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Preface 5
List of Abbreviations 6
1. All tax administrations in the world which have introduced self assessment rely on a
strong compliance verification system. A good compliance verification system seeks to
balance the objective of prompt detection of non-compliance with that of minimizing
administrative intrusion. The compliance verification system has three important prongs—
Scrutiny of Returns, Audit and Anti-Evasion.
2. This manual seeks to standardize the checks for returns’ scrutiny so that the same can be
carried out in all the field formations in the country in a systematic manner within a
common framework. The returns’ scrutiny process itself is divided into two parts—a prelimi-
nary scrutiny system covering all the returns and a detailed scrutiny system covering a few
returns selected on the basis of risk parameters extracted from the return itself.
3. The Manual for the Scrutiny of Central Excise Returns is organized into four chapters.
Chapter 1 outlines the rationale for returns’ scrutiny and discusses the related legislative
provisions. Chapter 2 discusses the Board’s guidelines for preliminary scrutiny and contains
the list of risk parameters which could be used for selecting returns for detailed scrutiny. It is
visualized that with the implementation of the ACES (Automation of Central Excise and
Service Tax Project), the preliminary scrutiny would be automated. This changeover from
manual returns’ scrutiny to automated returns’ scrutiny is discussed in Chapter 3. Chapter 4
contains the guidelines for carrying out detailed manual scrutiny of selected returns. A
detailed check list is provided to assist the Central Excise officers in the field to carry out the
scrutiny. The checks have been designed so as to ensure correctness of assessment covering
correct classification, correct valuation and correct CENVAT availment. A list of documents
has also been indicated against each scrutiny activity. The documentation of the scrutiny
findings is extremely important and this is incorporated in the check list itself through
provision of a separate column.
4. No manual is ‘cast in stone’ and is, by definition, an evolving document. It is hoped that
the Manual will benefit from the feedback received from the field officers and undergo
periodic revision in tune with contemporary requirements.
This manual has been prepared as part of the Asian Development Bank’s Technical Assistance Project (IND: TA 4263) titled
‘Capacity Building for Tax Administration’.
AC Assistant Commissioner
ACES Automation of Central Excise and Service Tax
ADE Additional Duty of Excise
AED (GSI) Additional Duty of Excise (Goods of Special Importance)
AED (TTA) Additional Duty of Excise (Textile and Textile Articles)
CEA Central Excise Act
CENVAT Central Value Added Tax
CERA Central Excise Revenue Audit
CETA Central Excise Tariff Act
CETSH Central Excise Tariff Sub-Heading
CIDA Canadian International Development Agency
CTSH Customs Tariff Sub Heading
DC Deputy Commissioner
DGFT Directorate General of Foreign Trade
DTA Domestic Tariff Area
IAD Internal Audit Department
JAC Jurisdictional Assistant Commissioner
NCCD National Calamity Contingent Duty
NSDL National Securities Depository Limited
QA Quality Assurance
RCIA Receipt cum Inspection Advice
SAED Special Additional Excise Duty
SCN Show Cause Notice
SED Special Excise Duty
SION Standard Input–Output Norms
1.1B The role of the Range Office before the introduction of self-assessment consisted of:
• Departmental assessment followed by clearance of goods.
The role of the Range Office after the introduction of self-assessment now consists of:
• Preliminary scrutiny of returns covering 100 per cent of the returns (to
be automated);
• Ensuring correctness of assessment for selected returns identified on the basis of
mini-risk parameters (selection of returns to be automated).
1.1D Consequently, with the introduction of self-assessment, the role of the Central Excise
Department has undergone a transformation; from a pre-clearance role, there has been a
shift to post-clearance scrutiny of assessment.
1.1.2B As the assessment is now the responsibility of the assessee, the main function of
the Department is to scrutinize or examine the tax return submitted by the assessee on a
monthly basis in case of larger assesses (ER1), and on a quarterly basis in case of SSI units
(ER3). Checking the returns filed would cover:
• Scrutiny of all the returns filed;
• Ensuring correctness of assessment of a small proportion of the returns selected
on the basis of objective risk parameters.
1.1.2C The report of the Task Force on Indirect Taxes, 2002, prepared under the Chairman-
ship of Vijay Kelkar, also explained the purpose of returns scrutiny as follows:
It is the view that assessment should be the primary function of the Central Excise Officers. Self-
assessment on the part of the taxpayer is only a facility and cannot and must not be treated as a
dilution of the statutory responsibility of the Central Excise Officers in ensuring correctness of duty
payment. No doubt audit and anti-evasion have their roles to play, but assessment or confirmation
of assessment should remain the primary responsibility of the Central Excise Officers.
