Kerala HC quashes tax demand on Flipkart, Myntra

In a relief to e-commerce companies, Kerala High Court held as illegal the commercial tax department's order imposing more than Rs 49 crore penalty on online traders Flipkart and Myntra for alleged violation of the state's tax laws.

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

The commercial tax department had in January last slapped a fine of Rs 53.63 crore on four on-line trading companies -- Flipkart, Myntra, Jabong.Com 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.

The Judge found that there was an uncertainty with regard to the real nature of transaction in question, whether the transaction was intra-state sale or an inter-state sale.

He said the officers ought to have referred the matter to assessing officers to arrive at liabilities to tax before taking recourse to penal provisions of Kerala Value Added Tax Act.

The court asked the state authorities to bear in mind that no tax shall be levied or collected except by authority of law.