After Supreme Court Ruling Overturned and Left Unresolved, Constitutional Court to Review Unconstitutionality in 'KSS Shipping Tax Lawsuit'

Prolonged Litigation Due to Conflict Over "Limited Unconstitutionality" Between Supreme Court and Constitutional Court

The Constitutional Court has decided to re-examine a tax litigation case in which it previously issued a "limited unconstitutionality" ruling and overturned a Supreme Court decision. The Court will determine whether it is unconstitutional for the National Tax Service not to comply, even after the supplementary provision that served as the basis for taxation was declared invalid and the Supreme Court ruling was found to be erroneous.

Tension is mounting in the Grand Courtroom of the Constitutional Court in Jongno-gu, Seoul, on the 3rd, one day before the Constitutional Court's ruling on the impeachment trial of President Yoon Sukyeol. 2025.04.03 Photo by Joint Press Corps

On the 22nd, the Constitutional Court announced that it had referred to the full bench for review on the 13th the constitutional complaint filed last month by KSS Shipping against the head of the Jongno Tax Office, seeking a "confirmation of unconstitutionality of administrative inaction." The Court explained, "After internal review and the preparation of a report following the filing of the constitutional complaint, we determined that the case required referral to the full bench."

This case dates back to 2004. KSS Shipping received a corporate tax reduction in 1989 on the condition of being listed on the stock exchange, but failed to complete the listing by 2003. As a result, the tax authorities imposed a tax of 6.5 billion won in January 2004. KSS Shipping filed a lawsuit to cancel the tax assessment but lost in both the first and second trials, and the Supreme Court also ruled against the company in 2011.

At the time, KSS Shipping argued that, since the full revision of the Restriction of Special Taxation Act took effect in 1994, the supplementary provision should also be considered invalid, making the tax assessment unjustified. However, the Supreme Court held that, even if the law was revised, the supplementary provision could still be considered valid if there were special circumstances.

During the trial, KSS Shipping requested a constitutional review of the law, but this was dismissed. In February 2009, the company filed a constitutional complaint with the Constitutional Court. In 2012, the Constitutional Court issued a limited unconstitutionality ruling, stating that interpreting the disputed supplementary provision as valid was unconstitutional. This resulted in conflicting interpretations between the Supreme Court and the Constitutional Court.

Based on the Constitutional Court's decision, KSS Shipping requested a retrial from the Supreme Court, but the Supreme Court dismissed the request in 2013. The Supreme Court argued that the Constitutional Court's decision only declared a specific interpretation and application of the provision unconstitutional, not the provision itself, and therefore had no legal basis. The Court held that it was not obliged to follow the Constitutional Court's decision and that it was not grounds for a retrial.

KSS Shipping again turned to the Constitutional Court, filing a constitutional complaint to overturn the dismissal of its retrial request. After nine years of deliberation, the Constitutional Court ruled to "overturn the Supreme Court's decision." The Court found that the Supreme Court's decision, which required payment of taxes based on an unconstitutional law, violated the constitutional right to a fair trial. Following the Constitutional Court's ruling, KSS Shipping requested a retrial from the Supreme Court, but a decision has yet to be issued.

While the power struggle between the Constitutional Court and the Supreme Court continued, the case remained unresolved. In 2023, KSS Shipping requested the National Tax Service to cancel the corporate tax ex officio, but no action was taken. The company also filed a complaint with the Anti-Corruption and Civil Rights Commission, but nothing changed. The Commission recommended considering the cancellation of the corporate tax assessment without paying additional refund interest, but the National Tax Service did not comply. As a result, on the 14th of last month, KSS Shipping filed another constitutional complaint, claiming that its constitutional rights were violated because the National Tax Service failed to cancel the tax assessment.

Cases in which the Supreme Court does not follow the Constitutional Court's limited unconstitutionality or retrial cancellation decisions continue to occur. GS Caltex and Lotte DF Retail, which have undergone similar processes as KSS Shipping, have also requested retrials from the courts, but their cases remain pending. The Constitutional Court stated that there are a total of five cases in which retrial requests, made in accordance with its decisions, have not been ruled on for an extended period.

Meanwhile, the National Assembly is discussing an amendment to the Constitutional Court Act to introduce the "judgment complaint" system, which would allow parties to challenge court rulings before the Constitutional Court. The Constitutional Court has also submitted an opinion to the National Assembly expressing its agreement on the need to introduce the judgment complaint system.