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Issues: (i) Whether the Tribunal was correct in allowing the dealer's appeal and setting aside the disallowance of input tax credit claimed on purchases from dealers who were deregistered or failed to discharge their tax liability; (ii) Whether the Tribunal was correct in allowing the dealer's appeal despite the dealer's alleged failure to discharge the burden under Section 70 of the KVAT Act to prove correctness and genuineness of the ITC claim.
Issue (i): Whether the Tribunal was right in allowing the respondent's appeal and setting aside the disallowance of input tax credit claimed on purchases from dealers who were deregistered and failed to disclose and discharge their tax liability on such sales.
Analysis: The Tribunal allowed the ITC claim on the basis that invoices bore valid TINs, e-UPass entries existed on the departmental portal, and payments were made through banking channels, concluding that the initial burden of proof had been discharged by the purchasing dealer and that the authorities must disprove entitlement. Subsequent binding authority of the Hon'ble Supreme Court (Ecom Gill Coffee Trading Private Limited) has clarified the requirements under Section 70 of the KVAT Act, including that mere invoices or cheque payments are insufficient and that additional particulars (name and address of selling dealer, vehicle and delivery details, freight/payment particulars, acknowledgement of delivery and evidence of physical movement of goods) may be necessary to establish genuineness of transactions.
Conclusion: Against the assessee.
Issue (ii): Whether the Tribunal was right in allowing the respondent's appeal despite the respondent's failure to discharge the burden under Section 70 of the KVAT Act of proving the correctness and genuineness of the ITC claim.
Analysis: Section 70 places the burden of proving correctness of an ITC claim on the purchasing dealer. The Supreme Court's interpretation prescribes the nature and extent of evidence required to discharge that burden. The High Court directed that the remand proceedings be completed by the Assessing Authority in accordance with the law laid down by the Supreme Court, allowing the respondent an opportunity to produce additional cogent material during reconsideration.
Conclusion: Against the assessee.
Final Conclusion: The revision petitions are allowed in part; the Tribunal's orders are modified to the extent that the remand proceedings shall be concluded by the Assessing Authority in accordance with the law laid down in Ecom Gill Coffee Trading Private Limited, with liberty to the dealers to produce additional material and with no opinion expressed on merits.
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