The main legal point established in the judgment is the interpretation of contractual clauses related to reimbursement of CST and deductions from the CENVAT credit, as well as the determination of a reasonable interest rate and costs of arbitration.

JUDGMENT :

REKHA PALLI, J.

1. The present petition under Section 34 of the Arbitration and Conciliation Act, 1996 filed by Steel Authority of India Limited, who was the respondent before the learned Arbitrator, assails the arbitral award dated 15.10.2019 where under the claims of the respondent have been allowed with actual costs of arbitration and interest @ 14% per annum.

2. The brief facts as emerge from the record are that the petitioner, which is engaged in the business of inter alia manufacturing steel, awarded a contract for setting up a Coupled Pickling Line and Tandem Cold Mill at Bokaro Steel Plant to a consortium of M/s Siemens VAI Metals Technologies Pvt. Ltd., M/s Siemens VAI Metal Technologies GmbH & Co, Austria and M/s McNally Bharat Engineering Co. Ltd. The parties, therefore, entered into a contract bearing No. TC/M/AGT-963 on 03.03.2008 which specified the project commencement date as 03.03.2008 and the date of completion as 03.09.2010. As per the terms of the contract entered into between the parties, it was envisaged that M/s Siemens VAI Metals Technologies Pvt. Ltd. (hereinafter referred to as ‘Siemens’) would procure the items, as set out in the contract, from such manufacturers as identified by the petitioner and that the price of each item would include a) Basic price, b) Excise Duty (ED) and c) Central Sales Tax (CST). The parties had also agreed that Siemens would pass on a minimum CENVAT credit of Rs.33,06,70,252/- to the petitioner. On 19.06.2015, the contract was amended and Siemens was substituted by the respondent and therefore the respondent also became bound by the terms of the contract executed between the petitioner and Siemens on 03.03.2008.

3. While the work under the contract was still underway, the respondent raised invoices towards the work done wherein, besides seeking reimbursement of the input sales tax paid by it towards purchase of items used for carrying out the work under the contract, the respondent also sought reimbursement of sales tax paid by its sub-contactors/vendors while executing the contractual work. On 04.09.2015, the respondent raised RA Bill No.34 for a total sum of Rs.6,66,68,750/- which was subsequently reduced to Rs.5,93,64,168/- towards 2.5% milestone against the completion certificate, in accordance with Article 2.1.4 of the contract. As the CENVAT credit which the respondent actually passed on to the petitioner was admittedly for an amount of Rs.19,70,32,185/-, as against the guaranteed amount of Rs.33,06,70,252/-, the petitioner refused to make any payments to the respondent until necessary documents were submitted by the respondent to show that the guaranteed amount of Rs.33,06,70,252/- towards CENVAT credit would be passed on to the petitioner. The respondent claimed that in terms of the price schedule as set out in the contract, it was entitled to deduct the shortfall in CENVAT credit from the contract price at serial No.15 of the summary price schedule. Per contra, the respondent’s stand was that deductions to the extent of shortfall in CENVAT credit could only be made from the gross contract price at serial No.12 and not the net contract price at serial No.15. As a result of these contrary positions, the respondent invoked arbitration and the matter was referred to the learned Sole Arbitrator by the Hon’ble Supreme Court vide its order dated 14.09.2018 passed in Arbitration Case(C) No.31/2018.

4. Before the learned Arbitrator, the respondent raised five claims and the petitioner raised two counter claims. The learned Arbitrator, after noticing that the parties were ad idem that work had been duly executed in terms of the contract, set out that the disputes between these parties had to be adjudicated in the following terms:-

“(1) non-reimbursement of Central Sales Tax (CST) amounting to Rs. 2,83,86,010.53/- to the Claimant by the Respondent (now reduced to Rs