Year-2022 Edition-2nd E-Magaz i ne लेखा दर्पण 2022 CGST AUDIT II, MUMBAI ZONE
CENTRAL BOARD OF INDIRECT TAXES & CUSTOMS CGST & CENTRAL EXCISE, MUMBAI ZONE CGST AUDIT-II COMMISSIONERATE
MESSAGE It gives me immense pleasure to know that CGST Audit-II Commissionerate Mumbai, has come up with E-Magazine “लेखा दर्पण 2022”- the audit compilation covering compliance, performance audit in a comprehensive and lucid manner. 2. The Indirect tax regime has experienced a quantum leap after the adoption of pathbreaking and historical GST reforms in 2017. The department has worked tirelessly to ensure smooth transition to the new system which has brought newer opportunities as well as challenges and Audit formations have a prominent role to play in revenue augmentation and systemic improvement for facilitation and compliance. 3. In the new paradigm of tax regime, Audit processes have undergone significant changes in terms of use of data analysis and internet driven tools. On the one hand, Audit function is expected to be efficient, time-bound and assessee friendly, while at the same time, it is seen as the instrument to plug leakages and loopholes which have put greater responsibility on the shoulders of the Audit Commissionerates. Therefore, Audit has been rightly recognized as one of the most important pillars of the new tax structure. This in turn has necessitated the departmental officers posted in Audit Commissionerates to innovate and engage with stakeholders and technology partners in constant efforts to make GST Audits innovative and technology driven using AI, IoT and Machine learning tools in conjunction and interplay of Meta i
datasets, law & procedures to come out with quality Audit Reports. 4. I am optimistic that this endeavour to enhance the competence and efficiency of the Audit officers is an appreciable step in this direction. It will serve as a repository of institutional memory for all the department officers and would enable them to sensitize the field formations about fresher ways to enhance compliance and facilitate in revenue augmentation. 5. I am sure officers of department would find this document useful and motivate Audit formations to work with greater enthusiasm, devotion and keep themselves abreast of the latest developments in the field of audit and analytical tools, accounting for better tax compliance. 6. I congratulate the officers and staff of Mumbai Audit-II Commissionerate for bringing out this compendium and wish them all the very best. (Ashok Kumar Mehta) Principal Chief Commissioner, CGST & C.Ex., Mumbai Zone. ii
PREFACE लेखा दर्पण 2022 is a humble attempt to compile the last year’s modes of evasion or avoidance during audits undertaken by internal auditors with respect to issues which can have all India ramifications for other Audit formations. 2. It covers the performance of the Commissionerate in respect of various compliance, non-confirmity with substantive provisions of CGST Act and Rules. It also focuses on sectoral issues, procedural and rule based issues which will enable the Commissionerates to optimize audit yield of similarly placed units and entities. The auditors have extensively used Registration modules, AIO data and DGARM red flag indicators reports and arrived at objections and observations based on interpretations and analysis of data and returns. 3. I feel happy to share that the officers of the Audit-II Commissionerate, Mumbai have also excelled in extra-curricular activities as much as in Audit work. Various Activities like Swachh Bharat Mission activities, Plantation drives were undertaken to celebrate Azaadi ka Amrit Mahotsav with enthusiasm and team spirit and kept the office space neat and clean by shifting to digitalization in a big way. i
4. I am hopeful that Audit-II Commissionerate would make best use of IT Applications and analytical tools like E-Way bill module, BIFA, Advait plateform to mine relevant data and conduct audit in non-intrusive and facilitative manner and cover a large number of units with quality outcome. 5. I hope this compilation would be useful for other Audit Commissionerates too in improving GST yield/outcome both qualitatively and quantitaively. (Ramesh Chander) Commissioner, CE & CGST Audit-II, Mumbai ii
“आगम” लखे ा पत्रिका वषष 2022, त्रितीय अकं सपं ादक मंडल सरं क्षक श्री अशोक कु मार मेहता, प्रधान मखु ्य आयकु ्त, के न्द्रीय वस्तु एवं सेवाकर तथा के न्द्रीय उत्पाद शलु ्क, मबंु ई जोन प्रधान सपं ादक श्री रमेश चन्द्र, आयकु ्त, के न्द्रीय वस्तु एवं सेवाकर तथा के न्द्रीय उत्पाद शलु ्क, लेखा परीक्षा-।।, मबंु ई सपं ादक श्री तपन कु मार, अपर आयकु ्त, के न्द्रीय वस्तु एवं सवे ा कर, लखे ा परीक्षा-II, मंबु ई सहयोग श्री पुनीत मेहता, श्री रामननवास मीना, त्रनरीक्षक, के न्द्रीय वस्तु एवं सवे ा कर, लखे ा कर सहायक, के न्द्रीय वस्तु एवं सेवा कर, परीक्षा-II, मंबु ई लखे ा परीक्षा-II, मंबु ई प्रकाशक (पत्रिका मंे प्रकात्रशत रचनाओं मंे व्यक्त त्रवचार रचनाकारों के त्रनजी त्रवचार ह।ै )
CONTENTS SUBJECT PAGE Message 1-2 Preface 3-7 Contents 8-9 10-34 1. Jurisdictional Map of CGST Audit-II, Mumbai Zone 35 2. Performance of CGST Audit-II Commissionerate, 36-39 Mumbai Zone 40-41 3. Top Detections & Recoveries 42-46 4. Important Observations of Audit-II Mumbai. 47-61 5. Guidelines to Facilitate Audit 6. Case Studies on Soft Skills 62 7. Acknowledgement by Higher Authorities 63 64 a. BIS Certificate 65-67 b. Chairman’s Weekly Newsletters 68 c. DG Audit Quarterly API Grading 69-71 8. Various activities under Azaadi Ka Amrit Mahotsav a. Plantation Drives. b. Swachh Bharat Mission. c. Various distribution drives. d. Felicitation of Freedom Fighter Shri G. G. Parekh ji. e. Publication of Cultural and Technical Magazines.
