Supreme Court Directs Centre To Reconsider Reward Paid To Person Who Informed About Tax Evasion By News Agency ANI Media Pvt Ltd

The Supreme Court recently directed the reward committee constituted by the Ministry of Finance under the "Reward to Informers” policy to take a fresh decision on the amount of reward awarded to a person who gave information regarding tax evasion by news agency M/s ANI Media Pvt Ltd.

The appellant before the Supreme Court contended that he had provided information to the authorities about the service tax evasion of Rs. 2.59 crores by M/s Asian News International (ANI) Media Pvt Ltd. The appellant claimed that upon giving such information, the defaulter came forward and voluntarily paid the service tax dues of Rs 2.59 crores. The reward committee sanctioned a final reward of Rs.5.50 Lakhs to the appellant based on information about the evasion of tax. The appellant claimed that he is entitled to a reward of Rs.51.80 Lakhs based on clause 4.1 of the above policy.

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 is up to 20% of the amount evaded plus the amount of fine and penalty levied.

Proceedings before Bombay HC

Aggrieved by the quantum of reward given, the appellant filed a petition under Article 226 of the Constitution before the Bombay High Court in 2015. Before the Bombay High Court, the the Principal Commissioner of Service Tax, in the affidavit in reply, admitted that information was provided by the appellant in relation to ANI Media. The tax evasion by this media company was set out in the affidavit. The affidavit further stated that the reward committee examined the information provided by the appellant and sanctioned a final reward of Rs.5.50 lacs, which is in tune with the information about evasion of tax and on investigation.

Refuting the stand of the department, the appellant filed a rejoinder before the High Court stating that he has to only give information with regard to the evasion of service tax. If that information is true and based on that recoveries are effected, then, the reward circular mandates computation of the sum based on the quantum thereof and not how the authorities arrive at any figures and attributable to the information. Thus, he argued that it is not possible for the authorities to bifurcate the information and attribute to the petitioner only that part of it, which results in actual recoveries

In 2016, a Division Bench of the High Court held that the writ petition involved disputed questions of fact and therefore, the appropriate remedy for the appellant was to file a civil suit. Aggrieved by this, the appellant approached the Supreme Court.

Supreme Court's analysis

The Supreme Court held that the reward committee did not apply its mind while granting the reward. The court emphasized that a decision-making authority must provide well-founded reasons for reaching a particular conclusion. It further asserted that subsequent attempts to supply reasons through affidavits would not be sufficient.

The bench comprising Justices Abhay S. Oka and Justice Sanjay Karol observed “The minutes show complete non-application of mind on the prayer made by the appellant. It is well settled that if the decision-making authority does not record reasons for coming to a particular conclusion, the reasons cannot be supplied by filing affidavits.”

The bench also noted that previously, in 2018, the Additional Solicitor General had informed that a decision has been taken to enhance the reward as Rs 9.45 lakhs. This was also taken as a factor by the Court to hold that there is no proper application of mind regarding the decision.

The Court allowed the appeal partly directing the committee to reconsider the case of appellant and decide if he’s entitled to an amount more than already given.

The Court highlighted that under Clause 4.1 of the Policy, the reward is up to 20% of the amount evaded plus the amount of fine and penalty levied. It noted that as per the policy, a committee comprising three members is empowered to take a decision regarding the reward.

The Court examined the Union’s affidavit which relied on a note-sheet, but the official Minutes did not mention any decision based on such notes.

The Court raised concerns about the lack of reasons provided in the decision to restrict the appellant's reward to Rs. 5.50 lakhs instead of the 20% entitled under the Policy. It also pointed out the order passed in 2018 where ASG had submitted that award was enhanced to 9.45 lakhs which go on to show non-application of mind.

The Court directed the committee to reconsider the case of appellant and determine if a higher amount is payable to him. It allowed the appeal in part and directed the committee to take a decision within 6 months.

ANI tweeted a statement in response to the report as follows :

Case title: Ketan Kantilal Modi v. Union of India

Citation: Civil Appeal No(s).12033/2018

Click Here To Read/Download Order (SC)

Click here to read/download the Bombay High Court judgment