Shiga Energy Pvt Ltd v. GE Power India Ltd

9. It is submitted that there was no agreement between the parties for any further tax liability/burden upon the petitioner/employer. It is submitted that there is no Schedule similar to Schedule 7 of DEPL Contract which details the amount of taxes to be reimbursed. If the contention of the respondent, that it is entitled to the reimbursement of taxes on BOP items, is to be considered then, in light of the absence of a schedule similar to Schedule 7 of DEPL Contract, the amount actually deposited by the sub-contractors becomes a vital record for determining the petitioner’s liability. The learned Arbitral Tribunal failed to consider the aforesaid facts, contentions as well as provisions of the contract while deciding the impugned award. Learned Arbitral Tribunal also failed to consider Clause 14.[2] and Clause 14.[4] of the GCC. The Clause 14.[4] read with Clause 14.[2] clearly indicates that only those taxes which are assessed on the respondent are liable to be reimbursed by the petitioner. Since taxes on BOP are assessed on third parties, the same is not the liability of the petitioner.

10. It is submitted that learned Arbitral Tribunal has incorrectly interpreted the term “actual” and “applicable taxes”. In para 8.[6] of the impugned award, the observations of the Tribunal are fallacious and wrong because they presuppose that the petitioner/employer would have got CENVAT credit with respect of taxes and duties paid by it and therefore, it would not have been at a loss while reimbursing those taxes. It is an admitted fact that no deemed exports benefits were availed by the petitioner/employer in view of the specific withdrawal of the Policy by the Government.

11. It is submitted that as per Article 2 (Contract Price and Terms of Payment) of the Contract and Clause 14 of GCC, the price of the product was to be exclusive of all applicable taxes and duties and levies. It further provides that all taxes and duties as applicable at the time of dispatch, will be reimbursed by the petitioner to the respondent, at actual.

12. The impugned award also failed to correctly interpret the abovementioned clauses, specifically “All taxes and duties applicable”. As per the Contract, the reimbursement of applicable taxes, duties and levies which was agreed between the parties, was only applicable on the underlying transaction being the output of the business transaction of respondent and not on the input of the business transaction. In this regard, learned counsel for petitioner submitted that on reading the above clauses, it is apparent and evident that the petitioner is in no way liable to pay taxes, i.e. Excise Duty and CST, on the goods procured by the respondent from the approved sub-contractors for delivery to the petitioner.

13. It is submitted that the terms of the Contract cast an obligation in terms of Clauses 11.[4] and 11.[5] of Special Conditions Contract (SCC) that the respondent would provide specific documents namely (i) Copies of supply invoices (ii) Copies of sub-supplier invoices (iii) Central Excise attested copy of the ER-1 showing details of duty paid (iv) Disclaimer Certificate (v) CENVAT declaration. These documents especially Central Excise attested details of duty paid would have shown that the duty was actually paid. It is further submitted that in reply to the statement of claim, the petitioner took a wide defence stating that it was not liable to reimburse taxes on BOP items at all, however, in its written submissions filed before the Tribunal, the petitioner took a limited stand that it was liable to reimburse the taxes on BOP items only if the respondent produced all the above mentioned documents, which included the Central Excise attested ER-1 which showed the actual payments made to the excise authorities.

14. Learned counsel appearing on behalf of the petitioner submitted that the Tribunal has also confirmed the above position on supply of documents by recording a finding to the effect that the deemed export benefit pertains to all the supplies in respect of the project and were not limited to those which were manufactured by respondent alone.

15. It is submitted that the Tribunal has erred while awarding the taxes and duties on BOP items without insisting/ensuring that the same amount has been deposited/actually paid by the sub-contractors of the respondent to the concerned authorities. The respondent has not supplied these documents to the petitioner nor has made the same a part of the record before the Tribunal. It is an admitted position that none of the contractually specified documents had been filed by the respondent before the Tribunal.

16. Learned counsel appearing on behalf of the petitioner vehemently submitted that even if the respondent’s submission is to be accepted that he is entitled to the reimbursement of taxes on BOP items, then the aspect on proofs of such payments actually deposited by the Sub contractors is vital to determine the liability of the petitioner in this regard as the same has to necessarily be reimbursed on “Actuals”, which is not possible without supply of the aforementioned document as a proof.

17. Learned counsel appearing on behalf of the petitioner submitted that as per Section 28(3) of the Arbitration Act, the tribunal was bound by the terms of the Contract i.e. Clauses 2.[1] of the Contract read with Clauses 14.[1] and 14.[4] of the GCC read with 11.[4] and 11.[5] of the SCC and hence, the Tribunal had to necessarily decide the present dispute on the basis of the provisions of the contract. The Tribunal did not take into account the above clauses and their stipulations and simply ignoring the above clauses awarded the claims in favor of the respondent. Hence, the respondent’s claim could not have been awarded by the Tribunal except after verifying strict compliance with the above clauses of the contract.

