Delhi High Court
The All India Glass Manufacturers ... vs Union Of India And Others on 27 May, 2009
Author: Rajiv Shakdher
Bench: Vikramajit Sen, Rajiv Shakdher
+* THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on : 27.05.2009
+ WP(C) No. 8749 of 2009
SAINT-GOBAIN GLASS INDIA LTD
& ANR. ..... Petitioner
versus
UNION OF INDIA & ORS. ..... Respondent
WP(C) No. 8761 of 2009
THE ALL INDIA GLASS MANUFACTURERS
FEDERATION ..... Petitioner
versus
UNION OF INDIA & ORS. ..... Respondent
Advocates who appeared in this case:
For the Appellant : Mr Raju M. Ramachandran, Sr. Advocate
with Mr Jitender Singh, Mr Saurabh S. Sinha, Mr
Shankar N. & Mr Mrigank Prabhakar, Advocates
in WP(C) No. 8749/2009.
Mr Pramod Kumar Rai with Mr Abdhesh
Chaudhary, Ms Manisha Suri & Mr Neelendu,
Advocates in WP(C) No. 8761/2009
For the Respondent : Mr. Sandeep Sethi, Sr. Advocate with Mr
Rajesh Sharma, Advocate in WP(C) No.
8749/2009
Mr Mukesh Anand, Advocate in WP(C) No.
8761/2009
CORAM :-
HON'BLE MR JUSTICE VIKRAMAJIT SEN
HON'BLE MR JUSTICE RAJIV SHAKDHER
1. Whether the Reporters of local papers may
be allowed to see the judgment ? Yes
2. To be referred to Reporters or not ? Yes
3. Whether the judgment should be reported
in the Digest ? Yes
RAJIV SHAKDHER, J
1. The captioned writ petitions lay challenge to notice of initiation
of safeguard investigation dated 16.01.2009 issued under Rule 6 of the
Customs Tariff (Transitional Product Specific Safeguard Duty) Rules,
WP(C) No. 8749/2009 Page 1 of 32
2002 (hereinafter referred to as „Rules‟), the notification of preliminary
findings dated 30.01.2009 issued by the Director General
(Safeguards)(hereinafter referred to as „the Director General‟), and the
consequent notification bearing No.37/2009-Customs dated
20.04.2009 issued by the Government of India, Ministry of Finance,
Department of Revenue imposing a provisional safeguard duty at the
rate of 20 per cent ad valorem in respect to soda ash falling under sub-
heading 283620 of the first schedule to the Act on its import into India
from People‟s Republic of China (in short „China‟).
2. Petitioner No.1 in Writ Petition No. 8749/2009 is a company
incorporated under the Companies Act, 1956 (hereinafter referred to
as „Saint-Gobain‟). The said petitioner is in the business of
manufacturing and marketing Architectural and Automotive Glass.
Petitioner No.2 in the said writ petition is an association of float glass
manufacturers. The Petitioner in Writ Petition No.8761/2009 is the
Federation of glass manufacturers which is incorporated as a non-
profit company under the Companies Act, 1956 (hereinafter referred to
as „the Federation‟). The Federation claims to represent all segments
of the industry which includes large, medium and small scale
manufacturers located in different parts of the country.
3. The genesis of the present litigation is in the initiation of
safeguard investigation by the Director General under the provision of
Rule 6 read with Section 8C of the Customs Tariff Tax, 1975
(hereinafter referred to as „the Act‟). It transpires that on 01.01.2009;
the Alkali Manufacturers Association of India, i.e., Respondent No.3,
which comprises of domestic producers such as Gujarat heavy
Chemical Limited, Tata Chemicals Limited, Saurashtra Chemicals
Limited, DCW Ltd and Nirma Ltd, (hereinafter collectively referred to
WP(C) No. 8749/2009 Page 2 of 32
„domestic producers‟) filed an application with the Director General for
the purposes of seeking initiation of investigation to determine
existence of serious injury or threat of serious injury to the domestic
producers of soda ash on account of import of increased quantities of
soda ash from China which had the potentiality of market disruption or
threatened to cause a market disruption both in absolute and relative
terms when compared to the domestic production of soda ash. By the
said application, the domestic producers sought protection by seeking
an imposition of both safeguard duty as well as quantitative
restrictions with regard to import of soda ash originating from China
for a period of four years. In the application, a prayer was also made
that, in the interregnum, a provisional duty be imposed in view of the
presence of „critical circumstances‟ which, according to them, would
result in irreparable damage. The said application was followed by an
updated application which was filed with the Director General on
14.01.2009.
4. On receipt of the aforesaid written application of the domestic
producers, the Director General issued the impugned notice of
initiation of safeguards investigation dated 16.01.2009; a copy of
which, as mandated under Rule 5, was sent to all interested parties
calling upon them to respond by 16.02.2009. By the said initiation
notice, it was also made clear that any other party to the investigation
who wishes to be considered as an interested party was free to submit
its request to the Director General within 21 days of the said notice.
4.1 It is not disputed that Saint-Gobain received a copy of the
initiation notice, even though the date of receipt is not indicated in the
writ petition. What is, however, not in dispute is that, by a
communication dated 29.01.2009, Saint-Gobain requested the Director
WP(C) No. 8749/2009 Page 3 of 32
General to supply to it, a copy of the initiation notification,
correspondence exchanged with the interested parties and the
domestic industry, copy of the application and updated information, if
any, as also a copy of the index to the public file and inspection of the
public file. In the very same communication, a request was also made
that in the interregnum, in consonance with the principles of natural
justice, no steps prejudicial to the interest of the user industry be
taken till effective opportunity is given to them to respond to the notice
of initiation of safeguard investigation.
5. It transpires that based on the views of the domestic producers,
the information supplied by them and the information available with
the Director General, came to the conclusion that preliminary findings
had revealed that the import of soda ash in increased quantities from
China had caused or threatened to cause a market disruption vis-a-vis
the domestic industry. He further recommended that in view of the
critical circumstances obtaining on account of import of soda ash from
China in increased quantities, which, if not stemmed by imposition of
provisional safeguard duty for a period of 200 days, pending final
determination, would by virtue of market disruption and/or threat of
market disruption, result in irreparable damage to the domestic
industry. In the opinion of the Director General, keeping in view
factors such as the average cost of production of soda ash by the
domestic producers, a reasonable return of capital employed, the
present level of import duty and current price of soda ash, a safeguard
duty at the rate of 31% ad valorem be imposed to protect the interest
of domestic industry in respect of imports from China with regard to
soda ash falling under sub-heading 2836210, 28362020 and 28362090
of the first Schedule of the Act.
