Case Note & Summary
The petitioner, Punj Lloyd Ltd., filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an arbitral award dated 28 April 2011. The dispute arose from a contract for laying of pipeline and associated works awarded by the respondent, Bharat Petroleum Corporation Ltd. The petitioner claimed reimbursement of service tax paid from 16 June 2005 onwards, arguing that the contract required the respondent to reimburse such tax. The arbitrator rejected part of the claim, holding that under the contract, the petitioner was only entitled to reimbursement of taxes that were payable on the date of bid submission (6 June 2005). Since service tax on construction services was imposed by Notification No.15/2005 dated 7 June 2005, effective from 16 June 2005, it was not payable on the bid date. The court examined the contract clauses, including Commercial Addendum No.1 which inserted 'Service Tax' into the relevant clauses, and found that the arbitrator's interpretation was plausible and not patently illegal. The court dismissed the petition, upholding the award.
Headnote
A) Arbitration - Section 34 of Arbitration and Conciliation Act, 1996 - Challenge to Arbitral Award - Service Tax Reimbursement - The court considered whether the arbitral award rejecting the claim for reimbursement of service tax was patently illegal or against public policy. The court held that the arbitrator's interpretation of the contract clauses was plausible and not perverse, and thus the petition under Section 34 was dismissed. (Paras 1-20) B) Contract Interpretation - Service Tax - Reimbursement Clause - The contract provided for reimbursement of service tax if the tax was payable on the date of bid submission. The service tax was imposed after bid submission but before contract award. The arbitrator held that the petitioner was not entitled to reimbursement as the tax was not payable on the bid date. The court upheld this interpretation as reasonable. (Paras 2-15)
Issue of Consideration
Whether the petitioner is entitled to reimbursement of service tax imposed after submission of bid but before award of contract, under the terms of the contract.
Final Decision
The petition is dismissed. The arbitral award is upheld.
Law Points
- Arbitration
- Service Tax
- Reimbursement
- Contract Interpretation
- Section 34 Arbitration and Conciliation Act
- 1996
