Input tax credit cannot be denied solely due to a seller's tax default when genuine purchases are proved.

Input tax credit cannot be denied merely because the selling dealer is alleged to be bogus or has not remitted tax, if the purchasing dealer has shown genuine purchases from registered dealers through invoices, banking payments and books of account. The burden under Section 70 is discharged by such material, and the Revenue must independently disprove the transaction rather than rely only on an enforcement report or alleged bill trading. The Department's remedy lies against the defaulting seller, not by rejecting credit without proof that the purchases were not genuine. The assessee was entitled to the input tax credit, and the Tribunal's order was sustained.

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Issues: Whether the assessee was entitled to input tax credit on purchases supported by invoices issued by alleged bogus dealers and whether the Tribunal's order allowing such credit was sustainable.

Analysis: The denial of input tax credit rested primarily on an enforcement report alleging bill trading by the selling dealers. The authorities did not correlate the assessee's purchases with movement of goods or undertake an independent verification of the genuineness of the transactions. The Court held that a claim of input tax credit cannot be rejected merely because the selling dealer allegedly failed to remit tax. Where the purchaser establishes purchases from registered dealers through invoices and supporting records, including payment through banking channels and entries in the books of account, the burden under Section 70 stands discharged. The Department's remedy lies against the defaulting selling dealer, not in denying credit to the purchasing dealer in the absence of proof that the transactions were not genuine.

Conclusion: The assessee was held entitled to the input tax credit, and the Tribunal's order was sustained.

Ratio Decidendi: Input tax credit cannot be denied solely on the basis of alleged default by the selling dealer when the purchasing dealer has produced material showing genuine purchases from registered dealers and the Revenue has not disproved the transaction.

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