2009 (2) TMI 224 - HC - Central Excise

Proof of payment of duty - Held that - The benefit of any exemption/reduction in excise duty was liable to be passed on to the buyer/respondent. From the general condition aforesaid, it is clear that excise duty could not be recovered by the supplier appellant, unless the same is paid and duly certified. Learned counsel for the appellant was repeatedly asked whether the appellant had, in fact, paid the excise duty sought to be recovered, and produced documents in support thereof before the Arbitrator. However, he did not answer this question and kept on insisting that the appellant was entitled to recover excise duty at the rate of 10%, irrespective of whether or not the same was charged to the appellant, or paid by it. Since excise duty is paid to the government, the same is bound to be accounted for and documented. Had the amount claimed been in fact paid towards excise duty, there would have been no difficulty in establishing the same by producing challans/receipts of payment. Mere self serving statements showing computation of the amount claimed, relied upon by the appellant could not constitute evidence to establish payment of the amount towards excise duty. Appeal dismissed. As noticed hereinabove, the appellant could recover (upto a maximum of 10% excise duty on the basic price which was firm and final) only that much amount towards excise duty as it had actually incurred. No material, it appears, was produced either before the Arbitrator, or before the learned single Judge to show that the amount of ₹ 3,10,865/- was, as a matter of fact incurred by the appellant towards excise duty, but not paid by the respondent. Therefore, there is not only a contradiction in the award, as rightly held by the learned single Judge, the award is also contrary to the express terms of the contract. The same has deservedly been set aside.

Issues:
1. Appeal against Arbitrator's award set aside by learned single judge.
2. Objections under Section 34 of the Arbitration and Conciliation Act, 1996.
3. Interpretation of clauses related to excise duty in the agreement.
4. Appellant's claim for reimbursement of excise duty.
5. Contradictions in the Arbitrator's award.
6. Failure to produce evidence of payment of excise duty.
7. Legal interpretation of excise duty reimbursement in the contract.
8. Lack of merit in the appeal.
9. Imposition of costs on the appellant.
10. Criticism of the Arbitrator's handling of the claim.

Analysis:
1. The appeal was filed against the Arbitrator's award, which was set aside by the learned single judge based on objections raised under Section 34 of the Arbitration and Conciliation Act, 1996. The objections were related to the excise duty clause in the agreement.

2. The appellant's claim for reimbursement of excise duty was based on the interpretation of the clauses in the contract. The appellant sought to recover 10% extra on the basic price as excise duty, regardless of whether it was actually paid by them.

3. The Arbitrator's award faced criticism due to contradictions in the decision-making process. The Arbitrator allowed the excise duty claim despite rejecting the appellant's request to amend the contract for a price increase. This inconsistency led to the award being set aside.

4. The appellant failed to produce evidence of actual payment of excise duty, which was a crucial aspect of the reimbursement claim. The lack of documentation supporting the payment raised doubts about the validity of the claim.

5. The legal interpretation highlighted that excise duty reimbursement was contingent upon actual payment by the appellant. The contract terms indicated that any exemption or reduction in excise duty should benefit the buyer, and the supplier could only recover the amount actually incurred.

6. The court found no merit in the appeal as the appellant could not prove the payment of excise duty claimed. The award was deemed contrary to the contract terms and rightly set aside by the learned single judge.

7. Costs were imposed on the appellant for filing a frivolous claim and wasting judicial time. The court criticized the appellant's unreasonable stance and ordered the payment of costs to the Prime Minister's Relief Fund.

8. The Arbitrator's handling of the claim was also criticized for lacking understanding of the legal issues involved. The Arbitrator's decision to allow the excise duty claim without proper documentation was deemed inappropriate, considering the legal background of the Arbitrator.

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