SUMMARY OF CUSTOM ACT,2064

&
CUSTOM RULES, 2064
INCOME YEAR
2076-77

PRESENTED BY :
CA. PRABIN RAJ KAFLE
FCA, M Com

FOR:
INSTITUTE OF CHARTERED ACCOUNTANTS OF NEPAL (ICAN)
SATDOBATO, LALITPUR
 CUSTOMS DUTY TO BE CHARGED (SECTION 5)

Customs duty shall be chargeable on all

goods to be exported or imported except
those goods which enjoy customs duty
exemption pursuant to this Act or the
prevailing law.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 DUTY TO BE LEVIED IN EVENT OF RE-IMPORT OF EXPORTED GOODS
(SECTION 6)
 If any person re-imports any goods which have been manufactured or finished
in Nepal and exported, such goods shall be subject to such duty as is
chargeable on the importation of the goods of similar kind or to the same
value, which have been manufactured or finished in a foreign country.
NOTE:
Where the raw materials and subsidiary raw materials of the goods returned
back pursuant to above were imported without paying duty, the duty
chargeable on the quantity of the raw materials or subsidiary raw materials
used in such goods shall also be recovered.

 However, no customs duty shall be charged on the goods which have been
returned back as follows:-
 Having been exported through parcel by post but could not be delivered
to the concerned person and thus returned back, or
 Having been returned back because the concerned person has refused to
take delivery after clearance made by the Customs Office or after having
arrived abroad, or
 Having been returned back because of being unable to meet standard
quality due to an accident or natural calamity.
CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES
 CASE STUDY:

a) Does custom duty get levied if re-import is done for exported

goods?

b) M/s. Horizon Medicine has purchased medicine raw material

from China. The raw materials were purchased with custom duty
exemption on the condition that products manufactured from
imported raw materials will be exported to Africa with value
addition. After export such goods has been returned back by the
customer on the ground that it was unable to meet standard
quality due to natural calamity at Africa. The Customs
department demanded custom duty on return of such goods and
raw material imported earlier without paying duty pursuant to
Custom Duty Act 2064. Is the argument of the custom officer is
in accordance with provision of Custom Duty Act 2064?

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 DUTY NOT TO BE CHARGED (SECTION 7)

 If any importer makes an application for not releasing any

goods imported by that importer and for so leaving such
goods with the Customs Office that they belong to the
Government of Nepal, no duty shall be charged on such
goods.

 The Government of Nepal may itself use the goods so left

pursuant to above or the Customs Officer may auction them
pursuant to this Act. Provided that where such goods are in
such a condition that they can neither be brought into use
nor be auctioned, the Customs Officer may remove such
goods from the Customs Office or destroy them as
prescribed; and the expenses incurred in such removal or
destroy shall be recovered from the concerned importer
himself / herself.
CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES
 DUTY NOT TO BE CHARGED (SECTION 7)

 If the importer makes application within prescribed time

period by fulfilling prescribed process with prescribed
evidence if any goods is found low quantity at the time of
dispatching any goods, valueless or low in quantity or weight
by business point of view due to breaking by calamity or
accident or having low quantity due to the act of theft, the
Customs Officer may give prescribed duty rebate or refund if
it is already recovered of that goods which is lost or have low
quantity or is found valueless by business point of view.

 The quantity of goods damaged pursuant to above, is found that

the purpose for which the goods have been imported do not
achieve the purpose but can be used as waste or scrap or other any
alternative utilization, the Custom Officer may recover the duty by
determining the value of such goods accordingly.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 CASE STUDY

a) What happens if any importer is unable to pay Customs duty for release of goods
imported by the importer?

b) Ms. Sharmila, Proprietor of Sharmila Trading, purchased goods from Japan for
trading purpose. Ms. Sharmila is unable to pay Customs duty for release of goods
imported for the Trading purpose. Comment with considering the relevant of
provision of Customs Act, 2064.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 BASE DATE FOR DETERMINATION OF DUTY (SECTION 8)

Condition Base Date

Goods to be exported or Tariff (rate of duty) prevailing

imported on the date of check pass of
such goods
Goods imported under the Tariff prevailing on the date of
diplomatic facility, duty payment of duty of such
facility or partial or full goods
exemption

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 CASE STUDY:

Ms. Bandana has purchased the Z goods from country

UK. The date of check pass of goods from Custom is
27th Magh 2076 and the declaration form of such goods
is registered with custom office is Magh 01, 2076. The
custom duty applicable on the declaration form date is
25% and on the date of clearance of goods custom duty
is applicable is 30%. Mr. Active, Custom Officer is
demanding custom duty from Ms. Bandana based on
the check pass date of goods on custom. As expert of
Customs is the demand of Mr. Active Custom Officer is
in accordance with the provision of the Custom Act,
2064?
CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES
 SUMMARY OF CUSTOM ACT,2064
&
CUSTOM RULES, 2064
INCOME YEAR
2076-77

PRESENTED BY :
CA. PRABIN RAJ KAFLE
FCA, M Com

FOR:
INSTITUTE OF CHARTERED ACCOUNTANTS OF NEPAL (ICAN)
SATDOBATO, LALITPUR
 BONDED WAREHOUSE (SECTION 10, RULE 9, RULE 10, RULE 12, RULE 13)

 The Government of Nepal may, if it considers appropriate to

accord the bonded warehouse facility to any person desirous
of availing of the bonded warehouse facility, so accord the
facility, as prescribed, that the bonded warehouse is operated
subject to the terms as prescribed.
 Following Industry or person intending to avail of the
facilities of bonded warehouse should apply at the
Department for the license:
i. Industry exporting ready made garments to foreign
country,
ii. Industry exporting its product to third country,
iii. Except the Industry mentioned in clause (i), other
industries exporting at least 20 percent or goods having
value more than Rs. 1 Crore of its production to India,
iv. Person who is importing goods to sale through the
government licensed duty free shop
CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES
 BONDED WAREHOUSE (SECTION 10, RULE 9, RULE 10, RULE 12, RULE 13)

 The time period for the license will be valid for one year.

 The licensee can get the license renewed from the Department by paying
renewal fee of Rs. Three thousand before the next fiscal year starts, if
licensee intends to renew the license for the next fiscal year.

 If the licensee failed to renew the license, the licensee should pay additional
fee of Rs. three thousand for each fiscal year for renewal of the license.

 The licensee of the bonded ware house, may import necessary raw materials
and the auxiliary raw materials (including the packaging materials not
produced in Nepal) with the furnishing of the bank guarantee equivalent to
the chargeable Customs duty for the purpose of producing goods for export
or sale in Nepal in convertible foreign currency.

 The Bank Guarantee should be furnished to the amount equivalent to the

total of chargeable Customs duty in addition to 15 percent on such Customs
duty.
CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES
 BONDED WAREHOUSE (SECTION 10, RULE 9, RULE 10, RULE 12, RULE 13)
 Time period of the bank guarantee should be from six months to twelve months. In
case of six months bank guarantee, if the extension is required beyond 6 months, it
can be extended maximum by additional 6 months.

 The owner who received the license of bonded warehouse to operate the duty free
shop should furnish the bank guarantee equivalent to the chargeable Customs duty
for the import of goods to sale from the duty free shop. In order to import such
goods, the Department should approve the list of goods and their quantity.

 The industry with bonded warehouse facility should export the goods through Letter
of Credit or banking documents.

