Council Regulation (EC) No 1354/2008 of 18 December 2008 amending Regulation (EC) No 1628/2004 imposing a definitive countervailing duty on imports of certain graphite electrode systems originating in India and Regulation (EC) No 1629/2004 imposing a definitive anti-dumping duty on imports of certain graphite electrode systems originating in India
Date: 2008-12-18
Institutions: Council of the European Union
Subjects: India, anti-dumping duty, electrical equipment, import, originating product

L 350/24

EN

Official Journal of the European Union

30.12.2008

COUNCIL REGULATION (EC) No 1354/2008

of 18 December 2008

amending Regulation (EC) No 1628/2004 imposing a definitive countervailing duty on imports of
certain graphite electrode systems originating in India and Regulation (EC) No 1629/2004 imposing
a definitive anti-dumping duty on imports of certain graphite electrode systems originating in India

THE COUNCIL OF THE EUROPEAN UNION,

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 member of the European Community (1)
(the basic Regulation), and in particular Articles 15 and 19
thereof,

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

Whereas:

A. PROCEDURE

(1)

I. Previous investigation and existing measures

The Council, by Regulation (EC) No 1628/2004 (2),
imposed a definitive countervailing duty on imports of
graphite electrodes of a kind used for electric furnaces,
with an apparent density of 1,65 g/cm3 or more and an
electrical resistance of 6,0 μΩ.m or less, falling within CN
code ex 8545 11 00 and nipples used for such elec­
trodes, falling within CN code ex 8545 90 90 whether
imported together or separately, originating in India.
The rate of the duty ranges between 7,0 % and 15,7 %
for individually named exporters with a residual duty rate
of 15,7 % imposed on imports from other exporters.

(2)

At the same time, by Regulation (EC) No 1629/2004 (3),
the Council imposed a definitive anti-dumping duty on
imports of the same product originating in India.

II. Initiation of a partial interim review

(3)

Following the imposition of the definitive countervailing
duty the Government of India (GOI) made submissions

(1) OJ L 288, 21.10.1997, p. 1.
(2) OJ L 295, 18.9.2004, p. 4.
(3) OJ L 295, 18.9.2004, p. 10.

that
the circumstances with regard to two subsidy
schemes (the Duty Entitlement Passbook Scheme and
the Income Tax Exemption under Section 80 HHC of
these
the Income Tax Act) have changed and that
changes are of a lasting nature. Consequently,
it was
argued that the level of subsidisation is likely to have
decreased and thus measures that have been established
partly on these schemes should be revised.

sufficient

The Commission examined the evidence submitted by
the GOI and considered it
to justify the
initiation of a review in accordance with the provisions
of Article 19 of the basic anti-subsidy Regulation. After
consultation
the
Commission initiated an ex officio partial interim review
of the measures in force by a notice published in the
Official Journal of the European Union (4).

Committee,

Advisory

the

of

The purpose of this partial interim review investigation is
to assess the need for the continuation, removal or
amendment of
in respect of
the existing measures
those companies having benefited from one or both
the
those
companies, in respect of other schemes where sufficient
evidence is provided in line with the relevant provisions
of the notice of initiation.

changed subsidy schemes

including,

for

(4)

(5)

III. Investigation period

(6)

The investigation covered the period from 1 October
2006 to 30 September 2007 (the review investigation
period or RIP).

IV. Parties concerned by the investigation

(7)

The Commission officially informed the GOI, the two
listed in the notice of
Indian exporting producers
initiation of the partial
interim review, as well as the
Community producers, of the initiation of the partial
interim review investigation.
Interested parties had the
opportunity to make their views known in writing and
to request a hearing. The written and oral comments
submitted by the parties were considered and, where
appropriate, taken into account.

(4) OJ C 230, 2.10.2007, p. 9.

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Official Journal of the European Union

L 350/25

The Commission sent questionnaires to two cooperating
exporting producers and to the GOI. Replies were
received from both the cooperating exporting producers
and the GOI.

The Commission sought and verified all
information it
deemed necessary for the determination of subsidisation.
Verification visits were carried out at the premises of the
following interested parties:

schemes, which allegedly
subsidies, were investigated:

involve

the

granting of

(a) Advance Authorisation Scheme (formerly known as

Advance Licence Scheme),

(b) Duty Entitlement Passbook Scheme,

1. Government of India

(c) Export Promotion Capital Goods Scheme,

— Ministry of Commerce, New Delhi;

(d) Income Tax Exemption,

2. exporting producers in India

(e) Electricity Duty Exemption of the State of Madhya

Pradesh.

— Graphite India Limited (GIL), Kolkatta

(13)

— Hindustan Electro Graphite (HEG) Limited, Noida.

V. Disclosure and comments on procedure

The GOI and the other interested parties were informed
of the essential facts and considerations upon which it
was intended to propose the amendment of the duty rate
applicable to the two cooperating Indian producers and
maintain the existing measures for all other companies
which did not cooperate with this partial interim review.
They were also given a reasonable time to comment. All
submissions and comments were taken duly into con­
sideration as set out below.

