Customs valuation excludes technical know-how fee absent nexus with imported goods or condition of sale

Technical know-how fee was not includible in the assessable value of imported models and moulds under Rule 9(1)(c) of the Customs Valuation Rules, 1988 because the fee related to manufacture of the contract products and not to the imported goods. Inclusion is permitted only where the royalty or licence fee is related to the imported goods and payable by the buyer as a condition of sale. The collaboration agreement did not make transfer of technical know-how a condition for purchasing the models and moulds, and the clauses relied on dealt only with payment manner and timing. The separate invoicing and duty payment on the imported goods supported exclusion of the fee from valuation.

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Issues: Whether technical know-how fee paid under the collaboration agreement was includible in the assessable value of the imported models and moulds under Rule 9(1)(c) of the Customs Valuation Rules, 1988.

Analysis: Rule 9(1)(c) permits addition only where the royalty or licence fee is related to the imported goods and is required to be paid by the buyer as a condition of sale of the goods being valued. The fee in question related to manufacture of the contract products and not to the imported models and moulds. The agreement did not make transfer of technical know-how a condition for purchase of the imported goods, and the cited clauses only indicated the manner and timing of payment. The models and moulds were separately invoiced and duty had been paid thereon.

Conclusion: The technical know-how fee was not includible in the assessable value of the imported goods, and the appeal was allowed.

Final Conclusion: The valuation addition was set aside because the fee lacked the required nexus with the imported goods and was not shown to be a condition of their sale.

Ratio Decidendi: Technical know-how fee is includible in customs valuation only when it is related to the imported goods and payable as a condition of their sale; a fee connected solely with indigenous manufacture is not addable.

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