Highest Level Corruption with overwhelming evidence exposed

RESTORATING THE PRIDE OF THE CUSTOMS ADMINISTRATION

(January 09, Colombo, Sri Lanka Guardian) 1. The government and people of this country are well aware of the deterioration of the law and order within the Customs Administration, particularly at the highest levels, causing tremendous losses of revenue to the government.

2. In this background, we, Sri Lanka Independent Government Trade Union Organization – Sri Lanka Customs, consider it is proper to bring to your notice the following, which require appropriate action to bring the wrongdoers at all levels to book, restoring the confidence of committed officers in the Department. We are extremely concerned about the lack of vision and lawlessness prevailing in the Customs that have been the root cause for generating a bad image in the eyes of the government and the general public. It is apparent that the public confidence can only be restored and the government revenue going down the drain could only be saved by addressing these issues decisively.

3. To cut short a lengthy discussion we refer below to, two Customs cases that demonstrate widespread corruption from top to bottom, lawlessness and lack of vision within the department in a nutshell.

Unwarranted interference of ZAM Jazeel, the Duputy DGC and the Legal Advisor in the foreign exchange fraud concerning the Habib Bank

4. This case was detected by a team of officers attached to the ADP Division on 30th December 2010 and the Manager, Habib bank was taken into custody. This is one of the massive foreign exchange frauds ever detected and runs into over billions of rupees where money has been sent out of the country on account of non-existing imports by the bank.

5. When the suspect bank manager was arrested and due to be produced before the Court, ZAM Jazeel interfered and misguided the DGC to release the suspect on the basis that there was no violation concerning the Customs Law. When the investigating officers urged the DGC to give the release order in writing the DGC, who is clearly with no law enforcement experience, declined to do so, claiming that it was a decision made by Jazeel, the Legal Advisor. When the officers insisted that Jazeel’s order should be made in writing Jazeel was summoned to the DGC’s office and was asked to give the release order in writing. Jazeel at this moment went back on his original advice to the DGC and informed the DGC that he needed at least 4 hours to study the matter further and to give his ruling in writing.

6. By this time the suspect had been in the custody for over 20 hours and it was apparent that Jazeel knew the fact that on completion of 24 hours the suspect had to be automatically released, in the absence of a remand order from the Magistrate’s Court. We are of the firm view that it was a deliberate act of betrayal on the part of Jazeel [probably the only legal advisor in the Govt service with no legal qualifications at all] who is under duty to protect the interests of the Customs.

7. This appalling state of affairs cornered the inexperienced DGC who was forced to seek AG’s advice on the matter. Immediately a meeting was arranged on the same day with the AG with the participation of the DGC, Jazeel, and the investigating officers. The AG totally refuted with Jazeel’s stand and advised the suspect to be produced before the Magistrate and put him in the remand custody. This was affected just before the expiry of the mandatory 24 – hour period by the investigating officers.

8. The committed officers of the Customs are flabbergasted as to how this so-called ‘legal advisor’ was allowed to occupy this prestigious, all important post causing tremendous losses in govt revenue running into billions. It is a known fact that Jazeel has no legal qualifications whatsoever yet he is allowed to carry on with no interruption at all. We have managed to trace an important confidential document [copy attached] submitted to DGC by Deputy DGC Dr Neville Goonawardana on 19th May 2010 complaining about the improper conduct of Jazeel and Tharaka Seneviratne, Director of Customs. This document alleges that both these officers are in the act of taking bribes from the fraudster elements.

Jazeel’s interference in the case of Lucky Asia Pvt Ltd [Case No: D/INV/2009/256] & D/INV/2009/286]

9. This case too vividly illustrates Jazeel’s unbecoming conduct as a senior Customs Official who is paid by public funds but serves the interests of revenue fraudsters.

10. The shipments referred to, in this case were seized on 03rd Sep 2009 further to credible information received by the DC [CCED], Dr Neville Gunawardhana on 24th Aug 2009. The confidential report dated 19th May 2010 [copy attached] submitted to the DGC by Dr Goonawardana, alleges that ZAM Jazeel and Tharaka Senevirathna are involved in this organised revenue fraud committed by an influential importer, namely Lucky Asia [Pvt] Ltd. The informant in this case had precisely provided the details of the fraud, even before the arrival of the contraband at the port of Colombo.

Modus Operandi of the fraud

11. The modus operandi adopted in this well executed fraud is, as follows;

12. As per the information provided [copy enclosed] the suspect company and several other companies are given safe passage through Customs by the officers namely ZAM Jazeel Jazeel, Tharaka Senevirathna, SKSH Wijesiri [ASC] and 6 others] to import goods that attract heavy duties, and also duties at unit rate. These officers are alleged to use their office to detain the goods related to the organised fraud, at the time of arrival. This is done to ensure that no other enforcement arm of the Customs would interfere with the shipments imported by these companies. After detaining the goods the importers declare the goods that apply normal duties only and clear the heavy dutiable goods undeclared with the help of Jazeel and other officers.

13. A large number of such shipments had been ‘facilitated’ by these officers over a considerable period of time. The two cases referred to herein are classic examples for the magnitude of the fraud which has been draining the govt revenue in an unprecedented scale. After receiving the information Dr Goonawardana kept the DGC, SACSW Jayathilake, informed of the modus aparandi of the fraud and the alleged connivance of Jazeel and Tharaka Seneviratna with the importers involved. And the further action concerning the fraud was initiated with the approval of the DGC.

14. Seizure notice for the detention of the containers [copy attached] was issued to Ports Authority on the initiative of Dr Goonawardna on 03rd Sep 2009. The ship carrying the containers arrived at the port of Colombo on 09th Sep 2009. Herein it is observed that the importer was making an application on 07th Sep 2009 [even before the arrival of the goods] seeking permission to re-export the goods that draw higher rates of Customs duties. It is apparent that he had made this application direct to Jazeel most likely under Jazeel’s own advice. The importer should have addressed the letter to the DGC who is vested with power to allow re-shipments under the Ordinance. But in this instance Jazeel had acted usurping the powers of the DGC and had allowed the shipment application .

15. After the seizure of the goods, the contents were examined on 28th Sep 2009 and the Customs duty on the heavy duty articles found in the containers was ascertained as follows.

Duty on shoes [at unit rate] Rs 13,500,000.00
Duty on gas lighters [at unit rate] Rs. 5,700,000.00

16. This case also brings to light the improper conduct of DGC, SACSW Jayathilake who was well aware of the serious allegations of wrongdoing against Jazeel, Tharaka Seneviratne and Wijesiri [ASC] and yet allowed all three men to actively engage in the investigation formalities as follows.

17. The examination of the seized goods was carried out by SKSH Wijesiri [ASC] and the examination report was submitted to Tharaka Senewirathna [DDC]. He in turn reported to Jazeel with his recommendations allowing the importer to abandon the goods that attracted heavy duties running into over 19 million rupees and to clear the rest of the consignment. By the time Tharaka Senewirathna made his recommendation on 30th Sep 2009, Jazeel had already given permission to reship the goods referred to in paragraph 15 above. It is quite clear that if not for the detection initiated by Dr Goonawardana, there would not have been any issue of reshipment and the entire shipment would have entered the market defrauding customs duty of over 19 million rupees.

18. It is observed that actions by Jazeel, Tharaka Senewirathna and Wijesiri were quite irregular and unlawful for the following reasons.

1. The decision to allow the importer to abandon the goods that attracted higher rate of duty taken by Tharaka Senewirathna was approved by ZAM Jazeel and the decision to re-export the same was also taken by him on his own with no approval from the DGC.

2. Both these officers had been accused and reported to the DGC by Dr Goonewardana [presently the Director General – Trade and Tariff, Treasury] for their connivance in the very same fraud.

3. Total duty payable on the goods re-shipped was Rs 19,200,000.00 and under the law no such reshipment is permitted unless 1/10 of the total duty is paid [i.e. Rs. 1,920.000.00]. And in this case the re-shipment had been allowed by Jazeel in contravention of the Section 22[2] of the Customs Ordinance.

Adverse effects of the inaction by the DGC SACSW Jayathilake

1. Despite the fact that Dr Goonawardana had urged the DGC SACSW Jayathilake to cause investigations into the matter and to take appropriate action against those officers involved in the fraud the DGC [ref his report to DGC], the DGC SACSW Jayathilake had failed in his duty resulting in the following.

o No proper investigation was carried out to ascertain the total number of shipments imported by the same importer adopting the same process, prior to the intervention by the deputy DGC Dr Goonewardana

o Identification of the goods which were actually imported in the previous occasions

o Identification of the officers involved in the examinations and release of the previous shipments

o Failure to recover at least the 1/10 of the duty on the goods re-shipped under pretext of Section 22 [2] of the Customs Ordinance by ZAM Jazeel

o Failure to establish the total revenue loss incurred due to this mass scale smuggling operation

o Setting up of a bad precedence of not taking any disciplinary action against the officers in authority who were involved in high profile frauds

o Sending a wrong message encouraging wrongdoing

We demand integrity in the Customs Service

We, as a Trade Union, a body devoted to regain the lost image and integrity of the Customs, demand stern action against all the officers involved in the above two cases. We urge them to be subjected to due process under the law setting an example to the entire Customs service.

W.M. R.P Widekoon

Hon General Secretary

Sri Lanka Independent Government Trade Union Organization – Sri Lanka Customs
Copies to: 1. The Secretary to HE the President
2. Commissioner General – Bribery and Corruption Commission
3. The Director – Presidential Task Force
4. Peoples’ watchdog – The Print and Electronic media

Source:
www.srilankaguardian.org/2011/01/customs-highest-level-corruption-with.html

Nation building efforts launched by the President effectively derailed by the dishonest ST PB Jayasundara

Petition to the President Mahinda Rajapaksa

 

by W.M.R.P. Wijekoon

General Secretary, Sri Lanka Independent Government Trade Union Organisation,Sri Lanka Customs

(November 19, Colombo, Sri Lanka Guardian) Sir, in response to your clarion call to all Lankan professionals living abroad to return and serve the motherland, we understand that Mr N Kodituwakku, the former head of the Customs Revenue Task Force who is now a solicitor practicing in the UK, returned to Sri Lanka further to a telephone interview had with you. It is known fact in the Customs circles that Mr Kodituwakku was a unique character, and highly regarded for his uncompromising stance, integrity and loyalty in the protection of the government revenue.

We are aware that he had been offered an interview with you wherein Mr Kodituwakku had briefed you about the circumstances under which he had left the country in September 2001 when Mrs Chandrika Kumaratunaga held the office of the President and Dr PB Jayasundara held the office of the ST. The life threatening circumstances under which Mr Kodituwakku left the country was vividly presented by a group of MPs on 09th October 2010, in the Parliament, just two weeks after his exit, wherein a serious allegations were levelled against the President Chandrika Kumaratunga, ST PB Jayasundara and the then DGC for betraying Mr Kodituwakku and forcing him to leave under death threats [a copy of the relevant proceedings enclosed].

We are aware that sometime after been left the country, Mr Kodituwakku had requested overseas leave, which had been refused by the then DGC Mr Sarath Jayathilake although the same DGC had allowed similar requests for overseas leave by some other officers made from abroad. We noted that in Kodituwakku’s case the DGC Mr Jayathilake had exploited the situation to his advantage and issued a vacation of post notice on Mr Kodituwakku, effectively bringing an end to his unparalleled record in the Customs Service.

We are aware that further to the interview he had at the temple trees, you had immediately directed the ST Dr PB Jayasundara to take required steps to ensure resumption of duties by Mr Kodituwakku and directed Mr Kodituwakku to meet the ST, who is however, ill-disposed towards Mr Kodituwakku for the reasons set out below.

We are aware that Dr PB Jayasundara did not want to allow Mr Kodituwakku to resume duties despite your recommendations and he only offered Mr Kodituwakku retirement from the public service as had already recommended by the formed DGC Sarath Jayathilake, further to Mr Kodituwakku’s previous appeal to the PSC, seeking permission to resume duties.

Since then Mr Kodituwakku had made several attempts to have an appointment with you and having all such attempts, he had now returned to his adopted country [the UK] and dispatched a letter to you [with copies sent to the Sri Lanka Customs Trade Union] explaining reasons as to why ST Dr PB Jayasundara declined to comply with your directive and disallowed his offer to resume duties in the Customs.

In order to make our submissions plain and clear we quote the following extracts taken from his letter addressed to you dated 13th Nov 2010.

“…However, since I returned to Sri Lanka honouring your call, I believe that it is my duty to brief you as to why the ST PB Jayasundara declined to comply with your directions. I thought it is my duty keep you informed of the relevant facts in this regard, because I perceive that you may disagree with ST’s prejudicial attitude against me…”


“… In my capacity as a Customs Inquiry officer I have found that in number of fraud inquires the conduct of ST Dr Jayasundara was unacceptable and amounted to abuse of office of the ST. I have set out below two cases, which I dealt with where I found Dr Jayasundara’s conduct was entirely unbecoming of a public officer holding a high office in the Executive…”

Case 1

“… In this case the Koggala Beach Hotel was charged for a fraudulent transaction where the company had sold 4 duty free permits issued to import luxury vehicles to be used in the Tourist Industry. The company had abused the privilege and had sold all four permits [3 to the Finance Company and 1 to Arjuna Ranatunga] to import the vehicles defrauding the government revenue. This case was presented before me and I dealt the General Manager, Koggala Beach Hotel and the Finance Company as required by law imposing a fine of over 7 million rupees for knowingly concerned in defrauding the government revenue…”


“… However, when the hearing of Ranatunga case [Case No:CRTF/04/2001] was due, as a result of direct interference of the Reggie Ranatuga, then a Cabinet Minister, and the President Chandrika Kumaratunga I was subjected to tremendous pressure by the ST PB Jayasundara through the then DGC Mr Janak Guranrathne. I was ordered to abandon the inquiry proceedings against Ranatunga altogether. I had to decline their unlawful directive as I was under duty to observe the rule of law. In fact it was my duty to treat every person charged before me equally, disregarding unlawful interferences…”


“… In this case, the pressure brought on me was such that I had to conduct the said inquiry having completely lost the pleasure of the ST Dr PB Jayasundara and the DGC Mr Gunarathne for defying their unlawful orders. Yet, I had the required will and firmness to meet out justice as required by law and to impose over four million rupees [Rs 4,198,255.00] on Ranatunga, which was determined on the value of the vehicle imported against the duty free permit and the amount of revenue defrauded by the unlawful importation of the luxury Benz car [Reg 65-3583] defrauding the government revenue…”


“… The said inquiry was held on 06th Sep 2001 and due to unprecedented pressure and threats to my life posed by those who were concerned in the said fraud I had to leave the country with my family just two weeks after finding Ranatunga in the wrong. It was a disgraceful act on the part of the ST and the President that after I had left the country, the inquiry record was called at the Treasury and the penalty imposed at the inquiry was nullified by abusing the Executive Power …”

Case 2

“… This particular case refers to the abuse of innocent customers by leading ‘renowned’ business enterprises in Sri Lanka who import inferior and substandard consumer goods – some electrical appliances imported by them were found to have been with heath and safety risks – from third world nations. These goods were imported at a very nominal value declared to Customs and cleared on payment of a nominal duty…”


“… These goods were later sold in the open market to the innocent buyers at an exorbitant price under the pretext those goods were original products imported from manufactures in Japan and in some cases from Europe. Trade description of these goods, such as the brand names and the country of origin displayed in the product and the packing were manifestly false. The wrongful act committed by the so-called renowned business establishments was amount to violation of the provisions of the Code of Intellectual Property Act and hence chargeable under the provisions of the Customs Law. Series of such cases were presented before me by the officers of the Customs Revenue Task Force, which were dealt with according to law, with penalties and forfeitures imposed on the wrongdoers involved …”


“… The powerful business enterprises involved were clearly displeased with the firm stand taken against them by me. Yet they refused to challenge the orders made against them in the Court of law. Instead they lobbied against me to the ST Dr Jayasundara. The ST, as customary, took the side of the wrongdoers and resorted to summon me at the meeting held at the Treasury, at which all affected business community were also present. At the said meeting, despite the fact I submitted to him that the right forum to decide the issues raised would be the Court of Law, the ST Dr Jayasundara abusing his authority harassed me in the presence of the powerful business community. The matter did not end there. The ST had the audacity to direct the DGC to refund all the penalties recovered from the wrongdoers who were found guilty for the violation of the provisions of the Code of Intellectual Property Act…”


“… Based on the said evidence I can vouch that ST, Dr Jayasundara is a dishonest official whose only concern was to facilitate the fraudster elements, some time under the pretext of ignorance of the law and procedure. He was always totally indifferent with the difficult role the Customs Inquiring officers played under trying circumstances, particularly in cases where powerful and influential fraudster elements involved. Under the Customs Law, inquiry proceeding conducted by the inquiry officers are deemed judicial and they are under duty to observe rule of law, rules of evidence and to comply with the principals of natural justice.


