- Triplet 3 - WTO Appellate Forum of DSB: Is it an appellate court?

Triplet 3

WTO Appellate Forum of DSB: Is it an appellate court?

By Shiva Kant Jha

December 12, 2008

THE decision of the Appellate Forum of the DSB, given on 10th day of October 2008, in the matter of ''India – Additional and Extra-Additional Duties on Imports from the United States” (popularly known as the ‘Wine Case') is yet another illustration of the craft of deception and art of stealth often resorted in litigation at the fora under the WTO regime. Before I turn to the actual decision of the AB, I must point out that the AB is not an appellate court. So we would act only at our peril if we look to it with a reverential submission as we do towards our courts of law, or even the International Court of Justice. The DSB appoints a Panel composed of governmental and/or non-governmental individuals, “including persons who have served on or presented a case to a panel, served as a representative of a Member or of a contracting party to GATT 1947 or as a representative to the Council or Committee of any covered agreement or its predecessor agreement, or in the Secretariat, taught or published on international trade law or policy, or served as a senior trade policy official of a Member”. The Appellate Body of the DSB, which hears appeals from Panel's cases, is comprised of “persons of recognized authority, with demonstrated expertise in law, international trade and the subject matter of the covered agreements generally.” These are what the rules say. The whole litigious process is opaque. The Panel deliberations are confidential. The reports are “drafted without the presence of the parties to the dispute” only in the light of the information provided and the statements made. Opinions expressed by individual panelists remained shut from public gaze. We do not know who argued and what was argued. The process itself is strategic. All this brings to mind Milton's Comus, whose words our Supreme Court referred in Shrisht Dhawan:

‘'T is only daylight that makes sin.

Let us not smug under the notion that the decision of the AB has not gone against India. The concluding line of the judgment (“the Appellate Body makes no recommendation, in this case, to the Dispute Settlement Body pursuant to Article 19.1 of the DSU”) is dexterously designed to lull our senses to the soporific delight which our wielders of power instantly derive from the mere sound bite of ‘wine' itself! It is said that AB has not handed down a ruling; and at best the USA can embark on new rounds of litigations if required. But read the judgment to discover how vacuous and deceptive such a view is. The AB has decided all the crucial issues against India; but has left to the lobbyists and the pressure groups to lead our government by the nose. Study our track record of what we have done and how we have done both before our government signed the Uruguay Round Final Act establishing the WTO, and during these years of corporate imperium. They can extract benefits of all sorts without stirring up the hornets' nest by getting their Rida Khans (Rida Khan was Clive's appointee to wield the Nawab's power as his Deputy Governor) to become this country's decision makers. India has a grand record of losing appeals before the AB: in some cases our government has been more eager to bend to lose than required: it hardly matters for the nation whether we become victims of our naivety or of some entente cordiale sinister in effect.

Now something about what the AB has said. The scope of this Triplet does not permit me to go into details. But what I have said about the judgment is borne out by what the AB has said. It construed Articles II:1(a) and II:1(b) of the General Agreement on Tariffs and Trade 1994 against the Indian position. India must remain bound to its Schedule of Concessions. What all this comes to? We may tax our people as much we want till they are bled white; we must not increase the burden on imports as the permissible burden on the foreign exporters must not exceed the committed amounts. Mir Kasim, the Nawab of Bengal, had been commanded by the East India Company Bahadur not to vex the foreign traders through taxation measures. The directive was unjust as whilst the Company's goods bore no incidence of tax burden, the Nawab's people cried under brunt. Realising the equity, Mir Kasim declared that even his subjects would get the benefits as the Britishers got. The Company picked up a nasty quarrel with the Nawab who lost his Nawabi. History repeats, and seldom are its lessons learnt.

Where are we driven to? The AB has delivered a declaratory judgment, leaving the interested parties to resort to strategic maneuverings. The technique of crypto-psychic pressure has the highest success rate in the present day economic architecture. Our watchers need to be watched: but who will watch them?

Now what is going to happen in our country? This way or that there would be attempts to trespass on the powers of the federating States. They would be pressurized or cajoled to let the Central Government toe the lines which will be drawn in pursuance of the AB's declaration. The States may run the risk of being subjected to the Procrustean bed crafted through a treaty signed transgressing the Central Government's constitutional competence to do so [This aspect of the matter is the subject matter of the Writ Petition civil No. 1287 of 2007]. If it happens so, our federal polity would change. Federal character has been considered one of the core Basic Features of our Constitution which can nether be damaged, or altered, through the legislative power nor through the constituent power. But our Central Government thinks that all the Basic Features can be subverted through treaty-making power exercised by the executive under the opaque system. In such situation the only way to protect the Constitution would be the ultima ratio of ‘We, the People': change through a referendum, if possible; or through a revolution if no other option left. I hope the reader would realize the sinister fall out of such a course: but the economists hardly appreciate it. I end this triplet with a rubaiyat of Omar Khayyam:

'Tis all a Chequer-board of Nights and Days
Where Destiny with Men for Pieces plays: Hither and thither moves, and mates, and slays,
And one by one back in the Closet lays  


Study the Phraseology - After 80- IB , let it be 80IC

THE Delhi High Court, explaining the import of Section 80-IB of the IT Act, said in CIT v. Eltek SGS (P) Ltd [2008-TIOL-156-HC-DEL-IT] , that it is crucial to appreciate the difference in language inter se the sections. Section 80- IB of the Income-tax Act does not use the expression ‘profits and gains derived from an industrial undertaking' as used in Section 80- HH of the Act but uses the expression ‘profits and gains derived from any business'.

