O R D E R
% 14.09.2026 This matter is being taken up today as 11.09.2026 was declared holiday on account of BRICS Summit.
MANMEET PRITAM SINGH ARORA, J.
FAO(OS)(COMM)- 130/2026
1. The present appeal has been filed under Section 37 of the Arbitration and Conciliation Act, 1996 ['Act'], assailing the judgment and order dated 23.02.2026 passed by the learned Single Judge in OMP(COMM) No. 451 of 2023 ['impugned judgment'], whereby the Appellant's objections under Section 34 of the Act were dismissed and the arbitral award dated 02.05.2023,
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as modified by order dated 07.07.2023, was upheld.
1.1. The dispute pertains to the award of INR 1,40,38,523/- in favour of the Respondent along with interest and costs, while rejecting the contractual basis of the deduction of the said amount as alleged by the Appellant, from the invoices.
2. During the arguments, Mr. Jayant Mehta, learned senior counsel for the Appellant has only pressed for the issues on limitation and waiver, estoppel or acquiescence [i.e., issue nos. 1 and 2] and on deduction of shortfall of minimum CENVAT credit [i.e., issue no. 4]. No other issues were pressed by the learned senior counsel.
FACTS IN BRIEF
3. In 2006, the Appellant, a Public Sector Undertaking having a steel plant at Bhilai, issued a Notice Inviting Tender ['NIT'] for 'Replacement of Existing MG sets for roughing and Finishing Stand Drives Motors of Plate Mill by Digital Thyristor Converters' at its Bhilai Steel Plant ['BSP']. The Respondent, being the successful bidder, was issued the Letter of Acceptance ['LOA'].
3.1. Pursuant thereto, the parties executed a contract on 01.06.2007 ['the contract']. Under the contract, the facilities were to be installed and commissioned within 21 months and were to undergo various stages of acceptance under Clauses 24 to 28 of the General Clauses of Contract ['GCC'].
3.2. It is stated that Article 2.1 of the contract specifically incorporated a minimum CENVAT credit of INR 4,65,71,592/-, which was offered by the
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Respondent in its tender along with a Gross Contract Price of INR 44,93,20,127/-. According to the Appellant, the minimum CENVAT credit was an important consideration in evaluation of the bid and formation of the contract. The contract also contained Clause 14.6 of the GCC, providing a detailed mechanism for adjustment of the Contract Price in case of variation in taxes and duties. Such adjustment was subject to, inter alia, the timing of the tax variation, the nature of the goods affected and production of documentary evidence by the contractor.
3.3. The Respondent commenced execution of the work; however, although the contractual period was 21 months, the Commissioning Certificate was issued only on 03.08.2010 by the Appellant, after a delay of more than one year. It is stated that the Performance Guarantee Certificate ['PGC'] was issued on 23.01.2012, thereafter, the Final Acceptance Certificate ['FAC'] was issued on 24.05.2013, whereupon the contract stood concluded and the Respondent was discharged of its contractual responsibilities and liabilities.
3.4. It is stated that since the Respondent failed to complete the work within the stipulated period, Appellant imposed liquidated damages to the maximum permissible extent of 5% under the contract, which was subsequently communicated to the Respondent vide communication dated 17.05.2014. By this communication dated 17.05.2014, the Appellant also informed the Respondent of its decision to recover the shortfall in minimum CENVAT credit, however, the amount was not quantified. The Appellant asserts that the Respondent acknowledged the communication dated 17.05.2014 by its letter dated 23.05.2014 and did not object to the proposed recovery of the shortfall of minimum CENVAT credit.
We note that the levy of liquidated damages is not a subject matter of
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these proceedings. The subject matter of these proceedings is the recovery of shortfall of minimum CENVAT credit i.e. INR 1,40,38,523/- by the Appellant.
3.5. It is stated that the Respondent furnished a discharge certificate dated 09.09.2015 and an affidavit dated 09.09.2015 undertaking not to raise any further claim. According to the Appellant, the Respondent thus accepted the Appellant's position regarding recovery of the shortfall of minimum CENVAT credit.
3.6. It is stated that the Respondent raised invoices towards balance payment on 31.05.2018, more than six years after the issuance of the relevant certificates. The Appellant contended that it considered the said invoices and, after adjusting INR 1,40,38,523/- towards the alleged shortfall in the minimum CENVAT credit, paid the balance amount to the Respondent on July, 2018.
3.7. The Respondent invoked the contractual dispute resolution mechanism under Article 10.1 in 2021 and issued a conciliation notice dated 26.05.2021 for recovery of inter-alia the aforesaid amount. Upon failure of conciliation, the Respondent commenced arbitration on 28.12.2021 before the Indian Council of Arbitration ['ICA'].
