Case Law Details
Xinyi Energy Smart (Malaysia) SDN BHD Vs Union of India (CESTAT Delhi)
CESTAT Delhi held that interest free advances received by the foreign exporter not includible in the value of goods supplied to India when advances are for expansion of production facility and future production activity.
Facts- Anti-Dumping Appeal has been filed by M/s. Xinyi Energy Smart (Malaysia) for setting aside the imposition of anti-dumping duty so far as the exports by Xinyi Energy are concerned by customs notification dated 11.11.2020 read with the final findings dated 20.08.2020. The submission is that its exports to India by Xinyi Energy are not at dumped prices, and the determination of the dumping margin by the designated authority in the final findings is erroneous for the reason that it is based on a faulty determination of the normal value and export price.
Anti-Dumping Appeal Numbers have been filed by M/s. Asahi India Glass Ltd, M/s. Gold Plus Glass Industry Ltd., M/s. Saint Gobain India Pvt Ltd. and M/s. Sisecam Flat Glass India Pvt. Ltd., respectively, as domestic industry, with a prayer that Xinyi Energy should have been treated as a non-co-operating exporter by the designated authority and/or relegate Xinyi Energy to residuary antidumping duty for the reason that Xinyi Energy had consciously provided incorrect information to the designated authority and also suppressed material facts from the designated authority.
Conclusion- Thus, the interest free advances received by the foreign exporter from the parent company are for expansion of the production facility and future production activity, and not relatable to the production and export of subject goods to India during the period of investigation.
The designated authority was not justified in holding that the cost of the product under consideration was understated to the extent of the impact of interest of such loans received towards future expansion and, therefore, was required to be adjusted by imputing notional interest cost.
FULL TEXT OF THE CESTAT DELHI ORDER
Anti-Dumping Appeal No. 50322 of 2021 has been filed by M/s. Xinyi Energy Smart (Malaysia), Sdn Bhd1 for setting aside the imposition of anti-dumping duty so far as the exports by Xinyi Energy are concerned by customs notification dated 11.11.2020 read with the final findings dated 20.08.2020. The submission is that its exports to India by Xinyi Energy are not at dumped prices, and the determination of the dumping margin by the designated authority in the final findings is erroneous for the reason that it is based on a faulty determination of the normal value and export price.
2. Anti-Dumping Appeal Numbers 50412 of 2021, 50413 of 2021, 50414 of 2021 and 50418 of 2021 have been filed by M/s. Asahi India Glass Ltd, M/s. Gold Plus Glass Industry Ltd., M/s. Saint Gobain India Pvt Ltd. and M/s. Sisecam Flat Glass India Pvt. Ltd.2, respectively, as domestic industry, with a prayer that Xinyi Energy should have been treated as a non-co-operating exporter by the designated authority and/or relegate Xinyi Energy to residuary antidumping duty for the reason that Xinyi Energy had consciously provided incorrect information to the designated authority and also suppressed material facts from the designated authority.
3. It transpires from the records that the domestic industry had filed an application before the designated authority for imposition of anti-dumping duty on imports of Clear Float Glass3 originating in or exported from Malaysia and a notification dated 23.08.2019 was issued for initiating an investigation to determine existence, degree and effect of the alleged dumping of the subject goods and recommend the amount of anti-dumping duty, which, if levied, would be adequate to remove the alleged injury to the domestic industry. The period of investigation for the purpose of investigation was notified to be from 01.04.2018 to 31.03.2019. The injury investigation period was to cover the previous three years i.e., April 2015- March 2016, April 2016-March 2017, April 2017-March 2018 and the period of investigation.
4. Xinyi Energy claims that pursuant to the initiation notification dated 23.08.2019, it communicated its intention to the designated authority to participate in the investigation and submitted confidential and non-confidential responses to the Exporter‟s Questionnaire. The designated authority granted an opportunity of oral hearing to the interested parties on 08.01.2020 and 15.07.2020, and all the parties who attended the oral hearing were asked to file written submission of the views expressed orally by them. The parties were also advised to collect written submission made by the opposing party and submit rejoinder. The essential facts of the investigation were disclosed to the interested parties by a disclosure statement dated 28.07.2020 and time was granted to the parties to provide comments on the disclosure statements.
5. The final findings were notified by the designated authority on 20.08.2020. A recommendation was made to the Central Government for imposition of anti-dumping duty on import of the subject goods originating in or exported from Malaysia from the date of notification to be issued by the Central Government.
6. The Central Government, thereafter, issued a notification dated 11.11.2020, which was published on the same date in the Gazette of India, imposing anti-dumping duty at the rate equal to the difference between the landed value of subject goods and the amount indicated in the corresponding entry in column (7). The said Table is reproduced below:
|
S. |
Hea-ding /Sub- heading |
Desc-ription of Group |
Country of origin | Country of Export |
Prod-ucer | Amount | Curr-ency | Unit |
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 |
| 1. | 7005 | Clear Float Glass of nominal thick-nesses ranging from 4mm to 12mm (both inclusive), the nominal thickness being as per BIS 14900: 2000 |
Malaysia | Malaysia | Kibing Group (M) Sdn. Bhd. |
273.12 | United States Dollar |
Metric tonne |
| 2. | -do- | -do- | Malaysia | Malaysia | Xinyi Energy Smart (Malaysia) Sdn. Bhd. | 272.87 | United States Dollar |
Metric tonne |
| 3. | -do- | -do- | Malaysia | Any | Any other than S. Nos. 1 and 2 above | 326.00 | United States Dollar |
Metric tonne |
| 4. | -do- | -do- | Any country not attra-cting antidumping duties | Malaysia | Any | 326.00 | United States Dollar |
Metric tonne |
7. The anti-dumping duty was to be effective for a period of five years from the date of publication of the notification in the official gazette.
8. Xinyi Energy, as a producer and exporter of the subject goods from Malaysia, has challenged the imposition of anti-dumping duty imposed upon it by the aforesaid notification dated 11.11.2020 issued by the Central Government. The domestic industry, at whose instance the anti dumping duty was imposed, has filed four appeals, each with a prayer that Xinyi Energy should be treated as a non-cooperating exporter and/or relegate it to residuary anti-dumping duty.
