Hindustan Agro Chemicals Limited vs Union Of India (Uoi) And Anr.
1999 Latest Caselaw 443 Del

JUDGMENT

C.M. Nayar, J.

1. This petition has been filed under Article 226 of the Constitution of India seek- . ing writ in the nature of mandamus for fixation of the Ex-works price of Single Super Phosphate (hereinafter referred to as 'SSP') supplied by the petitioner and for issuance of direction to the respondents to pay the balance being the difference between the subsidy paid to the petitioner and the subsidy payable on the basis of the correct notified ex-works cost for the quarters September, 1990 to August, 1992 as well as for payment of interest on the delayed payments at the market rate.

2. The petitioner is alleged to be a Company registered under the Companies Act having amongst its businesses, the business of manufacturing SSP which is an important fertilizer containing Sulphur and phosphate. The relevant facts with regard to payment of subsidy are referred to in paragraphs 2,3,4,5 and 7 of the petition which may be reproduced as follows:

"2. That between the years 1976 and August, 1992, the manufacture and sale of SSP was controlled by the Government. From 1976 to 1982, the controls worked as follows:

3. That the Government used to fix the selling price of SSP for each unit based on an ex-works cost price calculated by the Government. All the units were given a flat rate of subsidy at the rate of Rs. 200/- per tonne.

4. In the year 1976, the Government had commissioned a study of the working of this flat subsidy scheme with a view to improve the entire system of subsidy prevailing for SSP. This study was conducted . by an expert body known as the working group which was chaired by Shri S.S.Marathe, Chairman of the Bureau of Industrial Costs and Prices and had as its members so many other persons from various Government departments concerned with this question and some representation from the industry.

5. That this working group submitted its report to the Government in March, 1980 and they recommended that the system of subsidy for SSP to be changed to another system known as 'Retention Price Scheme'. A copy of this report is annexed as Annexure A to this petition. This scheme would be worked as follows:

7. That the difference between the selling price of SSP fixed by the Government and the ex-works cost calculated on a normative basis by the Government is paid to each unit by the Government in the form of a subsidy. As can be seen from the above scheme, this subsidy is really a subsidy being given to the farmers who are being supplied this fertilizer at a price which is lower than the cost of manufacture of this fertilizer. The so-called 'subsidy' paid to the manufacturing units is really a reimbursement of the difference between the normative cost of manufacture and the selling price fixed by the Government to the manufacturer and not a subsidy to the manufacturer.. The ex-works cost includes 11% return on capital which is also calculated by the FICC on the ba'sis of their own norms. An extract from the annual report of the Department of Fertilizer for the year 1991 briefly explains the working of this Retention Price Scheme and how it works on a normative basis. The extract is annexed hereto as Annexure-C."

3. The petitioner's grievance is referred to in paragraph 10 of the petition which reads as follows:

"10, The petitioner's grievance in this petition is that despite the submission of the appropriate cost data by the petitioner a long time back, the Government has still not fixed and notified the ex-works cost of the petitioner for the quarters of September 1990 to August 1992. It may be stated that with effect from 24th August, 1992, the sale of SSP has been de-controlled by the Government. It may be stated that the petitioner originally submitted the cost data of the following quarters on the following dates:

Quarters ended

Cost data submitted on

September

03-06-91

December

03-06-91

March

31-12-91

June

31-12-91

September

22-03-92

December

22-03-92

March

July

June

07-09-92

4. The learned counsel for the petitioner on the above basis has, therefore, contended that the Government has till date not fixed the ex-works price of the petitioner company for the quarter ending September, 1990 till August, 1992 with the result that the. petitioner has been paid subsidy on the basis of the last notified price which was for the quarter June 1990 which was much less than the cost that the petitioner had incurred for these quarters on account of cost escalation.

5. The plea as raised by the respondents is reflected in paragraph 14 of the petition which reads as follows:

" That in the subsequent oral discussions between the petitioner's officers and officials of FICC, the main objection being given orally by the FICC to fixing the correct ex-works cost of the petitioner is that the dates of some of the bills submitted by it regarding the purchase of raw material (Rock Phosphate) have been altered by hand. The petitioner's officers had explained to the representatives of the FICC that the reason why this had happened in some of the bills was because on some occasions, when the raw material (Rock Phosphate) was not available from the Government factory in time in order to avoid the loss of production, the petitioner had taken some Rock Phosphate from a private factory and used that to produce the SSP. Thereafter, as soon as the material was available in the Government factory, the petitioner purchased that and returned the material taken from the private party to them. However, since the raw material had already been taken and consumed by the petitioner's factory earlier (i.e prior to the actual delivery by the Government factory) some Accountant of the petitioner's company altered the date of the bills of the Government factory in order to show that the raw material had been delivered on the earlier date at which the raw material from the private party had been arranged by the petitioner. However, in the final statement submitted by the petitioner on 28.9.93 for all the quarters, all the bills of raw material purchased from the Government factory are shown against the correct quarters and no bill has been reflected twice anywhere in the statement. Moreover, the ex-works cost is to be fixed by the FICC on the basis of consumption norms set by them in advance and have nothing to do with the actual raw material consumed by the petitioner. In these circumstances, the refusal of the respondents to fix the ex-works cost so many years after the quarters to which they relate to is totally arbitrary."

