Departmental Audit is professional, independent and objective appraisal function that uses a disciplined, evidence-based approach to assess and improve the effectiveness of risk management, control and governance processes.
The departmental auditors look into the assessee’s own (private) records to verify whether the assessee is paying central excise duty correctly on excisable goods manufactured or deemed to be manufactured and service tax on taxable services provided and whether proper procedures are followed where required to be followed viz., in case of exports or while claiming the benefit of any exemption from duty or tax. The main intention in having the departmental audit is generally to avoid revenue leakage though the officers are also supposed to act as facilitators for trade and industry.
CERTAIN DOs AND DON'Ts
· Assessee cannot refuse to produce books of accounts and records as it could invite investigation and subsequent penal action going beyond the limitation period in case of detection of non payment or short payment of taxes/duties.
· The audit team should intimate their visit sufficiently in advance and this should be taken in writing and the duration of audit also confirmed.
· A team of responsible individuals who are also aware of the basic provisions of law, should be available at factory/office to answer queries of audit team.
· Access to books and accounts and other facilities should be provided only during working hours to enable them to conduct their functions and no record should be allowed to be removed from the premises. In case the officials seek to retain custody of records and take the same outside, there should be a written request for the same. Delivery of records to them should also be acknowledged by the officials/department.
· It should be noted that departmental officers are public servants and are punishable if they act contrary to Indian Penal Code. The following are punishable offences namely, fabrication of books and accounts, making false reports causing other person to suffer liability, threatening and criminal intimidation, annoyance and assault.
· It maybe possible that the departmental officer does not know the accounting principles, audit methodology and may not be a qualified auditor. This may lead to assessee facing irrelevant, unnecessary questions. Where the officer fails to understand the explanation given, he may be asked to submit his views in writing.
· Here it is very relevant to note that no duty demand can be raised without issuing a show cause notice and auditor cannot act as assessing officer. No summons can be issued during audit at all.
· The assessee cannot be stopped from carrying on his normal business activity for the sake of accommodating the auditors other than providing them the records needed for verification and the explanations or answers to their queries.
· Audit parties can only maker factual observations and not conclusion on points of law.
· The information based on which the auditor makes his findings can be made available to auditor under RTI Act 2005.
· The assessee is entitled to his views and opinions and explanations which should be noted before raising objections.
· After audit is over visit by officers should be discouraged.
· An assessee having a legitimate complaint against audit team can make a complaint to Chief Commissioner with copy to Commissioner and other concerned authorities.
· The staff of the concern need not stay beyond office hours. They need not give their phone numbers, personal details etc under law at all.
· Questioning for long hours under duress should be complained immediately.
· Trade secrets, formulas need not be furnished voluntarily by unit until request for the same is given in writing to the auditee.
· Documents need to be furnished only for the period that is covered by the audit and not for other periods.