Input tax credit barred by express statutory prohibition where sales were exempt under section 7(c) of VAT law.

Input tax credit was barred where the dealer's sales fell within clause (c) of section 7 of the Uttar Pradesh Value Added Tax Act, 2008 pursuant to the notifications dated 24.02.2010 and 25.03.2010. Although section 13(1) generally permits credit, section 13(7) expressly denies input tax credit when goods are sold under section 7(c). The statutory prohibition was held to override the exemption scheme and any policy objective behind the notifications. Accordingly, input tax credit was not admissible, and the denial or reversal of credit was upheld in favour of the revenue.

---

---

Issues: Whether input tax credit was admissible to a dealer whose sales were covered by clause (c) of section 7 of the Uttar Pradesh Value Added Tax Act, 2008 read with the notifications dated 24.02.2010 and 25.03.2010, in view of the embargo in section 13(7) of the Act.

Analysis: The turnover in question was admittedly brought within section 7(c) by the notifications issued for direct sale to manufacturer-exporters on Form-E. Section 13(1) provides the general scheme for input tax credit, but section 13(7) creates an express restriction and denies input tax credit where the sale of goods is exempt under section 7(c). The statutory bar is clear and operates notwithstanding any policy objective behind the exemption notifications. In tax law, the clear legislative command governs eligibility for credit, and the dealer could not claim input tax credit contrary to the express prohibition.

Conclusion: Input tax credit was not admissible, and the denial/reversal of credit was upheld in favour of the revenue.

---