 The industry with bonded warehouse facility should export, or sell in homeland
against convertible foreign currency, the finished products within eleven months
from the date of import of raw materials or auxiliary raw materials (including
packing materials not produced in Nepal).

 On the export of the finished product made of raw materials or auxiliary raw
materials (including packing materials not produced in Nepal), imported as per rule
10 by the industry with bonded warehouse facility, the value addition should be ten
percent over the value as determined by the Customs.
CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES
 BONDED WAREHOUSE (SECTION 10, RULE 9, RULE 10, RULE 12, RULE 13)

 The person getting the license of bonded warehouse should

sale the goods from the duty free shop in one year from the
date of import as imported for the sale in duty free shop.

 The textile industry importing yarn should sale its textile

made from such yarn to the export oriented garment industry
within eleven months from the date of import of yarn.

 If the concerned person applies for the time extension with

the reasons for not being able to export or sale the product or
submission of foreign currency receipt within the time period
mentioned, and such reason appears to be reasonable, the
chief of the customs office may extend the maximum time
period by six months.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 CASE STUDY:

Admiral Sportswear is a British internationally recognized

football, cricket and sportswear brand. It reached the peak of its
success in the 1970 and early 1980 through a series of
prestigious football team sponsorships. Admire sportswear
establish Admire sportswear Garments Pvt. Ltd in Nepal.
Admire sportswear Garments Pvt. Ltd. decided to import
fabrics from Admiral Sportswear for the purpose of exporting
the finished product to the European Unions. However,
management has planned to purchase of garments but they are
worried about the bulk of custom duty it has to pay for the
import and the export. Mr. Ram Alex CEO has approached you
for the advice on any provisions in the Act that can provide
some relief to the company in paying/ managing the custom
duty. Advise the company with considering the relevant
provision of Acts.
CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES
POWER TO ACCORD FACILITY TO MAKE IMPORT UNDER BANK GUARANTEE
FACILITY (SECTION 11)

The Government of Nepal may accord the

facility, as prescribed, to import under the bank
guarantee facility, in accordance with the
prescribed terms, such raw materials or
subsidiary raw materials as to be imported by
any industry for the purpose of manufacturing
goods and export them or such goods as are
imported for the operation of a duty free shop.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 BASES FOR DETERMINATION OF CUSTOMS VALUE OF GOODS TO BE
IMPORTED SECTION 13)
 The customs value of goods to be imported shall be determined on the basis of the
transaction value of such goods.

NOTE:
Transaction Value means the total amount to be set by adding freight, insurance and
other related costs incurred or incurable in the transportation of goods imported by
an importer up to the border of Nepal to the price actually paid or payable, directly or
indirectly, by the importer to the seller of such imported goods.

 If the transaction value declared by the importer, the Customs Officer shall
determine the customs value of the goods on the basis of such transaction value.

NOTE:
If the value declared by an importer pursuant to above is less than the customs value
determined by the Customs Officer pursuant to this Section, the Customs Officer
may do the following in relation to such goods:
 Clearing such goods by collecting fifty percent additional customs duty on
such difference value, or
 Purchasing, or causing to be purchased, such goods in a manner to pay the
amount to be set by adding five percent amount to the value so declared to
the importer.
CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES
 BASES FOR DETERMINATION OF CUSTOMS VALUE OF GOODS TO BE
IMPORTED SECTION 13)

 If such transaction value does not appear to include freight, insurance and other
related expenses, the Customs Officer shall determine the transaction value by
adding an estimated amount likely to be incurred for the same.

 If the customs value cannot be determined on the basis of the transaction value,
the customs duty of such goods shall be determined on the basis of the
transaction value of identical goods already imported into Nepal prior to the
import of such goods. Explanation: For the purposes of this Section, "identical
goods" means goods which are the same in all respects, including texture, quality,
nature and feature.

 If the customs value cannot be determined on the basis of the transaction value of
identical goods pursuant, the customs duty of such goods shall be determined on
the basis of the transaction value of similar goods already imported into Nepal
prior to the import of such goods.

Explanation: For the purposes of this Section, "similar goods" means goods
which, although not alike in all respects, have like feature and like component
materials which enable them to perform the same functions and to be
commercially interchangeable.
CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES
 BASES FOR DETERMINATION OF CUSTOMS VALUE OF GOODS TO BE
IMPORTED SECTION 13)

If the customs value cannot be determined on the basis of the transaction value of
similar goods and such goods have already been imported into Nepal and sold at
market to a person who is not related to the importer, the customs value of such
goods shall be determined on the basis of deductive value method, by deducting
the tax, duty levied in Nepal on the selling price of each unit of the maximum unit
so sold, and other related costs and profits.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 CASE STUDY:
As per the letter received from the department of customs:
“Dear Managing Director Ms. Deepa Sharestha, M/s Baltra Life Style Range Pvt. Ltd.
Custom value declared by M/s Baltra Lifestyle range Winner+ purchased is not in
accordance with the Customs Act 2064. Being suspicious of the transaction value
declared by the companies, the Customs officer Mr. Delta and Mr. Gama has collected
the selling price of such Winner + and concluded that the importer’s selling price of
such kind of oven is NPR. 22,500 before applicable VAT as per VAT Act 2052. Customs
office is believed that the declared value is lower than the actual and we decided to
apply the deductive value method for calculation of the transaction value of the
consignment. According to the transaction value for custom duty is NPR.1,900,000.
Please pay the customs duty accordingly.
Details of the transaction value calculation is:

Winner+ 125 @ NPR. 14,633.34 18,29,167.00

Transportation etc. up to custom 70,833.00
Transaction value for custom duty 19,00,000
Thank You.
Gunanidhi
Customs Officer February 25, 2020

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

Other Additional Information relevant to the Tax office letter:
 M/s Baltra Life style range has import Winner+ a product of Baltra on February 25,
2020. The details of the transaction are;

Invoice Value per piece of Winner is $75

Transportation, clearing and other expenses up to the
custom office 25,500.00
Bank and other L/C charges 9,500.00
Clearing expenses at Custom area 9,000.00
Transportation from custom to godown 9,000.00
Other direct expenses to bring the goods to godown 850.00

 On the industry average margin on Baltra imported products are 25% on the
landing cost for fixing the selling price.
 The rate of customs duty on the Winner+ is 21% of the transaction value.
 The rate of exchange on the day of customs clearance was NPR. 115.49 per $ on date
of February 25, 2020.
Required:
As a Customs and Tax Expert, advice the company letter issued by the customs office
with the relevant calculation along with the relevant provisions of customs Act 2064.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 BASES FOR DETERMINATION OF CUSTOMS VALUE OF GOODS TO BE
IMPORTED SECTION 13)

 If the customs value cannot be determined pursuant to deductive value method,

the customs value shall be determined on the basis of computed value method,
also calculating the costs incurred in the production or manufacturing of such
goods and profits made or likely to be made by the seller while selling such goods
to the importer.

