Supreme Court overturns High Court order on anti-dumping investigation: Designated Authority vs. Andhra Petrochemicals (2020)

LEGAL ISSUE: Whether the Designated Authority (DA) can be directed to conduct an anti-dumping investigation based on old data, and whether a High Court can direct the replacement of the DA for seeking updated data.

CASE TYPE: Anti-dumping law, International Trade Law

Case Name: The Designated Authority & Ors. vs. M/s The Andhra Petrochemicals Limited

Judgment Date: 1 September 2020

Date of the Judgment: 1 September 2020
The Supreme Court of India recently addressed a critical question regarding anti-dumping investigations: Can a Designated Authority (DA) be compelled to initiate an investigation based on outdated data, and can a High Court direct the replacement of the DA for seeking updated information? This case, The Designated Authority & Ors. vs. M/s The Andhra Petrochemicals Limited, highlights the importance of timely and accurate data in anti-dumping proceedings. The Supreme Court, in this case, overturned the Telangana High Court’s orders, emphasizing the need for the DA to adhere to prescribed procedures and timelines. The bench comprised of Justices Arun Mishra, Vineet Saran, and S. Ravindra Bhat, with the judgment authored by Justice S. Ravindra Bhat.

Case Background

Andhra Petrochemicals Limited (Andhra Petro) applied to the Central Government seeking the imposition of anti-dumping duty on imports of normal Butanol from Saudi Arabia. The Designated Authority (DA) initiated an investigation based on this application. Andhra Petro provided import data for a three-month period, while the investigation period was set from April 2015 to March 2016. Andhra Petro admitted that dumping from Saudi Arabia occurred only in the last three months of the investigation period (January to March 2016). They claimed that despite the short period, the volume of dumped imports was significant enough to cause material injury to the domestic industry, capturing 39% of the market share in India. Andhra Petro asserted that these exports were intended to grab the Indian market, undercutting domestic prices and adversely affecting their profits and returns on investments.

Timeline

Course of Proceedings

Initially, the Designated Authority (DA) terminated the investigation, citing insufficient data to evaluate injury to the domestic industry. Andhra Petro then approached the Telangana High Court, which directed the DA to reconsider their applications. Despite this, the DA again declined to initiate an investigation. The High Court, in its second order, directed the DA to initiate an investigation into imports of certain alcohols from the European Union and Singapore, and held that 2-Ethyl Hexanol (2-EH) produced by Andhra Petro was a ‘like article’ to 2-Propytheptyl Alcohol (2-PH) and Isononanol (INA). Following this, the DA requested updated data from Andhra Petro, which led to Andhra Petro filing another writ petition. The High Court then initiated suo motu contempt proceedings against the DA for seeking updated data and directed the Central Government to appoint a new DA.

Legal Framework

The case revolves around the interpretation and application of the Customs Tariff Act, 1975, and the Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Article and for Determination of Injury) Rules, 1995 (Rules of 1995).

Key provisions include:

• Section 9A of the Customs Tariff Act, 1975: This section empowers the Central Government to impose anti-dumping duties on articles exported to India at less than their normal value.
  
  “Section 9A. Anti-dumping duty on dumped articles. — (1) Where any article is exported by an exporter or producer from any country or territory (hereinafter in this section referred to as the exporting country or territory) to India at less than its normal value, then, upon the importation of such article into India, the Central Government may, by notification in the Official Gazette, impose an anti-dumping duty not exceeding the margin of dumping in relation to such article.”
• Rule 2(b) of the Rules of 1995: Defines ‘domestic industry’ as the domestic producers engaged in the manufacture of the like article.
  
  “2(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 term ‘domestic industry’ may be construed as referring to the rest of the producers”
• Rule 2(d) of the Rules of 1995: Defines ‘like article’ as an article identical or alike in all respects to the article under investigation, or if such an article does not exist, an article with closely resembling characteristics.
  
  “2(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.”
• Rule 4 of the Rules of 1995: Outlines the duties of the Designated Authority, including investigating dumping, identifying articles for anti-dumping duty, and determining injury to domestic industry.
• Rule 10 of the Rules of 1995: Describes how the normal value, export price, and margin of dumping are determined.
  
