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2016 (2) TMI 477 - SUPREME COURT

2016 (2) TMI 477 - SUPREME COURT - 2016 (332) E.L.T. 3 (SC) - 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 p .....

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as 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 consi .....

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ide and the tribunal is directed to decide the matter afresh keeping in view the observations made hereinabove. - Matter remanded back to tribunal. - Civil Appeal No. 2242/2006, Civil Appeal No.3481/2006 - Dated:- 7-1-2016 - Dipak Misra And Shiva Kirti Singh, JJ. For the Appellants : M/s Lawyer S Knit & Co, Adv., Mr B Krishna Prasad, Adv. & Mr Praveen Kumar, Advs For the Respondents : Mr B Krishna Prasad Adv., Mr Praveen Kumar, Adv., Mr Vishwajit Singh, Adv JUDGMENT Dipak Misra, J. The a .....

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. 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 afford .....

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indings 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 land .....

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e 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 tribuna .....

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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 f .....

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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 adop .....

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stablished 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 conse .....

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om 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 insura .....

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hen 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 adjust .....

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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 Hanwha's 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. .....

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ost 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 de .....

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he 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 .....

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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 No .....

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d 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 been done and this has lead to incorrect fixation of non-injurious price, and consequently anti-dumpi .....

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ot; 8. We have heard Mr. Basava Prabhu Patil, learned senior counsel for the appellant in Civil Appeal No. 2242 of 2006, Mr. Yashank Adhyaru, learned senior counsel for the appellant-Designated Authority in Civil Appeal No. 3481 of 2006, and Mr. S.K. Bagaria, learned senior counsel for respondent no. 7. 9. Mr. Basava Prabhu Patil, learned senior counsel, assailing the judgment and order passed by the tribunal has urged that the tribunal was not justified in comparing the normal value of a foreig .....

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here 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. The .....

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ave error by by-passing the generally accepted accounting principles in India as well as specific provisions of law that the recognized accounts have to be maintained for a particular product and that has led to the eventual determination. Learned counsel would criticise that the order of the tribunal is not clear and it is solely based on earlier determination in M/s. Hanwha Chemical Corporation's case. 10. In Civil Appeal No. 3481 of 2006 preferred by the DA, apart from raising the similar .....

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it was a by-product but not a co-product. 11. Mr. Bagaria, learned senior counsel appearing for the respondent no. 7, per contra, would contend that voluminous documents were filed by the said respondent as the appellant before the tribunal, and accordingly the tribunal had applied the principle in M/s. Hanwha Chemical Corporation's case and taken note of the market price of Chlorine at the relevant time and, therefore, the judgment and order passed by the tribunal are absolutely impeccable .....

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few passages from the monograph issued by the Institute of Costing Work Accounts of India. 12. To appreciate the aforesaid submissions in proper perspective, we have carefully scrutinized the judgment rendered by the tribunal. On a perusal of the same, we find that after narrating the facts and noting the submissions, the tribunal has observed that the DA has not taken into account many an aspect while determining the NIP, for it has taken into consideration certain obsolete concepts. The tribu .....

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price and normal value and determined the margin of dumping. The tribunal has opined that the margin of dumping in M/s. Hanwha Chemical Corporation is different from the margin of dumping from other non-cooperative exporters from Korea. After so observing, the tribunal has held that in case of M/s. Hanwha Chemical Corporation cost has been correctly determined by the DA taking the chlorine as co-product and separating its manufacturing cost during the process of manufacture of caustic soda at th .....

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rine as co-product up to the stage of separation the common cost should have been allocated on the basis of volume of production. Thereafter, it has been observed that in case of HCC, the DA has done that and hence, two different methods cannot be adopted for costing of the same product for comparison with cost of HCC. 14. To appreciate the factual score in proper perspective, we may profitably refer to Section 9A of the Act which reads as follows:- "Section 9A. Anti-dumping duty on dumped .....

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of dumping" in relation to an article, means the difference between its export price and its normal value; (b) "export price", in relation to an article, means the price of the article exported from the exporting country or territory and in cases where there is no export price or where the export price is unreliable because of association or a compensatory arrangement between the exporter and the importer or a third party, the export price may be constructed on the basis of the p .....

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mined in accordance with the rules made under sub-section (6); or (ii) when there are no sales of the like article in the ordinary course of trade in the domestic market of the exporting country or territory, or when because of the particular market situation or low volume of the sales in the domestic market of the exporting country or territory, such sales do not permit a proper comparison, the normal value shall be either- (a) comparable representative price of the like article when exported f .....

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cle has been merely transhipped through the country of export or such article is not produced in the country of export or there is no comparable price in the country of export, the normal value shall be determined with reference to its price in the country of origin. (1A). Where the Central Government, on such inquiry as it may consider necessary, is of the opinion that circumvention of anti-dumping duty imposed under sub-section (1) has taken place, either by altering the description or name or .....

