2022 (9) TMI 1171 - HC - Customs

Court deems Central Government's unilateral rescission of countervailing duty during Sunset review illegal.

REALSTRIPS LIMITED & 1 OTHER (S) Versus UNION OF INDIA & 1 OTHER (S)

The Court held that the Central Government's issuance of a Notification rescinding the countervailing duty during an ongoing Sunset review investigation ... Validity of rescinding of Anti Dumping Duty (ADD) - recommendation from designated authority obtained later - Sunset review investigation in respect of continuance of countervailing duty, already initiated and kept undecided, during the currency of the period of original Notification imposing such duty - Power of Central Government - import and purport of the words 'unless revoked earlier' occurring in sub-section (5) of section 9 of the Act. HELD THAT:- The notification levying the countervailing duty once issued under Section 9(1) of the Act, has an expiry period from the date of imposition, unless revoked earlier. It also provides that respondent no.1 may extend the period further, if it is of the opinion that 'the cessation of such duty is likely to lead to continuation or recurrence of subsidy and injury'. Two important pre-requisites are postulated by the first proviso of Section 9(6) of the Act. They are, (a) a review being conducted by respondent no.2, and (b) subsequent formation of an opinion by respondent no.1 on the basis of the review, that is, whether cessation of countervailing duty would lead to 'continuation or recurrence of subsidisation and injury.' These pre-requisites are required to be satisfied at the time of imposing as well as discontinuing the countervailing duty. In M/S. KUMHO PETROCHEMICALS CO. LTD., FAIRDEAL POLYCHEM LLP VERSUS UNION OF INDIA AND OTHERS [2014 (7) TMI 732 - DELHI HIGH COURT], the Delhi High Court held in relation to the anti-dumping duty that the procedural requirements included finding of causal link between dumping and inquiry to domestic inquiry. It was held that the injury is to be determined on objective examination of positive evidence of extent of dumping assessed through loss of market share of domestic inquiry in comparison to dump imports on the effective prices of said goods. In para 14 of the decision, the High Court delineated as to what was the comprehensive procedural requirements relating to investigation. The enabling power not to continue the anti-dumping duty/countervailing duty available under the provision, would not obliterate the requirement for the Countervailing Authorities to disregard or overlook the statutory requirement of fulfiling condition to establish about the prejudicial effect to the domestic industry and the ingredients mentioned in the section such as continuation or recurrence of subsidisation and the resultant injury to the domestic industry. Establishing these elements are sine qua non even before withdrawal or rescindment of the duty under the scheme of the provisions. In the present case, the Central Government acted without having with it recommendation of the Designated Authority in issuing the Notification rescinding the countervailing duty. The recommendation of the designated authority secured after statutory exercise and after going into the relevant considerations and criteria, was to be the source material for the Central Government to act. The Central Government acted without availability of foundational aspects and jurisdictional facts to proceed to issue the notification. Conferring such licence and power to act in such a way on the Central Government would be extending unfettered and arbitrary powers - The words 'unless revoked earlier occurring in sub-section (6) in section 9 of the Act would have to be construed accordingly. The same procedure including making of inquiry and ascertaining the aspect injury to the domestic industry, will have to be read into before power to revoke is exercised. It would be reasonable to apply Section 21 by construing the words ‘like manner’by equating them, for the purpose of present issue, with the procedure required under the statutory provisions of Customs Tariff Act, 1975 and relating to imposition of countervailing duty. The issuance of Notification dated 01.02.2022 by the Central Government rescinding the countervailing duty imposed by the Notification dated 07.09.2017 was a irregular and illegal exercise. The Notification rescinding the countervailing duty could not have been issued when the exercise in law required to be undertaken pursuant to the commencement of the process of Sunset review not completed - It was not permissible for the Central Government to issue the Notification rescinding the countervailing duty in absence of any recommendatory exercise and without waiting for such recommendations of the designated authority in accordance with prescribed procedure. The Central Government has no power to issue Notification in the manner issued, in absence of any without waiting for the recommendation by the designated authority. The Notification No.1/2022-Customs (CVD) dated 01.02.2022 issued by respondent no.1 rescinding the countervailing duty is hereby quashed and set aside - Respondent no.2 shall immediately proceed in respect of Sunset review process in relation to the continuance or otherwise of the countervailing duty already commenced as per Notification dated 08.10.2021. Issues Involved:1. Whether the Central Government could issue a Notification rescinding the countervailing duty during an ongoing Sunset review investigation.2. Whether the Central Government could issue such Notification without a recommendation from the designated authority.3. Whether the Central Government was obligated to follow the recommendatory procedure laid down in Sub-section (6) of Section 9 of the Customs Tariff Act, 1975, read with Rule 24 of the Customs Tariff Rules.4. The interpretation of the words 'unless revoked earlier' in sub-section (5) of section 9 of the Act.5. Whether the determination of 'continuation or recurrence of subsidization' and 'injury' is a condition precedent for rescinding the countervailing duty.Detailed Analysis:Issue 1: Issuance of Notification During Ongoing Sunset ReviewThe Court held that the Central Government's issuance of Notification dated 01.02.2022, rescinding the countervailing duty, was irregular and illegal. The Notification could not have been issued during the ongoing Sunset review investigation, which must be completed before any decision to continue, withdraw, or rescind the duty.Issue 2: Issuance of Notification Without RecommendationThe Court ruled that the Central Government could not issue the Notification rescinding the countervailing duty without any recommendatory exercise from the designated authority. The Central Government has no power to act unilaterally without waiting for the recommendation by the designated authority.Issue 3: Obligation to Follow Recommendatory ProcedureIt was obligatory for the Central Government to act and issue any Notification only after following the procedure laid down in Sub-section (6) of Section 9 of the Customs Tariff Act, 1975, read with Rule 24 of the Customs Tariff Rules. The procedure and exercise contemplated in these provisions are mandatory and cannot be treated as optional.Issue 4: Interpretation of 'Unless Revoked Earlier'The words 'unless revoked earlier' in section 9(6) of the Act do not grant the Central Government unfettered power to revoke the countervailing duty without following the statutory procedure. The revocation must be preceded by the ascertainment of essential ingredients, including a recommendation from the designated authority.Issue 5: Determination of 'Continuation or Recurrence of Subsidization' and 'Injury'The Court emphasized that the determination of 'continuation or recurrence of subsidization' and 'injury' is a sine qua non before issuing a Notification to rescind the duty. These are jurisdictional facts that must be established through the statutory procedure.Conclusion and Directions:1. The Notification dated 01.02.2022 rescinding the countervailing duty is quashed and set aside.2. The designated authority must immediately proceed with the Sunset review process.3. The review process must be completed in accordance with statutory provisions and rules.4. The designated authority must make necessary recommendations to the Central Government, which can then take appropriate action.5. The original Notification dated 07.09.2017 is revived, and the countervailing duty becomes leviable.6. The Sunset review initiated must be completed as per law.7. The levy of countervailing duty shall continue in the interregnum until the review process is completed and a decision is taken.Further Order:The Court rejected the request to suspend the implementation of the judgment and order for eight weeks. The reasons assigned in the judgment do not support granting a stay.