The Central Board of Excise and Customs (Board”) issued an Instruction F. No. 206/05/2014-CX.6 dated November 3, 2014 in respect of pre-audit on artificially splitting up of Rebate claims.

On coming across to the fact that assesseesare avoiding the per-audit of Rebate claims by artificially splitting up Rebate claims so as to keep each individual claim below Rs. 5 lakhs, the Board has empowered the Rebate sanctioning Authorities to order for pre-audit by clubbing Rebate claims where such claims are artificially splitted by the assessee. It has been further directed that such discretionary power shall be exercised by the Authorities as an exception than rule.

Our Comments: It would be interesting to know that the pre-audit by the AC(Audit) is patently illegal as held by the Hon’ble Bombay High Court in Bombay Chemicals Ltd Vs. Union of India [2005-TIOL-236-HC-MUM-CX] wherein it was said that “It is interference by audit cell in quasi-judicial proceedings and is illegal and unauthorized especially as audit cell did not give any hearing to affected parties before finalization of its order thereby depriving them from their rights under the refund order.”

 (Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email:

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October 2020