The MOOWR (Manufacturing and Other Operations in Warehouse) scheme has been a valuable tool for businesses operating within the customs framework. However, a significant challenge has emerged concerning the non-transferability of the MOOWR license in cases of corporate restructuring such as mergers, demergers, or amalgamations. This issue has become a major concern for license holders, creating legal and financial uncertainties.
Background
As per Regulation 7 of the Private Warehouse Licensing Regulations, 2016, a private bonded warehouse license is non-transferable. This condition is also explicitly stated in the MOOWR license, issued by the Pr. Commissioner/Commissioner of Customs.
During corporate restructuring (merger, demerger, or amalgamation), a new legal entity often emerges. Consequently, the MOOWR license becomes invalid either because the transferor ceases to exist in the Register of Companies or due to the transfer of ownership of warehoused goods to a different entity.
In such situations, the license holder may become liable for customs duty payments, or at the very least, may face show cause notices demanding previously deferred customs duties.
This raises an essential question: How can businesses navigate this challenge effectively?
Possible Solutions
A. If Merger/Demerger Has Not Yet Taken Place
Step 1: Include a specific clause in the merger/demerger scheme stating that the MOOWR license shall be transferred by order of the NCLT/High Court. This strengthens the case for transfer. If the Customs Department resists, the NCLT/High Court can be approached for further directives.
Step 2: Simultaneously, initiate advocacy and representation efforts with the Central Board of Indirect Taxes and Customs (CBIC) to seek relief and clarity on such cases.
B. If Merger/Demerger Has Already Been Implemented
Step 1: Most merger/demerger schemes contain a standard clause stating that all rights and obligations of the parties transfer to the resulting entity. Given that an MOOWR license grants the right to manufacture in a bonded warehouse, it should be considered part of this transfer. If the Customs Department disagrees, NCLT/High Court intervention may be necessary.
Step 2: Simultaneously, pursue advocacy and representation with CBIC to address this issue at a policy level.
Step 3: File an amendment application under Section 149 of the Customs Act. This provision allows for the amendment of any document presented at the customs house. While this option presents an interpretational challenge—since the law does not specify whether it applies to documents beyond the Bill of Entry or Shipping Bill—it remains a possible route to explore.
Conclusion
The non-transferability of the MOOWR license in restructuring scenarios presents a significant challenge for businesses. However, proactive planning and legal intervention can help navigate this issue. Companies undergoing mergers, demergers, or amalgamations should take preemptive steps to address license transferability in their restructuring schemes and engage with the authorities for a resolution. Through legal mechanisms and policy advocacy, a sustainable solution can be sought to ensure business continuity under the MOOWR framework.
No comments:
Post a Comment