Arbitration In IndiaDispute regarding Concessional Tax is Non-Arbitrable Dispute

September 22, 20220

The Supreme Court in M/s. Shree Enterprise Coal Sales Private Limited v. Union of India Civil & Anr. Appeal No. 6539 of 2022, decided on 12.09.2022 held that the dispute relating to availment of benefit under Concessional Tax is not arbitrable in nature, even when the valid Arbitration Agreement provides for the arbitrability of ‘any disputes’.

FACTS

M/s. Shree Enterprise Coal Sales Private Limited (hereinafter referred to as the “Appellant”) was engaged in the trading of coal, which was obtained by the Appellant through e-auctions conducted by the subsidiaries of Coal India Limited. The Appellant purchased coal from Northern Coal Fields Limited (hereinafter referred to as the “Respondent”), and received certain consignments through the Railways, of which the destination was Madhya Pradesh.

The Respondent initially charged the Concessional Tax at the rate of 2% on the Appellant, but failed to issue Form E-1 and did not grant the benefit of Form-C while charging the tax at the rate of 4%.

The Appellant filed a Writ Petition before the Allahabad High Court praying for:

  1. The issuance of Form E-1 by the Respondent; and
  2. The grant of benefit of Concessional Tax by the Respondent after accepting Form C on record.

The High Court dismissed the Writ Petition on the grounds that:

  1. The contractual terms of e-auction provided that any dispute is arbitrable; and
  2. The Appellant was seeking enforcement of a contract by way of Writ Petition for raising a claim of refund.

Aggrieved by the decision of the High Court, the Appellant filed the present Civil Appeal before the Supreme Court.

ISSUE BEFORE THE SUPREME COURT

Whether the dispute relating to availment of Tax Concession under the e-auction is arbitrable in nature?

DECISION AND FINDINGS

The Supreme Court opined that the High Court had erred in its decision on both the aspects, i.e., with regards to the dispute of availment of Tax Concession being arbitrable under the e-auction, and the Appellant seeking the enforcement of contract through the Writ Petition for raising claim of refund.

The Supreme Court observed that the Appellant did not raise any contractual claim in pursuance of the e-auction, but rather a claim of benefit under Concessional Tax. The Supreme Court noted that a contractual dispute would undoubtedly have been resolved by Arbitration, but the dispute raised by the Appellant, and the reliefs sought by the Appellant, clearly indicate that it is not a contractual dispute.

The Supreme Court observed that:

“Undoubtedly a contractual dispute would be amenable to be resolved by arbitration. However in the present case as the reliefs which have been extracted above indicate the dispute was not of that nature.”

Thus, the Supreme Court set aside the order of the High Court and remanded the matter back to the High Court for consideration on merits. Further, the High Court restored the Writ Petition of the Appellant before the High Court for consideration afresh. The Supreme Court further directed the High Court to endeavour an expeditious disposal of the Writ Petition, preferably within a period of 4 months, as the Writ Petition was filed in 2016.

AMLEGALS REMARKS

In the present case, the Supreme Court held that when a Arbitration clause exists in a contract, then the contractual disputes arising thereunder would be undoubtedly subject to Arbitration. However, when the dispute is not a contractual dispute and is related to aspects of tax such as Concessional Tax, it would not fall under the ambit of contractual dispute and would not be restricted for reference only to Arbitration, irrespective of the valid Arbitration Agreement expressly stating that “any dispute” is arbitrable.

Such disputes arising out of a significant question of law, i.e., regarding the availability of benefit under Concessional Tax to the Appellant, are non-arbitrable disputes and shall be considered under the Writ Jurisdiction of High Courts.


For any queries or feedback, please feel free to get in touch with rohit.lalwani@amlegals.com or riddhi.dutta@amlegals.com.

Leave a Reply

Your email address will not be published. Required fields are marked *

Current day month ye@r *

© 2020-21 AMLEGALS Law Firm in Ahmedabad, Mumbai, Kolkata, New Delhi, Bengaluru for IBC, GST, Arbitration, Contract, Due Diligence, Corporate Laws, IPR, White Collar Crime, Litigation & Startup Advisory, Legal Advisory.

 

Disclaimer & Confirmation As per the rules of the Bar Council of India, law firms are not permitted to solicit work and advertise. By clicking on the “I AGREE” button below, user acknowledges the following:
    • there has been no advertisements, personal communication, solicitation, invitation or inducement of any sort whatsoever from us or any of our members to solicit any work through this website;
    • user wishes to gain more information about AMLEGALS and its attorneys for his/her own information and use;
  • the information about us is provided to the user on his/her specific request and any information obtained or materials downloaded from this website is completely at their own volition and any transmission, receipt or use of this site does not create any lawyer-client relationship; and that
  • We are not responsible for any reliance that a user places on such information and shall not be liable for any loss or damage caused due to any inaccuracy in or exclusion of any information, or its interpretation thereof.
However, the user is advised to confirm the veracity of the same from independent and expert sources.