1 Basilal Ramnath Agarwal charitable trusts Vishwkarma institute of Management A Project Report On Audit of Export Oriented Unit For Ameya Management Consultancy Pvt. Ltd. Submitted to: In partial fulfillment of 2 years full time M.B.A. Course. Submitted By: Deepak Kulkarni VIM, Pune. (2005-07)
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1
Basilal Ramnath Agarwal charitable trusts
Vishwkarma institute of Management
A
Project Report
On
Audit of Export Oriented Unit
For Ameya Management Consultancy Pvt. Ltd.
Submitted to:
In partial fulfillment of 2 years full time M.B.A. Course.
Submitted By: Deepak Kulkarni
VIM, Pune.
(2005-07)
2
Acknowledgement
Before writing the actual report on summer training I wish very thankful to
Ameya Management Consultancy Pvt. Ltd. , who gave me a chance to make a
project.
A special thanks to Mr. Rajesh khadilkar sir, the director of Ameya
management consultancy Pvt ltd., who showed me the path of the project.
I also wish thanks to Mr. Kaushal Mundada, C.A. who gave proper
knowledge of auditing of EOU s. I also wish thanks to Mr. shrikant
Charegaonkar, who helped for this project.
I am very much thankful to Mrs.Smita Sovani, who showed me exact
direction of project & making of a report.
Deepak Kulkarni (MBA II)
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This is to certify that Mr. Deepak Kulkarni is
bonafide student of our institute. He has successfully
completed his summer project titled, Audit of Export
oriented Unit
in partial fulfillment of MBA programmed
2005-2007 as per rule of Pune University.
Director Project guide
4
Title Index
Sr. No. Title Pg. No.
Remark
1. Executive summary 4-6
2. Scope 7.1
3. Objective 7.2
4. Company Profile 8-16
5. Theoretical Background 17-21
6. Benefits of EOU 22-28
7. Information and formats of documents
29-39
8. Conclusion 40
9. Bibliography 41
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Executive Summary
Introduction:
Ameya Management Consultancy Pvt. Ltd. is well known
consultancy in Pune. It deals with excise, customs, service taxes etc.
Mr. Rajendra khadilkar is the director of a company & a very helping nature
person. The firm gives services to various companies.
I think it was a good experience to work with Mr. khadilkar and he
gave me full information about Export oriented unit.
About my work in summer training.
Project title:
The company deals with custom audit. I got a chance to
work as a trainee in well-known GME Pvt. ltd, which is registered under this
firm. So, my project title is Audit of EOU s and the documents maintained by
company.
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Why:
The area of exporting unit is becoming wider day-by-day. Customs audit
consists of the export oriented unit s audit. Working with custom and get
knowledge about Export-oriented units was a nice experience for me.
So, I feel very glad and very satisfied to work with Ameya
management consultancy Pvt ltd.
Location:
Ameya Management consultancy
Located at,
514, 5th floor, siddharth towers,
Near city pride theatres
Off karve road, kothrud,
Pune 411029
& Gadre marine export ltd. was located at,
Ratnagiri MIDC,
7
Dist. Ratnagiri.
Duration:
The period for the training was for the month of June and July. The
audit of Export oriented unit was done during this period so I got chance with
Ameya Management Consultancy PVT LTD to work on EOUs.
Result:
Two months experience in the field of export was very nice for
me. In these two months I get much knowledge of implementation of EOU and
the various documents maintained for the unit. Because of lack of time I cant
get full information about the unit but whichever information I can try to get
I had explained it in this report.
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Scope And Objective
Project title:
Audit of EOU s
Scope: (7.1)
The learning project of Audit of Export oriented units consists of
The study of the documents maintained by the company. I examined various
Types of documents maintained by the company. Due to lack of time I cant get
thorough knowledge of documents maintained by the EOU scheme. But few
Of them I had mentioned with the format and related information which I get
during the working. The study involved verification of records and checking
of various documents.
Objective (7.2)
The primary objective of this learning project was to get a
Knowledge of export-oriented unit and the documents maintained for
Implementation of EOU scheme. Also it consists the audit of EOU and gets much
Knowledge of verification of documents maintained by the EOU scheme.
