Availing input tax credit on invoices estops a party from denying delivery of the underlying goods.

The Respondent/Plaintiff, a proprietor of M/s Jain Chemicals, filed a commercial suit for recovery of ₹8,89,350/- against the Appellants/Defendants (a partnership firm and its partners).

The claim was based on three invoices from March 2016 for chemical supplies.

The Defendants admitted the invoices were reflected in their books of account and VAT returns but contended the bills were "fictitious" or "entry bills" created to share VAT input credit, asserting that no physical goods were ever delivered.

The Trial Court decreed the suit in favor of the Plaintiff.

The Defendants appealed, primarily arguing that the Plaintiff failed to produce transport receipts or signed acknowledgments of delivery.

The court primarily applied Section 34 of the Indian Evidence Act (IEA), 1872, regarding the evidentiary value of account entries, noting that such entries require corroboration to fasten liability, as held in Chandradhar Goswami v. Gauhati Bank Ltd.

The court also applied Section 102 of the IEA regarding the shifting burden of proof.

Crucially, the court invoked the Doctrine of Approbate and Reprobate (estoppel by election), citing Cauvery Coffee Traders v. Hornor Resources Company Limited, which prevents a party from accepting the benefit of a transaction (VAT credit) while denying its validity.

Additionally, the court drew an adverse inference from the failure to reply to a legal notice, per the principle in Metropolis Travels & Resorts (I) Pvt. Ltd. v. Sumit Kalra.

The Court observed that while the Plaintiff lacked signed delivery receipts, the Plaintiff explained that the responsibility for transport documentation rested with the buyer.

The Court found the Defendants' admission—that they had claimed VAT input credit on these specific invoices—to be fatal to their defense.

Following the precedent in Ranjeet Saini v. M/s Banwarilal Arora and Sons, the Court held that a defendant cannot claim tax benefits on a transaction and subsequently label that same transaction as "fictitious" in a recovery suit.

The Defendants' silence following the receipt of a pre-suit legal notice and their failure to produce their accountant or ledgers further undermined their credibility.

Consequently, the Plaintiff was found to have discharged the evidentiary burden, which the Defendants failed to rebut.

However, the Court modified the interest component, reducing the pendente lite and future interest from 9% to 6% per annum, deeming it more "just and reasonable" under Section 34 of the CPC.

The appeal was dismissed subject to this modification, and the deposited amount was directed to be released to the Respondent.