WORLD TRADE  
ORGANIZATION  WT/DS360/R 
9 June 2008 
 (08-2558) 
 Original:   English 
 
 
 
 
 
 
 
 
 
 
 
INDIA – ADDITIONAL AND EX TRA-ADDITIONAL DUTIES 
ON IMPORTS FROM THE UNITED STATES 
 
 
Report of the Panel  
 
 
 
  WT/DS360/R 
 Page i 
 
 
  TABLE OF CONTENTS 
Page  
 
I. INTRODUCTION ................................................................................................................... .1 
II. FACTUAL ASPECTS ..............................................................................................................2  
III. PARTIES' REQUESTS FOR FIND INGS AND RECOMMENDATIONS.........................2  
IV. ARGUMENTS OF THE PARTIES ........................................................................................3  
A. FIRST WRITTEN SUBMISSION OF THE UNITED STATES ................................................................3  
1. Introduction................................................................................................................... ............3  
2. Legal argument ................................................................................................................. ........3  
(a) Introduction................................................................................................................... ..............3  
(b) The Additional Customs Duty on alcoho lic beverages is inconsistent with 
Article II:1(b) and II:1(a) of the GATT 1994 .............................................................................4  
(i) Article II:1(b) of the GATT 1994 – Ordinary Cu stoms Duty or Other Duty or Charge.............4  
(ii) Article II:1(b) of the G ATT 1994 – in excess of..........................................................................5  
(iii) Article II:1(a) of the GATT 1994 ............................................................................................... .7 
(c) The Extra-Additional Customs Duty is inconsis tent with Article II:1(a) and II:1(b) of 
the GATT 1994.................................................................................................................. .........7  
(i) Article II:1(b) of the GATT 1994 – Ordinary Cu stoms Duty or Other Duty or Charge.............7  
(ii) Article II:1(b) of the G ATT 1994 – in excess of..........................................................................8  
(iii) Article II:1(a) of the GATT 1994 ............................................................................................... .9 
3. Conclusion ..................................................................................................................... ..........10  
B. FIRST WRITTEN SUBMISSION OF INDIA ......................................................................................10  
1. Introduction................................................................................................................... ..........10  
2. Factual background............................................................................................................. ...10 
(a) Mischaracterization of Indian duties as OCD and ODC...........................................................11  
(b) Misinterpretation of the statutory basis for Indian duties .........................................................11  
(c) Failure to distinguish between mandatory and discretionary provisions of Indian law............11  
(d) Failure to acknowledge the valid removal of the AD on alcoholic beverages..........................11  
3. Legal challenge................................................................................................................ ........11  
(a) Incorrect challenge of measures "as such"................................................................................12  
(b) Neither the AD nor the SUAD is inconsistent with Article II:1(a) and (b) of the 
GATT 1994...................................................................................................................... .........12  
(i) The AD and the SUAD are not OCDs.......................................................................................12  
(ii) Failure to discharge burden of proof........................................................................................13  
(iii) The AD and the SUAD are not ODCs.......................................................................................13  
(iv) The AD and the SUAD are not "in excess of" the rates in India's Schedules ...........................13  
(v) The AD and the SUAD are not inconsistent  with Article II:1(a) of the GATT 1994.................14  WT/DS360/R 
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  (c) The AD and the SUAD are equivalent to inte rnal taxes under Article II:2(a) of the 
GATT 1994...................................................................................................................... .........14  
(i) The SUAD is equivalent to the Sales Tax/Valu e Added Tax (collectively referred to as 
"VAT")......................................................................................................................... ..............15  
(ii) SUAD is equivalent to the Central Sales Tax (CST).................................................................15  
(iii) The SUAD is equivalent to other local taxes and charges........................................................15  
(iv) The AD and SUAD are imposed consistently  with Article III:2 of the GATT 1994..................16  
(d) The SUAD is consistent with Ar ticle III:2 of the GATT 1994.................................................17  
(i) The US has failed to dischar ge its burden of proof ..................................................................17  
(ii) Notwithstanding the US failure to discharge its burden of proof .............................................17  
4. Conclusion ..................................................................................................................... ..........17  
C. ORAL STATEMENT OF THE UNITED STATES AT THE FIRST SUBSTANTIVE MEETING OF 
THE PANEL ............................................................................................................................... .17 
1. Ordinary Customs Duties.......................................................................................................1 8 
2. AD and EAD exceed WTO-bound rates ...............................................................................19  
3. Article II:2(a) of the GATT 1994 – general ..........................................................................19  
4. Article II:2(a) of the GATT 1994 – EAD ..............................................................................19  
5. Article II:2(a) of the GATT 1994 – AD.................................................................................20  
6. Terms of referen ce ............................................................................................................. .....21  
7. AD – M/D....................................................................................................................... ..........21  
8. Concluding remarks ............................................................................................................. ..21 
D. ORAL STATEMENT OF INDIA AT THE FIRST SUBSTANTIVE MEETING OF THE PANEL .................23  
1. Factual issues................................................................................................................. ..........23  
(a) Mischaracterization  of AD and SUAD as OCD and ODC .......................................................23  
(b) Misinterpretation  of the statutory basis for Indian duties .........................................................23  
(c) Distinction between mandatory and discre tionary provisions of Indian law............................24  
(d) Failure to acknowledge the valid removal of the AD on alcoholic beverages..........................24  
2. Legal challenge................................................................................................................ ........24  
(a) Neither the AD nor the SUAD is inconsistent with Article II:1(a) and (b) of the 
GATT 1994...................................................................................................................... .........24  
(i) Ordinary Cust oms Duty .......................................................................................................... ..24 
(ii) Other Duties and Ch arges (ODC) ............................................................................................25  
(b) The AD and the SUAD are equivalent to inte rnal taxes under Article II:2(a) of the 
GATT 1994...................................................................................................................... .........25  
(c) The AD and the SUAD are imposed consistently with Article III:2 of the GATT 1994..........25  
(d) The SUAD is consistent with Ar ticle III:2 of the GATT 1994.................................................26  
(e) Incorrect challenge of measures................................................................................................ 26  WT/DS360/R 
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  E. SECOND WRITTEN SUBMISSION OF THE UNITED STATES ..........................................................27  
1. Introduction................................................................................................................... ..........27  
2. The AD and EAD are each inconsistent with Article II:1(b) of the GATT 1994 ..............27  
3. Neither the AD nor the EAD are charges with in the meaning of Article II:2(a) of 
the GATT 1994.................................................................................................................. ......29  
4. Terms of referen ce ............................................................................................................. .....32  
5. The AD and EAD are mandatory, not discretionary...........................................................33  
6. Conclusion ..................................................................................................................... ..........34  
F. SECOND WRITTEN SUBMISSION OF INDIA ..................................................................................35  
1. SUAD is equivalent to the VAT, CST and other taxes and charges...................................35  
(a) The SUAD is quantitatively equivalent to VAT, CST and other internal taxes and 
charges ........................................................................................................................ ..............35  
(b) The structure, design and effect of the SUAD ..........................................................................36  
(c) The SUAD is applied in a manner consiste nt with Article III:2 of the GATT 1994 ................37  
2. AD is equal to th e excise duty ................................................................................................3 8 
3. AD is validly  removed.......................................................................................................... ...38 
4. The distinction between ma ndatory vs. discretionary.........................................................39  
5. The United States has failed to make out a prima facie case ..............................................40  
(a) Definition of an OCD as applied to the AD and the SUAD .....................................................40  
(b) Definition of an ODC as applied to the AD and the SUAD .....................................................40  
G. ORAL STATEMENT OF THE UNITED STATES AT THE SECOND SUBSTANTIVE MEETING 
OF THE PANEL ...........................................................................................................................41  
1. Opening statement .............................................................................................................. ....41  
(a) Point 1........................................................................................................................ ...............41  
(b) Point 2........................................................................................................................ ...............42  
(c) Point 3........................................................................................................................ ...............42  
(d) Point 4........................................................................................................................ ...............42  
(e) Point 5........................................................................................................................ ...............43  
(f) Point 6........................................................................................................................ ...............43  
(g) Point 7........................................................................................................................ ...............44  
(h) Conclusion ..................................................................................................................... ...........45  
2. Concluding remarks ............................................................................................................. ..45 
H. ORAL STATEMENT OF INDIA AT THE SECOND SUBSTANTIVE MEETING OF THE PANEL .............47  
1. OCD/ODC or charge equivalent to internal taxes? .............................................................47  
2. The AD and the SUAD are equival ent to internal taxes......................................................48  
(a) AD is equal to the excise duty ................................................................................................. .48 
(b) SUAD is equivalent to the VAT, CST and other taxes and charges.........................................48  WT/DS360/R 
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  (c) The AD and the SUAD are applied in a manne r consistent with Article III:2 of the 
GATT 1994...................................................................................................................... .........49  
3. Terms of referen ce ............................................................................................................. .....49  
4. The distinction between ma ndatory vs. discretionary.........................................................50  
5. The United States has failed to make out a prima facie case ..............................................50  
6. Conclusion ..................................................................................................................... ..........50  
V. ARGUMENTS OF THE THIRD PARTIES ........................................................................50  
A. AUSTRALIA ............................................................................................................................... 50 
1. Introduction................................................................................................................... ..........50  
2. Removal of the additional duties ...........................................................................................51  
3. Consistency of the AD and "such additional duties" as would counterbalance 
taxes such as Sales Tax, Value-Added Tax, local tax or any other charges 
("SUAD") with Article II:1 of the GATT 1994....................................................................51  
4. Article II:2 of the GATT 1994 ...............................................................................................51  
5. Mandatory vs. discretionary legisl ation and "as such" claims...........................................52  
B. CHILE ............................................................................................................................... .........52  
1. The measures in force prior to 3 Ju ly 2007 and amendments thereto ...............................52  
2. India's arguments with respect to  Article II of the GATT 1994.........................................53  
3. Conclusion ..................................................................................................................... ..........53  
C. EUROPEAN COMMUNITIES ........................................................................................................54  
1. Introduction................................................................................................................... ..........54  
2. Review of a measure withdraw n after panel establishment................................................54  
3. Border duty or internal taxes?...............................................................................................54  
4. Article II:1 of the GATT 1994 ...............................................................................................54  
5. Articles II:2(a) and III:2 of the GATT 1994.........................................................................55  
6. Conclusions.................................................................................................................... ..........55  
D. JAPAN ............................................................................................................................... .........55  
1. Customs duty or internal tax? ...............................................................................................55  
2. Article III of the GATT 1994 applies to the SUAD..............................................................56  
3. Alternatively, Article II of the GATT 1994 applies to the SUAD.......................................58  
4. Conclusion ..................................................................................................................... ..........59  
E. VIET NAM............................................................................................................................... ..59 
1. Withdrawal of additional duties after Panel establishment................................................59  
2. Challengeable nature of mandatory vs. discretionary legislation ......................................59  
3. Indian additional duties in relation to the provision of Article II:2(a) ..............................60  
VI. INTERIM REVIEW...............................................................................................................60  
A. BACKGROUND ...........................................................................................................................60   WT/DS360/R 
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  B. PARTIES ' REQUESTS FOR CHANGES TO THE INTERIM REPORT ...................................................60  
1. Comments by the United States.............................................................................................60  
2. Comments by India.............................................................................................................. ...72 
C. OTHER CHANGES TO THE INTERIM REPORT ...............................................................................72  
VII. FINDINGS....................................................................................................................... ........72  
A. MEASURES AT ISSUE .................................................................................................................72  
1. General........................................................................................................................ .............73  
2. The Basic Customs Duty ("BCD")........................................................................................73  
3. The Additional Duty ("AD") .................................................................................................74  
4. The SUAD....................................................................................................................... .........76  
B. OVERVIEW OF THE PARTIES ' CLAIMS AND ARGUMENTS ...........................................................77  
C. PRELIMINARY MATTERS ............................................................................................................79  
1. New measures adopted by India after the establishment of the Panel...............................79  
(a) Customs Notification 82/2007 ..................................................................................................7 9 
(i) Arguments of the Parties....................................................................................................... ....79  
(ii) Analysis of the Panel.......................................................................................................... .......82  
Whether the Panel's terms of reference are suff iciently broad to include the new measure.................... 82  
Whether CN 82/2007 changed the essence of the old measure............................................................... 83  
Whether one or both Parties object to a ruling on the new measure........................................................ 84  
Whether a ruling on the new measur e is appropriate to secure a pos itive solution to the dispute........... 85  
(iii) Conclusion ..................................................................................................................... ...........86  
(b) Customs Notification 102/2007 ................................................................................................86  
(i) Arguments of the Parties....................................................................................................... ....86  
(ii) Analysis of the Panel.......................................................................................................... .......88  
Whether the Panel's terms of reference are suff iciently broad to include the new measure.................... 88  
Whether CN 102/2007 changed the essence of the old measure............................................................. 89  
Whether one or both Parties object to a ruling on the new measure........................................................ 89  
Whether a ruling on the new measur e is appropriate to secure a pos itive solution to the dispute........... 90  
(iii) Conclusion ..................................................................................................................... ...........91  
2. Discretionary vs. mandatory natu re of the measur es at issue ............................................91  
D. US CLAIMS OF VIOLATION OF ARTICLE II :1(B) OF THE GATT 1994...........................................93  
1. Relationship between Articles II:1(b) and II:2 of the GATT 1994.....................................93  
(a) General........................................................................................................................ ..............96  
(b) Case-speci fic.................................................................................................................. .........102  
2. Article II:2(a) of the GATT 1994.........................................................................................107  
(a) General........................................................................................................................ ............107  WT/DS360/R 
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  (b) "equivalent"................................................................................................................... ..........109  
(c) "consistently with the provisions of paragraph 2 of Article III".............................................115  
3. Consistency of the AD on alcoholic liquor with Article II:1(b) of the GATT 1994.........119  
(a) Ordinary customs duty (or "other duty or charge") ................................................................125  
(b) Equivalence to internal taxes .................................................................................................. 130 
(c) Conclusion ..................................................................................................................... .........141  
4. Consistency of the SUAD with Article II:1(b) of the GATT 1994 ....................................142  
(a) Ordinary customs duty (or "other duty or charge") ................................................................149  
(b) Equivalence to internal taxes .................................................................................................. 152 
(c) Conclusion ..................................................................................................................... .........165  
E. US CLAIMS OF VIOLATION OF ARTICLE II :1(A) OF THE GATT 1994.........................................165  
F. REFERENCES BY THE UNITED STATES TO ARTICLE III :2 OF THE GATT 1994 ..........................166  
VIII.  CONCLUSIONS AND RECOMMENDATIONS..............................................................170  
  WT/DS360/R 
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  TABLE OF WTO CASES CITED IN THIS REPORT 
 
Short Title Full Case Title and Citation 
Argentina – Hides and Leather  Panel Report, Argentina – Measures Affecting the Export of Bovine Hides 
and Import of Finished Leather , WT/DS155/R and Corr.1, adopted 
16 February 2001, DSR 2001:V, 1779 
Argentina – Hides and Leather  Award of the Arbitrator, Argentina – Measures Affecting the Export of 
Bovine Hides and Import of Finished Leather – Arbitration under 
Article 21.3(c) of the DSU , WT/DS155/10, 31 August 2001, DSR 2001:XII, 
6013 
Argentina – Textiles and Apparel  Panel Report, Argentina – Measures Affecting Imports of Footwear, Textiles, 
Apparel and Other Items , WT/DS56/R, adopted 22 April 1998, as modified 
by Appellate Body Report, WT/DS56/AB/R, DSR 1998:III, 1033 
Argentina – Textiles and Apparel  Appellate Body Report, Argentina – Measures Affecting Imports of 
Footwear, Textiles, Apparel and Other Items , WT/DS56/AB/R and Corr.1, 
adopted 22 April 1998, DSR 1998:III, 1003 
Canada – Periodicals  Appellate Body Report, Canada – Certain Measures Concerning 
Periodicals , WT/DS31/AB/R, adopted 30 July 1997, DSR 1997:I, 449 
Chile – Alcoholic Beverages Appellate Body Report, Chile – Taxes on Alcoholic Beverages , 
WT/DS87/AB/R, WT/DS110/AB/R, adopted 12 January 2000, 
DSR 2000:I, 281 
Chile – Price Band System  Panel Report, Chile – Price Band System and Safeguard Measures Relating 
to Certain Agricultural Products , WT/DS207/R, adopted 23 October 2002, 
as modified by Appellate Body Report, WT/DS207AB/R, DSR 2002:VIII, 
3127 
Chile – Price Band System  Appellate Body Report, Chile – Price Band System and Safeguard Measures 
Relating to Certain Agricultural Products , WT/DS207/AB/R and Corr.1, 
adopted 23 October 2002, DSR 2002:VIII, 3045 
Chile – Price Band System (Article 21.5 
– Argentina) Appellate Body Report, Chile – Price Band System and Safeguard Measures 
Relating to Certain Agricultural Products  – Recourse to Article 21.5 of the 
DSU by Argentina , WT/DS207/AB/RW, adopted 22 May 2007 
Dominican Republic – Import and Sale 
of Cigarettes Panel Report, Dominican Republic – Measures Affecting the Importation 
and Internal Sale of Cigarettes , WT/DS302/R, adopted 19 May 2005, as 
modified by Appellate Body Report, WT/DS302/AB/R, DSR 2005:XV, 
7425 
EC – Poultry  Panel Report, European Communities – Measures Affecting the Importation 
of Certain Poultry Products , WT/DS69/R, adopted 23 July 1998, as 
modified by Appellate Body Report, WT/DS69/AB/R, DSR 1998:V, 2089 
EC – Sardines  Appellate Body Report, European Communities – Trade Description of 
Sardines , WT/DS231/AB/R, adopted 23 October 2002, DSR 2002:VIII, 
3359 
EC  – Selected Customs Matters Appellate Body Report, European Communities – Selected Customs 
Matters , WT/DS315/AB/R, adopted 11 December 2006. 
Japan – Alcoholic Beverages II  Appellate Body Report, Japan – Taxes on Alcoholic Beverages , 
WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 
1996, DSR 1996:I, 97  
US – 1916 Act  Appellate Body Report, United States – Anti-Dumping Act of 1916 , 
WT/DS136/AB/R, WT/DS162/AB/R, adopted 26 September 2000, 
DSR 2000:X, 4793 WT/DS360/R 
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  Short Title Full Case Title and Citation 
US – Certain EC Products  Appellate Body Report, United States – Import Measures on Certain 
Products from the European Communities , WT/DS165/AB/R, adopted 
10 January 2001, DSR 2001:I, 373 
US – Corrosion-Resistant Steel Sunset 
Review  Appellate Body Report, United States – Sunset Review of Anti-Dumping 
Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan , 
WT/DS244/AB/R, adopted 9 January 2004, DSR 2004:I, 3  
US – Gasoline  Appellate Body Report, United States – Standards for Reformulated and 
Conventional Gasoline , WT/DS2/AB/R, adopted 20 May 1996, 
DSR 1996:I, 3 
US – Line Pipe  Appellate Body Report, United States – Definitive Safeguard Measures on 
Imports of Circular Welded Car bon Quality Line Pipe from Korea , 
WT/DS202/AB/R, adopted 8 March 2002, DSR 2002:IV, 1403 
US – Offset Act  
(Byrd Amendment ) Panel Report, United States – Continued Dumping and Subsidy Offset Act of 
2000 , WT/DS217/R, WT/DS234/R, adopted 27 January 2003, as modified 
by Appellate Body Report, WT/DS217/AB/R, WT/DS234/AB/R, 
DSR 2003:II, 489 
US – Wool Shirts and Blouses  Appellate Body Report, United States – Measure Affecting Imports of Woven 
Wool Shirts and Blouses from India , WT/DS33/AB/R and Corr.1, adopted 
23 May 1997, DSR 1997:I, 323 
  WT/DS360/R 
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  TABLE OF GATT CASES CITED IN THIS REPORT 
 
Short Title Full Case Title and Citation  
Canada – Provincial Liquor Boards 
(US) Panel Report, Canada – Import, Distribution and Sale of Certain Alcoholic 
Drinks by Provincial Marketing Agencies , adopted 18 February 1992, 
BISD 39S/27 
EEC – Animal Feed Proteins Panel Report,  EEC – Measures on Animal Feed Proteins , adopted  
14 March 1978, BISD 25S/49. 
EEC – Parts and Components Panel Report, European Economic Community – Regulation on Imports of 
Parts and Components , adopted 16 May 1990, BISD 37S/132.  
US – Customs User Fee  Panel Report, United States – Customs User Fee , adopted 2 February 1988, 
BISD 35S/245. 
US – Superfund  Panel Report, United States – Taxes on Petroleum and Certain Imported 
Substances , adopted 17 June 1987, BISD 34S/136.  WT/DS360/R 
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  I. INTRODUCTION 
1.1 On 6 March 2007, the United States requested c onsultations with the Government of India 
pursuant to Article 4 of the Understanding on Rules and Procedures Governing the Settlement of 
Disputes  ("DSU") and Article XXII of the General Agreement on Tariffs and Trade 1994  
("GATT 1994"), with respect to two duties that India applies to imports of certa in goods in addition to 
its basic customs duty. The request was circulated on 12 March 2007.1 
1.2 On 16 March and 21 March 2007, the European  Communities and Australia, respectively, 
requested to join in the consulta tions requested by the United Stat es.  India accepted the European 
Communities' request.  Consultations were held  on 13 April 2007.  Those consultations did not 
resolve the dispute. 
1.3 On 24 May 2007, the United States requested th at the Dispute Settlement Body ("DSB") 
establish a panel to examine this matter, pursuant to Article 6 of the DSU, with the standard terms of 
reference as set out in Article 7.1 of the DSU.2  At its meeting of 20 June 2007, the DSB established a 
Panel with the following terms of reference: 
"To examine, in the light of the relevant provisions of the covered agreements cited 
by the United States in document WT/DS360/5,  the matter referred to the DSB by the 
United States in that document, and to ma ke such findings as will assist the DSB in 
making the recommendations or in giving the rulings provided for in those 
agreements."3 
1.4 On 3 July 2007, the parties agreed to the following composition of the Panel: 
 Chairman: Mr. Luzius Wasescha 
 
 Members: Mr. Mateo Diego-Fernández    Mr. Bruce McRae
4 
 
1.5 Australia, Chile, the European Communities, Japan and Viet Nam reserved their rights to 
participate in the Panel proceedings as third parties.5 
1.6 The Panel met with the two parties on 17 and 18  September 2007.  It also met with the third 
parties on 18 September 2007.  The Panel met again with the parties on 13 and 14 November 2007. 
1.7 Australia, Chile, the European Communities a nd Japan presented third-party submissions 
before the first substantive meeting of the Panel.   Australia, the European Communities, Japan and 
Viet Nam made oral statements during the first substantive meeting of the Panel. 
1.8 The Panel issued its interim report to the par ties on 5 February 2008.  The Panel issued its 
final report to the parties on 20 March 2008. 
1.9 It is noted that on 24 April 2007, the DSB also  established a panel on a substantially similar 
matter at the request of the European Communities (WT/DS352/4).  That panel was composed by the 
Director-General before the Panel in this case.  Th e same three individuals serve as panelists in both 
proceedings.  The parties to the two proceedings , i.e., the European Communities, India and the 
                                                      
1 Document WT/DS360/1. 
2 Document WT/DS360/5. 
3 Document WT/DS360/6, para. 2. 
4 Ibid., para. 3. 
5 Ibid., para. 4. WT/DS360/R 
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  United States, agreed to harmonize the timetables for the two proceedings.  Howe ver, at the request of 
the European Communities, the panel in DS352 as of  16 July 2007 suspended its work indefinitely, 
subject to the provisions of Article 12.12 of the DSU. 
II. FACTUAL ASPECTS 
2.1 The present dispute concerns the following measures: 
• the AD (the "additional customs duty" as the Un ited States calls it or the "additional duty" 
as India calls it) on imports of alcoholic li quor for human consumption (beer, wine and 
distilled spirits, collectively "a lcoholic beverages"); and  
 
• the "Extra-Additional Duty" ("EAD" as the Un ited States calls it), or "such additional 
duty" ("SUAD" as India calls it) on imports such as the agricultural6 and industrial 
products7 identified in Exhibit US-1 and alcoholic beverages.  
 
2.2 Both are measures taken by the Central Governme nt and imposed at the border at the time of 
importation.  Both measures are imposed in add ition to India's basic customs duty (BCD).    
2.3 According to India, both measures are taken to  counter-balance various internal taxes or 
charges.  
III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS 
3.1 The United States claims that: 
the AD is: 
• inconsistent with Article II:1(b) of th e GATT 1994 as an ordinary customs duty that 
subjects imports of alcoholic beverages to ordinary customs duties in excess of those 
set forth in India's WTO Schedule; and 
 
• inconsistent with Article II:1(a) of th e GATT 1994 as an ordinary customs duty that 
affords imports of alcoholic beverages from the United States less favourable 
treatment than that provided for in India's WTO Schedule; and 
 
the EAD/the SUAD is: 
 
• inconsistent with Article II:1(b) of th e GATT 1994 as an ordinary customs duty that 
subjects imports, including alcoholic be verages and agricultural and industrial 
products listed in Exhibit US-1, to ordinary customs duties in excess of those set forth 
in India's WTO Schedule; and 
 
• inconsistent with Article II:1(a) of th e GATT 1994 as an ordinary customs duty that 
affords import from the United States, including alcoholic beverages and the products listed in Exhibit US-1, less favourable treatment than that provided for in India's 
WTO Schedule.
8 
 
                                                      
6 Exhibit US-1A, Extra-Additional Customs Duty on Agricultural Products. 
7 Exhibit US-1B, Extra-Additional Customs Duty on Industrial Products. 
8 US first written submission, para. 72.  WT/DS360/R 
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  3.2 India argues that both measures are charges equiva lent to internal taxes imposed consistently 
with Article III:2 of the GATT 1994 in respect of like domestic products and, as such, fall within the 
scope of Article II:2(a) of the GATT 1994.  India su bmits that, as measures falling within the scope of 
Article II:2, they are not inconsistent with  Article II:1(a) or (b) of the GATT 1994.  
IV. ARGUMENTS OF THE PARTIES 
4.1 This section is based on executive summaries of the parties' submissions and statements and 
does not include summaries of the parties' answers to  questions posed by the Panel in the context of 
the first and second substantive meetings. 
A. FIRST WRITTEN SUBMISSION OF THE UNITED STATES  
1. Introduction 
4.2 India has imposed ordinary customs duties on imports of alcoholic beverages from the United 
States that result in ordinary customs duties on these imports as high as 550 per cent.  India imposes 
these customs duties by levying an "additional cust oms duty" and an "extra-additional customs duty" 
in addition to and on top of a "basic customs duty" on imports of alcoholic beverages.  India levies 
these duties through the following measures: (1) Section 12 of the Customs Act, 1962 ("Customs 
Act") requiring the collection of customs duties as  specified in the Customs Tariff Act, 1975; 
(2) Sections 2 and 3 and the First Schedule of th e Customs Tariff Act, 1975 ("Customs Tariff Act"); 
(3) Customs notices issued pursuant to Section 25  of the Customs Tariff Act, including Customs 
Notification 20/1997 and 11/2005; (4) Customs Notification 32/2003; (5) Customs Notification 
19/2006.  Imposed in conjunction with the basic customs duty, the additional customs duty and extra-additional customs duty on alcoholic beverages are each  inconsistent with Article II:1(a) and (b) of 
the GATT 1994. 
4.3 The extra-additional customs duty is also incons istent with Article II:1(a) and (b) of the 
GATT 1994 as imposed on a number of imports other th an alcoholic beverages, as imposition of the 
extra-additional customs duty on such imports likewi se results in customs duti es that exceed those set 
forth in India's WTO Schedule.  These products in clude certain agricultural products such as milk, 
raisins and orange juice, as well as various other products, including those listed in Exhibit US-1.  
4.4 The United States respectfully requests that  the Panel find that India's measures are 
inconsistent with Article II:1(a ) and (b) of the GATT 1994, and that it recommend that India bring 
these measures into conformity with its obligations under the GATT 1994. 
2. Legal argument 
(a) Introduction 
4.5 Article II:1(b) of the GATT 1994 requires India to exempt imports from "ordinary customs 
duties" or "other duties or charges of any kind imposed on or in connection with ... importation" in 
excess of those provided for in its Schedule, and Article II:1(a) of the GATT 1994 requires  India to 
afford no less favourable treatment to imports than  provided for in its Schedule.  Together these 
provisions serve to "preserve the value of tariff concession negotiated by a Member with its trading 
partners, and bound in that Member's schedule" .  Both the additional customs duty and extra-
additional customs duty are inconsistent with  Article II:1(a) and (b) of the GATT 1994.  
4.6 The additional customs duty is imposed in additi on to the basic customs duty already levied 
on imports of alcoholic beverages.  The additional customs duty is inconsistent with Article II:1(a) 
and (b) of the GATT 1994 because the combination of  these two duties, as elaborated further below, WT/DS360/R 
Page 4 
 
 
  results in "ordinary customs duties" on imports of alcoholic beverages that exceed those set forth in 
India's Schedule.   
4.7 The extra-additional customs duty is imposed in  addition to the basic customs duty.  The 
extra-additional customs duty is inconsistent with  Article II:1(a) and (b) of the GATT 1994 because 
the combination of these duties resu lts in "ordinary customs duties" on imports that exceed those set 
forth in India's Schedule.  The United States notes that the extra-additional customs duty has been 
applied in addition to, and has been calculated on top of, the additional customs duty.  US claims 
against the extra-additional customs duty, howev er, do not rely on imposition of the additional 
customs duty to demonstrate that the extra-additional customs duty is inconsistent with Article II:1(a) 
or (b) of the GATT 1994. 
4.8 The US claims against the extra-additional customs duty concern a broader range of products 
than the US claims against the additional cust oms duty.  Whereas the latter concern alcoholic 
beverages, the claims against th e extra-additional customs duty concern alcoholic beverages as well as 
other products such as those listed in Exhibit US-1.  
(b) The Additional Customs Duty on alcoholic beverages is incons istent with Article II:1(b) 
and II:1(a) of the GATT 1994 
(i) Article II:1(b) of the GATT 1994 – Ordinary Customs Duty or Other Duty or Charge 
4.9 The additional customs duty is an ordinary customs duty within the meaning of 
Article II:1(b).  The WTO Agreement does not define "ordinary customs duty." 
4.10 Consistent with the rule of in terpretation of public internationa l law reflected in Article 31 of 
the Vienna Convention, the term "ordinary customs duties" must be interpreted in accordance with its 
ordinary meaning in context and in light of th e agreement's object and purpose.  The ordinary 
meaning of the term "customs duty" is a duty imposed on a product upon its importation into the 
customs territory of a Member.  The term "ordin ary" suggests a customs duty that is "normal, 
customary, usual", "belonging to or occurring in regular custom or practice", "of the usual kind, not 
singular or exceptional; commonplace, mundane."  Thus, an ordinary customs duty is a type of 
customs duty that is common and occurring most re gularly.  Determination of whether a measure 
constitutes an ordinary customs dut y should be based on the structure, design and application of the 
measure; the name or stated purpose the Memb er imposing may have ascribed to it is not 
determinative. 
4.11 By far the most common and regularly occurring types of customs duties in terms of 
structure, design and application are ad valorem , specific or a combination thereof, calculated on the 
value or quantity respectively of a good at the time  of importation.  Ordinary customs duties are not 
applied on a case-by-case basis or in response to  a singular or exceptional event or set of 
circumstances.  Instead, Members apply ordi nary customs duties as a matter of course upon 
importation of a product into its customs territory.  Ordinary customs duties in this sense are generally 
marked by a greater sense of transparency and predic tability than other types of border measures.  It 
follows that an "ordinary cust oms duty" is a duty – either ad valorem , specific or a combination 
thereof – calculated based on the quantity or value of  the good at the time of importation that applies 
as a matter of course upon a good's importation. 
4.12 With respect to the additional customs duty on al coholic beverages, it applies (i) at the time of 
importation, (ii) exclusively to imports (i.e., not to  domestic products), and (iii) as an ad valorem or 
specific duty, depending on the CIF value of the import.  In this regard, the additional customs duty is 
no different than the basic customs duty, whic h likewise applies at the time of importation, 
exclusively to imports and as an ad valorem or sp ecific duty.  Accordingly, the additional customs  WT/DS360/R 
 Page 5 
 
 
  duty appears to be of the kind normally or commonly imposed on imports, and consequently 
"ordinary" within the meaning of  Article II:1(b) of the GATT 1994.  
4.13 The structure of India's customs duty regime further supports this latter point.  As explained 
in above, Section 12(1) of the Customs Act requi res the collection of cu stoms duties as specified 
under any Indian law: "Except as otherwise provided in  this Act, or any other law for the time being 
in force, duties of customs shall be levied at such  rates as may be specified under [the Customs Tariff 
Act, 1975 (51 of 1975)], or any other law for the time being in force, on goods imported into, or 
exported from India."  This language requires the co llection of both the basic customs duty and the 
additional customs duty, both of which are specified under the Customs Tariff Act.  Further, 
Section 25 of the Customs Act provides authority to exempt certain imports from any "dut[y] of 
customs" and is the authority used to exempt impor ts from either (or both) the basic customs duty or 
additional customs duty.  Thus, the structure of In dia's own customs duty regime appears to regard 
both the additional customs duty and basic customs duty as ordinary customs duties. 
4.14 In this regard, it is relevant to note that Secti on 3(1) of the Customs Tariff Act states that the 
additional customs duty is to "hav[e] regard to the excise duty for the time being leviable on like 
alcoholic [beverages] produced ...in India".  Custom s Tariff Act, Section3(1), Exhibit US-3A.  This 
statement does not change the appropriateness of characterizing the additional customs duty as an 
ordinary customs duty as the purpose or intent a Member attributes to a tax or duty is not 
determinative; otherwise a Member could avoid the commitments made in its Schedule simply by its 
own characterization of the duty under domestic law. 
4.15 For each of these reasons, the additional custom s duty, like the basic custom duty, is an 
ordinary customs duty within the meaning of Article II:1(b) of the GATT 1994.    
4.16 In any event, the additional customs duty would be inconsistent with Article II:1(b) of the 
GATT 1994 even if it were an ODC within the mean ing of the second sentence of that article.  ODCs 
are defined in relation to ordinary customs duties in  that "other duties or ch arges" mean those duties 
or charges that are not "ordinary" customs duti es but are nonetheless imposed on or in connection a 
product's importation.  With respect to the additional customs duty, the second sentence of 
Article II:1(b) of the GATT 1994 would ensure that India may not avoid its tariff commitments simply by imposing a duty or other charge on the im portation of alcoholic beverages that may not be 
characterized as an "ordinary" customs duty but no netheless results in other duties or charges that 
exceed those set out in its Schedule.  In this dis pute, determining whether the additional customs duty 
is either an ordinary customs duty or ODC within  the meaning of Article II:1(b) of the GATT 1994, 
however, is not determinative of the outcome of this  dispute, as in either case, the additional customs 
duty would exceed the rates set out in India's Schedule, as discussed below. 
(ii) Article II:1(b) of the GATT 1994 – in excess of 
4.17 The additional customs duty subjects imports of  alcoholic beverages to ordinary customs 
duties "in excess of" those provided for in India's Sche dule.   Part 1 of India's Schedule sets forth the 
following bound rates of duty on beer, wine and dis tilled sprits as 150 per cent ad valorem.  India's 
Schedule does not identify any other duties or ch arges applicable to alcoholic beverages. 
4.18 India applies a 100 per cent basic customs duty on beer and, prior to July 3, 2007, also a 
100 per cent basic customs duty on wine.  On July 3, 2007, the basic customs duty on wine increased 
to 150 per cent.  (The US claims concern measures India imposed at the time of the Panel's 
establishment on 20 June 2007 and,  accordingly, are not based on any effect the 3 July 2007 customs 
notification may have had on the collection of the additional customs duty on alcoholic beverages.)  
With respect to distilled spirits, India applies a basic customs duty equal to its 150 per cent WTO 
bound rate.  WT/DS360/R 
Page 6 
 
 
  4.19 Section 3(1) of the Customs Tariff Act requir es the imposition of the additional customs duty 
on imports and Customs Notification 32/2003 set outs the rates of additional customs duty on imports 
of alcoholic beverages.  Section 3(2) of the Cu stoms Tariff Act requires that the additional customs 
duty be calculated on the value of the import inclusiv e of the basic customs duty owed.  As a result, 
the additional customs duty required under those measu res results not only in ordinary customs duties 
that exceed India's WTO bound rates for beer, wine and distilled spirits, but exceeds them by as much 
as 400 percentage points: 
 
Value  
BC  
AD 
(% or 
USD)   
BC 
Owed 
(USD)  
AD 
Owed  
(USD)  
Total 
Duties 
(USD)  
Effective 
Rate of 
AD 
   
Effective 
Rate of 
Duty   
WTO 
Bound 
Rate  
Beer 
and 
Wine    
41 100% 40* 41.00 40 81.00 97.6% 197.6% 150%
100 100% 20% 100.00 40 140.00 40% 140.0% 150%
26 100% 37* 25.00 37 62.00 148% 248.0% 150%
37 100% 50% 37.00 37 74.00 100% 200.0% 150%
1 100% 75% 1.00 1.5 2.50 150% 250% 150%
Spirits    
41 150% 53.2* 61.50 53.2 114.70 129.8% 279.8% 150%
86 150% 25% 129.00 53.75 182.75 62.5% 212.5% 150%
20 150% 53.2* 30.00 53.2 83.20 266% 416.0% 150%
39 150% 50% 58.50 53.2 111.70 136.4% 286.4% 150%
10 150% 40* 15.00 40 55.00 400% 550.0% 150%
16 150% 100% 24.00 40 64.00 250% 400.0% 150%
1 150% 150% 1.50 3.75 5.25 375% 525.0% 150%
* Numbers are US dollars (USD) per case unless followed by a per cent symbol (%). The table shows 
the effective rate of additional customs duty and aggregate duties on wine prior to the July 3, 2007 
increase in the basic customs duty rate for wine from 100 to 150 per cent.  
 
4.20 As the above table demonstrates, with respect to  beer and wine, all but the lowest rate of 
additional customs duty – 20 per cent on imports of wine or beer over 100 USD per case – results in 
ordinary customs duties on imports of beer and wine that exceed India's 150 per cent WTO bound 
rate.  With respect to distilled spirits, the additio nal customs duty at all rates results in ordinary 
customs duties that exceed India's WTO bound rates.  In fact, since the basic customs duty on distilled 
spirits is already equal to Indi a's WTO bound rate, any ordinary cu stoms duty imposed in addition to 
the basic customs duty on imports of distilled spirits would exceed India's WTO bound rate. 
4.21 Thus, applied in conjunction with the basic cu stoms duty, the additional customs duty results 
in ordinary customs duties that far exceed I ndia's WTO bound rates for alcoholic beverages.  
Accordingly, the additional customs duty as imposed pursuant to Section 3(1) of the Customs Tariff 
Act and Customs Notification 32/2003 is, as such, in consistent with Article II:1(b) as an ordinary 
customs duty in excess of those duti es specified in India's Schedule.  WT/DS360/R 
 Page 7 
 
 
  (iii) Article II:1(a) of the GATT 1994 
4.22 Article II:1(a) of the GATT 1994 requires each  WTO Member to "accord the commerce of 
[other Members] treatment no less favourable than that provided for in" the Member's Schedule.  As 
explained above, the additional cust oms duty imposed pursuant to Section 3(1) of the Customs Tariff 
Act and Customs Notification 32/2003 results in or dinary customs duties on imports of alcoholic 
beverages that exceed those set out in India's WT O Schedule.  By imposing ordinary customs duties 
on imports of alcoholic beverages from the United States in excess of those set forth in India's 
Schedule, the additional customs duty accords im ports from the United States less favourable 
treatment than provided for in India's Schedule and, as such, is inconsistent with Article II:1(a) of the 
GATT 1994. 
(c) The Extra-Additional Customs Duty is inconsiste nt with Article II:1(a) and II:1(b) of the 
GATT 1994 
(i) Article II:1(b) of the GATT 1994 – Ordinary Customs Duty or Other Duty or Charge 
4.23 As reviewed above, an "ordinary customs duty" within the meaning of Article II:1(b) of the 
GATT 1994 is a duty –  either ad valorem, specific or mixed – imposed on a good upon its 
importation (and not on domestic pr oducts), and calculated based on th e quantity or value of the good 
at the time of importation, while an ODC (other duty or charge) within the meaning of Article II:1(b) 
of the GATT 1994 is a duty or charge imposed on the importation of a good other than an ordinary 
customs duty. 
4.24 The extra-additional customs duty is an ordinary  customs duty for many of the same reasons 
as the additional customs duty is.  First, the extra- additional customs duty applies (i) at the time of 
importation, (ii) exclusively to imports, and (iii) as an ad valorem duty on the CIF value of the import.  
In this regard, the extra-additional customs duty, lik e the additional customs duty, is no different than 
the basic customs duty, and likewise appears to be  of the kind normally or commonly imposed on 
imports.  The extra-additional custom s duty is thus "ordinary" within the meaning of Article II:1(b) of 
the GATT 1994.  
4.25 As with the additional customs duty, the structur e of India's customs dut y regime bolsters this 
latter point.  Section 12(1) of the Customs Act likewise requires the collection of both the basic 
customs duty and the extra-additional customs duty and Section 25 of the Customs Act likewise  
provides the authority to exempt imports from "any duty of customs" including the basic customs duty 
or the extra-additional customs duty.  Thus, India' s own customs duty regime appears to regard both 
the extra-additional customs duty and the basi c customs duty as ordinary customs duties. 
4.26 The purpose a Member attributes to a duty or tax is not decisive in determining whether that 
duty or tax constitutes an ordinary customs dut y. Thus, Section 3(5)'s statement that the 
extra-additional customs duty is to counter-balance  sales or other indirect taxes imposed on like 
domestic products does not affect whether the extr a-additional customs duty may be regarded as an 
ordinary customs duty within the meaning of Article II:1(b) of the GATT 1994.    
4.27 For each of these reasons, the extra-additional customs duty, like the basic customs duty and 
the additional customs duty, is an ordinary customs duty within the meaning of Article II:1(b) of the 
GATT 1994.  
4.28 Similarly, even if the extra-additional customs duty were not an ordinary customs duty but 
were instead an ODC, it would be in breach of Article II:1(b) of the GATT 1994.  As explained 
above, ODCs are defined in relation to ordinary customs duties in that "other duties or charges" mean 
those duties or charges that are not "ordinary" customs duties but are nonetheless imposed on or in WT/DS360/R 
Page 8 
 
 
  connection with a product's importation.  With r espect to the extra-additional customs duty, the 
second sentence of Article II:1(b) of the GATT 1994 w ould ensure that India may not avoid its tariff 
commitments simply by imposing a duty or other charge on the importation of alcoholic beverages 
that may not meet the technical definition of an "ordinary" customs duty, but nonetheless results in 
customs duties or other charges that exceed those set out  in India's Schedule.  In this dispute, as is the 
case with the additional customs duty, determining wh ether the extra-additional customs duty is either 
an ordinary customs duty or ODC within the meaning of Article II:1(b) of the GATT 1994 is not 
determinative of the outcome in this dispute as, in either case, the extra-additional customs duty 
would exceed the rates set out in India's Schedule, as discussed below.   
(ii) Article II:1(b) of the GATT 1994 – in excess of 
4.29 The extra-additional customs duty subjects imports  of alcoholic beverages as well as other 
imports to ordinary customs duties "in excess of" tho se provided for in India's Schedule.  In addition 
to the basic customs duty and the additional custom s duty, Section 3(5) of the Customs Tariff Act 
provides for the imposition of the extra-additional customs duty on imports and Customs Notification 19/2006 requires that the extra-additional customs duty be levied on imports at four per cent ad 
valorem.   In contrast to Customs Notification 32/2003 setting out the rates of additional customs duty 
for alcoholic beverages, Customs Notification 19/2006  is broadly drafted, requiring the collection of 
the extra-additional customs duty on "all goods speci fied under the Chapter, heading, sub-heading or 
tariff item of the First Schedule to [the Customs Tari ff] Act."  Section 3(6) of the Customs Tariff Act 
requires that the extra-additional customs duty be calculated on the value of the import inclusive of 
the basic customs duty owed and the additional customs duty owed. 
4.30 Part of 1 of India's WTO Schedule binds ordi nary customs duties on beer, wine and distilled 
sprits (HS Nos. 2203-2206 and 2208) at 150 per ce nt ad valorem and does not identify any other 
duties or charges applicable to alcoholic beverages.   India's basic customs duty on beer and wine is 
100 per cent ad valorem whereas the basic customs duty on  distilled spirits is 150 per cent ad valorem.   
As noted above, Customs Notification 81/2007 (3 July 2007) raised the applied basic customs duty on 
wine to 150 per cent ad valorem on July 3, 2007 .  Thus, the extra-additional customs duty would 
result in customs duties in excess of India's bound rates on wine as well when imposed in conjunction 
with a basic customs duty of 150 per cent, for th e same reasons the extr a-additional customs duty 
results in customs duties in excess of India's bound rates for distilled spirits and products listed in 
Exhibit US-1.  Because India raised the basic custom s duty on wine to 150 pe r cent after the date of 
the Panel's establishment, we have  not included that argument here. 
4.31 Even factoring out the cumulative effect of th e additional customs duty, the extra-additional 
customs duty, when imposed in conjunction with the basic customs duty, results in ordinary customs 
duties on distilled spirits that exceed those set forth in India's WTO Schedule: 
Extra-Additional Customs Duty on Distilled Spirits* 
Value 
 EAD BC BC Owed EAD 
Owed Effective 
Rate of 
EAD Total 
Duties Effective 
Rate of 
Total 
Duty WTO 
Bound 
Rate 
100 4% 150% 150.00 10 10.0% 160.00 160% 150%
* Numbers are US dollars (USD) unless followed by a per cent symbol (%). The table shows the 
effective rate of additional customs duty and aggregat e duties on wine prior to the July 3, 2007 increase 
in the basic customs duty rate for wine from 100 to 150 per cent.  
 4.32 As noted, Section 3(6) of the Customs Tariff Act requires that the extra-additional customs 
duty be calculated on the value of the import inclusiv e of the basic customs duty owed, such that the  WT/DS360/R 
 Page 9 
 
 
  effective rate of the extra-additional customs duty on imports of distilled spirits is 10 per cent and the 
effective rate of aggregate duties (extra-additional customs duty in conjunction with the basic customs 
duty) is 160 per cent, ten percentage points over India's 150 per cent WTO bound rate for wine and 
spirits.  This would similarly be the case for other values; 100 USD as the value in the above table is 
simply illustrative. 
4.33 With respect to beer and wine, although imposition of the extra-additional customs duty in 
conjunction with the basic customs duty on beer and wine has not exceeded India's WTO bound rates 
of "ordinary customs duty", India's Schedule do es not specify any ODCs within the meaning of 
Article II:1(b) of the GATT 1994 for beer or wine (o r for distilled spirits).  Thus, to the extent the 
extra-additional customs duty is an ODC, the extr a-additional customs duty on beer and wine would 
exceed the ODCs set out in India's Schedule.  In fact , to the extent the extra-additional customs duty is 
an ODC, the extra-additional customs duty on beer, wine, spirits and every other product for which 
India took commitments in its Schedule would exceed  the ODCs set out in India's Schedule, as India 
has not scheduled the extra-additional customs duty for any product included in its Schedule, including those products listed in Exhibit US-1.  
4.34 Exhibit US-1 lists a number of agricultural and industrial products.  For each product listed, 
Exhibit US-1 identifies India's WTO bound rate al ong with the effective ordinary customs duty or 
ODC that results from application of the extra-a dditional customs duty in conjunction with the basic 
customs duty on that product.  The WTO bound rates listed reflect India's Uruguay Round 
commitments inclusive of any subsequent modifi cations in accordance with Article XXVIII of the 
GATT 1994.  
4.35  The applied rates of basic customs duties for products in Exhibit US-1 are at India's WTO 
bound rates for those products, and none of the products are indicated in India's Schedule as ones subject to an ODC.  As a result, application of the extra-additional customs duty in conjunction with 
the basic customs duty results in ordinary customs duties on those products that exceed those set forth 
in India's Schedule.  As with alcoholic beverages,  the extra-additional customs duty on other products 
applies in addition to and is calculated on top of the basic customs duty.  
4.36 Exhibit US-1 is an illustrative list; there may be products in addition to those listed in 
Exhibit US-1 for which imposition of the extra-add itional customs duty in conjunction with the basic 
customs duty results in ordinary customs duties in excess of those set forth in India's Schedule.  The 
United States has challenged the extra-additional cu stoms duty as such.  Accordingly, the US claims 
concern the extra-additional customs duty itself and therefore any instance for which application of 
the extra-additional customs duty in conjunction w ith the basic customs duty results in ordinary 
customs duties in excess of those set forth in India's Schedule.  
4.37 As demonstrated above, the extra-additional cu stoms duty, imposed in conjunction with the 
basic customs duty, subjects alcoholic beverages as well as other products to ordinary customs duties 
in excess of those set forth in India's WTO Schedule.  Article II:1(b) of the GATT 1994, however, requires India to exempt imports from ordinary cust oms duties or ODCs in excess of those set forth in 
its Schedule.   Accordingly, the extra-additional customs duty as imposed pursuant to Section 3(5) of 
the Customs Tariff Act and Customs Notification 19/2006 is, as such, inconsistent with India's 
obligations under Article II:1(b) of the GATT 1994. 
(iii) Article II:1(a) of the GATT 1994 
4.38 As noted above, Article II:1(a) of the GATT 1994 requires each WTO Member to "accord the 
commerce of [other Members] treatment no less fav ourable than that provided for in" the Member's 
Schedule.  Because the extra-additional customs duty r esults in customs duties on imports of alcoholic 
beverages and other products (incl uding those in Exhibit US-1) that exceed those set out in India's WT/DS360/R 
Page 10 
 
 
  Schedule, it accords imports from the United States less favourable treatment than provided for in 
India's Schedule.  Consequently, the extra-additiona l customs duty imposed pursuant to Section 3(5) 
of the Customs Tariff Act and Customs Notifi cation 19/2006 is, as such, inconsistent with 
Article II:1(a) of the GATT 1994.  
3. Conclusion 
4.39 For the reasons set out above, the United States requests the Panel to find that: 
 the additional customs duty is: 
 
• inconsistent with Article II:1(b) of th e GATT 1994 as an ordinary customs duty that 
subjects imports of alcoholic beverages to ordinary customs duties in excess of those 
set forth in India's WTO Schedule; and 
 
• inconsistent with Article II:1(a) of th e GATT 1994 as an ordinary customs duty that 
affords imports of alcoholic beverages from the United States less favourable 
treatment than that provided for in India's WTO Schedule; and 
 
 the extra-additional customs duty is: 
 
• inconsistent with Article II:1(b) of th e GATT 1994 as an ordinary customs duty that 
subjects imports, including alcoholic beve rages and products listed in Exhibit US-1, 
to ordinary customs duties in excess of tho se set forth in India's WTO Schedule; and 
 
• inconsistent with Article II:1(a) of th e GATT 1994 as an ordinary customs duty that 
affords import from the United States, in cluding alcoholic beverages and products 
listed in Exhibit US-1, less favourable treatment than that provided for in India's WTO Schedule. 
 
4.40 Accordingly, the United States also request s that the Panel recommend, pursuant to 
Article 19.1 of the DSU, that India bring its meas ures into conformity with the covered agreements 
B. F
IRST WRITTEN SUBMISSION OF INDIA  
1. Introduction 
4.41 The present dispute concerns the imposition of certain duties on imports of alcoholic liquor 
for human consumption ("alcoholic beverages") on which India imposes levies in the form of 
"additional duties" ("AD"); as well as a number of other agricultural9 and industrial products10, 
including alcoholic beverages (collectively the "identified products") on which India imposes duties 
in the form of "such additional duties as would count er balance taxes such as Sales Tax, Value Added 
Tax, local tax or any other charges" ("SUAD"). 
2. Factual background 
4.42 India refutes the contentions made by the Un ited States in its first written submission on the 
following factual grounds: 
                                                      
9 Exhibit US-1A, Extra-Additional Customs Duty on Agricultural Products. 
10 Exhibit US-1B, Extra-Additional Customs Duty on Industrial Products.  WT/DS360/R 
 Page 11 
 
 
  (a) Mischaracterization of Indian duties as OCD and ODC  
4.43 The AD and the SUAD, which are levied to offset different kinds of internal taxes, have been 
wrongly characterized by the United States as being "ordinary customs duties" ("OCD") or in the 
alternative as "other duties and charges" (" ODC") as understood under Article II:1(b) of the 
GATT 1994.  Based on this mischaracterization, the US has alleged that India is exceeding the 
commitments contained in its Schedules. Both the AD and the SUAD are duties levied in lieu of 
internal taxes – the AD on alcoholic beverages is imposed in lieu of state excise duties and the SUAD 
on the identified products is imposed to counte r-balance sales tax, VAT and other local taxes or 
charges, which are levied on like domestic produc ts. These duties are distinct from the basic customs 
duty ("BCD") imposed by the Government of India which is the only duty imposed by India as an 
OCD.  
(b) Misinterpretation of the statutory basis for Indian duties 
4.44 The United States has failed to distinguish between the duties levied under the Indian 
Customs Act, 1962 ("Customs Act") and those under the Customs Tariff Act, 1975 ("CTA"). The AD on alcoholic beverages is levied under Section 3( 1) of the CTA whereas the SUAD on the identified 
products is levied under Section 3(5) of the CTA. On the other hand, the BCD is authorized by 
Section 12 of the Customs Act. The US has iden tified the provisions of the Customs Act and the 
Customs Tariff Act as the measures in the present disput e that are collectively responsible for the levy 
of the BCD, the AD and the SUAD. In doing so, the US  has failed to make the intrinsic distinction 
between the types of duties and the statutory provisions responsible for their imposition. 
(c) Failure to distinguish between mandatory a nd discretionary provisions of Indian law 
4.45 The United States has challenged the identified I ndian statutory provisions "as such" without 
accounting for the fundamental distinction between those statutory provisions which authorize the imposition of a duty, and those which actually result in its levy. In doing so, it has blurred the 
distinction between the empowering provisions of Section 3 of the CTA which give the Central 
Government the discretion to impose the AD on al coholic beverages and the SUAD on the identified 
products, and the relevant Customs Notifications – which are a form of delegated legislation that 
ultimately determine that the AD on alcoholic beve rages and the SUAD on the identified products be 
levied at a specific rate, if at all.  
(d) Failure to acknowledge the valid remova l of the AD on alcoholic beverages 
4.46 The United States has failed to acknowledge that the AD on alcoholic beverages levied by 
Customs Notification No. 32/2003, dated March 1,  2003 ("CN 32/2003"), stands duly and validly 
removed through a subsequent Customs Notif ication No. 82/2007, dated July 3, 2007 
("CN 82/2007"). In doing so, the US has mounted a challenge on a measure which has ceased to have 
any effect, on account of a subsequent amendmen t to the measure despite having included "any 
amendments, related measures, or  implementing measures" in its description of the challenged 
measures. Without prejudice to India's stand that the earlier measure was also in conformity with 
India's WTO obligations, the Panel would be well with in its rights to take into account the subsequent 
removal of the AD on alcoholic beverages which was introduced after the Terms of Reference of the 
Panel were fixed. 
3. Legal challenge 
4.47 In addition to the factual gr ounds listed above, the United States has not succeeded in framing 
a sustainable legal challenge upon the compatibility of the identified Indian duties with provisions of 
the GATT for the following reasons: WT/DS360/R 
Page 12 
 
 
  (a) Incorrect challenge of measures "as such"  
4.48 The United States has identified Section 12 of the Customs Act and Section 3 of the CTA as 
two offending measures in the present dispute, an d in doing so, it has effectively challenged the 
empowering provisions in the two legislations as su ch, independently from the application of that 
legislation (through the identified Customs Notif ications) in specific instances. The threshold 
consideration in determining when a legislation as su ch – rather than a specific application of that 
legislation – is inconsistent with a Contracti ng Party's obligations under the GATT is based on 
whether the legislation is mandatory  as distinguished from discretionary.11 The distinction between 
mandatory and discretionary legislation turns on wh ether there is relevant discretion vested in the 
executive branch  of the Government.12 It is clear that neither Section 3(1) nor Section 3(5) of the 
CTA, enjoin upon the Central Government to necess arily levy the AD on alcoholic beverages or the 
SUAD on the identified products. Thus they cannot be said to be mandating actions inconsistent with 
the GATT Agreement. The two statutes on the other hand, empower  the Central Government with the 
discretion  to charge such duties, fix the rates at whic h they will be levied, and to issue Customs 
Notifications to give effect to such decisions. 
(b) Neither the AD nor the SUAD is inconsistent with Article II:1(a) and (b) of the GATT 1994 
4.49 The AD on alcoholic beverages is levied under Section 3(1) of the CTA and is a charge 
expressed in ad valorem  terms that is equivalent to the internal state excise duty  leviable on  like 
domestic products. The SUAD on the identified products is an ad valorem  duty that is levied under 
Section 3(5) of the CTA with the sole objective of offsetting the incidence of certain internal taxes 
that are directly levied on domestic like products, i.e. sales tax, value added tax (VAT) and other local 
taxes and charges. The nature, intent and design of the AD on alcoholic beverages and the SUAD on 
the identified products is solely to offset the inciden ce of certain internal taxes levied on like domestic 
products and these duties are validly imposed in acco rdance with Article II:2(a) of the GATT 1994.  
Neither the AD on alcoholic beverages nor the SUAD on the identified products is an OCD or an 
ODC as understood under Article II:1 of  the GATT 1994 for the following reasons: 
(i) The AD and the SUAD are not OCDs 
4.50  The term OCD used in Article II:1(b) has been described by a WTO Panel as being a duty 
"of the usual kind, not singular or exceptional; commonplace, mundane".13 A duty may be imposed on 
imports at the border and expressed in ad valore m terms but it is not necessary that each and every 
duty that is calculated on the basis of the value a nd/or volume of imports is necessarily an "ordinary 
customs duty".14  Both the AD and the SUAD are expressed in ad valorem terms but that does not 
necessarily make them OCDs.  In stead, the purpose and design of the AD on alcoholic beverages and 
the SUAD on the identified products is solely to offset  the incidence of certain internal taxes, i.e. in 
the case of the AD, state excise duties that are levi ed only on alcoholic beverages manufactured in 
India, and the SUAD – certain sales tax, value a dded tax (VAT) and other lo cal taxes and charges. 
Both such duties are charges impo sed in accordance with Article II:2(a) and are distinct from the 
OCD envisaged under Article II:1(b). This distinc tion has been acknowledged by the Appellate Body 
in Chile – Price Band System  where it held that:  
"Article II:2 of the GATT 1994 sets out exam ples of measures that do not qualify as 
either "ordinary customs duties" or "other  duties or charges". These measures include 
charges equivalent to internal taxes, an ti-dumping and countervailing duties, and fees 
                                                      
11 Appellate Body Report, US – 1916 Act , paras. 88-91. 
12 Ibid, para. 100 
13 Panel Report, Chile – Price Band System , para. 7.51. 
14 Appellate Body Report, Chile – Price Band System , para. 274.  WT/DS360/R 
 Page 13 
 
 
  or other charges commensurate with the co st of services rendered. They too may be 
based on the value and/or volume of imports, and yet Article II:2 distinguishes them 
from "ordinary customs duties" by providing  that "[n]othing in [Article II] shall 
prevent any Member from imposing" them "at any time on the importation of any 
product".15 
4.51 As noted earlier, the Indian statutory provisions that authorize the levy of the AD on alcoholic 
beverages (Section 3(1) of the CTA) and the SUAD on the identified products (Section 3(5) of the 
CTA) are clearly distinct from the provisions that  authorize the levy of the BCD (Section 12 of the 
Customs Act). The BCD is the only duty imposed on importation into India by way of an OCD as 
understood under Article II:1 of  the GATT 1994. The AD and the SUAD are on the other hand, duties 
that are intended to be in the nature of a levy impos ed at the border to offset various internal taxes in 
accordance with Article II:2(a) of the GATT 1994. 
(ii) Failure to discharge burden of proof  
4.52 The United States has failed to adequately d escribe the grounds on which either the AD on 
alcoholic beverages or the SUAD on the identifie d products would qualify as an "other duty of 
charge" which was imposed inconsistently with In dia's Schedules. In doing so, the US has failed to 
adequately make out a legal argument a nd has not discharged its burden of proof.16 
(iii) The AD and the SUAD are not ODCs 
4.53 Notwithstanding the US failure to discharge its  burden of proof, neither the AD on alcoholic 
beverages nor the SUAD on the identified products sa tisfy the Article II:1(b) second sentence test for 
determining whether a levy is an "other duty or  charge". The AD on alc oholic beverages and the 
SUAD on the identified products are imposed at the time of import but are not imposed on, or in 
connection with importation; instead, they are impo sed in lieu of state excise duties and sales tax, 
VAT, other taxes and charges respectively. Furthe r, while both duties are expressed in ad valorem 
terms, the Appellate Body in Chile – Price Band System  has held that this does not, make them "other 
duties and charges" under the second sentence of Article II:1(b).17 The AD on alcoholic beverages and 
the SUAD on the identified products are both "cha rges equivalent to internal taxes imposed 
consistently with the provisions of Article III:2" and India is perm itted to impose such charges under  
Article II:2 of the GATT 1994, but they do not  amount to an ODC.18 
(iv) The AD and the SUAD are not "in excess of" the rates in India's Schedules 
4.54 As noted above, neither the AD nor the SUAD ar e OCDs or ODCs that are required to be 
listed in India's Schedules and are not therefore to be included for determining whether India's duties 
are "in excess of" those provided in its Schedules. The only charge that India levies by way of an 
OCD, is the basic customs duty under Section 12 of the Customs Act which is in conformity with the 
commitments contained in its Schedules. As noted earlier, the AD and the SUAD are distinct from the 
basic customs duty and are imposed with the specifi c purpose of off-setting certain internal taxes and 
charges. The AD and the SUAD are imposed in ac cordance with Article II:2(a) of the GATT 1994 
and are not "in excess of" India's Scheduled commitments. 
                                                      
15 Appellate Body Report, Chile – Price Band System , para. 276. 
16 The United States notes that, as a general rule, "t he burden of proof rests upon the party, whether 
complaining or defending, who asserts the affirmative of a particular claim or defence". Appellate Body Report, 
US – Wool Shirts and Blouses , p. 14. 
17 Appellate Body Report, Chile – Price Band System , para. 275. 
18 Ibid, para. 276. WT/DS360/R 
Page 14 
 
 
  (v) The AD and the SUAD are not inconsistent  with Article II:1(a) of the GATT 1994 
4.55 As noted above, neither the AD nor the SUAD are OCDs or ODCs as defined under 
Article II:1(b), and are consequently not required to be listed as part of India's Schedules. Instead, the 
AD on alcoholic beverages and the SUAD on the identif ied products are charges levied at the border 
in lieu of internal taxes and in accordance with Sec tion II:2(a) of the GATT. India has "preserved the 
value of tariff concessions" listed in its Schedules and its "ordinary customs duty" applied on the 
importation of certain alcoholic beverages and other identified industrial and agricultural products are 
well within the limits prescribed in its Schedules.  
(c) The AD and the SUAD are equivalent to internal taxes under Article II:2(a) of the 
GATT 1994  
4.56 WTO Members are permitted by Article II:2(a) to levy certain charges at the border, 
notwithstanding the restrictions contained in Article II: 1(a) and (b), provided that such charges are: (a) 
"equivalent" to an "internal tax"; (b) imposed in a ma nner that is consistent with Article III:2; and (c) 
in respect of a "like domestic product". The AD on alcoholic beverages and the SUAD on the identified products are such charges which are le vied in accordance with Article II:2(a) of the 
GATT 1994.
19 The SUAD on the identified products is equivalent to the sales tax, value added tax, 
local tax and other taxes or charges leviable on th e sale or purchase or transportation of like goods 
in India, when imported into India and it imposes the same fiscal burden on imported products as on 
like domestic products.  The SUAD on the identified products was introduced to "counter-balance" 
internal taxes and charges at a rate not ex ceeding 4 per cent and is equivalent to the:  
• Value Added Tax (VAT) imposed by state governments on the intra- state sale of 
domestic products, from which imported like pr oducts at the time of importation are 
exempt20, and/or  
 
• the Central Sales Tax (CST) imposed by the Central Government on the inter -state 
sale of domestic products, from which impor ted like products at the time of 
importation are exempt21;  
 
• and/or other local taxes and charges on th e sale, purchase and transport of domestic 
products.  
 4.57 The Indian system of tax administration has been carefully calibrated in a manner such that if 
certain specified domestic products are exempt from any or all of these abovementioned internal 
taxes, then the imported like products are al so exempt from the payment of the SUAD.
22 This 
effectively ensures that the SUAD on imported products is  at all times equivalent to the internal taxes 
charged by way of VAT, CST or other taxes and charg es. Furthermore, to ensure complete parity and 
an equality of taxation for imported and like dom estic products, the methodology for calculation of 
the SUAD on the identified products is similar to the methodology used to calculate the state VAT 
and is in accordance with accepted international practices. The internal taxes that the SUAD is 
intended to counter-balance are described below: 
                                                      
19 Since the rate at which the AD on alcoholic be verages was charged has been effectively removed 
through CN 82/2007, arguments in support of its eq uivalence with the state excise duties which it was 
introduced to counter – balance, are not being offered at this stage, without prejudice to India's rights offer such 
details at a later stage. 
20 Article 286 of the Constitution precludes the state government from imposing taxes of sale on 
imports. 
21 Section 6(1) of the Central Sales Tax Act, 1956 authorizes the imposition of CST only on the inter – 
state sale of products, and not on products imported from outside the country. 
22 Notification No. 20/2006 – Cus., dated 1 March 2006.  WT/DS360/R 
 Page 15 
 
 
  (i) The SUAD is equivalent to the Sales Tax/Value Added Tax (collectively referred to as "VAT") 
4.58 The VAT is imposed by state governments under their respective state VAT statutes on 
domestic products and not on the importation of li ke products from outside India since they are 
precluded by the Constitution of India from levying VAT on the import of goods.23 Since domestic 
manufacturers have to bear the incidence of VAT , which is not equally imposed on the import of 
products into India, the Central Government has so ught to counter-balance the incidence of the VAT 
(and CST and other taxes and charges) by imposi ng the SUAD. Appropriate tax credit and exemption 
mechanisms ensure that if certain domestic products  are exempt from the payment of VAT, then the 
like imported products are also correspondingly exem pted from the payment of the SUAD . Similarly, 
products that are charged at a nominal rate of 1 per cent under the relevant state VAT legislations, are 
charged SUAD for imported like products at a corresponding rate of 1 per cent ad valorem.24  
Therefore, the SUAD is designed to be equivalent to the state VAT. 
(ii) SUAD is equivalent to the Central Sales Tax (CST) 
4.59 The CST is levied only on the inter-state m ovement of domestically manufactured products 
by the Central Government under the Ce ntral Sales Tax Act, 1956 ("CST Act").25  Since domestic 
manufacturers have to bear the incidence of CST (o n inter-state sales) which are not equally imposed 
on imported products, the Central Government has sought to counter-balance the incidence of these taxes by imposing a 4 per cent SUAD. The rate at which the CST is charged on a product is 
determined in accordance with the laws of the stat e from where the movement originates i.e. the rate 
of CST will be equivale nt to the prescribed rate of sales ta x/VAT of the state of origination. 
Therefore, the rate at which CST is levied on inte r-state sales is inter-connected with the VAT rates 
listed above and CST is levied at a basi c rate of 4 per cent on certain products
26 and a standard rate of 
12.5 per cent on all other products, unless the prod uct is jewellery and gold (in which case it is 
charged a nominal CST of 1 per cent) or if the pr oduct is exempted altogether from the payment of 
VAT. Accordingly in order to counter-balance the incidence of CST, the SUAD on imported products 
is levied at nil rate or at the rate of 1 per cent, or 4 per cent to ensure that imported products are not 
taxed in excess of Indian like pr oducts. Appropriate tax credit and ex emption mechanisms ensure that 
domestic goods that are exempt from the payment of VAT in the state from where it originates are also exempt from the payment of CST. Simulta neously, their like imported products are also 
exempted from the payment of the SUAD when they are imported into India.
27 Similarly, products 
such as gold, jewellery, etc. that are eligible to be charged at the nominal rate of 1 per cent CST, then 
their like imported products are correspondingly su bject to the SUAD at the (reduced) rate of 1 per 
cent ad valorem.28 Therefore, the SUAD on the identified pr oducts is designed not to exceed the CST 
and be equivalent to the CST. 
(iii) The SUAD is equivalent to other local taxes and charges 
4.60 In addition to the local taxes enumerated above, each state government is empowered by the 
Constitution of India to collect a variety of local levies on goods and the raw materials used in their 
manufacture, such as transport fees, various type of surcharges, cess etc. The cumulative effect of all 
state-level internal taxes imposed only on domestic  products, from the raw material stage to its 
                                                      
23 Article 286 of the Constitution precludes the state government from imposing taxes of sale on 
imports. 
24 Introduced by Notification No. 20/2006 – Cus., dated 1 March 2006. 
25 Section 5(1) of the Central Sales Tax 
26 In some limited instances, the CS T chargeable has recently been re duced to 3 per cent as of the 1 
April, 2007, i.e. in the case of inter- state sale of goods by a dealer to anot her registered dealer. (Section 8 (1) of 
the Central Sales Tax, 1956). 
27 Notification No. 20/2006 – Cus., dated 1 March 2006. 
28 Ibid. WT/DS360/R 
Page 16 
 
 
  finished state, have to be counter-balanced on imported like products. The SUAD was introduced with 
the objective of off-setting such internal taxes which may vary in nomenclature, quantum and 
character from state-to-state and the SUAD has b een levied at the lowest rate possible to 
counterbalance these state levies that are not imposed on like imported products. 
(iv) The AD and SUAD are imposed consisten tly with Article III:2 of the GATT 1994 
4.61 The AD on alcoholic beverages and the SUAD on the identified products are both imposed on 
the import of goods at the customs border, and are equivalent to and not "in excess of" the taxes and 
charges imposed upon like domestic goods. The structure, design and implementation of the AD on alcoholic beverages and the SUAD on the identified products clearly indicates that they are duties that 
are intended to counter-balance internal taxes and to  ensure the equality of taxation between domestic 
and imported like products and not to affo rd protection to the domestic industry.
29  
• The SUAD is imposed on "like products" : The products identified in the present 
dispute are certain alcoholic beverages and other identified industrial and agricultural 
products, listed by the United States These alcoholic beverages and the identified 
products are imported into India on the b asis of the Harmonized System (HS) of 
nomenclature used to describe them at the customs border and the SUAD is levied in 
accordance with this nomenclature. As noted earlier, the imported products are 
treated as being alike their domestic counter parts and therefore, exemptions granted 
to domestic products from local taxes and char ges will also result in an exemption for 
like imported products. In other words, for the purposes of the imposition (and exemption) of the SUAD, the Government of India treats products identified by the 
US, as being treated like their domestically manufactured counterparts.  
 
• The SUAD does not tax imported pro ducts "in excess of" domestic products:  The 
SUAD is a charge imposed at the border that  is equivalent to the VAT, CST or other 
local charges and duties paid by like do mestic products and the imposition of the 
SUAD equalizes the tax burden imposed on the imported product with its like 
domestic product.30 Since domestic taxes and charges (VAT and CST) are levied at a 
minimum rate of 4 per cent, which is equivalent to the 4 per cent SUAD imposed on 
imported like products, the tax burden on an imported product on account of SUAD 
cannot be said to be in excess of the ta x burden on like domestic  products. Further, 
under Indian law, the benefit of an exemption or reduction from a local tax such as 
VAT or CST results in a parallel exempti on or reduction from the payment of the 
SUAD for like imported products, thus ensuri ng an overall equality of tax burdens on 
imported and like domestic products.31. Further, the methodology for the calculation 
of the SUAD is in accordance with internati onal best practices and is designed in a 
manner such that the SUAD and the domestic VAT which, amongst other things it seeks to counter-balance, are both levied uniformly on the value of the product, 
inclusive of duties and taxes as applicable. This ensures complete parity and equality 
of taxation for imported and like domestic products. 
 
                                                     
 
29 Since the rate at which the AD on alcoholic be verages was charged has been effectively removed 
through CN 82/2007, arguments in support of its eq uivalence with the state excise duties which it was 
introduced to counter – balance, are not being offered at this stage, without prejudice to India's rights offer such 
details at a later stage. 
30 Although the SUAD results in the imposition of an equivalent tax burden on imported and like 
domestic products it is possible that, without prejudice to  its earlier contentions, the overall burden of taxation 
on imported products as a result of the SUAD may be marginally "in excess of" the tax on like domestic 
products which is below the " de minimis " level permissible under GATT Ad Article III, paragraph 3. 
31 Customs Notification No. 20/2006 – Custs., dated 1 March, 2006.  WT/DS360/R 
 Page 17 
 
 
  • Directly competitive or substitutable products: As noted above, the SUAD is imposed 
on the identified imported products at the border on the basis of their HSN 
classification to counter-balance internal taxes on like domestic products, including 
those identified by the US in its complaint. Therefore, by definition the SUAD is also 
imposed on products that are "directly competitive or substitutable".   
 
• The SUAD is not charged "so as to affo rd protection" to the domestic industry:  The 
purpose of imposing the SUAD as manifested in its design and intent32 on the 
identified products is to counter-balance certain local taxes and charges suffered by 
like domestic products and not to afford any measure of protection to the domestic 
industry. The SUAD is designed to impose a minimum rate of tax on imports to counterbalance the tax burden borne by like  domestic products by way of sales tax, 
VAT and other internal taxes and charges a nd does not result in dissimilar taxation of 
any magnitude between imported products and domestic products
33. The SUAD 
mechanism is calibrated with the internal tax mechanism su ch that the benefit of any 
exemption or concessional rate made availa ble to the domestic industry is equally 
extended to imports and has not been applied in a manner so as to afford protection to the domestic industry. 
 
