2024 (11) TMI 59 - HC - Service Tax

Entitlement of full reward to the Informer - Petitioner s entitlement to a reward based on the recovery of unpaid duty arising from his disclosure was acknowledged however, the Respondents disbursed only 2 percent of the claimed reward amount - Settlement of dispute under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) - Petitioner asserts that, since the duty evasion by the Company was uncovered solely based on the information he provided, he has a legitimate expectation of receiving the full reward of 20 percent as specified. HELD THAT - As per the guidelines, the competent authority has to consider the informer s degree of involvement and assistance, including whether they remained actively engaged or provided logistical support that contributed meaningfully to the operation. A critical factor in this determination is whether the information helped identify principal offenders such as organizers, financiers, or key associates involved in the scheme. The informer s contribution is viewed in higher regard if it exposes individuals central to the evasion network, thus enhancing the impact of the enforcement action. Together, these factors illustrate that the reward is not a fixed proportion of the recovery but instead a careful determination based on the informer s input, the level of risk, and the practical outcomes of their information in recovering government dues and capturing the key players involved. Thus on a holistic reading of the Guidelines, it emerges that the Petitioner s claim of reward for 20 percent is not a matter of right which can be sought by invoking this Court s writ jurisdiction under Article 226 of the Constitution. Petitioner has already been awarded INR 25 lakhs by the Respondents. The appropriateness of this quantum of reward cannot be adjudicated by this Court in proceedings under Article 226 of the Constitution, since it involves substantial determinations as to how and to what extent was the information useful in apprehending the duty evasion and the key players in this regard. While the information provided by the Petitioner was useful in determining that there was an evasion of duty by the company, the matter was eventually settled between the Respondents and the defaulting company under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. Thus, there is nothing on record to show that the discretion exercised by the Respondents has been manifestly arbitrary. Petitioner s contention that he was entitled to a personal hearing before the authorities, before the determination of his reward, is misconceived. The guidelines do not impose any such procedural requirement. As the reward scheme is discretionary and ex-gratia, the competent authority is not bound to give personal hearing. Ex-gratia payments do not necessitate the procedural formalities associated with legally binding rights, as they are governed by principles of administrative discretion. Court does not find any reason to interfere with the decision of the Respondents.

Summary

Issues:
Claim for full reward under informer scheme based on disclosure of tax evasion information. Disbursement of reward below claimed amount. Violation of right to equal treatment and principles of natural justice. Interpretation of guidelines for grant of rewards to informers and government servants.

Analysis:
1. The petitioner claimed entitlement to the full reward specified under the informer scheme guidelines for disclosing information leading to the recovery of unpaid dues by the respondents. The petitioner argued that the reward amount disbursed was inadequate and contrary to the guidelines, specifically invoking Clause 5.1.1. of the Guidelines for grant of Reward to Informers and Government Servants. The petitioner contended that the decision to disburse only a fraction of the claimed reward violated his right to equal treatment under Article 14 of the Constitution of India. The petitioner emphasized the necessity of a personal hearing before the determination of the reward amount, citing principles of natural justice and reliance on legal precedents.

2. The court examined the petitioner's arguments and found them devoid of merit. It reiterated that rewards under informer schemes are ex-gratia payments and subject to the discretion of the competent authority, as established by legal precedents. The court highlighted that the guidelines for informer rewards do not guarantee a fixed percentage but provide a discretionary framework for evaluating each case individually. The court emphasized that the informer's eligibility for a reward is contingent on various factors outlined in the guidelines, such as the specificity and accuracy of the information provided, the risk undertaken, and the extent of assistance in recovering government dues.

3. The court referenced Clause 3.3.1 of the guidelines, which mandates a case-specific evaluation of the informer's role, the nature of assistance rendered, and the impact on the enforcement action. The court emphasized that the reward determination is not a routine entitlement but a comprehensive assessment based on the informer's contribution, level of risk, and practical outcomes of the information provided. The court clarified that rewards under informer schemes are discretionary and not enforceable rights, as affirmed by legal precedents.

4. The court addressed the petitioner's reliance on the Kerala High Court judgment in Govindapillai v. Secretary, Central Board of Excise, noting that while judicial intervention was allowed in re-evaluating rewards in that case, the Supreme Court's authoritative precedents emphasized the discretionary nature of informer rewards. The court highlighted that the writ court's jurisdiction does not extend to quantifying contributions or adjudicating disputes regarding reward determinations, as it falls within the domain of the competent authority.

5. Ultimately, the court dismissed the writ petition, emphasizing that the petitioner had already been awarded a certain amount by the respondents. The court declined to interfere with the decision, noting that the discretion exercised by the respondents was not manifestly arbitrary. The court also rejected the petitioner's contention for a personal hearing, stating that the reward scheme being discretionary and ex-gratia did not necessitate procedural formalities associated with legally binding rights.