Seoul Administrative Court 2007Guhap12309 ( October 19, 2011)

early 2005 depth0164 ( December 21, 2006)

The exporter's claim for input tax deduction and refund of gold bullion transactions is contrary to the principle of good faith.

Since a malicious entrepreneur knew or was unaware of the fact that there was an illegal transaction for the purpose of evading the output tax amount in a series of transactions during gold bullion transactions, the Plaintiff’s assertion of input tax deduction and refund cannot be allowed against the principle of good faith.

Article 15 of the Framework Act on National Taxes

Article 17 of the Value-Added Tax Act

2011Nu9340, revocation of disposition imposing value-added tax, etc.

SPE Co., Ltd.

Head of the tax office;

Seoul Administrative Court Decision 2007Guhap12309 Decided September 25, 2008

September 7, 2011

October 19, 2011

1. The plaintiff's appeal is dismissed.

2. After the appeal system, 80% of the total costs of the lawsuit shall be borne by the Plaintiff, and the remainder by the Defendant.

1. Purport of claim

The Defendant’s imposition of KRW 2,11,76,605, KRW 15, KRW 2004, KRW 155, KRW 316, and KRW 315, KRW 2004, KRW 1,56, KRW 754, KRW 613, KRW 749, KRW 530, which the Defendant imposed on the Plaintiff on September 1, 2005, and KRW 1,56, KRW 2004, KRW 1,56, KRW 613, KRW 204, and KRW 749,389, and KRW 530 of corporate tax in 204, was revoked (the Plaintiff partially reduced the Plaintiff’s claim regarding the imposition of value-added tax in 1, 204,

2. Purport of appeal

The part of the judgment of the court of first instance against the plaintiff shall be revoked. The defendant's imposition of value-added tax 2,11, 776, 605 won in 2004 against the plaintiff on September 1, 2005, and the second value-added tax 15,316,315 won in 204, and the second value-added tax 1,56,754,613 won in 204 shall be revoked.

1. Details of disposition;

A. On March 23, 2004, the Plaintiff is a juristic person established for the purpose of wholesale business, precious metal export and import business, etc. by making 00 head office not exceeding 000 of the Jongno-gu Seoul Jongno-gu Seoul as the seat of its head office.

B. The Plaintiff received 14 copies of the tax invoice on the purchase of gold bullion which constitutes the total supply value of 17,168,690,080 in the first taxable period of the value-added tax for the first taxable period of the value-added tax for the year 2004, and 12 copies of the tax invoice on the purchase of gold bullion which constitutes the total supply value of 15,667,546,133 (hereinafter “the tax invoice of this case”) during the second taxable period of the value-added tax for the second taxable period of the value-added tax for the year 2004, and filed a return of the value-added tax for the first and second taxable years of 204 by deducting the input tax amount on the tax invoice of this case from the output tax amount for the year 1 and 204. The director of the Seoul Regional Tax Office notified the Defendant that the tax invoice of this case was false.

D. Accordingly, the Defendant excluded the input tax deduction for the instant tax invoice and imposed the additional tax pursuant to Article 22 of the Value-Added Tax Act, while applying the additional tax for receiving evidence under Article 76 of the Corporate Tax Act to the Plaintiff on September 1, 2005, imposed the amount of value-added tax 2,379,368,960, and the amount of value-added tax 325,095,420 for the second period of value-added tax in 2004, and denied the refund of KRW 1,566,754,613 for the second period of value-added tax in 2004, while rejecting the refund of KRW 749,389,530 for the corporate tax in 204 as the additional tax for receiving evidence.

E. On March 15, 2011, the Defendant revoked the portion of the imposition of value-added tax, such as failure to submit a list of total tax invoices, and accordingly, the Defendant left KRW 2,11,776,605 in 204 and KRW 15,316,315 in the imposition of value-added tax for the second period of value-added tax in 2004 (hereinafter “instant disposition”).

[Ground for Recognition: Facts without dispute, Gap evidence 1, 5, Eul evidence 1 through 4, Eul evidence 47 (including paper numbers, hereinafter the same shall apply) and the purport of whole pleadings]

2. Scope of adjudication of this court;

In the judgment of the first instance court, the decision that the Defendant revoked the disposition of imposition of corporate tax of KRW 749,389,530, which the Defendant rendered to the Plaintiff on September 1, 2005, was revoked, and the Defendant appealed but the appeal was dismissed in the judgment prior to remand, but the Defendant appealed but the Defendant’s appeal was dismissed in the judgment prior to remand. Since the part of the claim for revocation of the disposition of corporate tax in the claim filed by the Plaintiff became final and conclusive by the judgment of remand, the scope of the

3. Whether the disposition is lawful;

A. The parties' assertion

The Plaintiff asserts that the instant disposition rejecting input tax deduction or refund based on the instant tax invoice is unlawful, while the Defendant asserts that the Defendant’s seeking input tax deduction or refund based on the instant tax invoice is against the principle of trust and good faith, in light of the distribution channel of the instant gold bullion.

