Custom, Excise & Service Tax Tribunal
Deepak Nitrite Limited vs Designated Authority Directorate ... on 17 June, 2019
Author: Dilip Gupta
Bench: Dilip Gupta
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. 1
ANTI DUMPING Appeal No. 50401 of 2018
(Arising out of Notification No. 15/0/2016-DGAD dated 19.07.2017 passed by
Designated Authority Directorate General of Anti-dumping and Allied Duties,
New Delhi)
M/s. Deepak Nitrite Limited ...Appellant
Aaditya-I, National Highway No. 8,
Chhani Road,
Vadodara - 390024
Versus
Designated Authority Directorate ....Respondent
General of Anti-dumping and Allied Duties Department of Commerce & Industry, Parliament Street, Jeevan Tara Building, 4th Floor, New Delhi-110001 APPEARANCE:
Ms. Reena Khair & Shri Rajesh Sharma, Advocate for the Appellant Mr. Ameet Singh, Advocate for Designated Authority Mr. R.K. Manjhi, Authorised Representative for the Department CORAM : HON'BLE MR.JUSTICE DILIP GUPTA, PRESIDENT HON'BLE MR. ANIL CHOUDHARY, MEMBER (JUDICIAL) HON'BLE MR. C.L. MAHAR, MEMBER (TECHNICAL) Date of Hearing: 25.03.2019 Date of Decision: 17.06.2019 FINAL ORDER No. 50774/2019 JUSTICE DILIP GUPTA
1. This Appeal has been filed by Deepak Nitrite Ltd.1 under section 9C of the Customs Tariff Act 1975.2 The relief pressed for by Ms. Reena Khair, learned counsel for the Appellant at the ____________________
1. The Appellant
2. The Act 2 AD/50401/2018 time of hearing of the appeal is that the Non Injurious Price3 determined in the sunset review of anti-dumping duty imposed on imports of Sodium Nitrite originating in or exported from China PR4 should be enhanced as it has not been arrived at in accordance with the principles set out in Annexure III to the "Customs Tariff (Identification, Assessment and Collection of Anti-
Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995."5 The Final Findings were published in the Gazette of India - Extra Ordinary dated 19 July 2017 and the notification issued by the Ministry of Finance was published in the Gazette of India - Extra Ordinary dated 25 August 2017.
2. It transpires that the designated authority had earlier initiated an anti-dumping investigation against the import of Sodium Nitrite by a notification dated 4 November 1999. The final findings were notified by the designated authority on 3 November 2000 recommending imposition of definitive duties on imports of Sodium Nitrite which were notified by the Department of Revenue by a notification dated 19 December 2000. A sunset review was also carried out and the final finding was notified by the designated authority on 30 June 2011 recommending continued imposition of anti-dumping duty. The Central Government, thereafter, issued the notification dated 17 August 2011. A mid-term review was also conducted at the behest of the Appellant and the designated ___________________
3. NIP
4. Sodium Nitrite
5. 1995 Rules 3 AD/50401/2018 authority notified the final findings recommending change in the anti-dumping duty by notification dated 15 October 2014. The anti- dumping duty that was to be in force upto 16 August 2016 was modified by the said notification dated 15 October 2014. It needs to be noted that the validity of the anti-dumping duty on Sodium Nitrite was also extended by the Central Government upto 16 August 2017 by notification dated 8 August 2016.
3. The Appellant, before the expiry of the aforesaid period, filed an application before the designated authority for initiating another sunset review for extension of anti-dumping duty on imports of Sodium Nitrite. The designated authority on finding that there was sufficient evidence submitted by the Appellant to justify initiation of sunset review investigation, issued a public notice through notification dated 27 July 2016 to examine whether the expiry of the duty on the import of Sodium Nitrite was likely to lead to continuation or recurrence of dumping and injury to domestic industry.
4. The period of investigation for the purpose of review investigation covered the period from April 2015 to March 2016. The examination of trends in the context of injury analysis covered the periods from April 2012 to March 2013, April 2013 to March 2014 and April 2014 to March 2015 and the period of investigation. The designated authority, after determining the „Normal Value‟ for the producers and exporters in China PR and the „Export Price‟, determined the „Dumping Margin‟ in the range of 30 - 40%. The designated authority, then proceeded to examine the injury and 4 AD/50401/2018 causal link. In this context it examined the current injury, if any, to the domestic industry before examining the likelihood aspect of dumping and injury on account of imports from the subject country. It found that the demand for the product had increased during the period of investigation and the import volume from China had remained quite significant throughout the injury period. It also found that the landed price without anti-dumping duty was lower than the selling price of the domestic industry and would, therefore, result in significant price under cutting if the present anti-dumping duty was allowed to expire.
5. The designated authority then proceeded to determine the NIP considering the cost of production of the domestic industry for the product under consideration during the period of investigation. The designated authority found that the landed price of goods was significantly lower than NIP determined for the domestic industry and determined the range of „Injury Margin‟ to be 10 - 20%.
6. The designated authority, however, before giving its final findings informed all the interested parties of the essential facts under consideration which would form the basis for its decision.