The schemes (a) to (c) specified above are based on the
Foreign Trade (Development and Regulation) Act 1992
(No 22 of 1992) which entered into force on 7 August
1992 (Foreign Trade Act). The Foreign Trade Act
authorises the GOI to issue notifications regarding the
export and import policy. These are summarised in
Export and Import Policy documents, which are issued
by the Ministry of Commerce every five years and
updated regularly. One Export
and Import Policy
document is relevant to the RIP of this case, namely
the one covering the period 1 September 2004 to
31 March 2009 (EXIM-policy 04-09). In addition, the
GOI also sets out the procedures governing the EXIM-
‘Handbook of Procedures —
policy 04-09 in a
1 September 2004 to 31 March 2009, Volume I’ (HOP
I 04-09). The Handbook of Procedure is also updated on
a regular basis.

B. PRODUCT CONCERNED

(14)

The Income Tax Scheme specified above under (d)
is
based on the Income Tax Act of 1961, which is
amended yearly by the Finance Act.

(8)

(9)

(10)

(11)

electric

The product covered by this review is the same product
as the one concerned by Council Regulation (EC) No
1628/2004, namely graphite electrodes of a kind used
furnaces, with an apparent density of
for
1,65 g/cm3 or more and an electrical
resistance of
6,0
CN code
falling within
less,
ex 8545 11 00 and nipples used for such electrodes,
falling within CN code
ex 8545 90 90 whether
imported together or separately, originating in India.

μΩ.m or

C. SUBSIDIES

I. Introduction

(12) On the basis of the information submitted by the GOI
and the cooperating exporting producers and the replies
following
to the Commission's

questionnaire,

the

(15)

The Electricity Duty Exemption scheme specified in
the Madhya
is based on Section 3-B of
recital 12(e)
Pradesh Electricity Duty Act of 1949.

(16)

consultations with respect

the basic anti-
In accordance with Article 11(10) of
the Commission invited the GOI
subsidy Regulation,
for
to both
additional
changed and unchanged schemes with the aim of clari­
fying the factual situation as regards the alleged schemes
and arriving at a mutually agreed solution. Following
these consultations, and in the absence of a mutually
the
agreed solution in relation to these
Commission
the
investigation of subsidisation.

schemes,
in

included

schemes

these

all

L 350/26

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II. Specific Schemes

1. Advance Authorisation Scheme (AAS)

(a) L e g a l b a s i s

(17)

The detailed description of the scheme is contained in
paragraphs 4.1.1 to 4.1.14 of the EXIM-policy 04-09 and
Chapters 4.1 to 4.30 of the HOP I 04-09. This scheme
was called Advance Licence Scheme during the previous
review investigation that led to the imposition by Regu­
lation (EC) No 1628/2004 of
the definitive counter­
vailing duty currently in force.

(b) E l i g i b i l i t y

(18)

of

eligibility. Manufacturer-exporters

The AAS consists of six sub-schemes, as described below
in more detail. Those sub-schemes, inter alia, differ in the
scope
and
merchant-exporters ‘tied to’ supporting manufacturers
are eligible for the AAS physical exports and for the
requirement. Manufacturer-exporters
AAS for annual
supplying the ultimate exporter are eligible for AAS for
intermediate supplies. Main contractors which supply to
the ‘deemed export’ categories mentioned in paragraph
8.2 of the EXIM-policy 04-09, such as suppliers of an
export oriented unit (EOU), are eligible for AAS deemed
to manu­
intermediate
export. Eventually,
export’
facturer-exporters
eligible
benefits under the sub-schemes Advance Release Order
(ARO) and back to back inland letter of credit.

suppliers
for

‘deemed

are

(c) P r a c t i c a l

i m p l e m e n t a t i o n

(19) Advance authorisations can be issued for:

(i) Physical exports: This is the main sub-scheme.

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

‘Physical’

resultant

specific

a

(iii) 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 AAS for intermediate
the
supplies.
production and is obliged to export
the finished
product.

exporter

ultimate

finalises

The

(iv) Deemed exports: This sub-scheme allows a main
contractor to import inputs free of duty which are
required in manufacturing goods
to be sold as
‘deemed exports’
to the categories of customers
mentioned in paragraph 8.2(b) to (f), (g), (i) and (j)
of the EXIM policy 04-09. According to the GOI,
deemed exports refer to those transactions in which
leave the country. A
the goods supplied do not
number of categories of
regarded as
deemed exports provided the goods are manu­
factured in India, e.g. supply of goods to an EOU
or to a company situated in a special economic zone
(SEZ).

supply is

(v) ARO: The AAS holder intending to source the inputs
from indigenous sources, in lieu of direct import, has
the option to source them against AROs. In such
cases the Advance Authorisations are validated as
AROs and are endorsed to the indigenous supplier
the items specified therein. The
upon delivery of
the ARO entitles the indigenous
endorsement of
supplier to the benefits of deemed exports as set
out in paragraph 8.3 of the EXIM-policy 04-09 (i.e.
export,
AAS
supplies/deemed
deemed export drawback and refund of
terminal
excise duty). The ARO mechanism refunds taxes
and duties to the supplier instead of refunding the
same to the ultimate exporter in the form of draw­
back/refund of duties. The refund of taxes/duties is
available both for
inputs as well as
indigenous
imported inputs.

intermediate

for

(ii) Annual requirement: Such an authorisation is not
linked to a specific export product, but to a wider
product group (e.g. chemical and allied products).
The licence holder can — up to a 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.

