WAREHOUSING RULES AND REGULATIONS IN INDIA
According to Indian Customs Manual 2023, the Warehousing process in India is explained widely such as Legal provisions, Appointment of Public Warehouse, Appointment of Private Warehouses, Appointment of Special Warehouses, Cancellation of License, Warehousing Bond, Permission for removal of goods for deposit in warehouse, Period for which goods may remain warehoused, Extension of warehousing period, Interest for storage beyond permissible period, Waiver of interest, Owner's right to deal with warehoused goods, Transfer of goods from one warehouse to another, Clearance of warehoused goods for home consumption, Clearance of warehoused goods for Export, Allowance in case of volatile warehoused goods, Maintenance of records in relation to warehoused goods, Recovery of duty from bonded warehouses, Cancellation and return of warehousing bond, Manufacture and other operations in relation to goods in a warehouse and Manufacture and Other Operations in Special Warehouse (section 58A warehouse).
So, the extract of Indian Customs Manual 2023 updated till 31.12.2022 published by Central Board of Indirect taxes and Customs explains the following:
What are the Legal provisions of Warehousing as per Indian Customs Manual
The rules and regulations for Appointment of Public Warehouse
What are the provisions on Appointment of Private Warehouses
The rules and regulations on Appointment of Special Warehouses
How to Cancel License for warehouse
The process of Warehousing Bond
The Procedures and formalities in India on Permission for removal of goods for deposit in warehouse
Period for which goods may remain warehoused
Rules related to Extension of warehousing period
How to calculate Interest for storage beyond permissible period
Method of waiving interest under warehousing
Rules and regulations on Owner's right to deal with warehoused goods
How to transfer goods from one warehouse to another
Process of Clearance of warehoused goods for home consumption
How to treat Clearance of warehoused goods for Export
The details about Allowance in case of volatile warehoused goods
Rules and regulations to maintain records in relation to warehoused goods
Rules to recover duty from bonded warehouses
How to cancel and return warehousing bond
Rules and regulations on Manufacture and other operations in relation to goods in a warehouse
Process on Manufacture and Other Operations in Special Warehouse (section 58A warehouse)
The extract of Customs Manual 2023 about Warehousing process published by CBIC updated till 31.12.2022 is stated below:
Chapter 9: Warehousing
1. Introduction:
1.1 There are instances when the importer does not want clearance of the imported goods
immediately due to factors such as market price, saleability, requirement in the factory of
production, paucity of funds etc. The importer would prefer to warehouse such goods till they are
required. Some imported goods are also warehoused for supplies to EOU/EHTP/STP/SEZ units.
Goods imported for sale in Duty Free Shops at International Airports are also warehoused before
being sold to international travelers. Thus, the Customs Act, 1962 contains specific provisions that
facilitate the warehousing of imported goods. The imported goods after landing may be allowed to
be removed to a warehouse without payment of duty and duty is paid at the time of clearance from
the warehouse. Provisions lay down the time period up to which the goods may remain in a
warehouse, without incurring any interest liability and thereafter, with interest liability.
2. Legal provisions:
2.1 The facility of warehousing of the imported goods in Custom Bonded Warehouses, without
payment of Customs duty is permitted in terms of Chapter IX of the Customs Act, 1962.
3. Appointment of Public Warehouses:
3.1 Section 57 of the Customs Act, 1962 provides that the Principal Commissioner of Customs or
Commissioner of Customs may subject to such conditions as may be prescribed license a public
warehouse where dutiable goods may be deposited.
3.2 All the applications for licensing of Public Warehouses shall be carefully scrutinized and due
consideration shall be given to the following criterion for their appointment:
(a) is a citizen of India or is an entity incorporated or registered under any law for the time being
in force;
(b) submits an undertaking to comply with such terms and conditions as may be specified by
the Principal Commissioner of Customs or Commissioner of Customs, as the case may be;
(c) furnishes a solvency certificate from a scheduled bank for a sum of two crore rupees:
Provided that the condition of furnishing a solvency certificate shall not be applicable to an
undertaking of the Central Government or State Government or Union territory or to ports
notified under the Major Port Trusts Act, 1963 (38 of 1963);
[Refer Not. No. 70 /2016- Customs (N.T.) dated 14th May, 2016]
4. Appointment of Private Warehouses:
4.1 As per Section 58 of the Customs Act, 1962, The Principal Commissioner of Customs or
Commissioner of Customs may, subject to such conditions as may be prescribed, license a private
warehouse wherein dutiable goods imported by or on behalf of the licensee may be deposited.
