TMI Blog2010 (1) TMI 413X X X X Extracts X X X X X X X X Extracts X X X X ..... dian 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. - 22155 of 2009 - - - Dated:- 22-1-2010 - V.V.S. Rao and B.N. Rao Nalla, JJ. REPRESENTED BY: Shri S. Ravi, Sr. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 13 of the Rules, the Central Government issued a notification imposing provisional duty on the subject goods. The arguments in this writ petition are completed on 10.12.2009 and we reserved the matter for consideration. At that stage, senior counsel for VMCL informed the Court that miscellaneous application being W.P.M.P.No.35225 of 2009 has been filed seeking amendment of the writ petition to challenge the provisional ADD notification. As the same is consequential to the two impugned notifications in this writ petition, and as the said miscellaneous application is filed on the day the case is reserved, we decline to accept any miscellaneous application after the case is reserved. Background 3. The brief factual background that follows is a summary of affidavits, counter affidavits, reply affidavits, rejoinder affidavits, the impugned orders and other documents available on record. VMCL statedly is one of the largest manufacturers of SDH [SDH (Synchronous Digital Hierarchy) is an international standard used for combining multiple voice, video and data signals to a single stream for transmitting over fiber optic cable. For example, SDH equipment can multiplex telephon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / manufacturer of SDH, Tejas made an application on 11.01.2009 before DA. In the said application, Tejas alleged that SDH, the product under consideration (PUC), is also known as Multiplexers, Add Drop Multiplexers (ADM), Multiple Add Drop Multiplexers (MADM) and digital cross-connects which can be imported freely from any country either as complete equipment or in CKD/SKD form, that number of accessories required for connecting/installing SDH equipment in the network like E1 cables, PCM cables, power cables, racks, workstations etc and the software forming integral part come within the scope of PUC. This transmission equipment is governed by international standard such as TL 9000 and technical specification in India are defined by Telecom Engineering Centre (TEC). PUC is classified under Chapter 85 of the Customs Tariff Act, 1975 with complete description therein and the basic customs duty is nil. Tejas stated that PUC is being imported from subject countries for quite some time and that though the market is witnessing price decline of PUC from Chinese producers every year, during April-December 2008, the dumping of PUC was intensified in high proportions. They alleged that foreig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The DA considered these objections and came to conclusion that the subject goods entered Indian market from the subject countries at price less than the normal values in the domestic markets of the exporting countries and that domestic industry suffered material injury both by volumes and price effect of dumped imports. Accordingly, DA recommended provisional ADD equal to the lesser of margin of dumping and margin of injury which is at 236% of the CIF value of imports. These preliminary findings were notified in accordance with Rule 5(5) of the Rules and DA communicated the procedure subsequent to such notification for the purpose of final findings. Submissions 6. M/s.S.Ravi and S.Ganesh, senior counsel for VMCL and Prithvi respectively submit that assumption of jurisdiction by DA is erroneous because Tejas (i) is not a domestic industry; and (ii) is itself an importer which assembles and markets low end transmission products, and hence is a non-domestic industry/ manufacturer. Alternatively, they would urge that DA committed error in exercise of jurisdiction (i) in not applying the same tests for determining whether Tejas, VMCL, Prithvi and others are domestic industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exceeding the margin of dumping in relation to any article exported from any country or territory to India at less than its normal value. The explanation to subsection (1) defines the terms, "margin of dumping", "export price", and "normal value". Subsection (6) mandates that the Central Government may determine and identify the articles liable for ADD, export price, the normal value and the margin of dumping in relation to such articles, after such enquiry made in accordance with the Rules made by them. Section 9B (2) of the Act gives Rule making power to the Central Government and such Rules may provide for the manner in which any investigation may be made and the factors which shall be considered in such investigation. Under Section 9B (1)(b)(ii) of the Act, the Central Government shall not levy ADD on any article imported into India from a member of World Trade Organisation (WTO) or from a most favoured nation unless the Central Government makes determination that import of such article causes material injury to any established industry in India. In addition there shall have to be preliminary findings of dumping and consequent injury to domestic industry. For ready reference, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such preliminary findings is that it may lead to issue of notification by the Central Government imposing provisional ADD. Rules 14 and 15 of the Rules deal with suspension or termination of investigation. Rule 17 of the Rules deals with recording of findings. Rules 18 to 24 of the Rules contain the provisions that enable imposition of ADD and review thereof. 