Input tax credit cannot depend on a seller's tax deposit when the buyer has met all statutory conditions.

Input tax credit under the Rajasthan VAT regime cannot be denied to a bona fide purchasing dealer merely because the selling dealer failed to deposit the collected tax. Where the purchaser bought from a registered dealer, retained invoices and filed prescribed returns, its own statutory compliance was sufficient, and the burden of proving the seller's treasury deposit could not be shifted to it. Rule 18 was read down to the extent it made credit contingent on verification of the seller's actual tax deposit, so credit remains available on satisfaction of the purchaser's own statutory conditions.

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Issues: Whether input tax credit under the Rajasthan VAT regime can be denied to a purchasing dealer merely because the selling dealer has not deposited the tax in the Government treasury, and whether Rule 18, to the extent it makes such credit dependent on verification of the selling dealer's deposit, requires reading down.

Analysis: The purchasing dealer had complied with the statutory requirements by purchasing from a registered dealer, retaining invoices, and filing the prescribed returns. The Court held that it would be impossible for the purchasing dealer to ensure or prove whether the selling dealer had actually deposited the collected tax, and that the burden of such verification could not be shifted onto the bona fide purchaser. A construction that made input tax credit depend on the seller's subsequent compliance would place an onerous and impractical burden on the purchaser and would permit harassment. To avoid that result, the Court accepted the challenge only in part and read down Rule 18 so that credit is allowed to registered dealers on the basis of the prescribed conditions, without making it contingent upon prior verification of the selling dealer's actual tax deposit.

Conclusion: The condition in Rule 18 making input tax credit dependent on verification of the selling dealer's deposit was read down, and the petitioner was held entitled to input tax credit on compliance with its own statutory obligations.

Ratio Decidendi: A bona fide purchasing dealer who has satisfied the statutory requirements for claiming input tax credit cannot be denied that credit merely because the selling dealer failed to deposit the collected tax, since such a burden is impossible to discharge and would be unreasonable and discriminatory.

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