Clearance of Byproducts, Rejects, Waste and Scrap, Non-excisable Goods, etc.:
The DTA clearance of by-products and rejects on consessional rate duty is not allowed to
the EOUs, which have failed to achieve the prescribed NFEP. In such cases, the EOUs are
liable to pay full duty. Further, in case of these units, DTA clearance of finished goods is not
allowed even on payment of full duty. In case of waste/scrap/remnants, the same are allowed
to be sold in DTA on payment of consessional rate of duty within overall limit of 50% of FOB
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value of exports without insisting on achievement of prescribed NFEP. In case of sale of
scrap/waste/remnants beyond this limit, it is allowed on payment of full duty. As for DTA
clearance of goods manufactured by the EOUs, which are not excisable (e.g. cut flowers).
The duty on inputs and consumables etc. procured/imported duty free under exemption
notifications, which have gone into production of such non-excisable goods cleared into DTA,
is recovered.
De-Bonding:
An EOU may debond into a normal DTA unit subject to the approval of the Development
Commissioner and following of prescribed procedure & fulfilling the laid down conditions.
Such de-bonding is subject to penalty, if any, that may be imposed and payment of duties of
customs and excise applicable at the time of de-bonding. The standard conditions of de-
bonding, as indicated in the Handbook of Procedures provide, amongst other conditions, that
the applicable customs and central excise duty would be paid on imported and indigenous
capital goods, finished goods, raw materials, consumables, components etc. in stock.
Further, the unit in question continues to be treated as an EOU till the date of final de-
bonding order.
The duty payable in terms of the relevant notifications by the units seeking debonding is as
under:
(a)
Semi-finished and finished goods lying in stock at the time of de-bonding can be
cleared on payment of the excise duty equal to aggregate duties of Customs payable
on similar imported goods.
(b)
Capital goods, material handling equipment, office equipment and captive power plants
can be cleared on payment of an amount equal to the customs duty leviable on such
goods on the depreciated value thereof and at the rates in force on the date of
payment of such duty.
(c)
Goods including containers suitable for repeated use other than those at (b) above can
be allowed clearance on payment of customs duty on their value at the time of import
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and at the rate of duty in force on the date of payment of such duty.
(d)
Used packing materials such as cardboard boxes, polyethylene bags of a kind
unsuitable for repeated use can be cleared without payment of duty.
At the time of debonding, the EOUs are entitled for depreciation on imported/indigenous
capital goods. The rate of depreciation on capital goods have been specified and in case of
the computers and computer peripherals, accelerated rate of depreciation have been
provided for.
In the event of a gem and jewellery unit ceasing its operation, gold and other specious
metals, alloys, gem and other materials available for manufacture of jewellery are handed
over to a nominated agency (nominated by Department of Commerce) at a price determined
by that agency.
After studying this all information about EOUs. I examined various types of
documents maintained by the company. Due to lack of time I cant get thorough
knowledge of documents maintained by the EOU scheme. , but few of them I had
mentioned with the format and related information which I get during the working.
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Various Documents maintained by the company:
The study of document maintained by Gadre marine Export Ltd. is as follows.
These all documents are only related to custom s audit. Due to lack of time, whatever
information I could get I had tried to obtain it.
1. Commercial Invoice:
The format of commercial Invoice is as follows:
Name: Gade marine Export Pvt. ltd. Invoice No. & Date
Consignee: Buyers Order No.
Ref:
Country of origin Country of Destination INDIA JAPAN
Container No.
No. Of kinds of Package
Description of Goods
Quantity Rate Amount (Rs.)
Authorized signature
The commercial invoice register is maintained separately. The invoice amount tallied with
the amount of ARE-1. Here the rate is determined as per the grade of the product.
The product was fish paste, which was the raw material for the Gadre Marine Export
ltd.
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2.Format of Letter of Permission For EOU s Developer.
No. Government Of India
Ministry of commerce and industry
Department of Commerce
(EOU section) Dated: To, Subject: Proposal For setting up of Export Oriented Unit at
Sir, The under designed is directed to refer of your proposal for setting up of EOU
At ______________ and to convey the approval of the government of India to your proposal,
the details of which are noted below.
General Conditions:
1. At least 25% of the SEZ s area shall be used for developing industrial area for setting
up of EOU s.
2. It would be the responsibility of the developer to obtain required approval from various
statutory authorities under relevant statues and regulation of the government of India
and the state government.