(d) The SUAD is consistent with Article III:2 of the GATT 1994 
(i) The US has failed to discharge its burden of proof 
4.62 The US has argued in the alternative that th e AD and the SUAD are inconsistent with  
Article III:2 of the GATT 1994 as they exceed those taxes that are applied to like domestic products 
or directly competitive or substitutable domestic pr oducts. However, the US has failed to provide any 
basis for advancing such an argument and thus has failed to discharge its burden of proof.
34 
(ii) Notwithstanding the US failure to discharge its burden of proof 
4.63  As a complaining party in the dispute, the S UAD is imposed consistently with the provisions 
of Article III:2 of the GATT 1994 as noted above. 
4. Conclusion 
4.64 For the above reasons, the India requests the Pa nel to dismiss all the claims brought by the 
United States in this dispute. 
C. ORAL STATEMENT OF THE UNITED STATES AT THE FIRST SUBSTANTIVE MEETING OF THE 
PANEL  
4.65 This dispute concerns two customs duties th at India imposes on imports from the United 
States, including on beer, wine and distilled spirits . These duties are the additional customs duty (AD) 
and the extra-additional customs duty (EAD).  The AD and the EAD constitute ordinary customs 
duties, and India applies them at rates that exce ed the bound rates to which it committed in its WTO 
Schedule.  As a consequence, the AD and the EAD are each inconsistent with India's obligations 
under Article II:1(a) and II:1(b) of the GATT 1994. 
                                                      
32 Appellate Body Report, Chile – Alcoholic Beverages , paras. 71-72. 
33 Appellate Body Report, Canada – Periodicals , p. 32. 
34 The United States notes that, as a general rule, "t he burden of proof rests upon the party, whether 
complaining or defending, who asserts the affirmative of a particular claim or defence". US – Wool Shirts and 
Blouses , p. 14. WT/DS360/R 
Page 18 
 
 
  4.66 India contends that the AD and the EAD are in tended to offset or counterbalance internal 
taxes applied to like domestic products and as such  are not ordinary customs duties subject to 
Article II:1(a) or II:1(b).  India contends they are "charges equivalent to an internal tax" within the 
meaning of Article II:2(a) of the GATT 1994.  However, there is no evidence that either duty is in fact 
equal to, or offsets, internal taxes applied to like domestic products.    
1. Ordinary Customs Duties 
4.67 Article II:1(b) of the GATT 1994 obligates each  Member to exempt imports from ordinary 
customs duties in excess of the bound ra tes set out in that Member's WTO Schedule.   India's view of 
why the AD and the EAD do not constitute ordinary cu stoms duties boils down to three reasons.  One, 
India does not intend the AD or the EAD to be an ordinary customs duty.  Two, the "nature and 
purpose" of the AD and the EAD are "extra-ordinary" .  Three, the AD and the EAD are distinct from 
India's basic customs duty and, therefore, cannot be ordinary customs duties.  None of these reasons 
demonstrates that the AD or the EAD is not an ordinary customs duty.  
4.68 With respect to India's first and second reason,  when faced with issues of this sort, the 
Appellate Body has not based a determination of whether a measure constitutes an ordinary customs 
duty on the name, stated purpose or intention of the measure, but instead on an examination of the 
structure, design and effect of the measure at issue.  Thus, India's singular focus on the intention or purpose it ascribes to the AD and EAD is misguided.   
4.69 Examination of the structure, design and effect  of the AD and the EAD reveals that both are 
ordinary customs duties.  Both are structured and d esigned to, and in fact do, apply (i) at the time of 
importation, (ii) exclusively to imports, and (iii) as an ad valorem or specific duty.  The rate of AD 
varies depending on the CIF value of the product, and the rate of EAD is a flat four per cent.  The AD 
and the EAD also each apply as a matter of course upon a good's importation, and their application does not depend on any outside factors.   In each of these respects, the AD and the EAD are in 
structure and effect very much like India's basic customs duty.  
4.70 As to India's third reason, there is simply  no basis in the WTO Agreement for India's 
proposition that a Member may impose only one cust oms duty properly categorized as an "ordinary 
customs duty" and that any other customs duty that the Member might impose is simply something other than an ordinary customs duty.  The fact  that the AD and the EAD may be "distinct" from 
India's basic customs duty does not mean the AD and the EAD are not ordinary customs duties.  
Moreover, India's contentions that the AD and EAD are entirely distinct from the basic customs duty 
are incorrect.  In fact, all three duties are impo sed pursuant to the same provision under India's 
customs laws – that is, Section 12(1) of the Customs Act – and may be exempted with respect to 
certain products pursuant to the same provision under I ndia's customs laws – that is, Section 25(1) of 
the Customs Act.  The fact that each duty is furthe r elaborated under separate sections or sub-sections 
of the Customs Tariff Act does not make them "entirely distinct".  
4.71 In any event, even if the AD and the EAD were  not considered ordinary customs duties, they 
would nonetheless fall under Article II:1(b) of th e GATT 1994 because Article II:1(b) also prohibits 
"other duties or charges" that are not set out in th e Member's Schedule.  An "other duty or charge" is 
defined in relation to an ordinary customs duty, in that the term "other duties or charges" means those 
duties or charges that are not "ordinary" cust oms duties but are nonetheless imposed on, or in 
connection with, a product's importation.  The AD and the EAD are customs duties applied on 
products on their importation.  As such, if the AD or the EAD are not considered "ordinary customs 
duties", either would nonetheless constitute an "o ther duty or charge" within the meaning of  
Article II:1(b) of the GATT 1994.     WT/DS360/R 
 Page 19 
 
 
  2. AD and EAD exceed WTO-bound rates 
4.72 Because the AD and the EAD are ordinary customs duties, or in the alternative other duties or 
charges, within the meaning of Article II:1(b) of the GATT 1994, India is obligated not to impose 
them in excess of the WTO-bound rates set out in it s WTO Schedule.  India has failed to meet that 
obligation.  Starting with the AD, as detailed in pa ragraph 50 of the US submission, imposition of the 
AD on top of India's basic customs duty results in ordinary customs duties on imports of beer, wine 
and distilled spirits (collectively, "alcoholic beverages") that range from approximately 200 to 550 per 
cent.  India's WTO Schedule specifies a bound rate of 150 per cent for alcoholic beverages.  The AD, 
thus, results in ordinary custom duties that ar e between 48 to 400 percentage points over India's 
WTO-bound rates.  And, were the AD to be consider ed an other duty or charge, it would result in 
"other duties or charges" that exceed those set out in India's Sc hedule as India's Schedule does not 
specify any other duties or charges for any product. 
4.73 Turning to the EAD, Exhibit US-1 details th e imported products – in addition to distilled 
spirits – for which the EAD applies and for which its  imposition results in ordinary customs duties in 
excess of India's WTO-bound rates.  Exhibit US-1 is illustrative in that imposition of the EAD on any 
imported product for which India's basic customs duty is already at – or very near – India's WTO-
bound rate results in a breach of India's WTO-bound rates.  As with the AD,  were the EAD to be 
considered an "other duty or charge", it would also  exceed those set out in India's Schedule, as it does 
not specify any other duties or charges for any product. 
4.74 India does not dispute the fact that the AD and the EAD each result in customs duties in 
excess of the bound rates set forth in India's Schedul e. Instead, India simply reiterates its contention 
that the AD and the EAD are not ordinary customs duties.   However, for the reasons the United 
States has presented, the AD and the EAD are properly considered ordinary customs duties, or in the 
alternative other duties or charges.  And, b ecause India imposes each of the AD and the EAD in 
excess of the ordinary customs duties, or other duti es or charges, set forth in its WTO Schedule, each 
is inconsistent with Article II:1(b) and, as a c onsequence, also Article II:1(a) of the GATT 1994.  
3. Article II:2(a) of the GATT 1994 – general 
4.75 Article II:2(a) consists of two elements, each  of which must be met for a charge on the 
importation of a product to fall within the meaning of  that provision.  First, the charge must be 
"equivalent to an internal tax" imposed in respect of like domestic products.  Second, the charge must 
be imposed in a manner consistent with Article III:2 of the GATT 1994 in respect of like domestic 
products.  That is, the charge applied to imported products must not exceed the internal taxes on like 
domestic products to which they are asserted to be equivalent.  The first element appears to focus on 
the qualitative aspects of the measure, whereas the latter appears to focus on its quantitative aspects. 
4.76 India has not shown that the AD or the EAD meet s either element.  As a result, the Panel 
should reject India's contention that the AD and th e EAD may be justified under Article II:2(a).   
India, as the party asserting that the AD and the E AD are justified under Article II:2(a), bears the 
burden of substantiating that assertion and has failed to do so.  
4. Article II:2(a) of the GATT 1994 – EAD 
4.77 India asserts the EAD is "equal to" or "offset" three categories of internal taxes: (i) state-level 
value-added taxes or VATs; (ii) a Central Sales Ta x; and (iii) unspecified "other local taxes and 
charges".  India cites language in its Customs Ta riff Act that the Central Government may impose a 
duty on imports "as would counter-balance" certain  internal taxes on domestic products.   While 
India's Customs Tariff Act may indeed state that, In dia fails to present, any evidence, however, that WT/DS360/R 
Page 20 
 
 
  the EAD is equivalent to either the state-level VAT s – which can vary from state to state for the same 
product – or  the Central Sales Tax.  
4.78 India's explanation of the "principle applied by the Government of India in imposting" the 
EAD is equally uncompelling.  The stated purpose or  intention of the EAD is not determinative of 
whether it constitutes an ordinary customs duty or some  other type of duty or charge.  Instead, it is 
important to examine the structure, design and eff ect of the EAD.  And, nothing in terms of the 
structure, design or effect of the EAD appears equivalent to the state-level VATs or the Central Sales 
Tax.  First, as India explains the state-level VATs apply "broadly under ... four different rates of tax": 
zero, 1, 4, and 12.5 per cent.  Second, while stat e-level VATs may broadly break down into these four 
rates, there is no requirement that each of the 28 in dividual Indian states apply the same rate to the 
same domestic products.  Thus, one state may apply a VAT of four per cent on a particular product, 
whereas another state may apply no VAT on that same product.  The same two points are true for the 
Central Sales Tax as well may similarly vary from product to product and from state to state.  In 
contrast, the EAD is set at a flat  four per cent rate; it does not vary  from product to product nor does it 
vary based on the state in to which it is imported.  In fact, th e Customs Tariff Act appears to expressly 
prohibit that, as the proviso to Section 3(5) states that  where the internal taxes at issue are "leviable at 
different rates" the statute means to authorize imposition of a duty at a level so as to offset the "highest such tax".  
4.79 India's explanations of how it "calibrates" th e EAD to ensure that products exempt from the 
state-level VATs, and in turn the Central Sales Ta x, are inapposite. The US claims concern imports 
for which India imposes the EAD, not products that are exempt from the EAD.  Finally, in terms of 
the unnamed "other local taxes and charges", India provides no details on any such other local taxes 
or charges. 
4.80 With respect to the second element – imposed in  a manner consistent with Article III:2 of the 
GATT 1994 – India asserts that the EAD is "equal to" the state-level VATs or the Central Sales Tax 
imposed on domestic products "fro m which imported like products at the time of importation  are 
exempt".  However, both the state-level VATs and the Central Sales Tax apply to imported products.  
It is difficult to understand how the EAD offsets ta xes that already apply to imported products or how 
it results in duties on imported products that are "e qual to" those applied to like domestic products, 
when imported products are subject to the EAD in addition to the same state-level VATs and the 
Central Sales Tax that apply to like  domestic products.  Like domestic products are not subject to the 
EAD and thus are subject to taxes that are less th an those applied to imported products.  The EAD is 
therefore not a charge imposed in manner c onsistent with Article III:2 of the GATT 1994. 
4.81 The EAD results in charges on imported products "in excess" of those on like domestic 
products, even if it leads to such excess taxation in ju st one Indian state.  The fact remains that some 
imported products are treated less favourably th an their domestic like products, and that is 
inconsistent with Article III:2.  
4.82 A final point on the EAD to note is that, for purposes of responding to India's arguments 
today the United States has assumed that the imported products on the one hand – both alcoholic 
beverages and the products listed in Exhibit US-1 – and the domestic products subject to the internal 
taxes at issue on the other, are – as India contends –  "like" within the meaning of Article III:2 of the 
GATT 1994.  The United States has assu med the same for the same purpo ses with respect to the AD.   
5. Article II:2(a) of the GATT 1994 – AD 
4.83 In terms of whether the AD is "equivalent to  an internal tax" or imposed in a manner 
consistent with Article III:2 of the GATT 1994, Indi a provides very little in support of its assertions.  
India cites language in its Customs Tariff Act that directs the imposition of a duty on imports "equal  WT/DS360/R 
 Page 21 
 
 
  to the excise duty" for the time being leviable on dom estic alcoholic beverages in the different Indian 
states and asserts that the nature, intent and design of  the AD is to offset state excises taxes.  Yet, 
India does not identify any such state excise duties much less explain how the AD is "equivalent" to 
such unidentified state excise taxes or imposed in a manner consistent with Article III of the 
GATT 1994.  
4.84 Thus, with respect to both the AD and the EAD India has failed to rebut the US prima facie  
case that both the AD and the EAD are ordinary custom s duties within the meaning of Article II:1(b) 
of the GATT 1994 and that India applies these duties to imports in excess of its WTO-bound rates.   
6. Terms of reference 
4.85 After the DSB established this Panel with sta ndard terms of reference, India's Central 
Government issued Customs Notification 82-2007  which "exempts" alcoholic beverages from the 
rates of AD specified in Customs Notification 32/200 3.  Customs Notification 82-2007 is not within 
this Panel's terms of reference, a nd the Panel should not undertake to examine it in the course of this 
dispute.  
4.86 First, it is not clear as a factual matter that  Customs Notification 82-2007 eliminates the AD. 
For example, Customs Notification 82-2007 states th at it "effectively overrides" Customs Notification 
32-2003.  India does not assert that Customs Notification 32-2003 has been revoked.  
4.87 Second, even if India has eliminated the AD, Customs Notification 82-2007 is not within this 
Panel's terms of reference because it is not referenc ed in the US request fo r establishment.  To the 
extent Customs Notification 82-2007 has an  impact  on the AD would be a matter for the compliance 
stage of this dispute.  
4.88 Third, the United States shares the Appellate Body 's concern that if a panel takes into account 
measures introduced after the date of establishment, this creates a "moving target".  The United States 
would be particularly concerned if Customs Notifi cation 82-2007 had the effect of shielding the AD 
from scrutiny.  For example, in the event that, af ter conclusion of these proceedings, India's Central 
Government exercised what it characterized its "c omplete discretion" to impose (or re-impose) the 
AD or the Indian states introduce measures similar to  the AD, as India's submission suggests is their 
intent. 
7. AD – M/D 
4.89 The United States disagrees with India's interpreta tion of the AD, in particular of its reading 
of the statutory words "shall be liable" to sugg est imposition of the AD rests completely at the 
discretion of the Central Government.  The United States notes that non-enforcement of a mandatory 
measure – which in the US view the AD is – does not save the measure from being subject to 
challenge under the DSU.  In any ev ent, to the extent the Panel were to find the relevant statutory 
provisions did not mandate imposition of the AD, In dia freely admits Customs Notification 32-2003 
does.  Customs Notification 32-2003 is clearly a measu re within the Panel's terms of reference, and 
changes made with respect to the AD subsequent to the Panel's establishment should not be taken into 
account.  Therefore, the Panel need not undertake an examination of the mandatory-discretionary 
principle that India invites in its written submission. 
8. Concluding remarks 
4.90 For the reasons presented in its written submissi on and reviewed and elaborated in its oral 
statement and responses to questions, the United States  has firmly established its prima facie case that WT/DS360/R 
Page 22 
 
 
  the AD and the EAD are inconsistent with India's obligations under Article II:1(a) and (b) of the 
GATT 1994.  India has failed to rebut this case. 
4.91 Rather than present a point by point analysis, the United States focuses its closing remarks on 
a few key points that go to the heart of why the Pa nel should rejects India's attempts to defend the AD 
and the EAD under Article II:2(a) .  
4.92 First, India has not contested that the AD or EA D result in duties or charges that exceed its 
WTO-bound rates. Thus, if the Panel finds that the AD is an ordinary customs duty, or in the 
alternative an other duty or charge, then it should on the basis of the US prima facie case find that the 
AD results in a breach of India's tariff bindings and is , therefore, inconsistent with Article II:1(a) and 
(b).  The same is true with respect to the EAD. 
4.93 Second, with respect to its arguments under Article II:2(a), India has not provided any 
evidence that either the AD or the EAD is "equa l to" or offsets internal taxes imposed on like 
products.  Reliance on the stated or intended purpose of  the duties is insufficient to establish that such 
duties are not imposed in excess of taxes or char ges on like domestic products. The United States is 
struck by how – throughout India's written submission and oral statement –  India refers to the AD or 
the EAD as being "designed to" or "intended to" offset cer tain internal taxes, or that the "nature, intent 
and design" of the AD or the EAD is to offset such taxes, but has yet to make a showing or provide an 
accounting of how the AD and the EAD are in fact "e qual to" or not levied in excess of taxes on like 
domestic products.  And as a result, India has failed to provide evidence in support of its contention 
that either the AD or the EAD is applied in a ma nner consistent with Artic le III:2 of the GATT 1994. 
4.94 Third, India's identification of state-level VATs and the Central Sales Tax as two of the 
internal charges that the EAD is in tended to offset is simply not credible.  Those taxes already apply 
to imported products, and the EAD's application to imported products only results in imported 
products being subject to the EAD in addition to th e state-level VATs and Central Sales Tax that the 
EAD allegedly offsets.  
4.95 Fourth, the United States is troubled that at this stage in the Panel proceeding, India has 
identified none of the internal taxes the AD allege dly offsets, and with the exception of the state 
VATs and the Central Sales Tax, India has identifie d none of the internal taxes the EAD allegedly 
offsets.  The United States has requested India on a number of occasions, including in course of 
consultations and prior to initiating this dispute and in India's recent Trade Policy Review, to identify 
such taxes and provide an accounting of how they are "equal to" to or offset the AD and EAD respectively.  On each occasion, India has failed to meet that request.  The United States hopes that 
India will keep its commitment to the Panel in th is meeting to identify these taxes that the duties 
allegedly offset.   
4.96 The United States stresses that providing such an accounting is critical.  Without it, India 
cannot sustain its arguments under Article II:2(a), a nd in turn cannot support its defence of the AD 
and the EAD under Article II:1(a) or (b).  But, more broadly, the United States is concerned that if Article II:2(a) does not demand such an accounting, that this creates enormous potential for Members 
to undermine the value of their tariff commitments .  The United States recalls the Appellate Body's 
discussion in Argentina – Textiles and Apparel  that together Article II:1(a) and (b) serve "to preserve 
the value of tariff concessions negotiated by Member s with its trading partners, and bound in that 
Member's schedule".  An interpretation of Article II:2(a) that would permit the stated or intended 
purpose of a charge to demonstrate that the charge meets the requirements of Article II:2(a), would 
make it all too easy for Members to undermine th e value of those concessions:  Members could 
simply ensure that the stated purpose of a duty is  to offset internal taxes on like domestic products 
and, then, be free to impose that duty at any leve l, regardless of whether that level exceeds its WTO-
bound rates.    WT/DS360/R 
 Page 23 
 
 
  4.97 That is in essence what India is requesting this  Panel to do with respect to the AD and the 
EAD – that is, to accept the stated or intended pur poses of the AD and the EAD alone as proof that 
the duties meet the required elements of Article II:2( a).  The United States urges the Panel not to heed 
India's request in this regard and to demand an accounting that the AD and the EAD do not exceed the 
internal taxes on like domestic products to which they are allegedly equivalent if India is to sustain its 
Article II:2(a) contentions. 
D. ORAL STATEMENT OF INDIA AT THE FIRST SUBSTANTIVE MEETING OF THE PANEL  
1. Factual issues 
4.98 The United States has challenged the impositi on of "additional duty" ("AD") on alcoholic 
beverages and the "such additional duties as would counter balance the sales tax, value added tax, 
local tax or any other charges leviable on lik e domestic products" ("SUAD") on the identified 
products by India. It has based its challenge on what it calls "the most basic of WTO claims" – a 
breach of the bound rates of customs duty set forth in a Member's Schedule to the GATT. In doing so, 
the United States has misunderst ood the character, purpose, structure and design of the AD on 
alcoholic beverages and the SUAD on the identifie d products as being an OCD or ODC. This basic 
misconception is on account of its failure to understa nd the Indian tax system – pertaining to customs 
and off-setting duties, including the exemption and refund mechanisms for taxes imposed on imported 
products.  
(a) Mischaracterization  of AD and SUAD as OCD and ODC 
4.99 There is a clear demarcation under Indian la w between an ordinary (referred to as a basic 
customs duty or "BCD") and the AD and the SUAD.  The BCD is the only duty imposed on imports 
which is in the nature of an "ordinary customs du ties" ("OCD") as understood under Article II:1(b) of 
the GATT 1994 and are accordingly bound to the levels  prescribed in India's Schedules. India does 
not levy "other duties and charges" ("ODC") as unde rstood under Article II:1(b) of the GATT 1994 on 
alcoholic beverages or the identified products. The BCD is distinct from the AD and the SUAD, 
which are both levied on imported products in lieu of  different internal tax es. The United States has 
incorrectly equated the BCD with the AD on alcoholic beverages and the SUAD on the identified 
products. As a result, it has mischaracterized thr ee fundamentally different duties as being OCD or 
alternatively ODC, which are collectively in ex cess of India's bound rates in the Schedule.  
(b) Misinterpretation  of the statutory basis for Indian duties 
4.100  The United States has misinterpr eted the duties levied under the Customs Act and those under 
the Customs Tariff Act. The BCD is levied under Section 12 of the Customs Act, whereas the AD and 
the SUAD are imposed to counterbalance certain in ternal taxes and charges and are levied under 
Section 3(1) and 3(5) of the CTA respectively. The US has identified the provisions of the Customs Act and the Customs Tariff Act interchangeably as be ing the measures in the present dispute that are 
collectively responsible for the levy of the BCD , the AD and the SUAD. In doing so, the US has 
failed to make the intrinsic distinction between the types of duties and the statutory provisions 
responsible for their imposition. The US has also  misinterpreted the cross-reference provisions 
contained in the CTA and the Customs Act to mean that both statutes essentially administer the same 
duties that are in the nature of OCDs or ODCs.  
4.101  The statutory provisions and the interpretation by Indian courts make it very clear that the 
nature and character of the BCD, the AD on al coholic beverages and the SUAD on "identified 
products" are fundamentally distinct. Therefore the AD and the SUAD shall neither be confused with 
the BCD imposed under Section 12 of the Customs Act nor be interpreted as being an OCD or an 
ODC as understood by Article II:1(b) of the GATT 1994.  WT/DS360/R 
Page 24 
 
 
  (c) Distinction between mandatory and disc retionary provisions of Indian law 
4.102  The US has also failed to appreciate the diffe rence between those statutory provisions, which 
authorize the imposition of a duty, namely Sections 3(1) and 3(5) of the CTA and those that actually result in its levy, i.e. the relevant Customs Notifi cation. The provisions of Section 3 of the CTA give 
the Central Government the discretion  to impose the AD on alcoholic beverages and the SUAD on the 
identified products respectively. The Customs Notifi cations in contrast, are a form of delegated 
legislation through which the Central Government determines the specific rate at which the AD on 
alcoholic beverages and the SUAD on the identified pr oducts is to be levied. The Statute lays down 
that the duties cannot exceed the highest rate. It does not mean that the Central Government is obliged 
to impose the duties at the highest rate.   
(d) Failure to acknowledge the valid remova l of the AD on alcoholic beverages- 
4.103  The United States has also failed to take into account recent amendments made to Indian law, 
which have an immediate bearing on this dispute. Th e Government of India decided to exempt the AD 
on alcoholic beverages levied by Customs No tification No. 32/2003, dated March 1, 2003 
("CN 32/2003 "), through a subsequent Customs Notification No. 82/2007, dated July 3, 2007 
("CN 82/2007"). The CN 82/2007 effectively overri des the rates of AD imposed by its predecessor 
CN 32/2003 thereby ensuring that imported alc oholic beverages are no longer charged the AD. 
Consequently, the US present challenge is partially  based on a measure which has ceased to have any 
effect.  
2. Legal challenge 
(a) Neither the AD nor the SUAD is inconsistent w ith Article II:1(a) and (b) of the GATT 1994   
4.104  The US has characterized the AD on alcoholic  beverages and the SUAD on the identified 
products as being an OCD or in the alternative as an ODC. As explained earlier, the AD on alcoholic beverages and the SUAD on the identified products are distinct duties and are not to be confused for 
being OCDs or ODCs as understood under Article II: 1(b) of the GATT 1994. The AD is equivalent to 
the internal state excise duty  leviable on like domestic products whereas the SUAD is equivalent to 
certain internal taxes that are levied on like domest ic products, i.e. sales tax, value added tax (VAT) 
and other local taxes and charges. The structure, intent and design of the AD on alcoholic beverages 
and the SUAD on the identified products is solely to  counterbalance the incide nce of certain internal 
taxes levied on like domestic products and these duties are validly imposed in accordance with 
Article II:2(a) of the GATT 1994. 
(i) Ordinary Customs Duty 
4.105  The United States has failed to demonstrate that  either the AD on alcoholic beverages or the 
SUAD on the identified products are OCDs. While it is true that both duties are imposed on imports at the border and are expressed in ad valorem  terms, the Appellate Body in Chile – Price Band System  
has in the past held th at this does not mean that such duties are "ordinar y customs duties".
35 The basic 
purpose of the AD on alcoholic beverages and the SUAD on the identified products is to counter-
balance certain internal taxes and the Appellate Body in Chile – Price Band System  has confirmed 
that such duties do not qualify as OCDs envisaged under Article II:1(b) of the GATT 1994.  
                                                      
35 Appellate Body Report, Chile – Price Band System , paras. 271-272 and 274.  WT/DS360/R 
 Page 25 
 
 
  (ii) Other Duties and Charges (ODC) 
4.106  The United States has raised an argument in  the alternative that the AD on alcoholic 
beverages and the SUAD on the identified products may qualify as an "other duty or charge" without providing any reasons or basis for its contention. In doing so, the US has failed to discharge its burden 
of proof.
36 India's AD on alcoholic beverages or the S UAD on the identified products are not in the 
nature of an ODC as understood by the second sente nce test imposed in Article II:1(b). The AD on 
alcoholic beverages and the SUAD on the identifie d products as discussed earlier are imposed to 
counter balance certain internal taxes on like dom estic products and the mere fact that they are 
expressed in ad valorem  terms does not make them "other duties and charges" under the second 
sentence of Article II:1(b).37 
4.107  It is clear that neither the AD nor the SUAD fulfil the requirements for an OCD or ODC as 
understood under Article II:1(b) of the GATT 1994 a nd consequently, the question of whether they 
are "in excess of" the committed rates in India's Schedules does not arise.  
(b) The AD and the SUAD are equivalent to internal taxes under Article II:2(a) of the 
GATT 1994 
4.108  India levies the AD on alcoholic beverages and the SUAD on the identified products in 
accordance with the provisions of Article II:2(a)  of the GATT 1994 which permits WTO Members to 
levy certain charges at the border, provided that such char ges are: (a) "equivalent" to an "internal tax"; 
(b) imposed in a manner that is consistent with Ar ticle III:2; and (c) in respect of a "like domestic 
product". Since the AD on alcoholic beverages is no longer being charged, no detailed arguments in 
support of its equivalence with the state excise du ties are being presented at this juncture, without 
prejudice to India's rights to offer such details at a later stage.  
4.109  The SUAD on the identified products was desi gned to counter-balance the incidence of 
certain internal taxes from which imported like products  at the time of importation are exempt, i.e. the 
Value Added Tax (VAT) imposed by state governments on the i ntra- state sale of domestic products; 
and/or the Central Sales Tax (CST) imposed by the Central Government on the inter -state sale of 
domestic products; and/or other local taxes and charges on the sale, purchase and transport of 
domestic products. India ensures at all times that  imported products are not taxed in excess of 
domestic products and makes pr ovisions to exempt imported products from the SUAD if 
corresponding like domestic products are exempt from any or all of these internal taxes.38 
Furthermore, to ensure the equality of taxa tion for imported and like domestic products, the 
methodology for calculation of the SUAD on the iden tified products is similar to the methodology 
used to calculate the state VAT and is in accordance with accepted international practices.  
(c) The AD and the SUAD are imposed consistently with Article III:2 of the GATT 1994 
4.110  The structure, design and implementation of the AD on alcoholic beverages and the SUAD on 
the identified products clearly indicates that they  are duties that are intended to counter-balance 
internal taxes and to ensure the equality of taxa tion between domestic and im ported like products and 
not to afford protection to the domestic industry. Since the rate at which the AD on alcoholic 
beverages was charged has been effectively removed through CN 82/2007, arguments in support of its 
                                                      
36 The United States notes that, as a general rule, "t he burden of proof rests upon the party, whether 
complaining or defending, who asserts the affirmative of a particular claim or defence". Appellate Body Report, 
US – Wool Shirts and Blouses , p. 14. 
37 Appellate Body Report, Chile – Price Band System , para. 275. 
38 Notification No. 20/2006 – Cus., dated 1 March 2006. WT/DS360/R 
Page 26 
 
 
  equivalence with the state excise duties which it was introduced to counter-balance, are not being 
offered at this stage, without prejudice to India's rights to offer such details at a later stage.  
4.111  Additionally, the SUAD does not tax importe d products "in excess of" domestic products 
since it is equivalent to the internal taxes and charges paid by like domestic products. The imposition 
of the SUAD merely equalizes the tax burden imposed  on the imported product with its like domestic 
product. Since domestic taxes and charges (VAT and C ST) are levied at a minimum rate of 4 per cent, 
which is equivalent to the 4 per cent SUAD impos ed on imported like products, the tax burden on an 
imported product on account of SUAD cannot be sai d to be in excess of the tax burden on like 
domestic products. Further, under Indian law, the be nefit of an exemption or reduction from a local 
tax such as VAT or CST results in a parallel exemption or reduction from the payment of the SUAD 
for like imported products. Further, a refund scheme has been recently introduced through Customs 
Notification No. 102/2007 – Customs where goods once imported, are subsequently sold by the 
importer in India to a consumer, the importer is entitled to claim a full refund of the SUAD paid by 
him at the time of the importation, subject to the condition that on re-sale appropriate sales tax or 
VAT is paid and no credit is taken of the SUAD. This ensures an overall equality of tax burdens on 
imported and like domestic products since the Indian system of tax administration has been carefully 
calibrated such that where VAT on domestic products  is 1 per cent, SUAD is levied at 1 per cent; 
where the levy is nil, SUAD is nil; where the VAT rate is 4 per cent SUAD is 4 per cent and even 
where VAT is 12.5 per cent, SUAD is levied at 4 per cent.  Finally, the methodology for the 
calculation of the SUAD is in accord ance with international practice a nd is designed to ensure parity 
and equality of taxation for im ported and like domestic products. 
(d) The SUAD is consistent with Article III:2 of the GATT 1994 
4.112  The US has raised an argument in the alterna tive that the AD and the SUAD are inconsistent 
with Article III:2 of the GATT 1994. Such a contenti on changes the nature of the US challenge since 
the US has characterized the AD on alcoholic beve rages and the SUAD on the identified products as 
being duties under Article II of the GATT 1994 and no t as internal taxes and charges under Article III. 
It is incumbent upon the United States to explain the basis for its contention and by not doing so, the 
US has failed to discharge its burden of proof. 
(e) Incorrect challenge of measures   
4.113  The US has incorrectly challenged the empowering provisions in the Customs Act and the 
CTA, as opposed to the mandatory Cu stoms Notifications, which ultimate ly levy the respective duty.  
4.114  The WTO Panel and Appellate Body have in the p ast held that the threshold consideration in 
determining when a legislation as such – rather than  a specific application of that legislation – is 
inconsistent with a Contracting Party's oblig ations under the GATT is based on whether the 
legislation is mandatory  as distinguished from discretionary.39 The distinction between mandatory 
and discretionary legislation rests on whether there is relevant discretion vested in the executive 
branch  of the Government.40 In the present dispute, it is clear that neither Section 3(1) nor 
Section 3(5) of the CTA, enjoin upon the Central Government to necessarily levy the AD on alcoholic 
beverages or the SUAD on the identified products. T hus they cannot be said to be mandating actions 
inconsistent with the GATT Agreement.  The two statutes on the other hand, empower  the Central 
Government with the discretion  to charge such duties, fix the rates at which they will be levied, and to 
issue Customs Notifications to give effect to such decisions. 
                                                      
39 Appellate Body Report, US – 1916 Act , paras. 88-91. 
40 Ibid, para. 100.  WT/DS360/R 
 Page 27 
 
 
  4.115  Therefore, the US challenge has to be confined  to the relevant Customs Notifications through 
which the AD on alcoholic beverages and the SUAD on the identified products have been levied and 
not to the empowering statutory provisions of the Customs Act and the CTA. 
E. SECOND WRITTEN SUBMISSION OF THE UNITED STATES  
1. Introduction 
4.116  India's additional customs duty (AD) and ex tra-additional customs duty (EAD) on imports 
from the United States are inconsistent with Article II:1(a) and (b) of the General Agreement on 
Tariffs and Trade  1994  (GATT 1994).  The AD and the EAD are both ordinary customs duties, and 
by imposing them, India is exceeding the rat es specified in its Schedule to the GATT 1994 
(WTO-bound rates).  
2. The AD and EAD are each inconsistent with Article II:1(b) of the GATT 1994 
4.117  Article II:1(b) of the GATT 1994 prohibits a Me mber from levying "ordinary customs duties" 
or "other duties or charges imposed on or in conn ection with importation" (ODCs) in excess of the 
rates established in the Member's Schedule.  The term "ordinary customs duty" means a duty applied 
as a matter of course on the importation of a good into the customs territory of a Member at the time 
of importation that is either ad valorem , specific, or a combination ther eof.  An "ordinary" customs 
duty is a duty that is "normal, customary or usual".  
4.118  Ordinary customs duties are subject to the firs t sentence of Article II:1(b) of the GATT 1994, 
which prohibits such duties in excess of WTO-bound rates.  ODCs in contrast are subject to the 
second sentence of Article II:1(b), which prohibits ODCs at any rate if not specified in the relevant 
Member's Schedule.  Thus, the consequence of a du ty being considered an ODC is that a Member 
may not impose it at any rate if that Member has not inscribed in it its Schedule, even if it would not 
result in duties that exceed the Member's WTO-bo und rate.  Were the duty to be considered an 
ordinary customs duty, however, the Member could impose it up to its WTO-bound rate.  
4.119  The AD and EAD are both "ordinary customs duties" within the meaning of Article II:1(b) of 
the GATT 1994.  The AD is an "ordinary customs duty" because it applies: (i) at the time of 
importation (and, in this connection, it must be paid by the importer before the good may clear 
customs); (ii) as a matter of course upon a good's importation (and, in this connection, it applies generally on the importation of alcoholic beverages into India and the event for which liability ensues 
is importation); and (iii) as a combination of ad valorem  and specific duties. 
4.120  The EAD is likewise an "ordinary customs dut y" because it applies: (i) at the time of 
importation (and, in this connection, it must be paid by the importer before the good may clear 
customs); (ii) as a matter of course upon a good's importation (and, in this connection, it applies 
generally on the importation of products into India and the event for which liability ensues is 
importation); and (iii) as an ad valorem  duty. 
4.121  In this regard the AD and the EAD are no differe nt than India's basic customs duty (BCD).  
India has already conceded that  the BCD is ordinary customs duty within the meaning of 
Article II:1(b) of the GATT 1994.  Like the AD and the EAD, the BCD applies: (i) at the time of 
importation; (ii) as a matter of course upon a good 's importation; and (iii) as a combination of ad 
valorem  and specific duties.  In addition to these si milarities, there are a number of additional 
similarities which are reviewed in the US first written submission, oral statement and responses to the 
Panel's questions. WT/DS360/R 
Page 28 
 
 
  4.122  India, however, contends the AD and the EAD are "fundamentally distinct" from the BCD, 
and, on that basis, that the AD and the EAD are not ordinary customs duties.  The principle distinction 
India draws between the BCD and the AD and the EAD is  that the latter are intended to offset internal 
taxes imposed on like domestic pr oducts.  However, whether the AD and the EAD constitute ordinary 
customs duties must be based on an examination of their structure, design and effect; the stated 
purpose or intent of the duties does not determine whethe r either is or is not an ordinary customs duty.  
The situation in the GATT Panel, EEC – Parts and Components , is analogous to the present dispute. 
The EEC – Parts and Components  Panel rejected the notion that  the stated purpose of the anti-
circumvention duty under domestic law provided suffi cient basis to characterize the measure as an 
internal tax rather than a customs duty.  
4.123  An interpretation of Article II:1(b) of the GATT 1994 that would permit the stated purpose or 
intent of a measure to determine whether it fell  within the scope of that Article would permit 
Members to avoid or manipulate WTO commitments si mply by attributing a particular purpose to a 
measure (regardless of what the measure in fact does) or by calling a measure by one name versus another.  In this dispute, India may attribute a different purpose to the BCD on the one hand and the 
AD and EAD on the other, but all three constitute "ordinary customs duties"  and neither the AD nor 
the EAD offset or counterbalance internal taxes on like domestic products. 
4.124   India's focus on the "distinctions" between the BCD and the AD and the EAD suggests that 
in its view a Member may only impose one duty that  may properly be characterized as an "ordinary 
customs duty" under Article II:1(b) of the GATT 1994.  However, nothing in the text of Article II:1(b) of the GATT 1994 suggests Members are limited to a single "ordinary customs duty" 
and, in fact, the text refers to "ordinary customs duties".  Use of the plural "duties" suggests that 
Article II:1(b) of the GATT 1994 prohibits "ordinar y customs duties" on the importation of products – 
whether resulting from the application of one or more  individual duties – in excess of those specified 
in the relevant Member's Schedule.  
4.125  Even if the AD or the EAD were not an "ord inary customs duty", each would constitute an 
"other duty or charge" (ODC) within the meani ng of Article II:1(b) of the GATT 1994. The AD and 
the EAD would each necessarily constitute an ODC if it were not an ordinary customs duty. This is 
because the word "other" as used in  Article II:1(b) of the GATT 1994 means duties or charges that are 
not ordinary customs duties that are applied on or in connection with importation.  If the AD and EAD 
are not an ordinary customs duty, then they must  necessarily be something other than an ordinary 
custom duty.  The AD and the EAD apply at th e time of importation and as a consequence of 
importation.  Moreover, in asserting that the AD and th e EAD are charges equivalent to an internal tax 
within the meaning of Article II:2(a) of the GATT 1994, India has implicitly characterized both as 
charges "imposed on importation"  since the chapeau to Article II:2 of the GATT 1994 makes clear 
that it concerns measures "imposed on importation".  
4.126  The AD when imposed with India's BCD results  in ordinary customs duties on imports of 
alcoholic beverages in excess of India's WTO-bound rate by amounts ranging from 48-400 percentage 
points. With respect to the EAD when imposed with India's BCD it results in ordinary customs duties 
on imports in excess of India's WTO-bound rate.  The EAD also results in ordinary customs duties on imports in excess of WTO-bound rates in any situat ion where the BCD is already at or very near 
India's WTO-bound rate.  Were either the AD or th e EAD to be considered an ODC, it would exceed 
the ODCs specified in India's Schedule as India's Schedule does not specify any ODCs for alcoholic 
beverages or any other product.  
4.127  India has not contested the US prima facie case that the AD and the EAD each result in duties 
on imports in excess of those specified in India's Sc hedule.  Therefore, if the Panel finds the AD and 
the EAD are ordinary customs duties or ODCs w ithin the meaning of Article II:1(b) of the 
GATT 1994 it should also find on the basis of the US prima facie case that the AD and the EAD  WT/DS360/R 
 Page 29 
 
 
  exceed India's WTO-bound rates. The AD and the EAD are therefore each as such inconsistent with 
Article II:1(b) of the GATT 1994.  
4.128  Because the AD and the EAD are each inconsiste nt with Article II:1(b) of the GATT 1994, 
they are also each inconsistent with Article II:1( a) of the GATT 1994.  By imposing ordinary customs 
duties on imports of alcoholic beverages from the US in excess of those set forth in India's Schedule, 
the AD accords imports from the Un ited States less favourable treatment than provided for in India's 
Schedule and, as such, is inconsistent with Ar ticle II:1(a) of the GATT 1994.  Because the EAD 
results in customs duties on imports that exceed t hose set out in India's Schedule, it accords imports 
from the United States less favourable treatment  than provided for in India's Schedule.  
3. Neither the AD nor the EAD are charges within  the meaning of Article II:2(a) of the 
GATT 1994 
4.129  India asserts that the AD and the EAD are charg es imposed in accordance with Article II:2(a) 
of the GATT 1994 and describes Article II:2(a) as comprising three elements: "Article II:2(a) ... 
permits WTO Members to levy certain charges at the border, provided that such charges are (a) 
'equivalent' to an 'internal tax'; (b) imposed in a manne r that is consistent with Article III:2; and (c) in 
respect of a 'like domestic product'".  These are the same elements the United States identified in its 
oral statement at the first Panel meeting.  
4.130  With respect to the first element, a charge "e quivalent to an internal tax" means a charge 
imposed on the importation of a product that is "equa l in force, amount, or value" and corresponds or 
is "virtually identical especially in effect or f unction" to an internal tax imposed on like domestic 
products.  India appears to focus on only one aspect of  "equivalence", the amount of the charge in 
relation to the internal tax.  While the amount of  the respective liability is certainly a factor, the 
ordinary meaning of the word "equivalent" does not  appear to prejudge the aspects of two measures 
that might be examined to determine whether they correspond or are virtually identical.  Accordingly, 
the analysis should review the structure,  design and effect of the two measures. 
4.131  The United States assumes that India's assertion that the imports subject to the AD and the 
EAD and the domestic products subject to various internal taxes (to which the AD and the EAD are 
allegedly equivalent) are "like" is correct.  A ccordingly, for the AD and the EAD to be imposed 
consistently with Article III:2 of the GATT 1994, the AD and the EAD must be applied in a manner 
consistent with the first sentence which concerns " like" products and requires that internal taxes on 
imported products not be "in excess" of internal taxes on like domestic products by any amount.  The 
requirement applies to each import in respect of each like domestic product. The AD and the EAD 
result in charges on imported products in excess of those on like domestic products if it leads to 
excess taxation in even one Indian state. 
4.132  India asserts that the AD is equivalent to  state excise duties imposed on like domestic 
products. India admits that the AD "could in some cases, have been less than the excise duty being 
charged on like domestic products in some States, a nd in other cases equal to or perhaps slightly in 
excess of the excise duty being charged in some other States".  
4.133  On the basis of this admission alone the Pane l may find that the AD is not imposed in 
accordance with Article II:2(a) of the GATT 1994.  Any amount by which a tax on imports is in excess of that tax on like domestic products results in a breach of Article III:2 of the GATT 1994, and, 
in relation to like domestic products, less taxation of some imports does not remove the breach 
resulting from excess taxation other imports. Although India's admission alone provides sufficient 
reason to reject its assertion under Article II:2(a)  of the GATT 1994, there are other grounds as well. WT/DS360/R 
Page 30 
 
 
  4.134  First, the AD is an ordinary customs duty and, therefore, it is not a charge equivalent to an 
internal tax within the meaning of Article II:2(a) of the GATT 1994.  Second, even if the AD were not 
considered an ordinary customs duty but an other duty or charge on importation, India has presented 
no evidence that it is "equivalent" to an any inte rnal tax on like domestic alcoholic beverages or 
imposed consistently with Article III:2 of the GA TT 1994.  To accept the stated or intended purpose 
of the AD as proof that it is "equivalent" to state excise taxes without factual evidence to support that 
assertion would lead to the result that Members coul d very easily undermine the value of their tariff 
concessions by simply asserting that duties in ex cess of WTO-bound rates are intended to offset 
internal taxes (regardless whether they actually do).  
4.135  Third, the United States recalls that explanator y note to Section 3(1).  The plain reading of 
this explanatory note is that where the like domestic  product is subject to various tax rates, the "excise 
duty for the time being leviable on a like Article if produced or manufactured in India" means the 
highest rate of excise duty imposed.  Because the rate of excise duty on like domestic alcoholic 
beverages varies from state to state,  this means that with respect to  alcoholic beverages Section 3(1) 
provides that imports of alcoholic be verage shall be liable to an add itional duty that is equal to the 
highest rate of excise duty imposed by any of the Indi an states.  Accordingly, Section 3(1) read with 
the explanatory note subjects imports of alcoholic be verages to rates of AD that exceed the rate of 
excise duties on like domestic alcoholic beverages in at least some Indian states and, therefore, the 
AD is not imposed consistently w ith Article III:2 of the GATT 1994.  
4.136  The United States further notes the evidence referred to in the EC's third party submission 
that the taxation resulting from the AD on imports "exceeds by a large margin the taxation resulting 
from taxes denominated 'excise duty' in the legislation of most Indian States". 
4.137  In sum, the AD not a charge equivalent to an internal tax (state excise duties) and, as India 
even concedes, is imposed on imports in excess of state excise duties on like domestic alcoholic 
beverages.  Therefore, the AD is not a charge equiva lent to an internal tax imposed consistently with 
Article III:2 of the GATT 1994. 
4.138  India also seeks to justify the EAD by asser ting that it is imposed in accordance with 
Article II:2(a) of the GATT 1994 and identifies st ate level VATs and the CST in addition to unnamed 
other local duties and charges as the internal ta xes to which EAD is allegedly equivalent.  
4.139  As an initial matter, India also acknowledg es that the EAD may in  some instances be 
"marginally 'in excess'" of the tax on like domestic products.  India argues that this "marginal" amount 
in excess would be "below the 'de minimis' level permissible" under the Ad Note to Article III of the 
GATT 1994.  However, the relevant inquiry with r espect to the EAD concerns the first sentence to 
Article III of the GATT 1994 (to which the Ad Note  does not apply) because the EAD and internal 
taxes to which the EAD is allegedly equivalent con cern "like" products.  There is no "permissible" de 
minimis level of excess taxation permitted under the fi rst sentence of Article III:2 of the GATT 1994.  
Therefore, India has disproved its own assertions that the EAD is imposed consistently with 
Article III of the GATT 1994.  In any event, there is ample reason to reject India's assertions that the 
EAD is justified under Article II:2(a) of the GATT 1994. 
4.140  Foremost, the EAD is not "a charge equivalent to an internal tax" b ecause it is an "ordinary 
customs duty".  It therefore cannot be a charge equivale nt to an internal tax. In addition, with respect 
to its assertions that the EAD is equivalent to ot her local taxes and charges, India has not identified 
any such other local taxes or charges.  As a c onsequence, India cannot sustain its assertion that the 
EAD is "equivalent" to other local taxes or charges on like domestic products.  
4.141  Starting with the state level VATs, these internal  taxes imposed by the various Indian states 
are not, in terms of their structure,  design or effect, "equivalent" to the EAD.  First, according to India  WT/DS360/R 
 Page 31 
 
 
  the state level VATs are set generally at four different rates whereas the EAD is set at a single rate of 
four per cent for all products.   
4.142  Second, while the state level VATs may generally breakdown into these four rates, there is no 
requirement that the individual states apply the same  rate to the same domestic products.  Thus, one 
state may apply a VAT of four or 12.5 per cent on a particular product, whereas another state may 
apply no VAT on that same product whereas the EAD prescribes for all products, and on the 
importation of a product into any state, a rate of four per cent. 
4.143  Third, the state level VATs operate by crediting against the VAT owed on a product's 
transfer, the VAT paid on the product's previous transfers.  By contrast, there is no mechanism for 
crediting against the EAD owed on a product, taxes or charges paid on the product's previous 
transfers. Nor is there a mech anism for crediting the EAD paid on product against the VAT owed on 
the product's subsequent transfers in India. 
4.144  The CST is not equivalent to the EAD for sim ilar reasons.  Like the VAT, the CST is imposed 
at various rates and may vary from state to state and from product to product whereas the EAD prescribes a flat four per cent rate that does not vary from product to product or based on the recipient 
or the state into which the product is imported. 
4.145  Further, with respect to both the VAT and the CST,  the amount of EAD owed on imports as 
compared to the amount of VAT or CST owed on li ke domestic products is no t equivalent, since it 
does not correspond and is not virtually identical to the VAT or CST respectively on like domestic 
products.  
4.146  Finally, the United States reiterates that the st ated purpose of the EAD is not sufficient to 
support India's assertion that it is a charge equivalent to an internal tax. 
4.147  India has also conceded two critical points th at demonstrate that the EAD is not imposed 
consistently with Article III:2 of the GATT 1994: (i) the state level VATs and the CST apply to 
imported products sold within India; and (ii) the EA D is not eligible as a credit against the state level 
VATs or CST owed on that sale.  This means that imported products are subject to the EAD as well as 
the state level VATs and CST with no offsetting cr edit against either for the EAD paid.  As a 
consequence, and since domestic products are not s ubject to the EAD, imported products are subject 
to charges in excess of those on like domestic products and therefore the EAD is not imposed 
consistently with Article III:2 of the GATT 1994. 
4.148  India's assertions that it has "calibrated" the EAD with the state level VATs and CST to 
ensure "equality of taxation" for imported goods is simply incorrect.  India may contend that  imports 
are exempt from the EAD (or subject to a 1 per cent rate) when like domestic products are exempt 
from the state level VATs and CST (or subject to a 1 per cent VAT or CST).  However, this does not 
address the point raised in the preceding paragraph that imported products are subject to the EAD  – 
regardless of the rate at which it is imposed – in addition to the state level VATs and the CST when 
domestic products are only subject to the latter. 
4.149  Moreover, the explanatory note to Section 3(5) appears to indicate that the rate of EAD may 
not vary on the same product based on the applicable  VAT or CST rate.  The plain reading of this 
explanatory note means that where the like domestic product is subject to various tax rates, the "sales 
tax, value added tax, local tax or any other charg es for the time being leviable on a like Article on its 
sale, purchase or transportation in India" means th e highest rate of such tax or charge imposed.  
Section 3(5) calls for a single rate of EAD for e ach product.  As a consequence, where the like 
domestic product is subject to various rates of st ate level VAT or CST, the EAD on imports will 
necessarily exceed the rate of state level VAT or  CST on at least some like domestic products. WT/DS360/R 
Page 32 
 
 
  4.150  India's assertions that it has "calibrated" th e EAD with the state level VATs and CST also 
wrongly suggests that the rate of EAD on the one hand and the rates of state level VATs and the CST 
on the other are the same.  They are not.  
4.151  India also suggest that the EAD is calibrate d to the CST and VAT because the EAD paid on 
an input for a finished product may be credited against the central excise tax (abbreviated 
"CENVAT") owed on the finished product.  Taxes owed under the central excise tax, however, would 
not appear relevant to the question of whether th e EAD results in charges on imports in excess of 
those imposed by the state level VATs or CST on like domestic products. And, India has 
acknowledged there is no mechanism for crediting th e EAD paid against the state level VAT or CST 
owed.  
4.152  In sum, the EAD is not a charge equivalent to an internal tax (state level VATs, the CST, or 
unnamed other local taxes or charges) and, as India even concedes, it is imposed on imports in excess 
of internal taxes on like domestic product.  Theref ore, the EAD is not a charge equivalent to an 
internal tax imposed consistently with Article III:2 of the GATT 1994. 
4. Terms of reference 
4.153  India has invited this Panel to make findings with respect to tw o Customs Notifications issued 
after the date of this Panel's establishment on June 20, 2007. The Panel should not accept India's 
invitation because these measures are not with in the Panel's terms of reference.  
4.154  As an initial matter, it is not clear that eith er customs notification accomplishes what India 
contends it does.  First, contrary to India's assertions, Customs Notification 82/2007 does not appear 
to "effectively remove" or "effectively override" the AD.  Section 3(1) is mandatory, providing that 
imports "shall . . . be liable" to the AD, and rema ins in force.  In addition, as India acknowledges, 
Customs Notification 32/2003 also "'remains in force' in as much as it contemplates an AD on 
alcoholic liquor".  
4.155  Second, Customs Notification 102/2007 raises a nu mber of questions as to its effect on the 
EAD.  In addition, Customs Notification 19/2006, requiring imposition of the EAD, remains in force. 
4.156  In any event, neither of these measures are w ithin this Panel's terms of reference and, 
accordingly the Panel, may not take their effect  on the AD and EAD into account in making findings 
on the latter.  In this regard, the US request for th e establishment of a panel in this dispute forms the 
basis of this Panel's terms of reference.  The US  panel request does not include Customs Notification 
82/2007 or Customs Notification 10 2/2007 as neither of these measures existed at the time.  This 
Panel's term of reference were fixe d on the date of its establishment, June 20, 2007.  Accordingly, this 
Panel's terms of reference are limited to those measu res existing on the date of establishment and cited 
in the US panel request.  Because Customs Notif ication 82/2007 and Customs Notification 102/2007 
are not cited in the US panel request, and did not even exist on the date of establishment, they are 
outside this Panel's terms of reference and the Panel, therefore, may not make findings with respect to 
them. 
4.157  India contends that Customs Notification 82/ 2007 "effectively removes the AD on alcoholic 
liquor imposed by [Customs Notification] 32/2003" an d that as a result imports of alcoholic beverages 
are "not liable to an additional duty within the meani ng of Section 3(1) of the [Customs Tariff Act]".  
If this is true, it would not seem tenable for India to also argue that Customs Notification 82/2007 
does not "change the essence" of Customs Notifica tion 32/2003.  A measure effectively removing 
liability for another measure would seem to necess arily change the essence of the latter measure.  WT/DS360/R 
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  4.158  In Chile – Price Band System , the Appellate Body found that "if the terms of reference in a 
dispute are broad enough to include amendments to a measure – as they are in this case – and if it is 
necessary to consider an amendment in order to secu re a positive solution to the dispute – as it is here 
– then it is appropriate to consider the measure as amended in coming to a decision in a dispute".  The 
parameters the Appellate Body described in Chile – Price Band System  do not exist with respect to 
this dispute.  Considering Customs Notificati on 82/2007 (or Customs Notification 102/2007) would 
be contrary to the objective of secu ring a positive solution in this dispute.  The United States notes 
that the Appellate Body in Chile – Price Band System  prefaced its finding quoted above by stating 
that it did not mean to condone amending measures during proceedings to shield a measure from 
scrutiny and that the complaining party should not have  to adjust its pleadings to deal with a measure 
as a "moving target".  That concern is particularly acute in this dispute.   
4.159  First, the "amendments" at issue are customs notifications that India contends "effectively 
remove" the AD and "effectively addresses the issue of double taxation" of the EAD.  India has 
already acknowledged that its Central Government  can, at its discretion, withdraw Customs 
Notification 82/2007 and reinstate Customs Notificat ion 32/2003.  The United States understands this 
same discretion to exist with r espect to Customs Notification 102/2007.  India has also acknowledged 
that it contemplates that "subsequent to the removal of the AD", the Indian states will impose measures similar to the AD.  And, the United States further notes that Section 3(1) of the Customs 
Tariff Act mandates imposition of the AD.  It is  also unclear, as noted above, whether Customs 
Notification 102/2007 in fact resolves the issue of "double taxation" of imports.  Accordingly, there is a very real possibility that after conclusion of these proceedings, Customs Notification 82/2007 or 
Customs Notification 102/2007 may be withdrawn, that the Indian states may introduce measures 
similar to the AD, or that Customs Notification 102/ 2007 may not in fact eliminate charges on imports 
in excess of those on like domestic products. The Unite d States offers that consideration of these 
notifications in relation to AD and EAD would not  contribute to securing a positive solution in this 
dispute given the uncertainty today as to what the measures accomplish or how long they will remain 
in effect and that possibility that the AD may be reimposed. 
4.160  Second, as explained above, it is not clear the effect either Customs Notification 82/2007 or 
Customs Notification 102/2007 have on the measures in di spute.   Were they to have the effect India 
contends, this could demand an adjustment in the US  arguments in this dispute.  Given the limited 
time the United States has had to review and unde rstand either measure, and the India's Central 
Government's asserted "complete discretion" to i ssue customs notifications, this appears to be a 
"moving target" situation.  The extent to whic h either Customs Notification 82/2007 or Customs 
Notification 102/2007 has an effect on the AD or EAD would be a matter for the compliance stage of this dispute, as India itself noted in its arguments in India – Autos . 
5. The AD and EAD are manda tory, not discretionary 
4.161  India asserts that Section 3 of the Customs Ta riff Act and Section 12 of the Customs Act are 
not mandatory and as a consequence that they "may not be characterized as 'measures' subject to 
challenge by the United States".  The Panel should reject India's argument.  
4.162  First, Section 3(1) and 3(5) of the Customs Tariff Act and Section 12 of the Customs Act are 
mandatory.  Section 3(1) of the Customs Tariff Act and Section 12 of the Customs Act require both 
imposition of the AD and its imposition at the "highest rate".  Section 3(5) of the Customs Tariff Act 
requires that if the EAD is imposed it shall be levied at the "highest rate". Sections 3(2), 3(6) and 3(7) 
of the Customs Tariff Act are also mandatory, requi ring that the AD and EAD shall be calculated on 
top of and in addition to the BCD.  
4.163
 Second, on account of these requirements, Secti on 12 of the Customs Act and Section 3(1), 
3(2) and 3(7) of the Customs Tariff Act when im posed together with the BCD mandate a breach of WT/DS360/R 
Page 34 
 
 
  Article II:1(a) and (b) of the GATT 1994 with respect to the AD.  None of these measures provide the 
Central Government the discretion to act in a manne r consistent with Article II:1(a) or (b) of the 
GATT 1994.  Although Customs Notification 32/2003 specifies the rate of AD on alcoholic beverages, the statutory provisions  mandating its imposition result in a breach regardless of the rate of 
AD specified in a customs notification.  Becau se India already imposes the BCD on imports of 
alcoholic beverages at its WTO- bound rate, imposition of the AD at any rate in addition to the BCD 
results in ordinary customs duties in excess of India's WTO-bound rate. 
4.164  If the AD were considered an ODC, Section 12 of  the Customs Act and Section 3(1), 3(2) and 
3(7) of the Customs Tariff Act would likewise nece ssarily breach of Article II:1(b) of the GATT 1994 
because India does not specify any ODCs in its Schedule.   These statutory provisions also mean that 
the AD is not justified under Article II:2(a) of the GATT 1994 because, as explained above, the AD is 
not "equivalent" to an internal  charge and these provisions require that, where internal taxes are 
imposed on like domestic products at different rates, the rate of AD on imports shall be the highest of 
those rates.  Therefore, Section 12 of the Customs Act and Section 3(1), 3(2) and 3(7) of the Customs 
Tariff Act also necessarily result in charges on imports that are not equivalent to any internal charge 
and are in excess of internal taxes on like domestic products. 
4.165  Section 12 of the Customs Act and Section 3(5), 3(6) and 3(7) of the Customs Tariff Act also 
mean that the EAD is not justified under Artic le II:2(a) of the GATT 1994 because, as explained 
above, the EAD is not "equivalent" to any internal  charges and these provisions require that, where 
internal taxes are imposed on like domestic products at different rat es, the rate of EAD on imports 
shall be the highest of those rates.  Therefore, if the EAD is imposed, Section 12 of the Customs Act 
and Section 3(5), 3(6) and 3(7) of the Customs Tari ff Act necessarily result in charges on imports that 
are not equivalent to any internal charge and are in excess of internal taxes on like domestic products. 
4.166  The United States suggests, however, that the Pane l need not engage in elaborate analysis of 
whether Section 12 of the Customs Act or Sections 3(1) and 3(5) of the Customs Tariff Act are 
mandatory verses discretionary as the US claims concern the AD comprising a number of provisions 
of Indian law (including Section 3(1) of the Customs Act and Customs Notification 32/2003) that 
when imposed together with the BCD result in ordi nary customs duties on alcoholic beverages that 
exceed India's WTO-bound rate in breach of Article II: 1(a) and (b) of the GATT 1994.  Similarly, the 
US claims with respect to the EAD concern the EAD comprising a number of provisions of Indian 
law (including Section 3(5) and Customs Notificati on 19/2006) when imposed together with the BCD 
result in ordinary customs duties on imports th at exceed India's WTO-bound rate in breach of 
Article II:1(a) and (b) of the GATT 1994. With resp ect to both the AD and the EAD, the provisions of 
Indian law comprising them, when applied together with the BCD, mandate a breach of Article II:1(a) 
and (b) of the GATT 1994.  India itself acknowledges that the AD and the EAD are mandatory in so 
far as Customs Notification 32/2003 and 19/2006 specify  the rates at which imports shall be liable to 
the AD and the EAD respectively. 
6. Conclusion 
4.167  The United States requests the Panel to find that: (1) the AD is: (a) inconsistent with 
Article II:1(b) of the GATT 1994 as an ordinary customs duty that subjects imports of alcoholic beverages to ordinary customs duties in excess of those set forth in India's WTO Schedule; and (b) 
inconsistent with Article II:1(a) of the GATT 1994 as an ordinary customs duty that affords imports 
of alcoholic beverages from the United States less favour able treatment than that provided for in 
India's WTO Schedule; and (2) the EAD: (a) inconsis tent with Article II:1(b) of the GATT 1994 as an 
ordinary customs duty that subjects imports, includ ing alcoholic beverages and products listed in 
Exhibit US-1, to ordinary customs duties in excess of  those set forth in India's WTO Schedule; and (b) 
inconsistent with Article II:1(a ) of the GATT 1994 as an ordinary customs duty that affords import 
from the United States, including alcoholic bevera ges and products listed in Exhibit US-1, less  WT/DS360/R 
 Page 35 
 
 
  favourable treatment than that provided for in I ndia's WTO Schedule. Accordingly, the United States 
also respectfully requests that the Panel recommend, pursuant to Article 19.1 of the DSU, that India 
bring its measures into conformity  with the covered agreements. 
F. SECOND WRITTEN SUBMISSION OF INDIA  
4.168  In its first written submission and subsequent responses to the Panel's questions, India has 
explained in detail that the AD and the SUAD are not "ordinary customs duties" (OCD) or "other 
duties and charges" (ODC) as understood by Article II:1(b) of the GATT 1994 and are instead, 
charges equivalent to internal taxes imposed in  accordance with Article II:2(a) of the GATT 1994. 
India stands by the arguments on this issue put forward by it earlier but sees no reason to repeat them 
in this submission. Instead, India will focus on f our key issues, which form the basis of the US 
misunderstanding in the course of these proceedings: the first issue pertains to equivalence between 
the AD, SUAD and the internal taxes that they are intended to counterbalance; the second issue 
pertains to the AD on alcoholic beverages and the Pa nel's Terms of Reference; the third issue pertains 
to the distinction between mandatory and discreti onary measures; and the fourth issue is the US 
failure to discharge its burden of proof in making out a prima facie case. 
1. SUAD is equivalent to the VAT, CST and other taxes and charges 
4.169  The US has claimed that the SUAD on the iden tified products does not meet the requirements 
of Article II:2(a) of the GATT 1994. The reasons for the US assertion seems to be on account of: (a) 
India's failure to provide any evidence – either "showing or providing accounting" of how the SUAD 
is equal to internal taxes; and (b) an analysis of  the structure, design and effect of the SUAD, which 
the US believes is not equivalent to that of the in ternal taxes and charges that the SUAD is aimed at 
counter-balancing.41 
(a) The SUAD is quantitatively equivalent to VAT, CST and other internal taxes and charges 
4.170  India has previously highlighted that: (i) the SUAD is levied at 4 per cent which represents 
the minimum state VAT or CST imposed, and wherever the VAT or CTS is lower than 4 per cent 
(that is charged at 1 per cent or is exempt) then the SUAD is correspondingly levied at the lower rate; 
(ii) any general exemptions provide d for under the state VAT or CST legislations have been built into 
a corresponding exemption for imported like produc ts from the SUAD; and (iii) if the imported 
product is subject to further VAT and/or CST and other local taxes and charges when it enters the 
Indian market, the importer is eligible to either claim a refund42 or obtain a credit for the SUAD paid 
to ensure that  the goods are not taxed again.  
4.171  In this manner, the Indian tax system is calib rated to ensure equivalence between internal 
taxes and charges imposed on domestic products a nd the SUAD imposed on imported products. India 
is providing detailed accounting to further explai n how it ensures that the SUAD imposed on imported 
products is equivalent to the VAT and/or CST or  other taxes and charges imposed on like domestic 
products. 
4.172  In order to determine this "equivalence" be tween the SUAD and the internal taxes it is 
intended to counterbalance, a comparison of the ne t tax burden on imported and domestic products in 
each type of sale transaction is required. There are br oadly three types of sales transactions: the first 
being when a product is imported into India for di rect consumption; the second being where a product 
is imported into India for further manufacture; and the third being where a product is imported into 
India for the purpose of further re-sale. An analysis of the taxes payable in each  of these three types of 
                                                      
41 US oral statement at the first m eeting of the Panel, paras. 18-24. 
42 Customs Notification No. 102/2007 – Customs dated 14.09.2007. WT/DS360/R 
Page 36 
 
 
  transaction, reveals that in no transaction is the tax burden on imported products in excess of that 
borne by like domestic products. In the first type of  transaction, the domestic consumer bears a net tax 
burden, which is either equal to or higher than the 4 per cent tax cost borne by the importer. In the second type of transaction, the net incidence of taxa tion for an importer manufacturer is nil as he is 
entitled to a CENVAT credit for the SUAD paid. And fina lly, in the third type of transaction too, the 
total incidence of tax borne by the importer-trader in a transaction of this type is nil since he is entitled 
to a full refund for the SUAD paid. In other words, the existing system of credit and refunds ensures 
that imported products are not double taxed or taxed in excess of domestic like products. 
4.173  It is clear from the above analysis that the SUAD imposed on each of the Identified Products 
shall not result in an incidence of taxation for im ported products, which exceeds that for like domestic 
products. The explanation offered above will apply equally to alcoholic products as well, and thus 
even with respect to alcoholic be verages, a comparison of the total tax burden will reveal that the tax 
burden imposed on imported products is not in excess of the burden imposed on like domestic 
products. 
(b) The structure, design and effect of the SUAD  
4.174  The United States observes "nothing in terms of th e structure, design, or effect of the SUAD 
appears equivalent to the state level VAT or the CST".
43 Its observation seems to be based on three 
reasons: (i) VAT and CST are broadly levied at four  different rates, which may differ from product to 
product and from state to state, whereas the SUAD is levied at a flat rate of 4 per cent; (ii) the 
mechanism for providing exemptions from the SUAD h as shortcomings and is unable to ensure parity 
of taxation for imported and like domestic goods; and (iii) India has not provided any details of the 
"other taxes and charges" or substantiated that the SUAD is equivalent to such other taxes and 
charges. 
4.175  Different rates of VAT and CST: VAT is  imposed by state governments under their 
respective state VAT statutes. While it is possible th at there exist different VAT rates in different 
States for the same product, the lowest VAT rate in every state is 4 per cent, unless the product is 
exempted from VAT altogether, or is a product such  as gold, in which case the state VAT is 1 per cent 
in every State. The SUAD has acco rdingly been pegged to the lowest possible VAT rate on any 
product as applied in each Indian State.  
4.176  Further, the Central Government has made an e ffort to ensure that the VAT rates on products 
are to the extent possible, harmonized across States.  Each Indian state has implemented its own VAT 
statute based on the recommendations of the "E mpowered Committee" and the rates of VAT are 
largely the same in all the States. 
4.177  The difference in the VAT rates is also true of the rate at which CST is levied and the net tax 
burden imposed on account of CST is 4 per cent at the very minimum (other than registered dealers). 
Thus, as was the case with the VAT, it is equally possi ble that there exist different CST rates for the 
same product, but the SUAD is equivalent to the lowest  rate of CST (other than registered dealers for 
whom a full refund is available on re-sale). 
4.178  And finally, India has been able to establish an  equivalence of the net tax burden imposed on 
imported and domestic like products. As elaborat ed in its responses to the Panel's questions, 
equivalence as contemplated under Article II:2(a) must  be determined with reference to the overall 
fiscal burden placed on imported and domestic like products. The SUAD is imposed at a single rate of 
4 per cent because amongst other things, it is difficu lt to foretell which state the imported product will 
eventually be sold in and consequently, the applicab le rate of taxation on the product in that State. 
                                                      
43 US oral statement at the first meeting of the Panel, para. 19.  WT/DS360/R 
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  Since the SUAD on imported products is pegged to  the lowest rate of VAT/CST imposed on like 
domestic products, the fiscal burden on an importe d product cannot exceed that of a like domestic 
product.  
4.179  Exemption mechanisms for the SUAD: The Unite d States has pointed out that the "exemption 
mechanisms for the SUAD" have shortcomings and are unable to ensure parity without identifying 
what these shortcomings are.44 India would like to reiterate that the SUAD is carefully calibrated with 
the VAT/CST rates and wherever the domestic goods  are exempt from payment of state VAT even 
the like imported products are exempt from SUAD. Similarly if a reduced rate of VAT is applicable to 
domestic goods then the SUAD on the like imported pr oducts is also levied at the reduced rate.45 Thus 
India has ensured equivalence of fiscal burden on both domestic and like imported products.  
4.180  Other taxes and charges: The other taxes and ch arges that India has consistently referred to, 
includes local and municipal taxes and charges whic h vary from state to state and from product to 
product. These taxes and charges are imposed on the sal e, purchase or transportation of a domestically 
manufactured product (or the inputs used to manufact ure such products) in a manner such that the 
price of the domestic product is loaded with such ta xes, for which no credit or refund is available to a 
local manufacturer or dealer. On the other hand, such local taxes and charges are not imposed on 
imported like products. The objective of the SUAD is in  part, to counterbalance the incidence of such 
local taxes and charges as well, which is not borne  by imported like products. These local taxes and 
charges could take the form of a "Mandi Tax"46, a "Turnover Tax"47, a "Marketing Committee Fee"48 
etc.  
4.181  Notwithstanding these local taxes and charges, the equivalence required by Article II:2(a) 
with reference to the SUAD and the VAT and th e CST is clearly established and SUAD being pegged 
at the lowest rate of VAT/CST i.e. 4 per cent cannot  result in an excessive fiscal burden for imported 
products. Any local taxes and charges that the SUAD  is in part intended to counterbalance will only 
add to the fiscal burden for domestic products and not to similar imported products and as such, their 
identification would not have a bearing on the outcome of this dispute.  
(c) The SUAD is applied in a manner consis tent with Article III:2 of the GATT 1994 
4.182  The United States asserts that India has neglected to inform the Panel that both the state level 
VAT and the CST apply to imported products49 thereby resulting in taxes on imported products "in 
excess" of like domestic products and thus not fu lfilling the condition under Article III:2. India has 
consistently informed the Panel that the SUAD is  intended to counterbalan ce the state VAT and CST 
and to the extent that an imported product is ch arged the SUAD as well as the state VAT and CST, it 
shall be entitled either to a refund to the extent of the SUAD so paid or claim a credit for the full 
amount of SUAD thereby ensuring that no imported product can be ultimately subjected to both the 
SUAD and the CST/VAT.  
                                                      
44 US oral statement at the first meeting of the Panel, para. 20. 
45 Customs Notification No. 20/2006 – Custs., dated March 1, 2006 (CN 20/2006) 
46 Mandi Tax is levied in the State of Bihar (8 per cent), Orissa (1 per cent – 2 per cent), Rajasthan (1.6 
per cent) and a "Mandi Samiti Tax" is levied by the State of Uttar Pradesh (1 per cent for leather products and 
different rates for others). 
47 Turnover tax is levied in the State of Maharashtr a (1 per cent) and the City Corporation of Chennai 
(Rs.1000/ – half yearly). 
48 A Marketing Committee Fee is levied by the State of West Bengal (1 per cent). 
49 US oral statement at the first meeting of the Panel, para. 22. WT/DS360/R 
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  2. AD is equal to the excise duty 
4.183  The United States claims that the AD is not equi valent to an internal tax or imposed in a 
manner consistent with Article III:2 of th e GATT 1994, as required by Article II:2(a).50 The AD 
charged on all imported products is  equivalent to the excise dutie s charged on like domestic products. 
The equivalence is ensured for alcoholic bevera ges and all other imports other than alcoholic 
beverages in a different manner. 
4.184  For all products other than alcoholic beverages,  the AD is equivalent to the central excise 
duties imposed on like domestic products on account of three basic reasons: Firstly, Section 3(1) of the CTA requires that AD shall be "equal to th e excise duty for the time being leviable on a like 
article"; Secondly, the AD is charged with reference to and is equal to the rates of central excise duty 
charged on like domestic products under the Centra l Excise Tariff Act, 1985; Thirdly, excise duties 
are levied exclusively on the manufacture of do mestic products and not on imported goods and 
therefore the AD is imposed on imports in lieu of su ch excise duties. Therefore, the validity of the 
Additional Duties imposed under Section 3(1) of the CTA per se cannot be challenged. 
4.185  In the case of alcoholic beverages, each of I ndia's States and Union Territories are empowered 
to levy their own excise duties. Consequently, the Additional Duty could not be fixed with reference 
to any one single rate of excise duty and the Central Government decided in its discretion to adopt a method of imposing the Additional Duty through a process of averaging, and arrived at an 
approximation of the excise duty rates paid by differe nt States on alcoholic liquor. This rate could in 
some cases, be less than the excise duty being char ged on like domestic products in some States, and 
in other cases be different from the excise duty bei ng charged in some other States. However, the 
Central Government tried to ensure that to the extent possible, the rate was a reasonable 
approximation of the net fiscal burden imposed on li ke domestic products on account of the excise 
duty payable. 
4.186  Therefore the AD imposed under Section 3(1) of the CTA on all imported goods into India is 
per se equivalent to the excise duties charged on like domestic products and is entirely compatible 
with the provisions of Article II:2(a) of the GA TT 1994. Alcoholic beverages on the other hand, are 
the only product, on which the AD is fixed with  reference to the state excise duties through 
CN 32/2003 and has been subsequently exempted through CN 82/2007. 
3. AD is validly removed  
4.187  The United States contends first, that CN 82/2007 is not within the Panel's Terms of 
Reference and it is unclear as a factual matter wh ether it constitutes a revocation of the measure. 
Additionally, it submits that the analysis CN 82/200 7 will create a moving target and will "shield" the 
AD from the Panel's scrutiny.
51 
4.188  As noted in India's first written submission, CN 82/2007 is within the Panel's terms of 
reference since it is "an amendment that does not change the essence of the identified measure" and a 
panel has the authority to examine a legal instrument  enacted after the establishment of the Panel that 
amends a measure identified in the panel request.52 Further, it seems that th e United States had itself 
requested that such subsequent am endments be included within the Panel's Terms of Reference when 
                                                      
50 US oral statement at the first meeting of the Panel, para. 25. 
51 US oral statement at the first m eeting of the Panel, paras 27-31. 
52 Appellate Body Report, Chile – Price Band System , para. 144.  WT/DS360/R 
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  it included within its Request for the Establishment of the Panel.53 Therefore, the Panel is well within 
its rights to take into account CN 82/2007.  
4.189  Whether CN 82/2007 results in the revocation of the AD on alcoholic beverages as imposed 
through CN 32/2003 must be a matter of fact which is to be determined with reference to its ultimate 
effect. If CN 82/2007 has resulted in the complete withdrawal of the AD on alcoholic beverages as of 
that date, the allegedly offending measure CN 32/20 03 must be said to stand validly revoked. The 
Arbitrator in Argentina – Hides and Leather (Article 21.3) has held that a Member may use any 
appropriate means to achieve effective compliance with its WTO obligations – including the complete 
withdrawal of the offending measure, its partial modification or correction of the offending portion.54 
In the present dispute, India has chosen to remove the AD on alcohol ic beverages through 
CN 82/2003 and the imports of alcoholic beverages are no longer liable to pay any AD. There are no 
residuary or "lingering effect" of the AD on alcoholic  beverages and therefore the instrument used to 
remove the AD is not relevant.55  
4.190  The United States seems to contend that th e mere possibility that a measure although 
effectively removed at the time, may subsequently be re-introduced must mean that it has not been 
validly revoked. The Panel may assume that Member s will perform their treaty obligations in good 
faith and would not re-introduce the removed measure.56 India has effectively and in good faith 
removed the AD on alcoholic beverages through CN 82/2007 with immediate effect and should be 
treated as such. 
4.191  And finally, the US contention that CN 82/20 07 will constitute a "moving target" designed to 
shield the AD from scrutiny is without merit. CN  82/2007 is a validly enacted piece of delegated 
legislation. The Appellate Body in Chile – Price Band System  did not condone the practice of 
amending measures during dispute settlement pr oceedings or setting "moving targets", but 
nevertheless acknowledged that if the terms of refe rence in a dispute are broad enough to include 
amendments to a measure it would be necessary to c onsider them to secure a positive solution of the 
dispute.57  
4. The distinction between mandatory vs. discretionary 
4.192  The United States has contended that the effect of Section 3(1) of the CTA is mandatory and 
that even if it were not so, the measure  is not saved from a challenge under the DSU.58 The United 
States concludes that in either situation, India's aver ments on this issue are irrelevant, since even if the 
relevant statutory provision does not mandate the imposition of AD on al coholic beverages, 
CN 32/2003 does. The US arguments on this issue appear to be contradictory. On the one hand it 
makes an "as such" challenge59 and on the other it points out that the distinction between measures "as 
such" and "as applied" is "largely irrelevant"60. In another apparent contradiction, the United States 
frames its challenge of the AD "as such"61, but examines the WTO compatibility of the AD "as 
applied" to alcoholic beverages.62 
                                                      
