HC allows bail to person involved in availing fake ITC of Rs 260 crores who paid bail amount via Credit Ledger

In the matter of Amit Gupta vs Directorate General of GST Intelligence, High Court held that it cannot be said that the petitioner has not fulfilled bail conditions by depositing the amount via reversal of Input Tax Credit (ITC).

In this matter petitioner (“Amit Gupta”) challenged the order dated 9^th July 2021 passed by the learned CMM, Patiala House Courts whereby the bail granted to him was canceled.

For Fulfilling one of the Bail conditions i.e. to deposit an amount of Rs 2.70 crores, the petitioner deposited Rs. 1.10 crores through cash ledger and Rs. 1.60 crores by way of debiting/reversals through electronic ITC ledger.

Learned Trial Court Cancelled the Bail of Petitioner citing that he never took prior permission of the Court to deposit the amount of Rs. 1.60 crores through the reversal of credit from the electronic ledger and merely placed the compliance by way of challans before the Court on 21st January 2020.

Court Order:

12. Thus a reading of 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. Further Section 49 (5) and (6) describes the manner in which the amount of input tax credit available in the electronic ledger is to be utilised and provides that the balance in electronic cash ledger after payment of tax, interest, penalty, fee etc. may be refunded in accordance with the provisions of Section 54 of the GST Act.

13. 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 however, contends that since the learned Trial Court directed the petitioner to deposit the amount of Rs. 2.70 crores, he could not have availed the amount of Rs. 1.60 crores by debiting the ITCs.

14. As noted above, the petitioner has to his credit ITC worth Rs. 260 crores and the investigation does not show that beyond approximately Rs. 42 crores ITCs rest are fraudulent till now. Hence the reversal of the ITC credit for depositing the part amount of Rs. 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.

15. Undoubtedly, non-compliance of the conditions of bail is a ground for cancellation of the same however, in the present case the condition was to deposit a sum of Rs. 2.70 crores with the department which stands satisfied by the petitioner depositing part amount by transfer of ITCs. 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. 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.

16. Consequently, the impugned order dated 9th July, 2021 passed by the learned CMM, Patiala House Court is set aside.

17. Petition and application are disposed of.