Busan F&M Co., Ltd. (Law Firm Rate, Attorneys So-young et al., Counsel for the plaintiff-appellant)

Samsung Head of Samsung Tax Office

December 14, 2006

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of value-added tax amounting to KRW 1,565,909,00 on February 22, 2005 against the Plaintiff was revoked.

1. Details of the disposition;

The following facts do not conflict between the parties, or may be acknowledged by considering the whole purport of the arguments in each of the statements in Gap evidence 1-1, 2, 2-2, 5, 6-1, 2, 7-10, 7-10, and 1-1.

A. On February 15, 2002, the Plaintiff: (a) obtained the successful bid on October 15, 2002 at the auction procedure conducted with Suwon District Court No. 99ta, No. 118532 with respect to the shares in Nasan Distribution among the buildings and its ground, and machinery and equipment, corporeal movables, etc., owned by Nasan Distribution Co., Ltd. (hereinafter “Nasan Distribution”); and (b) completely paid the successful bid price on October 15, 2002.

B. On October 15, 2002, N.B. issued a tax invoice and filed a value-added tax return by dividing the auction price of KRW 17.225 billion for a building, machinery and equipment, corporeal movables, etc. (hereinafter “instant goods”) by the supply price of KRW 15,659,090,90, and value-added tax of KRW 15,565,909,09,091, excluding the auction price of KRW 15.275 billion for the portion of land subject to value-added tax exemption among the auction price.

C. After that, the Plaintiff filed for early refund of value-added tax on November 25, 2002 on the basis of the tax invoice received from Nasan Distribution, and received refund of the input tax amount of KRW 1,565,909,091 (hereinafter “instant input tax amount”) for the acquisition of the instant goods on December 9, 2002.

D. The defendant deemed that the value-added tax is not included in the successful bid price of the goods of this case, and the plaintiff's input tax amount was not deducted from the value-added tax base for the second period of 2002, and decided to correct the tax base and tax amount. On December 14, 2002, the plaintiff imposed and notified value-added tax of KRW 1,565,909,091 on the plaintiff (hereinafter "the correction disposition of this case"). Accordingly, on March 10, 2003, the plaintiff filed an objection (hereinafter "the objection of this case") against the defendant on March 10, 203, and the defendant revoked the above disposition of objection ex officio on March 12, 2003, and on March 21, 2003, the defendant rejected the decision of rejection on the ground that the disposition of this case was not made ex officio correction (hereinafter "the decision of this case").

E. After that point, the Seoul Regional Tax Office pointed out that it is not legitimate to deduct the instant input tax amount when auditing. On February 22, 2005, the Defendant: (a) deducted the instant input tax amount from the Plaintiff’s base of value-added tax for the second period of February 2002; (b) revised the tax base and tax amount; and (c) imposed and notified the Plaintiff of value-added tax amount KRW 1,565,909,000 (hereinafter “instant disposition”).

F. On March 21, 2005, the Plaintiff asserted for the adjudgment against the Director of the National Tax Tribunal, but the Director of the National Tax Tribunal dismissed the Plaintiff’s request for adjudgment on April 12, 2006.

2. Whether the disposition is lawful;

A. The assertion

(1) The instant disposition did not deduct the instant input tax, thereby causing the burden of value-added tax on all sales rather than on the added-value created by the Plaintiff. Although the collection of the input tax could not affect the deduction of the input tax, it is contrary to the basic principle of value-added tax as the requirement for the deduction of the input tax amount. Although the former Enforcement Decree of the Value-Added Tax Act explicitly states that the sale is subject to the Value-Added Tax Act, it goes against the principle of no taxation without any grounds, it goes against the principle of no taxation.

(2) The tax authority had consistently established rules to the same effect until the amendment of the authoritative interpretation of the Ministry of Finance and Economy on March 3, 2003 (reconsumption 46015-56) to the same effect, where a tax invoice related to an auction is issued by the owner of the object of the auction or by the auction court, and thus, the interpretation or practice regarding the deduction of the input tax amount was established by the ombudsman to the effect that the tax payer may be entitled to deduct the input tax amount. The Plaintiff acquired the goods of this case to the extent that it would be unreasonable for the Plaintiff to believe that such interpretation and practice would be possible to deduct the input tax amount. The revised rules also protect the trust of taxpayers established in the past, clearly stating that the revised rules are effective only in the future. Accordingly, the tax authority reported that the instant goods acquired through an auction on October 15, 2002 may not be subject to the deduction of the input tax amount, and the disposition of this case in violation of the principle of trust and good faith and prohibition of retroactive taxation.

(3) The decision of rejection of this case was made by the Defendant, a disposition agency, on the ground that the Defendant’s revocation ex officio of the corrective disposition of this case constitutes “when there is no disposition which became the object of an appeal,” and the revocation ex officio of the corrective disposition of this case is based on the Defendant’s decision. Thus, the decision of rejection of this case is merely in the form of “decision of revocation of a disposition which became the object of an appeal,” that is in fact a “decision of acceptance,” and on the other hand, the administrative agency, including the administrative agency, is bound by the administrative agency, and the administrative agency concerned cannot make any disposition contrary to the ruling of the ruling agency which accepted the claim. The Defendant was unlawful even though it was impossible to deny the input tax deduction by the binding force of the decision of rejection

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) As to the first argument

According to the provisions of Articles 615, 631, and 728 of the Civil Procedure Act, when a court of execution intends to sell real estate for auction, it shall be appraised by an appraiser, taking into account the appraised value, and the minimum auction price determined so would be the basis for determining the minimum amount for the purchase price of the real estate for auction. Therefore, whether the auction price includes value-added tax on the auction price can be determined by examining the contents of the assessment report. As a result, in case where the auction price does not include value-added tax on the auction price, the successful bidder does not have the value-added tax on the auction price, and even if the successful bidder submitted a tax invoice from the owner of the auction real estate under the premise that the value-added tax is included in the auction price, there is no room for deducting it from the input tax amount under the principle of value-added tax, and such legal principle does not change because the owner of the auction real estate bears the duty to pay value-added tax in relation to the auction price (see, e.g., Supreme Court Decision 2002Du1328, May 14, 2002).

