Custom Laws

General and Definition

1. Distinguish between the following under Custom Act, 2064.

i. Transaction value of identical goods and similar goods method.
ii. Deductive value method and computed value method.

2. Can the custom duty be paid before the goods came to the port or can it be paid provisionally? Explain.

3. Has section 30 of the Customs Act, 2064 given authority to Customs Officer for special test?

4. Rameswaram Exim is an export oriented unit which imports raw material from India as well as third
Country and then reprocesses the same to be further exported back to India, Japan and other European
Countries.
During the year it has imported various raw materials, sub raw materials along with packing material
(which are not manufactured in Nepal) subjected to a total custom duty of Rs. 1,500,000 which were
further used in manufacturing of a final consumable product to be exported to the prospective clients
abroad. At present, Rameswaram Exim is not having any bonded warehouse license and performs all its
export through proper banking channel that also through Letter of Credit.
So, on the basis of above stated information answer the followings:
i) Will Rameswaram Exim be able to import the above stated raw materials, sub raw materials as well
as packing material (not manufactured in Nepal) by keeping deposit against Custom Duty amounting
Rs. 1,500,000 i.e. through Pass Book System or will Rameswaram be required to pay the entire amount,
if on later stage it will export the resulting final consumable product? Will your answer be the same if
the resulting final consumable product is a Tobacco Oriented Product?
ii) What basic requirement needs to be followed to avail benefits of Duty Draw Back at the time of
Export of the final consumable product?
iii) Will the entity be allowed to avail the benefits of Duty Draw Back if it sales locally but in convertible
foreign currency instead of exporting to its prospective clients abroad?

5. Write short notes on the following considering the provisions of Customs Act:
i. Transaction Value
ii. Burden of Proof
iii. Provisional Assessment of Duty
iv. Post Clearance Audit
v. DRP system
vi. CTD form
vii. Bill of lading
viii. Write short note on “Post-clearance audit (PCA)” under Custom Act, 2064.
ix. Duty facilitySab
x. Exim Code
xi. Import Smuggling
xii. Power to take action u/s 91
xiii. Custom Officer.
xiv. What is the minimum value that is fixed for the purpose of auction under Customs Laws? Also
explain when, how and who fixes the minimum value?

Compiled and Developed by CA. Shesh Mani Dahal 1

 Custom Laws
Tax Calculation
6. XYZ Construction P. Ltd. has entered into the contract of purchase of following equipment’s under
following terms and conditions from GEJUWA International. The equipment’s were imported by
GEJUWA International under Bank Guarantee.
The import details are as follows:
Name of Equipment’s Original Cost Import Date
Total Amount (Euro)
Crane (2 Pcs) 1,000,000 2068.04.01
Lorry (1 Pc) 100,000 2074.04.01
Terms and Conditions:
i) Total Purchase Price of Both Equipment’s shall be Euro 150,000.
ii) Custom Duty shall be paid by XYZ Construction P. Ltd.
Ignore Excise Duty, CSF & other taxes. Custom Duty rate is 10% for both Equipments at custom
office.
Required:
Calculate Custom Duty and VAT to be paid by XYZ Construction P. Ltd. at Custom Office if custom
clearance is done on 2076.04.01.( Exchange Rate Euro 1= Rs.160)

7. ABC Trading has imported CAT Heavy equipment from Japan.

Calculate the transaction price for the purpose of calculation of custom duty on the basis of following
information:
CIF Kolkota price USD 120,000 Exchange Rate while opening LC Rs.114. Exchange Rate while retiring
LC Rs.115.
Exchange Rate while clearing the goods at Kolkota Rs. 112.
Exchange Rate while clearing at Nepal Birgunj Custom Office Rs. 110.
Kolkota port clearance charge including Misc. expenses (includes non-proper bill of Rs. 6,000) Rs.
21,000. Labor charge for unpack and repack at Birgunj customs Rs. 6,000 and unloading at the firm‘s
Chitwan Site yard Rs. 5,000 respectively.
Transportation and transit insurance from Kolkota to Birgunj Custom Rs. 80,000 and from Birgunj to
Chitwan Rs. 12,000.

