**Case T-462/04**

**HEG Ltd and Graphite India Ltd**

**v**

**Council of the European Union**

(Common commercial policy – Anti-dumping duties – Countervailing duties – Imports of certain graphite electrode systems originating in India – Rights of the defence – Equal treatment – Determination of injury – Causal link)

Summary of the Judgment

1.      *Common commercial policy – Protection against dumping – Investigation – Opening of an investigation against certain imports*

*(Agreement on implementation of Article VI of the General Agreement on Tariffs and Trade, ‘the 1994 Anti-Dumping Code’, Art.
9(2); Council Regulation No 384/96, Arts 5(6) and 9(5))*

2.      *Common commercial policy – Protection against dumping – Anti-dumping proceeding – Rights of the defence – Scope*

*(Council Regulation No 384/96, Art. 5(10))*

3.      *Common commercial policy – Protection against dumping or subsidy by non-member countries – Determination of anti-dumping and
countervailing duties – Enlargement of the Community after the investigation period*

*(Council Regulation No 384/96, Arts 6(1) and 11, and No 2026/97, Arts 11(1) and 18)*

4.      *Common commercial policy – Protection against subsidy practices of non-member countries – Subsidy – Concept*

*(Council Regulation No 2026/97, Arts 2(1)(a)(ii) and 5, and Annexes I to III)*

5.      *Common commercial policy – Protection against dumping or subsidy by non-member countries – Injury – Discretion of the institutions*

*(Council Regulations No 384/96, Art. 3, and No 2026/97, Art. 8)*

6.      *Common commercial policy – Protection against dumping or subsidy by non-member countries – Injury – Establishing of the causal
link*

*(Council Regulations No 384/96, Art. 3(2), (3) and (7), and No 2026/97, Art. 8(2), (3) and (7))*

7.      *Common commercial policy – Protection against dumping or subsidy by non-member countries – Injury – Causal link*

*(Council Regulations No 384/96, Art. 3(2), (3) and (7), and No 2026/97, Art. 8(2), (3) and (7))*

1.      Even if the Commission opens anti-dumping proceedings only against certain imports of a given product, whilst there is evidence
to justify investigating other imports, such a difference in treatment cannot constitute an infringement of either Article
9(5) of basic anti-dumping Regulation No 384/96, or Article 9(2) of the General Agreement on Tariffs and Trade (‘the 1994
Anti-Dumping Code’), or the general principle of equal treatment.

Firstly, such an alleged difference in treatment between imports which have had anti-dumping duties imposed and imports which
have not been the subject of any investigation does not fall within the scope of Article 9(5) of Regulation No 384/96, which
prohibits discriminatory treatment between imports which have all had anti-dumping duties imposed in respect of imports of
the same product, nor within the scope of Article 9(2) of the 1994 Anti-Dumping Code, which prohibits discriminatory treatment
in the collection of anti-dumping duties imposed on a product on the basis of the source of the imports in question. Nor
is the general principle of equal treatment applicable, since that principle must be reconciled with observance of the principle
of legality, according to which no one may rely to his own advantage on an unlawful act committed in favour of a third party.

(see paras 36, 38-40, 42)

2.      According to the principle that defence rights are to be observed, in the context of an investigation preceding the adoption
of an anti-dumping regulation the undertakings concerned must be placed in a position during the administrative procedure
in which they can effectively make known their views on the correctness and relevance of the facts and circumstances alleged
and on the evidence relied on by the Commission in support of its allegation concerning the existence of dumping and the resultant
injury.

An undertaking concerned by such proceedings cannot invoke an infringement of its defence rights as a consequence of the fact
that certain evidence contained in the confidential version of the complaint opening those proceedings is not summarised in
the non-confidential version which was communicated to it, where, having failed sufficiently to alert the Commission and then
the Council, it did not place those institutions in a position to assess the difficulties which that absence could cause it.

(see paras 45-47, 49)

3.      It is the composition of the Community at the time of the adoption of the respective regulations that must be taken into account
when anti-dumping and countervailing duties are determined. Those duties are not a penalty for earlier behaviour but a protective
and preventive measure against unfair competition resulting from dumping and subsidies. Furthermore, under Article 3(2) of
basic anti-dumping Regulation No 384/96 and Article 8(2) of Regulation No 2026/97 on protection against subsidised imports
from countries not members of the European Community, a determination of injury must be based on positive evidence and involve
an objective examination of both the volume of the dumped or subsidised imports and the effect of the dumped or subsidised
imports on prices in the Community market for like products, and the consequent impact of those imports on the Community industry.
It follows that, where an enlargement of the Community has taken place after the investigation period, and the information
obtained by the Commission during that period was not obtained with the enlargement in view and thus concerns only the Community
comprising the initial number of Member States, it is for the Commission, when adopting the provisional regulations, and,
where appropriate, the Council, when adopting the definitive regulations, to establish whether that information is also relevant
with regard to an enlarged Community.

The institutions cannot be relieved of such an obligation either by the normal prohibition on taking account of evidence subsequent
to the investigation period, laid down by Article 6(1) of the basic anti-dumping Regulation No 384/96 and Article 11(1) of
Regulation No 2026/97, or by the possibility of the measures being reviewed. In the first place, that period and that prohibition,
with exceptions, are intended to ensure that the results of the investigation are representative and reliable, by ensuring
that the factors on which the determination of dumping or subsidy and injury is based are not influenced by the conduct of
the producers concerned following the initiation of the anti-dumping proceeding, and therefore that the definitive duty imposed
as a result of the proceeding is appropriate effectively to remedy the said injury. Moreover, the mere possibility of a review,
which is left to the Commission’s discretion and would be conducted after the regulations have been adopted, cannot in any
way constitute a sufficient taking into account of the effects of the enlargement.

(see paras 63-67, 71)

4.      Having regard to the particularly clear wording of Article 2(1)(a)(ii) of Regulation No 2026/97 on protection against subsidised
imports from countries not members of the European Community, which excludes from the concept of subsidy the exemption of
an exported product from duties or taxes borne by the like product when destined for domestic consumption, or the remission
of such duties or taxes in amounts not in excess of those which have been accrued, provided that such an exemption is granted
in accordance with the provisions of Annexes I to III to the regulation, those annexes are not mere guidelines to determine
whether there are safeguards against excess drawbacks, but contain rules which must be complied with in order to avoid classification
of a remission or exemption from duties as a subsidy. Furthermore, it follows from the scheme of that article that the derogation
given to exemptions or remissions from duty is an exception to the principle that a subsidy exists where government revenue
that is otherwise due is forgone or not collected. That derogation must therefore be interpreted narrowly.

Consequently, in the absence of compliance with the provisions of Annexes I to III to Regulation No 2026/97, the countervailable
benefit is made up of the total amount of duties or taxes normally due. Limiting classification as a subsidy solely to the
excess collected presupposes that the system for remission or exemption of import duties is compatible with Article 2(1)(a)(ii)
of Regulation No 2026/97, and thus, with Annexes I to III thereto, since exporters are entitled to drawback in respect of
duties or taxes on the inputs used in the exported products only where the said provisions are complied with.

The aim of the criteria set out in Annexes II and III to the said regulation is to verify that the country of export’s drawback
scheme enables the actual consumption of inputs or substitution inputs to be confirmed. The first criterion relates to the
existence of a system or procedure which enables such verification to be carried out. The second criterion, which applies
in the alternative, in the event that such a procedure or system does not exist or is defective, consists of the country of
export having recourse to an examination based on the actual inputs used or transactions performed. In that regard, the Commission
need only determine whether the government of the exporting country has in place and applies a monitoring system or procedure.
It is in no way required to conduct an investigation in order to verify the way that system or procedure functions in practice.
On the contrary, in the absence of an appropriate monitoring system or procedure it is for the exporting country and not the
Community to carry out a further examination based on the actual inputs and transactions in question.

The fact that those annexes use the adverb ‘normally’ when referring to the steps which the Commission must take when examining
a drawback scheme implies that, in particular circumstances, the institutions may use other criteria, but it cannot deprive
them of the possibility of basing their finding that a drawback or substitution drawback scheme is unauthorised on the fact
that the criteria laid down are not met.

(see paras 89-92, 98, 103, 106)

5.      The question whether a Community industry has suffered injury and, if so, whether that injury is attributable to dumped or
subsidised imports and whether imports from other countries or, more generally, whether other known factors contributed to
the injury to the Community industry involves the assessment of complex economic matters in respect of which the institutions
enjoy a wide discretion. Consequently, review by the Community courts of the assessments of the institutions must be confined
to ascertaining whether the procedural rules have been complied with, whether the facts on which the contested decision is
based have been accurately stated and whether there has been any manifest error of assessment of the facts or any misuse of
powers.

(see para. 120)

6.      Under Article 3(2) and (3) of the basic anti-dumping Regulation No 384/96 and Article 8(2) and (3) of Regulation No 2026/97
on protection against subsidised imports from countries not members of the European Community, a determination of injury is
to be based, inter alia, on increases in imports, changes in prices on the Community market and changes in the profitability
of the Community industry. It is important, therefore, that the indicators on which the institutions base their findings should
be consistent with normal market conditions.

Thus, in determining injury, the Council and the Commission are under an obligation to consider whether the injury on which
they intend to base their conclusions actually derives from dumped or subsidised imports and must disregard any injury deriving
from other factors, particularly from the conduct of Community producers themselves or from imports of the product concerned
from third countries. The institutions are required to assess the effects of other known factors, not only when analysing
the causal link between those factors and the injury suffered by the Community industry, but also when determining the injury
suffered by the latter.

(see paras 121, 135, 146)

7.      In proceedings against dumping or subsidies, the choice of method for calculating the injury elimination level falls within
the discretion enjoyed by the institutions in respect of determinations of injury suffered by the Community industry and which
is justified by the complex economic assessments inherent in such determinations. Recourse to a method of calculation based
on the profit margin which the Community industry could reasonably have anticipated in the absence of unfair practices, as
opposed to a method of calculation based only on price undercutting, is not vitiated by any manifest error of assessment.

