The military government today ordered 22 university students arrested at a campus musical gathering last week to be sent into internal exile in remote villages.

The students, from the State Technical University, had been among 96 arrested as they held a traditional folklore gathering last Thursday to honor fellow students who had been expelled from the university for prohibited political activity.

Minister of the Interior Srgio Fernandez chose to apply the internal security laws to the 22 young men rather than turn them over to civil courts.

The remaining 74 students were released but warned against any further involvment in illicit political activity.

In another development, Navy Commander Jose Toribio Merino, who is also a member of the ruling junta, said today that Chile will refuse to participate this year in the 21st annual join U.S.-Latin American naval exercises known as Unitas.

Merino was responding to a U.S. press report that the Carter administration had decided to block Chile's participation in the exercises. The U.S. decision was said by columnists Rowland Evans and Robert Novak to be in retaliation for Chile's failure to extradite those accused of complicity in the assassination in Washington of former foreign minister Orlando Letelier.