HC Upholds Recovery Decree Despite No Delivery Proof; VAT Credit Claim Weakens Defence:

HC Upholds Recovery Decree Despite No Delivery Proof; VAT Credit Claim Weakens Defence The dispute arose out of a commercial transaction between the Plaintiff, a chemical supplier operating as M/s Jain Chemicals, and the Defendants, a partnership firm dealing in chemical trade. The Plaintiff claimed that in March 2016, goods worth Rs. 5,77,500 were supplied to the Defendants under three invoices on a credit basis. Despite repeated demands and a legal notice, payment remained outstanding. The Plaintiff also claimed interest at 18% per annum, taking the total claim to Rs. 8,89,350. The Defendants, however, denied any actual supply of goods. They contended that although invoices were received and reflected in their books and VAT returns, no physical delivery ever took place. As per defendants, the entries were mistakenly recorded by their accountant and the invoices were merely “entry bills” without any real transaction. The Commercial Court decreed the suit in favour of the Plaintiff, awarding the claimed amount along with interest. Aggrieved, the Defendants filed the present appeal before the Hon'ble High Court. Main Issue: Whether recovery can be sustained in absence of proof of physical delivery of goods, particularly when the Defendants had availed VAT input credit on the same invoices. HC's Order: The High Court upheld the decree in favour of the Plaintiff, holding that the transactions were genuine and legally recoverable. The Court observed that while entries in books and invoices alone may not be sufficient, the Defendants conduct that it availed VAT input credit on the disputed invoices strongly corroborated the Plaintiff’s case. The Court held that once VAT input credit had been claimed benefit, the Defendants cannot thereafter deny the existence of the transaction. This conduct attracted the doctrine of approbate and reprobate, preventing the Defendants from taking contradictory stands. The Court held that the Defendants failed to produce any account books or testimony of their accountant to support their claim of fictitious entries. Their failure to respond to the legal notice also does not support their case. The Court accepted the Plaintiff’s explanation that the documentation was the responsibility of the purchaser at the relevant time. Overall, absence of delivery proof alone was held insufficient to discredit the claim. On interest. the Court upheld pre-suit interest at 18% as per contractual terms but found the awarded pendente lite and future interest at 9% to be excessive. Exercising discretion, it reduced the same to 6% per annum. Therefore, the appeal was dismissed with a limited modification in the rate of interest. To Read Full Judgment, Download PDF Given Below