Indirect Tax Alert - Amendment To The Procedure Pertaining To Customs Post-Clerance Audit (PCA)

In respect of the Customs PCA process, CBIC issued Instruction no.:02/2021-Customs dated 16 February 2021. Pursuant to the review of the PCA performance, the aforesaid instructions have now been amended vide Instruction No.:27/2023-Customs dated 6 September 2023. The gist of the modifications proposed are tabulated hereunder:

Para Reference

Erstwhile Procedure

Revised Procedure

3.2.1 – Scope and Coverage of Premise-Based Audit (PBA)
  • As per the Audit Manual, Authorised Economic Operator (AEO) T1, T2 and T3 categories are to be audited once every two, three and five years respectively.
  • Audit planning is to be done in such a manner to ensure that 50% of AEO T1, 33.33% of AEO T2 and 20% of AEO T3 are audited every year.
  • AEO-Logistic Operators (AEO-LO) such as Customs Brokers, warehouses, etc. can be taken up under Theme Based Audit (ThBA) or inspected by the formations.
  • PBA shall be restricted to importers and exporters only and other entities will not be covered under PBA.
  • For FY 2020-21, if any such entity has been selected for PBA, the Audit shall be completed as planned.
  • The entire lot of IECs to be taken up for selecting entities for PBA as per risk parameters to be decided by the National Customs Targeting Centre (NCTC) in consultation with the committee formed under Para 3.2.2.
  • The risk parameters will be dynamic in nature and will evolve based on the feedback/information.
  • The number of entities to be selected for audit is to be calculated based on the capacity to conduct audits as informed by the Audit Commissionerates would be and finally decided by the committee."

3.2.2 – Selection of Premises
  • DG Audit to prepare the list of auditees for PBA in consultation with the DGARM.
  • For this, a committee consisting of all the Commissioners of Customs (Audit), representatives from DRI HQ and the ADG, NCTC shall meet in February every year to finalise the list of auditees for PBA for the next financial year.
  • The final list is to be communicated to the Audit Commissioners before 31 March.
  • Audit Commissionerate to plan PBA for the year in such a way that the number of auditees is evenly spread in all the months and all selected entities are audited.
  • Every selected entity is to be subjected to the full audit cycle starting from Desk Review, Audit Plan, Audit Verification, and preparation of audit report.
  • The procedure would continue to remain the same. However, the composition of the committee has been modified as under:
    • Committee to be headed by DG Audit; and
    • Committee to have a representative from Principal ADG / ADG (as against only ADG earlier) from NCTC.
  • Further, apart from the February meeting to finalise the list of auditees for PBA for the next financial year, the committee would meet thereafter as felt necessary.

3.2.4 – Visiting premises
  • Visit to premises to be kept as minimum as possible and communications (if any) to be done through electronic modes and meetings (if any) to be done through Video Conference.
  • If a visit is necessary, only then the field Commissionerate under which the entity/premises falls will be asked to conduct the visit and submit a report.
  • Audit Commissionerates to give specific mandate to the jurisdictional Commissionerates on the scope and objective of the visit and the areas to be focussed during such visits. Generalised terms of reference shall be avoided.
  • The para has been deleted.

3.3.1 – Selection of Themes
  • DG Audit to convene half-yearly meetings of the Committee consisting of all the Principal Chief Commissioners / Chief Commissioners in charge of Customs (Audit) Commissionerates.
  • The committee is to meet in January and July to select the themes for ThBA for the first and second halves respectively for each financial year.
  • The procedure would continue to remain the same. However, the composition of the committee would now include the Principal ADG/ ADG, NCTC, Mumbai and a representative from DRI HQ (not below the rank of Director).

3.4 – MIS reports
  • CUS PCA-I, CUS PCA-2 and CUS PCA-3 are prescribed for reporting the PCA performance of Transaction-Based Audit (TBA), PBA and ThBA respectively.
  • CUS PCA-4 is prescribed for the reporting of the status of audit detections.
  • The formats for CUS PCA-1, CUS PCA-2, CUS PCA-3, and CUS PCA-4 have been revised.

In addition to the above, consequential changes have also been made to Para 3.8.2(iv)(a) and (b) which provides that the Quarterly Bulletins would inter alia include the details and outcomes of the meetings constituted under these instructions.

[Instruction No.:27/2023-Customs dated 6 September 2023]