LANKA JATHIKA SARVODAYA SHRAMADANA SANGAMAYA
v.HEENGAMA
DIRECTOR GENERAL OF CUSTOMS AND OTHERS
SUPREME COURT.
G.P.S. DE SILVA, C.J., KULATUNGA, J.
AND RAMANATHAN, J.
S.C. APPLICATION NO. 173/91.
OCTOBER 05, DECEMBER 11 AND 15, 1992.
JANUARY 18 AND 29, 1993.
Fundamental Rights – Constitution, Article 12 (1) – Seizure of goods as forfeited- Power to mitigate forfeiture – Customs Ordinance, Sections 52, 163.
The petitioner (a non-governmental organization) imported a "Harris WebV15A Press" and accessories for use in its printing business. The Directorof Customs decided that the said goods are forfeited under s. 52 of the CustomsOrdinance on the ground of undervaluation for purposes of customs duty, anddetained the goods whereupon the petitioner applied to the Director General ofCustoms to mitigate the said forfeiture under s. 163 of that Ordinance on paymentof duty on an uplifted value and to release the goods. This was refused. Thepetitioner complained that such refusal infringed his rights under Article 12(1) ofthe Constitution in that it was discriminatory vis-a-vis other importers whoserequests for mitigation of the forfeiture of goods under s. 52 had been allowedin terms of s. 163 of the Ordinance.
Held :
The goods imported by the petitioner are forfeited by operation of lawunder s. 52 of the Ordinance and had been seized by customs asrequired by s. 125.
Ordinarily, the only remedy available to the petitioner for claiming the saidgoods is to institute proceedings in terms of s. 154, challenging the validityof the seizure. Article 126 of the Constitution has since provided anadditional remedy in appropriate cases.
Mitigation of forfeiture of goods is a question to be decided in the discretionof the Director General of Customs, on the facts of each case. However,on the material placed before the Court the other cases relied upon by
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the petitioner cannot be distinguished as being not similarly circumstanced;there has been a failure to fairly consider the petitioner's application formitigation; and that by reason of such discrimination the petitioner's rightto equal protection of the law under Article 12(1) has been infringed.
The seizure of the forfeited goods is vitiated by reason of discriminationin the exercise of the Director General's powers under s. 163 of the CustomsOrdinance.
Cases referred to :
Moosajees v. Attorney-General, S.C. Appeal No. 62/87 – S.C. Minutes of25.01.1991.
C.W. Mackie & Co. v. Commissioner-General of Inland Revenue, (1986)1 Sri L.R. 300, 301,308.
Abeywardena v. The I.G.P., S. C. Appeal 92/91 S.C. Minutes 23.8.1991.
Neville Fernando v. Liyanage, F.R.D. Vol. 2 p. 300.
Yick Wo v. Hopkins, 118 US 356.
Gooneratne v. Commissioner of Elections, (1987) 2 Sri LR. 165.
Jayanetti v. The Land Reform Commission, (1984) 2 Sri LR. 172.
Roberts v. Ratnayake, (1986) 2 Sri LR. 36, 79.
Elmore Perera v. Jayawickrema, (1985) 1 Sri LR. 285.
Palasamy Nadar v. Lanktree, 51 N.LR. 520, 522, 523, 526.
The Anandale (1877) 38 LT. 139.
De Keyser v. Harris (1936) 1 K.B. 224.
Jayawardena v. Silva 72 NLR 25, 29, 30, 38, 39.
Arumugaperumal v. The Attorney-General 48 N.LR. 510, 514, 515.
APPLICATION for relief for infringement of fundamental rights under Article 12
(1) of the Constitution.
R. K. W. Goonesekera with Chandra Goonesekera, Javid Yusuf and
J. C. Weliamuna for petitioner.
A. S. M. Perera, Deputy Solicitor-General for respondents.
Cur. adv. vult.
February 12, 1993.
KULATUNGA J.
This is an application arising upon the detention by Sri Lanka Customsof a "Harris Web V15A Press" and accessories imported by thepetitioner (a non-governmental organization) for use in its printingbusiness. The 2nd respondent (Director of Customs) decided that thesaid goods are forfeited under S. 52 of the Customs Ordinance on
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the ground of undervaluation for purposes of customs duty whereuponthe petitioner applied to the 1st respondent (The Director Generalof Customs) to mitigate the said forfeiture under S. 163 of theOrdinance on payment of duty on an uplifted value and to releasethe goods (without prejudice to the petitioner's right to challengesuch value in Court). This was refused; whereupon the petitioner gavethe 1st respondent a notice of an action in terms of S. 154(1) ofthe Customs Ordinance and filed an action in the District Court ofColombo praying for the following reliefs :
a declaration that the seizure and forfeiture of the said goodsis wrongful and illegal ;
a declaration that the plaintiff is entitled to the restorationof the goods or their value ;
damages in a sum of Rs. 21,565,184/- upto the dateof institution of the action and continuing damages in a sumof Rs. 700,000/- per month thereafter until satisfaction ofdecree ; and
costs.