(vi) Back to back inland letter of credit: This sub-scheme
again covers indigenous supplies to an Advance
Authorisation holder. The holder of an Advance
Authorisation can approach a bank for opening an
inland letter of credit in favour of an indigenous
supplier. The authorisation will be invalidated by
the bank for direct import, only in respect of the
value and volume of
items being sourced indi­
importation. The indigenous
genously instead of
supplier will be entitled to deemed export benefits
as set out in paragraph 8.3 of the EXIM-policy 04-09
(i.e. AAS for intermediate supplies/deemed export,
deemed export drawback and refund of
terminal
excise duty).

(20)

(21)

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Official Journal of the European Union

L 350/27

It was established that during the RIP one of the coop­
erating exporters obtained concessions under the first
sub-scheme,
is therefore
not necessary to establish the countervailability of the
remaining sub-schemes.

i.e. AAS physical exports.

It

Appendix 18 of HOP I 02-07, as applicable to Advanced
Licences issued before 13 May 2005. Account taken of
this
the investigated
is considered that
exporter was not able to demonstrate that the relevant
EXIM provisions at the time were met.

situation,

it

the

the
of

countervailing

imposition by Regulation (EC) No
Following
duty
definitive
1628/2004
currently in force, the GOI has modified the verification
system applicable to AAS. In concrete terms, for verifi­
cation purposes by the Indian authorities, an Advance
Authorisation holder is legally obliged to maintain ‘a
true and proper account of consumption and utilisation
of duty-free imported/domestically procured goods’ in a
specified format (Chapters 4.26, 4.30 and Appendix 23
HOP I 04-09), i.e. an actual consumption register. This
register has to be verified by an external chartered
accountant/cost and works accountant who issues a cer­
tificate stating that the prescribed registers and relevant
records have been examined and the
information
furnished under Appendix 23 is true and correct in all
respects. Nevertheless, the aforesaid provisions apply only
to Advance Authorisations issued on or after 13 May
2005. For all Advance Authorisations or Advance
Licences issued before that date, holders are requested
to
verification
i.e. to keep a true and proper account of
provisions,
licence-wise consumption and utilisation of
imported
goods in the specified format of Appendix 18 (Chapter
4.30 and Appendix 18 HOP I 02-07).

follow the

previously

applicable

(22) With regard to the sub-scheme used during the RIP by
the cooperating exporting producer, i.e. physical exports,
both the import allowance and the export obligation are
fixed in volume and value by the GOI and are docu­
mented on the Authorisation. In addition, at the time
of import and of export, the corresponding transactions
are to be documented by Government officials on the
Authorisation. 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 the HOP II 04-09.

(23)

(24)

Imported input materials are not transferable and have to
be used to produce the resulting export product. The
export obligation must be fulfilled within a prescribed
time frame after issuance of
the licence (24 months
with two possible extensions of six months each).

The review investigation established that the Advanced
Licences used for importing raw materials during the
RIP had been issued before 13 May 2005. Therefore,
stipulated by the
the new verification requirements
Indian authorities in HOP I 04-09, as described in
yet been tested in practice.
recital 21, had not
Furthermore,
the
necessary actual consumption and stock registers had
been kept in the format required by Chapter 4.30 and

the company could not show that

(d) D i s c l o s u r e c o m m e n t s

(25)

The cooperating exporter who had made use of AAS
during the RIP argued that it had voluntarily submitted
the advance licenses used, although they were issued
to verification by a certified
before 13 May 2005,
accountant according to the requisites of
the HOP I
04-09, and that this demonstrates that a proper verifi­
cation system now exists under the new provisions of the
HOP.

the

the

verification at

(26) A certificate in the form of Appendix 23 of the HOP,
signed by a certified accountant and dated 1 February
indeed submitted to the Commission
2008, was
services during
company's
premises. However, given that
the advance licences
were dated as of 2004, and the new HOP provisions
did not apply to them, it must be concluded that this
was a voluntary exercise by the company, which does
not demonstrate that an effective verification system was
actually implemented by the GOI. Furthermore,
it was
not shown that the excess duty remission, as calculated
by the certified accountant, was actually repaid to the
government.

