2016 (9) TMI 523 - HC - Customs

Claim of reward - information given to Department - raid carried on, on the basis of information of informer - excise duty evasion by one VFL - Polyester staple fiber - clandestine removal without payment of duty - O-41 register - CENVAT credit - Held that - the Rewards Committee has not adverted to various factors which are required to be taken into consideration by the Rewards Committee for coming to the conclusion qua the informant s entitlement to receive reward and the quantum, the Rewards Committee has rather rendered its decision making it subject to outcome of the proceedings before the DRT. The non-advertance to various factors in non-recording of findings qua informant or as to why informant deserves what reward and not recording its clear findings, the order is rendered vulnerable and hence, the Rewards Committee will have to take afresh look into the matter. The Rewards Committee will give full opportunity to both the sides to raise all the contentions. Reading of the scheme, calls upon the Rewards Committee to take a decision on the final reward and such decision is to be arrived at after completion of adjudication /appeal /revision proceedings and the final reward to be determined on the basis of net sale proceeds of goods seized /confiscated (if any) and/or amount of additional duty /fraudulently claimed drawback recovered plus penalty /fine recovered - the scheme seals limit of reward to 20% of the net sale proceeds. It will be open to all concerned to raise all contentions including the contention of recovery as contemplated in The Scheme does not cover the payment of duty by utilizing the cenvat credit. Petition disposed off - decided in favor of petitioner.

Issues Involved:

1. Entitlement to Reward under the Informer Scheme.
2. Interpretation of the Reward Scheme.
3. Statutory Duty and Issuance of Writ of Mandamus.
4. Actual Recovery and Utilization of Cenvat Credit.

Detailed Analysis:

1. Entitlement to Reward under the Informer Scheme:

The petitioner claimed entitlement to a reward for providing information that led to the discovery of excise duty evasion by VFL. The petitioner had already received an advance reward of ?1,00,000 but sought the final reward based on the adjudicated amount of ?9,92,31,857. The Rewards Committee had deferred the final reward, stating that only ?1,73,346 had been recovered through PLA and that further recovery proceedings were pending with the DRT, Mumbai.

2. Interpretation of the Reward Scheme:

The petitioner argued that the adjudication by the Commissioner of Central Excise and Customs, Surat-II, which confirmed the duty amount of ?1,15,60,118 paid by VFL, entitled him to 20% of this amount as a reward. The petitioner cited the Supreme Court's judgment in Union of India Vs. R. Padmanabhan, emphasizing that while the reward is ex-gratia and discretionary, it should not be arbitrarily denied if it falls within the scheme's parameters.

The respondents, represented by Senior Advocate Shri R.J. Oza, contended that the reward could only be based on the actual recovery made by the Department. According to the Reward Scheme, the final reward is determined by the net sale proceeds of seized goods and the amount of additional duty, fine, and penalty recovered. They argued that since only ?1,73,346 had been recovered and the rest was pending in DRT, the final reward could not be granted yet.

3. Statutory Duty and Issuance of Writ of Mandamus:

The petitioner sought a writ of mandamus to compel the respondents to grant the final reward. However, the respondents argued, citing Supreme Court judgments, that a writ of mandamus could only be issued where there is a statutory duty, which was not the case here. The Reward Scheme is an ex-gratia payment and does not create a statutory obligation on the authorities to grant a reward.

The court, referencing Union of India vs. C. Krishna Reddy and D.D. Gandhi Vs. Union of India, reiterated that the reward is discretionary and ex-gratia, and no one has a vested right to claim it. The court emphasized that the Reward Scheme is not a statute but a policy, and thus, a writ of mandamus could not be issued to enforce it.

4. Actual Recovery and Utilization of Cenvat Credit:

The respondents argued that the amount paid through Cenvat credit could not be equated with actual recovery. The Reward Scheme specifies that the reward is based on the net sale proceeds of seized goods and the amount of duty evaded plus fines and penalties recovered. Therefore, the payment of ?1,15,60,118 through Cenvat credit could not be considered for calculating the reward.

Conclusion:

The court found that the Rewards Committee had not adequately considered all relevant factors and had deferred its decision pending the outcome of DRT proceedings. The court directed the Rewards Committee to reconsider the petitioner's application for the final reward, taking into account the observations made in the judgment. The committee was instructed to provide a reasoned decision, considering the specifics of the Reward Scheme and the actual recovery made. The petition was disposed of with these directions, and no costs were awarded.

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