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2016 (4) TMI 801 - SC - Service TaxWhether increase in rates of service tax in respect of bank guarantee and insurance premium is directly relatable to terms of the contract and performance under the Contract is certainly a possible view. Appellant submitted that only those claims which were constructional inputs alone would be eligible to be covered under Clause 70 of COPA. Also the service tax on bank guarantee could have been avoided by the claimant, if the bank guarantee was replaced by tendering cash and that the facility of bank guarantee was optional and at the discretion of the claimant. Similarly, money advances were given for the benefit of the claimant and any cost associated with such benefit would not come within the scope of Clause 70.8. However, respondent submitted that the bank guarantees were required to be given under the contract itself and such requirement was stipulated by the appellant primarily to reduce its financial risk and to bind the claimant for its performance or protecting the money advanced to the respondents. In his submission, furnishing a performance bank guarantee @ 10% of the contract price was a mandatory condition of the contract under Clauses 10.1 and 10.2 of COPA. Though at some stage the option of performance bond was mentioned in COPA, such option was withdrawn making performance security to be compulsorily in the form of an unconditional bank guarantee. Such requirement being directly referable to essential conditions and arising out of the terms of the Contract, according to him the matter was definitely within the ambit of Clause 70.8 of COPA. Held that:- the assessment made by the Arbitral Tribunal as affirmed by the High Court was definitely within its jurisdiction. It has consistently been laid down by this Court that construction of the terms of a Contract is primarily for an Arbitrator or Arbitral Tribunal to decide and unless the Arbitrator or Arbitral Tribunal construes the contract in such a way that no fair minded or reasonable person could do, no interference by Court is called for. Viewed thus, we do not see any reason or justification to interfere in the matter. The view that the increase in rates of service tax in respect of bank guarantee and insurance premium is directly relatable to terms of the contract and performance under the Contract is certainly a possible view. - Decided against the appellant
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