Royalty on trademark use not added to imported goods value absent nexus and sale-condition requirement.

Royalty paid for use of a trademark on finished goods manufactured and sold in India was not includible in the assessable value of imported goods under Rule 10(1)(c) of the Customs Valuation Rules, 2007. The provision applies only where the royalty is both related to the imported goods and payable as a condition of their sale. Here, the agreements did not require raw materials to be purchased only from the licensor or its associates, and the materials could be sourced locally or from other suppliers. The royalty formula alone did not establish the necessary nexus with the imported goods, so loading the invoice value was unsustainable.

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Issues: Whether royalty paid for use of the trademark was includible in the assessable value of the imported goods under Rule 10(1)(c) of the Customs Valuation Rules, 2007.

Analysis: The provision applies only when royalty or licence fee is both related to the imported goods and payable as a condition of sale of those goods. On the facts, the royalty was paid for use of the trademark on the finished goods manufactured and sold in India, not for the imported raw materials. The agreements did not require purchase of raw materials only from the licensor or its associates, and the materials could be sourced locally or from other suppliers. The royalty formula, even if linked to sale price or cost components, did not by itself establish a nexus with the imported goods or make the payment a condition of their sale.

Conclusion: The royalty was not includible in the value of the imported goods, and the loading of invoice value was unsustainable.

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