March, 2005

The Supreme Court of India upheld the finding of the Designated Authority on determination of normal value in relation to Shenyang Mastsushita S. Battery Co. Ltd. a Chinese subsidiary of Mastsushita S. Electric industries Corporation, a multinational company registered in Japan on the ground that it operated on market economy principles and therefore market economy principles prescribed in the Customs Tariff (Identification, Assessment and Collection of Anti Dumping Duty on Dumped Articles and for Determination of Injuries) Rules, 1995 (the Rules) would apply. These are contained in Paragraphs 1 to 6 of Annexure I to the Rules which initially provided for the principles relating generally to the determination of normal value for all countries on the assumption that they operate on market economy principles. A distinction was drawn in 1999 for the first time between market economies and non-market economies. Annexure I was amended by two notifications dated 15.7.1999 and 31.5.2001 introducing paragraph 7 wherein it was provided that, “in case of imports from non-market economy countries, normal value shall be determined on the basis of the price or constructed value in a market economy third country, or the price from such a third country to other countries, including India, or where it is not possible, on any other reasonable basis, including the price actually paid or payable in India for the like product, duly adjusted if necessary, to include a reasonable profit margin”.

The second notification dated 31.5.2001 inserted a further paragraph after paragraph 7 as paragraph 8 in Annexure – I defining "non market economy country" as every country listed in that note and including any country which the designated authority determines and which does not operate on market principles of cost of pricing structures, so that sales of merchandise in such country do not reflect the fair value of the merchandise and laid out separate procedure for determination of normal value by Designated Authority.

The respondent Nos. 1 and 2 representing the domestic industry and manufacturing or importing lead acid batteries, before the Tribunal below viz. the Customs Excise and Gold (Control Appellate Tribunal) (CEGAT) contended that the Peoples' Republic of China was a non-market economy and, therefore, the normal value should be determined on the basis of the amendments effected to the Rules relating to non-market economies and the final finding of the Designated Authority granting exemption from anti dumping duty to the three Chinese exporters including Shenyang Mastsushita should be set aside.

The Supreme Court held that Shenyang Mastsushita had already produced sufficient material before the Designated Authority to justify a finding that the it was operating according to market conditions; that the Designated Authority had already visited the manufacturing units of Shenyang Mastsushita in China and verified the information produced by it and accordingly rejected the plea for imposition of anti-dumping duties.