Procedure to be followed in cases of manufacturing or other operations undertaken in special warehouses under section 65 of the Customs Act - Customs - PUBLIC NOTICE No. 29/2020

OFFICE OF THE COMMISSIONER OF CUSTOMS (EXPORT) Air Cargo Export, New Customs House, Near IGI Airport: New Delhi- -110037 C. No: VIII/12/ACE/Tech/PN/06/2020-21/4106 to 4135 Date:-27.08.2020 PUBLIC NOTICE No. 29/2020 Sub: - Procedure to be followed in cases of manufacturing or other operations undertaken in special warehouses under section 65 of the Customs Act -reg Attention of the Exporters, Importers, Customs Brokers and all other stakeholders is invited towards Circular No. 36/2020-Customs dated 17.08.2020 issued by CBIC on the above mentioned subject. 2. Manufacture and Other Operations in Special Warehouse Regulations, 2020(hereinafter referred to as the MOOSWR, 2020) have been issued vide Notification No.75/2020-Customs (N.T.) dated 17th August, 2020. These regulations allow manufacturing and other operations in a special warehouse licensed under section 58A of the Customs Act, 1962,with regard to warehoused goods specified in clause (1) of Notification No. 66/2016- Customs(N.T) dated 14th May, 2016 (herein after referred to as, specified goods ). 3 MOOSWR, 2020 cover the procedures and documentation for a section 58A warehouse, operating under Section 65 of the Act, in a comprehensive manner including application for seeking permission under section 65, provision of execution of the bond and security by the licensee, receipt, storage and removal of goods, maintenance of accounts, conduct of audit etc. 4. Further, the Special Warehouse (Custody and Handling of goods) Regulations, 2016,which were hitherto governing the procedure for custody and handling of goods deposited in and removed from a Special Warehouse have been amended, vide Notification No. 77/2020-Customs (N.T) dated 17th August, 2020, to exclude their application for such warehouses operating under section 65. The said regulations will continue to be applicable for special warehouses, not operating under Section 65. 5. An applicant desirous of manufacturing or carrying out other operations on specified in bonded warehouse under section 65 must have the premises licensed a special warehouse under section 58A of the Customs Act. applicants can seek a license under section 58A and permission to operate under section 65 synchronously, or request for permission under section 65, if they already have a warehouse licensed under section 58A. 6. For the sake of uniformity, ease of doing business and exercising due diligence in grant of permission under section 65, the form of application to be filed by an applicant is prescribed as in Annexure A (enclosed). The form of application has been so designed that the process for seeking grant of license as a Special Warehouse as well as permission to carry out manufacturing or other operations stands integrated into a single form. The declaration to be made to satisfy regulation 5 of Special Warehouse Licensing Regulations, 2016, and the undertaking to be made by the applicant as per regulation 4 of MOOSWR, 2020, is included in the application format (Part Il). 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. 7. It has also been decided that the licensees manufacturing or carrying out other operations in a bonded warehouse shall be required to maintain records as per the form prescribed under this circular Annexure B (enclosed). Regulation 4 of the MOOSWR, 2020, provides that the applicant under section 65 shall undertake to execute a bond in such format as specified. Further, Section 59 of the Customs Act requires the importer of the warehoused goods to furnish security and execute a triple duty bond for the warehoused goods. Thus, the bond prescribed under this Circular as per Annexure C (enclosed) serves the requirements of both MOOSWR, 2020 and Section 59 of the Customs Act. Additionally, the licensee will furnish security by way of a bank guarantee equivalent to the duty involved on the warehoused goods. 8. To the extent that the resultant product manufactured or worked upon in a bonded warehouse is exported, the licensee shall have to file a shipping bill and pay any amounts due. A GST invoice shall also be issued for such removal. In such a case, no duty is required to be paid in respect of the imported goods contained in the resultant product as per the provisions of section 69 of the Act. 9 .To the extent that the resultant product (whether emerging out of manufacturing or other operations in the warehouse) is cleared for domestic consumption, such a transaction squarely falls within the ambit of supply under Section 7 of the Central Goods and Service Tax Act, 2017 (hereinafter referred to as the CGST Act ) It would therefore be taxable in terms of section 9 of the CGST Act. or section 5 of the Integrated Goods and Services Tax Act, 2017 depending upon the supply being intra-state or inter- state. The resultant product will thus be supplied (rom the warehouse to the domestic tariff under the covet of GST invoice on the payment of appropriate GST and compensation cess, if any. As regards import duties payable on the imported goods contained in 90 much of the resultant products are concerned, same shall be paid at the time of supply of the resultant product from the warehouse for which the licensee shall have to file an ex-bond Bill of Entry and such transactions shall be duly reflected in the accounts prescribed under Annexure B (enclosed). As per MOOSWR, 2020, the applicant shall also inform the input-output norms for raw materials and final products and shall also inform the revised input-output norms in case of change therein. 