Arm's-length import valuation excludes unrelated royalty loading when collaboration payments concern only local manufacture.

Import valuation under the Customs Act must be based on the commercial invoice price where the buyer and foreign supplier deal at arm's length and there is no evidence of extra-commercial influence or depressed pricing. A foreign supplier's shareholding in the Indian buyer and board representation did not by itself establish mutuality of interest, because the interest was not reciprocal. Royalty and trade-mark payments linked only to indigenous manufacture and local marketing, and not to the imported SKD/CKD packs or complete vehicles, could not justify a 1% loading on import value. The assessable value therefore remained the invoice price under Section 14(1)(a), and resort to Section 14(1)(b) and Rule 8 was unwarranted.

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Issues: Whether the invoice price of the imported goods was acceptable under Section 14(1)(a) of the Customs Act, 1962, and whether the 1% loading on account of royalty payment was justified.

Analysis: The buyer and seller did not have mutuality of interest merely because the foreign supplier held shares in the Indian buyer and had representation on its board, since the interest was not reciprocal. The royalty and trade-mark arrangements were linked to indigenous manufacture and marketing of goods in India under a separate licence arrangement, and not to the import of SKD/CKD packs and complete vehicles. The record did not show that the import price was depressed by any extra-commercial consideration or that the dealings were not at arm's length. A single buyer did not by itself negate the character of the price as one at which the goods were ordinarily sold, so long as the price was fully commercial and the transaction was at arm's length.

Conclusion: The invoice price satisfied Section 14(1)(a) of the Customs Act, 1962, resort to Section 14(1)(b) and Rule 8 was unwarranted, and the 1% loading based on royalty was unjustified; the appeal failed.

Ratio Decidendi: Where import transactions are at arm's length and the consideration for royalty or technical collaboration relates only to local manufacture and not to the imported goods, the assessable value must be determined under Section 14(1)(a) on the commercial invoice price, without loading for unrelated royalty payments.

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