BHARAT PETROLEUM CORPORATION LTD.versusCOMMISSIONER OF CENTRAL EXCISE NASHIK COMMISSIONERATE

                  [2025] 1 S.C.R. 1987 : 2025 INSC 84

          Bharat Petroleum Corporation Ltd.
                           v.
 Commissioner of Central Excise Nashik Commissionerate
                    (Civil Appeal No. 5642 of 2009
                                  With
 Civil Appeal No(s). 8025-27 of 2010, Civil Appeal No. 5686 of 2014,
  Civil Appeal No. 9838 of 2017, Civil Appeal No. 5516 of 2019 and
                   Civil Appeal No. 10890 of 2024)
                                20 January 2025
               [Abhay S. Oka* and Pankaj Mithal, JJ.]


                            Issue for Consideration
       Whether while computing excise duty under the Central Excise
       Act, 1944 on sale of petroleum products, price of the products can
       be considered as the sole consideration and whether the revenue
       was entitled to invoke extended period of limitation u/s.11A(1) of
       the Act and to levy a penalty u/s.11AC of the Act?

                                   Headnotes†
       Central Excise Act, 1944 – Valuation of goods-price as sole
       consideration of goods:
       Held: The Memorandum of Understanding (MOU) dated 31st
       March 2002 by and between the Oil Marketing Companies
       (OMCs) incorporates mutual arrangements made by MNCs for
       an uninterrupted supply of petroleum products so that MNCs can
       further sell the products to their dealers – By no stretch of the
       imagination, it can be said that the price fixed under the MOU
       was the sole consideration for the sale by one OMC to the other –
       Further, there is no specific finding recorded in the decision of the
       Tribunal in the case of Hindustan Petroleum Corporation Ltd. that
       the price was the sole consideration for the sale – The Tribunal
       has not adverted to the question of whether the third condition
       in s.4(1)(a) of the Central Excise Act was complied with – Thus,
       even assuming there is a merger of the said decision with the
       order of this court in the said case, the order of this Court does not
       constitute a binding decision on the issue of compliance with such
       condition – The finding of the fact recorded by the Tribunal in Civil

* Author
1988                                                         [2025] 1 S.C.R.

                         Supreme Court Reports


    Appeal No. 5642 of 2009 that price was not the sole consideration
    cannot be faulted with. [Paras 28-30]

    Central Excise Act, 1944 – Applicability of extended period
    of limitation under the proviso to s.11-A(1) of the 1944 Act:
    Held: No detailed reasons have been recorded in support of
    invoking the extended period of limitation under the proviso to
    sub-section (1) of s.11-A by the Commissioner in his order – The
    department was aware of the MOU even before the date on
    which the show cause notice was issued – MOU was referred to
    in the decision of the Tribunal in the case of Hindustan Petroleum
    Corporation Ltd., thus, the ground of suppression of MOU taken
    to support the invocation of the extended period of limitation
    cannot be sustained – The second ground is that BPCL made
    the department believe that dual pricing was adopted as per the
    directions of the Government – It is not alleged in the show cause
    notice that any such misrepresentation was made by BPCL – The
    reply to the show cause notice submitted by the BPCL contains
    no such representation – Even in the order, no specific reference
    has been made to any such contention raised by BPCL or other
    OMCs – Hence, both the grounds in support of invoking an extended
    period of limitation cannot be sustained, and only on that ground,
    the demand cannot be sustained – Therefore, the said appeal
    preferred by the BPCL deserves to be allowed by setting aside the
    entire demand on the ground that the extended period of limitation
    could not be invoked – The other appeals to be remanded to the
    Tribunal for fresh adjudication. [Paras 32-34, 38, 39]

    Central Excise Act, 1944 – Applicability of s.11AC:
    Held: In this case, there is no allegation made by the Revenue
    of fraud, collusion or any wilful mis-statement on the part of the
    appellant – The stand taken is that the MOU was suppressed, and
    therefore, s.11AC will apply – In view of the findings recorded above
    on the issue of the invocation of the extended period of limitation,
    the penalty could not have been imposed. [Paras 36, 38]

                             Case Law Cited
    CCE v. Grasim Industries Ltd. [2018] 6 SCR 1099 : (2018) 7 SCC
    233; CCE v. Ispat Industries Ltd. [2015] 15 SCR 259 : (2016) 1
    SCC 631; CCE v. CERA Boards and Doors [2020] 11 SCR 471 :
[2025] 1 S.C.R.                                                           1989

               Bharat Petroleum Corporation Ltd. v.
       Commissioner of Central Excise Nashik Commissionerate

     (2020) 9 SCC 662; D.J. Malpani v. CCE [2019] 6 SCR 925 : (2019)
     9 SCC 120; V.M. Salgaocar and Bros. Pvt. Ltd. v. CIT [2000] 2
     SCR 1169 : (2000) 5 SCC 373; Kunhayammed & Ors v. State
     of Kerala & Anr. [2000] Supp. 1 SCR 538 : (2000) 6 SCC 359;
     Commissioner of Central Excise, Hyderabad v. Detergents India
     Ltd. [2015] 6 SCR 886 : (2015) 7 SCC 198 – referred to.
     Hindustan Petroleum Corporation Ltd. v. Commissioner of
     Central Excise (2005) 187 ELT 479 (Tri-Bang); Bharat Petroleum
     Corporation Ltd. v. Commissioner of Central Excise, Nashik (2009)
     242 ELT 358 (Mumbai) – referred to.

