23 May, 2022


Rs 2,000 M Vehicle Duty Fraud: A Story Full Of Half-Truths

By Nagananda Kodituwakku

Nagananda Kodituwakku

Nagananda Kodituwakku

Today, one English newspaper ‘Ceylon Today’ reported that over 2 billion rupees of ‘revenue’ has been lost by Customs on ‘undervalued’ vehicles. Relying on the information given by some Customs Officers the newspaper accused Director General of Customs, Chulananda Perera for ‘connivance’ in this colossal ‘fraud’.

The objective of this piece of writing is to respect the readers of their right to know the truth behind this whole episode and not to discredit or award credit to any. I will try my best to make this presentation in a very simplified form, enabling the learned reader to comprehend the whole issue.

Legal duty of customs

The Customs Department is the major revenue contributor of the government. And it is not out of place to mention that this department has produced some incredibly genuine officers as well its share of utterly corrupt officers. The primary duty of Customs is the collection and protection of government revenue and also to act as an agent at the border to enforce all restrictions and prohibitions as provided by various laws.

Rs 2,000 M vehicle import duty fraud

Levies are recovered on transaction value

All levies are charged on the ‘transaction value’ as defined by Article 1 of the Schedule E of the Customs Ordinance, which is the ‘primary basis’ for the customs valuation.

Stringent penal sanctions against abuse

The law provides stringent penal sanctions against any person presenting a FALSE valuation for customs purposes. This includes the forfeiture of the commodities and followed by a fiscal forfeiture of treble the value of the goods. (Section 52 of the Customs Ordinance).

Utterly corrupt Customs Valuation regime

There is an undeniable truth that no honest importer can survive in the trade with declaration of the ‘true transaction value’ as the valuation regime regulated by Customs is corrupt to the core, causing ‘hundreds of billions of revenue loss’ on regular basis, for which both the trade and the officers are jointly responsible.

Government removes vehicles from transaction value regime

In this backdrop in Nov 2013 the government made a decision (with a gazette notification published by the Minister) to apply ‘a minimum value’ (as determined by a committee appointed by the DGC), which shall be the basis for the recovery of all taxes.

Violation of the GATT obligations to adopt transaction value

This decision completely violated the Sri Lanka’s obligations under the World Trade Organisation Valuation Agreement as set out in Article 7 of the Customs Ordinance, which requires that ‘Customs value’ for all commodities shall be determined using reasonable means consistent with the principles and general provisions of the agreement of the implementation of Article VII of the General Agreement on Tariff and Trade (GATT) 1994. Furthermore it provides that no customs value shall be determined on the basis of ‘minimum customs value’ or ‘arbitrary or fictitious values’.

Customs valuation committee failed Government’s objective

However, with this flawed decision, the government contemplated to maintain ‘true customs value base’ for all makes and motor vehicles. All levies would be recovered on the minimum value – determined by the Customs – irrespective of the values declared by the importers.

Unfortunately, the appointed committee opted to operate on the basis of the minimum value of motor vehicles, fatally failed the government’s objective, due to the unfounded nature of the minimum values determined by it. This has now compelled the government revise the customs minimum value base substantially.

Law does not allow importers to be liable

This thoughtless decision-making by the government also had a very serious impact on the enforcement mechanism enacted by law against false value declarations for customs purposes. This is due to the fact that the declared valuation for vehicles forwarded by the importer has no regard in the revenue collection process, as interpreted by Article 10 of Schedule E.

Therefore, the false declaration allegations levelled against the importers are baseless and unfounded, as it has been established that the levies for each vehicle had been recovered on the minimum value, the basis determined by the Customs and not using any of the valuations disclosed by the importer.

There is no doubt that the officers may have lost a huge opportunity to claim a substantial cash reward from the enforcement action that would have been taken against the importers had the officers proved a case of wilful understatement of value by the importers.

Yet, the simple truth here is that the law does no allow any importer to be dealt with under the new valuation regime released to the trade by the Customs after the fraud involved in the formulation of the minimum value regime for customs purposes were detected.

Importance of rectifying the flawed valuation system without making vulgar allegations

Therefore the best prudent cause of action available to the government to correct this wrong process is to withdraw the regulations framed under Article 10 of the Schedule E of the Customs Ordinance and immediately reverting to the application of to the GATT Valuation system for motor vehicles, without making vulgar allegations against the DGC and the Minister.

