Bharat Petroleum Corporation Ltd. Vs Commissioner of Central Excise Nashik Commissionerate (Supreme Court of India)
Supreme Court held that the agreement between the oil marketing companies indicates that the price of petroleum products agreed under MoU is not a normal price and, therefore, is not a transaction value. Appeal allowed on the ground of extended period.
Facts- On 30th June 2000, the Central Board of Excise & Customs, Ministry of Finance, Department of Revenue, Government of India, 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.
Up to 31st March 2002, the price of petroleum products was fixed based on the Administered Price Mechanism. This system was done away with effect from 1st April 2002. On 31st March 2002, a Memorandum of Understanding, which was named as the Multilateral Product Sale-Purchase Agreement, was executed by and between the Oil Marketing Companies [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, 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.
