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Judgment
V.V.S. Rao, J.—Tejas Network Limited (Tejas), a Bangalore based company lodged an application on 11.1.2009 with Designated Authority (DA), for imposition of anti dumping duty (ADD, for brevity) on SDH (Synchronous Digital Hierarchy) equipment. They alleged that the product is being dumped from China PR and Israel (hereafter, subject countries) 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 (the Rules, for brevity) 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. The DA also invited comments on those findings from all interested parties for consideration in the exercise for recording final findings. Aggrieved by the initiation notification and preliminary findings, VMCL filed the instant writ petition seeking their invalidation.
When the matters are pending, in exercise of powers under 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
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 (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 telephone calls from many users to one single stream. SDH equipments are available in different sizes and mainly depend on the capacity. Example STM-1 (155 Mbps), STM-4 (622 Mbps), STM-16 (2.5 Gbps), STM-64 (10 Gbps) and STM-256 (40 Gbps) equipment especially STM-1 (155 Mbps), STM-4 (622 Mbps), STM-16 (2.5 Gbps), STM-64 (10 Gbps) and Dense Wavelength Digital Multiplexing (DWDM) DWDM is a technology that puts data from different sources together on an optic fiber with each signal carried at the same time on its own separate light (wavelength). Using DWDM, upto 80 separate wavelengths or channels of data can be multiplexed into a light stream transmitted on a single optical fiber. Typically multiple of SDH equipments are connected to DWDM networks - Optical Transmission Equipment - especially DWDM 2.5G and DWDG 10G. It also manufactures other transmission equipment with technical specification DXC Digital Cross Connect and interface converter. Admittedly it has three running supply contracts with BSNL for supply of 2.5G DWDM, DXC and DTM 16 MADM equipments. Indisputably VMCL imports parts and components in completely knocked down/semi knocked down (CKD/SKD) form, carries out manufacturing and final testing activities in India before supplying to different telecommunication companies like BSNL. There is also no dispute that there would be considerable differences in design, physical properties, uses and markets for STMs and DWDMs depending on carrying capacity and functionalities of these optical transmission equipments.
Tejas is also manufacturer of optical transmission equipments especially STM-1, STM-4 and STM-16. The fifth respondent M/s. Prithvi Information Solutions Limited (Prithvi, for brevity) is also one such enterprise which is sister concern of VMCL The sixth respondent of M/s. Tata Teleservices Limited is one of many endusers of SDH equipment. In March 2007 and May 2008 BSNL called for tenders for supply of STM-16 MADM equipments. Tejas along with M/s. Odryn Technologies Private Limited became lowest tenderer in respect of March 2007 tender. Prithvi along with Huawei Technologies Limited (Huawei, for brevity) was declared as lowest tenderer in respect of second tender. Statedly Prithvi quoted 7% higher rates than Tejas but BSNL successfully negotiated with Prithvi for price reduction. Perhaps, this compelled Tejas to approach DA for imposition of protective duty on VMCL and others. As required under Rule 5(1) of the Rules, claiming themselves as major domestic industry/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 El 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 foreign manufacturers dropped prices between 60-75% over their quoted prices in one year''s time and consequent material injury inflicted on domestic industry poses a threat. The price effect of imports allegedly caused substantial injury to domestic industry due to significant price depressing effect in the Indian market. Tejas asserted that they have enough capacity to meet the next ten years requirement and demand of India in manufacturing SDH equipment. Tejas requested DA to recommend ADD on SDH transmission equipment imported in India and requested to impose interim duty pending investigation. Be it noted that Tejas did not furnish any information in relation to (a) purchase policy including long term contracts for major materials; (b) sales policy indicating marketing/distribution channels, commission/discount policy, credit terms; (c) store accounting and inventories/stock/WIP valuation; (d) quality control procedure and tests being conducted; (e) details of job work done or got done during the investigation period, and (f) process flow diagram. They claimed that details thereof form business proprietary information.
Designated Authority issued initiation notification dated 21.04.2009 proposing investigation into the alleged dumping and consequent injury to domestic industry in terms of Rule 5 of the Rules. By letter dated 18.05.2009, the exporters, importers in India and other domestic manufacturers and industrial users were requested to make submissions relevant to the investigation within 40 days from the date of letter addressed to them or the date of initiation notification dated 21.04.2009. In response thereto, ECI India Private Company Limited, Huawei Technologies Limited, Vodophone Essar Limited, VMCL, Prithvi and Measurement and Controls Limited inter alia sent communications objecting the investigation on the ground that Tejas have no locus of filing the application as they get significant parts/quantities of components outsourced to specialized producers called EMS abroad. Objections were also raised that Tejas did not provide required information regarding source of imports and period thereof, there is no bifurcation of sale to India and export sale, that imports of subject goods have no consequential negative impact on applicant''s performance and that Product Control Number (PCN) classification does not reflect the characteristics of PUC. 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
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 industries or not; (ii) in incorrectly determining PUC and like article, in that DA failed to see glaring technology variations between the low end products (STM-1, STM-16 and MADM) manufactured by Tejas and high end products (STM-16, STM-64, DWDM 2.5G, DWDM 10G, other telecom equipment, power accessories etc) manufactured by VMCL and Prithvi; (iii) in evolving arbitrary, unfair and irrational PCN for the purpose of fair comparison of prices of various items included in PUC; (iv) in not applying mind properly; and (v) in violating principles of natural justice, in that DA did not afford hearing to Prithvi and did not consider preliminary objections of VMCL on an erroneous ground.
