India: Reasoned Order For Non-imposition Of Duties – Central Government Bound By Principles Of Natural Justice

Indian domestic producers recently challenged the decision of the Central Government to reject 24 findings issued by DGTR (Directorate General of Trade Remedies) recommending imposition or extension of trade remedial measures. The challenge to the decision was based on the fact that such decision did not contain any reasons and thus, was violative of the principles of natural justice. The CESTAT, while allowing the appeals, directed the Central Government to re-consider the recommendations and provide reasoned orders, in case they differ with the recommendations of DGTR.

Rejection of findings leading to challenge in CESTAT

In India, the investigations for imposition of trade remedial measures, in the form of anti-dumping, anti-subsidy and safeguard measures, are conducted by Directorate General of Trade Remedies ("DGTR"), which gives its findings in the form of recommendations to the Central Government. Thereafter, the Central Government decides, within a period of 3 months, to accept or reject the recommendations.

Following the rejection by the Central Government of 24 findings issued by the DGTR recommending imposition or extension of trade remedial measures, the aggrieved Indian domestic producers ("Appellants") approached the Central Excise and Service Tax Appellate Tribunal ("CESTAT"), collectively in the case of Apcotex Industries Limited vs. Union of India. The Appellants claimed that such rejections were made without providing any reasons for the same, and thus, were not sustainable. It was highlighted that while the Central Government issued an Office Memorandum ("OM") notifying the decision to not accept the recommendations of the DGTR in some cases; no OM or any other communication was issued in case of other recommendations.

The CESAT was called upon to decide whether an appeal against the impugned OMs was maintainable under Section 9C of the Customs Tariff Act, 1975 ("Act"); whether the determinations by the Central Government were legislative or quasi-judicial in nature; and whether the OMs issued by the Central Government were in violation of the principles of natural justice.

Whether an appeal lies against rejection by Central Government of recommendations of DGTR

At the outset, the CESTAT considered whether an appeal under Section 9C of the Act lies against an OM or not. The CESTAT observed that the provisions conferring right to appeal must be read in a manner that the right to appeal is not restricted or denied, unless such a construction is unavoidable. Section 9C of the Act does not restrict the right to appeal to a specific category of orders. Orders that determine the existence, degree and effect of subsidy or dumping in relation to imports of articles into India are subject to appeals under the Act. The CESTAT, thus, concluded that an appeal would lie before the CESTAT against the decision of the Central Government to not impose the duties as recommended by the DGTR, which included the impugned OMs.

Whether the Central Government performs a legislative or quasi-judicial function when considering recommendations of DGTR

The CESTAT also considered whether the act of imposition of duties by the Central Government was quasi–judicial or legislative in nature. It was held that the Central Government, while acting as a delegated legislative body, performs two distinct functions, the rule-making legislative function and the decision-making quasi-judicial function. While the legislative function of rule-making is not appealable under the Act, the quasi-judicial function of making a determination is expressly appealable under Section 9C of the Act. Further, such quasi-judicial function must be performed in adherence to the principles of natural justice to reach a final determination.

Whether the Central Government acted in accordance with the principles of natural justice

Regarding adherence to the principles of natural justice, the CESTAT noted that the Central Government, while rejecting a recommendation of the DGTR for imposition of duties, must give a reasoned order. The reasons for rejection must be recorded and communicated to the domestic industry, granting them an opportunity to represent their case. Non-communication of the decision within the prescribed time shall also be deemed to be a rejection of the recommendations. Thus, non-issuance of an OM in some of the cases would amount to rejection of recommendations as well, in the same way as in the cases were an OM was in fact issued.

Unreasoned decisions of the Central Government set aside

Based on the above, the Customs, Excise and Service Tax Appellate Tribunal held that the decision of the Central Government to not impose/ extend duties recommended by the DGTR, whether communicated through OM or not, was not a reasoned order and thus, not appropriate. Accordingly, the 24 appeals were allowed and the recommendations were remitted to the Central Government for their reconsideration. The Central Government is now expected to issue fresh orders either accepting the recommendations and imposing/ extending the duties, or issuing a fresh order providing reasons for rejecting the same. A similar decision was also given earlier in the case of Jubiliant Ingrevia Limited vs. Union of India.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.