TaxTMI 
TaxTMI 
2026 (2) TMI 1154
X X X X Extracts X X X X
X X X X Extracts X X X X
....n certificate and the final acceptance certificate were issued on 20.06.2012 and 12.12.2013 respectively. The petitioner submitted final invoices on 12.02.2019 and Rs. 1,07,61,378/- was deducted for shortfall in minimum guaranteed CENVAT credit (for short 'MGCC'). Upon failure of conciliation attempts, arbitration proceedings under clause 6 of the General Conditions of the Contract (for short 'GCC') were invoked on 07.02.2022. 3. The only dispute involved in the present petition is vis-a-vis claim nos.3 and 4 framed by the arbitrator, which read as under: "3. Whether the Claimant is entitled to the declaration from this Hon'ble Tribunal that the amount of Rs. 1,07,61,378 deducted by the Respondent on account of shortfall of guaranteed CENVAT is bad in law ? 4. Whether the Claimant is entitled to reimbursement of Rs. 1,07,61,378 deducted by the Respondent on account of shortfall of guaranteed CENVAT ?" 4. The issues were decided against the petitioner/claimant. Hence, the present petition. SUBMISSION OF THE PETITIONER 5. Learned counsel for the petitioner contends that the arbitrator travelled beyond the terms of the contract. In the absence of clause p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce 11.1 The Contract Price shall be as specified in Article 2 (Contract Price and Terms of Payment) of the Contract Agreement. The break-up of the Contract Price is given in the Appendix-1 to the Contract Agreement. 11.2. Price Basis 11.2.1 The Contract Price shall be for the entire scope of the Facilities including spares, oils, grease, lubricants, flushing liquor, chemicals for pickling etc. required till commissioning of the Facilities, imported surplus material and scrap in any form generated in side the plant premises. The contract price shall be inclusive of all taxes and duties and comprise inter-alia of Basic price, excise duty, sales tax, VAT including sales tax/VAT on works contract / Works Contract Tax), octroi, Turn Over Tax (TOT), Entry Tax, Service Tax, Education Cess and any other duties, taxes and levies, as may be applicable and prevailing on the base date of the contract and insurance. The payment of duties, taxes, levies, etc. will be reimbursed (on actual) against documentary evidence to be produced by the contractor, subject to a ceiling indicated in the price schedule of the contract. In no case the reimbursement towards dut....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d scrap generated inside the plant. The contract price was inclusive of taxes, duties, cess, entry tax applicable and prevailing on the base date of the contract as well as insurance. The payments of the taxes, duties and levies were to be reimbursed on actual basis subject to production of documentary evidence by the petitioner. The reimbursement was subject to the ceiling indicated in the price schedule except for service tax. 8.2 Clause 14 deals with taxes and duties. Clause 14.5.2 obligated the petitioner to submit necessary documents to BSP for availing the CENVAT credit. Duty was not to be reimbursed on failure of the petitioner to furnish documents for availing the CENVAT credit. 8.3 Clause 14.6 relates to variation in taxes and duties. Clause 14.6.1 provides that on increase or decrease in the tax rate, introduction of a new tax, abolition of an existing tax, change in interpretation or application of tax during the course of performance of the contract, the contract price shall be adjusted as per clauses 14.6.2 and 14.6.3 by making the required addition or reduction in the contract price. Under clause 14.6.2, adjustment of the contract price for variation in taxes wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not deal with the consequences in case of a shortfall. 14. The contract value is an amount payable to the petitioner for the work executed and is inclusive of taxes and duties. The MGCC is not a sum due for the work done but is a reimbursement of the duty paid which may vary consequent to several factors including variation in the rate of taxes and change in the price of items. 15. The matter needs to be considered from another angle. The gross contract value was Rs. 18,45,54,310/-. After giving credit of Rs. 2,16,42,894/- towards MGCC, the work would cost the respondents Rs. 16,29,11,416 /- (Net Contract Value). The position remained unchanged despite the shortfall in MGCC. The reimbursement of duty paid was Rs. 1,08,81,516/- for which the respondents shall get CENVAT credit. By not reimbursing the shortfall in MGCC the respondents retained the balance amount of Rs. 1,07,61,378/- and the net cost of the contract remained Rs. 16,29,11,4161/-. In other words, for getting an MGCC of Rs. 2,16,47,894/- the respondents had to pay Rs. 18,45,54,310/- but upon reimbursement of excise duty of Rs. 1,08,81,516/-, the respondents paid a sum of Rs. 17,37,92,932/- i.e. Rs. 1,07,61,378/- le....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 28(3) of the 1996 Act, that enjoins the Arbitral Tribunal to take into account the terms of the contract while making an award. The said "patent illegality" is not only apparent on the face of the award, it goes to the very root of the matter and deserves interference.........." 18.3 In Bharat Coking Coal Ltd. v. Annapurna Construction, (2003) 8 SCC 154 held as under: "22. There lies a clear distinction between an error within the jurisdiction and error in excess of jurisdiction. Thus, the role of the arbitrator is to arbitrate within the terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction, whereas if he has remained inside the parameters of the contract, his award cannot be questioned on the ground that it contains an error apparent on the face of the record." (emphasis supplied) 19. The law is well settled that the parties are bound by the terms of the contract and the arbitrator cannot go into the fairness of the terms and conditions. In the case in hand in absence of a clause providing for deduction on account of shortfall i....