Streamlining of Customs post Clearance Audit (PCA) work — Instructions - Customs - Instruction No. 02/2021

Instruction No. 02/2021- Customs F. No. 715/03/2020-Cus (AS) Government of India Ministry of Finance Department of Revenue Central Board of Indirect Taxes and Customs Anti-Smuggling Unit Room No. 501, Hudco Vishala Building, Bhikaji Cama Place, New Delhi Dated: 16th February, 2021 To All the Principal Chief Commissioners/ Chief Commissioners of Customs/ Customs (Preventive), All the Principal Chief Commissioners/ Chief Commissioners of CGST and Customs, The Director General of Audit, The Director General of Systems, All the Principal Commissioners/ Commissioners of Customs/ Customs (Preventive), All the Principal Commissioners/ Commissioners of CGST and Customs, The Commissioner, Directorate of Data Management. Madam/ Sir, Subject: Streamlining of Customs post Clearance Audit (PCA) work - Instructions- regarding: I am directed to draw your kind attention to the Notification No.85/2017-Customs (NT), dated 07.09.2017 , the Circular No.02/2019-Customs, dated 08.01.2019 , the Customs Post Clearance Audit Manual, 2018 and the Instruction No. 18/2020 dated 06.10.2020 relating to Customs Post Clearance Audit. Under the new Customs Post Clearance Audit (PCA) scheme there are Transaction Based Audit (TBA), Premise Based Audit (PBA) and Theme Based Audit (ThBA) and upon review thereof the findings are: i. There is a huge pendency in all the three types of Audit; ii. There is no proper system of reporting; iii. Monitoring of Customs PCA performance is not effective; iv. The follow up mechanism of audit detections needs strengthening; v. Time lines need to be streamlined for various activities of Customs PCA; vi. Monthly meetings to be streamlined; vii. Supervision by the Zonal Chief Commissioners is not effective and viii. Quarterly bulletins need improvement in term of content and structure. 2. Further, the Board has noticed several gaps in the existing reporting system. These include absence of proper formats for reporting, lack of prescribed timelines and inadequate performance monitoring mechanism etc. 3. The Board has examined the matter and accordingly it has been decided to issue the following instructions in respect of Customs PCA. 3.1 Transactional Based Audit (TBA) 3.1.1 Liquidation of pendency: The Monthly Performance Reports (MPR) section of the Directorate of Data Management (DDM) portal shall have two parts for reporting TBA in order to capture the details under two separate categories, namely for the period ending on 31.03.2021 and for the period from 01.04.2021 onwards (refer to para 5 on MIS reports). All the historical pendency accumulated up to 31.03.2021 is required to be cleared by 30.09.2021. All Customs Audit Commissionerates/Customs Houses /Customs Commissionerates shall draw an action plan in this regard. It is also understood that some of the formations complete the post clearance audit manually for sets of bills of entry and the same is not captured in the system. In such cases, the formations may take up the matter with the Directorate General of Systems to find a way to wipe out the pendency in the system. 3.1.2. Half yearly meetings on TBA: Respective Zonal ADGs of DG Audit shall convene half yearly meetings of all the Customs Audit Commissionerates/Customs Commissionerates to discuss the conduct of TBA. The meeting may deliberate upon topics such as including local risk parameters in the selection of BE/SB for TBA, the issue as to whether increase or decrease the total number of bills selected for audit, and the progress/pendency of TBA etc.. Similarly, the DG Audit shall convene half yearly meetings of the committee consisting of all Zonal Chief Commissioners or the officers deputed by him. The committee shall discuss the points placed before it by the ADG level meetings. It shall also review the total number/ percentage of transactions selected for TBA. The RMCC/DG ARM may also be made part of these meetings. 3.1.3. TBA in exports : As of now the PCA on exports has not yet started. In this regard, DG (Audit) may take necessary steps to start Export PCA from 1st April 2021. For the purpose, DG (Audit) may in consultation with DG ARM draw an action plan for the same and may furnish an Action Taken Report by 15.3.2021. 