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CMA Final · Indirect Tax Laws and Practice · Manufacture in Bond

Arvind Metals warehoused goods under a Section 59 bond. Part of the goods is transferred to Bhanu Industries, a different person. Under Section 59(5), which statement is correct?

Bhanu Industries must execute its own bond and furnish security. Section 59(5) requires a transferee of warehoused goods, whole or part, to execute a bond as under sub-sections (1) or (2) and give the prescribed security.

  1. AArvind Metals' bond covers the transferee automatically with no further action
  2. BBhanu Industries must execute a bond and furnish security as specified in the sectionCorrect
  3. COnly security is required from Bhanu Industries, not a bond
  4. DBhanu Industries need execute a bond only if the duty exceeds Rs 1 crore

Explanation

Section 59(5) says that where goods or any part are transferred to another person, the transferee shall execute a bond in the manner of sub-section (1) or (2) and furnish security under sub-section (3). Both bond and security are required, and no monetary threshold exists.

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