Manufacturing under Bonded Warehouse Dr M.S
Description: Manufacturing under Bonded Warehouse Dr M.S Krishna Kumar, Advocate MANUFACTURING UNDER BONDER WAREHOUSE Reasons for importer opting for Warehousing Importer may not like to clear goods due to saleability, market price, customer
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slide1. Manufacturing under Bonded Warehouse Dr M.S Krishna Kumar, Advocate<br>
slide2. MANUFACTURING UNDER BONDER WAREHOUSE Reasons for importer opting for Warehousing
Importer may not like to clear goods due to saleability, market price, customer requirements, paucity of funds etc – hence prefer to warehouse goods
Some imported goods are warehoused for supplies to EOU/STP/SEZ etc
Duty Free shops at international airports warehouse goods before selling to international travellers
Imported goods allowed to be cleared without payment of duty to warehouse- duty paid at the time of clearance from warehouse
Time limit for warehouse with or without interest prescribed – provisions contained in Chapter IX of CA 1962<br>
slide3. Public Warehouse & Private Warehouse Public Warehouses:
In terms of Sec.57 of CA 1962 the Principal Commr of Customs may subject to such conditions prescribed licence a Public Warehouse where dutiable goods may be deposited
Criteria for licence (a) citizen of India or Entity incorporated in India (b) submits undertaking to comply with terms & conditions (c) furnishes solvency certificate of scheduled bank for 2 crore ( solvency not applicable to undertaking of Central Govt/State Govt or Ports
Private Warehouses:
In terms of Sec.58 of CA 1962 Principal Commr of Customs may licence private bonded warehouse where dutiable goods imported by or on behalf of the licensee may be deposited<br>
slide4. Removal of Goods for deposit in warehouse Sec.60 Applicant to provide (a) all risk insurance policy to cover calamities, riots, fire, theft, pilferage, commercial crime etc – equivalent to duty involved on goods stored (b) give an Undertaking binding himself to pay duties, interest, fines and penalties payable as per Sec.73 A(3) of the CA 1962 (c) appoint a person who has sufficient experience in warehousing operations
Section 60 of CA 1962
Proper officer may by order permit removal of goods from customs station for deposit in warehouse- such order made electronically in customs automated system on the basis of risk evaluation – When order u/s 60(1) is made , goods shall be deposited in the manner prescribed
Owner’s right to deal with warehoused goods:
(a) inspect the goods; (b) deal with their containers 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<br>
slide5. Warehouse period – Sec.61 In case of capital goods for use in 100% EOU/STP/EHTP for mfg operations u/s 65 till their clearance from warehouse
Other than capital goods intended for use in 100% EOU/STP/EHTP till their consumption or clearance from their warehouse
In case of any other goods till the expiry of one year from date of order under Sec.60(1) – if the goods are perishable in nature shorter period may be prescribed by Customs
Principal Commissioner of Customs may extend the warehousing period on sufficient cause being shown, for a period not more than 1 year at a time
As per Sec.61(2) if the goods remain in warehouse beyond period of 90 days after order under Sec. 61(1) interest shall be payable at ratees prescribed under Sec.47 on the duty payable (expiry of 90 days till date of clearance)
Sec. 61(2) provides that Board may in public interest under circumstances of exceptional nature by order waive whole or part of interest by notification in Gazette<br>
slide6. In Bond Manufacture – Sec.65 Sec.65 – In Bond manufacture
Manufacture/other operations can be carried out in warehouse under Sec.65 – sanction of jurisdiction ACC – facility is beneficial if entire production is later exported – home consumption also permissible on payment of appropriate duty
In bond manufacture is available for goods imported for repairs, re-conditioning and re-engineering- goods can be imported without payment of duty and re-exported - Permission for in bond manufacture given by Principal CC u/s 65 (1)
If waste/refuse is generated the procedure is (a) if final product is exported- import duty on quantity contained in waste will be remitted if the same is destroyed OR duty paid on such waste as if it is imported (b) if final product is cleared for home consumption import duty payable on quantity of warehoused goods contained in such waste.<br>
slide7. In Bond Manufacture – Sec.65 Sec.65 – regulation – earlier Manufacture & other Operations in Warehouse Regulations 1966 (MOOWR 66) with MOOWR 2019
A person granted private bonded warehouse licence can apply for Sec.65 permission (a) licence u/s 58 (b) undertaking to maintain proper records (c) execute Bond (d_ to inform input output norms – no time limit for permission/licence – valid till cancelled or surrendered
Part of ease of doing business Sec.58 license & Sec.65 permission is contained in single application - The warehouse in which section 65 permission is granted shall also be declared by the Licensee as the principal/additional place of business for the purposes of GST<br>
slide8. In Bond Manufacture – Sec.65 licensees shall maintain accounts of receipt and removal in prescribed formats in digital form and furnish the same to the bond officer on monthly basis digitally.