4.2 The main conditions for granting Private Bonded Warehouse licences are:
Where, after inspection of the premises, evaluation of compliance to the conditions under
regulation 3 and conducting such enquiries as may be necessary, the Principal Commissioner of
Customs or Commissioner of Customs, as the case may be, is satisfied that licence may be
granted, he shall require the applicant to -
(a) provide an all risk insurance policy, that includes natural calamities, riots, fire, theft, skilful
pilferage and commercial crime, in favour of the President of India, for a sum equivalent to
the amount of duty involved on the dutiable goods proposed to be stored in the private
warehouse at any point of time;
(b) provide an undertaking binding himself to pay any duties, interest, fine and penalties payable
in respect of warehoused goods under sub-section (3) of section 73A or under the
Warehouse (Custody and Handling of Goods) Regulations, 2016;
(c) provide an undertaking indemnifying the Principal Commissioner of Customs or
Commissioner of Customs, as the case may be, from any liability arising on account of loss
suffered in respect of warehoused goods due to accident, damage, deterioration, destruction
or any other unnatural cause during their receipt, delivery, storage, despatch or handling;
and
(d) appoint a person who has sufficient experience in warehousing operations and customs
procedures as warehouse keeper.
[Refer Not. No.71 /2016- Customs (N.T.) dated 14th May 2016]
5. Appointment of Special Warehouses:
5.1 As per Section 58A of the Customs Act, 1962 the Principal Commissioner of Customs or
Commissioner of Customs may, subject to such conditions as may be prescribed, licence a special
warehouse wherein dutiable goods may be deposited and such warehouse shall be caused to be
locked by the proper officer and no person shall enter the warehouse or remove any goods
therefrom without the permission of the proper officer.
5.2 The Board may, by notification in the Official Gazette, specify the class of goods which shall be
deposited in the special warehouse licensed under sub-section (1) of Section 58A of Customs Act
1962.]
[Refer Notification No. 72 /2016 - Customs (N.T.) dated 14th May 2016]
5.3 The class of goods specified under sub-section (2) of section 58A has been notified by Board vide
Notification No. 66/2016-Customs (NT) dated 14.05.2020 (amended vide Notification No. 61/2020-
Customs (N.T) dated 27.07.2020)
6. Cancellation of Licence:
6.1 Section 58B of the Customs Act, 1962 provides that
(1) Where a licensee contravenes any of the provisions of this Act or the rules or regulations
made thereunder or breaches any of the conditions of the licence, the Principal
Commissioner of Customs or Commissioner of Customs may cancel the licence granted
under section 57 or section 58 or section 58A: Provided that before any licence is cancelled,
the licensee shall be given a reasonable opportunity of being heard.
(2) The Principal Commissioner of Customs or Commissioner of Customs may, without
prejudice to any other action that may be taken against the licensee and the goods under
this Act or any other law for the time being in force, suspend operation of the warehouse
during the pendency of an enquiry under sub-section (1).
(3) Where the operation of a warehouse is suspended under sub-section (2), no goods shall be
deposited in such warehouse during the period of suspension:
Provided that the provisions of this Chapter shall continue to apply to the goods already
deposited in the warehouse.
(4) Where the licence issued under section 57 or section 58 or section 58A is cancelled, the
goods warehoused shall, within seven days from the date on which order of such
cancellation is served on the licensee or within such extended period
as the proper officer may allow, be removed from such warehouse to another warehouse or
be cleared for home consumption or export:
Provided that the provisions of this Chapter shall continue to apply to the goods already
deposited in the warehouse till they are removed to another warehouse or cleared for home
consumption or for export, during such period.