THE CASE FOR THE PETITIONER
In this application the petitioner complains that the refusal of the 1strespondent to mitigate the forfeiture under section 163 of the CustomsOrdinance is discriminatory and hence violative of Article 12 (1) ofthe Constitution in that it is the general practice in cases ofundervaluation of goods to mitigate the forfeiture even where thecustoms valuation results in a 100% increase over the declared valueof goods; in such cases goods have been released to the importerafter payment of additional duty and in appropriate cases subject alsoto the payment of a penalty. In the instant case the request formitigation was refused arbitrarily without due consideration of themerits of the petitioner's appeal. The petitioner prays for the followingreliefs :
a declaration that the petitioner's rights under Article 12 (1)of the Constitution have been violated ;
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an order declaring the impugned forfeiture to be illegal andordering the machine to be released on payment of duty on anuplifted value without prejudice to the petitioner's right tochallenge the validity of such additional value in an appropriateforum ;
compensation in a sum of Rs. 3,500,000/-.
Learned Deputy Solicitor General for the respondents concededthat the exercise of the power of mitigation under S. 163 of theCustoms Ordinance constitutes executive and administrative actionwithin the ambit of Articles 17 and 126 of the Constitution and thata person aggrieved by a forfeiture under S. 52 of the Ordinance isnot confined to his remedy of a suit under the Ordinance but mayseek relief from this Court in the exercise of its jurisdiction underArticle 126 of the Constitution. However, this is the first such ap-plication in which relief has been sought both in this Court as wellas in the District Court arising from a seizure of goods under theCustoms Ordinance. It seems to me, therefore, that in making ourdetermination we have to examine the relevant principles of CustomsLaw and further, in the event of the decision being in favour of thepetitioner decide what relief he is entitled to bearing in mind the needto ensure that there will be no duplication of reliefs by reason ofproceedings in this Court and in the District Court.
It has been alleged that the "government controlled newspapers"have engaged in a campaign to vilify the petitioner's organizationand its President Dr. A. T. Ariyaratne. Two statements issuedby Dr. A. T. Ariyaratne have been produced marked P24 and P25.It is urged that this campaign tends to establish that the refusal bythe Customs Officers to release the printing press was mala fide;and that the motive for seizing it is to prevent criticism of thegovernment by the petitioner's organization.
The printing press in question is a second hand machine fromDenmark, purchased by the petitioner from Rotatech Grafiche Ma-chines BV of Holland as per sale agreement dated 30.01.91 (p11).The price stated in P11 is DFI. 479,260/-, freight and insurance tobe added. In a letter dated 23.08.90 addressed to the petitioner, (P5),Rotatech indicated that the exchange rate of the said currency was1US $ = DFI. 1.738. According to the pro forma invoice dated 07.02.91(P13) the price is as follows :
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CostDFI.472.860
Insurance + Freight
DFI.15,000
Total (Cost &
Insurance)DFI.487,860
The said machine arrived in Sri Lanka by ship and was enteredfor duty at a value of Rs. 11,091,929/- in Customs Bill of EntryNo. 04C 1833 dated 05.04.91 and a duty of Rs. 3,155,544/- waspaid. The petitioner states that the said value of Rs. 11,091,929/-was the Sri Lankan Rupee equivalent of the "actual price" based oncustoms parity rate.
On 12.04.91 a customs inspection of the machine was held atthe customs premises after opening the containers. Among thosewho conducted that inspection were the 1st and 2nd respondents,Messrs H. L. A. de Silva, Deputy Director of Customs (Intelligence)L. Gunawardena (Deputy Government Printer) Vas Gunawardena,Chairman of the Port Authority and Customs Officer Ranagala. On23.04.91 there was another customs inspection at which the 1strespondent, Mr. Neville Nanayakkara (The Government Printer) andMr. A. C. Lawrence retired Deputy Inspector General of Police werepresent. The petitioner states that an inspection attended by somany senior officials was most unusual.
On 06.05.91 Susiri de Silva, Managing Director of Vishva LekhaPress owned by the petitioner and his Counsel met the 1st respondentand inquired why the machine was not being released. The 1strespondent said that this was due to alleged undervaluation and thatan investigation was in progress. By his letter dated 24.05.91 (P17)Susiri de Silva requested that steps be taken to have the machinereleased early. This was followed by a customs inquiry at which Susiride Silva gave evidence and produced documents in proof of the valueof the machine and the spares. The Superintendent of CustomsValuation, the Appraiser of the Customs Valuation Branch and theGovernment Printer also gave evidence on the valuation of themachine and the spares. The inquiry was held on nine dates at whichthe petitioner was represented by Counsel who also tendered writtensubmissions. Consequently, the Customs fixed the value of the goodsat Rs. 18 Million and on that basis the 2nd respondent addressed
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a letter dated 05.09.91 (P18) calling upon Susiri de Silva to showcause why the machine and its accessories should not be declaredforfeit under S. 52 of the Customs Ordinance on the ground ofundervaluation.
