Law-Report-part-4.pdf

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CIvIL PROCEDURE CODE SECTION 29, SECTION 431 (1) – Hire 94
Purchase Agreement – Non Payment of installment – Vehicle seized –
Vehicle produced in Court – Who is entitled to the Vehicle? – Absolute
owner or the registered owner? – Rights of the person from whom the
vehicle was seized?
Haswi vs. Jaytissa and two others
CUSTOMS ORDINANCE – Section 47, Section 51, Section 52 – Willfully 101
failing to classify goods – Misdescription – Non declaration of
royalty – Is it undervaluation?
Utsch Lanka (Pvt) Ltd., And Another vs. Deputy Director Of
Customs And Others
(Continued in Part 5)
FOREST ORDINANCE – 13 of 1982 – Section 40 – Registered owner – 86
absolute owner – Registered owner convicted – Vehicle confscated –
Should the vehicle be released to the absolute owner? – Who is the
owner of the vehicle?
Oriental Financial Services Corporation Ltd vs. Ranga Forest
Offcer And Another
WRIT OF CERTIORARI – Admission of a child to school – Selection 85
overturned by the appellate Panel – Site Inspection – Residence – Irratio-
nal and unreasonable decision? – Public duty cast on authorities?
Sesadi Subasinghe (appearing through her next friend) vs.
Principal, vishaka vidyalaya And 12 Others
(Continued from Part 3)

Sesadi Subasinghe (Appearing Through Her Next Friend) Vs. Principal,
CA Vishaka Vidyalaya And 12 Others (Anil Gooneratne, J.) 85
mÍlaId lr ;SrKhg t<öu wjYH fõ' úfrdaO;dj ±lajQ fouõmshka
ks;Hdkql+,j Ndrlrejka yd úfrdaO;djhg ,la jQ orejkaf.a foudmshka
ks;Hdkql+,j Ndrlrejka fj; fjku le|úh hq;=h' m%:u iïuql
mÍlaIKfha § Ndú;d l< iS wd¾ fmdf;ys mß.Kl uqøs; f,aLkhys úfYAI
igyka ;Srefõ fï ms<sn| úia;r yd ;SrK r;= mdáka ,shd ±laúh hq;= w;r
úfrdaO;d mÍlaIKh iïnkaOj fjku jd¾;djla o ,nd .; hq;=h'˜
Respondents were not able to meet the above argument.
However I will leave this matter open for a pronouncement in
a subsequent case where it is fully argued.
In all the above circumstances of this case Respondents
have not been able to disprove the requirement of ‘residence’
in terms of the Education Department Circulars produced
in this application as regards the Petitioner. As such the
initial selection of the Petitioner refected in the temporary
list would stand unaltered. Therefore there is a public duty
cast on the offcial Respondents to admit the child concerned
to Vishaka Vidyalaya. In any event this court does not intend
to quash the selection of children whose names are refected
in document P20, but would quash the decision of the offcial
Respondents non selection of the Petitioner more particularly
the Appeals and Objections Panel. Subject to above we allow
the Petitioner’s application in terms of sub paragraphs ‘c’, ‘d’
& ‘g’ of the prayer to the petition, without costs.
Sathya hettige J. – I agree.
Application allowed.

86 Sri Lanka Law Reports [2011] 1 SRI L.R.
ORIENTAL FINANCIAL SERvICES CORPORATION LTD vS.
RANGE FOREST OFFICER AND ANOTHER
COuRT Of APPEAl
SISIRA DE AbREw,
gOOnERATnE, j.
CA (PHC) APn 26/2011
HC AmPARA 343/2009
mC AmPARA 317773
mARCH 15, 2011
APRIl 28, 2011
Forest Ordinance – 13 of 1982 – Section 40 – Registered owner –
absolute owner – Registered owner convicted – Vehicle confscated
– Should the vehicle be released to the absolute owner? – Who is
the owner of the vehicle?
The registered owner of a vehicle was convicted on his own plea for
transporting timber without a permit. At the inquiry-whether the
vehicle should be confscated or not, the absolute owner (fnance
company) from whom the registered owner obtained fnancial assistance
to purchase the vehicle gave evidence and claimed the vehicle. After
inquiry the Magistrate made order confscating the vehicle. The revision
application fled by the Finance Company in the High Court was
dismissed. The petitioner sought to revise the said judgment.
held:
(1) The owner envisaged in the law cannot be the ‘absolute owner’
(finance Company).
(2) The absolute owner has no control over the use of the vehicle
except to retake the possession of the vehicle for non payment
of installments. no injustice would be caused to him as he could
recover the amount he spent from the registered owner by way
of action in the District Court on the basis of a violation of the
agreement.
application in revision from an order of the High Court, Ampara.

Oriental Financial Services Corporation Ltd Vs. Range Forest Offcer
CA And Another (Sisira de Abrew, J.) 87
cases referred to :-
(1) Manawadu vs. A.G. 1987 2 Sri lR 30
(2) Faris vs. OIC Galenbindunuwewa 1992 1 Sri lR 167
(3) Nizar vs. IP Wattegama 1978 – 79 2 Sri lR 303.
(4) Umma Habeena vs. OIC Dehiattakandiya 1999 3 Sri lR 89
Asthika Devendra for Petitioner.
Respondents absent and unrepresented.
Cur.adv.vult
April 28th 2011
SiSira de abrew, J.
In this case the registered owner of vehicle no. EPlE
3471 was convicted on his own plea for transporting timber
without a permit. Thereafter an inquiry was held whether
the vehicle should be confscated or not. At the inquiry the
absolute owner from whom the registered owner obtained
fnancial assistance to purchase the vehicle, gave evidence
and claimed the vehicle but the registered owner did not give
evidence. After the inquiry the learned magistrate made order
confscating the vehicle. Being aggrieved by the said order the
petitioner moved the High Court in revision but the learned
High Court judge, by his order dated 2.11.2010, dismissed
the petition of the petitioner. being aggrieved by the said
order of the learned High Court judge (HCj) the petitioner
has fled the present petition to revise it.
The position taken up by the petitioner is that he is
unaware of the commission of the offence and that he has no
knowledge of the commission of the offence. He therefore con-
tends that both orders of the learned magistrate and the learned
High Court judge are wrong and the vehicle should be released
to him. learned Counsel for the petitioner relied on Manawadu
Vs Attorney General.(1) In considering the contention of

