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

Sagar Foods Ltd. executed a warehousing bond for goods. Of these goods, 60% have been cleared for home consumption and 30% exported; the balance 10% is neither cleared nor accounted for, though all dues on the cleared and exported goods are paid. Under Section 73 of the Customs Act, 1962, the proper officer:

The bond cannot be cancelled. Section 73 permits cancellation as discharged in full only when the whole of the goods are cleared, exported, transferred or otherwise duly accounted for and all dues are paid. A 10% balance unaccounted for defeats this condition.

  1. AShall cancel the bond, as 90% of the goods are accounted for
  2. BShall cancel the bond only after reducing it proportionately to 10%
  3. CShall not cancel the bond as discharged in full, because the whole of the goods are not cleared, exported, transferred or otherwise duly accounted forCorrect
  4. DShall cancel the bond on payment of a penalty of 10% of the duty

Explanation

Section 73 requires the whole of the goods covered by the bond to be cleared, exported, transferred or otherwise duly accounted for, and all dues paid, before cancellation. Since 10% remains unaccounted for, the condition fails. Partial discharge is not provided for.

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