7. Warehousing Bond:
7.1 Section 59 of the Customs Act, 1962 provides thatThe importer of any goods in respect of which a bill of entry for warehousing has been presented
under section 46 and assessed to duty under section 17 or section 18 shall execute a bond in a
sum equal to thrice the amount of the duty assessed on such goods, binding himself
(a) to comply with all the provisions of the Act and the rules and regulations made thereunder
in respect of such goods;
(b) to pay, on or before the date specified in the notice of demand, all duties and interest payable
under sub-section (2) of section 61; and
(c) to pay all penalties and fines incurred for the contravention of the provisions of this Act or
the rules or regulations, in respect of such goods.
7.2 For the purposes of sub-section (1), the Assistant Commissioner of Customs or Deputy
Commissioner of Customs may permit an importer to execute a general bond in such amount as
the Assistant Commissioner of Customs or Deputy Commissioner of Customs may approve in
respect of the warehousing of goods to be imported by him within a specified period.
7.3 The importer shall, in addition to the execution of a bond under sub-section (1) or sub-section (2),
furnish such security as may be prescribed.
7.4 Any bond executed under this section by an importer in respect of any goods shall continue to be
in force notwithstanding the transfer of the goods to another warehouse.
7.5 Where the whole of the goods or any part thereof are transferred to another person, the transferee
shall execute a bond in the manner specified in sub-section (1) or sub-section (2) and furnish
security as specified under sub-section (3).
8. Permission for removal of goods for deposit in warehouse.
8.1 Section 60 of the Customs Act, 1962 provides that when the provisions of section 59 have been
complied with in respect of any goods, the proper officer may make an order permitting removal
of the goods from a customs station for the purpose of deposit in a warehouse.
Provided that such order may also be made electronically through the customs automated system
on the basis of risk evaluation through appropriate selection criteria.
8.2 Where an order is made under sub-section (1), the goods shall be deposited in a warehouse in
such manner as may be prescribed.
9. Period for which goods may remain warehoused:
9.1 As per section 61 of the Customs Act, 1962,
(1) Any warehoused goods may remain in the warehouse in which they are deposited or in any
warehouse to which they may be removed,
(a) in the case of capital goods intended for use in any hundred per cent export-oriented
undertaking or electronic hardware technology park unit or software technology park
unit or any warehouse wherein manufacture, or other operations have been permitted
under section 65, till their clearance from the warehouse;
(b) in the case of goods other than capital goods intended for use in any hundred per
cent. export oriented undertaking or electronic hardware technology park unit or
software technology park unit or any warehouse wherein manufacture, or other
operations have been permitted under section 65, till their consumption or clearance
from the warehouse; and
(c) in the case of any other goods, till the expiry of one year from the date on which the
proper officer has made an order under sub-section (1) of section 60
Provided further that where such goods are likely to deteriorate, the period referred to in the
first proviso may be reduced by the Principal Commissioner of Customs or Commissioner
of Customs to such shorter period as he may deem fit.
10. Extension of warehousing period:
10.1 Section 61 of the Customs Act, 1962 provides that in the case of any goods referred to in this
clause, the Principal Commissioner of Customs or Commissioner of Customs may, on sufficient
cause being shown, extend the period for which the goods may remain in the warehouse, by not
more than one year at a time.
11. Interest for storage beyond permissible period:
11.1 As per Section 61(2) of the Customs Act, 1962,in the event where any warehoused goods
specified in clause (c) of sub-section (1) of Section 61 of Customs Act 1962 remain in a warehouse
beyond a period of ninety days from the date on which the proper officer has made an order under
sub-section (1) of section 60, interest shall be payable at such rate as may be fixed by the Central
Government under section 47, on the amount of duty payable at the time of clearance of the goods,
for the period from the expiry of the said ninety days till the date of payment of duty on the
warehoused goods.
