Technical licence fee excluded from import valuation where payment related to manufacture, not the imported goods themselves.

A technical licence fee paid for the right to manufacture licensed products in India was not includible in the assessable value of imported capital goods, consumables, components and parts under the Customs Valuation Rules, 1988. The decisive factor was the absence of a sufficient nexus between the lump sum fee and the import transaction: the fee related to manufacture of the licensed products, not to the imported goods themselves. Applying the larger bench view that technical know-how fees connected only with manufacture are not added to import value, the contrary precedent was treated as inapplicable on these facts, and the valuation addition was unsustainable.

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Issues: Whether the technical licence fee paid under the agreement was includible in the assessable value of the imported goods under the Customs Valuation Rules, 1988.

Analysis: The licence was obtained for manufacture in India of specified licensed products, while the imported items consisted of capital goods, consumables, and components and parts. The lump sum licence fee was directly connected with the right to manufacture the licensed products and not with the imported goods themselves. The fee therefore lacked the necessary nexus with the import transaction to justify loading it into the invoice value under Rule 9(1)(c). The earlier larger bench view that technical know-how fee relatable to manufacture of the licensed product is not added to the value of imported goods was applied, and the contrary reliance on other precedent was held inapposite on the facts.

Conclusion: The technical licence fee was not includible in the assessable value of the imported goods and the addition made by the authorities was unsustainable.

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