Pesachim Chapter 7, Mishnah 3. The Mishnah deals with a Pesach offering that was smeared with oil, since as we have already learned in this tractate, one may use fruit juices and rub them onto the offering. The question discussed here is what the law is regarding oil that has a special status: oil of Terumah or oil of ma'aser sheni (second tithe).
He smeared it with oil of Terumah:
"Im chavuras kohanim - yocheilu" - when the members of the group registered for that Pesach offering are kohanim, there is no problem at all, since they are permitted to eat Terumah.
"Im Yisrael" - when the members of the group are Yisraelim, who may not eat Terumah, a way must be found to remove the Terumah oil from the offering, and here the Mishnah distinguishes between two situations:
"Im chai hu - yedichenu" - if the meat is still raw and has not yet been roasted, it is enough to rinse it with water and dry it, because the oil has not yet been absorbed into the meat.
"Im tzli hu - yiklof es hachitzon" - once the meat has been roasted, the oil is absorbed into it, and therefore one must peel off the outer layer of the offering so that the Yisrael will not eat Terumah. This law certainly applies when the meat is hot, and some understand that it applies even when the meat is cold.
He smeared it with oil of ma'aser sheni:
As far as the eating itself is concerned, there is no problem here: ma'aser sheni is eaten in Jerusalem, and the Pesach offering too is eaten only in Jerusalem. Any Jew may eat ma'aser sheni as long as he is tahor, and so there is no concern, since in order to eat the Pesach offering a person must be tahor in any case.
Nevertheless the Mishnah rules: "Lo ya'asenu damim livnei chavurah" - he may not collect payment from the other members of the group for the ma'aser sheni oil that he smeared on the offering. He cannot say to them: just as you paid for the Pesach offering, so too you owe an additional payment for the oil.
The reason for this: "She'ein podin ma'aser sheni b'Yerushalayim", and some have the version - and this version perhaps fits better - "She'ein mochrin ma'aser sheni b'Yerushalayim". One may not sell ma'aser sheni in Jerusalem even in order to eat it there in holiness, because the Sages determined that this is too similar to redeeming ma'aser sheni in Jerusalem, which is ineffective and impossible. The redemption must be done outside Jerusalem, unless the ma'aser is tamei. In our case the oil is tahor, and therefore there is no possibility of redeeming it in Jerusalem, and for that reason he is not permitted to sell it for money - and that is in effect what collecting payment from the members of the group amounts to.
In summary: in this Mishnah we learned the law of one who smears the Pesach offering with oil that has a special status. With oil of Terumah - a group of kohanim eats as usual, while a Yisrael rinses the meat when it is raw or peels off its outer layer when it is roasted. With oil of ma'aser sheni - eating it is permitted, since everything takes place in Jerusalem and in purity, but he may not collect the price of the oil from the members of the group, because ma'aser sheni may not be redeemed or sold in Jerusalem.