By TIOL News Service

MUMBAI, FEB 28, 2018: THE issue before the Bench is - Whether where an informer supplying any information of some tax evasion, leading to duty demand being raised, can claim a reward for such service rendered, as an absolute right. NO is the verdict.

The Court held that the entitlement for reward in such cases is governed by the CBEC policies in this regard. While the petitioner claimed to have submitted crucial evidence leading to SCN being issued and duty demand being raised against the defaulting firm, the Department claimed that it had relied on the services of its in-house investigation and inteeligence agencies. It further claimed to have not relied on the information supplied by the assessee, claiming that the same was already available wit it. Thereupon, the Court held that the same was a factual dispute and went on to hold that the reward for supplying such informatin could not be claimed as a right. It further held that the petitioner was motivated only by monetary gain and the reward had rightly been denied to him.

Facts of the case

The petitioner herein is an individual & claimed to have provided crucial and valuable information w.r.t. tax evasion by e-commerce companies. He also claimed to have done so at great personal risk and on personal expense. The petitioner claimed to have gathered information regarding the activities and modus operandi of tax evasion of a particular company, and that he supplied such information to officers of the DRI. The petitioner alleged that such company had evaded payment of Customs duty and was misuing concessions granted to it. He further informed that such firm was allegedly engaged in smuggling and anti-national activities. The petitioner also provided information about a courier company which was aiding in such smuggling activities. The petitioner stated to be motivated by an obligation to help the Government curb tax evasion and prevent leakage of revenue. Based on such information supplied by the petitioner, a considerable duty demand was raised against the firm named by the petitioner. Thereupon, the petitioner was hopeful of receiving a monetary reward for the information supplied by him, but did not receive the same from the DRI officials. Subsequent complaints by the petitioner were dismissed, and the Department took the stand that the petitioner had provided no worthwhile information, and that the Department did not rely exclusively on material provided by the petitioner.

On hearing the matter, the High Court held that,

++ after a careful perusal of the above materials, we are of the opinion that the petitioner's claim for reward has been rightly negatived. Firstly, the petitioner establishes contact with Mr. P. K. Dash. What is apparent from page 38 onwards is that the petitioner seems to have established contact with him and acquaintances grew into a familiarity which by its nature is surprising. This Mr. P. K. Dash is supposed to have been treating the petitioner like a friend. He went on engaging him. Then on 21st January 2015, the petitioner gave a gist of information about misuse of courier facilities by courier companies M/s. ICC Worldwide Pvt. Ltd.. We have already referred to this gist in the foregoing paragraphs. Thereafter another message is forwarded by him and within a short span of time, following the earlier one. Then, Mr. Dash is contacted by the petitioner on a Sunday morning and when the petitioner says that it is always a curiosity in his mind regarding success of his information. Thereafter the petitioner sends whatsapp message on 23rd January 2015, 25th January 2015 and Mr. Dash is supposed to have been informing him not to worry, for the information provided is being analysed. Mr. Dash is supposed to be then stating that this a new type of case and the department needs to understand and plan properly and that should not make the petitioner anxious. Mr. Dash is then supposed to be informing the petitioner that he is on leave for a week following which the petitioner grew anxious and once again contacts him. This continues and from the whatsapp messages all that the petitioner is informed and very clearly that the agency for value added tax has probed many international companies for violation of value added tax duty. If any of them notice the irregularities, they may inform the concerned agency before even the petitioner could provide any information. Therefore he says that a separate case should be made for violation of service tax so also for a reward securing case the department has its own sources and agencies from which it gathers information and details. The revenue has its own intelligence wings and being a Government of India Department it can very well approach even the investigation agencies investigating crimes. The petitioner was anxious that before him the in-house agencies or the departmental agencies such as CBI would act swiftly thereby jeopardizing the interest of the petitioner. The case of the petitioner was only to seek a reward and in money. This generally does not seem to be a genuine and bona fide act to protect the larger public interest or block revenue leakages...

++ that is why we have repeatedly and during the course of hearing, insisted on Mr. Desai not inviting our interference in this disputed territory. It is therefore not a case as clear on facts as it is emerging from the orders passed in the writ petition of other informers. Pertinently each case has to be decided on its own merits and none can claim absolute right in seeking a reward. The circular relied upon by Mr. Desai itself says that the policies for reward are looked into, considered and reviewed from time to time. Though the essential scheme without fundamental changes, is the same in tune with the various recommendations and changing scenario of smuggling and commercial frauds, certain modifications have been considered necessary. Therefore specific guidelines / procedure have been evolved in dealing with reward. A eligible government servant is one part of the policy / guidelines. Then what we find is the stipulation and which is equally applicable to all, namely, the government servants and informers.

++ in the case at hand there is a dispute as to whether the department indeed relied on the information or the details provided by the petitioner. It specifically denies that it has so relied on the same. It says that it has its own sources to obtain information and its own intelligence generated led to investigations being carried out much prior to the petitioner coming on the scene. The petitioner came on the scene on January 2015 and the department claims to have obtained the information in April 2014 and in relation to certain transactions by the courier mode. Thus the petitioner has occasion of obtaining these details of the information collected and generated by the department from his own sources and encashing upon the same. The petitioner is accused of having relied on this very piece of information available with the department but without its details and he commenced correspondence in January 2015. He commenced correspondence about those cases which were already under the scanner of the department. The department had an in-house investigation mechanism and which it resorted to. It did not rely on the information made available by the petitioner. The petitioner's emails did not gave the details as were necessary and that is why the respondents have raised a dispute on the petitioner's right or entitlement to reward.

++ we do not think that such matters should be probed in our writ jurisdiction for that would convert this jurisdiction into one conferred with all the powers to enquire into, investigate and try such claims and probe the specific materials which are obtained by the department. The secrecy and confidentiality maintained would then have to be compromised in proceedings before us. These details would have to be revealed to the parties like the petitioner and based on the petitioner's assertions, liberty to controvert them either by examining the maker or the author of these statements or the documents would have to be provided or an opportunity to the petitioner to step into the box and assert his own claim by producing his own documents would have to be afforded followed by other witnesses. Equal opportunities would have to be afforded to the revenue. We are clear in our mind that none of the judgments which have been rendered by this court earlier have taken note of such types of cases or disputes and thereafter issued a direction to reward the petitioner.

(See 2018-TIOL-358-HC-MUM-CUS)