Plausible arbitral findings regarding tax credit availability are immune from judicial interference under Section 34.

The Petitioner (SAIL) filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging a limited portion of an Arbitral Award dated 30.06.2023 concerning CENVAT and input tax credit

SAIL contended that the Respondent (L&T) provided insufficient documentation, which prevented SAIL from availing tax credits, leading to a financial shortfall

L&T argued that SAIL had already reimbursed them for the CENVAT and VAT amounts based on the provided documents, thereby accepting their sufficiency, and that SAIL had made no actual attempt to claim the credits from tax authorities

The Majority Arbitral Tribunal rejected SAIL’s counterclaim, finding that L&T had fulfilled its obligation by paying the taxes and that the responsibility to claim credit lay with the employer (SAIL)

1. Whether the findings of the Majority Arbitral Tribunal regarding the sufficiency of documents and the Petitioner’s failure to avail input tax credit were perverse or patently illegal under Section 34 of the Act

2. Whether a Petitioner can claim a default by the Respondent for "insufficient documentation" when the Petitioner failed to take any steps to apply for the tax credit with the concerned authorities

The Court applied Section 34 of the Arbitration and Conciliation Act, 1996, which restricts judicial intervention to grounds of patent illegality, perversity, or conflict with the public policy of India

It relied extensively on OPG Power Generation (P) Ltd. v. Enexio Power Cooling Solutions (India) (P) Ltd. (2025) 2 SCC 417, which clarifies that "patent illegality" must be an illegality that goes to the root of the matter and not a mere erroneous application of law

The Court further utilized the tests for "perversity" established in Associate Builders v. DDA (2015) 3 SCC 49 and Ssangyong Engg. & Construction Co. Ltd. v. NHAI (2019) 15 SCC 131, stating that an award is perverse only if it is based on no evidence, ignores vital evidence, or is so irrational that no reasonable person would arrive at the same conclusion

The Court noted that its jurisdiction under Section 34 is not appellate and it cannot re-appreciate evidence unless the award is fundamentally perverse

The Court found that the Arbitral Tribunal had returned a categorical finding of fact that SAIL had not taken any steps—such as filing an application before tax authorities—to avail the input tax credit

Therefore, the Court reasoned that the sufficiency of the documents was inconsequential because SAIL never attempted to use them

Furthermore, the Court highlighted that SAIL had acted upon the documents by reimbursing L&T for the taxes paid, which logically supported the Tribunal's finding that the documents were sufficient for L&T to discharge its obligations

Following the standard set in OPG Power Generation, the Court concluded that the Tribunal’s decision was a "plausible and reasonable view" based on the record and did not warrant interference

The Court affirmed the Tribunal's finding that L&T had discharged its responsibility by paying the taxes and that SAIL’s inability to avail credit was not attributable to L&T

Consequently, the Court directed the release of the Bank Guarantee furnished by the Respondent