9. It would be appropriate to first refer to the relevant provisions of the Customs Tariff Act 19754 and the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules 19955 framed therein.
10. Section 9A of the Tariff Act deals with anti-dumping duty on dumped articles and also defines the „export price‟ and „normal value‟. It is reproduced below:
“ANTI-DUMPING DUTY ON DUMPED ARTICLES
9A (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.
Explanation. – For the purposes of this section, –
(a) “margin of dumping”, in relation to an article, means the difference between its export price and its normal value;
(b) “export price”, in relation to an article, means the price of the article exported from the exporting country or territory and in cases where there is no export price or where the export price is unreliable because of association or a compensatory arrangement between the exporter and the importer or a third party, the export price may be constructed on the basis of the price at which the imported articles are first resold to an independent buyer or if the article is not resold to an independent buyer, or not resold in the condition as imported, on such reasonable basis as may be determined in accordance with the rules made under sub-section (6);
(c) “normal value”, in relation to an article, means –
(i) the comparable price, in the ordinary course of trade, for the like article when destined for consumption in the exporting country or territory as determined in accordance with the rules made under subsection (6); or
(ii) when there are no sales of the like article in the ordinary course of trade in the domestic market of the exporting country or territory, or when because of the particular market situation or low volume of the sales in the domestic market of the exporting country or territory, such sales do not permit a proper comparison, the normal value shall be either –
(a) comparable representative price of the like article when exported from the exporting country or territory to an appropriate third country as determined in accordance with the rules made under sub-section (6); or
(b) the cost of production of the said article in the country of origin along with reasonable addition for administrative, selling and general costs, and for profits, as determined in accordance with the rules made under sub-section (6):
Provided that in the case of import of the article from a country other than the country of origin and where the article has been merely transhipped through the country of export or such article is not produced in the country of export or there is no comparable price in the country of export, the normal value shall be determined with reference to its price in the country of origin.”
11. A perusal of the aforesaid section 9A of the Tariff Act indicates if any article is exported from any country to India at less than its normal value, then upon the importation of such article into India the Central Government can impose anti-dumping duty not exceeding the margin of dumping. Margin of dumping has been defined to mean the difference between the export price and the normal value. The export price means the price of the article exported from the exporting country. Normal value has been defined to mean the comparable prices for the like article when destined for consumption in the exporting country.
12. Sub-section (5) of section 9A provides that anti-dumping duty imposed shall, unless revoked earlier, cease to have effect on the expiry of five years from the date of such imposition.
13. Sub-section (6) of the section 9A of the Tariff Act provides that the margin of dumping has to be ascertained and determined by the Central Government, after such enquiry as may be considered necessary and the Central Government may, by notification in the Official Gazette, make rules for the purpose of this section.
14. In exercise of the powers conferred by sub-section (6) of section 9A and sub-section (2) of the section 9B of the Tariff Act, the Central Government framed the 1995 Anti-Dumping Rules.
15. The duties of the designated authority are contained in rule 4 and the relevant portion is reproduced below:
“4. Duties of the designated authority.-
xxxxxxxxxxx
(d) to recommend to the Central Government-
(i) the amount of anti-dumping duty equal to the margin of dumping or less, which if levied, would remove the injury to the domestic industry, after considering the principles laid down in the Annexure III to these rules; and
(ii) the date of commencement of such duty;”
16. Rule 5 deals with initiation of investigation to determine the existence, degree and effect of any alleged dumping.
17. The principles governing investigations are contained in Rule 6. Rule 10 provides for determination of normal value, export price and margin of dumping and is reproduced below:
“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.”
18. Rule 16 provides that the designated authority shall, before giving its final findings, inform all interested parties of the essential facts under consideration which form the basis for its decision.
19. Rule 17 provides for final findings. It stipulates that the designated authority shall, within one year from the date of initiation of the investigation, determine as to whether or not the article under investigation is being dumped in India and submit to the Central Government its final findings. Apart from various factors on which the final findings is to be given, the designated authority is also required to recommend the amount of duty which if levied would remove the injury to the domestic industry after considering the principles laid down in Annexure III to the 1995 Rules. For this purpose the designated authority has to determine the non-injurious price of the like domestic product. Rule 17 is reproduced below:
“17. Final findings. – (1) The designated authority shall, within one year from the date of initiation of an investigation, determine as to whether or not the article under investigation is being dumped in India and submit to the Central Government its final finding –
(a) as to, –
(i) the export price, normal value and the margin of dumping of the said article;
(ii) whether import of the said article into India, in the case of imports from specified countries, causes or threatens material injury to any industry established in India or materially retards the establishment of any industry in India;
(iii) a causal link, where applicable, between the dumped imports and injury;
(iv) whether a retrospective levy is called for and if so, the reasons therefore and date of commencement of such retrospective levy:
Provided that the Central Government may, in its discretion in special circumstances extend further the aforesaid period of one year by six months:
Provided further that in those cases where the designated authority has suspended the investigation on the acceptance of a price undertaking as provided in rule 15 and subsequently resumes the same on violation of the terms of the said undertaking, the period for which investigation was kept under suspension shall not be taken into account while calculating the period of said one year,
(b) recommending the amount of duty which, if levied, would remove the injury where applicable, to the domestic industry after considering the principles laid down in the Annexure III to rules.
— — — —
(4) The designated authority shall issue a public notice recording its final findings.”