WP(C) No. 8749/2009 Page 4 of 32
5.1 By the very same notification on preliminary findings, the
Director General also indicated that a public hearing would be held in
due course, on the date to be indicated, before proceeding to a final
determination.
6. In response to the aforesaid notification of preliminary findings
dated 30.01.2009, Saint-Gobain addressed a communication dated
11.02.2009 to the Secretary to the Government of India, Department of
Revenue. It would be pertinent to note, that two days prior to the said
notice, the Federation, that is, the petitioner in Writ Petition No.
8761/2009 had also issued a notice dated 09.02.2009 on almost
identical lines to the Secretary, to the Government of India,
Department of Commerce, which was thereafter followed by a second
communication dated 13.02.2009.
7. It has been averred by the petitioner in CWP 8761/2009 i.e., the
Federation that earlier, Writ Petition bearing No. 7782/2009 filed by
Saint-Gobain, wherein the very same initiation notification dated
16.01.2009 and the notification of preliminary findings dated
30.01.2009 were impugned, was filed in this court, on 06.03.2009. The
said writ petition, i.e., WP(C) No. 7782/2009 came up for hearing in
Court on 26.03.2009 when, it was disposed of by a Division Bench,
briefly, on the ground that the institution of the writ petition was
premature as no order of levy of provisional safeguard duty had been
passed by the Central Government at that point in time.
7.1 It would be important to note at this stage that, in the
interregnum, i.e., 23.03.2009, a public hearing had been held by the
Director General as indicated in the Notification of preliminary hearing
dated 30.01.2009. This fact requires to be mentioned at this juncture
WP(C) No. 8749/2009 Page 5 of 32
as great stress has been laid on this aspect of the matter by the
petitioners before us which will be dealt with at a later stage in this
judgment.
7.2. Continuing with the narration, the petitioners‟ stand is that after
the conclusion of the public hearing, an opportunity was given to file
written submissions. Accordingly, written submissions were filed by
the petitioners on 30.03.2009 followed by a rejoinder by the domestic
producers on 30.04.2009.
7.3. It seems that Government of India, without awaiting the return
of findings by the Director General has decided to accept his
recommendation for imposition of provisional duty on import of soda
ash into India from China vide Notification no. 37/2009-Customs dated
20.04.2009. By this Notification, the Central Government, in exercise
of its powers under Section 8C (2) of the Act, read with Rules 10 and
14, upon consideration of the findings of the Director General, decided
to impose a provisional duty at the rate of 20% ad valorem in respect
of soda ash falling under sub-heading 283620 of the First Schedule of
the Act. The notification dated 20.04.2009 further provides that the
said provisional duty shall be effective upto 05.11.2009 unless
revoked, superseded or amended at an earlier date.
8. The petitioners, being aggrieved by the aforementioned actions
of the respondents 1 and 2, have instituted the instant writ petitions.
On behalf of the petitioners, in Writ Petition No. 8749/2009,
submissions were made by Sh. Raju Ramachandran, Sr. Advocate and
in Writ Petition No. 8761/2009, submissions were made by Sh. Pramod
Kumar Rai, Advocate. There are several grounds taken in the writ
WP(C) No. 8749/2009 Page 6 of 32
petition. However, the petitioners before us confined their submissions
to the following:-
8.1 The initiation notification dated 16.01.2009 issued by the
Director General clearly indicated that the interested parties may
respond to the application filed by domestic producers on or before
16.02.2009. It was submitted that even without waiting for the time
stipulated in the said notification, within a period of 14 days, the
Director General proceeded to issue a notification of preliminary
findings dated 30.01.2009, thus depriving them of an effective
opportunity to protect their interest and challenge the contentions
raised by the domestic producers, in their application before the
Director General. According to the learned counsels appearing for the
petitioners, right to be heard is ingrained in Rule 6(4) which requires
the Director General to accord at least 30 days time to respond to the
initiation of safeguards investigation notice issued by the Director
General. It was contended that the failure to do so had resulted in the
infraction of a right conferred under Rule 6(4) and hence all such steps
taken by the Director General and the Government of India thereafter
which included the issuance of notification of preliminary findings
dated 30.01.2009 and the Government of India notification dated
20.04.2009 imposing provisional duty had to be quashed and set aside.
8.2 In order to buttress their submission, the learned counsel for the
petitioners drew our attention to the application filed by the domestic
producers to demonstrate the inherent contradiction in the assertions
made in their application. Towards this end, it was pointed out that
even though the domestic producers‟ application specifically states
that the soda ash imported from China is high density soda ash, the
relief sought is with respect to all types of soda ash which includes
WP(C) No. 8749/2009 Page 7 of 32
light as well as high density soda ash. Our attention was also drawn to
the statistical table contained in Section II, paragraph 8 of the
application to demonstrate that the allegation of import of increased
quantities of soda ash from China, which purportedly caused or
threatened to cause market disruption, could not sustain on a plain
reading of the data incorporated therein. To appreciate this
submission, it would be perhaps relevant to note that comparative data
which has been filed by the domestic producers to show import of
increased quantities of soda ash from China is for the period April-
September, 2008 with respect to quantities and price of soda ash
imported from China and countries other than China. The relevant
table incorporated in paragraph 8 of the application is extracted
hereinbelow:-
"Export price: Details of export price of the
imported product exporter/country-wise and the
basis thereof (provide the f.o.b./ c.i.f. price at which
the goods enter into India).
Enclosed as Annexure-2 with this petition. these are CIF
import prices (as reported to Indian Customs).
