Regarding Excise Audit - 2000 (EA-2000) - Guidelines
No. 491 dated 28th October 1999
am directed to say that in conformity with the process of economic
liberalization, several tax reforms were effected in the field of Central Excise
tax administration including simplification if procedures relating to levy and
collection of duty. Introduction of 'Self Assessment System' in 1996 along with
'Selective Audit' was the major initiative in this direction. Such procedures,
based on based on the voluntary tax compliance by the assessees on the one hand
and selective, scientific and in-depth audit with professional thrust on the
other, are being evolved and introduced continuously. In order to have a more
scientific and effective audit system, by professionally trained officers, an
initiative called " Capacity Development of Central Excise
Administration" has been taken by the Board under which introduction of New
Excise Audit System, code named "Excise Audit-2000" (EA-2000) has been
In regard to introduction of this new system, the Director General of
Anti-Evasion, who is a member of the Co-operative Working Group of the Central
Excise Projects, has already addressed all Chief Commissioners and Commissioners
demi officially vide letter D.O. No. DGAE/CIDA/III/99 dated 6th October 1999
outlining the background and the actions required to be taken by the
commissioners and other officers. The same should be followed scrupulously to
the extent they are not inconsistent to the decisions and guidelines of the
board, contained in this Circular.
The following are the instructions and guidelines of the Board regarding
introduction of Excise Audit-2000 (EA-2000):
The EA-2000 will be introduced with effect from 15th November 1999. A
minimum of 15 days' notice should be issued to the concerned
assessee before commencing any audit. The actual auditing under EA-2000, will
therefore, commence from 1st December 1999.
Audit under EA-2000 will be conducted by trained staff/officers using
To start with, the audit of units paying duty of Rs. 5 crores and above
from the personal ledger accounts (PLA) in the preceding financial year (except
the units covered by the provisions of section 3A of the Central Excise Act,
1944) should be undertaken, provided audits are due in terms of the frequency as
already specified by the Board (i.e. once in a financial year). Audit of other
units will continue to be made as per the existing Audit Manual.
It has to be ensured that there is smooth transition from the existing
Audit System/Manual to the EA-2000. Since it may not be possible to switch over
entirely to EA-2000 immediately on or after 15th November, 1999, the audit under
the existing system will continue to be made in respect of remaining units
paying duty of Rs. 5 crores and above per annum as aforesaid.
It is, however clarified that a unit, which has already been audited in
the current financial year under the existing audit system, will not be taken up
for a fresh audit under the EA-2000 in this financial year.
Efforts should be made to complete such audit in about 5 to 7 working
days. This period may be extended in exceptional cases. To keep the number of
days for audit of a unit within a reasonable limit, the Commissioner may enhance
the strength of the audit team or depute two audit teams clearly specifying
Although the Manuals (Audit Manual and the Audit Programme) and the
Working Papers relating to EA-2000 are in 'draft form', only minor changes are
expected. After further review and revision, the final versions thereof will be
printed and circulated soon. In the meantime, audit under EA-2000 may be
undertaken on the basis of the draft Manuals and the draft Working Papers.
Since it is proposed to audit units paying duty exceeding Rs. 5 crores,
it is emphasized that the Additional Commissioner/Joint Commissioner (Audit)
should join such audit team (may be not for all the days) and personally
supervise the audits. The Deputy/Assistant Commissioner (Audit)/Assistant
Director (Cost) may assist the Additional Commissioner/Joint Commissioner
(Audit) wherever necessary.
The audit notes/reports relating to the audit of the units supervised by
an Additional Commissioner/Joint Commissioner (Audit) should invariably be
signed by him.
The Auditors will not issue any summons in cases where the records are
not forthcoming/ produced by the assessee for the purpose of audit. They will
also not exercise the powers of search, seizure, interrogation and arrest. Where
such actions are imperative, they may refer the matter to the Anti-Evasion Wing
of the Commissioner ate and the latter will take immediate necessary action
after taking clearance at a higher level.
The Audit Wing will not issue show-cause notices arising out of audit
objections. The matter will be referred to the Proper Officer for this purpose.
The creation of database and assessees profile is the pre-requisites for
switching over the EA-2000. It is imperative that this work is undertaken on top
For EA-2000 to be really effective, it is imperative that the specialized
training are imparted to the concerned officers/staff in adequate numbers in
each Commissioner ate. Though efforts are being made to get the auditors trained
in the new audit system based on Audit Manual. Working Papers, Instructor's
Guide and Participant's Manual with the help and guidance of National Academy of
Customs, Excise & Narcotics and the Trainers (officers who have already been
trained), there is also an urgent need to hold Workshops, Seminars and
inter-active sessions to that the concerned officers are made fully conversant
It is emphasized that only the officers specially trained for the purpose
should undertake audit undertake audit under EA-2000. Otherwise, schedules can
be charted out in such a manner that trained officers become available by then.
A Workshop for trade and industry should also be organized to familiarize
them with the EA-2000.
The Commissioners and other senior officers should take personal interest
and ensure that the EA-2000 takes off successfully. All the initial irritants
and difficulties should be sorted out expeditiously. For this purpose, each
Commissioner and other senior officers should go through and fully familiarize
themselves with the Audit Manual, Audit Programmer, Working Papers, Instructor's
Guide and Participant's Manual.
After four months of the actual start of audit under EA-2000, say as on
1st April 2000, the evaluation work of EA-2000 should be undertaken by each
Commissioner including the performance of the auditors and a Performance
Evaluation Report be prepared. Chief Commissioners should further evaluate their
report and send his consolidated overall Evaluation Report to Director General
of Anti-Evasion and Director (Audit). The idea is to synergies the process and
initiate corrective measures wherever necessary.
An "EA-Monitoring Cell" should be constituted of 4 to 5
selected officers, headed by the Commissioner. This Cell shall hold meetings at
least once in a fortnight. Broadly, the functions of the Cell would be as below:
To examine the overall working of EA-2000 in their jurisdiction and
identifying the areas which require special attentions and improvements;
Scrutiny of major audit objection and assist the Commissioner in taking
quick decisions about the acceptance or otherwise, of such objections;
Preparation of the Evaluation Report on EA-2000 for furnishing to the
Chief Commissioner; and
Dissemination of information relating to major audit objections accepted
by Commissioner and ensuring quick action there on.
Under the provisions of sub-rule (6) read with sub-rule 173G, the Central
Excise Officers entrusted with the work of audit under EA-2000 may demand for
accounts maintained and records/returns prepared by assessee (whether the same
are maintained of prepared in pursuance of the Central Excise Rules, 1944 or
not) in regard to the production, manufacture, storage, delivery or disposal of
goods, including the raw materials. They may, therefore, accordingly call for
any document/return/record including the "source document/records"
which may be connected to the details about production, manufacture, storage,
delivery or disposal of goods, including-tax returns, Sales-tax returns,
inventory records, returns, documents etc. are demanded and scrutinized by the
For the first six months, Director General of Anti-Evasion would monitor
the new audit system on behalf of the Board; whereafter the Director General of
inspection & Audit (Customs and Central Excise) would take over the work.
Any difficulties noticed in this regard may be brought to the notice of
the Director General of Anti-Evasion immediately, who will examine the issues
and send a report to the Board.
The trade and field formations may be suitably informed immediately.
Receipt of this Circular may please be acknowledged.
Hindi version will follow.