RASHTRIYA ISPAT NIGAM LTD. versus M/S. DEWAN CHAND RAM SARAN

RASHTRIYA ISPAT NIGAM LTD. versus M/S. DEWAN CHAND RAM SARAN

Under clause 9.3 of the contract, the contractor (respondent) is liable to bear and pay all taxes arising out of its obligations, including service tax, regardless of statutory liability changes. It is conventional and legally permissible for contractual parties to shift indirect tax liabilities. Arbitrator's interpretation reflecting this contractual allocation is valid and courts should not substitute their own views unless the interpretation is perverse.

Parties
Appellant: Rashtriya Ispat Nigam Ltd.; Respondent: M/s. Dewan Chand Ram Saran
Jurisdiction
India
Judgment Date
25 April 2012
Procedural Posture
Civil Appeal / Supreme Court Decision on Appeal From Division Bench Judgment of Bombay High Court, Which Confirmed Single Judge Decision Setting Aside Arbitrator's Award
Outcome
Appeal allowed
Legal Topics
Work Contract, Service Tax Liability, Interpretation of Contractual Clauses, Arbitration Award
Contract Law Taxation Arbitration Work Contract Service Tax Liability Interpretation of Contractual Clauses Arbitration Award

Case Brief

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Parties

Rashtriya Ispat Nigam Ltd.

Appellant

M/s. Dewan Chand Ram Saran

Respondent

Procedural Posture

Civil Appeal / Supreme Court Decision on Appeal From Division Bench Judgment of Bombay High Court, Which Confirmed Single Judge Decision Setting Aside Arbitrator's Award

Legal Issues

  1. 1 Whether under contract clause 9.3, appellant was entitled to deduct service tax from respondent's bills
  2. 2 Whether interpretation and award rendered by arbitrator were against terms of contract or illegal

Ratio Decidendi

Under clause 9.3 of the contract, the contractor (respondent) is liable to bear and pay all taxes arising out of its obligations, including service tax, regardless of statutory liability changes. It is conventional and legally permissible for contractual parties to shift indirect tax liabilities. Arbitrator's interpretation reflecting this contractual allocation is valid and courts should not substitute their own views unless the interpretation is perverse.

Court Disposition

Appeal allowed

Orders

  • Impugned judgments of Single Judge and Division Bench of Bombay High Court set aside
  • Arbitrator's award upholding deduction of service tax by appellant is restored