 Notwithstanding anything contained elsewhere in this Section, if the owner of the

goods imported under notice related to goods that passenger can bring or take for
personal purpose or the goods received as a gift or specimen and imported from a
foreign country or relief materials makes an application for the valuation of such
goods, showing the reason for failure to indicate the transaction value thereof and
if the Customs Officer considers the matter to be appropriate or submitted
without indication of value, he or she may determine a reasonable customs value
of such goods.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 BASES FOR DETERMINATION OF CUSTOMS VALUE OF GOODS TO BE
IMPORTED SECTION 13)

In determining the customs value of goods in accordance with the provisions of this
Section, the customs value shall normally be determined in a foreign currency.
Where the valuation of goods on which the duty has to be paid at the time of import
is made in a foreign currency, the conversion of such currency into Nepalese rupees
shall be made according to the selling rate of foreign currency which is prescribed by
the Nepal Rastra Bank and prevailing on the day in which the declaration form is
registered in customs office or received in customs office in electronic medium
through the computer system of such goods. In the case of a foreign currency of
which exchange rate is not prescribed by the Nepal Rastra Bank, such foreign
currency shall be converted into American dollars, and the selling rate of American
dollars shall be taken as the basis. Provided that in converting the customs value of
the goods of which duty is paid subsequent to the importation thereof under the
diplomatic facility, duty facility or full or partial exemption of duty, such conversion
shall be made according to the selling rate of foreign currency which is prescribed by
the Nepal Rastra Bank and prevailing on the day of payment of the remaining duty.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 CASE STUDY:

Kathmandu Trading House imports goods from Japan. Find out

the transaction price for a consignment received at Raxual
Custom Office on the basis of the following information:
Invoice price for Aswin US$. 30,000
 Rate of exchange at the time of L/C matures Rs. 64.50
 Rate of exchange at the time of delivery of goods taken at
Raxual Rs. 65
 Rate of exchange at the time of declaration form submitted Rs.
64.75
 Kolkata port clearance charge paid IRs. 25,000
 Transportation and insurance from Kolkata to Raxual IRs.
15,000
 Transportation from Raxual to Kathmandu Rs. 15,000
 Loading and unloading at Kathmandu Rs. 5,000.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 POWER TO FIX ESTIMATED AMOUNT OF FREIGHT, INSURANCE OR OTHER
RELATED COSTS:

 As per Sub Section (1) of Section 15, Where, owing to a circumstance beyond his
or her control, an importer is not able to forthwith submit documents of cost,
insurance or related costs incurred in the importation of any goods, the importer
may submit an application, accompanied by the reason for the same, to the
Customs Officer for the fixation of the estimated amount of such freight,
insurance or other related expenses.

 As per Sub Section (2) of Section 15, Where, in inquiring into the application
referred to in subsection (1), the contents appear to be reasonable, the Customs
Officer may fix the estimated amount for freight, insurance or other related
expenses likely to be included in the transaction value of such goods.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 POWER TO FIX ESTIMATED AMOUNT OF FREIGHT, INSURANCE OR OTHER
RELATED COSTS:

 As per Sub Section (3) of Section 15, The concerned importer shall submit
documents and evidence relating to the actual freight, insurance and other related
expenses no later than ninety days after the date of fixation of the estimated
amount of freight, insurance or other related costs pursuant to sub-section (2). If
the amount set forth in the documents and evidence so submitted is more than the
estimated amount fixed pursuant to sub-section (2), the importer shall pay the
duty chargeable on such excess value, and if it is less than that, the Customs Office
shall refund the remaining amount, upon deduction of the chargeable duty, to the
importer.

 As per Sub Section (4) of Section 15, Where the concerned importer fails to submit
documents and evidence within the period referred to in sub-section (3) or unless
it is proved otherwise, the estimated amount fixed by the Customs Officer
pursuant to sub-section (2) shall be considered as the final amount of such freight,
insurance or other related costs.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 CASE STUDY:

Rahaul & Gandi Enterprises imported hydraulic turbine of a power not exceeding
1,000 KW in FOB terms from USA. The FOB value is US$25,000. The company has
paid US$ 2,500 as freight, US$ 1,000 as design and development cost in USA.
Commission 3% of FOB value is payable in Nepal to the local agent in Nepalese
rupees. The company could not produce invoices for insurance in transportation from
USA to Mechi Custom Office. Owing to the circumstances beyond control the
company files an application to the custom office for fixation estimated amount
insurance cost. Estimated cost fixed by Custom Office was Rs. 73,500 and after 60 days
of determination of transaction value submits documentary evidence of insurance
cost of NPR 85,000. Due to delay in Calcutta port, it was bound to pay demurrage
charge of INR 300,000 in India. The transportation cost from Haldia port to Mechi
custom is INR 90,000 for which there is documentary evidence for INR 50,000.
Calculate transaction value and custom duty payable if the machinery is item falls
under part 84 of harmonic code and Custom Duty Rate is 5%. Assume: The selling
price determined by NRB for the day of clearance from Mechi Customs Office was
NPR. 106/US$ and NPR 1.6/INR and make other suitable assumptions where required.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 EXPORT OR IMPORT OF GOODS FOR REPAIR (RULE 7)

 As per Sub Rule (1) of Rule 7, In case it becomes necessary to send any goods to a
foreign country from Nepal for the purpose of repair or to bring such goods into
Nepal from abroad after repair thereof, full particulars regarding the number,
and size and specification of such goods, as far as possible, shall be filled up in
the declaration form and submitted to the Customs officer.

 As per Sub Rule (2) of Rule 7, In case any declaration form as mentioned in sub
rule (1) is received, Customs officer may allow passage for such goods, after
receiving guaranty of airlines operator without any cash deposit for aero plane,
helicopter or its engines, and after receiving deposits equivalent to 0.5 percent of
the value of goods for spare parts of aero plane and helicopter and 5 percent of
the value for the other goods.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 EXPORT OR IMPORT OF GOODS FOR REPAIR (RULE 7)

 As per Sub Rule (3) of Rule 7, Goods exported to foreign country for repair shall
have to be brought back within three months and Customs duty is chargeable on
the expenses involved in such repair or on the price of the spare parts which are
replaced. The chargeable Customs duty will be deducted from the amount of the
Customs deposit furnished and the balance of the deposit will be refunded.

 As per Sub Rule (4) of Rule 7, In case time limit prescribed in sub rule (3) for
bringing back such goods after repair is inadequate, an application accompanied
with documentary evidence of such inadequacy shall be submitted to the
Customs officer. The Customs officer may, if he so deems appropriate, extend the
time limit by a period not exceeding three months. In case the additional time
limit is inadequate, the Customs officer should write to the Director General of
the Department of Customs with the reasons and in case the Director General
approves the extension of the time limit, the Customs officer should extend the
time accordingly.

 As per Sub Rule (5) of Rule 7, As per this rule, if the goods exported for repair are
not brought back within the time limit prescribed under sub-rule (3) and (4) but
brought back after the lapse of time limit, the deposited amount shall be seized
and such goods shall be treated as fresh import and Customs duty shall be
chargeable accordingly.
CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES
 CASE STUDY:

a) Everest Manufacturing Co. imported a Machinery worth Rs. 50,00,000 by paying

the necessary duties. In that, one part costing Rs. 5,00,000 was defective and the
supplier was willing to replace the same free of cost if the defective part was sent to
him. If the company wants to export the same and receive the replacement part,
consider the custom duty, procedure for the same.

b) Prabhu Helicopter Pvt. Ltd. had sent its engine for repair purpose to Singapore on
Bhadra 5, 2076. The value of engine is US$ 2,000,000 and incurred US$ 200,000
repair cost (including spare parts replacement). The engine was back in Nepal
after repair on Falgun 5, 2076. What is the time limit for goods to be brought back
which were sent to a foreign country from Nepal for the purpose of repair?
Calculate the amount of Custom deposit at the time of sending the engine to
Singapore and Custom duty to be charged on returning of engine. Assume rate of
custom duty is 14%. Exchange rate on Bhadra 5, 2076 is 1 US$ = Rs. 115.50 and on
Falgun 5, 2076 is 1 US$ = Rs. 112.50.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 CASE STUDY:

c) Butwal Power Company Ltd. had sent its machines for repair purpose to Norway
on Magh 1, 2072 and the value of machine is US$ 800,000. Since, the repair process
is too longer time and the company takes permission from custom office for
extended time for re-import for 5 months from date of export. The machine was
returned after repairing on Chaitra 31, 2072. The bill provided by Norway for repair
is of US$ 250,000 (including spare parts replacement). Calculate the custom
deposit/bank guarantee at the time of sending machine to Norway and custom
duty to be paid on returning of machines. Assuming the custom rate to be 14%.