The profit margin to be used by the Council when calculating the target price that will eliminate the injury in question must
be limited to the profit margin which the Community industry could reasonably anticipate under normal conditions of competition,
in the absence of the dumped or subsidised imports.

(see paras 161-162)

JUDGMENT OF THE COURT OF FIRST INSTANCE (Fifth Chamber)

17 December 2008 (*)

(Common commercial policy – Anti-dumping duties – Countervailing duties – Imports of certain graphite electrode systems originating in India – Rights of the defence – Equal treatment – Determination of injury – Causal link)

In Case T‐462/04,

**HEG Ltd,** established in New Delhi (India),

**Graphite India Ltd,**established in Kolkata (India),

represented initially by K. Adamantopoulos, lawyer, and J. Branton, Solicitor, and subsequently by Mr Branton,

applicants,

v

**Council of the European Union,** represented by J.-P. Hix, acting as Agent, assisted by G.Berrisch, lawyer,

defendant,

supported by

**Commission of the European Communities,**represented by T. Scharf and K. Talabér‐Ritz, acting as Agents,

intervener,

APPLICATION for annulment of Council Regulation (EC) No 1628/2004 of 13 September 2004 imposing a definitive countervailing
duty and collecting definitively the provisional duty imposed on imports of certain graphite electrode systems originating
in India (OJ 2004 L 295, p. 4) and of Council Regulation (EC) No 1629/2004 of 13 September 2004 imposing a definitive anti-dumping
duty and collecting definitively the provisional duty imposed on imports of certain graphite electrode systems originating
in India (OJ 2004 L 295, p. 10),

THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Fifth Chamber),

composed of M. Vilaras, President, M. Prek (Rapporteur) and V. Ciucă, Judges,

Registrar: C. Kantza, Administrator,

having regard to the written procedure and further to the hearing on 4 June 2008,

gives the following

**Judgment**

**Factual background**

1        The applicants, HEG Ltd and Graphite India Ltd, are Indian companies which manufacture and export the product concerned. This
is graphite electrodes and nipples used for such electrodes with an apparent density of 1.65 g/cm3 and an electrical resistance of 6.0 μΩm or less, which gives them a very high rate of power feed (‘the product concerned’).

2        In response to complaints lodged in July 2003 by the European Carbon and Graphite Association, acting on behalf of SGL Carbon
Group GmbH (‘SGL’) and UCAR SA, representing a major proportion of the Community sector producing the product concerned, on
21 August 2003 the Commission announced, by two separate notices, the initiation of anti-dumping and anti-subsidy proceedings
concerning imports of the product concerned originating in India (OJ 2003 C 197, pp. 2 and 5 respectively). The investigation
covered the period from 1 April 2002 to 31 March 2003 (‘the investigation period’). The examination of trends relevant for
the assessment of injury covered the period from 1 January 1999 to the end of the investigation period (‘the period considered’).

3        The Commission sent questionnaires to all parties known to be concerned, to all other companies who made themselves known
within the deadlines set in the notice of initiation, and to the Indian public authorities. Replies were received from the
two applicants, from the two complainant Community producers, from eight user companies and from two unrelated importers.
In addition, one user company made a written submission containing some quantitative information and two users’ associations
made written submissions.

4        Verification visits were carried out at the premises of five Community producers, two unrelated importers in the Community,
four users and the two applicants.

5        On 13 November 2003 an initial meeting was held between the applicants and the Commission.

6        On 3 and 4 December 2003 and 26 February 2004, the applicants sent further comments to the Commission.

7        On 15 April 2004, the Commission published a notice regarding the application of anti-dumping and anti-subsidy measures in
force in the Community following enlargement to include the Czech Republic, the Republic of Estonia, the Republic of Cyprus,
the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland,
the Republic of Slovenia and the Slovak Republic and the possibility of review (OJ 2004 C 91, p. 2) (‘Notice on the possibility
of review of measures owing to enlargement’).

8        On 27 April 2004, the Commission sent the applicants three specific disclosure documents.

9        On 19 May 2004, the Commission adopted Commission Regulation (EC) No 1008/2004 imposing a provisional anti-subsidy duty on
imports of certain graphite electrode systems originating in India (OJ 2004 L 183, p. 35) and Commission Regulation (EC) No
1009/2004 imposing a provisional anti-dumping duty on imports of certain graphite electrode systems originating in India (OJ
2004 L 183, p. 61) (‘the provisional anti-subsidy regulation’ and ‘the provisional anti-dumping regulation’, together referred
to as ‘the provisional regulations’). On the same day, it sent a letter to the applicants setting out its observations on
the comments made by the applicants during the proceedings.

10      On 27 May 2004, the applicants sent their observations to the Commission on the specific disclosure documents and the provisional
regulations.

11      On 14 June 2004, a second meeting was held between the applicants and the Commission.

12      On 22 June 2004, the applicants submitted their observations to the Commission following the meeting of 14 June 2004.

13      By letter of 9 July 2004, the Commission sent the applicants two general disclosure documents concerning the essential facts
and considerations on the basis of which it was proposed to impose definitive anti-dumping and countervailing duties, and
a general disclosure document concerning the injury, causation and Community interest aspects of the two proceedings.

14      By letter of 19 July 2004, the applicants submitted their observations on the various documents received from the Commission.
They also requested a further meeting and raised the possibility of entering into undertakings.

15      On 13 September 2004, the Council adopted Regulation (EC) No 1628/2004 imposing a definitive countervailing duty and collecting
definitively the provisional duty imposed on imports of certain graphite electrodes originating in India (OJ 2004 L 295, p. 4)
and Regulation (EC) No 1629/2004 imposing a definitive anti-dumping duty and collecting definitively the provisional duty
imposed on imports of certain graphite electrode systems originating in India (OJ 2004 L 295, p. 10) (‘the contested anti-subsidy
regulation’ and ‘the contested anti-dumping regulation’ respectively, together referred to as ‘the contested regulations’).

**Procedure and forms of order sought by the parties**

16      By application lodged at the Court Registry on 30 November 2004, the applicants brought the present action.

17      By document lodged at the Court Registry on 21 April 2005, the Commission applied for leave to intervene in support of the
form of order sought by the Council. By order of 7 June 2005, the President of the First Chamber of the Court of First Instance
granted the application to intervene. By letter of 17 June 2005, the Commission informed the Court that it waived the right
to lodge a statement in intervention, but that it intended to appear at the hearing.

18      Following a change in the composition of the Chambers of the Court of First Instance, the Judge-Rapporteur was attached to
the Fifth Chamber, to which this case was accordingly assigned.

19      On hearing the report of the Judge-Rapporteur, the Court of First Instance (Fifth Chamber) decided to open the oral procedure.

20      In the context of measures of organisation of procedure, the Court invited the Council to produce certain documents. The Council
complied with that request.

21      The parties and the intervener presented oral argument and answered the questions put to them by the Court at the hearing
on 4 June 2008.

22      The applicants claim that the Court should:

–        annul the contested regulations;

–        order the Council to pay the costs.

23      The Council contends that the Court should:

–        dismiss the application;

–        order the applicants to pay the costs.

24      The Commission submits that the Court should dismiss the application.

**Law**

25      The applicants put forward five pleas, the first relating to the opening of an investigation into only Indian imports of the
product concerned, the second relating to the defective nature of the investigations in that they were conducted on the basis
of a Community of only 15 Member States, the third alleging errors in the classification of the Indian Duty Entitlement Passbook
Scheme (DEPB) as subsidisation and in the determination of the amounts of countervailing duties, the fourth and fifth alleging,
inter alia, failure to take into account both past anti-competitive practices and the effects of imports of the product concerned
from other countries in the analysis of the injury caused to the Community industry.

*First plea, relating to the opening of an investigation against only Indian imports of the product concerned*

Arguments of the parties

26      The applicants take the view that the institutions infringed Article 9(5) of Council Regulation (EC) No 384/96 of 22 December
1995 on protection against dumped imports from countries not members of the European Community (OJ 1996 L 56, p. 1), Article
9(2) of the Agreement on implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (OJ 1994 L 336, p. 103;
‘the 1994 Anti-Dumping Code’), and the principle of non-discrimination, and committed manifest errors of assessment in conducting
an anti-dumping investigation into only Indian imports of the product concerned.

27      The applicants submit, in essence, that the institutions infringed the principle of non-discrimination by failing to open
an investigation themselves into imports from other States that could be being dumped or by failing to engineer a complaint
to open parallel proceedings. They argue that the Commission could not agree to investigate only the complaint against them
and that it should have either initiated a parallel investigation into imports from other countries pursuant to Article 5(6)
of Regulation No 384/96 or informed the complainants that, unless they also submitted a complaint against the other countries
concerned, the proceedings would be terminated. They maintain that there are close economic links, extending to joint participation
in a cartel penalised by the Commission, between the complainants and the producers in the other third countries concerned,
which explains why the complaint targeted Indian imports. They further submit that the complaint or the information which
they supplied to the Commission contained evidence of dumping in relation to the products concerned from States other than
India (the United States, Poland, Japan, Russia, China and Mexico).

28      The applicants take the view that the principle of non-discrimination must also be observed at the time when a decision is
taken to initiate an investigation. Although the wording of Article 9(5) of Regulation No 384/96 relates only to States found
to have caused injurious dumping, it is clear that that article and the principle of non-discrimination, when applied together,
also cover a difference in treatment stemming from an investigation into imports from one State only, although evidence supplied
following the initiation of proceedings gives a prima facie indication that imports from other States should be included in
the investigation.

