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Issues: Whether the technical licence fee payable under the consultancy agreement was related to the imported goods and, therefore, liable to be added to the transaction value under Rule 9(1)(c) of the Customs Valuation Rules, 1988.
Analysis: The imported goods during the relevant period were found to be unpolished cookware components and allied items used in the appellant's existing manufacturing process taken over from the earlier unit. The technical know-how agreement came into existence only after the period of import, and the contemplated project under that agreement, namely construction of a manufacturing plant and implementation of a new manufacturing process, had not commenced. On the facts, the imported goods were not shown to have any real or direct connection with the project or with the licence fee payable under the agreement. The fee was therefore not a charge incurred as a condition of sale of the imported goods and could not be loaded into the assessable value.
Conclusion: The technical licence fee was not related to the imported goods and could not be added to the transaction value under Rule 9(1)(c) of the Customs Valuation Rules, 1988; the issue was decided in favour of the assessee.
Ratio Decidendi: A royalty or licence fee is includible in customs valuation only when it has a direct nexus with the imported goods and is payable as a condition of their sale; where the payment relates instead to a future manufacturing project or process not yet commenced, it is not addable to the transaction value.
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