Customs valuation excludes production know-how fee where payment is unrelated to imported goods and not a condition of sale.

A lump sum fee paid for transfer of production know-how for manufacturing rotor blades was not includible in the assessable value of imported goods under Rule 9(1)(c) because the payment related to manufacturing know-how for the finished product, not to the imported raw materials, components, or capital goods. The agreement also did not make payment of the know-how fee a condition for import. As both statutory requirements-relationship to the imported goods and condition of sale-were absent, the customs addition was unsustainable.

---

---

Issues: Whether the lump sum fee paid for transfer of production know-how for manufacture of rotor blades was liable to be added to the value of the imported goods under Rule 9(1)(c) of the Customs Valuation Rules, 1988.

Analysis: The know-how agreement granted the right to manufacture and sell rotor blades in India and covered engineering drawings, material specifications, work process sheets, lamination schedule, tool and mould specifications, and quality assurance material. The fee was paid for transfer of production know-how for manufacture of the final product and not for the imported raw materials, components, or capital goods. No clause in the agreement showed that payment of the know-how fee, or any part of it, was a condition for the import of the goods. The two statutory requirements for addition under Rule 9(1)(c), namely, that the payment must relate to the imported goods and must be a condition of sale, were not satisfied.

Conclusion: The know-how fee was not includible in the assessable value of the imported goods and the addition made by the customs authorities was unsustainable.

---