HIGH COURT OF TRIPURA
AGARTALA
Arb. A. 11/2022
The State of Tripura ----Appellant(s)
Versus
Sri Arun Kumar Dey, Contractor ----Respondent(s)
For Appellant (s) : Mr. K. De, Addl. GA
For Respondent(s) : Mr. A. Sengupta, Advocate
THE CHIEF JUSTICE MR. APARESH KUMAR SINGH
HON’BLE
MR. JUSTICE ARINDAM LODH
HON’BLE
Order
31/01/2024
Heard learned counsel for the appellant and learned counsel for the
respondent.
The learned Commercial Court had dismissed the Civil Misc. (Arbitration)
4 of 2020 filed under Section 34 of the Arbitration & Reconciliation Act, by the
applicant, appellant herein, affirming the award by the impugned order dated
23.02.2022. The sole dispute between the parties referred for arbitration was
regarding reimbursement of the service tax by the employer on completion of
the work under Clause 42 and 42.1 of the Agreement dated 16.02.2017. The
learned Arbitrator has dealt with the issue in the following manner:
The Executive engineer also in his turn submitted the written statement to the claims of the
“
contractor. After hearing the parties the only substantial issue that could be framed in the
case is "whether the contractor is entitled to the reimbursement of the Service tax already
paid by the contractor in all the running bills." Basing on the said issue other necessary issues
are also framed as follows:
(1) Whether the Respondent is liable to re-imbursement of Rs. 36,64,013.00 to the
contractor
(2) Whether the contractor is entitled to the ’interest’ on the claimed amount of
reimbursement if the department is found at fault, if so at what rate.
ISSUE-(I)
It is evident that the contractor was cautious enough about his duties and liabilities. He
wrote letter dt. 15-2-2017 (received by the department on 16-2-17) inviting opinion of the
Executive Engineer if he had understood the meaning of Clause-42.1 of the Agreement
otherwise than the contractor had understood. No response came forth, thereby indicating
that the Executive Engineer did not differ from the ordinary meaning of the clause and was
ad-idem with the contractor. In view of that it appears that the Executive Engineer was
disputing the ’reimbursement’ of service Tax illogically and without any reasons
Now let us look at the language used in the particular clause of the Agreement which
reads as
"42. Tax included in the Bid.
The percentage/rate quoted by the contractor shall be deemed to be inclusive of the sales
and other levies, duties, royalties, cess, toll tax of central or state government, local bodies
and authorities that the contractor will have to pay for the performance of the contract. The
employer will perform such duties in in regard to the deduction of such taxes at source as per
applicable law.
…..
…..
42.1. Any Central or State sales and other taxes including VAT on completed items of works
of this Contract as may be levied and paid by the contractor shall be reimbursed by the
Department to the contractor on proof of payment to the extent indicated in Part-II of
Schedule-A."
There is no dispute that the contractor paid/deposited the due service tax. There is no
dispute either on the amount claimed to have been deposited by the contractor through
State Bank of India In addition the contractor has annexed the copies of the vouchers of
payment.
The VAT Act or Service tax rules do not payment of tax or in other words it is the exempt
the dealer from contractor who is liable to pay the Tax. The Contract clause 42 (quoted
above) also confirms it, but here the issue is different. I am to decide whether the contractor
after having paid the tax is entitled to be re-imbursed the amount already paid by him.
The word "re-imburse" does not invite more than one meaning. The word means
"repayment", i.e., "paying back" and has no other meaning Thus here the question is only to
examine whether the Service tax connected with the contract work was paid in time and
whether reimbursement was demanded by the contractor on production of the proof.
I do not find any dispute on these facts. Yet the contractor has submitted documents in
proof of the payment and the demand of the Reimbursement In this backdrop it was the duty
of the Executive engineer to immediately arrange paying back the amount which had been
paid by the contractor in connection with the construction work. On careful reading of the
Clause 42.1 of the agreement I find that the re-imbursement is to be made in terms of the
Schedule-A Part-11. But I do not find any ’Part-II’ of the Schedule-A, and hence I summoned
the Executive Engineer to produce the Part-Il document as mentioned in the Agreement.
Neither he could find it in the Agreement signed by the Parties nor any other document could
be produced to prove the existence of "Part-II" of Schedule-A. The Contractor could not
explain why he signed the agreement without verifying whether there is any document as
Part-II of the Schedule-A.
