Delhi District Court
M/S Central Electronics Limited vs M/S Elcomponics Technologies India on 8 December, 2021
COURT OF DISTRICT JUDGE
(COMMERCIAL COURT-01),
SOUTH-EAST, SAKET COURTS, NEW DELHI
Presiding Officer: Sh. Raj Kumar Chauhan DHJS
OMP (Comm) No. 128/2019
In the matter of:
M/s Central Electronics Limited
4, Industrial Area, Shababad,
Ghaziabad, Uttar Pradesh. ..........Applicant.
Vs.
1. M/s Elcomponics Technologies India
Private Limited, Plot No. -39, Pocket-1,
Jasola, New Delhi. .........Respondent.
Date of institution : 22.11.2019
Date on which order was reserved : 08.12.2021
Date of pronouncement of the order : 08.12.2021
JUDGMENT
1. In this petition u/s 34 of Arbitration and Conciliation Act, 1996 (hereinafter referred as 'Arbitration Act'), the applicant as prayed for setting aside Arbitral Award dated 14.07.2018 on the following grounds :-
(a) Impugned Award is in contravention with the fundamental policy of law in India.
(b) Impugned Award is in conflict with the basic notion of justice and morality.OMP (Comm) No. 128/19
M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 1 of 46
(c) The Impugned Award suffers from patent illegality.
(d) The Impugned Award is an unreasoned Award and has been passed without considering the arguments of the applicant.
(e) The Learned Arbitrator has acted beyond its scope of authority by not appreciating the express and clear terms of the work order.
2. The brief facts which gave rise to the dispute between the parties are that the Greater Noida Industrial Development Authority (GNIDA) awarded a contract for commissioning of 01 Mega Watt Grid connected solar project to the petitioner / non- claimant for Rs. 12,78,52,000/-. The applicant on 02.11.2013 in view of awarded contract invited sealed bids by way of Tender Notice No. SPVM/EPC/0001/REV/2013-2014 from EPC Contractors who were duly authorized as system installers of M/s Sun Power Corporation (USA) for the supply of installation and commissioning of 1 MWP Grid connected Solar Power Project. That the respondent / claimant applied for the tender and after few negotiations the contract was finally sub-contracted to the respondent / claimant for an amount of Rs. 11,50,00,000/-. On 11.12.2013, a work order was issued by the applicant to the respondent which was in the form of term key contract. The said work order was issued alongwith Annexure-I and Annexure-II thereof on the terms agreed between the parties. On 22.01.2014, the respondent / claimant sought for some modifications in terms of the work order which were agreed upon by the applicant. On OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 2 of 46 27.02.2015, the respondent / claimant successfully commissioned the project and raised a final invoice in March 2015 for Rs. 11,50,00,000/-. However, the applicant deducted a sum of Rs. 61,17,458/- from the final bill on the ground that the respondent was not complying with the mandatory provisions of law by not paying the tax on account of frivolous examination. As a result the respondent / claimant was constrained to deposit the VAT for an amount of Rs. 51,80,907/- alongwith service tax of Rs. 7,38,144/-. with the Central Government. On 05.05.2016, the respondent / claimant invoked the arbitration clause and the Learned Arbitrator was appointed by Hon'ble High Court of Allahabad vide order dated 07.04.2017.
3. After entering into reference by the Learned Arbitrator, the respondent / claimant filed a statement of claim before it, alleging that the respondent / claimant acted in illegal manner by deducting extra TDS (WCT) from the payments of the claimant and depositing the said amount in account of another company instead of claimant; applicant / non-claimant also did not provide any TDS Certificate of the tax deducted and has not provided any statement of account at the time of release of the payment. It is further stated that the claimant / respondent was constrained to file an application before Uttar Pradesh VAT Department for directing the applicant / non-claimant to deduct VAT (WCT) TDS at a lower rate. On rejection of the application, the appeal was filed before the Appellate Tribunal and the Hon'ble Tribunal passed an order OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 3 of 46 dated 10.04.2015 observing that the project was a work contract and directed the applicant / non-claimant to deduct VAT (WCT) TDS @ 1% instead of 4% on the project value.
4. It is further alleged that the said project a turn key project was falling within the definition of work contract under the UP Value Added Tax Act, 2008. That the respondent / claimant raised the final invoice in March 2015 for 11.50 Crores. However, the applicant / non claimant has wrongly retained Rs 61,17,458/- from the payment due to the claimant. It is submitted that the non- claimant unnecessarily kept on insisting the claimant to provide tax invoices for the material supplied directly to the site. Since, it was a work contract, no separate tax invoices or material supplied was to be provided to the non-claimant. All the material were delivered directly to the site and out of which 80% were imported.
5. It is further alleged in the statement of claim that there is no single tax rate which is specified under the Uttar Pradesh Value Addes Tax Act, 2008 and which can be levied on the works contract, rather tax liability is determined based on the tax rates applicable on type and nature of the goods incorporated in the execution of the Works Contract. It is further alleged that vide a notification bearing No. KANI-2905/XI-9(65/15-UPACT-5-2008- ORDER/(135)-2015 on 06.07.2015, solar energy equipment and their parts have been exempted from payment of VAT by the Government of Uttar Pradesh. It is further alleged that the non-
OMP (Comm) No. 128/19M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 4 of 46 claimant have deducted VAT amounting to Rs. 51,80,907/- ignoring all rules and regulations of the Uttar Pradesh Value Added Taxes Act, 2008. It is further alleged that entire liability of the VAT(WCT) as per Uttar Pradesh VAT Act gets shifted to the sub-contractor i.e. the claimant as the respondent does not affect any transfer of property in any goods involved in the execution of the Works Contract and is therefore not liable for the payment of the VAT (WCT) on any deemed sale of goods. It is further alleged that cumulative inference of the aforesaid legal provisions is that if movement of goods from outside the state is for use or incorporation in a works contract being executed in UP, inter-alia the movement of goods is inextricably linked or connected with the contract being executed within the state, then in view of the legal provisions, no tax liability will accrue on such goods used in State of Uttar Pradesh for execution of the Works Contract. It is further alleged that the respondents' deduction of Rs. 61,17,458/- from the final bill are utterly unwarranted, unjust and thereby arbitrary, wrongful and illegal. It is further alleged that respondents / non-claimant did not abide by the numerous legal provisions where it is categorically mentioned that the respondent has no liability for the payment of VAT in the Works Contract.
