To Appeal or Not to Appeal? Curious Case of Anti-Dumping Duty not Levied

1. Introduction

It is a well-known fact that there is an innate complexity in fiscal law and policy. It has been commented upon by many Judges, much less the experience of ordinary citizens, that it is not easy to decipher the fine text of the tax law. Such policy choices in fiscal laws, however, are there for specific reasons. Larger underlying objectives and competing priorities are often the reason for the crisscross in tax law and policy. A fairly recent debate upon the scope of appellate remedies under the anti-dumping duty (ADD) law is one such illustration which explains the reasons for controversies in the fiscal space. The issue at hand is an innocuous question regarding the jurisdiction of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) and whether there is a provision to file an appeal in ADD dispute in a particular situation. In order to appreciate the controversy some background is necessary. It relates to the peculiar scheme of how the circumstances warranting the levy (or non-levy) of ADD are appreciated under the administrative and legal framework in India which will also explain the reason for the controversy.

2. Legal framework for levy of anti-dumping duty in India

ADD is administered under the overall customs law framework in India. The Customs Act, 1962 (1962 Act) provides for the legal framework governing import and export of goods in India. However, the 1962 Act does not carry the rate of tax leviable as customs duty. The classification and rate of tax is provided for under the Customs Tariff Act, 1975 (1975 Act). The 1975 Act is also a repository of a host of other taxes which are imposed at the time of import or export of goods. For illustration, safeguard duty, countervailing duty, etc. are certain other illustrations of taxes imposed under the overall customs law framework. However, conceptually ADD is not a customs duty, the latter being levied upon the act of importation of goods in a particular country. Instead ADD is understood as a trade protection measure which is deployed by the importing country in order to deal with the pernicious activity of dumping of goods by another country in the importing country.

The levy of ADD is now internationally aligned in terms of the legal framework mooted by the World Trade Organisation (WTO), as codified in terms of the “Agreement on Implementation of Article 6 of the General Agreement on Tariffs and Trade 1994[1].” This agreement sets out the international consensus and standards on the ingredients to be satisfied for levy of ADD besides the procedural steps and safeguards which are to be observed by the importing country for the levy of ADD. India as a member of the WTO has adopted this framework on ADD both in letter and spirit. In fact the Supreme Court of India has categorically declared that the levy of ADD under the Indian law must be in due compliance of India’s commitment to agree and abide by the WTO Agreement on ADD.[2]

The legal framework in India relating to ADD is set out in Section 9-A of the 1975 Act. This provision is a standalone code governing the levy of ADD and is supplemented by three other provisions in the 1975 Act; (a) Section 9-AA, which provides for refund of ADD in certain cases; (b) Section 9-B, which specifies certain situations in which ADD is not to be levied; and (c) Section 9-C, which provides for appeal to CESTAT in ADD cases. The present controversy relates to the interpretation of this Section 9-C. However, we shall come back to it after a brief appreciation of the administrative position in which ADD is levied in India.

3. Administrative scheme for levy of anti-dumping duty in India

The Government of India had adopted a peculiar scheme for levy of ADD. Ordinarily the Ministry of Finance (MoF) is the sole repository for the levy of taxes enacted by the Union Parliament. For illustration, income tax, wealth tax, service tax, central excise duty, customs duty, etc. are the various union taxes which have been implemented and enforced by the MoF. The levy of ADD is also the responsibility of the MoF. However, unlike other taxes where the MoF is this sole Judge and authority on the executive and administrative framework of all union taxes, such is not the case in ADD. Instead, an inquiry as to whether ADD should be levied or not is undertaken by the Ministry of Commerce and Industry (MoC) of the Government of India.

The Directorate General of Trade Remedies (DGTR), as a department of the MoC, undertakes the investigation if there is dumping and whether ADD is required to be levied in a given situation. This investigation is undertaken in terms of the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 (1995 Rules). These 1995 Rules supplement the legal framework for levy of ADD by laying out the detailed procedural framework to be followed by the DGTR during the investigation, including rights and obligations of the affected parties.

