Royalty on post-import sales excluded from customs value where it was unrelated to imported goods and not a condition of import.

Royalty paid under a technology transfer agreement on post-import sales of licensed products was held not includible in the assessable value of imported goods under Rule 9(1)(c) of the Customs Valuation Rules, 1988. The royalty was calculated as a percentage of net sales in India and exports, while the agreement specifically excluded landed cost, freight, insurance and customs duties from that computation. Because the royalty had no direct relation to the imported goods and was not a condition of import, it fell outside Rule 9(1)(c). The exclusion of royalty from assessable value was therefore sustained and the Revenue's challenge failed.

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Issues: Whether royalty paid under the technology transfer agreement was includible in the assessable value of the imported goods under Rule 9(1)(c) of the Customs Valuation Rules, 1988.

Analysis: The royalty was payable as a percentage of net sales of products manufactured and sold in India and exported from India. The agreement expressly excluded the landed cost of the imported materials, together with freight, insurance and customs duties, from the computation of net sales for royalty purposes. On these terms, the royalty had no relation to the imported goods and was not a condition for their import. The royalty therefore did not fall within the scope of Rule 9(1)(c).

Conclusion: The royalty was not includible in the assessable value of the imported goods and the Revenue's challenge failed.

Final Conclusion: The order sustaining exclusion of the royalty from assessable value was affirmed and the Revenue's appeal did not succeed.

Ratio Decidendi: Royalty payable on post-import sales of licensed products, where the imported goods are not linked to its computation and payment is not a condition of import, is not includible in the assessable value under Rule 9(1)(c) of the Customs Valuation Rules, 1988.

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