2014 (6) TMI 518 - HC - Central Excise

Ex gratia reward - identity of informer - Evasion of CENTRAL Excise duty - Reward Policy dated 20.06.2001 - Whether reward can be claimed as a matter of right - Held that - The question of identity of the informer, in the opinion of this Court, at least at this stage cannot arise because what was found in the sealed envelope corresponds entirely with the translation of the document placed on record along with the Writ petition An analysis of the Policy would reveal that it consolidates existing practices and policies prevailing in the three departments and outlined the eligibility for granting rewards to informants - petitioner provided what is characterised by the respondents themselves as basic information . During the submissions, learned counsel had relied upon certain show cause notices sought to have been issued to JV Industries sister concern to show that parallel line of investigation existed. Yet the proximity of the information provided by the petitioner on 12.11.2007 and the subsequent raid, which took place in December, 2007, in the opinion of this is Court decisive for a conclsion that the basic information provided in this case was also of a significant character. Therefore, it is held that the petitioners claim could not have been brushed aside in the manner that is sought to be urged by the respondents in the present case.. Given the nature of the discretion which the competent officials have under Rules 5 & 6.3 of the 2001 policy, all that can be said at this stage is that the denial of the petitioners representation on the ground of her being unable to establish identity and that she had only provided basic information which was insufficient to generate Interim Reward is not sustainable in law. As to whether the respondents would in the light of this finding wish to grant Interim Reward during the pendency of CESTAT proceedings as they appear to have done in the case of their own officers or await the decision of the CESTAT, is left to the discretion of the authorities who shall after considering all the materials available on record, pass appropriate orders and communicate the same directly to the petitioner within four weeks. - Decided in favour of appellant.

Summary

Issues Involved:
1. Claim for interim or advance reward.
2. Entitlement to final reward with interest.
3. Validity of the information provided by the petitioner.
4. Discretionary power of the authorities under the Reward Policy.
5. Identity and role of the informer.

Issue-wise Analysis:

1. Claim for Interim or Advance Reward:
The petitioners sought direction for the release of an interim or advance reward of Rs. 22 lakhs and a further direction for the release of Rs. 99.26 lakhs with interest. They claimed to be informers regarding the evasion of Central Excise Duty by M/s JV Industries and relied on the Reward Policy dated 20.06.2001, as amended on 16.04.2004. The petitioners furnished information that led to a search and seizure operation at JV Industries on 19.12.2007. Despite their claim, the Assistant Commissioner stated that no interim reward could be paid under the prevailing policy.

2. Entitlement to Final Reward with Interest:
The respondents argued that there is no vested right to claim a reward, as it is an ex gratia payment subject to the discretion of the competent authority. They contended that the rights to such rewards are inchoate until final adjudication. The respondents highlighted that the assesee JV Industries deposited Rs. 4.40 crores but chose to contest the matter, with the appeal pending before the Customs Excise and Service Tax Appellate Tribunal (CESTAT).

3. Validity of the Information Provided by the Petitioner:
The petitioners claimed that they provided written information on 12.11.2007, which was crucial for the investigation. The respondents, however, denied the significance of the information, stating that it was just basic information and not directly linked to the detailed investigation or the show cause notice issued. The court examined the sealed envelope containing the information and found it corresponded with the petitioners' claims, thereby validating the petitioners' assertion that they provided useful information.

4. Discretionary Power of the Authorities under the Reward Policy:
The Reward Policy of 2001, particularly Paras 5 and 6.3, outlines that reward is an ex gratia payment granted at the discretion of the competent authority. The policy allows for interim rewards in certain cases, but the final reward is contingent on the conclusion of adjudication/appeal/revision proceedings. The court noted that the discretion must be exercised judiciously and found that the respondents' outright rejection of the interim reward claim was not justified given the circumstances.

5. Identity and Role of the Informer:
The respondents questioned the identity of the informer, stating that no such officer named J.P. Singh was posted in the Anti Evasion branch at the relevant time. However, the court found that the information provided by the petitioners was credible and their identity as informers was established through the sealed envelope and RTI replies. The court concluded that the petitioners' role in providing the initial tip-off was significant.

Conclusion:
The court held that the denial of the petitioners' claim for an interim reward was not sustainable in law. The respondents were directed to reconsider the petitioners' claim for an interim reward during the pendency of the CESTAT proceedings and to communicate their decision within four weeks. The writ petition was allowed in these terms.