EOU valuation in domestic sales must follow customs rules; inadequate factual basis warrants remand for fresh determination.

For clearances by a 100 per cent export-oriented undertaking into the domestic tariff area, duty valuation is linked to the Customs Act, 1962 and the Customs Tariff Act, 1975 under the proviso to section 3 of the Central Excise Act, 1944. The sale price in the domestic market cannot be treated as an international trade price, so Rule 4 of the Customs Valuation Rules, 1988 is inapplicable. However, whether Rules 5 to 8 apply depends on factual material on comparability and valuation, and where the evidentiary basis is inadequate, the proper course is remand for fresh determination after evidence is led.

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Issues: Whether, for clearances by a 100 per cent export-oriented undertaking into the domestic tariff area, the valuation of the goods was to be determined under the Customs Valuation Rules, 1988 and whether the Tribunal was justified in applying Rule 7 without adequate factual material, or whether the matter ought to have been remitted for fresh determination.

Analysis: By virtue of the proviso to Section 3 of the Central Excise Act, 1944, duty on goods manufactured by a 100 per cent export-oriented undertaking and sold in India is linked to customs duty and the value has to be determined under the Customs Act, 1962 and the Customs Tariff Act, 1975. The sale price in the domestic market could not be treated as an international trade price, and the Tribunal was right in rejecting Rule 4 as the governing provision on that footing. However, the application of Rules 5 to 8 depended on factual matters bearing on comparability and valuation, and the Tribunal had recorded findings on those matters without an evidentiary basis. In that situation, the proper course was to send the matter back so that the relevant facts could be proved and the correct rule under the Valuation Rules could be identified.

Conclusion: The Tribunal's view that Rule 4 was inapplicable was upheld, but its conclusion applying Rule 7 was set aside and the valuation issue was remitted to the Commissioner for fresh decision after giving the parties opportunity to adduce evidence.

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