2020 Edition

CONTROLLER GENERAL OF DEFENCE ACCOUNTS

Ulan Batar Road, New Delhi- 110010
 INDEX
Para(s) Chapter Chapter Name Pages
No.
1-9 1 INTRODUCTORY 1-3
10-66 2 GENERAL PRINCIPLES AND RULES OF 4-38
AUDIT
67-79 3 AUDIT AGAINST PROVISION OF FUNDS 39-42
80-109 4 AUDIT OF RECEIPTS AND RECOVERIES 43-55
110-127 5 PAY ACCOUNTS OF ARMY OFFICERS 56-61
128-131 6 PAY ACCOUNTS OF JUNIOR 62-66
COMMISSIONED OFFICERS, OTHER
RANKS AND NON COMBATANTS
(ENROLLED)
132-159 7 PAY AND ALLOWANCES OF CIVILIAN 67-76
GOVERNMENT SERVANTS
160-183 8 TRAVELLING ALLOWANCE AND OTHER 77-88
CONVEYANCE CHARGES
184-202 9 UNIT ALLOWANCES, CONTINGENT AND 89-97
MISCELLANEOUS EXPENDITURE
203-227 10 CONTRACTS, EXPENDITURE ON 98-111
SUPPLIES AND HIRED LAND TRANSPORT
228-241 11 MILITARY ENGINEER SERVICES 112-118
EXPENDITURE
242-273 12 MISCELLANEOUS ACCOUNTS AND 119-134
PAYMENTS
274-286 13 PENSIONS 135-139
287-299 14 IMPORTED STORES 140-145
300-344 15 AIR FORCE ACCOUNTS 146-176
345-381 16 NAVY ACCOUNTS 177-188
382-404 17 RESULTS OF AUDIT AND FINANCIAL 189-206
IRREGULARITIES
405-444 18 APPROPRIATION ACCOUNTS OF THE 207-238
DEFENCE SERVICES
445-454 19 REPORT OF THE COMPTROLLER AND 239-243
AUDITOR GENERAL OF INDIA, UNION
GOVERNMENT (DEFENCE SERVICES)
455-472 20 GOVERNMENT e- MARKET PLACE 244-254
473-499 21 GOODS AND SERVICE TAX 255-272
APPENDIX 1 273-274
APPENDIX 2 275-277
APPENDIX 3 278-283
APPENDIX 4 284-286
APPENDIX 5 287-290
CONCORDANCE TABLE 291-305
 CHAPTER 1
Introductory

Para
Introductory 1

Statutory Audit by the Director General of Audit, Defence Services 4

Addressing of correspondence on questions of interpretation of Rules,

Procedure, Higher Audit and Financial Advice 7

Introductory

1. This code embraces (i) the broad and general principles on which audit
by the Defence Accounts Department is conducted over Defence Services
receipts and expenditure and (ii) the special points to be observed in the
audit of particular item of such receipts and expenditure.

2. No attempt has been made to include in this Code the detailed

procedure which is to be followed by the several audit sections of a Principal
Controller’s/Controller’s office in the conduct of its business. Such procedures
will be found in the relevant Office Manuals. Also, this Code does not include
instructions with regard to Local Audit and inspection of Store and Public Fund
Accounts, etc., by the Local Audit Officers of the Defence Accounts
Department. These instructions are contained in the ‘Army Local Audit Manual
Parts I (Volume I, II & III) and II, NLAO’s Manual and Air Force Local Audit
Manual’ ‘Internal Audit Manual (Fys)’, ‘Internal Audit Manual (BR)’, ‘Internal
Audit Manual (R&D)’ and ‘Canteen Store Audit Manual’.

3. In applying the rules in this Code, it is to be borne in mind that except

in its relation to the Statutory Audit conducted by the Director General of
Audit Defence Services, and its staff, the word ‘audit’ as used herein refers
solely to the functions of internal audit exercised by the Defence Accounts
Department on behalf of Secretary(Defence/Finance)/Financial Adviser,
Defence Services who functions in the dual capacity of principal
representative of the Ministry of Finance in the field of Defence expenditure
and as the Chief Accounting Officer for Defence services.

