Jeonju District Court 2007Guhap2347 revocation of the disposition imposing customs duties, etc.

○ Automobile Corporation

Head of Jeonju Customs Office

October 2, 2008

1. The plaintiff's claim is dismissed.

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

The imposition of customs duties and value-added taxes on April 1, 2005 by the Defendant against the Plaintiff shall be revoked in all of the disposition imposing customs duties and value-added taxes on the Plaintiff.

1. Details of the disposition;

A. On July 6, 2001, the Plaintiff established ○○○ Co., Ltd. (D○○○ AG; hereinafter “D○○○”) and 5:5 with a view to manufacturing engines on commercial cars (after that, the said joint venture company was successively changed to Da○ Commercial tea Co., Ltd., and ○○○○○ and ○○ Commercial Engine Co., Ltd., and was merged with the Plaintiff on November 5, 2004; hereinafter “○○ Engine”) and thereafter, the ○○ Engine concluded a technology introduction agreement from around September 2001 to around September 13, 201, with the content that the design drawings of Da○○○○ Co., Ltd., Ltd. (D○○○ and ○ △△△), the design drawings for manufacturing and distributing the said engines, and the content that the said joint venture company should provide support for the production of the said engineering and engine, etc.

B. After that, on April 21, 2003, the ○○ engine introduced the ○○○○○○ engine manufacture technology to the Minister of Finance and Economy, and applied for tax reduction or exemption on the grounds that it is a foreign investment company to run a business manufacturing commercial engines involving high technology as stipulated in Article 121-2(1)1 of the Restriction of Special Taxation Act (hereinafter “Special Taxation Act”), and received a decision of tax reduction or exemption on June 2, 2006.

C. From February 18, 2003 to May 4, 2004, the ○○ engine was reduced by 50% of customs duties and value-added tax on facilities and other capital goods imported from foreign countries for the manufacture of automobile engines over a total of 86 times as shown in the separate imposition disposition No. 1.

D. However, the Plaintiff and C○○ agreed to suspend a joint venture project for the manufacture of a commercial engine based on a mutual business judgment, and accordingly, C○○ transferred 50% of ○○ engine shares owned on May 12, 2004 to the Plaintiff.

E. On July 28, 2004 and September 1 of the same year, 2004, the ○○ engine filed an application for tax exemption with the Minister of Finance and Economy on the grounds that it falls under the grounds for exemption from tax collection as stipulated in Article 121-5 (5) 4 of the Specialized Act and Article 116-10 (2) 1 of the Enforcement Decree of the same Act, and the Minister of Finance and Economy requested the Minister of Commerce, Industry and Energy, the competent Minister, in accordance with relevant statutes on September 16, 2004, to hold consultations on the above application for tax exemption with the Minister of Commerce, Industry and Energy. On December 7, 2004, the Minister of Commerce, Industry and Energy presented that "the ○○ engine introduced a facility for the production of high technology accompanied by high technology (O○○, △△△△△, which was the initial premise for tax exemption, and that it is difficult to consult on the domestic settlement of technology and the effects of technology transfer."

F. However, the Minister of Finance and Economy decided that the above opinion of the Minister of Commerce, Industry and Energy is insufficient to decide whether to exempt tax collection, and requested again to consult with the Minister of Commerce, Industry and Energy on December 31, 2004. The Minister of Commerce, Industry and Energy on January 12, 2005, “○○ Engine was completed on October 31, 2003, and the production of a production facility was completed on January 5, 2004, and it was possible to produce engines from around that time until ○○ and joint venture was suspended, and it was not more than one year, considering that the initial period of technology introduction was 2014, it was not sufficient for the first time for the period of consultation with ○○○ and the first time for the introduction of high technology technology joint venture with ○○○ and the first time for the introduction of an independent engine, which was developed on behalf of ○ ○○, and the Plaintiff did not present the plan to introduce the production facility and the first time for the production of an alternative.