7. In as far as the determination of the NIP is concerned, the following disclosure was made:
"Price Underselling:
The Authority notes that the price underselling is an important indicator of assessment of injury. Non injurious price has been worked out and compared with the landed value of the subject goods to arrive at the extent of price underselling. The non-injurious price has been determined considering the cost of production of the domestic industry for the product under consideration during the POI, in accordance with Annexure III of the anti-dumping Rules."5
AD/50401/2018
8. The domestic industry submitted its comments and the relevant comments on which emphasis has been laid by learned counsel for the Appellant during the course of hearing, relate to the NIP that was determined. These comments are contained in paragraphs 7, 8, 9, 10 and 11. The relevant portions are reproduced below:
"7. The non-injurious price determined is too low. The Designated Authority has reduced the non-injurious price by excluding a number of elements of expenses. Petitioner has following submissions with regard to determination of the non- injurious price.
a) --- --- --- ---
b) The very basic objective of Annexure III is to determine the amount of anti-dumping duty that would remove injury to the domestic industry.
The principles laid down under Annexure III are the guiding doctrines to the authority for determination of NIP of the like domestic product. The objective of determining NIP is required to be considered while interpreting Annexure III. The text of Annexure III is required to be interpreted as given and no other practices can be applied.
c) The methodology for determination of NIP has been substantially changed from the one adopted by the petitioner, which is clearly inappropriate, as the methodology reported by the petitioner is based on the records maintained by the company.
--- --- --- ---
g) Annexure III to the rules introduced by the Government at the behest of Designated Authority provides as follows with regard to apportionment of expenses_
--- --- --- ---
It would be seen that consistency in apportionment is one of the fundamental provision incorporated under the Rules. Thus, apportionment of expenses on different basis than (a) the one followed by the company, (b) consistent with the rules, (c) consistently applied by the domestic industry over the injury period and past cases, (d) accepted by the Designated Authority in the past shall clearly imply (i) ignoring the legal provisions with regard to apportionment of expenses, (ii) lack of consistency in apportionment of expenses.
8. Following facts of the case clearly support that the methodology followed by the Designated Authority in the past and followed by the petitioner and the cost accountant in the present case is reasonable, appropriate and consistent.
a. DNL Nandesari plant is having two separate plant areas i.e. Nitro & Nitrite. Product under consideration (Sodium Nitrite) is classified under Nitrite plant.
6
AD/50401/2018 b. Following chemicals are classified under Nitrite plant:-
Sodium Nitrite (SNI)
Sodium Nitrate (SNA)
Nitro Sulphuric Acid (NSA)
Potassium Nitrate (KNA)
MAHCL
c. The production equipment & plant are different for products produced in Nitrite Plnt, but the utilities, effluent treatment plant, office buildings, land, cooling towers and other facilities are common. d. DNL is capturing actual cost of Raw Material & Utilities based on the actual consumption & utilization.
e. Other manufacturing expenses, Administrative Expenses & selling expenses and depreciation expenses are allocated based on the production volume of these products.
f. Sodium Nitrite and Sodium Nitrate account for production volume of approx 189 MT per day in joint / co-product route, while MAHCL (Fine & Specialty Chemicals) production is only approx 4 MT per day. Other products account for production of approx 11 MT per day. From the above numbers, it can be said that more than 90% production is coming from SNI/SNA, other products are only 5-6% and MAHCL is only 1-2% of production volume.
g. MAHCL is a specialized chemical which is manufactured for a particular product, for 100% export purpose and more than 95% of its quantity is sold to only one customer. Thus, DNL is having only two customers and second customer is taking less than 5% of total production. Further, MAHCL is made against the order of this customer and the company has to keep its plant shut in case no order is received from these two customers.
h. In sodium Nitrite / Sodium Nitrate, the company is handling more than 100 customers and dealers. Thus, production and sale of these products involves significantly higher degree of efforts as compared to MAHCL. i. MAHCL business is fixed and the market demand is also limited and therefore DNL produces a very small quantity to cater to the particular customers. The company is doing MAHCL business for 6-7 years. MAHCL business is generally long term contract basis and, therefore, involves hardly any marketing efforts.
j. All of DNL‟s resources including manufacturing, man power, administrative activities and selling efforts are almost 100% used for inorganic production, handling, selling of SNI / SNA due to its volume of production, large customer base and huge manpower included in activities.
k. For MAHCL, DNL hardly carries out any sales activities as it is 100% exported and no domestic selling expenses are incurred. For administrative expenses, since DNL handles only one destination and two customers (of which one is taking just 5-10% volumes), no major administrative cost like travelling, commission and other general expenses are involved. l. The inventory of the MAHCL is kept at very low level, as it is produced for specific customers. The working capital requirement for MAHCL is very less compared to high inventory of SNI / SNA and debtors for 100 plus 7 AD/50401/2018 customers requiring more working capital. Therefore, major part of the interest cost is incurred for inorganic items. m. The sale price of MAHCL and SNI / SNA is also not comparable. The sodium Nitrite is sold at Rs.38.72 a kg; while MAHCL sale price is Rs.852.26 per kg in the POI. However, as compared with complete year sale in terms of value, 31.67% sale is coming from MAHCL and rest 68.33% is coming from Inorganic products, while on volume basis, 90% of the sales of DNL are in Sodium Nitrite / Nitrate, and only 1-2% sales in MAHCL. n. The management employees involved for SNI / SNA production are more than 265, while for MAHCL around 20 employees are involved. If we take contract and trainee employees also, the total employee involvement in MAHCL are around 25. Secondly, in case MAHCL plant does not run, the employees can be utilized for SNI / SNA production. o. The table below shows the volume and value details for the POI period for the Nitrite Division. In terms of volume, MAHCL accounts for only 2% production and sales of the Nitrite Division.
