Customs Heads ignore President’s directives and ‘help’ spare parts importer
by Nirmala Kannangara
President Maithripala Sirisena’s order not to give tax or any other concessions to Vehicles Lanka (Pvt) Ltd , Order given to release the seized vehicle and The manual procedure that states how a comprehensive report with the officer’s observation should be submitted at the conclusion of an investigation
Keeping the new Finance Minister in complete darkness, the Director General Customs and the Additional Director General Customs is aiding and abetting a vehicle spare parts importer in an excise duty scam which has resulted in a loss of several billions of rupees to the national coffers in way of excise duties.
Unless Finance Minister Mangala Samaraweera takes quick action and find out how the Director General Customs (DGC) Chulananda Perera and his deputy the Additional Director General Customs (ADGC) Vipula Senanayake have aided and abetted Vehicles Lanka (Pvt) Limited to get away from paying the exact excise duties for the vehicles the latter has assembled in the country and how a seized vehicle belonging to the accused company was released on May 31, 2017 during an ongoing investigation, the duo are making Sri Lanka Customs yet another loss making institution.
Meanwhile astonishing revelations have come to light as to how ADGC, Vipula Senanayake had instructed Deputy Director Customs (Central Investigation Bureau) J. A. S. Jayakody to release Toyota Hi Ace Super GL van (chassis number KZH 100-1019736) that was amongst the 54 vehicles seized from Vehicles Lanka Minuwangoda yard on January 31, 2017 by the Anti Corruption Unit of Walana, Panadura with the assistance of officers of Central Investigation Bureau of Sri Lanka Customs whilst the investigation is on going.
According to a high ranking Customs Official, during an ongoing investigation of seized vehicles, no one has the authority to instruct to release vehicles until the investigation is concluded. As per the manual of procedure of Preventive Division of Sri Lanka Customs, in a prima facie case, the Investigating Officer should seize the goods as they are liable to forfeiture under Section 135 of the Customs Ordinance. The manual procedure of Preventive Division further states thus, ‘On conducting of preliminary investigations, if it is observed that there is a prima facie case, the investigating officer should seize the goods as they are liable to forfeiture under Section 135 of the Customs Ordinance. The goods should be seized and brought to the preventive office together with the suspects and any connected documents etc. At the conclusion of an investigation a comprehensive report with the officer’s observations including the offences should be submitted to the staff officer’.
Regulations ignored
“When the regulations state clearly, what made the ADGC to give an unlawful order to the Central Investigation Bureau (CIB) to release this vehicle? Senanayake and Managing Director Vehicles Lanka are said to be good friends and that was why this vehicle was released unlawfully,” sources who wished to remain anonymous told The Sunday Leader.
At a time when there is an order given on February 16, 2017 by President Maithripala Sirisena as the Minister of Mahaweli Development and Environment that Vehicles Lanka should not be given any tax concessions or any other concessions for their assembled vehicles, it is surprising as to how Treasury Secretary, DGC and the ADGC are overlooking all government rules and regulations to help their friend Managing Director Vehicles Lanka, Harsha de Silva. “If these public officials are allowed to overrule the President’s directives, then what is the use of having a President in this country?” sources queried.
It is learnt that the DGC’s decision to send one of the investigative officers on compulsory leave after the Director CIB went on retirement was to make way to release these seized vehicles without any issue. “It is these two investigating officers who became an obstacle for the DGC and the ADGC to release these seized vehicles. After the Director went on retirement, it was this investigating officer who became a threat to these officials in releasing the vehicles,” sources claimed.
When contacted ADGC, Vipula Senanayake to find out why such an unlawful directive was given to the CIB, Senanayake said that although the vehicle in question had been seized from the Minuwangoda yard with the other vehicles, the particular vehicle had been sold by Vehicles Lanka to another party some time back.
“By mistake our investigative officers had taken this vehicle into custody. As it was our mistake I gave orders to the CIB to release it to the owner,” Senanayake claimed.
When asked whether he has the documents to prove that the vehicle in question was not an illegally assembled vehicle and if so whether he had given copies of those documents to the CIB and the Preventive Division to release the vehicle, Senanayake said that he is in possession of all the relevant documents which had also been given to the CIB and the Preventive Divisions.
According to Senanayake, this vehicle had been brought to Vehicles Lanka assembling plant to be weighed. When queried as to why the buyer wanted it to be weighed, Senanayake said that it is for the vehicle registration purpose.
