TaxTMI 
TaxTMI 
2015 (9) TMI 1162
X X X X Extracts X X X X
X X X X Extracts X X X X
....eponderant view, that is the view of both the Bombay and Kerala High Courts and the Bombay Tribunal, is in favour of the construction suggested by revenue. Only the Karnataka Tribunal (Bangalore) has decided in favour of the assessee. 3. The question of law which arises in the instant appeals is whether anti-dumping duty imposed with respect to imports made during the period between the expiry of the provisional anti-dumping duty and the imposition of the final anti-dumping duty is legal and valid. 4. It is necessary in this case to begin at the very beginning. The General Agreement on Tariffs and Trade (GATT) in Article VI first laid down how, conceptually, anti-dumping duties were to be imposed. The relevant part of Article VI reads as under:- "Article VI Anti-dumping and Countervailing Duties 1. The contracting parties recognize that dumping, by which products of one country are introduced into the commerce of another country at less than the normal value of the products, is to be condemned if it causes or threatens material injury to an established industry in the territory of a contracting party or materially retards the establishment of a domestic industry. For the purp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mination of injury (but not of a threat thereof or of a material retardation of the establishment of an industry) is made or, in the case of a final determination of a threat of injury, where the effect of the dumped imports would, in the absence of the provisional measures, have led to a determination of injury, anti-dumping duties may be levied retroactively for the period for which provisional measures, if any, have been applied. 10.3 If the definitive anti-dumping duty is higher than the provisional duty paid or payable, or the amount estimated for the purpose of the security, the difference shall not be collected. If the definitive duty is lower than the provisional duty paid or payable, or the amount estimated for the purpose of the security, the difference shall be reimbursed or the duty recalculated, as the case may be." "10.6 A definitive anti-dumping duty may be levied on products which were entered for consumption not more than 90 days prior to the date of application of provisional measures, when the authorities determine for the dumped product in question that: (I) there is a history of dumping which caused injury or that the importer was, or should have been,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orting country or territory and in cases where there is no export price or where the export price is unreliable because of association or a compensatory arrangement between the exporter and the importer or a third party, the export price may be constructed on the basis of the price at which the imported articles are first resold to an independent buyer or if the article is not resold to an independent buyer, or not resold in the condition as imported, on such reasonable basis as may be determined in accordance with the rules made under sub-section (6); (c) "normal value", in relation to an article, means- (i) the comparable price, in the ordinary course of trade, for the like article when destined for consumption in the exporting country or territory as determined in accordance with the rules made under sub-section (6); or (ii) when there are no sales of the like article in the ordinary course of trade in the domestic market of the exporting country or territory, or when because of the particular market situation or low volume of the sales in the domestic market of the exporting country or territory, such sales do not permit a proper comparison, the normal value shall be e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s specifically made applicable in such notification or such imposition, as the case may be, shall not apply to articles imported by a hundred per cent export-oriented undertaking or a unit in a free trade zone or in a special economic zone. Explanation. - For the purposes of this section, the expressions "hundred per cent export-oriented undertaking", "free trade zone" and "special economic zone" shall have the meanings assigned to them in Explanations 2 to sub-section (f) of section 3 of Central Excise Act, 1944. (3) If the Central Government, in respect of the dumped article under inquiry, is of the opinion that - (i) there is a history of dumping which caused injury or that the importer was, or should have been, aware that the exporter practices dumping and that such dumping would cause injury; and (ii) the injury is caused by massive dumping of an article imported in a relatively short time which in the light of the timing and the volume of imported article dumped and other circumstances is likely to seriously undermine the remedial effect of the antidumping duty liable to be levied, the Central Government may, by notification in the Official Gazette, levy anti-d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e an exporter or producer fails to provide such records or information, the margin of dumping for such exporter or producer shall be determined on the basis of facts available.; (7) Every notification issued under this section shall, as soon as may be after it is issued, be laid before each House of Parliament. (8) The provisions of the Customs Act, 1962, (52 of 1962) and the rules and regulations made thereunder, including those relating to the date for determination of rate of duty, assessment, non-levy, short levy, refunds, interest, appeals, offences and penalties shall, as far as may be, apply to the duty chargeable under this section as they apply in relation to duties leviable under that Act." 7. In exercise of powers conferred, inter alia, by Section 9A (6) of the Customs Tariff Act, the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 have been framed. The Rules relevant to the determination of the present controversy are set out hereunder:- "2. Definitions.