Amit Gupta VS Directorate General Of Gst Intelligence

In this petition, the petitioner contests the order issued on 9th July, 2021 by the learned Chief Metropolitan Magistrate (CMM) of Patiala House Courts, which revoked the bail previously granted to the petitioner on 23rd December, 2019. The petitioner has also requested the quashing of proceedings initiated by the respondent under Sections 67 and 70 of the Central Goods and Services Tax Act, 2017 (CGST) and the return of records seized from various premises of the petitioner. However, during the arguments, the petitioner primarily focused on the following prayers:

1. The setting aside of the 9th July, 2021 order that cancelled the petitioner’s bail.

2. The restoration of the 23rd December, 2019 order that granted the petitioner regular bail.

The primary issue at hand is the challenge against the cancellation of the petitioner’s bail by the CMM, with the petitioner seeking to reinstate the earlier order that granted bai.

By this petition, the petitioner challenges the order dated 9th July 2021 passed by the learned Chief Metropolitan Magistrate (CMM) at Patiala House Courts, which cancelled the bail granted to the petitioner on 23rd December 2019. Although the petitioner also sought the quashing of proceedings initiated by the respondent under Sections 67/70 of the Central Goods and Services Tax Act, 2017 (CGST) and the release of records seized from various premises, the petitioner focused on prayers (a), (b), and (c) during arguments. These prayers sought to set aside the order dated 9th July 2021 cancelling the bail and to restore the order dated 23rd December 2019 granting regular bail.

The prosecution’s case against the petitioner alleges that he is a key figure in M/s Brilliant Metals Pvt. Ltd., M/s Progressive Alloys India Pvt. Ltd., and M/s JBN Impex Pvt. Ltd. The petitioner is accused of masterminding a scheme to fraudulently avail Input Tax Credit (ITC) based on fictitious and non-existent suppliers’ bills, resulting in fraudulent ITC worth ₹27.05 crores, which he further passed on. The total ITC availed by the petitioner in the aforementioned companies amounted to ₹260 crores.

Following his arrest, the petitioner was granted regular bail on 23rd December 2019, subject to several conditions: he was required to furnish a personal bond of ₹1 lakh with one surety of the same amount, deposit ₹2.70 crores with the complainant department by 6th January 2020, join the investigation as needed, avoid tampering with evidence or influencing witnesses, appear before the court for all hearings, and not leave the country without prior court permission.

Regarding the condition to deposit ₹2.70 crores, the petitioner complied by depositing ₹1.10 crores through a cash ledger and ₹1.60 crores via debiting/reversals through an electronic ITC ledger. However, according to the respondent and the impugned order, since the ITC availed was through fraudulent means, the entire ITC claimed by the companies was questionable. Consequently, the petitioner could not have fulfilled the conditions of the bail in good faith, leading to the cancellation of his bail by the order dated 9th July 2021.

By this petition, the petitioner challenges the order dated 9th July, 2021, issued by the Chief Metropolitan Magistrate (CMM) of Patiala House Courts, which cancelled the bail previously granted to the petitioner on 23rd December, 2019. The petitioner initially requested the court to quash the proceedings initiated under Section 67/70 of the Central Goods and Services Tax Act, 2017 (CGST) and sought the release of records seized from his premises. However, during the arguments, the petitioner focused on the following prayers: setting aside the 9th July 2021 order that cancelled his bail, and restoring the bail order from 23rd December 2019.

The prosecution’s case against the petitioner alleges that he, as a Director/key person in three companies—M/s Brilliant Metals Pvt. Ltd., M/s Progressive Alloys India Pvt. Ltd., and M/s JBN Impex Pvt. Ltd.—masterminded a scheme to fraudulently avail Input Tax Credit (ITC) worth ₹27.05 crores using non-existing and fictitious supplier bills. The total ITC availed by these companies amounted to ₹260 crores.

After his arrest, the petitioner was granted regular bail on 23rd December, 2019, upon furnishing a personal bond of ₹1 lakh and one surety of the same amount, subject to several conditions:

1. Depositing ₹2.70 crores with the complainant department by 6th January, 2020.

2. Cooperating with the investigation as required.

3. Not tampering with evidence or influencing witnesses.

4. Appearing before the court on every hearing date.

5. Not leaving the country without court permission.

The petitioner complied with condition No.1 by depositing ₹1.10 crores in cash and ₹1.60 crores by debiting/reversals through the electronic ITC ledger. The respondent and the court contended that since the ITC was fraudulently claimed, the petitioner could not use ITC reversals to meet the bail condition. Moreover, the petitioner did not seek prior court approval for this method of deposit and only presented the compliance via challans on 21st January, 2020. This led the respondent to file an application on 24th January, 2020, seeking the cancellation of the petitioner’s bail.

The respondent’s investigation revealed that the petitioner fraudulently availed ₹27.05 crores of ITC, with the total availed ITC amounting to ₹260 crores. The court noted that the respondent’s case was not that all ₹260 crores ITC were fraudulent, but only the identified ₹27.05 crores. During arguments, the respondent’s counsel added that beyond the ₹27.05 crores, the petitioner also availed fraudulent ITC worth ₹15 crores, which is under investigation by the Directorate General of GST Intelligence (DGGI), Meerut. Thus, the fraudulent ITC identified totals approximately ₹42 crores, leaving the rest of the ITC unchallenged as fraudulent.

The key issue in the petition is whether the petitioner’s partial compliance with the bail condition—using ITC reversals for the deposit—was valid. The petitioner’s counsel argued that under GST rules, deposits through form GST-DRC-03, which includes ITC reversals, are permissible, suggesting that the petitioner’s method of compliance with the bail conditions was legitimate.

Overall, the petitioner seeks to reinstate the original bail order by proving that the partial deposit through ITC was compliant with the terms and conditions set by the court, challenging the respondent’s assertion of fraudulent ITC usage beyond the explicitly identified ₹42 crores.

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