Input tax credit cannot be denied solely for seller's non-payment where genuine purchases and no fraud are shown.

Input tax credit cannot be denied solely because the selling dealer failed to remit tax collected from the purchaser, where the purchase is genuine and no fraud, bogus invoices, or non-existent vendors are shown. The burden remains on the dealer claiming credit to establish that the claim is correct and the transactions are valid and genuine, but the revisional authority must examine the statutory framework and evidence before sustaining denial. As prior verification had supported allowance of the credit and the denial was not founded on any finding of fictitious transactions, the revisional order was set aside and the matter remitted for fresh consideration after hearing the assessee.

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Issues: Whether denial of input tax credit could be sustained solely on the ground that the selling dealers had not deposited the tax collected from the assessee, and whether the revisional order restoring the denial required interference and remand.

Analysis: The governing principles under the Act place the burden on the dealer claiming input tax credit to establish that the claim is correct and that the transactions are valid and genuine. At the same time, the purchaser's entitlement to input tax credit is not automatically defeated merely because the selling dealer has failed to remit the collected tax, provided the purchase is genuine and no fraud or bogus transaction is shown. The factual record showed prior verification and allowance of credit in respect of the relevant purchases, and the denial was not based on a finding that the vendors were non-existent, the invoices were fake, or fraud had been played. In that situation, the revisional authority was required to examine the matter afresh with reference to the statutory framework and the evidence.

Conclusion: The revisional order was set aside and the matter was remitted to the revisional authority for fresh consideration after hearing the assessee. The assessee succeeded only to that extent.

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