Whether a claim for the refund of value-added tax is subject to a party litigation (affirmative)

[Majority Opinion] The reason why the Value-Added Tax Act provides for the State’s duty to pay the tax amount to an entrepreneur liable for value-added tax along with specific provisions on the definition, timing and method of payment thereof (hereinafter “taxpayer”) is that the legislator collects the amount of tax from the entrepreneur who supplied goods or services at each transaction stage before reaching the final consumer and pays it to the State through legislative determination in order to achieve tax policy objectives, such as promoting convenience in taxation and collection, and preventing duplicate taxation. In light of the content, the State’s duty to pay the value-added tax and its legislative intent, it is reasonable to view that the State’s duty to pay the tax amount to a taxpayer is specifically recognized by the Act and subordinate statutes, not the State’s duty to pay the tax amount to a taxpayer in the following phase through the process of receiving the tax amount deducted and refunded as the input tax amount from the State’s tax amount, and ultimately imposes it on the final consumer. If the tax amount collected in a certain taxable period exceeds the tax amount collected, it is reasonable to view that the State’s duty to pay the amount of tax to a taxpayer and its duty to pay taxes directly within the specific taxable period.

[Dissenting Opinion by Justice Park Poe-young] Article 3 subparag. 2 of the current Administrative Litigation Act provides for the definition of a party suit as “a lawsuit concerning a legal relationship based on an administrative disposition, etc. of an administrative agency and other legal relations under public law, which is a lawsuit involving a party’s legal relationship, and is an abstract interpretation of the court’s interpretation.” Therefore, it cannot be deemed that a logical and inevitable ground exists that should be the subject of a party suit solely on the ground that the legal nature of the right exists. Rather, when the value-added tax refund exceeds the value-added tax (purchase) paid at the time of purchase by an enterpriser, the State is able to return the value-added tax paid by the enterpriser without a justifiable reason and constitutes a claim for return of unjust enrichment under the Civil Act. In addition, even if a State has not actually received the amount of tax collected excessively from a certain enterpriser, the State’s obligation to collect the tax claim by acquiring such transaction due to a direct cause, thereby evaluating the existence of direct causal relationship between the loss and loss, and the legal relationship between the State’s obligation to pay unjust enrichment.

Article 3 subparagraph 2 of the Administrative Litigation Act, Articles 17 (1) and 24 (1) of the Value-Added Tax Act, Article 72 (1) and (4) of the Enforcement Decree of the Value-Added Tax Act

Supreme Court Decision 85Nu565 delivered on September 8, 1987 (Gong1987, 1573), Supreme Court Decision 87Nu479 delivered on November 8, 198 (Gong1988, 1540), Supreme Court Decision 92Da2002 delivered on November 27, 1992 (Gong1993Sang, 2405 delivered on April 12, 1996 (Gong196Sang, 1489), Supreme Court Decision 95Da4063 delivered on September 6, 199 (Gong196Ha, 2964), Supreme Court Decision 200Du29401 delivered on October 27, 1992 (amended on April 12, 1992), Supreme Court Decision 94Da34005 delivered on April 24, 201 (Gong196Ha, 2964) (amended on September 6, 1997).

Asian Trust Co., Ltd. (Law Firm LLC, Attorneys Lee Ho-ho et al., Counsel for the plaintiff-appellant)

Korea

Seoul High Court Decision 2011Na4102 decided September 7, 2011

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

The grounds of appeal are examined.

1. Article 17(1) of the Value-Added Tax Act provides that “The amount of value-added tax payable by an entrepreneur shall be the amount calculated by deducting the amount of tax under each of the following subparagraphs (hereinafter “purchase tax amount”) from the amount of tax on the goods or services supplied by him/her (hereinafter “sales amount”). However, an input tax amount exceeding the output tax amount shall be the refundable tax amount (hereinafter “Refund tax amount”). Article 1 provides that “the amount of tax on the supply of goods or services used or to be used for his/her own business” under Article 24(1)1 provides that “the amount of tax on the goods or services used or to be used for his/her own business” and Article 24(1)2 provides that “the head of a tax office having jurisdiction over a place of business shall refund the amount of tax on each taxable period to an entrepreneur as prescribed by the Presidential Decree.” Meanwhile, Article 72(1) of the Enforcement Decree of the Value-Added Tax Act provides that “The amount of tax refund under Article 24(1) of the Act shall be refunded to an entrepreneur within 30 days after the final return period for each taxable period.”