- In these rules, unless the context otherwise requires- (e) "provisional duty" means an anti dumping duty impos....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f sub-rule (3). (5) The designated authority shall notify the government of the exporting country before proceeding to initiate an investigation. 11. Determination of injury. - (1) In the case of imports from specified countries, the designated authority shall record a further finding that import of such article into India causes or threatens material injury to any established industry in India or materially retards the establishment of any industry in India. (2) The designated authority shall determine the injury to domestic industry, threat of injury to domestic industry, material retardation to establishment of domestic industry and a causal link between dumped imports and injury, taking into account all relevant facts, including the volume of dumped imports, their effect on price in the domestic market for like articles and the consequent effect of such imports on domestic producers of such articles and in accordance with the principles set out in Annexure II to these rules. (3) The designated authority may, in exceptional cases, give a finding as to the existence of injury even where a substantial portion of the domestic industry is not injured, if- (i) there is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ping of the said article; (ii) whether import of the said article into India, in the case of imports from specified countries, causes or threatens material injury to any industry established in India or materially retards the establishment of any industry in India; (iii) a causal link, where applicable, between the dumped imports and injury; (iv) whether a retrospective levy is called for and if so, the reasons therefor and date of commencement of such retrospective levy: Provided that the Central Government may, in its discretion in special circumstances extend further the aforesaid period of one year by six months: Provided further that in those cases where the designated authority has suspended the investigation on the acceptance of a price undertaking as provided in rule 15 and subsequently resumes the same on violation of the terms of the said undertaking, the period for which investigation was kept under suspension shall not be taken into account while calculating the period of said one year, (b) recommending the amount of duty which, if levied, would remove the injury where applicable, to the domestic industry. (2) The final finding, if affirmative, shall c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom a particular country, as referred to sub-rule (3) of rule 17, any anti-dumping duty applied to imports from exporters or producers not included in the examination shall not exceed - (i) the weighted average margin of dumping established with respect to the selected exporters or producers or, (ii) where the liability for payment of anti-dumping duties is calculated on the basis of a prospective normal value/ the difference between the weighted average normal value of the selected exporters or producers and the export prices of exporters or producers not individually examined: Provided that the Central Government shall disregard for the purpose of this sub-rule any zero margin, margins which are less than 2 per cent expressed as the percentage of export price and margins established in the circumstances detailed in sub-rule (8) of rule 6. The Central Government shall apply individual duties to imports from any exporter or producer not included in the examination who has provided the necessary information during the course of the investigation as referred to in the second proviso to sub-rule (3) of rule 17. (3) Notwithstanding anything contained in sub-rule (1), where ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntral Government on the basis of the final findings of the investigation conducted by the designated authority is higher than the provisional duty already imposed and collected, the differential shall not be collected from the importer. (2) If, the anti-dumping duty fixed after the conclusion of the investigation is lower than the provisional duty already imposed and collected, the differential shall be refunded to the importer. (3) If the provisional duty imposed by the Central Government is withdrawn in accordance with the provisions of sub-rule (4) of rule 18, the provisional duty already imposed and collected, if any, shall be refunded to the importer." 