Input tax credit cannot be reversed solely because the selling dealer's registration was cancelled when purchases are otherwise supported.

Input tax credit cannot be reversed merely because the selling dealer's registration certificate was later cancelled, where the assessee had disclosed the purchases, supported them with documents and objections, and the orders did not find the purchases doubtful or incorrect. The governing provision did not authorise denial of credit on that sole basis. If tax was paid to the selling dealer and the claim was otherwise accepted, the proper course is for the Department to proceed against the dealer in accordance with law. The assessment orders were set aside and the writ petitions were allowed, with liberty to proceed against the dealers.

---

---

Issues: Whether the Assessing Officer could reverse the assessee's input tax credit merely because the selling dealers' registration certificates had been cancelled.

Analysis: The assessee had disclosed the purchases in its returns and supported them with objections and documents. The impugned orders did not record that the purchases were doubtful or incorrect. The governing provision dealing with input tax credit did not authorise reversal on the sole ground that the selling dealer's registration was cancelled. Where tax had been paid to the selling dealer and the claim had otherwise been accepted, the proper course was for the Department to proceed against the selling dealer in accordance with law.

Conclusion: The reversal of input tax credit was not sustainable and the issue was decided in favour of the assessee.

Final Conclusion: The assessment orders were set aside and the writ petitions were allowed, with liberty to proceed against the dealers if so advised.

Ratio Decidendi: Cancellation of the selling dealer's registration, by itself, does not justify reversal of input tax credit where the purchase transactions are otherwise supported and the tax has been paid to the seller.

---