The provisions for warehousing have been mentioned under Chapter IX of the Customs Act, 1962 and other subsequent rules and regulations. The process of warehousing and its related provisions have been elaborated below.
What is Warehousing?
Warehousing is the process of storing physical goods before they are sold further or distributed. Warehouses safely and securely store products in an organized way to track where items are located, when they arrived, how long they have been there, and the quantity on hand.[1] It is important in order to help business’s import, export, transportation and manufacture of goods. It enables business to store, ship and distribute goods from one location.[2] The legal provisions relating to Warehousing are contained under Sections 57 to 73 of Customs Act, 1962 & Rule 2(18).Thereafter by The Manufacture and other operations in Warehouse Regulations, 1966 & The Warehoused Goods (Renewal) Regulations, 1963.[3] The law also lays down the time period up to which the goods may remain in a warehouse without incurring any interest liability and with interest liability.
The warehouses are to be appointed/licensed at particular places only which have been so declared by Central Board of Excise and Customs. The Board has delegated its power for declaring places to be Warehousing Stations to the Chief Commissioners of Customs. In respect of 100% EOUs, the powers to declare places to be Warehousing Stations have been delegated to the Commissioners of Customs.[4]
Relevant Provisions for Warehousing under Indian Customs Law
Appointment of Public Warehouses (Section 57)[5]: The section prescribes that the Principal Commissioner of Customs or the Commissioner of Customs may subject to certain conditions prescribe; appoint a public warehouse wherein dutiable goods may be deposited. These warehouses are managed by the warehousing corporations. The goods can be deposited by any person and there can be no cancellation of license.
In this respect, other than the Central Warehousing Corporation and the State Warehousing Corporations private operators can also be appointed as custodians and for this purpose all applications of custodianship are to be carefully scrutinized and due consideration given to factors such as feasibility and financial viability of warehouse operator, his credibility, his financial status, his past record to comply with Customs & Excise laws, expertise in warehousing field, etc. The applicant should accept to pay cost-recovery charges on payments of Merchant Overtime/Supervision Charges for obtaining services of Customs officers.[6]
Licensing of Private Warehouses (Section 58)[7]:This section provides that a license may be provided to any private warehouse under fulfillment of certain conditions by the Principal Commissioner of Customs or the Commissioner of Customs wherein dutiable goods may be imported on behalf of the licensee. The goods of the owners can only be deposited and the license can be cancelled for violation of the warehousing provisions.
In case of application, the goods are categorized into two categories:
- Storage of sensitive goods such as liquor, cigarettes, foodstuffs, consumables, etc.
- Non-sensitive goods
In case of sensitive the following guidelines in case of storage of sensitive goods have been provided:[8]
1. Applicants should produce a Solvency Certificate from a Scheduled Bank of repute for a value not less than Rs. 50 lakhs;
2. Such warehouses may not be located in residential areas;
The premises should be secure, possess fire-fighting provisions and easily accessible to the Customs Officers;
3. Goods deposited should be fully insured for a value at least equal to the customs duty;
4. The proprietor/partner/director must not be involved in any Customs or Excise offence. In case of any involvement in such offences, the license may be terminated after following the prescribed procedure;
5. In the case of individual consignments to be warehoused, a double duty-bond as prescribed under section 59 should be given by the licensee. In case of sensitive goods, a cash deposit/ bank guarantee equal to 25% of the duty liability (effective duty foregone) will be taken for each consignment. At the same time, a revolving bond with a single bank guarantee for a higher amount can be accepted if so requested for a number of consignments.
In the case of non-sensitive goods, applicants for Private Bonded Warehouses have to abide by all provisions as pertaining to sensitive goods discussed above, except that the requirement of furnishing a Solvency Certificate has been waived. The applicant, however, should be solvent for Rs. 10 lakhs and should possess a good record. A double duty bond with surety would suffice for storage of non-sensitive bonded goods. In case the Customs are not satisfied about the transactions of a particular bonder, the applicant may be asked to furnish a bank guarantee.[9]
Warehousing Bond (Section 59)[10]: The importer or his representative is required to present to the Customs a Bill of Entry for warehousing under Section 46 and assessed under Section 17 or Section 18 of the Customs Act shall execute a bond for sum equal to thrice the amount of the duty assessed for such goods and to pay all duties and interest payable under sub-section (2) of Section 61 and to pay all fines and penalties incurred for the contravention of any provisions under this Act. The Assistant Commissioner of Customs or Deputy Commissioner of Customs may permit an importer to execute a general bond for such amount as approved by them within a specified period. Additionally, a security has to be furnished by the importer and the bond executed by the importer in respect of any goods shall continue to remain in force even in the case of transfer of goods to another warehouse. 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) on transfer of goods wholly or partly.