Applying the insight one gains from that judgment, one can say that the section 80IC(7) contemplates the prescription of Form 10CCB by the Income-tax (Third Amendment) Rules, 2005 to become effective only from 4. 2. 2005 as this Amendment granted the essential statutory authority [vide AIR 2005 SC69] to do so. This view gains support from the expression “…shall, so far as may be,.” occurring in section 80IC(7). “So far as” is a variant on the idiom ‘as far as', which means “to whatever extent; as far as it etc goes, within its etc. limitations ' [ Shorter Oxford English Dictionary 1993 Edition].It normally means ‘to the extent that' [ Fowler's Modern English Usage 3 rd ed p. 400]. Similar functional and purposive approach can be adopted in construing the concept of the ‘book value' as used in the definition of ‘substantial expansion' [s. 80IC(8)]. The term is not defined in the Act: hence it admits of a meaning as commonly understood in the context of the purpose of the section. Hence it is inappropriate to borrow its meaning from the Accounting Standards which may permit inclusion even of the Revaluation surplus or deficit. The purpose of the said section is explained in the CBDT Circular on the Finance Act 2003. Obviously, the economic development requires real outlay of money in Plant and Machinery. This idea is underscored even by the expression “increase in the investment”. “Investment” means actual outlay of money.

It would be good if we concentrate on the statutory language to discover differentia inter se the sections. Whilst other sections of in this Part of the Income-tax Act use qualifiers and modifiers to prescribe precise and controlled province of operation, sections 8OIC uses no restrictive qualifier and modifier thereby permitting to it a wider reach and province. Whilst other sections prescribe the specifics of the industrial pursuits, section 80IC specifies only the theatres of operations leaving the nature of pursuits open-ended . Sections 80HH closely structures the realm of an undertaking by providing: “… any profits and gains derived from an industrial undertaking ,…..”. Section 80HHC makes an arch still narrower but more specific by referring to “…engaged in the business of export …” Section 80I follows the conventional protocol of specific narration. . Section 80IA adopts a new pattern of providing specific reference to structured activities in of an eligible business specified in sub-Section (4). It is to be noted that though Section 80IA refers to ‘an undertaking or an enterprise', its sub-Sections prescribe the specific activities which alone can constitute eligible business. Section 80IB has a convoluted structure: whilst it does not use modifier ‘industrial' with an undertaking , it tries to achieve that very objective by using the word “industrial” not only in the heading but also in section 80IB (3), (11A), and (11B). But Section 80IC is not subject to such riders. The change in the phraseology and syntax brings about change in the meaning of the provisions. The expression used in Section 80 HH is “any profits and gains derived from an industrial undertaking” but in section 80IC(1) it is “profits and gains derived by an undertaking…”. The words ‘by' and ‘from' condition and control the meaning of the provisions. “By an undertaking” contemplates that an undertaking is the agent of certain commercial action. “From”, on the other hand refers to a source alone. The commercial pursuits are not so closely specified and structured in section 80IC, as it has been done in other sections. It is true that the sub-Section 2 of Section 80IC refers to the zones for activities. But it will be seen that the terms of this sub-Section are very wide and open ended. This point can be clearly noticed by comparing Section 80IA with Section 80IC. Section 80IA too does not use a qualifier to restrict the import of ‘an undertaking or an enterprise', but it achieves the same result by prescribing meticulous specifics of the prescribed activities in its sub-Section (4).

I have scribbled these lines primarily to appreciate the technique of linguistic analysis (or semasiological method of interpretation) adopted by the Delhi High Court in Elte rather than to give a considered opinion on section 80-IC.


With Iron in the Soul

IF one is a mercenary, even efforts pro bono publico can promote one's prospect and fortune. If one works without that motive, one is surely to be sad on most occasions in the pursuit at public weal. This seems, perhaps, to be the destiny of the humans as we are. Centuries back a great Sanskrit poet expressed, with a pathetic ring, this conundrum of our existence in these lines which time has not turned stale:

Narpathitkarta dyeshtan yanti lokeh,
Janpadahit karta tyajeyte parthivendre,
It mahat virodhe vartamane samano,
Nripatijanapadanan durlabha karykartah.

[Satisfy the King to invite the people's wrath,
Work for the people but to incur the royal wrath,
Such workers are rare who can work for their common weal,
Even by existing precariously on the cusp of this conundrum.]

After composing the Mahabharata, the great Vyasa expressed his ennui and dismay towards the end of the epic: “I shout, with my arms raised, but none listens.” And the great Einstein, who worked overmuch for the public cause to save the World from the World War II, felt much assuaged on being told by Sigmund Freud that his sufferings in the public cause were self-created and self-fostered: it is the destiny of all who dedicate themselves to public good to work trudge on the life's difficult ridge with iron in his soul. Now from the sublime to the pedestrian: a PIL Petitioner is often destined to march ahead, with an iron in his soul, till the cul-de-sac is reached. He too swims up the powerful stream of hopes despite all the odds. - Links on Shivakantjha - Links on Shivakantjha

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