18. It is submitted that when material evidence is not considered in the award, which would go to the root of the matter, the award cannot be allowed to stand, and has to be set aside. In the present case as well the award allows the claim without considering the vital submissions made by the petitioner and without insisting on proofs of payments made by the sub-contractors with the concerned authorities on “Actual” basis. This aspect would also go to the root of the matter, as without the proofs of payments the liability of the petitioner cannot be determined in the present case.

19. Learned counsel for the petitioner submitted that in view of the foregoing submissions, the impugned award is liable to be set aside. On behalf of the respondent

20. Learned counsel appearing on behalf of the respondent submitted that the petitioner is attempting to make an entirely new case before this Court. It was never the case of the petitioner before the learned Tribunal that the respondent had not furnished the requisite documents/evidence for the payment/reimbursement of taxes, duties and levies on BOP. It is submitted that on the contrary, the case set-up by the petitioner in its Statement of Defence before the learned Tribunal as follows: “a. The term "actuals" in the Contract has to mean taxes, duties and levies payable by the Respondent to the exchequer and not by the Subcontractors to the exchequer. Since the taxes, duties and levies on BOP were paid by the subcontractors of the Respondent to the exchequer and not by the Respondent, the Petitioner was not liable to pay/ reimburse the same to the Respondent. The actual amount of taxes, duties and levies evidenced by the Tax Invoices on record, however, was not disputed. b. The taxes, duties and levies paid by the subcontractors to the exchequer, and in turn paid by the Respondent to the subcontractors, were included by the Respondent in its contract price. Allowing the Respondent to recover the same again from the Petitioner would amount to double recovery and hence unjust enrichment.”

21. It is submitted that the petitioner never disputed its obligation to pay/reimburse the taxes, duties and levies on BOP on the ground that it had not been provided proof of payment to the exchequer or that it was unaware of the "actuals". This was not even pleaded by the petitioner in the arbitral proceedings.

22. It is further submitted that the learned Tribunal has returned a factual finding on the basis of materials on record that the petitioner had, in fact, paid/reimbursed to the respondent the taxes, duties and levies on BOP at actual. These tax invoices are admitted documents and reflect the actual amount of taxes, duties and levies which the petitioner is obligated to reimburse to the respondent. It is also an admitted position that the petitioner had issued C-Forms acknowledging the actual amounts of taxes, duties and levies on BOP. It is vehemently submitted that this finding has not been challenged by the petitioner.

23. It is trite law that a party is precluded from raising mutually destructive pleas. Before the learned Tribunal, it was argued that the taxes, duties and levies have been deposited by the sub-contractor with the exchequer and the respondent has included these costs. Before this Court, the petitioner has argued that the evidence of payment of these taxes, duties and levies has not been furnished as per Clause 11.4(c) of SCC. Learned counsel for the respondent submitted that both these pleas, being mutually destructive, are impermissible in law.

24. It is submitted that the petitioner's reliance on SCC Clause 11 is erroneous. Clause 11 of the SCC does not deal with the obligation of the petitioner to pay/reimburse tax, duties and levies on BOP at all. This obligation, as correctly held by the Tribunal, is provided in Clause 14 of the GCC which deals with "Tax and Duties”. Under Clause 14 of the GCC, there is no such requirement of furnishing the documents as mentioned in Clause 11.[4] (c) of the SCC for the payment/reimbursement of taxes, duties and levies on BOP by the petitioner to the respondent.

25. It is submitted that Clause 11 of the SCC only provides for the mechanism to enable the petitioner to obtain deals with "Deemed Export Benefits". The documents listed in Clause 11.4( c) were only required to be furnished by the respondent to assist and enable the petitioner to claim Deemed Export Benefits. This was not an issue or dispute between the parties.

26. Learned counsel appearing on behalf of the respondent submitted that the same clauses of the Contract deal with both BOP as well as manufactured goods. The claimant never asked the respondent to provide the documents stipulated in Clause 11.[4] (c) of the SCC for either BOP or manufactured products, yet it paid/reimbursed the respondent for the taxes, duties and levies on manufactured products.

27. It is submitted that it is settled law that no new case can be put up without there being any factual foundation for the same in the pleadings. There was no dispute between the parties regarding the actual amounts of taxes, duties and levies on BOP deposited with the exchequer. There were no factual averments or documents on record of the Tribunal in this regard. The petitioner cannot be allowed to make out a new case before this Court at this stage.

