TaxTMI 
TaxTMI 
2010 (1) TMI 413
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....ion, DA issued initiation notification dated 21.4.2009 in terms of Rule 5 of the Customs Tariff (Identification, Assessment and Collection of ADD on Dumped Articles and Determination of Injury) Rules, 1995 (the Rules, for brevity) for investigation into the existence, degree and effect of alleged dumping of SDH equipment from the subject countries. M/s.Vuppulamritha Magnetic Components Limited, Hyderabad (VMCL), through their Counsel submitted preliminary objections on 16.6.2009 requesting DA to treat them as Indian producer, call for data/ information from other companies to determine whether Tejas is qualified to submit anti-dumping petition and reject the definition/criteria for classifying domestic producers as provided by Tejas in their petition. About three months thereafter DA published preliminary findings vide notification No.14/2/2009-DGAD, dated 07.9.2009. He came to conclusion that subject goods entered Indian market from subject countries at prices less than their normal values in the domestic markets of the exporting countries, that the dumping margins of subject goods are substantial and that the domestic industry suffered material injury caused by volume and price e....
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....er. Admittedly it has three running supply contracts with BSNL for supply of 2.5G DWDM, DXC and DTM 16 MADM equipments. Indisputably VMCL imports parts and components in completely knocked down/semi knocked down (CKD/SKD) form, carries out manufacturing and final testing activities in India before supplying to different telecommunication companies like BSNL. There is also no dispute that there would be considerable differences in design, physical properties, uses and markets for STMs and DWDMs depending on carrying capacity and functionalities of these optical transmission equipments. 4. Tejas is also manufacturer of optical transmission equipments especially STM-1, STM-4 and STM-16. The fifth respondent M/s.Prithvi Information Solutions Limited (Prithvi, for brevity) is also one such enterprise which is sister concern of VMCL. The sixth respondent of M/s.Tata Teleservices Limited is one of many endusers of SDH equipment. In March 2007 and May 2008 BSNL called for tenders for supply of STM-16 MADM equipments. Tejas along with M/s.Odryn Technologies Private Limited became lowest tenderer in respect of March 2007 tender. Prithvi along with Huawei Technologies Limited (Huawe....
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....unt policy, credit terms; (c) store accounting and inventories/stock/WIP valuation; (d) quality control procedure and tests being conducted; (e) details of job work done or got done during the investigation period, and (f) process flow diagram. They claimed that details thereof form business proprietary information. 5. Designated Authority issued initiation notification dated 21.04.2009 proposing investigation into the alleged dumping and consequent injury to domestic industry in terms of Rule 5 of the Rules. By letter dated 18.05.2009, the exporters, importers in India and other domestic manufacturers and industrial users were requested to make submissions relevant to the investigation within 40 days from the date of letter addressed to them or the date of initiation notification dated 21.04.2009. In response thereto, ECI India Private Company Limited, Huawei Technologies Limited, Vodophone Essar Limited, VMCL, Prithvi and Measurement and Controls Limited inter alia sent communications objecting the investigation on the ground that Tejas have no locus of filing the application as they get significant parts/quantities of components outsourced to specialized producers call....
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....d a preliminary objection questioning territorial jurisdiction of this Court. In addition he also contends that enquiry by DA as to 'domestic industry', 'like articles', 'PUC', 'PCN' etc being fact finding enquiry interference by judicial review Court is not warranted. According to senior counsel, judicial review of fact finding conclusions especially at the stage of preliminary findings must be denied as the aggrieved persons can always raise objections before the same authority before he records final findings and also seek refund of the provisional duty paid along with interest under Section 9A(8) of the Customs Tariff Act and Rule 21 of the Rules. He also points out that VMCL has already submitted their detailed response before DA which shall have to be considered in final investigation. He commends to reject the argument that Tejas is also importer. He contends that Tejas imports from Thailand and Malaysia, and as per Rule 2(b) of the Rules imports from subject countries can alone be treated as dumped articles and not by his client. He also refutes the contentions of VMCL on their plea of jurisdictional errors and denies any mala fide exercise of power by DA. Statuto....
