Input tax credit cannot be denied for supplier non-remittance when genuine purchases are proved by reliable documents.

Input tax credit cannot be denied merely because the supplier allegedly failed to remit tax where the purchaser dealer substantiates the transaction with reliable documentary evidence. The assessee produced a de-registration certificate, ledger extract, bank records, tax invoices, and check-post seals showing movement of goods, and the supplier was a registered dealer during the relevant period. Those materials established the genuineness of the purchases and rebutted any inference of a bogus transaction. The Karnataka HC held that the disallowance of input tax credit was unsustainable on these facts, and the assessee was entitled to succeed.

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Issues: Whether the assessee was entitled to input tax credit on purchases made from the supplier and whether the authorities were justified in disallowing such credit on the ground that the supplier allegedly did not remit tax.

Analysis: The statutory scheme places the burden on the dealer claiming input tax to prove that the claim is correct. On the materials on record, the assessee produced de-registration certificate, ledger extract, bank account extract, and tax invoices issued by the supplier. The supplier was shown to be a registered dealer during the relevant period, and the invoices bore check-post seals evidencing movement of goods. These materials supported the genuineness of the purchases and displaced the inference of a bogus or make-believe transaction. The non-remittance of tax by the supplier could not, by itself, deprive the purchaser of input tax credit when the purchaser had established a genuine transaction through documentary evidence.

Conclusion: The disallowance of input tax credit was unsustainable, and the assessee was entitled to succeed on this issue.

Ratio Decidendi: Once a purchaser dealer substantiates the genuineness of the purchase transaction and the claim to input tax credit through reliable documents, the purchaser cannot be denied input tax credit merely because the supplier allegedly failed to remit the tax.

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