By his letter dated 30.09.91 (P19), Susiri de Silva replied P18requesting the 1st respondent to permit the removal of the goodson the payment of the full amount of duty payable on the value thereoffixed by the customs without prejudice to the position that the truevalue of the goods is as set out in the relevant Bill of Entry dated05.04.91. In reply the 2nd respondent sent a letter dated 01.11.91(P20) informing Susiri de Silva that the machine and its accessorieswere forfeit in terms of S. 52 of the Ordinance.
We then have the letter dated 11.11.92 (P23) addressed to the1st respondent by Counsel for the petitioner which was an applicationfor a mitigation of the forfeiture of the goods in the exercise of thepowers of the 1st respondent under S. 163 of the Customs Ordinance.Counsel, however, made that application "without prejudice to the(petitioner's) right to take steps in Court to have the order of forfeituredeclared invalid". Counsel insisted that the true value of the goodsfor purposes of duty was Rs. 11,091,929/- and not Rs. 18 Million.They argued that this was the first time a V15A model machinehad been imported and that the Customs Officers or the GovernmentPrinter did not possess any expertise in valuing this type of printingmachine. As additional grounds in support of the petitioner's valuationof the goods, Counsel submitted that :
themachinewas no longer in production ;
themachinewas 11 years old ; and
thefact thatno penalty under S. 129 wasimposed
proved that there was no dealing by the petitioner withintent to defraud the revenue or to act fraudulently.
Counsel submitted that in the circumstances market price forpurposes of duty should be the actual price paid by the petitionernamely Rs. 11,091,929/-. Counsel also cited the decision in Moosajeesv. Attorney General(,). In that case, where this Court invalidateda seizure of goods as forfeit under S. 57 of the Customs Ordinancethe Court observed :
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‘It is difficult to imagine that the law gave an untrammelleddiscretion to the Collector to act in any manner he thinksfit; such discretion must undoubtedly be exercised reasonablywith the purposes and objects of the Customs Ordinance inmind0
By his reply dated 23.11.91 (P22) the 1st respondent declinedto vary the forfeiture of the goods.
As proof of discrimination, the petitioner has cited 15 cases ofimportation (giving reference to the relevant customs files) where thegoods had been grossly undervalued but the 1st respondent hadmitigated the forfeiture after payment of duty on an uplifted value;where the undervaluation is over 100%, the importer had beenordered to pay additional duty plus a penalty prior to the release ofgoods. The goods imported in the cases cited consist of radiocassette spare parts, ceiling fans in knocked down condition, spareparts for sewing machines, motor spare parts, used machines,printing machinery fabrics and electrical parts. In one such case thetrue value of the goods was Rs. 5,907,168/-. The petitioner statesthat there are many such instances, the records of which are inthe possession of the 1st and 2nd respondents and to which thepetitioner had no access and they establish the practice that forfeitureis not inflicted where there is a mere difference in valuation of thegoods. Three of the 15 instances cited were in 1989, twoin 1990 and remainder in 1991.
In his affidavit filed on 09.03.92, Susiri de Silva states that a Weboffset machine similar to the one imported by the petitioner wasimported by Express Newspapers Ceylon Ltd. on 24.12.91; that dutywas charged on US $ 262,015,00 (approximately Rs.11,004,630/-)which was the CIF value of the machine according to the pro formainvoice ; and that the said machine was thereafter cleared withoutdelay. In rebuttal, the 1st respondent has filed an affidavit (togetherwith a supporting affidavit (IRIA) from the Government Printer)wherein he states that the machine imported by Express NewspapersCeylon Ltd. was not similar to the one imported by the petitioner inthat whilst the former had 6 printing units, a folding unit and a stockingunit the latter had only 4 printing units and a folding unit. Susiri deSilva filed a further affidavit wherein he appears to have abandonedthe position that the two machines are similar but maintains that
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the machine imported by Express Newspapers Ceylon Ltd. hadaccessories which had not been separately valued and that thevalue of 11 Million declared by the importer was accepted withoutquery. I observe from the Bill of Entry (P26) for the machine importedby Express Newspapers Ceylon Ltd. that the CIF value declared wasfor the machine with accessories and hence reject the petitioner'scontention that its true value was more than the amount declaredby the importer. I accept the 1st respondent's version that the saidmachine is not similar to the one imported by the petitioner. In thecircumstances, the importation by Express Newspapers Ceylon Ltd.cannot be considered as evidence of discrimination.
THE CASE FOR THE RESPONDENTS
The case for the respondents is to be found in the counter affidavitof the 1st respondent filed on 06.03.92 together with countersubmissions on behalf of the 1st and the 2nd respondents whereinthey maintain that the customs valuation of the goods as Rs. 18 Millionis supported by the available evidence; that the petitioner's declarationof the value of goods as 11 Million constitutes an undervaluation inview of which the said goods are forfeit by operation of law underS. 52 of the Customs Ordinance, as amended by Act No. 83 of1988 ; that this was a gross undervaluation resulting in a heavyloss of revenue to the State ; that in view of the quantum ofundervaluation the 1 st respondent was satisfied that the forfeiture wasnot unduly severe, and hence rejected the application for mitigationof the forfeiture in terms of S. 163 of the Ordinance ; that thesaid goods have since been treated as state property ; and that inthe circumstances, the petitioner is confined to his remedy in theDistrict Court where he has challenged the said forfeiture under theprovisions of the Customs Ordinance.
