EXCISE AND CUSTOM LAWS (PRACTICAL APPROACH) VOLUME 2 2080-81

EXCISE ACT, 2058 & EXCISE RULES, 2059

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QUESTION
1. Mention the process related to levy and collection of Excise Duty.

CASE :

2. Sumy Distillery is sole proprietor firms registered in the name of Saud Chandra Prakash
produce liquor products. It has purchased 50 OP rectified spirit of 1000 liters from
Annapurna Sugar Industry Pvt. Ltd. Factory is monitored by Excise Officer it was found
that the Factory produce 1200 liter of 25UP wine name ―FEEL CHANGE. Excise duty is
NPR.680 per LP liter.

Required:
a. Volume of Feel Change wine produced (25UP) from the 50 OP rectified spirit of 1000 liters.

b. Find out amount of Excise duty if 75% of production is discharged from the Factory for
sales.

c. Find out amount of Excise duty if 90% of production is discharged from the Factory for
sales.

3. M/s Nepal Wines P. Ltd. imports whiskey from abroad and sells in local market. It
purchased following type and quantity of drinks recently. Calculate the Excise duty
payable on this consignment based on following information:

Code Item Qty Rate (CIF Kathmandu) Excise

Rate (Rs.)
2208.30.91 Whisky 500 $40/Ltr 1,872
15 U.P. Liters L.P. liter
2208.30.93 Whisky 600 $35/Ltr 1,578
30 U.P. Liters L.P. liter
2208.40.92 Rum 400 $ 30/Ltr 1,584
42.8% Liters L.P. liter
Alcohol
2208.90.95 Others 50 600 $ 25/Ltr 900 L.P.
U.P. Liters liter
- Others 300 $ 20/Ltr -
20% Liters
Alcohol

U.P. = Under Proof, L.P. = London Proof

Additional information:
1. Custom Duty applicable on all drinks is Rs. 2,000 per liter.

2. There is no code for 20% alcohol content in the Excise Tariff. Excise Duty for Others

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17.12% Alcohol (Code 2208.90.96) is Rs. 138 per L.P. liter. The applicable duty will be as
per the clarification provided in the Excise Tariff Annexure.

3. Ignore other duties and fees applicable.

4. Exchange Rate 1 USD = Rs. 120

4. Mayur Tobacco P. Ltd. has following transactions in the month of Chaitra 2080. You are
required to calculate the Excise Duty to be claimed for refund. There is no deposit
maintained with the Excise authorities and it follows physical control system. 10
Excise duty paid on import of raw materials 2,500,000
Excise duty paid on import of packing materials 400,000
Value of export of cigarette 30,000,000
Value of local sale of cigarette 50,000,000
Discount given on local sale 500,000
i) Would the answer be different if the value addition on the imported material is less
than 15%.
ii) What is the timeline by which the refund will have to be claimed?
iii) What is the normal time by which the Excise Officer shall refund the Excise Duty
refund claim?
5. Based on the following information of Butwal Rolling Pvt. Ltd for the month of Falgun
2080, you are required to calculate:
i) amount of Excise duty payable
ii) amount of custom duty payable and
iii) amount of VAT on sale, VAT on purchase & net VAT Payable for the months.
Sales
Particulars Unit Quantity Sales Amount
GI Wire Kg. 106,384 8,776,629
TOR Steel Bar Kg. 155,201 13,968,045
Angle Kg. 71,387 6,103,578
TMT Bars Kg. 40,399 3,514,691
Channel Kg. 40,430 4,548,404
Total 413,801 36,911,346

Import
Particulars Unit Quantity Amount
TOR Steel Bar Kg. 31779.15 1,271,166
Billet Kg. 339,859 20,391,514
Wire Rod Kg. 113,932 6,152,284
Zinc Kg. 4,031 907,031
Total 489,601 28,721,995

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Additional information related to customs and excise duty:

• Assuming Rate of Customs Duty: Billet / TOR Steel Bar- 5%, Wire Rod -10% and Zinc -
5%.
• Rate of excise is NPR. 1.65 per kg on excisable items and 5% on import items.

