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2021 (7) TMI 235 - HC - GSTValidity of interim arbitral award - Reimbursement of GST on production charges/supply of meals with effect from 1st July 2017 - welcome drink served to the passengers was provided by IRCTC - welcome drink formed a part of initial period of contract or not? - policy decision dated 07th February, 2017 - pecuniary jurisdiction as per the provision of Section 12(2) of the Commercial Courts Acts, 2015 - HELD THAT:- The contention that the policy decision dated 07th February, 2017 became a part of the contract between the parties has rightly been disallowed by the learned Arbitrator, by holding the same to be a fresh policy decision brought in by IRCTC post entering into the licensing agreement with DC. IRCTC could not give any justification for bearing the burden for the initial period between 19th December, 2016 to 4th March, 2017, despite it’s alleged understanding to the contrary. Its continued supply of welcome drink without expressly affirming that the contractual obligation for the job lay on DC, reaffirms the uncertainty of contractual obligations. On the basis of the conduct and the testimony of witnesses, the learned Arbitrator has rightly held that the actions of IRCTC exhibit ambiguity about DC’s contractually stipulated obligations, which were then redressed by way of the ex post facto policy decision. The interpretation of the contract, as done by the learned Arbitrator, is based on the conduct of the parties, the contractual stipulations, as well as the evidence on record. This court finds reasoning supporting such interpretation to be rational, balanced, and germane, and sees no reason to disagree with the same, especially when construction of contract falls within the realm of an arbitrator’s jurisdiction. For the aforesaid reasons, the court finds no merit in this ground of challenge. GST on production charges / supply of meal, post the introduction of the GST regime - HELD THAT:- GST regime has been introduced by the Central Government and is applicable to the services being provided by DC and is not in lieu of VAT, which has since been abolished. Therefore, the payment of GST on production charges is admissible to DC, which is to be reimbursed upon furnishing proof of deposit of the same with the concerned authorities - the quotes for supply/production of food in terms of Annexure-F were inclusive of taxes. There was no GST on production of food, neither on the date of tender nor on the date of award of licence. It was introduced much later, with effect from 1st July 2017. Would this tax be reimbursable to DC, or, in light of contractual provisions, it would be included in the rates quoted in the tender, was the question before the Arbitrator. The GST laws has replaced the erstwhile indirect taxation regime. This value added tax subsumed several indirect taxes, including VAT, which was an indirect tax, levied state-wise. Earlier, VAT was levied on production, in accordance with State-specific VAT Acts, which was being borne by DC. DC has explained that since the trains were moving through several states and each state had a different rate of tax under State VAT laws, it was not feasible to account for the same, therefore production charges were paid inclusive of taxes. Besides, no Input Tax Credit was available to IRCTC for VAT - The bifurcation of production charges was done under the afore-noted circular and it was advised that GST is to be reimbursed to the service provider on submission of proof of deposit. IRCTC’s witness admitted that tax invoices uploaded by DC under GSTR-1, in the return filed for outward supplies, have been reflected in GSTR-2, in the return of inward supplies of IRCTC, which is auto populated on the basis of GSTR-1. The tax paid to DC would thus be available as ITC for IRCTC to pay its outgoing tax liability. Further, in the train fare, GST charges are being included and recovered from the passengers on production of catering services (i.e. meals) at the agreed rates - the court does not find any fault with the interpretation of the relevant terms of the contract. The learned Arbitrator has decided the dispute within the four corners of the contractual provisions, in light of the change in tax regime brought about by the introduction of GST laws. It cannot be held that his findings are unfair or suffer from perversity. Therefore, the court cannot hold the reasoning to be wholly unsustainable, in the absence whereof, it is impermissible for the court to interfere - petition dismissed.
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