Customs, Excise and Gold Tribunal - Delhi
Indian Spinners Association vs Designated Authority on 30 June, 2004
Equivalent citations: 2005(98)ECC526, 2004(170)ELT144(TRI-DEL)
ORDER C.N.B. Nair, Member (T)
1. These appeals are directed against the imposition of definitive Anti-Dumping duty on the imports of Polyester Staple Fibre (PSE) from Korea R.P., Malaysia, Taiwan and Thailand under Notification No. 43/2003-Cus., dated 21st March 2003. The said imposition of duty was pursuant to Final Finding (Notification No. 22/1/2001 DGAD, dated 24th December 2002) of the Designated Authority in the Ministry of Commerce as under :-
"(a) the subject goods, originating in or exported from, the subject countries have been exported to India below normal value, resulting in dumping;
(b) the Indian industry has suffered material injury and threat thereof;
(c) injury has been caused by imports from the subject countries;" (emphasis supplied).
2. Three out of Four appeals have been filed by the domestic consumers of PSF (imported as well as domestically produced) for spinning yarn and the fourth appeal is by the domestic industry producing PSF. Both groups constitute important segments of Indian industry. The innumerable yarn manufacturers are a large traditional provider of goods and employment and PSF manufacturers, though few, constitute a big part of highly capital intensive petrochemical industry. Thus, both interests are vital to the country and in a sense both are domestic industry, though the law relating to anti-dumping classify them as conflicting interests, PSF manufacturers as 'domestic industry' and yarn manufacturers as "importers'. Yarn manufacturer seek open sourcing of their raw materials and PSF industry seeks remunerative prices.
3. Though the appeals of the importers have raised several issues relating to the procedure adopted by the Designated Authority, during the hearing of the appeals, they have submitted that the final findings and notification imposing anti-dumping duty are required to be set aside on one ground alone, namely, the absence of material injury to the domestic industry. It was urged that the Tribunal may consider this issue alone first and give a decision so that other issues do not have to be gone into. In case, the Tribunal was not satisfied that the appeal is required to be allowed on the ground of absence of injury, then the case may be reposted for considering other aspects. This request was accepted as satisfaction of each of the ingredients (dumping, injury and casual link) is the requirement for imposition of anti-dumping duty and the arguments by all parties were restricted to the question of material injury.
4. The contention of the appellant importers is that an objective assessment based on the materials and data available on record would show that there was no injury, let alone material injury to the domestic industry from the purported dumping. The appellant's contention is that the conclusion in favour of the domestic industry, (that there is material injury) has been reached by a distorted and improper presentation and analysis of data. It is being pointed out that finding on injury has been reached by fixing a high price for PSF as non-injurious price for the domestic industry on the assumption that the domestic industry is entitled to a return of 22% on capital. Learned Counsel for the appellant has contended that an assumption that the domestic industry should have a fixed return on capital every year is contrary to all norms of an open market as it seeks to create an artificial risk free environment for domestic industry. Learned Counsel for the appellants has emphasized that PSF, is a commodity and like other commodities is subject to price cycles, turning in profits or losses. The learned Counsel also emphasized that the Anti-dumping Law does not provide for first determining a non-injurious price as an artificial ideal price and then to conclude that material injury exists whenever rate of return on capital goes below 22%. Another point made by the appellants is that the finding in favour of the domestic industry on the issue of material injury has been obtained by an improper projection of data. It is pointed out that the Designated Authority chose an improper period of investigation i.e. January 2000 to September 2000. It is their point that such a period, which straddles parts of two Financial Years cannot yield data which could be the basis for a proper financial analysis. It is contended that the proper thing for the authority would have been to choose a full Financial Year so that reliable data would be available for a year to compare with the data of previous years and to reach reliable conclusions. The appellants have almost made an allegation that the choice of an improper period has been done to obfuscate and to award a finding in favour of the domestic industry. The main reason for making this allegation is that on the question of volume of imports of dumped goods (Para 20 of the final finding) the Designated Authority has projected volume growth improperly by annualizing the import of 8119 MT for January to September 2000 to 14202 for the whole year so as to yield an increase in import of 54% for the full year 2000 as compared to actual import of 9228 during the previous financial year 1999-2000. It is the submission of the learned Counsel that the proper thing for the authority would have been to go by the actual figures available for the full year 2000 or Financial Year 1999 to 2000, particularly since actual data was available well before the Final Findings in December 2002.
