Council Regulation (EC) No 1124/2007 of 28 September 2007 amending Regulation (EC) No 367/2006 imposing a definitive countervailing duty on imports of polyethylene terephthalate (PET) film originating in India
Date: 2007-09-28
Institutions: Council of the European Union
Subjects: India, countervailing charge, import, originating product, plastics

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(Acts adopted under the EC Treaty/Euratom Treaty whose publication is obligatory)

I

REGULATIONS

COUNCIL REGULATION (EC) No 1124/2007

of 28 September 2007

amending Regulation (EC) No 367/2006 imposing a definitive countervailing duty on imports of
polyethylene terephthalate (PET) film originating in India

THE COUNCIL OF THE EUROPEAN UNION,

original investigation period was 1 October 1997 to 30
September 1998.

Having regard to the Treaty
Community,

establishing the European

Having regard to Council Regulation (EC) No 2026/97 of 6
October 1997 on protection against subsidised imports from
countries not members of the European Community (1) (basic
Regulation) and in particular Article 19 thereof,

Having regard to the proposal submitted by the Commission
after consulting the Advisory Committee,

Whereas:

(1)

A. PROCEDURE

I. Previous investigation and existing measures

The Council, by Regulation (EC) No 2597/1999 (2),
imposed a definitive countervailing duty on imports of
polyethylene terephthalate (PET) film falling within CN
codes ex 3920 62 19 and ex 3920 62 90, originating in
India (the product concerned). The investigation which
that Regulation is hereinafter
led to the adoption of
referred to as the ‘original
investigation’. The measures
took the form of an ad valorem duty, ranging between
3,8 % and 19,1 % imposed on imports from individually
named exporters, with a residual duty rate of 19,1 %
imposed on imports of the product concerned from all
other companies. The countervailing duty imposed on
imports of PET film manufactured and exported by
Jindal Poly Films Limited,
formerly known as Jindal
Polyester Ltd (3), (Jindal or the company) was 7 %. The

(2)

(3)

(4)

(5)

The Council, by Regulation (EC) No 367/2006 (4),
following an expiry review pursuant to Article 18 of
the basic Regulation, maintained the definitive counter-
vailing duty imposed by Regulation (EC) No 2597/1999
on imports of PET film originating in India. The review
investigation period was 1 October 2003 to 30
September 2004.

The Council, by Regulation (EC) No 1288/2006,
following an interim review concerning the subsidisation
of another Indian PET film producer, Garware Polyester
Limited (Garware), amended the definitive countervailing
duty imposed on Garware by Regulation (EC) No
367/2006.

II. Ex officio initiation of a partial interim review

Prima facie evidence was available to the Commission
indicating that Jindal benefited from increased levels of
subsidisation, compared to the original investigation, and
that the changes to such levels were of a lasting nature.

III. Investigation

As a result, the Commission decided, after consulting the
to initiate ex officio a partial
Advisory Committee,
interim review in accordance with Article 19 of
the
basic Regulation, limited to the level of subsidisation to
Jindal, in order to assess the need for the continuation,
removal or amendment of
the existing countervailing
measures. On 2 August 2006 the Commission
announced, by a notice of initiation published in the
Official Journal of the European Union (5), the initiation of
this review.

(1) OJ L 288, 21.10.1997, p. 1. Regulation as last amended by Regu-

lation (EC) No 461/2004 (OJ L 77, 13.3.2004, p. 12).

(2) OJ L 316, 10.12.1999, p. 1.
(3) OJ C 297, 2.12.2004, p. 2.

(4) OJ L 68, 8.3.2006, p. 15. Regulation as amended by Regulation

(EC) No 1288/2006 (OJ L 236, 31.8.2006, p. 1).

(5) OJ C 180, 2.8.2006, p. 90.

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(6)

(7)

(8)

(9)

The review investigation period (review IP) ran from
1 April 2005 to 31 March 2006.

(v) Export Income Tax Exemption Scheme;

Jindal,

advised

officially

Commission

the
The
Government of India (GOI) and Du Pont Tejin Films,
Luxembourg, Mitsubishi Polyester Film, Germany, Toray
Plastics Europe, France and Nuroll, Italy, which represent
the overwhelming majority of Community PET film
production (hereinafter the Community industry), of the
initiation of the partial interim review. Interested parties
were given the opportunity to make their views known
in writing and to request a hearing within the time limit
set in the notice of initiation.

In order to obtain the information necessary for its inves-
tigation, the Commission sent a questionnaire to Jindal,
which cooperated by replying to the questionnaire. A
verification visit was carried out at Jindal’s premises in
India.

the essential results of

the GOI and the Community industry were
Jindal,
informed of
the investigation
and had the opportunity to comment. Comments were
received by Jindal and are discussed below. The GOI did
not submit any comments.

(vi) Export Credit Scheme;

(vii) Duty-Free Replenishment Certificate.

(12)

the GOI

to issue notifications

The schemes (i) to (iv) and (vii) above are based on the
Foreign Trade (Development and Regulation) Act 1992
(No 22 of 1992) which entered into force on 7 August
1992 (the Foreign Trade Act). The Foreign Trade Act
authorises
regarding
export and import policy. A multi-annual plan relating
to the Indian foreign trade policy for the period 1
September 2004 to 31 March 2009, which succeeded
the former export and import
(EXIM) policy, was
published by the GOI (FTP 2004 to 2009). In addition,
a handbook of procedures governing the FTP 2004 to
2009 (HOP I 2004 to 2009) was published by the GOI
and is updated on a regular basis (1).