6. Royal Stag Distillery has been manufacturing 65 UP Alcohol using Molasses as prime raw
material. The input output ratio is 20 litre per quintal of molasses. During the month
Bhadra 2080, it has purchased 200 quintal Molasses on which the excise duty is Rs. 50
per quintal. The excise duty payable on 65 UP Alcohol is Rs. 90 per liter. It is assumed
that all the production has been sold, out of which 70% is sold to a duty-free shop under
recommendation from Inland Revenue Office. Calculate the net Excise Duty payable for
the month?

7. XYZ Industries Pvt. Ltd. produces tobacco products for which the raw materials and
packing materials are imported from India. Excise duty is paid on the same at the time of
imports. The company value adds 20% on the raw material to make the final product and
export to India and other third countries. Answer the following with reference to Excise
Act and Rules:
i) Will excise duty paid on the import of raw material and packing materials be allowed to
claim for credit or refund?
ii) Will the answer be same if the custom duty on such raw materials is not levied?
iii) Can the excise duty paid on import of raw materials in the month of Shrawan 2079 be
claimed in the month of Ashwin 2080?
iv) Can the excise duty on raw materials be claimed for refund if the value addition is 10%
only?

8. Mr. Ram is a Business Man Established its business in Kathmandu last year. During
this year Mr. Ram has converted its business goods from non-excisable goods to
excisable goods. On dated Ashad end 2081, Mr. Kamal Excise officer visited the business
house of Mr. Ram found that non-excisable goods are converted to excisable goods in
business without paying any excise duty as required by the Excise Act 2058. But Mr.
Ram is arguing that he has converted the non-excisable goods to excisable goods so no
need to pay excise duty as demand by Excise officer. State the consequence in the action
taken by Excise officer

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9. XYZ Ltd. dealing excisable goods and services under physically controlled system. As per
the books of account of the company, there is excise payable of NRs. 1,500,000 of which
Rs. 500,000 is related to sales of 1 Baisakh 2081, Rs. 700,000 is related to sale of 25
Baisakh 2081 and the balance amount is related to sale of 10 Jestha 2081. The company
has not paid the excise amount till 31 Asadh 2081. In this case, briefly mention the duty
payment system and calculate late fee if excise payable amount is paid on 31 Asadh 2081.

10. Comment on the following

i. Excise Duty shall be paid at Custom point at the time of import of excisable goods
ii. Excise Duty shall be paid at the time of production and issue for sale of excisable
goods of physical control system.
iii. Excise Duty shall be paid at the time of issue of invoice of excisable goods of Self
Removal System
iv. Person has to be registered under Excise who stores excisable goods
v. Bank Guarantees can be given at the time of import for excisable goods against Excise
Duty payable at Custom point for the importer who exports its 80% of production.
11. A manufacturing company producing excisable goods and have obtained approval for self-
removal system. As per the financial statements for the year 2080/81 of the company,
there is excise payable of Rs.2,50,000 of which Rs.100,000 is related to sales of Baishakh,
2081, Rs.50,000 is related to the sales of Jestha, 2081 and the balance amount is related
to the sales of Ashadh, 2081. The company has not paid the excise amount till
15thBhadra, 2081.
In this case, briefly mention the excise duty payment in case of self removable system and
calculate fee if applicable till 15thBhadra, 2081.
(Assuming No. of Days: Baishakh 2081: 31, Jestha 2081: 31, Ashadh 2081: 32, Shrawan
2081: 32, Bhadra 2081: 31).

Mention the process related to levy and collection of Excise Duty.

12. A manufacturing company producing excisable goods and have obtained approval for self
removable system. As per the financial statements for the year 2080/81 of the company,
there is excise payable of Rs. 1,50,000.00 on which Rs. 50,000.00 is related to the sales of
Jestha, 2081 and the balance amount related to the Ashad, 2081. The company has not
paid the excise amount till 15 Bhadra, 2081. In this case, briefly mention the excise duty
payment in case of self removable system and calculate fee if applicable till Bhadra 15,
2081.

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13. Is there any provision under which an industry shall enjoy excise exemption
under Excise Act, 2058 although its products are excisable?