8. “Axis Co. Ltd.” wants to send its machines for repair purpose to USA. The value of machine is Rs.
1,050,000. Since, the repair process is supposed to take longer time, the company takes permission
from custom office for extended time for re-import for 5 months from date of export. Machines are
re-imported within stipulated time.
The bill provided by USA for repair is of Rs. 140,000 (including spare parts replacement).
Calculate the following:
i) Custom deposit at the time of sending it to USA?
ii) Custom duty to be charged on returning of machines and amount paid to/returned from Custom office.
(Ignore other duties/taxes except custom duty)
Note: Take Rate of custom duty 14%.
Answer should be in the light of the provisions of Custom Act and Rules 2064.

Compiled and Developed by CA. Shesh Mani Dahal 2

 Custom Laws
9. A motor car made in the year 2014 was imported in Nepal by a diplomatic mission in August 2016
under full duty exemption facility. The import value of the vehicle determined for the custom
purposes was Rs. 50 lakhs. The mission sold the vehicle in August 2020. You are required to
calculate the value of the vehicle for custom purposes.

10. Mr. Thomas, a resident of Europe, is out to create a new world record of world tour in a motor car in
minimum time. He entered into Nepal for same purpose under a carnet. He entered Nepal on
2076.01.01 through Birgunj Border. He moved through Kathmandu to Pokhara. On his way, he met
an accident. Due to his car accident, 2 persons got injured and police took his car in custody.

Required:
Under normal circumstances, what is the time allowed to Mr. Thomas to keep his motor car in Nepal,
without paying import duty?
i) As per the letter of recommendation given by “District Police Office”, the vehicle has remained in
police custody for 30 days and due to the accident it remained in a registered work shop of 25 days.
He takes out vehicle on 01.08.2076 from work shop. Mr. Thomas approached Custom office to exit
from Nepal on 2076.08.10.
How many days’ custom duty shall be levied in such case?
ii) Mr. Thomas has received offer of Rs. 2,000,000 for his vehicle. He is interested to sell off his vehicle
against this amount. Is it allowed?
Answer should be in light of provisions of Custom Act, 2064.

11. A car manufactured in 2011 was imported in Nepal on 2015 by Mr. Ramesh Chandra for his personal
use with partial exemption of custom duty for IRS 25 Lacs. On 15.05.2020, Mr. Ramesh Chandra
wants to transfer its ownership to his nephew Mr. Balram.
i) Calculate the transaction value of the car for Custom Duty purpose.
ii) What would be the transaction value if the car was manufactured and imported in year 2015?

12. Answer the following in light of Customs Act, 2064.

i) Mr. Alexender Shah, a Nepali citizen has brought a 40” LED television while returning from America
after his stay of 2 years for completing his studies. The value of LED TV was $ 750. What amount of
duties need to be paid at custom point. (Assume Exchange rate $ 1=Rs. 120, Custom Rate=5%)

ii) Which Industries can be declared as sick Industries by Government of Nepal? What are the rebates
provided to sick industries? Answer in the light of Custom Act 2064.

th
13. Shree Airlines had taken following items to Israel for repairs on 5 Shrawan, 2076.
Helicopter engine priced USD 10 million
Audi Car engine priced USD 1 million
th
It had taken the items back in Nepal on 15 Bhadra, 2076 and for the period the helicopter engine was
on repairs it brought an identical engine for the helicopter from Israel on the same day. th
The airlines found that the engine of helicopter was not repaired correctly and therefore again on 20
Ashwin, 2076 sent the engine back for repairing to Israel. It took another 2 months for the repairs to
complete and finally the engine was back in Nepal after repair.
Cost of repair was USD 1 million. Assuming the custom rate to be 10%, calculate the deposit/bank
guarantees that the airline had to provide and the custom duty to be paid. Consider only custom duty
Compiled and Developed by CA. Shesh Mani Dahal 3
 Custom Laws
in your calculation.

Exchange rates were as follows:

th
On 5 Shrawan, 2076 Rs. 118
th
On 15 Bhadra, 2076 Rs. 120
th
On 20 Ashwin, 2076 Rs. 121
th
On 20 Mangsir, 2076 Rs. 123

14. Premier Ltd. imported an equipment for Yen 7,50,00,000 by opening an L/C for the amount and paid
the amount on 10.12.2075, when the rate of Yen notified by Nepal Rastra Bank was Rs. 12.50=10
Yen. The goods arrived at Birgunj on 25.2.2076, when the rate of Yen notified by Nepal Rastra Bank
came to Rs. 10.30=10 Yen. Determine the Custom Duty liability of the company.