(13)

The Export Income Tax Exemption Scheme specified in
(v) above is based on the Income Tax Act 1961, which is
amended annually by the Finance Act.

B. PRODUCT CONCERNED

(14)

(10)

The product concerned is polyethylene terephthalate
(PET) film, originating in India, normally declared under
CN codes ex 3920 62 19 and ex 3920 62 90, as defined
in the original investigation.

The Export Credit Scheme specified in (vi) above is based
on Sections 21 and 35A of the Banking Regulation Act
1949, which allows the Reserve Bank of India to instruct
commercial banks regarding export credits.

C. SUBSIDIES

I. Introduction

(11) On the basis of the information available and the reply to
the Commission’s questionnaire, the following schemes,
allegedly involving the granting of subsidies, were inves-
tigated:

(a) Nationwide schemes

(i) Advance Licence Scheme;

(ii) Duty Entitlement Passbook Scheme;

(iii) Export Oriented Units Scheme/Special Economic

Zones Scheme;

(b) Regional Schemes

(15) On the basis of the information available and the reply to
the Commission’s questionnaire,
the Commission also
Incentives (here-
investigated the Package Scheme of
inafter,
the Government of Maharashtra
(the GOM) 1993. This scheme is based on resolutions
of the GOM Industries, Energy and Labour Department.

the ‘PSI’) of

II. Nationwide Schemes

1. Advance Licence Scheme (ALS)

(a) Legal basis

(16)

The detailed description of the scheme is contained in
paragraphs 4.1.3 to 4.1.14 of the FTP 2004 to 2009 and
Chapters 4.1 to 4.30 of the HOP I 2004 to 2009. The
scheme was replaced in April 2006, i.e. after the end of
the review IP, by the ‘Advance Authorisation Scheme’.
However, this appears to be essentially a name change.
The following analysis focuses on the ALS in place
during the review IP.

(iv) Export Promotion Capital Goods Scheme;

(1) Notification No 1 (RE-2006)/2004 to 2009 of 7.4.2006 of the
Ministry of Commerce and Industry of the Government of India.

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(17)

(b) Eligibility

‘tied

The ALS consists of six sub-schemes. Those sub-schemes
in the criteria for eligibility. Manu-
differ,
inter alia,
to’
facturer-exporters
and merchant-exporters
supporting manufacturers are eligible for the ALS for
physical exports and for the ALS for annual requirement.
Main contractors which supply to the ‘deemed export’
categories mentioned in paragraph 8.2 of
the FTP
2004 to 2009, such as suppliers of an export oriented
unit (EOU), are eligible for ALS deemed export. Manu-
facturer-exporters supplying the ultimate exporter are
eligible for ALS for intermediate supplies. Finally, inter-
mediate suppliers to manufacturer-exporters are eligible
the sub-schemes
for
Advance Release Order (ARO) and back-to-back inland
letter of credit. Since only the first four of the six sub-
schemes were used by Jindal during the review IP, only
those will be described in more detail below.

‘deemed export’ benefits under

or to a company situated in a special economic zone
(SEZ).

(iv) Intermediate supplies: This sub-scheme covers cases
where two manufacturers
intend to produce a
single export product and divide the production
process. The manufacturer-exporter produces
the
intermediate product. It can import duty free input
materials and can obtain for this purpose an ALS for
intermediate supplies. The ultimate exporter finalizes
the production and is obliged to export the finished
product.

(19) As stated above, Jindal used the ALS during the review
IP. More precisely, it made use of the four sub-schemes
indicated under (i) to (iv) above.

(c) Practical implementation

(18) An Advance Licence can be issued for:

(20)

(i) Physical

a

‘Physical’

exports: This is the main sub-scheme.

It
allows the duty-free import of input materials for
the production of
export
in this context means that the
product.
export product has to leave Indian territory. An
import
obligation,
including the type of export product, are specified
in the licence.

allowance

resultant

specific

export

and

an

in a

For verification purposes by the Indian authorities, a
licence holder is legally obliged to maintain ‘a true and
licence-wise consumption and util-
proper account of
imported goods’
specified format
isation of
(Chapter 4.30 HOP I 2004 to 2009)
(hereinafter the
consumption register). The verification showed that the
company did not properly maintain its consumption
register,
it did not record the link between
input material and the final destination of the resultant
product, as required by the format required by the GOI,
despite the fact that it not only exports the resultant
product but sells it on the domestic market as well.

that

i.e.

(ii) Annual requirement: Such a licence is not linked to a
specific export product, but
to a wider product
group (e.g. chemical and related products). The
can — up to a
licence holder
certain value
threshold set by its past export performance —
import duty free any input to be used in manufac-
turing any of the items falling under such a product
group. It can choose to export any resultant product
falling under the product group using such duty-
exempt material.

(21) With regard to sub-schemes (i) and (iii) above, both the
import allowance and the export obligation (including
deemed export) are fixed in volume and value by the
GOI and are documented on the licence. In addition, at
the time of
import and of export, the corresponding
transactions are to be documented by Government
officials on the licence. The volume of imports allowed
under this scheme is determined by the GOI on the basis
of standard input-output norms (SIONs). SIONs exist for
most products including the product concerned and are
published in Volume II of the HOP I 2004 to 2009. The
SIONs for PET film and PET chips, an intermediate
product, were revised downwards in October 2005.

