Delhi District Court
Rail Vikas Nigam Ltd vs Royal Forging Pvt Ltd on 9 June, 2022
In the Court of Shri Sanjiv Jain, District Judge,
(Commercial Court-03), Patiala House Courts New Delhi
OMP (Comm) No. 49/19
Rail Vikas Nigam Ltd
1st Floor, August Kranti Bhawan,
Bhikaji Cama Place,
New Delhi-110066 ....... Petitioner
versus
Royal Forging Pvt Ltd
18, R. N. Mukherjee Road,
6th & 8th Floor,
Kolkata-700001 ....... Respondent
Date of institution : 02.03.2019 Date of reserving judgment : 27.04.2022 Date of decision : 09.06.2022 JUDGME NT
1. Question involved in the present petition under Section 34 of the Arbitration & Conciliation Act, 1996 (hereinafter called the 'Act') is whether the work of "flash butt welding of 52 / 60 kg rails at site using mobile butt welding plant for different construction projects under RVNL of Indian Railways" is a composite work not subjected to service tax being part of railway infrastructure project of Public & National importance or a non composite work, which is subjected to OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.1 of 27 Service Tax.
2. The petitioner on 17.10.2005 had invited bid for the work of flash butt welding (FBW) of 52 / 60 kg rails at site using mobile butt welding plant for different construction projects under RVNL of Indian Railways. The respondent participated in the bid and was awarded the work vide letter of award dated 09.01.2006. The contract was signed on 13.02.2006. As per the contract, the respondent was to render services at different railways construction / infrastructure projects on multiple sites as detailed below:
S. Name of Project Railways Controlling
No. CPM / GM
A Central Railway
1 Pakni-Splarpur Doubling CR Raipur
2 Pakni-Mohol Doubling CR Raipur
B East Cast Railway
3 Keojhar-Tomka New Line ECoR BBS
C Northern Railway
4 Jn Cabin-Palwal 4th Line Doubling NR GM / CC
D North Central Railway
5 Palwal-Bhuteshwar 3rd Line NCR GM / CC
E Southern Railway
6 Thanjavur-Villupuram Gauge SR Chennai
Conversion
7 Cuddalore-Salem Gauge SR Chennai
OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.2 of 27
Conversion
3. The contract included the bill of quantities (BOQ) prescribing the rate payable to the respondent for each work done as below:
a. Flash Butt Welding of the given specification of new rail joints in yard or base depot to make 3/5 rail panels including handling of single rail including free lead up to 500 meter and staking of welded Rail panels within the yard as directed by site in-chargc with contractor's own Mobile Flash Butt Welding Plant. Mobilization. Freight.
Labour, consumables and all ancillary works as per Manual as per Manual, including ultrasonic testing of welded joints using contractor's own USFD Testing machine and supervisor and as per manual for Ultrasonic Testing of Rails welds.
b. Loading, leading, unloading and stacking over free lead of 200 mts miscellaneous material including released / new such as rails , etc., with use of any mechanized devices/ transport and other necessary operations taking all safety measures including all lifts , ascents, descents , crossing of track , nallahs, level crossing , handling, rehandling as complete job.
c. End cropping of specified rail end with contractor's all tools, plants, and equipments as directed.
d. Shifting of Mobile Flash Butt Welding Plant by Road from one project site to other project site.
4. The work was to be completed upto 08.05.2008 and the total contract consideration was Rs. 10,69,67,295/-. During execution, dispute arose qua reimbursement of service tax. The petitioner vide letter dated 02.09.2008 informed the respondent OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.3 of 27 that the Service Tax would not be payable on railway projects. An Arbitral Tribunal comprising of Sh. Ashok Kumar, Sr. Vice President, PRCL, A. K. Tyagi, GGM / Elect. / RVNL and Sh. D. C. Pandey, PED / Elect. / RVNL was constituted by the petitioner for deciding the issue of Service Tax as referred by the respondent vide letter dated 26.05.2015.
