[1] The meaning of "Fraud or other unlawful act" under Article 9 (1) of the Punishment of Tax Evaders Act

[2] The case reversing the judgment of the court below that found the defendant guilty of violating the Punishment of Tax Evaders Act by evading the traffic tax, on the ground that the court below found the defendant guilty of violating the Punishment of Tax Evaders Act

[1] Article 9(1) of the Punishment of Tax Evaders Act / [2] Article 9(1) of the Punishment of Tax Evaders Act

[1] Supreme Court Decision 2001Do3797 decided Feb. 14, 2003 (Gong2003Sang, 871)

Defendant 1 and one other

Defendants

Attorney Kim Jong-soo

Gwangju High Court Decision 2004No482 decided Dec. 28, 2004

The judgment of the court below is reversed, and the case is remanded to Gwangju High Court.

We examine the grounds of appeal.

1. Summary of the facts charged in this case

The summary of the facts charged of this case is as follows: “The Defendant: (a) conspired to sell pseudo petroleum products by mixing them with 61,700,050 litresponding P-8, P-9, etc. from the underground storage tank of the Nonindicted Co., Ltd., which was located in the Shindong from August 2002 to March 8, 2004; (b) manufactured and sold pseudo petroleum products by mixing them with 61,70,050 litresponding P-8, P-9, etc.; and (c) the market price of KRW 41,339,03,50 litresponding to 41,39,03,50; and (d) even if pseudo petroleum products were manufactured and sold, a tax invoice stating pseudo petroleum products via transit and filing a report thereon with the head of Female Tax Office from September 30, 2002 to December 31, 2002; and (d) 365, 14,20131.203.2

2. The judgment of the court below

Based on the evidence adopted by the first instance court, the lower court determined that the Defendants’ act of manufacturing and selling the above pseudo petroleum products violated Article 33 subparag. 3 and Article 26 of the former Petroleum Business Act (amended by Act No. 7209 of Mar. 22, 2004). Meanwhile, the Defendants’ act of issuing a tax invoice stating similar transit through trading items to the opposite contractual party while manufacturing and selling them, and reporting it to the said director of the tax office can be deemed as a fraud or other active act that makes the tax authority impossible to impose and collect traffic tax or significantly difficult to collect traffic tax. Thus, the lower court determined that the Defendants’ act violated Article 8 subparag. 1 and 2 of the Act on the Aggravated Punishment, etc. of Specific Crimes, Article 9(1)1 of the Punishment of Tax Evaders Act.

3. The judgment of this Court

However, it is difficult to accept the judgment of the court below on the exemption of traffic tax for the following reasons.

The term "Fraud or other unlawful act" under Article 9 (1) of the Punishment of Tax Evaders Act means a deceptive scheme or other active act that makes it impossible or considerably difficult to impose and collect taxes, and the mere failure to report under tax law or making a false report does not fall under this (see Supreme Court Decision 2001Do3797, Feb. 14, 2003).

However, according to the records, the defendants issued a tax invoice with respect to value-added tax, and filed a tax invoice with the competent tax office in response thereto, and did not separately issue a tax invoice or file a report with the competent tax office with respect to traffic tax. According to Articles 2, 3, 6, and 7 of the Traffic Tax Act, the traffic tax can be acknowledged as a national tax separate from the value-added tax imposed on the person who manufactures and takes out gasoline and substitute oil or similar substitute oil, which is taxable goods, according to the quantity of the taxable goods taken out by the State, which is imposed on the person who supplies the goods or services independently for business purposes. In light of the above, even if the defendants issued a tax invoice stating differently from the transaction items and filed a tax return with the competent tax office in response thereto, such acts by the defendants affected the imposition and collection of the traffic tax, which is separate from the value-added tax.

In addition, Article 20 of the Value-Added Tax Act provides that an entrepreneur shall submit a list of total tax invoices by buyer and a supplier, including the registration number, name or title, transaction period, preparation date, total sum of supply price during the transaction period, and total sum of tax amounts, etc., not the tax invoice itself, when filing the pertinent preliminary or final return. According to the records, the Defendants and the transaction partner can be acknowledged as not submitting a list of total tax invoices to the tax office under the above provisions and the tax invoices issued by the Defendants. Thus, if the tax invoice issued by the Defendants is not submitted to the tax office, it cannot be said that the tax office made it difficult to prevent the Defendants from being aware that the Defendants are manufacturing and selling taxable goods through transaction items, or making it more difficult to find such fact.

Therefore, the Defendants’ act of issuing a tax invoice stating different transaction items as above and filing a tax return at the district tax office in response thereto cannot be deemed as an active act that makes it impossible or considerably difficult to impose and collect traffic tax, barring any special circumstances as seen above, and thus, it cannot be deemed as a fraud or other unlawful act under Article 9(1) of the Punishment of Tax Evaders Act. Thus, the lower court did not exhaust all necessary deliberations by determining that the Defendants’ act constitutes fraud or other unlawful act without examining whether there are such special circumstances, and thereby, did not err by misapprehending the legal doctrine under Article 9(1) of the Punishment of Tax Evaders Act, thereby adversely affecting the conclusion of the judgment. Accordingly, the grounds of appeal pointed out as follows.

Therefore, the part of the judgment of the court below regarding traffic tax evasion should be reversed, and since the part concerning the manufacturing and selling of pseudo petroleum products is in concurrent crimes under the former part of Article 37 of the Criminal Act, the judgment of the court below should be reversed in its entirety.

4. Conclusion

Therefore, without examining the remaining grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices.

Justices Yang Sung-tae (Presiding Justice)