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CA Final · Indirect Tax Laws · Warehousing

Kaveri Electronics imports components that are warehoused under a bond executed under section 59(1). The whole of the goods are later sold to Lakshmi Components Ltd, a different person, while still in the warehouse. Which statement correctly reflects the Customs Act, 1962?

Lakshmi, the transferee, must execute her own bond in the manner specified in section 59(1) or (2) and furnish the prescribed security. Section 59(5) places this obligation on a transferee of the whole or part of the warehoused goods.

  1. AKaveri's bond is automatically transferred to Lakshmi, who need not execute a bond
  2. BLakshmi, as transferee, must execute a bond in the manner of section 59(1) or (2) and furnish security as prescribedCorrect
  3. CLakshmi need execute a bond only if the goods are moved to a different warehouse
  4. DThe goods must be cleared for home consumption before any transfer to another person is allowed

Explanation

Section 59(5) provides that where goods or any part are transferred to another person, the transferee must execute a bond as in sub-section (1) or (2) and furnish security under sub-section (3). Option A contradicts this. Section 59(4) concerns transfer to another warehouse, not another person.

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