5. As per the contract, the respondent was to render services on different construction projects at several locations. The nomenclature of job was that the respondent was to do flash butt welding of 52 / 60 kg rails at site using mobile butt welding plant for different construction projects under RVNL. During execution, respondent paid Rs. 40,49,979/- towards the service tax together with Education Cess on Service Tax to the Service Tax Authorities. It was duly certified by the Inspector Range (Service Tax), Raipur, CG. The respondent requested the petitioner on repeated occasions for the reimbursement of the said amount but the petitioner did not take any action. Clause 70.5 (subsequent registration) sub Section 3 of bid document provided that "after the date of 28 days prior to the latest date of submission of bids, any changes in statute which causes additional or reduced cost to the contractor, such additional or reduced cost shall be added to or deducted from the contractor price". The respondent accordingly applied for the refund of OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.4 of 27 Service Tax stating that RVNL has been paying Service Tax in similar works in other contracts. It also referred the letter of acceptance dated 30.07.2007 signed by the AGM / Project / RVNL, Chennai containing a note that "Service Tax as applicable at the time of execution will be paid extra".
6. According to the respondent, by the Financial Act, 2006, which came into effect from 01.05.2006, in the definition of "Service" under Section 65 (39a) (i) following words were inserted, ".......... or structures whether pre-fabricated or otherwise", meaning that the structures whether pre-fabricated or otherwise were added enhancing the scope of taxable services. The term "commissioning & installation agency"
defined under Section 65 (29) of the Financial Act, 1994 i.e. any agency providing service in relation to erection, commissioning or installation, was also amended on 01.05.2006, meaning "any service provided by a commissioning and installation agency in relation to (i) erection commissioning or installation of plant, machinery, equipment or structures whether pre-fabricated or otherwise........." Since the Finance Act 2006 came before the agreement dated 09.01.2006 having completion period ending on 08.05.2008, for the total contract consideration, the service tax has to be reimbursed by the petitioner. It is stated that other OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.5 of 27 Railways have been reimbursing the service tax. It also referred the minutes of the meeting dated 31.05.2006 on "Negotiation for works of flash butt welding with East Central Railway", where clarification was issued vide letter no ECR / CAO / CON / WT / NIT / 210 (Vol. 1/2201 Dt. 31.05.2006)". In the said reference, it was decided by the Railways to reimburse service tax leviable on FBW work upon production of documentary evidence. According to the respondent, Railway Board vide letter dated 18.08.2006 had clarified that the issue was examined in consultation with the Ministry of Finance (Department of Revenue / Central Board of Excise & Customs), which has clarified that since the activity of welding rails into long length rails for production or processing of goods for or on behalf of the client is an activity taxable under Business Auxiliary Service, therefore, service tax is leviable on the gross amount to be charged by the service provider for such service providing or to be provided. South Eastern Railways vide its letter dated 25.10.2010 had also clarified that as per the Railway Board letter dated 18.08.2006, onus of payment of service tax is on the contractor.
7. According to the petitioner, the respondent was awarded the work for different construction projects at several locations under RVNL. The parties had entered into only one contract, OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.6 of 27 which envisaged several works at several locations, thereby, making a composite work contract. Scope of work was not limited to only flash butt welding but several other works were also included as provided in BOQ. The services were required at the site where the work of doubling, introduction of new line, gauge conversion of railways was taking place i.e. Exclusive Railway & National infrastructure works. It was stated that no service tax was payable under the law and the respondent wrongly paid the service tax to the Service Tax Authorities. It referred the Finance Act, 2007, Section 65 (105) (zzzza) set out to tax the works contract, excluding works contract in respect of roads, airport, railways etc i.e. infrastructure projects / work contracts, which were individual and composite interalia as under:
"Taxable Service" means any service provided or to be provided to any person, by any other in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams. Explanation.
For the purposes of this sub-clause, "works contract" means a contract wherein, Transfer of property in goods involved in the execution of contract is leviable to tax as sale of goods. Such contract is for the purpose of carrying out:-
Erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe works, duct works of sheet metal work, thermal insulation, sound insulation, fire proofing, water proofing, lift and escalator, fire escape staircases or elevators; or OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.7 of 27 Construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry;or Construction of a new residential complex or a part thereof; or Completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to
(b) and (c); or Turnkey projects including engineering, procurement and construction or commissioning (EPC) projects.
