TaxTMI 
TaxTMI 
2015 (9) TMI 1162
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....together. It may also be stated that the preponderant 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 reta....
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....ticle 9, respectively, enters into force, subject to the exceptions set out in this Article. 10.2 Where a final determination 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 th....
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....on to an article, means the difference between its export price and its normal value; (b) "export price", in relation to an article, means the price of the article exported from the exporting 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, o....
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....collected as is in excess of the anti-dumping duty as so reduced. (2A) Notwithstanding anything contained in sub-section (1) and sub-section (2), a notification issued under sub-section (1) or any anti-dumping duty imposed under sub-section (2), unless 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 t....
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....-dumping duty. (6A) The margin of dumping in relation to an article, exported by an exporter or producer, under inquiry under sub- section (6) shall be determined on the basis of records concerning normal value and export price maintained, and information provided, by such exporter or producer: Provided that where 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, Assessme....
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....for or opposition, as the case may be, to the application. (4) Notwithstanding anything contained in sub-rule (1) the designated authority may initiate an investigation suo motu if it is satisfied from the information received from the Collector of Customs appointed under the Customs Act, 1962 (52 of 1962) or from any other source that sufficient evidence exists as to the existence of the circumstances referred to in clause (b) of 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....
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....for a period not exceeding six months which may upon request of the exporters representing a significant percentage of the trade involved be extended by the Central Government to nine months. 17. Final findings. - (1) The designated authority shall, within one year from the date of initiation of an investigation, determine as to whether or not the article under investigation is being dumped in India and submit to the Central Government its final finding - (a) as to, - (i) the export price, normal value and the margin of dumping 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 ....
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....densome and prevent the timely completion of the investigation. (4) The designated authority shall issue a public notice recording its final findings. 18. Levy of duty. - (1) The Central Government may, within three months of the date of publication of final findings by the designated authority under rule 17, impose by notification in the Official Gazette, upon importation into India of the article covered by the final finding, anti-dumping duty not exceeding the margin of dumping as determined under rule 17. (2) In cases where the designated authority has selected percentage of the volume of the exports from 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 export....
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....orts entered for home consumption before initiation of the investigation: Provided further that in the cases of violation of price undertaking referred to in sub-rule (6) of rule 15, no duty shall be levied retrospectively on the imports which have entered for home consumption before the violation of the terms of such undertaking. Provided also that notwithstanding anything contained in the foregoing proviso, in case of violation of such undertaking, the provisional duty shall be deemed to have been levied from the date of violation of the undertaking or such date as the Central Government may specify in each case. 21. Refund of duty. - (1) If the anti-dumping duty imposed by the Central 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 imp....
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....d counsel, any other construction would defeat the object and purpose of imposing a final anti-dumping duty after the Designated Authority has found, post investigation, that there is dumping of goods and material injury to the domestic industry as a result. Thus, despite dumping and material injury being present, no anti-dumping duty would be leviable in the interregnum period which would be wholly subversive of the object sought to be achieved; that is, saving the domestic industry from unfair trade practices of foreign exporters. She also argued that a literal reading of Rule 20 is called for which makes it clear that the final anti-dumping duty is to be levied from the date of imposition of provisional duty which would necessarily 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....
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....ed, and nothing beyond. It was further argued that Rule 20(2)(a) has to be harmoniously construed with both Rules 13 and 21, or else, the suggested construction by revenue of Rule 20(2)(a) would render Rules 13 and 21 nugatory. In this context, it was further argued that no duty can be levied in the interregnum period as the Government would then be doing indirectly what it is prohibited from doing directly - namely, extending the period of six months of the levy of provisional duty beyond six months and until the notification imposing the final anti-dumping duty. 12. Two earlier judgments of this Court have stated as to what exactly was the object sought to be achieved by the introduction of Section 9A of the Customs Tariff Act 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 Enterpr....
