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Bail amount can be paid by debiting credit ledger

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Brief summary of the case

Court: IN THE HIGH COURT OF DELHI AT NEW DELHI
Number: W.P.(CRL) 1267/2021
 Petitioner: Amit Gupta
Respondent: Directorate General of GST
Date of decision: 29.04.2022
Judges: Honourable Ms. Justice Mukta Gupta

Facts

  1. The petitioner 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.
  2. He is alleged to be the mastermind behind devising a mechanism of availing Input Tax Credit (ITC) on the strength of bills of various suppliers which were non-existing and fictitious.
  3. He is also alleged to avail fraudulent ITC worth ₹27.05 crores which he further passed on.
  4. The total ITC availed by the petitioner in the three companies mentioned above was totaling to ₹ 260 crores.
  5. The proceedings initiated by the GST department under Section 67/70 of Central Goods and Services Tax Act, 2017 (CGST) against petitioner and the records seized from the various premises of the petitioner and he was also arrested by commissioner.
  6. After the arrest, the petitioner was granted regular bail on 23rd December, 2019 on his furnishing a personal bond in the sum of ₹ 1 lakh with one surety of the like amount further subject to the following conditions:
    1. He shall deposit the amount of ₹2.7 crores with the complainant department latest by 06.01.2020.
    2. He will join the investigation with the IO as and when required.
    3. He shall not tamper with evidence or influence any witness in any manner whatsoever.
    4. He shall appear before the court on each and every date of hearing.
    5. He shall not leave the country without prior permission of the court.
  7. In respect of condition No.1. of deposit of amount of ₹2.70 crores, the petitioner deposited ₹1.10 crores through cash ledger and ₹1.60 crores by way of debiting/reversals through electronic ITC ledger.
  8. His bail was cancelled by the learned Chief Metropolitan Magistrate (CMM), Patiala on 9th July, 2021. due to petitioner never took prior permission of the Court to deposit the amount of ₹1.60 crores through reversal of credit from electronic ledger.

Petitioner’s argument

  1. The petitioner submits that form GST-DRC-03 issued under Rule 142(2) and 142(3) of the GST Rules permit deposit of amount through cash/credit of the ITC ledgers.
  2. Section 49 of GST Act permits availing of the amount in electronic ledger for making any payments towards output tax under the Act or under the Integrated Goods and Services Tax Act.
  3. Section 49 (5) and (6) describes the manner in which the amount of input tax credit available in the electronic ledger is to be utilized.
  4. The respondent does not dispute that the payment of tax could be made from the electronic ledger under Section 49 (4) of the GST Act in the learned CMM court.

Respondent’s argument

  1. The ITC availed were through fraudulent means and thus the entire ITC claimed by the companies were under cloud, therefore, the petitioner could not havefurnished ₹1.60 crores by reversal of the ITC as a condition of bail.
  2. The investigation carried out till now reveals availment of fraudulent ITC worth ₹27.05 crores and the total amount of ITCs availed by the petitioner is ₹260 crores.
  3. Besides ₹27.05 crores of ITC availed in the present case, the petitioner have been found to have availed fraudulent ITC worth ₹15 crores which are pending investigation by DGGI, Meerut.

Court observation

  1. The short issue in the present petition is whether in respect of the condition of deposit of amount of ₹2.70 crores which was a condition for grant of bail the petitioner could have deposited part amount through the ITCs
  2. Though before the learned CMM and in the reply, the case of the respondent is that the ITCs being fraudulent the same cannot be availed of, during the course of arguments, learned counsel for the respondent does not dispute that the payment of tax could be made from the electronic ledger under Section 49(4) of the GST Act.
  3. The petitioner has to his credit ITC worth ₹260 crores and the investigation does not show that beyond approximately ₹42 crores ITCs and rest are fraudulent till now (meaning thereby approx. 218 crores is fraudulent ITC) Hence the reversal of the ITC credit for depositing the part amount of ₹ 2.70 crores with the department as directed by the learned Trial Court cannot be said to be illegal or unwarranted, warranting cancellation of the bail granted to the petitioner.

Judgement

  1. Undoubtedly, non-compliance of the conditions of bail is a ground for cancellation of the bail.
  2. In the present case the condition was to deposit a sum of ₹2.70 crores with the department which stands satisfied by the petitioner depositing part amount by transfer of ITCs.
  3. Further in case the learned Trial Court felt that its order warranted deposit of money only with the department it could have granted time to the petitioner to deposit the same.
  4. The petitioner having fulfilled the condition of deposit of the amount partly by cash ledger and partly by debit ledger of the ITC it cannot be said that the petitioner has failed to fulfil the conditions imposed on him.
  5. Consequently, the impugned order dated 9th July, 2021 passed by the learned CMM, Patiala House Court is set aside.

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