Seoul Administrative Court 2006Guhap45173 ( November 30, 2007)

National High Court Decision 2006No1324 (Law No. 11, 2006)

The good faith principle is applied to exporters of gold bullion transactions via a bombing company.

Where an exporter of gold bullion knew, or was unaware of, a malicious business operator who makes an illegal transaction for the purpose of evading the output tax amount in a series of transactions during gold bullion transactions, claiming the deduction and refund of the input tax amount may not be permitted in violation of the good faith principle under Article 15 of the Framework Act

Article 15 of the Framework Act on National Taxes

2011Nu6860, revocation of disposition imposing value-added tax, etc.

XXD Co., Ltd.

Head of the tax office;

Seoul Administrative Court Decision 2006Guhap45173 decided Nov. 30, 2007

Seoul High Court Decision 2008Nu2134 Decided July 22, 2008

Supreme Court Decision 2008Du14616 Decided February 12, 2009

Re-transmission Judgment

Seoul High Court Decision 2009Nu6010 Decided August 14, 2009

[Judgment of re-return]

Supreme Court Decision 2009Du16367 Decided February 10, 201

July 20, 2011

October 5, 2011

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance court shall be revoked. The defendant requested on October 10, 2005 for the revocation of the imposition of value-added tax 1,326,127,910 won (additional 39,783,830 won, increased additional 15,913,530 won) for the first term period of 2004, the imposition of value-added tax 459,250,830 won for the second term of 204, and the imposition of additional tax 141,591,100 won (additional 4,22,100 won, increased additional tax 1,68,840 won) for the revocation of the imposition of value-added tax 2,736,850 won for the first term of 204, and the alteration of the purport of the corporate tax at the first instance court to the effect that the additional imposition of value-added tax was inappropriate for 204,000 won for the first term of 204, as the changed purport of the claim.

1. Details of the disposition and the scope of adjudication of the party concerned after the return;

A. The Plaintiff is a legal entity that operated gold bullion wholesale business from January 19, 2004, Seoul Jongno-gu, Jongno-gu, 000 Sejong Building 000, which was engaged in gold bullion wholesale business. The Plaintiff purchased gold bullion as follows in 2004 (i) export (ii) and domestic sales (iii) and received tax invoices accordingly.

① By the end of 2004, the gold bullion 1,139 g (hereinafter referred to as “the gold bullion in this case”) was purchased from eight wholesalers, such as A, etc. in total at KRW 16,903,213,000, and received a tax invoice accordingly (hereinafter referred to as “the purchase tax invoice in this case”).

② On February 11, 2004, on September 17, 2004, the Hong Kong and other corporations located in two Hong Kong, including O, exported KRW 974km in total to KRW 14,560,161,61,618.

③ On August 10, 2004 - October 11, 2004, four domestic companies, including BB, sold the remaining gold bullion amounting to KRW 2,487,046,000 in total, and issued a tax invoice accordingly (hereinafter “instant sales invoice”).

B. The Plaintiff reported the purchase tax invoice of this case (hereinafter collectively referred to as "the tax invoice of this case") and the sales tax invoice of this case (hereinafter referred to as "the second purchase tax invoice of this case") and the sales tax invoice of this case (hereinafter referred to as "the second purchase tax invoice of this case") in 2004, and corporate tax base and tax amount for the business year 2004. The Seoul Regional Tax Office decided that the tax invoice of this case was different from the facts of "the purchase tax invoice of this case" (hereinafter referred to as "the first purchase tax invoice of this case") after a criminal investigation against the Plaintiff. The Defendant notified the Plaintiff of the purchase tax invoice of this case and the additional tax amount by the deadline for payment (hereinafter referred to as "the second purchase tax invoice of this case") as stated in the following notice of correction and corporate tax as of October 10, 205, the Defendant did not pay the increased tax amount by the deadline for payment.

The remaining grounds of appeal were dismissed (this part of additional dues and aggravated additional dues is separate final and conclusive). The plaintiff, at the trial before remanding (before re-return) to the part of the second half-year disposition of value-added tax (141,591,100) and the second half-year value-added tax (459,250,830) were partly amended as follows. After remanding, the plaintiff only sought revocation of the disposition of imposition of value-added tax for the second year of 2004 (141,591,100-140,736,850) and the part of the second year of the second year of return and additional tax (200) with the exception of the amount of value-added tax return and additional tax for the second year of return and additional tax for the second year of 204, the part of the second year of return and additional tax for the second year of return and additional tax for the second year of return and additional tax for the second year of return and additional tax for the second year of return.