I must mention that in the two cases referred to above my relations with the ST, Dr Jayasundara became very sour as I had refused to compromise with his unlawful orders given to protect the interests of the fraudster elements…”


“… Now, I understand that justice had been done for the ST Dr Jayasundara by the Supreme Court and he had been found guilty for his fraudulent conduct and abusing his office, with a heavy fine of Rs 500,000.00 imposed on him and prohibition from taking any appointment in the Public Service…”

Public confidence in the Customs severely damaged

There are so many other cases where the ST Dr Jayasunara had been found concerned in defending fraudster elements. The Colombo Dockyard revenue fraud case where the public funds to the tune of over 619 million rupees had been misappropriated by the Colombo Dockyard Company is the best example. In this case, he directed the DGC not to enforce the penal sanctions provided by the Customs Ordinance against the Dockyard Ltd. The ST’s improper action that opened floodgates to government revenue fraudsters is now challenged before the Supreme Court [SC/536/2010] where he is cited as the main Respondent in the case.

Surreptitious actions to immune from liability

Sir, we are fully aware of the drastic actions being designed by the ST Dr Jayasundara against the public interests but to protect the interests of high profile organised fraudsters (including the Colombo Dockyard) who are responsible for robbing billions of public funds. These actions, surreptitiously designed by the ST, include across the board general amnesty to all high profile organised fraudster elements and would invariably receive the approval of the lawmakers in the upcoming budge, absolving them from of the criminal liability before any Court in Sri Lanka. The right-thinking taxpayers who obey their statutory obligations and always play their part would naturally perceive these drawbacks as a slap on their face.

We also aware that some of the drastic actions designed to taken through the budget include severe curtailment of law enforcement actions under the Customs Ordinance, probably removing enforcement provisions and the provisions provided by law to reward the informants and the fraud investigators. These actions designed against the public interests would effectively clip the wings of the frauds investigators and would only strengthen the hands of the fraudster elements.

Customs destined to fail without a right political will

Hon’ Sir, we firmly believe that you would now appreciate as to why the Executive should have honoured the Supreme Court order that ruled that Dr PB Jayasundara should not be allowed to hold any public office and the great dangers faced by the Country for defying the Supreme Court ruling by retaining dishonest people in the calibre of Dr PB Jayasundara in the Executive that not only hinder the Nation building efforts launched under your leadership but also would be perceived by the right thinking people in this country as a insult to their intelligence, as such actions are deemed abuse of peoples’ Executive power with a scant respect to the peoples’ sovereignty.

Need of the hour

Hon’ Sir, having placed the aforementioned information before you, as the Sri Lanka Freedom party Trade Union of the Sri Lanka Customs, we honestly believe that it is suffice to understand true character of the twofaced ST and as to why he declined to give effect to your directive and refused to recall Mr Kodituwakku to the active service. We believe that in the eyes of the right thinking people, particularly in an era where the image of the Customs Department is badly tarnished and needs an overall change, this incidence of refusal of services offered by the former head of the Customs Revenue Task Force Mr Kodituwakku by the ST, would be considered not only as a miscarriage of justice but also as an encouragement to the acute lawlessness rampant in the Department of Customs.

Rs 619 million rupee Dockyardgate scandal – Three high ranking Customs men caught pants down

In our previous exposures of the above we reproduced the Attorney General’s opinion given to the Director General of Customs on 10-05-2010 which carried a warning that the AG would withdraw the action pending before the Supreme Court against the Court of Appeal ruling favoring the Colombo Dockyard Ltd. This is despite the fact the company had already conceded guilt by making a special deposit of 95 million rupees with Customs, to apply against the final determination of the Customs inquiry that was pending against the Company.

 Now we draw your watchful eye to the three dodgy minutes made on the AG’s letter [10-05-2010] by three of the most senior Customs men, one being the Deputy Director General [Enforcement] ZAM Jazeel and the other, the Director [Preventive] Thilak Perera, on 31-05-2010 and the final minute dated 23-06-2010 by Deputy Director of Customs Lalitha Weerasinghe, sealing the fate of the Dockyard scandal. You would observe that all these Customs men have totally dismissed the minute made by the OIC of the Customs Legal Affairs Unit, condemning the AG’s dodgy opinion which was clear deviation of his own opinion expressed to the DGC on 04-11-2009.

 Three minutes by these Customs men, clearly demonstrate the surreptitious and hurried action taken by them to shut the case abruptly with no knowledge or consent of the new DGC Mrs Karunarathna. By then the new DGC had just taken over the office of the DGC from Sarath Jayathilake who had been involved in this scandal for a period of over 10 years.

 It is evident from the minute made on the AG’s letter by the OIC Legal affairs, addressed to the Deputy DGC ZAM Jazeel that the AG, at the meeting held at the AG’s office on 04-11-2009, had advised the Customs to proceed with the Customs inquiry since the Court of Appeal ruling favoring the Colombo Dockyard Ltd does not preclude the holding of the Customs inquiry. Connivance of the ZAM Jazeel in the Dockyard scandal is clearly evident to any watchful eye, from his own admission by his minute on the  AG’s letter. He simply concedes that he had failed to take any action to resume the Customs inquiry for a 6-month period since AG’s advice given on 04-11-2009 and hence order all officials down the line to close the case as per the AG’s irrational advice given to DGC on 10-05-2010.

 However, with the appointment of Mrs S Karunarathna to the office of the DGC the tide has completely changed. She had taken a firm stand on this issue, challenging the dodgy opinion expressed by the AG Mohan Peiris to shut the case. Her decision also cancelled the improper action taken by the three Customs men, whose conduct suggest their apparent collusion in this day light robbery committed by the Colombo Dockyard Ltd.  The Customs insiders believe that these three men had acted on the advice of the former DGC Jajathilake who had missed the opportunity to close the case before his sudden removal, solely due to the fact that the original case record had gone missing and could not be traced.

 The new DGC’s letter sent to AG on 03- 08-2010 [see the image of the letter shown separately] demonstrates her stand that clearly goes against AG’s advice. Her stand is based on the consideration of the colossal revenue loss incurred by the government and also based on the sudden deviation of the AG’s own stand since his original opinion dated 04-11-2009. The new DGC had plainly informed the AG that the withdrawal of the Supreme Court action at this stage is inappropriate.

 Now the concerned officers in the Customs are carefully monitoring what action would be taken against the three customs men against whom charges on corruption is looming for abuse of office for defrauding the government revenue. Their improper conduct also warrant dismissal from the Customs Service under the provisions of the  of the Customs Ordinance [Section 137], and corruption charges under the Bribery and Corruption law.

 Last Sunday, the print media [Sunday Leader] exposed the Secretary to the Treasury [ST] Dr Jayasundara’s double stand in this case, which is seen as an abuse of office of the ST by Dr Jayasundara to accommodate a revenue fraudster. Further to the media exposure of AG’s double standard in this scandalous affair and DGC’s firm stand notified to the AG to go ahead with the Dockyard Court action,    we can reveal that Dr Jayasundara had summoned the DGC and a team of Customs officials involved in the case, and severely reprimanded them to comply with the AG’s advice and not pursue Court action against the Colombo Dockyard. However, the ST PB Jayasundara, who had learnt lessons from previous Court orders made against him with harsh penalties and strictures, that followed by his removal from the public service, had taken necessary precautionary measures not to give anything in writing confirming his dodgy directive to the DGC. 

 In this background, we can reveal that the Customs Officers Union has come forward to protect the interests of the Customs and the DGC. The union members have called upon the DGC Mrs Karunarathna to take proper action to safeguard the office of the DGC by taking the wrongdoers to task, irrespective of their positions held in the Customs Service. They have also urged the DGC to call for a written confirmation from the ST of his verbal directive given to abandon the Court action initiated against the Colombo Dockyard Ltd. The letter by the trade union, an image which is reproduced here, urges that such an action is a necessity as the directive given by the ST is not in the best interests of the protection of the government revenue.

DGC’s firm stand against AG’s irrational opinion [03-08-2010]

DGC’s firm stand against AG’s irrational opinion [03-08-2010]

AG’s letter to DGC with irrational opinon [10-05-2010]

AG’s letter to DGC with an irrational opinion [10-05-2010]

Dodgy minutes by three key Customs men on AG’s letter [10-05-2010]

Minutes on the AG’s letter – page 2  [10-05-2010]

WORD OF ADVICE TO NEWLY APPOINTED DGC SUDHARMA KARUNARATHNA

We are extremely sorry to say that since your appointment to the office of the DGC nothing tangible has been achieved in arresting the prevailing lawlessness in the service and bring a noticeable change. The holders of the key positions that control the process of import and export trade, continue their grip unabated in the same manner they did it in the past decade under former DGC Jayathilake. Please note that their allegiance is still with their mentor Jayathilake, whose sworn allegiance had been with the fraudster elements and not with the Government.

In the circumstances we sense a possible danger posed by these highly placed Customs men who have been resorting to mislead you in a very discreet manner since the ‘Day One’ of your appointment. It is quite natural that they would get the maximum opportunity from your inexperience in dealing with an extremely sensitive and complex organization like Customs to tarnish your name.

Therefore, we warn you to be extremely diligent in all your interactions with these elements and use your intellect and experience to identify them at every turn. At the same time, we thought it proper to assist you to identify your priorities in the unique responsibility vested in you by the President. It is absolutely up to you to take notice of our word of advice or reject it altogether, but we believe that in the name of the Nation whose lifeline depends on the performance of the Customs, the saner counsel will prevail.

Try to win the hearts and minds of the officers before anything else and the ground realities in the era we live in

 In the first place don’t be prejudiced that Customs Officers are absolutely corrupt, which is not the case. Remember that we live in an era where the Nation is ruled by bribery and corruption and the Government revenue agencies like Customs, Inland Revenue and Excise are not exceptions. Yet, please note that the Customs is probably the only organization where you get some officers with high degree of integrity.

The personnel serving in the Customs represent various professional fields. They include, senior SLAS men, doctors, lawyers, engineers, architects, accountants, teachers, school principals, and officers from armed forces so on and so forth. It is a known fact that professionals belong to these categories level fierce criticism against Customs when they are not in the Customs service, but once they join the Customs they transform into a completely different lot with a totally different mind set. The past history indicates that the SLAS lot joining the Customs for a 3-year stint is the worst amongst them. They come with T20 mind set to accumulate wealth to the maximum by unlawful means during their short stay.

The above mentioned attitude of the senior officials of the Customs compels them to compromise with the politico-legal-business mafia in robbing the lifeline of the Nation. It is quite natural that in any organization when the top gets corrupt the middle order and the grassroots tend to follow suit. Therefore the corruption and malpractices in the Customs are to be understood on the basis of these ground realities.

The DGC is therefore should not antagonize the staff by taking ad-hoc administrative decisions. The first thing is to win the hearts and minds of entire Customs Service and make them aware of the great responsibility shouldered by them as the members of the leading revenue collector of the government. Dealing with the wrongdoers should not be done in a haphazard manner and the process should be a well thought out strategy that covers the department from the top to grassroots level and not from grassroots.

Be a successful team leader

Remember that ‘I am the boss and the boss is always right’ attitude would lead you no where as far as the Customs service is concerned. Be diplomatic in your approach and try to transform the attitude of the officers, which of course is an uphill task. This will take sometime but be firm and meaningful in your approach at all times.

You may encourage the officers by demonstrating that you are not prejudiced. Always encourage the officers to shun the bad habit of robbing public funds which would take them nowhere at the end of their life, except a fearful death for the sins committed against the humanity. Now it is your turn to motivate the officers by affording them an opportunity [on regular basis if possible] to come out with their grievances which had been denied throughout by the former DGC Jayathilake. This form of approach would naturally bring realities to light and will have a lasting impact on the officers to be honest in their primary duty once their issues are addressed. 

Use your authority to bring the evidence of large scale abuses to light

The big-time corruption in the Customs is known to every body. Quite seriously you may be the only exception as at the moment. We doubt whether the senior officers who are close to you would ever reveal about big-time frauds, simply because their own involvement in such cases. Therefore one way of winning hearts and minds of the middle level officers and the grassroots level is to assure them that you are going to take firm action irrespective of positions held by the wrongdoers.

For instance, the Customs headquarter building project became a gold mine for former DGC Jayathilake and his accomplices like Deputy DGC D Jayaratne. This J&J combine completely removed the second floor meant for the car park from the project plan. Please get your accountants [especially those who are responsible for approving payments for the new building project] to reveal the facts with confidence so that the magnitude of this fraud could be brought to lime light. [That was the very reason as to why Jayathilake pleaded with the ST not to remove his Deputy Jayarathne from the office of the Deputy DGC].

The next two dangerous characters are the so-called legal advisor ZAM Jazeel [please note that this man has no legal qualifications whatsoever] and Director Tilak Perera who singlehandedly dealt with most important revenue fraud inquiries that denied the government hundreds of millions of revenue. We will make sure that you see for yourself the damages caused by these two with their dodgy minutes and orders made in the inquiry records. Our honest advice to you is to be extra cautious when you deal with these elements keeping them at arms-length.

Take measures for the safe keeping of customs inquiry records

It is also a known fact that most of the high profile case records have gone missing. And this has been happening over the last few decades. People talk about these files ending up in the possession of fraudster elements themselves. So far during Jayathilake’s this criminal act came to a peak point but he did not make any move towards introducing a strategy for safekeeping of case records. The disappearance of the case record of the Colombo Dockyard revenue fraud handled by Director Tilak Perera is a shining example to this unpardonable offence. We therefore urge you to make a fool-proof methodology to secure all case records and hold the inquiry officers responsible for the safe keeping of the case records. A directive may be issued to all officers who conduct prosecution to have a copy record for their reference purposes.