5. The learned Sr. Counsel for the importers has further contended that, despite the data for incorrect period being considered and despite the erroneous method of analysis, the factual position noticed in the final findings could lead only to a conclusion that there was no injury to PSF manufacturers. In this regard, the learned Counsel has referred to the facts noticed in the Final Findings that total imports from the subject countries was only 2% of the total demand in India for PSF, domestic industry was producing at about 101% of installed capacity, domestic industry's inventory of PSF had "declined", there was no adverse impact on employment, domestic industry was able to increase sale prices during the period of investigation and such increased sale prices were well above the increase in raw material prices during the corresponding period.
6. The learned Counsel for the importers has emphasized that the finding on injury has been reached on completely erroneous conclusion that "Return on Capital Employed (ROCE) has been negative during the period of investigation" for the domestic industry. According to the importers such a conclusion cannot find place for a period in which sale price increase was more than the increase in the price of inputs. A finding of price suppression or price under cutting also is not tenable when the domestic industry is effecting the required sale price increases.
7. The appellant importers have also pointed out that the findings of the Designated Authority on the effect of imports also go against the domestic industries own published Balance Sheets/data. The Counsel have pointed out that both the major domestic units make no mention of dumping of PSF as a retardant or a threat and instead project a healthy and profitable time, led by increasing demand, globally efficient production and healthy profit.
8. In view of the allegation that the fixing of a fixed return on investment at 22% was artificial and against market reality, and that there was no price suppression, we directed the domestic industry to file data on the historical return, and other financial aspects and the data was filed by M/s Indian Spinners Association vide their letter dated 17th December 2003. The data so filed was got verified by the Officers of the Designated Authority who filed their verification report on 27th May 2004. The domestic industry has also filed data with regard to return on investment of the consumers of PSF in India.
9. The legal provision is that Anti-Dumping duty is not to be imposed routinely on a finding that there was dumping. It is equally important that there be material injury to the domestic industry and that there is a causal link between material injury and dumping. The appellant's submission is that in the present case, objective parameters could lead only to the conclusion that there was no injury. They have also contended that conclusions are required to be reached by the Designated Authority based on the objective analysis of actual data and not based on incorrect annualisation, assumption of pre-fixed return on capital etc.
10. We have perused the records and considered the submissions made by all parties including the Designated Authority. We have also considered the data filed during the hearing of the appeals. We find no reason to be detained by the contentions relating to selection of inappropriate period of investigation, incorrect annualisation etc. in view of the data that has become available during the appeal proceedings.
11. In the present case application of domestic industry was filed by the PSF Manufacturers' Association on behalf of the domestic industry. In regard to the allegation of injury, the statement made in the application was that Indian manufacturers "have been suffering losses or have made abnormally low profits". It was also stated that imports from the countries which were dumping "has been able to capture a disproportionately higher market share due to its aggressive policy of price under cutting". It was also submitted that despite healthy rate of growth of demand for PSF in the country and high levels of capacity utilization, profitability has suffered and the domestic industry has suffered losses on their sale despite high level of capacity utilization on account of serious price under cutting as well as price suppression by dumped imports. On the profitability of the domestic industry it was stated that "while the domestic industry has been making negligible profit of only __% on sales during the period of investigation, it may please be noted that returns are extremely negligible considering the huge amount of capital has been invested in the plant". On the threat of injury, it was submitted that there is huge surplus capacity in the dumping countries to the tune of about 2.5 times the annualized Indian consumption and the said "over capacity is like a hanging sword over the applicant/petitioner Indian industry". The final finding of the Designated Authority also mentions that "the domestic industry has been forced to sell at reduced prices that have resulted in losses", "imports are significantly depressing the prices of the domestic industry", "dumped imports have led to significant price under cutting", "decline in profitability of domestic industry has adversely affected returns on the investments and has thus suffered material injury".
12. On the particularly contentious issue of return on capital, the Designated Authority has summarised his finding as under : -
"29. Return on investment (Capital employed):
The domestic industry has submitted adequate information to substantiate its claim that Return on Capital Employed (ROCE) has been negative during the period of investigation. The return has not been sufficient even to recover the full interest costs the companies had to bear. It has been claimed that the domestic industry is entitled to a fair return on its investment but due to the price effect of the dumped imports, the domestic industry has not been able to realize a fair price. The Authority has analysed the financial information provided by the domestic industry and has also got the verification done. It has been seen that the return on capital employed has been negative for the domestic industry, which is a critical aspect of the injury to the domestic industry".
