DECISION /FINDINGS ' JUSTICE (RETD.) MUNIR A. SHEIKH (FEDERAL TAX OMBUDSMAN).---The captioned complaints are closely interconnected and are being disposed of by this single consolidated order.
2. C.No.540-L/05: Mr. Qaisar Khalil, the complainant, claims that he had acted as informer in cases of evasion of excise duty and sales tax instituted by the respondents against Messers Tayyab Textile Mills Limited, Chiniot. It was on the basis of information and documentary evidence supplied by him that the respondents proved evasion of taxes against the aforesaid mills. The Directorate of Intelligence and Investigation (Customs and Excise), Lahore, to whom he had supplied the information, had allotted him informer's Code 'AG' for purposes of secrecy. The mills was charged for evasion of excise duty and sales tax and two separate orders-in-original both, dated 6-9-2000 were passed directing the evader to deposit duty and sales tax amounting to Rs.12,383,560 and Rs.48,256,075 respectively. The aforesaid mills had also deposited the liabilities adjudged against it.
Both the show-cause notices and the order-in-original showed that the proceedings against the party were initiated on the basis of information provided by an informer who had provided original records to the Directorate of Intelligence pertaining to monthly statements showing opening stock, production, actual clearance and closing balance for the period from December, 1992 to June, 1998. He had become entitled to payment of reward out of the recovered amount. He submitted various applications to the respondents for payment of his share of reward under the relevant rules but the respondents had failed to remit the amount of reward due to him. Surprisingly, the respondents had themselves taken reward against the said recovery ignoring complainant's contribution. Although the complainant had risked his life in the national interest and provided evidential record against the party that led to recovery of duty and taxes yet he was being denied his reward, which amounted to `maladministration'. The respondents may be directed to pay him the amount of reward, which came to about Rs.1 million.
3. In reply, the Directorate of Intelligence and Investigation (Customs and Excise) have submitted that informer 'AG', in addition to the subject complaint had also filed a similar Complaint No.433- L/05 before the Honourable FTO. As confirmed by the then Additional Director Intelligence the informer identified as 'AG' was not the real informer in this case of evasion. The informer having code AG did not provide the information and record. Only the bona fide informer was entitled to claim the admissible reward .As per the Central Excise Reward Rules, 1984 and Sales Tax Reward Rules, 1998. The Directorate had already sanctioned informer's reward relating to evasion of central excise duty. The Collectorate of Faisalabad had disbursed reward for evasion of sales tax. The bona fide informer may approach the Collectorate in respect of sales tax reward. The complainant's plea that reward pertaining to central excise duty had not been sanctioned was incorrect.
4. The Collectorate of Sales Tax and Central Excise, Faisalabad, have forwarded A.C., Central Excise and Sales Tax's comments in which the A.0 points out that he was posted as Superintendent, Sales Tax and Central Excise during the period in question when the staff of Directorate of Intelligence (respondent No.5 and 6) visited Faisalabad requesting assistance in a case of evasion. He accompanied the intelligence staff and visited the mills as a result of which tax evasion was detected against Messrs Tayyab Textile Mills, Chiniot. The case of evasion was decided in favour of the Department. The Appellate Tribunal also rejected the mills appeal. The aforesaid mills deposited tax, liabilities by instalments. The Intelligence team had not disclosed the role of the informer. As such the Collectorate did not deal with the matter. Complainant's grievance related to the Directorate of Intelligence.
5. C.No.433-L/05: Mr. Abdul Ghafoor Harral filed this complaint originally at Islamabad, which was subsequently transferred to Lahore for clubbing it with Complaint No.540-L/05, as the two complaints were closely interlinked. The complainant(Abdul Ghafoor Harral) claims that although he was the real informer in the case of evasion of excise duty and sales tax against Masers Tayyab Textile Mills Limited, Chiniot the respondents had not paid him any reward or incentive money.
