C. L. Chaodhry,j. ( 1 ) THE petitioner was awarded the contract for thesupply of grease to Union of India. Certain disputes arose between theparties out of the execution of the contract. The Director General, Suppliesand Disposal, New Delhi appointed an Arbitrator and REFERRED TO the disputesand differences between the parties for adjudication. The learned Arbitratorentered upon the reference and made and published his award on 26. 11 1984. The operative portion of the award reads as under :- "i dismiss the claim of the contractor for Rs. 1,33,496. 50 (Rupeesone lakh thirty three thousand four hundred ninety six and paisefifty only), as increase in Excise Duty and for Rs. 16,274,00 (Rupeessixteen thousand two hundred seventy four only) as price increase. I also direct Union of India to pay the contractor, the amount ofsecurity disposit and balance price, withheld, in this case. All other claims of the parties are hereby dismissed. The parties shall bear their respective costs of the proceedingsbefore me. " ( 2 ) THE Arbitrator filed the award as well as arbitration proceedingsin court. Notice of filing of the award was given to the parties. Union ofindia has accepted the award. However, the petitioner has assailed theaward by filing objections under Sections 16,30 and 33 of the Arbitration Act. The award has been challenged on the following grounds :- ( 3 ) THAT the petitioner is doing the business of manufacture and saleof various kinds of grease. In order to manufacture the grease the petitionerbad to purchase base oil from the public corporation. The petitioner wasrequired to pay Excise Duty for these purchases and use the base oil withother ingredients to manufacture the grease. The Excise Duty was leviableon the manufacture of grease during the relevant period and the petitionerhad to receive credit on the Excise Duty paid on the base oil. This procedureis known as "set off" under the Excise Rules. By this way the petitioner wasto pay Excise Duty as levied minus Excise duty already paid on the base oil. On receipt of enquiry from the respondent the petitioner made his quotationon the basis of the Central Excise Rules and therefore, the same was partof the offer as made by the petitioner. On these terms a running contractdated 31. 1. 1977 came into being, for supply of various types of grease bythe petitioner. On receipt of enquiry from the respondent the petitioner made his quotationon the basis of the Central Excise Rules and therefore, the same was partof the offer as made by the petitioner. On these terms a running contractdated 31. 1. 1977 came into being, for supply of various types of grease bythe petitioner. One of the clauses of the contract reads as under :- "the prices quoted are firm subject to variation as stated inschedule c . The price accepted are inclusive of excise duty at theprevailing rate and any statutory variation in this respect upwardor downward will be to the purchaser s account. "the other relevant clause reads as under :- "the prices are firm and subject to the condition that any increase/decrease in the price of finished product as announced by theministry of Petroleum New Delhi will be to Government Account. Statutory increase in the rate of excise duty or sales tax shall bepayable. "the petitioner by letter dated 25. 2. 1978 was directed to intimate as to howmuch Excise duty the petitioner had paid from 16. 12. 1977. On 30/03/1978, Excise duly was withdrawn from the grease but no reduction or withdrawal in excise duly was given to the base-oil. The petitioner on 15. 4. 1978wrote to the respondent that the Excise duty was still payable on the base-oiland therefore, under the principle of set off they had paid the Excise dutyand withdrawal of Excise Duty on grease was meaningless and insignificant. Under these premises a claim was laid for a sum of Rs. 1,33,496. 53 onaccount of Excise duty paid on base oil. It was further claimed that therespondents also failed to pay a sum of Rs 36. 830. 00towards balance 2%and security deposit of Rs. 34. 157. 00. Interest was also claimed at the rateof 19% per annum. It is stated that there is an error apparent on the face ofthe award. There was never a claim by the petitioner for increased exciseduty as observed by the Arbitrator. The rejection of the claim by thearbitrator towards increase in Excise Duty was contrary to the records ofthe case and pleadings of the parties. The Arbitrator did not look into theevidence and the pleadings of the parties. The learned arbitrator ignored thestatutory rules under the Excise Act. The Arbitrator committed misconductby not following the law laid down in a number of judgments on this point. The Arbitrator did not look into theevidence and the pleadings of the parties. The learned arbitrator ignored thestatutory rules under the Excise Act. The Arbitrator committed misconductby not following the law laid down in a number of judgments on this point. On these allegations it is prayed that the award be set aside. ( 4 ) THE Union of India is contesting the claim of the petitioner. Inthe reply it is stated that the award is non-speaking award. The Arbirratorhas made the award after taking into account all the facts and circumstancesof the case. There is no mistake apparent on the face of the award. Theaward is understandable and unambiguous. The Excise Duty on finishedproduct applicable before 16 12. 