Reliance on the backfoot after Supreme Court stays a Gujarat High Court order

In a setback to Reliance Industries Ltd, the Supreme Court has stayed a Gujarat High Court order that had effectively revived anti-dumping duty on a vital raw material used in the production of polyester and other man-made fabrics.

The decision applies to imported purified terephthalic acid (PTA), which is used to make products containing polyester such as sportswear, swimsuits, jackets, sofas, curtains, and car seat covers.

The Union Government had on 24 July, 2019 imposed anti-dumping duty on PTA imports for five years. But in February 2020, Union finance minister Nirmala Sitharaman in her budget for 2020-21 announced the removal of the duty citing public interest.

Reliance Industries, Indian Oil Corp. Ltd and other domestic producers of the material stood to see their profit margins shrink due to the removal of the anti-dumpting duty, Mint had reported.

Reliance Industries, the largest producer of PTA in India with an annual capacity of 4.4 million tonnes, and other petitioners approached the Gujarat High Court arguing that removing the duty without following proper procedures was arbitrary and unjust. 

On 2 May this year, the court reinstated the notification from 2019. It also instructed the Union government to initiate a sunset review process to determine whether to continue or withdraw the duty. 

Following this, the Union government approached the apex court arguing that the 2019 notification would have expired on 23 July this year and could not be revived retroactively.

On Monday, a Supreme Court bench comprising Justices B.V. Nagarathna and N. Kotiswar Singh halted the Gujarat High Court’s proceedings and sought responses from Reliance Industries and the other parties involved.

“Can the High Court supervise the economy?” Justice Nagarathna remarked while staying the lower court’s order.

A downstream impact

Purified terephthalic acid is imported primarily from China, Iran, Indonesia, Malaysia, Taiwan, South Korea, and Thailand.

The Union government, in an affidavit to the Gujarat High Court, had explained that the ministry of textiles had in December 2019 proposed revoking the anti-dumping duty to support the man-made fibre textile industry. 

The protectionist tariff had made the raw material expensive, hurting domestic textile products and leading to low-capacity utilisation in sectors such as spinning, weaving, and garment manufacturing, the government informed the court. 

An inter-ministerial group, it added, had noted that while domestic producers of PTA operated at 90% capacity after the duty was imposed, the downstream industry faced high costs and low utilisation.

In response, Reliance Industries and other domestic producers argued that the anti-dumping duty had been removed without a comprehensive review or consultation with the industry. They warned that removing the duty would allow imports to enter the Indian market at much lower prices.

An expired notification

In the Supreme Court, Additional Solicitor General N. Venkataraman argued that the anti-dumping duty had been imposed for five years through the 2019 notification and would have expired on 23 July this year. 

The duty cannot be collected retroactively from July 2019 to July 2024 or from 24 July this year as that would involve both retrospective and prospective adjustments, which is not permissible, he said during the hearing.

Reliance Industries and MCC PTA India Corp Pvt. Ltd had originally approached the Directorate General of Trade Remedies in October 2013 complaining that imported PTA was being sold in India at prices below the domestic market value, harming the local industry.

Following an investigation, the directorate confirmed the claims and imposed anti-dumping duties on imports of the raw material from South Korea, Thailand, China, Indonesia, Taiwan, Iran, and Malaysia between 2014 and 2016.