Customs valuation excludes collaboration royalty where payments are not linked to imported goods or a condition of sale.

Documentation fees and running royalty paid under a technology collaboration agreement were not includible in the assessable value of imported goods because the payments related to technical documents, assistance and know-how for manufacture in India, not to the import transaction itself. The royalty was calculated on net ex-factory sales of finished products, and the imported components were separately valued at market price. As no link was shown between the imports and the impugned payments, and the payments were not a condition of sale of the imported goods, they could not be added under the Customs Valuation Rules, 1988. The exclusion of those payments from customs valuation was sustained.

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Issues: Whether documentation and running royalty payable under a collaboration agreement were includible in the assessable value of imported goods under the Customs Valuation Rules, 1988.

Analysis: The payment obligations under the agreement were for technical documents, technical assistance and know-how for manufacture of the final product in India. The royalty was computed on net ex-factory sales of the finished products, after excluding excise duty, taxes and the landed cost of imported components. The agreement did not show any link between the import of goods and the impugned payments, and the imported components were separately valued at market price. On these facts, the payments could not be treated as additions to the invoice value under the valuation rules.

Conclusion: The documentation fee and royalty were not includible in the assessable value of the imported goods, and the view of the adjudicating authority was upheld.

Final Conclusion: The appeal failed and the order excluding the impugned payments from customs valuation was sustained.

Ratio Decidendi: Payments under a technology collaboration agreement are not includible in the value of imported goods unless they are shown to be linked to the import or to form a condition of sale of those goods.

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