Customs Act, 1962 Section 59 — Warehousing bond
Customs Act, 1962 · Warehousing bond
Plain-English Explanation
Overview
Section 59 of the Customs Act, 1962, mandates the execution of a warehousing bond by importers who wish to store imported goods in a customs bonded warehouse. This bond secures the government's revenue and ensures compliance with customs regulations while the goods are warehoused.
Who Does This Apply To?
This section applies to:
- Importers who have presented a bill of entry for warehousing (Section 46) and whose goods have been assessed to duty (Section 17 or Section 18).
- Assistant Commissioners of Customs or Deputy Commissioners of Customs who may approve general bonds.
- Transferees of warehoused goods.
How It Works
The mechanism involves the following steps:
- Bond Execution: The importer executes a bond equal to thrice the amount of the duty assessed on the warehoused goods.
- Bond Conditions: The bond binds the importer:
- To comply with all provisions of the Customs Act and related rules concerning the goods.
- To pay all duties and interest payable (Section 61(2)) by the date specified in the demand notice.
- To pay all penalties and fines incurred for contravention of the Act or its rules regarding the goods.
- General Bond Option: The Assistant/Deputy Commissioner may allow an importer to execute a general bond for warehousing goods imported within a specified period. The amount of this bond is determined by the Assistant/Deputy Commissioner.
- Additional Security: The importer must also furnish additional security, as prescribed by rules, alongside the bond.
- Bond Continuity: The bond remains in force even if the goods are transferred to another warehouse.
- Transferee's Obligation: If the goods are transferred to another person, the transferee must execute a new bond (either a specific bond for the goods transferred or a general bond, as permitted by the Assistant/Deputy Commissioner) and furnish security.
Important Conditions & Exceptions
- Condition 1: The bond amount is calculated based on the assessed duty at the time of warehousing.
- Condition 2: The additional security to be furnished is determined by the prescribed rules, and varies depending on the nature of the goods and risk assessment.
- Exception: While Section 59 focuses on the importer, the obligations shift to the transferee upon transfer of the warehoused goods, requiring the transferee to execute a fresh bond.
Practical Example
ABC Importers imports electronic goods and presents a bill of entry for warehousing. The assessed duty on these goods is ₹50 lakhs. According to Section 59, ABC Importers must execute a warehousing bond for ₹1.5 crore (3 x ₹50 lakhs). The bond ensures that ABC Importers complies with all customs regulations while the goods are in the warehouse, pays any applicable duties and interest, and pays any penalties if they violate the rules. If ABC Importers then transfers the goods to XYZ Distributors, XYZ Distributors must execute their own warehousing bond for the remaining duty amount (if any) and furnish the necessary security.
Key Amendments
No major amendments since enactment.
No case laws found for this provision yet.
Browse all case laws →Frequently Asked Questions
What is a warehousing bond under Section 59 of the Customs Act, 1962, and when is it required?
A warehousing bond, as defined in Section 59 of the Customs Act, 1962, is a legal instrument executed by an importer who intends to store goods in a customs bonded warehouse. It's required when a bill of entry for warehousing has been presented under Section 46 and the goods have been assessed to duty under Section 17 or 18.
How is the value of the warehousing bond determined under Section 59(1)?
The warehousing bond under Section 59(1) is valued at thrice the amount of duty assessed on the goods intended for warehousing. This amount serves as a guarantee that the importer will comply with all relevant provisions, pay applicable duties and interest under Section 61(2), and settle any penalties or fines related to contraventions of the Customs Act.
Can an importer execute a general bond instead of individual bonds for each consignment under Section 59(2)?
Yes, under Section 59(2), the Assistant Commissioner or Deputy Commissioner of Customs may allow an importer to execute a general bond. This general bond covers multiple warehousing transactions within a specified period, streamlining the process and reducing administrative burden, subject to approval by customs authorities.
What security needs to be furnished in addition to the warehousing bond as per Section 59(3)?
Section 59(3) stipulates that the importer must furnish additional security as prescribed by relevant regulations, in addition to executing the warehousing bond. The nature and amount of this security are determined by customs authorities and may vary depending on the goods, importer risk profile, and prevailing regulations.