(27)

(28)

(29)

(e) C o n c l u s i o n

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, i.e. a financial contribution of the GOI
which conferred a benefit upon the
investigated
exporters.

exports

in law upon export performance,

clearly
In addition, AAS for physical
contingent
and
therefore deemed to be specific and countervailable
under Article 3(4)(a) of the basic Regulation. Without
an export
company cannot obtain
a
benefits under these schemes.

commitment

is

The sub-scheme used in the present case cannot be
considered as permissible duty drawback system or
substitution drawback system within the meaning of
Article 2(1)(a)(ii) of the basic Regulation.
It does not
conform to the strict rules laid down in Annex I item
(definition and rules for drawback) and
(i), Annex II
substitution
rules
(definition
Annex

and

for

III

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the basic Regulation. The GOI did not
drawback) of
effectively apply any 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
themselves cannot be
considered a verification system of actual consumption,
since they do not enable the GOI to verify with sufficient
precision what amounts of inputs were consumed in the
export production. Furthermore, an effective control
done by the GOI based on a correctly kept actual
consumption register did not take place during the RIP.
In addition, the GOI did not carry out a further exam­
inputs involved, although this
ination based on actual
would normally need to be carried out in the absence
of an effectively applied verification system (Annex
II(II)(5) and Annex III(II)(3) to the basic Regulation).

contingent upon export performance and was not
granted by reference to the quantities manufactured,
produced, exported or transported.

(33)

The subsidy rate established in respect of this scheme
during the RIP for the cooperating producer concerned
amounts to 0,3 %.

2. Duty Entitlement Passbook Scheme (DEPBS)

(a) L e g a l b a s i s

(34)

The detailed description of the DEPBS is contained in
paragraph 4.3 of
the EXIM-policy 04-09 and in
Chapter 4 of the HOP I 04-09.

(30)

This sub-scheme is therefore countervailable.

(f) C a l c u l a t i o n o f

t h e s u b s i d y a m o u n t

(b) E l i g i b i l i t y

(31)

(32)

the

systems,

In this respect,

In the absence of permitted duty drawback systems or
substitution drawback
countervailable
benefit is the remission of total import duties normally
due upon importation of inputs.
it is
noted that the basic Regulation does not only provide
for the countervailing of an ‘excess’ remission of duties.
According to Article 2(1)(a)(ii) and Annex I(i) of the basic
Regulation only an excess remission of duties can be
countervailed, provided the conditions of Annexes II
and III of the basic Regulation are met. However, these
conditions were not fulfilled in the present case. Thus, if
an absence of an adequate monitoring process is estab­
lished, the above exception for drawback schemes is not
applicable and the normal rule of the countervailing of
the amount of (revenue forgone) unpaid duties, rather
than any purported excess remission, applies. As set
out in Annexes II(II) and III(II) of the basic Regulation
the burden is not upon the investigating authority to
calculate
contrary,
according to Article 2(1)(a)(ii) of the basic Regulation it
only has to establish sufficient evidence to refute the
appropriateness of an alleged verification system.

remission. To the

such excess

The subsidy amount for the exporter which used the
AAS was calculated on the basis of
import duties
forgone (basic customs duty and special additional
customs duty) on the material imported under the sub-
scheme used for the product concerned during the RIP
(numerator).
In accordance with Article 7(1)(a) of the
basic Regulation, fees necessarily incurred to obtain the
subsidy were deducted from the subsidy amount where
accordance with
justified
subsidy
Article 7(2) of
this
amount has been allocated over the export
turnover
generated by the product concerned during the RIP as
is
appropriate

the basic Regulation,

claims were made.

denominator,

because

subsidy

the

In

(35) Any manufacturer-exporter or merchant-exporter

is

eligible for this scheme.

(c) P r a c t i c a l
D E P B S

i m p l e m e n t a t i o n

o f

t h e

(36) An eligible exporter can apply for DEPBS credits which
are calculated as a percentage of the value of products
exported under this scheme. Such DEPBS rates have been
established by the Indian authorities for most products,
including the product concerned. They are determined on
taking into account a presumed
the basis of SIONs,
import content of inputs in the export product and the
customs duty incidence on such presumed imports,
regardless of whether import duties have actually been
paid or not.

(37)

To be eligible for benefits under this scheme, a company
must export. At the point in time of the export trans­
action, a declaration must be made by the exporter to the
authorities in India indicating that the export is taking
place under the DEPBS. In order for the goods to be
the Indian customs authorities issue, during
exported,
the dispatch procedure, an export shipping bill. This
document shows, inter alia, the amount of DEPBS credit
which is to be granted for that export transaction. At this
point in time, the exporter knows the benefit it will
receive. Once the customs authorities issue an export
shipping bill,
the
granting of a DEPBS credit. The relevant DEPBS rate to
calculate the benefit is that which applied at the time the
export declaration is made.

the GOI has no discretion over

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Official Journal of the European Union

L 350/29

(38) DEPBS credits are freely transferable and valid for a
period of 12 months from the date of issue. They can
be used for payment of customs duties on subsequent
imports of any goods unrestrictedly importable, except
capital goods. Goods imported against such credits can
be sold on the domestic market (subject to sales tax) or
used otherwise.

