FRAUDULENT TRANSACTIONS & OWNERSHIP OF GOODS.

[Sadanand Bulbule]

Circular No. 76/50/2018-GST dated 31/12/2018 issued by the Central Board of Indirect Taxes and Customs (GST Policy Wing) reads as under:

6. Who will be considered as the ‘owner of the goods’ for the purposes of section 129(1) of the CGST Act?

It is hereby clarified that if the invoice or any other specified document is accompanying the consignment of goods, then either the consignor or the consignee should be deemed to be the owner. If the invoice or any other specified document is not accompanying the consignment of goods, then in such cases, the proper officer should determine who should be declared as the owner of the goods.

In this regard my understanding is as under:

The clarification being so, whether the concept of deemed ownership of goods can be applied even in respect of fraudulent transactions with manufactured documents for the purpose Section 129(1)(a) of the Act?

If the answer is yes, is it not a bonanza for the fraudsters to seek sympathetic remedy under Section 129(1((a) of the Act whenever caught red handed on investigation and escape from the full penalty under Section 129(1((b) of the Act?

Therefore the intrinsic intent of the said Circular needs to deciphered and if warrants, the surface meaning be redefined by GST Policy Wing confining it to protect the genuine and trusted tax invoice or any other specified documents accompanying the consignment of goods in transit. The core of the transactions should be focussed rather than the mechanical compliance with manufactured documents. In simple words, fraudsters should be kept outside from the purview of Section 129(1)(a) of the Act in the interest of equity. Because the fraudulent transactions are not simple violation of law attracting symbolic and graceful penalty. In any event, the remedy provided under Section 129(1)(a) of the Act should not become worst than decease as far as fraudulent transactions are concerned.

Kindly enlighten me with sagacious suggestions.

AI Summary

Deemed ownership of goods can affect penalty treatment under GST, raising concerns about manufactured documents and fraud.
The GST circular deems consignor or consignee as the deemed owner when valid invoices or specified documents accompany goods in transit, while empowering the proper officer to determine ownership where such documents are absent; the note questions applying this deeming rule to transactions supported by manufactured documents and stresses that identification of the original owner prevents improper release and protects revenue by enabling heavier penalty treatment where ownership cannot be established.