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....ublished in 1841) but to prevent unfair trade practices. The 1995 Amendment to Section 9A was apparently made in pursuance to Article VI of the General Agreement on Tariffs and Trade 1994 (GATT 1994) which permitted anti-dumping measures as an instrument of fair competition. The concept of anti-dumping is founded on the basis that a foreign manufacturer sells below the normal value in order to destabilise domestic manufacturers. Dumping, in the short term, may give some transitory benefits to the local customers on account of lower priced goods, but in the long run destroys the local industries and may have a drastic effect on prices in the long run." [at paras 10, 11 & 12] 15. A number of judgments, both English and Indian, have laid down as to what is the correct 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 rat....
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....thout need for any further enactment, it is a principle of construction of United Kingdom statutes, now too well established to call for citation of authority, that the words of a statute passed after the Treaty has been signed and dealing with the subject matter of the international obligation of the United Kingdom, are to be construed, if they are reasonably capable of bearing such a meaning, as intended to carry out the obligation, and not to be inconsistent with it." [at page 415] 18. Another interesting aspect was brought out by the House of Lords in The Hollandia's case [1982] 3 All ER 1141, and that is that a treaty provision embodied in a statute needs to be construed uniformly in all the member nations who are its signatories, and should therefore not be controlled by domestic precedents 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 th....
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....shall be followed by the Courts of Law. To support we may refer to Justice H.R. Khanna's opinion in Addl. Distt. Magistrate Jabalpur v. Shivakant Shukla [(1976) 2 SCC 521 : AIR 1976 SC 1207], Jolly George Varghese v. Bank of Cochin [(1980) 2 SCC 360 : AIR 1980 SC 470] and Gramophone Co. of India Ltd. v. Birendra Bahadur Pandey, [(1984) 2 SCC 534 : 1984 SCC (Cri) 313 : AIR 1984 SC 667]." [at para 15] 21. Similarly in Daya Singh Lahoria v. Union of India and others, (2001) 4 SCC 516, when construing Section 21 of the Extradition Act, 1962, this Court referred to the Extradition Treaty and construed Section 21 in the light of the international position then obtained. This Court said: ".... The Extradition Treaty contains several articles of which Article 7 is rather significant for our purpose, which may be quoted hereinbelow in 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 h....
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.... in the importing member." [para 5] "Therefore, when Rule 14(d) says that the investigation must be terminated if the 'volume' of the dumped imports is less than 3% of the imports of the like product, it must mean that the quantity of dumped imports must account for less than 3% of the total imports. To hold otherwise would mean that if the price is lower than 3%, irrespective of the quantity imported, the investigation would be dropped and it would, as submitted by the appellant, lead to the absurd situation that a small number of expensive imports would invite anti-dumping investigation but cheap imports flooding the domestic markets would not. In fact such a situation is exactly what the dumping rules have been framed to prevent." [para 10] 23. A conspectus of the aforesaid authorities would lead to the following conclusions: (1) Article 51(c) of the Constitution 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 s....
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...., which authorises the levy of the "final" or "definitive" anti-dumping duty retrospectively in the circumstances mentioned in sub-section (3). The scheme therefore of Section 9A(1) and (3) is that an anti-dumping duty is normally to be imposed with prospective effect unless, inter alia, because of massive dumping of an article in a relatively short time the remedial effect of the anti-dumping duty to be levied would be seriously undermined. This would therefore require a retrospective duty being levied, but not beyond a period of 90 days, to undo the effect of undermining the anti-dumping duty to be levied. Short of sub-section (3), no other part of Section 9A authorises the Central Government to levy an anti-dumping duty with retrospective effect. 25. Section 9A(2) speaks of an anti-dumping duty which the Central Government levies on the basis of a provisional estimate, thus referring to a provisional anti-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 R....
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....ilization of capacity; factors affecting domestic prices; the magnitude of the margin of dumping; actual and potential negative effects on cash flow, inventories, employment, wages, growth, ability to raise capital investments. (v) It must be demonstrated that the dumped imports are, through the effects of dumping, as set forth in paragraphs (ii) and (iv) above, causing injury to the domestic industry. The demonstration of a causal relationship between the dumped imports and the injury to the domestic industry shall be based on an examination of relevant evidence before the designated authority. The designated authority shall also examine any known factors other than the dumped imports which at the same time are injuring the domestic industry, and the injury caused by these other factors must not be attributed to the dumped imports. Factors which may be relevant in this respect include, inter alia, the volume and prices 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 ....