(emphasis supplied)
20. Ms. Reena Khair, learned counsel assisted by Ms. Shreya Dahiya, Shri Anmol Jain and Shri Subham Jaiswal made the following submissions:-
(i) The exports of Xinyi Energy to India are not at dumped prices, and the determination of the dumping margin by the designated authority in the final findings is erroneous as it is based on a faulty determination of the normal value and export price. The designated authority committed an error in making a deduction from the export price of Xinyi Energy to India on account of the proposed liaison office of the related company;
(ii) The disclosure statement notes that Xinyi Glass (India) Ltd6, a company registered in Hong Kong, had applied for opening of a liaison office in India, for which it established a temporary office for receiving official correspondence. The temporary office address was indicated on the website, in anticipation of approval to be granted by the Reserve Bank of India. Xinyi Glass was not concerned with the export of subject goods by Xinyi Energy during the period of investigation and this fact was accepted by the designated authority as no adjustment was made to the export price in the disclosure statement. Still, without any fresh evidence or information, the designated authority, in the final findings, concluded that Xinyi Glass is involved in the sale and marketing of subject goods in India during the period of investigation on behalf of its parent company, i.e. Xinyi Glass Holdings Ltd;
(iii) Xinyi Glass India and Xinyi Energy do not have inter-se shareholding, but are subsidiaries of a common parent, i.e. Xinyi International Investment (Hong Kong). Merely because a group company has applied for a liaison office with the expectation of carrying out certain activities in India in the future does not justify the conclusion that Xinyi Glass was involved in selling or marketing of subject goods in the past, i.e. during the period of investigation;
(iv) There is no legal basis for reduction or adjustment in the CIF price under the Tariff Act or the 1995 Rules;
(v) Xinyi Energy had received advances from its parent company i.e., Xinyi International Investment Ltd, a company incorporated in Hong Kong, which was reflected in the Audited Financial Statement for the year ended 31.12.2019 as current liabilities of the company, as an amount due to the holding company;
(vi) The amount given by the holding company is an infusion of capital by the parent company in the form of advances. The funds for these advances were obtained by the parent company from the Bank of China (Hong Kong) Ltd., which is a bank based in Hong Kong and incorporated under the Laws of Hong Kong. It is not a bank incorporated in China PR nor is it subject to laws of China PR. The interest free advances received from the parent company are for expansion of the production facility and future production activity and not relatable to the production and export of subject goods to India during the period of investigation;
(vii) Even if the advances are to be treated as an interest free loan relatable to the subject goods, then too the actual interest cost as per the loan agreement should be taken, but the designated authority took the interest cost based on a notional rate of interest prevailing in Malaysia, without rendering any finding as to why the actual interest cost is not acceptable for determining the interest foregone;
(viii) The submission made on behalf of the domestic industry that Xinyi Energy mis-declared facts in the Questionnaire is not correct. The question required the exporter to mention the address of its main corporate office and its office in India. As Xinyi Energy did not have any office in India, it correctly indicated the address of its Corporate Office in Hong Kong. The question did not require the exporter to mention the addresses of offices in India of all its related entities;
(ix) In any case, Xinyi Glass did not have an office in India, either during the period of investigation or at the time of filing of the Questionnaire response. The fact that a related company had applied to the Reserve Bank of India for permission to open a liaison office was not required to be mentioned in response to this question. The response given by the Xinyi Energy was, therefore, factually correct; and
(x) Even otherwise, rule 6(8) of the 1995 Rules has no applicability to the present case, as the designated authority had never asked Xinyi Energy to provide the expenses incurred by Xinyi Glass. In fact, Xinyi Energy had no opportunity to provide such information, as it believed that its contention on this issue had been accepted by the designated authority. It came to know that such adjustment was going to be made only after issuance of the final findings.
21. Shri Ramesh Singh, learned senior counsel assisted by Shri Jitendra Singh, Shri Akshay Soni, Shri Anshuman Sahni and Shri Sharad Bhausali, learned counsel and Shri Jinendra Singhvi learned consultant for the domestic industry, made the following submissions:
(i) The Questionnaire response of Xinyi Energy should have been rejected and Xinyi Energy should have been declared as non-cooperative, since it consciously provided incorrect information and suppressed material facts from the designated authority in order to not only deflate its cost of production to have a lower normal value, but also to inflate its export price;
(ii) Incorrect information was provided by the exporter with respect to the rate of interest charged by related party;
(iii) Incorrect information was provided by the exporter with respect to India office;
(iv) The interest cost of the exporter cannot be computed on the basis of the rate of interest that may have been paid by the parent company in Hong Kong; and
(v) The exporter cannot be allowed to make submissions on the basis of documents illegally kept confidential earlier.
22. Shri Ameet Singh assisted by Shri Mohit Yadav, learned counsel appearing for the designated authority, made the following submissions:
(i) There was concealment of fact by Xinyi Energy before the designated authority regarding its operations in India and the interest free loan. In its exporter‟s Questionnaire response, the exporter denied receiving any loans from its parent company;
(ii) With regard to the rate of interest to be adopted in the absence of the same being reflected in the books of accounts, Xinyi Energy did not provide any information regarding the interest rates prevailing in Malaysia. It is in this backdrop that the designated authority, by applying rule 6(8) of the 1995 Rules, proceeded with facts available and took the prevailing interest rate in Malaysia on the basis of the information available with it;
(iii) The reason for the application of notional interest was elaborated by the Supreme Court in Metal Box India Ltd. The Collector of Central Excise, Madras7;
(iv) The interest free loans received by Xinyi Energy do not reflect the actual cost associated with the production and sale of the article under consideration and no information regarding the interest rates prevailing in Malaysia was provided by Xinyi Energy to the designated authority during the course of the investigation; and
(v) The loan taken by Xinyi Hong Kong from a Bank situated in Hong Kong is not an international transaction, as the loan was taken by an entity situated in Hong Kong from a bank in Hong Kong under the rules and regulation made therein. Moreover, the transfer of loan from Xinyi Hong Kong to Xinyi Malaysia is an inter group transaction, which is not at arm‟s length. The designated authority, in order to compute the cost of production for the purpose of carrying ordinary course of trade test for the domestic sales in Malaysia, added interest cost prevailing in Malaysia.
23. Shri Rakesh Kumar, learned authorized representative of the Department appearing for the Central Government supported the final findings of the designated authority and the notification issued by the Central Government for imposition of anti-dumping duty on the subject goods from Malaysia.
