Input-tax credit on purchases from exempt sellers cannot be denied when invoice and exemption-certificate conditions are satisfied

A purchasing dealer remained entitled to input-tax credit on purchases from a seller exempted under section 76(6)(c) of the Uttaranchal Value Added Tax Act, 2005, because the statute linked credit to the tax shown in the invoice and the exemption certificate issued by the seller. The later 2008 amendment was treated as clarificatory and did not defeat credit where statutory conditions were met. A Commissioner's circular could not override that statutory entitlement, and the seller's exemption did not amount to unjust enrichment against the purchaser. The refusal to grant input-tax credit was therefore unsustainable.

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Issues: Whether a purchasing dealer was entitled to input-tax credit on purchases made from a dealer enjoying exemption from tax under section 76(6)(c) of the Uttaranchal Value Added Tax Act, 2005, and whether the 2008 amendment or the Commissioner's circular could deny that credit.

Analysis: The provision, as it stood before 31 March 2008, entitled the purchasing dealer to input-tax credit of the tax charged in the sale invoice together with the amount of exemption certified by the selling dealer. The subsequent amendment clarified that the purchaser could claim credit to the extent of the tax otherwise payable on the input, even where the selling dealer had been exempted. The exemption granted to the seller was a conscious statutory benefit and did not create unjust enrichment in favour of the purchaser when credit was claimed in accordance with the certificate appended to the invoice.

Conclusion: The purchasing dealer was entitled to input-tax credit even on purchases from exempted dealers, and the appeals failed.

Final Conclusion: The refusal to allow input-tax credit was unsustainable, and the common judgment allowing the writ petitions remained undisturbed.

Ratio Decidendi: Where the statute grants input-tax credit linked to the seller's invoice and exemption certificate, credit cannot be denied merely because the seller was exempt from tax, so long as the statutory conditions are satisfied.

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