29      The applicants point out the particular importance of Article 9(5) of Regulation No 384/96, in that it derives from Article
9(2) of the 1994 Anti-Dumping Code which itself is an expression of the most-favoured nation principle. In the field of anti-dumping,
this principle reflects the requirement that anti-dumping duties should not unfairly limit access to the market of goods from
one Member State that is a member of the World Trade Organisation (WTO) while imports from other countries may be dumped and
cause injury but not be subject to such duties. The Commission is not able to determine whether or not they were dumped and
the exact extent of the apparent injury without conducting an investigation.

30      Furthermore, the applicants take the view that the institutions committed manifest errors of assessment in considering that
the evidence presented did not justify the opening of investigations in relation to imports from States other than India.
That failure to open investigations also constitutes an infringement of the principle of sound administration.

31      The applicants also allege that the Commission adopted a discriminatory attitude as regards the definition of the products
concerned. Chinese imports were excluded from the investigation on the ground that the products in question were not manufactured
using premium needle coke whereas, in respect of the Indian imports, the Commission refused to exclude from the investigation
graphite electrodes and nipples used for such electrodes manufactured without using premium needle coke because it is the
basic physical and technical characteristics of the end product and its end uses, irrespective of the raw materials used,
that determine the product definition. They note that the Chinese products have the same end use as the lower end of the product
concerned.

32      Finally, in this plea, the applicants claim that their rights of defence have been infringed owing to the fact that some evidence
was excluded from the non-confidential version of the complaint on the ground that it would damage the essential business
interests of a competitor. Moreover, that is another indication of collusion between the complainants and some importers of
the product concerned in third countries, explaining why that evidence is not taken into account.

33      The Council disputes the applicants’ arguments.

Findings of the Court

–       Alleged discriminatory attitude as regards the definition of the product concerned

34      This complaint must be rejected at the outset as having no factual basis. First, it is apparent from recitals 11 to 14 in
the preamble to the provisional anti-dumping regulation, to which recital 6 of the contested anti-dumping regulation refers,
that premium needle coke was not one of the factors used by the institutions to define the product concerned. Secondly, the
applicants do not adduce any evidence to show that the institutions based their exclusion of Chinese imports from the investigation
on the fact that those imports were not manufactured using premium needle coke.

–       The failure to open an investigation into other potential sources of dumping

35      According to settled case-law, the general principle of equal treatment and non-discrimination requires that comparable situations
must not be treated differently and that different situations must not be treated in the same way unless such treatment is
objectively justified (see Case C‐110/03 *Belgium*v *Commission*[2005] ECR I-2801, paragraph 71 and the case-law cited).

36      It is true that the Commission is entitled under Article 5(6) of Regulation No 384/96 to initiate an investigation on its
own initiative in certain special circumstances. Similarly, it is common ground that it is Commission practice, in certain
circumstances, to ask a complainant to extend the scope of his complaint. However, there is no need to raise the question
as to whether it should have proceeded in this way in this case. A difference in treatment which consists of opening anti-dumping
proceedings against Indian imports only, while there is evidence to justify investigating other imports, even if this were
proved, cannot constitute an infringement of either Article 9(5) of Regulation No 384/96, or Article 9(2) of the 1994 Anti-Dumping
Code or the general principle of equal treatment.

37      First of all, it is stated in Article 9(5) of Regulation No 384/96 that ‘[a]n anti-dumping duty shall be imposed in the appropriate
amounts in each case, on a non-discriminatory basis on imports of a product from all sources found to be dumped and causing
injury, except as to imports from those sources from which undertakings under the terms of this Regulation have been accepted’.

38      It is apparent from the very wording of this provision that it prohibits discriminatory treatment between imports which have
all had anti-dumping duties imposed in respect of imports of the same product (see, to that effect, Case T‐89/00 *Europe Chemi-Con (Deutschland)* v *Council* [2002] ECR II‐3651, paragraph 58). What is at issue here, however, is an alleged difference in treatment between imports
which have had anti-dumping duties imposed and imports which have not been the subject of any investigation. The facts of
the present case therefore do not fall within the scope of Article 9(5) of Regulation No 384/96.

39      Secondly, as regards Article 9(2) of the 1994 Anti-Dumping Code, it suffices to point out that the scope of that provision
is equivalent to that of Article 9(5) of Regulation No 384/96, in that it prohibits discriminatory treatment when anti-dumping
duties imposed on a product are collected on the basis of the source of the imports in question. It therefore does not apply
in this case.

40      Thirdly, the argument alleging infringement of the general principle of equal treatment cannot be upheld either.

41      The fact that Article 9(5) of Regulation No 384/96 is an illustration of the principle of equal treatment (*Europe Chemi-Con (Deutschland)* v *Council*, paragraph 38 above, paragraph 51) does not mean that the institutions are not required to comply with that principle when
applying other provisions of Regulation No 384/96 (see, as regards Article 2(7)(b) of that regulation, Case T‐255/01 *Changzhou Hailong Electronics & Light Fixtures and Zhejiang Yankon* v *Council* [2003] ECR II-4741, paragraphs 60 and 61).

42      According to settled case-law, however, observance of the principle of equal treatment must be reconciled with observance
of the principle of legality, according to which no one may rely to his own advantage on an unlawful act committed in favour
of a third party (Case T-120/44 *Peróxidos Orgánicos* v *Commission* [2006] ECR II-4441, paragraph 77, and the case-law cited). The applicants’ argument, which relies entirely on the fact that
an investigation should also have been conducted into other imports, seeks to do just that. The principle of equal treatment
does not therefore apply in the present case and the failure to open an investigation into other possible sources of dumping
cannot affect the lawfulness of the contested anti-dumping regulation.

43      As a result, the applicants’ arguments alleging infringement of the principle of sound administration and manifest errors
of assessment in the evaluation of evidence provided by the applicants must also be rejected, since they seek to show that
the Commission should have opened an investigation into imports from third countries. For the same reason, the applicants’
criticisms relating to the fact that the complainants focused their complaint on Indian imports alone are of no relevance
as far as the lawfulness of the contested anti-dumping regulation is concerned.

–       Infringement of the principle of observance of the rights of the defence

44      According to settled case-law, observance of the rights of the defence is a fundamental principle of Community law (Case C-49/88
*Al-Jubail Fertilizer* v *Council* [1991] ECR I-3187, paragraph 15, and Joined Cases T-159/94 and T‐160/94 *Ajinomoto and NutraSweet*v *Council* [1997] ECR II-2461, paragraph 81).

45      According to that principle, in the context of an investigation preceding the adoption of an anti-dumping regulation the undertakings
concerned must be placed in a position during the administrative procedure in which they can effectively make known their
views on the correctness and relevance of the facts and circumstances alleged and on the evidence relied on by the Commission
in support of its allegation concerning the existence of dumping and the resultant injury (*Al-Jubail Fertilizer* v *Council*, paragraph 44 above, paragraph 17; Case T‐121/95 *EFMA* v *Council*[1997] ECR II-2391, paragraph 84; and *Ajinomoto and NutraSweet* v *Council*, paragraph 44 above, paragraph 83).

46      In this case, it must be observed that certain evidence contained in the confidential version of the complaint was not summarised
in the non-confidential version. This is the case, in particular, of Annexes 1, 5 to 7, 9 to 11, 15 to 18, 20 and 21, 23,
26, 28 to 31, and 33 to 44 of the complaint, which contains 45 annexes.

47      However, it was for the applicants to place the institutions in a position to assess the difficulties which the absence of
a summary of the evidence in question in the non-confidential version of the complaint could cause them (see, to that effect,
*Ajinomoto and NutraSweet* v *Council*, paragraph 44 above, paragraphs 109 and 110).

48      In this case, it is apparent from the documents provided by the applicants in the annex to their application that, although
they briefly referred in their observations on the complaint to the absence of a summary, at the beginning of the proceedings,
on 3 October 2003, they did not mention it again in their subsequent correspondence.

49      It follows that, by failing to have sufficiently alerted the Commission and then the Council, the applicants cannot rely on
infringement of their rights of defence.

50      It follows from all of the foregoing that the first plea must be rejected.

*Second plea, alleging infringement of fundamental procedural requirements in that the investigations were conducted on the
basis of a Community of only 15 Member States*

Arguments of the parties

51      The applicants take issue with the fact that the duties imposed by the contested regulations cover the territory of the 10
new Member States, although no investigation was carried out there, and therefore take the view that there is no legal basis
for imposing those duties. In that regard, this situation is different from that of duties adopted before enlargement, in
respect of which the investigation was conducted on the correct territorial basis.

52      Such an automatic extension of anti-dumping and anti-subsidy duties to the 10 new Member States is contrary to Article 1(1)
and (2), Articles 2 to 7 and Article 9(4) and (5) of Regulation No 384/96, and to Article 1(1), Articles 8 to 12, Article
15 and Article 31 of Council Regulation (EC) No 2026/97 of 6 October 1997 on protection against subsidised imports from countries
not members of the European Community (OJ 1997 L 288, p. 1). In essence, the applicants argue that the fact that those various
provisions refer either to the Community or to the Community industry means that the investigation must be conducted on the
basis of a well-defined territory, namely, the Community, rather than part of the Community. That follows also from the relevant
provisions of the 1994 Anti-Dumping Code and of the Agreement on Subsidies and Countervailing Measures concluded within the
WTO (OJ 1994 L 336, p. 156; ‘the ASCM’). The applicants further submit that an investigation encompassing the 10 new Member
States was necessary for the purpose of determining precisely the dumping margin and the injury which the dumping would cause
or which would be caused by the alleged subsidies. Finally, they point out that the initiation of anti-dumping proceedings
must be based on information on the evolution of the volume of the imports and the effect of those imports on prices of the
like product and their impact on the Community industry, so that measures adopted on the basis of 15 Member States cannot
be imposed automatically in a Community of 25 Member States without consideration as to whether these cases could have been
initiated at all on the basis of similar information for the enlarged Community.