[Reasons for Recognition: Facts without dispute, Gap 1-4 evidence, Eul 1-3 evidence, the whole purport of pleading]

2. Determination on the Defendant’s defense of this case

The defendant added a new claim for revocation of the disposition rejecting the refund of value-added tax for the second period of 2004 through the application for amendment of the purport of the claim in the previous trial prior to the re-transmission. This asserts that it is unlawful since it was filed without going through the procedure of the previous trial without going through the procedure.

Article 1(1)1 of the Value-Added Tax Act provides that “the supply of goods shall be deemed the delivery or transfer of goods on all contractual or legal grounds,” and Article 6(1) provides that “the supply of goods shall be deemed the delivery or transfer of goods on all contractual or legal grounds.” In light of the fact that value-added tax is a multi-level transaction tax, “delivery or transfer” under Article 6(1) of the Value-Added Tax Act includes all acts of causing transfer of authority to use or consume goods, regardless of actual profits (see, e.g., Supreme Court Decisions 85Nu286, Sept. 24, 1985; 9Du9247, Mar. 13, 2001; 99Du9247, Apr. 16, 2001). In such a case, whether a certain transaction constitutes the supply of goods under the Value-Added Tax Act should be determined on the grounds that it constitutes a specific transaction under Article 28(1)6 of the Value-Added Tax Act, etc.

In this case, the gold bullion was actually distributed from the importer to the exporter, and the Plaintiff purchased and delivered the gold bullion from 8 wholesalers, including international gold bullion on February 11, 2004, and received the purchase tax invoice of this case by fully paying the purchase price of this case, and the Plaintiff exported 974 km out of the gold bullion of this case to 2 enterprises located in Hong Kong, such as OO, and the remaining 165 km out of the total transactions remaining due to sales to 4 domestic enterprises, such as BB, etc. In light of the fact that the purchase and sales transaction of this case, which are part of the whole transactions, are in violation of the principle of trust and good faith as provided in Article 15 of the Framework Act on National Taxes, is not permissible. The same shall apply where the exporter was unaware of such fraudulent transactions due to gross negligence (see, e.g., Supreme Court en banc Decision 2009Du13474, Jan. 20, 2011).

The first purchase tax invoice of this case is related to all export transactions. In light of the transaction behavior, distribution channel, the period, volume, and value of the Plaintiff’s transaction in the pertinent gold bullion transaction, etc., the Plaintiff is deemed to have known or failed to know by gross negligence that there was a malicious business operator who makes an illegal transaction for the purpose of evading the output tax amount in the series of transactions during the pertinent gold bullion transaction. The Plaintiff’s assertion of deduction and refund of the pertinent input tax amount is not permissible against the principle of trust and good faith as stipulated under Article 15 of the Framework

However, since the second tax invoice of this case is related to domestic sales during the second tax period of value-added tax in 2004, the principle of trust and good faith cannot be applied. The defendant denied most of the input tax amount including the relevant input tax amount of the sales tax invoice of this case on the grounds of the disposition of refusal to refund value-added tax for the second tax period of 2004 and the processing transaction at the time of the disposition of imposition of the second tax invoice of this case on the grounds of the disposition of refusal to refund value-added tax and the disposition of additional tax, etc. (see subparagraph 1-2 of this case). However, since the tax invoice of this case does not fall under all different tax invoices, the amount of value-added tax refund and additional tax amount should be determined based on the time when the corresponding input tax invoice of this case filed by the plaintiff and the relevant input tax amount of the second tax invoice of this case are presented as it is.

The disposition of refusal to refund value-added tax and the disposition of additional tax for the second term of 2004, which was made within the scope of the legitimate amount of tax, are

5. Conclusion

The Plaintiff’s claim is without merit, including the disposition of refusal to refund value-added tax amounting to KRW 459,250,830 for the second term of 2004. The first instance court that dismissed the Plaintiff’s claim is ultimately justifiable. The Plaintiff’s appeal is dismissed.