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

Kavya Traders, an importer, transfers part of its warehoused goods to Rohan Enterprises, another person. Which statement follows from Section 59?

The transferee, Rohan, must execute his own bond in the manner of Section 59(1) or (2) and also furnish the prescribed security. The transferor's bond does not cover him, and security alone is insufficient because the section requires both bond and security.

  1. AKavya's original bond covers Rohan for the transferred goods
  2. BRohan, the transferee, must execute a bond as in sub-section (1) or (2) and furnish the security prescribedCorrect
  3. CNo bond is needed if the goods stay in the same warehouse
  4. DRohan need only furnish security without a bond

Explanation

Section 59(5) says where the whole or any part of the goods is transferred to another person, the transferee must execute a bond in the manner of sub-section (1) or (2) and furnish security under sub-section (3). Relying on the transferor's bond or giving only security is not what the section provides.

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