Lear Automotive India P Ltd vs Commissioner of GST&CCE(Chennai outer)

CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH – COURT No. I

Excise Appeal No. 41276 of 2018
(Arising out of Order-in-Appeal No. 47/2018 (CTA-II) dated 31.01.2018 passed by
Commissioner of GST & Central Excise (Appeal-II), Newry Towers, Plot No. 2054, I Block, II
Avenue, Anna Nagar, Chennai – 600 040)


M/s. Lear Automotive India Pvt. Ltd. ...Appellant
Plot No. P 8/2,
Mahindra World City,
Industrial Park,
Veerapuram Village,
Chengalpattu – 603 002.
Versus

Commissioner of GST and Central Excise ...Respondent
Chennai Outer Commissionerate,
Newry Towers, No. 2054-I,
nd th
2 Avenue, 12 Main Road,
Anna Nagar,
Chennai – 600 040.

APPEARANCE:
For the Appellant : Ms. Samyuktha Banusekar, Advocate
For the Respondent : Mr. M. Selvakumar, Authorised Representative

CORAM:
HON’BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL)
HON’BLE MR. AJAYAN T.V., MEMBER (JUDICIAL)

FINAL ORDER No. 40982 / 2026

DATE OF HEARING : 01.07.2026
DATE OF DECISION : 31.08.2026

Per Mr. VASA SESHAGIRI RAO

The present appeal has been filed by M/s. Lear
Automotive India Pvt. Ltd. (hereinafter referred to as “the
appellant”) against Order-in-Appeal No. 47/2018 (CTA-II)
dated 31.01.2018 passed by the Commissioner (Appeals-II),

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Central Tax & Central Excise, Chennai (hereinafter referred
to as “the impugned order”), remanding the matter for fresh
determination of the assessable value of tooling advances of
Rs.1,42,03,000/- received from M/s. Mahindra & Mahindra
Ltd. during 2011-12 to 2015-16. The Department, by Show
Cause Notice No. 56/2015-CE dated 14.12.2015, proposed
Central Excise duty of Rs.17,12,144/-, besides applicable
interest and penalty under Section 11AC of the Central
Excise Act, 1944, treating the advances as additional
consideration. The appellant contended that the tooling cost
was required to be amortised over the finished goods
manufactured with the tools and that the proportionate cost
had already been included in the assessable value.

2. The Adjudicating Authority, by Order-in-Original
No. 15/2017-CE dated 10.03.2017, accepted the appellant’s
method of amortisation and dropped the proceedings. The
Department challenged the same, contending, inter alia, that
only Rs.15,892/- with interest had been paid towards
amortisation and that the certificate relied upon was issued
by a Chartered Accountant instead of a Cost Accountant. The
Commissioner (Appeals), relying principally upon Circular
No.170/4/96-CX dated 23.01.1996, remanded the matter for
fresh determination of the amortised tooling value. The
present appeal is against the said remand.

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3. The Ld. Counsel Ms. Samyuktha Banusekar, for
the appellant, submitted that the tooling advances
themselves were not liable to be treated as assessable value
and that only the proportionate cost of tools used in the
manufacture of the finished goods was includible. The
appellant had followed this method and discharged duty on
the amortised tooling cost. Apart from the Chartered
Accountant’s certificate, the appellant relied upon tool
manufacturers’ invoices, tooling records, finished-goods
invoices, supplementary invoices and proof of payment of
duty and interest. It was submitted that Lear Automotive
India Pvt. Ltd. v. CCE, Nashik, 2012 (286) E.L.T. 558 (Tri.-
Mumbai) was distinguishable on facts, as the tooling cost had
not been amortised in that case. It was further contended
that Circular No.170/4/96-CX dated 23.01.1996 did not
mandate a Cost Accountant’s certificate in every tooling
case. On limitation, it was submitted that the tooling
advances and the proposed amortisation methodology had
been disclosed to the Department during audit in October-
November 2013. Reliance was placed upon Sankar Sealing
Systems Pvt. Ltd. v. Commissioner of GST & Central Excise,
2024 (6) TMI 1175 (CESTAT-Chennai) and Brakes India Pvt.
Ltd. v. Commissioner of Central Excise, 2025 (6) TMI 758
(CESTAT-Chennai).