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....eafter referred to as a specified country), unless in accordance with the rules made under sub-section (2) of this section, a determination has been made that import of such article into India causes or threatens material injury to any established industry in India or materially retards the establishment of any industry in India; and (iii) under sub-section (2) of either of section 9 and section 9A, on import into India of any article from the specified countries unless in accordance with the rules made under sub-section (2) of this section, a preliminary findings has been made of subsidy or dumping and consequent injury to domestic industry; and a further determination has also been made that a duty is necessary to prevent injury being caused during the investigation: Provided that nothing contained in sub-clauses (ii) and (iii) of this clause shall apply if a countervailing duty or an ADD has been imposed on any article to prevent injury or threat of an injury to the domestic industry of a third country exporting the like articles to India; (c) omitted in this order (2) omitted in this order 9. In exercise of their powers under Se....
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....ndustry" means the domestic producers as a whole engaged in the manufacture of the like article and any activity connected therewith or those whose collective output of the said article constitutes a major proportion of the total domestic production of that article except when such producers are related to the exporters or importers of the alleged dumped article or are themselves importers thereof in which case such producers may be deemed not to form part of domestic industry. (c) "interested party" includes - (i) an exporter or a foreign producer or the importer of an article subject to investigation for being dumped in India, or a trader or business association a majority of the members of which are producers, exporters or importers of such an article; (ii) the government of the exporting country; and (iii) a producer of the like article in India or a trade and business association a majority of the members of which produce the like article in India; (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, ano....
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....liminary findings and final findings would be ex facie without jurisdiction and any investigation would amount to error in the exercise of the jurisdiction. Be that as it is, Rule 6 contains principles that govern investigations, Rule 12 speaks of recording preliminary findings and Rule 17 deals with recording of final findings by DA. Precedents 14. In Rajasthan Textile Mills Association v Director General of Anti-Dumping[2002(149) E.L.T. 45(Raj.)], petitioner assailed initiation notification concerning imports of Polyester Staple Fiber (PSF) originating from four foreign countries. The preliminary findings were also challenged whereunder levy of provisional ADD was recommended. The respondents including "domestic industry" manufacturing PSF raised a preliminary objection regarding maintainability of writ petition against preliminary findings of DA having regard to availability of appeal before Central Excise Appellate Tribunal. A Division Bench of Jodhpur Bench of Rajasthan High Court negatived the contention observing as under. "As far as the challenge to preliminary finding is concerned, it being recommendatory in nature, the normal rule is that no ....
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....the proceedings subject to a case in that regard being made out. That is what the law is. The decision of the Central Government in the matter of ADD is appealable and also subject to writ jurisdiction on well-settled parameters of constitutional law." (emphasis supplied) 17. J.K.Industries v Union of India[2005(186)E.L.T.3(Raj.)] is a case involving the question of territorial jurisdiction of High Court to deal with challenge to ADD proceedings and challenge to notification levying ADD on an article imported from China P.R. Though a Division Bench of Rajasthan High Court came to the conclusion that petitioner has a cause of action to impeach the proceedings of DA and that it has territorial jurisdiction, it was held that the investigation by DA in aid of legislative function by Central Government to levy ADD cannot be interdicted nor DA restrained from continuing and completing investigation. The relevant observations regarding cause of action are as below. "Thus, for the purpose of investigation, the cause of action will consist of export, which emanates from a foreign country, import in India and the injury to domestic country. Such injury is measur....
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.... to appeal either before Tribunal or the Court". Insofar as nature of jurisdiction to be assumed by DA only on a complaint of dumping, it was held: "We are of the opinion that the nature of the proceedings before the DA 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 (1990CriU 2148). … 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 DA is to 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 DA and the Government notification on its basis is subject to an appeal before the CESTAT. This also makes it clear that the proceedings before the DA are quasi-judicial." 19. In Reliance Industries (supra), the principles for determination ....