12. Waiver of interest:
12.1 Section 61(2) of the Customs Act, 1962 provides that if the Board considers it necessary so to do,
in the public interest, it may, -
(a) by order, and under the circumstances of an exceptional nature, to be specified in such
order, waive the whole or any part of the interest payable under this section in respect of
any warehoused goods;
(b) by notification in the Official Gazette, specify the class of goods in respect of which no
interest shall be charged under this section;
(c) by notification in the Official Gazette, specify the class of goods in respect of which the
interest shall be chargeable from the date on which the proper officer has made an order
under sub-section (1) of section 60.
13. Owner's right to deal with warehoused goods:
13.1 The owner of any warehoused goods may, after warehousing the same,
(a) inspect the goods;
(b) deal with their containers in such manner as may be necessary to prevent loss or
deterioration or damage to the goods;
(c) sort the goods; or
(d) show the goods for sale.
14. Transfer of goods from one warehouse to another:
14.1 A licensee shall allow transfer of warehoused goods to another warehouse with the permission of
the bond officer under section 67 on the Form for transfer of goods from a warehouse. Where an
owner of the warehoused goods produces the Form for transfer of goods from a warehouse
bearing the orders of the bond officer, the licensee shall, -
(a) allow removal of the goods and their loading onto the means of transport;
(b) affix a one-time-lock to the means of transport;
(c) endorse the number of the one-time-lock on the Form for transfer of goods from a
warehouse and retain a copy thereof;
(d) endorse the number of the one-time-lock on the transport document and retain a copy
thereof;
(e) take into record the removal of the goods; and
(f) cause to be delivered, copies of the retained documents to the bond officer.
14.2 Upon receipt of goods from another warehouse, a licensee shall
(a) verify the one-time-lock on the means of transport carrying the goods to the warehouse;
(b) inform the bond officer immediately if the one-time-lock is not found intact, and refuse the
unloading of the goods;
(c) allow unloading, provided the one-time-lock is found intact, and verify the quantity of goods
received by reconciling with the Form for transfer of goods from a warehouse bearing the
orders of the bond officer;
(d) report any discrepancy in the quantity of goods to the bond officer within twenty-four hours;
(e) endorse the Form for transfer of goods from a warehouse with quantity received and retain
a copy thereof;
(f) acknowledge the receipt of the goods by endorsing the transportation document presented
by the carrier of the goods and retain a copy thereof;
(g) take into record the goods received; and
(h) cause to be delivered, copies of the retained documents to the bond officer and to the
warehouse keeper of the warehouse from where the goods have been received.
15. Clearance of warehoused goods for home consumption:
15.1 Any warehoused goods may be cleared from the warehouse for home consumption, if:
(a) a bill of entry for home consumption in respect of such goods has been presented in the
prescribed form;
(b) the import duty, interest, fine and penalties payable in respect of such goods have been
paid; and
(c) an order for clearance of such goods for home consumption has been made by the proper
officer:
Provided that the order referred to in clause (c) may also be made electronically through the
customs automated system on the basis of risk evaluation through appropriate selection criteria:
Provided further that the owner of any warehoused goods may, at any time before an order for
clearance of goods for home consumption has been made in respect of such goods, relinquish his
title to the goods upon payment of penalties that may be payable in respect of the goods and upon
such relinquishment, he shall not be liable to pay duty thereon: Provided also that the owner of
any such warehoused goods shall not be allowed to relinquish his title to such goods regarding
which an offence appears to have been committed under this Act or any other law for the time
being in force.
15.2 At the time of actual removal of the goods from the warehouse, the declared description of the
goods recorded on warehousing bill of entry, should be tallied with the description declared on the
ex-bond bill of entry.
15.3 As per provisions of Section 15 of the Customs Act, 1962, the rate of duty and tariff value for
clearance of the goods from a bonded warehouse shall be the rate of duty and tariff value on the
date on which a Bill of Entry for home consumption is presented under Section 68 of the Customs
Act, 1962. The value of the goods is taken as the same as assessed on the into-bond Bill of Entry
at the time of warehousing the goods.
15.4 A licensee shall not allow goods to be removed from the warehouse for home consumption, unless
the bond officer permits the removal of the goods. Upon the owner of the goods producing an
order made by the proper officer under section 68, the bond officer shall permit removal of the
goods and the licensee shall,
(a) deliver the quantity of goods as mentioned in the bill of entry for home consumption to the
owner of the goods and retain a copy of the bill of entry; and
(b) take into record the goods removed.
