2025 (5) TMI 779 - HC - Customs

Maintainability of this writ petition against the impugned preliminary findings dated 30.10.2024 and Addendum Notification dated 16.12.2024 - Prayer to prohibit the respondent authorities from issuing notification levying provisional duty under Rule 13 of the Custom Tariff (Identification Assessment and Collection of Anti-Dumping Duty) Rules 1995 - inclusion of specialty grades of PVC Suspension Resins (SPVC) imported by the petitioners for manufacturing Chlorinated Polyvinyl Chloride Resin (CPVC) within the scope of the Product Under Consideration (PUC) in the anti-dumping investigation. Maintainability of this writ petition against the impugned preliminary findings dated 30.10.2024 and Addendum Notification dated 16.12.2024 - HELD THAT - Against the preliminary findings arrived at by Designated Authority it cannot be said that there is effective remedy available as per section 9C of the Act more particularly when power of imposing anti-dumping duty on dumped articles emanates from section 9A of the Act which contemplates that any article is exported by an exporter or producer to India from any country at less than its normal value on such importation in India the Government of India is entitled to notification to impose anti-dumping duty not exceeding the margin of dumping in relation to article. While section 9B of the Act contemplates certain circumstances wherein no such anti-dumping duty can be imposed and section 9C of the Act provides an appeal to the Customs Excise and Service Tax Tribunal against the order of determination or review regarding the existence degree and effect of any substitute or dumping in relation to import. On plain reading of above rule 4 of the Anti-Dumping Rules the Designated Authority is empowered to investigate identify and submit its findings provisionally or otherwise to the Central Government as to normal value and injury apart from recommending to the Central Government about the amount of anti-dumping duty and the date of commencement of the duty - On basis of such preliminary findings the Central Government is to impose levy of provisional duty and on further investigation Designated Authority as per Rule 16 of the Anti-Dumping Rules is to arrive at final findings and determination is to be made as per Rule 17 in the form of recommendation and thereafter Central Government issues levy within the period of three months of the date of publication of final findings by Designated Authority as per Rule 18 of the Anti-Dumping Rules. Therefore considering the scheme of the Act and on perusal of section 9C of the Act it is clear that an appeal lies only after the determination which comes only after final findings given by the Designated Authority under Rule 17 of the Anti-Dumping Rules and levy of duty by the Central Government under Rule 18 of the Anti-Dumping Rules and therefore it cannot be said that there is alternative remedy of appeal available to challenge the preliminary findings which is impugned in this petition. Exclusion of specialized grades - HELD THAT - Designated Authority has come to the conclusion that DCW Limited has used domestically produced subject goods for manufacturing CPVC. However on perusal of the above data it is clear that during investigation period i.e. upto 30.09.2023 DCW has consumed SPVC Resins of 76 tons out of 1498 metric tons of DCW Pipe Grade and only 10 Metric tons out of 742 metric tons of DCW Fitting Grade whereas it has consumed imported SPVC Resin of other manufacturers in large quantity. Hence findings arrived at by the Designated Authority that domestic industry has demonstrated that PVC Resins manufactured by it is like article to the product imported in India which is used for manufacturing of CPVC is contrary to the definition of like article as such domestic industry has failed to point out the manufacturing of SPVC Resin of the grade which is required to be used by the petitioners for production of CPVC Resin used for manufacture of pipes of water for human consumption. It appears that Designated Authority has failed to consider the basic contention of the petitioners that the specialty grade SPVC Resins imported by the petitioners for the purpose of CPVC resin is used only for manufacture of water pipes for human consumption and has gone on tangent that there is no exclusive group of PVC Suspension Resin that is commonly used for the purpose of making CPVC Resin more particularly when no specialty grade SPVC as claimed by the petitioners is available in India or manufactured