                                List of Acts
     The Central Excise Act, 1944.

                             List of Keywords
     Section 11A(1) of the Central Excise Act, 1944; Section 11AC of
     the Central Excise Act, 1944; Sale of Petroleum Products; Price
     of the products; Valuation of goods; Extended period of limitation;
     Proviso to s.11-A(1) of the Central Excise Act, 1944; Penalty.

                            Case Arising From
     CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5642 of 2009
     From the Judgment and Order dated 17.06.2009 of the West Zonal
     Bench at Mumbai of the Customs Excise & Service Tax Appellate
     Tribunal in Appeal No. E/240/2008/MUM
     With
     Civil Appeal No(s). 8025-27 of 2010, Civil Appeal No. 5686 of 2014,
     Civil Appeal No. 9838 of 2017, Civil Appeal No. 5516 of 2019 and
     Civil Appeal No. 10890 of 2024

                         Appearances for Parties
     S.K. Bagaria, Sr. Adv., Parijat Sinha, Ms. Pallak Bhagat, Kumar
     Ajit Singh, Ms. Reshmi Rea Sinha, Devesh Mishra, B. Krishna
     Prasad, Mukesh Kumar Maroria, Advs. for the Appellant.
     Balbir Singh, A.S.G., Arijit Prasad, Sr. Adv., Mrs. B. Sunita Rao,
     Rupesh Kumar, H.R. Rao, Shyam Gopal, Vivek Chaudhuri, Bhaskar
     Sundaram, Aditya Rathore, Naman Tandon, Mukesh Kumar Maroria,
1990                                                         [2025] 1 S.C.R.

                         Supreme Court Reports


     V. Lakshmikumaran, Ms. Apeksha Mehta, Ms. Neha Choudhary,
     Ms. Falguni Gupta, Umang Motiyani, E.C. Agrawala, Mahesh
     Agarwal, Rishi Agrawala, M.S. Ananth, Abhinabh Garg, Abhinav
     Agrawal, Kartik Sharma, Parijat Sinha, Advs. for the Respondent.

                Judgment / Order of the Supreme Court

                                Judgment

     Abhay S. Oka, J.

     FACTUAL CONTROVERSY

     CIVIL APPEAL NO.5642 OF 2009

1.   The appellant in Civil Appeal No. 5642 of 2009 is Bharat Petroleum
     Corporation Ltd. (for short, ‘BPCL’). It is a public-sector undertaking.
     BPCL has a refinery in Mumbai and an extensive network of
     installations and depots nationwide. Similarly, Indian Oil Corporation
     Ltd. (for short, ‘IOCL’), Hindustan Petroleum Corporation Ltd. (for
     short, ‘HPCL’) and Indo-Burma Petroleum Company Ltd. (for short,
     ‘IBP’) also have refineries, installations and depots at different places
     in the country. Later on, IBP merged with IOCL. We refer to BPCL,
     IOCL and HPCL as the Oil Marketing Companies (for short, ‘the
     OMCs’) for convenience.
2.   On 30th June 2000, the Central Board of Excise & Customs, Ministry
     of Finance, Department of Revenue, Government of India (for
     short, ‘the Board’), issued a circular clarifying the meaning of the
     expression ‘transaction value’ as defined under clause (d) of Section
     4(3) of the Central Excise Act, 1944 (for short, ‘the 1944 Act’). Up to
     31st March 2002, the price of petroleum products was fixed based on
     the Administered Price Mechanism (for short, ‘APM’). This system
     was done away with effect from 1st April 2002. On 31st March 2002,
     a Memorandum of Understanding (for short, ‘the MOU’), which was
     named as the Multilateral Product Sale-Purchase Agreement, was
     executed by and between the OMCs at the behest of the Ministry of
     Petroleum and Natural Gas for a period of two years commencing
     from 1st April 2002. Under the MOU, it was mutually agreed that
     the OMCs should sell and purchase petroleum products among
     themselves and/or to one another at the Import Parity Price (for
[2025] 1 S.C.R.                                                      1991

                Bharat Petroleum Corporation Ltd. v.
        Commissioner of Central Excise Nashik Commissionerate

      short, ‘IPP’), which is defined as the landed cost of the products at
      the nearest port, plus the cost of transportation from the said port
      to the storage point of the selling OMC. IPP also includes terminal
      charges. Purchase and sale transactions of petroleum products
      between OMCs were to be made based on the MOU. The receiving
      OMC would further sell the petroleum products to their own dealers.
      The price fixed in accordance with the IPP was lower than the price
      at which the selling OMC sold its petroleum products directly to its
      own dealers. It was alleged that the purpose of the said MOU was
      to ensure the smooth supply and distribution of petroleum products,
      to avoid any disruption in supply all over India, and to save on
      transportation costs of the OMCs, when compared with procuring
      petroleum products solely from their respective refineries.
3.    Between 2002 and 2005, the Department issued several show-cause
      notices to the OMCs. The show cause notices proposed to arrive
      at the excise duty payable under the 1944 Act by referring to the
      price at which an OMC sold petroleum products to its own dealers
      rather than the price at which the OMCs sold petroleum products to
      one another and/or among themselves, i.e., the IPP. The appellant
      contends that some show cause notices were dropped, and some
      were confirmed. In those cases where show cause notices were
      dropped, the Commissioners accepted the IPP as the ‘transaction
      value’, and the Department did not challenge the same.
4.    In the case of the show cause notices which were not dropped,
      demands were confirmed, which led to the OMCs approaching the
      Customs, Excise & Service Tax Appellate Tribunal (for short, ‘the
      Tribunal’) after confirmation of the demands. In one such appeal
      in Hindustan Petroleum Corporation Ltd. v. Commissioner of
      Central Excise1, by judgment dated 28th February 2005, the Tribunal
      set aside the Order-in-Original. This judgment was carried before
      this Court by way of a civil appeal, which was summarily dismissed
      vide order dated 3rd January 2006.
5.    On 12th March 2007, the Commissioner of Central Excise and
      Customs, Nashik, issued a show cause notice to BPCL alleging that
      provisions of the 1944 Act and Central Excise Rules, 2002 have
      been contravened. The differential duty payable from 1st April 2002