3. The developer will make adequate provision for rehabilitation of the displaced person.
4. The developer shall be eligible for duty free import/ domestic procurement of goods only
for those activities approved by BOA
5. The state government shall issue requisite notification giving effect to the policy
announced by the state government and shall enact a SEZ act.
6. The project shall implemented and operated in terms of the parameters laid down by this
ministry
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7. The funds required for the project will be fully raised by developer, the external
borrowings will be as per the ministry of finance.
8. The promoters shall maintain adequate manpower to provide the facility
9. The operation and maintenance of the unit shall be undertaken as per the proposal.
10. The approval will be subject to cancellation in case of defective service ar if the service
is not up to minimum standard specification.
Kindly convey your acceptance of all the terms and conditions indicated above within 30 days
from the date of issue of this letter.
Yours faithfully
Director
Thus, it is important document of a company. The letter of permission shall issued by
Development commissioner to EOU.The letter of permission shall specify the item
manufacture for first five years. Letter of permission is also treated as license given by
concerned authority.
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CT-3 Register:
This is the important document of the company. To avoid the duty
payment the company issues the CT-3.
Difficulties have been expressed by the 100% EOUs in the procedure for obtaining CT-3
forms in particular they have suggested that since the present system of obtaining excise
duty free goods by way of CT-3 form is lengthy and time consuming , the same should be
done away with and instead the system has prevailing the sales tax side for issue of CT-3
form should be adopted wherein a pre authenticated book is issued to the GME Pvt. Ltd. for
claiming consessional rate of tax and the units are free to make use of it for obtaining raw
materials as and when required.
CT-3 forms were have 3 parts for the following purpose namely,
Part I: To be sent to the DTA supplier and be retained by the central Excise
Officer in charge of DTA supplier
Part II: To be sent by the 100% EOU to the range Superintendent
Part III: To be retained by the EOU for its record & verification.
Hence, I examined the CT-3 register .The procedure to be followed is as follows,
GME Pvt ltd gets the quotation from other company
They decides the price and
At last company issues CT-3
While examining the CT-3 register I verified every entries made by the company
The format of CT-3 register is as follows.
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Form CT-3
No. Date: ________
FORM CT-3
Certificate For removal of excisable goods under bond
This is to certify that:
Mr. /Messer .(Name and address) is/are bona fide license holding license NO.
. Valid upto .
That he/they has /have executed a bond in form B-17 (General Surety/ General Security)
No .date for rs .with the proper officer of central Excise or custom or Deputy
Commissioner of central Excise or custom .
and as such may be permitted to remove ..(Quantity) of . (Excisable goods )
from the unit at ..to their undertaking . at ..
That the specimen signature of his/their authorized agent , namely
shri are furnished below duly attested.
Specimen signature of Central Excise officer in
owner of authorized agent Sd/- charge of the EOU
Attested
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Form A.R.3-A This is another important document to be maintained by the company in
removal of excisable goods from a factory in INDIA to 100% EOU.
I examined whole A.R.3-A and verify the entries with other documents.
The format is as follows.
Form A.R. 3-A
Application for removal of Excisable goods from a factory in India to 100%
Export oriented Undertaking
I/we holder(s) of Central Excise License No. .in form ..
apply for leave to remove the under mentioned goods from the factory at ..
to the 100 % Export oriented undertaking of Mr./ Messers ..
No. And date
of entry in
RGI
Register
Description
of goods
No. And
description
of packages
Gross weight
of packages
Marks and
number of
packages
(1) (2) (3) (4) (5)
Quantity of
goods
Value Duty amt Manner of
transport
Remark
1. To be entered by the Consignor/owner or his authorized agent in words.
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2. The aforesaid Mr., have executed a bond at destination ; in form B 16
Gen. Surety dated .
3. I/we hereby declare the above particulars to be true.
Place:
Date: Signature of Consignor or
his authorized agent
1. Certificate of central excise officer at factory at removal:
To,
The officer of central excise,
In charge of the 100% EOU
I hereby certify that the consignment conforms in all respect to the description given
above and I have permitted removal under Transport permit.
