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

Kapoor Industries imported goods for warehousing. Duty assessed was Rs 5,00,000 and a bond under section 59(1) was executed. Goods with duty of Rs 3,00,000 were cleared for home consumption and the duty paid. The balance goods remain in the warehouse. Which statement follows from section 73?

The bond cannot be cancelled yet. Section 73 permits cancellation only when the whole of the goods have been cleared, exported, transferred or otherwise duly accounted for and all amounts due are paid. Partial clearance leaves goods in the warehouse, so the bond stays.

  1. AThe bond is cancelled as the larger part has been cleared
  2. BThe bond is cancelled once Rs 3,00,000 of duty is paid, since duty is covered
  3. CThe bond is reduced automatically to Rs 6,00,000 and stays in force
  4. DThe bond cannot be cancelled until the whole of the goods are cleared, exported, transferred or otherwise duly accounted for and all amounts are paidCorrect

Explanation

Section 73 allows cancellation only when the whole of the goods covered by the bond have been cleared, exported, transferred or otherwise duly accounted for, and all dues are paid. Part clearance is insufficient. Section 73 provides no automatic reduction of the bond amount, so Rs 6,00,000 is unsupported.

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