Material prepared by Smt M.

Janaki Devi,AAO(Customs), PDA(Central), Hyderabad

Revenue Audit Manual
Define the main principles to be followed in the audit of customs
receipts with reference to the statutory responsibilities of the C.A.G of
India?
The audit of receipts is inherent in the powers vested in the CAG of India by
Article 151 of the Constitution of India. The Article 151 lays down that the
reports of the CAG of India relating to the accounts of Union Government
shall be submitted to the President, who shall cause them to be laid before
each House of Parliament. Thus, the audit reports must relate to the totality
of the accounts of the Union and this totality would include all receipts.
Section 16 of the CAG (Duties, Power and Conditions of Service)
Act 1971, specifically enjoining upon the CAG to audit all receipts of the
Union and to satisfy himself that rules and procedures in that behalf, are
designed to secure an effective check on assessment, collection and proper
allocation of revenue and are duty observed. For this purpose, the CAG is
authorized to undertake such examination of accounts as he thinks fit and to
report thereon. The audit of receipts of the Union is, thus, a Statutory
responsibility of CAG of India.
The main principle in conducting Revenue audit with reference to
the provisions of Section 16 of the DPC Act 1971 are: -
1) The CAG shall audit all receipts that are payable in to
Consolidated Fund of India;
2) He should satisfy himself that the rules and provisions
in that behalf are designed to secure an effective check on the
assessment collection and proper allocation of revenue;
3) He should be satisfied that these procedures and checks
are properly applied; and
4) For the purpose of ascertaining that they are being duly
observed, he should make such examination of accounts as he
thinks fit and report thereon.
It will be seen from the above that the primary task of auditing is
unqualified and left to the discretion of the CAG. Principles at (2) and (3)
are not by way of limiting the scope of that task but illustrative of it.
It is primarily the responsibility of Customs authorities to see that
all revenues or other dues to Government which have to be brought to

Material prepared by Smt M.Janaki Devi,AAO(Customs), PDA(Central), Hyderabad
account are correctly and properly assessed, realized and credited to
Government account. The most important functions of audit are to see (1)
that adequate regulations and procedures have been framed by the customs
department to secure an effective check on assessment, collection and proper
allocation of taxes, and (2) to satisfy its elf by adequate test check that such
regulations and procedures are actually being carried out. It should also be
borne in mind that the basic purpose of audit is not only to see that all
demands raised are promptly collected and credited to Government but also
to secure that those demands are correctly raised and they satisfy the
requirements of law and that the executive does not grant unjustified or
unauthorized remissions and refunds to tax payers. Since, the customs laws
under which the revenue is collected provide for judicial remedy or judicial
interpretation, the activity of audit, should be limited to those matters which
are not subjected to judicial processes. It is only in those cases, where no
authoritative interpretation of a provision of law by a High Court or the
Supreme Court is available, that the CAG states what in his judgment is
correct requirement of law on the basis of the plain meaning of the statue
and puts forwards that view to the customs department for its acceptance
after examination.
The Audit Department should not in any way substitute itself for the
revenue authorities in performance of their statutory duties. But, audit
should satisfy itself that legality and regularity are observed in individual
assessments in general, that departmental machinery is sufficiently
safeguarded against error and fraud and that so far as can be judged the
procedures are so devised as to give effect to the requirements of the law of
Customs.
What are the customs documents scrutinised in audit?
May 2003, 5(ii)
As per para 2.6 of RA Manual, in the audit of Customs receipts, a day to
day scrutiny of current documents in the Customs Houses, a general review
of all such transactions and a detailed check of a percentage there of, is
done. For this purpose, the following documents are scrutinised: original
and duplicate bills of entry, original and duplicate shipping bills, original
and duplicate into and ex-bond bills, bond registers, baggage declarations,
postal transactions, refund and draw back cases and the like in the case of
Sea Customs; and the corresponding import and export applications,
baggage declarations etc., for land and Air Customs and an Audit of Ships