3.2. Premise Based Audit (PBA) 1 [ 3.2.1. The Scope and Coverage: The entire lot of IECs should be taken up for selecting entities for Premised Based Audit (PBA) as per risk-parameters to be decided by the National Customs Targeting Centre (NCTC), Mumbai in consultation with the committee formed as per Para 3.2.2 of these instructions. The risk parameters will be dynamic in nature and would keep on evolving as per feedback received and additional information available. The number of entities to be selected for audit during a financial year is to be calculated as per the capacity to conduct audits as informed by the Audit Commissionerates and finally decided by the committee. ] 2 [ 3.2.2. Selection of Premises : The DG Audit shall prepare the list of auditees for PBA in consultation with the DGARM. For this purpose, a committee headed by the DG Audit consisting of all the Commissioners of Customs (Audit), representative from DRI HQ and the Principal ADG/ADG, NCTC, Mumbai shall meet in February every year to finalise the list of auditees for PBA for the next financial year, and thereafter as felt necessary. The final list shall be communicated to the Audit Commissionerates before 31 st March. The Audit Commissionerates shall 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. It must be ensured that every entity selected should be subjected to the full audit cycle starting from Desk Review, Audit Plan, Audit Verification and preparation of Audit Report. ] 3.2.3. Role of Audit Commissionerates : The present practice of sending questionnaire to the other Commissionerate under whose jurisdiction the entity operates shall be stopped forthwith. Rather only the audit reports with the details of detections shall be forwarded to the respective formations for further necessary action. Accordingly, the pendency of follow up must be reflected in the monthly report of the respective Commissionerate. 3 [ **** ] 3.3. Theme Based Audit (ThBA) 4 [ 3.3.1. Selection of themes : The DG Audit shall convene half yearly meetings of the committee consisting of all the Principal Chief Commissioners/ Chief Commissioners in charge of Customs (Audit) Commissionerates; the Principal ADG/ ADG, NCTC, Mumbai and a representative from DRI HQ (not below the rank of Director). The committee shall meet in January and July to select the themes for ThBA for the first and second halves respectively for each financial year. ] 3.3.2. Timelines for ThBA: the timelines of the various activities in ThBA are given below: Sl. No. Event Timeline 1. Meeting for the finalization of the themes January /July 2. Preparation for the ThBA by the lead Commissionerate 31st March/ 30th September 3. Completion of ThBA 31st July /31st January 4. Report to DG Audit 20th August /20 th February 3.4. MIS reports 3.4.1: New formats : Three new formats namely, CUS PCA-I ( Annexure-I ), CUS PCA-2 ( Annexure-2 ). and CUS PCA-3 ( Annexure-3 ) are prescribed for the reporting of the PCA performance of TBA, PBA and ThBA respectively. A new format CUS PCA-4 ( Annexure-4 ) is prescribed for the reporting of the status of audit detections and it is given as Annexure-4 of this instruction. 3.4.2. MIS reports in DDM Portal : DDM to make these new formats available in the MPR section of the portal before 31.03.2021. DG Systems shall submit an Action Taken Report in this regard before 20.03.2021. 3.4.3. Uploading data in the new formats: While the reports relating to PBA and ThBA (i.e CUS PCA-2 and CUS PCA-3) shall be submitted online by the respective zones having Audit Commissionerates, the reports in respect of TBA (CUS PCA-I) and status of detections (CUS PCA-4) shall be submitted online by all the Zones including the Zones having Audit Commissionerates. All the Commissionerates shall upload the details in these formats in the DDM portal before 10 th of every month from 01.04.2021 onwards. 