Union of India v. C. Krishna Reddy — 1999 DIGILAW 994 (MAD)

Judgment :- N.K. JAIN, J. This writ appeal is filed against the order of the learned single Judge dated 22-9-1998 made in W.P. No. 4523 of 1996 whereby the learned single Judge directed the appellants/respondents to pay a further sum of Rs. 25 lakhs in addition to Rs. 10 lakhs to the respondent/petitioner within four weeks from the date of receipt of the copy of the order. Learned single Judge also directed to determine the respondent/petitioner's entitlement of the reward in respect of the balance amount and fix the quantum and pass an order with regard to the disbursement of the same within 3 months thereafter. 2.The necessary facts in brief, for the disposal of the writ appeal are - That the petitioner, an informer, furnished certain details to the effect that M/s. Sanjeevani Fodder Products Pvt. Ltd. (Sanjeevani) and M/s. Fometa India Machines Pvt. Ltd. (FOMETA) had evaded Customs duty amounting to Rs. 3 crores approximately by contravening the conditions of Adhoc Exemption Order No. 103/87, dated 30-3-1987 as amended. It is also alleged that M/s. Sanjeevani had got the exemption order from the Government of India exempting Fodder Production Units to be imported by them subject to the conditions that they would donate to Bharath Krishk Samaj within 15 days from the date of clearance, and would use them only for demonstration purposes but, conditions have been violated. It is alleged that M/s. Sanjeevani had imported and cleared through the Port of Madras these machines free of duty in terms of the said exemption order. It is further stated in the affidavit that M/s. Sanjeevani had produced some documents showing donations, and that instead of 50 machines, 56 machines had been actually imported and 5 out of the 6 excess machines had been sold by them to some Government Department. It is also submitted that on information and on investigation, the Department was of the view that certain items were liable for confiscation and accordingly confiscated them under the proviso to Section 110(1) of the Customs Act, the details of which were given in the affidavit. It is further alleged that the conditions of the ad hoc exemption order dated 30-3-1987 had been violated and that 50 FPUs cleared without payment of customs duties, are liable for confiscation under Section 111(o) of the Customs Act. It is further alleged that the conditions of the ad hoc exemption order dated 30-3-1987 had been violated and that 50 FPUs cleared without payment of customs duties, are liable for confiscation under Section 111(o) of the Customs Act. It is further stated that as the use for fabrication of FPUs by FOMETA was in violation of the import policy for spares, they are liable for confiscation under Section 111(d) of the Customs Act. It is further stated that besides the proceedings for confiscation they are liable for penal action also. It is also stated that case was adjudicated by the Collector of Customs (Judicial), Madras vide order dated 5-3-1993. Provisional assessment was made in respect of five bills of entry, and as detailed in the working sheet, Rs. 1, 82, 52, 608/- plus Rs. 1, 54, 63, 754/- is assessed to be recovered as duty, payable on the goods, on merits. The details of which were given including the details regarding the redemption fine imposed, and also the penalty imposed. It is further alleged that on receipt of information that the Commissioner of Customs, Madras had decided the case by order dated 5-3-1993, the petitioner contacted his officer, who wrote a letter on 15-4-1993 to the 7th respondent for sanction of the advance reward for the duty. The petitioner alleged that various correspondence took place in this regard and ultimately, on 6-11-1993, the Department sanctioned a sum of Rs. 5 lakhs as advance reward. 3.The grievance of the petitioner is that he is eligible for reward up to 20% of the duty sought to be evaded plus 20% of the fine and penalty levied/imposed and realised, provided the amount does not exceed 20% of the market value of the goods involved. He made a Fax message on 19-11-1993 to the 4th respondent requesting for payment of 25% of the reward amount of Rs. 40 lakhs being advance reward, as per guidelines. On 27-4-1994, he sent a letter to the Minister for Finance, Delhi requesting for initial advance reward, stating that as per the order of adjudication, his total reward claim is Rs. 1.71 crores approximately. The petitioner made the details of correspondence, in the affidavit. 40 lakhs being advance reward, as per guidelines. On 27-4-1994, he sent a letter to the Minister for Finance, Delhi requesting for initial advance reward, stating that as per the order of adjudication, his total reward claim is Rs. 1.71 crores approximately. The petitioner made the details of correspondence, in the affidavit. It is submitted that the recovery of the dues as well as disposal of the confiscated goods is pending for a very long time, due to the callous in action on the part of the Customs Department, whereas the information passed on by the respondent, to the Department thwarted the plans of the companies, mentioned in the affidavit. It is alleged that the payment of reward is not something gratis, that there was no question of any ex gratia payment and that there is a legal obligation on the part of the Government to pay reward, when the petitioner had informed certain details, even taking the risk of his life and as such is entitled to the payment of reward, as per the scheme