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2020 (1) TMI 211

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..... s 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 reas .....

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..... ty are that at the behest of the domestic industry, investigation was launched for the periods 2014-15 to 2017-18, regarding the need to initiate proceedings for the levy of safeguard duty under Section 8B of the Customs Tariff Act, 1975 (hereafter CTA or the Act ). Under Section 8B of the Act the Central Government after enquiry and upon recording a satisfaction that any article imported into India in such increased quantities and under such conditions so as to cause or threatening to cause serious injury to domestic industry can impose safeguard duty. The initiation of proceedings meant issuance of notice and hearing necessary parties. This resulted in the publication of preliminary findings on 5-1-2018. 5. The petitioner, which imports the goods, had after the issuance of the preliminary findings, successfully bid for supply of the goods for the purpose of solar power generation pursuant to a tender issued by the Maharashtra State Electricity Distribution Company Limited (hereafter MSEDCL ). It therefore participated in the proceedings and filed its objections to the proposal to impose safeguard duty. On 5-6-2018 the petitioner was declared a successful bidder for .....

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..... ifiable nature, having regard to the Customs Tariff (Identification and Assessment of Safeguard Duty) Rules, 1997 (hereinafter referred to as the Rules ). It was argued that the evaluation failed to notice that the Central Government s policy increased the target of solar power generation in the country from 20 GW to 100 GW in 2022 by five times. To achieve such a target, various organizations had bid to establish solar power generating units. The policy resulted in a huge demand for solar cells and panels. It was argued that materials on record in the form of figures collected in the impugned final findings disclosed that even if the domestic industry (which has now attained 85% production capacity of the installed machinery) works at full capacity yet it cannot meet more than 4% of the total demand. 9. Learned Senior Counsel highlighted that despite the restrictive conditions which had prevailed for four years (2012 to 2016) in the form of a DCR , which required foreign suppliers to source indigenous material wherever available, the domestic industry could not increase production to match the demand. 10. It was also argued that the DG considered only the incre .....

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..... considerable increase in the number of power projects set up from 6 bids in 2013-14 to 17 bids in the year 2015 and it was this increase that led to the increase in demand. However, the domestic industry could not match this demand. Therefore, the demand had to be met through imports. The increase in imports was therefore due to an increase in demand caused by the policies adopted by Government and cannot be linked to the production capacity of China and the failure of the DI to ramp up capacity during the DCR. He has also only considered the relative terms and not the absolute terms which is mandatory. 13. Mr. Saraswat, appearing for the respondents, urged that this court should not entertain this petition, as it is speculative. Highlighting that the petitioners first approached the Orissa High Court, which granted a blanket stay of the final findings, (which led to intervention by the Supreme Court, and subsequent stay of proceedings before that High Court) Counsel argued that the orders were sought from different High Courts. It was submitted that a plain reading of the orders made by the High Courts of Bombay and Andhra [Pradesh] would show that they were unreasoned, .....

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..... ficial Gazette, impose a safeguard duty on that article : Provided that no such duty shall be imposed on an article originating from a developing country so long as the share of imports of that article from that country does not exceed three per cent. or where the article is originating from more than one developing countries, then, so long as the aggregate of the imports from developing countries each with less than three per cent. import share taken together does not exceed nine per cent. of the total imports of that article into India : Provided further that the Central Government may, by notification in the Official Gazette, exempt such quantity of any article as it may specify in the notification, when imported from any country or territory into India, from payment of the whole or part of the safeguard duty leviable thereon. 17. The Rules, to the extent they are relevant, state as follows : 8. Determination of serious injury or threat of serious injury. - The Director General shall determine serious injury or threat of serious injury to the domestic industry taking into account, inter alia, the principles laid down in Annex to these ru .....

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..... 8) (1) In the investigation to determine whether increased imports have caused or are threatening to cause serious injury to a domestic industry, the Director General shall evaluate all relevant factors of an objective and quantifiable nature having a bearing on the situation of that industry, in particular, the rate and amount of the increase in imports of the article concerned in absolute and relative terms, the share of the domestic market taken by increased imports. changes in the level of sales, production, productivity, capacity utilization, profits and losses, and employment. (2) The determination referred to in paragraph (1) shall not be made unless the investigation demonstrates, on the basis of objective evidence, the existence of the causal link between increased imports of the article concerned and serious injury or threat thereof. When factors other than increased imports are causing injury to the domestic industry at the same time, such injury shall not be attributed to increased imports. In such a cases, the Director General may refer the complaint to the authority for anti-dumping or countervailing duty investigations, as appropriate. 18 .....

