IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C).No. 26466 of 2003(A)
1. KARTHIKAYAN T.K., VISHNU MANA, C.M.C. 29
... Petitioner
Vs
1. THE COMMISSIONER OF CENTRAL EXCISE
... Respondent
2. GOVERNMENT OF INDIA, REPRESENTED
For Petitioner :SRI.N.N.SUGUNAPALAN (SR.)
For Respondent :SRI.P.S.SREEDHARAN PILLAI, SCGSC
The Hon'ble MR. Justice S.SIRI JAGAN
Dated :13/01/2009
O R D E R
S.SIRI JAGAN, J
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W.P(C)No. 26466 of 2003
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Dated this the 13th day of January, 2009
J U D G M E N T
The petitioner was an employee of M/s. ITI Ltd. Palakkad. In the
course of his employment with company, he came across certain
evasion of excise duty made by company. By Ext.P1, he passed on
that information to the Superintendent of Central Excise, Customs,
Intelligence and Investigation Unit, Cochin. On the basis of that
information, the Central Excise Department made enquiries and
launched a case against the company for evasion of excise duty.
Immediately on issue of a show cause notice by the central excise
authority to the company pursuant thereto, the company admitted the
evasion with an explanation for the same and paid the excise duty.
Thereafter, the adjudicating authority namely; the Collector of Central
Excise, confirmed the demand for duty on the company and also
imposed penalty of Rs. 1 lakhs. To encourage the public to pass on
information regarding evasion of duties, the Government of India
announced a scheme for reward, which is produced as Ext.R1(a) along
with counter affidavit of the respondent. As per the same, informants
from public as well as the officers of the department are entitled to
W.P(C)No. 26466 of 2003 – 2 –
reward up to 20% of the amounts of duty involved plus amount of fine
and penalty levied, imposed and recovered. Guidelines are prescribed
for fixing the reward amount. Since the information supplied by the
petitioner unearthed evasion of duty by the company, pending
adjudication proceedings an advance reward of Rs.5 lakhs was paid to
the petitioner. In this regard it may also be noted that total amounts of
duty recovered from the company was Rs.85 lakhs. Rs. 1 lakhs penalty
was also recovered. However, by Ext.P5, the petitioner was informed
by the department that the Reward Committee had after going through
the records of case, observed that the previous Reward Committee had
taken a decision that the reward amount of Rs. 5 lakhs already
sanctioned to the petitioner could be treated as the final reward. The
petitioner is challenging Ext.P5.
2. According to the petitioner, in so far as, after declaring that
20% of the duty evaded can be paid as reward, the amount of Rs. 5
lakhs paid to the petitioner is palpably inadequate, in so far as 85 lakhs
have been recovered from the company as duty and another Rs. 1 lakh
as penalty pursuant to the information passed on by the petitioner.
Since Ext.P5 referred to a decision of the Reward Committee, I
directed the respondent to make available the files containing the
W.P(C)No. 26466 of 2003 – 3 –
decision of the Reward Committee. The file has been produced before
me today.
The claim of the petitioner is stoutly opposed by the respondents.
According to them, the Reward Committee who went into the question
of payment of reward for the particular information has decided that the
advance reward already paid to the petitioner should be treated as the
final reward. It is argued by the respondents that in view of Ext.R1(a)
guidelines issued by the Government, for the determination of the
amount of reward is in the discretion of the award committee and the
Collector. According to them, the Reward Committee and the Collector
has exercised that discretion correctly and decided that the amount to
be paid as reward in this case is only Rs. 8.5 lakhs out of which 5 lakhs
had been paid to the petitioner and Rs. 2.33 lakhs had been paid to the
officers who conducted the investigation. It is argued by the counsel for
the respondents that the petitioner is not entitled to any further amount
as reward.