53 India – Additional and Extra-Additional Duties on Imports from the United States , Request for the 
Establishment of a Panel by the United States, WT/DS360/5, 25 May 2007. 
54 Award of the Abitrator, Argentina – Hides and Leather (Article 21.3) , paras. 40-41. 
55 Panel Report, EC – Poultry , para. 252. 
56 Panel Report, Argentina – Textiles and Apparel , para. 6.14. 
57 Appellate Body Report, Chile – Price Band System , para. 144. 
58 US oral statement at the first meeting of the Panel, para. 34. 
59 Question 16, para. 3 in the US response to Panel's questions. 
60 US oral statement at the first meeting of the Panel, para. 34. 
61 Question 16, para. 3 in the US response to Panel's questions. 
62 US first written submission, para. 31. WT/DS360/R 
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  4.193  India has highlighted the discretionary nature of Sections 3(1) of the CTA in order to point 
out that the statutory provision does not manda te a WTO inconsistency and therefore any 
investigation must be limited to the provisions of the relevant Customs Notification. This distinction 
has been observed in previous Panel and Appellate Body decisions where it has been viewed as being 
a "threshold consideration".63 
4.194  India has consistently maintained that the rate at which the AD is imposed is specified by the 
Central Government through relevant Customs Notifications. The AD on alcoholic beverages was 
earlier imposed by CN 32/2003 and subsequently rem oved through CN 82/2007. To that extent, India 
submits that any analysis of the WTO compatibility  of the AD on alcoholic beverages may be limited 
to an examination of the provisions of CN 32/20 03, which is an identified measure in the present 
dispute. In other words, in order to determine th e WTO compatibility of the measures in question, the 
Panel may look into the rate at which the AD is levi ed and not whether India has the authority to levy 
the AD itself. Further, any examination of CN 32/2003 would be incomplete without considering 
CN 82/2007, which removes the AD on alcoholic beverages.  
5. The United States has failed to make out a prima facie case  
4.195  The United States alleges that both the AD on alcoholic beverages as well as the SUAD on 
the identified products are OCDs or ODCs and are c ontrary to India's obligations contained in  
Article II:1(a) and (b) of the GATT 1994. In ma king its claims, the United States has failed to 
demonstrate that the AD or the SUAD are indeed ta xes that qualify as an OCD or an ODC and has 
instead sought to discharge its burden of proof by arguing that India has not adequately demonstrated 
that the AD or the SUAD is not an OCD or OD C. In doing so, the United States has failed to 
discharge its burden of proof as the compla ining party to make out a prima facie case.64  
(a) Definition of an OCD as applied to the AD and the SUAD 
4.196  The definition of the term OCD may not be cons trued in its negative and Appellate Body has 
itself noted, that "it is not necessary that each and ev ery duty that is calculated on the basis of the 
value and/or volume of imports is ne cessarily an "ordinary customs duty".65 Therefore, the United 
States must establish in the affirmative that the AD and the SUAD are OCD. In order to make such an 
affirmative claim, the United Stat es as the complaining party in this dispute must look beyond the 
mere point at which the duty is levied and the ma nner in which the duty is expressed, since neither of 
them will necessarily mean or indicate that the duty is an OCD. In addition, the United States must 
substantiate in the affirmative that the "structu re, design and effect" of the AD and the SUAD make it 
an OCD.66 The United States has failed to take into acc ount any such relevant factors in framing its 
claim, and has instead observed that India has failed  to demonstrate that the AD or the SUAD is not 
an OCD.67 
(b) Definition of an ODC as applied to the AD and the SUAD 
4.197  The United States has at no stage substantia ted how the AD or the SUAD qualify as an ODC 
or explained how the AD or the SUAD could inter-c hangeably belong to two fundamentally different 
categories of import duties defined by Article II:1( b) of the GATT 1994 and has effectively blurred 
the distinction between an OCD and ODC. Such an  interpretation is contrary to the text of 
                                                      
63 Appellate Body Report, US – 1916 Act , paras. 88-91. 
64 The United States notes that, as a general rule, "t he burden of proof rests upon the party, whether 
complaining or defending, who asserts the affirmative of a particular claim or defence". Appellate Body Report, 
US – Wool Shirts and Blouse , p. 14. 
65 Appellate Body Report, Chile – Price Band System , paras. 271-272 and 274. 
66 Panel Report, Chile – Price Band System (Article 21.5 – Argentina),  para. 189. 
67 US oral statement at the first meeting of the Panel, para. 6.  WT/DS360/R 
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  Article II:1(b) of the GATT 1994 and past interpre tation of the OCD and ODC as being two distinct 
charges by previous WTO Panels.68 
4.198  Therefore, with respect to both its fundament al claims, the United States has failed to 
discharge its burden of proof in making out a prim a facie case that the AD and the SUAD are either 
OCD or ODC as defined under Article II:1(b) of the GATT 1994. The Panel may not make a finding 
on the validity of India's defence without having first established the fact that the United States has 
duly discharged its burden of establishing its claim. 
G. ORAL STATEMENT OF THE UNITED STATES AT THE SECOND SUBSTANTIVE MEETING OF THE 
PANEL  
1. Opening statement 
4.199  The United States has established a prima facie cas e that India's AD and EAD are inconsistent 
with Article II:1(a) and (b) of the GATT 1994.  I ndia has not rebutted the US prima facie case.  Nor 
has India sustained its own assertions that the AD and the EAD may be justified under Article II:2(a) 
of the GATT 1994.  The US prima facie  case and India's failure to rebut that case, or to sustain its 
assertions under Article II:2(a) of the GATT 1994, ar e detailed in the US written submissions and 
prior statements.  As such, the US  remarks focus on selected points th at bear emphasizing in light of 
India's second written submission. 
(a) Point 1  
4.200  The AD and the EAD are ordinary customs duties.   The United States has established a prima 
facie case that the AD and the EAD are ordinary customs duties. The United States has demonstrated 
that the AD is an ordinary customs duty because it applies: as a combination of ad valorem  and 
specific duties, at the time of importation, and as a matter of course upon a product's importation.  
Importation of alcoholic beverages is the event for which liability for the AD ensues, and the AD 
applies at the prescribed rate on each importation of  alcoholic beverages.  These features make the 
AD a "usual," "common" and "ordinary" kind of "customs duty."  And in this regard, the AD is 
"usual," "common" and "ordinary"  in the same way as India's basic customs duty is.  That is, each 
feature of the AD that makes it an ordinary custom s duty is shared by India's basic custom duty (or 
BCD) – a duty India concedes is an ordinary customs duty. 
4.201  The similarities reviewed in the US prior submissions between the AD on the one hand and 
the BCD on the other disprove India's contentions th at the AD and the BCD are "entirely distinct" and 
instead indicate that the AD is structured an d designed in much the same way as the BCD, and 
likewise is an ordinary customs duty.   
4.202  The United States has also demonstrated that th e EAD is an ordinary customs duty because it 
applies: as an ad valorem  duty, at the time of importation, and as a matter of course upon a product's 
importation. The EAD applies at the prescribed rate on each importation of products, unless 
separately exempt, and importation of a product is the event for which liabilit y for the EAD ensues.  
These features make the EAD a "usual," "common" or "ordinary" kind of "custo ms duty."  And in this 
regard, the EAD is "usual," "common" and "ordin ary" in the same way as India's basic customs duty 
is.  The EAD and the BCD also bear a number of sim ilarities that disprove India's contentions that the 
EAD and the BCD are "entirely distinct," and indi cate instead that the EAD, like the BCD, is an 
ordinary customs duty. 
                                                      
68 Panel Report, Dominican Republic – Import and Sale of Cigarettes , para. 7.113. WT/DS360/R 
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  4.203  India has not rebutted the prima facie case estab lished by the United States.  In particular, 
India has not identified any feature of the AD or th e EAD that is not "ordinary" in relation to the 
BCD, which India concedes is an ordinary customs duty.  India's only arguments in support of its 
contentions that the AD and EAD are not ordina ry customs duties are that the AD and EAD are 
governed by distinct legal provisions and that the AD and the EAD are intended to be charges 
equivalent to an internal tax.  With respect to India's first argument, the collection of the AD, EAD, 
and BCD are authorized under the same constitutiona l provision, required to be collected under the 
same section of the Customs Act (Section 12), and pr ivy to exemptions under the same section of the 
Customs Act (Section 25). With respect to India's second argument, a Member could simply ascribe a 
particular purpose or name to a duty, or categorize it under a particular provisi on of domestic law, and 
avoid its commitments with respect to ordinary cust oms duties.  This is why it is critical to focus on 
the structure, design and effect of a measure.  
4.204  In the context of this dispute, simply im posing the AD and the EAD under separate sections 
of the Customs Tariff Act, as compared to the BCD , or ascribing a particular policy objective to the 
AD or EAD cannot change the fact that all three duties – on account of their structure, design and 
effect – are ordinary customs duties.  
(b) Point 2 
4.205  And in the end, even if the AD and the EAD were not ordinary customs duties, they would 
nonetheless breach Article II:1(b) of the GATT 1994, because if not ordinary customs duties, the AD 
or the EAD would necessarily constitute an "other duty or charge imposed on or in connection with 
importation."  First, it is not disputed that either the AD or the EAD constitute a "duty" or "charge" on 
products.  Second, both are imposed on or in connec tion with importation.  The AD and the EAD are 
imposed on or in connection with importation because they are imposed at the time of importation and as a consequence of importation.  Contrary to India's assertions th e phrase "on or in connection with 
importation" does not concern the policy objectiv e associated with the duty; it concerns the 
relationship between the duty and importation.  Mo reover, India implicitly concedes the AD and the 
EAD are "imposed on importation."  Indeed, India could not advance a defence under Article II:2(a) 
of the GATT 1994 otherwise since that Article  concerns charges "imposed on importation." 
(c) Point 3 
4.206   In its second written submission, India explains th at the AD is not "virtually identical" to the 
state excise duties but instead an "approximation"  of those duties arrived at "through a process of 
averaging," and that in some cases the AD could be "in excess of the excise duty being charged in 
some states" on like domestic alcoholic beverages.  Ev en if India's explanation were true – which the 
United States cannot ascertain because India has submitted no evidence in support of it – the 
explanation would not mean the AD is " per se  equivalent" to state excises taxes nor that it is "entirely 
compatible with the provisions of Article II:2(a)."   In fact, India's explanation disproves its own 
defence. Under Article III:2 any amount of excess ch arges on imports is "too much" and imports are 
entitled to treatment no less favourable than th e most-favoured domestic products. A charge on 
imports equal to the average of the various rates of  internal taxes imposed on like domestic products 
will necessarily result in charges on imports in excess of internal taxes on some like domestic 
products.  
(d) Point 4   
4.207  Turning to the three scenarios India describes as demonstrating the "quantitative equivalence" 
of the EAD, none of these scenarios demonstrate that the EAD is  "quantitatively equivalent" to  the 
state-level VATs or the CST that it allegedly off sets.  Nor do these scenarios demonstrate that the 
EAD ensures that charges on imports do not exceed the state-level VATs or the CST on like domestic  WT/DS360/R 
 Page 43 
 
 
  products.  With respect to the first scenario India describes, a domestic product sold by a registered 
dealer in one state to a registered dealer in another state is subject to a CST rate of 3 per cent; whereas 
like imports are subject to an EAD rate of 4 per cent.  Moreover, imports are subject to the 4 per cent EAD even in cases where the like domestic product is  subject to a zero rate by virtue of a state 
deviating from the Empowered Committee suggested ra te.  With respect to the second scenario India 
describes, whether India's CENVAT subjects imports to charges in excess of those on like domestic 
products does not address the issue of whether the EAD subjects imports to charges that exceed the 
charges imposed by the state-level VATs and the CST.   
4.208  India's third scenario relies solely on a measure  that is not within this Panel's terms of 
reference – Customs Notification 102/2007 – to support its contention that the EAD does not result in 
charges on imports in excess of those on like domestic products.  Examination of the EAD comprising the measures within this Panel's terms of reference show s that imported products are subject to the 
EAD in addition to the state-level VATs and CST, whereas like domestic products are only subject to 
the state-level VATs and CST. 
(e) Point 5   
4.209  None of India's points support the conclusion that the EAD is equivalent to the state-level 
VATs or CST.  In fact a number of them suggest the contrary: (a) the state-level VATs and CST vary 
from product to product and from state to state and, with respect to the CST, from one purchaser to 
another, when the EAD is imposed at a flat 4 per cen t rate for all imports; (b) the EAD is not set at the 
"lowest VAT rate" or corresponding lowest CST rate si nce the lowest VAT or CST rate is zero and in 
transactions between registered dealers the CST rate is 3 per cent; (c) imports are not necessarily 
exempt from the EAD when like domestic products are exempt from a state-level VAT or the CST 
since states may exempt products from the VAT ra te suggested by the Empowered Committee, and 
there is no mechanism to adjust  the EAD correspondingly when stat es exercise such discretion.  
4.210  India provides no evidence that the other local tax es or charges to which it refers exist, much 
less any evidence that the EAD resu lts in charges on imports that do not exceed such taxes or charges 
– e.g., that such taxes or charges do not apply in addition to the EAD. 
(f) Point 6   
4.211  Customs Notification 82/2007 and Customs Notificat ion 102/2007 are not within this Panel's 
terms of reference, and India's attempts to justify the AD or the EAD on account of either 
notification's effect on the AD or the EAD should be rejected accordingly.  
4.212  India offers little new in support of its contenti on that Customs Notification 82/2007 is within 
the Panel's terms of reference and, in terms of Customs Notification 102/2007, does not even assert 
that it is within the Panel's terms of reference.  India misreads the US panel request's reference to 
"amendments, related measures, or implementing m easures", which is a reference to any amendments 
or measures in existence at the time of the US pa nel request.  There is no official compilation or 
searchable database of India's applied customs rates,  and ascertaining the official applied customs rate 
for any particular product requires knowing whether th e rate set out in the First Schedule to India's 
Customs Tariff Act has been modified.   The Pane l will appreciate that with such a system, it may 
become apparent during the course of the dispute th at a relevant citation to one of the measures 
identified, in existence at the time of the panel request, was overlooked (though that does not appear 
to be the case here).  But, the panel request's  reference to "amendment s, related measures or 
implementing measures" did not extend to measu res not even in existence at the time.  
4.213  Whether the United States, in India's view, has had sufficient time or not to review Customs 
Notification 82/2007 does not bring that measure within  the Panel's terms of reference.  And, India WT/DS360/R 
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  only introduced Customs Notification 102/2007 during the last Panel meeting.  In the time the United 
States has had to analyze Customs Notification 82/2007, it appears that (1) it does not revoke or 
rescind Customs Notification 32/2003, (2) that Cust oms Notification 32/2003 remains in force; and 
(3) that the statutory provision mandating imposition of the AD, and at the highest excise duty rate of 
any Indian state, remains in place.  
4.214  What Customs Notification 102/2007 accomplishes, or does not accomplish, is unclear. The 
refund mechanism it appears to establish subjects e ligibility for a refund to a number of conditions 
and procedures that appear – based on initial reports  from US industry –  to undermine the value of 
any applicable refund.  Furthermore, domestic pr oducts do not have to go through the additional step 
of requesting a refund, so it is not established that imported products are being treated no less 
favourably than like domestic products.  Moreover, Customs Notification 102/2007 would only appear to address India's "second scenario"; it woul d not appear to address India's "first scenario" 
where imported products are consumed by the importer. 
4.215  India's contention in this regard that "a Me mber may use any appropriate means to achieve 
effective compliance" is simply inapposite.  Th e appropriate means to achieve compliance and 
whether such compliance is effective would be a ma tter for the compliance stage of this dispute.  
4.216  India has yet to explain how taking into account Customs Notification 82/2007 (or Customs 
Notification 102/2007 for that matter) "is necessary ... in order to secure a positive solution to the 
dispute."  Doing so would not contribute to securing  a positive solution in this dispute, and, instead 
would put the United States in the position of having to deal with the AD (or the EAD) as a "moving target."  These issues are particularly acute in this  dispute given the uncertainty today as to either 
customs notifications' effect on the AD and the E AD respectively, and the ease with which either 
customs notification may be rescinded or otherwise re moved.  India has also indicated that collection 
of the AD may resume at either the central or state level.  
4.217  India contends that Customs Notification 102/2007 does not change the essence of Customs 
Notification 19/2006 and again refers to the US pane l request's reference to "any amendments, related 
measures or implementing measures."  The latter has al ready been addressed in this statement.  With 
respect to the former, if Customs Notificati on 102/2007 does what India contends, it appears 
fundamentally to change the essence of the EAD.  That is, according to India, prior to Customs 
Notification 102/2007 imports subsequently sold within  India were subject to the EAD in addition to 
the state-level VATs and CST, whereas with Customs Notification 102/2007 in place, such imports are no longer liable for the EAD, provided certain conditions are met.  A measure that allegedly 
removes liability for another measure would seem to necessarily change the essence of the latter 
measure.  In this regard, the United States points out that the facts in Chile – Price Band System  differ 
significantly from the facts in this dispute.  
(g) Point 7   
4.218  The AD and the EAD are each "as such" inconsis tent with Article II:1(a) and (b) of the 
GATT 1994.  The AD comprises a number of measures that apply cumulatively and when imposed 
with the basic customs duty, result in ordinary cu stoms duties on alcoholic beverages that exceed 
India's WTO-bound rate.  Each of these measures ma ndates the actions it describes, for the reasons 
the United States clearly sets out in the US second written submission.   
4.219  And in any event, even if any of the cite d statutory provisions had been discretionary, 
Customs Notification 32/2003, as India acknowledges, is not.  Customs Notification 32/2003 
mandates the collection of the AD at specified rates,  and collection of the AD at those rates result in 
ordinary customs duties on imports of alcoholic beverages in excess of India's WTO-bound rates.  WT/DS360/R 
 Page 45 
 
 
  4.220  India contends the United States has set out an "as applied" claim with respect to the AD 
because it has "examined the WTO compatibility of the AD ‘as applied' to alcoholic beverages."  Any 
reading of the US panel request, responses to th e Panel's questions and first and second written 
submissions, makes quite clear that the United Stat es is challenging the AD "as such," but only as it 
pertains to alcoholic beverages.  The statutory provisions and customs notifications comprising the 
AD on their face mandate a breach of India's WTO-bound rate for alcoholic beverages. 
4.221  With respect to the EAD, it is also mandatory.   While Section 3(5) provides that the Central 
Government may levy the EAD, Customs Notifi cation 19/2006 mandates its collection. Moreover, 
Section 3(5) requires that if imposed the EAD shall be  at the highest rate of internal taxes imposed on 
like domestic products up to a maximum of four per cent. 
(h) Conclusion 
4.222  The AD and the EAD are each ordinary customs duties that India imposes on imports in 
excess of WTO-bound rates.  Neither duty is charge e quivalent to an internal tax that is imposed 
consistently with Article III:2 of the GATT 1994.  Consistent with this Pa nel's terms of reference 
under DSU Article 7.1, the United States requests the Panel to find that the AD and EAD are 
inconsistent with Article II:1(a) and (b) of the GA TT 1994, and consistent with DSU Article 19.1, to 
recommend that India bring these measures into conformity with the GATT 1994. 
2. Concluding remarks 
4.223  The United States has established a prima faci e case that the AD and the EAD are each 
ordinary customs duties that India imposes in excess of its WTO-bound rate and are therefore inconsistent with Article II :1(a) and (b) of the GATT 1994. 
4.224  India instead asserts that the AD and the EAD ar e charges under GATT Article II:2(a) that are 
equivalent to internal taxes and imposed  consistently with GATT Article III:2. 
4.225  The United States has demonstrated that neither the AD nor the EAD is in fact equivalent to 
an internal tax nor imposed consistently with GATT Article III:2.  The United States has provided 
reasons in our written submissions and oral statement yesterday.  In this statement, the United States 
would like to focus on two points that merit specific mention in light of the discussions over the last 
two days. 
4.226  First, India argues that the AD and the EAD are imposed as a consequence of domestic 
products being charged an excise duty.   
4.227  That is factually incorrect.  As the United Stat es has pointed out, imports may be liable for the 
EAD even in instances where like domestic products are not subject to the relevant internal tax or are 
exempted from the relevant internal tax, for exam ple, where a state has exercised its discretion to 
deviate from the VAT rated suggested by the Em powered Committee. As noted in the US second 
submission, states may deviate by imposing no rate when the Empowered Committee has suggested a 
4 per cent rate. 
4.228  With respect to the AD, India has not even id entified the state excise duties to which the AD 
on alcoholic beverages is equivalent, much less th at the AD is imposed on imports as a consequence 
of state excise duties being levied on like domestic products.   
4.229  India's contention is simply a repackaging of its earlier arguments that the stated purpose of 
the AD and EAD is sufficient to qualify those duties as in  fact equivalent to an internal tax.  As the WT/DS360/R 
Page 46 
 
 
  United States has mentioned, the Panel should look at  the structure, design, and effect of a duty and 
not its stated purpose.  
4.230  Second, India asserts that the Central Government's authority to issue exemptions to the AD 
means that Section 3(1) itself does not mandate im position of the AD nor imposition of the AD at the 
highest rate.  This is incorrect.  In fact, that Section 25 of the Customs Act and Section 3(8) of the 
Customs Tariff Act provide the Central Government  authority to exempt products only proves that 
Section 3(1) requires the AD’s imposition and that those provisions are only exceptions to that rule -
that is, that an AD shall be imposed. 
4.231  The United States is struck by India's asserti ons in its second submission and statement 
yesterday that: 
• through Customs Notifications 82/2007 and 102/2007, India has "removed" the 
possibility that the AD and the EAD subject  imports to charges in excess of those 
imposed on like domestic products (para. 4.1) and;  
 
• with those notifications in place, Indi a has ensured conformity with its WTO 
obligations. 
 
4.232  The first point the United States would make is that Customs Notifications 82/2007 and 
102/2007 are not within the Panel’s terms of reference, and their effect on the AD or EAD should not 
be taken into account in making findings on the AD or EAD as those measures are described in the 
US panel request, and which form the basi s of the Panel's terms of reference. 
4.233  And the United States has explained that Cu stoms Notification 82 does not "withdraw" the 
AD, and we do not believe that Customs Notifica tion 102 provides a refund mechanism that – as India 
asserts – ensures imports are not subject to charges in excess of those on like domestic products.  We 
have explained these points in our second writte n submission and yesterday’s statement. 
4.234  Today, the United States would like to draw attention to two additional points. 
4.235  First, India's request that the Panel take Customs Notification 82 and 102 into account seeks 
to convert this panel proceeding over the confor mity of the AD and the EAD with India's WTO 
obligations into a compliance proceeding under Article 21.5 of the DSU.   
4.236  A panel, however, cannot properly judge whether one measure taken to bring another measure 
into conformity with a Member's WTO obligations  in fact accomplishes that until it first makes a 
finding that the initial measure is WTO-inconsistent. 
4.237  That is why in this dispute, even if Cust oms Notification 82 and 102 accomplish everything 
India claims they do, and we have explained that they do not, the Panel could not make a finding on 
the effect of those Customs Notifications without first making a finding on the AD and the EAD as set 
out in the US panel request, which forms the basis of  the Panel's terms of reference.  Whether India's 
actions subsequent to the Panel's establishment ha ve brought it into conformity with India’s WTO 
obligations is a matter for another stage of this proceeding. 
4.238  Second, as the United States has noted, India's invitation for the Panel to take Customs 
Notification 82 and 102 into account in making findings on the AD and the EAD as set out in the 
Panel's terms of reference renders  this dispute a "moving target".  India could take yet another 
measure later in this proceeding, or the Indian  states could impose new charges to replace the AD.  WT/DS360/R 
 Page 47 
 
 
  4.239  The Panel's findings in this dispute will contribut e to a positive solution.  First, it will provide 
a benchmark by which India and the United States may judge whether Customs Notification 82 or 102 
or any other measure may bring the AD or the EAD into conformity with India's WTO obligations, in 
the event of a compliance proceeding under Article 21.5.  The Panel's findings on the AD and EAD as 
described in the US panel request will also provide clarity to India as it considers whether an exercise 
of what it has characterized as its complete discretion to resume collection of the AD complies with 
its WTO obligations.  It will also guide the Indian states as they considering impose duties in lieu of 
the AD – as India suggests they may do – in assessi ng whether such duties comply with India's WTO 
obligations. 
H. ORAL STATEMENT OF INDIA AT THE SECOND SUBSTANTIVE MEETING OF THE PANEL  
4.240  India in its oral submissions at the second substa ntive meetings with the parties has refrained 
from repeating the submissions made by it earlie r in the proceedings and has instead limited its 
submissions to clarifying the key misconceptions  in the US submissions before the Panel and 
explaining the issues raised by the US in its second written submissions.  
1. OCD/ODC or charge equivalent to internal taxes?  
4.241  The United States has alleged that India levies Additional Duty (AD) under Section 3(1) of 
the Customs Tariff Act (CTA) and such other Additional Duties (SUAD) under Section 3(5) of the CTA in excess of its bound rates. The United States' allegation is based on an erroneous 
characterization of the AD and the SUAD as "ordin ary customs duty" (OCD) or "other duties and 
charges" (ODC) under Article II: 1 of the GATT 1994. 
4.242  Based on this premise the United States has furt her misinterpreted the statutory basis for the 
duties and has argued that the structure, design and e ffect of the AD and the SUAD are such that they 
are nothing but "basic customs duties" (BCD). Howe ver in doing so,  the United States has ignored 
the judicial interpretation, the purpose of the levy, the methodology of calculation, and the actual 
imposition and co-relation of the AD and the SUAD with  the internal taxes that they are intended to 
counter-balance. These factors clearly establish that these latter duties are distinct from each other, 
meant to serve separate purpose and have distinct effect and thereby can not be treated as BCD.  
4.243  The United States argues that the stated polic y purpose or intent of a measure does not 
determine whether a duty is an OCD or an ODC and should therefore be disregarded. India offers an 
explanation of the purpose behind its duties to s upport its averments on the structure, design and 
effect of the duties and submits that the Panel is  not precluded from considering the policy purpose of 
the duties while determining whether AD and the SUAD are OCDs/ODCs.
69  
4.244  The United States in the alternative argues that  the AD and the SUAD are ODCs. It contends 
that since the AD and the SUAD are applied at th e time of importation and as a "consequence of 
importation"70 they must automatically qualify as an ODC if  they are not characterized as OCD. India 
submits that even though the two duties are imposed at the time of importation, they are not levied as 
a "consequence of importation"; instead the liability arises as a consequence of the levy of internal 
duties and charges on the like domestic products. Since both the AD and the SUAD are imposed in 
lieu of internal taxes and charges, they are permitted under Article II: 2(a) of the GATT 1994.  
                                                      
69 Previous WTO Panels have considered the stat ed purpose of a measur e while characterizing a 
measure under the WTO law. See Panel Report, US – Offset Act (Byrd Amendment) , para. 7.41 
70 US second written submission, para 19 where the US seems to define "at the time of importation" as 
"the event for which liability for a duty ensues". WT/DS360/R 
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  2. The AD and the SUAD are equivalent to internal taxes 
4.245  India has consistently maintained that bot h the AD and the SUAD are equivalent to the 
internal charges that they are intended to offset, and are imposed in accordance with Article III: 2 of 
the GATT 1994. With the revocation of the AD on al coholic beverages through CN 82/2007 and the 
introduction of the full refund mechanism for th e SUAD paid through CN 102/2007 the possibility 
that imported products are taxed in excess of dom estic like products on account of the AD or the 
SUAD has been removed.71 
(a) AD is equal to the excise duty 
4.246  India has made every effort to demonstrate that the AD imposed under Section 3(1) of the 
CTA is equivalent to the excise duty imposed on like domestic products. For all products other than 
alcoholic beverages the AD is charged at the same  rates as the central excise duty on the like domestic 
products.72 For alcoholic beverages on the other hand, the AD was intended to offset the multiple 
levels of State excise duty imposed on them73 and since it could not be identical to any one single rate 
of State excise duty, it was imposed at a rate arrived at by reasonable approximation of the excise duty rates payable in different States.  
4.247  The United States argues that the relevant por tion of India's CTA mandates the imposition of 
the AD the highest rate where there are multiple rate s of domestic excise duty.  India has shown that 
Section 3(1) of the CTA does not necessarily mandate the imposition of AD at the highest rate; the 
Central Government retains the discretion to either  exempt a product from the levy or impose the duty 
at a reduced rate. For instance, wh en the AD on alcoholic beverages was in effect prior to 3 July 2007 
it was lower than the corresponding ex cise rates in several states.   
4.248  However in view of the concerns raised by its trading partners that this method of arriving at 
the rate of AD had resulted in some inconsis tencies in the way it was implemented through 
CN 32/2003, India decided to remove it through CN 82/2007. The United States argues that 
CN 82/2007 does not result in complete removal of the AD and moreover since the customs 
notification was brought in after the constitution of th e Panel, it shall not be considered. India submits 
that the CN 82/2007, by exempting the goods from the levy of duty imposed under CN 32/2003 as a 
matter of fact results in complete removal of the AD on alcoholic beverages. India also submits that 
the Panel may consider CN 82/2007 as being within its Terms of Reference and such a consideration 
would effectively bring about a resolution of the dispute. 
(b) SUAD is equivalent to the VAT, CST and other taxes and charges 
4.249  Contrary to the US submission , the SUAD is e quivalent to the VAT, CST and other taxes and 
charges (internal taxes & charges)  and has been imposed in accordan ce with Article II: 2(a) of the 
GATT 1994.  The structure of the SUAD is calibrated with the internal taxes and charges levied on 
domestic products so that it does not result in a heavier tax burden on imported like products. There 
are generally four rates of a VAT/CST levy in India:   "nil", 1 per cent, 4 per cent and 12.5 per cent.  
                                                     
 
71 The United States has relied on India "admissions" that there may be some limited instances in which 
the AD on alcoholic beverages (Para 33 of US seco nd written submission) and the SUAD on the Identified 
Products (Para 44 of US second written submission) could be "in excess" without considering that the 
revocation of the AD on alcoholic beverages and the introduction of the refund mechanism for the SUAD have 
resulted in the removal of any possible situation of excessive taxation. This is contrary to the very objective for 
which the Panel was constituted, i.e. achieving a satisfactory settlement of the matter. 
72 The rates of AD as per Section 3(1) of the CTA are equal to rates of central excise provided in First 
Schedule to the Central Excise Tariff Act.   
73 Under the Constitution pf India, excise duty on alcoholic beverages can be imposed only by the 
Sates.  WT/DS360/R 
 Page 49 
 
 
  Correspondingly the SUAD is levied either at "nil" rate  or at the rate of 1 per cent or 4 per cent. For 
all products where the VAT/CST is charged at 12.5 per cent above, the SUAD remains 4 per cent. In 
addition, the system of refunds ensures that in no situations the importe d products are charged a 
SUAD in excess of the like domestic product.74  
4.250  Secondly, the comparison of the net tax burd en on imported and domestic like products in 
each type of sale transaction shows that the two are mathematically equivalent in each type of 
transaction of sale, i.e. when a product is imported into India (a) for direct consumption; (b) for 
further manufacture; and (c) for the purpose of furthe r re-sale. An analysis of the taxes payable in 
each of these three types of transaction, reveals th at in no transaction is the tax burden on imported 
products in excess of that borne by domestic lik e products. In addition, the credit and refund 
mechanism as introduced through CN 102/207 ensur es that no imported products can be subjected to 
both the SUAD and the CST/VAT. The mechanism for re fund is clear, simple and transparent and the 
US apprehensions on the efficacy of the refund mechanism are completely misplaced.  
4.251  In addition to being "equivalen t" to internal taxes, the SUAD and the AD are applied in a 
manner consistent with Article III: 2 of the GATT 1994 since neither result in the taxation of imported 
products "in excess" of domestic like products.  
(c) The AD and the SUAD are applied in a manne r consistent with Article III:2 of the 
GATT 1994  
4.252  In addition to being "equivalen t" to internal taxes, the SUAD and the AD are applied in a 
manner consistent with Article III:2 of the GATT 1994 since neither result in the taxation of imported 
products "in excess of" domestic like products.75 Article III:2 of the GATT 1994 requires a 
comparison of the "actual tax burden" im posed on imported and domestic like products76 and as of 
date, India's taxation system is calibrated to ensu re that the burden of taxation on imported products 
does not exceed the burden placed on domestic like products in any transaction of sale.  
3. Terms of reference 
4.253  The United States contends that CN 82/2007 and 102/2007 are not within the Panel's Terms 
of References since they were introduced after th e Panel's establishment and the analysis of these 
measures will create a moving target and will "shield" the AD from the Panel's scrutiny. It is submitted that the Panel is well within its manda te to look into CN 82/2007 and CN 102/2007 even 
though they were introduced after the establishment of  the Panel since: (a) a panel has the authority to 
examine a legal instrument enacted after the est ablishment of the Panel that amends a measure 
identified in the Panel request
77; and (b) the United States had itself requested that "any amendments, 
related measures, or implementing measures"78 be included within the Pa nel's Terms of Reference. 
The two notifications issued after the constitution of the Panel were not in tended to create a moving 
                                                      
74 For example, where the CST is paid at 3 per cent (i n the case of sale from one registered dealer to 
another) the importers can claim a refund of the exce ss SUAD paid as per the mechanism introduced through 
CN 102/2007 
75 The United States submissions commenting on Footnote 51 of India's First Written Submission 
pertaining to the permissible " de minimis"  level (US second written submission, para 32 and footnote 44), is no 
longer relevant since the revocation of the AD on alcoholic beverages through CN 82/2007 and the introduction 
of the refund mechanism for the SUAD through CN 102/2007 have effectively removed any possibility that the 
AD or the SUAD imposed on imported products are "in excess of" internal taxes. India is therefore not 
addressing this issue in any further detail. 
76 Panel Report, Argentina – Hides and Leather , para. 11.183 to 11.185. 
77 Appellate Body Report, Chile – Price Band System , para. 144 
78 India – Additional and Extra-Additional Duties on Imports from the United States , Request for the 
Establishment of a Panel by the United States, WT/DS360/5, 25 May, 2007. WT/DS360/R 
Page 50 
 
 
  target, but to address the concerns raised by India's trading partners. Also, the notifications in question 
do not "change the essence" of the measures in ques tion and the mechanism for the levy of AD and 
SUAD on imports continues to subsist.  
4. The distinction between mandatory vs. discretionary 
4.254  The United States seems to suggest that the di stinction between mandatory and discretionary 
measures is not relevant to its claims.79 India however and has consistently highlighted the 
discretionary nature of Section 3(1) and 3(5) of the CTA in order to point out that the statutory 
provisions do not  mandate a WTO inconsistency and th e Panel's investigation, if any, may be limited 
to the Customs Notifications. This distinction be tween mandatory and discretionary provisions has 
been observed in previous Panel and Appellate bod y decisions where it has been viewed as being a 
"threshold consideration".  
5. The United States has failed to make out a prima facie case 
4.255  Throughout these proceedings, the United States h as failed to demonstrate that the AD or the 
SUAD are taxes that qualify as an OCD or an  ODC as defined in the second sentence of 
Article II:1(b) of the GATT 1994. Instead, it has s ought to discharge its burden of proof by arguing 
that India has not adequately demonstrated that the AD or th e SUAD is not an OCD. In order to make 
an affirmative claim that the AD and the SUAD are OCDs, the United States must look beyond the mere point at which the duty is levied and the ma nner in which the duty is expressed, since neither of 
them will necessarily mean or indicate that the duty is an OCD. In addition, the United States must 
substantiate in the affirmative that the "structu re, design and effect" of the AD and the SUAD make it 
an OCD.
80 The United States has failed to take into acc ount any such relevant factors in framing its 
claim, and has instead observed that India has fail ed to demonstrate that the AD or the SUAD is not 
an OCD.81 
6. Conclusion  
4.256  In conclusion India would like to emphasize that both the levies under the CTA – AD and 
SUAD are legitimately imposed to offset domestic  taxes imposed on like domestic goods in India and 
such a levy is permissible under Article II.(2)(a) of the GATT 1994. India has demonstrated at length 
how neither duty can be misconstrued as being either  an OCD or and ODC and that the rates of the 
duties are implemented through customs notifications. The statutory provisions of the CTA are purely 
discretionary and do not in themselves mandate a WT O inconsistency and are consequently not to be 
treated as measures in the present disp ute. India has always complied with its international obligations 
and the enactment of CN 82/2007 an d 102/2007 to address concerns rai sed by its trading partners is 
indicative of this fact India wishes to unequivoca lly and emphatically reiterate its commitment to 
abide by its WTO commitments.  
V. ARGUMENTS OF THE THIRD PARTIES 
A. AUSTRALIA  
1. Introduction 
5.1 Australia reserves its position in relation to an y issue not addressed in its written submission 
or oral statement.   
                                                      
79 US second written submission, para.80. 
80 Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina),  para. 189. 
81 US oral statement at the first meeting of the Panel, para. 6.  WT/DS360/R 
 Page 51 
 
 
  2. Removal of the additional duties 
5.2 The Panel is not precluded from making findings on measures which are properly within its 
terms of reference, even where those measures ha ve ceased to exist. However, a panel need only 
consider those claims which must be addressed to  resolve the matter at issue in the dispute. 
 
5.3 If the Panel considers that India's additional duty (AD) on alcoholic beverages has indeed 
been withdrawn and has "ceased to exist", it should ne vertheless consider whether, in the particular 
circumstances of this dispute, it is necessary to  make findings on the AD in order to resolve the 
dispute. 
3. Consistency of the AD and "such additional duties" as would counterbalance taxes such 
as Sales Tax, Value-Added Tax, local tax or any other charges ("SUAD") with 
Article II:1 of the GATT 1994 
5.4 A threshold issue is whether (as claimed by  the United States) the AD and the SUAD are 
"ordinary customs duties'" (OCDs) or "other dutie s and charges'"(ODCs) within the meaning of  
Article II:1(b) of the GATT 1994 or whether (as cl aimed by India) the AD and SUAD instead fall into 
a separate category of duties permitted under Article II:2(a).  
5.5 There is no definition of either "ordinary customs duty" or "other duty or charge" in the 
GATT. In addition to considering the ordinary meaning of the terms, the Appellate Body has 
suggested that determination of whether a measure  constitutes an OCD or ODC should be based on 
the structure, design and application of the specific measure in question. The name or stated purpose 
the Member imposing the measure ascribes to it is not determinative. Australia agrees with India that  
Article II:2 of the GATT 1994 measures may be based on value or volume and still be distinct from 
OCDs and ODCs within the meaning of Article II: 1(b) of the GATT 1994. Aust ralia therefore submits 
that further consideration by the Panel of the me asures' overall design, application and structure is 
necessary in order to decide whether the AD and SUAD fall within the scope of Article II:1(b) or 
alternatively Article II:2(a).  
5.6 In the event that the Panel accepts India's argum ent that its measures are properly within the 
terms of Article II:2 of the GATT 1994, it follows that they are neither OCDs or ODCs and therefore 
would be exempt from bound commitments.  
4. Article II:2 of the GATT 1994   
5.7 Article II:2(a) of the GATT 1994 permits Members to impose duties in excess of their bound 
commitments where necessary to counterbalance internal taxes from which imported products are 
exempt, provided that such charges on imports are "equivalent" to the internal taxes in question. 
5.8 Article II:2(a) of the GATT 1994 requires that, in  order to be categorised as "equivalent" to 
internal taxes within the meaning of that provi sion, measures must also be applied in a manner 
consistent with Article III:2 of the GATT 1994.  The United States clai ms in the alternative that the 
Indian measures are inconsistent with this requirement.  
5.9 On the face of India's legislation, including Section 3(1) and Section 3(5) of the Customs 
Tariff Act, the AD and SUAD could be charges "equiva lent" to internal taxes and within the scope of 
Article II:2(a). In Australia's view, however, this question remains an open one, to be answered by 
further consideration of the measures' overall design,  application and structure.  In particular, if 
imported products are being taxed u pon their arrival in an Indian st ate on the same basis as locally 
produced products, they cannot also be subject to AD and SUAD imposed at the border.  WT/DS360/R 
Page 52 
 
 
  5.10 In addition, the application of India's meas ures may result in some imported products 
incurring charges "in excess of" those imposed on some like domestic products (counter to the 
requirements of Article III:2 of the GATT 1994).  Th e "Explanation" to sub-section 3(1) of India's 
Customs Tariff Act (under which AD is applied to al coholic beverages) expressly states that where 
excise duty is leviable at different rates, AD shall be calculated at the highest (excise) duty.  Similarly, 
the "Explanation" to sub-section 3(5) of India's Customs Tariff Act expressly states that where 
internal taxes are leviable at different rates, SUAD will be fixed at the highest rate.  On its face, the 
legislation under which the AD and SUAD are imposed  mandates charges in excess of internal taxes 
and charges on like domestic products, at least in some parts of the territory of India.   
5. Mandatory vs. discretionary legi slation and "as such" claims 
5.11 It is clear that legislation having general application may be challenged "as such". The 
Appellate Body has identified the importance of this facet of the dispute settlement system in 
protecting "not only existing trade but also the secu rity and predictability ne eded to conduct future 
trade". 
5.12 However, Australia disagrees with India's a pplication of a mandatory and discretionary 
distinction in determining whether measu res are challengeable "as such".  In US – Corrosion 
Resistant Steel Sunset Review , the Appellate Body found that "the import of the 
'mandatory/discretionary distinc tion' may vary from case to case"; cautioned against "the application 
of this distinction in a mechanistic fashion" ; and stated that there is no reason why "in principle, non-
mandatory measures cannot be challenged 'as such'".   The Appellate Body concluded that whether a 
challenged measure is mandatory is not a preliminary jurisdictional matter but is "relevant, if at all, 
only as part of the Panel's assessment of whether the measure is, as such, inconsistent with particular 
obligations".   
5.13 Australia therefore submits that a mandatory/discr etionary distinction is not determinative of 
whether a Panel has jurisdiction to consider the re levant measures. Further, the Appellate Body has 
left open the possibility that discretionary legisla tion could be found to be inconsistent with WTO 
obligations.   
B. CHILE 
5.14 Chile would like to thank the Panel for the oppor tunity to present its views in this dispute 
between the United States and India concerning the application by India of additional and extra-
additional duties on certain imports from the United States. 
5.15 Chile reserved its rights as a third party in this di spute in order to safeguard the interests of its 
alcoholic beverages industry, chiefly its wine indus try.  In view of the increasing importance of the 
Indian market for Chile's wine and spirits expor ts, it is important that the recommendations and 
rulings of the Panel provide legal certainty with respect to the treatment granted by the Indian 
authorities to imports of such products. 
1. The measures in force prior to 3 July 2007 and amendments thereto 
5.16 On the basis of what the two parties themselv es claimed in their respective submissions, Chile 
considers that the Panel should begin by ruling on whet her or not the Indian measures in force prior to 
3 July 2007 violate its obligations under Article II of the GATT 1994. 
5.17 Regarding India's new measure of 3 July 2007 withdrawing the additional duty on alcoholic 
beverages, the United States contends that this measur e is outside the Panel's terms of reference, since 
it should only be examined at the implementation stag e, where applicable.  India, on the other hand,  WT/DS360/R 
 Page 53 
 
 
  argues that the Panel is competent to rule on this i ssue, in that the new measure is an amendment that 
does not alter the essence of the measure identified in  the request for a panel, as confirmed by the 
Appellate Body in Chile – Price Band System . 
5.18 In this connection, Chile would like to stress what  it has already stated, namely that the Panel 
should, as an initial matter, rule on the Indian m easures before the recent amendment, considering the 
actual requests of the parties in that respect, afte r which it will need to decide on the subsequent 
measure amending them, and the conformity of that measure with India's international obligations.  
Here, Chile agrees with the United States, and reaffirm  the need for the Panel to rule definitively on 
the consistency of the said measures. 
5.19 Without prejudice to the Panel's ruling, neither India nor any other WTO Member is under 
any obligation to keep its measures suspended or un changed pending the future ruling of the Dispute 
Settlement Body – a Member may revise its measur es at any time, and adjust them as it sees fit, 
provided they are consistent with its obligations under the WTO Agreements.  Thus, such measures 
cannot remain outside the scrutiny of a panel.  A ru ling in this respect, and in particular in this 
dispute, would contribute to the certainty that Ch ile hopes to obtain with respect to access to the 
Indian market for its products. 
2. India's arguments with respect to Article II of the GATT 1994 
5.20 India maintains that the extra-additional dut ies fall into the categories described in 
Article II:2(b) of the GATT 199482, and are not therefore inconsistent with Article II:1 of that 
Agreement.  To substantiate its claim, India refers  to reports of the Appellate Body, in particular Chile 
– Price Band System .  Chile would like to make two remarks in that respect. 
5.21 Firstly, India argues83 that duties that are imposed at the time of import may be expressed in 
ad valorem  or specific terms, but that this does not ma ke them "other duties and charges" under the 
second sentence of Article II:1(b) of the GATT 1994.   India's reference to paragraph 275 of the 
Report of the Appellate Body in Chile – Price Band System is inappropriate, since that paragraph 
merely states that the fact that "other duties or charges" take the form of an ad valorem  or a specific 
duty does not make them "ordinary customs duties", which may also be ad valorem  or specific.  It 
should be recalled that in that case, what was being discussed was the application of Article II:1 of the 
GATT 1994, and not Article II:2 as in this case. 
5.22 Secondly, the final point in the preceding paragraph is particularly important to the analysis of 
India's second argument, namely that Article II:2 of the GATT 1994 authorizes the application of charges equivalent to internal taxes, and that are im posed at the time of import.  Chile submits that in 
paragraph 276 of the above-mentioned report, the Appellate Body is referring to the situation 
regulated by Article II:2 for referential and illustra tive purposes or as an example, but that this does 
not mean that the report is actually ruling on Article II:2. 
3. Conclusion 
5.23 In Chile's view, the Panel should rule in such  a way as to reinforce one of the fundamental 
pillars of the GATT 1994, i.e. the principle of mark et access as reflected in the commitments specified 
in a Member's Schedule of Commitments. 
                                                     
 
82 India's first written submission, paragraph 52. 
83 India's first written submission, paragraph 57. WT/DS360/R 
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  C. EUROPEAN COMMUNITIES  
1. Introduction 
5.24 The intervention of the EC in this dispute is  about the discriminatory taxation imposed by 
India on wine and spirits originating in third co untries, by means of the measures which will be 
referred to as the Additional Duty (the "AD") and the Extra-Additional Duty (the "EAD"). 
2. Review of a measure withdrawn after panel establishment 
5.25 The European Communities consider s that a preliminary question that should be resolved is 
whether this Panel must assess and, if so, make  recommendations on the AD, considering that it has 
apparently been withdrawn by India.  
5.26 It is the opinion of the European Communities th at the Panel ought to consider the claims 
made by the United States on the AD, and thus assess this measure as it existed at the time of the establishment of the Panel. In fact, if a WTO Memb er could avoid the examination of its measures by 
simply withdrawing or suspending those measures, this could result in the paralysis of the Dispute 
Settlement system. 
5.27 However, as the measure is no longer in force,  the European Commun ities believes that the 
Panel does not need to make a recommendation on  the AD, unless the United States can provide a 
reasonable explanation of why it considers that such a recommendation on a withdrawn measure can 
be fruitful. 
3. Border duty or internal taxes? 
5.28 In order to assess the legality, as a matter of WT O law, of the AD and of the EAD it is 
necessary, first of all, to determine whether they are import tariffs (customs duties) falling within the 
scope of Article II of the GATT 1994 or internal taxes within the meaning of Article III of the 
GATT 1994.   
5.29 The European Communities observes that these duties are due on importation and as a 
condition for importation. They appear to be calcula ted and collected by the Central Indian customs 
authorities – pursuant to the basic Indian legisl ation on customs duties – exclusively on imported 
products.  
5.30 For these reasons, it is the view of the Europ ean Communities that th e AD and the EAD must 
be regarded as customs duties within the meaning of Article II:1 of the GATT 1994, and not, as India 
argues, as border tax adjustments intended to offset  various internal taxes. More specifically, these 
measures appear to constitute "ordinary customs duti es" within the meaning of Article II:1(b) of the 
GATT 1994. 
4. Article II:1 of the GATT 1994 
5.31 India's tariff schedule specifies as regards wines and spirits a bound rate of ordinary customs 
duty of 150 per cent ad valorem . This means that the combination of the basic customs duty and the 
AD and/or the EAD will often lead to an imposition of customs duties in excess of that set forth in the 
tariff schedule, thereby violating Article II:1 of the GATT 1994.  
5.32 However, even if the contested  measures were to be regarded  as "other duties or charges", 
they would still be in breach of the said provision, si nce India's tariff schedule lists no "other duties or 
charges" as regards wines and spirits.  WT/DS360/R 
 Page 55 
 
 
  5. Articles II:2(a) and III:2 of the GATT 1994  
5.33 According to Article II:2(a) of the GATT 1994, WTO Members may impose on the 
importation of any product "a charge equivalent to  an internal tax imposed consistently with the 
provisions of paragraph 2 of Article III in respect of the like domestic product or in respect of an 
Article from which the imported products has been ma nufactured or produced in whole or in part".  
5.34 India contends that the AD and EAD are in fact internal taxes intended to offset, respectively, 
the excise duty and various other taxes (sales tax, VAT and other local taxes) which weigh on 
internally produced alcoholic beve rages but not on imported ones.  
5.35 However, even if one were to follow India' s arguments (quod non), the contested measures 
would still violate WTO rules, and in particular Article III:2 of the GATT 1994.  
5.36 First of all, the evidence gathered from th e European Communities suggests that the AD 
exceeds the taxation resulting from taxes denominated "e xcise duty" in the legisl ation of most Indian 
States. Moreover, it appears that imported wines and spirits are not systematically exempted from the 
plethora of different sales taxes, value added taxes,  and other indirect taxes which the EAD allegedly 
offsets.  
5.37 In any event, India has not been able to illu strate and explain any mechanism designed to 
ensure that, in all cases, the contest ed measures are not applied in excess of the internal taxes they are 
supposed to offset. In this regard it should be obser ved that it is undisputed that some of the taxes 
allegedly offset by the AD and the EAD vary greatly fr om one Indian state to another and that in some 
States they are not even levied. 
6. Conclusions 
5.38 In the light of the above considerations, the European Communiti es believes that the 
contested measures constitute customs duties, and are thus incompatible with Article II:1 of the 
GATT 1994.  
5.39 However, even if they were regarded as in ternal taxes, and thus simple border tax 
adjustments, they would still be WTO incompatib le. Indeed, India has not proven that under all 
circumstances there is a mechanism ensuring th at the AD and the EAD are not in excess of the 
plethora of internal taxes, which greatly vary from one Indian state to another, and which are imposed 
on alcoholic beverages produced in India. 
D. JAPAN  
1. Customs duty or internal tax? 
5.40 In order  to assess the consistency of the SUAD with the GATT, it is necessary, first of all, to 
determine whether it is a customs duty within the sc ope of Article II of the GATT 1994 or an internal 
tax within the scope of Article III of the GATT 1994. 
5.41 In order to be identified as internal tax with in the scope of Article III of the GATT 1994, the 
Ad Note to Article III requires a concerned measure to fulfil two conditions; (i) the measure is applied 
to both imported products and the like domestic pr oducts, and (ii) is collected at the time of 
importation.  Whilst Japan does not have any intent to develop its argument on this point nor to take 
any particular position, Japan considers that the SUAD could be highly possibl e to violate either  
Article III or Article II of the GATT 1994, depending on the characterization of the SUAD as customs duty or internal tax as discussed below.  WT/DS360/R 
Page 56 
 
 
  2. Article III of the GATT 1994 applies to the SUAD 
5.42 India has claimed that the SUAD falls into a separate category of duties described in 
Article II:2(a) of the GATT 1994.84 In addition, India mentioned at the Trade Policy Review held in 
June 2007, in response to Japan's question that count ervailing duty (which consists of the AD and the 
SUAD) is categorized as internal tax. 
5.43 So long as the SUAD is categorized as internal ta x, it needs to be consistent with Article III:2 
of the GATT 1994. With regard to the requirement  of Article III:2 of the GATT 1994, the Appellate 
Body in Canada – Periodicals  held that two questions need to be answered to determine whether 
there is violation of Article III:2 of the GATT 1994: (a) whether imported and domestic products are 
like products; and (b) whether the imported produc ts are taxed in excess of the domestic products. 
And if the answers to both questions are affirmative, there is a violation of Article III:2, first sentence. 
If the answer to one question is negative,  there is a need to examine further. 
5.44 With regard to the first element, India does not  contend, and Japan agrees, on the point that 
imported products, on which the SUAD is imposed , and domestic products, on which the concerned 
internal taxes are imposed, are like products.85 
5.45 With regard to the second element, India insisted that the SUAD does not tax imported 
products "in excess of" of domestic like products.86 Japan finds, however, several uncertainties exist 
between the arguments made by India and the articles quoted by India as its legal basis. 
5.46 Contrary to the explanation of the India, the SUAD seems not to offset the Sales Tax/Value 
Added Tax by state governments (VAT), or the Cent ral Sales Tax by the Central Government (CST), 
and/or other local taxes and charges on the sale of domestic products.  As India stated exactly, 
imported goods are exempted from the imposition of these duties "at the time of importation"87, 
however, once products are imported and put into do mestic marketing channe ls, it is quite unclear 
whether these duties are imposed on the "imported" products or not. 
5.47 First, States Governments could impose VAT on imported goods after their importation.  
Article 286 of the Constitution of India ("the Constitution") provides that "No law of a state shall 
impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place … (b) in the course of the import of  the goods into, or export of the goods out of, 
the territory of India". 
5.48 It is clear that the Constitution does not prohibit state governments to impose VAT on 
imported products, but restrict them to impose VAT just on the sale of goods where such sale or 
purchase takes place "in the course of the import", or following to India's expression, "on the 
importation of goods from foreign countries".
88  In other words, in any re-sale situation, the imported 
products could remain subject to domestic VAT a nd importers are unable to claim credits for the 
SUAD paid.  If that is the case, the SUAD is applie d in addition to, and not in substitute for, the VAT 
and imported products are taxed "in excess of" domestic like products. 
5.49 Second, the plain reading of the text of the Central Sales Tax Act of 1956 ("CST Act") 
indicates that CST is levied on the inter-state movement both of importe d and domestic products.  
Section 6(1) of CST Act provides that "[p]rovided that  a dealer shall not be liable to pay tax under this 
                                                      
84 India's first written submission, para. 52. 
85 India's first written submission, paras. 83-84. 
86 Ibid, paras. 85-91. 
87 Ibid, para. 67. 
88 Ibid, para. 71.  WT/DS360/R 
 Page 57 
 
 
  Act on any sale of goods which, in accordance with the provisions of sub-section (3) of section 5, is a 
sale in the course of export of those goods out of the territory of India". 
5.50 By quoting Section 6(1) of CST Act, India insists that imported products are exempted from 
CST.89  However, Section 6(1) does not provide to exempt imported products from the imposition of 
CST, but only goods for exports from India are exempt ed.  In addition, Section 5(1) of the CST Act, 
another legal basis quoted by India for the justification of the SUAD, just provides the definition for 
when a sale or purchase of goods be deemed to take  place "in the course of the export of the goods"90 
and not provides any legal justification to show that  "CST is levied only on the inter-state movement 
of domestically manufactured products".91  
5.51 Even proved that imported products are exempted  from CST "at the time of importation", as 
stated by India92, the SUAD could not counter-balance CST.  In the case where an importer imports, 
discharges and sells a product within one state in India, the SUAD is imposed on the imported 
products at the time of importation.  On the contrary, if a manufacturer produces and sells a like 
product within the same State, he is not liable for any CST, since the domestic like product is not sold "in the course of Inter-State trade".
93  In that case, the SUAD is imposed on the imported products "in 
excess of" the taxes and charges im posed upon like domestic products. 
5.52 Third, the SUAD does not necessarily offset other local taxes and charges, such as transport 
fees, various types of surcharges, cess etc.  The Constitution prohibits state governments to impose "a 
tax on the sale or purchase of goods where such sale or purchase takes place in the course of the 
import of the goods".94  State governments could impose other local taxes and charges not on the sale 
or purchase of goods, but on other economic activities, su ch as transportations.  For example, octroi is 
levied by Municipalities on "entry of goods"95 which is out of the restriction of the Constitution.   
5.53 As pointed out by India, "the quantum and character of these local taxes and charges may 
change from State-to-State".96  In other words, some local taxes may not be imposed on imported 
products, but the others would be  on imported products as in th e same manner for domestic like 
products.  Examining the Argentine minimum specific duty system, the Appellate Body of Argentina 
– Textiles and Apparel  found that the concerned system is in violation of Article II of the GATT 1994, 
for the reason that its structure and design remains th e possibility that the ad va lorem equivalent of the 
customs duty collected would be in excess of the bound ad valorem rate.97  By analogy, since the 
structure and design of the SUAD remains the po ssibility that the SUAD may not offset these local 
taxations, the SUAD should be found as the violation of Article III of the GATT 1994. 
5.54 In addition to the above, Japan would like to  point out there is a factual basis supporting 
Japan's legal argument. Japanese industries are facing  great difficulties in India because of the SUAD. 
According to the industries, internal taxes such as VAT, CST and local tax or charges such as Octroi 
are levied on imported goods after customs clearance  and therefore SUAD is applied in addition to, 
and does not offset, such internal  taxes. Japan cannot emphasize enough the point that the India's 
theoretical arguments totally contradict actua l experience of various Japanese companies. 
                                                      
89 Ibid, para. 67. 
90 Article 5(1) of CST Act. 
91 India's first written submission, para. 71. 
92 Ibid. para. 67. 
93 Article 6(1) of CST Act. 
94 Article 286 of the Constitution of India. 
95  WTO Trade Policy Review Report of India, Reply to Japan's question on Special Additional Duty, 
WT/TPR/M/182/Add.1, p.188. 
96 India's first written submission, para. 79. 
97 Appellate Body Report, Argentina – Textiles and Apparel , paras. 48-54. WT/DS360/R 
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  5.55 Based on the above stated reasons, Japan requ ests the Panel to examine whether the SUAD 
offset VAT, CST, and/or other local taxes charg es or not, and if the S UAD does not counter-balance 
these internal duties, to find that the SUAD is im posed on the imported goods "in excess of" the taxes 
and charges imposed upon like domestic goods in violation of Article III:2 of the GATT 1994. 
3. Alternatively, Article II of the GATT 1994 applies to the SUAD 
5.56 Considering the possibility that the SUAD is categorized as customs duties rather than 
internal duties, Japan also would like to present its view on its consistency with Article II of the 
GATT 1994.  
5.57 As pointed out by India, the key provision for the discussion on the consistency of the SUAD 
with Article II of the GATT 1994 is Article II:2(a).98  Following Article II:2(a), if the SUAD is 
"imposed consistently with the provisions of pa ragraph 2 of Article III", Article II would not be 
applied to the SUAD. 
5.58 As discussed above99, Japan concerns that the SUAD would not offset VAT, CST, and/or 
other local taxes charges, and would violate Ar ticle III:2 of the GATT 1994. If that is the case, 
Article II of the GATT 1994 will be applied to the SUAD.  In other words, the SUAD does not fall 
into "a separate category of duties" described in  Article II:2(a) of the GATT 1994 and should be 
qualified either as "Ordinary Customs Duties (OCDs)" or as "Other Duties or Charges (ODCs)".100   
5.59 The Panel in Chile – Price Band System  found that OCDs differ from ODCs, which applied 
on the basis of factors of an exogenous nature such as fluctuating world prices.101  Although there 
could be some spaces for discussions on the character ization of the SUAD, Japan considers that the 
SUAD is inconsistent with Article II of the GATT 1994, regardless of whether it is characterized as 
OCDs or as ODCs. 
5.60 As claimed by United States, the SUAD is impo sed on the broad range of products including 
those products covered by Ministerial Declarati on on Trade in Information Technology Products 
(ITA).102  The ITA provides for participants, including India, to "bind and eliminate customs duties 
and other duties and charges of any kind, within the meaning of Article II:1(b) of the General 
Agreement on Tariffs and Trade 1994"103 with respect to all the IT products covered by the ITA (ITA 
products).  In other words, they are to eliminate th e duties, either in the form of OCDs or ODCs, on 
ITA products.   
5.61 Admittedly the basic tariff rates of India for IT A products are zero and no duties or charges is 
described in its Schedule as ODCs.  On the other hand, the Customs Tariff Act, 1975 and its related 
customs notifications do not exempt ITA products from the SUAD.  As a result, importation of ITA 
products into India is subject to customs duty i. e. 4 per cent of the assessable value of imported 
products.  In case that the SUAD, regardless of its  characterization either as OCDs or as ODCs, does 
not counter-balance VAT, CST and other local duties and is inconsistent with Article III:2 of the 
                                                      
98 Article II:2(a) of the GATT 1994 provides that "a charge equivalent to an internal tax imposed 
consistently with the provisions of paragraph 2 of Article  III in respect of the like domestic product or in respect 
of an Article from which the imported product has been manufactured or produced in whole or in part" shall be 
exempted from the obligation of Article II of the GATT 1994. 
99 Third party submission of Japan, para. 9.17. 
100 India's first written submission, para. 52. 
101 Panel Report, Chile – Price Band System , paras. 7.51-7.52. 
102 Exhibit US-1A of US first written submission. 
103 Ministerial Declaration on Trade in Info rmation Technology Products, WT/MIN(96)/16, 
13 December 1996, para. 2.  WT/DS360/R 
 Page 59 
 
 
  GATT 1994, the imposition of the SUAD on ITA products  is inconsistent with Article II of the 
GATT 1994. 
4. Conclusion 
5.62 For the foregoing reasons, Japan concerns that India's SUAD could be highly possibly 
inconsistent either with Article II or  with Article III:2 of the GATT 1994.  
E. VIET NAM 
5.63 Viet Nam confirms that it has a systematic inte rest on the interpretation and application of the 
GATT, in particular, to the Indian tariff system under the review of this Panel. Viet Nam will focus on 
the following three questions, without prejudice to  its position on any other one not addressed on this 
occasion.104 
• Should the Panel have the authority to rule on Additional Duties (AD) which India 
claims have been removed in practice; 
 
• The distinction between mandatory and discretionary legislation subject to  challenge; 
and 
 
• Indian Additional Duties in relation to the provision of Article II:2(a). 
 
1. Withdrawal of additional duties after Panel establishment 
5.64 Viet Nam is of the opinion that, although th e Panel is not precluded from considering the 
measure, within its terms of reference, as it existe d at the time of the establishment of the Panel, the 
ultimate objective of this Panel is to recommend  that the Dispute Settlement Body request the 
defendant to bring such measure, if and only if  inconsistent with the WTO Agreement, into 
conformity with its obligations under the GATT 1994. Hence, where the measure in question has 
actually ceased to exist, the Panel should consider  whether it is worth making findings, in the 
particular case of Additional Duties, for the purposes of resolving this current dispute. 
2. Challengeable nature of mandatory  vs. discretionary legislation 
5.65 As indicated by India in its first written s ubmission dated 31 Augus t 2007, the Appellate 
Body held in its report on US – 1916 Act  that: 
"[W]hereas legislation which merely gave the discretion to the executive authority of 
a contracting party to act inconsistently with the General Agreement could not be 
challenged as such; only the actual applicati on of such legislation inconsistent with 
the General Agreement could be subject to challenge." 
5.66 It is obvious that those statutes empowering solely the Central Government with  the discretion 
to charge such duties, fix the rate and to issue Customs Notifications to give effect to the discretionary 
power vested in the executive branch, cannot be cons idered mandating actions inconsistent with the 
GATT Agreement. Therefore, it would be appropriate to request the Panel to limit its examination to 
the identified Customs Notifications that impo se the AD and the SUAD in line with the practice 
followed by GATT Panels' and Appellate Body's jurisprudences. 
                                                      
104 Viet Nam's oral statement. WT/DS360/R 
Page 60 
 
 
  3. Indian additional duties in relation to the provision of Article II:2(a) 
5.67 In the view of Viet Nam, it is clear that Article II:2(a) allows Member to impose duties in 
excess of their bound commitments if such duties ar e equivalent to internal taxes which are also 
applied in a manner consistent with Article III:2 of the GATT 1994: not in excess of those applied to 
like domestic products and, moreover, not affo rding protection to domestic production. The 
consideration of the respective duties in question in  relation to Article II:2(a) should be based on the 
findings of the actual mechanism operating such du ties in practice.  Given the removal of AD in 
reality, the question is how the Panel is going to judge a measure in violation of the GATT Agreement 
based just on the descriptive facts from the past, wh ile the objective of the judgment is to put an end 
to the measure if found not to be consistent with the GATT Agreement. For the SUAD, with the 
duties subject to legal binding of less than or equal to 4 per cent of the assessable price, to counter balance taxes such as Sales Tax, Value Added Tax, local tax or a ny other charges as defined under the 
Indian Law, it merits revisiting the current jurisprudences on the de minimis level of dissimilarity 
taxation or the de minimis level allowed by Notes and Supplementary Provisions to Article III of the 
GATT, Ad Article III, paragraph 3 – as noted in foot note 51 of the first written submission of India of 
31 August 2007. For the argument that the AD ceased to have an effect in practice and the SUAD is 
within the de minimis  level of dissimilar taxation, if exact  equivalence is challenged, it is not 
necessary to consider the criteria of affording pr otection to domestic produc tion under Article III:1 – 
second sentence. Therefore, it seems to Viet Nam th at the SUAD, which is in turn the only measure 
for this Panel's reflection, should be found c onsistent with Article II:2(a) of the GATT 1994. 
VI. INTERIM REVIEW 
6.1   Pursuant to Article 15.3 of the DSU, the fi ndings of the final panel report must include a 
discussion of the arguments made by the parties at the interim review stage.  This Section of the Panel 
Report provides such a discussion.  As Article 15.3 ma kes clear, this Section forms part of the Panel's 
findings. 
A. B
ACKGROUND  
6.2 The United States and India separately requested an interim review by the Panel of certain 
aspects of the Interim Report issued to the Parties on 5 February 2008.105  Neither Party requested an 
interim review meeting.  However, the Parties ma de use of the opportunity to submit further written 
comments on each others' requests.106  On 20 March 2008, the Panel issued its Final Report to the 
Parties on a confidential basis. 
B. PARTIES ' REQUESTS FOR CHANGES TO THE INTERIM REPORT  
6.3 Below, the Panel  will address the Parties' requests for ch anges to the Interim Report. Unless 
otherwise indicated, the references below are to pa ragraph or footnote numbers appearing the in the 
Interim Report.  
1. Comments by the United States 
6.4 As an initial matter, the Panel  observes that the United Stat es in its comments has made a 
number of incorrect or misleading statements a bout the Panel's interim findings.  The Panel has 
clarified its findings in response to comments wh ere it found it appropriate to do so, but otherwise 
considers that they are sufficiently clear and speak for themselves.  Th e fact that the Panel has chosen 
not to respond to relevant statements each time obviously does not imply that the Panel agrees with 
                                                      
105 Letters of the Parties of 19 February 2008. 
106 Letters of the Parties of 4 March 2008.  WT/DS360/R 
 Page 61 
 
 
  these statements.  Separately, the Panel notes that I ndia has commented on some, but not all of the US 
comments.  
6.5 The United States  requests that at para. 1.2 the Panel add a sentence to reflect which 
Members requested to be joined in the consultations and which Members were accepted.  India  
opposes the change, noting that the United States was already given an opportunity to comment on 
this previously.  
6.6 The Panel  has made appropriate changes at para. 1.2,  even though this type of information is 
rarely included in panel reports.      
6.7 The United States  requests that immediately following para. 1.5 the Panel refer to the panel 
established by the DSB in DS352 at the re quest of the European Communities.  India  opposes the 
change, noting that the United States was already gi ven an opportunity to comment on this previously. 
6.8 The Panel  has added a new para. 1.9. 
6.9 The United States  requests that at para. 2.1 the Panel modify the second bullet point. 
6.10 The Panel  has made appropriate changes to para. 2.1. 
6.11 The United States  requests an addition to para. 7.3 for clarification.  India  opposes the US 
request.  
6.12 The Panel  has made appropriate changes to the paragraph in question. 
6.13 The United States  requests the Panel to provide further de tails on its allegation at para. 7.5.  
India  opposes the US request. 
6.14 The Panel  has made appropriate changes to the paragraph in question. 
6.15 The United States  requests additions to para. 7.8, asserting that the paragraph appears 
incomplete and could be read to suggest that the a pplied rates of BCD for imports other than alcoholic 
beverages are typically set out in the First Schedule.  India  opposes the US request, arguing that the 
Panel has correctly recorded the factual position. 
6.16 The Panel  has made appropriate changes to the paragraph in question. 
6.17 The United States  requests that in the first sentence of para. 7.9 the Panel refer to "any duty 
of customs".  India  opposes the US request. 
6.18 The Panel  does not find it appropriate to make th e change requested.  The paragraph in 
question deals with the BCD, as is made clear at para . 7.8, and the relevance of Section 25 to the AD 
and the SUAD is discussed later in the findings.  
6.19 The United States  requests that at para. 7.11 the Panel refer to the relevant statutory basis.  
India  opposes the US request. 
6.20 The Panel  has made appropriate changes to the paragraph in question. 
6.21 The United States  requests additions to the second and last  sentence of para. 7.19 in order to 
reflect more accurately the US claims.  India  opposes the US request. WT/DS360/R 
Page 62 
 
 
  6.22 The Panel  has made appropriate changes to the paragraph in question. 
6.23 The United States  requests that for accuracy and completeness the Panel modify the last 
sentence of para. 7.24 and add a new sentence at the end of that paragraph.  India  opposes the US 
request. 
6.24 For greater clarity, the Panel  has made an addition to the last sentence but does not see a need 
to add the proposed additional sentence.  
6.25 The United States  requests that para. 7.26 refer to India's acknowledgement that Customs 
Notification 32/2003 remains in force despite the fact that by virtue of Customs Notification 82/2007 the AD on alcoholic liquor is no longer collected.  India  opposes the US request. 
6.26 The Panel  has made an appropriate addition to the paragraph in question. 
6.27 The United States  requests the Panel to clarify at para. 7.28 that it has challenged the AD on 
alcoholic liquor and the SUAD "as such".  India  opposes the US request. 
6.28 The Panel  notes that para. 7.28 corresponds almost literally to the language used by the 
United States in its own submissions.
107  Nonetheless, the Panel has made appropriate changes to 
paras. 7.26 and 7.27.  
6.29 The United States  requests that the Panel add to the summaries of the US position provided 
by the Panel at paras. 7.40, 7.45 and 7.51, to reflect fully the US position.  India  opposes the US 
requests.  
6.30 The Panel  recalls that the paragraphs in questio n are intended to be summaries of the US 
position.  It is clear, therefore, that they do not reflect each and every argument and statement made by the United States.  At any rate, the Panel does not  consider it appropriate to add the new sentences 
suggested by the United States.  
6.31 The United States  requests that the Panel change, and add to, the summary of the US position 
provided by the Panel at para. 7.52, to clarify and reflect fully the US position.  India  opposes the US 
request. 
6.32 The Panel  has made appropriate changes to clarify the existing summary but does not find it 
appropriate to add the new sentence suggested by the United States.  
6.33 The United States  requests that at para. 7.54 the Panel add a reference to Section 3(1) of the 
Customs Tariff Act and clarify that the AD on alcoholic  liquor could also be levied at specific rather 
than ad valorem  rates.  India  opposes the US request.   
6.34 The Panel  does not find it necessary, in the specific c ontext of para. 7.54, to refer to Section 
3(1).  The Panel has made the suggested clarification.   
6.35 The United States  requests that the Panel add to its summa ry of the US position at para. 7.81.  
India  opposes the US request. 
6.36 The Panel  does not find it appropriate to add the suggested new sentence to its argument 
summary.  At any rate, the United States h as not provided any su pporting evidence.  
                                                     
 
107 US first written submission, para. 72; US second written submission, para. 92.  WT/DS360/R 
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  6.37 The United States  requests that the Panel change the summary of the US position provided 
by the Panel at para. 7.84, to clarify the US position.   This request is similar to the request regarding 
para. 7.52.  India  opposes the US request. 
6.38 The Panel  has made appropriate changes to clarify the summary.  
6.39 The United States  requests that in the second sentence of para. 7.90 the Panel add "according 
to India", to avoid confusion.  India  opposes the US request. 
6.40 The Panel  has made appropriate changes to the paragraph in question.  For greater 
correctness, the Panel also added a clarification at para. 7.91.  
6.41 The United States  requests that in order to reflect more accurately the US argument, the 
Panel modify the fourth and fifth sentences of para. 7.104.  India  opposes the US request.   
6.42 The Panel  does not find it appropriate to make th e requested changes at the paragraph in 
question.  The Panel considers that its summary of the US argument is not misleading and adequately 
reflects the US position.    
6.43 The United States  requests that the Panel add the phrase "as such" a second time in the 
second sentence to para. 7.105.  India  opposes the US request. 
6.44 The Panel  sees no need to make the requested change.  
6.45 The United States  requests that the Panel add the phrase "as such" a second time in the 
second sentence to para. 7.106.  India  opposes the US request. 
6.46 The Panel  sees no need to make the requested change.  
6.47 The United States  suggests that the Panel move the abbreviation "ODCs" to the end of the 
first sentence of para. 7.125.  India  opposes the US suggestion. 
6.48 The Panel  does not find it appropriate to make the suggested change.  
6.49 The United States  requests that at para. 7.145 the Pane l essentially add the US reply to Panel 
Question No. 68 in its entirety.  India  opposes the US request.   
6.50 The Panel  does not consider that it is warranted to re flect the US reply in full.  This said, in 
analyzing the US interpretation, the Panel has consid ered, and kept in mind, the full US reply to Panel 
Question No. 68.   
6.51 The United States requests that at para. 7.148 the Panel modify footnote 187 by adding a 
clarification and an additional sentence at the end.  India  opposes the US request.  
6.52 In view of the US comment, the Panel  has found it appropriate to merge footnotes 187 and 
188.  The Panel finds it unnecessary to add the suggest ed new sentence.  At any rate, the US view is 
already reflected at para. 7.120.    
6.53 The United States  requests the Panel to modify para. 7.161 as it allegedly suggests, 
incorrectly in the US view, that the United States did not seek to establish  that the AD on alcoholic 
liquor and the SUAD fall outside the scope of Article II:2(a).  The United States also notes that it 
collected Exhibits US-23, -27, -28 and -29 relating to State VATs after India had identified the 
particular State-level taxes that the SUAD allegedly offset.  India  opposes the US request. WT/DS360/R 
Page 64 
 