Product Production Sales Volume Sales Value
- POI Volume
MT % MT % Rs. %
Lacs
Sodium 55,395 74.38 52,219 72.91 20,789.41 54.40
Nitrite
Sodium 13,468 18.08 13,644 19.05 4,604.19 12.05
Nitrate
MAHCL 1,420 1.91 1,410 1.97 12,101.75 31.67
NSA / 4,192 5.63 4,347 6.07 721.83 1.89
KNA
p. The maximum resources are deployed by the company for SNI / SNA production.
q. Considering above facts, DNL is allocating all expenses on the basis of production quantity.
r. Post filing of the petition and during the course of the investigation, no query whatsoever has been raised seeking information on appointment methodology adopted in the disclosure statement. The petitioner has now come to know that the Designated Authority has modified the apportionment methodology. Nor there is any reasons given in the disclosure statement for rejecting the apportionment methodology followed by the petitioner and adopting a different appointment methodology.
s. Merely because sales price of a product is higher due to higher content of raw materials does not imply that fixed manufacturing expenses or overhead expenses shall also be proportionately higher.
t. Neither the text books on cost accounting nor the Annexure III nor the practice of the Designated Authority provides for one standard methodology to be applied in all cases. This itself shows that there can be more than one methodology for apportionment of fixed expenses and, therefore, the Designated Authority shall focus on consistency and reasonableness of the approach followed in allocation of common cost. In fact, following one methodology will reduce the entire cost accounting methodologies, practice and techniques to naught. 8
AD/50401/2018 u. By rejecting the certified cost statement, the relevance and importance of seeking certification has also been reduced to naught. If the Designated Authority requires a certified cost statement, the Designated Authority should adopt the same.
9. The information provided by the petitioner has also been certified by a practicing cost accountant. Rejecting the cost reported by the petitioner as per books maintained on reasonable and consistent basis and duly certified by a cost accountant shall negate the very purpose of seeking duly certified cost of production statement.
10. The petitioner is already significantly prejudiced by the present non injurious price law and in fact has been forced to file a writ petition before Hon‟ble High Court. The writ petition is pending for final hearing.
11. In view of the above, we strongly object to the rejection of cost of production reported by the petitioner and certified by the cost accountant. We further submit that the apportionment methods directed by the Authority are not the most appropriate one. Merely because sales price of two products are different, it does not follow that the overhead expenses involved for the two products should also differ in the same ratio. The petitioner finds that the domestic industry is being penalized because the cost accounting principles provide for a number of methodologies."
(emphasis supplied)
9. None of the producers / exporters / importers / other interested persons made any submissions to the disclosure statement made by the designated authority.
10. The post disclosure comments / submissions made by the domestic industry were then examined by the designated authority in paragraph 93 of the final findings and the same are reproduced below:
"93. The Authority notes that post-disclosure comments / submission made by the domestic industry are mostly reiterations of earlier submissions, which have already been examined suitably and adequately and properly addressed in the disclosure statement or relevant paras of the present finding. The Authority further considers as follows with regard to fresh issues raised by the domestic industry:
i) As regards the submissions of the domestic industry concerning determination of non-injurious price (NIP) the Authority notes that the detailed guidelines for computation of NIP is laid down under Annexure III of the anti-dumping Rules and the same has been adopted while determining NIP in the present investigation.
ii) As regards the submission of the domestic industry concerning continuation of the existing quantum and form of duty, the Authority notes that injury margin as well as dumping margin is positive in the present case. The mandate of the Designated Authority is to determine 9 AD/50401/2018 the existence, degree and effect of the alleged dumping and to recommend adequate quantum of anti-dumping duty, which, if levied, would be adequate to remove the injury to the domestic industry.
Accordingly, the quantum and form of the anti-dumping measures is decided by taking into consideration the facts of a case."
(emphasis supplied)
11. The conclusions and the recommendations of the designated authority are contained in the paragraphs 96 and 97 and they are reproduced below:
"L- CONCLUSIONS
96. Having regard to the contentions raised, information provided and submissions made by the interested parties and facts available before the Authority as recorded in this finding and on the basis of the above analysis of the state of continuation of dumping and consequent injury and likelihood of continuation / recurrence / intensification of dumping and injury, the Authority concludes that:
i) There is continued dumping of the product concerned from China PR, causing injury to the domestic industry.
ii) Imports are significantly undercutting and underselling the prices of the domestic industry.
iii) Cessation of anti-dumping duty is likely to lead to continuation and recurrence of dumping and injury to the domestic industry.
M- RECOMMENDATIONS
97. Accordingly, the Authority recommends that revised anti- dumping duties be continued to be imposed from the date of issue of notification by the Central Government on all imports of Sodium Nitric falling under Chapter 28 of Customs Tariff Classification Act 1975, originally in or exported from China PR. The anti-dumping duty shall be the amount mentioned in Column No. 8 of the following table:
SN Sub- Descriptio Country Country Producer Exporter Duty Unit Currency heading or n of of origin of Export Amount of Tariff Item Goods Measure 1 2 3 4 5 6 7 8 9 10 1 2834.1010 Sodium China China PR Any Any 72.95 MT US$ Nitrite PR 2 -Do- -Do- China Any Any Any 72.95 MT US$ PR Country Other than China 3 -Do- -Do- Any China PR Any Any 72.95 MT US$ Country other than China 10 AD/50401/2018
12. The Ministry of Finance (Department of Revenue), thereafter issued a notification dated 25 August 2017 imposing anti-dumping duty as recommended by the designated authority. This notification was published in the Gazette of India - Extra Ordinary dated 25 August 2017.
