ITC disallowance to bona-fide purchaser for seller’s default, SC upholds HC’s decision

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SC dismisses Revenue SLP, refuses to interfere with order of Delhi HC that held Section 9(2)(g) of Delhi VAT Act to the extent it disallows ITC to purchaser due to default of selling dealer in depositing tax, as violative of Articles 14 and 19(1)(g) of the Constitution of India; According to HC, Section 9(2)(g) gave a free hand to Dept. in deciding to proceed either against the purchasing dealer or selling dealer, however, in the situation envisaged by said section, clearly the defaulting party was the selling dealer for which the purchasing dealer was expected to bear the consequence; HC had observed that failure by Legislature to distinguish between bona fide and non-bona fide purchasing dealers resulted in Section 9(2)(g) applying equally to both the classes of purchasing dealers, which was certainly hit by Article 14 of Constitution; However, SC grants liberty to Revenue to move the HC with particulars of cases where the purchase transactions are not bona fide, so as to have the matters therein remitted back to the competent authority : SC

Citation: [TS-2-SC-2018-VAT]