 
  6.54 The Panel  has made appropriate changes to para. 7.161 in response to the US comments.  
Regarding the US assertion that it was able to colle ct information on State-level VAT only after India 
had identified this type of tax as being one of those the SUAD is applied to offset, we recall that CN 
19/2006 and Section 3(5) explicitly re fer to "value added tax".  We ha ve already explained that this 
reference cannot reasonably be read to include th e so-called Central VAT.  In addition, the Panel 
notes that the findings already address the US argument that the AD on alcoholic liquor and the 
SUAD do not identify internal taxes to  which they are equivalent.    
6.55 The United States  requests that the Panel delete foot note 207 which is attached to para. 
7.162.  Further, the United States requests that the Panel add a new sen tence to para. 7.162 to reflect 
the US position more accurately.  India  opposes the US request. 
6.56 In response to the United States' request, the Panel  has deleted elements of footnote 207.  The 
Panel did not find it appropriate to add a new sente nce to para. 7.162, but has added an appropriate 
sentence to para. 7.160.  Additionally, in response to  this US comment, it might be useful to point out 
that this Panel's approach is consistent  with that of the Article III:2 panel in Argentina – Hides and 
Leather .  Footnote 229 of the Interim Report addresses in what way that case presented relevant 
similarities to this case.  The panel in that case di d not require Argentina initially to make a prima 
facie case that RG 2784 was "equivalent in nature" to RG 3543.  Rather, in that case the European 
Communities failed to persuade the panel that RG 2784 was not "equivalent in  nature" and the panel 
proceeded on the basis of the European Commun ities' alternative claim.  See Panel Report, Argentina 
– Hides and Leather , paras. 11.146 – 11.154.   
6.57 The United States  requests that the Panel add a new sen tence to para. 7.164 to better reflect 
what the United States has argued.  India  opposes the US request.   
6.58 The Panel  does not find it appropriate to add the suggested sentence to the paragraph in 
question.  The Panel also notes that it has added a new sentence to para. 7.160.  
6.59 The United States  requests that the Panel add an iden tical new sentence at the end of both 
paras. 7.175 and 7.200.   
6.60 The Panel  does not find it appropriate to make the suggested additions.  In any event, para. 
7.174 already reflects the relevant US point.   
6.61 The United States  comments upon para. 7.215, requesting that the Panel offer specifically 
suggested new findings of fact which would, in the US view, allow for an evaluation, in the 
alternative, of India's contention that the AD on alcoholic liquor and the SUAD are imposed 
consistently with Article III:2 and th e US rebuttal to that contention.  India  opposes the US request, 
considering it unwarranted and uns upported by any legal obligation. 
6.62 The Panel  declines the US request.  In the circum stances of the present case, the Panel does 
not consider it appropriate to make the suggested new and abstract findings of fact.108  To begin with, 
the United States has not explained why and how the specific findings it is seeking would in fact be 
sufficient.  Even if they were, some of the s uggested findings appear to concern issues which the 
findings section of the Interim Report already touch es upon.  Other suggested findings concern issues 
upon which the Parties have expressed contrary views.  As a result, the Panel would need to provide 
additional analysis to support any new factual finding s, and the Parties would have no opportunity to 
seek a review of that additional analysis and/or of  the new factual findings reached by the Panel.   
                                                      
108 The Panel notes, however, that some of the information the United States requests the Panel to add 
is already contained in the findings section of the Interim Report.  WT/DS360/R 
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  6.63 The United States  requests that the Panel make a small clarification at para. 7.218 and add a 
new sentence at the end.  India  opposes the US request. 
6.64 The Panel  has made the requested clarification, but does not consider it appropriate to add the 
new suggested sentence.  
6.65 The United States  requests that the Panel add new sentences to its summary of the US 
position at para. 7.224.  India  opposes the US request. 
6.66 The Panel  does not find it appropriate to add the suggested new sentences at para. 7.224.  At 
any rate, the point is already noted at para. 7.201. 
6.67 The United States  requests that the Panel add new sentences to its summary of the US 
position at para. 7.226.  India  opposes the US request. 
6.68 The Panel  does not find it appropriate to add the suggested new sentences at para. 7.226.  The 
Panel notes that the point concerning the stated purpose is already noted at para. 7.220.  Nevertheless, 
the Panel has added a new footnote to para. 7. 226 and made requested editorial changes.  
6.69 The United States  requests that the Panel add new sentences to its summary of the US 
position at para. 7.227.  India  opposes the US request. 
6.70 The Panel  does not find it appropriate to add the s uggested new sentences.  Nevertheless, the 
Panel has made an appropriate change  at the paragraph in question.   
6.71 The United States  requests that the Panel clarify para. 7.238.  
6.72 The Panel  has made appropriate changes to para. 7.238. 
6.73 The United States  requests that at para. 7.247 the Panel revise its analysis of whether the AD 
on alcoholic liquor may be levied only if excise du ty is leviable on like domestic products.  The 
United States considers that the current analysis is  not supported by the evidence before the Panel.  
The United States further argues that there is inform ation other than that relied upon by the Panel to 
support the conclusion that the AD on alcoholic liquor is  applied as a matter of course on importation.  
India  opposes the US request, arguing that the analysis  is supported by evidence before the Panel. 
6.74 The Panel  does not find it appropriate to revise the analysis in question.  The United States 
asserts that the Panel relies upon statements by I ndia which do not concern the AD on alcoholic liquor 
but the AD on other products.  As an initial matter , it should be recalled, in response to the US 
assertion concerning "reliance", that the Panel "notes" the relevant statements of India and then states 
that these statements appear to be consistent w ith CN 32/2003 and the proviso to Section 3(1).  
Furthermore, at para. 3.5 of India's second oral st atement and para. 5 of In dia's comments on the US 
reply to Panel Question No. 43 India is referring to the "AD".  Since the United States is challenging 
the AD on alcoholic liquor and not the AD on othe r products, the Panel finds unconvincing the US 
interpretation of India's statements.  It is highl y implausible that India would seek to rebut US 
arguments concerning the AD on alcoholic liquor by  making counter-arguments that exclusively 
concern the AD on other products.  Consistently with the fact that India referred to the "AD" without 
qualification, the Panel thinks that in the specific context of the aforementioned paragraphs India is 
referring to the AD in general, because in relation to the point it has made at the relevant paragraphs 
there is no difference, in India's view, betw een the AD on alcoholic liquor and the AD on other 
products.  In this connection, the Panel has already addressed the relevance of India's reference to the 
Supreme Court decision in Hyderabad Industries Ltd .  However, in the light of the US comments, the 
Panel found it appropriate to clarify its discussion of the Supreme Court decision at para. 7.247 as WT/DS360/R 
Page 66 
 
 
  well as at para. 7.280.  The Panel also found it appr opriate, in view of the US comments, further to 
clarify the introductory sentence of para. 7.247.  A dditionally, in response to US comments, the Panel 
has made more explicit, at para. 7.247, other elemen ts supporting the Panel's conclusion.  On the other 
hand, the Panel does not find it appropr iate to accede to the US requests that it delete the references to 
India's statements or to indicate that they concern products other than alcoholic liquor.  
6.75 The United States alleges that there are key diffe rences in terms of text and operation between 
the AD on alcoholic liquor as compared to the AD on other products.  Accordi ng to the United States, 
while there appears to be a built-in  mechanism for India to ensure th at the AD on products other than 
alcoholic liquor is "equal to" the rate of central  excise duty on like domestic products and levied only 
in instances where like domestic products are subject to the central excise duty, there is no mechanism 
ensuring that the AD on alcoholic liquor "has regard to" to the rate of State excise duty on a like 
domestic products and is levied only in instances where the like domestic product is subject to State 
excise duty.  The Panel is not persuaded by this argument.  The fact that the rate of the AD on 
alcoholic liquor is specified "havin g regard to" the State excise duty for the time being leviable on a 
like State-manufactured alcoholic liquor neither de monstrates nor logically implies that the AD on 
alcoholic liquor may be levied even where no excise duty is leviable on a like domestically 
manufactured alcoholic liquor.  The issue of the conditions under which th e AD may be levied on 
alcoholic liquor or other products and the issue of th e rate at which it may be levied, once the relevant 
conditions are satisfied, are separate, sequential issues.  In relation to the former issue, as indicated at 
para. 7.247, both the opening paragraph of Section 3(1) and the proviso refer to "the excise duty for 
the time being leviable".  Similarly, the fact that there may not be a mechanism in place which 
"ensures" that India's Central Government could not , in fact, impose the AD on  alcoholic liquor even 
where no State excise duty is leviable on like domestically manufactured alcoholic liquor obviously does not imply that the Central Government would ha ve the right, as a matter of Indian law, to impose 
the AD on alcoholic liquor in such situations.    
6.76 The United States  requests that at para. 7.248 the Pane l make consequential changes based 
upon the US comments on para. 7.247.  India  opposes the US request, arguing that the paragraph 
reflects a correct interpretation of Indian law. 
6.77 The Panel  does not find it appropriate to make changes at para. 7.248.  This is in view of the 
Panel's response to the US comments on para. 7.247.  
6.78 The United States  requests that the Panel add new sentences to para. 7.252.  India  opposes 
the US request. 
6.79 The Panel  does not consider it appropriate to a dd the sentences suggested by the United 
States.  Nevertheless, the Panel has added new sente nces at the end of para. 7.252 in response to the 
US request.  
6.80 The United States  requests that between para. 7.251 and para. 7.252 the Panel add a new 
paragraph to set the context for the Panel's discussi on of Sections 12 and 25 of the Customs Act.  
India  opposes the US request. 
6.81 The Panel  does not find it necessary to add the suggested paragraph to set the context.  At any 
rate, the relevant paragraph appears to duplicate what is already contained at paras. 7.252 and 
following.  
6.82 The United States  requests that the Panel delete the re ference in para. 7.253 to the United 
States since, in its view, the paragraph misstates the US position.   India  opposes the US request, 
saying that the United States seems to be distancing itself from the position taken during the course of 
the proceedings.   WT/DS360/R 
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  6.83 The Panel  does not find it appropriate to make the suggested change.  The Panel does not 
consider that it has misstated the US position sin ce the paragraph in question reflects a US argument 
set out at para. 45 of the US first written submission.  Nevertheless, the Panel has made a small editorial change.  In view of the change made to para. 7.252, the Panel has also made a consequential 
change at the beginning of para. 7. 253.  Furthermore, the Panel noticed an omission by oversight in 
the footnote to para. 7.253, which has been corrected.     
6.84 The United States  requests that at para. 7.263 the Panel clarify the reference to the US reply 
to Panel Question No. 19.  The Unite d States also requests that the Panel modify the last footnote of 
the paragraph.  India  opposes the US request. 
6.85 The Panel  has made appropriate changes at para. 7.263 and in the footnote in question.  
6.86 The United States  requests that the Panel at para. 7. 277 complement its reference to the 
purpose a Member attributes to a measure.  India  opposes the US request. 
6.87 The Panel  does not consider it appropriate, in the sp ecific context of para. 7.277, to refer to 
the characterization of a duty under domestic law.  In fact, neither did the United States when making 
the relevant point in its first written submission, at footnote 71.  At footnote 71 the United States 
refers to avoiding commitments, not through attribut ion of an appropriate purpose, but rather through 
a Member's own characterization of a duty under its domestic law.  However, the relevant US 
argument relates to the purpose of the AD on alcoho lic liquor and not its characterization under Indian 
law.  Nonetheless, the Panel has made a clar ification in the paragraph in question.   
6.88 The United States  requests that the Panel modify para. 7.278 as it is allegedly based on the 
assumption that the proviso to Section 3(1) merely authorizes the Central Government to levy the AD 
on alcoholic liquor.  India  opposes the US request. 
6.89 The Panel  has made an appropriate change to the  paragraph in question. 
6.90 The United States  requests that at para. 7.281 the Pane l make consequential changes based 
upon the changes requested by the United States at paras. 7.247 and 7.248.  India  opposes the US 
request. 
6.91 Since the Panel  has not substantively revised its analysis at para. 7.247, the Panel does not 
find it appropriate to modify para. 7.281. 
6.92 The United States  offers a comment on para. 7.284.  Based upon that comment, the United 
States requests changes to paras. 7.285 and 7.287.  Th e United States requests the Panel to reflect that, 
in the US view, States have the power to impose duties and taxes on alcoholic liquor other than excise 
duties.  India  opposes the US request.  
6.93 The Panel  begins with the US comment on para. 7.284.  The first point to be made in 
response is that it is clear from context that the Panel uses the term "duties of excise", or "excise 
duties", to refer to those at issue in CN 32/2003 and the proviso to Section 3(1).  Furthermore, since 
the United States now comments on an aspect of Indian  constitutional law to which the Parties had not 
paid much attention before, the Panel has found it appropriate to address this aspect in two new 
paragraphs added immediately after para. 7.286.  The Panel has also made consequential changes at 
paras. 7.286 and 7.287.  In additio n, for consistency, the Panel has made small adjustments at paras. 
7.288 (in view of para. 7.290) and 7.287 (in view of para. 7.292).  The latter change resulted in a 
parallel change to para. 7.381 (in view of para. 7.387).  The Panel has also made an appropriate 
change to para. 7.285 and a conse quential change to para. 7.284.  Furthermore, having made changes 
to this section of the findings dealing with the AD on alcoholic liquor, the Panel found it appropriate WT/DS360/R 
Page 68 
 
 
  to make corresponding changes to the parallel secti on dealing with the SUAD.  Such changes have 
been made at paras. 7.378 and 7.387.  
6.94 The United States  requests that the Panel modify para. 7.288 in accordance with the 
modifications it has requested in relation to paras. 7.247 and 7.248.  India  opposes the US request.  
6.95 The Panel  does not agree with how the United States has characterized the contents of para. 
7.287, but has nonetheless made a small change for clarification. 
6.96 The United States  requests that the Panel clarify or e liminate the reference to "corresponding 
taxes or charges" at paras. 7.290 and 7.292.  India  opposes the US request. 
6.97 The Panel  has removed the reference in question at paras. 7.288, 7.290 and 7.292 and added a 
new footnote to para. 7.290.  The Panel has made parallel changes in the section dealing with the 
SUAD, at paras. 7.382, 7.385 and 7.387.  
6.98 The United States  comments on paras. 7.296 and 7.297, requesting that the Panel offer 
specifically suggested new findings of fact which would, in the US view, allow for an evaluation, in 
the alternative, of the United St ates' contention that the AD on alc oholic liquor results in ordinary 
customs duties or ODCs in excess of those set out in India's Schedule of Concessions.  India  opposes 
the US request, arguing it would be "futile" for the Pane l to continue with the analysis of facts after 
having found that the United States had not establis hed that the AD on alcoholic constituted an 
ordinary customs duty.  
6.99 The Panel  declines the US request.  In the circum stances of the present case, the Panel does 
not consider it appropriate to make the specifically suggested new findings of fact.109  The Panel notes 
the fact that the requested new findings of fact re late to claims based upon WTO provisions the Panel 
has determined are not applicable as well as the late stage in the proceedings.    
6.100  The United States  requests that at para. 7.300 the Panel make a clarification to its summary 
of the US position and add a new sentence.  India  opposes the US request. 
6.101  The Panel  has added the requested clarification, but does not find it appropriate to add the 
suggested new sentence. 
6.102  The United States  requests that the Panel add new sentences to its summary of the US 
position at para. 7.306.  India  opposes the US request. 
6.103  The Panel  does not find it appropriate to add the suggested new sentences at para. 7.306.  At 
any rate, the point is already noted at para. 7.201. 
6.104  The United States  requests that the Panel add several additional sentences to its summary of 
the US position at para. 7.308.  India  opposes the US request.  
6.105  The Panel  has added to its summary of the US pos ition at para. 7.308, as appropriate.  
6.106  The United States  requests that at para. 7.314 the Pa nel add an additional sentence to its 
summary of the US position.  India  opposes the US request. 
                                                      
109 The Panel notes that some of the information the United States requests the Panel to add is already 
contained in the findings section of the Interim Report.  WT/DS360/R 
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  6.107  The Panel  does not find it appropriate to add the sugg ested sentence at para. 7.314.  The point 
concerns replies by India to Panel questions.   
6.108  The United States  requests that between paras. 7.314 and 7.315 the Panel add a new 
paragraph to its summary of the US position.  India  opposes the US request. 
6.109  The Panel  does not find it appropriate to add the suggested new paragraph after para. 7.314.  
The Panel refers to Section C.2 where it has stat ed that it sees no need to examine whether the 
relevant statutory provisions are mandatory.  
6.110  The United States  requests that at para. 7.324 the Panel add a new sentence to its summary of 
India's position.  India  opposes the US request if not appropriately supplemented. 
6.111  The Panel  does not find it appropriate to add the suggested new sentence at para. 7.324.  The 
relevant point is already reflected at para. 7.364.  
6.112  The United States  requests that at para. 7.325 the Pane l make a clarification and add a new 
sentence to its summary of India's position.  India  opposes the US request if not appropriately 
supplemented. 
6.113  The Panel  has made the requested clarification at para. 7.325, but does not find it appropriate 
to add the suggested new sentence.  The relevant  point is already reflected at para. 7.364.  
6.114  The United States  requests that at para. 7.334 the Pane l revise its analysis of whether the 
SUAD may be levied only if relevant internal ta xes are leviable on a like domestic product.  The 
United States further argues that there is inform ation other than that relied upon by the Panel to 
support the conclusion that the SUAD is applied as a matter of course on importation.  India  opposes 
the US request, arguing that the United Stat es has not accurately reflected the position. 
6.115  The Panel  does not find it appropriate to revise the conclusion of the analysis in question.  In 
response to the US assertion that the Panel's references to para. 3.5 of India's second oral statement and para. 5 of India's comments on the US reply to  Panel Question No. 43 are in error, because they 
allegedly do not refer to the SUAD, the Panel notes th at at the paragraphs in question India is clearly 
referring to the "AD" and the "SUAD".  The fact that the last sentences of these paragraphs talk about 
the "AD" only is linked to the fact that the attach ed footnotes refer to the Supreme Court decision in 
Hyderabad Industries Ltd . which dealt with the "AD".  The Unite d States further asserts that there are 
situations where the SUAD is imposed on imports when  State VAT or the CST is not imposed on like 
domestic products.  The Panel notes in this respect th at the Panel at para. 7.334 refers to "relevant 
internal taxes" and not merely to State VAT or the CST.  Furthermore, footnote 351 indicates that it may be sufficient for one State to levy relevant intern al taxes.  As an additio nal matter, the references 
provided by the United States (US second written subm ission, para. 58; US  second oral statement, 
para. 13) concern hypothetical examples involving a rate  of State VAT, or CST, of nil (or "zero").  
The United States has not provided any evidence that  the SUAD was actually imposed in a situation 
where no State VAT or CST was imposed on the like domestic product.  As the Panel has already 
indicated, there is no evidence on the record that as of  the date of establishment of the Panel any State 
has nil-rated one or more products included in the list of "goods of local importance".  Nor has the 
United States offered evidence of a product not on that  list, but nil-rated by any State and not subject 
to CN 20/2006.  Finally, the United States assumes that for purposes of Indian law a nil (or "zero") 
rate of State VAT or CST would mean that no State VAT or CST is "leviable".  There is, however, no 
evidence on the record to support such  a conclusion.  Indeed, to us, a nil rate rather suggests that the 
relevant tax is leviable though no tax would be collected because th e rate for the time being is nil.  It 
is perhaps arguable that in the case of products outside the VAT system, like tobacco products, no 
State VAT is leviable, but India has said that in resp ect of such products a State sales tax is leviable.  WT/DS360/R 
Page 70 
 
 
  Notwithstanding the foregoing, the Panel has made  changes at para. 7.334 which correspond to those 
it has made in response to US comments on para. 7.247.   
6.116  The United States  requests that at para. 7.335 the Pane l make consequential changes based 
upon the US comments on para. 7.334.  India  opposes the US request. 
6.117  The Panel  does not find it appropriate to make changes at para. 7.335.  This is in view of the 
Panel's response to the US comments on para. 7.334.  
6.118  The United States  requests that between paras. 7.337 and 7.338 the Panel add a new 
paragraph to set the context for the Panel's discu ssion of Section 25 and Section 12 of the Customs 
Act.  India  opposes the US request, unless India's position is also presented. 
6.119  The Panel  does not find it necessary to add the suggested new paragraph to set the context.  
At any rate, the relevant paragraph appears to duplic ate what is already contained at paras. 7.338 and 
following.  
6.120  The United States  requests that the Panel add new sen tences to para. 7.338.  The United 
States further requests that the Panel delete the reference in the penultimate sentence to the United 
States since, in its view, the paragraph misstates the US position.  India  opposes the US request, 
unless India's position is also presented. 
6.121  The Panel  does not consider it appropriate to a dd the sentences suggested by the United 
States.  Nevertheless, the Panel has added new sente nces at the end of para. 7.338 in response to the 
US request.  Furthermore, the Panel does not consid er that it has misstated the US position since the 
paragraph in question reflects a US argument set out at para. 45 of the US first written submission.  
Nevertheless, the Panel has made small editorial changes.   
6.122  The United States  requests that at para. 7.347 the Panel clarify the reference to the US reply 
to Panel Question No. 19.  India  opposes the US request. 
6.123  The Panel  has made appropriate changes at para. 7.347. 
6.124  The United States  requests that at para. 7.350 the Pane l modify the fifth and sixth sentences 
and that at para. 7.351 the Panel modify the second sentence.  India  opposes the US request, unless it 
is appropriately supplemented. 
6.125  The Panel  does not find it appropriate to make the suggested modifications.  At any rate, the 
relevant point is already made elsewhere in the findings.   
6.126  The United States  requests that at para. 7.357 the Panel modify the reference to India's term 
"pegged".  India  opposes the US request. 
6.127  The Panel  has made appropriate changes at para. 7.357.  A consequential change has been 
made to the penultimate footnote as well as at para. 7.360. 
6.128  The United States  requests that in footnote 391 to para. 7.358 the Panel add a new sentence 
immediately preceding the penultimate sentence.  India  opposes the US request. 
6.129  The Panel  does not find it appropriate to add th e suggested sentence to footnote 391.  
Nevertheless, the Panel has made an appropriate clar ification in the last sentence of the footnote in 
question and added a new sentence at the end of the footnote.   WT/DS360/R 
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  6.130  The United States  requests that at para. 7.361 the Panel add several new sentences.  India  
opposes the US request. 
6.131  The Panel  does not find it appropriate to add the suggested additional text at para. 7.361.  At 
any rate, the basic point is already covered in the sa me paragraph.  Neverthele ss, the Panel has made a 
clarification in the last sentence.  
6.132  The United States  requests that at para. 7.363 the Panel add additional points to reflect fully 
the record.  India  opposes the US request. 
6.133  The Panel  does not find it appropriate to add the sugg ested points at para. 7.363.  The Panel 
notes that one of the points is already reflected at para. 7.364.  
6.134  The United States  requests that at para. 7.364 the Panel add two additional points.  India  
opposes the US request. 
6.135  The Panel  does not find it appropriate to add the two points suggested by the United States.  
At any rate, para. 7.367 already addresses the relevant issue.  The Panel has ma de editorial changes at 
para. 7.367.  
6.136  The United States  requests that at para. 7.365 the Panel add two additional points.  India  
opposes the US request. 
6.137  The Panel  does not find it appropriate to add the two points suggested by the United States.  
Indeed, it is unclear what these points would add to the existing paragraph.  
6.138  The United States  requests that the Panel modify para. 7.368 to reflect the US assertion that 
there are, in fact, situations where the SUAD is imposed on imported products when relevant internal 
taxes are not leviable on the like domestic products.  India  opposes the US request.  
6.139  The Panel  does not find it appropriate to change the paragraph in question.  At any rate, as 
para. 7.368 itself states, the issue is already furt her addressed elsewhere, including at para. 7.383.  
6.140  The United States  requests that at para. 7.370 the Panel complement its reference to the 
purpose of a duty in the second sentence.  India  opposes the US request. 
6.141  The Panel  does not find it appropriate, in the specific context of para. 7.370, to add the 
suggested text relating to the characterization of a duty under domestic law to the second sentence.  In 
fact, the United States itself dispensed with the text  it now requests to be added when it made the 
relevant point in its first written submission, at footnote 82.  
6.142  The United States  requests that at paras. 7.378, 7.380 and 7.381 the Panel clarify the 
situation to which the Panel's findings refer.  India  opposes the US requests. 
6.143  The Panel  does not see a need to clarify the paragra phs in question.  At any rate, relevant 
discussion is already contained in previous pa ragraphs, including paras. 7.364 and 7.365.  
6.144  The United States  requests that at para. 7.382 the Panel clarify the reference to "equivalent 
transactions".  India  opposes the US request. 
6.145  The Panel  does not see a need to clarify the paragraph in question.  At any rate, the concept is 
already discussed at para. 7.364.   WT/DS360/R 
Page 72 
 
 
  6.146  The United States  comments upon paras. 7.391 and 7.392, requesting that the Panel offer 
specifically suggested new findings of fact which would, in the US view, allow for an evaluation, in 
the alternative, of the United St ates' contention that the SUAD results  in ordinary customs duties or 
ODCs in excess of those set out in India's Schedule of Concessions.  India  opposes the US request, 
arguing that further factual findings are unnecessary in the light of the Panel's findings.  
6.147  The Panel  declines the US request.  In the circum stances of the present case, the Panel does 
not consider it appropriate to make the specifically suggested new findings of fact.110  The Panel notes 
the fact that the requested new findings of fact re late to claims based upon WTO provisions the Panel 
has determined are not applicable as well  as the late stage in the proceedings.  
6.148  The United States  requests, finally, that the Panel correct three clerical errors. 
6.149  The Panel  has made appropriate changes. 
2. Comments by India 
6.150  India  requests that at para. 8.2 the Panel delete the fourth sentence and the remainder of that 
paragraph.  India asserts that the relevant sentences,  which contain concluding remarks, appear not to 
be in conformity with Article 19.2 of the DSU, in th at they allegedly diminish the rights of India, or 
add to its obligations.  India further asserts that the concluding remarks appear to be at variance with 
the Panel's conclusion at para. 8.1 and give scope for misinterpretation of that conclusion.  India also 
alleges that the concluding remarks might be interpre ted to suggest that India would not implement its 
obligations in good faith or to circumscribe India's policy choices in implementing its WTO 
obligations.  The United States  opposes India's request, saying the concluding remarks clarify the 
Panel's conclusion at para. 8.1.    
6.151  The Panel  fails to see how its concluding remarks coul d be said to diminish India's rights, or 
to add to its obligations, or how they could be said to circumscribe the policy choices of India in 
respect of implementation of India's WTO obligations .  Nor does the Panel agree that the concluding 
remarks are liable to result in the Panel's conclusi ons being misinterpreted.  Nonetheless, in response 
to India's comments, the Panel has made appropriate  changes to the paragraph in question, including 
by adding a new footnote and deleting the last three sentences. 
C. OTHER CHANGES TO THE INTERIM REPORT  
6.152  The Panel  has made a number of other changes which were not specifically requested by the 
Parties.  These changes were made to eliminat e typographical errors or to edit the Report.  
VII. FINDINGS 
7.1 The Panel will begin its assessment of the matter before it by providing a brief description of 
the measures at issue, followed by an overview of the claims and arguments of the Parties.    
A. MEASURES AT ISSUE  
7.2 These proceedings concern two different types of  duties imposed by India at the border on 
certain products entering its customs territory.  These duties are levied in add ition to India's so-called 
basic customs duty.   
                                                      
110 The Panel notes that some of the information the United States requests the Panel to add is already 
contained in the findings section of the Interim Report.  WT/DS360/R 
 Page 73 
 
 
  1. General 
7.3 India's Central Government imposes several typ es of border charges ("duties"), including: the 
basic customs duty (hereinafter the "BCD"); the a dditional duty (hereinafter the "AD"), which its 
statutory basis states is related to the excise duty for the time being leviable  on like domestic products 
in India; as well as "such additional duties as woul d counter-balance the sales tax, value added tax, 
local tax or any other charges" (hereinafter the "SUAD") for the time being leviable on a like 
domestic product in India.   
7.4 India has indicated that there are no recorded "o ther duties or charges", within the meaning of 
Article II:1(b) of the GATT 1994 in India's Schedule of Concessions, which are applicable to any of 
the products subject to the measures at issue in these proceedings.111  
7.5 The measures being challenged in this case are the AD and the SUAD112, respectively. The 
United States alleges that the AD, when imposed in  conjunction with the BCD, results in a breach of 
India's obligations under Article II:1(a) and (b ) of the GATT 1994 because it results in ordinary 
customs duties or other duties or charges imposed on or in connection with importation that exceed 
those set out in India's Schedule of Concessions  The United States similarly alleges that the SUAD, 
when imposed in conjunction with the BCD, results in a breach of India's obligations under Article 
II:1(a) and (b) of the GATT 1994 because it results in  ordinary customs duties or other duties or 
charges imposed on or in connection with importation that exceed those set out in India's Schedule of 
Concessions.113  Accordingly, there follows a brief descr iption of the BCD, the AD and the SUAD as 
well as the provisions of Indian law identified by the United States as those through which India levies these duties.   
2. The Basic Customs Duty ("BCD") 
7.6 The authority to levy the basic customs duty is provided in Section 12 of India's Customs Act 
of 1962.  It states: 
"Dutiable Goods. (1) Except as otherwise provided in this Act, or any other law for 
the time being in force, duties of customs shall be levied at such rates as may be 
specified under [the Customs Tariff Act, 1975 (51 of 1975)], or any other law for the 
time being in force, on goods imported  into, or exported from India." 
7.7 Regarding the rates at which the BCD is to be levied, Section 2 of India's Customs Tariff Act 
of 1975 provides: 
"The rates at which duties of customs sh all be levied under the Customs Act, 1962, 
are specified in the First and Second Schedules."
114  
7.8 The First Schedule to the Customs Tariff Act specifies standard rates of duty for all imports.  
India has, however, partially exempted imports of certain goods from these standard rates through 
customs notifications.  In the case of certain alc oholic beverages, for instance, India has done so 
through Customs Notifications 11/2005 and 20/1997.  Th ey were issued on the basis of Section 25 of 
the Customs Act, a provision which is further explai ned in the following paragraph.  As a result of 
issuance of the aforementioned Customs Notifications , as of the date of establishment of the Panel, 
                                                      
111 India's reply to Panel Question No. 10. 
112 E.g., US first written submission, para. 72. 
113 US reply to Panel Question No. 16. 
114 Footnote 4 to Section 2 provides that the "First Schedule to the Act was substituted by the Customs 
Tariff (Amendment) Act, 1985 (8 of 1986) and further amended from time to time by subsequent amendment 
Acts; the substituted schedule came in force on 8.2.1986." WT/DS360/R 
Page 74 
 
 
  the applied rate of BCD for imports  of distilled spirits was 150 per cent ad valorem  and the applied 
rate of BCD for imports of beer and wine was 100 per cent ad valorem .  On 3 July 2007, i.e., after the 
date of establishment of the Panel, India increased  the applied rate of BCD for wine to 150 per cent ad 
valorem  through Customs Notification 81/2007.115  
7.9 Section 25 of the Customs Act confers upon the Central Government the power to grant 
exemptions "from the whole or any part of" the BCD.  It reads: 
"Power to grant exemption from duty. (1) If the Central Government is satisfied that 
it is necessary in the public interest so to do, it may, by notification in the Official 
Gazette, exempt generally either absolutely  or subject to such conditions (to be 
fulfilled before or after clearance) as may be specified in the notification goods of any 
specified description from the whole or any pa rt of duty of customs leviable thereon." 
3. The Additional Duty ("AD") 
7.10 The additional duty116 is provided for in Section 3(1) of the Customs Tariff Act.  The text of 
Section 3(1) reads:  
"Any article which is imported into India shall, in addition, be liable to a duty 
(hereafter in this section referred to as the additional duty) equal to the excise duty for 
the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviab le at any percentage of its value, the 
additional duty to which the imported article shall be so liable shall be calculated at 
that percentage of the value of the imported article: 
Provided that in case of any alcoholic li quor for human consumption imported into 
India, the Central Government may, by no tification in the Official Gazette, specify 
the rate of additional duty having regard to the excise duty for the time being leviable on a like alcoholic liquor produced or manufactured in different States or, if a like 
alcoholic liquor is not produced or manufactured in any State, then, having regard to 
the excise duty which would be leviable for the time being in different States on the 
class or description of alcoholic liquor to which such imported alcoholic liquor 
belongs.  
Explanation.— In this sub-section, the expression 'the excise duty for the time being 
leviable on a like article if produced or ma nufactured in India' means the excise duty 
for the time being in force which would be  leviable on a like article if produced or 
manufactured in India or, if a like article is not so produced or manufactured, which 
would be leviable on the class or description of articles to which the imported article 
belongs, and where such duty is leviable at different rates, the highest duty." 
7.11 The United States in this case only challe nges the AD on alcoholic liquor for human 
consumption such as beer, wine and distilled spirits.
117   The proviso to Section 3(1) relates the AD on 
alcoholic liquor to excise duties leviable on alcoholic liquor in different States. 
                                                      
115 US first written submission, footnote 75.  The WTO-bound rate for wine is 150 per cent ad valorem , 
as is that for beer and distilled spirits. 
116 As pointed out by the United States, the AD is sometimes also referred to as the "countervailing 
duty". 
117 US first written submission, para.52; US first oral statement, para. 12.  WT/DS360/R 
 Page 75 
 
 
  7.12 Section 3(2) of the Customs Tariff Act requires, inter alia , that the BCD leviable under 
Section 12 of the Customs Act is to be included in the calculation of the amount of AD due under 
Section 3(1) of the Customs Tariff Act. 
7.13 Section 3(7) of the Customs Tariff Act provides that the duty imposed under Section 3 shall be 
in addition to any other duty imposed under the Customs Tariff Act or any other law. 
7.14 Section 3(8) of the Customs Tariff Act explains the relationship between the AD and the 
provisions of the Customs Act, including the above-mentioned Section 25 thereof.  It reads:   
"The provisions of the Customs Act, 1962 and the rules and regulations made 
thereunder, including those relating to draw backs, refunds and exemption from duties 
shall, so far as may be, apply to the duty chargeable under this section as they apply 
in relation to the duties leviable under that Act." 
7.15 Customs Notification 32/2003118 of 1 March 2003 specifies the rates of AD for alcoholic 
liquor as applied on the date of establishment of the Pa nel.  The details are provided in the table below:  
 Heading Description of goods Rate of additional duty 
BEERS AND 
WINES  2203, 
2204, 
2205, 
or 
2206 All goods put up in bottles or cans or 
any other packing, for ultimate sale in 
retail and having a CIF price, - 
 
(a) not exceeding USD 25 per case; 
 
(b) exceeding USD 25 but not 
exceeding USD 40 per case; 
 
(c) exceeding USD 40 per case  
 
 
 
75% ad valorem  
 
50% ad valorem  or USD 37 per 
case, whichever is higher 
 
20% ad valorem  or USD 40 per 
case119, whichever is higher 
DISTILLED 
SPIRITS 2208 All goods put up in bottles or cans or 
any other packing, for ultimate sale in 
retail and having a CIF price, - 
 
(a) not exceeding USD 10 per case; 
 
(b) exceeding USD 10 but not 
exceeding USD 20 per case; 
 
(c) exceeding USD 20 but not 
exceeding USD 40 per case; 
 
(d)exceeding USD 40 per case 
  
 
 
 
150% ad valorem  
 
100% ad valorem  or USD 40 per 
case, whichever is higher 
 
50% ad valorem  or USD 53.2 per 
case, whichever is higher 
 
25% ad valorem  or USD 53.2 per 
case, whichever is higher 
 
7.16 Soon after the establishment of this Panel, on 3 July 2007, India issued Customs Notification 
82/2007, based upon Section 25 of the Customs Act r ead together with Section 3(8) of the Customs 
Tariff Act.  Through this notification, the Centra l Government of India exempted all the goods from 
the whole of the duties leviable under Customs Notification 32/2003.   
                                                      
118 Exhibit US-6. 
119 "Case" means a packing containing a total volume of nine litres of liquor (e.g., 12 bottles of 750ml 
capacity). WT/DS360/R 
Page 76 
 
 
  4. The SUAD 
7.17 The SUAD is provided for in Section 3(5) of the Customs Tariff Act.  The text of Section 3(5) 
is as follows:  
"If the Central Government is satisfied that  it is necessary in the public interest to 
levy on any imported article [whether on such article duty is leviable under 
subsection (1) or, as the case may be, sub-section (3) or not] such additional duty as 
would counter-balance the sales tax, value a dded tax, local tax or any other charges 
for the time being leviable on a like article  on its sale, purchase or transportation in 
India, it may, by notification in the Official Gazette, direct that such imported article 
shall, in addition, be liable to an addition al duty at a rate not exceeding four per cent. 
of the value of the imported article as specified in that notification. 
Explanation.—In this sub-section, the expressi on 'sales tax, value added tax, local tax 
or any other charges for the time being leviable on a like article on its sale, purchase 
or transportation in India' means the sales tax, value added tax, local tax or other 
charges for the time being in force, which would be leviable on a like article if sold, 
purchased or transported in India or, if a like article is not so sold, purchased or 
transported, which would be leviable on th e class or description of articles to which 
the imported article belongs, and where su ch taxes, or, as the case may be, such 
charges are leviable at different rates, the highest such tax or, as the case may be, 
such charge." 
7.18 The United States has referred to this particul ar additional duty as the "Extra-Additional Duty" 
("EAD") while India has referred to it as the "SUAD" .  The term "SUAD" is an abbreviation based on 
the phrase "such additional d uty" which appears in Section 3(5).  Neither "EAD" nor "SUAD" is an 
official denomination.120  India considers the term "EAD" misleading as, in its view, it suggests that 
the relevant duty is in some ways "extra".121  In view of the fact that the term used by India reflects 
the terms used in Section 3(5), the Panel has a dopted the term "SUAD" and will use it throughout.  
7.19 Based upon Section 3(5), the Central Government of India issued Customs Notification 
19/2006122 of 1 March 2006 to impose a 4 per cent ad valorem  duty of SUAD on imported goods 
"specified under the Chapter, h eading, sub-heading, or tariff item of the First Schedule to the 
[Customs Tariff Act]".  The US claims in respect of the SUAD concern imports of all goods subject to 
the SUAD for which imposition of the SUAD in co mbination with the BCD exceeds India's WTO-
bound rates, with the exception of those that ha ve been exempted through a customs notification.123  
Thus, the US claims against the SUAD concern a broader range of products than the US claims 
against the AD, which concern only alcoholic liquor .  The US claims against the SUAD concern not 
only alcoholic liquor but also othe r products, including agricultural products (such as milk, raisins and 
orange juice) and industrial products falling mainly under HS chapters 84, 85 and 90.  
7.20 Section 3(6) of the Customs Tariff Act requires, inter alia , that the BCD leviable under 
Section 12 of the Customs Act and the AD are to be included in the calculation of the amount of 
SUAD owed under Section 3(5) of the Customs Tariff Act.   
                                                      
120 India's reply to Panel Question No . 4; India's first written submission, para. 5.  As pointed out by the 
United States, the duty in question is sometimes also referred to as the "special countervailing duty". 
121 India's reply to Panel Question No. 4. 
122 Exhibit US-7. 
123 US reply to Panel Question No. 1; US first oral statement, para. 20.  WT/DS360/R 
 Page 77 
 
 
  7.21 As already noted, Section 3(7) of the Customs Tariff Act provides that the duty imposed under 
Section 3 shall be in addition to any other duty imposed under the Customs Tariff Act or any other 
law. 
7.22 As also noted, Section 3(8) of the Customs Tariff Act explains the relationship between, on the 
one hand, the AD and the SUAD, and, on the other hand,  the provisions of the Customs Act, including 
the above-mentioned Section 25 thereof.    
7.23 Based upon Section 25 of the Customs Act124, India issued Customs Notification 20/2006125 
which exempts specified goods from so much of the SUAD as is in excess of the amount calculated at 
the rate indicated in the Notification.  For all but one of the specified goods (for which a rate of 
1 per cent ad valorem  is indicated), the SUAD rate indicated is "nil".  
7.24 During the Panel's first substantive meeting, India informed the Panel that its Central 
Government had just issued Customs Notification 102/2007126 of 14 September 2007.  That 
notification, also based upon Section 25 of the Cust oms Act, exempted, subject to certain conditions, 
the products falling within the First Schedule to th e Customs Tariff Act, from the whole of the SUAD 
when imported into India for subsequent sale.  Purs uant to the Notification, the importer must pay the 
SUAD on the product's importation, but may subse quently file a claim for refund of the SUAD 
already paid on the imported products.  
B. OVERVIEW OF THE PARTIES ' CLAIMS AND ARGUMENTS  
7.25 Having described the measures at issue, the Pane l now provides a brief overview of the Parties' 
claims and arguments. 
7.26 The United States  separately challenges the AD on alc oholic liquor, as such, and the SUAD, 
as such.127  In relation to the AD on alcoholic liquor, the United States notes that it is imposed in 
addition to the BCD already levied on alcoholic liquor.  The United States considers that the AD on 
alcoholic liquor qualifies as an "ordinary customs du ty" or, in the alternative, as an "other duty or 
charge" within the meaning of Article II:1(b) of  the GATT 1994.  The United States submits that, in 
the light of this, the AD on alcoholic liquor is incons istent, as such, with Article II:1(a) and (b) of the 
GATT 1994 because the combination of the AD and the BCD results in ordinary customs duties on 
imports of alcoholic liquor that exceed those set forth in India's Schedule of Concessions.  
Specifically, the AD on alcoholic liquor, when impo sed with the BCD, results in ordinary customs 
duties on imports of alcoholic liquor that exceed India's bound rates by amounts ranging from 48 to 
400 percentage points.  Alternativel y, to the extent the AD on alcoholic  liquor is considered an "other 
duty or charge", the United States submits that it woul d exceed the "other duties or charges" set out in 
India's Schedule of Concessions, as India has not record ed the AD for alcoholic liquor in its Schedule.  
The United States is challenging the AD on alcoholic liquor as in force on the date of establishment of 
the Panel.  The United States considers that the modifications introduced by Customs Notification 
82/2007 are outside the Panel's terms of reference.    
7.27 In relation to the SUAD, the United States notes that it is imposed in addition to the BCD 
already levied on the products subject to the SUAD.  The United States considers that the SUAD 
                                                      
124 According to India, even though Customs Notification 20/2006 does not refer to Section 3(8) of the 
Customs Tariff Act, a reference to Section 3(8) is imp licit in Customs Notification 20/2006.  India's reply to 
Panel Question No. 39(a). 
125 Exhibit US-11. 
126 Exhibit IND-17. 
127 The United States points out that the SUAD has been applied in addition to, and has been calculated 
on top of, the AD but that its claims against the SU AD do not rely upon imposition of the AD to demonstrate 
that the SUAD is inconsistent  with India's WTO obligations. WT/DS360/R 
Page 78 
 
 
  qualifies as an "ordinary customs duty" or, in the alte rnative, as an "other duty or charge" within the 
meaning of Article II:1(b) of the GATT 1994.  The Un ited States submits that, in the light of this, the 
SUAD is inconsistent, as such, with Article II:1(a) and (b) of the GATT 1994 because the 
combination of the SUAD and the BCD results in ordinary customs duties on imports that exceed 
those set forth in India's Schedul e of Concessions.  More specifically, the SUAD results in ordinary 
customs duties on imports in excess of India's bound ra tes in any situation where the BCD is already 
at or near India's bound rate.128  Alternatively, to the extent the SU AD is considered an "other duty or 
charge", the United States submits that it would exceed the "other duties or char ges" set out in India's 
Schedule of Concessions, as India has not schedul ed the SUAD for any product included in its 
Schedule.   
7.28 The United States requests the Panel to find that: 
(a) the AD on alcoholic liquor is: 
(i) inconsistent with Article II:1(b) of  the GATT 1994 as an ordinary customs 
duty that subjects imports of alcoholic liquor to ordinary customs duties in excess of those set forth in India's WTO Schedule of Concessions; and  
(ii) inconsistent with Article II:1(a) of  the GATT 1994 as an ordinary customs 
duty that affords imports of alcoholic liquor from the United States less favourable treatment than that provi ded for in India's WTO Schedule of 
Concessions; and  
(b) the SUAD is:  
(i) inconsistent with Article II:1(b) of  the GATT 1994 as an ordinary customs 
duty that subjects imports, including al coholic liquor and products listed in 
Exhibit US-1, to ordinary customs duties in excess of those set forth in India's 
WTO Schedule; and   
(ii) inconsistent with Article II:1(a) of  the GATT 1994 as an ordinary customs 
duty that affords imports from the Un ited States, including alcoholic liquor 
and products listed in Exhibit US-1, less favourable treatment than that 
provided for in India's WTO Schedule of Concessions. 
7.29 The United States has not requested any findings under Article III:2 of the GATT 1994 even 
though an alternative claim under Ar ticle III:2 is put forward in the US request for the establishment 
of a panel.
129 
7.30 India  submits that the AD on alcoholic liquor an d the SUAD have been mischaracterized by 
the United States as being ordinary customs duties or , in the alternative, "other duties or charges" 
within the meaning of Article II:1( b).  India argues that the United States has based its identification 
and characterization of the AD on alcoholic liquor and the SUAD on an errone ous understanding of 
the scheme and provisions of law pertaining to cu stoms and off-setting duties and taxes in India.  
According to India, both the AD on alcoholic liquor a nd the SUAD are duties levied in lieu of internal 
taxes – the AD on alcoholic liquor is levied in lieu of excise duties and the SUAD is imposed to 
counterbalance sales tax, VAT and other local taxes or charges.  India points out that these duties are 
                                                      
128 The United States notes that Exhibit US-1 contains a number of examples in addition to alcoholic 
liquor where this is the case. 
129 We will revert to this point later on.  See infra , Section F.  WT/DS360/R 
 Page 79 
 
 
  distinct from the BCD and submits that they have been levied in accordance with the provisions of 
Article II:2(a) of the GATT 1994. 
7.31 India further notes that the AD on alcoholic liquor has been withdrawn through Customs 
Notification 82/2007 on 3 July 2007.  In India's vi ew, there therefore no longer exists any valid basis 
to challenge the AD on alcoholic liquor. 
7.32 India therefore requests that the Panel reject all claims made by the United States, since, in its 
view: 
(a) the AD on alcoholic liquor has been validly removed through Customs 
Notification 82/2007; and 
(b) the SUAD is a charge "equivalent to an internal tax" within the meaning of 
Article II:2(a) and imposed consistently  with Article III:2 of the GATT 1994. 
C. PRELIMINARY MATTERS  
7.33 Before addressing the US claims of violation unde r Article II:1 of the GATT 1994, it is useful 
to address two preliminary matters.  The first concerns two new Indian customs notifications concerning the AD on alcoholic liquor and the SU AD, both adopted after the establishment of the 
Panel.   The other preliminary matter concerns  whether the measures before the Panel may be 
challenged, as such, and if so, whether they may be determined to be inconsistent, as such, with WTO 
rules.  The Panel will address these two preliminary issues in turn.  
1. New measures adopted by India after the establishment of the Panel 
7.34 The first preliminary matter to be addressed by us was raised by India and concerns two new 
customs notifications issued by India after the date of establishment of the Panel.  India requests that 
the Panel not only take these new customs notificatio ns into account, but that it rule on the measures 
as modified by the new customs notifications.  Be low, the Panel will address Customs Notification 
("CN") 82/2007, which concerns the AD on alcoho lic liquor.  After that, the Panel will address 
Customs Notification ("CN") 102/2007.  
(a) Customs Notification 82/2007 
(i) Arguments of the Parties 
7.35 India  argues that the Central Government has co mplete discretion in the exercise of power 
granted to it under Section 3(1) of the Custom s Tariff Act.  The Central Government issued 
CN 32/2003 on 1 March 2003 to levy additional duti es on alcoholic beverage pursuant to Section 3(1) 
of the Customs Tariff Act.  The Central Government issued  CN 82/2007 on 3 July 2007 pursuant to 
Section 3(8) of the CTA and  Section 25(1) of the Customs Act.  This Notification exempted all the 
goods from the whole of the additiona l duty leviable under CN 32/2003.   
7.36 India claims that the nature of a Custom Notification is not merely an executive order but a 
delegated legislation.   It has the force of law and is  effective as of the date it is notified in the Official 
Gazette of India.  India argues that CN82/ 2007 has effectively overridden CN 32/2003.  
7.37 India argues that CN 82/2007 must be viewed as being "an amendment that does not change 
the essence of the identified measure" and, is therefor e well within the Panel's terms of reference.  
India contends that the Appellate Body has previously  held that "a panel has the authority to examine 
a legal instrument enacted after the establishment of  the panel that amends a measure identified in the WT/DS360/R 
Page 80 
 
 
  panel request"130.  It also considers that the United States had envisaged such a subsequent 
amendment in its request for establishment of this Panel, when it included "any amendments, related 
measures, or implementing meas ures" in its panel request. 
7.38 India argues that the measure of levying AD at the rate specified in CN 32/2003 has ceased to 
have any effect because of the recent amendment made in CN 82/2007.   
7.39 The United States  argues that because CN 82/2007 was issued after the Panel was 
established, it is outside the Panel's term of reference.  In addition,  CN 32/2003 remains in force and 
Section 3(1) of the CTA directs that "[a] ny article which is imported into India shall … be liable " for 
the AD.  Therefore, the measures identified in the US  panel request, i.e. CN 32/2003, remain in force 
and should  be considered by the Panel.  
7.40 The United States argues that India does not assert that CN 32/2003 has been revoked. The 
later Customs Notification, CN 82/2007, is not within the Panel's mandate.  Rather, it is a matter to be 
considered at the compliance stage of the disput e.  Citing the Appellate Body's statement in Chile – 
Price Band System , the United States also considers that a practice of amending measures during 
proceedings is not to be condoned, if such changes are made with a view to shielding a measure from 
scrutiny by a panel and that a complaining party should not have to adjust their pleadings during the 
proceedings in order to deal with a moving target .   The United States is concerned that CN82/2007 
could have the effect of shielding the AD from scrutiny as the Indian Central Government has  
complete discretion to re-impose the AD afterwards.  
7.41 India  replied to the Panel's question regarding the e ffect of CN 32/2007.  It indicated that the 
CTA empowers the Central Government to eith er impose AD on alcoholic liquor pursuant to 
Section 3(1) of CTA read with the proviso, or to exempt imported alcoholic liquor from the AD 
according to Section 3(8) of CTA read together with Section 25 of CA.  Therefore, the AD imposed by CN 32/2003 was removed as of 3 July 2007 through exemption notification CN 82/2007.  If the 
Central government were to withdraw CN 82/2007, it could do so through a new notification in the 
future to remove the exemption.  In that case, the effect of CN 32/2003 could be reinstated.   
7.42 In India's view, it has effectively and in good faith removed the AD as of 3 July 2007.  The 
mere possibility that subsequent legislation c ould theoretically re-introduce the AD on imported 
alcoholic beverages does not mean that the measure  has not been revoked. India also argues that 
CN 82/2007 is not a moving target; rather, the Panel' s terms of reference is broad enough to include 
"any amendments, related measures, or implementi ng measures", and consequently, the Panel should 
consider CN 82/2007.  
7.43 The United States  argues that it is not clear whether CN 82/2007 does remove the AD.  The 
fact is that Section 3(1) mandates that imports "shall… be liable" to the AD and that CN 32/2003 
remains in force.   
7.44 The United States also contends that if CN 82/200 7 does what India contends – i.e. effectively 
removes the AD – then it would seem to fundamentally  change the essence of the AD.   In its view, 
this dispute is distinguishable from the Chile – Price Band  System case.  In that dispute, the 
amendment of the measure made explicit a require ment already considered implicit under original 
measure, whereas in this case, the amendment at issue allegedly removes the AD, that is, permits 
something (exemption) that was not permitted unde r Indian law as of the date of the Panel's 
establishment. 
                                                     
 
130 Appellate Body Report, EC – Selected Customs Matters , para. 184.  WT/DS360/R 
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  7.45 The United States also considers that it is not necessary to consider CN 82/2007 in order to 
secure a positive solution in this dispute.  If th e Panel were to take into account this customs 
notification introduced after the establishment of th is Panel, it would create a moving target and result 
in shielding a measure from panel scrutiny.   In the US view, the fact that CN32/2003 may be 
reinstated and that the Central Government has a complete discretion to issue customs notifications 
create a possibility that after the conclusion of  these proceedings, CN82/2007 may be withdrawn 
hence the measure would constitute a moving target as the Appellate Body stated.    
7.46 India  argues that the US understanding of the statement of the Appellate Body in Chile – 
Price Band  System that an amendment which merely made e xplicit a requirement that was implicit 
under Chilean Law and which therefore did not change  the essence is incorrect.  In India's view, the 
amendment to Chilean Law – Article 12 of Law 18.525, "puts in place a cap on the Chilean PBS 
duties to avoid that those duties, in conjunction w ith the 8 percent applied rate, exceed the 31.5 per 
cent bound rate."  In other words, rather than maki ng an implicit requirement explicit, that amendment 
effectively placed a ceiling on the rates of duties in the PBS.  Similarly, the CN 82/2007 is to bring 
AD on alcoholic beverages to zero and does not change the essence of the measure. 
7.47 India also points out that the words "any amendments, related measures or implementing 
measures" used in the US panel request can include amendments made after the Panel's establishment, 
just as the Appellate Body stated in Chile – Price Band System.   The Appellate Body stated that if the 
terms of reference are broad enough to include am endments and if it is necessary to consider an 
amendment in order to secure a positive solution to the dispute, then it is appropriate to consider the 
measure as amended.    In India's view, this  is also the situation in this dispute. 
7.48 India argues that it has chosen to remove the AD, by reducing the rate of AD on alcoholic 
beverages to nil through CN 82/2007.   There are no lingering effects of the AD.  Furthermore, the 
specific way in which India achieved this policy obj ective is irrelevant.  Concerning the possibility 
that the AD may be re-introduced  at any time,  I ndia argues that previous panels have assumed that 
Members would perform their treaty obligation in good faith and would not re-introduce the removed 
measure.   India further argues that CN 82/2007 w as introduced to address the trade concerns, not to 
create a moving target. 
7.49 India considers that the two new notifications were not intended to create a moving target, but 
to address concerns raised by trading partners.  They  do not change the essence of the measure.   Also, 
India should be entitled to the benefit of the assumption of good faith principle. 
7.50 The United States  argues that the reference to "amendments, related measures, or 
implementing measures "in the US panel request is a reference to any amendments or measures in 
existence at the time of the establishment of the Pa nel.  The reason for such inclusive language is due 
to the fact that there is no compilation or datab ase of India's applied custom rates it may become 
apparent that a relevant citation to one of the measure s identified in existence at the time of the Panel's 
establishment, was overlooked.  But, the US argu es this phrase does not extend to measures not even 
in existence at the time. 
7.51 The United States also argues that  given the un certainty as to the two notifications' effect on 
AD and SUAD and the ease with which either custom notification may be rescinded or otherwise 
removed, they could be used as a moving target that the US has to deal with.  Therefore, consideration 
of the two notifications would not, in US view c ontribute to the positive solution of the dispute.  
7.52 In the US view, the modifications effected thr ough CN 82/2007 would, if at all, be a matter 
for consideration at the compliance stage, but not for consideration by this Panel.  Examining the 
measures as set out in the US panel request will provide a benchmark by which India and the United 
States may judge whether the new customs notificati on may bring the measure into conformity with WT/DS360/R 
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  the WTO rules.  The United Stat es also considers that CN 82/2007 does not affect the statutory 
provisions imposing the AD nor does it rescind or remove CN 32/2003  which specifies the rates of 
AD on alcoholic beverages. 
(ii) Analysis of the Panel 
7.53  India requests the Panel to make a ruling on the AD on alcoholic liquor as modified by 
CN 82/2007, which was issued after the establishmen t of this Panel.  The United States objects to 
such request.  The Panel considers that in orde r to determine whether it could rule upon the AD on 
alcoholic liquor as modified by the new customs notifi cation, it is useful to understand the particular 
situation of this dispute and compare it with releva nt rulings of previous panels and the Appellate 
Body.    
7.54 In this regard, we note that the AD on alcoholic liquor as in force on the date of establishment 
of the Panel was imposed through the original Customs Notification ("CN") 32/2003 of 1 March 2003 
which specifies rates of additional duty for alcoholic liquor.  For beer and wines, the rates vary from 
75 per cent ad valorem  to 20 per cent ad valorem  depending on the CIF valu e of the products, and for 
certain CIF values the rates are set out as specific rate s.  For spirits, the rates vary from 150 per cent to 
25 per cent, for products with different values respect ively, and for certain CIF values the rates are set 
out as specific rates.131  By contrast, CN 82/2007,  issued on 3 July 2007, exempts all the goods 
covered by CN 32/2003 from the whole of the duties leviable under CN 32/2003.132    
7.55 The Panel notes India's argument that CN 32/2003 has been effectively overridden by 
CN 82/2007, and that the former "has ceased to have any effect" due to the exemption made in 
CN 82/2007.133  However, it also notes India's subseque nt clarification that, legally speaking, 
CN 32/2003 "remains in force", though it has ceased to have any effect on account of the exemption 
notification CN 82/2007.134  Furthermore, the Panel understands that India's Central Government has 
complete discretion under Section 3(1) of the Cust oms Tariff Act to issue new custom notifications 
specifying rates of additional duty on alcoholic liquor.135  Thus, the Central Government could issue a 
new notification to withdraw CN 82/2007 or to specify the same rates as those specified in 
CN 32/2003.  In that case, the effect of CN 32/2003 could be reinstated.136   Based on these 
explanations by India, the Panel considers th at the AD on alcoholic liquor, as imposed through 
CN 32/2003, has not "ceased to exist"; rather, the AD on alcoholic liquor has been modified by the 
new CN 82/2007 after the Panel was est ablished.  The Panel notes that the Chile – Price Band System  
dispute concerned an amendment of a measure after th e establishment of the panel and, to that extent 
is similar to the situation we are considering here.  The Panel in its analysis below is therefore guided 
by the approach followed by the Appellate Body in Chile – Price Band System .  
Whether the Panel's terms of reference are su fficiently broad to include the new measure   
7.56 In Chile – Price Band System , the Appellate Body considered a number of factors to 
determine whether it could rule on a measure as am ended in a case where the amendment was adopted 
after the establishment of the panel.  The first of these factors is whether a panel's terms of reference 
are sufficiently broad to include the new measure.  In this regard, the Panel recalls that the new 
notification CN 82/2007 was not identified in the US panel request.  As explai ned, it was issued after 
the establishment of the Panel.  Nevertheless, there is a phrase in the US panel request to indicate that 
                                                      
131 Exhibit US-6. 
132 Exhibit IND-6. 
133 India's first oral statement, para. 17. 
134 India's reply to Panel Question No. 40(c). 
135 India's first written submission, paras. 34-35. 
136 India's reply to Panel Question No. 40(c).  WT/DS360/R 
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  the measures include those specifically identified "as well as any amendments, related measures, or 
implementing measures". 
7.57 The Panel notes that in Chile – Price Band System , the Appellate Body stated that the general 
phrase "as well as the regulations and complementary provisions and /or amendments" included in 
Argentina's panel request "suggests that Argentina intended the request to cover the measure even as 
amended".137  On that basis, Argentina's panel request was found to be broad enough to include the 
amendment adopted after the establishment of the panel.   
7.58 In the present dispute, the United States argues th at the phrase it used in its panel request "is a 
reference to any amendments or measures in existen ce at the time of the US panel request" and that 
the phrase does "not extend to measures not  even in existence at the time".138  The United States 
explained that the intention behind the phrase " as well as any amendments, related measures, or 
implementing measures"  was that in case the applied rate of customs duty had been modified in a 
customs notification of which the United States was not aware at the time it drafted its panel request, 
any such modifications in existence at the time of the establishment of the Panel would be included in 
the Panel request.139  In the United States' view, the Panel's terms of reference are limited to measures 
that existed at the time of establishment of the Panel and, therefore, CN 82/2007 falls outside the 
Panel's terms of reference.140 
7.59 The Panel is of the view that the phrase "as well as any amendments, related measures, or 
implementing measures" is objectively open to the in terpretation argued for by the United States.  
Moreover, we find plausible the United States' expl anation of its intention behind the reference to 
amendments and related or implementing measures in  the US panel request.  After all, it is well-
established that a panel's terms of reference are set on  the date of establishment of that panel and that, 
but for certain exceptional situations, measures adopt ed, or coming into force, after that date are 
outside a panel's terms of reference.  The fact that the Appellate Body in Chile – Price Band System  
found that a similar phrase revealed  an intention by the complaining party to include a measure not 
yet in existence on the date of establishment of a panel does not mean that the United States in this 
case could not have intended its phrase to cover only measures in existence on the date of 
establishment of the Panel, particularly when that phrase can be so interpreted.  Furthermore, as a 
panel, we must be careful not to rule upon a measure  that the complaining party never intended to be 
included within our terms of refere nce and is not requesting to be included.  The Panel therefore sees 
no reason to reject the United States' interpretation of the reference " as well as  any amendments, 
related measures, or implementing measures ".   
7.60 Accordingly, the Panel considers that the reference to " any amendments, related measures, or 
implementing measures " in the US panel request does not include measures adopted after the 
establishment of the Panel and that the US panel requ est is therefore not sufficiently broad to include 
CN 82/2007, which was issued after the establishment of the Panel. 
Whether CN 82/2007 changed the essence of the old measure  
7.61 Another factor considered by the Appellate Body in Chile – Price Band System  is whether 
"the essence of the old measure" has been changed by the new measure.  In that dispute, the Appellate 
                                                      
137 Appellate Body Report, Chile – Price Band System , para. 135 (emphasis added). 
138 US second oral statement, para. 20. 
139 The United States notes in this respect that it fo und it difficult to determine India's applicable rates 
of customs duty as there was no compilation or searchable database of India's applied customs rate for any 
particular product.  See US second oral statement, para. 20. 
140 US second written submission, para. 58. WT/DS360/R 
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  Body appears to have considered that the amen dment adopted after the establishment of the panel 
made explicit an implicit cap on the amount  of the tariff that could be applied: 
"We understand the Amendment as having clar ified the legislation that established 
Chile's price band system.  However, the Amendment does not change the price band 
system into a measure different  from the price band system that was in force before 
the Amendment.  Rather, as we have pointed out, Article 2 of Law No. 19.772 simply 
amends  Article 12 of Law No. 18.525 by  adding   a final paragraph to that provision.  
In its amended form, Law No. 18.525 incor porates the additional paragraph, making 
explicit that there is a cap on the amount of the total tariff that can be applied under 
the system at the tariff rate of 31.5 per cent  ad valorem , which has been bound in 
Chile's Schedule since the en try into force of the  WTO Agreement ."141   
7.62 This statement of the Appellate Body suggests that the requirement in the amendment (i.e., 
Law 19.772) had existed before the amendment was made.   The explicit requirement of Law 19.772 
was that the combination of duties resulting from the Chilean price band system and the ad valorem  
duty was not to exceed the rate of 31.5 per cent as bound in Chile's WTO Schedule.  The Appellate 
Body noted that under Chilean Law, WTO commitmen ts override domestic statutes even without the 
explicit requirement in law 19.772.142  The Appellate Body appears to have concluded that Law 
19.772 did not change the essence of the old measure for this reason.  
7.63 In the present case, the situation is different.  First, CN 32/2003 specifies the rates at which 
the additional duties on imported al coholic beverages have to be imposed, whereas the new customs 
notification exempts all the goods from the whole of  the duties leviable under CN 32/2003.  Thus, the 
two notifications have opposite legal effect – CN 32/2003 specifies positive duty rates for certain 
products, CN 82/2007 exempts those same products fr om these duty rates.  Secondly, before issuance 
of CN 82/2007, the AD, as imposed through CN 32 /2003, affected trade by imposing various and 
often high rates of additional duty on the rele vant imported products, whereas after issuance of 
CN 82/2007, the AD should no longer affect trade in alcoholic liquor since CN 82/2007 completely 
exempted relevant imported alcoholic liquor from the duties specified in CN 32/2003.143  Therefore, 
both the legal and practical effects resulting from the old measure and the new measure are substantially different.
144  The fact that India argues that the reason for issuing CN 82/2007 was to 
address the concerns of trading partners and that it effectively removed the additional duty145 also 
supports the understanding that CN 82/2007 changed th e essence of the old measure.  Indeed, were it 
otherwise, it would be difficult to see how the new measure could be said to respond to the concerns 
of trading partners.   
Whether one or both Parties object to a ruling on the new measure  
7.64 The Appellate Body in Chile – Price Band System  also noted that the parties had not objected 
to it ruling on the measure as amended.  It sated that  "as we observed, the par ticipants to this dispute 
do not object to our doing so", i.e., to the Appella te Body ruling on the price band system as amended 
                                                      
141 Appellate Body Report, Chile – Price Band System,  para. 137. 
142 Ibid, para. 126. 
143 As noted by India, the effect of CN 82/2007 is to bring the rate of AD down to zero.  India's second 
oral statement,  para. 5.3. 
144 A specific example can demonstrate the difference.   According to the old CN 32/2003, for bottled 
spirit with a CIF price not exceeding USD 25 per case, the additional duty was imposed at a rate of "150% 
ad valorem" , whereas with the new CN 82/2007 the additional duty is imposed on such imported spirit product 
at a rate of "nil".   The Panel considers that such a drastic change in the rate of additional duty indicates that the 
AD after issuance of CN 82/2007 is not essentially th e same as the AD before issuance of CN 82/2007. 
145 India 's second oral statement, para. 6.1.  WT/DS360/R 
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  by Law 19.772.146  In this dispute however, the Parties disagree on whether the Panel should rule on 
the AD on alcoholic liquor as modified by CN 82/20 07.  In fact, the United States explicitly objects to 
our doing so.  Thus, in relation to this fact or the situation is again different from the Chile– Price 
Band System  dispute.  
Whether a ruling on the new measure is appr opriate to secure a positive solution to the 
dispute  
7.65 The Panel notes that the Appellate  Body also considered in Chile – Price Band  System 
whether a ruling on the measure as amended was appr opriate in order to secure a positive solution to 
the dispute.   
"We consider it appropriate for us to rule  on the price band system as currently in 
force in Chile, that is, as amended by Law 19.772, to 'secure a positive solution to the 
dispute" and to make 'sufficiently precise recommendations and rulings so as to allow 
for prompt compliance'."147 
7.66 The Parties in this case hold different views on whether a ruling on the AD on alcoholic 
liquor as modified by CN 82/2007 would be appropri ate to secure a positive solution to the dispute.  
The United States argues that given the uncertainty as to the precise legal effect of CN 82/2007 and 
the ease with which customs notifications may be rescinded or otherwise removed by the Indian Central Government, it would be useful for the Panel to consider the original measures set out in the 
US panel request as this would provide a benchmar k by which India and the United States may judge 
whether the CN 82/2007 may bring the AD on alcoholic liquor into conformity with WTO rules.
148  In 
contrast, a ruling by the Panel on the situation as it exists after issuance of CN 82/ 2007 would not, in 
the United States' view, contribute to a positiv e solution of the dispute concerning the AD.149  The 
impact of CN 82/2007 should be consider ed at the compliance panel stage.   
7.67 India contends that previous panels have assumed that Members would perform their treaty 
obligations in good faith and would not re-introdu ce measures that had been removed.  India also 
recalls that CN 82/2007 was introduced to address trad e concerns of its trade partners, not to create a 
moving target for the complaining party.150  India therefore contends that it should be entitled to the 
presumption of good faith compliance with its WTO obligations.151  India also argues that the AD has 
been validly removed by CN 82/2007 and that it is, th erefore, appropriate for the Panel to consider the 
AD on alcoholic liquor as amended in coming to a decision in a dispute.152 
7.68 The Panel is sympathetic to the US argument that a ruling on the original AD on alcoholic 
liquor and not the AD as modified could contribute to  a positive solution of the dispute.  India has 
explained that, legally speaking, CN 32/2003 has not  been revoked.  Rather, it has been effectively 
overridden by the new CN 82/2007.  India has also  clarified that the Central Government has 
complete discretion to issue new customs notificat ions or withdraw CN 82/2007.  As a matter of 
Indian domestic law, the previous legal situation could thus be reinstated easily and quickly.   
7.69 The Panel also notes India's argument that its objective was not to create a "moving target" or 
to shield the AD from scrutiny, but to address trade c oncerns of its trading partners and that India has 
                                                      
146 Appellate Body Report, Chile – Price Band  System, para. 143. 
147 Ibid. 
148 US second oral statement,  closing statement para. 17. 
149 US second oral statement para. 24. 
150 India's second oral statement, para. 6.2.  India's second oral statement, closing statement, para. 23. 
151 India's second oral statement, closing statement, paras. 23-24. 
152 India's second oral statement, paras. 5.5, 6.1, 6.2. WT/DS360/R 
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  effectively "removed" the AD on alcoholic liquor as of 3 July 2007.153  The Panel does not question 
the good faith of India in trying to address concerns of  its trading partners by issuing CN 82/2007.  In 
fact, the Panel recognizes the significant efforts undertaken by India in this regard.  However, the Panel must also note that India has never stated th at the reason for the issuance of CN 82/2007 was to 
address a perceived WTO-inconsistency.  To the contrary, India has described the AD on alcoholic 
liquor prior to issuance of CN 82/2007 as a measure compatible with India's WTO obligations and as 
an "allegedly offending measure".  As a result, we  need to assume that CN 82/2007 was issued, not 
because India considered it necessary to bring itself into conformity with its WTO obligations, but 
rather voluntarily, in order to be responsive to con cerns expressed by its trading partners.  At this 
point, even though India has indicated that it has no intention of re-introducing the status quo ante , it 
seems that India is maintaining that it would not be precluded by WTO rules from doing so in good faith.   
7.70 Under these circumstances, that is to say, in a situation where India faces no meaningful 
obstacles in reinstating the status quo ante  (i.e., the AD on alcoholic  liquor as it existed before 
issuance of CN 82/2007) and where India apparently believes the status quo ante  was WTO-
consistent while the United States believes it was WT O-inconsistent, we consider that ruling on the 
AD on alcoholic liquor as it existed before issuan ce of CN 82/2007 could contribute to securing a 
positive solution to this dispute, whereas ruling on the AD on alcoholic liquor as modified by 
CN 82/2007 would not adequately do so, given that the modification has, in our view, changed the 
essence of the old measure.  Therefore, we find it ne ither necessary nor appropriate to rule on the AD 
on alcoholic liquor as modified by CN 82/2007 in or der to secure a positive solution to this dispute. 
(iii) Conclusion 
7.71 To summarize the above considerations, the Panel finds that: (i) the Pane l's terms of reference 
do not extend to CN 82/2007; (ii) the AD on alcoholic liquor as modified by CN 82/2007 is not 
essentially the same as the original AD on alcoholic liquor; (iii) one Party objects to the Panel ruling 
on the AD on alcoholic liquor as modified by CN 82/2007; (iv) it is neither necessary nor appropriate 
to rule on the AD on alcoholic liquor as modified by CN 82/2007 in order to  secure a positive solution 
to the dispute.  
7.72 In the light of, and based upon, the totality of  these findings, the Panel declines to rule on the 
AD on alcoholic liquor as modified by CN 82/2007. 
(b) Customs Notification 102/2007 
(i) Arguments of the Parties 
7.73 India  argues that it has issued CN 102/2007
154 establishing a credit and refund mechanism 
whereby imported products on which SUAD has alread y been paid receive either a full credit or a 
refund of the SUAD if a VAT/sales tax is paid on the resale.  In this way, the possibility of double 
taxation is eliminated.  
7.74 The United States  argues that neither CN 82/2007, nor CN 102/2007 existed at the time the 
Panel was established, the Panel's terms of reference are limited to those measures existing on the date 
of establishment and cited in the US Panel request.  Therefore, these two notifications are outside of 
the Panel's terms of reference. 
                                                      
153 India's second oral statement para. 6.2. 
154 Exhibit IND-17.  WT/DS360/R 
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  7.75 With respect to CN 102/2007, the United Stat es considers that the importer must pay the 
SUAD at the time of importation and may only thereafter seek a refund of the SUAD paid if certain 
documentation can be provided.  In the US view , conditions to which exemption from the EAD is 
subject may effectively undermine the exemption itself.    
7.76 The United States also considers that it is  not necessary to consider CN 82/2007 and 
CN 102/2007 in order to secure a positive solution in this dispute.  Rather, in the US view, doing so 
would be contrary to that objective, as the Appellate Body found in Chile – Price Band System , that 
"we do not mean to condone a practice of amendi ng measures during dispute settlement proceedings 
if such changes are made with a vi ew to shielding a measure from scru tiny by a panel".  Therefore, if 
the Panel were to take into account these two cust oms notifications introduced after the establishment 
of this Panel, it would create a moving target and result in shielding a measure from panel scrutiny.   
In the US view, the fact that the Central Govern ment has a complete discretion to issue customs 
notifications create a possibility that after the c onclusion of these proceedings, CN 102/2007 may be 
withdrawn hence the measure would constitute a m oving target as the Appellate Body stated.    
7.77 India  points out that the words "any amendments, related measures or implementing 
measures" used in the US panel request can include amendments made after the Panel's establishment, 
just as the Appellate Body stated in Chile – Price Band System.   The Appellate Body stated that if the 
terms of reference are broad enough to include am endments and if it is necessary to consider an 
amendment in order to secure a positive solution to the dispute, then it is appropriate to consider the 
measure as amended.  In India's view, this is also the situation in this dispute. 
7.78 India argues that Customs Notification 102/2007  does not change the essence of the measure, 
rather it only addresses certain concerns raised by tradi ng partners, in particular, to make sure that any 
excess tax paid and not addressed by way of a credit/offset mechanism would be refunded upon fulfilment of certain conditions.  Therefore, India considers that the two new notifications were not 
intended to create a moving target, but to address con cerns raised by trading partners.  They do not 
change the essence of the measure.  Also, India s hould be entitled to the benefit of the assumption of 
good faith principle. 
7.79 India also argues that the United States' understa nding of the statement of the Appellate Body 
in Chile – Price Band  System that an amendment which merely made  explicit a requirement that was 
implicit under Chilean Law and which therefore did not  change the essence is incorrect.  In India's 
view, the amendment to Chilean Law – Article 12 of Law 18.525, "puts in place a cap on the Chilean 
PBS duties to avoid that those duties, in conjunc tion with the 8 per cent applied rate, exceed the 
31.5 per cent bound rate".    
7.80 The United States  argues that the reference to "amendments, related measures, or 
implementing measures "in the US panel request is a reference to any amendments or measures in 
existence at the time of the establishment of the Pa nel.  The reason for such inclusive language is due 
to the fact that there is no compilation or datab ase of India's applied custom rates it may become 
apparent that a relevant citation to one of the measure s identified in existence at the time of the Panel's 
establishment, was overlooked.  But, the US argu es this phrase does not extend to measures not even 
in existence at the time. 
7.81 With respect to CN 102/2007, the United States argues that it does not address the situation 
where goods are imported to the importer as the end consumer who has to pay the full SUAD.  Also, 
the conditions for requesting refund at the resale stage may render the measure less favourable for 
imports comparing to the treatment given to domestic products.   
7.82 The United States also argues that  given the un certainty as to the two notifications' effect on 
AD and SUAD and the ease with which either custom notification may be rescinded or otherwise WT/DS360/R 
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  removed, they could be used as a moving target that the US has to deal with.  Therefore, consideration 
of the two notifications would not, in US view c ontribute to the positive solution of the dispute.  
7.83 The United States argues that CN 102/2007 also  change the essence of the SUAD if it does 
what India claims to do, that is, by virtue of CN 102/2007, imports are no longer liable to SUAD 
provided certain conditions are met.  In such case, as with the AD, a measure  that allegedly removes 
liability for another measures would seem to necessar ily change the essence of the latter measure.   
This is different from the situation in Chile – Price Band System , where both parties agreed to take the 
amendment into account and that the amendment si mply made explicit something already implicit 
under the Chilean law.    
7.84 In the US view, the modifications effected th rough CN 102/2007 would, if at all, be a matter 
for consideration at the compliance stage, but not for consideration by this Panel.  Examining the 
measures as set out in the US panel request will provide a benchmark by which India and the United 
States may judge whether the new customs notificati on may bring the measure into conformity with 
the WTO rules.    
(ii) Analysis of the Panel 
7.85 India requests the Panel to make a ruling on th e SUAD as modified by CN 102/2007, whereas 
the United States requests that the Panel rule on the SUAD as it existed at the time the Panel was 
established and that it not rule on the modi fication effected through CN 102/2007.  
7.86 The Panel recalls that based on Section 3(5)  of the Customs Tariff Act, the Central 
Government of India issued Customs Notification ("CN") 19/2006 on 1 March 2006 to impose the SUAD at a rate of 4 per cent ad valorem  on certain imported products.  Section 3(5) and CN 19/2006 
are identified in the US panel request. 
7.87 During the Panel's first substantive meeting, Indi a informed the Panel that it had just issued a 
new customs notification, CN 102/2007, providing for the possibility to claim a refund of the SUAD 
already paid on imported goods in case of subsequent  internal re-sale of the imported goods.  The 
refund is not automatic but subject to certain c onditions.  Thus, CN 102/20 07 introduces a  refund 
mechanism available only in specifi ed circumstances.  It is clear, therefore, that CN 102/2007 
complements, and modifies, but does not repl ace the SUAD as imposed through CN 19/2006.  In 
other words, the SUAD has not "ceased to exist" as a result of issuance of CN 102/2007.  
Accordingly, the situation with respect to the m odification of the SUAD after the establishment of the 
Panel is similar to the situation in the Chile – Price Band System  dispute and, hence, the Panel in its 
analysis will again be guided by th e approach followed by the Appellate Body in that dispute.  As the 
Panel's analysis of the modification of the SUAD is similar in a number of ways to that of the 
modification of the AD on alcoholic liquor, it is not necessary to repeat certain explanations already 
provided.  The analysis below should therefore be read together with the preceding analysis 
concerning CN 82/2007.   
Whether the Panel's terms of reference are su fficiently broad to include the new measure
 
