In Brief
A registered dealer under the Uttar Pradesh Value Added Tax Act, 2008 recorded sales of raw materials to manufacturer-exporters against Form-E (totalling Rs. 1,89,35,100) and claimed input tax credit of Rs. 6,42,260 on purchases. The assessing officer disallowed the credit, holding that sales exempt under section 7(c) of the Act (pursuant to notifications exempting such transactions) attract section 13(7), which prohibits input tax credit for exempt sales. The Supreme Court upheld the disallowance, holding that section 13(7) is a clear statutory prohibition: where sales are exempt under section 7(c), no input tax credit is available, regardless of policy intent behind the exemption notifications. The Court rejected the appellant's argument that denying input tax credit undermines the State's pro-exporter policy, emphasizing that tax and input tax credit entitlements are separate statutory concepts.
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