Input tax credit restrictions upheld as a valid fiscal control measure against constitutional challenge.

Input tax credit under the VAT regime is a statutory concession, not an indefeasible right, so the Legislature may impose conditions and restrictions to prevent excess credit and tax leakage. Applying the strong presumption of constitutionality in fiscal legislation, the Court held that section 18(3A) of the Rajasthan Value Added Tax Act, 2003 operates as a valid restriction in the statutory scheme and is not arbitrary or violative of Articles 14, 19(1)(g) or 300A. The constitutional challenge therefore failed and the provision was upheld.

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Issues: Whether section 18(3A) of the Rajasthan Value Added Tax Act, 2003, which restricts input tax credit where goods are subsequently sold at subsidized price, is unconstitutional as being arbitrary and violative of Articles 14, 19(1)(g) and 300A of the Constitution of India.

Analysis: Input tax credit under the VAT regime is a statutory concession and not an indefeasible independent right. The Legislature was competent to regulate the conditions for availing that concession, including time limits and restrictions meant to prevent excess credit and tax leakage. In fiscal legislation, the Court must adopt a strong presumption of constitutionality and exercise restraint, interfering only on clear proof of constitutional breach. The expression used in section 18(3A) was not read as a governmental subsidy scheme but as a restriction linked to sales below purchase cost in the statutory context. The challenge that the provision was contrary to the basic concept of input tax credit was rejected, as the provision was held to be within legislative power and not shown to be arbitrary or unconstitutional.

Conclusion: Section 18(3A) of the Rajasthan Value Added Tax Act, 2003 is constitutionally valid and the challenge under Articles 14, 19(1)(g) and 300A fails.

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