Supreme Court Clarifies Anti-Dumping Duty Extension Rules: Union of India vs. Kumho Petrochemicals (2017)

LEGAL ISSUE: Whether the extension of anti-dumping duty can be done after the expiry of the original notification period and whether the initiation of sunset review is valid if the notification is made public after the expiry of the original notification.

CASE TYPE: Anti-Dumping Law

Case Name: Union of India and Another vs. M/s. Kumho Petrochemicals Company Limited and Another

[Judgment Date]: 9th June 2017

Date of the Judgment: 9th June 2017

Citation: (2017) INSC 525

Judges: A.K. Sikri, J. and Ashok Bhushan, J.

Can the government extend an anti-dumping duty after the original duty period has expired? The Supreme Court of India addressed this critical question in a case involving the extension of anti-dumping duties on Acrylonitrile Butadiene Rubber. The court examined whether the extension of duty was valid and if the initiation of a sunset review was proper. This judgment clarifies the procedures and requirements for extending such duties, impacting international trade and domestic industries.

Case Background

The case revolves around the imposition and extension of anti-dumping duties on Acrylonitrile Butadiene Rubber (NBR) imported from Korea RP and Germany. Initially, an anti-dumping duty was imposed in 1997 following an investigation. This duty was extended through subsequent sunset reviews in 2002 and 2009. The second sunset review extended the duty until January 1, 2014.

On December 31, 2013, a day before the expiry of the second sunset review, a third sunset review was initiated. However, the notification for this review was made public on January 6, 2014, after the expiry of the existing duty period. Subsequently, on January 23, 2014, the government issued a notification extending the anti-dumping duty by one year, until January 1, 2015.

M/s. Kumho Petrochemicals Company Limited, a purchaser and exporter of NBR from Korea RP, and Fairdeal Polychem LLP, an importer, challenged the extension notification. They argued that the extension was invalid as it was issued after the original duty period had expired. They also contended that the sunset review was invalid because the public notice was issued after the expiry of the original notification.

The High Court partly allowed the writ petitions, ruling that the extension of the anti-dumping duty after the expiry of the original duty period was illegal. However, the High Court upheld the validity of the sunset review initiation, stating that public notice was not a prerequisite for initiation and could be issued within a proximate period after initiation.

The Union of India and Automotive Manufacturers Association in India appealed against the High Court’s decision on the extension of duty, while the writ petitioners challenged the High Court’s decision on the validity of the sunset review initiation. M/s. Omnova Solution (Pvt.) Limited, a domestic industry, also appealed in support of the Union of India.

Timeline

Course of Proceedings

The High Court of Delhi heard the writ petitions filed by M/s. Kumho Petrochemicals Company Limited and Fairdeal Polychem LLP. The petitioners challenged the notification extending the anti-dumping duty, arguing it was issued after the expiry of the original duty period. They also challenged the initiation of the sunset review, claiming the public notice was issued after the expiry of the original duty period.

The High Court partly allowed the writ petitions, ruling that the extension of anti-dumping duty after the expiry of the original duty period was illegal. However, the High Court rejected the challenge to the initiation of the sunset review, stating that public notice was not a prerequisite for initiation and could be issued within a proximate period after initiation.

Aggrieved by the High Court’s decision, the Union of India, Automotive Manufacturers Association in India, and M/s. Omnova Solution (Pvt.) Limited filed appeals in the Supreme Court. The writ petitioners also filed appeals challenging the High Court’s decision on the validity of the sunset review initiation.

Legal Framework

The core of this case lies in the interpretation of Section 9A of the Customs Tariff Act, 1975, which deals with anti-dumping duties.

Section 9A(5) of the Customs Tariff Act, 1975 states that:

“The anti-dumping duty imposed under this section shall, unless revoked earlier, cease to have effect on the expiry of five years from the date of such imposition:”

This section establishes that anti-dumping duties have a maximum life of five years. However, it also provides two provisos that allow for extensions under certain conditions.

The first proviso to Section 9A(5) of the Customs Tariff Act, 1975 allows the Central Government to extend the period of anti-dumping duty for another five years if a review indicates that the cessation of the duty would lead to a continuation or recurrence of dumping and injury.

The second proviso to Section 9A(5) of the Customs Tariff Act, 1975, which is at the heart of this dispute, states:

“Provided further that where a review initiated before the expiry of the aforesaid period of five years has not come to a conclusion before such expiry, the anti-dumping duty may continue to remain in force pending the outcome of such a review for a further period not exceeding one year.”