1.1.2D The purpose outlined clearly requires a conceptual distinction between checking of
the return and scrutiny of the assessment. In selecting the return for scrutiny of assessment,
different criteria could be adopted for the larger units (ER1) and the smaller units (ER3).
1.1.2E The legislative provision for returns scrutiny was made by incorporation of Sub-rule
3 to Rule 12 of Central Excise Rules 2002. Sub-rule 3 was inserted vide Notification No. 17/
2005 – CENTRAL EXCISE (N.T.), dated 31 March 2005. The relevant provision reads as:
The proper officer may, on the basis of information contained in the return filed by the assessee
under Sub-rule 1, and after such further enquiry as he may consider necessary, scrutinize the
correctness of the duty assessed by the assessee on the goods removed in the manner to be prescribed
by the Board.
1.1.2F The proper officer, referred to in Rule 12(3) of the Central Excise Rules 2002, is the
Range Superintendent who has been entrusted the task of checking the return and ensuring
the correctness of the duty assessed by the assessee. The returns scrutiny function is,
therefore, the core function of the Range Office. It would be appropriate to say that the
ownership of this business function lies with the Range Officer, with managerial supervision
duties assigned to the Divisional Assistant Commissioner. The Rule makes it quite clear that
guidelines for scrutiny will be prescribed by the Board. The Divisional Assistant
Commissioner’s function is to ensure that the scrutiny done by the Range is in conformity
with the Board’s guidelines. Importantly, Rule 12(3) of the Central Excise Rules 2002,
empowers the Range Superintendent to make any further enquiry deemed necessary in order
to carry out his statutory responsibility of returns scrutiny. This enquiry could be in the form
of recalling relevant documents such as the product catalogue to verify the description of the
product, examination of contracts entered into, and/or general market enquiries regarding
the product’s price.
2.1A In exercise of powers conferred under Sub-rule (3) of Rule 12 of the Central Excise
Rules 2002, the Board hereby lays down the procedure for scrutiny of the correctness of the
duty assessed by the assessee by the concerned officer:
1. All the returns received by the Superintendent of Central Excise under Sub-rule (1) of
Rule 12 shall be scrutinized by him to check the correctness of duty assessed. The
Inspectors posted in the Range will assist him in carrying out the scrutiny.
2. The scrutiny shall be carried out in two stages namely, the ‘scrutiny of return’ and
‘scrutiny of assessment’. Both the stages should be completed within three months of
the date of receipt of the return.
3. At the preliminary stage (to be called the ‘scrutiny of return’) all returns shall
be scrutinized as per the checklist in Annexe 2.1 of this chapter1 to ensure that the
information contained in the return is complete, prima facie, valid and internally
consistent. For example, whether the 8-digit Central Excise Tariff Sub-Heading (CETSH)
exists and if so whether the rate of duty is correctly mentioned. It would also involve
examination of the arithmetical accuracy of information contained in the return; for
1 Replicated here from the Circular No. 818/15/2005 – CX dated 15.7.2005, F.No.224/1/2005-CX-6, Board of Scrutiny
of Returns, Department of Revenue, Central Board of Excise & Customs, Ministry of Finance & Company Affairs, Government
of India.
2.1.1 Processing Guidelines Issued by the Board for the Preliminary Scrutiny of Returns
2.1.1A The Board’s guidelines provide a checklist for preliminary scrutiny of ER1 and ER3
returns (see Annexe 2.1). Action to be taken in respect of each of the preliminary scrutiny
checks specified for all returns is provided. Action indicated in the columns against each item
in the checklist must be carried out. A compendium of processing guidelines, specifically
with reference to the checklist in Annexe 2.1, is provided:
1. Registration No.: May be indicated and matched with the Assessee Master.
2. Name of the Assessee: Must match with the name given in the registration application.
3. Do the registration number and the name of the assessee match the records available in
the Range? Yes/No
Action if answer is No: The actual registration number must be obtained from the
Assessee Master and the number corrected in consultation with the assessee.
4. Are all the relevant columns in the return duly filled up? Yes/No
Action if answer is No: Return must be sent back to the assessee and the columns
completed.