JURISDICTIONAL MAP OF CGST Audit-II, MUMBAI ZONE 1
CGST Audit-II, MUMBAI ZONE 2
PERFORMANCE OF CGST AUDIT-II, MUMBAI ZONE 3
In conventional sense, Audit means scrutiny of the records of assessee and the verification of the actual process of receipt, storage, production and clearance of goods and provision of services with a view to check whether the assessee is paying the duty correctly and following the extant rules. However, apart from ‘compliance audit’ mentioned above, the officers of this Commissionerate also undertake ‘performance audit’ whereby they ensure that not only all the procedural compliances are made but also the duty paid is in accordance with rules & regulation in line with the business processes followed by the assessee. It deters the taxpayers from evading taxes in the name of Tax Planning. This ensures that the quality of audit gets as much preference as quantity of audits& optimizes audit yield. While conducting Audit, the guidelines issued by CAG, DG Audit, and other auditing principles &Auditing & accounting standards are positively adhered to. As a result, the performance of this Commissionerate has been encouraging. The summary of the performance is given below: Performance of CGST Audit-II, Mumbai Commissionerate for last three years at a glance Period No. of Units Detections Recoveries Total (Rs. In Crores) Recoveries FY 2017-18 Audited (Rs. In Crores) Spot Other (Rs. In Recovery Recovery Crores) FY 2018-19 238 181.70 84.66 2.14 86.80 FY 610 365.40 210.01 26.94 236.95 2019-20 500 409.19 139.04 34.08 173.12 FY 2020-21 600 916.67 80.37 7.15 87.52 FY 2021-22 462 275.54 36.45 37.57 74.02 4
DETECTIONS MADE COMPARATIVE PERFORMANCE FROM FY 2017-18 (July to March) to FY 2021-22 (till Feb, 2022) 2021-22 275.54 2020-21 916.67 2019-20 409.19 2018-19 365.4 2017-18 181.7 0 100 200 300 400 500 600 700 800 900 1000 RECOVERIES MADE COMPARATIVE PERFORMANCE FROM FY 2017-18 (July to March) to FY 2021-22 (till Feb, 2022) 2021-22 74.02 2020-21 87.52 2019-20 173.12 2018-19 236.95 2017-18 86.8 0 50 100 150 200 250 5
Audit Paras raised and pendency position as on 28.02.2022 Receipt Pendency/Months of Opening Disposal Closing 0-3 3-6 6-12 More balance as Audit up to Balance month month month paras the than 1 on up to Month 248 year 01.04.2021 the 1378 125 123 0 0 465 Month 1161 Details of Show Cause Notices Issued as a result of Audit Objections During April to February, 2022 No. of SCNs issued Amount involved in the SCNs (Rs. In Lakhs) S.No. Month FY FY FY FY 2020-21 2021-22 2020-21 2021-22 1 April 2 May 0 8 0.00 178.62 3 June 9 54 2737.21 34802.63 4 July 43 13 6134.87 5 August 10 44 1795.40 621.65 6 September 3 27 19766.99 7 October 39 780.49 8 November 29 9 18396.51 272.09 9 December 4 0 35.07 10 January 45 10 148.08 0 11 February 30 27 615.83 3 19 3174.86 4124.23 Total 215 12 2034.11 3366.75 223 2086.33 115.1 2895.49 35932.46 68149.85 6
SHOW CAUSE NOTICES ISSUED COMPARATIVE PERFORMANCE FROM APRIL TO FEBRUARY OF FY 2020-21 & FY 2021-22 700 600 500 400 681.5 300 200 359.32 - 2020-21 100 215 223 - 2021-22 0 AMOUNT INVOLVED IN SCN'S ISSUED SCN (Rs. In Crores) 7
TOP DETE Sr. Name of the Assessee Registration no. Category CX/ No. M/s HDFC ERGO 1 General Insurance AABCH0738EST004 Large Company Limited 2 M/s. Van Oord India AAACH5430JST001 Large Pvt. Ltd. M/s. Procter & 3 Gamble Hygiene and AAACP6332MST001 Large Healthcare Limited 4 M/s. Geeta Mercantile 27AAACR2483D1ZK Large Pvt. Ltd. 5 M/s. Bank Of India 27AAACB0472C4DF Large 8
ECTIONS /ST/GST No of Commissionerate Detection (Rs. Recovery Paras In Lakhs) (Rs. In Lakhs) ST 1 Mumbai East 5768.31 0.00 ST 3 Mumbai East 3729.34 0.00 ST 2 Mumbai East 3551.92 0.00 GST 8 Mumbai East 2103.83 0.00 GST 8 Mumbai East 1991.75 10.27
TOP RECO Sr. Name of the Assessee Registration no. Category No. 1 M/s DHL Logistics Pvt. AAACM6824HST004 Large Ltd. 2 MEP Infrastructure 27AADCM3650J1ZE Large Developers Limited 3 M/s. Future Lifestyle 27AABCF9869N1ZQ Large Fashions Limited 4 M/s. Westpac Banking AAACW7018FSD001 Large Corporation 5 M/s Gannon Dunkerley & AAACG1846PST008 Large Co. Ltd. 9
OVERIES CX/ST/ No of Commissionerate Detection Recovery GST Paras (Rs. In (Rs. In Lakhs) Lakhs) ST 4 Mumbai East 1145.99 1145.99 GST 18 Mumbai East 812.75 812.75 GST 4 Mumbai East 751.74 463.27 ST 1 Mumbai East 352.74 352.74 ST 7 Mumbai East 233.39 186.88
Important Observational Reports 10
Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s DHL Logistics /2021-22 Rs.11,45,99,369/- Rs.11,45,99,369/- Pvt. Ltd. Issue : Non payment of service tax on Import of service. During the course of audit, it was noticed that the assessee has paid an amount of Rs. 42,46,01,519/- to an overseas entity for Business Support service, however they have not paid service tax on the amount. As per Nofication No. 30/2012 dated 20.6.12 in clause I(B) taxable service provided or agreed to be provided by any person which is located in a non taxable territory and received by any person located in the taxable territory service tax is payable by the recipient of service. Also as per Rule 3 of the Place of Provision of Service Rules, 2012, the place of provision of a service shall be the location of the recipient of service. The same amount was recovered alongwith interest. Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s. Future /2021-22 Rs.7,51,73,899/- Rs.4,63,27,400/- Lifestyle Fashions Limited Issue: Ineligible ITC availed pertaining to previous Financial Year:- On perusal of the GST returns filed by taxpayer, it was observed that ITC received during the year had been availed in the subsequent financial year. The taxpayer was requested to submit the details w.r.t co-relation between ITC availed and the month of GSTR-3B in which it was availed. Since he could not provide the documents, the taxpayer vide email dtd. 18-02-2022, has informed that they have reversed the excess ITC. 11
Name of the party DAR No. Amount Amount Detection (in ₹) Recovered (in ₹) M/s. HDFC ERGO 177/2021-22 Rs.57,68,30,660/- NIL General Insurance Company Limited Issue : Non payment of Service Tax on Re-Insurance Services from reinsurance service provider located in non-taxable territory or country other than India or outside India:- During the course of Audit, it was observed that the assessee is purportedly claiming exemption under Notification No. 25/2012-ST dated 28.06.2012 under Sr. No. 26. As per the Notification, exemption is available only to General Insurance Companies providing those General Insurance services which are listed in the notification. It therefore appears that the said exemption is not available to re-insurance services received by the General Insurance Companies for providing General Insurance Services as listed in the notification. Therefore, the assessee has claimed exemption erroneously and have failed to pay the Service tax on re-insurance services received from a service provider located in non-taxable territory. Vide Notification No. 30/2012- Service Tax dated 20 June, 2012 the Service Tax has to be paid by the Recipient of the Service, to the extent of 100% under Reverse Charge Mechanism. Name of the party DAR No. Amount Amount Detection (in ₹) Recovered (in ₹) M/s. VAN OORD 122/2021-22 Rs. NIL INDIA PVT. LTD. 37,29,34,362/- Issue : Non matching of customer wise turnover as per books of account and as per Form 26AS:- During the course of audit , on the reconciliation of party-wise sales as per Sales register and Income as reflected from Form 26AS as per Income Tax Act have been reconciled . Certain differences were observed which had escaped the liability. 12
Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s. Geeta 223/2021-22 Rs. NIL Mercantile Pvt. Ltd. 21,03,82,594/- Issue : Non matching of customer wise turnover as per books of account and as per Form 26AS:- During the course of audit , on the reconciliation of party-wise sales as per Sales register and Income as reflected from Form 26AS as per Income Tax Act have been reconciled . Certain differences were observed which had escaped the liability . Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s. BANK OF 98/2021-22 Rs. Rs. 10,27,319/- INDIA 19,91,75,485/- Issue : Non payment of service tax on collected Penal interest/delayed payment charges:- During the course of EA 2000 Audit, it was observed that they have collected „Penal Interest/ Delayed Payment Charges‟ from their clients and have not discharged Service Tax payable on the said „Penal Interest/ Delayed Payment Charges‟. Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s. Allcargo 125/2021-22 Rs. Rs. 93,42,110/- Logistics Ltd 15,59,97,164/- Issue : Non-Payment of Service tax on reconciliation of revenue of Financials with Service Tax return for F.Y. 2016-17 and wrong availment of abatement on Ocean Freights:- During the course of reconciliation of revenue reported in profit & Loss account with the Service tax return for the Financial Year 2016-17, it was observed that the assessee had shown lesser ocean freight import income in 13
their Service tax return and consequently short paid the service tax. Further, it was noticed that the while discharging their service tax liability on ocean freight import the assessee have paid service tax on the ocean freight services provided by them by claiming abatement of 70%. As per notification No. 26/2012-ST dated 20.06.2012 (Sl. No. 10), there is an exemption on 70% of value of services of transportation of goods in a vessel subject to the fulfilment of the condition that Cenvat credit on inputs and capital goods used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004. Further, Circular No.206/4/2017-Service Tax dated 13th April, 2017 issued under F.No.354/42/2016-TRU clarified that abatement will not be available in case of foreign shipping line giving the reasons for the same in the said circular. Since the assessee has paid service tax on abated value, it has resulted in short payment of service tax. Therefore, they were requested to pay the differential amount of Service Tax along with applicable interest and penalty thereon. Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s. Allcargo 125/2021-22 Rs. 5,59,97,164/- Rs. 93,42,110/- Logistics Ltd Issue : Short-payment of Service Tax on RCM on Ocean freight by wrong availment of abatement on @70%:- Prior to 01.06.2016, the service by way of transportation of goods by an aircraft or a vessel from a place outside India up to the customs station of clearance in India was under negative list. The entry was removed from the negative list with effect from 01.06.2016.As a result of the changes, ocean freight for import consignments upto Indian sea port has become taxable, from 01.06.2016. As a consequence, if the 14
services of a Freight Forwarder / Multimodal Transport operator / Shipping line located in India is availed by an importer in India, service tax would be applicable in the hands of the service provider on the ocean freight received by them. If the service provider is situated outside India, service tax is payable by the Importer, under reverse charge. But if the foreign consignor, engages a foreign shipping line to transport the goods to an Indian Port, even though the place of provision of such service is India (destination of the goods – Rule 10 of the Place of Provision of Service Rules, 2012) no service tax is payable, as per the following Exemption available under S.No, 34 (c) of Notification 25/2012. In order to bring above said service provider and receiver who are located outside India under Service Tax net, Notification No. 1/2017-ST and 3/2017-ST dated 21.01.2017, effective from 22.01.2017 were issued. By virtue of these changes, the representative of the foreign shipping line in India, who files the import manifest, was made liable to pay service tax. Further, provisions were amended vide Notifications 14 to 16/2017 S.T. Dt.13.04.2017 which were made applicable from 23.04.2017.Circular No. 206/4/2017 Dt. 13.04.2017 has also been issued to explain the amendments. As per amended Notification 13/2017 in relation to services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, the importer as defined under clause (26) of section 2 of the Customs Act, 1962 (52 of 1962) of such goods; is liable to pay service tax. As per above clarification, it is clear that no abatement is admissible in case of ocean freight services imported in India. In view of above, it appears that the assessee has failed to pay service tax in respect of Ocean Freight services received by them from overseas shipping line. 15
Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s. JP Morgan 270/2021-22 Rs. NIL Chase Bank 11,36,34,069/- Issue : Wrong availment of exemption under the category export of services in respect to custodian charges.:- On scrutiny of the ST-3 returns filed by the taxpayer for the period from October, 2016 to July-2017, it was noticed that the taxpayer had shown export of services in respect of \"Banking and Financial Services\". On further examination and communication with the taxpayer, it was observed that the exemption was in respect to “Custodian Charges\" which was in respect to the services rendered to the clients situated in non- taxable territory. The sample invoices/agreement rendered by the taxpayer revealed that the taxpayer provides services viz. \"custodian services\" wherein they open a dematerialization account for their clients for the purpose of FII investment in securities in the Indian stock market. Since the foreign entities are not allowed to invest directly in the Indian stock markets, they have no alternative but to invest in the Indian stock markets via an investment banker. The taxpayer have availed exemption from payment of service tax thereon as export of services. However, broking of securities falls within the ambit of \"Banking and Financial Services\" in terms of definition contained in Section 65(12) of The Finance Act, 1994. Further, in terms of Rule 9 of the Place of Provision of Rules, 2012, the place of provision in respect to the services provided banking company, or a financial institution or a non-banking company to account holders shall be the location of the service provider. Hence in the instant case the place of provision of the services \"custodian charges” would be the place of the service provider, i.e. in India. The service therefore does not fall under the ambit of export of services and therefore not entitled to the exemption thereof. 16
Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s. JP Morgan 270/2021-22 Rs. NIL Chase Bank 11,36,34,069/- Issue : Wrong availment of exemption in respect to \"sub-custodian\" charges on the grounds that the same is provided to the service receiver situated in non-taxable territory since the same falls under the ambit of intermediary services:- On scrutiny of the ST-3 return filed by the taxpayer for the period from October-2016 to July-2017, it was noticed that the taxpayer had availed exemption in respect to services on the grounds that the same were provided to the service receiver situated in non-taxable territory. On further examination and communication with the taxpayer it was observed that the exemption was in respect to “sub-custodian charges\" which was the services rendered to the same legal entity (eg. JP Morgan Chase, US branch) situated in non-taxable territory. The sample invoices/agreements rendered by the taxpayer revealed that the taxpayer provides services viz. \"sub-custodian services\" to their counterparts situated in non- taxable territories in relation to opening a dematerialization account for the client of their counterparts. In such cases, JP Morgan Chase, US enters into an agreement with their clients who are also situated abroad for FII investment in securities in the Indian market. However, since JP Morgan Chase, US cannot directly offer securities broking services to their clients since they are situated in non-taxable territory, they approach their Indian counterparts for the purpose of opening of dematerialization accounts to their clients. For this purpose, JP Morgan Chase, India charges their counterparts “fees\" which is invoiced on a monthly basis. The taxpayer is claiming exemption in respect to, such \"sub-custody charges\" on the grounds that the service receiver is situated in non-taxable territory, However, the main service is given by the JP Morgan Chase, US to their clients and JP Morgan Chase, India is merely facilitating the main services 17