G. Ultimately, on March 7, 2005, the Minister of Finance and Economy decided that the ○ ○ Engine cannot be exempted from tax collection pursuant to Article 121-5(5)4 of the Special Act and Article 116-10(2)1 of the Enforcement Decree of the same Act. Accordingly, on April 1, 2005, the head of the former branch office of the Sisan Customs Office (the head of the former branch office of the Sisan Customs Office was amended on January 1, 2006, the Defendant succeeded to the duties of the head of the former branch office of the Sisan Customs Office) imposed on the Plaintiff the total of KRW 3,167,486,340 and value-added tax total of KRW 1,04,879,350, as stated in the attached disposition 1.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The defendant's disposition of this case is unlawful for the following reasons.

(1) The Plaintiff was jointly employed with ○○○○○○○○○○ Engine, which meets the 3rd level of exhaust gas emission standards, to introduce technology manufacturing technology. For this purpose, from July 26, 2001 to May 12, 2004, the Plaintiff brought an engine production facility equivalent to KRW 10 billion, which had been jointly operated with ○○ ○○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 2.

(2) Article 116-10 (2) 1 of the Enforcement Decree of the Special Coordination Act, upon delegation of Article 121-5 (5) 4 of the same Act, provides that "the relevant enterprise shall not interfere with its own production in Korea of products produced or provided by a business involving high technology" as grounds for exemption of tax collection, and the ○○ engine shall be deemed as grounds for exemption of tax collection at the stage of the mass production of engines of ○○○○○○○○○ ○○○○○ ○○ ○○ ○○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

(3) The Minister of Finance and Economy (or the Minister of Commerce, Industry and Energy) shall determine whether ○○ engine satisfies the requirements for exemption from tax collection, after undergoing an inspection of the requirements, such as whether high technology transfer has been completed and the purpose of exemption from tax collection has been achieved. However, there is an error of deviation from and abuse of discretion by making a decision in accordance with arbitrary standards without any actual inspection. The instant disposition was made based on the aforementioned illegal decision.

B. Relevant statutes

(1) Article 121-2 (1) 1 and Article 121-3 (1) of the Special Adjustment Act (amended by Act No. 7216, Jul. 26, 2004; hereinafter the same shall apply) provides for exemption from customs duties and value-added taxes on capital goods required for foreign investment projects which involve a high level of technology essential to enhance the international competitiveness of domestic industry, and Article 121-5 (2) 3 of the Special Adjustment Act and Article 116-8 (1) 3 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 18408, Jun. 5, 2004; hereinafter the same shall apply) provide for exemption from customs duties and additional taxes in cases where a foreign investor transfers his stocks owned by him under the Special Adjustment Act within three years from the date of exemption from customs duties, etc., to a corporation that manufactures a high level of technology accompanied by such exemption from customs duties and where it satisfies the requirements of Article 121-5 (1) 1 of the Special Exemption Act, such exemption from customs duties may be deemed as one of paragraph (1).

(B) First of all, in the instant case, it is reasonable to view that the high technology, which was the object of tax reduction and exemption for the ○○ engine, is the manufacturing technology of the ○○○○○○ Business Engine, in light of the contents of technology introduction agreements between the ○○ engine and the ○○○○○ (hereinafter “○○”) and the purpose of applying for tax reduction and exemption for the ○○ Engine, etc., as a premise to determine whether the ○ ○○ Engine satisfies the requirements for tax exemption exemption. Therefore, in order to determine whether the ○ ○ Engine satisfies the requirements of Article 121-5(5)4 of the Special Assistance Act and Article 116-10(2)1 of the Enforcement Decree of the same Act, the determination should be made on May 12, 2004 as to whether the ○ Engine was capable of producing an engine independently in the Republic of Korea.

(C) Comprehensively taking account of the overall purport of pleadings as to Gap's evidence Nos. 6, 7, 12, 16, 17, 18, and Eul evidence Nos. 5, and Eul's witness testimony, the ○ engine paid approximately KRW 33.4 billion to ○○○○ from 2001 to 2004, and 44 employees were dispatched to ○○○○○○○’s Germany’s Germany, and ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ was recognized as a joint venture of the ○○○○○○○○○ operated on October 30, 203 with the production facilities installed on April 1, 2004.

