2020 (7) TMI 426 - AT - Customs

Continuation of Anti-Dumping Duty - imports of Grinding Media Balls (excluding forged grinding media balls) - initiation of sunset review investigation by Domestic Industry - validity of Notification dated July, 13, 2018 - computation of landed value by considering the Preferential Rate of Duty (Nil Rate), as applicable under the ASEAN Agreement - Domestic Industry is earning superlative profits and its Return on Capital Employed is in excess of 22%. The first contention advanced by learned Chartered Accountant for the Appellant is the application that had been filed by the Domestic Industry for initiation of sunset investigation was not duly substantiated - HELD THAT - It is not possible to accept this submission. Such a ground has not been taken in this anti-dumping appeal filed by the Thailand exporter and, therefore, we find substance in the submission advanced by learned Counsel for the Respondents that in such a situation the Appellant should not be permitted to raise this issue in this Appeal - rule 7 of the 1996 Procedure Rules applies rule 10 of the 1982 Procedure Rules to anti-dumping appeals and rule 10 of the 1982 Procedure Rules provides that the Appellant shall not, except with the leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal. The Appellant has not sought any leave of the Tribunal to urge or to be heard in support of this ground not taken in the memorandum of appeal. It, however, needs to be noted that the Designated Authority in the initiation Notification dated July 4, 2017 has recorded a categorical finding that a duly substantiated application had been filed by the Domestic Industry. The second submission advanced by learned Chartered Accountant for the Appellant is that the Designated Authority incorrectly computed the landed value of the dumped goods by considering the preferential rate of duty which was nil under the ASEAN Agreement - HELD THAT - The landed value of the dumped imports is computed by taking the assessable value with the applicable basic duty of customs. Under the ASEAN Treaty, imports of subject goods from Thailand are chargeable to nil rate of duty, provided a certificate to establish that the goods are of Thailand origin is submitted. The Appellant has also not placed any material to show that any basic duty of customs was actually paid on the subject goods exported by the Appellant - A finding has been recorded that the Designated Authority adopted its consistent practice of evaluation of the landed value with the applicable customs duty. The applicable customs duty in the present case is nil in view of the ASEAN Treaty. The Third submission of learned Chartered Accountant for the Appellant is that there is no necessity for continuation of anti-dumping duty since the Domestic Industry is earning superlative profits and its Return on Capital Employed is in excess of 22% - HELD THAT - Apart from the fact that EBIDTA is not one of the listed injury parameters in Annexure-II of the 1995 Rules, the figures in the annual report contain details of all the products, including the product under consideration, and, therefore, the figures in the annual report cannot be made the basis for determining the profitability of the product under consideration in the domestic market. It needs to be noted that the anti-dumping investigations are confined to the product under consideration and, therefore, the profitability of the company as a whole has not to be seen - On behalf of the Domestic Industry, it has also been stated that actually the capital employed of the Domestic Industry is 13%, which is well below the bench mark of 22% that has been consistently adopted by the Designated Authority. It has also been stated by the Domestic Industry that the profits are below 10%, which cannot be termed to be superlative . The fourth submission advanced by the learned Chartered Accountant for the Appellant is that the Domestic Industry is a monopoly and is exploiting the situation by abusing its dominant position in Indian market by taking advantage of anti-dumping duty and raising the prices above the international level - whether the Domestic Industry has a monopoly in the Indian market? - HELD THAT - It is seen from the records that there are eight producers of the subject goods in India out of which two are the applicant domestic industry. From a perusal of the chart contained in paragraph 65 of the final findings of the Designated Authority, it is clear that for year 2016-17 the market share in demand of the Domestic Industry ( the applicant) is 52.19%, whereas the market share in demand of the remaining six producers is 47.37 %. It cannot, therefore, be said that applicant Domestic Industry is a monopoly since term monopoly envisages existence of a sole producer/seller in the market. This apart, the Appellant has not been able to substantiate that the Domestic Industry has been exploiting the Indian market or that its selling prices are higher than international prices - the submission cannot be accepted. The fifth submission advanced by learned Chartered Accountant for the Appellant is that non-disclosure of non-injurious price calculation sheet has resulted in denial of principles of natural justice and in this connection, reliance has been placed on the decision of the Gujarat High Court in NIRMA LIMITED VERSUS UNION OF INDIA 6 2017 (2) TMI 1206 - GUJARAT HIGH COURT - HELD THAT - It is not possible to accept this submission of the Appellant. The non-injurious price computation is based on