1    (2005) 187 ELT 479 (Tri-Bang)
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                        Supreme Court Reports


     to 5th September 2004 was quantified at Rs. 119,11,49,418/- (Rupees
     one hundred nineteen crores, eleven lakhs, forty-nine thousand, four
     hundred and eighteen only). Demand for education cess, interest,
     and penalty was also raised in the show cause notice. BPCL filed
     its reply to the show cause notice.
6.   The demand was confirmed by the Commissioner vide order dated
     8th December 2007. The extended period of limitation was invoked,
     and a penalty was also imposed under Section 11AC of the 1944
     Act. Being aggrieved by the order of the Commissioner, the appellant
     preferred an appeal before the West Zonal Bench of the Tribunal.
     The Tribunal upheld the order dated 8th December 2007. That is how
     BPCL has preferred Civil Appeal No. 5642 of 2009.

     Civil Appeal Nos. 8025-8027 of 2010
7.   Civil Appeal Nos. 8025-8027 of 2010 have been preferred by the
     Revenue. The respondent is IOCL. In this case, a show cause
     notice was issued on 30th March 2007 alleging that the assessee
     had adopted two different assessable values for the same product
     to compute excise duty. The first value taken was the price used
     for sale to their own dealers, and the second was the IPP used for
     sale to other OMCs. It was alleged that IOCL had suppressed the
     MOU. The Commissioner invoked the extended period of limitation
     and confirmed the demand. Being aggrieved by the demand, IOCL
     preferred an appeal before the Tribunal. The Tribunal interfered with
     the demand by the impugned judgment. The Tribunal relied upon
     its own decision in the case of Hindustan Petroleum Corporation
     Ltd.1 It was pointed out that this Court summarily dismissed an
     appeal preferred by the Revenue against the decision in Hindustan
     Petroleum Corporation Ltd.1 Therefore, in this case, the Revenue
     is in appeal.

     Civil Appeal No.5686 of 2014
8.   Civil Appeal No.5686 of 2014 is also preferred by the Revenue. The
     respondent is again IOCL. Even in this case, a similar order was
     passed by the Commissioner where the extended period of limitation
     was invoked, and the Commissioner confirmed the demand. The
     Tribunal set aside the order of the Commissioner on the basis of
     the decision of the Tribunal in the case of Hindustan Petroleum
     Corporation Ltd1. Therefore, the Revenue is in appeal.
[2025] 1 S.C.R.                                                   1993

               Bharat Petroleum Corporation Ltd. v.
       Commissioner of Central Excise Nashik Commissionerate

     Civil Appeal No. 9838 of 2017
9.   As far as Civil Appeal No. 9838 of 2017 is concerned, the assessee
     is BPCL. Three show cause notices were served upon BPCL, and
     the demand in the show cause notices was made absolute by the
     Commissioner. It is to be noted that the Commissioner invoked
     the extended period of limitation for one such show cause notice
     bearing Sl. No. 10/2004 dated 26.10.2004. The Tribunal interfered
     by observing that in the facts of the case, the adjudication on the
     basis of show cause notice has travelled beyond the show cause
     notice. As the Tribunal interfered, the Revenue is in appeal.

     Civil Appeal No.5516 of 2019
10. Civil Appeal No.5516 of 2019 is again preferred by the Revenue. A
    similar show-cause notice was issued to IOCL. The demand in the
    show cause notice was made absolute under Section 11A(2) of the
    1944 Act, i.e., without invoking the extended period of limitation.
    The Tribunal interfered in an appeal preferred by IOCL again by
    relying upon its own decision in the case of Hindustan Petroleum
    Corporation Ltd1. Therefore, the Revenue is in appeal.

     Civil Appeal No.10890 of 2024
11. In Civil Appeal No.10890 of 2024, IOCL is the respondent, and
    Revenue is the appellant. In this case, the Commissioner did not
    confirm the demand under the show cause notices against which
    the Revenue preferred an appeal before the Tribunal. While the
    Commissioner did not adjudicate on the question of limitation, it
    appears that the extended period of limitation was invoked in the
    show cause notices for only parts of the demand. The order of the
    Commissioner was confirmed by the Tribunal by relying upon the
    decision in Hindustan Petroleum Corporation Ltd.1 and other
    similar decisions. Therefore, the Revenue is in appeal.
12. We may note here that the MOU that is the subject matter of these
    appeals is the same.