(b) Fact of recognition;

1) The plaintiff's actual representative JungG had no experience of engaging in gold bullion business in the previous gold bullion business as a person retired on April 30, 2004 while working for several companies.

2) The gold bullion pursuant to the instant tax invoice (hereinafter referred to as “gold bullion”) was all imported from a foreign country by an importer and distributed as a tax-free gold, but was converted into a malicious business operator, and subsequently exported through the Plaintiff through the Plaintiff, through the two three-dimensional taxation sheet, after which the gold bullion was exported from the import to the export. A variety of transactions in the stages from the import to the export were conducted on or before the date of the import of the gold bullion,

(3) The Plaintiff exported the gold bullion of this case to the pertinent issue date of the tax invoice of this case. On March 29, 2004, the Plaintiff exported the gold bullion of this case to MGI Ltd. (foreign corporations located in Hong Kong) and the remaining 25 times to MGI Lt. (foreign corporations located in Hong Kong). On the other hand, as a result of the investigation conducted by the Seoul regional tax office, MGI Ltd and the GPM Co., Ltd., a major import source of the gold bullion of this case, were actually the same company, and the above companies were confirmed to be not a normal business entity, such as the lack of presentation of relevant documents related to export and import and transaction prices, and their ability to supply the gold bullion of this case was unclear. (4) The amount of the DD amount converted the gold bullion of this case to the taxation amount of the gold bullion of this case to its circulation was no longer than the normal purchase price of all the gold bullion of this case, and there was no difference in the amount of the sales price or sales price of the gold bullion of this case.

5) The price of the instant gold bullion exported by the Plaintiff was always set lower than the import price of the domestic importer. Upon the commencement of the tax investigation of the instant gold bullion, the Plaintiff did not export gold bullion any longer after suspending the export of gold bullion.

6) According to the statement of the transport invoice, etc., the gold bullion transaction in the instant gold bullion has already been entered as transported by the relevant company or has not been entered with a show of the time during which the gold bullion was carried out after the import declaration. Furthermore, the gold bullion transaction in the instant gold bullion transaction began to transfer the gold bullion received in advance from the Plaintiff to the predevelopment transaction entity in the order of the predevelopment stage, and led to the importing entity up to the predevelopment stage. The time required for the remittance of the gold bullion was settled in one time to the extent that it does not require only several minutes for each stage. The time required for the remittance of the gold bullion was made by the Plaintiff to the extent that the payment was made by the Plaintiff and the settlement of the gold bullion was fully completed from the class business entity, and the gold bullion transaction in the instant gold bullion transaction took place after the Plaintiff to the class business entity.

[Ground for Recognition: Facts without dispute, Gap's 2, 3, 26, 27, 28, 45, 49, 54, 67, Gap's evidence 65, Gap's evidence 61, Gap's evidence 68 through 92, Eul's evidence 96 through 120, Eul's evidence 96 through 120, Eul's evidence 13, 16, 19, Eul's evidence 24 through 46, the purport of the whole pleadings

C. Determination

1) Article 15 of the former Framework Act on National Taxes (amended by Act No. 119911, Jan. 1, 2010; hereinafter “Framework Act on National Taxes”) provides that “where a taxpayer performs his/her duties, he/she shall drive away from reliance and faithfully perform his/her duties.” This principle also applies to the legal relationship pertaining to value-added tax (Article 1 and Article 3(1) main text of the Framework Act on National Taxes). In any of the series of continuous transactions, where a malicious business operator is willing to evade value-added tax from the beginning to the beginning, and only if he/she fails to pay the value-added tax collected by the exporter (hereinafter “illegal transaction”), the exporter’s seeking deduction and refund of input tax amount would not be permitted if he/she knew that there was an illegal transaction at the preceding stage. This doctrine also applies to cases where the exporter did not know that there was an illegal transaction by 40% or more due to gross negligence (see, e.g., Supreme Court Decision 2012Du1414094).

2) The instant tax invoice is pertaining to all export transactions. In light of the transaction behavior, distribution channel, the period, quantity, and value of the Plaintiff’s transaction, the Plaintiff’s actual representative’s experience, and the result of the investigation of the transaction’s customer’s violation, etc., the Plaintiff is deemed to have known, or failed to know, by gross negligence, the circumstance that there was a malicious business operator engaged in illegal transactions for the purpose of evading the output tax amount in the series of transaction processes at the time of the instant gold bullion transaction. The Plaintiff’s assertion of deduction and refund of the instant tax invoice based on the instant gold bullion transaction is not allowed in violation of the principle of good faith as stipulated under Article 15 of the Framework Act on National Taxes.

3) The instant disposition rejecting the deduction or refund of the input tax amount pursuant to the instant tax invoice is lawful.

4. Conclusion

The judgment of the first instance is justifiable. The plaintiff's appeal is dismissed.