Case: Alkali Manufacturers Assn. of India and Ors Vs. Designated Authority, D.A.D.A.S. and Ors

1. The Appellant in Civil Appeal No. 2242 of 2006, namely, M/s. Alkali Manufacturers Association of India, filed a petition Under Rule 5 of the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 (for short, Anti-Dumping Rules) before the Designated Authority (DA) on behalf of the domestic industry alleging dumping of caustic soda originated in and exported from Peoples Republic of China and Korea. On the basis of the said petition/complaint, DA issued a notification initiating anti-dumping investigation covering the period from 01.04.2001 to 31.03.2003. The interested parties were required to place their views in writing before the said authority and after causing a preliminary inquiry, the findings were sent to the known exporters, importers and embassies of the two countries and exporters in the other countries to furnish their views to the DA. Opportunity of public hearing was afforded to the interested parties on 18.02.2003 and the parties were asked to submit their written submissions. On 14.07.2003, the DA issued a disclosure statement Under Rule 16 of the Anti-Dumping Rules. The Appellant in Civil Appeal No. 2242 of 2006 filed its comments on the disclosure statement before the DA and requested the said authority to disclose the reasons in detail for the determination of the preliminary findings recorded on 21.09.2002. Be it stated, the DA had notified its preliminary findings stating that the caustic soda had been dumped into India except from one exporter from Korea, M/s. Hanwha Chemical Corporation at less than its normal value as a result of which the Indian manufacturers of caustic soda had suffered injury. The DA provisionally recommended imposition of anti-dumping duty as the difference between $353.20 per MT and landed price of imports on every exporter from Korea except M/s. Hanwha Chemical Corporation (HCC) and the difference between $362.34 and landed price of imports on all exports from China. Regard being had to the preliminary findings, the Ministry of Finance had issued Notification No. 142 : of 2002 on 26.12.2002 imposing preliminary anti-dumping duties. After hearing the interested parties and issuance of the disclosure statement, the DA issued its final findings in which it determined that the dumping margin for all exporters from Korea was 37.30%, except for HCC for which it determined a dumping margin of (-)4.2% (de minimis), and the dumping margin for all exporters from China was 84.05%, except for Chlor Shanghai for which it determined a dumping margin of 41.7%. The said order was passed on 04.08.2003 and a final Notification No. 142 of 2003 was issued by the Central Government on 23.09.2003.2. Being aggrieved by the aforesaid Notification, the Appellant in Civil Appeal No. 2242 of 2006 filed an appeal before the Customs, Excise and Service Tax Appellate Tribunal, Principal Bench, New Delhi (for short, the tribunal) challenging the determination of the DA on antidumping duty. Two other companies, namely, M/s. National Aluminum Company Ltd. and M/s. Hindustan Lever Limited also preferred appeals challenging the imposition of anti-dumping duty on import of caustic soda.3. Before the tribunal, it was contended by the complaint/Appellant that the findings of the DA on the imports made from HCC recommending the anti dumping margin is de minimis (minus 4.2%) is not based on the correct appreciation of the facts and the normal value and the export price of sodium hydroxide (caustic soda) had not been correctly worked out in case of HCC as the data provided by the said Corporation was not correct. The said contention was elaborated on many a score which included that the export price as defined in Section 9A of the Customs Tariff Act, 1995 (for short, Act) had not been correctly determined; that the DA could not have worked out export price at ex-factory level as deduction allowed for arriving at the ex-factory price was without checking the records of HCC inasmuch as no appropriate response was given to the questionnaire; that the DA should have taken into consideration the price of each individual transaction for comparison of normal value and the export price. It was also urged that the methodology adopted by the DA for arriving at the cost of production was not disclosed although the authority was required to disclose all the reasons for arriving at the conclusion.4. The stand of the Appellant was resisted by the contesting Respondents. On behalf of the DA, reliance was placed on Cost Accounting Records (Caustic Soda) Rules, 1967 (for short, 1967 Rules) as amended from time to time and, on that basis it was put forth that chlorine was determined as a by-product. It was also contended that the DA had applied the correct methodology and hence, no fault could be found with the determination. The assail to the erroneous procedure being adopted by the DA was seriously resisted before the tribunal.5. The tribunal considering the submissions raised by the parties came to hold that the main duty of the DA is to determine existence degree and effect