     SUBMISSIONS
13. The learned senior counsel, Shri S.K. Bagaria, argued on behalf of
    BPCL. Shri V. Lakshmikumaran appeared for OMCs, and Shri Balbir
    Singh, ASG, represented the Revenue.
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14. In support of Civil Appeal no.5642 of 2009, learned senior counsel
    pointed out that this Court is concerned with Section 4 of the 1944
    Act as amended with effect from 1st July 2000. He relied upon the
    interpretation put by this Court to Section 4 in the case of CCE v.
    Grasim Industries Ltd.2, CCE v. Ispat Industries Ltd.3, and CCE
    v. CERA Boards and Doors4. He submitted that by virtue of the
    substitution of Section 4 with effect from 1st July 2000, the concept
    of ‘normal value’ has given way to the concept of ‘transaction value’.
    He submitted that the actual price paid or payable on each removal
    of goods becomes a transaction value, as defined in sub-section
    3(d) of Section 4. It means the price actually paid or payable for
    the goods. The submission of the learned senior counsel is that
    Section 4 permits the assessee to charge different prices from
    different buyers. He submitted that if different prices were charged for
    different removals, prices actually paid or payable for each removal
    become the value for the levy of excise duty. Further submission
    of the learned senior counsel is that it is lawful for BPCL to charge
    different prices to OMCs for sales made to them vis-à-vis their own
    dealers.
15. The learned senior counsel relied upon the terms of the MOU, which
    incorporate a price fixation formula in MOU based on IPP, which is
    defined to mean the landed cost of a product at a particular port,
    which would include all applicable elements.
16. The learned senior counsel relied upon a decision of this Court in
    the case of D.J. Malpani v. CCE5 in the context of putting narrow
    construction. The learned counsel submitted that, in addition to
    the price actually paid or payable for the goods, transaction value
    includes any additional amount the buyer is liable to pay to the
    assessee. He submitted that in the instant case, over and above
    the invoice price actually charged, no amount, either in cash or
    otherwise, was paid or payable by the OMCs to the appellant,
    and the price charged was always the sole consideration for
    the sale. He submitted that the sales to OMCs were made for


2   (2018) 7 SCC 233
3   (2016) 1 SCC 631
4   (2020) 9 SCC 662
5   (2019) 9 SCC 120
[2025] 1 S.C.R.                                                    1995

               Bharat Petroleum Corporation Ltd. v.
       Commissioner of Central Excise Nashik Commissionerate

     delivery at the time and place of removal. He submitted that
     the parties to the MOU were not related to each other, and
     therefore, Section 4(1)(a) was squarely applicable. He also relied
     upon a Circular dated 30th June 2000 issued by the Board. He
     submitted that the MOU was entered into based on a letter dated
     21st August 2001 from the Additional Secretary, Government of India.
     He also relied upon a Circular dated 14th February 2007 issued by
     the Government of India, Ministry of Finance, which records that the
     MOU was entered into between different PSUs, i.e., OMCs herein,
     at the behest of the Ministry of Petroleum and Natural Gas. He
     submitted that the decision in the case of Hindustan Petroleum
     Corporation Ltd1, was affirmed by this Court by summary dismissal
     of appeal preferred by Revenue by a Bench of three Hon’ble Judges
     by order dated 3rd March 2006. He submitted that in view of the
     judgment of this Court in the case of V.M. Salgaocar and Bros.
     Pvt. Ltd. v. CIT6, the decision of the Tribunal has merged into
     the order of this Court. Hence, the Tribunal could not have made
     a departure from the view taken in the said case as the Tribunal
     was bound by it. He pointed out that the decision in the case of
     Hindustan Petroleum Corporation Ltd1 has been followed by the
     Tribunal in several cases.
17. He submitted that the decision to invoke an extended period of
    limitation under proviso to Section 11A (1) of the 1944 Act was
    completely erroneous. He submitted that the instructions of the Board
    dated 14th February 2007 referred to the MOU, and therefore, there
    was no question of withholding the MOU from the Department. He
    submitted that this was not a case of fraud, collusion or any wilful
    mis-statement or suppression of facts and, therefore, the extended
    period of limitation could not be invoked. Hence, there was no reason
    to impose a penalty under Section 11 AC.
18. The learned counsel appearing for IOCL in Civil Appeal Nos.
    8025-27 of 2010 has also made detailed arguments. He also argued
    the issue of the merger of the decision of the Tribunal in the case
    of Hindustan Petroleum Corporation Ltd1 with the order of this
    Court summarily dismissing the appeal. In support of his contention



