Simplex Sdn Bhd. v Public Prosecutor (W-09-15-01/2017)

LIM CHEE SON @ LIM CHEE SONG

HUA KIA PAH … APPELLANTS AND PUBLIC PROSECUTOR … RESPONDENT [In The Matter of the High Court of Malaya at Kuala Lumpur

Simplex Sdn. Bhd.

Lim Chee Son @ Lim Chee Song

Siew Lai Ling

Hua Kia Pah] 2 CORAM: WIRA MOHTARUDIN BAKI, JCA YAACOB HAJI MD SAM, JCA SURAYA OTHMAN, JCA JUDGMENT OF THE COURT INTRODUCTION [1] The Respondent (Public Prosecutor) alleged that the 1st Appellant (Simplex Sdn Bhd) had committed an offence under section 135(1)(g) of the Customs Act 1967 (Act 235) by under-declaring the value of the kitchen equipment i.e. Manitowoc Ice Machine, Taylor Soft Serve Freezer, Manitowoc half-dice, Menu-master oven and Manitowoc ice dispenser (hereinafter collectively referred to as “said goods”) imported from the period of January 2010 until December 2011 and thereby the 1st Appellant had fraudulently evaded the customs duties and taxes imposed on the said goods at the time of import. The Respondent then on 23.9.2014 seized RM390,932.70 from the 1st Appellant’s Maybank Berhad current account no 014280-402164 (the seized property) which the Respondent alleged were the proceeds of the unlawful activity or offence committed from the period 3 of January 2010 until December 2011. The Respondent then made an application to the High Court pursuant to section 56(1) of Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATFPUA) [Act 613] to forfeit the seized property. [2] The learned High Court Judge allowed the Respondent/Applicant’s application made under section 56(1) Act 613 to forfeit the seized property of RM 390,932.70 and any accretion to it held in the Maybank Berhad current account number 014280-402164 belonging to the 1st Appellant. [3] Dissatisfied, the 1st Appellant appealed against the decision of the learned High Court Judge. We heard submissions from both parties and after perusing through the Appeal Records, we found merits in the appeal. Unanimously, we allowed the appeal. The decision of the learned High Court Judge was set aside. Herein below are our grounds. BACKGROUND [4] By way of a Notice of Motion under section 56(1) Act 613 dated 24.6.2015, the Respondent/ Applicant moved the High Court for the orders as follows: 4

to publish a notice in a Gazette calling upon any third party who claims to have any interest in the property to attend before the court to show cause as to why the property shall not be forfeited; and

(ii) to forfeit the seized property of RM390,932.70 and any accretion to it held in the Maybank Berhad current account number 014280-402164 belonging to the 1st Appellant. [5] The relevant affidavits filed by the Respondent/Applicant and the Appellants respectively in relation to the application are as follows:

‘Afidavit’ by Mohd Farez bin Rahman affirmed on 22.6.2015 (pg 4-7 Jilid 3A);

(ii) ‘Afidavit Prediket’ by Lim Kee Yee affirmed on 22.6.2015 (pg 8-31 Jilid 3A);

(iii) ‘Afidavit AMLATFPUAA’ by Mohd Samsol bin Md. Muzer affirmed on 22.6.2015 (pg 2469-2482 Jilid 3 N A);

(iv) ‘Afidavit Jawapan Responden-responden (1)’ by Lim Chee Son @ Lim Chee Song affirmed on 30.7.2015 (pg 2763-2799 Jilid 3 O A); 5

‘Afidavit Jawapan (1) Pegawai Penyiasat Pertama’ by Lim Kee Yee affirmed on 2.11.2015 (pg 3323-3326 Jilid 3 P);

(vi) ‘Afidavit Jawapan (1) Pegawai Penyiasat Kedua’ by Mohd Samsol bin Md. Muzer on 2.11.2015 (pg 3328-3334 Jilid 3 P);

(vii) ‘Afidavit Jawapan Responden-responden (2)’ affirmed on 18.11.2015 (pg 3336-3351 Jilid 3 P);

(viii) ‘Afidavit Jawapan (2) Pegawai Penyiasat Pertama’ by Lim Kee Yee affirmed on 23.3.2016 (pg 3352-3355 Jilid 3 P);

