Input tax credit cannot be denied to a purchasing dealer solely for the seller's tax default; recovery lies against the seller.

Input tax credit under the Tamil Nadu VAT Act, 2006 cannot be revoked from a purchasing dealer merely because the selling dealer failed to remit collected tax, where the purchaser has shown payment and the credit was accepted in self-assessment. The Department must pursue recovery against the defaulting selling dealer rather than deny credit to the buyer. On that basis, the impugned assessment orders were found unsustainable and were set aside, with the matter remitted for fresh consideration after giving the purchaser an opportunity of hearing.

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Issues: Whether input tax credit could be revoked from the purchasing dealer merely because the selling dealer had not remitted the collected tax, and whether the impugned assessment orders were liable to be interfered with and remitted for fresh consideration.

Analysis: The governing scheme of the Tamil Nadu Value Added Tax Act, 2006 permits input tax credit to a registered dealer when the tax on purchases has been paid in the prescribed manner. The Court followed the principle that, where the purchasing dealer has shown proof of payment and the credit was accepted in self-assessment, the dealer's entitlement to credit cannot be negatived only on the ground that the selling dealer failed to remit tax. In such a situation, liability lies on the selling dealer, and the Department must proceed against that dealer in accordance with law. The impugned orders were therefore unsustainable, and the matter warranted reconsideration by the authority after giving the petitioner another opportunity of hearing.

Conclusion: The revocation of input tax credit against the purchasing dealer solely for the seller's default was held to be unsustainable, and the orders were set aside with a direction to reconsider the matter afresh.

Final Conclusion: The writ petitions succeeded to the extent of setting aside the impugned orders and securing a fresh adjudication before the authority concerned.

Ratio Decidendi: Input tax credit cannot be withdrawn from a purchasing dealer merely because the selling dealer failed to pay the tax, where the purchasing dealer has established payment and the credit was granted in self-assessment; the Department must proceed against the selling dealer for recovery.

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