2009 (3) TMI 211 - HC - Central Excise

Appeal to High Court against arbitration award - Held that - The learned Arbitrator returned a finding of fact that the appellant claimant had not received Modvat benefit while paying excise duty on finished goods. It appears that this aspect has not been considered by the learned Single Judge, who has proceeded to examine the claim afresh on his own. In our view the approach of the learned Single Judge in this case was not correct, inasmuch as, he proceeded to step into the shoes of the arbitrator, rather than examining the award by application of recognized principles. The finding of fact that the Modvat benefit was not availed of by the claimant/appellant has not been noticed by the learned Single Judge and whichever way the issue is looked at, the exchequer suffered no loss. Accordingly, we are satisfied that the learned Single Judge has unjustifiably interfered with the finding of fact recorded by the arbitrator and has not even dealt with the said finding. The judgment of the learned Single Judge in respect of the award on Claim Nos. (a) & (d) is set aside. The award dated 18-6-1998 is consequently made Rule of the Court. The award on claim Nos. (a) and (d) is restored. The decree be drawn up as per the award.

Summary

Issues:
Challenge to judgment setting aside award on price difference due to increase in raw material cost and excise duty.

Analysis:
1. The appellant submitted a tender with a Modvat clause, which was later withdrawn at the request of the respondent. The rate contract accepted by the appellant specified variable prices based on raw material costs and excise duty. The respondent placed supply orders, and disputes arose regarding the price difference due to an increase in the cost of raw materials. Claims were referred to arbitration, where the appellant's claims were upheld.

2. The arbitrator considered circulars showing price increases in raw materials and observed that the appellant's claims were justified under the price variation clause. However, the learned Single Judge set aside the arbitrator's decision, stating that the appellant was not entitled to claim excise duty on the increased basic price, as per the contract terms. The judge found that the arbitrator had misinterpreted the contract terms and awarded claims against the contract's specific provisions.

3. The appellant argued that the arbitrator's interpretation was plausible and should not have been interfered with by the court. The court noted that the appellant did not receive Modvat benefit while paying excise duty, which was a finding of fact by the arbitrator. The court criticized the Single Judge for not considering this fact and for re-examining the claim independently, leading to unjustified interference with the arbitrator's decision.

4. Ultimately, the High Court allowed the appeal, setting aside the Single Judge's judgment and restoring the arbitrator's award on the price difference claims. The court emphasized that the Single Judge should have applied recognized principles and not substituted his understanding for that of the arbitrator. The decree was to be drawn up as per the award, and the appeal was disposed of in favor of the appellant.