Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.3905 OF 2012
(Arising out of SPECIAL LEAVE PETITION (CIVIL) NO. 17943/2008)
Rashtriya Ispat Nigam Limited … Appellant
Versus
M/s Dewan Chand Ram Saran … Respondent
J U D G E M E N T
H.L. Gokhale J.
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 Petition of the respondent against the appellant
herein.
3. The questions involved in this appeal are two-fold, (i)
firstly, whether under the relevant clause 9.3 of the terms and conditions
of the contract between the parties, the appellant was right in deducting
the service tax from the bills of the respondent and, (ii) secondly,
whether the interpretation of this clause and the consequent award rendered
by the arbitrator was against the terms of the contract and therefore
illegal as held by the High Court, or whether the view taken by the
arbitrator was a possible, if not a plausible view.
The contract and the relevant clause:
4. The appellant – a Govt. of India undertaking is engaged in the
manufacture of steel products and pig-iron for sale in the domestic and
export markets. The respondent is a partnership firm carrying on the
business of transportation of goods. In the year 1997, the appellant
appointed the respondent as the handling contractor in respect of
appellant’s iron and steel materials from their stockyard at Kalamboli,
Navi Mumbai. A formal contract was entered into between the two of them on
17.6.1998. ‘Terms and conditions for handling of iron and steel materials’
though recorded in a separate document, formed a part of this contract.
Clause 9.0 of these terms and conditions was concerning the payment of
bills. Clause 9.3 thereof read as follows:-
“9.3. The Contractor shall bear and pay all taxes, duties
and other liabilities in connection with discharge of his obligations
under this order. Any income tax or any other taxes or duties which
the company may be required by law to deduct shall be deducted at
source and the same shall be paid to the Tax Authorities for the
account of the Contractor and the Company shall provide the Contractor
with required Tax Deduction Certificate.”
Evolution of service tax:
5. Service Tax was introduced for the first time under
Chapter V of the Finance Act, 1994. Section 66 of the Act was the charging
section and it provided for the levy of service tax at the rate of five per
cent of the value of the taxable services. “Taxable service” was defined
in Section 65 to include only three services namely any service provided to
an investor by a stockbroker, to a subscriber by the telegraph authority,
and to a policy-holder by an insurer carrying on general insurance
business. Section 68 required 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,
connected with clearing and forwarding operations in any manner to any
other person and includes a consignment agent;
***
(17) ‘goods transport operator’ means any commercial concern
engaged in the transportation of goods but does not include a courier
agency;”
7. The service tax was brought into force on 5.11.1997 vide
Notification No.44/77 with effect from 16.11.1997. Consequent thereupon,
the appellant deducted 5% tax on the bills of the respondent for the period
30.11.1997 to 6.8.1999. The respondent, however, refused to accept the
deductions, and raised a dispute for arbitration under clause 15 of the
terms and conditions mentioned above. This dispute was referred for the
arbitration of a sole arbitrator, a retired Judge of the Delhi High Court.
8. Rules 2 (xii) and 2 (xvii) of the Service Tax Rules, 1994 as
amended in 1997 made the customers or clients of clearing and forwarding
agents and of goods transport operators as assesses. These amended rules
were challenged and were held ultra vires the Act by this Court in Laghu
Udyog Bharati vs. Union of India reported in 1999 (6) SCC 418. The Court
examined the provisions of the Act and particularly Section 68 and the
definition of “person responsible for collecting the service tax” in
Section 65(28) and in terms held in paragraph 9 that “the service tax is
levied by reason of the services which are offered. The imposition is on
the person rendering service.”
9. To overcome the law laid down in Laghu Udyog Bharati (supra),
the Finance Act 2000 brought in an amendment on 12.5.2000 (effective from
16.7.1997) in the manner indicated in Section 116 which reads as follows:
“116. Amendment of Act 32 of 1994. — During the period
commencing on and from the 16th day of July, 1997 and ending
with the 16th day of October, 1998, the provisions of Chapter V
of the Finance Act, 1994 shall be deemed to have had effect
subject to the following modifications, namely—
(a) in Section 65,—
(i) for clause (6), the following clause had been
substituted, namely—
‘(6) “assessee” means a person liable for collecting the
service tax and includes—
(i) his agent; or
(ii) in relation to services provided by a clearing and
forwarding agent, every person who engages a clearing and
forwarding agent and by whom remuneration or commission (by
whatever name called) is paid for such services to the said
agent; 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.’;
(c) in Section 67, after clause (k), the following clause had been
inserted, namely—
‘(k-a) in relation to service provided by goods transport operator to
a customer, shall be the gross amount charged by such operator for
services in relation to carrying goods by road in a goods carriage and
includes the freight charges but does not include any insurance
charges’.”
