CAG not authorised to visit factory of assessee in private sector

Dear Mr. Tendulkar,

At the outset I would like to state that I have nothing personal against you (and I am reading your article or seeing your picture for the first time on TIOL) but would like to mention that my critical comments hereunder on your article are meant only to stimulate your intellect and not hurt your sentiments or personal reputation as a �consultant�.

Your article on the CAG's power to visit the premises of assessees registered with Central Excise and Service Tax and audit their accounts is at best half baked and lacks depth of knowledge. You almost dismissed the level of knowledge of the high profile candidates you interviewed for some position of 'Head, Indirect taxes' for some large corporate/organization and tried to justify your level of knowledge on this subject by quoting the Constitution of India and the mandate given to CAG under the Constitution as well as Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971.

Unfortunately, it appears from your article that you did undertake proper research before belittling the knowledge of other experts. It appears that you visited the website of the CAG at www.cag.gov.in and did some quick research on the CAG's mandate before compiling your article. After reading your article, I also paid a visit to the website of CAG. I do not know where to begin my comments after dissecting your article but I would start with Rule 22 of Central Excise Rules, 2002. The sub-rule (3) thereof stipulates that every assessee shall, on demand make available to the officer empowered under sub-rule (1) or the audit party deputed by the CAG the documents and records prescribed therein. In your article you interpreted this sub-rule and stated,

�However the officers of CAG cannot be considered as an officer empowered by the Commissioner of Central Excise in his behalf who is working under Central Government, Ministry of Finance, Department of Revenue where as C&AG is functioning as per the provisions of Articles 149 to 151 of the Constitution of India & the Comptroller & Auditor General's (Duties, Powers & Conditions of Service) Act, 1971. Further Rule 22 of Central Excise Rules 2002 does not speak about "Visit to Premises.�

You may note that the sub-rule (3) ibid uses the conjunction �or� between the words �to the officer empowered under sub-rule (1), �the audit party deputed by the CAG�. So the above statement extracted from your article clearly highlights the eagerness on your part to dismiss the knowledge of other experts and assert your own intellectual brilliance without even caring to read what this Rule or its sub-rules state/stipulate. You must note that the CAG derives his powers independent of Rule 22 of Central Excise Rules, 2002 to depute his staff for �Audit�.

And coming to powers of �Audit� conferred on CAG, in your article you made the following remark,

�The above mandate of C&AG does not even speak about conducting Audit of which are not having any Central or State Government control or share holding.�

And further you referred to extracts of Chapter 2 of �Regulations for Audit and Accounts� formulated by the CAG in the year 2007, in exercise of the powers conferred under section 23 of Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971.

It appears that your impatience to condemn the rest of the experts whom you interviewed did not allow you to read up the entire �Regulations�. You also probably did not read the entire statute which deals with the duties and powers of CAG viz., Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971. In fact I am herewith providing a few extracts of the duties and powers of CAG from our Constitution, Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971 and the Regulations for Audit and Accounts formulated by the CAG.

Art. 149. Duties and Powers of the Comptroller and Auditor-General :- The Comptroller and Auditor-General shall perform such duties and exercise such powers in relation to the accounts of the Union and of the States and of any other authority or body as may be prescribed by or under any law made by Parliament and, until provision in that behalf is so made, shall perform such duties and exercise such powers in relation to the accounts of the Union and of the States as were conferred on or exercisable by the Auditor-General of India immediately before the commencement of this Constitution in relation to the accounts of the Dominion of India and of the provinces respectively.

Sections 16 and 18 of Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971

Audit of Receipts of Union or of States

16. It shall be the duty of the Comptroller and Auditor-General to audit all receipts which are payable into the Consolidated Fund of India and of each State and of each Union territory having a Legislative Assembly and to satisfy himself that the rules and procedures in that behalf are designed to secure an effective check on the assessment, collection and proper allocation of revenue and are being duly observed and to make for this purpose such examination of the accounts as he thinks fit and report thereon.

Powers of Comptroller and Auditor-General in connection with audit of accounts

18. (1) The Comptroller and Auditor-General shall in connection with the performance of his duties under this Act, have authority-
(a) to inspect any office of accounts under the control of the union or of a State, including treasuries, and such offices responsible for the keeping of initial or subsidiary accounts, as submit accounts to him;
(b) to require that any accounts, books, papers and other documents which deal with or form the basis of or an otherwise relevant to the transactions to which his duties in respect of audit extend, shall be sent to such place as he may appoint for his inspection;
(c) to put such questions or make such observations as he may consider necessary, to the person in charge of the office and to call for such information as he may require for the preparation of any account or report which it is his duty to prepare.
(2) The person in charge of any office or department, the accounts of which have to be inspected and audited by the Comptroller and Auditor-General, shall afford all facilities for such inspection and comply with requests for information in as complete a form as possible and with all reasonable expedition.

From the above extracts, it is abundantly clear that CAG has the power to �audit� of accounts of all entities and not restricted to only Government departments/companies/corporations. CAG also derives the powers to visit the places of assessees (section 18(b) ibid states that CAG has the authority to require any accounts, books, papers etc to be sent to such place as he may appoint for his inspection. Now, if he can direct the �auditee� to send the records to any place appointed by CAG for inspection, he can as well depute his staff to the premises of the auditee for conducting audit.

You may also refer to the following link which will take you to the Regulations for Audit and Accounts formulated by the CAG in the year 2007 in exercise of his powers under s. 23 of the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971
http://saiindia.gov.in/english/home/about_us/mandate/Regulations/Regulation2007.pdf

And I would request you to read Chapter 6 (c) which deals with �Audit of Receipts� to enlighten yourself about the �auditing� powers of CAG. Also read Chapters 12 and 13 of the said Regulations which provide in detail the scope of powers of auditor to access information and data required for audit.