10. In the scheme of things contemplated under Section 9A, 9B of the Act and the Rules made thereunder, the Central Government or the DA are not vested with suo motu powers to ascertain and determine the articles liable for ADD. Such exercise can be undertaken only at the instance and behest of the "domestic industry". Indeed any investigation by DA into these matters can be started only with a request from the "domestic industry". Therefore the essential and mandatory qualification for one to file an application before DA is to satisfy the requirements of being a "domestic industry". As noticed supra, when an application is made by a "domestic industry", the DA shall have to initiate investigation, determine the normal value, export price and margin of dumping and determine the injury or threat of injury in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is identical or alike in all respects to the article under investigation for being dumped in India or an article which has characteristics closely resembling the articles under investigation if there is no such article which is being dumped in India. Ascribing plain meaning to the definitions, any domestic producer who is not importer, exporter, who is not related to such exporters or importers, manufactures a major portion of the total domestic production - say more than 50%, then only such producer can be qualified as "domestic industry" to initiate investigation under Rule 5(1) of the Rules. In other words, any exporter or importer of an article identical to a dumped article or a subsidiary of such exporter or importer, which is controlled, shall not qualify as "domestic industry". Rule 4 casts duty on DA to investigate dumping and identify the article liable for ADD and submit the findings to the Central Government. He is also empowered to recommend the amount of ADD equal to the margin of dumping or less which if levied would remove the injury to the domestic industry. The ADD so determined finally under Rule 17 shall be the basis for the Central Government to issue noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own by the Apex Court in Raja Anand Brahma Shah v State of U.P., AIR 1967 SC 1081, that where the jurisdiction of an administrative authority depends upon a preliminary finding of fact, the High Court is entitled in a preceding of writ of certiorari to determine upon its independent judgment whether or not that finding of fact is correct. Once an ADD is levied, though it may be provisional, it may adversely affect the trade or business of the parties like the petitioner. Though, there is provision for refund of ADD but that in itself is not sufficient as the injury which may be caused to a trade or business, cannot be compensated by refund of the amount recovered as duty on anti-dumping." (emphasis supplied) 15. In Association of Synthetic Fibre Industry v J.K.Industries Limited[2006(199) E.L.T.196= (2005) 11 SCC 482], the respondent challenged a provisional anti-dumping notification in the High Court, which passed an order directing DA to keep the recorded final proceedings in a sealed cover and observed that the preliminary findings shall be subject to final decision. When the matter was being finally heard, appeal was filed before Supreme Court. 16. A question came up as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom a foreign country or territory; (ii) at place where import in Indian territory takes place; and (iii) at a place where injury to domestic industry is caused viz. where like articles as under investigation are manufactured in India and/or at a place where the article under investigation is put to industrial use. This is apart from the place where investigation is initiated and proceeded with." (emphasis supplied) 18. Reliance Industries v Designated Authority[2006(202) E.L.T. 23(S.C.)=2006 (10) SCC 368] is a case involving scope of Rule 7 of the Rules and the principles of determination of Non Injurious Price (NIP) when an article is found to be dumped in Indian markets. Reliance, the manufacturer of Pure Terephatalic Acid (PTA) applied to DA for imposing ADD on PTA imported from Japan, Malaysia, Spain and Taiwan. It was found that manufacturers from Japan, Malaysia, Spain and Taiwan were dumping PTA into India causing material injury to domestic industry. DA came to conclusion that imports from Japan and Malaysia were above NIP and therefore, there was no injury to domestic industry. Reliance unsuccessfully challenged the notification issued by Central Government imposin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have portents of derailing decisions-which could have a cascading impact and inflict resultant damage not only on the domestic industry in issue but even on industries which are vertically integrated to the said domestic industry in issue but even on industries which are vertically integrated to the said domestic industry, as also on their employees and industrial labour, which perhaps at times Courts cannot monetarily quantify. Therefore, the Court in our view, should be slow in entertaining such petitions. However, we make it clear that we are not to be understood as saying that in no case can writ petitions be entertained. Writ petitions in such cases ought to be entertained in our view, when there is either a complete lack of jurisdiction or a palpable error so grave which requires imminent interference by a writ Court." 