[1] Whether the public notice of collection, deferment of collection, and refund of import and sale charges of the former petroleum and alternative fuel (public notice of the Ministry of Commerce, Industry and Energy) and the calculation and management of the former required amount and review (public notice of the Korea Customs Service) have the effect as a legal order (affirmative)

[2] Whether the legal principles on the interpretation of the Act on Tax and Charges apply to the interpretation of the provisions concerning the criteria for calculating refunds, such as the subject, scale, and method of refunding surcharges under the former Act on Business of Petroleum and Alternative Fuel (affirmative), and whether the former public notice on the collection, deferment, and refund of surcharges on the import and sale of petroleum and alternative fuel, the collection of surcharges on the collection, deferment of collection, and refund (public notice of the Ministry of Commerce, Industry and Energy), and whether the former public notice on the calculation and management of the required amount (public notice of

[1] Articles 18(1)1 and 19(1)3 of the former Petroleum and Petroleum Substitute Fuel Business Act (amended by Act No. 8768, Dec. 21, 2007; hereinafter “former Petroleum Business Act”); Article 27(1)1, 2, and (4) of the former Enforcement Decree of the Petroleum and Petroleum Substitute Fuel Business Act (amended by Presidential Decree No. 20840, Jun. 20, 2008; hereinafter “former Enforcement Decree of the Petroleum Business Act”); Article 27(1)4 of the former Enforcement Decree of the Act on Special Cases Concerning the Collection and Refund of Charges on Import and Sale of Petroleum and Petroleum Substitute Fuel; Article 21(1)1 and (2)4 of the former Enforcement Decree of the Petroleum Business Act (amended by the Ordinance of the Ministry of Commerce, Industry and Energy No. 207-154, Dec. 28, 2007; hereinafter “former Enforcement Decree of the Petroleum Business Act”); Article 27(1)4 of the former Enforcement Decree of the Petroleum Business Act;

[2] A group of dues collected from a petroleum refiner, petroleum exporter or importer, or petroleum retailer (hereinafter “petroleum refiner, etc.”) but the former Petroleum and Petroleum Substitute Fuel Business Act (amended by Act No. 8768 of Dec. 21, 2007) and the former Enforcement Decree of the Petroleum and Petroleum Substitute Fuel Business Act (amended by Presidential Decree No. 20840 of Jun. 20, 2008) set the final amount of dues imposed by a petroleum refiner, etc. by refunding part of dues under the conditions as prescribed by the former Enforcement Decree of the said Act. In light of the substance of imposition and refund of petroleum refund, the legal principle on the interpretation of the Act on the Standards for Calculation of Refund, such as the subject, scale, method, etc. of refund, applies to the interpretation of the former Act on the Collection, Deferment of Collection and Refund of Dues (amended by Presidential Decree No. 2007-154 of Dec. 28, 2007).

[1] Articles 18(1)1, 19(1) and (3) (see current Article 19(5)), 27(1)1, 2, and (4) (see current Article 27(7) of the former Enforcement Decree of the Petroleum and Petroleum Substitute Fuel Business Act (Amended by Act No. 8768, Dec. 21, 2007); Article 11(1) and (4) of the former Enforcement Decree of the Act on Special Cases Concerning the Refund of Customs Duties, etc. Levied on Raw Materials for Export / [2] Articles 18(1)1, 19(1), and (3) (see current Article 19(5) of the former Act on Special Cases Concerning the Refund of Customs Duties, etc. Levied on Raw Materials for Export (Amended by Act No. 8768, Dec. 21, 2007); Article 18(2)1, Article 19(1), and (3) of the former Enforcement Decree of the Act on Special Cases Concerning the Refund of Customs Duties on Petroleum and Petroleum Substitute Fuel

E.S. Ltd. and three others (Law Firm LLC et al., Counsel for the plaintiff-appellant)

Korea National Oil Corporation (Law Firm Barun, Attorneys Gangwon-hun et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2013Nu29317 decided August 19, 2014

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. As to the grounds of appeal Nos. 3 through 6

A. The so-called administrative rules, which are issued by a superior administrative agency to a subordinate administrative agency, are generally effective only within the administrative organization, and do not have external binding force. However, if a provision of a law does not specify the procedure or method of exercising its authority while granting a specific administrative agency the authority to determine the specific matters of the law, and the delegated administrative agency specifically provides for the matters to be the contents of the law in the form of administrative rules, such administrative rules do not have the general effect of the administrative rules as seen above, but have the function to supplement the contents of the law in accordance with the provisions of the law that granted the administrative agency the authority to supplement the specific matters of the law. Accordingly, such administrative rules have the effect of an external binding law order in combination with those of the administrative rules so long as they do not go beyond the bounds delegated by the law in question (see Supreme Court Decision 2006Du3742, 3759, Mar. 27, 2008, etc.).

