Busan District Court Decision 2007Guhap5050 (Law No. 24, 2008)

National High Court Decision 2007Da2289 (207.05)

Whether a tax invoice for gold bullion received from an complainant on data constitutes a processing transaction.

It is natural that most of the materials purchased by the customer are purchased from the material, the fact that the customer files an accusation on the material, the fact that the amount deposited into the transaction amount was deposited and remitted to his own account, and the fact that there is no currently purchased account or accounting data can be found, it is judged as a processing transaction.

The contents of the decision shall be the same as attached.

Article 16 (Tax Invoice)

Article 17 (Payable Tax Amount)

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. The defendant's imposition of value-added tax of 16,841,280 won against the plaintiff on January 3, 2007 shall be revoked.

1. Details of the disposition;

The following facts are not disputed between the parties, or can be acknowledged by taking into account the whole purport of the pleadings in each description of evidence No. 1, evidence No. 3-1 through 7, evidence No. 1, and evidence No. 2.

A. From July 1, 1983, the Plaintiff is a person who runs precious metal wholesale and retail business with the trade name of "○○○○○○○-1, Busan-dong, Busan-gu, Busan-do, ○○○○○○○."

B. From July 9, 2001 to October 25, 2001, the Plaintiff received 80,484,545 won (hereinafter “each of the instant tax invoices”) in total from ○○○△△△△ (hereinafter “○○○○”) as shown in attached Table 1’s Schedule 1(1), and filed a return with the Defendant by deducting KRW 8,048,453 won from the input tax amount on the said supply value when filing a return for the second half-year value added tax in 2001.

C. As a result of conducting a tax investigation on the ○○○ juice, the director of the Nam-gu Tax Office issued or received a false tax invoice between March 5, 2001 and December 31, 2003 between the head of the tax office and the head of the tax office, on the ground that he violated the Punishment of Tax Evaders Act by issuing or receiving a false tax invoice without real transaction during the period from March 5, 200 to December 31, 203, filed an accusation against the police on March 3, 2006 and notify the Defendant of the same.

D. Accordingly, on January 3, 2007, the Defendant: (a) deemed that the instant tax invoice was issued without real transaction; and (b) did not deduct the input tax amount initially reported by the Plaintiff; and (c) notified the Plaintiff of the increase or decrease of KRW 16,841,280 as the value-added tax (including the additional tax) for the second period portion in 2001 (hereinafter “instant disposition”).

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant disposition shall be revoked on the following grounds.

(1) Even though the Plaintiff actually purchased the present tax invoice corresponding to the supply value of each of the tax invoices of this case from ○○ △△△, and transferred the price in full to a normal transaction, deeming that the Plaintiff received each of the tax invoices of this case without a real transaction solely on the ground that the Plaintiff was an enterprise accused of ○○ △△ Doro as data violates the fact.

(2) Although the Defendant previously conducted a tax investigation on the Plaintiff and completed an investigation to recognize that each of the tax invoices of this case was issued through normal transactions, the Defendant’s disposition of this case by conducting a tax investigation on the Plaintiff again violates the principle of prohibition of duplicate investigation under Article 81-4 of the Framework Act on National Taxes and Article 63-2 of the Enforcement Decree of the same Act

(3) In addition, the instant disposition is against the substance over form principle under the Framework Act on National Taxes, the principle of good faith, the principle of evidence taxation, and goes beyond the limits of discretion.

(b) Related statutes;

Article 16 (Tax Invoice)

Article 17 (Payable Tax Amount)

Article 81-4 (Prohibition of Abuse of Right of Tax Investigation)

Article 63-2 (Prohibition of Overlapping Investigation)

(c) Fact of recognition;

The following facts are not disputed between the parties, or may be acknowledged in the entries in Gap evidence 9, 10, and Eul evidence 8, taking into account the whole purport of the pleadings:

(1) The Plaintiff remitted the total of KRW 8,525,600,000, as shown in attached Table 1’s Schedule 1’s deposit account, from 00,000 on seven occasions on the date of issuance of each of the instant tax invoices, to 0,000 in one’s own deposit account. 6 times except October 23, 2001, the Plaintiff deposited the total of KRW 66,580,000 in cash or by substitution, prior to the remittance, as described in paragraph (2) of the same Table, into one’s own deposit account.