8. It is stated that the contract and the works cannot be splitted since the work entrusted with the respondent was a composite and no service tax is payable on the work contracts for railway / infrastructure projects. Reference was made of the case CCE & Customs Vs. Larsen & Toubro Ltd, (2016) 1 SCC 170, where it was clarified interalia as under:
Service tax is not leviable on infrastructure projects and Composite Works Contract. Copy of the said judgment is annexed hereto as Annexure R/W-3, which was also relied and circulated by the Claimant at the time of Oral Arguments by the Respondent. The relevant paragraphs of the judgment are reproduced herein below:
"10 By the Finance Act, for the first time, section 65 (105) (zzzzza) set out to tax the following:
" (105) (zzzza) to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminal, bridges, tunnels and dams.
Explanation.- For the purpose of this sub-clause, works contract means a contract wherein-
Transfer of property in goods involved in the execution of such contract is leviable to tax as sale of good, and Such contract is for the purpose of carrying out-
(a) erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise, installation of electrical and electronic OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.8 of 27 devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircase or elevators; or (b) Construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry; or (c) Construction of a new residential complex or a part thereof, or (d) completion and finishing services, repair, alteration renovation or restoration of, or similar services, in relation to (b) and (c). (e) Turnkey projects including engineering, procurement and construction or commissioning (EPC) projects."
9. It is stated that the Arbitral Tribunal time & again had sought respondent's representation to the Service Tax Department for reimbursement of the tax amount wrongly deposited but till the date of final hearing, it did not furnish any representation or the record, which clearly shows that the respondent had not approached the Service Tax Department and it instead approached the petitioner for the reimbursement, abusing the process of law.
10. The Tribunal, after hearing the parties and perusing the documents / pleadings came to the following conclusion:-
Even though Railway infrastructure projects are exempted from levy of Service Tax, but the part works are not exempted. The Ministry of Finance vide its notification dated 28.02.2007 has re-established that infrastructure projects are exempted from levy of Service Tax. But the work under consideration is not the composite Railway project, since, the work of FBW is only one activity and is OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.9 of 27 also executed by the Zonal Railways, under Rail Infrastructure works. The Supreme Court in its recent judgment of CEE & Custom Vs. Larsen & Turbo Ltd (2016) 1 SCC 170 has held that infrastructure projects including railways were never meant to be levied Service Tax and are thus exempted. In the instant case, only FBW is involved and this activity is also done by the maintenance organization of Railways, so it cannot be classified as the Rail Infrastructure Work, as all related activities had not been awarded to a single party. In the present case only one activity has been awarded to the claimant, so the claimant is not eligible for the Service Tax Exemption. As this activity is considered as standalone activity. The letter from Railway Board No. Track/21/2004/0110/7/51154 dated 18.08.2006 has also clarified that the service tax is payable on FB welding work. However, on the contrary, if FBW would have been a part of the composite Contract awarded to the main party the service tax exemption would have been applicable. The respondent could not submit any documentary evidence to prove that the Indian Railways were not required to pay service tax for FBW. So amount payable on account of unlawful deduction by the respondents allegedly towards service tax Rs. 40,49,797/- be refunded.
11. As regards interest, the Tribunal taking note of sub clause 60.7, Section 3, Part II of the contract agreement, which provided for giving mobilization advance @ 5% per annum allowed the interest @ 5% to be compounded annually w.e.f. 01.09.2008 i.e. rate on which request for reimbursement of service tax was rejected by the petitioner vide letter dated 02.09.2008 upto 30.09.2008. The respondent was also directed to give an undertaking that it has not claimed reimbursement of the service tax in any form from any Statutory Authority of the OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.10 of 27 Government.