What is notable in the aforesaid scheme is that the principal agency empowered to carry out the investigation (i.e. MoC), however, does not have the authority to implement the levy of ADD. The MoC, in a situation in which it considers that levy of ADD is warranted after a technical evaluation of the prescribed variable, can only make a recommendation to the MoF to such effect. It is thereafter the MoF which is the final arbiter as regards the decision whether or not to levy ADD. This is not a mere procedural mechanism whereby the MoC would recommend and the MoF would routinely impose ADD. Instead, it is the MoF which independently evaluates, having regard to other factors which it finds relevant to adjudge the recommendations of the MoC and thereafter arrives at a conclusion whether or not the levy of ADD is warranted. In other words, the MoF can approve or reject the recommendations of MoC. There are multiple illustrations with many such frequent instances, where the MoF disagrees with the MoC and refuses to levy ADD despite a positive recommendation of the MOC to such effect.

4. Contextualising the issue

It is in the aforesaid legal and administrative framework that the issue arises. Under law as also under the administrative framework, neither any parameter is set out as regards the obligation of MoF while considering the recommendations of MoC nor any enumeration of factors has been made which must be considered by the MoF in order to decide whether or not levy of ADD is warranted in a given fact pattern. Resultantly, the MoF only publishes its conclusion upon review of the recommendations of the MoC. In the event the MoF agrees with the recommendations of the MoC, it will issue a notification under the relevant legal provisions providing for levy of ADD. In such circumstances, the recommendations and the detailed findings of the MoC reflect the rational for the levy of ADD. The affected parties can rely upon such recommendations and findings in order to canvas appropriate legal action in case of prejudice being caused through such levy. In a reverse situation i.e. where the MoF disagrees with the recommendation of the MoC and chooses not to levy any ADD, in such a case the MoF publishes its conclusions regarding the disagreement. However, as a matter of convention, the MoF does not set out the reasons as to why it disagrees with the recommendations and findings of the MoC. It is at this stage that the issue arises because a decision not to levy ADD can also cause prejudice to certain persons.

The precise issue to be answered is whether there is a right of appeal in the event MoF rejects the recommendations of the MoC and decides not to levy ADD.

5. Appreciating the appellate mechanism for anti-dumping duty

This takes us to legal framework relating to CESTAT as the Appellate Tribunal. Though CESTAT is constituted under the 1962 Act, it is also the Appellate Tribunal for the purposes of ADD. Section 129-B of the 1962 Act provides for the remedy of appeal before the CESTAT in respect of a matters arising in relation to customs law. There is, however, a distinct provision for appeal in relation to ADD. The difference between the scope of two provisions is stark and accordingly warrants a closer review.

Section 129-B of the 1962 Act provides for the appellate remedy against “any order” passed by the specified officer of customs.[3] This is, however, not the case with Section 9-C of the 1975 Act which provides for an appeal remedy before CESTAT in relation to the ADD. In this situation, the appeal provision permits an appeal only “against an order of determination or review” in relation to ADD.[4]

In the aforesaid background, a question has arisen as to whether an appeal can be filed before the CESTAT in a situation where the MoC recommends for levy of ADD but the MoF decides to the contrary and does not levy ADD. Before that, one may ask, why does the issue of filing of appeal even arises when no ADD is levied. This is an interesting question, the response to which lies in appreciating the scheme of ADD. There are multiple interested parties in an ADD contest. As noted above, ADD is a trade protection measure invoked by an importing country the situation of dumping is not conducive to its interests. This is because dumping hurts the domestic industry of the importing country engaged in the manufacture or trade of such goods which have been dumped from abroad. Thus, in a situation where the MoC has concluded and recommended upon the levy of ADD, it implies that there is indeed dumping of goods being carried out in India by the exporters of another country which is creating injury to the domestic industry of India. Thus, in a situation where the MoF disagrees with the recommendation made by the MoC to levy ADD, the view of MoF prejudices the interests of the domestic industry of India insofar as no ADD would be imposed despite the conclusion by the MoC that such ADD is warranted in order to protect the interests of the domestic industry. In such a circumstance, therefore, it is obvious to expect that the domestic industry would be aggrieved by the decision of MoF not to impose ADD and may like to claim legal remedies against the refusal of the MoF to impose ADD. This takes us to the conjoint questions, whether CESTAT has jurisdiction in such a situation and whether the domestic industry (being an aggrieved party) can successfully prosecute an appeal against the MoF’s refusal to levy ADD.