7.88 Since CN 102/2007 was issued after the establishmen t of the Panel, it is not identified in  the 
US panel request.  As we have noted earlier, howev er, the US panel request contains the phrase "as 
well as any amendments, related measures, or implementing measures."  Nevertheless, in the United States' view, the Panel's terms of reference are li mited to measures that existed at the time of the  WT/DS360/R 
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  establishment of the Panel and, therefore, the ne w CN 102/2007 falls outside the Panel's terms of 
reference.155 
7.89 The Panel has previously explained its view  that the phrase "as well as any amendments, 
related measures, or implementing measures" in the US panel request should not be interpreted so as 
to cover measures adopted after the establishment of the Panel.  It follows that the US panel request is 
not sufficiently broad to include CN 102/2007 since it was issued after the Panel's establishment. 
Whether CN 102/2007 changed the essence of the old measure  
7.90 As explained by India, CN 102/2007 provid es that imported products on which the SUAD has 
already been paid are eligible, upon fulfilment of certain conditions, to receive a full refund of the 
SUAD on the re-sale of such imported products and thereby eliminates the possibility of double 
taxation of imported goods, as re-sale tran sactions may be subject to State VAT.156  Thus, according 
to India, it is clear that the refund mechanism intr oduced by CN 102/2007 eliminated, in whole or in 
part, what India refers to as possible double taxation of imported goods.  The Panel is of the view that 
this modification of the SUAD, viewed in its context,  is not just a minor and marginal change.  Based 
upon India's explanation, we think it is a significant change since it in whole or in part removed an 
element of possible less favourable treatment of re-sale transactions involving imported products vis-
à-vis  re-sale transactions invol ving like domestic products.157  In respect of the latter transactions, a 
credit is available for the State VAT paid on prior-stage sale transactions.   
7.91 Moreover, we note that, in terms of Indian la w, CN 102/2007 is an exemption notification.  
Subject to certain conditions, it exempts from th e SUAD goods imported into India for subsequent 
sale, by creating a refund possibility.  Thus, the ol d measure and the new measure have different legal 
effects, as otherwise there would have been no need to provide for an exemption from the old 
measure.  Also, the practical effects resulting from the old measure and the new measure are different in that in the case of the old measure the im porter needed to pay the SUAD at 4 per cent ad valorem , 
whereas in the case of the new m easure the importer can, subject to meeting relevant conditions, get 
the SUAD already paid fully refunded.  Therefor e, we consider that the SUAD as modified by 
CN 102/2007 is not essentially the same as the original  SUAD.  We further note in this regard that 
India has stated that it introduced CN 102/2007 in response to concerns expressed by trading 
partners.
158  If the SUAD after issuance of CN 102/2007 were essentially the same as before, it is 
difficult to see how the modification could make a difference for India's trading partners. 
7.92 Finally, even if CN 102/2007 were considered not to have changed the essence of the SUAD, 
we note that this factor by itself would not be dispositive of whether the Panel should rule on the 
SUAD as modified by CN 102/2007.  The Panel's c onclusion in this regard is based on an overall 
assessment of all factors relevant to this issue.  
Whether one or both Parties object to a ruling on the new measure  
7.93 In this dispute, the Parties disagree on wh ether the Panel should rule on the SUAD as 
modified by CN 102/2007.  India requests that we do, while the United States objects to our doing so.  To that extent, the circum stances in this dispute are different from those in the Chile– Price Band 
System  dispute.  
                                                     
 
155 US second written submission, para. 58. 
156 India's first oral stat ement, paras. 12-13. 
157 We note that India itself stated that "[a]spects of [the SUAD] which raised doubts on its being 'in 
excess' of domestic taxes now stand addressed and there is no question of any excess tax being retained".  
India's second closin g statement, para. 21 
158 India's second closing statement, para. 23. WT/DS360/R 
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  Whether a ruling on the new measure is appr opriate to secure a positive solution to the 
dispute  
7.94 The Parties in this case hold different views on whether a ruling on the SUAD as modified by 
CN 102/2007 would be appr opriate to secure a positive solution to the dispute.  The United States 
argues that given the uncertainty as to the precise legal effect of CN 102/2007, and the conditions 
attached thereto, and the ease with which custom s notifications may be rescinded or otherwise 
removed by India's Central Government, it would be useful for the Panel to consider the original 
measures set out in the US panel request as this would provide a benchmark by which India and the 
United States may judge whether the new CN 102/ 2007 may bring the SUAD into conformity with 
WTO rules.159  In contrast, a ruling by the Panel on the situation as it exists after issuance of 
CN 102/2007 would not, in the United States' view, contribute to a positive solution of the dispute.160  
The impact of CN 102/2007 should be considered at the compliance panel stage.   
7.95 India contends that previous panels have assumed that Members would perform their treaty 
obligations in good faith and would not withdraw corrective measures that had been introduced.  India 
also argues that CN 102/2007 was introduced to address concerns of its trade partners, not to create a 
moving target for the complaining party.161  India therefore contends that it should be entitled to a 
presumption of good faith compliance with its WTO obligations.162  
7.96 The Panel is sympathetic to the US argument th at a ruling on the original SUAD and not the 
SUAD as modified could contribute to a positive solution of the dispute.  India has clarified that the 
Central Government has complete discretion to i ssue new customs notifications or to withdraw 
CN 102/2007.  As a matter of Indian domestic law,  the previous legal situation could  thus be 
reinstated easily and quickly.   
7.97 The Panel also notes India's argument that its objective was not to create a "moving target"  or 
to shield the SUAD from scrutiny, but to address concerns of its trading partners.163  The Panel does 
not question the good faith of India in trying to address trade concer ns of its trading partners by 
issuing CN 102/2007.  In fact, as already stated, the Panel recognizes the significant efforts 
undertaken by India in this regard.  However, the Pa nel must also note that In dia has never stated that 
the reason for the issuance of CN 102/2007 was to address a perceived WTO-inconsistency.  To the 
contrary, India has described the SUAD prior to issuance of CN 102/2007 as a measure compatible 
with India's WTO obligations.  In particular, in its first written submission India has claimed that the 
old SUAD was consistent with Article III:2 of th e GATT 1994, and subsequently it indicated that it 
issued CN 102/2007 to remove "ambiguity".164  As a result, we need to assume that CN 102/2007 was 
issued, not because India considered it necessary to bring itself into conformity with its WTO 
obligations, but rather voluntarily, in order to be responsive to concerns expressed by its trading 
partners.  At this point, even though India has indicated that it has no intention of re-introducing the 
status quo ante , it seems that India is maintaining that it would not be precluded by WTO rules from 
doing so in good faith.   
7.98 Under these circumstances, i.e., in a situati on where India faces no meaningful obstacles in 
reinstating the status quo ante  (i.e., the SUAD as it was before issuance of CN 102/2007) and where 
India apparently believes the status quo ante  was WTO-consistent while the United States believes it 
was WTO-inconsistent, we consider that ruling on the SUAD as it was before issuance of 
                                                      
159 US second closing statement, para. 17. 
160 US second oral statement, para. 24. 
161 India's second oral statement, para. 6.2;  India's second closing statement, para. 23. 
162 India's second closing statement, paras. 23-24. 
163 India's second oral statement, para. 4.7; Indi a's second closing statement, paras. 23-24. 
164 India's first written submission, para. 99; In dia's second closing statement, para. 19.  WT/DS360/R 
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  CN 102/2007 could contribute to securing a positive so lution to this dispute, whereas ruling on the 
SUAD as modified by CN 102/2007 would not ade quately do so, given that, in our view, the 
modification has changed the essence of the old measure.  Therefore, we find it neither necessary nor appropriate to rule on the SUAD as modified by CN 102/2007 to secure a positive solution to this 
dispute. 
(iii) Conclusion 
7.99 To summarize the above considerations, the Pa nel finds that:  (i) the Panel's terms of 
reference do not extend to CN 102/2007;  (ii)  the SUAD as modified by CN 102/2007 is not 
essentially the same as the original SUAD;  (iii) one Party objects to the Panel ruling on the SUAD as 
modified by CN 102/2007;  (iv) it is neither necessary nor appropriate to rule on the SUAD as 
modified by CN 102/2007 in order to secure a positive solution to the dispute. 
7.100  In the light of, and based upon, the totality of  these findings, the Panel declines to rule on the 
SUAD as modified by CN 102/2007. 
2. Discretionary vs. mandatory na ture of the measures at issue 
7.101  As indicated, the other preliminary matter to be addressed by us was also raised by India and 
concerns whether the measures before the Panel may be challenged, as such, and if so, whether they 
may be determined to be inconsis tent, as such, with WTO rules.  
7.102  India  submits that the United States fails to appr eciate the distinction made under Indian law 
between the provisions of the Customs Act and th e Customs Tariff Act, which empower the Central 
Government to impose the BCD, the AD on alcoholic liquor and the SUAD, and the customs notifications pursuant to which the Central Government  may fix the rates of such duties.  India argues 
that the statutory provisions merely confer upon the Central Government the discretion to impose the 
duties and do not themselves prescribe the rates at wh ich such duties may be charged.  The statutory 
provisions also confer upon the Central Government the discretion to exempt imports from the duties.  
India considers that the United States has mischaracterized the provisions of Section 3(1) of the 
Customs Tariff Act, which authorizes the imposition of the AD, and Section 3(5) of the Customs 
Tariff Act, which authorizes the imposition of the SUAD, as being mandatory and consequently as 
being challenged measures in the present dispute.  
7.103  India further submits that while the Customs Act and the Customs Tariff Act are empowering 
statutes, the customs notifications issued by the Central Government in the exercise of its powers 
under these statutes are a form of delegated legislation under Indian law.  According to India, they are 
the mechanisms through which th e executive branch, i.e., the Ce ntral Government, imposes, or 
exempts, a good from the levy of a duty.  India stat es that the customs notifications, once issued, have 
the force of law and so are mandatory.  Therefore,  India maintains, the United States' challenge, and 
the Panel's investigation, has to be confined to the relevant customs notifications through which the 
AD and the SUAD have been levied. 
7.104  The United States  does not agree that, under the relevant  statutes, the imposition of the AD 
or the SUAD rests completely at the discretion of the Central Government.  In its view, Section 3(1) 
and 3(5) of the Customs Tariff Act and Section 12 of the Customs Act are mandatory.
165  The United 
States further submits that, in any event, India's ar guments on this issue are largely irrelevant to the 
outcome of this dispute, and the Panel therefore ne ed not undertake an elaborate analysis of whether 
                                                      
165 In relation to Section 3(5) the United States argu es that although it is discretionary in terms of 
whether the Central Government imposes the SUAD, it is ma ndatory with respect to the rate at which the SUAD 
is to be imposed should the Central Government choose to exercise its discretion. WT/DS360/R 
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  Section 12 of the Customs Act or Sections 3(1) and 3(5) of the Customs Tariff Act are mandatory or 
discretionary.  The United States points out in this  respect that the US claims concerning the AD 
relate to a number of provisions of Indian law (i ncluding Section 3(1) of the Customs Tariff Act and 
CN 32/2003) that when imposed together with the BCD result in ordinary customs duties on alcoholic 
liquor that exceed India's WTO-bound rate.  Similarly, the US claims concerning the SUAD relate to 
a number of provisions of Indian law (includi ng Section 3(5) of the Customs Tariff Act and 
CN 19/2006) that when imposed together with the BCD result in ordinary customs duties on alcoholic 
liquor that exceed India's WTO-bound rate.  The United States submits that the provisions of Indian law comprising the AD and the SUAD, when applie d together with the BCD, mandate a breach of 
Article II:1 of the GATT 1994.  The United States notes that India itself acknowledges that the AD 
and the SUAD are mandatory insofar as CN 32/2003 and CN 19/2006 specify the rates at which 
imports shall be liable to the AD and the SUAD, respectively. 
7.105  The Panel  recalls that the US claims concern th e AD on alcoholic liquor and the SUAD.  The 
United States is challenging the AD on alcoholic liq uor and the SUAD as such.  It is not challenging 
the AD or the SUAD on any particular shipment of goods entering India's customs territory.   
7.106  The United States has described the AD on al coholic liquor as comprising a number of 
provisions of Indian law, including Section 3(1)  of the Customs Tariff Act and CN 32/2003.  
Likewise, it has described the SUAD as comprising a number of provisions of Indian law, including 
Section 3(5) of the Customs Tariff Act and CN 19/2006.  The various provisions identified by the 
United States are the provisions which it considers to be the provisions through which the AD on 
alcoholic liquor and the SUAD are levied.
166  We understand that the United States has identified 
these provisions in an effort to identify the specifi c measures at issue, which are the AD on alcoholic 
liquor and the SUAD.  The United States has never said that it is challenging Section 3(1) or Section 3(5) of the Customs Tariff Act separately from the AD on alcoholic liquor and the SUAD, as 
actually imposed through specific customs notificati ons, nor has it requested the Panel to find that 
Section 3(1) and Section 3(5) are, as such, inconsistent with Article II:1.
167  It is clear to us, therefore, 
that this case involves no challenge to Indian stat utory provisions as such.  In our view, the United 
States is challenging the AD on alcoholic liquor, as imposed through CN 32/2003, and the SUAD, as 
imposed through CN 19/2006.   
7.107  Regarding whether the AD on alcoholic liquor, as imposed through CN 32/2003, and the 
SUAD, as imposed through CN 19/2006, may be challe nged, we note, as an initial matter, that it is 
uncontested that on the date of establishment of this Panel both the AD on alcoholic liquor and the 
SUAD were measures in force that were actually a pplied by the Central Government of India to 
imports of subject goods.  We further note that th e Appellate Body has stated that "any act or 
omission attributable to a WTO Member can be a measure of that Member for purposes of dispute 
settlement proceedings".168  Plainly, the AD on alcoholic liquor, as imposed through CN 32/2003, and 
the SUAD, as imposed through CN 19/2006, are acts a ttributable to India's Central Government and, 
as such, measures of India for the purposes of WTO dispute settlement proceedings.  Accordingly, 
they may be the subject of a challenge by the United States.   
7.108  As to whether the AD on alcoholic liquor, as imposed through CN 32/2003, and the SUAD, 
as imposed through CN 19/2006, are the kind of measures that we could possibly find to be 
                                                      
166 US first written submission, para. 2. 
167 US reply to Panel Question No. 16.  Indeed, if the United States had intended to challenge 
Sections 3(1) and 3(5) separately, it would not have been logical for the United States to have told the Panel that 
it is not necessary for the Panel to enga ge in elaborate analysis of whether Sections 3(1) or 3(5) are mandatory 
or discretionary, particularly since the United States considers that the mandatory vs. discretionary distinction is 
a relevant distinction in this case.  US second written submission, para. 80 and note 110. 
168 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review , para. 81.  WT/DS360/R 
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  inconsistent, as such, with applicable WTO rules, we note that both Parties in their submissions on 
this issue have attached importance to the di stinction between mandatory and discretionary 
measures.169  In the specific circumstances of this case, we  see no reason not to apply this distinction. 
India has confirmed, and accepts, that CN 32/2003,  through which the AD on alcoholic liquor was 
imposed, and CN 19/2006, through wh ich the SUAD was imposed, have th e force of law and, in that 
sense, are mandatory.170  Since under the relevant customs notifications in force on the date of 
establishment of this Panel the AD on alcoholic liquor  and the SUAD were required to be applied by 
the Central Government to imports of subject goo ds, it is of no particular importance whether the 
statutory provisions upon which the customs notifica tions are based are also mandatory.  We therefore 
see no need to examine the relevant stat utory provisions in this light.   
7.109  Having regard to the above considerations, we  are of the view that the AD on alcoholic 
liquor, as imposed through CN 32/2003, and the SUAD, as imposed through CN 19/2006, being 
measures which on the date of establishment of this  Panel were required to be applied and enforced, 
are the kind of measures which we could possibly find to be inconsistent, as such, with applicable 
WTO rules.  
7.110  As a consequence, we continue with our anal ysis of the US claims that both the AD on 
alcoholic liquor, as imposed through CN 32/2003,  and the SUAD, as imposed through CN 19/2006, 
are inconsistent, as such, with Article II:1 of the GATT 1994.  
D. US CLAIMS OF VIOLATION OF ARTICLE II :1(B) OF THE GATT 1994 
7.111  As previously mentioned, the United Stat es claims that the AD and the SUAD are each 
inconsistent, as such, with Article II:1(a) and (b) of the GATT 1994.  In terms of the order of our 
assessment of the separate US claims under Article II:1(a) and Article II:1(b), we begin with the 
latter, as the Appellate Body did in Argentina – Textiles and Apparel :171 
"Paragraph (a) of Article II:1 contains  a general prohibition against according 
treatment less favourable to imports than th at provided for in a Member's Schedule.  
Paragraph (b) prohibits a specific kind of pr actice that will always be inconsistent 
with paragraph (a):  that is, the applica tion of ordinary customs duties in excess of 
those provided for in the Schedule.  Becau se the language of Article II:1(b), first 
sentence, is more specific and germane to the case at hand, our interpretative analysis 
begins with, and focuses on, that provision." 
7.112  We, too, focus on issues of inte rpretation, before examining the measures at issue in the light 
of Article II:1(b).  
1. Relationship between Articles II:1(b) and II:2 of the GATT 1994 
7.113  The Panel  notes that Article II:1(b) of the GATT 1994 provides: 
The products described in Part I of the Sc hedule relating to any contracting party, 
which are the products of territories of other contracting parties, shall, on their 
importation into the territory to which the Sc hedule relates, and subject to the terms, 
conditions or qualifications set forth in that Schedule, be exempt from ordinary 
customs duties in excess of those set forth and provided therein.   Such products shall 
                                                      
169 Pursuant to that distinction in principle only mandatory measures may be found to be inconsistent, 
as such, with applicable WTO rules. 
170 India's first written submission, para. 32. 
171 Appellate Body Report, Argentina – Textiles and Apparel , para. 45. WT/DS360/R 
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  also be exempt from all other duties or charges of any kind imposed on or in 
connection with the importation in excess of those imposed on the date of this 
Agreement or those directly and mandator ily required to be imposed thereafter by 
legislation in force in the importing territory on that date. 
7.114  However, Article II:2 of the GATT 1994 provides:172 
Nothing in this Article shall prevent any contracting party from imposing at any time 
on the importation of any product: 
(a) a charge equivalent to an intern al tax imposed consistently with the 
provisions of paragraph 2 of Article III in respect of the like domestic product 
or in respect of an article from which the imported product has been 
manufactured or produced in whole or in part; 
(b) any anti-dumping or countervailing duty applied consistently with the 
provisions of Article VI; 
(c) fees or other charges commensurate with the cost of services rendered. 
7.115  We note the United States' argument that the AD and the SUAD are ordinary customs duties 
within the meaning of the first sentence of Article II:1(b) or, in the alternative, "other duties or 
charges of any kind imposed on or in connection with the importation" (hereafter "ODCs") within the meaning of the second sentence of Article II:1(b).  We also note that India disagrees, arguing that they 
are neither ordinary customs duties nor ODCs with in the meaning of Article II:1(b), but charges 
equivalent to internal taxes imposed in respect  of the like domestic product, as contemplated in 
Article II:2(a).  Accordingly, we initially need to analyze the relationship between Articles II:1(b) and 
II:2.   
7.116  The United States  submits that the ordinary meaning of  the term "customs duty" as it appears 
in Article II:1(b) is a duty imposed on a product up on its importation into the customs territory of a 
Member.  According to the United States, the term "o rdinary" suggests a customs duty that is "normal, 
customary, usual", "belonging to or occurring in regular custom or practice", "of the usual kind, not 
singular or exceptional; commonplace, mundane."
173  For the United States, an ordinary customs duty 
is thus a type of customs duty that is common and occurring most regularly.  Determination of whether a measure constitutes an ordinary customs duty should be based on the structure, design and 
application of the measure; the name or stated purpose the Member imposing it may have ascribed to 
it is not determinative. 
7.117  The United States submits that by far the mo st common and regularly occurring types of 
customs duties in terms of structure, design and application are ad valorem , specific or a combination 
thereof, calculated on the value or quantity respectively of a good at the time of importation.  The United States considers that ordinary customs duties are not applied on a case-by-case basis or in 
response to a singular or exceptional event or set of  circumstances.  Instead, Members apply ordinary 
customs duties as a matter of course upon importation of a product into its customs territory.  For the 
United States it follows that an "ordinary custom s duty" means a duty that applies to a good at the 
time of importation – not on a case-by-case basis or in response to a singular or exceptional event or 
set of circumstances – but as a matter of course on, or  in connection with, the good's importation.  An 
                                                     
 
172 Ad Notes omitted. 
173 The United States refers to  The New Shorter Oxford English Dictionary, L. Brown (ed) ( Clarendon 
Press), 1993, Vol., 2, p. 2018.  WT/DS360/R 
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  ordinary customs duty is typically ad valorem  (that is, calculated on the value of the good), specific 
(for example, calculated based on the quantity of  the good), or a combination thereof.   
7.118  The United States considers that there is no basis in the WTO Agreement  for the proposition 
that a Member may impose only one customs duty prop erly categorized as an "ordinary customs duty" 
and that any other customs duty that the Member might impose is simply something other than an 
ordinary customs duty.  In fact, the text refers to "ordinary customs duties".  Use of the plural "duties" 
suggests that Article II:1(b) prohibits "ordinar y customs duties" on the importation of products – 
whether resulting from the application of one or more  individual duties – in excess of those specified 
in the relevant Member's Schedule.  
7.119  In addition, the United States argues that ODCs are defined in relation to ordinary customs 
duties in that "other duties or ch arges" mean those duties or charg es that are not "ordinary" customs 
duties but are nonetheless imposed on or in connection with a product's importation.  The United 
States considers that a charge imposed on importa tion would necessarily constitute an ODC if it were 
not an ordinary customs duty.  This is because, in the United States' view, the word "other" as used in 
Article II:1(b) means duties or charges other than ordinary customs duties that are applied on or in 
connection with importation.   
7.120  In relation to the case at hand, the United States considers that having made a prima facie case 
that the AD and the SUAD are ordinary customs duties,  the necessary corollary of that showing is that 
neither the AD nor the SUAD is a "charge equivalent to an internal tax".  The United States further 
submits that in asserting that the AD and the SUAD are charges equivalent to an internal tax within 
the meaning of Article II:2(a), India has implic itly characterized the AD and the SUAD as charges 
"imposed on importation", since the chapeau to Artic le II:2 makes clear that it concerns measures 
"imposed on importation".  Therefore, if the AD a nd the SUAD are not ordinary customs duties, they 
must, in the United States' view, be "other duties or  charges" within the meaning of Article II:1(b).  
Thus, the United States considers that the measures sp ecified in Article II:2(a) are specific types of 
"other ... charges applied on or in connection with importation" that Members have agreed are 
permissible.  For the United States, it follows that, in  effect, India in this case is asserting that, even 
though the AD and the SUAD are not specified in its WTO Schedule, the AD and the SUAD are nonetheless justified as charges equivalent to  an internal tax under Article II:2(a).  
7.121  India  understands the term "ordinary customs dut y" in consonance with the language of 
Article II:1(b) and in light of its interpretation in prior decisions of the Appellate Body and the panel 
in Chile – Price Band System .  India notes that the panel in Chile – Price Band System  defined the 
term "ordinary customs duty" as being a duty "of the usual kind, not singular or exceptional; 
commonplace, mundane".
174  An ordinary customs duty is usually expressed in ad valorem  or specific 
duty terms.  However, India maintains, this does not mean that every duty that is imposed at the time 
of importation on an imported product and is expressed in ad valorem  terms will necessarily qualify 
as an ordinary customs duty.  The Appellate Body has itself noted that "it is not necessary that each 
and every duty that is calculated on the basis of the value and/or volume of imports is necessarily an 
'ordinary customs duty'".175  Likewise, the Appellate Body in Chile-Price Band System  has held that 
the fact that duties are expressed in ad valorem  terms does not make them ODCs under the second 
sentence of Article II:1(b).176 
7.122  India points out in this regard that there is a separate category of duties described in 
Article II:2(a) that is imposed at the border and that is based on the value and/or volume of imports 
and yet, according to the Appellate Body, does not qualify either as "ordinary customs duties" or as 
                                                      
174 Panel Report, Chile  – Price Band System , para. 7.51. 
175 Appellate Body Report, Chile  – Price Band System , paras. 271-272 and 274. 
176 Ibid., para. 275. WT/DS360/R 
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  ODCs.177  In particular, India notes, the Appellate Body has acknowledged that Article II:2 permits 
charges such as those that are equivalent to inte rnal taxes, which are imposed at the time of 
importation, but do not  amount to ODCs.178  India submits, therefore, that the United States must 
look beyond the mere point at which a duty is le vied and the manner in which it is expressed, since 
neither of them will necessarily mean or indicate th at the duty is an ordinary customs duty or ODC.  
7.123  India further argues that the United States has ef fectively blurred the distinction between an 
ordinary customs duty and ODCs by suggesting that if an import duty is not one, then it must be the 
other.  Such an interpretation is contrary to the text of Article II:1(b) and past interpretation of 
ordinary customs duties and ODCs as being two distinct charges.179 
7.124  Regarding the case at hand, India submits th at the United States must establish in the 
affirmative that the AD and the SUAD are ordinary cu stoms duties.  In addition, the United States 
must substantiate in the affirmative that the "s tructure, design and effect" of the AD and the SUAD 
make them ordinary customs duties. 
(a) General 
7.125  The Panel  notes that Article II:1(b) identifies two categories of charges: (1) ordinary customs 
duties imposed on the importation of a product and (2) "other duties or charges of any kind" (ODCs) 
imposed on, or in connection with, the importation of  a product.  We agree with the United States that 
the term "other" in the phrase "other duties or ch arges of any kind" indicates that the second category 
of charges, which is identified in the second sentence of Article II:1(b), is defined in relation to the 
first category, which is covered by the first sen tence of Article II:1(b).  The second category of 
charges thus encompasses duties and charges other than ordinary customs duties.   
7.126  The second category of charges is itself subdivided into two categories.  It includes ODCs 
imposed on the importation of a product.  In this respect, the terms "other" and "of any kind" would 
appear to indicate that this category is intended to  constitute a residual category of charges which, like 
ordinary customs duties, are imposed on the im portation of a product.  In addition,  the second 
category of charges includes a further type of ODCs, namely, those which are imposed, not on the 
importation of a product, but in connecti on with the importation of a product.   
7.127  The issue presented in this case is whether th e residual category of charges imposed on the 
importation of a product – i.e., ODCs imposed on th e importation of a product – should be considered 
as comprising any and all duties and charges imposed on the importation of a product, other than 
ordinary customs duties, or whether that categor y should be considered instead as encompassing only 
a subset of all such duties and charges.  The Un ited States argues for the former view, India for the 
latter. 
7.128  As an initial matter, we note that, read in isola tion, the terms "other" and "of any kind" in the 
phrase "other duties or charges of any kind" could conceivably support the interpretation argued for 
by the United States.  However, under the customary rules of treaty interpretation, it is necessary to 
read the terms of a provision in their context.  Th e immediate context of the phrase "other duties or 
charges of any kind" includes the fi rst sentence of Article II:1(b) which relates to ordinary customs 
duties.  Reading the provisions of the first and second sentence of Article II:1(b) together, we are 
struck by the parallelism between the two.  Both prov isions are part of one and the same paragraph of 
Article II and both stipulate that, fo r scheduled products (i.e., the prod ucts described in Part I of a 
                                                      
177 Ibid., para. 276. 
178 India refers to the Appellate Body Report on Chile  – Price Band System.  
179 India refers to the Panel Report on Dominican Republic – Import and Sale of Cigarettes , 
para. 7.113.  WT/DS360/R 
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  Member's Schedule of Concessions), the level of the charges identified in each sentence may not 
exceed a certain level.  To us, this parallelism strongly suggests that the two provisions bind the 
relevant categories of charges against increase beca use the charges intended to be covered by the two 
provisions are charges of the same kind.   
7.129  Ordinary customs duties are typically applie d so as to afford protection to domestic 
production.180  This is because, by their nature, they discriminate against imports of the products 
subject to the duty.  Or to put it another way, th ey inherently disadvantage imports of the subject 
products vis-à-vis  domestic products.  Indeed, this is pr ecisely why exporting Members seek tariff 
concessions.  And it is in order "to preserve the va lue of tariff concessions negotiated by a Member 
with its trading partners"181 that the provisions of the first sentence of Article II:1(b) make such 
concessions legally binding.   
7.130  The first sentence of Article II:1(b) could not effectively serve its purpose of preserving the 
value of tariff concessions if Members were not s ubject to any legal constraint when imposing ODCs 
that are of the same kind as ordinary customs duties,  that is to say, ODCs that inherently discriminate 
against, or disadvantage, imports of the products su bject to bound ordinary customs duties.  Of course, 
the provisions of the second sentence of Article II:1(b)  do introduce a relevant constraint, by requiring 
that ODCs imposed on, or in connection with, the im portation of products subject to bound ordinary 
customs duties may not exceed a defined level.  In  this way, the second sentence of Article II:1(b) 
helps prevent tariff concessions from being circumvented.182   
7.131  The foregoing considerations demonstrate that there is a readily apparent rationale – anti-
circumvention – for subjecting "other duties or charg es" that are of the same kind as ordinary customs 
duties to disciplines that parallel those contemplat ed by the first sentence of Article II:1(b).  
Accordingly, we need to pro ceed to analyze whether there would likewise be a rationale for 
subjecting different kinds of "other duties or charg es" to disciplines that pa rallel those contained in 
Article II:1(b), first sentence, and more specifica lly, "other duties or charges" imposed on the 
importation of a product but of a kind that is different from ordinary customs duties.    
7.132  In undertaking this analysis, it is useful once ag ain to look to the context of the phrase "other 
duties or charges of any kind" contained in Artic le II:1(b), second sentence.  In particular, it is 
instructive to look to Article II:2, which identifies three distinct categories of charges.  The three 
categories are: (1) charges equivale nt to internal taxes imposed in respect of domestic products or 
articles from which the imported products have been  manufactured or produced, (2) anti-dumping or 
countervailing duties and (3) charges for services rendered. 
7.133  The chapeau of Article II:2 makes clear that all three categories of charges (hereafter the 
"Article II:2 charges") have in common the fact that they are imposed "on the importation of [a] product".  In addition, we consider that the three categories of Article II:2 charges are all of a kind 
different from ordinary customs duties.  As already noted, ordinary customs duties by their nature 
                                                     
 
180 We note that Article II:4, first sentence, of the GATT 1994 confirms that Schedules of Concessions 
provide "protection".  We also note that according to  the Appellate Body, during the course of the Uruguay 
Round, negotiators of Article 4 of the  Agreement on Agriculture  envisioned that "ordinary customs duties 
would, in principle, become the only form of border protection".  Appellate Body Report, Chile – Price Band 
System , para. 200. 
181 Appellate Body Report, Argentina – Textiles and Apparel , para. 47. 
182 It is worth noting at this point that we ar e, of course, aware of the provisions of the Understanding 
on the Interpretation of Article II:1(b) of th e General Agreement on Tariffs and Trade 1994 as well as of the 
provisions of Article II:1(c) of the GATT 1994, both of wh ich also form part of the context of Article II:1(b).  
While we have taken these provisions  into account in our analysis, we di d not find it necessary separately to 
refer to them in support of our findings.  Having said this, we think our interpretation of Article II:1(b) and II:2 
is consistent with these provisions. WT/DS360/R 
Page 98 
 
 
  discriminate against, or disadvantage, imports of th e product subject to the duty.  This is true even 
where they are applied consistently with the provisio ns of Article II:1(b), first sentence.  In contrast, 
the charges contemplated in Article II:2 do not, in our view, inherently discriminate against, or 
disadvantage, imports of a product which is s ubject to one or more of these charges.   
7.134  Beginning with the charges identified in Article II: 2(a), they are charges equivalent to internal 
taxes imposed in respect of domestic products.  Such charges would discriminate against, or 
disadvantage, imports only if the internal taxes to which they are equivalent were not applied 
consistently with the provisions of Article III:2 of  the GATT 1994.  However, as Article II:2(a) itself 
makes clear, the relevant internal taxes must be imposed consistently with the provisions of 
Article III:2.  This indicates that this category of charges does not inherently discriminate against, or 
disadvantage, imports.  
7.135  In relation to anti-dumping or countervailing duties, referred to in Article II:2(b), it is true that 
they are applied exclusively to qualifying imports.  Nonetheless, it would be incorrect, in our view, to 
infer from this that they inherently discriminate agai nst, or disadvantage, imports.  In Article VI:1 of 
the GATT 1994 Members "recognize" that dumping is to be "condemned" if it causes or threatens to 
cause material injury to a domestic industry or materially retards the establishment of a domestic 
industry, and Article VI:2 therefore permits, in prin ciple, the levying of an anti-dumping duty in order 
to offset or prevent dumping.  Article VI:3 deal s with countervailing duties.  It defines the term 
"countervailing duty" as meaning a special duty levied for the purpose of offsetting any bounty or 
subsidy bestowed upon the manufacture, production or expor t of a product.  It is clear to us from these 
provisions of Article VI that when a Member levies an anti-dumping or countervailing duty on 
qualifying imports, and does so consistently with the provisions of Article VI – which it must do, as 
Article II:2(b) also makes clear – it should not be c onsidered to discriminate against, or disadvantage, 
such imports.  As we understand it, the concept unde rlying Article VI is that importing Members may 
levy anti-dumping and countervailing duties in orde r to protect domestic industries against the 
consequences of specified unfair trade practices attrib utable to private foreign exporters or producers, 
or to exporting Members.183  Seen in this light, rather than disadvantaging imports vis-à-vis domestic 
products, anti-dumping and countervailing duties a pplied consistently with the provisions of 
Article VI prevent domestic products from su ffering a disadvantage vis-à-vis imports.  
7.136  Finally, regarding charges for services rendered, d ealt with in Article II:2(c), here again these 
are charges imposed exclusively on imports.  Howeve r, the services in return for which this type of 
charge is imposed are services by governmental authorities which are connected with importation, 
that is to say, services which, by definition, are provided exclusively in relation to imports.184  A 
charge imposed for services provided in connec tion with importation in our view does not 
discriminate against, or disadvantage, imports, at least not if it is commensurate with the cost of 
services rendered.  Needless to say, the text of Artic le II:2(c) in fact contemplates charges which are 
commensurate with the cost of services rendered.  Also, Article VIII:1(a) of the GATT 1994 requires 
that such charges "be limited in amount to  the approximate cost of services rendered".185  We 
therefore consider that the kind of charges cont emplated in Article II:2(c) does not inherently 
discriminate against, or disadvantage, imports.    
                                                      
183 The Appellate Body in US – Line Pipe  stated that "safeguard measures differ from, for example, 
anti-dumping duties and countervailing duties to counter su bsidies, which are both measures taken in response 
to unfair trade practices."  Appellate Body Report, US – Line Pipe , para. 80. 
184 We note that Article VIII of the GATT 1994, whic h deals with the type of charges at issue in 
Article II:2(c), is entitled "Fees […] connected with Impor tation […]".  We further note that the GATT panel in 
US – Customs User Fee likewise considered that the services in ques tion were services provided to importers.  
Panel Report, US – Customs User Fee , para. 77. 
185 The GATT panel in US – Customs User Fee  was of the view that despite the slightly different 
wording of the "cost of services" limitations in Artic les II:2(c) and VIII:1(a), no difference in meaning was 
intended.  Panel Report, US – Customs User Fee , para. 75.  WT/DS360/R 
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  7.137  Having determined that Article II:2 charges ar e of a kind different from ordinary customs 
duties, we now turn to consider whether there woul d be a rationale for subjecting such charges to the 
disciplines contained in Article II:1(b), second senten ce, which parallel, and protect, those contained 
in Article II:1(b), first sentence.  In this regard, we recall that the first sentence of Article II:1(b) 
serves the purpose of preserving the value of tariff c oncessions.  We consider that the first sentence of 
Article II:1(b) can serve this purpose even as Members impose additional charges of the kind 
contemplated in Article II:2 on the importation of pr oducts subject to a tariff binding.  As we have 
explained, Article II:2 charges differ from ordinary customs duties (and "other duties or charges" that 
are of the same kind as ordinary customs duties) in th at they do not inherently discriminate against, or 
disadvantage, imports.  The imposition of such ch arges on the importation of products subject to a 
tariff binding does not inherently lessen the value of the relevant tariff concessions, which, to repeat, 
are concessions relating to discriminatory charges on imports.  Accordingly, in view of the different 
nature of the Article II:2 charges, we see no obvi ous rationale for subjectin g such charges to the 
disciplines contained in Article II:1(b), second sentence.  It is important to remember in this respect 
that the Article II:2 charges are each subject to sp ecific disciplines, set out in Articles III:2, VI and 
VIII:1(a) of the GATT 1994 and designed, inter alia , to prevent these charge s from being used to 
discriminate against, or disadvantage, imports. 
7.138  Furthermore, we think it implausible to assume that the GATT contracting parties would have 
accepted to bind charges that do not inherently discrim inate against, or disadvantage, imports.  To see 
this, consider a GATT contracting party who on th e date of the GATT 1947 imposed on imports of a 
product subject to a tariff binding a charge equivalent to an internal tax imposed consistently with the 
provisions of Article III:2 in respect of the like domestic product.  Subsequently, that contracting 
party determined that it was appropriate, e.g., for fi scal policy reasons, to raise the level of internal 
taxation.  Under the second sentence of Article II:1( b), that contracting party could not impose "other 
duties or charges" on imports that exceeded t hose imposed on the date of the GATT 1947.  If the 
charge equivalent to the internal tax imposed  on the like domestic product were considered to 
constitute such an "other duty or charge" subject to the disciplines contained in Article II:1(b), second 
sentence, the contracting party in question would have  been presented with a dilemma.  It could either 
have refrained from implementing what it had determ ined to be sound fiscal policy, thus foregoing the 
additional tax revenue to be genera ted by the planned increase in the level of internal taxation.  Or the 
relevant contracting party could have elected to put the like domestic product at a competitive 
disadvantage by subjecting it to an internal tax higher than the corresponding charge applied to 
imports of such product.186  We do not believe that GATT contr acting parties in 1947, or in 1994, 
would have agreed to abide by disciplines that c ould easily have produced such consequences.   
7.139  This view draws further contextual support from the chapeau of Article II:2 which makes 
clear that nothing in Article II prevents any contracting party from imposing "at any time" on the 
importation of any product one or more of the Artic le II:2 charges.  The phrase "at any time", which 
qualifies the verb "impose", is yet another elemen t pointing to a difference between the Article II:2 
charges and the "other duties or ch arges" identified in Article II:1(b), second sentence.  To recall, 
Article II:1(b), second sentence, stipulates that import s of a product are to be exempt from all other 
duties or charges of any kind imposed on the importa tion in excess of those imposed "on the date of 
this Agreement" or those directly and mandatorily re quired to be imposed thereafter by legislation "in 
force in the importing territory on that date".  Accordingly, whereas, under the GATT 1947, the "other 
duties or charges" identified in Article II:1(b), sec ond sentence, could be imposed only if they existed 
"on the date" of the GATT 1947 (and then only at the levels existing on that date), or pursuant to 
                                                      
186 It is no answer to say that the relevant contracting party could instead have applied the relevant 
internal tax also to imported products.  Article II:2 indicates that border charges may be used to adjust for 
internal taxes imposed on domestic products.  Moreov er, there may exist a domestic legal bar to subjecting 
imported products to an internal tax as opposed to a border charge.   WT/DS360/R 
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  legislation "in force" on that date, the Article II:2 ch arges could be imposed "at any time".  That is to 
say, they could be introduced, and by implication increased, also after the date of the GATT 1947.   
7.140  The aforementioned difference in the texts of the chapeau of Article II:2 and the second 
sentence of Article II:1(b) is consistent with our vi ew that while there is a readily apparent rationale 
for binding duties or charges that are of the same  kind as ordinary customs duties (i.e., those covered 
by Article II:1(b), second sentence), there is no obviou s rationale for binding Article II:2 charges (i.e., 
charges which are not of the same kind as ordinary customs duties) and that, in principle, Members 
are therefore free to introduce new, or increase exis ting, charges of this kind "at any time", provided, 
of course, they do so in accordance with the applicable requirements.  
7.141  To sum up, consideration of relevant context, pa rticularly of Article II:1(b), first sentence, and 
Article II:2, leads us to the view that, notwithst anding the broad scope of the phrase "other duties or 
charges of any kind" in Article II:1(b), second sente nce, the residual category of "other duties or 
charges" imposed on the importation of a product should not be considered as comprising any and all 
duties or charges imposed on the importation of a product other than ordinary customs duties.  Instead, the relevant context in this case indi cates that, consistently with the well-established ejusdem 
generis  canon of construction, the category of "other duties or charges" imposed on the importation of 
a product should be considered as encompassing only su ch duties or charges as are of the same kind 
as ordinary customs duties, i.e., charges which inhe rently discriminate agai nst, or disadvantage, 
imports.  As a result, the category of "other duties or charges" imposed on the importation of a 
product in our view does not comprise the three ca tegories of charges identified in Article II:2, 
notwithstanding the fact that the latter charges ar e also imposed on the importation of a product and 
may be applied in respect of a product subject to a tariff binding.
187 
7.142  The above interpretation of Artic le II:1(b), second sentence, is also consistent with the object 
and purpose of the GATT 1994.  Notably, that in terpretation does not run counter to the goal, 
expressed in the preamble to the GATT 1994, of substa ntially reducing "tariffs" with a view to, e.g., 
raising standards of living, expanding the pro duction and exchange of goods, etc.  Under our 
interpretation, duties and charges other than or dinary customs duties which are imposed on the 
importation of products described in Part I of  a Member's Schedule of Concessions and which 
inherently discriminate against, or disadvantage, imports (and hence are like "tariffs") are subject to 
the strict disciplines contained in Article II:1( b), second sentence, whereas duties and charges which 
do not inherently discriminate against, or disadvant age, imports (and hence are unlike "tariffs") are 
not subject to those strict disciplines, but to others.     
7.143  Finally, we note that our interpretation of Article  II:1(b), second sentence, is also in line with 
official GATT or WTO reports or decisions that specifically address the scope of the phrase "other 
                                                      
187 Regarding the broad phrase "other duties or charges of any kind", we note in passing that if the 
drafters of Article II:2 had intended for the charges identifie d in Article II:2 to be considered as "other duties or 
charges of any kind" within the meaning of Article II:1(b), second sentence, it would not only have been 
possible, but also more natural, to express such an intention in different and clearer terms.  For instance, 
Article II:2 could have been cast in the following terms: 
"Nothing in this Article shall prevent any contracting party from imposing on any product at 
any time, on or in connection with importation, such other duty or charge (other than an 
ordinary customs duty) as is: 
(a) equivalent to an internal tax imposed in respect of a like domestic product …; 
(b) imposed to offset or prevent dumping ... or to offset any bounty or subsidy ... 
bestowed upon the manufacture, produc tion of export of any product ...; 
(c) commensurate with the cost  of services rendered." 
Wording along such lines would have clearly indicated the intention that  the Article II:2 charges are to 
be considered "other duties or charges of any kind" within the meaning of Ar ticle II:1(b), second sentence.  Yet, 
the above wording is very different from the actual wording adopted.    WT/DS360/R 
 Page 101 
 
 
  duties or charges".  Thus, the 1955 Report of the Review Session Working Party on "Schedules and 
Customs Administration" states in relation to Article II:1(b) and (c) that:188 
"It is considered that the language of  this sentence [the second sentence of 
Article II:1(b) and (c)] is all-inclusive for it speaks of '… all other duties or charges of 
any kind imposed on or in connection with importation', and paragraph 2 
[Article II:2], which sets out the special charges which do not fall under paragraph 1, 
does not refer to charges on transfers." 
7.144  Subsequently, in 1980, the GATT Council adopted  a proposal by the GA TT Director-General 
concerning introduction of a loose-leaf system for the Schedules of Concessions.  The Council 
decision on "Introduction of a Loose-Leaf System for the Schedules of Tariff Concessions"  contains 
the following paragraph discussing the phrase "other du ties or charges" as it appears in Article II:1(b), 
second sentence:189  
"A similar question arises with respect to th e date of application to each concession 
for the purpose of Article II:1(b) of the Gene ral Agreement.  It has been agreed that 
the date, as of which "other duties or  charges" are bound, applicable to any 
concession in a consolidated schedule shoul d be, for the purpose of Article II, the 
date of the instrument by which the c oncession on any particular item was first 
incorporated into the General Agreement (c f. BISD 7S/115-116).  In order to draw 
full advantage of the loose-leaf system by  making it as transparent as possible as to 
the status of all concessions, I propose that the instrument by which the concession 
was first incorporated into a GATT Schedule be indicated in a special column 
(column 6 of the  proposed format in the annex to document L/4821/Add.1)  of the 
loose-leaf schedules.   I wish to point out in this co nnexion that such "other duties or 
charges" are in principle only  those that discriminate against imports.  As can be seen 
from Article II:2 of the General Agreement, such "other duties or charges" concern 
neither charges equivalent to internal  taxes, nor anti-dumping or countervailing 
duties, nor fees or other charges commensurate with the cost of services rendered ". 
7.145  According to the United States, the phrase "such 'o ther duties or charges'" in the above-quoted 
paragraph appears to be referring to a particular subs et of "other duties or charges", namely, those that 
needed to be bound for the purposes of Article II:1(b), second sentence.190  We are not persuaded by 
this interpretation.  It is the case that the phrase singl ed out by the United States refers to "other duties 
or charges" on importation within the meaning of  Article II:1(b), second sentence, but neither the 
highlighted passage nor the paragraph of which it is part  states or implies that there exists a subset of 
"other duties or charges" on importation, or that Article II:2 identifies duties or charges falling within 
such a category.  In our view, the adjective "such"  serves as a simple reminder to the reader that the 
concept of "other duties or charges" has been  introduced previously in the same paragraph. 
7.146  More recently, the Appellate Body very  briefly touched upon the issue in Chile – Price Band 
System , opining that:191 
"Article II:2 of the GATT 1994 sets out exam ples of measures that do not qualify as 
either 'ordinary customs duties' or 'other  duties or charges'. These measures include 
                                                      
188 GATT document L/329, adopted on 26 February 1955, BISD 3S/205, 209, para. 7. 
189 GATT document C/107/Rev.1, adopted on 26 March 1980, BISD 27S/22, 24, para. 9 (italics 
original; underlining added). 
190 US reply to Panel Question No. 68. 
191 Appellate Body Report, Chile – Price Band System , para. 276. WT/DS360/R 
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  charges equivalent to internal taxes, an ti-dumping and countervailing duties, and fees 
or other charges commensurate with the cost of services rendered." 
7.147  This statement by the Appellate Body, offered w ithout elaboration, is interesting in that it 
touches upon an issue we have not yet addressed se parately, namely, whether any of the Article II:2 
charges could be considered as "ordinary customs du ties" within the meaning of Article II:1(b), first 
sentence.  Neither Party to this dispute has argued that they could.  Like, apparently, the Appellate 
Body, we consider that Article II:2 charges are not  "ordinary customs duties"  within the meaning of 
Article II:1(b), first sentence.  As is clear from the above considerations, we are of this view because 
Article II:2 charges are not of the same kind as ordinary customs duties.192   
7.148  Our view that Article II:2 charges are not subject  to the obligations set out in Article II:1(b) 
has significant implications.  In particular, it means that Article II:2 does not set out exceptions to the 
positive obligations contained in Article II:1(b).  Accordingly, the sub-paragraphs of Article II:2 
cannot be invoked to justify a breach of the obligations contained in Article II:1(b).193  In saying this, 
we are mindful of the fact that the chapeau of Article II:2 opens with the phrase "[n]othing in this Article [Article II] shall prevent ...".  That phrase is similar to the phrase "nothing in this Agreement 
shall be construed to prevent ..." in the chapeau  of Article XX of the GATT 1994 which is entitled 
"General Exceptions" and which jurisprudence conf irms sets out exceptions to positive obligations.  
However, we do not consider that a phrase like "nothi ng in this Article shall prevent ..." always and 
necessarily introduces an exception of the kind describ ed above.  We think that instead, as in the case 
of Article II:2, such a phrase may also serve to pr ovide confirmation, clarification or reassurance and 
carries no necessary implication that a measure caught  by a clause introduced by such a phrase would 
otherwise (i.e., but for that phrase and the clause it introduces) be prevented by a positive obligation 
set out elsewhere in the relevant article or agreement.  
7.149  Another implication flowing from the view that Article II:2 charges are not subject to the 
obligations set out in Article II:1(b) is that it is in correct to suggest, as the United States does, that if a 
given charge is not an ordinary customs duty within  the meaning of Article II:1(b), first sentence, it 
must necessarily be an "other duty or charge" with in the meaning of Article II:1(b), second sentence.  
To be sure, the charge in question could be such an  "other duty or charge".  Equally, however, it could 
be one of the Article II:2 charges.   
(b) Case-specific 
7.150  The Parties to this dispute disagree on whethe r the measures challenged by the United States, 
the AD and the SUAD, are caught by the provisi ons of Article II:1(b) and, consequently, 
Article II:1(a).  The United States argues that the measures at issue are ordinary customs duties or, in 
the alternative, "other duties or charges" on the im portation of certain products.  As such, they would 
be subject to the obligations laid down in Ar ticle II:1(b).  India disagrees, submitting that the 
measures in question are charges on the importation of products which are equivalent to internal taxes 
imposed in respect of like domestic products.  As su ch, the measures at issue would not be subject to 
the obligations set out in Article II:1(b).   
7.151  As noted earlier, the United States considers th at an "ordinary customs duty" means a duty 
that applies to a good at the time of importati on – not on a case-by-case basis or in response to a 
                                                     
 
192 Being of the same kind as an ordinary customs dut y is a necessary, but not a sufficient condition, for 
a charge to be characterized as an "o rdinary customs duty".  As we have i ndicated, charges that are of the same 
kind as ordinary customs duties may fall within the category of "other duties or charges". 
193 In other words, the sub-paragraphs of Article II:2 do not provide affirmative defences to a claim of 
violation of Article II:1(b).  We note in this respect that  the United States, in response to Panel Question No. 44, 
has indicated that, in its view, Article II:2 does not prov ide for exceptions that are affirmative defences.  India 
appears to agree.  India's comments on the US reply to Panel Question No. 44.    WT/DS360/R 
 Page 103 
 
 
  singular or exceptional event or set of circumstance s – but as a matter of course on, or in connection 
with, the good's importation.  According to the United States, an ordinary customs duty is typically an 
ad valorem  duty, a specific duty, or a combination thereof.  It is useful and instructive to consider the 
concept of "other duties or charges" as it appear s in Article II:1(b), second sentence, and the concept 
of "charges on imports equivalent to internal taxes on like domestic products", as described in 
Article II:2(a), in the light of the elements relied upon by the United States to define the concept of 
"ordinary customs duties". 
7.152  We begin with the concept of "other duties or charges".  In our view, this concept 
encompasses duties or charges that apply to goods at the time of their importation and are imposed on 
the goods' importation.194  It is also clear that "other duties or charges" may be expressed in the form 
of ad valorem  duties or charges, specific duties or  charges, or a combination thereof.195  While we 
agree that the phrase "other duties or charges" c ould possibly cover duties or charges imposed "on a 
case-by-case basis or in response to a singular or ex ceptional event or set of circumstances", we are 
not persuaded that that phrase cannot cover duties or  charges imposed "as a matter of course" on the 
importation of goods.  Indeed, the panel in Dominican Republic – Import and Sale of Cigarettes  found 
that a 2 percent ad valorem  temporary surcharge imposed by the Dominican Republic on the 
importation of all goods entered fo r consumption constituted an "other duty or charge" within the 
meaning of Article II:1(b), second sentence.196  As we understand it, this surcharge was imposed "as a 
matter of course" on the importation of subject goods,  and not "on a case-by-case basis or in response 
to a singular or exceptional event or set of circumst ances".  Thus, the elements of the US definition of 
"ordinary customs duties" do not allow us to distin guish such duties from "other duties or charges" 
which are imposed as a matter of course on the importation of a good. 
7.153  Next, we compare the elements used in the US  definition of "ordinary customs duties" with 
charges on imports equivalent to internal taxe s on like domestic products, as described in 
Article II:2(a).  We note that Article II:2(a) refers to charges, not duties.  However, since the term 
"charge" is defined as "pecuniary bur den" or "liability to pay money"197, the term "charges" in our 
view includes duties.  Further, it is not apparent to  us why charges equivalent to internal taxes could 
not likewise be applied at the time of importation.  Moreover, as also pointed out by the United States, 
the chapeau to Article II:2 contempl ates that charges equivalent to in ternal taxes are imposed "on the 
importation" of a product.  The phrase "on the impo rtation" in Article II:2 parallels the phrase "on 
their importation" in Article II:1(b), first senten ce, and also the phrase "on ... the importation" in 
Article II:1(b), second sentence.  Given that Article II:1(b) and Article II:2 use identical language, and 
that the liability to pay ordinary customs duties is  typically triggered by importation, we see no reason 
why the liability to pay charges equivalent to in ternal taxes could not likewise be triggered by 
importation.198    
7.154  In relation to the US argument that ordinary customs duties are applied "as a matter of course" 
on the importation of a product and not on a case-by-case basis or in response to a singular or exceptional event or set of circumstances, it seems to us that charges equivalent to internal taxes could 
                                                     
 
194 We recall that Article II:1(b), second sentence,  refers to "other duties or charges" imposed " on or in 
connection with […] importation " (emphasis added). 
195 The Appellate Body indicated that most "oth er duties or charges" within the meaning of 
Article II:1(b), second sentence, are expressed in ad valorem and/or specific terms.  Appellate Body Report, 
Chile – Price Band System , para. 275.   
196 Panel Report, Dominican Republic – Import and Sale of Cigarettes , paras. 7.11, 7.18 and 7.25. 
197 Shorter Oxford English Dictionary , 5th ed., W.R. Trumble, A. Stevenson (eds.) (Oxford University 
Press, 2002), Vol. 1, p. 382.    
198 The fact that the internal taxes to which the relevant charges are equivalent link liability to events 
other than importation does not imply that the liability fo r the charges on imports ca nnot, or shoul d not, arise 
from importation.  In fact, in the case of imports, issues of jurisdiction would in most cases preclude linking 
liability to the same events.   WT/DS360/R 
Page 104 
 
 
  equally be applied "as a matter of course" on the impo rtation of a product.  Internal taxes are applied 
"as a matter of course" on like domestic products and not on a case-by-case basis or in response to a 
singular or exceptional event or set of circumstan ces, certainly where tho se taxes are imposed to 
generate revenue.  Logically, the same would then be true for any charges imposed on imports which 
are equivalent to such internal taxes.  As regards the basis of calculation, in Chile – Price Band 
System  the Appellate Body indicated that Article II:2 ch arges, too, "may be based on the value and/or 
volume of imports, and yet Article II:2 distin guishes them from 'ordinary customs duties ...'".199  If, 
then, Article II:2 charges may take the form of ad valorem or specific charges, we think they may also 
be calculated on the basis of some combin ation of value and volume of imports.  
7.155  Accordingly, based solely on the elements of the US definition of "o rdinary customs duties" 
such duties cannot be distinguished from charges whic h are imposed as a matter of course on imports 
and which are equivalent to internal taxes on lik e domestic products.  We note, as an additional 
matter, the term "ordinary" in the phrase "ordin ary customs duties".  It is defined as meaning 
"occurring in regular custom or practice; normal, cust omary, usual" or "of the usual kind, not singular 
or exceptional".200  We do not think that the term "ordinary" is intended to define the duties caught by 
the first sentence of Article II:1(b) based on the form they take.  At any rate, it is not apparent to us 
why an Article II:2(a) charge could not take the same form as a "normal" or "customary" customs 
duty, or a customs duty "of the usual kind".201   
7.156  As the above comparison shows, there can be char ges equivalent to internal taxes within the 
meaning of Article II:2(a), and also "other duti es or charges", which meet the elements of the 
definition of "ordinary customs duties" put forward by the United States.202  It follows that a 
demonstration that a charge satisfies these elements is not sufficient, by itself, to establish that the 
relevant charge is an ordinary customs duty (or an "other duty or charge" imposed on the importation 
of a good) under Article II:1(b) as opposed to a ch arge equivalent to an internal tax under 
Article II:2(a).  For such a charge, it is therefore ne cessary to establish, in addition, that it is of the 
same kind as, or in the nature of, an ordinary cu stoms duty (or an "other duty or charge" imposed on 
the importation of a good).  Consistently with our analysis above, we consider that a charge which 
meets the elements of the US definition is in the na ture of an ordinary customs duty (or an "other duty 
or charge" imposed on the importation of a good)  if it inherently discriminates against, or 
disadvantages, imports.  
7.157  Where the aforementioned additional demonstrati on has been made, the relevant charge could 
be either an ordinary customs duty or an "other duty or charge" imposed on the importation of a good.  
A further inquiry would then be called for to dete rmine whether the charge in question qualifies as an 
ordinary customs duty under the first sentence of Article II:1(b) or as an "other duty or charge" under the second sentence of Article II:1(b).  It is in this  context that the US argument that a particular 
product can be subject to more than one ordinary customs duty would be rele vant.  As our assessment 
below will show, to dispose of the claims before  us, we need not, and hence do not, examine the 
merits of this argument.   
7.158  The United States has not sought to develop and apply a general test for determining whether 
a charge which satisfies the elements of its defi nition of "ordinary customs duties" inherently 
                                                     
 
199 Appellate Body Report, Chile – Price Band System , para. 276.   
200 Shorter Oxford English Dictionary , 5th ed., W.R. Trumble, A. Stevenson (eds.) (Oxford University 
Press, 2002), Vol. 2, p. 2017.  The French and Spanish ve rsions of Article II:1(b), first sentence, refer to "droits 
de douane proprement dits" and "derechos de aduana propiamente dichos", respectively.    
201 Likewise, we do not see why an Article II:2(a) charge could not take the same form as a customs 
duty "properly so called".     
202 Indeed, this may be one reason why Article II:2 was included in Article II (which deals with 
Schedules of Concessions), to make clear that some charges, even though they may look like ordinary customs 
duties, or "other duties or charges", are charges of a different kind and, as such, subject to different disciplines.  WT/DS360/R 
 Page 105 
 
 
  discriminates against, or disadvantages, imports.  In  itself, this does not pose a problem.  The United 
States can, in our view, seek to establish by referenc e to the provisions of Article II:2 that a charge on 
the importation of a good is in the nature of an ordinary customs duty (or an "other duty or charge" 
imposed on the importation of a good).  As we ha ve explained, Article II:2 lists three specific 
categories of charges on the importation of a good that  do not inherently discriminate against, or 
disadvantage, imports.   
7.159  In the case before us, the debate between the Pa rties has revolved almost exclusively around 
the issue of whether the measures at issue fall within  the scope of Article II:2(a) (dealing with charges 
equivalent to internal taxes).  In this situation,  if the United States as the complaining party cannot 
establish that a charge which meets the elements of  its definition of "ordinary customs duties" falls 
outside the scope of Article II:2(a), it cannot successfully  establish that the charge is in the nature of 
an ordinary customs duty (or an "other duty or charge" imposed on the importation of a good).203  
Conversely, if the United States can establish that  such a charge falls outside the scope of 
Article II:2(a), II:2(b) and II:2(c), bear ing in mind the Appellate Body report on Chile – Price Band 
System,  the issue could arise whether Article II:2 exhaustively defines the universe of charges that do 
not inherently discriminate against, or disadvantag e, imports or whether it identifies only examples of 
such charges.204  In the latter case, a showing that a charge falls outside the scope of Article II:2 might 
not be sufficient, per se , to bring that charge within the scope of Article II:1.  The United States might 
also need to raise a presu mption that the charge in question is not  some other charge (not identified in 
Article II:2) that does not inherently discriminate ag ainst, or disadvantage, imports.  In view of our 
findings below, we need not attempt to resolve th ese issues.  Accordingly, we refrain from addressing 
these issues further. 
7.160  Below we will examine the measures at issue in the light of the provisions of Article II:2(a).  
The United States argues that India as the Part y asserting that the AD on alcoholic liquor and the 
SUAD are justified under Article II:2(a) bears the burden of substantiating that assertion.  We 
consider that, in the circumstan ces of the present case, it is incumbent upon the United States to make 
a prima facie case that the measures at issue fall outside the scope of Article II:2(a).205  In a case 
where the United States has not sought to use a genera l test to demonstrate that a charge satisfying the 
elements of its definition of "ordinary customs duties" inherently discriminates against, or 
disadvantages, imports, it would be improper, in our view, to relieve the United States of the burden 
of making a prima facie case that such a charge falls outside the scope of Article II:2(a).206  To 
reiterate, a charge can only be of the kind that inherently discriminates against, or disadvantages, 
imports if it falls outside the scope of Article II:2(a).207   
                                                      
203 To recall, the situation we are referring to is  one where the United States has not otherwise 
successfully demonstrated, using an appropriate general te st, that a charge which meet s the elements of the US 
definition of "ordinary customs duties" discriminates against, or disadvantages, imports.  Also, we are assuming 
that the issue of whether th e charge being challenged falls within th e scope of Article II:2(a) is objectively 
presented, which is the situation of our case. 
204 We recall, in this regard, that the Appellate Body in Chile – Price Band System  observed that 
Article II:2 sets out "examples" of measures which do not qualify as either ordinary customs duties or other 
duties or charges within the meaning of Article II:1(b).  Appellate Body Report, Chile – Price Band System , 
para. 276. 
205 Having said this, it is clear that both the United St ates and India need to pr ove their own assertions 
of fact.   
206 We recall our view that a demonstration that a char ge satisfies the elements of the US definition of 
"ordinary customs duties" would not be sufficient to establish that the charge falls outside the scope of 
Article II:2(a).   
207 We are not taking a position here on whether a showing that a charge falls outside the scope of 
Article II:2(a) would be sufficient to establish that it falls  within the scope of Article II:1(b).  As we have said, WT/DS360/R 
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  7.161  The mere fact that the responding party, due to  greater familiarity with, and readier access to, 
its domestic laws and policies, might find it easier th an the complaining party to supply information to 
a panel that would aid a determination of whether a particular border charge is equivalent to an 
internal tax and falls within the scope of Article  II:2(a) is not a sufficient reason for shifting the 
burden of proof onto the responding party.208  At any rate, any difficulties the complaining party 
might have encountered in collecting relevant info rmation could be taken in to account, as appropriate, 
in determining how much and what kind of eviden ce is required for the complaining party to sustain 
its burden of establishing a prima facie case that the border charge it is challenging falls outside the scope of Article II:2(a).
209  Thus, we consider that a complain ing party could seek to make a prima 
facie case, e.g., by presenting a duly substantiated explanation of where it l ooked for information on 
relevant internal taxes, what means of research it used210, what it found and why what it found, or did 
not find, warrants the inference that the challe nged border charge falls outside the scope of 
Article II:2(a).  We should note in this connection that in the present case there is no indication that 
relevant information was not accessible to the United St ates.  As a matter of fact, rebuttal evidence 
submitted by the United States suggests that it was able to collect relevant information.211   
7.162  We note that the United States in response to a question from the Panel referred to the GATT 
panel report on US – Customs User Fee , saying that it appeared to require the responding party to 
demonstrate the applicability of Article II:2(c) of the GATT 1994.212  That panel observed that its 
capacity to judge whether particular government ope rations of the responding party were "services" 
within the meaning of Article II:2(c) was limited by  the quality of the information presented to it.  
Apparently, this was the reason why the panel reach ed the view that "the government imposing the 
fee should have the initial burden of justifying any government activit y being charged for".213   
7.163  We observe that the GATT panel in US – Customs User Fee  addressed the provisions of 
Article II:2(c) and did not purport to make a ge neral statement about a ll sub-paragraphs of 
Article II:2.  In view of our findings below, we ha ve no need in this case to examine the measures at 
issue in the light of the provisions of Article II:2(c).  As a result, we do not comment upon the 
approach followed by the GATT panel in US – Customs User Fee.   Moreover, as we have explained, 
we consider that, in the particular circumstance s of the present case, we would not be justified in 
requiring India initially to make a prima facie case that the border charges at issue fall within the 
scope of Article II:2(a).   
                                                                                                                                                                     
in this case it can be left open what, if anything, more a complaining party would need to establish once it has 
demonstrated that the relevant charge fa lls outside the scope of Article II:2(a). 
208 It is worth noting in this conn ection that according to the Appellate  Body there is "nothing in the 
WTO dispute settlement system to support the notion that the allocation of the burden of proof should be 
decided on the basis of a comparison between the respec tive difficulties that may possibly be encountered by the 
complainant and the respondent in collecting information to prove a case".  Appellate Body Report, EC – 
Sardines , para. 281. 
209 The Appellate Body stated that "how much and precisely what kind of evidence will be required to 
establish such a presumption [that a claim of violation has merit] will necessarily vary from measure to measure, 
provision to provision, and case to case".  Appellate Body Report, US – Wool Shirts and Blouses , p. 14.   
210 In this regard, in the case before us, the United States could, for instance, have availed itself of the 
assistance of Indian tax lawyers, or of internationa l or Indian accounting firms with a tax practice.    
211 Exhibits US-23, -27, -28 and -29 contain the value-added tax legislation of four Indian States.   
212 US reply to Panel Question No. 44.   
213 Panel Report, US – Customs User Fee , para. 98.  The Appellate Body in  US – Wool Shirts and 
Blouses referred to this paragraph in a footnote, citing it as an example of a case where the responding party 
invoked certain provisions as a defence and the panel ex plicitly required the responding party to demonstrate the 
applicability of the provision it was a sserting.  Appellate Body Report, US – Wool Shirts and Blouses , 
footnote 23.  WT/DS360/R 
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  7.164  We note, in addition, that the United States app ears to accept that in at least some situations 
the complaining party would have the burden of establishing that the border charge being challenged 
does not meet the criteria of a particular paragra ph of Article II:2.  Specifically, the United States 
argues that in cases where the compla ining party asserts that the measure at issue is an "other duty or 
charge" imposed on or in connection with importa tion in breach of Article II:1(b), second sentence, 
and the responding party contends that the measure meet s the criteria of Article II:2(a), (b) or (c), then 
the complaining party must also establish that the me asure in dispute does not meet the criteria of the 
particular paragraph of Article II: 2 identified by the responding party.214  We recall that in our case 
the United States asserts, in the alternative, that th e Indian border charges it is challenging are "other 
duties or charges" imposed on importation and br each Article II:1(b), second sentence.  Moreover, 
although we do not consider that in the circumstances of this case India is required initially to identify 
a particular paragraph of Article II:2 and contend that the challenged border charges meet the criteria 
of that paragraph before the United States is to est ablish that the charges in question do not meet these 
criteria, we note that India in this case has in any ev ent done so as early as its first written submission.  
2. Article II:2(a) of the GATT 1994 
7.165  To resolve the issues presented in this case, the Panel  needs to go beyond the analysis already 
made of the provisions of Article II:2 of the GATT 1 994.  In particular, the Panel needs to undertake a 
detailed examination of the provisions of Article  II:2(a).  To recall, Article II:2(a) states:215 
Nothing in this Article shall prevent any contracting party from imposing at any time 
on the importation of any product: 
(a) a charge equivalent to an intern al tax imposed consistently with the 
provisions of paragraph 2 of Article III in respect of the like domestic product 
or in respect of an article from which the imported product has been manufactured or produced in whole or in part.   
7.166  The Panel begins its examination of the provi sions of Article II:2(a) with some general 
observations regarding its structure and elements.  
(a) General 
7.167  The first observation to be made is that the te xt of Article II:2(a), read together with the 
chapeau of Article II:2, refers to two distinct char ges: (1) an "external", or border, charge imposed on 
the importation of a (foreign-made) product and (2) an internal tax, or charge
216, imposed in respect of 
the like domestic product.217  While there is nothing unusual ab out an "external" charge being 
imposed on a product to be imported, it is noteworthy that, by its terms, Article II:2(a) appears to 
                                                      
214 US reply to Panel Question No. 44. 
215 Ad Note omitted. 
216 It is clear from the text of Article III:2 of the GATT 1994 that internal taxes are internal charges. 
Article III:2 provides (note omitted):  
The products of the territory of any contracting party imported into the territory of any other 
contracting party shall not be subject, directly or indirectly, to internal taxes or other internal 
charges of any kind in excess of those applied, directly or indirectly, to like domestic 
products.  Moreover, no contracting party shall otherwise apply internal taxes or other internal 
charges to imported or domestic products in a manner contrary to the principles set forth in 
paragraph 1. 
217 For the purposes of this dispute, the special case of  internal taxes imposed on "articles" from which 
the imported product has been manufactured or produced in whole or in part can be left aside as none of the 
Parties has presented arguments based on the clause referring to "articles".   WT/DS360/R 
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  contemplate an internal charge imposed in  respect of the like domestic product only.218  Thus, analysis 
of the basic structure and elements of Article II:2(a)  suggests that it refers to a situation in which a 
product to be imported is subject to  an "external", or border, char ge whereas the like domestic product 
is subject to an internal charge.   
7.168  Equally significant is the fact that Article II: 2(a) envisages the existence of a relationship 
between the border charge and the internal charge that goes beyond them being imposed in respect of 
a like product.  More particularly, Article II:2(a) deals with situations where a border charge on a 
product to be imported is "equivalent" to an in ternal charge on the like domestic product.  
Accordingly, for a border charge to fall within the scope of Article II:2(a), the relationship between it 
and the internal charge must be one of "equivalence". 
7.169  Regarding the internal tax, or charge, imposed  in respect of the like domestic product, it is 
pertinent to add, taking account of the particular fact s of this case, that the text of Article II:2(a) does 
not indicate that the internal tax needs to be imposed , in the case of a Member with a federal structure, 
by the central government of that Member.  Certai nly, Article II:2(a) implies a requirement that the 
internal tax be an internal tax attributable to th e Member imposing an equivalent border charge.  But, 
in our view, this does not, and should not, preclude th e possibility of the internal tax referred to in 
Article II:2(a) being imposed by, and at  the level of, sub-federal governments.219   
7.170  A further issue, linked to the previous one, arises from the fact that commonly, in Members 
with a federal structure, the power of imposing border charges on the importation of products is 
reserved to the central government.  This leads to  the possibility of the central government of a 
Member imposing a border charge and claiming that it is equivalent to internal taxes imposed by, and 
at the level of, sub-federal governments of that Memb er.  We see nothing in the text of Article II:2(a) 
to suggest an intention to rule out, a priori , the possibility of "equivalence" existing as between 
measures emanating from different leve ls of government.  In other words, we consider that the terms 
of Article II:2(a) are sufficiently broad to c over federal border charges of a Member that are 
equivalent to sub-federal inte rnal taxes of that Member.220   
7.171  Another element to which we wish to call atten tion already at this stage is the reference in 
Article II:2(a) to the provisions of Article III:2.   The phrase "consistently with the provisions of 
paragraph 2 of Article III" is inte rposed between the term "imposed" and the phrase "in respect of like 
domestic products".  The term "im posed" in Article II:2(a) relates to the internal tax and not the 
border charge.  Hence, the text contemplates a situation in which the internal tax is imposed 
consistently with Article III:2.  In other words, the text of Article II:2(a) appears to adopt an "outside-
in" perspective, in the sense that it seems to take the border charge as a given and the internal tax as 
something to be adjusted to it.  This perspectiv e is understandable in a provision that is part of 
Article II, entitled "Schedules of Concessions".  Presumably, the question Article II:2(a) sought to 
answer was under what circumstances contracting parties who at the time were maintaining border 
charges of a kind different from ordinary customs du ties could continue to maintain them separately 
from, and in addition to, bound ordinary customs duties or "other duties or charges" within the 
meaning of Article II:1(b).  In any event, the key poi nt to be retained in relation to the reference to 
Article III:2 is that the text of Article II:2(a), on its  face, draws a distinction between the concepts of 
                                                      