(iii) Deemed exports: This

sub-scheme allows a main
contractor the duty-free import of inputs required
to be sold as ‘deemed
in manufacturing goods
exports’ to the categories of customers mentioned
in paragraph 8.2(b) to (f), (g), (i) and (j) of the FTP
2004 to 2009. According to the GOI, deemed
exports refer to those transactions in which the
goods
country. A
number of categories of supply are regarded as
deemed exports provided the goods are manu-
factured in India, e.g. supply of goods to an EOU

supplied do not

leave

the

fulfilling

(22) With regard to sub-scheme (iii)
the

it was noted that the
deemed exports
respective obligation
under the ALS were essentially intra-company sales, i.e.
a PET chip manufacturing unit of Jindal (which is not a
separate legal entity) sold the PET chips for further down-
stream production of PET film to Jindal’s EOU. The
import of raw materials took place in the context of
the manufacture of
(PET
chips). In other words, under sub-scheme (iii) domestic
sales are considered to be exports.

intermediate product

the

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(23) With regard to sub-scheme (iv)

input materials dome-
stically procured by Jindal are written off from Jindal’s
Advance Licence and an intermediate Advance Licence is
issued to the domestic supplier. The holder of such inter-
the
mediate Advance Licence can import, duty-free,
goods needed to produce the product
that will sub-
sequently be supplied to Jindal as raw material for the
production of the product concerned.

sending of the consumption register to the Indian auth-
orities in the context of the redemption procedure) had
not yet been applied in the case of Jindal. Thus, the de
facto implementation of
this provision could not be
verified at this stage.

(24)

for

annual

requirement), only the

listed above (Advance
In the case of sub-scheme (ii)
Licence
import
allowance in value is documented on the licence. The
is obliged to ‘maintain the nexus
licence holder
between imported inputs and the resultant product’
(paragraph 4.24A(c) HOP I 2004 to 2009).

(d) Conclusion

(28)

The exemption from import duties is a subsidy within
the meaning of Article 2(1)(a)(ii) and Article 2(2) of the
basic Regulation,
in that the non-collection of import
duties otherwise due is a financial contribution of the
GOI, which conferred a benefit upon Jindal by
improving its liquidity.

(25)

Imported input materials are not transferable and have to
be used to produce the resultant export product. The
export obligation must be fulfilled within a prescribed
the licence (18 months
time frame after issuance of
with two possible extensions of six months each, i.e. a
total of 30 months).

(29)

(26)

the company’s specific
The verification showed that
consumption rate of key raw materials needed to
produce one kilogram of PET film,
in various degrees
depending on the quality of
the PET film and as
reported in the consumption register, was lower than
the corresponding SION. This was clearly the case with
regard to the old SION for PET film and PET chips, and,
to a lesser extent, to the revised SION which came into
force in September 2005,
i.e. during the review IP. In
other words, Jindal was allowed to import duty-free, as
per the SION, more raw materials than actually needed
for
the
in line with the FTP 2004 to
consumption register,
2009,
this
the crucial verification element. However,
register was neither properly kept nor ever inspected
by the GOI. The company claimed that the GOI would
adjust the excess benefit when the licences expired, i.e.
30 months from the issuance of a licence, as the
common practice is to make use of the two possible
this claim
extensions of six months each. However,
could not be verified as no licence used by Jindal had
yet been redeemed.

its manufacturing

This made

process.

(30)

(27)

Changes in the administration of the FTP 2004 to 2009,
which became effective in autumn of 2005 (mandatory

In addition, the four sub-schemes used by Jindal (i.e. the
ones listed above under (i) to (iv)) are contingent in law
upon export performance, and therefore deemed to be
specific and countervailable under Article 3(4)(a) of the
basic Regulation. Without an export commitment a
company cannot obtain benefits under these schemes.
Obviously, this is the case with regard to schemes (i),
(ii) and (iv), but even the ALS deemed exports fulfils
this criterion in the present case because the supply to
an EOU ultimately aims at real exports.

III

for

and

The sub-schemes used in the present case cannot be
considered as permissible duty drawback systems or
substitution drawback systems within the meaning of
Article 2(1)(a)(ii) of the basic Regulation. They do not
conform to the strict rules laid down in Annex I point
(definition and rules for drawback) and
(i), Annex II
Annex
substitution
rules
(definition
the basic Regulation. The GOI did not
drawback) of
effectively apply its 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 the basic Regulation and, in the case
of substitution drawback schemes, Annex III(II)(2) of the
basic Regulation). The SIONs for the product concerned
were not
themselves
sufficiently precise. The SIONs
cannot be considered a verification system of actual
those overly
consumption because
generous standard norms does not enable the GOI to
verify with sufficient precision what amount of inputs
were consumed in the export production. Furthermore,
no effective
the GOI based on the
consumption register took place.

the design of

control by

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(31)

long as

sold domestically, as

to the basic Regulation.

in its post-disclosure comments, main-
The company,
tained that it keeps a proper consumption register and,
as such, that a proper verification system is in place in
accordance with Annex II
It
further claimed that the ALS works as a substitution
so that duty-free inputs may be used to
scheme,
produce products
the
duty-free inputs are, either directly or through substi-
tution, consumed in the production of goods
sub-
sequently exported within a reasonable period of time.
However, even though the company might keep a
register of the consumption of raw material to produce
a quantity of the product concerned, it failed to maintain
a system whereby it could be verified which inputs were
consumed in the production of the exported product and
in what amounts, as stipulated by the FTP 2004 to 2009
(Appendix 23) and in accordance with Annex II(II)(4) to
the basic Regulation. Further,
it does not maintain a
system whereby it can be verified that the quantity of
the input for which drawback is claimed does not exceed
the quantity of similar product exported, in accordance
with Annex III(II)(2).
is, after
careful consideration, maintained that there is no link
the
between the
exported product, and that there is therefore no proper
verification system in place.

