CA Final · Indirect Tax Laws · Warehousing
Orion Foods Ltd. warehoused 1,000 cartons under a bond. It transferred 400 cartons to Sharma Distributors, a different person, and cleared the remaining 600 for home consumption after paying all dues on them. Sharma Distributors has executed no bond. Based on sections 59(5) and 73, which statement is correct?
Sharma must execute its own bond and furnish security under section 59(5). Orion's bond can be cancelled under section 73 only once the whole of the goods are cleared, exported, transferred or duly accounted for and all dues are paid. Partial clearance alone does not discharge the bond.
- AOrion's bond is cancelled because the goods are accounted for, and Sharma needs no bond
- BSharma must execute a bond as per section 59(1) or (2) and furnish security, and Orion's bond can be cancelled only when all goods covered are cleared, exported, transferred or duly accounted for and all dues are paidCorrect
- COrion's bond is cancelled at once because 600 of 1,000 cartons are cleared
- DSharma may rely on Orion's bond, and no security is needed
Explanation
Under section 59(5), a transferee of whole or part of the goods must execute a bond as under 59(1) or (2) and furnish security under 59(3). Section 73 allows cancellation when the whole of the goods have been cleared, exported, transferred or otherwise duly accounted for and all amounts due are paid. Here the 400 cartons are transferred and the 600 are cleared with dues paid, so the whole is accounted for, but Sharma still needs its own bond. Option A wrongly says Sharma needs no bond, and option C wrongly cancels on partial clearance.
Did you get it right without looking?
One question tells you little. A timed set on Warehousing shows your real accuracy, how long you take and where you lose marks.
More Warehousing questions
- Chitra Enterprises warehoused goods under a bond executed under section 59 and later moved all of them to another warehouse. Rohan Ltd then …
- Meera Exports owns goods lying in a warehouse under a section 59 bond. She wants to: (i) inspect the goods, (ii) repack the goods into entir…
- Mehta Electronics Pvt Ltd files a bill of entry for warehousing, and the duty assessed on the goods is Rs 4,00,000. It is not covered by any…
- Mehta Electronics Pvt Ltd files a bill of entry for warehousing under section 46 for imported components. The bill is assessed and the asses…
- Ganga Chemicals warehoused goods under a bond. It sells part of the goods lying in the warehouse to Yamuna Industries, which takes over thos…
- Kaveri Traders imports machine parts and warehouses them under a bond executed under section 59. Part of the goods are later transferred to …