14. After the success of Visit Nepal Year 1998 and Nepal Tourism Year 2011, the
Tourism Board of Nepal introduced Visit Nepal Campaign 2020. The Campaign
was announced in 2015 to be held in 2018 but was later postponed to 2020.
The mainstream media publicized Nepal as utterly devastated by the
earthquake in 2015 and failed to show that Kathmandu with other major
cities was almost intact. The earthquake significantly affected the inflow of
tourists in 2016 as the number of tourists halved compared with the previous
year. Currently, the country sees nearly one million tourist visitors yearly and
expect to double this number promoting Visit Nepal Campaign aggressively.
M/s Khagendra Distilleries manufacturer of all kinds of Alcohol products
including Beer Whiskey rum etc. International Brands in Nepal registered with
company registered office of Government of Nepal and Inland Revenue
Department.

Chief Operating Officer and Chief Finance Officer (CFO) of M/s Khagendra
Distilleries have planning to introduce the following scheme for targeting
and promotion of Tourist in 2020.
Particular Budget Remarks
Kathmandu –Pokhara (two ways) USD 212 2 Person
Kathmandu-Bhairahawa (two
ways) USD 200 2 Person
KTM –Bharatpur(two ways) USD 190 2 Person
Five Star hotel Accommodation in Per night and the
all places USD 100 average stay for 2 night
All Alcohol Beer and whiskey other Free No limits for dinks

COO and CFO have planned some schemes for retailer wholesaler some free
cartons of alcohol to growth sales during the tourist year 2020. CFO has
planned to book the expenses incurred during this scheme under sales
promotion expenses heading. Mr. Chief Executive Officer of the M/s
Khagendra distilleries seek your advice whether COO and CFO proposed
scheme is benefited to the company from a legal perspective.

15. Queenfisher Brewery Industries Limited, a multinational company having

manufacturing unit at Bharatpur, Chitwan manufacturing Queenfisher Brand
Beer. The management of the company announced a scheme that the
customer will get sure shot Rs. 10 to 100,000 as printed in the tin cap of the
bottle. Accordingly, the company makes the scheme to the public via Kantipur

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Daily. On the next day the department has issued a show case notice to the
company citing "why the license is not cancelled". Is the notice of the
Department is correct? Will your answer be different if the company made the
scheme to the public via Hoarding Board at Tripureshwor instead of Kantipur
daily?
16. Ministry of Culture, Tourism and Civil Aviation Nepal has planned to celebrate
Tourism Year 2020 with 2 Million target tourist in Nepal to promote tourist in
Nepal and increase the economic activities in Nepal. Mr. President NRN has
established the best beer factories in Nepal since 15 years. The Marketing
head and CFO of the company has planning to introduce some promotional
Scheme of beer targeting to Tourism Year 2020. They plan to give its
customers coins of Silver 10 gms , 20 gms and 50 gms for every one, two and
three case of beer purchase. Marketing head and CFO has proposed this
scheme to CEO Mr. Excellent but CEO seeking your advice of this promotion
plan of marketing head and CFO for Tourism Year 2020 for implement in 2020
of not?
17. Dolma Distilleries, manufacturer of Beer and wiskey both brand name is
―Change & Dance, which is facing top competition threat from similar product
manufacturer. The management of the company has decided to provide 10
beer & wiskey free for 5 cartons of Change & Dance and 2 cartons free for
every 10 cartons of Change & Dance sales. The consumer will get threes free
sales promotion from retailer. The retailer will be reimbursed the same from
dealers the company will pay to the dealers and will book under sales
promotion expenses. The company will do the luck draw schemes with TV,
Motorbike, and Car and house facility in yearend period. The management of
the company seeks your advice whether it can go for the schemes proposed by
them?

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18. Bagmati Plastic Private Limited is a 100% Foreign Direct Investment

(FDI) company established after taking necessary approval for FDI in
Nepal. The company has obtained license from the excise department for
manufacturing plastic packing materials and registered in VAT at Inland
Revenue Department (IRD). The company is one of the largest
manufacturers of Injection Stretch Blow Molded (ISBM) bottles and
containers. Innovation, segment-wise market expansion, penetration
and high degree of customer orientation have been the key factors
behind its growth. The company commenced its commercial operation
from 1st Ashad 2081.
In the production process of ISBM, input output ratio of Polypropylene
and finished product is 1:0.9. Custom duty paid @ 25% of landed cost is
not included in below data. The rate of excise duty on the product is 5 %
of the value.
The company has appointed its wholly owned subsidiary company
Gandaki Plastic Pvt. Ltd. for marketing and distribution of its product as
sole distributer. It sells its product to the distributor @ Rs. 38.15 per Kg.
Gandaki Plastic P. Ltd. in turn sells the product @ Rs. 75 per Kg. Normal
commission to distributors as per standard practice is Rs. 18 per kg. and
carriage out wards expenditure is Rs. 9 per Kg.