Summarized position with regard to volume and price is
given below:
Year Volume MT Price Rs./MT
China Other Total China Other Total
countries countries
1999- 3067 29872 32939 5342 5176 5191
2000
2000-01 - 43428 43428 - 5547 5547
2001-02 14840 148778 163617 7655 6987 7048
2002-03 1597 103679 105276 7382 6192 6210
2003-04 151 128214 128365 42268 5801 5844
2004-05 2120 182427 184547 11804 6257 6321
2005-06 9016 692026 701042 8778 1601 1694
2006-07 44892 215494 260386 8568 8143 8216
2007-08 45771 309003 354774 8906 9187 9151
Apr. - 22907 105997 128904 13181 11365 11688
WP(C) No. 8749/2009 Page 8 of 32
Sep., 08
Petitioner obtained information with regard to exports from China to
various countries in the world as per information published by China
Customs, which shows import volumes as follows:
Import Volume Average Monthly Average FOB
(MT) Imports (MT) Price
(US$MT)
2005-06 10063 839 157.15
2006-07 47252 3938 145.43
2007-08 45771 3814 218.55
April - Oct. 22334 3191 167.39
2007
Apr. - Oct. 28284 4041 218.87
2008
Nov., 2008 10000 10000 Import price
Dec. 2008 15000 15000 declined upto
CIF US$ 200
Apr. - Dec. 48284 5365
2008
8.3 Based on the aforesaid, it was argued that during the relevant
period i.e., April-September, 2008, the volume of imports of soda ash
from China was only 22,907 metric tonnes (MT) whereas in
comparison, the import from other countries was much more, i.e.,
1,05,997 MT. Similarly, the price of soda ash imported from China
was Rs 13,181/- per MT, which was higher than that which was
obtained with respect to soda ash imported from other countries which
disclosed as Rs 11,365/- per MT. Pivoted on these discrepancies, a
contention was made that the domestic producers had failed to make
out even a prima facie case, despite which, the Director General,
without making a suitable inquiry into the matter, had, with undue
haste, proceeded to issue a notice of preliminary findings, setting out
his recommendation for imposition of provisional duty, by accepting
the material and data supplied by domestic producers as gospel truth.
9. In rebuttal, on behalf of the Union of India and the Director
General Mr. Mukesh Anand, Advocate and Mr. Sandeep Sethi, Sr.
WP(C) No. 8749/2009 Page 9 of 32
Advocate representing the domestic producers, vigorously opposed the
admission of the Writ Petition contending that if the submission of
petitioners was accepted the entire purpose with which the various
provisions and the mechanism for imposition of provisional duty stands
incorporated in the Act and Rules would become nugatory.
9.1 The learned counsel for respondents submitted that the
procedure for imposition of provisional duty was contained in Rule 9,
which provided that if the Director General was of the view that there
was evidence to show that increased quantities would cause or
threaten to cause market disruption of domestic industry, he would
conduct an investigation and proceed to record his preliminary
findings, recommending thereby to the Government of India, a suitable
course of action to prevent and/or stem market disruption. In view of
the imminence of irreparable damage to the domestic industry by
virtue of increased quantities of imports, the procedure prescribed
under Rule 6(4) was not applicable to the inquiry conducted under
Rule 9, and thus no fault could be found with the actions of the
Director General, in not awaiting the expiry of the period notified
under the Initiation Notification dated 16.01.2009.
9.2 As regards the discrepancies pointed out by the petitioners with
respect to fact that the imports from China were far less than those
from other countries and at a higher price than imports from other
countries, it was submitted that a bare perusal of the contents of the
said table would show that within a span of four months, that is, April-
September, 2008, imports from China were equivalent to almost 50%
of the imports made from China in 2006-07 and 2007-08.
Furthermore, as regards the price, it was submitted that no mileage
could be drawn by comparing the price of import of soda ash with that
WP(C) No. 8749/2009 Page 10 of 32
of other countries, in view of the fact that the findings of the Director
General clearly indicated that the FOB price of export of soda ash from
China dropped from US $ 280.14 per MT in April, 2008 to US $ 194.07
per MT in December, 2008. This by itself, according to the learned
counsel, showed a sharp decline in the price and thus the necessity for
immediate action.
10. In rejoinder, the learned counsel for the Petitioner submitted
that assuming without admitting that Rule 6(4) did not apply in respect
of proceedings initiated under Rule 9, even then the principles of
natural justice had to be read into the said procedure since the
imposition of provisional duty for a period of nearly 200 days at the
rate of 20% ad valorem by the Government of India, entailed serious
civil consequences. It was submitted that there were no critical
circumstances which were present in the instant case, as the
imposition of the provisional duty was brought about after expiry of
nearly two and a half months from the date of issuance of Notification
of preliminary findings by the Director General. It was further
contended that at the point in time when the petitioners had
approached this Court by way of writ petition in March, 2009, it was
contended by the respondent Nos. 1 & 2 before this Court, that it may
not be necessary to issue an order for imposition of provisional duty as
hearing with respect to final determination had been completed in the
matter. It was submitted that contrary to the stand taken before this
Court on 26.03.2009, in the earlier round, the Respondent Nos. 1 & 2
had proceeded to impose provisional duty without giving any
opportunity to the petitioners to protect their interests.
11. We have heard the learned counsels for the parties. In order to
adjudicate upon this writ petition, it would be important to take note of
WP(C) No. 8749/2009 Page 11 of 32
certain provisions of the Act and the Rules as well as the basic purpose
and object in empowering the Director General and the Government of
India to take recourse to the measures provided therein.
12. Under the Act, i.e., Customs Tarrif Act, 1975, the Government of
India in order to protect the domestic industry has power to impose
broadly; Anti-Dumping Duty, Countervailing Duty or the Safeguard
Duty. Broadly, Anti-Dumping duty is imposed by the Government of
India where goods are imported into the country at a dumped price.
Dumped price is a price less than the normal value which is judged
with reference to the comparable price of an article imported to the
country in the ordinary course of trade when exported from the
exporting country. As against this, Countervailing Duty is imposed
generally if goods are subsidized in the country of export. Similarly,
resort is taken to imposition of safeguard duty if increased quantities
of goods enter the country. The determining factor as to which of the
three measures ought to be adopted when the goods are imported into
country, at a dumped price or are subjected to subsidy in the country
of export or in increased quantities, is dependent upon whether these
actions result in causing or threaten to cause material injury or
material retardation in the establishment of domestic industry or result
in causing or threaten to cause serious injury to domestic producers of
like or competitive products. In the case of the former, recourse may
be had to Anti-Dumping duty or Countervailing Duty, while in case of
the latter situation, resort may be had to safeguard duty.
