Thirumala Chemicals Ltd. vs Director General of Safeguards

This petition filed under Article 226 of the Constitution of India is directed against the Notification No. 75/2009-Customs, dated 30th June, 2009 levying safeguard duty for imports for the period 29th January, 2009 to 31st December, 2009 at the rates mentioned in the said Notification.

The petitioners are claiming to be domestic purchasers of Phthalic Anhydride ("PAN" for short) and that they have suffered serious injury on account of import of said items by the importers. They claimed to have approached the Director General (Safeguards) as per the provisions of Safeguard Duty Rules framed under the Customs Tariff Act, 1975. The Director General (Safeguards) has recorded its final findings vide Notification dated 28th May, 2009 indicating necessity of imposing safeguard duty on imports of PAN into India.

In exercise of powers conferred by Sub-section (1) of Section 8B of the Customs Tariff Act, 1975 read with Rules 12, 14 of the Rules 1997, after considering the findings of Director General (Safeguards), duty was imposed on PAN falling under tariff item 2917 35 00 of the First Schedule of the said Act when imported into India at the rates mentioned in the Notification No. 75/2009-Customs dated 30th June, 2009 referred to hereinabove.

The petitioners are seeking the declaration that the Notification No. 75/2009-Customs dated 30th June, 2009 purporting to levy safeguard duty only upto 31st December, 2009 i.e. for one year only is contrary to Section 8B(4) of the Customs Tariff Act, 1975 and that it ought to have been made operative or valid for the period of four years, unless revoked earlier, in terms of Section 8B(4) of the Customs Tariff Act, 1975. The petitioners are also seeking interim directions against the Customs Authorities throughout India to permit import of PAN subject to the collection of safeguard duty on provisional basis without prejudice to the rights of importers to claim refund of the same, if this petition is disallowed.

With the aforesaid backdrop, this petition was heard for admission. Rule was issued by an order dated 19th April, 2010 with further order directing Rule on interim relief returnable on 27th April, 2010, that is how the petition has now come up for hearing on interim prayer. Parties were accordingly heard.

Rival Submissions on Interim Prayer:

Mr. Sridharan, learned Counsel for the petitioners appearing with Mr. Prakash Shah urged that once having recommended to impose safeguard duty by the Director General (Safeguards), the Central Government ought to have imposed the safeguard duty for entire period of four years on the basis of the final findings dated 28th May, 2008, particularly in absence of any adverse material leading to the decision not to impose safeguard duty beyond a period of one year. According to him, the Central Government has erroneously exercised the discretion and failed to read the spirit of the scheme and object of the Safeguard Duty Rules which contemplates imposition of safeguard duty only in accordance with the final findings dated 28th May 2008 recorded by the Director General (Safeguards). Mr. Sridharan urged that the Central Government did not act within the limits provided u/s 8B of the Customs Tariff Act, 1975 read with Safeguard Duty Rules by not imposing safeguard duty in accordance with the final findings dated 28th May, 2008 of the Director General (Safeguards). He submits that in absence of firm protection in favour of the domestic industries, the domestic purchasers of PAN have suffered serious injury caused by the sudden and sharp increase in imports of PAN.

Mr. Sridharan further submits that having found that serious injury was caused to the domestic purchasers by Director General (Safeguards), it was obligatory on the part of the Central Government to levy safeguard duty. It is, thus, argued that the impugned Notification is palpably erroneous and is liable to be made operative for a further period of three years. Reliance is placed on Rule 4, 11 coupled with some other Rules relevant to the issue involved. He submits that the petitioners are entitled for interim protection during the pendency of the petition since they have made out prima facie case and balance of convenience in their favour and also demonstrated injury which they are suffering.

Per contra, Mr. R.V. Desai, learned Senior Counsel appearing for the respondents strongly urged that Writ of Mandamus cannot be issued to Legislature to enact a particular Legislation, though same is also true as regard to the Executive since the exercise of power to make Rules or issue notification are in the nature of subordinate Legislation. According to him, the Notification No. 75/2009-Customs, dated 30th June, 2009 is nothing but an out-come of exercise of the Legislative power exercised by Central Government as such, no writ of mandamus can be issued directing Central Government to issue Notification in accordance with the recommendations made by the Director General (Safeguards). He placed reliance on the judgment of the Apex Court in the case of State of Jammu and Kashmir Vs. A.R. Zakki and others, , Suresh Seth Vs. Commissioner, Indore Municipal Corporation and Others, , Narinder Chand Hem Raj and Others Vs. Lt. Governor, Administrator, Union Territory, Himachal Pradesh and Others, in support of his submission.

Mr. Desai further urged that if one turns to the prayer clauses incorporated in the petition, one would find that the final prayer and the interim prayer is almost identical. Based on this, he urged that by way of interim relief no final relief can be granted at this stage.