Material prepared by Smt M.Janaki Devi,AAO(Customs), PDA(Central), Hyderabad
files relating to imports and exports of in transit documents concerning a
rail or steamer
The import ships file comprise the following documents : - (Para
9.01 of RA Manual) 1. Import General Manifest 2. Bills of entry, original
and duplicate for home consumption, duplicate in to bond bills, original
and duplicate coastal bills of entry 3. Application for entry inwards,
amendments to manifest, memo of fees, Arrival Report, dock clearance
memo 4. Transshipment applications, boat notes etc, 5. Port trust out turn
statements in duplicate and Agents out turn statements 6. Show cause
notices.

What are the audit checks required on provisional duty bills of entry?
June 2005 4(b), May 2004 3(b)
As per para 6.47 (B), in the case of provisional duty bills of entry it should
be seen
1) that the orders of the Assistant Commissioner in charge of the group or
department were obtained before the goods were provisionally assessed and
a signed declaration that all available documents have been submitted is
obtained from the importer
2) that the proposed valuation was based on the recorded examination with a
suitable addition to safe guard the revenue, and that the appraiser has
recorded in detail the basis of provisional assessment
3) that the amount of provisional duty is more than the actual duty
recoverable
4) that the extension of time, if allowed, was granted by the proper authority
on proper cause being shown
5) that the final assessment was not unduly delayed
6) that there was not under valuation
7) that where the weight forms a basis of valuation a certain percentages has
been check weighed.
What are the various types of bills of entry that are examined in audit?
What are the audit checks exercised on Free Bills of entry?
12/1999, 4(b)

Material prepared by Smt M.Janaki Devi,AAO(Customs), PDA(Central), Hyderabad
As per para 6.46 of Revenue Audit Manual, the following are the bills of
entry that are examined in audit :
(a) Non bonded goods:
(i) Dutiable home consumption Bills of Entry
(ii) Import duty free Bills of Entry or home consumption
(iii) Bills of entry for Government stores
(b) Bonded Goods:
(i) Into bond bills of entry
(ii) Ex bond (out of bond) Bills of Entry.
Audit Checks on Free bills of entry: As per para 6.47 (C) of Revenue
Audit Manual, The audit on free bills of entry consists in seeing that the
goods have correctly exempted from duty under the authority of the Customs
Tariff or a notification or individual orders of the Government of India
issued under the provisions of Section 25 of the Customs Act 1962,
that the appraiser has quoted the authority adding his initials and date to the
word Free entered by him in the rate of duty column of bills of entry;
and that the orders for examination on the reverse of the bills of entry have
been carried out by the examining staff and that certificates required to be
produced under rules in certain cases for allowing free entry to goods are in
their proper form and that the particulars are correct.
Briefly explain the audit checks for :Nov 2007
i) Bills of Entry (dutiable): As per para 6.47 (A), the audit checks are:
(i) that the original is presented to the Import Department
under sn.46 of Customs Act, 1962 and that it bears the serial
number and Audit date stamp, and that it is duly noted by the
noter over his initials;
(ii) that the document is passed by the Appraiser
and is countersigned by the Asst. Collector
(iii) that the first two columns of the documents have been
properly filled in and that the total number of packages, cases,
crates duly certified in works by the Import department;
(iv) that the description given in the BE is complete and
gives clear idea of the goods imported;