This proviso allows for the continuation of anti-dumping duty for a maximum of one year while a review is pending, provided the review was initiated before the expiry of the original duty period.

The Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995, also play a crucial role. Rule 6 of these rules outlines the principles governing investigations, including the issuance of public notices. Rule 23 extends the applicability of Rule 6 to sunset reviews.

Arguments

Arguments of the Appellants (Union of India and Domestic Industry)

• The appellants argued that once the Central Government decides to hold a sunset review, as it did on December 31, 2013, it indicates a prima facie satisfaction that the duty should continue. Therefore, the anti-dumping duty should automatically continue until the review is complete.
• They contended that the word ‘may’ in the second proviso to Section 9A(5) of the Customs Tariff Act, 1975 should be read as ‘shall’ to ensure the purpose of the proviso is not defeated.
• They referred to Section 24 of the General Clauses Act, 1897, to argue that orders issued under repealed and re-enacted laws should continue in force.
• They argued that the second proviso to Section 9A(5) of the Customs Tariff Act, 1975, does not require a notification for the extension of duty and that the initiation of the review is sufficient for the duty to continue.
• They submitted that the word “continue” in the second proviso should not be read to mean “continue without interruption,” and that it can mean continuation with a break.
• They argued that even if a notification was necessary, there is no time limit prescribed for issuing it before the expiry of the original notification.

Arguments of the Respondents (M/s. Kumho Petrochemicals and Fairdeal Polychem)

• The respondents argued that the second proviso to Section 9A(5) of the Customs Tariff Act, 1975, is an enabling provision and does not mandate automatic extension of the anti-dumping duty.
• They contended that the word ‘may’ in the proviso should not be read as ‘shall’ because the legislature used both terms consciously in the same section.
• They argued that the second proviso allows for the duty to be extended for a period not exceeding one year, meaning the extension is not automatic and requires a specific notification.
• They submitted that the word ‘continue’ implies that there should be no discontinuance of the duty, and that the notification for extension must be issued before the expiry of the original duty period.
• They relied on the Agreement for Implementation of Article VI of GATT, which uses the word “may” for continuation of duty pending review.

Submissions Table

Issues Framed by the Supreme Court

1. Whether the date of December 31, 2013, or January 6, 2014, is the relevant date for determining the initiation of the sunset review?
2. Whether the amendment notification dated January 23, 2014, extending the anti-dumping duty after the original notification expired on January 1, 2014, is legally valid?

Treatment of the Issue by the Court

Authorities

Cases Relied Upon by the Court

Legal Provisions Considered by the Court

Judgment

How each submission was treated by the Court

How each authority was viewed by the Court

The Supreme Court analyzed the authorities presented by both sides. It agreed with the principle in B.K. Srinivasan & Ors. v. State of Karnataka & Ors. [1987] 1 SCC 658* and Union of India & Ors. v. Ganesh Das Bhojraj [2000] 9 SCC 461* that subordinate legislation should be published in the Official Gazette. However, it distinguished the case by noting that Section 9A(5) of the Customs Tariff Act, 1975 does not mandate a public notice for the initiation of a sunset review. The Court also relied on Reliance Industries v. Designated Authorities [2006] 10 SCC 368* to emphasize that proceedings before the Designated Authority are quasi-judicial.

The Court distinguished the case of Rishiroop Polymers (P) Ltd. v. Designated Authority and Additional Secretary [2006] 4 SCC 303*, stating it dealt with the nature of review exercises and not the interpretation of the second proviso to Section 9A(5) of the Customs Tariff Act, 1975. Similarly, the Court found that Section 24 of the General Clauses Act, 1897, and the judgment in Fibre Boards Private Limited, Bangalore v. Commissioner of Income Tax, Bangalore [2015] 10 SCC 333* had no relevance to the issue at hand. The Court also distinguished the cases of N. Nagendra Rao & Co. v. State of A.P. [1994] 6 SCC 205*, Dinkar Anna Patil and Another v. State of Maharashtra and Others [1999] 1 SCC 354*, and Sub-Committee on Judicial Accountability v. Union of India and Another [1991] 4 SCC 699*, holding that the word “may” should not be read as “shall” in the context of the second proviso to Section 9A(5) of the Customs Tariff Act, 1975.

