A CENVAT shortfall cannot be deducted from contract payments absent express contractual authority.

SAIL and Primetals entered into a contract dated 1 June 2007 for work at SAIL’s Bhilai Steel Plant.

The contract stated a Gross Contract Price of ₹44,93,20,127 and a minimum CENVAT amount of ₹4,65,71,592 to be passed on to SAIL.

During performance, the applicable duty rates fell, and Primetals passed on CENVAT credit of ₹3,25,33,069.

In 2018, SAIL deducted ₹1,40,38,523 from Primetals’ invoices, treating it as a shortfall in the minimum CENVAT amount.

Primetals invoked conciliation in 2021 and then arbitration.

The arbitrator allowed its claim; the Single Judge dismissed SAIL’s Section 34 challenge.

SAIL appealed under Section 37, pressing limitation, waiver, estoppel and acquiescence, and the contractual basis for the deduction.

Whether Primetals’ claim was barred by limitation, or defeated by waiver, estoppel or acquiescence, given the 2014 communication and the 2015 discharge documents.

Whether the contract authorised SAIL to deduct ₹1,40,38,523 for an alleged shortfall in the minimum CENVAT amount.

Whether the Single Judge erred under Section 34 by declining to set aside the award, such that appellate interference under Section 37 was warranted.

Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 confine judicial review of arbitral awards; a Section 37 court cannot exceed Section 34’s limits, reappraise the merits, or interfere merely because another interpretation is possible.

The Court also applied the principle that contractual terms cannot be added where the agreement contains no such term.

The relevant contract provisions were Article 2.1 and GCC Clauses 11.2, 14.5.2 and 14.6: they addressed the contract price, reimbursement against documentary evidence, CENVAT documentation, and price adjustment for tax variations, but did not expressly authorise deduction of a CENVAT shortfall from the contractor’s dues.

The Court held that the 17 May 2014 letter neither quantified the alleged shortfall nor demanded payment; it stated only that any shortfall would be deducted. The claim accrued when SAIL quantified and made the deduction in July 2018, so the subsequent conciliation and arbitration were within limitation. The 2015 discharge certificate and affidavit did not bar a challenge to a deduction made later.

On the merits, the Court read the minimum CENVAT figure as an estimate of duty expected to be paid and credit passed on—not as a cash discount or guaranteed reduction of the Gross Contract Price. Since the actual duty fell to ₹3,25,33,069 because of reduced duty rates, Primetals passed on the credit actually earned. The contract provided no basis for deducting the difference from Primetals’ dues; the arbitrator’s interpretation was at least plausible and disclosed no patent illegality warranting Section 34 interference.

Finding no basis for interference under Sections 34 or 37, it dismissed SAIL’s appeal and disposed of any pending applications.