 Don’t be hesitant to defend your officers when they refuse to compromise with fraudster elements

You can learn a lot, from some of your predecessors like Mr WDL Perera [DGC 1999-2001] and SMJ Senarathna [DGC 1996-1999] who had established their names in the service through sheer commitment to uphold the office of the DGC. Unlike the condemned Jayathilake who was a disgrace to entire Customs service, those officials had the will to refuse illegal orders, directives and warnings came from the above. Their conduct always provided the necessary inspiration to committed officers and it was a privilege for the officers to have worked under them as they decisively defended the officers who did the right thing.

Remember, that the primary sources that bring pressure on you are the Ministers, the ST and the Attorney General. Yet, in the interest of the country and for your own interest, you must have guts to refuse any improper order that affect the government revenue and demoralize the officers who perform an extremely difficult job under trying circumstances. 

You should know by now that bringing about change in the Customs is not an easy task. This cannot be simply achieved by simply removing a crook like Jayathilake as the ST Jayasundara thinks. According to ST’s belief demonstrated at the recently held conference, which you and many of us attended, when the office of the DGC is replaced with a person with good character [pointing the finger towards you] there will be a trickle-down effect making all the personnel from 4 Deputies downward good characters. What he implied from his statement was that Jayathilake was dishonest and therefore the entire Customs service became corrupt, which is not the case at all as explained above.

Be pragmatic in your approach and we wish you total success in all your endeavors to fight corruption and protect Government revenue.

GREAT DOCKYARD REVENUE FRAUD – BRIEFING TO PARLIAMENTARIANS

1.       What was the revenue fraud committed by the Colombo Dockyard Ltd [CDL]?

I.            The CDL, a BOI registered enterprise, sold 21 marine crafts manufactured with BOI privilege locally, which is prohibited under the law. The law requires that if the CDL intends to sell any finished products manufactured with raw material imported on duty free basis for export bound production, it should first apply for permission from BOI followed by Customs authorization and then pay all fiscal levies [Customs duties and other taxes] on the value of the goods so determined by the Customs on a bill of entry [Customs Declaration] furnished for Customs purposes. 

 II.            On an information provided by a private informant the Customs launched an investigation [Case No: P/Misc/93/2000] in October 2000 into this unlawful transaction which has revealed that the CDL had defrauded the total duty component amounting to a sum of Rs 619,483,827.00 on the 21 marine crafts sold locally.

2.       What was the modus operandi [the method] adopted by the CDL to commit this financial crime against the State?

First, the CDL did not apply for Customs permission for the sale of 21 marine crafts.

Secondly, the CDL included the duty component in the sale price of the marine crafts and recovered the total amount of fiscal levies amounting to Rs 619,483,827.00 from the buyers.

 Thirdly, the CDL misappropriated the total amount of the fiscal levies so recovered, without paying a single cent to the Customs. 

3.       After the completion of the investigation did the Customs follow the process as required by the law and hold an inquiry into this revenue fraud?

Yes. A formal Customs inquiry [Case No:P/Misc/93/2000] was commenced on 07^th February 2002 and inquiry officer Tilak Perera was appointed to hold the inquiry.

It is important to note that before the commencement of the formal Customs inquiry on an initiative taken by the officers who had led the investigation, the CDL had been compelled to make a special deposit of 94 million [Rs 94,015,050.00 to be exact] with the Customs. This amount was to be applied against the final determination in the case.

4.        What happened at the inquiry?

The Customs inquiry dragged on for more than two years with no tangible action whatsoever being taken by the Inquiry Officer Tilak Perera. No reasons whatsoever on this inordinate delay were given by the Inquiry Officer Tilak Perera and the then DGC, Sarath Jayathilake.

 

5.       Did the CDL accept the liability for defrauding fiscal levies of 619 million rupees at the inquiry?

No. Instead the CDL used all the influence at their disposal to get away from the liability. Further they made every attempt to have the deposit of Rs 94 million made with Customs refunded.

6.        Did the CDL become successful in evading the liability to the revenue fraud?

Yes. Both the DGC Sarath Jayathilake and the Inquiry Officer had been bought over by the CDL. The DGC Sarath Jayathilake abused the office of the DGC and went to the extent of granting an official pardon to the CDL and officially terminating the Customs Inquiry.

This amnesty was granted under the pretext of the Tax Amnesty Law [Act No 10 of 2003] which had nothing to do with the financial crime committed by the CDL i.e. evasion of payment of fiscal levies. [Please refer to the notification of termination of the Customs inquiry signed by the DGC Sarath Jayathilake dated 05^th March 2004].

7.       Did the CDL case come to an end with DGC’s official pardon?

No. The informant of this massive revenue fraud who was going to lose his legitimate entitlement to a financial reward by the termination of the inquiry by the DGC Sarath Jayathilake persuaded the investigating officers to challenge the amnesty granted to the CDL.

8.       What action was then taken by the investigating officers? 

In spite of the undue pressure brought upon them, the committed investigating team headed by the Senior Asst Superintendant of Customs Mr TR Ratnasiri refused to submit and challenged the unlawful order of the DGC Sarath Jayathilake before the Court of Appeal   [Case No: CA/1397/2004] on 25^th of June 2004. This decisive action taken by the officers forced the DGC Jayathilake to withdraw the amnesty granted to the CDL, and also to give an undertaking to the Court of Appeal to resume and complete the Customs inquiry ‘as expeditiously as possible’. Accordingly, the aforesaid court action which was filed against the DGC by the officers was withdrawn on 09^th February 2005. [Please refer to the ruling by the Court of Appeal dated 09-02-2005].

9.       Was the undertaking given to the Court honoured by the DGC Sarath Jayathilake?

No. The DGC, Jayathilake dishonored his undertaking given to the Court of Appeal and surreptitiously dodged the customs inquiry. According to the minutes made in the case record by the DGC Jayathilake, his legal advisor ZAM Jazeel [probably the only legal advisor with no legal qualification] and the inquiry Officer Tilak Perera, it becomes clear that ignoring the Customs inquiry was a collusive action committed by them favouring the CDL.

10.   Did the Customs conspirators deliberately play into the hands of the CDL to suppress the inquiry?

Absolutely Yes. Further to the undertaking to the Court of Appeal, only for the name sake, the inquiry was reopened on 10^th March 2005 and CDL was allowed to defy the Court of Appeal ruling with various unfounded legal submissions. Then on 27^th June 2005, despite a clear Court ruling to proceed with the Customs inquiry, the inquiry officer Tilak Perera once again allowed irrelevant objections raised against the legality of the Court ruling and continuance of the inquiry on the basis that Customs lacked jurisdiction to proceed with the case . This was another minutely calculated ploy to delay and suppress the inquiry proceedings. And again on 25^th July 2005 the inquiry officer allowed another application by CDL to suspend the proceedings for 6 weeks affording the CDL an opportunity to file counter action before the Court of Appeal and postponed the inquiry till 06^th Sep 2005 which never saw the light again.

11.   What was the consequence of the non-activation of the Customs inquiry?

In effect the DGC Jayathilake, his legal adivisor ZAM Jazeel and the inquiry officer Tilak Perera afforded CDL adequate time to plan their next move to evade the payment of fiscal levies amounting to 619 million rupees. Then with their tacit approval CDL initiated its own Court action before the Court of Appeal [CA/1413/2005] against Customs. They demanded a writ of prohibition from the continuation of the fraud inquiry by Customs.  

12.   Was this Court action facilitated the conspiracy between the CDL and the DGC?

Yes. The DGC in turn used this Court action by the CDL to justify his suspension of the Customs inquiry and also as an excuse for not carrying out the undertaking given to the Court of Appeal to resume the inquiry.

However, the DGC Sarath Jayathilake, his legal advisor ZAM Jazeel and the Inquiry Officer Tilak Perera had no answer for ignoring of the resumption of the Customs inquiry for a period of over 4 years. There was no interim order made against Customs by the Court of Appeal to suspend the Customs inquiry proceedings. According to the Customs investigators, the Court action initiated by the CDL was also a ploy collectively employed with the tacit approval of the DGC Jayathilake and two his aides namely, ZAM Jazeel and Tilak Perera the  to stop the Customs inquiry. 

13.    Did the Court action by CDL help them to prolong tax evasion and unjust enrichment from public funds?   

Yes. This case was deliberately dragged on for over a period of 4 years simply because there was no judicial precedence available favoring the CDL. That paved way for the CDL to prolong tax evasion and unjust enrichment from public funds. 

14.   When was the judgment of the CDL Court of Appeal case given and under what circumstances?

This case was finally determined by the Court of Appeal on 27^th April 2009. In the final determination, the Court of Appeal decided that the Customs duty and other levies defrauded by the Colombo Dockyard Ltd could be “recovered” from the Company as per the ruling given in the controversial Toyota Lanka case [SC Appeal No: 49/2008] delivered by the CJ Sarath Silva on 20^th March 2009 and a writ of prohibition was issued against the Customs from continuing the revenue fraud inquiry against the CDL.

This is a classic case that depicts the power and influence wielded by the politico-legal-business mafia that has the capability of maneuvering the whole ‘system’ to its advantage. Any prudent person who reads between the above lines would observe a link that exists between the two judgments and the time factor involved. It was as if the Court of Appeal had been waiting for over a period of 4 years for an impending, favorable judgment from a higher Court to rely upon. The judgment given by the Supreme Court 20^th March 2009 was promptly applied within a month to bring an end to the CDL Court of Appeal case on 27^th April 2009.

15.   Was the Court of Appeal Decision in the CDL case ‘good law’ and if not why? 

The Court of Appeal, failed to take any notice of the disparity of the facts between the Toyota Lanka case and the facts in the Colombo Dockyard case  where the crux of the issue was about the evasion of payment of duties. 

The case against Dockyard was about the willful evasion of Customs duties by the company whereas in the Toyota Lanka case it was about under payment of duties or misdescription of the goods. The Toyota Lanka ruling itself clearly distinguishes the difference between the evasion of duties with that of duties under-paid or unpaid on goods misdescribed.

Accordingly the decision in the Court of Appeal is clearly flawed and therefore merits setting aside by a ruling by the Supreme Court.

16.   What was the real impact of the Court of Appeal ruling on the Customs, CDL and other revenue fraudsters?

This ruling opened floodgates for revenue fraudsters who abuse BOI privileges to defraud the government revenue. All deterrents provided by the law against such elements have now been made defunct by the said ruling.

The CDL has been relieved from any penal action being taken against them as provided under the Customs Law for willful defrauding of government revenue amounting to 619 million rupees.

17.   Did the DGC follow appropriate course of action to arrest the damage caused by the Court of Appeal ruling?

No. The DGC Sarath Jayathilake simply ignored the gravity of the damage caused by the said ruling that simply encourages defrauding of government revenue by the fraudster elements which included CDL.   

18.    Did the investigators who led the investigations give up their duty of protecting the government revenue?  

No. They refused to do so even when the DGC Sarath Jayathilake and his aides had declined to challenge the Court of Appeal order. They warned the DGC of another Court action against his unbecoming conduct and abuse of office of the DGC. That made the DGC finally sign the letter prepared by the officers under legal advice, directing the AG to challenge the Court of Appeal ruling in the Colombo Dockyard Case [CA/1413/2005].

19.   Did the AG Mohan Peiris comply with the DGC’s request?

No. He refused to do so. In the circumstances the investigating officers convinced the Solicitor General Priyasad Dep to initiate action to challenge the Court of Appeal ruling with a special leave to appeal application filed in the Supreme Court [SC/SLA Application 100/2009] on 05^th June 2009.

20.   Where does the Supreme Court [SC/SLA Application 100/2009] action stand today? 

AG Mohan Peiris refused to proceed with the application filed before the Supreme Court that was done without his approval. He warned that the application for special leave would be withdrawn on the first day itself when it was first taken up before the Supreme Court.   However, Mohan Peiris was prevented from his intended action of withdrawing the application to Supreme Court when an aggressive media campaign was launched by the ‘Sunday Leader’ newspaper against his alleged conduct in the case.

21.   Did Mohan Peiris abuse the office of the AG to facilitate the fraudster elements?

Yes. Since filing of this application before the Supreme Court, Mohan Peiris in three occasions had asked further time to decide whether to proceed with this application or to withdraw the same. After a period of one year from the date of application,  he had on 10^th May 2010 informed the DGC that he would withdraw the case on the next date that falls on 30^th August 2010.  The extracts from his letter which are self-explanatory are reproduced below.

“… the Attorney General has filed application for special leave to appeal against the judgment of the Court of appeal dated 27^th April 2009. However, having reconsidered the judgment, I am of the opinion that necessary steps should be taken to recover the customs duty in terms of Section 18A of the Customs Ordinance. In the circumstances, there appears no purpose in proceeding with the said application for Special Leave and the Supreme Court would be informed of the withdrawal of the same in the next date…”

A thorough examination of this extract raises the following issues.  

• He claims that the special leave application to the Supreme Court was filed by him, which is absolutely false since it was initiated by the Solicitor General Priyasad Dep. 
• Almost one year after the application he reconsiders the judgment and decides to withdraw the application. [This is obviously false and even if it is true it shows the immaturity of the person who hold the office of the AG. No sensible AG would appeal against any judgment without proper consideration in the first place and would take a period of one year to reconsider on the issue].    
• He decides that there is no purpose of proceeding with the Supreme Court action. [This of course is true. It has been his sole objective from the very inception. If it was not for the timely action taken by the Solicitor General Priyasad Dep at the request of the investigating officers which was followed by an aggressive media exposure, Mohan Peiris would have achieved his objective almost a year ago].
• He directs the DGC to comply with the Court of Appeal ruling which was none of his business [True that the AG is the legal advisor of the State but he has no authority to dictate terms to the DGC or any other public authority].

22.   Is Mohan Peries a man with integrity?

Mohan Peiris seems to be an Attorney-at-Law with no integrity and a person unfit to perform the duties of an Attorney-at-Law. An affidavit made by the former DGC WDL Perera [1999-2001] on 16^th Feb 2001 plainly exposes the true character of Mohan Peiris who was then defending fraudster elements at Customs inquiries. It was very unfortunate that a head of the government revenue agency had to make a complaint against him to the Supreme Court by way of an affidavit for deception and unbecoming conduct. It is hitherto unknown whether the complaint made by the DGC had reached the Chief Justice or simply disappeared before its final destination.

23.   Why the need to support the Supreme Court action by the Parliamentarians? 

• Unless the opportunity afforded by the application to Supreme Court to overrule the bad judge-made laws, created over statue law, the government would incur a heavy loss of hundreds of millions of government revenue on daily basis
• The high profile revenue fraudsters are encouraged to defraud the government revenue at will as the deterrents imposed by statute law have been made defunct by the lawyers defending the big-time revenue fraudsters
• The committed officers with integrity who refuse to compromise with the revenue fraudster elements are clearly discouraged, disheartened and threatened
• The revenue targets set for Customs by the General Treasury would never be achieved
• And in this particular case the revenue fraudster who had defrauded over 619 million rupees would go scot-free without facing any penal sanctions as provided by the law.

