Introduction

The starting point of any anti-dumping investigation is the scope of the product under consideration (‘PUC’). Defining the scope of PUC is crucial in an investigation as the DGTR only assesses standing, dumping, injury, and causality with respect to the PUC. Depending on the nature and type of the product, the scope of PUC may be a very contentious issue in an investigation.

In a recent appeal, Technova Imaging Systems Pvt. Ltd. v. Designated Authority (AD/51425/2022), the Hon’ble Customs, Excise and Service Tax Appellate Tribunal (‘CESTAT’) has adjudicated on the threshold for considering a product within the scope of the PUC.

This article presents the brief facts leading to the appeal, issues raised before the Hon’ble CESTAT and the jurisprudence established.

Brief facts

The appeal was filed by Technova Imaging Systems Pvt. Ltd. (‘Appellant’) against Final Findings dated 7 September 2021 (‘Final Findings’) issued by the Directorate General of Trade Remedies (‘DGTR’) and the subsequent Customs Notification No. 68/2021-Customs (ADD) dated 6 December 2021 in the anti-dumping investigation concerning imports of ‘Certain Flat Rolled Products of Aluminium’ originating in or exported from China PR.

The PUC in the present case was broadly defined as ‘Certain Flat Rolled Products of Aluminium’, which included within its scope numerous types of products. One such product is ‘lithographic aluminium coils’, which are used for manufacturing digital offset printing plates used in the printing industry. The Appellant is a user of lithographic aluminium coils which had participated in the investigation before the DGTR.

Before the DGTR, the Appellant argued for exclusion of lithographic coils above 1150 mm width (‘subject product’) from the product scope since Hindalco Industries Ltd. (‘domestic industry’) was not manufacturing the said coils in commercial quantities to fulfil the demand of user in India. It was evidenced that total demand for such coils was around 10,000 MT per year while domestic industry had supplied some trial quantities amounting to mere 2% of such demand to the user. However, the DGTR did not exclude such coils from the scope of the PUC for the reason that mere demand supply gap does not call for product exclusions.

In its appeal, the Appellant argued that the domestic industry did not commercially manufacture and supply the subject product, and thus it should have been excluded by the DGTR from the scope of the PUC in the Final Findings. As stated above, the Appellant had argued the same before the DGTR. However, the DGTR rejected this argument on the ground that the domestic industry had indeed produced and sold this product type in the period of investigation (‘POI’), viz., April 2019 to March 2020.

Decision of the CESTAT

The key argument taken before the CESTAT by the Appellant was that even though the domestic industry had produced and sold the subject product during the POI, the domestic industry simply was unable to produce and sell the same in commercial quantities to the Appellant.

Taking cognizance of the fact that the domestic industry’s supplies to the Appellant were only on a trial basis, the Hon’ble CESTAT analyzed the quantities supplied by the domestic industry against the total demand of the subject product. The Hon’ble CESTAT noted that only 2% of the Appellant’s requirement of higher width coils were supplied by the domestic industry on trial basis during the POI, out of which 25% were rejected by the Appellant because they did not meet the technical manufacturing requirements of the user. On this basis, the Hon’ble CESTAT held that it cannot be said that the domestic industry manufactured and supplied the subject product in commercial quantities.

In conclusion, the Hon’ble CESTAT held that mere production of a product is not enough for a product to be included in the scope of the PUC; the domestic industry must show that it has catered to a certain amount of demand for that product for it to be included. Otherwise, the product should be excluded from the scope of the PUC.

Importance of User Participation in the Investigation

One of the key reasons the Appellant succeeded before the CESTAT was that the grounds urged by it before the CESTAT had been urged before the DGTR and relevant data of demand and supply by the domestic industry for subject product was placed on record before the DGTR which remained uncontroverted by the domestic industry. It is a general principle that grounds of appeal presented before the CESTAT must be those that are urged before the DGTR.

In this regard, it may be pointed out that the Appellant’s reliance on the questionnaire response and legal submissions made before the DGTR to stress on the product exclusion played an important role in convincing the CESTAT about the bona fides of its product exclusion claims and the DGTR’s errors in rejecting the Appellant’s claims.

This highlights the importance of user participation in any investigation and the importance of carefully crafting the questionnaire response and the legal submissions before the DGTR for product exclusion purposes.

Conclusion

Defining the scope of the PUC is the most crucial part in an anti-dumping investigation because it is with regard to the PUC that the DGTR examines critical aspects such as dumping, injury being faced by the domestic industry, etc., and in respect of which anti-dumping duty is eventually recommended by the DGTR.

If a product type which is not produced by the domestic industry is included within the scope of the PUC, this subjects the domestic users / importers to extreme hardships. Thus, it is important for the DGTR to examine whether the domestic industry produced and sold the product type during the POI defined for the investigation.

However, it is not sufficient if the domestic industry produced and sold the product type in any quantity. The domestic industry should have produced and sold the product type in commercial quantities during the POI. Of course, what constitutes ‘commercial quantity’ cannot be uniform in all investigations and will vary from case-to-case. In the facts of this case, a supply of around 200 MT of subject product to the users was not considered ‘commercial’ in view of the total demand of 10,000 MT in India.

Another important observation of the Hon’ble CESTAT in this case was the production and sale quantities during the POI were only relevant. This observation came in view of submissions made by the domestic industry’s counsel that they are in the process of setting up a new facility at Hirakut for manufacture of the subject product.

The Hon’ble CESTAT has made important observations concerning the subject matter and has affirmed an important threshold relevant for product scope exclusions. The jurisprudence developed in this case should guide the DGTR in analysing genuine user / importer interests in future investigations.

[The author is an Associate in WTO and International Trade Division in Lakshmikumaran & Sridharan Attorneys, New Delhi. He was involved in appearing on behalf of the Appellant in the appeal under discussion before the Hon’ble CESTAT.]