The All India Glass Manufacturers ... vs Union Of India And Others
2009 Latest Caselaw 2271 Del

+*             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,

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

„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

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.

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

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

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

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

2000-01    -          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




 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

Apr. - Oct. 28284 4041 218.87

Nov., 2008 10000 10000 Import price Dec. 2008 15000 15000 declined upto CIF US$ 200 Apr. - Dec. 48284 5365

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.

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

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

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

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

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

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

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

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

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.

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.

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

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

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

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

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,

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-

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

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

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;

(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

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

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

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