Warehousing – Advanced Tax Laws and Practice Important Questions
What is the difference between private warehouses and public warehouses under Customs law?
A Warehouse is a designated area where goods are allowed to be stored after landing, without payment of duty. A public warehouse is appointed under section 57 and a Private warehouse is licensed under section 58 of the Customs Act, 1962.
|Private Warehouse||Public Warehouse|
|Licensed by the CBIC||Appointed by the CBIC|
|Owned by the owner of goods||Managed by warehousing corporations|
|Only goods of owners can be deposited||Goods of any person can be deposited|
|The license can be canceled for violation of warehousing provisions.||No question of cancellation of license.|
AB Ltd. imported Super Kerosene Oil (SKO) and stored it in a warehouse. An ex-bond bill of entry for home consumption was filed and duty was paid as per the rate prevalent on the date of presentation of such bill of entry and the order for clearance for home consumption was passed. On account of the highly combustible nature of SKO, the importer made an application to permit the storage of such kerosene oil in the same warehouse until actual clearance for sale/use. The application was allowed. However, the rate of duty increased when the goods were actually removed from the warehouse. The department demanded the differential duty. The company challenged the demand. Whether it will succeed? Discuss briefly, taking support of decided case(s), if any.
Yes, the Company will succeed.
The facts of the given situation are similar to the case of CCus. v. Biecco Lawrie Ltd. 2008 (223) ELT 3 (SC) wherein the Supreme Court has held that where duty on the warehoused goods is paid and out of charge order for home consumption is made by the proper officer in compliance with the provisions of section 68, the goods allowed to be retained for storage in the warehouse as permitted under Section 49 of the Customs Act are not treated as warehoused goods and importer would not be required to pay anything more.
Section 49 of the Customs Act, 1962 inter alia provides that imported goods entered for home consumption if stored in a public warehouse, or in a private warehouse on the application of the importer and if the same cannot be cleared within a reasonable time, shall not be deemed to be warehoused goods for the purposes of this Act, and accordingly the provisions of Chapter IX shall not apply to such goods.
Explain the validity of the following statements with reference to Chapter IX of the Customs Act, 1962 containing the provisions relating to the warehousing:
- The proper officer is not authorized to lock any warehouse with the lock of the Customs Department.
- The Commissioner of Customs (Appeals) may appoint public warehouses wherein dutiable goods may be deposited.
- The Commissioner of Customs or Principal Commissioner of Customs is not required to give notice to the licensee for cancellation of the license of a private warehouse if he has contravened any provision of the Customs Act, 1962.
(1) The given statement is invalid:
As per section 58A(1) of the Customs Act, 1962 the Principal Commissioner of Customs or Commissioner s of Customs may subject to such conditions as may be prescribed, license a special warehouse wherein dutiable goods may be deposited and such I warehouse shall be caused to be locked by the proper officer and no person j shall enter the warehouse or remove any goods therefrom without the 2 permission of the proper officer.
(2) The given statement is invalid:
The Commissioner of Customs or the Principal Commissioner of Customs can appoint a public warehouse, wherein dutiable goods can be deposited under section 57 of the Customs Act, 1962.
(3) The given statement is valid:
The Commissioner of Customs or the Princi¬pal Commissioner of Customs is not required to give notice to the licensee while canceling the license of a private warehouse if he has contravened any provision of the said Act, as per section 58(2)(b) of Customs Act, 1962.
Balaram imported certain goods in November 2020 and an ‘into bond’ bill of entry was presented on 28th November 2020. Assessable value was US $1,00,000. The order permitting the deposit of goods in the warehouse for 3 months was issued on 2nd Dec. 2020. Balaram neither obtained an extension of the warehousing period nor cleared the goods within the permitted warehousing period of 1st March 2021. Only after a notice was issued under section 72 of the Customs Act, 1962 demanding duty and other charges, Bholaram removed the goods on 15th April 2021.
Compute the amount of duty payable by Bholaram while removing the goods from the warehouse, assuming that no additional duty or special additional duty is payable. You are supplied with the following information:
|Rate of exchange per USD||₹ 56||₹ 55||₹ 54|
|Rate of basic customs duty||15%||10%||5%|
Computation of customs duty payable by Bholaram
|Assessable Value in US$||1,00,000|
|Rate of Exchange (As per section 14 of the Customs Act, the rate of exchange in force on the date of presentation of Bill of Entry for warehousing shall apply. Hence, the rate in force on 28.11.2020 would apply.)||₹ 56 per US$|
|Rate of duty (Since goods remained in the warehouse beyond the permitted period, hence, as per section 72, they are deemed to be removed on expiry of warehousing period on 1.3.2021. Hence, the rate of duty in force on the date of such deemed removal would apply as per Kesoram Rayon (SC) and SBEC Sugars (SC)||10%|
|Basic Customs Duty @ 10% of Assessable Value (₹ 56,00,000 × 10%)||₹ 5,60,000|
|Add: Social Welfare Surcharge||₹ 56,000|
|Total Customs Duty payable||₹ 6,16,000|
Quoting the relevant provisions of the law, state the relevant dates for determining:
- Rate of duty, when warehoused goods are removed for home consumption.
- Rate of duty, if the warehoused goods are not removed from the warehouse within the permissible period.
(1) As per section 15(1)(&) of the Customs Act, 1962, rate of duty as prevalent on the date of presentation of Bill of Entry for clearance for home consumption from the warehouse is applicable and not the rate prevalent when goods were removed from customs port.
(2) Goods that are not removed within the permissible period are deemed to be improperly removed on the day they should have been removed. Thus, duty applicable on such date i.e., the last date on which the goods should have been removed is relevant and not the date on which the goods were actually removed.
Explain briefly how the terms ‘warehouse’, ‘warehoused goods’, and ‘warehousing station’ are defined in the Customs Act, 1962.
As per section 2(43) of the Customs Act, 1962 ‘warehouse’ means a public warehouse licensed under section 57 or a private warehouse licensed under section 58, or a special warehouse licensed under section 58A. Section 2(44) of the Customs Act, 1962 defines “warehoused goods” to means goods deposited in a warehouse. As per section 2(45) of the Customs Act, 1962 “warehousing station” means a place declared as a warehousing station under section 9 of the Act.
- Licensing of Public warehouses, Private warehouses and Special warehouses.
- Warehousing Bond – Triple duty bond to be executed.
- Warehousing Period:
a. For Capital goods and other than capital goods intended for use in 100% EOU, EHTP, STP, or any warehouse wherein manufacture or other operations have been permitted – Till their clearance from the warehouse.
b. For any other goods: Till expiry of 1 year from the date on which the proper officer has made an order under section 60( 1).
- Interest in case of warehoused goods: Applicable when goods are in the warehouse beyond a period of 90 days till the date of payment of duty on the warehoused goods. It is at 15% p.a.
- Rights of an owner to deal with warehoused goods
- Removal of goods from a warehouse
- Remission of duty in case of volatile goods
- Improper removal of goods from warehouse