8. We will take the facts contained in the judgment of the Bombay High Court dated 15.12.2011, in the case of Harsh International v. Commissioner of Customs, Civil Appeal No. 5119 of 2012, which explain how the question which has to be determined by this judgment arose. On 6th August, 2001 a public notice was issued by the Designated Authority initiating proceedings in regard to the import of Vitrified/Porcelain tiles originating in or exported from the People's Republic of China and the United Arab Emirates. The Designa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cessarily include the "gap" period. Further, since the final duty is made to relate back to the date of the provisional duty imposition, a fiction is employed which must be allowed to have full play and the mind should not boggle in giving such fiction its logical consequence. According to learned counsel, "levied" in Rule 20(2)(a) obviously does not include "collection" as has been held in several Supreme Court judgments and therefore, "levy" would not include "collection" for which reason Rule 20 has to be read on its own without reference to the consequence that is found in Rule 21. She further argued that it is true that laws that are made in pursuance of international treaties ought to be construed in accordance with such treaties, but where the Indian law deviates from the treaty agreement, Indian law prevails. It is clear that unlike Article 10 of the WTO Agreement, Rule 20(2)(a) only speaks of anti-dumping duty being levied from the date of imposition of provisional duty and does not speak of the period for which the provisional duty applied, thus making it clear that anti-dumping duty can be levied and collected for the "gap" or interregnum period. 11. On the other hand, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct read with the Anti-Dumping Rules. But before we come to these judgments, it is important to refer to our basic law, and in particular Article 51(c) of the Constitution of India, which reads as follows: "51. Promotion of international peace and security. -The State shall endeavour to - (c) foster respect for international law and treaty obligations in the dealings of organised peoples with one another; and" 13. In S&S Enterprise v. Designated Authority and others, (2005) 3 SCC 337, this Court said: "In our opinion, the interpretation of Rule 14(d) by Respondent No.1 and the Tribunal is incorrect and contrary to its language. The imposition of dumping duty is under Section 9A of the Customs Tariff Act, 1975 and the Rules and is the outcome of the General Agreement on Tariff and Trade (GATT) to which India is a party. The purpose behind the imposition of the duty is to curb unfair trade practices resorted to by exporters of a particular country of flooding the domestic markets with goods at rates which are lower than the rate at which the exporters normally sell the same or like goods in their own countries so as to cause or be likely to cause injury to the domestic mar....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... approach to the construction of a statute made in response to an international treaty obligation by a member nation. Thus, in The Jade The Eschersheim Owners of the motor vessel Erkowit v. Owners of the ship Jade, [1976] 1 All ER 920, the House of Lords stated: "As the Act was passed to enable Her Majesty's government to give effect to the obligations in international law which it would assume on ratifying the convention to which it was a signatory, the rule of statutory construction laid down in Salomon v. Customs and Excise Commissioners [1966] 3 All ER 871 and Post Office v. Estuary Radio Ltd. [1967] 3 All ER 633 is applicable. If there be any difference between the language of the statutory provision and that of the corresponding provision of the convention, the statutory language should be construed in the same sense as that of the convention if the words of the statute are reasonably capable of bearing that meaning." [at page 924] 16. Similarly in Quazi v. Quazi, [1979] 3 All ER 897, the House of Lords put it thus: "In the instant case, however, this does not help the respondent wife; it helps the appellant husband. The purpose for which the Recognition Act was passed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....but should be construed on its own terms on broad principles of general application in a purposive and not in a narrow literal manner. This is stated in the following words: "My Lords, the provisions in section 1 of the Act that I have quoted appear to me to be free from any ambiguity perceptible to even the most ingenious of legal minds. The Hague-Visby Rules, or rather all those of them that are included in the Schedule, are to have the force of law in the United Kingdom: they are to be treated as if they were part of directly enacted statute law. But since they form part of an international convention which must come under the consideration of foreign as well as English courts, it is, as Lord Macmillan said of the Hague Rules themselves in Stag Line Ltd. v. Foscolo, Mango and Co. Ltd.