Customs valuation excludes technical know-how fee and royalty where payment is not a condition of sale of imported goods.

Technical know-how fee and royalty paid under a technical assistance agreement were held not to form part of the assessable value of imported goods because the agreement related to manufacture in India, not to the imported components themselves. Under Rule 9(1)(c) of the Customs Valuation Rules, 1988, only royalties or licence fees relating to the imported goods and payable as a condition of sale are includible in transaction value. As no clause made such payment a condition of sale of the imports, the charges were excluded from assessable value.

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Issues: Whether technical know-how fee and royalty paid under the technical assistance agreement were includible in the assessable value of the imported goods under Rule 9(1)(c) of the Customs Valuation Rules, 1988.

Analysis: The technical assistance agreement related to manufacture in India of the appellant's products and not to the imported components as such. The fee and royalty were linked to the products to be manufactured in India, and no clause showed that payment of those charges was a condition of sale of the imported goods. Under Rule 9(1)(c), only royalties and licence fees related to the imported goods and payable as a condition of sale are addable to the transaction value. On that basis, the charges in question were not includible in the assessable value.

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

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