16. Clearance of warehoused goods for Export:
16.1 Any warehoused goods may be exported to a place outside India without payment of import duty
if
(a) a shipping bill or a bill of export or the form as prescribed under section 84 has been
presented in respect of such goods;
(b) the export duty, fine and penalties payable in respect of such goods have been paid; and
(c) an order for clearance of such goods for export has been made by the proper officer.
Provided that the order referred to in clause (c) may also be made electronically through the
customs automated system on the basis of risk evaluation through appropriate selection criteria.
Upon the bond officer permitting the removal of the goods from the warehouse, the licensee shall,
in the presence of the bond officer, cause the goods to be loaded onto the means of transport and
affix a one-time-lock to the means of transport.
16.2 Warehoused goods shall be allowed to be re-exported on the following terms: (a) The import in
the first instance was not un-authorized or in contravention of the FTP;
a) The re-export shall not be allowed against Indian Rupees, if the goods were imported by
payment in freely convertible foreign currency; and
b) On re-export, the exporter realizes full export value indicated in the Export Declaration Form,
within time limit specified in Regulation 9 of Foreign Exchange (Exports of Goods and
Services) Regulations, 2015.
16.3 Section 69 of the Customs Act, 1962 provides that if the Central Government is of opinion that
warehoused goods of any specified description are likely to be smuggled back into India, it may,
by notification in the Official Gazette, direct that such goods shall not be exported to any place
outside India without payment of duty or may be allowed to be so exported subject to such
restrictions and conditions as may be specified in the notification. In terms of Section 69 of the
Customs Act, 1962, the following notifications have been issued:
(i) Notification No. 45-Customs, dated 1-2-1963, amended vide Notification No. 185/89-
Customs, dated 16.06.1989, provides that the warehoused goods shall not be exported to
Bhutan, Nepal, Burma, Sikang, Tibet or Sinkiang, However, the warehoused goods can be
exported to Nepal in the following circumstances:
(a) If goods are exported against an irrevocable letter of credit in freely convertible
currency;
(b) If goods are exported for supplies to projects financed by any UN Agency or IBRD
Association or ADB or any other multilateral agency of the like nature and for which
payments are received in freely convertible currency; and
(c) If the specified capital goods are supplied against a global tender invited by HMG of
Nepal for which payment is received in Indian Rupees. These goods can be exported
only from Jogbani or Raxaul LCS on production of bank certifies of receipt of the
payment in freely convertible currency or Indian Rupees, as the case may be.
(ii) As per Notification No.46-Cus, dated 1-2-1963, export of warehoused goods without
payment of import duty in a vessel of capacity less than 1000 tons gross is permitted subject
to the condition that the exporter or agent of the vessel executes a bond for an amount equal
to the import duty leviable on such goods backed by surety or security and produces a
certificate within 3 months from the Customs authorities at port of destination that the goods
have been landed at the port of destination.
(iii)Notification No.47-Cus, dated 1-2-1963 bans export of warehoused (a) Alcoholic liquors,
(b) Cigarettes, (c) Cigars, and (d) Pipe Tobacco without payment of import duty as stores
on board a vessel of capacity less than 200 tons gross.
17. Allowance in case of volatile warehoused goods:
17.1 Section 70 of the Customs Act, 1962 provides that when any warehoused goods at the time
of delivery from a warehouse are found to be deficient in quantity on account of natural loss,
the Assistant/Deputy Commissioner of Customs may remit the duty on such deficiency.
17.2 Notification No. 03/2016 -Customs (N.T.) dated 11.01.2016 issued under Section 70 (20) of
the said Act specifies the goods on which duty may be remitted on account of natural loss,
having regard to the volatility of the goods and the manner of their storage. These goods
are:
(i) aviation fuel, motor spirit, mineral turpentine, acetone, methanol, raw naptha,
vaporizing oil, kerosene, high speed diesel oil, batching oil, diesel oil, furnace oil and
ethylene dichloride, kept in tanks;
(ii) wine, spirit and beer, kept in casks:
(iii) liquid helium gas kept in containers; and
(iv) crude stored in caverns.
