SAMHO GUNYOUNG CO LTD Vs. FLAKT INDIA LTD

JUDGEMENT

(1.) BY this petition under Section 34 of the Arbitration and Conciliation Act, the petitioner has assailed an award of the Tribunal dated 15th January, 2009 whereby the Tribunal allowed the claim of the respondent in respect of balance amount of milestone payment to the tune of USD72,730/- and INR39,04,510. 03 and also allowed a claim of USD18,045/- and INR2,66,460/- against vat and service tax not refunded. Tribunal awarded 12% interest on these amounts from the date they became due and payable, in case the amounts were not paid within 15 days of the passing of award, till realization. The Tribunal also directed the petitioner to pay balance 25% of the retention money of the claim and costs of arbitration proceedings.

(2.) THE respondent/claimant had entered into a sub- contract with the petitioner, called as 'tvs sub-contract' and the petitioner had deducted an amount of USD72,730/- and INR39,04,510. 03 out of the payments due towards the respondent and had also not refunded vat and service tax in terms of contract and had not paid remaining retention money to the tune of 25% which resulted into invocation of the Arbitration agreement by the respondent and passing of the award by the Tribunal in favour of the respondent. The contention of the counsel for the petitioner is that the sub- contract entered into between the petitioner and the respondent though was a lumpsum contract inclusive of all taxes, royalty, custom duties (other than custom duties, i. e. , basic custom duty, CVD and SAD of specified imported items which were not payable under the special exemption notification under the Customs Act, 1962 as described in terms of payment, Annexure-4), excise duty and other duties, still the petitioner was entitled to make deductions in case of an eventuality of deviation in the custom duty rates. The petitioner contended that it was entitled to deduct the amount on account of exemption of custom duty enjoyed by respondent under different notifications. The contracted lumpsum price entitled the petitioner to make recoveries of the amounts recovered from the petitioner by Samsung, on back- to-back basis.

(3.) THE learned Arbitral Tribunal considered the contract between the parties and the specific clauses regarding custom duty and came to conclusion that the petitioner's assumption that the fixed lumpsum price under the sub-contract was variable as per custom duty, was factually not correct. It was observed that there was no component of custom duty in the fixed lumpsum price agreed under the contract nor there was any incidence of custom duty charged and paid to the Government thereafter in respect of any of the imports into the country under the contract. The Tribunal also observed that the petitioner neither pleaded nor proved if any amount towards the exemption of custom duty was adjusted by the principal contractor (Samsung) from amount payable to the petitioner. It was also observed that the petitioner had failed to produce on record the invoices raised by Samsung on them having a component of custom duty, unlike the invoices raised by the respondent on the petitioner. The Arbitral Tribunal thus came to conclusion that the petitioner was not entitled to deduct the amount from the bills of respondent and allowed the claim of the respondent regarding these deductions. There is no dispute that the claimant/respondent was entitled for vat and service tax refund and during the arbitration proceedings, the petitioner had admitted a part of the claim and undertaken to release the said amount to the respondent/claimant at the earliest and as and when the same was received by the petitioner from the principal director.