I am directed to draw your attention to Board's instructions regarding Selective Audit contained in Circular No. 267/ 101/ 96-CX dated 13th November, 1996. Para 2.2 of the said Circular is reproduced below:

2.2   SSI units and medium units paying annual revenue of less than Rs. 1 crore need not be audited in the above manner. Instead there will be a system of Selective Audit keeping in mind the units, which are manufacturing evasion-prone commodities, using costly raw materials, showing negative growth of revenue etc. SSI units should be visited only on written permission of an officer not below the rank of Assistant Commissioner. Chief Commissioner may decide industry wise/ sectoral Audit of such units on the basis of list of sensitive commodities as may be identified by the Director General, Anti Evasion.

2.     Though above methodology of selective Audit by Internal Audit Parties may continue, it is further directed that the small scale and medium scale units will be audited only once in two years. Large-scale units will continue to be audited once in a year. Any audit shall be done only after giving one week's prior notice to the assessee.