Input tax credit cannot be denied to recipient on default of payment by supplier

Recently, the Hon’ble Supreme Court in the case of Commissioner of Trade & Taxes, Delhi and others Vs. Arise India Limited and others [TS-2-SC-2018-VAT], has dismissed the Special Leave Petition filed by the Revenue against the decision of the Hon’ble High Court of Delhi in the case of Arise India Limited and others Vs. Commissioner of Trade & Taxes, Delhi and others [TS-314-HC-2017(Del)-VAT] (“Arise India case”). The Hon’ble High Court of Delhi held Section 9(2)(g) of Delhi VAT Act to the extent it disallows Input tax credit (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.

We are sharing with you details of this important judgement of the Hon’ble High Court of Delhi in Arise India case for your easy digests:

Issue:

1. Whether treating both the ‘guilty purchasers’ and the ‘innocent purchasers’ at par under Section 9(2)(g) of the Delhi Value Added Tax Act, 2005 (“the DVAT Act”) is violation of Article 14 of the Constitution of India?

2. Whether input tax credit (“ITC”) can be denied to a bona fide purchaser under Section 9(2)(g) of the DVAT Act because of default of the selling dealer over whom such purchasing dealer has no control?

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