(ix) ‘Afidavit Jawapan (2) Pegawai Penyiasat Kedua’ by Mohd Samsol bin Md. Muzer on 23.3.2016 (pg 3357-3362 Jilid 3 P). [6] On 4.8.2016 pursuant to section 61 of Act 613, the Respondent caused a notice to be published in a Gazette P.U.(B) 352 calling upon any third party who claims to have any interest in the property to attend before the court to show cause as to why the seized property shall not be forfeited. [7] On 9.9.2016, the 1st Appellant filed an affidavit, affirmed by one Choong Weng Cheng, asserting its claim on the seized property deposing the reasons as to why the said property ought not to be forfeited. 6 DECISION OF THE HIGH COURT [8] The learned High Court Judge had allowed the Respondent/ Applicant’s application made under section 56(1) [Act 613] to forfeit the seized property of RM 390,932.70 and any accretion to it held in the Maybank Berhad current account number 014280-402164 belonging to the 1st Appellant. The High Court held that the seized property of RM390,932.70 were the proceeds of the unlawful activity of the 1st Appellant in evading the payment of customs duties and taxes on the said goods imported from the period of January 2010 until December 2011. APPELLANT’S GROUNDS OF APPEAL [9] The grounds of appeal are as follows: a) the seized property was the balance of monies remaining in the 1st Appellant’s bank account as of 20.5.2014. The seized property was the proceeds of the sale of non-dutiable goods imported by the 1st Appellant on 2.5.2014 and sold to KFC, Malaysia. It was not the proceeds of an offence alleged to have taken place from the period of January 2010 until December 2011; 7 b) the kitchen equipment imported on 2.5.2014 were non-dutiable where no element of customs duties were involved and under the circumstances no offence of fraudulent evasion of any customs duties is disclosed; c) the 1st Appellant, upon receipt of RM1,546,156.80 from KFC, Malaysia for the sale of the non dutiable kitchen equipment, had remitted RM1,496,990.00 (Singapore Dollars 580,000.00) to Simplex Private Ltd, Singapore as the exporter/supplier of the kitchen equipment to the 1st Appellant. On remittance of the aforesaid monies, the balance sum of monies remaining in the 1st Appellant’s bank account was RM427,719.56 as of 27.6.2014 which was initially frozen pursuant to an order issued under subsection 44(1) of Act 613. On 21.7.2014 the Respondent upon a request by the 1st Appellant had instructed Maybank Bhd to release to the 1st Appellant a sum of RM55,000.00 from the seized property leaving the balance sum of RM390,932.70 which is currently the seized property in question; d) the Customs Department did not make any demand or claim from the 1st Appellant to recover any short-paid customs duties 8 and taxes, if any, as provided under section 17 of the Customs Act 1967 for the period of January 2010 until December 2011; e) the Customs Department did not offer any compound nor prosecute the 1st Appellant for the alleged offence during the period from January 2010 until December 2011, if it is true as alleged by the Respondent that the 1st Appellant had committed an offence under subsection 135(1) (g) of the Customs Act 1967; f) as a consequence of the freezing and seizing order made pursuant to section 44 and section 50 of Act 613 respectively in respect of the seized property, the 1st Appellant had to borrow RM392,065.42 from a Third Party to make payment towards the salaries, deductions for income tax purposes, contribution to the Employees Provident Fund and social security and other administrative expenses incurred by the 1st Appellant for the month of June 2014; g) the Respondent had failed to produce any credible and reliable evidence that the seized property was related or connected to the alleged offence committed between January 2010 until December 2011; 9 h) the learned High Court Judge had misdirected himself as to the facts and law in ordering the forfeiture of the said property when the Respondent had failed to prove in the first instance that an offence had been committed in respect of the goods imported on 2.5.2014. The seized property was only related or connected to the importation of the kitchen equipment on 2.5.2014 and had no nexus to the importation of goods during the period from January 2010 until December 2011. It was wholly unsafe for the learned High Court Judge to rely on the allegation by the Respondent/Applicant without any proof of the commission of an offence in respect of the goods imported on 2.5.2014. OUR DECISION The applicable law [10] Section 4(1) of Act 613 states that money laundering is an offence. An offence of money laundering under subsection 4(1) is said to have been committed when any person engages in, or attempts to engage in, or abet in the proceeds of any unlawful activity or instrumentalities of an offence. 10

(1) Any person who——

engages, directly or indirectly, in a transaction that involves proceeds of an unlawful activity or instrumentalities of an offence;

acquires, receives, possesses, disguises, transfers, converts, exchanges, carries, disposes of or uses proceeds of an unlawful activity or instrumentalities of an offence;

removes from or brings into Malaysia, proceeds of an unlawful activity or instrumentalities of an offence; or

conceals, disguises or impedes the establishment of the true nature, origin, location, movement, disposition, title of, rights with respect to, or ownership of, proceeds of an unlawful activity or instrumentalities of an offence, commits a money laundering offence and shall on conviction be liable to imprisonment for a term not exceeding fifteen years and shall also be liable to a fine of not less than five times the sum or value of the proceeds of an unlawful activity or instrumentalities of an offence at the time the offence was committed or five million ringgit, whichever is the higher. [11] The word “money laundering” is defined in section 3 of Act 613 as follows: 11 “money laundering” means a person who—

engages, directly or indirectly, in a transaction that involves proceeds of any unlawful activity;