Proceedings prior to this appeal:
10. The respondent contended before the learned arbitrator that its
dominant work was of transporting and forwarding of goods by road, and not
of a handling contractor, and that the mere fact that it may be required to
handle the goods in a manner and to the extent provided in the contract
between the parties, was merely incidental. The learned arbitrator,
however, noted that the contract between the parties dated 17.6.1998
referred the respondent as the ‘handling contractor’, who shall undertake
the job of handling iron and steel materials at the yard of the company on
the terms and conditions stipulated therein as also in the manner and in
all respects as mentioned in the contract. He referred to the notice
inviting tender, the declaration of particulars relating to the tender, the
schedule of rates, the provision relating to scope of work and the
obligations of the contractor detailed in clause 6. In that connection,
he referred to the letter dated 27.11.1997 received from the office of
Commissioner of Central Excise, Chennai wherein he had also held the work
of the handling contractor as that of the clearing and forwarding agent
liable to pay service tax. The arbitrator therefore held that the
respondent was forwarding and clearing contractor.
11. Thereafter, he dealt with the question of liability to pay the
service tax, and by a detailed award dated 25.5.2004 rejected the
contentions of the respondent and dismissed the Claim Petition. In the
penultimate paragraph, the learned arbitrator held as follows:-
“Clause 9.3 of the Tender Terms and Conditions of the Contract,
to my mind is clear & unambiguous. Thus it is the Respondent who is
the assessee. It is also true that liability is of the Respondent to
pay the tax. But then, under the contract, under clause 9.3 to be
more precise, it was agreed that it would be the claimant who shall
bear “all taxes, duties and other liabilities” which accrue or become
payable “In connection with 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 & 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
& 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 the assessee who is liable under the law to pay the taxes to a
person who is not liable to pay the taxes under the law. In my
opinion, the award therefore suffers from total non-application of
mind and therefore, it is required to be set aside.”
13. The appellant preferred an appeal to a Division Bench of Bombay
High Court against the said judgment and order. The appeal was numbered as
Appeal No. 188/2006. The Division Bench dismissed the appeal by holding as
follows:
“16. ……..As noted, the Respondents are not “Assessee” under the
Service Tax Act. The Appellants are, being recipients, resisted and
have filed the return. It is, therefore, the appellant’s obligation
to pay the Service Tax and not that of the Respondents, there is no
specific clause that such service tax, liability would be deductible
from the amount payable by the Appellants to the Respondent pursuant
to the contract in question. The deduction as claimed and as directed
by the award in absence of any agreement or clause, therefore, is not
correct.”
14. Being aggrieved by the said judgment and order, the present
appeal has been filed. Mr. S. Ganesh, learned Senior Counsel has appeared
for the appellant, and Mr. K.K. Rai, learned Senior Counsel has appeared
for the respondent.
Submissions on behalf of the appellant:
15. As stated at the outset, the question involved before the
arbitrator and in the offshoots therefrom, is with respect to
interpretation of the above referred clause No.9.3. Mr. Ganesh, learned
counsel for the appellant submitted that the entire purpose in providing
this clause was to provide that the contractor will be responsible for the
taxes, duties and the liabilities which would arise in connection with
discharge of the obligations of the contractor. The obligations of the
contractor were laid down in clause 6.0 of the terms and conditions,
referred to above. This clause provides the details of contractor’s
responsibility for clearance of the consignments of the appellant. The
liability to pay the service tax arises out of the service provided by the
respondent. There is no dispute that in view of the above referred
amendment of 2000, the appellant as the recipient of the service is the
assessee under the service tax law. However, there is no prohibition in
the law against shifting the burden of the tax liability. In the instant
case, the tax liability 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 the arbitrators, therefore, clearly
related to the interpretation of the terms of the contract. The said
contract was being read by the parties differently. The arbitrators
were, therefore, clearly called upon to construe or interpret the
terms of the contract. The decision thereon, even if it be erroneous,
cannot be said to be without jurisdiction. It cannot be said that the
award showed that there was an error of jurisdiction even though there
may have been an error in the exercise of jurisdiction by the
arbitrators.”
17. It was also submitted by the learned counsel that the court is
not expected to substitute its evaluation of the conclusion of law or fact
arrived at by the arbitrator and referred to the following observation in
paragraph 31 in M/s Sudarsan Trading Co. vs. Govt. of Kerala reported in
[1989 (2) SCC 38].
