Royalty linked to manufacture and sale, not import value, cannot be added to customs assessable value without nexus.

Royalty paid under technical know-how agreements was not includible in the assessable value of imported components under the Customs Valuation Rules because it was linked to manufacture and sale of licensed products in India, not to the import of the components. The agreements did not require the importer to source components exclusively from the foreign collaborator, and even where a purchase preference clause existed, there was no compulsory purchase obligation. In the absence of a demonstrated nexus between the royalty and the imported goods, the conditions for adding the royalty to the import value were not met, and the assessee succeeded.

---

---

Issues: Whether royalty paid under technical know-how agreements was includible in the assessable value of imported components under the Customs Valuation Rules on the ground that it was related to the imported goods and was a condition of sale.

Analysis: The royalty was payable as a percentage of the net sale price of the licensed products in India, and the agreements did not require the importer to procure components only from the foreign collaborator. Even in the agreements containing a purchase preference clause, there was no stipulation of compulsory purchase from the licensor. On the facts, the payment of royalty was linked to manufacture and sale of products in India and not to the import of components. In the absence of a demonstrated nexus between the royalty and the imported goods, the requirements for loading the royalty into the import value were not satisfied.

Conclusion: The royalty was not includible in the assessable value of the imported goods, and the appeal succeeded in favour of the assessee.

---