for which they receive a fee on a periodic basis. It is JP Morgan Chase, US who are providing the main service to their clients and the invoices raised to the clients are also raised by JP Morgan Chase, US. Hence it appears that JP Morgan Chase, India is merely facilitating the main services and such service would rightly fall under the domain of \"intermediary services', Further, in terms of Rule 9 of the Place of Provision of Rules, 2012, the place of provision in respect to the 'intermediary services\" shall be the location of the service provider. Hence in the instant case the place of provision of the services \"sub custodian charges” would be the place of the service provider. i.e. in India. The services therefore does not merit exemption on the grounds that the same is provided in non-taxable territory, but instead would attract service tax since as per the Place of Provision of Service Rules, 2012 the services are rendered in India. Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s. Westpac 205/2021-22 Rs. Rs. 3,52,73,809/- Banking 3,52,73,809/- Corporation Issue : Non eligibility of exemption to originating services (intermediary services) performed wholly in India and provided to the same legal entity and claimed as export of services:- On perusal of the service tax returns filed by the assessee, it was noticed that the assessee have availed exemption on account of export of services provided to the same legal entity viz. M/s Westpac Singapore Branch. However on perusal of the sample invoices, it was observed that the services have been performed in India on account of which they were receiving remuneration from their Singapore counterpart an income which was 20% of the Net Interest Income/fee income. Since the assessee was merely facilitating Westpac Singapore Branch to provide loan services to the Indian clients for which the income was directly linked to the interest/fee income, the services rendered by M/s Westpac Banking Corporation were in 18
the form of “intermediary Services.” Further as per the POPS Rules , 2012, the place of the location of the services rendered was the was the location of the service provider in respect to “intermediary Services. Hence the services rendered by the assessee did not qualify as “Export of Services” and was liable to service tax. On active persuasion, the taxpayer has paid the entire service tax liability along with interest and penalty. Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s. B. BRAUN 205/2021-22 Rs.3,52,73,809/- Rs. 3,52,73,809/- MEDICAL (INDIA) PVT. LTD. Issue : Service tax on providing dialysis treatment to the patients in the premises of the hospital in the various states:- During the course of Audit, it was observed that the assessee has provided „Dialysis treatment‟ to the patients in the premises of the Government hospitals that offers services or facilities requiring for diagnosis or treatment on the basis of winning the PPP tender bid of Bihar and erstwhile Andhra Pradesh under the scheme “AROGYSHRI”. The company provided dialysis services to needy patients. Services were provided to patients in the premises of the said Government hospitals and reimbursement of claim was received from respective government Hospitals. The taxable service in relation to „health care‟ are defined in section 65(105) (zzzzo) of Finance Act 1994. The said section reads as follows: “(zzzzo)to any person,- (i) by a clinical establishment or (ii) by a doctor, not being an employee of a clinical establishment, who provides services from such premises for diagnosis, treatment or care for illness, disease, injury, deformity, abnormality or pregnancy in any system of medicine;] The assessee has availed exemption claiming notification No. 25/2012 dated 20.06.2012. 19
As per Para 2(i) of Notification No. 25/2012 dated 20.06.2012, service tax is not leviable on the following serice: -Health care services provided by: i) Clinical establishment, ii) An authorized medical practitioner or iii) Para-medics As per para 2(t) of Notification terms used above are explained hereunder: “Health care Services” means any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines in India and includes services by way of transportation of the patient to and from a clinical establishment, but does not include hair transplant or cosmetic or plastic surgery, except when undertaken to restore or to reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, injury or trauma: As per 2(j) of the Notification “Clinical Establishment” means a hospital, nursing home, clinic, sanatorium or any other institution by, whatever name called, that offers services or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India, or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases; The entity is required to be registered under Section 30 of the Clinical Establishments Act (Registration and Regulation) 2010 as „Clinical establishment‟ for the eligibility of taking exemption under the above referred notification. As per 2(d) of the above mentioned Notification “Authorized Medical practitioner” means a medical practitioner registered with any of the 20
councils of the recognized system of medicines established or recognized by law in India and includes a medical professional having the requisite qualification to practice in any recognized system of medicines in India as per any law for the time being in force; The entity is required to be registered as a medical practitioner with any of the councils of the recognized system of medicines established or recognized by law in India and includes a medical professional having the requisite qualification to practice in any recognized system of medicines in India as per any law for the time being in force. Although “Paramedics” is not defined in the explanation to the notification. However, it has been clarified in para No. 7.2.2 of CBEC‟s Education Guide as under: Paramedics are trained health care professionals, for example nursing staff, physiotherapists, technicians, lab assistants etc. Services by them in a clinical establishment would be in the capacity of employee and not provided in independent capacity and will thus be considered as services by such clinical establishment. Similar services in independent capacity are also exempted. Paramedics are individuals who are trained health care professionals. M/s. B.Braun Medical India Pvt. Ltd. is a company registered under the Companies Act, 1956. The company trades in the field of health care, catering to the therapeutic segments such as Anaesthesia, Surgery, Inventional cardiology, Othopedics and has a manufacturing plant for sutures which is situated at Chennai. They are neither registered as clinical establishment nor Authorised Medical Practitioners. The assessee was hiring the services of para-medics for providing the dialysis services but since the services provided by para-medics as employee does not make the assessee eligible for grant of exemption under above referred notification as can be seen from para No. 7.2.2 of CBEC‟s Education Guide as detailed above, they are not eligible for the exemption under above category. Hence SCN was issued to safeguard the government revenue. 21
Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s. The Great 73/2021- Rs. Rs. Eastern Shipping 22 4,24,19,853/- 4,24,19,853/- Co. Ltd. During the course of EA-2000 Audit, it was observed that the assessee had incurred the expenses in foreign exchange on telecommunication services provided by the service provider located outside taxable territory. However, it was observed that they have not considered the procurement of the said services as „import of service‟ and failed to pay service tax under RCM as required under erstwhile Section 68(2) of the Finance Act, 1994. Initially, the assessee argued that the satellite communication services were actually received and consumed on board the vessel; that such services were provided by a foreign entity i.e. an entity based outside India, and were actually consumed when the vessel was outside India. They have further submitted that services provided by a service provider located outside India and consumed on board the vessel in international waters (i.e. outside India), has no territorial nexus with India and accordingly no service tax could be levied on the same. Further they have referred Section 64 of the Finance Act, 1994 according to which the extent and applicability of the Act was only to “whole of India, except the State of Jammu & Kashmir”. During service tax era the place of provision was not specifically provided for the telecommunication services in Place of Provision of Service Rules, 2012 (POP Rules 2012) and hence the default rule i.e. Rule 3, being location of recipient of service would be the place of provision. Furthermore, it has been observed that the service provider in their invoices raised on the assessee has not mentioned any specific location or region where they have provided services to the assessee. In the instant case the assessee is the service recipient and the billing address is registered premises of the assessee in India. Further all their ships are registered in India. On persuasion, the assessee paid service tax liability under RCM alongwith interest. 22
Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s. Netcore 154/2021-22 Rs. Rs. 6,04,563/- Solutions Private 3,09,61,094/- Limited On scrutiny of Profit & Loss Account for the F.Y. 2016-17 to June, 2017, it was observed that the assesse had received income under the category “exceptional items” on sale of shares of subsidiary, associate and profit on sale of slump sale of unit/ business”. It is noticed that slump sale of business is exempted under sr. no. 37 of notification no. 25/2012-ST and trading of securities is an exempted service. Assessee is availing Cenvat Credit facility under the Cenvat Credit Rules, 2004 and reversing Cenvat credit on exempted services under Rule 6(3A) of Cenvat Credit Rules, 2004. However the said profit on sale of securities and slump sale is not included in the above calculation of exempted services. On enquiry with the assessee it is informed that they have not reversed proportionate Cenvat credit on above exempted services. Since, slump sale of business trading in Securities are Exempted Services, the assessee, being a provider of Taxable and Exempted Service, is liable for proportionate reversal of CENVAT Credit in terms of Rule 6(3A) of Cenvat Credit Rules, 2004. Therefore, the assessee was required to reverse the proportionate amount of Cenvat Credit along with interest under Section 75 of the Finance Act, 1994. Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s. ESSEL 97/2021-22 12,87,34,449 34,38,692 UTILITIES DISTRIBUTION COMPANY LTD. 23
i) Non Payment of GST for the period 2017-18 – It was found that the assessee have raised sales invoices with value of Rs. 11,23,78,045/- out of which they have declared only a sale value of Rs. 5,12,87,985/- and paid tax on the same during March 2018. However, the assessee have short declared their sales of services amounting to Rs. 6,10,90,060/- in the said return for the month of March 2018. Thereby, not paying tax on the same. Thus, the tax amount short paid is TOTAL- Rs.1,09,96,212/-(CGST Rs.54,98,106/- and SGST Rs. 54,98,106/-). ii) Related party transactions revealed that the assessee has received advance from their subsidiary company M/s. SND Limited amounting to Rs. 17,53,43,199/- during the period 2018-19 but they have not discharged any tax liability on the same. This amount has been shown specifically as advance received from the customer unlike any loan transaction which is shown on a separate head. They are providing only taxable services to M/s. SND Limited and therefore this amount received is liable to tax on receipt. They have failed to declare this amount in their GSTR 1 and GSTR 3B returns. iii) Related party transactions revealed that the assessee has paid advance to their subsidiary company M/s. Essel Infra Projects Ltd amounting to Rs. 13,91,74,000/ - during the period 2018-19. The assessee is only into rendering of services and therefore the advance received by the subsidiaries are liable to tax at the point of receipt by the subsidiary M/s. Essel Infra projects ltd. If they had done so, then they would have definitely passed on ITC credit to the assessee but the records revealed no such entries. Therefore, it appears that M/s. Essel Infra Projects Ltd. have not discharged their tax liability on the receipt of this advance. This amount has been shown specifically as advance received from the customer unlike any loan transaction which is shown on a separate head. 24
Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s. ESSEL 97/2021-22 12,87,34,449 34,38,692 UTILITIES DISTRIBUTION COMPANY LTD. i) Related party transactions revealed that the assessee has received an amount of Rs. 25,99,00,000/- from their subsidiary company M/s. Utilities grids solutions ltd. during the period 2016-17. The assessee is only into rendering of services and therefore the advance received from their subsidiaries are liable to tax at the point of receipt by them. But, they had not done so. They are liable to pay service tax at the rate of 15% on the said amount which has not been paid. ii) Related party transactions revealed that the assessee has received an amount of Rs. 13,31,00,000/- from their subsidiary company M/s. Muzzaffarpur Vidyut Vitaran Ltd. during the period 2016-17. The assessee is only into rendering of services and therefore the advance received from their subsidiaries are liable to tax at the point of receipt by them. But, they had not done so. They are liable to pay service tax at the rate of 15% on the said amount which has not been paid. Name of the party DAR No. Amount Amount Detection (in Recovered ( in ₹) ₹) M/s. Procter & 184/2021-22 Rs. NIL Gamble Hygiene 35,51,91,912/- and Healthcare Limited Service Tax - FY 2016-17 to FY 2017-18(Upto June 2017) A. Recovery of expenses cross charged - These are expenses incurred by the Company on employees deputed by the related company (Indian or 25
