CTO For Enhanced Production Capacity Issued After SC’s Order Fixing Total Import Limit; Importer Not Entitled To Proportionate Increase In Import Quota: Supreme Court

The Supreme Court has upheld the decision of the Delhi High Court which set aside the increased quota allocated for import of raw pet-coke (RPC) based on the “Consent to Operate” (CTO) issued to the importer for an enhanced production capacity, after the top court’s order dated 09.10.2018.

The bench of Justices S. Ravindra Bhat and Dipankar Datta remarked that the Andhra Pradesh Pollution Control Board (APPCB) had issued the CTO for the additional quantity after the Supreme Court’s order dated 09.10.2018, where it had fixed the outer limit for import of RPC based on the total production capacity of the entities existing on the said date.

The court said that since the appellant/ importer’s additional capacity was created after the Supreme Court’s order dated 09.10.2018, the same could not have been considered by the court.

Thus, the bench upheld the decision of the Division bench of the High Court where it had ruled that the appellant was not entitled to a proportionate increase in its share of the total imports permitted by the Supreme Court, on the basis of the subsequent increase in its production capacity.

The Director General of Foreign Trade (DGFT) determined the criteria for the allocation of imported raw pet-coke (RPC) and allocated the quota for import of RPC among various entities.

Based on the report issued by the Environment Pollution Control Authority (EPCA), the Supreme Court by an order dated 09.10.2018 directed that RPC import cannot exceed 1.4 Million Metric Tonnes per Annum (MTPA). The said figure was based on the production capacity given by each one of the entities that were engaged in the import of pet coke for production of calcined pet coke (“Calciners”).

The DGFT, thereafter, proceeded to allocate specific quantities of RPC out of the total import quantity of 1.4 Million MTPA which was to be imported by each calciner on the basis of their actual production capacity.

Subsequently, the appellant, M/s Sanvira Industries, requested for enhancement of the import quota allocated to it, based on its claim of enhanced production capacity. Sanvira claimed that it ought to be allocated a proportionate quantity of RPC having regard to its production capacity which had increased from 2,00,000 to 3,30,000 MTPA.

Thereafter, the Andhra Pradesh Pollution Control Board (APPCB) issued a letter stating that as per its record, based on inspection of Sanvira’s unit, the latter’s capacity for manufacture of calcinated petroleum coke was 3,30,000 MT per annum. Relying on the same, the DGFT increased the import quota allocated to Sanvira. A similar request by the respondent, Rain CII Carbon (Vizag) Ltd, for enhanced allocation based on its claim of increased capacity, was rejected by the DGFT.

Rain CII challenged the increased allocation to Sanvira by filing a writ petition before the Delhi High Court, which was dismissed. The Division Bench of the Delhi High Court in appeal, set aside the decision allocating an enhanced import quota to Sanvira. The Division Bench in its impugned judgment held that though Sanvira could produce 3,30,000 MTs per annum, that did not automatically lead to the inference that it was entitled to an increase in its share of the total imports permissible by the order of the top court, dated 09.10.2018.

In the appeal filed before the Apex Court against the decision of the Division bench, the Supreme Court observed that by an order dated 09.10.2018, the court had fixed the outer limit of import of RPC at 1.4 Million Metric tonnes per annum. The same was based on the assessment by EPCA which evaluated the requirements of various industries and units which were engaged in the production of diverse commodities and raw materials. The court noted that the estimation with respect to the capacity and the utilization of imported RPC was based on the figures provided by the industry itself.

“The EPCA report clearly states that the total capacity was 1.17 million tonnes; in arriving at this figure the EPCA took note of the capacity based upon the Consent to Operate (CTO) issued by the concerned Pollution Control Board. In the case of Rain CII, the capacity recorded was 500,000 MTPA, and in the case of Sanvira 2,00,000 MTPA,” the Supreme Court added.

