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

Held

The Court held in favour of the dealers, ruling that they are entitled to ITC on the evaporation of petroleum products. The Court reasoned that Section 8 of the Act, which states that input tax shall not include tax paid on goods mentioned in Schedule E when used or disposed of in circumstances mentioned against such goods, is crucial. The Court found that the circumstances mentioned against Entry 5 of Schedule E, which pertains to disposal otherwise than by way of sale, are not applicable to petroleum products listed in Entries 1 and 2 of Schedule E. The Court emphasized that the phrase "against such goods" in Section 8 is of importance. Therefore, the Revenue's contention that ITC on evaporation losses should be disallowed based on Entry 5 of Schedule E was rejected. The appeals filed by the State were dismissed.

Facts

These appeals by the Excise and Taxation Commissioner, Haryana, and the State of Haryana, involved multiple petitioners (dealers) and concerned tax periods spanning from 2009-10 to 2014-15. The core issue revolved around the eligibility of Input Tax Credit (ITC) for evaporation losses of petroleum products. The Revenue contended that ITC should not be available for such losses, citing provisions related to the disposal of goods. The dealers, on the other hand, argued for the availability of ITC, considering the inherent nature of petroleum products and the Ministry of Petroleum's allowance for evaporation. The matters were consolidated and heard together by the High Court.

Key Issues

1. Whether Input Tax Credit (ITC) is admissible on evaporation losses of petroleum products, considering the provisions of the Haryana Value Added Tax Act, 2003, specifically Section 8 and Schedule E, read with Explanation (v) to Section 2(1)(zg). Petitioner/Dealer's Arguments: The dealers argued that evaporation losses are an inherent characteristic of petroleum products and not a disposal of goods otherwise than by way of sale. They contended that Section 8 and Entry 1 of Schedule E, when read together, do not preclude ITC on such losses, and that Entry 5 of Schedule E, which deals with disposal otherwise than by sale, is not applicable to petroleum products listed in Entries 1 and 2. Revenue/State's Arguments: The Revenue contended that ITC on evaporation losses should be disallowed, relying on the circumstances mentioned in Schedule E, particularly Entry 5, which pertains to goods disposed of otherwise than by way of sale. They argued that the Division Bench's previous ruling in the All Haryana Petroleum Dealers Association's case, while upholding the vires of Explanation (v) to Section 2(1)(zg), did not definitively address the ITC on evaporation, and that departmental instructions indicated ITC on evaporation should be nil.