In the present case,

consumed

duty-free

input

and

it

(32)

The sub-schemes are therefore countervailable.

(e) Calculation of the subsidy amount

(33)

(34)

The subsidy amount was calculated as follows. The
the import duties foregone
numerator is the sum of
(basic customs duty and special additional customs
duty) on the material
imported under sub-schemes (i)
to (iii) respectively applicable to imports via the inter-
mediate manufacturer;
in the case of sub-scheme (iv),
import duties
the numerator
foregone on inputs used in producing the product
concerned during the review IP.

sum of

the

the

is

i.e. after the end of

The company claimed, in its post-disclosure comments,
that the customs duties for the raw materials needed for
the production of PET film decreased from 15 % to 7,5 %
from March 2006,
the IP, and
requested that
the Commission take this change into
account in the calculation of the subsidy rate for ALS.
However, although there have been instances where
the IP have been taken into
events occurring after
account, this is restricted to extraordinary circumstances
which do not appear to apply in this case. Therefore, in
accordance with Articles 5 and 11(1) of the basic Regu-
lation, this request has to be rejected.

(35)

The company further claimed,
in its post-disclosure
comments, that the benefit under sub-scheme (iv) was,

the price difference between regular domestic
in fact,
purchases of inputs and purchases of inputs against in-
validation of ALS and produced some calculations to that
effect without supporting evidence. However, the benefit
is calculated on the basis of the duty foregone in the
licence, since the sale/purchase price of the material
is
a purely commercial decision and does not alter the
In any event, this claim was
amount of duty unpaid.
made post-disclosure for the first
time and, as there
was no opportunity for the Commission to verify it, it
was rejected.

(36)

fulfil

In accordance with Article 7(1)(a) of the basic Regulation,
fees necessarily incurred to obtain the subsidy were
deducted from the subsidy amounts where justified
claims were made. The entire amount of import duties
foregone is taken as the numerator and not the excess
remission/exemption, as the company requested, because
the conditions laid down in
the ALS does not
Annex II to the basic Regulation.
In accordance with
Article 7(2) of the basic Regulation, the denominator is
the export turnover during the review IP. The company
claimed that deemed exports should be included in the
total export turnover of the company during the review
IP. However, as these transactions are not, in fact, exports
but rather sales to the domestic market, they cannot be
properly classified as exports and were thus not included
in the total export turnover amount.

(37)

The subsidy rate established for the ALS amounts to
14,68 %.

2. Duty Entitlement Passbook Scheme (DEPBS)

(a) Legal Basis

(38) A description of the DEPBS is contained in paragraph 4.3

of the FTP 2004 to 2009.

(b) Eligibility

(39)

Jindal was not found to be using the DEPBS during the
review IP, therefore no further analysis of the counter-
vailability of this scheme is necessary.

3. Export Oriented Units Scheme
Economic Zones Scheme (SEZS)

(EOUS)/Special

(a) Legal basis

(40)

The details of these schemes are contained in Chapter 6
of the FTP 2004 to 2009, the HOP I 2004 to 2009
(EOUS),
framed
the SEZ Act 2005 and the rules
thereunder (SEZS).

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(b) Eligibility

(vi) possibility of 100 % foreign equity ownership.

(41) With the exception of pure trading companies, all enter-
prises which undertake to export a certain amount of
their production of goods or services may be set up
under the EOUS or SEZS. Jindal was found to benefit
from the EOUS but not the SEZS during the review IP.
Consequently, the analysis focuses on the EOUS only.

(c) Practical implementation

(42) An EOU can be established anywhere in India. This

scheme is complementary to the SEZS.

import

exports,

requirements

(43) An application for EOU status must include details of,
inter alia, planned production quantities, projected value
indigenous
of
requirements for a period of five years. If the authorities
accept
and
conditions attached to the acceptance will be com-
municated to the company. The agreement to be recog-
nised as a company under the EOUS is valid for a five-
year period and can be renewed further.

company’s

application,

terms

and

the

the

(44) A crucial obligation of an EOU, as set out in the FTP
2004 to 2009, is to achieve net foreign exchange (NFE)
earnings, i.e. in a reference period (five years), the total
value of exports has to be higher than the total value of
imported goods.

(45) An EOU is entitled to the following concessions:

(i) exemption from import duties on all types of goods
and
goods,
(including
the manufacture,
consumables)
production or processing or in connection therewith;

raw materials

required

capital

for

(ii) exemption from excise duty on goods procured from

indigenous sources;

(iii) reimbursement of central sales tax paid on goods

procured locally;

(46) Units operating under these schemes are bonded under
the surveillance of customs officials in accordance with
Section 65 of the Customs Act. EOUs are legally obliged
to maintain, in a specified format, a proper account of all
the consumption and utilisation of all
imports, of
imported materials and of
the exports made. These
documents are required to be submitted periodically to
the competent authorities (quarterly and annual progress
reports). However, ‘at no point in time shall [an EOU] be
required to correlate every import consignment with its
exports, transfers to other units, sales in the DTA and
balance in stock’, as per paragraph 6.11.2 of the FTP
2004 to 2009.