Senior counsel for Tejas Sri Arshad Hidaytullah does not dispute reviewability of impugned orders, but raised a preliminary objection questioning territorial jurisdiction of this Court. In addition he also contends that enquiry by DA as to ''domestic industry'', Tike articles'', ''PUC, ''PCN'' etc being fact finding enquiry interference by judicial review Court is not warranted. According to senior counsel, judicial review of fact finding conclusions especially at the stage of preliminary findings must be denied as the aggrieved persons can always raise objections before the same authority before he records final findings and also seek refund of the provisional duty paid along with interest u/s 9A(8) of the Customs Tariff Act and Rule 21 of the Rules. He also points out that VMCL has already submitted their detailed response before DA which shall have to be considered in final investigation. He commends to reject the argument that Tejas is also importer. He contends that Tejas imports from Thailand and Malaysia, and as per Rule 2(b) of the Rules imports from subject countries can alone be treated as dumped articles and not by his client. He also refutes the contentions of VMCL on their plea of jurisdictional errors and denies any mala fide exercise of power by DA.
Statutory provisions
Section 9A of the Customs Tariff Act 1975 (the Act, for brevity), was inserted by the Customs Tariff (Second Amendment) Act 1992, which was substituted by the Customs Tariff (Amendment) Act 1995, with effect from 01.01.1995, which again underwent several amendments. There are eight sub-sections. Section 9A(1) is a charging section and empowers the Central Government to impose ADD not 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 Sub-section (1) defines the terms, "margin of dumping", "export price", and "normal value". Sub-section (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. u/s 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, Section 9B(1)(b) of the Act with its three clauses is extracted hereunder.
9B. (1) Notwithstanding anything contained in Section 9 or Section 9A,-
(a) omitted in this order
(b) the Central Government shall not levy any countervailing duty or ADD-
(i) u/s 9 or Section 9A by reasons of exemption of such articles from duties or taxes borne by the like article when meant for consumption in the country of origin or exportation or by reasons of refund of such duties or taxes;
(ii) under Sub-section (1) of either of Section 9 and Section 9A, on the import into India of any article from a member country of the World Trade Organisation or from a country with whom Government of India has a most favoured nation agreement (hereafter referred to as a specified country), unless in accordance with the rules made under Sub-section (2) of this section, a determination has been made that import of such article into India causes or threatens material injury to any established industry in India or materially retards the establishment of any industry in India; and
(iii) under Sub-section (2) of either of Section 9 and Section 9A, on import into India of any article from the specified countries unless in accordance with the rules made under Sub-section (2) of this section, a preliminary findings has been made of subsidy or dumping and consequent injury to domestic industry; and a further determination has also been made that a duty is necessary to prevent injury being caused during the investigation:
Provided that nothing contained in Sub-clauses (ii) and (iii) of this clause shall apply if a countervailing duty or an ADD has been imposed on any article to prevent injury or threat of an injury to the domestic industry of a third country exporting the like articles to India;
(c) omitted in this order
(2) omitted in this order
In exercise of their powers under Sections 9A(6) and 9B(2) of the Act, the Central Government made the Rules. It is necessary to notice these Rules to the extent relevant. There are 24 Rules and two annexures. Rule 2 of the Rules defines various terms. Rules 3 and 4 of the Rules deal with appointment of DA and his duties. Rules 5 to 12 of the Rules deal with initiation of investigation and recording of preliminary findings with regard to the dumped articles and injury to domestic industry. The consequence 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.
In the scheme of things contemplated u/s 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 with Rule 6 of the Rules and Annexures-I and II. If for any reason applicant/petitioner is not a "domestic industry", the initiation of investigation and recording of preliminary findings as well as final findings would be ex fade illegal because an unqualified entity cannot trigger the process for imposition of ADD. To that extent, there is no dispute between the rival parties before us.
"Domestic industry", "interested party" and "like article" are defined in Rules 2(b), 2(c) and 2(d) of the Rules. Omitting proviso and explanation thereto, Rules 2(b), 2(c) and 2(d) of the Rules read as under.
Definitions.- In these rules, unless the context otherwise requires-
(b) "domestic industry" means the domestic producers as a whole engaged in the manufacture of the like article and any activity connected therewith or those whose collective output of the said article constitutes a major proportion of the total domestic production of that article except when such producers are related to the exporters or importers of the alleged dumped article or are themselves importers thereof in which case such producers may be deemed not to form part of domestic industry.
(c) "interested party" includes -
(i) an exporter or a foreign producer or the importer of an article subject to investigation for being dumped in India, or a trader or business association a majority of the members of which are producers, exporters or importers of such an article;
(ii) the government of the exporting country; and
(iii) a producer of the like article in India or a trade and business association a majority of the members of which produce the like article in India;
(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;
(emphasis supplied)
Domestic producers engaged in the manufacture of "like article" whose collective output constitutes a major proportion of total domestic production of that article shall be "domestic industry". But exporters or importers of the alleged dump article or producers related to them do not form part of "domestic industry". "Like article" means an article 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 notification imposing such duty. Therefore, in the scheme of things DA has a pivotal role.
