M/S. S
& S. Enterprise Vs. Designated Authority & Ors [2005] Insc 112 (22 February 2005)
Ruma
Pal, Arijit Pasayat & C.K. Thakker Ruma Pal, J.
The
appellant imported lead acid batteries from Bangladesh during the period 1.2.2000 to 13.9.2001. The total number of batteries
so imported were found to be less than 3% of the total imports of such
batteries into India during that period. This was so
found by the Designated Authority (the respondent No.1), on an investigation
consequent upon a complaint lodged by the private respondent under Rule 5 of
the Customs Tariff (Anti-Dumping Duty on Dumped Articles and for Determination
of Injuries) Rules 1995 (referred to as 'the Rules').
Rule
14(d) inter alia provides that if the Designated Authority determines that the
volume of the dumped imports actual or potential from a particular country
accounts for less than 3% of the imports of the like product, he shall
terminate the investigation immediately. Nevertheless the respondent No.1
continued the investigation in respect of the imports from Bangladesh on the finding that the value of
imports made from Bangladesh was more than 6% which was more
than the de minimis limit of 3% as provided under Rule 14(d). On 7th December, 2001 the Respondent No.1 published the
final finding determining that anti-dumping duty was payable in respect of such
imports of batteries during the period under investigation. The Ministry of
Finance accepted the recommendation of the respondent No.1 and notified the
Anti- dumping Duty by Notification dated 2.1.2002.
The
appellant preferred an appeal before the Central Excise & Gold (Control
Appellate Tribunal (CEGAT). The Tribunal rejected the submission of the
appellant that the Designated Authority should have computed the volume of
exports on the basis of quantity rather than on the basis of price. It held
that the word "volume" in the context of Rule 14 meant value.
In our
opinion, the interpretation of Rule 14(d) by the respondent No.1 and the
Tribunal is incorrect and contrary to its language. The imposition of dumping
duty is under Section 9A of the Customs Tariff Act 1975 and the Rules and is
the outcome of the General Agreement on Tariff and Trade (GATT) to which India is a party. The purpose behind the
imposition of the duty is to curb unfair trade practices resorted to by
exporters of a particular country of flooding the domestic markets with goods
at rates which are lower than the rate at which the exporters normally sell the
same or like goods in their own countries so as to cause or be likely to cause
injury to the domestic market. The levy of dumping duty is a method recognized
by GATT which seeks to remedy the injury and at the same time balances the
right of exporters from other countries to sell their products within the
country with the interest of the domestic markets. Thus the factors to
constitute 'dumping', is (i) an import at prices which are lower than the
normal value of the goods in the exporting country; (ii) the exports must be
sufficient to cause injury to the domestic industry.
However
a negligible quantity of imports would not be sufficient to cause such injury.
Article 5.8 of the Agreement on Implementation of Article VI of the GATT, 1994
makes this clear:
"An
application under paragraph 1 shall be rejected and an investigation shall be
terminated promptly as soon as the authorities concerned are satisfied that
there is no sufficient evidence of either dumping or of injury to justify
proceeding with the case. There shall be immediate termination in cases where
the authorities determine that the margin of dumping is de minimis, or that the
volume of dumped imports, actual or potential, or the injury, is negligible.
The margin of dumping shall be considered to be de minimis if this margin is
less than 2%, expressed as a percentage of the export price. The volume of
dumped imports shall normally be regarded as negligible if the volume of dumped
imports from a particular country is found to account for less than 3% of
imports of the like product in the importing Member, unless countries which
individually account for less than 3% of the imports of the like product in the
importing Member collectively account for more than 7% of imports of the like
product in the importing Member." The de minimis rule as far as the price
is concerned is when the dumping margin or the difference between the export
price of the article and its normal value, is less than 2%. In other words the
exporter is selling the goods in India at almost the same price that it does in its country. As far as quantity
is concerned, if the export accounts for less than 3% of the total imports of
the like article into India, it is treated as too trivial for
the law and is ignored.