28. It is further submitted that there is no patent illegality in the award even on this ground. Learned Tribunal has, by way of a detailed and well-reasoned award, returned a finding on merits and on the basis of evidence before it.

29. It is submitted that the petitioner had, on the basis of the subcontractors’ tax invoices and debit notes issued by the respondent, paid/reimbursed Rs. 28,55,489/- (Rupees Twenty Eight lakhs Fifty Five Thousand Four Hundred Eighty Nine Only) towards taxes, duties and levies on BOP to the respondent in four tranches from February 2015 to August 2015 and thereafter was making on-account payments towards taxes, duties and levies on BOP.

30. The Hon’ble Supreme Court has in the case of Associate Builders v. DDA (2015) 3 SCC 49 held that findings on merits are within the domain of the arbitral tribunal and courts exercising jurisdiction under Section 34 of the Act do not act as courts of appeal. The arbitrator is the ultimate master of the quantity and quality of evidence before him. Findings on merits, even if based on little evidence or evidence which does not measure up to the legally trained mind, cannot be interfered with by courts under Section 34 of the Act. It is submitted that the award is unanimous and does not suffer from any patent illegality. Therefore, this Court may not interfere in the impugned award.

31. Learned counsel for the respondent further submitted that the unanimous award is detailed, well-reasoned and based on evidence. The Award does not suffer from any patent illegality or any infirmity whatsoever which would warrant interference therewith under Section 34 of the Act. Hence, the instant petition is devoid of any merit and is liable to be dismissed.

FINDINGS AND ANALYSIS

32. I have heard the learned counsel appearing on behalf of the parties and gone through the material on record as well as the arbitral award.

33. Before proceeding further, I find it necessary to briefly revisit the existing position of the law with respect to the scope of interference with an arbitral award in India.

34. As far as, Section 34 of the Act is concerned, the position is wellsettled by now that the Court does not sit in appeal over the arbitral award and may not interfere on merits. The Court may only interfere on the limited ground provided under Section 34(2)(b)(ii) of the Act i.e. of the award is against the public policy of India. As per the legal position clarified through decisions of this Court that violation of Public Policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of justice of India, conflict with justice or morality and existence of patent illegality in the arbitral award. The concept of the fundamental policy of Indian law would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice and reasonableness.

35. It is only if one of the above conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii) of the Act but interference does not entail a review of the merits of the dispute and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a plausible view based on the facts.

36. The impugned award dated 14th October, 2020 has been challenged by the petitioner on the following grounds: (a) Firstly, learned Arbitral Tribunal has proceeded and passed an award without recording the taxes, duties and levies and without any evidence on record. Therefore, the impugned award was passed “without any evidence”. (b) Secondly, the non-consideration of vital submissions made by the

(c) Thirdly, the learned Arbitral Tribunal has failed to consider Clause

37. The respondent vehemently opposed the instant petition and submitted that in the Statement of Defence, the petitioner has admitted to the knowledge that the taxes on BOP were in fact paid by the subcontractors to the Exchequer. It is also argued that Statement of Defence (SOD) only clarifies about the onus of payment and not about the actual proof of payment. It is also argued that it is not the case of the petitioner that it was not aware that sub-contractors had to deposit the taxes to the Exchequer. It is the case of the petitioner that proof of actual payment of taxes by sub-contractors on BOP sales was not examined by the Arbitral Tribunal while affixing the contractual obligation on the petitioner to reimburse these taxes. This argument has not been taken by the petitioner before the learned Arbitral Tribunal.

38. Before I proceed to deal with the merits of the present case, I find it convenient to refer, in brief, to the principles elucidated in the case laws cited by the learned counsel appearing on behalf of the parties. In my view, the difficulty does not lie so much in gathering or enunciating the principles, but in applying them to a particular situation in hand. The ground on which an award can be challenged and constrained is Section 34 of the Act.

39. There are essentially three areas in which the arbitral award is likely to be challenged before this Court or the Hon’ble Supreme Court.

(i) Firstly, an award may be challenged on jurisdictional grounds.

(ii) Secondly, an award may be challenged on what may broadly be described as “procedural, close grounds, such as failure to give a party an equal opportunity to be heard”.

(iii) Thirdly, and most rarely, an award may be challenged on substantive grounds on the basis that the Arbitral Tribunal made a mistake of law.

40. The grounds for successfully challenging an award under Section 34 of the Act are elaborated hereinunder: (a) Adjudicability:- An Arbitral Tribunal is empowered to decide for itself whether or not it has jurisdiction over a particular dispute under the doctrine of “competence-competence”. If its jurisdiction is challenged, the Arbitral Tribunal may decide the point as preliminary issue in an interim award or as part of its award on the merits. In the United States, the standard depends on whether the jurisdictional decision was based on compliance with procedural pre-conditions, in which case differential review applies or consent to arbitrate at all. (b) Another ground for challenge is that the Arbitral Tribunal has exceeded its power in the decision that it has rendered. This ground of challenge contemplates a situation in which an award has been made by the Tribunal that did have jurisdiction to deal with the dispute, but which exceeded its powers by dealing with claims that had not been submitted to it.