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....diction, that no part of cause of action has arisen within the jurisdiction of the Court at Ahmedabad. The High Court accepted the plea of Adani holding that the existence of registered office of the Company would ipso facto give cause of action to the High Court within whose jurisdiction the registered office is situated. Before the Supreme Court a question arose whether any of the facts mentioned in the respondents' application would give rise to part of cause of action at Ahmedabad at least for the purpose of conferring territorial jurisdiction on High Court. After noticing the facts, Supreme Court observed that mere fact that respondent-Company is receiving export and import orders and making payments from Ahmedabad has no connection whatsoever with the dispute that is involved in the case and therefore the same would not give rise to any cause of action to a Court at Ahmedabad to adjudicate on the actions complained against Union of India. After referring to Oil and Natural Gas Corporation v Utpal Kumar Basu[(1994) 4 SCC 711], the Supreme Court held: It is seen from the above that in order to confer jurisdiction on a High Court to entertain a writ petition or a speci....
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....orial jurisdiction unless those facts are such which have a nexus or relevance with the lis that is involved in the case. Facts which have no bearing on the lis or dispute involved in the case, do not give rise to a cause of action so as to confer territorial jurisdiction on the court concerned. Similarly, the facts pleaded in the writ petition must have a nexus on the basis whereof a prayer can be granted. Those facts which have nothing to do with the prayer made therein cannot be said to give rise to a cause of action which would confer jurisdiction on the Court. 23. The Division Bench also reiterated that the question of cause of action has to be determined with reference to the pleadings to know whether whole or part of the cause of action has arisen within the territorial limits of the High Court and that while analyzing the facts, the correctness or otherwise of those pleadings is irrelevant and immaterial. If insignificant, trivial and unconnected events take place within the territorial limits which are not at all relevant to the case, those events by themselves would not constitute a part of cause of action. 24. Both the Senior Counsel also invited our ....
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.... law applicable to them gives the plaintiff a right to relief against the defendant. It must include some act done by the defendant since in the absence of such an act no cause of action can possibly accrue. It is not limited to the actual infringement of the right sued on but includes all the material facts on which it is founded It does not comprise evidence necessary to prove such facts, but every fact necessary for the plaintiff to prove to enable him to obtain a decree. Everything which if not proved would give the defendant a right to immediate judgment must be part of the cause of action. But it has no relation whatever to the defence which may be set up by the defendant nor does it depend upon the character of the relief prayed for by the plaintiff. 26. In Alchemist Limited v State Bank of Sikkim[(2007) 11 SCC 335], the above view has been reiterated, thus: It may be stated that the expression "cause of action" has neither been defined in the Constitution nor in the Code of Civil Procedure, 1908. It may, however, be described as a bundle of essential facts necessary for the plaintiff to prove before he can succeed. Failure to prove such facts would give ....
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....se from interested parties and terminating the investigation duly recording final findings as to the dumping, and the resultant injury to domestic industry. In the third stage, the Central Government imposes ADD in accordance with Rule 18 of the Rules. Rule 23 of the Rules confer power on the Central Government to review imposition of ADD if it is satisfied that there is no justification for continued imposition of such duty. The provisional duty in certain circumstances can also be assailed in a writ petition but there is no remedy against initiation notifications or preliminary findings. The notification of the DA publishing the final findings is indisputably appealable under Section 9C before the CESTAT constituted under Section 129 of the Customs Act, 1962. This, however, is no ground to in limine repel a challenge to initiation notification or preliminary findings on the ground that there is an effective alternative remedy at a subsequent stage of proceedings. Indeed, the Supreme Court in J.K.Industries (supra) indicated that any anti dumping decision is 'also subject to writ jurisdiction on well settled parameters of constitutional law'. 29. In a petition for judici....
