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What is Central Excise/Service Tax Audit?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 pranesh asked about 3 years ago

What is Central Excise/Service Tax Audit?

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4 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered almost 3 years ago

Verification of Bills, Invoices and Documents CA will verify all the bills, sales invoices and documents relating to the excisable goods which are bought and sell. Review of Excise Duty Valuation As per current provisions, whether obtained or paid excise duty is correct. It is the duty of auditor to check it. Review of CENVAT Credit Register Auditor should review the CENVAT credit register and correct the mistake if there is in it. Review of Return CA should review the return of excise duty which is filled on the basis of self assessment. By reviewing, ca should check the rates and calculations of excise duty and if he or she is confirm, he or she should tick as audited. Review of Reconciliation There are lots of reconcilations relating to excise duty which auditor should review. a) Reconciliation between excise duty and VAT b) Reconciliation between Excise duty payable and CENVAT Credit on inputs c) Reconciliation between excise duty credit on input services and capital goods. 6.Review of Documents relating to EOU clearance and SEZ

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 CA Sandeep Bohra answered almost 3 years ago

Dear Friend, Audit is a verification of financial accounts and other records particularly records relating to production, clearance of goods or provision of service by the assessees to ascertain that duties of Central Excise / Service Tax are correctly paid. The Central Excise officers posted in Commissionerate of Audit conducts Audit which include Assistant / Deputy Commissioner, Joint /Additional Commissioner or Joint Director (Cost). As per central excise duty act, there is no statutory condition of auditing of excise duty. But if company audits his audit duty, it will be helpful for company because with audit, all bills, transactions and records relating to excise duty will be checked by professional. So, before paying excise duty, all errors and mistakes can be easily rectify or after paying excise duty, company can claim for refund of excess excise duty payments. Audit under service tax is covered by section 14AA of Central Excise Act, 1944 as applicable to service tax and section 72A inserted by the Finance Act, 2012 w.e.f. 28-5-2012. The Central Board of Excise and Customs (CBEC) has issued guidelines for audit of accounts of Service Tax assessees. Finance Act, 2012 had amended section 83 of the Finance Act, 1994 w.e.f. 28-5-2012 by omitting section 14AA of Central Excise Act, 1944, while inserting certain other sections in section 83. Section 14AA of Central Excise Act, 1944 deals with special audit in cases where the credit of duty availed or utilized is not within the normal limits etc. However a new section 72A has been inserted by the Finance Act, 2012 w.e.f. 28-5-2012 in Chapter V of the Finance Act, 1994 which provides for ‘special audit’.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 lochan answered about 3 years ago

Audit is a verification of financial accounts and other records particularly records relating to production, clearance of goods or provision of service by the assessees to ascertain that duties of Central Excise / Service Tax are correctly paid. The Central Excise officers posted in Commissionerate of Audit conducts Audit which include Assistant / Deputy Commissioner, Joint /Additional Commissioner or Joint Director (Cost). Thanks

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Aarti Vadnerkar answered about 3 years ago