3.8. In arbitration, the Respondent initially raised two claims, including the subject claim for INR 1,40,38,523/- towards recovery on account of the alleged shortfall in minimum CENVAT credit. The second claim concerning Entry Tax was subsequently withdrawn, after reconciliation, and is not a subject matter in these proceedings.
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3.9. The Appellant contested the sole claim of INR 1,40,38,523/- on merits as well as on limitation, waiver, estoppel and acquiescence. It maintained that the Respondent had failed to provide the contractually guaranteed minimum CENVAT credit to the Appellant and had never invoked Clause 14.6 of the GCC or furnished the documentary material necessary to seek any adjustment of the Contract Price on account of variation in taxes and duties.
3.10. The learned Arbitrator framed issues concerning limitation, waiver, estoppel and acquiescence, legality of the deduction of INR 1,40,38,523/- towards shortfall of minimum CENVAT credit, interest and costs.
3.11. The learned Arbitrator passed the award dated 02.05.2023, subsequently modified under Section 33 of the Act by order dated 07.07.2023 and delivered on 19.07.2023. The learned Arbitrator allowed the Respondent's claim for INR 1,40,38,523/-, rejecting the Appellant's reliance on Article 2.1 of the contract and Clause 14.6 of the GCC as well as the objection on limitation, waiver, estoppel and acquiescence.
3.12. Aggrieved by the award, the Appellant challenged the award under Section 34 of the Act in OMP(COMM) No. 451/2023. By impugned judgment dated 23.02.2026, the learned Single Judge dismissed the Appellant's Section 34 petition and upheld the arbitral award as modified.
SUBMISSIONS BY THE APPELLANT
4. In the present appeal, the Appellant principally contended that the learned Single Judge failed to give effect to Article 2.1 of the contract and Clause 14.6 of the GCC governing the minimum CENVAT credit, Contract Price and variation in taxes and duties. It is submitted that the Respondent
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failed to invoke the mechanism prescribed under Clause 14.6 of the GCC nor furnished the requisite documentary evidence to establish any tax or duty variation accounting for the alleged shortfall of minimum CENVAT credit and its effect on the Contract Price. It is further contended that the Respondent was duly informed, vide communication dated 17.05.2014, of the proposed recovery on account of the said shortfall of minimum CENVAT credit, which communication was acknowledged by it, yet no objection was raised at the relevant time. The Respondent thereafter furnished a final discharge certificate and affidavit undertaking not to raise any further claim, however, the Respondent raised its claim disputing the recovery of shortfall of minimum CENVAT credit only after the actual deduction from the final payment in 2018. According to the Appellant, the claim was therefore barred by limitation and was, in any event, hit by waiver, acquiescence and estoppel arising from the Respondent's conduct.
4.1. The Appellant submitted that the impugned judgment supplements the reasoning of the learned Arbitrator, which is impermissible in exercise of the limited jurisdiction under Section 34.
4.2. The Appellant submitted that the learned Arbitrator, while considering limitation, estoppel, waiver and acquiescence, erroneously held that limitation in respect of the minimum CENVAT credit claim commenced only upon actual deduction in July 2018, treating the amount as unquantified in Appellant's communication dated 17.05.2014. It is submitted that this finding ignores Article 2.1 of the contract and the Respondent's knowledge of the guaranteed minimum CENVAT credit and its alleged shortfall. It is contended that therefore the shortfall amount of INR 1,40,38,523/- was implicit in the communication dated 17.05.2014.
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4.3. The Appellant submitted that the learned Single Judge compounded the error in the arbitral award by holding that the final invoices were required to be submitted after obtaining NOCs from the concerned departments and that the labour-department NOC was obtained only in 2018. It is submitted that this was not even the Respondent's pleaded case and, in any event, did not explain the Respondent's prolonged silence after completion of the work in
2013.
4.4. The Appellant submitted that the learned Single Judge also erroneously held that Appellant had neither deducted nor quantified the minimum CENVAT credit shortfall in 2014. According to the Appellant, the communication dated 17.05.2014 clearly conveyed the decision to recover the shortfall, while the Respondent, having itself guaranteed the minimum CENVAT credit, was in a position to establish whether any alleged tax variation justified failure to meet the guarantee. The Respondent never objected to the decision or approached SAIL under Clause 14.6 of the GCC for refixing the Contract Price.
