jan. 1, 2010); Article 12(3) of the Value-Added Tax Act; Article 29 subparag. 6 and Article 3 subparag. 2 of the Enforcement Decree of the Value-Added Tax Act.

A. In light of the fact that Article 12(3) of the Value-Added Tax Act provides that the supply of goods or services exempt from value-added tax is subject to the supply of goods or services, and the prior meaning of “essential accompanying” in this context can be seen as “the supply of goods or services without any choice but with no choice but to follow it” for the supply of goods or services, it is true that the supply of food does not fall under the original meaning of funeral services (such as the storage of time signals, installation of empty places and teams, lease of funeral parlors for the provision, etc.).

However, Article 3 subparag. 2 of the Enforcement Decree of the Value-Added Tax Act provides that "goods or services deemed to be incidental to the supply of goods or services which are the main transaction in light of transaction practices" as one of the incidental goods or services referred to in Article 1(4) of the Value-Added Tax Act (Article 12(3) of the Value-Added Tax Act, which provides the main basis for whether the instant food supply is exempt from taxation, does not have any special reason to regard the meaning of "goods or services indispensable to the supply of goods or services" as different from that of Article 12(4) of the Value-Added Tax Act, and therefore, Article 12(3) of the Enforcement Decree of the Value-Added Tax Act shall apply to determining

However, in light of the meaning and scope of the supply of certain goods or services is not necessarily a fixed change, not necessarily a transactional practice, awareness of the general public in society, and changes in the relevant social culture, even if the Value-Added Tax Act only provides that the above provision does not exceed the delegation scope of the Value-Added Tax Act. Furthermore, the above provision of the Enforcement Decree does not exceed the delegation scope of the Value-Added Tax Act. Furthermore, the interpretation of the tax law should be interpreted as the legal text, barring special circumstances, in light of the principle of no taxation without the law, or the interpretation of the tax law should not be permitted (see Supreme Court Decision 2008Du11594, Oct. 9, 2008, etc.).

Therefore, when the supply of goods or services is subject to tax exemption under the provisions of the Value-Added Tax Act, the incidental nature of the supply of goods or services shall not be denied without permission on the sole ground that the supply of goods or services does not fall under the original meaning of the main goods or services subject to tax exemption, by comprehensively taking into account various circumstances based on

If such determination is based on the premise, whether the supply of certain goods or services is incidental to the supply of goods or services should be based on the primary basis of Article 3 of the Enforcement Decree of the Value-Added Tax Act, which embodys “essential accompanying” as stipulated in Article 12(3) of the Value-Added Tax Act.

Based on the above legal principles, this case is examined.

According to the court’s fact-finding results with respect to the New Airport, Cheongju Hospital’s funeral hall, Cheongju Hospital’s funeral hall, Cheongyang Hospital’s funeral hall, Seoul University Hospital’s funeral hall, Gyeongsung Hospital’s funeral hall, Gyeongnam funeral hall, annual funeral hall, and Ywon funeral hall, each fact-finding with respect to each funeral hall can be acknowledged that the above funeral hall provides funeral services to the visitors who find an empty place within the necessary scope of the provision (i.e., g., g., g., to provide food within the necessary scope of the provision, although the funeral hall does not directly provide food, this does not mean that the provision of food was entrusted to a third party without any direct provision of food, and that the provision of food at the funeral hall is made in a limited place for a particular general purpose, not only because the provision of food at the funeral hall is made in the general place, but also because the provision of food at the funeral hall is not sufficient to recognize that the provision of food at issue of the funeral hall is an incidental food provision of the funeral.

B. The value-added tax exemption system aims at lowering the calendarness of value-added tax by lowering the tax burden on daily necessities, or lowering the final consumer price of certain goods or services for the purpose of facilitating the use of certain goods or services. The purpose of setting funeral services as tax exemption is to make the burden on funeral expenses for the welfare of the public. Considering the instant food supply as tax exemption subject to the foregoing accords with the purport of the value-added tax exemption system.

C. The Defendant asserts to the effect that the incidental nature of the instant food supply cannot be recognized on the grounds that ① restaurant business is defined as an independent service subject to value-added tax, ② the ratio of the food supply sales to the funeral sales exceeds about 37%, ③ funeral service costs and food supply costs are clearly distinguished. However, in the case of a reason, the mere fact that such incidental nature is not recognized is the result of the denial of the value-added tax exemption system itself, ② in the case of a reason, the incidental nature is not denied solely on the ratio of the sales to the sales, and ③ in the case of a reason, Article 3 subparag. 2 of the Enforcement Decree of the Value-Added Tax Act is a provision premised on the distinction between the main goods or services supply cost and the ancillary goods or services supply cost (if the funeral service cost and the supply cost are not clearly distinguished, it is related to the subject-matter of tax exemption under Article 3 subparag. 1 of the Enforcement Decree of the Value-Added Tax Act), and all of the above reasons cannot be a reason to deny

D. The Defendant asserts to the effect that, in order to fall under “goods or services that are deemed to be supplied incidental to the supply of goods or services ordinarily in light of transaction practices,” under Article 3 subparag. 2 of the Enforcement Decree of the Value-Added Tax Act, the practice of transaction by a business entity providing funeral services must be established (i.e., whether such transaction practices have been established based on the supplier) and that the funeral hall’s funeral practices with which a resident living in the funeral hall is established, cannot be said to fall under the above provisions solely on the ground that there is a funeral practice with which a resident living in the funeral hall provides food

However, in light of the language and text of the above Enforcement Decree, and the purport of the VAT exemption system as seen earlier, the core of recognition of incidental nature is merely whether the supply of food is incidental to anyone in the course of the supply of funeral services according to transaction practices, and there is no reason to limit that the supply of food can be recognized only through a direct implementation by the funeral service supplier (see, e.g., Supreme Court Decision 2006Da15488, Apr. 2, 2006). In other words, whether the provision of food is directly provided or not is not applicable to a case where the food supplier and the food supplier are different from the food supplier, not because it is not recognized as incidental nature, but because the food supplier is different from the food supplier.