DA can suo motu initiate investigation when it receives information from the Commissioner of Customs regarding the existence of dumping causing injury to domestic industry. DA can also initiate investigation only when an application is made by or on behalf of domestic industry. Therefore, the assumption of jurisdiction by DA depends on the applicant satisfying that it is a domestic industry as defined under Rule 2(b) of the Rules. In the absence of the qualifications as to domestic industry, the assumption of jurisdiction by DA, initiation of investigation, preliminary findings and final findings would be ex facie without jurisdiction and any investigation would amount to error in the exercise of the jurisdiction. Be that as it is, Rule 6 contains principles that govern investigations, Rule 12 speaks of recording preliminary findings and Rule 17 deals with recording of final findings by DA.
Precedents
In Rajasthan Textile Mills Association v. Director General of Anti-Dumping 2002 (149) E.L.T. 45 (Raj.), petitioner assailed initiation notification concerning imports of Polyester Staple Fiber (PSF) originating from four foreign countries. The preliminary findings were also challenged whereunder levy of provisional ADD was recommended. The respondents including "domestic industry" manufacturing PSF raised a preliminary objection regarding maintainability of writ petition against preliminary findings of DA having regard to availability of appeal before Central Excise Appellate Tribunal. A Division Bench of Jodhpur Bench of Rajasthan High Court negatived the contention observing as under.
As far as the challenge to preliminary finding is concerned, it being recommendatory in nature, the normal rule is that no interference should be made by a writ Court under Article 226 of the Constitution. However, as the Rule 6 provides an opportunity to the industrial users as well as interested parties or its representatives to present an information relevant to the investigation, the limited interference is called for to satisfy if the preliminary finding has been recorded after following the statutory provision. It is of course true that it is for the Central Government to levy or not to levy a provisional duty on the basis of the preliminary finding but as laid down by the Apex Court in Raja Anand Brahma Shah Vs. State of Uttar Pradesh and Others, 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)
In E.V. Chinnaiah Vs. State of Andhra Pradesh and Others, 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. A question came up as to whether High Court''s jurisdiction was ousted at the stage of investigation by DA. While observing that mere communication of findings by DA to Central Government would not prejudice any interested parties. Supreme Court further held that High Court''s jurisdiction is not ousted and at any stage, High Court can pass orders. It was held:
Needless to say, all these steps including the imposition of ADD, in the event of the Central Government forming an opinion to do so, would be subject to the result of the writ petition pending in the High Court and High Court does have power to grant an interim relief at any stage of the proceedings subject to a case in that regard being made out. That is what the law is. The decision of the Central Government in the matter of ADD is appealable and also subject to writ jurisdiction on well-settled parameters of constitutional law.
(emphasis supplied)
J.K. Industries Ltd. Vs. Union of India (UOI), is a case involving the question of territorial jurisdiction of High Court to deal with challenge to ADD proceedings and challenge to notification levying ADD on an article imported from China P.R. Though a Division Bench of Rajasthan High Court came to the conclusion that petitioner has a cause of action to impeach the proceedings of DA and that it has territorial jurisdiction, it was held that the investigation by DA in aid of legislative function by Central Government to levy ADD cannot be interdicted nor DA restrained from continuing and completing investigation. The relevant observations regarding cause of action are as below.
Thus, for the purpose of investigation, the cause of action will consist of export, which emanates from a foreign country, import in India and the injury to domestic country. Such injury is measured in terms of injury to manufacturers of similar article in India and to the industrial users of article under investigation. This position of necessity interests to be heard as affected parties is apparent from definition of interested parties in Rule 2(c) and mandatory requirement to offer opportunity to industrial users and/or to representative consumer organisation where article is commodity ordinarily sold at retail level under Rule 6(5) of the Rules of 1995.... Therefore, part of cause of action to be investigated arises (i) at place from where export to India takes place from 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)
Reliance Industries Ltd. Vs. Designated Authority and Others, 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 imposing ADD on PTA originating from Spain only before CESTAT. The Supreme Court reversed the decision of CESTAT but clarified that the Judgment would not benefit the appellant for the past. Insofar as Rule 7, which empowers DA to treat certain material as confidential information, the apex Court held that, "excessive and unwarranted claim of confidentiality defeats the right of appeal and in the absence of knowledge of the consequences, grounds, reasoning and methodology by which the DA has arrived at its decision and made its recommedation, the parties to the proceedings cannot exercise their right to appeal either before Tribunal or the Court". Insofar as nature of jurisdiction to be assumed by DA only on a complaint of dumping, it was held:
We are of the opinion that the nature of the proceedings before the DA are quasi-judicial, and it is well-settled that a quasi-judicial decision, or even an administrative decision which has civil consequences, must be in accordance with the principles of natural justice, and hence reasons have to be disclosed by the authority in that decision vide Mukund Lal Bhandari and others Vs. Union of India and others, We do not agree with the Tribunal that the notification of the Central Government u/s 9A is a legislative Act. In our opinion, it is clearly quasi-judicial. The proceedings before the DA is to determine the lis between the domestic industry on the one hand and the importer of foreign goods from the foreign supplier on the other. The determination of the recommendation of the DA and the Government notification on its basis is subject to an appeal before the CESTAT. This also makes it clear that the proceedings before the DA are quasi-judicial.
In Reliance Industries (supra), the principles for determination of NIP on PTA adopted by DA were faulted by applying strict scrutiny standard and it was observed that Section 9A of the Act does not afford protectionism but only prevents unfair trade practices. If DA acts arbitrarily and unreasonably, as held by apex Court such exercise must be visited with invalidation.
