The main legal point established in the judgment is that the contract constituted a sale of cement by the petitioner to the respondent, leading to the respondent's liability to pay works contract tax. The court also affirmed the respondent's entitlement to reimbursement of the tax paid under Section 64A of the Sale of Goods Act, 1930.

VALMIKI J. MEHTA, J.

1. By this petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’), petitioner herein; the respondent in the arbitration proceedings; impugns the Award of the Arbitrator dated 23.7.2003 by which the respondent herein; the claimant in the arbitration proceedings; was held entitled to an amount of Rs.27,30,600/- alongwith interest at 9% per annum simple on account of reimbursement of tax paid by the respondent under the Maharashtra Sales Tax on the Transfer of Property in Goods (= cement) involved in the Execution of Works Contracts (Re-enacted) Act, 1989 (hereinafter referred to as ‘the Maharashtra Act, 1989’), inasmuch as such tax (hereinafter ‘works contract tax/sales tax’) was to be paid by the petitioner as per Clause 12 of the contract but the petitioner had failed to pay the same.

2. The facts of the case are that petitioner engaged the respondent-contractor for construction of 554 dwelling units at Kharghar, Navi Mumbai (Maharashtra). Parties entered into an Agreement dated 29.3.1996 in this regard. The subject dispute arose under this contract.

3. Arbitrator by the impugned Award has held that the cement which was supplied by the petitioner to the respondent at a fixed price of Rs. 2,800/- per metric tons, for incorporation in the subject works contract, amounted to a sale of cement by the petitioner to the respondent in view of the judgment of the Supreme Court in the case of M/s N.M. Goel and Co. Vs. Sales Tax Officer, Rajnandgaon and Another, AIR 1989 SC 285, and once there was a sale of cement by the petitioner to the respondent, respondent under the Maharashtra Act, 1989 was liable to pay tax to the Sales Tax Authority of Maharashtra inasmuch as petitioner who had to pay such tax as per the contract had not paid the same under the Bombay Sales Tax,1959 resulting consequently of the liability of the respondent under the Maharashtra Act, 1989. Arbitrator has also by the Award held that respondent is not estopped from claiming amount against the petitioner although the respondent had issued a No Claim Certificate(NOC) and received payment as per the final bill inasmuch as respondent only later was issued notice by the taxing authority. Arbitrator has held that it was the petitioner which was under Clause 12 of the Contract liable to pay all taxes and levies on the cement supplied by the petitioner to the respondent under the contract and thus since the petitioner had not paid sales tax under the Bombay Sales Tax Act, consequently the respondent is held assessable and liable to pay the works contract tax under the Maharashtra Act, 1989. Essentially, the Arbitrator holds that the petitioner has sold the cement to the respondent under the contract with the representation that with respect to such sale, sales tax was duly paid by the petitioner but actually it was not paid as required/stated in Clause 12 of the Contract and whereby the respondent had to pay works contract tax and which amount paid by the respondent was therefore recoverable by the respondent from the petitioner.

4. Before this Court, counsel for the petitioner has very vehemently argued the following aspects:-

(i) There is no sale of cement by the petitioner to the respondent. As per Clause 12 of the Contract, cement which was supplied by the petitioner to the respondent at a fixed rate under the contract was for incorporating the same in the work/project owned by the petitioner itself and therefore, there cannot be sale of cement to one’s own self by the petitioner and that in such circumstances it cannot be that there was sale of cement to the respondent.

(ii) If the respondent has rightly or wrongly paid the works contract tax under the Maharashtra Act, 1989 to the taxing authority, even then the respondent cannot claim the tax from the petitioner in view of Article 69.1 of the General Conditions of Contract (GCC) read with Clause 25 of the Special Conditions of Contrac