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....(1948) 1 KB 223]. While doing so, the Court has to assume that the finding of fact by the decision maker or fact finding tribunal is final and calls for no interference unless it is perverse or is based on no evidence or made ignoring relevant material and is based on irrelevant material. Secondary review also bars the Court from taking another plausible view if the case gives rise to two views and must respect the view of the fact finding authority by applying intermediate/deferential standard scrutiny. These principles are supported by English as well as Indian case law. We may refer to three Supreme Court Judgments. 32. In Om Kumar (supra), the dual review principles are summarized as below. It is clear from the above discussion that in India where administrative action is challenged under Article 14 as being discriminatory, equals are treated unequally or unequals are treated equally, the question is for the Constitutional Courts as primary reviewing Courts to consider correctness of the level of discrimination applied and whether it is excessive and whether it has a nexus with the objective intended to be achieved by the administrator. Here the Court deals ....
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....nto the areas exclusively reserved by the supreme lex to the other organs of the State. Decisions and actions which do not have adjudicative disposition may not strictly fall for consideration before a judicial review court. The limited scope of judicial review succinctly put are: (i) Courts, while exercising the power of judicial review, do not sit in appeal over the decisions of administrative bodies: (ii) A petition for a judicial review would lie only on certain well-defined grounds. (iii) An order passed by an administrative authority exercising discretion vested in it, cannot be interfered in judicial review unless it is shown that exercise of discretion itself is perverse or illegal. (iv) A mere wrong decision without anything more is not enough to attract the power of judicial review; the supervisory jurisdiction conferred on a Court is limited to seeing that Tribunal functions within the limits of its authority and that its decisions do not occasion miscarriage of justice. (v) The Courts cannot be called upon to undertake the Government duties and functions. The Court shall not ordinarily interfere with a policy decision of....
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....er and being an importer cannot challenge the preliminary findings. This submission is devoid of any merit. The definition of domestic industry is in two parts. First part defines what is 'domestic industry'. The second part which reads, "… except when such producers are related to … importers of the alleged dumped article or are themselves importers thereof in which case, such producers may be deemed not to form part of domestic industry", does not exclude importers from Thailand and Malaysia like Tejas from being importer. Therefore, Rule 2(b) does not disqualify an importer like VMCL to challenge preliminary finding rendered at the instance of another importer. In other words, Rule 2(b) speaks of locus of domestic industry to petition to DA under Rule 5(1) of the Rules and it does not prohibit an aggrieved importer/manufacturer from questioning the locus of a manufacturer to invoke anti dumping law. So as to seek protection from injury due to dumped article, a producer must necessarily satisfy the requisites of Rule 2(b) but any producer whether domestic or not can challenge the preliminary findings inter alia showing that DA assumed jurisdiction wrongly. The percentage of i....
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....hange constitutes a process of manufacture. It has been brought to our notice that VMCL is an assesee under Central Excise Act. As rightly contended by their counsel an industry cannot be a manufacturer for levy of central excise and cannot cease to be a manufacturer for the purpose of anti dumping law. There is no denial that VMCL also makes some of the parts which go into making of SDH equipment which are subject to testing before they are supplied to end users. Mainly because it gets testing software from Huawei and uses its brochure, it does not cease to be a manufacturer. The process involved is certainly manufacturing. In any event, when the impugned preliminary findings and the provisional levy directly affect them, VMCL cannot be denied standing on the ground that they are not manufacturers. Whether Tejas is an importer? 39. Tejas admit that they are involved in research carried out in India, design and development, utilizing electronic manufacturing services (EMS) in India and abroad, assembly and test procedure, software testing and specification, and assembly and testing in India in addition to post sales maintenance/supply of spares. In par....
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....ess flow chart, purchase policy, sales policy, stores accounting and inventories/stock, inventory valuation, quality control procedure etc. It appears they furnished non-confidential summary of this information based on which DA evaluated the percentage of imported components in the final products of Tejas. DA justified this opining that the information is highly business sensitive. This cannot be accepted. In Reliance Industries (supra), Supreme Court, on reading Rule 7 of the Rules, and relying on Sterlite Industries (India) Limited v Designated Authority[42], Supreme Court held that the said rule does not contemplate any right on the DA to claim confidentiality and that it would be illegal on the part of the DA to deny the applicant any information on the ground of confidentiality. Therefore, not making available the relevant material to the other side would not only render DA's exercise illegal but would deny valuable right to the opposing parties to seek redressal before appellate authority or the court of judicial review, as the case may be. 41. Yet another aspect of the matter is the burden of proof. Though the impugned preliminary findings do not say in many words....