  “10. Determination of normal value, export price and margin of dumping . – An article shall be considered as being dumped if it is exported from a country or territory to India at a price less than its normal value and in such circumstances the designated authority shall determine the normal value, export price and the margin of dumping taking into account, inter alia, the principles laid down in Annexure I to these rules.”
• Rule 17 of the Rules of 1995: Specifies the timeline for the Designated Authority to make its final findings, which is generally within one year from the initiation of the investigation.
• Rule 20 of the Rules of 1995: Deals with the commencement of anti-dumping duty.

The legal framework aims to protect domestic industries from unfair trade practices like dumping while ensuring fair competition. The investigation process must be completed within specified timelines to provide timely relief to the affected industries.

Arguments

Arguments by the Designated Authority (DA) and the Central Government:

• The DA argued that it is essential to use updated and contemporaneous data for a valid anti-dumping investigation.
• They highlighted that the Standard Operating Procedure (SOP) requires the use of recent data, typically not more than six months old at the time of initiation of investigation.
• The DA contended that the question of whether goods are ‘like articles’ is a technical one requiring substantiation by relevant data.
• The Central Government argued that the DA is a quasi-judicial authority and the High Court cannot direct the substitution of one official with another.
• The DA argued that the High Court’s direction to initiate investigation based on old data was incorrect and that the DA was duty bound to seek updated data.

Arguments by Andhra Petrochemicals Limited:

• Andhra Petro argued that the Designated Authority (DA) failed to consider that 2-Ethyl Hexanol (2-EH), which they produce, is a ‘like article’ to 2-Propytheptyl Alcohol (2-PH) and Isononanol (INA) imported from other countries.
• They contended that commercially and technically, these products are substitutable and should be considered ‘like articles’.
• Andhra Petro argued that the DA deliberately omitted to comply with the High Court’s directions.
• They also argued that the DA was wrong to seek data beyond the period mentioned in their initial complaint.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the core issues addressed by the court can be summarized as follows:

1. Whether the Designated Authority (DA) is obligated to initiate an anti-dumping investigation based on outdated data.
2. Whether the High Court was justified in initiating contempt proceedings against the DA for seeking updated data.
3. Whether the High Court was justified in directing the replacement of the incumbent Designated Authority (DA).
4. Whether the Designated Authority (DA) was correct in seeking updated data for the investigation period.
5. Whether the High Court was correct in its interpretation of the term ‘like article’.

Treatment of the Issue by the Court

The following table demonstrates how the Court decided the issues:

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court held that the High Court’s orders were erroneous and set them aside. The court emphasized the importance of timely and accurate data in anti-dumping investigations. The court noted that the DA was acting within the framework of the law and the Standard Operating Procedure (SOP) by seeking updated data. The Court also held that the High Court cannot direct the substitution of one official with another on the assumption that non-inclusion of some goods in the expression “like article” was mala fide.

How each authority was viewed by the Court?

• The Supreme Court relied on S&S Enterprise v. Designated Authority [CITATION] to explain the purpose of anti-dumping duties, emphasizing the need to curb unfair trade practices while balancing the interests of domestic and international markets.
• The Court cited Reliance Industries Ltd. v. Designated Authority [CITATION] to underscore that Section 9A of the Customs Tariff Act aims to maintain a level playing field and prevent dumping, thus protecting domestic industries from unfair competition.
• The Court referred to Tata Chemicals v. Union of India [CITATION] and Automotive Tyre Manufacturers Association v. the Designated Authority [CITATION] to highlight that the Designated Authority (DA) follows a prescribed quasi-judicial procedure when determining whether to impose anti-dumping duties.
• The Court mentioned Union of India v. Kumho Petrochemicals [CITATION] to note that the Anti-Dumping Rules (ADA) are to be assimilated into domestic laws.
• The Court used Directorate General of Anti-Dumping v Sandik International [CITATION] and Association of Synthetic Fibre Industries v Apollo Tyres Ltd [CITATION] to caution that judicial review should be exercised with caution, especially in cases involving final findings by the DA.
• The Court cited Commr. of Customs v. G.M. Exports [CITATION] to emphasize the timeline for the Designated Authority to complete its investigation and the conditions for retrospective levy of duty.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Adherence to Procedure: The Court emphasized that the Designated Authority (DA) must adhere to prescribed procedures and timelines for anti-dumping investigations.
• Importance of Timely Data: The Court highlighted the necessity of using updated and contemporaneous data for a valid investigation, as per the Standard Operating Procedure (SOP).
• Quasi-Judicial Authority: The Court recognized the DA as a quasi-judicial authority and stated that High Courts should not interfere with its functions unless there is a clear violation of the law.
• Limited Scope of Judicial Review: The Court cautioned against the continuous oversight of the DA’s functions through judicial review, emphasizing that such review should be exercised circumspectly.
• Statutory Timelines: The Court noted that the Customs Tariff Act and the Rules of 1995 clearly intend for investigations to be completed within pre-determined time limits.

