2019 (1) TMI 1388 - HC - Customs

Levy of Safeguard Duty - capacity utilisation of the applicant is 85% - injury on account of imports - Held that - Issue Notice returnable on 23rd January 2019. By way of ad-interim relief the sixth respondent is directed to assess the provisional safeguard duty payable by the petitioner relating to bills of entries referred to at Annexure-P-14 to the petition and further import of solar cells and modules in accordance with section 18 of the Customs Act and release the goods without insisting upon payment of safeguard duty on executing a bond. Such bond shall be executed by an authorised officer of the company. Direct service is permitted qua the respondent No. 6.

Summary

Issues:
- Eligibility of domestic industries to move application under Customs Tariff Rules
- Interpretation of the definition of "domestic industry"
- Calculation of domestic production and demand
- Capacity utilization of the applicant
- Provisional safeguard duty assessment and release of goods

Issue 1: Eligibility of domestic industries to move application under Customs Tariff Rules
The case involved a challenge to the eligibility of certain domestic industries to move an application under rule 5 of the Customs Tariff (Identification and Assessment of Safeguard Duty) Rules, 1997. The Director General had restricted the application to two domestic industries, M/s. Indosolar Limited and M/s. Jupiter Solar Power Limited, out of the initial five parties. The contention was that the Director General incorrectly calculated the domestic production, leading to the exclusion of three parties, including those situated in the Special Economic Zone (SEZ). The argument was based on the definition of "domestic industry" under the Customs Tariff Act, emphasizing that the collective output of the two parties did not constitute a major share of the total production in India.

Issue 2: Interpretation of the definition of "domestic industry"
The main point of contention was the interpretation of the definition of "domestic industry" under clause (b) of sub-section (6) of section 8B of the Customs Tariff Act, 1975. The argument put forth was that even if the collective production of the two parties accounted for 38% of the total domestic production in the Domestic Tariff Area (DTA), it did not meet the criteria of constituting a major share of the total production in India. This interpretation was crucial in determining the eligibility of the parties to move the application for safeguard duty.

Issue 3: Calculation of domestic production and demand
Another aspect highlighted was the discrepancy in the calculation of domestic production and demand. It was pointed out that the calculation of 38% of total Indian production was incorrect as the actual total Indian production exceeded the mentioned figure of 842 MW. The argument was that the safeguard duty should not be imposed to protect only about 3% of the domestic demand, leading to the conclusion that the application itself might not be maintainable based on these calculations.

Issue 4: Capacity utilization of the applicant
Reference was made to the capacity utilization of the applicant, which was stated to be 85%. This fact was presented to argue that the applicant could not claim to be injured due to imports since their capacity utilization was relatively high. This factor was crucial in assessing the impact of imports on the domestic industry and determining the necessity of imposing safeguard duty.

Issue 5: Provisional safeguard duty assessment and release of goods
In response to the submissions made, the court issued a notice returnable on a specific date and directed the sixth respondent to assess the provisional safeguard duty payable by the petitioner. It was further ordered that the import of solar cells and modules should be released without requiring payment of safeguard duty, subject to the execution of a bond by an authorized officer of the company. However, it was clarified that if the notification upholding the safeguard duty was upheld, the petitioner would be liable to pay the provisionally assessed safeguard duty.

In conclusion, the judgment delved into various intricate aspects related to the eligibility of domestic industries to apply for safeguard duty, the interpretation of relevant legal definitions, calculation discrepancies, capacity utilization considerations, and the provisional assessment and release of goods subject to safeguard duty conditions.