Excise Audit - Points to be noted

Simple single dozen steps before starting the Excise audit:

1. Understand the client Business with system support on business transaction

2. Some ERP may not support all the requirements of Excise data i.e. Oracle 11 I may not support the production data i.e. Opening Stock, Manufacture quantity, Removal of Stock and closing stock, rejection to vendor details are not available.

3. Some client may having entire/part of the removal are exports or local clearance on payment of duty or local clearance under exemption or clearance under export incentive scheme. Should study the background of respective notification/circular/case laws/provisions of respective Act.

4. Should have knowledge on preparation of ER1, get the movement of RG23A/PLA. Collect the total Duty Payment movement with removal of goods category i.e., stock transfer/as such removal on Sales/as such removal on Rejection/Scrap/Export Sales/Removal on payment of duty. The manufactured sales amount should tally with this breakup; this may help to tie up the reported sales in ER1 with Financial Statement sales (manufactured) figure. Understand the removal of goods is provisional clearance of final.

5. Scrutiny on CENVAT register may help to finding ineligible credit

6. Scrutiny on CENVAT credit on Capital goods may help to find the correct availment of CENVAT credit.

7. Charge off/write off/unusual consumption of stock should be questionable due to reversal of CENVAT credit.

8. Get the details of last five year audit Report done by the excise authority (EA 2000), Show Cause Notice issued details and status on appeal of Show Cause Notice if any.

9. Before commencing the audit get the details of Excise GL code reconciliation with ER1 return and understand the preparation of excise return.

10. Don’t shy for ask any question, keep on ask question till you are convince from accounting and provision point of view; excise guy may expert in tax but lose focus on accounting treatment.

11. Understand the valuation of closing stock.

12. Compliance factor need to check i.e. filing return in time, submission of proof of export in time, getting the re-warehousing certificate in time, validity of letter of undertaking, etc.,