4.5. The Appellant submitted that the learned Single Judge could not have sustained the award by supplying a new rationale for the learned Arbitrator's failure to enforce Clause 14.6.2 of the GCC. According to the Appellant, the learned Arbitrator had treated non-compliance with the contractual requirement of evidence as non-fatal, whereas the learned Single Judge supplied an additional reasoning that the Respondent would not have been entitled to reimbursement, but Appellant could not have made the deduction. Such supplementation of the reasoning of the award, it is submitted, exceeds the limited scope of judicial review under Section 34.
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4.6. The Appellant consequently submitted that the arbitral award dated 02.05.2023, as modified on 07.07.2023, and the impugned final order dated 23.02.2026 suffer from patent illegality, non-application of mind and disregard of the contractual provisions, and are contrary to the public policy of Indian law. The Appellant therefore seeks setting aside of the impugned order as well as the arbitral award.
SUBMISSIONS BY THE RESPONDENT
5. The Respondent submitted that the learned Arbitrator correctly held that the contract did not authorise the Appellant to deduct the minimum CENVAT credit shortfall. The learned Arbitrator found that, under Clause 14.5.2 of GCC, failure to furnish the requisite documents for claiming CENVAT would result in non-reimbursement, but there was no contractual provision permitting deduction of the shortfall amount from the Respondent's dues.
5.1. The Respondent submitted that the learned Single Judge correctly held that there was no clause in the contract providing for deduction on account of shortfall in minimum CENVAT credit and that no term could be read into the contract between the parties. It was correctly held that the Gross Contract Price represented the amount payable for the work executed and was inclusive of taxes and duties, whereas minimum CENVAT credit represented reimbursement of duty actually paid and could vary depending upon factors such as variation in tax rates and prices.
5.2. The Respondent submitted that the learned Single Judge correctly observed that there was no contractual basis for deducting the minimum CENVAT credit shortfall from the invoices or Net Contract Price. Such
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deduction, in the absence of an enabling contractual provision, would amount to adding a term to the contract, which is impermissible.
5.3. The Respondent submitted that the findings of the learned Arbitrator and the learned Single Judge on limitation, contained in paragraphs 14.6 to
14.10 of the award and paragraphs 6 to 10 of the impugned judgment, also support the Respondent's case and warrant no interference.
FINDINGS AND ANALYSIS
6. We have heard the learned counsels for the parties and perused the record.
7. Vide impugned arbitral award, the learned Arbitrator held that the Respondent's claim for recovery of INR 1,40,38,523/- was within limitation and not barred by waiver, estoppel or acquiescence. The learned Arbitrator held that the deduction of INR 1,40,38,523/- made by the Appellant from the Respondent's invoices, for recovery of the alleged shortfall in the minimum CENVAT credit, was not sustainable as it was beyond the terms of the contract. Vide impugned judgment the learned Single Judge upheld the findings of the arbitral award to be in consonance with the terms of the contract and the claim of recovery to be within limitation, and not barred by waiver, estoppel or acquiescence.
8. The issue arising for our consideration in this appeal is whether the learned Single Judge failed to exercise the power conferred on him under Section 34 of the Act to interfere with the arbitral award.
9. The relevant Article i.e., Article 2.1 of the contract and Clauses 11.1, 11.2, 11.2.1, 14.5.2, 14.6.1, 14.6.2 and 14.6.3 of the GCC relied upon by the
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Appellant to assail the impugned arbitral award read as under: -
CONTRACT
"2.1 Contract Price (Reference GCC Clause 11 & Appendix-1) The Employer hereby agrees to pay to the Contractor the Contract Price in consideration of the performance by the Contractor of its obligations hereunder. The Contract Price shall be Rs.44,93,20,127/- (Forty four crores ninety three lakhs twenty thousand one hundred and twenty seven only), or such other sums as may be determined in accordance with the terms and conditions of the Contract. A minimum CENVAT amount of Rs.4,65,71,592/- (Four crores sixty five lakhs seventy one thousand five hundred and ninety two only) shall be passed on to BSP. The contractor will submit the required documents to BSP for availing CENVAT credits.
GENERAL CONDITIONS OF CONTRACT
11. Contract Price
11.1 The Contract Price shall be as specified in Article 2 (Contract Price and Terms of Payment) of the Contract Agreement. The break-up of the Contract Price is given in the Appendix-1 to the Contract Agreement.