Therefore, the appraisal report of the goods of this case can be acknowledged that there is no value-added tax on the successful bidder at the auction price of the goods of this case in full view of the purport of the entire arguments and the purport of the whole arguments as seen earlier, and the appraisal report of the goods of this case can be acknowledged that there is no value-added tax on the successful bidder at the auction of this case since there is no input tax amount to be collected by the successful bidder at the auction of this case, and the plaintiff's above assertion is without merit.

(2) As to the second argument

(A) First, we examine the principle of prohibition of retroactive taxation.

Article 18(3) of the Framework Act on National Taxes, which provides the principle of prohibition of retroactive taxation, generally accepted by taxpayers as interpretation of tax-related Acts or practices of national tax administration, refers to the extent that such interpretation or practice has been accepted by an unspecified taxpayer who is not a specific taxpayer without an objection and that it is not unreasonable for taxpayers to trust such interpretation or practice (see Supreme Court Decision 91Nu9893, May 25, 1993, etc.). It cannot be deemed that such interpretation or practice existed merely because there was an expression of public opinion on the criteria for interpretation of tax-related Acts, or the fact that tax authorities’ established rules or interpretation, basic rules, etc. are prescribed (see Supreme Court en banc Decision 86Nu96, May 26, 1987, etc.). In order to establish such non-taxation practice, it should not be deemed that there was an objective fact not taxed for a considerable period of time, but it should be determined that the tax authority has no special intention to impose taxes after investigating the tax base or practice, etc. 90.

In the instant case, the Supreme Court rendered a decision or judgment to the effect that, in a case where the rules and interpretation of the Ministry of Finance and Economy cited by the Plaintiff are interpreted by the tax authorities prior to March 3, 2002, the value-added tax is included in the successful bid price, so the Board of Audit and Inspection may obtain a tax invoice from the owner and deduct the input tax amount. However, according to the purport of the entire pleadings, the Board of Audit and Inspection in the case of the request for a review on September 26, 2000 "the depreciation 200-281" on March 5, 2002, the National Tax Tribunal did not impose a tax amount for the period of imposition of value-added tax on May 14, 202 (No. 2002du1328) and the former rules and regulations were not included in the imposition of value-added tax in the imposition of value-added tax, and thus, it cannot be deemed that there is no possibility for the Plaintiff to be subject to a tax exemption under the principle of value-added tax.

Therefore, since the defendant properly interpreted and imposed the relevant Acts and subordinate statutes different from some similar precedents on the instant case, the instant disposition cannot be deemed to violate the principle of retroactive taxation prohibition.

(B) Next, we examine the principle of trust protection.

In general, in order to apply the principle of trust and good faith to the acts of tax authorities in tax law relations, the tax authorities must express the public opinion that is the object of trust to taxpayers, and the taxpayer should not be responsible to the taxpayer when the taxpayer trusted that the expression of opinion is justifiable, and what is the taxpayer should be done by the taxpayer, and the tax authorities should make dispositions against the above expression of opinion, thereby infringing the taxpayer's interest (see Supreme Court Decision 98Du2713, Aug. 18, 200).

Therefore, even if the tax authority expressed a public opinion as alleged by the plaintiff, it should not be attributable to the plaintiff as to the plaintiff's trust that the tax authority's opinion was justifiable and trusted. As seen above, some tax authorities imposed tax on similar cases differently from the public opinion that the plaintiff paid, and only some tax authorities made a false interpretation of the relevant laws and regulations, and thus, it cannot be deemed that there was a trust that can be protected for the plaintiff. The plaintiff's assertion in this part is not attributable to the plaintiff's justifiable and fair expression of public opinion. Thus, the plaintiff's assertion in this part is without merit without any need to further examine other issues.

(3) On the third argument

First, we examine whether the decision of dismissal in this case is effective to bind the defendant.

Article 80(1) of the Framework Act on National Taxes provides that "a decision under Article 65 as applied mutatis mutandis in Article 81 shall bind an administrative agency concerned" without providing for the validity of the decision on the request for examination. In light of the effect of the decision on the request for examination as applied mutatis mutandis in Article 81 without providing for the validity of the decision on the request for examination, the decision on the request for examination shall be binding only on the administrative agency concerned, and the decision on the request for examination as independent inquiry agency shall not be binding upon the decision of the head of the relevant tax office or the director of the competent regional tax office, or the decision on the request for examination by the Commissioner of the National Tax Service. Thus, if the decision on the request for examination or objection is intended to grant such effect as to the decision on the request for examination, the decision on the request for examination shall have a provision on the request for examination and the decision on the request for examination, and even if the decision on the request for examination falls under substantially a decision on the request for examination, the decision on rejection as applied mutatis mutandis in Article 37(1) of the Administrative Appeals Act shall not be binding on the defendant.

Therefore, the plaintiff's above assertion based on the premise that the rejection decision of this case has an effect to bind the defendant is without merit.

(4) Ultimately, the instant disposition, which entered into this conclusion, is lawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit. It is so decided as per Disposition.

Judges Jeong Jong-chul (Presiding Judge)