Rajasthan HC says Supplier Tax Default Can Deny the Recipient ITC

The petitioner had availed ITC on purchases from a supplier which subsequently became insolvent and failed to remit the tax. 

The Rajasthan High Court rejected the challenge to Section 16(2)(c), holding that payment of tax by the supplier is a mandatory condition for ITC and that Sections 41 and Rule 37A provide the statutory mechanism to address supplier defaults rather than making the condition impossible to comply with.