88 Sri Lanka Law Reports [2011] 1 SRI L.R.
learned counsel for the petitioner, it is necessary to consider
Section 40 of the forest Ordinance as amended by Act no. 13
of 1982 is as follows:
“Upon the conviction of any person for a Forest Offence
(a) all timber or forest produce which is not the property
of the State in respect of which such offence has been
committed and
(b) all tools, boats, carts, cattle and motor vehicles used in
committing such offence (whether such tools, boats,
carts, cattle and motor vehicles are owned by such
person or not)
shall by reason of such conviction be forfeited to the
State.”
I have cited the above section since that was the section
that was considered in the judgment of Manawadu's case
(supra). for the purpose of completeness I would like to state
that this section was repealed by Act no. 65 of 2009 and
the following section was substituted in its place.
“ Where any person is convicted of a forest offence –
(a) all timber or forest produce which is not the property of the
State in respect
of which such offence has been committed; and
(b) all tools, vehicles, implements, cattle and machines used
in committing such offence,
shall in addition to any other punishment specifed
for such offence, be confscated by order of the convicting
Magistrate:

Oriental Financial Services Corporation Ltd Vs. Range Forest Offcer
CA And Another (Sisira de Abrew, J.) 89
Provided that in any case the owner of such tools,
vehicles, implements and machines used in the commission of
such offence, is a third party, no order of confscating shall be
made if such owner proves to the satisfaction of the court that
he had taken all precautions to prevent the use of such tools,
vehicles, implements, cattle and machines as the case may be,
for the commission of the offence.”
At this stage it is relevant to consider certain judicial
decisions relating to confscation of vehicles under the
Animals Act.
In Faris vs. OIC Galenbidunuwewa(2) justice Sn Silva (as
he then was) held: “In terms of the proviso to Section 3A of
the Animals Act, an order for confscation cannot be made if
the owner establishes one of two matters. They are
(1) that he has taken all precautions to prevent the use of the
vehicle for the commission of the offence;
(2) that the vehicle has been used for the commission of the
offence without his knowledge.
In terms of the proviso, if the owner establishes any one
of these matters on a balance of probability, an order for
confscation should not be made. An order for confscation
could be made only if the owner was present at the time of
the detection or there was some evidence suggesting that the
owner was privy to the offence.”
In Nizar vs IP Watthegama(3) justice Vythialingam and
justice Abdul Cader held: “ The learned magistrate was
clearly wrong when he took the view that by reason of the
removal of the proviso to section 3A by the Emergency
Regulation, confscation of the vehicle must automatically

90 Sri Lanka Law Reports [2011] 1 SRI L.R.
follow on conviction and that he was under no obligation
to consider the cause shown by the owner. The words “be
liable to confscation” used in section 3A gave a discretion
to the Magistrate whether to confscate the vehicle
or not and accordingly the owner should be given an
opportunity of showing cause that he had taken all precau-
tions against the use of his vehicle for the commission of
the offence and that he was not in any way a privy to the
commission of the offence. The vehicle ought not to be
confscated where the owner succeeded in showing cause.”
In umma Habeeba vs OIC Dehiattakandiya(4) justice
Yapa and justice gunawardene observed: “The lorry in
question had been used for illegally transporting nine heads
of cattle and four accused were found guilty on their own
pleas. The Driver of the lorry was the husband of the owner
of the vehicle. The Court was of the view, that the fact that
the Driver was the husband, itself proved knowledge on the
part of the appellant (owner) that the offence in question was
committed with the knowledge of the appellant.”
Held : “what section 3A means is that the vehicle shall
necessarily be confscated if the owner fails to prove that
the offence was committed without the knowledge but not
otherwise. If, as contended, the magistrate was given a
discretion to consider whether to confscate or not – the
Magistrate could confscate even when the offence was
committed without the knowledge of the owner taking into
consideration other damnable circumstances apart from
knowledge or lack of it on the part of the owner. ”
In Manawadu vs The AG (supra) Sharvananda Cj and
Atukorale j held: “by Section 7 of Act no. 13 of 1982 it was not

Oriental Financial Services Corporation Ltd Vs. Range Forest Offcer
CA And Another (Sisira de Abrew, J.) 91
intended to deprive an owner of his vehicle used by the
offender in committing a forest offence without his (owner’s)
knowledge and without his participation. The word “forfeited”
must be given the meaning “liable to be forfeited” so as to
avoid the injustice that would fow on the construction that
forfeiture of the vehicle is automatic on the conviction of the
accused. The amended subsection 40 does not exclude by
necessary implication the rule of audi alteram partem. The
owner of the lorry not a party to the case is entitled to be
heard on the question of forfeiture of the lorry. If he satisfes
the court that the accused committed the offence without
his knowledge or participation, his lorry will not be liable to
forfeiture.
The magistrate must hear the owner of the lorry on the
question of showing cause why the lorry is not liable to be
forfeited. If the Magistrate is satisfed with the cause shown,
he must restore the lorry to the owner. The magistrate may
consider the question of releasing the lorry to the owner
pending inquiry, on his entering into a bond with suffcient
security to abide by the order that may ultimately be binding
on him.”
It is therefore seen under the existing law a vehicle
transporting timber cannot be confscated if the owner of
the vehicle on a balance of probability establishes one of the
following things.
1. That he has taken all precautions to prevent the use of
the vehicle for the commission of the offence.
2. That the vehicle has been used for the commission of the
offence without his knowledge.