20. Before we take up further analysis of the case, we need to refer to two more precedents relied on by Tejas to challenge the territorial jurisdiction of this Court, namely Union of India v Adani Exports Limited[2001(134) E.L.T. 596(S.C)=(2002) 1 SCC 657 ] and Alind Workers Congress v United Shippers Limited[2008(6) ALT 325 :(2009) 147 Comp Cas 559(AP)] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich have no bearing with the lis or the dispute involved in the case, do not give rise to a cause of action so as to confer territorial jurisdiction on the court concerned. (emphasis supplied) 22. In Alind (supra), a company registered in State of Kerala was declared sick company by BIFR, which also sanctioned a scheme of revival involving takeover of the sick company by United Shippers. The effort to revival failed and BIFR sanctioned rehabilitation schemes which involved two divisions of sick company forming a separate entity. The said order was assailed by United Shippers before AAIFR. The appellate authority passed an order on 06.02.2007 setting aside the directives of primary board. Alind then assailed the said order in a writ petition before this Court. The fact that the sick company had three divisions in Hyderabad and that the writ petitioner therein having submitted a bid from Hyderabad were shown as constituting cause of action. The question of territorial jurisdiction was main issue before this Court. Relying on Adani Exports (supra), Kusum Ingots and Alloys Limited v Union of India[2004 (168)E.L.T.3=(2004) 6 SCC 254] and Eastern Coal Fields v Kalyan Banerjee[(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) E.L.T. 3= (2002) 5 SCC 167], Shew Kumar Agarwal v Union of India[2002 (141) E.L.T. 312(Cal.)], Rajasthan Textile Mills Association v Director General of Anti Dumping[2002 (149) E.L.T. 45(Raj.)], Sree Karpagambal Mills Limited v Gte.General of Anti Dumping and Allied Duties[2002(150) E.L.T. 1349 (Mad.)], J.G.Impex v Designated Authority[2003 (154) E.L.T. 226 (Mad.)], Mahavir Mirror Industries v Designated Authority[2003(155) E.L.T. 226(Mad.)] and Indian Express Newspapers v Union of India[2003(157) E.L.T. 138(Del.)]. If necessary, we will refer to them at appropriate place in this Judgment. Analysis, findings and reasons Territorial jurisdiction 25. Indisputably the power of the High Court to issue writs, orders, or directions to any public authority can be exercised in relation to territories of the State over which such High Court presides. So as to invoke the jurisdiction a person has to show the cause of action wholly arose or partly that arose within such territorial jurisdiction. Whether the seat of the State Government or public authority or the residence of any contesting respondents is situated within those territories is immaterial. Even if all the contes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving its manufacturing facilities as stated to us in Hyderabad. It manufactures optical transmission equipments at Hyderabad. For the said purpose it imports components at Hyderabad. The statement of denial by Tejas has been demurred by VMCL in their reply affidavit stating that it is engaged in importation of parts, components of the equipments purported to be covered under PUC in Hyderabad and engaged in manufacture of equipments purported to be covered under PUC in Hyderabad. Therefore, certainly they have cause of action to approach this Court. Further more, assuming that ADD is validly imposed, VMCL is required to pay such duty on the goods imported at Hyderabad and any coercive steps for collection of levying duties shall have to be taken by Customs establishment at Hyderabad. The DA published initiation notification from Delhi, received objections and responses at Delhi, conducted preliminary hearing there and published its preliminary findings in National Capital. Nonetheless, as VMCL imports components at Hyderabad, certainly part of cause of action for them has arisen within the territorial limits of this Court. Indeed, the DA in counter did not raise any objection on thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Indian law (see TATA Cellular v Union of India[(1994) 6 SCC 651: AIR 1994 SC 11], Om Kumar v Union of India[(2001) 2 SCC 386 : AIR 2000 SC 3689] and State of U.P. v Johri Mal[(2004) 4 SCC 714: AIR 2004 SC 3800]. Indian Administrative Law had also accepted axiom in Chief Constable of North Wales v Ivons[(1982) 3 ALL ER 141 :(1982) 1 WLR 1155(HL)] that Judicial review looks at decision making process than decision itself. Having regard to rule of law under a written constitution with not so perfect delineation of roles, powers and jurisdictions of the State organs, Indian law also contemplates either strict judicial scrutiny or deferential scrutiny depending on the role assigned to the Court under the Constitution and the subject of review. 