Customs valuation excludes separately identifiable know-how fees when they are not a condition of sale of imported machinery.

Customs valuation under Section 14 of the Customs Act, 1962 includes only the transaction value of imported goods, together with additions permitted by Rule 9 of the 1988 Valuation Rules. Payments may be added only if they form part of the price of the imported goods or are shown to be a condition of sale. Separately identifiable charges for post-importation technical assistance, process know-how, or technical documentation are excluded where they are not linked to fabrication or supply of the machinery itself. On the stated facts, the licence fee and technical know-how fee were held not to be includible in the assessable value of the imported plant and machinery.

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Issues: Whether the licence fee and technical know-how fee payable under the collaboration agreement were includible in the assessable value of the imported plant and machinery for customs duty purposes.

Analysis: Customs valuation under Section 14 of the Customs Act, 1962 is based on the value of the imported goods at the time and place of importation, and Rule 4 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 adopts transaction value subject to the additions permitted by Rule 9. Under Rule 9(1)(e), only payments actually made or to be made as a condition of sale of the imported goods can be added. Charges for post-importation activities, including technical assistance or know-how unrelated to the price of the imported machinery itself, are excluded where they are separately identifiable and distinguishable from the price actually paid or payable. On the facts, the know-how/licence fee was for process know-how and technical documentation, not for fabrication or supply of the imported equipment, and the record did not show understatement of the plant price or a direct condition of sale of the machinery.

Conclusion: The licence fee and technical know-how fee were not includible in the assessable value of the imported goods, and the challenge to the Tribunal's view failed.

Ratio Decidendi: For customs valuation, only payments that form part of the price of the imported goods or are proved to be a condition of sale of those goods can be added to transaction value; separately identifiable post-importation technical or know-how charges are excluded.

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