24. The submissions advanced by learned counsel for Xinyi Energy, learned senior counsel appearing for the domestic industry, learned counsel appearing for the designated authority and learned authorized representative appearing for the Central Government have been considered.
25. The submission advanced by the learned counsel for Xinyi Energy is that the export price of the subject goods to India by Xinyi Energy are not at dumped prices and the determination of the dumping margin by the designated authority is not correct as the normal value and export price have not been correctly determined.
26. In order to appreciate the submission, it would be appropriate at this stage to examine what was disclosed by the designated authority in the disclosure statement.
27. Regarding the determination of the normal value, the designated authority, after consideration of the submissions made by the interested parties and the domestic industry and after noting the definition of normal value contained in section 9A(1)(c) of the Tariff Act, observed as follows:
“Disclosure Statement
Normal Value
30. As regards the issue to adjustment in export price of Xinyi Smart, due to existence of their related party of in India, the exporter has submitted that Xinyi Glass (India) Limited, a company registered in Hong Kong, is in the process of establishing office in India. Currently, they have temporary office address in India, which is indicated on the website of the Company. It was further clarified that Xinyi Glass (India) is not involved in the process of export to India.
31. As regards the submission of the Domestic Industry that Xinyi has withheld the information about their Indian operations and services offered by them Xinyi has clarified that they have only applied for the office in India and relevant documents were reproduced to support their claim.
32. As regards the issue of adjustment in cost and normal value on account interest free loans, the Authority notes that the same have been appropriately adjusted while computing normal value. As regards the submissions of the Domestic Industry that the exporters are purchasing the raw material from their related parties, it is noted that the Domestic industry has not provided any evidence to prove that the input prices and machinery price from related parties are not a fair price. Moreover, while analyzing the data submitted by the exporters, the Authority has also not found any inconsistency in the prices of the inputs from the related party. In view, thereof, the concerns of the Domestic industry relating to transfer pricing are adequately taken care of.
(emphasis supplied)
28. The normal value for Xinyi Energy that was disclosed in the disclosure statement is as follows:
“Normal Value for the Appellant
36. It is noted from the response that M/s Xinyi Energy Smart (Malaysia) Sdn. Bhd., Malaysia, during the POI, has sold *** MT of the subject goods having invoice value *** MYR to unrelated customers in the domestic market. It is noted that their domestic sales are in sufficient quantity in the domestic market. Xinyi Energy has provided transaction wise details of sales made in home market in its Questionnaire Response. Detailed examination of the response was carried out on desk study basis. To determine the normal value, the Authority conducted the ordinary course of trade test to determine profit making domestic sales transactions with reference to cost of production of subject goods.
37. It has been claimed by the domestic industry that the exporter has obtained interest free loans from their group company. Further, it has procured of raw material/plant and machinery from a related company and natural gas in Malaysia at subsidized prices. The Authority noted that as per Audit Report for the year 2018, the company has obtained interest free loan of *** MYR from its holding company, namely Xinyi International Investments Limited, Hong Kong. This company has claimed that this loan has been obtained by the Holding Company from Bank of China (Hong Kong) Limited for investing in Xinyi Energy Smart (Malaysia) Sdn. Bhd., Malaysia at an Interest Rate of HIBOR+***% p.a. In support of the same copy of the agreement between Bank of China (HK) and Xinyi International Investments Limited, Hong Kong have been provided. The Authority has notionally worked out the incidence of interest to arrive at ex-factory cost at Xinyi Energy Smart based on the prevailing long term loans in Malaysia during the period of investigation. As regards the submissions of the Domestic Industry that the exporters are purchasing the raw material from their related parties, it is noted that the no evidence has been placed on record to prove that the input prices and machinery price from related parties are not at fair price. Moreover, while analyzing the data submitted by the exporters, the Authority has also not found any inconsistency in the prices of the inputs from the related party. In view thereof, the concerns of the Domestic Industry on this issue are adequately taken care off. With regards to natural gas prices in Malaysia it is observed that allegation of an actionable specific subsidy is being examined separately by the Authority in anti-subsidy investigation. The Authority further notes that in an AD investigation, various input cost elements have been considered for computation of the cost of production of producer/exporter as per the accounting principles, and books of accounts maintained by the producer/exporter in accordance with relevant Rules.
38. The cost so arrived has been considered for applying ordinary course of trade test. In case profit making transactions are more than 80% then the Authority has considered all the transactions in the domestic market for the determination of the normal value. Where profitable transactions are less than 80%, only profitable domestic sales are taken into consideration for the determination of normal value. Based on the ordinary course of trade test, only profit-making domestic sales have been taken for determination of normal value, since the profitable sales were found to be less than 80%.
39. M/s Xinyi Energy Smart (Malaysia) Sdn. Bhd., Malaysia, has claimed adjustments on account of ocean freight, insurance, inland transportation, credit and rebate. Accordingly, weighted average normal value for M/s Xinyi Energy Smart (Malaysia) Sdn. Bhd., Malaysia, has been determined, and the same is mentioned in dumping margin table.”
(emphasis supplied)
29. The designated authority also disclosed the export price for Xinyi Energy in the disclosure statement and it is as follows:
“Export Price for the Appellant
40. M/s Xinyi Energy Smart (Malaysia) Sdn. Bhd., Malaysia, has exported directly *** MT of the subject goods having invoice value *** MYR to Indian buyers. The producer/exporter has claimed adjustments on account of ocean freight, insurance, inland transportation, credit cost, bank charges. The Authority has not considered this adjustment while arriving at ex-factory domestic sales. The Authority has analyzed the post disclosure comments and after analyzing the same, found that the Xinyi Glass (India) Ltd is indeed involved in the soliciting business enquiries, and marketing of their group company’s products which include subject goods manufactured by Xinyi smart.
41. It is also noted that the exporter has not provided any evidence / information to enable the Authority to deduct relevant expenses of the Xinyi Glass India. In order to make appropriate adjustments the Authority has deducted *** % from the export price of Xinyi Smart, based on selling and marketing costs only of the Xinyi Glass Holding Limited in accordance to the Rule 6(8). The net export price after these adjustments is given in the dumping margin table.”
