Technical know-how fee excluded from import value where payment was for manufacturing rights, not a condition of sale.

A technical know-how fee paid under a licence agreement for transfer of technology and information for manufacturing licensed products was not includible in the assessable value of imported components. Rule 9(1)(c) of the Customs Valuation Rules, 1988 applies only where the royalty or licence fee is related to the imported goods and is payable, directly or indirectly, as a condition of their sale. As there was no nexus between the lump-sum fee and the imported components, and no contractual condition tying the payment to their sale, the addition was held unsustainable.

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Issues: Whether the technical know-how fee of DM 1,00,000 paid to the foreign collaborator was includible in the assessable value of the imported components under Rule 9(1)(c) of the Customs Valuation Rules, 1988.

Analysis: The fee was paid under the licence agreement as consideration for technical know-how and information enabling manufacture and related operations on the licensed products. The agreement showed no nexus between the lump-sum payment and the imported components themselves, and no covenant making the payment directly or indirectly a condition of sale of the imported goods. Rule 9(1)(c) permits addition only where royalty or licence fee is related to the imported goods and is payable as a condition of sale. The cited precedent also supported exclusion where the payment relates to manufacture of the licensed products rather than to the import of components.

Conclusion: The technical know-how fee was not includible in the assessable value of the imported components and the addition made by the lower authorities was unsustainable.

Ratio Decidendi: A licence fee paid for transfer of technology for manufacture of licensed products is not includible under Rule 9(1)(c) unless it is shown to be related to the imported goods and payable, directly or indirectly, as a condition of their sale.

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