6. Stock-taking the rival contentions and the current position

There are certain well-settled legal aspects regarding right to appeal; (a) an appeal is a creature of statute; (b) there is no inherent right to file an appeal; (c) a remedy by way of appeal must be specifically provided by law; and (d) no appeal is maintainable in the absence of a specific law providing for an appeal remedy.[5]

Applying this standard, a view has arisen that there is no right of appeal in a situation where the MoF refuses to levy ADD. The proponents of this view indicate two broad reasons to substantiate their position; (a) Section 9-C of the 1975 Act which provides the appellate remedy is limited to a situation where there is an “order of determination or review” in relation to ADD whereas no such order exists in wake of MoF’s refusal to accede to the views of the MoC; and (b) Section 9-C of the 1975 Act, which is specific to ADD, is at contrast with the appeal provision relating to customs duty under the 1962 Act. Under the latter, any person aggrieved has the right to file an appeal against any order passed by the specified customs officer. The contrast between the two provisions is crucial and determinative because this implies that a person being aggrieved is irrelevant under the 1975 Act, and also there is no right of appeal against every order of MoF. Accordingly it is argued that there is no legislative intent to provide for an appeal against MoF’s refusal to impose ADD.

Conversely, those carrying the opposite view contend that the refusal of the MoF to impose ADD despite a positive recommendation of the MoC warrants a judicial review and the appeal mechanism cannot be made defunct by the MoF’s refusal to provide reasons for its disagreement with the detailed findings of the MoC. The proponents of this view highlight that the constitutional scheme neither permits any wing of the Government to act unilaterally or arbitrarily so as to trample upon the legal rights of the citizens nor can the government’s decisions affect the citizens without being substantiated with valid rationale and adequate reasons to support its decision. On this account it is argued that irrespective of the correctness of the view of the MoF that ADD should not be imposed, the MoF does not have an unbridled discretion and it is obliged to give reasons for its decision not to impose ADD. Such reasons it is further contended, must be also subjected to judicial review as non-levy of ADD (particularly when one wing of the Government has concluded and recommended levy of ADD) has serious consequences and severely prejudices the affected domestic industry.

It is crucial to note that the aforesaid discussion and the rival positions are not a hypothetical or mere academic inquiry and in fact have received judicial advertence. In Jindal Poly Film Ltd. v. Designated Authority[6] the Delhi High Court by way of a detailed order rejected a writ petition (as non-maintainable) against refusal of the MoF to levy ADD being of the view that even in such a situation an appeal was maintainable before the CESTAT.[7] This order of the High Court was premised principally upon the conclusion that the refusal of the MoF to levy ADD also constitutes an “order of determination” and thus appeal is indeed maintainable. This order actually reversed the tide as prior to this delineation by the Delhi High Court, the CESTAT was taking a consistent view that no appeal is maintainable when no ADD is levied by the MoF.[8]

The High Court’s exposition of the statutory provisions, however, appears not to have extinguished the debate. For illustration, the Government continues to hold the view that an order of the MoF refusing to levy ADD cannot be subjected to appeal before the Appellate Tribunal. This view of the Government has been noted by the Appellate Tribunal but only to be rejected.[9] However, at this stage, it is not clear if the Government has accepted the position emanating from the legal exposition of the Delhi High Court or would seek the final view by way of appeal to Supreme Court. Thus, as of date, precarious tranquillity prevails on the lis and the aggrieved domestic industry.

7. Factoring the policy considerations

It is critical to note that the determination whether or not an appeal lies against the MoF’s decision not to levy ADD does not depend only on the interpretation of Section 9-C of the 1975 Act. Instead, there are multiple policy considerations which are relevant in order to arrive at a balanced position. Some of these are enlisted below:

• The 1995 Rules provide the statutory framework for the levy of ADD. Of these, Rule 18 is relevant for the purpose of our inquiry. It states that “[t]he 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, … anti-dumping duty ….” Two aspects of this provision are relevant. First, there is no obligation upon the Central Government to impose ADD as Rule 18 states “may”. The contours of this expression are well settled, especially when contrasted from the expression “shall”, which is also frequently employed[10] in the 1995 Rules. Put differently, there is no obligation upon the Government to impose ADD and instead it is the discretion of the Government to impose a tax. Thus, the necessity for judicial review is doubtful. Second, Rule 18 clearly delineates the position of MoC vis-à-vis MoF. The MoC, acting through the DGTR is referred only as the “designated authority” in the 1995 Rules whereas it is the MoF which acts as the “Central Government” in the setting of Rule 18. Thus, the decision to levy or not to levy the ADD is of the MoF and no legal consequences should arise from the determination and recommendations of the MoC alone.

