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

Under the Customs Act, 1962, Sunrise Traders has executed a warehousing bond for goods kept in warehouse A. The goods are later moved to warehouse B. What is the position of that bond?

The bond continues in force. Section 59(4) of the Customs Act provides that a bond executed by the importer for any goods stays valid even if the goods are transferred to another warehouse, so no fresh bond is needed for the movement.

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

Explanation

Section 59(4) says a bond executed by an importer in respect of any goods continues in force notwithstanding the transfer of the goods to another warehouse. So no fresh bond is needed merely for a warehouse change. Lapse on transfer is therefore wrong.

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