Customs valuation and royalty: payment for reproduction rights and domestic sales was not includible in imported goods value.

Royalty for the right to reproduce imported compact discs and DVDs was held not to form part of customs assessable value where it was payable on sales in India and not as a condition of sale for export to India. Applying Rule 9(1)(c) of the Customs Valuation Rules, 1988, the Tribunal noted that only royalty related to the imported goods and payable as a condition of import sale is includible in the price actually paid or payable. Because the agreement did not require sourcing exclusively from the foreign supplier and the royalty also covered locally manufactured goods, the payment was treated as outside customs valuation, and the Revenue's appeal failed.

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Issues: Whether royalty payable for the right to reproduce imported compact discs and DVDs could be added to the customs value of the imported goods.

Analysis: The dispute was covered by the Tribunal's earlier decision in the importer's own case, which held that royalty payable on sales in India was not a condition of sale for export to India. Under Rule 9(1)(c) of the Customs Valuation Rules, 1988, only royalty related to the imported goods and payable as a condition of sale is includible in the price actually paid or payable. The agreement did not show that the imports had to be sourced only from the foreign supplier, and the royalty was payable on sales in India, including locally manufactured CDs, which showed that the payment was not a condition of import sale. The authorities cited by Revenue were distinguishable.

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

Ratio Decidendi: Royalty is includible in customs value only when it is related to the imported goods and payable as a condition of sale for export to India; a royalty payable on domestic sales or on reproduction rights is not so includible.

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