Freed from 600 charges deemed defective, Perak duty-free store operator reaches amicable settlement with Customs to end all prosecution

KUALA LUMPUR, July 11 — Duty-free store operator Seruntun Maju Sdn Bhd has reached an amicable settlement with the Royal Malaysian Customs Department to end all prosecution against the company and its officials.

This follows a magistrate’s decision last October to release the company and its officials from 600 charges — initiated by the Customs Department — which were deemed to be defective.

In a July 6 company announcement to the Singapore stock exchange by Seruntun Maju’s Singapore-incorporated parent company Duty Free International Limited (DFIL), the listed firm’s board of directors said that the settlement is “mutually beneficial” to all parties.

In the settlement recorded as a consent order in the High Court in Taiping, Perak on July 6, Customs “terminates all prosecution and investigation instituted against” Seruntun Maju and four of its officers, while Seruntun Maju will pay a “certain amount of compound with no admission of guilt or liability”, the company announcement said.

Citing previous Court of Appeal and Federal Court decisions in Seruntun Maju’s favour, DFIL said Seruntun Maju “has been vindicated that its business operations were always in full compliance with the applicable laws”.

DFIL also said that SMSB has and will always conduct its business in accordance with the country’s law, and said the settlement with Customs meant that the matter with the government department has been resolved.

Seruntun Maju has been operating since 1991, with its main business being a duty-free store in the border town of Pengkalan Hulu, Perak.

This duty-free shop is in the “buffer zone” or between Malaysia and Thailand’s immigration checkpoints, where customers from Thailand can shop in the store without entering Malaysia and without carrying travel documents — based on procedures since the 1990s.

The Customs Department had granted renewable two-year duty-free licences to Seruntun Maju since 1993, and issued these two-year licences on June 2, 2014 and June 1, 2016.

But the Customs Department then added new conditions to the licence via an Appendix D issued on November 5, 2014 and again issued on September 14, 2016, which were months after the licences had been issued.

Under Appendix D’s item 19, Seruntun Maju was required to prepare records of sales receipts with the full name, travel document number and vehicle number of the duty-free store’s customers.

Ringgit notes are seen at a money changer in Kuala Lumpur June 20, 2018. - Bernama pic

Based on a previous DFIL company announcement, Seruntun Maju had on November 21, 2017 received several bills of demands dated November 14, 2017 from the Perak Customs, which demanded for payment of over RM15.4 million in customs duties, over RM23.5 million in excise duties, over RM377,000 in sales tax and over RM2.25 million in Goods and Services Tax (GST) over alleged non-compliance of additional conditions for the duty-free shop. This came up to RM41,594,986.86 or over RM41.59 million demanded by Customs.

On November 23, 2017, Seruntun Maju filed for judicial review at the High Court against the Perak Customs director-general and the Customs director-general, to challenge the legality of the additional conditions in Appendix D which the Customs Department said it had breached.

The High Court on June 29, 2018 dismissed Seruntun Maju’s challenge by ruling among other things that the Customs Department is allowed to issue any conditions for duty-free shop licences and at any time even after the licence is issued.

Seruntun Maju then appealed to the Court of Appeal, which ruled in the company’s favour on June 18, 2020. The company had also obtained a stay that suspended the need to pay the customs duties and excise duties, while pending the appeal.

A three-judge panel at the Court of Appeal unanimously ruled that there are no provisions under Section 65D of the Customs Act 1967 which would allow the Customs Department to modify and vary the licence or add new conditions after the duty-free licence had been issued to Seruntun Maju.

Ruling that the Customs Department had acted ultra vires or beyond the scope of its powers under Section 65D when it added new conditions after it had issued the licence to Seruntun Maju, the Court of Appeal quashed the additional conditions in Appendix D.

On January 11, 2021, the Federal Court rejected the Customs Department’s leave to appeal the Court of Appeal’s decision. DFIL previously explained that this meant SMSB has no obligation to pay the sum of over RM41.59 million demanded by Customs as the bills of demand were set aside.

The company then applied for a refund of the sales tax and GST totalling RM2,326,451.78 which it had previously paid, and it is understood that the Customs in April 2021 agreed to the refund and that the company received this refund in June 2021.

Despite the Court of Appeal and Federal Court rulings where the additional conditions of the duty-free licences had been quashed, the Customs Department on February 25, 2021 initiated criminal charges against Seruntun Maju and its officers for allegedly breaching these additional conditions.

National news agency Bernama previously reported that 600 charges were read out on February 25 in the Magistrates’ Court in Pengkalan Hulu for about eight hours from noon until 8pm to three Seruntun Maju directors and the company Seruntun Maju as represented by its manager, with 150 charges read out to each of them.

The charges were based on the company’s alleged failure to comply with the additional licence conditions in Item 19 requiring sales receipts to contain the duty-free store’s customers’ full name, travel document number and vehicle number and were allegedly committed at the duty-free shopping complex in Pengkalan Hulu, with the charges brought under Section 65D punishable by a maximum RM20,000 fine or a maximum five-year jail term or both upon conviction. The 600 charges are similar and only differ in the sales receipt numbers.

As Seruntun Maju had previously won its civil lawsuit where the additional conditions were quashed, all four of them pleaded not guilty and claimed trial, and were allowed bail at RM10,000 each with one surety.

Based on a previous DFIL company announcement, Seruntun Maju had on March 12, 2021 sent a representation letter to the attorney-general (AG) to ask for the criminal proceedings involving 600 charges against the company and its officers to be discontinued, but this was rejected on April 6, 2021 by the AG and the prosecution then sought to amend all the 600 charges.

The prosecution on April 8, 2021 withdrew the proposed amended charges as they were defective, while the company on July 27, 2021 again wrote to the AG to ask for the criminal case to be discontinued.

Seruntun Maju on June 18, 2021 applied to have the criminal charges struck out for being defective.

Even before the striking out application could be heard, the Magistrates’ Court decided on October 28, 2021 to release the company and its officers from all 600 charges, as the magistrate found that there were significant administrative defects in the charges and the filing of proposed amended charges by the Customs.

But as the magistrate had issued an order for discharge not amounting to acquittal from the 600 defective charges, the magistrate had also said the Customs is free to file fresh charges against Seruntun Maju and its officials.

It is understood that Customs had on October 29, 2021 filed a criminal revision application at the High Court in Taiping in a bid to reinstate the 600 charges against Seruntun Maju and its officials.

But with the recent July 6 settlement between Customs and the company, the entire matter has now come to an end with Customs ending all prosecution against Seruntun Maju.