Exchange rates were as follows:

On Magh 1, 2072 Rs. 102.50
On Chaitra 31, 2072 Rs. 104.50

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 EXPORT OR IMPORT OF GOODS FOR REPAIR (RULE 7)

 As per Sub Rule (6) of Rule 7, In case it becomes necessary to bring any goods
from a foreign country to Nepal for the purpose of repair or to send back such
goods from Nepal to abroad after repair thereof, full particulars regarding the
number, specification and size of such goods shall be filled up in the declaration
form and submitted to the Customs officer.

 As per Sub Rule (7) of Rule 7, In case any declaration form as mentioned in sub-
rule (6) is received, Customs officer may allow passage for such goods, after
receiving deposits equivalent to the chargeable Customs duty and noting the
time limit of six months for the export of such goods.

 As per Sub Rule (8) of Rule 7, As per sub-rule (7), the goods imported for repair
is returned within six months time limit and the documentary evidence is
presented for the payment of repair, the Customs duty deposited at the import
time shall be refunded. In case goods are not returned or the specification of the
goods did not match with the goods that is presented for export or documentary
evidence for the payment is not presented, such goods and the deposited
amount at the time of importation shall be seized.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 EXPORT OR IMPORT OF GOODS FOR REPAIR (RULE 7)

 As per Sub Rule (9) of Rule 7, In case airline company registered to operate airlines
have to export engines of airplane or helicopter for repair and during the period of
repair if the airway company has to import engine on rent from the foreign
country, the company may import engine on bank guarantee equivalent to
Customs duty in the Customs office and such import should be for maximum
period of six months. If the engine is exported within the period, the bank
guarantee will be released. If the engine is not exported within the period, the
Customs duty should be charged treating engine as fresh import.

 As per Sub Rule (10) of Rule 7, Notwithstanding anything contained in this rule,
on the recommendation of the Ministry of Foreign Affairs, the diplomatic mission
may export to repair goods and import after repair without deposit and on record.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 DETERMINATION OF CUSTOMS VALUE OF GOODS TO BE EXPORTED
(SECTION 16)
 The invoice value declared by an exporter shall be the customs value of the goods to
be exported.

 Notwithstanding anything contained above, the Government of Nepal may, if

considers necessary, determine separate customs value of any goods of specific
nature to be exported, by notification in the Nepal Gazette. Where separate customs
value is so determined, the customs vale of such goods shall be the invoice value
declared by the exporter or the customs value so determined by the Government of
Nepal, whichever is higher.

 The value of goods to be determined pursuant to this Section shall be determined in

foreign currency. Such foreign currency shall be converted into the Nepalese rupees
according to the buying rate of foreign currency which is prescribed by the Nepal
Rastra Bank and prevailing on the day in which the declaration form is registered in
the customs office or received in customs office in electronic medium through the
computer system of such goods.

 Customs Base= ex-factory price + transportation cost up-to Customs Area + other
cost up-to Customs Area

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 DETERMINATION OF DUTY PRIOR TO ARRIVAL OF GOODS AT CUSTOMS
OFFICE

 As per Sub Section (1) of Section 24, If any importer wishes to pay the duty
chargeable on any goods to be imported by the importer prior to the arrival
of such goods at the concerned Customs Office, the importer may, for that
purpose, make an application, accompanied by the declaration attaching
documents as per Section 18 to the Customs Officer.

 As per Sub Section (2) of Section 24, If, on examination of the application
received pursuant to sub-section (1), it appears reasonable to so collect the
duty, the Customs Officer may determine the duty pursuant to Section 22.
Duty such determined shall be paid at Custom Office by the Importer.

 As per Sub Section (3) of Section 24, If the rate of duty determined pursuant
to sub-section (2) or the exchange rate of convertible foreign currency
prevailing on the day of payment of duty differs from that prevailing on the
day of clearance of goods, the rate prevailing on the day of clearance of
goods shall be applied.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 CASE STUDY:

Mr. Ram Krishna Neupane wanted to import the goods from USA. The goods which
are to be imported did not arrive to Customs boarder but he wanted to make the
payment of duty in advance so that goods after arrival could be cleared from
Customs faster. He paid the customs duty on March 26, 2020 for the goods to be
imported at the exchange rate of 1 USD = Rs. 112. The goods arrived on April 26, 2020
and Mr. Neupane wanted to clear the goods on that day and the exchange rate on
that day was 1 USD = Rs. 116. Mr. Neupane claims that there will not be any impact of
the difference in exchange rate as he has already paid the duty in advance. State your
views on the claim of Mr. Neupane referring the provisions of Customs Act/Rules.
Will there be any difference if the exchange rate on April 26, 2020 was 1 USD=Rs.
110?

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 CASE STUDY:

Rock Cement Industries (P) Ltd. has paid custom duty of Rs. 70,000 as deposit at
the custom duty rate of one percent on Rs. 7,000,000 ($100,000 @ 70 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. 70,000. The quantity and date of import
were as follows:

MT Exchange Rate for 1

Date (QTY) USD

18.07.2076 8000 71

19.07.2076 2000 70
Is the duty calculated on import i.e. Rs. 70,000 correct? State the Provision relating
to computation of custom at the time of clearance of goods.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 SUMMARY OF CUSTOM ACT,2064
&
CUSTOM RULES, 2064
INCOME YEAR
2076-77

PRESENTED BY :
CA. PRABIN RAJ KAFLE
FCA, M Com

FOR:
INSTITUTE OF CHARTERED ACCOUNTANTS OF NEPAL (ICAN)
SATDOBATO, LALITPUR
 EXPORT OR IMPORT OF GOODS FOR REPAIR (RULE 7)

 As per Sub Rule (1) of Rule 7, In case it becomes necessary to send any goods to a
foreign country from Nepal for the purpose of repair or to bring such goods into
Nepal from abroad after repair thereof, full particulars regarding the number,
and size and specification of such goods, as far as possible, shall be filled up in
the declaration form and submitted to the Customs officer.

 As per Sub Rule (2) of Rule 7, In case any declaration form as mentioned in sub
rule (1) is received, Customs officer may allow passage for such goods, after
receiving guaranty of airlines operator without any cash deposit for aero plane,
helicopter or its engines, and after receiving deposits equivalent to 0.5 percent of
the value of goods for spare parts of aero plane and helicopter and 5 percent of
the value for the other goods.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 EXPORT OR IMPORT OF GOODS FOR REPAIR (RULE 7)

 As per Sub Rule (3) of Rule 7, Goods exported to foreign country for repair shall
have to be brought back within three months and Customs duty is chargeable on
the expenses involved in such repair or on the price of the spare parts which are
replaced. The chargeable Customs duty will be deducted from the amount of the
Customs deposit furnished and the balance of the deposit will be refunded.

