What Are the Compliance Penalties Under MOOWR? (2026)

MOOWR penalties are not a single sanction. They range from interest on warehoused goods to deemed clearance of goods you still hold, enforcement of the triple duty bond, and cancellation of the licence itself under the Customs Act, 1962.

The severity depends on which provision is engaged, and the harshest one operates retrospectively. Understanding which is which is the difference between a manageable correction and a crystallised liability.

The Deemed Clearance Penalty on Job Work

This is the most unforgiving of the MOOWR penalties. Where any of the prescribed job work conditions is violated, the goods are deemed to have been cleared for home consumption on the date they were cleared for job work.

Duty, interest, and penalties are reckoned from that earlier date, not from the date the breach is discovered. Months of interest can accrue before anyone notices. The bond executed by the Section 65 unit stays in full force notwithstanding the removal of goods for job work.

MOOWR Penalties: Two Interest Rates, Not One

Interest under Section 61(2) applies to goods that remain warehoused beyond ninety days without being put to manufacture. It runs at the rate notified by CBIC, presently 15 per cent per annum, on the duty payable at clearance.

A higher rate of 24 per cent applies where duty is demanded on contravention of the conditions of the warehousing bond under Section 59. The distinction is deliberate. Deferment is a facility, and abusing it attracts a steeper charge than simply holding goods too long.

Improper Removal Under Section 72

Where warehoused goods are removed in contravention of Section 71, where goods are not removed at the expiry of the permitted warehousing period, or where goods covered by a Section 59 bond are not duly accounted for to the satisfaction of the proper officer, the position is serious.

The proper officer may demand, and the owner shall forthwith pay, the full amount of duty chargeable on those goods together with interest, fine, and penalties. This is a forthwith demand, not a routine assessment.

MOOWR Penalties Leading to Cancellation

Section 58B empowers the Principal Commissioner or Commissioner to cancel a licence granted under Section 57, 58, or 58A where the licensee contravenes the Act, the rules or regulations, or breaches a condition of the licence.

Operations may also be suspended pending inquiry, during which no fresh goods may be deposited, though the warehousing provisions continue to apply to goods already inside. On cancellation, warehoused goods must be removed within seven days.

The Protection You Have Against Cancellation

Cancellation is not automatic. Before any licence is cancelled, the licensee must be given notice of the alleged contravention and a reasonable opportunity of being heard. That is a statutory proviso, not a courtesy.

Cancellation is also a quasi-judicial function. The Delhi High Court has held that the power under Section 58B sits independently with the customs officer, and that the Board cannot direct how a quasi-judicial authority decides a particular case. A cancellation notice flowing from an administrative directive rather than an independent finding on your facts is contestable.

Common Breaches That Trigger MOOWR Penalties

In practice the causes are mundane:

• Late or missing monthly returns under Regulation 17.
• Stock mismatches between physical inventory and the Annexure B accounts.
• Unauthorised removal of warehoused or resultant goods.
• Operating beyond the declared scope of manufacture or other operations.
• Sending capital goods to a job worker, which is not permitted.
• Failure to correlate inputs sent for job work with goods received back.

The Bond Is the Enforcement Instrument

Behind most MOOWR penalties sits the triple duty bond executed under Section 59, in a sum equal to thrice the duty assessed. It binds the importer to comply with the Act, to pay duties and interest under Section 61(2), and to pay all fines and penalties incurred.

Where dues are not paid, the bond is invoked to recover them. A bond that has been carelessly debited and re-credited across transfers is a liability of its own at audit.

How JPARKS INDIA Helps

At JPARKS INDIA, we keep Regulation 17 returns current, reconcile stock against the Annexure B accounts, structure job work so the deemed clearance provision is never engaged, and respond to notices under Section 58B where cancellation is threatened. Having served 500+ importers and exporters since 2018, we keep bonded facilities out of the penalty regime. Learn more about our MOOWR scheme services or book a free consultation.

Frequently Asked Questions

Q1. What are the compliance penalties under MOOWR?

They include interest under Section 61(2), deemed clearance of goods on job work breaches, forthwith duty demand under Section 72, enforcement of the Section 59 bond, and cancellation of the licence under Section 58B.

Q2. What happens if job work conditions are breached?

The goods are deemed to have been cleared for home consumption on the date they were cleared for job work. Duty, interest, and penalties are reckoned from that date, not from discovery of the breach.

Q3. What interest rate applies on a MOOWR breach?

Interest under Section 61(2) runs at the notified rate, presently 15 per cent. A higher rate of 24 per cent applies where duty is demanded on contravention of the warehousing bond under Section 59.

Q4. Can my MOOWR licence be cancelled without a hearing?

No. Before cancellation under Section 58B, the licensee must be given notice and a reasonable opportunity of being heard. Cancellation is a quasi-judicial function exercised independently by the customs officer.

Q5. What happens to goods if the licence is cancelled?

They must be removed within seven days of the cancellation order being served, or an extended period allowed, either to another warehouse, for home consumption on payment of duty, or for export.

Related guides

• Start here: What is the MOOWR Scheme in Customs?
• Can Customs Revoke MOOWR Approval? (2026 Guide)
• Is the MOOWR Scheme Shutting Down or Facing Changes? (2026)
• MOOWR Implementation Challenges: What Companies Face (2026)
• Disadvantages of the MOOWR Scheme: The Real Costs (2026)

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