(2) around March 5, 2001, 00 Won 50 billion capital (50 million won in 2002) was established by ○○○○ Family Co., Ltd. Around March 5, 2001; the turnover in the return of value-added tax was 38.5 billion won in the first term portion in the year 2001; the second term portion in the first term portion in the year 2002; 132.2 billion won in the second term portion; the first term portion in the year 2003; the purchase amount was 38.2 billion won in the first term in the year 2001; the second term portion in the year 200 billion won in the amount; the second term portion in the tax investigation was 200 billion won in the amount; the second term portion in the year 200 billion won in the amount of purchase amount was 3.7 billion won in the amount in the year 200 billion won in the 2000 billion won; the first term portion in the year 1.3 billion won in the year 200.3 billion won in the purchase amount.

(3) According to the result of the tax investigation conducted on the ○○○ juice from April 29, 2003 to December 31, 2005, ○○ ○○ juice received the purchase tax invoice of KRW 63.6 billion in total from the 2001 ○○ ○○ ○○ LLC Co., Ltd., Ltd., ○○ ○○ ○○ LLC Co., Ltd., ○○ ○ ○ ○ ○○ LLC Co., Ltd., ○ ○ ○ ○ ○, Inc., Ltd., ○ ○ ○ ○ ○, Inc., Ltd., ○ ○ ○ ○ △60 billion in total from the ○ ○ ○○ ○ ○ ○○ LLC Co., Ltd., Ltd., the purchase amount of KRW 18.2 billion in total, the sales amount of KRW 19.7 billion in total, the purchase amount of KRW 19.6 billion in total △ ○ 7000 million.

In addition, 00 billion won or more in total among the sales offices of ○○ through ○○ through 2003 are 21 and 81.3% in total sales. Among them, 13 companies, including ○○○ Tracdong, were investigated as data or a tax offense.

(4) On March 3, 2006, the director of the tax office of Seodaemun filed a complaint with the police on the grounds that he violated the Punishment of Tax Evaders Act by having the other party evade value-added tax, etc. by evading the total amount of KRW 55.4 billion from 2001 women 1 to 2003, on the ground that he received 90 tax invoices of KRW 5,53.4 billion from 46 companies, including ○○ Alley system Co., Ltd. without real trade, and evaded value-added tax, while preparing and delivering 7,706 of sales tax invoices of KRW 5,52.9 billion in total from 00,000,000,000,000 to 55.2 billion, on the ground that he/she violated the Punishment of Tax Evaders Act by evading value-added tax, etc.

(5) Under the above tax investigation, the investigation was conducted on three occasions between November 17, 2004 and November 24, 2004 on three occasions, but after the accusation was filed with the police, the whereabouts of the police became unknown and the prosecution was suspended.

(6) The Plaintiff reported the sales amount of the value-added tax for the first quarter of 2001 to KRW 310 million, the purchase amount of KRW 2550 million, and the sales amount for the second quarter to KRW 287 million, and reported the purchase amount to KRW 190 million.

D. Determination

(1) Determination on the first argument

(A) If a tax invoice on a part of any of the costs reported by a taxpayer is proved to have been prepared falsely without real transactions by the Defendant, who is the tax authority, without real transactions, and it is disputed as to whether it is an actual cost and the other party to the payment of the cost claimed by the taxpayer has been proved to the extent that it is reasonable to believe that such cost is actually paid, a taxpayer who is easy to present all the data, such as the account book keeping and evidence, need to prove it (see Supreme Court Decision 96Nu8192, Sept. 26, 1997).

(B) In full view of the following circumstances, each of the tax invoices of this case is deemed to have been delivered to the Plaintiff without real transaction by ○○○○○○, and the evidence Nos. 6-1 through 5, Nos. 13-1 through 15, Nos. 13-2, and Nos. 16. Each of the statements in the evidence Nos. 6-1 through 5, No. 7, No. 8-1 through 3, and No. 11-4, and each of the statements in the evidence No. 8-1 through No. 11, No. 11, and No. 15, and Nos. 13 through 16, there is no evidence to acknowledge otherwise.

1) As a result of conducting a tax investigation, most of the secondary purchasing units of 001 201 and the secondary purchasing units of 2001 1 through 2003 203 are investigated into the data that a considerable number of sales offices engaged in processing transactions other than real transactions, and the suspicions on the data that issued sales tax invoices without real transactions appears to be the upper limit.

2) The Plaintiff wired money equivalent to the value of each supply to the bank account of ○○○ △△ ice on a daily basis on the issue date of each tax invoice of this case. However, in order to remit the money of KRW 75,232,300 in five times, the Plaintiff deposited money of KRW 66,580,000 in cash or by substitute and used it as remittance financial resources prior to the transfer of the money of KRW 75,232,300 in total, the source of which is not clear to one’s own bank account. It seems to be natural that the Plaintiff did not immediately immediately transfer money to the bank account of ○○○○ △△△-ro without directly transferring money to one’s own bank account, but instead, took the method of remitting money by account transfer through telebank or telephone banking.

