Manufacture in bonded warehouse :

As mentioned earlier warehousing was considered in the initial stage as a device for:

(i) temporary storage of imported goods which were intended to be ultimately exported out of India;

(ii) piecemeal clearance of imported goods, for home consumption to suit importer’s requirements.

As an improvement of the above facilities, certain operations were permitted to be carried out in the bonded warehouse itself before export of the goods. Gradually, this concept was extended to deliberate importation of raw materials, manufacture of goods in the bondedwarehouse and final export of the finished  goods out of India. In this scheme of things there was no:

(i) effective import of goods and clearance of goods for home consumption, involving payment of import duty of customs; and

(ii) effective export from the town, involving drawback of import duty etc. There was no problem or difficulty in ensuring the identity of the goods. There was also full security over the import duty otherwise payable on the imported goods through the medium of the warehousing double entry bond.

It may not be incorrect to say that this concept further evolved into the concept of Free Trade Zones within or adjacent to the customs area in the port, and subsequently extending this facility to interior places as an adjunct to inland bonded warehouses and finally evolving the concept of 100% Export Oriented Undertakings.

Statutory Provisions: The statutory provisions relating to the manufacture in the bonded warehouse are contained in sections 65 and 66 of the Customs Act, 1962. Now we can discuss the statutory provisions in detail.