Contractual tax reimbursement and tender obligations: Delhi HC upheld arbitral findings on welcome drink costs and GST reimbursement.

A Delhi HC decision on a transportation services contract held that the service provider was not liable for welcome drink costs during the disputed period because the original tender did not include that obligation and the later policy change operated only prospectively. It also held that GST paid on production charges after 01.07.2017 was reimbursable on proof of deposit, since the governing commercial circulars required tax reimbursement and the record supported payment. Applying section 34 principles, the court declined interference where the arbitral award rested on a plausible reading of the contract, circulars, and evidence.

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Issues: (i) Whether the service provider was liable to bear the cost of welcome drink supplied to passengers during the relevant period; (ii) Whether GST paid on production charges after 01.07.2017 was reimbursable to the service provider on proof of deposit.

Issue (i): Whether the service provider was liable to bear the cost of welcome drink supplied to passengers during the relevant period.

Analysis: The tender was structured on a partial unbundling model, and the sector-wise services in the tender did not expressly include welcome drink. The later policy decision requiring the on-board service provider to supply welcome drink was introduced after commencement of the contract. The contractual documents and the contemporaneous conduct showed that the obligation was not part of the original bargain for the disputed period.

Conclusion: The service provider was not liable to bear the welcome drink cost for the relevant period, and the deductions made on that account were unjustified.

Issue (ii): Whether GST paid on production charges after 01.07.2017 was reimbursable to the service provider on proof of deposit.

Analysis: The governing commercial circulars provided for reimbursement of applicable taxes to the licensee on proof of payment, and the GST regime replaced the earlier tax structure for the relevant services. The evidence showed deposit of GST by the service provider, and the contract did not justify treating GST as irrecoverable merely because production charges were earlier described as inclusive of taxes. The arbitral finding on admissibility of GST was supported by the record and did not suffer from perversity.

Conclusion: GST on production charges after 01.07.2017 was payable by way of reimbursement to the service provider on proof of deposit.

Final Conclusion: The challenge to the award failed, and the arbitral findings on welcome drink and GST reimbursement were upheld.

Ratio Decidendi: In proceedings under section 34, the court will not interfere with an arbitral award that rests on a plausible interpretation of the contract and evidence, and contractual tax reimbursement clauses will be given effect according to the governing circulars and the proven tax payment.

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