Time for cashback: HC orders 16-cr tax refund to Flipkart

Bengaluru: The Karnataka high court has ordered the commercial taxes department to refund Rs 16.1 crore to Flipkart India. This amount represents 70% of a pre-deposit made using input tax credit (ITC) from its electronic credit ledger (ECL).

The court stated in a recent order that the refund is to be paid in cash. Justice S R Krishna Kumar also directed that applicable interest on the total pre-deposit of Rs 23 crore be paid in cash as per law. The case dates back to reassessment orders issued for the tax period 2011-12 to 2014-15 under the Karnataka Value Added Tax Act, 2003 (KVAT Act). These orders classified mobile phone chargers as unscheduled commodities and imposed a higher tax rate, resulting in a demand of Rs 23 crore.

Flipkart appealed the orders before the joint commissioner of commercial taxes (appeals), which dismissed the case in 2017. The company made a pre-deposit of 30% of the total demand-Rs 6.9 crore-in cash. Subsequently, Flipkart appealed before the Karnataka Appellate Tribunal (KAT), Bengaluru, and deposited the remaining 70% pre-deposit-Rs 16.1 crore-using ITC from its ECL on July 20, 2019. The department accepted this. On March 31, 2022, KAT upheld Flipkart's appeals, and the high court dismissed the department's revision petitions in 2023, affirming the order.

As a result, Flipkart became eligible for a full refund of the pre-deposits. However, the department refunded only the 30% cash component and withheld the Rs 16.1 crore ITC portion, prompting Flipkart to seek relief from the high court.

The department contended that under a circular dated April 16, 2018, only arrears of interest and penalty could be reversed from the cash ledger, not voluntary payments made via ITC. It further argued that Flipkart did not seek ITC reversal or file for re-credit, thus disallowing a cash refund. Rejecting these arguments, Justice Krishna Kumar held that all refundable amounts must be paid in cash, irrespective of the mode of payment. He noted that retaining funds without entitlement obliges the state to refund with interest.


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