6. The respondents have filed counter affidavit where amongst other pleas it has been stated in reply to paragraphs 6 to 8 that 'indigenous Rock Phosphate was also available from Government owned mines in Rajasthan, Madhya Pradesh and Uttar Pradesh. The petitioner unit had procured bulk of rock phosphate from indigenous sources such as MPSMC only. Hence, it is not clear as to how the petitioner unit has indicated that most of the raw-material was imported and had to be transported from the ports. Further, the petitioner unit is located in Rajasthan being very close to the Government-owned mines in Rajasthan itself i.e. RSMML and RSMDC. It is not clear as to why the petitioner unit had been procuring bulk of its rock phosphate requirement from the mines located in M.P. The petitioner Unit's contention in reply to the clarification sought on this point that the cost of phosphate from MPSMC worked out cheaper than the cost of Rajasthan rock was not found to be correct. The fixation of ex-works price and subsidy payable for each quarter can be worked out by the respondents, only on the submission of data for cost of variable inputs complete in all respects by the SSP manufacturing units including the petitioner Unit. In case of any discrepancy or wanting information / invoices/ documents from the SSP Units, the.ex-works price and subsidy payable cannot be finalised until complete information/document/supporting invoices are furnished. In . the case of the petitioner unit, it was seen that the petitioner unit had consistently been submitting incomplete quarterly data for variable inputs. The petitioner unit furnished its cost data for various quarters i.e. quarter ending March, 1988, June, 1988, March, 1990, June, 1990 etc. without furnishing all the copies of purchase invoices as was required to be done by them under the laid-down procedure. It may also be added that till date copies of the complete set of supporting documents for certain quarters up to June, 1990 wherever called for have not been furnished. Notwithstanding the same, the respondents had been finalising the subsidy of the petitioner unit on a provisional basis subject to the submission of purchase invoices in . all cases mainly with a view to mitigating the hardship likely to be caused to the petitioner unit on account of payment of subsidy at the unrevised rate. As per the procedure of the Fertilizer Industry Co-ordination Committee (FICC), the data for variable cost of inputs should be submitted by the SSP units to the FICC within 45 days from the last date of the quarter to which the data pertains. From the information provided by the petitioner as well as that available in this office, it would be seen that the petitioner unit has never cared to submit its data for quarters ending 9/90 to 9/92 in time and.in certain cases the time lag has been from 6 months to 15 months.'

7. The respondents have further pleaded that while scrutinising the variable input cost data of the unit for quarter ending September, .1990 onwards also, it was found that all the supporting documents/invoices had not been furnished by the Unit and the petitioner Unit only furnished the information as late as November, 1993. The respondents made a specific charge in respect of the information as supplied by the petitioner Unit in the following manner:

"It was found that the petitioner unit had still not furnished all the supporting invoices. Further, what was more serious and reprehensible Was that some of the invoices furnished by the petitioner unit were found to have been tampered with. A statement showing the details of each of the 19 tampered invoices is enclosed together with the photostat copies of the related invoices as Annexure A and A(1) to A(19). There is clearly an attempt to manipulate the record with mala fide and fraudulent intent. This irregularity could be detected as the copies of documents which were found tampered at a later date had already been submitted by the petitioner unit in support of previous quarters cost data. The unit has still not submitted complete set of invoices for all the quarters, despite the fact that the unit was repeatedly asked to furnish the wanting invoices. These deficiencies were pointed out to the petitioner unit through various letters.