(c) Arbitrability:- The concept of Arbitrability which provides another ground to challenge the award. If any arbitration arises, it is necessary to have regard to relevant law of the State. These are likely to include the law governing the party involved where the agreement is with a State or State entity, the law governing the arbitration agreement, the law of the seat of arbitration and the law of ultimate place of enforcement of the award. Whether or not a particular type of dispute is “arbitrable, close under a given law is, in essence, a matter of public policy for that law to determine.” “Against the public policy the determination of any dispute is not permissible under the law”. Procedural Grounds

41. It is broad category of grounds for challenging arbitral awards relating to deficiency in the way in which the Arbitral Tribunal was appointed or the Arbitral procedure was conducted. As per Section 34 of the Act, an award can be challenged when the party making the application was not given proper notice of the appointment of an Arbitrator or of the arbitral proceedings or was otherwise unable to present his case. (a) Lack of due process:-procedural irregularity: Certain minimum procedural standards may be observed in the fair and proper conduct of arbitration. These procedural standards are designed to ensure that the Arbitral Tribunal is properly constituted that the arbitral procedure is in accordance with agreement of the parties, and that the parties are given proper notice of the proceedings, hearings and awards. In other words, the aim is to ensure that the parties are treated with equality and are given fare hearing with proper opportunity to present their respective cases. (b) Further Procedural Issues: An award is also at risk of challenge where the composition of the Arbitral Tribunal and the procedure adopted in the arbitration are not in conformity with the agreement of the parties or failing such agreement, with the law. Substantive Grounds

42. If the Tribunal has jurisdiction, the correct procedures are followed and the correct formalities are observed, the award i.e. good, bad or indifferent is final and binding on the parties. It matters not that the Tribunal erred in its review of the evidence or misapplied the applicable law. The question, arises as to whether there should be a great degree of judicial review of the merits or is it enough to ensure that the correct procedures have been observed as the law requires or is something more needed to ensure that the learned Arbitral Tribunal has reached the correct decision.

43. As per the Section 34 of the Act, the award of the learned Arbitral Tribunal can be challenged on the ground if the award is contrary to the public policy, patent illegality and passed without any evidence. In the instant case, the main ground for challenging the award is that the learned Arbitral Tribunal while passing the award has not taken into consideration any evidence led by the parties, particularly, by the

44. I may now proceed to summarise the conclusions reached by the learned Arbitral Tribunal. The relevant extract of the impugned award is reproduced as under: “6. POINTS OF DETERMINATION 6.[1] Following points of differences were formulated by the Tribunal, which needed determination:

(i) Whether the respondent is liable to pay to the claimant the taxes and duties on Bought Out Products (BOP) items under the contract dated 21.05.2019?

(ii) Whether the respondent had made payments towards taxes and duties on Bought Out Products (BOP) items under the contract dated 21.05.2019?

(iii) Whether the claims as raised by the claimant towards taxes and duties on Bought Out Products (BOP) items are barred by law of limitation?

(iv) Whether the claimant is entitled to the claims preferred by it?

7.17 The Ld. Counsel pointed out that the Claimant in its oral arguments referred to the Statement filed by the Respondent along with its Statement of Defence as Annexure A [marked in evidence of RW-1 as Ex. RW-1/2) to submit that payments reflected in the said Statement were towards Taxes and Duties on BOP. In this regard, Claimant specifically referred to the entry at Row No. 6 of Annexure A/Ex. RW-2 to submit that the Claimant had failed to show the corresponding Invoice (for Taxes on Manufactured goods) for an amount of Rs. 1,45,331/ (Rupees One Lac Forty Five Thousand Three Hundred and Thirty One Only). As per the claimant, the said payment corresponded to the Tax Invoice for BOP at Pages 143 & 144 of Volume I of the Statement of Claim. In this regard, the Claimant sought to project that since the sum total of the Tax figures appearing in the last row at Page 144, added up to Rs. 1,45, 331, it should be taken & assumed that the said payment was made towards taxes on BOP. Further, for another entry appearing at Page 54 of Annexure A/Ex-RW[2], being entry dated 31.10.2016 for an amount of Ra. 17,00,000/- ….. Xxxx

7.26 According to Mr. Khurana, the aforesaid evidence clearly reflected that the respondent had not made any payments of taxes towards BOP at any stage. From that he endeavoured to submit that the parties clearly understood that taxes regarding BOP were not to be reimbursed so far as this contract is concerned, as a result of specific omission of Schedule 7 in the instant contract, the contra-distinct with DANS contract. He submitted that these few factors viz, deletion of Schedule 7 and making of reimbursement of taxes on BOP at all from the very beginning would make it clear that the judgments in DANS case were also not applicable. He extensively read out from those judgments to argue that the conclusion reached by the Arbitral Tribunal as accepted by the courts was influenced by the fact that in the said case, DANS had initially made the payments of taxes towards BOP and later on started denying the same.

