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CA Final · Indirect Tax Laws · Warehousing

Gupta Imports warehoused goods and later transferred a part of them to Rao Traders, a different person. Subsequently, Gupta cleared the remaining goods for home consumption and paid all dues on them. Which view is correct under sections 59 and 73 of the Customs Act, 1962?

Rao Traders must execute its own bond and furnish security under section 59(5). Gupta's bond can be cancelled under section 73 once all goods are cleared, exported, transferred or otherwise accounted for and all amounts due are paid, so the transfer does not prevent cancellation.

  1. ARao Traders must execute its own bond and furnish security under section 59(5); Gupta's bond can be cancelled only when all goods covered are cleared, exported, transferred or otherwise accounted for and all amounts are paidCorrect
  2. BRao Traders need not execute any bond because Gupta's bond continues for it
  3. CGupta's bond must be cancelled only after Rao clears its goods
  4. DGupta's bond cannot be cancelled because part of the goods was transferred

Explanation

Section 59(5) requires a transferee of goods to execute its own bond and furnish security. Section 73 allows cancellation when all goods under the bond are cleared, exported, transferred or otherwise accounted for and dues are paid. Transferred goods count as accounted for, so Gupta's bond can be cancelled.

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