Audit and Identity Verification

In one line

Sections 99A and 99B let the department check a trader after the goods have gone, and check who the trader is. Precisely: section 99A empowers the proper officer to audit the assessment of duty of imported or export goods, or of a multiple-transaction assessment, at his office or at the premises of the auditee; and section 99B, inserted by the Finance Act 2022, empowers the verification of identity and compliance of a person who is a beneficiary of any of the Act's benefits or procedures.

Why these sections exist

Because self-assessment moved the check from before clearance to after it. Section 17(1) requires the importer or exporter to assess his own duty, and section 47 permits clearance on payment. The department no longer sees most consignments before they leave the port, and its protection lies in what it can do afterwards: verify under section 17(2), re-assess under section 17(4), recover under section 28, and audit under section 99A.

Audit is different in kind from the other three, and that is the point of the section. Verification and re-assessment look at a consignment; audit looks at a trader. It examines records, systems and patterns over a period, at the trader's own premises if necessary, which is the only way to find an error repeated across hundreds of bills of entry.

Section 99B answers a different problem: who is actually behind a transaction. The Act extends a great many benefits, exemptions, concessional rates, duty credits, warehousing licences and authorised courier registrations, and these are attractive to people who create entities in order to obtain them. Section 99B lets the department check that the beneficiary is who he says he is and complies with what the benefit requires.

The provisions

Section 99A, audit. The proper officer may carry out the audit of assessment of imported goods or export goods or of an auditee under this Act either in his office or in the premises of the auditee in such manner as may be prescribed.

The Explanation defines "auditee" as a person who is subject to an audit under this section and includes an importer or exporter or custodian approved under section 45 or licensee of a warehouse and any other person concerned directly or indirectly in clearing, forwarding, stocking, carrying, selling or purchasing of imported goods or export goods or dutiable goods.

Three features of the definition deserve comment. It reaches beyond the importer to the whole chain: the custodian under section 45, the warehouse licensee, the freight forwarder, and the person who bought the goods. It is drawn by function rather than by status, so a person is an auditee because of what he does with the goods. And it includes persons concerned indirectly, which is what permits an audit to follow a transaction into the domestic market.