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of <h1>Court upholds arbitral award on service tax reimbursement, emphasizing limited review scope under Section 34</h1> <h3>GOVT OF NCT OF DELHI Versus M/s MBL INFRASTRUCTURE LTD.</h3> GOVT OF NCT OF DELHI Versus M/s MBL INFRASTRUCTURE LTD. - TMI Issues Involved:1. Liability to pay service tax.2. Interpretation of contractual terms regarding taxes and levies.3. Jurisdiction and scope of arbitral award review u/s 34 of the Arbitration & Conciliation Act, 1996.Summary:1. Liability to Pay Service Tax:The petitioner, GNCTD, challenged the arbitral award dated 11.05.2010, which reaffirmed the earlier award dated 15.06.2009, holding the petitioner liable to pay service tax to the respondent-contractor. The contract for comprehensive maintenance of Ring Road and Outer Ring Road was awarded to the respondent, with the stipulated contract period from 24.08.2005 to 23.08.2008. Disputes arose during the contract, leading to arbitration. The Arbitrator initially awarded the claims to the respondent, including the liability for service tax, which was later set aside by the Court and remanded for re-hearing. The Arbitrator, upon re-hearing, maintained that since service tax was imposed after the bid submission date (15.04.2005), the petitioner was liable to reimburse the respondent for the service tax.2. Interpretation of Contractual Terms Regarding Taxes and Levies:The petitioner argued that the respondent was aware that no service tax would be paid by the petitioner, as clarified during a pre-bid conference. The petitioner relied on Condition No. 13.3 of the contract, which stated that all duties, taxes, and levies payable under the contract should be included in the bid price. The Arbitrator, however, held that service tax was not applicable at the time of bid submission and thus was not included in the bid. The Arbitrator reasoned that the respondent could not foresee future tax levies and was not expected to include them in the bid.3. Jurisdiction and Scope of Arbitral Award Review u/s 34 of the Arbitration & Conciliation Act, 1996:The Court emphasized that its examination of the arbitral award under Section 34 of the Act is limited and does not involve sitting as an appellate court. The Court found the Arbitrator's view plausible and reasonable, noting that the contractual terms did not explicitly state that future taxes would be borne by the respondent. The Court distinguished the present case from the Supreme Court's decision in M/s Rashtriya Chemicals & Fertilizers Ltd V. M/s. Chowgule Brothers & Ors, where the contract explicitly precluded any escalation of rates during the extended period.Conclusion:The Court dismissed the petition, upholding the arbitral award that required the petitioner to reimburse the respondent for the service tax imposed after the bid submission date. The Court found no merit in the petitioner's arguments and affirmed the Arbitrator's interpretation of the contract and the applicable law.
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