6   (2000) 5 SCC 373
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                                  Supreme Court Reports


     based on the merger, he relied upon a decision of this Court in the
     case of Kunhayammed & Ors v. State of Kerala & Anr.7.
19. He submitted that the sale price based on IPP when the petroleum
    products are sold to OMC should be taken as transaction value,
    especially when the transaction is on a principal-to-principal basis
    at arm’s length. In his submission, this would show that the price is
    the sole consideration for the sale. He pointed out that as provided
    in Article 4 of the MOU, there was, in fact, a sale of petroleum
    products. He submitted that the IPP is not a notional price but an
    arm’s length price. Relying upon a decision of this Court in the case
    of Commissioner of Central Excise, Hyderabad v. Detergents
    India Ltd.8, he submitted that it is permissible to sell the same
    product at different prices to different parties. In such a case, the
    actual sale value will be taken as transaction value. He submitted
    that apart from the fact that no extra-commercial consideration flows
    from the MOU, the same has been executed as per the directions
    of the Ministry of Petroleum and Natural Gas. He also submitted
    that recourse could not have been taken to the extended period of
    limitation as there was no suppression of material facts by IOCL.
20. Shri Balbir Singh, learned ASG appearing for the Revenue submitted
    that neither in the case of Hindustan Petroleum Corporation Ltd1 nor
    in the case of Bharat Petroleum Corporation Ltd. v. Commissioner
    of Central Excise, Nashik9, the interpretation of various clauses in
    the MOU has been made. Moreover, there is no finding recorded in
    both the decisions of the Tribunal on the issue of whether the price
    was the sole consideration for the sale. He submitted that even
    assuming there was a merger of the decision in the case of Hindustan
    Petroleum Corporation Ltd.1 with the order of the Supreme Court
    summarily dismissing the appeal, the Tribunal has not considered
    whether the price fixed under the MOU was the sole consideration for
    sale. He submitted that in the impugned judgment that is the subject
    matter of Civil Appeal no.5642 of 2009, the Tribunal had considered
    the various clauses of the MOU in detail and has recorded a finding
    of fact that the price was not the sole consideration for sale. He


7   (2000) 6 SCC 359
8   (2015) 7 SCC 198
9   (2009) 242 ELT 358 (Mumbai)
[2025] 1 S.C.R.                                                        1997

               Bharat Petroleum Corporation Ltd. v.
       Commissioner of Central Excise Nashik Commissionerate

     pointed out that by the letter dated 21st August 2001, the Ministry
     of Petroleum and Natural Gas has only directed that there has to
     be an MOU for product sharing arrangements between OMCs so
     that region-wise and company-wise supply-demand balance could
     be arrived at. He submitted that the question here is whether price
     is the sole consideration of sale, even assuming that the MOU has
     been drawn in terms of the directions of the Ministry. He submitted
     that the OMCs did not produce a copy of the MOU, and, therefore,
     there was justification for invoking the extended period of limitation
     on the ground of suppression of material facts.

     OUR VIEW IN CIVIL APPEAL NO.5642 OF 2009
21. The issues involved can be broadly summarised as under:
     (i)    Whether the price was the sole consideration of sale?
     (ii)   Whether the revenue was entitled to invoke an extended period
            of limitation under the proviso to Section 11A(1) of the 1944 Act?
     (iii) Whether the revenue was entitled to levy a penalty under
           Section 11AC of the 1944 Act?

     WHETHER PRICE WAS THE SOLE CONSIDERATION FOR SALE
22. Section 4(1) of the 1944 Act reads thus:
            “4. Valuation of excisable goods for purposes of
            charging of duty of excise.— (1) Where under this Act,
            the duty of excise is chargeable on any excisable goods
            with reference to their value, then, on each removal of
            the goods, such value shall—
            (a) in a case where the goods are sold by the assessee,
            for delivery at the time and place of the removal, the
            assessee and the buyer of the goods are not related
            and the price is the sole consideration for the sale,
            be the transaction value;
            (b) in any other case, including the case where the goods
            are not sold, be the value determined in such manner as
            may be prescribed.”
                                                     (emphasis added)
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                          Supreme Court Reports


23. Therefore, for applicability of clause (a) of Section 4(1), the following
    conditions must be fulfilled:
     a.    The assessee sells the goods for delivery at time and place
           of the removal;
     b.    The assessee and the buyer are not related; and
     c.    The price is the sole consideration for the sale.
     Only if all three conditions are fulfilled, the value of the goods for
     the purpose of computation of excise duty will be the transaction
     value. In a given case, if it is not proved that the price was the sole
     consideration for sale, clause (a) of Section 4(1) would not apply.
     In that case, clause (b) of Section 4(1) would apply.
24. We have perused the MOU dated 31st March 2001. IOCL, HPCL,
    BPCL and IBP are the parties to the MOU. As stated earlier, IBP
    later merged with IOCL. Recital nos. (i), (ii) and (iii) are very relevant,
    which read thus:
           “(i) All the above Oil Marketing Companies except IBP
           are engaged in the business of refining crude .. and for
           this purpose have established …./associate refineries and
           all the above Oil Marketing Companies are engaged in
           the business of marketing or petroleum products and for
           this purpose have established large product handling &
           marketing infrastructure.
           (ii) All the above Oil Marketing Companies are desirous
           to avail of product sharing/assistance from each other
           in order to ensure smooth supply and distribution of
           POL products and to avoid any kind of disruption of
           supply all over India.
           (iii) At present, the parties to this Agreement are
           Government of India Undertakings and for their
           mutual benefit, the parties had various discussions
           among themselves and reached agreement of using
           the available product of each other on the terms and
           conditions contained hereinafter. Further, if during
           the agreement period, any of the parties undergoes
           disinvestment of their Government equity holding,
[2025] 1 S.C.R.                                                       1999

               Bharat Petroleum Corporation Ltd. v.
       Commissioner of Central Excise Nashik Commissionerate

           then subject to Government of India’s residual equity
           holding continuing in the party/parties, this Agreement
           shall hold good.”
                                                   (emphasis added)