In Saint-Gobain Glass India Ltd. and Another Vs. Union of India (UOI) and Others, Supreme Court held as under.
In our opinion, the scope for interference in matters which have huge economic impact is very narrow. As a matter of fact, actions instituted in courts such as the instant writ petitions 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.
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 and Others Vs. Adani Exports Ltd. and Another, and Alind Workers Congress (affiliated to INTUC) Vs. United Shippers Limited and Others,
In Adani Exports (supra), the respondents invoked the jurisdiction of Gujarat High Court, at Ahmedabad alleging that they carried on business of export and import from Ahmedabad; orders for export and import are placed and accepted from Ahmedabad; documents and payments for exports and imports were sent/made at Ahmedabad; the credit of duty claimed is in respect of exports handled from Ahmedabad and therefore substantial part of cause of action had arisen within the jurisdiction of Gujarat High Court. The Union of India disputed territorial jurisdiction, that no part of cause of action has arisen within the jurisdiction of the Court at Ahmedabad. The High Court accepted the plea of Adani holding that the existence of registered office of the Company would ipso facto give cause of action to the High Court within whose jurisdiction the registered office is situated. Before the Supreme Court a question arose whether any of the facts mentioned in the respondents'' application would give rise to part of cause of action at Ahmedabad at least for the purpose of conferring territorial jurisdiction on High Court. After noticing the facts, Supreme Court observed that mere fact that respondent-Company is receiving export and import orders and making payments from Ahmedabad has no connection whatsoever with the dispute that is involved in the case and therefore the same would not give rise to any cause of action to a Court at Ahmedabad to adjudicate on the actions complained against Union of India. After referring to Oil and Natural Gas Commission Vs. Utpal Kumar Basu and Others, the Supreme Court held:
It is seen from the above that in order to confer jurisdiction on a High Court to entertain a writ petition or a special civil application as in this case, the High Court must be satisfied from the entire facts pleaded in support of the cause of action that those facts do constitute a cause so as to empower the court to decide a dispute which has, at least in part, arisen within its jurisdiction. It is clear from the above judgment that each and every fact pleaded by the respondents in their application does not ipso facto lead to the conclusion that those facts give rise to a cause of action within the Court''s territorial jurisdiction unless those facts pleaded are such which have a nexus or relevance with the lis that is involved in the case. Facts which 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)
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 Ltd. Vs. Union of India (UOI) and Another, and Eastern Coalfields Ltd. and Others Vs. Kalyan Banerjee, this Court explained the test as follows.
In order to exercise jurisdiction to entertain a writ petition, the High Court must be satisfied, from the entire facts pleaded in support of the cause of action, that those facts do constitute a cause so as to empower the court to decide a dispute which has, at least in part, arisen within its jurisdiction. Each and every fact pleaded in the writ petition does not ipso facto lead to the conclusion that those facts give rise to a cause of action within the court''s territorial jurisdiction unless those facts are such which have a nexus or relevance with the lis that is involved in the case. Facts which have no bearing on the lis or dispute involved in the case, do not give rise to a cause of action so as to confer territorial jurisdiction on the court concerned. Similarly, the facts pleaded in the writ petition must have a nexus on the basis whereof a prayer can be granted. Those facts which have nothing to do with the prayer made therein cannot be said to give rise to a cause of action which would confer jurisdiction on the Court.
The Division Bench also reiterated that the question of cause of action has to be determined with reference to the pleadings to know whether whole or part of the cause of action has arisen within the territorial limits of the High Court and that while analyzing the facts, the correctness or otherwise of those pleadings is irrelevant and immaterial. If insignificant, trivial and unconnected events take place within the territorial limits which are not at all relevant to the case, those events by themselves would not constitute a part of cause of action.
Both the Senior Counsel also invited our attention to various other decisions in Calcutta Discount Company Limited Vs. Income Tax Officer, Companies District, I and Another, S. Pratap Singh Vs. The State of Punjab, Om Prakash v. State of Haryana, (1971) 3 SCC 792 (293) E.P. Royappa Vs. State of Tamil Nadu and Another, Gulam Mustafa and Others Vs. The State of Maharashtra and Others, , D.L.F. Housing Construction (P) Ltd. Vs. Delhi Municipal Corpn. and Others, , Mohinder Singh Gill and Another Vs. The Chief Election Commissioner, New Delhi and Others, , Shakti Auto Garage and Others Vs. The Assistant Regional Transport Officer and Others, , Sirpur Paper Mills Ltd. Vs. Collector of Central Excise, Hyderabad, , B.P.L. India Ltd. Vs. Commissioner of Central Excise, Cochin, , Shew Kumar Agarwal Vs. Union of India (UOI), Rajasthan Textile Mills Association v. Director General of Anti Dumping 2002 (149) ELT 45 (Raj), Sree Karpagambal Mills Limited v. Gte.General of Anti Dumping and Allied Duties 2002 (150) ELT 1349 (Mad), J.G. Impex (P) Ltd. Vs. Designated Authority, , Mahavir Mirror Industries and Another Vs. The Designated Authority Director General of Anti Dumping and Allied Duties, Ministry of Commerce and Industry, Government of India and Others, and Indian Express Newspapers Ltd. Vs. Union of India (UOI), . If necessary, we will refer to them at appropriate place in this Judgment.
