Court allows input tax credit for registered dealers despite unpaid tax by selling dealer

The court set aside the impugned orders passed by the respondent and allowed the writ petitions. The court held that a registered dealer can claim input tax credit if they establish payment of tax on purchases, even if the selling dealer had not paid the collected tax. The liability for unpaid tax by the selling dealer should not be imposed on the purchasing dealer who had provided proof of tax payment on purchases. No costs were awarded, and connected miscellaneous petitions were closed as a result of the judgment.

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Issues:
Challenging impugned orders passed by respondent, mismatching transactions leading to tax liability, input tax credit claim, interpretation of Section 19(1) of TNVAT Act, applicability of previous court decision.

Analysis:
The petitioner, a registered dealer, challenged orders passed by the respondent regarding mismatching transactions leading to a proposed tax liability. The petitioner had filed Form I Returns for the years in question, reporting total and taxable turnover. The respondent issued a notice based on discrepancies in the returns, proposing to bring certain transactions under the taxable net element. The petitioner, in accordance with relevant provisions, claimed Input Tax Credit and argued against the respondent's demand for proof of tax payment by the seller. The petitioner relied on a previous court decision to support their case.

The respondent, represented by the Additional Government Pleader, contended that the issue at hand was covered by a previous court decision involving similar circumstances. The court referred to the relevant portion of the previous decision, emphasizing that a registered dealer can claim input tax credit if they establish payment of tax on purchases. The court highlighted that the petitioner's self-assessment under the TNVAT Act justified their claim for input tax credit, even if the selling dealer had not paid the collected tax. The court held that the liability for unpaid tax by the selling dealer should not be imposed on the purchasing dealer who had provided proof of tax payment on purchases.

Based on the above analysis and the interpretation of Section 19(1) of the TNVAT Act, the court set aside the impugned orders passed by the respondent and allowed the writ petitions. No costs were awarded, and connected miscellaneous petitions were closed as a result of the judgment.

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