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AUDITOR’S RESPONSIBILITY AND AUTHORITY

Service Tax - Central Excise and Service Tax Audit Manual - CBEC - 03 - Chapter 3 AUDITOR S RESPONSIBILITY AND AUTHORITY 3.1 Definition of Auditor : Auditor means a Central Excise officer entrusted with the responsibility of conducting an audit . 3.2 Role of the auditor: 3.2.1 While conducting audit, the auditor is required to carry out his duties with utmost sincerity, integrity and diligence. The auditor has immense responsibility in detection of non-compliance, procedural irregularities and l .....

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ng the course of the audit, if certain technical infractions, without any revenue implications, arising due to bona fide oversight or ignorance of the assessee/taxpayer, are noticed, the assessee/taxpayer should be guided for immediate correction. Such cases should also be mentioned in working papers. The auditor should also apprise the assessee/taxpayer of the provisions of the Central Excise Act, 1944 and Finance Act 1994 relating to applicability of interest and encourage him to take advantag .....

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nd an opportunity be given to the assessee/taxpayer to give his explanation before an objection is finalised and consequential action is initiated. 3.2.3 The auditor should take into account the explanation from the assessee/taxpayer regarding all points of dispute, before taking the final view. If necessary, the auditor should contact his supervising Assistant/Deputy Commissioner to ensure that the views taken by him are consistent with the law and the latest instructions. 3.2.4 An auditor is r .....

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arriving at every objection that goes into the draft audit report after audit verification. The documentary evidence which has been relied upon in arriving at certain conclusion should invariably be cited and included. 3.3 Dealing with the public: 3.3.1 The objective of the Central Excise Department is to collect correct amount of duties/taxes levied under the Central Excise/Service Tax Law in a cost effective, responsive, fair and transparent manner and also to maintain public confidence in the .....

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ansparent application of law and the right to be treated with courtesy and consideration. The auditor should explain that the tax compliant assessees/taxpayers stand to gain from such an audit in as much as: - i. they will be better equipped to comply with the Laws and the relevant Procedures; ii. the preparation of prescribed returns and self-assessment of Central Excise duties and Service Tax will be focussed better, correct and complete; iii. the scrutiny of business accounts and returns subm .....

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is superiors and follow it up by a written report, if necessary. 3.3.4 Confidentiality should be maintained in respect of sensitive and confidential information furnished to an auditor during the course of audit. All records submitted to the audit parties in an electronic or manual format, should be used only for verification of levy of excise duty/service tax or for verification of the tax compliance. These shall not be used for any other purposes without the written consent of the assessee. Ma .....

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conducting the audit. Thus, the auditor is also a proper officer . 3.4.2 The auditor, for conducting audit, has to mainly rely on the records maintained by the assessee/taxpayer in the ordinary course of business. 3.4.3 CENTRAL EXCISE: Under sub rule (2) of rule 22 of Central Excise Rules, 2002 the assessee is required to furnish a list in duplicate of the following: i. all the records prepared and maintained for accounting of transactions in regard to receipt, purchase, manufacture, storage, sa .....

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udit parties: i. the records maintained or prepared by him in terms of sub rule (2); ii. the cost audit reports, if any, in terms of Section 148 of Companies Act, 2013. 3.4.3.2 As any other officer of Central Excise, the auditor is empowered to access any registered premises for carrying out verifications and checks for conduct of audit when authorised by the Commissioner under rule 22 of the Central Excise Rules 3.4.3.3 Rule 22 of the Central Excise Rules, 2002 provides that the Commissioner ma .....

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vy and collection of duty, which, in the present regime of self-assessment would mean verification of correctness of self-assessment and payment of duty by the assessee. It may be noted that the expression verification used in the section is of wide import and would include within its scope, audit by the departmental officers, as the procedure prescribed for audit is essentially a procedure for verification mandated in the statute. 3.4.4 SERVICE TAX 3.4.4.1 Service providers of taxable services .....

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used but not defined in Service Tax Rules but defined in the Central Excise Act, 1944 and the rules made there under shall have the meanings assigned to them in that Act and Rules. [Notification No.2/94-ST, dated 28.06.1994] The definition of Central Excise Officer as contained in the Section 2(b) of the Central Excise Act, 1944 will also apply to the Central Excise officers conducting Service Tax audit and shall also include Service Tax officers. Thus, a Central Excise officer, who is assigned .....

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ernment has inserted a new rule 5(A)(2) in the Service Tax Rules, 1994 vide notification no. 23/2014-Service Tax dated 5th December, 2014. This rule, inter alia, provides for scrutiny of records by the audit party deputed by the Commissioner. Such scrutiny essentially constitutes audit by the audit party consisting of departmental officers - Refers Circular No. 181/7/2014-ST dated 10.12.2014. ii. Verification of records mandated by the statute is necessary to check the correctness of assessment .....

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