2012 (9) TMI 849 - HC - Indian Laws

Excise duty burden - initially the bids always included Excise Duty to be borne by HCL whereas the Work Order suggest Excise Duty to be borne by the appellant - Held that - When the price was negotiated and terms were fixed through negotiation, the final contract that was entered into would be the final important document to be looked at, that did not specifically provide, HCL would bear the Excise Duty. The notice inviting tender also did not stipulate such clause. NIT says otherwise. When the parties entered into a contract, if such clause was specifically excluded they should have made a mention of the same in the contract. Contract was silent. The contract was followed by Work Order issued by April 14, 2007 incorporating clause 4.9.1. Thus notice inviting tender categorically imposed Excise Duty on the appellant, Work Order was consistent. Rothery being the only witness of the claimant had signed the Work Order. Whether or not Ahlawat being the local representative missed the issue, is immaterial. The Managing Director that also did not finally incorporate the clause mentioned above, signed the price bid.

Summary

Issues involved: Dispute over Excise Duty payment obligation arising from a mining contract tender process.

Detailed Analysis:

1. Background and Contract Formation: Hindusthan Copper Limited (HCL) floated a global tender for copper ore extraction at their mine. The appellant, an Australian party, won the tender after submitting bids in two parts: Techno Commercial Bid and Price Bid. The final offer was accepted, leading to a formal contract and a Work Order issued by HCL for extraction to commence. Dispute arose when HCL declined to pay Excise Duty mentioned in the invoice.

2. Contention of Appellant: Appellant argued that Excise Duty obligation was not clearly defined in the contract and was initially to be borne by HCL based on the bids. They claimed that a clause shifting the tax burden was missed by their local representative, and continuous mention of Excise Duty in their bids was never objected to by HCL.

3. Arbitration and Judicial Scrutiny: The dispute was referred to arbitration, where the arbitrator and a learned Single Judge held the obligation to be on the appellant. Appellant's counsel contended that evidence suggesting the appellant deleted the tax clause was not properly confronted, and judicial scrutiny should consider if the award resulted in a miscarriage of justice.

4. Counter-Contention by HCL: HCL argued that the final contract and Work Order obligated the appellant to bear Excise Duty, supported by clause 4.9.1 in the tender notice. They claimed that the appellant's failure to produce their local representative as a witness indicated their awareness of the tax obligation.

5. Judicial Decision: The High Court upheld the arbitrator's award, emphasizing that the contract and Work Order did not explicitly mention HCL bearing the Excise Duty. The Court noted that the absence of a specific clause in the final contract shifted the tax burden to the appellant as per the Work Order. The Court found no grounds for interference and dismissed the appeal, with no costs awarded.

In conclusion, the High Court's judgment upheld the arbitrator's decision, emphasizing the importance of explicit contract terms in determining tax obligations. The Court found that the absence of a specific clause in the final contract shifted the Excise Duty burden to the appellant as per the Work Order, leading to the dismissal of the appeal.