Seoul Administrative Court 2009Guhap41028 ( October 17, 2010)

early 208west2387 (209.09)

The good faith principle is applied to exporters of gold bullion transactions via a bombing company.

An exporter’s assertion of deduction or refund of input tax cannot be permitted against the principle of good faith under Article 15 of the Framework Act on National Taxes where he/she knew, or was unable to know, the fact that there was an illegal transaction for the purpose of evading output tax amount in a series of transaction processes.

Article 15 (Good Faith and Sincerity)

2011Nu24318 Revocation, etc. of Disposition of Imposition of Value-Added Tax

XX Co., Ltd

Head of the District Tax Office

Seoul Administrative Court Decision 2009Guhap41028 decided June 17, 2010

Seoul High Court Decision 2010Nu21879 Decided January 14, 2011

Supreme Court Decision 2011Du3975 Decided July 14, 2011

November 23, 2011

December 28, 2011

1. Revocation of a judgment of the first instance;

2. All of the claims filed by the Plaintiff are dismissed.

3. Of the total litigation costs, 20% is borne by the Plaintiff, and the remainder is borne by the Defendant, respectively.

1. Purport of claim

On April 1, 2008, the Defendant revoked each imposition disposition of KRW 2,406,45,460 for the second period portion of the value-added tax for the year 2002 against the Plaintiff, KRW 12,484,867,960 for the first period portion of the value-added tax for the year 2003, KRW 5,430,60 for the second period of the value-added tax for the year 203, KRW 135,106,970 for the first period of the year 204, KRW 642,210,00 for the corporate tax for the business year 203, KRW 134,595,580 for the business year 204 (However, the portion of the imposition disposition of the value-added tax for the second period of the value-added tax for the year 202 and KRW 103 for each of the imposition disposition of the value-added tax for the second period of the tax year 203 years 200.

2. Purport of appeal

The provisions of paragraphs 1 and 2 shall apply.

1. Details of disposition;

A. On August 19, 2002, the Plaintiff was established for export and import business, general wholesale business, etc. and completed the registration of dissolution on May 6, 2004.

B. The defendant was notified by the director of the Seoul Regional Tax Office of taxation that the plaintiff issued and delivered a false tax invoice without a real transaction, and conducted a tax investigation with the plaintiff. ① From August 2002 to June 2003, the defendant: (a) GD ginsengcom Co., Ltd., which is gold bullion wholesalers; (b) UNS, UDRM Co., Ltd., ERM Co., Ltd, JS Co., Ltd., Ltd.; (c) TNCo Ltd., Ltd. (hereinafter collectively referred to as the "this case's sales"); (d) gold bullion sales at zero tax rate (hereinafter referred to as "gold bullion sales"); (e) from July 2003 to December 2003, 200; (e) the purchase price of gold bullion Co.,, Ltd., Ltd. and (e) the purchase price of gold bullion Co.,, Ltd., Ltd. under HS 30,000,000 for the total purchase price of gold bullion Co., Ltd., Ltd. (hereinafter referred to the 2G purchase price certificates No.).

C. On July 7, 2011, after filing an appeal, the court of the first instance rejected the appeal filed by the Defendant. On July 7, 201, the Defendant revoked the imposition of value-added tax for the second term of 2002 and the first term of 203, each of the imposition of value-added tax for the second term of 2003, and the additional tax (1,891,521,65, 65, 1,500, 2004, 205, 3065, 205, 207, 305, 2065, 205, 205, 207, 305, 205, 205, 205, 205, 306, 205, 205, 205, 206, 306, 3065, 2016, 3065, 365, 36165

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4, Eul evidence Nos. 1, 2, and 20 (including each number; hereinafter the same shall apply), the purport of the whole pleadings

2. Scope of adjudication of this court;

As above, the Supreme Court dismissed the above ex officio cancellation while the defendant was pending in the final appeal, and reversed the transaction part of gold bullion and the part on the imposition disposition of value-added tax for the first period of 2004, which is the remainder of the second period of the imposition of value-added tax in 2003, and remanded to this court. Accordingly, the scope of judgment to be judged by the court of final appeal after remand is limited to the disposition of this case reversed as above, and the remaining part of the judgment before remand is separate and finalized.

3. Whether the disposition is lawful;

A. The parties' assertion

The plaintiff asserts that the disposition of this case, which refused to deduct the input tax amount, cannot be viewed as a tax invoice different from the fact, is unlawful, while the defendant asserts that seeking the input tax amount deduction in light of the distribution channel of the gold bullion in this case is not allowed since it violates the principle of trust and good faith.