As above, the reason behind the legislators’ provision on the definition, timing and method of tax refund under the Value-Added Tax Act and the duty to pay the tax amount to an entrepreneur liable for value-added tax (hereinafter “taxpayer”) is that through legislative determination to achieve the purpose of tax policy by facilitating convenience in taxation and collection and preventing duplicate taxation, the entrepreneur who supplied goods or services at each stage of transaction before reaching the final consumer, collects the amount of tax from the entrepreneur who received the supply and pays it to the State, and the entrepreneur who collected the amount of tax was obligated to pay it to the final consumer in turn through the process of receiving the deduction and refund from the State’s input tax amount, and ultimately imposes it ultimately on the final consumer. As a result, when the amount of tax collected in any taxable period exceeds the amount of tax collected in transaction, the amount equivalent to the value-added tax amount created by the taxpayer is traded and collected, and thus, it can be deemed that the legislators specifically recognized upon the tax technology and policy request (see, e.g., Supreme Court en banc Decision 200Da2902, Nov. 27, 2002).

Therefore, in light of the content, form, legislative intent, etc. of the Value-Added Tax Act, the State’s duty to pay the amount of tax refundable to a taxpayer is directly arising pursuant to the Value-Added Tax Act and subordinate statutes regardless of whether the State has actually paid the amount of tax collected excessively from a taxpayer in any taxable period. The legal nature of the duty is not the duty to return unjust enrichment recognized by the Value-Added Tax Act and subordinate statutes, but rather the duty to return unjust enrichment recognized to adjust property status between a beneficiary and a loss, and is specifically determined by the existence or scope

Therefore, the taxpayer's claim for the payment of the value-added tax refund against the country corresponding to the taxpayer's obligation to pay the value-added tax refund is not a civil procedure but a party's lawsuit under Article 3 (2) of the Administrative Litigation Act.

Nevertheless, Supreme Court Decisions 94Da34005 delivered on April 12, 1996, 95Da4063 delivered on September 6, 1996, 97; 97Da26432 delivered on October 10, 1997; 200Du7520 delivered on October 26, 2001, and Article 51(1) of the Framework Act on National Taxes concerning the Refund of National Tax Refunds, which held that a claim for the payment of value-added tax refund is subject to civil litigation, not an administrative litigation, shall be modified to the extent that the return of the value-added tax refund under individual tax laws is also uniformly unjust enrichment in relation to the interpretation of Article 51(1) of the Framework Act on National Taxes, and thereby, shall be modified to the same purport within the same extent as this decision, including Supreme Court Decisions 85Nu565 delivered on September 8, 198; 87Nu479 delivered on November 8, 1988.

2. In light of the above legal principles and records, the court below revoked the judgment of the court of first instance which was examined and judged by civil procedure and transferred the instant case to the District Court of the Government, the competent court of the administrative case, on the premise that the Plaintiff’s claim was subject to the payment claim of value-added tax arising under Article 24(1) of the former Value-Added Tax Act (amended by Act No. 9915, Jan. 1, 2010) and Article 24(1) of the Value-Added Tax Act (amended by Act No. 9915, Jan. 1, 2010) and Article 24(1) of the Value-Added Tax Act (amended by Act No. 9915, Jan. 1, 2010), which applies to the refund of value-added tax of the said case for the second period of February 2, 2008, as well as the legal nature

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, except for a dissenting opinion by Justice Park Poe-young.

4. Dissenting Opinion by Justice Park Poe-young is as follows.

A. However, we cannot agree with the Majority Opinion’s logic that the legal nature of the duty to pay value-added tax ought to be specifically determined under the Value-Added Tax Act and that of the State’s duty under public law, which is specifically recognized from the perspective of tax policy, is to a certain extent acceptable. However, we cannot agree with the Majority for the following reasons to view that the Majority Opinion ought to revise the Supreme Court’s decision to the contrary purport because it is not a civil procedure but a party’s lawsuit under Article 3 subparag. 2 of the Administrative Litigation Act

B. Article 3 Subparag. 2 of the current Administrative Litigation Act provides that the definition of a party suit is “a lawsuit concerning a legal relationship based on an administrative agency’s disposition and other legal relations under public law, and a lawsuit involving a party’s legal relationship is subject to the interpretation of the court.” Therefore, it cannot be deemed that there is a logical and inevitable satellite to be the subject of a party suit solely on the ground that there exist elements under public law such as the legal nature of the right.

