Metal Lease Charges are Part of Transaction Value, Not Post-Import Interest: CESTAT Upholds Inclusion in Customs Valuation [Read Order]

The Delhi Principal Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that metal lease charges are part of the transaction value and must be included in the assessable value of imported goods.

MMTC Pamp India Pvt. Ltd., a company engaged in refining and minting gold and silver, imported dore bars from various international suppliers under actual user licenses. The company operated under contracts that treated it as a bailee, with ownership of the goods retained by foreign suppliers until final settlement based on assay testing.

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During the investigation, customs authorities raised concerns regarding the company’s practice of using provisional invoices at the time of import and finalizing payments based on later settlement reports. A show cause notice was issued, alleging undervaluation of imports due to the exclusion of metal lease charges and post-import insurance premiums. The adjudicating authority confirmed a differential duty demand of over Rs. 164 crore and imposed an equivalent penalty under Section 114A of the Customs Act.

Before the Tribunal, the appellant’s counsel argued that the metal lease charges were merely interest on deferred payment and not part of the original transaction value. They also cited their status as a bailee and explained that ownership of goods remained with foreign suppliers until post-import pricing. The appellant submitted that the inclusion of such charges would be inconsistent with the Customs Valuation Rules and past precedents.

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The revenue counsel relied on the valuation adopted by the Principal Commissioner and explained that the lease charges were a condition of sale, not post-import interest. They pointed out that the supplier agreements clearly established the appellant as a bailee and that lease charges were regularly paid during the period from the date of import to the date of final pricing, based on daily international rates.

The bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) after examining the agreements and the appellant’s communications with the Reserve Bank of India and State Bank of India, found that the metal lease charges were not in the nature of interest but were directly linked to the transaction itself. The tribunal observed that no interest was disclosed to the RBI, but lease charges were acknowledged as a recurring obligation.

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Since the pricing was deferred but not the ownership, the charges were determined to be an integral part of the sale conditions. The tribunal ruled that metal lease charges were a necessary element of the import transaction and not separate post-import expenses. The tribunal upheld the inclusion of lease charges in the assessable value and dismissed the appellant’s challenge on this point.

The tribunal granted partial relief by setting aside the penalty and rejecting the invocation of the extended limitation period, it sustained the valuation method adopted by customs with respect to lease charges.

To Read the full text of the Order CLICK HERE

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M/s MMTC Pamp India Pvt. Ltd vs Principal Commissioner of Customs , 2025 TAXSCAN (CESTAT) 515 , CUSTOMS APPEAL NO. 54789 OF 2023 , 13 May 2025 , Shri Tushar Jarwal , Shri Gurdeep Singh