 As per Sub Rule (4) of Rule 7, In case time limit prescribed in sub rule (3) for
bringing back such goods after repair is inadequate, an application accompanied
with documentary evidence of such inadequacy shall be submitted to the
Customs officer. The Customs officer may, if he so deems appropriate, extend the
time limit by a period not exceeding three months. In case the additional time
limit is inadequate, the Customs officer should write to the Director General of
the Department of Customs with the reasons and in case the Director General
approves the extension of the time limit, the Customs officer should extend the
time accordingly.

 As per Sub Rule (5) of Rule 7, As per this rule, if the goods exported for repair are
not brought back within the time limit prescribed under sub-rule (3) and (4) but
brought back after the lapse of time limit, the deposited amount shall be seized
and such goods shall be treated as fresh import and Customs duty shall be
chargeable accordingly.
CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES
 CASE STUDY:

a) Everest Manufacturing Co. imported a Machinery worth Rs. 50,00,000 by paying

the necessary duties. In that, one part costing Rs. 5,00,000 was defective and the
supplier was willing to replace the same free of cost if the defective part was sent to
him. If the company wants to export the same and receive the replacement part,
consider the custom duty, procedure for the same.

b) Prabhu Helicopter Pvt. Ltd. had sent its engine for repair purpose to Singapore on
Bhadra 5, 2076. The value of engine is US$ 2,000,000 and incurred US$ 200,000
repair cost (including spare parts replacement). The engine was back in Nepal
after repair on Falgun 5, 2076. What is the time limit for goods to be brought back
which were sent to a foreign country from Nepal for the purpose of repair?
Calculate the amount of Custom deposit at the time of sending the engine to
Singapore and Custom duty to be charged on returning of engine. Assume rate of
custom duty is 14%. Exchange rate on Bhadra 5, 2076 is 1 US$ = Rs. 115.50 and on
Falgun 5, 2076 is 1 US$ = Rs. 112.50.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 CASE STUDY:

c) Butwal Power Company Ltd. had sent its machines for repair purpose to Norway
on Magh 1, 2072 and the value of machine is US$ 800,000. Since, the repair process
is too longer time and the company takes permission from custom office for
extended time for re-import for 5 months from date of export. The machine was
returned after repairing on Chaitra 31, 2072. The bill provided by Norway for repair
is of US$ 250,000 (including spare parts replacement). Calculate the custom
deposit/bank guarantee at the time of sending machine to Norway and custom
duty to be paid on returning of machines. Assuming the custom rate to be 14%.

Exchange rates were as follows:

On Magh 1, 2072 Rs. 102.50
On Chaitra 31, 2072 Rs. 104.50

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 EXPORT OR IMPORT OF GOODS FOR REPAIR (RULE 7)

 As per Sub Rule (6) of Rule 7, In case it becomes necessary to bring any goods
from a foreign country to Nepal for the purpose of repair or to send back such
goods from Nepal to abroad after repair thereof, full particulars regarding the
number, specification and size of such goods shall be filled up in the declaration
form and submitted to the Customs officer.

 As per Sub Rule (7) of Rule 7, In case any declaration form as mentioned in sub-
rule (6) is received, Customs officer may allow passage for such goods, after
receiving deposits equivalent to the chargeable Customs duty and noting the
time limit of six months for the export of such goods.

 As per Sub Rule (8) of Rule 7, As per sub-rule (7), the goods imported for repair
is returned within six months time limit and the documentary evidence is
presented for the payment of repair, the Customs duty deposited at the import
time shall be refunded. In case goods are not returned or the specification of the
goods did not match with the goods that is presented for export or documentary
evidence for the payment is not presented, such goods and the deposited
amount at the time of importation shall be seized.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 EXPORT OR IMPORT OF GOODS FOR REPAIR (RULE 7)

 As per Sub Rule (9) of Rule 7, In case airline company registered to operate airlines
have to export engines of airplane or helicopter for repair and during the period of
repair if the airway company has to import engine on rent from the foreign
country, the company may import engine on bank guarantee equivalent to
Customs duty in the Customs office and such import should be for maximum
period of six months. If the engine is exported within the period, the bank
guarantee will be released. If the engine is not exported within the period, the
Customs duty should be charged treating engine as fresh import.

 As per Sub Rule (10) of Rule 7, Notwithstanding anything contained in this rule,
on the recommendation of the Ministry of Foreign Affairs, the diplomatic mission
may export to repair goods and import after repair without deposit and on record.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 DETERMINATION OF DUTY PRIOR TO ARRIVAL OF GOODS AT CUSTOMS
OFFICE

 As per Sub Section (1) of Section 24, If any importer wishes to pay the duty
chargeable on any goods to be imported by the importer prior to the arrival
of such goods at the concerned Customs Office, the importer may, for that
purpose, make an application, accompanied by the declaration attaching
documents as per Section 18 to the Customs Officer.

 As per Sub Section (2) of Section 24, If, on examination of the application
received pursuant to sub-section (1), it appears reasonable to so collect the
duty, the Customs Officer may determine the duty pursuant to Section 22.
Duty such determined shall be paid at Custom Office by the Importer.

 As per Sub Section (3) of Section 24, If the rate of duty determined pursuant
to sub-section (2) or the exchange rate of convertible foreign currency
prevailing on the day of payment of duty differs from that prevailing on the
day of clearance of goods, the rate prevailing on the day of clearance of
goods shall be applied.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 CASE STUDY:

Mr. Ram Krishna Neupane wanted to import the goods from USA. The goods which
are to be imported did not arrive to Customs boarder but he wanted to make the
payment of duty in advance so that goods after arrival could be cleared from
Customs faster. He paid the customs duty on March 26, 2020 for the goods to be
imported at the exchange rate of 1 USD = Rs. 112. The goods arrived on April 26, 2020
and Mr. Neupane wanted to clear the goods on that day and the exchange rate on
that day was 1 USD = Rs. 116. Mr. Neupane claims that there will not be any impact of
the difference in exchange rate as he has already paid the duty in advance. State your
views on the claim of Mr. Neupane referring the provisions of Customs Act/Rules.
Will there be any difference if the exchange rate on April 26, 2020 was 1 USD=Rs.
110?

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 CASE STUDY:

Rock Cement Industries (P) Ltd. has paid custom duty of Rs. 70,000 as deposit at
the custom duty rate of one percent on Rs. 7,000,000 ($100,000 @ 70 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. 70,000. The quantity and date of import
were as follows:

MT Exchange Rate for 1

Date (QTY) USD

18.07.2076 8000 71

19.07.2076 2000 70
Is the duty calculated on import i.e. Rs. 70,000 correct? State the Provision relating
to computation of custom at the time of clearance of goods.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 POST CLEARANCE AUDIT (SECTION 34)

 As per Sub Section (1) of Section 34, In order to ascertain whether the goods
check pass by the Customs Office are the same as declared by an
importer/exporter or confirm to the declaration made by the importer/exporter
or not, the Director General or customs officer may audit, inter alia, the
importer/exporter's books relating to the purchase, import/export or sale of
goods, records, books of accounts or similar other documents, bank records,
computer system and all records related to his or her business. While doing such
audit duty can also be determined if feel necessary.
 As per Sub Section (2) of Section 34, If, upon audit made pursuant to sub-
section (1), it is found that the goods imported by the importer or exported by
the exporter are different than those declared by the importer/exporter or are
inconsistent with the declaration made by the importer/exporter or the
transaction value or the quantity of the goods has been declared less and by
virtue thereof lesser duty has been recovered, the Customs Officer shall
immediately recover from the importer/exporter the duty chargeable on such
less value or quantity at the time of import/export and take action against such
importer/exporter for the declaration of less transaction value or quantity,
pursuant to this Act.
However, when less transaction amount is declared hundred percent of the duty
chargeable will be collected as fine.`
CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES
 POST CLEARANCE AUDIT (SECTION 34)
 As per Sub Section (3) of Section 34, If, upon audit made pursuant to sub-section (1),
it appears that less duty has been recovered by the reason of difference in sub-
heading of commodity classification or due to exemption of applicable duty, the
concerned Customs Office shall recover such shortfall amount of duty and fine
equivalent to that of shortfall amount from the importer/exporter.

