Imposition of anti-dumping duty on import of Hydroxy Quinoline from China under Quantity Based Advance Licence Scheme – provisional demand based on preliminary enquiry

Case: VETCARE ORGANIC PVT LTD v/s CESTAT, CHENNAI & COMMISSIONER OF CUSTOMS, CHENNAI

Citation: 2011-TIOL-443-HC-MAD-CUS

Issue:- Imposition of anti-dumping duty on import of Hydroxy Quinoline from China under Quantity Based Advance Licence Scheme – provisional demand based on preliminary enquiry – later held that no dumping existed but saving clause notified – whether sustainable?

Brief Facts:- Appellant was engaged in manufacture of Animal Feed Supplements and Veterinary Drugs. They exported their manufactured goods under Quantity Based Advance Licence Scheme (QBAL) under Duty Exemption Entitlement Certificate Scheme, as per the EXIM policy. In the circumstances, the assessee imported Hydroxy Quinoline on six occasions under 7 Bills and the period of import was covered between 30.12.1996 and 25.02.1997 from China for the manufacture of finished goods. The final products were imported between 15.11.1996 and 19.6.1997 and the export obligation under the QBAL was fulfilled. Exports were covered under EXIM Policy for 1992-97.

In the meantime, anti-dumping was imposed on import of Hydroxy Quinoline from China. Provisional demand was made to the appellant to pay the anti-dumping duty in terms of Notification No. 80/96-Cus dated 16.10.1996 under 6 different orders. The investigation to levy anti-dumping duty was based on the complaint filed by one company.

Aggrieved by the levy, appellant filed appeals before the Commissioner (Appeals) which confirmed the demand however allowed duty exemption in respect of one bill of entry dated 30.04.1997, made after the issue of Notification No. 41/1997 revoking the anti-dumping duty liability and directed the Designated Authority to consider the prayer for drawback.

In appeal before the Tribunal, the Judicial member agreed with the assessee, on account of order passed withdrawing the earlier notifications but the Technical Member differed. The matte was referred to a third member. The Third member agreed with the Technical Member. Thus, levy was confirmed.

Aggrieved by the same, appellant has filed appeal before the High Court raising following substantial questions of law:

1. Whether the levy of anti dumping duty on imports made under a Quantity Base Advance Licence (QBAL) are justified especially in the light of Notification No.41 /97- Cus dated 30.04.1997?

2. Whether the levy of anti-dumping duty is justified in the light of the Board Circular No.106 /95- Cus dated 11.10.1995 which grants duty draw back and/or refund of anti dumping duty in respect of imported inputs which were actually used in the goods exported?

3. Whether the Tribunal was justified in dismissing the appeal solely based on para 13 of the Third Member's order, when the Third Member actually declined to go into the arguments raised by the appellant on the ground that the ROM application filed by the appellant was pending before the Division Bench which passed the dissent order?

4. Whether the preliminary findings of the designated authority levying anti dumping duty for the period in investigation between 01.04.1995 to 30.09.1995 would have any relevance for the imports made during the period in dispute (28.10.1996 to 25.02.1997)?"

A writ petition has also been filed being aggrieved by the latter portion of the Notification No. 5/2001-Cus dated 22.01.2001. Therein it is contends that Notification contain a saving clause that things done or omitted to be done before such rescission, is contrary to the provisions of Anti-dumping Rules, and in particular, to Rule 21 (3). It was contended that in terms of Rule 13 of the said Rules, the provisional duty could remain for a period of 6 months, which may be extended for a further period as provided for under Rule 14 of the said Rules. The Notification containing the saving clause is contrary to the provisions of the Act and violative of Article 265 of the Constitution.

In another Writ petition, the applicability and levy of anti-dumping duty.

Revenue has counter petition contending hat petitioner had projected the case on a wrongful assumption that their case is covered by Section 18 (4) of the Customs Tariff Act and Rule 21(3) of the Customs Tariff (Determination of Injury) Rules. When the withdrawal is conditional, the petitioner is not entiled to refund of the duty levied. The withdrawal of anti-dumping duty w.e.f. 22.01.2001 would, in no way, affect the levy and collection of anti-dumping duty and the earlier Notifications. So too, any duty not levied or short-levied would be recoverable as per the Notifications, which were ruling the field till 2001. In such circumstances, the question of refund or dropping of the proceedings, did not arise.

Appellant’s Contention:- Appellant contended that going by the EXIM Policy 1992-97, when the imports are under actual user's licence and the assessee had already performed its export obligation, the question of levying any duty under anti-dumping laws, does not arise. When the policy makers are contemplating exemption from duty on performance of the obligations under the EXIM Policy, the benefit of such exemption policy has to be maintained. Throughout the period of policy of licence validity, unless and until the Licensing Authority or the Customs Authority alleged any violation either as to the policy conditions or to the provisions of the Customs Act, the question of denying the benefit of the EXIM Policy did not arise. They further submitted that the provisions of the anti-dumping laws have no relevance to the compliance of the obligation under the actual user's licence. In the last clearance under the bill of entry dated 30.4.1997, the Revenue itself exempted the assessee from the provisions of the anti-dumping laws, there being no violation. Going by the fact that the entire import was under one licence, one cannot divide the imports as one prior to the Notification of the year 2001 and post 2001. Since the import is a continuous process under the actual user's licence granted to the assessee, the Revenue is not justified in levying antidumping duty.