Analysis, findings and reasons
Territorial jurisdiction
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 contesting respondents are not having residence but still part of cause of action arises, Court shall have jurisdiction. This is well settled. Cause of action is explained by Supreme Court in A.B.C. Laminart Pvt. Ltd. and Another Vs. A.P. Agencies, Salem,
A cause of action means every fact, which, if traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the Court. In other words, it is a bundle of facts which taken with the law applicable to them gives the plaintiff a right to relief against the defendant. It must include some act done by the defendant since in the absence of such an act no cause of action can possibly accrue. It is not limited to the actual infringement of the right sued on but includes all the material facts on which it is founded It does not comprise evidence necessary to prove such facts, but every fact necessary for the plaintiff to prove to enable him to obtain a decree. Everything which if not proved would give the defendant a right to immediate judgment must be part of the cause of action. But it has no relation whatever to the defence which may be set up by the defendant nor does it depend upon the character of the relief prayed for by the plaintiff.
In Alchemist Limited v. State Bank of Sikkim (2007) 11 SCC 335, the above view has been reiterated, thus:
It may be stated that the expression "cause of action" has neither been defined in the Constitution nor in the Code of Civil Procedure, 1908. It may, however, be described as a bundle of essential facts necessary for the plaintiff to prove before he can succeed. Failure to prove such facts would give the defendant a right to judgment in his favour. Cause of action thus gives occasion for and forms the foundation of the suit.
In J.K. Industries Limited (supra), a Division Bench of High Court of Rajasthan, visualized part of cause of action in an anti dumping case (i) at the place where exports to India take place; (ii) at the place where the imports come into Indian markets; and (iii) at the place where injury to domestic industries is caused. Applying the general principles of cause of action or the principles in relation to anti dumping cases, we are convinced that this Court has territorial jurisdiction for the reasons which are as follows. VMCL is a company registered in Andhra Pradesh having 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 this aspect. We accordingly reject the submission of Tejas on the question of territorial jurisdiction.
Scope of judicial review
The exercise for levying ADD is in three stages. First stage is initiation of investigation and recording of preliminary findings by the DA on an application made by domestic industry. This may or may not lead to levy of provisional ADD. The second stage (post decisional) involves DA inviting further comments, objections and response from interested parties and terminating the investigation duly recording final findings as to the dumping, and the resultant injury to domestic industry. In the third stage, the Central Government imposes ADD in accordance with Rule 18 of the Rules. Rule 23 of the Rules confer power on the Central Government to review imposition of ADD if it is satisfied that there is no justification for continued imposition of such duty. The provisional duty in certain circumstances can also be assailed in a writ petition but there is no remedy against initiation notifications or preliminary findings. The notification of the DA publishing the final findings is indisputably appealable u/s 9C before the CESTAT constituted u/s 129 of the Customs Act, 1962. This, however, is no ground to in limine repel a challenge to initiation notification or preliminary findings on the ground that there is an effective alternative remedy at a subsequent stage of proceedings. Indeed, the Supreme Court in J.K. Industries (supra) indicated that any anti dumping decision is ''also subject to writ jurisdiction on well settled parameters of constitutional law''.
In a petition for judicial review of decision maker''s proceedings at the initial stage, what is the type of the review required? Is it primary review or secondary review? What is the standard of scrutiny? Is it strict scrutiny or intermediate/deferential standard scrutiny? Whether such scrutiny permits differing with fact finding authority on the question of locus of the applicant, PUC, PCN exemption from disclosure of confidential information etc. These aspects assume importance in this case.
Principles of judicial review - illegality, irrationality and impropriety as well as proportionality; discovered in GCHQ case Council of Civil Services Union v. Minister for Civil Services (1984) 3 All ER 935 : (1984) 3 WLR 1174 have been accepted in Indian law (see Tata Cellular Vs. Union of India, Om Kumar v. Union of India (2001) 2 SCC 386 : AIR 2000 SC 3689 and State of U.P. and Another Vs. Johri Mal, 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.
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 issue by "fact finding", "rule stating" and "rule applying", such decision maker is required first to evaluate facts and then interpret law and apply the law. A challenge to such orders calls for a secondary review, in that the Court is required to examine the rationality, reasonableness and unarbitrariness of the decision by applying Principles stated in Associated Provincial Picture Houses Limited v. Wednesbury Corporation (1947) 2 All ER 680 (CA) : (1948) 1 KB 223. While doing so, the Court has to assume that the finding of fact by the decision maker or fact finding tribunal is final and calls for no interference unless it is perverse or is based on no evidence or made ignoring relevant material and is based on irrelevant material. Secondary review also bars the Court from taking another plausible view if the case gives rise to two views and must respect the view of the fact finding authority by applying intermediate/deferential standard scrutiny. These principles are supported by English as well as Indian case law. We may refer to three Supreme Court Judgments.
In Om Kumar (supra), the dual review principles are summarized as below.
It is clear from the above discussion that in India where administrative action is challenged under Article 14 as being discriminatory, equals are treated unequally or unequals are treated equally, the question is for the Constitutional Courts as primary reviewing Courts to consider correctness of the level of discrimination applied and whether it is excessive and whether it has a nexus with the objective intended to be achieved by the administrator. Here the Court deals with the merits of the balancing action of the administrator and is, in essence, applying "proportionality" and is a primary reviewing authority....
