Technical know-how fees excluded from customs value where no nexus with imported parts or condition of sale is shown

Technical know-how fees are not includible in the assessable value of imported goods unless the revenue shows a direct link to the imported components and that payment is a condition of sale. Here, the imported items were parts for a medium frequency induction furnace, while the fee related to technology transfer for indigenous manufacture. The earlier collaboration agreements had expired before the relevant import period, and no subsisting arrangement was shown to connect the fee with the imported parts. On that factual basis, the fee could not be added to the import value, and the assessee succeeded.

---

---

Issues: Whether technical know-how fee paid under an earlier collaboration agreement was includible in the assessable value of imported parts of furnace and heating equipment under Rule 9(1)(c) of the Customs Valuation Rules, 1988.

Analysis: The imported goods were only parts used in the manufacture of a medium frequency induction furnace, while the technical know-how payment related to transfer of technology for indigenous manufacture. The earlier collaboration agreements had expired before the relevant import period, and the record did not show any subsisting arrangement making the payment a condition of sale of the imported goods. In the absence of a demonstrated nexus between the fee and the imported components, the fee could not be added to the import value.

Conclusion: The technical know-how fee was not includible in the assessable value, and the issue was decided in favour of the assessee.

Ratio Decidendi: A technical know-how payment is not includible in the assessable value of imported goods unless it is shown to be linked to the imported goods and to form a condition of their sale.

---