Royalty outside import value where no sale-condition nexus exists; extended-period demand also fails for lack of suppression.

Royalty under a technology assistance agreement was held outside the transaction value of imported raw materials because it was not shown to be a condition of import or sale and no direct nexus with the goods was established; the royalty was linked to manufacture and sale of finished products. The extended period for demanding differential duty was also found unsustainable because the department had full knowledge of the arrangement, the relevant documents had been furnished over the years, and no suppression of facts, new material, or change in law was shown. On these grounds, the demand failed and consequential relief followed.

---

---

Issues: (i) Whether royalty payable under the technology assistance agreement was includible in the transaction value of the imported raw materials; (ii) whether invocation of the extended period for demanding differential duty was sustainable.

Issue (i): Whether royalty payable under the technology assistance agreement was includible in the transaction value of the imported raw materials.

Analysis: The agreement did not show that royalty was payable as a condition for the import or sale of the raw materials. The royalty was linked to manufacture and sale of finished goods, and no evidence established a direct nexus between the royalty payment and the imported raw materials. The earlier orders had also accepted the declared value and held royalty to be outside the assessable value.

Conclusion: The royalty was not includible in the transaction value of the imported raw materials.

Issue (ii): Whether invocation of the extended period for demanding differential duty was sustainable.

Analysis: The department had full knowledge of the arrangement and the relevant documents were consistently furnished over the years. The same issue had already been examined in earlier proceedings, and no new facts or change in law were shown to justify reopening the matter after such a long lapse of time. On the material available, suppression of facts was not established.

Conclusion: Invocation of the extended period was unsustainable.

Final Conclusion: The impugned demand could not be sustained, and the appeal succeeded with consequential relief.

Ratio Decidendi: Royalty is includible in the value of imported goods only where it is shown to be payable as a condition of sale or import and is directly linked to the imported goods; in the absence of such nexus, and where the department had prior knowledge of the relevant facts, an extended-period demand cannot be maintained.

---