Most of the factories are under ‘Self Removal Procedure’ and there is no physical control over production

and clearance of goods. Assessment is mainly based on returns submitted by assessee. Department has
evolved various checks and counterchecks to ensure that e!cise duty is not evaded.
Checks by Departmental authorities - "arious checks have been devised to reduce leakage of revenue.
"#S#$S %& %&&#'(RS (very factory comes under )urisdiction of Range Superintendent. $he
Superintendent and (!cise #nspectors *orking under him do occasionally visit factories. +o*ever, they are
not e!pected to have day to day checks.
S$%'- $A-#./ 0 .e* 'entral (!cise Rules make no provision for ‘store room’ or ‘stock taking’.
+o*ever, it does not mean that stock taking by e!cise authorities is prohibited. #n the opinion of author,
stock taking can be done of finished goods and 'envat goods.
R%AD '+('-S Surprise road checks are carried out to see that all goods moving are accompanied by
duty paying documents.
#.&%RMA$#%. &R%M #.&%RMA.$S 1ike all ta! departments, department can and does collect
information from secret informants 2some times he is a disgruntled employee of the 'ompany3. #n R K
Ranganathan v. UOI 455626763 (1$ 746 2Mad +'3, payment of such re*ard *as ordered *hen
information *as found to be accurate and *as furnished at earliest point of time.
PR("(.$#"( S('$#%. (ach 'ommissionerate has a preventive section to have surprise checks and
raids *hen evasion is suspected.
DR# Directorate of Revenue #ntelligence under 'entral 8oard of (!cise and 'ustoms, gathers information
from various sources 2including informants3 about ta! evasion and take suitable action.
Departmental Excise Audit – Audit means scrutiny and verification of documents, events and processes in
order to verify facts and dra* conclusions regarding correctness of recording the facts and the efficiency of
a system under study. &or 'entral (!cise purposes, Audit means scrutiny of the records of the assessees and
the verification of the actual process of receipt, storage, production and clearance of goods *ith a vie* to
check *hether the assessee is paying the 'entral (!cise duty correctly and is follo*ing the 'entral (!cise
procedures. - Chapter 15 Para 1.1 of CBE&C’s CE Manual, !!1.
An Audit section is attached to each 'ommissionerate. Some audit parties are functioning under
'ommissionerate head9uarters, *hile some may function at important industrial centres *here :oint
'ommissioner or Addl 'ommissioner has been posted. Audit of assessee’s factory is carried out by visit by
‘audit party’. $he Audit Party usually consist of 4;7 inspectors and a Deputy %ffice Superintendent, headed
by a (!cise Superintendent. A' ; D' and senior officers are also associated *ith the audit of large units.
$hese audit parties visit factories periodically. Audit by these audit parties is called <departmental audit<.
.e* audit system, termed as ‘(A4555’ =(!cise Audit 4555> has been introduced *ith help of Revenue
'anada. $his is part of various pro)ects Ministry of &inance has taken up *ith aid of 'anadian #nternational
Development Agency 2'#DA3.
S?8M#SS#%. %& R('%RDS 8@ ASS(SS(( - "#$e Rule 44273 of 'entral (!cise Rules =earlier rule
6A7/ 2B3>, assessee is re9uired to produce to audit parties 2#3 records maintained by him in respect of
accounting of transactions in regard to receipt, purchase, manufacture, storage, sales or delivery of goods
including inputs and capital goods as re9uired under rule 44243 of '( Rules 2##3 cost audit reports u;s 4778
of 'ompanies Act 2iii3 #ncome $a! audit report u;s CCA8 of #ncome $a! Act.
%re&uen'( of au$#t ) Audit of assessees paying duty of over Rs one crore through P1A is normally carried
out once in a year. $hose units *hich pay cash duty bet*een Rs 65 lakhs to one year are audited once in
t*o years. #n case of units paying cash duty less than Rs 65 lakhs per annum, not more than 45D of the
units are audited every year. =$his *orks out to about once in five years>. Selection of small units is done
for prioritiEation, by applying risk assessment techni9ue.
$he audit parties check records, see the operations of factory and carry out test checks. (!cise returns are
checked *ith other records and returns like balance sheets, bank statements, store ledger, buyer*ise
ledger, return to department of industries and other /overnment authorities etc. $hese checks are done on
selective basis. #f their 9ueries are not replied satisfactorily, sho* cause notices cum demands are issued
and ad)udicated as per (!cise Rules.
CERA - Audit of C and AG - 'omptroller and Auditor /eneral of #ndia also carries out audits of all
assessees. $hese are called ‘'(RA’ i.e. 'entral Revenue Audit. $hese audit parties audit accounts of e!cise
as *ell as customs assessees. 'F A/ is an authority appointed under Article 6CG of 'onstitution of #ndia.
Article 6H6 of 'onstitution specifies that reports of 'FA/ shall be submitted to President of #ndia, *ho
causes these to be laid before each +ouse of Parliament. '(RA audits are conducted as a part of audit of
/overnment accounts. $hus, these audits are conducted under 'onstitutional authority and are in no *ay
connected or related to internal audits carried out by staff of e!cise department. &re9uency of '(RA Audits
is as per the importance they attach and availability of time to '(RA audit parties.
Assessee is re9uired to produce to audit parties 2#3 Records 2##3 cost audit report 2iii3 #ncome $a! audit
report.
Scrutiny of monthly returns (very assessee has to submit a monthly return to Superintendent, 'entral
(!cise. $his *ill be ackno*ledged by him on the assessee’s copy. .o assessment order *ill be issued.
$hese returns *ill be only scrutinised. Some returns *ill be studied in details and further investigation may
be made.
Valuation Audit - Special Audit - "aluation is one of the most vital and important aspect of assessment of
e!cise duty payable. #n order to ensure that duty is being paid correct ‘Assessable "alue’, a provision has
been made to order a ‘Special Audit’ in some specified cases, vide section 6CA of '(A. $he audit can be
ordered only *ith prior approval of 'hief 'ommissioner of '(.
Cenat credit audit - Special Audit - As per section 6CAA of '(A 2added *.e.f. 6Cth May, 6IIA3, special
audit of 'envat credit availed or utilised can be ordered by 'ommissioner of 'entral (!cise. Such audit can
be ordered if the 'ommissioner of '( has reason to believe that 2a3 'envat credit availed or utilised is not
*ithin the normal limits, having regard to nature of final products and type of inputs 2b3 'envat credit has
been availed or utilised by reason of fraud, collusion or any *ilful misstatement or suppression of facts.
Such audit can be done by practising <'ost Accountant<, to be appointed by 'ommissioner of '(. (!penses
of and incidental to such audit, including the remuneration payable to the cost accountant shall be paid by
'entral /overnment 2i.e. e!cise department3