Input tax credit reversal barred where goods movement and supplier tax payment were proved by official records, despite later retrospective deregistration.

Input tax credit could not be reversed where official records showed purchase of coffee seeds, payment of output tax by the supplier, and undisputed movement of goods. The Revenue's challenge based on alleged non-genuineness of the sale failed because the supplier was registered and assessed by the department, and its later deregistration operated retrospectively only after the relevant assessment year. The HC held that speculative doubts about the transaction, without contrary record evidence, were insufficient to deny credit. Reversal of input tax credit was therefore unsustainable and the question of law was answered in favour of the assessee.

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Issues: Whether the reversal of input tax credit on the ground that the sale transaction was not genuine was sustainable when the movement of goods was accepted and the selling dealer's assessment order showed payment of output tax.

Analysis: The assessment order recorded that the assessee had purchased coffee seeds from the selling dealer during the relevant tax period and that output tax had been paid. The order also noted that the movement of goods was not in dispute. The objection based on later deregistration of the selling dealer failed because the deregistration was approved retrospectively after the relevant assessment year. The plea that the selling dealer did not exist also failed, as the records showed that it was registered with the Commercial Tax Department and had been assessed by the departmental authority.

Conclusion: The reversal of input tax credit was unsustainable and the question of law was answered in favour of the assessee and against the Revenue.

Ratio Decidendi: Where the movement of goods and payment of output tax are established from official records, input tax credit cannot be reversed on speculative doubts about the genuineness of the transaction or on a later retrospective deregistration of the supplier.

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