If products from a bonded warehouse is exported, the licensee shall have to file a SB for transport of goods from the warehouse to the customs station of export.
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.- domestic procurement is concerned, applicable rates of taxes shall be payable and exemptions, if any, can also be availed. By virtue of unit under section 65, they shall not be entitled to procure goods domestically, without payment of taxes<br>
slide9. Sec.67 - Transfer of goods from one warehouse to another Sec.67 - Transfer of goods from one warehouse to another:
Owner of any warehoused goods with permission of bond officer remove them from one warehouse to another (a) transfer under Form prescribed (b) one time lock for transport (c) endorse the number of one time lock in form (d) take on record the removal of goods .
In the warehouse receiving goods Bond officer (a) verify one time lock (b) if lock not in tact inform the other Bond officer (c) allow unloading, verify quantity & other details of goods (d) report any discrepancy (e) acknowledge receipt of goods and take on record the goods received
Sec.68 Clearance of warehoused goods for home consumption:
warehoused goods may be cleared - for home consumption, if – (a) a B/E for home consumption is filed (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 made by the proper officer – order can also be made electronically based on risk parameters<br>
slide10. Clearance of warehoused Goods Sec.68 Clearance of warehoused goods for home consumption:
Owner may relinquish his title to goods upon payment of penalties – not liable to pay duties
Owner of goods shall not be allowed to relinquish title to goods where offence has been committed under the Act or any law for time being in force
Procedure for clearance
The description in warehouse B/?E to tally with ex-bond B/E
As per Sec.15 rate of duty & tariff value from bonded warehouse shall be date on which B/E for home consumption presented under Sec.68
The value as per into bond B/E is taken for assessment for ex-bond B/E
No goods shall be removed without the permission of Bond officer<br>
slide11. Sec.69 Clearance of warehoused goods for Export: Sec.69 Clearance of warehoused goods for Export:
Warehoused goods can be exported without payment of import duty (a) if SB of BoE is presented (b) export duty, fine & penalties payable has been paid (c) order for clearance of goods for export made by proper officer- order can be made electronically
Upon permission by Bond officer, licensee can load the goods in transport vehicle with one time lock
On re export the exporter realizes the forex spent on import – no loss on foreign exchange + the goods were not unauthorized or imported in contravention of FTP – if goods were imported on payment in freely convertible currency export under INR not permitted
If the Govt is of opinion that warehoused goods of any description are likely to be smuggled back into India – notify that goods shall not be exported without payment of duty or exported subject to restrictions
Notfn. 45 Cus dated 13.2.1963 – warehoused goods shall not be exported to Bhutan, Nepal, Burma, Tibet<br>
slide12. Sec. 72 – goods improperly removed from warehouse Sec. 72 – goods improperly removed from warehouse etc
Any warehoused goods removed in contravention of Sec.71 ( no goods shall be removed except for home consumption, export or another warehouse)
Goods have not been removed even after expiry of warehousing period
Goods for which Bond executed, not duly accounted for
The proper officer may demand the owner to pay forthwith full amount of duty chargeable with interest and penalties
If the owner fails to pay the amount, the proper officer may without prejudice to any other remedy cause to be detained and sold, after notice to the owner<br>
slide13. Custody of warehoused Goods –Sec.73 A Sec.73 A custody of warehoused goods
All warehoused goods shall be in custody of person licensed under Sec.57, 58 or 58A until they are cleared
Where the goods are removed in contravention of Sec.71 the licensee shall be liable to pay duty, interest, penalties<br>
slide14. Manufacture and Other Operations in Warehouse (no. 2) Regulations, 2019, (MOOWR 2019) The salient features of the program are:
No geographical limitation on setting up units
A single application -single point of approval
Improved liquidity with deferment of import duty and no interest liability.