Place:
Date: Signature
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B-17 Bond:
. All the EOUs are required to execute a single all purpose bond i.e. B-17
bond undertaking themselves to fulfill the conditions stipulated in the exemption notification of
EOU scheme. This bond is taken to take care of the interests of revenue arising out of goods
lost in transit, goods taken into Domestic Tariff Area for job work/ repair/ display etc but not
brought back etc. The bond is executed with the jurisdictional Assistant Commissioner of
Customs/Central Excise in charge of the unit. The format of the bond is prescribed vide
notification No. 6/98-CE ( NT) dated 2-3-1998.
The bond covers the activities which include, inter alias, transshipment of import /export
goods between port of import/export and units' premises; duty-free import/procurement from
the indigenous sources as per relevant notification and warehousing/storage in the unit;
movement of duty-free goods for job work and return; temporary clearance for repair and
display in exhibitions, testing/approvals etc.; and movement of goods against AR-4, AR-3A
and CT-3 etc. and transfer from one warehouse to another.
However, it does not cover the differential duty amount against advance DTA sale for which
a separate bond is to be executed. The bond is taken for an amount equal to 25% of the duty
forgone on the sanctioned requirement of capital goods plus the duty forgone on raw
materials required for 3 months. Surety or security equivalent 5% of the bond amount in the
form of bank guarantee is required to be given by the EOUs
After studying of all information about B-17 bond, I actually examined the bond.
It is most important document of the Export oriented unit company.
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Form B-17 (General surety / security)*
General Bond with (surety / security) to be executed by the
100% EOUs / Units in EHTP/STP
We, having our registered office at
..Hereinafter referred to as the obligors and ..called the
Surety (ies) (which expression shall, unless repugnant to the context or meaning thereof
Include our heirs, successors, executors, administrators, liquidators, legal representative
And assignees) hereby hold and firmly bind ourselves, jointly and severally unto the
President of India hereinafter referred to as the Government in the sum of Rs .
Rupees. Only for which payment to be well and truly made, we,
The obligors bind us by these presents.
Whereas we the obligors have been granted by the government an
Industrial license for setting up a hundred present export oriented undertaking for the
Manufacture of the goods for export outside India on the terms and conditions stipulated in
Letter of intent no. Dated and we the obligors have duly accepted
The same terms and conditions.
I / we further declare that this bond is given under the orders of the
Central Government in the performance of an act in which the public are interested.
In these presents the words imposing singular only shall also include
The plural and vice versa where the context so requires.
In witness thereof these presents have been signed this day .
of .19 .hereinbefore written by the obligor(s) and the surty(ies).
Place:
Date: signature of the obligor
Witness (1) Address (1) Occupation
(2) Address (2) Occupation signature of surety
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Continued
Witness (1) Address (1) Occupation Signature and date
(2) Address (2) Occupation Name .
Designation ..
Accepted for and on behalf of the President Of India on ..day ..
of ..19 ..
Signature and date
Name ..
Designation ..
I had studied the B-17 bond. A single all-purpose Bond was required to be
furnished by 100 % EOU in lieu of the different bonds being executed earlier. The B-17
bond can be executed with either surety or security.
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Some other important documents, which I have examined and verified
But due to lack of time I cant, get sufficient information about them. They are
As follows.
1.Daily stock register:
The company maintained daily stock register. Daily stock
register was consisting with entries regarding with daily production from the company.
It also consists of day-to-day dispatched goods entries. it also consist the stock lying with
the factory premises. Thus daily stock register consists every stock of goods which are lying
with the factory. The goods exported were returned back also recorded in this register.
2.Proof of export register:
This is another important register of company. Proof of export
register was consisting the bills at the time of export. This invoice or bill is considers as a
proof of export. I examined the register and also found the entries, which were not recorded
in it. It must be submitted to department on monthly basis.
At this stage the study of documents get over.
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Conclusion:
At this stage the study of documents get over but some
important points which were covered in Audit report was as follows (As per
auditor s view)
1. Goods exported were returned back but not entered in DSA register
2. Daily stock register is not maintained product wise as each product is
cleared under different values.
3. Proof of export should be submitted to dept. on monthly basis.
4. Records of any clearance from factory to be maintain.
5. Service tax on Export commissions is to be paid for the unit on monthly
basis.
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Bibliography:
For making this project report I refereed the following books.
1.NABHI s Manual for 100% Export units NABHI Publication
2.Central excise act and rules
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