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CA Final · Indirect Tax Laws · Warehousing

Kaveri Imports Ltd has warehoused goods under a bond executed under section 59. It transfers the whole lot to another warehouse of its own. Separately, it later transfers part of the goods to Delta Retail Ltd, a different person. Which statement is correct under section 59?

Kaveri's bond continues in force despite the move to another warehouse, while Delta Retail, as a transferee of part of the goods, must execute its own bond and furnish the prescribed security. This follows from section 59(4) and section 59(5).

  1. AKaveri Imports' bond lapses on transfer to the other warehouse, and Delta Retail needs no bond
  2. BKaveri Imports' bond continues despite transfer to another warehouse, and Delta Retail must execute its own bond and furnish security for the goods transferred to itCorrect
  3. CDelta Retail may rely on Kaveri Imports' bond, as the bond runs with the goods
  4. DBoth Kaveri Imports and Delta Retail must execute a fresh bond for the transfer of goods between warehouses

Explanation

Section 59(4) states that a bond continues in force notwithstanding the transfer of goods to another warehouse. Section 59(5) requires a transferee of the whole or part of the goods to execute a bond and furnish security. Hence only the second option holds; the third wrongly lets the transferee rely on the transferor's bond.

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