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2012 (7) TMI 868 - UTTARAKHAND HIGH COURTPurchase of goods from exempted dealer - unjust enrichment - Held that:- The fact remains that a purchasing dealer will only be entitled to input-tax credit when he adds value to the input and then sells the same. While purchasing the input, he is required to pay tax thereon. While selling the value added input he is also required to pay tax thereon. Suppose, the input worth ₹ 100 was to be taxed at the rate of 10 per cent, the value of the input purchased would be ₹ 110 and suppose on that input a value addition to the tune of ₹ 10 has been made, the value of the product available for sale would be ₹ 120. Suppose the product is also sold at ₹ 120 and suppose the same will also attract tax at the rate of 10 per cent, then the tax liability of the seller would be ₹ 12. Because the dealer has paid tax of ₹ 10 on the input, he will be entitled to input-tax credit of ₹ 10 and, accordingly, would be liable to pay tax of ₹ 2. In the instant case, the dealer, from whom purchase has been made, did not pay any tax, as he was exempted from paying the same. The amount of tax payable, which has been exempted, would also be ₹ 10 and the same would also be reduced from ₹ 12 exposing the liability of the seller to ₹ 12. The fact remains, the exemption has been given to the seller, from whom the purchase has been made. That is a conscious action; by reason thereof the purchase value of the input has been permitted to be reduced. In the circumstances, there is no unjust enrichment on the part of the purchaser of input from the exempted dealer, while he is permitted input tax credit to the extent, as certified by the exempted dealer in the invoice. Appeal dismissed.
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