(D) However, in light of the fact that ○○○○ ○○ ○○ ○○ ○○ 2’s existing ○○ ○○ 2’s existing ○○ 2’s existing ○ ○ 2’s existing 1st 2nd 2nd 2nd 6th 2nd 6th 2nd 2nd 2nd 2nd 3rd 2nd 2nd 3rd 2nd 2nd 2nd 3rd 2nd 3rd 2nd 2nd 3rd 2nd 3rd 2nd 3rd 2nd 3rd 2nd 3rd 2nd 2nd 3rd 2nd 3rd 2nd 3rd 2nd 3rd 2nd 2nd 3rd 2nd 2nd 3rd 2nd 3rd 2nd 3rd 3rd 2nd 200 st st 3rd 3rd 2nd 3rd 2nd 3rd 2nd 2nd 3st 3st 3st 3st 3rd 3rd 3.

(E) In addition, the Plaintiff’s assertion that ○○○ 2’s ○○ 2’s ○○ 2’s 2-year technology transfer of an engine was completed at the time of the joint venture with ○ 2-○ 2-year technology transfer, but did not produce an engine to prevent legal disputes with ○ 2-○ 2, and that the Plaintiff’s 4-year 2-wide 2-year technology transfer was generated using the above O○ 2-year 2-year equipment based on the transferred technology, and thus, the Plaintiff’s assertion that the 0-year 2-year 2-year 2-year technology transfer technology transfer had not been hindered in producing the 1-year 0-year 2-year 2-year 2-year 2-year 1, as seen earlier, without any need to further examine the Plaintiff’s argument that the 1-year 2-year 2-year 2-year 2-year 2-year 2-year 2, supra.

(2) On March 7, 2005, the disposition of this case on the plaintiff's second argument is based on the decision of the Minister of Finance and Economy on whether the disposition of this case violates the principle of no taxation without law. The decision of the Minister of Finance and Economy was made after consultation with the Minister of Commerce, Industry and Energy pursuant to Article 121-5 (5) 4 of the Special Act and Article 116-10 (2) 1 of the Enforcement Decree of the same Act that ○○ engine failed to meet the requirements of tax exemption under the above provision. As seen above, the Minister of Commerce, Industry and Energy adopted the facilities for the production of ○ 3 engines with the former C○○'s oil supply, but at the time of the consultation with the Minister of Finance and Economy, the plaintiff did not actually manufacture high-tech technology products using the above facilities, and the plaintiff's opinion that "the first plan to replace the above facilities with the first high-tech technology and the first plan to apply the same Article to 100-10 engines for production without any specific reasons."

Rather, comprehensively taking account of the purport of Eul evidence No. 15 and arguments, the ○○ engine shall pay 2,880,000 square meters in total for receiving product technical documents (design drawings, etc.) from C○○○○○, and 34,000 loyalty engines per 1st engine in return for the right to produce and distribute loyer products (OO○z engine), 689,000 loyalty with engineering usage fees, 1,320 loyaltys per day in return for receiving product production support services, or 26,40 loyals per month to C○○○○○○○○○○, which is a facility for the production of the above engine, and it is difficult for the Plaintiff to autonomously collect new parts from the Plaintiff and ○○○○○, which is the ground for its failure to use the 1st 1st 2nd 1st 1st st st son’s product manufacturing process.

(3) Article 121-5(5)4 of the Special Cases Concerning the Plaintiff’s Third Claim and Article 116-10(2)1 of the Enforcement Decree of the same Act provide only the duty of consultation with the competent Minister in determining whether to exempt tax collection, and do not provide any separate duty of investigation, etc. for this purpose. In full view of the overall purport of arguments in the statement Nos. 3 and 4, the Minister of Finance and Economy decided not to grant tax exemption for ○○ Engine after consultation with the Minister of Commerce, Industry and Energy, which is the competent Minister. The Minister of Commerce, Industry and Energy, the competent Minister, even though he did not conduct on-site investigations, has presented documents submitted by ○ ○ Engine, a series of processes conducted from the establishment of ○ ○ Engine to the joint venture with ○ ○ ○ ○○. Thus, it can be acknowledged that the Plaintiff’s opinion on the exemption of tax collection of ○ Engine was presented on the ground that it did not deviate from the Plaintiff’s discretionary power.

3. Conclusion

Therefore, all of the disposition of this case is legitimate, and the plaintiff's claim of this case is dismissed as it is without merit. It is so decided as per Disposition.