Input Tax Credit cannot be denied to a bona fide purchaser absent proof of collusion or fraudulent invoicing.

Input Tax Credit cannot be denied to a bona fide purchasing dealer merely because the selling dealer failed to remit the tax collected. Where the purchaser holds tax invoices, E-Sugam receipts and has paid through account payee cheques, those materials support genuineness of the transactions unless the Revenue proves collusion or fraudulent invoicing between buyer and seller. The purchasing dealer is not expected to ensure the seller's tax compliance. On that basis, denial of Input Tax Credit was unsustainable and the disallowance was set aside in favour of the assessee.

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Issues: Whether Input Tax Credit could be denied to a purchasing dealer merely because the selling dealer failed to deposit the tax collected, in the absence of proof of collusion or fraudulent invoicing.

Analysis: The assessee purchased goods from registered dealers, possessed tax invoices and E-Sugam receipts, and made payments through account payee cheques. The mere failure of the selling dealer to remit tax did not, by itself, establish that the purchase transactions were bogus. The purchasing dealer had no practical means to secure compliance by the selling dealer. Denial of Input Tax Credit was therefore not justified unless the Revenue could establish collusion between the purchaser and the selling dealer to create invoices for wrongful availment of credit.

Conclusion: The denial of Input Tax Credit was unsustainable, and the assessee was entitled to the credit.

Final Conclusion: The revision petition failed, and the orders disallowing Input Tax Credit were set aside in favour of the assessee.

Ratio Decidendi: A bona fide purchasing dealer cannot be denied Input Tax Credit solely because the selling dealer defaults in remitting tax, unless the Revenue proves collusion or fraudulent participation by the purchaser.

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