13. Ms. Reena Khair, learned counsel for the Appellant, after placing the relevant provisions of the Act and the anti-dumping rules, made the following submissions:
i) The Appellant had filed detailed comments to the disclosure statement in regard to the determination of NIP proposed by the designated authority, but the designated authority determined the NIP on „turn over‟ basis instead of „production quantity basis‟ without any discussion and without assigning any reason;
ii) The incorrect determination of NIP has resulted in a lower injury margin and consequently the duty imposed is inadequate to address the injurious effect of dumping on the domestic industry.
iii) The common expenses are to be apportioned in accordance with paragraph 4 (vi) of Annexure III to the anti-dumping rules and even though „production quantity‟ is listed as a „scientific and reasonable basis‟ for apportionment and has also been applied consistently by the domestic industry for the period under investigation, but the designated authority has changed the methodology to „sales turn over‟ without any justification;11
AD/50401/2018
iv) The designated authority could not have adopted a basis different from that adopted by the domestic industry, except where the method adopted by the domestic industry was not scientific or reasonable;
v) The designated authority failed to take into consideration the Cost Audit Reports which were prepared by an external Cost Auditor in terms of the Cost Accounting Standards and which were duly submitted to the Central Government in terms of Section 148 of The Companies Act 2013; and
vi) The order passed by the designated authority is liable to be set aside as no reasons have been indicated in the order for not accepting the methodology adopted by the domestic industry for apportionment of common expenses.
14. Shri Amit Singh, learned counsel appearing for the designated authority has made the following submissions:
i) The final findings have been recorded by the designated authority for determination of NIP in accordance with the principles set out in Annexure III to the 1995 Rules;
ii) The methodology prescribed in Annexure III is in conformity with the guidelines prescribed by the Cost Accounting Institution through Cost Accounting Standards and in particular to Cost Accounting Standard - 3 and Cost Accounting Standard - 11;
iii) The Appellant manufactures different products from different plants and machines installed in the same campus of the manufacturing unit at Nandeswari Division. The appellant 12 AD/50401/2018 had allocated expenses on production ratio, but the authority has determined the expenses on a „scientific and reasonable basis‟ on „turn over basis‟ since the production ratio was unreasonable and not scientific.
15. Learned Authorised Representative for the Department has adopted the arguments of Shri Amit Singh, learned counsel appearing for the designated authority.
16. We have considered the submissions advanced by the learned counsel for the parties.
17. The anti-dumping duty on sodium nitrite was first imposed by a notification dated 19 December 2000 issued by the Ministry of Finance. The imposition of duty was reviewed from time to time and the second sunset review final finding recommending continued imposition of the anti-dumping duty on sodium nitrite was notified by a notification dated 17 August 2011. Before the expiry of period of five years for which the anti-dumping duty was continued, the Appellant moved an application for initiating another sunset review for extension of the anti-dumping duty on imports of sodium nitrite. Finding that there was sufficient evidence submitted by the Appellant to justify initiation of a sunset review investigation, the designated authority issued a public notice. The period of investigation for the purpose of review and investigation was April 2015 to March 2016.
18. In order to appreciate the contentions advanced by the learned counsel, it would be appropriate at this stage to refer to the relevant provisions of the Act and the Rules framed therein. 13
AD/50401/2018
19. Section 9A of the Act deals with anti-dumping duty on dumped articles and is reproduced below:
"ANTI-DUMPING DUTY ON DUMPED ARTICLES (1) Where any article is exported by an exporter or producer from any country or territory (hereinafter in this section referred to as the exporting country or territory) to India at less than its normal value, then, upon the importation of such article into India, the Central Government may, by notification in the Official Gazette, impose an anti-dumping duty not exceeding the margin of dumping in relation to such article.
Explanation. - For the purposes of this section, -
(a) "margin 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 price at which the imported articles are first resold to an independent buyer or if the article is not resold to an independent buyer, or not resold in the condition as imported, on such reasonable basis as may be determined in accordance with the rules made under sub-section (6);
(c) "normal value", in relation to an article, means -
(i) the comparable price, in the ordinary course of trade, for the like article when destined for consumption in the exporting country or territory as determined 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 from the exporting country or territory to an appropriate third country as determined in accordance with the rules made under sub-section (6); or
(b) the cost of production of the said article in the country of origin along with reasonable addition for administrative, selling and general costs, and for profits, as determined in accordance with the rules made under sub-section (6) :
Provided that in the case of import of the article from a country other than the country of origin and where the article 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."
(emphasis supplied) 14 AD/50401/2018
20. A perusal of the aforesaid section 9A of the Act indicates if any article is exported from any country to India at less than its normal value, then upon the importation of such article into India the Central Government can impose an anti-dumping duty not exceeding the margin of dumping. Margin of dumping has been defined to mean the difference between the export price and the normal value. The export price means the price of the article exported from the exporting country. Normal value has been defined to mean the comparable prices for the like article when destined for consumption in the exporting country.
