205 Revocation of revocation of disposition, such as rectification of customs duties, etc.

Co., Ltd. 000

(Explanation omitted)

Representative Director 000000

[Defendant-Appellee] Plaintiff 1 and 3 others

Head of Busan Customs Office

Litigation Performers 000, △△△△

May 25, 2006

June 22, 2006

1. The Defendant’s disposition of imposition of KRW 650,54,50 in total, each of the customs duties, value-added taxes, and additional taxes stated in the [Attachment 1] that the Plaintiff filed against the Plaintiff shall be revoked.

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

The same shall apply to the order.

1. Details of the disposition;

The following facts are acknowledged as either a dispute between the parties, or as a whole by considering the purpose of the entire pleadings in each entry of Gap evidence 1 to 54, Gap evidence 3-1 to 12.

A. On May 14, 1983, the Plaintiff was a juristic person established for the purpose of manufacturing drugs and importing pet drugs, etc., and at least 50% of the Plaintiff’s shares are held by the pharmaceutical company F.000 company (hereinafter “0 Switzerland”) established in Switzerland, Switzerland.

B. Between September 20, 199 and May 27, 2002, the Plaintiff imported at 54 times a unit product of 150 g 60 g g 150 g g 120 g l g l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l, l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l ll l l

2. Whether the disposition is lawful;

A. The parties' assertion

(1) The plaintiff's assertion

The disposition of this case shall be revoked on the following grounds of illegality:

(A) The special relationship between the Plaintiff and 00 did not entirely affect the determination of the import transaction price at the same time.

(B) The domestic sale price calculated by the Defendant pursuant to Article 33 of the Act is based on the calculation of profit and general expenses rate as data of the comparable companies selected as a arbitrary standard, and is unlawful beyond the discretionary scope under Article 27(4) of the Enforcement Decree of the Act and Article 6(2) of the Enforcement Rule of the Act.

(2) The defendant's assertion

(a)1)The determination of the import price at a market by means of resale price method (Rrice) is generally known to be that: (a)the profit ratio of the exporter and the distribution authority is negotiated on the basis of the domestic selling price calculated by the insurance amount in the pharmaceutical transaction in accordance with this method; (b) the profit ratio is the largest impact on the determination of the import price; and (c) the sales price at the resale price in which the sales price and the profit and the general expenses are charged are not more than 60 per cent to 70 per cent; and (d) the importer, even with the guarantee of its profit and general expenses by 35 per cent.

2) However, in the import price of a trade channel, the sales cost rate is more than 50% or 60%, and there is no data related to the price negotiations between the Plaintiff and 00 as well as the Plaintiff and 00.

3) Therefore, the import price at the relevant market was affected by the special relationship between the Plaintiff and 00.

(B) The rate of normal profit and general expenses applied by the Defendant at the time of the instant disposition is determined reasonably in accordance with legitimate procedures.

B. Relevant statutes

Attached Form 2 shall be as listed in attached Table 2.

C. In fact-finding, the following facts are acknowledged in addition to the testimony of Gap 6, Eul 3 through 9, Eul 11, Eul 14-1 and Eul 2, and witness leaping △△○, and Kim ○○, respectively.

(1)(a)In order to import complete medicine, domestic insurance will be approved by the Ministry of Health and Welfare as well as domestic sales licenses and as domestic sales final consumer prices (hereinafter referred to as "insurance prices"). In principle, insurance prices are determined at a level of 65 per cent of the average amount of the insurance prices in the advanced seven countries, such as the United States, the United Kingdom, Japan, Germany, France, Italy, Canada, etc., but if complete medicine is new and only some of the above seven countries are insured, domestic insurance prices will be determined by taking into account only those ones.

(B) The resale price, which is the price at which an importer of a complete medicine sells to a domestic wholesaler, is determined at the price determined by the above-mentioned domestic insurance price less the profit and expenses of a wholesaler, which is determined by negotiation between the importer and the wholesaler. The profit, etc. shall be determined at the level of 3-8% of the number of domestic insurance.

(C) The import price of the complete medicine is usually determined at a level determined by the resale price determined as above, excluding the profit and general expenses of the importer determined by negotiations between the importer and the exporter.

