Manual for the Scrutiny of Central Excise Returns 2008

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Chapter 2: Policy Guidelines2A In the re-engineering of the return scrutiny business process, a conceptual distinction ismade between preliminary scrutiny of returns and detailed scrutiny of select assessments.The Board issues regular guidelines to undertake scrutiny of returns. These guidelines coverthe major statutory returns, ER1 and ER3. ER1 covers the monthly returns submitted by allunits which do not avail exemption under the notification issued in terms of Rule 12 of theCentral Excise Rules 2002 based on the value of clearances in a financial year. ER3 covers thesmaller units which furnish returns on a quarterly basis and avail turnover-based exemption.The guidelines issued by the Board in terms of Rule 12(3) of the Central Excise Rules 2002govern preliminary scrutiny and also stipulate risk parameters which should be used by thefield formations to select a small percentage of units for detailed manual scrutiny.2.1 SALIENT GUIDELINES TO THE SCRUTINY OF ER1 AND ER3 RETURNSBY THE CONCERNED OFFICER2.1A In exercise of powers conferred under Sub-rule (3) of Rule 12 of the Central ExciseRules 2002, the Board hereby lays down the procedure for scrutiny of the correctness of theduty assessed by the assessee by the concerned officer:1. All the returns received by the Superintendent of Central Excise under Sub-rule (1) ofRule 12 shall be scrutinized by him to check the correctness of duty assessed. TheInspectors posted in the Range will assist him in carrying out the scrutiny.2. The scrutiny shall be carried out in two stages namely, the ‘scrutiny of return’ and‘scrutiny of assessment’. Both the stages should be completed within three months ofthe date of receipt of the return.3. At the preliminary stage (to be called the ‘scrutiny of return’) all returns shallbe scrutinized as per the checklist in Annexe 2.1 of this chapter 1 to ensure that theinformation contained in the return is complete, prima facie, valid and internallyconsistent. For example, whether the 8-digit Central Excise Tariff Sub-Heading (CETSH)exists and if so whether the rate of duty is correctly mentioned. It would also involveexamination of the arithmetical accuracy of information contained in the return; for1Replicated here from the Circular No. 818/15/2005 – CX dated 15.7.2005, F.No.224/1/2005-CX-6, Board of Scrutinyof Returns, Department of Revenue, Central Board of Excise & Customs, Ministry of Finance & Company Affairs, Governmentof India.MANUAL FOR THE SCRUTINY OF CENTRAL EXCISE RETURNS 2008 11
example, duty payment or the break-up of duty paid in cash and through CENVATcredit. The preliminary scrutiny shall also include checking whether the assessment isconsistent with the existing orders on a particular commodity or in respect of theconcerned assessee. It should also be verified whether there is any provisional assessmentorder in respect of the assessee.4. After checking against the list provided here in Annexe 2.1, the Superintendent mustcomplete it and duly affix her signature to it. Wherever discrepancies or deficiencies arenoticed, the Range Superintendent should take appropriate action, especially towardssafeguarding of revenue.5. Apart from the above checks, the preliminary scrutiny shall also involve a closeexamination and comparison of trends of payment of duty, production, clearance (forhome consumption on payment of duty, under exemption, and for exports), value, andCENVAT utilization to identify returns to be selected for detailed scrutiny.6. The parameters on the basis of which returns would be selected for detailed scrutiny inthe second stage are listed in Annexe 2.2. Such selection has to be carefully made so thatall those units that qualify in terms of prescribed risk parameters are chosen. The saidselection may not normally exceed 5 per cent of the total returns received in the givenmonth or quarter. Returns that show a consistent trend of a negative impact on revenuefor the maximum number of parameters should be selected on a priority basis. Forexample, a return that shows an abnormal trend in respect of all eight parameters (S.Nos 3 to 10 of Annexe 2.2) should be prioritized over one that shows an abnormaltrend in respect of only seven or less parameters. The results of the scrutiny should berecorded in the checklist proforma in Annexe 2.2, duly signed by the Range Superintendent.A calculation sheet should also be appended. The purpose of the detailed scrutinyis to ascertain the correct reason for abnormal trends exhibited for the risk parametersidentified in the Board’s guidelines.7. In suitable cases, the designated officer may be required to call for documents/recordsfor verification as per Sub-rule (4) of Rule 12. In rare cases, the officer may even berequired to pay an assurance visit to the assessee’s premises, for which provisions existin Rule 22 of Central Excise Rules 2002. However, such visits should be made verysparingly, with due observance of existing instructions.8. A register for scrutiny of assessment (Annexe 2.3) should be maintained in the RangeOffice. The entries for the month or quarter to which the return pertains, and the dateof its receipt, should be made the instant the return is received. The relevant columnsfor scrutiny should be filled promptly, after each stage of scrutiny. The concernedDeputy/Assistant Commissioner should ensure that the said register is regularly maintainedand the scrutiny is carried out without delay.9. A monthly report shall be submitted by each Range Superintendent to the jurisdictionalAssistant/Deputy Commissioner of the Division regarding the number of returnsreceived and scrutinized in the proforma (Annexe 2.4). The report should besubmitted such that it reaches the Assistant/Deputy Commissioner latest by the 15th ofthe month.12 MANUAL FOR THE SCRUTINY OF CENTRAL EXCISE RETURNS 2008
Page 3 and 4: 2 MANUAL FOR THE SCRUTINY OF CENTRA
Page 5: 3.1.3 When is a Return Marked for R
Page 8 and 9: Chapter 1: Introduction tothe Retur
Page 10 and 11: Select units could be chosen depend
Page 14 and 15: 10 Every six months, the Deputy/Ass
Page 16: Action if answer is No: Reconciliat
Page 19 and 20: ANNEXE 2.1: CHECKLIST FOR THE PRELI
Page 21: ANNEXE 2.2: CHECKLIST FOR SELECTION
Page 25 and 26: (Continued from previous page)Type
Page 27 and 28: (Continued from previous page)Code
Page 29 and 30: 3.1.4A Once these returns are ident
Page 31 and 32: discussed in Chapter 3. Chapter 4 l
Page 33 and 34: 4.2.1 Checklist for Scrutiny of ER
Page 35 and 36: ANNEXE 4.1 CHECKLIST FOR ER1 AND ER
Page 37 and 38: (Continued from previous page)S.no.
Page 53: (Continued from previous page)S.no.

Manual for the Scrutiny of Central Excise Returns 2008

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