12. Sh. Udit Seth, Ld. Counsel for the petitioner vehemently argued that the impugned award is against the fundamental policy of India and also against the settled terms of the contract. The award did not deal with the submissions advanced by the petitioner or the statute law laid down by the Supreme Court and the circulars issued by the Ministry of Finance, which categorically exempt the work in infrastructure projects from levy of service tax. Ld. Counsel contended that the award suffers from non application of mind. Though, the parties had concluded the arguments on 03.05.2017 but the award was pronounced on 05.10.2018 after an inexplicable delay of 18 months. The Tribunal failed to observe that the work done in the instant project was the railway infrastructure work on which service tax was not payable. Since, the petitioner was under no obligation to pay the service tax, the claim for reimbursement was not maintainable. The remedy available with the respondent is to seek refund from the Service Tax Department. Ld. Counsel stated that construction activities concerning railways are excluded from the definition of commercial or industrial construction as defined in sub clause (25b) of Section 65 of the Finance Act. Ld. Counsel argued that the Tribunal failed to observe that composite work contracts are not subject OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.11 of 27 to service tax. The Tribunal also ignored the circular issued by the Ministry of Finance dated 28.02.2007, which exempted the railway projects from the scope of levy of service tax. It failed to take cognizance of the law laid down in the case of CCE & Customs (supra), where, it was clearly held that service tax is not leviable on infrastructure project and composite work contracts. Reference is also made of the cases Delhi Metro Rail Corporation Limited Vs. MCD & Ors, 2008 (103) DRJ 369, Afcons Infrastructure Limited Vs. Commissioner of Service Tax, Appeal No. ST/85811 to 85813 & 85447/2013, decided on 04.07.2013, Shahadra (Delhi) Saharnpur Light Railway Co. ltd Vs. Municipal board, Saharanpur (1967) 3 SCR 243 and Numaligarh Refinery Ltd Vs. Daelim Industrial Co. Ltd, (2007) 8, SCC 466, SMS Infrastructure Ltd Vs. Commissioner of Central Excise &Customs Nagpur, Appeal No. ST/133/2011 decided on 24.02.2016 passed by the Customs, Excise & Service Tax Appellant Tribunal, vide order dated 24.02.2016. Ld. Counsel stated that the Tribunal erroneously held that part work done by the respondent under the contract was not a part of railway project or the work done was for the maintenance of rails.
13. Sh. Ashish Khorana, Ld. Counsel for the respondent per contra argued that the grounds raised in the present petition are OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.12 of 27 baseless. This Court is not sitting as a Court of appeal. Ld. Counsel stated that the Tribunal has adjudicated the disputes after holding several hearings granting fullest opportunities to the parties. Ld. Counsel stated that the scope of interference in the petition under Section 34 is very narrow.
14. Ld. Counsel contended that the objections against the award are basically on the interpretation of the terms of the contract and it is a well settled law that the Court cannot interfere in an award, even if, the Court may come to different conclusion and the finding of facts cannot be corrected since the Arbitrator is the master of facts and the law. Ld. Counsel stated that the Tribunal while making the award has examined all the documentary evidence and the pleadings and passed the award in accordance with law. Ld. Counsel stated that the respondent was entitled for the reimbursement of service tax as per the law. Since, the petitioner wrongly refused to pay the service tax, the respondent finding no other alternative sought the arbitration. Ld. Counsel stated that the Tribunal had considered the judgment in the case of CCE & Customs (supra) as evident from the arbitral record. Ld. Counsel stated that there is no contradiction as to the payment of service tax by the respondent. It was the petitioner, which had to reimburse the same to the respondent. Reference is made of the cases OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.13 of 27 Olympus Superstructures Pvt Ltd Vs. Meena Vijay Khetan, AIR 1999 SC 2102, ONGC Vs. Saw Pipes Pvt Ltd, AIR 2003 SC 2629, Kunj Behari Banerjee and Sons & Ors Vs. New India Assurance Co. Ltd, 2009 (1) RAJ 328 (SC), Union of India Vs. Arctic India, 2010 (4) ALR, Delhi State Industrial & Infrastructure Development Corporation Ltd Vs. Rama Construction Company, 2014 (3) Arb LT 105 (Delhi) DB, Delhi Development Authority Vs. Bhardwaj Brother, 2014 (3) Arb LR 333 (Delhi) DB and Associate Builders Vs. Delhi Development Authority, (2014) 11 AD (SC) 213.
