Undervalued Imports, Contempt of Court, and the BMW Case: An Expanded Sri Lankan Legal Analysis
The case involving Prestige Automobiles, the former authorized BMW dealer in Sri Lanka, and the importation of 1,728 luxury vehicles, has exposed significant fissures in Sri Lanka’s legal and fiscal framework. The core allegations—that witness statements were used to mislead judges and that undervalued invoices were submitted to the court—engage complex questions of contempt of court, perjury, and the rule of law.
The Fundamental Allegation: Misleading the Court
The central legal controversy revolves around whether Prestige Automobiles or its representatives knowingly submitted false documentation and made misleading statements to the Court of Appeal. When a party presents evidence it knows to be false, or makes statements designed to deceive the court, it strikes at the heart of the judicial process. The Court of Appeal itself characterized the matter as a "grave abuse of tax concessionary" , a finding that implicitly questions the veracity of the information previously presented to it.
The process by which the court permitted a fresh Customs inquiry is particularly instructive. Prestige Automobiles had initially obtained a writ from the Court of Appeal quashing the earlier Customs inquiry . However, when German Customs officials provided original, higher-value invoices, the Additional Solicitor General presented this fresh evidence to the court . Justices Nissanka Bandula Karunaratne and Shashi Mahendran then permitted a new investigation, holding that the Director General of Customs had a right to call for a fresh inquiry in light of this new evidence . This judicial reasoning suggests that the court was satisfied that the material initially presented was potentially incomplete or unreliable.
Contempt of Court: Sri Lankan Legal Formalities
The possibility of contempt of court arises from the allegations that witness statements were deliberately misleading and that undervalued invoices were submitted to the court. In Sri Lanka, contempt of court is a serious offense that undermines the authority of the judiciary and the administration of justice.
Constitutional and Statutory Framework
The power to punish for contempt is rooted in the Constitution itself. Article 105(3) establishes the Supreme Court and the Court of Appeal as superior courts of record with "all the powers of such Court including the power to punish for contempt of itself" . The term "Court of Record" is significant—it signifies that the proceedings of these courts are enrolled for perpetual memory and testimony, and their records are absolutely authoritative . This inherent power to punish for contempt is essential to enable courts to administer justice according to law .
The Administration of Justice Law (No. 44 of 1973) provides the statutory framework for contempt proceedings . Section 41 empowers:
The Supreme Court to try contempt and impose imprisonment up to seven years or a fine of up to Rs. 7,000
The Court of Appeal to impose imprisonment not exceeding five years or a fine not exceeding Rs. 5,000
Every High Court to take cognizance of and try contempt committed against or in disrespect of its authority
The recently enacted Contempt of a Court, Tribunal or Institution Act, No. 8 of 2024 has significantly modernized and clarified contempt law. It defines contempt broadly to include acts committed with intent to "bring the authority of a court, tribunal or institution and administration of justice into disrespect or disregard" or to "interfere with, or cause grave prejudice to the judicial process" . Key provisions include:
Section 3(2) specifies that willful disobedience to any judgment, decree, direction, or order of a court constitutes contempt
Expressing or publishing any false matter that scandalizes or lowers the judicial authority or dignity of a court is also contempt
Procedural Safeguards
The law provides crucial procedural safeguards. Under the new Act, the Supreme Court or Court of Appeal may take cognizance of contempt on its own motion, on a motion by the Attorney-General, or on a motion by any other person . However, the court must first satisfy itself that a prima facie case of contempt has been established before issuing a rule on the alleged contemnor . The person charged must then be afforded an opportunity to make their defense, file an affidavit, or adduce evidence . This ensures that contempt proceedings are not arbitrary but are conducted with due process.
Witness Statements and the Issue of Perjury
The allegations that witness statements were deliberately misleading engage provisions of the Code of Criminal Procedure Act relating to false evidence. Section 448 of the Code of Criminal Procedure Act (No. 15 of 1979) allows a High Court Judge, upon the conclusion of a trial, to have a witness arraigned and tried on an indictment for intentionally giving false evidence if they materially contradict their previous testimony .
The Supreme Court has emphasized the importance of proper procedure in such cases. In Kumarasinghe v. The State (2001), the Court held that a witness charged with giving false evidence must be properly charged and given sufficient time and opportunity to retain counsel and prepare a defense, in keeping with the fundamental rights guaranteed by Article 13(3) of the Constitution . This requirement of procedural fairness is a cornerstone of Sri Lankan criminal law.
The Fiscal Dimension: Taxpayer Loss and Abuse of Concessionary Permits
The legal issues are compounded by the immense fiscal implications. The undervaluation scheme, if proven, deprived the Sri Lankan state of an estimated Rs. 16.263 billion in legitimate tax revenue . The case centers on 1,728 BMW vehicles imported between 2011 and 2014 under government duty concession permits ostensibly for government employees .
Investigators allege a highly coordinated scheme involving:
Artificial deflation of invoice values: The authentic factory values of the BMWs were removed and replaced with artificially low figures
Misuse of concessionary permits: Permits legally issued to senior public servants were allegedly acquired through a shadow secondary market and transferred to private luxury buyers
Routing through shell companies: Paperwork was routed through intermediary shell companies to obscure the true value
An earlier, highly controversial administrative effort sought to settle the matter by imposing a payment of only Rs. 100,000 per vehicle—described as roughly one percent of the alleged revenue loss. That decision was later reversed, reopening the way for a full investigation .
Legal Repercussions and Accountability
The BMW case represents a critical test of Sri Lanka's commitment to judicial integrity and fiscal accountability. The potential for contempt of court arises from the legal scrutiny of the evidence and statements initially presented to the court. If the invoices and witness statements were indeed intended to mislead, it represents a grave offense against the justice system.
Under Sri Lankan customs law, if systemic fraud on this scale is conclusively established, statutory penalties could rise well beyond the original tax loss, with authorities able to seek fines of up to three times the value of the goods involved . The ruling allowing a fresh Customs probe is a step toward accountability, but the full legal repercussions for those involved remain to be seen.
As the court noted, contempt jurisdiction is not for the glorification of the bench but exists "solely for the protection of the public" . The case underscores the urgent need for greater transparency in vehicle valuation to prevent systemic revenue leakage that costs the Sri Lankan taxpayer billions.