Input Tax Credit cannot be reversed from a purchaser solely because the selling dealer failed to remit VAT.

Input Tax Credit under the Tamil Nadu VAT Act could not be reversed from a purchasing dealer merely because the selling dealer failed to remit VAT, where the credit was claimed on proper invoices and there was no statutory basis for reversal on that ground alone. Section 19(16) addresses incorrect, incomplete, or improper ITC claims, but does not authorise reversal solely due to the seller's non-payment. Consequential penalty based on that premise was also unsustainable to that extent.

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Issues: Whether Input Tax Credit could be reversed and penalty imposed on the purchaser solely on the ground that the selling dealer did not pay VAT.

Analysis: Section 19(16) of the Tamil Nadu Value Added Tax Act, 2006 makes Input Tax Credit provisional, but it does not authorize reversal merely because the selling dealer has not remitted tax. The provision is directed to incorrect, incomplete, or improper claims of Input Tax Credit, not to a case where the purchaser has paid tax against original invoices and the department seeks recovery from the selling dealer. On the admitted facts, the impugned reversal of credit and consequential penalty could not be sustained to the extent founded on the sellers' non-payment of VAT.

Conclusion: The issue was decided in favour of the assessee; reversal of Input Tax Credit could not be made merely because the sellers failed to pay VAT.

Final Conclusion: The writ petitions were allowed only on the issue of sellers' non-payment of VAT, while other grievances were left to be pursued by appeal.

Ratio Decidendi: Input Tax Credit cannot be reversed from the purchasing dealer merely on the ground that the selling dealer failed to pay tax, where the credit was claimed on proper invoices and the statute does not authorize such reversal on that basis alone.

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