Warehousing: formula sheet

Key formulas

Bond amount under Section 59

Bond amount = 2 × duty assessed on the warehoused goods

Duty assessed means the customs duties assessed on the goods. In ICAI-style problems, add BCD, social welfare surcharge, IGST and any other applicable duty. State this assumption in your answer.

Assessable value for IGST on imports (standard working)

IGST base = assessable value + BCD + social welfare surcharge (and any other duty levied under the Customs Tariff Act)

Use this to find the total duty before multiplying by two. Always follow the rates given in the question.

Social welfare surcharge (if applicable)

SWS = 10% × BCD

Apply only where the question says it is leviable. Some goods are exempt.

Meaning of warehouse

Warehouse = public (Sec 57) + private (Sec 58) + special (Sec 58A)

Know who may use each type and which authority licenses it.

What the bond secures

Bond covers: duty + rent + other charges + penalties and fines

The owner binds himself to pay all these, not only the duty.

Who can act

Owner of warehoused goods (after warehousing)

The right arises only once the goods are warehoused. Before warehousing, the right does not apply.

Acts allowed under Section 64

Sort | Show for sale | Deal to prevent loss, deterioration or damage or maintain good condition

These are the acts the section covers. Learn them as a short list for written answers. Do not add 'inspect' or 'take samples' as separate items of this list.

Condition for every act

Permission of proper officer + compliance with regulations and prescribed conditions

Dealing without permission is a violation. The goods remain under customs control throughout.

Proviso to Section 64

Proviso deals with removal of samples from the warehouse → it states no duty rule

Do not write that duty is payable on samples under the proviso. The proviso also does not let the owner take out goods that are not meant for sale or export.

What Section 64 is not

Dealing in warehouse ≠ clearance for home consumption or export

Clearance is an ex-bond bill of entry (Section 68) or shipping bill (Section 69). Duty is paid or export proceeds then.

Manufacture in warehouse

Section 65 (separate permission)

Manufacture or other operations is a different right. Do not apply Section 64 to it.

Condition for cancellation of bond

Goods cleared for home consumption (Sec 68) or exported (Sec 69), or otherwise dealt with per the Act + all dues paid ⇒ bond cancelled

Both parts must be met. Clearance alone is not enough if duty, interest, fine, penalty, rent or other charges remain unpaid.

Part clearance

Part of goods cleared ⇒ bond continues for the balance goods

Cancellation is for the full discharge of the bond obligation. It is not triggered by partial clearance.

Purpose of the bond (link to Sec 59)

Bond executed at warehousing (Sec 59) ⇒ cancelled under Sec 73 when obligations are over

Use this line to open answers: Section 59 creates the bond, Section 73 ends it.

Meaning of stores

Stores (Section 2(38), in plain words) = goods for use in a vessel, aircraft or vehicle, including fuel, spare parts and other articles of equipment (whether or not for immediate fitting), and provisions and articles for consumption by the passengers or crew

This is a paraphrase, not the verbatim text. The definition is wider than Section 85. Section 85 applies only to stores for consumption on board a vessel or aircraft proceeding to a foreign port.

Core rule of Section 85

Warehoused goods + vessel or aircraft proceeding to a foreign port → proper officer may permit them to be taken as stores for consumption on board, without payment of import duty

State the rule in plain words. It is not a permanent exemption for every use of the goods.

Clearance for home consumption

Warehoused goods cleared for home consumption → bill of entry for home consumption and duty payable before removal (Section 68); interest under Section 61 only if the warehousing period, original or extended, has run out

Diversion to home use needs clearance and duty under Section 68 first. Interest under Section 61 is a separate consequence of overstay. If the goods are sold or removed without that clearance, it is an unauthorised removal: duty with interest and possible penalty can be demanded under Section 72, and the goods may be liable to confiscation.

Purpose test

Benefit available only while goods go as stores for consumption on board a vessel or aircraft proceeding to a foreign port

Goods diverted to any other use fall outside the concession.

Quick revision

• Warehousing lets imported goods be stored under customs control with duty deferred.
• Warehouses are licensed under Sec 57-58.
• After assessment, the owner executes the bond (Sec 59); then the proper officer permits deposit of the goods in the warehouse (Sec 60).
• The bond secures duty and the owner's compliance with warehouse conditions.
• Under Sec 64, the owner may, with the proper officer's permission, deal with the goods in limited ways, such as sorting or packing; manufacture and other operations are under Sec 65.
• Dealing with goods in the warehouse does not end customs control over them.
• When goods are cleared and obligations are met, the bond is cancelled.
• Bond cancellation depends on discharge of the obligations, not on the passage of time.
• Sec 85 deals with goods removed from a warehouse for use as stores on a vessel or aircraft on a foreign run.
• Always identify the stage of the goods before choosing the section.
• In answers, write provision, facts and conclusion; avoid quoting section numbers you are unsure of.

Common mistakes

• Taking the bond amount as the value of goods or as the duty itself. Fix: Write 'twice the duty assessed' at the top of every working and apply it to the total duty only.
• Leaving IGST out of the duty before multiplying for the bond. Fix: State the assumption that all duties assessed under customs, including IGST, form the base, and include them in the total.
• Treating Section 64 dealings as clearance of the goods Fix: Remember that Section 64 acts happen under customs control. Clearance needs an ex-bond bill of entry or a shipping bill.
• Forgetting the proper officer's permission Fix: Open every answer with 'with permission of the proper officer and subject to the regulations and conditions'.
• Cancelling the bond after part of the goods is cleared. Fix: Check the quantity. The bond continues for the goods still in the warehouse.
• Ignoring unpaid rent, interest, fine, penalty or other charges. Fix: Check every due connected with the goods before concluding that the bond can be cancelled.
• Treating any goods in a ship or aircraft as stores Fix: Test the purpose. Are the goods for use in the vessel, aircraft or vehicle, or provisions and articles for consumption by passengers or crew, as Section 2(38) says? For Section 85, are they for consumption on board a vessel or aircraft going to a foreign port? If not, Section 85 does not help and the normal import rules apply.
• Saying stores are permanently exempt from customs duty Fix: Say the warehoused goods may be supplied as stores without payment of import duty for a vessel or aircraft going to a foreign port. Diverted goods become dutiable.

Exam tips

• Numerical questions are usually short. Show the total duty line clearly, because it carries the marks before the multiplication by two.
• For theory, write the definition of warehouse by listing Sections 57, 58 and 58A, then add one line on who uses each type.
• In MCQ cases, check whether the user is 'anyone', 'the licensee for goods imported by or for him' or 'specified goods only'. That decides the licence type.
• State your assumption about whether IGST and SWS are included in the duty. A stated assumption protects your marks.
• Link the topic with the later stages in one line: after warehousing, the owner can deal with the goods (Sec 64), and the bond is cancelled (Sec 73) once the goods are cleared or exported and the conditions of the bond are satisfied.
• Write the list of acts (sort, show for sale, deal to prevent loss or maintain condition) in one line. Do not list 'inspect' or 'take samples' as separate statutory rights under the section.
• Always mention the proper officer's permission. It is the condition most often missed.
• If a question mentions samples, say the proviso to Section 64 deals with their removal. Do not state that it makes duty payable on samples.