Input tax credit cannot be denied solely for seller non-remittance where the purchaser complied with statutory requirements.

Input tax credit could not be reversed merely because the selling dealers failed to remit tax, where the purchasing dealer had complied with the statutory requirements and shown tax paid on purchases. Section 19(1) of the Tamil Nadu VAT Act and rule 10(2) of the Tamil Nadu VAT Rules were treated as protecting the purchaser in such circumstances, while the seller's non-remittance was a matter for action against the seller. Section 19(16) was not read as authorising cancellation of credit on that ground alone. The orders confirming reversal of input tax credit were therefore unsustainable and were set aside, with the matter remitted for fresh consideration on merits.

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Issues: Whether input tax credit could be reversed merely because the selling dealers had not remitted tax, and whether the impugned orders confirming reversal of input tax credit were sustainable.

Analysis: The petitioner had produced replies and relied on the statutory scheme governing input tax credit. The cited authorities treated section 19(1) of the Tamil Nadu Value Added Tax Act, 2006 and rule 10(2) of the Tamil Nadu Value Added Tax Rules, 2007 as protecting a purchasing dealer who had complied with the prescribed requirements and shown payment of tax on purchases. The decisions also treated the seller's failure to remit tax as a matter to be pursued against the seller, not as a ground to deny credit to the purchaser. Section 19(16) was held not to authorise cancellation of input tax credit on that ground alone.

Conclusion: The impugned orders were unsustainable and were set aside. The matter was remitted to the authority for fresh consideration on merits and in accordance with law.

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