15. Rock Cement Industries (P) Ltd. has paid custom duty of Rs. 100,000 as deposit at the custom duty
rate of one percent on Rs. 7,000,000 ($100,000 @ 100 as on 17.07.2076) for the import of raw material
of 10,000 MT. However, the duty payment is for partial import on following period. At the time of
import the deposit was reversed and total duty was shown as Rs. 100,000. The quantity and date of
import were as follows:
Date MT (Qty.) Exchange Rate for 1 USD
18.07.2076 8,000 Rs. 101
19.07.2076 2,000 Rs. 100
Is the duty calculated on import i.e. Rs. 100,000 correct? State the Provision relating to computation of
custom at the time of clearance of goods.

16. Platinum International purchased goods worth $200,000 on CFR Kolkata basis and incurred following
cost associated with import. Calculate the value for custom purposes explaining if each of the
components of the cost is allowed or disallowed.

Transit insurance
From source to Kolkata $ 2,000
From Kolkata to Nepal port INR 50,000
From Nepal port to factory NPR 50,000
Agent commission
At Kolkata port INR 10,000

At Nepal port INR 20,000

Transportation cost
From source to Kolkata $ 5,000
From Kolkata to Nepal port INR 50,000
Demurrage
At Kolkata port INR 10,000
At Nepal port NPR 10,000
Buying commission paid abroad $ 5,000
LC commission paid to banks $ 1,000
How the custom valuation would change if the term of this purchase is FOB source country. Consider
exchange rate of Rs. 1.60 for INR and Rs. 115 for USD.

Compiled and Developed by CA. Shesh Mani Dahal 4

 Custom Laws
17. A Manufacturing Company, based in Hetauda has imported a machine (HS code 8479.89.10) on 30
July, 2018 from Culcutta, India at FOB cost of IRs 1 million, other details are as follows:
i. Freight from Culcutta to Birgunj custom was IRs. 50,000.00 & Birgunj custom office to Hetauda IRs.
20,000.00
ii. Insurance was paid to insurer in Nepal: Rs. 5,000.
iii. Amount Rs. 10,000.00 paid to custom agent for clearance from custom office.
iv. The machine was produced in 2016 in India.
v. Custom tariff is 5 % for the Machine
Calculate all duty and taxes payable to Custom office, if applicable.

18. A car manufactured in 2014 was imported in Nepal in 2017 by a project under customs duty privilege
paying 1 % customs duty for recording purpose. The value determined at the time of import was FCY
15,000.00 and rate of exchange was Rs. 70 for FCY1. The custom duty of Rs.10,500.00 was paid as
1 % whereas excise duty and VAT were exempted as per the decision of Government.
On July 14, 2018 the project has allowed the general manager in Nepal to get the ownership of the car
in his own name free of cost. But the GM has to pay all duties and taxes in case payable. All supporting
documents have been submitted to the custom office for clearance on 30 July, 2018.

The custom tariff 80 % and excise duty 60 % are applicable for such imported car. The exchange rate
on 30 July is Rs. 96 for FCY1. Calculate all duties and taxes payable to the customs office.

19. Roshan commercial co. imported the followings goods from Hong Kong in CIF to Kolkatta Port. The
cost of transporting from Kolkata to Birgunj was US$ 6000. The quantity and CIF cost of goods are
as follows:
Commodities Quantities Unit price Total cost (CIF Kolkata)
A 100 US$ 900 US$ 90,000
B 160 US$ 300 US$ 48,000
C 120 US$ 400 US$ 48,000
D 80 US$ 700 US$ 56,000

From the examination of goods in customs point the custom differ found that the price of A is US$
1000. Accordingly, the quantity of the D was 90 pieces in the place of 80. Compute the custom duty
assuming the rate 25%, 20%, 5%, 10% for A, B, C and D respectively. Per unit weight & volume of
each commodity is same.
Use exchange rate US $1 = 110.