(emphasis supplied)
30. The designated authority also disclosed the dumping margin as follows:
Dumping Margin
44. Considering the normal value and export prices for the subject goods as above, the dumping margin for the subject goods has been determined as follows. It is seen that the dumping margin for the subject goods is more than de-minimis and significant.
Dumping Margin Table
|
Country |
Producer | Normal Value/CNV (US$/MT) | Export Price (US$/MT) | Dumping Margin US$/MT | Dumping Margin% | Dumping Margin Range |
| Malaysia | Kibing Group (M) Sdn. Bhd | *** | *** | *** | *** | 0-10 |
| Xinyi Energy Smart (Malaysia) Sdn. Bhd. | *** | *** | *** | *** | 0-10 | |
| Others | *** | *** | *** | *** | 50-60 |
31. The designated authority also noted the submissions made by the domestic industry in the comments filed to the disclosure statement and the same have been noted as follows:
“H. Post Disclosure Submissions
Submission by the domestic industry
93. The Domestic Industry in their post disclosure statement submissions has further submitted that Xinyi India is involved in the operations of marketing and sales of Xinyi Smart Malaysia being the same group company. It has been further submitted that the presence of their country representative, in the first oral hearing to monitor the overall proceedings relating to antidumping and anti-subsidy investigation and the fact that their regional representative, based in Mumbai as Territory Manager in Xinyi Glass Holdings Ltd., to focus on marketing and sales of Xinyi Smart product in the Indian market, shows the level of involvement in the operations relating to sales of the product under consideration in India. In view thereof, the Domestic Industry reiterated its request to reject the claim of individual dumping margin of Xinyi Group. They also requested that the export price of the exporter should be appropriately adjusted to the extent of the expenses incurred by Xinyi Glass Holdings Ltd.”
32. The submissions made by the producers/exporters/importers and the other interested parties to the disclosure statement were also noted by the designated authority as follows:
“Submissions by producers/exporters/importers and other interested parties
98. It has been submitted that for opening up a Liaison Office local address in India with a local representative is required. To meet this requirement Xinyi Glass (India) Ltd., Hong Kong has appointed a country representative and hired a cabin of 110 sq. ft in Gurugram, Haryana to meet the requirement of local representative and local address. They also submitted Xinyi Glass (India) Limited, Hong Kong, has filed an application before RBI for approval to establish a Liaison Office in India, and the said application is still pending as the required approval from RBI has not been granted, and Xinyi Glass (India) Limited cannot start its operations till the approval from RBI is granted. It is further submitted that Xinyi Glass (India) Ltd. is not authorised to open any bank account in India without approval for establishment of Liaison Office from RBI, all its expenses including Rent for Office and salary to its only staff member is directly paid by the Group Company. In view of the above facts, it is submitted that there is no related company operational in India of Xinyi Energy Smart. Claim of the Domestic Industry with regard to Xinyi Glass (India) Ltd. is totally incorrect and needs to be rejected.”
33. After having considered the post disclosure comments, the designated authority proceeded to record its examination and the same is reproduced below:
“Examination by the Authority
100. The Authority notes that most of the submissions by parties are repetitive in nature and have been examined and addressed in the disclosure statement and in the foregoing parts of the present findings. The findings above deal with all such arguments of the domestic industry and other interested parties. However, the Authority has examined these submissions herein below to the extent relevant and not addressed elsewhere.
104. With regard to argument of domestic industry that Xinyi Energy Smart (Malaysia) SDN BHD is maintaining a liaison office in India, and export price of the exporter should be appropriately adjusted to the extent of the expenses incurred by Xinyi Glass Holdings Ltd, the Authority has examined the issue in the light of information already on record and post-disclosure comments received from all the parties where both the parties have submitted documents in support of their contention, and based on the information on record, and examination, the Authority has found credence in the submissions of the Domestic Industry that Xinyi glass (India) Ltd is indeed involved in the marketing and sales of the products of Xinyi Group. It was, therefore, incumbent upon the exporter to declare their operations and the set-up with full transparency. It is also noted that it was only after the Domestic Industry pointed out the presence of the representative of Xinyi Glass (India) Ltd in the oral hearing as well as the fact that they are involved in the marketing and sales to India that the exporter provided additional information to the Authority to the extent that they only have a temporary office in India. From the submission of the exporter, it is also noted that the Xinyi glass (India) Ltd, are working with temporary office. However, the Authority also notes that the exporter has not provided any evidence/ information to enable the Authority to deduct relevant expenses of their working in India. It is noted that their India office is indeed engaged in soliciting enquiries and marketing on behalf of their parent company Xinyi Glass Holding Ltd for marketing of their group company’s products which include subject goods manufactured by Xinyi smart.
105. In view of the above, it was considered appropriate to make appropriate adjustments by deducting ***% from the export price of Xinyi Smart, for determining net export price taking into account selling and marketing costs of the their parent company ie Xinyi Glass Holding Limited in accordance to the Rule 6(8) of the Rules.
108. With regard to the argument of Xinyi Energy Smart (Malaysia) SDN BHD with regard to the notional interest rate charged in respect of loans from principal shareholder, it is found that the cost was understated to the extent of the impact of interest of such loans and the Authority has duly adjusted the same by imputing notional interest cost.”
(emphasis supplied)
34. The conclusions recorded by the designated authority are as follows:
“J. Conclusion
115. Having regard to the contentions raised, information provided, and submissions made by the interested parties and facts available before the Authority as recorded in these final findings and on the basis of the above analysis, the Authority concludes that:
a. The product under consideration has been exported to India from the subject country below its associated normal value, thus resulting in dumping.
b. The Domestic Industry has suffered material injury due to dumping of the product under consideration from the subject country.
c. The material injury has been caused by the dumped imports from the subject country.”