(43)

(39) Applications for DEPBS credits are electronically filed and
can cover an unlimited amount of export transactions.
De facto no strict deadlines exist to apply for DEPBS
credits. The electronic system used to manage DEPBS
does not
transactions
outside the deadline submission periods mentioned in
chapter 4.47 HOP I 04-09. Furthermore, as clearly
provided in Chapter 9.3 HOP I 04-09 applications
received after the expiry of submission deadlines can
always be considered with the imposition of a penalty
fee (i.e. 10 % on the entitlement).

automatically exclude

export

(d) D i s c l o s u r e c o m m e n t s

inputs used. Moreover,

This scheme cannot be considered a permissible duty
substitution drawback system
drawback system or
within the meaning of Article 2(1)(a)(ii) of
the basic
Regulation. It does not conform to the strict rules laid
down in Annex I item (i), Annex II (definition and rules
for drawback) and Annex III
(definition and rules for
substitution drawback) of
the basic Regulation. An
exporter is under no obligation to actually consume
the goods imported free of duty in the production
process and the amount of credit is not calculated in
relation to actual
there is no
system or procedure in place to confirm which inputs
are consumed in the production process of the exported
product or whether an excess payment of import duties
occurred within the meaning of item (i) of Annex I and
Annexes II and III of the basic Regulation. Lastly, an
exporter is eligible for the DEPBS benefits regardless of
whether it imports any inputs at all. In order to obtain
for an exporter to simply
the benefit,
export goods without demonstrating that any input
material was
imported. Thus, even exporters which
procure all of their inputs locally and do not import
any goods which can be used as inputs are still entitled
to benefit from the DEPBS.

is sufficient

it

(40) One cooperating exporter argued that all

therefore only the excess remission,

the DEPBS
credits obtained by the company had been used to
import materials used in the production of the product
concerned, despite being in principle allowed to use them
for other purposes, as stated above. This exporter claimed
in that
that therefore their actual use of DEPBS was,
in line with a normal duty drawback system,
respect,
if any
and that
should
to
Article 2(1)(a)(ii) and Annex I(i) of the basic Regulation
only if the conditions of Annexes II and III of the basic
Regulation are met can an excess remission of duties can
be countervailed. These conditions, as explained in recital
43 were not
the
the amount of
normal rule of
unpaid duties
than any
forgone),
purported excess remission, applies.

the countervailing of
(revenue

fulfilled in the present case. Thus,

countervailed. However,

according

rather

be

(41)

(42)

(e) C o n c l u s i o n s o n t h e D E P B S

The DEPBS provides subsidies within the meaning of
Article 2(1)(a)(ii) and Article 2(2) of the basic Regulation.
A DEPBS credit is a financial contribution by the GOI,
since the credit will eventually be used to offset import
duties, thus decreasing the GOI's duty revenue which
would be otherwise due. In addition, the DEPBS credit
confers a benefit upon the exporter, because it improves
its liquidity.

is

contingent

The DEPBS
in law upon export
performance, and therefore deemed to be specific and
countervailable under Article 3(4)(a) of the basic Regu­
lation.

(44)

(f) C a l c u l a t i o n o f

t h e s u b s i d y a m o u n t

regard,

it was

considered that

In accordance with Articles 2(2) and 5 of the basic Regu­
the amount of countervailable subsidies was
lation,
the benefit conferred on the
calculated in terms of
In
recipient, which is found to exist during the RIP.
this
is
the benefit
conferred on the recipient at the point in time when
an export transaction is made under this scheme. At
this moment, the GOI
is liable to forgo the customs
duties, which constitutes a financial contribution within
the meaning of Article 2(1)(a)(ii) of the basic Regulation.
Once the customs authorities issue an export shipping
bill which shows, inter alia, the amount of DEPBS credit
which is to be granted for that export transaction, the
GOI has no discretion as to whether or not to grant the
subsidy and it has no discretion as to the amount of the
exporting
the
subsidy.
producers booked the DEPBS credits on an accrual
basis as income at the stage of export transaction.

Furthermore,

cooperating

(45) Where

justified claims were made,

fees necessarily
incurred to obtain the subsidy were deducted from the
credits so established to arrive at the subsidy amount as
numerator, pursuant to Article 7(1)(a) of the basic Regu­
lation. In accordance with Article 7(2) of the basic Regu­
lation this subsidy amount has been allocated over the
total export
turnover during the review investigation
period as appropriate denominator, because the subsidy
is contingent upon export performance and it was not
granted by reference to the quantities manufactured,
produced, exported or transported.

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Official Journal of the European Union

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(46)

The subsidy rates established in respect of this scheme
during the RIP for the cooperating exporting producers
amount to 6,2 % and 5,7 %.

3. Export Promotion Capital Goods Scheme (EPCGS)

(a) L e g a l b a s i s

(47)

The detailed description of the EPCGS is contained in
Chapter 5 of the EXIM-policy 04-09 and in Chapter 5
of the HOP I 04-09.