12.1 Under Section 8B of the Act, the Central Government has been
given power to impose safeguard duty if after conducting an enquiry it
is satisfied that the article imported into the country in such increased
quantities and under such conditions, will cause or threaten to cause
WP(C) No. 8749/2009 Page 12 of 32
serious injury to domestic industries. This is a general power available
to the Government of India. A specific provision i.e., Section 8C was
introduced in the Act by Finance Act, 2003 w.e.f. 11.05.2002 in respect
of specific safeguards duty with regard to imports from China. Under
Sub-Section (6) of Section 8C, the Central Government has been
empowered to make rules for the purposes of giving effect to the
provisions of Section 8C. By a notification no. 34/2002-Customs dated
11.06.2002 the Central Government has framed the necessary Rules.
13. It would be relevant to note that the provisions for safeguard
duty under Section 8B and 8C of the Act and the relevant rules framed
thereunder have been enacted pursuant to „Article XIX of GATT -
Emergency Action on Imports of Particular Products' (in short
„GATT‟) read with „WTO Agreement on Safeguards‟ (in short „WTO
Agreement‟). A reading of the provisions of clause 1(a), 1(b), 2, 3(a)
and 3(b) of Article XIX GATT read with the provisions of WTO
agreement on Safeguards would show that the measures provided for
imposition of safeguard duty as also provisional duty in the event of
presence of critical circumstances is taken recourse to ensure play for
„structural adjustment‟ by the domestic industry with a view to
„enhance rather than limit competition‟ in international markets. The
provisions for imposition of safeguard duty are thus temporary in
nature. We do not wish to burden the judgment with extensive
extracts from either the GATT or the WTO agreement. It would
perhaps be sufficient to indicate that the provisions both under 8B and
8C of the Act as well as the rules framed thereunder are largely based
on the provisions of Article XIX of the GATT and the WTO agreement
on safeguards. For the purposes of the present writ petition, it may
WP(C) No. 8749/2009 Page 13 of 32
perhaps be convenient to refer to clause 1(a) and 2 of Article XIX. The
same read as follows:-
"1.(a) If, as a result of unforeseen developments and
of the effect of the obligations incurred by a contracting
party under this Agreement, including tariff concessions,
any product is being imported into the territory of that
contracting party in such increased quantities and under
such conditions as to cause or threaten serious injury to
domestic producers in that territory of like or directly
competitive products, the contracting party shall be free,
in respect of such product, and to the extent and for
such time as may be necessary to prevent or remedy
such injury, to suspend the obligation in whole or in part
or to withdraw or modify the concession.
XXXXXXXXX
2. Before any contracting party shall take action
pursuant to the provisions of paragraph 1 of this Article,
it shall give notice in writing to the Contracting Parties
as far in advance as may be practicable parties having a
substantial interest as exporters of the product
concerned an opportunity to consult with it in respect of
the proposed action. When such notice is given in
relation to a concession with respect to a preference, the
notice shall name the contracting party, which has
requested the action. In critical circumstances, where
delay would cause damage, which it would be difficult to
repair, action under paragraph 1 of this Article may be
taken provisionally without prior consultation, on the
condition that consultation shall be effected immediately
after taking such action." (emphasis supplied)
14. A reading of the aforementioned provisions of clause 1(a) and 2
of Article XIX shows that if on account of increased quantities of
import of an article into the territory of a contracting party causes or
threatens to cause serious injury to the domestic producers in that
territory of like or directly competitive products then the contracting
party so effected, is free to suspend the obligation in whole or in part
or to withdraw or modify the concession in respect of such an article to
the extent it is considered necessary to prevent or remedy such injury.
Similarly, under clause 2, before taking any action, the contracting
party is required to give notice in writing to the other contracting
WP(C) No. 8749/2009 Page 14 of 32
party as far as may be practicable. However, in critical circumstances
where delay would cause damage, which would be difficult to repair,
action under Paragraph 1 of this Article may be taken provisionally
without prior consultation, on the condition that consultation will be
effected immediately after taking such action.
15. When this provision is compared with the Rules provided under
Section 8C (2) of the Act the scheme of said Rules attains greater
clarity. A brief overview of the Rules in so far it is relevant is as
follows.
15.1 Rule 1 gives the short title and the date on which the Rules come
into force. Rule 2 sets out the definition amongst others, all that which
would constitute „Critical circumstances‟ and „Increased quantity‟.
Rule 3 makes provision for appointment of the Director General
(Safeguard). Rule 4 sets out the duties of the Director General, in
particular, to investigate existence of market disruption or threat of
market disruption to the domestic industry as a consequence of
increased import of an article into India as also to identify the article
liable for safeguard duty under Section 8C of the Act. On conclusion of
his findings provisional or otherwise the Director General is required
to submit the same to the Central Government with a recommendation
as to the quantum of duty to be levied and the duration for which the
levy should enure in order to remove market disruption or threat of
market disruption to the domestic industry. It is also the duty of the
Director General under Sub-Rule (5) of Rule 4 to review from time to
time the need for continuance of such safeguard duty.
15.2 Under Rule 5, the Director General on receipt of a written
application by or on behalf of the domestic producer of like article or
WP(C) No. 8749/2009 Page 15 of 32
directly competitive article, is required to investigate the existence of
market disruption or threat to market disruption. Under Sub-Rule (2)
of Rule 5, the applicant is required to give evidence of
(i) increased imports;
(ii) the market disruption or threat to market disruption caused to
the domestic industry in absolute or relative terms to domestic
production;
(iii) and lastly, the causal link between the imports and the alleged
market disruption or threat to market disruption.
15.3 Under Rule 5(3), the Director General is required to examine the
accuracy and adequacy of evidence in respect of the aforesaid
ingredients. The Director General may initiate a suo motu action
under sub-Rule (4) of Rule 5.
