Indirect Tax Laws and Practice · Manufacture in Bond

Warehousing Bond under Section 59 of the Customs Act

Updated 11 October 2026 · Fact-checked

A warehousing bond under Section 59 is a written undertaking the importer executes once a bill of entry for warehousing is assessed to duty. The bond amount is thrice the assessed duty. It binds the importer to follow the law, pay duty, interest, penalties and fines. A security must also be furnished.

Understand Warehousing Bond under Section 59

When you import goods and do not want to pay duty immediately, you can deposit them in a customs bonded warehouse. Duty is deferred until the goods are cleared for home consumption or exported. Customs needs protection against the risk that the goods leave without duty being paid. The warehousing bond is that protection.

Section 59 applies to the importer of goods for which a bill of entry for warehousing has been presented under section 46 and assessed to duty under section 17 or section 18. Only after assessment does the bond come in, because its amount depends on the duty assessed.

The bond is a contract with three promises. You will comply with the Act, rules and regulations for those goods. You will pay on or before the date in the demand notice all duties and interest payable under section 61(2). You will pay all penalties and fines incurred for contravention in respect of those goods.

The bond is not enough alone. Under section 59(3), you must also furnish such security as may be prescribed. Section 59(2) offers a convenience for regular importers: a general bond for goods to be imported within a specified period, in an amount approved by the Assistant Commissioner or Deputy Commissioner of Customs.

The bond travels with the goods. It stays in force even if the goods move to another warehouse. If goods are transferred to another person, that person must execute his own bond and furnish security. The bond is cancelled under section 73 once the goods are cleared, exported, transferred or otherwise duly accounted for and all dues are paid.

Key rules to remember

Bond amount (specific bond): Bond amount = 3 × duty assessed on the goods; Section 59(1): a sum equal to thrice the duty assessed. Duty means the duty assessed under section 17 or 18.
General bond: Amount = as approved by AC/DC of Customs; Section 59(2): for goods to be imported within a specified period. The amount is approved by the officer, not fixed at three times.
Security requirement: Bond + prescribed security; Section 59(3): security is in addition to the bond, whether specific or general.
Transfer to another warehouse: Same bond continues; Section 59(4): no fresh bond is needed when goods move to another warehouse.
Transfer to another person: Transferee executes bond + security; Section 59(5): applies to whole or part of the goods transferred.
Demand on default: Duty + interest, fine, penalties; Section 72(1)(d): where bonded goods are neither cleared nor duly accounted for, the proper officer may demand these and the owner must pay forthwith.

How to solve Warehousing Bond under Section 59 questions

Use this sequence for any question on the warehousing bond. It keeps the amount, the person and the conditions straight.

1Check the stage: has the bill of entry for warehousing been presented and assessed to duty? The bond follows assessment.
2Identify who executes the bond: the importer. In a transfer of goods to another person, the transferee.
3Decide the type: specific bond for the consignment, or a general bond approved under section 59(2) for imports within a specified period.
4For a specific bond, compute 3 × assessed duty. Use only duty assessed, not goods value, and not interest or fine.
5State the three undertakings: comply with the law, pay duty and interest, pay penalties and fines.
6Add the security under section 59(3) in addition to the bond.
7Handle movement or transfer: same bond for another warehouse; fresh bond and security for another person.
8Close with the end of the bond: cancellation under section 73 once goods are cleared, exported, transferred or accounted for and dues are paid.

Quickest way: Three-times-duty shortcut

When to use it: Use for numerical MCQs asking the bond amount for a consignment.

Find the assessed duty: total of the duties assessed on the goods.
Multiply by 3.
If the question says general bond, ignore the multiple and use the amount approved by the officer.
Remember that security is separate and extra.

Common mistakes in Warehousing Bond under Section 59

Taking the bond amount as equal to the duty or as the value of goods
Students recall that a bond exists but not the multiple.
Fix: Write 'thrice the duty assessed' at the start of your answer and compute 3 × duty.
Treating the security as a substitute for the bond
Both protect the revenue, so they seem alternatives.
Fix: Section 59(3) says security is in addition to the bond.
Saying a fresh bond is needed whenever goods move to another warehouse
Confusing movement with transfer to another person.
Fix: Under section 59(4) the bond continues. A new bond is needed only when goods are transferred to another person.
Applying the three-times rule to a general bond
The rule is learnt as the only bond rule.
Fix: For a general bond under section 59(2), the amount is what the AC/DC approves.
Executing the bond before assessment
Assuming the bond is part of filing the bill of entry.
Fix: The bond relates to goods for which the bill of entry has been presented and assessed to duty.
Forgetting that the bond covers penalties and fines too
Focus stays on duty.
Fix: List all three undertakings: compliance, duty and interest, penalties and fines.

Worked examples

Example 1

Alpha Components Ltd imports goods and files a bill of entry for warehousing. Duty assessed is ₹4,20,000. Compute the amount of the specific bond under section 59 and state whether security is also needed.

Show the solution

The bill of entry for warehousing is assessed to duty, so a bond is required.
Bond amount = 3 × ₹4,20,000.
3 × 4,20,000 = ₹12,60,000.
Section 59(3) requires prescribed security in addition to the bond.

Answer: The bond is for ₹12,60,000. Prescribed security must also be furnished in addition.

Example 2

Bharat Traders executed a bond for goods warehoused in Warehouse A. It later moves part of the goods to Warehouse B and sells the rest to Kaveri Imports, which takes them over in the warehouse. What are the bond requirements?

Show the solution

For the goods moved to Warehouse B, section 59(4) applies: the bond remains in force despite transfer to another warehouse.
Movement to another warehouse still needs the proper officer's permission under section 67, subject to prescribed conditions.
For the goods sold to Kaveri Imports, section 59(5) applies: the transferee executes a bond as in section 59(1) or (2).
Kaveri Imports must also furnish security under section 59(3).

Answer: No fresh bond is needed for the goods moved to Warehouse B. Kaveri Imports must execute its own bond and furnish security for the goods it takes over.

Exam tips

Learn the figure 'thrice the duty assessed' and the three undertakings in (a), (b) and (c) of section 59(1).
Distinguish specific bond, general bond, transfer to another warehouse and transfer to another person in four lines.
In case scenarios, check whether the goods are wholly cleared or accounted for. That points to cancellation under section 73 or demand under section 72.
In MCQs, watch for options using value of goods or duty plus interest as the bond base. Both are wrong.

Practice questions from Manufacture in Bond

Warehousing Bond under Section 59 in other exams

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

CA FinalWarehousing Concept and Warehousing Bond (Sec 59)

Warehousing Bond under Section 59: frequently asked questions

What is the amount of warehousing bond under section 59?

For a specific bond it is a sum equal to thrice the duty assessed on the goods. For a general bond under section 59(2), the amount is what the Assistant or Deputy Commissioner approves.

Who executes the warehousing bond?

The importer of the goods executes it, after the bill of entry for warehousing is presented and assessed to duty. If goods are transferred to another person, the transferee executes a bond.

Is security needed along with the bond?

Yes. Section 59(3) says the importer must furnish prescribed security in addition to the bond, whether it is a specific or general bond.

What happens to the bond when goods go to another warehouse?

The bond continues in force notwithstanding the transfer of goods to another warehouse. The removal itself needs the proper officer's permission under section 67.