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Statutory Audit by the Director General of Audit, Defence Services

4. As, unlike the Civil Accounts and Audit Offices the offices of the
Defence Accounts Department are not administratively subordinate to the
Comptroller and Auditor General of India, statutory audit of the accounts and
financial transactions of Defence Services is carried out on behalf of the
Comptroller and Auditor General by an organization directly under its
administrative control. The head of this organization is the Director General of
Audit, Defence Services, who is assisted by Principal Directors/Directors/Jt.
Directors/Deputy and Assistant Directors. The statutory audit of Defence
Services expenditure is only a test audit. Which is conducted by these officers
to such extent and in such manner as may be directed by the Comptroller
and Auditor General.

5. The Director General of Audit, Defence Services, audits all sanctions of

the Government of India in the Ministry of Defence and the Ministry of
Defence (Finance). They scrutinize all Codes and Regulations issued for the
use and guidance of the Defence Accounts Department and prepares
annually, a Report on the Appropriation Accounts of the Defence Services.
Audit in the Principal Controllers/Controllers Offices is conducted concurrently
and it is seen that the accounts of the Defence Services as included in the
Combined Finance and Revenue Accounts are a correct presentation of facts
and represent money that has really been spent in the manner in which it is
shown to have been spent.

6. Audit of Cantonment Fund Accounts conducted by the Defence

Accounts Department is not subject to Test Audit by the Director General of
Audit (Defence Services). Cantonment Boards pay audit fees to the Defence
Accounts Department.

7. Principal Controllers/Controllers should not address Services

Headquarters or the Ministry of Defence (Finance) directly on questions of
interpretation of rules, procedure, higher audit and financial advice. Such
questions should always be referred by them to the Controller General of
Defence Accounts.

Note: Pure Audit Reports (or endorsements by Principal

Controllers/Controllers on memoranda addressed by lower formations to
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authorities at services Headquarters) which only state facts and the actual
audit position as understood with reference to extent orders and decisions
should however be rendered direct to Services Headquarters.

8. Where a matter pertains to more than one Principal

Controller/Controller, the initiating Principal Controller/Controller should
itself make references to the other Principal Controllers/Controllers to
ascertain the procedure and views prevailing in their offices and state the
same in its reference to the CGDA office to enable a quick decision to be
taken.

9. Performance Audit Teams (PAT) should be constituted in every

PCDAs/CDAs to undertake the performance audit of Services provider units/
formation i.e Ordnance depot, Supply depot, EME workshops, Military Farms,
Sanik Schools etc. of their respective audit areas. Finding of the report should
be submitted to respective PSOs through proper channel.

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 CHAPTER 2

GENERAL PRINCIPLES AND RULES OF AUDIT

Para

Introductory 10
Audit responsibility of Controllers 15
Audit and scrutiny of sanctions and orders 16
Audit of sanctions to expenditure 24
Audit against propriety 31
Extent of audit of expenditure 34
Audit of expenditure 35
Main objects of audit of expenditure 37
Provisional payments 41
Audit of bills and vouchers 49
Specimen signatures 53
Amendment and interpretation of Rules 54
Financial Advice 55

Introductory
10. The primary function of audit is to verify the accuracy and
completeness of accounts to secure that all receipts are brought to account
under the proper head, that all expenditure and disbursements are
authorized, vouched and correctly classified and that the final account
represents a complete and true statement of the financial transactions it
purports to exhibit.

11. A clear distinction between Audit and Administrative Functions should be

borne in mind by Services and the Defence Accounts Department in the
discharge of Audit functions. It is the function of the Government to make
Financial Rules and Orders for the Defence Services, and of the Officers of the
Defence Services and the Defence Accounts Department responsible for
making payments, to apply these rules and orders. It is the function of audit
to verify that these rules and orders are properly applied. It is not the
function of audit to prescribe what such rules and orders shall be or to
interfere with their administrative application.

