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TMI Blog2020 (5) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the claim amounts, as also to show that the Smart Cards were actually delivered. In most of the claims under this Head, the petitioner failed to connect the invoices filed, with the amounts claimed while with respect to Regional Centre, Lucknow, the petitioner could not rebut the evidence of the respondent that the Smart Cards were even received - this part of the Award calls for no interference in judicial review by this Court under Section 34 of the Act. Recovery of a sum of ₹ 80,77,215/- on account of the differential tax deposited by the Petitioner due to non-issuance of Sales Tax 'C' Forms by the Respondent alongwith interest thereon @ 21% from the date of deposit till 28.02.2017 to the tune of ₹ 1 0587373/- - HELD THAT:- There is no evidence for proving the Sales Tax Challans filed by the petitioner and nor were the originals produced. The deposition of PW-1, Rajendra Yadav, is noted wherein he admits that the amounts indicated in the Challan do not exclusively relate to the Smart Cards supplied to the respondent and also relate to the other parties as well - The Tribunal has come to a finding that the respondent is not a dealer under Section 2( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te nor the obligation under the Contract nor can even be sustained in any commercial transaction or in the business common sense. Recovery of a sum of ₹ 4450440/- as reimbursement of the costs/ expenditure incurred by the Petitioner in providing services to the Respondent for the period 1.06.2015 to 8.07.2015 - HELD THAT:- Having raised a claim, the onus of proving that the services were rendered by the petitioner was on the petitioner itself. Petitioner could not place any order on record by which the respondent had sought its services beyond the contractual period. On the contrary, Annexure C-19 was an email dated 28.04.2015 issued by the respondent to its Regional Centres, with a copy to the petitioner, that the petitioner should return all the hardware and software to the ECHS, in compliance with Clause 9.1.3 of the Agreement - also, this Claim was in clear contradiction to the claim for unutilized Smart Cards. On one hand, the petitioner complained about withholding the applications which proved that the Contract was to end on 31.05.2015 while on the other hand, it urged that it worked beyond the contractual period. RW-1 had clearly deposed and proved the email dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure the Kits only from the petitioner. Tenure of the Agreement was five years from 01.06.2010 to 31.05.2015. Initially, ECHS had 227 Polyclinics and 13 Regional Centres but later the number of Polyclinics increased to 426 and the Regional Centres to 28. As a result, the petitioner avers that it had to incur additional expenses in collecting approved application forms and providing additional software support. Under Clause 5 of the Agreement, respondent agreed to pay a sum of ₹ 135/- per smart card in the time and manner laid down in Annexure E of the Agreement. Para 2 of Annexure E provided that respondent would give Sales Tax Form C once in a year against the invoices raised by the petitioner for supply of the Smart Card. Clause 5 of the Agreement and para 2 of Annexure E are extracted below :- 5. CONSIDERATION 5.1 The Parties have agreed that for the Turnkey Solutions, SITL shall be entitled to receive ₹ 135/- (Rupees One Hundred Thirty Five only) per Smart Card delivered, to be payable by the Department at the time and in the manner specified in Annexure E. Annexure E 2. SITL will raise the invoice and the Department will give Form C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of outstanding dues in respect of the supply of Smart Cards made by the Petitioner to the Respondent; (b) A sum of ₹ 80,77,215/- on account of the differential tax deposited by the Petitioner due to non-issuance of Sales Tax 'C' Forms by the Respondent alongwith interest thereon @ 21% from the date of deposit till 28.02.2017 to the tune of ₹ 1 0587373/-; (c) A sum of ₹ 66,89,250/- on account of unutilized 49,500 Red Pre-printed Smart Cards/ White Smart Cards; (d) A sum of ₹ 2,97,67,500/- on account of non-procurement of referral Authentication Kits (RAKs) by the empanelled medical facilities; (e) A sum of ₹ 4450440/- as reimbursement of the costs/ expenditure incurred by the Petitioner in providing services to the Respondent for the period 1.06.2015 to 8.07.2015. 9. Respondent filed its Statement of Defence and also filed a Counter Claim, seeking cost of the proceedings. 10. The Arbitral Tribunal passed an Award dated 31.07.2018 and disallowed the claims of the petitioner, except for Claim No.1, which has been allowed partially with a direction to pay to the petitioner a sum of ₹ 2025/- as outstanding dues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 008 is misplaced as the negotiations prior to the Agreement have no meaning in the eyes of law once detailed terms have been incorporated in the Agreement. Even assuming that the letter was relevant and the price of ₹ 135/- quoted by the petitioner was inclusive of taxes petitioner cannot be denied the benefit of concession in payment of taxes on account of non-issuance of Form C . Learned senior counsel further argues that the Tribunal has misinterpreted the statutory provisions of Central Sales Tax Act, 1956. It is not disputed by the respondent that it had availed the services of the petitioner for providing Smart Card which contained a unique memory chip. In addition thereto, petitioner was also required to install the hardware for implementation of the Smart Card Project and was to generate software