Circular No. 48 /2020-Customs Dated 27/10/2020
Manufacturing and other operations undertaken in bonded warehouses under Section 65 of the Customs Act, 1962-
Section 65 of the Customs Act,
1962 provides that the owner of any warehoused goods may carry on any
manufacturing process or other operations in the warehouse in relation to such
goods, with the permission of the Principal Commissioner of Customs or
Commissioner of Customs and subject to such conditions as may be prescribed.
Manufacture and Other Operations in Warehouse (no.2) Regulations 2019, were
issued vide Notification No.69/2019-Customs (N.T.) dated 01.10.2019, hereinafter
referred to as, “MOOWR, 2019” prescribing the procedure, documentation and
compliances to be followed under Section 65 of the Customs Act, 1962.
2. Board has from time to time received suggestions and requests from members of
the trade and industry on the scheme of Manufacturing and other Operations in a
Warehouse under Section 65 of the Customs Act, 1962. The requests revolve around
making the scheme more investor friendly and seeking more clarity with regard to
certain aspects. A Committee was therefore constituted by the Board to study the
provisions of Section 65 of the Customs Act, 1962 and the regulations issued
there under and make recommendations for consideration of the Board. The
committee has since submitted its report.
3. The issues raised by the trade and the recommendations of the Committee have
been examined. To bring in greater regulatory clarity and certainty for
investors, Board has decided to clarify the following issues:
(i) Job work for a Section 65 unit: Trade has sought clarity on the goods
eligible to be sent for job work and the procedure to be followed for removal of
goods for job work by a Section 65 unit.
Clarification:
Circular No. 34/2019-Customs dated 1st October 2019 had provided, in Annex B
(Form to be maintained by a unit operating under section 65 of the Customs Act,
1962 for the receipt, processing and removal of goods) for removal of goods from
a Section 65 unit for job work and receipt after job work, as part of the
manufacture or other operations. Thus, only inputs are allowed to be sent out
from a Section 65 unit for job work. The capital goods can be sent outside the
Section 65 unit for repair, with the permission of the bond officer.
The job work shall be subject to the following conditions:
(i) The goods upon import should be first deposited in the Section 65 premises
and duly accounted for before the same is sent for job work.
(ii) It should be possible to establish the identity/ correlate the goods after
job work with those sent for job work.
(iii) On completion of the job work, the goods can be brought back to the
Section 65 unit or exported/ cleared to DTA from the job worker’s premises. In
case the goods are exported/ cleared to DTA from the job worker’s premises, the
procedure as per Regulations 14 and 15 of MOOWR 2019, as applicable shall be
followed and the date of removal from job workers premise shall be deemed to be
the date of removal from the warehouse.
(iv) Scrap, waste or remnants generated during the job work shall be either
returned to the Section 65 unit or cleared from job-worker's premises on payment
of applicable duties.
(v) The procedure and timeline for the return of goods sent for job work under
Section 65 unit will be in line with GST provisions, as the Section 65 Unit is
also a GST registrant.
(vi) The account to be maintained under Circular No. 34/2019-Customs dated 1st
October 2019 will be kept updated as regards job work at all times.
Trade has also requested that moulds, jigs, tools, fixtures, tackles,
instruments, hangers, patterns and drawings be allowed to be sent to the job
workers premises for use in the job work. Considering the nature of goods sought
to be removed from a Section 65 unit for the purposes of job work, Board has
decided to allow the said goods viz moulds, jigs, tools, fixtures, tackles,
instruments, hangers, patterns and drawings to be sent to the premises of a job
worker, subject to due accounting of the goods by the Section 65 unit in the
account specified. Such goods will be used by the job worker exclusively for the
concerned Section 65 unit. The procedure and timeline will be in line with the
GST provisions.
It may also be noted that the bond to be executed by a Section 65 unit,
prescribed through the aforementioned circular, stays in full force
notwithstanding the removal of goods for job work from a Section 65 unit.
In case of violation of any of the above provisions, the goods shall be deemed
to be cleared for home consumption on the date of clearance of the goods for job
work. The applicable duties, interest and penalties shall be reckoned
accordingly.
(ii) Job work for others
by a Section 65 unit: Trade has sought clarity on
whether the Section 65 unit can itself carry out job work for other units and
the procedure to be followed for the same.
Clarification: The issue has been examined with a view to enhance
capacity utilization and acknowledging the realities of manufacturing
environment where various units support each other in producing the final
product. It is clarified that a Section 65 unit being a GST registered unit, can
perform job work operations and shall maintain due accounting of such job work
as per the provisions of GST law.
In case any imported inputs which are warehoused are consumed during the job
work process, duty shall be paid on such goods (i.e. the warehoused goods) by
filing Ex-Bond Bill of Entry, when such job worked goods are returned to the
principal/owner. In case the goods after job work are exported from the premises
of the Section 65 unit, the import duty on the warehoused goods used for the job
work need not be paid as per section 69 of the Customs Act, 1962.
(iii) Whether a Section 65 unit can procure goods from FTWZ: Circular
34/2019-Customs dated 1st October 2020, does not explicitly mention sourcing of
goods from FTWZ. Hence there is apprehension on whether such sourcing is
allowed.
Clarification: Vide para 14 of Circular No. 34/2019-Customs dated 1st
October 2020, Board has clarified that the objective of Section 65 is to enable
manufacture and other operations in customs bonded warehouses. For this purpose,
the units should be able to procure required raw materials, consumables, capital
goods etc., imported or procured from domestic market.
There are no restrictions imposed on sourcing of goods by units operating under
Section 65. Moreover, the units are GST registrants, which are also allowed to
procure goods from SEZ/FTWZs. In view of the foregoing, it is clarified that a
Section 65 unit may source capital goods or inputs from a SEZ/FTWZ, following
the applicable procedures.
4. The above provisions may be given wide publicity through issue of Public
Notices.
5. Any difficulties faced in the implementation of this Circular may please be
brought to the notice of Board.
6. Hindi version follows.
Yours faithfully,
(Temsunaro Jamir)
Additional Commissioner (ICD)