Input tax credit claims require proof of genuine purchases and goods movement; invoices alone do not suffice where evidence is doubtful.

A purchasing dealer claiming input tax credit under the KVAT regime bears the burden of proving the genuineness of the purchase transactions and the physical movement of goods with cogent evidence. Tax invoices, cheque payments and account records are not enough where surrounding circumstances create doubt, including missing transport particulars, doubtful vehicle details, inability to produce sellers, and non-remittance of tax by the selling dealers. In such a case, documentary form does not establish actual transactions, so input tax credit is disallowed. Once that disallowance stands, deletion of consequential penalty under Section 70(2)(a) cannot survive and the penalty component is restored.

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Issues: (i) Whether the dealer claiming input tax credit under the KVAT regime must prove the genuineness of the purchase transactions and the physical movement of goods; (ii) whether mere tax invoices, cheque payments, and account records are sufficient to discharge that burden when the selling dealers have not remitted the tax and the surrounding evidence is doubtful; (iii) whether the deletion of penalty under Section 70(2)(a) of the KVAT Act could survive once the disallowance of input tax credit is restored.

Issue (i): Whether the dealer claiming input tax credit under the KVAT regime must prove the genuineness of the purchase transactions and the physical movement of goods.

Analysis: The statutory scheme places the burden on the purchasing dealer to establish that the claim for input tax credit is correct. In a fiscal statute, the claim is not proved by applying an ordinary civil standard of preponderance alone. The dealer must adduce cogent material showing the actual transaction, including the identity of the seller, movement of goods, and delivery particulars. The reasoning also noted that the GST framework continues the same burden rule under the corresponding provision on proof.

Conclusion: The burden lay on the assessee to prove the claim for input tax credit, and it was not discharged.

Issue (ii): Whether mere tax invoices, cheque payments, and account records are sufficient to discharge that burden when the selling dealers have not remitted the tax and the surrounding evidence is doubtful.

Analysis: The Tribunal had treated invoices, cheque copies, and account extracts as sufficient, but the surrounding material showed serious doubts about the claim. The reassessment findings recorded absence of proper goods description, missing transport particulars, dubious vehicle numbers, doubtful addresses, inability to produce the selling dealers, and non-payment of tax by the sellers. These circumstances went to the root of the genuineness of the transactions and the actual movement of goods. Mere documentary formality could not override the adverse factual indicators.

Conclusion: The evidence relied on by the assessee was insufficient, and the disallowance of input tax credit was justified.

Issue (iii): Whether the deletion of penalty under Section 70(2)(a) of the KVAT Act could survive once the disallowance of input tax credit is restored.

Analysis: The penalty relief was only consequential to the setting aside of the disallowance of input tax credit. Once the Tribunal's interference with the assessment failed, the foundation for deleting the penalty also disappeared. The restoration of the assessment order necessarily carried with it the revival of the penalty component that had been upset by the appellate authority.

Conclusion: The penalty deletion could not survive and the penalty order stood restored.

Final Conclusion: The revision petition succeeded, the Tribunal's order was set aside, the assessee's appeals failed, the Revenue's cross-appeals succeeded, and the assessment and penalty consequences were revived.

Ratio Decidendi: In a claim for input tax credit under the KVAT regime, the purchasing dealer bears the burden of proving the genuineness of the transaction and the physical movement of goods by cogent evidence, and where that burden is not discharged, documentary form alone does not justify ITC or the deletion of consequential penalty.

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