2024 (10) TMI 979

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....ender was divided into six packages [Package A to Package F], each dealing with a different part of the country. The disputes in the present case concern supply under Package A [North-West India] and Package F [East and North-East India]. The respondent submitted its bid for these two packages, and Advance Purchase Orders ["APOs"] were issued on 28.01.2014, in the sum of Rs. 119,73,05,950.51/- for Package A and Rs. 187,29,38,962.66/- for Package F. The APOs were amended subsequently, which were accepted by the respondent, and POs were ultimately issued on 25.03.2014, in the sums of Rs. 30,25,28,952.07/- and Rs. 71,79,72,748.61/- respectively. 3. The only claim of the respondent, which has been allowed by the impugned award, relates to excise duty payable on the goods in question. There is a difference in classification of the goods by the petitioner, and the classification adopted by the Excise Department, upon which the respondent has raised its invoices. 4. In the APOs, the goods were classified by the petitioner under Customs and Excise Tariff Head No. 90011000, which was exigible to duty at the rate of 12.36%. However, in the POs, the goods were classified under Customs a....

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....f Clause III.12.2 of the NIT. The learned arbitrator has also held that the other claims of the respondent were not based upon proper pleadings, and therefore rejected them. 9. In sum, as against claims of Rs. 67,26,437/- and Rs. 1,85,70,315/- on account of Package A and Package F respectively, the learned arbitrator has awarded, in favour of the respondent, the sums of Rs. 51,10,050/- and Rs. 1,19,66,589/-, alongwith interest thereupon at 9% per annum, and part of its costs. B. Submissions on behalf of the petitioner 10. Mr. Chandan Kumar, learned counsel for the petitioner, submits that the learned arbitrator has committed a jurisdictional error in entering into a disputed question of excise classification, as classification of goods for tax purposes is a sovereign function, which cannot be adjudicated by a contractual and consensual dispute resolution mechanism. 11. Mr. Kumar further submits that Clause III.12.2 of the NIT permitted a revision of price on account of "change" in tax. Quite apart from the fact that the POs were not actually revised, Mr. Kumar argues that a disputed question of classification does not constitute a "change" in tax. He submits that the ra....

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....duty must be paid to the revenue authorities, was in issue. This question is distinct from the dispute raised, which is whether the petitioner was liable to pay to the respondent the price of the goods supplied, alongwith excise duty at the rate stipulated in the invoices. To partake the character of a dispute relating to a sovereign function, it must have some effect on the rights and obligations of the State. In the present case, the revenue authorities were not even party to the dispute, which concerned only two commercial entities, who had inter se disputes as to the proper classification of the goods. Such disputes have rightly been held to be capable of resolution by arbitration. 17. Before turning to the merits of the dispute, it may be noted that the learned arbitrator held [In paragraph 38 of the impugned award.] that the rights and obligations of the parties were governed by the POs, and not by the APOs. The respondent had raised this issue, in view of the fact that the value of the APOs was substantially higher than the value of the goods stated in the POs, inter alia on account of the excise classification under Tariff Head No. 90011000 in the APOs, and Tariff Head N....

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....r has held that such a change may encompass the issue of classification, and not just a change of rates of duties within a given classification. He has also related this to the purpose of a permitted revision, which is to place the burden of the applicable excise duty upon the petitioner. There is no implausibility in this analysis at all. 21. Mr. Kumar cited judgments of the Supreme Court in PSA SICAL Terminals (P) Ltd. v. Board of Trustees of V.O. Chidambranar Port Trust Tuticorin 2021 SCC OnLine SC 508 and Indian Oil Corpn. Ltd. v. Shree Ganesh Petroleum (2022) 4 SCC 463., to submit that an arbitrator is not entitled to rewrite the contract between the parties or to restructure the transactions, but must decide in accordance with the contractual provisions. While there can be no dispute as to the proposition advanced, I am of the view that the argument is misconceived in the facts of this case. As held above, there is no ground to challenge the construction placed by the learned arbitrator on Clause III.12.1. If so, the petitioner was duty bound to pay the invoices as raised by the respondent. If any amendment was required in the POs, it was for the petitioner to issue revise....

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.... the goods could only have been decided by the concerned revenue authorities. I do not find the said judgment to be of much assistance in the facts of this case. The Commissioner of Central Excise disallowed capital goods credit claimed by the assessee on the strength of excise invoices issued by the manufacturer of the goods. The CESTAT allowed the appeal, holding that the Commissioner having jurisdiction over the assessee, which was the recipient of the goods, had no jurisdiction to change the classification of the goods. In the present case, however, the respondent was the supplier of the goods and the petitioner was the recipient. The observations of the CESTAT are thus consistent with the effect of the impugned award also. 26. In fact, the learned arbitrator further noted that, by a communication dated 19.06.2014, the respondent had informed the petitioner that it was dispatching the goods under the Excise Tariff Head given in the POs, but any demand/show cause issued by the revenue authorities would be at the risk and cost of the petitioner. The respondent thereafter further informed the petitioner, by a communication dated 13.11.2014, that the Excise Department had demand....