Sugar: Brown turns white

*SLSI certified the consignment was white sugar, but Govt. Analyst said it was not so

By Nalaka Nonis

The Customs is investigating a case where a millionaire businessman in Colombo had allegedly forged documents with the help of an official attached to the Sri Lanka Standards Institute (SLSI) to alter the classification of a sugar shipment valued at more than Rs. 400 million thereby attempting to defraud the state of tax amounting to Rs. 45 million.

Certificate issued by the SLSI giving colour ICUMSA units of the consignment of sugar to be 280, an import document showing weight and value of the consignment and the certificate issued by the Government Analyst’s Department indicating that the colour sample shows 654 ICUMSA units.

An official in the team handling the investigation told The Sunday Times he had found out that Kala Traders (Pvt) Ltd, a leading sugar importer, had allegedly imported 10,000 metric tonnes of brown sugar from Papua New Guinea.

The importer had paid a duty levy of Rs. 4.50 per kilo by declaring the consignment contained white crystalline sugar for the purpose of being eligible for the duty waiver which was in place for white sugar.

Kala Traders managing director Shri Skandarajah had allegedly imported the consignment of brown sugar by submitting a false declaration to the Customs on September 30, 2004 in which the classification of the sugar stock had been altered to white sugar.

The Customs had subsequently detected the declaration to be false and had ordered the shipment of sugar to be detained.

The Customs official said the importer had altered the colour classification of the sugar on the customs declaration for the alleged purpose of benifitting from the tax waiver given for white sugar.

After the consignment was seized by Customs, Mr. Skandarajah took the matter to courts stating that the consignment of sugar was classified as white sugar and as such asked court to order the release of the shipment.

Court ordered the Customs to release the sugar stock to the importer on the basis of a Sri Lanka Standards Institute (SLSI) inspection report according to which the consignment was classified as white sugar.

But the Customs official pointed out that Kala Traders had submitted a false report which was allegedly prepared with the collusion of an SLSI assistant director attached to the quality assurance section.

Customs said that by providing a false inspection report, the importer had misguided courts.

According to Sri Lanka standards, for the purpose of being classified as white sugar, the ICUMSA – International Commission for Unified Methods of Sugar Analysis – the sugar should contain less than 500colour units and if it exceeds that figure then the sugar is classified as brown sugar.

The SLSI inspection report had stated that the sugar contained only 280 ICUMSA units and as such certified the consignment to be white sugar.

“This report compelled the Customs to obtain an inspection report from the Government Analyst for the purpose of double-checking the correctness of the SLSI report.

The Analyst’s report stated that the sugar contained 654 ICUMSA units which figure was well above the permitted 500 units mark for white sugar,” the Customs official said.

He claimed that the official at the SLSI allegedly confessed to them that he allegedly forged the colour units of the sugar samples given to him by the importer even without any inspection being done.

Later Customs filed action to have the court order reversed and this request was allowed. Thereafter the consignment of sugar was unloaded at the Kala Traders’ warehouse but placed under the Customs seal and custody.

“The court ordered the shipment to be handed back to the Customs with the importer having to pay Rs. 10,000 as costs”, the official said.

After the consignment under dispute was returned to the Customs as ordered by court, many attempts to apprehend Mr Skandarajah had drawn a blank as he was allegedly absconding and was once also known to have entered the premises of an embassy to evade the Customs officers who were on his trail.

While the investigation into the alleged fraud was proceeding, Customs auctioned 2,000 metric tonnes of sugar at Rs. 37 a kilo.

The Customs official claimed that Kala Traders later went to the Supreme Court which ordered that the sugar be resold to Kala Traders at Rs. 37 a kilo.

Mr. Skandarajah had reportedly complained to the CID saying the Customs officials had manipulated his import documents in an alleged attempt to implicate him in a tax fraud.

Customs claimed the managing director of the firm was absconding since July 20 and dismissed certain media reports which alleged he was kidnapped by Customs officials.

Customs said it would go ahead with the investigation even in the absence of the main suspect and added that Kala Traders (Pvt) Ltd imports manager was produced at the Colombo Magistrate’s Court and sentenced to nine months imprisonment for his involvement in the fraudulent transaction.

Meanwhile Mr. Skandarajah’s wife told The Sunday Times her husband had gone missing since July 20 and she believed the abduction might have been carried out by a militant group.

“He has not come home since the day he went out saying he was going to the CID to make a statement,” she said.

But she declined to comment on the alleged sugar fraud incident in which her husband is reported to be involved.

When contacted by The Sunday Times an official in the SLSI declined to comment about the involvement of one of its officials in forging an inspection report saying SLSI chairman and director general were out of the country.