*Nagananda Kodituwakku – Former head of the Customs Revenue Task Force & Attorney-at-Law

Print Friendly, PDF & Email

Latest comments

  • 14

    This is a lot of space wasted for nothing. The Customs are corrupt. Period, full stop. Add to this a corrupt business community looking to cut corners and political henchmen looking for their cut, the entire system is a leaking sieve of precious revenue.

    One can ‘consult’ customs officials who will advise how to package shipments, how to ship them and to which warehouse to assign, so they can ‘manage’ the process.

    Do you seriously think the T’shirts and bras you got at the plaza were imported with proper duties paid?

    All this nonsense at the moment is about different interests pointing at others to divert attention.
    If 700million in contraband were seized last year, imagine what went through in both directions without any hindrance or with false valuations.

  • 6

    Minister Rajitha Senaratne has carefully refrained from bringing the matter to the notice of the newly appointed Bribery/Corruption Commission, which too will “see no evil”.

    If and when a new constitution is written, the “minimum value determination” by a committee appointed by the DGC will be enshrined.
    The minister in charge will be the chief beneficiary.

  • 0

    Why the officers try to make this a big issue, is it because they are worried about the government revenue.
    The clear answer to this is NO.

    Not because of any thing else, but because of DGC’s action these cheats lost a chance for a BIG reward running into several hundreds of millions.

  • 1

    Nothing will change. We Sri Lankans love our cars !!!

    And when the lucky few get into power or places of privilege, they will make every effort to make use of that power and privilege to get more and more expensive cars at lower and lower rates of duty

    It has Always Been Thus and Thus Shall It Always Be!! Amen !

    In the unlikely event that I will percolate up to those dizzying heights, I will make sure my $50,000 car is valued at $5,000

    State Revenue be damned !!!

  • 2

    In the Customs today, there are no honest officers any more.

    One such officer brilliant fighter was Sujith Perera.

    Such officers cannot survive in this department. He was shot dead by another fellow Customs officer Weerawansa on a reward issue and now serving death sentence in the Colombo Prison.
    Customs is a den of rouges today.

  • 1

    Change of Pillows by no means has eradicated the headache. The malady may have become worse by many a perception with corrupt, ambitious men having their sights high – Yahapaalanaya and sanctimonious humbugs notwithstanding. What is the guarantee the proposed cleaning-up operations at the higher levels this month will change the culture of thievery that has infected most of the men in high chairs – men, and women for that matter – coming and going in different party Colours.

    There are no signs Sri Lanka’s collective pain is going to vanish quickly despite a few, coming from decent and privileged backgrounds, who have the interest of the country in mind and who have the international clout and ability to gradually take the country out of the rut. Religion in politics, politics in religion and an otherwise foolish and unpredictable electorate are the real culprits preventing us going towards the much-hyped Singaporean Utopia. If the ethnic issue is dented with common sense replacing racial prejudice we may be half way through.


  • 1

    This particular matter of a Minister giving instructions to Customs to release those vehicles has been now reported to the FCID. The main “issue” here is why a Minister has to give “directives” to “Release” those vehicles or as a matter of fact why Ministers get involved in these issuing such orders, without allowing the officials to do their assigned functions as provided for in the rules and guide lines. If anything has happened ignoring those guide lines, then on a complaint a Higher Official could decide. The whole trouble is these Politicians “fingering” in all routine matters that make a mess of things. Let us wait and see what the FCID would do on the complaint received.

  • 1

    Why this good governance Govnt. still keep on MaRa Stoog Chulananda Perera who is corrupt to the core. He spoiled the Dept. of Immigration and Emigration and ‘promoted’ to the next level of corruption!!!
    ANOTHER MaRa bootlicker Sarath Kumara, renowned for Maldives visa scheme fraud also gone to Department of Registration of Persons and continue the old habit as usual and no one to monitor him either.

    What a Yahapalanaya!!!!!!

  • 0


    Probably, you cry for Customs man and accused DGC Chulalanda Perera, as a Rajapakse henchman corrupt to the core.

    When such accusations are leveled you got to be sure that you are in the right place to make such accusations.