15. I have given my thoughtful consideration to the rival contentions, perused the record, award and gone through the case laws supra.
16. Section 34 of the Arbitration and Conciliation Act reads as:
"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 sub- section (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 OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.14 of 27
(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 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- I For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India only if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81."
ii) It is in contravention with the fundamental policy of Indian law;
iii) It is in conflict with the most basic notions of morality or justice.
Explanation-II- 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.
[2 (A) An arbitral award arising out of arbitrations other than OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.15 of 27 international commercial arbitrations, may also be set aside by the court, if the court 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 reappreciation of evidence.
17. Normally, the general principles are that the decision of the Arbitrator unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even if the court as a court of law would come to a different conclu- sion on the same facts. The court cannot reappraise the evi- dence 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 cancelled are those men- tioned in the Arbitration Act. Where the arbitrator assigns co- gent grounds and sufficient reasons and no error of law or mis- conduct is cited, the award will not call for interference by the court in the exercise of the power vested in it.
18. In the case of Associate Builders v/s Delhi Development Authority, (2015) 3 SCC 49, it was held that interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when con- science of the Court is shocked or when illegality is not trivial OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.16 of 27 but goes to the root of the matter. 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.
19. In Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India Ltd. 2019 SCC OnLine SC 677, the Supreme Court has held that under Section 34 of the Act, a decision which is perverse while no longer being a ground for challenge under public policy of India but 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.
20. A perusal of contract document reveals that the respondent had to do the work of flash butt welding of 52 /60 kg rails at multiple sites using mobile butt welding plant for different construction projects under RVNL. The scope of work included flash butt welding of new rail joints in yard or base depot to make 3 /5 rails panel including handling of single rail, stacking of welded rail panel within the yard including OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.17 of 27 ultrasonic testing of welding joints, loading / unloading / stacking over rails etc using the mechanized devises / transport, end cropping of specified rail end shifting of welding plant from one project site to other project site.
21. From the scope of work, it is clear that it was a single work of flash butt welding of new rail joints using 52 /60 kg rails for different construction projects under RVNL. The work did not include any other work relating to infrastructure development to be taken as part of infrastructure projects. It was a single contract for several locations. The Finance Act, which became effective from 01.05.2006 includes the structures whether pre-fabricated or otherwise for taxable services as provided under Section 65 (39a) (i). The contract was awarded on 09.01.2006, so in terms of clause 70.5 sub section 3 of the bid document, additional / reduced cost shall be added / deducted in / from the contractor's price. It is clear from the bid documents that if the respondent was to pay any sum on account of service tax at the time of execution of work, the same would be reimbursed by the petitioner. In this case, before the Tribunal, the respondent had produced letter of acceptance dated 30.07.2007 of the AGM (Project), RVNL, Chennai in respect of the similar work containing a note that the service tax as applicable at the time of execution would be paid extra. It OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.18 of 27 was also pleaded by the respondent that other zones of Railways have also reimbursed the service tax. It produced the minutes of the meeting dated 31.05.2006, where, it was clarified that railway would reimburse service tax leviable on flash butt welding upon production of documentary evidence. In the instant case, the respondent had paid the service tax, which fact was not disputed by the petitioner. In fact, the respondent had informed the petitioner about payment of the service tax and requested for its reimbursement but the petitioner remained silent and at no point of time before the completion of the work pointed out that service tax was not payable as the said work is a part of infrastructure project on which service tax was not leviable. The Railway Board in its letter dated 18.08.2006 had also clarified that the activity of welding rails into long length rails amounts to production / processing of goods is an activity taxable under the Business Auxiliary Service, so the service tax is leviable on such service.