5. Are all the CETSH numbers mentioned in the return prima-facie valid, that is, do they
exist in the First Schedule? Yes/No
Action if answer is No: The return must be sent back to the assessee and the invalid
CETSH number or incorrect CETSH number corrected.
6. Are the rate(s) of duty prima-facie correct, with reference to the 8-digit classification(s)
and description of goods provided in the return? Yes/No
2.1.2 Processing Guidelines Issued by the Board for the Scrutiny of Assessment
2.1.2A The Board’s guidelines provide for the selection of a small portion of ER1 and ER3
returns for detailed scrutiny. These guidelines specify a list of 10 risk parameters in which risk
is determined on the basis of comparative trends in parameters such as PLA payment,
CENVAT availment, exempted clearances, and quantity cleared. A 15 per cent change in
trends is considered a threshold between what may be adjudged risky and non-risky.
2.1.2B The guidelines of the Board were examined along with feedback from all the six
Commissionerates where pilot tests were undertaken: Ahmedabad I & II, Noida, Pune III,
Bhubaneshwar, and Rohtak. The consensus was that no specific percentage needed to be
indicated, and risk may be evaluated solely on the basis of the direction of the trends. For
example, if the duty paid in this return is less than that in the last return, then it may be
concluded that risk is reflected in a ‘Yes’ response. It was also felt that after listing the returns
on the basis of descending order of risk (based on the number of ‘yes’ responses), the final
selection should be made by the local Commissionerates keeping in mind the following:
1. Registration No.
3. Whether the registration number and the name of the assessee match according to the records
available in the Range? Yes/No
4. Whether all the relevant columns in the return have been duly filled up? Yes/No
5. Whether all the CETSH Nos. mentioned in the return are, prima-facie, valid, i.e., they exist in
the First Schedule? Yes/No
6. Whether the rate(s) of duty are, prima-facie, correct with reference to the 8-digit classification(s)
and description of goods provided in the return? Yes/No
7. In case any of the products appearing in the return attracted different rates of duty within the
same month, whether such details have been separately mentioned? Yes/No
8. Whether the notification no.(s) and date(s) as well as their S. Nos shown in the return are,
prima-facie, correct with reference to the 8-digit classification(s) and description(s) of goods
shown in the return? Yes/No
9. Whether there are any conditions prescribed in any of the exemption notifications claimed by
the assessee? If so, are they prima-facie satisfied? Yes/No
10. Whether the duties/amounts due and payable have been correctly calculated with reference to
the rate(s) of duty and assessable value(s) shown in the return? Yes/No
11. In case the rate of duty is specific, whether the amount of duty payable is correctly calculated
with reference to the quantity of goods cleared and the applicable rate as shown in the return?
Yes/No
12. Whether the debits made from credit account and current account add up to the ‘total duty
paid’ as shown in the return? Yes/No
13. Whether copies of challans through which duty has been paid have been submitted with the
return? Yes/No
14. Whether the opening balance of CENVAT credit indicated in the return tallies with the closing
balance indicated in the return for the previous month/quarter? Yes/No
15. Whether the (opening balance + total credit availed) – (credit utilized for payment of duty on
goods + credit utilized when inputs or capital goods are removed as such + credit utilized for
payment of duty on services) = closing balance of CENVAT credit?
Yes/No
16. Whether the total duty payable is more than the total duty paid? If yes, take necessary action.
Yes/No
1. Registration No.
3. Calculate the change in duty paid through PLA over the last return in Yes/No
percentage terms. Is there a decrease?
4. Calculate the change in the value of exempted clearances (other than Yes/No
export) over the last return in percentage terms. Is there an increase?
5. Calculate the change in unit assessable value for each CETSH over the Yes/No
last return. Is there a decrease?
6. Calculate the change in value of clearances to EOUs over the last return. Yes/No
Is there an increase?
8. Calculate the change in the ratio of CENVAT utilization to total duty Yes/No
payment over the last return. Is there an increase?
10. Calculate the change in quantity of goods cleared for home Yes/No
consumption for each CETSH over the last return.
Is there a decrease?
Financial Year___________________
III. Index
Commodity Description________________________________________________________________
_____________________________________________________________________________________
V.
Month/ Date of Provisional Amount of Amount of duty debited Date of Result of Whether
Quarter receipt of or final duty scrutiny scrutiny selected
the return assessment payable as for second
per the stage
return scrutiny?