11.2 Price Basis
11.2.1 The Contract Price shall be for the entire scope of the Facilities including spares, oils, grease, lubricants, flushing liquor, chemicals for pickling etc. required till commissioning of the Facilities, imported surplus material and scrap in any form generated in side the plant premises. The contract price shall be inclusive of all taxes and duties and comprise inter-alia of Basic price, excise duty, sales tax, VAT including sales tax/ VAT on works contract/Works Contract Tax), octroi. Turn Over Tax (TOT), Entry Tax, Service Tax, Education Cess and any other duties, taxes and levies, as may be applicable and prevailing on the base date of the contract and insurance. The payment of duties, taxes, levies, etc. will be reimbursed (on actual) against documentary evidence to be produced by the contractor, subject to a ceiling (other than Service Tax) indicated in the price schedule of the contract. In no case the reimbursement towards duties and taxes, etc., shall exceed the amount indicated in Appendix-1 towards duties, taxes, levies, etc. (other than Service Tax) except as indicated in Sub-Clause 14.6.1,
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hereof. The contract price shall not include Entry Tax for indigenous as well as imported supply, which shall be paid and borne by the Employer. The bidders may indicate the portion of supply, on which entry tax is not required to be paid by the Employer and the same shall be included in contract price. Invoice for supply of goods shall contain the following:
- Tax payer Identification Number under C.G. VAT Act. - In case of supplies manufactured within Bhilai Municipal Local Area then "Goods Sold are Local Goods" is to be endorsed. - In case of Entry Tax paid supplies, "Material is Entry Tax Prepaid" is to be endorsed.
……..
14.5 CENVAT Credit
14.5.2 The Contractor shall submit the necessary documents required by the Employer to avail the CENVAT Credit. In case the Contractor fails to submit the required document for claiming the CENVAT Credit by the Employer in respect of certain plant & equipment, the amount of Excise Duty on such indigenous plant & equipment and Counter Veiling Duty on such imported plant & equipment, shall not be paid by the Employer to the Contractor.
14.6 Variations in Taxes & Duties
14.6.1 For the purpose of the Contract, it is agreed that the 'Contract Price' specified in Article 2 ("Contract Price" & "Terms of Payment") of the Contract Agreement is based on the taxes, duties, levies and charges prevailing on Base date (hereinafter called "Tax" in this Sub-Clause 14.6 hereof). If any rate of tax is increased or decreased, a new tax is introduced, an existing tax is abolished, or any change in interpretation or application of any tax occurs in the course of the performance of Contract, which was or will be assessed on the Contractor, Sub- Contractors or their employees in connection with performance of the Contract. an adjustment of the Contract Price shall be made as per Sub- Clauses 14.6.2 & 14.6.3, hereof, by addition to the Contract Price or deduction therefrom, as the case may be.
14.6.2 The adjustment in the Contract Price towards variation in the taxes shall be made by the Employer on production of the documentary evidences by the Contractor.
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14.6.3 The Contract Price shall be adjusted towards variations in taxes in respect of only finished equipment supplied by the Contractor to the Employer. No adjustment in the Contract price shall be made for variations in the taxes on raw materials, parts, component/ intermediate components, assemblies/ sub-assemblies, etc."
[Emphasis Supplied]
I. Scope of Interference
10. The jurisdiction of this Court under Section 37 of the Act, to interfere with an arbitral award is as limited as the scope of interference permissible under Section 34 of the Act and cannot exceed beyond it. Thus, if an award is not liable to be disturbed under Section 34 of the Act, the same cannot be interfered with in exercise of powers under Section 37 of the Act. The Court hearing an appeal under Section 37 of the Act cannot undertake an independent assessment of the merits of the award and is only required to ascertain that the Court under Section 34 of the Act has acted within its limit as prescribed under the Act. The scope of jurisdiction under Section 37 of the Act is not akin to normal appellate jurisdiction.
11. The limited scope of interference by the Court in Section 37 of the Act has been recently reiterated by the Supreme Court in its recent judgment Jan De Nul Dredging India Pvt Ltd. v. Tuticorin Port Trust1. In this judgment the Supreme Court has taken note of its earlier decisions in MMTC Limited
v. Vedanta Limited2, Konkan Railway Corporation Ltd. v. Chenab Bridge Project Undertaking3, and UHL Power Company Ltd. v. State of Himachal Pradesh4. The relevant paragraphs read as under: -
29. That being the position, the award of the Arbitral Tribunal was not
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liable to be disturbed under Section 34 of the Act and was rightly not disturbed. It is settled in law that the appellate powers under Section 37 are limited to the scope of Section 34 and cannot exceed beyond it. Certainly, therefore, if an award is not liable to be disturbed under Section 34 of the Act, the same could not have been interfered with in exercise of powers under Section 37 of the Act.
………..
