" We demand the right thinking people in the government and the opposition to come out of hibernation and to address these scandalous affairs with full force, to restore rule of law in the country, the absence of which costs the country dearly, forcing the innocent people to undergo enormous hardships for no fault of them."...................................
by Wishwamithra
(August 20, Colombo, Sri Lanka Guardian) The Sunday Leader believes in the role of the media as the ‘watchdog’ of the nation and provides trustworthy information to the public at all times. Our Investigative journalism keeps an ‘eagle’s eye’ on politicians and public officials for the purpose of holding them accountable for any abuse of office. They exercise the sovereignty of the people as the members of the executive and legislature and are expected to discharge their duties with total integrity whilst being faithful to their oath of allegiance. The very same public who elect these people to office expect the media to play its watchdog role effectively and ensure that the sovereignty of the people is not abused. The scandalous affairs like the one the ‘Sunday Leader’ exposed on 08th August 2010 come into the limelight as a direct result of this obligation to the people by the national media, the fourth state.
Our exposure on the Colombo Dockyard revenue fraud seems to have shaken the foundations of the three major pillars of the government, Treasury, AG’s Department and the Customs. Now the Secretary to the Treasury, Dr PB Jayasundara has become the latest high profile figure to have entangled in this scandalous ‘drama’ in which several other highly placed government officials are also involved.
Colombo Dockyard fraud in a nutshell
The Colombo Dockyard Ltd [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.
On an information provided by a private informant the Customs revenue fraud preventive officers launched an investigation [Case No: P/Misc/93/2000] in October 2000 into this unlawful transaction. The investigation confirmed that the CDL had unlawfully misappropriated the total duty component amounting to a sum of Rs 619,483,827.00 collected from the buyers on the 21 marine crafts sold locally without the BOI approval and Customs authorization.
Modus operandi adopted by the CDL in this revenue crime
First, the CDL failed to apply either BOI or 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 who purchased the marine crafts.
Thirdly, the CDL misappropriated the total amount of the fiscal levies so recovered, without remitting a single cent to the government revenue.
Time line of the Dockyardgate
October 2000 - Fraud preventive officers of Customs launch investigations into the revenue fraud
August 2001 - The investigation compels the CDL to make a special deposit of 94 million with
the Customs. This deposit is to be applied against the final determination of the Customs inquiry.
February 2002 - Having established a prima face case against the Colombo Dockyard Ltd, the
Customs begins a formal Customs inquiry [Case No:P/Misc/93/2000] under the Deputy Director of Customs Thilak Perera. This inquiry drags on for over two years with no tangible result achieved.
March 2004 - The Director General of Customs Sarath Jayathilake terminates the Customs
inquiry by granting a general amnesty to the Colombo Dockyard Ltd. The DGC grants this amnesty under the pretext of the Tax Amnesty Law [Act No 10 of 2003] brought in by the then Minister of Finance KN Chosky of the Ranil Wickramasinghe Govt [2002-2004]. This law had no application whatsoever on the financial crimes, similar to the one committed by the Colombo Dockyard Ltd, and hence it is alleged that the action by the DGC Jayathilake was amounted to abuse of office costing the govt of over 619 millions of public funds.
June 2004 - Fraud preventive officers of Customs challenge DGC’s action before the Court of
Appeal [Case No: CA/1397/2004] compelling him to withdraw the amnesty granted to the CDL.
February 2005 - On the day of the final determination of the case, the DGC gives an undertaking
to the Court of Appeal to complete the Customs inquiry ‘as expeditiously as possible’. Thus the revenue fraud preventive officers withdraw the Court of Appeal action.
Feb to Sep 2005 - DGC Jayathilake ignores the undertaking given to the Court. On the other hand the inquiry officer Thilak Perera drags on the fraud inquiry with no tangible action whatsoever taken.
September 2005 - The Colombo Dockyard Ltd initiates its own Court action against Customs before
the Court of Appeal [CA/1413/2005]. They demand a writ of prohibition against Customs from the continuing the Customs revenue fraud inquiry.
Sep 2005 to April 2009 - The Court of Appeal action drags on with no apparent reason for 4 years
whilst the DGC Jayathilake and inquiry officer Thilak Perera continues to refuse the resumption of the Customs inquiry with no justifiable reason. [There was no stay order from the Court of Appeal to stop the Customs inquiry proceedings].