3.5. Post Audit Compliance cell (PACC) 3.5.1. All the Customs (Audit and jurisdictional) Commissionerates shall have PACC to ensure effective monitoring of Customs PCA. The PACC of Customs (Audit) Commissionerates shall monitor TBA, PBA and ThBA, as the case may be. The PACC of jurisdictional Commissionerates shall monitor TBA and will also coordinate with the audit Commissionerates on PBA and ThBA. The ADC/ JC rank officer shall supervise the proper functioning of PACC. 3.5.2. Principal Commissioner/Commissioner of Customs (in charge of audit or jurisdictional Commissionerate shall convene monthly meeting of PACC and shall send a consolidated monthly report to the ADG Audit of the concerned Zone within seven days of the meeting. The monthly PACC meeting shall be completed at least seven days before the MCM meeting, so that there will be enough time to prepare for the MCM. 3.6. Monitoring Committee Meeting (MCM) 3.6.1. The principal Commissioner/Commissioner of Customs (in charge of audit or jurisdictional Commissionerate as the case may be) shall convene monthly meeting of MCM preferably in the third week of the succeeding month to monitor the audit performance. The ADC/JC in charge of the PACC of all the concerned jurisdictional Commissionerates shall attend this meeting. 3.6.2. The MCM shall discuss about performance of TBA, PBA and ThBA, as the case may be, and decide on the objections raised during the month. Besides, the MCM shall also take stock of the status on the decisions taken previously, progress on the pending audit objections; and any other relevant issue which has a bearing on conducting PCA. 3.6.3. The principal Commissioner/Commissioner shall send a monthly report to the DG (Audit) within seven days of the MCM. 3.7. Supervision by Principal Chief Commissioner/ Chief Commissioner 3.7.1. All the Zonal Customs heads (in charge of Customs audit Commissionerates and jurisdictional Commissionerates) shall examine 5% of the audit reports on a selective basis. 3.7.2. The Pr. CCs/CCs shall send a report to the DG Audit at the end of every six months (first report by 30th October and the second report by 30th March) on such scrutiny done by them. 3.8. Quarterly Bulletin 3.8.1. The quarterly bulletin shall be published by DG (Audit) for every quarter by the end of the succeeding month of the relevant quarter. 3.8.2. In addition to the existing contents the quarterly bulletin shall also contain the following: i. details of detections of Customs PCA (All India and Zone wise data); ii. details of the pendency in TBA; iii. details of pendency in the settlement of audit paras; iv. details and outcomes of the following meetings: 6 [ a) Committee headed by DG Audit, consisting of all the Principal Chief Commissioners/ Chief Commissioners in charge of Customs (Audit) Commissionerates; the Principal ADG/ ADG, NCTC, Mumbai and a representative from DRI HQ (not below the rank of Director) which meets in January and July to select the themes for ThBA for the first and second halves respectively for each financial year, b) Committee headed by DG Audit, consisting of all the Commissioners of Customs (Audit), representative from DRI HQ and the Principal ADG/ADG, NCTC, Mumbai which meets in February every year to finalise list of auditees for PBA for the next financial year, and thereafter as felt necessary, ] c) committee headed by DG Audit, consisting of all zonal Chief Commissioners to review TBA meets on a half yearly basis, and d) committee of Commissionerates of Customs (audit and jurisdictional) headed by zonal ADGs of DG (Audit) to review TBA on a half yearly basis. v. activities done in terms of different timelines for ThBA; vi. details of MCM held during the quarter, and vii. half yearly reports from the Zonal Chief Commissioners on their review of 5% of audit reports on a random basis. 4. In the Customs PCA Manual, 2018, any aspect which is inconsistent with the above instructions shall be brought to notice for suitable modification of the manual. In case of a conflict the provisions of this Instruction will prevail. 5. The difficulties, if any, faced in implementation of these instructions may be brought to the notice of the Board. Encl.: Annexure-1, 2, 3 and 4. (Sharad Srivastava) Director (Anti Smuggling) 5 [ ] **************** NOTES:- 1. Substituted vide Instruction No. 27/2023- Customs dated 06-09-2023 before it was read as, 3.2.1. The scope and Coverage: As per the Audit Manual, AEO T1, T2 and T3 categories are to be audited once in every two/three/five years. Therefore, the audit planning is required to be done in such a way that 50% of the AEO T1, 33.33% of the AEO T2 and 20% of the AEO T3 shall be audited every year. As the AEOs-LO such as Customs Brokers, warehouses, etc. can be taken up under ThBA, or inspected by the formations. The PBA shall be restricted to importers and exporters only and other entities wont be covered under PBA hereafter. It is clarified further that, for the year 2020-21, if any such entity has been selected for PBA, the Audit shall be completed as planned. 