(b) E l i g i b i l i t y

(48) Manufacturer-exporters, merchant-exporters

to’
supporting manufacturers and service providers are
eligible for this scheme.

‘tied

(52)

(53)

(54)

(c) P r a c t i c a l

i m p l e m e n t a t i o n

(49) 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 payment of a fee, an
EPCGS licence. Until 31 March 2000, an effective duty
rate of 11 % (including a 10 % surcharge) and, in case of
high value imports, a zero duty rate was applicable. 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.

the EPCGS is contingent

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

be

system

cannot

scheme

considered

system or
the

Eventually,
this
a
permissible duty drawback
substitution
of
within
drawback
Article 2(1)(a)(ii) of the basic Regulation. Capital goods
are not covered by the scope of such permissible systems,
as set out in Annex I, item (i), of the basic Regulation,
because they are not consumed in the production of the
exported products.

meaning

(e) C a l c u l a t i o n o f

t h e s u b s i d y a m o u n t

The subsidy amount was calculated, in accordance with
Article 7(3) of the basic Regulation, on the basis of the
unpaid customs duty on imported capital goods spread
across a period which reflects the normal depreciation
period of such capital goods.
In accordance with the
established practice, the amount so calculated, which is
attributable to the RIP, has been adjusted by adding
interest during this period in order to reflect the full
long-
value of the benefit over time. The commercial
term interest rate during the review investigation period
in India was considered appropriate for this purpose.
Where
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
numerator. In accordance with Article 7(2) and 7(3) of
this subsidy amount has been
the basic Regulation,
turnover during the RIP as
allocated over the export
is
the
denominator,
appropriate
contingent upon export performance and it was not
granted by reference to the quantities manufactured,
produced, exported or transported.

justified claims were made,

because

subsidy

(50)

(51)

The EPCGS licence holder can also source the capital
goods indigenously. In such case, the indigenous manu­
facturer of capital goods may avail of the benefit for
duty-free import of components required to manufacture
such capital goods. Alternatively, the indigenous manu­
facturer can claim the benefit of deemed export
in
respect of supply of capital goods to an EPCGS licence
holder.

(d) C o n c l u s i o n o n E P C G S c h e m e

The EPCGS provides subsidies within the meaning of
Article 2(1)(a)(ii) and Article 2(2) of the basic Regulation.
The duty reduction constitutes a financial contribution by
the GOI, since this concession decreases the GOI's duty
revenue, which would be otherwise due. In addition, the
duty reduction confers a benefit upon the exporters,
because the duties saved upon importation improve its
liquidity.

(55)

The subsidy rates established in respect of this scheme
during the RIP for the cooperating producers amount to
0,7 % and 0,3 %.

(f) D i s c l o s u r e c o m m e n t s

(56) One cooperating exporter pointed out a mistake in the
methodology initially used for calculating the benefits of
EPCG, in particular with regard to the amount of interest
applied. This mistake, which affected both cooperating
exporters, was corrected.

4. Income Tax Exemption Scheme (ITES)

Section 80HHC of the Income Tax Act 1961 (ITA)

(57) Under this scheme exporters could avail the benefit of a
partial
income tax exemption on profits derived from
export sales. The legal basis for this exemption was set
by Section 80HHC of the ITA.

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Official Journal of the European Union

L 350/31

(58)

This provision was abolished for the assessment year
2005-06 (i.e. for the financial year from 1 April 2004
to 31 March 2005) onwards and thus 80HHC of the ITA
does not confer any benefits after 31 March 2004. The
cooperating exporting producers did not avail of any
benefits under this scheme during the RIP. Consequently,
since the scheme has been withdrawn, it shall therefore
not be countervailed, in accordance with Article 15(1) of
the Regulation.

Section 80 I A of the ITA

(a) L e g a l b a s i s

(d) C o n c l u s i o n
8 0 I A o f

o n
t h e I T A

I T E S

u n d e r

S e c t i o n

(64)

The exemption from income tax is a subsidy within the
meaning of Article 2(1)(a)(ii) and Article 2(2) of the basic
Regulation, i.e. a financial contribution of the GOI which
conferred a benefit upon the investigated exporters.

(65) However, the investigation has shown that access to the
ITES under Section 80 I A of the ITA is not limited to
certain enterprises in the sense of Article 3(2)(a) of the
basic Regulation. This scheme appears to be available to
all companies on the basis of objective criteria. Neither
has any other evidence been found in this case that the
scheme is specific.

(59)

The scheme is based on Section 80 I A of the ITA. This
provision was brought into the ITA through the Finance
Act of 2001.

(66)

(b) E l i g i b i l i t y

(60)

Section 80 I A of the ITA applies to companies engaged
in the setting up of infrastructure facilities, including the
generation and distribution of power,
in any part of
India.

(c) P r a c t i c a l

i m p l e m e n t a t i o n

(61) According to the provisions of the ITA Section 80 I A,
an amount corresponding to the profit generated by the
power generating activities is exempted from profit tax,
for 10 consecutive years within the first 15 years of
operation of the generating unit. The unit in question
must be new and have started operation on or after
the 1 April 2003 and up to 31 March 2010.

