Input Tax Credit available on evaporation loss of petrol pumps: High Court Of Punjab And Haryana

The High Court Of Punjab And Haryana recently pronounced that the assessee shall be entitled to Input Tax Credit (ITC) on evaporation of the petroleum products.

In this matter, Respondent is the dealer running a petrol pump and engaged in the purchase and sale of petroleum. For the assessment year 2010-11 [for short ‘A.Y.’], the assessment was finalized by Excise and Taxation Officer-cum-Assessing Authority, Bhiwani on 23rd December 2013 allowing the claim of ITC. Revisional Authority revised the assessment vide order dated 19th August 2016. ITC for evaporation losses was reversed. The Tribunal accepted the contention of the dealer and allowed the appeal on 3rd July 2017. It was held that Assessing Authority rightly allowed the claim of ITC on evaporation.

Mr. Samarth Sagar, Additional Advocate General, Haryana appearing for the State/Appellant argued that disposal of evaporated Petrol and HSD was otherwise than by way of sale hence the dealer was not entitled to ITC as per Entry 5 of Schedule E of the Act.

Mr. Sandeep Goyal, an Advocate appearing for the dealers defended the order of the Tribunal. He contended that Entry 5 of Schedule E does not deal with petroleum products. He raised an argument that considering the nature of the goods involved, it cannot be held that goods were disposed of otherwise than by way of sale.

As per the High Court, the tax paid to the State by the oil companies on the goods sold would be ITC available to the purchasing. There would be no ITC for tax paid on the goods specified in Schedule E when used or disposed of in the circumstances mentioned against those goods. The circumstances mentioned in Schedule E against petroleum products and natural gas are that when used as fuel or exported out of the State. Entry 5 of Schedule E is not dealing with the items mentioned at Entries 1 and 2. In other words, circumstances mentioned against Entry 5 are not applicable to petroleum products and natural gas.

The bench of Judges Avneesh Jhingan, Ajay Tewari, and Pankaj Jain accordingly dismissed The appeals filed by the State.