2016 (10) TMI 605 - AT - Customs

Levy of Anti Dumping duty - challenging the finding of the DA - caustic soda - chlorine - imported from China P.R. and Korea R. P. - costing of chlorine emerging during the manufacture of caustic soda - whether or not the chlorine emerging during the process of manufacture of subject goods has Equal Economic Importance ? - is chlorine a joint product of the status equal to caustic soda? - Held that - when more than one product emerge during the common manufacturing process two or more those can be considered to have Equal Economic Importance if they give equal economic return or monetary benefit to the producer. In such situation these products can be considered as joint/ co-products. Even if chlorine has fluctuating price showing upward trend during certain times cannot economically realise that much benefit to the producer in India as equal to caustic soda. Admittedly chlorine is of economic importance and the producers do realise significant benefit by sale or partly by captive consumption in making derivatives chemicals. However it is clear based on the evidence placed that the integrated downstream manufacture resulting in economic consumption of substantial quantum of chlorine in the DI has not reached a level which will make chlorine a product of Equal Economic Importance to the producer. On perusal of the cost audit report it is seen that Chlorine has been consistently treated as by-product and the Cost Accounting Standards applicable to such treatment have been applied. The realisation out of chlorine produced shows that the position of Equal Economic Importance cannot be given to chlorine in the Indian context. Treatment of chlorine as a by-product is correct - appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Imposition of Anti-Dumping (AD) duty on caustic soda originating from China and Korea.
2. Treatment of chlorine as a by-product or co-product for determining the cost of production.
3. Determination of Non-Injurious Price (NIP) and injury margin.
4. Validity of the Tribunal's comparison of normal value of foreign exporters with the NIP of Indian producers.
5. Consideration of "Equal Economic Importance" of chlorine in the manufacturing process.

Detailed Analysis:

1. Imposition of Anti-Dumping (AD) duty on caustic soda originating from China and Korea:
The Alkali Manufacturers Association of India (AMAI) filed for the imposition of AD duty on caustic soda from China and Korea under the Customs Tariff Act, 1975. The Designated Authority (DA) investigated and recommended AD duty based on the Customs Tariff (Identification, Assessment, and Collection of Duty or Additional Duty on Dumped Articles and for Determination of Injury) Rules, 1995. Provisional AD duty was imposed, followed by definitive AD duty through Customs Notification No. 142/2003-Cus dated 23.09.2003.

2. Treatment of chlorine as a by-product or co-product for determining the cost of production:
AMAI challenged the DA's recommendation for not considering M/s Hanhwa Chemical Corporation and argued that chlorine should be treated as a co-product rather than a by-product. The Tribunal initially set aside the DA's findings and remanded the matter for fresh determination, emphasizing that the cost of chlorine should be reasonably and equitably distributed between chlorine and caustic soda.

3. Determination of Non-Injurious Price (NIP) and injury margin:
The Tribunal's order was contested by AMAI and the DA before the Supreme Court, which directed the Tribunal to re-examine the "Equal Economic Importance" of chlorine. The Tribunal was instructed to consider generally accepted accounting principles and statutory concepts to determine whether chlorine should be treated as a by-product or co-product, impacting the NIP and injury margin calculations.

4. Validity of the Tribunal's comparison of normal value of foreign exporters with the NIP of Indian producers:
AMAI argued that the Tribunal unjustifiably compared the normal value of foreign exporters with the NIP of Indian producers, given the different accounting practices. The Supreme Court remanded the matter to the Tribunal for fresh consideration, emphasizing the need for rational examination of "Equal Economic Importance."

5. Consideration of "Equal Economic Importance" of chlorine in the manufacturing process:
The Tribunal, upon re-examination, concluded that chlorine did not have "Equal Economic Importance" to caustic soda for domestic producers due to constraints in storage, transportation, and lack of integrated downstream usage. The economic return from chlorine was not comparable to that from caustic soda. Therefore, chlorine was treated as a by-product, consistent with Cost Accounting Standards and practices. The appeals challenging the DA's findings and consequent Notifications were dismissed.

Conclusion:
The Tribunal, adhering to the Supreme Court's directions, reaffirmed that chlorine should be treated as a by-product in the Indian context due to its lesser economic significance compared to caustic soda. The appeals against the DA's findings were dismissed, and the imposition of AD duty on caustic soda from China and Korea was upheld.