Section 58 and Section 65 of the Customs Act, 1962 sit in Chapter IX and together form the legal basis of the MOOWR scheme. Section 58 licenses a private bonded warehouse. Section 65 permits manufacture and other operations on the goods warehoused in it. A unit needs both.
The two sections do not operate alone. Four instruments govern how they work in practice, and most guidance names none of them.
The operative framework consists of:
Circular No. 34/2019-Customs dated 1 October 2019 prescribes the bond format and clarifies duty payment on resultant goods.
Section 58 empowers the Principal Commissioner or Commissioner of Customs to licence a private warehouse where dutiable goods may be deposited without payment of duty at import.
The licensee must provide facilities, equipment, and personnel sufficient to control access and secure the goods, appoint a warehouse keeper with experience in warehousing and customs procedures, and indemnify the Commissioner against loss. A fully enclosed structure is not mandated.
Section 65 permits, with the sanction of the proper officer, manufacture and other operations in relation to the warehoused goods. The section contains no words of qualification or limitation on the nature of the goods or the activity.
That was the express holding of the Delhi High Court in ACME Heergarh Powertech. The phrase in relation to conveys a causal link, so capital goods need only contribute to the operation, not themselves be transformed.
This is the provision that makes a Section 65 unit commercially different from a plain bonded warehouse, and it is the one most often left out.
In an ordinary warehouse, goods may remain one year, and interest accrues on the deferred duty beyond 90 days under Section 61(2). In a warehouse where operations are permitted under Section 65, capital goods may remain until clearance and other goods until consumption or clearance. No fixed period. No interest.
Section 59 requires the importer to execute a bond in a sum equal to thrice the duty assessed, binding him to comply with the Act, pay duties and interest under Section 61(2), and pay fines and penalties. The bond format at Annexure C of Circular 34/2019 serves both MOOWR and Section 59.
Under Section 68, goods are cleared for home consumption on an ex-bond Bill of Entry with duty paid. Under Section 69 they may be exported without duty. Section 15 fixes the rate of duty as that in force on the date the ex-bond Bill of Entry is presented.
A common misconception deserves correcting. Under the 2019 Regulations, there is no physical control or day-to-day presence of customs officers in a Section 65 warehouse.
Supervision was deliberately shifted from the proper officer to a self-appointed warehouse keeper. Units operate on a self-compliance model and are subject to risk-based audits. The obligations are digital accounts furnished monthly to the bond officer under Regulation 17, and reporting discrepancies within 24 hours.
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, rules or regulations, or breaches a licence condition, after giving an opportunity of being heard. The provision is administered by CBIC. Operations may be suspended pending inquiry.
On cancellation, warehoused goods must be removed within seven days. Voluntary surrender follows the Private Warehouse Licensing Regulations, 2016, by written request, subject to clearing all goods and settling dues.
At JPARKS INDIA, we handle combined Section 58 and Section 65 applications, structure the Section 59 bond, set up Regulation 17 digital records, brief the warehouse keeper, and respond to any notice under Section 58B. Having served 500+ importers and exporters since 2018, we keep bonded facilities compliant with Chapter IX end to end. Learn more about our MOOWR scheme services or book a free consultation.
Section 65 permits manufacture and other operations in relation to warehoused goods, with the sanction of the proper officer. It contains no limiting words on the nature of the goods or the activity undertaken.
Section 58 licenses the private bonded warehouse. Section 65 permits manufacture and other operations inside it. A MOOWR unit needs both, and the Section 65 permission is co-terminus with the Section 58 licence.
The MOOWR (No. 2) Regulations, 2019, the Private Warehouse Licensing Regulations, 2016, and the Warehoused Goods (Removal) Regulations, 2016, read with Chapter IX of the Customs Act, 1962.
No. The 2019 Regulations removed physical control. Supervision shifted to a self-appointed warehouse keeper, with risk-based audits, digital monthly accounts under Regulation 17, and 24-hour discrepancy reporting.
Under Section 61, capital goods may remain until clearance and other goods until consumption or clearance, with no fixed period and no interest. An ordinary bonded warehouse is limited to one year, with interest after 90 days.
