The multilateral trading system on which World Trade Organisation (WTO) agreements are based is reliant on the principles of equal treatment for member countries, as governed by either the most-favoured nation or national treatment systems.
As part of their compliance with these systems, member countries must be transparent in their actions. 'Transparency' can be defined as the quality of something, such as a situation or an argument, that makes it easy to understand.(1)
There is little question that the smooth functioning of the multilateral trade system relies on effective transparency of the trade rules and regulations that individual members adopt to implement their obligations. While the trade effects of non-transparent government measures are generally difficult to identify and quantify, a lack of transparency can be disabling and costly for those affected.
The Anti-dumping Agreement already includes a range of detailed rules that together can be termed its transparency provisions. These are specifically found in Article 6 (evidence), Article 12 (public notice and explanation of determinations) and Annex I (procedures for on-the-spot investigations). These provisions already contain a high level of detail beyond that in many of the other WTO agreements.
The principles of natural justice are immutable principles widely held to be indispensable to a fair trial or valid decision in any legal system. In the Indian context, this was explained in Swadeshi Cotton Mills v Union of India:(2)
"This rule of fair play must not be jettisoned save in very exceptional circumstances where compulsive necessity so demands. The court must make every effort to salvage this cardinal rule to the maximum extent possible, with situational modifications. But, the core of it must, however, remain, namely, that the person affected must have reasonable opportunity of being heard and the hearing must be a genuine hearing and not an empty public relations exercise."
The aforesaid principles were recently applied in a Supreme Court case involving anti-dumping duty. In Automotive Tyre Manufacturers Association v Designated Authority(3) the court held that the Directorate General of Anti-dumping and Allied Duties (ie, the designated authority) performs quasi-judicial functions under the Customs Tariff Act 1975, read with the Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Rules. Further it held that the designated authority performs quasi-judicial functions while determining disputes between parties for and against the levy, and it is therefore its duty to follow the principles of natural justice implicit in the powers conferred on it.
After hearing the arguments of the interested parties, the officer who was the designated authority was transferred. The new authority passed the final order without granting a fresh hearing to the interested parties.
The two main issues before the Supreme Court for its consideration were:
- whether the proceedings before the designated authority were in the nature of a dispute and hence whether the authority was quasi-judicial; and
- whether the failure of the new authority to provide a fresh hearing (as requested by the appellants prior to issuing the final findings) was a violation of natural justice.
The authority determined a lawsuit between persons supporting the levy of duty and those opposing the levy, and as such is a quasi-judicial body. The Supreme Court held that:
"52. Having examined the scheme of the Tariff Act read with the 1995 Rules on the touchstone of the aforenoted principles, particularly the first principle enunciated in Province of Bombay v. Khushaldas S. Advani & Ors. - AIR 1950 SC 222, we have no hesitation in coming to the conclusion that this is an obvious case where the [Designated Authority (DA)] exercises quasi-judicial functions and is bound to act judicially. A cursory look at the relevant Rules would show that the DA determines the rights and obligations of the 'interested parties' by applying objective standards based on the material/information/evidence presented by the exporters, foreign producers and other 'interested parties' by applying the procedure and principles laid down in the 1995 Rules. Rule 5 of the 1995 Rules provides that the DA shall initiate an investigation so as to determine the existence, degree and effect of any alleged dumping upon the receipt of a written application by or on behalf of the domestic industry; sub-rule (4) thereof empowers the DA to initiate an investigation suo motu on the basis of information received from the Commissioner of Customs or from any other source. When the DA has decided to initiate an investigation, Rule 6 requires that a public notice shall be issued to all the interested parties as mentioned in Rule 2(c) of the 1995 Rules, as also to industrial users of the product, and to the representatives of the consumer organizations in cases when the product is commonly sold at the retail level. It is manifest that while determining the existence, degree and effect of the alleged dumping, the DA determines a [dispute] between persons supporting the levy of duty and those opposing the said levy.
53. Further, it is also clear from the scheme of the Tariff Act and the 1995 Rules that the determination of existence, effect and degree of alleged dumping is on the basis of criteria mentioned in the Tariff Act and 1995 Rules, and an anti-dumping duty cannot be levied unless, on the basis of the investigation, it is established that there is:
(i) existence of dumped imports;
(ii) material injury to the domestic industry; and
(iii) a causal link between the dumped imports and the injury.
