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CA Final · Indirect Tax Laws · Warehousing

Ganga Chemicals warehoused goods under a bond. It sells part of the goods lying in the warehouse to Yamuna Industries, which takes over those goods. Which statement follows from section 59?

Yamuna must execute its own bond and furnish security. Section 59(5) provides that where the whole or any part of the goods is transferred to another person, the transferee executes a bond under sub-section (1) or (2) and furnishes the prescribed security.

  1. AGanga's bond covers Yamuna automatically with no further action
  2. BYamuna must execute its own bond and furnish security as per section 59Correct
  3. COnly security is needed from Yamuna, not a bond
  4. DNo bond is needed if the goods are transferred only in part

Explanation

Section 59(5) says that where the whole or any part of the goods is transferred to another person, the transferee must execute a bond in the manner of sub-section (1) or (2) and furnish security under sub-section (3). Part transfer does not remove this requirement.

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