Cash CENVAT
(1) (2) (3) (4) (5) (6) (7) (8) (9)
I. Preliminary scrutiny
Opening balance No. of ER1/ Total no. of No. of returns No. of Closing balance
of returns ER3 returns returns for which returns selected of returns pending
pending for received during required to be preliminary for detailed for preliminary
preliminary the month scrutinized scrutiny scrutiny scrutiny
scrutiny (1) + (2) completed during (4) – (3)
the month
(1) (2) (3) (4) (5) (6)
Opening No. of fresh ER1/ Total no. of No. of returns for Closing No. of
balance of ER3 returns returns which detailed balance of returns
returns selected required to be scrutiny com- returns pending for more
pending for during the month scrutinized pleted during the pending for than 3 months
detailed (1) + (2) month detailed scrutiny
scrutiny (4) – (3)
3A The Automation of Central Excise and Service Tax project (ACES) is currently being
developed by Wipro and seeks to automate the checking of returns (see Section 3.1.1). The
scrutiny of assessment would continue to remain manual and would be confined to a few
selected returns.
3.1.2A The Returns Scrutiny Module seeks to automate the process of checking returns
instead of the manual preliminary scrutiny described in Chapter 2. As outlined above, the
application software throws up two classes of returns on the basis of the logic of mini-risk
parameters built into the software: one set (see Section 3.1.3) for review and correction and
another set of returns for detailed scrutiny of assessment,.
Code Return Cause for which the return is marked for review
RC05 ER1, ER2, ER3 An entry in the remarks column of the return would
automatically mark the return for review after it has been
processed successfully. The status of the return need not
change, but the fact that an entry has been made in the
remarks column would alert a supervising central excise
official that the return needs to be looked into. The
assessee can enter remarks for a variety of reasons—
payment of duty under protest, dissonance with the list
of notifications the system has, and other such issues.
RC06 ER1, ER2, ER3 The assessee defrays more than the amount mentioned
in a particular source document.
RC07 ER1, ER2, ER3 The assessee does not mention the serial code of a duty
head against the TR-6 challan using which he defrayed
arrears under Section 11A(2B) or Rule 8, Central Excise
Rules 2002 or when he defrayed his interest liability as
applicable while paying the above arrears.
3.1.3A For every case, the Superintendent (or any official scrutinizing the returns) fills in
his observations—particularly for those issues that have been recorded by the system. These
observations are filled in a separate screen provided for this purpose. This screen can be
described as the observation sheet. The observation sheet would be created with a reference
to the return of the assessee (and would thus note the registration number, name, and other
details of the assessee as well). This observation sheet can be kept as a record in case a dispute
arises on account of the issues the return raises. The observation sheet containing the remarks,
observations, and revenue implications noted by the concerned official can be marked to the
AC/DC who in turn can mark it to the Joint/Additional Commissioners. The officials to be
marked could be picked up from the hierarchy chart (workflow) present within the system.
Since the observation sheet would be linked to the return, all officials in the hierarchy would
be able to view the return in question. A copy of the observation sheet may be sent to the
planning cell in the Audit Section where it would form part of the assessee’s profile.
Provisional entries in running account of assessee would need to be made manually.
3.1.3B These returns marked for review would have to be validated in consultation with the
assessee and re-entered into the system. Selection of returns for scrutiny of assessment would
only be from the validated returns. Unvalidated returns would be outside the zone of
selection. The software being developed for the returns scrutiny manual under the ACES
project will apply the following mini-risk parameter filters to returns that have been pro-
cessed successfully:
1. An assessee would be considered risky or not-risky on the basis of his return if the
particular parameter has increased or decreased in relation to: (a) the average value of
the parameter as recorded in the returns submitted in the fiscal year in which the return
that is being assessed belongs; or (b) the value of the parameter as recorded in the
4A The Manual for the Scrutiny of Central Excise Returns owes its origin to the Business
Process Re-engineering exercise initiated in July 2000 under the CIDA-assisted Capacity
Development Project as a prelude to computerization of business processes in Central
Excise. The exercise identified returns scrutiny as one of the key business processes in view of
the introduction of self-assessment in October 1996. Working Groups were formed for each
business process like Registration, Export Procedure, Dispute Resolution and Returns’ Scru-
tiny. One of the major recommendations made by the group on Returns’ Scrutiny was that
there should be a two-stage returns’ scrutiny.