the confidential cost of production of the Domestic Industry. It would be a serious breach of the confidentiality provisions contained in rule 7 of the 1995 Rules if the same were to be disclosed to the foreign exporter. The judgment of the Gujarat High Court in Nirma Ltd. does not help the Appellant on this issue. The High Court held that calculation is required to be disclosed to the Domestic Industry on whose data the computation of the non-injurious price is carried out for there can possibly be no bar of confidentiality in relation to a party which has provided the information - In the present case, the information was provided by the Domestic Industry and it is the foreign exporter who is demanding the non-injurious price computation. The Designated Authority was, therefore, justified in not disclosing the confidential costing information of the Domestic Industry, that formed the basis for calculation of the non-injurious price , to the foreign exporter. The sixth submission advanced by learned counsel for the Appellant is that insignificant imports could not have caused any injury to the Domestic Industry so as to warrant an extension of anti-dumping duty in the sunset review - HELD THAT - The test to be applied in a sunset review is the likelihood of continuation or recurrence of dumping and injury. This aspect has been considered by the Designated Authority in Paragraph 99 of the final findings. The Designated Authority has recorded a categorical finding that since it was required to determine recurrence of injury, the actual volume of import would not be relevant for analysis of likelihood of injury. It is, therefore, not possible to accept the sixth submission of the Appellant. The seventh submission advanced on behalf of the Appellant is that an erroneous finding has been recorded by the Designated Authority on the issue of likelihood of continuation or recurrence of dumping and injury - HELD THAT - The Designated Authority noted that it was required to evaluate the existing surplus capacities of the foreign exporter to explore the possibility of diversion to the Indian market. The Designated Authority found as a fact that the Thailand exporter had ample production capacities and it was also exporting the product under consideration to other countries in the world. The eighth contention of learned Chartered Accountant for the Appellant is that the rate of duty was required to be modified, having regard to the current dumping margin and injury margin in terms of section 9A of the Tariff Act - whether in a sunset review, where an affirmative order for extension of anti-dumping duty is made on the basis that there is a likelihood of recurrence of dumping and injury, the rigours of section 9A(1) of the Tariff would still apply? - HELD THAT - The scope of a sunset review was examined by the Supreme Court in UNION OF INDIA AND ANOTHER VERSUS M/S. KUMHO PETROCHEMICALS COMPANY LIMITED AND ANOTHER 2017 (6) TMI 526 - SUPREME COURT and by the Tribunal in THAI ACRYLIC FIBRE CO. LTD. VERSUS DESIGNATED AUTHORITY 2010 (4) TMI 389 - CESTAT, NEW DELHI - The Supreme Court pointed out that in a sunset review, focus is on the issue whether withdrawal of anti-dumping duty would lead to continuation or recurrence of dumping and injury to the Domestic Industry - Tribunal in Thai Acrylic Fibre have also been reproduced in paragraph 27 of this order. The Tribunal observed that since a sunset review entails a likelihood determination, the present levels of dumping are not that relevant as the likelihood of continuance or recurrence of dumping. Further, since during the period of investigation, the anti dumping duty is in force, the current level of dumping may be non-existent or minimum. Thus, the criteria under section 9A(1) that anti-dumping duty should not exceed the dumping margin would have no practical application for continuance of the anti-dumping duty under section 9A(5) of the Tariff Act - the submission cannot be accepted. The ninth submission advanced by learned Chartered Accountant for the Appellant is that the Designated Authority did not examine the causal link between the dumped imports and the injury to the Domestic Industry - HELD THAT - This submission of learned counsel for the Appellant cannot also be accepted. It is in an original investigation, where the determination is based on the existence of current dumping and current injury, that it is necessary for the Designated Authority to establish that the injury is not on account of any factors, other than the dumped imports. In fact, clause (v) of Annexure-II to the 1995 Rules gives a list of factors which are required to be examined for this purpose. In a sunset review the Designated Authority is required to examine the likelihood of recurrence of dumping and injury on the expiry of the anti-dumping duty. Thus, causal link in a sunset review is not required to be re-established, as the same had been established at the time of original investigation. Thus, once the Designated Authority had exercised its discretion in recording findings on the basis of the facts available to it and there is no perversity in the exercise of this discretion, it is not possible to accept the submission of the Domestic Industry that the foreign exporter should have been treated as non-cooperative and residual duty under the Customs Notification dated July 13, 2018 issued by the Central Government should have been levied on the foreign exporter. The Appeal filed by the Domestic Industry, therefore, deserves to be dismissed.

