Audit under Central Excise Act, 1944 :
Central Excise Act, 1944 provides for following types of audit:
(a) Special audit for valuation purposes under section 14A,
(b) Special audit for Cenvat credit purposes under section 14AA
The provisions in respect of each of the audit have been discussed below:
(a) Valuation audit [Section 14A]
Who can order audit: Any Central Excise Officer not below the rank of an Assistant/Deputy Commissioner of Central Excise can order for valuation audit at any stage of enquiry, investigation or any other proceedings before him if he is of the opinion that the value has not been correctly declared or determined by a manufacturer or any person. However, for ordering such an audit prior approval of the Principal Chief Commissioner/ Chief Commissioner of Central Excise is necessary.
The directions given by Assistant/Deputy Commissioner for special audit after obtaining prior approval of Principal Chief Commissioner/ Chief Commissioner of Central Excise is not an appealable order in terms of section 35B. The Tribunal in the case of Neelam Products Ltd. vs. CCE Delhi III held that an opportunity for hearing is to be given to the assessee before the issuance of the direction for special audit. As the opportunity for hearing would help the authority to form an objective opinion on the complexity of the case based on prescribed factors.
Audit by practicing Chartered/Cost Accountant: The Central Excise officer will direct such manufacturer/person to get the accounts of his factory, office, depots, distributors or any other place, as may be specified by the said Central Excise Officer, audited by a Cost Accountant or Chartered Accountant. Such Cost Accountant or Chartered Accountant will be nominated by the Principal Chief Commissioner/ Chief Commissioner of Central Excise in this behalf.
Cost accountant shall have the meaning assigned to it in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959.
Chartered Accountant shall have the meaning assigned to it in section 2(1)(b) of the Chartered Accountants Act, 1949.
Audit Report: The Cost Accountant or the Chartered Accountant has to submit the duly signed and certified audit report within the period specified by the Central Excise Officer. He shall also mention in the report such other particulars as may be prescribed by such Central Excise Officer.
Time limit for submission of report: Such period can be extended by the Central Excise Officer at the request of the manufacturer/person for material and sufficient reason. However, the maximum period of submission of audit report shall be 180 days from the date of receipt of the cost audit order by the manufacturer. This audit shall be in addition to any other audit under any other law for the time being in force or otherwise.
Manufacturer is given the opportunity of being heard: The manufacturer/person shall be given an opportunity of being heard in respect of any material gathered on the basis of audit and proposed to be utilized in any proceedings under the Central Excise Act or rules made thereunder.
(b) CENVAT Credit audit [Section 14AA]
Who can order audit: The Principal Commissioner/ Commissioner of Central Excise may call for an audit if he has reason to believe that the credit of duty availed of or utilized by a manufacturer of any excisable goods –
(a) is not within the normal limits having regard to the nature of the excisable goods produced or manufactured, the type of inputs used and other relevant factors, as he may deem appropriate;
(b) has been availed of or utilized by reason of fraud, collusion or any willful mis -statement or suppression of facts.
Audit by practicing Chartered/Cost Accountant: The Principal Commissioner/ Commissioner shall direct such manufacturer to get the accounts of his factory, office, depot, distributor or any other place, as may be specified by him, audited by a Cost Accountant or Chartered Accountant nominated by him.
Cost Accountant shall have the meaning assigned to it in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959.
Chartered Accountant shall have the meaning assigned to it in section 2(1)(b) of the Chartered Accountants Act, 1949.
Audit Report: The Cost Accountant or the Chartered Accountant has to submit the duly signed and certified audit report within the period specified by the Central Excise Officer. He shall also mention in the report such other particulars as may be prescribed by such Central Excise Officer. This audit shall be in addition to any other audit under any other law for the time being in force or otherwise.
Manufacturer is given the opportunity of being heard: The manufacturer shall be given an opportunity of being heard in respect of any material gathered on the basis of the audit and proposed to be utilized in any proceeding under the Central Excise Act or rules made thereunder.