TaxTMI 
TaxTMI 
2026 (6) TMI 1099
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....ing Respondent No.2 as the sole arbitrator [Arbitral Tribunal]. 2. The Arbitral Tribunal partly allowed the claims of respondent No.1 [URC], which was a claimant before it. The Arbitral Tribunal awarded a sum of Rs. 3,52,50,404/- (Rupees Three Crore Fifty Two Lakh Fifty Thousand Four Hundred and Four only) along with interest at the rate of 9% per annum in favour of URC in addition to a sum of Rs. 5,00,000/- as costs of the arbitral proceedings. The Arbitral Tribunal also partly allowed the counter-claims of NCBS to the extent of Rs. 18,21,310/- (Rupees Eighteen Lakh Twenty One Thousand Three Hundred and Ten only) along with interest at the rate of 9% per annum. 3. By the impugned order, the learned Commercial Court rejected the NCBS's petition for setting aside the impugned award. Aggrieved by the same, the NCBS has preferred the present appeal. 4. The impugned award was rendered in the context of the disputes that had arisen between the parties in connection with their Agreement dated 19.06.2017 [the Agreement]. 5. Mr. Arvind K. Kamath, learned Additional Solicitor General of India, who appeared for NCBS, confined the present appeal to setting aside of the impugned aw....
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.... 2 of the Work Order, URC was required to complete all works within 10 months from the 15th day of the date of issuance of the Work Order, that is, by 15.04.2018. URC completed the works, albeit after some delay. The completion certificate issued indicates that URC completed the works on 20.03.2019, that is, approximately 11 months beyond the stipulated period. According to NCBS, even as on 27.04.2019, certain works remained unattended and incomplete, including: (i) rectification of white patches in PU flooring in the animal holding area; (ii) damage to fire curtains on the 2nd and 3rd floor service levels; (iii) commissioning of AC works in the CIFF area; and (iv) other pending snag points. The actual completion cost of the project, excluding extra/substituted/deviated items, was Rs. 32,06,63,371/-. In addition to the original scope, URC executed various non-tendered, extra, substituted, and deviated works [NT Items] the value of which was accounted for at Rs. 9,65,91,596/-. 11. On account of the aforementioned delay in completion, the Engineer-in-Charge levied a penalty of Rs. 1,00,000/- (Rupees One Lakh only) on URC for the period from 1....
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....fined in the Rate Notification. Thus, the concessional rate of 12% was inapplicable, and the standard rate of 18% GST applied. ARBITRAL PROCEEDINGS AND THE IMPUGNED AWARD 16. Despite the AAR ruling, disputes between the parties persisted. URC issued a notice dated 25.08.2020 under Section 21 of the A&C Act, invoking the arbitration clause. Thereafter, URC filed a petition [CMP No.159 of 2021] under Section 11 of the A&C Act seeking the appointment of an arbitrator. This court allowed the said petition by an order dated 30.06.2022, and the Arbitral Tribunal was constituted by appointing a sole arbitrator. 17. URC claimed that the implementation of the GST regime with effect from 01.07.2017 necessitated an upward revision of payments to account for the statutory tax burden of 18%. Their primary claim involved the recovery of a differential GST sum of Rs. 2,40,73,564/-, along with pre-reference interest amounting to Rs. 2,29,40,107/-. URC also claimed pendente lite and future interest at 18% per annum. 18. URC argued that their quoted tender rates did not include WCT (4%) and Labour Cess (1%) because they were registered as regular dealers under the VAT regime and had not ....
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....ent has paid an excess amount of Rs.1,30,37,202 'to the claimant which the respondent is entitled to recover from the claimant together with interest at the rate of 18% per annum? 8. Whether the claimant is entitled to arbitration and legal costs? 9. Whether the respondent is entitled to the claim of Rs. 30 lakhs towards cost a including other legal and arbitration expenses? 10. What award or order?" 21. The Arbitral Tribunal answered the first issue by referring to the AAR's order dated 23.09.2019 and accepted that GST at the rate of 18% was applicable to NCBS in respect of the present works contract. 22. The impugned award sets out a tabular statement detailing the differences between the parties' calculations. The said statement indicated that the difference in the amounts was on four counts: (i) Rs.1,47,34,311 on account of the value of NT Items exclusive of GST. Whilst URC claimed that the value was Rs.9,65,91,596, NCBS claimed that it was Rs.8,18,57,285/-; (ii) Rs.63,370/- on account of the difference in the calculation of the amount of VAT and Excise Duty included in the contract price. Whilst URC claimed that taxes of t....
