Plaintiff (Attorney Il-il et al., Counsel for the plaintiff-appellant)

Head of Daegu Customs Office

October 27, 2006

Daegu District Court Decision 2005Guhap3068 Delivered on May 24, 2006

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance is revoked. The rejection disposition that the defendant rendered against the claims for correction of customs duties, such as the Plaintiff’s statement on February 17, 2005 on the details of the request for correction as stated in the

1. Details of the disposition;

The following facts are recognized in full view of the purport of the entire pleadings in each entry of Gap evidence 1, 2, 8, and Eul evidence 1-1, 2, and 3-1.

A. On December 30, 2002, the Plaintiff was notified by the Minister of Finance and Economy that a foreign-capital invested company that is a corporation of the Netherlands shall carry on the high technology class business as stipulated in Article 121-2 (1) 1 of the Restriction of Special Taxation Act, which is a foreign-capital invested company in full, and shall grant tax exemption under the same paragraph for the pertinent business.

B. During the period from January 3, 2003 to July 28, 2004, the Plaintiff imported 47 items, including NAB-242, customs duties 11,765,000, value-added tax 15,582,750, and 15,750) from the date of import to the Daegu Customs Office, without applying for exemption from customs duties and value-added tax under the Restriction of Special Taxation Act.

C. On September 16, 2004, the Plaintiff filed an application for review and confirmation with the President of the Korea Foreign Exchange Bank delegated the authority to review and confirm the specifications of the goods imported from capital goods under Article 38(2) of the Enforcement Decree of the Foreign Investment Promotion Act with respect to the instant goods. On December 17, 2004, the Plaintiff filed an application for exemption from customs duties and value-added tax under Article 121-3(1)1 of the Restriction of Special Taxation Act with respect to the instant goods pursuant to Article 38-3(2) of the Customs Act and Article 34(1) of the Enforcement Decree of the same Act on the ground that the instant goods constitute capital goods subject to exemption from customs duties and value-added tax under Article 121-3(1)1 of the Restriction of Special Taxation Act. At the same time, the Plaintiff filed an application for exemption from customs duties under Article 38-3(2) of the Customs Act and filed an application for exemption from customs duties under Article 38-3(1) of the same Act.

D. On February 17, 2005, the Defendant: (a) filed an application for reduction or exemption with the head of the relevant customs office prior to the acceptance of the import declaration; (b) filed an application for reduction or exemption of or exemption from customs duties pursuant to Article 112 (Application for Reduction or Exemption from Customs Duties) of the Enforcement Decree of the Customs Act; and (c) filed an application for review and confirmation with the competent Minister before the shipment of the documents under Article 38 (2) of the Enforcement Decree of the Restriction of Special Taxation Act, among the documents submitted pursuant to Article 51-5 (Application for Exemption from Customs Duties, etc.) of the Enforcement Decree of the Restriction of Special Taxation Act, on the ground that the Plaintiff filed the said application with the head of the Korea-Japan Bank on September 16, 2004, which was after the receipt of the import declaration.

2. Whether the rejection disposition of this case is legitimate

A. The plaintiff's assertion

The plaintiff asserts that the rejection disposition of this case is unlawful for the following reasons.

(1) The main issue of this case is a special law and a higher-tier corporation subject to tax reduction or exemption pursuant to Article 121-3(3) of the Restriction of Special Taxation Act, which is a special law and a higher-tier corporation. The purpose of receiving tax reduction or exemption pursuant to Article 112(1) of the Enforcement Decree of the Customs Act, which is a general law and subordinate law, is to limit the rights granted to taxpayers by the Restriction of Special Taxation Act by stipulating that the taxpayer should apply for tax reduction or exemption prior to the acceptance of import declaration. Thus, the interpretation that the Enforcement Decree of the Restriction of Special Taxation Act of a higher corporation does not clearly specify the scope or criteria of delegation with respect to the Enforcement Decree of the Customs Act of a subordinate corporation, even though the Special Act on the Taxation of Special Taxation does not expressly specify the scope or criteria of delegation with respect to the Enforcement Decree of the Customs Act of a subordinate corporation, can restrict the methods of exercising the rights granted under the Restriction of Special Taxation Act by prescribing the contents of superior statutes without specific authority of superior

(2) In light of the contents, form, legislative history, legislative intent, etc. of the legal provisions pertaining to the exemption of customs duties on the instant goods, customs duties exemption shall be naturally recognized without a party’s application. Therefore, an application for exemption of customs duties on a foreign-capital invested company under Article 121-3 of the Restriction of Special Taxation Act shall take the procedures prescribed in Article 121-3(3) of the Restriction of Special Taxation Act, not Article 112 of the Enforcement Decree of the same Act, Article 51-5 of the Enforcement Decree of the same Act, and Article 38(2) of the Enforcement Decree of the Foreign Investment Promotion Act, and each of the above provisions is merely imposing a taxpayer’s duty to cooperate with the government, and does not provide a necessary exemption requirement. Therefore, customs duties should be naturally exempted if it is confirmed that the relevant goods are subject to exemption of customs duties even if there is no submission by the taxpayer within the prescribed period, as prescribed by the Act, and therefore, the Defendant erred in the disposition of rejection on the ground that the details of imported goods under Article 51-5 of the Enforcement Rule of the Restriction of Special Taxation Act and Article 38(2).

