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TMI Blog2024 (10) TMI 1134X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioners to have defended the same in which they were successful - It was a Notice/Order issued for payment of service tax on the premise that NCA attracted the service tax. The Notice may have been found to be not sustainable by CESTAT, but in no way can the respondent be held responsible for the costs incurred by the petitioners in defending the said Notice/Order before the CESTAT. The overhead costs, expenses and interest on the overdraft to garner money for pre Appeal deposit may have been borne by the petitioners as the Notice was in their name, and under no law can the incurred expenses be fastened on the respondent. Furthermore, the specific challenge was to the Notice/Order vide which the Service Tax was sought to be imposed upon the petitioners, which was not leviable in the first instance. In view of erroneous Notice in the name of the Petitioners, it was only they who had to defend themselves from imposition of the Service Tax. The costs incurred for challenging. The Notices was specific to the petitioners and they cannot transpose their liability on the respondents - It cannot be overlooked that in the Agreements, in was specifically mentioned that the service Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as ABCL ) having its manufacturing unit at Chandigarh Road, Rajpura, District Patiala. The petitioners entered into a Non-Compete Agreement dated 10.02.2012 (hereinafter referred to as NCA ) read with Business Transfer Agreement dated 21.12.2011 (hereinafter referred to as BTA ), which may collectively be referred to as the Agreements . The petitioner Nos. 1, 2 and 3 received a sum of Rs. 17,00,00,000/-, Rs. 15,00,00,000/- and Rs. 15,00,00,000/- respectively from the respondent as Non-Compete Fee under the NCA, by virtue of which the entire edible oil business of ABCL, a going concern on an as is where is basis, was transferred as a whole to the respondent, for a total consideration of Rs. 220,00,00,000/-. 3. After the execution of the Agreements, Notices for Indirect Tax enquiries and demands were issued. Although in the terms of the NCA read with the BTA, all Taxes except Direct Taxes were agreed to be the responsibility of the respondent, it breached the Agreements by refusing to shoulder the responsibility under the Notice despite their undertakings in the Agreements. 4. The petitioners being the named recipients of the Non-Compete fee, had no option but to challenge the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onger required in view of the Order dated 01.01.2018 of CESTAT, was extraneous to the terms of reference. The Tribunal failed to appreciate that the question of chargeability of Service Tax was not before the Tribunal and the decision of the CESTAT had no bearing to the contractual understanding between the parties as to who should shoulder the indirect taxes. 9. The impugned Award records in paragraph 12 that neither the claimants nor the respondent is liable to pay service tax with respect to the amounts paid to the claimants under the NCA and in so observing, the Tribunal exceeded its scope of reference. The impugned Award is in contravention of the Fundamental Policy of Indian law and has caused undue enrichment of the respondent on account of the failure by the Arbitral Tribunal, to adjudicate the real Claims between the parties. Consequently, the petitioners have been rendered remediless. The legitimate claims made by the petitioners with regard to the costs of defending and challenging the demand of Service Tax has been ignored; had the petitioners not challenged the demand of Service Tax, it would have resulted in confirmation of the demand for Service Tax on the Non-Compet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d beyond doubt, the authenticity of the costs incurred by them. The parties had agreed that since the detailed evidence was led in the Arbitration arising out of the same cause of action/transaction in the BTA, oral evidence need not be recorded in the proceedings and that the matter be decided on the basis of material placed on record. The learned Tribunal itself had passed the Procedural Order contained in the e-mail dated 29.10.2016 noting that no oral evidence needs to be led in the matter. Therefore, admittedly the Tribunal ought to have decided the disputes on the basis of documents filed during the course of the arguments. The impugned Award is, therefore, not only ex facie illegal but also is in conflict with the basic notion of justice as despite details and supporting documents being available on the record, the Tribunal failed to appreciate or even record the same. 13. The Application under Section 23 (3) of the Act has been erroneously dismissed despite the fact that it was filed well during the pendency of the arbitral proceedings as well as before passing of the Arbitral Award. The learned Tribunal even held a hearing on the said Applications and took written synopsis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the Petition, which could satisfy the grounds as set out in Section 34(2) of the Act. 18. The respondent has admitted entering into a BTA dated 21.12.2011 and NCA dated 10.02.2012 with the petitioners. It is asserted that the learned Tribunal has rightly taken into consideration the Order dated 01.01.2018 of CESTAT, which had allowed the Appeal filed by the petitioners challenging the assessment Orders dated 08.05.2015, passed by the Assessing Officer, Central Excise Commissionerate, Chandigarh-II, directing the petitioners to pay the assessed service tax along with penalty and interest to the tune of INR 9,68,50,00,/- pursuant to the execution of the Non-Compete Agreement. The CESTAT had held that Service Tax is not leviable in respect of the transaction