3. I have heard the rival contentions in detail.
4. Ext.R1(a) contains the guidelines for giving rewards. Clause
4(1) of the same reads thus:
“4.1 Informers and Govt. servants will be eligible for
reward upto 20% of the net sale-proceeds of the contrabandW.P(C)No. 26466 of 2003 – 4 –
goods seized and/or amount of duty evaded plus amount of fine
and penalty levied/imposed and recovered. However, in respect
of gold, silver, opium and other narcotic drugs etc. seized under
the provisions of the Customs Act, 1962/Narcotic Drugs and
Psychotropic Substances (NDPS) Act, 1985, the overall ceiling
of reward will be as per specific rates indicated in the Annexure.
These ceilings would be subject to periodical revision in the light
of the price fluctuations of these items, for which periodical
intimations may be sent to the DGRI/DGNCB, who, in turn, will
send suitable recommendations to the Ministry, for appropriate
revision, as and when warranted.”
Clause 5(1) further states thus:
“5.1 Reward is purely an ex-gratia payment which,
subject to guidelines, may be granted on the absolute discretion
of the authority competent to grant rewards and cannot be
claimed by anyone as a matter of right. In determining the
reward which may be granted, the authority competent to grant
reward will keep in mind the specificity and accuracy of the
information, the risk and trouble undertaken, the extent and
nature of the help rendered by the informer, whether information
gives clues to persons involved in smuggling, or their associates
etc., the risk involved for the Govt. servants in working out the
case, the difficulty in securing the information, the extent to
which the vigilance of the staff led to the seizure, special
initiative, efforts and ingenuity displayed, etc. and whether,
besides the seizure of contraband goods, the
owners/organizers/financiers/racketeers as well as the carriers
have been apprehended or not.”
5. Going by the above, the question to be decided is whether the
Reward Committee has taken a decision in its discretion in tune with the
guidelines as quoted above. I am of opinion that in so far as the
maximum amount of reward payable has been fixed as 20% and the
amounts recovered as duty and penalty from the company pursuant to
the information given by the petitioner comes to above 86 lakhs, the
Reward Committee ought to have applied their mind to decide as to
W.P(C)No. 26466 of 2003 – 5 –
why the reward amount should be restricted to 8.5 lakhs which is only
less than 10% of the amounts recovered as duty and penalty pursuant
to the information supplied by the petitioner. From the decision of the
Reward Committee quoted above, I do not find proper application of
mind in that regard. It is not now disputed before me that but for the
information supplied by the petitioner the particular evasion of duty
would never have come to light and the department would not have
been able to recover the amount of Rs.85 lakhs at all. That being so, I
am of opinion that a more judicious application of mind was called for
on the part of the Reward Committee on the amount to be fixed as
reward, based on the guidelines quoted above, which does not appear
to have been done going by the decision of the Reward Committee
which is available in the file produced by the respondents and reads
thus:
“In this case the appeal proceedings are not over. However
the company has contested only penalty. The duty amount has
already been realised. Out of the available reward amount of Rs.8.5
lakhs the total amount disbursed is only Rs. 2.33 lakhs. The informer
has already been sanctioned a reward of Rs.5 lakhs.
The appeal proceedings relate only to penalty and as far as
reward amount is concerned it has already been realised and the
reward for both the informer and the officers is much less than the
admissible amount. The Board’s instructions to disburse only 50%
and wait for finalisation of appeal is only to ensure that the amount
demanded is in dispute. Keeping in mind all these factors the
committee has decided that the reward to the informer and the
officers can be treated as final. Since the discussion has not beenW.P(C)No. 26466 of 2003 – 6 –
recorded, this note has been prepared. Commissioner may kindly
approve this note for record.”
6. In the above circumstances, I am of opinion that the Reward
Committee should re-consider the matter in the light of the guidelines.
Accordingly, the 1st respondent is directed to re-consider the issue of
payment of further reward amount to the petitioner in accordance with
Ext.R1(a) Guidelines. Orders in that regard shall be passed, as
expeditiously as possible, at any rate, within two months from the date
of receipt of a copy of this judgment. The orders to be passed on the
basis of the guidelines by the Reward Committee shall on the face of it
show that every aspect of the case as stipulated in the guidelines has
been taken into consideration while taking a final decision in the matter
of payment of additional reward to the petitioner.
The writ petition is disposed of as above.
S.SIRI JAGAN, JUDGE
rhs