2017 (5) TMI 1440 - HC - Customs

Levy of SAD - import of sulphur and rock phosphate - N/N. 23/2002-Cus dated 1st March 2002 - the intent and purpose of SAD was to afford a level playing field for indigenous manufacturers of goods which were also imported from outside to protect the indigenous industry - the case of petitioner is that with the issuance of the impugned N/N. 23/2002-Cus effective 1st March 2002 however this level playing field was completely disturbed. The said notification was issued in supersession of N/N. 19/2011-Cus - Held that - It is not as if in the present case the impugned notification reflected in N/N. 23/2002-Cus dated 1st March 2002 has no basis - The mere fact that the government made a reference to the prevailing rates of customs duty and not to sales tax or local tax and the impact thereof would not per se render the decision contrary to section 3 A CTA - The mere fact that there might be some inconvenience for a short period on account of the increase or decrease in rates of SAD is not by itself a reason to declare the fixation of the rate of duty as unreasonable or illegal. The Court is not satisfied that in the impugned notification can be said to be arbitrary or irrational or that it has been issued by the government without taking into account all the relevant factors. Consequently the Court is not inclined to interfere with the impugned notification dated 1st March 2002 which in any event has been superseded by the N/N. 23/2003-Cus dated 1st March 2003. Petition dismissed - decided against petitioner.

Summary

Issues Involved:
1. Legality of Notification No. 23/2002-Cus dated 1st March 2002.
2. Impact of the notification on the indigenous manufacturers of phosphoric acid.
3. Scope of judicial review regarding the withdrawal of exemption and imposition of Special Additional Duty (SAD).

Issue-wise Detailed Analysis:

Legality of Notification No. 23/2002-Cus dated 1st March 2002:

The petitioner, Oswal Chemicals and Fertilizers Ltd., challenged the legality of the Notification No. 23/2002-Cus dated 1st March 2002, which removed 'sulphur' and 'rock phosphate' from the ambit of goods entitled to nil rate of Special Additional Duty (SAD) and subjected them to SAD @ 4%. The petitioner argued that this notification disturbed the "level playing field" intended by the original SAD provisions, which aimed to protect indigenous manufacturers from the competitive disadvantage posed by imported goods. The court noted that the decision to fix or alter the rate of SAD is a fiscal policy decision and not typically subject to judicial review unless it is shown to be irrational, arbitrary, or made without considering relevant factors. The court found that the impugned notification had a basis and was part of a broader policy to gradually adjust duty rates, which was not rigid or inflexible.

Impact of the Notification on Indigenous Manufacturers of Phosphoric Acid:

The petitioner contended that the impugned notification adversely affected indigenous manufacturers of phosphoric acid, as they had to pay a higher customs duty (5% plus 4% SAD) compared to importers of phosphoric acid who only paid 5% ad valorem. This, according to the petitioner, placed indigenous manufacturers "in severe jeopardy." The court acknowledged the inconvenience caused to the manufacturers but emphasized that such short-term impacts do not render the notification unreasonable or illegal. The court also noted that the situation was remedied prospectively in the 2003 Union Budget through Notification No. 29/2003-Cus dated 1st March 2003, which restored the nil rate of SAD for both sulphur and rock phosphate.

Scope of Judicial Review Regarding Withdrawal of Exemption and Imposition of SAD:

The petitioner argued that the withdrawal of the nil rate of SAD and imposition of 4% SAD should be subject to judicial review, as per the principles laid down in Dai Ichi Karkaria v. Union of India. The court reiterated that while judicial review is possible, it is limited to examining whether the decision-making process was fair, reasonable, and in accordance with the law. The court found that the government had taken relevant factors into account and that the decision to impose SAD at 4% was not arbitrary or irrational. The court also clarified that the expression "having regard to" in Section 3A(1) of the Customs Tariff Act (CTA) should be interpreted purposively, and the phrase "any other charges" should not be narrowly construed to only include charges similar to sales tax and local tax.

Conclusion:

The court concluded that the impugned notification was neither arbitrary nor irrational and had been issued after considering all relevant factors. Consequently, the court declined to interfere with the notification, which had already been superseded by Notification No. 29/2003-Cus dated 1st March 2003. The petition was dismissed with no orders as to costs.