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12. Audit by the Defence Accounts Department is conducted with reference to
the rules laid down in this Code, Financial and other Regulations for the
Defence Services and other orders issued by Government and other
Competent Financial Authorities from time to time.
The standards of financial propriety enunciated in para 32 of this code are the
basic rules on which all audit is conducted as regards propriety of
expenditure.

13. In the course of scrutiny of accounts and transactions of the Defence

Services, audit is entitled to make relevant queries and observations and to
call for such vouchers, statements, returns and explanation in relation to
them as it may consider necessary in the interest of proper discharge of its
duties. All queries and observations should be couched in a language which is
courteous and impersonal.

14. In auditing Defence Services Accounts, audit should not make

independent enquiries from the personnel of the Defence Services etc., as
such action would amount to an encroachment on the functions of the
administrative authorities. Audit should confine itself to calling upon the
administrative authorities to furnish any information that may be required
and in cases of difficulty it should confer with these authorities to the best
means of obtaining the information which it requires.

Audit Responsibility of Principal Controllers/Controllers

15. A Principal Controller/Controller of Defence Accounts is responsible
through the Controller General of Defence Accounts to the Secretary
(Defence/Finance) and Financial Adviser. Ministry of Defence (Finance) for the
audit of the portion of the receipts and expenditure of Defence Services that
is entrusted to him. Without the sanction of the Controller General of Defence
Accounts, he will not take up the audit of any accounts which do not fall
within the sphere of his duties of audit except the audit of Regimental Funds
of units and formations as provided in para 834 of regulations for the Army
1962 Edition.

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Audit and Scrutiny of Sanctions and Orders
16. Sanctions and orders which are applicable to Defence Services issued by
the Government of India and various Defence Organisations with the
concurrence of the Ministry of Defence (Finance) are communicated by them
direct to the Principal Controllers/Controllers of Defence Accounts. Such
sanctions should indicate that the order/memorandum/letter issues with the
concurrence of Ministry of Defence (Finance) vide their U.O. No….. Dated…….
Similar sanctions and orders issued by authorities lower than the Government
of India are communicated direct to the Principal Controllers/Controllers by
the such authorities except:
(i) Those issued by the Chief of Army Staff, whose sanctions and order are
communicated by the respective branches of Army Hqrs.
(ii) Those issued by the Chief of Naval Staff, whose sanctions and orders are
communicated by the authorities empowered to sign on his behalf.
(iii) Those issued by the Chief of Air Staff, whose sanctions and orders are
communicated by the authorities who have been delegated powers to sign on
his behalf.

Note : Sanction accorded by the Ministry of Defence in their capacity as local

Government under the CSR (vide serial No. 30 of appendix 1 to CSR) or
under the powers delegated to them by Govt. will be communicated direct to
the CGDA by the Ministry of Defence. Such sanctions will be viewed as
sanctions issued by authorities lower than the Govt. of India and will be
subjected to audit by Principal Controllers/Controllers. See para 18 below.

Copies of Government sanctions which are intended for communication to the

Principal Controllers/Controllers of Defence Accounts, who have to act upon
the sanction, will be signed in ink by the sanctioning authority. Copies
endorsed to other Principal Controllers/Controllers may bear cyclostyled
signatures. These instructions are applicable to sanctions issued with the
concurrence of financial authorities as well as those issued under the power
vested in the various competent financial and administrative authorities.
These do not apply to sanctions of a general nature including those involving
delegation of powers which may continue to be issued under cyclostyled
signatures. These are to be followed only in cases of sanctions which are in
the nature of conveying sanctions for a particular item of expenditure or for

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an appointment or regularization of loss, with a definite monetary implication
or limit.

17. The audit of Government of India sanctions is conducted by the Director

General of Audit, Defence Services. A regular audit of such sanctions will not
therefore, be carried out by the Principal Controllers/Controllers.
All Codes, regulations and standing orders issued by the Government of India
are scrutinized by the Director of Audit Defence Services and the Controller
General of Defence accounts and need no further scrutiny by Principal
Controllers/Controllers of Defence Accounts.