The 1st respondent denies the alleged infringement of thepetitioner's rights under Article 12 (1) of the Constitution. He alsodenies the averment that the established practice in the CustomsHouse is that a forfeiture is not inflicted on a mere undervaluationbut that the goods are released on payment of additional duty togetherwith a penalty where the undervaluation is over 100%. At the sametime the 1st respondent denies the particular paragraph in Susiri deSilva's affidavit which refers to the cases of mitigation relied uponby the petitioner. However, there is no specific denial of the said
SC Lanka Jathika Sarvodaya Shramadana Sangamaya v. Heengama
Director General of Customs and Others (Kulatunga ,J.)9
cases or the existence of the relevant files quoted in Susiri de Silva'saffidavit. In view of this, Susiri de Silva, in his affidavit filed on08.03.92, called upon the respondents to produce inter alia the filesrelating to the cases mentioned in his original affidavit. The 1strespondent filed an affidavit in reply to the said affidavit by Susiride Silva in which he makes no references to the files called for. Inthese circumstances, I reject the 1st respondent's bald denial of thecases of mitigation relied upon by the petitioner. In fact the learnedDeputy Solicitor General who represented the respondents at thehearing did not support the said denial but submitted inter alia, thatthe importers in the said cases were not similarly circumstanced asthe petitioner and hence there is no infringement of Article 12 of theConstitution.
SUBMISSIONS OF COUNSEL
The learned Deputy Solicitor General made the following submissionsin defence of the refusal by the 1st respondent to release the goodsto the petitioner :
On the basis of the evidence of the officers of the CustomsValuation Branch and the Government Printer, the machineimported by the petitioner with additional spares and accessorieswas worth Rs. 18 Million and not 11 Million as declared in theBill of Entry. As such the said goods are forfeit by operationof law, under S. 52 of the Customs Ordinance and were dulyseized by officers of the customs. He submitted that the customsvaluation is supported by the certificate of inspection dated31.12.90 (P7) which had been submitted to the NationalDevelopment Bank by a Danish firm (SGS Inspection (Denmark)A/S) in connection with the petitioner's application for a loanfor the purchase of the said machine. P7 states that the plantmay work satisfactorily for another 12-15 years and that "anestimated value of a similar plant with the same functiontoday would be approximately US $ 1,200,000/-" (Rs. 48Million).
On the question of mitigation of forfeiture, the DeputySolicitor General submitted that S. 163 of the CustomsOrdinance empowers the 1st respondent to exercise that powerprior to the seizure of the goods which are forfeit. In the instant
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case, when the application for a mitigation was received, goodshad been seized as forfeit and hence S. 163 had noapplication; the 1st respondent had no power to mitigate (evenif he had mistakenly thought otherwise); such goods can berestored only by the Minister, under S. 164. The petitioner hasnot applied to the Minister for such relief. He also submittedthat it is S. 164 (and not S. 163) which empowers the restorationof goods "detained as undervalued". As such the 1st respondenthad no power of mitigation not only in the instant case but alsoin the other cases relied upon by the petitioner. The purportedmitigations in the other cases were invalid; if so, the petitionercannot claim the right to an order for the restoration of thegoods on the ground of discrimination. He submitted thatS.12 (1) guaranteed the right to equal protection and notequal violation of the law and cited in support thedecisions in C. W. Mackie & Co. v. Commissioner GeneralInland Revenue<2) and Abeywardena v. The I.G.P.(3)
Assuming that the 1st respondent had the power ofmitigation under S. 163, he has exercised that power reasonablywhen he declined to mitigate the forfeiture in view of the amountof undervaluation, which was as much as Rs. 6 Million. In noneof the cases relied upon by the petitioner was there suchundervaluation; the petitioner was not similarly circumstancedas the importers in the said cases; and as such the chargeof discrimination has not been established.
Learned Counsel for the petitioner made the following submissions:
On the question of the value of the machine he arguedthat in the absence of fraud the value declared by the petitioneron the basis of which a duty of Rs. 3 Million was computedand paid (in the light of import documents) should be acceptedas the correct market value. He said that he would not challengethe integrity of Mr. Nanayakkara, the Government Printer whovalued the machine at Rs. 18 Million but submitted that Mr.Nanayakkara is not an expert in valuing a second hand printingpress not being in possession of any data for ascertaining the“market value" of such a machine, especially the model importedby the petitioner. As regards the SGS certificate (P7) referredto by the Deputy Solicitor General, Counsel submitted that
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by their letter dated 25. 07.91 (P21), S.G.S. clarified thatthe value of 48 Million quoted in P7 for a new machine,was for the more advanced V15D model but that theclosest model to V15A imported by the petitioner (andno longer in production) was V15C which was pricedabout 27.6 Million and hence the machine in disputeshould be valued having regard to the price of the V15Cmodel and not the V15D model.
