Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
Circular No. 985/09/2014-CX
New Delhi, dated the 22nd Sept. 2014
To
The Chief Commissioners of Central Excise and Service Tax (ALL),
The Director General of Service Tax,
The Director General of Audit,
The Director General of Central Excise Intelligence,
The Commissioners of Service Tax (ALL).
Madam/Sir,
Subject – Guidelines regarding Structure, Administrative set up and
Functions of Audit Commissionerates - reg
On implementation of cadre review there would be 23 Central Excise
Zones and 4 Service Tax Zones with each zone having one or more Audit
Commissionerates. Each Audit Commissionerate would cover assessees registered
under the jurisdiction of 3 to 5 Executive Commissionerates. Principal Chief
Commissioner and Chief Commissioner shall assign the jurisdiction of Audit
Commissioner in the zone, decide the location of Audit Commissionerates and its
subordinate offices. Following guidelines may be followed while finalizing the
location and organizational structure of Audit Commissionerate and its
subordinate offices, subject to deviations needed to cater to the local
requirements.
Location of Audit Commissionerate:
2.1 The headquarters and the subordinate offices of the Audit Commissionerates
could be co-located in metropolitan city based zones.
2.2 In non-metropolitan city based zones, Executive Commissionerates are spread
over different cities therefore the headquarters of the Audit Commissionerates
may be located in the city where zonal office is located, and at least one of
the Circles (subordinate office explained later) may be located in the city
where Executive Commissionerates are located.
2.3 In cases where there is more than one Audit Commissionerate in the Zone, the
location of the second or third Audit Commissionerate and its subordinate
offices may be decided based on the geographical concentration of the taxpayers.
However, the Headquarters of the Audit Commissionerate may be in the city where
the Executive Commissionerate is located. This is to ensure that audit officers
work in close coordination with the Executive Commissionerates and are
accessible to the assessees.
2.4 LTU Audit - Two LTU Audit Commissionerates have been created. LTU Audit
Commissionerate at Delhi shall have jurisdiction over assessees registered with
LTU Delhi, Kolkata or Bangalore whereas LTU Audit Commissionerate at Mumbai
shall have jurisdiction over the assessees registered with LTU Mumbai or
Chennai. The assigning of audit to the subordinate offices of these
Commissionerates may be carried out taking into account the location of cluster
of assesses. While assigning assessees to the subordinate office, assessees with
same PAN number should be assigned to one subordinate officer.
Configuration of Audit Commissionerate:
3.1 Audit Commissionerate would comprise of a Headquarters similar to an
Executive Commissionerate and subordinate offices proposed to be called Circles
similar to a Divisions. The Circles would be headed by a Deputy or Assistant
Commissioner. The Circles would comprise of Audit Groups equivalent to the Range
offices which would have Superintendents and Inspectors.
3.2 Audit Commissioner would be Head of the Department and the headquarters
would have two Additional or Joint Commissioners, who are in turn would be
supported by two Deputy or Assistant Commissioners each.
3.3 The proposed sections in the Headquarters are:
- Planning and coordination section to look after scheduling and support in
conduct of MCM meeting, maintenance and updationof Assessee Master File,
maintenance of Records/Registers and submission of reports to look after
formation / constitution of audit groups and deployment of officers matching
skills with audit requirement, maintenance of database of officer’s profile,
training needs of officers.
- Administration, Personnel & Vigilance section to look after administrative
matters, transfer, leave, allowances, budgetary grants, vigilance matters etc.
- Technical section to look after draft Show Cause Notices, audit follow up,
court cases, Board’s circulars, instructions etc.
- Risk Management and Quality Assurance section to look after risk based
selection of units, use of Third Party Source of Information, maintenance of
Audit database of units to be audited, selecting themes/issues for audit,
performance appraisal and Quality Assurance
3.4 The aforementioned four sections of an Audit Commissionerate can be manned
by either 3 or 4 Deputy / Assistant Commissioners in the Headquarters. In case
of three Sections in Headquarters, the Technical and Planning function can merge
into one. The other Deputy / Assistant Commissioners would be in charge of
Circles. Each Audit Commissionerate may have 6 to 7 Circles under its
jurisdiction.
3.5 The Circles would be assigned the geographical jurisdiction of either an
entire Commissionerate or some Divisions of an Executive Commissionerate.
3.6 Division of the jurisdiction of an Executive Commissionerate between two
Audit Commissionerates / Audit circles should be avoided.
3.7 In addition to geographically defined Circles, the Audit Commissionerates
may have functionally oriented Circles for conducting Theme/Issue based audit
(for example Insurance, telecom, Banking services or specific commodities etc)
and its territorial jurisdiction should cover the jurisdiction of the entire
Audit Commissionerate.
Organisational Structure of Audit Commissionerates
Staffing norms:
4.1 Headquarters shall be manned by one Commissioner, two Additional or Joint
Commissioners and three or four Deputy Commissioners.
4.2 Each Audit Circle shall be headed by Deputy or Assistant Commissioner and
will also comprise of Audit Groups. The Audit Groups deployed for large units
should comprise of 2-3 Superintendents and 4-6 Inspectors. For Medium units the
Audit Group should include 1 - 2 Superintendents and 2 - 4 Inspectors. For Small
units the Audit Group should include, 1 Superintendent and 1 - 2 Inspectors.
4.3 Groups for Large units, Medium units and Small units should be in such
number that the following distribution of manpower deploymentin audit groups is
achieved.
- 50% of manpower to Large units
- 30% of manpower to Medium units
- 10 % of manpower to Small units
- 10% of manpower for planning, coordination and follow up.
