Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
Circular No. 887/07/2009-CX
11th May, 2009
Sub: Manner of Scrutiny of ER1, ER2 and ER3 returns and returns submitted by
Dealers by the proper officer – regarding.
These guidelines supersede the earlier instructions issued vide Circular
No.818/15/2005-CX from F.No.224/1/2005-CX.6 dated 15th July, 2005 and Circular
No.249/83/96-CX issued from F.No.206/1/96-CX.6 dated 11.10.96. These guidelines
seek to explain the content of the Return Scrutiny Manual, which has been
prepared and is now being circulated to all the field formations vide this
circular.
- Sub rule 3 of Rule 12 of the Central Excise Rules, 2002 provides for scrutiny
by the proper officer to ensure correctness of duty assessed by the assessee on
the goods removed. The returns would be received by the Superintendent of
Central Excise who is the proper officer under sub rule (1) of Rule 12 to
scrutinize the return. The Inspectors posted in the Range would assist him in
this task. As clarified by the earlier instructions, the scrutiny of the return
is required to be carried out in two stages, viz., (i) the scrutiny of the
return and (ii) scrutiny of assessment. The rationale for this two stage
scrutiny and its clear distinction from audit is explained in Chapter 1 of the
Manual.
- In the preliminary scrutiny (to be called the ‘scrutiny of return’), all
returns would be scrutinized as per the checklist given in Annexure-1 to this
Circular, which is also contained in Chapter 2 of the Manual. This would involve
checking the correctness of the information furnished, the timeliness of payment
of duty and the timeliness of filing the return. For example, whether the
8-digit CETSH exists, and if so, whether the rate of duty is correctly
mentioned. It would also involve checking the arithmetical accuracy of
information contained in the return e.g. duty payment or the break-up of duty
paid in cash and through CENVAT credit. Verification of the correctness of the
provisional assessment order in respect of the assessee would also form part of
the mandate of preliminary scrutiny. After the checklist at Annexure-1 has been
executed, it should be completed and duly signed by the Superintendent. Wherever
any discrepancies/deficiencies are noticed, it shall be the responsibility of
the Range Superintendent to take appropriate action including safeguarding the
revenue.
- It is visualized that as soon as the Automation of Central Excise and Service
Tax (hereinafter referred to as ACES) project is implemented, preliminary
scrutiny would be done by the system. The manner in which the system would
conduct the scrutiny has been outlined in Chapter-3 of the Return Scrutiny
Manual. Until the implementation of the ACES project, preliminary scrutiny would
be done manually in terms of the procedure laid down in the para-3 supra.
Chapter-2 of the Return Scrutiny Manual explains in detail the manner in which
the manual preliminary scrutiny is to be done.
- The second stage scrutiny called the ‘scrutiny of assessment’ would be
confined to returns selected on the basis of mini risk parameters, which are
given in Annexure-II and are also contained in Chapter-2 of the Return Scrutiny
Manual. Once the ACES project is implemented, the returns would be selected
automatically by the system and list in descending order of risk would be
forwarded every month to the Commissionerate for final selection. It would be
the responsibility of the jurisdictional Joint/Additional Commissioner to decide
on the number of returns to be taken up for detailed scrutiny by the Ranges
keeping in mind the availability of administrative resources which can deliver
quality scrutiny.
- In selecting the returns, the jurisdictional Joint/Additional Commissioner
should not select returns of those units which are to be mandatorily audited.
Further, once a return of an assessee has been selected, the return of the
assessee should not be selected again for the next 12 months. The
Joint/Additional Commissioner should also assign some returns of selected EOUs
(ER2 return) and quarterly returns of dealers to the Ranges for scrutiny,
selected on the basis of local risk factors. Chapter 4 of the Return Scrutiny
Manual provides a detailed check list for scrutiny of ER1/ER3, ER2 returns and
quarterly return submitted by Dealers.
- The detailed checklist contained in Chapter-4 identifies the check-list for
scrutiny and also indicates the documents that need to be perused. The
Superintendent of Central Excise should verify the details as per the checklist
and record the observations against each of the scrutiny activity. The
documentation of the return scrutiny findings is extremely important. Besides
raising non-compliance issues, it may also initiate referrals for Audit and
Anti-evasion. Normally, no visit should be made to the unit for carrying out
return scrutiny and documents required should be called for verification in
terms of sub-rule (4) of Rule 12 of the Central Excise Rules, 2002.
- Scrutiny done as per the checklist along with the observations should be
signed by the Divisional Assistant/Deputy Commissioner who should also indicate
the action taken on the basis of the scrutiny outcomes.
- The field officers should carefully go through the Return Scrutiny Manual and
follow the scheme of verification provided in the Manual.
(Ashima Bansal)
Under Secretary to the Govt. of India
F. No. 267/09/2007-CX.8 (Pt.I)