Jindal Saw Limited vs Designated Authority Directorate ... on 14 July, 2020

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Custom, Excise & Service Tax Tribunal

Jindal Saw Limited vs Designated Authority Directorate ... on 14 July, 2020

(vii) A determination of a threat of material injury shall be based on facts and not merely on allegation, conjecture or remote possibility. The change in circumstances which would create a situation in which the dumping would cause injury must be clearly foreseen and imminent. In making a determination shall consider, inter alia, such factors as:

(a) A significant rate of increase of dumped imports into India indicating the likelihood of substantially increased importation;

(b) Sufficient freely disposable, or an imminent, substantial increase in, capacity of the exporter indicating the likelihood of substantially increased dumped exports to Indian markets;

(c) Whether imports are entering at prices that will have a significant depressing or suppressing effect on domestic prices, and would likely increase demand for further imports; and

(d) Inventories of the article being investigated."

25. It had been established by the Designated Authority that there was dumping by the exporter which had resulted in injury to the domestic industry in the past and, therefore, they initiated detailed investigation and concluded in the year 2007 vide their Final Findings notified vide Notification dated 23 August, 2007 that there was dumping of subject goods namely, DI pipes from China PR, and accordingly, Anti-Dumping Duty on the subject goods imported from China PR was imposed by the notification in September, 2007. It is also a matter of record that the Designated Authority considered it necessary to continue with the Anti-Dumping Duty in the first sunset review which took place in September, 2013 and accordingly the levy of Anti-Dumping Duty on subject goods was continued. From a perusal of the above mentioned legal provisions, it is apparent that in case of sunset review, the authority has to only see whether the cessation of Anti-Dumping Duty on the subject goods would lead 23 AD/52172/2019 to continuation or recurrence of dumping and injury to the domestic industry.

26. In this connection, it would be appropriate to reproduce the observations of the Supreme Court in Kumoh Petolchemicals Company Ltd. vs Union of India reported in [2017 (351) ELT 65 (SC)], wherein it was held as under:

"9. It is not in dispute that in terms of Section 9A(5) of the Act, anti-dumping duty is effective for a period not exceeding five years from the date of its imposition. The Government is empowered to revoke the duty imposed even before the expiry of five years. In any case, such a duty admittedly ceases to be operative after five years from the date of imposition. At the same time, the Central Government is empowered to initiate review, called „sunset review‟, and to investigate and decide as to whether it is necessary to continue the levy of anti-dumping duty. As in the case of original Notification imposing such a duty, the Central Government is to satisfy itself that if the period of anti- dumping duty is not extended, it is likely to lead to continuation or recurrence of dumping and injury to the domestic industry. The nature of exercise to be undertaken by the Central Government in a „sunset review‟ is somewhat different from the initial exercise to determine whether anti-dumping duty is to be levied at all or not. When it comes to review, the focus would be on the issue as to whether withdrawal of anti-dumping duty would lead to continuation or recurrence of dumping as well as injury to the domestic industry. The nature and scope of this exercise is lucidly explained by this Court in Reliance Industries v. Designated Authorities, (2006) 10 SCC 368 = 2006 (202) E.L.T. 23 (S.C.) in the following manner :-

"38. We are of the opinion that the nature of the proceedings before the DESIGNATED AUTHORITY are quasi- judicial, and it is well settled that a quasi-judicial decision, or even an administrative decision which has civil consequences, must be in accordance with the principles of natural justice, and hence reasons have to be disclosed by the Authority in that decision vide S.N. Mukherjee v. Union of India [(1990) 4 SCC 594 : 1990 SCC (Cri) 669 : 1991 SCC (L&S) 242 : (1991) 16 ATC 445].

39. We do not agree with the Tribunal that the notification of the Central Government under Section 9A is a legislative act. In our opinion, it is clearly quasi-judicial. The proceedings before the Designated Authority are to 24 AD/52172/2019 determine the lis between the domestic industry on the one hand and the importer of foreign goods from the foreign supplier on the other. The determination of the recommendation of the Designated Authority and the government notification on its basis is subject to an appeal before CESTAT. This also makes it clear that the proceedings before the Designated Authority are quasi-judicial."

(emphasis supplied)

27. The above view was also taken by the Tribunal in Thai Acrylic Fibre Ltd. vs. Designated Authority reported in [2010 (253) ELT 564 (Tri-Del)]. The relevant extract is reproduced herein below:

"13. Unlike original investigations, sunset reviews are prospective in nature, as they focus on the likelihood of the continuation or recurrence of dumping and injury, in case antidumping duties are removed. With respect to the question whether dumping is likely to occur in the event that the anti- dumping duties are removed, the D.A. has to consider relevant economic facts which might indicate that in the event the anti- dumping duty is removed, dumping will recur. With respect to the injury determination, if the anti-dumping duty has had the desired effect, the condition of the domestic industry would be expected to have improved during the period the anti-dumping duty was in effect. Therefore, the assessment whether injury will continue, or recur, would entail a counter-factual analysis of future events, based on projected levels of dumped imports, prices, and impact on domestic producers. Thus the D.A. has to address the question as to whether the domestic industry is likely to be materially injured again, if duties are lifted.