The court’s reasoning focused on the procedural aspects of anti-dumping investigations and the need for the Designated Authority to have the most current information available. The court’s analysis was heavily weighted towards the legal framework and procedural compliance, with a lesser emphasis on the factual aspects of the case.

Logical Reasoning

The court rejected any alternative interpretations that would have supported the High Court’s view. The court’s decision was primarily based on the need for the DA to follow prescribed procedures and the importance of using current data.

The Supreme Court’s decision was clear:

• The Designated Authority (DA) is not obligated to initiate an anti-dumping investigation based on outdated data.
• The High Court’s initiation of contempt proceedings against the DA was not justified.
• The High Court’s direction to replace the incumbent DA was also not justified.

The Supreme Court quoted the following from the judgment:

• “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 the domestic market.”
• “The purpose of Section 9-A is, therefore, to maintain a level playing field and prevent dumping while allowing for healthy competition.”
• “Investigations shall, except in special circumstances, be concluded within one year, and in no case more than 18 months, after their initiation.”

There was no majority or minority opinion in this case. The judgment was unanimous.

The Supreme Court’s analysis focused on the procedural aspects of anti-dumping investigations and the need for the Designated Authority to have the most current information available. The court’s decision was primarily based on the need for the DA to follow prescribed procedures and the importance of using current data.

The implications for future cases are that the Designated Authority (DA) will be required to adhere to the timelines and procedures outlined in the Customs Tariff Act and the Rules of 1995, and that High Courts will be more circumspect in their judicial review of anti-dumping investigations.

No new doctrines or legal principles were introduced in this case.

Key Takeaways

• The Designated Authority (DA) is not required to initiate an anti-dumping investigation based on outdated data.
• The DA has the authority to seek updated data to ensure the investigation is based on current and relevant information.
• High Courts should exercise caution when reviewing anti-dumping investigations and should not interfere with the DA’s functions unless there is a clear violation of the law.
• Timely and accurate data is crucial for effective anti-dumping investigations.
• The DA must adhere to the prescribed timelines for completing investigations.

This judgment reinforces the importance of the Designated Authority’s role in anti-dumping investigations and the need for the DA to have the most current and accurate information available. It also establishes that the High Courts should exercise caution in their judicial review of anti-dumping investigations.

Directions

The Supreme Court set aside the orders of the Telangana High Court, including the direction to replace the incumbent Designated Authority (DA).

Development of Law

The ratio decidendi of this case is that the Designated Authority (DA) is not obligated to initiate an anti-dumping investigation based on outdated data and must seek updated data to comply with the law. This decision reinforces the importance of timely and accurate data in anti-dumping investigations and clarifies the scope of judicial review in such matters. There is no change in the previous positions of law, but the judgment clarifies the procedural requirements for anti-dumping investigations.

Conclusion

In conclusion, the Supreme Court’s decision in The Designated Authority & Ors. vs. M/s The Andhra Petrochemicals Limited clarifies the procedural requirements for anti-dumping investigations, emphasizing the importance of timely data and the need for the Designated Authority to adhere to prescribed procedures. The Court’s judgment reinforces the autonomy of the DA in conducting investigations and cautions against excessive judicial interference.