31. Any law, ordinance, rule, regulation, notification inconsistent with the provisions of Part III of the Constitution of India would be void. A law made by incompetent legislative body or rules or regulations which are ultra vires are invalid and unenforceable. Probably for this reason doctrine of primary review is applicable when they are brought under curial scrutiny. When a public authority or a decision maker is required to resolve an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w is one which no reasonable person could have taken. If his action does not satisfy these rules, it is to be treated as arbitrary (In G.B.Mahajan v Jalgoan Municipal Council ((1991) 3 SCC 91 (SCC at p.111)]. Venkatachalaiah, J (as he then was) pointed out that "reasonableness" of the administrator under Article 14 in the context of administrative law has to be judged from the stand point of Wednesbury rules. In Tata Cellular (supra), Indian Express Newspapers Bombay (P) Limited v Union of India, ((1985) 1 SCC 641 : AIR 1986 SC 515, (SCC at p.691)), Supreme Court Employees' Welfare Association v Union of India ((1985) 1 SCC 641 (SCC at p.241)) and U.P.Financial Corporation v Gem Cap (India) (P) Limited ((1993) 2 SCC 299 : AIR 1993 SC 1435 (SCC at p.307)) while judging whether the administrative action is "arbitrary" under Article 14 (i.e., otherwise than being discriminatory), this Court has confined itself to a Wednesbury review always. 33. In Johri Mal (supra), the gamut of judicial review is reiterated as under. The Scope and extent of power of the judicial review of the High Court contained in Article 226 of the Constitution of India would vary from case to case, the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt noticed Royappa (supra) and observed that in such a case Article 14 of the Constitution of India would be attracted. In relation to other administrative actions as for example punishment in a departmental proceeding, the doctrine of proportionality was equated with Wednesbury Unreasonableness. (emphasis supplied) 35. In view of the 'three stage anti dumping levy exercise', we are convinced that notification of preliminary findings and the consequential provisional duty rules must be subjected to primary review because any error of law at that stage would vitiate the entire process and would render the notification illegal. Insofar as DA's exercise of determination of 'normal value', 'export price' and 'margin of dumping' as well as 'determination of injury' to domestic industry are concerned being in the realm of 'fact assessment', ordinarily they should be subjected to secondary review, applying Wednesbury principles. Before us, the impugned notifications are impeached on the grounds that DA's assumption of jurisdiction is erroneous and that DA's determination of PUC is arbitrary. Therefore, the standard of scrutiny is strict scrutiny or in-depth scrutiny. Whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar view was expressed observing as under. Lastly, it was contended that the paper making machine was not really manufactured by the appellant. Various components and parts were purchased and a few of the parts were fabricated at the factory and the assessee ultimately assembled various parts of the machine. We are unable to uphold this argument also because it has to be seen whether a final product is something distinct and apart from the components that have gone into its production. What the appellant has erected in its factory is a paper making machine. It may have purchased various components to make the machine but nonetheless what has been produced is something quite different from the components that had been purchased. A new marketable commodity has emerged as a result of the manufacturing activity of the appellant. (emphasis supplied) 38. In BPL India Limited v Commissioner of Central Excise[2002(143) E.L.T. 3 =(2002) 5 SCC 167], Supreme Court referring to DCM (supra) reiterated the settled law as under. It is well settled that a question as to when a manufacture of product takes place within the meaning of Section 2(f) of the Act (Central Excise Act, 1944) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raw materials imported from China, Israel and other countries, it is mentioned that 65.58% of raw material is imported. The names of parts of components imported from China are mentioned, but the actual figures in terms of quantity and value are conspicuous by absence. The fact however remains that majority of raw material is imported by Tejas to carry on their activities mentioned to hereinabove. Indeed, in paragraph 6 of Section II of their application they do admit that they are importers but to claim to be considered as domestic manufacturers notwithstanding the imports of components/sub-assemblies. Section 2(23) of the Customs Act defines "import" means 'bringing into India from a place outside India'. The term 'importer' is defined in Section 2(26) in relation to any goods at any time between their importation at the time whey they are cleared for home consumption as including a owner or any person holding himself out to be importer. Tejas squarely fall within the definition of 'importer' and it is altogether a different question whether being importer Tejas stands excluded from being 'domestic industry'. 