2. Substituted vide Instruction No. 27/2023- Customs dated 06-09-2023 before it was read as, 3.2.2. Selection of Premises : The DG Audit shall prepare the list of auditees for PBA in consultation with the DGARM. For this purpose, a committee consisting of all the Commissioners of Customs (Audit), representative from DRI HQ and the ADG, National Customs Targeting Centre (previously RMCC) shall meet in February every year to finalise the list of auditees for PBA for the next financial year. The final list shall be communicated to the Audit Commissionerates before 31st March. The Audit Commissionerate shall plan the 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. It must be ensured that every entity selected should be subjected to the full audit cycle starting from Desk Review, Audit Plan, Audit Verification and preparation of audit report. 3. Omitted vide Instruction No. 27/2023- Customs dated 06-09-2023 before it was read as, 3.2.4. Visiting premises: The visit to premises shall be kept as minimum as possible and all the communications if any required shall be done through electronic modes and meetings if necessary shall be done through Video Conference. If a visit is necessary, only then the field Commissionerate under which the entity/premises falls shall be asked to conduct the visit and submit their report. The Audit Commissionerates in such cases shall 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. 4. Substituted vide Instruction No. 27/2023- Customs dated 06-09-2023 before it was read as, 3.3.1. Selection of themes: The DG Audit shall convene half yearly meetings of the committee consisting of all the Principal Chief Commissioners/ Chief Commissioners in charge of Customs (Audit) Commissionerates. The committee shall meet in January and July to select the themes for ThBA for the first and second halves respectively for each financial year- 5. Substituted vide Instruction No. 27/2023- Customs dated 06-09-2023 before it was read as, Annexure-1 PAC-1 Transaction Based Audit (TBA) Commissionerate : Month : Date of Last MCM : (Amount Rs. in Lacs) Category Total no. of BEs/SBs given OOC/ LEO during the month Opening Balance of pending TBA No. of BEs/SBs selected for TBA % BEs /SBs Selected during the month No. of B/Es or S/B audited Closing Balance of pending TBA (Col. No. 3+4-7) During the Month Upto the Month During the Month Upto the Month 1 2 3 4 5 6 7 8 9 IMPORT EXPORT Total (Amount Rs. in Lacs) Period-Wise Break-UP No. of Consultative Letters issued No. of Detections Made During the Month (Including cases where Consultative Letters are not issued) Amount of Detections Made Upto the Month (including Consultative Letters not issue) No. of Recoveries Made During the Month (Including Consultative Letters not issued) Amount of Recoveries Made Upto the Month (Including Consultative Letters not issued) 1 Year 1 -2 Year 2-3 Years 3 Years During the Month Upto the Month No. Amount No. Amount No. Amount No. Amount 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Note : 1. Captured all the information given in the formats in Audit Manual and as suggested by Commissioner (RI I) 2. Opening Balance should reflect total number of pending TBA as on 1st April, 2020 3. During the month Figures should reflect figures for the reporting month only but in the first report for the current Financial Year During the month figures should be from 1 April, 2020 to the reporting month 4. Upto the month figures should reflect cumulative figures for the reporting Financial Year Annexure-2 PCA-2 Premises Based Audit (PBA) Commissionerate : Month : Date of Last MCM : (Amount Rs. in Lacs) Category Total number of Premises selected for Audit During the Year Opening Balance of pending PBA No. of Premises selected for Audit No. of premises audited