53      The applicants essentially take the view that the Commission was entitled to conduct an investigation which took into account
the fact that enlargement was imminent, since no provision of Regulations Nos 384/96 and 2026/97 prevents it from sending
requests for information.

54      They reject the Council’s argument based on the method suggested in the Notice on the possibility of review of measures owing
to enlargement. That notice cannot provide justification for the institutions’ departure from the relevant regulations. While
the applicants acknowledge that the Notice does state that pending proceedings may result in duties being applied across the
new Member States, they take the view, in essence, that the recommended solutions, in particular, the possibility of obtaining
an interim review from the Commission were of no interest in relation to proceedings which were not yet concluded at the time
of enlargement. They point out, in that regard, that there is no possibility of requesting an interim review until at least
one year has expired from the date of imposition of the relevant measures.

55      The fact that it has been observed, in certain cases, that the conclusions of the investigation were not radically altered
by widening the examination to include the new Member States is irrelevant outside the individual cases examined.

56      The Council considers that it correctly extended application of the anti-dumping and anti-subsidy measures to the enlarged
Community. It follows from the limited overall economic importance of enlargement that the findings of the investigations
conducted in the Community of 15 Member States are, in principle, also valid for the enlarged Community, which is confirmed
by the limited number of requests for an interim review. It maintains that an automatic review of all existing anti-dumping
and anti-subsidy measures would have created a significant burden and additional costs for all operators involved and would
therefore not be feasible in practical terms.

57      The Council submits that the Notice on the possibility of review of measures owing to enlargement provides a complex transitory
solution within the Community’s discretion and consisting of a two-pronged review mechanism to ensure that adjustments can
be made where justified.

58      First, it follows that, from 1 May 2004, all the anti-dumping and anti-subsidy measures in force will automatically apply
to imports into the Community enlarged to 25 Member States, and that, if pending investigations initiated before 1 May 2004
were to lead to the imposition of measures, these would equally apply to imports into the 25 Member State Community.

59      Secondly, a review mechanism was set up to ensure that corrections could be made. The Council notes in this regard that the
Commission was prepared to carry out a partial or full review, at the request of any interested party, of anti-dumping and
anti-subsidy measures pursuant to Article 11(3) of Regulation No 384/96 and Article 19 of Regulation No 2026/97, before expiry
of the one-year period, since the Commission announced that it would use its right to conduct reviews on its own initiative.
The Council observes that the applicants did not avail themselves of that opportunity and considers that it was because they
did not believe that an interim review would have produced results more favourable to them.

60      Moreover, the Council considers that the applicants’ submissions are purely formalistic in that they do not claim that an
investigation covering all 25 Member States would have yielded different results and did not present any evidence whatsoever
to that effect.

61       Finally, the Council points out that, for greater thoroughness, the Commission assessed the impact of enlargement in all
pending investigations, including the two sets of proceedings at issue, and that there was no significant difference in the
results.

Findings of the Court

62      It is common ground that although the investigation period lasted from 1 April 2002 to 31 March 2003, while the Community
was made up of only 15 Member States, the provisional regulations were adopted on 19 May 2004 and the contested regulations
on 13 September 2004, when the Community comprised 25 Member States.

63      It must be observed that anti-dumping duties and countervailing duties are not a penalty for earlier behaviour but a protective
and preventive measure against unfair competition resulting from dumping and subsidies (see, as regards anti-dumping duties,
Case T-138/02 *Nanjing Metalink*v *Council* [2006] ECR II-4347, paragraph 60). Furthermore, under Article 3(2) of Regulation No 384/96 and Article 8(2) of Regulation
No 2026/97, a determination of injury must be based on positive evidence and involve an objective examination of both the
volume of the dumped or subsidised imports and the effect of the dumped or subsidised imports on prices in the Community market
for like products, and the consequent impact of those imports on the Community industry.

64      It follows that, when anti-dumping and countervailing duties are determined, it is the composition of the Community at the
time of their adoption that must be taken into account. To the extent that the information obtained by the Commission during
the investigation period was not obtained with the enlargement in view and thus concerns only the Community of 15 Member States,
it was for the Commission, when adopting the provisional regulations, and, where appropriate, the Council, when adopting the
contested regulations, to establish whether that information was also relevant with regard to a Community composed of 25 Member
States.

65      It is true that Article 6(1) of Regulation No 384/96 and Article 11(1) of Regulation No 2026/97 imply that factors arising
after the investigation period must not be taken into account. In the present case, however, the fact that the Community’s
enlargement constitutes an event that took place after the investigation period cannot in any way relieve the institutions
of the duty referred to in the previous paragraph.

66      As the Court of First Instance has had occasion to point out in relation to Article 6(1) of Regulation No 384/96, the investigation
period and the prohibition on consideration of factors relating to a subsequent period are intended to ensure that the results
of the investigation are representative and reliable, by ensuring that the factors on which the determination of dumping and
injury is based are not influenced by the conduct of the producers concerned following the initiation of the anti-dumping
proceeding, and therefore that the definitive duty imposed as a result of the proceeding is appropriate to remedying effectively
the injury caused by the dumping (*Nanjing Metalink*v*Council*, paragraph 63 above, paragraph 59).

67      Furthermore, by using the term ‘normally’, Article 6(1) of Regulation No 384/96 does allow exceptions to the rule against
taking account of information relating to a period subsequent to the investigation period. As regards circumstances favourable
to the undertakings concerned by the investigation, it has been held that the Community institutions cannot be required to
incorporate in their calculations factors relating to a period subsequent to the investigation period unless such factors
disclose new developments which make the proposed anti-dumping duty manifestly inappropriate (Case T-161/94 *Sinochem Heilongjiang*v*Council* [1996] ECR II-695, paragraph 88, and Case T‐188/99 *Euroalliages and Others* v *Commission*[2001] ECR II‐1757, paragraph 75). If, on the other hand, factors relating to a period subsequent to the investigation period
justify, because they reflect the current conduct of the undertakings concerned, the imposition or increase of an anti-dumping
duty, it is clear, on the basis of the foregoing, that the institutions are entitled, indeed obliged, to take account of them
(*Nanjing Metalink*v*Council*, paragraph 63 above, paragraph 61). The same reasoning can be followed in relation to the application of Article 11(1) of
Regulation No 2026/97, the drafting of which on this is point is identical to that of Article 6(1) of Regulation No 384/96.

68      In addition, it should be recalled that, according to settled case-law, in the sphere of measures to protect trade, the Community
institutions enjoy a wide discretion by reason of the complexity of the economic, political and legal situations which they
have to examine (see Case T‐35/01 *Shanghai Teraoka Electronic* v *Council* [2004] ECR II-3663, paragraph 48 and the case-law cited). It is also settled case-law that, where the Community institutions
have such discretion, respect for the rights guaranteed by the Community legal order in administrative procedures is of even
more fundamental importance. Those guarantees include, in particular, the duty of the competent institution to examine carefully
and impartially all the relevant aspects of the individual case (Case C‐269/90 *Technische Universität München* [1991] ECR I-5469, paragraph 14, and Case T-167/94 *Nölle* v *Council and Commission* [1995] ECR II-2589, paragraph 73).

69      Clearly, the accession of 10 new Member States between the end of the investigation period and the adoption of the contested
regulations is a relevant aspect which the institutions were bound to examine, within the meaning of the case-law referred
to in paragraph 68 above, in order to assess its impact on the two pending investigations.

70      Contrary to the Council’s contention, merely referring to the supposed limited overall economic importance of enlargement
cannot relieve the institutions of the abovementioned obligation, since such a consideration of a general kind does not concern
the particular economic sector to which the imports in question belong.

71      The Notice on the possibility of review of measures adopted by the Commission does not in any way constitute the taking of
sufficient account of the effects of enlargement on pending proceedings. On the contrary, that method consists of not examining
automatically the effects of enlargement, while providing for the possibility of subsequent review of the measures in question.
The mere possibility of such a review, which is left to the Commission’s discretion and would be conducted after the regulations
have been adopted, cannot relieve the institutions of their obligation to ensure that the enlargement of the Community would
not affect the amount of anti-dumping and anti-subsidy duties.

72      However, it is apparent from the general disclosure document relating to the injury, causation and Community interest aspects
of the two proceedings, that, in the present case, the Commission did evaluate the effects of enlargement on the relevance
of the data obtained during the investigation period. The Commission observes in that document – its findings being uncontested
by the applicants – that, first, the Indian imports to the new Member States were priced slightly lower than those recorded
during the investigation period and, secondly, in terms of sales, production and imports of the product concerned, the share
of the 10 new Member States was minimal. Furthermore, it is mentioned in the same document that the only two known facilities
producing the product concerned in the new Member States are located in Poland and that the Commission obtained information
from an anti-dumping investigation carried out by the Polish authorities in 2003 showing that the prices of the Indian imports
into Poland were 4% lower than those of imports into the Community of 15.

73      By carrying out such a verification after the investigation period, the Commission thereby assured itself that the information
obtained during the investigation was still representative of the Community as it was composed at the time of the adoption
of the anti-dumping and countervailing duties. It therefore did not fail to fulfil its obligation to examine all the relevant
factors of the present case.

74      It is apparent from the findings above that the argument alleging that the institutions should have ascertained whether the
information in their possession enabled them to open an investigation in relation to an enlarged Community must be rejected.
It necessarily follows that the information on which the Commission based its decision to initiate the proceedings in question
could also justify the initiation of an investigation in relation to a Community made up of 25 Member States.

75      As regards the references to the provisions of the 1994 Anti-Dumping Code and the ASCM, it suffices to state that the applicants
have not shown how the content of those provisions differs from that of the provisions of Regulations Nos 384/96 and 2026/97
which give effect to the specific obligations contained therein.