40. Before we take up the other point we need to deal with Rule 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the article under investigation for being dumped in India. In the absence of such an article, another article which has characteristics closely resembling the articles under investigation is also 'like article'. Therefore, if two articles one manufactured in India and another dumped in India have same nomenclature, it would not satisfy the definition of 'like article'. To be so, both of them should be identical or alike in all respects. As per their application, Tejas manufacture SDH equipment with specifications branded as STM-1, STM-4, STM-16 whereas VMCL manufactures SDH equipment with specifications branded as STM-64, STM-256, DWDM 2.5G, DWDM 10G, DXC and interface converter. The tariff classification under Chapter 85 of the Custom Tariff Act deals SDH under one sub-heading and other multiplexers, optical multiplexer software under different sub-headings. Further, it is submitted by the counsel that the capacity of SDH equipment differs depending on the specification. It can range from 155 Mbps for STM-1 to 40 Gbps for STM-256. Therefore, the DA while inviting response from interested parties/exporters/importers/domestic agencies indicated code table for creation of PCN fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to date. Petitioner has regular exports of the product under consideration, details of which may be seen in Proforma-IV-A enclosed with this petition. The petitioner has been importing some components/sub-assemblies from other countries. However, import of these components or sub-assemblies is only to supplement the production activities of the petitioner, by leveraging the economies of scale of a global supply chain. The focus of the petitioner remains in design, development and manufacturing of the product in the Country. By contrast, a number of foreign producers have set up offices in India but they carry out all substantial design and development of the product in their country and the Intellectual Property resides in their respective home countries. A large part of manufacturing activities is therefore undertaken outside India. These entitles supplement such production activities by undertaking incremental activities in India. In view of the above, the petitioner submits that- (a) the petitioner should be considered as eligible domestic manufacturer to bring the present petition, notwithstanding that supplemental imports of components or sub-assemblies being made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that they import dual purpose component and their use of imported components is minimal. In such a situation, can the applicant importer be treated as domestic industry? After giving anxious consideration, and also perusing the documents produced by Tejas before DA, we are convinced that Tejas cannot be treated as domestic industry under the Rules and therefore, the assumption of jurisdiction by DA is erroneous. Tejas do not satisfy the requirements of being domestic industry. The reasons for this conclusion are as follows. 47. Firstly, as analysed by us, to be domestic industry, a domestic producer should be engaged in the manufacture of article to the extent of major proportion. If such manufacturer is also importer of alleged dumped article, such producer cannot be treated as domestic industry. The second part of definition in Rule 2(b) does not make any distinction between an importer of components used in the manufactured article and importer of articles using such components to barest quantity. If Rule 2(b) is read as excluding a domestic producer, who manufactures goods by using imported components/sub-assemblies taking up research, design and development activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lify to be 'domestic industry'. 50. Fourthly, the claim to be considered as domestic industry, Tejas relied on letters allegedly given by M/s.Measurement Controls Limited and letter of CMAI (Cellular and Mobile Association of India). The letter given by CMAI is alone placed on record. As per this letter, there are five companies including Tejas who have R D design and manufacturing in India owning intellectual property and eleven companies importing/trading equipment with minimal value addition in terms of buying accessories in India. On that basis, CMAI stated that they "are confident that production of Tejas is certainly far more than 50% of Indian production". It is not clear from the impugned order as to whether the DA made any enquiries with CMAI. If CMAI letter is excluded from consideration, there is no acceptable proof that Tejas is a major domestic industry. It is not clear whether CMAI has examined the import figures of Tejas and the percentage of imported components that go into SDH equipment made by them. As already noticed, DA found more than 65% of the components imported by Tejas. Therefore, no credibility can be attached to the letter of CMAI. 51. Fifthly, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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