Input tax credit cannot be denied for retrospective cancellation of the seller's registration when purchases were made during valid registration.

Input tax credit could not be denied merely because the selling dealers' registration certificates were cancelled retrospectively. The governing principle was that a purchasing dealer is entitled to rely on the seller's registration as it stood on the date of the transaction, and later cancellation cannot undo entitlement arising from valid purchases. The burden cannot be shifted to the buyer to anticipate future cancellation of the seller's registration, as that would defeat statutory protection for dealings with a registered dealer. The assessment orders were therefore set aside.

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Issues: Whether input tax credit could be denied on the ground that the selling dealers' registration certificates were cancelled retrospectively.

Analysis: The dispute turned on the effect of retrospective cancellation of the selling dealers' registration on purchases made when the registrations were valid. The governing principle applied was that a purchasing dealer is entitled to rely on the registration certificate of the selling dealer that was in force at the time of transaction, and a later retrospective cancellation cannot invalidate the purchaser's entitlement based on those transactions. The Court followed the settled position that the burden cannot be shifted to the purchasing dealer to enquire into possible future cancellation of the seller's registration, as that would defeat the statutory protection attached to dealings with a registered dealer.

Conclusion: Input tax credit could not be denied merely because the selling dealers' registrations were cancelled with retrospective effect, and the challenge to the assessment orders succeeded.

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