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Manoj Jagram & Associates

Manoj Jagram & Associates

Chartered Accountants

Audit / Pre-audit Services Under Central Excise & Services Tax Audit

In conventional sense, Audit is refer to verification and scrutiny of documents, transaction and events and processes in order to verify facts and draw conclusions considering the correctness of recording of facts and the efficiency of a system under study.

For Central Excise concern, Audit is refer to scrutiny of the records of Assessee and verification & examination of the actual process of manufacturing of goods, classification of goods, correct valuation, measurement, proper usage of exemption notifications, export of goods, remission of duty, payment of duty, etc. with a view to check that whether the Assessee is enable to paying the Central Excise duty correctly and in timely and following the prescribed procedures.

For Service Tax concern, Audit is refer to examination of scrutiny of the records of Assessee and verification of the real provision of services, realization of sale proceeds, correct classification of service, timely discharge of tax liability, timely submitted of returns / information etc. with a consider to check that whether the assessee is enable to paying the Service Tax correctly and following the prescribed procedures.

For Cenvat Credit concern, Audit is refer to scrutiny of the records of assessee and verification of the receipt of Capital Goods, Inputs, accounting, Input Services, availing, utilizing, timely discharge of tax liability, reversing etc. of credit. Refund of cenvat credit in case of export, optimum cenvat credit in case Exempted and Non Exempted Goods are manufactured / Services are provided.

In the conventional / traditional system of Central Excise Audit / Service Tax Audit, Audit Parties of the Department visit assessee unit / premises. The main objective of above audit is to check compliance of procedures and also leakage of revenue.

CERA (Central Excise Revenue Audit) or EA-2000 is Audit exercise which is done by the departmental officers


According to our experience if a periodical Central Excise Audit / Service Tax Audit (with Cenvat Audit) is carried out by the internal auditors, the management will get great aid to realize the areas of wrong payment of central excise or service tax or incorrect availment of cenvat credit and get aid in taking the corrective action immediately.

Simultaneously, if a unit reaches its Central Excise / Service Tax records and documents audited before departmental audit, that unit can consider the departmental auditors get more confidence and claim that its records are clean. We recognise this exercise as pre-audit service.

Under Internal Audit, the auditor take its main focus from both prospective i.e. the approach of the revenue (departmental) auditors from revenue leakage prospective and correct and timely discharge payment of duties and taxes while getting all the benefits available in the statue upto the maximum level.

It has been considered that in sometimes, the units are paying ignorantly more taxes / duties or due to wrong impression of certain provisions of the law. On the other side, some units are not availed / utilized the full eligible cenvat credit either on the Capital goods or inputs or input services due to ignorance.

Even large units which having advanced accounting and inventory software may lack in compliance of Central Excise / Service Tax and Cenvat Credit to the optimum level due to reason of complexity of the provision of the acts and rules made there under.

So, a unit should get its Cenvat Credit Records / Excise Records / Service Tax records audited / checked by experts to ensure / confirm the unit is discharging its excise duty / service duty liability correctly and timely while making optimum tax planning.

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