Royalty in assessable value depends on nexus with imported goods, not merely on a collaboration agreement for manufacturing know-how.

Royalty paid under a technical collaboration agreement was examined for inclusion in the assessable value of imported lubricating oils. Rule 9(1)(c) applies only where royalty or licence fees relate to the imported goods and are payable as a condition of sale, to the extent not already included in the price actually paid or payable. The agreement showed payment for technical knowledge, services and know-how for manufacture and blending of products in India, not for the imported goods as such. In the absence of a clause extending the royalty to the imports and without the basic import documents, the issue required fresh examination and reconsideration on the material to be produced.

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Issues: Whether royalty paid under a technical collaboration agreement was includible in the assessable value of imported lubricating oils when the royalty related to manufacturing and blending technology and not to the imported goods as such.

Analysis: Rule 9(1)(c) permits addition only of royalties and licence fees that are related to the imported goods and that the buyer is required to pay, directly or indirectly, as a condition of sale, to the extent they are not already included in the price actually paid or payable. The agreement showed that the royalty was payable for supply of technical knowledge, services, and know-how for manufacture and blending of Castrol products in India. On that footing, such royalty could not automatically be treated as part of the value of goods imported and sold without any further processing. In the absence of a clause extending the royalty obligation to such imported goods, and without the basic import documents before it, the matter required fresh examination by the appellate authority.

Conclusion: The royalty was not held to be includible in the assessable value merely on the basis of the collaboration agreement, and the issue was remitted for reconsideration on the basis of material to be produced by the appellant.

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