In a case where Company A, which runs the business of the purpose of the electronic tobacco wholesale and retail, sold nicotine solution manufactured by mixing the nicotine concentration added to the nicotine concentration imported from foreign countries, and the competent authorities imposed tobacco consumption tax and local education tax pursuant to Articles 49(4), 51, 52(2), 150, and 151 of the former Local Tax Act on the nicotine solution, which deducts nicotine concentration declared and paid when the tobacco consumption tax, etc. was imported from the total nicotine solution solution sold by Company A, the case holding that the lower court determined that Company A’s manufacturing of nicotine solution solution by mixing the nicotine concentration with the new tobacco product constitutes the manufacturing of the new tobacco product, and thus, it constitutes the manufacturing of the “electronic tobacco” subject to the tobacco consumption tax, not the sale of the imported nicotine concentration, but the concentration of nicotine solution solution to which the imported nicotine concentration was much more than the dilution concentration method, and thus, it cannot be deemed that the imported nicotine solution content constitutes the competent authorities’s tax base.

Articles 47 subparag. 1, 48(1) and (2), 51, and 52 of the former Local Tax Act (Amended by Act No. 12602, May 20, 2014); Article 2 of the former Tobacco Business Act (Amended by Act No. 12269, Jan. 21, 2014; see current Article 2 subparag. 1)

Korean Electronic Tobacco Co., Ltd. (Attorney Cho Sung-sung, Counsel for the plaintiff-appellant)

The head of Sung-nam City and one other (Attorneys Kim Sung-hun et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2015Nu71879 decided August 25, 2016

All appeals are dismissed. The costs of appeal are assessed against the Plaintiff.

The grounds of appeal are examined.

1. The former Local Tax Act (amended by Act No. 12602, May 20, 201; hereinafter the same) provides that “tobacco” shall be subject to imposition of tobacco consumption tax (Article 48(1)); and the term “tobacco” shall refer to the tobacco stipulated in Article 2 of the Tobacco Business Act (Article 47 Subparag. 1); it shall be classified into “manufactured tobacco”, “Chewing tobacco”, and “snrinking tobacco” into “snicking tobacco” (Article 48(2)); and the tobacco consumption tax shall be imposed on a manufacturer or bonded area, who takes out tobacco from the manufacturing place, and then takes it out of the manufacturing place, and its tax base shall be “non-number, weight, or nicotine solution of the tobacco” (Article 51); and the tax rate shall be 100,000 won or 214,000 won of the tobacco in its entirety (amended by Act No. 1251, Feb. 24, 2012).

2. The court below, citing the judgment of the court of first instance, acknowledged the facts as stated in its reasoning, based on the above provisions of the above Acts and subordinate statutes, and found the facts as follows: (1) The amount of nicotine’s nicotine’s tobacco constitutes “tobacco” as defined in Article 2 of the former Tobacco Business Act, and Article 48(2) of the former Local Tax Act provides such electronic tobacco as taxable subject to tobacco consumption tax; (2) in the case of electronic tobacco, the electronic device to reduce nicotine’s nicotine’s solution and inhale it into body does not have independent usefulness; and (3) The court below determined that the Plaintiff is liable to pay the amount of nicotine’s tobacco consumption tax by adding nicotine’s nicotine’s nicotine concentration to the nicotine’s nicotine’s nicotine concentration, alcohol, distilled solution, nicotine’s solution, and nicotine’s solution to the tobacco consumption tax, and thus, determined that the Plaintiff is liable to pay the amount of nicotine’s tobacco separately from its own technological concentrate in the process of collecting nicotine’s solution and paying it.

3. In light of the provisions of the above relevant Acts and subordinate statutes, since the Plaintiff’s manufacturing of nicotine by dilution nicotine’s concentration constitutes a new tobacco product, the lower court’s judgment is justifiable to have determined that this constitutes the manufacturing of “electronic tobacco” which is subject to tobacco consumption tax under the former Local Tax Act. Moreover, since the tobacco consumption tax on electronic tobacco under the provisions of the Acts and subordinate statutes is a specific quantity based on its capacity, even if the Plaintiff paid tobacco consumption tax in accordance with its capacity while importing nicotine’s concentration, it did not sell it as it is, but rather did not sell it as it was, and took out more quantity of nicotine than the way of dilution by dilution by inserting the additives. The lower court did not constitute double taxation, as otherwise alleged in the grounds of appeal. The lower court did not err by misapprehending the relevant legal doctrine, etc.

Therefore, all appeals are 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 Kwon Soon-il (Presiding Justice)