7.27 On the aforesaid foundation, i.e, no part payments were made for reimbursing taxes on BOP, Mr. Khurana submitted that part of the claim for taxes on BOP was also barred limitation. He pointed out that the contract in question was entered into on 21.05.2010 pursuant to which the claimant supplied equipment ete, including BOP items. As far as respondent is concerned, since the very commencement of the works of supply under the contract, it neither acknowledged nor paid taxes on BOP items. The claimant had raised the dispute and invoked arbitration vide communication dated 18.02.2019 According to Mr Khurana, the period of……….. Xxxx

7.43 Last submission of Mr Khurana was that the claim as raised in the present proceedings had not been correctly computed. On this aspect, he submitted that the Claimant's claim of Rs. 3,92,92,680/- as raised in the present Arbitral proceedings, is based upon the working furnished at Page 930 of Volume III of the Statement of Claim. However, a perusal of the amounts mentioned at Page 930 vis-à-vis the amounts mentioned in the corresponding documents filed by the Claimant itself in the present Arbitral proceedings, shows that the amounts mentioned at Page 930 and the computation thereof is incorrect. In this respect, the respondent relied upon a tabulated chart reflecting the said position.

8. ANALYSIS AND CONCLUSION OF THE TRIBUNAL 8.[1] We have considered the respective submissions of the counsel for the parties with reference to the pleadings as well as documentary and oral evidence on record. The moot question which needs decision is as to whether Clause 14 of the Agreement puts an obligation on the part of the respondent to pay/reimburse taxes and duties even in respect of BOP supplies. As noted above, there is no dispute between the parties that Excise Duty and CST on the manufactured items were to be reimbursed as provided in the contract and the said mum, in fact, has been paid by the respondent to the claimant. This issue/dispute of payment of Excise Duty and CST is to be decided on the interpretation of Clause 14 of GCC. The other peripheral issues viz, whether respondent in fact initially made payment towards taxes on BOP or the effect of the judgment in DANS Energy in incidental and pressed into service by the claimant as supporting factors. Therefore, the Arbitral Tribunal is of the view that since Clause 14 of GCC, which is the relevant clause to decide this issue, needs to be interpreted in the first instance to find an answer to the main issue. 8.[2] Though this clause has already been reproduced in the beginning while taking note of the relevant clauses of the agreement as well as GCC and SCC, for the sake of continuity in discussion, we would like to reproduce the clause once again, which reads as under:

14. Taxes and Duties: (Page 503 (Volume 2A-GCC) 14.[1] All Taxes and Duties (Excise Duty, Central Sales Tax, Customs Duty and Service Tax) applicable are indicated in Schedule 7 and will be paid/reimbursed by the Employer at actual. All State and local (State Government, Municipal, etc., such as Entry Tax/Octrol/VAT/Works Contact Tax/any other local taxes, duties, levies, ete. which are not Included in Schedule 7, if levied on the Contract, shall be paid/ reimbursed by the Employer on actual. However, the Income Tax, whenever applicable on the contractor or the Expatriates deputed by him for the Project, under the purview of this contract shall be borne by the contractor 14.[2] Notwithstanding GCC Sub-clause 14.[1] above, the Employer shall bear and promptly pay all customs and import duties, imposed on the Plant and Equipment and mandatory spare parts specified in Price Schedule No. 1 and that are to be incorporated into the Facilities by the law of the country where the Site is located. Essentiality Certificate/Project Authority Certificate for the claim of Concessional rate/Exemption of Customs Duty as applicable for Project Import Advance Authorisation shall be provided by Employer. As per Import Export Policy (2008-2009), as applicable of Government of India, goods supplied for the project where procedure of International Competitive Bidding (ICB) has been followed, same shall be eligible for Deemed Export benefits. The Employer shall be solely responsible for obtaining such Deemed Export Benefits. For the Material/Items purchased outside the State of Sikkim, Road Permit and Form-C and other relevant statutory requirements to avail the Concessional Rate of CST shall be issued by the Employer. The above payment/reimbursement of taxes, duties as defined in Schedule 7 i.e. Excise Duty, Customs Duty, Central Sales Tax and Service Tax shall be restricted to the extent of Grant Total amount mentioned in Schedule No. 7 subject to GCC Clause 14.[4] and 36. If any material/item as per the nomenclature mentioned in Bill of Quantities and invoiced by the contractor, are coming directly from the works of his duly approved sub-contractor to the employer's site in a state different from the state wherein Sub-contractor's work are located, the contractor shall effect „Sale in Transit‟ for such transaction. For effecting „Sale in Transit‟, the contractor shall ensure that his Sub-contractor raises invoices in the Contractor's name and obtains GR/LR/RR in the name of Contractor and the Contractor further endorse the GR/LR/RR in the name of Employer during transit of the equipment before the delivery of equipment is taken over the Employer. Such transaction shall also be treated as direct transaction between Employer and the Contractor. 14.[3] If any Lax exemptions, reductions, allowances or privileges may be available to the Employer in the country where the Site is located, the Contractor shall extend all help to enable the Employer to benefit from any such tax savings to the maximum allowable extent. 14.[4] For the purpose of the Contract, it is agreed that the Contract Price specified in Article 2 (Contract Price and Terms of Payment) of the Form of Contract Agreement is based on the taxes, duties, levies and charges prevailing on the date of signing of Contract (hereinafter called „Tax‟ in this GCC Sub-clause 14.4). If any rates of Tax are increased or decreased, a new Tax is introduced, an existing Tax is abolished, or any change in interpretation or application of any Tax occurs in the course of the performance of Contract, which was or will be assessed on the Contractor, in connection with performance of the Contract, an equitable adjustment of the Contact Price shall be made to fully take into account any such change by addition to the Contract Price or deduction therefrom, as the case may be, in accordance with GCC Clause 36 (Change in Laws and Regulations) hereof. 8.[3] It is trite position in law, which position is accepted by both the parties that by Agreement, the parties may agree as to which party is to bear the burden of taxes and duties. Excise Duty and CST were payable to the Department by the claimant. Vide aforesaid clause, it was agreed that such taxes and duties will be reimbursed by the respondent. Clause 14.[1] of GCC in this behalf mentions about „all‟ taxes and duties which are applicable, shall be reimbursed by the respondent "at actual". It specifically mentions Excise Duty and CST. This clause also states that even State and Local taxes levied on the contract shall be paid/ reimbursed by the respondent on actual. As far as Income Tax is concerned i.e., specifically excluded by mentioning that the same shall be borne by the claimant. Thus, apart from Income Tax i.e., the direct tax, all indirect taxes and duties were to be reimbursed by the respondent. Pertinently, this clause does not distinguish between the taxes and duties payable on manufactured items, the products which were manufactured by the claimant itself or BOP, i.e., the products which were got manufactured from sub-contractors. It is of some significance to note that, as per the contract, the claimant was not only permitted to get certain items manufactured from its subcontractors, even the names of those sub-contractors are specifically mentioned in the contract. Therefore, it was agreed between the parties that certain items would be manufactured by the sub-contractors which are given the nomenclature of "Bought Out Products" (BOP). Notwithstanding the same, Clause 14.[1] talks of "all" taxes and duties and does not exclude from its ambit taxes and duties payable on BOP. It will also be pertinent to point out that the contract in question was for lumpsum amount and the prices were mentioned in Appendix X to the contract which contains Schedule of rates and prices. It gives the description of plant, equipment and specified spare parts and indicates Ex-Works (India) prices thereof. Total price agreed was Rs.97,52,50,853/-. There are three "notes" appended to this Annexure which appear at the bottom of the Annexure and are material for deciding the controversy at hand. These are:

45. The Relevant extract of the Statement of Defence filed by the petitioner is reproduced hereinbelow: “…It is submitted that as per the Contract, the reimbursement of applicable taxes, duties and levies which was agreed between the Parties, was only applicable on the underlying transaction being the output leg of the business transaction of Claimant (i.e. sale of Products by the Claimant) and not on the input leg of the business transaction of Claimant (i.e. procurement of goods by the Claimant). In this regard, the Respondent submits that on reading the above clauses, it is apparent and evident that the Respondent is in no way liable to pay tax.es, i.e. Excise Duty and CST, on the goods procured by the Claimant from the approved Sub-Contractors for delivery to the Respondent, on account of the following reasons: i. 'Applicable taxes and duties' should be on the underlying transaction being the output leg of the transaction i.e., Products sold by the Claimant to the Respondent. ii. 'Employer shall bear and promptly pay all Customs Duty on the Plant and Equipment' - As per the terms of the Contract, with respect to the input leg of the transaction (for the Claimant), the Respondent was only required to reimburse Customs Duty paid on the procurement of the Products by the Claimant, as the same was expressly and specifically agreed under the Contract (expressio unius est exclusio alterius). In other words, the Respondent submits that since the Excise Duty and CST paid by the Claimant to the Sub-Contractor was not expressly agreed to be reimbursed by the Respondent like import duty, the same cannot be recovered in any manner whatsoever from the Respondent. An ambiguous interpretation cannot be assigned to the term 'applicable tax', which was relevant only with respect to the underlying transaction being the output leg of the supply of made by the Claimant. iii. 'At Actuals' the taxes should have been actually paid by the Claimant to the exchequer. Since, in the input leg of the transaction (for the Claimant), the tax amount is collected by the Sub-Contractor (or the Claimant's supplier) and it is this Sub-Contractor, and not the Claimant, who deposits the tax with the exchequer, thus, the Respondent has no liability with regards to the payment of tax by the Sub-Contractor on supply made to the Claimant. iv. Further, and most pertinently the Contract envisages that the Contract Price is based on the taxes and duties, which was or will be 'assessed on the Contractor.' On a combined reading of the aforesaid Clauses pertaining to following three key aspects of the Contract viz. i. Parties to the Contract; ii. 'Contract Price' payable by the Employer to the Contractor; and iii. Taxes applicable 011 'Contract Price'. It is apparent that the Contract envisaged the payment of 'applicable taxes' only with respect to the 'Contract Price' i.e. as.applicable on the Contract Price payable by Employer to Contractor with respect to supply under the Contract. (h) It is submitted that taxes borne by the Claimant became part of its cost. In that event, allowing the Claimant to again recover such tax.es once again under the umbrella of tax clause would mean double recovery of taxes paid. This is clearly a case of unjust enrichment, which is against the public policy and, therefore, should not be allowed. With respect to the aforesaid, it would be relevant to mention herein that while the Claimant had charged an amount of Rs. 46,53,20,000/-, for the BOP items under the Contract (out of the total contract price of Rs. 97,52,50,853/-), the Claimant has (as per its own invoices) claimed to have paid an amount of Rs. 26,52,20,712/- to its vendors for the said BOP items. Therefore, the significant margin of the Claimant (being the difference between Rs. 46,53,20,000/- and Rs. 26,52,20,712/-) is wholly revealing of the fact - that the charges towards excise duty (being charged on the activity of manufacture) were already factored in the costs charged by the Claimant towards BOP items, as to be supplied under the Contract. Such being the case, it is wholly erroneous and misleading for the Claimant to claim such charges etc. on BOP items from the Respondent herein over ·and ·above the agreed Contract price. In view of the aforementioned i.e. the charges towards excise duty (being charged on the activity of manufacture) were already factored in the costs charged by the Claimant towards BOP items the averments of the Claimant that the benefit of duty draw back.cannot be claimed by the Respondent without paying for the alleged claims, as raised in the present proceedings (being the third party taxes on BOP items) is wholly erroneous and misconceived.

(i) It is submitted that the Claimant has failed to appreciate that under a tax clause a vendor cannot be allowed to recover those taxes that are not applicable on the underlying transaction or the taxes that he was never liable to pay to the government. Allowing a person to recover something as 'tax', which is admittedly not leviable or applicable on such transaction or person under law, is clearly against the public policy. Reference to Schedule 7 by Claimant erroneous and (j) Reference by the Claimant to a 'Schedule 7' (more specifically in Para 28 of its Statement of Claim), to submit that the Respondent Relvant Terms of Contract dated 21 May 2010 between the Claimant & the Respondent and the contract between the Claimant & Dans Energy Private Limited dated 07 August 2009

46. In the instant case, the dispute pertains to the taxes and levies in respect of BOP goods which were procured by the respondent from the approved sub-contractor as enunciated in the appendix to the contract. The other types of goods are manufactured goods which are directly manufactured by the respondent. The invoices in this aspect were raised as the consignee invoice to the respondent. The sub-contractor supplies the BOP along with invoice and after that the respondent sales in transit to the applicant takes places in accordance with Section 6(2) of the CST Act, 1956. The Excise Duty and CST were charged on such BOP goods supplied. The dispute between the parties arose, when the applicant did not pay an amount of Rs. 3,89,92,930/- in respect of the taxes, levies and duties paid by the respondent. The genesis of the dispute is to determine whether the petitioner was contractually liable to pay aforesaid amount i.e. Rs. 3,89,92,930/- in respect of the taxes, levies and duties towards BOP to the respondent.

