Pre - audit blues ?
Netizens may recollect that it required a case of improper sanction of refund involving over Rs 4 crores , detected at the time of post - audit to trigger Board's Circular No 33/90 -CX introducing thereby pre-audit in respect of refund claims of Central Excise duties involving Rs. 5 lakhs and above. The cause of pre-audit was addressed again by the Board vide Circular No 809/6/2005- CX dated 01.03.2005 wherein in supersession of earlier instructions, Board decided that all refund / rebate claims involving an amount of Rs 5 lakhs or above should be subjected to pre-audit at the level of jurisdictional Commissioner. In such cases, a suitable Order-in-Original shall be passed by the Deputy / Assistant Commissioner of Central Excise. It has also been mentioned in the said Circular that since the claim is pre-audited with the concurrence of Commissioner, the usual review proceedings under Section 35E may not be necessary in such case.
Most of us would agree that the procedure of pre-audit enables the Department to doubly assure itself that the refund /rebate documents go through further scrutiny thus increasing the chances of detection of any fraud. However Hon'ble Bombay High Court in Bombay Chemicals Ltd vs Union of India has interalia observed that pre-audit before finalization is an interference by audit cell in the quasi-judicial proceedings and held that this was 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.
The procedure of pre-audit continues in many Commissionerates blissfully oblivious of the above High Court directive. One Commissionerate falling within the jurisdiction of Bombay High Court has promptly brought the above development to the notice of the Board. Hopefully, we will have some decision on the same before contempt proceedings are launched by some aggrieved party for continuing with the prevalent practice of Pre-audit in terms of Boards Circular No 809/6/2005- CX dated 01.03.2005. There should however be no laxity in reducing the level of scrutiny on the refund / rebate documents and suitable methods should be undertaken to handle the situation without hurting the interest of Revenue.