 As per Sub Section (4) of Section 34, The Director General or the Custom Examiner
while auditing under sub section (1), if observed that required information related to
goods has not been clearly declared, shall use and follow the power and procedure
with respect to it, to collect additional amount pursuant to existing laws, summon
the concerned person, take his or her deposition, examine the evidence, require the
submission of documents, issue notice.

 As per Sub Section (5) of Section 34, If, upon audit made pursuant to sub section (1)
section, the importer/exporter does not appear within the given time or does not
submit the document and evidence, the Director General or the Customs Examiner
shall audit on the basis of available documents and evidence, by imposing a fine
pursuant to Sub-section (15Ka) of Section 57 and withholding the import export
transactions.
However, if additional document evidence is found with respect to the
importer/exporter after audit is made pursuant to this sub section section, this sub
section shall not be deemed to prohibit conducting re-audit based on such
additional documents.
CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES
 POST CLEARANCE AUDIT (SECTION 34)

 As per Sub Section (6) of Section 34, Before providing order for recovery of fines
and additional amount pursuant to Sub Section (2) and (3), concerned person
shall be provided fifteen days time to submit the clarification.

 As per Sub Section (7) of Section 34, The duty and fine amount determined
under this section shall be deposited within thirty-five days from receiving the
order to deposit the amount by the person so ordered. Duty and fine amount not
paid within mentioned time shall bear interest at the rate of fifteen percent
annually for the period beginning with the date of order.

 As per Sub Section (8) of Section 34, If, any importer/exporter does not deposit
the amount that should be deposited pursuant to sub-section (7), Customs
officer shall freeze moveable or immoveable property of such importer/exporter
and collect such amount from the said property.

 As per Sub Section (9) of Section 34, If any amount cannot be collected Pursuant
to subsection (8), the due amount shall be collected as government debt.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 POST CLEARANCE AUDIT (SECTION 34)

 As per Sub Section (10) of Section 34, Pursuant to this section, The director
general or the customs examiner shall, if necessary, require submission of
documents relating to the importer/exporter, businesses owned by the
importer/exporter, payment of goods, bank accounts, profit and loss statement,
tax details, invoices or other such required documents from concerned bank or
Financial institution, and any other organization or individual related to
importers/exporter’ business. When asked upon, the organization or individual
should compulsory furnish the documents as required.

 As per Sub Section (11) of Section 34, The audit referred to in this Section may
be made until four years after the date of clearance of goods.
If it is proved that exporter or importer has submitted false writing or paper
and has deposited the duty amount less than the actual, Customs Inspector
with the approval of Director General may audit beyond 4 years.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 IMPORT FROM INDIA (SCHEDULE 1 SECTION 3)

In case of goods produced in India and imported from India through Letter of
Credit, a concession of 5% on the prescribed rate if the customs duty on the goods is
from 5% to 30% and 3% in case the tariff is more than 30% shall be provided. In
case the tariff is fixed on the basis of quantity of the goods, such concessions are not
provided.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 CASE STUDY:

Adrian EXIM Co. Ltd. has imported motorcycles by

declaring INR 6,000,000 CFR Raxaul though Letter
of Credit. Customs Officer assessed at the customs
point and found that there is under-invoicing by
50%. How can the Customs Officer assess the
import? If the under-invoicing was found out
during post clearance audit, how would the
assessment be done? Customs and Excise Duty
Rates are respectively 60% and 40%.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 CASE STUDY:

Bheri Transport Company has purchased 2 chassis of truck @ Rs 1,500,000

from Sipradi Trading Pvt. Ltd. on 1 March 2020.

 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.

 Chassis were sent to Lucknow on 5 March 2020 and returned on 25 April

2020. The body maker company has charged @ INRs. 800,000 for
constructing body of trucks and imported in Nepal through Letter of
Credit.

Calculate custom duty payable on this transaction. Custom rate is 15%.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

GOODS DEPOSITED IN CUSTOMS GO-DOWN SHOULD BE CLEARED (RULE
32)
 As per Sub Rule (1) of Rule 32, The owner of the goods should arrange for clearance
of goods within sixty days from the date of deposit of such goods in the customs
go-down.
But the chief of the customs office may notify the owner of the Goods to clear
goods within a reasonable time limit before the expiry of the date on the ground
that the goods are harmful, perishable, not appropriate to keep in the go- down
or unavailability of the go -down space. If the owner of the goods does not clear
within the notified time, the chief of the customs may take action under section
47 of the Act.

 As per Sub Rule (2) of Rule 32, The Manager of the go-down managed by the other
person should notify the customs office immediately the list of goods not cleared
by the owner of the goods under sub-rule (1).

 As per Sub Rule (3) of Rule 32, After receiving the list under sub-rule (2), the chief
of the customs office should take action immediately as per section 47 of the Act.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 OWNERSHIP OF GOODS SEIZED AND NOT CLEARED FROM CUSTOMS
BELONGING TO GOVERNMENT OF NEPAL
 As per Sub Section (1) of Section 47, Any goods which are seized under this Act shall
belong to the Government of Nepal.

 As per Sub Section (2) of Section 47, The owner of goods concerned shall take
delivery of the goods held in customs within the prescribed period.

 As per Sub Section (3) of Section 47, The concerned Customs Office shall publish a
seven-day public notice for taking delivery of the goods which have not been cleared
within the period referred to in sub-section (2).

 As per Sub Section (4) of Section 47, If, after the publication of the notice referred to
in subsection (3), the owner of goods concerned makes an application, accompanied
by a reasonable ground for not being able to clear the goods within the period
referred to in sub-section (2), to the Customs Office and such reason appears to be
reasonable, the Customs Officer may, by collecting the chargeable duty, permit the
owner to clear such goods.

 As per Sub Section (5) of Section 47, The concerned Customs Officer shall forfeit the
goods not cleared from the Customs Office even upon the publication of the notice
as referred to in sub-section (3). Such goods shall belong to the Government of
Nepal. CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES
COMPENSATION FOR GOODS WITHHELD IN CUSTOMS OFFICE OR GODOWN

 As per Sub Section (1) of Section 69, The Customs Office or the godown shall so
safely keep the goods held in the Customs Office or the godown that no loss or
damage is caused to such goods.

 As per Sub Section (2) of Section 69, If the goods referred to in sub-section (1) are
stolen, lost or otherwise destroyed, damaged or get damaged, except for a wear and
tear due to a natural calamity or accident or wear and tear likely to arise normally in
the course of holding or lifting goods, the owner of such goods shall be entitled to
recover, as prescribed, compensation for such goods from the Customs Office or the
body operating the godown.
However, such owner shall not be entitled to make a claim for compensation unless
and until his or her title to such goods is established.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 COMPENSATION FOR THE GOODS (RULE 56)

 As per Sub Rule (1) of Rule 56, The owner of goods seeking compensation pursuant
to section 69 of the Act, should send application to the customs office or the
operator of the go-down stating the clear reasons for compensation along with the
documents to prove the claim.

