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CASE NO.: Appeal (civil)  9012 of 2003

PETITIONER: M/s. S & S. Enterprise                                   

RESPONDENT: Designated Authority & Ors.                      

DATE OF JUDGMENT: 22/02/2005

BENCH: Ruma Pal,Arijit Pasayat & C.K. Thakker  

JUDGMENT: J U D G M E N T

RUMA PAL, J.

       The appellant imported lead acid batteries from  Bangladesh during the period 1.2.2000 to 13.9.2001.  The total  number of batteries so imported were found to be less than 3%  of the total imports of such batteries into India during that  period.  This was so found by the Designated Authority (the  respondent No.1), on an investigation consequent upon a  complaint lodged by the private respondent under Rule 5 of the  Customs Tariff (Anti-Dumping Duty on Dumped Articles and for  Determination of Injuries) Rules 1995 (referred to as ’the  Rules’).  Rule 14(d) inter alia  provides that if the Designated  Authority determines that the volume of the dumped imports  actual or potential from a particular country accounts for less  than 3% of the imports of the like product, he shall terminate  the investigation immediately. Nevertheless the respondent  No.1 continued the investigation in respect of the imports from  Bangladesh on the finding that the value of imports made from  Bangladesh was more than 6% which was more than the de  minimis  limit of 3% as provided under Rule 14(d). On 7th  December, 2001 the Respondent No.1 published the final  finding determining that anti-dumping duty was payable  in  respect of such imports of batteries during the period under  investigation. The Ministry of Finance  accepted the  recommendation of the respondent No.1 and notified the Anti- dumping Duty by Notification dated 2.1.2002. The appellant preferred an appeal before the Central  Excise & Gold (Control Appellate Tribunal (CEGAT).  The  Tribunal rejected the submission of the appellant that the  Designated Authority should have computed the volume of  exports on the basis of quantity rather than on the basis of  price. It held that the word "volume" in the context of Rule 14  meant value.   In our opinion, the interpretation of Rule 14(d) by the  respondent No.1 and the Tribunal is incorrect and contrary to  its language. The imposition of dumping duty is under Section  9A of the Customs Tariff Act 1975 and the Rules and is the  outcome of the General Agreement   on Tariff and Trade  (GATT) to which India is a party.  The purpose behind the  imposition of the duty is to curb unfair trade practices resorted  to by exporters of a particular country of flooding the domestic  markets with goods at rates which are lower than the rate at  which the exporters normally sell the same or like goods in  their own countries so as to cause or be likely to cause injury to

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the domestic market.  The levy of dumping duty is a method  recognized by GATT which seeks to remedy the injury and at  the same time balances the right of exporters from other  countries to sell their products within the country with the  interest of the domestic markets.  Thus the factors to constitute  ’dumping’, is (i) an import at prices which are lower than the  normal value of the goods in the exporting country; (ii)  the  exports must be sufficient to cause injury to the domestic  industry.  However a negligible quantity of imports would not be  sufficient to cause such injury. Article 5.8 of the Agreement on  Implementation of Article VI of the GATT, 1994 makes this  clear:  "An application under paragraph 1 shall be  rejected and an investigation shall be  terminated promptly as soon as the  authorities concerned are satisfied that  there is no sufficient evidence of either  dumping or of injury to justify proceeding  with the case.  There shall be immediate  termination in cases where the authorities  determine that the margin of dumping is de  minimis, or that the volume of dumped  imports, actual or potential, or the injury, is  negligible.  The margin of dumping shall be  considered to be de minimis if this margin  is less than 2%, expressed as a  percentage of the export price.  The  volume of dumped imports shall normally  be regarded as negligible if the volume of  dumped imports from a particular country is  found to account for less than 3% of  imports of the like product in the importing  Member, unless countries which  individually account for less than 3% of the  imports of the like product in the importing  Member collectively account for more than  7% of imports of the like product in the  importing Member."           The de minimis  rule as far as the price is concerned is  when the dumping margin or the difference between the export  price of the article and its normal value, is less than 2%.  In  other words the exporter is selling the goods in India at almost  the same price that it does in its country.  As far as quantity is  concerned, if the export accounts for less than 3% of the total  imports of the like article into India, it is treated as too trivial for  the law and is ignored.  The Rules have also distinguished between volume as  meaning quantity on the one hand and price on the other.  For  example under Rule 11(2), the Designated Authority is required  to determine the injury to the domestic industry taking into  account, inter-alia, the volume of dumped imports and their  effect on the price in the domestic market for like articles.  In  Section 14 itself, such distinction is maintained in Rule 14 (c)  and (d). Of particular significance is Annexure II to the Rules,  which deals with the principles for determination of injury.  Paragraph 1 provides that : "A determination of injury shall involve an  objective examination of  both (a) the volume  of the dumped imports and the effect of the  dumped  imports on prices in the domestic  market for like article and (b) the consequent  impact of these imports on domestic  producers of such products."

