Area-based exemption special rate cannot be denied when value addition is computed from audited financial records on a rational unit-wise basis.

Under the area-based exemption scheme, special rate fixation could not be refused merely because the assessee derived unit-wise sale value from audited financial statements and apportioned it to units on a stock-transfer basis. The scheme required actual value addition to be computed from the preceding financial year's audited figures, and the claimant supported its computation with statutory auditor certification and audited records. As the same methodology had already been accepted for computing gross sales value in an earlier identical matter, rejection of the special rate on that ground alone was inconsistent with the approved approach. The special rate claim was therefore valid.

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Issues: Whether fixation of special rate under the area-based exemption notifications could be rejected merely because the sale value was arrived at from the audited financial statements of the company by apportioning the same to the respective units on the basis of stock transfer ratio.

Analysis: The exemption scheme required computation of actual value addition on the basis of the preceding financial year's audited figures. The appellant had supported its claim with statutory auditor certification and unit-wise allocation of sales value based on the company's audited records. The method adopted had already been accepted in an earlier decision on an identical issue, where computation of gross sales value from all-India sales realization and audited financial statements was held to be permissible. The rejection of the special rate by the adjudicating authority, solely for using that methodology, was therefore inconsistent with the approved approach to value addition computation.

Conclusion: The rejection of the special rate was not sustainable, and the appellant's claim for fixation of special rate was held to be valid.

Ratio Decidendi: Where the exemption notification requires value addition to be computed from audited financial records, the special rate cannot be denied merely because the assessee apportions the company's audited sale value to individual units on a rational stock-transfer basis.

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