35. The recommendation made by the designated authority are as follows:
“K. Recommendation
116. The Authority notes that the investigation was initiated and notified to all interested parties and adequate opportunity was given to the exporters, importers and other interested parties to provide positive information on the aspect of dumping, injury and casual link. Having initiated and conducted the investigation into dumping, injury and casual link in terms of the provisions laid down under the Rules and having established positive dumping margin as well as material injury to the domestic industry caused by such dumped imports, the Authority is of the view that imposition of definitive anti-dumping duty is required to offset dumping and injury. The Authority, therefore, considers it necessary and recommends impositions of antidumping duty on imports of the subject goods from the subject country in the form and manner described hereunder.”
Liaison Office
36. The first issue that has to be decided is as to whether the designated authority was justified in making deductions from the export price of Xinyi Energy on account of liaison office.
37. It needs to be noted that in the disclosure statement the designated authority noted that Xinyi Glass is a company registered in Hong Kong and it had applied for opening a liaison office in India for which it had established a temporary office for receiving official correspondence. This temporary office was noted in the website in anticipation of the approval to be granted by the Reserve Bank of India. The designated authority accepted the contention of Xinyi Energy that Xinyi Glass was not concerned with the export of the subject goods by Xinyi Energy during the period of investigation and accordingly the designated authority did not make any adjustment to the export price.
38. The contention of the learned counsel for Xinyi Energy is that without any fresh evidence or information the designated authority in the final findings, concluded that Xinyi Glass was involved in the sale and marketing of the subject goods during the period of investigation on behalf of its parent company i.e. Xinyi Glass Holding Limited. In this connection, learned counsel referred to paragraphs 40, 41, 104 and 105 of the final findings of the designated authority.
39. The finding that Xinyi Glass is involved in the marketing and sales of the subject goods in India, during the period of investigation is based on the following:
a) Application filed by Xinyi Glass to the Reserve Bank of India for opening a liaison office.
b) Taking on rent an office admeasuring 110 Sq. feet (referred to as Cabin 1) for receiving official correspondence after the period of investigation.
c) Mention of this office address on Company website.
d) Public hearing attended by Mr. Rajesh Kumar, sole employee of Xinyi Glass in India.
40. It is seen that all these facts were before the designated authority before it issued the disclosure statement. There is nothing on the record which may indicate that any fresh evidence was led by the domestic industry, after the issuance of the disclosure statement, which could have persuaded the designated authority to form an opinion regarding involvement of Xinyi Glass in the export of subject goods by Xinyi Energy during the period of investigation.
41. Xinyi Energy claims that it never had a liaison office in India, nor it had applied to any authority for opening of such office. The records indicate that Xinyi Glass also did not have any liaison office in India during the period of investigation. Even otherwise, a liaison office can only act as a medium for communication, and scope of activities is restricted. In this context, reference can be made to letter dated 14.08.2020 submitted by Xinyi Energy to the designated authority, which reads as follows:
“1. Kind attention of the Authority is drawn to Section 2 (e) and 3 of Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016 (Amended up to January 21, 2019)-Enclosed as [Exhibit-1]:
Section 2 (e) reads as “Liaison Office” means a place of business to act as a channel of communication between the principal place of business or Head Office or by whatever name called and entities in India but which does not undertake any commercial/trading/industrial activity, directly or indirectly, and maintains itself out of inward remittances received from abroad through normal banking channel,
Section 3 reads as under:
“Prohibition against a branch office or a liaison office or a project office or any other place of business in India
No person resident outside India shall without prior approval of the Reserve Bank open in India a branch office or a liaison office or a project office or any other place of business by whatever naive called except as laid down in these Regulations.”
42. Thus a, person who is not a resident of India can open a branch office or a liaison office only with the prior approval of the Reserve Bank of India and in accordance with the Regulations. Secondly, the liaison office cannot undertake any commercial/trading/industrial activity directly or indirectly. The domestic industry has not brought on record any evidence to suggest that Xinyi Glass carried out any commercial activity. In this connection, it would be pertinent to reproduce the communication dated 14.08.2020 submitted by Xinyi Energy to the designated authority for clarifying the factual position and it is:
“3. In support of our submissions, we are hereby further submitting the following:
a) Business License of Xinyi Glass (India) Limited [Exhibit-3], which clearly shows that Xinyi Glass (India) Limited is registered in Hong Kong and not in India.
b) We are also enclosing herewith an email received from ICICI Bank, India, who is processing their application for approval from Reserve Bank of India for establishment of Liaison Office about the status of such application ‘Exhibit-4. The application for such approval has been filed through ICIC Bank India. The email issued by ICICI Bank clearly shows that:
-
- Xinyi Glass (India) Limited, Hong Kong, has filed an application before RBI for approval to establish a Liaison Office in India.
- The said application is still pending as the required approval from RBI has not been granted.
- Xinyi Glass (India) Limited cannot start its operations till the approval from RBI is granted.
4. From the email received from ICCI Bank it is clear that no approval has been granted by Government of India for start of Liaison Office in India. In absence of such approval Xinyi Glass (India) has not established any business operations in India. It has also been clarified that Xinyi Glass (India) Ltd. cannot start its activities without obtaining approval for establishment of Liaison Office, which is still pending.
5. It is further submitted that Xinyi Glass (India) Ltd., Hong Kong is not a subsidiary of Xinyi Energy Smart, Malaysia. With the liaison office, the foreign parent company will get help in entering into Indian market and exploring and studying the Indian market situation for their business growth. Foreign corporations are permitted to open liaison/representative offices in India (subject to obtaining specific approval from the RBI), to undertake liaison activities on their behalf. Liaison Office cannot perform any business activity. It is emphasised that no approval has been granted by the RBI during the period investigation and also till today to open a liaison office to Xinyi Glass (India) Ltd., Hong Kong.
*****
7. Further, it is submitted that Xinyi Glass (India) Ltd has only one employee at present in India. He is looking after the registration process of Liaison Office. No Commercial activity is being carried out as such by Xinyi Glass (India) Ltd. local office in India, which is merely acting as a postal address for completing the registration process in India”.