Permission of deposit of goods in a Warehouse (Section 60)[11]: This is applicable when the provisions of Section 59 have been complied with respect of any goods whereby the proper officer may make an order permitting the deposit of the goods in a warehouse.
Period for which goods may remain warehoused (Section 61)[12]: The goods deposited in a bonded warehouse may be stored for a period of one year. However, in case of capital goods intended for any 100% export-oriented undertaking, then such goods can be stored for a period of 5 years. The period of warehousing can be extended by the Commissioner of Customs for a period of 6 months and by the Chief Commissioner of Customs for such further period.
In case of granting an extension the following categories of cases are considered if the interests of revenue are not jeopardized:
1. Goods supplied as ship stores/aircraft stores.
2. Goods supplied to diplomats.
3. Goods used in the units operating under manufacture-in-bond scheme.
4. Goods imported by 100% EOUs.
5. Goods warehoused and sold through duty free shops.
6. Machinery, equipment and raw material imported for building and fitment to ships.
These extensions however are not meant to be granted regularly but only under circumstances where the goods have to be kept in the warehouse beyond the control of the importer. In case the warehoused goods are likely to deteriorate, the Commissioner of Customs may reduce the one year’s period of warehousing to such shorter period as he may deem fit.
Control over warehoused goods (Section 62)[13]: The goods deposited in the warehouse shall be subject to control of the proper officer. No person can enter the warehouse without the permission of the proper officer or remove any goods there from. The proper officer may cause the warehouse to be locked with the lock of the Customs Department and no person shall remove or break such lock and the officer shall have access to every part of the warehouse and have the power to examine the goods.
Payment of rent and warehouse charges (Section 63)[14]: The rent has to be paid by the owner of the warehoused goods to the warehouse-keeper at the rates fixed under any law for the time being in force or where no rates are so fixed, at such rates as may be fixed by the Commissioner of Customs. If the rent is unpaid within ten days from the date the warehouse-keeper may after notice to the owner of the warehoused goods and with permission of the proper officer sell a sufficient portion of the goods as the warehouse-keeper may select.
Owner’s right to deal with warehoused goods (Section 64)[15]: The owner of goods may with the sanction of the proper officer and after the payment of prescribed fees inspect the goods, separate damaged or deteriorated goods from the rest, sort the goods and change their containers for the purpose of preservation, sale, export or disposal of goods, deal with goods and their containers in such a manner as may be necessary to prevent loss or deterioration or damage to the goods, show the goods for sale, or take samples of goods without entry for home consumption, and if the proper officer so permits, without payment of duty on such samples.
Manufacture and other operations in relation to goods in a warehouse (Section 65)[16]: The owner of any warehoused goods may carry on any manufacturing process or other operations in the warehouse with the sanction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs and on payment of fees. Where there is any such waste the whole or any part of the goods resulting from such operations are exported, import duty shall be remitted on the quantity of the warehoused goods and if any part of goods resulting from such operation are for home consumption, then import duty shall be charged on the quantity of the warehoused goods.
Power to exempt imported materials used in the manufacture of goods in warehouse (Section 66)[17]: The Central Government by notification in the Official Gazette can exempt duty for the manufacture of goods and the rate of duty leviable on the imported materials exceeds the rate of duty leviable on such goods, if the Central Government is satisfied that in the interests of the establishment or development or development of domestic industry it is necessary to do so.
Removal of goods from one warehouse to another (Section 67)[18]: The owner of goods can remove the goods from one warehouse with the permission from the proper officer subject to conditions as may be prescribed.
Clearance of warehoused goods for home consumption (Section 68)[19]: Goods which are subject for home consumption may be cleared by the importer subject to a bill of entry for home consumption in respect of such goods, goods on which import duty, penalties, rent, interest and other charges have been paid and an order for clearance of such goods for home consumption which has been made by the proper officer.