92 Sri Lanka Law Reports [2011] 1 SRI L.R.
who is the owner of the vehicle? This is the most
important question that must be decided in this case. Can
it be said that the absolute owner (the fnance company)
committed the offence or it was committed with the
knowledge or participation of the absolute owner. The answer
is obviously no. Surely a fnance company cannot partici-
pate in the commission of an offence of this nature when the
vehicle is not with it. It cannot be said that the fnance
company had the knowledge of the commission of the offence
when the vehicle was not with it. The owner envisaged in
the law cannot be the absolute owner. In the present case
the registered owner is the one who drove the vehicle at the
time of the commission of the offence. He was convicted on
his own plea. If the court is going to release the vehicle on
the basis that the owner of the vehicle is the absolute owner,
then after the release, it is possible for the absolute owner to
give the vehicle to another person. If this person commits a
similar offence, the fnance company can take up the same
position and the vehicle would be again released. Then where
is the end to the commission of the offence? where is the end
of the violation of the forest Ordinance? There will be no end.
If the courts of this country take up this attitude the purpose
of the legislature in enacting the said provisions of the forest
Ordinance would be defeated. In my view Courts should
not interpret the law to give an absurd meaning to the law.
In this connection I would like to consider a passage from
‘Interpretation of Statutes by bindra 7th edition page 235. “It
is a well known rule of construction that a statute should
not be construed so as to impute absurdity to the legisla-
ture.” for these reasons I hold that the owner envisaged in
law is not the absolute owner and the owner envisaged in law
in a case of this nature is the person who has control over

Oriental Financial Services Corporation Ltd Vs. Range Forest Offcer
CA And Another (Sisira de Abrew, J.) 93
the use of the vehicle. The absolute owner has no control
over the use of the vehicle except to retake the possession of
the vehicle for non payment of installments. If the vehicle is
confscated holding that the absolute owner is not the owner
envisaged in law, no injustice would be caused to him as
he could recover the amount he spent from the registered
owner by way of action in the District Court on the basis of
violation of the agreement. There may be other situations
where a vehicle being used for transport of timber in violation
of the Forest Ordinance, but it is diffcult to give an answer
to each and every situation. Such cases must be decided on
the facts of the case and those decisions must be reserved for
future.
I have earlier pointed out that the owner envisaged in
law is not the absolute owner. Therefore even if the absolute
owner proves that he had taken all precautions to prevent the
use of the vehicle for the commission of the offence or that the
vehicle had been used for the commission of the offence
without his knowledge, he cannot succeed in this case.
for the above reasons I dismiss the petition of the
petitioner and refuse to issue notice on the respondents.
gooneratne, J. – I agree.
Nova refused.

94 Sri Lanka Law Reports [2011] 1 SRI L.R.
HASWI vS. JAYTISSA AND TWO OTHERS
COuRT Of APPEAl
SISIRA DE AbREw. j
AbEYRATnE. j
CA (PHC) 13/2006
HC COlOmbO HCRA 429/2003
mC mT. lAVInIA 73167
julY 5, 2010
Civil Procedure Code Section 29, Section 431 (1) – Hire Purchase
Agreement – Non Payment of instalment – Vehicle seized – Vehicle
produced in Court – Who is entitled to the Vehicle? – Absolute
owner or the registered owner? – Rights of the person from whom
the vehicle was seized?
upon a hire purchase agreement between one D and K- respondent-
an investment company- D acquired possession of a vehicle. K was
the absolute owner and D the registered owner. Thereafter upon a
contract between D and the appellant, the appellant acquired the
possession of the vehicle and he had paid fve installments to K. K seized
the vehicle as instalments were not paid, and the Police on a complaint
lodged by the appellant reported facts to the Magistrate, seized the
vehicle as ordered and produced the vehicle in Court which held an
inquiry and ordered the delivery of possession of the vehicle to the
appellant. The High Court revised the said order and ordered that the
vehicle be handed over to K.
On appeal –
held:
(1) The respondent K on the purchase agreement has become the
absolute owner. D is the registered owner, the appellant is neither
the absolute owner nor the registered owner.
Per Sisira de Abrew.j
“principle that property must be delivered to the person from
whose possession it was seized is not an absolute one and there
are limitations to the said principle. The applicability of this