Although the seller (Vehicles Lanka) has to pay the excise duty to Customs when an assembled vehicle is sold, from what Senanayake said, it is evident how Vehicles Lanka as usual had sold vehicles without paying applicable taxes to the government.
Documents not given
However officials from the Preventive Division and the CIB confirmed to this newspaper that they were asked to release this vehicle but not a single document as stated by the ADGC had been given to them.
“From the time the investigation team seized these vehicles from Minuwangoda yard in January, the DGC and the ADGC together with the Treasury Secretary Dr. R.H.S. Samaratunge were working round the clock to get these vehicles released. In addition they were attempting to get eight containers of spare parts imported by Vehicles Lanka which were seized by Customs in 2013 released by various means. What is the reason why these three officials want to help out Vehicles Lanka when there is clear evidence that the vehicles were unlawfully assembled and there are three court orders preventing the release of the said eight containers? It is alleged that all these three officials are handsomely rewarded by the spare parts importer to get his vehicles and containers released,” sources alleged.
“These officials say that Vehicles Lanka got a Supreme Court order (SC FR Application No: 304/ 2011) to import 2250 vehicle body parts to the country. After it was revealed that this spare part importer had misrepresented facts to the controller of Imports and Exports and had got the said license for importation of 2250 vehicle body parts the then Treasury Secretary Dr. P.B. Jayasundera by letter dated February 28, 2013 to the DGC instructed not to release the consignments imported by Vehicles Lanka,” sources said.
Following the Treasury Secretary’s letter, Vehicles Lanka went to Supreme Court (SC. SPL.LA. No: 76/ 2013) against the Treasury Secretary’s order citing the DGC, Treasury Secretary and Cabinet of Ministers as respondents seeking a directive to the Director General Customs and the Treasury Secretary to allow the petitioner to clear the goods he has imported. It was then revealed as to how the petitioner after obtaining the earlier court order (SC/ FR/304/2011) misled the Controller Imports and Exports by submitting an application on October 10, 2012 and obtained an import license to import a consignment of 750 units of vehicle bodies per year for three years totaling to 2250 units of vehicle bodies.
Delivering the order on March 15, 2013, Justice S. Sriskandarajah had said that the petitioner is not entitled to import the 2250 vehicle parts. The order further states as thus, ‘Therefore the petitioner is not entitled to import 2250 vehicle parts in terms of the SC/ FR/ 304/ 2011 settlement and hence the petitioner has misrepresented facts to the Controller of Imports and Exports and had got the said license to import the 2250 vehicle body parts.
The consignment that is subject matter of this application was imported under the said license. As the petitioner, has not come to this Court with clean hands, this Court decline to issue notice on the respondents. Notice refused’.
Vehicles Lanka then filed an appeal against the previous ruling in Court of Appeal (CA (Writ) 57/2013). The three member bench presided over by the then Chief Justice Mohan Peiris in his judgment said that they see no basis to grant special leave and dismissed the application. The importer once again made an application to Court of Appeal (CA/Writ/ 446/2014) citing DCG, Treasury Secretary and Cabinet of Ministers seeking notice to get the imported goods released, President of the Court of Appeal Justice Vijith K. Malalgoda delivering the order on February 12, 2016 said that he is of the view that the decision in CA/Writ/57/2013 is a final and conclusive decision as the said decision is considered with the facts of the present’s case. The order further states thus, ‘In a prerogative writ, this court is not inclined to re-consider the same issues which were considered once by this court. It is trite law that there needs to be finality to litigation and therefore parties stopped from bringing multiple suits on the same issue resulting in over burdening the court. Therefore this court is not inclined to issue notice on the respondents as moved by the petitioners’.
According to the sources before Dr. P.B. Jaysundera’s directives and after the first SC/ FR/ 304/ 2011 settlement Customs had released consignments consisting chassis and engines for 62 vehicles to Vehicles Lanka Minuwangoda plant with an undertaking that these vehicle parts would not be used until the investigations are concluded. However at the time of the raid it was found out that the chassis and engines for the 62 vehicles that were released earlier by the Customs, only 13 unlawfully assembled vehicles were found in the premises and the rest 49 vehicles were not found at the premises. It is suspected that Vehicles Lanka has illegally assembled and disposed the 49 vehicles without paying taxes which were due to the state.
