Where a tax authority imposes an increase in the amount of tax originally reported by a taxpayer on the ground that there exists a claim system for correction under Article 45-2 (1) of the former Framework Act on National Taxes, whether an appeal may not be filed, or whether it may not be asserted that the tax base or amount initially reported is excessive, in addition to disputing the grounds for increase imposition in such

Article 45-2 (1) of the former Framework Act on National Taxes (amended by Act No. 8830 of Dec. 31, 2007)

Supreme Court en banc Decision 2010Du11733 Decided April 18, 2013 (Gong2013Sang, 967)

Plaintiff

The director of the tax office

Seoul High Court Decision 2009Nu35612 decided September 30, 2010

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. A processing transaction in which an entrepreneur prepares and delivers only sales tax invoices without supplying goods or services to another entrepreneur shall not be deemed liable to pay value-added tax on the grounds that there is no supply of goods or services subject to value-added tax, and such processing sales shall be excluded from the tax base of value-added tax (see Supreme Court Decisions 88Nu4522, Jun. 26, 1990; 2007Du16974, Dec. 24, 2009).

In addition, Article 45-2(1) of the former Framework Act on National Taxes (amended by Act No. 8830, Dec. 31, 2007) provides that where the tax base and tax amount entered in the tax base return exceeds the tax base and tax amount to be reported under the tax-related Acts, a taxpayer may file a claim with the head of the competent tax office for the determination or correction of the tax base and tax amount of the national tax initially reported and reported for correction within three years after the statutory due date of return expires. However, even if the tax authority imposed a disposition to increase the tax amount initially reported on the ground that such a request for correction exists, it cannot be said that the taxpayer is unable to file an appeal against it, or that the tax base and tax amount initially reported are excessive in addition to disputing the grounds for imposing the tax authority’s increase in the appeal (see Supreme Court en banc Decision 2010Du1733, Apr. 18,

2. In full view of the adopted evidence, the lower court recognized the following facts: (a) as a whole, the Plaintiff’s report on value-added tax or revised report on the portion of the first half of the year 2005 and the first half of the year 2006, each of the input tax amount and the amount of value-added tax sent to the so-called “intersection transaction” without actual transaction to adjust the amount of value-added tax; (b) provided that insofar as the Defendant imposed a disposition to rectify the details of the return by excluding them from those subject to input tax deduction on the ground that the above purchase tax invoice is different from the facts, the Plaintiff may assert that the tax base and the amount of tax already reported are excessive; (c) according to the above recognized facts, the portion of the tax base reported by the Plaintiff constitutes the processed sales should be excluded from the tax base of value-added tax; and (d) determined that the disposition to impose the correction of this case, which the Defendant did not include it in the tax base as it is, ultimately, the Defendant shall not have any choice but to calculate the tax base and the amount payable by means of estimation.

In light of the aforementioned legal principles and records, the judgment of the court below is just and acceptable. Contrary to the allegations in the grounds of appeal, the court below did not err by misapprehending the legal principles on the scope of grounds of objection, or by misapprehending the legal principles on the burden of proof of processed sales, thereby adversely affecting the conclusion of the judgment. In addition, according to the records, the court below did not err by misapprehending the legal principles on the scope of revocation of the tax disposition, since the output tax amount based on the tax invoice deemed to be false exceeds the Defendant’s denied input tax amount.

3. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Shin (Presiding Justice)