in F. No R. 13011/5/88 - Adv. dated 7-6-1988. It is also stated that on account of a conflict between the Customs department and the DRI, petitioner cannot be deprived of the reward and the same cannot be given to the persons of DRI department and as such there is a bias and mala fides on the part of the authorities concerned and they forced the petitioner to run from pillar to post which act amounts to mala fide. It is also submitted that as there is no remedy and the petitioner has been paid Rs. 10 lakhs against Rs. 1, 71, 43, 273/- which is praying to grant Rs. 75, 71, 636/- being the balance advance reward pending final disposal of the writ petition. In the main writ petition, the petitioner sought for a direction to the respondents praying to grant the full reward of Rs. 1, 71, 43, 272/- subject to the payments already made. 4.A counter-affidavit has been filed denying the allegations. It is stated that they had received the information that M/s. Sanjeevani and M/s. Fometa had evaded customs duty amounting to Rs. 3 crores by contravening the conditions of the exemption order. It is also stated that Indian Grassland and Fodder Research Institute, Jhansi, deposited the redemption fine of Rs. 2 lakhs in respect of one confiscated unit. It is stated that they had received the information that M/s. Sanjeevani and M/s. Fometa had evaded customs duty amounting to Rs. 3 crores by contravening the conditions of the exemption order. It is also stated that Indian Grassland and Fodder Research Institute, Jhansi, deposited the redemption fine of Rs. 2 lakhs in respect of one confiscated unit. However, the duty in respect of that unit has not been paid by the importers and in respect of other 55 units nobody came forward to clear the same on payment of redemption fine and duty. It is also stated that unless finally adjudicated the petitioner cannot claim to get the entire reward, and Rs. 10 lakhs had been already sanctioned to the petitioner. It is also stated that guidelines for grant of reward to the informers and Government servants were revised by the Government of India vide letter F. No. 13011/3/85 Adv., dated 30-3-1988 and accordingly the informers and Government servants are eligible for reward up to 20% of the penalty levied/imposed and realised provided the amount does not exceed 20% of the market value of the goods involved. It is also submitted that the subject case was adjudicated on 10-3-1993 and that except one person no other person has come forward to pay duty and fine as per the adjudication order and the penalty amounts could not be recovered from the persons concerned. It is also submitted that even though the amount could not be realised, the petitioner was, initially paid a sum of Rs. 5 lakhs and later Rs. 5 lakhs totalling Rs. 10 lakhs was sanctioned and disbursed to the informer/petitioner and therefore till the matter is adjudicated finally, the petitioner cannot get any more money in view of the new policy. It is further stated that one M/s. India Grassland and Fodder Research Institute, Jhansi, has filed an appeal before the Customs, Excise, Gold (Control) Appellate Tribunal (CEGAT), Madras and it was dismissed by CEGAT on 2-12-1994, and the order was received by Customs House, Madras on 29-12-1994 and writ petition No. 2469/95 is pending in this Court. Similarly some matters are pending and till they are ultimately disposed of, the petitioner is not entitled for any reward. Similarly some matters are pending and till they are ultimately disposed of, the petitioner is not entitled for any reward. 5.Learned single Judge, after considering the materials available on record and upon hearing the parties, by a detailed order, held that the petitioner has given the information about the contravention made by the companies, as stated above, and the units were seized, adjudication proceedings were initiated and finally a duty to the tune of Rs. 3.37 crores was levied apart from redemption fine of Rs. 3.80 crores and penalty of Rs. 1.55 crores. It was also observed that the respondents/Department have not expressed any difficulty in locating the units for confiscation, that the information so furnished was correct and accurate and as such, there cannot be any doubt that the petitioner is entitled to reward of 20%. The argument of the department that the orders are merely guidelines and have no mandatory force and it is only the absolute discretion of the authority had been repelled. The learned single Judge further observed that in case the petitioner had not passed on the information, the Department could not have been able to find out the evasion and therefore on the principle of legitimate expectation, the petitioner is entitled to get 20% from out of the duty sought to be evaded, levy of penalty and fine. 6.Learned single Judge also considered certain decisions, cited by learned Counsel, while considering the principle of legitimate expectation. Learned single Judge also considered the fact of pendency of the appeals and the contention that the Department despite their best efforts, could not collect and realise the entire amount and observed that when the orders have been passed in the year 1993 and when some cases/appeals are pending without the grant of stay orders, it was always open to the authorities concerned to sell the units, wherever the option of redemption has not been exercised. 7.In appeal counter and re-joinder to counter are also filed. Vacating stay petition is also filed. 