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TMI Blog2022 (6) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... eady invested funds in the contractual arrangement arrived at with IRCTC, on 12.04.2017, the respondent accepted the terms indicated in the communication dated 07.02.2017, concerning the supply of welcome drink for the period that was to extend beyond 18.06.2017 - the claim of the respondent qua welcome drink was restricted to the period spanning between 19.12.2016 and 18.06.2017. To be noted, the temporary license was extended by IRCTC till 04.07.2018. The learned arbitrator, correctly concluded that IRCTC could not have deducted the amounts expended by them towards serving welcome drink to the passengers from the bills of the respondent. Whether IRCTC is obliged to reimburse the amount deposited by the respondent towards GST levied, with effect from 01.07.2017, on production charges? - HELD THAT:- IRCTC also does not seem to have disputed the fact, that it has recovered GST from the passengers by factoring the same in the train fare - the argument advanced by IRCTC, that it is not obliged to reimburse GST to the respondent, even if it establishes proof of payment of same, seems completely untenable. As correctly concluded by the arbitrator, GST from 01.07.2017 would ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges/supply of meals after 01.07.2017, when the Goods and Services Tax Act, 2017 [ GST Act ] came into force. 2.3 Third, whether the financial burden concerning the food which got wasted due to cancellation or the failure of the passengers to turn up was required to be borne by the respondent. 2.4 Fourth, as to whether the respondent was entitled to the relief as claimed, which included a claim for interest. 3. The record shows, that issues on the same lines were framed by the learned arbitrator on 18.11.2020. It is also an admitted position, and something that emerges from the record that on 27.10.2020, before the learned arbitrator, the respondent gave up on its claim for service tax. Admittedly, insofar as the first two aspects are concerned, the learned arbitrator ruled in favour of the respondent. Insofar as the third aspect is concerned, the learned arbitrator rendered a decision against the respondent. Since a partial/interim award has been rendered, the fourth aspect referred to above has not been dealt with as yet by the learned arbitrator. 4. It is in this background, that arguments were advanced by counsel for the parties. Mr Nikhil Majithia advanced subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision of welcome drink, on the ground that it did not form a part of the tender document and therefore, the deductions made by IRCTC on that score were untenable. 7. Insofar as the second aspect was concerned i.e., whether the respondent was entitled to claim GST on production charges/supply of meals after 01.07.2017, it was contended that the charges that were fixed for the supply of meals and rendering of services were provided in Annexure-F appended to the contract. 7.1 A careful perusal of Annexure-F would show, that where the service provider provided dinner/lunch, the maximum charge fixed in that behalf was Rs. 84/- (including taxes), whereas the rate for service charges was pegged at Rs. 14.56, albeit, excluding taxes. 7.2 Therefore, according to Mr Majithia, the learned arbitrator had incorrectly proceeded to hold that service tax did not form part of the amount that was to be reimbursed to the respondent. 7.3 Likewise, according to Mr Majithia, the learned arbitrator also fell into error by holding that the respondent would be entitled to payment of GST on food production charges on amounts reflected in Annexure-F of the tender document albeit after 01.07.2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovider on submission of proof of deposit of the said tax with the appropriate government authority. 9.3 The fact, that the said circular was binding on IRCTC was sought to be established by referring to the testimony of RW-1. This aspect, according to Mr Thanai, was noticed by the learned arbitrator, while ruling on the issue in favour of the respondent. 9.4 Mr Thanai also adverted to the fact, that the learned arbitrator had observed that the GST regime applied to the services provided by the respondent and that the same was not in lieu of Value Added Tax (in short VAT ) as was sought to be portrayed by IRCTC. 9.5 Concerning this aspect, Mr Thanai made it a point to bring to our notice clauses 5.1 and 5.2 of CC 32/2014, which according to him were in line with clause 4 of CC/2017, to which, we have made a reference above. In support of his submission, Mr Thanai also alluded to the observations made by the learned single judge in paragraph 20 of the impugned judgement dated 05.07.2021. Analysis and Reasons: 10. We have heard the learned counsel for the parties, and perused the record. 11. The following admitted facts emerge from the record, which, to our mind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o time. 1. Rationalization of Menu .. 1.5 Welcome drink will be served to all passengers of AC Classes (1A/EC 2A/3A/CC) on commencement of the journey. However, whenever the Breakfast is followed immediately after Welcome drink then Frooti, the tetrapack drink hitherto being provided alongwith Breakfast will not be served. In case of service of subsequent Breakfast during any journey, drink/Aerated Drinks/Chhach/Lassi/in tetra pack will continue to be served. 19. A careful perusal of the 2.1 of the tender would show, that the service provider (i.e., the respondent) was required to provide catering services free of cost, as per the menu and instructions contained in CC 32/2014. 20. Furthermore, the sector wise catering services, that were to be provided to the passengers were outlined in annexure-E of the tender. Quite clearly, as found by the learned arbitrator as well, CC 32/2014 applied when composite contracts were in vogue. After 2016, admittedly, IRCTC had followed the unbundling of services model, and therefore the bidders (the respondent in this case), were required to provide sector wise catering services to the passengers. 20. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by IRCTC till 04.07.2018 28. The learned arbitrator, while ruling in favour of the respondent, concerning the provisioning of a welcome drink by the respondent has observed the following: 18.3. It is clear that the initial period of contract for 6 months had commenced from 19th December 2016 and the welcome drink continued to be provided by the Railways, duly served to the passengers by the claimant, from 19th December 2016. This issue was raised for the 1st time by the respondent by the letter dated 7th February 2017 10th February 2017. And the claimant started serving the welcome drink from its own resources. After the letter dated 02nd March 2017 subject of course to the condition that the claimant would be charging for the supply of welcome drink and wet tissue. This was based on the contention that welcome drink did not form part of the tender document and therefore it was not to be provided by the claimant as per the contract between the parties. 