18. The audit of all sanctions and orders affecting Defence Services issued by
authorities lower than the Government of India, the Comptroller and Auditor
General or the Controller General of Defence Accounts devolves on Principal
Controllers/Controllers of Defence Accounts concerned and such audit must
be carried out before audit is conducted on the transactions arising from such
sanctions and orders.

Note 1: The fact that the sanctions accorded by the administrative authorities
at Armed Forces Hqrs., under the financial powers vested in them under the
rules in Financial Regulations and other rules and regulations or orders may
have been concurred in by the financial authorities at those Headquarters,
does not relieve the Principal Controllers/Controllers of their responsibility for
the audit of these sanctions as financial concurrence does not connote an
audit of the sanctions. Accordingly all sanctions accorded by the Services
Hqrs should be audited by Principal Controllers/Controllers with reference to
the orders governing the sanction even though the sanctions indicate that the
same were concurred in by the Ministry of Defence (Finance). These
sanctions not having been accorded by the Government of India are
not auditable by the Director General of Audit Defence Services.

Note 2. At the micro level, audit of sanctions by PCDAs/CDAs will be an

effective tool to carry out risk analysis of individual procurement proposals
and to provide assurance that all laid down procedures have been followed.

19. All expenditure of Public money which is not authorized by the

Regulations or other orders requires the sanction of the Govt. of India.
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Accordingly, all orders which convey sanctions either directly or indirectly to
such expenditure should be issued in the form of a Government letter or
Army/Air Force/Navy Instructions. The Principal Controllers/Controllers of
Defence Accounts should not act on any letter issued by the branches of
Armed Forces Headquarters unless appropriately issued in the form of a
Government letter or Army/Air Force/ Navy Instruction.

20. The sanctions and orders effecting financial transactions may be broadly
divided into three cases:-
(1) Rules and general orders:
(2) Grants and appropriations; and
(3) Sanctions to expenditure.

21. All such rules and orders should be scrutinized to see:-

(1) That they are consistent with the essential requirements of audit and
accounts
(2) That they do not conflict with the orders of or rules made by any higher
authority and
(3) That in case they have not been separately approved by competent
higher authority; the issuing authority possesses the necessary rule making
power.

22. In applying the first of these checks, the Principal Controllers/Controllers

should be guided by subsidiary instructions which may have been issued by
the Comptroller and Auditor General or the Controller General of Defence
Accounts from time to time.

23. In applying the second of these checks the guiding principles enunciated
below should be observed:

(i) If the sanctioning authority is vested with full powers in respect of the
particular class of expenditure sanction accorded under these powers, the
same can be challenged by audit only under the standards of financial
propriety (see para 32)

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(ii) If it is vested with powers which may be exercised, provided due regard is
paid to certain criteria which are expressed in a general form, sanctions
accorded under these powers can be challenged by audit:-
(a) If the disregard of the criteria is considered to be so serious as to make
the sanction perverse, or
(b) If the facts of the case are such as to make the audit authority confident
that one or more of the criteria have been disregarded;
(iii) If it is vested with powers which are expressed in precise terms the Audit
officer is bound to ascertain that the order defining its powers is obeyed
exactly in every instance and
(iv) In all cases, if Principal Controller/Controller has reasons to think that
undue advantage has been taken of the provisions of any rule under where
the order issued, such cases should be brought to the notice of the proper
superior authority. Cases of disregard of standards of financial propriety
should be dealt with under paragraph 33.

Audit of Sanctions to Expenditure

24. One of the important functions of audit in relation to the audit of
expenditure is to see that each item of expenditure is covered by the sanction
of the authority competent to sanction it. Here, audit has not only to see that
the expenditure is covered by a sanction either general or special, but it has
also to satisfy itself (i) that the authority sanctioning it is competent to do so
by virtue of the powers vested in it by the provisions of appropriate orders or
Regulations and (ii) that the sanction is definite and thus needs no reference
either to the sanctioning authority itself or to any higher authority.

