Case Note & Summary
The dispute arose between a foreign company, engaged in providing offshore drilling rigs, and the Oil & Natural Gas Corporation Ltd (ONGC) regarding the reimbursement of customs duty paid on the import of a rig. The applicant had imported the rig in 1988 and was entitled to reimbursement under a contract clause. After a customs show-cause notice in 1999 and subsequent tribunal orders, the applicant paid customs duty amounting to Rs.26,67,94,320/- in February 2001. The applicant sought a refund based on an essentiality certificate, which was ultimately rejected by the customs department in February 2002. Following ONGC's denial of reimbursement, the applicant invoked the arbitration clause in March 2003. ONGC contended that the arbitration application was premature since the essentiality certificate was not utilized and the customs department had not yet made a decision on the applicant's entitlement. The court noted that the liability to pay customs duty had accrued and thus the arbitration application was maintainable. The court appointed two arbitrators to resolve the disputes and allowed them to fix their own terms regarding remuneration and hearing dates.
Headnote
A) Arbitration - Prematurity of Application - Invocation of Arbitration Clause - Arbitration & Conciliation Act, 1996, Section 11(4) - The court held that the invocation of the arbitration clause was not premature as the liability to pay customs duty had accrued despite the pending decision on the essentiality certificate. The court appointed arbitrators to resolve the disputes arising from the contract. (Paras 1-3).
Issue of Consideration
Whether the arbitration application was premature given the pending decision on the essentiality certificate by the customs department.
Final Decision
The court appointed arbitrators to resolve the disputes between the parties, holding that the arbitration application was maintainable despite the pending customs decision.
Law Points
- Arbitration
- Customs Duty
- Essentiality Certificate
- Reimbursement
- Prematurity of Arbitration Application
