Manual - Scrutiny of returns - Are Executive Commissionerates usurping powers of Audit Commissionerates?
AUGUST 01, 2015
By S Maheswaran, B.Sc., B.L., Superintendent of Central Excise, Chennai
CENTRAL Board of Excise and Customs (CBEC) has issued Circular No. 185/4/2015-ST dated 30.06.2015 prescribing detailed manual scrutiny of Service Tax Returns. By issuing this circular, CBEC has adopted a methodology of entrusting a similar work in the nature of conducting audit to the two wings of the same department i.e., Audit Commissionerate and Executive Commissionerate.
Before going into the discussion about whether the "detailed manual scrutiny" is needed in the present scenario inasmuch as separate full fledged Audit Commissionerates headed by separate Commissioners are operational w.e.f. 15.10.2014 , consequent to the cadre restructuring process undertaken in CBEC, let us first discuss about the evolution of audit conducted in Central Excise and Service tax.
Audit in central excise was conducted under conventional method before the year 2000. But after the introduction of Excise Audit in the form of EA-2000, much stress is given in the area of comparison of excise records with financial records viz., ledgers, trial balance, balance sheet, etc. of the assesse. Further importance is given for comparison of excise returns with the returns filed by the assessee with other departments viz., Commercial Tax, Income Tax, etc. Following suit, "Service Tax Audit Manual" also prescribes similar types of verification on the lines of "EA-2000 Audit Manual".
The CBEC recently underwent a major restructuring process.One of the results of the restructuring is formation of exclusive Audit Commissionerates for central excise as well as for service tax headed by separate Commissioners to strengthen the exercise of audit which is the only regular verification in which all the records/accounts maintained by the assesse are accessed. Exclusive staffs have been allotted to Audit Commissionerates and their only duty is to conduct audit on central excise/service tax assesses, who are divided into different categories based on the revenue paid by them &on which basis periodicity of audit is fixed. Further, units are selected for audit, based on risk parameters also.
Now we discuss about the evolution of scrutiny of Excise Returns and Service Tax returns. In respect of Central Excise, CBEC vide Circular No. 818/15/2005 CX dt 15.07.05 prescribed method for scrutiny of the ER1 returns filed by assessees as per sub rule 3 of the rule 12 of the Central Excise Rules, 2002. The circular was superseded by Circular No. 887/05/2009 CX dated 11.05.09 prescribing a "Return Scrutiny Manual" elaborating the procedures for undertaking the detailed scrutiny. Circular No. 1004/11/2015 CX dt 21.07.15 has also been issued recently prescribing percentage of returns that require detailed mandatory scrutiny.
In respect of Service tax, CBEC vide Circular No. 113/07/2009 ST dated 23/04/09 prescribed a "Return Scrutiny Manual for Service Tax (RSMST)" prescribing the procedures for conducting detailed scrutiny of service tax returns. Now Circular No. 185/4/2015-ST dated 30.06.2015 has been issued prescribing methodology for conducting "detailed manual scrutiny of Service Tax Returns".
Now we come back to the discussion regarding the "detailed manual scrutiny of service tax returns". The methodology prescribed for the detailed manual scrutiny is more or less equal to the steps followed in "service tax audit manual" for conducting audit on service tax assessees. As discussed earlier, before the birth of exclusive Audit Commissionerates, audit was conducted by officers in audit section which was one among the sections in the executive commissionerates and their focus on conducting of audit on units (except mandatory units) were restricted due to administrative inconvenience viz.,shortage of staff etc., But after the cadre restructuring process and creation of exclusive Audit Commissionerates, apart from mandatory units the audit can cover more number of assesses.The "detailed manual scrutiny" would have been a welcome one had it was conducted before the era of creation of "exclusive Audit Commissionerates". Won't the introduction of "detailed Manual Scrutiny" defeat the very purpose of formation of separate audit commissionerates, which are created only for the purpose of conducting audit the process which subsumes the scrutiny/comparison of returns filed by the assessee as discussed earlier. The same view can be taken in respect of "detailed scrutiny of excise returns" in the post audit commissionerate era, though the number of excise assessees are very less when compare with that of service tax assesses.
In conclusion, it is needless to say that the whole country is eagerly expecting the roll out of GST in the ensuing financial year which is a major change in the indirect tax system in the largest democracy of the world. Both assessees as well as departmental officers need to be acquainted with the nuances of the GST for the smooth transformation of indirect tax system in our country. At this juncture entrusting the exercise of detailed "manual scrutiny of service tax returns" with the range officer of the executive commissionerates which is similar to one being conducted by the audit commissionerates, appears to be a fit case for reconsideration. Whether CBEC will revert?
(The views expressed by the author are purely personal one)
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