8.The main contention of Mr. T.K. Sampath, the learned Additional Central Government Standing Counsel is that the respondent/petitioner cannot take advantage of the guidelines of the department and in any case, the reward can be granted only after the issue had been finally adjudicated/realised as per the Amendment. Vacating stay petition is also filed. 8.The main contention of Mr. T.K. Sampath, the learned Additional Central Government Standing Counsel is that the respondent/petitioner cannot take advantage of the guidelines of the department and in any case, the reward can be granted only after the issue had been finally adjudicated/realised as per the Amendment. To this, the learned Counsel for the respondent/petitioner submits that there are guidelines of the department and now the department cannot say that despite the fact that on the information of the respondent/petitioner and ultimately got the goods confiscated, the petitioner is not entitled to get the reward as per the existing guidelines. He also submitted that since the Amendment came into effect only after the information/complaint it cannot be attracted. Learned Counsel also re-agitated the points raised in the writ petition stating that the Department wants to deprive him and also to take advantage of this entire information so gathered for their own benefit. Even assuming that it is ex gratia, the petitioner is entitled to get 50% only, before adjudication, as Commissioner has already passed orders. It is also submitted that if it is not paid, what is the purpose and who will come forward to give information, at his own risk. He further submitted that learned single Judge has rightly awarded the amount, so no interference is called for. 9.We have heard the learned Counsel appearing on either side and perused the materials on record. 10.Though so many averments had been made in the affidavit and counter-affidavit and the learned single Judge had considered various aspects in detail, in the order, we are not inclined to go into the merits of the issue in hand. The only point raised for consideration in this writ appeal is whether the petitioner is entitled to get the reward and to what extent. 11. The relevant portions of the guidelines in F. N. 13011/3/85-Adv., dated 30-3-1985 are extracted as under : Informers and Government servants will be eligible for 3.2.1. reward up to 20% of the duty, if any, sought to be evaded plus 20% of the fine and penalty levied/imposed and realised, provided the amount does not exceed 20% of the market value of the goods involved. reward up to 20% of the duty, if any, sought to be evaded plus 20% of the fine and penalty levied/imposed and realised, provided the amount does not exceed 20% of the market value of the goods involved. 5.1Payment of advance rewards Advance reward may be paid to informers and Government servants up to 50% of the expected final reward immediately on seizure in respect of the following categories of goods, namely :- ............. In all other cases, whether the seizure or of 5.3 evasion/infringement detected on the basis of documents, 25% of the expected final reward may be paid after the issue of a show cause notice provided the authority competent to sanction reward is satisfied that there is reasonable chance of confiscability/infringement/evasion, as the case may be, being established in adjudication and sustained in appeal/revisionary proceedings. In all other cases, 25% of the expected final reward may be 6.3 paid after adjudication resulting in confiscation and/or confirmation of the demand/infringement and the remaining 50% may be paid only after the conclusion of the appeal/revision proceedings by the appropriate authorities, (such as, Tribunals, FERA Board, etc.) resulting in the upholding of confiscation, demand/fines/penalties, etc., imposed under the respective Acts. Clause 8.1.1 of the guidelines deals with the monetary limit for sanction of rewards to informers and Government servants and the power vested with the different officers as per the limit. 12.The reward policy dated 30-3-1985 has been modified by proceedings F. No. R. 13011/5/89. Adv., dated 15-5-1989 wherein it has been stated that final reward should be paid only after actual realisation of the Central Excise Duty/Customs Duty, penalty, fine, etc., para 6.3 of reward rules dated 30-3-1985 stands amended accordingly. It is well settled that the guidelines cannot supersede or override the Rules and the Act. But, at the same time, the guidelines can supplement. In the instant case, admittedly guidelines were prevailing and as per the guidelines the petitioner is entitled, which is clear from a perusal of the guidelines mentioned above. Government is following the guidelines and disbursing the amount as per the guidelines, is also not controverted. Therefore, the argument of the learned Additional Central Government Standing Counsel that the petitioner cannot take advantage of the guidelines, is not tenable at this stage. Government is following the guidelines and disbursing the amount as per the guidelines, is also not controverted. Therefore, the argument of the learned Additional Central Government Standing Counsel that the petitioner cannot take advantage of the guidelines, is not tenable at this stage. More particularly when the Department itself alleged that in view of the Amendment of the year 1989 till final realisation, the petitioner cannot take the reward amount. 