Input-tax credit depends on invoice-tax charged, not actual cash payment, where lawful adjustment or set-off applies.

Input-tax credit under section 76(6)(c) of the Uttaranchal Value Added Tax Act, 2005 is linked to the "tax charged" in the invoice, meaning the quantified tax liability reflected there and not necessarily cash remittance by the seller. Where the tax has been lawfully adjusted or set off under the scheme, the purchasing dealer's credit is not defeated by non-payment in cash. A departmental circular restricting credit to actual cash payment was therefore inconsistent with the statute, and the notice based on that circular lacked legal foundation.

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Issues: (i) Whether, under section 76(6)(c) of the Uttaranchal Value Added Tax Act, 2005, a purchasing dealer can claim input-tax credit only on actual payment of tax to the selling dealer, or whether adjustment or set-off of the quantified tax shown in the sale invoice is sufficient; (ii) Whether the departmental circular and consequential notice denying input-tax credit on the ground of non-payment of tax were sustainable.

Issue (i): Whether, under section 76(6)(c) of the Uttaranchal Value Added Tax Act, 2005, a purchasing dealer can claim input-tax credit only on actual payment of tax to the selling dealer, or whether adjustment or set-off of the quantified tax shown in the sale invoice is sufficient.

Analysis: The expression "tax charged" in section 76(6)(c) was construed to mean the tax liability quantified and reflected in the invoice, not necessarily tax actually paid in cash. The scheme of the Act permits payment of tax by adjustment or set-off, and the corresponding tax liability of the exempted seller is also adjusted against the exemption entitlement. The Court treated the provision as one granting exemption-related benefit and applied a liberal construction once the dealer fell within the statutory coverage. It relied on the distinction between exigibility to tax and actual payment of tax, and held that the purchasing dealer's entitlement does not depend on physical remittance by the seller if the amount has otherwise been adjusted or set off in law.

Conclusion: The purchasing dealer was entitled to input-tax credit even without actual cash payment to the seller, if the tax charged stood adjusted or set off.

Issue (ii): Whether the departmental circular and consequential notice denying input-tax credit on the ground of non-payment of tax were sustainable.

Analysis: Since section 76(6)(c) did not require actual payment of tax in cash, the circular restricting credit only to cases of such actual payment was inconsistent with the statute. The notice issued solely on the basis of that circular therefore lacked legal foundation. As the provisional assessment orders in connected matters proceeded on the same erroneous premise, they were equally unsustainable.

Conclusion: The circular, the notice, and the connected provisional assessment orders were quashed.

Final Conclusion: The statutory benefit of input-tax credit could not be denied merely because the tax shown in the seller's invoice had not been physically paid in cash, where the liability stood lawfully adjusted or set off; the petitions succeeded and the impugned administrative action failed.

Ratio Decidendi: For purposes of input-tax credit under an exemption-linked sales tax scheme, "tax charged" denotes the quantified tax liability reflected in the invoice and lawfully adjustable against the seller's exemption entitlement, and does not require actual cash payment by the purchaser.

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