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

Sharma Traders, the importer under a section 59 bond, transfers part of the warehoused goods to Verma Exports, another person. What must Verma Exports do under section 59?

Verma Exports must execute its own bond under sub-section (1) or (2) and furnish the security specified in sub-section (3). Section 59(5) imposes both obligations on a transferee of the whole or part of the goods.

  1. ANothing, as Sharma Traders' bond covers the transferred goods
  2. BExecute a bond in the manner of sub-section (1) or (2) and furnish security as specified under sub-section (3)Correct
  3. CExecute a bond only, since security is required only from the original importer
  4. DPay the duty immediately and execute no bond

Explanation

Section 59(5) provides that where goods or any part are transferred to another person, the transferee must execute a bond under sub-section (1) or (2) and furnish security under sub-section (3). Option 3 is wrong because security is also required.

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