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) Whether the instant goods fall under the category of goods subject to customs reduction or exemption

(A) The Customs Act provides that customs duties shall be imposed by the nature of goods at the time of import declaration or by their quantity (main sentence of Article 16 and the main sentence of Article 17). Accordingly, the Customs Act provides that any person liable for duty payment shall file a declaration on the price at the time of import declaration (Article 27), and that any person liable for duty payment shall file a declaration on the payment of customs duties with the head of the relevant customs office at the time of import declaration (Article 38(1)). The Enforcement Decree of the same Act provides that any person who receives customs duties shall file an application for the reduction or exemption of customs duties with the head of the relevant customs office within 3 years from the date of filing a declaration on the import declaration or for the ex post facto exemption of customs duties under Article 32(1)2 of the Customs Act (Article 38(2)). In addition, the Customs Act provides that, in principle, an ex post facto examination of the amount of customs duties declared after receipt of the declaration on the import declaration or ex post facto exemption of customs duties shall be conducted within 1.

(B) In light of the relevant provisions of the Customs Act and the Act on Special Cases Concerning the Restriction of Taxes, in order to introduce capital goods exempt from customs duties, etc., the amount of reduction or exemption of customs duties, etc. should be reported at the time of import declaration on such capital goods and subject to prior examination of the tax amount. In order to do so, it is natural to file an application for reduction or exemption of customs duties with relevant

(C) In addition, Article 121-3(1) and (3) of the Restriction of Special Taxation Act provides that certain capital goods introduced by a foreign investor or a foreign investing corporation shall be exempted from customs duties under the Restriction of Special Taxation Act, and in this case, a taxpayer shall apply for exemption from customs duties under the conditions as prescribed by the Ordinance of the Ministry of Finance and Economy. Article 51-5(3) of the Enforcement Rule of the Restriction of Special Taxation Act provides that a person who intends to apply for exemption from customs duties, etc. shall submit an application for exemption from customs duties, etc. accompanied by a copy of the specifications of the imported capital goods confirmed under Article 38(2) of the Enforcement Decree of the Foreign Investment Promotion Act, and Article 38(2) of the Enforcement Decree of the Foreign Investment Promotion Act provides that a person who intends to introduce capital goods shall prepare a specification specifying the quantity, size, price, manufacturer, etc. of such capital goods to the competent Minister before they are shipped, and the Plaintiff shall apply for exemption from customs duties, etc. under Article 121-3(1)3) of the Restriction of Special Taxation Act.

(D) Therefore, we cannot accept the Plaintiff’s assertion that exemption of customs duties, etc. on the instant goods is naturally recognized even without a party’s application.

(E) The Plaintiff asserted that the provision on reduction or exemption of customs duties, etc. on the goods at issue of this case is also providing for the reduction or exemption of customs duties, etc. on October 24, 1997 and the Supreme Court Decision 2001Du3006 Decided May 16, 2003. However, each of the above Supreme Court decisions stated that the transfer income tax on the income accrued from the transfer of land within the self-employed land or public project or the urban redevelopment zone for not less than eight years under the former Regulation of Tax Reduction or Exemption Act shall be reduced or exempted as a matter of course if the requirements for reduction or exemption are met, and it shall not be reduced or exempted, and the provisions of the same Act on reduction or exemption of taxes shall be merely a mere imposition of cooperation obligation on the transferor or transferee to submit necessary documents to the Government in determining the tax base and the amount of tax, and it shall not be applied as it is without exception to the previous Supreme Court Decision 2001Du3006 Decided May 16, 2003.

(2) Whether Article 112(a) of the Enforcement Decree of the Customs Act goes against the principle of statutory reservation and the principle of legal advantage

In light of the aforementioned various provisions of the Customs Act and the Act on Special Cases concerning Taxation Restrictions, inasmuch as deeming that an application for reduction or exemption of customs duties on the instant goods is to be filed before an import declaration on the instant goods is accepted, Article 112 of the Enforcement Decree of the Customs Act provides that an application shall be filed before the import declaration on the reduction or exemption of customs duties is accepted under the Customs Act, other Customs Act, or any treaty, and it does not stipulate any new tax exemption requirements, and thus does not violate the principle of statutory reservation or the principle

3. Conclusion

Therefore, the plaintiff's claim of this case shall be dismissed as it is without merit, and the judgment of the court of first instance shall be just and the plaintiff's appeal is dismissed as it is without merit. It is so decided as per Disposition.

Judges Kim Su-chul (Presiding Judge)