2016 (2) TMI 477 - SC - Customs

Challenge to the Levy of anti-dumping duties - appellant urged that tribunal was not justified in comparing the normal value of a foreign exporter with the NIP of Indian producers and further there was no warrant to direct the DA to determine cost of production for foreign exporters and of Indian producers following the same methodology when the foreign exporters and Indian producers adopt and apply different accounting practices as permissible in their respective countries; that the tribunal has applied the principle laid down in HCC case though in the said case, the normal value and the value of export price was the same and there was really no dumping; that the tribunal has grossly erred by treating chlorine as a co-product or a joint-product along with caustic soda without taking note of the accounts of the company which has been maintained on the basis of the generally accepted accounting principles; that the tribunal has really not kept itself alive to the language employed in Para 12 of Schedule III to the 1967 Rules which lays down the concept of Equal Economic Importance for the joint products. Held that - 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 Corporation s case and the price rise in the price of Chlorine, we are constrained to dislodge the judgment and order of the tribunal. Appeals are allowed and the judgment and order passed by the tribunal are set aside and the tribunal is directed to decide the matter afresh keeping in view the observations made hereinabove. - Matter remanded back to tribunal.

Summary

Issues Involved:
1. Determination of anti-dumping duty.
2. Methodology for calculating export price and normal value.
3. Classification of chlorine as a by-product or co-product.
4. Determination of non-injurious price (NIP) and injury margin.
5. Application of principles from M/s. Hanwha Chemical Corporation's case.
6. Tribunal's jurisdiction and methodology.

Detailed Analysis:

1. Determination of Anti-Dumping Duty:
The appellant, M/s. Alkali Manufacturers Association of India, filed a petition under the Customs Tariff (Identification, Assessment, and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995, alleging dumping of caustic soda from China and Korea. The Designated Authority (DA) initiated an investigation and issued preliminary findings, recommending anti-dumping duties. The Ministry of Finance issued a notification imposing these duties.

2. Methodology for Calculating Export Price and Normal Value:
The DA determined the export price and normal value for caustic soda, finding significant dumping margins for exporters from China and Korea, except for M/s. Hanwha Chemical Corporation (HCC). The methodology involved deducting ocean freight, insurance, port charges, and other expenses to reach the ex-factory price. The DA's findings were challenged, with the appellant arguing that the export price and normal value for HCC were not correctly determined.

3. Classification of Chlorine as a By-Product or Co-Product:
The DA classified chlorine as a by-product, which was contested. The tribunal held that chlorine should be treated as a co-product based on the Cost Accounting Records (Caustic Soda) Rules, 1967, which require equitable cost distribution up to the point of separation. The tribunal found that the DA had correctly determined the cost for HCC but failed to apply the same principle to the domestic industry.

4. Determination of Non-Injurious Price (NIP) and Injury Margin:
The tribunal found that the DA did not correctly determine the NIP by not treating chlorine as a co-product. It set aside the DA's final findings and the notification, remanding the matter for fresh determination of NIP and injury margin, ensuring equitable cost distribution between chlorine and caustic soda.

5. Application of Principles from M/s. Hanwha Chemical Corporation's Case:
The tribunal applied principles from the HCC case, where the DA had compared the ex-factory export price and normal value, determining the margin of dumping. The tribunal held that the same methodology should be applied to the domestic industry, ensuring identical treatment.

6. Tribunal's Jurisdiction and Methodology:
The Supreme Court found the tribunal's approach fallacious, noting it had mechanically adopted principles from the HCC case without considering the specific facts. The tribunal failed to address the concept of "Equal Economic Importance" and did not adequately analyze whether chlorine should be treated as a co-product based on its economic significance. The Supreme Court directed the tribunal to reconsider the matter, taking into account generally accepted accounting principles, statutory concepts, and commercial use.

Conclusion:
The Supreme Court allowed the appeals, set aside the tribunal's judgment, and remanded the matter for fresh determination. The tribunal was instructed to decide the case within six months, considering all relevant factors, including statutory concepts, commercial use, and "Equal Economic Importance."