[1932] A.C. 328 at 350, [1931] All ER Rep 666 at 677 - "desirable in the interests of uniformity that their interpretation should not be rigidly controlled by domestic precedents of antecedent date, but rather that the language of the rules should be construed on broad principles of general acceptation." They should be given a purposive rather than a narrow literalistic construction, particu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....extenso: "7. A person surrendered can in no case be kept in custody or be brought to trial in the territories of the High Contracting Party to whom the surrender has been made for any other crime or offence, or on account of any other matters, than those for which the extradition shall have taken place, until he has been restored, or has had an opportunity of returning, to the territories of the High Contracting Party by whom he has been surrendered. This stipulation does not apply to crimes or offences committed after the extradition." The aforesaid Article unequivocally indicates that the person concerned cannot be tried for any other crime or offence than those for which the extradition shall have taken place until he has been restored or has had the opportunity of returning to the territories of the High Contracting Party by whom he has been surrendered. The provisions of Section 21 of the Extradition Act are in consonance with the aforesaid Article of the Extradition Treaty...." [at para 3] 22. In yet another judgment of this Court, i.e. S&S Enterprise, already referred to, this Court construed Rule 14(d) of the very anti-dumping rules with which we are concerned, i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itution of India is a Directive Principle of State Policy which states that the State shall endeavour to foster respect for international law and treaty obligations. As a result, rules of international law which are not contrary to domestic law are followed by the courts in this country. This is a situation in which there is an international treaty to which India is not a signatory or general rules of international law are made applicable. It is in this situation that if there happens to be a conflict between domestic law and international law, domestic law will prevail. (2) In a situation where India is a signatory nation to an international treaty, and a statute is passed pursuant to the said treaty, it is a legitimate aid to the construction of the provisions of such statute that are vague or ambiguous to have recourse to the terms of the treaty to resolve such ambiguity in favour of a meaning that is consistent with the provisions of the treaty. (3) In a situation where India is a signatory nation to an international treaty, and a statute is made in furtherance of such treaty, a purposive rather than a narrow literal construction of such statute is preferred. The interpre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nti-dumping duty. The Section further goes on to say that after a final determination is made in accordance with the Rules, the Central Government may reduce such provisional anti-dumping duty, having regard to the final determination made by the designated authority under the Rules. If and when this happens, what is important to note is that refund shall be made of so much of the anti-dumping duty which has been collected in excess of the final anti-dumping duty so reduced. Under sub-section (5), a maximum period of five years is allowable on the anti-dumping duty imposed. This is extendable only for a further period of five years and not beyond. Sub-section (6) in turn refers to the Central Government's power to make rules, inter alia, to assess and collect anti-dumping duty. 26. It is important to note that neither sub-section (2) nor sub-section (6) authorises the Central Government, either expressly or by necessary implication, to make rules and/or to levy anti-dumping duty with retrospective effect. This is in contrast with sub-section (3) which expressly so authorises the Central Government in the circumstances mentioned in the sub-section. Interpretation of the Anti-Dumpi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es of imports not sold at dumping prices, contraction in demand or changes in the patterns of consumption, trade restrictive practices of and competition between the foreign and domestic producers, developments in technology and the export performance and the productivity of the domestic industry." 28. It will thus be seen that the determination of material injury to domestic industry depends on a series of complex economic factors which are to be segregated from other factors which may also cause injury to the said industry. 29. Under Rule 12, the designated authority is to "proceed expeditiously" with the conduct of the investigation and shall in appropriate cases record his preliminary findings on all the aspects delineated above. No time frame is indicated except that utmost dispatch is the order of the day. 30. Rule 13 is very important and when Rule 20 is read harmoniously with both Rules 13 and 21, all the dark clouds which come in on account of the suggested construction of Rule 20 by revenue get dispelled by the sunlight of harmonious construction of all the three Rules read together. 31. Rule 13, in line with clause 7.4 of the WTO Agreement, enables the Central Gover....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t Rule 19 is a mistake made by the draftsman of the Rules. Rule 18 is obviously referred to. Thus, under sub-rule (1), the provisional anti-dumping duty takes effect on and from the date of its publication in the official gazette. Same is the case with the final anti-dumping duty levied under Rule 18. 