Case name: Bharat Petroleum Corporation Ltd versus Commissioner of Central Excise
Nashik Commissionerate
Case number: CIVIL APPEAL NO. 5642 OF 2009
Date 26-01-2025
Quorum: ABHAY S. OKA, J.
FACTS OF THE CASE
This case involves the memorandum of understanding [MOU] entered between the Bharat petroleum corporation ltd. [BPCL] the public sector undertaking has a refinery and an extensive network installations and depots nationwide. and other oil marketing companies [OMCs] which includes Indian oil corporation ltd [IOCL], Hindustan petroleum corporation ltd [HPCL], Indo- Burma petroleum company ltd [IBP] these companies are also have refiners, installations and depots at different places in India. This agreement involves the price which is specified between them for share and sale off oil products among themselves at the fixed price called the import parity price (IPP).On 30th June,2000, the circular issued by the central board of excise & customs, ministry of finance, department of revenue, government of India clarified the meaning of the expression ‘transaction value’ as defined in the section 4(#) of the central excise act, 1944 and the government tax department argued that BPCL was only paying the less excise duty because the tax was only calculated with the lower parity price not with the high price which is originally charged by the BPCL with its dealers.
ISSUES
- Whether the excise duty be calculated by the lower price under MOU that is IPP or it should be calculated with the higher price charged to its dealers?
- Whether the BPCL hided the information from the government and leads to department to extend the period for collecting past taxes?
- Whether BPCL is liable to pay penalties for the alleged wrong doings?
LEGAL PROVISIONS
CENTRAL EXCISE ACT
- Section 4 Valuation of excisable goods for purposes of charging of duty of excise.
- Section 11A Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded.
- Section 11AC Penalty for short-levy or non-levy of duty in certain cases.
ARGUMENTS
ARGUMENTS FOR THE APPELEANT
- BPCL argued that the import parity price IPP fixed under the Memorandum of understanding MOU is fair and legal
- BPCL contended that it is legally allowed to use the different price for different buyers under the tax laws and it does not amount to discrimination or biased way of pricing.
- BPCL claimed that it did not hide any information from the government and the government is well aware about the Memorandum of understanding. Hence the extended time period for tax collection and penalties didn’t apply.
ARGUMENTS FOR THE RESPONDENT
- The government department argued that the memorandum of understanding price was not the full price or value of the oil product charged to its dealers which is a high rate compared to the IPP.
- The department accused the BPCL of hiding the information from the government department to intentionally reduce the tax payments.
- The department contended that it is justified in extending the time period for tax collection and penalties.
ANALYSIS
- The court highlighted the purpose of the memorandum of understanding: it is made for nonprofit purposes and to ensure a steady supply of oil products across India.
- The court noted that the government has knowledge about the existence of MOU, so there is no point of BPCL hiding it from the government. Hence the department has not succeeded in extending the time period in collecting the tax.
- There is no proof of fraud or intentional hiding on the part of the BPCL, no penalty could be imposed on the part of the BPCL.
JUDGMENT
In the present case BPCL won the case and the court dismissed the claim made by the department for extension of tax collection and penalties. All the other cases related to the cases are sent back to the lower tribunals to review based on the judgment of the present case.
CONCLUSION
The supreme court decided the case in the favour of the BPCL stating it didn’t act fraudulently and there is no liability for extra taxes or for penalties. The court emphasised the purpose of the MOU that is not for making profit but for ensuring the smooth function among oil companies.
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WRITTEN BY: MUTHULAKSHMI B
