Customs valuation excludes know-how and licence fees unless they are part of the import price or a condition of sale.

Charges for technical know-how, design, engineering and licence-related services are includible in customs assessable value only if they form part of the price of the imported goods or are payable as a condition of sale. Applying Section 14 of the Customs Act, 1962 and Rule 9 of the Customs Valuation Rules, 1988, the text states that post-importation or separately contracted technical payments are not addable merely because they relate to the same project. A mere overlap of agreements or the project-like character of the transaction does not by itself establish the required legal nexus. On that basis, the valuation enhancement was held unsustainable and the appeal succeeded with consequential relief.

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Issues: Whether the fees paid under the know-how, process package and other services agreement, including design and engineering charges and licence fee, were includible in the assessable value of the imported equipment under the Customs Valuation Rules, 1988, as charges related to the imported goods or as payments made as a condition of sale.

Analysis: The agreements for confidentiality, supply of equipment, and know-how were examined together, but the decisive question was whether the disputed payments were linked to the import of goods so as to form part of transaction value under Section 14 of the Customs Act, 1962 and Rule 9 of the Customs Valuation Rules, 1988. The governing test was whether there was a clear condition of sale requiring payment for know-how, design or post-import services as a prerequisite for the import of the equipment. The imported goods could be valued only on the basis of the price actually paid or payable, with additions permitted only where the statutory requirements were satisfied. Payments for post-importation activities, technical assistance, or know-how unconnected with the import price and not shown to be compulsory for the sale of the goods were not includible. The cited Supreme Court principles were applied to hold that a mere overlap of contracts or the project-like character of the transaction did not by itself establish the necessary legal nexus.

Conclusion: The disputed know-how, design, engineering and licence-related charges were not includible in the assessable value of the imported equipment, as they were not proved to be a condition of sale or part of the import price.

Final Conclusion: The impugned valuation enhancement was unsustainable and the appeal succeeded with consequential relief.

Ratio Decidendi: Charges for technical know-how, design or other services are includible in customs valuation only when they are shown to be part of the price of the imported goods or payable as a condition of sale; post-importation or independently contracted payments do not form part of assessable value merely because they relate to the same project.

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