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..... spondingly had increased from 1419 MW to 10618 MW. 21. The observations in para 49(2), in the opinion of the Court belies the submission made that the sales were not taken into account in terms of absolute figures. The Director General took note of the fact that domestic sales increased from 115 MW to 314 MW; however, correspondingly imports also increased by 8558 MW. Domestic capacity utilization too had increased from 48 to 85%. 22. Having regard to the above background, the Director General in the final findings noticed as follows :- (viii) Inventory : The inventory carried by the DI increased by more than 2 times during the POI, as indicated in the table below. Particulars 2014-15 2015-16 2016-17 2017-18 (up to Sept. 2017) Closing Inventory (Indexed) 100 114 243 251 (ix) Price Undercutting : There was a significant price undercutting by the imported goods thro .....

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..... dustry. The rise in imports and coinciding serious injury caused to the domestic industry during the injury period, establishes causality. (iii) The domestic industry has been able to demonstrate that the developments in the market on surge in imports of the PUC were unforeseen in the context of Article XIX of GATT. (iv) There will be some impact on the Solar Power Developers and also ultimate consumer as a result of safeguard duty on the PUC. (v) It is however concluded that imposition of safeguard duty in this case would be in public interest because it will prevent complete erosion of manufacturing base of Solar industry in the country which is upcoming and holds promise for a stronger manufacturing base in the country in future, at the same time, it is also in the public interest, to prevent undue escalation of Solar power cost, tariff to the final customer and that attainment of the target of 100 GW of Solar Power Deployment by 2022 is not derailed. The consideration of two competing interests require a balanced view. (vi) From the analysis of post-POI data, it has been observed that the position of domestic industry fu .....

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..... ondition that the quantum and mechanism of compensation payment shall be determined and shall be effective from such date as may be decided by the MERC. Therefore, 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. 27. This Court is unpersuaded with the submission that the Bombay High Court and its Nagpur Bench granted interim relief or that the Andhra Pradesh High Court granted certain interim relief whereby a facility of clearing goods by only paying 50% duty was granted - balance was to be secured by bank guarantee. A careful reading of those orders reveal that the concerned High Court, with respect did not choose to adduce any reason, but took into consideration, solely the impact of the safeguard duty. No consideration about the prima facie strength of the petitioner s arguments, or how the balance of convenience was in its favour, has been recorded in those orders. 28. This aspe .....

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..... carried by the domestic industry increased by more than two times during the period of investigation and that there was a significant price undercutting by the imported goods throughout the POI and that it was evident that the high level of price undercutting prevented the domestic industry from increasing their prices as a result of which they suffered losses. The Director General has further found that the continued price undercutting has finally led to a situation where the domestic industry is not able to raise prices above the landed value and that the threat of serious injury is established. In paragraph 52 of the final findings, the Director General has recorded the factors relevant in regard to determining the cause and effect relationship of increased imports and the serious injury during the POI and the threat of serious injury in the future to domestic industry, wherein it has been inter alia recorded that the imports have increased significantly in absolute terms; the market share of imports has increased and consequently the market share of domestic industry had declined : the imports are available at prices lower than the selling price of the domestic industry and are .....

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..... i) the power developers, and (iv) the consumer of electricity who may bear the brunt of safeguard measures in form of increased electricity tariff. Thus, from the facts as emerging from the record it is clear that the Director General has considered all relevant parameters in the final findings. As to whether such findings are justified having regard to the material on record, would be required to be gone into at the stage of final hearing of the petition. 24. Insofar as the question of balance of convenience is concerned, if the petitioner continues to make imports by simply executing a bond, the operation of the final findings in effect and substance remain stayed and the domestic industry does not get any benefit under the impugned notification and final findings. In the opinion of this court, when the Director General (Safeguard) has found that the domestic industry has suffered injury and also faces threat of serious injury, if the ad interim relief granted earlier is continued, the domestic industry would continue to suffer such injury and may collapse under the impact of the onslaught of imports. On the other hand, insofar as the importers are concerned, the Governm .....

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