2006 (3) TMI 175 - HC - Central Excise

Summary

Issues:
Objections filed challenging arbitration award under Sections 30 and 33 of the Arbitration Act, 1940 regarding excise duty refund based on Modvat scheme.

Analysis:
The respondent was awarded a contract for supply of XLPE Cables with excise duty payable extra, initially at 10.5%. Subsequently, the excise duty rate was amended to 25% with a condition for refund under the Modvat scheme. However, this amendment was later withdrawn, reverting to the original 10.5% excise duty rate. Despite this, the respondent continued to charge and the petitioner paid excise duty at 25%. The petitioner claimed a refund based on the Modvat scheme, leading to arbitration. The Arbitrator allowed the refund claim, interest, and costs. The respondent objected, arguing that withdrawal of the amended excise duty rate also nullified the Modvat scheme refund condition. The court rejected this argument, holding that the respondent was liable to refund the excess excise duty charged, as per the contract terms. Additionally, the court emphasized that sellers cannot retain excise duty amounts meant for the Excise Department, even if indirectly benefiting from the Modvat scheme.

The Arbitrator's decision was supported by various reasons, including the respondent's failure to provide Modvat details, withholding information, and not proving the actual dates of raw material purchases affecting excise duty calculations. The court noted the respondent's lack of cooperation in submitting required details despite multiple opportunities. The court highlighted the adverse inference drawn by the Arbitrator due to the respondent's non-disclosure of information and failure to substantiate claims regarding excise duty calculations and Modvat benefits.

During the proceedings, the court directed the parties to submit excise duty details at different rates to determine the actual amounts payable and paid. Despite repeated opportunities, the respondent failed to provide the necessary information, including Modvat scheme benefits derived. The court emphasized that the respondent's affidavit presented a different case without supporting evidence, undermining their objections. Ultimately, the court dismissed the objections, upholding the arbitration award as the rule of the Court, along with interest payments as per the decree. The court underscored the importance of providing cogent evidence in arbitration proceedings and reiterated that it does not sit in appeal over arbitrator decisions.

In conclusion, the court's detailed analysis upheld the arbitration award, emphasizing the importance of contractual terms, disclosure of information, and submission of supporting evidence in arbitration proceedings. The court's decision highlighted the respondent's failure to cooperate, provide necessary details, and substantiate claims, leading to the dismissal of objections and affirmation of the arbitration award.