Punjab & Haryana High Court: ITC Available on Evaporation Loss of Petroleum Products

The Punjab and Haryana High Court has ruled that the taxpayers can claim Input Tax Credit (ITC) under the Value Added Tax (VAT) on the evaporation loss of petrol and diesel.

The assessee is in the business of running a petrol pump and is engaged in the purchase and sale of petroleum products. The assessment was finalised for the assessment year 2010–11 by the Excise and Taxation Officer-cum-Assessing Authority, allowing the claim of ITC for evaporation loss of petroleum products.

However, the revisional authority revised the assessment and reversed the ITC for evaporation losses. Hence, the assessee approached the tribunal to allow the ITC on the evaporated loss of petroleum products.

After reviewing the application, the tribunal accepted the dealer’s contention and allowed the appeal. It also held that the Assessing Authority rightly allowed the claim of ITC on evaporation loss and dismissed the review application filed by the state on 4th May 2018. 

Later, the Excise authority has appealed against the tribunal’s orders. The counsel appearing for the department contended that the issue was covered in favour of the appellant by the decision of the Division Bench of Punjab and Haryana Court in All Haryana Petroleum Dealers Association’s case.

It also held that evaporated petrol and HSD disposal was not by way of sale. Hence, the assessee was not entitled to ITC as per Entry 5 of Schedule E of the Act.

The court observed that the contention raised by counsel for the department had a misconception because it was based upon circumstances mentioned in Entry 5 of the Haryana VAT Act, 2003, i.e., when the goods are disposed of otherwise than by way of sale.

If the contention is accepted, it will add circumstances to Entry 1 of Schedule E of the Haryana VAT Act, 2003. Hence, the Punjab & Haryana High Court bench consisting of Justice Ajay Tewari, Justice Avnish Jhingan and Justice Pankaj Jain has ruled that the assessee can claim ITC in evaporation loss of petroleum products.

For any clarifications/feedback on the topic, please contact the writer at dvsr.anjaneyulu@cleartax.in