Clearance of warehoused goods for exportation (Section 69)[20]: Goods can be exported to any place outside India without payment of import duty if a shipping bill or a bill of export has been presented in respect of such goods, the export duty, penalties, rent and other charges payable in respect of such goods have been paid and an order for clearance of such goods has been made by the proper officer. Further, if the Central Government is of the opinion that warehoused goods of any specified description is likely to be smuggled back into India, and then it shall through the Official Gazette direct that such goods shall not be exported to any place outside India without the payment of duty or may be allowed to be exported subject to restrictions.
The following section must be further read with the Warehouse Goods (Removal) Regulations, 2016, whereby the goods removed from one warehouse to another warehouse from a warehouse to a custom station for export, the owner of the goods shall make such a request by filing the Form appended to these regulations. Further, during transport the goods shall be under one-time-lock affixed by the proper officer or the licensee provides that the Principal Commissioner of Customs or Commissioner of Customs, having regards to the nature of the goods allow for transport without affixing the one-time-lock. Upon arrival the owner of the goods shall produce the bond officer or proper officer under Section 60(1) within one month or within such period as the officer may allow. An acknowledgement has to be issued by the bond officer of the warehouse stating that the goods have arrived at the place failing which the owner of the goods shall pay the full amount of duty chargeable on account of such goods together with interest and fines as payable.
Allowance in case of volatile goods (Section 70)[21]: The section applies to goods which have high regards to volatility and the manner of their storage and such volatility shall be mentioned by the Central Government by notification in the Official Gazette. Thus, when any warehoused goods at the time of delivery is found to be deficient in quantity on account of such deficiency then the Assistant Commissioner of Customs or Deputy Commissioner of Customs may remit the duty on such deficiency.
Goods not to be taken out of a warehouse except as provided by the Act (Section 71)[22]: Warehoused goods shall not be taken out of the warehouse except on clearance for home consumption or re-exportation or for removal to another warehouse as provided by the Act.
Goods improperly removed from the warehouse, etc. (Section 72)[23]: The owner of goods shall pay the full amount of duty chargeable on account of goods which have been removed in contravention with Section 71, 61, 64 and 59 together with all penalties, rent, interest and other charges payable in respect of such goods when a proper officer demands for it.
Cancellation and return of warehousing bonds (Section 73)[24]: 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 as per Section 59 and has been cleared for home consumption or export is entitled to receive it.
General power to make regulations
Section 157 of the customs Act, 1962[25] empowered the Central Government of Board to make regulations consistent with this Act and rules to carry out the purpose of this Act. Accordingly, the Central Government / Board made the following regulations for the smooth operation of warehouse to facilitate imported goods and goods meant for export:[26]
1. Private Warehouse licensing regulations, 2016,
2. Public Warehouse licensing regulations, 2016,
3. Special Warehouse licensing regulations, 2016,
4. Warehoused Goods (Removal) regulations, 2016,
5. Special warehouse (Custody and Handling of Goods) Regulations, 2016,
6. Warehouse (Custody and handling of Goods) Regulations, 2016.
Conclusion
The above paper deals with the various provisions related to provisions of Warehousing under the Customs Act, 1962. The article highlights the various sections which have been incorporated under the Act to regulate the process of Warehousing for goods. The act lays down provisions for the appointment and licensing of public and private warehouses respectively along with the specific time period for which the goods may remain in these warehouses. The process of licensing and supervision of these warehouses have been delegated to the Chief Commissioner of Customs and other such officer. The act further lays down the type of bonds that must be secured from the owner of the goods to allow them use the warehouse. The rules are stricter in case of storage of sensitive goods such as liquor, cigarettes, foodstuffs and consumables.
Warehousing bonds form an important part of warehousing operations and the importer or his representatives are required to execute a bond for a sum equal to thrice the amount of the duty assessed for such goods and pay all duties and interest payable under sub-section (2) of Section 61. These bonds can also be cancelled by the proper officer under Section 73 of the Act. The goods can only be allowed to be deposited in a warehouse if there is compliance with Section 59 of the Act. The period for which such bonded goods can be kept at a warehouse is one year and for capital goods which are 100% export-oriented can be stored for a period of five years. This period can be extended by the Chief Commissioner of Customs for a period of 6 months only where the goods kept in the warehouse is beyond the control of the importer.