The company had following transactions during the month of Ashad

2081:
Import of plastic 100 tonne Polypropylene (CIF Raxaul) 1,000,000
Clearing and forwarding expenses at Raxaul 140,000
Carriage Inward incurred 96,000
Factory Wage 245,000
Other production cost 345,000
Stock of plastic Polypropylene at the end of Ashad 2081 35 tonnes
Stock of finished products at the end of Ashad 2081 35 tonnes
Purchase of Scooter (inclusive of VAT) 169,500
Purchase of Mini Truck (inclusive of VAT) 2,260,000
Required:
i) On 25th Ashad 2081 fire broke out at midnight in factory of Bagmati
plastic private limited and raw materials store was destroyed. Fire was
doused with the help of Nepal Army at 4 a.m. in the morning. What
are the obligation, consequences and time limit to company as per
VAT, Custom and Excise Act?
ii) Tax officer is of firm belief that the company is under invoicing its
product. IRD thinks to buy the stock of finished product at price
invoiced by the company. Can IRD buy the product without consent of
the company?

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iii) IRD has assessed additional VAT on finished goods sold on the ground
that the product was heavily under invoiced than the prevailing
market price. State the relevant provision of VAT Act.
iv) Calculate amount of VAT payable for the month of Ashad 2081.
v) Excise authorities are considering imposing additional excise on the
company on the ground that factory price is not derived properly.
State the relevant provision and advise the company on powers of the
excise authorities to impose additional excise duty.
19. Himalayan Noodles Pvt. Ltd, manufacturing various noodles, provided
the following information of production and sales of noodles for the
month of Chaitra, 2080. The standard norm is 94 KG production from
100 KG raw materials. It is mandatory to comply with the said input and
output ratio, otherwise it is treated as deemed sales. During the month
of Chaitra, 2081, the company provided the following information:
Particulars Quantity Amount Rs.
Opening Raw Materials
Opening stocks the flour 5000 KG 500,000.00
Opening stocks wheat Gluten` 500 KG 200,000.00
Opening Finished Goods
10,000
Everest Baby Noodles
Cartoons
20,000
Everest Flight Noodles
Cartoons
15,000
Everest Choice Noodles
Cartoons
Purchase in the month
Purchase of the flour 315000 KG 10,000,000.00
Purchase of the wheat Gluten 35,000 KG 680,000.00
Laminated plastic packet 10,000 KG 500,000.00
350000
Cartoons 1,400,000.00
cartoons
Production
55000
Everest Baby Noodles
cartoons
40000
Everest Flight Noodles
cartoons
35000
Everest Choice Noodles
cartoons
Sales

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57000
Everest Baby Noodles
cartoons
45000
Everest Flight Noodles
cartoons
34000
Everest Choice Noodles
cartoons
Closing Raw Materials
The flour 6000 KG 500,000.00
Wheat Gluten 600 KG 200,000.00
Closing Finished Goods
8,000
Everest Baby Noodles
Cartoons
15,000
Everest Flight Noodles
Cartoons
16,000
Everest Choice Noodles
Cartoons

Packing of Noodles and per packet selling price to the dealer are as
follows:

Number of packets Grams in per Selling

Sales
in per cartoon packet Price Rs.

Everest Baby
45
Noodles 50.00 12.00
Everest Flight
30
Noodles 90.00 25.00
Everest Choice
60
Noodles 55.00 15.00

Additional information:

1) All purchase are exclusive of excise duty and VAT.

2) Per packet selling price are exclusive of VAT.
3) The opening excise payable is Rs. 50,000 and VAT payable is Rs.
100,000.
4) Excise duty is as follows:
a. Flour and wheat gluten: 20 % of the Price
b. Per KG Noodles: Rs. 7.5
c. Plastic and cartoons: 5 % of the Price
5) You are asked by the company to calculate the excise duty and VAT
payable for the month Chaitra, 2081.