13.It is seen that the new guidelines/amendment came into effect in the year 1989. A perusal of the new guidelines shows that they have not been given retrospective effect. It is settled that retrospective effect can only be given when it is expressly provided. Otherwise not. We also find no materials or grounds to infer that the new guidelines are given retrospective effect. Whether the guidelines are mandatory or directory is to be seen with the object to be achieved and one of the objects is to check the evasion of tax with a great risk involved. 14.Under the circumstances, the argument of the learned Counsel for the Department that the reward amount can only be paid after final realisation as per the new guidelines is not tenable. The learned single Judge has also repelled the argument. We find no reason to differ from. At the most, the letter dated 15-5-1989 modifying the earlier policy dated 30-3-1985 i.e. para 6.3 to the extent of 25% of the expected final reward, should be paid only after actual realisation of excise duty/customs/penalty/fine, etc. So, we find no reason to differ with the views of the learned single Judge on this aspect. 15.So far as the right to get reward amount is concerned, one cannot claim a right of reward as one has a duty to discharge in the administration of justice. But, so long as the guidelines are in existence, as stated, and are not scrapped, the Department cannot deprive the informers from getting the reward amount. It is also not disputed that, on earlier occasion, persons who are informers are getting the reward on furnishing information. Now, what is to be seen as to whether the information is specific, correct and accurate. Therefore, in view of the facts of the given case, we are of the opinion that the petitioner is entitled to get the reward. It is also not disputed that, on earlier occasion, persons who are informers are getting the reward on furnishing information. Now, what is to be seen as to whether the information is specific, correct and accurate. Therefore, in view of the facts of the given case, we are of the opinion that the petitioner is entitled to get the reward. Different stages have also been provided for granting reward.16.Next the question remains to be considered is, as to what will be the amount of Reward. As all these are questions of fact, they cannot be gone into by this Court, nor this Court will go into the merits of the case at this stage, but it is seen that in the instance case, complaint/information was made in the year 1987 and on the basis of the information furnished, goods were seized and provisional assessment was made by the Department on 5-3-1993. A sum of Rs. 10 lakhs was awarded as reward, to the petitioner/informer, pending final adjudication. Learned ACGSC submits that only six excess machines had been sold out of 50 machines, it is stated that nobody has come forward to pay fine and duty and some appeals are pending, but with no stay order, and final realisation has not been made. As stated, this Court will not go into the fact whether they had violated the conditions stipulated in getting exemption, evaded to pay tax and what had been with the confiscation of goods, pending adjudication. But, the information seems to be correct. The learned single Judge has also awarded a sum of Rs. 25 lakhs, though the petitioner claimed Rs. 75.71 lakhs as per the guidelines prevailing at the time of information, observing that non-adjudication is due to the delay on the part of the administration. The learned ACGSC has not been able to show otherwise. Therefore, the order of the learned single Judge cannot be said to be erroneous. However, we feel that the amount directed to be paid now is on the high side. In the circumstances of the case, taking note of the fact, as mentioned in the rejoinder, dated 13-1-1999 filed before this Court, that earnest steps are being taken by the Department to dispose of the machines, and nobody has turned up, and once disposals are over, they will definitely consider the claim of further reward in accordance with the guidelines. In the circumstances of the case, taking note of the fact, as mentioned in the rejoinder, dated 13-1-1999 filed before this Court, that earnest steps are being taken by the Department to dispose of the machines, and nobody has turned up, and once disposals are over, they will definitely consider the claim of further reward in accordance with the guidelines. In the facts and circumstances of the case and in the interests of justice, we direct the Department to adjudicate and decide or auction the goods, within a period of six months from the date of receipt of a copy of this order. With a view to keep the balance equal on both sides, in the meantime, the Department shall pay the petitioner/informer a sum of Rs. 5 lakhs (five lakhs only) within a period of three weeks from the date of receipt of a copy of this order and further a sum of Rs. 5 lakhs, within 3 weeks thereafter. It is also made clear that if the Department fails to comply with the above direction, within the stipulated time, they have to pay the rest of the amount as per the orders of the learned single Judge dated 22-9-1998. However, it is made further clear that this order will not preclude the Department from having a negotiation with the petitioner on the issue and fix the amount for reward considering the facts situation. In view of the what we have stated above, the order of the learned single Judge is modified to the extent indicated above. The writ appeal is disposed of accordingly. Consequently, connected C.M.Ps. are also closed. There will be no orders as to costs.