(47) Domestic sales are dispatched and recorded on a self-
export
certification basis. The dispatch process of
consignments of an EOU is supervised by a customs/
excise official, who is permanently posted in the EOU.

(48)

(49)

Jindal utilised the EOU to import capital goods free of
import duties and to obtain a reimbursement of
the
central sales tax paid on goods procured locally. It did
not make use of the exemption from import duties on
raw materials, since the EOU facility, in order to produce
PET film, uses PET chips as raw materials. These PET
chips are produced in another unit of
the company
from raw materials purchased under the ALS.

(d) Conclusions on the EOU

(basic

The exemption of an EOU from two types of import
additional
duties
and special
customs duty
the central
customs duty) and the reimbursement of
sales tax are financial contributions by the GOI within
the meaning of Article 2(1)(a)(ii) of the basic Regulation.
Government revenue which would be due in the absence
of
thus conferring a benefit
upon the EOU within the meaning of Article 2(2) of
the basic Regulation by improving its liquidity.

this scheme is foregone,

(iv) facility to sell up to 50 % of the fob value of exports
on the domestic market’s so called domestic tariff
area (DTA) on payment of concessional duties;

(50)

(v) exemption from income tax normally due on profits
realised on export sales in accordance with Section
10B of the Income Tax Act, for a period of 10 years
after the beginning of its operations, but only up to
2010;

Thus, the exemption from basic customs duty and special
additional customs duty and the sales tax reimbursement
constitute subsidies within the meaning of Article 2 of
the basic Regulation. They are contingent in law upon
export performance and, therefore, deemed to be specific
and countervailable under Article 3(4)(a) of
the basic
Regulation. The export objective of an EOU as set out
in paragraph 6.1 of the FTP 2004 to 2009 is a necessary
condition to obtain the incentives.

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(51)

it was confirmed that

the GOI has no
In addition,
effective verification system or procedure in place to
confirm whether and in what amounts duty and/or
sales-tax-free procured inputs were consumed in the
production of the exported product (Annex II(II)(4) to
the basic Regulation and,
in the case of substitution
drawback schemes, Annex III(II)(2) of the basic Regu-
lation).
the exemption from duties on
capital goods
is not a permissible duty drawback
scheme because capital goods are not consumed in the
production process.

In any event,

(52)

The GOI did not carry out a further examination based
on actual inputs involved, although this would normally
need to be done in the absence of an effective verification
system (Annex II(II)(5) and Annex III(II)(3) of the basic
Regulation), nor did it prove that no excess remission
had taken place.

(e) Calculation of the subsidy amount

(53) Accordingly, the countervailable benefit is the exemption
from total duties (basic customs duty and special ad-
ditional customs duty) normally due upon importation,
as well as the sales tax reimbursement, both during the
review IP.

(54)

(55)

(i) R e i m b u r s e m e n t o f c e n t r a l s a l e s t a x o n

d o m e s t i c a l l y p r o c u r e d g o o d s

The numerator was established as follows: the subsidy
amount was calculated on the basis of
the sales tax
reimbursable on the purchases made for the production
sector, e.g. parts and packing materials, during the review
IP. Fees necessarily incurred to obtain the subsidy were
deducted in accordance with Article 7(1)(a) of the basic
Regulation.

subsidy amount was allocated over

In accordance with Article 7(2) of the basic Regulation,
this
the export
turnover generated by all export sales of the product
concerned during the review IP (the denominator),
because
export
performance and it was not granted by reference to the
quantities manufactured, produced, exported or trans-
ported. The subsidy margin thus obtained was 0,04 %.

contingent

subsidy

upon

the

is

the

rate

case

requirement

legislation applicable

statements; however,

specified in the
in this

company claimed that this should have been the de-
preciation rate actually used by the company in its
financial
in
is interpreted to refer to the depreciation
Article 7(3)
to the
rate
company,
specified in the
the
Companies Act 1956. The amount so calculated which
is then attributable to the review IP was adjusted by
adding interest during this period in order to reflect
the value of the benefit over time and thereby estab-
lishing the full benefit of this scheme to the recipient.
Fees necessarily incurred to obtain the subsidy were
deducted in accordance with Article 7(1)(a) of the basic
Regulation from this sum to arrive at the subsidy amount
as the numerator. In accordance with Article 7(2) and
7(3) of the basic Regulation this subsidy amount was
allocated over
the
product concerned during the review IP as the appro-
priate denominator, because the subsidy is contingent
upon export performance and was not granted by
reference to the quantities manufactured, produced,
exported or
transported. The company claimed that
deemed exports should be included in the total export
turnover, but this claim was rejected for the reasons set
out
in recital 36 above. The subsidy margin thus
obtained was 1,26 %.

turnover of

the export

sales of

(57)

Thus, the total subsidy margin under the EOU scheme
for Jindal amounts to 1,3 %.

4. Export Promotion Capital Goods Scheme (EPCGS)

(a) Legal Basis

(58) A detailed description of the EPCGS can be found in
Chapter 5 of the FTP 2004 to 2009 and in Chapter 5
of the HOP I 2004 to 2009.

