Input tax credit cannot be denied to a bona fide purchaser for a seller's tax remittance default.

Input tax credit cannot be denied to a bona fide purchasing dealer when goods are bought from registered sellers against proper invoices and payment is made through traceable banking channels; the purchaser's duty is limited to verifying registration and compliance with the Act. If the selling dealers collected tax but failed to remit it or disclose returns correctly, the revenue's remedy lies against those defaulting sellers, not against the purchaser. Revisional interference with the first appellate finding was therefore unwarranted, and the assessee remained entitled to ITC.

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Issues: Whether Input Tax Credit could be denied to the purchasing dealer merely because the selling dealers allegedly failed to remit the full tax collected on the sales, and what level of due diligence was required from the purchasing dealer.

Analysis: The appellant had purchased goods from registered dealers against proper invoices and had paid the invoice value along with tax through account transfer. The record did not show that the dealers were unregistered or untraceable. If the selling dealers collected tax but did not fully remit it or did not correctly disclose their returns, the revenue's remedy lay against those dealers. The purchasing dealer was only required to ensure that the seller was registered and that the transaction was carried out in accordance with the Act. Once the transaction was complete and payment had been made, the purchaser could not be denied ITC on the basis of alleged defaults of the selling dealers. The revisional interference with the first appellate finding was therefore unwarranted.

Conclusion: Input Tax Credit could not be disallowed to the assessee on the ground of the selling dealers' default in remitting tax, and the assessee was entitled to the credit.

Ratio Decidendi: A bona fide purchasing dealer cannot be denied input tax credit where the purchase is from registered dealers against proper invoices and payment is made through traceable banking channels, merely because the selling dealer has defaulted in remitting tax to the State; the revenue must proceed against the defaulting seller.

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