So far as the merits of the issues involved in the petition are concerned, he tried to support the Notification and prayed that no interim relief should be granted in favour of the petitioners for want of prima facie case and balance of convenience.

Mr. P.K. Rai appearing for respondent No. 5 urged that the grant of interim relief will create monopoly in favour of the petitioners. He submits that by an interim order, no provisional tax much less provisional safeguard duty can be ordered by this Court in exercise of writ jurisdiction under Article 226 of the Constitution of India. According to him, it is a legislative power of the Central Government which this Court cannot exercise.

Mr. Rai further took us through detailed finding recorded and the Notification impugned in this petition. He also pointed that the impugned Notification was issued on 30th June, 2009. According to him, the petitioners were well aware about the fact that the safeguard duty is going to be for a period of one year only i.e. upto 31st December, 2009. As such, it was obligatory on the part of the petitioners to approach this Court with expeditious dispatch much before the expiry of the subject Notification. In his submission, the petitioners have taken advantage of the Notification and few days before its expiry they made representation and approached this Court much after expiry of the impugned Notification. He, thus, submits that the delay caused in approaching this Court was a deliberate act on the part of the petitioners, as such, the petitioners are not entitled to interim relief as prayed.

Mr. Rai further submits that the recommendations made by the Director General (Safeguards) categorically records the names of the importers in paragraph No. 2 of its recommendations. As many as eight importers are named therein but none of them is made party to the petition. According to him, all of them are importers and behind their back, no order much less interim order can be passed by this Court directing them to give an undertaking to protect the interest of the Revenue or to protect the interest of the importers. On this count, he submits that the petition is liable to be dismissed for non joinder of necessary parties. According to him, it was necessary for the petitioners to join them as party respondent to the petitioners. He further submits that so far as respondent No. 5 is concerned, it is an association of manufacturers, whereas respondent No. 6 is a Federation. Similarly, respondent No. 9 is a Chemical Industries Association. He, thus, submits that no list of members is to be found in the petition, as such it will not be possible for this Court to implement the interim order, if passed. In his submission, the Courts are not expected to pass orders implementation of which cannot be supervised by the Court granting order. He submits that the present petition is technically defective and the defects pointed out herein are fatal to the survival of the petition, as such, this is not a fit case for grant of interim relief.

Mr. Rai further submits that it was open for the petitioners to file Review as contemplated under Rule 18 of the Safeguard Rules rather than filing petition before this Court. He further submits that the representation dated 4th November, 2009 made by the petitioners to the Director General (Safeguards) is also not to be found on the record of this Court.

Mr. Rai further pointed that a request made by the petitioners in their representation dated 4th November, 2009 was to make safeguard duty operative for a period of three years. It operated for a period of one year. The petitioners are now claiming that the Notification imposing safeguard duty is for a period of four years ought to have been issued. According to him, the shifting stand taken by the petitioners is sufficient to doubt the bona fides of the petitioners. He, thus, submits that this is not a fit case for grant of interim relief.

Mr. Rai also took us through the contents of the recommendation of the Director General (Safeguards) to demonstrate that the 80% domestic market is captured by the petitioners. There is an increase in the import to the extent of 9% only. He further submitted that the petitioners are exporting their produce to the Republic of China and their product is subjected to anti-dumping duty in that country. He, thus, submits that the petitioners are exporting their product to the Republic of China at the rate less than Indian selling price. In his submission, this by itself is sufficient to demonstrate that the increased imports are not causing any injury to the petitioners, since they can afford to dump their product in China at lower rates. He, thus, submits that this is not a fit case for grant of interim relief.

In rejoinder, Mr. Sridharan urged that by way of interim directions, the importers can be permitted to execute bond so that they can be put to the notice that in the event the petition succeeds they will have to pay safeguard duty. In the event the petition is dismissed, then they will not suffer any prejudice. He, thus submits that the interim relief, as prayed, if granted, it will not cause any prejudice or injury to either of the parties to the petition.

Consideration:

Having heard learned Counsel for the parties, it is necessary to consider the parameters of grant of interim relief. The grant or refusal to grant of interim relief in the complaint is covered by three well established principles viz. (i) whether the complainant has made out a prima facie case; (ii) whether the complainant would suffer irreparable injury in absence of interim relief; and (iii) whether the balance convenience lies in his favour. The burden to prove these three necessities lies on the person seeking interim relief. Interim relief is not granted to a party guilty of delay or who has indulged in suppression of facts. The person seeking interim relief must approach the Court with clean hands. The Court has to see whether the claim is bona fide and whether there is a fair and substantial question to be tried.

