2019 (3) TMI 1058 - HC - Customs

Supreme Court directs rational allocation of Raw Pet Coke quota, emphasizes fair distribution

Rain CII Carbon (Vizag) Ltd. And Anr. Versus Union of India and Anr.

The Supreme Court set aside the allocation of unutilised Raw Pet Coke (RPC) quota by the Directorate General of Foreign Trade (DGFT) and directed a ... Restricted import or not - Raw Pet Coke (RPC) - apportionment of unutilised quota of Raw Pet Coke (RPC) amongst various applicants including the petitioner - Held that:- It is apparent that the manner in which the distribution of the excess quantity has been distributed, is manifestly irrational. This is so because the respondents have allocated quantities for making up the shortfall with reference to the production capacity of the applicants and not their requirements to meet their production capacity. Admittedly, the production capacity of the manufacturers of CPC is significantly lower than the input (RPC) required to exhaust the said capacity. It is also apparent that the manner in which the surrendered quantity is distributed also does not exhaust the surrendered quantity. A aggregate of 73,516.661 MT of RPC has been surrendered out of which only 2903.79 MT of RPC has been allocated to the three applicants - RPC can be freely imported but its overall import has been restricted to 1.4 Million MT per annum (0.7 Million MT for the period October, 2018 to March, 2019) by virtue of the order of the Supreme Court in the case of M.C. Mehta v. Union of India [2018 (11) TMI 1352 - SUPREME COURT] - There is, thus, no reason not to permit manufacturers from importing RPC up to the aforesaid limit. In the present case, there are only three applicants who had applied for distribution of the utilised quantity and the shortfall in their cases - Since, it is apparent that the endeavour of the respondents was to allocate the unutilised quantity on the basis of the shortfall, it would be apposite for the respondents to allocate the same on the basis of the shortfall, subject to the limit that the total allocated quantity does not exceed the half yearly input capacity. The allocation as made in the impugned minutes, is set aside and the respondents are directed to re-compute the allocation of the aforesaid basis; that is on the basis of shortfall between the quantity of RPC applied for and the quantity allocated - Petition disposed off. Issues Involved1. Apportionment of unutilised quota of Raw Pet Coke (RPC) among various applicants.2. Rationality of the allocation method based on production capacity versus actual requirements.Detailed Analysis1. Apportionment of Unutilised Quota of Raw Pet Coke (RPC) Among Various ApplicantsThe petitioner challenged the decision of the Directorate General of Foreign Trade (DGFT) regarding the allocation of unutilised RPC quota. The Supreme Court had restricted the import of RPC to 1.4 million metric tonnes per annum, necessitating a proportional distribution among manufacturers. The DGFT's minutes from a meeting held on 08.02.2019 detailed the allocation process, which included a table showing the distribution among various manufacturers. However, 73,516.661 metric tonnes of RPC remained unutilised because some manufacturers did not import the allocated material. The respondents decided to allocate this surrendered quantity to three manufacturers, including the petitioner, whose demands were not fully met.2. Rationality of the Allocation Method Based on Production Capacity Versus Actual RequirementsThe petitioner argued that the allocation method was flawed as it pegged additional quantities to half of the annual production capacity without considering the actual input requirements. The petitioner contended that RPC, as a raw material, is required in larger quantities than the final product (CPC) manufactured. The Court found this contention merited, noting that the allocation based on production capacity was irrational. The production capacity of CPC manufacturers is significantly lower than the input (RPC) required to meet that capacity.The Court highlighted that the allocation did not exhaust the surrendered quantity, as only 2903.79 MT of RPC was allocated out of the 73,516.661 MT available. The Court emphasized that the allocation should be based on the shortfall between the quantity applied for and the quantity allocated, rather than the production capacity. A tabular statement was provided to illustrate the shortfall for the three applicants:| S. No. | Name of the Firm | Quantity Applied for Import | Quantity Allocated on 27.12.2018 | Shortfall ||--------|------------------|-----------------------------|----------------------------------|-----------|| 1. | Rain CII Carbon (Vizag) Ltd. | 3,52,145 | 2,53,338.65 | 98,806.35 || 2. | Sanvira Industries Ltd. | 1,83,746 | 99,154.07 | 84,591.93 || 3. | Petro Carbon and Chemicals (P) Ltd. | 1,40,616 | 46,475.49 | 94,140.51 |The Court directed that the shortfall should be the basis for reallocating the surrendered quantity, ensuring that the total allocated quantity does not exceed the half-yearly input capacity. The Court noted that the input-output ratio for the petitioner is approximately 1.5:1, as confirmed by the Andhra Pradesh Pollution Control Board, indicating that the petitioner's intake capacity is 7,05,600 MT, which is one and a half times the annual production capacity of 5,11,000 MT.ConclusionThe Court set aside the allocation made in the impugned minutes and directed the respondents to re-compute the allocation based on the shortfall between the quantity of RPC applied for and the quantity allocated. The petition was disposed of with these directives, and all pending applications were also disposed of. The Court emphasized the need for a rational method of apportioning the surrendered quantity to ensure fair distribution among the manufacturers.