VAT reimbursement claim requires proof of actual tax payment before a cause of action against the seller arises.

A claim by a purchaser to recover VAT from the seller does not arise merely because the tax department issues demand notices or denies input tax credit; actual payment of the demanded tax is the foundational fact needed to create a recoverable cause of action. On the pleaded facts, the plaintiff produced departmental notices but no proof that the demanded amount had been paid to the department, so the suit for reimbursement was held not maintainable and the finding of no cause of action was upheld.

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Issues: Whether the suit for recovery of VAT paid to the defendant was maintainable in the absence of proof that the plaintiff had actually paid the tax again pursuant to the departmental demand.

Analysis: The dispute arose from proceedings under Section 39(1) of the Karnataka Value Added Tax Act, 2003, by which the tax department denied input tax credit and raised demand notices against the plaintiff because the selling dealer had collected tax but not remitted it. The Court noted that the plaintiff relied on the departmental order and notices, and also on notices issued to the defendant, but no material was produced to show that the plaintiff had in fact paid the demanded amount to the department. In the absence of such payment, the mere issuance of a departmental demand did not create a cause of action against the defendant for recovery of the amount.

Conclusion: The suit was not maintainable on the pleaded facts, and the finding that no cause of action arose was upheld, against the assessee.

Final Conclusion: The dismissal of the suit was affirmed because the plaintiff failed to establish the foundational fact necessary to claim reimbursement from the defendant.

Ratio Decidendi: A claim for recovery of tax allegedly borne by the purchaser against the seller does not arise merely because the department issues a demand or denies credit; the claimant must first show actual payment of the demanded amount so as to found a recoverable cause of action.

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