6. Following claims have been made in the Statement of Claim :-
(i) Award of Rs. 61,17,458/- which the respondent has illegally deducted from the final payment of Rs. 11.50 Crores OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 5 of 46 made to the claimant.
(ii) Award of Rs. 26,24,641 towards interest on Rs. 61,17,458 as withheld.
(iii) Award of Rs. 13,23,300 towards the interest accrued on account of late and incomplete payments.
(iv) Costs towards the arbitration proceedings.
7. In the Statement of Defence following preliminary objections were raised :-
7.1 The main claim of the claimant towards allegedly wrong withholding of the taxes under UP VAT Act, 2008, is not maintainable for the simple reason that the duty to pay VAT lay with the claimant, who was to issue the sale invoice thereafter.
The claimant having failed to pay the same and issue the sale invoice, the respondent discharged the said burden (after having failed to claim CENVAT). Thus, all claims of the claimant are liable to be dismissed on this ground alone. 7.2 In any event, without prejudice assuming for the sake of argument that the VAT is not applicable, the benefit cannot be passed on to the sub-contractor. The benefit if any has to go to the contractee or the ultimate consumer (GNIDA) as per the law declared and settled by the Constitution Bench of the Hon'ble Supreme Court of India.
8. In para-wise reply, it is stated that it was a divisible work order and the contract was a turn-key contract and not work OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 6 of 46 contract. It is pertinent to mention that annexure-II issued with the divisible work order clearly and expressly lists the break-up of costs under each component including VAT which was duly accepted and acted upon by the claimant; that no issue regarding VAT was ever raised by the claimant and right from the beginning parties were at consensus on the inclusion of VAT component in the figure of Rs. 11.50 Crores, any alleged issue raised by the claimant at a belated stage pertaining to the VAT component was without any merits and is liable to be rejected. It is further submitted that TDS (WCT) was deducted as per law and as soon as claimant provided the certificate for lower deduction of WCT, the respondent immediately followed the order and deducted the WCT accordingly. However, even the amount already deducted @ 4% was not deposited with the authorities and the amount was refunded to the claimant. It is further stated that divisible work order itself states that prices break-up detail would be as per enclosed annexure-II thereof. Annexure-II to the divisible work order, which is an intrinsic part of the said divisible work order, therefore, contains a specific and separate price break-up inter alia for the supply component wherein VAT amount of Rs. 51,80,947/- on supply portion, is clearly indicated. The total supply value including VAT is also separately indicated, being Rs. 10,87,99,884/-, which as submitted above, has been accepted by the claimant on numerous occasions.
OMP (Comm) No. 128/19M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 7 of 46
9. It is further stated that the respondent CEL has informed the claimant right from the beginning that VAT amount Rs. 51,80,907/- will be paid to M/s Elcomponics on submission of sale invoice by the claimant M/s Elcomponics to CEL, but the claimant did not submit sale invoice even after repeated requests. Since, the claimant did not submit the invoice despite repeated requests, CEL has already deposited VAT amount Rs. 57.60 Lacs on 20.04.2015 for this project. Due to this, the respondent could not claim CENVAT credit. Now, in view of the fact that the time to claim CENVET credit has expired, the amount of Rs. 51.81 Lakhs towards VAT in any case cannot be paid to the claimant. This issue has also been discussed several times and explained to their various representatives who visited the respondent on number of occasions.
10. It is further stated that the amount of VAT amounting to Rs. 51,80,947 and service tax amounting to Rs. 3,66,220 which was payable by the claimant to the respondent CEL in accordance with the terms of the divisible work order was duly deposited on behalf of the claimant in the state and Central Government Treasury alongwith tax payable by CEL on the amount of value addition therein. As such, the total amount of VAT and Service Tax deposited by CEL was Rs. 57,60,000 and Rs. 7,38,144 respectively. In that view, the amounts of Rs. 51,80,947 and Rs. 3,66,220 have been shown to be a withheld by the respondent CEL in the SOC filed by the claimant in an entirely erroneous and OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 8 of 46 unjustified manner. Since the claimant defaulted in the payment of the said amount in the Government Treasury, the respondent CEL was compelled to pay the said tax on behalf of the claimant in order to discharge its liability in accordance with the provisions of law.
11. It is further stated that the respondent has made deduction of the stated amount in accordance with law as submitted above in this SOD and there is no illegality in it. Rather the claimant in a cryptic way has sought to avail the protection of the provisions of the UP-VAT Act, 2008, in response to which it has been clearly demonstrated that no such protection accrues to the claimant. The claimant is therefore not entitled to an award of Rs. 61,17,458/-.
