Gujarat HC: Specialty SPVC Excluded from Anti-Dumping Probe

Epigral Limited (Meghmani Finechem Limited)) & Anr. Vs Union of India & Ors. (Gujarat High Court)

Gujarat High Court has directed the Designated Authority (DA) under the Ministry of Commerce to exclude specialty grade Suspension Polyvinyl Chloride (SPVC) resins, imported by Epigral Limited (formerly Meghmani Finechem Limited) and another petitioner for manufacturing Chlorinated Polyvinyl Chloride (CPVC) used in potable water pipes, from the scope of an ongoing anti-dumping investigation. The court found significant procedural lapses by the DA in determining the “Product Under Consideration” (PUC) and “like article” as per its own guidelines. Read SC Judgment: Supreme Court Stays Gujarat HC Order on PVC Anti-Dumping

The judgment, delivered by Justices Bhargav D. Karia and D.N. Ray, arose from a petition filed by Epigral Limited challenging the DA’s preliminary findings, particularly an Addendum Notification dated December 16, 2024. The petitioners argued that the specialty grade SPVC resins they import for producing CPVC resins – which are then used to manufacture pipes for human drinking water (conforming to IS Code 17988:2022 for CPVC Resin and IS Standard 15778 for PVC pipes) – are not manufactured by the domestic industry (DI) and therefore should not be part of the anti-dumping investigation.

The court scrutinized the DA’s conclusion that the domestic industry, including DCW Limited (respondent no. 6), produced a “like article” to the imported specialty SPVC. The judgment noted that data submitted by DCW Limited itself revealed minimal consumption of its domestically produced SPVC resins for manufacturing CPVC during the investigation period (up to September 30, 2023). DCW had consumed only 76 metric tons of its pipe-grade SPVC out of 1498 metric tons and a mere 10 metric tons of its fitting-grade SPVC out of 742 metric tons for CPVC production, while consuming large quantities of imported SPVC resin. Furthermore, the court observed that data indicated DCW Limited did not produce any SPVC resin during the period of investigation and had also imported specialty grade SPVC resin to manufacture CPVC.

A key point of contention was the “Acid Test” argument put forth by the DA, suggesting that the petitioners should have first approached the domestic industry to procure the goods and report any defects before resorting to imports. The court strongly disagreed with this proposition, which the Additional Solicitor General (ASG) claimed was a basic concept not requiring precedent. The judgment stated, “We disagree with the aforesaid proposition of the learned ASG. On the contrary, we are of the view that such a proposition is as novel as it is misconceived.” The court emphasized that the burden was on the domestic industry to prove that it manufactured a “like article,” including the specialty grade SPVC resin required by the petitioners.

The High Court extensively referred to the DA’s own “Manual of Operating Practices for Trade Remedy Investigation,” particularly Chapters 3 and 4 concerning PUC and like articles. The Manual stipulates that the PUC must be identified precisely at the investigation’s initiation and should generally include only items manufactured by the DI. If a definition is too vague, it may lead to overprotection, while a too-narrow definition may fail to provide relief. The scope of the PUC can be restricted during the investigation but not enhanced after initiation.

The court found that the DA had “failed to consider the basic contention of the petitioners” that the specialty grade SPVC resins are unique and not available domestically. The DA, according to the judgment, “has gone on tangent that there is no exclusive group of PVC Suspension Resin that is commonly used for the purpose of making CPVC Resin.”

The Manual outlines several characteristics for determining a “like article,” including physical similarity, technical substitutability, commercial substitutability, functional substitutability, and production likeness. It states that “determination of the PUC and the ‘like article’ in an anti-dumping investigation holds the key to establishing dumping and injury, and any fallacies in the same could make the entire investigation void.” The court noted that the Manual also mentions that production substitutability – where producers can interchangeably produce products within the same facility – could deem them “like articles,” citing an instance in the “case of aluminum radiators” where product variants, though not substitutable by end-users, were produced interchangeably by all producers.

The court concluded that the DA failed to conduct a “classificatory investigation” to determine if the specialty SPVC imported by the petitioners was indeed a “like article” to what the domestic industry produced. The DA accepted the domestic industry’s submissions “without any further investigation to clearly and accurately define and describe the scope of the PUC.” It was found that the DA based its findings on the premise that the imported SPVC could be used for general purposes, but failed to examine whether the SPVC produced by the domestic industry (other than the specialty grade) could be used to manufacture CPVC resin for potable water pipes.

The judgment stated, “Designated Authority has failed to take into consideration the basic standard of proof to be applied for arriving at conclusion that the articles which are imported by the petitioners being specialty grade SPVC cannot be considered as ‘like article’ manufactured by the domestic industry.”

Consequently, the court found the DA’s findings in the Addendum Notification “not tenable” due to “clear procedural lapse…as per Manual of Operating Practices for Trade Remedy Investigations.” The court, however, clarified that it was not delving into the “technical aspects of examination whether specialty grades of SPVC Resin imported by the petitioners is a ‘like article’ or not but have examined the procedure and process of analysis adopted by the Designated Authority.” It also refrained from examining whether respondent Nos. 4 to 6 (domestic producers) fell within the definition of “domestic industry” under Section 2(b) of the Customs Tariff Act, 1975, limiting its examination to the exclusion of the specialty grade SPVC resins.

The petition was partly allowed, and the Designated Authority was directed to exclude the specialty grade SPVC resins imported by the petitioners for manufacturing CPVC for safe and non-hazardous potable water supply pipes and fittings from the scope of the PUC in its further investigation. The court reasoned that “such specialty grade SPVC Resins are neither produced by the domestic industry nor were they technically or commercially substitutable and interchangeable with the grades commercially produced in the domestic industry.”

A request by the respondents’ counsel to stay the operation and implementation of the order was refused by the court, noting that the Designated Authority was yet to pronounce its final assessment order.