List of Current Affairs

Source: Supreme Court  

Why in News? 

Recently, the bench of Justice Manoj Misra and Justice Nongmeikapam Kotiswar Singh has held that bona fide purchasers cannot be denied Input Tax Credit (ITC) under the DVAT Act merely because the seller failed to deposit VAT, upholding the Delhi High Court’s ruling protecting genuine buyers. 

• The Supreme Court held this in the matter of The Commissioner Trade and Tax Delhi v. M/S Shanti Kiran India (P) LTD (2025). 

What was the Background of The Commissioner Trade and Tax Delhi v. M/S Shanti Kiran India (P) LTD (2025) Case ? 

• The appeals arose from disputes concerning Input Tax Credit (ITC) claims made by registered purchaser dealers under the Delhi Value Added Tax Act, 2004. M/s Shanti Kiran India (P) Ltd., the respondent, was a registered dealer who had purchased goods from certain seller dealers who were also duly registered with the Department at the time of the transactions. 
• The purchaser dealers had made payments including Value Added Tax to the registered seller dealers in accordance with the invoices raised by them. The invoices contained all requisite details including the Tax Identification Numbers of the sellers, and the transactions were documented as per Section 50 of the DVAT Act. 
• Subsequently, after the completion of these transactions, the registration of the seller dealers was cancelled by the Department. It was discovered that these seller dealers had failed to deposit the tax collected from the purchaser dealers with the Government, thereby becoming defaulters. 
• The Commissioner of Trade and Tax, Delhi, denied the Input Tax Credit claims to the purchaser dealers on the ground that the selling dealers had not deposited the collected tax with the Government. The Department relied upon Section 9(2)(g) of the Delhi Value Added Tax Act, 2004, which stipulated conditions for allowing ITC. 
• The purchaser dealers challenged this denial before the Delhi High Court, contending that they were bona fide purchasers who had acted in good faith, paid the taxes as per valid invoices, and had no knowledge or involvement in the sellers' subsequent default. They argued that they should not be penalised for the offence or default committed by the seller dealers. 
• The matter involved interpretation of Section 9(1) and Section 9(2)(g) of the DVAT Act, which dealt with the conditions for granting and denying ITC respectively. The central issue was whether a purchasing dealer who had fulfilled all his obligations could be denied ITC merely because the selling dealer failed to deposit the collected tax with the authorities. 
• The Delhi High Court had earlier decided a similar issue in On Quest Merchandising India Pvt. Ltd. vs. Government of NCT of Delhi, wherein it had read down the provisions of Section 9(2)(g) to protect bona fide purchasers from being denied ITC in the absence of any collusion or fraud. 

What were the Court’s Observations? 

• The Court observed that the primary issue for consideration was whether the benefit of Input Tax Credit is available to registered purchaser dealers who paid taxes to registered seller dealers in terms of invoices raised by them, even though those seller dealers did not deposit the collected tax with the Government. 
• The Court noted that there was no dispute that on the date of transaction, the seller dealers were duly registered with the Department. The registration of those seller dealers was cancelled only after the transaction, and they defaulted in depositing the tax collected by them from the purchaser dealers. 
• The Court observed that the High Court had found the respondents to be bona fide purchaser dealers who had paid taxes in good faith to registered seller dealers and were therefore entitled to the benefit of ITC after due verification of invoices. 
• The Court took note of the decision in On Quest Merchandising India Pvt. Ltd. vs. Government of NCT of Delhi, wherein the Delhi High Court had interpreted Section 9(2)(g) of the DVAT Act by reading down the expression 'dealer or class of dealers' to exclude bona fide purchasing dealers who had entered into purchase transactions with validly registered selling dealers who had issued tax invoices in accordance with Section 50 of the Act where there was no mismatch of transactions. 
• The Court observed that unless the provision was read down in this manner, it would have to be held violative of Article 14 of the Constitution.  
• The Court noted that the result of such reading down would be that the Department is precluded from invoking Section 9(2)(g) of the DVAT to deny ITC to a purchasing dealer who has bona fide entered into a purchase transaction with a registered selling dealer who has issued a tax invoice reflecting the TIN number. 
• The Court further observed that in the event the selling dealer has failed to deposit the tax collected by him from the purchasing dealer, the remedy for the Department would be to proceed against the defaulting selling dealer to recover such tax and not deny the purchasing dealer the ITC. However, where the Department is able to come across material to show that the purchasing dealer and the selling dealer acted in collusion, then the Department can proceed under Section 40A of the DVAT Act. 
• The Court observed that the aforesaid decision of the High Court in On Quest Merchandising had been challenged before the Supreme Court in Special Leave to Appeal (Civil) No.36750 of 2017, which was disposed of without interfering with the order of the High Court. 
• The Court observed that there was no dispute regarding the selling dealer being registered on the date of transaction, and neither the transactions nor invoices in question had been doubted based on any inquiry into their veracity. The Court found no evidence suggesting any collusion or fraudulent conduct on the part of the purchasing dealers in respect of the offence committed by the selling dealers. 
• The Court observed that it did not find good reason to interfere with the order of the High Court directing grant of ITC benefit after due verification. The Court held that the appeals lacked merit and accordingly dismissed them. 

