Input Tax Credit cannot be denied to a compliant purchaser merely because the selling dealer failed to remit tax.

Input Tax Credit under the Tamil Nadu VAT Act could not be reversed against a purchasing dealer solely because the selling dealer failed to remit tax, where the purchaser had disclosed the transactions, held valid tax invoices, and otherwise satisfied the statutory conditions for credit. The court applied its earlier view on Section 19(1) and held that the proper course was to proceed against the defaulting seller rather than deny credit to the buyer. The reversal of Input Tax Credit was therefore set aside, with liberty preserved to take action against the sellers in accordance with law.

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Issues: Whether Input Tax Credit claimed by a purchasing dealer could be reversed on the ground that the selling dealers had not remitted tax to the department.

Analysis: The dispute turned on the scope of Section 19(1) of the Tamil Nadu Value Added Tax Act, 2006. The Court followed its earlier view that once the purchasing dealer had disclosed the purchases, held valid tax invoices, and claimed credit in accordance with the statute, the credit could not be denied merely because the selling dealer had not paid tax. The proper course, if necessary, was to proceed against the selling dealer.

Conclusion: Input Tax Credit could not be reversed against the purchasing dealer on the ground of non-payment of tax by the selling dealers.

Final Conclusion: The writ petition succeeded and the impugned reversal of Input Tax Credit was set aside, leaving liberty to proceed against the sellers in accordance with law.

Ratio Decidendi: A purchasing dealer's Input Tax Credit cannot be reversed solely because the selling dealer failed to remit tax, where the statutory requirements for claiming credit are otherwise satisfied.

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