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

Sharma Metals Ltd has executed a warehousing bond under Section 59 for goods stored in Warehouse A. The goods are later moved wholly to Warehouse B, both being licensed warehouses, with the same importer remaining owner. What is the effect on the bond?

The bond continues in force. Section 59(4) states that a bond executed by the importer remains valid even if the goods are transferred to another warehouse. A fresh bond is needed only where goods pass to another person, who must execute his own bond and security.

  1. AThe bond lapses and a fresh bond must be executed for Warehouse B
  2. BThe bond continues in force despite the transfer of goods to another warehouseCorrect
  3. CThe bond continues only if the duty is paid in advance
  4. DThe bond continues only for half the original period

Explanation

Section 59(4) provides that a bond executed by an importer continues in force notwithstanding the transfer of the goods to another warehouse. A fresh bond is required only when goods are transferred to another person, not merely another warehouse. The advance payment condition does not appear in the provision.

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