Haswi Vs. Jaytissa and two others
CA (Sisira de Abrew, J.) 95
principle depends on the facts of each case. I hold that when the
property seized by the Police Offcer does not fall into any of the
categories mentioned in Section 431 (1) of the Criminal Procedure
Code, the magistrate only on that ground should not hand over the
property from whose possession it was seized. He must on such
occasions hand over the property to the true owner and not to the
person from whose possession it was taken by the Police – words
as it thinks ft in Section 431(1) gives discretion to the Magistrate
to hand over property to the true owner or to the person who is
entitled to the possession of the property”.
appeal from a judgment of the High Court of Colombo.
cases refferred to :-
(1) De Alwis vs. De Alwis – 78-79-80- SlR 17
(2) Punchi Nona vs. Hinni Appuhami – 60 nlR 518
(3) Piyadasa vs. Punchibanda- 62 nlR 307
(4) Sugathapala vs. Thambirajah- 67 nlR 91
(5) Balagalla vs. Somaratne 70 nlR 382
(6) Maniyarthasan vs. Rose 71 nlR 164
(7) Freudenburg Industries Ltd vs. Dias Mechanical Engineering Ltd
CA 69/79 CAm 14.7.83
(8) Silva and another vs. OIC Police station, Thambuthegama 1991
2 Sri lR 83 (followed)
S.N. Vijithsinghe for 1st party respondent-appellant
C.R. de Silva PC with R.J. de Silva and D. Weerawardena for petitioner-
respondent
September 09th 2010
SiSira de abrew J.
upon a hire purchase agreement between one Subash
Dayananda and Kalutota Investment (Pvt) ltd (hereinafter
referred to as the respondent), Subash Dayananda acquired
possession of vehicle no 58-7635. The respondent became
the absolute owner of the vehicle whilst Subash Dayananda
became the registered owner. Thereafter upon a contract
between Subash Dayananda and the appellant, the latter

96 Sri Lanka Law Reports [2011] 1 SRI L.R.
acquired the possession of the vehicle. learned Counsel for
the appellant submitted that the appellant had paid fve
installments to the respondent. He therefore tried to contend
that the appellant is entitled to possess the vehicle and the
respondent had no right to seize the vehicle. However the
respondent seized the vehicle as installments were not
paid as agreed in the hire purchase agreement. Police, on a
complaint made by the appellant, reported facts to the
magistrate who made an order to produce the vehicle in
court. Police in compliance with the said order produced the
vehicle in court. The learned magistrate, after inquiry, ordered
the delivery of the vehicle to the appellant. The learned High
Court judge in revision set aside the order of the learned
magistrate and ordered the delivery of the vehicle to the
respondent. being aggrieved by the said judgment of the
learned High Court Judge, the appellant has fled this appeal
to set aside the said judgment.
learned counsel for the appellant contended that the
appellant was entitled to the possession of the vehicle since
the respondent accepted the installments paid by him. Sunil
jayathissa who gave evidence on behalf of the respondent
stated in evidence that anybody could pay installments in
relation to the hire purchase agreement. It has to be stated
here that the respondent did not sign any contract with the
appellant. Therefore it has to be concluded that there was
no hire purchase agreement between the appellant and the
respondent although some installments were paid by the
appellant. The appellant is neither the registered owner nor the
absolute owner. but the respondent is the absolute owner.
In deciding the question as to who is entitled to the
possession of the vehicle court must consider Section 431(1)
of the Criminal Procedure Code (CPC) which reads as follows:

Haswi Vs. Jaytissa and two others
CA (Sisira de Abrew, J.) 97
“The seizure by any police offcer of property taken
under section 29 or alleged or suspected to have been stolen
or found under circumstances which create suspicion of the
commission of any offence shall be immediately reported
to a Magistrate who shall forthwith make such order as he
thinks ft respecting the delivery of such property to the person
entitled to the possession thereof, or if such person cannot be
ascertained respecting the custody and production of such
property.”
This section deals with three categories of property seized
by a police offcer.
1. Property taken under Section 29 of the CPC.
2. Property alleged or suspected to have been stolen.
3. Property found under circumstances which create
suspicion of the commission of any offence.
In De Alwis vs De Alwis(1) justice Ismail held thus: “That
for an order to be made for disposal of this property under
section 102 of the Administration of justice law (which was
based on section 419 of the Criminal Procedure Code) the car
must have been property alleged to be stolen or suspected to
have been stolen or found in circumstances which created
the suspicion of the commission of any offence. As the vehicle
did not fall into any of these categories the magistrate had
no jurisdiction to make an order for its disposal under this
section and had no alternative but to order its return to the
possession of the person from whose custody the police had
apparently taken it.”
learned President’s Counsel relying on this judgment
contended that as the vehicle does not fall into any of the
categories mentioned above the learned magistrate could not

98 Sri Lanka Law Reports [2011] 1 SRI L.R.
have delivered the vehicle to the appellant. I now advert to this
contention. what is the position if the property does not fall
into the categories mentioned in Section 431(1) of the CPC?
Should the magistrate, on that ground alone, hand over the
property to the person from whose custody it was taken? To
answer this question I would like to consider certain judicial
decisions.
justice Hng fernando (as he then was) in Punchinona
Vs Hinniappuhamy(2) held: “Where the seizure by a police
offcer of property alleged or suspected to have been stolen
is reported to a magistrate under section 419 of the Criminal
Procedure Code, the magistrate, if he does not consider
“offcial” custody to be necessary, has no alternative but to
order the property to be delivered back to the person from
whose possession it was seized. The Magistrate has no power
to order the property to be given to any other person on
the ground that the latter is the true owner.” justice
Hng fernando expressed the same view in Piyadasa Vs
Punchibanda.(3) but justice Sri Skandaraja in Sugathapa-
la Vs Thambiraja(4) did not follow the view expressed by
justice Hng fernando in the said two cases. His lordship
observed: “That it is open to a magistrate, when he acts under
section 419 (1), to direct the property found in the possession
of one person to be delivered to another person who is
entitled to possess it. Section 419 has conferred jurisdiction
on the magistrate to decide who is entitled to the possession
of such property. In exercising that power, the magistrate is
not deciding a civil dispute, but only the right of possession
in respect of the property. In the absence of anything to show
the title to the property, it should be ordered to be delivered
to the person in whose possession it was when it was seized
by the police.”

