Royalty linked to imported goods was held includible in customs value because it formed part of sale conditions.

Royalty paid under a technology transfer and supply arrangement was held includible in the assessable value of imported goods because the payment was commercially linked to the imports and operated as a condition of sale. The royalty was calculated by reference to activated ports, continued after the business shifted from domestic manufacture to importing complete cards, and non-payment could lead to termination of supply obligations. On those facts, the payment was not treated as a separate post-import service fee but as part of the import price, and the authorities excluding royalty were found inapplicable. Inclusion in assessable value was upheld under the customs valuation rules.

---

---

Issues: Whether royalty paid under the technology transfer arrangement was includible in the assessable value of the imported goods as a royalty or licence fee related to the imported goods and payable as a condition of sale.

Analysis: The royalty was payable on the number of ports activated by the cards. The supply agreement was consistent with the technology transfer agreement, and the royalty obligation continued even when the appellant shifted from manufacturing cards in India to importing complete cards. The payment structure showed that non-payment could result in termination of the supplier's obligation to supply, making the royalty commercially linked to the import. On these facts, the royalty was not merely for post-importation services or for manufacture alone, but was directly connected with the imported goods and formed part of the price conditions governing their sale. The cited authorities on exclusion of royalty did not apply on the facts, while the authorities supporting inclusion of royalty as part of the import value did.

Conclusion: The royalty was includible in the assessable value under Rule 9(1)(c) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 2008, and the issue was decided in favour of Revenue.

---