Excise And Taxation Commissioner, Haryana vs. M/S Saraswati Filling Station And Another

Held

The High Court held in favour of the dealers, ruling that they are entitled to Input Tax Credit (ITC) on the evaporation of petroleum products. The Court reasoned that the statutory provisions, particularly Section 8 of the Act and Entry 1 of Schedule E, when read together, indicate that ITC is not to be denied for evaporation losses. The Court found that the circumstances mentioned against Entry 5 of Schedule E do not apply to petroleum products and natural gas, which are covered by Entries 1 and 2. The Court emphasized that the phrase 'against such goods' in Section 8 is of importance, and the conditions in Entry 5 are not applicable to petroleum products. The Court dismissed the appeals filed by the State. The ratio decidendi is that statutory evaporation losses within prescribed limits for petroleum products are not to be treated as a disposal of goods otherwise than by way of sale for the purpose of denying ITC.

Facts

These appeals by the Excise and Taxation Commissioner, Haryana, and the State of Haryana, involve multiple petitioners (dealers) and concern tax periods ranging from 2009-10 to 2014-15. The core issue revolves around the eligibility of Input Tax Credit (ITC) for evaporation losses of petroleum products. The State challenged the dealers' claim for ITC on these losses, which are statutorily permitted by the Ministry of Petroleum to the extent of 0.6% for motor spirit and 0.2% for HSD. The State's action under challenge is the denial of ITC on these evaporation losses, leading to the present appeals before the High Court.

Key Issues

1. Whether, under the Haryana Value Added Tax Act, 2003 (the Act), dealers are entitled to claim Input Tax Credit (ITC) on evaporation losses of petroleum products, specifically motor spirit and High-Speed Diesel (HSD), within the limits prescribed by the Ministry of Petroleum. Petitioner's Arguments: The dealers contended that evaporation losses, occurring due to the inherent nature of petroleum products, should not be treated as a disposal of goods otherwise than by way of sale. They argued that the statutory allowance for evaporation losses by the Ministry of Petroleum should be recognized, and ITC should not be denied on such unavoidable losses. Revenue/State's Arguments: The State argued that ITC is not available for goods mentioned in Schedule E when used or disposed of in the circumstances mentioned against them. They relied on Entry 5 of Schedule E, which they interpreted to mean that ITC on evaporation should be nil. They also referred to a previous Division Bench judgment in All Haryana Petroleum Dealers Association’s case, though acknowledging that the specific issue of ITC on evaporation was not the primary subject of that ruling.