The Karnataka High Court has ordered the commercial taxes department to refund Rs 16.11 crore to Flipkart India, which the ecommerce firm had deposited towards 70% pre-deposit of the total tax demand while challenging the tax assessment orders.
Justice SR Krishna Kumar at the high court, by a July judgement, the copy of which is available now, has also ordered the department to pay interest at the applicable rate to Flipkart India in cash on the entire deposit amount of Rs 23 crore from the date of deposit to the date of refund.
A long-drawn dispute arose after the commercial tax authorities treated mobile phone chargers as an unscheduled commodity and taxed them at a higher rate, raising a combined demand of Rs 23.01 crore. The department did so by way of four separate reassessment orders in 2016 and 2017 under the Karnataka VAT Act, 2003, for the tax period from 2011-12 to 2014-15.
Unhappy with the assessment, Flipkart India filed appeals before the department authorities by depositing Rs 6.90 crore (30% of the demand) in cash as required under VAT laws. When the department dismissed the appeal, it challenged the dismissal before the Karnataka Appellate Tribunal in July 2019 after depositing the remaining tax demand of Rs 16.11 crore (70% of the tax demand) using its input tax credit (ITC) available in the electronic credit ledger (ECL).
The Tribunal, however, allowed Flipkart’s appeals in March 2022, and the HC division bench, too, later dismissed the sales tax revision petition filed by the department. Thus, Flipkart India became entitled to the refund of the entire 100% of the pre-deposit it paid to the department.
The department, however, refunded only Rs 6.90 crore (30% of the tax demand) in cash and continued to retain Rs 16.11 crore (70% of the tax demand), which Flipkart discharged using its ITC. The department, however, did not respond to Flipkart India’s requests to refund Rs 16.11 crore along with the applicable rate of interest.
Justice Krishna Kumar, in his 52-page order, wrote: “…I am of the considered opinion that the petitioner (Flipkart) is entitled to the entire 70% pre-deposit made through ITC/ECL by way of refund in CASH from the respondents who are liable to repay/refund the entire 70% pre-deposit paid through ITC/ECL back to the petitioner together with interest due to delayed refund within a stipulated time frame.”
A senior official of the commercial taxes department said the issue here was whether interest was payable by the government on refund to the dealer, if the payment by the dealer was made using the input tax credit (ITC) under the provisions of Karnataka VAT Act. The department is examining the court order.
According to one comment on microblogging site X, the high court has provided significant clarity and relief for businesses involved in tax disputes, particularly on pre-deposits and refunds. The court has ruled that if a refund is admissible, it must be paid in cash, regardless of whether the original pre-deposit was made in cash or by using input tax credit.
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Justice SR Krishna Kumar at the high court, by a July judgement, the copy of which is available now, has also ordered the department to pay interest at the applicable rate to Flipkart India in cash on the entire deposit amount of Rs 23 crore from the date of deposit to the date of refund.
A long-drawn dispute arose after the commercial tax authorities treated mobile phone chargers as an unscheduled commodity and taxed them at a higher rate, raising a combined demand of Rs 23.01 crore. The department did so by way of four separate reassessment orders in 2016 and 2017 under the Karnataka VAT Act, 2003, for the tax period from 2011-12 to 2014-15.
Unhappy with the assessment, Flipkart India filed appeals before the department authorities by depositing Rs 6.90 crore (30% of the demand) in cash as required under VAT laws. When the department dismissed the appeal, it challenged the dismissal before the Karnataka Appellate Tribunal in July 2019 after depositing the remaining tax demand of Rs 16.11 crore (70% of the tax demand) using its input tax credit (ITC) available in the electronic credit ledger (ECL).
The Tribunal, however, allowed Flipkart’s appeals in March 2022, and the HC division bench, too, later dismissed the sales tax revision petition filed by the department. Thus, Flipkart India became entitled to the refund of the entire 100% of the pre-deposit it paid to the department.
The department, however, refunded only Rs 6.90 crore (30% of the tax demand) in cash and continued to retain Rs 16.11 crore (70% of the tax demand), which Flipkart discharged using its ITC. The department, however, did not respond to Flipkart India’s requests to refund Rs 16.11 crore along with the applicable rate of interest.
Justice Krishna Kumar, in his 52-page order, wrote: “…I am of the considered opinion that the petitioner (Flipkart) is entitled to the entire 70% pre-deposit made through ITC/ECL by way of refund in CASH from the respondents who are liable to repay/refund the entire 70% pre-deposit paid through ITC/ECL back to the petitioner together with interest due to delayed refund within a stipulated time frame.”
A senior official of the commercial taxes department said the issue here was whether interest was payable by the government on refund to the dealer, if the payment by the dealer was made using the input tax credit (ITC) under the provisions of Karnataka VAT Act. The department is examining the court order.
According to one comment on microblogging site X, the high court has provided significant clarity and relief for businesses involved in tax disputes, particularly on pre-deposits and refunds. The court has ruled that if a refund is admissible, it must be paid in cash, regardless of whether the original pre-deposit was made in cash or by using input tax credit.
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