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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)

(DISCLAIMER : The views expressed are strictly of the author and Taxindiaonline.com doesn't necessarily subscribe to the same. Taxindiaonline.com Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the sites)

 RECENT DISCUSSION(S) POST YOUR COMMENTS
   
 
Sub: Audit by Range Office

Audit Commissionerates were formed for audit of records maintained by assessee; and there are specific parameters to select the units for audit. it is Government Policy to trust the assessee and audit their records randomly. But the audit by ranges may defeat the policy, and definitely will end with harassment.
UK

Posted by Unnikrishnan P
 
Sub: Audit and detailed scrutiny of returns

The major difference between Audit and detailed Scrutiny is that for conducting Audit, officers have to visit assessee's premises; whereas, for conducting detailed scrutiny of returns, records of assessee are to be called for in Range office.

So far as Service Tax detailed scrutiny is concerned, as per Circular dated 30.6.2015, assessees who have been selected for Audit or have been audited in past three years should not be taken up for detailed scrutiny. Whereas, for Excises detailed scrutiny, as per Circular dated 21.7.2015, assessees who have been selected for audit in a given financial year shall not be selected for detailed scrutiny. Further, once the return of an assessee has been selected for detailed scrutiny, the return of the assesse should not be selected again for the next 12 months for detailed scrutiny.

Thus, assessees will not to face Audit and detailed Scrutiny for the same period.

These are personal views.

Posted by Shvetal Parikh
 
Sub: Start using available digital platform of office workflow in modules of ACES

I totally agree with the author that the so called detailed scrutiny by the Range officer will result in harassment of the assesses. Added to this, the officers who are facing problems due to poor planning and performance in utilising of ACES and with severe shortage of manpower, are not in a position to do effective scrutiny. It is also a duplication of the tasks assigned to Audit Commissionerates as per the reorganisation and the assessees are to be contacted to get all the informations for scrutiny in the traditional mode. The officers are always kept busy in churning out some reports which has not served any purpose as no follow up action appears to have been taken by using such reports. Inspite of computerisation, the thirst for reports has not ended, which is a bad practice in the present digital era. The use of paper has increased multifold as the use of traditional way doing office work, even after computerisation continues, which is against the very principle and purpose behind such an effort. The assurance and goal set out at the start of ACES, i.e., to automate all the excise and service tax office work flow has totally failed. Implementation of ACES in toto has to be the first step that needs to be taken now without any further delay. Instead of planning to utilise and concentrate on office automation, the restarting of the detailed manual scrutiny by the already ill-equipped Range is only a retrograde step.The TARC has suggested for a functional orientation to promote specialization as against the existing system. Further it recomends that all the key operations of tax officers are to be shifted to the digital platform to ensure uniform and reliable measurement of their performance. If we donot exploit the digital platform already in existance for over a decade, it is underutilisation of the facility. If we adopt the traditional method instead of CAAP audit, it is a step in the negative direction and we are bound to fail as the history indicates. As against improving and strengthening the audit commissionerates by providing sufficient manpower, suitable infrastructre, digital analysis skills and tools etc., so as to serve the purpose for which it is created, reverting to an old traditional method is not a desirable step. Instead efforts should be taken for immediate and total utilisation of all the modules of ACES, so that the traditional reports regime sees its end. If all the modules of ACES are used and further upgraded, it will not only helps in total office automation but also helps in effective management of available officers. By doing so the complete revenue and related data, details of previous audit , master files, dispute details, cases in Tribunal and court, pendency in refund, recovery to be effected etc.,could be accessed readily, without approaching the assessee time and again.
It is my sincere hope that the department will take positive steps in this direction so that the officers of all grades and ranks are made to use the ACES for every office work as promised at the start, so that our performance improves and the assessees are spared of the unproductive task of providing information time and again.

MG Kodandaram
Supdt NACEN
Bengaluru

Posted by madihally kodandaram
 

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