12. On the basis of the pleadings of the parties, Learned Arbitrator has passed the Award in favour of the claimant / respondent. The observation of the Learned Arbitrator is reproduced as under :-
"In this case, a very short question of law is involved for consideration and determination by this Arbitral Tribunal. The question relates to the liability of payment of VAT, a tax payable under the U P Value Added Taxes Act, 2008 (2008 Act, for short). The broad question is whether the contractor to whom the contract for execution of the contract work was awarded was liable to pay the aforesaid tax to the government and whether on the presumption that the contractor had either not OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 9 of 46 paid the tax or was not intending to do so, could the respondent, which had awarded the contract to the claimant have deducted the tax amount from the bills of the contractor for its onward transmission to the government towards the payment of the said tax under the aforesaid 2008 Act. The facts in brief are that Greater Noida Industrial Development Authority (GNIDA), desirous of setting up a 1MWp grid connected solar power project at Kasna in Greater NOIDA awarded a contract to the respondent for commissioning this project at a cost of Rs. 12,78,52,000/-. After inviting bids from various parties, the Respondent in turn awarded this contract in favour of the Claimant for execution of the aforesaid project at a contact value (price) of Rs 11,50,00,000/. A works contract was accordingly executed between the Claimant and the Respondent on 11/12/2013 for the commissioning and installation of the aforesaid project. The tender category in the aforesaid works contract was mentioned as "works" and the type of the contract was also mentioned as "works".
It is the undisputed case of the parties before me that the contract was successfully executed and completed and accordingly the claimant became entitled to the payment of the contract amount agreed upon between the parties, namely Rs 11.50 crore. When the claimant issued an invoice amounting to Rs. 11.50 crore towards the total cost of the project, the respondent admittedly deducted and retained to itself an amount of Rs. 61,17,458.00/- on the ground that this amount, the claimant was required to pay to the government as VAT and since the claimant had OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 10 of 46 not paid this amount to the government, respondent presumed and thought and was of the opinion, that it was the statutory duty or obligation of the respondent to pay the said tax amount to the government and therefore it deducted from the bill of the claimant the aforesaid amount for its onward payment to the government.
As I have indicated at the very beginning of this Award, the only short question of law which is involved for consideration and determination in this case is this: under the aforesaid 2008 Act, who was liable or is liable to pay the tax (VAT) and if under the provisions of the 'aforesaid 2008 Act, it was the claimant-contractor which was liable to pay the tax, why did the respondent have to take upon itself the burden of paying the said tax on behalf of the claimant to the government? And, if in law, there was no such obligation or duty or responsibility of the Respondent, could it have deducted and retained to itself the said amount for payment to the government?
The project was a turnkey project falling within the definition of a "works Contract"
under the aforesaid 2008 Act. Undoubtedly, the claimant contractor is a "dealer" under the 2008 Act and if sale of any goods has taken place under the said Act, the transfer of property in the goods took place from the claimant contractor to GNIDA and not to the respondent. Where a works contract is executed through a sub-contractor, i.e. the claimant in the present case, the property immediately before the incorporation of the said goods in the works, belonged to the claimant contractor and with the execution and OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 11 of 46 completion of the project in question it would become the property of the contractee, i.e GNIDA. The property would never pass on to the main contractor, i.e, the 'Respondent in the present case. There is only one event of transfer of property and also therefore only one taxable event.
During the course of extensive hearing of the case, Ld. counsel appearing for both the parties took me through various provisions of the 2008 Act as well as the Rules framed thereunder and I found that indeed under the specific provisions of the Act and the Rules framed thereunder, as well as keeping in view the overall broad scheme of the Act, the liability to pay VAT always would rest on the shoulders and be the responsibility of the contractor and it is the contractor and the contractor alone who would be always liable to pay the tax and in the event of the contractor committing a default in the payment of the tax, he alone would be liable to face all the consequences. Under this scheme of the Act and looking to various provisions of the Act, 1 have no hesitation in holding that there is no obligation or responsibility, at all, on the part of the respondent in ever being held liable to pay the tax which the contractor - claimant was liable and had not paid. No provision of the Act either fastens any such obligation or duty or liability upon the Respondent and therefore perhaps either on a misreading of the provisions of the Act or in ignorance, or perhaps in an overzealous attempt to safeguard the interests of the revenue, the respondent deducted the amount in question and retained it to itself to the detriment of the claimant.OMP (Comm) No. 128/19
M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 12 of 46 Under the scheme of the 2008 Act (Section 3(1)), the liability to pay the tax rests upon a dealer who is held liable to pay the tax on his taxable turnover of sale or purchase or both. As I've already held, the Respondent by no stretch of imagination could be termed or styled as a dealer under 2008 Act since the expression "dealer" in the facts of the present case would apply either to the claimant- contractor or to the contractee, GNIDA. In the present case I'm not going into any question as to whether the claimant was entitled to claim any, exemptions, wholly or in part from its liability to pay the tax and similarly I'm not also going into any question as to what amount of tax, at what rate, if at all was the claimant liable to pay because all these questions would fall in the domain of the tax authorities, I'm also not going into any question about whether the goods were imported or purchased in India and whether these were in the course of inter- state trade or commerce. All these issues also would fall in the domain of the tax authorities. The limited question which has fallen for my consideration in this arbitration is whether the respondent had any obligation to pay tax on the supposed or presumed default of the claimant in doing so and I have already taken a view that it was no part of the responsibility, duty or obligation of the respondent to pay any tax on behalf of the claimant.
I have therefore no hesitation in holding that the deduction and retention of the aforesaid amount of Rs. 61,17,457.00/-. by the respondent was neither authorised under law not permissible-and similarly there was no obligation or duty cast upon the Respondent to have remitted this, amount to the government OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 13 of 46 as and by way of payment of VAT on behalf of the claimant. Respondent is therefore held liable to refund this amount to the claimant.
