Plaintiff 1 and two others (Attorneys Choi Jae-young et al., Counsel for the plaintiff-appellant)

The director of the tax office

September 10, 2009

1. All of the plaintiffs' claims are dismissed.

2. The costs of lawsuit are assessed against the plaintiffs.

On October 11, 2007, the Defendant’s disposition of value-added tax imposed on the Plaintiffs, as stated in the separate sheet of taxation, shall be revoked.

1. Details of the disposition;

A. The Plaintiffs’ clothes and retailers

(1) Plaintiff 1: Jung-gu Seoul Special Metropolitan City (hereinafter address 1 omitted) shopping (No. 1 omitted) (mutual name: ○○)

(2) Plaintiff 2: The same (hereinafter address 2 omitted) and the same (hereinafter address 2 omitted) shall have one floor (number 2 omitted) (mutual name: △△).

(3) Plaintiff 3 (Plaintiff 2 in the judgment of the Supreme Court): The number of names (No. 3 omitted) at the same (hereinafter address 1 omitted)

(b) Results of the Seoul Regional Tax Office’s criminal investigation;

(1) The investigation period: January 16, 2007 to April 19, 2007

(2) Details of detection

(A) The actual operator of the △△△○ Accounting Office (including the Plaintiff and 1,223 companies’ tax declaration and vicarious bookkeeping) reported value-added tax on the said 1,223 companies, Nonparty 1 (the Nonparty in the judgment of the Supreme Court) performed cross-transactions in exchange for sales and purchase tax invoices under mutual agreement without real transactions in order to meet the sales and purchase tax base of the bookkeeping companies, input tax amount, and tax amount payable at a certain level.

(B) Issuance of tax invoices equivalent to KRW 219,849,00,000 in total of supply values by adjusting the sales tax base and input tax amount as above.

C. Plaintiffs’ VAT declaration

The Plaintiffs each purchase tax invoice issued by Nonparty 1 (Plaintiff 1: 316,31,00, Plaintiff 2: Total value of supply; KRW 121,229,00; Plaintiff 3: Total value of supply; KRW 145,015,00; hereinafter each purchase tax invoice of this case) deducted the input tax amount on each purchase tax invoice issued by Nonparty 1 from the output tax amount by taxable period, and filed a value-added tax return.

D. The defendant's corrective disposition (the each disposition of this case on October 11, 2007, and each disposition of this case)

Value-added Tax is corrected and notified as shown in the attached Form, by deducting each input tax amount on the grounds that each purchase tax invoice of this case is false;

[Ground of recognition] Facts without dispute, Gap evidence 1 to 3, Eul evidence 1 to 1-2, Eul evidence 2-1 to 9, the purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

A. The plaintiffs' assertion

(1) Purchase transactions on each of the instant purchase tax invoices are those on the sales tax invoices and cross-market transactions in each of the pertinent taxable periods. Accordingly, the supply price of the corresponding transaction on each of the instant purchase tax invoices shall be deducted from the tax base, and at least the amount of the sales shall be determined by the method of the estimate investigation.

(2) The Defendant imposed a value-added tax only for 3 taxable periods on the merchants who filed a revised return among the merchants in South Korea, the same address as the Plaintiff, but imposed a value-added tax for 11 taxable periods only on the Plaintiff on the ground that the revised return was not filed. This contradicts the principle of tax equity.

B. Determination

(1) As to the first argument

According to the provisions of Article 17 of the Value-Added Tax Act, where tax invoices under Article 16 have not been issued, or where all or part of the entries required for the delivered tax invoice have not been entered or has been entered differently from the fact, the input tax amount should not be deducted from the output tax amount even if the goods or services have been actually supplied. However, it is reasonable to deem that in the case of a sales declaration, as long as a taxpayer voluntarily filed a return on sales, such sales have been actually made. Even though there was no actual domestic sales, the portion reported by a taxpayer as the sales in the value-added tax, which is a tax return method, has been finalized (where the sales tax amount, etc. has been reported excessively, the taxpayer should take the procedure of claiming for correction of the amount of reduction or exemption), and the portion reported as the sales amount should not be deducted from the total sales amount under the principle of equity (see Supreme Court Decision 2004Du9917, Nov.

Since the tax base and the amount of tax determined by the declaration can no longer be contested in a lawsuit disputing the disposition of increase in the amount of tax, even if the plaintiffs asserted that the sales of the taxable period stated in the attached taxation details should be deducted from the tax base as the processing transaction later in this case, so long as the plaintiffs legally reported the sales of the taxable period and confirmed, it cannot be accepted even if they claim that the sales declaration transaction should be

(2) On the second argument

Considering the overall purport of the statements and arguments in the evidence Nos. 2-1, 2, and 6, the defendant sent a guide to the effect that in the case of non-party 1's non-party 1's non-party 1's refusal to file a revised return on the value-added tax for the first period from the first period of time of 2005 to the first period of 2006, the defendant issued a notice to the effect that in the case of non-party 1's non-party 1's refusal to comply with the revised return, it can be acknowledged

However, the above taxation disposition by the Defendant is very weak, but it is only a rectification disposition for three taxable periods, and it does not seem to have been waived for the remaining taxable periods, considering the lack of human resources of the tax authorities, for the merchants who filed a revised tax return, considering the fact that the tax authorities received tax invoices related to Nonparty 1. In addition, even if it was found that it would give them the benefit of time for the remaining taxable periods, it was already planned at the time of the revised tax return guidance.

Therefore, it is difficult to view the disposition of this case as contrary to the principle of fair taxation solely on the grounds that the plaintiffs asserted.

(3) As to the other argument

Although Plaintiff 3 asserts to the effect that it is merely a person who is registered as a business operator and the actual business operator is Nonparty 2, it cannot be taxed on him under the substance over form principle, the above assertion cannot be accepted as there is no evidence to acknowledge it.

3. Conclusion

The plaintiffs' claims are dismissed in entirety because they are without merit.

[Attachment]

Judges Cho Sung-sung(Presiding Judge) (Presiding Judge)