“There were several other assembled vehicles in the premises as well, but our officers were not aware as to how these parts were imported. When requested documents related to these vehicles and or parts the company representatives who were present at the time of the raid were unable to produce any documents. Though adequate time was given to get down the documents for these vehicles they failed to produce any document to establish the legal importation of these vehicles or for the parts. When the investigation officers sent summons to, Harsha de Silva to appear at Sri Lanka Customs on October 21, 2016 and then again on November 11, 2012 to record a statement on the locally assembled vehicles which were at his factory, he never appeared but repeatedly requested the CIB officers to re-schedule the dates. It was evident from the letters sent by De Silva that he has avoided to appear at Customs by giving lame excuses,” sources added.
According to sources, 11 assembled vehicles found during the earlier raid on July 11, 2016 in connection with case No: CIB/ INV/ 108/ 2016 were not found at the time the second raid was conducted at the Minuwangoda assembling plant on January 31, 2017. “When the CIB officers raided the Minuwangoda plant on July 11, 2016 there were 37 unregistered vehicles and the officers had taken details of them but could not seize as Chulananda Perera wanted them to come back without seizing them. As there was a prima facie case against Vehicles Lanka, the police officers who seized the vehicles on January 31, 2017 handed over 26 vehicles to Sri Lanka Customs in terms of the provisions of Sections 135 and 136 of the Customs Ordinance. Another 28 vehicles which could not be seized and transported were sealed in the premises of Vehicles Lanka by the Police and Customs.
Earlier this newspaper highlighted how DGC on April 25, 2017 gave a written order to the Director Excise to release a vehicle of this vehicle spare part importer and to link with the Motor Traffic Department enabling its registration although the applicable taxes were not paid by the importer.
According to gazette notification no: 1992/29 dated November 10, 2016, the imposed customs tariff from 2017 budget for each imported vehicle or locally assembled vehicle has to be calculated according to the vehicle engine capacity.
Although this regulation came with effect from November 11, 2017, when Vehicles Lanka paid only Rs.239, 400 as the customs tariff, the DGC had legalised the fraud. This paper is in possession of the hand written order given by the DGC and the payment paid to Bank of Ceylon, Taprobane Branch, Colombo to be credited to Director General of Custom’s Excise Collection Account through People’s Bank cheque no: 532214.
“The HS Code of this vehicle in question is 87.03.32.59 and according to Section 17, Chapter 87, page 19 of Sri Lanka Customs National Imports Tariff Guide, the excise levy for this vehicles come under this HS Code is Rs.6, 000 per CC. Although the engine capacity of this vehicle as declared by Vehicles Lanka is 1974CC, the Department of Motor Traffic vehicle registration document shows the engine capacity of this vehicle is 2190CC. There again Vehicles Lanka had misled Customs by giving a much lesser engine capacity to evade the excise duty but submitted the correct details to the Motor Traffic Department. Hence the applicable customs tariff should be Rs.13.14 million. By instructing the Director Excise to link this vehicle with the RMV for registration at a time the importer had defrauded Rs.12.9 million to the state. The Finance Ministry maintains the post of Director General Customs not to give concessions to friends for personal gains but for the benefit of the country. Instead Chulananda Perera had made Vehicles Lanka the benefactor not the country,” sources alleged.
Huge revenue loss
Meanwhile it is learnt that the company in question had paid excise taxes much lower than the taxes applicable and the loss of revenue to the country by this false declaration is mounting to a staggering Rs.109 million.
Meanwhile it has also unearthed that there had been a huge revenue loss in the collection of excise duty from this importer due to an illegal order given by R.H.S. Samaratunge when he was the Director General Department of Trade, Tariff and Investment Policy.
Treasury Secretary is accused of giving a directive to Sri Lanka Customs to give a special excise duty recovery method to Vehicles Lanka to import chassis on Bank Guarantees and Co-operate Guarantees in respect of the payable excise duties.
According to Section 29 (1) (b) of the Excise (Special Provision) Act No: 13 of 1989, The Minister may make regulations for and in respect of prescribing the manner in which the excise duty recovered under this Act shall be credited to revenue and the security to be provided payment thereof. Who is Samaratunge to go beyond his powers to help out this importer? All this is done keeping the Finance Minister in complete darkness. It is the Finance Minister who can impose such regulations and can implement once it is gazetted. Although he tried to hoodwink the former Finance Minister Ravi Karunanayake, he did not succeed his attempts as Minister Karunanayake did not allow Samaratunge to help out Vehicles Lanka,” sources added.