March 20, 2009 The Supreme Court, in the Case filed by Toyota Lanka Ltd [SC Appeal No:
49/2008] rules that where there is a under payment of duty on any goods misdescribed, the Customs is precluded from invoking the penal provisions against the importer. Instead the Customs should recover the duties defrauded.
April 27, 2009 Within a month the Court of Appeal applies the Toyota Lanka ruling to decide the CDL case. The Court rules that the Customs duty and other levies defrauded by the Colombo Dockyard Ltd could be recovered. Further a writ of prohibition was issued against the Customs from continuing the Customs revenue fraud inquiry against the CDL.
May 2009 The revenue fraud preventive officers disagree with the Court of Appeal ruling and urged the DGC to challenge the Court of Appeal ruling. Yet the DGC Jayathilake refuses to challenge the Court ruling and allows the Dockyard Ltd to rely on the Court ruling.
However, as the fraud preventive officers challenged the DGC and warned him with another Court action against abuse of office, the DGC signs a letter addressed to AG requesting to appeal against the Dockyard court ruling.
June 2009 The AG Mohan Peiris refuses to accede to the DGC’s request. Then preventive officers of Customs make representation to the Solicitor General Priyasad Dep who files action before the Supreme Court [SC/SLA Application 100/2009] challenging the Court of Appeal ruling.
The grounds for appeal was that the Court of Appeal had failed to take notice of the disparity between the Toyota Lanka case and the Colombo Dockyard case. 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 on goods misdescribed. The Toyota Lanka ruling itself clearly distinguishes the difference between the evasion of duty with that of duties under-paid or unpaid on goods misdescribed.
Nov 04, 2009 - The AG suddenly changes his stand at a high profile meeting [ AG Mohan Peiris, Solicitor General Priyasad Dep, DGC Sarath Jayathilake, his Deputy ZAM Jazeel] held at the AG’s office and advises the DGC to proceed with the Customs Inquiry against the Colombo Dockyard Ltd. His advice is based on the ground that the Court of Appeal ruling did not preclude the Customs from continuing the customs inquiry for defrauding the Customs duties by the Colombo Dockyard Ltd.
Nov 2009 to May 2010 - Despite the AG’s advice, the DGC, the Customs legal advisor ZAM Jazeel and Inquiry Officer Thilak Perera refuse to initiate the inquiry proceedings [please see the minutes made by Deputy DGC on the AG’s letter addressed to AG dated 10th May 2010].
May 10, 2010 - The AG within a period of one year backs down from his own opinion and informs the DGC that he would not challenge the Court of Appeal ruling and advises to recover the Customs duties. He further informs that he would withdraw the application filed before the Supreme Court on the next date i.e. 30th August 2010.
31st May 2010 - The Customs legal advisor ZAM Jazeel informs the Director of Customs [Preventive] to recover the Customs duties defrauded by the Colombo Dockyard Ltd as per the AG’s advice. [However the minutes confirm that the action initiated by ZAM Jazeel has not been approved by the DGC].
31st May 2010 - The Director of Customs [Preventive] Thilak Perera advises the Deputy Director [Preventive] Lalitha Weerasinghe to recover defrauded Customs duties from the Colombo Dockyard Ltd.
23rd June 2010 - Then the Deputy Director [Preventive] Lalitha Weerasinghe directs Chief Preventive Officer to give effect to the AG’s advice and recover duties defrauded by the Colombo Dockyard Ltd.
03rd Aug 2010 - The revenue fraud preventive officers informs the new DGC Ms S Karunaratne about the action being carried out by ZAM Jazeel and Thilak Perera to close the case. The new DGC immediately informs the AG that withdrawal of the Supreme Court action at this stage is improper, considering the colossal fiscal levies evaded by the Colombo Dockyard Ltd.
08th Aug 2010 - Sunday Leader exposes the Dockyard fraud and the attempts being made by the AG to close the matter.
16th Aug 2010 - The AG stuns by the new DGC’s response. Suddenly the ST Dr PB Jayasundara at a Treasury meeting finds faults with the Customs Officers for defying the AG’s advice and leaking the AG’s letter to the media ‘Sunday Leader.’ He firmly directs the DGC Mrs S Karunaratna [he was careful not to confirm his directive in writing] to abide by the AG’s advice and not to proceed with the Supreme Court action.
