-The Court by observing the decision of Apex Court in the matter of The State of Karnataka v. M/s. Ecom Gill Coffee Trading Private Limited stated
that the said decision can be distinguished especially looking at section 70 of the KVAT Act and also petitioner having to produce not only the invoices
but also the account details and the documents evidencing transportation of goods. However, this did not absolve the assessee from the rigor provided
under Section 16(2)(c). This provision in effect casts a burden of proof on the purchasing dealer who claims ITC, which is a right created under statute;
sustained only under the specific terms of the statute.
-The benefit to claim ITC is one conferred by the statute and if the conditions prescribed in the statute are not complied; no benefit flows to the
-The contention of double taxation was negated by the Court since the claim was denied only when the supplier who collected tax from the purchaser
failed to pay it to the Government.
-Further contention raised was regarding measures provided to recover the collected tax, which selling dealer failed to pay to the Government. The
mere fact that there is a mode of recovery provided under the statute would not absolve the liability of the tax payer to satisfy the entire liability to the
Government. The purchasing dealer being the person who claims ITC could only claim the benefit if the supplier who collected the tax from the
purchaser has paid it to the Government and not otherwise.
-The Government definitely could use its machinery to recover the amounts from the selling dealer and if such amounts are recovered at a later
point of time, the purchasing dealer who paid the tax to its supplier could possibly seek for refund. However, as long as tax paid by the purchaser to
the supplier, is not paid up to the Government by the supplier; the purchaser cannot raise a claim of ITC under the statute.
-When supplier fails to comply with the statutory requirement, the purchasing dealer cannot, without credit in his account claim ITC and the remedy
available to the purchasing dealer is only to proceed for recovery against the seller. Even if such recovery from the supplier is affected by the purchasing
dealer; the State would be able to recover the tax amount collected and not paid to the exchequer, from the selling dealer since the rigor of provisions
for recovery on failure to pay up, after collecting tax, enables the Government so to do.
-Therefore, there should be credit available in the credit ledger of the purchaser to claim Input Tax and otherwise the claim would be frustrated. On
the above reasoning, it was held that the claim of ITC raised cannot be sustained when selling dealer has not paid up the amounts to the Government;
despite collection of tax from the purchasing dealer