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20. Mr. Krishna Hari Satyam desires to start a manufacturing business. He imports
raw material from foreign country. The finished goods attract excise (which is
not tobacco related or alcohol related product) and subject to value added tax
as well. He wants to understand the legal formality under various tax laws
before he can commence his business. He approached you with the following
queries:
i) Is there any requirement of registration under Value Added Tax Act, 2052;
Excise Duty Act, 2058 and Customs Act, 2064? If so, is there any renewal
requirement? You are also required to clarify him the conditions for
registration.

ii) Can the business/license be suspended under Value Added Tax Act, 2052;
Excise Duty Act, 2058 and Customs Act, 2064 for any violation of any
provisions of those law? If so, what is the maximum period the business or
license can be suspended by tax authority?

iii) Is there any provision by which the registration under Value Added Tax Act,
2052; Excise Duty Act, 2058 and Customs Act, 2064 are withheld at the will
of the registered person? If so, how can the registration be reinstated.

21. Mr. Netra is dealing with the excise goods in his home town Kanchanpur, due to
financial crisis Mr Netra has applied for the adjournment of Excise license in
accordance with the provision of Excise Act 2058. Excise office has suspense
the excise license for three years as demand by Mr. Netra in accordance with
the section 9ka of Excise Act, 2058, on dated 2078 Magh 27. Mr. Excellent
rd
Excise officer visited the office of Mr. Netra on dated 23 Jestha 2081 and fine
Mr. Netra for not renewed as required by the Excise Act 2058. Is the action
taken by Mr. Excellent, Excise office is in accordance with the provision of
Excise Act 2058?

22. The ABC Bricks Industries is registered under the Excise Act and incurred
heavy loss since F/Y 2078/079 due to pandemic situation in Nepal. The owner
of ABC Bricks Industries wanted to adjourned the license for two years from
F/Y 2079/080 to 2080/081. As you are a tax expert, the firm wants your expert
opinion whether the adjournment for two years is possible or not? Your views
are to be based on the legal provision of Excise Act, 2058.

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23. Juice industry is producing various juices and selling to the distributors.
The industry's production cost is Rs. 80 per liter and it sells adding 15 %
value addition on production cost. An Excise officer inspected the factory
premises and juice issue point of the industry on 15 Magh, 2080. He found
shortage of 1000 liters Juice in the stock pertaining to the period of Kartik,
2080. The excise officer realized that the industry has no intention of the
fraudulent monthly excise return. However, he issued a notice on 15
Falgun, 2080 penalizing under section 16 in addition to the assessment to
the industry on the shortage stocks. The excise duty of juice is Rs. 10 per
liter. The management needs your advice on the following issues, advice by
citing the relevant provisions of excise act and rules.

i) Whether the Excise officer is correct to to assess the excise amount and
penalize on the shortage of juice?

ii) If the management realized the actual stock shortage shown by the excise
officer. What are the consequences of Excise Act on this shortage items?

24. At what conditions excise duty is exempt and what is the penalty if the
person fails to furnish information to extend co-operation as per Excise
Act?
25. ABC Co. is a transportation company which carry goods from one place to
another. Mr. Hari Bhadur Thapa called the ABC Co. and entered into an
agreement to hire a vehicle for carrying goods from Bhairahawa to
Kathmandu. The price for the service was Rs. 100,000. Hari Bhadur Thapa
loaded some barrels containing liquor and headed towards Kathmandu
along with the driver. At Mugling, the vehicle was intercepted by Excise
Police and on enquiry it was found that the liquor was illicit (forbidden by
law) liquor. The person who hired the vehicle had run away in the
meanwhile. The value of the liquor was estimated at Rs. 10 lakh. What is
the punishment under the Excise Act in such circumstances? What enquiry
is to be made before any punishment?
26. Tax office of Department of Excise has wanted to issue show causes notice
to Delta Ltd. because M/s Delta Ltd. had clearance goods without payment
of excise duty. However, M/s Delta Ltd has got information from reliable

