1. Introduction:
1.1 Central Board of Indirect Taxes and Customs (CBIC), In exercise of the powers conferred by clause
(k) of section 157, read with section 99A and clause (ii) of subsection (2) of section 158, of the Customs Act, 1962 (52 of 1962) and in supersession of the On-site Post Clearance Audit at the Premises of Importers and Exporters Regulation, 2011,has notified the Customs Audit Regulations, 2018, vide Notification No. 45/2018-Customs (N.T.) dated 24th May 2018.
[Notification No. 45/2018-Customs (N.T.) dated 24th May 2018.]
1.2 A new Chapter XII A with heading ‘AUDIT’ was introduced in Customs Act, 1962 after Section 99.
A new Section 99A (under Chapter XII A) has been introduced to provide a statutory framework for the procedure for conducting post clearance audit.
Section 99A: the proper officer may carry out the audit of assessment of imported goods or export goods or of an auditee under this Act either in his office or in the premises of the auditee in such manner as may be prescribed. Explanation of said Section 99A defines “auditee” as under:
Explanation – For the purposes of this section, “auditee” means a person who is subject to an audit under this section and includes an importer or exporter or custodian approved under section 45 or licensee of a warehouse and any other person concerned directly or indirectly in clearing, forwarding, stocking, carrying, selling or purchasing of imported goods or export goods or dutiable goods.
It means, scope of auditee has been enlarged significantly by aforesaid definition.
[Inserted by Finance Act, 2018 (Act No. 13 of 2018), dt. 29-3-2018.]
1.3 A new clause (k) has been inserted in section 157 of the Customs Act [vide Finance Act, 2018 (Act No. 13 of 2018)] to enable the Board to frame regulations in accordance with the new section 99Aof the said Act.
Clause (k) of section 157 reads as:
(k) the manner of conducting audit;
[Inserted by Finance Act, 2018 (Act No. 13 of 2018), dt. 29-3-2018.]
1.4 Customs Audit Regulations, 2018 has been issued in terms of power conferred by Clause (k) of section 157and the same is in accordance with global best practices, which is aimed at creating an environment of increased compliance while allowing the Department the flexibility to increase the facilitation for importers and exporters. Customs Audit Regulations, 2018 mark a fundamental shift in the functioning of the Indian Customs since the legal compliance and correct assessment of Customs duties will be verified by the Customs at the premises of importers and exporters. The earlier On-site Post Clearance Audit at the Premises of Importers and Exporters Regulations 2011’ (OSPCA regulation) was applicable in relation to imported / export goods that were cleared after the enactment of the Finance Bill, 2011 i.e. 08.04.2011. The said OSPCA regulation, empowered the proper officer for verification of correctness of assessment of duty on imported or export goods at the premise of importer or exporter and also prescribed the manner of conducting audit.
1.5 As per Customs Audit Regulations, 2018, “audit” includes examination or verification of declaration, record, entry, document, import or export licence, authorisation, scrip, certificate, permission etc., books of account, test or analysis reports, and any other document relating to imported goods or export goods or dutiable goods, and may include inspection of sample and goods, if such sample or goods are available and where necessary, drawl of samples. Further, for the purpose of the section 99A, “auditee” means a person who is subject to an audit under the section and includes an importer or exporter or custodian approved under section 45 or licensee of a warehouse and any other person concerned directly or indirectly in clearing, forwarding, stocking, carrying, selling or purchasing of imported goods or export goods or dutiable goods. Further, “premises” includes the registered office, branch office, warehouse, factory, or any other premises at which, imported goods or export goods or dutiable goods or books of account or records of transaction or other related documents, in relation to the said goods are ordinarily kept, for any purpose by an auditee.
2. Customs Audit Regulations, 2018:
2.1 Customs Audit Regulations, 2018 prescribes the methodology of Selection for Audit which states that the selection of auditee or the selection of import declarations or export declarations, as the case may be, for the purposes of audit shall primarily be based on risk evaluation through appropriate selectivity criteria. Thus, “risk based selection” is at the core of Customs Audit.
2.2 Customs Audit Regulations, 2018 also prescribe the manner of conducting audit at the premises of importer or exporter. It also stipulates the responsibilities and compliance on the part of auditee.
3. Auditee to preserve and make available relevant documents
3.1 The auditee shall preserve and on request by the proper officer make available in a timely manner, for the purposes of audit, true and correct information, records including electronic records, documents or accounts maintained in compliance of the provisions of the Act, rule or regulations, made there under or any other law for the time being in force, maintained for a minimum period of five years in relation to imported goods or export goods or dutiable goods.
