Royalty linked to sale value including imported components is includible in customs valuation; prior acceptance does not trigger res judicata.

Royalty paid under a licence agreement was treated as includible in customs assessable value where it was calculated on net sale price that included imported components, making the royalty linked to the imported goods and a condition of sale for valuation purposes. The fact that transaction value had earlier been accepted did not bar fresh examination of the royalty issue. Res judicata was found inapplicable in subsequent customs valuation review proceedings on the same statutory footing, so the prior non-challenge by the importer did not prevent reconsideration. The Revenue's position was upheld and the Commissioner (Appeals) order was set aside.

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Issues: (i) Whether royalty paid under the licence agreement was includible in the assessable value of the imported goods under the customs valuation rules. (ii) Whether the earlier accepted valuation order barred reconsideration on the basis of res judicata.

Issue (i): Whether royalty paid under the licence agreement was includible in the assessable value of the imported goods under the customs valuation rules.

Analysis: The transaction value had been accepted under the valuation rules, but that did not conclude the separate question whether royalty formed part of the assessable value. The licence terms showed that the royalty was computed on net sale price without deduction for components purchased from the foreign licensor, meaning the imported components were included in the royalty base. On that footing, the facts matched the principle applied in the precedent concerning royalty linked to sale price including imported components, where such royalty was treated as a condition of sale and includible in valuation.

Conclusion: The royalty was rightly includible in the assessable value, in favour of Revenue.

Issue (ii): Whether the earlier accepted valuation order barred reconsideration on the basis of res judicata.

Analysis: In customs valuation matters, mere acceptance of an earlier order does not create a bar of res judicata when the issue arises for a subsequent review or renewal on the same statutory footing. The earlier non-challenge by the importer did not prevent examination of the valuation position in the present proceedings, and the doctrine was held inapplicable on the facts.

Conclusion: Res judicata did not apply, in favour of Revenue.

Final Conclusion: The order of the Commissioner (Appeals) was set aside and the Revenue's appeals succeeded, with the cross-objections disposed of accordingly.

Ratio Decidendi: Where royalty is calculated on sale value that includes imported components, such royalty is linked to the imported goods and is includible in customs assessable value; in subsequent valuation review proceedings, prior acceptance of an earlier order does not by itself attract res judicata.

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