Karnataka High Court orders tax dept to refund Rs 16.11 crore deposit to Flipkart within six weeks

Bengaluru: The Karnataka High Court has ordered the Commercial Taxes Department to refund Flipkart India Private Limited within six weeks the remaining Rs 16,11,19,226 pre-deposit in cash and also to pay interest in cash, applicable on the total deposit of Rs 23,01,70,324. Justice SR Krishna Kumar passed this order in a petition filed by Flipkart.

For the tax period 2011-12 to 2014-15, reassessment orders were issued against Flipkart, raising a total demand of Rs 23.01 crore under the Karnataka Value Added Tax Act, 2003 (KVAT Act). This was towards mobile phone chargers considering it as unscheduled commodities. The matter reached finality with the high court in 2023 dismissing the petitions filed by the Commercial Taxes Department challenging the orders by the KAT ordering refund.

Moving the present petition before the high court, Flipkart contended that while the department refunded 30% of the pre-deposit (Rs 6.9 crore) paid in cash, it continues to withhold the remaining 70% (Rs 16.11 crore), which was paid using Input Tax Credit (ITC), available in its Electronic Credit Ledger (ECL).

On the other hand, the department contended that as per the April 16, 2018 circular, the company would be entitled to recover the pre-deposit through the credit ledger alone and not by way of cash refund. It was further stated that since only arrears are recoverable by reversing ITC and the same does not apply to voluntary payment.

Justice Krishna Kumar examined section 142 KGST Act and said it essentially outlines transitional provisions for handling goods and services tax during the switch from the earlier regime to GST and noted that the expression ‘refund in cash’ has been specifically provided. The court also observed that the 70% pre-deposit was not voluntary but for the purpose of filing the appeal. Irrespective of the circular cited by the department, the court said specific provisions contained in section 142 (3), (5), 6(a), 7(b), 8(b) and 9(b), categorically provide for refund by way of cash. “to put it differently, the statutory scheme underlying the aforesaid provisions will clearly indicate that all types/kinds of refund found to be payable/admissible under any of the various situations/circumstances enumerated in Section 142(3) to 142(9) of the KGST Act would entail refund back in cash only and as such the contention urged by the respondents cannot be accepted,” the court said.

Re-assessment orders were challenged

Several assesses had challenged the re-assessment orders issued by the Commercial Tax Department during the pre-GST period. The department had claimed that a mobile charger is not an integral part of the mobile phone to treat among ‘composite goods’. The high court upheld the orders passed by the KAT and said that a mobile phone charger sold along with a mobile phone is a composite part in the package and tax cannot be levied differently on them.