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Issues: Whether the licence fee and royalty paid under the technology agreement were includible in the assessable value of the imported capital goods under Rule 9(1)(c) of the Customs Valuation Rules, 1988.
Analysis: The agreement showed that the collaborator was to transfer Basic Float Process Technology and Additional Technology for manufacture of float glass. The lump sum licence amount and recurring royalty were payable for the transfer of technology and for manufacture and sale of finished goods, not as a condition of import of the capital goods. Rule 9(1)(c) applies only where royalty or licence fee is related to the imported goods and is payable as a condition of sale of those goods. The facts were distinguishable from cases where the agreement itself linked royalty to imported components or their cost. Following the controlling Supreme Court principle, the requisite nexus with the imported capital goods was absent.
Conclusion: The licence fee and royalty were not includible in the assessable value of the imported capital goods, and the appeal was allowed.
Ratio Decidendi: Royalty or licence fee is includible in customs value only when it is related to the imported goods and is payable as a condition of their sale or import, and not when it is merely consideration for technology transfer or manufacture of finished products.
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