UNION OF INDIA Vs. SURYA PHOSPHATE LIMITED

JUDGEMENT

(1.) The question involved in the present appeal is of the interpretation of Circular letter dated 19th June, 1982 issued by the Fertilizer Industry Co-ordination Committee, Government of India (Department of Chemicals and Fertilizers) ('FICC') to all manufacturers of Single Super Phosphate. Did the circular letter represent to the manufacturers that they would be paid differential rate of subsidy based on the actual ex factory price of each of the manufacturing units or did it inform them that the subsidy would be based on the ex factory price of each of the units which would be worked out by the FICC To appreciate the controversy, it is necessary to have a glimpse of the relevant facts.

(2.) Before 23rd May, 1982, viz., the date on which the SSP was brought under the Retention Price Control, every manufacturer of SSP, irrespective of the cost of manufacture, used to get the same subsidy at the above rate. However, different retail prices were fixed for different manufacturers and for different marketing zones of the same manufacturer. The retail prices were fixed from time to time by the Fertilizers Association of India in accordance with the, formula laid down by the Ministry of Agriculture in May 1966. Under this formula the ex factory price for each manufacturing unit was fixed taking into account the prescribed fixed charges and variations in the price of raw materials and bags as compared to the costs of these materials provided for in the original formula. The result was that there was no uniformity in the price of SSP.

(3.) The Working Group on Review of Subsidy on SSP examined all these aspects and gave a report in 1980. The group recommended that the scheme of flat subsidy at the above rate be replaced by a scheme of differential level of subsidy for each manufacturer depending on the ex factory price and other expenses incurred by each manufacturer as fixed according to the formula/ guidelines recommended by the Working Group. The Group came to the conclusion that a system of Retention Price of SSP similar to the one existing for Nitrogenous and Complex Fertilizers was not expedient. While variable costs, which constituted about 80 per cent of the total cost of SSP, were susceptible of determination on a normative approach and without difficulty, the detailed costing of a fixed cost element under each unit was not a practical proposition. This was so mainly because of the existence of a large number of units manufacturing SSP which were also multi-product/ multi-activity units. The Group, therefore, suggested a formula for determining the variable costs to which were to be added the fixed costs suggested by the Group in order to arrive at the ex factory price of each manufacturing unit.