35. The gist of the aforesaid decisions is that the jurisdiction of the court under Section 37 of the Act is akin to the jurisdiction of the court under Section 34 of the Act, and, therefore, the scope of interference by the court in appeal under Section 37 cannot go beyond the grounds on which challenge can be made to the award under Section 34 of the Act. Moreover, the courts exercising powers under Sections 34 and 37, do not act as a normal court, and therefore, ought not to interfere with the arbitral award on a mere possibility of an alternative view.
36. In other words, the scope of interference of the court with the arbitral matters is virtually prohibited, if not absolutely barred. The powers of the Appellate Court are even more restricted than the powers conferred by Section 34 of the Act. The appellate power under Section 37 of the Act is exercisable only to find out if the court exercising power under Section 34 of the Act, has acted within its limits as prescribed thereunder or has exceeded or failed to exercise the power so conferred. The Appellate Court exercising powers under Section 37 of the Act has no authority of law to consider the matter in dispute before the Arbitral Tribunal on merits so as to hold as to whether the award of the Arbitral Tribunal is right or wrong. The Appellate Court in exercise of such power cannot sit as an ordinary court of appeal and reappraise the evidence to record a contrary finding. The award of the Arbitral Tribunal cannot be touched by the court unless it is contrary to the substantive provision of law or any provision of the Act or the terms of the agreement.
[Emphasis Supplied]
12. Thus, while examining the order passed by the Court under Section 34 of the Act, this Court while exercising jurisdiction under Section 37 of the Act cannot interfere in the arbitral award on the mere possibility of an alternative view on facts or interpretation of the contract to reverse the findings of the arbitral tribunal. Where the view adopted by the arbitral tribunal is a possible
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and plausible view of the contractual provisions and the learned Single Judge has found no ground under Section 34 of the Act warranting interference, the Appellate Court cannot substitute its own view for the view of the arbitral tribunal, merely because a different interpretation may also be possible.
13. It is in the backdrop of the aforesaid limited scope of judicial interference under Section 37 of the Act, the challenges raised by the Appellant to the impugned judgment and impugned arbitral award have to be examined in this judgment.
II. Issue Nos. 1 and 2 on limitation and waiver, estoppel or acquiescence
14. The learned Arbitrator, while deciding Issue No. 1 relating to limitation, held that the Appellant's letter dated 17.05.2014 merely stated that the shortfall, 'if any', in fulfilment of the minimum CENVAT credit would be deducted. The letter neither quantified the alleged shortfall nor indicated the amount liable to be deducted. He, therefore, held that the right to invoke arbitration could not have accrued to the Respondent until the alleged shortfall was quantified and actually deducted by the Appellant. He held that since the amount of INR 1,40,38,523/- was deducted, by the Appellant, from the Respondent's invoices on 04.06.2018 and 10.07.2018, the cause of action for invoking arbitration arose only at that stage in July 2018. He further held that, on reckoning limitation from 10.07.2018, as per record the Respondent had invoked the mandatory conciliation on 26.05.2021, followed by the invocation of arbitration on 28.12.2021, and the arbitral proceedings were consequently within limitation.
15. On Issue No. 2, concerning the Appellant's plea of waiver, estoppel and acquiescence on the basis of the discharge certificate and affidavit of
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undertaking issued in year 2015, the learned Arbitrator held that waiver could arise only where there was an intentional relinquishment of a known right, by the Respondent. He noted that the letter dated 17.05.2014 did not disclose either the quantum of the alleged CENVAT shortfall or the amount proposed to be deducted. He held that the Respondent, therefore, could not be said to have had full knowledge of the right sought to be waived. He consequently held that the principles of waiver, estoppel and acquiescence could not be invoked, much prior to the actual quantification and deduction of INR 1,40,38,523/- by the Respondent on 10.07.2018.
16. The learned Single Judge has concurred with the aforesaid findings of the learned Arbitrator and his findings are recorded at paragraph nos. 6 to 10 of the impugned judgment. In addition, learned Single Judge noted that the final invoices were raised by the Respondent, in the year 2018 after obtaining the requisite NOCs as per the terms of the contract. He noted that the NOC of the labour department was received only in 2018. He held that since the claims in the final invoices in the year 2018 were raised by the Respondent as per the Contract Price, thus, upon the deduction of INR 1,40,38,523/- by the Appellant from the said invoices, the cause of action for challenging the deduction arose in the year 2018 and not prior thereto. He held that therefore the issuance of the final discharge certificate and the affidavit of undertaking in the year 2015, would not estop the Respondent from invoking arbitration for recovery of INR 1,40,38,523/-.
