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How are manufacturing companies' accounts audited in India?


The Central Excise Act provides for two kinds of audits on the manufacture of goods:

1. Special Valuation Audit.

This audit aims to ensure that the value of a good is correctly determined: if tax authorities believe that the value has not been correctly determined through self-assessment, a special valuation audit may be ordered.

2. Central Value-added Tax (CENVAT) credit audit.

CENVAT is a centrally administered tax which measures value added in each stage of manufacture. If a Commissioner of Central Excise has “reasons to believe” that the credit availed is not normal, or that it has been availed on account of fraud, willful misstatement, suppression of facts or collusion, then she or he can order an audit to assess the claimed credit. 

Both of these audits are undertaken by a cost accountant (a member of the Institute of Cost and Works Accountants of India holding a Certificate of Practice), nominated by the authority ordering the audit.


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