18.4. On the other hand, the respondent has contended that Railway Board Circular No. 32 of 2014 is the part of the tender document, as Annexure D. Clause 1 of Annexure D deals with Rationalisation of Menu and Cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at his own cost, he can be given, exit from the contract. Nothing has been mentioned as to what was being done during the departmental operation and before unbundling. It means, even the regional offices of the respondent were not clear as to what was to be done in this regard. Moreover, even the brands were approved on a temporary basis for service in 2A/3A/CC. Moreover, the respondent was continuing to supply the Welcome drink to be served to the passengers by the claimant. It appears that there was a presumption that the supply of Welcome drink was the responsibility of the respondent before the above policy was implemented. It also refers to the exercise to implement the Railway Board Budget announcement (2016 17) regarding unbundling of catering services. It means it was a fresh policy altogether and the same was implemented after the contract came into force. 18.8. On the one hand, the respondent contends that the welcome drink was part of the contract because the Railway Board Circular No. 32/2014 was integral part of the tender document and on the other hand, it is issuing a fresh policy in2017. Moreover, the respondent had continued to supply the welcome drink fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... welcome drink. Even in the award letter dated 06th October 2016, it is not specifically mentioned that the welcome drink was to be provided by the claimant to the passengers. Therefore, as is visible from the policy dated 07.02.2017, it was just an after-thought on the part of the respondent that the welcome drink was to be provided by the claimant from its own resources and that no payment for the same will be made to them in lieu thereof. It is just strange that while there is no specific mention about supply of the welcome drink by the claimant, yet it intended to force upon the claimant, to supply the same through its policy dated 07.02.2017, and that too without any payment of charges in lieu thereof. It. is not understood as to how the claimant is supposed to provide any service without payment of any charges. Therefore, it is not feasible to agree to the argument of the respondent that the supply of the welcome drink was part of the contract and the claimant was expected to provide the same free of any charges and when it failed to provide the same to the passengers, the respondent was forced to provide the same from its own is resources. 18.12. It is surprising that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Mr Majithia also brought to our notice, the fact, that between 01.07.2017 and 31.03.2018, GST on food production charges was to be paid at the rate of 18%, and that after 01.04.2018, the GST rate fell to 5%. 33. In sum, as per Mr Majithia, the rate fixed for meals supplied by the respondent, whenever there was a shortfall, was inclusive of taxes. Therefore, according to Mr Majithia, Rs. 84/- per meal which was payable to the respondent, was inclusive of taxes, and over and above this, the respondent was required to be paid service charges for serving the meal to the passengers. 33.1 In support of this plea, our attention was drawn to the policy framework captured in IRCTC s letter dated 07.02.2017, and the correspondence which was exchanged between the parties. 33.2 In particular, reference was made to letters dated 10.02.2017, 06.04.2017 and 12.04.2017. Mr Majithia submitted, that the respondent, via letter dated 12.04.2017 accepted the changes brought about on 07.02.2017. 34. According to us, insofar as reimbursement of taxes deposited by the respondent is concerned, the same is governed by CC 32/2014 and CC 44/2017 as correctly noticed by the learned arbitrator. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blishes proof of payment of same, seems completely untenable. 41. GST is a central tax, whereas VAT is a local tax, which various states would have levied at the relevant time, when the 2017 Act had not been enacted. It appears, that because the VAT rates varied from state to state, production charges were made inclusive of tax at the relevant point in time. Since VAT, amongst other taxes, stands repealed, the respondent, rightly claims, that it should be reimbursed GST upon proof of payment of the same. 42. The learned arbitrator s findings, on this issue, with which we are in complete agreement, read as follows- 19.15. Claimant has mentioned that it is indicated towards the end of the tender document that ''Service tax is payable as per applicable rates. In this regard, the contention of the respondent is that the charges for the supply of food are inclusive of all the taxes. On the other hand, the contention of the claimant is that service tax is not included in the above charges. In para 5.1 of the CC- 32 of 2014, it is clearly mentioned that the Service Tax is to be paid separately, subject to proof of payment. In para-5.2, it is mentioned that any applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that service tax did not form part of the term inclusive of taxes. Since the GST regime has been introduced by the Central government and is applicable to the services being provided by the claimant and is not in lieu of the VAT which has since been abolished, therefore, the payment of GST on production is admissible to the claimant. Claimant is to be reimbursed GST on deposit of the same with the concerned authorities. 19.18. PW2 Nitin Goel stated in his examination in Chief that GST for the period 01st July, 2017 onwards was deposited in time with the concerned authorities and the same was intimated to the respondent. 19.19. It is interesting to note that RWI, in his cross-examination was confronted with the GST challan forms, and he admitted that the GST to the claimant was paid on the basis of said challans. He further admitted that invoices uploaded in GSTR1 by claimant are reflected in GSTR2 to the respondent and that payment to the claimant was made on the basis of verification of the records submitted by the claimant and also GSTR1. RWI further admitted that respondent did not pay GST amount on the production charges as claimed by claimant. 19.20. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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