Rule 10 of the said Rules lays down the criteria for the determination of the normal value, export price and margin of dumping, while Rule 11 deals with the determination of injury which according to Annexure II to the 1995 Rules is based on positive evidence and involves an objective examination of both:
(a) the volume and the effect of the dumped imports on prices in the domestic market for like products; and
(b) the consequent impact of these imports on domestic producers of such products. (See: S&S Enterprise Vs. Designated Authority & Ors. (2005) 3 SCC 337).
It is evident that the determination of injury is premised on an objective examination of the material submitted by the parties. Moreover, under Rule 6(7) of the 1995 Rules, the DA is required to make available the evidence presented to it by one party to other interested parties, participating in the investigation. It is also pertinent to note that Rule 12 of the 1995 Rules which deals with the preliminary findings, explicitly provides that such findings shall 'contain sufficiently detailed information for the preliminary determinations on dumping and injury and shall refer to the matters of fact and law which have led to arguments being accepted or rejected.' A similar stipulation is found in relation to the final findings recorded by the DA under Rule 17(2) of the 1995 Rules. Above all, Section 9C of the Tariff Act provides for an appeal to the Tribunal against the order of determination or review thereof regarding the existence, degree and effect of dumping in relation to imports of any article, which order, obviously has to be based on the determination and findings of the DA. The cumulative effect of all these factors leads us to an irresistible conclusion that the DA performs quasi-judicial functions under the Tariff Act read with the 1995 Rules."
Given that the final findings were recorded by the successor authority, which had no occasion to hear the appellants, the final order passed by the new authority offended the basic principle of natural justice. The court further held that:
"58. It is thus, well settled that unless a statutory provision, either specifically or by necessary implication excludes the application of principles of natural justice, because in that event the Court would not ignore the legislative mandate, the requirement of giving reasonable opportunity of being heard before an order is made, is generally read into the provisions of a statute, particularly when the order has adverse civil consequences which obviously cover infraction of property, personal rights and material deprivations for the party affected. The principle holds good irrespective of whether the power conferred on a statutory body or Tribunal is administrative or quasi-judicial. It is equally trite that the concept of natural justice can neither be put in a strait-jacket nor is it a general rule of universal application. Undoubtedly, there can be exceptions to the said doctrine. As stated above, the question whether the principle has to be applied or not is to be considered bearing in mind the express language and the basic scheme of the provision conferring the power; the nature of the power conferred and the purpose for which the power is conferred and the final effect of the exercise of that power. It is only upon a consideration of these matters that the question of application of the said principle can be properly determined. (See: Union of India Vs. Col. J.N. Sinha & Anr. (1970) 2 SCC 458.)
59. In light of the aforenoted legal position and the elaborate procedure prescribed in Rule 6 of 1995 Rules, which the DA is obliged to adhere to while conducting investigations, we are convinced that duty to follow the principles of natural justice is implicit in the exercise of power conferred on him under the said Rules. In so far as the instant case is concerned, though it was sought to be pleaded on behalf of the respondents that the incumbent DA had issued a common notice to the Advocates for ATMA and Ningbo Nylon, for oral hearing on 9th March 2005, however, there is no document on record indicating that pursuant to ATMA's letter dated 24th January 2005, notice for oral hearing was issued to them by the incumbent DA. Moreover, the alleged opportunity of oral hearing on 9th March, 2005, being in relation to the price undertaking offer by Ningbo Nylon, cannot be likened to a public hearing contemplated under Rule 6(6) of the 1995 Rules. The procedure prescribed in the 1995 Rules imposes a duty on the DA to afford to all the parties, who have filed objections and adduced evidence, a personal hearing before taking a final decision in the matter. Even written arguments are no substitute for an oral hearing. A personal hearing enables the authority concerned to watch the demeanour of the witnesses etc. and also clear up his doubts during the course of the arguments. Moreover, it was also observed in Gullapalli (supra), if one person hears and other decides, then personal hearing becomes an empty formality. In the present case, admittedly, the entire material had been collected by the predecessor of the DA; he had allowed the interested parties and/or their representatives to present the relevant information before him in terms of Rule 6(6) but the final findings in the form of an order were recorded by the successor DA, who had no occasion to hear the appellants herein. In our opinion, the final order passed by the new DA offends the basic principle of natural justice. Thus, the impugned notification having been issued on the basis of the final findings of the DA, who failed to follow the principles of natural justice, cannot be sustained. It is quashed accordingly."