However, the fault is with the Department which drafted the Agreement, and the
contractor cannot be held responsible. The only part, which may be attributed to the
contractor is his negligence or lack of observation about the clause-42.1 of the agreement,
nothing more. Thus there is no space for the Department to dispute the claim of re-
imbursement of all taxes on proof of payment on conclusion of the work Truly speaking, the
dispute has been raised by non- reimbursement of the claim without any foundation. As the
contract Cl.42.1, in the absence of any "Part-II" of Schedule-A binds the department with
obligation to pay back the service tax already paid by the contractor, only on production of
the proof of payment.
The issue is thus decided in favour of the Claimant contractor.
As discussed above the contractor was negligent about his duties. He signed the
agreement without any clarification sought about the clause 42.1, Schedule-A Part-II, I
consider that he should not go scott free and a penalty on that score should be imposed. His
claim of Rs. 36,64,013.00 should be restricted to Rs 36,00,000.00 only.
”
Apart from that, the learned Arbitrator has accorded interest @9% from
01.02.2018 till the date of payment since Issue No. (1) relating to
reimbursement of service tax dues by the employer was decided in favour of
the contractor, service provider. The learned Commercial Court has dealt with
the only issue under challenge on grounds of patent illegality in the following
manner at paragraph 9 after dealing with the case of the parties and the
decisions of the Apex Court on matters pertaining to patent illegality. Para 9 is
quoted hereunder:-
“9. The scheme and scope of the provisions of Section 34 of Arbitration Act aims at keeping the
supervisory roles of the court at minimum level. The Arbitrator while passing the award had
taken reference to the Clause 42 of the NIT and in absence of existence of Part II of price bid has
held the fault on the part of the petitioner while drafting the agreement and thereby also
attributed the negligence on the part of the contractor for lack of observation about the clause
42.1 of the agreement. Regard being had to the circumstances the findings and decision so
arrived at by the arbitrator cannot be termed as patently illegal within the meaning of sub-
section 2A of Section 34 of the Arbitration Act.
As referred to above we cannot sit as an appellate court and to re-appreciate the findings
so arrived by the Arbitrator. The contentions so raised on behalf of the petitioner also do not
bring the matter within the mischief of any of the grounds as enumerated in Section 34(2) of the
Arbitration Act in view of the law as referred to above.
In view of the discussion as we had herein-
above I order as follows.”
Learned counsel for the appellant submits that neither the learned
Commercial Court nor the learned Arbitrator took into consideration the benefit
of exemption which the contractor was entitled to avail under the exemption
notification. Though the contractor was entitled for such exemption, but he
voluntarily deposited the tax dues and sought its reimbursement. Therefore, the
impugned judgment passed by the learned Commercial court is fit to be set-
aside and the matter needs be remanded for fresh consideration.
Learned counsel for the respondent has straight away drawn attention of
this court to the findings rendered by the learned Arbitrator in the award and
also the impugned order passed by the learned Commercial Court.
We have extracted the relevant part of the findings of the learned Arbitrator
and the discussions made by the learned Commercial Court on the only issue as
regards reimbursement of the service tax dues to the contractor/service provider
in terms of Clause 42.1 of the Agreement here-in-above. The parties were
bound by the Agreement. Payment of service tax dues on the part of the
contractor with the service tax department is not in dispute. Clause 42.1 simply
states that the contractor shall be reimbursed by the department on proof of
payment to the extent as indicated in Part II of Schedule-A relating to any
Central or State Sales and other Taxes including VAT on completed items of
work under the contract.
The contractor had submitted documents in proof of the payment which is
not in dispute. The decisions of the learned Arbitrator, therefore, were well
within the confines of the term of the Agreement. As such, he cannot be said to
have committed an error of jurisdiction or wandered outside jurisdiction in
deciding claims which did not fall within the terms of the Agreement.
As such following the ratio laid down in the case of Ssangyong Engg &
Construction Co. Ltd. vs. NHAI, reported in (2019) 15 SCC 131, in para 37 to
41 and 69 of the report, we do not find any error in impugned order passed by
the learned Commercial Court.
Accordingly, the instant appeal is dismissed.
(ARINDAM LODH),J (APARESH KUMAR SINGH), CJ
Digitally signed by SAIKAT KAR
SAIKAT KAR
Date: 2024.02.01 15:23:26
+05'30'