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....., the net amount payable came to Rs. 41,89,89,945/-. Deducting the total amount already paid of Rs. 39,86,71,646/-, the Arbitrator arrived at the balance principal amount payable to URC as approximately Rs. 2,03,18,299/-. 28. While answering Issue No.4 on pre-reference interest, the Arbitrator calculated pre-reference interest at Rs. 1,02,29,430/-, making the total sum as on the date of reference at Rs. 3,05,47,729/-. In determining Issue No.5, the Arbitral Tribunal computed pendente lite interest at 9% as Rs. 47,02,675/-. Thus, the Arbitral Tribunal awarded an amount of Rs. 3,52,50,404/- along with post-award interest at 9% per annum from the date of the impugned award till the date of payment. 29. The Arbitral Tribunal also allowed the counter-claims to the extent of Rs. 18,21,310/- comprising the penalty of Rs. 1,00,000/- imposed for the period of delayed completion, and Rs. 17,21,310/- towards the defective fire curtains, with interest at 9% per annum from the date of the impugned award till the date of payment. 30. The dispositive part of the impugned award is set out below: "i. The claim petition filed by the Claimant is partly allowed with cost. i....
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.... relief. However, the Final Bill did not include the GST component in respect of NT items and, therefore, the value of NT items did not include any component of GST. Paragraph 46 of the impugned order is set out below: "However, the contention of the employer is that the said sum stated in the final bill is inclusive of GST of 18%, and if the 18% GST is deducted therefrom, it comes to Rs.8,18,57,285, which is the value of the non-tendered items as claimed by the employer. If this final bill is closely perused, it is noted that at row H, which is above the non-tendered items, GST of 6% is added (towards interim relief of GST because at that time, employer was still contending that, GST is 12% and not 18% and the difference of 6% GST was given as interim relief). But the GST component is not added for non-tendered items. Therefore, the only conclusion to be drawn is that the sum of Rs.9,65,91,596, which is given as the total of the non-tendered items, is exclusive of GST, to which 18% GST has not been added." 33. The learned Commercial Court also rejected the contention that WCT was required to be reduced from the contract price as URC was not assessable to such taxes and....
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....T was leviable on the supply at the rate of 12% or 18%. It was NCBS's contention that it was a government organisation and, therefore, GST at the concessional rate of 12% was payable on the supply. He submitted that the issue was concluded by the AAR's ruling. He submitted that in view of the said disputes, NCBS had certified the work done at the pre-GST rates agreed in respect of the BOQ items and with 12% GST in respect of NT items. However, subsequently, NCBS agreed to pay the additional 6% GST on BOQ items as an interim relief. However, that, too, was withheld at the time of the final settlement. He contended that the said interim relief was only in respect of BOQ items and not NT items. He submitted that NT items were always certified at the rate of 12% GST, which was admitted by NCBS's witness (RW1) in his cross-examination. He referred to the following extract from the transcript of the cross-examination: "The contents of RA bill Ex.R7(p) are all true and correct. The amount of Rs.9,65,91,596/- shown in column No.2 upto date amount refers to extra/ substitute/ deviated items. The said amount includes GST component also at 12%. It is false to suggest that....
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.... URC had raised tax invoices with 18% GST. However, NCBS failed to pay the invoiced amount with 18% GST. URC, on NCBS's instructions, substituted the invoices with 12% GST and issued credit notes. After the AAR had ruled that NCBS was liable to pay GST at the rate of 18%, URC filed revised returns, which he submitted would be evident from the GST returns he filed. He contended that, since the dispute involved a question of fact, the decision of the Arbitral Tribunal must be accepted as final. He submitted that this Court cannot, in the proceedings under Section 37 of the A&C Act, reappreciate the evidence and review the arbitral award. 41. He referred to the decision in the case of Bombay Slum Redevelopment Corporation Private Limited v Samir Narain Bhojwani [(2024) 7 SCC 218] and, on the strength of the said decision, contended that the power to remand should be exercised only in exceptional cases and not as a matter of routine. He also referred to the recent decision of the Supreme Court in Punjab State Civil Supplies Corporation Limited and Another vs. Sanman Rice Mills and Others [2024 SCC OnLine SC 2632] and contended that the scope of intervention in arbitral matters w....