acquires, receives, possesses, disguises, transfers, converts, exchanges, carries, disposes, uses, removes from or brings into Malaysia proceeds of any unlawful activity; or

conceals, disguises or impedes the establishment of the true nature, origin, location, movement, disposition, title of, rights with respect to, or ownership of, proceeds of any unlawful activity, where— (aa) as may be inferred from objective factual circumstance, the person knows or has reason to believe, that the property is proceeds from any unlawful activity; or (bb) in respect of the conduct of a natural person, the person without reasonable excuse fails to take reasonable steps to ascertain whether or not the property is proceeds from any unlawful activity. [12] The word “unlawful activity” in section 3 of Act 613 is defined as follows: 12 “unlawful activity" means—

any activity which constitutes any serious offence or any foreign serious offence; or

any activity which is of such a nature, or occurs in such circumstances, that it results in or leads to the commission of any serious offence or any foreign serious offence. [13] The word “proceeds of an unlawful activity” is defined as follows: “proceeds of an unlawful activity" means any property, or any economic advantage or economic gain from such property, within or outside Malaysia—

which is wholly or partly—

derived or obtained, directly or indirectly, by any person from any unlawful activity;

(ii) derived or obtained from disposal or other dealings with the property referred to in subparagraph (i); or

(iii) acquired using the property derived or obtained by any person through any disposal or other dealings referred to in subparagraph

or (ii); or

which, wholly or partly, due to any circumstances such as its nature, value, location or place of discovery, or to the time, manner 13 or place of its acquisition, or the person from whom it was acquired, or its proximity to other property referred to in subparagraph (a)(i),

(ii) or (iii), can be reasonably believed to be property falling within the scope of subparagraph (a)(i), (ii) or (iii); [14] From the above definitions it will show that money laundering is principally concerned with the proceeds from any unlawful activity/serious offence. [15] The word “serious offence” is defined in section 3 of Act 613 as follows: “serious offence" means—

any of the offences specified in the Second Schedule;

an attempt to commit any of those offences; or

the abetment of any of those offences; [16] A look at the Second Schedule shows that on offence under s 135 of the Customs Act 1967 constitute as a serious offence. Thus from the definition from section 3 of Act 613, the essence of money laundering is as follows: 14

First, there must be an ‘unlawful activity’ which is any activity that is related to the pre-defined list of offences provided under the Second Schedule of the Act 613. These pre-defined offences are typically known as the predicate offence;

Secondly, there must also be identifiable proceeds from the said unlawful activity/predicate offence. These proceeds must be identifiable and specifically and directly connected “in specie” to the unlawful activity/predicate offence;

Thirdly, there must be an act associated with money laundering involving the said identifiable proceeds from the unlawful activities/predicate offence. This act is pre-defined under items

(a), (b) and (c) of the definition of ‘money laundering’; and

Lastly, the requisite mens rea associated with the offence of money laundering must be present as set-out under items (aa) and (bb) of the definition of ‘money laundering’. 15 [17] The forfeiture provision, section 56 of Act 613 meanwhile states: Forfeiture of property where there is no prosecution 56.

Subject to section 61, where in respect of any property seized under this Act there is no prosecution or conviction for an offence under subsection 4(1) or a terrorism financing offence, the Public Prosecutor may, before the expiration of twelve months from the date of the seizure, or where there is a freezing order, twelve months from the date of the freezing, apply to a judge of the High Court for an order of forfeiture of that property if he is satisfied that such property is—

the subject-matter or evidence relating to the commission of such offence;

terrorist property;

the proceeds of an unlawful activity; or

the instrumentalities of an offence.

The judge to whom an application is made under subsection (1) shall make an order for the forfeiture of the property if he is satisfied—

that the property is—

the subject-matter or evidence relating to the commission of an offence under subsection 4(1) or a terrorism financing offence;

(ii) terrorist property;

(iii) the proceeds of an unlawful activity; or 16

(iv) the instrumentalities of an offence; and

that there is no purchaser in good faith for valuable consideration in respect of the property.

Any property that has been seized and in respect of which no application is made under subsection (1) shall, at the expiration of twelve months from the date of its seizure, be released to the person from whom it was seized.