3) There is no book or accounting data, etc. proving that the Plaintiff actually purchased ○○△△△△△, such as the entry of each of the instant tax invoices.

4) In addition to each tax invoice of this case, the Plaintiff appears to have no other transaction with ○○○ juice. In light of the Plaintiff’s usual business type, size, etc., which can be seen in the Plaintiff’s details of return and payment of value-added tax, the Plaintiff’s intensive purchase of this case’s each tax invoice at least KRW 80,484,545, on a one-time basis, during the period of two months in July and October 2001, and then sold it again as gold products of precious metals through processing, seems to be an exceptional point in view of the empirical rule.

5) In this regard, the Plaintiff filed a tax invoice 5 (Evidence 6-1 through 5) with a processing company, such as ○○○○○ Doctrie, ○○ Doctrie Co., Ltd., and ○○○ Doctrie, etc., as evidence, and submitted five tax invoices (Evidence 6-1 through 5). However, all of the remaining four tax invoices issued by ○○ Doctrie on July 31, 2001, except for one tax invoice (supply price of KRW 7,184,40) issued by ○ ○○ Doctrie, issued after January 30, 202, and the Plaintiff subsequently purchased ○ Doctrie from ○ Doctrie, and thus it is difficult to deem that the Plaintiff processed the instant products purchased from ○ ○○ Doctrie as it was later purchased on October 25, 2001.

6) After introducing ○○○○○○ △△△ to the Plaintiff, the witness of the first instance court testified that he/she received and delivered the present purchase of the Plaintiff at the Plaintiff’s request to the Plaintiff. However, ○○ △△ was subject to a disposition of increase or correction of value-added tax, etc. on the ground that he/she received a false purchase tax invoice from the Plaintiff, as the Plaintiff, on the ground that he/she received a false purchase tax invoice from ○○ ○○ △△ △○, he/she was subject to a disposition of increase or correction of value-added tax, etc., he/she filed a lawsuit against the competent district tax office under Busan District Court 2008Guhap

7) From July 5, 200, 200, ○○○○○○○○, a witness of the Party testified to the effect that, while working as the employee of the Plaintiff’s ○○○○○○○○○, the Plaintiff purchased the present from ○○○○○, and received the present date through ○○ Kim○, which was entrusted to ○○○○, Inc., ○○○○, etc. for processing, and that he was aware of the fact that he sold the present goods to the general customers. However, according to the wage and salary income tax of the National Tax Service, ○○○ is recognized only as an employee of the instant tax invoice from May 1, 202 after the issuance date of each of the instant tax invoices.

(C) Therefore, the plaintiff's first argument is without merit.

(2) Judgment on the second argument

(A) According to Article 81-4(2)1 of the Framework Act on National Taxes, in a case where there is evident evidence to prove a suspicion of tax evasion, a reinvestigation may be conducted even in the same tax item and the same taxable period.

(B) Comprehensively taking account of the overall purport of the arguments in the statement Nos. 7 and 8 of this case, the defendant recognized that each of the tax invoices of this case were issued through normal transactions and closed tax investigations as a result of conducting a general correction investigation of value-added tax on the plaintiff from March 9, 2004 to March 17, 2004.

However, as a result of the tax investigation conducted on ○○△△△△ from April 29, 2003 to December 31, 2005, on the grounds that the Republic of Korea violated the Punishment of Tax Evaders Act by obtaining a false issuance of the purchase tax invoice amounting to KRW 5,53.4 billion in total and the sales tax invoice amounting to KRW 5,52.9 billion in total with the purchase tax invoice amounting to KRW 5,53.4 billion in total between the first through the second period of 2001 to the second period of 2003 without real transactions or by issuing the value-added tax, etc., it is reasonable to deem that the investigation on the instant disposition was lawful on March 3, 2006 and that the Defendant notified the Defendant of the taxation data on the Plaintiff in a transaction relationship with ○○△△△△△△△, and that the investigation on the instant disposition was conducted based on evident evidence to prove the tax evasion.

(C) Therefore, the plaintiff's second assertion is without merit.

(3) Judgment on the third argument

As above, it is difficult to recognize that the disposition of this case violates the substance over form principle, the principle of trust and good faith, the principle of evidence taxation under the Framework Act on National Taxes, or exceeds the limits of discretion of the tax authorities, and there is no other evidence to acknowledge it otherwise.

Therefore, the plaintiff's third assertion is without merit.

3. Conclusion

Therefore, the plaintiff's claim of this case shall be dismissed as it is without merit. However, since the judgment of the court of first instance is just with this conclusion, the plaintiff's appeal is dismissed as it is without merit. It is so decided as per Disposition.