ORDER
C.M. Nayar, J.
1.
This petition has been filed for issuance of directions to the respondents to regularise the sales of 2210 MT of Single Super Phosphate (for short SSP) made by petitioner No.1 for the Rabi season of 1989-90 in excess of its EC allocation.
2. The relevant facts as stated in the petition are referred to in paragraphs 2,3,4,5,6 and 7 of the writ petition which read as follows:
“2. The petitioner is a manufacturer of Single Super Phosphate (SSP) one of the fertilizers used as agricultural input in India. The first petitioner’s fertilizer plant comprises of Sulphuric; Acid Plant, Single Super Phosphate Plant and Granulation Plant and the petitioner at its works manufactures Single Super Phosphates from raw material such as rock phosphate and sulphur.
3. Prior to 1982, SSP was under informal price control which was made effective from 16th March, 1976. A flat subsidy of Rs.200 per metric ton (PMT) was granted by the Government of India while the consumer price for individual unit was fixed by the Fertiliz ers Association of India in accordance with the formula agreed to with the Government of India after deducting the said subsidy. The individual units even then were able to recover their costs.
4. In the year 1982, the Government of India brought SSP under formal price control known as the Retention Price and subsidy (hereinafter referred to as RPS) for regulating the price and sale of SSP manufactured indigenously throughout the country. This scheme was introduced on the basis of a detailed study and recommendation of an Inter-ministerial working group appointed by the Government, which submitted its report to the Government in
March, 1980.
5. Pursuant to the introduction of the scheme, the Government sent a circular to all Fertilizer Units manufacturing SSP in the country informing them about the decision of the Government to work out a differential subsidy payable to different Fertilizer Units on the basis of their ex-factory cost price. It was on the basis of this promise of the Government to ensure that all Ferti lizer Units manufacturing SSP would be allowed a subsidy to compensate them for the loss in selling at a low price fixed by the Government that several new units, including those of the petitioners, were established all over the country.
6. Under this Retention Price and Subsidy Scheme, each manufacturer of SSP was required to sell the SSP manufactured by him designated sales area at prices which were fixed by the Government. Since the idea was to make this fertilizer available to the farming community at reasonable prices, the prices so fixed were nvariably lower than the manufacturing cost of all manufacturers of this fertilizer.
7. In order to compensate the manufacturers for having to sell the fertilizer, SSP, at this low price, the Government would calculate the total cost of manufacturing and distributing (hereinafter referred to as ‘total cost’) SSP for each manufacturer and pay the difference as subsidy to the manufacturers so as to ensure that each manufacturer was able to get a reasonable return if he operated his unit efficiently.”
3. By Scheme dated April 6, 1988 issued by the Government of India maximising of industrial production the application of the petitioners for reendorsement was made as would be indicated from reading of paragraph 19 of the petition which reads as follows:
“Realising that the efficiency of manufacturing SSP was the only means of increasing sales and that only efficiency in would result in higher profitability, M/s Varinder Agro Chemicals Limited, Petitioner No.1, achieved the actual production of 1,21,150 Metric Tons during the year 31.3.1990. The increased capacity utilisation entitled the first petitioner to get endorsed the actual maximum production which had been achieved by
balancing equipments and adding Pollution Control equipments to reduce consumption of Sulphuric Acid and distinct improvement in production process were made by the first petitioner and in the year 1989-90 the production increased to 185 per cent of the existing capacity through increased operational efficiency by modification and innovation of the process at a very marginal financial outlay. The petitioner No.1 consequently applied for the re-endorsement of the maximum production for the financial year 1.4.1988 to 31.3.1990 in accordance with the Press Note 1988. The petitioners were and are entitled to the endorsement of 1,21,156 MT capacity utilisation. Despite the submission of an
application for automatic endorsement on 25.5.1990, the Govern ment did not endorse the same on the licence. Hereto annexed and marked as Annexure-D is a copy of the application made on the 5.4.1990 for re-endorsement of the additional capacity on the industrial licence.”