What is Input Tax Credit? 

• Definition: 
  • Input Tax Credit is a mechanism that allows registered businesses to claim credit for the tax paid on purchases of goods or services used in their business operations. 
• Core Principle: 
  • At the time of paying tax on sales (output), a business can deduct the tax already paid on purchases (input) and remit only the balance amount to the government. 
• Purpose: 
  • ITC eliminates the cascading effect of taxes by ensuring that tax is levied only on the value addition at each stage, not on the entire transaction value. 
• Working: 
  • When a business purchases inputs, it pays tax. When it sells outputs, it collects tax. The business sets off the input tax against output tax and pays only the difference. 
• Example: 
  • A manufacturer buys raw materials for ₹1,00,000 plus ₹18,000 GST. He sells finished goods for ₹2,00,000 plus ₹36,000 GST. He pays only ₹18,000 (₹36,000 minus ₹18,000) to the government. 
• Eligibility Conditions: 
  • The business must possess a valid tax invoice, must have received the goods or services, the supplier must have deposited the tax with the government, and the recipient must have filed returns. 
• Benefits: 
  • ITC reduces the overall tax burden on businesses and consumers, promotes transparency, encourages compliance, and makes goods and services more competitively priced. 
• Restrictions: 
  • ITC cannot be claimed on motor vehicles (except for specified uses), food and beverages, construction of immovable property, personal consumption items, and other blocked credits under Section 17(5) of the CGST Act. 
• Statutory Framework: 
  • ITC is governed by Section 16 of the CGST Act, 2017, with restrictions specified under Section 17(5). 

Delhi Value Added Tax Act, 2004 

• Section 7 - Liability to pay tax This provision deals with the liability of dealers to pay tax on sales of goods. 
• Section 9(1) - Input Tax Credit This provision permits Input Tax Credit to a registered dealer in respect of turnover of purchases occurring during the tax period where the purchase arises in the course of his activities as a dealer and the goods are to be used by him directly or indirectly for the purpose of making sales which are liable to tax under Section 7 of the DVAT Act. 
• Section 9(2) - Conditions for denial of Input Tax Credit This sub-section sets out the conditions under which Input Tax Credit would not be allowed to a registered dealer. 
• Section 9(2)(g) - Specific condition for ITC denial This clause made Input Tax Credit benefit available to a purchasing dealer only when the tax paid by the purchasing dealer has actually been deposited by the selling dealer with the Government or has been lawfully adjusted against output tax liability and correctly reflected in the return filed for the respective tax period. 
• Section 40A - Proceedings against dealers acting in collusion This provision empowers the Department to proceed against dealers where material evidence exists showing that the purchasing dealer and the selling dealer acted in collusion to commit fraud or tax evasion offences. 
• Section 50 - Tax invoices This provision mandates the requirements for valid tax invoices to be issued by registered dealers, including details such as Tax Identification Number (TIN), description of goods, and tax charged. 

Source: Supreme Court  

Why in News? 

Recently, the bench of Justice Mahesh Chandra Tripathi and Justice Amitabh Kumar Rai held that the limitation period for filing applications under Section 28-A of the Land Acquisition Act, 1984 begins from the date of the redetermination award relied upon, not from the original award, reaffirming the provision’s beneficial and liberal interpretation. 

• The Allahabad High Court held this in the matter of Ved Prakash Saini and 45 Others v. State of U.P. And 2 Others (2025).

What was the Background of Ved Prakash Saini and 45 Others v. State of U.P. And 2 Others (2025) Case ? 

• The Krishi Utpadan Mandi Samiti, Moradabad proposed acquisition of 47.98½ acres of land at village Majhola for constructing a Market Yard. The State Government issued a notification under Section 4(1)/17(4) of the Land Acquisition Act, 1894 on 30th April 1977, published on 14th May 1977. Possession was taken on 10th July 1977, and the Special Land Acquisition Officer declared the award on 9th August 1982, fixing compensation at Rs. 15.75 per square yard. 
• Dissatisfied tenure holders filed Land Acquisition References under Section 18, which were rejected on 3rd February 1989. Review applications were filed citing that other references had been allowed at Rs. 64/- per square metre. These review applications were allowed on 14th March 1990, enhancing compensation to Rs. 64/- per square metre with statutory benefits. 
• The KUMS challenged these enhancement awards through first appeals before the Allahabad High Court, which were allowed in 2004, remanding matters for fresh determination. The Reference Court re-determined compensation at Rs. 108/- per square metre vide judgment dated 30th January 2016. Similar compensation was awarded on 19th September 2017. 
• The KUMS again filed first appeals which were dismissed by the High Court on 5th February 2020 and 8th February 2021. The Supreme Court dismissed the KUMS' Special Leave Petition on 26th October 2020, confirming the enhanced compensation at Rs. 108/- per square metre. 
• Landowners who had not filed references under Section 18 moved applications under Section 28-A of the Act on 10th February 2021, seeking re-determination based on enhanced compensation awarded to similarly situated landowners. The KUMS objected, arguing that applications should have been filed within three months of the 14th March 1990 order. The SLAO allowed the applications on 17th February 2022, re-determining compensation at Rs. 108/- per square metre with statutory benefits. 
• The landowners filed the leading writ petition for compliance, whilst KUMS filed writ petitions seeking quashing of the SLAO's order. After various proceedings, the Supreme Court remitted matters to the High Court for fresh consideration on 21st November 2024.