foreign) to their company and working exclusively for them in India. Such services are rendered by these employees in India to the assessee and therefore such recoveries are taxable in India as the service is performed in India. B. Reimbursement of related parties for expenses shared - These are expenses incurred by the Company on employees deputed by the related company (Indian or foreign) to their company and working for them as well as the other related entities in India. Such services are rendered by these employees in India to the assessee and they have apportioned appropriate value to such services and recovered from them. C. In the related party transactions, it was observed that under the head “expenses cross charged” - M/s. P & G Company, U.S. and others (foreign entities) have cross charged expenses incurred by them on their behalf to the assessee in respect of services rendered by them to the assessee. In all these cases, they were liable to pay service tax. Since the taxpayer did not agreed to the observations raised, SCN was issued. Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s. Petronas 140/2021-2022 Rs. Rs. 86,54,180/- Lubricants (India) 1,88,40,054/- Pvt Ltd During the course of audit, it was noticed from the financials that in the case of Reimbursement of expenses made to their parent company in foreign currency, the taxpayer have not paid IGST on reverse charge basis. On further verification it was seen that such expenses are in fact for various licences/ legal charges/ manpower charges for their factory project etc incurred by the parent on their behalf. Schedule I read with section 7 (1) of CGST Act, 2017 specifies that that supply of goods or services between related persons in the course or furtherance of business will be treated as 26
supply even if made without consideration. As such they are required to pay IGST of Rs. 55,31,361/- under Reverse Charge. Taxpayer has paid the same along-with the interest. Further, it is seen from the financials that they have received amount as below as Reimbursement of Marketing expenses from their parent company. On sample verification of the relevant documents, it is observed that the amount pertains to various marketing events held at various locations in India and other related services like ticketing, hotel expenses etc. In this regard as per the provisions of sub section (3) to (13) of section 13 of the IGST Act, 2017 all those services the place of place of supply falls in the taxable territory i.e. India and as such the amount received from the Parent Company situated outside India is taxable. Hence, IGST of Rs. 1,01,85,875/- is needed to be paid on such receipt. The taxpayer did not agree to the objection stating that the services fall under the definition of exports since these are marketing expenses and not paid the said liability. Accordingly, SCN is issued to the taxpayer. Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in M/s. Invisalign 225/2021-22 ₹) Rs. NIL. SCN Issued 1,78,61,078/- India LLP M/s. Invisalign India LLP is a global medical device company with industry-leading innovative products. The taxpayer is a major supplier of invisible dental braces/removable aligners that gradually straighten the teeth.All Invisalign products are designed, manufactured and marketed by Align Technology, whose global headquarters are in California, USA. The taxpayer is the subsidiary of M/s. Align Technology, USA. Taxpayer had not paid GST on “Other Income” shown in Financials. They claimed that the amounts are received from their foreign parent company under Transfer Pricing adjustment. However, on further 27
verification, it came to light that the taxpayer is raising month wise „Recharge Invoice‟ to their parent company and the resultant transactions wherein the amount is reimbursed by their parent company are reflected in the Financial accounts under the head of “Other Income”. The recharge invoices are nothing but intercompany recharges wherein M/s. Invisalign India LLP have incurred costs on behalf of their parent company and the taxpayer is reclaiming the same. For the purposes of GST, revenue recognition principles require that the cost and the income should be shown gross in the profit and loss account. It implies that they account for the recharge as part of the income and the costs as part of the overhead in the profit and loss account rather than net the cost off against the recharge. The taxpayer has recharged all of the costs that they have incurred on behalf of M/s. Align BV and are getting compensated for the same. These entries and transactions appearing in the Financials of taxpayer is a compensating cost reimbursed by their parent company and is taxable under GST Law in India under Section 15(2) of the CGST Act, 2017. Further the taxpayer failed to reconcile the amount of Other Income in their Annual Return (GSTR-9 & 9C) wilfully suppressing the information. The taxpayer did not agree to the observation of the Audit. SCN is proposed to be issued. Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s. Korn Ferry 264/2021-22 Rs. 59,46,964/- NIL. SCN Issued International Pvt. Ltd. Support Services rendered to Group Companies located abroad claimed as Exports:- During Audit it was noticed that the assessee located in India assists its overseas associate company in the recruitment process by conducting research of relevant talent, preliminary screening of candidates profiles, making reference check, etc. The final call is taken by the overseas associate 28
company. These purported services are claimed by assessee as export of services by raising an invoice for „Professional Fees‟ to their various units located abroad without mentioning any details as to the nature of assignment/services and performed for which client. The said Services are nothing but „Intermediary Services‟ as defined under Section 2(13) of Integrated Goods and Services Tax Act, 2017 .In the instant case the intermediary services are provided to the recipient located outside India and the Inter-State provisions as contained under Section 7(5)(c) of the IGST Act shall be applicable and hence IGST is payable under such transactions. Assessee did not agree to the observation of the Audit. SCN is proposed to be issued. Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s. ILFS 312/2021-22(ST) Rs. 48,43,023/- NIL. SCN Issued Transportation Networks Ltd. Service tax not discharged on Commission received for facilitating Bank Guarantee to Overseas subsidiaries:- M/s. IL& FS Transportation Networks Ltd. (ITNL) are providing Bank Guarantee issued by Indian Banks to their overseas subsidiary companies. The Bank Guarantee is provided as a counter guarantee to Foreign bank on behalf of the overseas subsidiary companies. The assessee merely facilitates the provision of service of Bank Guarantee which is given by the Indian Banks to the lender of their overseas subsidiary. The assessee is charging a consideration for facilitating such services. These services are in the nature of „Intermediary Services‟ as per Notification No. 28/2012-ST dated 20.06.2012. Indian Bank provide Counter guarantee/SBLC to Foreign bank and in turn that Foreign Bank issues a final bank Guarantee to the Lender on 29
behalf of the Foreign Client of ITNL. In lieu of such service, ITNL charge @ 1% of guarantee amount to the Foreign Subsidiary. Though the assessee agreed to the observation of the Audit, they were unable to pay by virtue of the Company being in NCLT. Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s. Birla Sun Life 182 /2021-22 ₹ 4,00,98,000/- SCN issued. Insurance Company Ltd Non reversal of CENVAT credit on account of trading in securities. During the course of EA-2000 audit, on verification of Statement of Profit & Loss Accounts for the year 2015-16, 2016-17 and 2017-18 (Q1), it is observed that under the head “income from investments”, income of Rupees 87,531 Lakh for the Fin. Year 2015-16 , Rupees 1,05,926 Lakh for the Fin. Year 2016-17 and Rupees 45,391.84 lakh for the period April to June, 2017 as net profit on sale of investments has been booked on account of „profit on sale of /redemption of investments”. Since, trading in Securities is an Exempted Service, the assessee, being a provider of Taxable and Exempted Service, is liable for proportionate reversal of CENVAT Credit in terms of Rule 6(3) of Cenvat Credit Rules, 2004. Explanation 3- For the purpose of this rule, exempted Services as defined in clause (e) of rule 2 shall include an activity, which is not a „service‟ as defined in section 65B(44) of the Finance Act, 1994, provided that such activity has used inputs or inputs services. Therefore, the assessee is liable to reverse proportionate amount of common CENVAT credit as envisaged under Rule 6(3) of the CENVAT Credit Rules, 2004. As such, common CENVAT credit is ought to be reversed attributable to the profit earned from investment. During the course of audit, it has been observed that the taxpayer had not reversed proportionate 30
