Suvasini Charitable Trust Vs Government of NCT of Delhi & Anr (Delhi High Court)
The Delhi High Court, in the case of Suvasini Charitable Trust Vs Government of NCT of Delhi & Anr, has delivered a significant judgment addressing the denial of Input Tax Credit (ITC) to purchasing dealers due to the failure of selling dealers to deposit the collected tax with the government. The Court concluded that Section 9(2)(g) of the Delhi Value Added Tax (DVAT) Act, 2004, cannot be used to penalize bona fide purchasers for the defaults committed by the selling party.
Core Issue: The Burden on the Buyer
The central issue revolved around Section 9(2)(g) of the DVAT Act. This provision allowed the tax department to deny ITC to a purchasing dealer if the selling dealer failed to deposit the tax collected, did not lawfully adjust it against their output tax liability, or failed to reflect the transaction correctly in their returns.
The Value Added Tax (VAT) is an indirect tax where the seller collects the tax from the buyer and is liable to pay it to the government. The buyer, in turn, claims this tax amount as ITC, which they can set off against their own tax liability.