The application dated April 25, 1990, as referred to above, reads as follows:
“No.VACL/F/90/993
April 25,1990
The Secretariat for Industrial Approvals
(SIA), Department of Industrial
Development, Udyog Bhawan,
New Delhi-110011
Dear Sirs,
Sub: Re-endorsement of Capacity against Industrial Licence No. CIL 229 (80) dated 21st August, 80 under the Industries (Dev.& Reg.) Act, 1951 for the manufacture of Sulphuric Acid and Single Super Phosphate at Sanghera, Distt. Sangrur in the State of Punjab.
Kindly refer to the above subject, enclosed herewith please find six copies of application alongwith industrial Licence for Re endorsement of Capacity in response to Ministry of Industry, epartment of Industrial Development, Press Note No.9 (1988 Series) dated 6.4.88.
You are requested to kindly process our case on priority.
Thanking you,
Yours faithfully,
For Varinder Agro Chemicals Ltd.,
(K.S. NIJHER)
Asstt.General Manager
“PROFORMA OF APPLICATION FOR RE-ENDORSEMENT OF CAPACITY IN RE SPONSE TO MINISTRY OF INDUSTRY, DEPARTMENT OF INDUSTRIAL DEVELOP MENT, PRESS NOTE NO.9 (1988 SERIES) DATED 6.4.88
1. Name and address of the : Varinder Agro Chemicals Ltd.
industrial undertaking. 85, Industrial Area 'A',
Ludhiana-141003.
2. Whether the industrial : CIL(229) 80 dated
21.8.1980 undertaking
holds an industrial
licence or a registration
from the technical
authority. Give details
of the industrial
licence/registration.
A copy of the licence/
registration may also
be attached.
3. Whether registered under
MRTP Act and if so, indicate
relevant Section : No.
4. Whether under default : No.
notice under the MRTP Act
and if so, the number and date
of such default notice.
5. Whether covered by FERA : No.
6. Item(s) of production. If
an Appendix-I item, please
indicate the item No.in
Appendix-I dated 2.2.1973
(as amended from time to time) : No.
7. Whether the item(s) of
manufacture is/are reserved
for small scale sector. : No.
8. Whether the item of
manufacture falls in Schedule
IV or V of the exemption
notification dated 16.2.73
as amended from time to
time : Not applicable.
9. Please state whether any
additional investment was made
after 1.4.88 in plant, machinery
and equipment, if so, the qu antum
thereof as also its percentage of
the book value of investment that
existed on 1.4.88 in plant, machinery
and equipment related to the particular
item of manufacture. : Rs.13.45 lacs,9.2%
Year Produ- Value
ction (Rs. in
(Qty.) lakh)
10. Indicate the actual production 1985-86 44721 726.72
achieved year wise from 1985-86 1986-87 67141 1131.33
onwards both in terms of 1987-88 90500 1647.10
quantity and value 1988-89 101674 2297.83
1989-90 121156 2847.17
11. Indicate the details of export obligation, if any, imposed on the industrial approval ready granted and state to what extent the export obligations have been : Nil. fulfillled. Enclosed documentary proof in support of your statement" Certified that the information furnished above is true and is as per the records maintained by the industrial undertaking.for VARINDER AGRO ChemicalS LIMITED
SD/-
(K.S.Nijher)
ASSTT. GENERAL MANAGER (FINANCES)
Figures in item No.10 verified by me from the books of accounts
and records produced before me and found correct.
for K.K.Kapoor & Associates
Chartered Accountant
Place:Ludhiana (K.K.Kapoor)
Partner"
As a result of enhancement of capacity the petitioner’s unit is alleged to have supplied more than what was allocated to it. The claim as made is also based on the communication of Director of Agriculture, Punjab, Chandigarh dated May 10, 1990 which reads as
follows: ”
No.1194/18-336-M
Dt. Chandigarh the: 10.5.90
From
The Director of Agriculture,Punjab
Chandigarh.
To
The Deputy Secretary (Fertilizers),
Govt. of India,
Ministry of Agr. & Coop.
Department of Agriculture,
Krishi Bhawan,
New Delhi.
Subject: Regarding regularisation of sale of SSP by M/s Varinder
Agro Chemicals Ltd.
Sir,
M/s Varinder Agro Chemicals Ltd., have intimated that they have sold 49076 MT SSP against the allocation of 46450 MT of SSP during Rabi 1989-90 due to demand from farmers. It has further been requested by the concern that Government of India may be approached to regularise it. It is, therefore, requested that govt. of India may regularise the excess sale of SSP by M/s Varinder Agro Chemicals Ltd., during Rabi 1989-90 as explained above.
