Imported Gosari 260 Million Won Lawsuit... Court Rules "Tax Exempt if Blanched, Taxed if Boiled" (Comprehensive)

1,200 Tons of Boiled Gosari from China
Declared as Blanched Gosari for Import
Boiling Does Not Preserve Raw Material Characteristics
Law: "No VAT Exemption"

The court ruled that "boiled bracken" is not subject to value-added tax (VAT) exemption when imported, unlike "blanched bracken." The judgment stated that boiled bracken, which is heated for a considerable period, differs in nature from blanched products that preserve the characteristics of the raw material.

According to the legal community on the 5th, the Seoul Administrative Court Administrative Division 5 (Presiding Judge Kim Sun-yeol) ruled against importer and seller A in a lawsuit seeking to nullify the imposition of VAT and other charges by Seoul Customs.

From February 2014 to January 2015, A imported 1,200 tons of bracken from China, declaring the product name as "blanched bracken" to receive VAT exemption benefits.

However, Seoul Customs determined that A's imported goods were "boiled bracken," not "blanched bracken." Additionally, since the imported goods were packaged in units of 1 to 2 kg and sold at retail, they did not meet the VAT exemption requirements. Therefore, Customs issued a notice demanding payment of approximately 242 million KRW in VAT and about 21 million KRW in additional tax.

Under the VAT Act, unprocessed food products are exempt from VAT. However, blanched vegetables that have undergone primary processing such as simple drying, freezing, or packaging without altering the original nature of the raw product are included in the exemption.

For simply processed food products like blanched vegetables, VAT exemption is excluded if the products are supplied in the same packaging units. However, if packaging is done temporarily for simple transportation convenience, the products are included in the exemption.

A filed an appeal with the Tax Tribunal in 2015 against the imposition, but the tribunal dismissed the case, stating that the appeal was filed after the deadline and was therefore inadmissible.

Later, in 2021, A applied to Seoul Customs for exemption from the additional tax portion of the imposition, but Customs rejected the application, stating that the conditions for reduction of additional tax were not met and the appeal period had expired.

A then filed a lawsuit claiming that there is no special standard distinguishing blanched bracken from boiled bracken, and that Customs arbitrarily classified the imported goods as boiled bracken without basis, requesting confirmation that the VAT imposition by tax authorities is invalid. A also argued that the packaging was for transportation convenience, not for retail sale.

However, the court did not accept A's claims. The court stated, "The imported goods in this case are products that have undergone preservation and sterilization after being heated multiple times in water at temperatures between 60 and 80 degrees Celsius for a considerable period," and added, "It is difficult to consider them as merely blanched vegetables that have undergone simple primary processing."

The court also judged, "Since the products were sold to consumers in the same packaging as when imported, it is difficult to consider the packaging as temporary for simple transportation convenience."

This content was produced with the assistance of AI translation services.