21. Rule 3 of the 1995 Rules provides that the Central Government may by notification in the Official Gazette appoint a person not below the rank of a Joint Secretary to the Government of India or such other person as the Government may think fit as the designated authority for the purpose of the Rules. The principles governing investigations are contained in Rule 6. Rule 10 provides for determination of normal value, export price and margin of dumping and is reproduced below:
10. Determination of normal value, export price and margin of dumping. -
An article shall be considered as being dumped if it is exported from a country or territory to India at a price less than its normal value and in such circumstances the designated authority shall determine the normal value, export price and the margin of dumping taking into account, inter alia, the principles laid down in Annexure I to these rules.
22. Rule 11 of the 1995 Rules deals with determination of injury and is reproduced below:
15
AD/50401/2018 "11. Determination of injury. -
(1) In the case of imports from specified countries, the designated authority shall record a further finding that import of such article into India causes or threatens material injury to any established industry in India or materially retards the establishment of any industry in India.
(2) The designated authority shall determine the injury to domestic industry, threat of injury to domestic industry, material retardation to establishment of domestic industry and a causal link between dumped imports and injury, taking into account all relevant facts, including the volume of dumped imports, their effect on price in the domestic market for like articles and the consequent effect of such imports on domestic producers of such articles and in accordance with the principles set out in Annexure II to these rules.
(3) The designated authority may, in exceptional cases, give a finding as to the existence of injury even where a substantial portion of the domestic industry is not injured, if -
(i) there is a concentration of dumped imports into an isolated market, and
(ii) the dumped articles are causing injury to the producers of all or almost all of the production within such market."
23. Rule 16 provides that the designated authority shall, before giving its final findings, inform all interested parties of the essential facts under consideration which form the basis for its decision.
24. Rule 17 provides for final findings. It stipulates that the designated authority shall, within one year from the date of initiation of the investigation, determine as to whether or not the article under investigation is being dumped in India and submit to the Central Government its final findings. Apart from various factors on which the final findings is to be given, the designated authority is also required to recommend the amount of duty which if levied would remove the injury to the domestic industry after considering the principles laid down in Annexure III to the 1995 Rules. For this purpose the designated authority has to determine the NIP of the like domestic product. Rule 17 is reproduced below: 16
AD/50401/2018 "17. Final findings. - (1) The designated authority shall, within one year from the date of initiation of an investigation, determine as to whether or not the article under investigation is being dumped in India and submit to the Central Government its final finding -
(a) as to, -
(i) the export price, normal value and the margin of dumping of the said article;
(ii) whether import of the said article into India, in the case of imports from specified countries, causes or threatens material injury to any industry established in India or materially retards the establishment of any industry in India;
(iii) a causal link, where applicable, between the dumped imports and injury;
(iv) whether a retrospective levy is called for and if so, the reasons therefore and date of commencement of such retrospective levy:
Provided that the Central Government may, in its discretion in special circumstances extend further the aforesaid period of one year by six months:
Provided further that in those cases where the designated authority has suspended the investigation on the acceptance of a price undertaking as provided in rule 15 and subsequently resumes the same on violation of the terms of the said undertaking, the period for which investigation was kept under suspension shall not be taken into account while calculating the period of said one year,
(b) recommending the amount of duty which, if levied, would remove the injury where applicable, to the domestic industry after considering the principles laid down in the Annexure III to rules.
--- --- --- ---
(4) The designated authority shall issue a public notice recording its final findings."
(emphasis supplied)
25. Rule 23 deals with Review and is as follows:
"23. Review. -
(1) Any anti-dumping duty imposed under the provision of section 9A of the Act, shall remain in force, so long as and to the extent necessary, to counteract dumping, which is causing injury.
(1A) The designated authority shall review the need for the continued imposition of the anti-dumping duty, where warranted, on its own initiative or upon request by any interested party who submits positive information substantiating the need for such review, and a reasonable period of time has elapsed since the imposition of the definitive anti-dumping duty and upon such review, the designated authority shall recommend to the Central Government for its withdrawal, where it comes to a conclusion that the 17 AD/50401/2018 injury to the domestic industry is not likely to continue or recur, if the said anti-dumping duty is removed or varied and is therefore no longer warranted.
(1B) Notwithstanding anything contained in sub-rule (1) or (1A), any definitive antidumping duty levied under the Act, shall be effective for a period not exceeding five years from the date of its imposition, unless the designated authority comes to a conclusion, on a review initiated before that period on its own initiative or upon a duly substantiated request made by or on behalf of the domestic industry within a reasonable period of time prior to the expiry of that period, that the expiry of the said anti-dumping duty is likely to lead to continuation or recurrence of dumping and injury to the domestic industry.
(2) Any review initiated under sub-rule (1) shall be concluded within a period not exceeding twelve months from the date of initiation of such review.
(3) The provisions of rules 6, 7, 8, 9, 10, 11, 16, 17, 18, 19, and 20 shall be mutatis mutandis applicable in the case of review."
26. The main grievance of the Appellant is regarding the determination of NIP. It would, therefore, be relevant to reproduce the relevant provisions of the principles contained in Annexure III to the 1995 Rules and the relevant portions are as follows:
"Principles for determination of non-injurious price:
(1) The designated authority is required under sub-rule (1) of rule 17 to recommend the amount of anti-dumping duty which, if levied, would remove the injury where applicable to the domestic industry.
(2) For the purpose of making recommendation under clause (1), the designated authority shall determine the fair selling (notional) price or non-injurious price of the like domestic product taking into account the principles specified herein under.
(3) The non-injurious price is required to be determined by considering the information or data relating to cost of production for the period of investigation in respect of the producers constituting domestic industry.