In determining whether the property is—

the subject-matter or evidence relating to the commission of an offence under subsection 4(1) or a terrorism financing offence;

terrorist property;

the proceeds of an unlawful activity; or

the instrumentalities of an offence, the court shall apply the standard of proof required in civil proceedings. [18] It must be noted that section 56 is two pronged. Before the Respondent can make an application for forfeiture to a High Court Judge, the Appellant has to meet the requirements or conditions of section 56 (1) of the Act. The conditions are that the application has to be made before the expiration of twelve months from the date of seizure, or where there is a freezing order, twelve months from the freezing. Further, the Respondent 17 has to be satisfied that the seized property is the subject-matter or evidence relating to a commission of such offence, a terrorist property, the proceeds of an unlawful activity, or the instrumentalist of an offence before he can make such an application. [19] Likewise, once the application is before the learned Judge, the similar requirements/conditions as in section 56 (1) applies. Before the learned Judge can make an order for the forfeiture of the seized property under section 56 (2), he has to be satisfied that the following conditions has been fulfilled by the Respondent, namely that:

since section 56 proceedings is subject to section 61 of the Act, that there are no claims from any bona fide third parties purchaser in good faith for valuable consideration in respect of the seized property;

the property was frozen and seized under the Act;

there had been no prosecution or conviction under section 4(1) of the Act;

the seized property is the subject-matter or evidence relating to a commission of such offence, a terrorist property, the proceeds 18 of an unlawful activity, or the instrumentalist of an offence, that is, the seized property was used in the commission of the offence under section 4(1); and

in determining conditions (a) to (d), the learned Judge shall apply the standard of proof as required in civil proceedings or in other words, the standard of proof on a balance of probabilities. [20] Having established the essence of money laundering, we pause to observe that section 56 when read together with section 4 of the Act establishes the necessity for the existence of a predicate offence. The predicate offence here is the offence under section 135(1)(g) of the Customs Act 1967. [21] Further section 70 of Act 613 reads as follows: Standard of proof 70.

Any question of fact to be decided by a Court in proceedings under this Act shall be decided on a balance of probabilities.

Subsection (1) shall not apply in relation to any question of fact that is for the prosecution to prove in any proceedings for an offence under this Act or any subsidiary legislation under it. 19 [22] Section 70(2) recognizes that when it comes to proving the predicate offence, the burden on the prosecution must be beyond a reasonable doubt. [23] Once the predicate offence is proved beyond a reasonable doubt, it must then be proved, on a balance of probabilities, that the specific proceeds derived from the predicate offence, was used in the commission of an offence of money laundering (which requires an element of mens rea). The specific proceeds derived from the predicate offence must be, in specie, the movable and immovable properties sought to be forfeited. In this context, according to the Law Lexicon, specie means anything in its own form, not any equivalent, substitute, or reparation. [24] This link between the predicate offence and the commission of money laundering is a pre-requisite to forfeiture as provided under section 56 of the Act 613. [25] The Court in determining whether the proceeds are from an unlawful activity under section 4 shall apply the standard of proof required in civil proceedings or as we know it, on a balance of probabilities. This is 20 provided for in section 56(4) and section 70(1) of Act 613. As such the forfeiture proceeding under section 56 can be deemed to be either a civil forfeiture proceeding or a quasi-criminal forfeiture proceeding. [26] It is therefore trite that the simple existence of an alleged, and as yet unproven, predicate offence is insufficient. The specific proceeds from the said predicate offence must be linked to the offence of money laundering which is crucial to establish the commission of an offence under section 4(1)(a) and this is a prerequisite to section 56(1) of the Act. [27] Following from the above, it is incumbent for the Respondent to make clear to this Court and the Appellants, in any application for forfeiture, the following elements:

the exact predicate offence, the evidence and basis upon which the commission of the offence has been established beyond reasonable doubt;

identify the proceeds of the predicate offence that forms, in specie, the property in the hands of the 1st Appellant; 21

specify and identify the exact act or acts by which the 1st Appellant committed “money laundering”; and

specify and identify the manner in which the element of mens rea required for the commission of the offence of money laundering may be attached to the 1st Appellant. [28] The Court of Appeal cases of Teh Tek Soon v PP [2015] 1 LNS 1504, PP v Billion Nova Sdn Bhd & Ors [2016] 2 CLJ 763, Azmi Osman v PP & Another Appeal [2015] 9 CLJ 845, PP v Kuala Dimensi Sdn Bhd & 8 Ors [2019] 3 CLJ 650; [2018] 6 MLJ 37 and PP v Awalluddin bin Sham Bokhari [2018] 2 MLJ 401 support the contention that the standard of proof applicable is on a balance of probabilities and not beyond a reasonable doubt. Respondent’s allegation [29] The Respondent/Applicant alleged that the 1st Appellant had committed an offence under section 135(1)(g) of the Customs Act 1967 by under-declaring the value of the kitchen equipment i.e. Manitowoc Ice Machine, Taylor Soft Serve Freezer, Manitowoc half-dice, Menu-master 22 oven and Manitowoc ice dispenser (“ the said goods ”) imported from the period of January 2010 until December 2011 and thereby the 1st Appellant had fraudulently evaded the customs duties and taxes on the said goods at the time of import. The Respondent further alleged that the seized property were the proceeds of the unlawful activity or offence committed from the period of January 2010 until December 2011. Issues for determination [30] The issues that arose for determination by the High Court were as follows:

