The Central Board of Indirect Taxes and Customs (CBIC) is putting in place a new audit approach, based on the experience gained over years in implementation of Post Clearance Audit (PCA). The latter is an initiative to adopt global best practices, promote a culture of voluntary compliance, reduce border controls and shift compliance checks to the post-clearance stage.
PCA was first introduced in 2005, when the Risk Management System was launched. It replaced the conventional system of concurrent audit at the time of clearance of import and export goods. By separating the audit and assessment functions, it facilitated the expeditious clearance of goods. On-site Post Clearance Audit was introduced in 2011, envisaging a more comprehensive series of checks at the premises of importers and exporters. However, a need was felt to expand the scope and strengthen the legal framework.
Accordingly, Customs laws were amended last year to include custodians or licencees of a warehouse, customs brokers and any other person concerned directly or indirectly in clearing, forwarding, stocking, etc, within the ambit of PCA. An important change was to widen the scope of audit from mere assessment of duty to verification of the details furnished in bills of entry and shipping bills, and attendant statements, documents and declarations, presented during the process of self-assessment by importers and exporters.
Thus, under the new scheme, transaction-based audit (TBA), will be confined to a few transactions under the risk management system. Most other transactions will be covered under premises-based audit (PBA), where goods will be released without any Customs intervention under a self assessment procedure — audit will be at the premises of importers and exporters. A TBA may also be later converted into a PBA. Second, the scope of PBA is extended to include entities such as custodians, customs brokers, etc, who are also involved in the activity of import or export.
In a PBA, the Customs would review import and export over a period and check all relevant commercial records, including financial statements and contracts, to verify the particulars in a cargo declaration. PBA would enable the department to bridge the communication divide and usher in a new era of partnership with trade, says the CBIC. The Board may also select any criteria or theme for the audit. The Directorate General of Analysis and Risk Management has been asked to identify the potential focus areas and entities for various types of audit.
Suitable notifications have been issued under the Customs laws to establish audit commissionerates in Chennai, Delhi and Mumbai, with all-India jurisdictions. These will be headed by an officer of the rank of principal commissioner of customs. Officers of specified ranks in these commissionerates are suitably empowered for audit.
A major implication of the new approach is greater trade facilitation by way of quicker clearance of import and export goods. Most goods will be cleared on the basis of self-assessment by importers and exporters, without Customs intervention. The onus of filing correct bills of entry and shipping bills, proper classification, claiming exemptions only when eligible and paying duties, etc, is shifted to importers and exporters. They must establish sound internal systems to ensure compliance.