Haswi Vs. Jaytissa and two others
CA (Sisira de Abrew, J.) 99
His lordship justice Sirimanne in Balagalla Vs Somara-
thne (5) too did not follow the view expressed by justice Hng
fernando in these two cases and remarked thus: “where a
person, after discovering that stolen property has been sold to
him, surrenders the property to the police, the magistrate has
power under section 419 (1) of the Criminal Procedure Code
to order the property to be handed over to the true owner and
not to the person from whom it was taken by the police.”
However later His lordship justice Thambiah in
Mariyathasan Vs Rose(6) again followed the view expressed by
justice Hng fernando in the said two cases.
I have else where in this judgment considered the
judgment in De Alwis Vs De Alwis (supra).
His lordship justice Senevirathne in Freudenburg
Industries Ltd Dias Mechanical Engineering Ltd(7) observed
that the principle that property be delivered to the person
who had possession of it at the time of seizure will not apply if
there is an unlawful or criminal element in such possession.
justice Sn Silva (as he then was) following the said
judgment of justice Senevirathna in Silva and Another Vs
OIC Police Station Thambuththegama(8) held: “There are
limitations to the principle that property must be delivered to
the person from whose possession it was seized, since it may
result in the property being delivered to a person who may
have obtained possession through criminal means. In such
an event the magistrate may have to consider the question
of title.”
Having considered all the above judicial decisions, I
endorse the view expressed by justice Sn Silva in Silva’s case
(supra) and hold that the principle that property must be

100 Sri Lanka Law Reports [2011] 1 SRI L.R.
delivered to the person from whose possession it was
seized is not an absolute one and that there are limita-
tions to the said principle. The applicability of this principle
depends on the facts of each case. I further hold that when the
property seized by the police offcer does not fall into any of
the categories mentioned in Section 431(1) of the CPC, the
magistrate, only on that ground, should not hand over the
property to the person from whose possession it was seized.
He must on such occasions, hand over the property to the
true owner and not to the person from whose possession
it was taken by the police. The words “as he thinks ft” in
Section 431(1) of the CPC gives discretion to the magistrate to
hand over the property to the true owner or to the person who
is entitled to the possession of such property.
In the instant case who is the true owner? The respon-
dent, on the hire purchase agreement, has become the
absolute owner. Subash Dayananda is the registered owner.
The appellant is neither the absolute owner nor the registered
owner. Situation would have been different if the registered
owner, after paying 75% of the hire purchase price, made a
claim for the possession of the vehicle. for the above reasons,
I hold that the appellant is not entitled to claim the posses-
sion of the vehicle in the proceedings before the magistrate.
He may perhaps be entitled to pursue his claim in a case
before the District Court.
for the above reasons, I hold that there is no merit in this
appeal and dismiss the appeal but without costs.
abeyrathne, J. – I agree.
Appeal dismissed.

Utsch Lanka (Pvt) Ltd., And Another Vs. Deputy Director Of Customs And Others
CA (Srisandarajah, J.) 101
UTSCH LANkA (PvT) LTD., AND ANOTHER vS.
DEPUTY DIRECTOR OF CUSTOMS AND OTHERS
COuRT Of APPEAl
SRISKAnDARAjAH, j.
CA 82/2007
jAnuARY 12, 2011
fEbRuARY 25, 2011
APRIl 1, 4, 2011
Customs Ordinance – Section 47, Section 51, Section 52 – Willfully
failing to classify goods – Misdescription – Non declaration of
royalty – Is it undervaluation?
Erich utsch Ag – a german Company – entered into an agreement
with Commissioner of Motor Vehicles for the delivery of retro refective
number plates with embossed number and 3rd number plate sticker
for windscreen for a period of 5 years. The 1st petitioner company was
incorporated in Sri lanka to facilitate the above agreement. Erich utsch
Ag as the licensor granted an exclusive right to the 1st petitioner to
use the necessary technology, expertise and to obtain training required
by the 1st petitioner as licensee. The terms and conditions included a
payment of a Royalty fee of 10% per annum of the total turnover. A
building belonging to the Commissioner of Motor Traffc was given to
the 1st petitioner for the storage of imported blank plates and to emboss
number in the blank plates.
The 1st petitioner imported blank plates and the raw materials from
the German Company on a commercial basis. The tariff classifcation
advice was 7616.00. The petitioner had been declaring the imported
item under HS 7616 code until one of the imports were questioned
at the examination point. After inquiry, the petitioners were charged
by the Customs – for willfully failing to classify and pay the customs
duties and other levies. At the conclusion of the inquiry order of
forfeiture of goods in terms of Sections 47, 129,166b was made.
further an order on the importer to disclose all the relevant and
material evidence to the customs in declaring the goods at the time

102 Sri Lanka Law Reports [2011] 1 SRI L.R.
of importation. The Respondents contention was that the importer has
willfully failed to classify and pay the custom duties and other levies
correctly and that the petitioners have willfully classifed aluminium
plates under HS 7606.99.09 disregarding the fact that the invoice
from the german Company state that the HS Code is 8310.00. The
respondents further contended that as regards royalty payments, the
importer has to declare the royalty payments to the Customs in order to
determine the value of the goods imported. It was further contended the
World Health Organization (W.H.O) had described the goods in issue
under Heading 83.10.
held:
(1) blank plates imported contain several lion water marks, pre
engraved secret numbers and the national emblem (Sri lanka)
security measures, after importation the importer as per the
agreement embosses two letters, four numbers across the plate
separated by a dash with a provincial identifcation (two) letters.
The world Customs Organisation had described the goods in issue
under heading 83.10 not because the blank plate contains key
letters, number or designs on them but because the plate is
designed for the subsequent insertion of details.
In view of this opinion all the consignments of aluminium plates
imported by the 1st petitioner falls within the classifcation of HS
Code 8310.00 and the duties short levied could be recovered as
provided for in Section 18.
(2) Royalty payment is not related to the imported goods or it is a
condition of sale of the imported goods, therefore the royalty
payment need not be added to the price actually paid. failure
to enter the payment of royalties in the Customs Value Declara-
tion form will not amount to a false declaration to charge the
petitioners under Section 52.
application for a writ of Certiorari.
cases referred to :-
(1) Toyota Lanka (Pvt.) Ltd vs. Jayatilaka Director General of Customs –
CA 2093/2005 – C.A.m. 1.10.07
(2) Toyota Lanka (Pvt) Ltd vs. Director General of Customs SC 49/2008
– SCm 29.03.2009