18. Maintenance of records in relation to warehoused goods:
18.1 A licensee shall, -
(a) maintain detailed records of the receipt, handling, storing, and removal of any goods into or
from the warehouse, as the case may be, and produce the same to the bond officer, as and
when required;
(b) keep a record of each activity, operation or action taken in relation to the warehoused goods;
(c) keep a record of drawl of samples from the warehoused goods under the Act or any other
law for the time being in force; and
(d) keep copies of the bills of entry, transport documents, Forms for transfer of goods from a
warehouse, shipping bills or bills of export or any other documents evidencing the receipt or
removal of goods into or from the warehouse and copies of the bonds executed under
section 59.
18.2 The records and accounts required to be maintained under sub- regulation (1) shall be kept
updated and accurate and preserved for a minimum period of five years from the date of removal
of goods from the warehouse and shall be made available for inspection by the bond officer or any
other officer authorised under the Act.
18.3 A licensee shall also preserve updated digital copies of the records specified under subregulation
(1) at a place other than the warehouse to prevent loss of records due to natural calamities, fire,
theft, skilful pilferage or computer malfunction.
18.4 A licensee shall file with the bond officer a monthly return of the receipt, storage, operations and
removal of the goods in the warehouse, within ten days after the close of the month to which such
return relates.
18.5 Where the period specified in section 61 for warehousing of goods is expiring in a particular month,
the licensee shall furnish such information to the bond officer on or before the 10th day of the
month immediately preceding the month of such expiry.
18.6 The data prescribed for maintenance of records, shall be stored electronically. The software for
maintenance of electronic records must incorporate the feature of audit trail which means a secure,
computer generated, time-stamped electronic record that allows for reconstruction of the course
events relating to the creation, modification, or deletion of an electronic record and includes actions
at the record or system level, such as, attempts to access the system or delete or modify a record.
19. Recovery of duty from bonded warehouses:
19.1 In any of the following cases, that is to say, -
(i) where any warehoused goods are removed from a warehouse in contravention of section
71;
(ii) where any warehoused goods have not been removed from a warehouse at the expiration
of the period during which such goods are permitted under section 61 to remain in a
warehouse;
(iii) where any goods in respect of which a bond has been executed under section 59 and which
have not been cleared for home consumption or export are not duly accounted for to the
satisfaction of the proper officer, -
19.2 The proper officer may demand, and the owner of such goods shall forthwith pay, the full amount
of duty chargeable on account of such goods together with interest, fine and penalties payable in
respect of such goods.
19.3 If any owner fails to pay any amount demanded under sub-section (1), the proper officer may,
without prejudice to any other remedy, cause to be detained and sold, after notice to the owner
(any transfer of the goods notwithstanding) such sufficient portion of his goods, if any, in the
warehouse, as the said officer may deem fit.
20. Cancellation and return of warehousing bond:
20.1 When the whole of the goods covered by any bond executed under section 59 have been cleared
for home consumption or exported or transferred or are otherwise duly accounted for, and when
all amounts due on account of such goods have been paid, the proper officer shall cancel the bond
as discharged in full, and shall on demand deliver it, so cancelled, to the person who has executed
or is entitled to receive it.
20A Custody and removal of warehoused goods20A.1 Section 73A of the Customs Act, 1962 provides that all warehoused goods shall remain in the
custody of the persons who has been granted a licence under section 57 or section 58 or section
58A until they are cleared for home consumption or are transferred to another warehouse or are
exported or removed as otherwise provided under this Act.
20A.2 The responsibilities of the person referred to in sub-section (1) who has custody of the
warehoused goods shall be such as may be prescribed.
20A.3 Where any warehoused goods are removed in contravention of section 71, the licensee shall be
liable to pay duty, interest, fine and penalties without prejudice to any other action that may be
taken against him under this Act or any other law for the time being in force.
