Delhi High Court refuses to vacate bail of person accused of fraudulently using ITC

the Delhi High Court bench Judge Mukta Gupta ruled that the amount of the bond may be paid through the cash ledger and the input tax credit (ITC) debit ledger.

It has been alleged by the department that the applicant is one of the directors/key persons of M/s Brilliant Metals Pvt. Ltd., M/s Progressive Alloys India Pvt. ltd. and M/s JBN Impex Pvt. ltd. and allegedly the mastermind behind devising a mechanism for using ITC based on invoices from various vendors which were non-existent and fictitious, thereby profiting from fraudulent ITC worth Rs. 27.05 crores, which he then transmitted. The petitioner received a total of Rs. 260 crore in ITC from the three companies.

The petitioner secured a regular surety by providing a personal surety in the amount of Rs. 1 lakh along with surety.

Regarding the deposit condition of Rs. 2.70 crores, the petitioner deposited Rs. 1.10 crores through the cash ledger and Rs. 1.60 crores in the form of debits and write-offs through the large ITC e-book.

According to the department, since the ITC was made available through fraudulent means and therefore the entire ITC claimed by the companies was under the cloud, the petitioner could not have provided Rs. 1, 60 crores by reversal of ITC as a condition of bail.

The CMM, while canceling the bond, held that the petitioner never sought prior permission from the Court to deposit the amount of Rs. compliance by way of challans in court on January 21, 2020, after the respondent filed an application to vacate the applicant’s bond.

The petitioner challenged the cancellation of the bond on the grounds that Form GST-DRC-03, issued under Rules 142(2) and 142(3) of the GST Rules, permits the deposit of a cash amount or to the credit of ITC records.

Section 49 of the GST Act allows the amount of an electronic ledger to be used to make input tax payments under the Act or the Integrated Commodities Tax Act and services. Section 49 (5) and (6) describes how the input tax credit amount available in the electronic ledger is to be used and provides that the balance in the electronic cash ledger after payment of the tax , interest, penalties, fees, etc. . may be refunded in accordance with the provisions of Section 54 of the GST Act.

The court, in quashing the bail order, held that failure to comply with the bail conditions is grounds for voiding it; however, in the present case, the condition was to deposit a sum of Rs. 2.70 crores with the department, which was satisfied by the petitioner depositing part of the amount through the transfer of ITC. the trial court found that his order justified depositing money only with the department and could have given the petitioner time to deposit it. Since the petitioner has fulfilled the condition of depositing the amount partly by cash register and partly by debit register of the ITC, it cannot be said that the petitioner has not fulfilled the conditions imposed on him.

Case title: Amit Gupta vs. General Directorate of GST Intelligence Headquarters

Quote: 2022 LiveLaw (Deleted) 426

Date: 29.04.2022

Applicant’s lawyer: Lawyer Rajesh Jain

Counsel for the Respondent: Senior Permanent Advisor Harpreet Singh

Click here to read/download the order