Material prepared by Smt M.Janaki Devi,AAO(Customs), PDA(Central), Hyderabad
(v) that the correct I.C.T number is shown and the R I T C
code number is also shown;
(vi) that no unauthorized addition or alterations have been
made in it, and that any corrections existing at the time of its
presentation have been attested;
(vii) that the rate of duty levied is in accordance with the
Indian Customs Tariff subject to the ruling issued from time to
time and that the duty payable has been correctly calculated;
(viii) that the correct rate of exchange as per daily Bank slips
is shown in the case of goods assessed on invoice value;
(ix) that when the goods are passed on tariff value or where
the goods are subject to a specific rate of duty the unit of quantity
or weight, as the case may be, is recorded in words as well as in
figures;
(x) (a) in the case of goods assessed to duty on the basis of
invoice under sn. 14(i)(a), addition of freight and insurance
charges have been shown; (b) in the case of invoice value in
rupees the importer has declared the assessable value after
addition of landing charges and endorsed the BE invoice in
Rupees;;
(xi) That the value, weight or quantity assessable to duty is
correctly calculated and written in words and figures and the
calculation of quantity and weight recorded on the reverse of the
BE are correct;
(xii) That the assessment is according to the rate of duty
prescribed in the Indian Customs Tariff and has been correctly
calculated and the duty recovered is correctly shown in figures
and duly certified in words and that the BE bears the initials of the
duty calculators ;
(xiii) That if there is more than one item in the BE, the
summation of total value, weight or quantity of the several items
is correct;
(xiv) That in the case of goods imported ex-bond from
Customs port, the quantity and value in the BE accepted by the
appraiser for the purpose of assessment, agree with the relative

Material prepared by Smt M.Janaki Devi,AAO(Customs), PDA(Central), Hyderabad
bond advice, which after check is to be returned to the Appraising
department for further action;
(xv) That in the case of goods assessed to duty at the
preferential or protective rate of duty, the appraiser has attached to
the BE, the duplicate copy of the certificate of origin in the proper
form duly attested;
2. Audit checks on Refund claims: As per para 15.34, the audit of
refund claims consists in seeing:-
i. that the refund is sanctioned by the competent authority;
ii.
that it is in accordance with the requirements
of Customs Act and the executive orders of the Government and
the CBEC;
iii.
that the amount of it is arithmetically correct;
iv.
that a note of the refund sanctioned is made
against the original credit entry;
v.
that all the refunds in excess of Rs 20 are duty
stamped. For this purpose paid vouchers from Accounts section
of AGs office should be called for and seen;
vi.
where refund is paid after expiry of time limit
laid down in sn. 27 of Customs Act, it should be seen that
relaxation of time limit is specifically authorized by the Board.
3. Audit checks on drawback claims:- As per section 12.27 of RA
Manual, the general checks to be exercised on drawback claims are:
A . In respect of claims under Section 74, audit should see:
i whether the claims are presented in proper form, the declarations
are all furnished and within the time limit prescribed under the Act
and rules;
ii whether the examiner had made a detailed report of the result of
examination on the reverse of the shipping bill and that the
description on the shipping bill tallies with the examination report;

Material prepared by Smt M.Janaki Devi,AAO(Customs), PDA(Central), Hyderabad
iii that the drawback export order is signed at proper places by the
appraising staff;
iv that it is ensured that the market value of goods is more than the
amount of drawback claimed;
v that the claim is not less that Rs 5 except in case of supplementary
claims;
vi that the goods have been properly identified and that the claim
does not include cases where goods have been declared as not
complete for identification for drawback under sn. 74;
vii that the goods are not re exported to a port to which shipment
under claim of drawback is prohibited;
viii that the rates applied are correct as per the rates prevalent on the
date of export and that the calculations are correct;
ix that a note of drawback is kept in the original BE where
necessary;
B. In respect of claims of drawback under Sn. 75:
i it should be seen that relevant procedure prescribed in the rules
framed Government from time to time governing the grant of
drawback in respect of any material used in the particular kind of
manufactured article have been followed;
ii the rate of drawback so applied on such items of goods based on
Government of India notifications or orders and that the correct rates
applicable to the goods exported as per descriptions on the shipping
bills and examination re export are adopted;
iii the amount of drawback paid is correctly worked out on the basis
of the rate adopted and the quantity exported
iv the goods exported are not prohibited by the Govt. of India.;
What are ship files? Enumerate the audit checks required on import
ships files?
1994, 2004
(Para 9.01 of RA Manual) Ships files are compiled with all the documents
pertaining to a ship, after the normal period of time for transactions in
connection with the imports and exports has lapsed. The scrutiny and
compilation of the ships files is done in the Manifest clearance Department

