Customs valuation excludes collaboration fees and royalty when they are independent of the import sale and not a condition of sale.

Technical know-how fee, technical assistance fee and royalty paid under a collaboration agreement were not includible in the assessable value of imported goods because they were shown to relate to transfer of technical information, training, guidance and manufacturing support in India, not to the imported material or capital goods. The royalty was computed on net ex-works sales price after excluding imported raw materials, taxes and duties, and no term made the payments a condition of sale of the imports. On those facts, the customs valuation rule relied on by Revenue did not justify addition of the collaboration payments, and the Revenue appeal failed.

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Issues: Whether the technical know-how fee, technical assistance fee and royalty paid under the collaboration agreement were liable to be added to the assessable value of the imported goods.

Analysis: The agreement showed that the consideration for know-how and technical assistance was payable for transfer of technical information, training, guidance and related support for manufacture in India. There was no clause linking the payments to the supply of imported material or capital goods, and the royalty was calculated on net ex-works sales price after excluding imported raw materials, taxes and duties. On the facts found, the payments were not shown to be a condition of sale of the imported goods, and the valuation rule invoked by Revenue did not justify their inclusion in the assessable value.

Conclusion: The payments were not includible in the assessable value of the imported goods, and Revenue's appeal failed.

Final Conclusion: The respondent succeeded because the collaboration payments were held to be independent of the import transaction and outside customs valuation.

Ratio Decidendi: A technical know-how or royalty payment is not includible in the assessable value of imported goods unless it is shown to be linked to the imported goods as a condition of sale or otherwise falls within the customs valuation rules.

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