TaxTMI 
TaxTMI 
2025 (4) TMI 735
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....d by Integral Coach Factory (ICF), the respondent in the arbitration. 2. In O.P.No.128 of 2024, the petitioner therein, who was the claimant in the arbitration, was unsuccessful in the arbitration, as their claim for enforcement of the statutory variation clause on account of non-release of 7% differential GST amount by the respondent subsequent to the revision of the rate of GST was rejected on the ground that the petitioner might have included 13% differential GST in their quoted price for getting the award in their favour. However, in the remaining OPs, namely, Arb.O.P.(Com.Div.) Nos.602 of 2023, 74, 423 to 429 of 2024 and 92 & 172 of 2025, the respondents in those OPs are the claimants in the arbitration. They also sought for release of 7% differential GST amount and sought for enforcement of the statutory variation clause in the contract. The Arbitral Tribunal, which had passed the respective arbitral awards in their favour, had held that the respondents, who are the claimants in those OPs, are entitled for release of 7% differential GST amount as per their arbitral claim. 3. Since the issue involved in all these OPs is one and the same, this Court is disposing of all th....
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.... governed by the contractual conditions under Statutory Variation Clause (SVC). However, increase in GST rate amendments shall be considered for quoted HSN only, against documentary evidence, provided such increase of GST rates takes place after the date of tender opening. The benefit of reduction in GST rate shall have to be passed on to railways. 2.8 While quoting the rates, the tenderer shall pass on, by way of reduction in prices, the full input tax credit that may become available in respect of all the inputs used in the supply of final goods/or services under GST scheme and submit a declaration in their offer of the same. 3.0 Statutory Variations: 3.1 Statutory variation will be considered during the original delivery period and against documentary evidence only. However increase in taxes or duties on account of misclassification or misapprehension of law shall not be allowed. Tenderers are thus advised to include Statutory Variations Clause correctly and explicitly in their offers." 6. The respective Arbitral Tribunals which had passed the impugned arbitral awards in favour of the contractors had held that Clause 3.0 (statutory variation) of the....
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....ve contractors were obligated to reduce prices under Clauses 2.8 and 2.9 of the GCC read with Clause 3.0 of the respective POs. JPO No.1 of 2019 relied upon by the learned ASG is not a part of the contract and therefore, the respective contractors never contractually agreed to the same. 9. The respective Arbitral Tribunals, which had passed the impugned arbitral awards, in favour of the respective contractors, had also held based on the evidence available on record that no additional ITC benefit accrued to the respective contractors due to output GST rate increase. Therefore, the respective Arbitral Tribunals held that the claim of ICF that the respective contractors were obligated to reduce prices as per Clauses 2.8 and 2.9 of the GCC read with Clause 3 of the respective POs is misplaced and untenable. The respective Arbitral Tribunals had also taken note of the fact that ICF had fully honoured the arbitral award in favour of M/s.Kineco Limited on the same issue by refunding the sum pertaining to withheld GST. 10. As per the GST scheme, the availability of ITC is always understood in the context of better availment of ITC and not better utilization of ITC. The availment and ....
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....ctive contractors had also filed a certificate obtained from the Chartered Accountant before the Arbitral Tribunals, which were marked as exhibits, to prove that the benefit of ITC never accrued to their favour on account of increase in output GST rate with effect from 01.10.2009, when there was no change in the input tax regime. To disprove the Chartered Accountant certificate filed by the respective contractors before the respective Arbitral Tribunals, no iota of evidence has been produced by ICF. The Chartered Accountant was also not summoned by ICF for cross-examination. The respective Arbitral Tribunals had therefore rightly interpreted that benefit of ITC would arise only if there is change in the ITC scheme and not on account of change in output tax structure. A certificate obtained from the Chartered Accountant also clarifies that accumulated ITC is not forming part of bid price quoted by the respective contractors in the tender stage. Only based on the evidence available on record, the respective Arbitral Tribunals had come to the right conclusion that no accumulated ITC has been factored/included in the basic price offered by the respective contractors to ICF, while submi....
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....reement of the parties. (f) The arbitral award is in violation of the public policy of the State. (g) The arbitral award deals with a dispute not falling within the terms of submission to an arbitration. 15. In the case on hand, due to revision in the rate of GST subsequent to the date of the contract, the respective contractors have been compelled to enforce the statutory variation clause. They cannot be left high and dry for no fault of theirs, as it seen from the evidence available on record, they would not have factored unexpected revision in the rate of GST from 5% to 12% while they had quoted their price through their respective bids. The respective Arbitral Tribunals has rightly considered and passed the impugned arbitral awards in favour of the respective contractors. None of the grounds raised in these petitions fall within the parameters required for setting aside the arbitral awards insofar as the arbitral awards passed in favour of the respective contractors are concerned. Therefore, the arbitration OPs filed by ICF in Arb.O.P.(Com.Div.) Nos.602 of 2023, 74, 423 to 429 of 2024 and 92 & 172 of 2025, do not deserve any merit and there is no scope for ....
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....ax was only with respect to the final products (contract goods) from 5% to 12% and it was nobody's case that there was corresponding variation on the input tax which resulted in any additional tax benefit. Therefore, neither Clause 2.8, which contemplates 'input tax credit that may become available' nor clause 2.9 which refers to 'additional input tax credit' has happened in the facts of the present case. The variation was not in respect of inputs, but, in respect of final products. Therefore, neither of the said clauses are applicable to the case on hand. 19. Even though the Arbitral Tribunal which had rejected the claim of one of the contractors, noticed the submission of the contractor that ITC is never treated as part of the cost and is charged to the profit and loss account, the Arbitral Tribunal failed to appreciate its import and purport. ITC is not to be treated as a cost and it is accounted as an asset in the books of account as laid down in the accounting standards. The Guidance Notes issued by the Institute of Chartered Accountants provides that input credit is liable to be treated as an asset and cannot be forming part of cost inventory. Similarly....
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....ates were increased from 12% to 18%. The only submission made by ICF in support of this arbitrary and whimsical approach is that when the rate of GST increased from 12% to 18%, the quantum of ITC was negligible. It is settled law that instrumentality of the State cannot adopt arbitrary, whimsical and unreasonable approach even in the realm of private contracts. 24. From the foregoing reasons, it is clear that the impugned arbitral award rejecting one of the contractors claim which is the subject matter in Arb.O.P.No.128 of 2024, suffers from perversity and is patently illegal for the following reasons:- (a) The impugned arbitral award suffers from infirmity on account of misapplication and misreading of the clear terms of the bid document. (b) The impugned arbitral award disregards the settled position of law regarding ITC under the GST regime. (c) The impugned arbitral award is an unreasoned award and therefore, is violative of Section 31(3) of the Act. (d) The impugned arbitral award is passed in ignorance of the vital evidence and therefore, is absolutely perverse in law. (e) The impugned arbitral award is in conflict with the publ....