• In addition to the aforesaid aspect a critical and noteworthy aspect is that ADD is a tax. Under the constitutional scheme, the judiciary is certainly competent to annul a tax liability or even quash the statutory provision levying a tax. However, it is doubtful if the judiciary can direct the Government to issue a particular notification[11] or levy the tax itself. Equally, levy of tax is policy matter where is generally beyond the judicial prowess, especially in the fiscal realm.[12] In fact, in the very context of ADD, there are decisions to support that levy of ADD is a legislative function.[13]

• The decision of the Gujarat High Court in Alembic[14] provides an added perspective insofar as it highlights the limited role of MoC and the larger balancing rule of MoF in the context of ADD so as to approve the MoF’s exclusive role by enumerating a host of factors which require appreciation. One of these overwhelming reasons assigned by the High Court to approve independent role and overriding authority of the MoF relates to the finer distinction between the role of MoF and the MoC. According to the High Court, the role of MoC is limited and “specific, to ascertain existence, degree and effect of any alleged dumping and various factors connected therewith”. In comparison, the role of MoF is much wider as it needs to appreciate a “[n]umber of other questions of larger public interest such as possible impact of ADD on other industries, on consumption, on supply, etc. of such articles may not possibly be within the purview of designated authority while carrying out investigation envisaged under the rules”. Hence, the statutory provisions should not be interpreted in a manner which renders MoF to “be oblivious of all such factors and once through mathematical exercise, task of ascertaining extent of dumping and causal injury to the domestic industry is completed, necessarily to such extent, ADD must follow. Any such proposition would be putting the Central Government into too straitjacket a situation wherein on a mere ascertainment of dumping and its impact on domestic industry, the Government in all cases invariably be bound to impose duty irrespective of fact that such imposition may for valid reasons found to be not in public interest”.

• The decision in Alembic[15] is also relevant from the perspective of the wide-ranging non-legal variables which form the MoF’s zone of consideration while evaluating MoC’s recommendations. In this case the MoF defended non-levy of ADD inter alia citing lack of domestic industry’s capacity to address the local demand, which defence was accepted by the High Court. Courts are clearly not the best forums for adjudication of such economic and financial variables.[16]

• Also relevant is the perspective that there are inherent differences in scope and approach of judicial review between an appeal remedy before the CESTAT versus a writ petition before the High Court. This is because it is well settled that the appellate forum is obliged to examine validity of appeal and all antecedents to it, including review of all aspects relating to the order challenged before it.[17] This scope of appeal is at contrast with the scope of inquiry in a writ petition wherein the High Court generally has a limited scope to address violation of constitutional rights or legal errors without adverting to disputed questions of facts. Thus, pragmatically there is a significant distinction in the standard of judicial review by CESTAT in appeal vis-à-vis High Court in writ petition. Thus, there is added reason to determine the correct forum to address propriety of MoF’s refusal to levy ADD.

• In any case, the scheme of appeal before the CESTAT in an ADD dispute is also peculiar. Unlike the provision under the 1962 Act which confers wide powers upon the CESTAT, limited powers are vested in the CESTAT under the 1975 Act in respect of ADD disputes. To elaborate, Section 9-C(4) of the 1975 Act states that “the provisions of sub-sections (1), (2), (5) and (6) of Section 129-C of the Customs Act, 1962 shall apply to the Appellate Tribunal in the discharge of its functions under this Act as they apply to it in the discharge of its functions under the Customs Act, 1962”. Section 129-C of the 1962 Act, however, has clauses (1) to (8). Thus, clauses (7) and (8) of Section 129-C of the 1962 Act do not apply to CESTAT while considering ADD appeals under Section 9-C of the 1975 Act. This has a crucial relevance because clause (7) vests the powers of a civil court in the CESTAT thereby authorising it to pass orders for “(a) discovery and inspection; (b) enforcing the attendance of any person and examining him on oath; (c) compelling the production of books of account and other documents; and (d) issuing commissions”. Clause (8) deems “any proceeding before the Appellate Tribunal … to be a judicial proceeding within the meaning of Sections 193 and 228 and for the purpose of Section 196 of the Penal Code”. By exclusion of these clauses (7) and (8), therefore, the 1975 Act has severely restricted the powers and scope of inquiry by the CESTAT. Does this aspect manifest the legislative intent of a limited scope of review by the CESTAT in ADD matters generally?

