The Hon’ble High Court of Delhi vide its order dated 29^th April 2022 in the matter of Amit Gupta Vs Directorate General of GST Intelligence Headquarters in W.P.(CRL) 1267/2021 held that the bail granted cannot be cancelled on a doubt that ITC utilized for depositing the amount as ordered by the Trial Court while granting bail, is fraudulent when the assessee is able to substantiate the same as legit and not fraudulent.

The Petitioner preferred the writ petition challenging the order dated 9^th July 2021 passed by Ld. CMM, Patiala House Courts, whereby the bail granted to the petitioner vide order dated 23^rd December 2019 was cancelled.

Facts: –

• The prosecution against the Petitioner is that he is one of the directors/key persons in M/s Brilliant Metals Pvt. Ltd., M/s. Progressive Alloys India Pvt. Ltd. and M/s JBN Impex Pvt. Ltd. and allegedly a mastermind in fraudulent availment of ITC amounting to Rs. 27.05 Crores on the strength of invoices pertaining to suppliers which were non-existing or fictitious. Further, the total ITC availed by the petitioner in the three companies mentioned above was totalling to ₹260 crores.
• That after the arrest, the petitioner was granted bail vide order dated 23^rd December 2019 on furnishing a bond of Rs. 1 lakh with one surety of the like amount subject to conditions that ‘He will deposit the amount of Rs, 2,70,00,000 with the department, he will join the investigation with IO as and when required, he shall not temper evidence of influence witness, he shall appear before the court on every date of hearing and will not leave the country without prior permission of the court’
• That as required by the bail order, the petitioner deposited Rs. 1.10 crores through cash ledger and Rs. 1.60 crores through reversal from electronic credit ledger, which as per the department was availed through fraudulent means and was under doubt.
• It was held by the Ld. Trial Court that the Petitioner never took the permission of the Court to deposit the aforesaid amount through reversal of credit from electronic ledger and simply placed the challans before the Court. Consequently, the department filed an application for cancellation of bail on 24^th January, 2020.
• That in the present matter the petitioner availed the ITC amounting to Rs. 260 crores, out of which ITC amounting to Rs. 27.05 Crores was disputed by the department and rest of ITC i.e., Rs. 232.95 Crores has not been disputed by the department, being availed by fraudulent means.

Petitioner’s Submissions: –

• That referring to Form GST DRC-03 issued under Rule 142(2) and Rule 142 (3) of CGST rules and law stated in Section 49 and Rule 86A, it was submitted on the behalf of the petitioner that the Act permits the deposit of amount through cash/credit of ITC ledgers.

Respondent’s Submissions: –

• On the other hand, it was submitted on the behalf of the respondents that ITC in dispute has been availed through fraudulent means and is under a suspicion, therefore could not have been utilized by the petitioner for making payment of Rs. 1.60 crores.
• It was informed during the course of arguments that apart from ITC in dispute i.e., Rs. 27.5 crores, an investigation against the petitioner for availing fraudulent ITC of Rs. 15 crores, is also pending before the DGGI.

Held: –

• The Hon’ble High Court after considering the submissions from the both sides, facts of the case and law applicable, observed that in total the petitioner availed the ITC of Rs. 260 crores, even as per the case of the respondent till date beyond approximately Rs 42 Crores of ITC, the rest of the ITC have not been found to be availed fraudulently.
• That a perusal of Section 49 of GST Act, make it very clear that it permits availing amount in electronic ledger for making payment towards output tax, Section 49(5) & Section 49 (6) prescribes the manner to utilize and provides that the balance of ITC after payment of tax, interest, penalty, fee etc. may be refunded in accordance of provisions of Section 54 of the GST Act.
• Further during the course of arguments, it was not disputed on behalf of the respondents that under Section 49(4) payment of tax could be made through electronic ledger.
• The Hon’ble Court observed that investigation does not show that apart from Rs. 42 crores (approx.), out of ITC availed amounting to Rs. 260 Crores, is fraudulent till now. Thus, the reversal of ITC towards the deposit of Rs. 2.70 crores as directed by the Ld. Trial Court is not illegal or unwarranted, warranting cancellation of bail granted to the petitioner.

The Hon’ble High Court with the above observations found that the petitioner has fulfilled the condition of deposit of amount partly by cash ledger and partly by reversal from credit ledger, thus it cannot be said that the petitioner has failed to fulfil the conditions imposed on him. Therefore, the impugned order dated 9^th July, 2021 passed by the learned CMM, Patiala House Court is set aside. 

The Hon’ble Court with the above findings disposed of the Writ petition.