If the Respondent has deposited the aforesaid VAT amount with the government, which it says it has, it may apply to the government for its refund. But the liability to pay to the Claimant is neither dependent nor contingent upon the Respondent obtaining its refund from the government. In other words, the liability of the Respondent to pay to the Claimant is absolute and totally independent of whether it gets its refund or not from the. government. If it gets its refund, very well; if it does not get the refund, bad for itself. But, it has to blame itself for the precarious situation in which it placed itself, to begin with."
13. I have heard the learned counsels at length and perused the written arguments submitted alongwith relevant citations.
14. In the written arguments it is argued by the counsel for petitioner that the impugned award dated 14.07.2018 is in complete violation of the public policy of India and in complete incorrect understanding and reading of law for following reasons :-
"(i) Section 34(1) of the UP VAT Act,2008 casts an obligation on every person responsible for making payment to the selling dealer to deduct tax while OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 14 of 46 making payment to the selling dealer. Therefore, the Petitioner was obligated to deduct tax and deposit the same with tax authorities.
(ii) Section 34(4) casts an
obligation on the Selling
Dealer/Respondent in this case to
approach the assessing authority and get clarification on the amount of tax to be deducted if the amount deducted is more as per him and the tax deducted is less. Therefore, the proper forum for the Respondent was to approach the tax authorities.
(iii) Section 34 (6) casts an obligation on the person deducting tax, i.e. petitioner herein to deposit the tax deducted with the government treasury. It is admitted fact that the amount so deducted from the respondent has already been deposited with the government authorities by the petitioner.
(iv) Section 34(8) imposes a penalty OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 15 of 46 on the person who has made direct payment to the selling dealer without deducting any tax. The penalty is upto double the amount of tax not deposited alongwith the simple interest @ 15% per annum. Therefore, in the event the Petitioner would not have deducted tax it would have faced penalties under the applicable laws.
(v) Section 34(11) provides that the tax deducted and deposited by the person deducting the tax shall be treated as tax paid on behalf of the selling dealer and a credit is to be given to the selling dealer. In case tax is in excess then liable to be paid, the selling dealer would be entitled to refund.
Accordingly, the recourse of the Respondent is to seek refund from the tax authorities and no liability cannot be fastened upon the Petitioner to refund the tax deposited with interest.
(vi) Section 34(13) further provides that in case of works contract, if the tax OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 16 of 46 amount to be deducted is not unascertainable and direction in this regard is obtained from the Authorities, then the person making payment shall deduct an amount equivalent to 4% of the gross amount of payment. The Petitioner is again obligated to deduct tax and deposit the same with tax authorities.
(vii) UPVAT Act,2008 clearly imposes an obligation on the Petitioner to deduct the tax while making the payment to the Respondent and deposit the same with the Authorities, as has been done by the Petitioner. It is further argued that the Arbitrator has committed an error by holding that there is no obligation on the Petitioner to deduct the tax and deposit with the government. It is further argued that the deduction of tax at source and its deposition with the Government authorities is fundamental to the tax jurisprudence of the country. It is further argued that thus the impugned Award directing the Petitioner to pay the OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 17 of 46 amount of tax deducted and deposited with the government authorities to the Respondent and thereafter seek refund from the tax authorities is against the public policy of India and the prevalent laws.
(viii) That the Respondent in its written submission has admitted that the petitioner is under obligation to deduct tax. As per the submission of the Respondent, the Petitioner has deducted extra tax than required and therefore the arbitral proceedings were initiated. The petitioner submits that the Arbitrator on the contrary, to the admitted position has passed an award against the Petitioner on the basis that the petitioner had no obligation to deduct and deposit with the government authorities, which is incorrect in law. The Arbitrator has failed to determine that how and why the submission of the Respondent that the Claimant has deducted the extra tax is maintainable. Even if it is assumed that the Petitioner has deducted extra OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 18 of 46 tax, the Claimant can always make a claim for refund from the authorities. Therefore, in view of the above, the impugned Award be set-aside.
(ix) That the impugned Award has also wrongly awarded claim no.2 of interest on delayed payments without examining any facts and defence of the Petitioner. The Petitioner has filed detailed reason chart (@ 154/LOD, 170,
171)for delayed payment however the same is not noted or discussed by the Learned Arbitrator in the Award (Pls refer @20) on the contrary, the Learned Arbitrator records that the Petitioner has not factually rebutted the same in SOD."
15. In additional written arguments, it is further argued that the entire controversy and issues in disputes can be summarized as below :-
"(a) Whether the value of Contract awarded to the respondent company for a total value of Rs. 11.50 crores include VAT component of Rs. 51,80,947/and service tax component of Rs.
OMP (Comm) No. 128/19M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 19 of 46 3,66,220/separate from the supply value component as mentioned in Annexure-2 of the work order?
(b) Whether there has been any
amendment/change in the price
break(Annexure-2) issued along with the work order and whether the said amounts of vat and service tax is payable to the respondent company as an amount towards supply value portion over and above to what has been agreed in the contract, because it has not issued Tax Invoice as required under the provisions of Section 22 of U.P. Value Added Tax Act?
(c) Whether the transaction in question is exempt from tax even though tax was duly imposed thereon by the assessing authority of the petitioner company and has been duly paid accordingly. Whether respondent is entitled to claim tax exemptions and whether such exemptions can lead to change/ increase in the agreed price for OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 20 of 46 supply value component of the work order?
(d) Whether the respondent was liable to issue tax invoice to the petitioner company and to disclose the amount of vat and service tax separately therein as mentioned in Annexure-2 of the contract as provided in Section 22 of U.P. Value Added Tax Act?
(e) Whether having once agreed for raising a separate VAT invoice to the petitioner company and after the petitioner having acted upon it, can the Respondent refuse to issue the tax invoice?
