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TMI Blog2012 (4) TMI 457X X X X Extracts X X X X X X X X Extracts X X X X ..... " - the said paragraph 6 deals in great details with the work which was required to be done by the respondent as clearing and forwarding agent. It is therefore absolutely clear that the term "his obligations under this order" in clause 9.3 of the contract denoted the contractor's responsibilities under clause 6 in relation to the work which he was required to carry out as handling contractor - the respondent as the contractor had to bear the service tax under clause 9.3 as the liability in connection with the discharge of his obligations under the contract and there was no reason for the High Court to interfere in the view taken by the arbitrator. - Civil Appeal No. 3905 of 2012 - - - Dated:- 25-4-2012 - R.M. Lodha, H.L. Gokhale, JJ. JUDGEMENT H.L. Gokhale, J 1. Leave granted. 2. This appeal is directed against the judgment and order dated 25.2.2008 rendered by a Division Bench of the Bombay High Court in Appeal No.188/2006 confirming the decision of a single Judge of that court dated 4.7.2005 in Arbitration Petition No.364/2004, whereby the High Court has set aside the award dated 25.5.2004 passed by a sole arbitrator which award had dismissed the Claim Petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... every person providing taxable service to collect the service tax at specified rates. Section 69 of the Finance Act, 1994 provided for registration of the persons responsible for collecting service tax. Sub-sections (2) and (5) indicated that it was the provider of the service who was responsible for collecting the tax and obliged to get registered. 6. By the Finance Act, 1997 the first amendment to Section 65 of the Finance Act, 1994 was made, inter alia, by extending the meaning of "taxable service" from three services to 18 different services categorised in Section 65(41), sub-clauses (a) to (r). Sub-clause (j) made service to a client by clearing and forwarding agents in relation to clearing and forwarding operations, a taxable service. Similarly, service to a customer of a goods transport operator in relation to carriage of goods by road in a goods carriage was, by sub-clause (m), also included within the umbrella of taxable service. The phrases "clearing and forwarding agent" and "goods transport operator" were defined as follows: "65. (10) 'clearing and forwarding agent' means any person who is engaged in providing any service, either directly or indirectly, connecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t; or (iii) in relation to services provided by a goods transport operator, every person who pays or is liable to pay the freight either himself or through his agent for the transportation of goods by road in a goods carriage;' (ii) after clause (18), the following clauses had been substituted, namely- '(18-A) "goods carriage" has the meaning assigned to it in clause (14) of Section 2 of the Motor Vehicles Act, 1988; (18-B) "goods transport operator" means any commercial concern engaged in the transportation of goods but does not include a courier agency;'; (iii) in clause (48), after sub-clause (m), the following sub- clause had been inserted, namely- '(m-a) to a customer, by a goods transport operator in relation to carriage of goods by road in a goods carriage;'; (b) in Section 66, for sub-section (3), the following sub-section had been substituted, namely- '(3) On and from the 16th day of July, 1997, there shall be levied a tax at the rate of five per cent of the value of taxable services referred to in sub-clauses (g), (h), (i), (j), (k), (l), (m), (m-a), (n) and (o) of clause (48) of Section 65 and collected in such manner as may be prescribed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the discharge of his obligation." Service tax was one such tax/duty or a liability which was directly connected with "the discharge of his obligation" as the clearing and forwarding agent. It is this contractual obligation which binds the claimant and though under the law it is the respondent who is the assessee, it can and rightly did deduct the service tax from the bills of the claimant in terms of the said contractual obligation, the validity and legality of which has not been challenged before me." 12. This award led the respondent to file a petition under Section 34 of the Arbitration and Conciliation Act, 1996 being Arbitration Petition No.364/2004 before the High Court of Judicature at Bombay. A Learned Single Judge of the High Court allowed that petition, and set aside the award with costs by judgment and order dated 4.7.2005. The learned Judge while arriving at that conclusion referred to the definition of the term "assessee" and held that insofar as service tax under the Finance Act, 1994 is concerned, the appellant as the assessee was liable to pay the tax. The learned Judge observed as follows:- "The purpose of clause 9.3 is not to shift the burden of taxes from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y will depend upon the value of the taxable service provided by the respondent, and therefore clause 9.3 required the respondent to take the burden. Mr. Ganesh cited the example of sales tax which the assessee can shift to the customer. In his submission, the phrase, "liabilities in connection with the discharge of his obligations" under this clause will have to be construed in that context. 