Rs 47 crore Penalty on Flipkart Quashed by Kerala High Court


Kerala High Court on Tuesday quashed state government’s orders imposing huge penalties on online retailers Flipkart and Myntra for non-payment of value added tax (VAT) for goods sold online and delivered in the state. Both the companies had contended that they only offer an online marketplace and that taxes are paid by the respective sellers in their home states.

Allowing petitions by Flipkart and Myntra, Justice A K Jayasankar Nambiar wondered how the authorities could levy a tax or impose a penalty in the absence of any material to suggest that returns filed by the sellers had been rejected by concerned authorities.

The court said the government should bear in mind the fundamental constitutional precept under Article 265 that no tax shall be levied or collected except by authority of law.

The commercial tax department had in January last slapped a fine of Rs 53.63 crore on four online trading companies — Flipkart, Myntra, Jabong and Robemall Apparels – accusing them of illegal business in the state during 2012-14. Flipkart was asked to pay a fine of Rs 47.15 crore and Myntra Rs 2.23 crore.

Questioning the government’s action against them at the high court, the e-tailers had alleged that the orders asking them to pay penalties were issued without jurisdiction and authority of law.

The Kerala High Court Judge found that there was an uncertainty with regard to the real nature of the transaction in question, whether the transaction was an intra-state sale or an inter-state sale.
Government’s argument that the situs (location) of the virtual shop can be traced to Kerala is legally flawed as it is well settled, through various Supreme Court decisions, that the situs of a sale is wholly irrelevant when considering whether a sale is interstate or not, the judgment said.



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Ranjeet Kumar Upadhyay

Ranjeet Kumar Upadhyay is a Computer Engineer by profession. He recently finished his B.TECH from Uttaranchal Institute Of Technology, Dehradun. He has been working in AON for last two years. He has a great taste for technology and loves to read and write.

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