Vinayak Trexim Vs Government of NCT of Delhi Through Secy. (Finance) & Ors (Delhi High Court)
In a significant judgment, the Delhi High Court has addressed the denial of Input Tax Credit (ITC) to purchasing dealers when selling dealers fail to deposit Value Added Tax (VAT) with the government. The case, Vinayak Trexim Vs Government of NCT of Delhi Through Secy. (Finance) & Ors, scrutinized Section 9(2)(g) of the Delhi Value Added Tax (DVAT) Act, ultimately interpreting it to safeguard diligent purchasers.
VAT, as defined by Section 2(1)(r) of the DVAT Act, functions as an indirect tax. While the seller is primarily liable to remit this tax to the government, the financial burden is passed on to the purchaser as part of the sale price. To claim ITC, a purchasing dealer is required to exercise due diligence by verifying the selling dealer’s registration under the DVAT Act and ensuring receipt of a valid tax invoice with the Taxpayer Identification Number (TIN). Although purchasers can verify a seller’s credentials online, the Court acknowledged a crucial practical limitation: purchasers cannot reasonably be expected to monitor whether the seller has actually deposited the collected tax with the government or lawfully adjusted it, especially in situations where mismatches arise due to the seller’s default.