What were the Court’s Observations? 

• The Court observed that Section 28-A of the Land Acquisition Act, 1894 is a beneficent provision addressing inequality in compensation awards arising from the inability of inarticulate and poor landowners to utilise the reference mechanism under Section 18. Such beneficial legislation must be construed liberally to advance its objective of extending benefits rather than curtailing intended relief. 
• The Court held that the KUMS' limitation argument was fallacious. Relying on the Supreme Court's decision in Banwari v. HSIIDC, the Court observed that limitation under Section 28-A commences from the date of the specific award on which re-determination is sought, not from earlier awards subsequently set aside. The order dated 14th March 1990 was judicially annulled by KUMS' own appeals and cannot serve as the foundation for computing limitation. An annulled order cannot be relied upon for subsequent proceedings. 
• The Court noted that landowners filed applications on 26th April 2016, well within three months of the Reference Court's judgment dated 30th January 2016, satisfying limitation requirements. The Court rejected the "stale claims" contention, observing that landowners could not have filed applications until a valid, final enhancement award became available. The delay was occasioned by prolonged litigation initiated by KUMS itself, making it inequitable to penalise landowners for the acquiring body's own actions. 
• The Court held that all statutory conditions for invoking Section 28-A were satisfied: lands acquired under identical notification; enhanced compensation attained finality; landowners never filed Section 18 references; and applications filed within prescribed limitation. Denying enhanced compensation would perpetuate the inequality Section 28-A was designed to eliminate. 
• The Court emphasised that compensation for land acquisition is constitutional obligation under Article 31, not gratuitous payment. The State's duty to provide just compensation is not diminished by financial considerations. It would be manifestly unjust to deny landowners enhanced compensation when their lands were acquired under identical circumstances as those receiving higher compensation. The doctrine of equal treatment demands similarly situated persons receive similar compensation. The Court expressed hope that authorities would implement the order ensuring landowners receive due compensation without further delay, observing that compensation is legal entitlement long overdue. 

What is Section 28 A of the Land Acquisition Act, 1984 ? 

• Section 28-A of the Land Acquisition Act, 1984 deals with Re-determination of the amount of compensation based on the award of the court 
• Sub-section (1) 
  • Where in an award under this Part, the court allows to the applicant any amount of compensation in excess of the amount awarded by the Collector under Section 11, the persons interested in all the other land covered by the same notification under Section 4, sub-section (1) and who are also aggrieved by the award of the Collector may, notwithstanding that they had not made an application to the Collector under Section 18, by written application to the Collector within three months from the date of the award of the court require that the amount of compensation payable to them may be re-determined on the basis of the amount of compensation awarded by the court. 
  • Proviso: In computing the period of three months within which an application to the Collector shall be made under this sub-section, the day on which the award was pronounced and the time requisite for obtaining a copy of the award shall be excluded. 
• Sub-section (2) 
  • The Collector shall, on receipt of an application under sub-section (1), conduct an inquiry after giving notice to all the persons interested and giving them a reasonable opportunity of being heard, and make an award determining the amount of compensation payable to the applicants. 
• Sub-section (3) 
  • Any person who has not accepted the award under sub-section (2) may, by written application to the Collector, require that the matter be referred by the Collector for the determination of the court, and the provisions of Sections 18 to 28 shall, so far as may be, apply to such reference as they apply to a reference under Section 18. 
• Key Elements of Section 28-A: 
  • Eligibility: Persons interested in land covered by the same notification who are aggrieved by the Collector's award 
  • Pre-condition: They must not have made an application under Section 18 
  • Trigger: Court awards enhanced compensation to any applicant under the same notification 
  • Time limit: Three months from the date of the court's award (excluding the day of pronouncement and time for obtaining copy) 
  • Procedure: Written application to the Collector for re-determination 
  • Inquiry: Collector conducts inquiry with notice and hearing 
  • Further reference: Dissatisfied persons may seek court reference under sub-section (3)