(f) Whether in case the respondent is allowed to receive the amount of vat and service tax as separately mentioned in Annexure-2 of the Contract, it would not be unjustly enriched by the amount of tax realised but not disclosed and paid.
(g) Whether the refusal to issue tax OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 21 of 46 invoice amounts to breach of contract?"
15.1 It is further argued that the Learned Arbitrator instead of deciding each issue and applying its mind independently to the same and passing speaking order, decided not to discuss individual issue and on the contrary, decided a non-existent issue i.e whether the Appellant had any obligation to pay tax on the supposed or presumed default of the claimant in do so? It is further argued that the Ld. Arbitrator misunderstood the entire premises and confused the deposit of tax by the petitioner company as tax deposited on behalf of Respondent. It is further argued that the correct fact is that the tax was deposited by the petitioner company for the project in discharge of the obligations upon it under the Act and since the respondent failed to issue tax invoice, the input tax credit could not be claimed and thus the payment of money was refused.
15.2 It is further argued that the Learned Arbitrator by passing the award has changed the agreed terms of the contract where it was agreed that amount of Rs. 51, 80,947/- will be payable only as an reimbursement of VAT to the respondent because supply of goods and services and amount of tax due thereon were shown separately and agreed upon in the contract. It is further argued that the Ld. Arbitrator failed to establish whether the amount of tax payable to the respondent can be paid without issue of Tax Invoice on the part of the respondent and without OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 22 of 46 disclosing therein that the said amount of vat and service tax is being charged and realised from the petitioner company.
15.3 It is further argued that passing of the Award on wrong premise and not discussing the issues raised in the claim petition and the statement of defence qualifies it to be a patent illegality and against the public policy of law and thus the award is liable to be set aside.
15.4 It is further argued that the impugned Award suffers from patent illegality and must be set aside. In support to his submissions learned counsel for petitioner has placed reliance upon following judgments of the Hon'ble Supreme Court and the Mumbai High Court :-
"(i) Bhanumati Jaisukh Bhai vs. Ivory properties & Hotels Private Limited and Ors. MANU/MH/0127/2020 para no.
172, 173
(ii) Ssangyong Engineering &
Constructions Co. Ltd. vs. National Highways Authority of India (NHAI) Manu/SC/0705/2019 para no. 25-30
(iii) Associate Builders vs. Delhi Development Authority, Manu/SC/ 1076/2014 OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 23 of 46
(iv) PSA Sical Terminals Pvt Ltd. Vs The Board of Trustee of V.O Chidambranar Port Trust Tuticorin and Ors civil appeal no. 3699-3700 of 2018 decided on 28.7.2021."
16. The respondent on the other hand in written arguments submitted as under :-
(i) The impugned Award is not in conflict with public policy of India and that there is no patent illegality on the face of the Award and the petition is liable to be dismissed with cost.
(ii) It is admitted fact that the sub-contract was completed by the respondent within time and there is no dispute regarding the completion of the project and the performance of the Contract.
(iii) The submission of the petitioner to the effect that the project was in the nature of Work Contract and that petitioner was entitled under the provision of Section 34 of the UPVAT Act to deduct TDS on Work Contract is contrary to the facts because notwithstanding that the petitioner was entitled and has deducted TDS @ 4% and also issued TDS Certificate, but the respondent was entitled to the exemption due to solar project and was awarded certificate of lower TDS Rate @ 1% from Authority OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 24 of 46 under the UPVAT Act. After submitting the said order of the Authority, the petitioner adjusted the TDS on further payments which was initially deducted at higher rates. To that extent there is no dispute, but the amount of Rs. 61,57,457/- was not deducted by way of TDS u/s 34 of UPVAT Act as no certificate for the same was issued by the petitioner to the respondent. Therefore, the petitioner was wrong in arguing that the petitioner was entitled to deduct the said amount.
(iv) The provisions of UPVAT Act does not cast obligation on main contractor i.e. the petitioner to artificially levy any VAT / WCT on the Work Contract over and above the TDS already deducted as per provision of Section 34 of the said Act. It is so because project was executed as a single turn key project for all inclusive cost of supply of material and services involved for completion of project without any further bifurcation. Therefore, the petitioner deliberately retained the additional amount of Rs. 61,57,457/- on account of VAT over and above of the TDS without any justification.
(v) The petitioner after the alleged deduction and deposit of Rs. 61,57,457/- with the TAX Authority has not issued the TDS certificate as required u/s 34 (7) of UPVAT Act to the respondent.
(vi) The petitioner has sought the setting aside of the Award on vague and ambiguous grounds as he failed to show any OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 25 of 46 provision of UPVAT Act which may make the impugned Award contrary to it.
(vii) The Learned Arbitrator has rightly held that the question of tax liability was within the domain of appropriate tax authorities and has rightly decided that the petitioner has illegally assumed their liability to pay tax as it has been held that the liability to pay tax was on the respondent i.e. sub-contractor and not the petitioner. It was the responsibility of the petitioner to get the refund of the wrongly submitted tax and refund of said amount to respondent is not contingent upon that fact.
(viii) The petitioner has wrongly presumed that the respondent would not discharge his tax liability and after raising of the invoices by the respondent, the petitioner has raised the disputed amount with itself to discharge the so called tax liability which is contrary to law and is malicious on the part of petitioner.
