Excise And Taxation Commissioner Haryana vs. M/S Munjhal Filling Station Safidon Jind And Another

Held

The High Court held in favour of the dealers, ruling that they are entitled to claim Input Tax Credit (ITC) on the evaporation of petroleum products within the prescribed limits. The Court reasoned that the State's contention, which relied on Entry 5 of Schedule E, was flawed because Entry 5 applies to goods other than those mentioned in Entries 1 and 2 of Schedule E, which include petroleum products. The Court emphasized that the phrase "against such goods" in Section 8 of the Act is of importance, indicating that the exclusionary circumstances in Schedule E must be specifically applicable to the goods in question. The Court found that the circumstances mentioned against Entry 5 were not applicable to petroleum products. While acknowledging the previous Division Bench judgment regarding the vires of Explanation (v) to Section 2(1)(zg) and a peripheral argument on evaporation losses, the Court noted that the Division Bench had not specifically considered the language of Section 8 and Entry 1 of Schedule E in detail. Therefore, the Court concluded that the statute clearly permits ITC on evaporation losses of petroleum products, dismissing 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 revenue authorities sought to deny ITC on these losses, contending that evaporation constituted a disposal of goods otherwise than by way of sale, thereby falling under the exclusionary provisions of Schedule E of the Haryana Value Added Tax Act, 2003. The dealers, on the other hand, argued for the admissibility of ITC on such losses, which are statutorily permitted by the Ministry of Petroleum. The tax periods under dispute span several years, primarily between 2009-10 and 2014-15.

Key Issues

1. Whether, under the Haryana Value Added Tax Act, 2003, dealers are entitled to claim Input Tax Credit (ITC) on the evaporation losses of petroleum products (petrol and HSD) that occur within the prescribed limits. Contentions of the Petitioner/Revenue: The State/appellant argued that evaporation losses are a disposal of goods otherwise than by way of sale, and therefore, ITC on such losses should be denied as per the provisions of Schedule E, particularly Entry 5. They relied on the interpretation that such losses fall under the circumstances mentioned against goods in Schedule E, leading to the reversal of ITC. They also referred to a previous Division Bench judgment in All Haryana Petroleum Dealers Association’s case, which upheld the vires of Explanation (v) to Section 2(1)(zg) and mentioned that as per condition (ii) against Entry 5 of Schedule E, the ITC on evaporation shall be nil. Contentions of the Respondent/Dealers: The dealers contended that evaporation losses, being within the statutorily permitted limits (0.6% for motor spirit and 0.2% for HSD), are an inherent characteristic of the goods and not a disposal otherwise than by way of sale. They argued that Section 8 of the Act and Entry 1 of Schedule E, which deal with petroleum products, do not impose the restrictions mentioned in Entry 5. They asserted that the exclusion in Schedule E applies to goods other than those mentioned in Entries 1 and 2, and that the circumstances mentioned against Entry 5 are not applicable to petroleum products.