AG’s threatening letter to DGC notifying withdrawal of Supreme Court Action

Notice of Termination of Dockyard Revenue Fraud Inquiry by DGC Jayathilake

DGC’s affidavit on AG Mohan Peiris’s unbecoming conduct as an Attorney-at-Law

The Great Dockyard fraud: Presidential directive reopens the 619 million rupee fraud inquiry: Jayathilake on the dock

On representation made to the President by concerned officials it is learnt that the Dockyard revenue fraud inquiry which had been effectively closed on the directive of the former DGC Sarath Jayathilake, has been reopened.

Colombo Dockyard Ltd is a BOI registered enterprise and is allowed to import raw materials to manufacture marine craft for the export market. Agreement entered into with the BOI provides permission for local sales subject to making a formal Customs declaration before effecting sales and payment of Customs duties and other levies.

Inquires have revealed that the Dockyard has sold 21 marine craft [9 to Ports Authority (SLPA) and 12 to Sri Lanka Navy (SLN)]. The sale price negotiated was also included the Customs duties and other levies but the Dockyard has misappropriated the element of Customs duty amounting to over 619 million rupees.

It is revealed that the former DGC Jayathilake had unlawfully terminated the relevant the Customs inquiry [P/Misc/93/2000] commenced on 19-03-2002, under the Tax Amnesty Law [Act No 10 of 2003] allowing the Dockyard to misappropriate the Government revenue recovered from the sale of 21 marine craft. He also had attempted to refund the 94 million rupee deposit held by the Customs against the 619 million rupee revenue fraud committed by Colombo Dockyard Ltd.

However, further to legal action initiated by the concerned officers before the Court of Appeal [CA/1397/2004] challenging the DGC’s decision, the amnesty granted to Dockyard Ltd was withdrawn and the Customs deposit of 94 million rupees was retained. Further a clear undertaking was also given by the former DGC Jayathilake to the Court to conclude the Customs inquiry as expeditiously as possible. It is very important for the readers to know that the said undertaking was given by Jayathilake in the year 2004.

However, after the said undertaking Jayathilake conspired with Tilak Perera [the Director who conducted the Customs inquiry] and deliberately delayed the resumption of the inquiry indefinitely. These two conspirators had provided their tacit approval to the Dockyard Ltd to challenge the Customs Inquiry, which the Dockyard complied with a Court action filed before Court of Appeal [CA/1413/2005]. This case had been dragging on for over 4 years and finally on 27-04-2009 the Court of Appeal erred and misdirected itself with the facts of the case and issued a writ of prohibition against the Customs from continuing with its own inquiry into the Dockyard revenue fraud. This ruling was based on the Toyota Lanka judgment [SC/49/2008] and the Vallible Lanka judgement [SC/26/2008] the facts of which are totally different from the facts of the Dockyard Case. Both these judgments were delivered by the former CJ, Sarath N Silva, who maintains a personal animosity against the President Rajapakse and by these judgements Sarath N Silva has effectively opened the floodgates for the organised revenue fraudsters. In the Toyota Lanka ruling it was held that no revenue fraudster should be punished with penalties and forfeiture of goods imported by defrauding government revenue and only the eliment of revenue defrauded should be recovered by Customs. And in Vallible Lanka it was held that, where the GST eliment of the duties is defrauded the Customs has no authority to enforce penal provisions provided in the Customs Ordinance against fraudsters found guilty. This ruling was delivered against the government’s main revenue collection machinery, the Customs, that accounted for more than one half of the government revenue. This bad ruling was delivered despite the fact that the Goods and Services Act [26 of 2000] draws clear distinction between imported goods and other goods and where the tax administration of imports goods is clearly vested in the hands of the Director General of Customs. In the Vallibel Lanka it was held that only the Commissioner Inland Revenue is empowered t0 initiate action to recover the governmet revenue so defrauded by the fraudster not the Customs Administration. Readers should note that in effect these two judgments have nullified the operation of the deterant provisions provided in the Customs Ordinance against the revenue fraudsters and effectively encourge the fraudster eliments to indulge in revenue frauds at ease. Readers should also note that the Court of Appeal ruling in the Dockyard case, based on the two judgements referred to above, is only one case amongst series of such cases where the fraudsters benifited from the bad judge made law created by the former CJ, Sarath N Silva, effectively allowing misappropriation of the Customs duties, as in the case against against Colombo Dockyard Ltd where the fraudster was allowed to misapproprate  government revenue to the tune of over 619 million rupees.

The concerned officers who had been betrayed and ridiculed by their own boss Jayathilake had vehemently protested against the said Court order and brought heavy pressure on Jayathilake to challenge ruling before the Supreme Court. Under the circumstances the DGC should have directed the AG to appeal against the Court ruling. However in this case, the DGC had refused to request the Attorney General to initiate action to overturn the Court ruling that had opened floodgates to any BOI enterprise to defraud revenue at will. However, when Jayathilake was threatened with another Court action by the concerned officers he very reluctantly placed his signature to a letter [13-05-2009] prepared by the concerned officers under legal advice urging the AG to challenge the Court of Appeal ruling [CA/1413/2005] favoring the Colombo Dockyard Ltd.

Yet, when the letter reached the Attorney General Department, the AG, Mohan Peiris refused to challenge the Court Appeal ruling with no apparent reasons given. This action by the AG arouses suspicion of any prudent person as to why the AG decided to ignore an apparently flawed Court ruling which had cost the government of its rightful revenue of over 619 million rupees.

However, the concerned officers who fought the case throughout refused to give in their fight and were able convinced the Solicitor General Priyasad Dep about the flawed Court of Appeal ruling that effectively paved way for losses of billions of government revenue, if allowed to remain unchallenged. Having realized that the whole thing was a carefully calculated conspiracy, the Solicitor General, Priyasad Dep summoned the then DGC Jayathilake and the Deputy DGC Jazeel, severely criticized their deceptive attitude and blamed for the failure to meet their statutory obligations under the Customs Ordinance. Readers may note that this phase of the story took place when the AG, Mohan Peiris was away from the Island.

On his return to Sri Lanka the AG Mohan Peiris became furious when he learnt about the action taken by the Solicitor General to challenge the Court of Appeal ruling. He had blamed Priyasad Dep for defying his orders and directed him not to proceed with special leave application to challenge the CA ruling.  However, the media exposure by Sunday Leader of AG’s unbecoming conduct in the case forced the AG to restrain himself and let the special leave to appeal application filed before the Supreme Court on 05^th June 2009.

To the dismay of all concerned officers of the Department of Customs the AG has since been refusing to take any tangible action on the case which is strangely similar to the action taken by the former DGC Jayathilake to not to proceed with the Customs Inquiry concerning Colombo Dockyard Ltd. It is strange that whenever the case is called for by the Supreme Court the AG informs the Court that he needs further time to consider as to whether to proceed with the application or to withdraw it. Now this case is due be taken up before the Supreme Court for the 3^rd time on 03th August 2010. Readers, you are the jury who would decide the final outcome!

The million rupee questions arising out of this 619 million Dockyard duty fraud are listed below.

1. Why the former DGC, Jayathilake deliberately failed in his statutory duty to take proper action under the Customs Law against the Colombo Dockyard Ltd?
2. Why did he drag the Customs Inquiry indefinitely?
3. Why did he grant general amnesty to the Dockyard Ltd freeing them from any liability and subsequently withdrew the amnesty?
4. Why didn’t he comply with the undertaking  given to the Court of Appeal to conclude the Customs Inquiry as expeditiously as possible?
5. What is the deceptive role played by the former DGC, Jayathilake and his deputy Jazeel in this whole episode centering on Colombo Dockyard Ltd?
6.  What motivated the AG to ignore and decline to challenge Toyota Lanka, Vallibel lanka and the Dockyard ruling based on rulings of the first two cases despite the fact that in the Dockyard case material facts were were totally different from the first two cases?  
7. Who is the right thinking person; the AG who refuses to challenge the Court ruling or the Solicitor General who is of the view that the Court ruling should be challenged to close the floodgates opened for revenue fraudsters?
8. What remedial action avails for the concerned officers when AG declines to act: are they to hire lawyers from the private bar to protect the interests of the State?
9. Did Mohan Peiris and Sarath Jayathilake work hand in hand to let the fraudster go scot-free?
10. What are the direct or indirect inducements offered by the Colombo Dockyard Ltd if any, to these high ranking officials concerned to defy their statutory duties?
11. If the AG, Mohan Peiris, is a man of integrity will he justify his course action in this Dockyard case to the President who is also the Finance Minister?
12. Will the President’s directive to reopen the case would meet out justice to the concerned officers and the informant who provided the credible information about the 619 million government revenue fraud to the Customs?

A ‘feminine touch’ to save Customs!

It was really heartening to watch the felicitation ceremony of the deposed King of the Customs for nine years in a five-star environment last week. The King would have surely noted his ‘comrades’ contributing Rs 4000.00 per head out of their ‘meager salaries’ and wept in private. There was a question for a laymen as to how ‘poor public servants in the Customs’ afforded to throw a ‘five – star send off’ for their ‘poor master’ who had been kicked out by HE the President in spite of his ‘genuine and clean record,’ as he claimed in public.

However, on the contrary we understand that some right-thinking officers are making representations to the new DGC about damaging decisions taken by the King Sarath J, that had made the Government incur substantial revenue losses whilst the Jayathilake mafia prospered.

This news emanating from the Customs circles has compelled the Customs Whistleblowers to explore whether the allegations made against the King Sarath J are justifiable. Surely a man who has sacrificed his total life to ‘uplift’ the Customs service would not deserve such allegations.

Now, let us have a look at the directive given by the King Sarath J with regard to the passenger baggage clearance [UPB] on 19^th June 2008. The provision of Section 107 of the Customs Ordinance clearly prohibits commercial goods in passenger baggage. However, the King Sarath J’s directive permitted commercial goods in UPB.

Now we present the question to students in the 5^th Standard [with apologies to Sirasa TV].

Question 1 – Did King Sarath J violate the Customs Law? [the correct answer is undoubtedly ‘Yes’]

One may naturally claim that the King Sarath J did not possess the knowledge of the 5^th Standard student and let his order survive his unceremonious removal by HE the President. Even at the time of this publication, King Sarath J’s illegal order costs the country billions rupees of government revenue unabated.

Therefore we publish; you decide!

Now we have a second question.

Question 2 – Was the King Sarath J unaware of CCTV images of commercial cargo movements in the baggage area and about the details of so-called passenger baggage weight over 1500 kilos shown against each smuggler in the baggage info provided to Customs by air lines?

The answer to this once again is clearly ‘Yes’. The CCTV images and the ‘passenger manifests with baggage weight details’ reveal that smugglers continue to pass through the Customs at the Airport with over ONE METRIC TON of commercial goods [carried by each smuggler] under the pretext of UPB. Yet, the directive of  King Sarath J provides a blanket cover to these smuggling operations and ‘the gardian of the boaders’ simply turned a blind eye against this day light robbery.

Question 3 – Would any reasonably prudent person have sufficient grounds to determine whether the King Sarath J had been involved in this smuggling operation?

Over to you readers!

We publish; you decide!

Apart from the above we understand that concerned Customs Officers possess more evidence on alleged misdeeds committed by King Sarath J [including the release of precious metal on personal guarantees and abuse of informant’s shares of financial rewards etc]. We are ready to publish them as and when we receive authentic information. Until then we have few more questions.

Question 4 – Are we in a position to believe that King Sarath J was unaware of his statutory obligations under Section 2 of the Customs Ordinance [duty to take measures for the management and protection of government revenue]?

Our information is that the ST PB Jayasundara had been expressing his dissatisfaction over the long period of reign of the King Sarath J in several instances.  Sarath J was also blamed for his incompetence and failure to deal with the revenue fraudsters and their accomplices in the department. It is said that during his tenure of well over 9 years bribery and corruption in the Customs were at peak levels. During this period no Customs personnel had been found guilty for any kind of revenue fraud. This should surely go into the Guinness Book of Records and the King should be especially rewarded for this commendable achievement. Probably King Sarath J seemed to have thought that he was acting under Section 2 of the Customs Ordinance.

Therefore we publish; you decide!

We would now wish to discuss the latest developments in the famous 5-container affair that probably would have contributed towards the removal of the King Sarath J. It goes on record that the King Sarath J opposed to the digging of previous UPB imports as if he was certain that all of them were genuine. Further it has been discovered that after the seizure of 5 containers by ADP, two similar containers which had arrived in the port had been allowed to reship before the removal of the King Sarath J from the office of the DGC.

The investigations being conducted by the ADP unit into the 5 containers seized by them reveal a large volume of high valued goods including over 29 million packs of cigarettes [valued over 200 million rupees] imported under the very nose of King Sarath J. All these containers were caught by the ADP only after their release by the RTF.  Investigations conducted into the previous shipments have so far revealed that over 12 containers of contraband have been imported resorting to the same methodology.

Thus the next question goes as follows.

Question 5 – Does the conduct [requesting not to inquire into previous shipments, allowing reshipments etc] of King Sarath J after the seizure of 5 containers suggest that he had been playing a key role in this massive smuggling operation?

Over to you readers!

We publish; you decide!

Modus operandi of this operation provides an excellent opportunity to grasp the realities of the contemporary Customs. The prevention of smuggling activities are mainly handled by the following authorities in the Customs.

1. Revenue Task Force [RTF]
2. Central Intelligence Unit [CIU]
3. Preventive Office
4. Chief Charges Officers [CO]
5. Customs law also empowers any other officer of Customs to prevent smuggling and to protect revenue.

We understand that the officers from the ADP unit exercised the power vested in them under 5 above, in seizing the now famous 5-container contraband. The general belief in the Customs and the business community is that the majority of key divisions in the Customs had been headed by the ‘handpicked’ officers of King Sarath J. One fine example is that L M Nelson who heads the Central Intelligence Unit has been in the same position during the past nine years and still going strong. And the other notable feature is the exposure of the ‘RTF team’ [handpicked by the King Sarth J] which was trapped by the ADP in the 5-container affair.

A ‘feminine touch’ to the Customs for the first time in history

The new DGC Mrs Sudharma Karunarthna, formerly from the General Treasury has been vested with the responsibility to protect the government revenue and restore law and order in the Customs Department.

As usual we understand that the rogue elements in the Customs are already in the process of pacifying the new DGC and bombarding her with distorted information. Some of them have gone into the extent of quipping that a woman in the office of the DGC would not last long and it is really a ‘manly’ job. These two faced elements who naturally pretend to be the ‘guardians of the government revenue’ practice completely the opposite in private. The protests launched by the ‘so-called’ trade unions against the removal of the King Sarath J and the appointment of the new DGC have to be understood in this context.

The officers with commitment and integrity would not usually come forward to show off or to please the DGC. They shoulder an enormous responsibility and if the DGC maintains a big communication gap with them it will be unhealthy for the entire Customs. It is not a secret that these officers are a minority in the Customs and thus the DGC has a greater responsibility in identifying, safeguarding and encouraging such officers who bring real difference to the Customs Service.