16. The learned counsel submitted that interpretation of clause 9.3 by the arbitrator was the correct one, and in any case, was a possible if not a plausible one. The Courts were, therefore, not expected to interfere therein. He submitted that the dispute in the present case was concerning the interpretation of a term of the contract. It has been laid down by this Court that in such situations, even if one is of the view that the interpretation rendered by the arbitrator is erroneous, one is not expected to interfere therein if two views were possible. Mr. Ganesh referred to the following observations of this Court in H.P. State Electricity Board vs. R.J. Shah reported in [1999 (4) SCC 214] at the end of paragraph 27, which are to the following effect:- "27. ........The dispute before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nance Act, 1994, how the meaning of taxable service was extended in 1997, and how the definition of assessee subsequently included the person who engages a clearing and forwarding agent, or a goods transport operator. 19. He drew our attention to paragraph 21 of Gujarat Ambuja Cement Ltd. (supra) wherein this Court observed as follows: "21. As is apparent from Section 116 of the Finance Act, 2000, all the material portions of the two sections which were found to be incompatible with the Service Tax Rules were themselves amended so that now in the body of the Act by virtue of the amendment to the word "assessee" in Section 65(5) and the amendment to Section 66(3), the liability to pay the tax is not on the person providing the taxable service but, as far as the services provided by clearing and forwarding agents and goods transport operators are concerned, on the person who pays for the services. As far as Section 68(1-A) is concerned by virtue of the proviso added in 2003, the persons availing of the services of goods transport operators or clearing and forwarding agents have explicitly been made liable to pay the service tax." 20. The respondent relied upon the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d become amenable for being set aside by a court. ii) An error relatable to interpretation of the contract by an arbitrator is an error within his jurisdiction and such error is not amenable to correction by courts as such error is not an error on the face of the award. iii) If a specific question of law is submitted to the arbitrator and he answers it, the fact that the answer involves an erroneous decision in point of law does not make the award bad on its face. iv) An award contrary to substantive provision of law or against the terms of contract would be patently illegal." v) Where the parties have deliberately specified the amount of compensation in express terms, the party who has suffered by such breach can only claim the sum specified in the contract and not in excess thereof. In other words, no award of compensation in case of breach of contract, if named or specified in the contract, could be awarded in excess thereof. vi) If the conclusion of the arbitrator is based on a possible view of the matter, the court should not interfere with the award." Consideration of the rival submissions: 22. We have noted the submissions of both the learned coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r misplacement of the consignments also. Clause 9.0 which deals with payment of bills, provides in clauses 9.1 and 9.2 that the bills will be prepared on the basis of the actual operations performed and the materials accounted on the basis of weight carried and received. Clause 9.3 has to be seen on this background. The tax liability will depend upon the value of the taxable service provided, which will vary depending upon the volume of the goods handled. 25. It was submitted on behalf of the respondent that clause 9.3 and the contract must be read as a whole and one must harmonise various provisions thereof. However, in fact when that is done as above, clause 9.3 will have to be held as containing the stipulation of the contractor accepting the liability to pay the service tax, since the liability did arise out of the discharge of his obligations under the contract. It appears that the rationale behind clause 9.3 was that the petitioner as a Public Sector Undertaking should be thereby exposed only to a known and determined liability under the contract, and all other risks regarding taxes arising out of the obligations of the contractor are assumed by the contractor. 26. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be read as incorporated only with a view to provide for contractor's acceptance of the tax liability arising out of his obligations under the contract. 28. It was pointed out on behalf of the appellant that it is conventional and accepted commercial practice to shift such liability to the contractor. A similar clause was considered by this Court in the case of Numaligarh Refinery Ltd. vs. Daelim Industrial Co. Ltd., reported in [2007 (8) SCC 466]. In that matter, the question was as to whether the contractor was liable to pay and bear the countervailing duty on the imports though this duty came into force subsequent to the relevant contract. The relevant clause 2(b) read as follows: "2(b) All taxes and duties in respect of job mentioned in the aforesaid contracts shall be the entire responsibility of the contractor..." Reading this clause and the connected documents, this Court held that they leave no manner of doubt that all the taxes and levies shall be borne by the contractor including this countervailing duty. 29. In any case, assuming that clause 9.3 was capable of two interpretations, the view taken by the arbitrator was clearly a possible if not a plausible o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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