Detailed analysis or examination and reconciliation of the financial and cost records maintained by the constituents of the domestic industry are to be carried out for this purpose.
(4) The following elements of cost of production are required to be examined for working out the non-injurious price, namely : -
--- --- --- ---
(vi) The expenses to the extent identified to the product are to be directly allocated and common expenses or overheads classified under factory, administrative and selling overheads may be apportioned on reasonable and scientific basis such as machine hours, vessel occupancy hours, direct labour hours, production quantity, sales value, etc., as applied consistently by domestic producers and the reasonableness and justification of various expenses claimed for the period of 18 AD/50401/2018 investigation may be examined and scrutinised by comparing with the corresponding amounts in the immediate preceding year."
--- --- --- ---
(emphasis supplied)
27. Clause (3) of the aforesaid principles provides that NIP is required to be determined by considering the information or data relating to cost of production for the period of investigation in respect of the producers constituting domestic industry. Clause (4) enumerates the elements of cost of production that are required to be examined for working out the NIP. In regard to the expenses identified to the product, it has been provided for in (vi) that they are to be directly allocated. However, the common expenses or overheads classified under factory, administrative and selling overheads have to be apportioned on a reasonable and scientific basis, such as machine hours, vessel occupancy hours, direct labour hours, production quantity, sales value etc. as applied consistently by the domestic producers. The grievance of the Appellant is regarding the apportionment of common expenses.
28. The Appellant contends that its plant at Nandeswari produces sodium nitrite, sodium nitrate, nitro sulphuric acid, potassium nitrate and MACHL. The production equipment and plant are different for the products produced but the utilities, effluent treatment plant, office buildings, land, cooling towers and other facilities are common. The manufacturing expenses like administrative expenses, selling expenses and depreciation expenses are based on the production volume of the products. 19
AD/50401/2018 Sodium nitrite and sodium nitrate account for production volume of approximately 189 MT per day while MAHCL production is 4 MT per day. The other products account for production of approximately 11 MT per day. It is, therefore, stated that more than 90% of production is of sodium nitrite and sodium nitrate, while that of MAHCL is only 1-2% of the production volume. It has also been stated that MAHCL is a specialised chemical which is manufactured for a particular customer for 100% export purpose and more than 95% of its quantity is sold to only one customer. The remaining 5% is sold to a second customer. It is, therefore, stated that hardly any sales activity is carried out for MAHCL since there are only two customers and no administrative cost is involved. In fact, it is produced against orders placed by the customers and the plant has to be kept shut in case no order is received. For sodium nitrite and sodium nitrate it has to handle more than 100 customers and dealers. Thus, the production and sale of these two products involves a significantly higher degree of effort as compared to MAHCL. The sale price of MAHCL of sodium nitrite and sodium nitrate is also not comparable since sodium nitrite was sold at Rs. 38.72 per kg while MAHCL was sold at Rs. 852.26 per kg during the period of investigation. Thus, during the period of one year, the sale in terms of value is 31.67% from MAHCL and 68.33% from the remaining products, while on volume basis, 90% of sales is for sodium nitrate / sodium nitrite and only 1-2% sales is for MAHCL. The Appellants have also placed a table showing the volume and value details for the period under investigation. This chart has been 20 AD/50401/2018 reproduced in paragraph eight of this order dealing with the comments filed by the Appellant to the disclosure statement. The employees involved for production of sodium nitrite and sodium nitrate are about 265, while that for production of MAHCL is about
20. It is for this reason that the Appellant had apportioned the common expenses on the basis of production quantity. The aforesaid information provided by the Appellant was also certified by a practicing Cost Accountant.
29. The grievance of the Appellant is that though clause 4(vi) of the principles for determination of NIP provides that the common expenses should be apportioned on a reasonable and scientific basis, one of which one is the „production quantity‟, the designated authority has determined the common expenses on the basis of „sales value‟. The contention is that not only is the apportionment of common expenses on "production quantity" basis a reasonable and scientific basis, but it has also been applied consistently by the domestic producers but the disclosure statement does not give any reason as to why NIP was not determined on „production quantity‟ basis. It has also been urged that even though the Appellant had in the comments submitted to the disclosure statement, elaborately pointed out why the common expenses should be worked out on the basis of "production quantity " and not "sales value", yet no reasons have been given in the final findings arrived at by the designated authority for determining the common expenses on „sales value‟.
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30. To examine the said contentions, it is necessary to examine the contents of the disclosure statement made by the designated authority in regard to the determination of NIP. These are contained in paragraph 53 of the final findings given by the designated authority. What has been mentioned in paragraph 53 is that NIP has been determined considering the cost of production of the domestic industry for the product under consideration during period of investigation in accordance with Annexure III to the anti- dumping rules.
