Royalty tied to exploitation rights can enter customs assessable value when it functions as a condition of sale.

Royalty payable for the right to exploit and distribute imported pre-recorded cassettes and CDs was held includible in customs assessable value under Rule 9(1)(c) of the Customs Valuation Rules, 1988 where the agreement linked payment to retail price and net sales and made it payable on terms showing a direct nexus with importation and sale. The Tribunal treated the royalty as a condition of sale rather than a separate post-import commercial charge and upheld its addition to the transaction value, declining to follow contrary Tribunal decisions in view of the High Court authority placed before it.

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Issues: Whether royalty payable on distribution and sale of pre-recorded cassettes and CDs was includible in the assessable value of the imported goods under Rule 9(1)(c) of the Customs Valuation Rules, 1988 as a condition of sale.

Analysis: The royalty was linked to the exploitation and distribution of the imported pre-recorded cassettes and CDs, which were imported solely for resale. The agreement provided for royalty on the basis of retail price and net sales, and the payment remained payable even where returns exceeded the stated limit, indicating that the liability was not confined to actual sales alone. On these facts, the royalty was treated as having a direct nexus with the importation and as forming part of the condition for sale. The Tribunal preferred the view that such royalty fell within Rule 9(1)(c), and declined to follow the contrary Tribunal decisions relied upon by the importer in light of the High Court authority cited before it.

Conclusion: The royalty was correctly added to the transaction value, and the inclusion of the royalty amount in the assessable value was upheld against the assessee.

Ratio Decidendi: Royalty payable for the right to exploit and distribute imported pre-recorded goods is includible in the customs assessable value where, on the terms of the agreement and the surrounding facts, such payment operates as a condition of sale.

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