Customs valuation of royalty and licence fees turns on nexus with imported goods and condition of sale under Rule 9(1)(c).

Royalty, technical fee, technical know-how fee or licence fee paid under collaboration agreements is includible in the assessable value of imported goods only where the payment is related to those goods and is required as a condition of their sale under Rule 9(1)(c) of the Customs Valuation Rules, 1988. Payments for technical know-how, drawings, designs, manufacture of licensed products in India, or post-import commercial arrangements are not automatically addable merely because imported components are later used in manufacture. Each agreement must be examined on its own terms, and absent a clear nexus with the imported goods and a condition-of-sale element, the fees are excluded from assessable value.

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Issues: Whether royalty, technical fee, technical know-how fee or licence fee paid under collaboration agreements was includible in the assessable value of imported goods under Rule 9(1)(c) of the Customs Valuation Rules, 1988.

Analysis: The determinative test under Rule 9(1)(c) is whether the payment is related to the imported goods and whether it is required to be made by the buyer as a condition of sale of those goods. Where the fee is paid for technical know-how, drawings, designs, manufacture of licensed products in India, or post-import commercial arrangements such as distribution, it is not automatically addable merely because the imported components are used in the manufacture of the final product. The clause relied on in each case had to be examined on its own terms, and the existence of technical assistance or product manufacture arrangements did not by itself establish that the royalty or fee was a condition of sale of the imported goods. On the facts of the individual appeals, the requisite nexus with the imported goods and the condition-of-sale element were not shown.

Conclusion: Royalty, technical fee, technical know-how fee or licence fee was not includible in the assessable value in the appeals decided in favour of the assessees, and the Revenue appeal on the contrary was rejected.

Final Conclusion: The batch was disposed of by applying the same valuation principle to different agreements, resulting in exclusion of the impugned fees from assessable value in the assessee appeals and rejection of the Revenue's challenge in the remaining appeal.

Ratio Decidendi: Under Rule 9(1)(c) of the Customs Valuation Rules, 1988, royalty or licence-related payments are includible in assessable value only if they are related to the imported goods and payable as a condition of their sale.

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