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s section and the rules made thereunder of the normal value and the margin of dumping in relation to any article, impose on the importation of such article into India an anti-dumping duty on the basis of a provisional estimate of such value and margin and if such anti- dumping duty exceeds the margin as so determined,- (a) the Central Government shall, having regard to such determination and as soon as may be after such determination, reduce such anti-dumping duty; and (b) refund shall be made o .....

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ade zone or in a special economic zone. Explanation. - For the purposes of this section, the expressions "hundred per cent export-oriented undertaking", "free trade zone" and "special economic zone" shall have the meanings assigned to them in Explanations 2 to sub-section (f) of section 3 of Central Excise Act, 1944. (3) If the Central Government, in respect of the dumped article under inquiry, is of the opinion that - (i) there is a history of dumping which caused .....

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tte, levy anti-dumping duty retrospectively from a date prior to the date of imposition of anti-dumping duty under sub-section (2) but not beyond ninety days from the date of notification under that sub-section, and notwithstanding anything contained in any other law for the time being in force, such duty shall be payable at such rate and from such date as may be specified in the notification. (4) The anti-dumping duty chargeable under this section shall be in addition to any other duty imposed .....

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e years and such further period shall commence from the date of order of such extension. Provided further that where a review initiated before the expiry of the aforesaid period of five years has not come to a conclusion before such expiry, the anti-dumping duty may continue to remain in force pending the outcome of such a review for a further period not exceeding one year. (6) The margin of dumping as referred to in subsection (1) or sub-section (2) shall, from time to time, be ascertained and .....

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ch articles may be determined and for the assessment and collection of such anti-dumping duty. (6A) The margin of dumping in relation to an article, exported by an exporter or producer, under inquiry under sub- section (6) shall be determined on the basis of records concerning normal value and export price maintained, and information provided, by such exporter or producer: Provided that where an exporter or producer fails to provide such records or information, the margin of dumping for such exp .....

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to the duty chargeable under this section as they apply in relation to duties leviable under that Act." 15. As we find the said Section is quite a comprehensive provision and deals with various facts covering "margin of dumping", "export price", "normal value", etc. It clearly stipulates that it is an additional duty. The said duty is to be imposed on various criteria. In this regard, we may usefully reproduce Rule 5 of the Anti-Dumping Rules. It reads as follo .....

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able, and (c) where applicable, a causal link between such dumped imports and alleged injury. (3) The designated authority shall not initiate an investigation pursuant to an application made under sub-rule (1) unless - (a) it determines, on the basis of an examination of the degree of support for, or opposition to the application expressed by domestic producers of the like product, that the application has been made by or on behalf of the domestic industry: Provided that no investigation shall b .....

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tion of an investigation. Explanation. - For the purpose of this rule the application shall be deemed to have been made by or on behalf of the domestic industry, if it is supported by those domestic producers whose collective output constitute more than fifty per cent of the total production of the like article produced by that portion of the domestic industry expressing either support for or opposition, as the case may be, to the application. (4) Notwithstanding anything contained in subrule (1 .....

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rmination of injury. Rule 17 provides for final findings. To understand the import of the Section and the Anti-Dumping Rules, we may reproduce a passage from the S&S Enterprise v. Designated Authority and others (2005) 3 SCC 337:- "In our opinion, the interpretation of Rule 14(d) by Respondent No.1 and the Tribunal is incorrect and contrary to its language. The imposition of dumping duty is under Section 9A of the Customs Tariff Act, 1975 and the Rules and is the outcome of the General .....

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medy the injury and at the same time balances the right of exporters from other countries to sell their products within the country with the interest of the domestic markets. Thus the factors to constitute 'dumping', are (i) an import at prices which are lower than the normal value of the goods in the exporting country; (ii) the exports must be sufficient to cause injury to the domestic industry." 17. In Reliance Industries Ltd. v. Designated Authority and others (2006) 10 SCC 368 t .....

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mpanies. This is done by selling goods at a very low price for some time so that the domestic industries cannot compete and are thereby destroyed, and after such destruction has taken place, prices are again raised. The purpose of Section 9-A is, therefore, to maintain a level playing field and prevent dumping, while allowing for healthy competition. The purpose is not protectionism in the classical sense (as proposed by the German economist Friedrich List in his famous book 'National System .....

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e transitory benefits to the local cus- tomers on account of lower priced goods, but in the long run destroys the local industries and may have a drastic effect on prices in the long run." 18. Recently in Commissioner of Customs, Bangalore v. M/s G.M. Exports & others 2015 (1) SCALE 169, while dealing with the concept of 'injury', a two-Judge Bench has observed:- "It will thus be seen that the determination of material injury to domestic industry depends on a series of comp .....

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n 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 Corporation's 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. .....

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uld contend that it would depend upon the realization of amount from sales. It is submitted by him that the appellant had received 82% from sales of caustic soda and 18% from the sale of Chlorine subject to certain variations. 20. Mr. Bagaria, learned senior counsel, has put forth that the amount reflected in the accounts may be correct for the purpose of accounting as provided under the Companies Act, 1956 and other purposes but the words "Equal Economic Importance" being not defined .....

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