2010 (1) TMI 413 - HC - Central Excise

Anti-Dumping duty- VMCL filed the writ petition. Fact of the case it that- (Tejas) a Banglore based company lodged an application with Designated Authority (DA), for imposition of anti dumping duty on SDH (Synchronous Digital Hierarchy) equipment. They alleged that the product is being dumped from China PR and Israel that the price reduction is high and that it being a domestic industry their performance deteriorated in terms of profits, return on investment, cash-flow and growth besides leaving adverse impact on employment and wages. Acting on said application, 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 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 effect of dumped imports. Held that- Tejas is not a domestic industry and assumption of jurisdiction by DA on their application is erroneous and illegal. The two impugned notifications must therefore suffer invalidation. In the result, the writ petition is allowed as prayed for and initiation notification dated 21.04.2009 and the preliminary findings dated 07.09.2009 are accordingly set aside.

Summary

Issues Involved:
1. Territorial jurisdiction of the High Court.
2. Scope of judicial review.
3. Whether VMCL is a manufacturer.
4. Whether Tejas is an importer.
5. Whether VMCL manufactures 'like articles'.
6. Assumption of jurisdiction by the Designated Authority (DA).

Detailed Analysis:

1. Territorial Jurisdiction:
The Court concluded that it has territorial jurisdiction because VMCL, a company registered in Andhra Pradesh, imports components and manufactures optical transmission equipment in Hyderabad. The Court noted that any coercive steps for collection of levying duties would be taken by the Customs establishment at Hyderabad. The DA did not raise any objection on this aspect, and hence, the Court rejected Tejas' submission on the question of territorial jurisdiction.

2. Scope of Judicial Review:
The Court identified three stages in the anti-dumping levy process: initiation of investigation and preliminary findings, post-decisional comments and final findings, and the imposition of ADD by the Central Government. The Court emphasized that while preliminary findings and provisional duties can be subjected to primary review, the DA's determination of 'normal value', 'export price', and 'margin of dumping' should be subjected to secondary review applying Wednesbury principles. The Court held that the notification of preliminary findings and the provisional duty rules must be subjected to strict scrutiny.

3. Whether VMCL is a Manufacturer:
The Court noted that VMCL imports parts and components in CKD/SKD form and manufactures various SDH equipment. The Court rejected the contention that VMCL is not a manufacturer, referencing the definition of 'manufacture' in the Central Excise Act and previous Supreme Court judgments. The Court concluded that VMCL is indeed a manufacturer, as it brings into existence a new substance distinct from the components purchased.

4. Whether Tejas is an Importer:
The Court found that Tejas imports components and sub-assemblies from multiple countries, constituting 65.58% of their raw materials. The Court noted that Tejas falls within the definition of 'importer' under the Customs Act. The Court also criticized the DA for not making available relevant material to the other side, which would render the DA's exercise illegal.

5. Whether VMCL Manufactures 'Like Articles':
The Court noted that the definition of 'like article' requires the articles to be identical or alike in all respects. The Court observed that the SDH equipment manufactured by VMCL and Tejas have different specifications and capacities. The Court concluded that it is a disputed question of fact whether the SDH equipment manufactured by VMCL are alike or identical to those manufactured by Tejas, and it is for the DA to apply a rationale procedure to arrive at such a finding.

6. Assumption of Jurisdiction by the DA:
The Court concluded that Tejas cannot be treated as a domestic industry under the Rules, and therefore, the assumption of jurisdiction by the DA is erroneous. The Court noted that Tejas imports a significant portion of their components and does not manufacture all necessary accessories, parts, and components. The Court emphasized that the DA must apply a strict standard and has no competence to deviate from legislative prescription. The Court held that the DA's assumption of jurisdiction was erroneous and illegal, and therefore, the initiation notification and preliminary findings must be invalidated.

Conclusion:
The High Court allowed the writ petition, setting aside the initiation notification dated 21.04.2009 and the preliminary findings dated 07.09.2009. The Court directed the parties to bear their respective costs.