E. According to the Supreme Court precedents, there is no room for the application of tax exemption to the case where a business entity separate from the funeral service business entity supplies food. Unlike the above case, according to the Plaintiff’s assertion, the funeral service business entity’s direct supply of food would be subject to tax exemption, resulting in unreasonable discrimination in accordance with the business method of food supply, thereby violating the principle of tax equality.

However, it is difficult to accept the Defendant’s assertion in light of the following: (a) where a business entity separate from a funeral service business entity supplies food, it cannot be deemed unreasonable discrimination in light of the structure and purport of the value-added tax system as a result of a business entity’s different performance; and (b) the circumstance that the business entity is not exempt from taxation in the case of a different business entity is not based on leading the conclusion that the funeral service business entity cannot be exempt from taxation even if it directly supplies food.

4. Judgment as to the main claim

A. In order for a taxation disposition to be null and void as a matter of course, it is insufficient to say that there is an unlawful ground for the disposition, and it is objectively obvious that the defect violates an important statute, and it is necessary to determine whether the defect is significant and obvious, the purpose, meaning, function, etc. of the laws and regulations, which form the basis for the taxation disposition, should be examined in a teleological context, and at the same time, reasonable consideration of the specificity of the specific case itself is necessary. From this point of view, in a case where there is an objective circumstance that could mislead a person who has no legal relation or fact which is subject to taxation to be subject to taxation as it is subject to taxation due to an objective circumstance that makes it clear whether the defect is subject to taxation, it cannot be said that it is apparent even if the defect is serious, and thus, it cannot be said that the taxation disposition that misleads the fact of taxation is null and void as a matter of course (see, e.g., Supreme Court Decisions 96Nu12634, Jun. 26, 1998>

B. We examine the instant case based on the foregoing legal doctrine.

As seen earlier, it appears that the instant food supply constitutes a tax-free object stipulated in the Value-Added Tax Act, but this can only be clarified after investigating factual relations and ascertaining whether there is a transaction practice ordinarily incidental to the supply of funeral services, which is the main transaction. As such, even if there is a defect prior to the instant disposition, it cannot be deemed that the instant disposition is void as a matter of course. Accordingly, we cannot accept the Plaintiff’s assertion as to the Plaintiff’s primary claim.

5. Determination on the conjunctive claim

A. Principal tax portion

The Defendant asserts that the part of the conjunctive claim of this case seeking revocation of the principal tax of each value-added tax is unlawful, since it did not go through a prior trial procedure.

In full view of the purport of the argument in the statement No. 2, the Plaintiff filed an appeal with the Director of the Tax Tribunal around April 2010, and sought revocation of the principal tax of the instant disposition without seeking revocation of the principal tax of the instant disposition, and filed the instant lawsuit and sought revocation of the principal tax only. Accordingly, the part of each of the ancillary claims in the instant lawsuit seeking revocation of the principal tax of the value-added tax is unlawful as it did not go through the procedure of a previous trial.

B. Additional tax portion

1) In order to ensure the propriety of taxation, additional tax is a kind of administrative sanction that takes place when a taxpayer is liable to pay taxes in good faith and to pay the tax amount, and neglects to perform his/her duties in order to secure the same. Such a sanction is not imposed if there is a justifiable reason to believe that it is not unreasonable for the taxpayer to be unaware of his/her duties due to the existence of conflicting views in tax laws interpretation beyond a simple legal site or the scope of misunderstanding, etc., when there is a circumstance where the taxpayer can reasonably present it, or when there is a circumstance that it is unreasonable to expect the party to fulfill his/her duties, or when there is a reason that it is unreasonable to expect the party concerned to pay his/her duties, etc. (see Supreme Court Decision 202Du66, Aug. 23, 2002, etc.).

2) Even when considering the fact that the imposition of value-added tax is in a situation where the legal effect cannot be denied due to the pre-trial procedure, as seen above, insofar as the food supply of this case ought to be subject to tax exemption, it is reasonable to view that there is a justifiable reason that does not err by neglecting the Plaintiff’s obligation.

Therefore, without examining the remainder of the Plaintiff’s remaining claims as to additional tax, each of the instant disposition is unlawful.

6. Conclusion

Therefore, the part of the conjunctive claim of this case seeking revocation of each of the principal tax of this case is unlawful, and the part seeking revocation of each of the principal tax of this case shall be accepted, and the main claim shall be dismissed as it is without merit. Since the judgment of the first instance is improper to conclude a different conclusion, it is so unfair, the plaintiff's appeal is partially accepted, and the judgment of the first instance as to the additional tax of this case is revoked, and each of the dispositions of this case is revoked. The plaintiff's remaining

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Judges Kim Jong-chul (Presiding Judge)