Order Date – 18 August 2023

Parties: M/s Aastha Enterprises Vs The State of Bihar and The Joint Commissioner, State Taxes

Facts – 

• The Petitioner, M/s Aastha Enterprises, made purchases from seller and payments were made through bank accounts. The invoices issued evidencing the payment of the value of the goods along with the tax. However, the seller failed to deposit tax. 

Issue – 

• Whether the purchasing dealer can be denied Input Tax Credit evidenced by the invoice when the seller failed to deposit the tax?

Order – 

• The Divisional Bench of Hon’ble High Court observed that the purchasing dealer being the person who claims Input Tax Credit could only claim the Input Tax benefit if the supplier who collected the tax from the purchaser has paid it to the Government and not otherwise. However, as long as the 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 Input Tax Credit under the statute.
• The mere production of a tax invoice, establishment of the movement of goods and receipt of the same and the consideration having been paid through bank accounts would not enable the Input Tax Credit; unless the credit is available in the ledger account of the purchasing dealer who is an assessee.
• When the supplier fails to comply with the statutory requirement, the purchasing dealer cannot, without credit in his account claim Input Tax Credit 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 effected 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 the provisions for recovery on failure to pay up, after collecting tax, enables the Government so to do.
• Hence, it was held that the claim of Input Tax Credit raised by the petitioner cannot be sustained when the supplying/selling dealer has not paid up the amounts to the Government; despite collection of tax from the purchasing dealer. 
• The writ petition is dismissed.