76      It follows from the above that the second plea must be rejected.

*Third plea, relating to the classification of the DEPB Scheme as subsidisation and to the determination of the amount of countervailing
duties*

Arguments of the parties

77      The applicants maintain that the contested anti-subsidy regulation is contrary to the principle of proportionality, to Articles
1(1), 2(1)(a)(ii) and 15(2) of Regulation No 2026/97 and Annex III thereto and Articles 1.1(a)(1)(ii) and 19.3 of the ASCM,
and is vitiated by a manifest error of assessment and procedural defects through the imposition of countervailing duties in
inappropriate amounts.

78      First of all, they describe how the Indian DEPB scheme (‘the DEPB’) operates: an exporter receives a credit upon export of
a product corresponding to the amount of import duties paid upon importation of input raw materials necessary for manufacture
of the exported product on a per unit basis, in accordance with ‘standard technical input-output norms’ (‘SIONs’). They stress
the importance of a refund of the duties paid on importation of the inputs necessary for manufacture of the product concerned,
and particularly of the most costly, premium needle coke, which is not available in India.

79      The applicants dispute the classification as subsidisation in the contested regulation. In any event, even if it were arguable
that the DEPB scheme has the elements of a subsidy, it was wrongly decided in the regulation that the countervailable benefit
was constituted by the full amount of the duty usually payable on all imported inputs. Only the excess collected may constitute
a subsidy.

80      In the first place, that is the conclusion reached from a reading of Article 2(1)(a)(ii) of Regulation No 2026/97 in conjunction
with Annex I(i) thereto. Annex II(I)(2) also supports that analysis. It shows that, if a scheme results in an excess drawback,
then there may be a subsidy to the extent of the excess. It is therefore for the Commission to determine whether there is
an excess, before possibly classifying it as a subsidy. The same approach is taken by the definition in Annex III(I). According
to the applicants, since the DEPB should be classified as a substitution drawback scheme, the relevant provision is Annex
III of Regulation No 2026/97, which the Council failed to analyse.

81      The Council’s argument, to the effect that a drawback subsidy may exist even if there is no payment of excess, when the scheme
in question does not strictly adhere to the provisions of Annexes I to III to Regulation No 2026/97, is based on the mistaken
premiss that those annexes contain a series of conditions for what constitutes a perfect drawback scheme. Rather they are
guidelines for determining whether there are safeguards in place to ensure that excess is not possible.

82      Secondly, the DEPB was wrongly considered not to be a properly constituted drawback scheme because there is no procedure in
India for verifying that it is correctly implemented. The applicants consider that it is such a scheme, made up of the following
elements: the application and strict enforcement of the SIONs; the fact that credits are granted on exports and can only be
used for imports of input raw materials, in accordance with the ‘input-output’ rules. They also point out that most Indian
exporters use the DEPB scheme as they would a drawback scheme that made it a strict requirement that all drawbacks be used
exactly against inputs consumed in the manufacturing process of the exported goods. They do this because it makes economic
sense. This scheme was conceived as an incentive for economic traders, but with pragmatism and economy of administration on
an Indian-wide scale also in mind.

83      Thirdly, the applicants criticise the institutions for failing to investigate whether an excess resulted when inputs were
taken into account. They thus infringed the principle of sound administration and the fundamental principles of Regulation
No 2026/97. They submit, in essence, that the Commission has a specific duty to examine whether the government of the exporting
country has a system or procedure in place to confirm which inputs are consumed in the manufacturing process of the exported
product, and in what amounts. If it was believed that there was no such system in place in India, the Commission should have
investigated whether the DEPB did in practice operate efficiently and to what extent it might grant an excess drawback to
exporters, in order to countervail only that. It is illogical to consider that it is for the Indian authorities to carry out
a new examination, since a further examination presupposes the existence of sufficient verification systems which, if they
had been in place, would have prevented the grant of an excess drawback. The applicants point out that, in any event, it is
for the Community institutions to determine whether a subsidy exists and if so in what amount.

84      Fourthly, they observe that it is a fundamental principle of international law, made clear in the ASCM and the Community customs
system, that a manufacturer should not be required to bear duties on goods imported only for the purposes of further working
and then re-export. However, there is no internationally-binding definition of the conditions which such a system must satisfy.
The approach of the Community institutions amounts to imposing on India, a developing country without an advanced customs
system, a system which mirrors exactly that which exists under the Community Customs Code.

85      In the fifth place, and in the alternative, should it be decided that the total amount of the drawback is a subsidy regardless
of whether it is excess or not, the applicants point out that the Commission still has to identify the countervailable portion
of that subsidy. They state that, under Article 5 of Regulation No 2026/97, the only countervailable part of a subsidy is
the benefit conferred on the recipient. As it is a universally acknowledged principle that exported goods need not bear import
duties on inputs consumed in their manufacture, then a benefit may only arise if an exporter receives drawback in excess of
the import duties paid on the inputs consumed in the manufacture of the exported goods.

86      The Council disputes the merits of this plea.

Findings of the Court

87      In this plea, the applicants essentially allege that the institutions erred in law in their definition of subsidisation, erred
in their legal classification of the DEPB, and finally, infringed a procedural obligation by failing to investigate how the
DEPB actually functions.

88      The wording of this plea includes a reference to the principle of proportionality. However, at no point do the applicants
explain why the classification of the DEPB as a subsidy is contrary to the principle of proportionality. Such a submission
does not satisfy the requirements of Article 44(1) of the Rules of Procedure of the Court of First Instance, on the ground
that it is not sufficiently clear and precise to enable the defendant to prepare its defence and the Court to rule on the
action, if necessary without any other supporting information. Accordingly, the submission must be declared inadmissible (see,
to that effect, Case T‐352/94 *Mo och Domsjö*v *Commission* [1998] ECR II‐1989, paragraphs 333 and 334).

–       Alleged error of law in defining subsidisation

89      Under Article 2(1)(a)(ii) of Regulation No 2026/97: ‘A subsidy shall be deemed to exist if ... there is a financial contribution
by a government in the country of origin or export, that is to say, where ... government revenue that is otherwise due is forgone
or not collected (for example, fiscal incentives such as tax credits); in this regard, the exemption of an exported product
from duties or taxes borne by the like product when destined for domestic consumption, or the remission of such duties or
taxes in amounts not in excess of those which have been accrued, shall not be deemed to be a subsidy, provided that such an
exemption is granted in accordance with the provisions of Annexes I to III.’

90      It is apparent from that provision that, contrary to what the applicants claim, Annexes I to III to Regulation No 2026/97
are not mere guidelines to determine whether there are safeguards against excess drawbacks, but contain rules which must be
complied with in order to avoid classification of a remission or exemption from duties as a subsidy. Such a conclusion is
evident from the very clear wording of Article 2(1)(a)(ii) of Regulation No 2026/97. Furthermore, it follows from the scheme
of that article that the derogation given to exemptions or remissions from duty is an exception to the principle that a subsidy
exists where government revenue that is otherwise due is forgone or not collected. That derogation must therefore be interpreted
narrowly.

91      Consequently, by deciding in recitals 8 and 9 of the contested anti-subsidy regulation that, in the absence of compliance
with the provisions of Annexes I to III of Regulation No 2026/97, the countervailable benefit was made up of total import
duties normally due on all imports, the Council did not err in law in interpreting Article No 2026/97. In fact, limiting classification
as a subsidy solely to the excess collected, as the applicants suggest, presupposes that the system for remission or exemption
of import duties is compatible with Article 2(1)(a)(ii) of Regulation No 2026/97, and thus, with Annexes I to III thereto.

92      For those reasons, the argument based on an alleged infringement of Article 5 of Regulation No 2026/97, according to which
‘[t]he amount of countervailable subsidies ... shall be calculated in terms of the benefit conferred on the recipient which
is found to exist during the investigation period’, must be rejected. It is based on the same false premiss that exporters
are entitled to drawback in respect of duties on the inputs used in the exported products, whereas it is clear from the foregoing
that such entitlement is conditional on compliance with Article 2(1)(a)(ii) of Regulation No 2026/97.

93      That conclusion is not undermined by the reference to Annex I(i), Annex II(I)(2), point I.2, and Annex III(I) in which it
is stated, in essence, that a drawback scheme may constitute a subsidy if it results in a payment of amounts which exceed
those levied. It must be pointed out that those various provisions recall the principle set out in Article 2(1)(a)(ii) of
Regulation No 2026/97, but are not intended to specify the exact criteria which must be met by a drawback scheme to be compatible
with that article, since those criteria are set out in other provisions in Annexes II and III to Regulation No 2026/97.

94      Finally, as regards Articles 1(1) and 15(2) of Regulation No 2026/97 and Articles 1.1(a)(1)(iii) and 19.3 of the ASCM, to
which the wording of this plea refers, the applicants do not explain how those provisions could in any way affect the analysis
of the conditions which a scheme for exemption or remission of import duties must satisfy to avoid classification as a subsidy.

–       Alleged error in the classification of the DEPB as a subsidy

95      According to Annex II(II)(4) of Regulation No 2026/97: ‘Where it is alleged that ... a drawback scheme ... conveys a subsidy by
reason of over-rebate or excess drawback of indirect taxes or import charges on inputs consumed in the production of the exported
product, the Commission must normally first determine whether the government of the exporting country has in place and applies
a system or procedure to confirm which inputs are consumed in the production of the exported product and in what amounts.
Where such a system or procedure is determined to be applied, the Commission must normally then examine the system or procedure
to see whether it is reasonable, effective for the purpose intended, and based on generally accepted commercial practices
in the country of export.’ Annex III(II)(2) of Regulation No 2026/97, concerning substitution drawback systems, contains similar
wording.

