Input-tax credit cannot be denied merely for supplier default when the purchaser holds valid invoices and registration details.
Input-tax credit refund under the Tamil Nadu VAT scheme cannot be withdrawn solely because suppliers failed to file returns or remit tax, where the purchasing dealer produced the prescribed tax invoices, TIN details and supporting records and the suppliers were registered dealers. The Revenue must pursue the defaulting suppliers instead of denying the purchaser's statutory benefit without showing that the suppliers were non-existent or that invoice requirements were unmet. An assessment order that ignores returns, debit-note particulars and other material already filed by the assessee is liable to be set aside and reconsidered after proper examination of the record and a hearing. The refund withdrawal failed, and the matter was remitted for fresh decision.
Issues: (i) Whether refund of input-tax credit could be withdrawn merely because the vendors had not filed returns or remitted tax, when the purchasing dealer had produced invoices and the vendors were registered dealers; (ii) Whether the second assessment order, which ignored the return and debit-note particulars placed by the assessee, was liable to be set aside and reconsidered.
Issue (i): Whether refund of input-tax credit could be withdrawn merely because the vendors had not filed returns or remitted tax, when the purchasing dealer had produced invoices and the vendors were registered dealers.
Analysis: The claim for input-tax credit was examined against the scheme of the Tamil Nadu Value Added Tax Act, 2006 and Rule 10(2) of the Tamil Nadu Value Added Tax Rules, which require production of the original tax invoice with the prescribed particulars. The assessee had furnished invoices, TIN numbers and supporting details, and the Revenue did not dispute that the vendors were registered dealers on its rolls. In that setting, the mere non-payment of tax by the suppliers could not, by itself, defeat the purchaser's claim. The Revenue was expected to take action against the defaulting vendors, rather than deny the purchaser's refund claim without material to show that the vendors were non-existent or that the statutory requirements were not met.
Conclusion: The withdrawal of refund was unsustainable and the issue was decided in favour of the petitioner.
Issue (ii): Whether the second assessment order, which ignored the return and debit-note particulars placed by the assessee, was liable to be set aside and reconsidered.
Analysis: The later assessment order proceeded on the footing that the refund claim was false, although the assessee had placed returns, debit-note details and related supporting material before the assessing authority. Since those materials were not properly considered, the proper course was to set aside the order and require a fresh decision after examining the return filed in January 2009, the form W materials, the form I return, annexures and the reply already submitted, and after giving the assessee an opportunity of hearing.
Conclusion: The assessment order was set aside and the matter was remitted for fresh consideration in favour of the petitioner.
Final Conclusion: The assessee succeeded on both writ petitions: the refund withdrawal could not be sustained on the ground of the suppliers' default, and the later assessment was set aside for reconsideration on the existing record.
Ratio Decidendi: A purchasing dealer's claim to input-tax credit cannot be rejected merely because the supplier failed to remit tax, where the purchaser has produced the prescribed tax invoice particulars and the supplier is shown as a registered dealer; any default by the supplier must be addressed against the supplier, not by denying the purchaser's statutory benefit.