218 The European Communities suggests that Article II:2( a) could also cover a border charge equivalent 
to an internal tax imposed in respect of the like domestic and imported product in cases where the domestic 
product is subject to a higher tax rate than the importe d product in respect of which the same internal tax is 
imposed.  EC third party written submission, para. 66.  In the present case, there is no need to decide whether 
the situation described by the European Communities would in fact be one that would be covered by the 
provisions of Article II:2(a).   
219 We note that neither Party to this dispute has suggested otherwise.   
220 Here again, we note that neither Party to this dispute has suggested otherwise.    WT/DS360/R 
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  "equivalence" and "consistency with  Article III:2".  We understand that neither Party disputes that the 
concepts of "equivalence" and "cons istency with Article III:2" are separate and distinct concepts.   
7.172  With the foregoing remarks in mind, we now turn  to examine in more detail the two concepts 
of "equivalence" and "consiste ncy with Article III:2" as they appear in Article II:2. 
(b) "equivalent" 
7.173  The United States  argues that in Article II:2(a) the term "equivalent" is used to describe a 
relationship between a "charge" and "internal tax".  The ordinary mean ing of the word "equivalent" is 
"equal in force, amount, or value"221; "corresponding or virtually identical especially in effect or 
function"222; "virtually the same thing; having the same effect"223.  Taken in the context of 
Article II:2(a), an "equivalent" charge thus appear s to mean a charge imposed on importation that 
corresponds to and is equal in force, amount or value, or virtually identical in effect, function or amount, to an internal tax imposed on the like dom estic product.  The United States considers that 
examination of whether two measures are "equivale nt" requires an examination of the structure, 
design and effect of the measures. 
7.174  In the United States' view, while the amount of th e respective liability is certainly a factor in 
whether the charge on the imported product and th e internal tax on the like domestic product are 
"equivalent", the ordinary meaning of the word "e quivalent" does not appear to prejudge the aspects 
of two measures that might be examined to dete rmine whether they correspond or are virtually 
identical.  Also, were the examina tion focused solely on the amount of the charge in relation to the 
internal tax this would appear to make the require ment that the charge not be in excess of internal 
taxes largely redundant.  
7.175  The United States further argues that the term "cha rge" in Article II:2(a) is described not only 
by the term "equivalent" but also by the phrase "i mposed consistently with the provisions of 
Article III:2".  The United States submits that whether a charge is "equivalent" to an internal tax and 
whether a charge is imposed consistently with Artic le III:2 are separate inquiries.  According to the 
United States, the element of "equivalent to an inte rnal tax" appears to focus on the qualitative aspects 
of measure, whereas the other element referred to in Article II:2(a) – "consistently with the provisions 
of Article III:2" – appears to focus on its quantitativ e aspects.  With regard to the latter element, the 
question is not whether the charges are in effect e qual or virtually identical but whether the charges 
subject imported products to an y taxation in excess of that imposed on like domestic products. 
7.176  India  argues that "equivalence" as referred to in Article II:2(a) has to be limited to ensuring 
that the net fiscal burden imposed by the border ch arge on the imported product does not exceed that 
imposed by the internal tax on the like domestic produc t.  The intent and purpose of Article II:2(a) is 
to provide WTO Members with a way in which they  can offset internal taxes borne by domestic 
products and ensure an equal fiscal burden on impor ted and domestic like products.  India accordingly 
understands the term "equivalent" as used in Article II:2(a) to mean  that the taxes charged at the 
border in lieu of internal charges do not impose a greater net fiscal burden on imported products than 
on like domestic products.  
                                                     
 
221Merriam-Webster Online Dictionary , available at <http://www.merriam-webster.com/-
dictionary/equivalent>.   
222Merriam-Webster Online  Dictionary , available at <http://www.merriam-webster.com/-
dictionary/equivalent>.    
223 The New Shorter Oxford English Dictionary, L. Brown (ed) (Clarendon Press), 1993, Vol. 1, p. 843. WT/DS360/R 
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  7.177  More specifically, India argues that Webster's Dictionary defines the word "equivalent" as 
being "equal in value, force, meaning or the like".224  Accordingly, in India's view, Article II:2(a) 
means that the charge imposed on imported products must be equal in force to the internal tax.  
Therefore, the requirement of "equivalence" must be said to be met if the charges imposed at the 
border overall impose an equal fiscal burden on importe d products as the internal taxes applied to like 
domestic products.  
7.178  India further argues that term "equivalent" must  be contrasted with the phrase "in excess of" 
used in Article III:2 which requires that taxes applie d internally to imported products must not be "in 
excess of" internal taxes applied to like domestic pr oducts.  India points out that the term "in excess 
of" has been restrictively interpreted by the Appella te Body.  Even the smallest amount of excess is 
impermissible.225  Thus, India submits, an internal  tax imposed on imported products under 
Article III:2 would need to satisfy a stricter sta ndard than a charge imposed on imported products at 
the border under Article II:2(a).  The equivalence re quired under Article II:2(a) is limited to requiring 
an equality of net fiscal burden on imported and like domestic products.  Consequently, a country like 
India, with its federal structure and different rates of  state-level internal taxes, need only ensure that 
the net fiscal burden of any border charge imposed  on imported products is no greater than the net 
fiscal burden of any internal taxes imposed on like domestic products. 
7.179  The Panel  notes that dictionaries identify more than one possible ordinary meaning of the 
term "equivalent".  Among the possible meanings  are: "[e]qual in power, rank, authority, or 
excellence", "[e]qual in value, significance, or meani ng", "[t]hat is virtually the same thing; having the 
same effect" and "[h]aving the same re lative position or function; corresponding".226  It emerges from 
these definitions that "equivalence" and "equality" ar e not one and the same concept.  The adjective 
"equivalent" denotes something that is equal, or virtually equal, in one respect, but not others.227  
Thus, "equivalence" implies a lesser degree of commonality or correspondence than "equality".   
7.180  This view fits well with the provisions of Artic le II:2(a) which contrast an "external", or 
border, charge with an internal charge.  In the s ituation contemplated in Article II:2(a), the product to 
be imported and the like domestic produc t are not subject to "equal", or the same, charges,  in that the 
product to be imported is subject to an "external", or border, ch arge upon importation whereas the like 
domestic product is subject to an internal ch arge, e.g. upon manufacture (ex factory level).228  At the 
same time, as Article II:2(a) makes clear, this important difference does not preclude the charge levied 
at the border being considered "equivale nt" to the charge levied internally. 
7.181  The issue to which we must turn, then, is in what respect the border charge to which 
Article II:2(a) refers needs to be equal, or virtually equal, to an internal charge for it to fall within the 
scope of that provision.  In this regard, we can qui ckly eliminate the dictionary definitions "[e]qual in 
power, rank, authority, or excellenc e" and "[e]qual in value, significance, or meaning".  The concepts 
of power, rank, authority and excellence do not fit with the concept of charges imposed on 
                                                      
224Merriam-Webster Online Dictionary  available at <http://www.merriam-webster.com/-
dictionary/equivalent>.     
225 India refers to the Appellate Body Report on Japan – Alcoholic Beverages II , p. 24. 
226 Shorter Oxford English Dictionary , 5th ed., W.R. Trumble, A. Stevenson (eds.) (Oxford University 
Press, 2002), Vol. 2, p. 851. 
227 Two objects x and y are equivalent if they are equal in respect of one particular trait, property, 
attribute, feature, etc.  See Meyers kleines Lexikon Philosophie , ed. Redaktion für Philosophie des 
Bibliographischen Instituts (Mannheim/Wien/Zürich: Biblio graphisches Institut, 1987), p. 46 (under "general"). 
228 In this respect, we agree with the United States th at the situation contemplated in Article II:2(a) is 
different from that contemplated in the Note Ad Article III of the GATT 1994 where an internal tax or charge 
which applies to both the imported product and the like domestic product is collected or enforced in the case of 
the imported product at the time or point of importation.  As the Note makes clear, the tax or charge collected at 
the time or point of importation is to be regarded as an internal tax or charge.    WT/DS360/R 
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  products.229  Regarding the definition "equal in significan ce", we can see how it may be of interest to 
determine whether winning the football world cup is equal in significance to winning a gold medal in 
the athletics world championships, but we fail to see  a plausible rationale for determining whether a 
charge imposed at the border in respect of an impor ted product is equal in significance to an internal 
charge imposed in respect of a like domestic product.   Similarly, while it makes sense to say that in 
American English the word "faucet" is "equal in mean ing" to the word "tap" in British English, it is 
not clear to us how charges imposed on products c ould be usefully compared in terms of their 
meaning.  Finally, we note that in an exchange situation two sheep might be considered "equal in 
value" to a dozen hens, or x USD may be "equal in  value" to y Euros.  Apart from the fact that 
charges are not normally considered to have a valu e, we note that Article II:2(a) does not seem to be 
concerned with an exchange situation.       
7.182  Another dictionary definition we have noted is "having the same effect" or, as the United 
States submits, "equal in amount".  To assess the ap propriateness of these definitions, it is necessary 
to look to the context of the term "equivalent" in Artic le II:2(a).  Of particular relevance in this regard 
is the phrase "consistently with the provisions of paragraph 2 of Article III ".  We have already 
underlined the importance of distinguishing the con cept of "equivalence" from that of "consistency 
with Article III:2".  As also pointed out by the United States, these concepts concern, and call for, 
separate inquiries.   
7.183  Regarding the inquiry into whether the internal tax (to which a border charge is equivalent) is 
imposed consistently with Article III:2, it is useful  to recall that Article II:2(a) refers to "like" 
domestic products.  Therefore, Article II:2(a) implicitly references the provisions of Article III:2, first 
sentence.230  In this respect, we note the finding by the panel in Argentina – Hides and Leather  that 
Article III:2, first sentence, is concerned with th e "economic impact [of taxes or charges] on the 
competitive opportunities of imported and like domestic products" and that, therefore, in an inquiry 
under Article III:2, first sentence, "what must be compared are the tax burdens imposed on the taxed 
products".231  The same panel further found that Article  III:2, first sentence, does not permit any tax 
burden differentials disf avouring imported products.232   
7.184  In the situation contemplated in Article II: 2(a), tax burden differentials disadvantaging 
imports could result, for instance, from the border charge being applied at higher rates than the 
internal tax, or from it not being creditable against in ternal charges in case of internal re-sale of the 
imported product when such credits are availabl e for equivalent transactions involving the like 
domestic product.  In the light of this, a situation where a border charge does not "have the same 
effect" (in terms of its impact on competitive cond itions as between the imported product and the like 
domestic product) as an internal tax, or is not "equ al in amount" to an internal tax, would be one 
where the internal tax is not imposed consistently with Article III:2.   
7.185  The foregoing demonstrates that if we were to  construe "equivalent" as meaning "having the 
same effect", or "equal in amount", we would fa il to give separate meaning to the concepts of 
"equivalence" and "consistency with  Article III:2", contrary to the requirement of effective treaty 
interpretation.233  Indeed, if we were to adopt these meanings, it would be difficult to see any 
                                                      
229 Regarding the dictionary meaning "equal in fo rce", referred to by the United States, it is not 
apparent to us how this could be considered a relevant meaning.  While a tornado might, perhaps, be equal in 
force to some types of explosions, we fail to see what th e United States means by a border charge that is equal 
in force to an internal charge. 
230 The present case does not present the issue whether Article II:2(a) might, in addition, imply a 
reference to the provisions of Article III:2, second sentence.  Both Parties have argued in terms of "like" 
products only.   
231 Panel Report, Argentina – Hides and Leather , para. 11.182. 
232 Ibid., para. 11.243 (referring to the Appellate Body Report in Japan – Alcoholic Beverages II ). 
233 See Appellate Body Report, US – Gasoline , p. 23. WT/DS360/R 
Page 112 
 
 
  difference between the two concepts.  Accordingly, reading the term "equivalent" in its context, we 
think the mere fact that a comparison of a borde r charge on the importation of a product with an 
internal tax imposed on the like domestic product reveal s a tax burden differential to the detriment of 
imported products would not  warrant the conclusion that the borde r charge is not "equivalent" to the 
internal tax.234   
7.186  We are thus left with the dictionary defi nition "[h]aving the same relative position or 
function; corresponding".  We consider that this definition, notably "having the same function" and 
"corresponding", fits well with the specific context of Article II:2(a).  In relation to the definition 
"corresponding", consistent with the difference between "equivalence" and "equality", we would 
nonetheless add that this should not be taken as mean ing "corresponding absolutely or completely", 
but "corresponding in a relevant respect", such as function.   
7.187  Both meanings – "having the same function" and "corresponding" – comport well with what 
we have said above about the impor tance of distinguishing the concept of "equivalence" from that of 
"consistency with Article III:2".  Where a comp arison of a border charge on the importation of a 
product with an internal tax imposed on the like do mestic product shows a ta x burden differential to 
the detriment of imported products, this does not necessarily imply that the border charge does not 
have the same function, or does not correspond, to th e internal tax.  Analysis may indicate that the 
border charge has the same function as, or corresponds to, the internal tax and hence is "equivalent" to 
the internal tax.  Or analysis may show that the borde r charge is, e.g., an "other duty or charge" and so 
does not have the same function as, or does not correspond  to, the internal tax.  As a result, construing 
"equivalent" as meaning "having the same functi on", or "corresponding", preserves the separate 
meaning we think should be given to the con cepts of "equivalence" and "consistency with 
Article III:2". Moreover, we consider that th e meanings "having the same function" and 
"corresponding" are in accord with the explanati on of the term "equivalent" given by the Legal 
Drafting Committee during the Geneva session of th e Preparatory Committee and referred to by the 
Parties.  The Legal Drafting Committee stated that the term "equivalent" meant that:235  
"[F]or example, if a [charge] is imposed on perfume because it contains alcohol, the 
[charge] to be imposed must take into c onsideration the value of the alcohol and not 
the value of the perfume, that is to say th e value of the content and not the value of 
the whole". 
7.188  Plainly, a value-based border charge on perfume  cannot be said to "have the same function" 
as, or to "correspond" to, a valu e-based internal tax on domestic alcohol .  On the other hand, a border 
charge imposed in respect of the alcohol containe d in perfume could possibly be said to "have the 
same function" as, or to "correspond" to , an internal tax on domestic alcohol.  
7.189  Having ascertained the appropriate ordinary meani ng of the term "equivalent", we think it is 
useful, in a second step, to attempt to elucidate wh en a border charge imposed on the importation of a 
product can be said to "have the same function" as an internal tax imposed in respect of the like 
                                                      
234 Logically, then, the same conclusion would apply in cases where there is a tax burden differential to 
the detriment of like do mestic products.  A similar conclu sion was reached by the panel in Argentina – Hides 
and Leather, although that case was an Article III:2 case.  None theless, similarly to our case, the panel in that 
case had to determine whether two Argentinean tax measures – RG 3543, which was applicable to import 
transactions, and RG 2784, which was applicable to like domestic (and internally re-sold imported) products – 
were "equivalent in nature" (Panel Report, Argentina – Hides and Leather , para. 11.154).  The panel observed in 
this regard that "[t]he mere fact that some equivalent transactions are not subject to RG 2784 or are subject to 
different rates does not, in our view, detract from the co mparability of RG 3543 and RG 2784.  In fact, such 
differences may constitute infringements of Ar ticle III:2, first sent ence".  Panel Report, Argentina – Hides and 
Leather , note 450. 
235 Doc. EPCT/TAC/PV/26, p. 21.  WT/DS360/R 
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  domestic product.236  We begin this task by noting that Artic le II:2(a) relates a border charge imposed 
on the importation of a product to an internal tax imposed on the like domestic product.  To us, this 
indicates that Article II:2(a) is concerned with the relative function of the border charge and internal 
tax, respectively.  In other words, we think that th e concept of "equivalence" in Article II:2(a) implies 
that the relevant internal tax fulfils a certain f unction in respect of the domestic product whereas the 
border charge fulfils the same (relative) functio n in respect of imports of the like product.  
Additionally, since Article II:2(a) relates a border char ge to an internal tax, it can be inferred that it 
needs to be assessed whether the two charges fulfil the same relative function within the customs duty 
and tax system of the Member concerned.  It foll ows that, in effect, an "equivalence" determination 
under Article II:2(a) aims at establishing whether despite constituting separate charges, the border 
charge on the importation of a product and the intern al tax on the like domestic product, when viewed 
together, can be considered to form a distinct w hole within the relevant Member's customs duty and 
tax system.   
7.190  We consider that, for the purposes of an ex amination under Article II:2(a), the relevant 
function fulfilled both by the internal tax on the domestic product and the borde r charge is to impose a 
charge on a particular product qua product.  It is not their function to impose a charge on a particular 
product qua domestic product (in the case of the internal tax) or qua foreign product being imported 
(in the case of the border charge).  To take the example of a border charge on wine, if it is 
"equivalent" to an internal tax, its function is, a nd must be, to impose a charge on the importation of 
wine, not because it is foreign-made wine, but because it is a product on which a charge is to be imposed regardless of whether it is of foreign or domes tic origin, with the consequence that it needs to 
be imposed on wine also if and when it is being imported.     
7.191  For further illustration, it is useful to consider the case of or dinary customs duties or "other 
duties or charges".  We have already explained that these are charges which by nature and design 
discriminate against, or disadvantage, imports.  Cons istently with this, we consider that the basic 
function fulfilled by this kind of charges is  to impose a charge on a particular product qua foreign 
product being imported.  Thus, to stick to the example of wine, an ordinary customs duty, or an "other 
duty or charge", is imposed on the importation of wi ne because it is foreign-made wine that is being 
imported.  Where an ordinary customs duty or "other  duty or charge" is imposed, the foreign origin of 
the subject product is not merely an incidental char acteristic of that product but the very reason for the 
imposition of such a duty.   
7.192  Yet another situation that it is instructive to  consider is one where a border charge on the 
importation of a product is levied at a higher rate th an an internal tax imposed in respect of the like 
domestic product.
237  The question presented by this type of s ituation is whether the mere existence of 
a rate differential disfavouring the product bei ng imported would preclude the border charge from 
being regarded as "having the same function" as the in ternal tax.  As mentioned previously, our view 
is that the existence of such a rate differentia l would not preclude an a ffirmative "equivalence" 
determination that would otherwise be warranted.  
7.193  We think it is not incongruous to say that a bor der charge can have the same function as, and 
hence be equivalent to, an internal tax, but at the same time provide for less favourable treatment of 
the subject product than the internal tax.  On the co ntrary, allowing for this possibility is consistent 
with the distinction drawn in Article II:2(a) betw een the concepts of "equivalence" and "consistency 
with Article III:2".  That distinction suggests that  it must be possible for a border charge to be 
                                                      
236 Hereafter we omit separate reference to the mean ing of "corresponding".  This is because we think 
that in the particular context of Article II:2(a) the "correspondence" required as between a border charge and an 
internal tax is, essentially, "correspondence in function". 
237 We are using the case of a rate differential as one example of a case involving a tax burden 
differential. WT/DS360/R 
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  equivalent to an internal tax and for that internal  tax to be imposed inconsistently with Article III:2.238  
Accordingly, the fact that a border charge on the importation of a product is levied at a higher rate 
than an internal tax imposed on the like domestic product in our view does not demonstrate that the 
two charges do not have the same function, viz., to impose a charge on the relevant product qua 
product.  Instead, the existence of such a rate di fferential may merely demonstrate that each charge 
fulfils that function (i.e., that of im posing a charge on the relevant product qua product) in a different 
manner, with the consequence that the product being imported is treated less favourably than the like 
domestic product.239   
7.194  We see nothing in our interpretation of the term  "equivalent" that would conflict with the 
object and purpose of the GATT 1994 of substantially reducing "tariffs" with a view to, e.g., raising 
standards of living, expanding the pr oduction and exchange of goods, etc.240  In particular, we do not 
share the United States' co ncern that if we were not to give th e term "equivalent" the interpretation it 
appears to argue for – equal in amount or value, or virtually identical in effect or amount – we would 
undermine the value of tariff concessions negotiated by exporting Members.  This argument might 
have some force if an affirmative "equivalence"  determination meant that the importing Member 
would be essentially free to impose, in addition to any WTO-consistent ordina ry customs duty and/or 
ODC, a border charge on the importation of a product at  a level, or otherwise in a manner, that would 
disadvantage it vis-à-vis  the like domestic product.  This is not the case, however.  As we will explain 
further below, if a border charge is determined to be  equivalent to an internal tax, it is caught by the 
provisions of Article III:2, first sentence.241  Article III:2, first sentence, sets out a strict national 
treatment obligation.  Indeed, as the United States  itself has reminded us, under Article III:2, first 
sentence, even a de minimis  tax burden differential disfavouring the product being imported would put 
the importing Member in breach of Article III:2.242  Thus, we do not believe  the interpretation which 
we consider should be given to th e term "equivalent" in Article II:2( a) diminishes the value of tariff 
concessions.     
7.195  As to how it is to be determined whether a particular border charge on the importation of a 
product is being imposed to levy a charge on that product qua product or qua foreign product being 
imported, we consider this type of  determination must be made having regard to the specific facts and 
circumstances of each case, notably including the customs duty and tax system of the relevant 
Member as in existence at the time of review.  Indeed, by nature, the outcome of an Article II:2(a) 
inquiry is highly context-dependent.  One and the sa me border charge may be determined to have the 
same function as an internal tax in one context but to  have a different function in another context.  To 
provide an example, a border charge which at present has the same function as an internal tax 
imposed on the like domestic product may subsequent ly cease to fulfil the same function if the 
internal tax is repealed or imposed also in respect of the imported product.   
7.196  Finally, we need to consider the consequences of  a negative "equivalence" determination.  In 
this regard, it is useful to thin k first about what are the consequen ces of an affirmative "equivalence" 
determination.  As we have expl ained above, a border charge which is imposed on the importation of 
a product and which is equivalent to an internal ta x imposed in respect of the like domestic product is 
                                                      
238 This is also consistent with the point we have made earlier that Article II:2(a) charges are charges 
that do not inherently discriminate against, or disadvantage, imports, but that particular Article II:2(a) charges 
may discriminate against, or disadvantage, imports (and, hence, fall foul of the provisions of Article III:2). 
239 Of course, it is possible that a border charge, such as an ordinary customs duty, is applied to the 
product being imported at a higher rate than an internal tax imposed in respect of the like domestic product 
without the two charges having the same function.  In such a case the existence of a rate differential would 
obviously not demonstrate that each charge fulf ils the same function in a different manner. 
240 See the preamble to the GATT 1994. 
241 We reiterate that the case at hand does not present the issue whether Article II:2(a) might, in 
addition, imply a reference to the provisi ons of Article III:2, second sentence. 
242 See Appellate Body Report, Japan – Alcoholic Beverages II , p. 25.  WT/DS360/R 
 Page 115 
 
 
  one which has the same function as the internal tax, bu t in other respects differs from the internal tax.  
As further addressed in the next sub-section, the re ference in Article II:2(a)  to "consistency with 
Article III:2" makes clear that, in the view of the drafters of Article II:2(a), a border charge on the 
importation of a product which fulfils the same f unction as an internal tax on the like domestic 
product should be, and is, subject to  the provisions of Article III:2.  Since such a border charge is 
caught by the provisions of Article III:2, there is, to that extent, a clear indication that it is a border 
charge of the kind which does not inherently discrimin ate against, or disadvantage, imports.  In view 
of this indication, it seems sensible not to subj ect this kind of border charge to the obligations 
contained in Article II:1.   
7.197  In contrast, a border charge on the importation of  a product which has been determined not to 
be equivalent to an internal tax imposed in r espect of the like domestic product does not have the 
same function as the internal tax.  It stands to reason that a border charge which, quite apart from 
being different from an internal tax in terms of fo rm, etc., does not even have the same function as an 
internal tax cannot be considered to be subject to  the provisions of Article III:2.  If such a border 
charge is not caught by the provisions of Article III: 2, however, there is, to that extent, no indication 
that it is a border charge of the kind which does not inherently discriminate against, or disadvantage, 
imports.  In the absence of such an indication243, there does not appear to be an obvious reason for not 
subjecting this kind of border charge to the obligations contained in Article II:1.   
7.198  The foregoing considerations lead us to the view th at, in an Article II:2(a) inquiry, it is only if 
a border charge is equivalent to an internal tax th at it can (ever) be concluded that – to use terms 
similar to those appearing in the chapeau of Article  II:2 – "nothing in Article II would prevent" the 
imposition of such a charge.  Or to put it another way, for the purposes of an Article II:2(a) inquiry, 
"equivalence" is a necessary condition for a charge to  fall outside the scope of Article II:1.  It is 
important to recall, however, that "equivalence"  is a necessary condition for the purposes of an 
Article II:2(a) inquiry only.  To explain, even if a border charge is not equivalent to an internal tax 
and thus does not fall within the scope of Article II:2(a), it may still fall within the scope of, e.g., 
Article II:2(b).  If it meets the conditions of Article II:2(b), it falls outside the scope of Article II:1.  
Hence, in cases where a border charge is not equivale nt to an internal tax, it may or may not fall 
outside the scope of Article II:1. 
(c) "consistently with the provisions  of paragraph 2 of Article III" 
7.199  As already pointed out, Article II:2(a) distingui shes the concept of "equivalence" from that of 
"consistency with Article III:2".  Below, some additional observations are offered regarding the 
relevance of the latter concept to an Article II:2(a) inquiry.   
7.200  The United States , as previously noted, stresses that whether a charge is "equivalent" to an 
internal tax and whether a charge is imposed cons istently with Article III:2 are separate inquiries.  
According to the United States, the element of "equiva lent to an internal tax" appears to focus on the 
qualitative aspects of measure, whereas the element of "consistently with the provisions of 
Article III:2" appears to focus on its quantitative aspec ts.  Specifically, the latter element requires that 
the charge applied to imported products must not  exceed the internal taxes on like domestic products 
to which they are asserted to be equivalent. 
7.201  The United States considers that each of the two separate elements of Article II:2(a) – 
"equivalent to an internal tax" a nd "imposed consistently with the provisions of Article III:2" – must 
be met for a charge on the importation of a product to  fall within the scope of that provision.  As a 
result, a charge equivalent to an internal tax imposed in respect of the like domestic product but 
                                                      
243 We note that such an indication could also result,  e.g., from the fact that  the border charge in 
question is caught by the provisions  of Article VI of the GATT 1994. WT/DS360/R 
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  imposed inconsistently with Article III:2 could not , in the United States' view, be justified under 
Article II:2(a).   
7.202  India  states that Members are permitted by Artic le II:2(a) to levy charges at the border, 
notwithstanding the restrictions contained in Artic le II:1, provided that such charges are: (a) 
"equivalent" to an internal tax, (b) imposed in a mann er that is consistent with Article III:2, and (c) in 
respect of a "like domestic product".  Thus, from this statement it would appear that it, too, views the 
element of "consistently with the provisions of  Article III:2" as an independent element to be 
separately established.244  As noted earlier, however, India also appears to suggest that a border charge 
need only be equivalent to an internal tax and that  "equivalence" is a more flexible concept than the 
concept used in Article III:2 of "not in excess of".245  In this regard, India refers to the GATT panel in 
US – Superfund  which stated that Article III:2 requires "complete equivalence between domestic and 
imported products".246  To India, this apparently suggests that  if a border charge is "equivalent" to an 
internal tax, it would also be  consistent with Article III:2.247    
7.203  The Panel  begins its additional analysis of the con cept of "consistency with Article III:2" by 
noting again that it does not consider that "equiva lence" and "consistency with Article III:2", as 
distinguished in Article II:2(a), are one and the same  concept, such that a finding of "equivalence" is 
one and the same things as a finding of "consiste ncy with Article III:2", or that a finding of 
"equivalence" compels a finding of "consistency w ith Article III:2".  Regarding the first proposition, 
as is clear from previous discussion, it is possible, an d makes sense, to give the two concepts different 
meaning.  Also, if the concepts were the same, or  were intended to mean the same, there would be no 
point in referring to both concepts in one and th e same subparagraph and in relation to the same 
measures being related to each other.   
7.204  With regard to the second proposition (to the effect that a finding of "equivalence" compels a 
finding of "consistency with Article III:2"), we recall that Article II:2(a) refers to the "like domestic 
product" and that it therefore implicitly refers to Article III:2, first sentence.248  In our view, in a case 
involving charges on imported and like domestic products , it is not possible to infer "consistency with 
Article III:2" from the existence of "equivalence".  This is because, as we have said, the concept of 
"equivalence" is compatible with the existence of  a tax burden differential, which is not the case of 
the concept of "consistency with Article III:2", at  least not in a case involving charges imposed on 
like products as opposed to charges imposed on di rectly competitive or substitutable products. 
7.205  We note India's reference to the GATT panel report on US – Superfund .  We agree with India 
that that panel appears to have used the term "e quivalent" both to indicate "equivalence" within the 
meaning of Article II:2(a)249 and to mean "not in excess of" within  the meaning of Article III:2, first 
sentence250.  In its report, the panel does not suggest, however, that the concepts of "equivalence" 
                                                      
244 In fact, this is how India has an alyzed the measures at issue in th is case under Article II:2(a).   
245 India's reply to Panel Question No. 14. 
246 India refers to GATT Panel Report, US – Superfund , para. 5.2.9. 
247 India's reply to Panel Question No. 68. 
248 We recall that the present case does not present the issue whether Article II:2(a) might, in addition, 
imply a reference to the provisions of Article III:2,  second sentence.  Accordingly, we leave this issue 
unaddressed. 
249 See, e.g., GATT Panel Report, US – Superfund , para. 5.2.9 ("[a tax imposed on imported 
substances, appraised on the basis of the value of the imported substance] would […] no longer be imposed in 
relation to the amount of taxable chemicals used in their production but the value of the imported substance 
[derived from the chemicals]" and hence not meet "the requirement of equivalence which the drafters explained 
in the perfume – alcohol example"). 
250 See ibid., paras. 5.2.8 ("to the extent that the tax on certain imported substances was equivalent to 
[i.e., did not exceed] the tax borne by  like domestic substances as a re sult of the tax on certain [domestic] 
chemicals, the tax met the national treatment requirement of Article III:2, first sentence") and 5.2.9 ("whether  WT/DS360/R 
 Page 117 
 
 
  within the meaning of Article II:2(a) and "consiste ncy with Article III:2" are the same.  Nor does the 
panel say that "equivalence" implies "consistency wi th Article III:2".  The panel did seem to consider, 
however, that, on the facts of the case before it, a l ack of equivalence meant that the challenged tax, 
which was imposed on imported produc ts, would have fallen foul of  Article III:2, first sentence.251  
But this was because, on the facts of that case, th e absence of an equivalent tax imposed on domestic 
products meant that the tax imposed on imported products was imposed exclusively on imported 
products.  It is important to note in this connection that the case before the GATT panel in US – 
Superfund  involved a completely different situation from ours.  In that case, the panel was examining 
a claim under Article III:2.  As is clear from our prev ious remarks, in the context of an Article II:2(a) 
inquiry, a lack of equivalence does not imply an  inconsistency with Article III:2.       
7.206  Next, we wish to elaborate upon a point we have made earlier, namely, that a border charge 
on the importation of a product equivalent to an in ternal tax on the like domestic product is within the 
ambit of Article III:2.  Absent the provisions of Ar ticle II:2(a), it might have been open to debate 
whether a border charge which is equivalent to an inte rnal tax (that is to say, a border charge which is 
not itself an internal tax) falls within the scope of ap plication of Article III:2.  This is because, by its 
terms, Article III:2 applies to "internal taxes or  other internal charges".  The provisions of 
Article II:2(a) have rendered any such debate moot.  The reference in Article II:2(a) to an internal tax 
imposed consistently with the provisions of Artic le III:2 would not make much sense if the border 
charge contemplated in Article II:2(a) were not ca ught by the provisions of Article III:2.  Indeed, 
Article III:2 requires a comparison of the tax bur den borne by imported products, on the one hand, 
and domestic products, on the other.  The text of Artic le II:2(a) refers to an internal tax imposed in 
respect of the like domestic product.  Thus, in the si tuation contemplated in Article II:2(a), the charge 
to which it is logical to compare the internal tax on the domestic product is the border charge on the importation of that same product.   
7.207  The view that border charges equivalent to in ternal taxes are subject to the provisions of 
Article III:2 is further supporte d by the GATT panel report on EEC – Animal Feed Proteins.  The 
panel in that case observed that:
252   
"The wording of Article II:2(a) which refers to  'charges equivalent to internal taxes' is 
different from that of Article III:2 which refe rs to 'internal taxes and other charges of 
any kind', but it appeared to be the comm on understanding of the drafters of these 
articles that their scope should be the same as to the kind of measures being covered." 
7.208  The other issue to be examined as part of this additional analysis is th at of the consequences 
that would flow from an affirmative or nega tive determination regard ing "consistency with 
Article III:2".  It is well to recall in this regard that, in an Article II:2(a) inquiry, the issue of consistency with Article III:2 would only arise in a case where it ha d been previously determined that 
a border charge is equivalent to an internal tax, as otherwise the border charge would not be subject to 
the provisions of Article III:2.  Accordingly, for the purposes of the present analysis, we shall assume 
a border charge that is equivalent to an internal tax.   
7.209  We need not dwell upon the cases where a border char ge is equivalent to an internal tax and 
the internal tax is imposed consistently with Artic le III:2.  Undoubtedly, such a border charge would 
fall outside the scope of application of Article II:1.   The cases we need to discuss are those where a 
border charge is equivalent to an internal tax an d the internal tax is imposed inconsistently with 
Article III:2.  In relation to those cases, we recall our view that it is the fact of being equivalent to an 
                                                                                                                                                                    
 
they will establish complete equivalence [i.e., equal ta x burdens] between domestic and imported products, as 
required by Article III:2, first sentence, remain open questions"). 
251 Ibid., para. 5.2.9. 
252 GATT Panel Report, EEC – Animal Feed Proteins , para. 4.16c. WT/DS360/R 
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  internal tax which brings a border charge within the scope of application of Article III:2 and removes 
that border charge from the scope of application of Ar ticle II:1.  The validity of this conclusion is not 
affected by whether the internal tax to which the relevant border ch arge is equivalent is imposed 
consistently with the pr ovisions of Article III:2.253  If the internal tax is imposed inconsistently with 
the provisions of Article III:2, then, quite simply, the importing Member is in breach of its obligations 
under Article III:2.  This finding of a breach of Article III:2 would be the end result of the analysis 
(barring availability of exceptions justifying such br each) and not merely an intermediate result that 
would take the analysis of the border charge back to Article II.254  In other words, we consider that a 
border charge which is equivalent to an internal ta x imposed inconsistently with Article III:2 would, 
also, fall outside the scope of application of Article II:1. 
7.210  Thus, we think it would be incorrect to say that it is only if a border charge is equivalent to an 
internal tax and the internal tax is imposed consisten tly with Article III:2 that it can be concluded, in 
the words of the chapeau of Article II:2, that not hing in Article II would prevent the imposition of 
such a charge.  As we just have explained, a borde r charge equivalent to an internal tax which is 
imposed inconsistently with the provisions of Artic le III:2 would, in our view, fall outside the scope 
of application of Article II:1.  As a result, we consider that, for the purposes of an inquiry under 
Article II:2(a), equivalence is both a necessary a nd a sufficient condition whereas consistency of the 
internal tax with the provisions of Ar ticle III:2 is not a necessary condition.   
7.211  The foregoing presents the issue of what purpose is served by the reference in Article II:2(a) 
to the consistency with Article III:2 of the internal tax to which a border charge  is equivalent.  As we 
see it, rather than to stipulate an additional require ment that must be met for a border charge to fall 
outside the scope of Article II:1, the purpose of th e reference in question is  to acknowledge, and call 
attention to, the existence of relevant requirements stipulated elsewhere in the GATT 1994, viz., in the 
provisions of the next article.  In other words, we  consider that the main purpose of the reference in 
question is to link up the provisions of Article II:2(a)  with those of Article III:2.  In so doing, the 
reference acts as an important reminder to Members that their obligations in respect of border charges 
of the kind at issue in Article II:2(a) go beyond ensuring that such border charges are equivalent to 
internal taxes.255  In our view, Article II:2(a) could thus be understood as referring, in effect, to "an 
internal tax imposed (as it must be pursuant to this  Agreement) consistently with the provisions of 
paragraph 2 of Article III". 
7.212  We do not think it is possible to draw particul ar inferences from the reference to consistency 
with Article III:2 regarding the GATT 1947 negotiators ' intentions in respect of those cases, discussed 
above, where a border charge is equivalent to an in ternal tax, but the tax is imposed inconsistently 
with Article III:2.256  Indeed, as we have suggested, Article II:2(a)  in our view refers to an internal tax 
imposed "consistently with" Article III:2 becau se this is what the GATT 1947 prescribed (and the 
                                                      
253 We recall our view that the fact that the border charge is imposed at a higher rate than the internal 
tax to which it is equivalent does not preclude an affirmative "equivalence" determination. 
254 Indeed, in view of the fact that Article II:2(a) confirms that a border  charge equivalent to an internal 
tax is subject to Article III:2, the situation is comparable  to one where an internal tax is applied to the imported 
product at a higher rate than is applied to the like domestic product pursuant to a separate, but corresponding, 
internal tax.  The fact of being inconsistent with Artic le III:2 would not remove such an internal tax from the 
scope of application of Article III:2 and bring it within the scope of application of Article II:1, e.g., on the 
grounds that it disadvantages imports in the same way an "ordinary customs duty" (or "other duty or charge") 
would do.   
255 As we have indicated previously, the reference in addition provides important confirmation of the 
fact that border charges equivalent to internal taxes are caught by the provisions of Article III:2.  This, in turn, is 
an indicator that such border charges are border charges of the kind which do not inherently discriminate 
against, or disadvantage, imports.    
256 Nonetheless, as we have said, the reference supports the inference that border charges equivalent to 
internal taxes are subject to the provisions of Article III:2.  WT/DS360/R 
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  GATT 1994 still prescribes today).  Where a border charge  is equivalent to an internal tax, it is 
subject to Article III:2, and so the internal tax to  which the border charge is equivalent must be 
imposed consistently with Article III:2.  If a refe rence to other requirements to be complied with – 
specifically, those contained in Article III:2 – was to be included in Article II:2(a), it stands to reason 
that the text of Article II:2(a) would do so in a ma nner that reflects, and is consistent with, what the 
GATT 1947 prescribed and, hence, would contemplate an internal tax imposed consistently with 
Article III:2.  In the light of this, the fact that th e text of Article II:2(a) contemplates an internal tax 
imposed "consistently with" Article III:2 in our vi ew does not support the conclusion that the GATT 
1947 negotiators considered that if a contractin g party subsequently imposed an internal tax 
inconsistently with Article III:2, the border charge eq uivalent to that internal tax would be subject to 
the provisions of Article II:1.   
7.213  Additionally, we note that the relevant context of Article II:2(a) includes Article II:2(b) which 
makes clear that Article II does not prevent the imposition, on the importation of a product, of an 
"anti-dumping or countervailing duty a pplied consistently with the provi sions of Article VI".  In our 
view, similarly to what we have said in respect of  the concept of "consistency with Article III:2" in 
Article II:2(a), the concept of "consistency with Article  VI" in Article II:2(b) is not to be regarded as a 
necessary condition, for the purpo ses of an Article II:2(b) inqui ry, for an "anti-dumping or 
countervailing duty" imposed on the importation of a prod uct to fall outside the scope of Article II:1.  
Accordingly, we consider that our interpretation of the phrase "an internal tax imposed consistently 
with the provisions of paragraph 2 of  Article III" in Article II:2(a) is consistent with the provisions of 
Article II:2(b).   
7.214  As to whether our interpretation of the phrase "a n internal tax imposed consistently with the 
provisions of paragraph 2 of Article III" is consis tent with the object and purpose of the GATT 1994, 
we recall our view that a border charge equivalent to  an internal tax which is imposed inconsistently 
with the provisions of Article III:2 would fall outside  the scope of Article II:1.  However, we have 
also indicated that such a border charge would be caught by the strict obligations contained in 
Article III:2.  In the light of this, we do not c onsider that our interpretation of the aforementioned 
phrase could be said to undermine the value of ta riff concessions negotiated by exporting Members.257  
As our interpretation does not threaten to unde rmine the value of tariff concessions, we do not 
consider that it runs counter to the object and pu rpose, expressed in the preamble to the GATT 1994, 
of substantially reducing "tariffs".   
7.215  A final point should be made.  In keeping with our view that the reference in Article II:2(a) to 
"consistency with Article III:2" is  not intended to stipulate an additional requirement to be met for a 
border charge to fall outside the scope of Article  II:1, we would not proceed, in an inquiry under 
Article II:2(a), to examine the consistency of an inte rnal tax with Article III:2 after having determined 
that a particular border charge is equivalent to that internal tax.258  It is important to keep in mind, in 
this connection, that if the complaining party wi shes a panel to examine the internal tax and an 
equivalent border charge in the light of the require ments of Article III:2, it is open to the complaining 
party to include in its panel request  an independent claim of violati on of Article III:2, and to develop 
such a claim in its submissions to a panel.    
3. Consistency of the AD on alcoholic liquor with Article II:1(b) of the GATT 1994 
7.216  The Panel  now turns to assess the Unit ed States' claim that the AD on alcoholic liquor is, as 
such, inconsistent with Article II:1(b) of the GATT 1994. 
                                                      
257 For further elaboration, see supra , para. 7.194. 
258 In a case where it has been determined  that a particular border charge is not equivalent to an internal 
tax, a necessary condition of Article II:2(a) is not met, and so a negative "equivalence" determination ipso facto  
ends an Article II:2(a) inquiry.   WT/DS360/R 
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  7.217  The United States  recalls that Article II:1(b) prohibits Members from levying "ordinary 
customs duties" or "other duties or charges imposed  on or in connection with importation" in excess 
of the rates established in Members' Schedule (" WTO-bound rates").  In the United States' view, the 
AD on alcoholic liquor is inconsistent with this pr ovision as an "ordinary cu stoms duty" that exceeds 
India's WTO-bound rates.  The United States submits that the AD on alcoholic liquor is an "ordinary 
customs duty" because it applies: (1) at the time of importation (and, in this connection, it must be 
paid by the importer before the good may clear customs); (2) as a matter of course upon a good's 
importation (and, in this connection, it applies ge nerally on the importation of alcoholic beverages 
into India and the event for which liability ensu es is importation); and (3) as a combination of ad 
valorem  and specific duties.  The United States points out that in this regard the AD on alcoholic 
liquor is no different from India's BCD.  In relati on to the BCD, the United States observes that India 
has already conceded that the BCD is an ordinary customs duty within the meaning of Article II:1(b).  
The United States notes that like the AD on alcoholic liquor, the BCD applies: (1) at the time of 
importation (and, in this connection, it must be paid by the importer before the good may clear 
customs); (2) as a matter of course upon a good's impor tation (and, in this connection, it applies 
generally on the importation of products into India and the event for which liability ensues is 
importation); and (3) as a combination of ad valorem  and specific duties.  
7.218  The United States contends that there are a number of additional similarities between the 
BCD and the AD on alcoholic liquor which indicate that the AD on alcoholic liquor like the BCD is 
an "ordinary customs duty", including the fact that bot h are referred to under Indian law as "duties of 
customs", authorized under the same constitutional provision, required to be levied under the same 
provision of the Customs Act, subjected to exemp tions under the same provision of the Customs Act, 
and administered under the same Customs rules and procedures. 
7.219  The United States points out that the principal distinction India draws between the BCD and 
the AD on alcoholic liquor is that the latter is in tended to offset internal taxes imposed on like 
domestic products.  The United States argues that whether the AD on alcoholic liquor constitutes an 
ordinary customs duty must be based on an examinati on of its structure, design and effect.  The stated 
purpose or intent of a duty does not determine whether it is or is not an ordinary customs duty.  The United States notes that the GATT 1947 panel in EEC – Parts and Components  rejected the notion 
that the stated purpose or characterization of  an EEC anti-circumvention duty under EEC law 
provided a sufficient basis to characterize the measure as an internal tax rather than a customs duty.  
Similarly, the United States submits, this Panel shoul d reject India's contention that the stated purpose 
or characterization of the AD under Section 3(1) of the Customs Tariff Act provides a sufficient basis 
to find the AD on alcoholic liquor a charge equivalent  to an internal tax rather than an ordinary 
customs duty.  
7.220  The United States argues, in addition, that an in terpretation of Article II:1(b) that would allow 
the stated purpose or intent of a measure to determ ine whether it fell within the scope of that article 
would allow Members to avoid or manipulate WTO co mmitments simply by attributing a particular 
purpose to a measure (regardless of what the measure  in fact does) or by calling a measure by one 
name versus another, similar to the situation faced in EEC – Parts and Components .  In this dispute, 
the United States contends, India may attribute a different purpose to the BCD on the one hand and 
the AD on alcoholic liquor on the other, but both of them, based on an examination of their structure, 
design and effect as reviewed a bove, constitute "ordinary customs duties" within the meaning of 
Article II:1(b).   
7.221
 Furthermore, in the United Sates' view, the fact that the AD on alcoholic liquor may be 
distinct from India's basic customs duty, in that it is imposed under a separate section of the Customs 
Tariff Act, does not mean that the AD on alcoholic liquor is not an ordinary customs duty.  According 
to the United States, it is not the case that a Memb er may only impose one duty that may properly be 
characterized as an "ordinary customs duty" unde r Article II:1(b).  Nothing in the text of  WT/DS360/R 
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  Article II:1(b) suggests that Members are limited to a single "ordinary customs duty" and, in fact, the 
text refers to "ordinary customs duties" in the plural.  
7.222  In the alternative, the United States believes that even if the AD on alcoholic liquor were not 
an "ordinary customs duty", it would constitute an "other duty or charge" (ODC) within the meaning 
of Article II:1(b), second sentence.  The United St ates submits that the AD on alcoholic liquor would 
necessarily constitute an ODC if it were not an or dinary customs duty. This is because the word 
"other" as used in Article II:1(b) means duties or ch arges that are not ordinary customs duties that are 
applied on or in connection with importation.  If the AD on alcoholic liquor is not an ordinary 
customs duty, then it must, in the United States' view , necessarily be something other than an ordinary 
custom duty.  The United States points out in this regard that the AD on alcoholic liquor applies on or 
in connection with importation.  Specifically, it applies at the time of importation and as a consequence of importation (that is, importation is  the event for which liability for duty ensues).  
Moreover, the United States considers that in asserti ng that the AD on alcoholic liquor is a charge 
equivalent to an internal tax within the meaning of  Article II:2(a), India has implicitly characterized it 
as a charge "imposed on importation" since the chap eau to Article II:2 makes clear that it concerns 
measures "imposed on importation".  Therefore, the United States maintains, if the AD on alcoholic 
liquor is not an ordinary customs duty, it must be  an other duty or charge within the meaning of 
Article II:1(b).  
7.223  Regarding the other element of an Article II:1(b)  inquiry, the United States contends that the 
AD on alcoholic liquor when imposed with India's BCD  results in ordinary customs duties on imports 
of alcoholic liquor in excess of India's WTO-bound rates.  Specifically, the United States asserts that 
the AD on alcoholic liquor imposed with the BCD r esults in ordinary customs duties on imports of 
alcoholic beverages that exceed Indi a's WTO-bound rates of 150 percent ad valorem  by amounts 
ranging from 48 to 400 percentage points.  According to the United States, the AD on alcoholic liquor 
is therefore as such inconsistent with Article II: 1(b).  Moreover, if the AD on alcoholic liquor were 
considered an ODC, it would, in the United Stat es' view, exceed the ODCs specified in India's 
Schedule as India's Schedule does not specify any ODCs for alcoholic liquor or any other product.  
7.224  The United States notes India's assertion that the AD on alcoholic liquor is equivalent to State 
excise duties imposed on like domestic products and t hus imposed in accordance with Article II:2(a).  
The United States considers that it has presented ev idence and argument sufficient to establish a prima 
facie case that the AD on alcoholic liquor is (i) an  ordinary customs duty that (ii) exceeds India's 
WTO-bound rates and, therefore, is inconsistent with  Article II:1(b).  According to the United States, 
having made a prima facie case that the AD on alcoholic liquor is an ordinary customs duty, the 
necessary corollary of that showing is that the AD on alcoholic liquor is not a "charge equivalent to an 
internal tax".   
7.225  The United States further points out that even  if the AD on alcoholic liquor were not 
considered an ordinary customs duty but an "other duty or charge" on importation, India has presented 
no evidence that it is "equivalent" to an internal  tax on like domestic alcoholic liquor and imposed 
consistently with Article III:2.  The United Stat es argues that India as the party asserting that the AD 
on alcoholic liquor is justified under Article II:2(a)  bears the burden of sustaining that assertion.  
According to the United States, in view  of the Appellate Body report in United States – Wool Shirts 
and Blouses
, it is up to India to present evidence and argum ent sufficient to establish that what it 
asserts is true.   
7.226  The United States submits in this regard that  although India asserts that the AD on alcoholic 
liquor is equivalent to State excise duties on domest ic alcoholic liquor, it has not actually identified WT/DS360/R 
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  any such State excise duties,259 much less explained how the AD on alcoholic liquor is "equivalent" to 
them or imposed consistently with Article III:2.  In the United States' view, simply citing the stated 
purpose of Section 3(1) of the Customs Tariff Act is insufficient.  According to the United States, to 
be considered equivalent to internal taxes within  the meaning of Article II:2(a), the AD on alcoholic 
liquor must in fact be equivalent to, and offset  or counterbalance, internal taxes on like domestic 
products.   
7.227  The United States submits, in addition, that I ndia has admitted that the AD on alcoholic liquor 
"could in some cases, have been less than the ex cise duty being charged on like domestic products in 
some States, and in other cases equal to or perhaps slightly in excess of the excise duty being charged 
in some other States".260  Therefore, the United States contends, since the AD on alcoholic liquor – by 
India's own admission – exceeds the excise duties char ged on like domestic products in at least some 
instances, it is not imposed consistently with Ar ticle III:2 with respect to like domestic products.  
Furthermore, the United States notes that even if India had not admitted that the AD on alcoholic 
liquor is imposed on imports in excess of State excise  duties on like domestic products in some States, 
the Explanation to Section 3(1) supports the same  conclusion.  The United States considers that, 
notwithstanding India's contentions to the contrary , Section 3(1) read with the Explanation means 
that, since the rate of excise duty on like domestic alcoholic liquor varies from State to State, imports 
shall be liable to an AD that is equal to the high est rate of State excise duty imposed.  Accordingly, 
the United States believes, Section 3(1) read with the Explanation subjects imports of alcoholic liquor 
to rates of AD that exceed the rate of excise dutie s on like domestic alcoholic beverages in at least 
some Indian States and, as a consequence, the AD on alcoholic liquor is not im posed consistently with 
Article III:2.  
7.228  The United States further notes an assertion made  by the European Communities in its third 
party submission.  The United States points out that  in that submission the European Communities 
explained that it had compared the taxation resultin g from the AD on alcoholic liquor on imports with 
the taxation resulting from excise taxes applied by a number of Indian States on like domestic 
products and concluded that the AD on alcoholic li quor "exceeds by a large margin the taxation 
resulting from taxes denominated 'excise duty' in the legislation of most Indian States representing a 
major proportion of the market for wines and spirits".261  
7.229  In the light of this, the United  States considers that the AD on alcoholic liquor is not a charge 
"equivalent" to internal taxes (State excise duties) and, as India even concedes, that it is imposed on 
imports in excess of State excise duties on like domestic alcoholic liquor.  Therefore, the United 
States believes, the AD on alcoholic liquor is not a charge "equivalent" to internal taxes imposed 
consistently with Article III:2. 
7.230  India submits that the United States fails to appreci ate that there is a clear demarcation under 
Indian law between the BCD and the AD on alcoholic  liquor.  India argues that the BCD is the only 
duty imposed by it on imports which is in the natu re of an "ordinary customs duty" as understood 
under Article II:1(b) and is accordingly bound at the levels prescribed in India's Schedule.  India does 
not levy any "other duties or charges".  India stat es that the BCD is distinct from the AD on alcoholic 
liquor, which is levied on imported products in  lieu of different internal taxes.   
7.231  India submits that the United States has failed properly to distinguish between different types 
of duties and the statutory provisions based upon wh ich they are imposed.  India notes in this regard 
                                                      
259 The United States contends that it has made requests for relevant information to India.  However, in 
the context of the Panel proceedings, the United States has not made use of the opportunity to put an appropriate 
written question to India. 
260 The United States refers to India's reply to Panel Question No. 28. 
261 The United States refers to paras. 79-82 of the EC third party written submission.  WT/DS360/R 
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  that although the AD and the BCD are authorized unde r the same constitutional entry, they are levied 
under different statutory provisions.  India recalls that the Customs Act and the Customs Tariff Act 
are different statutory enactments created by separate acts of Parliament.  Indi a contends that the BCD 
is levied under Section 12 of the Customs Ac t whereas the AD on alcoholic liquor was levied under 
Section 3(1) of the Customs Tariff Act.  India also  maintains that the United States has misinterpreted 
the cross-reference provisions contained in Section 3( 8) of the Customs Tariff Act and Section 25 of 
the Customs Act to mean that both statutes essentially administer the same duties and that they are in 
the nature of "ordinary customs du ties" or ODCs.  India argues that  the mere existence of a cross-
reference between two statutes, inserted primarily for administrative convenience, does not alter the 
nature of the distinct charges levied under each.  Sp ecifically in relation to Section 25 of the Customs 
Act, India does not agree with the United States that the power to exempt imports from the AD is 
contained in the Customs Act.  According to In dia, without the existence of the reference in 
Section 3(8) of the Customs Tariff Act, the po wer to exempt imports from the AD does not exist 
under Section 25.  Furthermore, India considers that  the mere fact that the AD on alcoholic liquor is 
calculated "inclusive of" the BCD does not make it an "ordinary customs duty" or an ODC.  India 
points out that the AD is calculated under the Cust oms Tariff Act and not the Customs Act.  In sum, 
India submits that the levy, calculation and colle ction of the AD on alcoholic liquor as well as 
exemptions from the AD on alcoholic liquor are prov ided for in the Customs Tariff Act, which makes 
the AD on alcoholic liquor fundamentally differe nt from the BCD levied under Customs Act.  
7.232  According to India, the intent and design of the AD on alcoholic liquor is solely to offset the 
excise duty payable by Indian manufacturers on the like domestic product.  India contends that this 
view has been confirmed by a binding interpretation of Section 3(1) of the Customs Tariff Act – the 
statutory basis of the AD – by the Supreme Court of India in Hyderabad Industries Ltd. v. Union of 
India .  India is of the view that the policy purpose behind the introduction of a duty is an important 
factor, although not the only factor, which a Panel may look into while characterizing a duty.  The 
Panel, India suggests, is not precluded from reviewing all relevant factors. 
7.233  In sum, in India's view, it is clear from su ch factors as the purpose of the AD on alcoholic 
liquor, its statutory basis and its relationship with the internal taxes it is intended to counterbalance 
that the AD on alcoholic liquor is a distinct duty from the BCD.  The BCD, India notes, has no such 
purpose (as it is intended as a tariff imposed in accordance with India's Schedule), no relationship 
whatsoever with any internal tax and a different statutory basis.   
7.234  India notes that the only commonality between the BCD, which is an "ordinary customs 
duty", and the AD on alcoholic liquor is that they are imposed on imports at the border and that both 
are expressed in ad valorem  terms.  India submits in this re gard that the Appellate Body in Chile – 
Price Band System  held that this does not necessarily mean that such duties are "ordinary customs 
duties".  As a result, the United States as the compla ining party must look beyond the mere point at 
which the duty is levied and the manner in which the duty is expressed, since neither of them will 
necessarily mean or indicate that th e duty is an "ordinary customs dut y".  Yet, India contends, instead 
of positively substantiating the existence of a prim a facie case, the United St ates has based its claim 
under Article II:1(b) on two elements: (i) what it consid ers to be the general definition of an "ordinary 
customs duty" and (ii) India's alleged failure to pr ove that the AD on alcoholic liquor falls outside this 
broad definition.  India considers, therefore, that the United States as the complaining party in this 
case has failed to make out a prima facie case that the AD on alcoholic liquor is  an "ordinary customs 
duty".  Consequently, in India's view, the United States' further assertion that the AD on alcoholic 
liquor results in ordinary customs duties "in excess  of" the WTO-bound rates in India's Schedule is 
without merit.   
7.235  Regarding the United States' alternative asserti on that the AD on alcoholic liquor may qualify 
as an "other duty or charge", India submits that the United States has offered no reason in support of 
its contention other than that it is imposed "on impor tation".  India submits that the United States has, WT/DS360/R 
Page 124 
 
 
  therefore, failed to discharge its burden of proof.  India considers that the AD on alcoholic liquor is 
not in the nature of an ODC.  It is imposed at  the time of import but is not imposed on, or in 
connection with importation.  India argues that, c ontrary to the United States' contention, the AD on 
alcoholic liquor is not imposed as a consequence of importation.  India maintains that the liability to 
pay the AD on alcoholic liquor arises as a consequen ce of domestic like products being charged an 
excise duty and not merely because the products are impor ted into India.  Looked at in another way, if 
domestically manufactured goods are not charged an  excise duty, then, India contends, imported like 
products will also not be charged the AD on alcoholic liquor even if they are imported into the customs territory of India.
262 
7.236  Based upon the above arguments, India submits that  rather than being an "ordinary customs 
duty" or an ODC within the meaning of Article II:1(b), the AD on alcoholic liquor was being imposed 
in accordance with the provisions of Article II:2(a).  India considers that as a charge equivalent to an 
internal tax, it did not erode the "value of tariff concessions" offered by India.   
7.237  Concerning the issue of "equivalence", India no tes that each of its 28 State Governments and 
7 Union Territories are empowered to levy their ow n excise duties.  Consequently, India argues, the 
AD on alcoholic liquor could not be fixed with refe rence to any one single rate of State excise duty 
and the Central Government decided in its discreti on to adopt the most practical method of imposing 
the AD on alcoholic liquor through a process of averag ing, whereby the Central Government arrived 
at an approximation of the excise duty rates paid by different States on alcoholic liquor.  India notes 
that this rate could in some cases be less than the excise duty being charge d on like domestic products 
in some States, and in other cases equal to or pe rhaps in excess of the excise duty being charged in 
some other States.  However, India contends, the Cent ral Government tried to ensure that to the extent 
possible, the rate was a reasonable approximation of the net fiscal burden imposed on like domestic products on account of the excise duty payable on alcoholic liquor. 
7.238  India submits, finally, that the Explanation to Section 3(1) cannot be interpreted as binding 
the Central Government to impose the AD on alcoholic liquor at the highest rate, as the United States 
seems to believe.  India contends in this respect that the on AD on alcoholic liquor as imposed 
through CN 32/2003 was in some States lower th an the State excise duty being charged on like 
domestic products.  Thus, if the United States' cont ention that the Central Government is required to 
levy the AD on alcoholic liquor at the highest rate were accepted, the Central Government would not 
have been empowered to levy the AD on alcoholic liquor at a rate lower than the highest excise 
duties.  India submits that this clearly establishes the existence of discretion on the part of the Central 
Government. 
7.239  In view of the above, India considers that the United States has failed to demonstrate that the 
AD on alcoholic liquor was not imposed in accordance with Article II:2(a) and that, notwithstanding 
the United States' failure to discharge its burde n, India has amply demonstrated how the AD on 
alcoholic liquor was imposed in accordance with Article II:2(a).  
7.240  The Panel  notes India's argument that the United States' claim of inconsistency with 
Article II:1(b) lacks merit because, in its view, the challenged measure – the AD on alcoholic liquor, 
as imposed through CN 32/2003
263 – was not subject to the provisions of Article II:1(b).  India 
considers that, contrary to the United States' assertio n, the measure at issue was neither an "ordinary 
customs duty" nor an "other duty or charge" within the meaning of Article II:1(b), but rather a charge 
equivalent to State-level internal taxes within the meaning of Article II:2(a).    
                                                      
262 India argues that this position is confirmed by the decision of the Supreme Court of India in 
Hyderabad Industries Ltd. v. Union of India . 
263 Hereafter, unless the context requires otherwise, we  will for the sake of brevity refer to the "AD on 
alcoholic liquor" rather than "the AD on alcoholic liquor, as imposed through CN 32/2003".  WT/DS360/R 
 Page 125 
 
 
  7.241  In view of the disagreement between the Parti es over the correct legal characterization of the 
AD on alcoholic liquor, before undertaking any further analysis of the United States' claim under 
Article II:1(b), the Panel needs to satisfy itself that  the measure at issue fell within the scope of 
application of Article II:1(b).  As correctly argu ed by the United States, if the challenged measure 
qualifies as either an "ordinary customs duty" or an  "other duty or charge", it was subject to the 
provisions of Article II:1(b).  The United States' prin cipal contention in this regard is that the AD on 
alcoholic liquor constituted an "ordinary customs dut y" within the meaning of Article II:1(b), first 
sentence.  The United States' altern ative contention is that it constituted an "other duty or charge" 
within the meaning of Article II:1(b), second sentence.   
7.242  The United States' alternative contention is not  based on separate or additional evidence, but 
rather on the word "other" in th e phrase "other duty or charge".264  According to the United States, if 
the challenged measure were considered by the Pane l not to constitute an "ordinary customs duty", it 
would, in view of the word "other", necessarily  be an "other duty or charge" imposed on the 
importation of alcoholic liquor.  This means that if  the United States cannot demonstrate, based on the 
evidence adduced by it, that the AD on alcoholic liq uor was an ordinary customs duty, it will also 
have failed to establish its alternative contention.   
7.243  In the light of the above, the Panel will exam ine first whether the AD on alcoholic liquor was 
an "ordinary customs duty" (or, alternatively, an "other duty or charge" imposed on the importation of 
alcoholic liquor) and, thus, subject to the obligations contained in Article II:1(b), first sentence (or, 
alternatively, those contained in Article II:1(b), second sentence). 
(a) Ordinary customs duty (or "other duty or charge") 
7.244  We begin our examination by recalling at the outset that the United States has sought to 
establish that the AD on alcoholic liquor was an "ordin ary customs duty" by reference to its definition 
of that concept.  Accordingly, we now proceed to  consider the definitional and other elements relied 
upon by the United States with a view to determin ing whether they establish that the AD on alcoholic 
liquor was an "ordinary customs duty" (or alternatively, an "other duty or charge" imposed on the 
importation of alcoholic liquor). 
7.245  To recall, the United States considers that the term "ordinary customs duty" as it appears in 
Article II:1(b) means a duty that applies to a good at the time of importation – not on a case-by-case 
basis or in response to a singular or exceptional event or set of circumstances – but as a matter of 
course on, or in connection with, the good's importati on.  According to the United States, an ordinary 
customs duty is typically an ad valorem  duty, a specific duty, or a combination thereof.   
7.246  The AD, as its statutory name makes clear, is a "duty".265  It applies to goods (articles) which 
are imported into India (in our case, alcoholic liquor).266  It does not apply to domestic goods.  The 
AD is assessed at the time and point of importation by India's Customs authorities.267  The good which 
is imported and subject to the AD is cleared through  customs for entry into India's customs territory 
once the AD has been paid.268  The AD is payable by the importers of the subject goods or their 
                                                      
264 US second written submission, para. 19. 
265 Section 3(1) of the Customs Tariff Act, including its proviso. 
266 Ibid; CN 32/2003. 
267 India's replies to Panel Question Nos. 5 and 12; US reply to Panel Question No. 12. 
268 India's reply to Panel Question No. 12.  In some circumstances, goods may clear customs on 
execution of bonds or under duty deferment procedures.  US reply to Panel Question No. 12. WT/DS360/R 
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  agents.269  Furthermore, as imposed through CN 32/2003, the AD on alcoholic liquor took the form of 
either an ad valorem  duty or a specific duty.270 
7.247  Regarding whether the AD on alcoholic liquor was also applied "as a matter of course" on the 
importation of alcoholic liquor, we note India's argument that the AD is not levied on imports 
unconditionally.  Specifically, India stated that if domestically manufactured goods are not charged an 
excise duty, imported like products will also not be charged the AD.271  This statement appears to be 
consistent with the text of CN 32/2003 and the proviso  to Section 3(1) of the Customs Tariff Act, in 
that both refer to "the excise duty for the time bei ng leviable".  Moreover, the Supreme Court of India 
stated in  Hyderabad Industries Ltd. v. Union of India  that "[t]he levy of additional duty being with a 
view to provide for counter balancing the excise duty leviable, we are clearly of the opinion that 
additional duty can be levied only if on a like article excise duty could be levied".272  The Supreme 
Court's statement concerned the AD as it existed prior to the inclusion in Section 3(1) of the proviso 
regarding alcoholic liquor.  Section 3(1) at the time consisted of what  is now the opening paragraph of 
Section 3(1) and the Explanation.  However, we unde rstand that as of the date of establishment of the 
Panel, the opening paragraph of S ection 3(1) and the Explanation also applied to alcoholic liquor.273  
Moreover, the text of the opening paragraph and the proviso both contain the phrase "the excise duty 
for the time being leviable".  In view of these el ements, we see no reason to disagree with India's 
statement that the AD on alcoholic liquor can be levied only if on like domestically manufactured 
alcoholic liquor (or domestically manufactured alc oholic liquor of the same class or description) 
excise duty is leviable.  Accordingly, since the AD  on alcoholic liquor was being collected on the date 
of establishment of this Panel, it can be inferred th at, in the view of India's Central Government, the 
aforementioned condition for the levy of the AD was satis fied at the time.  In the light of this, as well 
as the characteristics of the AD on alcoholic liquor set out  at paras. 7.246 and 7.248, it seems to us to 
be correct for the United States to say that in resp ect of alcoholic liquor subject to the AD, the AD on 
alcoholic liquor was applied as a matter of course, and not on a case-by-case basis or in response to a 
singular or exceptional event or set of circumstances.   
7.248  Finally, as to whether the AD on alcoholic liquor was imposed "on the importation" of 
alcoholic liquor, we note India's assertion that  liability for the payment of the AD arises as a 
consequence of domestic like products being charge d an excise duty and not merely because the 
products are imported into India.  In our view, India's assertion does not adequately distinguish 
between what we see as two separ ate issues: (1) whether a particul ar good is liable to a duty (i.e., 
whether a duty is to be imposed in respect of a particular good) and (2) what is the event which 
triggers the liability to pay a duty that is to be im posed respect of a particular good (i.e., what is the 
taxable event).  We consider that the element of "on the importation" as it appears in Article II:1(b) 
and II:2, and also in the US definition of "ordin ary customs duties", goes to the second issue.  In 
relation to the AD, as discussed above, the evidence s uggests that it may be levied on alcoholic liquor 
only if State excise duty is leviable on like do mestically manufactured alcoholic liquor, or 
domestically manufactured alcoholic liquor of the same class or description.274  Where this condition 
is met, and the AD is imposed in respect of re levant alcoholic liquor, the event which in our 
                                                      
269 Ibid. 
270 Exhibit US-6. 
271 India's second oral statement, para. 3.5; India's comments on the US reply to Panel Question No. 43. 
272 Exhibit IND-11, para. 17.  We note, also with a view to further references by us to statutory 
interpretations by the Supreme Court of India, that India has stated that pursuant to Article 141 of the 
Constitution of India the law declared by the Supreme Court is  binding on all courts within the territory of India. 
273 India's replies to Panel Question Nos. 27(b), (c) an d (i).  The United States similarly considers that 
the opening paragraph of Section 3(1) requires the impos ition of the AD on alcoholic liquor (and all other 
imports).  US reply to Panel Question No. 11; US second written submission, paras. 84-85. 
274 It is not clear from the evidence before us whethe r it would be sufficient if one or more States, as 
opposed to all States, permitting the sale of alcoholic liquo r levied an excise duty on like alcoholic liquor or on 
alcoholic liquor of the same  class or description.  WT/DS360/R 
 Page 127 
 
 
  understanding triggers the liability to pay the AD is  the importation of the relevant alcoholic liquor.275  
Therefore, it seems to us that the United States is  correct in saying that the AD was a duty imposed 
"on the importation" of alcoholic liquor.  
7.249  Judging exclusively by the above characteristi cs of the AD on alcoholic liquor as in force on 
the date of establishment of this Panel, we would agree with the United States that the AD on 
alcoholic liquor could, in principle, have qualified as an "ordinary customs duty", or an "other duty or 
charge", within the meaning of Article II:1(b) .  However, these same characteristics are also 
consistent with India's view that the AD on alc oholic liquor qualified as a charge imposed on the 
importation of a product and equivalent to an inte rnal tax imposed in respect of the like domestic 
product within the meaning of Article II:2(a).  In this regard, to mention only a few elements276, the 
AD being a "duty" imposed on a product, it can be considered a "charge" imposed on a product as that term is used in Article II:2(a).  Also, as we have explained, the AD is a duty imposed "on the 
importation of a product".  And finally, as is already clear from its name, the AD is imposed in 
addition to India's basic customs duty (BCD) which the United States does not dispute is an "ordinary 
customs duty" within the meaning of Article II:1(b).
277  Article II:2 implies that Article II:2(a) charges 
may be imposed on a product subject to a tariff binding in addition to the ordinary customs duty 
levied on that product.278  
7.250  In response to a question from the Panel, I ndia has stated that the BCD, the AD and the 
SUAD are referred to in India as "duties of customs".279  India has explained that this reflects the fact 
that all three duties are authorized  by the same constitutional entry, Entry 83 of List I (Union List), 
which confers upon the Central Government the exclusiv e power to legislate with regard to "duties of 
customs".280  In our view, the fact that, for the purposes of Indian constitutional law, the AD 
constitutes a "duty of customs" does not imply that , for WTO purposes, it is an "ordinary customs 
duty", or an "other duty or charge", within the meaning of Article II:1(b).281  Moreover, we do not 
consider that the fact of describing the AD as a "dut y of customs" undermines India's view that it is an 
Article II:2(a) charge.  Article II:2(a), read together with the chapeau of Article II:2, refers to a charge 
imposed on the importation of a product and equivalent to an internal tax.  Hence, the border charge 
in question is not itself an internal tax, but merely equivalent to such a tax.  We therefore think that 
even as a "duty of customs" the AD on alcoholic liquor could qualify as a border charge equivalent to 
an internal tax within the meaning of Article II:2(a) .  Moreover, we are not troubled by the fact that 
India's basic customs duty (BCD), which we have  said may be considered, for WTO purposes, as an 
                                                      
275 As we have said, India has indicated that the AD is payable by the importer at the point and time of 
importation, and customs clearance is not granted until the AD has been paid. 
276 See also supra , paras. 7.153-7.155. 
277 The United States considers, however, that the BCD is not the only "ordinary customs duty" 
imposed by India. 
278 We note that since the AD on alcoholic liquor applies exclusively to imports, it is clear that it 
produces the same type of effect as the BCD.  However, Article II:2(a) charges by definition apply to imports 
only.  We also note in this context the European Co mmunities' allegation that the AD on alcoholic liquor was 
introduced on the same date India committed to eliminate the last quantitative restrictions judged WTO-
inconsistent in the dispute India – Quantitative Restrictions on Imports of Agricultural, Textile and Industrial 
Products (WT/DS90).  According to the European Communities, "it seems fair to assume" that the new measure 
was adopted to produce the same or similar effects as the measures just withdrawn, i.e., to limit imports of 
alcoholic liquor into India.  EC third party oral statement, para. 18.  We note in this regard the statement by the 
Appellate Body in Chile – Alcoholic Beverages  according to which "Members of the WTO should not be 
assumed, in any way, to have continued  previous protection or discrimination through the adoption of a new 
measure".  Appellate Body Report, Chile – Alcoholic Beverages , para. 74 (footnote omitted). 
279 India's reply to Panel Question No. 7. 
280 Ibid. 
281 We note, in this respect, the statement by the United States that, according to the GATT panel report 
on EEC – Parts and Components , the particular characterization of a measure under the domestic law of the 
responding party is not determinative of the proper characterization of that measure under WTO rules. WT/DS360/R 
Page 128 
 
 
  "ordinary customs duty", is also regarded, for the purposes of Indian constitutional law, as a "duty of 
customs".  Indeed, as we have said, it is not appare nt to us why an Article II:2(a) charge could not 
take the same form as an "ordinary customs duty", or an "other duty or charge".   
7.251  Consistently with the fact that the AD is c onsidered in India a "duty of customs", it is 
collected and administered by India's Customs au thorities pursuant to the provisions of India's 
Customs Act.282  In our view, this does not disqualify th e AD from being an Article II:2(a) charge.  
Since an Article II:2(a) charge is, by nature, a border charge, it seems quite natural that a Member 
might find it convenient to entrust its Customs author ities with the collection of such a charge and, to 
that end, would apply its Cust oms legislation as appropriate.  
7.252  Relying upon the fact that the AD is regarded as a "duty of customs", the United States asserts 
that Section 25 of the Customs Act is the legal authority used by India's Central Government to exempt imports from the BCD and/or the AD.  Section 25 empowers the Central Government to 
exempt goods "from the whole or any part of duty of  customs leviable thereon".  India contests this 
US assertion, arguing that the specific provision conf erring the power to exempt imports from the AD 
is Section 3(8) of the Customs Tariff Act.  Section 3(8) states that the provisi ons of the Customs Act, 
including those relating to exemption from duties – i.e ., Section 25 – "shall, so far as may be, apply" 
to the AD as they apply to duties leviable under the Cu stoms Act.  Thus, from the text of Section 3(8) 
it would appear that Section 3(8) renders applicable  to the AD, "so far as may be", the provisions of 
Section 25.  If this were a correct interpretation of  Section 3(8), it would be plausible to argue, as 
India does, that, but for Section 3(8), the provisions of Section 25 would not be available to exempt 
imports from the AD.  We note that unlike CN 82/2007, other customs notifications, including CN 
20/2006 or CN 102/2007, reference Section 25, but not Section 3(8).  In reply to a question from the 
Panel India stated that some customs notifications  refer to Section 25 only and that in those cases a 
reference to Section 3(8) is implicit, since, without it, the exemption mechanism provided for in 
Section 25 could not be invoked.  According to Indi a, the absence of a reference to Section 3(8) does 
not invalidate an exemption notification.
283 
7.253  Even if Section 3(8) did not have the legal significance ascribed to it by India and Section 25 
provided independent authority to exempt imports from the AD, contrary to what the United States 
suggests, this would not demonstrate that India's customs duty system regards both the BCD and the 
AD as "ordinary customs duties".  Rather, it would merely demonstrate that there exists a common 
exemption authority for different types of "duty of  customs", such as the BCD, the AD or the SUAD.  
Logically, this does not imply that, for the purpo ses of Indian law, the BCD, the AD and the SUAD 
are all considered charges of the same nature and serving the same purpose.  Indeed, Section 25 
makes clear that an exemption may be granted with regard to only a part of the "duty of customs" 
leviable on a good.  This appears to make it possible to grant an exemption from one type of "duty of 
customs" (e.g., the BCD), but not another (e.g., the AD).284      
7.254  Having regard to the description of the AD as a "duty of customs", the United States further 
asserts that the AD is required to be collected under the same provision of India's Customs legislation 
– Section 12(1) of the Customs Act – as the BCD.  Section 12(1) provides that "[e]xcept as otherwise 
provided in this Act, or any other law for the time be ing in force, duties of customs shall be levied at 
such rates as may be specified under [the Customs Ta riff Act], or any other law for the time being in 
                                                      