whether an offence under s.135(1)(g) Customs Act 1967 had been committed from the period of January 2010 until

whether the seized property were the proceeds of the unlawful activity or the offence ; and

that there is no purchaser in good faith for valuable consideration in respect of the seized property. 23 [31] Therefore, it is a prerequisite that the Respondent/Applicant had to prove that an offence under s.135(1)(g) of Act 235 had been committed and in this instant case, whether there was a fraudulent evasion of customs duties or taxes on the said goods imported by the 1st Appellant from January 2010 until December 2011 and that the seized property (RM 390,932.70) held in the Maybank Berhad current account no. 014280- 402164 belonging to the 1st Appellant were the proceeds of such an unlawful activity or offence. Contention of 1st Appellant [32] The 1st Appellant state that it is a company incorporated in Malaysia and is in the business of importing, dealing and retailing in kitchen equipment and its spare parts. At all material times, the value and the customs duties and taxes paid in respect of the said goods imported by the 1st Appellant during the period of January 2010 until December 2011 were assessed and determined by the proper custom officer pursuant to s. 13(1) Customs Act 1967 where such valuation of the goods are deemed correct for the purpose of payment of customs duties and taxes. [33] The 1st Appellant vide the Affidavit in Reply (1) and Affidavit in Reply

affirmed by Lim Chee Son @ Lim Chee Song on 30.7.2015 (at 24 paragraph 8.3 at pages 2763 - 2799 Jilid 3 O A) and 18.11.2015 respectively averred that the seized property was not the subject matter of the alleged offence nor the proceeds of the unlawful activity. According to the paragraph 8.3 of the Affidavit in Reply by Lim Chee Son@Lim Chee Song dated 30 July 2015, it is stated that RM390,932.70 which is in the 1st Appellant’s account as of 25.7.2014 was part of the monies obtained by the 1st Appellant on or about 20.5.2014 in respect of the goods sold to KFC Manufacturing Sdn Bhd (“KFC”), vide Invoice No. I201403570 and I201403571. Both these invoices dated 7.5.2014 has no connection to the offence alleged to have been committed by the 1st Appellant for the period from January 2010 until December 2011. Further, Lim Chee Son averred that on or about 20.5.2014 upon receipt of RM1,546,156.80 from KFC in respect of the sale of the goods, the 1st Appellant remitted SGD580,000 (RM1,496,990.00) to Simplex Private Limited, Singapore being the supplier of such goods (hereinafter referred to as ‘the Supplier). The goods sold to KFC were non-dutiable goods and therefore not subject to payment of any customs duties. “8.3 The applicant had failed to consider that the said property, RM390,932.70 which is in the 1st Respondent’s bank account as of 25.7.2014 in respect of the goods sold to KFC Manufacturing Sdn Bhd (‘KFC’) vide invoice No.I201403570 and I201403571 both dated 7.5.2014 25 which has no connection to the offence as alleged to have been committed by the 1st respondent for the period from January 2010 until December 2011. On or about 20.5.2014 upon receipt of RM1,546,156.80 from KFC in respect of the sale of the goods, the 1st respondent remitted SGD580,000 (RM1,496,990.00) to Simplex Private Limited, Singapore being the supplier of such goods (hereinafter referred to as ‘the Supplier). The goods sold to KFC were non-dutiable goods and therefore not subject to payment of any customs duties. I am advised by my solicitors which I believe to be true that under the circumstances no offence could have been committed under section 135(1) (g) of the customs Act 1967. Therefore the said property is not the proceeds of any unlawful activities as alleged by the applicant to have been committing during the period from January 2010 until December 2011. Now shown to me copies of the official Receipt 1-05-001028-2014/B18, Customs Declaration Form and all related documents including the purchase order, invoices, delivery order, bank statement and remittance dated 21.5.2014 in respect of the imported goods sold to KFC, annexed herewith and marked collectively as Exhibit ‘CSL-2’.” (Note that reference to the 1st Respondent in the Affidavit in Reply is the 1st Appellant – Simplex Sdn Bhd in this Appeal) 26 [34] As stated earlier, the 1st Appellant, upon receipt of RM1,546,156.80 from KFC, Malaysia for the sale of the non-dutiable kitchen equipment, had remitted RM 1,496,990.00 (Singapore Dollars 580,000.00) to Simplex Private Ltd , Singapore as the supplier of the kitchen equipment where the balance sum of monies remaining in the 1st Appellant’s bank account was RM 427,719. 56 as of 27.6.2014 which was initially frozen pursuant to an order issued under subsection 44(1) of Act 613. On 21.7.2014 the Respondent upon a request by the 1st Appellant had instructed Maybank Bhd to release to the 1st Appellant a sum of RM 55,000.00 from the seized property leaving the balance sum of RM 390,932.70 which is currently the seized property in question. (See paragraph 6, 7 and 8.3 of Afidavit Jawapan Responden-responden (1) of Lim Chee Son @ Lim Chee Song affirmed on 30.7.2015). [35] The 1st Appellant at all times maintained that the 1st appellant had not committed any act of fraudulent evasion of customs duties and taxes in respect of the said goods imported during the period from January 2010 until December 2011 for the simple reason that the 1st Appellant had declared the value of the said goods correctly to the custom officers who in turn had determined the value of the goods in accordance with the valuation rules as laid down in the Customs (Rules of Valuation) Regulation 27