by any domestic industry - Designated Authority therefore has failed to take into consideration the basic standard of proof to be applied for arriving at conclusion that the articles which are imported by the petitioners being specialty grade SPVC cannot be considered as like article manufactured by the domestic industry. On perusal of the BIS License issued to DCW Limited on 22.06.2024 though such standard came into force on 20.10.2022 such standard is not mandatory. Designated Authority has failed to consider the similar SPVC Resin carrying the same K value imported by the petitioners and agents acting upon instructions of respondent No. 4 and without such thorough investigation to substantial extent accepting what is submitted by the respondent nos. 4 to 6 the Designated Authority has arrived at a conclusion that specialty grades of SPVC Resins imported by the petitioners are like article manufactured by domestic industry. On perusal of the Standard Operating Practices for Trade Remedy Investigation it appears that Designated Authority has not identified the PUC at the time of initiating investigation by dealing with the objections raised by the petitioners more particularly when the scope of product under consideration can be restricted during the course of investigation but cannot be enhanced or enlarged after such initiation. Therefore Designated Authority was required to consider the submissions and objections raised by the petitioners during investigation only. It is true that different grades forms types etc. may not be in different products in absence of specific definition of product but clause 3.1 where Article 2.1 of the Anti-Dumping Agreement refers to the like product whereas the Act and the Anti-Dumping Rules use the word like article to indicate product under consideration which is matter of investigation. There is no specific definition or description of th product under consideration under the Anti-Dumping Rules however it is the single most important starting point of an investigation and section 2 (d) defines like article to mean a product which is like article or in absence of like article most similar in characteristics and uses to the article subject to investigation. Therefore while considering the like article PUC is required to be freezed at the time of initiation of investigation only. Therefore determination of PUC as like article in Anti-Dumping investigation holds the key for establishing dumping and injury and the fallacies in the same could lead to the entire investigation being void. Designated Authority ought to have made further investigation at this stage only to examine whether specialty grade SPVC Resin imported by the petitioners can be considered as like article to become part of the product under consideration imported from subject countries within the scope of section 2 (d) of the Act or not more particularly when the Designated Authority has not considered the data available on record regarding captive consumption of specialty grade of SPVC Resins produced by the Domestic Industries during the period of investigation - Designated Authority has only relied upon the data placed on record by the respondent No. 6 which could not have been considered to arrive at a conclusion that there is no specialty grade SPVC and hence the question of excluding the same from PUC does not arise. Therefore findings recorded in Addendum Notification dated 16.12.2024 arrived at by the Designated Authority are not tenable. Conclusion - The Specialty Grade SPVC Resins imported by the petitioners for manufacture of CPVC to be used for manufacture of the safe and non-hazardous CPVC pipes and fittings for potable water supply are to be excluded from the product under consideration for the purpose of investigation initiated by the Designated Authority in absence of any classificatory investigation carried out while determining the product under consideration as there is clear procedural lapse on part of the Designated Authority as per Manual of Operating Practices for Trade Remedy Investigations to come to such preliminary findings. Respondent Designated Authority is therefore directed to exclude specialty grade SPVC Resins imported by the petitioners for manufacturing of CPVC from the scope of PUC in the further investigation as such specialty grade SPVC Resins are neither produced by the domestic industry nor were they technically or commercially substitutable and interchangeable with the grades commercially produced in the domestic industry. Petition allowed in part.