Material prepared by Smt M.Janaki Devi,AAO(Customs), PDA(Central), Hyderabad
of the custom House. In some places export ships files are compiled in the
export department itself.
The object of compiling a ships file for imports and exports is to
ensure that all transactions have taken place in accordance with the Act, the
Rules and Regulations and that the transactions pertaining to a ship are
complete in all particulars.
Checks on Import ships file: As per para 9.9 of Revenue Audit Manual,
audit has to satisfy itself that:
i) dutiable goods have not been imported without payment of
duty as free goods or by means of bogus or incomplete documents or
through inadvertence or error;
ii) all goods are correctly described in documents as regards
quantity, weight, value, etc.
iii) the procedure for the control, discharge and clearance of
goods has been correctly followed.
iv) That all documents relating to ships files are forth coming
and are complete.
Audit checks on Export ship files: As per para 9.16, in auditing an export
ships file, it is seen that:
i) all packages entered for export are fully accounted for by
shipping bills, transshipment permits etc.
ii) dutiable cargo has not been exported free of duty;
iii) all goods are correctly described in documents as regards
quantity, value, weight etc.
iv) the prescribed procedure for shipment of goods is followed;
v) where necessary, prescribed percentages of check weighment
of dutiable goods has been carried out and proper action has been
taken for settling differences in excess of the prescribed limits;
vi) short shipment notices have been filed within the time limit
laid down;
vii) fees have been properly levied for the amendment of the
manifest;
viii) corrections in the manifests and connected documents have
been dealt with according to the prescribed procedure;

Material prepared by Smt M.Janaki Devi,AAO(Customs), PDA(Central), Hyderabad
ix) in respect of goods shipped under claim of drawbacks,
advices have been sent to other ports of call of the vessel.
Landing charges
As per para 4.28 of Revenue Audit Manual, (Part VI), Customs, Landing
charges are recovered on the imported packages by the Port Trust
Authorities for the expense incurred in the actual landing and depositing of
the goods in the Customs House. These charges form part of the value of
the goods under section 14 of the Customs Act 1962. Accordingly landing
charges payable to the port authorities on imported goods are required to be
added to the C.I.F value of those goods to arrive at the assessable value for
purpose of levy of customs duty.
Since, however, the actual landing charges can not be readily ascertained
before the assessment, the Government of India decided that a flat rate of
landing charges should be fixed and this should be added to the C.I.F. value.
The Central Board of Revenue directed that the rates of landing charges
prescribed by the Port Trust Authorities should be reviewed by the Customs
Houses periodically. The flat rate of landing charges should be calculated on
Advalorem basis.
Preferential rate - para 5.23(b) of RA Manual
12/99
In respect of any article if a standard rate and a preferential rate are provided
in the schedule to the customs Tariff Act 1975, then the preferential rate is
applicable, if the article is the produce or manufacture of any country or
territory, declared as a preferential area by the Central Government (Section
4 of Customs Tariff Act 1975). These preferential duties are shown by the
side of standard rates in the next column in the tariff schedules. The Central
Government may increase or decrease the effective rate of preferential duty,
by issue of notification in the official gazette.
Inspection and examination
Para 6.19 of Revenue Audit Manual Inspection means examination of a
package externally to see that the marks and numbers agree with those in the
Bills of entry. In the case of open goods, this external examination goes to
the extent of verifying declaration of description and quantity.
Examination means measurement and weighment of the goods. It includes
inspection and in addition to opening the package of verify the contents; to

Material prepared by Smt M.Janaki Devi,AAO(Customs), PDA(Central), Hyderabad
draw samples for test. When 'examine' orders are passed for only a part of
the consignment, the rest are only inspected.