22. The petitioner has pleaded that the contract envisaged several works at several locations, thereby, making a composite work contract, the scope of work was not limited to flash butt welding but several other works as provided in the bills of quantities. On a careful perusal of the contract and the bills of quantities, I find that though the contract is one for the work at OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.19 of 27 several locations but it is in respect of only one activity i.e. flash butt welding of rails at site using mobile butt welding plant. It did not include several other works as pleaded by the petitioner. There is no quarrel on the legal proposition as provided under Section 65 (105) (zzzza) of the Finance Act, 2007 / laid down in the case of CCE & Customs & Larsen & Toubro Ltd (supra) and that the infrastructure projects / work contracts are exempted from the service tax but in the present case, the work undertaken by the respondent in no way can be said to be an infrastructure project or composite work as claimed by the petitioner.
23. It may be true that the respondent did not furnish any document as to the representation made to the Service Tax Department for the reimbursement of the tax amount allegedly wrongly deposited but from, this the petitioner cannot be exempted from the reimbursement of the service tax, which was paid by the respondent during the execution of work to the Authorities. In this case, the Tribunal has held that even though, the railway infrastructure projects are exempted from levy of service tax but the part works are not exempted. It was held that since the work under consideration is not the composite railway project and flash butt welding is only one activity and is also executed by the zonal railways under the rail infrastructure OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.20 of 27 works, so it is not exempted from the levy of service tax. The Tribunal has also referred the case CCE & Customs & Larsen & Toubro Ltd (supra) and distinguished it holding that instant work involved only flash butt welding, which activity is also undertaken by the maintenance wing of railways, so, it cannot be classified as the railway infrastructure work as all related activities had not been awarded to the single party. In this case, only one activity has been awarded to the respondent, so it would not be entitled to service tax exemption being the activity as stand alone activity. The Tribunal also referred the letter of the Railway Board dated 18.08.2006 regarding the clarification on the payment of service tax on flash butt welding work. The Tribunal had noted that had the work of flash butt welding been the part of the composite contract awarded to the main party, service tax exemption would have been applicable. In this case, there is nothing to indicate that the petitioner was not required to pay the service tax on the work of flash butt welding. The Tribunal has rightly held that the amount paid by the respondent on that account is liable to be reimbursed by the petitioner. The correspondences on record would also show that the respondent many a times had requested the petitioner for the reimbursement of the amount but the petitioner did not take any action and slept over the matter. It rather would have issued a letter or coordinated with the Tax Authorities for releasing the OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.21 of 27 amount, in case, the work was exempted from the levy of service tax. It left everything on the agency for seeking refund, which already delayed for more than a decade.
24. A perusal of arbitral award and the record reveals that the Tribunal had given equal opportunities to the parties to submit their documents and had detailed discussions in many meetings including in the last meeting held on 23.07.2018. It had considered the contentions of the parties and the case laws referred by the parties in support of their contentions and thereafter passed the award giving the detailed reasons. In this case, the Tribunal has rightly interpreted the terms of the contract and the circulars issued by the Ministry from time to time and there is nothing to infer that the award is against the fundamental policy of India / settled terms of the contract or it suffers from non application of mind. The case of Delhi Metro Rail Corporation (supra) referred by the petitioner is distinguishable on facts. In that case, it was held that the petitioner was entitled to exemption from payment of municipal taxes in view of Section 184 of 1989 Act but only respect of assets, which have been defined as railways in Section 2 (31). In the present case, there was a categorical observation of the Tribunal that the work executed by the respondent was not exempted from levy of service tax being a single work not the OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.22 of 27 composite work or the infrastructure work. The cases of Afcon Infrastructure (supra), the appellant had undertaken civil construction for the Delhi Metro Rail Corporation under turn key contracts and did not pay the service tax on the activity undertaken by it but the present case involved a single activity, which is not exempted from the levy of service tax. In the case of Shahadra (Delhi) Saharnpur Light Railway Co. ltd Vs. Municipal board, Saharanpur (supra) Numaligarh Refinery Ltd Vs. Daelim Industrial Co. Ltd (supra) and SMS Infrastructure Ltd Vs. Commissioner of Central Excise &Customs Nagpur (supra) are also distinguishable on facts and do not help the petitioner. In the case of Shahadra (Delhi) Saharnpur Light Railway Co. ltd Vs. Municipal board, Saharanpur (supra), the question involved was whether railway is entitled to claim exemption from payment of terminal tax. The present case however relates to the work of flash butt welding and being a single work / activity, service tax is payable.