On the question of mitigation of forfeiture, Counsel
submitted :
that the D.S.G.' s contention that S. 163 of theCustoms Ordinance had no application and that in theother cases of mitigation relied on by the petitioner themitigations were invalid is untenable in that this positionhas not been taken either in the affidavit of the 1strespondent or in the counter submissions filed on behalfof the respondents. The position taken there is that thepetitioner had sought mitigation under S. 163 "as helawfully might" and this was refused in view of the amountof undervaluation and upon the view that the forfeiturewas not unduly severe. Counsel argued, that in anyevent, if the goods were forfeit, S.163 is applicable andan application for a mitigation thereunder was duly madeby the petitioner ;
that the decision to refuse mitigation was not fairlytaken having regard to the other importers and thatit is tainted by extraneous considerations. He arguedthat the amount of undervaluation is not a rational guidefor discrimination and that the discretion should beexercised in the context of the value of the article andother considerations. It was submitted that in other cases,the forfeiture had been mitigated even where thegoods had been undervalued by over 100% ; here theundervaluation is much less percentage – wise butmitigation was refused, based on the amount of under-valuation. Such discrimination is unreasonable. Counselfurther submitted that even though by reason of thedecision in Neville Fernando v. Liyanagew the petitioner
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(being a corporate body) is unable to complain ofinfringement of Article 14(a) which guarantees
freedom of expression, the Court should, in decidingwhether the refusal to mitigate was violative of Article12 (1), take into account the fact that the goods consistof a printing press used in the production of publicationsby the petitioner's organization which engages in socialservice activity in terms of its objects contained inS. 3 of Act No. 16 of 1972 by which the said organizationhas been incorporated ;
that there are circumstances which indicate thatthe refusal to mitigate the forfeiture is tainted byextraneous considerations. Counsel drew our attentionto the following allegations made in the petition :
On 18.03.91, the Managing Director of the Presswas informed by an officer of ABN Bank (which gavethe petitioner a facility to purchase the machine) that theController of Exchange had personally come to the Bankto collect a copy of the letter of credit.
On 28.03.91, Superintendent of Police CIDMr. Ottanpitiya inquired from the Managing Director ofthe Press regarding the importation of the machine.
The unusual interest shown in the machine by anumber of high ranking officials.
Counsel for the petitioner next set out the following legal principlesin support of his submissions:
There can be discrimination in the application of a law.
Acts which appear to be neutral on their face but are intruth characterised by arbitrariness violate the right to equalprotection of the law.
Exercise of unguided discretion constitutes arbitrariness andmay per se justify a complaint of unequal treatment. If thereis a motive for such conduct, it may strengthen the allegation.
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Equals must be treated equally.
As authority for the said legal principles Counsel cited :
Yick Wo v. Hopkins 118 US 356 (5)
Equal Protection of the Laws, Polyviou 649-650
Chaudhury and Chaturvedi's Law of Fundamental Rights 3rd Ed.
93, 103.
Gooneratne v. Commissioner of ElectionsJayanetti v. The Land Reform Commission (7)
C.W. Mackie & Co. v. Commissioner of Inland Revenue (z)Roberts v. Ratnayake (8)
Elmore Perera v. Jayawickrema (9)
RELEVANT PRINCIPLES OF CUSTOMS LAW
FORFEITURE & SEIZURE OF GOODS
The Customs Law applicable to forfeiture and seizure of goods isrelevant to a proper determination of the application before us.Forfeiture of goods is one of the consequences of a breach of theprovisions of the Customs Ordinance. Some of the sections providethat in the event of such breach the goods shall be forfeitede.g. Sections 34 (1), 43, 44, 50, 50A (1) (b), 52, 55, 65, 75,100A (2), 107, 107A (1), 107A (2), 121, 131 and 142. Section 57provides that in the absence of any explanation to the satisfactionof the Director General of Customs, the goods shall be forfeited.Sections 38 and 68 provide that the goods shall be liable to forfeiture.
In Palasamy Nadar v. Lanktree (10) (a case in which the goodsbecame forfeited under S.46 (now 44) of the Ordinance) GratiaenJ. said (p. 522-523) :
"If goods are declared to be "forfeited" as opposed to “liableto forfeiture" on the happening of a given event, their owneris automatically and by operation of law divested of his propertyin the goods as soon as the event occurs. No adjudicationdeclaring the forfeiture to have taken place is required toimplement the automatic incident of forfeiture. This seems tobe the effect of the decisions of the English Courts in the
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Anandale (11) and De Keyser v. Harris (12). In Jayawardena v.