What happens to the warehousing bond if the warehoused goods are transferred to another warehouse under Section 59(4)?
As per Section 59(4), the original warehousing bond remains in force even if the goods are transferred to another warehouse. The bond's obligations continue to apply to the goods, regardless of their location, until all duties, interest, and penalties are settled.
What obligations does the transferee have when warehoused goods are transferred to them according to Section 59(5)?
When warehoused goods are transferred to another person, Section 59(5) requires the transferee to execute their own warehousing bond, mirroring the requirements for the original importer under Section 59(1) or (2). Additionally, the transferee must furnish the security as specified under Section 59(3), ensuring that they are legally responsible for the goods and any associated obligations.
If I have warehoused goods and need to clear them, how does the Section 59 bond come into play?
The warehousing bond executed under Section 59 secures the deferred payment of customs duties and taxes while the goods are stored. When you intend to clear the goods for home consumption, the duties become due. Satisfying these duty obligations releases you from the liability under the bond. Any outstanding interest, penalties, or fines covered by the bond must also be paid for complete discharge.
Key Conditions & Requirements
| Condition | Details |
|---|---|
| Bill of entry for warehousing requirement | A bill of entry for warehousing must be presented under Section 46 and the goods assessed to duty under Section 17 or 18 before a warehousing bond can be executed. |
| Bond amount calculation | The bond amount must be equal to thrice the amount of the duty assessed on the goods intended for warehousing. |
| Bond obligations: Compliance, duties, penalties | The bond obligates the importer to comply with the Customs Act and rules, pay duties and interest under Section 61(2), and pay penalties and fines incurred. |
| General bond option | Assistant/Deputy Commissioner of Customs may allow a general bond for warehousing goods imported within a specified period. |
| Additional security requirement | In addition to the bond, the importer must furnish security as prescribed. |
| Bond continues after transfer to another warehouse | The bond executed by the importer remains in force even if the goods are transferred to another warehouse. |
| Transferee's bond obligation | If goods are transferred to another person, the transferee must execute a bond similar to the original importer and furnish security. |
| Duty payment deadline | The importer is bound to pay duties and interest by the date specified in the demand notice. |
Amendment History
Substituted (w.e.f. 14-5-2016) for section 59 by section 126 of the Finance Act, 2016 (28 of 2016). Earlier section 59 was amended by section 6 of Act 55 of 1991, (w.e.f. 23-12-1991); by section 60 of Act 32 of 1994, (w.e.f. 13-5-1994); by section 50 of Act 22 of 1995, (w.e.f. 26-5-1995); by section 100 of Act 27 of 1999, (w.e.f. 11-5-1999) and by section 84 of Act 10 of 2000, (w.e.f. 12-5-2000). Section 59, before substitution by the Finance Act, 2016, stood as under: "
Warehousing bond.- (1) The importer of any goods specified in [***1 sub-section (1) of section 61, which have been entered for warehousing and assessed to duty under section 17 or section 18 shall execute a bond binding himself in a sum equal to twice the amount of the duty assessed on such goods- (a) to observe all the provisions of this Act and the rules and regulations in respect of such goods; (b) to pay on or before a date specified in a notice of demand,- (i) all duties, and interest, if any, payable under sub-section (2) of section 61; (ii) rent and charges claimable on account of such goods under this Act, together with interest on the same from the date so specified at such rate not below eighteen per cent and not exceeding thirty-six per cent. per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette; and (c) to discharge all penalties incurred for violation of the provisions of this Act and the rules and regulations in respect of such goods. (2) For the purposes of sub-section (1), the Assistant Commissioner of Customs or Deputy Commissioner of Customs may permit an importer to enter into 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. (3) A bond executed under this section by an importer in respect of any goods shall continue in force notwithstanding the transfer of the goods to any other person or the removal of the goods to another warehouse: Provided that where the whole of the goods or any part thereof are transferred to another person, the proper officer may accept a fresh bond from the transferee in a sum equal to twice the amount of duty assessed on the goods transferred and thereupon the bond executed by the transferor shall be enforceable only for a sum mentioned therein less the amount for which a fresh bond is accepted from the transferee."