Skip to content

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

Kiran Imports warehoused a consignment under a bond. Of the goods, 60% were cleared for home consumption with duty paid, 25% were exported, and 15% were sold and transferred to Mehta Traders, who executed their own bond and furnished security under section 59(5). Kiran has paid all amounts due on account of the goods. Under section 73, what is the position of Kiran's bond?

The proper officer shall cancel the bond as discharged in full. Under section 73, once the whole of the goods has been cleared, exported or transferred, which here is 60% + 25% + 15% = 100%, and all dues are paid, cancellation follows.

  1. AIt cannot be cancelled until Mehta Traders clear the transferred goods
  2. BThe proper officer shall cancel it as discharged in full, since all the goods are cleared, exported or transferred and all dues are paidCorrect
  3. CIt can be cancelled only for 85% of its value
  4. DIt continues for three years regardless of clearance

Explanation

Section 73 requires cancellation when the whole of the goods has been cleared for home consumption, exported or transferred, or otherwise duly accounted for, and all dues are paid. Here 60% + 25% + 15% = 100% is accounted for and dues are paid, so the bond is cancelled. The first option wrongly ties Kiran's bond to the transferee's actions.

Did you get it right without looking?

One question tells you little. A timed set on Manufacture in Bond shows your real accuracy, how long you take and where you lose marks.

Practise Manufacture in BondFree diagnostic mock

More Manufacture in Bond questions