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CAG has no power to conduct Excise & Service Tax Audit of private

TrustmanBlog Data Collection Legal Outsourcing IndiaCAG has no power to conduct Excise & Service Tax Audit of private

Apr

30

CAG has no power to conduct Excise & Service Tax Audit of private

The Calcutta High Court delivered a judgment that Comptroller & Auditor General and any officers subordinate to him have no power to conduct audit of private enterprises unless these are financed or funded by Government or grants given by government. The High Court also quashed the letter issued by CERA a wing of CAG to conduct audit of Kolkatta based stock broker Company, SKP Securities Ltd [Writ Petition No 21053 of 2011] & held that there is no provision under Central Excise Act or Finance Act 1994 empowering CAG to undertake audit of private enterprises which are not funded by government. The High Court further held that Rule 5A (2) is ultra vires to the extent for directing every assessee to provide records to Audit Party of CAG. The High Court is of the view that only in case of Special Audit envisaged under section 72A of the Finance Act or Section 14A or Section 14AA of Central Excise Act; assessee is required to provide records, not otherwise, to audit party.  In a writ petition no. 20517 of 2012 of Infinity INFOTECH Park Limited, Kolkatta, wherein also similar issues were raised, similar judgment was passed, by referring to SKP Securities Ltd judgment. In both the writ petitions in last few days, extensive arguments were made. Hon’ble High Court delivered judgement in open Court by accepting arguments made on behalf of the Petitioners & by covering the provisions of various Acts relating to Audit by holding that except for Government Companies there are no provisions in any Act empowering CAG to conduct audit of any company. Court even held that C& AG Act also does empower to CAG audit of companies registered under Companies Act, 1956.  The High Court has also referred the matter to division bench of High Court by noting that another coordinating bench has taken view in  Berger Paint case that both Department & CAG can conduct audit by specifically noting that in Central Excise Rules 173, which is pera materia to Rule 5A, was not pressed & in that judgment subject matter was to interpret  the word “or” appearing in Rule, whether it has to be read as “and” and both authority, Department &  CAG can simultaneous conduct audit or not.

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