17. In our considered opinion, the finding of the learned Arbitrator that the cause of action for invoking arbitration arose only in July 2018, when the amount of INR 1,40,38,523/- was deducted by the Appellant is correct and warrants no interference. Indeed, the contents of the letter dated 17.05.2014
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neither quantifies the amount of the alleged shortfall, nor raises a demand on the Respondent. It only conveys the intention of the Appellant to deduct the amount 'if any' on account of the alleged shortfall. The Appellant admittedly quantified its demand and deducted INR 1,40,38,523/- on 10.07.2018. The deduction of the Appellant on account of the alleged shortfall, on merits, has been found to be beyond the terms of the contract. Therefore, the stand of the Respondent that its cause of action arose when the inadmissible deduction was made by the Appellant on 10.07.2018 is correct as this is the effective date of recovery. In these facts, the finding on limitation returned by the learned Arbitrator in favour of the Respondent, as upheld by the learned Single Judge, merits no interference.
18. The reasons recorded by the learned Arbitrator while deciding Issue No. 2 on waiver, estoppel or acquiescence is based on its findings on Issue No. 1. He has held that since the deduction was effected in July 2018, these pleas are not maintainable for barring the claim. The learned Single Judge has opined that the reliance placed by the Appellant on discharge certificate and affidavit of undertaking issued in the year 2015 cannot bind the Respondent and estop it from challenging the deduction of INR 1,40,38,523/- made subsequently in July 2018. This additional reason recorded by the learned Single Judge at paragraph 10 for upholding the finding of learned Arbitrator on Issue No. 2 is based on admitted documents and we find no error in the said additional reason. In these facts, the finding on Issue No. 2 returned by the learned Arbitrator in favour of the Respondent merits no interference, as rightly held by the learned Single Judge.
III. Issue Nos. 4 on entitlement of Respondent to reimbursement of INR 1,40,38,523/- deducted by the Appellant, on account of the alleged shortfall in the minimum CENVAT credit.
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19. It is a matter of record that the Gross Contract Price was INR 44,93,20,127/-, which included CENVAT credit of INR 4,65,71,592/-. The Respondent had agreed to pass on the said CENVAT credit to the Appellant by furnishing all requisite documents so as to enable the Appellant to avail the CENVAT credit. Thus, the Net Contract Price after deducting the CENVAT credit payable to the Respondent was INR 40,27,48,535/-.
20. The learned Arbitrator, while deciding Issue No. 4, examined the contractual provisions governing the Contract Price and CENVAT credit, including Clause 2.1, Clause 11.2 and Clauses 14.5.2 and 14.6 of the GCC.
21. The learned Arbitrator held that the Gross Contract Price of INR 44,93,20,127/- included an amount of INR 4,65,71,592/- towards the CENVAT credit, which was to be passed on by the Respondent to the Appellant.
22. The learned Arbitrator noted that as per Clause 14.5.2 of the GCC, the Respondent was required to furnish the Appellant, with requisite documents to enable the Appellant to avail the benefit of CENVAT credit of INR 4,65,71,592/-. He held that Clause 14.5.2 of the GCC contemplated non- reimbursement of CENVAT by Appellant to the Respondent, in the absence of Respondent submitting the requisite supporting documents.
23. The learned Arbitrator held that however, the contractual clauses did not confer a right upon the Respondent to recover the shortfall of CENVAT credit by altering or reducing the Gross Contract Price.
24. The learned Arbitrator further noted that on the basis of invoices furnished by the Respondent, the Appellant had reimbursed INR
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3,25,33,069/- towards CENVAT, which indicated that the quantum of duties and taxes paid by the Respondent was known to the Appellant. He noted that there was no allegation of avoidance or evasion of duties or taxes by the Appellant against the Respondent.
25. The learned Arbitrator held that the deduction of the shortfall of CENVAT credit has to be made from the Gross Contract Price i.e., INR 44,93,20,127/-.
26. Thus, the learned Arbitrator concluded that the Appellant could not, after execution of the contract, vary the Gross Contractual Price by deducting the alleged minimum CENVAT credit shortfall from the Net Contract Price. The claim for refund of INR 1,40,38,523/- was accordingly allowed.