 As per Sub Rule (2) of Rule 56, In case of receiving application pursuant to sub rule
(1), such application should be examined and if it is found that the compensation
needs to be provided, decision should be taken to provide compensation to the
total amount of price quoted in the invoice for which compensation is asked and
five percent addition to the price quoted.

 As per Sub Rule (3) of Rule 56, In case of goods deposited for the purpose of
import in the go-down operated by the other person provided compensation
pursuant to sub rule (2), the amount equivalent to custom duty on import of such
goods should be deposited at the concerned customs office within seven days of
providing the compensation as per sub rule (2).

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 CASE STUDY

Delta Pvt Ltd. kept 15000 liter of Alcohol raw material with custom code 2207.03.34
in first 1st March 2020 in warehouse of Gama Pvt.Ltd. near Gaurifanta custom office.
In April 30 , 2020 CFO of Delta Mr. Khagendra visited warehouse and found shortage
of 1500 liters of raw materials due to mishandling by warehouse representative. Cost
per liter of raw materials is NPR. 2,200 but the market price is NPR.2500 per liters.
CFO claimed that 1500 liters raw materials cost shall be reimbursed by Gama with
market price of NPR. 2500 per liters but representative of Gama Mr. Rajib is disagree
with CFO Mr. Khagendra because Mr. Rajib argue that goods kept in warehouse
should have been cleared within 60 days from the date of goods entered into
warehouse and therefore no claims can be entertained by Delat CFO. Mr. Khagendra.
The applicable customs duty is per liter NPR 40. As consultant of the warehouse
operator and Clients advice to Both the company by stating the relevant provision of
Customs Act 2064 and Custom Regulation 2064.

CA. PRABIN RAJ KAFLE, P.R.K. ASSOCIATES

 SUMMARY OF CUSTOM ACT,2064
&
CUSTOM RULES, 2064
INCOME YEAR
2076-77

PRESENTED BY :
CA. PRABIN RAJ KAFLE
FCA, M Com

FOR:
INSTITUTE OF CHARTERED ACCOUNTANTS OF NEPAL (ICAN)
SATDOBATO, LALITPUR
 DEMURRAGE

 As per Sub Section (1) of Section 72, If the owner of goods stored in a customs
godown operated by the Customs Office does not get clearance and get delivery
of such goods within the prescribed time limit, demurrage shall be charged as
prescribed.

 Provided that no demurrage shall be charged in the case of those goods which
could not be cleared by the Customs Officer because of confusion about the
valuation, classification of goods or for other reason.

 As per Sub Section (2) of Section 72, Notwithstanding anything contained in

sub-section (1), if there is a reasonable ground for remitting demurrage
chargeable on any goods because of the occurrence of any special circumstance
or condition, the prescribed authority may make full or partial remission, as
prescribed.
 DEMURRAGE

 As per Sub Rule (1) of Rule 50, No demurrage shall be charged for seven days from
the date on which goods are stored in the customs office operated warehouse.

 As per Sub Rule (2) of Rule 50, In case goods are not cleared within the time limit
prescribed in sub-rule (1) the demurrage shall be charged from the eighth day at a
rate mentioned in Schedule 9 as follows. The demurrage shall not be more than the
customs value of goods.

Rate of demurrage charge (SCHEDULE 9)

Airport Custom Office Other Custom Office

Upto 30 Days 60 paisa per KG Upto 30 Days 40 paisa per KG

per Day per Day
From 30 days to Rs. 1 per KG per From 30 days to 60 60 paisa per KG per
60 Days Day
Days Day
More than 60 Rs. 1.40 per KG
More than 60 Days 80 paisa per KG per
Days per Day
Day
For the purpose of calculating demurrage charges weight of entire goods of one
declaration form or one consignment shall be taken. If weight is less than 1 Kg then
1 kg shall be taken into consideration.
 CASE STUDY:
Shrestha Electric Co. Ltd. has imported 10,000 Kg. different types of electronic
goods from Singapore and 7,000 Kg. goods were arrived in Birgunj Custom Office
and 3,000 Kg. goods were arrived in Tribhuvan International Custom Office on
Shrawan 1, 2076. But due to shortage of funds the company could take delivery of
the goods only after 90 days from Birgunj as well as Tribhuvan International
Custom Office.

Required:
Whether Custom Office can charge demurrage in the above cases as per Custom
Act?
If yes, what would be the demurrage charge?

Explain who has authority to grant remission for the demurrage.

 CASE STUDY:

M/s ABC Impex has imported three consignments which are lying at the Tribhuban
International Airport custom office warehouse from January 01, 2020. Consignment
one is of 10,000 Kgs, consignment two is of 20,000 Kgs and Consignment three is of
30,000 Kgs. The consignments could not be cleared within next seven days. From the
next date of expiry of seven days, consignment one got cleared on 30th day,
consignment two got cleared on 60th day and consignment three got cleared on 90th
day. Is ABC Impex liable to pay demurrage in any of cases specified and if yes in any of
the case, then calculate the amount as per the act and rules? For the purpose of
calculation, customs value of consignment one, two and three is Rs. 500,000, Rs.
2,000,000 and Rs. 2,500,000 respectively. Give your answer along with the relevant
provisions of act and rules on demurrage.
 CASE STUDY:
Delta Importer Pvt. Ltd has imported special type of the machinery during the
financial year 2076/077. Due to certain problems the imported machine was only
cleared from customs office after 120 days on entering the goods into custom point.
Details regarding import of special type of machine are as below.

Particular NPR/USD
FOB Price of machine Imported( Manufactured by Russia and Supplied
by Singapore) $40,000
Rate of Exchange on date of clearance $1 NRs 115.56
FOB price of identical machine already imported in Nepal is 4,000,000
Air freight: Supporting document not available. Estimated value of Air freight is NPR.
250,000 was determined by the custom officer for air freight.
Local Transportation 75000
Insurance(Out of which NPR. 65,000 paid to Nepal insurance company) 230,000
Custom Agent Commission 75000
Cost of installation in Nepal 75000
Custom Rate 22%
Weight of Machine (Kg) 421.3

Required:
Compute total amount payable to custom officer under Custom Act, 2064 and
Financial Act, 2076.
 EXPORT OR IMPORT THROUGH THE SMALL CUSTOMS OFFICE

As per Sub rule (1) of Rule 62, Following goods may be exported or imported
through the small customs office:-
(Ka) On the export, unprocessed agriculture goods and the local natural
production.

(Kha) On import, Goods of any value listed in Schedule 12 from Small Custom
Office,

(Ga) On import, Goods valuing up to Rs. 25,000 listed in Schedule 13 from

Branch Custom Office

(Gha) On import, Goods valuing up to Rs. 10,000 from Small Custom Office
other than Branch Custom Office mentioned in Clause (Kha) and (Ga)
 EXPORT OR IMPORT THROUGH THE SMALL CUSTOMS OFFICE

 As per Sub rule (1Ka) of Rule 62, Notwithstanding anything containg in Sub Rule
(1), Permanent or temporary import of any type of machine driven vehicle is not
allowed from small custom office except imported through approval from Director
General.

 As per Sub rule (2) of Rule 62, While exporting or importing goods pursuant to this
rule, export or import of goods other than the immediate neighbouring countries
are not permitted.