When the rule of law is ignored governance is bound to collapse
In any recognized democracy the maintenance of the Rule of Law is an essential ingredient, which guarantees the protection of rights and freedom of the people. It is the cornerstone of the whole system of the administration of justice that is unfortunately lacking in Sri Lanka. All organs of the government are expected to play their constitutional obligations towards the rule of law. However, the events unfolding in Sri Lanka suggest that the constitutional norm ‘sovereignty in the people’ is nothing more than a constitutional myth in the absence of respect to the rule of law by the government of Sri Lanka.
Issues concerning the conduct of AG Mohan Peiris
Mohan Peiris is a lawyer appointed to the office of the AG from the private bar. He is required by law to perform the duties of the AG with total integrity. However his conduct in this case clearly raises several issues about his integrity.
In the first place he has refused to challenge the Court of Appeal ruling that favored the Colombo Dockyard Ltd. This has opened the floodgates for the government revenue fraudster elements that resort to abuse tax free privileges for unjust enrichment by defrauding the government revenue. He deliberately refused to appeal against the Court of Appeal ruling until the Solicitor General Priyasad Dep filed action before the Supreme Court to have the flawed Court of Appeal order quashed.
Then he suddenly changed his stand and on 04th Nov 2009 [please refer to the DGC Mr Karunarathna’s letter dated 03-08-2010 addressed to the AG] advised the Customs to proceed with the Customs inquiry as the Court of Appeal ruling did not preclude the Customs from continuing the inquiry against the Colombo Dockyard Ltd for defrauding the Customs duties.
He switched his stand again on 10th May 2010, almost one year after filing action before the Supreme Court, and pretended as if he had not given his opinion to the Customs to proceed with the Customs Inquiry by notifying the DGC that action would be taken to withdraw the Supreme Court action on the next date that is 30th August 2010.
The conduct of the incumbent AG raises serious doubts about his integrity. But what our investigations into his past conduct have revealed is startling and beyond belief for any person who is concerned about the highly acclaimed public office like the Attorney General. We have found irrefutable evidence of his unbecoming conduct as an Attorney-at-Law in an affidavit affirmed by the Director General of Customs, Mr WDL Perera [1999-2001] for bringing the office of the Attorney-at-Law into disrepute. [You are invited to visit Sri Lanka Customs Whistleblowers website that reproduced the image of the signed affidavit by the DGC, WDL Perera]
Issues concerning the DGC Sarath Jayathilake [2002 – 2010], his deputy ZAM Jazeel and Tilak Perera, Director of Customs & the inquiry officer
The DGC and all other officers of Customs are appointed under the law for the management and collection of Customs duties [Section 2 of the Customs Ordinance] and the law clearly provides that collusion in manner by the officers with the revenue fraudsters be rendered them incapable of serving in the public service [section 137 of the Customs Ordinance].
All three officials involved in this case, namely DGC Sarath Jayathilake, Deputy DGC ZAM Jazeel and Director of Customs Thilak Perera were fully aware that the goods imported by the Colombo Dockyard limited had been exempted from payment of Customs duties. Therefore, the Colombo Dockyard Ltd was liable to forfeit three times of the value of the goods for illegal disposal of the goods evading the payment of fiscal levies [Section 50A of the Customs Ordinance]
All three officers have clearly failed to perform their duty as required by law for the reasons best known only to them and hence are liable to be dealt with under the provisions of the Customs Ordinance.
The deliberate delaying tactics employed by all three and their various unlawful evasive actions, for example the DGC Jayathilake terminating the Customs inquiry, refusing to comply with the undertaking given to Court of Appeal, and various other dodgy endorsements made on the case record, clearly demonstrates their collusion with the Colombo Dockyard Ltd in the evasion of payment of Customs duties amounting to 619 million rupees.
Issues concerning the ST Dr PB Jayasundara holding the office of the Secretary to the Treasury
The ST Dr PB Jayasundara is fully aware of the gravity of the revenue fraud committed by the Colombo Dockyard Ltd. He is aware that the company has unjustly enriched with these public funds. He is also fully aware of the need of deterrents against organized revenue fraudsters. He knows that if the Colombo Dockyard Ltd is allowed to go scot free that will open the floodgates for all fraudulent elements to evade the Customs duties with no fear whatsoever.