96      According to Annex II(II)(5) of Regulation No 2026/97: ‘Where there is no such system or procedure, where it is not reasonable,
or where it is instituted and considered reasonable but is found not to be applied or not to be applied effectively, a further
examination by the exporting country based on the actual inputs involved will normally need to be carried out in the context
of determining whether an excess payment occurred. If the Commission deems it necessary, a further examination may be carried
out in accordance with paragraph [II]4.’ Annex III(II)(3) of Regulation No 2026/97, concerning substitution drawback systems,
contains similar wording.

97      In order to find that the DEPB could not be classified as an authorised drawback or substitution drawback scheme, the Council
took as its basis, inter alia, the circumstances described in recital 9 of the contested anti-subsidy regulation, according
to which:

‘[The Government of India] did not apply an effective verification system or procedure to confirm whether and in what amounts
inputs were consumed in the production of the exported product (Annex II(II)(4) of ... Regulation [No 2026/97] and, in the case
of substitution drawback schemes, Annex III(II)(2) [to Regulation No 2026/97]). Additionally, the [Government of India] did
not carry out a post-export examination based on actual inputs involved to determine whether an excess payment occurred, although
this would normally be required in the absence of an effectively applied verification system (Annex II(II)(5) and Annex III(II)(3)
to ... Regulation [No 2026/97]).’

98      It must be held that the Council correctly interpreted the criteria set out in Annexes II and III to Regulation No 2026/97,
the aim of which is to verify that the country of export’s drawback scheme enables the actual consumption of inputs or substitution
inputs to be confirmed. The first criterion relates to the existence of a system or procedure which enables such verification
to be carried out. The second criterion, which applies in the alternative, in the event that such a procedure or system does
not exist or is defective, consists of the country of export having recourse to an examination based on the actual inputs
used or transactions performed.

99      The Council rightly found that the DEPB did not meet the criteria laid down in Annexes II and III to Regulation No 2026/97.

100    First, it is not apparent from the description of the DEPB as it appears in recitals 23 to 30 of the provisional anti-subsidy
regulation – which is confirmed by the Council in recital 6 of the contested anti-subsidy regulation and is not disputed by
the applicants – that the Government of India put in place a verification procedure or mechanism. Contrary to what the applicants
maintain, the combination of several factors, including the application of the SIONs, the use of credits for imports of inputs,
and the fact, cited in their written pleadings, that most Indian exporters use the DEPB scheme as they would a drawback scheme
that made it a strict requirement that all drawbacks be used exactly against inputs consumed in the manufacturing process
of the exported goods, do not equate to a verification system or procedure within the meaning of Annex II(II)(4) and Annex
III(II)(2) to Regulation No 2026/97.

101    Secondly, it is common ground that the Government of India did not carry out a post-export examination, as it was required
to do in the absence of a verification system or procedure in accordance with Annexes II(II)(5) and Annex III(II)(3) to Regulation
No 2026/97. This point is confirmed, moreover, by the applicants’ argument to the effect that it is for the Community to carry
out such an examination.

102    The Council was therefore entitled to consider that the DEPB did not satisfy the criteria laid down in Annexes II and III
to Regulation No 2026/97 and that, therefore, it could not be classified as an authorised drawback or substitution drawback
scheme for the purposes of Article 2(1)(a)(ii) of that regulation.

103    This finding is not affected by the use of the adverb ‘normally’ in Annexes II and III to Regulation No 2026/97. Although
that wording implies that, in particular circumstances, the institutions may use other criteria, it cannot deprive them of
the possibility of basing their finding that a drawback or substitution drawback scheme is unauthorised on the fact that the
criteria laid down are not met.

104    The applicants’ arguments that there is no internationally-binding definition of a drawback scheme and that India is a developing
country cannot invalidate this finding. In this regard, it suffices to point out that Annexes II and III to Regulation No
2026/97 accord with Annexes II and III to the ASCM which make no distinction in favour of developing countries.

105    For the sake of completeness, it may be noted that the DEPB is not based on the actual inputs or substitution inputs used
in the exported product, but on a mere estimate of their quantity. In this respect, the scheme does not include any condition
on actual use of inputs in the exported product. However, the existence of such a condition implicitly but necessarily follows
from Article 2(1)(a)(ii) of Regulation No 2026/97 and Annexes II and III thereto

–        The absence of an investigation into how the DEPB actually functions

106    As is apparent from paragraphs 95 and 96 above, the Commission need only determine whether the government of the exporting
country has in place and applies a monitoring system or procedure. It is in no way required, contrary to the applicants’ claim,
to conduct an investigation in order to verify the way the DEPB functions in practice. On the contrary, in the absence of
an appropriate monitoring system or procedure it is for the exporting country and not the Community to carry out a further
examination based on the actual inputs and transactions in question. This complaint must therefore be rejected.

107    In the light of the foregoing, the third plea in law must be rejected.

*Fourth plea, alleging failure to take into account the effects of anti-competitive practices on the Community market for which
fines were imposed when determining injury*

Arguments of the parties

108    The applicants claim that the contested regulations infringe, on the one hand, Article 1(1), 3(1), (6) and (7), and Article
9(4) of Regulation No 348/96, Articles 3 and 9 of the 1994 Anti-Dumping Code, and, on the other hand, Articles 1(1), 8(1),
(6) and (7) and 15(1) of Regulation No 2026/97 and Articles 15 and 19 of the ASCM, and are vitiated by a manifest error of
assessment, inasmuch as they impose definitive duties on imports of the product concerned in the absence of a correct and
proper determination of the injury caused, in particular by taking as a basis data made unreliable by the existence of an
anti-competitive agreement.

109    They point out that anti-dumping and countervailing duties may only be imposed if it has been shown following an investigation
that material injury has been caused to the Community industry. Under the WTO rules, it is necessary to ensure that recourse
to trade protection measures does not foreclose access of the imports at issue to the Community market, while the injury to
the Community industry may have been caused by other factors. An accurate calculation of the exact level of injury is therefore
necessary so as to prevent injury caused by other factors being attributed to the imports under examination and to enable
the proper application of the lesser duty rule.

110    The applicants also note the importance attached by the Community judicature to the determination of the part played by other
factors in the injury caused to the Community industry and, in particular, the effects of any anti-competitive practices.
Thus, in Case C‐358/89 *Extramet Industrie* v *Council* [1992] ECR I-3813, the Court of Justice annulled a duty on the ground that the Commission had not correctly determined the
injury caused by the imports nor considered whether the relevant Community industry was responsible for its own injury through
anti-competitive actions on its part.

111    The applicants claim that, according to the judgment of the Court of First Instance in Case T-58/99 *Mukand and Others* v *Council* [2001] ECR II-2521, it is for the Commission to decide whether the market under investigation was affected by the anti-competitive
activities in question and accordingly whether reliable conclusions could be drawn in respect of injury. They also point out
that, under Article 8(6) and (7) of Regulation No 2026/97 and Article 3(6) and (7) of Regulation No 384/96, the institutions
are required to refrain from attributing to the imports under examination the injurious effects on the Community industry
of its own anti-competitive conduct. They infer that, in the event of anti-competitive practices leading to price-fixing on
the Community market in respect of products which are the subject of an anti-dumping or anti-subsidy investigation, the Commission
should terminate proceedings on the basis that that anti-competitive activity invalidates the injury and causation determinations,
and indeed makes them impossible.

112    In this case, the applicants submit that the anti-competitive conduct penalised by the Commission in its decision 2002/271/EC
of 18 July 2001 relating to a proceeding under Article 81 [EC] and Article 53 of the European Economic Area Agreement (OJ
2002 L 100, p. 1) should have been taken into account. The principal effects were artificially high prices up to March 1998.
That prevented both an exact determination of the alleged price undercutting by Indian imports and of the appropriate profitability
levels of the Community industry. Also, the effect of the anti-competitive practices was to raise the Community producers’
market shares artificially. Therefore, no conclusions should be drawn from the fact that price levels fell. The applicants
infer that it was not possible for the Commission to make any reliable assessment of injury indicators. They submit that the
Commission should have considered whether the difficulties experienced by the Community industry were not due to its own actions.
They maintain that the circumstances of the present case make the analysis easier than it was in *Mukand and Others* v *Council*, cited in paragraph 111 above, because the anti-competitive practices took place on the same market as the imports in question.
They conclude that it is impossible to compare the price levels of Community and Indian graphite electrodes.

113    The applicants dispute the analysis that the effects of the cartel had ceased by the beginning of the period considered, 1
January 1999. It is an illusion to think that the effects of a long term price-fixing and market-sharing cartel disappear
immediately, especially in an oligopolistic market. They point out that, on 1 January 1999, the Commission’s investigation
of the cartel had just begun and the effects of the cartel were at their height, since, in particular, the prices charged
had been agreed in prior years and were therefore very high. The subsequent drop in prices was therefore attributable more
to the gradual cessation of the effects of the cartel than to the Indian imports. In that regard, the applicants claim that
they submitted to the Commission evidence of contemporaneous and matching price increases showing that the market was not
free of the effects of the cartel.

114    They conclude from the foregoing that the Commission committed manifest errors of assessment in the determination of both
injury and causation. On the one hand, the Commission did not have adequate and reliable indicators for measuring the injury.
The applicants claim, in essence, that since the purpose of countervailing and anti-dumping measures is, in principle, to
restore a level playing field, the Commission must have a clear idea of where the level playing field stands. Here, the only
quantifiable issues were the declines in performance of the Community industry, which is not comparable to material injury
justifying the imposition of duties. On the other hand, as regards the examination of causation, the decline in performance on the part of Community producers
must be seen as self-inflicted, the consequence of their anti-competitive practices, not of the Indian imports.

115    The Council submits that the institutions examined whether the relevant injury data were affected by the past cartel and correctly
concluded that that was not the case.

Findings of the Court

116    Article 1(1) of Regulation No 384/96 provides that an anti-dumping duty may be applied to any dumped product whose release
for free circulation in the Community causes injury.