15.4 After receipt of an application from domestic producers under
Rule 5 or in the event the Director General decides to take suo motu
action, he is obliged to issue a public notice under Rule 6 if he intends
to initiate investigation. In the public notice, the Director General is
required to give information with regard to the article involved, the
date of initiation of investigation, a summary on the basis of which
allegation of market disruption or threat to market disruption is based,
reasons for initiation of investigation, the time limits and the address
to which responses of interested parties should be directed. Under
sub-Rule (2) of Rule 6, certain entities are specifically mentioned to
whom copies of public notice are to be provided. Sub-Rule (3) of Rule
6 states that the Director General is required to give a copy of the
application to known exporters, or the concerned trade association,
the Chinese Government and the Central Government and the
WP(C) No. 8749/2009 Page 16 of 32
Government of India, Ministry of Commerce. Sub-Rule (4) of Rule 6
provides that the Director General may also issue notice calling for any
information in such form as may be specified by him from the
exporters, foreign producers and the Chinese Government. This
information is to reach the Director General within a period of 30 days
from the date of receipt of the notice or within such extended period as
the Director General may allow on sufficient cause been shown. Under
Sub-Rule (5) of Rule 6, the Director General is also required to provide
an opportunity to industrial users of the article under investigation and
representatives of consumer organisations to furnish information
relevant to the investigation. Interested parties or its representatives
may make oral representations which are to be taken into account only
if they are followed by a written submission. Under Sub-Rule (7) of
Rule 6, the Director General is required to make evidence available
presented by one interested party to all other interested parties
participating in the investigation. If a party refuses access to or fails
to provide information within reasonable period or impedes the
investigation, the Director General under Sub-Rule (8) of Rule 6 would
record that fact and make such recommendations to the Central
Government as he deems fit under the circumstances.
15.5 The confidentiality of information supplied is protected under
Rule 7 unless the Director General comes to a conclusion that the
same is unwarranted. In such eventuality, the Director General may
call upon the party to give a summary of the non-confidential
information.
15.6 The basis for determining market disruption or threat to market
disruption is provided in Rule 8 read with Annexure to the Rules,
which delineates that determination shall be based on evaluation of all
WP(C) No. 8749/2009 Page 17 of 32
relevant factors of an objective and quantifiable nature having a
bearing on the situation of that industry, in particular, the rate and
amount of the increase in imports of the article concerned in absolute
and relative terms, the share of the domestic market taken up by
increased imports, changes in the level of sales, production,
productivity, capacity utilisation, profit and loss and employment.
Keeping in mind the factors indicated above, it would have to be
demonstrated that there is a causal link between increased imports of
the article concerned and market disruption or threat to market
disruption. If for some reason the Director General is of the view that
the market disruption or threat to market disruption is not on account
of increased import, then, he is well within his power to refer the
complaint to the concerned authority for anti-dumping or
countervailing duty investigation as may be deemed appropriate.
15.7 In the event the Director General is of the view that critical
circumstances obtain, then, he is empowered to proceed expeditiously
under Rule 9 with the conduct of investigation regarding market
disruption or threat to market disruption. The finding arrived at by
Director General are communicated through public notice with a copy
to the Central Government, Ministry of Commerce and Finance.
15.8 In the event the Central Government accepts the
recommendation of the Director General, it would proceed to impose
provisional duty as recommended or in such modified form as it may
deem fit. The proviso to Rule 10, however, makes it clear that
provisional duty, if imposed, shall not remain in force for a period
exceeding 200 days from the date of its imposition.
WP(C) No. 8749/2009 Page 18 of 32
15.9 Under Rule 11, the Director General is required to give final
findings within eight months from the date of initiation of investigation
or such extended time as the Central Government may accord. The
final findings are nothing but a final determination that the increased
imports of an article under investigation has caused or threatens to
cause a market disruption to the domestic industry keeping in mind
the umbilical chord of a causal link between the two. In the final
determination, the Director General is required to recommend that
quantum of duty which, if levied, would be adequate in preventing or
in remedying the injury, that is, market disruption caused to the
domestic producers. This recommendation would also indicate the
duration for which the duty ought to be levied. In recording final
findings, the Director General is obliged to deal with all matters of fact
and law and give a reasoned conclusions. The said final findings are
required to be publically notified with a copy to the Central
Government, Ministry of Commerce and Finance.
15.10 Under Rule 12, the Central Government on receipt of the final
findings of the Director General may impose a safeguard duty not
exceeding the amount indicated by the Director General. In the event
the Director General‟s final findings are contrary to the prima facie
evidence on which investigation under Section 8C of the Act was
initiated, in the first instance, then the Central Government within 30
days of publication of the final findings is obliged to withdraw the
provisional duty, if any, imposed under the Act.
15.11 Rule 13 provides for the obligation to impose a safeguard duty
on a Non-discriminatory basis, that is, on all imports of such article
from China.
WP(C) No. 8749/2009 Page 19 of 32
15.12 Rule 14 provides that safeguard duty shall take effect whether
provisional duty under Rule 10 or duty imposed under Rule 12, from
the date of publication of the notification in the Official Gazette
imposing such duty.
15.13 Rule 15 provides for refund of safeguard duty in case after the
conclusions of the investigations under Section 8C of the Act, the
safeguard duty imposed is lower than the provisional duty which has
been imposed and collected. The differential amount is to be refunded
to the importer.
15.14 Under Rule 16, it has been made clear that the duty shall be
imposed only if the period necessary to prevent or remedy market
disruption and, in no event shall it operate beyond four years from the
date of its imposition. The Central Government, however, in case of
imports from China, is empowered to extend the period of imposition
with an outer limit of 10 years from the date on which such duty was
first imposed.
15.15 Under Rule 17, the Director General is required to review from
time to time, the need for continued imposition of safeguard duty and
in the event, there is no justification for continued imposition, he is
required to recommend to the Central Government for withdrawal of
the same. In the event, the imposition of safeguard duty extends
beyond three years, the Director General is required to review its
continued imposition which, in any case, will not be later than mid
term of such imposition.