(ix) The respondent has referred the following judgments in support of his case :-
"1. Dyna Technologies Pvt. Ltd. V. Crompton Greaves Ltd., 2019 SCC OnLine SC 1656
2. P.R. Shah, Shares & Stock Brokers (P) Ltd. V. B.H.H. Securities (P) Ltd., (2012) 1 SCC 594 OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 26 of 46
3. MMTC Ltd. V. Vedanta Ltd., (2019) 4 SCC 163
4. Swan Gold Mining Ltd. V. Hindustan Copper Ltd., (2015) 5 SCC 739
5. National Highways Authority if India V. NCC-VEE, 2015 SCC OnLine Del 8119
6. Centrotrade Minerals & Metals Inc. V. Hindustan Copper Ltd., (2006) 11 SCC 245
7. Associate Builders V. DDA, (2015) 3 SCC 49 98-141
8. Order dated 09.03.2016 passed by Hon'ble Supreme Court of India in M/s. Annapurna Electronics Etc V. M/s.
Crompton Greaves Ltd. & Ors., Special Leave to Appeal (C) No(s).
21680/2015"
17. The petitioner has challenged the finding of the Learned Arbitrator primarily on the ground that the impugned Award is in contravention of the fundamental policy of law in India; the impugned award is in conflict with basic notion of justice and morality; the impugned award suffer from patent illegality; the impugned award is unreasoned award as argument of the petitioner was not considered; the learned arbitrator has OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 27 of 46 acted beyond the scope of authority by not appreciating the express and clear terms of the work order.
18. Analysis Normally, the general principles are that Arbitrator is a Judge of the choice of the parties and his decision, unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even by the Court as a Court of law could come to a different conclusion on the same facts. The Court cannot reappraise the evidence and it is not open to the Court to sit in appeal over the conclusion of the Arbitrator. It is not open to the Court to set aside a finding of fact arrived at by the Arbitrator and only grounds on which the award can be set aside are those mentioned in the Arbitration Act. Where the Arbitrator assigns cogent grounds and sufficient reasons and no error of law or misconduct is cited, the award will not call for interference by the Court in exercise of the power vested in it. Where the Arbitrator is a qualified technical person and expert, who is competent to make assessment by taking into consideration the technical aspects of the matter, the Court would generally not interfere with the award passed by the Arbitrator.
19. An Arbitral Award can be set aside on the grounds set out in Sections 34(2)(a), (b) and (2A) of the Act in view of Section 5 of the Act.OMP (Comm) No. 128/19
M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 28 of 46
20. Section 34 (1), (2) and (2A) of The Arbitration and Conciliation Act, 1996 read as under :-
"34. Application for setting aside arbitral award- (1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and subsection (3).
(2) An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 29 of 46 decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part;
or
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 1 - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.-- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 30 of 46 finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence."
21. Supreme Court in case of "Associate Builders vs. Delhi Development Authority, (2015) 3 SCC 49" has held that the interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. It is held that once it is found that the arbitrator's approach is neither arbitrary nor capricious, no interference is called for on facts. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of trivial nature. Also was held therein that :-
"33. "...when a court is applying the 'public policy' test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award.... Once it is found that the arbitrators approach is not OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 31 of 46 arbitrary or capricious, then he is the last word on facts.."
22. Supreme Court in case of "Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India, 2019 SCC OnLine SC 677" has held that under Section 34 (2A) of the Act, a decision which is perverse while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. A finding based on the documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties and therefore would also have to be characterized as perverse. It is held that a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.
23. Hon'ble Supreme Court in the case of "Patel Engineering Ltd. vs. North Eastern Electric Power Corporation Ltd., MANU/SC/0447/2020" inter alia held that wherein the finding of Ld. Arbitrator are arrived at by taking into account irrelevant facts and by ignoring the vital clauses, the same suffer from the vice of irrationality and perversity and that the award will be liable to be set aside when while interpreting the terms of the contract, no reasonable person could have arrived at a different conclusion other than that the awards passed by the OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 32 of 46 arbitrator suffer from the vice of irrationality and perversity.
24. In the case of "Swan Gold Mine vs Hindustan Copper,MANU/SC/0849/2014", the law laid in the case of Oil & Natural Gas Corporation Ltd. vs Saw Pipes Ltd., (2003) 5 SCC 705 was discussed and inter alia held that when the parties have entered into concluded contract, agreeing terms and conditions of the said contract, they cannot back out and challenge the award on the ground that the same is against the public policy and the Court was precluded from re-appreciating the evidence and to arrive at different conclusion by holding that the arbitral award is against the public policy.
25. In the case of "M/s Arosan Enterprises Ltd vs Union of India & Anr., MANU/SC/0595/1999", it was inter alia held that reappraisal of evidence by the Court is not permissible in the proceeding under the Arbitration Act. In the event of there being no reason in the award, question of interference of the court would not arise at all. In the event, however there are reasons, the interference would still be not available within the jurisdiction of the Court unless of course, there exist a total perversity in the award or the judgment is based on wrong proposition of law. In the event, however, two views are possible on a question of law as well, the Court would not be justified in interfering with the award. Also was held that the Court as matter of fact, cannot substitute its evaluation and come to the conclusion that the OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 33 of 46 arbitrator had acted contrary to the bargain between the parties. If the view of arbitrator is a possible view the award or the reasoning contained therein cannot be examined. The decisions in the cases of " State of Rajasthan vs Puri Construction Co. Ltd, MANU/SC/0865/1994" and "Sudersan Trading Company vs Government of Kerala & Anr., MANU/SC/0361/1989" were relied. Also was held therein that where an Aribitrator makes a mistake either in law or in fact in determining the matters referred, but such mistake does not appear on the face of the award, the award is good notwithstanding the mistake, and will not be remitted or set aside.
