Indirect Tax Laws and Practice · Manufacture in Bond

Cancellation and Return of Warehousing Bond under Section 73

Updated 11 October 2026 · Fact-checked

Under Section 73 of the Customs Act, 1962, the proper officer cancels a warehousing bond as discharged in full when all goods covered by it are cleared for home consumption, exported, transferred or otherwise duly accounted for, and all dues on those goods are paid. On demand, the cancelled bond is handed to the person who executed it or is entitled to it.

Understand Cancellation and Return of Bond under Section 73

When you warehouse imported goods without paying duty, you sign a warehousing bond under Section 59. The bond is your promise to follow the law, pay duty, interest, penalties and fines on those goods. It is a security for the Government's revenue.

A bond cannot stay alive forever. Section 73 says when it ends. It ends when the goods it covers are no longer sitting in the warehouse with duty unpaid, and the Government has got everything due on them.

There are two tests, and both must be met. First, the whole of the goods covered by the bond must have been cleared for home consumption, exported, transferred, or be otherwise duly accounted for. Second, all amounts due on those goods must have been paid.

Once both tests are met, the proper officer shall cancel the bond as discharged in full. The word is "shall", so cancellation is a duty of the officer, not a favour. On demand, the officer delivers the cancelled bond to the person who executed it or is entitled to receive it.

The section applies to bonds executed under Section 59. Under Section 59, the bond is for a sum equal to thrice the duty assessed on the goods, and a general bond can be allowed by the Assistant or Deputy Commissioner. Section 73 is the closing step of that chain: bond given, goods dealt with, dues paid, bond cancelled and returned.

Key rules to remember

Conditions for cancellation (Section 73): Whole of goods cleared/exported/transferred/otherwise duly accounted for AND all amounts due paid ⇒ bond cancelled as discharged in full; Both conditions are needed. Part clearance does not discharge the bond.
Who acts: Proper officer cancels; delivers the cancelled bond on demand; Delivery goes to the person who executed the bond or who is entitled to receive it.
Bond amount under Section 59(1): Bond sum = 3 × duty assessed on the goods; Gives the background to what Section 73 discharges. A general bond under Section 59(2) is for an amount the Assistant or Deputy Commissioner approves.
Ways goods leave the bond: Home consumption | Export | Transfer | Otherwise duly accounted for; These are the four routes named in Section 73.

How to solve Cancellation and Return of Bond under Section 73 questions

Use this method for any question asking whether a warehousing bond can be cancelled or returned.

1Identify the bond. Check that it was executed under Section 59 for goods warehoused after a bill of entry for warehousing.
2List all goods covered by the bond, and note what happened to each lot: cleared for home consumption, exported, transferred, or lost or otherwise accounted for.
3Test the first condition: is the whole of the goods covered? If any quantity remains in the warehouse or is unaccounted for, the bond stays.
4Test the second condition: have all amounts due on the goods been paid, such as duty, interest, penalties and fines? Dues unpaid mean no cancellation.
5If both are met, state that the proper officer shall cancel the bond as discharged in full.
6Add the return step: on demand, the cancelled bond is delivered to the person who executed it or is entitled to receive it.
7Conclude clearly with the answer and, if the case fails a test, say what must be done to meet it.

Quickest way: Two-test check

When to use it: Use in MCQs and short case questions where you must decide quickly whether the bond is discharged.

Ask: is every unit covered by the bond accounted for?
Ask: is every rupee due on those goods paid?
Both yes: bond cancelled and returned on demand. Any no: bond stays in force.

Common mistakes in Cancellation and Return of Bond under Section 73

Saying the bond is cancelled once part of the goods is cleared.
Students assume each clearance reduces the bond automatically.
Fix: The section speaks of the whole of the goods. Cancellation needs full clearance or accounting.
Ignoring the payment condition and cancelling after clearance alone.
Focus stays on the movement of goods, not on dues.
Fix: Always check that all amounts due on the goods are paid before declaring discharge.
Leaving out transfer as a way of discharge.
Students remember only home consumption and export.
Fix: Section 73 also covers goods transferred or otherwise duly accounted for. Remember the four routes.
Saying the importer must apply and the officer may choose to cancel.
Confusing cancellation with return on demand.
Fix: Cancellation is mandatory once conditions are met ("shall cancel"). Only delivery of the cancelled bond is on demand.
Mixing up Section 73 with Section 143(2), which also speaks of cancelling a bond.
Both use similar wording about discharge in full.
Fix: Section 73 is for warehousing bonds under Section 59. Section 143 is for bonds given to allow import, export or clearance before a required thing is done, and the Assistant or Deputy Commissioner acts there.

Worked examples

Example 1

Rao Traders executed a bond under Section 59 for 1,000 units of imported goods warehoused. 600 units were cleared for home consumption on payment of duty, and 400 units remain in the warehouse. Rao asks the officer to cancel the bond. Advise.

Show the solution

The bond covers all 1,000 units, so the test is about the whole of the goods.
Only 600 units are cleared and the duty on them is paid.
400 units are still in the warehouse and not cleared, exported, transferred or otherwise accounted for.
The first condition of Section 73 is not met, so the bond cannot be discharged in full.

Answer: The bond cannot be cancelled now. It stays in force until the remaining 400 units are cleared, exported, transferred or otherwise duly accounted for and all dues are paid.

Example 2

Mehta Exports warehoused goods under a Section 59 bond. Half the goods were exported, and the other half were cleared for home consumption after duty was paid. All interest and other amounts due on the goods are paid. What can Mehta Exports claim, and from whom?

Show the solution

Check the first condition: the whole of the goods is dealt with, half by export and half by home consumption clearance.
Check the second condition: all amounts due, including duty and interest, are paid.
Both conditions are met, so the proper officer shall cancel the bond as discharged in full.
Mehta Exports, as the person who executed the bond, may demand the cancelled bond, and the officer shall deliver it.

Answer: The proper officer must cancel the bond as discharged in full, and on demand deliver the cancelled bond to Mehta Exports.

Exam tips

Write both conditions every time: whole of the goods accounted for and all dues paid. Examiners look for both.
Quote "discharged in full" and "on demand" in your answer. These phrases carry marks.
In case scenarios, tabulate quantity cleared, exported and remaining to spot part clearance quickly.
Link to Section 59 in one line, since Section 73 only applies to bonds executed under it.

Practice questions from Manufacture in Bond

Cancellation and Return of Bond under Section 73 in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CA FinalCancellation and Return of Warehousing Bond (Sec 73)

Cancellation and Return of Bond under Section 73: frequently asked questions

When is a warehousing bond cancelled under Section 73?

It is cancelled when the whole of the goods covered by the bond are cleared for home consumption, exported, transferred or otherwise duly accounted for, and all amounts due on those goods are paid. The proper officer then cancels it as discharged in full.

Who returns the cancelled bond and to whom?

The proper officer delivers it, on demand. It goes to the person who executed the bond or who is entitled to receive it.

Is cancellation optional for the officer?

No. Section 73 says the proper officer shall cancel the bond once the conditions are met. Only the delivery of the cancelled bond depends on a demand.

Does Section 73 apply to bonds under Section 143?

No. Section 73 deals with warehousing bonds under Section 59. Section 143 has its own provision for cancelling bonds given for doing a required thing after import, export or clearance.