Furthermore, with respect to the interpretation of the Act on Taxes and Charges, it shall not be interpreted as the legal text, unless there are special circumstances, regardless of the requirements for imposition or exemption, nor shall it be interpreted extensively or analogically without reasonable grounds (see Supreme Court Decision 2007Du9884, Oct. 26, 2007).

B. Article 18(1)1 of the former Petroleum and Petroleum Substitute Fuel Business Act (amended by Act No. 8768 of Dec. 21, 2007 and enforced on June 22, 2008; hereinafter “former Petroleum Business Act”) provides that surcharges may be collected from petroleum refiners, petroleum exporters or importers, or petroleum retailers who import petroleum or sell petroleum products (hereinafter “petroleum refiners, etc.”) in order to stabilize petroleum supply and demand, and the price of petroleum. Article 19 of the same Act provides that surcharges collected may be refunded in cases where a person subject to surcharges uses or supplies petroleum for the purpose prescribed by the Presidential Decree (Article 19) and other matters necessary for refund standards and refund procedures (Article 18(3)).

Accordingly, Article 27(1) of the former Enforcement Decree of the Petroleum and Petroleum Substitute Fuel Business Act (amended by Presidential Decree No. 20840, Jun. 20, 2008; hereinafter “former Enforcement Decree of the Petroleum Business Act”) provides that where a person who has paid a charge falls under any of the following subparagraphs, he/she shall be fully or partially refunded the charge, and subparagraph 1 of Article 27 provides that “where a petroleum refiner or petroleum exporter or importer exports products prescribed by the Ordinance of the Ministry of Commerce, Industry and Energy, which are produced in the process of refining petroleum products or petroleum (hereinafter “reasons 1”), and subparagraph 2 provides that “where a petroleum refiner or petroleum exporter or importer exports products prescribed by the Ordinance of the Ministry of Commerce, Industry and Energy, which are produced in the process of refining petroleum products or petroleum for industrial raw materials prescribed by the Ordinance of the Ministry of Commerce, Industry and Energy (including where he/she supplies them as fuel to manufacture industrial raw materials among by-products)” (Article 27(4) provides that the Minister of Knowledge Economy shall determine and publicly notify the subject matter of the charge:

Article 21(1)1 of the former Public Notice on the Collection, Deferment of Collection, and Refund of Charges for Import and Sale of Petroleum and Petroleum Substitute Fuel (amended by the Ministry of Commerce, Industry and Energy No. 2007-154 of Dec. 28, 2007 and enforced January 1, 2008; hereinafter “former Public Notice”) prepared by delegation of the former Petroleum Business Decree provides that “where a person exports petroleum products under the Foreign Trade Act” as one of the “reasons 1,” and Article 21(2)1 of the former Public Notice on the Collection, Collection, and Refund of Charges for Import and Sale of Petroleum and Petroleum Substitute Fuel (including alternative petroleum products) as one of the “reasons 2” refers to the case where a person supplies byproduct (including alternative petroleum products) as a raw material for the manufacture of petroleum chemical or fertilizer.

In addition, the main sentence of Article 23 (1) of the former Enforcement Decree of the Act on Special Cases concerning the Refund of Dues shall be calculated by providing for "(amount of petroleum used for the production of petroleum products subject to refund) x (unit price for the preceding month) x (unit price for the production of petroleum used for the preceding month) x (unit price for the preceding month) x (unit price for the production of petroleum) 1. Article 24 (1) 1 of the same Decree shall be calculated by applying the formula of the former Enforcement Decree to "the number of petroleum used for the production of petroleum products subject to refund" and "the number of petroleum used for the production of petroleum by-products" in Article 26. Article 24 (2) 1 of the same Decree shall be calculated by applying the formula of the former Enforcement Decree to "the number of petroleum products subject to refund" and "the number of petroleum by-products for the production of petroleum products subject to refund" after obtaining confirmation of the quantity of petroleum by-products from the Korea Association for the use of petroleum by-products and the number of petroleum by-products in attached Form 25.