The RTF – ADP Container Bombshell Galvanizes the Customs

[The following piece of writing submitted by one of our members is really exciting. It is claimed that the ‘extract’ belongs to a confession of an autobiography to be published by the former DGC Sarath Jayathilake – 2002-2010]

“…Why all blame me? It is true that I did handpick the ‘smart and reliable RTF staff’ to combat revenue frauds the way I wanted. Under my personal guidance, their conduct had been exemplary up until May 2010 and what an extravagant life style we enjoyed collectively in the guise of enforcing the Customs law!.. Thus, I was dumfounded when these ‘super investigators’ got themselves entangled in the 5 – container affair in May 2010 and were caught red-handed. I continue to believe that it is unfair to blame me for the sheer negligence on the part of these idiots, who failed to get away with such a low risk game plan compared to what we have accomplished in the past…

…I accounted for a ‘illustrious career’ in the Customs service. In the year 1979, myself and Tissera, the ‘1971 revolutionary’ were handpicked by H B Dissanayake, the then Customs Chief, erroneously thinking that our young blood would guarantee an honest and dedicated service in the Customs. Now after a period of well over 30 years, every concerned person is fully aware how our ‘young blood’, bloodied the entire Customs and bled the government revenue down the drain. No matter what, both of us became unbelievably rich and remained corrupt to the core till the very end…

…I honestly believe that nobody can blame Mr Dissanayake for all our misdeeds and our links to the fraudster mafia that ruined the Customs Administration. It was quite natural that we, like any other ambitious ‘young products’ accumulated wealth in the shortest period possible by exploiting all the available avenues…

…In the same token, I repeat, please do not blame me but you may blame the Satan in my soul that would have influenced me to select the RTF men who had a botched operation as their final act. Simply, they tarnished my ‘good and hard earned image’…”

Now you may refer to the Question and Answer session set out below that elaborates the facts concerning the 5 – container affair referred to in the above confession by Sarath J.

Q.        What is RTF and what are the duties vested in this unit?

A.         The RTF, the Revenue Task Force of the Customs is a special unit in the Customs Department that functions directly under the Director General of Customs [DGC]. The statutory duty of the Customs is to protect the government revenue and prevent smuggling. This is the duty of all the officers appointed to the Customs Service from the DGC downwards. The RTF is a special unit with unrestricted powers and is empowered to intervene in the duties of all the other divisions of Customs at any given time. For instance the RTF may investigate the activities of Import Division of Customs under the personal directions of the DGC.

This unit has wide powers to seize any incriminating material, goods or persons [including the Customs personnel] suspected to be involved in revenue frauds. This unit is required to ensure that all divisions of Customs effectively discharge their revenue protection duties as per the Customs Law. The officers attached to this unit are handpicked by the DGC.

Q.        Can you explain the 5 – container affair in a nutshell?

A.         Before going into the details of the 5 – container affair the reader should understand the different method of importation of goods and various types of examinations conducted for Customs purposes. In the case of General cargo, they are subjected to screening and physical examination as required and directed by various divisions in the Customs, such as Preventive, Import, Central Cargo Examination and Central Intelligence.

The goods imported as Unaccompanied Passenger Baggage [UPB] are released to the UPB warehouses located outside the port premises. They are generally subjected to cursory examination only unless any abuse is suspected.

The 5 – container affair begins with a revenue fraudster engaged in import trade bringing in 5 containers loaded with contraband [goods, importation of which is restricted or prohibited] in the guise of UPB goods.

Q         What units got involved in this particular 5 – container affair?

A          Initially the RTF and then the Computer Division of the Customs.

Q.        What is the modus operandi or the method employed by the RTF in the case of the 5 containers?

A.         On arrival of these containers the RTF officers used their ‘special powers’ to seize all 5 containers for ‘detailed investigation’ under their supervision.  Once the RTF intervenes and detains containers no other Customs authority, which includes Chief Charges Officer, Chief Preventive Officer or Chief of Central Intelligence has any power to seize them in spite of credible information if any on smuggling. In this case the RTF released all the goods in the five containers except for 5 packages which were detained for detailed examination.

Q.        What was the intention behind the detention of containers by the RTF and releasing the goods subsequently whilst detaining only 5 packages?

A.         This was a deliberate action by RTF to provide safe passage for the contraband through Customs. This methodology was applied to provide a secured protection to the smuggler from intervention by rest of the divisions or authorities in the Customs.

Q.        What happened to the rest of the goods in the 5 – containers after their release by the RTF?

A.         Some smart officers attached to the Computer Division of Customs had gathered information about an ongoing smuggling operation carried out with the connivance of the RTF. These officers had the courage to intervene against the RTF and seize all the remaining goods released by the RTF.

Q.        What were the contents in the packages of the 5 containers seized by the Computer Division?

A.         All those packages contained commercial cargo that attracted very high rate of duties. Those goods included cigarettes – some 20 million packs, perfumes and cosmetic products. They had been imported under the pretext of ‘genuine unaccompanied passenger baggage’ and were accordingly transferred to the warehouses by the RTF.

Q.        What is the approximate value of the contraband?

A.        Over 200 million rupees.

Q.         Is it true that the fraudster involved has imported contraband through the same process?

A.         Yes, all that evidence will come to light with the people involved in the fraud?

Q.         It is correct that some such containers have been reshipped after the detection was made?

A.         Yes, some containers have been reshipped after the modus operandi was exposed?

Q.        Does the Customs Computer Division engage in acts of fraud prevention?

A.         Generally speaking ‘No’. However, every officer of the Customs is empowered by law to protect the government revenue and to prevent   smuggling. Hence if the time permits any officer of Customs, irrespective of his place of work is empowered to enforce the revenue protection laws whenever and wherever any reasonable suspicion exists.

Q.        RTF staff hand-picked by the DGC is supposed to be special investigators. Do you mean that the RTF was involved in protecting the smuggler instead of protection of government revenue in this 5 – container affair?

A.         Absolutely Yes! Although they were public officers maintained by the taxpayers money to perform a  statutory duty of protecting government revenue, the raid conducted by the Computer Division revealed that the RTF officers who were under the patronage of Sarath Jayathilake, the DGC, had directly connived in the smuggling attempt. This is a clear cut case of abuse of power that exposed an ongoing revenue crime involving the RTF which only consists of handpicked officers by the DGC.

Q.        Is there a direct link between the removal of the DGC Sarath Jayathilake and the detection of 5 – container load of contraband?

A.         There is no firm answer to this question yet.  At the time of publishing this piece of writing the investigations were still going on. We can only confirm that within days after the exposure of this organized revenue fraud Sarath Jayathilake was removed from the office of the DGC.

Q.        At the beginning of this piece of writing the ‘extract’ of the autobiography of Sarath J refers to this 5 – container affair. Is it a confession or an admission?

A.         Our member who submitted the ‘extract’ prefers to remain anonymous for the time being. We hope that he would come forward with the evidence – may be the published autobiography of Sarath J in near future. Until such time we retain our right to be silent on the issue.

Q.       Is it correct that some men who enjoyed a hay day under Jayathilake organising a fair-well party for him?

A.       Yes, there are a lot of people who were enormously benefited and earned substantial volume of wealth of ill-gotten money under Jayathilake. It is natural that these people would show their solidarity to their ‘excellent leader’ who was shown the door by the President?

Q.        What are the lessons learnt from this 5 – container episode?

A.        Any person who holds the office of the DGC is required to take all necessary measures to protect the government revenue with a dependable team of officers dedicated to discharge their duties honestly and effectively.  This high office should be maintained with a high degree of integrity and pride of service that cannot be compromised. At the time this 5 – container affair came to light, the then DGC  was not maintaining a clean record and he had surrounded himself with a selected group of rogue elements. The lesson here is that even such an influential rouge team  has its own limitations and could become vulnerable at any given time. On the other hand a good DGC surrounded by rogue elements might also be vulnerable if failed to  use his intellect to identify the ‘right team’ sans rogue elements before it is too late. Major frauds of this nature can only be prevented with reliable intelligence combined with proper and well-researched methodologies. Another important factor herein is the courage shown by the officers who caught  the RTF officers in their wrong act. This is a very rare display of sheer bravery and  dedication to service. The lesson here is the need to encourage, recognize and protect these officers  so that others would follow suit. Such recognition would also encourage the honest officers who prefer to discharge their duties effectively but silently, to come out and expose the DGC to the prevailing ground realities of the Customs service.

Did Sarath Jayathilake honestly serve the Nation or helped enrich fraudster elements? Did the media really play the role of the ‘watchdog’ during Jayathilake’s 9 – year tenure until his removal by the President?

We, the Customs Whistleblowers, observe unprecedented media frenzy over the removal of the Sarath Jayathilake from the office of the DGC. In our view, the media seems to be utterly ignorant of the improper conduct of the Sarath Jayathilake as the head of the Customs for over a 9 – year period. We doubt whether the so-called ‘trade unions’ agitating for his return, do mirror the opinion of the general membership  or serve the interests of  a few stooges of former DGC Sarath Jayathilake.

We act as the watchdog of the public in the protection of government revenue and our main concern is to protect the public interest in this sphere. We are fully aware of the responsibility vested in the Customs as the major revenue collector and we believe that the decision, although belated, by the President to kick Jayathilake out unceremoniously from the office of the DGC must be hailed as a step in the right direction in protecting the government revenue.

Sarath Jayathilake, the simple young man, begins his Customs career

Jayathialake joined Customs along with his colleague, the ‘well-known’ Customs character, H M R Tissera in 1978 as the first ever directly enlisted Assistant Directors of Customs. Both these young people who inherited nothing and used public transport to travel to work were very keen to come up in their life within a shortest possible timeframe. It was an innocent desire of any youth of their age. Out of these two young men, Tissera was ‘smarter’ and played a remarkable ‘T20 innings’ in the Customs, in playing out public funds until he was shown the door out prematurely a few years ago. He was lucky to have an opportunity to retire without facing a criminal charge for embezzling public funds in hundreds of millions of rupees. However, it is not a secret in the Customs circles that, after his removal Tissera found it difficult to recover his     ill-gotten black money [over 600 million rupees] loaned to motor spare parts traders in Panchikawatte. It is also rumored that he continues to suffer from an incurable disease as a consequence of his sins committed against the suffering masses of the Nation. The public funds that should have gone to the people had been robbed by Tissera to satisfy his greed.

Before coming back to the story of young Jayathilake it is pertinent to mention that the then head of the department, HB Dissanayake, had been highly worried about his own mistake of enlisting these two young men straight to the staff officer grade believing that they would set an example to the entire Customs service by being ‘Men of Integrity’. Unlike Tissera, Jayathilake choose to play a real ‘Test Innings’ in the Customs service with right temperament and consistency and rose up to become the DGC, in spite of all his nefarious activities committed in connivance with the government revenue fraudsters. At the end of their respective ‘innings’ both of them demonstrated to the entire Customs service how not to become ‘Men of Integrity’. The saddest part of the story is that a substantial number of officers in the service followed these two characters in turning themselves rouge elements. So much so for the great expectations of HB Dissanayake, the man who relied on them for their integrity, which has unfortunately not gone into their systems at birth!

It is a story that any independent observer would undoubtedly raise the question as to how these two young humble men became unbelievably enriched themselves and powerful figures within a relatively short span of time. No government servant in parallel services would be able even to imagine the enormous wealth amassed by these two characters by the time they passed their middle age. No wonder HB Dissanayake, the former head of Customs [1973-1988], had a shock of his life by watching the unfolding drama of playing out public funds under his own eyes  by his own ‘selectees’ placed in the powerful positions in the Customs service. It is clear that Jayathilake became smarter than Tissera as the time went by and managed to survive under several regimes whilst surreptitiously resorting to violate his statutory obligations under the Customs Law.

We are unaware whether the ‘Greatest DGC ever’ produced by Customs is enjoying a ‘peaceful’ retirement or a ‘painful’ retirement.  We strongly believe that the natural law of justice will take its own course on Jayathilake too as in the case of his erstwhile colleague Tissera. Apart from the turning of ‘Wheel of Kamma,’ we believe that there is a strong possibility of hauling him before a court of law in real life for the misdeeds committed by him.

The President has already indicated that the Corruption Commission would be restored very soon to deal with all wrongdoers irrespective of their former or current status. Therein the credible evidence of corruption and malpractices, already placed before the Corruption Commission against Jayathilake would surely be inquired into. It is a fact that the said charges include unlawful directives, his contribution towards creating a bad law nullifying the deterrents imposed by statute law and misappropriation of informants’ shares of rewards [ the media please note! ]

We firmly believe that the damage caused by Jayathilake to the revenue collection methodology of Customs is beyond imagination. Jayathilake had been already exposed for his unbecoming conduct that opened the flood gates for organized revenue fraudsters to pilfer billions of government revenue. The improper role he played in the SC Appeal No 49/2008 allowing former CJ Sarath Silva to create a bad law that suspended the operation of statue law, the Customs Ordinance, has already cost the government of its rightful revenue in billions and continues unabated. Refer to the exposure under the headings;

a.      ‘Sarath Silva’s creation of bad law targeting Customs allows DGC Jayathilake to thrive on,’

b.      How the DGC prevented the operation of law

We unreservedly support the right action in the right direction by the President

The President and the ST are fully aware of the enormous damage caused to Customs revenue collection methodology by Jayathilake. Numbers of representations have been made to the President seeking remedial actions to check the decline of the Customs service and to restore the pride of service once again. Therefore, the action taken by the President to remove Jayathilake from the office of the DGC is a welcome move and also a lesson for all the other corrupt officials holding high office.  Now the time has come for all patriotic and committed officers to give their best to the Nation building efforts of the government headed by the President Mahinda Rajapakse.

So much so for the two humble young men directly enlisted to the Customs as Assistant Directors of Customs by mistake. Both of them had a great time, energy and opportunity to serve Nation as never before. But it was sad that they collectively failed in their duty by trying to satisfy their never ending desires ignoring the consequences that are very costly.

Sarath Silva’s creation of bad law targeting Customs allows DGC Jayathilake to thrive on

The former CJ Sarath N Silva, in collaboration with PC Faiz Mustapha in SC Appeal No 49/2008 [Toyota Lanka Case] ruled that the fraud preventive officers should not be allowed to receive financial rewards from the proceeds of the revenue crimes as permitted by the Customs Ordinance. This ruling made on 22^nd of March 2009 has now become good law superseding the statue, creating heavy losses to the government revenue in unimaginable scale. It is very strange as to how the former CJ accepted the illogical submissions made by Faiz Mustapha who submitted that the Customs officers resort to the procedure of seizure, in view of the statutory reward scheme [under section 153 of the Customs |Ordinanced] for the disbursement of amounts recovered as forfeitures and penalties which he argued heavily weighed in favour of the Customs Officers and induces the officers to ‘harass importers’ by effecting seizures of goods confiscated by operation of law in terms of Section I25 of the Customs Ordinance.

We, the Customs whistleblowers are of the firm view that this bad precedence created by the former CJ Sarath N Silva, based on falsified submissions by the PC Faiz Mustapha, is clearly contravenes the statutory law [Section 125 of the Customs Ordinance] which was successfully invoked against the organised revenue fraudsters for many decades and equally upheld by the higher Courts [Supreme Court and Court of Appeal] until Sarath Silva’s  bad and irrational law came into being since March 2009.

We are of the firm view that these utterly irrelevant and unfounded allegations made against the officers by Faiz Mustapha and Sarath Silva helped to create a bad precedence that the seizure of goods imported defrauding the revenue is manifestly illegal.  As Sarath Silva ruled that such actions lends credence to the submissions of the Appellants as to the reward oriented motivation, which induces ‘over-zealous’ action in effecting seizures and imposing penalties, whereas the proper cause would be to recover any additional amounts that may be due according to the due process of law.

