TaxTMI 
TaxTMI 
2026 (10) TMI 394
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....ad Chowk. SH: C/o Flyovers, Loops, Bridges across supplementary drain, FOBs, Footpath, Cycle Tracks, Widening of Road on embankment, Rain Water Harvesting Scheme, Electrical works and other allied works" (hereinafter "the Project"). In respect of the same, an agreement dated 14th May, 2013 was entered into between the Appellant and Public Works Department (NCTD), Government of India. The stipulated date of start was 21st May 2013 and of completion was 20th May 2015. The total value of the contract was Rs. 442,95,68,517/-. 4. Disputes had arisen between the parties in respect of certain claims under this contract. Accordingly, the Appellant invoked the arbitration clause contained in Clause 25 of the General Conditions of Contract, in terms of which the ld. Sole Arbitrator was appointed. The ld. Sole Arbitrator was a retired Judge of this Court. 5. Further to the arbitration proceedings, Award dated 10th December, 2019 was rendered by the ld. Sole Arbitrator. 6. Before the ld. Sole Arbitrator, the Appellant had, inter alia, claimed for reimbursement of service tax and environmental compensation cess. In the claim for service tax, the Appellant sought reimbursement of a tota....
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....e with regard to actual payment of the service tax of an amount of Rs. 5,02,47,953/- (Rupees Five Crores Two Lacs Forty Seven Thousand Nine Hundred Fifty Three only) by the Claimant out of which an amount of Rs. 1,38,58,095/- (Rupees One Crore Thirty Eight Lacs Fifty Eight Thousand Ninety Five only) has been directly deposited by the Claimant with the Department of Service Tax and Rs.3,63,89,858/- (Rupees Three Crores Sixty Three Lacs Eighty Nine Thousand Eight Hundred Fifty Eight only) deposited with the Department on payment of the same through its various vendors/sub-contractors. Manifestly, the Rs. 1,38,58,095/- (Rupees One Crore Thirty Eight Lacs Fifty Eight payment of Rs. Thousand Ninety Five only) has been deposited by the Claimant, on the demand of the same raised by the Department and for which the Claimant had furnished sufficient proof in the form of Challans so as to satisfy the Engineer-In-Charge about the genuineness and actual payment of the same by the Claimant. As regards the payment of Rs. 3,63,89,858/- (Rupees Three Crores Sixty Three Lacs Eighty Nine Thousand Eight Hundred Fifty Eight only) by the claimant for the input services received by it from its sub-contr....
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....in terms of Clause 37(i) of GCC read with Clause 14 of the Instructions to Bidders. 44. The said conclusion is, ex facie, erroneous. Clause 37(i) of the GCC expressly provided that Sales Tax / VAT (except Service Tax), Building and other Construction Workers Welfare Cess or any other tax or cess "in respect of this contract" shall be payable by the Contractor. However, in respect of Service Tax, the same would be paid by the Contractor to the concerned department on demand and would be reimbursed to it by the Engineer-in-Charge. There is no ambiguity that Clause 37(i) of the GCC refers to the Service Tax levied "in respect of this Contract"; that is, the Agreement entered into by CEC on item rate basis. As noticed above, there is no dispute that execution of the Agreement was exempt from levy of any Service Tax. Accordingly, there is no question of CEC claiming reimbursement of any Service Tax. 45. CEC is not claiming reimbursement of Service Tax in respect of the Agreement executed by it or the works performed by it; CEC claims the Service Tax levied in respect of the services availed by it from third party service providers. This is, obviously, the Service Tax c....
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....he award on the ground that it was in conflict with the public policy of India and therefore, was liable to be set aside under Section 34(2)(b)(ii) of the A&C Act. This Court had observed that the award is vitiated by patent illegality on the face of the award, however, in paragraph 47 of the judgement dated 22.03.2022, this Court had held that the award of reimbursement of service tax is contrary to the express terms of Clause 37(i) of the GCC. It is settled law that an award which runs contrary to the express terms of the contract is also liable to be impeached as being in conflict with the public policy of India. 5. The second contention that an amount of Rs.1,38,58,095/- had been paid directly to the Service Tax Department and therefore, was liable to be reimbursed, is unmerited. This Court had considered the aforesaid contention and found that the respondent was not entitled to seek reimbursement of service tax paid in respect of services availed by it. In terms of the contract between the parties, the respondent was entitled to service tax that was payable in respect of the contract in question. The service tax levied on the works executed by the respondent/applicant....
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....tions to Bidders read as under: "Clause 15 of the General Rules and Directions. Sales-tax and VAT (except service tax), purchase tax, turnover tax or any other tax applicable in respect of the Contract be payable by the Contractor and Government will not entertain any claim whatsoever in respect of the same. However, in respect of service tax, same shall be paid by - the contractor to the concerned department on demand and it will be reimbursed to him by the Engineer in Charge after satisfying that it has been actually and genuinely paid by the contractor. Clause 37(i) of GCC: Sales Tax/ VAT (except Service Tax), Building and other Construction Workers Welfare Cess or any other tax or Cess in respect of this contract shall be payable by the contractor and Government shall not entertain any claim whatsoever in this respect. However, in respect of service tax, same shall be paid by the contractor to the concerned department on demand and it will be reimbursed to him by the Engineer-in-Charge after satisfying that it has been actually and genuinely paid by the contractor. Clause 14 of the Instructions to Bidders: Sales Tax, Excise-....
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....he service tax reimbursement would apply only to services in respect of this contract is also correct. However the said expression would merely mean that the service tax reimbursement can be claimed in respect of services which are rendered or availed qua this Project by the Appellant. The phrase 'in respect of this contract' means the contract relating to the Project i.e., development of the corridor between Mukarba Chowk to Wazirabad Chowk which was awarded to the Appellant. Obviously, the Appellant could not have claimed reimbursement of any other service tax payment which it may have made qua other projects. This fact having been verified by the ld. Arbitrator and accordingly the claim having been awarded to the Appellant was not liable to be interfered with under Section 34 by the ld. Single Judge. 27. Needless to add that this being an international commercial arbitration as one of the parties is a foreign company, the settled legal position is that the ground of patent illegality does not apply. This is clear from a reading of Section 34(2A) of the ACA, 1996 which reads as under: "34. Application for setting aside arbitral award. [...] (2-A) An ....