Technical Session II

VALUATION AUDIT U/S 14A OF CENTRAL EXCISE ACT,1944

Dr.Vimal Kumar Aggarwal

Practicing Cost Accountant

MAJOR SOURCE OF INDIRECT TAXES FOR CENTRAL GOVERNMENT

Central

Excise Customs Service Tax

14 A AND 14 AA OF
CENTRAL EXCISE ACT,1944
There was always a bone of contention between the assesse and the department relating to biasness by the officers of Revenue Department while doing departmental audits,. Concept of an Independent Audit by Professional who better understand the concept of Cost and Cenvat Credit was introduced and section 14 A and 14 AA was introduced for Valuation and Cenvat Credit Audit accordingly. Initially, responsibility was assigned to Cost Accountants but later on Chartered Accountants were also included in the scope.

REASONS FOR SPECIAL AUDIT

When

Revenue Department fees there is Low Recovery of Taxes than anticipated. to collect more revenue than projected due to revision of targets by the MOF Information of duty evasion by a particular Industry or Unit for which department feels the need of audit by an Independent Expert in the Field.i.e COST ACCOUNTANTS

Wants

Specific

REASONS FOR LOW RECOVERY OF TAXES

Low PLA to Cenvat credit i.e. assesse has availed more Cenvat credit and paid less cash through PLA. It may be due to following major reasons

Low Value additions Lower Price realization by Assessees leading to low payment of duties Difference in duty rates on Input Credit and Output Credit leading to higher accumulation of input credit. Partially Dutiable Outputs like in case of Tractor & agriculture implements

Returns and Statutory Financial Statements Analysis and Comparative Study through application of Generally Accepted Cost Accounting Principles [GACAP] and techniques - Case Study Approach

SECTION 14 A VALUATION AUDIT STUDY FORGING UNIT Facts of the case

CASE

Company has 2 units Forging and Machining of Auto Components One in duty paying zone Other in Duty Exempted Zone Department feels duty evasion by low valuation while making transfer to duty exempted unit

SECTION 14

a VALUATION AUDIT-

CASE STUDY FORGING UNIT ..

Cost Accountant Appointed u/s 14 A Strong resistance from the assesse Total Non cooperation by the assesse using all type of dilly delaying tactics like

wrong information

Manipulation of records Abusing the Department

RESULT
Took 6 months to complete the audit and innumerous efforts Duty evasion case detected to the tune of Rs.118 lacs Failed to get any relief inspite of going to all channels.

High

appreciation for Cost Accountant Firm

SECTION 14 A VALUATION AUDIT

CASE

STUDY-II MENTA OIL UNIT

CASE STUDY-II MENTA OIL UNIT

Facts of the case

Unit Situated in Duty Free Zone Cenvat Credit Allowed Any Duty paid from PLA but refundable in the next month Customer allowed the input credit on the invoices raised by assesse unit

RESULT
Cost Accountant Firm appointed u/s 14 A/AA for special Audit Detailed technical Examination happened successfully as Cost Accountant himself was also an industrial engineer with more than 20 years core industry experience. Unit found to be involved in heavy manipulations by making fake entries . Duty involved in 11 months period estimated to be in crores .

SUGGESTIONS FOR COST ACCOUNTANTS

Must gain practical knowledge of the industry processes before taking up the audit. Must be thoroughly well versed with accounting systems , taxation systems , process etc. Must keep high integrity , self respect and low profile. Avoid any kind of conflict with the assesse and department as you have to strike a balance between two opposite parties. KEEP YOUR SELF REGULALRY UPDATED WITH THE LATEST DEVELOPMENT IN VARIOUS FIELDS