Customs valuation and royalty payments: royalty not added to imported goods value where it is unrelated to sale conditions.

Royalty under a licence agreement was not includible in the assessable value of imported zipper parts and components because Rule 9(1)(c) of the Customs Valuation Rules, 1988 applies only where the royalty is relatable to the imported goods and is a condition of sale. The agreement excluded the value of imported parts and components from the royalty base, supporting the finding that the payment was neither linked to the imported goods nor a pre-condition for their sale. The remand order did not address this factual basis or the governing principle, and a later arrangement had also been accepted in favour of the assessee.

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Issues: Whether royalty paid under the licence agreement was liable to be added to the assessable value of the imported parts and components of zippers.

Analysis: Rule 9(1)(c) of the Customs Valuation Rules, 1988 permits addition only of royalty that is relatable to the imported goods and that forms a condition of sale. The agreement in question excluded the cost of imported parts and components from the base on which royalty was computed. The Original Authority had therefore correctly found that the royalty was neither linked to the imported goods nor a pre-condition of their sale. The impugned remand order did not deal with this factual finding or with the governing ratio, and the arrangement for the subsequent period had also been accepted by the first appellate authority in favour of the assessee.

Conclusion: The royalty was not includible in the assessable value, and the issue was decided in favour of the assessee.

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