Customs valuation excludes technical know-how royalty unless it is a condition of sale of imported goods.

Royalty and lump-sum technical know-how payments were held outside the assessable value of imported goods under Rule 9(1)(c) because the agreement showed they were consideration for disclosure of know-how, technical devices and data for manufacture, not a condition of sale of the imported goods. On that basis, the valuation addition was not permissible and the inclusion of those payments in customs assessable value was set aside.

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Issues: Whether the lump sum and royalty payable under the technical know-how agreement were includible in the assessable value of the imported goods under Rule 9(1)(c) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988.

Analysis: The agreement showed that the lump sum payment and royalty were in consideration of disclosure of know-how, technical devices and data for manufacture of the product. The payment was not a condition of sale of the imported goods, but was related to the subsequent manufacture of the goods. On that footing, the royalty and lump sum did not fall within the valuation addition contemplated by Rule 9(1)(c).

Conclusion: The amounts paid towards technical know-how and royalty were not includible in the assessable value of the imported goods, and the appeal succeeded.

Final Conclusion: The inclusion of know-how related payments in the customs assessable value was set aside.

Ratio Decidendi: Royalty or technical know-how payments are not includible in the assessable value of imported goods unless they are a condition of sale of those goods.

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