Rather, the amount of value-added tax is more than the value-added tax (sales tax) paid at the time of purchase by a business operator, and the State can return the value-added tax paid by a business operator because there is no justifiable reason to hold the value-added tax, thereby constituting a claim for return of unjust enrichment under the Civil Act. In addition, even if the State has not actually paid the amount of tax collected excessively from a business operator, it can be understood that there is a direct relationship and causation between losses and profits because the State acquires tax claims against a business operator who has collected the transaction due to the direct cause of the business operator's act of contribution, and that the provisions of Article 24(1) of the Value-Added Tax Act and Article 72(1) of the Enforcement Decree of the Value-Added Tax Act are special provisions that relieves the requirements of the State

Ultimately, it does not necessarily mean that the state’s immediate return of unjust enrichment is a party litigation under the Administrative Litigation Act, where the administrative court has exclusive jurisdiction over a claim for payment of the refund, on the ground that the requirements, procedures, and timing are stipulated in the Value-Added Tax Act and subordinate statutes concerning the refund of value-added tax that is reasonable for the definition and fairness, and that the payment obligation has the nature

C. The Korean judicial system has a separate administrative court (Articles 40-2 through 40-4 of the Court Organization Act). However, other than the Seoul Administrative Court, a regional administrative court has not yet established, and thus, the principal district court and the Chuncheon District Court have jurisdiction over administrative cases [the proviso of Article 2 and Article 1(1) of the Addenda to the Court Organization Act (amended by July 27, 1994)]. Thus, except the Seoul area, the principal district court and the Gangwon District Court branch branch court of the Chuncheon District Court are dealing with civil cases and administrative cases concurrently. In addition, the personnel system of judges adopts a circular assignment system to which assignment is periodically changed between the judges belonging to the administrative court and the judges belonging to the district court.

Furthermore, unlike the appeal litigation, a party suit under the Administrative Litigation Act does not recognize a heavy effect (see Articles 44(1) and 29(1) of the Administrative Litigation Act), and it is possible to conduct an ex officio hearing (see Articles 44(1) and 26 of the Administrative Litigation Act). However, the previous Supreme Court precedents restrict the application of ex officio deliberation by holding that “only the matters entered in the records can be examined and determined on the basis of ex officio, and it is only possible for the court to investigate and determine the evidence within the scope of the claim if it deems it necessary (see, e.g., Supreme Court Decisions 94Nu4820, Oct. 11, 1994). Furthermore, the consolidation of appeal litigations and lawsuits for return of unjust enrichment is permitted (see, e.g., Articles 10 and 38(1) of the Administrative Litigation Act; 208Du23153, Apr. 9, 2009).

As above, from the viewpoint of judicial system or litigation practice such as the above, the distinction between civil litigation and party litigation is not very significant.

In addition, through the Supreme Court precedents accumulated for several hundred and twenty years, it seems that the general public has a firm perception that the claim for the refund of value-added tax is subject to civil procedure like the claim for the refund of overpaid or erroneously paid amount or the claim for state compensation due to illegal disposition, etc., and such practical practice has been established. As such, it is not desirable in terms of the majority opinion that deeming the claim for the refund of value-added tax as subject to a party lawsuit even when revising the precedents only in regard to the claim for the payment of the refund of value-added tax, as stated

Therefore, it is more reasonable to maintain the Supreme Court precedent and wait for legislative and comprehensive resolution through the future revision of law, rather than changing the claim for the refund of value-added tax to the party subject to the party litigation in the direction of expanding the subject of our company litigation, in that it is more reasonable to ensure the stability of the legal life of the people.

D. Therefore, the court below revoked the judgment of the court of first instance on the ground that the plaintiff's claim for payment of value-added tax was subject to the party lawsuit, and transferred this case to the Jung-gu District Court, the competent court of administrative case, which affected the conclusion of the judgment. Therefore, the judgment of the court below is erroneous in the misapprehension of legal principles as to the form

For the foregoing reasons, we respectfully dissent from the Majority Opinion.

Justices Yang Chang-soo (Presiding Justice)