20A.4 The Warehoused Goods (Removal) Regulations, 2016 amended vide Warehoused Goods
(Removal) Amendment Regulations, 2019, the Warehouse (Custody and Handling of Goods)
Regulations, 2016 amended vide Warehouse (Custody and Handling of Goods) Amendment
Regulations, 2019 and the Special Warehouse (Custody and Handling of goods) Regulations,
2016 amended vide Special Warehouse (Custody and Handling of goods) Regulations, 2020
exclude their application for such warehouses operating under section 65. The said regulations
will continue to be applicable for warehouses, not operating under Section 65.
[Refer Notification No. 70/2019-Cus (NT) d.t 01.10.2019, 71/2019-Cus (NT) d.t
01.10.2019 and 77/2020-Cus (N.T) d.t 17.08.2020]
21. Manufacture and other operations in relation to goods in a warehouse:
Section 65 of the Customs Act, 1962 provides for manufacture as well as carrying out other
operations in a bonded warehouse under sections 58 or 58A.
21.1 Manufacture and Other Operations in Private Warehouse (section 58 warehouse) Under section
65, the Board has prescribed “Manufacture and Other Operations in Warehouse(no.2)
Regulations, 2019” amended vide “Manufacture and Other Operations in Warehouse(no.2)
Regulations, 2020” to carry manufacture and other operations in a private warehouse (section 58).
These regulations provide for eligibility conditions for grant of licence, conditions of the bond to be
executed by the licensee, maintenance of accounts, appointment of warehouse keeper, provision
for facilities, equipment and personnel, conditions for transport and receipt of goods from custom
station, from another warehouse, domestically procured goods, transfer of goods from a
warehouse, removal of resultant goods for home consumption and export, maintenance of records
and conduct of audit etc. The form of application to be filed by an applicant before the jurisdictional
Principal Commissioner / Commissioner of Customs, the form of accounts and the bond to be
executed to be maintained by a private warehouse (section 58) operating under section 65 is
prescribed under Circular 34/2019-Customs dated 01.10.2019.
21.2 If the resultant product manufactured or worked upon in a bonded warehouse is exported, the
licensee shall have to file a shipping bill and pay any amounts due. A GST invoice shall also be
issued for such removal. In such a case, no duty is required to be paid in respect of the imported
goods contained in the resultant product as per the provisions of section 69 of the Customs Act.
21.3 If the resultant product whether emerging out of manufacturing or other operations in the
warehouse) is cleared for domestic consumption, such a transaction squarely falls within the ambit
of "supply" under Section 7 of the Central Goods and Services Act, hereinafter referred to as the
"CGST Act". It would therefore be taxable in terms of Goods and Service Tax Act,2017 section 9
of the CGST Act, 2017 or section 5 of the Integrated Goods and Services Tax Act, 2017 depending
upon the supply being intra-state or inter-state. The resultant product will thus be supplied from
the warehouse under the cover of GST invoice on the payment of appropriate GST and
compensation cess, if any. As regards import duties payable on the imported goods contained in
so much of the resultant products are concerned, same shall be paid at the time of supply of the
resultant product from the warehouse for which the licensee shall have to file an ex-bond Bill of
entry and such transactions shall be duly reflected in the accounts prescribed under Annexure B
of Circular No.34/2019-Custom dated 01.10.2019.
21.4 It may be noted that units operating under section 65 read with section 58 of the Customs Act, are
entitled to import capital goods, machinery, inputs etc. by following the provisions under Ch IX. In
so far as domestic procurement is concerned, applicable rates of taxes shall be payable and
exemptions, if any, can also be availed. By virtue of simply being a unit operating under section
65, they shall not be entitled to procure goods domestically, without payment of taxes. The records
in respect of such domestically procured goods shall be indicated in the form for accounts as
prescribed.
21.5 Since the warehouse operating under section 65 also functions as a warehouse licensed under
section 58, the licensees can import goods and clear them as such, for home consumption under
section 68 on payment of import duties, along with interest as per subsection (2) of section 61 of
the Act or clear them as such for export under section 69 of the Act. The licensees shall also be
required to submit monthly returns in “Form B” as prescribed under Circular No. 25/2016-Cus
dated 8th June 2016 in case the warehouse is used for such purposes i.e. non-section 65 purposes.
