Input tax credit cannot be denied to a bona fide purchaser merely because the selling dealer failed to remit VAT.

Input tax credit could not be denied where the purchaser dealer proved payment for the purchases, movement of goods, and the existence of the selling dealers through invoices, stock records, bank statements, cheque realisation details, transport documents and returns. The Tribunal's factual finding on discharge of the burden of proof was supported by the record and was not perverse. The Court further held that once VAT is shown to have been paid to the selling dealer, the purchaser's input tax credit cannot be defeated merely because the seller allegedly failed to remit tax to the Government; any recovery action lies against the selling dealer.

---

---

Issues: Whether the Tribunal's finding that the assessee had discharged the burden of proof for claiming input tax credit was perverse, and whether the purchaser dealer could be denied input tax credit on the ground that the selling dealer had not deposited VAT with the Government.

Analysis: The Tribunal recorded a factual finding, on the basis of invoices, stock records, bank statements, cheque realisation details, transport documents, and returns of the selling dealers, that the assessee had established payment for the purchases, movement of goods, and the existence of the selling dealers during the relevant tax periods. That finding was supported by the material on record and was not shown to be perverse. The Court further held that once the purchaser dealer demonstrates payment of VAT to the selling dealer, entitlement to input tax credit cannot be defeated merely because the selling dealer allegedly failed to remit the tax to the Government; in such a case, the Revenue must proceed against the selling dealer.

Conclusion: The Tribunal's grant of input tax credit was upheld and the challenge by the Revenue was rejected.

---