(b) Eligibility

(59) Any manufacturer-exporter and merchant-exporter ‘tied
to’ a supporting manufacturer or service provider is
eligible for this scheme.
Jindal was found to benefit
from this scheme during the review IP.

(ii) E x e m p t i o n f r o m i m p o r t d u t i e s ( b a s i c
c u s t o m s d u t y a n d s p e c i a l a d d i t i o n a l
c u s t o m s d u t y ) a n d r e i m b u r s e m e n t o f
c e n t r a l s a l e s t a x o n c a p i t a l g o o d s

(56)

In accordance with Article 7(3) of the basic Regulation,
the benefit was calculated on the basis of the amount of
unpaid customs duty on imported capital goods and of
the amount of sales tax reimbursed on purchases of
capital goods, both spread across a period which
reflected the normal depreciation period of such capital
goods in the industry of the product concerned. The

(c) Practical Implementation

(60) Under the condition of an export obligation, a company
is allowed to import capital goods (new and — since
April 2003 — second-hand capital goods up to 10
years old) at a reduced rate of duty. To this end, the
GOI issues, upon application and the payment of a fee,
an EPCG licence. Since April 2000, the scheme provides
for a reduced import duty rate of 5 %, applicable to all
capital goods imported under the scheme. In order to
meet the export obligation, the imported capital goods
must be used to produce a certain amount of export
goods during a certain period.

L 255/8

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Official Journal of the European Union

29.9.2007

(61)

(62)

(63)

(64)

(65)

(66)

(d) Conclusion on the EPCGS

The EPCGS provides subsidies within the meaning of
Article 2(1)(a)(ii) and Article 2(2) of the basic Regulation,
as the GOI foregoes revenue otherwise due. In addition,
the duty reduction confers a benefit upon the exporter
because the non-payment of duties saved upon im-
portation improves its liquidity.

Further, the EPCGS is contingent in law upon export
performance, since such licences cannot be obtained
is
without a commitment
deemed to be specific and countervailable under Article
3(4)(a) of the basic Regulation.

to export. Therefore,

it

reasons set out in recital 36 above. The subsidy obtained
by Jindal is 1,11 %.

5. Export Income Tax Exemption Scheme (EITES)

(a) Legal basis

(67)

The legal basis for this scheme is contained in the
Income Tax Act 1961, amended yearly by the Finance
Act. The latter sets out, every year, the basis for the
collection of taxes, as well as various exemptions and
deductions which can be claimed. Export Oriented
Units e.g. may claim income tax exemptions under
section 10B of the Income Tax Act 1961.

The scheme cannot be considered a permissible duty
substitution drawback system
drawback system or
within the meaning of Article 2(1)(a)(ii)
to the basic
Regulation. Capital goods are not covered by the scope
of such permissible systems, as set out in Annex I, item
(i)
to the basic Regulation, because they are not
consumed in the production of the exported products.

(b) Practical implementation

(68) As Jindal was not found to have availed itself of any
the
benefits under the EITES no further analysis of
countervailability of this scheme is necessary.

(e) Calculation of the subsidy amount

(a) Legal basis

6. Export Credit Scheme (ECS)

The numerator was established as follows: the subsidy
amount was calculated, in accordance with Article 7(3)
of the basic Regulation, on the basis of unpaid customs
duty on imported capital goods spread over a period
which reflects the normal depreciation period of such
capital goods in the PET film industry, which, for the
reasons set out in recital 56 above, was deemed to be
the rate specified in the Companies Act 1956 and not
the one actually used by the company. Interest was added
to this amount in order to reflect the full value of the
benefit over time. Fees necessarily incurred to obtain the
subsidy were deducted, in accordance with Article 7(1)(a)
of the basic Regulation.

The company claimed that capital goods imported duty-
free under the ECPG scheme for use in the Khanvel unit
were no longer in use and that the benefit relating to
such goods should not be included in the numerator.
However, as there is no evidence that the company no
longer possesses such goods or that it will not use them
again, the Commission must reject this claim.

turnover of

In accordance with Article 7(2) and 7(3) of the basic
Regulation, this subsidy amount was allocated over the
export
the product concerned generated
during the review IP (the denominator), as the subsidy
is contingent upon export performance. The company
claimed that deemed exports should be included in the
total export turnover, but this claim was rejected for the

(69)

The details of the scheme are set out in Master Circular
IECD No 5/04.02.01/2002-03 (Export Credit in Foreign
No
Currency)
Master
10/04.02.01/2003-04 (Rupee Export Credit) of
the
Reserve Bank of India (RBI), which is addressed to all
commercial banks in India.

Circular

IECD

and

(b) Eligibility

(70) Manufacturing exporters and merchant exporters are
Jindal was found to benefit

eligible for this scheme.
from this scheme during the review IP.

(c) Practical implementation

to exporters at

(71) Under this scheme, the RBI sets mandatory ceilings on
interest rates applicable to export credits, both in Indian
rupees and in foreign exchange, which commercial banks
can charge an exporter ‘with a view to making credit
internationally competitive
available
rates’. The ECS consists of two sub-schemes, the Pre-
Shipment Export Credit Scheme (packing credit), which
covers credits provided to an exporter for financing the
purchase, processing, manufacturing, packing and/or
shipping of goods prior
to export, and the Post-
Shipment Export Credit Scheme, which provides for
working capital
loans for financing export receivables.
The RBI also directs the banks to provide a certain
amount of their net bank credit towards export finance.