But where an administrative action is challenged as "arbitrary" under Article 14 on the basis of Royappa (supra)(as in cases where punishments in disciplinary cases are challenged), the question will be whether the administrative order is "rational" or "reasonable" and the test then is the Wednesbury test. The Courts would then be confined only to a secondary role and will only have to see whether the administrator has done well in his primary role, whether he has acted illegally or has omitted relevant factors from consideration or has taken irrelevant factors into consideration or whether his view 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 and others Vs. The Jalgaon Municipal Council and others, . 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 Vs. Gem Cap (India) Pvt. Ltd. and Others, 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.
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 nature of the order the relevant statute as also the other relevant factors including the nature of power exercised by the public authorities, namely, whether the power is statutory, quasi judicial or administrative. The power of judicial review is not intended to assume a supervisory role or done the robes of omnipresent. The power is not intended either to review governance under the rule of law nor do the courts step into the areas exclusively reserved by the supreme lex to the other organs of the State. Decisions and actions which do not have adjudicative disposition may not strictly fall for consideration before a judicial review court. The limited scope of judicial review succinctly put are:
(i) Courts, while exercising the power of judicial review, do not sit in appeal over the decisions of administrative bodies:
(ii) A petition for a judicial review would lie only on certain well-defined grounds.
(iii) An order passed by an administrative authority exercising discretion vested in it, cannot be interfered in judicial review unless it is shown that exercise of discretion itself is perverse or illegal.
(iv) A mere wrong decision without anything more is not enough to attract the power of judicial review; the supervisory jurisdiction conferred on a Court is limited to seeing that Tribunal functions within the limits of its authority and that its decisions do not occasion miscarriage of justice.
(v) The Courts cannot be called upon to undertake the Government duties and functions. The Court shall not ordinarily interfere with a policy decision of the State. Social and economic belief of a Judge should not be invoked as a substitute for the judgment of the legislative bodies. (See Ira Munn v. State of Ellinois 94 US 113 : 24 L Ed 77 (1876).
In Teri Oat Estates (P) Ltd. Vs. U.T., Chandigarh and Others, Supreme Court referring to Om Kumar (supra), summarized the scope of primary and secondary review, which reads as under
In Om Kumar (supra), however, this Court evolved the principle of Primary and Secondary Review. The doctrine of primary view was held to be applicable in relation to the statutes or statutory rules or any order which has the force of statute. The secondary review was held to be applicable inter alia in relation to the action in a case where the executive is guilty of acting patently arbitrarily. This Court 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)
In view of the ''three stage anti clumping 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.
Whether VMCL is manufacturer?
VMCL admittedly imports parts, components, accessories of telephone transmission equipment in CKD/SKD form and manufactures STM-1, STM-4, STM-16, STM-64, DWDM 2.5G, DWDM 10G, DXC and interface converter. These are supplied to domestic customers like BSNL. From this it is contended by Tejas that petitioner is not a manufacturer and being an importer cannot challenge the preliminary findings. This submission is devoid of any merit. The definition of domestic industry is in two parts. First part defines what is ''domestic industry''. The second part which reads, "...except when such producers are related to...importers of the alleged dumped article or are themselves importers thereof in which case, such producers may be deemed not to form part of domestic industry", does not exclude importers from Thailand and Malaysia like Tejas from being importer. Therefore, Rule 2(b) does not disqualify an importer like VMCL to challenge preliminary finding rendered at the instance of another importer. In other words, Rule 2(b) speaks of locus of domestic industry to petition to DA under Rule 5(1) of the Rules and it does not prohibit an aggrieved importer/manufacturer from questioning the locus of a manufacturer to invoke anti dumping law. So as to seek protection from injury due to dumped article, a producer must necessarily satisfy the requisites of Rule 2(b) but any producer whether domestic or not can challenge the preliminary findings inter alia showing that DA assumed jurisdiction wrongly. The percentage of imports used in their manufacture is not placed by VMCL before this Court. They admit to import of equipment in CKD/SKD as well as components and manufacture of their own parts and then assemble SDH equipment. From this admitted position, we cannot countenance that VMCL is not a manufacturer.
In Union of India (UOI) Vs. Delhi Cloth and General Mills, a Constitution Bench of Supreme Court relying on Permanent Edition of ''Words and Phrases'' held that the word ''manufacture'' is understood to mean as bringing into existence a new substance and does not mean merely to produce some change in substance. So to say every manufacture involves processing but every processing does not amount to manufacture. In Sirpur Paper Mills Ltd. Vs. Collector of Central Excise, Hyderabad, a similar 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)
In B.P.L. India Ltd. Vs. Commissioner of Central Excise, Cochin, 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) is mixed question of law and fact. The nature and the extent of processes may vary from case to case. When a change takes place and a new and distinct article comes into existence known to the consumers and the commercial community as a commercial product, which can be no longer regarded as the original commodity, such a change constitutes a process of manufacture.
It has been brought to our notice that VMCL is an assesee under Central Excise Act. As rightly contended by their counsel an industry cannot be a manufacturer for levy of central excise and cannot cease to be a manufacturer for the purpose of anti dumping law. There is no denial that VMCL also makes some of the parts which go into making of SDH equipment which are subject to testing before they are supplied to end users. Mainly because it gets testing software from Huawei and uses its brochure, it does not cease to be a manufacturer. The process involved is certainly manufacturing. In any event, when the impugned preliminary findings and the provisional levy directly affect them, VMCL cannot be denied standing on the ground that they are not manufacturers.
Whether Tejas is an importer?
