D&A LLC successfully represented a fruit processing company (“Client”) in a dispute seeking the cancellation of a value-added tax (VAT) assessment. The Client produces and sells fruits packaged in plastic cups through a complex manufacturing process involving sterilization, cutting, washing, refrigeration, and the injection of mixed gas. The tax authority determined that the Client’s processing procedures constituted food manufacturing and processing activities that generated substantial added value, rather than primary processing intended merely for transportation or storage. Therefore, it imposed VAT on the Client.

The key issue in this case was whether the Client’s fruit processing activities were subject to VAT. Representing the Client, we provided a detailed explanation of the entire fruit processing procedure, which involved cutting the fruits, washing them in a dipping solution containing vitamin C and sodium bicarbonate to prevent browning, and injecting a mixed gas of nitrogen, oxygen, and carbon dioxide before packaging the fruits in plastic cups. We argued that these processes were primarily intended to preserve the fruits’ freshness during storage and distribution, rather than to alter their original taste or characteristics. Accordingly, we asserted that the Client’s activities should be exempt from VAT under Article 26(1)1 of the Value-Added Tax Act and Article 34(1) of its Enforcement Decree.

We further contended that the Client’s processing constitutes the primary processing that does not alter the inherent nature of the original products, as the procedures merely enhance storage convenience and prevent browning without affecting the fruits’ essential characteristics or taste.

The court accepted our arguments and ultimately ruled that the tax authority’s imposition of VAT on the Client’s cup-packaged fruits was unlawful.