According to him, he had submitted an application dated 26-11-1998 to Mr. Tauseef Ahmad Qureshi, then Additional Director Intelligence, Lahore, concerning evasion by the said mills together with all the relevant documents as proof of tax evaion/concealment. The said officer got him registered as informer, allotting him code 'AG" (Abdul Ghafoor) on 26-11-1998. As a result of information supplied by him, the premises of the aforesaid mills were raided, some more records were recovered which confirmed documentary proof of evasion which he had provided. While no reward was paid to him even after a lapse of nearly six years the Sales Tax staff at Faisalabad had themselves received their share of reward. He had met the Additional Director Intelligence twice on 10-8-2002 and 4-11-2003 for payment of early reward, also reminded him by faxes but to no avail.
He had also met various officers of the Directorate of Intelligence, including Director, Additional Director and D.G. Intelligence on different times who confirmed that reward would be paid soon but without any results. The C.B.R. May be directed to make payment of his reward as per relevant rules.
6. In their comments the Directorate of Customs Intelligence and Investigation, Lahore, have submitted that, no doubt, the complainant had submitted an application on 26-11-1998 but, as per record, Abdul Ghafoor Harral was not a bona fide informer. The case of evasion against the aforesaid mills was instituted on the basis of ,documentary evidence provided by another person.
The Directorate had paid informer's reward relating to excise duty to Mr.Tauseef Ahmad Qureshi, the then Additional Director, for paying it to the genuine informer. The complainant had met Additional Director Intelligence. He was informed that funds, whenever available, would be placed at the disposal of Mr.Tauseef Ahmad Qureshi for disbursement to bona fide informer. Mr. Tauseef Ahmad Qureshi vide his letter dated 12-9-2002 had confirmed that Abdul Ghafoor Harral was not informer in the case of evasion against the aforesaid mills. Qaisar Khalil was the real informer because he had provided the material/documentary evidence on the basis of which evasion was detected.
7. The AR of Mr. Qaisar Khalil (C.No.540-L/05) submitted that his client had provided the information/documents about evasion of central excise duty and sales tax by Messrs Tayyab Textile Mills Limited, Chiniot to then Additional Director Customs Intelligence, Lahore. Although the evaded duty and taxes had been recovered yet only an amount of Rs.120,000 had been paid to his client in the central excise case and the rest of the reward of Rs.823,845 pertaining to sales tax had not been paid to him. The Directorate should sanction the reward.
8. Mr. Ahmad Kamal, the DR, submitted that recovery of duty and taxes was effected in February, 2003. The Directorate of Intelligence and the Collectorate of Central Excise and Sales Tax, Faisalabad had conducted a joint raid on the aforesaid mills. Even the contravention report on evasion of sales tax had been prepared and issued by the Collectorate of Faisalabad. While the Directorate of Intelligence had paid the informer's reward in regard to evasion of central excise duty, the rest of the reward pertaining to sales tax had to be sanctioned by the Collectorate of Central Excise and Sales Tax Faisalabad. He further explained that Qaisar Khalil worked as Excise Incharge in Messrs Tayyab Textile Mills Limited, Chiniot. It was he who gave relevant records/documents to Mr. Jamshad Yousaf, Senior Intelligence Officer (SIO) for which he was issued receipts on 3-3-1998 and 3-12-1999. The AR also submitted that Qaisar Khalil was the real informer and pointed out that the Collectorate of Faisalabad had sanctioned reward ignoring Qaisar Khalil's contribution in the case.
9. The AR representing Mr. Abdul Ghafoor Harral in Complaint No433-L/05 pointed out that his client was the real informer, which was also evident from the fact that it was agreed on 20-1-2004, with the consent of Tauseef Ahmad Qureshi, then Additional Director, that reward be jointly shared by Qaisar Khalil and Abdul Gahfoor Harral. Mr. Qureshi had given his consent in the presence of Mr.Younas Khan, Director Intelligence. He also added that his client had given information to Mr. Tauseef Ahmad Qureshi who allotted him code number 'AG'. Mr. Tauseef Ahmad Qureshi (Additional Director) could not deny that his client was indeed the real informer. At this stage Mr.Tauseef Ahmad Qureshi explained that it was only agreed that payment of reward to Qaisar Khalil would be made in the presence of Abdul Ghafoor Harral. He had not signed the so-called agreement dated 20-1-2004 placed on record by Abdul Ghafoor Harral. He submitted that the two complainants had come together to see him. Mr. Harral was not employee of the mills. He was in fact a Wapda employee. 98% of the case, Mr. Tauseef Ahmad Qureshi added, was instituted on the basis of information supplied by Qaisar Khalil. The contravention report on sales tax evasion issued by the Collectorate of Faisalabad showed that the case of evasion had been made out on the basis of information provided by the informer.
