Technical know-how and royalty for Indian manufacture excluded from imported goods valuation

Technical know-how fees and royalty paid under agreements for manufacture in India were not includible in the assessable value of imported goods under the Customs (Valuation) Rules, 1988, because the charges related to Indian manufacture and not to the import transaction. The agreements showed that the products were to be manufactured in India, and on those facts there was no obligation to add the royalty or know-how charges to the import value. A cited precedent was found inapplicable because the factual matrix differed. The impugned order was set aside and the original authority's order was restored.

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Issues: Whether the technical know-how fees and royalty paid under the agreements for manufacture in India of the new products were includible in the assessable value of the imported goods under the Customs (Valuation) Rules, 1988.

Analysis: The payment was found to relate to manufacture of goods in India and not to the imported goods. The agreements showed that the products were to be manufactured in India and that there was no obligation, on the facts, requiring inclusion of the royalty or technical know-how charges in the value of the imports. The authority's reliance on the cited precedent was held inapplicable because the factual matrix was different, and the view was supported by the settled position that such charges are not to be added where they are linked to Indian manufacture and not to the import transaction.

Conclusion: The technical know-how fees and royalty were not includible in the assessable value.

Final Conclusion: The impugned order was set aside and the order of the original authority was restored.

Ratio Decidendi: Charges for technical know-how or royalty are not includible in the assessable value of imported goods when they are paid for manufacture in India and are not attributable to the imported goods.

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