14. Sunset review entails a likelihood determination in which present levels of dumping is obviously not so relevant as is the likelihood of continuance or recurrence of dumping. Moreover, during the investigation period, the anti-dumping duty would be in force and hence, the current level of dumping may be non- existent or minimal. The exporters under investigation may also sell at a non-dumped price during this period knowing fully well that a sunset review would be in progress. Hence, the criteria under Section 9A(1) that the anti-dumping duty should not exceed the dumping margin would have no practical application for continuance of the duty under Section 9A(5). There is also no such warrant in law under the said Section 9A(5) to do so."

AD/52172/2019

28. It is clear from the aforesaid observation of the Supreme Court and the provisions of the Act and the Rules that the objective and purpose of sunset review is to examine whether on removal of Anti-Dumping Duty, the incidence of recurrence of the dumping and injury to the domestic industry is likely to take place again or not. It is relevant to mention here that in the likelihood analysis, the degree and extent of dumping and consequent injury to the domestic industry during the period of investigation is not much relevant or important.

29. Before proceeding further it is appropriate to have a glance of the findings which have been given by the Designated Authority for non-continuation of Anti-Dumping Duty on the subject DI Pipes.

"67. The examination of post-disclosure comments is as under:

i. As regards the submission that the Authority has not carried out sufficient analysis on likelihood or recurrence of dumping and injury, it is noted that the Authority has carried out detailed analysis in this regard at appropriate places of the present findings.

ii. The Authority notes that there have been negligible imports of the Product under Consideration during the period of investigation and therefore the price attractiveness analysis for the Indian market based on such miniscule import would be inappropriate.

iii. The domestic industry has itself submitted that even in post-POI period there is no likelihood of any import of subject goods having taken place on account of (a) anti-dumping duty being in force and

(b) the nature of the product, as no Chinese producer /exporter is understood to have participated in any contract for supply of ductile iron pie in India. Since the import of PUC has almost stopped during the injury period, the requirement of significant rate of increase of dumped imports into India in terms of Annexure II (vii)(a) of the AD Rule for analysis of likelihood of continuation or recurrence of injury is not met.

AD/52172/2019 iv. The authority further notes that the very fact that the imports of PUC declined sharply during injury period establishes the fact that the anti-dumping measure applied since 23rd August, 2007 has already served its intended purpose and that there is no need for its further continuation.

v. The Authority further takes note of the fact that there are surplus capacities with the Chinese exporters. However, the Authority reiterates that mere creation of additional capacities cannot be considered as a conclusive evidence of likelihood of dumping or injury. The Domestic Industry has failed to provide any evidence to prove that the additional capacities in China would be diverted to India in case of revocation of anti-dumping duty.

I. Conclusion and Recommendations

68. Having examined the contentions of the domestic industry and on the basis of the above analysis, the Authority concludes that continuation of anti-dumping duty is not warranted and accordingly recommends no further extension of anti-dumping duty on the subject goods from the subject countries. "

30. We have examined the Final findings in detail and find that the important facts which have been mentioned by the Appellant domestic industry have not been properly considered by the Designated Authority. We take note of the fact that imposition of Anti-Dumping Duty on the subject DI pipes imported from China PR have made a definite impact on the health of the domestic industry. A perusal of various key economic parameters indicate that the health of domestic DI pipe manufacturing industry has been showing improvement only after imposition of Anti-Dumping Duty on the subject goods.

31. We also find that after imposition of Anti-Dumping Duty, the imports from China PR of the DI pipes became almost 27 AD/52172/2019 negligible as only a small quantity of 73 MT was reported to have been imported during the period of investigation i.e. 2017- 2018. The purpose of importing such a small quantity at a high price may have been to distort price undercutting. However, the fact remains that after imposition of Anti-Dumping Duty on the DI pipes imported from China PR, the imports from the subject country were reduced drastically and this provided a protective shield to the domestic industry.

32. For the purpose of analysing whether there is any likelihood of continuation of Anti-Dumping Duty, in case the Anti-Dumping Duty is removed from the import of DI pipes from China PR, it has to be noted that China is not only an exporter to India but it has also been exporting the subject goods to various other countries, such as Turkey, Vietnam and Sri Lanka. The appellant domestic industry had provided detailed data of price underselling, dumping margin etc. with regard to imports by China to these countries. It is relevant to examine the analysis carried and provided by the Domestic Industry with regard to price undercutting and dumping margin of exports of DI pipes by China PR to countries namely, Sri Lanka, Turkey and Vietnam.