     As seen from clause (ii), the MOU has been executed so that the
     OMCs can avail of product sharing/assistance from each other.
     Product sharing/assistance was required to ensure the smooth
     supply and distribution of petroleum products and to ensure that
     there is no disruption in the supply of petroleum products to OMCs
     all over India. Recital no. (iii) sheds light on the real nature of the
     transaction reflected in the MOU. The object is to use the available
     products of each OMC on the terms and conditions set forth in the
     MOU. Thus, the object of the MOU is not to sell petroleum products
     on a commercial basis to other OMCs. The real object is to ensure
     that each OMC gets a smooth supply of petroleum products and
     any disruption of supply is avoided. Therefore, the emphasis is
     on allowing individual OMCs access to each other’s products and
     facilitating the sale of petroleum products to their respective dealers/
     customers. The sale of products under the MOU is for the benefit
     of the respective business activities of the OMCs.
25. Clause 2.10 defines “Group of Refineries” as IOCL and its associates,
    including different companies/ refineries, as stated therein. The group
    of refineries also include Reliance Petroleum Limited (for short,
    ‘RPL’). Clause 2.14 defines an “Industry Logistics Plan (ILP)” as an
    All India Supply and Distribution Plan jointly drawn by the OMCs
    based on the industry’s product availability and market demands
    for particular months. Thus, the All India Supply and Distribution
    Plan, known as ILP, was jointly drawn by the OMCs, considering
    the market demand and availability.
26. Clause 4.1 of the MOU provides that OMCs agree to sell and
    purchase the products to each other in such quantities as determined
    based on the principles laid down in the ILP procedure. The ILP
    procedure is drawn jointly by the OMCs to ensure that adequate
    supply for each one of them is available.
27. Clause 4.3 of the MOU reads thus:
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                        Supreme Court Reports


           “4.3 It is agreed that any shortfall in actual upliftment
           quantity ex RPL versus Monthly reassessed Quantity
           of Oil Marketing Companies, shall be reduced by the
           excess quantity of the Product that RPL has delivered in
           the month to any other Oil Marketing Company against
           its respective Monthly Quantity.”
     27.1 Clause 4.6 of the MOU reads thus:
               “4.6 Coastal movement shall be as per the detailed
               procedure, as mutually agreed, as placed at
               Annexure B.”
               Clause 4.6 refers to coastal movement. Clause 2.4
               defines “Coastal Plan” which implies that a plan
               for tanker loading, movement and discharge was
               prepared jointly by OMCs.
28. Therefore, after taking into consideration the aforementioned parts
    of the MOU, it is crystal clear that the arrangement reflected from
    the MOU is essentially for ensuring that every OMC gets smooth
    and uninterrupted supply all over India, irrespective of whether
    an OMC has a refinery or otherwise in a particular part of India.
    Thus, from a plain reading of the MOU, we find that the real
    consideration for the MOU was to ensure an uninterrupted supply
    to all the OMCs at various places in India. The MOU incorporates
    mutual arrangements made by MNCs for an uninterrupted supply
    of petroleum products so that MNCs can further sell the products
    to their dealers. By no stretch of the imagination, it can be said
    that the price fixed under the MOU was the sole consideration
    for the sale by one OMC to the other. Hence, we concur with the
    conclusion in the impugned judgment that the price was not the
    sole consideration for sale.

     THE DECISION OF THE TRIBUNAL IN HINDUSTAN PETROLEUM
     CORPORATION LTD1.
29. Now, we turn to the decision of the Tribunal in Hindustan Petroleum
    Corporation Ltd.1, an appeal against which has been summarily
    dismissed by this Court. We have carefully perused the said decision.
    Apart from mentioning that the MOU was executed according to
[2025] 1 S.C.R.                                                      2001

               Bharat Petroleum Corporation Ltd. v.
       Commissioner of Central Excise Nashik Commissionerate

     the direction of the Government of India, the Tribunal has not
     looked into the contents of the MOU. There is a vague reference
     to HPCL’s agreement with other oil companies. There is no specific
     finding recorded therein, after considering the terms and conditions
     of the MOU, that the price was the sole consideration for the sale.
     Therefore, the decision of the Tribunal ignores a crucial ingredient
     of Section 4(1)(a) of whether the price was the sole consideration
     for the sale. The Tribunal has not adverted to the question of
     whether the third condition in Section 4(1)(a) was complied with.
     Even assuming that there is a merger of the decision in the case
     of Hindustan Petroleum Corporation Ltd1 with the order of this
     Court, the order of this Court does not constitute a binding decision
     on the issue of compliance with the third condition in Section
     4(1)(a) as the Tribunal had not decided the said issue.

     THE CIRCULAR DATED 14TH FEBRUARY 2007
30. Now, we come to the Circular issued by the Board on 14th February
    2007. The circular refers to the decision in the case of Hindustan
    Petroleum Corporation Ltd.1 Though the circular mentions that
    pending cases and future assessments of the product should be
    decided based on the said decision, it was observed that the facts
    of the case decided by the Tribunal may be gone through properly in
    order to apply to the pending cases as well as future assessments.
    Therefore, even the Circular noted the requirement of applying the
    ratio to the facts of each case. Thus, the finding of the fact recorded
    by the Tribunal in Civil Appeal No.5642 of 2009 that price was not
    the sole consideration cannot be faulted with.

