Top court reverses oil refiner tax ruling

SK Innovation, the nation’s top oil refiner, may end up coughing up the majority of the refund it received from the state-run Korea National Oil Corp.

The Supreme Court said Monday that it has reversed the decision made by the Seoul High Court in 2013. The Seoul court ruled that SK was not obligated to return part of the tax refund from Korea National Oil it received in October 2001 because the five-year statute of limitations had expired. The amount was worth about 4.59 billion won ($4 million).

Because of the top court’s ruling Monday, SK may now have to return 4.593 billion won in addition to 9 billion won it was ordered to pay in 2013, a total of 13.6 billion won.

The decision by the top court on Monday follows a prolonged legal battle between SK Innovation and the state-run oil corporation that started nearly a decade ago.

SK Innovation initially requested a tax refund on 1.6 billion liters of crude oil it supplied from August 2001 to March 2004 to the petrochemical complex in Ulsan where the petrochemical company also operates its refineries.

A tax imposed on imports of crude oil - a measure intended to stabilize the supply and price of oil in Korea - qualifies for a refund when it is used to produce exported products or as industrial material.

The state-owned oil company decided in 2006 to retrieve the tax refund it gave to SK, 18.8 billion won, after the Board of Audit and Inspection of Korea made a recommendation to the Korea National Oil Corporation, saying SK Innovation used the crude oil for “self-consumption.” SK sued the same year.

The local court ruled in 2007 that SK qualified for the majority of the refund and only had to pay about 4 billion won.

But the appeals court said in 2009 SK should return 14.2 billion won while 4.6 billion won should be waived after a statute of limitations ran out, a decision reserved by the Supreme Court in 2011.

The company announced later last month it posted an earnings surprise of over 1 trillion won in operating profit in the first quarter that came largely from businesses outside refining, including production of chemicals and lubricants.

BY CHOI HYUNG-JO [choi.hyungjo@joongang.co.kr]