Export unit exemption extends to stock transfers to group unit, with valuation to follow the statutory domestic clearance framework.

A 100% export oriented unit may claim the benefit of Notification No. 2/95-C.E. for clearances made by stock transfer to another unit of the same company, because the exemption was not confined to sales alone and transfers to a domestic unit were covered. For such stock transfers, valuation must be examined under the applicable statutory valuation framework for goods cleared to the domestic tariff area. The matter was remanded for fresh merits-based adjudication, including valuation, and the restrictive departmental view was found unsustainable.

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Issues: (i) Whether the benefit of Notification No. 2/95-C.E. was available to clearances made by a 100% export oriented unit on stock transfer basis to another unit of the same company; (ii) whether the valuation of such stock transfers had to be determined under Section 14 of the Customs Act.

Issue (i): Whether the benefit of Notification No. 2/95-C.E. was available to clearances made by a 100% export oriented unit on stock transfer basis to another unit of the same company.

Analysis: The Board's circular clarified that the expression concerning sales into the domestic tariff area was not to be read narrowly so as to exclude transfers to another division or unit of the same company. It recognised that the concessional exemption was available where the goods were removed to a domestic unit, even if the transfer was not by sale, and that the restrictive departmental view was not sustainable.

Conclusion: The benefit of Notification No. 2/95-C.E. was held to be available to stock transfers to another unit of the same company.

Issue (ii): Whether the valuation of such stock transfers had to be determined under Section 14 of the Customs Act.

Analysis: The circular stated that, in cases of stock transfer by an export oriented unit, the only matter requiring attention was valuation, which had to be undertaken in accordance with the statutory valuation framework applicable to goods cleared to the domestic tariff area. The Commissioner (Appeals) had not decided the appeal on merits, making a fresh merits-based adjudication necessary.

Conclusion: The matter was remanded for fresh decision on merits, including valuation, in accordance with the applicable valuation provisions.

Final Conclusion: The dispute on eligibility to exemption was clarified in favour of the assessee, and the impugned order was set aside with a direction for reconsideration of the appeal on merits by the appellate authority.

Ratio Decidendi: A concessional exemption intended for clearances into the domestic tariff area cannot be denied merely because the clearance is effected by stock transfer to another unit of the same company, and valuation issues in such cases must be examined under the statutory valuation framework.

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