4B It was suggested that a distinction be made between preliminary scrutiny, which would
cover all the returns, and detailed scrutiny, which would cover only selected returns. It was
recommended that preliminary scrutiny be a stage at which all the returns would be checked
for correctness (arithmetical accuracy of duty computation), completeness (of information),
and timeliness (timely submission of return and timely payment of duty). A small portion of
returns would then be selected for a detailed scrutiny of assessment on the basis of risk
parameters. Under the Automation (ACES) project, preliminary scrutiny will be done online
and will cover core checks like submission of critical information, date of payment of duty,
date of furnishing of the return, and correct computation of the duty payable. The automa-
tion of preliminary scrutiny is already built into the ACES project which has been explained
in Chapter 3 of this Manual. It is visualized that while preliminary scrutiny will be done in
the Divisions, the Ranges will do the detailed manual scrutiny, and that this activity will
constitute one of their core functions. The detailed scrutiny of assessment exercise would be
designed to ensure correctness of assessment (i.e. correctness of classification, valuation, and
availment of CENVAT credit).
4C Chapter 1 of the Manual outlines the returns scrutiny process covering statutory
returns, that is, ER1, ER2, and ER3. In addition, it also covers the scrutiny of declarations
submitted by registered dealers who transfer CENVAT credit from one manufacturer to
another. Chapter 2 discusses the Board’s guidelines for the manual preliminary scrutiny
of all returns. The process will be automated once the ACES system is introduced. The
detailed contours of the returns scrutiny module in the ACES application software are
Scrutiny Process
Scrutiny Process
A detailed scrutiny programme is part of the Risk Management Policy of many international
tax administrations. It performs two important functions:
(a) A detailed scrutiny programme typically supplements the Audit programme
which normally targets assessees who demonstrate high risk of non compliance.
They require more time for completion (as they are conducted on site) and entail
higher skill requirements on the part of auditors. On the other hand, a detailed
scrutiny programme typically addresses lower risk cases, helps to cover larger
number of units (conducted in office), requires lower skill levels, and enables
assessment in a timely and cost effective manner;
(b) A detailed scrutiny programme also serves in ‘work load development’ by initiat-
ing referrals for audit/anti-evasion.
The recommendation of introducing a two-stage scrutiny was accepted and ratified by the
Board. The Board issued directions vide circular No.818/15/2005-CX dated 15 July 2005.
The circular interalia identified a list of risk parameters which could be used, for selecting
returns for detailed scrutiny of assessment. The legislative backing to the returns’ scrutiny
process was given by incorporating Rule 12(3) of the Central Excise Rules 2002, which
interalia provides for the relevant officer to ‘scrutinize the correctness of the duty assessed by
the assessee on the goods removed.’
4D The checklists contained in this chapter have been prepared on the basis of interaction
with field officers during which the feasibility of carrying out these checks was established.
Pilot tests were also carried out in selected Commissionerates to validate these checks.
4.1B It was visualized that the returns would be selected centrally and be available in
various Divisions. It would be the responsibility of the jurisdictional Joint Commissioner/
Additional Commissioner to finalize the list of returns to be scrutinized by the Range Officer
from the assessment of returns centrally selected up by the system. This final selection would
be based on his assessment of available staff in the Range and also the objective of ensuring
that the units selected exclude those that were mandatorily audited in the previous financial
year or are likely to be audited in the current year. This would avoid duplication of effort and
optimize the use of administrative resources available in the Range. In selecting the final list
of units, the Additional Commissioner could also direct the scrutiny of the earlier returns of
units which are stop-filers as this, in itself, would be an indicator of risk. Finally, the Joint
Commissioner/Additional Commissioner could also select the returns of declarant dealers
for scrutiny identified on the basis of large volume of CENVAT credit passed on to various
manufacturers, as these units are not normally audited.
4.1C Once the return to be scrutinized is selected, the specific aspects to be scrutinized
would be identified (whether classification or valuation or CENVAT availment) based on
some of the criteria indicated in 4.1B above. For example, if the return has been selected on
account of increase in exempted clearances, the scrutiny of assessment would have to focus
especially on whether the exemption notification has been correctly availed. Similarly, if the
return is selected on account of reduction in the value per unit of clearance, then correctness
of the value declared under Section 4 of the Central Excise Act, read with Valuation Rules,
2000 would have to be evaluated. This is important to provide focus to the scrutiny effort,
optimize the use of administrative resources, and achieve the best revenue outcome.