(b) Fact of recognition;

1) From around 2002 to 2004, gold bullion was imported by abusing the zero-rate tax rate or tax exemption system among precious metal companies located in Jongno-gu Seoul Metropolitan Government, and it was converted into the so-called "large-scale carbon company" through various stages of zero-rate tax or tax exemption, and then is re-exported into the so-called "large-scale carbon company" and then distributed gold bullion for taxation through multiple stages of wholesalers. While exporting gold bullion, the importer is entitled to the value-added tax paid while importing gold bullion, and the exporter did not pay the value-added tax, and the exporter extended the so-called wide-scale carbon business to receive the value-added tax that has not been paid by the large carbon company

2) Article XX was the representative director of the Plaintiff’s representative director. Around August 2002, the Plaintiff was established to conduct gold bullion transactions in accordance with the proposal, such as KimYT, a major shareholder of the TR comprehensive trade of the Plaintiff, which was engaged in gold bullion import business. The relevant parties, such as the above Article XX, were unaware of the transaction method of gold bullion at the early stage of the Plaintiff’s establishment, but they did not know of the transaction method of gold bullion in the process of tax investigation, etc., but they made a statement to the effect that the said parties, such as the above Article XX, were not aware of the transaction method in the process of the Plaintiff’s establishment, but they introduced gold bullion import agent company BK, etc., which

3) From August 2002 to June 2003, the Plaintiff imported the instant gold bullion from Hong Kong as a broker such as BK, etc., to sell it to the purchaser of the instant gold bullion at the zero-rate rate and paid at the time of import. The Plaintiff, as the importer of gold bullion from around August 2002 to around June 2003, imported the instant gold bullion from Hong Kong, and sold it to the purchaser of the instant gold bullion at the time of import. The instant gold bullion was re-exported by the exporter on the same day or following day on the date of import by the Plaintiff.

4) The Plaintiff purchased most gold bullion from July 2003 to April 2004 as the exporter of gold bullion from the instant purchase price, and exported the gold bullion to MTS low on or following the day or following the date of the instant purchase, and refunded or deducted the input tax amount. The instant gold bullion was mainly imported by RS Comprehensive Trade, etc., and exported by the Plaintiff on the day or following the date of import. The Plaintiff exported the instant gold bullion purchased from the instant purchase price on the day or following the date of most trade in 6-7 stages. The Plaintiff exported the instant gold bullion purchased from the instant purchase price to the low-priced MTS low-priced gold bullion located in Hong Kong through the BRS global business, the transportation company.

5) With respect to the transaction of the instant gold bullion, etc. imported by the Plaintiff, all of the transaction stages from the Plaintiff to the exporter was completed in the reverse order, and with respect to the transaction of the gold bullion exported by the Plaintiff, all of the transaction stages from the importer to the Plaintiff were completed in the reverse order.

6) The instant gold bullion, such as the instant sales gold bullion, imported by the Plaintiff, and the instant gold bullion, as indicated in the separate sheet that the Plaintiff exported, are related to the wide-scale coal business that most of the instant gold bullion were sold at lower supply than their purchase prices (However, the amount added to the value-added tax amount, i.e., the value-added tax plus the value-added tax, is higher than the purchase price), and

7) Of the instant sales offices, GD ginseng.com, UDRA, and JSA Co., Ltd. were accused of material suspicion. Of the instant sales offices, the PEGS, who is the actual operator of the PGGAD, was convicted of having been accused of having been convicted of tax evasion.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 6 through 40, Eul evidence Nos. 3 through 9, 11 through 14, 19, and the purport of the whole pleadings

C. Determination

1) Article 15 of the former Framework Act on National Taxes (amended by Act No. 9911, Jan. 1, 2010; hereinafter referred to as “Framework Act on National Taxes”) provides that “A taxpayer shall drive away decently and faithfully in performing his/her duties. The same shall apply where a tax official performs his/her duties.”

This principle is naturally applicable to legal relations concerning value-added tax (Article 1 and Article 3(1) main text of the Framework Act on National Taxes). In a case where a malicious entrepreneur does not pay the value-added tax collected by him/her by attempting to make an abnormal transaction in which only profit is created by a method of evading value-added tax and rather than by a method of evading value-added tax (hereinafter “illegal transaction”), among a series of continuous transactions, in which case the exporter knew that there was an illegal transaction at all stages, such an exporter’s seeking deduction and refund of input tax amount is not allowed in violation of the principle of good faith as stipulated in Article 15 of the Framework Act on National Taxes (see, e.g., Supreme Court en banc Decision 2009Du13474, Jan. 20, 201).

2) The instant tax invoice is related to all export transactions. However, in light of various circumstances revealed by the aforementioned facts and evidence, namely, the purchase transaction behavior and distribution channel of the instant gold bullion, the period, quantity and value of the Plaintiff’s transaction, the payment process, the relationship between the Plaintiff’s previous gold bullion import transaction, the status of the relevant transaction partner, the details of the Plaintiff’s establishment, and the result of the relevant transaction partner’s investigation, etc., the Plaintiff is deemed to have known, or failed to have known, by gross negligence, that there was a malicious business operator engaging in illegal transactions for the purpose of evading the output tax amount in the series of transaction transactions

As above, the Plaintiff’s assertion of the input tax deduction of the instant tax invoice based on the instant gold bullion transaction based on the fact that there is a malicious business operator and the malicious business operator knew or was not aware of the existence of the instant gold bullion transaction due to gross negligence is not allowed against the principle of trust and good faith stipulated under Article 15 of the Framework Act

The instant disposition is lawful.

4. Conclusion

The judgment of the first instance is revoked. All of the claims filed by the plaintiff are dismissed.