We are a mobile phone manufacturing company registered with the excise department. We have received an audit notice from the excise department asking us to furnish certain documents/ information. We understand that the Delhi High Court has recently held that excise officers do not have the power to conduct an audit. Please let us know if our understanding is correct.
Vide judgment in the case of Ms Travelite (India) vs UOI [2014-TIOL-1304-HC-DEL-ST], the Delhi High Court has held that the Finance Act, 1994, does not authorise a general audit of the type envisioned by Rule 5A(2) of the Service Tax Rules, 1994 (ST Rules). Instead the Act only provides for a special audit in case the circumstances mentioned in Section 72A of the Finance Act are fulfilled. The High Court has also quashed the CBEC Instruction, issued in furtherance to Rule 5A(2) of the ST Rules, to the extent that the same pertains to a general audit under Rule 5A(2) of the ST Rules.
However, it may be noted that the above decision has been pronounced with respect to audits conducted by the department under the Finance Act i.e. for service tax audits and not with respect to audits under the Central Excise Act, 1944.
Further, the CBEC has also issued a Circular No. 986/10/2014-CX dated 9 October 2014 wherein it has been provided that the central excise officers have the appropriate statutory backing for conducting an excise audit in terms of Section 37(2)(x) and Rule 22 of the Central Excise Rules, 2002.
Therefore, it is advisable that the information/ documents as required by the excise officers for conducting the audit be provided to the
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