Allows procurement of GST compliant goods from the domestic market for use in manufacture and other operations in a Section 65 unit.
A single digital account for ease of doing business and easy compliance.
efficient capacity utilization, as there is no limit on quantum of clearances that can be exported or cleared to the domestic market.<br>
slide15. MOOWR -2019 – Eligibility Eligibility
A person granted warehouse licence under Sec.58 of CA 62 r/w Private Warehouse Licensing Regulations 2016
A person can also make combined application for licence u/s 58 and in bond manufacture under Sec.65
Person to be citizen of India or Entity incorporated/registered in India - Old unit in DTA eligible to apply.
Fully enclosed structure no pre-requisite – building to be suitable for secured storage of goods
Licence is valid until cancelled or surrendered – no renewal - Only allowed in private bonder warehouse NOT in public bonded facility - No physical control for operations u/s 58 and 65 – only risk based audit<br>
slide16. MOOWR 2019- Other Features Other features
MOOWR is duty deferment scheme – BCD & IGST stands deferred till they are cleared from warehouse for home consumption – no interest – if finished goods are exported BCD/IGST stands remitted (not duty payable)- duty deferment without any time limitation
Can import capital goods without payment of duty – can import raw materials/inputs without BCD/IGST
BCD and IGST on imports stands deferred – till they are cleared for home Consumption or exported – home consumption u/s 68 on payment of applicable duties without interest –<br>
slide17. MOOWR – Other Features capital goods can be exported after use without payment of duty u/s 69- no duty if capital goods are used in warehouse – duty on capital goods does not get incorporated in duty of goods cleared in DTA
warehouse keeper to be appointed – maintain and sign records on behalf of licensee – inspection by customs on ex-bonding based on risk parameters not as routine
depreciation is not available if capital goods are cleared for home consumption after use<br>
slide2. MANUFACTURING UNDER BONDER WAREHOUSE Reasons for importer opting for Warehousing
Importer may not like to clear goods due to saleability, market price, customer requirements, paucity of funds etc – hence prefer to warehouse goods
Some imported goods are warehoused for supplies to EOU/STP/SEZ etc
Duty Free shops at international airports warehouse goods before selling to international travellers
Imported goods allowed to be cleared without payment of duty to warehouse- duty paid at the time of clearance from warehouse
Time limit for warehouse with or without interest prescribed – provisions contained in Chapter IX of CA 1962<br>
slide3. Public Warehouse & Private Warehouse Public Warehouses:
In terms of Sec.57 of CA 1962 the Principal Commr of Customs may subject to such conditions prescribed licence a Public Warehouse where dutiable goods may be deposited
Criteria for licence (a) citizen of India or Entity incorporated in India (b) submits undertaking to comply with terms & conditions (c) furnishes solvency certificate of scheduled bank for 2 crore ( solvency not applicable to undertaking of Central Govt/State Govt or Ports
Private Warehouses:
In terms of Sec.58 of CA 1962 Principal Commr of Customs may licence private bonded warehouse where dutiable goods imported by or on behalf of the licensee may be deposited<br>
slide4. Removal of Goods for deposit in warehouse Sec.60 Applicant to provide (a) all risk insurance policy to cover calamities, riots, fire, theft, pilferage, commercial crime etc – equivalent to duty involved on goods stored (b) give an Undertaking binding himself to pay duties, interest, fines and penalties payable as per Sec.73 A(3) of the CA 1962 (c) appoint a person who has sufficient experience in warehousing operations
Section 60 of CA 1962