Meanwhile, Article 2 Subparag. 4 of the Act on Special Cases concerning the Refund of Customs Duties provides that "the term "required amount" means the amount of raw materials required in the production of export goods, including the amount of normal loss and loss incurred in the production process. Article 10(1) provides that "The applicant for refund shall prepare a document in which the amount of raw materials required for the export goods is calculated as prescribed by Presidential Decree (hereinafter "statement of the required amount") and shall calculate the refund amount based on the calculation statement of the required amount. Article 11(1) of the Enforcement Decree of the Act on Special Cases concerning the Refund of Customs Duties provides that "the person who intends to prepare the calculation statement of the required amount shall report to the head of the competent customs office and calculate the required amount as prescribed by Presidential Decree." Article 2(4) provides that "1. Name of export goods; 2. Calculation method of the required amount; 3. The period and application period of application for the calculation of the required amount; 4. Manufacturing process and process description of export goods; 5. Other matters related to the calculation of the required amount."

As a result, Article 1-2 of the former Act on the Calculation and Management of Required Amount and Examination (amended by the Korea Customs Service Notice No. 2008-36, Nov. 3, 2008; hereinafter “former Korea Customs Service Notice”) provides for the total quantities of raw materials (excluding the quantity of raw materials used for producing inferior products) generated in the normal process of producing export goods (excluding the quantity of raw materials used for producing inferior products). The term “by-products” refers to goods with economic value generated in addition to export goods during the manufacturing process (subparagraph 7); the term “self-required quantity” refers to the total quantities of raw materials generated in the manufacturing process of export goods and sold or used for a person; the term “the total quantities of raw materials” refers to the quantities calculated by an enterprise preparing accounts for the required amount under Article 10(1) of the Act and Article 11 of the Decree; and Article 2-4(2) and (2) of the Decree provides for the total quantities of products used in the production process of each product for a specific period of up to 2 years.

Furthermore, Article 2-14(1) of the former Customs Service Notice provides that where it is difficult to separately identify the raw materials that have caused by-products, it shall be deemed that by-products have been generated from all the raw materials required in the manufacturing process of the product. Paragraph (2) provides that the formula for calculating “by-products deduction rate” (A: the price of the product produced in the relevant process where by-products are generated, B: the price of the total raw materials required in the relevant process where by-products are generated, C: the price of the relevant raw materials that have caused by-products, and D: the price of the relevant by-products: Provided, That where it is difficult to calculate the price A and B, the price of the relevant raw materials that have caused by-products is determined as D/C, A, B, C, and D, and the refund for the raw materials that have occurred by-products under paragraph (4) shall be calculated by using the deduction rate by by-products in accordance with paragraph (2). (hereinafter collectively, Article 2-14 shall be referred to as “by-products management regulations”).

C. According to the reasoning of the lower judgment, the companies prior to the establishment or merger of the Plaintiffs (hereinafter “Plaintiffs”) paid charges to the Defendant at the time of importing petroleum pursuant to relevant Acts and subordinate statutes, such as the Petroleum Business Act. In the event that petroleum is exported by refining petroleum or used for a specific purpose, etc., surcharges already paid within the scope equivalent to the amount of petroleum used as raw materials for the production of “export petroleum products” or “industrial raw material products” subject to such refund are refunded; ② in the process of producing petroleum by refining crude oil (hereinafter “raw gas refining process”), the amount of petroleum generated at the first stage is separate from 0.5% of the total amount of petroleum by-products generated from 20% of the total amount of petroleum by-products to 30% of the total amount of petroleum by-products generated from 20% of the total amount of petroleum by-products generated from 20% of the total amount of petroleum by-products to 20% of the total amount of petroleum by-products generated from 20% of the total amount of petroleum by-products to 20.

Based on such factual basis, the court below determined that the by-products management regulations under Article 2-14(2) of the former Notice of the Korea Customs Service shall apply to the plaintiffs in calculating the amount of refund based on the "reasons No. 1", and that in this case, it is legitimate for the defendant to calculate the amount required by-products in the formula of the deduction ratio of by-products (if it is difficult to calculate the price of A, B, C, and D), and that in relation to hydrogen, it is legitimate to calculate the amount required by-products in the formula of the "by-products generation ratio" (i.e., the item column of the material surface column of the former notice of the FIE, and that in relation to hydrogen, it can be included in hydrogen merely in the case of the entry of by-products in the material surface column of the former notice of FIE, and further, the plaintiffs' use the hydrogen for the evasion of oil in the raw milk refining process constitutes "the sale of by-products for fuel" after calculating the refund amount.

D. However, in light of the legal principles as seen earlier, it is difficult to accept the judgment of the court below in the following respect.

