2020 (1) TMI 211 - HC - Customs

Levy of safeguard duty - final notification issued on 16-7-2018 - import of solar cells whether or not assembled in modules or panels - petitioner argued that safeguard duty is contrary to the applicable principles and the norms governing the determination of injury and consideration of all other factors set out in the Act as well as Rule 8 of the Rules of 1997 - HELD THAT - Duty imposition was preceded by an application filed on behalf of domestic industry. The investigation conducted covered the periods 2014-15 to 2017-18. In January, 2018, the preliminary findings were recorded. In fact, the preliminary findings had recommended imposition of 70% safeguard duty. After the findings were recorded, comments and objections of the interested parties were sought. Interestingly, the petitioner had participated in the proceedings which culminated in the final findings. This is a significant aspect because the likely prospect as to imposition of safeguard duty (at the point in time when the petitioner participated in the bid (which opened in April, 2019) in which it was ultimately successful - in June, 2019 was known to it. This aspect, in the opinion of the Court, is important because the petitioner was well aware that imposition of safeguard duty was likely- even the preliminary findings had been announced on 5-1-2018. In the opinion of this Court, on a prima facie reading of the elaborate findings, all relevant factors which the Director General had to take into account, were indeed considered when the impugned final findings were issued - it is evident that the petitioner would not be prejudiced, because it has negotiated a condition that the impact of the levy is not borne by it. Furthermore, this court also notices that being an indirect tax, the levy is borne by the ultimate consumer; the petitioner, as supplier would factor in the tax impact in the cost. This court also notices that the primary object of imposing safeguard duty is to eliminate injury or real threat of injury, posed by import of the product. That objective would be entirely defeated if the court were to blindly endorse a claim of illegality regarding imposition of the duty, which was preceded by elaborate hearing of all parties - including the petitioner, and a reasoned order, which culminated in the impugned notification. Granting such a stay or interim order would facilitate entry of the goods at vastly lower prices, precisely what Parliament intended to curb through the levy. Clearly, the balance of convenience is not in favour of the petitioner, for grant of such relief. The Court is therefore, of the opinion that no interim orders are called for. The stay application is dismissed - List both the writ petitions for final hearing on 22-10-2019.

Issues Involved:
1. Legality of the imposition of safeguard duty on imported solar cells.
2. Evaluation of factors considered by the Director General in recommending the safeguard duty.
3. Impact of the safeguard duty on the petitioner and the domestic industry.
4. Jurisdiction and appropriateness of granting interim relief.

Issue-wise Detailed Analysis:

1. Legality of the Imposition of Safeguard Duty:
The petitioner challenged the final notification issued on 16-7-2018 by the Director General of Trade Remedies recommending the levy of safeguard duty on imported solar cells. The petitioner argued that the safeguard duty was contrary to applicable principles and norms governing the determination of injury as per the Customs Tariff Act, 1975 and the 1997 Rules. The Court noted that the imposition of safeguard duty was preceded by an application from the domestic industry and an investigation covering the periods 2014-15 to 2017-18. Preliminary findings in January 2018 had recommended a 70% safeguard duty, and the petitioner had participated in the proceedings leading to the final findings.

2. Evaluation of Factors Considered by the Director General:
The petitioner contended that the Director General (DG) failed to evaluate all relevant factors and instead considered irrelevant factors. However, the Court found that the DG had indeed considered all relevant factors, including the rate and amount of increase in imports, the share of the domestic market taken by increased imports, and changes in sales, production, productivity, capacity utilization, profits, losses, and employment. The DG's final findings noted that despite increased domestic sales and capacity utilization, the market share of domestic sales had decreased, and imports had increased significantly. The DG concluded that the domestic industry had suffered serious injury due to increased imports at lower prices.

3. Impact of the Safeguard Duty on the Petitioner and the Domestic Industry:
The petitioner argued that the imposition of safeguard duty was arbitrary and would adversely affect its business. The Court observed that the petitioner had entered into a power purchase agreement with MSEDCL, which included a change of law clause ensuring compensation for any adverse financial impact due to changes in duties or taxes. Therefore, the petitioner would not be prejudiced by the safeguard duty. The Court also noted that the primary objective of the safeguard duty was to protect the domestic industry from serious injury caused by increased imports, and granting interim relief would undermine this objective.

4. Jurisdiction and Appropriateness of Granting Interim Relief:
The petitioner sought interim relief to clear goods without paying the safeguard duty, citing similar relief granted by other High Courts. The respondents argued that the orders from other High Courts were unreasoned and did not consider the prima facie strength of the case or balance of convenience. The Court agreed with the respondents, noting that the Gujarat High Court had vacated a similar interim order, emphasizing the need to protect the domestic industry from serious injury. The Court concluded that granting interim relief would defeat the purpose of the safeguard duty and was not warranted in this case.

Conclusion:
The Court dismissed the petitioner's application for interim relief, emphasizing that the Director General had considered all relevant factors and that the imposition of safeguard duty was necessary to protect the domestic industry from serious injury. The petitioner's power purchase agreement ensured compensation for any adverse financial impact, and the balance of convenience favored the domestic industry. The writ petitions were listed for final hearing on 22-10-2019.

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