Input tax credit cannot be denied to a buyer for a seller's non-remittance when purchase payment and returns are duly proved.

Input tax credit cannot be denied to a registered purchasing dealer merely because the seller did not remit the tax, where the buyer has shown payment on purchases and complied with the prescribed return requirements. The statutory scheme places any liability for non-remittance on the selling dealer, not on the buyer claiming credit in accordance with the rules. On that basis, the demand for proof of the seller's remittance was unsustainable, and the impugned assessment orders were set aside.

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Issues: Whether input tax credit could be denied to the purchasing dealer by insisting on proof that the seller had remitted the tax, and whether the impugned assessment orders were sustainable.

Analysis: The governing provisions permit input tax credit to a registered dealer when the purchase tax has been paid in the manner prescribed. The cited precedent held that where the purchasing dealer has shown proof of payment on purchases and has complied with the prescribed return requirements, the purchasing dealer cannot be burdened for the seller's failure to remit the collected tax. The liability, if any, lies on the selling dealer and not on the buyer who claims credit in accordance with the statutory scheme and the prescribed rule.

Conclusion: The purchasing dealer was entitled to input tax credit, and the demand to produce proof of tax payment by the seller could not be sustained. The impugned orders were set aside in favour of the petitioner.

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