Customs valuation for EOU domestic clearances turns on FOB comparables, not mere domestic price or MRP.

Valuation of clearances by a 100% Export Oriented Unit into the Domestic Tariff Area cannot be based merely on domestic transaction price or MRP unless the assessable value is lawfully supported under the customs valuation framework. The notice and computation were found unsustainable because they did not establish a valid basis for treating the domestic sale price as the assessable value. The governing principle applied was that domestic market price is not automatically the transaction value for customs purposes, and the FOB/export price of identical or similar goods is a relevant benchmark for such valuation. The demand was held not sustainable and the assessee's valuation basis was accepted.

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Issues: Whether the valuation of goods cleared by a 100% Export Oriented Unit into the Domestic Tariff Area could be based on the domestic transaction value or MRP, or whether the FOB value of comparable exports was the proper basis for assessment.

Analysis: The valuation adopted in the demand was found unsustainable because the show cause notice and computation did not establish a lawful basis for adopting MRP or the domestic sale price as the assessable value. The governing principle applied was that the price of goods sold in India by an EOU is not, by itself, the transaction value contemplated for goods sold in the course of international trade under the Customs valuation framework. The earlier Tribunal decisions and the affirmed view of the Supreme Court were relied upon to hold that domestic market price cannot be equated with the price of like imported goods, and that FOB/export price of identical or similar goods is a relevant basis for valuation in such cases.

Conclusion: The demand was held to be not sustainable, and the assessee's valuation basis was accepted.

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