Customs valuation excludes post-import know-how and supervision charges absent a condition of sale

Additional payments are includible in customs assessable value under Rule 10 of the Customs Valuation Rules, 2007 only if they relate to the imported goods and form a condition of sale. On the facts, the know-how licence fee related to production after installation of the plant, and the supervision charges related to erection, commissioning and start-up; neither was shown to be a condition of sale of the imported goods. The licence fee and supervision charges were therefore not includible in assessable value, and the corresponding duty demand could not be sustained.

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Issues: Whether the licence fee for process know-how and the charges for supervision of erection and commissioning of the imported plant were includible in the assessable value of the imported goods.

Analysis: Inclusion of additional payments in the transaction value under Rule 10 of the Customs Valuation Rules, 2007 requires that the payment be related to the imported goods and be a condition of sale, and the charge must not be attributable merely to post-import activities. The contract showed that the know-how licence related to production of spandex yarn after installation of the plant, and the supervision charges related to erection, commissioning and start-up of the plant. No contractual term or factual basis established that either charge formed a condition of sale of the imported goods. The cited authorities also support the principle that post-import technical services or know-how fees, when not linked to the condition of sale, are not includible in customs valuation.

Conclusion: The licence fee and supervision charges were not includible in the assessable value and the duty demand based on their inclusion could not be sustained.

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