(62)

statement.

the company's annual

The calculation of the income tax deduction forms part
tax return, and is audited
of
together with the company's profit and loss and other
It must comply with the rules
financial
the accounting
stipulated in the ITA, namely that
valuation of
its
market value. It is the role of the Income Tax authorities
to verify if the calculation of the income tax deduction is
according to ITA rules and the companies' audited
accounts. The investigation has shown evidence that
the authorities have in practice verified the calculation
and made adjustments to the calculations when justified.

the electricity generated must reflect

Furthermore, it is tied to a product (electricity) other than
the product concerned and benefits under the scheme
therefore occur on the basis of an activity which is not
the production of sales of the product concerned.
In
these circumstances,
it is considered that any benefits
accruing to the exporters concerned under this scheme
should not be countervailed.

5. Electricity Duty Exemption (EDE)

(67) Under the Industrial Promotion Policy of 2004, the State
of Madhya Pradesh (MP) offers exemption of electricity
duty to industrial companies
investing in electricity
generation for captive consumption.

(a) L e g a l b a s i s

(68)

The description of the electricity duty exemption scheme
applied by the MP Government is set out in Section 3-B
of the Electricity Duty Act of 1949.

(b) E l i g i b i l i t y

(69) Any industries located in the jurisdiction of

the MP

Government, investing in new captive power plants.

(c) P r a c t i c a l

i m p l e m e n t a t i o n

(70) According to a 29 September 2004 notification of the
MP Government, companies or persons investing in new
captive power plants of more than 10 KW capacity can
obtain from the MP Electrical Inspectorate a certificate of
exemption from electricity duty. The exemption is only
given for electricity generated for self-consumption, and
only if the new captive power plant is not a replacement
of an older one. The exemption is granted for a period of
five years.

(63)

The investigation has
shown that both investigated
exporting producers have set up captive power plants
as part of their graphite production units. They have
therefore
corresponding deduction in
income tax, according to the provisions of the ITA.

requested the

(71) A notification from the MP Government dated of 5 April
2005 exempted the new power plant established by one
of the cooperating exporting producers in this investi­
gation from electricity duty for a period of 10 years.

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Official Journal of the European Union

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(d) D i s c l o s u r e c o m m e n t s

(f) C a l c u l a t i o n o f

t h e s u b s i d y a m o u n t

(75)

(72)

The cooperating exporter who was granted an exemption
from electricity duty claimed that the EDE scheme is not
specific, and is applied without discrimination to all
the
eligible companies. According to that exporter,
initial policy of granting an exemption for five years
was
the Government of
Madhya Pradesh to confer an exemption for ten years.
However, no published notification of such a policy
change was
cooperating
exporter or by the GOI in their replies.

submitted either by

subsequently

revised by

the

The benefit to the exporting producer has been calculated
on the basis of the amount of electricity duty normally
due during the review investigation period but which
remained unpaid under this scheme. In accordance with
Article 7(2) of
the amount of
the basic Regulation,
subsidy (numerator) has then been allocated over total
sales
period
review
(denominator), because it relates to all sales, domestic
and export, and it was not granted by reference to the
quantities manufactured,
or
transported.

investigation

produced,

exported

during

the

(e) C o n c l u s i o n o n E D E S c h e m e

(73)

This scheme is a subsidy within the meaning of Articles
2(1)(a)(ii) and 2(2) of the basic Regulation. It constitutes a
financial contribution by the MP Government, since this
incentive decreases the state revenues which would be
otherwise due.
it confers a benefit upon
the recipient company.

In addition,

foresee a period of exemption of

(74) Although the Industrial Promotion Policy of 2004 and
the MP
the 29 September 2004 notification of
Government
five
years, the exporting producer in question was granted
an exemption of
this incentive
does not appear to be granted according to criteria and
conditions clearly set out by law, regulation, or other
official document.

ten years. Therefore,

(76) A subsidy margin of 0,7 % was thus established for one
company which received benefits under the EDE.

III. Amount of countervailable subsidies

(77)

It is recalled that in Regulation (EC) No 1628/2004 the
amount of countervailable subsidies, expressed ad valorem,
was found to be 15,7 % and 7 % respectively for the two
exporting producers cooperating with the present partial
interim review.

(78) During the present partial interim review the amounts of
countervailing subsidies, expressed ad valorem, were found
to be as listed hereunder:

Company

Graphite India Ltd

HEG Ltd

ALS

nil

0,3 %

DEPB

6,2 %

5,7 %

EPCG

0,1 %

0,5 %

EDE

nil

0,7 %

Total

6,3 %

7,2 %

(79)

(80)

IV. Countervailing measures

In line with the provisions of Article 19 of the basic anti-subsidy Regulation and the grounds of this
partial interim review stated under point 3 of the notice of initiation, it is established that the level of
subsidisation with regard to the cooperating producers has changed and, therefore, the rate of
countervailing duty imposed by Regulation (EC) No 1628/2004 has to be amended accordingly.

investigations). According to Article 24(1) of

The countervailing duty under review resulted from parallel anti-subsidy and anti-dumping investi­
gations (the original
the basic Regulation and
Article 14(1) of Council Regulation (EC) No 384/96 of 22 December 1995 on protection against
dumped imports from countries not members of the European Communities (1) the anti-dumping
duties imposed by Regulation (EC) No 1629/2004, were adjusted to the extent that the subsidy
amounts and the dumping margins arose from the same situation.