Summary

The core legal questions considered by the Court in this matter are:

1. Whether the Designated Authority was justified in including the specialty grades of PVC Suspension Resins (SPVC) imported by the petitioners for manufacturing Chlorinated Polyvinyl Chloride Resin (CPVC) within the scope of the Product Under Consideration (PUC) in the anti-dumping investigation.

2. Whether the specialty grades of SPVC imported by the petitioners qualify as "like articles" under Rule 2(d) of the Anti-Dumping Rules vis-`a-vis the SPVC produced by the domestic industry.

3. Whether the writ petition challenging the preliminary findings and the Addendum Notification of the Designated Authority is maintainable at this stage or whether the petitioners have an alternative remedy under section 9C of the Customs Tariff Act, 1975 ("the Act").

4. Whether the Designated Authority followed the proper procedure and legal framework, including the Manual of Operating Practices for Trade Remedy Investigations, in defining and describing the PUC and in considering the exclusion requests made by the petitioners.

5. Whether the Designated Authority erred in shifting the burden of proof to the petitioners to demonstrate that the specialty grades of SPVC are not substitutable or produced domestically.

Issue-wise Detailed Analysis

1. Inclusion of Specialty Grades of SPVC within PUC

Legal framework and precedents: The Anti-Dumping Rules, framed under the Act, empower the Designated Authority to identify the article liable for anti-dumping duty (Rule 4(b)) and to define the PUC accurately at the initiation stage (Manual of Operating Practices, paras 3.4, 3.13). The concept of "like article" under Rule 2(d) is central to this determination. The definition requires the article to be identical or, in absence thereof, to have closely resembling characteristics.

Court's interpretation and reasoning: The Court noted that the Designated Authority issued an Addendum Notification dated 16.12.2024 rejecting the petitioners' request to exclude specialty grades S65C and S66J of SPVC imported for manufacture of CPVC. The Authority reasoned that these specialty grades are not uniquely used for CPVC manufacture but are also used for general purposes, and that the domestic industry produces like articles substitutable with the imported specialty grades.

Key evidence and findings: The Designated Authority relied on test reports comparing bulk density and porosity parameters, submissions by domestic producers, and import data showing that 92% of the specialty grade imports were by traders not producing CPVC. The Authority also considered claims by Hanwha Solutions Corporation that it manufactures CPVC using its own SPVC resins without specialty grades.

Application of law to facts: The Court found that the Designated Authority did not conduct a thorough classificatory investigation at the initiation stage and improperly expanded the scope of PUC after initiation. The Authority accepted domestic industry data without independent verification and failed to consider that the petitioners' specialty grades were not produced domestically during the period of investigation.

Treatment of competing arguments: The petitioners argued that their specialty grades are technically and commercially distinct and not substitutable by domestic grades. The respondents contended that the Authority's approach was consistent with the Rules and that the petitioners' claim was unsupported. The Court agreed with the petitioners that the Authority failed to properly examine the technical and commercial substitutability and improperly shifted the burden of proof to the petitioners.

Conclusions: The Court held that the specialty grades of SPVC imported by the petitioners should be excluded from the PUC for the purpose of ongoing investigation, as they were neither produced domestically nor substitutable with domestic products.

2. Definition of "Like Article" and Determination of Domestic Industry

Legal framework and precedents: Rule 2(d) defines "like article" as identical or closely resembling products. Article VI of GATT 1994 and the Agreement on Implementation of Article VI emphasize the need for objective examination of injury and like products. The Manual of Operating Practices elaborates on technical, commercial, functional, and production substitutability.

Court's interpretation and reasoning: The Court emphasized that the identification of the PUC and like articles is foundational to the investigation. The Designated Authority must determine the PUC at initiation and cannot expand it later. The Authority's reliance on domestic industry data without verifying whether the specialty grades were produced domestically or substitutable was flawed.

Key evidence and findings: The Court noted that the domestic producer DCW Limited did not produce the specialty grades during the investigation period and imported such grades itself. The Authority's conclusion that domestic and imported products are substitutable was based on limited parameters and unverified lab reports.

Application of law to facts: The Court held that the Authority failed to apply the objective tests for like articles properly and did not consider the absence of domestic production of the specialty grades. The burden to prove domestic production and substitutability rests with the domestic industry and the Authority, not the petitioners.

Treatment of competing arguments: The respondents argued that different grades are subsets of one product and thus like articles. The petitioners highlighted technical differences and lack of domestic production. The Court sided with the petitioners, finding the Authority's approach inconsistent with the Rules and Manual.

Conclusions: The specialty grades imported by the petitioners are not like articles produced domestically and should be excluded from the PUC.

3. Maintainability of Writ Petition Challenging Preliminary Findings

Legal framework and precedents: Section 9C of the Act provides for appeal only after final determination by the Designated Authority under Rule 17 of the Anti-Dumping Rules. Preliminary findings under Rule 12 are recommendatory. The Court referred to decisions holding that writ petitions against preliminary findings are maintainable when no alternative remedy is available, especially to prevent irreparable harm.