282 India's replies to Panel Question Nos. 5 and 12; Section 3(8) of the Customs Tariff Act. 
283 India's replies to Panel Question Nos. 39(a) and 27 (h).  In its reply to Panel Question No. 27(h), 
India stated that the Supr eme Court of India, in Assistant Commissioner , Commercial Taxes v. Dharmender 
Trading Co ., AIR 1988 SC 1247, held  that when the exercise of legislativ e power can be traced to a legitimate 
source, mere failure to mention it does not vitiate the exer cise of the power.  India has not submitted the text of 
the decision. 
284 Exhibits IND-13, paras. 14 and 18; IND-12.  WT/DS360/R 
 Page 129 
 
 
  force, on goods imported  into […] India".  Section 2 of the Customs Tariff Act provides that "[t]he 
rates at which duties of customs shall be levied unde r the Customs Act, 1962, are specified in the First 
and Second Schedules".  India argues that the United States' assertion regarding the statutory basis for 
the levy of the AD is incorrect as a matter of Indian law. 
7.255  It is important not to be misled, in construing Section 12(1), by the fact that Section 12(1) 
uses the term "duties of customs" and talks about rates being specified under the Customs Tariff Act.  
As was observed by the Supreme Court of India in Hyderabad Industries Ltd. v. Union of India , 
"[t]here are different types of customs duty levied under different acts or rules".285  The Supreme 
Court further stated that "there can be no manne r of doubt that additional duty which is levied under 
Section 3(1) of the Tariff Act is independent of th e customs duty which is levied under Section 12 of 
the Customs Act".286  Thus, even though both the BCD and the AD are "duties of customs" and the 
issue of the specification of rates is in both cases d ealt with in the Customs Tariff Act, the statutory 
basis for the levy of the BCD is Section 12(1) of th e Customs Act, whereas that for the levy of the AD 
is Section 3(1) of the Customs Tariff Act, a nd not, as the United States suggests based upon its own 
interpretation of Indian law, Section 12(1) of the Customs Act.  As a result, consideration of the 
statutory bases of the BCD and the AD does not bear out the United States' assertion that under India's 
customs duty regime both the BCD and the AD ar e regarded as "ordinary customs duties".  
7.256  The United States also points out that in accordance with Sectio n 3(2) of the Customs Tariff 
Act the AD on alcoholic liquor is to be calcu lated based upon the value of the imported good 
inclusive of the BCD.  India has said that the method of calculating the AD on alcoholic liquor is based upon that applied for excise duties.
287  In our understanding, it is not uncommon even in the 
case of ad valorem  internal taxes enforced and collected at  the point and time of importation to assess 
them on the basis of the duty-paid value of the imported good.288  In the light of this, we do not think 
that the fact that the AD on alcoholic liquor is levied based upon a value of the imported good which 
is defined to include the BCD indicates that the AD is itself an "ordinary customs duty" or an "other 
duty or charge".   
7.257  Another point clarified by India in response to  a question from the Panel is that the revenue 
collected by India's Customs authorities as a result of the levy of the AD on alcoholic liquor does not 
go to the States alone, but is distributed as between India's Central Government and the States in 
accordance with a revenue sharing formula.  The same applies to the BCD and the SUAD.289  As we 
see it, the fact that the Central Government does not  distribute to the States all of the revenues 
collected as a result of imposition of the AD on alcoholic liquor does not demonstrate that the AD is 
not a border charge equivalent to State-level internal  taxes.  Article II:2(a) does not speak to the issue 
of revenue distribution, and our interpretation of the term "equivalent" does not turn on how revenues 
collected are distributed.  Moreover, one reason for im posing an Article II:2(a) charge is to level the 
competitive playing field as between products being imported and like domestic products.  This can 
be achieved independently of the pa rticular revenue sharing formula that is adopted.  Therefore, we 
attach no particular importance to the fact that in terms of the distribution of revenues collected there 
is no difference between the AD and the BCD.   
                                                      
285 Exhibit IND-11, para. 14. 
286 Ibid., para. 17.  At para. 14, the Court provided  elaboration as follows:  "Merely because the 
incidence of tax under Section 3 of the Customs Tariff Ac t, 1975 arises on the import the articles into India it 
does not necessarily mean that the Customs Tariff Act cannot provide for the charging of a duty which is 
independent of the customs duty leviable under the Customs Act". 
287 India's reply to Panel Question No. 29.   
288 See also GATT Panel Report, Canada – Provincial Liquor Boards (US) , para. 5.25. 
289 India's replies to Panel Question Nos. 25 and 47(b)-(d). WT/DS360/R 
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  7.258  The foregoing analysis shows that even though the AD on alcoholic liquor met the elements 
of the US definition of "ordinary customs duties", this  is not sufficient, on its own, to establish that the 
AD on alcoholic liquor was an ordinary customs duty (or an "other duty or charge" imposed on the importation of alcoholic liquor) under Article II:1(b)  as opposed to a border charge equivalent to an 
internal tax under Article II:2(a).  This remains true  even if account is taken of the overall structure of 
India's customs duty and tax system, including su ch aspects as the domestic legal description of the 
AD as a "duty of customs", the role of India's Cu stoms authorities in the collection of the AD, the 
exemption mechanism established by Section 25 of th e Customs Act, the method of calculation of the 
AD and the distribution of the revenues collected as a result of imposition of the AD.       
7.259  As we have explained previously, under such circumstances, it is necessary for the United 
States to establish, in addition, that the AD on alc oholic liquor was of the same kind as, or in the 
nature of, an ordinary customs duty (or an "other duty or charge" imposed on the importation of 
alcoholic liquor).   
(b) Equivalence to internal taxes 
7.260  We have also indicated previously  that the United States can seek to establish by reference to 
the provisions of Article II:2 that the AD on alcoholic  liquor was in the nature of an ordinary customs 
duty (or an "other duty or charge" imposed on the impor tation of alcoholic liquor).  In this regard, the 
only category of Article II:2 charges discussed by th e Parties is that concerning charges imposed on 
the importation of a product and equivalent to inte rnal taxes imposed in respect of the like domestic 
product.   
7.261  As our analysis below amply demonstrates, this  case does indeed objectively present the issue 
whether the AD on alcoholic liquor was a charge equiva lent to an internal tax within the meaning of 
Article II:2(a), or to be more accurate, whether it was a charge equivalent to State-level internal taxes 
(excise duties).  In these conditions, if the United St ates as the complaining party cannot establish that 
the AD on alcoholic liquor was not equivalent to Stat e-level internal taxes imposed in respect of like 
domestic alcoholic liquor, it cannot successfully estab lish that the AD on alcoholic liquor was in the 
nature of an ordinary customs duty (or an "other  duty or charge" imposed on the importation of a 
good).
290  Accordingly, the issue we turn to examin e now is whether the United States has met its 
burden of establishing that the AD on alcoholic liquor  was not "equivalent" to State-level internal 
taxes on like domestic alcoholic liquor.291  
7.262  We first examine the particular features, stru cture and design of CN 32/2003.  CN 32/2003 
says the Central Government specified the rates of AD applicable to alcoholic liquor "having regard 
to the excise duties for the time being leviable on like alcoholic liquors produced or manufactured in 
different States, or the excise duties which would be leviable for the time being in different States on the class or description of alcoholic liquor, as th e case may be".  Thus, CN 32/2003 suggests that 
"excise duties" were in force at the time in diffe rent States of the Union and that such excise duties 
were imposed in respect of like alcoholic liquor  produced or manufactured in these States or in 
respect of domestic alcoholic liquor of the class or description of alcoholic liquor to which the 
imported alcoholic liquor belongs.
292  The passage quoted from CN 32/2003 further indicates that the 
                                                      
290 We have explained previously that if the United States could establish that the AD on alcoholic 
liquor was not an Article II:2(a) charge, we would need to examine what, if any, further demonstration would be 
required of it.    
291 We recall that, for the purposes of an Article II: 2(a) inquiry, "equivalence" is a necessary condition 
for the AD on alcoholic liquor to fa ll outside the scope of Article II:1. 
292 We note that there is a distinction to be made be tween India's 28 States an d the 7 Union Territories.  
In its reply to Panel Question No. 24, India indicates, however, that this distinction is not relevant to the 
resolution of any issue put before the Panel.  The United States has not claimed otherwise.  Accordingly, we will 
hereafter pay no further attention to this distinction.    WT/DS360/R 
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  Central Government set the rates of AD for alcohol ic liquor having regard to the State excise duties 
on domestic alcoholic liquor leviable at the time.   
7.263  We observe that CN 32/2003, on its face, points to the existence of a relationship between the 
AD on alcoholic liquor and State excise duties on alc oholic liquor.  In relation to these State excise 
duties on alcoholic liquor, we note that the Cons titution of India describes and characterizes State 
excise duties on alcoholic liquor as duties on goods manufactured or produced in the relevant State.293  
According to India, the taxable event from which lia bility to pay such a duty arises is the manufacture 
of the product.294  Evidence submitted by the United States rega rding the so-called central excise duty 
(i.e., the excise duty levied by the Central Governme nt of India on goods manufactured or produced in 
India other than, inter alia , alcoholic liquor) suggests that it applies to goods manufactured or 
produced in India upon their removal from the place of manufacture or production.295  Nevertheless, 
in response to a question from the Panel, the United States said that the reference in the proviso to 
Section 3(1) to "excise duties" appeared to be a re ference to internal taxes.   The United States further 
said that without knowing the details of these exci se duties, it could not make a determination that 
they constituted internal taxes within the meaning of Article III:2.296  In our assessment, the elements 
before us tend to support the view that the State ex cise duties on domestic alcoholic liquor referred to 
in CN 32/2003 and the proviso to Section 3(1) ar e imposed in respect of domestic goods – alcoholic 
liquor manufactured or produced in the relevant State.  However, in view of the particular 
circumstances297, we deem it appropriate to suspend our analys is of this issue for the time being and to 
conduct our "equivalence" inquiry on the assumption that the State excise duties on alcoholic liquor 
may be regarded as internal tax es imposed in respect of a domestic product, as contemplated in 
Article II:2(a).   
7.264  As to whether the alcoholic liquor subject to the AD was "like"298 domestic alcoholic liquor 
subject to State excise duties, we note that the Par ties have been arguing or assuming that this is the 
case.299  Since the Parties did not treat this as an issue of particular interest or concern and there is 
little relevant information on the record, in relation to  this issue as well we consider it appropriate to 
suspend our analysis for the time being and to conduct the present "equivalence" inquiry on the 
assumption that the alcoholic liquor subject to the AD was "like" domestic alcoholic liquor subject to State excise duties.  
7.265  The United States notes that CN 32/2003 does not identify any State excise duties to which 
the AD relates.  However, Article II:2(a) requires that a border charge imposed on a product being 
imported be equivalent to an internal tax imposed in  respect of the like domestic product.  It contains 
no requirement specifically to identify the relevant internal tax by name, date of publication, etc.
300  
                                                      
293 Entry 51 of List II of the Constitution of India, quoted in India's reply to Panel Question No. 26. 
294 India's reply to Panel Question No. 36. 
295 Exhibit US-21; US reply to Panel Question No. 12.  This seems relevant in view of the similar 
language of the provisions of the Constitution of India authorizing the making of laws concerning State excise 
duties and the central excise duty.  Entr y 84 of List I of the Constitution refers  to "[d]uties of excise on tobacco 
and other goods manufactured or produced in India except", inter alia , alcoholic liquor for human consumption.  
Entry 51 of List II of the Constitution refers to "[d]uties of excise on the following goods manufactured or 
produced in the State", including on alcoholic liquor for human consumption.  
296 US reply to Panel Question No. 19. 
297 The record contains little evidence on the issue, wh ich reflects the fact that neither Party paid much 
attention to it.       
298 Article II:2(a) uses the phrase "like domestic product". 
299 US second written submission, para. 30 (assuming " likeness" and noting, in addition, that the Panel 
need not reach the issue); India's firs t written submission, para. 84 (arguing "likeness" for SUAD, but addressing 
also alcoholic liquor). 
300 The fact that it is not a requir ement does not mean that it would no t be desirable for a Member, as a 
matter of good practice, specifically to identify the relevant internal tax. WT/DS360/R 
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  At any rate, it is clear to us from the text of CN  32/2003, particularly when read together with the 
proviso to Section 3(1) of the Customs Tariff Act, that the State excise duties on alcoholic liquor to 
which CN 32/2003 refers are those in force at the tim e in the different States of the Union.  In other 
words, they comprise the excise duties of all tho se States which levied such duties on alcoholic liquor 
at the time.301  Also, as we have just mentioned, the C onstitution of India explicitly refers to, and 
explains, the concept of State excise duties on al coholic liquor.  Based upon these elements, we think 
that the relevant State excise duties referred to in CN 32/2003 are, in principle, identifiable.302   
7.266  The United States further points out that CN 32/2003 does not indicate how the rates of AD 
specified by the Central Government "have regard" to  the excise duties levied by the States.  It is 
useful to deal with this point after we have cons idered relevant provisions of Section 3(1) of the 
Customs Tariff Act pertaining to the AD on alcoholic li quor.  We note in this respect the statement in 
CN 32/2003 to the effect that the rates of AD were specified by the Central G overnment "[i]n exercise 
of the powers conferred by the proviso to sub-sec tion (1) of Section 3 of the Customs Tariff Act, 
1975".  In view of the fact that there is a clear and direct link between CN 32/2003 and the proviso to section 3(1) of the Customs Tariff Act, the proviso is relevant to an assessment of whether the AD on 
alcoholic liquor was equivalent to State excise duti es imposed in respect of domestic alcoholic liquor. 
7.267  We recall that the proviso to Section 3(1) reads:  
"Provided that in case of any alcoholic li quor for human consumption imported into 
India, the Central Government may, by no tification in the Official Gazette, specify 
the rate of additional duty having regard to the excise duty for the time being leviable on a like alcoholic liquor produced or manufactured in different States or, if a like 
alcoholic liquor is not produced or manufactured in any State, then, having regard to 
the excise duty which would be leviable for the time being in different States on the class or description of alcoholic liquor to which such imported alcoholic liquor 
belongs."  
 
7.268  Concerning the proviso's phrase "having regard to ", India has explained that it "addresses the 
specific situation of alcoholic liquor where different  States levy varying rates of excise duty and the 
Central Government is [therefore] unable to fix a si ngle rate of AD which is 'equal to the excise duty' 
[as is contemplated in the introductory paragraph of Section 3(1) for products imported into India 
other than alcoholic liquor and in respect of whic h the like domestic product is subject to an excise 
duty levied by the Central Government (the Central Excise Tax)]".
303  India further stated that the 
proviso "requires the Central Government to cons ider the varying rates of State excise duties 
pertaining to alcoholic liquor before fixing the rate  of AD, but does not make it mandatory to adopt 
any one single rate – this continues to be left  to the discretion of the Central Government".304  Finally, 
India observed that the proviso "does not require a correlation between the methodology for the 
calculation of the AD and the respective State excise duties" due to "the inherent difficulties in using 
the same methodology when different States have different rates of excise duties for alcoholic 
liquor".305 
                                                      
301 India's reply to Panel Question No. 8(a) suggests that some States do not permit the sale of domestic 
alcoholic liquor.  It is uncl ear from India's reply whether these States  permit the sale of imported alcoholic 
liquor. 
302 We note in this respect that the United States is not alleging that India is in breach of its obligations 
of Article X:1 of the GATT 1994 on publication of trade regulations. 
303 India's reply to Panel Question No. 27(d). 
304 Ibid. 
305 Ibid. (corrected for typographical error).  WT/DS360/R 
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  7.269  With these explanations in mind, we now return to the point raised by the United States that 
CN 32/2003 does not indicate how the Central Governme nt had regard to State excise duties when it 
specified the rates of AD for alcoholic liquor.  Indi a has addressed the specific point raised by the 
United States in response to a question from the Panel.  India stated that the rates of AD specified in 
CN 32/2003 are the result of "a process of averaging,  whereby the Central Government tried to ensure 
that to the extent possible, the rate was a reasona ble representation of the net fiscal burden imposed on 
like domestic products on account of the excise duty payable on alcoholic liquor".306  India went on to 
observe that the Central Government "also noticed  that the fiscal burden imposed on lower-priced 
alcoholic liquor, which accounts for a majority of sales in the domestic market, was higher than that 
imposed on higher priced alcoholic liquor" and that , consequently, it was decided "to divide the rate 
into four ad valorem  rates and impose these rates as the additional duty on alcoholic liquor through … 
CN 32/2003".307  Finally, India stated that "[w]hile it is po ssible that in some States and in some price 
bands, the AD imposed [through CN 32/2003] on importe d products may be marginally in 'excess of' 
the excise duty imposed on like domestic products in that State, it is equally likely that the AD is less than the State excise duty in some other States".
308   
7.270  The first point we wish to make in response to  the above is that, by itself, the fact that 
CN 32/2003 does not say how the Central Government "had regard" to State excise duties does not mean that the AD on alcoholic liquor is not equi valent to State-level excise duties on domestic 
alcoholic liquor.  We see no requirement in Article  II:2(a) that a Member imposing a border charge 
equivalent to an internal tax needs explicitly to state, either in the measure establishing the border 
charge or that establishing the corresponding internal  tax, why and how either is equivalent to the 
other.
309   
7.271  As to whether the rates specified in CN 32/ 2003 indicate that the AD on alcoholic liquor is 
not equivalent to State-level excise duties on domest ic alcoholic liquor, we should make clear at the 
outset that neither the United States nor India has supplied specific information about excise duties 
actually levied by different States on alcoholic liquor.310  This said, it is clear from India's Constitution 
that the States are empowered to levy excise du ties on alcoholic liquor manufactured or produced in 
the relevant State.311  Since there do not appear to exist any harmonization measures, it is also clear 
that the structure and level of these ex cise duties may vary from State to State.312  India has asserted in 
response to a question that, at the time of the Panel' s establishment, all States that permitted the sale of 
                                                      
306 India's reply to Panel Question No. 28.  India has not provided further particulars in support of its 
statement. 
307 Ibid.  India has provided no information regarding the fiscal burden imposed in different States on, 
respectively, low- and high-pri ced domestic alcoholic liquor. 
308 Ibid.; India's reply to Panel Question No. 8(c).  We note that the quoted statement seems consistent 
with India's argument that in cases wh ere the rates of excise duty in eac h State vary, the Central Government 
need not specify the rate of AD at the highest excise duty rate. 
309 We do not understand the United States to say otherwise.  However, we do not wish to suggest that 
it would not be desirable for a Member, as a matter of good practice, to provide an ex ante  explanation. 
310 After the second substantive meeting with the Par ties, the Panel, in a written question, requested 
India to identify relevant State excise duties and any differ ences in terms of the form of taxation, applicable duty 
rates, etc.  India did not respond to the Panel's question.  Regrettable as this is, we note that we put the question 
to India in an effort at obtaining more background information that could have helped us in our internal 
deliberations.  Also, some of the information might have enabled us to verify certain assertions by India in case 
this would have proved necessary.  As is clear from our findings, however, we have been able to dispose of the 
US claim under Article II:1(b) without the information in question.  We have, therefore, refrained from pursuing 
our question. 
311 Entry 51 of List II of the Constitution of India. 
312 We note that this can also be in ferred from the text of the provis o to Section 3(1) of the Customs 
Tariff Act. WT/DS360/R 
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  alcoholic liquor levied an excise duty on alcoholic liquor subject to the AD.313  India further stated 
that the excise duties levied by  the States did, indeed, vary.314   
7.272  Although we have no information on specific State excise duties, it is possible, and useful, to 
offer some observations regarding the rates of AD specified in CN 32/2003, based upon the 
explanations India has provided.  To begin with, Indi a has stated that the proviso to Section 3(1) does 
not require any correlation between the methodology for the calculation of the AD and that for the 
calculation of the respective State excise duties.  It  appears that, in essence, the point India intends to 
convey in referring to methodologies for calculation is that, irrespectively of what individual States 
may do in relation to their excise duties on al coholic liquor, the provi so leaves the Central 
Government free to decide, e.g., whether to impose the AD on alcoholic liquor in the form of an 
ad valorem  duty, a specific duty or a combination of both.  As we have already pointed out, the rates 
of AD specified in CN 32/2003 take the form of either ad valorem  duties or specific duties.  Similarly, 
we note that CN 32/2003 creates different price bands and different rates of AD corresponding to 
these bands.   
7.273  In our view, even if, as appears possible, the form ( ad valorem  vs. specific duties, etc.) and 
structure of the rates of AD for alcoholic liquor were  different from the form and structure of the rates 
of State excise duties on alcoholic liquor, this would not demonstrate that the AD on alcoholic liquor was not equivalent to State excise duties on domestic  alcoholic liquor.  The concept of "equivalence" 
as it appears in Article II:2(a) does not imply that a bo rder charge and an internal tax need to have the 
same form ( ad valorem  vs. specific duties, etc.) and/or rate structure.
315  Rather, it implies that they 
need to have the same function of imposing a charge on a product qua product.  We do not see why a 
border charge and an internal tax having a different form ( ad valorem  vs. specific duties, etc.) and/or 
rate structure could not nonetheless fulfil the same relative function within the customs duty and tax system of the Member concerned.   
7.274  We also wish to comment upon India's stat ement that the rates of AD specified in 
CN 32/2003 reflect a process of averaging.  As expl ained by India, its attempt at averaging in a 
context of State excise duties leviable at different  rates could have meant that the rate of AD for 
alcoholic liquor exceeded the rate of excise duty appl icable to like domestic alcoholic liquor in some 
States and in some price bands (or, more generally , that the tax burden as a result of imposition of the 
AD on alcoholic liquor exceeded the tax burden as a resu lt of imposition of a particular State excise 
duty on like alcoholic liquor manufactured or produced  in the State).  If that was the case, and India 
explicitly acknowledged that this was a possible c onsequence of CN 32/2003,  it would nevertheless 
                                                     
 
313 India's reply to Panel Question 8(a).  India has not provided any supporting evidence.  At the same 
time, we note that the United States has not asserted otherw ise or provided evidence to the contrary.  In contrast, 
the European Communities as a third party asserts that not all Indian States appl y taxes on alcoholic liquor 
under the denomination "excise duty".  It refers to De lhi for wines and spirits, and Maharashtra as regards 
wines.  EC third party written submission, para. 20.  Neither Party has commented or relied upon this EC 
assertion.  As the European Communities has not substant iated its assertion through documents, information or 
detailed explanation, we are not in a position to determine whether the European Communities is correct in 
asserting that the States in question do not levy any excise  duty on specified alcoholic liquor.  Also, as noted by 
the European Communities itself at para. 19 of its submission, the denominations of State taxes may vary from 
State to State.  In these circumstances, just like we can on ly note India's assertion that all States did levy excise 
duties on alcoholic liquor, so also we can only note the EC assertion to the contrary. 
314 India's reply to Panel Question 8(b).  The United States relied upon this reply by India.  US second 
written submission, note 58. 
315 Indeed, if it were otherwise, a Member could not, e.g., use a price band to apply an additional and 
preferential rate (e.g., 2 per cent ad valorem ) to products being imported while applying a general rate (e.g., 6 
per cent ad valorem ) to all like domestic products and to products being imported that do not qualify for the 
preferential rate.  We do not consider that the terms of  Article II:2(a) are intended to prevent a trade-creating 
rate structure of this type.    WT/DS360/R 
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  not demonstrate, for the reasons  we have articulated earlier316, that the AD on alcoholic liquor and the 
State excise duties did not fulfil the same relative f unction within India's customs duty and tax system.  
Instead, the existence of a rate differential (or,  more generally, of a tax burden differential) 
disfavouring alcoholic liquor being imported may merely indicate that the AD on alcoholic liquor and 
the State excise duties fulfilled the function of imposing a charge on alcoholic liquor qua alcoholic 
liquor in a different manner, with the consequence that, in some States and circumstances, alcoholic 
liquor being imported was treated less favourably than the like domestic product.317   
7.275  Before proceeding to consider the purpose of th e AD on alcoholic liquor it is appropriate to 
call attention to a feature of CN 32/2003 that neither Party specifically commented upon.  As we 
understand it, pursuant to CN 32/2003, the AD on alc oholic liquor was imposed on the importation of 
specified alcoholic liquor apparently without regard  for where in India, and, specifically, in which 
State, it would be finally consumed.318  To our minds, if it was the case that the AD was being 
imposed, pursuant to CN 32/2003, on alcoholic liquor destined for consumption in a State where no 
excise duty was leviable on like alcoholic liquor, this  would present the issue whether in respect of 
alcoholic liquor destined for consumption in that  State, the AD was "equivalent" to a State-level 
excise duty.  However, as previously noted and as further addressed below, it is not clear from the 
record whether on the date of establishment of the Panel there were States that permitted the sale of 
alcoholic liquor but did not levy an excise duty on alcoholic liquor subject to the AD.  
7.276  Having regard to our considerations so far, it can  thus be said that the particular features and 
structure of CN 32/2003, including the fact that, on its face, it points to a relationship with State 
excise duties, the form and structure of the rates it sp ecifies, and the fact that it applies to imports of 
alcoholic liquor without apparent regard for its final destination in India, sup port or at least are not 
inconsistent with India's position that the AD on al coholic liquor was "equivalent" to State excise 
duties.   
7.277  Turning now to examine the design, or purpose, of the measure at issue, we note the United 
States' argument that the proviso's phrase "having re gard to the excise duty for the time being leviable 
on like alcoholic liquor produced or manufactured in different States" does not change the 
appropriateness of characterizing the AD on alcoholic liquor as an ordinary customs duty, because, in 
its view, the purpose or intent a Member attributes to a duty is not determinative.  Otherwise, the 
United States maintains, a Member could avoid the commitments made in its Schedule simply by 
attributing an appropriate purpose to the duty.319  In considering this argument, we note, as an initial 
matter, that the phrase referred to by the United St ates does not actually state the purpose of the AD 
on alcoholic liquor.  Rather, as stated by India, it directs the Central Government to take account of 
State excise duties when exercising its right to set the rate of AD for alcoholic liquor.320 
7.278  Nonetheless, we consider that the phrase in question is consistent with India's view321 that the 
AD on alcoholic liquor is designed to offset State ex cise duties levied on alco holic liquor produced or 
                                                      
316 See supra , para. 7.192-7.193. 
317 Ibid. 
318 CN 32/2003 applies to alcoholic liquor for human consumption.  See the proviso to Section 3(1) of 
the Customs Tariff Act.  We also note that as of the date of establishment of the Panel no exemptions had been 
granted from the AD as imposed through CN 32/2003. 
319 In support of its argument, the United States refers to the GATT Panel Report on EEC – Parts and 
Components , para. 5.7.   
320 To that extent, the proviso does not appear to constitute an example of a case where a Member's 
statute attributes to a duty a particular purpose or intent.  At any rate, we would agree that the purpose stated in a 
Member's legislation is not determinative, by itself, fo r WTO purposes.  Nevertheless, it is a relevant factual 
element which we may consider together with others in coming to an overall conclusion on the issue of 
"equivalence". 
321 India's reply to Panel Question No. 27(d). WT/DS360/R 
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  manufactured in the States.322  To us, this seems to be a natural and plausible explanation of why the 
Central Government is to have regard to Stat e excise duties when specify ing the rate of AD for 
alcoholic liquor.  However, from the text of the pr oviso it is not clear to us whether the AD may be 
imposed on alcoholic liquor imported into India onl y in cases where an excise duty is for the time 
being leviable on like domestic alcoholic liquor in all States permitting the sale of the alcoholic liquor 
in question, or whether it would be sufficient that an excise duty is leviable in only some States 
permitting its sale.323  Regarding the second hypothesis, it is pertinent to note that pursuant to 
Section 3(8) of the Customs Tariff Act in conjuncti on with Section 25 of the Customs Act the Central 
Government appears to have the power to grant ex emptions from the levy of the AD subject to such 
conditions (to be fulfilled before or after custom s clearance) as it may sp ecify in the exemption 
notification.324  Thus, it seems to us that even if the proviso authorized, or required, the Central 
Government to impose the AD in cases where an ex cise duty is leviable in only some States 
permitting the sale of alcoholic liquor, it is not clear that the Central Governme nt would be required to 
impose it on all alcoholic liquor imported into India, i rrespective of its final destination.  In the light 
of this, and in the absence of evidence to the contrary, we see no reason to consider that the AD on 
alcoholic liquor, as designed, necessarily " overshoots" in certain circumstances. 
7.279  In support of its view regarding the design of the AD on alcoholic liquor, India has referred to 
the following statement offered by the S upreme Court of India in its decision in Hyderabad Industries 
Ltd. v. Union of India :325  
"Even though the impost under Section 3 [of the Customs Tariff Act] is not called a 
countervailing duty there can be little doubt that  this levy under Section 3 is with a 
view to levy additional duty on an imported article so as to coun terbalance the excise 
duty leviable on the like article indigenously made."   
7.280  Although this statement concerns an earlier version of Section 3(1) which did not include the 
current proviso relating to alcoholic liquor, we consid er that it is relevant also to the AD on alcoholic 
liquor as contemplated in the proviso.326  To begin with, the proviso was incorporated into, and thus 
forms an integral part of, Section 3(1).  Furtherm ore, the principal change effected by the proviso 
relates to the rate of AD to be applied.  The openi ng paragraph stipulates that for products other than 
alcoholic liquor the AD is to be equal to the ex cise duty (central excise tax), whereas the proviso 
stipulates that for alcoholic liquor the rate must have  regard to the excise duty in different States.  We 
fail to see in this difference regarding the rate of AD to be applied any indication that India's 
                                                      
322 In our view, the fact that, as pointed out by India in reply to Panel Question No. 28, the proviso 
allows the Central Government to set the rate of AD in  a manner that results in the rate exceeding the excise 
duty leviable in some States and being lower than the excise duty leviable in other States does not imply that it 
is designed to accomplish something othe r than offsetting State excise duties.   Setting the AD rate based upon a 
determination of some kind of average State excise duty is one way of offsetting such duties.    
323 We note that neither Party has addressed this issue.   
324 The power to grant exemptions appears to include the power to grant a refund of a duty already 
paid.  See the decision by th e Supreme Court of India in Assistant Commissioner of Commercial Taxes (Asst.) 
Dharwar and Ors. vs. Dharmendra Trading Company and Ors ., at para. 8 (Exhibit IND-20), and CN 102/2007 
which references Section 25 and provides for the possibility  of obtaining a refund of the SUAD paid in specified 
circumstances. 
325 Exhibit IND-11, para. 15. 
326 As a separate matter, we note that the Supreme Court of India is an independent branch of the 
Central Government of India (Exhibit IND-9).    WT/DS360/R 
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  legislature intended for the AD on alcoholic liquor to have a purpose different from that of the AD on 
other products.327   
7.281  In sum, having regard to the issue of the d esign of the AD on alcoholic liquor, we think the 
text of the proviso, the above-quoted statement by the Supreme Court of India as well as the 
previously discussed condition that the AD is to be le vied on alcoholic liquor only if on like alcoholic 
liquor (or alcoholic liquor of the same class or descri ption) excise duty is leviable are all consistent 
with India's view that the AD on alcoholic liquor as contemplated in the proviso to Section 3(1) is 
designed to counterbalance State excise duties.  More over, it does not appear to us to be the case that 
the AD on alcoholic liquor, as designed, necessar ily "overshoots" in certain circumstances.328  If, as 
argued by India, the AD on alcoholic liquor was designed to counterbalance State excise duties on 
like domestic alcoholic liquor, this would in our view support the inference that it was designed to impose a charge on alcoholic liquor imported into India qua alcoholic liquor, and not qua alcoholic 
liquor being imported.   
7.282  As to what this means for the AD on alcoholic liquor, as actually imposed through 
CN 32/2003, we recall that the proviso to Section 3(1) is the statutory basis upon which CN 32/2003 
was issued, that CN 32/2003 explicitly states that the Central Government had regard to the excise 
duties leviable in different States, as required by the proviso
329, and that there is no indication that the 
consistency of CN 32/2003 with the pr oviso was ever questioned in India330.  To that extent, there is 
no reason to think, based upon CN 32/2003 and its stat utory basis, that the AD on alcoholic liquor 
could not be designed to counterbalance State excise duties, as argued by India.  Or to put it another way, the aforementioned elements do not contradi ct the view that the function which the AD on 
alcoholic liquor was designed to fulfil was to impos e a charge on alcoholic liquor imported into India 
qua alcoholic liquor.   
7.283  Nevertheless, the design of the AD on alc oholic liquor could not, in any event, be 
determinative, on its own, of whet her it was equivalent to State excise duties.  As we have pointed 
out, the outcome of an "equivalence" inquiry unde r Article II:2(a) is cont ext-dependent.  Depending 
on the context, one and the same border charge may be  equivalent, or not equivalent, to an internal 
tax.  As a result, we also need to examine the AD on alcoholic liquor in its relevant context.   
7.284  We turn first to the legal context within wh ich the AD on alcoholic liquor operated, i.e., the 
legal structure of India's customs duty and tax sy stem.  Indeed, the AD on alcoholic liquor did not 
operate within a vacuum, but formed part of, an d was embedded in, the legal framework of India's 
customs duty and tax system.  We commence our review  of the relevant legal context with the State 
excise duties on alcoholic liquor.  As we have indicated previously, the Constitution of India 
empowers the States to impose "duties of excise" on alcoholic liquor manufactured or produced in the 
State.
331  In addition, the same entry of th e Constitution empowers the States to impose 
"countervailing duties" on alcoholic liquor manufact ured or produced elsewhere in India.  The 
relevant entry is silent on the issue of the power s of State Governments in respect of imposition of 
excise duties or countervailing duties on imported alc oholic liquor.  However, India has told the Panel 
                                                      
327 To recall India's explanation: "The proviso to Section 3(1) addresses the specific situation of 
alcoholic liquor where different States le vy varying rates of excise duty and the Central Government is unable to 
fix a single rate of AD which is 'equal to the excise duty'".  India's reply to Panel Question No. 27(d). 
328 In the light of these elements as well as in vi ew of our consideration below of the legal context 
within which the AD on alcoholic liquor operates, there is no apparent reason to be concerned that the relevant 
phrase in the proviso is designed  to conceal the true nature of the AD on alcoho lic liquor.   
329 We also recall in this regard the further explanations provided by India in response to Panel 
Question No. 28. 
330 In the context of the present pr oceedings, the United States has not, itself, alleged that CN 32/2003 
is not properly based on the proviso to Section 3(1). 
331 Entry 51 of List II of the Constitution of India.   WT/DS360/R 
Page 138 
 
 
  that its Constitution adopts a positive list approach  according to which the Central Government and 
the State Governments are to exercise their powers strictly in accordance with  their respective lists.332  
Thus, since the aforementioned relevant entry of the State List does not confer upon State Governments the power to impose excise duties,  or countervailing duties, on alcoholic liquor 
imported into India, and such power does not app ear to be conferred elsewhere, it seems the State 
Governments lack the power to impose excise duti es or countervailing duties on alcoholic liquor not 
manufactured or produced in the State or elsewhere in India.
333     
7.285  Given the lack of powers of State Governments in respect of imposition of excise duties or 
countervailing duties on alcoholic liquor not manufactured or produced in the State or elsewhere in 
India334, it is not unreasonable that India's customs duty and tax system, as it existed on the date of 
establishment of this Panel, would provide for so me form and measure of compensatory taxation of 
imported alcoholic liquor.  In this regard, we firs t note that the Constitution of India authorizes the 
Central Government to impose "duties of exci se" on goods, but only on "goods manufactured or 
produced in India".335  Moreover, the relevant provision exp licitly states that the Central Government 
is not authorized to impose duties of excise on al coholic liquor.  In other words, the Constitution 
reserves to State Governments the right to impose excise duties on alcoholic liquor.336  And, at any 
rate, the Central Government can impose excise du ties only on goods manufactured or produced in 
India.   
7.286  However, as we have seen, the Constitution of India authorizes the Central Government, and 
it alone, to impose "duties of customs".337  India has explained that the term "duties of customs" 
encompasses the BCD, the AD and the SUAD.  The Pa rties have not specifically discussed any other 
"duties of customs" that would be applicable to alc oholic liquor.  In view of the fact that the Central 
Government does not have the authority, under India's Constitution, to impose excise duties on 
alcoholic liquor imported into India, it seems natural that it might possibly wish to use a "duty of 
customs" in order to counterbalance State excise du ties.  In this regard, it is common ground in this 
case that the BCD, which is also applied to alcoholic  liquor, is an "ordinary customs duty" within the 
meaning of Article II:1(b).338  As such, in relation to alcoholic liquor, as in relation to any other 
products on which it is imposed, it has the func tion of imposing a charge on the subject product qua 
product being imported into India.  Put differently, it is not imposed to counterbalance State excise 
duties.  The SUAD is imposed pursuant to Section 3( 5) of the Customs Tariff Act to "counter-balance 
the sales tax, value added tax, local tax or any other charges" leviable on the sale, purchase or 
transportation of domestic products.  India has explai ned that the categories of charges enumerated in 
Section 3(5) do not overlap with the category of excise duties mentioned in the proviso to 
Section 3(1).339  Thus, the SUAD does not purport to counterbalance State excise duties on alcoholic 
liquor.  Consequently, the "duty of customs" that is le ft to achieve this purpose is the AD.  As we have 
previously seen, the AD has a statutory basis that  is different from that of the BCD, which is 
consistent with the view that it fulfils a different  function within India's customs duty and tax system, 
namely, in relation to alcoholic liquor, the f unction of imposing a charge on alcoholic liquor qua 
alcoholic liquor. 
                                                      
332 India's reply to Panel Question No. 48(d).  As part of the same reply, India also explained that it has 
a system of judicial review whereby the exercise of by the Central Government and State Governments of their 
respective powers under the positive lists is subject to judicial scrutiny. 
333 India's reply to Panel Question No. 48(c). 
334 Ibid. 
335 Entry 84 of List I of the Constitution of India. 
336 India's replies to Panel Question Nos. 30(a) and (b). 
337 Entry 83 of List I of the Constitution of India.   
338 India's first written submission, para. 12; US second written submission, paras. 8, 10 and 16. 
339 India's reply to Panel Question No. 27(e).  WT/DS360/R 
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  7.287  We note that the State List of the Constitution of India confers upon State Governments 
exclusive power with regard to "[i]ntoxicating liq uors, that is to say, the production, manufacture, 
possession, transport, purchase and sale of intoxicating liquors".340  Furthermore, the Constitution of 
India grants the State Governments exclusive power with regard to "[f]ees in respect of any of the 
matters in this List [the State List], but not including fees taken in any court".341  Hence, it may be the 
case that the State Governments have the power to impose fees on, e.g., the transport of intoxicating 
liquor.  We note, however, that neither Party has ex plained the concept of "fees" as it appears, inter 
alia, in the State List and how it relates to other relevant concepts appearing in that List, such as 
"duties of excise" and "taxes".342  Nor have we been provided with any example of a State measure 
imposing a fee on imported alcoholic liquor in lieu of  State excise duties.  Based upon the information 
on the record it is not clear to us whether, as a matt er of Indian law or as a practical matter, fees could 
be used by State Governments to counterbalan ce State excise duties imposed on alcoholic liquor 
manufactured or produced in the relevant State.343   
7.288  Even if fees could, in principle, be so used (and we recall that we have seen no example 
documenting this), it seems to us that a "duty of cu stoms" like the AD fits more naturally with the 
provisions of Entry 51 of the State List which deals with State "excise duties" and "countervailing 
duties".  To recall, in a case involving alcoholic  liquor, States may in accordance with Entry 51 
impose excise duties only on alc oholic liquor manufactured or produced in the State and 
countervailing duties only on alcoholic liquor manufact ured or produced elsewhere in India.  Given 
this, it seems natural, having regard  to alcoholic liquor manufactured or produced outside India, to 
counterbalance State excise duties by using a "dut y of customs" like the AD, since "duties of 
customs" are by definition imposed only on goods im ported into India.  In contrast, there is no 
indication in the relevant List s of the Constitution that "fees"  are by definition imposed only on 
imported goods.  Moreover, if fees were the more  obvious and natural inst rument to use for the 
purpose of counterbalancing State excise duties, it is not easy to see why Entry 51 contemplates 
countervailing duties imposed at the same or lower rates as excise duties, and not fees, since States 
imposing excise duties on alcoholic liquor would then  typically impose "fees" on out-of-State Indian 
alcoholic liquor.344   
7.289  In the light of the above, the legal framework  of India's customs duty and tax system, as 
described above, is not inconsistent with India' s position that the AD on alcoholic liquor was designed 
to counterbalance excise duties imposed by States pe rmitting the sale of alcoholic liquor.  Simply put, 
                                                      
340 Entry 8 of List II of the Constitution of India. 
341 Entry 66 of List II of the Constitution of India. 
342 The term "fee" is commonly used to denote charge s payable in return for services.  See, e.g., 
Articles II:2(c) and VIII of the GATT 1994.  Thus, in relation, for instance, to the "production", "manufacture", 
"purchase" or "sale" of alcoholic liquo r, the term "fees" as it appears in Entry 66 could be referring to licensing 
fees.  
343 For instance, it is not clear from the record whether the Constitution of India would permit the 
imposition by a State Government of a fee that discriminates against imported alcoholic liquor and whether a 
fee imposed by a State Government on imported alcoholic liquor could be properly compared, not to a fee, but 
an excise duty imposed on alcoholic liquor manufactured or  produced in the relevant St ate.  We recall in this 
context that it is not clear whether Entry 66 of List II us es the term "fee" to denote service charges or whether it 
uses the term in a broader sense. 
344 We note, as a separate and additional matter, the United States' comment that it is not clear that the 
State Governments lack the power to impose excise taxes on the consumption of imported alcoholic liquor.  
However, the United States has failed to identify any en try in the State or Concurrent List authorizing the 
imposition of this type of tax.  Nor has the United States cited an example of a State excise tax on the 
consumption of imported alcoholic liquor, imposed in lieu of an "excise duty" imposed on State-manufactured 
alcoholic liquor.  As we will explai n in more detail in our analysis below of the SUAD , alcoholic liquor, 
whether imported or domestically produced, may, like other products, be subject to the Central Sales Tax, a 
State sales tax, etc.  However, these taxes are not exci se taxes, nor is there any information on the record to 
suggest that they are imposed to counterbalance State "excise duties" on alcoholic liquor.    WT/DS360/R 
Page 140 
 
 
  the relevant States cannot impose excise duties on im ported alcoholic liquor, and it appears that the 
Central Government can only counterbalance State excise duties on alcoholic liquor by means of a 
"duty of customs".  Moreover, the record does not indicate that there is another "duty of customs" 
applicable to alcoholic liquor designed to counterba lance State excise duties, or that there are other 
taxes or charges imposed by State Governments th at could be said to counterbalance State excise 
duties with regard to alcoholic liquor imported into I ndia.  It is true that the States are not legally 
required to impose excise duties.  The lack of  a requirement to impose excise duties does not, 
however, give rise to a presumption that the Stat es permitting the sale of alcoholic liquor would not 
actually impose such duties.   
7.290  If all States permitting the sale of alcoholic liq uor levied an excise duty on alcoholic liquor 
subject to the AD, and if the States levied exci se duties on alcoholic liquor as envisaged in India's 
Constitution (and so did not impose them on imported alcoholic liquor),345 the legal framework 
described above also supports the view that the AD on alcoholic liquor and the State excise duties on 
alcoholic liquor fulfilled the same relative function within India's customs duty and tax system.  To 
begin with, it is clear that, under the legal framework in existence at the time  of establishment of the 
Panel, the AD constituted a charge on alcoholic liquo r imported into India, whereas the State excise 
duties referred to in CN 32/2003 and the proviso to Section 3(1) constituted charges on alcoholic 
liquor produced or manufactured in the State imposing the duty.  Moreover, to the extent all States 
permitting the sale of alcoholic liquor levied an ex cise duty on alcoholic liquor subject to the AD, the 
legal framework supports the inference that the function the AD, as imposed by CN 32/2003, fulfilled 
within India's customs duty and tax system was to impose a charge on alcoholic liquor qua alcoholic 
liquor, and not qua alcoholic liquor being imported into India.  Furthermore, to the extent the States 
levied excise duties as envisaged in India's C onstitution (and thus did not impose them on imported 
alcoholic liquor), the legal framework also supports the inference that the f unction the State excise 
duties fulfilled within India's customs duty and tax system was to impose a charge on alcoholic liquor 
qua alcoholic liquor, and not qua alcoholic liquor produced or manufactured in the State imposing the 
duty.  
7.291  Besides the legal context within which the AD on  alcoholic liquor operated, it is, of course, 
important to have regard also to the factual cont ext within which it was imposed.  In this respect, a 
relevant factual issue is whether, on the date of establishment of the Panel, all States permitting the 
sale of alcoholic liquor levied an excise duty on al coholic liquor subject to the AD.  As we have 
indicated, if this was not the case, it would present th e issue of whether in respect of alcoholic liquor 
destined for consumption in States that did not le vy an excise duty, the AD fulfilled the same function 
as, and so was "equivalent" to, a State excise duty.  We recall in this regard that it is unclear from the record whether on the date the Panel was establishe d all States permitting the sale of alcoholic liquor 
levied an excise duty on alcoholic liquor subject to the AD.  As there is no apparent reason to presume 
that individual States would not use their power to impose an excise duty on alcoholic liquor and since in this case it is up to the United States to establish that the AD was not "equivalent" to State 
excise duties, we can only conclude that there is no evidence on the record to demonstrate that there 
were States permitting the sale of alcoholic liquor that did not levy an excise duty on alcoholic liquor subject to the AD. 
7.292  Another relevant factual issue is whether Indi a's Constitution and/or relevant laws were in 
fact implemented as envisaged in these legal instruments.   We note in this respect that we have seen 
no concrete evidence of instances where an excise duty was imposed on imported alcoholic liquor in 
individual States.  In the absence of  evidence to the contrary, we must, therefore, presume that, at the 
                                                     
 
345 We will revert to these two factual conditions further below.  WT/DS360/R 
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  time of establishment of this Panel, the States followed the requirements of India's Constitution and 
did not impose excise duties on imported alcoholic liquor.346 
7.293  Accordingly, the legal and factual context w ithin which the AD on alcoholic liquor operated 
on the date of establishment of the Panel does not indicate that the AD on alcoholic liquor was not 
"equivalent" to State excise duties imposed in respect of like alcoholic liquor produced or 
manufactured in the State imposing the duty. 
7.294  Based upon the above analysis of the AD on alcoholic liquor, including its particular features, 
structure and design and the legal and factual contex t within which it operated,  we thus come to the 
following overall result regarding the element of "equivalence":  
(a) The evidence before us, comprising, inter alia , CN 32/2003, its statutory basis and 
the general legal framework of India's cust oms duty and tax system as it existed at the 
time of establishment of this Panel, is not  inconsistent with India's position that the 
AD on alcoholic liquor was "equivalent" to St ate excise duties imposed in respect of 
like alcoholic liquor produced or manufactured in the State imposing the duty; 
(b) there is no evidence on the record to demons trate that, on the date of establishment of 
the Panel, there were States permitting the sal e of alcoholic liquor that did not levy an 
excise duty on alcoholic liquor subject to the AD; and 
(c) there is no evidence on the record to demonstrate that, notwithstanding the general 
legal framework in existence at the time, ex cise duties were, in fact, imposed in the 
States on imported alcoholic liquor.   
7.295  In these circumstances, we can only conclude that the United States has failed to meet its 
burden of establishing that the AD on alcoholic liquo r was not "equivalent", within the meaning of 
Article II:2(a), to State excise duties imposed in  respect of like alcoholic liquor produced or 
manufactured in the State imposing the duty. 
7.296  In view of this conclusion, we need not, fo r the purposes of disposing of the United States' 
claim under Article II:1(b), and hence do not, come b ack to the issues of wh ether the State excise 
duties on domestic alcoholic liquor are internal taxes imposed in respect of domestic products and 
whether the alcoholic liquor subject to the AD was in  fact "like" domestic alcoholic liquor subject to 
State excise duties.   
(c) Conclusion 
7.297  As we have explained earlier, in the specific circumstances of this case, if the United States as 
the complaining party cannot meet its burden of establishing that the AD on alcoholic liquor was not 
"equivalent" to State excise duties imposed in  respect of like domestic alcoholic liquor,347 it cannot 
successfully establish that the AD on alcoholic liquor was of the same ki nd as, or in the nature of, an 
ordinary customs duty (or an "other duty or char ge" imposed on the importation of alcoholic liquor). 
7.298  As we have also explained, in the absence of a showing that the AD on alcoholic liquor was 
in the nature of an ordinary customs duty (or an  "other duty or charge" imposed on the importation of 
a good), the fact that it met the elements of the US  definition of "ordinary customs duties" is not 
                                                      
346 We also recall in this context that the record cont ains no example of a fee,  or other tax or charge, 
imposed by a State, consistently or inconsistently with the Constitution of India, on imported alcoholic liquor in 
lieu of State excise duties imposed on alcoholic liquor manufactured or produced in the relevant State. 
347 We recall that, for the purposes of an Article II: 2(a) inquiry, "equivalence" is a necessary condition 
for the AD on alcoholic liquor to fa ll outside the scope of Article II:1. WT/DS360/R 
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  sufficient to establish that it was an  ordinary customs duty (or an "other duty or charge" imposed on 
the importation of alcoholic liquor) under Article II: 1(b).  Hence, we find that the United States has 
failed to establish that the AD on alcoholic liquor co nstituted an ordinary customs duty (or an "other 
duty or charge" imposed on the importation of alcoholic  liquor) within the meaning of Article II:1(b).  
As a result, it has not been demonstrated that th e obligations contained in Article II:1(b) were 
applicable to the AD on alcoholic liquor. 
7.299  Accordingly, we come to the conclusion that the United States has failed to establish that the 
AD on alcoholic liquor, as imposed through CN 32/2003, w as inconsistent with Article II:1(b), first or 
second sentence. 
4. Consistency of the SUAD with Article II:1(b) of the GATT 1994 
7.300  The Panel  now proceeds to examine the United States ' additional claim that the SUAD is, as 
such, inconsistent with Article II:1(b) of the GATT 1994. 
7.301  The United States submits that the SUAD is inconsistent with this provision as an "ordinary 
customs duty" that exceeds India's WTO-bound rates.  The United States submits that the SUAD is an 
"ordinary customs duty" because it a pplies: (1) at the time of importation (and, in this connection, it 
must be paid by the importer before the good ma y clear customs); (2) as a matter of course upon a 
good's importation (and, in this connection, it appl ies generally on the importation of alcoholic 
beverages into India and the event for which liability ensues is importation); and (3) as an ad valorem  
duty.  The United States points out that in this re gard the SUAD is no different from India's BCD.  In 
relation to the BCD, the United States observes that India has already conceded that the BCD is an 
ordinary customs duty within the meaning of Artic le II:1(b).  The United States notes that like the 
SUAD, the BCD applies: (1) at the time of importation (and, in this connection, it must be paid by the 
importer before the good may clear customs); (2) as a matter of course upon a good's importation 
(and, in this connection, it applies generally on th e importation of products into India and the event for 
which liability ensues is importation); and (3) as a combination of ad valorem  and specific duties.  
7.302  The United States contends that there are a number of additional similarities between the 
BCD and the SUAD which indicate that the latter, like the former, is an "ordinary customs duty", 
including the fact that both are referred to under In dian law as "duties of customs", authorized under 
the same constitutional provision, required to be le vied under the same provision of the Customs Act, 
subjected to exemptions under the same provision of the Customs Act, and administered under the 
same Customs rules and procedures. 
7.303  The United States points out that the principal distinction India draws between the BCD and 
the SUAD is that the latter is intended to offset in ternal taxes imposed on like domestic products.  The 
United States argues that whether the SUAD constitu tes an ordinary customs duty must be based on 
an examination of its structure, design and effect.  The stated purpose or intent of a duty does not 
determine whether it is or is not an ordinary cu stoms duty.  The United States notes that the GATT 
1947 panel in EEC – Parts and Components  rejected the notion that the stated purpose or 
characterization of an EEC anti-circumvention du ty under EEC law provided a sufficient basis to 
characterize the measure as an internal tax rather than a customs duty.  Similarly, the United States 
submits, this Panel should reject India's contention that the stated purpose or characterization of the 
SUAD under Section 3(5) of the Customs Tariff Ac t provides a sufficient basis to find the SUAD a 
charge equivalent to an internal tax rather than an ordinary customs duty.  
7.304  The United States argues, in addition, that an interpretation of Article II:1(b) that would 
permit the stated purpose or intent of a measure to determine whether it fell within the scope of that 
article would permit Members to avoid or manipul ate WTO commitments simply by attributing a 
particular purpose to a measure (regardless of what the measure in fact does) or by calling a measure  WT/DS360/R 
 Page 143 
 
 
  by one name versus another, similar to the situation faced in EEC – Parts and Components .  In this 
dispute, the United States contends, India may a ttribute a different purpose to the BCD on the one 
hand and the SUAD on the other, but both of them, based on an examination of their structure, design and effect as reviewed above, constitute "ordinary customs duties" within the meaning of 
Article II:1(b).   
7.305  Furthermore, in the United Sates' view, the f act that the SUAD may be distinct from India's 
basic customs duty, in that it is imposed under a separate section of the Customs Tariff Act, does not 
mean that the SUAD is not an ordinary customs duty.   According to the United States, it is not the 
case that a Member may only impose one duty that may properly be characterized as an "ordinary 
customs duty" under Article II:1(b).   
7.306  In the alternative, the United  States believes that even if the SUAD were not an "ordinary 
customs duty", it would constitute an "other duty or charge" (ODC) within the meaning of 
Article II:1(b), second sentence.  The United States submits that the SUAD would necessarily 
constitute an ODC if it were not an ordinary cust oms duty.  If the SUAD is not an ordinary customs 
duty, then it must, in the United States' view, necessar ily be something other than an ordinary custom 
duty.  The United States points out in this regard that the SUAD applies on or in connection with 
importation.  Specifically, it applies at the time of importation and as a consequence of importation 
(that is, importation is the event for which liabilit y for duty ensues).  Moreover, the United States 
considers that in asserting that the SUAD is a charge equivalent to an internal tax within the meaning 
of Article II:2(a), India has implicitly characterized it as a charge "imposed on importation" since the chapeau to Article II:2 makes clear that it concerns  measures "imposed on importation".  Therefore, 
the United States maintains, if the SUAD is not an or dinary customs duty, it must be an other duty or 
charge within the meaning of Article II:1(b).  
7.307  Regarding the other element of an Article II:1(b)  inquiry, the United States contends that the 
SUAD when imposed with India's BCD results in ordinary customs duties on imports in excess of 
India's WTO-bound rates.  More particularly, the United States asserts that the SUAD imposed with 
the BCD results in ordinary customs duties on impor ts in excess of WTO-bound rates in any situation 
where the BCD is already at or very near I ndia's WTO-bound rate.  The United States notes that 
Exhibit US-1 contains a number of examples of produc ts in addition to alcoholic liquor where this is 
the case.  According to the United States, the SUAD is therefore as such inconsistent with 
Article II:1(b).  Moreover, if the SUAD were consider ed an ODC, it would, in the United States' view, 
exceed the ODCs specified in India's Schedule as India's Schedule does not specify any ODCs for any 
product.  
7.308  The United States notes India's assertion that th e SUAD is equivalent to State excise duties 
imposed on like domestic products and thus imposed  in accordance with Article II:2(a).  The United 
States considers that it has presented evidence and argument sufficient to establish a prima facie case 
that the SUAD is (i) an ordinary customs duty that (ii) exceeds India's WTO-bound rates and, therefore, is inconsistent with Article II:1(b).  According to the United States, having made a prima 
facie case that the SUAD is an ordinary customs duty,  the necessary corollary of that showing is that 
the SUAD is not a "charge equivalent to an internal tax".   
7.309  The United States further points out that even if  the SUAD were not considered an ordinary 
customs duty but an "other duty or charge" on impor tation, India has presented no evidence that it is 
"equivalent" to an internal tax on like domestic produc ts and imposed consistently with Article III:2.  
The United States argues that India as the part y asserting that the SUAD is justified under 
Article II:2(a) bears the burden of sustaining that assertion.   
7.310  The United States notes in this regard India's st atement that the SUAD is equivalent to State-
level VATs and the CST in addition to unnamed ot her local taxes and charges imposed on domestic WT/DS360/R 
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  products.  With regard to the latter category of taxes, the United States argues that India has not 
identified any such other local taxes or charges un til its second written submission.  In the US view, 
India's effort to identify such taxes is not adequa te.  The United States argues that India has provided 
no evidence that such taxes or char ges exist, much less any evidence that such taxes or charges are 
equivalent to the SUAD, or that the SUAD results in charges that do not exceed su ch taxes or charges.  
Accordingly, the United States considers, Indi a cannot sustain its assertion that the SUAD is 
equivalent to these local taxes or charges. 
7.311  With regard to State-level VATs, the United Stat es argues that they are not, in terms of their 
structure, design or effect, "equivalent" to the SUAD.  First, the United States notes that while, 
according to India, the State-level VATs are set generally at four different rates depending on the 
product subject to the VAT (zero and one, four and 12.5 per cent ad valorem )348, the SUAD is set at a 
single rate of four per cent for all products.  Sec ondly, the United States asser ts that while the State 
level VATs may generally break down into four rates, there is no requirement that the individual 
States apply the same rate to the same domestic products.  Thus, the United States maintains, one 
State may apply a VAT of four or 12.5 percent on a particular product, whereas another state may 
apply no VAT on that same product.  The United States points out in this respect that a White Paper 
on State-Level Value Added Tax by the Empowered  Committee of [Indian] State Finance Ministers 
explains that an individual State may exempt up to ten commodities of its choosing from the VAT and 
that certain goods will be "outside" the VAT system , including liquor.  In addition, the United States 
notes, the Union Territory of Delhi applies its VAT at five rates (zero and one, four, 12.5 and 20 
percent).  The United States notes that this c ontrasts with the SUAD which does not prescribe 
different rates for different produc ts and does not subject imports to different rates depending on the 
Indian State into which it is imported.  Thirdly, the United States mentions the fact that State VAT 
operates by crediting against the VAT owed on a product's transfer, the VAT paid on the product's 
previous transfers.  By contrast, the United Stat es submits, there is no mechanism for crediting against 
the SUAD owed on a product, taxes or charges paid on  the product's previous transfers. Nor is there a 
mechanism for crediting the SUAD paid on a pr oduct against the VAT owed on the product's 
subsequent transfers in India. 
7.312  Regarding the CST, the United States consider s that it is not equivalent to the SUAD for 
similar reasons.  The United States contends that like the VAT, it is imposed at various rates and may 
vary from State to State and from product to product.   Depending on the recipient, the United States 
notes, the CST may be set at a flat 3 per cent rate (if the recipient is a registered dealer) or may be set 
at a rate corresponding to one of the four VAT rates a pplicable to that product in the State in which it 
originated (if the recipient is not a registered dealer).  
7.313  The United States further states that with respect to both the VAT and the CST the amount of 
SUAD owed on imports as compared to the amount  of VAT or CST owed on like domestic products 
is not equivalent, since it does not correspond, and is not virtually identical to, the VAT or CST, respectively, on like domestic products.  For example, with respect to some products, the rate of State-
level VATs and the CST is 12.5 per cent, whereas the rate of SUAD is four per cent.  A rate of four 
per cent, the United States submits, does not appear to correspond, or be virtually identical to, a 12.5 
per cent rate (the base on which both are calculated are the same).   
7.314  Finally, the United States reiterates that the st ated purpose of the SUAD is not sufficient to 
support India's assertion that it is a charge equivalent to an internal tax.  Thus, in the United States' 
view, the fact that Section 3(5) of the Custom s Tariff Act authorizes the Central Government to 
impose "an additional duty as would counter-balance" certain internal taxes does not mean that the 
resulting SUAD in fact "counter-balan ces" such internal taxes.    
                                                     
 
348 The United States notes, however, that some Stat e-level VATs appear to apply five rates: zero and 
one, four, 12.5 and 20 per cent.  The United States refers to the example of the Union Territory of Delhi.    WT/DS360/R 
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  7.315  The United States submits, as an additional ma tter, that India also acknowledges that the 
SUAD may in some instances be "marginally 'i n excess' of the tax on like domestic products".349  
Therefore, the United States maintains, in con ceding that the SUAD may result in any amount of 
charge on imports in excess of internal taxes on like domestic products, Indi a has disproved its own 
assertions that the SUAD is imposed consistently w ith Article III:2 and in turn justified under GATT 
1994 Article II:2(a). 
7.316  The United States further asserts that State-level VATs and the CST apply to imported 
products sold within India and that  imported products are, therefore, subject to the SUAD as well as 
the State-level VATs and CST with no offsetting cr edit for the SUAD paid.  As a consequence, and 
since domestic products are not subject to the SUAD, imported products are, in the United States' 
view, subject to charges in exces s of those on like domestic products and, therefore, the SUAD is not 
imposed consistently with Article III:2. 
7.317  Finally, the United States submits that the rate of SUAD, on the one hand, and the rates of 
State-level VATs and the CST, on the other, are not the same.  First, the United States points out that 
the rate of CST for sales to registered dealers is three per cent whereas the rate of SUAD is four per 
cent.  Secondly, the United States contends that, as noted above, there may be instances where the rate 
of State-level VATs vary from State to State.  In  such instances, the United States argues, the SUAD 
which is imposed at a single rate cannot at the same time be equal to two or more rates of State-level 
VAT on like domestic products.  Thirdly, the United St ates submits that in in stances where the CST is 
based on the rate of State-level VAT of the State from which it originates, there may be instances 
where the rate of CST varies within in a single Stat e.  The United States notes that, for example, if the 
VAT rate in one State (State A) is four per cent and in another State (State B) is zero, when sold from 
State A to a non-registered dealer in State C, a produc t will be subject to a CST rate of four per cent, 
whereas when sold from State B to a non-registered dealer in State C, the product will be subject to a 
CST rate of zero.  The United States argues that th e SUAD imposed at a single rate cannot at the same 
time be equal to two or more rates of CST. 
7.318  In the light of the above, the United States considers that the S UAD is not a charge equivalent 
to an internal tax (State-level VATs, the CST, or unnamed other local taxes or charges) and, as India 
even concedes, it is imposed on imports in excess of internal taxes on like domestic products.  
Therefore, the United States believes, the SUAD is not a charge equivalent to an internal tax imposed 
consistently with Article III:2. 
7.319  India submits that the United States fails to appreci ate that there is a clear demarcation under 
Indian law between the BCD and the SUAD.  India argues that the BCD is the only duty imposed by 
it on imports which is in the nature of an "ordin ary customs duty" as understood under Article II:1(b) 
and is accordingly bound at the levels prescribed in India's Schedu le.  India does not levy any "other 
duties or charges".  India states that the BCD is distinct from the SUAD, which is levied on imported 
products in lieu of different internal taxes.  Acco rding to India, the structure and design of the SUAD 
clearly highlight the fact that it is an "extra-ordinar y" duty levied at the time of import and not in the 
nature of an "ordinary customs duty" or ODC. 
7.320  India submits that the United States has failed properly to distinguish between different types 
of duties and the statutory provisions based upon wh ich they are imposed.  India notes in this regard 
that although the SUAD and the BCD are authorized  under the same constitutional entry, they are 
levied under different statutory provisions.  India re calls that the Customs Ac t and the Customs Tariff 
Act are different statutory enactments created by separ ate acts of Parliament.  India contends that the 
BCD is levied under Section 12 of the Customs Act whereas the SUAD is levied under Section 3(5) 
of the Customs Tariff Act.  India maintains that  the United States has misinterpreted the cross-
                                                      
349 The United States refers to India' s first written submission, note 51. WT/DS360/R 
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  reference provisions contained in Section 3(8) of  the Customs Tariff Act and Section 25 of the 
Customs Act to mean that both statutes essentially admini ster the same duties that are in the nature of 
"ordinary customs duties" or ODCs.  India argues that  the mere existence of a cross-reference between 
two statutes, inserted primarily for administrative conve nience, does not alter the nature of the distinct 
charges levied under each.  Specifically in relation to Section 25 of the Customs Act, India does not 
agree with the United States that the power to ex empt imports from the SUAD is contained in the 
Customs Act.  According to India, without the ex istence of the reference in Section 3(8) of the 
Customs Tariff Act, the power to exempt imports  from the SUAD does not exist under Section 25.  
Furthermore, India considers that the mere fact that  the SUAD is calculated "in addition" to the BCD 
does not make it an "ordinary customs duty" or an OD C.  India points out that the SUAD is calculated 
under the Customs Tariff Act and not the Customs Act.  In sum, India submits that the levy, 
calculation and collection of the SUAD as well as exemptions from the SUAD are provided for in the 
Customs Tariff Act, which makes the SUAD funda mentally different from the BCD levied under 
Customs Act.  
7.321  According to India, Section 3(5) of the Cust oms Tariff Act makes clear that the intent and 
design of the SUAD is solely to offset, or counter balance, certain internal taxes from which imported 
products at the time of importation are exempt, i.e ., the State value-added tax ("VAT"); and/or the 
Central Sales Tax ("CST"); and/or "other local tax es and charges" on the sale, purchase or transport of 
domestic products.  India is of the view that the po licy purpose behind the introduction of a duty is an 
important factor, although not the only factor, wh ich a Panel may look into while characterizing a 
duty.   
7.322  In sum, in India's view, it is clear from such factors as the purpose of the SUAD, its statutory 
basis and its relationship with the internal taxes it is intended to counterbalance that the SUAD is a 
distinct duty from the BCD.  The BCD, India notes,  has no such purpose (as it is intended as a tariff 
imposed in accordance with India's Schedule), no rela tionship whatsoever with any internal tax and a 
different statutory basis.   
7.323  India notes that the only commonality between the BCD, which is an "ordinary customs 
duty", and the SUAD is that they ar e imposed on imports at the bord er and that both are expressed in 
ad valorem  terms.  India submits in this re gard that the Appellate Body in Chile – Price Band System  
held that this does not necessarily mean that such duties are "ordinary customs duties".  As a result, 
the United States as the complaining party must look beyond the mere point at which the duty is levied and the manner in which th e duty is expressed, since neither of them will necessarily mean or 
indicate that the duty is an "ordinary customs dut y".  Yet, India contends, instead of positively 
substantiating the existence of a prima facie case, the United States has based its claim under 
Article II:1(b) on two elements: (i) what it consider s to be the general definition of an "ordinary 
customs duty" and (ii) India's alleged failure to  prove that the SUAD falls outside this broad 
definition.  India considers, therefore, that the United States as the complaining party in this case has 
failed to make out a prima facie case that the SUAD is an "ordinary customs duty".  Consequently, in 
India's view, the United States' further assertion that the SUAD results in ordinary customs duties "in 
excess of" the WTO-bound rates in India's Schedule is without merit.   
7.324  Regarding the United States' alternative asser tion that the SUAD may qualify as an "other 
duty or charge", India submits that the United States has offered no reason in support of its contention 
other than that it is imposed "on importation".  In dia submits that the United States has, therefore, 
failed to discharge its burden of proof.  India consid ers that the SUAD is not in the nature of an ODC.  
It is imposed at the time of import but is not im posed on, or in connection with importation.  India 
argues that, contrary to the United States' contenti on, the SUAD is not imposed as a consequence of 
importation.  India maintains that the liability to  pay the SUAD arises as a consequence of domestic 
like products being charged a VAT/sales and other local taxes and not merely because the products 
are imported into India.  Looked at in another way, if domestically manufactured goods are not  WT/DS360/R 
 Page 147 
 
 
  charged a VAT/sales and other local taxes, then, India contends, imported lik e products will also not 
be charged the SUAD even if they are impor ted into the customs territory of India. 
7.325  Based upon the above arguments, India submits that  rather than being an "ordinary customs 
duty" or an ODC within the meaning of Article II: 1(b), the SUAD is imposed in accordance with the 
provisions of Article II:2(a).  India considers that as a charge equivalent to an internal tax, it does not 
erode the "value of tariff con cessions" offered by India.   
7.326  Concerning the issue of "equivalence", India argues that the SUAD is calibrated by the 
Central Government to be equivalent to the State VAT, the CST and other local taxes and charges.  
With regard to the State VAT, India points out that it is imposed by State Governments on the intra-
State sale of domestic products under their respec tive State VAT statutes on domestic products and 
not on the importation of like pr oducts from outside India since they are precluded by the Constitution 
of India from levying VAT on the import of goods.350  India submits that since domestic 
manufacturers have to bear the incidence of VAT  which is not equally imposed on the import of 
products into India, the Central Government has sought to counterbalance the incidence of the VAT 
(and the CST and other local taxes and charges) by imposing the SUAD.  According to India, 
appropriate tax credit and exemption mechanisms ensu re that if certain domestic products are exempt 
from the payment of State VAT, then the like imported products are also correspondingly exempted from the payment of the SUAD.  Similarly, products that are charged at a nominal rate of 1 per cent 
under the relevant State VAT legislation are ch arged SUAD for imported like products at a 
corresponding rate of 1 per cent.
351  Therefore, India contends, the SUAD is designed to be equivalent 
to the State VAT.  India notes in this regard that it is because of variations in the State VAT rates that 
India has chosen to peg the SUAD on imported produc ts to the lowest rate of VAT imposed on a like 
domestic product.352  In India's view, merely because the VAT is in some instances charged at 
different rates cannot mean that the SUAD is not  "equivalent" to internal taxes imposed on like 
domestic products.  
7.327  With regard to the CST, India notes that it is levied only on the inter-state movement of 
domestically manufactured products by the Centra l Government under the Central Sales Tax Act.  
India argues that since domestic manufacturers have to  bear the incidence of the CST (on inter-State 
sales) which is not imposed on the import of products  into India, the Central Government has sought 
to counterbalance the incidence of the CST by impos ing a 4 per cent SUAD.  India points out that the 
rate at which the CST is charged on a product is determined in accord ance with the laws of the State 
from where the movement originates, that is to sa y, the rate of CST will be equivalent to the 
prescribed rate of sales tax/VAT of the State of origin.  Thus, the rate at which CST is levied on inter-
state sales is interconnected with the VAT rates.  According to India, appropriate tax credit and 
exemption mechanisms ensure that domestic goods that are exempt from the payment of VAT in the 
State from where they originate are also exempt from the payment of CST.  Simultaneously, India 
contends, their like imported products are also ex empted from the payment of the SUAD when they 
are imported into India.353  Similarly, India notes, in the case of  products such as gold, jewellery, etc. 
that are eligible to be charged the CST at the nomi nal rate of 1 per cent, th eir like imported products 
are correspondingly subject to the SUAD at the (reduced) rate of 1 per cent.354  
7.328  With regard to the "local taxes and other char ges", India notes that each State Government is 
empowered by the Constitution of India to collect  a variety of local levies on goods and the raw 
materials used in their manufacture, such as transpor t fees, various type of surcharges, cess etc.  India 
                                                      
350 India refers to Article 286 of the Constitution of India. 
351 India refers to CN 20/2006. 
352 India notes that where the VAT rate exceeds 4 pe r cent, the SUAD charged is only 4 per cent. 
353 India refers to CN 20/2006. 
354 India refers to CN 20/2006. WT/DS360/R 
Page 148 
 
 
  submits that the cumulative effect of all State-le vel internal taxes imposed only on domestic products, 
from the raw material stage to its finished state, have to be  counterbalanced on imported like products.  
India asserts that the SUAD was introduced with the objective of counterbalancing such internal taxes 
which may vary from State to State in terms of their nomenclature, quantum and character.  
According to India, the SUAD is levied at the lowest  rate possible to counterbalance these State levies 
that are not imposed on like imported products. 
7.329  India submits, as an additional matter, that the SUAD does not tax imported products "in 
excess of" like domestic products since it is equiva lent to the VAT, the CST and/or other local taxes 
and charges paid by like domestic products.  India notes that the imposition of the SUAD on the 
imported product merely equalizes the tax burden im posed on the like domestic product.  India argues 
that since internal taxes and charges (VAT and CST)  are levied at a minimum rate of 4 per cent, the 
tax burden on an imported product on account of the SUAD, which is levied at a rate of 4 per cent, 
cannot be said to be in excess of the tax burden imposed on like domestic products.  Furthermore, 
India recalls that the benefit of an exemption or reduction from an internal tax such as VAT or CST 
results in a parallel exemption or reduction from the payment of the SUAD for like imported products, 
thus ensuring an overall equality of tax bu rdens on imported and like domestic products.  
7.330  In view of the above, India considers that the United States has failed to demonstrate that the 
SUAD is not imposed in accordance with Article II: 2(a) and that, notwithstanding the United States' 
failure to discharge its burden,  India has amply demonstrated how the SUAD is imposed in 
accordance with Article II:2(a).  
7.331  The Panel  notes at the outset that the United States' legal claim in respect of the SUAD is the 
same as its claim in respect of the AD on alcoholic liquor.  The analytical framework of the Panel's 
examination of the SUAD is, therefore, not different  from that applied in the Panel's examination of 
the AD on alcoholic liquor.  The SUAD itself bears many similarities with the AD on alcoholic liquor, 
and so the issues presented in respect of the SUAD ar e in good part the same as, or similar to, those 
presented in respect of the AD on alcoholic liquor.  As a result, there are observations and 
explanations the Panel considers it is not necessary to  repeat in its examination below of the SUAD.  
It is important, therefore, that the Panel's analysis of the SUAD be read together with, and in the light 
of, the more detailed analysis of the AD on alcohol ic liquor.  Also, the Panel will refer back to its 
analysis of the AD on alcoholic liquor, as appropriate. 
7.332  With this said by way of introduction, we now turn to examine the Un ited States' claim of 
inconsistency with Article II:1(b) .  The United States, as is logical in view of its claim under 
Article II:1(b), asserts that the SUAD, as imposed through CN 19/2006355, constitutes an "ordinary 
customs duty", or, in the alternative,  an "other duty or charge" within the meaning of Article II:1(b).  
As the United States' alternative contention is not ba sed on separate or additional evidence, but rather 
on the word "other" in the phrase "other duty or charge"356, if the United States cannot demonstrate, 
based on the evidence adduced by it,  that the SUAD is an ordinary customs duty, it will also have 
failed to establish its alternative contention.  Indi a contests that the SUAD is either an "ordinary 
customs duty" or an "other duty or charge".  I ndia considers that it instead constitutes a charge 
equivalent to internal taxes within the meaning of Article II:2(a).  India therefore requests the Panel to 
reject the United States' claim under Article II:1(b).   
7.333  In the light of the disagreement between the Pa rties over the correct legal characterization of 
the SUAD, the Panel will examine first whether the SUAD was an "ordinary customs duty" (or, 
alternatively, an "other duty or charge" imposed on the importation of the products subject to the 
                                                      
355 Hereafter, unless the context requires otherwise, we  will for the sake of brevity refer to the "SUAD" 
rather than "the SUAD, as imposed through CN 19/2006". 
356 US second written submission, para. 19.  WT/DS360/R 
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  SUAD) and, thus, subject to the obligations co ntained in Article II:1(b), first sentence (or, 
alternatively, those contained in Article II:1(b), second sentence). 
(a) Ordinary customs duty (or "other duty or charge") 
7.334  We begin our examination by recalling that the United States has sought to establish that the 
SUAD is an "ordinary customs duty" by reference to its definition of that concept.  Accordingly, we 
now proceed to consider the definitional and othe r elements relied upon by the United States with a 
view to determining whether they establish that  the SUAD is an "ordin ary customs duty" (or 
alternatively, an "other duty or charge" imposed on the importation of the products subject to the 
SUAD). 
7.335  The SUAD, as its statutory name makes clear, is a "duty".357  It applies to goods (articles) 
which are imported into India (in our case, those specified in CN 19/2006).358  It does not apply to 
domestic goods.  The SUAD is assessed at the time and point of importation by India's Customs 
authorities.359  A good which is imported and subject to the SUAD is cleared through customs for 
entry into India's customs territo ry once the SUAD has been paid.360  The SUAD is payable by the 
importers of the subject goods or their agents.361  Furthermore, the SUAD takes the form of an ad 
valorem  duty.362 
7.336  Regarding whether the SUAD was also applied "as a matter of course" on the importation of 
the subject products, we note India's argument that the SUAD is not levied on imports 
unconditionally.  Specifically, India stated that if domestic products are not charged State VAT or 
sales tax, or other local taxes, imported like products will also not be charged the SUAD.363  This 
statement appears to be consistent with the text of CN 19/2006 and Section 3(5) of the Customs Tariff 
Act and its Explanation, in that both refer to diffe rent types of internal taxes "for the time being 
leviable"364 on the sale, purchase or transportation in India of a like product, or a product of the same 
class or description as the imported product.  We recall that corresponding language is found in the 
proviso to Section 3(1) and CN 32/2003 dealing with the AD on alcoholic liquor, and that a decision 
by the Supreme Court of India makes clear that the AD can be levied on a product only if on a like 
product excise duty is leviable.  In view of these elements, we see no reason to disagree with India's 
statement that the SUAD can be levied on an im ported product only if on a like domestic product (or a 
domestic product of the same class or description) rele vant internal taxes are leviable.  Accordingly, 
since the SUAD was being collected on  the date of establishment of this Panel, it can be inferred that, 
in the view of India's Central Government, the aforementioned condition for the levy of the SUAD 
was satisfied at the time.  In the light of this , as well as the characteristics of the SUAD set out at 
paras. 7.335 and 7.337, it seems to us to be correct for the United States to say that in respect of the 
products subject to the SUAD the SUAD is applie d as a matter of course, and not on a case-by-case 
basis or in response to a singular or excep tional event or set of circumstances.   
7.337  Finally, as to whether the SUAD was imposed "on the importation" of the products subject to 
the SUAD, we note India's assertion that liab ility for the payment of the SUAD arises as a 
consequence of relevant intern al taxes being leviable on domes tic like products and not merely 
                                                      
