An entrepreneur who invested in a cigarette manufacturing business has had an almost €1.2 million fine slashed to €4,350 on appeal after it turned out that he was well within legal time limits when he informed tax authorities that the imported raw tobacco had started being manufactured.
Frankie Apap set up his business venture at a time when there was no other local cigarette-manufacturing factory, obtaining the relative licence in July 2020 after seeking guidance from the Tax Commissioner and customs authorities to make sure of conformity with local and EU law.
He invested in warehouses designed to store the imported raw material and also purchased the machinery necessary for the manufacturing process at his Zejtun factory.
In October 2020 he imported some 3,140 kilos of raw tobacco from Poland.
Later, he called customs seeking direction on the necessary paperwork that was to be submitted for the purpose of sending some cigarette samples for testing in Germany.
That call triggered an inspection at Apap’s factory and that was when trouble started.
Apap was subsequently charged with having started the manufacturing process without having first obtained the necessary customs clearance and without paying the relative duties and tax due.
Upon conviction by a Magistrates’ Court in February, Apap was handed a one-month jail term suspended for two years together with a fine of €1,149,240.
He appealed that conviction on various grounds, arguing further that the punishment was too harsh and disproportionate.
When delivering judgment on Wednesday the Court of Criminal Appeal, presided over by Madam Justice Edwina Grima, upheld the conclusions of the first court in respect of the appellant’s failure to inform the authorities about the importation of the raw tobacco. The confiscation of the tobacco was confirmed in her judgment.
However, the judge revoked the decision of the first court in so far as the appellant’s obligation to inform the authorities about the start of manufacture was concerned.
In terms of the Customs Ordinance and the Excise Duty Act, as an authorised tax warehouse keeper of tobacco and tobacco products, Apap was bound to submit his statement “not later than the 21st day of the month immediately following the end of each accounting period.”
On the basis of documentation produced in evidence, that six-month period expired on January 16, 2021, namely six months after the issuing of the licence.
Thus, when customs officials inspected Apap’s warehouse on December 1, 2020, he was well within time limits to inform the Commissioner of the start of manufacture. And in fact, the relative statement was submitted on January 13, 2021.
In light of such considerations the court partly revoked the conviction, finding the appellant only guilty of failing to declare the importation of the raw material.
That unprocessed material was, at that stage, not subject to customs duties nor taxes and consequently, there was no issue of tax evasion.
In such cases, the legislator imposed heavy sanctions so as to counter tax evasion, with fines running into hefty sums that were three or five times the amount of taxes due, observed the court.
While imprisonment and confiscation of the merchandise were mandatory when the imported product was tobacco, since there was no issue of tax evasion in this case, the fine was to tend towards the minimum €4000, said Madam Justice Grima.
The punishment was thus varied by condemning Apap to a one-month jail term suspended for one year and slashing the fine to €4350.
Lawyers Jose’ Herrera, Martina Herrera and Herman Mula assisted the appellant.