The Ministry of Finance's "Reward to Informers" policy came under scrutiny when the Supreme Court directed the reward committee to reconsider the awarded amount to an individual who provided information about tax evasion by news agency M/s ANI Media Pvt Ltd., news agency LiveLaw reported on Saturday. The appellant claimed to have informed the authorities about the service tax evasion amounting to Rs. 2.59 crores by M/s Asian News International (ANI) Media Pvt Ltd. Following the disclosure, the defaulter voluntarily paid the service tax dues of Rs. 2.59 crores.
The Reward Committee, in response, granted a final reward of Rs. 5.50 Lakhs to the appellant for the provided information related to the tax evasion. However, the appellant argued that he is entitled to a reward of Rs. 51.80 Lakhs as per clause 4.1 of the policy. The Supreme Court has now directed the committee to review and make a fresh decision on the appropriate reward amount in light of the appellant's contentions.
What do the rules say?
As per Clause 4.1 of the "Reward to Informers and Government Servants Review of Policy-Procedure and Guidelines" issued by the Ministry of Finance (Department of Revenue), Central Board of Excise and Customs, the reward granted can be up to 20% of the evaded amount along with any fines and penalties imposed. Displeased with the amount of reward received, the appellant approached the Bombay High Court in 2015 by filing a petition under Article 226 of the Constitution.
During the proceedings at the Bombay High Court, the Principal Commissioner of Service Tax, in the affidavit submitted as a response, acknowledged that the appellant had provided crucial information regarding ANI Media. The affidavit outlined the tax evasion carried out by the media company based on the information provided by the appellant. Furthermore, it was mentioned that the Reward Committee examined the details furnished by the petitioner and approved a final reward amount of Rs. 5.50 lakhs, in line with the information provided regarding the tax evasion and subsequent investigation.
Challenging the department's position, the appellant submitted a rejoinder to the High Court, asserting that his responsibility was solely to provide information regarding the evasion of service tax. According to the appellant, as long as the information provided is accurate and leads to successful recoveries, the reward circular requires the computation of the reward based on the amount recovered, not on how the authorities arrive at any figures and attribute them to the information. The appellant argued that the authorities cannot separate the information and attribute to him only a portion of it, which results in actual recoveries.
In 2016, a Division Bench of the High Court ruled that the writ petition raised issues of disputed facts, and hence, the proper recourse for the appellant was to file a civil suit. Dissatisfied with this ruling, the appellant appealed to the Supreme Court.
SC questions govt's reasoning
The Supreme Court, in its analysis, found that the reward committee had not exercised due diligence when awarding the reward. The court stressed the importance of a decision-making body providing well-founded reasons to support its conclusions. It emphasized that attempting to supply reasons through affidavits after the fact would not be considered adequate.
The bench, consisting of Justices Abhay S. Oka and Justice Sanjay Karol, observed that the minutes of the decision showed a complete lack of careful consideration regarding the appellant's plea. They emphasised that if a decision-making authority fails to provide reasons for arriving at a specific conclusion, those reasons cannot be supplied later through affidavits.
The bench also noted that in 2018, the Additional Solicitor General had informed that a decision had been made to increase the reward to Rs 9.45 lakhs. This fact further supported the court's view that there was a lack of proper consideration in reaching the original decision. As a result, the Court partially allowed the appeal, directing the committee to reassess the appellant's case and determine if he is entitled to a higher amount than the one already awarded.
The Court highlighted that Clause 4.1 of the Policy permits a reward of up to 20% of the evaded amount, along with any fines and penalties levied. It pointed out that the policy empowers a committee comprising three members to decide on the reward. However, upon examining the Union's affidavit, which relied on a note-sheet, the Court found no mention of any decision based on such notes in the official Minutes.
The Court expressed concern over the lack of reasoning behind the decision to limit the appellant's reward to Rs. 5.50 lakhs instead of the entitled 20% as per the Policy. The Court also referred to the 2018 order, where the ASG had submitted that the award had been enhanced to 9.45 lakhs, further highlighting the lack of proper reasoning in the original decision.
In light of these findings, the Court instructed the committee to review the appellant's case and determine if a higher amount should be granted. The Court partially allowed the appeal and set a six-month timeline for the committee to make the new decision.
ANI issues statement
Soon after the LiveLaw broke the news, ANI issued a statement and said, "... there has been an attempt to mischaracterize an order passed by the Supreme Court in unrelated proceedings where ANI is not even arrayed as a party".
"ANI Media Pvt. Ltd. (‘ANI’) has been a multimedia news agency for over five decades. In 2010, ANI had received a demand from the appropriate authority for payment of deficient service tax. This demand was voluntarily and duly complied without contest by ANI forthwith. This was duly accepted by the competent authorities and the matter stood closed. ANI is in full compliance with all applicable laws and there is no outstanding tax demand against it as on date.
There has been an attempt to mischaracterize an order passed by the Supreme Court in unrelated proceedings where ANI is not even arrayed as a party. Any insinuation or suggestion of any wrongdoing is mischievous and defamatory," ANI said.