“…………in the instant case the court had examined the different
claims not to find out whether these claims were within the disputes
referable to the arbitrator, but to find out whether in arriving at
the decision, the arbitrator had acted correctly or incorrectly.
This, in our opinion, the court had no jurisdiction to do, namely,
substitution of its own evaluation of the conclusion of law or fact to
come to the conclusion that the arbitrator had acted contrary to the
bargain between the parties.……….”
Submissions on behalf of the respondent
18. Learned senior counsel for the respondent Mr. Rai, on the other
hand, submitted that the concerned clause cannot be read to imply a right
to shift the tax liability. He submitted that the appellant was the
assessee for the payment of service tax, and the concerned clause merely
laid down that the contractor will have to pay all taxes, duties and other
liabilities which he was otherwise required to pay if they arise in
connection with discharge of his obligations under the contract. The
appellant was entitled to deduct only the income tax and other taxes or
duties which it was so required by law to deduct. The disputed deductions
would mean that the contractor had taken over the tax liability of the
appellant as if the liability was on the contractor. He referred to the
judgment of this Court in Gujarat Ambuja Cements Ltd. vs. Union of India
reported in [2005 (4) SCC 214]. This judgment discusses the evolution of
the service tax as to how service tax was introduced by the Finance 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 judgment of this Court in Bank
of India vs. K. Mohan Das reported in [2009 (5) SCC 313] by one of us
(Lodha, J.). The issue in that matter was with respect to the
interpretation of some of the provisions of the voluntary retirement scheme
of 2000 of the appellant bank. In paragraph 32 thereof this Court has
observed as follows:-
“….32. The fundamental position is that it is the banks who
were responsible for formulation of the terms in the contractual
Scheme that the optees of voluntary retirement under that Scheme
will be eligible to pension under the Pension Regulation, 1995,
and, therefore, they bear the risk of lack of clarity, if any.
It is a well-known principle of construction of a contract that
if the terms applied by one party are unclear, an interpretation
against that party is preferred (verba chartarum fortius
accipiuntur contra proferentem).”
Based on this paragraph, it was submitted that the arbitrator was
bound to follow the principle of contra proferentem in the present case.
It was contended that since the propounder of the contract was the
petitioner in case of vagueness, the rule of contra proferentem will have
to be applied in interpreting the present contract. Therefore, the
liability to pay service tax was on the appellant as the assessee, and it
could not be contended that under Clause 9.3 that liability was accepted by
the respondent. The judgment in Bank of India (supra) was also pressed
into service to submit that clause 9.3 and the contract must be read as a
whole, and an attempt should be made to harmonise the provisions.
21. It was submitted by the respondent that this Hon’ble Court very
succinctly summarised the legal principles for setting aside an award in
SAIL vs. Gupta Brother Steel Tubes Ltd. (by one of us – Lodha J.) reported
in [2009 (10) SCC 63] in paragraph 18 wherefrom principles (i) and (iv)
would be attracted. As against that, the appellant stressed sub-paras (ii)
& (vi) of the same paragraph 18. We may therefore quote the entire
paragraph which reads as follows:-
“….18. It is not necessary to multiply the references. Suffice
it to say that the legal position that emerges from the decisions o
this Court can be summarised thus:
i) In a case where an arbitrator travels beyond the contract,
the award would be without jurisdiction and would amount to
legal misconduct and because of which the award would 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 counsel. If
we see the evolution of the service tax law, initially the liability to pay
the service tax was on the service provider, though it is now provided by
the amendment of 2000 that the same is on the person who avails of the
service. It is relevant to note that the agreement between the parties was
entered into on 7.6.1998. The appellant had deducted 5% service tax on the
bills of the respondent for the period 30.11.1997 to 6.8.1999 which in fact
it was required to deduct under the service tax law as it then stood.
Subsequently, by the amendment of the definition of assessee effected on
12.5.2000 (though retrospectively effective from 16.7.1997) the liability
to pay the service tax was shifted to the person who was availing the
service as the assessee. We must note that it is thereafter that the
parties have gone for arbitration, and the respondent has relied upon the
changed definition of assessee to contend that the tax liability was that
of the appellant.
23. We are concerned with the question as to what was the intention
of the parties when they entered into the contract on 7.6.1998, and how the
particular clause 9.3 is to be read. Since clause 9.3 of the contract
refers to the liabilities of the contractor in connection with discharge of
his obligations, one will have to refer to clause 6 of the “Terms and
Conditions for Handling of Iron and Steel Materials of RINL, VSP” which was
an integral part of the contract between the petitioner and the respondent,
and which was titled “Obligations of the Contractor”. 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.
