Background

• Lu Fortune Investment (Pvt) Ltd & Another vs Sri Lanka Customs. Court of Appeal Case No. 26/2021
• Petitioners: Lu Fortune Investment (Private) Limited (a trading company) and its Managing Director, Lu Zengshan (a Chinese national).
• Respondents: Director General of Customs and related officers of Sri Lanka Customs.
• Key Issue: Alleged undervaluation of imported goods by the Petitioners and subsequent inquiry by Sri Lanka Customs under the Customs Ordinance.
• Law Applicable: Customs Law – Section 52 of the Customs Ordinance as amended– difference between Section 51A and 52 of the Customs Ordinance as amended – fraud and/or evidence of intentional undervaluation by the importer – essential that the Customs officer conducts investigations and/or inquiry to obtain all relevant information – the rules of natural justice dictate that the general provisions pertaining to inquiries need to be followed

Facts

1. The Petitioners admitted to importing goods via three Customs Declarations (2017–2020).
2. The value declared for certain shipments was amended by Sri Lanka Customs, and the Petitioners paid the revised duties without protest.
3. A post-clearance investigation in June 2020 revealed evidence of undervaluation:
   • A commercial invoice (on the Petitioner’s phone) showed a value of USD 142,836.76, whereas the declared value was USD 37,152.90.
   • Evidence of false declarations was recovered, including deleted invoices and emails.
4. The Petitioners argued that:
   • The Managing Director lacked English proficiency, impacting the fairness of the inquiry.
   • Sri Lanka Customs should have acted only to recover any short-levied duty under Section 18(2) or Section 51A(2) of the Customs Ordinance.

Legal Issues

1. Fairness of Inquiry: The Petitioners contended that they were denied a fair hearing due to language barriers and lack of legal representation.
2. Scope of Customs’ Authority: Whether Customs could pursue forfeiture of goods under Section 52 after releasing them and amending declared values.

Court’s Analysis

1. Language and Representation:
   • The Petitioners were offered translation services and declined legal representation despite ample opportunity.
   • The court found no evidence of prejudice due to language barriers.
2. Customs Authority and Legal Framework:
   • Section 51A allows for value amendments after investigations, but Section 52 applies where false declarations are proven.
   • The court emphasized the distinction between honest mistakes (covered by Section 51A) and intentional undervaluation (covered by Section 52).
   • Evidence suggested deliberate undervaluation, justifying Customs’ actions under Section 52.
3. Legal Precedents:
   • Referenced cases clarified that forfeiture under Section 52 requires evidence of intent or culpability.
   • The court rejected the Petitioners’ reliance on the Toyota Lanka case, noting it dealt with description errors, not valuation.

Decision

• The application was dismissed.
• The court upheld Sri Lanka Customs’ right to investigate and act under Section 52 for deliberate undervaluation, even post-clearance.

Conclusion

This case reinforces the principle that Customs authorities can pursue penalties for false declarations under Section 52, irrespective of prior amendments to declared values. It also underscores the importance of procedural fairness during inquiries, which the court found was adequately maintained.

Read Full Judgement