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2014 (6) TMI 761 - HC - VAT and Sales TaxInput tax credit - validity of circular dated April 17, 2008 - Whether the petitioner is entitled for input-tax credit under section 76(6)(c) of the Act on the purchase value of the raw material which the assessee had purchased from a dealer who is exempted from payment of tax under section 4A of the Act - Held that:- liability to pay tax chargeable under section 3 of the Act is different from quantification of the tax payable on assessment. The liability to pay tax and actual payment of tax are conceptually different and if there was an exemption, the dealer would be required to pay the tax in terms of section 3 of the Act. In the light of the aforesaid, the petitioner was liable to pay tax under the Act but for the exemption. Section 76(6)(c) clearly provides that a purchasing dealer would be entitled to input-tax credit of the amount of tax charged and this provision relating to exemption has to be liberally construed. It is not necessary that a purchasing dealer would be entitled to input-tax credit only if he has paid the tax charged in the sale invoice. The purchasing dealer would be entitled for input-tax credit if the said amount is adjusted or set off, as the case may be. The circular of the Commissioner, Commercial Tax, dated April 17, 2008 insofar as it interprets section 76(6)(c) to the effect that benefit would only be given to those purchasing dealers who have actually paid the tax to the seller, is patently erroneous and against the provision of section 76(6)(c) of the Act. - Consequently, the circular dated April 17, 2008 of the Commissioner, Commercial Tax, insofar as it interprets section 76(6)(c), is patently erroneous and to that extent is quashed. Since the notice dated March 3, 2009 was issued on the basis of the said circular, the same is wholly illegal and without any basis and is also quashed. - Decided in favour of assessee.
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