Royalty under licence agreement not added to customs value where transaction value was accepted and no sale nexus was shown.

Royalty paid under a licence agreement is not includible in the assessable value of imported goods where the declared import price is accepted as the transaction value and the relationship between importer and supplier is found not to have influenced pricing. The price matched the supplier's price lists, and no nexus was shown between the royalty obligation and the imported goods. Because the royalty related to manufacture of pantographs and was not shown to be a condition of sale, Rule 10(1)(c) of the Customs Valuation Rules, 2007 could not be used to load the royalty into customs value.

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Issues: Whether royalty paid under the licence agreement was liable to be added to the transaction value of the imported goods under the Customs Valuation Rules, 2007 despite acceptance of the declared price as the transaction value on the basis that the relationship between the importer and suppliers had not influenced the price.

Analysis: The declared import prices were found to match the supplier's price lists and the authorities had accepted the transaction value on the basis that the relationship between the parties had not influenced pricing. The royalty obligation under the licence agreement related to the manufacture of pantographs and not to a demonstrated condition of sale of the imported goods. Once the transaction value was accepted as arm's length and no nexus was shown between the royalty and the imported goods, Rule 10(1)(c) could not be invoked to load royalty into the assessable value.

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

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