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4. The Ld. Authorized Representative Shri M.
Selvakumar, for the Revenue, supported the impugned order
and submitted that the appellant had received
Rs.1,42,03,000/- as tooling advances but had not discharged
duty on the entire amount. It was contended that the
methodology contemplated by Circular No.170/4/96-CX had
not been properly followed and that the certificate ought to
have been obtained from a Cost Accountant. Reliance was
also placed upon the appellant’s earlier decision in Lear
Automotive India Pvt. Ltd. v. CCE, Nashik, 2012 (286) E.L.T.
558 (Tri.-Mumbai). The Revenue further contended that duty
and interest were paid only after departmental detection and
that penalty under Section 11AC was therefore attracted.

5. We have considered the Show Cause Notice, the
Order-in-Original, Order-in-Appeal (the impugned order), the
submissions and the documentary evidence placed on
record. The following questions arise for determination: -
i. Whether the tooling advances are includible in the
assessable value in their entirety, or only the
proportionate/amortised tooling cost attributable to the
finished goods manufactured with the aid of the tools?
ii. Whether the extended period of limitation is invocable
and, consequently, whether the remand and the

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consequential liability to interest and penalty are
sustainable?

Issue No. (i): Whether the tooling advances are includible
in the assessable value in their entirety, or only the
proportionate/amortised tooling cost attributable to the
finished goods manufactured with the aid of the tools?
7. The dispute is not whether tooling cost has any
bearing on valuation. The appellant itself accepts that the
cost attributable to tools used in the manufacture of the
finished goods has to be reflected in their assessable value.
The controversy is whether the entire tooling advance can be
treated as assessable value upon receipt or whether only the
proportionate cost attributable to the finished goods
manufactured with the aid of the tools is required to be
included.

8. Section 4 of the Central Excise Act, 1944, as
applicable during the relevant period, provides for
determination of transaction value where the statutory
conditions are satisfied. Rule 6 of the Central Excise
Valuation Rules, 2000 provides for inclusion of the money
value of additional consideration flowing directly or indirectly
from the buyer. Explanation 1 to Rule 6 specifically refers to
the value, “apportioned as appropriate”, of tools, dies,

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moulds, drawings, blueprints and engineering, development
and design work used in connection with the production and
sale of the excisable goods. The statutory scheme, therefore,
does not contemplate automatic loading of the entire value
of a tool on a single clearance; what is required is
determination of the portion attributable to the goods being
valued.

9. The principle of proportionate amortisation is
also recognised in Flex Industries Ltd. v. Commissioner of
Central Excise, Meerut, 1997 (91) E.L.T. 120 (Tribunal) =
1997 (1) TMI 173 (CEGAT, New Delhi). The Tribunal held
that the entire cost of custom-made cylinders used in the
manufacture of printed pouches could not be loaded into the
value of the goods cleared during the relevant period; the
cost was required to be apportioned having regard to the
expected life and capability of the cylinders and the quantity
of finished goods manufactured. Though the case concerned
printing cylinders, the principle is relevant to the method of
apportioning tooling cost.

10. The appellant has also relied upon the Larger
Bench decision in Mutual Industries Ltd. v. Collector of
Central Excise, 2000 (117) E.L.T. 578 (Tri.-LB). The Larger
Bench held that the value attributable to moulds supplied by

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the buyer and used in the manufacture of finished goods
constitutes additional consideration and is includible in the
assessable value. At the same time, the decision proceeds on
the basis of the proportionate value attributable to the use of
the moulds. The decision therefore supports the appellant’s
contention that, while the tooling cost has a valuation
consequence, its entire advance cannot be treated as
assessable value merely on receipt; the relevant amount is
the proportionate cost attributable to the finished goods
manufactured with the aid of the tools.

