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GST ITC Fraud: Delhi HC holds Debiting through Electronic ITC Ledger is valid Deposit to Fulfill Bail Condition
May, 12th 2022

The single bench of Delhi High Court presided by Ms. Justice Mukta Gupta in the issue of Input Tax Credit (ITC) fraud has held that debiting through electronic ITC ledger is a valid deposit to fulfill bail condition.

The petitioner, Amit Gupta, is one of the Directors or 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 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 and thus availed fraudulent ITC worth ₹27.05 crores. The petitioner was arrested and granted regular bail subject to conditions out which one was for 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. The Trial Court cancelled the bail granted to the petitioner believing that the ITC availed were through fraudulent means and thus the entire ITC claimed by the companies were under cloud, therefore, the petitioner not entitle to furnished ₹1.60 crores by reversal of the ITC as a condition of bail. Aggrieved petitioner filed Writ petition before the High Court.

The counsel for the petitioner, Mr. Rajesh Jain submitted that the petitioner has to his credit ITC worth ₹260 crores and the investigation does not show beyond ₹42 crores, ITCs are fraudulent till now. Therefore the reversal of the ITC credit for depositing the part amount of ₹2.70 crores with the department cannot be illegal or unwarranted. The counsel for the respondent, Mr. Harpreet Singh submitted that ITCs being fraudulent the same cannot be availed for deposit.

The High Court has held that “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. Consequently, the impugned order passed by the learned CMM, Patiala House Court is set aside”.

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