As the impugned notification had been issued on the basis of the final findings of the authority, which failed to follow the principles of natural justice, it could not be sustained. The court therefore ordered the notification to be quashed.
This has led to a plethora of cases being reconsidered by the incumbent authority; even appeals pending before other courts have been affected. The High Court of Gujarat in its judgment in Meghmani Organics Ltd v Union of India in Special Civil Application (15817/2010) followed the judgment of the Supreme Court in ATMA. The facts in Meghmani were identical to those in ATMA. The High Court set aside not only the challenged final findings, but also the customs notification imposing the duties. It held that the newly appointed authority wrongly issued the final findings and notification on the basis of a hearing that was granted by an earlier officer. The new authority should therefore have provided a fresh hearing.
The High Court of Gujarat in the present case had followed the decision in ATMA and held that the absence of provision of a fresh personal hearing by the newly appointed authority, which had not itself heard the parties earlier, is a violation of the principles of natural justice. The relevant paragraph of the judgment on this issue is reproduced below:
"The present case on all material facts is identical to one decided by the Apex Court in case of Automotive Tyre Manufacturers' Association [supra]. We have no hesitation to come to the conclusion that on the basis of the ratio laid down by the Apex Court in the case of Automotive Tyre Manufacturers' Association [supra], the proceedings in the present case must also be held vitiated. To reiterate the previous Officer holding the position of the Designated Authority from the initiation of the investigation right upto the stage of the public hearing. All these proceedings were completed by October 2010(sic). The Officer was changed on January 2010. Thereafter, no further hearing was granted, despite a demand by the Petitioners. The newly appointed Designated Authority issued a Disclosure Statement to all the parties. The Petitioners pointed out what according to them were omission and lacunae in such statement. The Designated Authority proceeded to submit the final findings, without offering personal hearing to the Petitioners."
Dozens of appeals are pending in numerous investigations before the appellate tribunal that have been filed against the notification and recommendation issued by the Ministry of Finance and the designated authority. The bench recently heard the arguments of the interested parties. Appellants that are aggrieved by the imposition of anti-dumping duties and that have similarly placed facts (ie, that the authority which presided over the hearing was not that which passed the final finding) typically rely on the aforementioned cases and demand that such orders of the impugned notification in their investigation be dismissed forthwith. In reply, respondents (ie, domestic industry and the government) have argued before the appellate tribunal that the appellants must show whether they rightly raised a request for fresh hearing and that prejudice was shown to them with the issuance of the impugned order.
Further, under Section 129B of the Customs Act 1962, the appellate tribunal has the right to confirm, modify or annul the decision or order appealed against, or may refer the case back to the authority that passed such decision. The relevant part of the section is reproduced below:
"SECTION 129B(1) The Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being heard pass such orders thereon as it thinks fit, confirming, modifying or annulling the decision or order appealed against or may refer the case back to the authority which passed such decision or order with such directions as the Appellate Tribunal may think fit, for a fresh adjudication or decision, as the case may be, after taking additional evidence, if necessary."
Consequently, the respondent parties before the appellate tribunal are making submissions for the tribunal to return the impugned findings to the authority for reconsideration on the issues raised by the appellant, rather than setting aside the finding in its entirety. Conversely, the appellants have argued that remand is not possible, given that the WTO Anti-dumping Regulations require that in any circumstances the investigation should be completed within a period of 12 months, with a further extension of six months, and not beyond.
A review application has been filed by the authority for the Supreme Court to reconsider the judgment passed in ATMA.
If the appellate tribunal quashes the impugned orders passed by the authority imposing anti-dumping duties, the Ministry of Finance will have to refund anti-dumping collected from the importers if they have followed the prescribed procedures as documented under the Customs Act. The aggrieved parties may also prefer to file an appeal against the order of the appellate tribunal before the Supreme Court.
For further information on this topic please contact Suhail Nathani or Sanjay Notani at Economic Laws Practice by telephone (+91 22 6636 7000), fax (+91 22 6636 7172) or email ([email protected] or [email protected]).
(1) As defined in the Oxford Advanced Learners Dictionary, at www.oxfordadvancedlearnersdictionary.com.