29.9.2007

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Official Journal of the European Union

L 255/9

(72) As a result of these RBI Master Circulars, exporters can
obtain export
rates
compared to the interest rates on ordinary commercial
credit
set under market
conditions.

(cash credits), which are

at preferential

interest

credit

(d) Conclusion on the ECS

rates,

interest

the above preferential

Firstly, by lowering financing costs as compared with
market
interest
rates confer a benefit within the meaning of Article
2(2) of the basic Regulation on such exporters. Despite
the fact that the preferential credits under the ECS are
granted by commercial banks, this benefit is a financial
contribution by a government within the meaning of
is a
Article 2(1)(iv) of the basic Regulation. The RBI
public body, falling, therefore, within the definition of
a ‘government’ set out in Article 1(3) of the basic Regu-
lation and it instructs commercial banks to grant prefer-
ential financing to exporting companies. This preferential
financing amounts to a subsidy, which is deemed to be
specific and countervailable, since the preferential interest
rates are contingent upon export performance pursuant
to Article 3(4)(a) of the basic Regulation.

(73)

(74)

(77)

III. Regional Scheme

Package Scheme of Incentives (PSI) of the Government
of Maharashtra (GOM)

(a) Legal basis

In order to encourage the establishment of industries in
less developed areas of the State, the GOM has been
granting incentives to new expansion units set up in
developing regions of the State, since 1964, under a
scheme commonly known as the ‘Package Scheme of
Incentives’. The
scheme has been amended several
times since its introduction and the ‘1993 scheme’ was
eligible for application from 1 October 1993 to 31
March 2001, whereas the latest amendment,
the PSI
2006, was introduced in the margins of the ‘Industrial,
Investment & Infrastructure Policy of Maharashtra 2006’
in spring 2006 and is foreseen to be eligible for appli-
cation up to 31 March 2011. The PSI of the GOM is
composed of several sub-schemes, the main one being
direct grants via a so-called industrial promotion subsidy,
the exemption from local sales tax and electricity duty
and the refund of octroi tax.

(78)

Jindal continues to avail itself of incentives under the PSI
1993 until May 2011 and not under successor schemes.
Consequently, only the PSI 1993 was assessed in the
context of the case at hand.

(e) Calculation of the subsidy amount

The subsidy amount was calculated on the basis of the
difference between the interest paid for export credits
used during the review IP and the amount that would
have been payable if market
interest rates had been
charged, as for ordinary commercial loans made by the
company. The subsidy amount (numerator) was allocated
over the total export turnover during the review investi-
gation period (denominator) in accordance with Article
7(2) of the basic Regulation, as the subsidy is contingent
upon export performance and is not granted by reference
to quantities manufactured, produced, exported or trans-
ported. Jindal availed itself of benefits under the ECS and
obtained a subsidy of 0,1 %.

(79)

(b) Eligibility

a

large-scale

in expansion or diversification of

In order to be eligible, companies must invest in less
developed areas, either by setting up a new industrial
capital
establishment or by making
investment
an
existing industrial establishment. These areas are classi-
fied, according to their economic development,
into
lesser
different
developed area and least developed area). The main
criterion to establish the amount of
incentives is the
area in which the enterprise is or will be located and
the size of the investment.

less developed area,

categories

(e.g.

7. Duty-Free Replenishment Certificate (DFRC)

(c) Practical implementation

(a) Legal basis

(80)

(75)

The legal basis for this scheme is contained in paragraph
4.2 of the FTP 2004 to 2009.

(b) Practical Implementation

(76) As Jindal was not found to have availed itself of any
benefits under
the DFRC during the review IP, no
further analysis of the countervailability of this scheme
is necessary.

intra-State

Remission of local sales tax on sales of finished goods:
goods are normally subject to central sales tax (for inter-
State sales) or, in the past, State sales tax (for intra-State
sales) at varying levels, depending upon the State(s) in
which transactions are made. In April 2005 the sales tax
legislation for
in Maharashtra was
replaced by a value added tax (VAT) system. Under the
exemption scheme, designated units are not required to
collect any sales tax on their sales transactions. Similarly,
designated units are exempted from payment of the local
sales tax on their purchases of goods from a supplier
itself eligible for the scheme. Jindal was found to have
benefited from this exemption in relation to sales trans-
actions during the review IP.

sales

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Official Journal of the European Union

29.9.2007

(86)

(87)

(81)

(82)

Reimbursement of electricity duty: eligible units are
eligible for refund of electricity duty on the electricity
consumed for production purposes
for a period of
seven years from the date of commercial production. In
the case of Jindal this seven-year period lapsed on 31
March 2003. Consequently, Jindal was no longer eligible
for the reimbursement of electricity duty.

Refund of the octroi tax: octroi is a tax levied by local
Governments in India, including the GOM, on goods that
enter the territorial limits of a town. Industrial enterprises
are entitled to a refund of the octroi tax from the GOM if
their facility is located in certain specified towns within
the territory of the State. The total amount that may be
refunded is restricted to 100 % of
the fixed capital
Jindal’s plant is located outside city limits
investment.
and is therefore per se exempt from octroi tax, with
the result that this sub-scheme is not applicable in the
present case.