The Court relied on Life Insurance Corporation of India v. Escorts Ltd. [1986] 1 SCC 264* to argue that in the absence of words such as “prior” or “previous”, it cannot be contended that an extension should be granted before the expiry of the original period. However, the Court distinguished the case by stating that the extension notification must be issued before the expiry of the original notification. The Court also relied on Babu Varghese v. Bar Council of Kerala [1999] 3 SCC 422* and Harivansh Lal Mehra v. State of Maharashtra [1971] 2 SCC 54* to argue that the notification for extension must be issued before the expiry of the original duty period.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

The Court emphasized that the second proviso to Section 9A(5) of the Customs Tariff Act, 1975, is an enabling provision, not a mandatory one. The use of the word “may” indicates that the Central Government has the discretion to extend the anti-dumping duty. The Court noted that the legislature consciously used both “may” and “shall” in different parts of the same section, indicating that they had different meanings.

The Court was also influenced by the fact that the maximum period for extension of anti-dumping duty under the second proviso is one year, indicating that the period can be shorter and requires a specific notification. The Court also emphasized that the notification for extension must be issued before the expiry of the original notification.

The Court also considered Article 11.1, 11.2, and 11.3 of the Agreement for Implementation of Article VI of GATT, commonly known as the ‘Implementation Agreement’. These articles provide that the duty may remain in force pending the outcome of such a review, and the Court held that Section 9A(5) of the Customs Tariff Act, 1975 is in tune with the aforesaid Articles of the Implementation Agreement.

The Court also noted that the notification dated January 23, 2014, was an amendment to the earlier notification dated January 2, 2009, which had already lapsed. The Court held that an amendment to a non-existing notification is not valid.

The Court also emphasized that no duty or tax can be imposed without the authority of law, and that such a law has to be in the form of an appropriate notification.

Logical Reasoning

The Court rejected the argument that the extension of the anti-dumping duty is automatic once the sunset review is initiated. It held that the second proviso to Section 9A(5) of the Customs Tariff Act, 1975, is anenabling provision, not a mandatory one. The Court emphasized that the use of the word “may” indicates that the Central Government has the discretion to extend the duty, and that this discretion must be exercised through a specific notification.

The Court also rejected the argument that the word “may” in the second proviso should be read as “shall.” It noted that the legislature consciously used both terms in the same section, indicating that they had different meanings. The Court held that “may” should be interpreted as an enabling provision, giving the government the power to extend the duty, but not mandating it.

The Court further rejected the argument that the extension notification can be issued even after the expiry of the original notification. It held that the second proviso to Section 9A(5) of the Customs Tariff Act, 1975, allows for the continuation of the anti-dumping duty for a maximum of one year, and that this continuation must be uninterrupted. Therefore, the notification for extension must be issued before the expiry of the original duty period.

The Court also rejected the argument that the word “continue” in the second proviso can mean continuation with a break. It held that the word “continue” implies that there should be no discontinuance of the duty, and that the notification for extension must be issued before the expiry of the original duty period.

The Court also rejected the argument that the date of initiation of the sunset review should be the date of publication of the notification, and held that the relevant date is the date of the decision to initiate the review.

Ratio Decidendi

The Supreme Court held that the second proviso to Section 9A(5) of the Customs Tariff Act, 1975, is an enabling provision, not a mandatory one. The extension of anti-dumping duty requires a specific notification, which must be issued before the expiry of the original notification. The Court also held that the date of initiation of the sunset review is the date of decision and not the date of publication.

Obiter Dicta

The Supreme Court observed that the legislature consciously used both “may” and “shall” in the same section, indicating that they had different meanings. The Court also observed that the word “continue” implies that there should be no discontinuance of the duty.

Final Order

The Supreme Court dismissed the appeals filed by the Union of India and the domestic industry. It upheld the High Court’s ruling that the extension of anti-dumping duty after the expiry of the original duty period was illegal. The Court also upheld the High Court’s ruling that the initiation of the sunset review was valid.

Impact of the Judgment

The judgment has a significant impact on the administration of anti-dumping duties in India. It clarifies that:

• The extension of anti-dumping duty is not automatic upon the initiation of a sunset review.
• The extension requires a specific notification by the Central Government.
• The notification for extension must be issued before the expiry of the original duty period.
• The date of initiation of a sunset review is the date of the decision to initiate the review, not the date of publication.

This judgment emphasizes the importance of adhering to procedural requirements in the imposition and extension of anti-dumping duties. It ensures that such duties are not extended arbitrarily and that the rights of importers and exporters are protected. The judgment also reinforces the principle that no duty or tax can be imposed without the authority of law.

The judgment has implications for international trade, as it clarifies the rules for extending anti-dumping duties, which are frequently used to protect domestic industries from unfair competition. It also provides greater clarity to businesses operating in the international trade arena.