Contractual reimbursement of excise duty requires proof of actual payment; an inconsistent arbitral award was set aside.

A contractual clause allowing reimbursement of excise duty was confined to duty actually incurred, supported by proof of payment, and subject to the contract's certification requirements. An arbitral award granting the supplier a 10% excise duty component despite absence of challans or receipts, and despite the contract making the basic price firm and fixed, was inconsistent with the express bargain. Where an award grants recovery contrary to the contract and without proof of actual liability or payment, it is vulnerable to interference as patently illegal under Section 34 of the Arbitration and Conciliation Act, 1996. The award was set aside.

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Issues: Whether the arbitral award granting the supplier a claim for excise duty at 10% could be sustained when the contract contemplated reimbursement only of excise duty actually incurred and duly supported by proof of payment, and whether the award was liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996.

Analysis: The contract made the basic price firm and fixed and permitted recovery of excise duty only as reimbursement, subject to statutory variation and certification under the contract conditions. The claimant had sought enhancement of the contract price by 10% even though it had not shown that excise duty had actually been paid or that supporting challans or receipts existed. The award was also internally inconsistent because the claim for amendment of the contract to merge excise duty into the price had been rejected, yet the same amount was granted under a different head. An award that grants a sum contrary to the express contractual terms and without proof of actual liability or payment is open to interference as patently illegal.

Conclusion: The award was rightly set aside and the appeal failed.

Final Conclusion: Recovery of excise duty under the contract was confined to duty actually incurred and proved, and the award allowing the claim without such proof was unsustainable.

Ratio Decidendi: An arbitral award allowing recovery contrary to the express contract and without proof of actual payment of the claimed duty is patently illegal and liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996.

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