Input tax credit cannot be denied solely due to seller default where the purchaser proves genuine transactions and statutory burden.

Input tax credit under the Karnataka Value Added Tax Act, 2003 cannot be denied to a purchasing dealer merely because the selling dealer was deregistered or failed to remit tax, where binding authority recognises that the buyer's credit does not fail solely on the seller's default. The Tribunal also accepted that the assessee had produced sufficient material to prove the genuineness and correctness of the purchases, thereby discharging the statutory burden. On that basis, the revision petition failed and the order granting input tax credit relief was sustained.

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Issues: (i) whether input tax credit could be denied to the purchasing dealer merely because the selling dealers had been deregistered or had not discharged tax on the sales; (ii) whether the assessee had discharged the burden of proving the correctness and genuineness of the claim under the Karnataka Value Added Tax Act, 2003.

Issue (i): Whether input tax credit could be denied to the purchasing dealer merely because the selling dealers had been deregistered or had not discharged tax on the sales.

Analysis: The Tribunal had allowed the claim by following an earlier Division Bench decision which had already answered the same legal question. The controlling principle applied was that the purchasing dealer's credit cannot be rejected solely on the basis of default by the selling dealer in payment of tax.

Conclusion: The issue was answered against the petitioner and in favour of the assessee.

Issue (ii): Whether the assessee had discharged the burden of proving the correctness and genuineness of the claim under the Karnataka Value Added Tax Act, 2003.

Analysis: The Tribunal found that the assessee had produced material sufficient to establish the genuineness of the transactions and had discharged the statutory burden placed on it. No independent error was found in that conclusion.

Conclusion: The issue was answered against the petitioner and in favour of the assessee.

Final Conclusion: The revision petition failed because the questions of law were covered by existing binding authority and the Tribunal's order granting input tax credit relief was sustained.

Ratio Decidendi: Input tax credit cannot be denied to a purchasing dealer solely because the selling dealer has defaulted in tax compliance, where the purchasing dealer has otherwise discharged the burden of proving the genuineness of the transaction.

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