Customs and Excise Duties

The audit procedures for custom duties are listed below:

  1. Examine Cash Book: Examine the payment of custom duties in the cash book with reference to bill of entry.
  2.  Examine the Bill of Entry:
    ¾ Check the amount of custom duty was calculated correctly, i.e., in accordance with the applicable rate for dutiable goods.
    ¾ If the duty has been paid by dealing and forwarding agent, examine bill of entry with reference to agent’s bill.
    ¾ If the duty has been paid by the client directly, examine bill of entry together with receipt evidencing payment of customs duty.
  3.  Examine Disputed Cases Carefully: In case of a dispute about the amount of duty payable, a provisional payment may have been made. The auditor should determine the duty payable and ensure any additional duty to be paid or refund expected should have been adjusted.
  4.  Verify for Duty Drawback: Duty drawback refers to a scheme under which central excise and customs duties paid for raw-materials and other inputs used in the manufacture of the product prior to its export are refunded to the exporter. The auditor should verify the claim of duty drawback with reference to acknowledgement issued by the Directorate of duty drawback.

Excise duty becomes payable at the time of releasing at excisable goods from the factory/godown to the manufacturer. Normally, the excise duty payable is deposited with the designated bank to the credit of the controller of excise and one copy of the challan is forwarded to him for obtaining the permit and another copy is sent to the dispatch department evidencing payment of required duty. The auditor may adopt the following procedures to vouch the payment of excise duties:

  1.  Verify payment of excise duties by examining the duly paid as per challans with reference to the quantity of goods in respect of which issue permits have been received.
  2.  Test check the accuracy of the amount of duty paid by multiplying the rate of excise duty with the value of goods issued as per the client’s stock register.
  3.  In respect of excisable goods manufactured but remaining to be released, ensure that necessary provision for unpaid excise duty has been made.
  4.  Ensure that in every case CENVAT credit has been adjusted and only net excise duty has been paid.
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