Input tax credit cannot be denied to a purchaser merely because the seller enjoyed tax remission under the statutory scheme.

A purchasing dealer was held entitled to input tax credit and refund where the selling industrial unit had obtained tax remission under the statutory scheme, because Section 21(9)(x) of the Jammu and Kashmir VAT Act bars credit only to the dealer who actually enjoys the remission. The Court also noted that Section 22 allows carry forward and refund of excess input tax credit, and a departmental clarification could not curtail that statutory entitlement or defeat the VAT chain. The objection based on alternative remedy was rejected because the writ challenge would have been futile in the circumstances. The clarification, assessment orders and demand notices were quashed, and refund of the amount deposited under interim orders was directed.

---

---

Issues: (i) whether a purchasing dealer is entitled to input tax credit and refund where the selling industrial unit had availed tax remission under the statutory scheme; (ii) whether the writ petitions should be rejected on the ground of availability of an alternative remedy.

Issue (i): whether a purchasing dealer is entitled to input tax credit and refund where the selling industrial unit had availed tax remission under the statutory scheme.

Analysis: Section 21(9)(x) of the Jammu and Kashmir Value Added Tax Act, 2005 denies input tax credit only to a registered dealer who himself gets the benefit of tax remission. The remission scheme operated in favour of the selling industrial unit, while the petitioner only purchased goods on tax invoices and had paid the tax reflected therein by price adjustment. The Court further held that Section 22 of the Act permits carry forward and refund of excess input tax credit when credit exceeds tax liability. The clarification issued by the department could not curtail the statutory entitlement and was inconsistent with the Act and the scheme's object of preserving the VAT chain.

Conclusion: The petitioner was entitled to input tax credit and refund, and the clarification, assessment orders, and demand notices could not be sustained.

Issue (ii): whether the writ petitions should be rejected on the ground of availability of an alternative remedy.

Analysis: The existence of an appellate remedy did not justify refusal of relief in the facts of the case, as the impugned clarification was binding on the authorities and resort to appeal would have been futile. The writ petitions had also remained pending for a long period and had already been admitted for hearing, so the Court proceeded to decide them on merits.

Conclusion: The objection based on alternative remedy was rejected.

Final Conclusion: The departmental clarification and consequential assessment demands were quashed, and the writ petitions succeeded with refund of the amount deposited pursuant to interim orders.

Ratio Decidendi: A purchaser cannot be denied input tax credit merely because the seller enjoyed tax remission, where the statute restricts credit only to the dealer who gets the remission and the purchaser has paid tax under the invoice; a departmental clarification cannot override or dilute the statutory entitlement.

---