20. ABC Company Ltd. imported a Toyota Land Cruiser from Japan at US $ 56,000 in CIF to Kolkata
Port. The cost of Freight and insurance from Kolkata to Birgunj was Rs 65,000. As a customs officer,
determine the amount of customs duty, excise duty and VAT. The prevailing rates of customs duty,
excise duty and VAT are 80%, 60% and 13% respectively. Assume the exchange rate for 1 US$ is Rs
110/US$.

21. A car manufactured in Jan 2011 was imported in Nepal in Jan 2014 by a project under custom duty
privilege paying 2% custom duty. The value determined at the time of import was $ 20,000 and rate
of exchange was Rs 78 for $ 1.
On July 14, 2016 the project has allowed the General Manager in Nepal to get the ownership of the car
in his own name free of cost, but the Manager has to pay duty in cases payable. The exchange rate on
Compiled and Developed by CA. Shesh Mani Dahal 5
 Custom Laws
the day of customs clearance was Rs 100 for $ 1.
Calculate the transaction value of the car for custom duty purpose.

22. Bheri Transport Company has purchased 2 chassis of truck @ Rs 1,500,000 from Sipradi Trading Pvt.
Ltd. on 1 March 2011.
i. Bheri Transport Co. wants to send the chassis to Lucknow, India to construct the body of trucks. As a tax
consultant, you have to recommend Bheri Transport Co. what documents should be submitted to Custom
Office while sending chesis to construct body of trucks in India.
ii. Chassis were sent to Lucknow on 5 March 2011 and returned on 25 April 2011. The body maker company
has charged @ IRs. 800,000 for constructing body of trucks.
Calculate custom duty payable on this transaction. Custom rate is 15%.

23. An export-oriented industry has the following figures of import of raw materials and auxiliary raw
materials:

Date of import Quantity Transaction Rate of Custom

value
2060.05.15 1,000 kg 1,00,000 15%
2060.07.25 1,500 kg 1,50,000 15%

As per the industrial norms, for 97 kg of finished goods 100 kg of raw materials shall be required. The
details of the export of finished products produced using the above raw materials and auxiliary raw
materials are as follows:
Date of export Quantity
2061.02.10 700
2061.03.10 200
2061.06.05 800
2061.07.26 700
Calculate the amount of cash guarantee to be deposited by the importer at the time of import of the
raw materials and the auxiliary raw materials. Also calculate the amount of custom payable in case of
breach of the conditions of the cash guarantee. Make calculations and the relevant provisions as part
of your answer:

24. Ramesh & Co. is engaged in producing various plastic products. It exports about 50% of production
to India and Bangladesh. The Industrial Department has determined the following input and output
ratio for the product;
For 100 Kg. of the product the following materials shall be required:
PVC granules 70 kg
CaCO3 30 kg
Master batch 1 kg
Other materials 4 kg
Total 105 kg
The firm has obtained permission from Custom office for import of raw materials and auxiliary raw
Compiled and Developed by CA. Shesh Mani Dahal 6
 Custom Laws
materials required for products to be exported against cash deposit of custom duty. The firm has imported
the following raw materials on 10.08.2066 against deposit of cash for custom duty:

Materials Kgs. Transaction value Per kg. Rs. Rate of Custom Duty
PVC granules 5,000 70 15%
CaCO3 2,000 30 15%
The above mentioned transaction value is inclusive of expenses up to custom office. The firm has
exported the following quantity of its products utilizing the raw materials imported as mentioned
above:
Date kg.
05.06.2067 2,000
01.07.2067 2,000
02.09.2067 1,000

On the basis of the figures given above, calculate the amount of cash deposit to be made at custom office
for custom duty on the import and also the amount of settlement available for the export. Also calculate
amount of penalty chargeable, if any.

Miscellaneous

25. Answer the following questions:

a ) What is the time limit for Goods, Machinery or Spares parts to be brought back which are sent to a
foreign country from Nepal for the purpose of repair under Custom Act, 2064?
b) Explain the Post Clearance Audit with reference to current Custom Act provisions.
c ) A car manufactured in 2002 was imported in Nepal in 2005 by a project under custom duty privilege
paying 2% custom duty. The value determined at the time of import was $ 20,000 and rate of
exchange was Rs 78 for $ 1.