Utsch Lanka (Pvt) Ltd., And Another Vs. Deputy Director Of Customs And Others
CA (Srisandarajah, J.) 103
(3) Commissioner of Customs (Port) vs. M/s Toyota Kirloska Motor Pvt
Apparel (Civil) 3635 or 20006 – 17.5.2007
(4) Chief Executive Offcer of the New Zealand Customs Service vs. Nike
New Zealand 2004 – 1 nZlR 238.
(5) Commissioner for the South African Revenue service vs. Delta Motors
(Corp) (Pvt) Ltd – (SC) South Africa Case no. 279/2001 – minutes of
23.9.2002.
Nigel Hatch PC with Ranjith de Alwis, Ms. K. Geekiyanage and
Ms. P. Abeywickrama for Petitioner.
Farzana Jameel for Respondents.
Cur.adv.vult
April 28th 2011
SriSandaraJah, J.
Erich utsch Ag (a company incorporated under the
laws of germany) entered into an agreement with the Com-
missioner of Motor Traffc on the 11th of October 1999 (P3)
for the manufacture, supply and delivery of retro-refective
number plates with embossed number and 3rd number plate
sticker for windscreen for a period of fve years subject to the
terms and conditions of the said agreement. The 1st Petitioner
Company was incorporated in Sri lanka to facilitate the above
agreement. The 1st Petitioner in order to perform its business
entered into a license agreement with the said Erich utsch
Ag of germany on 21st march 2000 (P5). In terms of this
agreement Erich utsch Ag as licensor granted an exclusive
right to the 1st Petitioner to use the necessary technology ex-
pertise and to obtain the training required by the 1st Petitioner
as licensee in connection with the manufacture, supply and
delivery of retro-refective number plates with embossed
number and 3rd number plate sticker for windscreen. The
terms and conditions of the said agreement include a payment

104 Sri Lanka Law Reports [2011] 1 SRI L.R.
of royalty fee of ten per cent (10%) per annum of the total
turnover of the 1st Petitioner as per the audited accounts.
Even though the said agreement P5 did not specify the role
of the 1st Petitioner in executing the agreement P3, according
to the evidence the 1st Petitioner’s role is engaging in the busi-
ness of embossing and printing motor vehicle numbers in
blank plates imported from Erich utsch Ag and delivering the
completed number plates for vehicles as and when required
by the Commissioner of Motor Traffc in terms of agreement
P3. A building belonging to the Commissioner of Motor Traffc
has been given to the 1st Petitioner for the storage of imported
blank plates and to emboss numbers in the blank plates.
The 1st Petitioner imported blank plates and other
raw materials for this purpose from Erich utsch Ag on a
commercial basis after making the purchase price for the
goods imported. for the purpose of this importation the
Petitioners submitted that they relied on an advise sought
and obtained by Asia Capital Ltd on a Tariff Classifcation on
the applicable Harmonized System (HS code) to the samples
attached to the application no. TC/99/177 dated 25.11.1999.
The tariff classifcation advice was that the HS Code
applicable to the product described in the application as
per sample is 7616.00. The sample submitted with the said
application according to the Petitioners is a blank aluminium
plate containing yellow and white refective sheeting with
government emblem, laser branded serial number and ensure
marks. The Respondents admitted that samples were given
to the customs to obtain a ruling but denied any markings
in the blank aluminium plates. As the samples submitted
are not available with the customs it is not possible to verify
this position. The Asia Capital ltd sought and obtained this
Tariff Classifcation as it was the local agent for Erich Utsch

Utsch Lanka (Pvt) Ltd., And Another Vs. Deputy Director Of Customs And Others
CA (Srisandarajah, J.) 105
Ag prior to the incorporation of the 1st Petitioner Company.
As advised the 1st Petitioner had been declaring the imported
aluminium blank plates to customs under this HS Code until
one of the imports was questioned at the examination point
of customs in january 2003. This required the Petitioner to
obtain a second ruling and it was obtained on 24.07.2003.
According to the 2nd classifcation advise the goods are
classifed under Harmonized System (HS code) 8310.00.
The Customs investigations into the imports of blank
number plates by the 1st Petitioner commenced in 2004. An
inquiry was held under the Customs Ordinance in the year
2006. The Inquiry proceeded on the basis of suspicion that
the offences of misdescription and undervaluation of the
goods imported were committed.
The Petitioners were charged by the customs in rela-
tion to 53 consignments imported by m/S utsch lanka (Pvt)
ltd from m/s Erich utsch Ag of germany since 25th April
2000 to 24th march 2005. The items imported are rectangular
aluminium plates of various dimensions (with rounded
corners and rased edges, covered with a refective foil with
several lion water marks pre-engraved secret numbers and
the national emblem of Sri lanka), hot stamping foils, 3rd
licence plate stickers, TTR foils. These items were intended for
the embossing and printing of motor vehicle number plates.
The charges levelled against the Petitioners were as
follows:
(1) m/S utsch lanka (Pvt) ltd pays annually a royalty to
m/S Erich utsch Ag of germany which is 10% of the
total turnover of the respective fnancial year.