Silva (13> Fernando CJ., Samarawickrema J. and Weeramantry
J. adopted the above view with approval.
FORFEITURE FOR UNDERVALUATION
S.52 provides – "Where it shall appear to the officers of the customsthat the value declared in respect of any goods is not in accordancewith the provisions of Schedule E, the goods in respect of which suchdeclaration has been made shall be forfeited together with the package
in which they are contained This provision for forfeiture was
introduced by the amending Act No. 83 of 1988. Prior to thisamendment, S. 52 only empowered the customs to detain goodswhich are undervalued and upon final examination for duty to takesuch goods for the use of the Crown after which the Collector wasrequired to pay the amount of such valuation, together with the dutiespaid upon such goods to the importer or proprietor of such goodsand to dispose of such goods for the benefit of the Crown. By theaforesaid amendment, the legislature has provided for the automaticforfeiture of undervalued goods, by operation of law and therebyeffected a fundamental alteration of the law. This principle of automaticforfeiture is not affected by the decision of this Court in Moosajeescase (supra) where the provision which was considered was S. 57under which the goods are declared forfeited "in the absence of anyexplanation to the satisfaction of the Director-General". Such languageinvests the Director General with a measure of discretion in the matterof forfeiture; but S. 52 and other sections which provide for forfeitureof goods are not so qualified.
S. 125 of the Ordinance inter alia, requires the customs to seize
goods which are declared to be forfeited. Such seizure (in the sense
of a physical act of seizure) is necessary to complete the ownershipof the State to the goods-Arumugaperumal v. The Attorney –
General <14>. Goods are seized when they are taken forcible possessionof with the intention that ultimate loss by forfeiture and condemnationwould result from the seizure – Palasamy Nadar v. Lanktree S. * * * * (10)
S. 154 provides for the manner of instituting proceedings for claimingseized goods. This is the only remedy available to the owner forchallenging the validity of the seizure and alleged forfeiture. It has
been held that unless an action is instituted in a competent Courtto so challenge the seizure, the property in the goods will be lost
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to the owner. Palasamy Nadar v. Lanktree Jayawardena v.Silva(,3). Article 126 of the Constitution has since provided an additionalremedy in appropriate cases.
VALUE OF GOODS
Schedule 'E' of the Ordinance prescribes the following rules for fixingthe value of imported goods :
It means their normal price i.e. the price in the open marketbetween a buyer and a seller independent of each other.
Normal price is determined, inter alia, on the followingassumptions :
that the goods are delivered to the buyer at the port or placeof introduction in Sri Lanka ;
that the seller bears the costs, charges and expenses ofthe sale and delivery of the goods at such port or place whichare hence included in the normal price ;
Costs, charges and expenses referred to above include, interalia, the following:
carriage and freight to Sri Lanka ;
insurance.
that the buyer bears all duties in Sri Lanka ;
that a sale in the open market between a buyer and aseller independent of each other presupposes inter alia, thatthe price is the sole consideration.
The price paid or payable may be accepted as the valuefor customs purposes if the price corresponds at the time ofvaluation to the normal price as indicated at 1 above and theprice is adjusted if necessary to take account of circumstancesof sale which differ from those on which the normal price isbased.
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To summarise, value of goods for customs purposes means thenormal price or the open market price and the normal price includescosts, insurance and freight i.e. the CIF value. Prima facie theprice paid or payable for goods i.e. the CIF value is acceptableas value for customs purposes provided, however, it correspondsto the normal price determined subject to the qualificationscontained in Schedule E e.g. that in the matter of the sale betweenthe buyer and the seller, price is the sole consideration; and ifthe circumstances of the sale differ from those on which thenormal price is based, the price will be adjusted if necessarytaking account of such circumstances. In other words, CIF value neednot necessarily be the value of the goods for customs purposes.
APPLICATION OF THE LAW TO THE FACTS OF THIS CASE
Learned Counsel have addressed us on two issues namely theforfeiture of the goods (on the ground of undervaluation) and therefusal by the 1st respondent to mitigate the forfeiture. Both theseissues have been agitated by the parties in their pleadings. Thisapplication is rooted in the second of these issues and hence weneed not ordinarily have considered the first issue. It has, however,become relevant for the following reasons :
The petitioner's application for a mitigation was withoutprejudice to the petitioner's right to take steps in Court to havethe order of forfeiture declared invalid which is an unusualcondition for an importer to insist on when applying for amitigation. This condition is repeated in the petitioner's prayerfor relief where he seeks an order from this Court declaringthe impugned forfeiture to be illegal (for violation of Article 12(1) and ordering the machine to be released on payment ofan uplifted value without prejudice to the petitioner's rightto challenge the validity of such additional value in sinappropriate forum. He also seeks compensation in a sum ofRs. 3,500,000/-.
In the pending District Court action too he claims thegoods on the basis that their (seizure) and forfeiture arewrongful and illegal but this claim is made in terms ofthe Customs Ordinance. He also seeks to recover damagesin a sum of Rs. 21,565,184/- and continuing damages.
SCLanka Jathika Sarvodaya Shramadana Sangamaya v. Heengama
Director General of Customs and Others (Kulatunga, J.)17
It seems to me that the granting of relief subject to the aforesaidreservation and leading to such overlapping of reliefs as is likely tooccur in the context of the proceedings before this Court and theDistrict Court would not be “just and equitable" in terms of Article126(4) of the Constitution. I am, therefore, compelled to decide boththe said issues which the parties have raised before this Court forthe purpose of ensuring that the relief, if any, that may be grantedin these proceedings would be just and equitable.
