2016 (3) TMI 514 - AT - Customs

Rule 5 of the Anti-Dumping Rules - Initiation of investigations - Investigation started by designated authority on the application of Tejas (Domestic industry) - Appellants contended initiation of investigation as bad in law since the authority took no steps for verification of the information / data furnished before it, prior to such initiation - Held that - the information contained in trade magazine should normally not form the basis of final determination as regards dumping, injury etc. and such should be made on the basis of the best available information in the record of the Authority including the data provided by the foreign exporters or producers in their responses. At the stage of initiation, only the applicant domestic industry is before the Designated Authority and requiring the domestic industry to produce the exact facts and figures relating to exporters in a foreign country would be unreasonable at the stage more so because such details are normally in the exclusive knowledge of the foreign parties. The applicant can only be asked to bring before the Authority, evidence which is reasonably available to it for the purpose of initiation of investigation during the course of which other parties would bring all relevant facts before the Authority for making the final determinations. Here for the purposes of initiation, the journal has been used only for prima facie satisfaction. As DA has determined for the purposes of initiation the major factors that, the products of the applicants constitute a major proportion in Indian production, support of other domestic producers on account of more than 50% of production of the like products produced and application has been made by or on behalf of the domestic industry, it has satisfied itself as to the criteria of standing in terms of Rule 5 of the Rules. Therefore, initial investigations can be initiated by the designated authority on the application of Tejas. Rules 2(b) of the Anti-Dumping Rules - Eligibility of Tejas as domestic industry - Held that - as per the definition of domestic industry under Rule 2 ibid, the word producer has connotation wider than a mere manufacturer and includes even those engaged in any connected activity. Here, the Tejas are performing substantial activities which covers within the scope pf producer. Therefore relying on the decision of Madras High Court in the case of Nirma Ltd. Vs. Saint Gobain Glass India Ltd. 2012 (10) TMI 832 - MADRAS HIGH COURT , Tejas are eligible as domestic industry in terms of Rule 2(b) ibid. Definition of Product Under Consideration with regard to statute - Whether STM1, STM4, STM16, STM64, and STM256 to be treated as single products od distinct products - Held that - the various STMs, are all having SDH technology and are upgradations of the models having lower numerical value. They are different types of SDH Equipment, which is the product under consideration. Thus, the determination of product scope by Designated Authority is sustainable. Regarding the contention that the scope of PUC has been altered during the course of investigations, Designated Authority is required to come to a final determination only after consideration of the contentions of all interested parties and in the process, the scope of PUC may get altered but that would not vitiate the proceedings so long as the principles of natural justice are complied with in respect of the interested parties which has been done in this case. As STM64 has not offered by the domestic industry, it should be excluded from the scope of PUC. As long as the product is imported, duty can be imposed on all types of such product provided such type is in commercial competition with the like article made in India and can cause injury on its import. STM 256 is a higher version of STM 64. STM256 if offered at a lower price can substitute for STM64 and cause injury to Tejas qua its market for STM64 in India. Therefore, STM256 is not a distinct or separate product, but one type of SDH equipment, that is PUC. Levy of Anti-dumping duty and Valuation of goods- Import of SDH Transmission Equipment from China PR and Israel - Notification No.125/2010-Cus, dated 16.12.2010 - Held that provision of Sections 12/14 of the Customs Act, 1962 are applicable only with reference to goods imported and therefore, the levy of anti-dumping duty would fail on PUC when imported as a part embedded in the goods imported for want of availability of the machinery provisions. Section 12 of Customs Act, 1962 has no applicability or relevance to the levy of the anti-dumping duty which is levied in terms of Section 9A of the Customs Tariff Act, 1975. As regards the valuation of goods/items which are imported as parts/components embedded in some other goods, it is pertinent to mention that the provisions of Customs Valuation Rules framed under Section 14 of the Customs Act, 1962 are clearly capable of valuing even such imported goods which are found lying unclaimed in the middle of nowhere even embedded in other goods, separate transaction value thereof, (i.e. of the PUC) will not be available but non-availability of transaction value does not in the least lead to failure of assessment of value because Customs Valuation Rules are clearly capable of dealing with such situations. The exporter can declare the transaction value for the SDH Equipment separately. If such declaration is not found to be true or the transaction value is simply not available, the Customs Authorities would resort to the Customs Valuation Rules for the item subject to levy of anti-dumping duty. Therefore, the contention of appellant do not sustain. Inclusion of software and SDH Equipment fitted with cellular equipment - Incorrect on the ground of circumvention as the Rules concerning circumvention were brought into force only in 2012 - Held that - Rules 25 to 28 of the Rules, which came into effect from 19.01.2012 deal with circumvention of anti-dumping duty. However, nothing can be read in these Rules to mean that Designated Authority should not levy the duty in a manner so as to ensure that it is not circumvented. After all, when duty is levied by Central Govt., it has to ensure that the same is effective in counteracting the injurious effects of dumping which implies that Designated Authority should ensure that the levy of duty is not amenable to unintended circumvention. The above said Rules 25 to 28 regarding circumvention only deal with situations where circumvention is found to be taking place and provide mechanism to identify, investigate and determine circumvention and review thereof and do not imply that the Designated Authority is debarred from so recommending the levy as to avoid circumvention as far as possible plugging the possible/obvious loopholes which can lead to circumvention. Liability of notification - Whether to be set aside on ground of vagueness - Held that - expression for SDH application only is quite comprehensible and there is nothing too esoteric about it. Also, there is nothing so vague or incomprehensible about expressions like for SDH application only as to make it impossible or impractical to implement the anti-dumping notification. Levy of anti-dumping duty - Software downloaded electronically - Absence of mechanism to levy and collect duty - Held that - no duty can be levied and collected on software downloaded electronically as has been held by CESTAT in the case of Oracle India Pvt. Ltd. & Others Vs. C.C.(Export), New Delhi 2015 (9) TMI 317 - CESTAT NEW DELHI. Therefore, the appellants can have no grievance on that count. - Decided partly in favour of appellant

