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

Meera Exports imported goods and warehoused them under a bond. Part of the goods is sold and transferred to another person, Nikhil Industries. Which statement follows from the Customs Act, 1962?

Nikhil Industries must execute its own bond and furnish the prescribed security. Section 59(5) requires the transferee of the whole or any part of warehoused goods to execute a bond in the manner of section 59(1) or (2) and furnish security.

  1. AMeera's bond covers Nikhil automatically and nothing more is needed
  2. BNikhil, as transferee, must execute a bond and furnish security as required for the transferred goodsCorrect
  3. COnly security, and no bond, is needed from Nikhil
  4. DThe transfer is not permitted unless all goods are transferred

Explanation

Section 59(5) provides that where whole or any part of the goods is transferred to another person, the transferee must execute a bond under sub-section (1) or (2) and furnish security under sub-section (3). Both a bond and security are needed, and part transfer is allowed.

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