 As per Sub rule (3) of Rule 62, Director General may frame and implement the
procedure to manage the export or import through the small customs offices.
 ARRANGEMENT FOR PRIZE (RULE 47)

 As per Sub Rule (1) of Rule 47, Anybody who capture person(s) smuggling while
importing or exporting or seeking to smuggle goods while importing or exporting,
or furnish information relating thereto, shall be granted rewards at the rates
mentioned below in case it is proved that such goods have been smuggled while
importing or exporting or have been sought to be smuggled while importing or
exporting. The reward shall be paid from the proceeds of the auction of such
goods after the case is settled.
(Ka) For persons furnishing information about attempts to smuggle
while importing or exporting, fifteen percent,
(Kha) For persons seizing goods being smuggled while importing or
exporting and producing the same along with the smuggler, thirty
percent,
(Ga) For persons who only seize and produce goods being smuggled
while importing or exporting, twenty percent.
 As per Sub Rule (2) of Rule 47, According to this rule, if the reward for informer
has to be given to the government employee, receipt of payment and the copy of
the identity card must be enclosed in the record. If the informer is not the
government employee but an individual, receipt of payment and the copy of the
identity card of the individual must be enclosed in the record.
 ARRANGEMENT FOR PRIZE (RULE 47)

 As per Sub Rule (3) of Rule 47, If the individuals getting reward as per sub rule
(1) are more than one person, the amount of reward will be proportionately
distributed.

 As per Sub Rule (4) of Rule 47, Notwithstanding anything contained elsewhere
in this regulation, the reward will not be paid if the informer does not comply
with the regulation.
Clarification:- For the purpose of this rule “ The proceeds of the auction
of the goods” means the auctioned value or sales value, which does not
include the legal taxes.
 As per Sub Rule (5) of Rule 47, Notwithstanding anything mentioned in Sub-
Rule (1), in order to grant reward to the person who gives clue and submits the
goods along with arresting with or without person in the case of gold, silver or
ornament, the reward shall be granted ten percent of the amount received
through auction or sale or one million rupees whichever shall be less.
Clarification:- For the purpose of this rule “ The proceeds of the auction
of the goods” means the auctioned value or sales value, which does not
include the legal taxes.
 SUMMARY OF CUSTOM ACT,2064
&
CUSTOM RULES, 2064
INCOME YEAR
2076-77

PRESENTED BY :
CA. PRABIN RAJ KAFLE
FCA, M Com

FOR:
INSTITUTE OF CHARTERED ACCOUNTANTS OF NEPAL (ICAN)
SATDOBATO, LALITPUR
 REBATE ON VEHICLES AND OTHER ITEMS IMPORTED WITH CUSTOMS DUTY
PRIVILEGE (SCHEDULE 1 SECTION 9)

 Vehicle and equipment imported under diplomatic facilities or duty facilities or

imported by project or project contractor or consultant under a condition of return
back of such assets under full or partial duty facilities or bank guarantee facility or
deposit facility or imported by any other association under full or partial duty facility,
or vehicle imported on full or partial duty facility on personal purpose, gifted or sold
or retain by the importer, for finding the customs value, the customs officer shall
deduct 10% on the value fixed at the time of import on WDV method for a maximum
period of five years.
 Customs value (after depreciation) is calculated in foreign currency (based on the
time of import). Such foreign currency shall be converted into Nepalese currency as
per current rate.
 Depreciation will be calculated from the date of manufacturing less the period spend
in foreign country.
 CASE STUDY:
Avengers Pvt. Ltd. has entered into a contract for the purchase of following equipment’s
under following terms and conditions from Stark Enterprises. The equipment’s were
imported by Stark Enterprises under Bank Guarantee facility. The import details are as
follows:

Name of Equipment Original Cost (In Euro) Import Date

Excavator (2 Pcs) 500000 2070.04.01
Lorry (1 Pc) 100000 2074.04.01

Terms and Conditions:

i) Total Purchase Price of Both Equipments shall be Euro 150,000.00
ii) Custom Duty shall be paid by Avengers Pvt. Ltd.
Ignore Excise Duty, CSF and other taxes. Custom Duty rate is 10% for both equipments.
Required:
Calculate Custom Duty to be paid by Avengers Pvt. Ltd., if custom clearance is done on
2076.04.01 (Exchange Rate: Euro 1 = Rs. 120).
 CASE STUDY:

A car manufactured in 2010 was imported in Nepal in 2013 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, 2020 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, 2020.
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. Assume Custom Service fee is Rs. 500.
Calculate all duties and taxes payable to the customs office.
 GOODS TO BE BROUGHT IN BY PASSENGERS
 As per Schedule 1 Section 2 of Custom Act,2064, goods imported other than duty
exempted, accompanied or unaccompanied by a passenger, as per the baggage
rules shall be charged a lump sum customs duty at a flat rate of 40% instead of
levying chargeable Customs Duty, Excise Duty and Value Added Tax. If the
baggage is unaccompanied, there will not be a change in calculated figures.

 As per Schedule 1 Section 2 (1) of Custom Act,2064, customs duty shall be charged
as per the tariff rates on goods such as silver ornaments, cigarettes, pipe tobacco,
liquor, means of transport, arms and ammunitions and other goods requiring
import license even if it is part of baggage.

 As per Schedule 1 Section 22(12) of Custom Act, 2064, as per the notice published
in Nepal Gazette regarding baggage rules, Nepali travellers bringing LCD
Television, Plasma or LED TV shall be charged at the rate of 55% as lump sum
customs duty instead of levying chargeable customs duty, excise duty and value
added tax.

 However, if any types of television up to 32 inch brought in by Nepali citizen

coming from foreign employment by working at least 12 month continuously then
no such duty shall be charged for one time only. No such rebate shall be allowed if
its size is in excess of 32 inch.
 GOODS TO BE BROUGHT IN BY PASSENGERS

As per Schedule 1 Section 2 (4) of Custom Act, 2064, if a foreign traveller, brings
with him/ her gold and silver ornament, for personal purpose and later to be taken
back while returning, in excess of 50 grams (for gold) and 100 grams (for silver) and
declares at customs point, then after testing and verification, such ornament is
allowed to make entry by depositing 20 percent of ornament value. While returning
back, such amount of deposit shall be refunded. But during testing and verification,
quality and quantity of ornament is found to be different from what has been
declared at customs point, then this shall be a punishable offence as per section
57(1) of Customs Act, 2064.
 CASE STUDY:

a) Mr. Ram Prasad brought an item A that is other that duty exempted goods from
abroad (accompanied baggage with him) whose value amounts to NPR 10,00,000.
Prevailing Excise duty is @30%, Customs Duty @ 30%, VAT 13%. Calculate the
excise duty, customs duty and VAT payable by Mr. Ram Prasad as per the
provision of the customs act (amended by Finance Act, 2076). Will there be
change in calculated figures if the baggage is unaccompanied with him?

b) If such item A is Arms and Ammunitions, does the customs act (amended by
Finance Act, 2076) tax separately from above case?

c) If Mr. Ram, as a Nepali traveller, brings home LCD plasma or LED TV amounting
to Rs. 500,000, then what will be the customs duty payable?
 CASE STUDY:

If Mrs. Sweety, a foreign traveller, brings gold ornament of 160 grams and silver
ornament 220 grams for personal usage amounting to Rs. 500,000, then what
amount Mrs. Sweety needs to pay as per the Customs Act (amended by Finance
Act, 2076)? Also give your answer with relevant provision while returning back
to her country.