26. National Pencil Industry imported certain pigments for use in pencil making for IRs. 500,000. The
custom officer classified it under Custom Code 3207 at 15% instead of under Custom Code 3212 on
which only 10% duty is payable. Your advice is sought as to how to proceed in the matter.

27. A & A Enterprises has paid custom of Rs. 25,400 on 2068.06.02 and cleared the required raw
materials. On scrutiny of accounts, it came to knowledge that custom has been overpaid to the
department by Rs. 3,200. Answer the following in this regards.
i) A & A Enterprises wanted to claim refund of the custom and applied to related custom
department on 2068.09.03. Is A & A Enterprises entitled to claim for refund?
ii) What are the conditions under which overpaid custom shall not be refunded by the
department? Answer should be based on provisions of Custom Act, 2064.
28. Vogue Fashions, an international brand of apparel, has opened a manufacturing unit in Nepal.
Company plans to import the fabrics and other material from its head office in France and export the
product to India. Advise the company the most suitable custom process it should follow and also
mention the conditions that it needs to fulfill.

29. Mr. Jugal Jain, a resident of India being a part of a Religious group, entered Nepal through Birgunj on
25th Magh, 2071 to visit various religious sites at different locations in the country. He was travelling
with his personal car having an Indian number plate. Later on he moved to Kathmandu and had plans
for Bhairawa also but unfortunately his plans and group were badly hit by the devastating earthquakes
which hit the country on 12th Baisakh, 2072. His vehicle was also badly damaged and had to undergo
repairs.
Compiled and Developed by CA. Shesh Mani Dahal 7
 Custom Laws
Required:
i) Under normal circumstances, what is the time allowed to Mr. Jugal Jain to keep his car in Nepal,
without paying a form of Import Duty and under what circumstances can vehicles be imported
temporarily without paying import duty?

ii) As per the letter of recommendation given by “District Police Office”, the vehicle has remained in a
registered workshop for 55 Days. Mr. Jain takes out his Vehicle on 07th Ashadh, 2072 from the
workshop. Mr. Jain accordingly approached the custom office to exit from Nepal on 10th Bhadra,
2072. How many days custom duty shall be levied in such case?

iii) While he was in Nepal Mr. Jugal Jain received an offer for sale of his 1600 CC Ford Figo Aspire at
a promising price of Rs. 2,500,000. Can he sale the same or not?

30. Mention the appeal procedures as per Custom Act, 2064.

31. Calculate demurrage payable on delivery of laptop in the following case;

Ekira is a PhD student in top university of United States of America. Ekira brother Mr. Yeklabya demand
laptop which she sends through International Courier service provider consignment and it arrived in
Bhairawa Custom office on 25 November 2016 but the brother is unable to take consignment on timely.
On 2nd March 2017 brother took delivery laptop from the custom office.
Product details:
• MacBook Pro 13-inch and Invoice Price $1799
• Touch Bar and Touch ID
• 13.3-inch (diagonal) LED-backlit Retina display
• 2.9GHz or 3.1GHz dual-core Intel Core i5 or 3.3GHz dual-core Intel Core i7 processor Turbo Boost
up to 3.6GHz
• Up to 10 hours battery life
• Up to 1TB SSD
• Force Touch trackpad
• 3.02 pounds
• Weight 3.5 Kg
Applicable Customs duty is 30% and exchange rate on customs clearance is NPR. 107.02 per US$.

32. Knitwear is a manufacturer of woolen pashmina shawls. Normally it exports 100% of its products. The
company availed bonded warehouse facility for woolen yarn. Due to some technical reasons, about 20%
of the product could not be exported and the company sold those products in Nepal. The value of product
sold in Nepal is Rs. 5,00,000. Knitwear had imported yarn to the value of Rs. 60,00,000 and applicable
rate of custom duty for the yarn is 5%.
Knitwear applied for clearance of bank guarantee with required documents within specified period along
with reasons of selling in Nepal. Custom authorities have ordered the bank to pay Rs 97,650 and clear
balance of guarantee. State whether custom authorities are right in their action. Assume that
transportation cost up to custom point is 5% of invoice price.