In arriving at the balance of convenience, the Court has to weigh the mischief likely to be caused to the applicant, if the interim relief is refused. At the same time, it has also to compare the injury likely to be caused to the other side, if the interim relief is granted. Apart from considering prima facie case and balance of convenience, the Court/Tribunal has also to consider as to whether grant or refusal to grant interim relief will cause any irreparable injury to the party to the proceeding. The injury means a legal injury. A lawful exercise of right cannot be described as an injury. So long as the party is acting in the exercise of a right which the law recognises, it cannot be said that the party is committing any wrong leading to any injury. When as a result of the proceeding, it is found that the party has not got the particular right, the position would be different, but if on the date of the proceeding the party has got the legal right to do a certain act, that act cannot be regarded as a wrong in law nor would its result be regarded as injury. The Court, while granting interim relief, has also to keep in mind that the interim relief is always granted in the aid of final relief.

It is indisputable that temporary injunction is granted during the pendency of the proceeding so that while granting final relief the court is not faced with a situation that the relief becomes infructuous or that during the pendency of the proceeding an unfair advantage is not taken by the party in default or against whom temporary injunction is sought. But power to grant temporary injunction was conferred in aid or as auxiliary to the final relief that may be granted. The Apex Court repeatedly said that ''an interim relief can be granted only in aid of, and as an ancillary to, the main relief which may be available to the party on final determination of his rights in a suit or proceedings. The interim relief can obviously be not granted also because the object behind granting interim relief is to maintain status quo ante so that the final relief can be appropriately moulded without the party''s position being altered during the pendency of the proceedings.

With the aforesaid understanding, if one turns to the rival submissions and the case sought to be canvassed by the rival parties before this Court, one thing is clear that as on date, the Notification imposing safeguard duty is not holding the field. It has already expired. Therefore, no safeguard duty is being imposed on importers. The imports can attract safeguard duty only in the event fresh Notification is issued by the Central Government in that behalf or in the event, after adjudication, this Court comes to the conclusion that the Notification ought to have been for a period of four years and that there was no power for the Central Government to issue Notification for a period of less than four years. Unless either of these two events takes place, the importers cannot be subjected to safeguard duty. The petitioners, therefore cannot contend that as on date they are exercising their right, which the law recommends. Their right is only to approach this Court to invoke writ jurisdiction of this Court and seeking adjudication thereof. Except this, as on date, there is no any subsisting right in favour of the petitioners.

Let us assume for the sake of arguments, that this Court grants interim relief subject to the condition that the importers should execute bond agreeing therein to pay safeguard duty in the event petition succeeds. The moment bond is executed, the importers shall incur contingent liability. Once the contingent liability is made to hang on their head, they are bound to include the component of the safeguard duty in the sale price of their product. The incidence of this contingent liability is bound to be transferred by them to their consumers. In the event the petition is dismissed, the importers are bound to pocket the element of safeguard duty recovered by them from their consumers or to the extent transferred by them to their customers. In the circumstances, they are bound to be unjustly enriched.

So far as the petitioners are concerned, they would get benefit of pushing their product to the local market. Some importers may import on execution of the bond, some of them in order to avoid contingent liability may not import and may tend to purchase from the petitioners. In that event, the petitioners are bound to reap the advantages flowing from the interim order. In the event the petition is dismissed, the petitioners are bound to pocket the advantages reaped by them. In either of the situations, the clock cannot be put back. The importers and petitioners both are bound to reap the advantages at the cost of the consumers. The interim order, as prayed would result in directing the imposition of safeguard duty without finally exercising judicial power or without directing the Union of India to exercise their legislative or quasi judicial power as the case may be.

Apart from the above consideration, the petitioners were expected to approach this Court well within time from the Notification No. 75/2009-Customs dated 30th June, 2009. Once the Notification has expired and allowed to die its natural death, it is not possible to infuse life in the dead Notification by a judicial order, that too, at interim stage.

Apart from this, the importers were party to the investigation proceeding adjudicated by the Director General (Safeguards), they are not party to the petition though the petitioners were aware of those persons. In absence of those persons, the interim order or the conditions put cannot bind them.

The interim order would also result in discriminatory treatment, in the sense, it will bind the respondents, who are party to the petition, whereas the importers, who are not party, they would be free to import without there being restrictions on their power to import. The interim order as prayed, if granted, it will not give rise to equal level playing field to all the importers.

The associations, who have been joined as party respondents can hardly be subjected to any condition. This Court even does not have any list of the members of those associations and/or federation, who are respondents in the petition. Under these circumstances, even if interim relief as prayed is granted, it will not be possible for this Court to seek implementation of such order.

The petition also involves a serious question as to whether the Notification No. 75/2009-Customs, dated 30th June, 2009 is a product of Legislative exercise of powers or quasi judicial exercise of powers. This issue can only be decided at the time of final hearing of the petition. At interim stage, such a serious issue cannot be gone into.

Thus, taking over all view of the matter, in our considered opinion, this is not a fit case to grant interim relief. Prayer in this behalf is, therefore, liable to be rejected. However, considering the importance of the subject, the hearing of the petition stands expedited.

Parties to the petition are directed to complete their pleadings within eight weeks from today. Order accordingly.