Attorney General And Customs At Loggerheads

• AG writes off Rs. 525 million

By Faraz Shauketaly

In an astonishing turn of events, the Attorney General’s Department has advised the Director General of Customs, that they will withdraw from a case involving the collection of Customs duties and levies from Colombo Dockyard PLC – a case where over Rs. 525 million of public money is at stake.
Customs had sought special leave to appeal against the decision given in the Court of Appeal, stating that in the Court of Appeal the judges relied on the Vallibel and Toyota Lanka cases. Both these cases, state senior Customs officials familiar with the matter, are quite different from the case that involves Colombo Dockyard.
In the case of Toyota Lanka, the Court of Appeal considered a case where the importer had mis-described the goods and had therefore underpaid duties. The Colombo Dockyard case, say Customs sources, is manifestly different. Under their BOI agreement, Colombo Dockyard were permitted to sell their products in the local market, provided that the necessary and applicable duties and levies were paid, using a format known as “CUSDEC” or a Customs Declaration.
Investigations carried out by the Customs had uncovered a clear case of deliberate withholding of payment on the part of Colombo Dockyard. The company had entered into agreements with both the Sri Lanka Navy and the Sri Lanka Ports Authority for a total of 21 craft. The craft were manufactured using imported raw materials and parts, on which the company was obliged to pay duties and levies. This they had to do using the CUSDEC format.
Customs documentation reveals that Colombo Dockyard collected the duties and levies from both the Navy and SLPA, amounting to Rs 619 million, of which only a small amount was remitted onwards. A sum of Rs 525 million remains at the centre of the dispute.
Senior Customs officials say that the Solicitor General Priasad Dep went to the Supreme Court only after convincing himself and others that the Court of Appeal ruling in the Toyota Lanka case was manifestly and significantly different. Customs officers now claim that if they had engaged the services of a firm of solicitors from the Private Bar, this matter would not have taken so long – as the Attorney General’s Department have consistently asked for more time to make a decision, in spite of the Solicitor General having looked through the file previously and making a decision that there was a prima facie case with which they could proceed to the Supreme Court.
Customs predict a horrific implication if this matter is not ruled upon at the highest court as on the face of it, any BOI company may now deem it fit to sell in the local market and not remit a CUSDEC in terms of duties and levies.
The Sunday Leader after having made a number of attempts to contact the new Director General of Customs, Suddharma Karunaratna finally caught up with her. Expressing surprise that a newspaper was privy to what was going on, she nevertheless stated that as she was quite new to the subject she was “studying” the case and “considering” various options.