Customs valuation of imported machinery includes know-how fee where technical assistance is integral to sale and operation.

Engineering and know-how fees paid under a technical collaboration agreement were held includible in the assessable value of imported plant and machinery under Rule 9(1)(b)(iv) of the Customs Valuation Rules. The agreement was treated as a composite arrangement for supply of equipment together with technical data, drawings and know-how necessary to establish and operate the plant, and the imported machinery could not function without that technical assistance. On that basis, the know-how fee was found to be intrinsically connected with the imported goods and to constitute a condition of sale, even though it was not expressly stated in the contract. The lower authority's exclusion was set aside.

---

---

Issues: Whether the engineering and know-how fee paid under the technical collaboration agreement was includible in the assessable value of the imported plant and machinery under Rule 9(1)(b)(iv) of the Customs Valuation Rules.

Analysis: The agreement showed a composite arrangement for supply of equipment and machinery along with technical engineering data, drawings and know-how necessary to establish and operate the plant. The supplier was engaged in providing technical know-how for the polyester yarn manufacturing plant, and the imported machinery could not be put into operation without the technical assistance. In these circumstances, the fee for know-how was held to be intrinsically connected with the imported goods and to form a condition of sale, even if not expressly stated in the contract.

Conclusion: The know-how fee was includible in the assessable value of the imported goods, and the exclusion ordered by the lower authority was set aside.

Final Conclusion: The appeal was allowed and the Revenue succeeded on the valuation issue.

---