117    Article 3 of the regulation provides:

‘1. Pursuant to this Regulation, the term “injury” shall, unless otherwise specified, be taken to mean material injury to
the Community industry, threat of material injury to the Community industry or material retardation of the establishment of
such an industry and shall be interpreted in accordance with the provisions of this Article.

...

6. It must be demonstrated, from all the relevant evidence ... that the dumped imports are causing injury within the meaning
of this Regulation. ...

7. Known factors other than the dumped imports which at the same time are injuring the Community industry shall also be examined
to ensure that injury caused by these other factors is not attributed to the dumped imports under paragraph 6. Factors which
may be considered in this respect include the volume and prices of imports not sold at dumping prices ... restrictive trade
practices of ... third country and Community producers.’

118    According to Article 9(4) of Regulation No 384/96, ‘[w]here the facts as finally established show that there is dumping and
injury caused thereby, and the Community interest calls for intervention ... a definitive anti-dumping duty shall be imposed
by the Council’.

119    Articles 1, 8 and 15 of Regulation No 2026/97 are drafted in a similar way with regard to countervailing duties.

120    According to settled case-law, the question whether a Community industry has suffered injury and, if so, whether that injury
is attributable to dumped or subsidised imports and whether imports from other countries or, more generally, whether other
known factors contributed to the injury to the Community industry involves the assessment of complex economic matters in respect
of which the institutions enjoy a wide discretion. Consequently, review by the Community courts of the assessments of the
institutions must be confined to ascertaining whether the procedural rules have been complied with, whether the facts on which
the contested decision is based have been accurately stated and whether there has been any manifest error of assessment of
the facts or any misuse of powers (see, to that effect, Case T‐164/94 *Ferchimex* v *Council* [1995] ECR II‐2681, paragraph 131, and *Mukand and Others*v *Council*, paragraph 111 above, paragraph 38).

121    First, as regards the argument alleging that the injury indicators were unreliable, it should be borne in mind that under
Article 3(2) and (3) of Regulation No 384/96 and Article 8(2) and (3) of Regulation No 2026/97, a determination of injury
is to be based, inter alia, on increases in imports, changes in prices on the Community market and changes in the profitability
of the Community industry. It is important, therefore, that the indicators on which the institutions base their findings should
be consistent with normal market conditions (see, to that effect,*Mukand and Others*v *Council*, paragraph 111 above, paragraph 46).

122    An analysis of the relevant passages of the provisional regulations, confirmed by the contested regulations, does not show
that the institutions committed a manifest error of assessment in considering that, on the date on which the period under
examination began, 1 January 1999, the effects of the anti-competitive conduct penalised in Decision 2002/271 had disappeared
(recital 46 of the provisional anti-dumping regulation and recital 90 of the provisional anti-subsidy regulation, confirmed,
respectively, by recital 18 of the contested anti-dumping regulation and recital 27 of the contested anti-subsidy regulation).

123    It is apparent from recitals 77 to 81 of the provisional anti-dumping regulation and recitals 121 to 125 of the provisional
anti-subsidy regulation, confirmed by the Council in recital 21 of the contested anti-dumping regulation and recital 29 of
the contested anti-subsidy regulation, that that conclusion is supported by a sufficiently convincing analysis in an area
in which the institutions enjoy a wide discretion.

124    The finding that the effects of the cartel had ceased on 1 January 1999, the date chosen as the starting point for the period
considered, was based on the observation that virtually all the transactions actually invoiced and paid in 1999, and the ensuing
prices resulted from agreements set after the date on which the cartel ceased to operate (March 1998). That finding is in
turn based on the following circumstance, referred to in recital 78 of the provisional anti-dumping regulation and recital
122 of the provisional anti-subsidy regulation:

‘The investigation has found that in the period 1998-1999, annual contracts covered around 40% of the transactions, six-month
contracts covered around 35% and three-month contracts or single orders covered around 25%. Long-term contracts (e.g. three-year
contracts) have been gaining ground relatively recently, but were, in the years 1997-98, marginal, if not totally non-existent,
as one could logically expect in a market that was characterised by high prices.’

125    In addition, the Council relies on the finding, set out in recital 80 of the provisional anti-dumping regulation and recital
124 of the provisional anti-subsidy regulation, that an analysis of long term prices of the products concerned on the Community
market had shown that prices increased gradually during the 1990s, reaching a peak in 1998, then declined sharply by 14% between
1998 and 1999.

126    The Commission explained moreover why the development of prices in another market, that of large diameter electrodes (i.e.
with a diameter above 700 mm), was not relevant (recital 79 of the provisional anti-dumping regulation and recital 123 of
the provisional anti-subsidy regulation).

127    It remains to be ascertained whether the above considerations are invalidated by the applicants’ arguments.

128    First of all, in order to show that the effects of the cartel on the market in question were still being felt on 1 January
1999, the applicants submit that on that date the Commission’s investigation of the cartel had just begun and the anti-competitive
effects were at their height. It suffices to point out that the institutions rightly took Decision 2002/271 as their basis,
from which it is clear that the investigation began on 5 June 1997 (recital 32) and that the infringement persisted until
February/March 1998 (recital 155).

129    Secondly, the applicants refer to the oligopolistic structure of the market in question and the fact that competition on that
market was absent or very limited to assert that competition could not be re-established immediately, but only gradually.
As is clear from paragraphs 122 to 126 above, the existence of a manifest error of assessment is not apparent from a mere
reading of the provisional and definitive regulations. It is thus for the applicants to adduce evidence which would enable
the Court of First Instance to reach a different conclusion (see, to that effect, *EFMA*v *Council*, paragraph 45 above, paragraph 106; Case T‐210/95 *EFMA*v*Council* [1999] ECR II-3291, paragraph 58; and *Mukand and Others*v *Council*, paragraph 111 above, paragraph 41).

130    In this regard, the applicants submitted evidence showing, in their view, that SGL and UCAR simultaneously increased prices
after 1 January 1999 and, therefore, that normal market conditions were not restored. That evidence was cited and further
evidence submitted in their letter of 22 June 2004.

131    Without there being any need to question the probative value of some of those documents taken from the internet (extracts
from the Yahoo Finance and UCAR and SGL websites), it suffices to point out that those documents do not touch upon the essential
factor which prompted the Commission, as confirmed by the Council, to find that normal market conditions were restored on
1 January 1999, namely the sharp 14% fall in prices between 1998 and 1999. By those documents, the applicants seek only to
show that there were simultaneous price increases after 1 January 1999, and in particular, between 2002 and 2004. Those documents
do not therefore call into question the reasoning to the effect that on 1 January 1999, the effects of past anti-competitive
behaviour had disappeared, and accordingly that the injury indicators were sufficiently reliable. Since that analysis is not
directly called into question, the alleged parallel increase in prices cannot be regarded as having arisen from the conduct
that was penalised by Decision 2002/271 or as constituting evidence of the absence of normal market conditions.

132    In that regard, the facts in this case are different from those which gave rise to the judgment in *Mukand and Others*v *Council*, paragraph 111 above, relied on by the applicants, in which the Council did not dispute the existence of the evidence which,
the Court of First Instance held, rendered the analysis of the prices of the product concerned unreliable.

133    Secondly, and as a result, the applicants’ other arguments must also be rejected.

134    First of all, the institutions did not commit any manifest error of assessment in considering that, once the effects of the
practices penalised in Decision 2002/271 had disappeared, the Community market enjoyed normal conditions of competition.

135    Next, it is true that, according to settled case-law, in determining injury, the Council and the Commission are under an obligation
to consider whether the injury on which they intend to base their conclusions actually derives from dumped imports and must
disregard any injury deriving from other factors, particularly from the conduct of Community producers themselves (*Extramet Industrie* v *Council*, paragraph 110 above, paragraph 16, and Case T‐107/04 *Aluminium Silicon Mill Products* v *Council* [2007] ECR II-669, paragraph 72). However, for the reasons outlined above, it must be held that any injury which the Community
might have caused to itself had ceased on the date on which the examination period began.

136    Finally, as regards the applicants’ references to alleged infringements of Articles 3 and 9 of the 1994 Anti-Dumping Code
and Articles 15 and 19 of the ASCM, it appears that they do not argue that the content of those provisions was different from
that of the provisions in Regulations Nos 384/96 and 2026/97 which give effect to the specific obligations contained therein.

137    In the light of the foregoing, the fourth plea in law must be rejected.

*Fifth plea relating to the Council’s failure, when determining injury, to take into account the effects of other factors and
to the choice of method for calculating injury*

Arguments of the parties

138    In essence, the applicants criticise the institutions for attributing all the injury to the Indian imports, whereas a proper
investigation as regards other factors, and in particular, of other imports that were undercutting prices would certainly
have led to the conclusion that there was dumping from countries other than India, in particular from Japan. Consequently,
both the provisional regulations and the contested regulations are contrary either to Article 3(7) of Regulation No 348/96
or to Article 8(7) of Regulation No 2026/97.

139    Furthermore, the applicants consider that in this case, where other factors may have played a role in the drop in prices of
the products, the Commission should not have calculated the profit margin on the basis of a target price allegedly corresponding
to what it would have been in the absence of dumping and subsidy (price underselling) but should have followed the well-established
basis of price undercutting. The applicants consider that the method favoured by the Commission in this case, which is based
on a comparison of Indian export prices with Community industry target prices with a supposedly reasonable profit margin,
has the effect of making the Indian imports bear the burden of all supposed injury caused to the Community industry even though
the Commission has concluded that Indian imports are not the sole cause thereof. This is precisely what Article 3(7) of Regulation
No 384/96 and Article 8(7) of Regulation No 2026/97 set out to avoid.

