Shaleen ShahUnder Gujarat VAT Act, amongst other conditions, the purchasing dealer can claim input tax credit (ITC) only if the purchases are made from another registered dealer.
In cases where the assessee had purchased the goods from a dealer who was a registered dealer and, subsequently the registration of the said seller is cancelled retrospectively / ab-initio, the assessing officers have been disallowing ITC and also levying interest & penalty.
In a recent order in the case of Delta Rubber & Plastic Products, the Hon’ble Gujarat High Court relying upon Supreme Court’s decision in Suresh Trading Company has held that whatever may be the effect of a retrospective cancellation upon the selling dealer, it can have no effect upon any person who has acted upon the strength of a registration certificate when the registration was current.
