Base production for exemption includes stock transfers and consignments, limiting exemption to turnover above that benchmark.

For exemption under Section 4-A and the governing notification, base production is determined with reference to production capacity and the prior maximum production, and the exemption operates only on turnover beyond that base quantity. Stock transfer and consignment transactions do not amount to sales, so they are included in base production rather than excluded from it. The assessment order was therefore required to be modified to reflect that legal position, with stock transfers and consignments counted in the base production computation for units undertaking expansion, diversification or modernisation.

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Issues: Whether, for the purpose of exemption under Section 4-A and the governing notification, stock transfer and consignment transactions are to be included while determining base production.

Analysis: The dispute turned on the correct meaning of base production for units undertaking expansion, diversification or modernisation. The Court followed the Full Bench ruling that the quantity of base production is fixed with reference to production capacity and prior maximum production, and that the exemption applies only to turnover in excess of that base quantity. It was held that stock transfer and consignment transactions do not constitute sales, and therefore are included in base production rather than excluded from it. The assessment order, to the extent it excluded stock transfer from the base production computation, was required to be modified in accordance with that legal position.

Conclusion: Stock transfer and consignment transactions form part of base production for the purpose of exemption under Section 4-A and the notification, and the petitioner succeeded on this issue.

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