11. Circular No.170/4/96-CX dated 23.01.1996 also
proceeds on the principle of proportionate valuation. It refers
to patterns supplied by buyers or prepared at their cost and
contemplates apportionment having regard to the expected
life and capability of the pattern and the quantity of castings
manufactured. It further states that a Cost Accountant’s
certificate may be accepted. The Commissioner (Appeals),
however, treated the reference to a Cost Accountant as a
mandatory requirement. We find no basis for such
interpretation. The Circular does not convert the suggested
certificate into a statutory precondition for establishing
valuation, particularly where other reliable documentary
evidence is available. Further, the Circular specifically
concerns patterns used in casting operations and cannot be

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treated as prescribing an inflexible evidentiary requirement
for all forms of automobile tooling.

12. The documentary evidence on record is also
material. The tooling records identify actual procurement and
manufacture of tools through specialised vendors, including
Maini Plastics, RGP Moulds Pvt. Ltd., Ankush Enterprises, Om
Technocrat, SML Toolings, AVM Plastics, Divine Toolings,
Kraftsman Tooling and Daechang India Seat Co. Pvt. Ltd.,
with descriptions and values of individual tools. The
production records connect the tooling with manufacture of
components and automobile seats. Payment records also
corroborate receipt of tooling-related amounts.

13. More importantly, the record contains a
supplementary Challan-cum-Tax Invoice No.15500009 dated
02.11.2015 referring to “tool amortization cost as per
annexure”, along with the corresponding assessable value
and duty. The Chartered Accountant’s certificate sets out the
tool values, expected production/life, amortisation per seat,
quantities cleared and duty payable. For example, in one
category it records 19 tooling items valued at Rs.34,50,000/-
and amortisation of Rs.34.50 per seat; in another, 55 tooling
items valued at Rs.85,25,000/- and amortisation of Rs.85.25

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per seat. It further records the corresponding quantities of
seats cleared and duty paid through supplementary invoice.

14. The objection of the Commissioner (Appeals)
that the certificate was issued by a Chartered Accountant
instead of a Cost Accountant, by itself, cannot justify
rejection of the entire valuation exercise. The certificate was
supported by the underlying invoices, tooling records,
production documents, supplementary invoice and payment
evidence. The impugned order does not identify any specific
error in the tool values, life expectancy, production quantity
or amortisation calculation. A remand cannot be sustained
merely for obtaining another professional certificate when
the existing documentary evidence has not been shown to be
unreliable.

15. We have also considered the decision in the
appellant’s own case, Lear Automotive India Pvt. Ltd. v.
Commissioner of Central Excise, Nashik, 2012 (286) E.L.T.
558 (Tri.-Mumbai), relied upon by the Revenue. The said
decision recognises that tooling consideration supplied by the
buyer and used in the manufacture of finished goods has
valuation implications. However, the factual basis of that
decision was materially different, particularly as regards
disclosure of the tooling arrangement and non-amortisation

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of the tooling cost. In the present case, the record contains
evidence of the tooling activity, its cost and amortisation, as
well as payment of duty on the amortised cost. The earlier
decision, therefore, cannot be applied to treat the entire
tooling advance as assessable value in the present case.

16. In the present case, the Department has not
identified any specific deficiency in the appellant’s
amortisation. No particular tool value, expected life,
production quantity or amortisation rate has been shown to
be incorrect, nor has any specific clearance been identified
on which the appropriate amortised tooling cost remained
unpaid. The evidence on record establishes actual tooling
activity and subsequent inclusion of the amortised cost in the
assessable value. The entire tooling advance of
Rs.1,42,03,000/- therefore cannot be treated as assessable
value merely because it was received from the buyer. The
Order-in-Original, having considered the evidence and
accepted the amortised valuation, was justified in dropping
the demand proposed on the entire tooling advance. Issue
No. (i) is answered in favour of the appellant.

Issue No. (ii) : Whether the extended period of limitation
is invocable and, consequently, whether the remand and

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the consequential liability to interest and penalty are
sustainable?
17. The Show Cause Notice dated 14.12.2015
invoked the extended period under Section 11A(4) of the
Central Excise Act, 1944 on the allegation that the appellant
had suppressed the receipt of tooling advances. The
allegation has to be examined in the light of the appellant’s
conduct and the Department’s own knowledge of the
transaction.

