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2022 (3) TMI 746 - PUNJAB AND HARYANA HIGH COURTInput Tax Credit - evaporation/handling losses of the petroleum products - HELD THAT:- As per provisions of Act, the tax paid to the State by the oil companies on the goods sold, would be ITC available to the purchasing dealers. 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 vires of Explanation (v) to Section 2(1) (zg) of the Act was subject matter of challenge before the Division Bench of this Court in ALL HARYANA PETROLEUM DEALERS ASSOCIATION VERSUS STATE OF HARYANA AND OTHERS [2014 (11) TMI 966 - PUNJAB AND HARYANA HIGH COURT]. The vires of provisions were upheld by the Division Bench. The issue with regard to reversal of input tax credit on evaporation was not subject matter before the Division Bench. However, a peripheral argument was raised by the petitioner that there would be an ever increasing gap between input tax available and the credit availed by dealers. The Division Bench rejected the argument considering that Ministry of Petroleum allowed evaporation losses to the extent of 0.6% for motor spirit and 0.2% for HSD - The Division Bench had not considered the language of Section 8 of the Act and Entry 1 of schedule E. Section 8 specifically provides 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. “Against such goods” is of importance. Even from the reading of Entry 5 of Schedule E, it is clear that entry applies to goods other than those mentioned in Entries 1 and 2 of Schedule E. The question is answered in favour of the dealer i.e. assessee shall be entitled to ITC on evaporation of the petroleum products - The appeals filed by the State are accordingly dismissed.
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