31. The Appellant had submitted detailed comments as to why NIP has to be determined considering "production quantity", which was not only a reasonable and scientific and basis but this method had also been applied consistently by the domestic producers. The comments on the said aspect of the disclosure statement have been examined by the designated authority in paragraph 93 of the order, which has also been reproduced above. All that has been stated is that the guidelines contained in Annexure III to the anti- dumping rules have been adopted while determining the NIP. Rule 17 (i) provides that the designated authority shall determine as to whether or not the article under investigation is being dumped in India and submit to the Central Government its final finding on factors enumerated in (a) and (b) of sub-rule (1) of Rule 17. Sub- rule (b)provides that the designated authority shall recommend the amount of duty which, if levied, would remove the injury to the domestic industry after considering the principles laid down in Annexure III to the Rules. It was therefore, imperative for the 22 AD/50401/2018 designated authority, in its final findings, to have determined the amount of duty that would remove the injury in accordance with the principles contained in Annexure III to the 1995 Rules. Clause (2) of Annexure III provides that for the purpose of making the recommendations under Rule 17(i), the designated authority shall determine the NIP of the like domestic product taking into account the principles specified in the subsequent clauses. Clause 4(vi) gives the various elements of cost of production that are required to be examined for working out the NIP. In regard to common expenses or overheads classified under factory, administrative and selling overheads it has been provided that they may be apportioned on a reasonable and scientific basis. Both "production quantity" and "sales value" have been mentioned for this purpose but at the same time it has also been stated that they should have been consistently applied by domestic producers. The designated authority was, therefore, under an obligation to consider the comments submitted by the Appellant to the disclosure statement but there is no consideration at all of the comments.
32. Shri Amit Singh, learned counsel appearing for the designated authority had however, made an attempt to support the impugned order on the basis of reasons which are not contained in the final findings of the designated authority. These submissions have been noted in the earlier part of this order and they deal with the guidelines contained in the cost accounting standards. 23
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33. Learned counsel for the Appellant has, however, submitted that the impugned order has to be judged on the basis of the reasons given in the order and the order cannot be supported by fresh reasons advanced during the course of hearing of the Appeal. In support of this submission, learned counsel has placed reliance on the decision of the Supreme Court in Mohinder Singh Gill and Another Vs. Chief Election Commissioner, New Delhi reported in (1978) 1 SCC 405.
34. The Supreme Court in Mohinder Singh Gill observed as follows:
"8. The second equally relevant matter is that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to court on account of a challenge, get validated by additional grounds later brought ,out. We may here draw attention to the observations of Bose J. in Gordhandas Bhanji (1) "Public orders, publicly made, in exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the officer making the order of what he meant, or of what was in Ms mind, or what he intended to, do. Public orders made by public authorities are meant to have public effect and are intended to effect the actings and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself."
Orders are not like old wine becoming better as they grow older."
35. It will, therefore, not be appropriate to examine the order on the basis of reasons not contained in the final findings recorded by designated authority. The reasons contained in the order can only be seen, but as noticed above, no reasons are contained in final findings as to why the basis for determining the common expenses pointed out by the Appellant have not been considered and another basis has been taken into consideration.
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36. The determination of a correct NIP went to the root of the matter because the amount of duty to be levied would depend upon it. In this connection, it would be appropriate to refer to the decision of the Supreme Court in Reliance Industries Ltd. Vs. Designated Authority and others reported in (2006) 10 SCC
368. The Supreme Court observed as follows:
"33. The purpose of imposition of duty is both to redress injury and to prevent material retardation of the establishment or growth of that industry (vide S. 9B(1) (b)(ii), rules 11, 17(a)(ii) and Annexure II). In the present case by fixing an NIP based upon specific advantages in the matter of electricity that the Appellant company processed, and permitting dumping of the PTA into India, the DA has ensured that no other company can set up PTA manufacturing facilities without also being in a position to generate its own electricity at a price less than the price of electricity generally available in the domestic market. This, in our opinion, is surely not tenable, as it will result in discrimination.
34. In our opinion the DA has clearly ignored the purpose for which the NIP is computed. The DA has failed to appreciate that once dumping and injury is established, the existence of an unfair trade practice by the exporters is undisputed and a restrictive view in computing an unduly low NIP would lead to granting a premium to the erring exporters at the cost of the domestic industry, which is suffering injury.
... ... ...
(emphasis supplied)
37. It has been emphasised by the Supreme Court time and again that the nature of proceedings before the designated authority are quasi judicial and reasons have to be stated by the authority for arriving at findings.
38. In this connection, it would be pertinent to refer to the decision of the Supreme Court in Reliance Industries Ltd. In connection with the determination of NIP, the Supreme Court observed that the nature of proceedings before the designated authority are quasi judicial and reasons have to be recorded by the designated in support of its findings. The observations are:25
AD/50401/2018 "38. We are of the opinion that the nature of the proceedings before the DA are quasi-judicial, and it is well-settled that a quasi-
judicial decision, or even an administrative decision which has civil consequences, must be in accordance with the principles of natural justice, and hence reasons have to be disclosed by the authority in that decision vide S.N. Mukherjee v. Union of India, [1990] 4 SCC
594.
39. We do not agree with the Tribunal that the notification of the Central Government under Section 9A is a legislative Act. In our opinion, it is clearly quasi-judicial. The proceedings before the DA is to determine the lis between the domestic industry on the one hand and the importer of foreign goods from the foreign supplier on the other. The determination of the recommendation of the DA and the Government notification on its basis is subject to an appeal before the CESTAT. This also makes it clear that the proceedings before the DA are quasi-judicial.
40. In the present case, the NIP computed by the DA was much lower than that computed by the Appellant, and the reasons for such variance and detailed calculations were not disclosed by the DA to the Appellant. No good reasons were given for reducing the cost price of electricity supplied by the Appellant produced in its captive power plant. This was clearly illegal. ... ... ...
45. In our opinion, excessive and unwarranted claim of confidentiality defeats the right to appeal. In the absence of knowledge of the consequences, grounds, reasoning and methodology by which the DA has arrived at its decision and made its recommendation, the parties to the proceedings cannot effectively exercise their right to appeal either before the Tribunal or this Court. This is contrary to the view taken by the Constitution Bench of this Court in S.N. Mukherjee's case."