9.1 The proper officer shall ensure that the goods so cleared are result of manufacturing or other operations. In case the licensee is unable to carry out any manufacturing or other operations on warehoused goods, then the goods may be cleared as such, either for home consumption after the payment of applicable import duties along with the interest accrued upon such goods in terms of Section 61 (2) of the Customs Act, 1962 or may be exported. In such case the provisions of clause (b) of Section 61 (1) shall not be applicable. 10. The waste generated during the course of manufacture or other operations of the resultant product may be cleared for home consumption as per clause (b) to sub-section (2) of section 65 of the Customs Act on payment of applicable duties of customs and GST. 11. Where the resultant product is exported, and duty on the waste or refuse is paid as per proviso to clause (a) to sub-section (2) of section 65, the same shall be deposited manually through a Challan. The records maintained as per Annexure-B (enclosed) would be sufficient for accountal of such goods. 12. Regulation 3 (2) (e) (i) of the Special Warehouse Licensing Regulations, 2016, requires the applicant to provide the details of site or building of the proposed special warehouse suitable for secure storage of dutiable goods to the satisfaction of the Commissioner of Customs, Air Cargo Export, New Customs House, New Delhi. Regulation 8 of MOOSWR 2020 requires the licensee to provide such facilities, equipment and personnel as are sufficient to control access to the warehouse, provide secure storage of the goods and ensure compliance to the regulations. Considering the nature of goods to be warehoused in a special warehouse, the applicant has to ensure to the satisfaction of the Commissioner of Customs, Air Cargo Export, New Customs House, New Delhi that the structure is fully closed from all sides, has Titgate(s) with access control and personal to safeguard the premises, It is to be ensured that there CCTV cameras at the gate(s) and there is a provision of accessing the same by customs officers. The applicant shall make ensure the Proper facilities. equipment and personnel put in place for secure storage of goods to the satisfaction of the Commissioner for considering grant of licence, Further. office space for bond officer and sufficient space for customs officer for carrying out examination At the time of arrival or removal Of goods have to be provided. 13. As per Regulation 4(2) (i) of MOOWSR 2020, a licensee is required to maintain accounts of receipt and removal of goods in digital form in such format as may be specified and furnish the same to the bond officer on monthly basis digitally. This information shall be communicated from the registered email address of a licensee to email Id [email protected]. Appointment of any new warehouse keeper should also be intimated along with the monthly returns. 14. As per Regulation 18(3), the records should be maintained electronically using software which has inter alia features of audit trail and with each event being recorded with time stamp. The licensee is also required to provide details of such software while applying in terms of MOOSWR 2020. At the time of inspection, the proper officer should, through a demonstration, check and ensure that the software meets the requirements of Regulation 18(3). In case licensee wishes to use any other software after issuance of license, bond officer should be informed in advance along with similar demonstration. Proper officer shall record the observations and confirm that the new software meets the requirements of Regulation 18(3). 15. Section 58A provides that the proper officer shall cause a warehouse licensed under section 58A to be locked and no person shall enter the warehouse except in his presence. It is clarified that this requirement shall be applicable for the strong-room where specified goods are warehoused, in terms of regulation 9 of MOOS W R, 2020. This will not apply to the remaining licensed premises. 16. The services of customs officer for supervising various activities prescribed in the MOOSWR, 2020, shall be chargeable on cost recovery or overtime basis, in terms of regulation 4(2)(vi). The licensee shall have to indicate the frequency with which the warehouse has to be operated per day / per week and the expected business hours of such operation, requiring supervision/presence of the bond officer in terms of MOOSWR, 2020. 16.1 A licensee is required to provide all relevant documents and information to the Commissioner of Customs, Air Cargo Export, New Customs House, New Delhi including the distance of the warehouse from the customs office for the purpose of evaluating the projected requirement and to determine which of the mode of recovery of costs needs to be applied and the amount to be Paid by the licensee. 17. For departmental officers, this Shall be treated aq Standing order. 18. Difficulties if Any should be brought to the notice of the Additional Commissioner (Air Catgo Export) New Customs House, New Delhi. This issues with the approval of the Commissioner, Air Cargo Export, NCH, New Delhi. (K.R. Madhar) Additional Commissioner Air Cargo Export