Input tax credit reversal needs proper hearing and cannot rest only on the selling dealer's return defaults.

Input tax credit cannot be reversed against a purchasing dealer merely because the selling dealer filed nil returns or allegedly made an incorrect revised return; that issue must be examined by the selling dealer's own assessing authority, and the purchasing dealer cannot be fixed with the seller's default. The assessment was also vitiated because no meaningful personal hearing was afforded after objections were filed, as the authority did not fix a specific hearing date before confirming reversal. The impugned assessment was set aside and the matter remitted for fresh adjudication after notice, objections, personal hearing, and verification from the relevant authority.

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Issues: (i) Whether the assessment order was vitiated for want of a proper opportunity of personal hearing before confirming the proposal to reverse input tax credit. (ii) Whether input tax credit could be reversed merely because the selling dealer had filed nil returns and whether the assessing authority could reject the revised return filed by the selling dealer as an after-thought.

Issue (i): Whether the assessment order was vitiated for want of a proper opportunity of personal hearing before confirming the proposal to reverse input tax credit.

Analysis: The notice stated that objections could be filed and that the dealer would be heard in person, but no specific date for personal hearing was fixed after receipt of objections. A meaningful hearing requires the assessing authority to consider the objections first and then fix a date for personal hearing, especially where the objections may themselves warrant dropping the proposal.

Conclusion: The assessment was vitiated for denial of a proper opportunity of personal hearing, against the Revenue.

Issue (ii): Whether input tax credit could be reversed merely because the selling dealer had filed nil returns and whether the assessing authority could reject the revised return filed by the selling dealer as an after-thought.

Analysis: Reversal of input tax credit cannot be founded solely on the selling dealer's default in filing returns or on alleged incorrect particulars, as the liability for the seller's non-payment does not automatically shift to the purchasing dealer. The assessing authority of the purchasing dealer also lacked jurisdiction to treat the revised return of the selling dealer as an after-thought; that question could be examined only by the selling dealer's assessing authority.

Conclusion: The reversal of input tax credit on those grounds was unsustainable, in favour of the Assessee.

Final Conclusion: The impugned assessment was set aside and the matter was sent back for fresh adjudication after notice, objections, personal hearing, and verification from the selling dealer's assessing authority.

Ratio Decidendi: Input tax credit cannot be reversed against the purchasing dealer merely because the selling dealer has defaulted in returns or tax payment, and any adverse conclusion must be preceded by a proper personal hearing and taken by an authority having jurisdiction over the relevant dealer's return.

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