of alleged dumping in relation to import of any article and to submit its finding provisionally or finally to the Central Government regarding normal value, export price and margin of dumping in relation to the article under investigation and the injury or threat of injury to an industry established in India or material retardation to the establishment of industry in India consequent upon imports of such articles from specified countries and to recommend levy of anti-dumping duty equal to the margin of dumping or less which if levied would remove the injury to the domestic industry and the date of commencement of such duty. The tribunal addressed the issue whether the allegation that in the case of HCC the normal value and export price had not been correctly determined as a consequence of which higher antidumping duty on HCC had been imposed and proceeded to hold thus:19.1 In case of M/s. Hanwha Chemical Corporation, caustic soda was exported from Korea to India. The order for export was obtained by M/s. Tricon who had filed the tender with M/s. NALCO and whose tender was accepted. M/s. Tricon for exporting caustic soda to M/s. NALCO India placed order on M/s. Hanwha Corporation to supply the goods to M/s. NALCO and M/s. Hanwha Corporation in turn obtained the goods from M/s. Hanwha Chemical Corporation. We find that in this case the goods were exported from Korea to India irrespective of the fact that the tender was in the name of M/s. Tricon, USA. Therefore, Designated Authority has to determine a definite CIF export price at which the goods were exported from Korea to India. When the CIF export price is available from Korea to India then it has to be taken as the export price. To reach the ex-factory export price, the deduction of ocean freight, ocean insurance, port charges, commission paid to the middleman namely M/s. Hanwha Corporation and inland freight and inland insurance, etc. has to be deducted to reach the ex-factory price for export. This has been done, therefore, there is no relevance of taking into consideration the SGA expanses of M/s. Hanwha Corporation. We also find that deduction of $5 per DMT was also not permitted by the Designated Authority for caustic soda produced by diaphram technology as there is no difference in caustic soda when manufactured by membrain technology or diaphram technology. It is immaterial whether M/s. Hanwha Chemical Corporation and M/s. Hanwha Corporation were running in loss, we have only to see whether the export price has been correctly determined or not. We find that the Designated Authority in his final finding has observed that the authority for the purpose of final finding considered the adjustment as claimed by the customer on discount adjustment in terms of sale as per NALCO tender and adjustment of previous transaction sale to M/s. Tricon. Thus addition of $4.57/MT was correctly done. Thus, Designated Authority has correctly determined the export price for caustic soda and it was normatted for other exporters from Korea. This normatted export price was taken and normal value was determined on the basis of published figures of domestic sale in Chlor Alkali Magazine. The domestic industry has raised various points with regard to M/s. Hanwha Chemical Corporation like in sufficient/dismal disclosure, incorrect cost of production data, lack of information of affiliation, illegal adjustment of US $5 PMT claimed citing NALCO tender and issue of contract and physical export. The Designated Authority had examined and verified at the plant site corporate office of M/s. Hanwhas Chemical Corporation relevant cost record, financial records and production records for determining the cost components, domestic sale price, export price, pricing policy and transfer pricing to M/s. Tricon. The English version of balance sheet was also prodded to domestic industry apart from other non-confidential information as and when asked for.19.2 The Designated Authority has observed that the investigation is not NALCOs centric although NALCO consumes sizable quantity, but the consumption of NALCO just 6 to 7 per cent of Indian demand, therefore, the investigation covers all other of imports whether by NALCO or others.6. After so holding, the tribunal opined that in case of HCC cost had been correctly determined by the DA taking the chlorine as a co-product and separating its manufacturing cost during the process of manufacture of caustic soda at the stage of separation of chlorine and caustic soda on the basis of the value of production and the same principle should have been adopted by the DA in case of domestic industry. The tribunal opined that the identical treatment was not given to the domestic manufacturers and HCC. After so holding, the tribunal proceeded to deal with the non-injurious price and opined thus:22. While determining the non-injurious price for the like article for the domestic industry, the Designated Authority has used the actual verified cost of production of the subject goods to determine optimum cost of production for domestic industry taking into account the normatted base consumption norm of all the