There were certain reports in the newspapers namely, The Hindu and Economic Times regarding irregularities in the functioning of another SSP Unit which like the petitioner unit had procured rock phosphate mainly from Madhya Pradesh State Mining Corporation. It had been alleged that the unit had claimed huge subsidy on the basis of bogus production and sale of fertilizer and had extracted subsidy from the Government on account of bogus sales, it was also reported that while the company had produced only 6,000 to 8,000 tons of SSP per annum, on paper, production to the extent of two-thirds of the licensed capacity of 66,000 MT per annum was claimed. It was further alleged that the said case was the "Tip of the Iceberg" and on investigation similar pattern may arise in many other fertilizer companies also. While the exact facts in the case of concerned unit were to be ascertained, the respondent had also taken action to ascertain whether any other companies were involved. In this connection, an affidavit was also filed by the respondents on 23.4.1994 in Civil Writ Petition No. 83/94 in the matter of M/s. HSB Fertilizers Pvt. Ltd. v. Union of India and Civil Writ Petition No. 84/94 in the matter of M/s Kashi Urvarak Pvt. Ltd. v. Union of India . The respondents had sought a period of three months to ascertain the facts in the case of the 2 petitioner units in the writ petition Nos. 83/94 and 84/94. The Hon'ble High Court had been pleased to grant an extension of time by 2 months to the respondents to do the needful. Payments in the case of the 2 petitioner units in civil writ petition No. 83 and-84 of 1994 were released as per the orders of the Hon'ble High Court as these two units prima facie did not appear to be involved in similar irregularity. However, in the case of the present petitioner unit, the respondents were unable either to finalise the revision of ex-works price and subsidy payable or to release payment of the pending claims, as it had been detected while scrutinising the data submitted by the petitioner Unit that the same had been tampered with which clearly betrays mala fide and fraudulent intent on its part.

The contention of the petitioner unit that the information sought for by this office was irrelevant for calculating ex-works price is not correct. Ex-works price is calculated on normative basis only after considering the actual cost data incurred by the unit in respect of variable inputs. Submission of data for each quarter by the units is essential to know the source of procurement of raw-material i.e whether imported or indigenous, if transported by rail or road (for freight purposes) and other relevant information. Thus, the contention of the unit that ex-works price can be calculated on the basis of preliminary information (which was incomplete in case of petitioner) is totally misleading."

8. Further-more it has been submitted that the invoices were wilfully tampered with and it has been accepted by the petitioner Unit. The petitioner procured rock phosphate from private sources and altered the date of invoices from Government Agency to show that the material from Government Agency was received on the same date on which the Unit had procured rock phosphate from the private agencies. All the SSP Units had been informed that SSP produced out of rock phosphate purchased from sources other than the Government agencies, would not be eligible for subsidy. The petitioner, it is contended, knowingly and wilfully tampered with the invoices of Madhya Pradesh State Mining Corporation (MPSMC) to extract subsidy which was not due from the Government. It is next pleaded in the counter affidavit that the rate of subsidy which is based on the ex-factory price is worked out separately for each manufacturing unit. In order to work put the ex-factory price for each unit, it is necessary to have information from each of the units on the items detailed in proforma circulated vide the Department of Fertilizers letter No. FICC/FSA/SSP/70/82-83 dated 19th June, 1982. This quarterly information is to be certified either by the Chartered Accountant of the unit concerned or by the Statutory Auditors. The quarterly information is required because variable costs are to be determined with reference to the expenses for each factory on the average of three months preceding the last quarter. The Circular as referred to above 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".The Supreme Court in Union of India and Ors. v. Surya Phosphate Limited and another has held that 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. The information supplied by the petitioner on the basis of the tampered invoices could not formulate the basis of working out the subsidy as claimed by the petitioner.

9. The above facts will clearly establish that there have been manipulation of dates committed by the petitioner Unit. There has been a change in the date of supply of rock phosphate and in certain cases by blanking out the particulars relating to the dale of supply etc. The petitioner Unit also has admitted that they had purchased raw material i.e. rock phosphate from private parties which was prohibited by a Government Circular No. FICC/F&A/SSP/Cir/87/300 dated September 11, 1987. With regard to the change of dates in some of the invoices the rejoinder affidavit dated March 13, 1995 only states that merely because the dates of supply of some of the invoices for rock phosphate are incorrectly stated, the respondents cannot withhold the issuance of the relevant ex-works price notifications and cannot withhold subsidy for even those bills or periods for which there is not even an allegation of any kind against the petitioner. The plea that the petitioner's factory is functioning since 1982 when the relention price scheme started and has been producing SSP and paid the due subsidy since then without any complaint from the FICC or the respondents is of no consequence as the invoices have been held to be tampered knowingly and wilfully.

10. In view of the above reasons, it will be wrong to entertain the claim of the petitioner which has been raised in this petition for payment of subsidy for the relevant period i.e. for the quarters September 1990 to August, 1992. The manipulation of dates in purchase of raw materials is quite clearly established. In this background the petition will also raise questions of fact which cannot be the subject matter of proceedings under Article 226 of the Constitution of India. The present petition, therefore, is devoid of merit and is dismissed. There will be no order as to costs.