Input tax credit cannot be denied solely for seller defaults when the purchaser has valid invoices and supporting proof.

Writ jurisdiction was treated as maintainable despite an alternate appellate remedy because the assessment order was non-speaking, ignored objections and supporting documents, and showed non-application of mind. Reversal of input tax credit was held unjustified where the purchaser relied on valid tax invoices and produced material such as vendor confirmations, since the authority proceeded on assumptions about seller defaults without properly reconciling the record. The assessment was therefore set aside for arbitrariness and failure to consider the evidence, reinforcing that purchaser credit cannot be denied solely because the selling dealer allegedly failed to file returns or pay tax.

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Issues: (i) Whether the writ petition was maintainable notwithstanding the alternate appellate remedy under the Tamil Nadu Value Added Tax Act, 2006; (ii) Whether reversal of input tax credit was justified merely because the selling dealers had allegedly not filed returns, not paid tax, were treated as unregistered dealers, or had had their registrations retrospectively cancelled.

Issue (i): Whether the writ petition was maintainable notwithstanding the alternate appellate remedy under the Tamil Nadu Value Added Tax Act, 2006.

Analysis: The existence of an appellate remedy does not by itself bar writ jurisdiction. The impugned assessment was found to be a non-speaking order that ignored the petitioner's objections and the documentary material produced, including vendor confirmations and tax invoices. The order also reflected non-application of mind and serious procedural infirmity, making insistence on the alternate remedy unjustified.

Conclusion: The writ petition was maintainable and the preliminary objection was rejected.

Issue (ii): Whether reversal of input tax credit was justified merely because the selling dealers had allegedly not filed returns, not paid tax, were treated as unregistered dealers, or had had their registrations retrospectively cancelled.

Analysis: Input tax credit had been claimed on the basis of valid tax invoices and material was produced to show payment and vendor confirmation for a substantial part of the turnover. The assessing authority failed to reconcile the data, failed to consider the material produced, and proceeded on incorrect assumptions regarding the status of some vendors. The reasons assigned for reversal were therefore arbitrary and contrary to the settled approach that the purchasing dealer should not be denied credit solely because of default on the seller's side when the purchaser has complied with the prescribed requirements.

Conclusion: Reversal of input tax credit was not justified and the assessment order was unsustainable.

Final Conclusion: The assessment was set aside for arbitrariness, non-application of mind, and failure to consider the petitioner's evidence, with the result that the petitioner succeeded in challenging the reversal of input tax credit.

Ratio Decidendi: A purchasing dealer who claims input tax credit on valid tax invoices and produces supporting material cannot be denied that credit solely because the selling dealer failed to file returns or remit tax, especially where the assessing authority ignores the material on record and passes a non-speaking and arbitrary order.

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