The Karnataka High Court in the case of Flipkart India has brought significant clarity and relief for businesses involved in tax disputes, particularly concerning pre-deposits and refunds.
The bench of Justice S.R.Krishna Kumar has observed that if a refund is admissible, it must be paid in cash, regardless of whether the original pre-deposit was made via cash or by utilizing Input Tax Credit (ITC) from the Electronic Credit Ledger (ECL). This is a direct interpretation of statutory provisions, which do not distinguish between payment methods for refunds.
The bench stated that if a refund is admissible, it must be paid in cash, regardless of whether the original pre-deposit was made via cash or by utilizing Input Tax Credit (ITC) from the Electronic Credit Ledger (ECL). This is a direct interpretation of statutory provisions, which do not distinguish between payment methods for refunds.
The bench clarified that Rule 92(1A), which suggests re-crediting ITC to the ECL, is prospective in nature and applies only from its insertion date (March 23, 2020). Pre-deposits made before this date are not subject to this rule, reinforcing the right to a cash refund.
The bench reiterated that when the government retains excess tax without a statutory right, it is liable to refund the amount with interest from the date of payment. This is not a penalty but a statutory obligation to compensate for the use of funds.
The bench explicitly directed the refund of the entire pre-deposit amount, including the 70% paid via ITC/ECL, in cash, along with applicable interest on the total deposited amount from the date of deposit until payment.
Background
The petitioner is a dealer registered with the Respondent Commercial Tax Department and is engaged, interalia, in the business of B2B trading across a wide gamut of products including Mobiles, Electronic items, Apparels, Footwear, etc.
The grievance of the petitioner that while 30% of the pre-deposit paid by the petitioner through cash at the time of filing the appeal before the first appellate authority was refunded by the respondents back to the petitioner, the remaining balance of 70% pre-deposit paid by the petitioner at the time of filing the appeal by utilizing the Input Tax Credit (ITC) available in its Electronic Credit Ledger (ECL) was not refunded back to the petitioner by the respondents. Pursuant to which, petitioner submitted representations calling upon the department to refund/release/sanction the balance 70% of the pre- deposit amounting to Rs.16,11,19,226/- together with the applicable interest back to the petitioner in cash and since the said request was not complied with by the respondents, who did not refund as claimed by the petitioner in cash, petitioner is before this Court by way of the present petition.
Conclusion
The court held that as per provisions contained in Sections 142(7)(b) and 142(8)(b) of the KGST Act the petitioner is entitled to the entire 70% pre-deposit made through ITC/ECL by way of refund in CASH from the department 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 timeframe.
Case Details
Case Title: M/S. Flipkart India Versus The Assistant Commissioner Of Commercial Taxes
Case No.: Writ Petition No. 7277 Of 2025
Date: 16th Day Of July, 2025
Counsel For Petitioner: Tarun Gulati, Senior Counsel
Counsel For Respondent: K. Hema Kumar
Read More: End of an Era: Principal Chief Commissioner A.R.S. Kumar Bids Adieu to Customs & GST Service