entered into between the parties. As levy of Service Tax was the sole reason for initiation of the Arbitration against the respondent and it is conclusively held that the petitioners are not liable for any Service Tax, the petitioners suffered no damnification. The Tribunal after coming to the conclusion that no evidence has been led by the petitioners to establish their Claim, rightly dismissed the Application under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The petitioners have deliberately refused to acknowledge that the rights and obligations of the parties, were governed by the two Agreements and that these two Agreements were independent; the terms of BTA could not be read into Non-Compete Agreement. Had the parties contemplated that the Service Tax obligation would be on the respondent; it would have been so expressly provided in the Non-Compete Agreement. There is no such stipulation regarding the obligation to pay tax in the Non-Compete Agreement. The petitioners are not entitled to re-agitate the same submissions before the Tribunal in view of the CESTAT Order holding that no Service Tax was payable, and the interpretation of the BTA and the NCA was not required. 21. The respondent has summarised in its Reply and submissions before the Tribunal that as per the provisions of BTA and NCA, there was no liability of the respondent, to bear the Service Tax Liability. The petitioners, by way of the present Petition, has sought to reagitate the merits of the case without establishing the applicability of any of the grounds provided under Section 34(2) of the Act, to challenge the Award. It is thus, contended that the Petition is l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Defence that the invocation of Arbitration by the petitioners was improper and unsustainable as there existed no cause of action. The petitioners had thus written Letter dated 01.06.2013 to Superintendent (Preventive) Central Excise Commissionerate, Chandigarh-II that prior to 01.06.2012, the Service Tax was not leviable on the amounts charged as Non-Compete Fees since the same was received on 10.02.2012 by the petitioners. This contention of the petitioner, has been upheld in the CESTAT Order. The defence taken by the respondent was that it was agreed position between the claimants and the respondent that the Non-Compete Agreement would not attract the service tax under the prevailing laws as on 12.02.2012. This was taken into consideration in the CESTAT Order and therefore, the Order was significant to be considered while adjudicating the Claims by the Arbitrator. The petitioner had falsely claimed in the Rejoinder that the respondent was liable to pay Service Tax on account of the demand raised by the Tax authorities. However, since no tax was leviable on the Non-Compete Agreement, the petitioners had erroneously claimed in its Rejoinder that as per the terms of the BTA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -deposit amount, did not survive. The petitioners, therefore, cannot now assail the Award of the Tribunal on the ground that the CESTAT Order is beyond the scope of reference of the dispute. 29. It is further asserted that the petitioners have erroneously sought setting aside of the Arbitral Award on the ground that the Application under Section 23 (3) of the Act, 1996 had been dismissed without assigning any reasons. The Applications were devoid of merit and had been opposed by the respondents. The learned Tribunal while dismissing these Applications had observed that the claimants had not established by evidence that the amounts claimed represented the expenses incurred in pursuing the proceedings relating to the Service Tax matter. While assailing these observations, the petitioners are deliberately ignoring the settled position of law that the Arbitrator is the ultimate master of the quality and quantity of the evidence to be relied when he delivers the Arbitral Award. The petitioners cannot now assail the Tribunal finding by requiring this Court to re-assess or re-appreciate the documents furnished by the petitioners before the Tribunal. 30. Without prejudice, it is further cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Applications under Section 23 (3) had been filed without obtaining the leave of the Tribunal, after the completion of final arguments. 34. The respondent has further asserted that as per the terms of BTA and Non-Compete Agreement, it was not liable to bear the Service Tax liability. The BTA is a Slump Sale as defined under Section 2 (42C) of the Income Tax Act, 1961. The Acquired Business had been purchased by paying a lump sum consideration and no individual value had been assigned to the assets or liabilities. Although, the Non-Compete Agreement formed part of the Transaction Documents as listed in Schedule 14 of the BTA, it was a completely separate and independent document governed by and enforceable as per its own provisions. It is a comprehensive document in itself and as per Clause 7.1, constituted an entire Agreement between the parties. Clauses 1.1 and 11 of the NCA read with Clauses 24.7 and 3.4 of the BTA, makes it evident that there was no understanding and/or contractual Agreement between the parties, under either of these Agreements to fasten any liability on the respondent to pay the impugned Claim/Service Tax. 35. Likewise, Clause 24.7 of the BTA, does not fasten an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raneous considerations and is without jurisdiction (iii) The Tribunal abdicated adjudication of the disputes and gave no finding on the question of contractual liability of one or the other party under the Contracts. 