26. In the case of "MCD vs Harcharan Dass Gupta Construction Pvt. Ltd., MANU/DE/4010/2018", the pronouncements in the case of "Associated Builders vs Delhi Development Authority, (2015) 3 SCC 49" were relied upon. In aforesaid case of Associated Builders, it was inter alia held that:
"xxxx xxxx xxxx
33. It must clearly be understood that when a court is applying the "public policy" test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 34 of 46 arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts. In P.R. Shah, Shares & Stock Brokers (P) Ltd. v. B.H.H.Securities (P) Ltd., [(2012) 1 SCC 594: (2012) 1 SCC (Civ) 342: 2011 LAWPACK(SC) 50505: 2011(6) R.A.J. 27], this Court held: (SCC pp. 601-02, para 21) "21. A court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act. The Arbitral Tribunal has examined the facts and held that both the second respondent and the appellant are liable. The case as put forward by the first respondent has been accepted. Even the minority view was that the second respondent was liable as claimed by the first respondent, but the appellant was not liable only on the ground that the arbitrators appointed by the Stock Exchange under Bye-law 248, in a claim against a non-member, had no jurisdiction to decide a claim against another member. The finding of the majority is that the appellant did the transaction in the name of the second respondent and is therefore, liable along with the second respondent.OMP (Comm) No. 128/19
M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 35 of 46 Therefore, in the absence of any ground under Section 34(2) of the Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at.
xxxx xxxx xxxx"
27. The Hon'ble Supreme Court of India in "PSA SICAL Terminals Pvt. Ltd. vs. The Board of Trustees of VO Chidambranar Port Trust Tuticorin & Ors., Civil Appeal No. 3699-3700/2018, judgment dated 28.07.2021", has revisited the law relating the intervention by the Courts u/s 34 of the Arbitration Act and findings recorded in para no. 42, 43 and 44 are reproduced as under :-
"42. It will thus appear to be a more than settled legal position, that in an application under Section 34, the court is not expected to act as an appellate court and re-appreciate the evidence. The scope of interference would be limited to grounds provided under Section 34 of the Arbitration Act. The interference would be so warranted when the award is in violation of public policy of India, which has been held to mean the fundamental policy of Indian law. A judicial intervention on account of interfering on the merits of the award OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 36 of 46 would not be permissible. However, the principles of natural justice as contained in Section 18 and 34(2)(a)(iii) of the Arbitration Act would continue to be the grounds of challenge of an award. The ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the most basic notions of morality or justice. It is only such arbitral awards that shock the conscience of the court, that can be set aside on the said ground. An award would be set aside on the ground of patent illegality appearing on the face of the award and as such, which goes to the roots of the matter. However, an illegality with regard to a mere erroneous application of law would not be a ground for interference. Equally, re- appreciation of evidence would not be permissible on the ground of patent illegality appearing on the face of the award.
43. A decision which is perverse, OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 37 of 46 though would not be a ground for challenge under public policy of India, would certainly amount to a patent illegality appearing on the face of the award. However, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.
44. To understand the test of perversity, it will also be appropriate to refer to paragraph 31 and 32 from the judgment of this Court in Associate Builders (supra), which read thus :-
31. The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that where:
(i) a finding is based on no evidence, or
(ii) an Arbitral Tribunal takes into OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 38 of 46 account something irrelevant to the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision, such decision would necessarily be perverse.
32. A good working test of perversity is contained in two judgments. In Excise and Taxation Officer−cum−Assessing Authority v. Gopi Nath & Sons [1992 Supp (2) SCC 312], it was held: (SCC p.
317, para 7) "7..... It is, no doubt, true that if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then, the finding is rendered infirm in law. In Kuldeep Singh v. Commr. of Police [(1999) 2 SCC 10: 1999 SCC (L&S) 429], it was held: (SCC p.
14, para 10) "10. A broad OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 39 of 46 distinction has, therefore, to be maintained between the decisions which are perverse and those which are not. If a decision is arrived at on no evidence or evidence which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse. But if there is some evidence on record which is acceptable and which could be relied upon, howsoever compendious it may be, the conclusions would not be treated as perverse and the findings would not be interfered with."
28. In view of the law referred above and the arguments advanced at bar and also the written submissions submitted by the parties as discussed above, I have examined the findings recorded by the Learned Arbitrator to find out if the said finding is liable to be set aside on the grounds raised in the petition by the petitioner and also discussed above.
29. The following findings by the Learned Arbitrator is relevant and is reproduced hereunder :-
OMP (Comm) No. 128/19M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 40 of 46 "The project was a turnkey project falling within the definition of a "works Contract" under the aforesaid 2008 Act. Undoubtedly, the claimant contractor is a "dealer" under the 2008 Act and if sale of any goods has taken place under the said Act, the transfer of property in the goods took place from the claimant contractor to GNIDA and not to the respondent. Where a works contract is executed through a sub-contractor, i.e. the claimant in the present case, the property immediately before the incorporation of the said goods in the works, belonged to the claimant contractor and with the execution and completion of the project in question it would become the property of the contractee, i.e GNIDA. The property would never pass on to the main contractor, i.e, the 'Respondent in the present case. There is only one event of transfer of property and also therefore only one taxable event.
During the course of extensive hearing of the case, Ld. counsel appearing for both the parties took me through various provisions of the 2008 Act as well as the Rules framed thereunder and I found that indeed under the specific provisions of the Act and the Rules framed thereunder, as well as keeping in view the overall broad scheme of the Act, the liability to pay VAT always would rest on the shoulders and be the responsibility of the contractor and it is the contractor and the contractor alone who would be always liable to pay the OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 41 of 46 tax and in the event of the contractor committing a default in the payment of the tax, he alone would be liable to face all the consequences. Under this scheme of the Act and looking to various provisions of the Act, 1 have no hesitation in holding that there is no obligation or responsibility, at all, on the part of the respondent in ever being held liable to pay the tax which the contractor - claimant was liable and had not paid. No provision of the Act either fastens any such obligation or duty or liability upon the Respondent and therefore perhaps either on a misreading of the provisions of the Act or in ignorance, or perhaps in an overzealous attempt to safeguard the interests of the revenue, the respondent deducted the amount in question and retained it to itself to the detriment of the claimant.
