Kalev                            ANNOUNCEMENT                           29.06.2005



AS KALEV DISPUTES TAX AND CUSTOMS BOARD DECISION



AS Kalev is disputing the decision of the Tax and Customs Board's (TCB) Põhja  tax

centre of 17 June 2005 on determining the carry-over stock and surplus  quantities

of sugar for AS Kalev.



AS Kalev continues to hold the position that  it  declared  its  sugar  quantities

correctly and in conformance with the provisions of the  Surplus  Quantities  Fees

Act (SQFA) and the company is not the owner or possessor of the  15,600-ton  sugar

surplus quantity declared excessive by the MTA as of 1 May 2004.



The SQFA, published 27 April 2004, entered into force on  1  May  2004.  AS  Kalev

sold the 15,400 tons of sugar it possessed before the SQFA entered into force.  AS

Kalev gave the rights to the ownership of the sugar to a buyer upon conclusion  of

a contract. Since the conclusion of the contract, AS Kalev has not been the  owner

of the sugar.



The obligations of the buyer and seller arising from the sugar sale contract  have

been fulfilled and  the  sales  contract  has  real  legal  and  factual  economic

consequences that conform to its content. The tax authority's position  that  this

sales transaction was a mere technicality is unjustified. AS Kalev does not  agree

with the position of the tax authority solely due to the fact that  it  is  proven

in documentary form that the rights to the sugar were transferred in exchange  for

actual payment.



AS Kalev finds that the allegations and conclusions in the decision of  the  TCB's

Põhja tax centre are erroneous and  groundless  and  that  standards  on  tangible

rights and principles of law have been violated.



The TCB Põhja tax centre requires, with its decision of  17  June  2005,  that  AS

Kalev remove from the market by a decision of 30 November 2005 at the  latest  the

excessive sugar stock of 15,600 tons that were in the company's possession  as  of

1 May 2004. AS Kalev is disputing this decision by submitting a challenge  to  TCB

or issuing a complaint to the Tallinn Administrative Court. 



AS Kalev legal department director Allan Viirma:

 

"The determining of an excessive sugar stock for  AS  Kalev  by  TCB  decision  is

groundless and illegal. AS Kalev was  relieved  of  this  sugar  before  the  SQFA

entered into force, which is why  it  is  not  understandable  how  AS  Kalev  can

remove, a second time, sugar it has already sold.



The Overstock Act was published on 27 April of last  year  and  took  effect  four

days later on 1 May. This law established retroactive  punitive  fines  for  sugar

stock deemed excessive, even where the purchases of sugar were legal at  the  time

that they were made.



Companies were not obliged to follow the process of the draft law or the  European

negotiations. Companies could operate with legal certainty that they had  no  need

to fear sanctions as long as they had  not  violated  the  law  published  and  in

force. Pursuant to the Estonian constitution, only published laws are  subject  to

enforcement. The fact that TCB calls  a  real  sale  "a  technicality",  does  not

provide a basis to encumber companies with  unreasonable  duties.  There  were  no

reasonable grounds for publishing this retroactive unfavourable law just a  couple

days before it entered into force. An audit carried out by the State Audit  Office

with regard to sugar overstock that confirms  the  aforementioned  arguments  also

points to omissions by the state."





Ruth Roht

PR manager

+372 6 077 858