8. Conclusion

The aforesaid discussion, even though hinged upon the interpretation of statutory provisions governing appeal in ADD matters, reveals the complexities which are inherent in tax policy. Viewed from the judicial perspective, the observations of the Delhi High Court and the CESTAT’s current outlook appear to be a reasonable interpretation to subject MoF’s refusal to levy ADD within the appellate framework. However, examined from the larger policy perspective, many other variables require appreciation in order to arrive at a balanced conclusion which takes into consideration the innate limitations of a judicial review whether to impose a tax, such as the ADD. One would hope that the debate attains a quietude sooner than later, given the larger implications the conclusion has on the role of judiciary in rejudging the government’s decision not to levy a tax.

 

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† Tarun Jain, Advocate, Supreme Court of India; LLM (Taxation), London School of Economics

[1] Available HERE

[2] Commr. of Customs v. G.M. Exports, (2016) 1 SCC 91.

[3] S. 129-B of the Customs Act, 1962, providing for “appeals to the Appellate Tribunal” inter alia states that “any person aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order ….”

[4] S. 9-C(1) of the Customs Tariff Act, 1975, providing for “appeals” states that “an appeal against the order of determination or review thereof shall lie to the Customs, Excise and Service Tax Appellate Tribunal constituted under S. 129 of the Customs Act, 1962 (hereinafter referred to as “the Appellate Tribunal”), in respect of the existence, degree and effect of – (i) any subsidy or dumping in relation to import of any article; or (ii) import of any article into India in such increased quantities and under such condition so as to cause or threatening to cause serious injury to domestic industry requiring imposition of safeguard duty in relation to import of that article”.

[5] See generally, Raj Kumar Shivhare v. Directorate of Enforcement, (2010) 4 SCC 772.

[6] 2018 SCC OnLine Del 11395 : (2018) 362 ELT 994.

[7] 2018 SCC Online Del 11395 : (2018) 362 ELT 994.

[8] For illustration, see SI Group India (P) Ltd. v. Designated Authority Anti-Dumping Appeal No. 50456 of 2017, decided by CESTAT, Delhi on 17-8-2017 vide Final Order No. 56445 of 2017, following Panasonic Energy India Co. Ltd. v. Union of India Anti-Dumping Appeal No. 50452 of 2017 decided by CESTAT, Delhi on 20-7-2017 vide Final Order No. 55305 of 2017.

[9] Jubilant Ingrevia Ltd. v. Union of India, Anti-Dumping Appeal No. 50461 of 021, decided by CESTAT, Delhi on 27-10-2021 vide Final Order No. 51988 of 2021. This final order has been followed subsequently by the CESTAT in Assn. of Chloromethanes Manufacturers REGUS v. Union of India, 2021 SCC OnLine CESTAT 2622 and SI Group India (P) Ltd. v. Union of India, 2021 SCC OnLine CESTAT 2623.

[10] For illustration, Rule 4 states that “[i]t shall be the duty of the designated authority, in accordance with these rules, ….” As another illustration, Rule 5 states, “the designated authority shall initiate an investigation to determine the existence, degree and effect of any alleged dumping only upon receipt of a written application by or on behalf of the domestic industry”.

[11] See generally Mangalam Organics Ltd. v. Union of India, (2017) 7 SCC 221.

[12] See generally, Federation of Railway Officers Assn. v. Union of India, (2003) 4 SCC 289 inter alia observing that “[i]n examining a question of this nature where a policy is evolved by the government judicial review thereof is limited. When policy according to which or the purpose for which discretion is to be exercised is clearly expressed in the statute, it cannot be said to be an unrestricted discretion. On matters affecting policy and requiring technical expertise court would leave the matter for decision of those who are qualified to address the issues. Unless the policy or action is inconsistent with the Constitution and the laws or arbitrary or irrational or abuse of the power, the court will not interfere with such matters”.

[13] This aspect, however, is a debatable proposition. For rival positions, see generally, Haridas Exports v. All India Float Glass Manufacturers’ Assn., (2002) 6 SCC 600 and Reliance Industries Ltd. v. Designated Authority, (2006) 10 SCC 368.

[14] Alembic Ltd. v. Union of India, 2011 SCC OnLine Guj 7686.

[15] 2011 SCC OnLine Guj 7686.

[16] See generally, Manohar Lal Sharma v. Narendra Damodardas Modi, (2019) 3 SCC 25.

[17] Kapurchand Shrimal v. CIT, (1981) 4 SCC 317.