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sources for show causes notice and deposit excise duty with interest before
issuing of actual notice. Mr. Ram and Ms. Sita both the tax officer issue
cause notice to M/s Delta Ltd. stating that why the M/s Delta Ltd. should
not be subject to a mandatory penalty equal to the excise duty sought to be
evaded under Excise Act, 2058. As a tax expert, state the conditions for levy
of penalty under Excise Act 2058 and state whether there is any discretion
to reduce Excise penalty.
27. In case of committing any offense in contravention of Excise Act by
preparing false account or forged documents.
28. Anheuser-Busch InBev is producing different types of liquors and selling its
product in Nepal as well as foreign countries. The company has obtained
license from the Inland Revenue Department as per Excise Act and
submitted its return and excise amount in regularly. By the email and post
on dated 13 February 2024 IRD has received information from an
unidentified person regarding that the company has not been maintaining
excise record properly, smuggling goods etc., conducting its activities in
contravention of Excise Act 2058. Regarding this situation what are the
actions and rewards will be given by IRO under Excise Act 2058 and give
an expert view.
29. A Valley Plastic industry is a manufacturing company producing plastic
products. The industry imports raw materials (plastic seeds) and sells
finished products. The standard norm is 95 KG production from 100 KG
raw materials. It is mandatory for compliance, otherwise it is treated as
deemed sales. During the month of Poush, 2080, the company provided the
following information:
Particulars Quantity Amount
Rs.
Opening stocks (Raw Material: 2000 KG 200,000
seeds)
Opening stocks (Finished Products) 1000 KG 200,000
Raw Material imported: seeds 20,000 KG 2,400,000
Production expenses 680,000
Sales 20,000 KG 7,600,000
Closing stocks (Raw Material) 800 KG 144,000
Closing stocks (Finished Products) 600 KG 400,000
Additional information:
• The sales amount represents the total invoice value including VAT; the
remaining items are exclusive excise prices.
• The production expenses include the wages amounting to Rs. 195,000;
remaining expenses are not excisable.
• The industry follows the FIFO method including raw materials.
• The opening excise payable is Rs. 50,000

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• The industry pays the excise duty as per the standard norms to avoid
further penalties.
In this case, you are asked by the company to calculate the excise duty
payable for the month Poush, 2080 by citing the relevant provisions of the
Excise Act, 2058. The company also requested to consider the compliance of
standards. The applicable rate of excise duty is 5 per cent in all cases, if
applicable.
30. What is the fine and penalty under Excise Act in case of following offense
by a person?
i) Excess stock that those recorded in books.
ii) Produced excisable wine without obtaining approval of brand name.
iii) Producing excisable goods without obtaining license.
iv) Using duplicate excise sticker used in production and removal of
tobacco products.
v) Not maintaining safe records for the required period of 6 years.
vi) Person other than hotel, restaurant and party palace doing business of
alcohol and tobacco mixing with other business.
vii) Obstructing the review by Inland Revenue Department and its officers.

31. Liquor World (Pvt.) Ltd. has the following stocks. Analyze and suggest the
company about the shortages as per Excise Rules, 2059.
Stock as per Physical
Stock as per Record Verification
Liquor 10,000 litres 9,890 litres
Beer bottles after Stock as per physical
pasteurization, Stock as per record verification
packaging and storing 10,000 bottles 9,600 bottles

32. M/s Sita Ram Limited, an excise licensee, intends to convert spirit into
denatured spirit and intends to sell anhydrous ethanol to Nepal Oil
Corporation for mixing with petrol. As an expert, you have to provide your
answer whether excise rules allow usage of such spirit or sale of ethanol for
other purposes.

33. Mountain Beverage Private Limited is engaged in the manufacturing and

sale of liquors. Some of the excise sticker issued by the Excise office got
damaged during manufacturing and packaging process. Please advise
management of the Company on the provisions contained for the write off
of the damaged stickers in Excise Act 2058 and Rules 2059.

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34. State the place where finished commodities are stored under Excise Duty Act.

35. Whether the Excise Duty shall be levied on the followings?

i) Production of Pet bottles (under custom code 3923) by a Beverage
Industry for packing of its final product.
ii) Sale of Molasis (Khudo) by a sugar manufacturing unit.
iii) Local production of marble.
iv) Local production of motorcycle (Electric)
v) Production and sale of Pasta /Noodles/ Macaroni

36. An International Chain Hotel wants to establish a Star Hotel in Nepal in the
Tourism year 2020. You are appointed as a local tax consultant and want the
following tax advice from you:
i) Whether the International Chain hotel requires license to establish a Hotel
in Nepal and what is the license fee for a star hotel?
ii) Whether license is required to be renewed every year and what is the
additional fee if the renewal fee is not paid on time as per Excise Act?

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