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TMI Blog2007 (4) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... rsons/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". 3. S/Shri P.M. Gupte, A.D. Pardhy, Vinay V. Ghatge and Vishwas V. Ghotge, who are the members of the group and directors of the companies viz. CPPL, KPPL, APL and CML respectively in their respective statements confirmed the share holding pattern of their respective company, which was communicated by the companies to the department. They confirmed the existence of the group viz. "Creative Group" and that their respective companies were members of the said group. Further, it was also disclosed that the companies used the logo "Creative Group" in the official stationary with a view to indicate that they were the group of the companies and the group had a separate office in Mumbai, which provided management advice to all the members of the group. 4. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of "Creative Group" whose members were also Directors who shared 100% share capital of APL and KPPL, 80% of CPPL and also held 81% share of marketing company viz. CML. Thus almost entire shareholdings of all the four companies viz. APL, CPPL & KPPL, the manufacturing companies, CML, the marketing company were held by the members of the group along with their families Further except for the two persons who are not members of the group, all other directors of the four companies are from the group. 8. He invited our attention to Section 2(g) of MRTP Act, 1969 which de fines "interconnected undertaking" and states that if any of the following connections exists, the two undertakings would be deemed to be interconnected undertaking. (1) If one owns or controls another; (2) --------------- (3) If both are owned by companies and... .(c) If both body corporates are under the same management….. (d)….. (4) -------------- (5) -------------- (6) If the undertakings are owned by the same person or by the same group; (7) -------------- 9. The term "under same management" has been defined as follows: Two body corporates will be deemed to be under the same management if any of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that there existed mutuality of interest between the manufacturing companies and the marketing company. In terms of the shareholdings, 81% of the profit earned by the marketing company (CML) was being flowed back to the three manufacturing companies through their shareholders. The Commissioner did not appreciate the fact that the individuals/directors who held shares of the manufacturing, companies were members of the group and their relatives and they were also majority shareholders of the marketing company. Since mutuality of interest was not disclosed to the department extended period was rightly invoked and various decisions relied upon were not relevant as they related to pre 2000 period except in the case of Pepsico India Holdings (P) Ltd. v. CCE - 2004 (163) E.L.T. 478 (Tri.) which related to later period in that case discount granted by the manufacturing company was being passed on to the ultimate buyer which was not so in the present case. They referred to the various decisions of the Supreme Court in the case of Calcutta Chromotype Limited v. CCE - 1998 (99) E.L.T. 202 and D. Bhoormull - 1983 (13) E.L.T. 1546 (S.C.) in which it was held that there is no bar on the autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) or (iv) of clause (b) of section 4(3) of the Act or the buyer is a holding company or subsidiary company. Therefore the burden is cast upon the department to prove that - (a) undertakings are interconnected undertaking and in addition they are - (b) (i) relative or (ii) buyer is a relative and a distributor of the assessee or a sub-distributor, or (iii) they are so associated that they have interest, directly or indirectly, in the business of each other, or (iv) the buyer is a holding company or subsidiary company or the assessee, 16. They refer to the decision of the Tribunal in the case Kirloskar Ferrous Industries Ltd. v. CCE - 2007 (78) RLT 402 in which it was held that in terms of Boards' letter F. No. 354/81/2000-TRU, dated 30-6-2006, merely because the undertaking are interconnected undertaking, it would not be a ground to reject the transaction value unless the units are related person. 17. It was submitted that it is not disputed by Revenue that goods were being sold to dealer other than CML at the same price and same discount was extended. Once an independent price is available, which is not disputed, the assessment in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustomer company. 19. In the present appeal, none of the manufacturing units holds share in the marketing company viz. CML or in other manufacturing units. Further CML does not hold any share in APL and KPPL. It holds only 12% share in CPPL. In view of this share holding, it cannot be claimed that any of the manufacturing company has any interest, direct or indirect, in the business of CML. Further it can also not be alleged that CML has any interest, direct or indirect in the business of APL and KPPL. 20. Holding of 12% share only in CPPL by CML would not amount to having any interest in the business of CPPL as held by the Supreme Court in the case of UOI v. ATIC Industries Ltd. - 1984 (17) E.L.T. 323 (S.C.). Reliance is also placed on the decision in the case of New India Industries Ltd. v. UOI - 1988 (37) E.L.T. 547 (Bom.) = 1990 (46) E.L.T. 23 (Bom.) wherein the Bombay High Court has held that "It is essential that the assessee and the person alleged to be a related person must have interest direct or indirect in the business of each other " In cases, where 50% shares of the manufacturing company are held by the customer company, the customer company can be said to be having i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f is treating all the three units as independent company. Reliance was placed on the decision of the Supreme Court in the case of Gajanan Fabrics Distributors v. CCE, Pune - 1997 (92) E.L.T. 451 (S.C.) in this regard. 24. We have considered the submission. We find that it is admitted and undisputed fact that all three manufacturing companies were selling only 60% of their products to the so-called related marketing company viz. CML. There is no dispute that remaining 40% clearances were to independent buyers including industrial consumers. It is not the case of the department that the price at which the goods were being sold to CML was different from the one being charged from the independent buyers. Therefore the price at which the goods are being sold to CML cannot be said to be influenced by the so-called relationship between them. In view of this, even if CML and the three manufacturing companies are considered as interconnected units and also related person in terms of sub- clause (ii) or (iii) or (iv) of clause (b) of sub-section 3 of Section 4 of Central Excise Act, the value will then have to be taken in the manner as prescribed in rule 9. However, rule 9 is applicable onl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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