The CBIC has issued a Notification No. 75/2020-Customs (N.T.) dated August 17, 2020 on Manufacture and Other Operations in Special Warehouse Regulations, 2020 ( “the MOOSWR, 2020”). These regulations will 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 May 14, 2020 (“specified goods”).
CBIC vide Circular No. 36/2020 – Customs dated August 17, 2020 laid down the procedures and documentation for section 58A warehouse, operating under Section 65 of the Customs 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.
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 Application for such warehouse operating under section 65 for the sake of uniformity, ease of doing business and exercising due diligence the form of application to be filed by an applicant before the jurisdictional Principal Commissioner / Commissioner of Customs is prescribed as in :
- An applicant desirous of manufacturing or carrying out other operations on specified goods in a bonded warehouse under section 65, must have the premises licensed as a special warehouse under section 58A of the Customs Act.
- The 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.
- 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 II).
- 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.
- The licensees manufacturing or carrying out other operations in a bonded warehouse shall be required to maintain records in Annexure B.
- 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.
- Annexure C 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.
The Regulation of the Special Warehouse Licensing Regulations, 2016 and MOOSWR 2020 are as follows:
- As per Regulation 3(2)(e)(i) of the Special Warehouse Licensing Regulations, 2016, the Principal Commissioner or Commissioner has to be satisfied that the site or building of the proposed special warehouse is suitable for secure storage of dutiable goods.
- 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.
- The Principal Commissioner or Commissioner has to ensure that the structure is fully closed from all sides, gate(s) with access control and personnel to safeguard the premises.
- 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 the designation based official email id accessed by the bond officer. Appointment of any new warehouse keeper should also be intimated along with the monthly returns.
- Jurisdictional Commissionerate should ensure that such emails are functional and details of same are communicated at the time of issuance of license and also published through public notice.
- 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 should record the observations and confirm that the new software meets the requirements of Regulation 18(3).
- 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 MOOSWR, 2020. This will not apply to the remaining licensed premises.
- 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.
- The Principal Commissioner / Commissioner shall evaluate the projected requirement and also consider the distance of the warehouse from the customs office to determine which of the modes of recovery of costs needs to be applied and the amount to be paid by the licensee.
The Circular can be accessed at: https://www.cbic.gov.in/resources/htdocs-cbec/customs/cs-circulars/cs-circulars-2020/Circular-No-36-2020.pdf