(See paragraph 12 and 13 Afidavit Jawapan (1) of Lim Chee Son @ Lim Chee Song affirmed on 30.7.2015 [pg. 2769 Jilid 3 O A] and Exhibit “CSL-3” (Jilid 3 O A - Jilid 3 O B, pgs. 2835 – 3180). [36] The Respondent/Applicant contended that the alleged offence was committed for the period commencing from January 2010 until December 2011 but the seized property found in the 1st Appellant’s bank was the balance of monies remaining in the 1st Appellant’s account as a result of the sales of the non-dutiable kitchen equipment imported on 2.5.2014. Under the circumstances we are of the view that the Respondent had failed to show that there was a nexus between the seized property and the alleged offence allegly committed from January 2010 until December 2011. [37] It must be noted that the 1st Appellant had produced evidence which was unchallenged by the Respondent /Applicant that the seized property was the balance of monies remaining in the 1st Appellant’s bank account as of 20.5.2014 . The seized property were the proceeds of the sale of non-dutiable goods to KFC, Malaysia which were imported by the 1st Appellant on 2.5.2014 and were not the proceeds of an offence alleged to have taken place from the period of January 2010 until December 2011. 28 [38] Thus in the circumstances, we have to agree with the 1st Appellant that it is evident from the documents exhibited that the kitchen equipment which was imported by the 1st Appellant was non-dutiable and therefore did not give rise to any element of fraudulent evasion of any customs duties. The Respondent/Applicant had never challenged this crucial piece of evidence in their affidavits in reply. Under the circumstances the Respondent had failed to disclose that an offence under s.135(1)(g) of Customs Act 1967 had been committed. [39] Further, the Respondent had not commenced any prosecution against the Appellants in respect of any offence under s.135(1)(g) Customs Act 1967 nor had the Respondent made any written demand pursuant to s.17 of the same to claim from the 1st Appellant any short-paid taxes for under-declaration of the said goods from the period from January 2010 until December 2011. If the Respondent believed that the 1st Appellant had fraudulently evaded from paying the customs duties and taxes on such goods at the times of import for the period from January 2010 until December 2011, there are provisions in the Customs Act 1967 which gives power to the investigation officer and the Deputy Public Prosecutor to open an investigation paper and prosecute the offender who 29 violates the said Act or make a written demand under s. 17 of the same. Section 17 of the Customs Act 1967 state as follows:

“Payment of duty, etc., short paid or erroneously refunded

Whenever—

through inadvertence, error, or for any other reason, misconstruction on the part of any officer of customs, or through unintentional misstatement as to value, quantity or description by any person, or for any other reason, the whole or any part of any customs duties or other moneys payable under this Act have not been paid; or

the whole or any part of such customs duties or other moneys, after having been paid, have been, owing to any cause, erroneously refunded, the person liable to pay such customs duties or other moneys or the person to whom such refund has erroneously been made, as the case may be, shall pay the deficiency or repay the amount paid to him in excess, on demand being made within three years from the date on which customs duty was payable or deficient customs duty was paid or the refund was made, as the case may be, and without prejudice to any other remedy for the recovery of the amount due, any goods belonging to such person which may be in customs control may be detained until such customs duty or deficiency be paid or the refund be repaid, as the case may be. 30

Where any amount is payable in accordance with subsection (1) the Director General may allow the amount to be paid by instalments in such amounts and on such dates as he may determine.” [40] In the Affidavit of Lim Kee Yee (1st investigating officer) dated 22 June 2015, Jilid 3A, he stated that through his investigation the 1st Appellant had fraudulently under declared the goods. If this is so, why was there no prosecution under s. 135(1)(g) or a demand being made against the 1st Appellant under s. 17 of the Act?

