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

Imported materials are used under Section 65 to manufacture goods in a warehouse. Duty on the materials is 25% and duty on the finished goods is 10%. The Central Government wishes to help a domestic industry. Which statement is correct under Section 66?

The Central Government may, by notification, exempt the imported materials from the whole or part of the excess rate, here 15 percentage points (25% less 10%), if satisfied it is needed to establish or develop a domestic industry. The power is discretionary and confined to the excess.

  1. AIt may exempt the materials from the whole or part of the excess rate of 15%, by notification, if satisfied it is necessary for establishing or developing a domestic industryCorrect
  2. BIt must exempt the materials fully from the 25% duty
  3. CIt may exempt the finished goods from the 10% duty by an order of the Assistant Commissioner
  4. DIt may exempt only the whole of the 25% rate, never a part

Explanation

Section 66 applies where duty on materials exceeds that on the goods; here the excess is 25% minus 10% = 15%. The Central Government may, by notification, exempt the whole or part of that excess if satisfied it is necessary in the interest of a domestic industry. The power is discretionary and limited to the excess, not the whole rate.

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