25. In Mc Dermott International Inc v. Burn Standard Co.
Ltd and Ors, CA No. 4492 of 1998, the Supreme Court has observed as under:
"It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The construction of the contract agreement, is within the jurisdiction of the arbitrators having regard to the wide OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.23 of 27 nature, scope and ambit of the arbitration agreement and they cannot, be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law."
26. As regards the contention that the parties had concluded the arguments on 03.05.2017 and there was inexplicable delay of 18 months in pronouncing the award, which was pronounced on 05.10.2018, the Arbitrator's record reveals that the Tribunal had conducted the proceedings on 09.06.2017, 28.07.2017, 18.08.2017 & 01.09.2017. It was recorded in the award that parties has taken excessive time in submitting the documents and clarifications on the submissions. The Tribunal also had a detailed discussions in many meeting and the last meeting was held on 23.07.2018. In this case, the Arbitral Tribunal was con- stituted vide letter dated 26.05.2015 i.e. prior to the amendment in the Act, which came into effect on 23.10.2015. Before the amendment, no time limit was prescribed for passing the award after the Tribunal entering upon the reference. So, the delay, if any, does not prove fatal to the award.
27. In the instant award, the Tribunal has covered all the as-
pects of the claims, records and the proceedings and thereafter, OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.24 of 27 given the findings. It is not the case that it was bias or he mis- conducted the proceedings or whatever observations it has made were beyond the scope of the contract/agreement. It inter- preted the contract and the terms and conditions and thereafter, passed a reasoned award which is not against the public policy nor the award smells of any fraud which requires review by the court under Section 34 of the Arbitration and Conciliation Act, 1996.
Conclusion:
28. Now to sum up, in the instant case, most of the grounds raised by the petitioner to challenge the award are factual in nature which have been already considered and adjudicated in the impugned award. It is outside the scope of Section 34 of the Act to reappreciate the entire evidence and come to conclusion because such an approach would defeat the purpose of arbitration proceedings. It has been consistently held 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 facts 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 quality and quantity of evidence to be relied upon when he delivers his arbitral award. Once, it is found that the arbitrator's approach is not arbitrary or OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.25 of 27 capricious, then he is the last word on facts. (P.R Shah, Shares & Stock Brokers (P) Ltd v. B.H.H Securities (P) Ltd. [(2012) 1 SCC 594).
29. Having examined the various contentions of the peti-
tioner on the touchstone of the parameters of interference as ex- plicitly laid down by the Supreme Court in several judgments referred to above, I am of the view that the impugned Award, does not suffer from any infirmity or error apparent on the face of record. It is not for this Court to sit in appraisal of the evi- dence led before the Tribunal and this Court will not open itself to the task of being a judge on the evidence placed before the Tribunal which was subject matter of dispute. In the present case, the Tribunal has deliberated on the issues under reference which were within its competence and as per the agreement en- tered into between the parties. The Tribunal has duly explained the reasons for arriving at its decisions. There is nothing to indi- cate that award is in conflict with the basic notions of justice and the fair play and fundamental policy of Indian law or in contravention of the terms of the agreement or it lacks reason- ing.
OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.26 of 27
30. For the aforesaid discussions, I am of the view that the impugned award does not call for interference.
31. The petition is accordingly dismissed with no orders as to costs.
32. File be consigned to record room.
Announced in open court today i.e. 09.06.2022 (Sanjiv Jain) District Judge (Commercial- 03) Patiala House Courts, New Delhi OMP Comm No. 49/2019 Rail Vikas Nigam Ltd Vs. Royal Forgings Pvt Ltd Page No.27 of 27