Also, the order of High Court of Calcutta in granting stay on the visit of CAG to the premises of the petitioner is only an interim direction and the matter is yet to be decided finally.

I must state that I am not a great fan of CAG Audit myself because of the manner in which they interpret certain provisions of law and raise objections which defy law and logic. During my tenure in the customs and excise department I worked closely with the CAG auditors during my tenure in the Ranges/Divisions. It is another matter that many of the experts and consultants in this field are blissfully unaware of the trouble CAG audit creates for an assessee (SCNs issued based on their objections refuse to die). Some of them may not be aware of Rule 22 of CER, 2002 as well.

But I would sincerely advise you that no one is an expert in any field and there will be deficiencies in every person, which a person will learn and correct himself over the years. I only wonder how many of the interviewees lost their chance to grab that position because they could not tackle your question in the interviews conducted by you.

Lastly, my sincere advice to you is that before you state or write something please undertake a certain amount of research and do not write anything with half baked information, which may mislead netizens into undertaking something adventurous (like that Kolkata assessee did) which only foments more litigation and trouble all around.

Best regards,
Santosh Hatwar
Advocate

santosh hatwar 23/01/2012

 

Dear Mr. HATWAR,

Please note that my personal reputation as Consultant and self esteem or sentiments are not so fragile to get hurt by comments of any �gTom, Dick & Harry�h. Secondly it is a historical practice (often found in Indian Politics also) that when person who do not get anything to attack on the subject matter, always tries to make a personal attack; which only shows that persons culture, nurture and intellectual level. Being a well cultured, well nurtured, sophisticated and civilised person I refrain to retaliate your personal attack.

For your kindest information I am writing articles since 1996 in reputed Customs & Excise Law journals like Excise Law Times (ELT), Excise Customs & Reporter (ECR) which are published for last thirty-thirty five years and also in Revenue Law Times (RLT); learned advocate like you might have not heard these names, so you might not be reading those journals being a revenue officer in past, as sitting in the chair revenue officer himself defines & interprets law as per his wish, whims and fancy because unfortunately in Indian Constitution there is no provision prescribing accountability of bureaucracy.

As you have shown keen interest in my credentials I would like to draw your kind attention towards decision of Honourable CESTAT in the case of Indian Seamless Metal Tubes Ltd. Versus Commissioner of Central Excise, Aurangabad 2004 (177) E.L.T. 374 (Tri. - Mumbai) where in after my arguments honourable single member judge has allowed Cenvat Credit on �gWelding Electrodes�h even after departmental representative has referred larger bench decision Jaypee Rewa Plant v. CCE, Jaipur - 2003 (159) E.L.T. 553 (LB) which is a rare incidence where single member judge had decided against decision of Larger Bench. The department appeal against decision of Mumbai Tribunal is pending before Honourable Bombay High Court but its fate is almost decided by the decision of Honourable High Court of Rajasthan in the case of Hindustan Zinc Ltd. v. Union of India 2008 (228) E.L.T. 517 (Raj.)

Unfortunately very learned Advocate of C&AG like you, claiming to have in depth knowledge on the subject; in your �gfully beaked�h comments, made on my article after thorough research, could not put before nitizens a singly provision under Article 149 to 151 of Constitution of India or any other Act which authorises officers of �gC&AG�h to VISIT private sector factories. Further learned advocate and person claiming to be worked with Excise & Customs department why remained silent about the fact that �gthe ITRA conducting IT Audit of Income Tax department has never visited any assessee's premises which also functions under same authority i.e. C&AG and also audit of sales tax department is conducted by C&AG without visiting assesses.

It is my humble request to you to kindly enlighten where it is mentioned in sub-rule 3 of Rule 22 of Central Excise Rules 2002 about �gVISIT TO PREMISES�h the said sub-rule 3 of Rule 22 of Central Excise Rules 2002 only says �gshall, on demand make available�h. The learned well versed advocate like you should have obliged all netizens by giving basis to read & interpret �gshall, on demand make available�h as �g�gshall, be allowed to visit and audit�h but unfortunately Rule 22(3) does not utter a single word about VISIT TO PREMISES OR AUDIT. Further I once again humbly request you kindly enlighten all netizens with your eminent research knowledge and expertise gained from revenue department to read and interpret �gmost holy, self proclaimed dummy-god creatures of constitution viz. officers of C&AG�h as �gofficers empowered by Commissioner on his behalf�h
With my small tiny brain neither having elite intellectual brilliance nor gained divine expertise in the subject by working for �grevenue department�h or Indian Reporting Service I tried my level best to locate justification for such interpretation in the renowned book of Justice G.P. Singh �gPrinciples of Statutory Interpretation�h (13th Edition 2012) but unable to trace the same. Learned well versed advocate & ex-revenue officer might not be aware of this book as sitting in the chair revenue officer himself defines & interprets law as per his wish, whims & fancy.

For a very learned friend like you, with in depth knowledge on all the subjects and a champion researcher, I would like to draw your kind attention towards one legal term that subordinate legislation (you may call it rules) beyond the principal legislation (you may call it Act or in present matter Constitution) are �gUltra Vires�h (means beyond powers.) Anyway empty vessel always makes more noise.

with best regards

Prasad S Tendulkar

Prasad Tendulkar 23/01/2012

 

Dear Mr. Tendulkar,

My comments on your article is self explanatory and there is nothing more to add to enlighten you on this subject. It appears that you have still not read the relevant provisions referred to in my comments. Thank you very much for making an effort to impress me with your credentials. Anyway, better luck next time.

Best regards,
Santosh Hatwar
Advocate

santosh hatwar 23/01/2012