Contractual allocation of Modvat credit prevails over tender conditions; award contrary to the concluded contract was set aside.

An express clause in the concluded supply order required any Modvat credit availed on the excise duty element in the base paper to be passed on to the security press. The contractor accepted and performed the order despite protesting the stipulation, so the binding terms of the completed contract prevailed over earlier tender conditions. The arbitrator's reliance on the absence of such a clause in the tender notice, and the conclusion that the credit belonged to the contractor, was inconsistent with the contract and could not stand. The sub silentio argument was rejected because the Modvat clause had been specifically raised and disputed by both sides.

---

---

Issues: Whether the Modvat credit arising from the supply order could be retained by the contractor or was required to be passed on to the security press under the concluded contract.

Analysis: The supply order incorporated an express term that any Modvat credit availed by the contractor on the excise duty element in the base paper was to be passed on to the security press. Although the contractor protested this stipulation, it accepted and acted on the order, continued performance, and did not withdraw from the contract. Once the contract came into existence, the binding force lay in its terms and not in the earlier tender conditions. The arbitrator's reliance on the absence of such a clause in the tender notice, and the resulting conclusion that the credit belonged to the contractor, was inconsistent with the completed contract and therefore could not stand. The argument based on sub silentio was rejected because the clause was specifically raised, understood, and disputed by both sides.

Conclusion: The contractor was bound to pass on the Modvat credit to the security press, and the arbitral award as affirmed by the High Court was set aside on this point.

Ratio Decidendi: Where a concluded contract expressly allocates a fiscal benefit, that contractual allocation prevails over prior tender conditions, and an arbitral award contrary to the contract is liable to be interfered with as patently illegal.

---