Input tax credit cannot be reduced to the notified rate where tax was actually paid on purchase and burden was not passed on.

Input tax credit could not be restricted to the tax notionally payable at the notified rate where the assessee had actually paid tax on purchase of the same goods. The statutory definition of input tax covered tax "paid or payable", and the credit provision allowed full credit for purchases used in taxable sales inside the State. On that wording, there was no basis to confine credit to the scheduled rate merely because the selling dealer may have realised excess tax. In the absence of any finding that the assessee had passed on the burden, reversal of credit was unjustified and the issue was decided in favour of the assessee.

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Issues: Whether input tax credit could be restricted to the tax actually payable at the notified rate, and the excess tax paid on purchase could be disallowed.

Analysis: The amount claimed as input tax credit was the tax actually paid on purchase of the same goods. Section 2(p) treated input tax as the aggregate of tax paid or payable, and Section 13(1)(a) allowed credit of the full input tax in respect of purchases used in the course of taxable sales inside the State. Since the statute expressly used both "paid" and "payable", there was no basis to confine credit only to the tax computed at the scheduled rate. The authorities' reasoning based solely on excess realization by the selling dealer could not justify reversal of credit in the absence of any finding that the assessee had passed on the burden.

Conclusion: Input tax credit could not be curtailed merely because the tax paid on purchase exceeded the tax notionally payable at the scheduled rate. The question was answered in favour of the assessee and against the revenue.

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