1977 was 20% ad valorem whereas the samewas reduced from 20% ad valorem to Rs. 1. 200. 00 per M. T. with effect from16. 12. 1977 and thereafter wef. 303. 1978the Excise Duty was completelywithdrawn As per clause (6) of the RGC the prizes accepted were inclusiveof excise duty and at the prevailing rate and statutory variation in thatrespect upward or downward were to be on the purchaser s account. As suchthe firm was not entitled to any increase. Thus there was no error apparenton the face of the award The arbitrator had adjudicated the actual dispulesbetween the parties. There is no misconduct on the part of the Arbitrator. ( 5 ) ON the pleadings of the parties the following issues were framed :- 1. Whether the impugned award dated 26/11/1984,made by Mrs. R. Laxman is liable to be set aside/remitted onany of the grounds mentioned in the objection petition ? (2) Relief. Parties were given liberty to lead evidence by way of affidavits. ( 6 ) I have heard the learned counsel for the parties and have gonethrough the record. My findings on the issues are as under :-Issue No. 1: ( 7 ) THE case of the petitioner is that the Arbitrator has not properlyappreciated the claim made on behalf of the petitioner. The claim laid beforethe Arbitrator on behalf of the petitioner was not in respect of the increasein excise duty. The claim was that on 30/03/1978 the Encise duty waswithdrawn from the grease but no reduction or withdrawal was given on thebase-oil. The claim laid beforethe Arbitrator on behalf of the petitioner was not in respect of the increasein excise duty. The claim was that on 30/03/1978 the Encise duty waswithdrawn from the grease but no reduction or withdrawal was given on thebase-oil. The withdrawal of excise duty on grease was meaningless andinsignificant because in over all prevailing duty there was no change andsubsequently on 17/05/1978 claimant again made it clear that the exciseduty on base-oil was still payable. The amount of Rs. 1,33. 496. 57 wasclaimed on account of the excise duty paid on the base oil. The learnedarbitrator has not appreciated the scope of the claim of the petitioner, andit is a clear case of non-application of mind. The Arbitrator has notconsidered the claim of the petitioner in respect of the excise duty paid onthe base oil i e the dispute which was REFERRED TO to the Arbitrator remainsundecided. In this connection reliance is placed on Fertilizer Corporationof India v. M/s. Bharat Painters, (AIR 1986 Orissa 82) wherein it was held"that an award which is the product of non-application of the mind of thearbitrator cannot be permitted to be sustained in law, since this would comewithin the expression "otbeiwise invalid" used in Section 30 of thearbitration Act. Non-application of mind to the materials on record suggestsabsence of fair play and indicates that the arbitrator did not function in amanner befitting his role)" ( 8 ) ON the other hand the contention of the respondent is that theaward is non-speaking one and there is no error apparent on the face of theaward. The Arbitrator has decided the dispules REFERRED TO to him and it is nota case of non-application of mind. ( 9 ) I have considered the relevant contentions of the parties and havegone through the record. The Arbitrator dismissed the claim of the petitionerfor Rs. 1,33,496. 50 as increase in excise duty. In fact the petitioner had notclaimed any amount on account of increase in the excise duty. the case ofthe petitioner was that though the excise duty on grease was withdrawn w. e. f. 30. 3. 1978 yet there was an element of excise duty paid on the base-oil whichis one of ths ingredients for manufacture of grease as such they were entitledto the excise duty paid on the base-oil. the case ofthe petitioner was that though the excise duty on grease was withdrawn w. e. f. 30. 3. 1978 yet there was an element of excise duty paid on the base-oil whichis one of ths ingredients for manufacture of grease as such they were entitledto the excise duty paid on the base-oil. The Arbitrator, it appears, has notappreciated the scope of the reference and scope of the claim of thecontractor as laid before the Arbitrator. It is aclear case of non-applicationof mind and there is an error apparent on the face of the award. I agree withthe law laid down in Fertilizer Corporation s case (Supra ), which laid downthat an award which is the product of nun-application of mind of thearbitrator cannot be permitted to sustain in law. The Arbitrator has notdecided the real question at issue which was "whether the claim of thepetitioner for payment of excise duty on base-oil was justified or not. " ( 10 ) IN the result the (objection petition succeeds) and the award of thearbitrator dated 26. 11. 1984 is set aside, the matter is remitted to thearbitrator for re-consideration in terms of the observations made above. Ofcourse the Arbitration will decide the matter afresh after hearing the parties. This petition is disposed of leaving the parties to bear their own costs.