Tejas admit that they are involved in research carried out in India, design and development, utilizing electronic manufacturing services (EMS) in India and abroad, assembly and test procedure, software testing and specification, and assembly and testing in India in addition to post sales maintenance/supply of spares. In paragraph 6 of Section II of their application dated 11.01.2009 to DA for imposition of ADD Tejas admit that they are importing components/sub-assemblies from other countries to supplement production activities and that their focus remains in design, development and manufacture of the product in the country. As noticed hereinabove, they utilize EMS in India and abroad for manufacturing PUC. In Tejas application placed before this Court, the details of the imports of components/sub-assemblies are not available. In the impugned preliminary findings, this aspect of the matter has been adverted to in paragraphs 19 to 23, which prove that Tejas imports components/sub-assemblies, printed circuit boards from China, Dubai, France, Germany, Hong Kong, Israel, Japan, Malaysia, Philippines, Singapore, Switzerland, Taiwan, Thailand, USA and United Kingdom. Besides mentioning the total value of 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''.
Before we take up the other point we need to deal with Rule 7 of the Rules. It provides that the manufacturer who files an application under Rule 5(1) can withhold confidential information in which event the DA can permit filing of non-confidential summary. In their application, Tejas did not disclose information required u/s 6 of proforma like process flow chart, purchase policy, sales policy, stores accounting and inventories/stock, inventory valuation, quality control procedure etc. It appears they furnished non-confidential summary of this information based on which DA evaluated the percentage of imported components in the final products of Tejas. DA justified this opining that the information is highly business sensitive. This cannot be accepted. In Reliance Industries (supra), Supreme Court, on reading Rule 7 of the Rules, and relying on Sterlite Industries (India) Limited v. Designated Authority (2006) 10 SCC 386, Supreme Court held that the said rule does not contemplate any right on the DA to claim confidentiality and that it would be illegal on the part of the DA to deny the applicant any information on the ground of confidentiality. Therefore, not making available the relevant material to the other side would not only render DA''s exercise illegal but would deny a valuable right to the opposing parties to seek redressal before appellate authority or the court of judicial review, as the case may be.
Yet another aspect of the matter is the burden of proof. Though the impugned preliminary findings do not say in many words, in the counter affidavit, DA appears to throw the burden of proving, the negative aspects of Tejas on VMCL A perusal of Rule 2(b), 5(1), 6, 8, 12 and Annexures I and II of the Rules would belie any such argument that the burden on VMCL. The initial burden is always on Tejas to prove that they constitute domestic industry, that in spite of imports by themselves, they do not constitute importer and that by reason of dumping of the article, they suffered injury. The DA cannot expect those manufacturers/suppliers/dealers of the same article to prove the negative. If the applicant u/s 5(1) discharges initial burden, the onus then shifts to responding parties to prove their case as to why ADD should not be levied.
Whether VMCL does not manufacture Tike articles''?
As per Rule 2(d) of the Rules, ''like article'' means an article, which is identical or alike in all respects 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 subheadings. 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 for SDH equipment for all capacities and other equipment. It only deals with STM-1, STM-4, STM-16 and STM-64. Therefore, from all this material available it is not clear as to whether SDH equipments manufactured by VMCL are alike or identical to the products manufactured by Tejas. Indeed, as rightly pointed out by senior counsel for Tejas, it is a disputed question of fact and it is for the DA to apply a rationale procedure to arrive at such a finding. Besides, this depends on the finding on the question whether the assumption of jurisdiction by DA is illegal?
Assumption of jurisdiction by DA
DA has no power or jurisdiction to suo motu investigate to determine alleged dumping unless he has information from Commission of Customs. DA cannot initiate investigation unless and until an application is made by or on behalf of domestic industry. The condition precedent for DA to assume jurisdiction under Rule 5(1) is that, the applicant shall be a domestic industry as defined in Rule 2(b) of the Rules. VMCL, Prithvi and TATA Teleservices argue that initiation of investigation by DA on the application of Tejas is erroneous and illegal. They contend that Tejas is not a domestic industry as defined under Rule 2(b) of the Rules and that the articles manufactured and marketed by VMCL are not the like articles manufactured by Tejas. The second aspect of this is already been adverted to above. Therefore, in this part of Judgment, the focus is on whether Tejas is a ''domestic industry''.
We have noticed the activities of Tejas as admitted by them in their counter affidavit. We have also noticed the articles manufactured/assembled by them. We have already concluded supra that Tejas themselves are importers of the PUC. Indeed, as admitted by them and as concluded by DA 65.58% of the components used by Tejas are imported from as many as 17 countries including China and Israel. What is the basis for them to claim to be ''domestic industry? In their application before DA, while admitting that they import components/sub-assemblies from other countries they requested to treat them as domestic manufacturer and explained reasons for such request as under.
Does any of the petitioner(s) import and/or export the subject goods. If yes, please provide details of country wise volume and value of imports and exports during the last two years and in the current year 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 by them.
(b) Consider other entities in India undertaking incremental activities in India as ineligible domestic manufacturers.
They also requested other manufacturers/producers of PUC who also import components and sub-assemblies as non-domestic manufacturers and stated the reasons as follows.
Name(s), address(es) of Indian producers other than complainant along with their production (Volume and value) of subject goods during the last two years and the current year.
