Customs valuation excludes technical know-how fees where they are not within the rule-based additions to import value.

Technical know-how fees payable under a collaboration agreement were not includible in the assessable value of imported goods under Rule 9(1)(b)(iv) of the Customs Valuation Rules, 1988. The rule allows additions only for specified goods or services supplied free of charge or at reduced cost for use in producing and selling the imported goods, or for design, engineering, plans and sketches necessary for production, and only where such value is not already included in the price paid or payable. On the facts, the fees reflected technical assistance for setting up and running the plant, not the value of drawings or other items supplied by the importer, and so did not fall within the rule.

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Issues: Whether technical know-how fees payable under a collaboration agreement were includible in the value of imported goods under Rule 9(1)(b)(iv) of the Customs Valuation Rules, 1988.

Analysis: The rule permits addition only of the value of goods or services supplied by the buyer free of charge or at reduced cost for use in connection with the production and sale for export of the imported goods, and only to the extent such value is not already included in the price actually paid or payable. It also contemplates design, engineering, plans and sketches undertaken elsewhere than in India and necessary for production of the imported goods. On the facts, the know-how payments were made for technical assistance in setting up and running the plant, and there was no reliable basis to treat them as the value of drawings, designs or other items supplied by the importer within the scope of the rule. The reasoning adopted below was held to be inconsistent with the agreement and with the requirements of the rule.

Conclusion: The technical know-how fees were not includible in the assessable value of the imported goods under Rule 9(1)(b)(iv) of the Customs Valuation Rules, 1988.

Ratio Decidendi: For addition to the value of imported goods under Rule 9(1)(b)(iv), the item sought to be added must fall strictly within the specific heads of value contemplated by the rule and must be shown, on the record, to have been supplied or incurred in the manner required by that provision.

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