Proper officer may by order permit removal of goods from customs station for deposit in warehouse- such order made electronically in customs automated system on the basis of risk evaluation – When order u/s 60(1) is made , goods shall be deposited in the manner prescribed
Owner’s right to deal with warehoused goods:
(a) inspect the goods; (b) deal with their containers 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<br>
slide5. Warehouse period – Sec.61 In case of capital goods for use in 100% EOU/STP/EHTP for mfg operations u/s 65 till their clearance from warehouse
Other than capital goods intended for use in 100% EOU/STP/EHTP till their consumption or clearance from their warehouse
In case of any other goods till the expiry of one year from date of order under Sec.60(1) – if the goods are perishable in nature shorter period may be prescribed by Customs
Principal Commissioner of Customs may extend the warehousing period on sufficient cause being shown, for a period not more than 1 year at a time
As per Sec.61(2) if the goods remain in warehouse beyond period of 90 days after order under Sec. 61(1) interest shall be payable at ratees prescribed under Sec.47 on the duty payable (expiry of 90 days till date of clearance)
Sec. 61(2) provides that Board may in public interest under circumstances of exceptional nature by order waive whole or part of interest by notification in Gazette<br>
slide6. In Bond Manufacture – Sec.65 Sec.65 – In Bond manufacture
Manufacture/other operations can be carried out in warehouse under Sec.65 – sanction of jurisdiction ACC – facility is beneficial if entire production is later exported – home consumption also permissible on payment of appropriate duty
In bond manufacture is available for goods imported for repairs, re-conditioning and re-engineering- goods can be imported without payment of duty and re-exported - Permission for in bond manufacture given by Principal CC u/s 65 (1)
If waste/refuse is generated the procedure is (a) if final product is exported- import duty on quantity contained in waste will be remitted if the same is destroyed OR duty paid on such waste as if it is imported (b) if final product is cleared for home consumption import duty payable on quantity of warehoused goods contained in such waste.<br>
slide7. In Bond Manufacture – Sec.65 Sec.65 – regulation – earlier Manufacture & other Operations in Warehouse Regulations 1966 (MOOWR 66) with MOOWR 2019
A person granted private bonded warehouse licence can apply for Sec.65 permission (a) licence u/s 58 (b) undertaking to maintain proper records (c) execute Bond (d_ to inform input output norms – no time limit for permission/licence – valid till cancelled or surrendered
Part of ease of doing business Sec.58 license & Sec.65 permission is contained in single application - The warehouse in which section 65 permission is granted shall also be declared by the Licensee as the principal/additional place of business for the purposes of GST<br>
slide8. In Bond Manufacture – Sec.65 licensees shall maintain accounts of receipt and removal in prescribed formats in digital form and furnish the same to the bond officer on monthly basis digitally.
If products from a bonded warehouse is exported, the licensee shall have to file a SB for transport of goods from the warehouse to the customs station of export.
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.- domestic procurement is concerned, applicable rates of taxes shall be payable and exemptions, if any, can also be availed. By virtue of unit under section 65, they shall not be entitled to procure goods domestically, without payment of taxes<br>
slide9. Sec.67 - Transfer of goods from one warehouse to another Sec.67 - Transfer of goods from one warehouse to another:
Owner of any warehoused goods with permission of bond officer remove them from one warehouse to another (a) transfer under Form prescribed (b) one time lock for transport (c) endorse the number of one time lock in form (d) take on record the removal of goods .