16. As is evident from the scheme of the Rules framed under Section
8C of the Act, that if critical circumstances obtain, the Director
General is obliged to conduct an expeditious investigation and record
WP(C) No. 8749/2009 Page 20 of 32
the result of his investigation by way of a preliminary finding. The
trigger for invoking the Rule 9 is the presence of critical
circumstances, that is, circumstances backed by clear evidence that
increased quantities of import have caused or threaten to cause
market disruption of the domestic industry to the extent that it could
inflict irreparable damage on the domestic industry.
17. If such a situation arises, the scheme of the rules according to
us, excludes implicitly the applicability of Rule 6(4) or a procedure
akin to it. The reasons for the same are not far to see. Firstly, the
criticality of the circumstances demand immediate action in order to
remedy and/or prevent the damage to domestic industry of irreparable
nature. Secondly, the period of imposition of provisional duty is brief,
in any event, cannot exceed 200 days. Thirdly, the recommendation of
the Director General for imposition of provisional duty if accepted by
the Central Government is subject to the outcome of the final findings
of the Director General. If the final finding of the Director General is
in the negative, the Central Government is required to withdraw the
provisional duty imposed within 30 days, and if the duty recommended
in the final finding it is less than that imposed as provisional duty, the
importer is entitled to a refund. And lastly, the final finding has to be
returned by the Director General within eight months from the date of
initiation of investigation.
18. We are fortified, in our view, if regard is had to the provisions of
clause (2) of Article XIX of the GATT which states, in no uncertain
terms, that prior consultation is excluded in the event critical
circumstances exist which require immediate imposition of provisional
duty. However, the affected party should be heard immediately
thereafter. In the scheme of the Rules referred to above, by necessary
WP(C) No. 8749/2009 Page 21 of 32
implication, hearing of Petitioner and persons similarly placed is
excluded. Mr Ramachandran‟s submission that even if Rule 6(4) is
excluded, since civil consequences follow imposition of provisional
duty, the principles of natural justice had to be adhered to even at the
stage of imposition of provisional duty is untenable for the reason if
the rationale provided in the first instance for exclusion of opportunity
is expedition, it cannot be implied in Rule 9 to negate this very
purpose. Therefore, in our view the requirement of a hearing followed
by consideration of written submission before final findings are
returned by the Director General are the sine qua non of the scheme
evolved in the Rules, a mechanism which adequately protects the
interest of the petitioners
19. In our opinion rules of natural justice stand circumscribed if
recourse is had to Rule 9, as is suggestive on an appreciation of the
scheme of the Act and Rules framed thereunder. In this context, the
observations of Tucker, L.J. in Russell vs Duke of Norfolk and Ors.
1949 (1) All.E.R. 109 at page 118 being relevant, are extracted
hereinbelow:-
"....There are, in my view, no words which are of universal
application to every kind of inquiry and every kind of
domestic tribunal. The requirements of natural justice
must depend on the circumstances of the case, the nature
of the inquiry, the rules under which the tribunal is acting,
the subject matter that is being dealt with, and so forth."
20. Our Supreme Court, in its judgment, in the case of Ajit Kumar
Nag v. G.M., Indian Oil Corporation Ltd. AIR 2005 SC 4217 at
page 4227, paragraph 28, encapsulated the law as to when pre-
decisional hearing can be excluded. In that case, the services of an
employee of the corporation were terminated on the grounds of acts of
WP(C) No. 8749/2009 Page 22 of 32
hooliganism. The order of termination was passed by the General
Manager of the employer corporation. In doing so, the General
Manger dispensed with an enquiry by taking recourse to the relevant
standing orders. The employee challenged the validity of the said
standing order as well as the termination order on the ground that it
violated the principle of natural justice. The Supreme Court, in that
context, made the following observations based on the Constitution
Bench judgment of the Supreme Court in the case of UOI & Anr. vs
Tulsi Ram Patel (1985) 3 SCC 398, in the context of the proviso to
Article 311(2) of the Constitution of India:-
"The Court also stated that Article 311(2) required that
before a civil servant is dismissed, removed or reduced in
rank, an enquiry must be held and reasonable opportunity
of being heard must be afforded to him in respect of the
charges leveled against him. The Court, however, observed
that in certain circumstances, application of the principles
of natural justice could be modified and even excluded.
Both in England and in India, it is well established
that where a right to a prior notice and an
opportunity to be heard before an order is passed
would obstruct in taking of prompt action, such a
right could be excluded. It could also be excluded
where the nature of the action to be taken, its object
and purpose and the scheme of the relevant statutory
provisions warrant its exclusion. The maxim audi
alteram partem could not be invoked if import of
such maxim would have the effect of paralyzing the
administrative process or where the need for
promptitude or the urgency so demands. The Court
stated that if legislation and the necessities of a situation
can exclude the principles of natural justice including the
audi alteram partem rule, a fortiori so can a provision of
the Constitution, for a constitutional provision has a far
greater and all pervading sanctity than a statutory
provision. It also stated that the principles of natural
justice having been expressly excluded by a constitutional
provision, namely, the second proviso to Article 311(2), it
could not be reintroduced by a side door by providing for
the enquiry. The Court, however, hastened to add that
where the second proviso to Article 311(2) is applied on an
extraneous ground or a ground having no relation to the
situation envisaged in that clause, the action would be
mala fide and void. In such a case, invalidating factor may
be referable to Article 14. The second proviso to Article
311(2) was based on public policy, in public interest and
WP(C) No. 8749/2009 Page 23 of 32
for public good and it must be given effect to. Regarding
opportunities to such Government servants who have been
dealt with in exercise of power under the second proviso to
Article 311(2), the Court stated :
"In this connection, it must be remembered that a
government servant is not wholly without any
opportunity. Rules made under the proviso to
Article 309 or under Acts referable to that article
generally provide for a right of appeal except in
those cases where the order of dismissal, removal
or reduction in rank is passed by the President or
the Governor of a State because they being the
highest constitutional functionaries, there can be
no higher authority to which an appeal can lie
from an order passed by one of them. Thus, where
the second proviso applies, though there is no
prior opportunity to a government servant to
defend himself against the charges made against
him, he has the opportunity to show in an appeal
filed by him that the charges made against him
are not true. This would be a sufficient compliance
with the requirements of natural justice. In
Maneka Gandhi case and in Liberty Oil Mills v.