Closing Balance of pending PBA (Col. No. 3+4-6) During the Month Upto the Month During the Month Upto the Month 1 2 3 4 5 6 7 8 IMPORT AEO T3 AEO T2 AEO T1 Imports Total EXPORT AEO T3 AEO T2 AEO T1 Export Total Grand Total (Amount Rs. in Lacs) Detections Made During the month Detections Made Upto the month Amount of Spot Recovery Made Total Recoveries Made During the month (including Spot Recovery) Total Recoveries Made Upto the month (including Spot Recovery) No. Duty Amount No. Duty Amount No. Amount No. Duty Amount No. Duty Amount 9 10 11 12 13 14 15 16 17 18 Note : 1. Captured all the information given in the formats in Audit Manual and as suggested by Commissioner (RI I) 2. Opening Balance should reflect total number of pending PBA as on 1st April, 2020 3. During the month Figures should reflect figures for the reporting month only but in the first report for the current Financial Year During the month figures should be from 1 April, 2020 to the reporting month 4. Upto the month figures should reflect cumulative figures for the reporting Financial Year Annexure-3 PCA-3 Theme Based Audit (ThBA) Commissionerate : Month : Date of Last MCM : (Amount Rs. in Lacs) Year of Selection Theme No. Theme Selected Total Number of Importers/ Exporters selected for Audit for the reporting year Opening Balance of pending ThBA No. of Importers / Exporters selected for Audit No. of Audits Conducted During the Month Upto the Month During the Month Upto the Month 1 2 3 4 5 6 7 8 9 IMPORTERS EXPORTERS (Amount Rs. in Lacs) Closing Balance of pending ThBA (Col. No 5+6-8) Detections Made During the month Detections Made Upto the month Recoveries Made During the month Recoveries Made Upto the month No. Duty Amount No. Duty Amount No. Duty Amount No. Duty Amount 10 11 12 13 14 15 16 17 18 Note : 1. Captured all the information given in the formats in Audit Manual and as suggested by Commissioner (RI I) 2. Opening Balance should reflect total number of pending ThBA as on 1st April, 2020 3. During the month Figures should reflect figures for the reporting month only but in the first report for the current Financial Year During the month figures should be from 1 April, 2020 to the reporting month 4. Upto the month figures should reflect cumulative figures for the reporting Financial Year Annexure-4 PCA-4 : STATUS OF AUDIT PARA (Showing Follow Up of the Objections raised in TBA/ThBA/PBA) Month : Commissionerate : (Amount Rs. in Lacs) Category Opening Balance of objection raised under PCA (Including cases where Consultative Letters not issued) Objections raised during the month Consultative Letters issued during the month Total (Col. 2+4+6 and 3+5+7) No. Amount No. Amount No. Amount No. Amount 1 2 3 4 5 6 7 8 9 TBA ThBA PBA TOTAL (Amount Rs. in Lacs) Disposal During the Month Dropped on Merit by Competent Authority before MCM Dropped on Merit in MCM Recovery Made SCN Issued Total Disposals during the month (Col.10+12+14+16 and 11+13+15+17) No. Amount No. Amount No. Amount No. Amount No. Amount 10 11 12 13 14 15 16 17 18 19 (Amount Rs. in Lacs) Closing Balance of objection raised under PCA (Col. No. 8-18 9-19) Period-wise Break-up of Closing Balance 1 Year 1-2 Years 2-3 Years 3 years No. Amount No. Amount No. Amount No. Amount No. Amount 20 21 22 23 24 25 26 27 28 29 NOTE : 1. Captured all the information given in the formats in Audit Manual and as suggested by Commissioner (RI I) 2. Opening Balance should reflect total number of pending PCA as on 1st April 2020 3. During the month Figures should reflect figures for the reporting month only but in the first report for the current Financial Year During the month figures should be from 1 April, 2020 to the reporting month 4. Upto the month figures should reflect cumulative figures for the reporting Financial Year 6. Substituted vide Instruction No. 27/2023- Customs dated 06-09-2023 before it was read as, a) committee headed by DG Audit, consisting of chief commissioners in charge of Audit Commissionerates meets in January and July every year to decide the themes for ThBA, b) committee headed by the DG Audit, consisting of Commissioners of Customs (Audit), representatives from DRI HQ and ADG in charge of Customs in DG ARM; meets in February every year to finalize the list for PBA,