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2016 (4) TMI 801 - SUPREME COURT

2016 (4) TMI 801 - SUPREME COURT - 2016 (42) S.T.R. 628 (SC) - Whether 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 b .....

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k 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 Though at some stage the option of performance bond was mentioned in COPA, such option was withdrawn making performance security to be compulsorily in the form of an unconditional bank guarantee.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 refera .....

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ues 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 - Civil Appeal No. 2529 of 2016 (Arising out of S .....

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sake of convenience, the facts leading to the filing of FAO (OS) 588 of 2013 are dealt with in detail. 2. Contract No.TNHP/2, Construction Package II-C for a contract price of ₹ 295.53 crores for executing the work of 4-laning and strengthening of the existing 2 lanes sections between km 38 to km 115 on National Highway- 2 in Uttar Pradesh was awarded to the Respondent on 12.03.2001. 3. Clause 14.3 of Instruction to Bidder was as under:- All duties, taxes and other levies payable by the C .....

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ementation India Ltd. 2015(6) SCR 107. Clause 70.8 dealing with effect of Subsequent Legislation was as under:- Clause 70.8: Subsequent Legislation If, after the date 28 days prior to the closing date for submission of bids for the Contract there are changes to any National or State Statute, Ordinance, Decree or other Law or any regulation or by-law of any local or other duly constituted authority or the introduction of any such State Statute, Ordinance, Decree, Law, regulation or by-law in Indi .....

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uced cost shall not be separately paid or credited if the same shall already have been taken into account in the indexing of any inputs to the Price Adjustment Formulae in accordance with the provisions of Sub-Clauses 70.1 to 70.7 of this Clause. 4. Disputes having arisen between the parties, the matter was referred to the Arbitral Tribunal. Two claims were raised by the respondent namely: (i) Dispute No. 1 Compensation for additional cost on account of increase in Service Tax on the Insurance P .....

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including insurance for works were subject to levy of service tax which would be collected by the Insurance Company along with premium chargeable. There being revisions in the rate of service tax from 5% to 10.30%, over a period of time, according to the claimant service tax paid in excess of 5% was reimbursible by the appellant under Clause 70.8 of COPA. Similarly, in terms of the Clause 10.1 of COPA, the respondent-claimant was required to furnish Bank Guarantee for due execution of the contra .....

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e paid by the Respondent an amount of ₹ 11,34,877/- on account of Service Tax paid by him at rates in excess of 5% of the premium paid. 6.2 The Claimant shall also be paid by the Respondent a sum of ₹ 11,22,811 towards interest on the above amount for period upto the date of this award i.e. 28.02.2013. 6.3 Post award interest shall be payable in addition, on the principal sum awarded of ₹ 11,34,877/- at the rate of 12% per annum from 01.03.2013 to the actual date of payment of .....

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by the Respondent a sum of ₹ 43,84,987/- towards interest on the above amount for period upto the date of this award i.e. 28.02.2013. 10.3 Post award interest shall be payable in addition on the awarded sum of ₹ 63,58,368/- at the rate of 12% per annum (simple) from the date of award to the actual date of payment of the said sum. No post award interest may, however, be paid in case the sums awarded under 10.1 and 10.2 above are paid within 90 days of the date of the award. 6. The awa .....

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defined in Sub-Clause 70.8. In terms of the Sub-clause, such costs are not payable separately if the same have already been taken into account in indexing of the inputs in Price Adjustment Formulae under Sub-clause 70.3. The Claimant has placed on record a letter dated 24.01.2008 from the Economic Advisor, Ministry of Commerce and Industry, confirming that Service Tax was not an input into indexing of Whole Sale Price Indices, used in India. 7. The award passed by the Arbitral Tribunal was chal .....

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present appeal arising out of FAO(AS)590 of 2013 are more or less identical. In that matter identical claims were raised on two counts but arising out of a different contract by the very same claimant. The Arbitral Tribunal granted ₹ 8,84,969/- in respect of dispute no. 1 with interest @ 12% per annum under identical two heads as found in the earlier case. Similarly, in respect of dispute no.2, the Arbitral Tribunal awarded ₹ 42,35,385/- with interest @ 12% per annum. 9. In NHAI v. I .....

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ontract and challenge at the instance of National Highways Authorities of India was negated. 10. The fact that there had been revision in the rates of service tax from time to time was not disputed by the appellant. Ms. Indu Malhotra, learned Senior Counsel appearing for the appellants in both the matters, however, submitted that only those claims which were constructional inputs alone would be eligible to be covered under Clause 70 of COPA. In her submission, the service tax on bank guarantee c .....

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