Customs valuation of imports excludes royalty and technical know-how fees when payments relate to Indian-manufactured final products.

Royalty and technical know-how/option fee are not included in the assessable value of imported goods under Rule 9(1)(c) of the Customs Valuation Rules, 1988 where the agreement shows those payments relate to the final products to be manufactured in India, not to the imported goods themselves. The Tribunal examined the option/licence terms, including the licensed product, licensed technology, licence fee and royalty clauses, and found no contractual basis linking the payments specifically to the imports. On that footing, the declared price of the imported goods could not be enhanced by those amounts, and the Commissioner (Appeals) order was set aside.

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

Analysis: The payments were examined against the contractual terms and found to be connected with the manufacture of the final product in India rather than with the importation of the goods. No clause in the agreements established that the amounts were paid in relation to the imported goods. Since the payments were not shown to be a condition of the import transaction or attributable to the imported goods, they could not be added to the declared price.

Conclusion: The royalty, technical know-how fee, and option fee were not includible in the assessable value of the imported goods, and the appeal succeeded.

Ratio Decidendi: Amounts paid for technology or royalty connected only with post-import manufacture of the finished product are not includible in the assessable value unless they are shown to be payments in relation to the imported goods.

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