Madras HC Holds Anti-Dumping Duty On Embedded Castings Does Not Extend To Complete Equipment Containing Such Castings

The Madras High Court held that ADD under Notification No. 42/2017 is leviable only on Castings for wind-operated electricity generators and cannot be extended to the entire gearbox merely because castings form part of such equipment. The Court observed that, although the notification covers castings in raw, finished, sub-assembled form or as part of a sub-assembly, equipment or component, the levy remains confined to the casting portion alone and does not extend to the complete equipment containing such castings.

BRIEF FACTS OF THE CASE¹

• The Petitioner imported gearboxes for Wind Turbine Generators and Castings for gearboxes from China. The imported goods were classified under CTH 84834000. At the time of import, a dispute arose regarding the applicability of Anti-Dumping Duty (ADD) under Notification No. 42/2017- (ADD) dated 30.08.2017, which provides for levy of ADD on Castings for wind-operated electricity generators originating in or exported from China.
• The Customs authorities took the view that the imported Gear Boxes and Castings were primarily in the nature of castings and accordingly proceeded to re-assess the Bill of Entry under Section 17(4) of the Customs Act, 1962. By an order passed under Section 17(5) of the Act, the Department held that ADD was payable not only on the imported castings but also on the Gear Boxes imported by the Petitioner.
• Aggrieved by the said re-assessment, the Petitioner approached the Hon’ble Madras High Court on the ground that the order has been passed without affording an opportunity of hearing. Accordingly, the Hon’ble Court set aside the order and remanded the matter back to the Customs Authority for fresh consideration after granting the Petitioner an opportunity of being heard.
• Pursuant thereto, the imports were provisionally assessed, and the proceedings culminated in an Order dated 29.12.2022, whereby the Department once again held that ADD was leviable on the imported Gear Boxes as well as the Castings and accordingly finalised the assessment.
• Aggrieved by the said order, the Petitioner approached the Hon’ble Madras High Court. The issue before the Hon’ble Court was whether, in terms of Notification No. 42/2017, ADD could be levied on the entire value of the imported Gear Boxes containing castings, or whether the levy was restricted only to the casting portion forming part of such equipment.

HON’BLE HIGH COURT OBSERVATIONS:

• The Hon’ble High Court held that the levy of ADD under Notification No. 42/2017 is confined only to castings for Wind Operated Electricity Generators and cannot be extended to the entire equipment or component in which such castings are embedded. The Court observed that the notification, as well as the recommendations of the Designated Authority, specifically target “castings” and not gear boxes or other finished equipment as independent products. Although the notification covers castings in raw, finished, or subassembled form, or where such castings exist as part of a sub-assembly, equipment, or component, the levy remains restricted to the casting portion alone.
• The Court places reliance on the Commissioner of Customs, Chennai – II vs Siemens Gamesa Renewable Power Pvt. Ltd. [Appeal No. 40917 of 2017], wherein it was categorically held that the notification authorises levy of duty on castings even when they form part of a larger equipment or component. However, such levy can be imposed only on the value of the castings and not on the entire equipment or component in which the castings are incorporated. The Tribunal had clarified that while gear boxes and other assemblies may contain castings, the notification does not authorise the Department to treat the entire equipment as subject goods for the purpose of ADD.
• The Court further noted that the aforesaid decision had not been challenged by the Department and had therefore attained finality. Consequently, the interpretation adopted by the Tribunal was binding upon the Customs authorities. The Court also took note of the fact that, in subsequent imports of identical goods from the same supplier, the Department itself had levied ADD only on the castings and had accepted the Petitioner's self-assessment in respect of the gear boxes. This conduct of the Department supported the Petitioner's contention that the notification did not permit levy of duty on the entire gear box.
• Accordingly, the Court held that the respondent had acted without statutory authority in extending the levy of ADD to the imported Gear Boxes as a whole. The Court therefore set aside the order; the Petitioner's self-assessment in respect of the Bill of Entry was directed to be accepted and further directed the release of the bonds and bank guarantees furnished towards the differential duty demanded on the Gear Boxes.

AURTUS COMMENTS

• The ruling reinforces a product-specific reading of anti-dumping notifications. The expression extending coverage to castings present in a sub-assembly, equipment or component prevents the subject casting from escaping ADD merely because it is imported in an incorporated form; it does not, by itself, convert the larger gearbox or finished equipment into the notified product. The ratio should therefore be applied by closely comparing the description, scope and charging table of the relevant ADD notification with the goods as imported.
• The Court’s reliance on the unchallenged CESTAT decision and the Department’s treatment of subsequent identical imports strengthens the requirement of consistency in assessment. However, the principal enquiry remains whether the levy, on a proper construction of the notification and the designated authority’s findings, is confined to the subject goods and their attributable value.
• For importers of assemblies containing goods covered by an ADD measure, the decision provides a useful basis to resist duty on the value of the entire assembly. The position should nevertheless be supported by robust evidence identifying the embedded subject goods and their value, such as bills of materials, drawings, supplier declarations, cost breakups and consistent invoice descriptions. Where a reliable segregation is unavailable, disputes may shift from the scope of the levy to valuation and evidentiary sufficiency.

Footnote

1 M/s Para Enterprises Pvt. Ltd. v. Deputy Commissioner of Customs (Import) [Writ Petition No. 5448 of 2023]