(1) In full view of the contents, form, purport, etc. of the pertinent statutes, each of the provisions of the former Public Notice and the former Public Notice of the Korea Customs Service are based on delegation of the former Public Notice of the Petroleum Business Act that stipulates that “the refund standards or the refund subject, size, method, etc. shall be determined and publicly announced by the Minister,” and it shall be deemed that the same has the effect as an external binding legal order in supplement of the provisions of the relevant statutes.

Furthermore, when collecting charges from petroleum refining business operators, etc., but refunding part of charges under the former Petroleum Business Act, thereby setting the amount of charges to be finally borne by petroleum refining business operators, etc. In light of the substance of imposing and refunding oil refunds, the legal doctrine on the interpretation of the Act on the Imposition of Taxes and Charges shall be applied in interpreting the provisions on the criteria for calculating refunds, such as the subject, scale, and method of refund. Therefore, the provisions on the former Public Notice of the Childbirth and the former Public Notice of the Korea Customs Service, which set the criteria for calculating refund, should be interpreted and applied in principle in accordance with the language and text, and shall not be extensively interpreted or analogically interpreted

(2) As to the method of treating fuel gas

First of all, fuel gases have gone through a minimum stabilization for burning through separate processing by the Plaintiffs. Since waste gas generated in the process of crude oil refining has been manufactured for sale purposes or actually commercialized for sale purposes and cannot be sold to a third party, it is reasonable to view it as by-products, “by-products,” not included in “loss quantity of raw materials generated in the process of normally producing export goods,” but rather, as “by-products, goods with economic value incidental to the production process of export goods, other than export goods, are sold or used by himself/herself.”

However, in addition to the relevant regulations and the language, history, and purport of the announcement, ① the fuel gas is deemed to be included in by-products in the announcement revised on December 29, 2008; however, the former announcement and the former announcement made by the Korea Customs Service that applied during the period subject to the disposition of the instant case was not clearly prescribed in the method of treating “fuel gas” in calculating the refund amount; ② the former announcement clearly prescribed the eligible amount of refund in Article 21 and the method of calculating the refund amount in Article 23, which are one of the components of the formula in Article 26(1), are to be calculated by applying the “voluntary required amount by-products” only as to the “amount of petroleum used for producing petroleum by-products” that are one of the components of the formula in Article 26(1) and thus, it is difficult to determine the “amount of refund money by-products” as the “amount of refund money by-products” generated by-products” under Article 2-14(by-2) of the former notification made by the Korea Customs Service, instead of using by-by-by-1).

(3) As to the method of handling a lawsuit

In light of various circumstances such as hydrogen generated from a petroleum chemical process that produces a variety of chemical products using naphthas, namely, ① the Plaintiffs obtained substantial economic benefits by using the hydrogen for the sluting purposes from the crude oil refining process; ② the hydrogen is the product sold in the market; ③ the hydrogen is incidental to the naphtha decomposition process, it is reasonable to grasp it as by-products, not as grandchildren.

However, considering the following circumstances, in light of Article 25(1) of the former Public Notice No. 25(1) and the content of the material balance sheet, which provides for the calculation method of “payment rate of dues”, one of the elements of “reasons No. 2” for the calculation of the amount of crude oil, the application of the imposition rate to Type 20 can not be seen as having been used for the purpose of calculating the amount of net input oil so that it can not be seen that the pertinent part of the net input quantity can be excluded from the calculation of the amount of refund. (2) As such, it is difficult to view the Plaintiffs as having the petroleum chemical supplier to submit the calculation method of “payment rate of dues” for the purpose of calculating the amount of dues under Article 25(1) of the former Public Notice No. 4 as the sale rate of raw milk by-products, the sale volume of by-products and self-consumption of petroleum by-products can not be seen as having been separately included in the calculation of the quantity of petroleum by-products generated for any purpose other than the 4thyle and other substances.

(4) Nevertheless, the court below held that the disposition of this case, which revoked the part corresponding to the above, was lawful, on the ground that the plaintiffs did not apply by-products management regulations to fuel gas but applied to hydrogen "in a case where by-products are sold for fuel use or for other purposes," and instead applied to the defendant for refund, and the defendant paid the amount calculated by recognizing it as it is illegal. Accordingly, the court below erred in the misapprehension of legal principles as to the former Petroleum Business Act, the former Petroleum Business Act, the former Industrial Division Notice, and the interpretation and application of the former Customs Service Notice Regulations, which set the calculating method of refund in relation to fuel gas and hydrogen, and thereby affected the conclusion of the judgment

2. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Jo Hee-de (Presiding Justice)