Documentation & Policy - Volume 1

CHAPTER VI
Warehousing Under Customs Act

Warehousing is a statutory facility for depositing imported goods in a warehouse pending payment
of duty. The advantage of the scheme is that the imported goods can be cleared on payment of
duty in installments, as and when required during the warehoused period, up to one year.

A warehouse may be public under Sec. 57 or private under Sec. 58 of the Customs Act. A public
warehouse is appointed and private warehouse licensed, under the above provisions by the Asst.
Commissioner of Customs. The place where a warehouse, public or private is allowed, should
however be one that has been declared as a warehousing station by the Central Board of Excise
and Customs, under Section 9 of the Customs Act.

Public warehouses are managed by public bodies such as the Port Trusts, Central Warehousing
Corporation etc. Private warehouses are managed by individual Importers. While licensing private
warehouses under Section 58, the Asst. Commissioner takes care to see that there is no risk to
Customs Revenue. He ensures that the applicant for licence is solvent, that the place is a secure
one for storing non duty paid imported goods and that there is no danger of theft, loss or
deterioration due to natural causes like weather conditions etc. He also takes into consideration the
volume of imported goods likely to be deposited in the warehouse, the total amount of Customs
duty on such goods etc., before issuing the licence. Licensing of private bonded warehouses is
done normally only when public bonded warehouses have not been appointed at a warehousing
station. The licence is issued by the Asst. Commissioner normally for a calendar year and may be
cancelled by him after giving one month's notice to the licensee. It can also be cancelled if the
licensee commits any contravention of the Customs Act, Rules and Regulations, after giving him an
opportunity to represent. Section 58 (1) provides specifically that ordinarily only goods belonging to
the licensee shall be warehoused. However, other imported goods may also be deposited in a
private warehouse where facilities for deposit in a public warehouse are not available. In all cases
permission of the proper officer under Section 60 is necessary. It must be noted that the consent of
the private warehouse licensee is also required before any Importer can deposit his goods in the
private warehouse.

Section 46 of the Customs Act requires an Importer (or his Customs House Agent) to file a Bill of
Entry for home consumption or for warehousing. If an Importer intends to deposit his consignment
in a private or public warehouse he files a Bill of Entry for warehousing in quadruplicate (yellow in
colour) in the Import Department of the Custom House. The Importer of the goods which have been
entered for warehousing and assessed to duty under Section 17 or 18 shall execute a bond as
required in Sec. 59 of the Customs Act for twice the amount of duty leviable on the goods (Instead
of executing separate bonds for each consignment imported by him, an Importer may also furnish a
general bond for a lump-sum covering twice the amount of duty leviable on goods to be imported
by him during a specified period, say 6 months/one year etc.).

The period during which imported goods may remain in the warehouse without payment of duty
has been specified in Section 61 of the Customs Act. It is one year in the case of nonconsumable
stores and five years in case of Capital goods intended for use in any 100% Export Oriented unit.
These limits may be extended by the Collector of Customs by 6 months and by the Chief
Commissioner for any further period. For all such extended periods the Importer has to pay an
interest fixed by relevant notification calculated with reference to the amount of duty.

Warehoused goods are subject to the control of the Customs Department. The proper officer shall
have access to every part of the warehouse and the power to examine the goods therein.

The owner of the goods may with the permission of the Bond Officer, inspect the goods, separate
damaged or deteriorated goods, change the packing, show the goods for sale to prospective buyers
and take samples.

MANUFACTURE-IN-BOND:
Section 65 of the Customs Act also provides for manufacture and other operations in bond subject
to such conditions as may be prescribed. Such manufacture and operation should take place in
conformity with 'Manufacture and other Operation Regulations, 1966'. Section 65 itself provides for
the manner in which duties should be collected on the waste or refuse arising out of such
manufacturing operations in bond. If the entire products resulting out of manufacture in bond are
exported out of India and the waste is destroyed in the presence of a customs officer, then no
import duty is leviable on the imported goods contained in the waste. If the waste is cleared out of
the warehouse for home consumption them import duty is leviable on the waste as if such waste
only has been imported (instead of goods which were actually imported and warehoused). If the
products manufactured in bond are not exported, but cleared for home consumption, import duty is
leviable on the quantity of imported goods contained in the waste. If the manufactured products
are partly exported and partly cleared for home consumption, the quantity of waste resulting from
manufacturing operations will be proportionately apportioned for levy of (or exemption from) duty
in the manner mentioned above.

Section 67 permits transfer of warehoused goods from one warehouse to another. For this purpose
the owner applies in a prescribed form for the permission of the Asst. Commissioner. If both the
warehouses are situated in the same town, the goods are required to be transferred under the
supervision of the Customs Officer (Escort Officer). If they are situated in different towns, owner is
required to furnish a bond for the amount of duty involved and undertaking to produce a certificate
from the proper officer at destination about the due arrival and warehousing of goods there, in order
to get it discharged.
The Importer (or owner) may clear the warehoused goods for home consumption on payment of
duty, warehouse rent, interest etc. (if any). For this purpose he is required to file an ex-Bond (green)
Bill of Entry under Section 68. After assigning admission number and date it is transferred to the
Bonds Department where the Bond Clerk verifies the declared particulars with the particulars
already entered in the Warehouse Register from the 'Into-Bond Bill of entry'. Thereafter the green Bill
of Entry is assessed by the Appraising Group. The Importer pays the duty and obtains out of charge
order on the reverse of the duplicate Bill of Entry from the Office Superintendent of the Cash &
Accounts Department. He then produces this duplicate Bill of Entry to the Bond Officer or
Warehouse Keeper and clears the consignment from the warehouse. Under Sec. 15(1) (b) the rate
of duty applicable in the case of goods cleared from a warehouse under section 68, on the date on
which a bill of entry for home consumption in respect of such goods is presented under that
section.

The warehoused goods may also be exported out of India by presenting a Shipping Bill and after
payment of export duty, rent, interest etc., if any, but no import duty is chargeable on the imported
warehoused goods so exported (Section 69 Customs Act).

Under Section 70, the duty on specified volatile goods like aviation fuel, motor spirit, mineral
turpentine, acetone, menthol, raw naptha, vaporising oil, kerosene, high speed diesel oil, batching oil
and furnace oil kept in tanks and, wine, spirit and beer kept in casks may be remitted by the Asst.
Commissioner on the quantity found deficient due to natural loss at the time of delivery from the
warehouse. This provision however is slightly different from the provision of Section 22 and 23
applied to warehoused goods. When any warehoused goods are damaged at any time before
clearance for home consumption on account of an accident not due to any wilful act, negligence or
default of the owner, proportionate abatement of duty is available to the Importer (Section 23).
Similarly when any warehoused goods have been lost or destroyed at any time before clearance for
home consumption, remission of duty shall be allowed by the Asst. Commissioner (Section 23).
Section 23 also provides that the owner of any imported goods may relinquish his title to the goods
before home consumption or allowed to be warehoused and thereupon he shall not be liable to pay
the duty thereon.

When all the imported goods warehoused have been cleared for home consumption on payment of
duty or exported or otherwise duly accounted for, the bond furnished by the Importer under Section
59 is cancelled and returned to the Importer.