and source of the software for the project. At the end of the Contract, the legal ownership of the hardware and software was transferred to the respondent. Therefore, the Smart Cards and the technology employed to make them operational will fall under the definition of goods under Section 2(d) of the Act. Further, there was a sale of the goods for cash and hence, Section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plications. Pertinently, under Clause 1.1.51 and Clause 7.1.9, petitioner was obliged to maintain stock for further supply of average volume of cards. Therefore, the respondent was in clear breach of its obligations under Clause 7.1.13 under which it was bound to supply monthly projections for the number of cards required during the next six months. The petitioner could not have foreseen that the respondent would abruptly curtail the supply of cards even though one month was remaining before the Contract was to expire. The petitioner in its evidence had clearly brought out that the entire inventory could be inspected as the same being voluminous could not have been brought before the Tribunal, in physical form. This part of the Award thus deserves to be set aside as per the petitioner. 15. With respect to the rejection of Claim No.4, learned senior counsel for the petitioner contends that the Tribunal completely lost sight of the fact that the petitioner was unable to sell the Kits due to the respondent s failure to act in accordance with Clause 3.1.12 of the Agreement, which required the respondent to facilitate the procurement of the Kits by the empaneled hospitals / labs. Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same parties. The exemption on account of Form C , can be claimed only in cases where the sale is made to a registered dealer while in the present case, the respondent is not a registered dealer. Further argument is that under Section 8(1)(b) of the Central Sales Tax Act, 1956, Sales Tax on Inter-State Sale is 2% or State Rate, whichever is lower, provided the sale is to a registered dealer and the goods are covered in the Registration Certificate of the purchasing dealer. Blank C Forms are issued by Sales Tax Authorities to the purchasing dealer who has made Inter-State purchases on concessional rate of CST. Thus, the exemption on the basis of Form C cannot be availed by the petitioner in the present case. 19. It is further contended by the counsel for the respondent that even otherwise the claim relating to non-issuance of Form C is barred by limitation. The exemption is claimed on the yearly basis and thus, the dispute, if any, ought to be have been raised within one year of the alleged non-issuance. Having acquiesced to the fact that the respondent was not issuing the Form C and having slept over for five years, it is not open to the petitioner to now raise this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e month of May 2015 in terms of the Clauses of the Agreement. Without prejudice, it is argued that the petitioner has not even produced anything on record to show that, in fact, 49,500 cards remained unutilized due to withholding of the application forms. A specific question was put to the petitioner s witness during cross-examination, but nothing was brought out in the evidence to substantiate the claim. Attention is drawn to Question Nos.13 to 16 of the evidence recorded by the Tribunal on 11.12.2017. It is further argued that the cards supplied for the year 20132014 were around 3,21,259 while those for the year 2014-2015 were around 3,21,303. Thus, the monthly average was around 26,700 cards and it cannot be contended that the petitioner suffered loss on account of non-forwarding of the approved applications in the last month. 22. Defending the Award towards rejection of Claim No.4, learned counsel argues that beyond making payments for the Smart Cards actually supplied as per specification, there was no contractual obligations on the respondent under the Agreement. The petitioner was not able to point out any provision in the Agreement which mandated the respondent to ensure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pensioners. The beneficiaries requiring hospitalization, OPD treatments or diagnostic tests, etc. are referred to service hospitals managed by the Armed Forces or to the empaneled private hospitals / diagnostic centres by ECHS Polyclinics. The purpose of introducing Smart Cards was to authenticate the beneficiary by matching stored finger prints to the presented live finger prints so as to avoid impersonation, forgery, fraud and misuse of public funds. 26. It was agreed by the parties under Clause 5 of the Agreement that the respondent would pay a sum of ₹ 135/- per Smart Card. The petitioner mobilized its resources and commenced the work for the Smart Card Project. According to the petitioner, it supplied a total of 23,77,180 Smart Cards to the respondent and received a sum of ₹ 31,93,46,524/- against the said supply and certain amounts remained pending with regard to supplies in certain Regional Centres. 27. Claim No.2 of the petitioner before the Arbitral Tribunal was on account of non-issuance of Sales Tax C Forms by the concerned Regional Centres alongwith interest. According to the petitioner, Sales Tax at the rate of 5% has been paid on account of Smart Car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Smart Cards supplied to the beneficiaries will not be termed as a sale or a resale under the Act. Respondent was, therefore, not liable to give any Form C to the petitioner. On this account, Claim No.2 has been rejected. 