Names & addresses of other Indian Producers are enclosed as Annexure 2.2. This list does not include those companies who are undertaking research & developments outside India, largely import the product under consideration in SKD or CKD conditions, carry out Remaining production activities in India and supply the product locally. These companies are nothing but importers of the product in India. As stated in detail in Section I, production to product under consideration involves substantial amount of product design and development. Further, a number of consumers insist on supplies being made by an Indian entity even in respect of goods supplied by the foreign producers. It is therefore possible that some of the foreign producers might have carried out inconsequential activities in India and supplies the product under consideration by invoicing from within India either directly or through partnerships with local manufacturers/traders, who do minimal value addition. However, these companies should not be considered as part of domestic producers for the reason that these entities are not carrying out design and development in India nor they undertake full manufacturing activity in India. The petitioner has identified these companies in the category of importers in India.
In the impugned notification, DA responded to the request of the Tejas favourably giving the following reasons: Tejas imported dual use components/parts as well as those components and parts which have a dedicated use for SDH equipment, that total imports from China during period of investigation is 4.79% of total cost of production, and that their principal activity is manufacturing in India which includes essential research and design/development in production activity. Therefore, the case throws up a peculiar situation where one importer of PUC seeks imposition of ADD on the other importer on the 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.
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 from the category of importer, the same would amount to legislation which the Court ought to avoid.
Secondly, Tejas proposed the period from April to December 2008 as the period of investigation (POI). DA found that during POI the imports by Tejas accounted for 4.79%. Out of which, they used 0.53% only for dedicated use of SDH equipment and all other components have dual use. This does not make any difference. In a given case, an applicant for imposing ADD might import components/sub-assemblies in huge quantities and then request the DA to investigate restricting POI for a period during which no imports were received. Hence, it is irrelevant whether Tejas imports dual use components/parts and whether a fraction of imports was only used for manufacturing of SDH equipment. Here, we may hasten to add that there may be situations where domestic producers manufacture articles using indigenous components and sub assemblies, but depend on foreign know-how for international certification to achieve the specification standards. In such cases, it would be a question of fact whether such producers can be treated as domestic industry or not, but when the applicant for imposition of ADD is himself an importer seeking imposition of ADD on another importer manufacturing finished product, DA must apply strict standard and has no competence to deviate from legislative prescription.
Thirdly, in their application to DA Tejas gave the product description as Synchronous Digital Hierarchy transmission equipment, its accessories, associated software, its essential parts and components in assemblies, CKD or SKD form or fitted with eventual broadband/cellular equipment. While describing the product, they also stated that populated PCBs, Power supply, lasers, chassis, software, El cables, PCM cables, power cables, racks, and workstations as constituting essential parts of SDH transmission equipment. To qualify to be domestic industry, Tejas must show that they do manufacture all necessary accessories, parts, components and cables, and then assemble SDH equipment. Admittedly, Tejas is an importer of these numerous parts. None of them is manufactured by them. Admittedly, they import all critical components and manufacture or buy from local market certain non-essential parts and utilize EMS in India and abroad for manufacturing SDH equipment. Therefore, Tejas do not qualify to be ''domestic industry''.
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.
Fifthly, Tejas went before DA alleging that if ADD is not imposed on the imports from China and Israel there would be significant price depressing effect on the Indian market, although, the cost of production has been declined. This factor also influenced DA in coming to the conclusion that injury is caused to domestic industry both by volume and price effect of dumped imports. The approach of DA is ex facie erroneous and contrary to the object of enacting Section 9A of the Act. In Reliance Industries (supra), Supreme Court explained the underlying object of enacting Section 9A as follows.
The purpose of Section 9A can, therefore, easily be seen. The purpose was that our industries which had been built up after independence with great difficulties must not be allowed to be destroyed by unfair competition of some foreign companies. Dumping is a well-known method of unfair competition which is adopted by the foreign companies. This is done by selling goods at a very low price for some time so that the domestic industries cannot compete and are thereby destroyed, and after such destruction has taken place, prices are again raised.... The purpose of Section 9A is, therefore, to maintain a level-playing field and prevent dumping, while allowing for healthy competition. The purpose is not protectionism in the classical sense (as proposed by the German economist Friedrich List in his famous book ''National System of Political Economy1 published in 1841) but to prevent unfair trade practices. The 1995 Amendment to Section 9A was apparently made in pursuance to Article VI of the General Agreement on Tariffs and Trade 1994 (GATT 1994) which permitted anti-dumping measures as an instrument of fair competition.
(emphasis supplied)
Thus, anti dumping law essentially aims at preventing unfair trade practices by levy of protective duties. The approach is to immunize local industry from market predation and the protective umbrella is available only to domestic industry. Two or more importers whose selling price is determined by market forces; both domestic and international - cannot seek such shelter under anti dumping law nor the designated authority can initiate investigation under the Rules at the instance of one importer against another importer.
Conclusion
It may be taken as well settled that the High Court''s jurisdiction at any stage of proceedings under anti dumping law is never ousted. The decision of DA or Central Government is amenable to writ jurisdiction (see J.K. Industries (supra)). But, the scope of judicial review is very limited, and ordinarily the finding of facts by the statutory authority entrusted with such duty cannot be interfered. Therefore, on the issues regarding "like article", the extent of injury to domestic industry and the quantity of imports etc., being in the realm of fact finding, we have only dealt with them in a cursory manner avoiding appellate consideration and evaluation. Nonetheless, we are convinced as held supra, 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 for the reasons as above.
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. We direct the parties to bear their respective costs.