4.2B Scrutiny has to be conducted on the basis of specific checklists which have been
compiled and appended to this chapter. This would facilitate scrutiny on the basis of a
structured format. Some of the features of the checklists for scrutiny of ER1, ER2 and ER3
Returns and of dealers are explained below:
4.2.2B All dealers declarant units (with value of clearances greater than Rs 40 lakh) who
pass on the CENVAT credit to other dealers or manufacturers are required to register and file
the declaration under Notification 14/2005 - CE (NT) dated 1 March 2005 as amended from
time to time. As far as dealers are concerned, although they do not pay any duty it is
important to ensure that the CENVAT Credit has been correctly passed on to other dealers or
manufacturers in terms of the CENVAT Credit Rules, 2004. In the legal scheme under the
Central Excise Rules and CENVAT Credit Rules, the responsibility for correct availment of
CENVAT lies with the user manufacturer rather than the dealer.
4.3A The guidelines given to verify ER 1, ER 2, and ER 3 returns seek to ensure correctness
of assessment in terms of classification, valuation, and CENVAT availment. One of the
important features of the scrutiny process is documentation of the results of the scrutiny. A
column for recording observations is built into the checklist. It is important that the Range
Officers record their observations in this column, along with suggested action points. Some
indicative comments have been incorporated which illustrate some of the typical action
points that could emerge from the scrutiny. This will help to guide the Range Officers. The
entire checklist alongwith the comments recorded in the column for observations must be
periodically submitted to the Divisional Assistant Commissioner.
4.3B The documentation of scrutiny findings has many advantages. First of all, some of the
findings/ observation of the Range officer may have an immediate revenue implication
6. Was the return filed within Determine whether penalty Mention details of payment
the due date?. is recoverable. of penalty recoverable.
7. Was the duty paid within Determine whether interest Mention details of payment
the due date? and penalty for late of interest if necessary.
payment is necessary from
the challans with the Pay
and Account Officer.
8. Are details of other pay- Tally with the challans and Mention details of payment
ments indicated correctly? budget codes. of interest if necessary.
A. Classification
12. Verify the description of Check whether the assessee Record observations
goods is describing the goods as including any reference
they are commonly known made to the assessee.
in market/trade parlance by
calling for sample. Also, ask
for sample invoices of main
commodities manufactured.
Do not allow the assessee to
reproduce the heading
given in the Central Excise
Tariff Act, 1985
13. Examine the classification Call for product catalogue/ In case there is
of goods declared with leaflet literature/purchase disagreement about
reference to product order/chemical classification, refer the issue
catalogue/ leaflet composition/ drawing/test to the AC/DC with the
literature/ purchase order/ analysis report or any other observations of the Range
chemical composition/ relevant information and Officer.
drawing/ test analysis examine. Also, examine the
report or any other classification mentioned in
information. the invoices after calling for
sample invoices.
14. Are there are any Orders Specify the circular numbers In case it is not, refer the
under Section 37B of the and dates. Ascertain issue to AC/DC for issue of
Act or instructions issued whether the existing show cause notice for
by the Board on the classification of goods is in correcting the same.
subject goods and their consonance with 37B order.
classification?
15. Verify sample clearance Call for sample invoices Intimate the assessee and
invoices for correct usage issued for clearance of goods record details of
of quantity code. and for correct usage of correspondence.
quantity code.
16. In respect of commodities Obtain sample invoices to Record the details of
subject to specific rates of verify the same. correspondence with
duty ensure that the assessee.
quantity code conforms
with unit quantity adopted
in the clearance invoices.
17. Examine the eligibility of Call for product details end In case of any disagreement,
the exemption/s use particulars, contract record the reasons for non
conditional exemption documents or any other eligibility and refer the
availed, if any, document that may be matter to AC/DC.
required to verify the
correctness of the
exemption availed.
18. In case of SSI units, the Examine the value of In case of any disagreement,
computation of aggregate clearances as given in the record reasons and intimate
value of clearances up to previous return (for the AC/DC.
the period may be verified. same financial year) and
verify eligibility as to the
slab rate.
Keeping the above sales pattern in mind the verification in the manner indicated below
may be conducted
19.1 Is the product Examine the Weights and Record the reasons for non-
manufactured covered Measures Act with respect to eligibility for exemption if
under Section 4 or Section the product and ensure so determined.
4A of Central Excise Act correctness of the
1944? Under section 4A, exemption claimed with
is there any exemption for respect to the Provisions of
the product under the the Weights and Measures
Weights and Measures Act Act.
like for OE supplies to
bulk industrial consumers?
