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5. Sub-Section 2 of Section 24 states that where a selling dealer has received back the goods as a result of sales return or unfructified sale, the output tax paid or payable thereon will be reduced, adjusted or refunded in the manner as prescribed. Section 17 deals with the burden of proof and in terms of Sub-Section 2 therein, for the purpose of claim of ITC, the burden of proving such claim shall lie on such dealer.

6. Section 19 of the Act would be very relevant, which deals with ITC and the same is quoted hereunder.

(16) The input tax credit availed by any registered dealer shall be only provisional and the assessing authority is empowered to revoke the same if it appears to the assessing authority to be incorrect, incomplete or otherwise not in order.

(17) If the input tax credit determined by the assessing authority for a year exceeds tax liability for that year, the excess may be adjusted against any outstanding tax due from the dealer.

(18) The excess input tax credit, if any, after adjustment under sub-section (17), shall be carried forward to the next year or refunded, in the manner, as may be prescribed.

33. At this juncture, it may be useful to have a bird's eye view of provision under the VAT Act of a few States in India. In the State of Maharastra Section 48 of the Maharastra VAT Act, 2002, deals with set off, refund etc. Subsection (2) states that no set off or refund shall be granted to any dealer in respect of any purchase made, unless the claimant dealer produces a tax invoice containing a certificate that the registration certificate of the selling dealer was in force on the date of sale by him and the due tax, if any, payable on the sale has been paid or shall be paid and unless such certificate is signed by the selling dealer or a person duly authorised by him. Sub-section (5) of Section 48 declares that in no case the amount of set off or refund or the purchase of the goods shall exceed the amount of tax in respect of the same goods, actually paid. Thus, Section 48(2) of Maharastra VAT Act mandates that the purchasing dealer should produce a tax invoice and a certificate from the selling dealer that tax due has been paid/shall be paid and he is a registered dealer on the date of sale to be enable to claim set off/Input Tax Credit. The Constitution validity of Section 48(5) was upheld in the case of Mahalaxmi Cotton Ginning Pressing and Oil Industries vs. State of Maharastra & Ors., reported in (2012) 51 VST 1 (Bombay).

51. In Mahalaxmi Cotton Ginning Pressing and Oil Industries (supra), the Hon'ble Division Bench of the Bombay High Court was considering the Constitutional validity of Section 48(5) of the MVAT Act, 2002. Section 48 of the said Act deals with set off, refund, etc., Section 48(5) states that in no case, the amount of set off or refund on any purchase of goods shall exceed the amount of tax in respect of the same goods, actually paid, if any under the Act except the extent purchase tax is payable by the claimant dealer on the purchase of the said goods effected by him. One of the contentions, which is identical to the contention raised in these Writ Petitions is that the claimant dealer in order to claim a set-off is required to produce an original tax invoice, is required to maintain accounts reflecting the date of purchase, name of the selling dealer and a registration certificate, number of the tax invoice. purchase price of the goods and the tax, if any, recovered by the selling dealer and once these conditions are fulfilled, the dealer would be entitled to the benefit of a set-off irrespective of whether the selling dealer has deposited the tax collected in the Treasury. Further, the Act does not have any machinery for the purchaser to ascertain whether the seller has actually paid VAT and it casts a burden on the purchasing dealer, which is impossible to perform since the Act and the Rules do not empower the purchasing dealer to seek any document from the vendor other than the tax invoice for the purchases made. Therefore, to deny benefit of set-off for the failure of the selling dealer to deposit the tax would be to impose a condition which is impossible to perform. The selling dealers are registered in the State and collect tax as agents for the State and the State has statutory powers to recover tax from a defaulting dealer by taking recourse to the coercive arm of the law, including by way of assessment, recovery, attachment and prosecution.