Court's interpretation and reasoning: The Court observed that the petitioners had no alternative remedy against preliminary findings and provisional duties. The appeal under section 9C lies only after final findings and imposition of duty by the Central Government.

Key evidence and findings: The Court noted prior case law supporting writ petitions against preliminary findings and the absence of any provisional duty imposed during pendency.

Application of law to facts: The Court entertained the writ petition challenging preliminary findings and the Addendum Notification.

Treatment of competing arguments: Respondents contended the petition was premature and alternative remedies existed. The Court rejected this, emphasizing the lack of alternative remedy at the preliminary stage.

Conclusions: The writ petition challenging preliminary findings is maintainable and properly entertained.

4. Compliance with Procedural Requirements and Manual of Operating Practices

Legal framework and precedents: The Manual of Operating Practices mandates accurate and timely definition of PUC, freezing scope at initiation, and consideration of exclusion requests within three months. The Authority must ensure transparency and opportunity to all parties.

Court's interpretation and reasoning: The Court found that the Designated Authority failed to define the PUC precisely at initiation, unilaterally expanded the scope, and brushed aside the petitioners' exclusion requests initially on confidentiality grounds. The Court directed the Authority to share confidential information and allow submissions before finalizing the scope.

Key evidence and findings: The Court referred to the chronology of communications, representations, and the Addendum Notification. It noted procedural lapses in handling exclusion requests and failure to conduct thorough investigation.

Application of law to facts: The Court held that procedural lapses rendered the preliminary findings unsustainable and directed exclusion of specialty grades from PUC in further investigation.

Treatment of competing arguments: Respondents argued due process was followed and that the Authority's findings were reasoned. The Court disagreed, emphasizing procedural fairness and adherence to the Manual.

Conclusions: The Designated Authority must comply with procedural requirements and conduct proper investigation regarding specialty grades before finalizing the PUC.

5. Burden of Proof Regarding Technical and Commercial Substitutability

Legal framework and precedents: The burden to establish like articles and injury lies with the domestic industry and Designated Authority. The petitioners are not required to prove non-substitutability or absence of domestic production.

Court's interpretation and reasoning: The Court rejected the Designated Authority's approach of requiring the petitioners to prove that specialty grades are not produced domestically or are not substitutable. The Court held this to be a novel and misconceived proposition.

Key evidence and findings: The Court noted the data showing domestic industry's failure to produce specialty grades and reliance on imports. The Authority's shifting of burden was contrary to legal principles.

Application of law to facts: The Court concluded that the Authority erred in burden allocation and must independently verify domestic production and substitutability.

Treatment of competing arguments: Respondents argued the "acid test" requires petitioners to approach domestic industry first. The Court rejected this as lacking legal basis.

Conclusions: The Designated Authority must bear the burden of proof for like article determination and cannot shift it to petitioners.

Significant Holdings

"The determination of the Product Under Consideration (PUC) and the 'like article' in an anti-dumping investigation holds the key to establishing dumping and injury, and any fallacies in the same could make the entire investigation void."

"The Designated Authority was required to consider the submissions and objections raised by the petitioners during investigation only. The scope of product under consideration can be restricted during the course of investigation but cannot be enhanced after such initiation."

"The specialty grades of SPVC imported by the petitioners for manufacturing CPVC are neither produced by the domestic industry nor are they technically or commercially substitutable and interchangeable with the grades commercially produced in the domestic industry."

"The burden to prove that specialty grades are produced domestically and substitutable rests on the domestic industry and the Designated Authority, and cannot be shifted to the petitioners."

"The writ petition challenging preliminary findings is maintainable as no alternative remedy under section 9C of the Act is available at this stage."

"The Designated Authority failed to conduct a thorough investigation and improperly relied on domestic industry data without independent verification, thereby committing procedural lapses."

"The specialty grades of SPVC imported by the petitioners are to be excluded from the product under consideration for the purpose of further investigation."

"The petition is partly allowed to the extent indicated and the Designated Authority is directed to exclude the specialty grades from PUC in further proceedings."