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TMI Blog2025 (1) TMI 989X X X X Extracts X X X X X X X X Extracts X X X X ..... poration 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 pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty payable from 1st April 2002 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 use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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. (2018) 7 SCC 733, CCE v. Ispat Industries Ltd. (2016) 1 SCC 631, and CCE v. CERA Boards and Doors (2020) 9 SCC 662. He submitted that by virtue of the substitution of Section 4 with e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. CIT (2000) 5 SCC 373, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 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( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... takings 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, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrangements 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 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llful 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 theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner (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-- (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, Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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