33. The Domestic Industry has carried out the Price underselling analysis on the basis of the actual exports made by Chinese exporters to Turkey, Vietnam and Sri Lanka. The position which emerges is as follows:

                                             Sri          Turkey           Vietnam
                                            Lanka
      Landed              RS/MT             44520         40502            42451
      Value
      NIP                 Rs/MT             56359         56359            56359
      Price               Rs/MT             11839         15857            13908
      underselling
      Price                 %               27%               39%           33%
      underselling
      Price               Range             20-30         35-45            30-40
      underselling




                                       28
                                                         AD/52172/2019

34. From the above, it is obvious that the injury margin is likely to be positive in no uncertain terms if the Anti-Dumping Duty is not extended. The price undercutting would also be positive. In such a situation, withdrawal of Anti-Dumping Duty will certainly enable the manufacturers and exporters of the subject goods from China to freely dump the subject goods to the detriment of the Domestic Industry.

35. Similarly, with regard to dumping margin the following position was submitted before the Designated Authority by the Domestic Industry.

                                     Sri       Turkey        Vietnam
                                    Lanka
      Net            Rs/MT          32111      28761         30386
      Export
      Price
      Normal         Rs/MT          48098      48098         48098
      Value
      Dumping        Rs/MT          15987      19337         17712
      Margin
      Dumping          %             50%        67%           58%
      Margin

36. The above mentioned Tables also reveal that China exporters have been indulging in huge dumping of the subject goods in countries such as Sri Lanka, Turkey and Vietnam. The margin of dumping has been varying from 50% to 67%, which is very high and it will be very difficult for any industry to compete with such a dumped price. The Designated Authority in the Final findings has not made any analysis and drawn any conclusion on these submissions.

37. The appellant Domestic industry had also provided concrete evidence of excess capacities available in China for manufacture of subject goods namely DI pipes. The Table below basically makes it very clear that China exporters have a huge capacity to manufacture and export the goods to India. The Domestic Industry has compared the domestic capacities in China with 29 AD/52172/2019 capacities, production, sales and demand in India to provide an insight into the potential danger and the imminent likelihood of dumped imports into the country in large volumes, as shown below:

Particulars Chinese capacity (MT) 7520000 Capacity of Domestic Producers (MT) 2235000 Demand in India (MT) 1576776 Production of Domestic industry (MT) 1724624 Sales of Domestic industry (MT) 1576368 Chinese capacity as a % of capacity of 336% domestic industry (%) Chinese capacity as a % of demand in 477% India (%) Chinese capacity as a % of production 436% of domestic industry (%) Chinese capacity as a % of sales of 477% domestic industry (%)

38. From the above Table it is amply clear that the capacity of the subject goods in China is 3.36 times of the capacity of the Domestic Industry. Further, Chinese capacity of the subject goods is 5.1 times and 4.36 times of the demand in India and production of the Domestic Industry respectively.

39. Now referring to the provisions of Appendix II, which provides guidelines for making a determination with regard to the likely existence of dumping and material injury threat in likelihood analysis, the Designated Authority was required to consider the following factors:

(A) a significant rate of increase of the dumped imports into India indicating the likelihood of substantially increased importation;

(B) sufficient free disposable, or an imminent substantial increase in capacity of the exporter indicating the likelihood of substantial increased dumped exports to Indian markets, 30 AD/52172/2019 taking into account the availability of other export markets to absorb any additional exports;

(C) Whether the imports were entering at prices that would have a significant depressing or suppressing effect on the domestic prices and would likely increase the demand for further imports and (D) inventory of article being investigated.

40. We undertake to analyse the facts given in the preceding paragraphs. It is a matter of record that after imposition of Anti- Dumping Duty in 2007, the imports from China PR has been minimum. This establishes beyond doubt, that the imposition of Anti-Dumping Duty was effective. We also find that key economic factors such as profits, returns on investment and capacity utilisation have all shown appreciable improvement. The factors A and C of Appendix-II need to be taken together for arriving at any conclusion. The incidence of dumped imports was minimum during the period of investigation because of imposition of Anti-Dumping Duty as the Domestic Industry could provide effective price competition to the dumped imports. As a result, the import of dumped import of subject goods namely, the DI pipes became minimum and Domestic Industry could effectively meet the demand of subject goods in the domestic market. It has also to be seen whether the exporting country namely China PR resorted to dumping of their product in other countries as during the POI and post POI there are no exports to India from China PR. This fact is of great relevance in analysing the „likelihood‟ situation, if Anti-Dumping duty ceases to be levied, as there are no dumped imports after imposition of Anti- Dumping Duty.

