Pre - audit blues?
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 inter alia 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.
Board has now realised this, and has now given instructions that the pre-audit will be done by the Assistant Commissioner in the Commissionerate and not the Commissioner himself. Accordingly, the present system of pre-audit of claims by Commissioner would henceforth be dispensed with.
It took the Board nearly two years to clarify the position.
CBEC CIRCULAR NO. 857/15/2007/CX., Dated: November 2, 2007