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TMI Blog2016 (11) TMI 1437X X X X Extracts X X X X X X X X Extracts X X X X ..... tract on 9-8-2006 for transportation of crude oil for a period of two years from 17-7-2006. In November 2006, ONGC had recovered a sum of Rs. 3,62,255/- towards service tax from out of the bills of the claimant company. On 11-12-2006, the claimant company objected to such recovery by addressing a letter stating that they are only transporters of goods and there is also no instruction from the tax authority to pay service tax. (ii) The claimant had executed an indemnity bond on 22-1-2007 irrevocably agreeing to reimburse service tax amount to ONGC, if ONGC had paid the amount on demand by appropriate authority and ONGC released the amount. In response to a letter from the Superintendent of Central Excise, ONGC addressed the Superintendent informing that as per contract, the rates were inclusive of all taxes including service tax and the payment of service tax will have to be taken with the claimant. ONGC deducted a sum of Rs. 29,29,397/- from out of the bills of the claimant towards service tax liability for the contract period. (iii) The claimant informed ONGC on 30-7-2008 that they are not Goods Transport Agency (GTA) but owner of tankers and sought for refund of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Award can be set aside only on the grounds mentioned under Section 34(2) and 34(3) of the Arbitration and Conciliation Act, 1996 and not otherwise. The learned counsel appearing for the appellant vehemently contends that the Arbitral Tribunal has taken the role of the statutory authority and it also decided contrary to the terms of the contract and therefore, the Award is to be set aside. Thus, the argument is focused on the principle of patent illegality. Under patent illegality, there are three grounds (i) Contravention of the Substantive Law of India [Section 28(1)(a)]; (ii) Contravention of the Arbitration Act [Section 31(3)] and (iii) Beyond the terms of the contract [Section 28(3)]. 7. In Associate Builders v. DDA reported in (2015) 3 SCC 49, the Hon'ble Supreme Court has held thus : "42. In the 1996 Act, this principle is substituted by the 'patent illegality' principle which, in turn, contains three sub-heads - 42.1 (a) A contravention of the substantive law of India would result in the death knell of an arbitral award. This must be understood in the sense that such illegality must go to the root of the matter and cannot be of a trivial nature. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. (See Pure Helium India (P) Ltd. v. ONGC [(2003) 8 SCC 593] and D.D. Sharma v. Union of India [(2004) 5 SCC 325]). 113. Once, thus, it is held that the arbitrator had the jurisdiction, no further question shall be raised and the court will not exercise its jurisdiction unless it is found that there exists any bar on the face of the award." 8. Bearing the above decision and the provisions of law as to the principle of patent illegality in mind, the contentions of the learned counsel appearing for the appellant is to be analysed. In this case, the dispute between the claimant and the appellant/ONGC is whether the claimant is liable to pay service tax, as per the terms of the contract. 9. The claimant entered into contract with ONGC for transportation of crude oil by road by tankers from various locations to designated production sites of the ONGC. The contract was for two years from 17-7-2006. Till 28-6-2007, the date on which the Superintendent of Central Excise issued a letter calling for details of payment of service tax from ONGC, there was no demand of ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ONGC. It also further provides that service tax if any applicable and/or levied on charter hire payment against this contract/agreement will be reimbursed by ONGC at actual against documentary evidence. Therefore, for the charter hire payment charges, ONGC has to bear service tax as per the above Clause 21 of the Contract. 12. The contention before the Arbitral Tribunal was that the nature of transaction and charges under the contract are not chartered hired payment but only the Goods Transport Agency charges. Therefore, the Tribunal roved into and ascertained the nature and character of the service rendered by the claimant/ONGC, so as to decide who is liable to pay service tax, as per the terms of the contract. As the ONGC had acquired for its exclusive use the tankers under the contract, ONGC had chartered the tankers transportation offered by the claimant for a period of two years. Therefore, the Tribunal held that the charges referred to in Clause 21 of the Contract is "charter hire payment". 13. The Tribunal rejected the contention of the ONGC that the service comes under Goods Transport Agency pointing out that as per the definition under Section 65(50b) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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