Under the scheme of the 2008 Act (Section 3(1)), the liability to pay the tax rests upon a dealer who is held liable to pay the tax on his taxable turnover of sale or purchase or both. As I've already held, the Respondent by no stretch of imagination could be termed or styled as a dealer under 2008 Act since the expression "dealer" in the facts of the present case would apply either to the claimant-contractor or to the contractee, GNIDA. In the present case I'm not going into any question as to whether the claimant was entitled to claim any, exemptions, wholly or in part from its liability to pay the tax and similarly I'm not also going into any question as to OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 42 of 46 what amount of tax, at what rate, if at all was the claimant liable to pay because all these questions would fall in the domain of the tax authorities, I'm also not going into any question about whether the goods were imported or purchased in India and whether these were in the course of inter-state trade or commerce. All these issues also would fall in the domain of the tax authorities. The limited question which has fallen for my consideration in this arbitration is whether the respondent had any obligation to pay tax on the supposed or presumed default of the claimant in doing so and I have already taken a view that it was no part of the responsibility, duty or obligation of the respondent to pay any tax on behalf of the claimant.
I have therefore no hesitation in holding that the deduction and retention of the aforesaid amount of Rs. 61,17,457.00/-. by the respondent was neither authorised under law not permissible- and similarly there was no obligation or duty cast upon the Respondent to have remitted this, amount to the government as and by way of payment of VAT on behalf of the claimant. Respondent is therefore held liable to refund this amount to the claimant.
If the Respondent has deposited the aforesaid VAT amount with the government, which it says it has, it may apply to the government for its refund. But the liability to pay to the Claimant is OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 43 of 46 neither dependent nor contingent upon the Respondent obtaining its refund from the government. In other words, the liability of the Respondent to pay to the Claimant is absolute and totally independent of whether it gets its refund or not from the government. If it gets its refund, very well; if it does not get the refund, bad for itself. But, it has to blame itself for the precarious situation in which it placed itself, to begin with."
30. On perusal of the written submissions, it is found that the stand taken in the statement of defence and statement of claim has been reiterated in the written arguments by both the parties. The petitioner in additional written arguments has raised the point that the Learned Arbitrator has changed the agreed terms of the contract as it was agreed that amount of Rs. 51,80,947/- will be payable only as a reimbursement of the VAT to the respondent. However, this stand has been taken for the first time in the additional written arguments as the said facts are neither alleged in statement of defence nor in the petition. It is further argued in additional written arguments that the Learned Arbitrator has not discussed the issues raised in the claimed petition as well as in the statement of defence as a result the Award suffers from patent illegality. It is to be noticed that the petitioner has not raised any such issues before the Learned Arbitrator during the arbitral proceedings. This Court cannot sit in appeal so as to set aside the reasoning and the observation of the Learned Arbitrator which are passed on cogent appreciation of facts and law applicable to the OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 44 of 46 dispute before the Learned Arbitrator.
31. Relying upon the law laid in the cases of "(i) Associate Builders (supra); (ii) Ssangyong Engineering & Constructions Co. Ltd. (supra); (iii) Patel Engineering Ltd. vs. North Eastern Electric Power Corporation Ltd., (supra);
(iv) Swan Gold Mine vs Hindustan Copper (supra); (v) Oil & Natural Gas Corporation Ltd. vs Saw Pipes Ltd., (supra); (vi) M/s Arosan Enterprises Ltd (supra); (vii) MCD vs Harcharan Dass Gupta Construction Pvt. Ltd., (supra); and (viii) PSA SICAL Terminals Pvt. Ltd. vs. The Board of Trustee of VO Chidambranar for Trust Tuticorin & Ors.", it can be said that not only the reasoning of the Ld. Arbitrator are logical, but all the material and evidence were taken note of by the Ld. Arbitrator and this Court cannot substitute its own evaluation of conclusion of law or fact to come to the conclusion other than that of the Ld. Arbitrator. Cogent grounds, sufficient reasons have been assigned by Ld. Arbitrator in reaching the just conclusion and no error of law or misconduct is apparent on the face of the record. This Court cannot reappraise the evidence and it is not open to this Court to sit in the appeal over the conclusion/findings of facts arrived at by Ld. Arbitrator. Re-appraisal of the matter cannot be done by this Court. No error is apparent in respect of the impugned award. I do not find any contradiction in the observations and findings given by Learned Arbitrator. There is no patent illegality or legal perversity in the Award. The award is not OMP (Comm) No. 128/19 M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 45 of 46 against any public policy nor against the terms of contract of the parties. No ground for interference is made out. None of the grounds raised by the petitioner attract Section 34 of the Act.
32. For the foregoing reasons, the petition is hereby dismissed. The parties are left to bear their own costs.
File be consigned to record room.
Digitally signed RAJ by RAJ KUMAR
CHAUHAN
Announced in open Court KUMAR Date:
CHAUHAN 2021.12.08
on 08.12.2021. 14:16:04 +0200
(RAJ KUMAR CHAUHAN)
District Judge (Commercial Court-01) South East/Saket Courts New Delhi.
OMP (Comm) No. 128/19M/s Central Electronics vs. M/s Elcomponics Technologies India Pvt. Ltd.
(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/08.12.2021 Page 46 of 46