Contract cannot be rewritten by arbitration: unauthorised CENVAT deduction from invoices was set aside as patent illegality.

A tribunal cannot deduct a shortfall in minimum guaranteed CENVAT credit from invoices unless the contract expressly authorises such deduction. Where the contract only made non-furnishing of documents relevant to reimbursement of the duty component, and did not permit reduction of the net contract value, treating the shortfall as recoverable from bills amounted to adding a term to the agreement. An arbitral award based on a non-existent contractual stipulation exceeds the contract and is vitiated by patent illegality. The award rejecting the claim was therefore set aside, and the deduction was held impermissible.

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Issues: Whether the shortfall in minimum guaranteed CENVAT credit could be deducted from the invoices in the absence of an express contractual clause, and whether the arbitral award rejecting the claim was liable to be set aside for travelling beyond the contract.

Analysis: The contract fixed a gross price with a stipulated minimum CENVAT credit component to be passed on, but the relevant clauses only provided that failure to furnish documents for availing CENVAT credit would disentitle reimbursement of the duty component. The shortfall in CENVAT did not alter the net contract value payable for the work, and the contract contained no clause authorising deduction of the shortfall from invoices. The arbitral tribunal nonetheless proceeded on the basis that the shortfall had to be made good and relied on a non-existent contractual stipulation, which amounted to adding terms to the contract. An arbitral award must remain within the contractual framework and any departure from the express terms attracts patent illegality.

Conclusion: The deduction of the shortfall in minimum guaranteed CENVAT credit from the invoices was impermissible, and the arbitral award was liable to be set aside for patent illegality.

Final Conclusion: The petition succeeded and the arbitral award rejecting the claim was annulled because the tribunal had gone beyond the contract and upheld a deduction not authorised by its terms.

Ratio Decidendi: An arbitral tribunal cannot add to or rewrite the contract between the parties, and an award founded on a contractual term that does not exist is vitiated by patent illegality.

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