Royalty and licence fee exclusion from import valuation turns on nexus with imported goods and condition of sale.

Royalty or licence fee payable under a technical collaboration arrangement was considered for inclusion in the assessable value of imported components under customs valuation rules. The payment was calculated on the net invoice value of licensed products sold in India, and the agreement expressly excluded the landed cost of the imported components from that base. Because the royalty was not related to the imported goods and was not payable directly or indirectly as a condition of sale of those goods, it had no direct or indirect nexus with the imports. Royalty and licence fee were therefore not includible in the value of the imported components, and the departmental appeal failed.

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Issues: Whether royalty or licence fee payable under the technical collaboration arrangement was includible in the assessable value of the imported components under the customs valuation rules.

Analysis: The royalty was computed on the net invoice value of the licensed products sold in India, and the agreement specifically excluded the landed cost of imported components from the calculation. The relevant valuation rule permits addition only where royalty or licence fee is related to the imported goods and is payable by the buyer directly or indirectly as a condition of sale. Since the royalty calculation excluded the value of the imported components, the payment was held to have no direct or indirect relation to the imported goods.

Conclusion: Royalty and licence fee were not includible in the value of the imported components, and the departmental appeal failed.

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