Functions of Audit Commissionerate
5.1 Monitoring Committee Meeting (MCM) should be convened by Audit
Commissionerate, for which the Executive Commissioner or his representative will
be invited to attend. The decision with regard to settlement of an audit
objections after recovery of all dues or dropping of the unsustainable audit
objections shall vest with the Audit Commissioner. Approved audit objections
including those in which show cause notices are proposed to be issued should be
conveyed to the Executive Commissioner in the form of Minutes of the MCMs, who
shall respond to these objections conveying his agreement/disagreement within 15
days of the receipt of the minutes of the MCM.
5.2 On points of difference, further consultations may be held for a maximum
period of 15 days. In case the difference persists, the final decision to issue
show cause notice rests with the Audit Commissioner.
5.3 Audit Commissionerate shall issue the show cause notice, wherever necessary,
after the audit objections are confirmed in the MCMs. The show cause notice
shall be answerable to and adjudicated by the Executive Commissioner or the
subordinate officers of the Executive Commissionerate as per the adjudication
limits prescribed the Board. Audit function will end with the issuance of show
cause notice and further action including adjudication and follow-up shall be
the responsibility of Executive Commissioner.
5.4 Litigation after adjudication proceedings (including defending the order
before the appellate forums-Commissioner (Appeals)/Tribunals/Courts) shall be
the responsibility of Executive Commissioner. However, Audit Commissionerates
shall remain closely associated and provide inputs wherever required.
5.5 The function of pre-audit/post-audits of refunds, rebates and brand rate
fixation of drawback shall continue with the jurisdictional Executive
Commissionerate.
5.6 CERA audit shall be attended by the Executive Commissionerate by compiling
necessary information and replying to the audit objections raised by C&AG. Audit
Commissioners will have no role either in compiling / furnishing information to
CERA or replying to the C&AG objections. However, it is desirable that Audit
Commissionerate is aware of the objections raised by C&AG. Therefore, copy of
the objections received from CERA and replies furnished by the Executive
Commissioner shall be forwarded to the Audit Commissionerate by the Executive
Commissionerate.
5.7 Anti-evasion functions shall continue with the Executive Commissionerates.
Audit Commissionerates may refer, with the approval of the MCM, any case arising
out of audit where detailed investigation is necessary to the Executive
Commissionerates.
5.8 Special Audit shall be ordered by the Audit Commissionerates. Section 14A /
14AA of CEA, 1944 and Section 72A of the Finance Act, 1994 provide for such
special audits in the specified circumstances by Cost Accountants / Chartered
Accountants. The Audit Commissioners shall be the competent authority to order
Special Audit, either on their own satisfaction or on a reference received from
the Executive Commissioner.
5.9 Audit should be so conducted that the assessee is least inconvenienced.
Documents as prescribed in the manual should be called and preparatory work
finalized ahead of audit. Audit should be completed expeditiously and as soon as
the Final Audit Report is prepared , it should be ensured that a copy of the
Final Audit Report including ‘ NIL ’ report is dispatched or provided to the
assessee under acknowledgement to be kept in Assessee Master File.
5.10 Currently, audit is undertaken for each tax separately even though the
business and financial records verified during the audit remains common for all
the three tax administered by the Board . In order to improve the efficiency of
audit process, it has been decided that coordinated and integrated audit
covering two or more taxes for assessees having common PAN shall be carried out.
Necessary legal enablement has been provided in the notification conferring
territorial jurisdiction to the Commissionerates such that Service Tax Audit
Commissionerates can audit Central Excise assessees within a zone and
vice-versa. An assessee who is registered under Central Excise, Service Tax and
Customs need not be subjected to three separate audits. The information about
his various registrations is available and such assessees would be subjected to
a complete audit by the designated Audit Commissionerate. For this purpose the
Principal Chief Commissioner / Chief Commissioner will assign the audit of an
assessee to a particular Audit Commissionerate, based on payment of Central
Excise duty or Service tax whichever is higher. Following the same principle
OSPCA would be also be carried out by the designated Central Excise or Service
Tax Audit Commissionerate, in an integrated manner.
5.11 It is proposed to issue risk based audit norms in due course of time. In
the interim the existing audit norms may be used to ensure that audit functions
continue efficiently.
Transfer policy and capacity building:
6.0 Audit requires specialized skills in accountancy and handling of financial /
SAP or ERP related databases apart from domain knowledge of Central Excise,
Service Tax and Customs law and procedures. The officers need to gain knowledge
of compliance requirements under Income Tax, Companies Act, VAT laws to do a
comprehensive and meaningful audit. The officers who have gained expertise in
this regard are few. DG (Audit) in consultation with NACEN shall develop
appropriate modules for training of officers in audit functions and inform field
on further progress. As it takes time for officers to gain expertise in audit
techniques , appropriate transfer policy to be followed by Zones shall be
prepared by the DG, Audit with due approval of the Board so that the department
can adequately use officers for audit after they have acquired the necessary
skills . Suggested transfer policy shall be circulated by the DG , Audit after
approval of the Board .
Removal of difficulty -
7.0 Past guidelines and instructions on the subject stand modified to the extent
they are in conflict with these guidelines . If there is any difficulty in
implementing the above guidelines , Principal Chief Commissioners and Chief
Commissioners are authorised to issue appropriate instructions to be valid for
temporary periods to remove difficulty in setting up and operationalizing Audit
Commissionerates . Issues which need to be addressed in the Board may be
forwarded to the Director General of Audit with suggestions for further
examination and seeking approval of the Board where needed .
(ROHAN )
OSD (CX-6)
F. No. 206/03/2014-CX.6