Yours faithfully,
Sd/-
J.D.A. (Inputs)
For Director of Agriculture,
Punjab.”
4. The learned counsel for the respondents has argued that Government is not bound to pay subsidy for the supplies which are alleged to have been ade over and above the allocation made to a particular manufacturer. The petitioner did not obtain any prior approval from the Government and has now claimed that it has supplied 2210 MT more than its allocation. Para-graph 5 of the counter affidavit which gives the explanation of the respondents may be reproduced as under:
“That in reply to para 5 of the petition it is admitted that a circular letter was sent to all units manufacturing SSP informing them of the Government decision to work out a differential subsidy payable to different fertiliser units on the basis of their ex-factory cost price. Ex-factory price is being calculated and decided upon by Fertiliser Industry Co-ordination Committee (FICC) on a normative basis. Subsidy allowed to the manufacturing units is the difference between the ex-factory price so calculat ed and the consumer price fixed by the Government. It is, howev er, submitted that the promise, if any, to pay subsidy to compensate the manufacturers for the loss for selling the fertiliser at
a low price was only in respect of quota allocated to a particular manufacturer. The Government was not bound to pay subsidy for the supply which is alleged to have been made over and above the allocation made to a particular manufacturer.”
5. Paragraphs 18,19 and 20 of the counter affidavit may also be referred o as below:
“18. That para 18 of the petition as stated is not admitted. It is submitted that to entitle the manufacturer to the grant of subsidy for the sale of quantity of super phosphate in excess of allocation, the said manufacturer is required to obtain prior permission from the Government of India. It is submitted that the telegram marked as Annexure `C’ to the petition relates to the sale of unallocated quantity of single super phosphate during the Kharif 1988 season and, therefore, the same cannot have any applicability, to the period subsequent to thesaid Kharif 1988 season. It is submitted that the petition relates to the alleged withholding of subsidy of extra sale made during Rabi 1989-90 season. The petitioner had not obtained prior permission from the Government of India for sale of quantity of single super phos phate in excess of ECA allocation for Rabi 1989-90 season. It is submitted that the said Annexure `C’ is not relevant for purposes of the present petition.
19. That in reply to para 19 of the petition it is submitted that the petitioner was one of the 9 applicants who sought re-endorsement of their existing licenced capacity in terms of Press Note No.9 (1988 Series). The case was submitted to the Special Committee of Secretaries on Fertilizer Projects (SCOS) which decided that “for enhancement of existing licenced capacity for 9 cases under the re-endorsement scheme in terms of Press Note, the SSP production figures claimed by the units under consideration should be verified in the first instance and thereafter the issue should be brought back to the committee for further consideration”. It was also necessary to verify whether the conditions
imposed in such cases in the Press Note No.9 (1988 series) issued by the Department of Industries Development relating to ceilings on additional investments were satisfied/fulfilled. A Technical Committee consisting of 5 officials was constituted by the Government to verify the figures of production given by the units for the relevant years on the basis of production facility avail able, procurement and consumption of raw materials, power consumption, SS despatches, sales tax paid, additional investment made etc. The report of that Technical Committee has since been received and the request of the petitioner alongwith others is being processed to be submitted to the special committee of
Secretaries on Fertilizer Projects for taking a final decision in the matter.
20. That in reply to para 20 of the petition it is submitted that under the provisions of Section 3 of the Essential Commodities Act, 1955 the petitioner was given an ECA allocation of 46,450 MTs of SSP in Punjab during Rabi 1989-90 against which his actual
sale was 49,080 Mts. i.e 2,630 Mts of SSP in excess of the ECA allocation. The Ministry of Agriculture, Department of Agriculture and Co-operation allocates the product under the Essential Commodities Act after receiving the recommendations of the Department of Fertilizers regarding the production estimate of the different units. Department of Fertilizers approved the production of 46,870 Mts. of SSP for the petitioners for Rabi 1989-90. If the petitioner had produced more than 46,870 MTs of SSP during Rabi 1989-90 he should have got the additional production certified by the Department of Fertilizers in excess of 46,870 MTs. Even after the additional production is certified by the Department of Fertilisers it has to be followed by a proper ECA Allocation by the Deptt. of Agriculture and Co-operation. It is essentially the responsibility of the Department of Agriculture and co-operation to make available fertilizers in the needy areas. The petitioner should have approached the Department of Agriculure and Co-operation for additional ECA allocation of he had more quantity of SSP for sale. Instead of approaching the Department of Agriculture and Co-operation for additional ECA alloca tion, he chose to sell it at his own which is a violation of the provisions of the Essential Commodities Act.”