Excise Audit: As per central excise duty act, there is no statutory condition of auditing of excise duty. But if company audits his audit duty, it will be helpful for company because with audit, all bills, transactions and records relating to excise duty will be checked by professional. So, before paying excise duty, all errors and mistakes can be easily rectify or after paying excise duty, company can claim for refund of excess excise duty payments. Audit of excise duty is done by CA or cost accountants who are the professionals for all types of audit working. 1. Verification of Bills, Invoices and Documents CA will verify all the bills, sales invoices and documents relating to the excisable goods which are bought and sell. 2. Review of Excise Duty Valuation As per current provisions, whether obtained or paid excise duty is correct. It is the duty of auditor to check it. 3. Review of CENVAT Credit Register Auditor should review the CENVAT credit register and correct the mistake if there is in it. 4. Review of Return CA should review the return of excise duty which is filled on the basis of self assessment. By reviewing, ca should check the rates and calculations of excise duty and if he or she is confirm, he or she should tick as audited. 5. Review of Reconciliation There are lots of reconcilations relating to excise duty which auditor should review. a) Reconciliation between excise duty and VAT b) Reconciliation between Excise duty payable and CENVAT Credit on inputs c) Reconciliation between excise duty credit on input services and capital goods. 6.Review of Documents relating to EOU clearance and SEZ There are economic and export oriented units and special economic zone where govt. gives exemption for paying excise duty and income tax for some time. Auditor should check updated rules and also review of the documents relating to EOU and SEZ. 7. Review of Store and other Records Auditor should review of store and other records which are relating to excise duty. He should verify each transaction and also check physical quantity. 8. Making of Report This is the final step of excise duty audit. In this, auditor will make the report inwhich he or she will write his opinion relating to correctness and fair view of excise duty's records. Service tx audit: Audit of Service Tax Assessees Audit under service tax is covered by section 14AA of Central Excise Act, 1944 as applicable to service tax and section 72A inserted by the Finance Act, 2012 w.e.f. 28-5-2012. The Central Board of Excise and Customs (CBEC) has issued guidelines for audit of accounts of Service Tax assessees. Finance Act, 2012 had amended section 83 of the Finance Act, 1994 w.e.f. 28-5-2012 by omitting section 14AA of Central Excise Act, 1944, while inserting certain other sections in section 83. Section 14AA of Central Excise Act, 1944 deals with special audit in cases where the credit of duty availed or utilized is not within the normal limits etc. However a new section 72A has been inserted by the Finance Act, 2012 w.e.f. 28-5-2012 in Chapter V of the Finance Act, 1994 which provides for ‘special audit’. Audit by Chartered Accountant and Cost Accountant The Finance Act, 2009 has added ‘chartered accountant’ to the cost accountants in section 14A and 14AA of the Central Excise Act, 1944 so as to empower the Chief Commissioner of Central Excise to nominate a chartered accountant or cost account for conducting special audit under the provisions. An explanation has also been inserted to explain that chartered accountant would mean a chartered accountant as defined in section 2(1)(b) of the Chartered Accountants Act, 1949. Thus, w.e.f. 19.8.2009, a chartered accountant can also be appointed for conducting special audit for the purpose CENVAT credit under service tax. Section 14AA of Central Excise Act, 1944 deals with special audit in cases where credit of duty availed or utilized is not within normal limits etc and is applicable to service tax under section 83 of Finance Act, 1994. Scope of Audit The scope of Service Tax audit covers all services which are subject to levy of Service Tax and the selection of assessees and auditing of those assessees who have been selected for auditing will be subject to the guidelines and procedures prescribed in Service Tax audit manual. (Circular No. 775/8/2004-CX dated 17-2-2004) The audit shall cover all areas of accounts and revenue as per proforma which will have summary of audit reports, summary of audit result, working papers on preliminary review, systems information, organization chart, tax accounting, service information, evaluation of internal controls, general accounting, revenue system, analysis, audit plan, Service Tax trend and reconciliations. While doing the audit, care should be taken to ascertain whether any part of the service charges have been shifted in the expense account thereby suppressing the value of taxable service. At times checking of bank account with expenses and receipts is also important. Any liability accrued for import of services should be examined as also the exchange rate fluctuations. Under section 66A, a company may be liable to service tax with respect to services provided by a foreign branch to its Indian head office. Such services may not be reported as turnover in the financial statements. Auditors should obtain a list of foreign branches and branch accounts and try to scrutinize the same so as to ascertain the value of taxable services. A good service tax audit approach would include the following – Overall knowledge of the service provider’s business, accounting systems, returns and other reports filed, history of past assessments, litigation, etc. Obtaining the trial balance and getting used to the chart of accounts. Understanding the accounting system of the service provider. Touring the premises of the service provider including godowns, warehouses, depots, branches, units etc. Evaluating the internal control system of the service provider. In case of multi-locational units, trial balance should be obtained unit-wise. Understanding the various records maintained by the service provider.

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