41. We take note of two important facts here, firstly that the Domestic Industry has substantial demand of the subject product, and that the exporters from China PR have been 31 AD/52172/2019 exporting their product i.e. DI pipe to other countries such as Sri Lanka, Turkey and Vietnam at substantial price underselling varying between 27% to 39%. As indicated in the above Tables there has been huge dumping margins varying from 50% to 67%. These two factors obviously indicate that if the Anti- Dumping Duty is not imposed on the imports of DI pipes from China PR, the Chinese exporters would certainly dump their product to capture the demand of Indian domestic markets of DI pipes by reducing the price competitiveness of goods manufactured in India.

42. As mentioned earlier, the Chinese producers /exporters have huge excess production capacities with them. The production capacities of Chinese producers are much above their local demand and it is as high as four times of the Indian capacities as can be seen from the Table in paragraph 37. These excess production capacities in excess of the Chinese demand are certainly not for decorative purpose but for export to other countries. Thus, this very fact satisfies criterion B of the Appendix II and establishes that as soon as the protective guard of Anti-Dumping Duty is removed, there would be a likelihood of dumping of these goods, i.e. DI pipes into the Domestic Indian market.

43. However, the Designated Authority in the Final findings has not considered all facts in a scientific and analytic manner. The finding of the Designated Authority that the cessation of Anti- Dumping Duty is not likely to lead further dumping of the subject product into domestic industry is contrary to the record and cannot be sustained.

44. We also take note that the dumping margin worked out by the Designated Authority has not been disclosed to the appellant Domestic industry by taking shelter of Rule 7 of Anti-Dumping Duty Rules, 1995.

AD/52172/2019

45. It is apparent from a bare reading of Rule 7 that a claim of confidentiality can only be made by the participating companies / persons. It is not for Designated Authority to claim confidentiality under Rule 7. This position has been clarified by the Supreme Court in Reliance Industries. The relevant extract is reproduced below:

"41. Learned counsel for the respondent has relied on Rule 7 of the Customs Tariff (Identification, Assessment and Collection of Anti- dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995, which states as under :

"7. Confidential informations. - (1) Notwithstanding anything contained in sub-rules (2), (3) and (7) of Rule 6, sub-rule (2) of Rule 12, sub-rule (4) of Rule 15 and sub-rule (4) of Rule 17, the copies of applications received under sub-rule (1) of Rule 5, or any other information provided to the designated authority on a confidential basis by any party in the course of investigation, shall, upon the designated authority being satisfied as to its confidentiality, be treated as such by it and no such information shall be disclosed to any other party without specific authorization of the party providing such information.

(2) The designated authority may require the parties providing information on confidential basis to furnish non-confidential summary thereof and if, in the opinion of a party providing such information, such information is not susceptible of summary, such party may, submit to the designated authority a statement of reasons why summarization is not possible.

(3) Notwithstanding anything contained in sub-rule (2), if the designated authority is satisfied that the request for confidentiality is not warranted or the supplier of the information is either unwilling to make the information public or to authorize its disclosure in a generalized or summary form, it may disregard such information".

42. In our opinion, Rule 7 does not contemplate any right in the Designated Authority to claim confidentiality. Rule 7 specifically provides that the right of confidentiality is restricted to the party who has supplied the information, and that party has also to satisfy the Designated Authority that the matter is really confidential. Nowhere in the rule has it been provided that the Designated Authority has the right to claim confidentiality, particularly regarding information which pertains to the party which has supplied the same. In the present case, the Designated Authority failed to provide the detailed costing information to the appellant on the basis of which it computed the NIP, even though the appellant was the sole producer of the product under consideration, in the country. In our opinion this was clearly illegal, and not contemplated by Rule 7."

46. Thus, non-disclosure of dumping margin to the appellant by claiming shelter of Rule 7 is not justified and violates the principles of natural justice.

AD/52172/2019

47. In view of above discussion, we are convinced that if Anti-Dumping Duty on the import of DI pipes from China PR is not continued, it may result in likelihood of dumping of subject goods i.e. DI pipes in the Domestic market.

48. In view of above, we hold that the Anti-Dumping Duty on the subject goods namely, D.I. pipes needs to continue after the expiry of the period covered by the first sunset review. We however, remand the matter to the Designated Authority for a limited purpose for re-determining the quantum of Anti-Dumping Duty, if so considered necessary, for the remaining period of five years. This exercise shall be completed within a period of two months from the date of receipt of this order. However, in case the duty is being redetermined, then till the quantum of Anti- dumping Duty is redetermined, the present rate of Anti-dumping Duty shall continue on the subject DI pipes imported from China PR.

49. In view of the above, we set aside the Final Findings of the Designated Authority with the above directions. The appeal is allowed to the extent as indicated above.

(Order pronounced in the open court on 14th July, 2020) (JUSTICE DILIP GUPTA) PRESIDENT (C.L. MAHAR) MEMBER (TECHNICAL) (RACHNA GUPTA) MEMBER (JUDICIAL) ss 34

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