The ST has no authority over the enforcement of the Customs Law that is fully vested in the Director General of Customs. Therefore his verbal instructions given to the DGC on 16th Aug 2010 not to pursue with the Supreme Court action is manifestly unlawful and amounts to abuse of office of ST.
The Supreme Court in one of its landmark judgments held Dr PB Jayasundara responsible for fraud and corruption in the privatization of Lanka Marine Services Ltd., during the then UNP administration. At that time, Dr. Jayasundara held the post of Chairman of the Public Enterprise Reforms Commission (PERC).
In the said judgment delivered by a bench headed by former Chief Justice Sarath N. Silva, Dr. Jayasundera was also found to have acted contrary to the law and fined Rs.500,000 to be paid as compensation to the State. He swore an affidavit undertaking to desist from holding any government office in the future.
Dr. Jayasundara later filed a motion in the Supreme Court after the present Chief Justice Asoka de Silva assumed office, seeking permission to be relieved from his own undertaking and to resume work in the public service. The SC granted him the requested relief and he was restored to the office of the Secretary to the Treasury by the present government.
Major concerns in this scandalous affair that cost the government dearly
This is a case where the Colombo Dockyard Ltd had misappropriated 619 million rupees collected from the buyers [Sri Lanka Ports authority and Sri Lanka Navy] who had purchased the 21 marine crafts. This colossal sum of money has been collected to pay the Customs duties on the goods sold. This is a daylight robbery of public funds carried out with the aid and abetting of the whole administrative machinery of respective institutions involved. The unbecoming conduct of the heads of three institutions [Treasury, AG’s Department and Customs] and several other high ranking officials in the Customs Department illustrates the level of impact the sum of rupees 619 million, had on the high profile public officials.
These officials are appointed to protect the interest of the government, but their improper conduct create a doubt in the minds of the people whether they are working for the corrupt business elite or the people of this country, whilst being paid by the public funds. The conduct of the judiciary [the Court of Appeal] too creates a serious doubt about the integrity of the judge who heard the case filed by the Colombo Dockyard Ltd. This is a classic case that depicts the power and influence wielded by corrupt business elite that possesses the capability of maneuvering the whole ‘system’ to its advantage. It is extremely sad that whatever the government comes into power with the peoples’ mandate this business-admin-legal-caucus remain intact causing enormous financial losses to the government.
Any prudent person who reads between the lines of the judgment given by the Court of Appeal in the Dockyard case and also the Toyota Lanka case would observe a link that exists between the two judgments and the time factor involved in the Dockyard case. At the same time it can easily be observed that the Customs decision makers had been delaying the due process under the customs law until the Colombo Dockyard Ltd found a suitable way out. A careful examination of the timing of the Court of Appeal judgment favoring the Colombo Dockyard Ltd appears 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 Toyota Lanka ruling by the Supreme Court 20th March 2009 was promptly applied by the Court of Appeal within a month to bring an end to the CDL Court of Appeal case on 27th April 2009.
Public suffer when the rule of law suffer
The maintenance of the Rule of Law is an essential ingredient in good governance. Unfortunately in Sri Lanka it seems that the executive is completely ignorant of the importance of this basic fundamental constitutional norm. As a result the public is forced to suffer in the hands of corrupt elements whose actions are openly condoned by the Government.
During the recently concluded election campaigns the President Rajapakse publicly declared that he would devote his second term in office to put a stop to the bribery and corruption in the public sector. It is very strange that despite the total public awareness of the misdeeds carried out by dishonest public officials, the government continues to retain their services as if they are indispensable. By keeping these corrupt officials in office the government faces public outcry whilst its popularity ratings reach rock bottom. Now being the peoples’ watchdog, we urge the general public to act themselves as a jury and to pass a verdict on these corrupt officials, compelling the government to think twice before relying on these people for good governance.
We demand the right thinking people in the government and the opposition to come out of hibernation and to address these scandalous affairs with full force, to restore rule of law in the country, the absence of which costs the country dearly, forcing the innocent people to undergo enormous hardships for no fault of them.
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