(emphasis supplied)
39. In Asstt. Commr. Commercial Tax Department Vs. Shukla & Brothers reported in 2010 (254) ELT 6 (SC), the Supreme Court, in regard to determination of NIP, again observed that the proceedings before the designated authority are quasi judicial in nature and reasons have to be recorded by the designated authority. The Supreme Court noticed that NIP computed by the designated authority was much lower than that computed by the appellant but reasons for such variance and detailed conclusion had not been disclosed by the designated authority to the Appellant. It is for this reason that the Supreme 26 AD/50401/2018 Court observed that in the absence of knowledge of the consequences, grounds, reasons and methodology by which the designated authority arrived at this decision, the party to the proceedings cannot exercise its right of appeal, either before the Tribunal or before the Supreme Court. The observations of the Supreme Court are as follows:
"13. The principle of natural justice has twin ingredients; firstly, the person who is likely to be adversely affected by the action of the authorities should be given notice to show cause thereof and granted an opportunity of hearing and secondly, the orders so passed by the authorities should give reason for arriving at any conclusion showing proper application of mind. Violation of either of them could in the given facts and circumstances of the case, vitiate the order itself. Such rule being applicable to the administrative authorities certainly requires that the judgment of the Court should meet with this requirement with higher degree of satisfaction. The order of an administrative authority may not provide reasons like a judgment but the order must be supported by the reasons of rationality. The distinction between passing of an order by an administrative or quasi-judicial authority has practically extinguished and both are required to pass reasoned orders. In the case of Siemens Engineering and Manufacturing Co. of India Ltd. v. Union of India and Anr. [AIR 1976 SC 1785], the Supreme Court held as under :-
"6.......If courts of law are to be replaced by administrative authorities and tribunals, as indeed, in some kinds of cases, with the proliferation of Administrative Law, they may have to be so replaced, it is essential that administrative authorities and tribunals should accord fair and proper hearing to the persons sought to be affected by their orders and give sufficiently clear and explicit reasons in support of the orders made by them. Then alone administrative authorities and tribunals exercising quasi-judicial function will be able to justify their existence and carry credibility with the people by inspiring confidence in the adjudicatory process. The rule requiring reasons to be given in support of an order is, like the principle of audi alteram partem, a basic principle of natural justice which must inform every quasi-judicial process and this rule must be observed in its proper spirit and mere pretence of compliance with it would not satisfy the requirement of law. ..."
(emphasis supplied)
40. In Kranti Associates Pvt. Ltd. Vs. Masood Ahmed Khan reported in 2011 (273) ELT 345 (SC), the Supreme Court after referring to the earlier decisions that hold that a quasi judicial authority must record reasons in support of its conclusion because reasons assure that the discretion has been exercised by the 27 AD/50401/2018 decision maker on relevant grounds and by disregarding irrelevant considerations, also observed that recording of reasons operates as a valid restraint on any possible arbitrary exercise of quasi judicial power. In paragraph 51 of the judgement, the Supreme Court summarised the position of law and the said paragraph is reproduced below:
"51. Summarizing the above discussion, this Court holds:
(a) In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially.
(b) A quasi-judicial authority must record reasons in support of its conclusions.
(c) Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well.
(d) Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power.
(e) Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations.
(f) Reasons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies.
(g) Reasons facilitate the process of judicial review by superior Courts.
(h) The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the Life blood of judicial decision making justifying the principle that reason is the soul of justice.
(i) Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants‟ faith in the justice delivery system.
(j) Insistence on reason is a requirement for both judicial accountability and transparency.
(k) If a Judge or a quasi-judicial authority is not candid enough about his/her decision making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism.
(l) Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or „rubber-stamp reasons‟ is not to be equated with a valid decision making process.28
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(m) It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor (1987) 100 Harward Law Review 731-737).
(n) Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See (1994) 19 EHRR 553, at 562 para 29 and Anya v. University of Oxford, 2001 EWCA Civ 405, wherein the Court referred to Article 6 of European Convention of Human Rights which requires, "adequate and intelligent reasons must be given for judicial decisions".
(o) In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of "Due Process".
41. Thus, it is clear from the aforesaid decisions of the Supreme Court that the principles of natural justice not only require the designated authority to grant an opportunity to the party to show cause but the order passed by the designated authority should also give reasons for arriving at conclusions and any violation of these two facets can vitiate the order. In the present case, neither was any information supplied to the Appellant in the disclosure statement nor do the final findings give any reason.
42. The final findings of the designated authority notified in the Government Gazette dated 19 July 2017 in regard to the determination of NIP, therefore, cannot be sustained and are set aside. Thus, the extent of imposition of duty in the notification dated 25 August 2017 issued by the Ministry of Finance is not correct. The matter is, therefore, remitted to the designated authority to re-determine the NIP, keeping in mind the observations made in this Order. However, the imposition of duty contained in the notification dated 25 August 2017 shall continue 29 AD/50401/2018 till a fresh notification is issued in this regard by the Ministry of Finance. The Appeal is, accordingly, allowed to the extent indicated above.
(order pronounced in the open court on 17.06.2019) (JUSTICE DILIP GUPTA) PRESIDENT (ANIL CHOUDHARY) MEMBER (JUDICIAL) (C.L. MAHAR) MEMBER (TECHNICAL) Bhanu