When a sanction to expenditure received by the Audit Officer has been

examined and admitted as regular and correct, the audit of expenditure
against the audited sanction becomes a simple matter as audit has merely to
see that the expenditure conforms to the provisions of the sanction

25. In accordance with the provisions contained in Para 18 to 21 above, the

audit of all the sanctions and orders affecting Defence Services issued by
authorities lower than the Government of India; the Comptroller and Auditor
General or the Controller General of Defence Accounts devolves on
Controllers of Defence Accounts concerned and such audit must be carried

9
out before audit is conducted on the transactions arising from such sanctions
and order.
The PCDAs/CDAs should ensure that all the existing instructions for audit and
scrutiny of sanctions and orders are complied with while conducting audit of
accounts and transactions of the Defence Services. It should also be ensured
that the Audit of Sanctions is done before the payment is made.

The guiding principles for Audit of Sanctions are enumerated below-

1. The authority issuing sanction is competent to do so by virtue of the
powers to him/her, on objects specified in basic regulations/rules with
reference to scales laid down by Government.

2. The sanction is definite and thus needs no reference either to the

sanctioning authority itself or to any higher authority.

3. The monetary limit, which has been set in each case, extends to each
separate sanction. The criteria in every case is total cost of a measure
and no measure which requires the sanction of higher authority shall
be sanctioned by a lower authority in instalments by splitting, with a
view to bring the issue of such sanctions within its powers.

4. In case there is splitting of sanctions, Audit should examine as to

whether the same has resulted into financial loss to the Govt., apart
from violating the basic Delegation of Powers.

5. The terms and conditions laid down while delegating the financial
powers are fulfilled by the CFA.

6. Delegated powers are used duly giving due considerations to the

Standards of Financial Propriety.

7. The powers are properly exercised for indented purpose and advise
rendered by the IFA/FA are regarded in spirit.

8. The sanction should indicate the Head of Account against which the
expenditure is to be booked.

9. The expenditure sanctioned against locally controlled Head is being

viewed against allotment of funds made available within the budgeted
provision as approved by the Parliament.

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 10.The sanction to expenditure of a definite amount or upto a specific limit
should be expressed both in words and figures the amount of
expenditure sanctioned. The following clause appears in the sanctions:
“The sanction issues in exercise of the powers conferred on me vide Sl.
No.___of ___AI/NI/AFI/Govt. letter No. Dated __in consultation with
Internal Finance Branch vide UO/IO No. ___Dated___”. The last
sanction No. and date should be incorporated in the sanction. The
sanction should clearly mentioned and budgetary allocation, funds
exhausted till last sanction, balance of funds available.

11.The specimen signature of the CFA and the officers who are authorized
to sign the expenditure sanction involving defence expenditure on
behalf of the CFA has been verified.

12.The sanction should clearly indicate the amount of expenditure interalia

indicating whether the cost of the item is inclusive of all taxes and
duties.

13.The sanction accorded to incur expenditure during the particular year

has been acted upon during the financial year itself and should not be
acted upon during the subsequent financial year unless it is specifically
revalidated.

14.Amendments/Corrigendum should be linked with the original sanction.

26. Delinking the activity of Audit of Sanction from Payment

During the Audit of Sanctions from the point of competence of Sanctioning
Authority, the following guiding principles should be observed-

a. If the Sanctioning Authority is vested with full powers in respect of

certain classes of expenditure, the sanction accorded under such
powers should not be questioned except on grounds of propriety. When
objection is raised against a sanction on grounds of propriety, the
Accounts Office should explain to the Sanctioning Authority why the
sanction is considered open to objection. Ordinarily, the occasion for
raising objections on grounds of propriety should arise only rarely as it
is primarily the responsibility of the Sanctioning Authority to satisfy
itself on the propriety of the sanction. It is only in cases of blatant or
gross violation of accepted principles of financial propriety that
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 objections can be legitimately taken by the Accounts Office. Even in
such cases the Accounts Office should not stop the payment but
should report the matter to the CFA through the PCDA/CDA for
such action as the CFA may consider necessary.

