From Colombo Telegraph
By Nagananda Kodituwakku
On 27th Jan 2016, the JVP Leader, Mr Anura Kumara
Dissanayake, made a ‘revealing statement’ in the parliament, alleging that on
the orders of the DGC Chulananda Perera and Finance Minister Ravi Karunanayake,
a large number of Toyota Prado jeeps (180 units) seized by Customs, have been
released only on recovery of 1.6 million rupees of additional duty for each
vehicle. Anura K further alleged that the government had incurred a colossal
revenue loss of over 4.7 billion rupees, as a result of the withdrawal of the
Gazette Notification No 1901/3 of 10th Feb 2015 (issued by the Finance
Minister), which permitted the Customs Officers to ‘combat such frauds’.
It appears that a group of Customs officers have taken the
JVP leader for a ride, having fed him with some false information. Whatever is
the motive behind these allegations, the JVP Leader cannot be allowed to
mislead the people abusing the Parliamentary privileges.
Customs Law relating to valuation of commodities
Sri Lanka is a member of the General Agreement on Trade and
Tarrifs (GATT) since July 1948 and in 1994 several important changes were made
to GATT Valuation Agreement (Article VII), which were incorporated into the
Customs Ordinance in 2003. This changes requires (Section 51) Customs to charge
levies on all commodities on the ‘transaction value’, which is the primary
source of valuation of goods for Customs purposes.
With this change, the Customs Law also provided stringent
sanctions for ‘deliberate understatement of value for customs purposes’, which
includes forfeiture of goods (Section 52) and if the fraudulent intent is
established, to impose severe penal sanctions up to the treble the value of the
goods (Section 129).
Alleged revenue losses on vehicle imports
In Sri Lanka, the Government’s tax revenue depends heavily
on the levies charged on motor vehicles. And it is nothing but fair to say that
Customs Department is responsible for causing a significant revenue loss due to
the collusion of the some Customs officers assisting the unscrupulous importers
to present false values for Customs purposes.
‘Vehicles’ withdrawn from application of GATT valuation
regime
Considering the magnitude of the revenue loss that had been
incurring by the understatement of values, a policy decision was taken in Nov
2013, to remove the ‘motor vehicles’ from the application of GATT Valuation
Agreement VII.
This was followed by a formulation of a new valuation regime
applicable to motor vehicles based on the minimum value concept determined by
the Minister and published in the gazette in terms of Article 10 of the
Schedule E of the Customs Ordinance. The objective of the new valuation regime
was to maintain the ‘true value’ of the motor vehicles, ensuring the proper
collection of revenue.
Corruption eats into Minimum Value regime as well
However, the special Customs Valuation Committee appointed
to formulate the new valuation regime had ‘moles’ within, who had apparently
connived with the fraudulent elements in the motor vehicle trade and made way
for corruption to creep in. Accordingly the ‘minimum value’, which was the
basis for charging of levies determined by the Committee, became false and
untrue. As a result the minimum values decided by them had been significantly
lower than the actual ‘transaction values’, causing heavy losses of revenue to
the government.
Apparently Anura K has been totally clueless on the issue
and also on the magnitude of the corrupt practices adopted by the Customs
Officers throughout. He has entered into an unknown territory controlled by
unpatriotic corrupt elements. What he should have done was to demand the
Corruption Commission to initiate a credible inquiry into the manner in which
the Customs Valuation Committee had formulated the schedule of minimum value.
Importers taking advantage of the situation prevailed
It is common knowledge that people do not voluntarily pay
taxes and pay less when loopholes exist.
The importers took the maximum advantage of the false
minimum value regime operated by the Customs and began paying lower levies,
causing heavy revenue losses to the government. Although the importers paid
less they could not be dealt with according to law, as their actions were
perfectly within the law, owing to the blatant failure on the part of the
Customs Valuation Committee as illustrated above.
