Court protects purchasing dealer in tax dispute, directs recovery from selling dealer. Alternative remedy not a bar.

The Court held that the purchasing dealer cannot be held liable for non-payment by the selling dealer if the purchasing dealer had proof of tax payment on purchases. The Court found the revocation of input tax credit based on the selling dealer's non-payment to be incorrect and directed the department to pursue the selling dealer for tax recovery. Despite the availability of an alternative remedy, the Court allowed the writ petition, emphasizing that the alternative remedy should not prevent consideration of the petition due to the incorrectness of the revision orders. The impugned order was set aside, and the writ petition was allowed with no costs imposed.

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Issues: Liability of purchasing dealer for non-payment by selling dealer, Revocation of input tax credit, Alternative remedy

Liability of purchasing dealer for non-payment by selling dealer:
The petitioner, a purchasing dealer, challenged an order holding them liable for non-payment by the selling dealer. The Court referenced a previous case where it was established that the liability should be on the selling dealer, not the purchasing dealer who had proof of tax payment on purchases. The Court noted that the authority cannot revoke input tax credit based on the selling dealer's non-payment, especially when the purchasing dealer had paid the tax and claimed the credit, as confirmed during self-assessment. The Court found the orders revising the input tax credit to be incorrect and contrary to the TNVAT Act and Rules, directing the department to pursue the selling dealer for tax recovery.

Revocation of input tax credit:
The Court examined Sub-section (16) of Section 19, which allows provisional input tax credit but does not authorize revocation based on the selling dealer's non-payment. The Court emphasized that the authority cannot revoke input tax credit if the purchasing dealer had paid the tax to the selling dealer and claimed the credit properly. The Court deemed the revision orders revising input tax credit as incorrect and erroneous, emphasizing that the department should pursue the selling dealer for tax recovery instead of penalizing the purchasing dealer.

Alternative remedy:
The respondent argued that the petitioner had an alternative remedy to address the issue, contending that the objections were considered, and a detailed order was passed. However, the Court held that the writ petition should be allowed despite the availability of an alternative remedy. The Court emphasized that the alternative remedy should not bar the consideration of the writ petition, especially in light of the facts presented and the incorrectness of the revision orders. Consequently, the impugned order was set aside, and the writ petition was allowed, with no costs imposed.

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