33. Determine the transaction price for a consignment received at Raxual Custom Office on the basis of
the following information:
Invoice price for Kolkata $ 5,000
Rate of exchange at the time of L/C matured Rs. 75.00

Compiled and Developed by CA. Shesh Mani Dahal 8

 Custom Laws
Rate of exchange at the time of delivery of goods taken at Kolkata Rs. 74.50
Rate of exchange at the time of custom clearance Rs. 74.00
Kolkata port clearance charge paid IRs. 5,000
Transportation and Insurance from Kolkata to Raxaul Rs. 2,000
Transportation from Raxaul to Kathmandu Rs. 2,000
Loading and unloading at Kathmandu Rs. 1,000

34. Kajaria Iron & Steel Private Limited (KISPL) is engaged in the business of Tiles, Sanitary Ware
and Bathroom fittings since last 5 years. The Company has recently decided to expand its business
by opening showrooms at different locations on the Ring Road of Kathmandu Valley. For that
purpose the company has imported some 100 Boxes of Tiles and sanitary wares, valuing Rs. 100,000
for its new showrooms and kept at private warehouse at the Birgunj Customs Office in good
condition. The applicable customs duty on such goods is 30% as per the tariff. The goods had entered
into the warehouse on January 1, 2010. The showrooms are still under interior decoration stage and
therefore the managing director of KISPL decided to keep the goods in the warehouse for some time.
On February 15, the company’s representative visited the warehouse to see whether the goods are
kept safely or not and found that 10 Boxes are damaged due to mishandling by the warehouse
operator. Cost of each box was Rs 1000 but the current market prices have increased drastically and
the present market price per box comes to Rs. 1,250. Considering the current market price, KISPL
lodged a claim of Rs. 12,500/- for the damage along with customs duty and profit margin. The
Warehouse operator is of opinion that the goods should have been cleared within 45 days from the
date of goods entered into warehouse and therefore no claims can be entertained. You are the
consultant of the Warehouse operator and have to advise with the provisions of Law the following:

i) Whether the contention of the warehouse operator is correct?

ii) Whether the amount claimed by the goods owner is correct?
iii) How much amount has to be paid by the warehouse operator to KISPL?
iv) What is the provision of Customs Duty in such case?

35. State whether the following statements are true or false quoting the relevant provisions.
a) If the freight is not mentioned in the airway bill or the freight declared by the importer is found to be lower
than the actual freight, in the case of imports by air, the customs officer can fix the values assuming the estimated
air freight of the air route.
b) Goods produced in People's Republic of China and imported through Tibet Autonomous Region under Letter
of Credit will be allowed rebate at 4% on the chargeable customs duty.
c) Goods imported through India under Letter of Credit will be allowed rebate at 4% on the chargeable customs
duty.
d) Mr. Ram want to submit foreign currency USD receipt documents to custom office after actual received of
USD money in case of expert of its goods.
e) Is this possible all the goods imported from Tibet, Autonomous Region of China are exempt from customs
duty in Nepal under the Favoured Nation clause?

36. Ram and Krishna are importer of ovens. On Ashwin 15, 2075, the firm has imported a consignment of
45 pcs. of ovens of a certain capacity. The details of which are given hereunder:
Invoice Value CIF per piece is $ 75.00
Transportation, clearing and other expenses up to custom office 17,500
Bank and other L/C charges 750
Clearing expenses at Custom area 4,500
Compiled and Developed by CA. Shesh Mani Dahal 9
 Custom Laws
Transportation from custom to godown 4,500
Other direct expenses to bring the goods to godown

The other relevant information in this regard are as under:

In normal conditions the importers of similar items are marking up 20% on the landing cost for fixing
selling price. The rate of custom duty on the ovens is 19% of the transaction value. The rate of exchange
on the day of custom clearance was NPR. 115.82 per $.

Being suspicious of the transaction value declared by the importer, the custom officer has collected
selling price of such ovens and concluded that the importer‘s selling price of such kind of oven is NPR.
20,500 per pc. before VAT.

Gaddachowaki Custom officer has many has many reasons to believe that the declared value is lower
than the actual and he decided to apply deductive value method for calculation of the transaction value
of the consignment.

As an expert, state in brief the circumstances in which the custom officer is empowered to apply the
deductive value method for determining the transaction value of the consignment. On the basis of the
above information, you are required to calculate selling price as per invoice value method and the
transaction price of the consignment applying the deductive value method.

Compiled and Developed by CA. Shesh Mani Dahal 10