13. As has already been noted in this order, detailed information about the historical return on capital employed and aspects of pricing of PSF have been filed by the domestic industry. The position in regard to rate of return for the years 1993-94 to 1999-2000 is represented in the graph below :-
The above graph makes it clear that the swing is vast. Further, in the year 1999 to 2000, the domestic industry was having a very healthy return. The first quarter of the period of investigation is the last quarter of that profitable year. Therefore, the claim of "loss" or "nominal profit" is not borne out by the data for the last financial year for which accounts had been finalized. As noted, part of that year forms part of the Period of Investigation also. There is also no reason to accept that fortunes dipped dramatically in the remaining six months of the period of investigations. We further find that, even going by the actual percentages, the complaint of injury is not justified by the claim for 22% ROCE.
14. The domestic industry has furnished ROCE data for some yarn manufacturing units/consumers of PSF. The following is the position :
________________________________________________ Operating Margin Roce ________________________________________________ FY'02 FY'03 FY'02 FY'03 ________________________________________________ 5.6% 7.8% 16.3% 28.5% ________________________________________________ 5.9% 10.7% 5.0% 10.2% ________________________________________________ 10.2% 11.7% 14.5% 13.5% ________________________________________________ 11.8% 13.0% 23.8% 29.6% ________________________________________________ 6.7% 17.5% 7.1% 24.2% ________________________________________________ 5.7% 6.4% 8.3% 9.4% ________________________________________________ We find that ROCE in that industry is also subject to variation and the returns are not invariably close to 22%, justifying a similar claim by the PSF industry;
15. With regard to price impact of dumped imports, Annexure-II (injury analysis) to Anti Dumping Rules lays down that the Designated Authority shall consider "whether there has been a significant price under cutting by the dumped import as compared with the price of like product in India", "or whether the effect of such imports was otherwise to depress price to a significant degree or prevent price increase which otherwise would have occurred to a significant degree". In the present case, the data on this is also not indicative of significant price undercutting or of prices being depressed significantly as would be seen from the graph below which has been filed by the domestic industry.
The graph above shows that the sale prices of the domestic industry were at a level higher than the prices of imported goods during the last six months of the Period of Investigation. The Designated Authority has also noted in Para 25 that the domestic industry was able to raise selling prices during the Period of Investigation. We find from the actual data that price increase was about 11%. Still the filial finding has concluded that the domestic industry was not "able to raise the selling price to a level to recover its full cost of production and to achieve a reasonable return". This finding does not fit in with the actual numbers made available during the hearing or the graph above and the position noted earlier about return on investment. The position appears to be that the two prices are moving somewhat independently. Domestic prices remained reasonably higher than import prices for more than two third of the time. May be, there is a gravitational pull on each other. Clearly it is not one way, that the imported goods (price) dictated domestic prices.
16. A very important aspect of selling price of PSF produced in India during the POI is that, according to the data made available by the domestic industry itself, raw material price increase during the POI consumed only 67% of the increase in sale price of PSF, while that percentage was higher at 69% during the previous year. Thus, higher selling prices of PSF was not being neutralized by increases in raw material prices.
17. The overall position of the domestic industry during the period of investigation is that it had excellent capacity utilization, very low inventory, modest sale price rise and good return on investment. This is the over all position projected in the balance sheets of the major manufacturers also as pointed out during the hearing by the importers.
18. The case for threat of injury is being made on the ground of excess capacity of production in the countries from which PSF was being dumped. The Anti Dumping Rules make it clear that the threat must be a clearly foreseen and imminent threat. As already noticed, dumping is going on and the dumped prices are not causing material injury. Therefore, existence of surplus production capacity cannot be taken as posing a clearly foreseen and imminent threat of injury.
19. In view of what has been stated above, we are of the opinion that the finding regarding material injury and threat of injury are not sustainable in the present case. In the absence of these, imposition of Anti-Dumping duty is not permissible. Accordingly, Notification No. 43/2003-Cus. imposing duty is set aside and the appeals of importers are allowed. The appeal of domestic manufacturers of PSF has no merit and is rejected.