In the recent judgement by Hon’ble High Court of Punjab and Haryana in All Haryana Petroleum Dealers Association vs. State of Haryana (2014) 71 VST 185 (P&H) the vires of Explanation (v) to Section 2(1)(zg) of the Haryana Value Added Tax Act, 2003 was challenged on the ground that it is violative of Article 246 read with Entry 54 of List II of Seventh Schedule to Constitution of India.
The issue arose as a result of Notification No. Leg. 22/2011 dated September 29, 2011 which amended the definition of “sales price” under section 2(1) (zg) of Haryana Value added Tax, 2003 by inserting explanation (v). The effect of the amendment was that the sale price for the purpose of charging VAT, now included the commission payable to retail dealers for sale of petroleum products. Therefore, the VAT would now be charged on final price at which petrol is sold to the consumers which includes Commission of retail dealers/profits of seller. Thus, the Hon’ble Court was to decide the question whether State of Haryana is empowered to collect tax on the commission income of petrol dealers by way of modifying definition of “sales price” in Haryana Value Added Tax Act, 2003.
It was held by the High Court that State of Haryana is not violating the Article 246 read with entry 54 of seventh schedule of Constitution of India as the amended definition of “sales price” is in conformity of business practice of Oil companies and dealers.
Another issue which arose due to the aforesaid amendment was in respect of adjustment of the excess input tax credit which accumulated in the hands of petroleum dealers because of evaporation loss of petrol products. This was due to the fact that output tax liability of the dealers is lower on account of evaporation loss leading to tax being carried forward on a regular basis.
As regards the adjustment of Input tax credit the Hon’ble High Court held that the Input tax credit shall not be allowed for evaporated goods as state of Haryana in its circular dated 21.03.2013 issued by Excise and Taxation Department has clarified that no credit shall be allowed for goods on which no output tax liability is arising.
Atul Kumar Gupta
B Com (Hons) FCA, FCMA, MIMA, CIQA, PGDEMM
Central Council Member of ICAI (2013-16)
Former Chairman NIRC of Institute of Chartered Accountants of India
Former Chairman NIRC of Institute of Cost Accountants of India
Author of “An Introduction to Service Tax” & “Comprehensive Guide to Service Tax”
M: 9810103611 E: email@example.com