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17 August, 2018
As anticipated in our last blog on this subject , solar cells continue to be at the heart of to-and-fro trade remedy measures being undertaken by various countries. The Government of India has fired the most recent salvo by notifying the imposition of safeguard duty on solar cells through the Department of Revenue, Ministry of Finance.
The termination of the anti-dumping investigation by the Directorate General of Anti-dumping and Allied Duties (DGAD) may have allowed a temporary sigh of relief to those rooting for exports. But that has been largely offset because of the safeguard duty investigation by the Directorate General of Safeguards (DGS).
The safeguard duty investigation was initiated based on a petition filed by the Indian Solar Manufacturers Association (ISMA) with the DGS requesting imposition of a safeguard duty on imported solar cells from China, Malaysia, Singapore and Taiwan.
In its preliminary finding [1], the DGS recommended a safeguard duty of 70% on imported solar cells. This led to one of the solar power producers/importers (Shapoorji Pallonji Infrastructure Capital Co Ltd) filing a writ petition[2] in the High Court of Madras challenging the preliminary findings and seeking that they be quashed.
Interim protection was granted by the Madras High Court in January 2018 (in the form of a status quo order) and it provided temporary relief, but not for long. Eventually, the Madras High Court dismissed the writ petition in April 2018. In its order, the Madras High Court noted that the “scope of interference, in matters, which have huge economic impact, is very narrow” and no prejudice will be caused to the petitioner since it would be entitled to make submissions during the public hearing to be held before the issuance of final findings.
Not to be disheartened, in May 2018, another solar power producer/importer (Acme Solar Holdings Limited) moved the High Court of Delhi seeking relief against the safeguard duty investigation. However, the High Court of Delhi disposed of this writ petition[3] directing that it be treated as a representation to the Central Government to be considered before the final decision is taken. This decision also suggests reluctance on the part of the High Courts to intervene in such matters.
Not long thereafter, on 16 July 2018, the DGS issued its final findings[4], concluding that increased imports of solar cells into India have caused, and continue to threaten, serious injury to domestic producers; it thus recommended that a phased safeguard duty for a two-year period (beginning at 25% and ending at 15%) would be in the public interest. As mentioned above, these were only recommendations and they needed to be notified by the Ministry of Finance to come into force.
Before the safeguard duty could be notified, another round of litigation was initiated, this time at the High Court of Orissa. Interestingly, the same party that had unsuccessfully moved the High Court of Delhi against the preliminary findings (Acme Solar Holdings Limited), moved the High Court of Orissa (on 20 July 2018) against the final findings issued by the DGS. As per reports[5], the Orissa High Court granted temporary protection to the petitioner by directing the Central Government not to issue any notification regarding safeguard duty until 20 August 2018 (at the time of writing, the order is not reflected on the Orissa High Court website but several news outlets have covered the same[6]).
However, on 30 July 2018, the Department of Revenue, Ministry of Finance notified the imposition of safeguard duty as recommended by the DGS in the final findings. The final notification clarified that it shall not apply to imports from developing countries except China and Malaysia.
As per reports, the Central Government’s notification of the safeguard duty despite the interim protection granted by the High Court of Orissa may raise questions about the validity of the notification by the Ministry of Finance.
Not surprisingly (given the stakes involved), a contempt petition has been filed following the Central Government notification imposing safeguard duties. The earlier writ petition in the High Court of Orissa also continues to be pending.
In a recent development, it has been reported that the Finance Ministry has “decided not to insist on payment of safeguard duty for the time being”[7] in compliance with interim orders passed by the High Court of Orissa on the subject. Therefore, the Orissa High Court seems to have passed an interim order directing the Central Government to put the safeguard duty notification on hold. (As on time of writing, the order is not reflected on the Orissa High Court website)
Additionally, a new writ petition (by Shapoorji Pallonji Infrastructure Capital Co Ltd) has also been filed in the High Court of Madras[8], whereby the High Court of Madras has also passed an interim order (relying on the one passed by the Orissa High Court) for release of goods without payment of safeguard duty, on the basis of provisional assessment and the execution of a bond to pay such provisionally assessed duty in the event that the duty is upheld by the court later. Summarily, this order will ensure that if the court upholds the duty, the duty could be imposed on consignments that would have been cleared thus far.
The above turn of events (including the unsuccessful writ petitions), especially the quick disposal of such cases, highlight that courts deem that such matters ought to be considered and decided within a short period and the same may require extraordinary interim orders. This sentiment has been expressed by a Division Bench of the High Court of Delhi[9] where, dealing with cases involving anti-dumping and safeguard duties, it observed that:
“If these writ petitions are not dealt with within a short time period, then they may all be rendered infructuous. This is the danger that exists in such matters”.
The Court observed this when it narrated how it had to pass an interim order (lasting for close to eight months) directing the relevant authorities to initiate sunset reviews because of the impending expiry of the relevant notification. Yet, all the interim orders were vacated when the petitions were finally dismissed.
Interestingly, even after the issuance of final findings in previous cases involving safeguard duty, the Supreme Court has held[10] that legal recourse through a writ petition would not normally be available, since it is only a recommendation.
Crucially, in the case of a safeguard duty notification (unlike in the case of an anti-dumping duty notification), no statutory appeal exists whereby aggrieved parties can seek statutory remedy against the final notification. However, certain avenues for relief at this stage do exist.
Nonetheless, as on date, while short term relief has been provided by the interim orders passed by the courts, the long term consequence will depend on the actual legal validity of the safeguard duty notification continues which continues to be in limbo, with multiple legal challenges.
For further information, please contact:
Rahul Goel, Partner, Cyril Amarchand Mangaldas
rahul.goel@cyrilshroff.com
[1] Issued on 5 January 2018;
[2] W.P.1156/2018
[3] W.P.(C) 5755/2018
[4] Issued on 16 July 2018; available at http://www.dgtr.gov.in/sites/default/files/Solar-Final_Finding-English.pdf
[5] Kaavya Chandrasekaran, Orissa High Court stays safeguard duty on imported solar panels, The Economic Times (25 July 2018); Sanjay Datta, Govt ignores court stay, slaps 25% duty on solar imports, Times of India (31 July 2018).
[6] Ibid.
[7] Kaavya Chandrasekaran, For now, no safeguard duty on solar equipment imports, The Economic Times (14 August 2018).
[8]W.P. No. 20476/2018 (Interim orders passed on 10 August and 13 August 2018)
[9] Kesoram Rayon vs The Designated Authority & Ors. on 8 November, 2017 (W.P.(C) 146/2017, Order dated 8 November 2017).
[10] United Phosphorous Ltd. and Ors. v. Director General (Safeguards) and Ors.; 2000(91)ECR765(SC)