Pursuing the facts of the case, the court reckoned that the Consent to Operate (CTO) issued by APPCB in Sanvira’s favour recorded the total capacity at 2,00,000 MTPA. Further, the APPCB issued the CTO for the additional quantity of 3,30,000 MTPA only on 26.12.2019. Referring to the minutes of the meeting dated 13.02.2020 of the Union Ministry of Commerce, the bench concluded, “The consistent position of the GOI is that any capacity added by the procedures after the Order of this Court dated 09.10.2018 would not be taken into consideration while allocating the RPC.” The court further noted that the same document i.e., the minutes also recorded that Sanvira’s additional capacity was created after the Supreme Court’s order dated 09.10.2018.

The bench further remarked that the DGFT treated the letter dated 04.05.2020 issued by APPCB as if Sanvira’s original capacity was 3,30,000 MTPA, ignoring the fact that Sanvira’s claim for enhanced import quota allocation was rejected about five times previously.

Upholding the decision of the Division Bench, the court said that the Division bench had correctly held that the annual total limit of import of 1.4 Million Metric Tonnes was based on the total production capacity as on 09.10.2018, which had been fixed by the Supreme Court on the basis of the capacity disclosed by all the calciners. For Sanvira, the original capacity disclosed by it was 2,00,000 MTPA, the court said, adding that the consent to produce 3,30,000 MTPA of coke was issued by the APPCB only after 09.10.2018. Therefore, the same could not have been considered by the court, the Apex Court said.

“This court is of the considered opinion that the view expressed by the impugned judgment is correct. Barring the fact that a clarification was issued on 04.05.2020, by the APPCB, there was no change in circumstance; the material document to be considered was the CTO, which for the relevant period (i.e. as on 09.10.2018) was 2,00,000 MT per annum, for Sanvira. Even according to it, the claim for enhancement was made later, and the CTO for the increased capacity was issued on 26.12.2019. In these circumstances, the clarification of APPCB, that as on a particular date, the production capacity was 3,30,000 MTPA was of no consequence, because it was the CTO that was considered all along, in all previous meetings. Therefore, the findings and conclusions of the Division Bench cannot be faulted,” the top court held.

The court thus dismissed the appeal.

Case Title: M/s Sanvira Industries vs Rain CII Carbon (Vizag) Ltd. & Ors

Citation : 2023 LiveLaw (SC) 497

Counsel for the Appellant: Mr. Raj Bahadur Yadav, AOR Mr. Ashish Prasad, Adv. Ms. Mukta Dutta, Adv. Mr. Vivek Singh, AOR

Counsel for the Respondent: M/S. Ahmadi Law Offices, AOR Mr. Shariq Ahmed, Adv. Mr. Tariq Ahmed, Adv. Mr. Tushar Mehta, Solicitor General Mrs. Sonia Mathur, Sr. Adv. Mr. Raj Bahadur Yadav, AOR Mr. Shashank Bajpai, Adv. Mr. Rupesh Kumar, Adv. Mr. Saurav Roy, Adv. Mr. Madhav Singhal, Adv. Mr. Manish Pushkarna, Adv. Mr. Dhananjaya Mishra, AOR Mr. Arnav Dash, Adv. Mr. Navneet Dogra, Adv. Mr. Nikhil Bhatia, Adv. Mr. Ayan Rai, Adv. Mr. Syed Jafar Alam, AOR Ms. Shivani Kahdekar, Adv. Ms. Shivani Khandekar, Adv. Mr. Gokul Holani, Adv.

The Supreme Court has upheld the decision of the Delhi High Court who had set aside the increased quota allocated for import of raw pet-coke (RPC) based on the “Consent to Operate” (CTO) issued to the importer recording an enhanced production capacity, after the top court’s order dated 09.10.2018.

The bench remarked that the Andhra Pradesh Pollution Control Board (APPCB) had issued the CTO for the additional quantity after the Supreme Court’s order dated 09.10.2018, where it had fixed the outer limit for import of RPC based on the total production capacity of the entities existing on the said date. The court said that since the appellant/ importer’s additional capacity was created after the Supreme Court’s order dated 09.10.2018, the same could not have been considered by the court.

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