They further stated that given the object of the EXIM Policy, the licence granted to the assessee and in the background of the review notification that there is no dumping of goods into the country, the latter portion of Notification No.5 /2001 dated 22.1.2001, preserving those acts done, or protecting the rights of the Government to do, cannot survive under any of the provisions of the Anti-Dumping Laws. Thus, the latter portion in Notification No.5 /2001 dated 22.01.2001 goes against the very scheme of the anti-dumping laws; hence, beyond the purview of the Government to preserve any such authority. Thus, when the antidumping provisions are not available herein, on facts, the Notification preserving such authority is contrary to Article 14 of the Constitution of India.

Respondent’s Contention:- Revenue argued that Notification No. 5/2001 dated 22.01.2001 has only a prospective effect, in that, it seeks to preserve all acts done, apart from preserving the right of the Government, to take action in such of those acts in those cases, where there was an omission to levy duty. It must be pointed out herein that the learned Standing Counsel fairly brought to the notice of this Court the decision of the Tribunal in the case of Rao Insulating Company Limited vs. Commissioner of Customs, Bangalore [2007 (213) ELT 101 (Tri. Bang.)] , wherein, the Tribunal had accepted the plea of the assessee based on Notification No.25 /04 Customs dated 22.01.2004 that the words "except as respects things done or omitted to be done before such rescission" cannot authorize or preserve the imposition of anti-dumping duty. The Tribunal further pointed out that on a similar issue, the Chennai Customs have granted refund order, which has been accepted by the Department that the Notification could not protect acts, which are done in imposition of anti-dumping duty, etc.

Reasoning of Judgment:- The High Court held that as per assessee’s submission on the vires of the portion of Notification No. 5/2001 dated 22.1.2001, in so far as it seeks to preserve the levy imposed as well as to reserve the authority to touch cases, which were omitted to be brought under levy as violative of the provisions of anti-dumping laws as well as Article 265 of the Constitution of India. Once on factual findings, the Government found that there was no dumping of materials from the People's Republic of China in the local market and hence, the anti-dumping laws could not be invoked, the question of preserving any such authority to impose duty under the anti-dumping laws does not arise.

Further the Court held that as perusal of Rule 18 of the Rules 1995 shows that once the Designated Authority arrived at a finding under Rule 17 of the Rules by a Notification in the Official Gazette, the Government could authorize imposition of anti-dumping duty as determined under Rule 17 of the Rules. It was held that a reading of both Rule 18 & 17 leave no doubt that on the finding thus given by the Designated Authority, the State cannot proceed further to preserve any order or reserve any jurisdiction on an authority, to protect any act done, either provisionally or otherwise or confer authority to assume jurisdiction o make a fresh levy.

It was further held that Rule 19 states that any provisional duty imposed under Rule 13 of the Rules and anti-dumping duty imposed under Rule 18 shall be on a non-discriminatory basis and applicable to all imports of such articles from whatever sources found dumped. Thus, a reading of all the 3 Rules, it was held that it is clear that the assumption of authority to levy anti-dumping duty, rests on a positive finding on dumping, which is injurious to the local market, and that once the finding is otherwise, the question of either maintaining a levy or imposing a fresh one, does not arise. Thus, it was held that the latter portion of the Notification, preserving the rights of the Government in respect of duty imposed or to impose duty in cases where it was omitted to be done before the rescission of the earlier notification under Notification No. 5/2001 dated 22.01.2001, is contrary to the Scheme of the Anti-dumping laws and violative of Articles 14 and 265 of the Constitution.

The High Court noted that the provisional demand raised against the assessee was challenged by filing review petition before the Designated Authority. The Designated Authority had given finding in favour of the assessee by passing Notification No. 5/2001 dated 22.01.2001, that there was no anti-dumping. It was held that as the said finding remained unchallenged by the Revenue, the next step was applying Rule 18(4). But instead of doing so, the Notification No. 5/2001 travelled beyond what is contemplated under the provisions of Anti-dumping laws, not only to preserve the action taken to levy duty, but also to preserve the authority to take action in case where there was an omission to impose duty. Such reservation of authority goes against the very scheme of the Anti-dumping laws. It was held that the levy, as such, cannot be made in the light of the findings given in Noificaion No. 5/2001 dated 22.01.2001.

It was held that as the entire action was based on Notification No. 5/2001, there was no need to go into other issues. The High Court noted the purpose of introducing EXIM Policy and it was held that the import of raw materials for export under QBAL Scheme cannot be subjected to anti-dumping duty.

Decision:- Appeals and Writ petitions disposed of accordingly.

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PJ/Case Laws/2011-12/1274

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