2025 (4) TMI 78 - HC - Customs

Low Ash Metallurgical Coke import restrictions upheld under Section 9A FTDR Act safeguard measures

The Delhi HC upheld quantitative restrictions on Low Ash Metallurgical Coke imports imposed through safeguard measures under Section 9A of the FTDR Act, ... Applicability of Clause 1.05 of the Foreign Trade Policy, 2023 (FTP) - prospective application of import/export restrictions, in case of change in policy from ‘free’ to ‘restricted/prohibited/ state trading’ or ‘otherwise regulated’ - import of Low Ash Metallurgical Coke (LAM Coke) - HELD THAT:- Two aspects are crucial as regards conduct of investigation under the Safeguard Rules, 2012. Firstly, for the purpose of conduct of investigation, it is clearly provided that the concerned “authorised officer” shall duly notify the non-exporters; the concerned trade association; the Government of the exporting country. Further, Rule 6(5) clearly provides that the authorised officer shall provide opportunity to the industrial use of goods under investigation and to representative consumer organisations in case where the goods are commonly sold at retail level, to furnish information which is relevant to the investigation. Thus, there is adequate notice to all concerned as regards the initiation of investigation. Once the final determination is made after following the elaborate procedure in the Safeguard Rules, 2012, with the participation of all the concerned stakeholders, and upon a notification being issued under Rule 10 [thereby imposing quantitative restrictions], the same shall be taken into effect from the date of publication of said notification. There is no provision for any further transitional arrangement. As noticed, this is unlike in the case of an action/notification issued under Section 3 (2) of the FTDR Act. In the present case, the country-wise quantitative restrictions have been imposed based on an elaborate safeguards investigation carried out by DGFT under the Safeguard Rules, 2012, and pursuant to final findings notified vide notification number 22/4/2023-DGTR dated 29.04.2024 r/w notification dated 28.05.2024. It has been specifically held by the Supreme Court in Agricas [2020 (8) TMI 705 - SUPREME COURT] that the Safeguard Rules, 2012 are also in conformity with the provisions of WTO agreement on safeguards made in terms of Article XIX of GATT-1994. There is no rationale for subjecting safeguard measures to any ‘transitional provision’ which is not incorporated in the said Rules - Further, it has been pointed out that the major exporting countries, the concerned importers/exporters; other stakeholders including Indonesia exporters and petitioners were privy to the investigation and the final findings/recommendation dated 29.04.2024 of the DGTR. The impugned notification is clearly predicated on the investigation carried out under Section 9A of the FTDR Act, 1992 read with the Safeguard Rules, 2012. The reference to Section 3 and Section 5 of the FTDR Act, 1992 in the notification dated 26.12.2024 is clearly surplusage inasmuch as there is no manner of doubt that the said notification is entirely based on the final findings rendered pursuant to the investigation conducted under QR Rules, 2012. In the present case, after the notification dated 26.12.2024 came to be issued, the petitioners submitted applications for operational listing of their ICLCs, in terms of Clause 1.05 of the FTP. However, the said exercise was moot, in view of the position that the impugned notification is premised on Section 9A of the FTDR Act, and the inquiry conducted as per the Safeguard Rules, 2012 which stands on an independent footing and is not subject to any transitional provision/s as set out in Clause 1.05 of the FTP - It cannot be lost sight of, particularly in the contemporary global trade context, that the leeway afforded to contracting states under Article IX of GATT, 1994 to take action to protect their domestic industry, cannot be whittled down by holding that safeguard measures be subject to ‘transition provision/s’. The same is not mandated or contemplated under Article IX of GATT, 1994 nor under Section 9A of the FTDR, which, as held in Agricas, is a product of an “act of transformation” to implement Article IX of GATT, 1994. Conclusion - The validity of the notification imposing quantitative restrictions on LAM Coke imports upheld. The transitional provisions of the FTP do not apply to measures under Section 9A, which are designed to protect domestic industries from serious injury due to import surges. This Court finds not merit in the present petitions, and same is dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include:- Whether the transitional provisions under Clause 1.05 of the Foreign Trade Policy, 2023 (FTP) apply to quantitative restrictions imposed under Section 9A of the Foreign Trade (Development & Regulation) Act (FTDR Act).- The distinction between actions taken under Section 3 and Section 9A of the FTDR Act, and whether the transitional provisions under Clause 1.05 of the FTP can override the specific safeguard measures imposed under Section 9A.- The implications of the notification dated 26.12.2024, which imposed quantitative restrictions on the import of Low Ash Metallurgical Coke (LAM Coke), and whether it was issued in accordance with the procedural and substantive requirements of the FTDR Act.2. ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe legal framework involves the FTDR Act, particularly Sections 3 and 9A, and the Safeguard Measures (Quantitative Restrictions) Rules, 2012. Clause 1.05 of the FTP is also central to the analysis. The court also references the WTO agreements, particularly Article XIX of the General Agreement on Tariffs and Trade (GATT), 1994, which Section 9A of the FTDR Act aims to implement.Court's Interpretation and ReasoningThe court concluded that the transitional provisions under Clause 1.05 of the FTP do not apply to quantitative restrictions imposed under Section 9A of the FTDR Act. The court emphasized that Section 9A is a standalone provision designed to protect domestic industries from serious injury due to increased imports. The procedural requirements under Section 9A, including a detailed investigation and stakeholder consultation, distinguish it from the broader import restrictions under Section 3.Key Evidence and FindingsThe court noted that the notification dated 26.12.2024 was issued following a comprehensive investigation by the Directorate General of Trade Remedies (DGTR) under the Safeguard Rules, 2012. The investigation concluded that the increased import of LAM Coke threatened to cause serious injury to the domestic industry, justifying the imposition of quantitative restrictions.Application of Law to FactsThe court applied the legal principles to the facts by determining that the notification under Section 9A was validly issued and not subject to the transitional provisions of Clause 1.05 of the FTP. The court found that the petitioners' reliance on Clause 1.05 was misplaced, as it pertains to changes in import policy under Section 3, not Section 9A.Treatment of Competing ArgumentsThe petitioners argued that their Irrevocable Commercial Letters of Credit (ICLCs) should be honored under the transitional provisions of the FTP. However, the court rejected this argument, emphasizing that the safeguards under Section 9A were not subject to such transitional arrangements. The court also dismissed the argument that the notification was improperly issued under Section 3 and Section 5 of the FTDR Act, affirming that it was based on Section 9A.ConclusionsThe court concluded that the quantitative restrictions imposed by the notification were valid and necessary to protect the domestic industry. The transitional provisions of Clause 1.05 of the FTP were deemed inapplicable to the safeguards imposed under Section 9A.3. SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning'The notification under Section 9A (1) is a product of an elaborate quasi-judicial exercise. This is in sharp contrast to a measure taken/notification issued under Section 3 of the FTDR Act read with Clause 2.07 of the FTP.'Core Principles Established- Section 9A of the FTDR Act operates independently of Section 3 and is designed to address serious injury to domestic industries due to increased imports.- The transitional provisions under Clause 1.05 of the FTP do not apply to safeguard measures imposed under Section 9A.- Notifications under Section 9A require a detailed investigation and are not subject to the transitional arrangements applicable to general import policy changes under Section 3.Final Determinations on Each IssueThe court dismissed the petitions, upholding the validity of the notification imposing quantitative restrictions on LAM Coke imports. The court reaffirmed that the transitional provisions of the FTP do not apply to measures under Section 9A, which are designed to protect domestic industries from serious injury due to import surges.