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

Civil Appeal · 2025 INSC 84Decided 20 Jan 2025
Civil Appeal No. 5642 of 2009, with connected Civil Appeal Nos. 8025-27 of 2010, 5686 of 2014, 9838 of 2017, 5516 of 2019, and 10890 of 2024
Justice Abhay S. Oka · Justice Pankaj Mithal

Background

State-run oil companies (Bharat Petroleum, Indian Oil, and Hindustan Petroleum) had an arrangement, entered at the Government's direction, to sell petroleum products to each other at a lower "Import Parity Price" so as to ensure smooth nationwide supply. The Excise Department issued show-cause notices years later alleging this arrangement understated the products' value for excise duty purposes, and invoked the extended five-year limitation period (instead of the usual one year) to raise the demand, claiming the arrangement had been suppressed from tax authorities.

Decision Breakdown

The Supreme Court agreed that the price under the inter-company arrangement was not the "sole consideration" for the sale, since the deal served a supply-coordination purpose beyond pure pricing. However, it held that the extended five-year limitation period under Section 11A of the Central Excise Act can only be invoked where there is actual fraud, collusion, or wilful suppression of facts with intent to evade duty, and here, the Revenue made no such allegation, only that the arrangement was not disclosed. Since the arrangement was made at the Government's own behest, the demand against Bharat Petroleum was time-barred and was set aside; the connected appeals were sent back to the Tribunal to be decided afresh in light of this ruling.

Lesson Learnt

Tax and excise authorities cannot invoke an extended limitation period to raise old demands unless they can show actual fraud or deliberate concealment with intent to evade duty: an arrangement made openly, even if not proactively disclosed, does not by itself amount to suppression.

Official source (sci.gov.in)View Judgment (PDF)

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