(D) The term “sales cost” and “profit and general expenses rate” of complete medicine are mutually substitute concepts. The former is the importation price ratio compared to resale price (=sales cost) and the latter is the profit and general expenses ratio compared to resale price. (2) On the basis of the first sale in Japan around 1998, after obtaining permission for domestic sales of rare medicine, which is a complete medicine, around 12.00, and around May 200, the domestic sales price was 000, 10000, 20000, 100,0000,0000,0000,000,0000, 200,000,000,000,000, 20,000,000, 20,000,000,000, 20,000,000,000,000,000,000,00,000,00.

[Attachment 1]

A person shall be appointed.

(B) Although the Defendant demanded the submission of data related to price negotiations between the Plaintiff and 00 on the instant disposition and the instant disposition, the Plaintiff did not submit such data on the ground that there was no such data.

(C) Meanwhile, as of the first import date ( October 6, 200), 120 g 84 g △△△△△△△△△△, imported by the Plaintiff from 00, the ratio of the sales cost to the resale price as of the first import date of 71%, 750 g 10 g g 20 g 200 ( June 20, 200), and the ratio of the sales cost as of the first import date of 73%, 73%, 250 g 10 g 100 g 250 g g 1996 ( November 30, 196) (the sales cost ratio is 69%) on each country, including the Plaintiff, etc. around January 23, 2001.

[Attachment 2]

A person shall be appointed.

(5) At the time of the instant disposition, the Defendant calculated the current status of gross sales profit (profit and general expenses) of the comparable enterprises in 2002 by averaging the profit and general expenses of the companies indicated in the column for “business name” under [Attachment 3] below, with the exception of an enterprise having special relation between the exporter, importer and the first buyer in Korea, among domestic enterprises importing goods in conformity with the guidelines for applying for profit and general expenses at the Korea Customs Service for approval of the profit and general expenses:

[Attachment 3]

A person shall be appointed.

D. Determination

(1) Article 30(3)4 of the Act and Article 23(1) of the Enforcement Decree of the Act provide that where a special relationship between a buyer and a seller directly or indirectly control the other party and a seller affects the price of the relevant goods, the dutiable value shall be determined by the methods under Articles 31 through 35 of the Act, not the import transaction price under Article 30(1) of the Act, but the import transaction price of the relevant goods. Article 23(2) of the Enforcement Decree of the Act provides that where the buyer and the seller are in such special relationship, the price of the relevant goods shall be determined by the method of determining ordinarily the price of the relevant goods, (i) where the buyer and the seller are determined by the method that conforms to the normal pricing practice in the relevant industry (subparagraph 2), (iii) where it is determined by the method that conforms with the normal pricing practice in the relevant industry, or a price close to the dutiable value of the same or similar goods that are determined by Articles 33 and 34 of the Act, such special relationship shall not affect the price of the relevant goods.

(2) However, in the interpretation of the relevant provision, even if there is a special relationship between the buyer and the seller, it cannot be readily concluded that such relationship directly affects the import price of the relevant goods. Therefore, in principle, the tax authority bears the burden of proving that such relationship affected the import price of the relevant goods.

(3) Comprehensively taking account of such contents of relevant Acts and subordinate statutes and legal principles as above (c) and (1) above, the Defendant’s price and rate of profit or general expenses calculated for the comparable enterprises for the instant disposition from 18.53% to 57.69% cannot be readily concluded that the special relationship had affected the import price merely because the Plaintiff’s profit and general expenses rate reached 40-50% since it was no higher than that of the Plaintiff’s for the instant disposition. As such, it is difficult to conclude that the importer’s import of drugs did not change the import price at a different rate than the first one of the import price determined on the basis of the market price determined on the basis of the total market price at a lower rate than that of the Plaintiff’s first price determined on the basis that there was no difference between the import price and the pharmaceutical products at a lower rate than that of the Plaintiff’s first price and the sales price at a lower rate than that of the instant pharmaceutical products. Thus, it is difficult to view that there was no difference between the import price and the first sale price determined on the basis of the insurance market price.

(4) Therefore, the Plaintiff’s assertion on this issue is with merit, and thus, the instant disposition should be revoked in an unlawful manner without examining it.

3. Conclusion

Therefore, the plaintiff's claim of this case is justified and it is so decided as per Disposition.

The presiding judge, the number of judges;

Judge Choi Jin-jin

Judges Kim Jong-chul