Input tax credit cannot be reversed on vendor verification alone when purchase invoices and supporting records are produced.

Input tax credit reversal cannot be sustained solely on vendor verification where the purchasing dealer has produced purchase invoices and supporting particulars, and the assessment order does not meaningfully consider the dealer's reply. The governing principle is that adverse action must follow a fair process and relevant material must be examined before denying credit. If the purchasing dealer shows purchases from a registered seller and the record supports the claim, the Revenue should not mechanically reject the credit on a summary vendor-based objection and may instead proceed against the defaulting vendor. On these facts, the reversal of input tax credit was held unsustainable and the impugned order was quashed.

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Issues: Whether reversal of input tax credit could be sustained when the assessment was based solely on verification of the vendor and without proper consideration of the assessee's reply and supporting invoices.

Analysis: The assessment proposal and the impugned order proceeded on the basis of the inspection and the vendor's position, without calling for the books and without effectively considering the assessee's explanation and purchase invoices. The governing principle applied was that, where the purchasing dealer is shown to have made purchases from a registered dealer and relevant particulars are available, adverse action should not be taken mechanically against the purchaser without proper verification and observance of fairness in decision-making. The challenge was also supported by the Court's earlier view that, in such situations, the Revenue must proceed against the defaulting vendor rather than deny the purchaser's legitimate claim on a summary vendor-based objection.

Conclusion: The reversal of input tax credit was unsustainable and the impugned order was liable to be quashed in favour of the assessee.

Ratio Decidendi: An input tax credit claim cannot be denied or reversed merely on the basis of vendor verification when the assessee has furnished supporting purchase particulars and the assessment is made without proper consideration of the reply and relevant material; the Revenue must adopt a fair procedure and proceed against the defaulting seller if necessary.

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