(emphasis supplied)
43. It is, therefore, clear that Xinyi Energy by the communication dated 14.08.2020 informed the designated authority that the application filed by the Xinyi Glass before the Reserve Bank of India for granting approval to establish a liaison office in India was pending and that Xinyi Glass had not established any business operations in India. In fact, without obtaining the approval Xinyi Glass could not have started its activities. Xinyi Energy also informed that even otherwise liaison office cannot perform any business activity.
44. Learned senior counsel for the domestic industry, however, submitted that the website of the Xinyi Glass mentions India office under the heading „sales network‟ and the address, email and the contact number is also provided in the website. This apart, one Mr. Rajesh Singh country head of Xinyi Glass India office attended the hearing before the designated authority on behalf of the exporter. Xinyi Glass is also listed as a supplier of the product under consideration i.e. „float glass‟ on Trade India Website. Xinyi Glass is also listed as a supplier of the product under consideration on Just Dial Website. Thus, Rajesh Singh acted in the capacity of a Sales Representative of Xinyi Energy in India.
45. In the present case, there is nothing on the record which may indicate that the said information relates to the period of investigation i.e. from 01.04.2018 to 31.03.2019. This apart till 14.08.2020 approval had not been granted by the Reserve Bank of India to Xinyi Glass to open a liaison office and there was only one employee of Xinyi Glass in India who was merely looking after the registration process of the liaison office. It would, therefore, not be appropriate to examine the information referred to by the learned senior counsel to determine whether Xinyi Energy had a liaison office in India.
46. Thus, the expenses, if any, incurred by Xinyi Glass would have no bearing or impact on the price at which the goods were exported. Section 9A(1)(b) of the Tariff Act which deals with the definition of „export price‟ provides for a construction of an export price where either on account of relationship between exporter and importer or a third party, the export price to India becomes unreliable. The present is a case where the exporter and importer are not related parties and the sale price to the Indian importer represents the true and full consideration for the sale. The findings recorded by the designated authority on this aspect, therefore, cannot be sustained.
47. A further contention was raised on behalf of the domestic industry by the learned senior counsel that the Questionnaire response of Xinyi Energy should have been rejected by the designated authority and Xinyi Energy should have been declared as non-cooperative as it consciously provided incorrect information and suppressed material facts from the designated authority. In this connection, learned senior counsel for the domestic industry submitted that in response to Questions No‟s. 2 and 3 in section A and Question No. 3 in Section E of the Questionnaire, Xinyi Energy submitted incorrect information by not disclosing that it does marketing in India and is involved in the sales of the product under consideration.
48. As noted above, the information/documents on basis of which the domestic industry so urges cannot be considered and secondly even otherwise, the domestic industry is not justified in making such and averment.
49. Article 6.8 of Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade, 19948 read as follows:
“6.8 In cases in which any interested party refuses access to, or otherwise does not provide, necessary information within a reasonable period or significantly impedes the investigation, preliminary and final determinations, affirmative or negative, may be made on the basis of the facts available. The provisions of Annex II shall be observed in the application of this paragraph.”
50. Paragraph 6 of Annexure II referred to an article 6.8 is relevant and is as follows:
“6. If evidence or information is not accepted, the supplying party should be informed forthwith of the reason therefor, and should have an opportunity to provide further explanation with a reasonable period, due account being taken of the time-limits of the investigation. If the explanations are considered by the authorities as not being satisfactory, the reason for the rejection of such evidence or information should be given in any published determinations.”
51. The question in the exporter Questionnaire reads as under:
“Q No. 3 List complete address of your main corporate office and your office in India, if any. Provide their telephone, fax numbers and E-mail address. State name, address, telephone, fax numbers and Email address of the principal contact person (or representative/legal representative in India or elsewhere for the purpose of Anti-Dumping proceedings).”
52. The question required Xinyi Energy to mention the address of its main corporate office and its office in India. Xinyi Energy claims that as it did not have any office in India, it correctly indicated the address of its Corporate Office in Hong-Kong. The question did not require the exporter to mention the addresses of offices in India of all its related entities. In any case, as noted above, Xinyi Glass did not have an office in India, either during the period of investigation or at the time of filing of the Questionnaire response. The fact that Xinyi Glass, a related company, had applied to the Reserve Bank of India for permission to open a liaison office was not required to be mentioned in response to this question. The response given by Xinyi Energy was, therefore, factually correct.
53. Even otherwise, rule 6(8) has no applicability to the present case, as the designated authority had never asked Xinyi Energy to provide the expenses incurred by Xinyi Glass. According to Xinyi Energy, it had no opportunity to provide such information, as it believed that its contention on this issue had been accepted by the designated authority in the disclosure statement and it came to know that such an adjustment was going to be made only after issuance of the final findings.
54. In regard to paragraph 6 of Annexure II, Xinyi Energy claims that it had no occasion to provide the Annual Report of Xinyi Glass, which would reflect that the total expenses incurred by this Company are minimal. The designated authority has taken the expenses of the ultimate holding company, which is concerned with different businesses relating to multiple products and many different markets, other than India. In the absence of any opportunity or any specific request from the designated authority for furnishing such information, rule 6(8) would not be applicable in the present case. It was also pointed out by the learned counsel for Xinyi Energy during the course of hearing that the adjustment made by the designated authority is about 40 times the total expenses incurred by Xinyi Glass in 2018 and 2019 in their annual report.
Loading the Cost of Production
55. The second submission advanced by learned counsel for Xinyi Energy that the designated authority was not justified in making adjustment to the normal value by loading the cost of production.
56. The submission advanced by the learned counsel for Xinyi Energy is that the Xinyi Energy received advances from its parent Company i.e. Xinyi International Investment Ltd., a Company incorporated in Hong Kong and in the Audited Financial Statement for the year ended 31.12.2019 for Xinyi Energy, the advance has been reflected in the current liabilities of the company as an amount due to the immediate holding company. Learned counsel also pointed out that Note 15 to the Statement mentions that the amount due to the immediate holding Company represent advances which are unsecured, interest free and repayable on demand.
