Customs valuation of imported capital goods excludes technology and licence fees not tied to the goods or sale conditions.

Licence fee and basic engineering fee paid to a foreign collaborator were not includible in the assessable value of imported capital goods for a sulphuric acid plant under Rule 9 of the Customs Valuation Rules, 1988. The payments were found to relate to the plant as a whole and the technology for its operation, including both imported and indigenous equipment, rather than to the imported goods alone. Rule 9(1)(b)(iv) did not apply because no engineering, development, artwork, design work or plans were supplied free of charge by the buyer. Rule 9(1)(c) also failed because the licence fee was for technology use and was not shown to be a condition of sale of the imported goods. Rule 9(1)(e) could not bring in payments unconnected with the imported goods merely because they arose under linked agreements.

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Issues: Whether the licence fee and basic engineering fee paid under the agreements with the foreign collaborator were includible in the assessable value of the imported capital goods for the sulphuric acid plant under Rule 9 of the Customs Valuation Rules, 1988.

Analysis: The value-loading could not be sustained because the payments under the licence and basic engineering arrangements were found to relate to the overall sulphuric acid plant and the technology for its operation, which comprised both imported and indigenous equipment, rather than to the imported capital goods alone. Rule 9(1)(b)(iv) was inapplicable because no engineering, development, artwork, design work or plans were supplied by the buyer free of charge to the seller. Rule 9(1)(c) was also inapplicable because the licence fee was for the right to use the technology and was not shown to be a condition of sale of the imported goods or related to those goods. Rule 9(1)(e) could not be invoked because payments unconnected with the imported goods do not form part of customs value merely because they arise under linked agreements.

Conclusion: The licence fee and basic engineering fee were not includible in the assessable value of the imported capital goods, and the loading of 2.03% was unsustainable.

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