10. Despite issue of call notice, no one had appeared to represent the Collectorate of Faisalabad.
The case had to be adjourned to another date. On that date also, the representative of Faisalabad Collectorate did not turn up. Since certain issues required clarification from the Faisalabad Collectorate the hearing could not be concluded. The complaint was re-fixed for hearing on which date all concerned, including DR of Faisalabad Collectorate, appeared.
11. At the last hearing, the AR of Qaisar Khalil reiterated that the mere fact that Qaisar Khalil had been issued receipts by the Directorate against records/documents supplied by him proved that his client was indeed the informer and as such he was entitled to payment of reward which amounted to almost Rs.1 million. He added that while his client had been paid only Rs.120,000 in the excise-related case, no reward had been paid to him in sales tax-related case despite various written requests and visits to respondents' offices. The Directorate should pay the balance reward to his client.
12. The AR for Mr. Abdul Ghafoor Harral (C.No.433-L/05) submitted that Qaisar Khalil was an ex- employee of Messrs Tayyab Textile Mills, Chiniot. His services had been terminated due to misappropriation prior to submission of his client's application dated 26-11-1998 regarding evasion of duty and taxes. No doubt, Qaisar Khalil was in possession of information about evasion of duty and taxes by the aforesaid mills but it was not he who informed the department about it. Actually, Qaisar Khalil had approached one Rana Muhammad Latif, Meter Reader in Wapda, informed him about tax evasion by the aforesaid mills and asked him to give him a person who would be bold enough to act as an informer in the case. Abdul Ghafoor Harral, XEN, Wapda decided to become the informer at a risk to his life. Accordingly, Abdul Ghafoor Harral submitted an application dated 26-11-1998 to the Directorate of Intelligence about evasion of duty and taxes fully supported with facts and figures about evasion. He was allocated code AG'(Abdul Ghafoor) which could be seen on top of the said application. It was due to his client's efforts that evasion was detected and recoveries of the duty and taxes were made. His client had asked for payment of reward vide various letters and through frequent visits to the respondents' offices but to no avail. Reward due to his client should have been paid.
13.. At this stage, Abdul Ghafoor Harral asked Qaisar Khalil to indicate whether or not he had met him along with Rana Muhammad Latif (Harral's witness) and whether or not all three of them had met and given information to Mr. Tauseef Ahmad Qureshi because Qaisar Khalil had expressed fear about his life and it was decided among them that Harral would act as informer in the case.
Qaisar Khalil admitted that three of them had gone to Mr. Tauseef Ahmad Qureshi, then Additional Director, but stated that Abdul Ghafoor Harral had acted as informer only on his behalf as a cover- up front man. On the contrary, Abdul Ghafoor Harral argued that he, taking risk of life, had become informer in the case and was, therefore, entitled to payment of reward. He added that information about evasion was first given by him, Qaisar Khalil gave information to the department only later.
Abdul Ghafoor Harral and his AR added that at one stage Qaisar Khalil had agreed that the two of them would jointly and equally share reward money. At this stage, Rana Muhammad Latif, witness produced by Abdul Ghafoor Harral, was asked to record his statement. He submitted that Qaisar Khalil had approached him for putting up a person who would become informer/front man in a case of evasion of duty and taxes by Messrs Tayyab Textile Mills Limited, Chiniot. He told him that Abdul Ghafoor Harral was willing to become the informer. He added that all three of them went to Mr. Tauseef Ahmad Qureshi, then Additional Director, who allocated informer's code number to Abdul Ghafoor Harral. Asked as to whether the two informers had agreed to share the reward the AR of Abdul Ghafoor Harral stated that a statement to that effect had been submitted by Qaisar Khalil and Abdul Ghafoor Harral to Mr. Tauseef Ahmad Qureshi.
