Pre-Audit Patently Illegal
IN DDT 1022 - 31.12.2008, I wrote,
"Board had issued detailed instructions on sanction of refunds of Customs Duty by Circular No. 24/2007-Cus dated 02.07.2007. It was instructed that all applications involving a refund of duty and/or interest of Rs. 5 lakh or more shall be subjected to pre-audit as per the existing practice.
Board further clarified,
Pre-audit of all refund claims will be conducted by the Assistant/Deputy Commissioner (Audit), in the Commissionerate Headquarters Office. Thereafter, the Assistant/Deputy Commissioner of Group/Division will pass an order-in-original in respect of the claim. Thereafter, the orders-in-original passed in this regard shall be subjected to review by the Commissioner concerned.
Why all this complication? One AC receives the refund application and sends it to another AC for pre-audit - waits for the report from that AC and then he should pass an adjudication order. Is he bound by the observations of the Audit AC? What happens if the Audit AC is junior to him? (This is not a small problem - government runs on seniority ego).
Now what happens if the refund AC takes a different view? Is he supposed to allow the refund or not? Why can't the AC (refunds) simply process the claim and decide and then the Commissioner can review the order if he wants to?
In some Commissionerates, as there is only one AC in the Head Quarters and he cannot pre-audit his own files of refund, the pre-audit is conducted by the Additional/ Joint Commissioners. Can any AC pass adjudication orders against the views of his senior officers? Is it not gross interference into quasi judicial functions of the AC?
Is the pre-audit another channel for slush money? Even the assessees are clever; they file refund claims of less than Rs. 5 lakhs to avoid pre-audit and sometimes the refund section officers advise them to bifurcate or trifurcate refund claims so that each claim is for less than Rs. 5 lakhs and need not go for pre-audit.
Recently it has come to our notice that an AC issued a SCN to an assessee that it has filed five refund claims to avoid pre-audit and add to his work.
Actually there is no need for this Audit - pre or post. We now have a perfect review system in place where invariably every order of the lower Authority is reviewed by the staff of the Commissioner, which is actually much better than the pre and post Audit.
What happened is a historical confusion. All payments made by the Department are subject to audit and every Commissionerate has a CAO and PAO for the job. The PAO is from the Principal Chief Controller of Accounts and is the guardian of the government funds and all payments including duty refunds were audited by him from an Auditor's point of view. Somewhere down the line they thought that this Audit has to be done by the AC (Audit) in the Commissionerate and the PAO got eliminated and the AC (Audit) took his place, though they are expected to perform different kinds of audit.
This pre-audit by the AC(Audit) is patently illegal as held by the Bombay High Court in Bombay Chemicals Ltd vs Union of India - 2005-TIOL-236-HC-MUM-CX.
Any continuation of such practice would attract contempt proceedings. We had suggested so in - 14.12.2006."
It is more than nine years since the Bombay High Court passed the order and the Board is merrily continuing with this illegal unnecessary system which only breeds corruption and is in no way useful to the Government.
Yet another blow to Modi's Governance - Maybe the Prime Minister has more opponents in the Government than in politics who are out to tarnish his image and reputation. Will somebody tell the FM or PM to do away with such outlandish procedures?