Central Excise – Interconnected Undertakings (ICU) - Whether transaction value to be rejected

The brief facts of the case are that M/s. Arofine Polymers Limited (APL), M/s. Krosslink Polymers Private Limited (KPPL) and M/s Creative Polymers Private Limited (CPPL) are manufacturers of excisable goods falling under Chapters 39 and 35 of Central Excise Tariff Act, 1985. They have been selling al most 60% of their final products through a marketing company viz. M/s. Color- bond Marketing Limited (CML). During the course of investigations undertaken by the department, share holding pattern of all the 4 companies was examined and statements of directors of the companies were recorded. It was inter alia revealed that 7 persons/individuals along with their family members formed a group of named as "Creative Group" with a view to control and manage business of the 4 companies mentioned above. Each of the said 7 members of the group was Director on the Board of Directors of at least one of the 4 companies. The group companies used common logo/symbol in their all correspondences so as to indicate that they were member constituents of the "Creative Group".

In the above circumstances, whether the value of clearance through interconnected undertaking should be rejected and valued as per rule, 9 of the Valuation Rules?

In the instant case honorable tribunal has held that:

"In view of the same, without going into the issue as to whether the manufacturing companies and marketing company can be considered as interconnected or related persons, we hold that since the price at which the goods were being sold to the marketing company and other independent buyers was one and the same, price at which the goods were being sold to the marketing company viz. CML cannot be rejected."

(Full text of judgment visit - 2007 -TMI - 1567 - CESTAT,MUMBAI)