The Karnataka HC in a series of judgements has held that under the KVAT Act, ITC cannot be partly disallowed to the extent of non-payment of VAT to the government by the dealer.
The HC held further that a bonafide purchaser cannot be put at jeopardy, when he has done all that the law expects him to comply. The purchasing dealer has no means to ascertain and secure compliance provisions of the KVAT Act by the selling dealer and therefore cannot be burdened with the same.
Recently, the Madras HC in the case of DY Bethel Enterprises has also ruled that ITC cannot be disallowed due to non-payment of GST to the government by the dealer.
TRANSWORLD STAR MANJUSHREE- Kar HC
RAJSHREEE IMPEX- Kar HC