Union of India, the right to make a representation
after an action was taken was held to be a
sufficient remedy, and an appeal is a much wider
and more effective remedy than a right of making
a representation......"
......We are aware of the normal rule that a person must
have a fair trial and a fair appeal and he cannot be asked
to be satisfied with an unfair trial and a fair appeal. We are
also conscious of the general principle that pre-decisional
hearing is better and should always be preferred to post-
decisional hearing. We are further aware that it has been
stated that apart from Laws of Men, Laws of God also
observe the rule of audi alteram partem. It has been stated
that the first hearing in human history was given in the
Garden of Eden. God did not pass sentence upon Adam and
Eve before giving an opportunity to show cause as to why
they had eaten forbidden fruit. [See R. v. University of
Cambridge, (1723) 1 Str 557]. But we are also aware
that principles of natural justice are not rigid or
immutable and hence they cannot be imprisoned in a
straight-jacket. They must yield to and change with
exigencies of situations. They must be confined within
their limits and cannot be allowed to run wild. It has been
stated ; "To do a great right after all, it is permissible
sometimes to do a little wrong". [Per Mukharji, C.J. in
Charan Lal Sahu v. Union of India, (Bhopal Gas Disaster);
(1990) 1 SCC 613. While interpreting legal provisions, a
court of law cannot be unmindful of hard realities of life. In
our opinion, the approach of the Court in dealing with
such cases should be pragmatic rather than pedantic,
WP(C) No. 8749/2009 Page 24 of 32
realistic rather than doctrinaire, functional rather
than formal and practical rather than 'precedential'."
21. This brings us to the submission of the petitioner that there were
discrepancies in the data supplied and that the bare reading of the
data supplied by domestic producers would show that the test of
import of increased quantities of soda ash to an extent that it caused
or threatened to cause market disruption of the domestic industry was
not fulfilled. The learned counsel for the petitioners‟ comparison of
quantity and price of figures of import of soda ash into India for the
period April-September, 2008 between those from China and other
countries, is misconceived for the following reasons. Firstly, import of
22907 MT of soda ash requires to be considered with imports of
previous years. A perusal of figures of imports in paragraph 8 of the
domestic producers application would show that, for the period 2003-
04 to 2006-07, while imports increased from 151 MT to 45711 MT, in
the four months period between April-September, 2008, the imports
were 22907 MT, which is, almost 50% of the previous year‟s import.
The total import from countries, other than China, in the same period
between April-September, 2008, was 105997 MT. Thus, in percentage
terms, out of the total import of 128904 in April-September, 2008,
import from China was 17.7%, while in the earlier years, the
percentage of import of soda ash from China, when compared with
total imports of soda ash for a period of four months, works out to
5.75% for 2006-07, 0.43% for 2005-06, 0.38% for 2004-05 and 0.04%
for 2003-04. The source of this data is Indian Customs as per table
incorporated in the domestic producers‟ application. Similarly, even
as regards price, there is a wide variation between price prevailing in
2003-04 which was Rs 42268 per MT to Rs 13191 per MT in April-
WP(C) No. 8749/2009 Page 25 of 32
September, 2008. However, when compared with price of soda ash
imported from other countries for the same period which is shown as
Rs 11,365 per MT, is higher. The variation in price could be on
account of various factors, one of which may be quality. But what is
important, the annualized rate for 2007-08 of soda ash imported from
China at Rs 8906 per MT, is lower than the rate of soda ash imported
from other countries, which is shown at Rs 9187 per MT.
21.1 A significant point is that the Director General has collated and
analyzed the data available with him and broadly arrived at following
findings:
(i) The soda ash, a product under investigation, which is
produced by the domestic producers is like or directly
competes with the soda ash imported from China.
(ii) The applicants together manufacture more than 90% of the
domestic production (nearly 99.98%) .
(iii) That due to economic melt down, the demand for soda ash
had declined. The Chinese producers have significant
idling production capacities and therefore, they are
resorting to sale of product in the Indian market. What has
compounded the problem is the decline in demand for their
product in the major export markets and the
commencement of new commercial ventures of the same
product. This has led to significant increase in imports
from China at low prices.
(iv) There is not only an increase in imports from China in
absolute terms, but also, a significant increase in share of
imports from China in relation to domestic production.
The share of imports from China in relation to domestic
WP(C) No. 8749/2009 Page 26 of 32
production has increased from 0.44%, in 2005-06 to 2.59%
in April-September, 2008, which has sharply increased
thereafter to 10.13%. Accordingly, there is market
disruption in relation to domestic production. While
domestic manufacturers commanded nearly 92.64% of the
market share as against 0.44% by Chinese imports in 2005-
06; this share of the Chinese imports has gone up to
10.13% during October-December, 2008 while the share of
domestic producers has fallen to 83.20% during the same
period.
(v) The level of inventories of domestic production has
increased significantly from 47721 MT in the first week of
November, 2008 to 1,10,082 MT in the second week of
January, 2009. The increase is 132% in just eight weeks.
Result and effect on production is that average weekly
production has declined from 42329 in November, 2008 to
37976 between 8th to 14th January, 2009.
(vi) Similarly, capacity utilization has fallen from 93.41% in
November, 2008 to 66.7% in January, 2009.
(vii) The profit has fallen from Rs 2,114 per MT in the year
2005-06 to 2181 per MT in 2007-08 and further declined to
Rs 1,976 per MT between April to September, 2008.
(viii) The FOB price of export from China has dropped from US
$ 280 per MT in April, 2008 to US $ 194.07 per MT in
December, 2008 which continued to fall in January, 2009.
(ix) The employment levels when compared to base year 2005-
06 had also dipped. Instances of decline in employment
WP(C) No. 8749/2009 Page 27 of 32
levels in Gujarat Heavy Chemicals and Tata Chemicals Ltd
have been given.