140    The applicants maintain that the Council appears to confuse the separate concepts of causation and the exclusion of other
factors from the injury analysis. The applicants are not suggesting that, in any given anti-dumping or anti-subsidy case,
other factors causing injury should deprive the Community industry of all protection, just that injury caused by those other
factors should not be attributed to the dumped imports, as Article 3(7) of Regulation No 348/96 requires.

141    The Council considers that this plea should be rejected.

Findings of the Court

142    Under Article 3(7) of Regulation No 384/96 and Article 8(7) of Regulation No 2026/97, known factors other than the dumped
or subsidised imports which are injuring the Community industry at the same time are also to be examined to ensure that injury
caused by these other factors is not attributed to the dumped or subsidised imports.

143    As the Court has had occasion to point out, it is possible to attribute to the imports considered responsibility for injury
even if their effects are merely part of more extensive injury attributable to other factors, and in particular, imports from
third countries (see, to that effect, Joined Cases 277/85 and 300/85 *Canon and Others* v *Council* [1988] ECR 5731, paragraph 62).

144    However, it is for the institutions to establish whether those other factors were not such as to break the causal link between
the imports in question and the injury suffered by the Community industry (see, to that effect, Case T‐166/94 *Koyo Seiko* v *Council* [1995] ECR II‐2129, paragraphs 79, 81 and 82, and Case T‐97/95*Sinochem* v *Council* [1998] ECR II‐85, paragraph 98).

145    Similarly, it is for the institutions to ensure that the injury attributable to other factors is not taken into account when
injury is determined within the meaning of Article 3(7) of Regulation No 384/96 and of Article 8(7) of Regulation No 2026/97
and that, therefore, the anti-dumping or countervailing duty imposed does not exceed the level necessary to remove the injury
caused by the dumped or subsidised imports (see, to that effect, as regards the application of Article 4(1) of Council Regulation
(EEC) No 2423/88 of 11 July 1988 on protection against dumped or subsidised imports from countries not members of the European
Economic Community (OJ 1998 L 209, p. 1), the wording of which is similar to that of Article 3(7) of Regulation No 384/96
and of Article 8(7) of Regulation No 2026/97, Case T‐210/95 *EFMA* v *Council*, paragraph 129 above, paragraphs 59 and 60).

146    Accordingly, the institutions are required to assess the effects of other known factors, and in particular, the effects of
imports of the product concerned from third countries, not only when analysing the causal link between the imports examined
and the injury suffered by the Community industry, but also when determining the injury suffered by the latter.

147    It is in the light of those considerations that the applicants’ complaints relating, on the one hand, to the failure to take
into account the effects of other factors and, on the other hand, to the choice of method for calculating the injury elimination
level must be assessed.

–       The complaints relating to the failure to take into account the effects of other factors

148    The applicants’ only express criticism is levelled at the failure to take into account the effect of the Japanese imports.

149    In its provisional regulations, the relevant recitals of which (83 to 88 of the provisional anti-dumping regulation and 127
to 132 of the provisional anti-subsidy regulation) were confirmed by the Council (recital 21 of the contested anti-dumping
regulation and recital 29 of the contested anti-subsidy regulation), the Commission endeavoured to show that no indications
could be found that imports from certain third countries other than India had contributed to the injurious situation suffered
by the Community industry.

150    It came to the following conclusion, set out in recital 87 of the provisional anti-dumping regulation and in recital 131 of
the provisional anti-subsidy regulation:

‘Given the average prices, the small volume of [the] imports [from third countries other than India], their limited market
share and the above considerations in terms of product range, no indications could be found that these third country imports,
whether or not originating from facilities owned by the two complainant Community producers, contributed to the injurious
situation suffered by the Community industry notably in terms of market shares, sales volumes, employment, investment, profitability,
return on investment and cash flow.’

151    That conclusion is based on a number of factors which are not expressly criticised by the applicants.

152    It is thus not disputed that only imports from three countries other than India, namely, Japan, Poland and the United States,
had a share of the Community market above 1% during the investigation period, and that their CIF Community frontier price
(‘the CIF price’) was above that of the Indian imports. The CIF price of the Polish imports exceeded those of the Community
industry. According to the findings in the provisional regulations, the market share of the United States declined from 5.3
to 4.7%.

153    It is true that the provisional regulations contain few explanations relating to the Japanese imports. They simply mention
that ‘the market share of Japan rose from 2.1% in 1999 to 2.6%’ and that the CIF price of those imports undercut the Community
industry’s price, but was above India’s (recital 128 of the provisional anti-subsidy regulation and recital 84 of the provisional
anti-dumping regulation).

154    Although such imports are certainly not such as to break the causal link between the imports examined and the injury suffered
by the Community industry, it was for the institutions to establish whether those imports were not a separate source of injury
to the Community industry, and if that was the case, not to attribute that injury to the imports examined.

155    Even though the statement of reasons in the contested regulations with regard to the Japanese imports is succinct, it is made
clear to the requisite legal standard, however, in the contested regulations and the provisional regulations to which they
refer, that such an effect was regarded as non-existent or too insignificant to be the source of any significant injury.

156    First, it is clear from those regulations that the obligation on the institutions not to attribute to the imports under examination
injury suffered by the Community industry which was caused by other factors, and in particular, by imports of the product
concerned from third countries, was properly construed. Indeed, the following is stated in recital 117 of the provisional
anti-subsidy regulation, and in a similar way in recital 73 of the provisional anti-dumping regulation:

‘In accordance with Article 8(6) and (7) of ... Regulation [No 2026/97], the Commission examined whether subsidised imports
have caused injury to the Community industry to a degree that enables it to be classified as material. Known factors other
than the subsidised imports, which could at the same time be injuring the Community industry, were also examined to ensure
that possible injury caused by these other factors was not attributed to the subsidised imports.’

157    Secondly, the institutions were entitled to consider, in this case, that the effects of imports from third countries were
non-existent or only very limited, and consequently that those imports were not the source of any significant injury that
they would have had to ensure were not attributed to the imports examined.

158    In this regard, it is stated in recital 136 of the provisional anti-subsidy regulation, and similarly in recital 92 of the
provisional anti-dumping regulation, that ‘the effect of the decline in demand linked to the slowdown in the steel market,
of the return to normal competition conditions after dismantling of the cartel, of the performance of other Community producers,
of the imports from other third countries, of the export performance of the Community industry was non-existent or only very
limited and consequently not such as to alter the provisional finding that there is a genuine and substantial causal link
between the subsidised imports from the country concerned and the material injury suffered by the Community industry’.

159    Such a conclusion with regard to imports the volume of which increased by only 0.5% over the entire period examined, which
was adopted in an area where, for the reasons referred to in paragraph 120 above, the institutions enjoy a wide discretion,
does not appear to be manifestly wrong.

160    It follows that the applicants’ first complaint must be rejected.

–       The complaint relating to the choice of method for calculating the injury elimination level

161    The choice of method of calculation falls within the discretion enjoyed by the institutions in respect of determinations of
injury suffered by the Community industry and which is justified by the complex economic assessments inherent in such determinations.
Recourse to a method of calculation based on the profit margin which the Community industry could reasonably have anticipated
in the absence of unfair practices, as opposed to a method of calculation based only on price undercutting, is not vitiated
by any manifest error of assessment.

162    The profit margin to be used by the Council when calculating the target price that will eliminate the injury in question must
be limited to the profit margin which the Community industry could reasonably anticipate under normal conditions of competition,
in the absence of the dumped or subsidised imports (Case T-210/95 *EFMA*v*Council*, paragraph 129 above, paragraph 60). The applicants have not been able, however, to show that that was not the case here.

163    This second complaint, and therefore, the fifth plea must be rejected.

164    It follows that the action must be dismissed in its entirety.

**Costs**

165    Under Article 87(2) of the Rules of Procedure of the Court of First Instance, the unsuccessful party is to be ordered to pay
the costs if they have been applied for in the successful party’s pleadings. Under Article 87(4) of those rules, institutions
which intervened in the proceedings are to bear their own costs.

166    Since the applicants have been unsuccessful and the Council applied for costs, the applicants must be ordered to pay, in addition
to their own costs, the costs incurred by the Council. The Commission shall bear its own costs.

On those grounds,

THE COURT OF FIRST INSTANCE (Fifth Chamber)

hereby:

1.      **Dismisses the action;**

2.      **Orders HEG Ltd and Graphite India Ltd to bear their own costs and to pay the costs of the Council;**

3.      **Orders the Commission to bear its own costs.**

| Vilaras | Prek | Ciucă |
| ------- | ---- | ----- |

Delivered in open court in Luxembourg on 17 December 2008.

[Signatures]

Table of contents

Factual background

Procedure and forms of order sought by the parties

Law

First plea, relating to the opening of an investigation against only Indian imports of the product concerned

Arguments of the parties

Findings of the Court

– Alleged discriminatory attitude as regards the definition of the product concerned

– The failure to open an investigation into other potential sources of dumping

– Infringement of the principle of observance of the rights of the defence

Second plea, alleging infringement of fundamental procedural requirements in that the investigations were conducted on the
basis of a Community of only 15 Member States

Arguments of the parties

Findings of the Court

Third plea, relating to the classification of the DEPB Scheme as subsidisation and to the determination of the amount of countervailing
duties

Arguments of the parties

Findings of the Court

– Alleged error of law in defining subsidisation

– Alleged error in the classification of the DEPB as a subsidy

– The absence of an investigation into how the DEPB actually functions

Fourth plea, alleging failure to take into account the effects of anti-competitive practices on the Community market for which
fines were imposed when determining injury

Arguments of the parties

Findings of the Court

Fifth plea relating to the Council’s failure, when determining injury, to take into account the effects of other factors and
to the choice of method for calculating injury

Arguments of the parties

Findings of the Court

– The complaints relating to the failure to take into account the effects of other factors

– The complaint relating to the choice of method for calculating the injury elimination level

Costs

---

- Language of the case: English.