By TIOL News Service

NEW DELHI, OCT 10, 2016: THE brief facts are that M/s Alkali Manufacturers Association of India (AMAI) filed an application for imposition of Anti Dumping duty on caustic soda (subject goods) originating in or exported from China P.R. and Korea R. P. in accordance with the provisions of Customs Tariff Act, 1975.

Based on Final Finding Customs Notification No. 142/2003-Cus was issued imposing definitive AD duty on the subject goods.

AMAI challenged the recommendation of the DA on the ground that they had not recommended AD duty on M/s Hanhwa Chemical Corporation. M/s National Aluminium Co. Limited and M/s Hindustan Lever Limited have opposed the imposition of AD duty on the subject goods.

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 that during the Period Of Investigation the cost of chlorine was varying and it has been treated as by-product by the DA. When cost of chlorine is substantial then it should not be taken as by-product but should have been treated as co-product as per para 12 of Annexure -III of Cost Accounting Records (Caustic Soda) Rules, 1967; that two different methods, one for M/s Hanhwa Chemical Corporation and another for domestic industry should not have been followed for arriving at the cost.

The Tribunal set-aside the Customs Notification No. 142/2003-Cusand remanded the matter to the DA.

The Supreme Court set aside the above order of the Tribunal and remanded the matter for a fresh decision. It was directed to specifically examine the concept of "Equal Economic Importance" on a rational basis to decide the status of chlorine - whether a by-product or a co-product.

After considering the elaborate submissions made by both sides, the Bench observed and held thus -

++ the central point of dispute is whether or not the chlorine emerging during the process of manufacture of subject goods has "Equal Economic Importance". In order to consider chlorine a joint product of the status equal to caustic soda we have to examine the guidelines as stipulated in para 12 of Schedule -III of 1967 Rules.

++ we note that the term "Equal Economic Importance" has not been defined. The plain meaning of the same is that when more than one products emerge during the common manufacturing process, two or more of 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.

++ as per Dictionary of Accounting by Jonathan Law - 2010 (Oxford University Press) a main product is a product of a process that has the greatest economic significance. Other products of secondary economic importance are regarded as by-products. However, if all products have equal importance they are regarded as joint products.

++ 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. 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.

++ various major units in D I have been selling substantial portion of chlorine, not consuming the same for value added downstream products. Considering the constraints in storage and transport and also lack of integrated capacity to use, the realisation towards such sale only can be considered to fix the economic importance of chlorine. Based on the submissions made by the parties, admittedly, such realisation will not give chlorine the status of "Equal Economic Importance" when compared to the subject goods.

++ (from the Cost Audit reports it is evident 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 as compared to caustic soda and thus cannot be treated as joint product.

Holding that treatment of chlorine as a by-product to arrive at a finding by the DA is justified,the appeals were dismissed.

(See 2016-TIOL-2656-CESTAT-DEL-LB)