“Saya menegaskan bahawa hasil siasatan saya pada tahun 2011 menerusi 39 kali pengimportan barangan peralatan dapur restoran dan alatan ganti bagi peralatan di atas cukai yang perlu dibayar oleh “Responden Pertama” kepada “JKDM” adalah sebanyak RM1,062,037.44 bagi duti import dan RM513,332.37 bagi cukai jualan menjadikan kesemua jumlah cukai yang perlu dibayar kepada “JKDM” sebanyak RM1,575,369.44 namun secara curang “Responden Pertama” hanya membayar cukai kastam sebanyak RM115,030.00 bagi duti import dan RM59,598.10 bagi cukai jualan menjadikan kesemua jumlah cukai yang dibayar oleh “Responden Pertama” kepada “JKDM” hanyalah RM174,628.10. Jelas menunjukkan “Responden Pertama” telah terkurang bayar kepada “JKDM” dan kehilangan hasil sebanyak RM1,400,741.34 kepada Kerajaan Malaysia 31 [sesalinan ringkasan pengiraan cukai pengimportan barangan tersebut dilampirkan di sini dan ditandakan sebagai ekshibit “LKY-36”.]

Saya menegaskan merujuk kepada “LKY 36” bil.1 pada 07.09.2011 “Responden Pertama” telah melakukan pengimportan barangan dari Singapura dan membuat pengikraran pada borang “K1” bernombor B10109006715. [Segala dokumen berkaitan pengimportan tersebut dilampirkan di sini dan ditanda sebagai “LKY 37(a) hingga LKY 37(r)”].

Saya menegaskan bahawa hasil siasatan terhadap pengimportan “Responden Pertama” pada penyataan saya di perenggan 26 “Responden Pertama” secara curang telah melampirkan satu invoice rekaan bernombor P-4345 (rujuk Ekshibit “LKY 37 (k) semasa membuat pengikraran dalam borang ‘K1’.” [41] A further perusal of the affidavit affirmed by the 1st investigating officer Lim Kee Yee clearly indicated that the allegation of violation against Act 613 by way of fraudulently evading the payment of customs duties and taxes on such goods at the times of import was done during the period from January 2010 until December 2011 but the Respondent only seized the monies from the 1st Appellant’s Maybank Berhad current account on 32

25.7.2014. From the Respondent’s affirmed affidavits there was no evidence to show that the money seized RM390,932.70 was the money obtained from any transactions which were carried out from the period of January 2010 until December 2011. Thus the Respondent had failed to show the nexus or link between the money seized and the unlawful activity (under declaration or non-payment of customs duties on the said goods), otherwise the Customs Department would have offered to issue a compound or prosecute the 1st Appellant for the alleged offence during the period of January 2010 until December 2011, if it is true as alleged by the Respondent, that the 1st Appellant had committed an offence under subsection 135(1) (g) of the Customs Act 1967. [42] Further we noted that when the 1st Appellant’s bank account was frozen pursuant to an order issued under subsection 44 (1) of Act 613, the monies available in the 1st Appellant’s bank account was RM427,719.56. From the facts, it is noted that this sum was the balance of monies remaining in the 1st Appellant’s bank account after receipt of RM1,546,156.80 from KFC and after remitting RM1,496,990.00 (Singapore Dollars 580,000.00) to Simplex Private Ltd, Singapore for the import of the non-dutiable kitchen equipment. (Refer to the Afidavit Jawapan Responden-responden (1)’ by Lim Chee Son @ Lim Chee Song affirmed 33 on 30.7.2015 at pages 2763 - 2799 Jilid 3 O A at paragraph 21 at page 2792) which read as follows: “21. On 21.7.2014 the 2nd investigating officer had instructed the Maybank Bhd to release to the 1st respondent a sum of RM55,000.00 from the sum of RM427,719.56 which was frozen and held in 1st respondent bank account……” [43] The above paragraph explained that the 2nd investigating officer had instructed Maybank Berhad to release a sum of RM55,000.00 from the total of RM427,719.56 which was frozen and held in the 1st Appellant’s bank account pursuant to an order issued under subsection 44(1) of Act 613. [44] The Respondent submitted that the seized property is the subject matter or evidence related to the commission of an unlawful activity. If the seized property was obtained from an unlawful activity as contended by the Respondent, then the seized property must be seized in its total sum which was frozen to the amount of RM427,719.56 pursuant to the order issued under subsection 44(1) of Act 613, and not on the balance amount after releasing the sum of RM55,000.00. The instruction of the 2nd investigating officer to Maybank Berhad to release a sum of RM55,000.00 from the total sum of RM427,719.56 to the 1st Appellant for the purpose of monies due to 34 be paid as salaries for the staffs of the 1st Appellant itself can lead to a conclusion that the seized property (initially at RM427,719.56) were not the proceeds of any unlawful activity or proceeds of any offence under section 135(1)(g) of Customs Act 1967. Thus the Respondent had failed to prove to this court in what circumstances they had released the sum of RM55,000.00 to the 1st Appellant. [45] It is trite law that if a property is seized on the basis that it was obtained by way of an illegal or an unlawful activity or in violation of any Act, then the seizure of the said property must be in total, since the seizure of that particular property is a legal action provided by that particular written law. In this Appeal the instruction of the 2nd investigating officer to release the amount of RM55,000.00 to the 1st Appellant for the purpose of paying the salaries of the 1st Appellant’s staffs clearly shows that the seizure in this appeal does not reflect the real intention of Act 613 when the said Act was enforced against the 1st Appellant. CONCLUSION To summarize: [46] The Respondent alleged that the unlawful activity or offence was committed from the period of January 2010 until December 2011. The 1st 35 Appellant had proven through documents and unchallenged affidavits that the seized property were not the proceeds of an offence alleged to have taken place from the period of January 2010 until December 2011 but were the proceeds of the sale of non-dutiable goods imported by the 1st Appellant on 2.5.2014 and sold to KFC, Malaysia. Therefore, the 1st Appellant had proven that they were purchasers in good faith for valuable consideration in respect of the seized property. [47] The kitchen equipments imported in 2.5.2014 were non-dutiable where no element of customs duties were involved and under the circumstances no offence of fraudulent evasion or under declaration of any customs duties is disclosed. Therefore, if the Respondent contended that there was any under-declaration or evasion detected by the custom’s investigating officer from his investigation, the Custom Department can make a written demand from the 1st Appellant for any short-paid taxes under s. 17 of the Customs Act. [48] If the seized property was obtained from an illegal or an unlawful activity as contended by the Respondent, then the seized property must be seized in its total sum, that is the frozen amount of RM427,719.56 pursuant to the order issued under subsection 44(1) of Act 613, and not on the 36 balance amount of RM390,932.70 after the release of the sum of RM55,000.00 to the 1st Appellant. [49] There was no sufficient judicial appreciation of the law and facts by the learned High Court Judge. In fact, the learned High Court Judge had misdirected himself as to the facts and law in ordering the forfeiture of the seized property under s. 56(2) of Act 613 when the Respondent had failed to prove in the first instance that an offence has been committed in respect of the said goods imported on 2.5.2014 and that the seized property was related to the offence of under declaration or evasion of duties and taxes of the said goods (unlawful activity). (Refer to Lee Ing Ching & Ors v Gan Yook Chin & Anor [2003] 2 MLJ 97; [2003] 2 CLJ 19 CA, Gan Yook Chin

