Input tax credit reversal cannot rest on seller default when purchaser's tax payment is shown and statutory limits do not permit it

Input tax credit cannot be reversed against a purchasing dealer under the provisional-credit provision merely because the selling dealer allegedly failed to remit tax, where the purchaser has shown payment for purchases and the claim was accepted in self-assessment. On those admitted facts, recovery must be pursued against the defaulting selling dealer, and the revision orders were inconsistent with the TNVAT Act and Rules. The court also held that the existence of an alternate statutory remedy was not an absolute bar to writ relief where the impugned action was legally untenable. The writ petition was therefore maintainable and the impugned order was set aside.

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Issues: (i) Whether input tax credit could be reversed by invoking section 19(16) merely because the selling dealer had allegedly not paid tax. (ii) Whether the availability of an alternative statutory remedy barred the writ petition.

Issue (i): Whether input tax credit could be reversed by invoking section 19(16) merely because the selling dealer had allegedly not paid tax.

Analysis: The provision governing provisional input tax credit was held not to authorise reversal on the basis that the selling dealer failed to remit tax where the purchasing dealer had shown payment for purchases and the tax claim had been accepted in self-assessment. The liability, on the admitted facts, was to be pursued against the selling dealer in accordance with law, and the impugned revision orders were found inconsistent with the TNVAT Act and Rules.

Conclusion: The reversal of input tax credit was unsustainable and the assessee succeeded on merits.

Issue (ii): Whether the availability of an alternative statutory remedy barred the writ petition.

Analysis: The existence of an alternate remedy was not treated as an absolute bar in the circumstances, particularly where the impugned action was found to be legally untenable on the admitted facts.

Conclusion: The writ petition was maintainable and the objection based on alternative remedy was rejected.

Final Conclusion: The impugned order was set aside and the assessee obtained relief in writ jurisdiction.

Ratio Decidendi: Input tax credit cannot be reversed against a purchasing dealer under the provisional-credit provision merely because the selling dealer has allegedly defaulted in remitting tax, where the purchase tax payment is shown and the statutory provision does not cover such a case.

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