106 Sri Lanka Law Reports [2011] 1 SRI L.R.
The importer has failed in all the instances to declare the
royalty payments to the Customs which is dutiable. As
a result the importer has defrauded Rs. 49,773,031/=
of government revenue. The total actual value of the
consignment is Rs. 392,088.184/= whereas the total
declared value is Rs. 335,692,996/=. Therefore the
importer and the declarant shall be dealt with in terms of
Section 47 and 52 of the Customs Ordinance.

(2) Out of the 53 consignments the importer has failed
wilfully to classify and pay the customs duty and other
levies correctly on the aluminium based plates on 22
occasions.
The Petitioners’ position with regard to the payment of
royalty (1st charge); is that the payment of royalty by the
Petitioners is on a local transaction between the 1st Petitioner
and the Commissioner of Motor Traffc which is not within
the scope of the Customs Ordinance as amended in 2003
and/or as royalties are not paid directly or indirectly by the
1st Petitioner as a condition of the sale of the goods being
valued, instead it is paid by the 1st Petitioner for the provision
of technology used in relation to the embossing and printing
of numbers in imported blank plates.
with regard to the 2nd charge the Petitioners contended
that at all material time the 1st Petitioner not only sought
tariff classifcation ruling in relating to the classifcation of
goods imported by the 1st Petitioner but also abided by the
ruling given by the Customs in declaring the goods at the
time of importation.
At the conclusion of the inquiry the Petitioners were
called upon by the 1st Respondent to show cause for charges

Utsch Lanka (Pvt) Ltd., And Another Vs. Deputy Director Of Customs And Others
CA (Srisandarajah, J.) 107
framed against them and the order was delivered on
16.01.2007 as follows:
(a) Order forfeit m/s utsch lanka (Pvt) ltd represented by
Mr. George Salis Lopez, Director – General Manager,
mr. jan Vlaskamp, Director and mr. R. n. Hettiarachchi,
Director, Rs. 184,260,095/- in terms of Section 47 of the
Customs Ordinance (Chapter 235);
(b) Order forfeit m/s utsch lanka (Pvt) ltd represented by
Mr. George Salis Lopez, Director – General Manager,
mr. jan Vlaskamp, Director and mr. R. n. Hettiarachchi,
Director Rs. 88,609,608/- at my election in terms of
section 52 and 166b of Customs Ordinance (Chapter
235);
(c) Order forfeit Mr. George Salis Lopez, Director – General
manager, Rs. 10,000,000/- in terms of Section 129 and
166b of the Customs Ordinance (Chapter 235).
(d) Order forfeit mr. jan Vlaskamp, Director Rs. 10,000,000/-
in terms of Section 129 and 166b of the Customs
Ordinance (Chapter 235).
(e) Order the importer to disclose all the relevant and
material evidence to the Customs valuation division in
order to decide the actual ratio of the royalty payment
which is liable for Customs valuation purpose, with
respect to the imports whichever not considered at this
inquiry for the purpose of recovering Customs duties and
levies short paid.
The Petitioners in this application has sought a writ of
certiorari to quash the aforesaid orders dated 16.01.2007
among other reliefs.

108 Sri Lanka Law Reports [2011] 1 SRI L.R.
offence of Misdescription
The order of forfeiture of the goods valued at
Rs. 184,260,095/- in terms of Section 47 of the Customs
Ordinance (Chapter 235) is based on the allegation that the
importer has wilfully failed to classify and pay in relation
to 22 consignments the customs duties and other levies
correctly on the aluminium based plates.
In Toyota Lanka (Pvt) Limited v. S.A.C.S.W. Jayathilaka
Director General of Customs(1), the Toyota lanka (Pvt) limited
cleared 64 units of vehicles from customs after paying the
duty attached to the relevant classifcations. Subsequently
the Customs Department issued a seizure notice acting in
terms of Section 125 of the Customs Ordinance in relation to
31 units of the said vehicles and seized the vehicles on the
basis that in the customs declaration the vans are incorrectly
classifed as buses under HS Code 8702.10.13.
This decision was challenged by way of a writ of certio-
rari in the above case and the Court of Appeal quashed the
decision to seize the vehicles for the reason: “When a
declarant enters a HS Code in the CuSDEC which in his
opinion is the correct classifcation of the goods imported, the
disagreement of the classifcation of the goods by the Director
general of Customs will not attract the forfeiture
contemplated in Section 47 and hence the vehicles cannot
be seized under section 125 of the Customs Ordinance. The
Court also observed:
“If the Director general of Customs is of the opinion that
in fact the correct classifcation (HS Code) has not been
included in the CuSDEC and in consequence the customs
has short levied any duty, it could make a determination

