The Mumbai bench of the Customs, Excise and Service Tax Appellate Tribunal has held that the suppression of facts cannot be alleged merely for the reason that the audit party found some credit availed by the assessee as inadmissible.
The appellants engaged in the manufacturing of dutiable goods namely “PP Medicines” and during the Audit it is also observed that it has carried out sale of raw materials by selling the same to M/s Cipla Ltd., Mumbai, on whose behalf it also undertakes manufacturing process on job work basis.
On the basis of the Audit Report, the department imposed duty liability including interest and penalty covering extended period on the ground of suppression of facts etc.
On second appeal, the Tribunal noted that the purpose of statutory audit, as available in the Manual published by the Institute of Chartered Accountants of India in respect of EA audit and CERA audit under Chapter 17 is that the idea behind such conduct of verification is to reasonably ensure that no amount, which under the central excise law is chargeable as duty, escapes taxation and the process of verification is always carried out in the presence of assessee and in the process, the auditor is required to discuss the matter with the assessee and advice him to follow correct procedure in future. It is also referred in the said manual that after such submission of audit report, in cases where the disputed amount have not already been paid by the assessee at the spot, demand notices are issued by the department for their recoveries.
“EA 2000 audit was therefore held to be participative audit. Likewise, CERA audit is conducted by the Comptroller and Auditor General of India in respect of receipt and expenditure of the Government of India. It also discharges revenue audit which covers central excise, service tax and customs laws during which time the assesses were examined by CERA audit party to point out the deficiencies, leakage of revenue and non recoveries of dues by the Central Excise Department. Therefore, it cannot be said that only because audit party had found some credit availed has inadmissible, suppression of fact is made out,” the Tribunal said.
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