We can reveal with confidence that with the said ruling the honest revenue fraud investigators in the service are clearly dispirited to enforce the law against the fraudster elements. The unhealthy conditions created with this bad precedence is such that lawlessness in the Customs is now thriving as officers are induced to connive with the revenue fraudster elements and to defraud the government revenue as any enforcement action taken against the fraudsters is challenged in the higher Courts  [Court of Appeal and Supreme Court] and decisions made to confiscate goods imported defrauding government revenue quashed, in view of the bad judge-made law created by the former CJ.

Details of two recent cases where the Court held against the Customs relying on the Toyota Lanka ruling are provided below.

1. CA application No 541/2005 – Lanka Marine Services Ltd, the Court of Appeal by its order dated 26^th May 2009 quashed the charges levelled against the company by the Customs for defrauding the government revenue.

1. CA application No 1413/2005 – Colombo Dockyard Ltd, the Court of Appeal decided that if the goods were delivered before the collection of proper customs duties – which generally occurs with the connivance of dishonest officers – the amount of duties so defrauded, should be recovered in terms of Section 18A of the Customs Ordinance.

It is very unfortunate that neither the incompetent DGC Sarath Jayathilake, nor the Attorney General, has taken any corrective measure to rectify the massive losses of revenue being incurred by the government as a result of the bad precedence. The damage caused by the bad precedence can be easily rectified by a revision application made to the Supreme Court, like in the case of Dr B P Jayasundara, the Secretary to the Treasury, who was perceived as a fraudster and punished by the very same CJ.  Later Dr Jayasundara’s removal from the office was restored on a revision application made to the Supreme Court.

However, no similar action has been taken to nullify the bad precedence created by the former CJ Sarath Silva as no proper representations have been made to the President [who is also the Minister of Finance] by the DGC Sarath Jayathilake.  Therefore, on this issue of National importance we request the President to direct AG to take appropriate measures to rectify the damage caused by the bad precedence created by the former CJ that is absolutely necessary to the protect and collect of Customs revenue that is well over 50% of the total government revenue.

Bad ruling provides cover to DGC to protect fraudster elements

It is known fact in the Customs circles that the incumbent DGC Sarath Jayathilake, who is more concerned about the securing his office as the DGC, deliberately refrain from performing his statutory duty of protecting revenue. Hence he clearly refuses to condone strict enforcement actions against the organised government revenue fraudsters. The DGC has already made his stand known to the last batch of new recruits to the Customs service that they should not aspire to be a firm and honest revenue fraud busters and to enjoy fruits of financial rewards offered under the law from the proceeds of crimes  [penalties and forfeitures].

We can reveal that the young and self-motivated officers, who enforce the law against the organised revenue fraudsters, most of the time under trying circumstances, are now at receiving end and are made to suffer for defying the DGC’s guidelines on fraud preventive measures. Their legitimate share of reward from proceeds of revenue crimes guaranteed by the Customs Ordinance are being denied by a carefully calculated ploy employed by the DGC.

The Customs Ordinance [section 153 of the Customs Ordinance] require the DGC to credit 50% of the proceeds of revenue crime to the reward fund for distribution among the officers concerned and informers who provide credible information about revenue frauds. Yet, we can reveal that the DGC refuses to carry out his legal duty and on his orders the total proceeds of revenue crimes are simply credited to the General Treasury [Consolidated Fund] together with import duties and other levies i.e. including the 50% share of proceeds of revenue crimes meant to be distributed amongst the officers and informers whose actions are directly responsible for busting revenue frauds and recovery of additional revenue.  We believe that the Treasury backs this unlawful action by the DGC relying on the misrepresentation made against the officers by the DGC, Sarath Jayathilake.

We blow our whistles and say that the former CJ Sarath N Silva’s irrational bad precedence and DGC Sarath Jayathilake’s illegal actions may lead to a situation where the same CJ’s bad rulings affecting human rights caused to the withdrawal of GSP plus facility to Sri Lanka. In the same manner CJ Sarath Silva’s rulings concerning Customs and government revenue may deliver a wrong message to the international community that Sri Lanka is a country which openly and officially condones abuse of public funds. We observe that so far no one has pointed out this fact to the President, the Government and the Nation at large.

Uncovering of unlawful lobster export trade racket

Law governing the export of lobsters, crabs and other sea creatures [a lucrative trade in the modern export trade] prohibits the exportation of young lobsters that not reached the reproductive age. This prohibition was put in place for a purpose i.e. to ensure the sustainability of the lobsters and to prevent total extinction of these creatures from the Sri Lankan waters.

The Customs, as the enforcement agency, was empowered to seize any shipment of lobsters and crabs carrying eggs and the Bio-Diversity Unit of the Customs Department effectively enforced the law against unscrupulous traders. This unit headed by Mr Samantha Gunasekara, in fact, was responsible for the seizure of a large number of export shipments of young lobsters and crabs carrying eggs prohibited to catch or export. All such shipments of live crabs and lobsters were released back to the sea. This is purely a preventive action taken to ensure ecological balance and to avoid the total depletion of this valuable natural resource. The law relating to export of lobsters was enforced by Customs on the basis of the size and length of the creature that was specified by the regulations gazetted under the law.

However, we can confirm that due to an utter foolish action by one powerful politico who was more concerned of his supporters who dominate the lobster industry, the governing rules that prevented the export of young lobsters was abolished to accommodate export of young lobsters that not reach the reproductive age.

Lobby work against the Bio Diversity Unit of the Customs is so powerful that they have made the defunct by removing all dedicated nature lovers served in the Unit. We can also reveal that the DGC Sarath Jayathilake is taking action to silence Mr Samantha Guansekara with an unfounded allegation of negligence levelled against him by implicating him in a case that was concluded more than three years ago, in which Mr Gunasekara has not played any role whatsoever.

We, the Sri Lanka Customs Whistleblowers, requests all those who are concerned with the nature and natural resources of Sri Lanka and the ecological balance of the sea creatures, particularly lobsters and crabs that faced total extinction to raise their concerns to the authorities.

DGC Sarath Jayathilake lets National Revenue pouring down the drain

In our previous press release we, the Sri Lanka Customs whistleblowers, exposed the losses incurred by the Customs in unimaginable scale due to the former CJ Sarath N Silva’s Toyota Lanka judgment [SC Appeal 49/2008] that opened the floodgates for the organized revenue fraudsters.

We, observed that our exposure is being used by the President Rajapakse’s men for the petty political advantage only i.e. to discredit the former CJ Sarath Silva. Howerver, drawing no attention whatsoever to stop the abuse of the Toyota Lanka judgment – visit President Rajapakse’s political website for more details.

1. www.presidentialelections2010.blogspot.com/2010/02/former-cj-assisted-by-dgc-open.html
2. www.presidentialelections2010.blogspot.com/2010/03/former-cj-sarath-n-silva-and-dgc-sarath.html

We say that the Customs Ordinance enacted by the British centuries ago, clearly provides severe punitive measures against the government revenue fraudsters. These include automatic forfeiture of goods imported by defrauding the revenue in any manner [section 47 and 125] plus sweeping powers given to Customs authorities to impose treble the value of goods on those who are knowingly concerned in evasion of duties [section 129].

These penal provisions have been effectively used by Customs for decades against the organized revenue fraudsters to confiscated good imported by unlawful means a clear deterrent to against the defrauding the Customs revenue which account for more than 50% of the total government revenue.

However, these punitive measures against those who intentionally defraud revenue have been effectively made defunct by the bad law created by Sarath N Silva retired CJ who now enjoys his government pension paid to him from the government revenue.

We, the Sri Lanka Customs whistleblowers restate that with the creation of the judge-made-law by Sarath N Silva [former CJ] fraudsters are encouraged to defraud the revenue. In the event any fraud committed by them is detected by the Customs, they are now given the option to pay the revenue defrauded by them, as per the precedence created by the judge-made-law created by the former CJ, and completely get away from the penal sanctions set out in the Customs Ordinance which include the confiscation of goods and severe penalties.

Since this judge-made-law created on 20^th March 2009, we can confirm that all cases where the fraudsters have been duly dealt with under the Customs Ordinance are challenged as illegal by the fraudster eliments, before the Court of Appeal and the Supreme Court, and the penalties and forfeitures imposed on the fraudsters by the Customs are being overruled by the Courts, relying on the bad precedence created in Toyota Lanka case by former CJ Sarath N Silva.

It is very regrettable that the government keeps silence on this whole saga and allows the sleepwalker DGC Sarath Jayathilake, who is directly responsible for the creation of the bad law by his lethargic attitude and inaction, to continue in the office of the DGC, whilst the government incurs heavy revenue loss in unimaginable scale.

We, the Sri Lanka Customs whistleblowers once again appeal to the President Rajapakse who is also the Minister in charge of Finance to intervene immediately to close the floodgates opened preferably with a revision application to the Supreme Court to nullify bad judge-made-law created by the Toyota Lanka judgment and also to deal with those who are responsible for this blunder appropriately.

Negligence by Customs Chief paves way for revenue loss in billions

In the ‘landmark’ judgement [SC Appeal 49/2008] pronounced by the former CJ Sarath N Silva it was held that the seizure of goods under the Customs Ordinance after delivered upon payment of duties, is manifestly illegal and the correct procedure would be to recover the element of revenue defrauded by the importer as ‘additional duties’ and release the goods. It was further held by the CJ that application of Section 125 of the Customs law against the fraudster and forfeiture of goods is inconsistent with the ‘scheme and structure of the Customs law’.

The Court held that the seizure of goods by the officers of Customs is affected in a situation where a recovery process duties defrauded is the ‘proper course of action’ ‘solely for the enrichment of the Customs Officers’ and the Customs Officers effect purported seizures on ‘tenuous grounds causing harassment to importers’.

We, the Customs Whistleblowers, can confirm that Customs would not have lost this case, which opened the floodgates for revenue fraudsters if not for the deliberate inaction by the DGC Sarath Jayathilake, who prevented the Respondent in this case, Asst Director K Premanath from making an affidavit to the Supreme Court stating that the importer had cleared the good defrauding the revenue with false description of the goods, purportedly with the connivance of the officers appointed to examine the goods.

Had the Respondent, Deputy Director, K Premanath, made the factual position clear to the Supreme Court that there was a willful revenue fraud committed by the importer,  the CJ Sarath N Silva would not have able to say his the judgment that the Respondent K Premanath had agreed with the classification of the importer and delivered the goods relying on the classification of goods – description of goods as furnished to Customs by the importer – which was factually false, as the importer had cleared the goods with false description that attract the lower rate of customs duties.

Why the bad law created by CJ Sarath Silva is clearly detrimental

From the day this infamous judgment was pronounced there are series of cases [full list of all such cases will follow soon], where the Customs confiscated goods cleared defrauding the government revenue, have been challenged before the Court of law and the decision by the customs quashed by the Court, relying on the bad law created by CJ, Sarath N Silva. From the peoples’ and the country’s point of view, we, the Customs whistleblowers can say that the precedence created with this bad law is extremely harmful and it had made the whole customs administration defunct against the organized revenue fraudsters who are encouraged to defy the customs law and defraud the government revenue at ease. In the event any fraud committed is detected, thanks to the new law created, the fraudster can simply get away from any punishment by paying the government revenue defrauded. Unfortunately, the incumbent DGC, Sarath Jayathilalke, who clearly refuse to tolerate any preventive measures against organized revenue fraudsters, simply maintain absolute silence on this extremely harmful judgment. So far no tangible action whatsoever has been taken by him to get the bad law revised by the Supreme Court with a revision application made to Court. We urge the President Rajapakse, who is also the Finance Minister to intervene and to take remedial measures as soon as possible to arrest the situation and to stop the colossal loss of government revenue incurred due to lethargic attitute and inaction by the Customs Administration.

To all members in the Cabinet and the President

TAKE MEASURES TO ADDRESS FATAL FAILURES OF THE CUSTOMS

Statutory duty of the Director General of Customs [DGC] and the other officers of Customs is to protect the government revenue. Under the law, all these officers are under duty to take necessary measures to enhance the effectiveness of the management of Customs i.e. collection and protection of the government revenue. Yet, today the Customs administration is almost defunct due to maladministration and corruption and the Government could not afford to ignore the Customs, the major source of revenue collection and the following areas are identified where immediate attention is required.

Install a firm, honest and inspiring personality as the DGC

The incumbent DGC is identified as the main impediment for the failure for the following reasons whose actions clearly demoralized the committed and honest officers in the service. 

1. Unlawful intervention and abandonment of enforcement of law relating to reward scheme

Whereas the law clearly provides for measures with a handsome reward scheme to motivate officers whose actions clearly help the effectiveness of the management of customs by stern action taken against the organized revenue fraudsters by way of penalties and forfeitures imposed on them, a deterrent imposed by law, the incumbent DGC does see such fearless and uncompromising revenue fraud fighters as a threat to revenue fraudsters. And he  openly make his stand clear stating that no officer joining the service should endeavor to enforce the revenue protection laws against organized revenue fraudsters and earn rewards which the DGC considers as an act of “harassment to the business community”.

With a view to discourage such officers the incumbent DGC refuses to honor his statutory obligation of giving effect to the Reward Scheme. Instead he credit the quantum of funds meant to be used for rewarding of officers [50% of the proceeds generated by way of penalties, forfeiture of goods and further forfeitures imposed on the fraudsters] to the consolidated fund. His deliberate action clearly demoralized the officers who are made to suffer for denying their legitimate right recognized by the Customs Law.

2. Implementation of the GATT designed to promote international trade by any means, with no effective measures put in place to check the abuse

GATT Valuation agreement – introduced to promote trade with no barriers and tolerate the understatement of value for customs purposes by the organized revenue fraudsters – was put into practice in Sri Lanka with no effective measures whatsoever put in place up until now to arrest the floodgates opened with the introduction of the GATT that resulted huge revenue drop and the incumbent DGC, who is fully aware of the revenue drop with GATT came into force, is utterly  ignorant and unconcerned of the dangers face by the country as he believes that effective remedial action would antagonize the powerful business community and may lead to his removal from the office of the DGC.

3. Allowing commercial cargo in passenger baggage incurring heavy revenue losses

This is strictly not permitted under the Customs law which clearly prohibits the importation of commercial cargo in passenger baggage [Section 107A of the Customs Ordinance]. Yet, the DGC is directly instrumental for defying the government, of its rightful revenue, possibly in billions of rupees, due to his failure to stand firm against the political pressure. The DGC has opened the floodgates for the revenue fraudsters by a manifestly illegal action by him preventing the operation of law against such elements allowing importation of commercial cargo in passenger baggage, circumventing the existing baggage regulations.

The directive issued under DGC’s authority that came into force from 19thJune 2008, clearly violate the existing regulations and allows organized revenue fraudsters to bring in commercial cargo in passenger baggage. Since it came into force, hundreds of tons of commercial cargo are being imported under the guise of passenger baggage. Sometimes just one person brings in over 500 kilograms of commercial cargo in accompanied baggage, and simply passed through Customs barrier with no interference by Customs. In effect, this so-called illegal directive issued by the DGC has given a blanket cover to corrupt officers to allow commercial cargo, defying the government billions of rupees of its rightful revenue.