57. Learned senior counsel for the domestic industry, however, submitted that the „elements of costs‟ referred to in paragraph 1 of Annexure I to the 1995 Rules can only be determined in relation to the country of origin/exports i.e., Malaysia and the adoption of interest cost in Hong Kong would mean that in the event of non-arm’s length transactions between related parties, the designated authority would be forced to consider the element of cost for a third country, which is not under examination, for which even verification is not envisaged in the scheme of the 1995 Rules.
58. It would be seen that the amount given by the holding Company is an infusion of capital by the parent Company in the form of advances. The funds for these advances were obtained by the parent Company from the Bank of China (Hong Kong) Ltd. This is a bank based in Hong Kong and incorporated under the Laws of Hong Kong. It is not a bank incorporated in China PR nor is it subject to laws of China PR.
59. The Bank of China (Hong Kong) Ltd. extended the loan for the project company, which has been defined as under in the Loan Agreement:
“ „Project Company’ means Xinyi Energy Smart (Malaysia) Sdn Bhd (the subsidiaries of the Borrower’s group in Malaysia.”
60. The purpose of the loan has been described as under:
“Loan Purpose: To finance the Borrower’s group for capital expenditure in Malaysia (including (i) acquisition and / or expansion of the factories, (ii) acquisition of the production equipment, and (iii) supplement funds etc.) and the working capital requirements.”
61. The interest rate is as follow:
“Interest Rate: For HKD drawings
Interest shall be charged at 0.8% p.a. over HIIBOR as determined by the Bank for the relevant Interest. Period on the first Business Day of such Interest Period.
For USD drawings:
Interest shall be charged at 0.8% p.a. over LIBOOR as determined by the Bank for the relevant Interest.
Period 2 business days (being days on which banks in London, New York and Hong Kong are open for business but excluding Saturday, Sunday and public holidays) prior to commencement of the relevant Interest Period.”
62. The rate offered by the Bank is 0.8% plus the Hong Kong Interbank Offer Rate9 notified by the Hong Kong Association of Bank. The Hong Kong Association of Banks, has as its members banks such as Bank of America, Bank of India, Barclay‟s Bank, PLC, Citi Bank NA, Credit Suisse AG. The HIBOR is an international Benchmark for lending and debt instruments issued in the Asian region.
63. Thus, the interest free advances received from the parent company are for expansion of the production facility and future production activity, and not relatable to the production and export of subject goods to India during the period of investigation.
64. However, even if the advances are to be treated as an interest free loan relatable to the subject goods, then too, the actual interest cost as per the loan agreement should be taken, but the designated authority took the interest cost based on a notional rate of interest prevailing in Malaysia, without rendering any finding as to why the actual interest cost is not acceptable for determining the interest foregone.
65. Learned senior counsel for the domestic industry also submitted that the loan agreement should be discarded because China is not a market company.
66. This submission cannot be accepted for the simple reason that the Bank of China (Hong Kong) Ltd. is incorporated under the Laws of Hong Kong and is not in main land China. Hong Kong has never been treated as a non-market economy and even otherwise, it is not the case that the loan was extended on a market linked international rate of interest free from any government intervention. The designated authority was, therefore, not justified in holding that the cost of the product under consideration was understated to the extent of the impact of interest of such loans and, therefore, was required to be adjusted by imputing notional interest cost.
67. Learned senior counsel for the domestic industry also submitted that even regarding this aspect, false information had been submitted by Xinyi Energy in response to the exporter Questionnaire.
68. It is not possible to accept this contention of learned senior counsel of the domestic industry.
69. Question 8 (j) of Section G is as follows:
“j. Explain the basis of interest costs charged for the product concerned. In case the company is a larger group, provide the basis of charging interest.”
70. The financial statement did mention about the advances and since these advances were stated to be for future expansion they would not form part of the production cost, which information was sought in section G. The advances received from the holding Company were also shown in the audit reports which had been filed by Xinyi Energy. Xinyi Energy also claims that it had explained this fact to the Costing Team during the desk verification.
71. Learned senior counsel for the domestic industry has also placed reliance upon the final findings of the designated authority in certain other matters to contend that the designated authority should have declared Xinyi Energy as non-cooperative. These final findings have been enclosed as Annexures P1 to P11. It is seen that in two matters which are contained in Annexures P8 and P11, the recommendations of the designated authority were not accepted by the Central Government. Annexure P9 relates to investigation of clear float glass originating in or exported from Malaysia and not China PR. As regards Annexure P6, the recommendations made by the designated authority have yet to be accepted by the Central Government. In the remaining matters, the final findings are on entirely different issues.
72. It is, therefore, not possible to accept the contentions advanced by the learned counsel for the appellant in Anti-Dumping Appeal Numbers. 50412 of 2021, 50413 of 2021, 50414 of 2021 and 50418 of 2021 that Xinyi Energy should have been treated as a non-co-operating exporter by the designated authority and should have been relegated to residuary anti-dumping duty.
73. However, with regard to the issue raised by Xinyi Energy in Anti-Dumping Appeal No. 50322 of 2021, the matter has to be remitted to the designated authority to determine the export price by excluding the deductions from the export price of Xinyi Energy on account of the alleged liaison office in India. The designed authority shall also determine the normal value of the product in the light of the observations made in this order and forward the recommendations to the Central Government for issuance of a fresh notification under rule 18 of the 1995 Anti-Dumping Rules, if so considered necessary.
74. Anti-Dumping Appeal No. 50322 of 2021, therefore, deserves to be allowed to the extent indicated above.
75. Anti-Dumping Appeal Numbers. 50412 of 2021, 50413 of 2021, 50414 of 2021 and 50418 of 2021 are dismissed.
(Order Pronounced on 20.01.2023)
Notes:-
1. Xinyi Energy
2. the domestic industry
3. the subject goods
4. the Tariff Act
5. the 1995 Rules
6. Xinyi Glass
7. Civil Appeal No’s. 215-16 of 1989 decided on 10.01.1995
8. GATT
9. HIBOR
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