Reliance Industries Limited Vs Designated Authority (CESTAT Delhi)
CESTAT Delhi remanded the matter to designated authority in the matter of imposition of anti-dumping duty on imports of MEG ‘Mono Ethylene Glycol’ as selective examination with respect to only one period was made as base for determination of injury.
Facts- M/s. Reliance Industries Limited, a domestic producer of ‘Mono Ethylene Glycol’ in India, had filed this appeal to assail the Notification notifying that since the domestic industry had not suffered material injury in terms of the provisions contained in the Customs Tariff (Identification, Assessment, and Collection of Anti- Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 it would not be appropriate to recommend a levy of anti-dumping duty on the import of MEG. Accordingly, the designated authority terminated the investigation which was initiated by a Notification dated 28.06.2021.
Notably, the present appeal has been filed against the final findings dated 27.10.2022 of the designated authority deciding not to recommend the imposition of anti-dumping duty on imports of MEG originating in or exported from the subject countries.
Conclusion- Held that the designated authority, in the present case, has exclusively relied upon the marginal improvement in the period of investigation as compared to 2019-20 and had ignored the trends over the years before that. Such selective examination, particularly in the present facts where the domestic industry itself has claimed injury since 2019-20, may defeat the entire purpose of injury assessment.
The inevitable conclusion, therefore, is that the designated authority would have to re-examine the matter in the light of the observations made above. The final findings of the designated authority contained in the Notification dated 27.10.2022 are, accordingly, set aside and the matter is remitted to the designated authority to give final findings in the light of the observations made above. The appeal is allowed to the extent indicated above.
FULL TEXT OF THE CESTAT DELHI ORDER
M/s. Reliance Industries Limited1, a domestic producer of „Mono Ethylene Glycol2′ in India, has filed this appeal to assail the Notification dated 27.10.2022 notifying that since the domestic industry had not suffered material injury in terms of the provisions contained in the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 19953 it would not be appropriate to recommend levy of antidumping duty on the import of MEG. Accordingly, the designated authority terminated the investigation which was initiated by a Notification dated 28.06.2021.
2. The appellant with M/s. India Glycol Ltd., another Indian producer of MEG, had filed an application before the designated authority seeking imposition of anti-dumping duty on imports of MEG from Kuwait, Saudi Arabia and United States of America 4 . The designated authority issued a Notification dated 28.06.2021 initiating investigation under section 9A of the Customs Tariff Act, 19755 read with rule 5 of the 1995 Rules to determine the existence, degree and affect of alleged dumping of the subject good from the subject countries and to recommend the amount of anti-dumping duty, which if levied, would be adequate to remove the alleged injury to the domestic industry. The period of investigation was considered to be from 01.01.2020 to 31.12.2020 and the injury analysis period was notified to be from 2017-18, 2018-19, 2019-20 and the period of investigation.
The designated authority disclosed the essential facts of the investigation to the known interested parties by a disclosure statement dated 23.09.2022, and after consideration of the comments issued final findings through a Notification dated 27.10.2022.
3. The present appeal has been filed against the final findings dated 27.10.2022 of the designated authority deciding not to recommend imposition of anti-dumping duty on imports of MEG originating in or exported from the subject countries primarily, despite concluding that MEG was being dumped by the subject countries, for the reason that the domestic industry had not suffered material injury as some of its significant performance parameters had improved in the period of investigation i.e. from January 2020 to December 2020 as compared to the previous year i.e. 2019-20.
4. MEG, as noted by the designated authority, is a clear, colour less, odour less, and slightly viscous liquid, which is majorly used as a chemical intermediate in the production of polyester fibres, polyester films, and resins such as polyethylene terephthalate6. PET is converted into plastic bottles which are used globally. The designated authority also noted that MEG is usually produced using two basic raw materials, ethylene and oxygen. Ethylene and oxygen are combined to produce ethylene oxide in a multi-tubular catalytic reactor. The highly exothermic reaction is carefully controlled with proprietary and effective safety systems developed by scientific design. Ethylene oxide produced in the reactor is separated to high quality purified ethylene oxide and/or is further processed to produce fibre-grade MEG as well as di- and tri- ethylene glycols (DEGTEG).
5. The contention of the appellant that is it backwardly integrated in as much as it captively produces ethylene at its Ethylene plant, which it then converts into ethylene oxide for producing MEG at its MEG plant. As ethylene is not sold in the market, it is for the purpose of its Cost Accounting records, considered as a cost centre, and the ethylene captively produced is transferred to MEG plant at cost without any return or profit.
6. During the course of the investigation, the appellant had submitted that it was facing price injury on account of MEG being imported at dumped price from 2019-20 onwards. It was also submitted by the appellant that even though earlier there were considerable imports of the subject goods in the country, such imports were at fair prices and were on account of demand-supply gap in India. However, once the domestic industry enhanced capacities in 2018-19, the imports into India declined. Thereafter, from 2019-20, the imports in excess of demand-supply gap increased significantly, on account of dumping. The domestic industry also claimed that the landed price of the subject imports declined steeply over the injury period and was the lowest during the period of investigation. Further, the decline in landed price far outpaced the decline in the price of ethylene, i.e. the primary raw material. What was also submitted was that whereas the mark up of MEG import prices over Ethylene prices in the financial year 2017-18 was around Rs. 8,302/- metric ton, the same turned negative in the financial year 2019-20 and the period of investigation.
7. The appellant also submitted that since the subject goods require specialized storage capacities, prolonged storage is not viable. Consequently, it was forced to sell its product in the market at prices which were not remunerative. The same resulted in a significant decline in its profitability.
8. The key profitability factors, as noted by the designated authority in paragraph 119 of the final findings, are as under:
Profitability, return on investment and cash profits of the domestic industry over the injury period is as follows:
