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M/s Alkali Manufacturers Association of India, M/s National Aluminium Co. Limited and M/s Hindustan Lever Limited Versus Designated Authority, DGAD, MoF.

2016 (10) TMI 605 - CESTAT NEW DELHI

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 c .....

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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 t .....

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ndran, Member (Technical) Ms. Reena Khair, Sh. Rajesh Sharma and Ms. Rita Jha, Advocates for the Appellant in AD Appeal No. 521 of 2003 (Alkali) Sh. Gopal Jain, Sr. Advocate, Sh. Suhail Nathani, Sh. Somnath Shukla, Ms. Kriti Awasthi & Ms. Ashwani Chandrasekharan, Advocates in AD Appeal No. 127 of 2004 (HLL) None for AD Appeal No. 616 of 2003 (NALCO) For Respondent Sh. Amit Singh, Advocate for the D.A. Sh. Govind Dixit, AR for the Revenue ORDER Per: B. Ravichandran: These appeals were remande .....

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ed 14.05.2002. The Period of Investigation (POI) was 01.04.2001 to 31.03.2002. After following the procedure set out in Customs Tariff (Identification, Assessment and Collection of Duty or Additional Duty on Dumped Articles and for Determination of Injury) Rules, 1995 (AD Rules), the DA recommended AD duty on subject goods originating in or exported from the above said countries vide Final Finding dated 04.08.2003. Earlier, based on preliminary finding dated 21.09.2002 provisional AD duty was im .....

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ken up together for hearing and decided by the Tribunal vide Order No. 26 - 28/2005-AD (PB) dated 23.12.2015. The Tribunal after examining rival contentions concluded that the principle of taking chlorine as co-product for the purpose of arriving at manufacturing cost as adopted in case of M/s Hanhwa Chemical Corporation should have been adopted by the DA in case of domestic industry also. The Tribunal held during the POI the cost of chlorine was varying and it has been treated as by-product by .....

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price and injury margin. The matter was remanded to the DA for a fresh determination of NIP and injury margin by reasonably and equitably distributing the cost of production between chlorine and caustic soda and to issue Final Finding on that basis, afresh, in accordance with law. 3. Two Civil Appeals were filed against the said order of the Tribunal before the Hon'ble Supreme Court. AMAI contested the Final Order of the Tribunal on the ground that the Tribunal was not justified in comparin .....

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e matter back to the DA. It was urged that chlorine has been correctly considered as by-product and the remand order by the Tribunal for re-determination of NIP was not correct. 4. The Hon'ble Supreme Court after considering both the Civil Appeals, passed order dated 07.01.2016. The Hon'ble Supreme Court set-aside the above mentioned order of the Tribunal and remanded the matter for a fresh decision. The Hon'ble Supreme Court directed the Tribunal to specifically examine the concept .....

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as above, the matter was listed before this Tribunal and the submissions of all involved parties were heard elaborately. 6. Ms. Reena Khair, and Sh. Rajesh Sharma, Id. Counsels appearing on behalf of AMAI submitted that electrolysis of solt solution (brine) results in generation of three products simultaneously, namely caustic soda, chlorine gas and hydrogen. Chlorine gas cannot be stored or transported to long distance as it is a hazardous product. It should be consumed immediately for further .....

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considering the hazardous nature of chlorine and consequent difficulty in marketing the product some of the parties in domestic industry have processed a part of chlorine to produce certain value added products/ derivatives like chloride paraffin, benzyl alcohol etc. None of the parties in domestic industry have the same level of integration as achieved by the producers in subject countries investigated by the DA. In such countries chlorine has got very valuable use in integrated PVC resin plan .....

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POI. M/s Grasim Industries sold 92% of chlorine produced during the POI. M/s DCW Limited, though had a PVC resin plant, have not consumed chlorine for the said purpose. As per records of the company for production of PVC resin the company utilised VCM as a raw material. Though VCM can be made using chlorine the company has not utilised chlorine for this purpose. As such mere existence of PVC resin in the product list of M/s DC W Limited did not imply consumption of chlorine gas captively. It was .....

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the treatment of chlorine as by-product by the said industry. 8. Ld. Counsels for AMAI sought to demonstrate by illustrative calculations as to how the treatment of chlorine as a by-product or co product will impact the quantification of injury and thereby AD duty leviable. To sum up it is the case of AMAI that chlorine cannot be considered as a co-product or product of "Equal Economic Importance" for the domestic industry in order to arrive at the NIP for domestic industry. 9. Sh. So .....

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for sale, the company instead allocating joint cost could credit the sales value of the quantities actually utilised. A reference was also made to Cost Accounting Standards, CAS-19 on joint cost. When two or more products produced by the same process, each having a sufficiently high saleable value to merit recognition as a main product, these are to be considered as joint products. 10. Ld. Counsel further submitted that commercial use of chlorine in India will justify it's treatment as co-pr .....

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tic soda in the domestic market as both have distinct economic importance. To sum up, it is the case of HLL that chlorine has significant economic importance and NIP of caustic soda has to be determined by treating chlorine as a co-product. 11. NALCO in the written submission explained the process of manufacture of caustic soda. It was contended that two third of chlorine produced is consumed in further production vinyl chain. The production of chlorine and caustic soda is inter-related with dow .....

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on as unequal treatment was given to SEZ, EOU on the one side and NALCO on the other side which is violative of Article 19 as well as Article 14 of the Constitution. NALCO prayed for setting-aside the imposition of AD duty on the subject goods. 12. Ld. Counsel for the DA submitted that the impugned finding by the DA and the consequent customs Notification imposing AD duty has been made strictly in accordance with the provisions of AD Rules and the applicable Standards of Accounting. The accounti .....

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perused the appeal records. We have also carefully examined the written submissions made by the parties. These appeals are considered afresh in line with the direction of the Hon'ble Supreme Court order dated 07.01.2016. The Hon'ble Supreme Court directed for a fresh consideration of the status of chlorine emerging during the manufacture of caustic soda. This is relevant to arrive at correct methods of costing having direct bearing on the NIP and thereafter on the AD duty. The central po .....

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ion of products shall be apportioned to joint products on reasonable and equitable basis and shall be applied consistently. The basis on which such joint costs are apportioned to different products arising from the process shall be indicated in the cost records" 15. We note that the term "Equal Economic Importance" has not been defined. The plain meaning of the same is that when more than one product emerge during the common manufacturing process, two or more those can be consider .....

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ded as joint products. Keeping this in mind we examine the various submissions made by parties as above. Chlorine and caustic soda are two of the most important inorganic chemicals having industrial use. They are together normally referred to as chlor -alkali. Chorine is largely used in the synthesis of chlorinated organic compound. It is difficult to store and transport economically and hence it is generally produced near the consumer industry. We note that the DI has not evolved a level of tot .....

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it by sale or partly by captive consumption in making derivatives chemicals. However, it is clear, based on the evidence placed before us 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. This is mainly due to constraint in full usage of chlorine captively in the vinyl chain and the difficulty in storing and t .....

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