Assessable value of imports excludes engineering and supervision charges unless payment is a condition of sale or third-party obligation.

Charges for technical, engineering, design, supervision and related services are includible in the assessable value of imported goods under Rule 9(1)(e) only if payment for them is a condition of sale, or if the importer must discharge an obligation of the seller to a third party, and the amount is not already included in the price paid or payable. On the contract terms, the engineering, drawings, pretest, quality, supervision and erection charges were not shown to be a sale condition or a third-party obligation. The loading of value was therefore set aside and the inclusion of these service-related charges was rejected.

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Issues: Whether the cost of application engineering, technical data and drawings, shop drawings and specifications, pretest, quality and supervision, design and seasoning, and erection and supervision was includible in the assessable value of the imported goods under Rule 9(1)(e) of the Customs Valuation Rules, 1988.

Analysis: The inclusion contemplated by Rule 9(1)(e) applies only when the payment is actually made, or is to be made, as a condition of sale of the imported goods, including a payment made to satisfy an obligation of the seller to a third party, and the amount is not already included in the price paid or payable. On the terms of the contracts, the payments for engineering, drawings, supervision and allied services were not shown to be a precondition for the sale of the imported goods, nor was there any obligation of the seller to a third party that the importer was required to discharge. The cited authorities relied on by the department were distinguished on facts, while the principle applied in the later Supreme Court decision supported exclusion in the absence of a sale condition.

Conclusion: The service and engineering charges were not includible in the assessable value, and the challenge to the loading of value succeeded.

Final Conclusion: The order of inclusion of the impugned service-related charges in the assessable value was set aside and the appeal was allowed to that extent.

Ratio Decidendi: Charges for technical, engineering, design, or supervision services are includible in the assessable value only where payment for them is a condition of sale or is made to satisfy an obligation of the seller to a third party.

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