47. The learned Arbitral Tribunal, while interpreting the Clause 14 of the Contract, reached on the conclusion that the petitioner is obligated to pay the taxes and duties and there is no difference between the payment of taxes and duties in respect of manufactured goods and BOP. Taking view of the reason assigned in the interpretation as quoted in the foregoing paragraphs, I do not find any error or illegality in the said interpretation of the learned Arbitral Tribunal. The learned Arbitral Tribunal has also rejected the arguments of the applicant regarding the applicable taxes and duties and held that “the moment taxes and duties become applicable in respect of supplies to the respondent, they are reimbursable under Clause 14.1. That clause does not state that such taxes and duties were to be payable by the claimant directly to the Government. The expression “applicable” is to be understood in the context of manufacturing of goods and not with reference to the person. The subcontractor while paying excise duty had passed on the burden to the claimant and the claimant therefore, became entitled to the payment or reimbursement thereof from the respondent.”

48. The learned Arbitral Tribunal rightly interpreted the term “at actuals” as “none of the contractual provisions qualify for the respondent’s obligation as confining to manufactured products only. On the contrary, the language is wide and all encompassing and includes BOP as well. The expression “actual” in this context refers the taxes, duties and levies actually paid to the exchequer.” Therefore, as per the contract, there is no distinction between the respondent and the subcontractor. The Schedule 7 does not in any way affect the tax liability of the petitioner towards the respondent. The Schedule 7 merely stated an estimate amount which may be paid to the petitioner and was not based on the actuals.

49. The learned Arbitral Tribunal has rightly rejected the argument of the applicant on the aspect that reimbursement of taxes on account of BOP supplies was not made by the petitioner on 4th March, 2015 and 15th May, 2015. The petitioner acknowledged reimbursement of taxes and duties for BOP and such liability was not disputed/refuted by the

50. I am also in agreement with the learned Arbitral Tribunal’s finding that the Contract between the respondent and DANS have identical terms, the only distinction being omission of Schedule 7. However, the omission of Schedule 7 does not impact the petitioner’s liability to pay/reimburse the taxes, duties and levies on BOP. I have perused the entire documents on record and found that the applicant has never contended before the learned Tribunal that the respondent had not furnished the requisite documents for the reimbursement of taxes, duties and levies on BOP. The learned Arbitral Tribunal rightly reached on the conclusion and passed the impugned award, while considering the entire evidence on the record, the statement of claim, the statement of defence and written arguments filed and had given the detailed reasons. As it is a settled law while considering a challenge to an arbitral award where private parties are involved, the Court need not examine the validity of the findings or the reasoning behind the findings given by an Arbitrator. The extent to which a Court may exercise supervisory power in this respect is limited to examining whether the award and the conclusion drawn therein is supported by findings and not whether the findings themselves are erroneous or sound. The Court shall not conduct a roving enquiry into the facts and evidence of the matter and neither shall the Court sit in appeal against the award of the Arbitrator.

51. In UHL Power Company Limited vs. State of Himachal Pradesh, 2022 4 SCC 116, the Hon’ble Supreme Court reiterated the narrow scope under Section 34 of the Act and held as under:

17. A similar view, as stated above, has been taken by this Court in K. Sugumar v. Hindustan Petroleum Corpn. Ltd. [K. Sugumar v. Hindustan Petroleum Corpn. Ltd., (2020) 12 SCC 539], wherein it has been observed as follows: (SCC p. 540, para 2) “2. The contours of the power of the Court under Section 34 of the Act are too well established to require any reiteration. Even a bare reading of Section 34 of the Act indicates the highly constricted power of the civil court to interfere with an arbitral award. The reason for this is obvious. When parties have chosen to avail an alternate mechanism for dispute resolution, they must be left to reconcile themselves to the wisdom of the decision of the arbitrator and the role of the court should be restricted to the bare minimum. Interference will be justified only in cases of commission of misconduct by the arbitrator which can find manifestation in different forms including exercise of legal perversity by the arbitrator.””

52. In Delhi Airport Metro Express Private Limited vs. Delhi Metro Rail Corporation Limited, 2022 1 SCC 131, the Hon’ble Supreme Court held as under:

53. Hence, the law which has been settled by the Hon’ble Supreme Court is that the scope of interference with an arbitral award under Section 34 of the Act is fairly limited and narrow. The Court shall not sit in an appeal while adjudicating a challenge to an award which is passed by an Arbitrator, the master of evidence, after due consideration of facts, circumstances, evidence and material before him.

54. In view of the foregoing discussions on facts and law, I don’t find any reason to interfere in the impugned award as there is no perversity or illegality or error in the said award.

55. Accordingly, the instant petition, being devoid of any merit, is dismissed along with pending applications, if any.

56. The judgment be uploaded on the website forthwith.

JUDGE MAY 8, 2023 gs/db