39. The Award is against the legal principles and the contract between the parties. It is perverse as it overlooks the Claims of the petitioners that the Applications under Section 23 (3) of the Act, have been dismissed without application of mind. The Tribunal has disregarded its own prior Order and ignored the material evidence on record. No opportunity was granted to the petitioners, to adduce evidence on supplementary Claims, which is violative of principles of natural justice. The Award led to be undue enrichment of the respondent. 40. Learned counsel for the petitioners has argued that only issue before the Tribunal, was: who was liable to pay the Service Tax? The Claims clearly disclosed the cause of action; in fact the Petition under Section 16 of the Act was filed for the respondent to assert that the Claims of the petitioners were pre-mature, but the same was dismissed by the learned Tribunal. 41. The petitioners themselves had stated in its Written Submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther asserted that Impugned Award neglects to consider relevant clauses of Contracts and therefore is beyond jurisdiction. Reliance for the same is placed on Bharat Coking Coal Ltd. v. Annapurna Construction (2003) 8 SCC 1543 and MD, Army Welfare Housing Organization v. Sumangal Services (P) Ltd. (2004) 9 SCC 619. 46. The Petitioner has also submitted that Impugned Award is in contravention of settled legal principles and de hors the contracts between the parties, against the fundamental policy of Indian law, suffers from patent illegality and ignores its own previous orders and materials furnished and available on record. Reliance for the same is placed on Hindustan Zinc Limited v. Friends Coal Carbonization (2006) 4 SCC 445; Associate Builders v. DDA (2015) 3 SCC 49; and Ssanyong Engineering Construction Co. Ltd. v. NHAI (2019) 15 SCC 131. 47. Lastly, the Petitioner submits that the petition is not barred by limitation as Delivery of signed Arbitral Award to a Party on 01.03.2019, Petition was filed on 21.05.2019 and re-filed on 27.05.2019 after removing objections. Reliance is placed on Benarsi Krishna Committee Ors. v. Karmyogi Shelters Pvt. Ltd. (2012) 9 SCC 496. 48. Learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, the respondent asserted that it is a settled practice of courts to not pronounce upon matters which are only of an academic interest. Reliance is placed on P.H. Pandian v. P. Veldurai Anr. (2013) 14 SCC 685; Harsharan Verma v. Charan Singh Ors. (1985) 1 SCC 162; Central Areca Nut Cocoa Marketing Processing Cooperative Ltd. v. State of Karnataka Ors. (1997) 8 SCC 31; K.N. Rajakumar v. V. Nagarajan and Ors. (2022) 4 SCC 617 . Reliance was also placed on Life Insurance Corporation of India and Anr. v. Ram Pal Singhy Bisen (2010) 4 SCC 491 to assert that mere filing or exhibiting of a document does not dispense with its proof. 51. Submissions heard and the record along with the written submissions perused. 52. A Nil Award has been given by the learned Arbitrator. A Show Cause Notice dated 22.10.2014 was issued by the Ld. Principal Commissionerate, Chandigarh-II and subsequently Assessment Order was passed on 08.05.2015 levying the service tax on the petitioners on the NCA. 53. The petitioners have asserted that they are not liable to pay the amount towards the Service Tax as claimed by the Notice and, in fact, after the BTA and NCA, the liability if any arose under these two A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainable by CESTAT, but in no way can the respondent be held responsible for the costs incurred by the petitioners in defending the said Notice/Order before the CESTAT. The overhead costs, expenses and interest on the overdraft to garner money for pre Appeal deposit may have been borne by the petitioners as the Notice was in their name, and under no law can the incurred expenses be fastened on the respondent. 61. Furthermore, the specific challenge was to the Notice/Order vide which the Service Tax was sought to be imposed upon the petitioners, which was not leviable in the first instance. In view of erroneous Notice in the name of the Petitioners, it was only they who had to defend themselves from imposition of the Service Tax. The costs incurred for challenging. The Notices was specific to the petitioners and they cannot transpose their liability on the respondents. 62. It cannot be overlooked that in the Agreements, in was specifically mentioned that the service Tax is not leviable on NCA fees. For the erroneous acts of the third party, the respondent can definitely not be held liable for the costs incurred in defending the Notices before CESTAT. 63. In the written arguments and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the service tax on NCA is leviable or not falls within the jurisdiction of CESTAT, which got decided by the CESTAT as not liable to be imposed on the NCA fees. Before the learned Arbitrator, the petitioners had sought avoidance of payment of the Service Tax on the ground that liability if any, is that of the respondent. Therefore, it cannot be said that the Tribunal committed any error on the face of record by relying on the Order of the CESTAT quashing the Demand Notice. Once the demand itself was held to be not sustainable, the question of who is liable to pay this purported/ proposed Service Tax became academic, as rightly observed but the Arbitral Tribunal. 69. The scope of a challenge under Section 34 of the Act, 1996 is limited to the grounds stipulated therein as held in MMTC Limited v. Vedanta Ltd, (2019) 4 SCC 163. Comprehensive judicial literature on the scope of interference on the ground of Public Policy under Section 34 was postulated in Associate Builders vs. DDA, (2015) 3 SCC 49. The Apex Court placed reliance on the judgment of ONGC v. Saw Pipes, 2003 (5) SCC 705 to determine the contours of Public Policy wherein an award can be set aside if it is violative of The f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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