b. The PCDA/CDA should bring to the notice of the CFA any expenditure
which does not seem to be covered by the terms of any
Rules/Regulations or any authority quoted as justification and which
has been incurred by placing upon such Rules/Regulations, an
interpretation of which may appear not to be a natural, plain or
reasonable interpretation.

c. If the Sanctioning Authority is vested with powers, which may be

exercised subject to the fulfillment of certain conditions, the sanction
can be accepted on the certification of the Sanctioning Authority that
the prescribed conditions have been fulfilled. Similarly, where the
Sanctioning Authority is vested with powers which can be exercised,
provided due regard is paid to certain criteria, sanctions accorded
under such powers cannot be challenged unless the disregard of the
criteria is considered so serious, as to make the sanction perverse. In
such cases, it is the duty of the Accounts Officer to report the matter to
the CFA through the PCDA/CDA for final decision.

d. For the purpose of financial sanctions, a group of works which forms

one project shall be considered as one work and the necessity for
obtaining the sanction of a higher CFA to a project is not avoided on
the ground that the cost of each particular work in the project does not
require such sanction.

27. It is imperative that utmost care and attention should be devoted to the
work connected with the audit of sanctions to expenditure, as once a sanction
has been accepted in audit, expenditure may have to be passed against it for
a length of time.

28. In the audit of sanctions to expenditure, the guiding principles enunciated

below should be observed in addition to the requirement mentioned in para
24:

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(i) The principles enumerated in paragraph 23 (i), (ii) & (iii) and paragraph
33 are observed.
(ii) For the purpose of financial sanction, a group of works which forms part of
one and the same project shall be considered as one work and the necessity
for obtaining the sanction of a higher authority to a project is not avoided by
reasons of the fact, that the cost of each particular work in the project is
within the powers of the lower authority. In short, a measure as a whole
requiring the sanction of the higher authority should not be sanctioned in
installments by a lower authority. This criterion would also mutatis mutandis
be applicable to expenditure sanctioned on the employment of personnel
purchase of stores etc.
Note: A preliminary enquiry survey or experiment which must necessarily
precede the preparation of any project or scheme need not be considered, for
the purpose of this rule, as forming part of that project or scheme, as a
whole.
(iii) If any one item of a scheme requires the sanction of a higher authority,
that item should not be given effect before sanction to it is obtained.

29. Except under the orders of the Principal Controller/Controller, no order

of sanctions shall be accepted in audit unless it has been received from or
through the sanctioning authority (see para 16 et. Seq). When an order
sanctioning expenditure contains no indication of the amount or limit of
sanction, the Principal Controller/Controller should address the authority
sanctioning it.

30. In order to avoid fraudulent payments on the basis of forged

Government Sanction, it will be ensured in Principal Controllers/Controllers
office that:
(i) The specimen signatures of the officers who are authorised to sign the
Government Sanctions involving Defence expenditure i.e. Desk officers, under
Secretaries, Deputy Secretaries, Directors and Joint Secretary of the Wing of
the Ministry of Defence will be verified by the PCDA, New Delhi and the
concerned PCDAs/CDAs who are required to audit and pass the claims with
reference to the said sanctions. For this purpose, in respect of each Joint
Secretary Wing of the Ministry of Defence including Department of Defence
Production and Supplies & DRDO, a Nodal officer will be nominated by the