(Continued on next page)
19.2 Verify whether the goods Get sample sales tax In case there is no sale,
have been cleared on a document to confirm valuation would have to be
‘sale’ basis. whether there was sale. determined under the
Valuation Rules and the
correct methodology must
be adopted which may be
recorded in this column
19.3 Are any Orders under • Specify the circular In case of non conformity
Section 37B or Board numbers and date. refer matter to AC/DC.
instructions are available • Check whether existing
with regard to the valua- practice of valuation is in
tion of the product? conformity with Section
37B orders.
19.4 In case of sale of goods, Call for relevant sample In case of any disagreement,
for delivery at any time invoices to ascertain the record the action taken.
other than the date of value at the time closest to Matter could be referred to
removal, verify whether the time of removal for audit through AC/DC and
assessment is done assessment. this fact may be recorded in
this column
19.5 In case of sale of goods Call for sample invoices In case of any disagreement,
for delivery at a place and sample transport record the action taken.
other than the factory documents such as lorry Matter could be referred to
gate verify whether the receipt to verify correctness audit through AC/DC and
correct abatement of abatement towards the same could be recorded
towards transportation transportation. In case of as action taken in this
is claimed. equalized freight claimed as column.
abatement, call for the
certificate issued by cost/
chartered accountant. In
case of any doubt, call for
the documents from the
transporter.
19.9 In respect of sales to or Call for sample sale invoices In case of any disagreement,
through related person, of related person to record the action taken.
verify whether the value unrelated buyers for Matter could be referred to
of goods is determined verification. audit through AC/DC if felt
under the provisions of necessary.
Rule 9 of Central Excise
Valuation Rules 2000.
19.10 In case of valuation based Call for packing materials/ In case of any disagreement,
on MRP under Section 4A, labels indicating MRP along record the action taken.
the MRP declaration on with invoices for
the sample packages may verification.
be verified.
19.11 Is the abatement of duty Examine the S. no. in the In case of any disagreement,
correctly availed and the relevant notification and record the action taken.
assessable value correctly determine the abatement
arrived at? admissible for the product.
19.12 In case of more than Call for verification of In case of any disagreement,
one MRP being sample invoices. record the action taken.
indicated on the
package, verify whether
the duty is paid on the
highest MRP.
19.13 Does the inputs/ semi- If the goods are not Action taken may be
processed material sent returned, duty liability on recorded.
for job work outside semi-finished goods should
return to factory within be worked out and duty
180 days. determined on such
clearance.
C. CENVAT
20. Cross tally the receipt of Call for the list of inputs, Record observation on
goods and services capital goods and input eligibility and report to AC/
services on which credit has DC
been taken to determine
eligibility.
21. In respect of capital Call for list of capital goods Determine non-compliance
goods verify whether received by the assessee if found and record
50 per cent of credit is during the period of the corrective action taken.
availed. return for verification.
22. If inputs or capital goods Fact may be ascertained Action taken may be
are cleared as such, check from the returns recorded
whether the amount
equivalent to credit taken
is reversed or paid.
D. Miscellaneous points
23. Check whether existing Call for adjudication orders In case they are not
adjudication orders for the scrutiny period implemented action should
requiring recovery of which would be available be taken to ensure that
revenue have been with the Division office or clearances are made in
implemented Headquarter’s Adjudication accordance with quasi
prospectively or not. Section. judicial order in terms of
Board’s circular 824/1/2006
dated 16.1.2006.
26 Examine the
maintenance of separate
records with reference
to the bills of materials,
etc. in case exempted
goods are cleared.
28. Verify whether the Obtain a copy of the bond Record the result of the
assessee has opted for executed by the assessee and verification.
provisional assessment a copy of the bank
and whether the unit guarantee and check the
has executed the bond. validity date.
Is the bank guarantee
furnished valid on date?
29. Were the inputs procured Check whether the removal Record the results of the
under CT-1 used for the of goods is in excess of the verification
purpose for which they quantity permitted in
were procured? the CT-1.
(Continued on next page)
30. Check whether the CT-3 In case of such clearances Goods not manufactured
clearances are made. check the following (a) are not eligible for
whether the description is exemption and this fact may
specific and whether input be verified and if necessary
is capable of use technically action for reversal of credit
in the final product at the may be taken and action
recipient’s end and (b) taken may be recorded in
whether the product cleared this column.
has been manufactured in
the factory or has been
procured from outside and
cleared as such.