Unlawful seizure of Prado vehicles at Hambantota port
Later on, a group of enforcement officers in the Customs in
the revenue protection directorate found out that the values so determined by
the Customs Valuation Committee were false. And as the JVP leader has correctly
said, these officers seized a large number of vehicles, alleging that ‘there
was a violation of law relating to valuation of the vehicles for Customs
purposes’ and therefore the vehicles were liable to be forfeited under the
Customs Ordinance (Section 52). Naturally their objective was to release these
vehicles subject to a recovery of penalties, allowing them to claim 1/3 of such
recoveries as cash rewards.
However, it appears that the officers responsible for the
seizure of the Prado jeeps were clueless on the law applicable to the motor vehicles.
They had failed to comprehend that the commodity (motor vehicles) has been
withdrawn from the application of the GATT valuation agreement Article VII,
since 2013, permitting no enforcement action whatsoever as the basis for
recovery of levies was the minimum value so determined by the Customs, which
had no bearing on the transaction value whether it was lower or higher than the
minimum value regime.
Unlawful seizure challenged
Further to the representation made against the unlawful
seizure of the vehicles to the Attorney General, a Gazette (No 1933/16 of 22nd
Sep 2015) was issued by the government, rectifying the error made by the
previous gazette (No 1901/3 of 10th Feb 2015), clearly outlining the process as
specified in the Customs Ordinance (Article 10 of Schedule E). This effectively
outlawed any enforcement action being taken against motor vehicle imports after
levies are charged on the basis of the minimum value as determined by the
Customs and not on the transaction value.
JVP leader being misled
JVP Leader Mr Anura Kumara alleges that the withdrawal of
the Gazette No 1901/3 of 10th Feb 2015 has effectively prevented the Customs
Officers from enforcing the law to recover a colossal loss of revenue of 4.7
billion rupees. This allegation is manifestly false and unfounded, because the
said gazette was withdrawn as it had violated the primary law (Article 10 of
Schedule E of the Customs Ordinance) under which it was published. The correct
application of law has been clearly spelt out by the Chairman of the Customs
Valuation Committee on 20th Oct 2015 as follows.
‘Once value for motor vehicles are determined by the DGC, it
shall be the Customs Value for recovery of taxes and when complied with (by the
importers), no penal sanctions provided by Customs Ordinance can be invoked.’
The new DGC takes action as required by law
In keeping with the correct application of law, the new DGC,
Chulananda Perera, made an order to release all Prado jeeps, subject to
recovery of levies on the minimum value as determined by the Customs. As a
direct result of this action the officers involved in the unlawful seizure have
been denied with the opportunity to appropriate cash rewards, as the DGC did
not permit any penalty recoveries, which is absolutely correct and lawful
order. Naturally, it is obvious that the officers who seized these vehicles
were unhappy and fed the JVP Leader with falsified information, enabling him to
make unfounded allegations against the DGC and the Finance Minister in the
Parliament.
Best course of action to protect revenue
The best course of action available in this regard for Mr
Anura K, if he is genuinely interested in protecting the government revenue is
to demand the Finance Minister Mr Ravi K to withdraw the regulations framed
under Article 10 of the Schedule E of the Customs Ordinance for Motor Vehicles,
bringing the motor vehicles back under the GATT valuation agreement, which
permits stringent enforcement action, if the process of valuation of
commodities is abused for improper purposes.
If he is an honest politician he should investigate those
who are responsible for taking him for a ride, undermining the office of the
DGC with false allegations made against it for not permitting the dishonest
officers to claim cash rewards from the intended unjust penalties to be imposed
on car importers. And the JVP leader also owes a public apology for abusing
parliamentary privileges to make manifestly unfounded allegations without
clarifying the bona fide of the information.
It is pertinent to mention that the JVP made similar error
when they came out with the baseless ‘Lamborghini’ allegation against the MR
family without clarifying the source and credibility of the information. Anura
K publicly alleged that Rajapaksas had imported 19 ‘Lamborghini’ cars,
defrauding over 975 million rupees of government revenue, with no idea about
the ‘Carnet System’, which permits temporary imported with no levies subject to
re-export. The truth is that not 19 but 21 such cars had been imported under
the Carnet facility but had re-exported them after the event. The Customs
Imports Directorate confirmed the re-exportation this vehicles but the JVP
refused to correct their false statement.
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