participating domestic industry and the actual price of raw material which are consumed for production of caustic soda during the period of investigation. We find that Cost Accounting Records (Caustic Soda) Rules 1967 as amended from 1999 provide for maintenance of proper books of accounts containing particulars in Schedule III and proforma A and B mentioned in the said schedule annexed to the rules relating to utilization of materials labour and other items of cost as far as these are applicable to caustic soda in any form. We find that during the POI, the cost of chlorine was varying and it has been treated as a bye-product by the Designated Authority. When cost of chlorine is substantial then it should not be taken as bye-product but it should be treated as a co-product as per para 12 of Annexure-III to Cost Accounting Records (caustic soda) Rule 1967. In such a situation, DA should have apportioned the cost upto point of separation on reasonable and equitable basis. He should have taken caustic soda and chlorine as co-product and up to the stage of separation the common cost should have been allocated on the basis of volume of production. In case of M/s. Hanwha Chemical Corporation the Designated Authority has done this. Therefore, two different methods cannot be adopted for costing of the same product for comparison with cost of M/s. Hanwha Chemical Corporation. A uniform practice should have been adopted for both.7. The aforesaid view persuaded the tribunal to hold that the non-injurious price was not correctly determined by the DA and, accordingly, set aside the Notification No. 142 of 2003 dated 23.09.2003 and the final findings of the DA on non-injurious price and injury margin and remanded the matter to the DA for fresh determination of non-injurious price and injury margin by reasonable and equitable distributing the cost of production between the chlorine and caustic soda and issue findings afresh in accordance with law. The tribunal finally held thus:22.2 We are, therefore, of the view that the non-injurious price was not correctly determined by the Designated Authority. In case of M/s. Hanwah Chemical Corporation, the Appellant had separated the cost of production between Caustic soda and Chlorine at the point of separation of the Chlorine and Caustic soda. The same principle should be applied for domestic industry for reasonable and equitable distribution of cost of production between chlorine and caustic soda. Since this has not be, en been done and this has lead to incorrect fixation of non-injurious price, and consequently anti-dumping duty.23. We, therefore, set aside the impugned notification No. 142/2003-Cus dated 23rd September, 2003 and the final findings of the DA on non-injurious price and injury margin. We remand the case to the designated Authority for a fresh determination of non-injurious price and injury margin by reasonably and equitably distributing the cost of production between chlorine and caustic soda and issue final finding afresh on that basis in accordance with law and in the light of this judgment.

Court's reasoning:
19. It is pertinent to note that except M/s. Hanwha Chemical Corporation, the other exporters did not cooperate. However, it was the obligation of the complainant to establish that there was an injury to the domestic industry. For the said purpose, the endeavour was made to establish before the DA that it was a by-product and it succeeded in the said attempt. The tribunal, on being approached by the 7th Respondent, has set aside the order and the notification. As is noticeable, the reversal has taken place on two counts, namely, the principle determined in M/s. Hanwha Chemical Corporations case, and further by taking notice of the fact that the cost of Chlorine was substantial during the said period and, therefore, it deserved to be treated as a co-product as per the 1967 Rules. The approach of the tribunal, as we see, is fallacious. It has observed that M/s. Hanwha Chemical Corporations case is absolutely different. In such a situation, it should not have mechanically adopted the said principle. That apart, as submitted by Mr. Patil, it has followed a general principle of the rise in price but has not dwelt upon the issue with regard to the concept, i.e., Equal Economic Importance. The Equal Economic Importance, as is canvassed, is the price almost similar to the main product, i.e. caustic soda.21. In our considered opinion, the tribunal should have dwelled upon the said facet before it recorded the finding whether it is a co-product or a by-product. It is because the Equal Economic Importance has to be considered on a rational and pragmatic basis. It is the duty of the tribunal to see whether the DA had considered the said aspects or proceeded on hypothetical basis. The tribunal has the jurisdiction to appreciate the evidence in entirety and arrive at a conclusion and that having not been done and the entire judgment having been based on the application of M/s. Hanwha Chemical Corporations case and the price rise in the price of Chlorine, we are constrained to dislodge the judgment and order of the tribunal.