Special Audit Under GST

Dr Sanjiv Agarwal

Special audit is a tool provided to the revenue to order for special audit under section 66 of the GST Act, 2017 to be carried out by a chartered accountant or a cost accountant. Such special audit shall be carried out on the directions of deputy or assistant commissioner with prior approval of the commissioner, if such officer is of the opinion that the assessee has not declared the value correctly or credit availed is not within the normal limits. The Finance Act, 1994 contained section 72A for special audit of assessee by chartered accountants or cost accountants. In the Central Excise Act, 1944, section 14AA provided for special audit.

In SKP Securities Ltd. v Deputy Director (RA-IDT) (2013) 29 STR 337; (2013) 39STT 327 (Calcutta), it was held that condition precedent to order for special audit is reason to believe that person liable to service tax is within circumstances stipulated in section 72A (wrong declaration of value of taxable service, mis-utilisation of credit of tax etc). Such insinuation of wrongful act affects citizen in his social life, and comes within scope of civil consequences.

In that view, such an order has to comply with the principles of natural justice. Reference in this context be made to the judgment of the Supreme Court in Sahara India (Firm), Lucknow v Commissioner of Income Tax, Central-I and Another reported in (2008) 14 SCC 151: 2008 (226) E.L.T. 22 (S.C.). The Supreme Court held that the expression „civil consequences encompasses infraction of not merely property or personal rights but of civil liberties, material deprivations and non-pecuniary damages. Anything which affects a citizen in his civil life comes under its wide umbrella.

Principles guiding special audit