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.... said sub-section, such retrospective levy cannot commence beyond 90 days from the date of the notification imposing provisional duty. 33. Under Rule 18, the Central Government may in its discretion, and within a maximum period of three months from the date of publication of the final findings by the designated authority, impose a final anti-dumping duty. 34. This brings us to Rule 20, the correct construction of which is determinative of the question raised in these appeals. The first thing to notice about Rule 20 is, as its marginal note states, that it is concerned only with the date of commencement of duty. Once this is appreciated, it becomes clear that its focus is only on when anti-dumping duties are to commence. In sub-rule (1), it speaks of anti-dumping duties levied under Rule 13 and Rule 19, and states that they shall take effect only prospectively, i.e. from the date of publication in the official gazette. It is clear that 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....
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....measures were applied (and for all practical purposes "converts" the provisional measure into a definitive measure); and The other involves the collection of definitive duties up to 90 days prior to the date of application of provisional measures, although no definitive duties can be collected on imports that took place before initiation." 36. On a correct reading of the said sub-rule, therefore, the final anti-dumping duty only incorporates the provisional anti-dumping duty within itself, but in the manner provided by Rule 13. Thus, it is clear that such incorporation can only be the period upto which the provisional duty can be levied and not beyond. Thus understood, it is clear that both literally, and in keeping with the object sought to be achieved - that is the making of laws in conformity with the WTO Agreement, there can be no levy of anti-dumping duty in the "gap" or interregnum period between the lapse of the provisional duty and the imposition 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 cl....
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....at no "gap" or intervening period occurs between the expiry of the provisional duty and the imposition of the final duty, inasmuch as a proposal to levy final duty has to be submitted no later than one month before the expiry of a provisional duty. 39. However, interestingly enough, in the United States Manual dealing with anti-dumping duties, the following is the statement of law:- "Therefore, a period of time, known sometimes as the "gap period," may exist between the expiration of the end of the provisional measures, even if extended, and the publication of the ITC's final determination (the starting of definitive duties) where the DOC cannot require CBP to collect cash deposits, bonds, or other securities. (The gap period begins the day after the end of the 4- or 6-month period, and ends the day before the ITC's final determination is published). The DOC normally administers this problem in one of two ways. We either send instructions to CBP towards the beginning of the gap 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 ....
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....efunded to the importer. But sub-rule (1) goes a step further and states that if the anti-dumping duty finally imposed is higher than the provisional duty already imposed and collected, the differential shall not be collected from the importer. 44. It is obvious that this Rule has been framed in the interest of international trade. It is well known that export contracts are entered into long before anti-dumping duties may be imposed, and in the interests of international trade, the importer should not be put to a loss in case a final duty happens to be higher than the provisional duty already imposed. The delicate balancing act between protection of domestic industry and the hardship caused in the course of international trade has thus been tilted in favour of the latter. If learned counsel for the revenue were right, despite the fact that such differential cannot be collected from the importer under Rule 21(1) for the period that the provisional duty notification is in force, during the interregnum 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. I....
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....e of Rule 13 second proviso by extending the period of the provisional duty notification beyond a period of 6 months, which clearly cannot be done. We find therefore that on all these counts, the arguments of revenue cannot be countenanced. 47. It remains now to deal with the impugned judgment of the Bombay High Court. After setting out the contentions of the respective parties and referring to the relevant statutory provisions and the WTO Agreement, the Bombay High Court arrives at a finding that Parliament has made a departure from the language used in the WTO Agreement and the Court must therefore give effect to such departure. 48. We have already held that this would fly in the face of all the judgments referred to in paragraphs 15 to 22 hereinabove, and principles (3) and (4) of paragraph 23 of this judgment which speak of how domestic legislation must be construed when it is made in furtherance of an international treaty. In particular, in the facts of these cases, it would also ignore the effect 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, som....