The
Rules have also distinguished between volume as meaning quantity on the one
hand and price on the other. For example under Rule 11(2), the Designated
Authority is required to determine the injury to the domestic industry taking
into account, inter-alia, the volume of dumped imports and their effect on the
price in the domestic market for like articles. In Section 14 itself, such
distinction is maintained in Rule 14 (c) and (d). Of particular significance is
Annexure II to the Rules, which deals with the principles for determination of
injury.
Paragraph
1 provides that :
"A
determination of injury shall involve an objective examination of both
(a) the
volume of the dumped imports and the effect of the dumped imports on prices in
the domestic market for like article and
(b) the
consequent impact of these imports on domestic producers of such
products."
Paragraph
2 speaks of the consideration of whether there has been a significant increase
in the dumped imports while examining the volume of dumped imports and whether
there has been a significant price under cutting by the dumped imports in order
to assess the effect on the prices in the domestic market i.e. an increase in
quantity and a decrease in the export prices. Again Paragraph 5 which deals
with the causal relationship between dumping and the injury to the domestic
industry speaks of "the volume and prices of imports" as one of the
relevant factors.
The
percentage of 3% vis a vis the quantity is not broad based but determined, we emphasise,
with reference to a 'like article'. The word "like article" has been
defined in Rule (2) (d) as:-
"
(d) "like article" means an article which is identical or alike in
all respects to the article under investigation for being dumped in India or in the absence of such an
article, another article which although not alike in all respects, has characteristics
closely resembling those of the articles under investigation." The
consideration of volume would also be limited to such "like
articles".
Therefore,
when Rule 14(d) says that the investigation must be terminated if the 'volume'
of the dumped imports is less than 3% of the imports of the like product, it
must mean that the quantity of dumped imports must account for less than 3% of
the total imports. To hold otherwise would mean that if the price is lower than
3%, irrespective of the quantity imported, the investigation would be dropped
and it would, as submitted by the appellant, lead to the absurd situation that
a small number of expensive imports would invite anti-dumping investigation but
cheap imports flooding the domestic markets would not. In fact such a situation
is exactly what the dumping rules have been framed to prevent.
Nobody
has questioned the preliminary finding of the Designated Authority that the
quantity of the imports from Bangladesh
during the period of investigation was less than 3% of the total imports of the
'like article' to India. The investigation therefore should
have been promptly dropped against Bangladesh.
The
respondents' submission that the preliminary finding was not conclusive of the
matter and was subject to a final finding is unacceptable and is against the
language of Rule 14(d). The proceedings for investigation, are, under Rule 5,
initiated on a written application by the domestic industry. The application is
required to be supported by evidence of
(a) dumping;
(b) injury
where applicable; and
(c) a
causal link between dumping of imports and the alleged injury.
The
Designated Authority is required on the basis of the evidence as adduced by the
domestic industry, to arrive at a prima facie conclusion even before initiating
the investigation. The initiation of the investigation is then publicly
notified with copies being sent to the known exporters of the articles alleged
to be dumped as well as to the Government of exporting countries and other
interested parties.[Rule 6(2)]. Information may be required by the Designated
Authority from such persons who are required to supply the same, normally
within 30 days from the date of the receipt of the notice. After collecting
such evidence and information which pertain to the ingredients of dumping, the
Designated Authority is required "in appropriate cases" to record a
preliminary finding regarding export price, normal value and margin of dumping
and the injury to the domestic industry under Rule 12. If the Designated
Authority is of the opinion on the basis of its preliminary finding that there
has been dumping which has caused injury to the domestic industry, it may make
a preliminary determination of the margin of dumping. On the basis of the
preliminary finding the Central Government may, under Rule 13, levy provisional
duty. It is at this stage that Rule 14 comes into operation when the
investigation is yet to be completed finally and the final findings published
under Rule 17.
As we
hold that it was incumbent on the respondent No. 1 to have closed the
investigation under Rule 14(d) once it came to the conclusion that the volume
of dumped imports was less than 3% of the total imports it is sufficient to
upset the finding of the Tribunal and the respondent No.1 to set aside the anti
dumping duty imposed on the appellant. In the circumstances, it is unnecessary
to decide on the further challenge raised by the appellant on the basis of
violation of Rule 16.
The
appeal is accordingly allowed and the impugned decisions of the Tribunal and
the Designated Authority are set aside.
Back