2021 (11) TMI 821 - HC - GST

Burden to bear the GST amount - Arbitration award- supply of the elevators - Reimbursement of amount payable on account of GST as stated in the tax invoices raised by Kone - input tax credit - contravention of provisions of Section 171 of CGST Act, 2017 or not - jurisdiction/scope of authority of the Hon ble Arbitral Tribunal as per the provisions of the Arbitration and Conciliation Act, 1996 - Whether GST or DVAT is applicable for the transaction between the parties under the Contract Agreement? - principles of unjust enrichment - Claimant or Respondent is entitled to interests and/or costs or not? HELD THAT - It is apparent that the principal dispute before the Arbitral Tribunal remains unadjudicated. The issue struck by the Arbitral Tribunal was whether Kone had erred in not claiming the Input Tax Credit. Thus, the Arbitral Tribunal was required to address the question whether Kone was entitled to claim Input Tax Credit in respect of the Excise duty paid for the lifts in question prior to 30.06.2017 and if so, whether DMRC was obliged to reimburse the GST, notwithstanding, that Kone had not availed of such benefits - It is seen that the Arbitral Tribunal found both the parties wanting for not engaging in joint discussions for exploring the possibility of availing Input Tax Credit under the CGST Act. Accordingly, the Arbitral Tribunal reasoned that both the parties should equally bear the amount of Input Tax Credit that may have been possibly available. This Court is of the view that since the impugned award does not address the dispute, the impugned award in this regard is liable to be set aside. It is also relevant to refer to Section 28(2) of the A C Act. The Arbitral Tribunal might decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorized it to do so and not otherwise. The phrase ex aecquo et bono means according to equity and conscience. It empowers the arbitrator to dispense with consideration of the law and to take decisions on notions of fairness and equity. The term amiable compositeur is a French term and means an unbiased third party who is not bound to apply strict rules of law and who may decide a dispute according to justice and fairness. In view of Section 28(2) of the A C Act, the Arbitral Tribunal was required to decide the disputes in accordance with law and not render a decision in disregard of the same, in the interest of justice and equity. It is relevant to note that there was no dispute that Kone had, in fact, paid the GST. It is also not in dispute that DMRC was required to reimburse the GST in addition to the price as fixed. The Arbitral Tribunal had rejected DMRC s contention that DVAT was payable. In view of the Arbitral Tribunal s findings, the onus to establish that Kone was entitled to an Input Tax Credit in respect of the Excise duty of ₹1,27,30,042/- rested with DMRC - The Arbitral Tribunal has not rendered any decision in respect of the aforesaid issues and has in fact left the disputes in this regard undecided. Petition disposed off.

Issues Involved:
1. Liability for reimbursement of GST paid by the claimant.
2. Compliance with GST law and claiming Input Tax Credit (ITC) for excise duty.
3. Applicability of GST or DVAT for the transaction.
4. Financial loss caused by raising invoices under GST instead of VAT.
5. Violations of CGST Act or DVAT Act.
6. Unjust enrichment by the claimant.
7. Entitlement to interest and costs.
8. Reliefs entitled to the parties.

Detailed Analysis:

1. Liability for Reimbursement of GST Paid by the Claimant:
The Arbitral Tribunal concluded that the lifts in question were not incorporated into the works during the DVAT regime. It held that both parties had deferred the liability of VAT till the handing over of the elevators and issuance of Taking Over Certificates. The Tribunal found that DVAT invoices could not have been raised for the 85 lifts in question, thus deciding in favor of Kone. The Court found no infirmity with this conclusion, noting that DMRC had not objected to the GST invoices and had reimbursed the GST except the disputed amount.

2. Compliance with GST Law and Claiming ITC for Excise Duty:
The Tribunal held that Kone should have sought an advance ruling to clarify its entitlement to ITC for the excise duty paid. Both parties were found equally responsible for not availing the ITC. The Tribunal decided that both parties had erred in not exploring the possibility of ITC under the CGST Act, thus sharing equal responsibility.

3. Applicability of GST or DVAT for the Transaction:
The Tribunal found that the taxable event under the DVAT Act did not occur as the lifts were not incorporated into the works before 01.07.2017. It concluded that GST was applicable, not DVAT. DMRC's contention that the lifts were liable to DVAT was rejected due to insufficient evidence.

4. Financial Loss Caused by Raising Invoices under GST Instead of VAT:
The Tribunal concluded that Kone had not caused financial loss to DMRC by raising invoices under GST law instead of VAT law. It found that DMRC had reimbursed the GST without objection, indicating acceptance of GST applicability.

5. Violations of CGST Act or DVAT Act:
The Tribunal found no violations of the CGST Act or DVAT Act by either party. It held that both parties had not acted jointly to explore ITC possibilities, leading to shared responsibility.

6. Unjust Enrichment by the Claimant:
The Tribunal concluded that Kone had not enriched itself at DMRC's expense by not claiming ITC for excise duty. It found that both parties shared equal responsibility for not availing the ITC.

7. Entitlement to Interest and Costs:
Kone's claim for pre-award interest was denied, but the Tribunal granted future interest at 9% per annum if the awarded amount was not paid within ninety days. The Tribunal awarded 50% of the claimed amount to Kone, considering both parties' shared responsibility for not availing ITC.

8. Reliefs Entitled to the Parties:
The Tribunal awarded ?63,65,021/- to Kone, half of the claimed amount, due to shared responsibility for not availing ITC. Both parties were allowed to initiate fresh proceedings regarding the principal dispute on ITC entitlement.

Conclusion:
The Court found no grounds to interfere with the Tribunal's decision on GST applicability and reimbursement. However, it set aside the award regarding ITC entitlement due to the Tribunal's failure to address the principal dispute. The parties were given liberty to initiate fresh proceedings. The petitions were disposed of accordingly.

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