SUPREME COURT OF INDIA
S and S Enterprise
Vs
Designated Authority
Civil Appeal No. 9012 of 2003
((Mrs.) Ruma Pal and Arijit Pasayat)
22/02/2005
MRS. RUMA PAL, J.
1. 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').
2. 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.
3. 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.
4. 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.
5. 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 isjio 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." *
6. 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.
7. 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." *
8. 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.
9. 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." *
10. The consideration of volume would also be limited to such "like
articles".
11. 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 antidumping 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. #
12. 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.
13. 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.
14. 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
antidumping 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.
15. The appeal is accordingly allowed and the impugned decisions of the
Tribunal and the Designated Authority are set aside.