Cenvat Credit on account of trading in securities. As assessee were not agreeing to make payment, to safeguard the government revenue, show cause cum demand notice was issued. Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s. Damco India 279 /2021-22 ₹ 99,81,402/-. ₹ 132,61,108/- Private Limited Non-payment or short payment of tax under RCM on the Network Transportation Fees paid by assessee to their foreign based holding company. In the course of audit it is seen from the financials and reconciliation that the assessee has recorded the payments due in foreign currency to their foreign based associate companies/holding company under the category of Network Transportation Fees (NTF) for the FY 2016-17, which is informed as the proportionate payments towards usage of the services of the Parent company and its various associate companies across the world. Since the said payment made is towards availment of services from abroad, it falls under import of services, and as such service tax with cesses was required to be paid under RCM by the assessee. On pointing out during the audit, the assessee informed that total value of NTF is determined and finalized only at the time of finalization of books of accounts, which is a post year-end activity; that the amounts are provided for in the financials on provisional basis; that it was not possible to discharge RCM liability on such NTF amount during the financial year itself; that however, when the Company received invoices from the group Company for the same in the subsequent financial year, the Company made payment of service tax liability under RCM. It was checked and found that part payment of tax, amounting to ₹ 3,99,97,570/- was made by them but late , i.e. after the due date of payment. However, the interest on the said late payment was not paid by the assessee. The interest calculated on the said late payment of taxes worked out to ₹ 31
56,74,527/- was thus payable by the assessee. And the balance amount of tax, amounting to ₹ 43,07,874/- which was not paid at that time was also required to be paid by them alongwith applicable interest from due date till date of payment. The assessee has accepted the audit observation and paid the tax amount alongwith interest. Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s. MEP 158 /2021-22 ₹ 8,12,74,784/- ₹ 8,12,74,784/- Infrastructure Developers Limited Proportionate reversal of common credit on exempt supplies:- It is noticed that various expenses are incurred by HO Maharashtra Location which are common towards exempt supplies and taxable supplies. As per Section 17(2) of the Act, where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero- rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies. Therefore, the common ITC needs reversal in accordance with Rule 42 of CGST Rules, 2017. On persuasion, the assessee accepted the audit observation and reversed the Input Tax Credit. Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s. Axis Securities 158 /2021-22 Rs. NIL. SCN Issued Limited 2,47,42,801/- Non-payment of Service tax on Delayed Payment Charges:- During the audit, it was noticed that on the settlement date, the 32
assessee have to make payment to stock exchanges for settling obligations on behalf of all their clients, irrespective of the fact whether they have received the dues from their clients or not. It was noticed that in cases where their clients are not making payments to them on or before the settlement date, they charge Interest/ Delayed Payment Charges (DPC) from their clients, which is then debited to client‟s ledger account maintained by them. Further, the terms and condition as mentioned in application form which the customer solicits / signs at the time of opening the account clearly mention that the customer shall maintain margin with them. Further, it also states that shortfall has to be made good by the customer and in case of non-receipt of shortfall, the customer suo-moto authorises them to sell the existing securities in the portfolio and recover the pending dues. Further, penal charge i.e. DPC are also recovered in a situation where the money / balance is recovered from sale of collaterals. Accordingly, for the extra amount in the nature of Delayed Payment Charge charged for such facilitation can be termed as a consideration towards such act of tolerance as they have to perform duties over and above their scope as a stock broker. It seems they have charged service fee in the nature of DPC which is linked to interest rate and it recovers extra amount which is nothing but an extra charge liable to tax under Section 66E(e) of Finance Act, 1994. As assessee was not agreeing to make payment, to safeguard the government revenue, show cause cum demand notice was issued. Name of the party DAR No. Amount Amount Detection (in ₹) Recovered ( in ₹) M/s. Gannon 84 /2021-22 Rs. Rs. 1,86,87,753/- 2,33,38,879/- Dunkerley & Co. Ltd. 33
Wrong transition of tax paid on mobilization advance vide Tran-1:- During the audit, it was observed that the assessee had transited the service tax paid on the unadjusted mobilization advance received, amounting to Rs. 1,33,53,721/- to their Electronic Credit Ledger vide Tran-1, under Section 142 (11) (c) of CGST Act, 2017. As per Section 142 (11) (c) of CGST Act, 2017 “where tax was paid on any supply both under the Value Added Tax Act and under Chapter V of the Finance Act, 1994, tax shall be leviable under this Act and the taxable person shall be entitled to take credit of value added tax or service tax paid under the existing law to the extent of supplies made after the appointed day and such credit shall be calculated in such manner as may be prescribed.” In this regard, in the case of Shapoorji Pallonji and Company Pvt. Ltd. (GST AAR Tamil Nadu), it is held that: “The applicant on receipt of advance has paid the service tax on the 40% of the value as required under the provisions of Service Tax. The like situations are more aptly covered under the transition provision at Section 142(11)(b) wherein it is stated that no tax is payable on services under the GST Act to the extent the tax was leviable on the said services under Chapter V of the Finance Act. Therefore, we conclude that GST is not payable on the Mobilisation advance which has been received prior to GST implementation as per Section 142(11)(b) of the Act.” In view of the above, the provisions of 142 (11) (c) of CGST Act, 2017 are not applicable in this case and therefore, the assessee were not eligible to transition the service tax paid on the unadjusted mobilization advance. On persuasion, the assessee accepted the audit observation and reversed the Input Tax Credit. 34
