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IN THE HIGH COURT OF DELHI AT NEW DELHI
VIBHU BAKHRU, J.
Delhi Metro Rail Corporation Ltd - Appellant
Versus
M/S Kone Elevators India Pvt. Ltd - Respondent
O.M.P. (COMM) 211, 227 of 2021 & I.A. 9158 of 2021, 9159 of 2021 & 14771 of 2021
Decided on : 22-11-2021
Delhi Value Added Tax Act, 2004 - Central Goods and Services Tax Act, 2017 – Sections 140 and 171 - Supply and installation of elevators - Tenders - Contract Agreement - Award - Arbitral Tribunal - Whether Input Credit Tax for Excise duty paid was available to Kone - Applicability of GST on supply of elevators - Authority for Advance Ruling - DMRC had issued a notice inviting tenders for supply and installation of elevators. Kone had participated in tendering process pursuant to aforesaid notice and was successful in securing contract. Parties entered into a ‘Contract Agreement whereby Kone agreed to design, manufacture, supply, install, test and commission 143 numbers of heavy duty machine room-less elevators for Delhi MRTS Project Phase-III for an aggregate price - Arbitral Tribunal held that since
Kone had claimed reimbursement of Excise duty and DMRC had granted the same, it was a joint responsibility of both the parties to avail Input Tax Credit in respect of Excise duty paid by Kone.
Finding of the Court :
Court finds no infirmity with aforesaid conclusion. Indisputably, DMRC had not objected to petitioner raising Tax
Invoices under GST regime. It had in fact conceded that GST was payable and had accordingly, reimbursed entire GST except amount as according to DMRC, Kone was entitled to Input Tax Credit for said amount. Thus, Arbitral Tribunal found same in favour of Kone. The said view cannot be stated to be ex facie patently illegal or one that falls foul of fundamental policy of Indian law - GST rate as applicable on the said dates was 12% and therefore, DMRC was liable to pay GST at lower rate of 12% instead of 18%. In view of the Arbitral Tribunal’s finding that DMRC had raised no objections regarding issuance of tax invoices and had substantially paid same; this Court finds no ground to fault the decision of Arbitral Tribunal not to accept the aforesaid contention - Arbitral Tribunal might decide “ex aequo et bono or as amiable compositeur” only if parties have expressly authorized it to do so and not otherwise - Arbitral Tribunal’s findings, the onus to establish that Kone was entitled to an Input Tax Credit in respect of Excise duty rested with DMRC. In addition, DMRC was also required to establish that it was entitled to withhold the payment of GST in respect of un-availed Input Tax Credit in order to successfully resist Kone’s claim for payment of the balance amount of GST paid by it. Arbitral Tribunal has not rendered any decision in respect of aforesaid issues and has in fact left disputes in this regard undecided - Impugned award set aside.
Result: Petitions disposed of
JUDGMENT :
VIBHU BAKHRU, J
1. The parties have filed these petitions impugning an arbitral award dated 15.03.2021 delivered by an Arbitral Tribunal comprised of three arbitrators (‘the Arbitral Tribunal’).
2. The impugned award was rendered in the context of disputes that have arisen between the parties in connection with the contract whereby Kone Elevator India Private Limited (hereafter ‘Kone’) had agreed to supply, install and commission elevators, and Delhi Metro Rail Corporation (hereafter ‘DMRC’) had agreed to purchase the same.
The Factual Context
3. In December 2012, DMRC had issued a notice inviting tenders for supply and installation of elevators. Kone had participated in the tendering process pursuant to the aforesaid notice and was successful in securing the contract. The parties entered into a ‘Contract Agreement CE-3-LOT-1’ dated 23.01.2013 (hereafter ‘the Contract Agreement’) whereby Kone agreed to design, manufacture, supply, install, test and commission 143 numbers of heavy duty machine room-less elevators for Delhi MRTS Project Phase III for an aggregate price of Rs.54,50,64,298/-.
4. In terms of the Special Conditions of Contract (SCC) as applicable to the Contract Agreement, it was agreed that the contract price would be inclusive of all taxes, levies duties, cess, freight, insurance and other incidental charges including statutory deductions towards income tax works, contract tax etc. except the following: “(a) concessional customs duty as applicable for project imports under Chapter 98.01 of Customs Tariff Act; (b) Excise Duty; and (c) VAT/GST”.
5. It was agreed that the aforesaid levies would be reimbursed by DMRC on actual basis and on submission of documentary proof. It was also agreed that any new taxes or other statutory variations in customs/excise duty and sales tax on finished products would be to the account of DMRC. However, Kone was required to submit relevant documents to prove the same.
6. Kone completed its obligations under the Contract Agreement in certain stages.
7. Out of the 143 lifts to be supplied and commissioned, Kone supplied and installed 10 lifts that were made operational for public use in October 2015. Kone raised invoices for the supply, erection and commissioning of the said elevators and charged Value Added Tax (VAT) at the rate of 12.5% on 85% of the total value of invoices so raised. This was because, admittedly, no service tax was payable in respect of commissioning and installation of the said elevators as it was exempted in terms of the notification dated 20.06.2012.
8. The controversy essentially relates to 85 elevators that were supplied by Kone for installation of the “JICA Section” prior to 30.06.2017. Against the aforesaid supplies, DMRC released a sum of Rs.23,11,47,304/-as per the Running Account Bills raised by Kone till 30.06.2017.
9. There is no dispute that the Running Account Bills were raised on the basis of the agreed milestones regarding manufacture, dispatch, delivery and installation of the said lifts.
10. Kone raised tax invoices against the aforesaid supply of 85 elevators after 01.07.2017 under the GST regime. Admittedly, GST at the rate of 18% was payable at the material time when the invoices were raised. Accordingly, Kone claimed that it was entitled to Rs.4,16,06,515/-being the GST payable on the aggregate value of Rs.23,11,47,304/-of the invoices raised by it. DMRC reimbursed an amount of Rs.2,88,76,473/- against Kone’s claim for reimbursement of GST, in terms of the tax invoices but declined to pay the balance amount of Rs.1,27,30,042/-. Prior to 30.06.2017, DMRC had already reimbursed a sum of Rs.1,27,30,042/- as Excise duty on the said supplies and it claimed that Input Tax Credit for the said amount was available to Kone against its GST liability of Rs.4,16,06,515.
11. The dispute between the parties essentially relates to Kone’s claim for Rs.1,27,30,042/-being the balance amount payable on account of GST as stated in the tax invoices raised by Kone. The
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