Technical know-how fee excluded from customs value where it was not a condition of sale or directly linked to imported goods.

Technical know-how fee payable for manufacture of the final product was held not to form part of the assessable value of imported raw materials under the Customs Valuation Rules. The fee had no direct nexus with the imported goods: it was not a condition of sale, there was no obligation to source the goods only from the foreign supplier, and the imports were independently priced, including by reference to London Metal Exchange values. Technical assistance for start-up and manufacturing of the finished product therefore did not justify loading the fee into the customs value, and the assessee succeeded.

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Issues: Whether technical know-how fee paid under the agreement with the foreign supplier was includible in the assessable value of the imported raw materials under Rule 9(1)(c) of the Customs Valuation Rules, 1988.

Analysis: The fee was payable for manufacture of the final product, namely catalyst, and not for the imported raw materials. There was no clause making payment of technical know-how fee a condition of sale of the imported goods, nor was there any obligation to import the goods only from the foreign supplier. The record also showed that the imported goods were priced independently, including on the basis of London Metal Exchange prices. The technical assistance relating to start-up and manufacturing assistance for the finished product did not establish a sufficient nexus with the imported goods so as to justify addition to their value.

Conclusion: The technical know-how fee was not includible in the assessable value of the imported goods and the appeal was allowed in favour of the assessee.

Ratio Decidendi: A payment for technical know-how or manufacturing assistance is not includible in the assessable value of imported goods unless it is shown to be a condition of sale of those goods or otherwise directly relatable to the imported items.

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