Assessable value of imports depends on proof that royalty and know-how fees were linked to sale conditions and the goods.

Technical know-how fee and royalty paid to a foreign collaborator are includible in the assessable value of imported capital goods only if the Revenue proves both a clear nexus with the imported goods and that the payment was a condition of sale under Rule 9(1)(c) of the Customs Valuation Rules, 1988. The agreement and surrounding evidence must be examined closely to identify the operative clause and determine whether the collaboration payments were linked to the imports in the required manner. Where the record is not specifically analysed, fresh verification of the purchase order and other materials is necessary before inclusion can be sustained.

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Issues: Whether the technical know-how fee and royalty paid to the foreign collaborator were includible in the assessable value of the imported capital goods and components under Rule 9(1)(c) of the Customs Valuation Rules, 1988.

Analysis: Inclusion of such payments required the Revenue to establish both a nexus between the payments and the imported goods and that the payments were made as a condition of sale of the imported goods. The agreement and the conduct of the importer had to be examined closely to determine whether the collaboration fee and royalty were linked to the imports in the manner contemplated by Rule 9(1)(c). As the lower authorities had not specifically identified the applicable clause and had not undertaken a meticulous examination of the agreement and relevant evidence, the matter required reconsideration after verification of the purchase order and other materials.

Conclusion: The issue was not finally decided on merits and was remitted for fresh adjudication on whether the statutory conditions for inclusion were cumulatively satisfied.

Ratio Decidendi: Technical know-how fee or royalty can be added to the assessable value of imported goods only if the Revenue proves both the requisite nexus with the imports and that the payment was a condition of sale.

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