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       Paragraph 2 speaks of the consideration of whether there  has been a significant increase in the dumped imports while  examining the volume of dumped imports and whether there  has been a significant price under cutting by the  dumped  imports  in order to assess the effect on the prices in the  domestic market i.e. an increase in quantity and a decrease in  the export prices.  Again Paragraph 5 which deals with the  causal relationship between dumping and  the  injury to the  domestic industry speaks of "the volume and prices of imports"  as one of the relevant factors. The percentage of 3% vis a vis the quantity  is not broad  based but determined, we emphasise, with reference to a ’like  article’.  The word "like article" has been defined in Rule (2) (d)   as:-         " (d) "like article" means an article which  is identical or alike in all respects to the article  under investigation for being dumped in India  or in the absence of such an article, another  article which although not alike in all respects,  has characteristics closely resembling those of  the articles under investigation."

       The consideration of volume would also be limited to  such "like articles".  Therefore, when Rule 14(d) says that the investigation  must be terminated if the ’volume’ of the dumped imports is less  than 3% of the imports of the like product, it must mean that the  quantity of dumped imports must account for less than 3% of  the total imports.  To hold otherwise would mean that if the  price is lower than 3%, irrespective of the quantity imported, the  investigation would be dropped and it would, as submitted by  the appellant, lead to the absurd situation that a small number  of expensive imports would invite anti-dumping investigation but  cheap imports flooding the domestic markets would not.  In fact  such a situation is exactly what the dumping rules have been  framed to prevent. Nobody has questioned the preliminary finding of the  Designated Authority that the quantity of the imports from  Bangladesh during the period of investigation was less than 3%  of the total imports of the ’like article’ to India.  The investigation  therefore should have been promptly dropped against  Bangladesh. The respondents’ submission that the preliminary finding  was not conclusive of the matter and was subject to a final  finding is unacceptable and is against the language of Rule  14(d). The proceedings for investigation, are, under Rule 5,  initiated on a written application by the domestic industry.  The  application is required to be supported by evidence of (a)  dumping; (b) injury where applicable; and (c) a causal link  between dumping of imports and the alleged injury.   The  Designated Authority is required on the basis of the evidence  as adduced by the domestic industry, to arrive at a prima facie  conclusion even before initiating the investigation.  The initiation  of the  investigation is then publicly notified with copies being  sent to the known exporters of the articles alleged to be  dumped as well as to the Government of exporting countries  and other interested parties.[Rule 6(2)].    Information may be  required by the Designated Authority from such persons who  are required to supply the same, normally within 30 days from  the date of the receipt of the notice.   After collecting such  evidence and information which pertain to the ingredients of  dumping, the Designated Authority is required "in appropriate  cases" to record a preliminary finding regarding export price,  normal value and margin of dumping and the injury to the

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domestic industry under Rule 12.  If the Designated Authority is  of the opinion on the basis of its preliminary finding that there  has been dumping which has caused injury to the domestic  industry, it may make a preliminary determination of the margin  of dumping.  On the basis of the preliminary finding the Central  Government may, under Rule 13, levy provisional duty.  It is at  this stage that Rule 14 comes into operation when the  investigation is yet to be completed finally and the final findings  published under Rule 17.   As we hold that it was  incumbent on the respondent No.  1 to have closed the investigation under Rule 14(d) once it  came to the conclusion that the volume of dumped imports was  less than 3% of the total imports it is sufficient to upset the  finding of the Tribunal and the respondent No.1 to set aside the  anti dumping duty imposed on the appellant.  In the  circumstances, it is unnecessary to decide on the further  challenge raised by the appellant on the basis of violation of  Rule 16.          The appeal is accordingly allowed and the impugned  decisions of the Tribunal and the Designated Authority are set  aside.