Writ jurisdiction and disputed excise recovery: arbitration clause did not bar review, and future contract recovery was restrained.

A writ petition under Article 226 was maintainable despite an arbitration clause and alternative remedy because the challenge concerned the legality of the impugned demand, not a pure contractual dispute; judicial review was therefore available against allegedly unauthorised fiscal action. On the excise issue, royalty and stowing excise duty could not be unilaterally loaded into transaction value and recovered from buyers through future contracts while the taxability question remained unresolved before a larger Bench. The recovery from future supplies was restrained, subject to the petitioners furnishing an indemnity bond to protect the respondents' position if royalty was ultimately held taxable.

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Issues: (i) Whether a writ petition was maintainable under Article 226 of the Constitution of India despite the availability of an arbitration clause and an alternative remedy; (ii) Whether royalty and stowing excise duty could be brought within the transaction value for the purpose of central excise duty and recovered from the buyers through future contracts.

Issue (i): Whether a writ petition was maintainable under Article 226 of the Constitution of India despite the availability of an arbitration clause and an alternative remedy.

Analysis: The dispute was not a pure contractual controversy involving disputed facts alone. The challenge went to the legality of the demand itself, and the availability of arbitration did not operate as an absolute bar to the exercise of writ jurisdiction. The Court held that judicial review could be invoked where the impugned action was challenged as unauthorised and legally unsustainable.

Conclusion: The writ petitions were maintainable and were not barred by the arbitration clause or alternate remedy.

Issue (ii): Whether royalty and stowing excise duty could be brought within the transaction value for the purpose of central excise duty and recovered from the buyers through future contracts.

Analysis: The Court noted the conflicting Supreme Court pronouncements on whether royalty is a tax and observed that the question had been referred to a larger Bench and remained unresolved. In that situation, the Court declined to treat the issue as finally settled against the petitioners. Since the buyers had already paid the coal price and tax components for completed transactions, the respondents could not unilaterally recover the disputed excise duty on royalty and stowing charges from future supplies. At the same time, the Court preserved the respondents' position by requiring an indemnity bond in case the larger Bench ultimately held royalty to be taxable.

Conclusion: The impugned recovery from future contracts was not permitted, and the respondents were directed to suspend such recovery, subject to the petitioners furnishing an indemnity bond.

Final Conclusion: The challenge succeeded substantially: the recovery action was restrained, the petitions were held maintainable, and the matter was disposed of with protective directions balancing the interests of both sides.

Ratio Decidendi: A writ court may intervene against a disputed fiscal recovery arising from a contractual arrangement where the legality of the levy itself is under unresolved judicial consideration, and an arbitration clause does not bar judicial review as an absolute rule.

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