    The whole country knows how the Customs men rob a fair share of the tax revenue, running into billions.

    The meager salary they earn as public officers is not different to other public officers in similar positions in other government departments. But their palaces, super luxury cars, regular foreign trips with such a income tells the story. Surely FCID should conduct a inquiry to find out how the Customs men enjoy such a luxury life.

  • 1

    Truth is that Customs Officers act as they please, and there in no one to discipline them.

    They accused me for paying a lower tax on a Mercedes S300 car I imported from the UK, after I paid tax on the Customs valuation. Now they say that I should make a deposit of 2.5 million to pay duty unpaid with another 2.5 million (altogether 5 million). When I asked why another 2.5 million I was told that I should pay a penalty for not paying the correct duty.

    Now I am aware that these people get 1/3 of the money recovered as penalties as a reward. I know the man who stopped all these Prado Jeeps had a dream to recover over 300 million as penalties and to get a huge reward of over 100 million. Now this person tries to find fault with the DGC for denying his reward.

    DGC’s order was only to recover the duty difference. It is not a secrete that the said order was made only after it was discovered that the Customs Valuation Committee people were responsible for fixing lower values for vehicles.

  • 1

    thank god,now i can eat my buriyani in peace.I thought this bastards had whacked 2000 million of my hard earned money,but thanks to naga it is all a lie.I nearly choked on my chicken drumstick when seeing on my lap top on Ceylon Today about the 2000 million.The waiters at buhari rushed and brought some first aid kit which saved me. Vive la preme vaallha!!vaalha, who never trusted the buhari employees and insisted on the first aid kit before handing the restaurant to them.

    As an after thought i was thinking it would have been nice to have the 2000 million in my account at the Central bank,instead of all these vehicles we can’t travel in due to congestion.Then sinha pore mahendran need not issue bonds at a rate and drown the sinha leys in debt before he vanishes into the teeming concrete jungle of singapore.

  • 0

    I remember in late sixtees a powerful politician of the green party got hold of a sports model car of which customs duty had not been paid.
    Then principal collector of customs(Distinguished CCS officer) requested politician to pay the customs duty or failing which he is going to seize the vehicle, then the politician complained to then Treasury secretary (another distinguished CCS officer) who in return told the politician that principal collector of the customs implementing the law of the country and you will have to pay the duty, matter was settled after politician paying the duty.

    • 0

      at that time buffaloes and gorillas had still got into parliament.
      The transition from the traditional ruling elite to the masses was only starting to take place slowly.After the alleged coup, sidelining the christians was a tragedy for the country.With sinhala bhuddhism we threw the baby out with the bathwater unlike mandela who believed in working with the white people for the upliftment of all.

      • 0


        “unlike mandela….”

        Even his work ultimately fell flat on it’s face. South Africa is in a bad way in many areas. Social, Economical, Political.

        The only thing they can say with some satisfaction is “No More Apartheid”

        • 0


          it is still the best in africa though.From the number of illegal migrants who come there from other countries you can prove it.

          It is also ranked better than us in the world competitiveness index.All this is because there still whites who are holding positions of authority.Blacks have to be properly trained before they can take over.See the verdict given by the black woman judge in the pistorious case which was subsequently overturned by a white judge.Any idiot can see he shot the wife except for that judge.Look at zimbabwe after they got rid of the whites.

  • 0

    Abuse of tax revenue as penalties and sharing of 1/3 of such recoveries, as cash reward is probably the biggest fraud takes place in customs and this is very common occurrence in Customs today. The DGC should direct the authorities to conduct a proper investigation into this abuse that costs the government colossal amount of tax revenue in billions.

    Worse part of it is that those who direct ‘fraud investigations’ conducting fraud inquiries by themselves and steal the lion share of cash rewards from junior officers, who are employed as tools and given only peanuts.
    Conducting of a proper audit of the bank accounts of the recipients of cash reward, and the foreign accounts held by the inquiring officers would reveal the magnitude of this organised fraud.

Leave A Comment

Comments should not exceed 200 words. Embedding external links and writing in capital letters are discouraged. Commenting is automatically disabled after 5 days and approval may take up to 24 hours. Please read our Comments Policy for further details. Your email address will not be published.