Service Tax - Audit of the Audit
AUDIT of Service Tax assessees by CAG as well as the Department's Audit wing is a hotly debated and litigated issue. In a recent Audit Report, the CAG found serious lapses in the Audit by Department's Audit. The CAG observed,
The three important prongs of the compliance verification system adopted by the department comprise returns' scrutiny, audit, and anti-evasion. Compliance verification through audit entails conduct of audit at assessee premises by following prescribed procedures including selection of assessee units based on risk parameters and scrutiny of records of the assessee to ascertain the level of compliance with the prescribed rules and regulations. Internal Audit is empowered under the Service Tax Rules, 1994, to access the records of the assessees at their registered premises. Every Commissionerate has, within its Internal Audit section, an Audit cell, manned by an Assistant/Deputy Commissioner and Auditors and headed by an Additional/Joint Commissioner. The Audit cell is responsible for planning, monitoring and evaluating the audits conducted. Audit parties consisting of Superintendents and Inspectors carry out the audit at assessee premises in accordance with the Audit Plan and as per the procedures outlined in the Service Tax Audit Manual, 2011.
CAG checked the adequacy of coverage of assessees as well as the quality of audits undertaken by the internal audit parties and noticed several lapses like 1.Non-payment of Service Tax, 2.Non-payment of interest on belated payment of Service Tax, 3.Non compliance with Point of Taxation Rules, etc., in units already audited by Internal Audit Parties of the Department.
The CAG can audit the internal audit of the Department, but can the Service Tax Department Audit do a similar exercise and find out the flaws in the CAG Audit?