Summary

Issues Involved:
1. Validity of the application filed by the Domestic Industry for initiation of sunset investigation.
2. Computation of landed value by considering the Preferential Rate of Duty under the ASEAN Agreement.
3. Necessity for continuation of anti-dumping duty considering the profits and Return on Capital Employed of the Domestic Industry.
4. Alleged monopoly and abuse of dominant position by the Domestic Industry.
5. Non-disclosure of "Non-Injurious Price" calculation sheet.
6. Impact of insignificant imports on the Domestic Industry.
7. Findings on the likelihood of continuation or recurrence of dumping and injury.
8. Modification of the rate of duty based on current margin and injury margin.
9. Examination of the causal link between dumped imports and injury to the Domestic Industry.
10. Treatment of the foreign exporter as non-cooperative and the imposition of residual duty.

Detailed Analysis:

1. Validity of the Application Filed by the Domestic Industry:
The appellant contended that the application for sunset investigation was not duly substantiated. However, this ground was not raised in the memorandum of appeal, and no leave was sought to introduce it. The Designated Authority had recorded that a duly substantiated application was filed by the Domestic Industry, and thus, this contention was dismissed.

2. Computation of Landed Value by Considering the Preferential Rate of Duty:
The appellant argued that the Designated Authority incorrectly computed the landed value by considering the Preferential Rate of Duty (Nil Rate) under the ASEAN Agreement. The Tribunal upheld the Designated Authority’s method, noting that the applicable customs duty was indeed "nil" under the ASEAN Treaty, and the appellant failed to show that any basic duty of customs was paid on the subject goods.

3. Necessity for Continuation of Anti-Dumping Duty Considering Profits and Return on Capital Employed:
The appellant claimed that the Domestic Industry was earning superlative profits and had a Return on Capital Employed in excess of 22%. The Tribunal noted that the profitability of the company as a whole is not relevant, and only the product under consideration should be examined. It was found that the capital employed was 13%, below the benchmark of 22%, and profits were below 10%, which cannot be termed as "superlative."

4. Alleged Monopoly and Abuse of Dominant Position by the Domestic Industry:
The appellant alleged that the Domestic Industry was a monopoly and was exploiting its dominant position. The Tribunal found that there were eight producers of the subject goods in India, with the Domestic Industry holding 52.19% market share and the remaining producers holding 47.37%. Thus, the Domestic Industry was not a monopoly, and the appellant failed to substantiate claims of exploitation.

5. Non-Disclosure of "Non-Injurious Price" Calculation Sheet:
The appellant argued that non-disclosure of the "Non-Injurious Price" calculation sheet resulted in a denial of natural justice. The Tribunal upheld the confidentiality provisions, noting that disclosing the Domestic Industry's confidential cost of production to a foreign exporter would breach rule 7 of the 1995 Rules. The Gujarat High Court’s decision in Nirma Ltd. was distinguished as it involved disclosure to the party providing the information, not to a foreign exporter.

6. Impact of Insignificant Imports on the Domestic Industry:
The appellant contended that insignificant imports could not have caused injury warranting an extension of duties. The Tribunal noted that in a sunset review, the volume of imports is not a relevant consideration; the focus is on the likelihood of continuation or recurrence of dumping and injury.

7. Findings on the Likelihood of Continuation or Recurrence of Dumping and Injury:
The Tribunal examined the Designated Authority's findings and upheld that there was a likelihood of recurrence of dumping and injury. Factors such as the surplus capacities of the foreign exporter, the small quantity of exports made at dumped prices, and the attractiveness of the Indian market were considered.

8. Modification of the Rate of Duty Based on Current Margin and Injury Margin:
The appellant argued for a modification of the duty rate based on current margins. The Tribunal noted that in a sunset review, the current level of dumping is not as relevant as the likelihood of continuance or recurrence of dumping. The criteria under section 9A(1) of the Tariff Act do not apply to continuance of duty under section 9A(5).

9. Examination of the Causal Link Between Dumped Imports and Injury:
The appellant contended that the Designated Authority did not examine the causal link. The Tribunal held that in a sunset review, the causal link is not required to be re-established as it was already established during the original investigation. This view was supported by the WTO Appellate Body’s report in United States-Anti-Dumping Measures.

10. Treatment of the Foreign Exporter as Non-Cooperative and Imposition of Residual Duty:
The Domestic Industry argued that the foreign exporter should be treated as non-cooperative and residual duty should be imposed. The Tribunal found that the Designated Authority had exercised discretion appropriately by recording findings based on available facts and there was no perversity in this exercise of discretion.

Conclusion:
Both Anti-Dumping Appeal No. 53285 of 2018 filed by the foreign exporter and Anti-Dumping Appeal No. 53586 of 2018 filed by the Domestic Industry were dismissed.