FORFEITURE OF GOODS
The machine was seized as forfeit on the ground that Rs. 11 Milliondeclared by the petitioner was an undervaluation. The respondentsstate that its value is Rs. 18 Million. The parties have placed thefollowing material for the consideration of this Court :
Susiri de Silva's affidavit in which he asserts that Rs. 11Million (CIF value) is the correct value for customs purposes.In support of this value, the petitioner has annexed theSGS inspection certificate dated 31.12.90 (P7) according towhich the machine had been manufactured in 1979 ; its valueat the time of purchase (in 1979) was DKK 3,400,000 (Rs. 12Million) ; and the plant may work satisfactorily for another12-15 years. P7 also states that the estimated value of a similarplant with the same function as on the date of inspection wasUS 1,200,000 (Rs. 48 Million).
The 1st respondent's affidavit in which he states that thetrue value of the machine is Rs. 18 Million. This is supportedby the affidavit of the Government Printer Mr. NevilleNanayakkara (1R1).
Mr. Nanayakkara states that he has been attached to the Departmentof Government Printing for a period of over 21 years of which fora period of 11 years he has been functioning as the GovernmentPrinter ; that he is called upon every month to give valuations tovarious banks on the post value and replacement value of printingmachinery ; that accordingly every month he obtains informationrelating to the availability of second hand printing machines and theirprices from U.S.A., U.K., Japan and India; and that he is fully awareof the current price structure of second hand printing machinery.
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Exhibit P23 (petitioners written submissions dated11.11.91) addressed to the 1st respondent states that theofficers of the Customs Valuation Branch fixed the value of themachine at 19 Million by depreciating 60% from the value ofa similar new machine referred to in P7. In other words, it wastheir opinion that if a new machine with the same function wouldcost 48 Million, the value of the used machine imported bythe petitioner should be 19 Million. This would mean that anincrease in the price of a new machine could also result inthe appreciation of the value of a used machine, which isnot an unreasonable view. Mr. Nanayakkara has reduceda further 1 Million and fixed the value of the machine at 18Million.
Exhibit P. 21 (SGS letter dated 25.07.91). This was
obtainedbythepetitioner during the pendancy of the
customs inquiry presumably to neutralise the effect of ExhibitP7 in respect of the valuation of the machine imported bythe-petitioner. P21 seeks to achieve this by attempting aclarification which is briefly as follows :
V15A model which was imported is no longer produced:
the models were available in the market as follows :
15A-1966to 1987
15C-1979to 1990
15D-1979- current
V 15D is the newest and much better version than V 15A.In P7 reference was made to the V 15D model where it statedthat "an estimated value of a similar plant with the same functiontoday would be approximately US $ 1,200,000" becausefrom1990 the only replacement model for V 15A was V 15Dand the seller had been offered a V 15D model as replacementfor the V 15A ;
based on information since received they state, that a V15C model with same capabilities as the V 15A under referencewould be priced around US $665,000 ex plant, (which isequivalent to about Rs. 27.6 Million CIF Colombo).
SCLanka Jathika Sarvodaya Shramadana Sangamaya v. Heengama
Director General of Customs and Others (Kulatunga, J.) 19
It has been submitted on behalf of the petitioner that going onthe value of model V 15C, depreciated according to the percentage(60%) used by the customs, the value of the machine imported bythe petitioner is only Rs. 11 Million. I am unable to agree with thissubmission because at the time of the said importation, V 15C modelwas no longer being produced. P21 itself states that from 1990 theonly replacement model for V 15A was V 15D. If so, the valuationof the second hand V 15A machine with reference to the value ofthe V 15D ex plant cannot be faulted.
Exhibit P5, Rotatech letter dated 23.08.90 addressed toSusiri de Silva. In this letter Rotatech informed “we have tradedthis press for US $ 270,000 because our main interest is sellingnew presses nowadays and it is not necessary to make a bigprofit on second hand equipment". This indicates that it wasnot a sale in the open market between a buyer and a sellerindependent of each other where the price was the soleconsideration as required by Schedule 'E' of the Ordinance.The seller's object was not so much to make a profit relatedto the demand but to dispose of the second hand machinequickly. In all the circumstances, I am of the view that thisis a case in which the price paid cannot be accepted as thevalue for customs purposes and the customs officers werejustified in inquiring into the value.
CONCLUSION
On the question of valuation, the petitioner relies on the CIF valueand the fact that the machine was 11 years old at the time ofimportation. The respondent's case is supported by the evidence ofthe Government Printer and other circumstances which I haveenumerated above. The Government Printer has set out hisqualifications and experience to give an opinion and these have notbeen contradicted by the petitioner. As such, I am unable to acceptthe submission of the petitioner's Counsel that the Government Printeris not competent to assess the market value of the machine. On theavailable evidence, the customs decision that the value of the machineis Rs. 18 Million is justified. Accordingly, the petitioner hadundervalued the goods when he declared its value as Rs. 11 Million.True, no fraud has been alleged in that regard. This, however, doesnot preclude the customs from determining the true value of thegoods.