     Was the extended period of limitation under the proviso to
     Section 11-A(1) of the 1944 Act applicable?
31. Section 11A reads thus:
           “Section 11A - Recovery of duties not levied or not paid
           or short-levied or short-paid or erroneously refunded-
           (1) When any duty of excise has not been levied or paid
           or has been short-levied or short-paid or erroneously
           refunded, whether or not such non-levy or non-payment,
           short-levy or short payment or erroneous refund, as
2002                                                    [2025] 1 S.C.R.

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         the case may be, was on the basis of any approval,
         acceptance or assessment relating to the rate of duty on
         or valuation of excisable goods under any other provisions
         of this Act or the rules made thereunder a Central Excise
         Officer may, within one year from the relevant date, serve
         notice on the person chargeable with the duty which has
         not been levied or paid or which has been short-levied or
         short-paid or to whom the refund has erroneously been
         made, requiring him to show cause why he should not
         pay the amount specified in the notice :
         Provided that where any duty of excise has not been
         levied or paid or has been short-levied or short-paid or
         erroneously refunded by reason of fraud, collusion or
         any willful mis-statement or suppression of facts, or
         contravention of any of the provisions of this Act or
         of the rules made thereunder with an intent to evade
         payment of duty, by such person or his agent, the
         provisions of this sub-section shall have effect as
         if, for the words “one year”, the words “five years”
         were substituted :
         Explanation : Where the service of the notice is stayed
         by an order of a Court, the period of such stay shall be
         excluded in computing the aforesaid period of one year
         or five years, as the case may be.”
                                                (emphasis added)

    Show cause notice dated 12th March, 2007 was issued to BPCL.
    The demand in the show cause notice was for the period from
    1st April, 2002 to 5th September, 2004. As per sub-section (1) of
    Section 11-A, a notice of demand could have been issued within
    one year from the relevant date. The demand could be for a short
    levy, short payment, non-levy, non-payment, or erroneous refund.
    The period of one year is to be calculated from the relevant date
    as defined in sub-section 3(ii) of Section 11-A. There is no dispute
    that the demand notice was not issued within the stipulated period
    provided under sub-section (1) of Section 11-A, and therefore, an
    extended period of limitation was invoked by the revenue.
[2025] 1 S.C.R.                                                             2003

               Bharat Petroleum Corporation Ltd. v.
       Commissioner of Central Excise Nashik Commissionerate

32. Under the proviso to sub-section (1) of Section 11-A, an extended
    period of limitation can be invoked when there is a non-levy or
    non-payment or short levy or short payment of the excise duty
    by a reason of fraud or collusion or any wilful mis-statement or
    suppression of facts or contravention of any of the provisions of
    1944 Act or the rules made thereunder with the intent to evade
    payment of duty. The show cause notice referred to the statements
    recorded of BPCL officers and other OMCs. No detailed reasons
    have been recorded in support of invoking the extended period of
    limitation by the Commissioner in his order. The High Court, in the
    impugned order, has confirmed the extended period of limitation by
    recording the following findings in paragraph 44:
           “44. On the question of time bar, we find that the
           show cause notice has alleged that the contents
           of the MOU were not brought to the notice of the
           Commissionerate and that M/s. BPCL has misled the
           Department into believing that the dual pricing adopted
           by them has been done on the directive of the Govt.
           of India. This has not been contested by the appellants.
           Their only defence is that mere non-submission of the
           MOU cannot be a ground for invoking the extended time
           limit and there should be some positive act of omission /
           commission for the same. Withholding the MOU from the
           Department, and making the Department believe that
           the dual pricing was adopted as per the directive of
           the Government cannot be considered to be innocent
           acts. This is definitely a positive act, for which the extended
           time limit has been rightly invoked.”
                                                     (emphasis added)

33. Thus, the first ground is withholding or suppressing the MOU. We
    are dealing with a public sector undertaking. It is pertinent to note
    that the impugned judgment incorporates the letter dated 14th
    February, 2007 issued by the Board. The letter itself records that
    to ensure a regular supply of petroleum products, the Oil PSUs
    (OMCs) entered into an MOU at the behest of the Petroleum and
    Natural Gas Ministry. It also refers to the decision of the Tribunal
    in the case of Hindustan Petroleum Corporation Ltd.1 by stating
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                         Supreme Court Reports


     that the said decision records that the sale price, as per the MOU,
     correctly represents the transaction value. Therefore, the department
     was aware of the MOU even before the date on which the show
     cause notice was issued. As noted earlier, the date of the MOU is
     31st March, 2002. Moreover, as indicated in the said letter, MOU was
     referred to in the decision of the Tribunal in the case of Hindustan
     Petroleum Corporation Ltd.1. It is pertinent to note that the date of
     the said decision is 28th February, 2005. In fact, in the said decision,
     a submission of the revenue has been recorded that the agreement
     between the oil companies indicates that the price of petroleum
     products agreed thereunder is not a normal price and, therefore, is
     not a transaction value. Hence, the first ground taken to support the
     invocation of the extended period of limitation cannot be sustained.
34. The second ground is that BPCL made the department believe that
    dual pricing was adopted as per the directions of the Government. A
    careful perusal of the show cause notice shows that it is not alleged
    that any such misrepresentation was made by BPCL that the pricing
    as provided in the MOU was adopted by the BPCL as per the
    directions of the Central Government. The reply to the show cause
    notice submitted by the BPCL contains no such representation. In
    the show cause notice, statements recorded of officers of BPCL and
    other OMCs have been referred to and relied upon. However, it is
    not alleged that any of the officers stated that the price of the goods
    sold under the MOU was fixed as per the directives of the Central
    Government. We have also carefully perused the order passed by
    the Commissioner on the show cause notice. Even in the order, no
    specific reference has been made to any such contention raised
    by BPCL or other OMCs. Even the order also refers to statements
    of the officers of BPCL and other OMCs. Hence, both the grounds
    in support of invoking an extended period of limitation cannot be
    sustained, and only on that ground, the demand cannot be sustained.