Jindal
It was established that, during the review IP,
continued to benefit from countervailable subsidisation
by the Indian authorities. Further,
the subsidy rate
found during this review is considerably higher than
investigation. No
that established during the original
evidence is available that the schemes will be discon-
tinued or phased out in the near future.

Since it has been demonstrated that the company is in
receipt of much higher subsidisation than before and that
it is likely to continue to receive subsidies of an amount
higher than determined in the original investigation, it is
concluded that the continuation of the existing measure
is not sufficient to counteract the countervailable subsidy
causing injury and that the level of the measure should
therefore be amended to reflect the new findings.

(d) Conclusion on the PSI 1993 of the GOM

(83)

Jindal only accrued remission rights of sales tax on sales
of finished goods during the review IP, which in the past
has been found not to confer a benefit on the recipient
(recital 114 of Regulation (EC) No 367/2006). Conse-
quently, the PSI is not countervailable in the present case.

IV. Amount of countervailable subsidies

(84)

The amount of countervailable subsidies determined in
accordance with the basic Regulation, expressed ad
is
valorem,
17,1 %. This amount of subsidisation exceeds the de
minimis threshold mentioned under Article 14(5) of the
basic Regulation.

the investigated exporting producer

for

SCHEME

ALS

EOUS

EPCGS

ECS

Total

%

%

%

Jindal

14,68

1,30

1,11

%

0,1

%

17,1

VI. Conclusion

(88)

In view of the conclusions reached with regard to the
level of subsidisation of Jindal and the insufficiency of
the existing measure to counteract the countervailable
subsidies found, the countervailing duty with regard to
Jindal should be amended in order to reflect the new
subsidisation levels found.

(89)

The amended countervailing duty should be established
at the new rate of subsidisation found during the present
review, as the injury margin calculated in the original
investigation remains higher.

(90)

shall be subject

Pursuant to Article 24(1) of the basic Regulation and
Article 14(1) of Regulation (EC) No 384/96, no
product
to both anti-dumping and
countervailing duties for the purpose of dealing with
one and the same situation arising from dumping or
from export
is
subject to an anti-dumping duty of 0 % with regard to
the product concerned, these provisions do not apply in
the present case.

subsidisation. However,

since Jindal

V. Lasting nature of changed circumstances with

(91)

regard to subsidisation

(85)

In accordance with Article 19(2) of the basic Regulation,
it was examined whether the continuation of the existing
measure was
the counter-
insufficient
vailable subsidy which is causing injury.

to counteract

the essential

the GOI and the Community industry were
Jindal,
facts and considerations on
informed of
the basis of which it was intended to recommend the
amendment of the measures in force and had the oppor-
tunity to comment. The GOI did not
submit any
comments, and Jindal’s comments have been discussed
in the recitals relevant to each specific comment above.

29.9.2007

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Official Journal of the European Union

L 255/11

(92)

The company, in its post-disclosure comments, requested
the Commission to accept a price undertaking in order to
offset
the countervailable subsidies found herein. The
Commission has examined the company’s proposal and
considers that a price undertaking cannot be accepted.
Price undertakings based on groups of products, as
suggested by the company, permit a large degree of flex-
ibility to change the technical characteristics of
the
products within the
PET film comprises
group.
numerous and evolving differentiating features, which
largely determine sales price. Consequently, changes in
those features have a significant impact on prices. An
attempt
to make them
more homogeneous in terms of physical characteristics
would lead to a multiplication of groupings which would
render monitoring unworkable, in particular, by making

to subdivide the groupings

for

customs

authorities

to discern the
it difficult
difference between product types and the classification
of products by grouping upon importation. For these
reasons, the acceptance of the undertaking is considered
impractical within the meaning of Article 13(3) of the
Jindal was informed and given the
basic Regulation.
opportunity to comment. However,
its comments have
not altered the above conclusion.

(93) As India Polyfilms Limited, a company previously related
to Jindal, merged with Jindal on 1 April 1999 and no
longer forms a separate entity, it was removed from the
list set out in Article 1(2),

HAS ADOPTED THIS REGULATION:

Article 1

Article 1(2) of Council Regulation (EC) No 367/2006 shall be replaced by the following:

The rate of duty applicable to the net free-at-Community-frontier price, before duty for imports

‘2.
produced in India by the companies listed below, shall be as follows:

Company

Ester Industries Limited, 75-76, Amrit Nagar, Behind South Extension Part-1,
New Delhi 110 003, India

Flex Industries Limited, A-1, Sector 60, Noida 201 301 (U.P.), India

Garware Polyester Limited, Garware House, 50-A, Swami Nityanand Marg, Vile Parle (East),
Mumbai 400 057, India

Jindal Poly Films Limited, 56 Hanuman Road, New Delhi 110 001, India

MTZ Polyfilms Limited, New India Centre, 5th Floor, 17 Co-operage Road,
Mumbai 400 039, India

Definitive
duty (%)

TARIC
Additional
Code

12,0

A026

12,5

14,9

17,1

8,7

A027

A028

A030

A031

Polyplex Corporation Limited, B-37, Sector-1, Noida 201 301, Dist. Gautam Budh Nagar,
Uttar Pradesh, India

19,1

A032

All other companies

19,1

A999’

This Regulation shall enter into force on the day following that of its publication in the Official Journal of the
European Union.

Article 2

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 28 September 2007.

For the Council
The President

M. PINHO