Technical know-how fee excluded from customs value where it was separate from the sale of imported components

Technical know-how fee paid under a collaboration agreement was not includible in the assessable value of imported components and parts because the fee related to transfer of know-how, assistance and training for manufacture of licensed products in India, not to the import sale itself. The agreement showed the know-how was supplied separately from the imported goods, and payment of the fee was not a condition of sale of those goods. Lacking the required nexus with the imported components and parts, the fee could not be added to the transaction value under Rule 9(1)(c) of the Customs Valuation Rules, 1988, and the departmental addition was unsustainable.

---

---

Issues: Whether technical know-how fee paid under the collaboration agreement was includible in the assessable value of the imported components and parts as a condition of sale under Rule 9(1)(c) of the Customs Valuation Rules, 1988.

Analysis: The agreement showed that the payment was for transfer of technical know-how, assistance and training for manufacture of the licensed products in India. The know-how was supplied separately from the imported components and parts, and nothing in the agreement made payment of the fee a condition for the sale of those goods. The fee therefore lacked the requisite nexus with the imported goods for addition to their transaction value.

Conclusion: The technical know-how fee was not includible in the assessable value of the imported components and parts, and the addition made by the department was unsustainable.

---