2013 (7) TMI 208 - HC - Service Tax

Reimbursement of service tax - terms of contract - dispute between service provider and service receiver - Held that - It was not open to the Appellant to unilaterally alter the purchase order and even assuming that the Appellant had committed a mistake - it was not entitled to claim in excess of what was stipulated in the contract - condition of the contract that Cenvatable Service Tax will be paid on actuals had to be read in conjunction with the SP2 form. Arbitral award u/s 34 Arbitration and Conciliation Act - Section 28(3) requires the arbitral tribunal to decide in accordance with the terms of the contract Held that - The arbitrator had made a possible interpretation of the terms of contract and that the Court under Section 34 would not be justified in taking a different view - award is based on an interpretation of the terms of the contract which cannot be said to suffer from any perversity - award has taken due note of the clarification in the course of the recording of submissions - arbitrator has not ignored the relevant terms - appeal rejected in the favour of respondent.

Summary

Issues:
Challenge to arbitral award on service tax component reimbursement.

Analysis:
The judgment pertains to an appeal challenging an arbitral award regarding the reimbursement of service tax component in a contract related to a project. The appellant contested the award, arguing that the amount specified in Form SP2 was not a ceiling and should be reimbursed at actuals. The sole arbitrator, however, held that the appellant could not unilaterally alter the purchase order and was not entitled to claim more than stipulated in the contract. The Learned Single Judge upheld the arbitrator's decision, stating that it was a possible interpretation of the contract terms and declined to interfere under Section 34.

The appellant contended that the service tax should be reimbursed at actuals as per the contract terms and that the amount in Form SP2 was a guideline, not a ceiling. They also highlighted clarificatory emails that were allegedly not adequately considered by the arbitrator. On the other hand, the respondent supported the award, emphasizing that reimbursement should align with the contract terms and Form SP2 guidelines. They argued that the arbitrator's interpretation was valid, and the Learned Single Judge rightly declined to intervene.

The judgment analyzed the relevant clauses of the contract, specifically Clause 1.1 and Clause 3.2.2, which outlined the reimbursement process for service tax against submission of cenvatable documents. The court rejected the appellant's argument that the amount in Form SP2 was not a ceiling, as it would render the contract clauses redundant. It affirmed that the arbitrator's interpretation was valid under Section 28(3) and considered the clarificatory emails, noting that they did not deviate from the contract terms.

Ultimately, the court found no error in the Learned Single Judge's decision to dismiss the petition under Section 34 and upheld the arbitral award. The appeal was consequently dismissed, with no order as to costs.