31. Check whether any Check whether assessee is Record your observations. If
goods were procured filing monthly returns to found necessary the matter
under Central Excise the jurisdictional Deputy/ could be referred to Anti-
Rules 2001 (removal of Asst. Commissioner Evasion to ascertain
goods at concessional showing an invoice-wise whether the goods were
rate of duty for simple account of quantity cleared for the intended
manufacture of and value of goods received, purpose.
excisable goods). goods consumed for
intended purpose, and stock
of such goods in balance.
32. Any other point worth
mentioning that has a
bearing on revenue.
S. Activity Further action if the answer Against each item certify the
no. Is ‘no’ fact of verification by mentioning
the status as ‘verified’ in the
checklist. In case of any
observation repairing action,
mention it clearly
S. Activity Further action if the answer Against each item certify the
no. Is ‘no’ fact of verification by mentioning
the status as ‘verified’ in the
checklist. In case of any
observation repairing action,
mention it clearly
S. Activity Further action if the answer Against each item certify the
no. Is ‘no’ fact of verification by mentioning
the status as ‘verified’ in the
checklist. In case of any
observation repairing action,
mention it clearly
11. Is unit of quantity If not, then corrected copy
mentioned correctly at may be obtained from the
S. no. 3(3) of the table assessee and intimated to
annexed to the ER2 the assessee.
return?
12. Are exemption If not, then the same may
notification and S.no. be brought to the notice of
in the notification the assessee for correction.
correctly indicated at S.
nos 4A and are the
conditions of the
notification satisfied?
S. Activity Further action if the answer Against each item certify the
no. Is ‘no’ fact of verification by mentioning
the status as ‘verified’ in the
checklist. In case of any
observation repairing action,
mention it clearly
16. Check whether the debits If not, then for any short
made in Personal Ledger payment, draft SCN may
Account and credit be forwarded to the
account add up to duty Jurisdictional AC for
payable at S. no. 4A(25). necessary action.
Check 4A(25) with 4C.
19. Check whether the If not, then the same may This is an arithmethic check
(opening balance + total be corrected by the assessee and should have been done
credit availed) + (credit after due verification of during the preliminary
utilized for payment of input-credit documents, scrutiny
duty on goods +credit input/capital goods such
utilized when inputs or as, clearance documents,
capital goods removed as and invoices of taxable
such + credit utilized for service rendered.
payment of duty on
services) + other
miscellaneous payments =
closing balance of
CENVAT credit.
S. Activity Further action if the answer Against each item certify the
no. Is ‘no’ fact of verification by mentioning
the status as ‘verified’ in the
checklist. In case of any
observation repairing action,
mention it clearly
22. Give details of the goods Check whether the goods This is required to be check
procured under CT-3 and procured are correctly at the time of issuing the
examine whether these accounted for. CT-3 certificate
goods are really required
for production of export
of goods. Check 6A.
S. Activity Further action if the answer Against each item certify the
no. Is ‘no’ fact of verification by mentioning
the status as ‘verified’ in the
checklist. In case of any
observation repairing action,
mention it clearly
25. Check whether the goods If so, the unit has to return Permission for destruction
procured are destroyed the goods to the original is to separately obtained.
only because they are not supplier and these cannot be
destroyed by the EOUl.
in line with the
specifications/
requirements of the 100
per cent EOU.
Classification
Valuation
11. Are the goods traded by the If yes, ask the dealer to take a
dealer such as that may allow manufacturing registration
for repacking, relabelling from and pay differential duty with
bulk purchased for retail sale? interest.
Does the activity amount to
manufacture under Central
Excise law?
Duty Incidence
12. Verify whether the dealer Calculate the total duty
passes only proportionate declared by the manufacturer
duty credit. of the goods and the
proportionate credit that can
be passed on by the dealer in
5 per cent of the total
transactions/invoices of the
dealer.
13. Check whether the dealer has Ensure that the register has
maintained the register to serially numbered pages. Any
account all his purchases and discrepancies in maintaining
sales invoices. the register may be brought to
the notice of the dealer for
compliance.
15. Is the quantum of sale of Call for the income tax returns
goods in terms of total sales and reconcile sale figures of
value consistent with the dutiable excisable goods.
income tax returns filed by the
dealer?
18. Check whether the invoices Select not more than five
received by the dealer are invoices in the whole quarter
genuine. randomly and send them to
the Range Superintendent of
the originating genuinity
verification.