Excise And Taxation Commissioner Haryana vs. M/S B H Filling Station, Ratia Fatehabad And Another

Held

The Court held in favor of the dealers, ruling that they are entitled to ITC on the evaporation of petroleum products within the prescribed limits. The Court reasoned that the State's contention was based on a misinterpretation of Schedule E, particularly Entry 5, which was not applicable to petroleum products as per Entries 1 and 2. The Court emphasized that Section 8 of the Act and Entry 1 of Schedule E are crucial, and the phrase 'against such goods' is of importance. The Court found that the circumstances mentioned against Entry 5 of Schedule E do not apply to petroleum products. Therefore, evaporation losses, when within the prescribed limits, do not disentitle dealers to ITC. The Court dismissed the appeals filed by the State.

Facts

These appeals by the Excise and Taxation Commissioner, Haryana, and the State of Haryana, involve multiple dealers of petroleum products. The core issue revolves around the eligibility of Input Tax Credit (ITC) for evaporation losses of petrol and High-Speed Diesel (HSD). The tax periods span from 2009-10 to 2014-15. The Excise and Taxation Commissioner challenged various orders that allowed ITC on evaporation losses to the dealers. The procedural history indicates these are appeals filed before the High Court against prior decisions that favored the dealers. The amount in dispute is not explicitly stated but pertains to the ITC claimed on evaporation losses.

Key Issues

1. Whether the evaporation of petroleum products, within the limits prescribed by the Ministry of Petroleum (0.6% for motor spirit and 0.2% for HSD), constitutes a disposal of goods otherwise than by way of sale, thereby disentitling dealers to Input Tax Credit (ITC) under Schedule E of the Haryana Value Added Tax Act, 2003? Petitioner's Arguments (State/Appellant): The State contended that evaporation losses fall under the circumstances mentioned in Schedule E, specifically Entry 5, which disallows ITC when goods are disposed of otherwise than by way of sale. They argued that this would lead to an ever-increasing gap between input tax available and credit availed by dealers, referencing a previous Division Bench judgment. They also pointed to condition (ii) against Entry 5 of Schedule E stating ITC on evaporation shall be nil. Respondent's Arguments (Dealers/Assessees): The dealers argued that evaporation, given the nature of the goods and within prescribed limits, is not a disposal of goods otherwise than by way of sale. They relied on the specific language of Section 8 of the Act and Entry 1 of Schedule E, which pertains to the circumstances mentioned 'against such goods'. They asserted that the conditions in Entry 5 of Schedule E do not apply to petroleum products and natural gas mentioned in Entries 1 and 2.