Introduction on Warehousing :

The concept of warehousing is a trade practice involving trade off between (a) the economics of importation and (b) the quantitative requirement of the importer at any given point of time. Warehousing is resorted to in case where the importer does not want to clear the goods immediately due to lack of storage facilities or in case of arrival of shipment much earlier than planned or in case of working capital issues. When goods are warehoused, no customs duty is payable on such goods at such point of time. Section 57 to 73 deals with warehousing provisions. This facility is available to traders as well as to direct importers.

For instance, the requirements of the importer at any given point of time is 50 tonnes. In case the supplier does not agree to sell that much quantity or the freight is not economical, the importer, in these circumstances, is forced to place an order for 200 tonnes. As soon as the goods are imported, duty has to be assessed on them. Therefore, instead of clearing the whole consignment the importer is allowed to clear the consignment in convenient lots after paying appropriate duty on that particular portion that is cleared. During the intervening period, the goods are held in custody in a place called warehouse. The consideration the importer is required to pay for this facility was that :-

(i) he should bind himself to pay to the government a sum equal to double the amount of total duty determined, with such surety or security as may be required (this is known as double duty bond) and

(ii) he should agree to pay duty on the goods cleared from such warehouse at the rate of duty and valuation prevalent on the date on which a bill of entry in respect of such goods is presented.

This facility is also necessary in another situation. Ship stores like liquors, cigarettes, preserved food were imported into India and supplied to vessels according to their requirements. The entire consignment imported is intended to be so shipped out of the country. The same was the case of fuel for the ship like furnace oil, diesel oil etc. Obviously there was no point in collecting import duty on the whole of the consignment and granting drawback piecemeal as and when such goods were exported. It was not also safe for the revenue point of view to allow such goods to lie in the port uncleared until they are exported/shipped as shipstores.