14. The AR for Qaisar Khalil (C.No.540-L/05) argued that according to Black's Law an informer was 'an undisclosed person who confidentially discloses material information of a law violation, thereby supplying a lead to officers for their investigation of a crime...."Judged on this criterion, Qaisar Khalil was the informer because it was he who supplied material information to the authorities leading to detection of evasion and recovery of evaded tax amounts. Even the then Additional Director Intelligence admitted that Qaisar Khalil was indeed the informer. The AR drew attention to Mr. Tauseef Ahmad Qureshi's letter dated 12-9-2002 confirming the same adding that his client had supplied records/docurnents for which the Directorate had issued receipts. On the other hand, the AR representing Abdul Ghafoor Harral (Complaint No.433-I /05) submitted that it was his client who was allotted code 'AG' and hence was the 'undisclosed peron' answering informer's definition as laid down in Black's Law. He added that the department was unduly conniving with and favouring Qaisar Khalil. He also pointed out that not only his client had not been given his share of sales tax reward he had also been denied his share of reward of Rs.120,000 relating to excise duty already sanctioned by the Directorate.
15. Mr. Ahmad Kamal (DR) added that a mere reading of the contravention report prepared and issued by the Faisalabad Collectorate would disclose that the case was jointly instituted by staff of the Collectorate of Faisalabad and Directorate of Intelligence on the basis of information supplied by the Directorate. There was an informer in the case, that is why serial No.8 of the preamble of the contravention report read" Name of informer---through Directorate of Intelligence and Investigation (Customs and Excise), Lahore". Tauseef Ahmad Qureshi informed that reward of Rs.120,000 on account of evasion of excise duty had already been paid to Qaisar Khalil.
16. A.C. Faisalabad who attended the last hearing was asked as to why the Collectorate had not given informer's reward, despite the fact that as per the contravention report prepared by the Collectorate the case of evasion of sales tax was instituted on the basis of information received by an informer cultivated by the Directorate of Intelligence, he submitted that since the Collectorate did not possess proper information about the informer, reward could not be given to anybody. He added that reward for a limited amount in the sales tax related case was, however, disbursed among various officers as per the sanction order (on record). The informer's reward, he submitted, was diverted to Common Pool Fund (CPF). He added that if Directorate of Intelligence disclosed the name of the bona fide informer the Collectorate of Faisalabad would sanction the reward due to the genuine informer.
17. Qaisar Khalil was asked to indicate whether he was prepared to share the reward with Abdul Ghafoor Harral he submitted that lie would be prepared to pay him 25% of the reward both in respect of evaded central excise and sales tax in the presence of Mr. Tauseef Ahmad Qureshi. On the contrary, Abdul Ghafoor Harral kept on claiming that he was entitled to 50% reward because he had helped the department to detect and recover evaded amounts at a great risk to his life. Qaisar Khalil, however, placed on record a written statement to the effect that he would be prepared to pay only 25% of the reward to Abdul Ghafoor Harral reiterating that he himself was the real informer as confirmed by Tauseef Ahmad Qureshi.
18. In his written statement (on record), filed with reference to captioned complaints, Mr. Tauseef Ahmad, the then Additional Director, stated that in 1998 two persons namely Qaisar Khalil and Abdul Ghafoor Harral had met him. Qaisar Khalil disclosed that Messrs Tayyab Textile Mills were indulging in evasion of duty and taxes. He provided original private sales record duly signed by the management of the aforesaid unit for the period December, 1992 to June, 1998. He, the bona fide informer, due to certain reasons, did not want to disclose his identity. He, therefore, forwarded the said complaint, through another person, on which informer's code of 'AG' was allotted. Abdul Ghafoor Harral had no practical role in providing information/evidence at all. Para 1 to 10 of Sales Tax order-in-original indicated that it was the Directorate which had initiated the case and pursued it before the adjudicating authority. It was the staff of the Directorate, which worked tirelessly to make out the case and recover evaded duty and taxes. While the Collectorate of Faisalabad had sanctioned, out of the total reward, an amount of Rs.670,000 to its staff, it had not sanctioned any reward to the officers of the Directorate nor to the informer despite the fact that the name of the Directorate staff was reflected in the contravention report (involving evasion of sales tax) prepared and issued by the Faisalabad Collectorate. The Faisalabad Collectorate had sanctioned an amount of Rs.134,000 only as informer's reward instead of admissible reward of Rs.957,845 and had transferred the same to their common pool fund. The Directorate had taken up the issue regarding entitlement of reward in respect of evasion of sales tax with the C.B.R. The C.B.R.