Summary

Issues Involved:
1. Initiation of Anti-Dumping Investigations
2. Eligibility of Domestic Industry
3. Definition of Product Under Consideration (PUC)
4. Inclusion of Parts and Components
5. Post-Decisional Hearing
6. Rejection of Price Undertaking
7. Market Economy Treatment
8. Inclusion of Software and SDH Equipment
9. Vagueness of Notification
10. Duty on Electronically Downloaded Software

Detailed Analysis:

A. Initiation of Anti-Dumping Investigations:
The appellants contended that the initiation of the investigation was flawed as the Designated Authority (DA) did not verify the information/data provided before initiating the investigation. The court referred to Rule 5 of the Anti-Dumping Rules, which requires only a prima facie satisfaction of the DA regarding dumping, injury, and causal link for initiation. The court found that the domestic industry had submitted a detailed petition with sufficient evidence, and the DA was justified in initiating the investigation based on this petition.

B. Eligibility of Domestic Industry:
The second issue was whether Tejas Networks Ltd. qualified as a domestic industry under Rule 2(b) of the Anti-Dumping Rules. The court noted that Tejas undertook substantial activities in India, including R&D, design, and partial production, and therefore qualified as a producer. The court also found that Tejas had a major proportion of domestic production. The DA had the discretion to include or exclude a producer who is also an importer, and Tejas was not importing the subject goods from China. Thus, Tejas was rightly considered an eligible domestic industry.

C. Definition of Product Under Consideration (PUC):
The appellants argued that different types of SDH equipment (STM1, STM4, STM16, STM64, and STM256) should not be treated as a single product. The court referred to WTO Panel Reports, which clarified that it is not necessary for all types covered by PUC to be alike or homogenous. The court upheld the DA's determination that all SDH equipment, despite different configurations, constituted a single product under consideration.

D. Inclusion of Parts and Components:
The appellants contended that there was no domestic industry for parts and components, and hence no duty should be imposed on their import. The court found that excluding parts and components would allow circumvention of the duty. The DA had included parts and components to prevent such circumvention, consistent with global practices. The court upheld the DA's inclusion of parts and components within the scope of the PUC.

E. Post-Decisional Hearing:
The appellants argued that the post-decisional hearing was a mere formality. The court found that the DA had granted due opportunity for hearing to all interested parties and had considered the arguments afresh. The conclusions of the DA remained unchanged, and the procedure followed was found to be proper.

F. Rejection of Price Undertaking:
The appellants contended that the rejection of the price undertaking was inconsistent with Article 8.3 obligations. The court noted that Huawei Technologies had not cooperated in providing verified export sales information, making it impractical for the DA to accept the price undertaking. The rejection was thus justified.

G. Market Economy Treatment:
The appellants argued that market economy treatment was wrongly denied to Alcatel Lucent Shanghai Bell Co. Ltd. The court found that the DA had substantial grounds, including significant state participation in the company, to deny market economy status. The DA's determination of normal value based on facts available was upheld.

H. Inclusion of Software and SDH Equipment:
The appellants argued that the inclusion of software and SDH equipment embedded in other equipment was incorrect due to the Rules concerning circumvention coming into force only in 2012. The court found that the DA was justified in recommending the levy in a manner to avoid circumvention, ensuring the effectiveness of the anti-dumping duty.

I. Vagueness of Notification:
The appellants argued that the notification was vague, particularly the expression "for SDH application only." The court found the expression to be comprehensible and practical for implementing the anti-dumping notification.

J. Duty on Electronically Downloaded Software:
The appellants contended that software downloaded electronically could not be subjected to anti-dumping duty. The court agreed, referencing the CESTAT decision in Oracle India Pvt. Ltd., which held that no duty could be levied on such downloads.

Conclusion:
The court did not find any infirmity in the final findings of the Designated Authority and dismissed the appeals. The judgment was pronounced in the Open Court on 24.02.2016.