4. Tacit approval of revenue frauds by DGC’s deliberate inaction

Far-reaching effects of the TOYOTA LANKA ruling [SC Appeal No: 49/2008]

From the government revenue collection view point, the infamous bad law created in this case by the then CJ Sarath N Silva, has set up a precedence with very damaging and far-reaching effects.  The DGC, by his deliberate inaction, has simply allowed the powerful revenue fraudster elements to defy stringent measures taken against any form of revenue frauds devised in the Customs Ordinance, that were effectively used against the government revenue fraudsters to curb revenue frauds for centuries.

The effect of the bad law created by the former CJ, Sarath N Silva, is such that it has formulated a very safe methodology, outside the Customs Ordinance, for the organized government revenue fraudsters to effectively defy the government of its rightful revenue. Simply the ruling in this case overrides the established statue law, the Customs Ordinance, a very powerful tool against the government revenue fraudsters.

The CJ’s ruling in this case formulate a very safe methodology for the revenue fraudsters, to indulge in various types of unlawful actions, circumventing the deterrents imposed by the established by law, with no fear or concern whatsoever about the forfeiture of goods imported by unlawful means and any further forfeitures that would have been imposed on them for defrauding the government revenue. The far-reaching consequences of the bad law created by the former CJ Sarath N Silva in this case is such that it had already denied the government of its rightful revenue of billions of rupees and the damages caused by the creation of this bad law continues unabated.

Unbecoming an utterly self-centered conduct of the DGC

The Customs Administration plays a very sensitive role concerning the government revenue, which is the lifeline of any government and this key government agency accounts for over 50% of the total revenue of the government. The DGC whose primary duty is to protect the government revenue – Section 137 of the Customs Ordinance -has been instrumental in helping to create this bad law that is capable of surviving itself under any regime. The DGC’s deplorable conduct in this case, and his absolute silence and inaction about the aftermath of the creation of the bad law with far-reaching effects – incurring the government billions of rupees of losses of it’s rightful revenue – is the best example that one could sight to establish his unbecoming conduct as the person holding the office of the DGC. The DGC is fully aware of the losses being incurred by the government that continues unabated. Yet, he had betrayed the country and let the country suffer dearly.

In this case the damage caused by the bad law created by the former CJ, Sarath N Silva, has several extremely damaging ramifications. Therefore, we urge the President Rajapakse to intervene immediately to arrest the deplorable situation created by the bad law that has effectively negated the Statute, the Customs Ordinance. We urge the President to initiate action to bring a revision application to the Supreme Court to nullify the bad law created by the former CJ Sarath Silva, which brought in the following ramifications.

• In effect, as a result of the CJ’s bad law, the importers are encouraged to defraud the government by resorting to follow any fraudulent mythology and the Customs have already experienced heavy revenue loss due to false declarations, misdescription of goods and under statement of valuation of goods.

• Thanks to CJ’s irrational ruling, the power vested in the officers by the section 125 of the Customs Ordinance have been completely nullified and negated. From now on, no goods on which government revenue has been defrauded and hence forfeited by operation of law can be seized by customs and such action has been declared illegal.

• In the event any fraud is detected by frauds preventive officers, after released of goods, the importer can simply get away from effect of the operation of law against them. The goods so imported by unlawful means and thereby forfeited by operation of law are no more considered forfeited by the operation of law.

• Now, with the bad law created by the former CJ Sarath Silva, a new precedence has been set up and the revenue fraudsters are encouraged to exploit the bad law to their advantage and maximize the defrauding of the government revenue. In the very unlikely event of been detected, now the fraudsters are allowed to pay the amount of government revenue so defrauded to customs and get away from forfeiture of goods and further forfeitures that would have been imposed on them for knowingly concerned in defrauding the government revenue

Why the DGC should be held responsible for the creation of bad law

In this case, the Head of motor car unit, [the Second Respondent in the case] has been prevented from making an affidavit to the Supreme Court by the DGC. He should have given a affidavit setting out the modus operandi of this fraud and the collusive action by the officers appointed to examine the vehicles before they were release. The second Respondent was the best person who was qualified to say that if not for the timely action taken by the fraud preventive officers, the government would have incurred a massive revenue loss as a result of the collusive actions by the officers appointed to examine the vehicles before release, with the revenue fraudster.

In terms of the Customs Ordinance, the primary duty vested in the DGC and the other officers of customs, is to protect the government revenue [Section 137 of the customs Ordinance]. The DGC was under duty to initiate immediate investigation into this fraud after it had been detected. The DGC should have identified the officer or officers colluded with the revenue fraudster and passed the vehicles under wrong classification that attract lower rate of duty. In this case, the DGC was also under duty to deal with the fficers responsible for the defrauding of the government revenue, under the provisions of 137 of the Customs Ordinance which require dismissal of the officers involved in the revenue fraud.

The DGC’s inaction in this case is deliberate and intentional and he was simply an accessory in this scam. Had he performed his legal duty, that would have exposed the fraudulent act on the part of the importer, there would not have been any opportunity for the revenue fraudster to bring an action before the Court of law. By his deliberate inaction the DGC, Sarath Jayathilake, let the former CJ, Sarath N Silva to exploit the absence of any statement by way of affidavit, by the second respondent – presence of which would have given no room at all to the CJ – to abuse his authority and to allow the Writ sought by the revenue fraudster.

The CJ, in his ruling stated that “… the 2nd Respondent had not filed an affidavit and hence had denied the contention of the Appellant that the vehicles were examined by the 2nd Respondent prior to release…”  It was stated further in the ruling that the “… 2nd Respondent has not stated anywhere the he me made a mistake… ”. We, say with full responsibility that refusal of an affidavit by the 2nd Respondent is a part of the well planned conspiracy that cooked up to facilitate the revenue fraudster.

It is very unfortunate that CJ, Sarath Silva, like many other controversial decisions by him, had favored the government revenue fraudster in this case, having fully aware that he would open the floodgates for the revenue fraudsters with his irrational ruling.

CJ, Sarath N Silva, knew the gravity of the fraud committed by the importer and the total revenue defrauded by the importer. Therefore, we say that in his ruling he had been very careful not to utter a word about the total amount of government revenue the importer defrauded that is well over one hundred and nineteen million rupees [Rs. 119,520.000.00].

If not for some form of interest in this case, which is obvious by the manifestly unfounded reasoning given to justify his ruling, the proper course of action would have been to affirm ruling given by the Court of Appeal and to issue a show cause notice on the Director General of Customs for the failure in part to take action as required by law that are set out below.

• Demand the DGC, to show cause for his inaction against the officers responsible for releasing the goods in the very first instance, in terms of section 137, which attract an imposition of a forfeiture of Rs 100,000.00 on the officer or officers involved in this case and their dismissal from the Customs Service.

• Demand the DGC to show cause as to why he failed to submit a affidavit from the second respondent in the case, K Premanath, the Deputy Director of Customs, giving reasons for failure on his part to seize the vehicle when they are presented for examination with a bill of entry that clearly disagreed with the vehicles

Sarath N Silva [CJ] assisted by Sarath Jayathilake [DGC] open floodgates for revenue fraudsters

Far-reaching effects of the TOYOTA LANKA ruling [SC Appeal No: 49/2008]

We, the Sri Lanka Customs Whistleblowers are an independent body formulated to fight   corruption and abuse of power by any person holding any public office. Today, we bring with full confidence to the notice of the people about the background and the decision of a very important and infamous supreme court decision from the, government revenue view point, that set up a precedence with very damaging and far-reaching effects.  The  modus-operandi in this case, that was designed to protect the organised fraudsters has been a minutely planned one by the PC Faiz Musthapha that was well supported by the DGC, Sarath Jayathilake by his deliberate inaction, and finally put into action by CJ, Sarath N Silva by a creation of a bad law that has defied stringent measures against any form of revenue frauds devised in the Customs Ordinance, that were effectively used against the government revenue fraudsters to curb revenue frauds for centuries.

Therefore, the Customs Whistleblowers, we consider it is our duty to blow the whistle and to announce all law abiding people in this country, that the bad law created by the former CJ, Sarath N Silva, has formulated a very safe methodology for the organized government revenue fraudsters effectively defying the government billions of its rightful revenue. The effect of the bad law created by the CJ, Sarath N Silva was such that it overrides the established statue law, the Customs Ordinance, a very powerful tool against the government revenue fraudsters. The CJ’s ruling in this case formulate a very safe methodology for the revenue fraudsters, to indulge in various types of unlawful actions, circumventing the deterrents imposed by the established by law, with no fear or concern whatsoever about the forfeiture of goods cleared by unlawful means and any further forfeitures that would have been imposed on them for defrauding the government revenue. The far-reaching consequences of the bad law created by the former CJ Sarath N Silva in this case is such that it had already denied the government of its rightful revenue of billions of rupees and the damages caused by the creation of this bad law continues unabated.

Subject matter of the case

The subject matter in this case is 40 vehicles of Toyota Land Cruizer vehicles imported and cleared through the customs by fraudulent means, defraying the government revenue of over Rs 119,520.000.00. The Customs revenue fraud preventive officers had enforced the law against the revenue fraudster and caused the seizure of the vehicles, that were available with the importer at the time of the initiation of their fraud preventive action. The importer involved in the fraud challenged the seizure before the Court of Appeal, yet their action failed as the Court of Appeal rejected their writ application wholly as it had no legal basis.

Ruling bad in law by the CJ

Then the fraudster businessman appealed against the ruling in the Supreme Court, and the hearing was allocated by the CJ before a bench headed by the CJ himself. The matter was argued before him on 30^th June 2009 and the ruling by CJ himself, was delivered on 30^th July 2009, which the Customs Whistleblowers declare is baseless and manifestly unfounded.

In his ruling the CJ, Sarath N Silva pronounced that the order by the Court of Appeal is bad in law and held with the revenue fraudster businessman. The CJ declared that the enforcement action by customs against the revenue fraudster is illegal and seizure of goods already cleared through Customs, defrauding the government revenue, is also manifestly illegal. The CJ ruled that instead of seizure of goods – that have been forfeited by the operation of law – the proper cause of action should have been to let the fraudster to pay the amount of customs duty defrauded by him and no further action as required by law.

CJ Sarath N Silva opens the floodgates for the fraudsters

We, the Customs Whistleblowers, can declare that by this irrational ruling pronounced by the former CJ Sarath Silva, the floodgates have been effectively opened to the revenue fraudsters to defraud the government revenue by any means with no risk of confiscation of goods imported by illegal means. We can say with confidence that as a result this blunder caused by the CJ Sarath N Silva’s bad law, the revenue losses that is being incurred by the government after the creation of this bad law is unimaginable. Exposing this high handed and manifestly illegal action by the former CJ, Sarath N Silva, which we argue amounts to abuse of the office of the CJ by Sarath N Silva, we urge the President Rajapakse to take appropriate steps to as quickly as possible to arrest the situation, which would otherwise be too late costing the government of its rightful revenue in unimaginable scale. We also urge the President to examine a possibility of bringing an action against the former CJ, Sarath N Silva for his deliberate illegal and anti-social action that cost billions of rupees of public funds and for performing the duties of the office of the Chief Justice dishonestly violating the oath of allegiance given by him to respect the law of the land and to be faithful in all his actions as the Chief Justice.

Unbecoming an utterly self-centered conduct of the DGC

The Customs Administration plays a very sensitive role concerning the government revenue, which is the lifeline of any government and this key government agency accounts for over 50% of the total revenue of the government. However, we can report with confidence that the incumbent DGC, Sarath Jayathilake, whose primary duty is to protect the government revenue -Section 137 of the Customs Ordinance -, has been instrumental in helping to create the bad law that only highly powerful politico-business-admin-mafia, that is capable of surviving itself under any regime. His deplorable conduct in this case, and his absolute silence and inaction about the aftermath of the creation of the bad law with far-reaching effects incurring the government billions of rupees of losses of it’s rightful revenue, is the best example that we could sight to establish his unbecoming conduct as the person holding the office of the DGC. The DGC is fully aware of the losses being incurred by the government that continues unabated, yet he had betrayed the country and let the country suffer dearly in the hands of powerful politico-business-admin-mafia, which we say enjoy patronage of powerful agents in all government agencies, which include certain members in the Judiciary, that is required by law to exercise the peoples’ judicial power appropriately, and not according to the whim and fancies of certain individuals.

Bare facts concerning the TOYOTA LANKA Case – SC Appeal No: 49/2008

Team of Customs officers led by Mr P Saman Silva, seized nine Toyota Land Cruiser vehicles after they had been cleared through the Customs. By the time of seizure, the importer had already sold 31 of such vehicles. The reason for the seizure was that the importer had defrauded the government revenue by suppressing vital information about the vehicles that would attract the higher rate of Customs duties and other levies. The investigations conducted, after the seizure of vehicles, had revealed that for each vehicle the imported has defrauded Rs 2,988.000.00 – well over 29 million rupees – of government revenue and the total amount defrauded was over 119 million.

Modus operandai of the fraud that caused the seizure of the vehicles

The Customs levies a lower rate of Customs duty for vehicle imported for passenger transport, whereas other vehicles – meant private use – are charged at the higher rate of duty. The determining factor of the applicable rate of duty is how the vehicle is designed – whether for private use or public use – and the number of seats provided in the vehicle. Accordingly, by law and procedure, the vehicles designed with 10 seats or over are classified as vehicles for passenger transport and the Customs duties are charged at a lower rate of duty whilst the vehicles designed for private use i.e. with seating capacity of nine or lesser are charged at higher rate of duty.

In this case, the importer in his declaration made to customs, had made a false declaration and had classified the vehicle [under HS code 8703.32.10.01] as a one designed for passenger transport, whereas the vehicles imported were in fact designed for private use with the lesser seating capacity. Accordingly, the importer had paid the lesser rate of duty applied for passenger transport vehicles and cleared the vehicles, almost certainly with the collusion of the officers appointed to examine the vehicles before release. Therefore the act committed by the importer, was illegal as he had managed to clear the vehicles by fraudulent means, defrauding the revenue of Rs 2,988.000.00 for each vehicle. By this willful fraudulent act, all vehicles had been forfeited by the operation law – in terms of section 47 of the customs ordinance – as the particulars provided in the bill of entry or customs declaration, disagreed with the particular of the goods imported against it. Therefore, the Customs officers had seized nine such vehicles, held with the importer at the time of raid conducted by customs, in terms of section 125 of the customs ordinance, which had been the practice followed according to law in similar cases all this time.

However, the importer Toyota Lanka, challenged the forfeiture before the Court of Appeal [CA application No 2118/2005]. Yet, the Court of Appeal refused their application that was obviously manifestly unfounded. Then the importer challenged the decision of the Court of Appeal before the Supreme Court, and which Sarath Silva, the CJ himself, took up for hearing.