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concerned Joint Secretary who will send specimen signatures of all officers of
the Wing i.e., Desk officers, Under Secretary, Deputy Secretaries, Directors
and Joints Secretary of that Wing who are authorised to sign the Government
Sanctions involving Defence expenditure to the PCDA, New Delhi and other
PCDAs/ CDAs who are required to audit and pass claims with reference to the
said sanctions. In case of any subsequent change in any of the incumbents in
the wing, immediate amendment to the list of specimen signatures shall also
be sent to PCDA, New Delhi and other PCDAs/CDAs concerned by the officer.
(ii) Further, a monthly list of all Government sanctions issued by each Joint
Secretary wing under the Ministry of Defence including Department of
Defence Production and Supplies & DRDO, who are authorized for incurring of
expenditure, shall be sent by the Nodal officer of each wing to PCDA, New
Delhi and other Principal Controller’s/Controller’s concerned, so that they are
precluded from accepting in audit and other sanctions stated to have been
issued by the Ministry of Defence.
(iii) The nomination of Nodal Officer and receipt of specimen signatures
through them and receipt of monthly list of all Government Sanctions will be
watched by the concerned PCDAs/CDAs.

Audit against Propriety

31. It is an essential function of audit to bring to light not only cases of clear
irregularity but also every matter which in its judgment appears to involve
improper expenditure or waste of public money or stores, even though the
accounts themselves may be in order and no obvious irregularity has
occurred. It is thus not sufficient to see that sundry rules or orders of
competent authority have been observed. It is of equal importance to see
that the broad principles of orthodox finance are borne in mind not only by
disbursing officers but also by sanctioning authorities.

32. No precise rules can be laid down for regulating the course of audit
against propriety. Every officer incurring or authorising expenditure from
public money should be guided by high standards of financial propriety. Every
officer should also enforce financial order and strict economy at every step
and see that all relevant financial Rules and Regulations are observed by its
own office and by subordinate disbursing officers. Audit officers in the
performance of their duties should ensure application of the following
principles:
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(1) Every officer is expected to exercise the same vigilance in respect of
expenditure incurred from public money as a person of ordinary prudence
would exercise in respect of expenditure of his own money.

(2) The expenditure should not be prima facie more than the occasion
demands.

(3) No authority should exercise its powers of sanctioning expenditure to pass

an order which will be directly or indirectly to its own advantage.

(4) Expenditure from public money should not be incurred for the benefit of a
particular person or section of the people, unless:-
(a) a claim for the amount could be enforced in a Court of Law, or
(b) the expenditure is in pursuance of a recognised policy or custom,

(5) The amount of allowances, granted to meet expenditure of a particular

type, should be so regulated that the allowances are not on the whole a
source of profit to the recipients.

(6) The responsibility and accountability of every authority delegated with

financial powers to procure any item or services on Government account is
total and indivisible. Government expects that the authority concerned will
have the public interest uppermost in its mind while making a procurement
decision. This responsibility is not discharged merely by the selection of the
cheapest offer but must conform to the following yardsticks of financial
propriety:
(a) Whether the offers have been invited in accordance with governing rules
and after following a fair and reasonable procedure in the prevailing
circumstances.
(b)Whether the authority is satisfied that the selected offer will adequately
meet the requirement for which it is being procured.
(c)Whether the price on offer is reasonable and consistent with the quality
required.

15
(d) Above all, whether the offer being accepted is the most appropriate one
taking all relevant factors into account and in keeping with the standards of
financial propriety.

(7) Whenever called for, the concerned authority must place on record in
precise terms, the considerations which weighed with it while taking the
procurement decision.

(8) The proper discharge of duties by an audit officer in this field is a very
delicate matter and requires much discretion and tact. A challenge against
expenditure should not be expressed as based on the above principle of
financial propriety but as transgressing an universally accepted standards of
official conduct or financial administration.
Note: The provisions contained in the first sentence of para (6) mentioned
above will not apply to Department of supply, where special purchase
procedure exists.

33. When the Principal Controller/Controller considers that any rule or

order has infringed any one of the canons of financial propriety, he should
convey his opinion to the administrative authority concerned for such action
as that authority may think fit to take and request it to intimate in due course
the action taken by it. Thereafter, if he considers it necessary he may report
to the next higher authority. While addressing correspondence to Service
Headquarters or the Government of India, the provisions of para 7 et. Seq.
should be kept in mind.