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I hold that the goods are forfeit on the ground of undervaluation,in terms of S. 52 of the Ordinance, by operation of law. Such goodsmust be seized ; but in this case there is no express seizure of thegoods. However, the 1st respondent's letter dated 25.11.91 (P22)wherein he refused to vary the forfeiture discloses a clear intentionto permanently deprive the petitioner of the goods and hence itconstitutes a seizure of the goods within the ambit of S. 125. Thequestion then is whether the said seizure is vitiated on the groundof discrimination by reason of the 1st respondent's failure to mitigatethe forfeiture under S. 163.
ALLEGED DISCRIMINATION WITH REFERENCE TO S. 163
I cannot accept the D.S.G.'s submission that S. 163 had no applicationbecause the goods had been seized as forfeit and that the properremedy was for the petitioner to have appealed to the Minister underS. 164. The application for mitigation (though subject to an unusualreservation of the right to challenge the forfeiture in Court) was madeprior to the seizure and hence it was a valid application. I am ofthe opinion that the other submission that goods "detained asundervalued" can only be released by the Minister under S. 164 isuntenable.
That appears to have been the position prior to the amendmentof S. 52 when the goods could only have been detained forundervaluation for the use of the Crown subject to payment of theirvalue to the importer or the owner of such goods. Under the amendedS. 52, undervalued goods are forfeit by operation of law. Suchforfeiture attracts S. 163. It follows that in the other cases referredto by the petitioner, 1st respondent was competent to mitigate theforfeiture and he did mitigate such forfeitures validly, before the goodswere seized in terms of S. 125. This Court will indeed presume thatthe said mitigations were validly made.
As regards the refusal to mitigate the forfeiture, I agree with thepetitioner's Counsel that the amount of the undervaluation is not areasonable guide for refusal, particularly for the reason that suchamount would depend on the nature of the article. However, I donot agree that merely because the forfeiture had been mitigated evenwhere the undervaluation was 100%, the 1st respondent is boundto mitigate in every such case. That is a question to be decided in
SC Lanka Jathika Sarvodaya Shramadana Sangamaya v. Heengama
Director General of Customs and Others (Kulatunga, J.)21^
the discretion of the 1st respondent, on the facts of each case ; butupon a consideration of all the circumstances, I am satisfied that therefusal to mitigate the instant forfeiture was unreasonable and hencediscriminatory. The fact that the goods consist of a printing pressand that no fraud is alleged against the petitioner are very relevantcircumstances which do not appear to have received consideration.
It is true that the application for mitigation was subject to anunusual condition namely, without prejudice to the petitioner's rightto challenge in Court the forfeiture of the goods. It is unusual becausea mitigation can be made on the assumption that the forfeiture isvalid but unduly severe ; and if it was thought prudent to reserveany right, the appropriate course would have been to make theapplication without prejudice to the petitioner's right to challenge theforfeiture in Court, in the event of a refusal to mitigate the forfeiture.However, the 1st respondent's refusal to mitigate was not on thatground but in view of the amount of the undervaluation leading to"a heavy loss of revenue" to the State. (The D.S.G. informed us thatthe loss would be around Rupees 1.9 Million in duty). It is clear thatin view of the said ground the 1st respondent was not preparedto release the goods, even if the application to mitigate wasunqualified. Such conduct constitutes an arbitrary exercise of discretionwhich justifies the allegation of discrimination vis a vis others whoare similarly circumstanced.
While there is no cogent evidence to establish the allegation thatthe seizure of the goods without mitigation was mala fide and fora collateral purpose, yet the material placed before us shows thatthere has been a failure to fairly consider the petitioner's applicationfor mitigation. This in my view is a case of undervaluation of goodsand automatic forfeiture under S. 52 and but for the discriminationthat has been established in the instant application the petitionerwould have been compelled to challenge the forfeiture by way ofproceedings in the District Court. I hold that by reason of suchdiscrimination the petitioner's right to the equal protection of the lawunder Article 12 (1) has been infringed.
RELIEF TO THE PETITIONER
In the light of my findings, I hold that the impugned forfeiture is valid.However, the seizure of the forfeited goods is vitiated by reason ofdiscrimination in the exercise of the 1st respondent's powers underS. 163 of the Customs Ordinance. Accordingly, I grant :
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a declaration that the petitioner's rights under Article 12(1) have been infringed ;
an order directing the 1st respondent to release to thepetitioner the said machine together with its accessoriesand spares on payment of duty on the value of Rs. 18 Million.In view of my finding upholding the said value, I disallowthe prayer that this relief be without prejudice to thepetitioner's right to challenge the validity of the additionalduty elsewhere ;
compensation in a sum of Rs. 662,664.24 (Rupees SixHundred and Sixty Two Thousand, Six Hundred Sixty Four andCents Twenty Four) being the sum equal to legal interest for21 months on duty paid by the petitioner on the Bill of Entrydated 05.04.91 after which the petitioner was not permittedto clear the machine ;
costs in a sum of Rs. 5500/- (Rupees Five Thousand FiveHundred).
G. P. S. DE SILVA, C.J. – I agree.
RAMANATHAN, J. – I agree.
Relief granted.
