Resolving an old and long-debated issue in anti-dumping investigations, the Division Bench of the Delhi High Court, delivered a judgment on 31 May, 2018 in Kumho Petrochemical Co. Ltd. v. The Designated Authority & Ors. [W.P. (C) 4886/2014]. It held that extensions of anti-dumping duty post expiry of the duty in force, whether it be one-year extension in the interim of sunset review or five-year extension in view of likelihood of recurrence or continuation of dumping and injury to the domestic industry pursuant to a sunset review determination, are both impermissible. The judgment interprets the legal provisions governing the levy and collection of duties in the interim of and pursuant to sunset review as contained in Section 9A(5) of the Customs Tariff Act, 1975.
The legal provision under consideration pertains to the conduct of sunset reviews and states, in relevant part, as follows:
“9A. Anti-Dumping Duty on dumped articles,-…
(5) The anti-dumping duty imposed under this section shall, unless revoked earlier, cease to have effect on the expiry of five years from the date of such imposition:
Provided that if the Central Government, in a review, is of the opinion that the cessation of such duty is likely to lead to continuation or recurrence of dumping and injury, it may, from time to time, extend the period of such imposition for a further period of five years and such further period shall commence from the date of order of such extension:
Provided further that where a review initiated before the expiry of the aforesaid period of five years has not come to a conclusion before such expiry, the anti-dumping duty may continue to remain in force pending the outcome of such a review for a further period not exceeding one year.”
The writ petition arose from the sunset review for extension of anti-dumping duties imposed on imports of rubber chemical known as PX-13 (6PPD) originating in or exported from China and Korea RP. The following facts and dates are relevant for following the progression in the matter:
|30-04-2013||Initiation of sunset review with respect to certain Rubber Chemicals (including PX-13) from China and Korea RP.|
|04-05-2013||Expiry of definitive anti-dumping duty imposed pursuant to original imposition by Customs Notification No. 133/2008-Customs dated 12-12-2008.|
|05-07-2013||Issue of Customs Notification No. 17/2013-Customs (ADD) pursuant to second proviso of Section 9A(5) imposing duty retrospectively from 5-5-2013 for a one year period up to 4-5-2014, in the interim of the sunset review investigation. Thus, there was a gap of 60 days between expiry of anti-dumping duty and retrospective re-notification.|
|29-04-2014||Issue of final findings of the subject sunset review.|
|24-07-2014||Issue of Customs Notification No. 35/2014-Customs (ADD) re-imposing the anti-dumping duty for a further five-year period. Thus, there was a gap of 80 days when there was, effectively, no duty in force.|
Issues raised before the High Court of Delhi
The petitioners challenged the following:
- Validity of the extension of anti-dumping duty, post-expiry of the same, for the one year pending sunset review; and
- Validity of the extension of anti-dumping duty, post-expiry of the extended one-year period, for the five years pursuant to the sunset review determination.
Judgement of the High Court of Delhi and underlying assessment
The High Court of Delhi allowed the ptition filed by M/s Kumho Petrochemical Co. Ltd. and set aside:
- The notice of initiation of sunset review dated 30 April, 2013;
- The final findings dated 29 April, 2014 recommending continued imposition of duties pursuant to the sunset review;
- Customs Notification No. 17/2013-Customs (ADD) dated 5 July, 2013 issued pursuant to second proviso of Section 9A(5) imposing duty retrospectively from 5-5-2013 for a one year period up to 4-5-2014, in the interim of the sunset review investigation;
- Customs Notification No. 35/2014-Customs (ADD) dated 24 July, 2014 re-imposing the anti-dumping duty for a further five-year period.
Basis for setting aside the notice of initiation of sunset review dated 30 April 2013
The High Court saw it fit to set aside the notice of initiation in the present case as the underlying petition was filed on 9 April, 2013, less than a month prior to the expiry of the anti-dumping duty in force. In light of the prescribed guidelines as contained in DGAD Trade Notice No. 2/2011 dated 06.06.2011, the High Court of Delhi noted that a strict stipulation enjoins the DGAD to initiate sunset reviews on the basis of a duly substantiated petition only when the same is filed at least 90 days prior to the date of expiry of the anti-dumping duty. According to the Court, such prescribed time period should not be deviated from. The Court observed that requirement to adhere to timelines is an overriding feature of the anti-dumping duty regime and leniency shall not be shown in allowing delays in filing of the application for sunset review.
It was argued by the respondent domestic industry that the petition had been filed well in advance, but was revised and refiled in April, 2013 with modified POI. The High Court dismissed the claim stating that such modification reflected that either the unmodified petition lacked substance or that it was replete with errors. .
Based on the foregoing, the High Court observed that the amended Petition filed belatedly on 9 April, 2013 was, in effect, a new application and could not be treated as an application that was filed in a time bound manner. Accordingly, the High Court set aside the initiation of the sunset review investigation based on such delayed petition.
Basis for setting aside the Final Findings dated 29 April, 2014
Having set aside the Notice of Initiation, as discussed above, the High Court went on to also set aside the final findings in this case.