27. Learned Single Judge has dealt with this Claim at paragraphs 15 to 19 and 22 of the impugned order. The relevant paragraphs read as under: -
"15. It would be relevant to note that the gross contract price constituted of following items:
| S.No. |
Description |
Siemens Indian Rupees |
| 1. |
Supply of Plant & Equipment(a) Imported (FOB) (Refer Table-3) (b) Indigenous (At site) (Refer Table-4 |
36,31,01,429/- |
| 2. |
Civil Engineering Work including Supplies (Refer Table-9) |
5,82,08,460/- |
| 3. |
Storage, Handling, Erection, Commissioning, and P.G. Tests of Plant & |
2,80,10,238/- |
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|
Equipment including Erection of Refractory (Refer Table-11) |
|
| 4. |
Total contract Price (1 to 13) |
44,93,20,127/- |
| 5. |
CENVAT Credit |
4,65,71,592/- |
| 6. |
Contract Price (Net of CENVAT & VAT Credit) |
40,27,48,535/- |
16. Article 2.1 provides that the respondent shall ensure passing on the MGCC of Rs.4,65,71,592/-. The effect is that the gross contract price was Rs.44,93,20,127/- but after availing the benefit of MGCC the cost of the work for the petitioner would be Rs.40,27,48,535/- which is the net contract price after credit of CENVAT and VAT. Clause 14.5.2 provides that upon failure of the respondent to submit the required documents for claiming CENVAT there shall be no reimbursement. Albeit in the case in hand, less excise duty paid resulted in a shortfall in MGCC but for this eventuality there is no clause in the contract providing for deduction of the amount for shortfall in MGCC. There cannot be quarrel with the proposition that no clause can be read into the contract entered between the parties.
17. The contract value is an amount payable to the respondent for the work executed and is inclusive of taxes and duties. The MGCC is not a sum due for the work done but is reimbursement of duty paid which may vary consequent to several factors including variation in the rate of taxes and change in the price of items.
18. The matter needs to be considered from another angle. The gross contract value was Rs.44,93,20,127/-. After getting credit of Rs.4,65,71,592/- of MGCC, the work would cost the petitioner Rs.40,27,48,535/- (Net Contract Value). The position remained unchanged despite the shortfall in MGCC. The duty paid of Rs.3,25,33,069/- was reimbursed for which the petitioner got CENVAT credit. By not reimbursing the shortfall in MGCC the petitioner retained the balance amount of Rs. 1,40,38,523/- and the net cost of the contract remained Rs.40,27,48,535/-. In other words, for getting an MGCC of Rs.4,65,71,592/- the petitioner had to pay Rs.44,93,20,127/- but upon reimbursement of excise duty of Rs.3,25,33,069/-, the petitioner paid a sum of Rs.43,52,81,604/- i.e., Rs.1,40,38,523/- less. Consequently, the net contract price payable for
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the work done remained unaffected by the shortfall in MGCC as it was not reimbursable and the amount remained with the petitioner.
19. Whether the variation in the rate of tax resulted in shortfall in MGCC and whether such variation in respect of raw materials, components etc could lead to adjustment of contract price as per clause 14.6.1 need not be dilated upon. The arbitrator has rightly decided that shortfall in MGCC shall not be reimbursed but there cannot be deduction for shortfall in MGCC thereby rendering the reasons for shortfall to be inconsequential. For this very reason the non-compliance with clause 14.6.2. shall not be fatal to the claim of the respondent."
[Emphasis Supplied]
28. Mr. Jayant Mehta, learned senior counsel appearing on behalf of Appellant has contended that the learned Arbitrator failed to give effect to the phrase 'minimum' in Article 2.1 of the Contract Price. He stated that the recovery of INR 1,40,38,523/- by Appellant was towards the shortfall in the credit of minimum CENVAT amount of INR 4,65,71,592/- as guaranteed by the Respondent to the Appellant at the time of the formation of the contract. He stated that the interpretation of the Article 2.1, by the learned Arbitrator, renders the phrase 'minimum' otiose. He, however, fairly admits that the CENVAT amount dropped to INR 3,25,33,069/- due to reduction in the rates of duty and not due to any act or omissions of the Respondent herein. He states that in case of reduction of rate of Duty, the Respondent had to approach the Appellant for variation of the Contract Price as per Clause 14.6 of GCC, however, Respondent did not approach and the Contract Price remained unchanged and therefor the obligation to reimburse the minimum CENVAT credit remained unchanged.
29. We find no merit in the submissions of the Appellant.
30. The interpretation of the Appellant selectively reads the phrase
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'minimum' in Article 2.1 but fails to read the entire phrase which records 'minimum CENVAT amount of INR 4,65,71,592/-', and the last sentence of the said Article which reads that 'The contractor will submit the required documents to BSP for availing CENVAT credits.' A plain reading of the Article and other clauses of GCC shows that what was promised and agreed was passing on of the CENVAT credit earned by the Respondent under the contract. The Appellant's selective interpretation shows that it understood the amount of 'minimum CENVAT amount of INR 4,65,71,592/-' mentioned in Article 2.1 to be a cash discount of the Contract Price, however no such intention can be garnered from Article 2.1 and the other Clauses of the GCC or the contract.
