Case: Union of India and Others Vs. Surya Phosphate Limited and Another

cost of production of SSP] and the actual ex-factory price of SSP of each of the manufacturing units. Hence, uged Shri Sen, the High Court was right in directing the Government to calculate the subsidy payable to the respondent-Company as per the interpretation of the Circular letter by the Company and also to pay the arrears in question. He also contended that that is the only interpretation possible of the said Circular letter. 12. There is no dispute that what holds the field for the payment of the subsidy is the Circular letter of 19th June, 1982. The controversy relates to its interpretation. Taking into consideration the entire history of the subsidy as we have narrated above, the recommendation of the Working Group, its acceptance by the Government and the issuance of the Circular letter to implement the recommendation and the subsequent minutes of the meetings of the FICC held on 16th October, 1982 and 17th February, 1983 and the method for working out the ex-factory price detailed therein, we are of the view that the contention advanced by Shri Sen is not correct. Viewed in its proper context, there is no doubt that the Circular letter in question has only intimated to the manufacturers that consequent upon the fixing of the retail price of SSP w.e.f. 23rd May, 1982, it had become necessary to replace the old scheme of the payment of uniform flat subsidy, by a new scheme. The new scheme was for payment of differential rate of subsidy. That rate of subsidy was to be based on the ex-factory price which had to be worked out separately for each manufacturing unit. In order to work out the ex-factory price of each unit, it was necessary to have information from each to the units on items detailed in the proformae. The information called for was for two different quarters preceding the quarter beginning from April, 1982 since the uniform retail price of SSP had come into effect from 23rd May, 1982. This quarterly information was to be certified either by the Chartered Accountant of the unit concerned or by the statutory auditors. The quarterly information was required because the variable costs were to be determined with reference to the expenses for each factory on the average of three months preceding the last quarter. In para 2 of the Circular letter it was clearly stated that the information in question was required to enable this office to work out the ex-factory price in respect of SSP manufactured in your unit. This was a clear indication that it was the FICC which was going to work out the ex-factory price. If the subsidy was to be based only on the ex-factory price to be stated by the manufacturing unit, there was no question of working it out by the FICC office. 13. It would thus be seen that the Circular letter made no representation other than conveying to each of the manufacturing units that a scheme for payment of differential rate of subsidy in place of the earlier uniform flat subsidy was being introduced. What that differential rate of subsidy would be would depend upon the ex-factory price worked out by the FICC separately for each manufacturing unit. The method by which the ex-factory price was to be worked out for each of the manufacturing units was not indicated in the Circular letter. That was to be on the basis of the recommendation of the Group as accepted by the Government. In fact, the new method of payment of subsidy was based o n the said recommendation which also included the formula to work out the ex-factory price. 14. Shri Sen attacked the recommendation of the Group and the method adopted by the FICC to work out the ex-factory price and the subsidy, on the ground that they were not made known to the manufacturing units. They were, according to him, kept confidential by the Government and all that was held out was the promise contained in the Circular letter of 19th June 1982 which, according to him, was for payment of subsidy to each unit on the basis of its actual costs. It is not necessary for us to go into the question as to whether the method/formula adopted by the FICC should have been made known to the manufacturers or not. Suffice it to point out that the Circular letter in question had not indicated any particular method of working out the ex-factory price. It was implicit in the said Circular letter that the ex-factory price would be worked out by the FICC on certain basis. It is incorrect to say that in the absence of a method for working out the ex-factory price indicated in the said Circular letter it should be presumed that what was represented to the manufacturing units was that they would be paid subsidy on the basis of the actual costs shown by them. 15. Understandably, the method adopted by the FICC for working out the ex-factory price was on a normative basis as recommended by the Group and accepted by the Government. That was as it should be. In the absence of norms for working out the costs of different components, there would virtually be a chaos and arbitrariness. To give only one instance: if a manufacturing unit were to consume more Rock Phosphate and Sulfur or Sulfuric Acid than the consumption norm, its cost of production of SSP would be higher than the cost of production of the standard SSP. It cannot be argued that in spite of it, the manufacturing unit should be paid the differential rate of subsidy on the basis of the unwarranted cost. One can multiply such instances with reference to each of the other elements of cost of producing SSP. In the absence of norms, there would be a good deal of scope for arbitrariness and misfeasance at both ends. We are, therefore, of the view that the contention urged by Shri Sen cannot be accepted.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]It is not necessary for us to go into the question as to whether the method/formula adopted by the FICC should have been made known to the manufacturers or not. Suffice it to point out that the Circular letter in question had not indicated any particular method of working out the ex-factory price. It was implicit in the said Circular letter that the ex-factory price would be worked out by the FICC on certain basis. It is incorrect to say that in the absence of a method for working out the ex-factory price indicated in the said Circular letter it should be presumed that what was represented to the manufacturing units was that they would be paid subsidy on the basis of the actual costs shown by them13. It would thus be seen that the Circular letter made no representation other than conveying to each of the manufacturing units that a scheme for payment of differential rate of subsidy in place of the earlier uniform flat subsidy was being introduced. What that differential rate of subsidy would be would depend upon the ex-factory price worked out by the FICC separately for each manufacturing unit. The method by which the ex-factory price was to be worked out for each of the manufacturing units was not indicated in the Circular letter. That was to be on the basis of the recommendation of the Group as accepted by the Government. In fact, the new method of payment of subsidy was based o n the said recommendation which also included the formula to work out the ex-factory price15. Understandably, the method adopted by the FICC for working out the ex-factory price was on a normative basis as recommended by the Group and accepted by the Government. That was as it should be. In the absence of norms for working out the costs of different components, there would virtually be a chaos and arbitrariness. To give only one instance: if a manufacturing unit were to consume more Rock Phosphate and Sulfur or Sulfuric Acid than the consumption norm, its cost of production of SSP would be higher than the cost of production of the standard SSP. It cannot be argued that in spite of it, the manufacturing unit should be paid the differential rate of subsidy on the basis of the unwarranted cost. One can multiply such instances with reference to each of the other elements of cost of producing SSP. In the absence of norms, there would be a good deal of scope for arbitrariness and misfeasance at both ends. We are, therefore, of the view that the contention urged by Shri Sen cannot be accepted.