Had clarified that the Directorate was competent to sanction reward to officers working under their administrative control. In his statement, the Additional Director urges that the Directorate of Intelligence should sanction the remaining admissible reward to their staff and the informer beside asking Collectorate Faisalabad to disburse Rs.134000, already sanctioned and transferred to CPF fund by them so that complete admissible reward of the informer could be paid to the bona fide informer.
19. During the hearing also, when asked to explain as o who was the real informer, Mr. Tauseef Ahmad Qureshi, then Additional Director and one of the respondents, explained that material/evidence/ papers/ registers were handed over to him by Qaisar Khalil. It was his information that led to recovery of more records from the premises of the aforesaid mills. Abdul Ghafoor Harral did not furnish any material information/documents. He submitted that Jamshad Yousaf, Special Intelligence Officer (SIO), was associated with the proceedings. When asked about it, Jamshad Yousaf, who was present at the hearing, submitted that the case was framed on the basis of records provided by Qaisar Khalil. Tauseef Ahmad Qureshi reiterated that Qaisar Khalil was the main informer who provided all records/information and interacted with the department during the entire proceedings leading to detection of duty and taxes.
20. The arguments of the parties and record of the case have been considered and examined.
Each of the two complainants stakes his claims for payment of reward in cases of evasion of excise duty and sales tax instituted against Messrs Tayyab Textile Mills Limited, Chiniot. The contravention cases framed against the aforesaid mills were adjudicated. The Appellate Tribunal rejected complainant's appeal. The Department succeeded in recovering evaded duty and taxes. The moot question is as to who was the real informer in the subject cases. The record of the case and the arguments of the two sides point to the fact that whereas Qaisar Khalil had gathered information/documents about evasion of duty and taxes by the aforesaid mills, supplied the same to the Directorate of Intelligence against proper receipts. The informer's code 'AG' was allocated to Abdul Ghafoor Harral who had agreed with Qaisar Khalil in the presence of Rana Muhammad Latif, Meter Reader, Wapda, to act as informer. The three of them had also met Mr. Tauseef Ahmad Qureshi, then Additional Director, who allotted Abdul Ghafoor Harral the code number. Qaisar Khalil admits that Abdul Ghafoor Harral was engaged merely to act as a cover-up, only as front man but claims that he himself was the real informer. Clearly, the two of them acted together. Even if Abdul Ghafoor Harral had acted as a front man he was registered as `informer' and was allocated informer's code number. He assumed that role at a risk to his life. While Qaisar Khalil might have supplied the records/documents/information to the Directorate of Customs. Intelligence Abdul Ghafoor Harral, by agreeing to become an informer, had done so at a risk to his life---a fact which cannot be easily ignored. Even the Directorate of Intelligence cannot deny that it had allocated informer's code to Abdul Ghafoor Harral. Thus the two of them had acted together to help the Directorate of Intelligence in detecting evasion of duty and taxes. The statement of witness Rana Muhammad Latif also confirms that position. It is also a fact that at one stage the two persons had agreed to share the reward money and had submitted in this regard an application (on record) to Mr. Tauseef Ahmad. While Qaisar Khalil holds that, for all practical purposes, he was indeed the informer. He did not deny that he had approached Abdul Ghafoor Harral for becoming informer on his behalf. During the hearing, Qaisar Khalil agreed that he would be prepared to pay 25% of total reward to Abdul Ghafoor Harral i.e. 25% of both excise duty related reward, already paid to him, and 25% of sales tax related reward, which is still payable, in the presence of Mr. Tauseef Ahmad Qureshi. However, according to Mr. Tauseef Ahmad Qureshi, then Additional Director Intelligence, Qaisar Khalil had played a predominant role in detection of evasion and recovery of government dues. The Additional Director also emphasized that Qaisar Khalil had closely interacted with the department throughout the proceedings. Considering Mr. Tauseef Ahmad Qureshi, then Additional Director's version, the evidence on record and the facts that came to light during the hearing it is felt that both Qaisar Khalil and Abdul Ghafoor Harral are to be recognized as informers in the subject cases of evasion. According to the Directorate of Intelligence and Mr. Tauseef Ahmad Qureshi, then Additional Director, who had received the information leading to detection of evasion, Qaisar Khalil's contribution was greater than that of Abdul Ghafoor Harral. Even so it cannot be denied that Abdul Ghafoor Harral had also played a significant role inasmuch as he decided to act as an informer/front man at a risk of his life. Considering the overall circumstances of the case, the categorical and vehement testimony of Mr. Tauseef Ahmad Qureshi, then Additional Director that Qaisar Khalil had played a major role in detection of evasion and also considering that it is not possible to ignore the role played by Abdul Ghafoor Harral it will be just and appropriate if the admissible reward is distributed between Qaisar Khalil and Abdul Ghafoor Harral in the ratio of 75:25, as also agreed to by Qaisar Khalil.