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....perverse." 46. In this view, the only issue to be examined is whether the Arbitral Tribunal has ignored material or evidence that is vital for adjudicating the subject disputes. 47. Before proceeding further, it would be relevant to refer to the Arbitral Tribunal's reasoning for accepting the URC's contention that the amount Rs. 9,65,91,596/- of NT items excluded GST at the rate of 18% per annum. Paragraph 13 of the impugned award, which sets out the Arbitral Tribunal's reasoning for accepting the URC's claim is set out below: "13. As per the procedure prescribed the Claimant submitted the final bill for payment to the Engineer in-charge which is marked as Ex.R7(p) which is relied upon by the Respondent. Its contents have been admitted as true and correct by RW-1. If we look at the bill produced at Ex.R7 (p) it is evident that the same has been scrutinised and verified by the Engineer (Electrical) NCBS, EIC (E & HAVC), NCBS, EIC (Civil), NCBS, Tech Assistant (Civil) who have signed the bill for having verified the same. The amount shown therein under various heads has been verified by them and upon verification, they certified the amount for nontender....
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....quantum of tax included in the contract price and GST payable on the supply. However, as far as NT items are concerned, it is not disputed that no such exercise is required to be conducted, as the same were not included in the BOQ items and, consequently, in the contract price. Thus, NCBS was liable to pay for NT items and the applicable GST. 51. The question of whether the applicable GST rate was the concessional rate of 12% or 18% did not survive in view of the AAR's ruling. Concededly, NCBS is liable to pay GST at the rate of 18%. Thus, the Arbitral Tribunal was required to address the issue of whether the figure Rs. 9,65,91,596/- included GST at the rate of 18%. 52. The 21st and final bill [Marked as R7] referred to by the Arbitral Tribunal does not expressly indicate whether it was inclusive of GST or whether the value excluded GST at the rate of 18%. If at all, the words that the value is "full and final" would support the NCBS's contention that the figure was a rounded and final figure. However, the Arbitral Tribunal's interpretation of the said bill may not be amenable to review in proceedings under Section 34 of the A&C Act. However, there was other material on r....
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....8,595 24,714,880.55 4,448,678 14,136,989.83 2,544,658 RAB-15 P 32,673,594 31,926,903 30,873,315 733,038 1,187,435 29,685,879.81 5,343,458 621,218.64 111,819 RAB-16 Q 41,398,682 34,777,519 33,629,861 6,621,200 1,293,456 32,336,404.68 5,820,553 5,611,186.44 1,010,014 RAB-17 R 40,525,815 33,980,110 32,858,766 6,545,588 1,263,799 31,594,967.06 5,687,094 5,547,108.47 998,480 RAB-18 S RAB-19 T 70,972,537 57,087,193 55,203,316 13,885,760 2,123,204 53,080,111.53 9,554,420 11,767,593.22 2,118,167 REMOVAL OF ITEMS FROM ORIGINAL CONTRACT AND SHIFTED TO EXTRA ITEMS -23,586,267 -22,807,920 23,586,267 -877,228 -21,930,691.73 -3,947,525 19,988,361.86 3,597,905 RAB-FINAL U 84,022,838 54,700,113 52,895,009 21,814,684 2,034,423 50,860,586.04 9,154,905 18,487,020.12 3,327,664 VAT/ED PORTION AS PER M/S.URC -33,462,071 -....
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....3,371 32,06,63,371 3 Rebate 3.3% of original contract value 1,05,81,891 1,05,81,891 4 Value of work after rebate 31,00,81,480 31,00,81,480 5 Value of Non Tendered (NT) items 9,65,91,596 8,18,57,285 (1,47,34,311) 6 Total Executed Value including NTI items 40,66,73,076 39,19,38,764 7 VAT & ED Amount 3,33,98,702 3,34,62,071 (63,370) 8 Less WCT 4% - 1,19,26,211 (1,19,26,211) 9 Basic Value excluding GST Value 37,32,74,374 34,65,50,483 10 GST Amount (18%) 6,71,89,387 6,23,79,087 A Total Amount Payable as per CPWD format after deducting VAT/ED and adding 18% GST 44,04,63,762 40,89,29,570 Less Statutory Deductions Income Tax TDS Surcharge on Income Tax TDS 94,65,297 94,65,297 Labour Cess 45,25,426 45,25,426 TDS under GST 30,52,168 30,52,168 Recovery towards Mobilization advance interest - work &nbs....