Input tax credit cannot be denied merely for seller registration cancellation absent collusion or statutory disqualification.

Input tax credit under the Delhi VAT Act, 2004 could not be denied to a purchasing dealer merely because the selling dealers' registrations were cancelled or their transactions were oubted, where there was no collusion and no express statutory disqualification. Section 9(1) grants credit to a qualifying dealer, while Section 9(2) is a limited exception that permits denial only on the specified grounds. The later insertion of clause (g) in Section 9(2), effective from 1 April 2010, was not treated as a mere clarification of an existing restriction. The statutory scheme also did not impose on the purchaser a duty to verify the seller's tax payment, and Section 28 supports confidentiality in that regard.

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Issues: Whether input tax credit under the Delhi VAT Act, 2004 could be denied to the purchasing dealer merely because the selling dealers' registrations had been cancelled or because of doubts regarding the selling dealers' transactions, in the absence of collusion or any express statutory disqualification.

Analysis: Section 9(1) grants input tax credit to a qualifying purchasing dealer, while Section 9(2) operates as a restrictive exception and permits denial only in the situations specifically enumerated. The newly introduced clause (g) in Section 9(2), effective from 1 April 2010, could not be treated as a mere clarification of an already existing limitation. The statutory scheme did not place on the purchasing dealer an onerous burden to monitor whether the selling dealer had deposited tax, and Section 28 reinforces confidentiality in that regard. On the facts, the rejection of credit rested on the cancellation of the selling dealers' registrations and related investigative material, not on any finding of collusion by the assessee.

Conclusion: Input tax credit could not be denied on that ground alone, and the assessee was entitled to succeed.

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