propriety of a disposition denying the application of the zero tax rate by determining the supply through a defective purchase certificate

It is insufficient to conclude that there was a knowledge of the defect in the procedure of issuing a purchase certificate or the fact that the instant goods are to be distributed in Korea, not to be exported from abroad.

Article 11 of the Value-Added Tax Act

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. The lower court acknowledged the facts as indicated in its reasoning, and determined that the Plaintiff’s sales contract for the supply of this case, other than the Plaintiff’s 8 AB-based recreation business (hereinafter “AB-based recreation business”), was merely an exemption from the supply of each of the instant products, and the Plaintiff’s sales contract was established immediately before the supply of each of the instant products. In particular, the Plaintiff’s application for value-added tax refund was rejected by applying the same method prior to the supply of each of the instant products. Each of the instant supply and subsequent transactions appears not to have been conducted immediately after the import or purchase of the instant products by the relevant companies including the Plaintiff, but did not know of the fact that there was no possibility that the sales contract for the instant products would have been sold again to the Plaintiff at the time of the purchase of the instant products, and that there was no possibility that each of the instant products would have been sold to the Plaintiff at least KRW 50,000,000,000,000,000 won for the supply of the products, including the Plaintiff’s sales contract and its related products.

2. However, the judgment of the court below is not acceptable for the following reasons.

In the event that a supplier of goods supplies goods through a purchase certificate, and the approval of a purchase certificate was revoked later because of a defect in the issuance of the purchase certificate, barring special circumstances, such as the supplier’s knowledge that there was a defect in the process of issuing the purchase certificate at the time of the supply of the goods, the supply of goods based on the purchase certificate may not be deemed to be excluded from zero-rate tax rate (see, e.g., Supreme Court Decisions 2003Du3642, Jun. 11, 2004; 2002Du9100, Aug. 30, 2004); and the burden of proof on special circumstances, such as that the supplier knew that there was a defect in the process of issuing the purchase certificate.

In accordance with the facts established by the court below, there is no direct evidence that the plaintiff knew that there was a defect in the process of issuing each purchase certificate at the time of the supply of this case, or that the plaintiff knew that the goods of this case would be consumed in Korea without being exported. Meanwhile, while importing the goods of this case, the plaintiff, while paying 10% value-added tax first, and selling them to AAAtec games by applying zero-rate tax rate, traded approximately 1% profit while selling them. If the plaintiff knew that the purchase certificate of this case was defective or that the goods of this case were consumed in Korea without being exported, the plaintiff was at risk of not being entitled to value-added tax of KRW 80 million which was denied in advance due to the denial of zero-rate tax rate, and without securing any way to secure damages, it was clearly contrary to the empirical rule that the plaintiff was aware that there was a defect in the purchase certificate of this case to obtain 80 million won, which was 1% of the sales revenue of this case, and immediately after the purchase or sale of the goods of this case.

Nevertheless, the court below determined that each of the supply of this case is not subject to zero tax rate because it is reasonable to deem that the plaintiff knew that the purchase certificate of this case was supplied in this case or that the goods of this case were distributed in Korea, not exported from Korea, with the knowledge that the purchase certificate of this case was defective at the time of the transaction of this case. The court below erred by misapprehending the legal principles on zero tax rate application or by violating the rules of evidence, which affected the conclusion of the judgment. The ground of appeal pointing

3. Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.