Arguments for fraudsters by PC Faiz Musthapha

At the hearing, the respondent, Toyota Lanka whose bill for the lawsuit was over 30 million rupees, was represented by the PC Faiz Musthapha – which we believe should catch the attention of the Inland Revenue to explore what sort of income declaration was made by PC Musthapha for the tax purposes for the year 2008/2009. Musthapha argued that “seizure of vehicles by the customs officers are purely reward oriented” and that attitude had induced the officers of their the “overzealous” action in effecting the seizure and imposing penalties, whereas the proper cause of action would have been to recover the amount of revenue defrauded by the importer, under the provisions of section 18 of the Custom Ordinance, which was argued the “due process of law.” Counsel, Faiz Musthapha further argued that, in event amount defrauded by the imported had been recovered under the section 18 of the Customs Ordinance, the entire quantum so recovered would have been credited to the revenue, not just 30% of the proceeds, had they been forfeited as the other 70% would have been credited to the reward fund and to the compensation fund – created by the law to encourage the revenue fraud preventive officers to enforce the Customs law effectively against the organized revenue fraudsters.

Counsel Musthapha reinforced his argument with an allegation leveled against the officers, whose actions, in fact, would have recovered additional revenue by way of further forfeitures imposed on the importer for knowingly defrauding the government revenue and proceeds of crime that would have realized from the disposal of the vehicles forfeited by operation of law, in the case. Further, if not for the undue and irrational judicial intervention and creation of a bad law by the former CJ, Sarath N Silva, the fraud preventive action by the officers would have clearly made the importer to think twice before committing similar fraudulent act in future that would cost them dearly, with stringent deterrents measures in place against such unlawful actions.

Counsel Musthapha argued further that the customs officers resort to procedure of seizure of good even after “goods  are examined passed by the Customs Officers”, in view of the reward scheme, where the officers are awarded financial rewards from the proceeds of revenue crimes collected by way of forfeitures, penalties and fines imposed on revenue fraudsters. He “enlightened the CJ, Sarath N Silva” that in terms of the section 153, only 30% of total proceeds of revenue crimes are credited to the revenue and other 70% is goes to the reward fund and to the compensation fund – which we say is created by law to ensure effectiveness of the management of the Customs law and procedure.  However, it was very unfortunate that neither the CJ nor the AG realized that if not for the preventive measure initiated by the revenue fraud preventive officers, nothing at all would have materialized by way of additional duty or proceeds of crime, generated from the disposal of the goods

CJ, Sarath N Silva’s creation of bad law

The CJ, Sarath N Silva, refused to consider the submissions by the State that the misdescription of the goods would be a fraudulent act on the part of the importer and the mere recovery duty so defrauded is not an adequate deterrent. Yet, the CJ, simply relied on the submissions for Appellant by Counsel Faiz Musthapha and finally he held that the actions of the fraud preventive officers and seizure of goods is manifestly illegal and the proper cause of action would have been the recovery of revenue defrauded by the importer in terms of section 18 of the customs ordinance, in which case nothing would go the 3^rd Respondent who initiated action against the revenue fraudster, but the whole proceeds that recover would go to the revenue. We, the Customs Whistleblowers, concerned with the proper enforcement of the Customs law and protection of the government revenue, are sorry to say that the bad law created by the former Chief Justice, Sarath N Silva, is groundless and manifestly unfounded for number of reasons that are set out below.

Why the CJ, Sarath N Silva’s creation is bad in law

Firstly his interpretation of sections 18, 47 and 125 of the Customs Ordinance is manifestly wrong. We, the Customs Whistleblowers could thing of any reason as to why the CJ, Sarath N Silva – unless his action was motivated by some other consideration that best known to him – applied the provisions of section 18 of the Customs Ordinance in this case, which has nothing to do in cases where the “government revenue is defrauded” by any person. His reasoning given for adopting the provisions of the section is manifestly unfounded. The new law created by the CJ by his irrational ruling states that “proper course of action would be a requirement for payment for the amount due prior to delivery of goods or the recovery of the amounts due in terms of Section 18” which we say is manifestly wrong and not the intention of the lawmakers, that provides stringent measures by law against any form of defrauding of government revenue.

The purpose of the provisions set out in Section 18 is to recovery of duties or charges short levied or erroneously refunded on a claim for refund of customs duties and the provisions of section 18 has no application whatsoever, in situation where there is a revenue fraud committed by any person, as in this case, where the importer had made a wrong classification with intend to defraud the government revenue.

On the other hand the provision of law, the former CJ talked about, is a relatively new amendment to the powerful Customs Law that was brought into operation well over 150 years ago and enforced fairly and squarely against all forms of revenue frauds. If the CJ’s interpretation of the Customs Law is the correct analysis, then what he implies is that from 1974 onwards – the year the amendment to section 18 that came into being, on what the CJ wholly relied upon – the law has been amended to facilitate the government revenue fraudsters.

Further, careful examination of his ruling, reveals that he was unhappy with the frauds preventive officers, who bring additional revenue to the government,  and therefore  provided with financial rewards,  by law,  and also compensation, in the event any harm is inflicted on them by the powerful revenue fraudsters. In his ruling the CJ states that the 3rd Respondent, P Saman De Silva – one of the fearless fraud preventive officer in the Customs, who had earned tens of millions of rupees purely for his daring actions and commitment to enforce law against organized revenue fraudsters with no fear or favor – has nothing to do with this case, which we believe is an absurd statement that is uncalled for. This shows that the former CJ’s ruling was motivated by jealousy towards the 3^rd Respondent and he was clearly biased against him for no apparent reason. Probably, the CJ, Sarath N Silva was happy to deny the officer his legitimate share of reward the case, in the event the CJ had affirmed the decision of the Court of Appeal.

The role played by the DGC, Sarath Jayathilake, in this scam

We, the Customs Whistleblowers, say with full responsibility that this whole saga is a well calculated fraud committed by the CJ, Sarath N Silva, PC, Faiz Musthapha, assisted by the DGC, Sarath Jayathilake who had deliberately prevented the second Respondent in this case, the head of motor car unit, from making an affidavit to the Supreme Court, setting out the modus operandi of this fraud and the collusive action by the officers appointed to examined the vehicles before release. The second Respondent is the best person who is qualified to say that if not for the timely action taken by the fraud preventive officers, the government would have incurred a massive revenue loss as a result of the collusive actions by the officers appointed to examine the vehicles before release, with the revenue fraudster.

In terms of the Customs Ordinance, the primary duty vested in the DGC and the other officers of customs, is to protect the government revenue [Section 137 of the customs Ordinance]. We, the Customs Whistleblowers, say that DGC was under duty to initiate immediate investigation into this fraud after it had been detected by the third respondent P Saman de Silva, the fraud investigation officer and the third Respondent in the case. The DGC should have identified the officer or officers colluded with the revenue fraudster and passed the vehicles under wrong classification that attract lower rate of duty. In this case, the DGC was also under duty to deal with the officers responsible for the defrauding of the government revenue, under the provisions of 137 of the Customs Ordinance which require dismissal of the officers involved in the revenue fraud.

We, the Customs Whistleblowers, say that the DGC’s inaction in this case is deliberate and intentional and we say that the DGC is simply an accessory in this scam. Had he performed his legal duty, that would have exposed the fraudulent act on the part of the importer, and there would not have been any opportunity for the revenue fraudster to bring an action before the Court of law seeking a Writ against the officers who conducted enforcement action against the revenue fraudster. By his deliberate inaction the DGC, Sarath Jayathilake, let the CJ, Sarath N Silva to exploit the absence of any statement by way of affidavit, by the second respondent, presence of which would have given no room at all to the CJ, to abuse his authority and to allow the Writ against the officers enforced the law against the revenue fraudster.

The CJ, in his ruling stated that “… the 2^nd Respondent had not filed an affidavit and hence had denied the contention of the Appellant that the vehicles were examined by the 2^nd Respondent prior to release…”  It was stated further in the ruling that the “… 2^nd Respondent has not stated anywhere the he me made a mistake… ” We, the Customs Whistleblowers say with full responsibility that refusal of a affidavit by the 2^nd Respondent is a part of the well planned conspiracy that cooked up to facilitate the revenue fraudster.

It is very unfortunate that CJ, Sarath Silva, like many other controversial decisions by him, had favored the government revenue fraudster in this case, having fully aware that he would open the floodgates for the revenue fraudsters with his irrational ruling. We invite every law abiding citizen to examine the so-called ruling by the CJ, Sarath N Silva that is reproduced in our webpage, which demonstrate his collusion with the revenue fraudster that is quite obvious to any lay person who reads his ruling.

He knew the gravity of the fraud committed by the importer and the total revenue defrauded by the importer. Therefore, we say that in his ruling he had been very careful not to utter a word about the total amount of government revenue the importer defrauded that is well over one hundred and nineteen million rupees [Rs. 119,520.000.00].

If not for some form of interest in this case, which is obvious by the manifestly unfounded reasoning given to justify his ruling, the proper course of action would have been to affirm ruling given by the the Court of Appeal and to issue a show cause notice on the Director General of Customs for the failure in part to take action as required by law that are set out below.

1. Demand the DGC, to show cause for his inaction against the officers responsible for releasing the goods in the very first instance, in terms of section 137, which attract an imposition of a forfeiture of Rs 100,000.00 on the officer or officers involved in this case and their dismissal from the Customs Service.
2. Demand the DGC to show cause as to why he failed to submit a affidavit from the second respondent in the case, K Premanath, the Deputy Director of Customs, giving reasons for failure on his part to seize the vehicle when they are presented for examination with a bill of entry that clearly disagreed with the vehicles

Take measures to close floodgates opened for fraudsters by the CJ, Sarath N Silva

We, the Customs Whistleblowers, trust the reelected Peoples’ President Mahinda Rajapakse, who promised to devote his second term to eradicate bribery and corruption in all institutions. In this particular case the damage caused by the bad law created by the former CJ, Sarath N Silva, has several extremely damaging ramifications. Therefore, we urge the President Rajapakse to intervene immediately to arrest the deplorable situation created by the bad law that has effectively negated the Statute, the Customs Ordinance. We urge the President to initiate action to bring a revision application to the Supreme Court to nullify the bad law created by the former CJ Sarath Silva, which brought in the following ramifications.

1. In effect, as a result of the CJ’s bad law, the importers are encouraged to defraud the government by resorting to follow any fraudulent mythology and the Customs have already experienced heavy revenue loss due to false declarations, misdescription of goods and under statement of valuation of goods.
2. Thanks to CJ’s irrational ruling, the power vested in the officers by the section 125 of the Customs Ordinance have been completely nullified and negated. And no goods on which government revenue has been defrauded and hence forfeited by operation of law can be seized by customs any more and such action have been declared ultra vires ipso facto.
3. In the event any fraud is detected by frauds preventive officers, after released of goods, the importer can simply get away from effect of the operation of law against them. The goods so imported by unlawful means and thereby forfeited by operation of law are no more considered forfeited by the operation of law.
4. Now, with the bad law created by the former CJ Sarath Silva, a new precedence has been set up. And the revenue fraudsters are encouraged to exploit the bad law to their advantage and maximize the defrauding of the government revenue. In the very unlikely event of been detected, now the fraudsters are allowed to pay the amount of government revenue so defrauded to customs and get away from forfeiture of goods and further forfeitures that would have been imposed on them for knowingly concerned in defrauding the government revenue.

Toyota Lanka Judgement – SC 49/2008

Toyota Lanka Judgment – SC Application No 49/2008

Please click the link for the judgment

For the benefit of the former CJ Sarath N Silva

As the bad law created by the CJ Sarath N Silva shows that he is absolutely ignorant about the Customs Law and procedure, we the Customs Whistleblowers, set out below for his information and for others who would like to understand the importance role the Customs officers performs, sometime under extremely difficult circumstances, as the key revenue earner of the government, and the reason as to why the revenue protection of Customs are given sweeping powers by law to ensure effectiveness of the Customs Service.

In this short briefing we also discuss the measures taken by law to encourage the honest and committed officers with a financial reward scheme and a compensation fund created to compensate the officers who suffer various injuries and sometime death in their fight against the revenue fraudsters. The measures taken by law against the dishonest officers who collude with the revenue fraudster which attract dismissal from the service and severe penalties are also discussed in this short briefing.

The Customs plays a very important role in the collection and protection of government revenue. Therefore, the law specifies stringent penalties and forfeitures against those who knowingly defraud the government revenue. For the benefit of the former CJ, Sarath N Silva, who apparently believes that those who defraud the government revenue could plainly get away from their liability with the payment of the government revenue so defrauded by them, we provide below the measures set out in the customs law against the government revenue fraudsters.

Why the officers of customs are given wide powers

The Customs law, a longstanding law, is a carefully constructed piece of legislation primarily designed to protect the government revenue. This law gives the officers, employed to protect the revenue, sweeping powers to deal with any person concerned in defrauding the customs revenue that include the power to;

1. to arrest any person against whom any reasonable suspicions exists for the commission of an offence under the customs ordinance.
2. to search any building or place where the officers suspect that there are unaccustomed or goods prohibited or restricted to import or brought into Sri Lanka contrary to prevalent laws and regulations [Section 125 & 128]
3. to stop and search vehicles suspected to be transporting smuggled goods and stop and search any vessel liable to seizure or examination under the customs ordinance cause to fire at any such vessel when refused to obey orders by customs to stop.
4. to seize any goods that are declared forfeited by operation of law for defrauding the revenue of customs [125]
5. to seize any goods on which duties have been defrauded that stored anywhere within the territory of Sri Lanka, at reasonable hours during the day or night [128].

Strict penal provisions against those who are concerned in revenue frauds

Penal provisions provided by the law against the revenue fraudsters also very stringent and includes;

1. In case of gold 3kgs or over jail term of not less than 15 yrs and confiscation of property
2. In case of frauds involving foreign currency a jail term not less than 15 years and confiscation of property
3. In case of revenue frauds involving made up garments [depending on the number of articles] jail term varies from one year to 15 years and includes the confiscation of property
4. In case of electronic and electrical goods [depending on the number of items] imported defrauding the government revenue, the jail terms again varies from one year to 15 years
5. In cases where the intention to defraud the government revenue is established, in addition to forfeiture of the goods involved in the fraud the person concerned is also liable to a further forfeiture up to the treble to values of the goods so imported or exported by defrauding the government revenue

The overriding objective of these stringent measures are to protect the government revenue, the lifeline of any government without which no government can function and raise finance required to run the government business as required by the Constitution.  Unfortunately, knowingly or otherwise, the former CJ pretended that he was unaware of these provisions set out by law against the government revenue fraudsters.

The legal duty vested in the officers appointed to protect the govt revenue

The lawmakers, having carefully studied the importance of the role played by the customs officers appointed to protect the government revenue, have clearly set about the duties on the officers employed to enforce the customs law. By law these officers are   required to take necessary measures to manage and protect the government revenue [section 2, and 137] and they are also required to perform their duties appropriately.

Penal sanctions against corrupt officers to prevent loss of revenue

Primarily officers in the Customs deal with duties concerning government revenue and the opportunities are in abundance for those dishonest to defraud the government revenue with the collusion or connivance with the fraudster elements. Therefore, in order to deter such unlawful actions effectively, the law provides stringent measures against every person employed to protect the government revenue. These deterrent measures include the dismissal of such dishonest officers from the customs service plus provisions to impose a further forfeiture of Rs 100.000.00 [section 137]. Similarly if any officer of customs is caught taking any fee or benefit, whether pecuniary or otherwise, the law provides similar sanctions, which include dismissal from the service and also to a fine of Rs 10.000.00