BSR Infratech India Ltd. Vs Indian Oil Corporation Ltd. (Karnataka High Court)
Mere Assertion of GST ITC Loss Without Tax Authority Rejection Cannot Justify Withholding Security Deposit: Karnataka HC
The Karnataka High Court allowed the commercial appeal filed by BSR Infratech India Ltd. against dismissal of its suit seeking recovery of ₹36,64,474, being the balance security deposit withheld by Indian Oil Corporation Ltd. The appellant had executed civil and structural works at IOCL’s LPG Bottling Plant at Mysuru under a contract valued at ₹9,08,22,617.25. The work was completed on 30.10.2013 and accepted by IOCL. Of the security deposit of ₹97,07,341 retained from running bills, ₹48,53,670 was released in 2015 and ₹11,89,196 in December 2018, while ₹36,64,474 remained withheld.
IOCL contended that it had lost Input Tax Credit under the Karnataka Value Added Tax Act, 2003 because the appellant had not furnished tax invoices complying with Rule 29 of the Karnataka Value Added Tax Rules, 2005. The Commercial Court accepted this position and dismissed the suit.
The High Court held that once the appellant established the contract, completion of work, expiry of the warranty period and demands for refund, the evidentiary onus shifted to IOCL to justify continued withholding. The Court found that IOCL failed to establish that invoice defects caused denial of ITC or that the alleged loss was contractually recoverable. IOCL had received and processed the invoices, deducted VAT and issued Form VAT 156. Its witness also admitted that invoices were cleared without objections. No assessment order, audit report, tax-authority rejection, or computation establishing the alleged ITC loss of ₹36,64,474 was produced.
