Revenue-neutral purchase tax demand fails where department software defect made payment and input tax credit adjustment impracticable.

Purchase tax demand under Section 12 could not be sustained where the dealer had already paid output tax on sales and the department's online return system, until May 2010, automatically reflected the purchase tax on both the tax payable and input tax credit sides, making proper payment and set-off impracticable. The appellate authority treated the matter as revenue neutral because payment of the tax would have been available for input tax credit and no revenue loss arose. The Tribunal erred in applying the statute literally without accounting for the software defect and the resulting practical inability to comply. The assessee was entitled to relief.

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Issues: Whether the demand of purchase tax was sustainable when the dealer had paid the output tax on sales, could not pay the purchase tax because of a defect in the online return software, and the tax, if paid, would have been available for adjustment as input tax credit.

Analysis: Purchase tax under Section 12 had to be paid by the dealer, but the record showed that the online Form I system, till May 2010, automatically reflected the purchase tax on both the tax payable side and the input tax credit side, creating a practical impossibility in payment and later adjustment. The appellate authority had accepted this software-driven difficulty and treated the matter as revenue neutral because the dealer had paid the sales tax on the entire turnover and neither gained nor caused loss to the revenue. The Tribunal reversed that view by applying the statute literally and ignoring the defect in the department's own software and the resulting inability to make a proper payment and claim credit.

Conclusion: The demand of purchase tax was not sustainable on the facts of the case, and the assessee was entitled to relief.

Ratio Decidendi: Where a tax demand becomes revenue neutral and the dealer's non-payment is attributable to a defect in the department's own online system, a purely literal insistence on payment without accounting for the practical inability to pay and set off the amount through input tax credit cannot be sustained.

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