Utsch Lanka (Pvt) Ltd., And Another Vs. Deputy Director Of Customs And Others
CA (Srisandarajah, J.) 109
of the correct classifcation (H.S. Code) of the goods
imported and the customs duty short levied could be
recovered under Section 18 of the Customs Ordinance.”
The Supreme Court in Toyota Lanka (Pvt) Limited v.
Director General of Customs(2) held:
“Hence I am fortifed in the view and hold that the
provision in Section 47 “but if such goods shall not agree with
particulars in the bill of entry the same shall be forfeited. . .”
apply to a situation in which by means of a wrongful entry
goods are conveyed by stealth, to evade payment of customs
duties or dues or contrary to prohibitions or restrictions. In
such a situation of a wrongful entry and evasion, since the
consequence of forfeiture is by operation of law, even if the
offcer had delivered the goods upon the submission of
a CUSDEC, such goods may be seized at any subsequent
stage in terms of Section 125. I am further of the view and
hold that the forfeiture provided for in Section 47 would not
apply to a situation of a disputed classifcation of goods or an
under payment of short levy of dues or duties. In such event
the proper course would be a requirement for payment of the
amount due prior to delivery of goods or the recovery of the
amounts due in terms of Section 18.”
both the Court of Appeal and the Supreme Court held
that the forfeiture provided for in Section 47 would not
apply to a situation of a disputed classifcation of goods in the
absence of an intention of defrauding the revenue.
The Respondents’ contention in this instant case is that
the importer has wilfully failed (intentionally defrauded the
revenue) to classify and pay the customs duties and other levies
correctly on the aluminium based plates. The Respondents’

110 Sri Lanka Law Reports [2011] 1 SRI L.R.
contention is that the Petitioners have wilfully classifed the
“Aluminium Plates” under H. S. Code 7606.99.09 disregard-
ing the fact that the invoices (2R1 to 2R4) from m/s Erich
utisch Ag, state that the HS Code as 8310.00. In this regard
the dates of the invoices are relevant. Invoice 2R1 is dated
20.10.1999 and invoices no 2R2 to no 2R4 are dated
03.11.1999. The Petitioners have relied on a Tariff Classif-
cation Advice dated 25.11.1999 bearing no TC/99/177. The
Customs Department has a special unit to give such advice
and according to this advice the advice sought is in relation
to an article: 'Rectangular Aluminium Plates in sizes as per
attached letter’ and they are imported in the form: ‘Aluminium
plate form as per sample attached with refective foil’. For
this product the tariff classifcation given by the Customs
Department is H. S. 7616.9909. The Petitioners are bound
to rely on this advice given by the Customs Department
even though the Petitioners or its supplier holds a different
opinion in relation to HS code of the said product. The
Petitioner relied on this advice until he was compelled to seek
an advice on 24.07.2003 and by this advice the Petitioner was
advised that the product in relation to which he has sought
advice is HS 8310.00. It is admitted that the Petitioners
thereafter classifed this item under HS code 8310.00 for its
imports.
The imports of the blank aluminium plates in issue with
regard to classifcation are in relation to the period 17.12.1999
to 24.07.2003. The Petitioners’ position is that he correctly
described the article imported under HS Code 7616.9909
on the classifcation advice sought and obtained from the
customs bearing no. TC/99/177 dated 17.12.1999. The
position of the Respondents is that the classifcation given
as HS 7616.9909 to a product described as “Aluminium

Utsch Lanka (Pvt) Ltd., And Another Vs. Deputy Director Of Customs And Others
CA (Srisandarajah, J.) 111
Plate form as per sample attached with refective foil”. In the
said advice of the Customs bearing no. TC/99/177 dated
17.12.1999 in the comments column it has been specifcally
stated that “If the plates imported bear any letters, numbers
or designs they would fall under 8310.00” It is admitted that
the blank plates imported contains several lion water marks,
pre-engraved secret numbers and the national emblem of
Sri lanka (here in after referred to as security features). After
importation the importer as per agreement embosses, two
letters, four numbers across the plate separated by a dash
with a provincial identifcation (two) letters.
The position taken by the Petitioners is that the
sample of the blank aluminium plate with the security
features was submitted with the document by which the
advice was sought (The Respondents states that the said
sample is not available with the customs to confrm whether
the said sample contained the security features but it was
admitted by the Respondents that the sample of the blank
plate was given) if the Customs offcers had thought that the
security features could be considered as letters, numbers
or design then they need not make a special note that if
the plates imported bear any letters, numbers or designs
they would fall under 8310.00” instead they would have
classifed under HS code 8310.00 but as they have
considered the aluminium plate submitted and advised that
it will fall under the classifcation HS 7606.11 shows that
the Customs Department has decided that the security fea-
tures will not fall under the description stated by them in the
comments. The Petitioners on this basis imported blank
aluminium plates declaring HS Code no.7606.11 in the
CuSDEC.
The position of the Respondents is that the sample
submitted for advice is only a rectangular blank aluminium

112 Sri Lanka Law Reports [2011] 1 SRI L.R.
plate without lion water marks, pre-engraved secret
numbers and the national emblem of Sri lanka (security
features), this position was taken by the Respondents because
of the comments made in the said advice that ‘if the plates
imported bear any letters, nos or designs they would fall
under 8310.00’ .
It is in evidence that when these goods are cleared the
advice bearing no TC/99/177 dated 17.12.1999 was also
attached for easy reference. As contended by the Respondents
that the position of the customs from the very inception that
if the plates imported contained the security features (any
letters, numbers or designs on them) they will be classifed
under HS 8310.00, is correct then the custom offcers when
passing the goods after inspection would not have released
the goods to the importer as the goods are classifed under
HS 7606.11 based on the advice bearing no TC/99/177
dated 17.12.1999. further if it is clear in the minds of the
offcers of the Customs that they security features could be
considered as letters, numbers or design then they need not
have referred this issue of classifcation to the world Customs
Organization on 25.08.2003 after giving a second advice on
24.07.2003 informing the Petitioner that the same product
falls under classifcation HS 8310.00.
The Director of Customs by his letter dated 25th August
2003 addressed a letter to the World Customs Organization
and has given the description of the Article as follows:
“Rectangular aluminium plates of various dimensions,
with rounded corners and raised edges, covered with a
refective foil with security features, intended to be used
for the manufacture of motor vehicle license number plates.