21. While the Directorate of Intelligence has paid informer's reward in a case of evasion of central excise duty to Qaisar Khalil alone, the Collectorate of Sales Tax, Faisalabad has already issued a sanction order dated 5-6-2004 working out informer's reward amounting to Rs.134,000 diverting the same to department's common pool fund. The basis on which they have worked out the informer's reward is best known to them because even according to the Directorate of Intelligence the informer's reward in respect of case of evasion of,sales tax was much higher. It is observed that while sanctioning the reward (sanction order on record) the Collectorate of Faisalabad did not care to find out who the informer was and also ignored the fact that the sales tax contravention report, prepared and issued by the Collectorate, itself, had clearly indicated at serial No.8 of the preamble of the contravention report' 8'--name of informer-through Directorate of Intelligence and Investigation (Customs and Excise), ' Lahore. It is not understood why the Faisalabad Collectorate failed to coordinate with the Directorate of Customs Intelligence to determine (i) whether or not there was any informer and (ii) the extent of reward due to the informer. The Faisalabad Collectorate appears to have sanctioned reward to its own staff ignoring the due share of informer's reward. However, during the hearing, the DR representing the Collectorate of Faisalabad submitted that the Collectorate would be prepared to disburse reward to the bona fide informer of the Directorate of Intelligence disclosed and confirmed the name of the informer to the Faisalabad Collectorate. The question as to whether the reward in the case of evasion of sales tax is to be sanctioned by the Directorate of Intelligence or by the Collectorate of Faisalabad is a question for the department to settle. Clearly, there has been 'maladministration' on the part of the respondents inasmuch as the informer reward, if admissible, which was due to be paid since long had not been paid to the proper persons. One also observes that there was lack of coordination between the Directorate of Intelligence and the Collectorate of Faisalabad in processing of cases for payment of reward as per the Reward Rules. This lack of coordination reflects carelessness and indifference on the part of the respondents, which again amounts to 'maladministration'. Regardless of whether the Directorate or the Collectorate sanctions the admissible reward it is recommended that the C.B.R. Direct the competent authority to:
(i) Work out the admissible amount of informer reward and distribute it between Qaisar Khalil and Abdul Ghafoor Harral in the ratio of 75:25. Payment of Abdul Ghafoor Harral's share in the case of evasion of sales tax should be made to him by the department in the presence of Mr. Tauseef Ahmad Qureshi, the then Additional Director.
(ii) As Qaisar Khalil had agreed to pay 25% of the total reward to Abdul Ghafoor Harral, the payment of 25% of excise related reward, already received by Qaisar Khalil from the Directorate of Customs intelligence, to Abdul Ghafoor Harral, may be so arranged by the department that Abdul Ghafoor Harral's share on this account is paid to him by Qaisar Khalil in the presence of Mr. Tauseef Ahmad Qureshi, the then Additional Director.
(iii) Compliance be reported within 30 days of the receipt of this order.