31. Article 2.1 contemplated that the Respondent will provide the Appellant with minimum CENVAT credit of INR 4,65,71,592/-. This is because parties had estimated at the time of formation of the contract that Excise Duty and Counter Veiling Duty to this extent would be attracted and deposited with the Government.
32. The contract stipulated that Respondent would deposit Excise Duty and Counter Veiling Duty with the Government and then seek reimbursement of the said Duty from the Appellant, by furnishing the requisite documents so as to enable the Appellant to take the CENVAT credit. The sum of Excise Duty and Counter Veiling Duty which parties contemplated at the time of formation of the contract was INR 4,65,71,592/-. The Respondent agreed under the contract that it shall pass on the said CENVAT credit of INR 4,65,71,592/- to the Appellant.
33. The Appellant admits that due to the reduction of rate of Duty during
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the execution of the contract the actual Duty amount payable to the Government stood reduced from INR 4,65,71,592/- to INR 3,25,33,069/- Thus, the actual Duty deposited by the Respondent with the Government, and reimbursed by the Appellant was only INR 3,25,33,069/-. The Appellant admits that the credit of CENVAT amount of said INR 3,25,33,069/- has been duly passed on by the Respondent to the Appellant by furnishing the requisite documents.
34. This reduction of the Duty by the Government in fact led to the Appellant saving INR 1,40,38,523/- out of the Gross Contract Price of INR 44,93,20,127/-.
35. The Appellant has contended that the reasons recorded by the learned Single Judge at paragraphs 18 and 19 of the impugned order are independent reasons given by the Court for upholding the award and on this ground, it prays for interference. However, on merits the Appellant is unable to rebut the reasons recorded by the learned Single Judge for upholding the award and rejecting the Appellant's claim for justifying recovery and deduction of INR 1,40,38,523/-. We also find that the learned Arbitrator at paragraph 14.29 of the impugned award has recorded similar reasons for allowing this claim in favour of the Respondent and against the Appellant, though articulated differently.
36. The distinction drawn by the learned Arbitrator and learned Single Judge in the Gross Contract Price and the Net Contract Price is a material distinction and the reasons recorded in the arbitral award and the impugned judgment demonstrates that the Appellant has suffered no monetary loss due to the Claim 1 of INR 1,40,38,523/- being allowed in favour of the
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Respondent as the said amount was not paid by it to the Respondent in the first place. The essence of Appellant's reliance on of Article 2.1 and Clauses 11 and 14.5 and 14.6 of GCC is that Appellant expected to pay Excise Duty and Counter Veiling Duty to the extent of INR 4,65,71,592/- to the Respondent on duly raised invoices and imposed a corresponding obligation on the Respondent to pass on the said CENVAT credit to the extent of INR 4,65,71,592/-. However, the Appellant reimbursed Excise Duty and Counter Veiling Duty for an amount of INR 3,25,33,069/- and did not pay INR 1,40,38,523/-, as no demand was raised by the Respondent. Thus, the Appellant was never out of pocket of INR 1,40,38,253/- which was intended to be paid to the Respondent towards Duty at time of formation of the contract and has suffered no loss.
37. The contention or perception of the Appellant that there is a 'shortfall' is misleading. The Duty amount 'reduced' from INR 4,65,71,592/- to INR 3,25,33,069/- leading to a 'savings' of INR 1,40,38,253/- to the Appellant. The CENVAT credit earned by the Respondent under the contract was INR 3,25,33,069/- and it passed on the said credit to the Appellant. The perception of shortfall is therefore misconceived.
38. We find no perversity or patent illegality in the reasoning of the arbitral award. The learned Arbitrator has correctly interpreted the contractual provisions. The arbitral award has been passed after considering the relevant clauses of the contract. In our considered opinion, the interpretation by the arbitrator is not only plausible but in the absence of any clause providing for deduction on account of shortfall in minimum CENVAT credit, is the only possible interpretation. In our considered opinion, the interpretation proposed by the Appellant is not even a plausible interpretation. Learned Single Judge
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has rightly refrained from interfering in the award in exercise of its jurisdiction under Section 34 of the Act. The arbitral award does not warrant interference in proceedings under Section 37 of the Act.
39. For the aforesaid reasons, the present appeal is dismissed. Pending applications, if any, disposed of.
MANMEET PRITAM SINGH ARORA, J.
C.HARI SHANKAR, J.
SEPTEMBER 14, 2026/dsn/AM
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