35. Sub-rule (2) is in two parts. Sub-clause (a) deals with the date of commencement of an anti-dumping duty, having due regard to a provisional duty that has been levied, whereas sub-clause (b) specifically deals with duty to be retrospectively imposed, that is a retrospective imposition prior to the imposition of a provisional duty. It will immediately be noticed that the subject matter of sub-clause (a) does not purport to be the imposition of an anti-dumping duty with retrospective effect. This is because it seeks to give effect to clause 10.2 of the WTO Agreement. As has been argued by learned counsel on both sides, the key to the understanding of the import of sub-clause (a) is the expression "where a provisional duty has been levied...." Obviously, the word "levied" has to be read as levied in accordance with Rule 13 which, as its marginal note indicates, provides for the "lev....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the final duty. Such interpretation makes it clear that clause 10.2 of the WTO Agreement is reproduced in the same sense though not in the same form in sub-rule (2)(a). The same result therefore as is envisaged in clause 10.2 is achieved by the said construction - that is anti-dumping duty may be levied retroactively for the period for which provisional measures have been applied. The said construction is in consonance with the principles already laid down earlier in this judgment in that the WTO Agreement is intended to be applied by the various signatory nations in a uniform manner. This can only be done by construing the language of Section 9A read with the Rules in the same sense as that of the WTO Agreement. 37. At this juncture, it is interesting to note that a number of member countries of the WTO agreement have opted for the Rule by which anti-dumping duty is levied to the full extent of the margin of dumping. Such nations like Argentina, Mexico and USA therefore have, under the WTO Agreement, only a period of 4 months extendable upto a maximum period of 6 months (instead of 6 months and 9 months respectively) so far as the life span of a provisional duty is concerned. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... period, instructing them to stop collecting cash deposits or bonds, or we wait until the order has been published, then instruct CBP to liquidate all entries during the gap period without regard to antidumping duties." 40. We are heartened to note that one other signatory nation has taken the stand that no duty can be collected during the "gap period". 41. Viewed slightly differently, the suggested construction by revenue would render Rule 2(a) ultra vires Section 9A. It has already been seen that sub-section (2) and sub-section (6) of Section 9A do not authorize the imposition of a duty with retrospective effect, in contrast with sub-section (3) thereof. Any duty levied by a final duty notification during the interregnum period would necessarily amount to a retrospective levy of duty for the reason that such period is not covered by the provisional duty notification, being beyond 6 months. This would therefore render sub-rule (2)(a) ultra vires Section 9A. A construction which is both in consonance with international law and treaty obligations, which Article 51(c) of the Constitution states as a directive principle of State policy; and with the application of the doctrine of h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gnum period, the full amount of final duty is liable to be recovered from the importer. This would turn Rule 21(1) on its head and result in an absurdity. A simple example will suffice. If provisional duty already imposed and collected is Rs. 50/- per metric ton (PMT), and final duty imposed say one year later with retroactive effect from the date of imposition of the provisional duty is Rs. 100/- PMT, the difference of Rs. 50/- PMT cannot be recovered from the importer for the period that the provisional notification is in force. Therefore, for the first 6 months in the aforesaid example, the importer is liable to pay nil duty. However, for the next 6 months, that is in the interregnum period between the expiry of the provisional duty and the date of imposition of the final duty, the importer becomes liable to pay Rs. 100/- PMT. The said example demonstrates how the arguments of the revenue would lead to an absurdity such as this. 45. Rule 21(1) also answers the contention of the Revenue that the object of anti-dumping laws would be defeated if it were found that dumping and material injury having been found, yet no anti-dumping duty can be levied. By application of this Rule, it....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct of Article 18.4 of the WTO Agreement, which expressly states that all the signatory member nations have to make their laws "conform" to the provisions of the WTO Agreement, something which the Central Government itself states in its internet website which deals with the law of anti-dumping. 49. The High Court goes on to state that the construction suggested on behalf of the assessee would lead to a manifest absurdity as there would be no reason or justification to hold that the levy of anti-dumping duty must sustain a break during the period between the expiry of the provisional duty notification and the issuance of a notification imposing a final anti-dumping duty. The High Court went on to hold that the object and purpose underlying Section 9A would be defeated, as for the interregnum period where both dumping and material injury to domestic industry are found, no anti-dumping duty can be issued. This conclusion again cannot be countenanced for the simple reason that if Rule 20(2)(a) were to be construed n the fashion suggested by the High Court, it would be ultra vires Section 9A for the reasons already given by us. Further, the object and purpose of Section 9A is to impose ....