The stand of the Government is also categorically stated in a Communication to the petitioners dated July 20, 1990 which reads as under:
“No.19038/89-Fert Stat
Government of India
Ministry of Agriculture
Department of Agriculture & Coop.,
Krishi Bhavan, New Delhi
Dated the 20th July,1990
To,
The Managing Director,
Varindera Agro Chemicals Ltd.,
85, Industrial Area ‘A’, P.B. 339,
Ludhiana-141003.
Subject :- Supply of fertilizers without ECA allocation-violation of provision of EC Act, 1955.
Sir,
As you are aware, distribution of fertilizers is regulated by the Government of India under Section 3 of Essential Commodities Act, 1955. Under this Act, the allocations for supply of fertilizers to various States from manufacturers are given by this Department for each crop season through a Supply Plan, which is circulated to all States and Fertilizer Manufacturers. p>
2. The allocations for supply of fertilizers to various States for Rabi, 1989-90 season were given in this Department’s letter No.22001/89-Fert Stat dated 3rd October, 1989. After reviewing the supplies from your Company at the end of the season, it has been found that you have exceeded/violated the ECA allocations as under :-
(‘000 tonnes)
Sl. State ECA allo- Quantity Sales in excess
No. cation sold of ECA allocation
1. Punjab 46.65 49.08 2.43
You are therefore directed to explain as to why action should not be taken for withholding the payment of freight and other subsiies in respect of supplies made in violation of ECA allocation. Your reply should reach this Department within 15 days of receipt of this communication.
Yours faithfully,
Sd/-
(K.G. Krishnamoorthy)
Deputy Secretary to the Government of India
6. Similar communication was sent on 26th December, 1990 which may also be reproduced as under:
“No.9-5/90-F&A 1399
Government of India Office of Fertiliser Industry
Coordination Committee,
Ministry of Agriculture
Department of Fertilisers,
8th Floor, Sewa Bhavan, R.K. Puram,
New Delhi-110 066.
the 26th December,1990
To,
The Managing Director,
Varinder Agro Chemicals Limited,
85-Industrial Area,
P.B. No.359.
Ludhiana-141003.
Subject :- Payment of subsidy on Single Super Phosphate – violation of E.C.A. allocation during Rabi 1989-90.
Sir,
As you are already aware, the manufacturers are required to sell their fertilisers as per State-wise allocations made by the Government of India under Essential Commodities Act and any violation thereof is liable for action as per rules. The Departent of Agriculture & Cooperation have intimated that your Unit have sold 2,210 MT in excess of E.C.A. allocation in the State of Punjab during Rabi 1989-90. As such subsidy on the above quantity is not payable to you.
Accordingly, you are requested to refund a sum of Rs.28,08,910/- within a period of 15 days from the date of issue of this letter through Demand Draft drawn in favour of Executive Director, Fertilizer Industry Co-ordination Committee, payable at New Delhi.
Please acknowledge receipt.
Yours faithfully,
Sd/-
(PREM SINGH)
DIRECTOR ( F&A)”
7. In view of the above, the admitted position is that the petitioners’ Unit allegedly sold an additional 2.43 MT in excess of EC allocation. The Communication by the Government of Punjab dated May 10, 1990 states that the petitioners have intimated that they have sold 49076 MT SSP during Rabi 1989-90 due to demand from farmers and requested for regularising the same. This letter would not establish that any amount is due as the respondents have denied that the same is payable as further subsidy and on the contrary proposed action against the petitioners unit for exceeding its allocation.
8. For the aforesaid reasons, the present petition is liable to be dis-missed and it is ordered accordingly. Rule is discharged. There will be no order as to costs.