29. I find substance in the contention of the respondent that on 21.11.2008, when the petitioner had quoted the price of ₹ 135/- per Smart Card, it had clearly included ₹ 5/- as an element of tax. Admittedly, 2% tax is payable by the petitioner even where exemption is allowed on the basis of Form C . The petitioner allegedly paid 5% towards tax on account of non-issue of Form C . The difference, i.e. 3% of ₹ 135/- per card would be ₹ 4.05/- per card as against ₹ 5/- sought by the petitioner in its price of ₹ 135/-. Hence, even otherwise no loss has been caused to the petitioner due to non-issue of Form C . From this perspective, the argument that the petitioner was entitled to a concession under the Sales Tax Act as also that the respondent is a registered dealer becomes irrelevant. In my view, the Tribunal has committed no illegality in rejecting the said claim and there is no cause for interference by this Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal rejected the liability of the respondent for payment against this Centre. In my view, no patent illegality can be found in the rejection of the said claim except to the extent of ₹ 2025/- which has been allowed towards the claim payable by Regional Centre, Hissar. It was for the petitioner to lead evidence to show that the invoices being filed in support of the claim pertained to the claim amounts, as also to show that the Smart Cards were actually delivered. In most of the claims under this Head, the petitioner failed to connect the invoices filed, with the amounts claimed while with respect to Regional Centre, Lucknow, the petitioner could not rebut the evidence of the respondent that the Smart Cards were even received. 31. In my view, this part of the Award calls for no interference in judicial review by this Court under Section 34 of the Act. Relevant part of the Award is as under :- During the arguments Ld. Senior Counsel for the Claimant had submitted that during the pendency of the proceedings, all dues except ₹ 945/- from RC Bangalore, ₹ 2025/-from RC Hissar and ₹ 13499/- from RC Lucknow remain to be paid. Hence on this score only a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder was placed on it during the subsistence of the Contract for supplying the unutilized ECHS Pre-printed cards. The Tribunal observes, on the contrary that the petitioner admitted that under Clause 7.1.13, respondent was required to provide monthly projection of the required cards for the next month, six months prior to the expiry of the Contract. The petitioner also admitted that in November 2014 and thereafter the respondent never made any such projections. The Tribunal, therefore, was of the view that when the respondent did not place any order or sent monthly projections after November 2014, it could not be blamed for any unutilized inventory for the Smart Card and cannot be made liable on this account. The Tribunal also observed that the petitioner had not proved on record any document to show that it had spent the amount so claimed for getting / buying the cards and thus found the claim to be doubtful. 33. In my view, the Award suffers from no illegality leave alone a patent illegality. The respondent herein is right in its contention that the Agreement clearly underscored the need of the parties to stop the work in the last month of the Contract and hand over the softwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28/4/15 Ex. C-19 (page276) which though has remained unproved, does not in any manner change the nature of rights of the parties under the agreement. From the total number of smart cards supplied by the claimant, average per month comes to around 39620 smart-cards. When the Respondent did not place any order after November, 2014 or send monthly projection after Nov. 2014, the Respondent cannot be blamed for any unutilised inventory of 49500 smart cards. In the absence of any order or projections supplied by the Respondent after November, 2014, it is not liable to pay for the said unutilised smart-cards, after expiry of the contract on 31/05/15, between the parties and the claim of the Claimant, on account of the unutilised inventory of pre-printed cards, cannot be entertained and is hereby dismissed. Also the Claimant has not proved on record any document to show that it had spent the said amount for getting/buying the said number of Cards. This is also a serious lapse which renders this claim doubtful. The Claimant therefore is not entitled to get any money from the Respondent on this score. This Claim as such also stands dismissed. 34. Claim No.4 was for recovery o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITL for identifying patients referred by ECHS polyclinics.' Significantly it talks of facilitation by the Respondent to the empanelled medical facilities to procure Referral Authentication Kits from the Claimant. There is no specific stipulation in Ex. C-1 the agreement dated 31/05/10 between the parties that the Respondent shall buy RAKs of the value of ₹ 2,97,67,500/-. In the absence of any such stipulation, it cannot be said that there is any breach of the agreement committed by the Respondent. It is not the case of the Claimant that it has supplied RAKs of the value of ₹ 2,97,67,500/-to the Respondent or that it had bought the RAKs for the Respondent which are lying with it. On the other hand the claim in this regard is about the alleged breach committed by the Respondent. Since there is no such binding clause including Clause No.3.1.12 in the agreement Ex.C1 which casts an obligation on the Respondent to buy RAKs worth ₹ 2,97,67,500/-,the claim of the Claimant needs outright rejection and is accordingly dismissed. 37. Claim No.5 was on account of costs / expenses for services allegedly rendered between the period 01.06.2015 to 08.07.2015. The Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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