(P) & Anor v Lee Ing Chin @Lee Teck Seng & Ors [2005] 2 MLJ 1; [2004] 4 CLJ 309 FC, UEM Group Berhad v Genisys Intergrated Pte Ltd [2010] 9 CLJ 785, Ming Holdings (M) Sdn Bhd v Tuan Syed Azahari bin Nor Shahabudin & Anor [2010] 4 MLJ 577 and Dream Property Sdn Bhd v Atlas Holding Sdn Bhd [2015] 2 CLJ 453). [50] Based on all the reasons above, we find merits in this appeal and we unanimously allowed the appeal and set aside the decision of the learned High Court Judge. 37 Appeal allowed. Decision of High court is set aside. Signed Dated: 5th January 2021 (SURAYA OTHMAN) Judge Court of Appeal Malaysia CASE(S) REFERRED TO: 1) Teh Tek Soon v PP [2015] 1 LNS 1504; 2) PP v Billion Nova Sdn Bhd & Ors [2016] 2 CLJ 763; 3) Azmi Osman v PP & Another Appeal [2015] 9 CLJ 845; 4) PP v Kuala Dimensi Sdn Bhd & 8 Ors [2019]3 CLJ 650; [2018] 6 MLJ 37; 5) PP v Awalluddin bin Sham Bokhari [2018] 2 MLJ 401; 6) Lee Ing Ching & Ors v Gan Yook Chin & Anor [2003] 2 MLJ 97; [2003] 2 CLJ 19; 7) Gan Yook Chin (P) & Anor v Lee Ing Chin @Lee Teck Seng & Ors [2005] 2 MLJ 1; [2004]4 CLJ 309; 8) UEM Group Berhad v Genisys Intergrated Pte Ltd [2010] 9 CLJ 785; 9) Ming Holdings (M) Sdn Bhd v Tuan Syed Azahari bin Nor Shahabudin & Anor [2010] 4 MLJ 577; and 10) Dream Property Sdn Bhd v Atlas Holding Sdn Bhd [2015] 2 CLJ 453). LEGISLATION REFERRED TO: 1) Sections 3, 4, 56, 61 and 70 Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATFPUA) [Act 613]; and 2) Sections 17 and 135 of the Customs Act 1967 [Act 235]. 38 COUNSEL: For the Appellants:- Messrs J R Ravendran & Associates Advocates & Solicitors Suite B 717, Block B 7th Floor, Kelana Square No.17, Jalan SS7/26 47301 Petaling Jaya Selangor Darul Ehsan For the Respondent:- Timbalan Pendakwa Raya Jabatan Peguam Negara Bahagian Guaman, Aras 6 No. 45, Persiaran Perdana, Presint 4 62100 Putrajaya.