Case Law (SC) -- If the grounds in support of invoking an extended period of limitation cannot be sustained then on the basis of those grounds, the demand raised in adjucation order cannot be sustained.

Bharat Petroleum Corporation Ltd. v. Commissioner of Central Excise [2025 INSC 84] dated 20.01.2025

"32. Under the proviso to sub-section (1) of Section 11-A, an extended period of limitation can be invoked when there is a nonlevy 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 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."

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