GUIDELINE TO FACILITATE AUDIT While conducting GST Audits of various types of units, Audit II Commissionerate found a near similar pattern in finding out the Paras across industries and category of units. The same was compiled and utilized to effect higher detection and recoveries for Audit II, Mumbai Commissionerate. The following guidelines would facilitate in undertaking the GST audits specially of smaller and medium units in the required time, effectively and efficiently. The major bullet points enumerated below would constitute substantial and substantive part of screening of GST Returns and books of accounts of the taxpayer while undertaking both desk and outdoor audit. The observations mentioned below can be used in conjunction with the guidelines, instructions and Manual issued by DG (Audit) & CBIC from time to time to undertake thorough audit and optimizing the manpower resources so as to increase the number of Audits and its outcome. a. Reconciliation of Sales/Other Income as per books of accounts with liability declared in GSTR-1/GSTR-3B. b. Reconciliation of GSTR-1 & GSTR-3B & subsequent adjustment/rectification of these Returns. c. Reversal of Input Tax Credit in case of Exempt/Nil Rated Supply. d. Reconciliation of Input Tax Credit Closing Balance as on 31st March should match with Balance reflected in Electronic Credit ledger. e. Classification of goods/services and their respective rates. f. Matching of Input Tax Credit on imported goods with ICEGATE. g. Admissibility of Input Tax Credit. h. Verification of “Place of Supply” to check whether the GST is charged in the right head. i. Reverse Charge liability in case of services. j. Verification of “Other Income” items in Notes to Accounts and ledgers therein. k. Supply of Services free of cost to branches located to other states. l. Non-availment of Input Tax Credit in case of supply of free samples/FOC receipts. m. Creditors for more than 180 days as per Section 16(2) of CGST Act, 2017. n. Check whether adjustment of Advances paid in earlier month done correctly or not. o. Any foreign payment made for anything other than import of goods for which CA’s certificate is obtained. p. Anykind of recoveries from employees is taxable under GST. q. Check whether ITC has been reversed on any value of goods written off in the books. r. Check whether GST and Compensation Cess (till 24.12.2017) paid on sale of used cars by the taxpayer. s. Check whether ITC on prepaid expenses has been availed. If yes, then it needs to be reversed as those services are not considered to be received by the taxpayer. 35
CASE STUDIES ON SOFT SKILLS IN AUDIT 36
The phrase ‘soft skills’ incorporates a wide variety of personality traits, communication and people skills, social attitudes and emotional intelligence. These qualities are increasingly important for success in the workplace – and not just for those in leadership positions. This Commissionerate pays much emphasis on communication skills, team work, problem-solving skills, leadership skills and an excellent work ethic, all of which plays a vital role in augmenting revenue and respect for the department. This office had made use of material provided by NACIN in respect of training on Soft Skills. The emphasis on soft skills has led to greater amount of Audits done without compromising with the quality of Audit. Due to soft skills only, this Office has adapted well to new technology driven tools and frequent changes in law. The conduct of the officers with the assessee is also worth mentioning. Below are some case studies which depict the use of soft skills by this office: A. Calling for the Documents: a) In the GST regime, M/s Siemens India Pvt. Ltd. is registered at their HO at Khargar. They have branch offices at Kalwa, Nashik & Bhiwandi. Therefore, they need to co-ordinate, collect and collate the documents and data from their branches and warehouse. Further, they had compliance date line of 18/19/20 of every month for GSTR 3 B returns as well as 30 September 19 for Annual returns 9 & 9C. They were seeking postponement of the audit by 3 months, Understanding their difficulty, the assessee were requested to share the documents gradually in staggered time frame. Initially thye Balance sheets, PnL then Trial Balance & ledgers and finally the ITC credit ledgers. All the documents were received in soft form, same 37
were scrutinized, and the queries were shared through mail keeping in mind the timeline of compliance for GST, Income Tax etc. b) The director of M/s. High Parra Constructions Private Limited had filed multiple grievances with the Finance Minister questioning the reasons for selection of their unit for EA-2000 Audit and stating duplication of detailed scrutiny and Audit for the same period. The Audit of the said assessee was taken up on time-bound manner with due precautions considering the sensitivity of the issue. Due to the non-cooperating behavior of the assessee, basic required documents were retrieved from the GST portal and MCA website. The assessee was also granted Personal hearing by the Additional Commissioner, which was attended by the assessee along with their Consultant. They were politely requested to submit the necessary documents required for conducting EA-2000 Audit. Being conversant with Service Tax Act/Rules, the assessee agreed upon the facts narrated by the audit team. During their next visit, they had brought all the necessary documents for audit verification, as requested by the Audit team. During the conversation, the audit team told him that by extending his co-operation, he is helping the Government of India in liquidating the audit pendency and the Government respects their honest taxpayers. The audit team gained his confidence by conveying various laws and procedures and appreciated his contribution towards economy of the nation. The assessee was highly impressed by the courteous and polite behavior of the audit officers of audit team. During the course of audit, total detection of short payment / non- payment of service tax was made to the tune of Rs.13,61,844/- which was willingly paid by the assessee. Lessons Learnt: To understand the genuine difficulty of the trade and provide viable solution. 38
B. Detection a) The Tax Executive, Manager and the Consultant are direct stakeholders in the compliance; any detection of non compliance by the Audit team adversely affects and seriously jeopardizes their respective future in the entity. M/s Jacob Engineering, a USA, MNC in the field of Petroleum Refinery consultancy was being audited. Improper credits of about Rs 22 lakh were detected; it was going to adversely affect both the tax executive and manger. However, without any show of triumph or euphoria, the CFO was briefed with proper perspective, praising the efforts of the Tax team for their diligent compliance and truthful documentation. As a tribute to their hard work and honesty, the non compliance was projected to be a minor aberration. The CFO immediately ensured the discharge of all the Service tax liability without any adverse action on the Tax team. Lessons Learnt: Do have empathy for the Tax team. Appreciate them for their diligent compliance. C. Recovery: A substantial non compliance was noticed at Air Mauritius with Service tax liability of about Rs. 55 crore. The Tax Management and their Consultant were disputing the liability. Systematically, all the relevant data were collected &analysed andthen presented to the assessee clearly bringing out their non-compliance. The details of the practice followed by other entities in the same field of operation were also collected and presented to the assessee. They were also informed about the reduction of penalty to 15% in case of immediate payments. The assessee got convinced and discharged the liability of Rs. 55 crore. Lessons Learnt: Diligent and systematic hard work brings forth the actionable data. 39
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