21.6 Given the continuous nature of operations in warehouses under section 65, and the potential need
to clear resultant goods expeditiously, the requirement to obtain prior permission of the proper
officer for each clearance could pose a challenge to making clearances on time to meet delivery
schedules. Therefore to facilitate such timely clearances and for convenience of the trade,
recourse has been taken to the powers vested under Section 143 AA, and it has been provided
under regulation 13, 14 and 15 of MOOWR 2019 that while a licensee shall file the due
documentation (such as the Form for transfer of goods from a warehouse, bill of entry and shipping
bill, respectively) and pay the duties due, prior permission of the proper officer is not an essential
condition for removal of the warehoused goods (as part of the resultant goods). The licensees who
wish to avail self-sealing facility for exports can avail the facility made available under circular
26/2017 customs dated 01.07.2017 and its linked circulars.
21.7 Goods (only inputs) can be removed from a Section 65 unit for jobwork and received after jobwork.
Capital goods can be sent outside the Section 65 unit for repair, with the permission of the bond
officer. The form for maintaining the account of jobwork by a Section 65 unit is prescribed in Annex
B of Circular No. 34/2019-Customs dated 01.10.2019. Further, Section 65 unit, being a GST
registered unit, can perform job work operations and should maintain due accounting of such job
work as per the provisions of GST law.
[Refer to Circular No. 48/2020-Customs dated 27.10.2020]
22. Manufacture and Other Operations in Special Warehouse (section 58A warehouse):
22.1 Under section 65, the Board has prescribed “Manufacture and Other Operations in Special
Warehouse Regulations, 2020”. These regulations provide for eligibility conditions for grant of
licence under Section 58A of the Act for warehousing of specified goods, notified by Board under
sub-section (2) of section 58A (refer Para 5.3),along with permission for undertaking
manufacturing or other operations in the warehouse under section 65 of the Act, conditions of the
bond to be executed by the licensee, maintenance of accounts, appointment of warehouse keeper,
provision for facilities, equipment and personnel, maintenance and operation of strong room,
conditions for transport and receipt of goods from custom station, from another warehouse,
domestically procured goods, transfer of goods from a warehouse, removal of resultant goods for
home consumption and export, maintenance of records and conduct of audit etc.
22.2 The form of application to be filed by an applicant before the jurisdictional Principal Commissioner
/ Commissioner of Customs, the form of accounts and the bond to be executed to be maintained
by a special warehouse (section 58A) unit operating under section 65 is prescribed under Circular
No. 36/2020-Customs dated 17.08.2020. The Circular also covers the procedure for, receipt,
storage and removal of goods, maintenance of accounts, conduct of audit etc. in a section 58A
unit undertaking manufacturing or other operations under section 65.
The licensees manufacturing or carrying out other operations in a bonded warehouse shall be
required to maintain records as per the form prescribed under the circular (Annexure B).
Regulation 4 of the MOOSWR, 2020, provides that the applicant under section 65 shall undertake
to execute a bond in such format as specified. Further, Section 59 of the Customs Act requires
the importer of the warehoused goods to furnish security and execute a triple duty bond for the
warehoused goods. Thus, the bond prescribed under the Circular as per Annexure C serves the
requirements of both MOOSWR, 2020 and Section 59 of the Customs Act. Additionally, the
licensee will furnish security by way of a bank guarantee equivalent to the duty involved on the
warehoused goods.
[Refer to Notification No. 75/2020-Cus (NT) d.t 17.08.2020 and
Circular No. 36/2020-Customs dated 17.08.20]
22.3 To bring in greater regulatory clarity and certainty for members of the trade and industry Board
has clarified the following, detailed in the circular referred below.
(a) Job work for a section 65 unit.
(b) Job work for others by a Section 65 Unit
(c) Whether a section 65 unit can procure goods from FTWZ
[Refer to Circlular No. 48/2020-Customs dated 27.10.2020]