Case Note & Summary
The petitioner, an informer, sought a writ under Article 226 of the Constitution to compel the Director General of Central Excise Intelligence to release an interim reward under the Union Government's reward scheme for providing information leading to the detection of service tax evasion by Punj Lloyd Ltd. The information pertained to the construction of a pipeline for ONGC at JNPT Terminal, and the department issued a show cause notice on 19 December 2007 under the Finance Act, 1994. During investigation, the assessee paid Rs. 10.80 crores as service tax and Rs. 52.59 lakhs as interest. The Commissioner confirmed the demand with penalty on 26 February 2009, but the assessee filed an appeal before the CESTAT (Delhi Bench) in May 2009, contending that service tax was not applicable during the relevant period under the new works contract category effective from 1 June 2007. The appeal remained pending. The petitioner argued that Clause 6.3 of the Ministry of Finance circular dated 20 June 2001 entitled him to an interim reward because the assessee had voluntarily paid the evaded duty. The department countered that reward is purely ex-gratia under Clause 5.1, the assessee had not admitted liability, and the appeal's pendency precluded any final determination of reward quantum. The Court held that Clause 6.3 requires four cumulative conditions: voluntary payment during investigation, admission of liability by the assessee, issuance of a show cause notice, and the competent authority's satisfaction that there is a reasonable chance of the evasion finding being sustained on appeal. Since the department's affidavit stated the assessee had not admitted liability and the appeal before CESTAT was unresolved, the conditions were not met. The Court also emphasized that under Article 226, it could not assume the discretion vested in the reward committee to assess the likelihood of success in the pending appeal. Consequently, the Court dismissed the writ petition, declining to direct either payment or consideration of the case by the committee.
Headnote
A) Reward Scheme - Nature of Reward - Ex-gratia Payment - Ministry of Finance Circular dated 20 June 2001, Clause 5.1 - Reward under the scheme is purely ex-gratia, cannot be claimed as of right, and is in the absolute discretion of the competent authority, considering factors such as specificity of information, risk, and help rendered - Held, no vested right to reward (Paras 5, 8) B) Reward Scheme - Interim/Advance Reward - Conditions for Payment under Clause 6.3 - Ministry of Finance Circular dated 20 June 2001, Clause 6.3 - Clause 6.3 applies to cases not covered by Clauses 6.1 or 6.2; requires voluntary payment of evaded duty during investigation, admission of liability, issuance of show cause notice, and authority's satisfaction that there is reasonable chance of confiscation/infringement/evasion being established and sustained on appeal - Held, all four conditions must be met; mere payment not sufficient if liability not admitted (Paras 6-7) C) Constitutional Law - Writ Jurisdiction - Scope under Article 226 - Constitution of India, Article 226 - Court in writ jurisdiction cannot substitute its own assessment for the discretion of the competent authority regarding likelihood of success in pending appeal; such determination is for the committee - Held, writ court cannot direct reward payment while assessee's liability remains sub judice (Paras 7-8) D) Reward Scheme - Payment After Finality - Pending Appeal - Ministry of Finance Circular dated 20 June 2001, Clause 6.3 - Where the assessee has contested liability and appeal is pending before CESTAT, the matter has not attained finality; interim reward cannot be directed as the quantum may not become payable and recovery may be impossible if assessee succeeds - Held, petition dismissed (Paras 2, 8)
Issue of Consideration
Whether the petitioner is entitled to an interim reward under the Government's reward scheme for informers before final adjudication of the service tax liability of the assessee.
Final Decision
Writ Petition dismissed. No interim reward directed because liability not admitted and appeal pending.
Law Points
- Reward under Union Government scheme is purely ex-gratia
- no vested right
- Interim reward under Clause 6.3 requires voluntary payment and admission of liability
- show cause notice
- authority satisfaction
- Court cannot substitute its discretion for committee's
- Pending appeal on assessee's liability precludes direction for interim reward.
