Delhi High Court Rules GST Evasion Informer Has No Right to Claim Reward

The Delhi High Court recently affirmed that any person who furnishes information about alleged Goods and Services Tax (GST) evasion cannot claim a reward as a matter of right. The Court noted that any reward is a discretionary grant by the Revenue.

The petitioner, referred to as “XY,” filed the instant petition claiming that she had supplied information concerning alleged GST evasion by one M/s Shakti Enterprises and was not considered for a reward under a Notification dated July 31, 2015, issued by the Central Board of Excise and Customs (Anti Smuggling Unit), which has been reconstituted and renamed as the Central Board of Indirect Taxes and Customs (CBIC) since 2017.

Following the provision of the information, a show-cause notice was issued to M/s Shakti Enterprises on July 28, 2023, which culminated in an order-in-original dated December 6, 2023, by which substantial demands were raised and penalties imposed. The order-in-appeal was challenged, with the appellate authority setting aside penalties against the partners and leaving only a small demand. Aggrieved by the modification of the penalty and non-grant of a reward, the petitioner approached the High Court.

Gaurav Sharma and Manpreet Kour appeared for the Respondent Union of India, with Samiksha Godiyal, Tenzing N. Bhutia, and B.D. Rao Kundan for the Revenue, relying on the decision of the Supreme Court in Union of India & Ors. v. C Krishna Reddy (2003) to argue that a writ of mandamus cannot be issued at the behest of an informer.

A Division Bench of Justice Prathiba M. Singh and Justice Shail Jain at the outset queried the maintainability of the writ, noting that the petitioner’s status is that of an informer and that an informer cannot convert a claim to a discretionary award into a lis (Latin for a legal dispute or litigation) against the private respondent on merits. Accordingly, the Bench observed that the grant of an award under the scheme initiated by the CBEC is a discretionary grant and prima facie not amenable to challenge as a legal entitlement.

Kumar Utkarsh appeared for the petitioner and pointed out that there is a list of a large number of clients of M/s Shakti Enterprises who had deposited Tax Deducted at Source (TDS) and the taxable value has been wrongly taken by the Department, leading to a small demand being raised in the order-in-appeal passed on 15th July, 2024.

Accordingly, the High Court directed the informer to remain present during the next date of hearing and required the parties to be ready to address the issue of maintainability of the matter. The Court also directed that a properly notarised affidavit containing the petitioner’s full particulars be retained in a sealed cover by the Registry.