21.2 The criticality of the situation has been expressed by noting that
while there is a significant increase in export of soda ash from China in
the recent times with the resultant increase in market share of such
soda ash when compared to domestic producers, there is a shrinkage
of domestic producers market. It is stated that this would critically
impair the domestic industry whose inventories have increased from
130% between November, 2008 to January, 2009 with a significant
decrease in capacity utilization, employment and profitability. There
is, as per evidence available, a clear and imminent threat of market
disruption warranting imposition of provisional duty as any delay
would result in damage which would be difficult to repair.
21.3 We would uphold the impugned notification dated 20.04.2009
levying provisional duty for the reasons:-
(i) that the levy is in public interest, which is made to give effect to a
provision in the statute that domestic industry is to be protected
from onslought of increased quantities of export which cause or
threaten to cause market disruption;
(ii) power is conferred on a senior functionary i.e., the Director General,
who is required to exercise the same after due analysis of material
and evidence collected by him after taking into account the presence
of critical circumstances. In the instant case, the Director General
has evaluated the material and criticality of circumstances and come
to the conclusion that if the flow of increased imports from China are
not stemmed it would cause or threaten to cause market disruption
unleashing irreparable damage;
WP(C) No. 8749/2009 Page 28 of 32
(iii) the recommendation of the Director General was considered by the
Central Government whereupon the rate of provisional duty imposed
was 20% ad valorem as against the recommended rate of 31% ad
valorem;
(iv) the decision to levy provisional duty is transitory, which is required
to be followed by a final finding by the Director General within a
stated time frame after which the levy would dissolve.
21.4 Keeping the aforesaid data referred to in the preliminary
findings in mind and, the analysis of the Director General which has
been further considered by the Government, we have no doubt that the
decision of the Central Government to impose provisional duty cannot
be found fault with. In any event, this is not a case of no material or
no evidence or a complete non-application of mind which would call for
interference by a Writ Court. It is trite law that the Writ Court is, in
fact, concerned with only the decision making process and not with the
final decision. The Court cannot re-appreciate the primary or
perceptive facts found by an authority acting under a statute. (See
H.B. Gandhi, Excise and Taxation Officer cum Assessing
Authority, Karnal & Ors vs M/s Gopi Nath & Sons & Ors 1992
Supp. (2) SCC 312 and Indian Overseas Bank vs I.O.B Staff
Canteen Workers' Union & Anr. (2000) 4 SCC 245 The
specialised agency which is the Director General has analyzed the
material before it and has come to a conclusion that there is imminent
danger of an irreparable kind to the domestic industry if imports from
China are allowed into enter the country without the disincentive of a
provisional duty. This recommendation of the Director General, after
due consideration albeit, at a lower rate has been accepted by the
WP(C) No. 8749/2009 Page 29 of 32
Central Government. We would be, in these circumstances, be wary of
interdicting the same.
21.5 A perusal of the preliminary findings clearly establishes that the
submissions of the petitioner that the Director General has merely
adopted the opinion given by the domestic producers without any
investigation, is belied by the fact that there is extensive collation of
data and its analysis in the order of Director General in the notification
dated 30.01.2009 containing the preliminary findings. The other
contention of the learned counsel for the petitioner that there was no
cause for imposing a provisional duty in view of the fact that nearly
two and a half months have passed from the date of issuance of
notification of preliminary findings by the Director General, is also
untenable in our view for the reason, one has to bear in mind the
extent of data which has to be collated and analyzed. The period of
two and a half months by itself cannot be considered as one which
would persuade us to hold that criticality of circumstances had
disappeared. In this regard, the petitioners had tried to seek
sustenance from the order dated 26.03.2009 passed in Writ Petition
No. 7782/2009 when this Court had recorded the submissions of the
counsel appearing for the Union of India and the Director General that
the hearing for final determination is complete and therefore, it may
not be any necessary to pass an order of provisional duty. According
to us, a close reading of the order of this court dated 26.03.2009 would
show that while the said observation of the counsel for Union of India
and the Director General was recorded, the court went on to say that
this is a matter which is to be considered by the Director General. It is
obvious that these carefully worded observations were made keeping
in mind the fact the assessment as to whether a provisional duty is to
WP(C) No. 8749/2009 Page 30 of 32
be imposed till the final finding is arrived at by the Director General is
entirely within the domain of the Director General. Upon reading of
the notification containing the preliminary findings, we have not been
able to persuade ourselves, as indicated hereinabove, that there was
no material for the Director General to come to a conclusion that
critical circumstances did not obtain in the matter calling for
imposition of provisional duty. Whether the final findings support the
preliminary findings is a matter which the Director General is
empowered to consider and make suitable recommendation to the
Central Government. Therefore, in our view, the said submission of
the petitioners deserves to be rejected at the very threshold. The
submission that the domestic producers in their application have
categorically stated that the imported soda ash from China is High
Density soda ash but the relief for imposing provisional duty has been
sought for and granted even with respect to Low Density soda ash, is
also without substance for more than one reason. First, this
submission assumes that the Director General has based his
investigation only on the basis of material supplied by the domestic
producers. Second, there is material in the application of the domestic
producers which indicates that High Density soda ash is made by
mechanically compacting light soda ash. And lastly, these are
technical matters which are completely within the ken of the Director
General.
21.6 In our opinion, the scope for interference in matters which have
huge economic impact is very narrow. As a matter of fact, actions
instituted in courts such as the instant writ petitions have portents of
derailing decisions- which could have a cascading impact and inflict
resultant damage not only on the domestic industry in issue but even
WP(C) No. 8749/2009 Page 31 of 32
on industries which are vertically integrated to the said domestic
industry, as also on their employees and industrial labour, which
perhaps at times Courts cannot monetarily quantify. Therefore, the
Court in our view, should be slow in entertaining such petitions.
However, we make it clear that we are not to be understood as saying
that in no case can writ petitions be entertained. Writ Petitions in
such cases ought to be entertained in our view, when there is either a
complete lack of jurisdiction or a palpable error so grave which
requires imminent interference by a writ court.
22. In view of our discussion above, we find no merit in the petitions.
Both Writ Petition Nos. 8749/2009 and 8761/2009 are dismissed.
There shall however be no order as to cost.
RAJIV SHAKDHER, J.
VIKRAMAJIT SEN, J. May 27, 2009 da WP(C) No. 8749/2009 Page 32 of 32