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.... as rightly pointed out by senior counsel for Tejas, it is a disputed question of fact and it is for the DA to apply a rationale procedure to arrive at such a finding. Besides, this depends on the finding on the question whether the assumption of jurisdiction by DA is illegal? Assumption of jurisdiction by DA 43. DA has no power or jurisdiction to suo motu investigate to determine alleged dumping unless he has information from Commission of Customs. DA cannot initiate investigation unless and until an application is made by or on behalf of domestic industry. The condition precedent for DA to assume jurisdiction under Rule 5(1) is that, the applicant shall be a domestic industry as defined in Rule 2(b) of the Rules. VMCL, Prithvi and TATA Teleservices argue that initiation of investigation by DA on the application of Tejas is erroneous and illegal. They contend that Tejas is not a domestic industry as defined under Rule 2(b) of the Rules and that the articles manufactured and marketed by VMCL are not the like articles manufactured by Tejas. The second aspect of this is already been adverted to above. Therefore, in this part of Judgment, the focus is on whether Te....
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....semblies as non-domestic manufacturers and stated the reasons as follows. 3. Name(s), address(es) of Indian producers other than complainant along with their production (Volume and value) of subject goods during the last two years and the current year. Names & addresses of other Indian Producers are enclosed as Annexure 2.2. This list does not include those companies who are undertaking research & developments outside India, largely import the product under consideration in SKD or CKD conditions, carry out Remaining production activities in India and supply the product locally. These companies are nothing but importers of the product in India. As stated in detail in Section I, production to product under consideration involves substantial amount of product design and development. Further, a number of consumers insist on supplies being made by an Indian entity even in respect of goods supplied by the foreign producers. It is therefore possible that some of the foreign producers might have carried out inconsequential activities in India and supplies the product under consideration by invoicing from within India either directly or through partnerships with local ma....
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....POI). DA found that during POI the imports by Tejas accounted for 4.79%. Out of which, they used 0.53% only for dedicated use of SDH equipment and all other components have dual use. This does not make any difference. In a given case, an applicant for imposing ADD might import components/sub-assemblies in huge quantities and then request the DA to investigate restricting POI for a period during which no imports were received. Hence, it is irrelevant whether Tejas imports dual use components/parts and whether a fraction of imports was only used for manufacturing of SDH equipment. Here, we may hasten to add that there may be situations where domestic producers manufacture articles using indigenous components and sub assemblies, but depend on foreign know-how for international certification to achieve the specification standards. In such cases, it would be a question of fact whether such producers can be treated as domestic industry or not, but when the applicant for imposition of ADD is himself an importer seeking imposition of ADD on another importer manufacturing finished product, DA must apply strict standard and has no competence to deviate from legislative prescription. ....
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....of production has been declined. This factor also influenced DA in coming to the conclusion that injury is caused to domestic industry both by volume and price effect of dumped imports. The approach of DA is ex facie erroneous and contrary to the object of enacting Section 9A of the Act. In Reliance Industries (supra), Supreme Court explained the underlying object of enacting Section 9A as follows. "The purpose of Section 9A can, therefore, easily be seen. The purpose was that our industries which had been built up after independence with great difficulties must not be allowed to be destroyed by unfair competition of some foreign companies. Dumping is a well-known method of unfair competition which is adopted by the foreign companies. This is done by selling goods at a very low price for some time so that the domestic industries cannot compete and are thereby destroyed, and after such destruction has taken place, prices are again raised. … The purpose of Section 9A is, therefore, to maintain a level-playing field and prevent dumping, while allowing for healthy competition. The purpose is not protectionism in the classical sense (as proposed by the German economist Fried....