Input-tax credit requirements held directory where genuine transactions and supporting documents could still be verified.

Input-tax credit could not be denied solely because every prescribed detail was missing from the seller's bills and money receipts, where the essential particulars were available and the transaction could be verified; the authorities were required to examine genuineness rather than reject the claim outright. Payment by account payee cheque or draft was also treated as directory, not mandatory, because the payment rule was aimed at preventing false claims and contained an exception reflecting practical banking constraints. Since payment was made through bank to a State undertaking and the genuineness of the sale remained open to verification, the disallowance was set aside and the claim left for fresh examination on the supporting documents.

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Issues: (i) Whether input-tax credit could be denied for want of a tax invoice or for minor omissions in the seller's money receipts and bills, and whether such documents could be verified to establish a genuine sale. (ii) Whether payment by account payee cheque or account payee draft under the payment rule was mandatory so as to bar input-tax credit when payment was made through bank to a State undertaking that did not accept such instruments.

Issue (i): Whether input-tax credit could be denied for want of a tax invoice or for minor omissions in the seller's money receipts and bills, and whether such documents could be verified to establish a genuine sale.

Analysis: Input-tax credit under the statute is available only on receipt of an original tax invoice, and the prescribed rule sets out the contents of a tax invoice. The prescribed format serves administrative convenience, but absence of some ancillary particulars does not by itself invalidate the document if the material particulars are available. Where the essential information is present and the transaction can be verified, the authorities may examine the documents further instead of rejecting the claim outright.

Conclusion: Denial of input-tax credit solely for absence of every prescribed detail was not justified, and verification of the bills and money receipts was required.

Issue (ii): Whether payment by account payee cheque or account payee draft under the payment rule was mandatory so as to bar input-tax credit when payment was made through bank to a State undertaking that did not accept such instruments.

Analysis: The payment rule contains an express proviso recognising situations where banking facility is unavailable, showing that the rule is directed to preventing false claims and ensuring genuineness rather than imposing an inflexible bar. If the dealer can establish the genuine nature of the transaction and explain the mode of payment, input-tax credit cannot be denied merely because the price was not paid by account payee cheque or draft. On the facts, the payment was made through bank to a State Government undertaking, and the refusal of that undertaking to accept cheque payment required consideration.

Conclusion: The payment requirement was treated as directory, and non-payment by cheque or draft did not automatically defeat the claim for input-tax credit.

Final Conclusion: The disallowance of input-tax credit was set aside for fresh verification of the transactions and supporting bills, leaving the claim to be decided on genuineness after such examination.

Ratio Decidendi: A procedural requirement governing input-tax credit is directory, not mandatory, where the statute's object is to prevent false claims and the assessee can establish the genuineness of the transaction and the substance of the tax invoice.

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