3.2 The auditee shall render assistance to the proper officer and his team of officers in the discharge of their official duty and shall in no case refuse or obstruct the proper officer or his team of officers in discharge of their official duty.
4. Manner of conducting audit
4.1 Following guidelines are prescribed under the Customs Audit Regulations, 2018:
(1) The proper officer may conduct audit either in his office or in certain cases at the premises of an auditee.
(2) The proper officer may, where considered necessary, request the auditee to furnish documents, information or record including electronic record, as may be relevant to audit.
(3) The proper officer shall give not less than fifteen days advance notice to the auditee to conduct audit at the premises of the auditee.
(4) The proper officer may, where considered necessary, inspect the imported goods or export goods or dutiable goods at the premises of the auditee or request the auditee to produce sample, if available, with him.
(5) The proper officer shall inform the auditee of the objections, if any, before preparing the audit report to provide him an opportunity to offer clarifications with supporting documents.
(6) Where the auditee is in agreement with the audit findings, he may make voluntary payments of duty, interest or other sums, due, if any, in part or in full and the proper officer shall record the same in the audit report.
(7) Where the proper office has asked the auditee to furnish information, document, record or sample for the purposes of audit, it shall be mandatory for the proper officer to inform outcome of such audit to the auditee.
(8) The proper officer shall complete audit in cases where it is conducted at the premises of the auditee within thirty days from the date of starting of the audit. The jurisdictional Commissioner of Customs may extend the period of completion of audit from thirty days to sixty days, by an order in writing.
4.2 Post Clearance Audit (PCA) and Customs Audit Regulations, 2018
1. Types of Post Clearance Audit:
a. Transaction Based Audit (TBA): Examination of BE/SB for verifying compliance to all the legal provisions and to check for any short levy or non levy. TBA normally does not require the auditor to visit the premise but if required it may involve a field audit also.
b. Premise Based Audit (PBA): Here the legal compliance and correct assessment of Customs duties will be verified at the premise of the importers and exporters. Identification of auditees for the PBA will be done based on the risk parameters. PBA will be conducted once in two/three/five years for AEO T-1/T-2/T-3 respectively.
c. Theme Based Audit (ThBA): This provides for the review of data relating to the entire business activity for a particular commodity or industry or issue. It provides for systematic approach to data collection and analysis of data to determine the likelihood of compliance.
2. Directorate General of Analysis and Risk Management has been entrusted the responsibility of identifying the potential focus areas and entities for various types of audit. Audit Comissionerates have started functioning in right earnest with encouraging results.
[Refer Circular No. 02/2019-Customs dated 08.01.2019]
5. Assistance of professionals:
5.1 If the proper officer, having regard to the nature and complexity of the audit, is of the opinion that the audit has to be done with the assistance of a professional like Chartered Accountant, Cost Accountant, an expert in the field of computer sciences or information technology etc., may do so, with the previous approval of the Principal Commissioner/Commissioner of Customs.
6. Penalty:
6.1 Any auditee, who contravenes any provision of these regulations or abets such contravention or fails to comply with any provision of these regulations with which it was his duty to comply, shall be liable to a penalty which may extend to fifty thousand Indian rupees.”
7. Officers of Customs Audit:
7.1 The Board vide Notification No. 39/2018-Customs (N.T.) dated 11th May, 2018 has appointed officers of Customs of specified ranks as officers of Customs Audit for the purpose of carrying out audit under section 99A of the Customs Act, 1962. The specified officers have also been empowered under Section 17 and Section 28 of the Customs Act, 1962 vide Notification No. 40/2018-Cus (NT) dated the 11th May, 2018 which shall enable them to issue necessary show cause notices based on the findings of audit. The officers of the respective jurisdictional executive Customs Commissionerates have also been empowered by the Board as proper officers under section 99A vide notification No. 44/2018-Customs (N.T.) dated 24th May, 2018.
[Refer Notification No 39/2018-Cus( NT)., dated 11-05-2018 & Notification No 40/2018-Cus( NT)., dated 11-05-2018, notification No. 44/2018-Customs (N.T.) dated 24-05-2018]
7.2 The Board vide Notification No: 85/2017-Customs(NT) dated 07.09.2020 has notified Audit Commissionerates in Chennai, Delhi and Mumbai Zones with all India jurisdiction.
7.3 The Board vide Instruction No: 18/2020-Customs dated 06.10.2020 has appointed Directorate General of Audit as the nodal directorate for Customs PCA.
8. The Customs Audit Manual 2018 explains in detail the principles, methodology and procedure for conducting three types of customs audits i.e. Transaction based audit (TBA), Theme based audit (ThBA) and Premises based Audit (PBA), which should be referred to for more details about Customs Audit.
Source – Custom Duty Manual 2023
