Input tax credit cannot be reversed from a purchaser solely due to the seller's tax default under Tamil Nadu VAT law.

Input tax credit validly claimed by a purchasing dealer cannot be reversed merely because the selling dealer failed to file returns or remit tax, where the purchaser paid tax and satisfied the prescribed invoice and self-assessment conditions under the Tamil Nadu VAT Act. Section 19(16) permits revocation only if the claim is incorrect, incomplete, or otherwise not in order, and a seller's default does not by itself make the buyer's claim defective. Recovery, if any, lies against the defaulting selling dealer. On that basis, the court set aside the input tax credit reversal, penalty proposals, and revision orders.

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Issues: Whether input tax credit could be reversed from the purchasing dealer merely because the selling dealer failed to file returns or remit tax.

Analysis: The registered dealer had paid tax to the seller, produced the prescribed tax invoice particulars, and claimed input tax credit in self-assessment. Section 19(1) of the Tamil Nadu Value Added Tax Act, 2006 permits input tax credit where the tax due on the purchase has been paid in the prescribed manner, and the requirement was satisfied on the admitted facts. Section 19(16) makes the credit provisional, but it authorises revocation only where the claim is incorrect, incomplete, or otherwise not in order. A default by the selling dealer in remitting tax does not make the purchaser's otherwise valid claim incorrect, nor does it justify fastening the seller's liability on the buyer. The proper course is recovery against the selling dealer.

Conclusion: The reversal of input tax credit and the connected penalty proposals were unsustainable and liable to be set aside in favour of the assessee.

Final Conclusion: The writ petitions succeeded, and the impugned revision orders were quashed.

Ratio Decidendi: Input tax credit validly availed by a purchasing dealer cannot be denied or reversed solely on the ground that the selling dealer failed to remit the tax, where the purchaser has paid the tax and complied with the prescribed conditions.

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