Arbitration Decision: Welcome Drink, GST, Wasted Food Issues

The court upheld the arbitrator's decision that the respondent was not obligated to serve a welcome drink without additional compensation as it was not part of the initial contract. It also ruled in favor of the respondent regarding the entitlement to claim GST on production charges/supply of meals, stating that GST should be reimbursed separately. The court did not address the financial burden for wasted food issue as the respondent did not appeal. The court dismissed the appeal, upholding the partial/interim award and directing each party to bear their own costs.

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Issues Involved:
1. Obligation to serve a welcome drink.
2. Entitlement to claim Goods and Services Tax (GST) on production charges/supply of meals.
3. Financial burden for wasted food due to cancellation or no-show of passengers.
4. Entitlement to relief, including interest.

Issue-wise Detailed Analysis:

1. Obligation to Serve a Welcome Drink:

The appellant (IRCTC) argued that the respondent was required to provide a welcome drink based on clause 2.1 of the tender and Commercial Circular 32/2014 (CC 32/2014). However, the respondent contended that the obligation to serve a welcome drink was not part of the tender document or the Letter of Award (LOA) and was introduced only after the license period commenced. The learned arbitrator found that the decision to impose the welcome drink obligation was taken on 07.02.2017, after the contract had started, and thus, the deductions made by IRCTC for the welcome drink were unjustified. The court agreed with the arbitrator's interpretation that the welcome drink was not part of the initial contract and that the respondent was not obligated to provide it without additional compensation.

2. Entitlement to Claim GST on Production Charges/Supply of Meals:

The appellant contended that the charges for meals were inclusive of all taxes, including GST, and thus, the respondent was not entitled to additional GST reimbursement. The respondent argued that after the GST Act came into force on 01.07.2017, GST on production charges should be reimbursed separately upon proof of payment. The arbitrator and the court referred to Commercial Circular 44/2017 (CC 44/2017) and CC 32/2014, which mandated reimbursement of applicable taxes upon proof of payment. The court upheld the arbitrator's decision that GST was to be reimbursed to the respondent, as IRCTC had already factored GST into the train fare and could claim Input Tax Credit (ITC) for the period when GST was at 18%.

3. Financial Burden for Wasted Food:

The arbitrator ruled against the respondent on this issue, and since the respondent did not file a cross-appeal or make submissions regarding this aspect, the court did not address it further.

4. Entitlement to Relief, Including Interest:

This issue was not dealt with in the partial/interim award as it was still pending consideration by the arbitrator.

Conclusion:

The court found no reason to interfere with the impugned judgment dated 05.07.2021, and the partial/interim award dated 15.12.2020 was upheld as neither patently illegal nor perverse. The appeal was dismissed, and the parties were directed to bear their own costs.

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