The goods in a warehouse are under the control of a proper officer and proper rent has to be paid by the owner of the warehoused goods to the warehouse-keeper as per the rates fixed. The owner of the goods can also inspect the goods or deal with them however permission is required from the proper officer. The owner of the goods can manufacture these warehoused goods in the warehouse with a sanction from the Assistant Commissioner of Customs or Deputy Commissioner of Customs and on payment of fees. The Central Government has powers to exempt imported materials used in manufacture of goods and the owner has to follow proper regulations in order for removal of goods from the warehouse. In case of any contravention by the owner he has pay all penalties, rent, interest and other charges payable in respect of such goods when a proper officer demands for it. In case of goods with high volatility, it has to be mentioned by the Central Government through the Official Gazette. Further, under Section 157 of the Act, the Central Government is empowered to make regulations which are consistent with the act. There are several legislations that have been enforced to ensure that the process of warehousing runs seamlessly. Hence, the following provisions of warehousing under Customs Act have been dealt accordingly in the present paper.
[1] Kristina Lopienski, What is warehousing? ShipBob’s guide to Warehousing Solution and Logistics, ShipBob (May 5, 2021, 10:14 PM), https://www.shipbob.com/blog/warehousing/
[2] Smuruthi Kesavan, What is warehousing?, Zoho (May 5, 2021, 10:54 PM), https://www.zoho.com/inventory/guides/what-is-warehousing.html
[3] Neeraj Prasad, Warehousing provisions under Indian Customs Law, Tax and Regulatory Affairs (Jul. 4, 2012), https://taxandregulatoryaffairs.wordpress.com/2012/07/04/warehousing-provisions-under-indian-customs-laws/
[4] How to Export Import, https://howtoexportimport.com/Warehousing-of-Imported-Goods-4628.aspx (last visited May 7, 2021)
[5] The Customs Act, 1962, § 57, No. 52, Acts of Parliament, 1962 (India).
[6] Neeraj Prasad, Warehousing provisions under Indian Customs Law, Tax and Regulatory Affairs (Jul. 4, 2012), https://taxandregulatoryaffairs.wordpress.com/2012/07/04/warehousing-provisions-under-indian-customs-laws/
[7] The Customs Act, 1962, § 58, No. 52, Acts of Parliament, 1962 (India).
[8] Ministry of Finance, General Circular No. 99/95 (Issued on September 20, 1995).
[9] EximGuru, http://www.eximguru.com/exim/indian-customs/customs-manual/warehousing.aspx#licensing_of_private_bonded_warehouses:_ (last visted May 11, 2021).
[10] The Customs Act, 1962, § 59, No. 52, Acts of Parliament, 1962 (India).
[11] The Customs Act, 1962, § 60, No. 52, Acts of Parliament, 1962 (India).
[12] The Customs Act, 1962, § 61, No. 52, Acts of Parliament, 1962 (India).
[13] The Customs Act, 1962, § 62, No. 52, Acts of Parliament, 1962 (India).
[14] The Customs Act, 1962, § 63, No. 52, Acts of Parliament, 1962 (India).
[15] The Customs Act, 1962, § 64, No. 52, Acts of Parliament, 1962 (India).
[16] The Customs Act, 1962, § 65, No. 52, Acts of Parliament, 1962 (India).
[17] The Customs Act, 1962, § 66, No. 52, Acts of Parliament, 1962 (India).
[18] The Customs Act, 1962, § 67, No. 52, Acts of Parliament, 1962 (India).
[19] The Customs Act, 1962, § 68, No. 52, Acts of Parliament, 1962 (India).
[20] The Customs Act, 1962, § 69, No. 52, Acts of Parliament, 1962 (India).
[21] The Customs Act, 1962, § 70, No. 52, Acts of Parliament, 1962 (India).
[22] The Customs Act, 1962, § 71, No. 52, Acts of Parliament, 1962 (India).
[23] The Customs Act, 1962, § 72, No. 52, Acts of Parliament, 1962 (India).
[24] The Customs Act, 1962, § 73, No. 52, Acts of Parliament, 1962 (India).
[25] The Customs Act, 1962, § 157, No. 52, Acts of Parliament, 1962 (India).
[26] Dinesh Verma, Warehousing / Bonded Movement under Customs Act, 1962 & Provisional Assessment, Tax Guru (May 12, 2021, 5:20 PM), https://taxguru.in/custom-duty/warehousing-bonded-movement-customs-act-1962-provisional-assessment.html
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