Input tax credit cannot be denied on genuine registered-dealer purchases supported by invoices and bank payments; consequential entry tax fails.

Where registered dealers supported the transactions with tax invoices and bank payments, and the purchases were found genuine on verification, input tax credit could not be denied on the ground that there was no actual sale or purchase. The court accepted the factual finding that both dealers were registered during the relevant period and that the goods were tax paid. Once input tax credit was sustained, the consequential levy of entry tax, which depended on its denial, could not survive.

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Issues: Whether the assessee was entitled to input tax credit when the selling and purchasing dealers were found registered and the transactions were supported by tax invoices and bank payments; and whether entry tax could be levied consequentially once input tax credit was allowed.

Analysis: The denial of input tax credit rested on the supposed non-registration of the dealers, but the factual findings recorded that both the selling and purchasing dealers were registered during the relevant period and that the payments were made through banking channels. The transactions were supported by tax invoices and the goods were found to be tax paid. The contention based on Rule 21(3) of the Uttar Pradesh Value Added Tax Rules, 2008, namely that input tax credit could be denied in the absence of actual sale or purchase of goods, was not accepted because the tribunal had found the purchases to be genuine on verification. Once the benefit of input tax credit was sustained, the levy of entry tax, being consequential to its denial, could not survive.

Conclusion: The assessee was entitled to input tax credit, and the consequential levy of entry tax was not attracted.

Final Conclusion: The revisions failed on merits because the factual basis for denying input tax credit was not sustainable, with the result that the assessee succeeded and the connected entry tax demand also fell.

Ratio Decidendi: Where registered dealers have supported transactions by tax invoices and bank payments and the purchases are found genuine on verification, input tax credit cannot be denied on the ground of absence of actual sale or purchase, and a consequential levy dependent on such denial cannot be sustained.

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