24. If we look into this clause 6.0, we find that the obligations
of the contractor are defined and spelt out in minute details. Clause 6.0
is split into 33 sub-clauses, and it provides for obligations of the
contractor in various situations concerning the clearance of consignments,
and the services to be provided by the respondent as the handling
contractor wherefrom the tax liability arises. The contractor is made
responsible for pilferage, any loss or 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 far as the submission of shifting of tax liability is
concerned, as observed in paragraph 9 of Laghu Udyog Bharati (Supra),
service tax is an indirect tax, and it is possible that it may be passed
on. Therefore, an assessee can certainly enter into a contract to shift
its liability of service tax. Though the appellant became the assessee due
to amendment of 2000, his position is exactly the same as in respect of
Sales Tax, where the seller is the assessee, and is liable to pay Sales Tax
to the tax authorities, but it is open to the seller, under his contract
with the buyer, to recover the Sales Tax from the buyer, and to pass on the
tax burden to him. Therefore, though there is no difficulty in accepting
that after the amendment of 2000 the liability to pay the service tax is on
the appellant as the assessee, the liability arose out of the services
rendered by the respondent to the appellant, and that too prior to this
amendment when the liability was on the service provider. The provisions
concerning service tax are relevant only as between the appellant as an
assessee under the statute and the tax authorities. This statutory
provision can be of no relevance to determine the rights and liabilities
between the appellant and the respondent as agreed in the contract between
two of them. There was nothing in law to prevent the appellant from
entering into an agreement with the respondent handling contractor that the
burden of any tax arising out of obligations of the respondent under the
contract would be borne by the respondent.
27. If this clause was to be read as meaning that the respondent
would be liable only to honour his own tax liabilities, and not the
liabilities arising out of the obligations under the contract, there was no
need to make such a provision in a bilateral commercial document executed
by the parties, since the respondent would be otherwise also liable for the
same. In Bank of India (supra) one party viz. the bank was responsible for
the formulation of the Voluntary Retirement Scheme, and the employees had
only to decide whether to opt for it or not, and the principle of contra
proferentem was applied. Unlike the VRS scheme, in the present case we are
concerned with a clause in a commercial contract which is a bilateral
document mutually agreed upon, and hence this principle can have no
application. Therefore, clause 9.3 will have to 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 one. It is not possible to say that the arbitrator had
travelled outside his jurisdiction, or that the view taken by him was
against the terms of contract. That being the position, the High Court had
no reason to interfere with the award and substitute its view in place of
the interpretation accepted by the arbitrator. The legal position in this
behalf has been summarized in paragaph 18 of the judgment of this court in
SAIL vs. Gupta Brother Steel Tubes Ltd. (supra) and which has been referred
to above. Similar view has been taken later in Sumitomo Heavy Industries
Ltd. vs. ONGC Ltd. reported in [2010 (11) SCC 296] to which one of us
(Gokhale J.) was a party. The observations in paragraph 43 thereof are
instructive in this behalf. This paragraph 43 reads as follows:
“43. ………The umpire has considered the fact situation and placed
a construction on the clauses of the agreement which according to him
was the correct one. One may at the highest say that one would have
preferred another construction of Clause 17.3 but that cannot make the
award in any way perverse. Nor can one substitute one's own view in
such a situation, in place of the one taken by the umpire, which would
amount to sitting in appeal. As held by this Court in Kwality Mfg.
Corpn. v. Central Warehousing Corpn*. The Court while considering
challenge to arbitral award does not sit in appeal over the findings
and decision of the arbitrator, which is what the High Court has
practically done in this matter. The umpire is legitimately entitled to
take the view which he holds to be the correct one after considering
the material before him and after interpreting the provisions of the
agreement. If he does so, the decision of the umpire has to be accepted
as final and binding.”
*[2009 (5) SCC 142]
30. In view of what is stated above, 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. The
appellant could not be faulted for deducting the service tax from the bills
of the respondent under clause 9.3, and there was no reason for the High
Court to interfere in the view taken by the arbitrator which was based, in
any case on a possible interpretation of clause 9.3. The learned single
Judge as well as the Division Bench clearly erred in interfering with the
award rendered by the arbitrator. Both those judgments will, therefore,
have to be set-aside.
31. Accordingly, the appeal is allowed and the impugned judgments of
the learned Single Judge as well as of the Division Bench, are hereby set
aside. The award made by the arbitrator is upheld. The parties will bear
their own costs.
…………..……………………..J.
[ R.M. Lodha]
…………………………………..J.
[ H.L. Gokhale ]
New Delhi
Dated : 25th April, 2012
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