Basis for setting aside the Customs Notification No. 17/2013-Customs (ADD) dated 5 July, 2013
The primary issue raised in the petition pertained to the validity of the extension of anti-dumping duty, post-expiry of the same, for one year pending sunset review. In this regard, the High Court of Delhi held that the power under the second proviso to Section 9A(5), to “extend” an anti-dumping duty in the interim of an ongoing sunset review, after expiry of the original notification, is unavailable.The Court considered the recent judgment of the Supreme Court dated 9.6.2017 in Union of India & Anr. v. Kumho Petrochemicals [Civil Appeal Nos. 8309-8310/2017] wherein it was held that:
“40. Two things which follow from the reading of the Section 9A(5) of the Act are that not only the continuation of duty is not automatic, such a duty during the period of review has to be imposed before the expiry of the period of five years, which is the life of the Notification imposing anti-dumping duty. Even otherwise, Notification dated January 23, 2014 amends the earlier Notification dated January 02, 2009, which is clear from its language, and has been reproduced above. However, when Notification dated January 02, 2009 itself had lapsed on the expiry of five years, i.e. on January 01, 2014, and was not in existence on January 23, 2014 question of amending a nonexisting Notification does not arise at all. As a sequitur, amendment was to be carried out during the lifetime of the Notification dated January 02, 2009. The High Court, thus, rightly remarked that Notification dated January 02, 2009 was in the nature of temporary legislation and could not be amended after it lapsed......”
Thus, the High Court held that the Notification No. 17/2013-Customs (ADD) issued 60 days after the expiry of the levy of anti-dumping duty for the first five-year period, would be non-est because it sought to extend a levy which had lapsed on 04.05.2013. Specifically, the High Court observed that “The phrase “may continue to remain in force”, assumes that there is a levy which exists and its continuance i.e. its carrying forward - without a break in its existence, is necessary. The moment the levy comes to an end or there is a break in its continuance, it cannot be revived in the Sunset Review exercise…. In the present case, the original levy came to an end on 04.05.2013. The levy had a limited life and unless fresh life was infused in it before its predetermined expiry date, it could not be deemed to have been extended. Infusion of fresh life into the levy for a period of one year requires a fresh notification, in addition to the notification for initiation of the Sunset Review. That not being so, in the present case the levy under impugned Notification is without authority, hence it has to be and is set aside.”
Basis for setting aside theCustoms Notification No. 35/2014-Customs (ADD) dated 24 July, 2014:
Examining the second issue, the High Court held that the second notification, i.e., Notification No. 35/2014-Customs (ADD) dated 24 July, 2014, could not be sustained because it was not issued within the period of the original five years or in the extended period of one year in the interim of the sunset review by which the earlier duty had been extended. It found that there was cessation of duty on 5.5.2013 and again on 5.5.2014, therefore, there was no duty on two dates which could have been extended.
In this regard, it remains open to interpretation whether the cessation of duty on 5.5.2013 alone could have led to the setting aside of the second customs notification (owing to the gap between the expiry of the original levy and the date of issue of the second notification) or whether such an outcome is the result of the two breaks, as in the present case.
The High Court also addressed the claims put forward by the DGAD and other Respondents that no delay could be found in the issue of the second notification, i.e., Customs Notification No. 35/2014 dated 24.7.2014 because it was notified within the timelines prescribed under Rule 18(1) of the Rules (within 3 months of the issue of final findings by the DGAD). The High Court noted that the timeline prescribed under Rule 18(1) is not a stand-alone authorization to the Government but rather, must be read in harmony with the rigid timelines of Section 9A(5) of the Act.
The judgment introduces valuable clarity in terms of the timelines for levy and collection of anti-dumping duties. The following principles emerge from the judgment of the Delhi High Court:
- An application seeking the initiation of a sunset review or claiming the likelihood of continuation or recurrence of dumping and injury to the domestic industry in case of discontinuance of duties must be filed well in advance, in line with the prescription of the DGAD;
- Where the DGAD determines that sunset review merits initiation, it must ensure that the same is initiated prior to the expiry of the original period of levy;
- Once a sunset review is initiated, the Customs notification extending the period of original levy must be issued prior to the expiry of such period;
- Where the DGAD comes to the conclusion, in a sunset review determination, that there is a likelihood of continuation or recurrence of dumping and injury in case of revocation of duty and therefore, recommends the continuation of duties, then the notification of levy must be issued prior to the expiry of the original levy or prior to the expiry of the extended one-year period, whichever applicable;
- There should be no break in between the levy pursuant to the sunset review determination and the original levy. The thread of the existing duty has to continue from the initial five year levy to the one year extended period of sunset review to the proposed five year period.
Further, it appears that the Designated Authority was aware of the lacunae in the procedures for the conduct of the sunset review and the difficulties posed by the same. Accordingly, the DGAD had issued Trade Notice No. 02/2017 dated 12 December, 2017 wherein it introduced strict timelines for the filing of the petition seeking sunset review as well as timelines for DGAD action, leaving sufficient time for issuance of Customs Notification, where required. The Trade Notice creates a time bound schedule to ensure that sset review investigations would not suffer from procedural ambiguities.
[The author is Principal Associate, International Trade Practice, Lakshmikumaran & Sridharan, New Delhi]