357 Section 3(5) of the Customs Tariff Act. 
358 Ibid; CN 19/2006. 
359 India's replies to Panel Question Nos. 5 and 12; US reply to Panel Question No. 12. 
360 India's reply to Panel Question No. 12.  In some circumstances, goods may clear customs on 
execution of bonds or under duty deferment procedures.  US reply to Panel Question No. 12.   
361 Ibid. 
362 Section 3(5) of the Customs Tariff Act; CN 19/2006. 
363 India's second oral statement, para. 3.5; India's comments on the US reply to Panel Question No. 43. 
364 CN 19/2006 omits the words "for the time being" but at the same time indicates that it is based on 
Section 3(5). WT/DS360/R 
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  because the products are imported into India.  As  discussed above, the evid ence suggests that the 
SUAD can be levied on an imported product only if on a like domestic product (or a domestic product 
of the same class or description) relevant internal taxes are leviable.365  Where this condition is met, 
and the SUAD is imposed in respect of the rele vant product, the event which in our understanding 
triggers the liability to pay the SUAD  is the importation of the product.366  Therefore, it seems to us 
that the United States is correct in saying that th e SUAD is a duty imposed "on the importation" of the 
products subject to the SUAD. 
7.338  Judging exclusively by the above characteris tics of the SUAD, we would agree with the 
United States that the SUAD could, in principle, qu alify as an "ordinary customs duty", or an "other 
duty or charge", within the meaning of Article II: 1(b).  However, these same characteristics are also 
consistent with India's view that the SUAD qualifies as a charge imposed on the importation of a subject product and equivale nt to internal taxes imposed in resp ect of the like domestic product within 
the meaning of Article II:2(a).  In this  regard, to mention only a few elements
367, the SUAD being a 
"duty" imposed on a product, it can be considered a "charge" imposed on a product as that term is 
used in Article II:2(a).  Also, as we have explai ned, the SUAD is a duty imposed "on the importation 
of a product".  And finally, as is clear from its name, the SUAD is imposed in  addition to India's BCD 
which the United States does not dispute is an "o rdinary customs duty" within the meaning of 
Article II:1(b).368  As we have stated earlier, Article II:2(a) charges may be imposed on a product 
subject to a tariff binding in addition to the ordinary customs duty levied on that product.369 
7.339  We recall that the BCD, the AD and the SUAD are regarded under Indian law as "duties of 
customs".370  In fact, CN 20/2006 which exempts specified products from some or all of the SUAD, 
refers to the SUAD as an "additional duty of custom s".  We also note that the SUAD is collected and 
administered by India's Customs authorities pursu ant to the provisions of India's Customs Act.371  For 
the reasons we have given earlier in the context of our analysis of the AD on alcoholic liquor, we 
consider that these elements do not conflict with  India's view that the SUAD, as imposed by 
CN 19/2006, is an Article II:2(a) charge.372   
7.340  The fact that the SUAD under Indian law is considered a "duty of customs" presents another 
issue, identified by the United States and familia r from our discussion of the AD on alcoholic liquor.  
Section 25 of the Customs Act empowers the Centra l Government to exempt goods "from the whole 
or any part of duty of customs leviable thereon".  India argues that the authority to exempt products 
from the SUAD is not conferred by Section 25 of the Customs Tariff Act, but Section 3(8) which, as 
we have also noted earlier, stipulates that the provisions of the Customs Act, including Section 25, 
apply to the SUAD.  We also recall that in reply to a question from the Panel India stated that some 
customs notifications, including CN 20/2006, refe r to Section 25 only and that in those cases a 
reference to Section 3(8) is implicit.  According to  India, the absence of a reference to Section 3(8) 
                                                      
365 It is not clear from the evidence before us whethe r it would be sufficient if one or more States, as 
opposed to all States, levied relevant internal taxes on a like domestic product or a domestic product of the same 
class or description. 
366 As we have said, India has indicat ed that the SUAD is payable by th e importer at the point and time 
of importation, and customs clearance is not granted until the SUAD has been paid. 
367 See also supra , paras. 7.153-7.155. 
368 The United States considers, however, that the BCD is not the only "ordinary customs duty" 
imposed by India. 
369 We note that since the SUAD applies exclusively to imports, it is clear that it produces the same 
type of effect as the BCD.  However, Article II:2( a) charges by definition apply to imports only.   
370 India's reply to Panel Question No. 7. 
371 India's replies to Panel Question Nos. 5 and 12; Section 3(8) of the Customs Tariff Act. 
372 See supra , paras. 7.250-7.251.  WT/DS360/R 
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  does not invalidate an exemption notification.373  We consider that even if Section 25 provided 
independent authority to exempt imports from the S UAD, contrary to what the United States suggests, 
this would not demonstrate that India's customs duty system regards both the BCD and the SUAD as 
"ordinary customs duties".  The reasons supporting this  view are articulated in our analysis of the AD 
on alcoholic liquor.374 
7.341  Having regard to the description of the SUAD  as a "duty of customs", the United States 
further asserts that the SUAD and the BCD are requir ed to be collected under Section 12(1) of the 
Customs Act, a proposition contested by India whic h says the statutory basis for the levy of the 
SUAD is Section 3(5) of the Customs Tariff Act.  We are of the view that the statutory basis for the 
levy of the BCD is Section 12(1) of the Customs Act, whereas that for the levy of the SUAD is 
Section 3(5) of the Customs Tariff Act.  In support of our view, we refer to the considerations we 
have offered when analyzing the same issue in the context of our discussion of the AD on alcoholic 
liquor.375  In the light of our view, we are unable to ag ree with the United States that consideration of 
the statutory bases of the BCD and the SUAD supports  the United States' assertion that under India's 
customs duty regime both the BCD and the SUAD are regarded as "ordinary customs duties". 
7.342  The United States also points out that in accordance with Sectio n 3(6) of the Customs Tariff 
Act the SUAD is to be calculated based upon the value of the imported good inclusive of the BCD 
and the AD.  India has said that the method of calculating the SUAD is based on that of the State 
VATs.376  As we have indicated, we understand th at it is not uncommon even in the case of 
ad valorem  internal taxes enforced and co llected at the point and time of interpretation to assess them 
on the basis of the duty-paid value of the imported good.377  Moreover,  it is our understanding that in 
the case of general sales ta xes like the VAT that are imposed on imported goods at the border it is not 
uncommon to include in the value of the imported good also specific commodity taxes (such as excise 
taxes payable on the good in question).  In the light of this, we do not think that the fact that the 
SUAD is levied based upon a value of the imported good which is defined to include the BCD and the 
AD indicates that the SUAD is itself an "ordinary customs duty" or an  "other duty or charge".   
7.343  Another point previously covered in relati on to the AD on alcoholic liquor concerns the 
distribution of revenues collected between India's Ce ntral Government and the States.  As we have 
stated in that context, the re venues collected from the levy of the AD, the SUAD and the BCD are 
distributed as between India's Central Governme nt and the States in accordance with a revenue 
sharing formula.  Thus, although the SUAD is said to counterbalance, inter alia , State-level internal 
taxes, some of the revenues collected go to the Ce ntral Government.  At the same time, some of the 
revenues collected from the levy of the BCD, which is  not said to counterbalance any internal taxes, 
go to the States.  For the reasons explained in our analysis of the AD on alcoholic liquor, we attach no particular importance to the fact that in terms of  the distribution of revenues collected there is no 
difference between the SUAD and the BCD.
378   
7.344  The foregoing analysis shows that even t hough the SUAD meets the elements of the US 
definition of "ordinary customs duties", this is not su fficient, on its own, to establish that it is an 
                                                      
373 India's replies to Panel Question Nos. 39(a) and 27 (h).  In its reply to Panel Question No. 27(h), 
India stated that the Supr eme Court of India, in Assistant Commissioner , Commercial Taxes v. Dharmender 
Trading Co ., AIR 1988 SC 1247, held  that when the exercise of legislativ e power can be traced to a legitimate 
source, mere failure to mention it does not vitiate the exer cise of the power.  India has not submitted the text of 
the decision. 
374 See supra , paras. 7.252-7.253. 
375 See supra , paras. 7.254-7.255. 
376 India's reply to Panel Question No. 29.  India has said that State VAT is levied based upon a value 
of the product which is defined to include other taxes, including excise duties, as applicable. 
377 See also GATT Panel Report, Canada – Provincial Liquor Boards (US) , para. 5.25. 
378 See supra , para. 7.260. WT/DS360/R 
Page 152 
 
 
  ordinary customs duty (or an "other duty or charge" imposed on the importation of the products 
subject to the SUAD) under Article II:1(b) as opposed to  a border charge equivalent to an internal tax 
under Article II:2(a).  This remains true even if a ccount is taken of the overall structure of India's 
customs duty and tax system, including such aspects as the domestic legal description of the SUAD as 
a "duty of customs", the role of India's Custom s authorities in the collection of the SUAD, the 
exemption mechanism established by Section 25 of th e Customs Act, the method of calculation of the 
SUAD and the distribution of the revenues collected as a result of the levy of the SUAD.       
7.345  As a result, as in the case of the AD on alcoholic liquor, we need to go on to determine 
whether the United States has established, in addition, that the SUAD is of the same kind as, or in the 
nature of, an ordinary customs duty (or an "other  duty or charge" imposed on the importation of the 
products subject to the SUAD).   
(b) Equivalence to internal taxes 
7.346  We have indicated previously that the United St ates can seek to establish by reference to the 
provisions of Article II:2 that the SUAD is in the nature of an ordinary customs duty (or an "other duty or charge" imposed on the importation of the produc ts subject to the SUAD).  In this regard, as 
in the case of the AD on alcoholic liquor, the Parti es only discussed Article II:2(a)-type charges, i.e., 
charges equivalent to internal taxes.   
7.347  As our analysis below amply demonstrates, th is case objectively presents the issue whether 
the SUAD is a charge equivalent to internal taxes (sales tax, value added tax and other local taxes and 
charges) within the meaning of Article II:2(a).  As a result, if the United States as the complaining 
party cannot establish that the SUAD is not equivalent  to internal taxes imposed in respect of like 
domestic products, it cannot successfully establish that the SUAD is in the nature of an ordinary 
customs duty (or an "other duty or charge" imposed on the importation of the products subject to the SUAD).  Accordingly, we now turn to examine whether the United States has met its burden of 
establishing that the SUAD is not "equivalent" to internal taxes on like domestic products.
379  
7.348  We first examine the particular features, stru cture and design of CN 19/2006 which directs the 
imposition of the SUAD on specified goods at a rate of 4 per cent ad valorem .380  CN 19/2006 says 
the Central Government directed the imposition of th e SUAD at the rate identified "having regard to 
the sales tax, value added tax, local tax and other taxes or charges leviable on sale or purchase or 
transportation of like goods in India".  Thus, CN 19/2006 states that internal taxes of the specified 
kind were in force at the time in India and that such  internal taxes were imposed in respect of goods 
that are like those subject to the SUAD.   
7.349  We observe that CN 19/2006, on its face, point s to the existence of a relationship between, on 
the one hand, the SUAD and, on the other hand, th e sales tax, value added tax, local tax and other 
taxes or charges leviable in India.  In relation to  these taxes or charges, CN 19/2006 indicates that 
they are leviable on the sale, purchase or transporta tion of goods.  India contends that the internal 
taxes or charges referred to in CN 19/2006 are in ternal taxes or charges imposed in respect of 
domestic products.  In response to a question from th e Panel, the United States said that the reference 
in Section 3(5) to various taxes or  charges appeared to be a referen ce to internal taxes.  The United 
States further said that without knowing the details  of these taxes or charges, it could not make a 
determination that they constituted internal  taxes within the meaning of Article III:2.381  In our 
assessment, to the extent CN 19/2006 refers to ta xes or charges leviable on the sale or purchase of 
                                                      
379 We recall that, for the purposes of an Article II: 2(a) inquiry, "equivalence" is a necessary condition 
for the SUAD to fall outside the scope of Article II:1. 
380 Section 3(5) of the Customs Tariff Act envisages a maximum rate of 4 per cent ad valorem . 
381 US reply to Panel Question No. 19.  WT/DS360/R 
 Page 153 
 
 
  goods, the elements before us tend to support the view  that they are internal taxes or charges imposed 
in respect of domestic goods.  To the extent CN 19/2006 refers to taxes or charges leviable on the 
transportation of goods, there is not much informati on on the record about the nature of these internal 
taxes or charges.382  In these circumstances, we deem it appropriate to suspend our analysis of this 
issue for the time being and to conduct our "equiva lence" inquiry on the assumption that the relevant 
taxes or charges may be regarded as internal ta xes or charges imposed in respect of domestic 
products, as contemplated in Article II:2(a).   
7.350  As to whether the products subject to the SUAD are "like"383 domestic products subject to 
relevant internal taxes, we note that the Parti es have been arguing or assuming that this is the case.384  
Since the Parties did not treat this as an issue of particular interest or concern, and there is little 
relevant information on the record, in relation to this issue as well we consider it appropriate to 
suspend our analysis for the time being and to conduct the present "equivalence" inquiry on the 
assumption that the products subject to the SUAD ar e "like" domestic products subject to relevant 
internal taxes.   
7.351  As correctly noted by the United States, CN 19/2006 does not specifically identify any 
internal taxes to which the SUAD relates.  Howeve r, as we have previously stated, Article II:2(a) 
contains no requirement specifically to identify the re levant internal tax by na me, date of publication, 
etc.  At any rate, from the text of CN 19/2006, it is clear to us that the internal taxes to which 
CN 19/2006 refers are taxes in force at the time in India.385  Also, we note that, by definition, sales 
taxes and value-added taxes ("VAT") are taxes on the sale of a product.386  Therefore, it follows from 
the text of CN 19/2006 that the category of "local taxes and other charges" are charges imposed on the 
sale, purchase or the transportation of a domestic good.   
7.352  More particularly, regarding the "sales tax", we note that there exist in India State-level sales 
taxes.387  To begin with, State sales taxes are imposed on goods outside the State VAT system.388  
India has indicated that these goods include alcoholic  liquor, tobacco products and certain petroleum 
products.389  In addition, there apparently is one State – Uttar Pradesh – which still applies a sales tax 
instead of a VAT.390  State sales taxes are leviable on sales taking place within the State imposing the 
tax.391  In addition, there is a Central Sales Tax ("C ST") which is levied exclusively on inter-state 
                                                      
382 This reflects the fact that neither Party paid much attention to this category of taxes or charges.  In 
particular, there is little information regarding whether th ese taxes or charges are (a) internal taxes or charges 
within the meaning of Article III:2 or (b) internal tr ansportation charges within the meaning of Article III:4, 
second sentence. 
383 Article II:2(a) uses the phrase "like domestic product". 
384 US second written submission, para. 30 (assuming " likeness" and noting, in addition, that the Panel 
need not reach the issue); India's first written submission, para. 84. 
385 This is also confirmed by the statutory basis of Section 3(5), more specifically the Explanation to 
Section 3(5) which refers to taxes "for the time being in force". 
386 This has been confirmed, for India's case, by India in its reply to Panel Question No. 35. 
387 They are authorized under Entry 54 of List  II (State List) of the Constitution of India. 
388 India's replies to Panel Question Nos. 33 and 52; Exhibit IND-25, p. 13. 
389 India's reply to Panel Question No. 33; Exhibit IND-25, p. 13. 
390 India's second written submission, note 2 and para. 2.12. 
391 Pursuant to Entry 92A of List I (Union List) of the Constitution of India, the Central Government 
alone is empowered to impose taxes on inter-State trade or commerce.  India's replies to Panel Question Nos. 
30(c), 49(b) and 58.  Furthermore, Section 286 of the Constitution of India the States may not impose taxes on 
the sale of goods where the sale take s place "in the course of the import of the goods into […] the territory of 
India". WT/DS360/R 
Page 154 
 
 
  sales.392  Although it is prescribed by a law of the Ce ntral Government, the CST is levied, collected 
and appropriated by the State where the good being sold originates.393   
7.353  Regarding the "value added tax", as already mentioned, all States but one apply a State 
VAT.394  As with State sales taxes, State VAT is leviable on sales taking place within the State 
imposing the VAT.  There is a separate tax referred to as the Central VAT, or "CENVAT".  However, 
this Central VAT system concerns the central excise duty.395  As we have previously explained, 
India's Constitution distinguishes between excise duties, which are taxes on the manufacture of a 
good, and sales taxes.396  Since CN 19/2006 refers to sales taxes and VAT but not excise duties, it is 
apparent that CN 19/2006 does not refer to the CENVAT, or central excise duty.   
7.354  In sum, it seems clear that the sales tax referre d to in CN 19/2006 is any applicable State sales 
tax or the CST, and the value added tax referred to is any applicable State VAT.  It is useful to note 
that a sale in India involving a pa rticular good would be subject either  to State sales tax/State VAT (in 
case of intra-State transactions) or to the CST (in case of inter-State transactions).  
7.355  So far as concerns the "local ta x and other taxes or charges", the term "local tax" suggests that 
the relevant tax is applied in a local area, by a local government or municipality of the State.  The 
phrase "other taxes or charges" does not explicitly indicate whether the relevant charges are imposed 
by the Central Government and/or the State Governments.  In view of the fact that the other taxes identified in CN 19/2006 are all State taxes
397, it seems natural to infer that the "other taxes or 
charges" at issue are tho se imposed at State level.398  At any rate, India has pointed out that any "local 
tax and other taxes or charges" must be authorized by a specific constitutional entry.399  We note in 
this regard that there are entries in the State Li st concerning charges other than general sales taxes.400   
7.356  In the light of the above, we think that the rele vant internal taxes referred to in CN 19/2006 
are, in principle, identifiable.401  In fact, the taxes and charges id entified by India before the Panel 
correspond to the above inferences.  Specifically, India has stated that the SUAD is intended to 
counterbalance the following three categories of intern al taxes: (1) the State VAT/State sales taxes, 
(2) the CST, and (3) other local ta xes and charges imposed by State402 or local governments.403  
7.357  The United States further observes that CN 19/2006 does not indicate how the 4 per cent ad 
valorem  rate of SUAD specified therein "has regard" to the internal taxes menti oned.  By itself, the 
fact that CN 19/2006 does not say how the Central G overnment "had regard" to the relevant internal 
taxes does not mean that the SUAD is not equivalent to those internal taxes.  We further note that, as 
is indicated in its text, CN 19/2006 was issued by the Central Government "[i]n exercise of the powers 
conferred by sub-section (5) of section 3 of the Cust oms Tariff Act, 1975".  In view of the fact that 
                                                      
392 Section 6(1) of the Central Sales Tax Act (Exhibit IND-3). 
393 India's replies to Panel Question Nos. 6 and 25.  Th e CST is collected from th e seller.  India's reply 
to Panel Question No. 61. 
394 India's second written submission, para. 2.12.  Like  State sales taxes, State VAT is authorized under 
Entry 54 of List II (State List) of the Constitution of India. 
395 Exhibit IND-25, p. 3; Section 3(1) of the Central Excise Act (Exhibit US-21). 
396 See, e.g., India's replies to Panel Question Nos. 36 and 48(a). 
397 As noted, the CST, in effect, is also a State tax in that it is levied and ap propriated by the States. 
398 In fact, India has said that the local taxes and ot her charges the SUAD is intended to counterbalance 
are those levied at State level.  In dia's reply to Panel Question No. 25. 
399 India's reply to Panel Question No. 30(a). 
400 E.g., Entries 56-58 and 66. 
401 We note in this respect that the United States is not alleging that India is in breach of its obligations 
of Article X:1 of the GATT 1994 on publication of trade regulations. 
402 India's first written submission, para. 79 ; India's reply to Panel Question No. 25. 
403 India's first written submission, paras. 23 and 70; India's second written submission, note 2.  WT/DS360/R 
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  there is a clear and direct link between CN 19/20 06 and Section 3(5) of the Customs Tariff Act, 
Section 3(5) is relevant to an assessment of whethe r the SUAD is equivalent to internal State taxes 
imposed in respect of like domestic products. 
7.358  We recall that Section 3(5) reads:  
"If the Central Government is satisfied that  it is necessary in the public interest to 
levy on any imported article [whether on such article duty is leviable under 
subsection ( 1) or, as the case may be, sub-section ( 3) or not] such additional duty as 
would counter-balance the sales tax, value a dded tax, local tax or any other charges 
for the time being leviable on a like article  on its sale, purchase or transportation in 
India, it may, by notification in the Official Gazette, direct that such imported article 
shall, in addition, be liable to an addition al duty at a rate not exceeding four per cent. 
of the value of the imported article as specified in that notification." 
 
7.359  Thus, Section 3(5) leaves a margin of discreti on to the Central Government, but at the same 
time stipulates that the rate of SUAD may not exceed 4 per cent ad valorem .  CN 19/2006 imposes the 
SUAD at this maximum rate of 4 per cent ad valorem .  India has explained that the rate of 4 per cent 
has been calibrated to ensure equivalence between  the SUAD and the State VAT/sales taxes, the CST 
and other local taxes and charges.  More specifical ly, India has explained that the rate of the SUAD 
has been set so as to correspond to the lowest rate  of State VAT applicable to a particular product.404  
The 4 per cent rate of SUAD corresponds to  the lowest basic rate of State VAT.405   
7.360  According to India, based on guidelines prep ared by the Empowered Committee of State 
Finance Ministers for the implementation of Stat e-level VAT, the States adopted VAT statutes which 
largely provide for the same four applicable ad valorem  rates of VAT: (1) nil for exempt goods, 
which include (a) certain natural and unprocessed goods as well as (b) "goods of local importance", 
(2) a special rate of 1 per cent for gold, bullion, je wellery, etc., (3) a basic rate of 4 per cent for basic 
necessities and (4) a basic rate of 12.5 per cent for all other goods.406  With regard to "goods of local 
importance", India has stated that they are identif ied in a list of 50 goods which has been approved by 
the Empowered Committee.407  From this list, each State may choose 10 goods to be nil-rated or 
exempted.408  The remaining goods on the list are apparently subject to any of the State's basic rates.  
                                                      
404 E.g., India's second written submission, para. 2.12, stating that the SUAD ha s been "pegged" to the 
lowest rate of State VAT. 
405 The term "basic rate" is used, e.g., in Exhibit IND-25, p. 13.   
406 The guidelines at issue are entitled "A White Paper On State-Level Value Added Tax" (Exhibit 
IND-25).  India has confirmed that the White Paper is not binding on States, noting that under the Constitution 
of India the States alone are empowered to levy sales taxes.  India's reply to Panel Question No. 54.  
Nonetheless, we note that the White Paper states that "[ i]t should be clearly noted, as already mentioned before, 
that all the States have agreed to amend their earlier VAT Bills so as to conform broadly to the common design 
as elaborated in this  White Paper. […]  The point of reference on VAT should therefore be this design of VAT 
as explained in this White Paper".  Exhibit IND-25, p.18.  Under the heading of "Design of State-Level VAT", 
the White Paper includes a sub-heading "VAT Rates and Classification of Commodities" which identifies the 
identified four rates of VAT and also indicates the type and approximate number of goods to be subject to each 
rate.  Ibid., p. 13.  Finally, the White Paper states that the common design of the State-level VAT "will also stop 
unhealthy tax rate 'war' and trade diversion among the States".  Ibid., p. 14.  Taken together, these elements 
suggest to us that individual States are not supposed, e.g., to nil-rate goods falling within the 4 per cent category 
(with the possible exception of any "goods of local importance" which might fall within that category), as 
otherwise it is difficult to see how the common design could achieve the goal of averting a tax rate "war".  In 
relation to "goods of local importance", we note that the White Paper describes them as goods which are of local 
social importance for individual States "without having any inter-state implication".  Ibid., p. 13.    
407 Exhibit IND-24. 
408 India's reply to Panel Question No. 55.    WT/DS360/R 
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  7.361  The United States has submitted evidence concerning one State that applies an additional rate 
of 20 per cent.409  India does not dispute that in different States different VAT rates may apply to the 
same good, but asserts that the lowest ba sic rate in every State is 4 per cent.410  In fact, India has stated 
that the SUAD is imposed at the single rate of 4 per cent, among other things, because the States 
where imported goods will eventually be sold may ha ve different applicable rates of 4 per cent or 
higher.  Evidence supplied by the United States further shows that there are at least four States which, 
under their relevant laws, have the authority to reduce any applicable rates of State VAT.411  However, 
the fact that these States have the authority to redu ce rates does not demonstrate that the lowest basic 
rate in any of these States is less than 4 per cent.  The authority to lower rates may have been provided 
for other reasons.412  Moreover, we understand that the Cent ral Government, under Sections 3(5) and 
3(8) of the Customs Tariff Act, also has the author ity to reduce the rate of SUAD in general or for 
specific goods.   
7.362  As noted, the SUAD as imposed through CN 19/2006 is levied at 4 per cent.  However, a 
separate customs notification issued by  the Central Government – CN 20/2006413 – exempts certain 
goods from some or all of the SUAD.  Specifically, as a result of CN 20/2006, India maintains, goods 
(other than "goods of local importance") that are exempt from State VAT are also exempt from the 
SUAD (nil rated).414  Similarly, goods subject to the special VAT rate of 1 per cent are subject to a 
corresponding rate of SUAD of 1 per cent.  India has stated that since the S UAD has been set so as to 
correspond to the lowest VAT rate applicable to a pa rticular product, the SUAD is levied at nil or 1 
per cent even where other relevant taxes, such as "o ther local taxes or charg es", are leviable on the 
like domestic good.415  India acknowledges, however, that for "goods of local importance" which are 
nil rated in individual States there is no corresponding SUAD exemption.  India submits that its 
international trading partners cannot be said to have  a significant commercial interest in the relevant 
goods which, India notes, include products such as re ligious threads, indigenous food ingredients and 
handicraft items.  India asserts that there are no signi ficant imports of such goods into India.  The 
United States points out that it does export at least some of the listed products, such as tapioca.  
7.363  The CST is interconnected with the State VAT.  The CST is levied at the rate applicable to 
the sale of the relevant good under the sales tax la w of the State where the good originates (i.e., from 
which it is sold).416  Thus, since the State VAT rates in the St ate of origin generally are either nil, 
1 per cent, 4 per cent or 12.5 per cent, the CST would be levied at these same rates, respectively.  
Where the CST rate is nil or 1 per cent, by virt ue of CN 20/2006, the corresponding rate of SUAD 
would also be nil (except for "goods of local importance") or 1 per cent.  For other goods, the rate of 
SUAD is 4 per cent, whereas, according to India, the rate of CST is 4 per cent or higher, since, like 
VAT rates, the CST rates in different States may be different for the same good.  There appear to be 
two possible exceptions, however.  First, based on Indi a's explanations of State VAT and the CST, it 
would seem that where a "good of local importance" h as been nil-rated in the State of origin, the CST 
rate would also be nil.  However, the informati on before us does not allow us to verify this.   
Secondly, as pointed out by India, where a dealer se lls to a registered dealer in another State, the 
                                                      
409 Exhibit US-23. 
410 India's second written submission, para. 2.12 ; India's reply to Panel Question No. 53. 
411 Exhibits US-23, -27, -28 and –29. 
412 One such purpose could be to allow for co-ordinat ed downward adjustment of all State VAT rates in 
the light of actual experience with implementation of a State VAT system or a changi ng economic situation.  
The guidelines prepared by the "Empowered Committee" of State Finance Ministers for the implementation of 
State-level VAT state that it is expected that after an initial loss of revenue in some States, introduction of VAT 
may, after a few years, lead to revenue growth.  Exhibit IND-25, p. 15.  If so, then there might be room for a 
lowering of the basic rates of 4 and 12.5 per cent. 
413 Exhibit US-11. 
414 The United States has not contested this. 
415 India's reply to Panel Question No. 34. 
416 Section 8(2) of the Central Sales Tax Act.  WT/DS360/R 
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  dealer is to pay CST amounting to 3 per cent of his turnover or at the rate applicable to the sale of 
such good under the sales tax law of the State of origin, whichever is lower.417  It seems that this 
concessional rate reflects the fact that the CST pa id on a first inter-State sale transaction is not 
creditable against the State VAT (or the CST) pa yable in case of subsequent re-sale within the 
relevant State (or to another State).418  India has, however, confirmed that the SUAD is applicable to 
imports by registered dealers.419  Accordingly, if application of the turnover rule leads to a lower 
effective tax rate than the relevant State VAT rate , the rate of the SUAD may, depending on the State 
of origin of the good subject to the CST, exceed the rate of the CST.   
7.364  In relation to State sales taxes other than VAT , i.e., those applicable to goods outside the 
VAT system, India has stated that State sales taxes for such goods vary from State to State, but are 
equal to or higher than 4 per cent.420  They may, India maintains, be higher than 12.5 per cent.421  
India has, however, provided no supporting eviden ce.  The United States, for its part, has not 
submitted evidence disproving this assertion.  Furthermore, no informa tion was provided to us 
regarding the rates applicable under the sales tax maintained by the State of Uttar Pradesh.  
7.365  Finally, so far as concerns "other local taxes a nd charges", we understand that some or all of 
these charges (such as Mandi taxes, market committee fees, turnover taxes or transport fees) are not 
eligible for credit against the State VAT.422  India states that the SUAD is intended to counterbalance 
those "other local taxes and charges" whic h are not creditable against the State VAT.423  These 
charges increase the tax burden borne by goods subject to State VAT or CST as well as of goods 
subject to State sales tax.  India submits that th ese charges therefore effec tively raise the cumulative 
rate resulting from imposition of intern al taxes to one that is higher than the basic 4 per cent rate of 
SUAD.  As previously pointed out, India has said th at where a good is subject to a State VAT rate of 
nil (or 1 per cent) and, in addition, to "other local  taxes and charges" which are not creditable against 
State VAT, the SUAD would, nevertheless, be applied at  a rate of nil (or 1 per cent), and not at a rate 
of 4 per cent.424 
7.366  It is important to note, as an additional matter, India's explanation that the SUAD was 
introduced to counterbalance only those of the rele vant internal taxes or charges that would be 
leviable on a good in respect of a domestic sal e transaction equivalent to the import transaction 
involving the like good.425  India refers to this as the "first sal e" transaction.  Subsequent to the first 
(international) sale transaction, imported goods – like domestic goods subsequent to a domestic first 
sale transaction – may of course be re-sold internally  or used in the manufacture of another product.  
India notes that where imported goods on which the SUAD has been paid have entered India's 
customs territory, and where they are subsequently re-sold internally or used in the manufacture of 
another product, they are subject to State VAT, Stat e sales tax, CST and/or "other local taxes or 
charges", or not, in the same way as like domestic products.   
                                                      
417 Section 8(1) of the Central Sales Tax Act.  India ha s stated that this rule has been in force since 1 
April 2007.  However, Exhibit IND-3 shows that a simila r rule was in force previously.  Also, this Panel was 
established on 20 June 2007. 
418 India's reply to Panel Question No. 59. 
419 India's reply to Panel Question No. 37(b). 
420 By implication, the same would then be true for the CST in case of inter-sta te transactions involving 
such goods. 
421 India's reply to Panel Question No. 33. 
422 India's reply to Panel Question No. 46; India's second written submission, para. 2.17. 
423 India's first written submission, para. 79; In dia's second written submission, para. 2.17. 
424 India's reply to Panel Question No. 33.    
425 India's first written submission, para. 71; India's second written submission, para. 2.5; India's reply 
to Panel Question No. 48(e) and (f). WT/DS360/R 
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  7.367  In this regard, India has stated that on the date  of establishment of the Panel no refund of the 
SUAD paid in respect of the import transaction was available against the State VAT, or the CST, 
payable in respect of a domestic re-sale transaction.426  Nor was the SUAD paid creditable against the 
State VAT, or the CST, payable in respect of a domestic re-sale transaction.427  This mirrors the 
situation of the CST, in that the CST paid in resp ect of a first inter-State sale transaction is not 
creditable against the State VAT, or the CST, payable in respect of a domestic re-sale transaction.428  
In relation to State VAT, we recall that one of the particularities of State VAT is that an off-set is 
given for State VAT paid in respect of previous sale transactions (e.g., for inputs or the same good 
where the goods was not further processed).429  Accordingly, the State VAT paid in respect of a first 
intra-State sale transaction is creditable against the State VAT payable in respect of an intra-State re-
sale transaction.430   
7.368  India has pointed out that a credit of the SUAD paid is available when imported raw materials 
are used for further manufacturing finished products and the finished products are sold.  That credit 
can be used against the central excise duty (C ENVAT) payable on the finished manufactured 
product.431  In response to a question, India has confirme d, however, that the credit in question cannot 
be used to offset any other tax es like the State VAT, the CST, etc.432  Furthermore, the credit against 
the central excise duty is equally available where the raw materials from wh ich the finished product 
has been manufactured are domestic.433   
7.369  As to whether the rate of SUAD specified in  CN 19/2006 indicates that the SUAD is not 
equivalent to the relevant internal taxes (i.e., th e State VAT/sales tax, the CST and "other local taxes 
or charges"), the first point to be made is that while, as indicated above, we have a good deal of 
general information, we have little specific information about State VAT/sales taxes or "other local 
taxes or charges" actually levied by different States.   Nevertheless, it is clear from the information we 
have and the explanations India has provided that there could conceivably be circumstances where the 
SUAD is levied at a rate that is higher than the rate resulting from imposition of the relevant internal 
taxes on like domestic goods, or results in a hi gher tax burden being im posed on products being 
imported.  Such circumstances might, for example, ari se where an equivalent domestic transaction: (i) 
involves a "good of local importance" for which a partic ular State has set a rate of State VAT of nil, 
(ii) involves an inter-State sale to a registered dealer434 or (iii) is subject to State VAT and followed by 
an intra-State re-sale transaction involving the same good435.  Even assuming, however, that 
circumstances might arise where, e.g., the rate of SUAD exceeded the rate resulting from imposition 
of relevant internal taxes on like domestic goods, in our view this would nevertheless not demonstrate, 
                                                      
426 As previously noted, in the course of the Panel proceedings India issued CN 102/2007 which 
provides, subject to certain conditions being satisfied, for the possibility of obtaining a refund from the SUAD 
paid in case of a subsequent domestic re -sale transaction subject to State VAT. 
427 India's reply to Panel Question No. 51(a). 
428 India's reply to Panel Question No. 59.  In our  understanding, there also is no possibility of 
obtaining a refund. 
429 India's reply to Panel Question No. 32(b); Exhibit IND-25, p. 1. 
430 It is unclear from the information on the record  whether the State VAT paid is also creditable 
against the CST which is payable in respect of  a domestic inter-State re-sale transaction. 
431 The availability of the credit is provided for in Rule 3 of the Cenvat Credit Rules (Exhibit IND-4). 
432 India's reply to Panel Question No. 51(b) and (c). 
433 India's reply to Panel Question No. 51(b). 
434 We make no comment upon whether this second set of circumstances remains relevant in view of 
CN 102/2007 which came into force after the date of establishment of the Panel.  We note in this regard India's 
contention that registered dealers will either resell the same product or use the imported product to manufacture 
other products.  The United States contends that a regi stered dealer could also co nsume or use a product it 
purchased inter-State. 
435 We make no comment upon whether this third set of circumstances remains relevant in view of 
CN 102/2007 which came into force after the date of establishment of the Panel.  WT/DS360/R 
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  for the reasons we have stated earlier436, that the SUAD and relevant internal taxes do not fulfil the 
same relative function within India's customs duty a nd tax system.  Instead, the existence of a rate 
differential (or, more generally, of a tax burden differential) disfavourin g products being imported 
may merely indicate that the SUAD and the relevant  internal taxes fulfil the function of imposing a 
charge on the products subject to the SUAD qua products in a different manner, with the consequence 
that, in certain circumstances, products being imported are treated less favourably than like domestic 
products.437   
7.370  An additional feature of CN 19/2006 to which we wish to draw attention is that according to 
our understanding, pursuant to CN 19/2006, the SUAD is imposed on the importation of a subject 
good without regard for the particular State into which it is imported.  To our minds, if the SUAD 
were imposed, through CN 19/2006, on a good imported into a State where relevant internal taxes are 
not leviable on the like domestic good, this would pr esent the issue whether in respect of imports of 
the relevant good into that State the SUAD is  "equivalent" to relevant internal taxes.438  However, as 
further addressed below, there is no evidence on the r ecord to show that, on the date of establishment 
of the Panel, this situation pertained.   
7.371  Having regard to the foregoing considerations, it can thus be said that the particular features 
and structure of CN 19/2006, including the fact that, on its face, it points to a relationship with 
relevant internal taxes, the rate it specifies, and the fact that it applies to imports of subject goods 
without apparent regard for the State into which they are imported, support or at least are not 
inconsistent with India's position that the SUAD is "e quivalent" to relevant internal taxes leviable in 
India.   
7.372  Turning now to examine the design, or purpo se, of the SUAD, we note the United States' 
argument that the statement in Section 3(5) th at the SUAD may be imposed "[i]f the Central 
Government is satisfied that it is necessary in the public interest to levy on any imported article […] 
such additional duty as would counter-balance the sales tax, value added tax, local tax or any other 
charges for the time being leviable […] in India"  does not affect whether the SUAD may be regarded 
as an ordinary customs duty.  In the United States' view, the purpose or intent a Member attributes to 
a duty is not determinative.439  We would agree that the purpose stated by a Member in its legislation 
is not determinative, by itself, for WTO purposes.  Nevertheless, it is a relevant factual element which 
we may consider together with others in co ming to an overall conclusion on the issue of 
"equivalence".440 
7.373  In considering this element, we observe, as an  initial matter, that the quoted statement in 
Section 3(5) makes clear that if the SUAD is imposed, it must be imposed for the purpose of 
counterbalancing the internal taxes identified in Sec tion 3(5).  We therefore consider that the passage 
in question is consistent with India's view441 that the SUAD is a duty imposed by the Central 
Government of India to offset the incidence of State VAT/sales taxes, the CST and other local taxes 
or charges that are not levied on the importation of goods into India.442  
                                                      
436 See supra , para. 7.192-7.193. 
437 Ibid. 
438 We recall that pursuant to CN 20/2006 a list of specified goods are nil-rated.  In relation to these 
goods, the issue referred to would not arise. 
439 In support of its argument, the United States refers to the GATT Panel Report on EEC – Parts and 
Components , para. 5.7. 
440 See also Panel Report, Argentina – Hides and Leather , note 440. 
441 India's first written submission, paras. 69 and 70. 
442 In our view, the mere fact that the Explanation to  Section 3(5) contemplates  that in cases "where 
such [internal] taxes, or, as the case may be, such charges are leviable at different rates", the Central 
Government may set the rate of SUAD by reference to "t he highest such tax or, as the case may be, such WT/DS360/R 
Page 160 
 
 
  7.374  It is not clear to us from the quoted statement whether the SUAD may be imposed on a good 
being imported into India only in cases where relevant internal taxes are for the time being leviable on 
a like domestic good in all States, or whether it woul d be sufficient that relevant internal taxes are 
leviable in only some States.443  Regarding the second hypothesis, it is pertinent to note that pursuant 
to Section 3(8) of the Customs Tariff Act in conjunction with Section 25 of the Customs Act the 
Central Government appears to have the power to grant exemptions from the levy of the SUAD 
subject to such conditions (to be fulfilled before or after customs clearance) as it may specify in the 
exemption notification.444  Thus, it seems to us that even if Section 3(5) authorized the Central 
Government to impose the SUAD in  cases where relevant taxes are leviable on a good in only some 
States, it is not clear that the Central Governme nt would be required to impose it on all like goods 
imported into India, irrespective of the State into whic h they are imported.  In the light of this, and in 
the absence of evidence to the cont rary, we see no reason to consider that the SUAD, as designed, 
necessarily "overshoots" in certain circumstances. 
7.375  In sum, having regard to the issue of the design of the SUAD, we think the text of 
Section 3(5) as well as the previously discussed co ndition that the SUAD is to be levied on a good 
only if on a like good (or a good of the same class or d escription) relevant internal taxes are leviable 
are consistent with India's view that the SUAD as  contemplated in Section 3(5) is designed to 
counterbalance the internal taxes Section 3(5) identifi es.  Moreover, it does not appear to us to be the 
case that the SUAD, as designed, necessarily "overshoots" in certain circumstances.445   
7.376  If, as argued by India, the SUAD is designed to counterbalance the internal taxes identified in 
Section 3(5) and leviable on like domestic goods, this would in our view support the inference that it 
is designed to impose a charge on the subject goods as such, and not qua goods being imported.  It 
should be recalled in this respect that the SUAD is cappe d, by virtue of Section 3(5), at a rate of 4 per 
cent ad valorem  for all subject goods whereas, as we have seen , in respect of some of these goods the 
States may apply rates of, e.g., State VAT that are hi gher.  It is clear, therefore, that the SUAD, as 
designed, may not fully counterbalance the relevant in ternal taxes.  The fact that it may not does not 
imply, in our view, that it is designed to have a di fferent function.  Rather, as we have said earlier, it 
may indicate that the SUAD and the relevant internal taxes fulfil the function of imposing a charge on the goods subject to the SUAD qua goods in a different manner, with the consequence in this case 
being that, in certain circumstances, goods bei ng imported are treated more favourably than like 
domestic products. 
7.377  As to what this means for the SUAD, as actua lly imposed through CN 19/2006, we recall that 
Section 3(5) is the statutory basis upon which CN 19/2006 was issued, that CN 19/2006 explicitly 
states that the Central Government had regard to th e "sales tax, value added tax, local tax and other 
taxes or charges" leviable in India, as required by Section 3(5), and that there is no indication that the 
consistency of CN 19/2006 with Sectio n 3(5) was ever questioned in India
446.  To that extent, there is 
no reason to think, based upon CN 19/2006 and its statutory basis, that the SUAD could not be designed to counterbalance the internal taxes identif ied in CN 19/2006, as argued by India.  Or to put 
                                                                                                                                                                    
 
charge", provided the rate does not exceed 4 per cent ad valorem , does not demonstrate that the SUAD is 
designed to accomplish something other than offsetting the incidence of relevant internal taxes.  As CN 19/2006 
and CN 20/2006 indicate, the provisions of Section 3( 5) and its Explanation leave the Central Government 
considerable freedom of action.     
443 We note that neither Party has addressed this issue.   
444 As we have indicated previously, the power to grant exemptions appears to include the power to 
grant a refund of a duty already paid.   
445 In the light of these elements as well as in vi ew of our consideration below of the legal context 
within which the SUAD operates, there is no apparent re ason to be concerned that the relevant statement in 
Section 3(5) is designed to conceal  the true nature of the SUAD.   
446 In the context of the present pr oceedings, the United States has not, itself, alleged that CN 19/2006 
is not properly based on Section 3(5).  WT/DS360/R 
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  it another way, the aforementioned elements do not contradict the view that the function which the 
SUAD is designed to fulfil is to impose a charge  on goods imported into India as such, and not on 
goods qua goods being imported.   
7.378  Nevertheless, the design of the SUAD could not, in any event, be determinative, on its own, 
of whether it is equivalent to rele vant internal taxes.  As we have previously explained, as part of our 
"equivalence" inquiry under Article II:2(a), we also need  to examine the SUAD in its relevant context.   
7.379  We turn first to review the legal contex t within which the SUAD operates and, more 
specifically, the legal framework of India's customs duty and tax system, of which the SUAD forms part.  We commence our review with the State VA T and the sales taxes.  The Constitution of India 
empowers the States to impose taxes on the sale (o r purchase) of goods, except where such sale (or 
purchase) takes place in the course of inter-State trade or commerce.
447  However, pursuant to 
Article 286(1) of the Constitution of India, "[n]o law of a State shall impose, or authorise the 
imposition of, a tax on the sale or purchase of goods wh ere such sale or purchase takes place […] (b) 
in the course of import of the goods into […] the territory of India".  As explained by India, Article 286(1) prohibits States from imposing State VAT or sales taxes in respect of the import 
transaction, i.e., when an imported product first enters the Indian customs territory.
448  Accordingly, 
the first (international) sale transaction may not be subjected to State VAT or a State sales tax, but subsequent domestic re-sale transactions may be subjected to State VAT or a State sales tax.  In 
addition, the States lack the power of imposing State VAT or a State sales tax in respect of inter-State 
sale transactions.  The power to impose taxes on the sale or purchase of goods where such sale or 
purchase takes place in the course of inter-State trade or commerce is reserved to the Central 
Government.
449   
7.380  Given that State Governments lack the power to impose VAT or sales taxes in respect of 
international or inter-State sale transactions, it is  not unreasonable that India's customs duty and tax 
system, as it existed on the date of establishment of  this Panel, would provide for some form and 
measure of compensatory taxation of these sale tran sactions.  In this rega rd, it is our understanding 
that the Central Government has exercised its pow er to impose sales taxes on inter-State trade inter 
alia by enacting the Central Sales Tax Act which provides for the imposition of the CST.450  We 
further understand that the Central Government does not have the power to impose taxes on the sale 
or purchase of goods where such sale or purchase tak es place in the course of import of the goods into 
the territory of India.451  However, as we have seen, the Cons titution of India authorizes the Central 
Government, and it alone, to impose "duties of customs" .  To recall, India has explained that the term 
"duties of customs" encompasses th e BCD, the AD and the SUAD.  The Parties have not specifically 
discussed any other "duties of customs" that would be  applicable to the goods subject to the SUAD.  
In view of the fact that the Central Government does not have the authority, under India's 
Constitution, to impose sales taxes on  products being imported into In dia, it seems natural that it 
might possibly wish to use a "duty of customs" in  order to counterbalance the State VAT or sales 
taxes leviable on like products in India.   
7.381  In this regard, it is common ground in this case that the BCD, which is no doubt also applied 
to some or all of the products subject to the SUAD,  is an "ordinary customs duty" within the meaning 
of Article II:1(b).  As such, it has the function of imposing a charge on the subject product qua 
                                                      
447 Entry 54 of List II (State List) of the Constitution of India.   
448 India's reply to Panel Question No. 30(a). 
449 Entry 92A of List I (Union List).   India asserts that this also follows from Article 286(1)(a) which 
prohibits the imposition of State sales taxes where the sale  takes place "outside of the State".  India's reply to 
Panel Question No. 58. 
450 India's reply to Panel Question No. 30(c). 
451 India's first written submission, para. 71. WT/DS360/R 
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  product being imported into India.  Put differently , it is not imposed to counterbalance any of the 
internal taxes at issue.  The AD is imposed pursuant to Section 3(1) of the Customs Tariff Act to 
counterbalance State or Central excise duties.  In dia has explained that the categories of taxes or 
charges enumerated in Section 3(5) do not overlap  with the category of excise duties referred to in 
Section 3(1).452  Thus, the AD does not purport to counterbal ance any of the internal taxes or charges 
referred to in Section 3(5).  Consequently, the "duty of  customs" that is left to achieve this purpose is 
the SUAD.  As we have seen, the SUAD has a statut ory basis that is different from that of the BCD, 
which is consistent with the view that it fulfils a different function within India's customs duty and tax 
system, namely, the function of imposing a charge on the products subject to the SUAD qua products 
rather than qua products being imported. 
7.382  Regarding the "other local taxes or charges" le viable on the sale, purchase or transportation of 
like domestic products, India has stated that Article  286(1) of the Constitution of India prohibits the 
imposition of "other local taxes or charges" on the sale or purchase of goods where the sale or 
purchase takes place in the course of th e import of the goods into India.453  We note that 
Article 286(1) only concerns State or local taxes on the sale or purchase of goods; it does not concern 
State or local taxes on the transportation of goods.454  However, as pointed out by India, "other local 
taxes or charges" must be authorized by a specific constitutional entry in List II or III.455  We have not 
been able to identify, nor did the Parties identify, among the "other local taxes or charges" authorized 
by specific constitutional entries in List II or III, an y which could be imposed, in lieu of transportation 
charges, in the course of the import of relevant goods into India's customs territory.456  India has also 
confirmed that "other local taxes or charges" on the sale or purchase of goods may not be applied 
when the sale or purchase takes place in the course of in ter-State trade, and that such taxes or charges 
may be imposed on the transportation of goods only to th e extent that such goods enter the territory of 
the State or local area imposing such a tax or charge.457  In view of the foregoing, it is understandable 
that the Central Government might possibly wish  to use a "duty of customs" like the SUAD to 
counterbalance any "other local taxes or charg es" on the sale, purchase or transportation of goods 
which cannot be imposed, at the State or local level, in respect of import transactions.458   
7.383  In the light of the above, we c onsider that the legal framework of India's customs duty and tax 
system, as described above, is not inconsistent w ith India's position that the SUAD is designed to 
counterbalance State VAT/sales taxes, the CST and "other local taxes or charges" leviable in India.  
The States are either expressly prohibited from imposi ng, or lack the power to impose, the relevant 
internal taxes (State VAT/sales taxes and "other lo cal taxes or charges") on goods in the course of the 
                                                      
452 India's reply to Panel Question No. 27(e). 
453 India's reply to Panel Question No. 48(e).  India has confirmed that once imported products enter 
India's customs territory, they may be subjected to "other local taxes or ch arges" in the same way as domestic 
products.  India's replies to Panel Question Nos. 30(a), 41 and 48(f). 
454 Ibid. 
455 India's reply to Panel Question No. 30(a).  We also recall that India has explained that it has a 
system of judicial review whereby the exercise by the Central Government and State Governments of their 
respective powers under the pos itive lists is subject to judicial scruti ny.  India's reply to Panel Question No. 
48(d). 
456 We note Entry 52 of List II (Exhibit US-20) wh ich deals with taxes on the "entry of goods into a 
local area for consumption, use or sale therein".  However, it would appear that the word "entry" does not refer 
to entry into the customs territory of India, but rather, as  the text of Entry 52 suggests, entry into a local area.  
This understanding appears to be consistent also with India's response to Panel Qu estion No. 48(e) as well as 
India's response to Panel Question No. 49(b) which indicates that no "other local taxes or charges" may be 
imposed on the inter-State sale of goods.      
457 India's reply to Panel Question No. 49(b). 
458 India's reply to Panel Question No. 48(f).  In the case of inter-State transactions, to the extent it 
wished to provide for any compensatory taxation, the Central Government would need to use the CST or 
another tax on the sale or purchase of goods.  WT/DS360/R 
 Page 163 
 
 
  import into India's customs territory.  In turn, it appears that the Central Government can only 
counterbalance relevant internal taxes (the CST,  State VAT/sales taxes and "other local taxes or 
charges") by means of a "duty of customs".  More over, the record does not indicate that there is a 
"duty of customs" other than the SUAD applicab le to the relevant products and designed to 
counterbalance relevant internal taxes, or that th ere are other types of taxes or charges imposed by 
State Governments that could be said to counterbalan ce relevant internal taxes with regard to products 
imported into India and subject to the SUAD.  It is true that the States are not legally required to 
impose State VAT/sales taxes and/or "other local ta xes or charges".  The lack of a requirement to 
impose such taxes or charges does not, however, give rise to a presumption that the States would not 
actually impose such taxes or charges.      
7.384  If relevant internal taxes are leviable in all States on products subject to the SUAD, and if the 
States levy such taxes as envisaged in India's C onstitution (and so do not impose them on products in 
the course of their import into India's customs territory),459 the legal framework described above also 
supports the view that the SUAD and the relevant in ternal taxes fulfil the same relative function, in 
respect of equivalent transactions, within India's customs duty and tax system.  To begin with, it is 
clear that, under the legal framework as described  above, the SUAD imposes a charge in respect of 
import transactions involving specified products impor ted into India, whereas the relevant internal 
taxes impose a charge in respect of equivalent  domestic transactions i nvolving like products.  
Moreover, to the extent all States levy relevant internal taxes on products subject to the SUAD, the 
legal framework supports the inference that th e function the SUAD, as imposed by CN 19/2006, 
fulfils within India's customs duty and tax system  is to impose a charge on the specified products qua 
products, and not qua products being imported into India.  Furthermore, to the extent the States levy 
the relevant internal taxes as envisaged in Indi a's Constitution (and thus do not impose them on 
products in the course of their import into India's cu stoms territory), the lega l framework also supports 
the inference that the function these internal taxes fulfil within India' s customs duty and tax system, in 
respect of domestic transactions equivalent to import transactions, is to impose a charge on the 
products qua products, and not qua domestic products.  
7.385  Having reviewed the legal context within which the SUAD operates, we now turn to consider 
the factual context within which the SUAD is imposed.  In this respect, a relevant issue is whether, on 
the date of establishment of the Panel, all States levi ed relevant internal taxes on products subject to 
the SUAD.  We note in this respect that pursuant to  the Central Sales Tax Act the CST is required to 
be levied.  Furthermore, India has stated that all States but one impose State VAT and that the State 
which does not impose a VAT imposes a sales tax.460  The United States did not contest this 
statement.  Regarding the list of "goods of local  importance" from which States may select up to 10 
items to be nil-rated or exempted from VAT, we observe that the fact that the States have the right to 
do so does not necessarily imply that any State had actua lly availed itself of that right as of the date of 
establishment of the Panel.461  At any rate, we have been provided no evidence indicating that a 
particular State has nil-rated or exempted one or  more products which are included in the list of 
"goods of local importance" and subject to the S UAD.  In relation to goods outside the VAT system, 
India asserts that such taxes are levied at a rate of 4 per cent or higher.  However, there is no 
information on the record which confirms that all States impose a sales tax on goods which are 
outside the VAT system but subject to the SUAD.462  Finally, concerning other "local taxes or 
charges", we have been given examples of such tax es or charges imposed by particular States, but the 
evidence before us does not indicate whether such taxes or charges are levied in all States.   
                                                      
459 We will revert to these two factual conditions further below. 
460 India's second written submission, note 2 and para. 2.12. 
461 India has suggested that conditions apply, including that nil-rating or exempting a listed good not 
have any inter-State implications.  India's reply to Panel Question No. 55. 
462 Exhibit IND-25, p. 13, suggests that the relevant goods used to be taxed and would "continue to be 
taxed", but no specific information is provided. WT/DS360/R 
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  7.386  We see no basis upon which we would be entitled to presume that, as of the date of 
establishment of the Panel, there were States which did not impose relevant taxes on goods subject to 
the SUAD (e.g., on goods outside the VAT system or "goods of local importance").463  We also recall 
that in this case it is up to the United States to est ablish that the SUAD is not "equivalent" to relevant 
internal taxes.  As a result, we can only conc lude that there is no evidence on the record to 
demonstrate that, on the date of establishment of the Panel, there were States which did not levy 
relevant internal taxes on products subject to the SUAD. 
7.387  Another relevant factual issue is whether India' s Constitution and/or relevant laws are in fact 
implemented as envisaged in these legal instruments.  We note in this respect that there is no evidence 
on the record indicating that relevant internal ta xes have been imposed on products subject to the 
SUAD in the course of their import into India's custom s territory.  In the absence  of such evidence, we 
must presume that, at the time of establishment of  this Panel, the States followed the requirements of 
India's Constitution and/or relevant laws and did not impose relevant internal taxes on products 
subject to the SUAD in the course of thei r import into India's customs territory.464    
7.388  Accordingly, the legal and factual context w ithin which the SUAD operated on the date of 
establishment of the Panel does not indicate that th e SUAD was not "equivalent" to relevant internal 
taxes leviable on products subject to the SUAD.     
7.389  Based upon the above analysis of the SUAD, incl uding its particular features, structure and 
design and the legal and factual context within wh ich it operates, we thus come to the following 
overall result regarding the element of "equivalence":  
(a) The evidence before us, comprising, inter alia , CN 19/2006, its statutory basis and 
the general legal framework of India's customs duty and tax system, is not 
inconsistent with India's position that the SUAD is "equivalent" to taxes or charges 
referred to in CN 19/2006 and leviable  in India on like domestic products; 
(b) there is no evidence on the record to demons trate that, on the date of establishment of 
the Panel, there were States which did not le vy internal taxes or charges referred to in 
CN 19/2006 on products subject to the SUAD; and 
(c) there is no evidence on the record to demonstrate that, notwithstanding the general 
legal framework in existence at the time, re levant internal taxes or charges were, in 
fact, imposed on products subject to the SUAD in the course of their import into 
India's customs territory.  
7.390  In these circumstances, we can only conclude that the United States has failed to meet its 
burden of establishing that the SUAD is not "equivale nt", within the meaning of Article II:2(a), to 
taxes or charges referred to in CN 19/2006 an d leviable in India on like domestic products. 
7.391  In view of this conclusion, we need not, fo r the purposes of disposing of the United States' 
claim under Article II:1(b), and hence do not, come back  to the issues of whether the taxes or charges 
referred to in CN 19/2006 and leviable in India ar e internal taxes or charg es imposed in respect of 
domestic products and whether the pr oducts subject to the SUAD are in fact "like" domestic products 
subject to the previously mentione d internal taxes or charges.  
                                                      
463 We recall that CN 20/2006 nil-rates certain goods that would otherwise be subject to the SUAD, as 
imposed through CN 19/2006. 
464 We also recall in this context th at the record contains no specific example of another type of tax or 
charge, imposed by a State, consistently or inconsisten tly with the Constitution of India, on imported products 
subject to the SUAD in lieu of relevant internal taxes.  WT/DS360/R 
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  (c) Conclusion 
7.392  As we have explained earlier, in the specific circumstances of this case, if the United States as 
the complaining party cannot meet its burden of est ablishing that the SUAD is not "equivalent" to 
taxes or charges referred to in CN 19/2006 a nd leviable in India on like domestic products,465 it cannot 
successfully establish that the SUAD is of the same kind  as, or in the nature of, an ordinary customs 
duty (or an "other duty or charge" imposed on the importation of the products subject to the SUAD). 
7.393  As we have also explained, in the absence of a showing that the SUAD is in the nature of an 
ordinary customs duty (or an "other duty or char ge" imposed on the importation of a good), the fact 
that it meets the elements of the US definition of  "ordinary customs duties" is not sufficient to 
establish that it is an ordinary customs duty (or an  "other duty or charge" imposed on the importation 
of the products subject to the SUAD) under Article II:1(b).  Hence, we find that the United States has 
failed to establish that the SUAD constitutes an ordi nary customs duty (or an "other duty or charge" 
imposed on the importation of the products subject to the SUAD) within the meaning of 
Article II:1(b).  As a result, it has not been demonstrated that the obligations contained in Article II:1(b) are applicable to the SUAD. 
7.394  Accordingly, we come to the conclusion that the United States has failed to establish that the 
SUAD, as imposed through CN 19/2006, is inconsiste nt with Article II:1(b), first or second sentence. 
E. US
 CLAIMS OF VIOLATION OF ARTICLE II :1(A) OF THE GATT 1994 
7.395  Having disposed of the US claims of violati on of Article II:1(b) of the GATT 1994, we turn 
now to assess the separate and additional US claims of violation of Article II:1(a) of the GATT 1994.  To recall, the United States claims that both th e AD and the SUAD are inconsistent, as such, with 
Article II:1(a).  Article II:1(a) reads as follows: 
"Each contracting party shall accord to the commerce of the other contracting parties 
treatment no less favourable than that provi ded for in the appropriate Part of the 
appropriate Schedule annexe d to this Agreement." 
7.396  The claims made by the United States  under Article II:1(a) are linked to its claims under 
Article II:1(b).  As already noted, the United States is  of the view that the AD is inconsistent with 
Article II:1(b) because it results in ordinary cust oms duties on imports of alcoholic beverages that 
exceed those set out in India's WTO Schedule.  Based  on this view, and relying on the Appellate Body 
report on Argentina – Textiles and Apparel , the United States submits that by imposing ordinary 
customs duties on imports of alcoholic beverages from the United States in excess of those set forth in 
India's Schedule, the AD also accords imports from the United States less favourable treatment than 
provided for in India's Schedule and is therefor e, as such, inconsistent with Article II:1(a). 
7.397  Similarly, the United States submits that the SUAD is, as such, inconsistent with 
Article II:1(a).  Because in the United States' view  the SUAD results in customs duties on imports of 
alcoholic beverages and other produc ts (including those in Exhibit US-1) from the United States that 
exceed those set out in India's Schedule, it accord s imports from the United States less favourable 
treatment than provided for in India's Schedule.  Consequently, the United States argues, the SUAD 
is, as such, inconsistent with Article II:1(a).  
7.398  India  considers that the SUAD is not inconsistent  with Article II:1(a).  India submits that 
Article II:1(a) and (b) when read together require that an offending measure be either an ordinary 
                                                     
 
465 We recall that, for the purposes of an Article II: 2(a) inquiry, "equivalence" is a necessary condition 
for the SUAD to fall outside the scope of Article II:1. WT/DS360/R 
Page 166 
 
 
  customs duty or an ODC which is in excess of bound commitments and which results in "less 
favourable" treatment being given to imported products.  In this respect, India recalls its view that the 
SUAD is neither an ordinary customs duty nor an ODC as defined under Article II:1(b), and hence is 
not required to be listed as part of India's Schedule.  Instead, India argues, the SUAD is a charge 
levied at the border in lieu of internal taxes and in accordance with Section II:2(a).  India therefore 
considers that it has "preserved the value of tariff concessions" listed in its Schedule and its ordinary 
customs duty applied on the importation of certain alcoholic beverages and ot her identified industrial 
and agricultural products is well within th e limits prescribed in its Schedule.  
7.399  Regarding the AD, India's position is that it has been validly removed by virtue of Customs 
Notification 82/2007 which reduced the AD rate applicable to alcoholic beverages to nil. 
7.400  The Panel  notes that the United States' claims under Article II:1(a) are in the nature of  
consequential claims.466  The United States argues, in essence, that an inconsistency with Article II:1(a) 
follows by implication from an establ ished inconsistency with Article II:1(b).  We are able to accept this 
argument, which is supported by the Appellate Body report on Argentina – Textiles and Apparel  
wherein the Appellate Body found that  "[p]aragraph (b) [of Article II:1]  prohibits a specific type of 
practice that will always be inconsiste nt with paragraph (a) [of Article II:1]".467  And further on in the 
same report, the Appellate Body observed that "[i]t is evident to us that the application of customs duties 
in excess of those provided for in a Member's Sc hedule, inconsistent with the first sentence of 
Article II:1(b), constitutes 'less favourable' tr eatment under the provisions of Article II:1(a)".468   
7.401  Accordingly, the starting point of our analysis  are our conclusions concerning the US claims 
under Article II:1(b).  These conclusions are to the effe ct that the United States has failed to establish 
that India has acted inconsistently with its obligations under Article II:1(b) either in respect of the AD or 
in respect of the SUAD.  As no inconsistency with Article II:1(b) has been established, and as the 
United States' claims under Article II:1(a) are premised on the existence of a breach by India of 
Article II:1(b), we come to the conclusion that the United States has also failed to establish that the AD 
and/or the SUAD are inconsistent with Article II:1(a).   
F. REFERENCES BY THE UNITED STATES TO ARTICLE III :2 OF THE GATT 1994 
7.402  There is one additional matter it is appropriate to address before  concluding.  This concerns 
various references made by the United States to th e provisions of Article III:2 of the GATT 1994 and 
to the alleged inconsistency of the measures at issue with these provisions.  
7.403  In this regard, we recall at the outset the US  request for the establishment of a panel of 
25 May 2007 which states in relevant part:469 
"Even if the additional duty and the extr a additional duty were considered to be 
internal taxes applied at the time of impo rtation, these duties subject imports from the 
United States to internal taxes in excess of  those applied to like domestic products or 
directly competitive or substitutable domest ic products in breach of Article III:2 of 
the GATT 1994, and afford less favourable tr eatment to imported products than to 
like domestic products in breach of Article III:4 of the GATT 1994. 
                                                      
466 See, e.g., para. 14 of the US fi rst oral statement where the United States submits that "because India 
imposes each of the AD and the [SUAD] in excess of the or dinary customs duties, or other duties or charges, set 
forth in its WTO Schedule, each is inc onsistent with Article II:1(b) and, as a consequence, also Article II:1(a) of 
the GATT 1994". 
467 Appellate Body Report, Argentina – Textiles and Apparel , para. 45. 
468 Ibid., para. 47. 
469 WT/DS360/5.  WT/DS360/R 
 Page 167 
 
 
  ... 
These measures appear to be inconsistent w ith India's obligations under provisions of 
the GATT 1994, in particular with: 
[Article II:1(b) of the GATT 1994 a nd Article II:1(a) of the GATT 1994]; 
and to the extent that the measures impose an  internal tax or other charge on imported 
products,  
(5) Article III:2 of the GATT 1994; and 
(6) Article III:4 of the GATT 1994." 
7.404  It is clear from the above-quoted passage that the US request for the establishment of a panel 
covers alternative US claims under Artic le III:2 and Article III:4 of the GATT 1994. 
7.405  Subsequent to the establishment of the Panel, in its submissions to the Panel, the United 
States, as already noted, referred to the provisions  of Article III:2 of the GATT 1994, but nowhere do 
these submissions refer, either explicitly or by imp lication, to the provisions of Article III:4 of the 
GATT 1994 in connection with a measure before the Panel.470  There can therefore be no doubt that 
the United States has effectively abandoned its altern ative claim under Article III:4.  Conversely, in 
view of the fact that the United States has made re ferences to the provisions of Article III:2 and to the 
alleged inconsistency of the AD on alcoholic liquo r and the SUAD with these provisions, as well as 
the Panel's findings that the AD and the SUAD are "cha rges equivalent to internal taxes imposed ... in 
respect of the like domestic product" , it is appropriate to examine be low whether the United States put 
forward a claim under Article III:2 on wh ich the Panel needs to rule.    
7.406  Section IV of the US first written submission is  entitled "Summary of Legal Argument".  In 
that section, there is a paragraph – paragraph 33 – which reads as follows: 
"Alternatively, the additional customs dut y and extra-additional customs duty are 
inconsistent with GATT Article III:2 as tax es applied on imported products, including 
alcoholic beverages, that exceed those app lied to like domestic products or directly 
competitive or substitutable domestic products." 
7.407  This paragraph states an alternative claim of violation, albeit in very summary form.  The 
brevity of the statement is not surprising for a para graph included in a summary.  However, contrary 
to what one would expect after reading the summary, Section V of the US first written submission, 
which is entitled "Legal Argument", does not prov ide any arguments in support of a separate and 
independent claim under Article III:2.   
7.408  Moreover, both in the introductory section a nd in the concluding section of the US first 
written submission, the United States put forward requ ests for findings by the Panel.  In both sections, 
the United States requests findings in relation to its claims under Article II:1(a) and Article II:1(b) of 
the GATT 1994.  Yet in neither section does the Unit ed States request findings in relation to a claim 
under Article III:2. 
                                                      
470 The United States appears to sugges t that CN 102/2007 may not be consistent with Article III:4.  US 
second oral statement, para. 22.  However, as we have previously explained, the United States itself has 
requested that we not rule upon CN 102/2007 in this case.   WT/DS360/R 
Page 168 
 
 
  7.409  Consideration of the US first written submission thus leads to the conclusion that although the 
United States at paragraph 33 stated a claim unde r Article III:2 in summary form, it refrained both 
from developing relevant arguments and from requesting findings in relation to that claim.  In the 
light of this conclusion, it is necessary to go on to review the US second written submission and other 
submissions to the Panel.   
7.410  The introductory and concluding sections of the US second written submission set out 
requests to the Panel for findings in relation to the US claims under Article II:1(a) and Article II:1(b) 
of the GATT 1994, but, as in the case of the US firs t written submission, do not request the Panel to 
make findings in relation to a claim under Artic le III:2.  Likewise, while the US second written 
submission contains specific sections discussing th e US claims under Article II:1(b), there is no 
section devoted to a possible altern ative US claim under Article III:2.471 
7.411  Nevertheless, there exists one section in the US second written submission, Section III, which 
contains statements relating to Article III:2.  Sec tion III is intended to demonstrate that the AD on 
alcoholic liquor and the SUAD are not charges with in the meaning of Article II:2(a) of the GATT 
1994.  As part of that demonstra tion, the United States argues that in  at least some instances the AD 
and the SUAD result in charges on imported products in excess of those on like domestic products 
and hence are not imposed consistently with Article III:2.472 
7.412  The statements in Section III alleging a lack of consistency of the AD and the SUAD with 
Article III:2 do not warrant the conclusion that  the United States has pursued a separate and 
independent claim under Article III:2.  As explaine d, the statements in question are embedded in a 
discussion of whether the AD and the SUAD fall within the scope of Article II:2(a).  In turn, that 
discussion is linked to the US claims under Article II:1( a) and (b).  It would be improper for the Panel 
proprio motu  to take these statements out of their specific context and rely on them to rule on an 
alternative claim under Article III:2.  Certainly, it  would be improper to do so in the present case 
where the United States has not requ ested any findings in relation to a claim under Article III:2 and 
has not incorporated relevant statements, through cross-references, into a section or paragraph(s) 
devoted to a separate alternative claim under Article III:2.473 
7.413  Turning to the two US oral statements, we not e that neither of them sets out a request for 
findings in relation to a claim under Article III:2.  Both oral statements nevertheless argue that the 
SUAD is not a charge imposed in a manner consistent with Article III:2.474  In addition, the second 
oral statement argues that India effectively conceded  that the AD is not a charge imposed in a manner 
consistent with Article III:2.475  However, as is the case with the US second written submission, the 
discussion offered in the oral statements regardi ng the consistency with Article III:2 of the AD and 
the SUAD forms part of an analysis of whether the AD and the SUAD are, to use the United States' 
terms, "justified" under Article II:2(a) notwithsta nding the prohibitions contained in Article II:1(a) 
and (b).  The relevant discussion is not part of a separate and independent analysis of whether the AD 
and the SUAD are in breach of Article III:2, nor is it made part of any such analysis through cross-
references.    
                                                      
471 This is despite the fact that India had previously  argued at para. 98 of its first written submission and 
para. 29 of its first oral statement that the United States  had failed to explain the basis for its contention that the 
AD and the SUAD are inconsistent with Article III:2. 
472 US second written submission, paras. 34, 39, 42, 52, 54, 57 and 60. 
473 This seems consistent with the view of the Appellate Body expressed in US – Certain EC Products .  
The facts of that case were somewhat different but the Appellate Body appeared to indicate that where a 
complaining party in support of a claim wishes to rely on relevant references made in its submissions to a panel, 
such references need to be "specifically linked" to th e claim of violation in question.  See Appellate Body 
Report, US – Certain EC Products , para. 113. 
474 US first oral statement, paras. 22-23; US second oral statement, paras. 13-15. 
475 US second oral statement, para. 12.  WT/DS360/R 
 Page 169 
 
 
  7.414  Finally, neither of the concluding statements of  the United States delivered at the end of each 
substantive meeting requests findings in resp ect of a separate and independent claim under 
Article III:2.  The first concluding statement allege s that India has failed to prove its contention that 
the AD and the SUAD are applied in a manner consistent with Article III:2.476  The second concluding 
statement asserts that the United States has demo nstrated that neither the AD nor the SUAD is 
equivalent to an internal tax or imposed consistently  with Article III:2 and that they are therefore not 
to be considered as charges under Article II:2(a).477  However, once again, the issue of the consistency 
of the AD and the SUAD with Article III:2 is addressed  exclusively in connection with the US claims 
under Article II:1(a) and (b) and India's counter-a rgument that the AD and the SUAD fall within the 
scope of Article II:2(a).        
7.415  Accordingly, having regard to the US submissions  as a whole, the Panel is not convinced that 
the United States meant to pursue the alternative cl aim under Article III:2 it stated in its first written 
submission.  Indeed, if the United States meant to pursue such a claim, it would be highly unusual to 
state it in a summary section of the first written submission without ever following up, and supporting, such an initial statement of claim wi th independent or incorporated argument and 
evidence. 
7.416  But even assuming that the United States intended to pursue an alternative claim of violation 
based on paragraph 33 of its first written submission, the fact remains that the United States failed to 
make a request for findings in relation to a claim unde r Article III:2.  In a situ ation such as the one we 
are facing, where the complaining party has explicit ly requested findings in relation to some claims 
put forward by it but not others, it would be incongr uous for a panel to offer findings on those claims 
in respect of which the complaining party has not requested any findings.
478  Consequently, as the 
United States at no point requested us to make findings on a claim under Article III:2, and as there is no other indication in the record suggesting that such findings were nevertheless expected, we see 
neither a need nor a justification to rule on such a claim.
479   
7.417  In any event, paragraph 33 of the US first wr itten submission, which is the only paragraph 
devoted to a possible independent claim under Articl e III:2, would be insufficient to sustain the 
United States' burden of establishing that the challe nged measures are inconsistent with Article III:2.  
That paragraph states a claim, but offers no arguments or evidence in support.  As indicated above, 
the fact that the United States advanced relevant  arguments in connection with other claims is 
inapposite in the absence of appropriate incorporation of those arguments.   
7.418  In the light of the above considerations, we  offer no findings on the merits of the US 
alternative claim, stated at paragraph 33 of the US first written submission, that the AD and the 
SUAD are inconsistent with Article III:2.   
                                                      
476 US first concluding statement, para. 5. 
477 US second concluding statement, paras. 2-3. 
478 We note in this regard the Appellate Body's view that for reasons of due process and orderly 
procedure the responding party and the third parties must not be left to wonder what specific claims have been 
made.  See Appellate Body Report, Chile – Price Band System , para. 164.  By extension, where a complaining 
party requests findings in relation to some of the claims it has made, for the reasons enunciated by the Appellate 
Body, it appears justifiable to conclude, absent other evid ence to the contrary, that a failure to request findings 
in relation to other claims means that no findings are requested. 
479 We note in passing that in US – Certain EC Products  the United States appealed against the panel's 
finding of inconsistency with Artic le 23.2(a) of the DSU arguing, inter alia , that the complaining party in that 
case "never requested or argued for findings unde r Article 23.2(a)".  See Appellate Body Report, US – Certain 
EC Products , para. 108. WT/DS360/R 
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  VIII.  CONCLUSIONS AND RECOMMENDATIONS 
8.1 For the reasons set forth in this Re port, the Panel concludes as follows: 
(a) the United States has failed to establish that the Additional Duty on alcoholic liquor is 
inconsistent with Article II:1(a ) or (b) of the GATT 1994; and  
(b) the United States has failed to establish that the SUAD is inconsistent with 
Article II:1(a) or (b) of the GATT 1994. 
8.2 In the light of these conclusions, the Panel ma kes no recommendations under Article 19.1 of 
the DSU.  However, we find it appropriate, in the particular circumstances of this case, to offer some concluding remarks.  To recall, after the establis hment of this Panel, India issued new customs 
notifications making certain changes to the AD on alcoholic liquor and the SUAD
480, "to address 
concerns raised by [India's] trading partners"481.  It is therefore appropriate to note that the Panel's 
disposition of the US claims under Article II:1(a) and (b) does not necessarily imply that it would be 
consistent with India's WTO obligations for India to  withdraw the relevant new customs notifications 
or otherwise re-establish the status quo ante , i.e., the situation as it existed on the date of 
establishment of the Panel.  By the same token, in making this point, we do not wish to suggest that 
the entry into force of the new customs notifica tions necessarily implies that the AD on alcoholic 
liquor, to the extent it still exists, and the SUAD are WTO-consistent.482   
 
__________ 
 
 
                                                      
480 See supra , Section C.1. 
481 India's second oral statement, para. 9.1. 
482 The new customs notifications are outside our terms of reference, and so we did not assess their 
impact upon the WTO-consistency of the AD on alcoholic liquor and the SUAD.