Under the conventional /traditional system of central excise audit, audit parties visited assessees unit without much preparation and verify all the statutory records (i.e. those prescribed under the Central Excise law) to check compliance of procedures and also leakage of revenue, if any. Experiences showed that such audits did not result in detection of major aberrations. Most of the audit objections pertained to either minor procedural irregularity or duty short payment of small amounts mostly due to human error. Further, this method of auditing did not envisage checking of the internal records of the assessee as well as those records which are maintained by the assessee under the other laws like Income-tax Act, Sales Tax Act, Companies Act etc.

In the year 2000, as a measure of simplification of procedures, the maintenance of all statutory records under the central excise law was dispensed with. No longer was the assessee required to record the receipt of raw material, production and clearance/sale of finished goods etc. in registers/documents prescribed by the central excise department. As a result, the assessees are now allowed to maintain all their records in whichever form they like (including maintenance of the entire records in electronic form) provided the essential information required for calculation of central excise duty liability can be obtained from such records. Under these circumstances it becomes necessary for the auditors to look into the assessees own (private) records to verify whether the assessee is paying central excise duty correctly and following the laid down procedures.

Another change brought in recent years is doing away the system of assessment of the returns by the departmental officers. Now the assessee is required to self assess his monthly tax returns before filing the same with the department. The departmental officers only scrutinise this return to check for any apparent mistake made by the assessee. They are not required to carry out detailed verification. Therefore, the entire burden of checking whether the assessee actually paying his taxes correctly, now lies with audit.

The statutory changes resulting in dispensation of statutory records as well as self assessment of central excise duty by the assessee has led to the conventional/traditional system of audit bec oming irrelevant.