18. The record shows that the Department raised an
audit objection on 23.10.2013 concerning the tooling
advances and referred to the appellant’s earlier decision in
Lear Automotive. The appellant replied on 24.10.2013 and
again on 26.11.2013, explaining that tooling development
was in progress and that, after determination of the final
tooling cost, the proportionate amount would be amortised
and included in the value of the seats. Thus, the Department
was aware of the tooling advances and the appellant’s
valuation methodology well before issuance of the Show
Cause Notice.

19. The dispute was essentially one of valuation
methodology—whether the entire tooling advance was liable
to be included or whether the tooling cost was to be

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apportioned over the finished goods. In Sankar Sealing
Systems Pvt. Ltd. v. Commissioner of GST & Central Excise,
2024 (6) TMI 1175 (CESTAT-Chennai), the coordinate Bench
held that mere failure or negligence in adopting the correct
valuation or payment of duty does not, by itself, establish
suppression with intent to evade, particularly where the
dispute concerns valuation. The present case stands on a
stronger footing because the tooling advances and the
proposed method of valuation were specifically brought to
the Department’s notice during audit.

20. The Revenue’s reliance upon the appellant’s
earlier decision in Lear Automotive India Pvt. Ltd. v. CCE,
Nashik, 2012 (286) E.L.T. 558 (Tri.-Mumbai), does not assist
it on limitation, as that decision arose in materially different
circumstances. In the present case, the tooling advances and
the appellant’s proposed method of amortisation were
disclosed to the Department during audit in October-
November 2013. The principle laid down in Mutual Industries
Ltd. v. Collector of Central Excise, 2000 (117) E.L.T. 578
(Tri.-LB), is also relevant, as the Larger Bench held that
where the material particulars were disclosed to the
Department, the extended period could not be invoked. The
necessary ingredients of suppression of facts with intent to
evade duty are therefore not established in the present case.

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21. The appellant’s reliance on Brakes India Pvt. Ltd.
v. Commissioner of Central Excise, 2025 (6) TMI 758
(CESTAT-Chennai), is also relevant to the question of
penalty. Revenue neutrality, by itself, cannot determine
statutory liability; however, it is a relevant circumstance
when considered with the appellant’s disclosure of the tooling
advances, the bona fide valuation method adopted and the
subsequent payment of duty and interest on the amortised
tooling cost. In the facts of the present case, there is no
material establishing deliberate suppression or intent to
evade duty warranting penalty under Section 11AC. The ratio
of Brakes India therefore supports the appellant’s case on
penalty.

22. We therefore find that the Department has failed
to establish wilful suppression, misstatement or deliberate
withholding of material information with intent to evade
duty. The extended period under Section 11A(4) is
consequently not invocable. Since the principal demand, as
proposed on the entire tooling advance, is also unsustainable
on merits, the consequential interest and penalty cannot
survive. Penalty under Section 11AC cannot be sustained
merely because the Department subsequently adopted a

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different valuation methodology. Issue No. (ii) is answered in
favour of the appellant.

23. In view of the foregoing findings, the entire
tooling advance of Rs.1,42,03,000/- could not be treated as
assessable value. Only the proportionate/amortised tooling
cost attributable to the finished goods manufactured with the
aid of the tools was includible. The Department has not
established any specific short-payment after taking into
account the amortised tooling cost already included by the
appellant. The extended period is also not invocable in the
facts of the case. The Commissioner (Appeals), therefore,
was not justified in remanding the matter merely for
obtaining a Cost Accountant’s certificate when the existing
documentary evidence had not been shown to be deficient in
any particular.

24. As such, the Order-in-Appeal No. 47/2018 (CTA-
II) dated 31.01.2018 is set aside and Order-in-Original No.
15/2017-CE dated 10.03.2017, dropping the proceedings
initiated by Show Cause Notice No. 56/2015-CE dated
14.12.2015, is restored. Consequently, the proposed
demand of Rs.17,12,144/-, along with applicable interest and
penalty under Section 11AC of the Central Excise Act, 1944,
does not survive. The appeal filed by M/s. Lear Automotive

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India Pvt. Ltd. is allowed with consequential relief, if any, in
accordance with law.
(Order pronounced in open court on 31.08.2026)



Sd/- Sd/-
(AJAYAN T.V.) (VASA SESHAGIRI RAO)
MEMBER (JUDICIAL) MEMBER (TECHNICAL)

MK