Retrospective cancellation of seller registration cannot defeat valid input tax credit already accrued to the buyer.

Input tax credit validly availed on purchases from registered dealers cannot be reversed merely because the selling dealers' registration certificates were later cancelled retrospectively. Where the purchaser bought taxable goods, paid tax, and claimed credit on the strength of invoices and registration certificates that were valid at the time of sale, the retrospective cancellation affects the selling dealer but does not unsettle the buyer's accrued statutory benefit. Section 19(15) of the Tamil Nadu VAT Act cannot be applied to defeat completed transactions where the purchasing dealer acted on a subsisting registration certificate. The challenge to the notices and assessment orders succeeded.

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Issues: Whether input tax credit validly availed on purchases from registered dealers can be reversed merely because the selling dealers' registration certificates were cancelled retrospectively.

Analysis: The petitioners purchased taxable goods from dealers who held valid registration certificates at the time of sale, paid tax on the transactions, and availed input tax credit on the basis of invoices and assessment orders. Section 19(15) of the Tamil Nadu Value Added Tax Act, 2006 contemplates reversal of input tax credit where the selling dealer's registration is cancelled, but the Court held that this provision cannot be applied to unsettle completed transactions where the purchaser acted on valid registration certificates in force at the time of purchase. The retrospective cancellation may affect the selling dealer, but it cannot prejudice a purchasing dealer who relied on the subsisting certificate and lawfully availed the credit. The Court relied on the principle that retrospective cancellation of the seller's registration does not defeat rights already accrued to the buyer on the strength of a valid certificate.

Conclusion: Retrospective cancellation of the selling dealer's registration certificate does not justify reversal of input tax credit already validly availed by the petitioners; the challenge to the notices and assessment orders succeeds.

Ratio Decidendi: A purchasing dealer who has acted on a valid registration certificate in force at the time of sale acquires the statutory benefit attached to that transaction, and retrospective cancellation of the seller's registration cannot destroy that accrued benefit.

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