Kalev fights off allegations of excess sugar stocks

  • 2005-07-20
  • From wire reports
TALLINN - Kalev, Estonia's leading confectionery, lodged a protest with the administrative court asking the court to cancel the tax authority's ruling that found the candy manufacturer had excess sugar stocks on the eve of EU accession last year.

Kalev has asked the court not to apply the penalties pursuant to the law on excess stock since it contradicts the constitution.

The company said it has not changed its position that it declared its excess stocks of sugar correctly and that it was not the owner and possessor of 15,600 tons of sugar judged to be excessive prior to the country's accession on April 30, 2004.

The Tax and Customs Board's tax center on June 17 set Kalev's excess sugar stocks at 15,600 tons and ordered the firm to remove it from the market. Kalev, however, claimed it sold 15,400 tons of sugar before the law on excess stock penalties took effect.

The tax authority, however, is of the opinion that Kalev was still the owner of the sugar on May 1, 2004.

If the firm's excess sugar stocks remain at 15,600 tons after all, the so-called sugar fine slapped on it may amount to 135 million kroons (8.6 million euros).

Allan Viirma, head of Kalev's legal service, said the tax authority's ruling was groundless and illegal. "AS Kalev got rid of the sugar even before the ESSA entered into force, and so it is incomprehensible how AS Kalev can withdraw sugar it had already gotten rid of once," Viirma said. "The fact that the Tax and Customs Board calls a real sale 'fictional' does not provide any ground for laying unreasonable duties on the company."

CEO Oliver Kruuda told reporters that the confectionery's warehouse was not big enough to hold 15,000 tons of sugar.

Customs statistics show that Kalev bought up to 12,000 tons of sugar, equal to the company's four years' sugar reserve, from May 2003 until May 2004.

Estonia is currently facing a huge penalty for amassing sugar on the eve of accession, which is forbidden by EU law. The government, which recently hired a Dutch law firm to contest the European Commission's decision, is hoping that it can force some of the country's sugar importers and users to help foot the bill. The total fine for Estonia's excessive sugar stocks could amount to 45 million euros.