In the warehouse receiving goods Bond officer (a) verify one time lock (b) if lock not in tact inform the other Bond officer (c) allow unloading, verify quantity & other details of goods (d) report any discrepancy (e) acknowledge receipt of goods and take on record the goods received
Sec.68 Clearance of warehoused goods for home consumption:
warehoused goods may be cleared - for home consumption, if – (a) a B/E for home consumption is filed (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 made by the proper officer – order can also be made electronically based on risk parameters<br>
slide10. Clearance of warehoused Goods Sec.68 Clearance of warehoused goods for home consumption:
Owner may relinquish his title to goods upon payment of penalties – not liable to pay duties
Owner of goods shall not be allowed to relinquish title to goods where offence has been committed under the Act or any law for time being in force
Procedure for clearance
The description in warehouse B/?E to tally with ex-bond B/E
As per Sec.15 rate of duty & tariff value from bonded warehouse shall be date on which B/E for home consumption presented under Sec.68
The value as per into bond B/E is taken for assessment for ex-bond B/E
No goods shall be removed without the permission of Bond officer<br>
slide11. Sec.69 Clearance of warehoused goods for Export: Sec.69 Clearance of warehoused goods for Export:
Warehoused goods can be exported without payment of import duty (a) if SB of BoE is presented (b) export duty, fine & penalties payable has been paid (c) order for clearance of goods for export made by proper officer- order can be made electronically
Upon permission by Bond officer, licensee can load the goods in transport vehicle with one time lock
On re export the exporter realizes the forex spent on import – no loss on foreign exchange + the goods were not unauthorized or imported in contravention of FTP – if goods were imported on payment in freely convertible currency export under INR not permitted
If the Govt is of opinion that warehoused goods of any description are likely to be smuggled back into India – notify that goods shall not be exported without payment of duty or exported subject to restrictions
Notfn. 45 Cus dated 13.2.1963 – warehoused goods shall not be exported to Bhutan, Nepal, Burma, Tibet<br>
slide12. Sec. 72 – goods improperly removed from warehouse Sec. 72 – goods improperly removed from warehouse etc
Any warehoused goods removed in contravention of Sec.71 ( no goods shall be removed except for home consumption, export or another warehouse)
Goods have not been removed even after expiry of warehousing period
Goods for which Bond executed, not duly accounted for
The proper officer may demand the owner to pay forthwith full amount of duty chargeable with interest and penalties
If the owner fails to pay the amount, the proper officer may without prejudice to any other remedy cause to be detained and sold, after notice to the owner<br>
slide13. Custody of warehoused Goods –Sec.73 A Sec.73 A custody of warehoused goods
All warehoused goods shall be in custody of person licensed under Sec.57, 58 or 58A until they are cleared
Where the goods are removed in contravention of Sec.71 the licensee shall be liable to pay duty, interest, penalties<br>
slide14. Manufacture and Other Operations in Warehouse (no. 2) Regulations, 2019, (MOOWR 2019) The salient features of the program are:
No geographical limitation on setting up units
A single application -single point of approval
Improved liquidity with deferment of import duty and no interest liability.
Allows procurement of GST compliant goods from the domestic market for use in manufacture and other operations in a Section 65 unit.
A single digital account for ease of doing business and easy compliance.
efficient capacity utilization, as there is no limit on quantum of clearances that can be exported or cleared to the domestic market.<br>
slide15. MOOWR -2019 – Eligibility Eligibility
A person granted warehouse licence under Sec.58 of CA 62 r/w Private Warehouse Licensing Regulations 2016
A person can also make combined application for licence u/s 58 and in bond manufacture under Sec.65
Person to be citizen of India or Entity incorporated/registered in India - Old unit in DTA eligible to apply.
Fully enclosed structure no pre-requisite – building to be suitable for secured storage of goods
Licence is valid until cancelled or surrendered – no renewal - Only allowed in private bonder warehouse NOT in public bonded facility - No physical control for operations u/s 58 and 65 – only risk based audit<br>
slide16. MOOWR 2019- Other Features Other features
MOOWR is duty deferment scheme – BCD & IGST stands deferred till they are cleared from warehouse for home consumption – no interest – if finished goods are exported BCD/IGST stands remitted (not duty payable)- duty deferment without any time limitation
Can import capital goods without payment of duty – can import raw materials/inputs without BCD/IGST
BCD and IGST on imports stands deferred – till they are cleared for home Consumption or exported – home consumption u/s 68 on payment of applicable duties without interest –<br>
slide17. MOOWR – Other Features capital goods can be exported after use without payment of duty u/s 69- no duty if capital goods are used in warehouse – duty on capital goods does not get incorporated in duty of goods cleared in DTA
warehouse keeper to be appointed – maintain and sign records on behalf of licensee – inspection by customs on ex-bonding based on risk parameters not as routine
depreciation is not available if capital goods are cleared for home consumption after use<br>