     WHETHER SECTION 11AC WAS APPLICABLE?
35. Then, we come to the penalty imposed under Section 11AC of the
    1944 Act. Section 11AC reads thus:
          “11AC. Penalty for short-levy or non-levy of duty in
          certain cases
[2025] 1 S.C.R.                                                           2005

               Bharat Petroleum Corporation Ltd. v.
       Commissioner of Central Excise Nashik Commissionerate

           Where any duty of excise has not been levied or paid
           or has been short-levied or short-paid or erroneously
           refunded by reasons of fraud, collusion or any wilful mis-
           statement or suppression of facts, or contravention of any
           of the provisions of this Act or of the rules made there
           under with intent to evade payment of duty, the person
           who is liable to pay duty as determined under sub-section
           (2) of section 11A, shall also be liable to pay a penalty
           equal to the duty so determined:
           Provided that where such duty as determined under sub-
           section (2) of section 11A, and the interest payable thereon
           under section 11AB, is paid within thirty days from the
           date of communication of the order of the Central Excise
           Officer determining such duty, the amount of penalty liable
           to be paid by such person under this section shall be
           twenty-five per cent. of the duty so determined:
           Provided further that the benefit of reduced penalty under
           the first proviso shall be available if the amount of penalty
           so determined has also been paid within the period of
           thirty days referred to in that proviso:
           Provided also that where the duty determined to be
           payable is reduced or increased by the Commissioner
           (Appeals), the Appellate Tribunal or, as the case may be,
           the court, then, for the purposes of this section, the duty
           as reduced or increased, as the case may be, shall be
           taken into account:
           Provided also that in case where the duty determined to
           be payable is increased by the Commissioner (Appeals),
           the Appellate Tribunal or, as the case may be, the court,
           then, the benefit of reduced penalty under the first proviso
           shall be available, if the amount of duty so increased, the
           interest payable thereon and twenty-five per cent. of the
           consequential increase of penalty have also been paid
           within thirty days of the communication of the order by
           which such increase in the duty takes effect.
           Explanation.--For the removal of doubts, it is hereby
           declared that--
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                        Supreme Court Reports


          (1) the provisions of this section shall also apply to cases
          in which the order determining the duty under sub-section
          (2) of section 11A relates to notices issued prior to the
          date on which the Finance Act, 2000 receives the assent
          of the President;
          (2) any amount paid to the credit of the Central Government
          prior to the date of communication of the order referred to
          in the first proviso or the fourth proviso shall be adjusted
          against the total amount due from such person.”
                                                  (emphasis added)

36. In this case, there is no allegation made by the Revenue of fraud,
    collusion or any wilful mis-statement on the part of the appellant.
    The stand taken is that the MOU was suppressed, and therefore,
    Section 11AC will apply. In view of the findings recorded above on
    the issue of the invocation of the extended period of limitation, the
    penalty could not have been imposed.
37. In paragraph 40 of the impugned judgment, it is mentioned that BPCL
    did not submit any argument on the valuation method adopted by the
    Commissioner, who has adopted Rule 11 read with Rule 7. However,
    the Tribunal found that Rule 4 of the Central Excise Valuation Rules,
    2000, is the correct provision to be applied for valuation.
38. Therefore, the said appeal preferred by the BPCL deserves to be
    allowed by setting aside the entire demand on the ground that the
    extended period of limitation could not be invoked.

     OTHER APPEALS
39. As far as the other appeals are concerned, the OMCs have succeeded
    before the Tribunal. Therefore, in the light of the findings recorded
    by us in Civil Appeal No.5642 of 2009, these appeals will have to
    be remanded to the Tribunal for fresh adjudication.
40. Hence, we pass the following order:
     i)   Civil Appeal No.5642 of 2009 is hereby allowed. The impugned
          orders, including the order dated 8th December 2007 passed
          by the Commissioner of Central Excise, Nashik are hereby
          set aside;
[2025] 1 S.C.R.                                                          2007

                 Bharat Petroleum Corporation Ltd. v.
         Commissioner of Central Excise Nashik Commissionerate

     ii)     In the remaining appeals, the impugned judgments are hereby
             quashed and set aside, and the appeals are remanded to the
             concerned Tribunals to decide the same in accordance with
             the law laid down in this judgment and accordingly, the appeals
             are partly allowed;
     iii)    We make it clear that after remand, the Tribunal will decide the
             cases in the light of the findings recorded in this judgment; and
     iv)     There will be no orders as to costs.

     Result of the case: Civil Appeal No.5642 of 2009 is allowed.
                          Other appeals remanded to the Tribunal.



     †
         Headnotes prepared by: Adeeba Mujahid, Hony. Associate Editor
                                (Verified by: Ankit Gyan, Editor)