(81)

The subsidy schemes investigated and found to be countervailable in the current review proceeding,
with the exception of EDE, constituted export subsidies within the meaning of Article 3(4)(a) of the
basic Regulation.

(1) OJ L 56, 6.3.1996, p. 1.

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Official Journal of the European Union

L 350/33

(82)

It is therefore appropriate that the anti-dumping duty be readjusted to reflect the new levels of
subsidisation found in the present review, as far as export subsidies are concerned. Moreover,
in
accordance with Article 15(1) of the basic Regulation, the level of countervailing duties should not be
higher than the injury elimination margin found in the original
investigation. As in the original
investigation, given that the level of cooperation was high (100 %) the residual subsidy margin was
set at the level of the company with the highest individual margin.

(83) Accordingly, the levels of countervailing and anti-dumping duties should be adjusted as follows:

Company

Subsidy margin

Dumping
margin

Injury elimi­
nation margin

Countervailing
duty

Anti-dumping
duty

Graphite India Ltd

HEG Ltd

All others

6,3 %

7,2 %

7,2 %

31,1 %

15,7 %

24,4 %

7,0 %

31,1 %

15,7 %

6,3 %

7,0 %

7,2 %

9,4 %

0 %

8,5 %

(84) One cooperating exporter claimed that since the present
partial interim review was limited to the level of subsi­
disation, the anti-dumping duties should not be modified.

(85)

(86)

In this respect, it is recalled that the notice of initiation of
the present review stated that ‘for those companies which
to both anti-dumping and countervailing
are subject
measures, the anti-dumping measure may be adjusted
accordingly should there be a change in the counter­
vailing measure.’ The change in the anti-dumping duties
is not the result of any new findings concerning the level
of dumping, but an automatic consequence of the fact
that the original dumping margins had been adjusted to
reflect the level of export subsidies found, and that the
latter have now been revised.

company

individual

countervailing duty

The
rates
specified in this Regulation reflect the situation found
during the partial
interim review. Thus, they are solely
applicable to imports of the product concerned produced
by these companies. Imports of the product concerned
manufactured by any other company not specifically
this Regulation,
mentioned in the operative part of
including
specifically
from these rates and shall
mentioned, cannot benefit
to the duty rate applicable to ‘all other
be subject
companies’.

entities

related

those

to

(87) Any claim requesting the application of these individual
countervailing duty rates (e.g. following a change in the
name of the entity or following the setting up of new
production or sales entities) should be addressed to the
Commission (1) forthwith with all relevant information,
in particular any modification in the company's activities
linked to production, domestic and export sales associ­

consultation of

ated with, for instance, that name change or that change
in the production and sales entities. If appropriate, and
the
after
Commission is hereby empowered to amend the Regu­
lation accordingly by updating the list of companies
benefiting from individual duty rates,

the Advisory Committee,

HAS ADOPTED THIS REGULATION:

Article 1

Article 1(2) of Regulation (EC) No 1628/2004 shall be replaced
by the following:

‘The rate of the definitive countervailing duty applicable to
the net
for
products produced by the companies listed below shall be
as follows:

free-at-Community-frontier price, before duty,

Company

India

Graphite
Chowringhee
Road,
700016, West Bengal

Limited

(GIL), 31
Kolkatta —

Electro Graphite

(HEG)
Hindustan
Towers, A-12,
Limited,
Sector- 1, Noida — 201301, Uttar
Pradesh

Bhilwara

Definitive
duty

TARIC
additional
code

6,3 %

A530

7,0 %

A531

7,2 %

A999’

(1) European Commission, Directorate-General for Trade, Directorate H,

All others

Office N-105 4/92, 1049 Brussels, Belgium.

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Official Journal of the European Union

30.12.2008

Article 1(2) of Regulation (EC) No 1629/2004 shall be replaced by the following:

Article 2

‘The rate of the definitive anti-dumping duty applicable to the net free-at-Community-frontier price,
before duty, for products produced by the companies listed below shall be as follows:

Company

Definitive duty

TARIC additional code

Graphite India Limited (GIL), 31 Chowringhee Road, Kolkatta
— 700016, West Bengal

Hindustan Electro Graphite (HEG) Limited, Bhilwara Towers,
A-12, Sector — 1, Noida — 201301, Uttar Pradesh

All others

9,4 %

0 %

8,5 %

A530

A531

A999’

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

Article 3

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

Done at Brussels, 18 December 2008.

For the Council
The President

M. BARNIER