Extent of Audit of Expenditure

34. The extent to which the various classes of bills and accounts will be
audited is shown in the Annexure to this chapter. The quantum of audit may
however, be suitably increased under the personal orders of the Principal
Controller/Controller to the extent he may order at his discretion, where the
state of accounts is unsatisfactory and warrants more detailed audit. Bills and
accounts not enumerated in that annexure will be audited in full. The extent
of audit in respect of Stores and Public Fund Accounts is prescribed in the
‘Army Local Audit Manual Part I (Volume I, II & III) and II, NLAO’S Manual
and Air Force Local Audit Manual. The extent of audit in respect of MES

16
Accounts is prescribed in the MES Accounts Manual and the MES Local Audit
Manual.

If a Principal Controller/Controller desires to relax audit temporarily in a

matter which concerns his own office or his subordinate offices, he should
invariably refer the cases to CGDA for obtaining prior concurrence.

Audit of Expenditure
35. The audit of all expenditure debitable to Defence Services estimates is
conducted by the Principal Controllers/Controllers of Defence Accounts either
centrally in their own offices or locally through the agency of the Local Audit
Officers.
The detailed instructions with regard to the Local Audit and inspection
of Stores and Public Fund Accounts, etc, by the Local Audit Officers are
contained in the Army Local Audit Manual Parts I(Volume I ,II & III) and II,
NLAO’s Manual and Air Force Local Audit Manual.

36. The pay accounts of the service personnel of the Defence Services are
maintained on IRLAs, which are subjected to review/post audit as the case
may be. The procedure for the maintenance and review/post-audit of IRLAs is
described in the respective chapters of this code.
The system of maintaining the pay accounts of Civilians is different
from that of service personnel. In the case of the former, the gazetted
officers have the option to draw their salaries either in cash or by cheque.
Options of all the officers should be obtained in March every year. The option
once exercised in March holds good for the entire financial year and no
change during the course of the year is allowed. In cases where the officers
wished to be paid in cash, the heads of offices draw their salaries through
consolidated paybills and render monthly to PCDA/CDA concerned for pre-
audit and payment. While those who opt to draw their salaries by cheques
prefer their paybills themselves monthly to the PCDA/CDA concerned for pre-
audit and payment. The paybills of non-gazetted establishment are prepared
by the Heads of Offices and rendered monthly to the PCDA/CDA concerned
for pre-audit and payment.
On the Air Force side, however, the pay accounts of civilians (except
non industrial civilian employees) are maintained by the administrative

17
authority on IRLAs like those of service personnel and subjected to post-audit
by the DAD.
The procedure for the audit of pay bills of civilian officers and
establishment will be found in the relevant chapters of this code.
Industrial personnel of Ordnance Depots, EME Workshops, Military Farms,
MES etc. are paid by administrative authorities on check rolls/industrial
personnel bills subject to post-audit by Local Audit Officers/Regional Audit
Officers (MES).
In certain exceptional cases such as Hospitals, Supply Depots,
Miscellaneous formations, however, the pay and allowances of industrial
personnel are also claimed and disbursed in the same manner as non-
industrial personnel.
The pay bills of non industrial personnel are drawn by the Head of
Office and are pre-audited by the PCDA/CDA. On the Air Force side, payments
to non industrial civilian employees are made, out of public fund accounts, on
acquittance rolls-cum-pay bills and are post audited by the PCDA(AF).
The industrial personnel of the Navy are paid in the following manner:
(a) Pay accounts are maintained by the wages section of the PCDA
(Navy) in parts I & II of the Register of Wages (NSO 340 and NSO 341) in
respect of those under the administrative control of the Admiral
Superintendent, Naval Dockyard, Mumbai.
(b) In respect of industrial personnel of I.N. Establishments in Mumbai
other than (a) above and also INS ‘Shivaji’, pay bills are prepared by the
Officer Commanding concerned and are pre-audited by the PCDA (N).
(c) In respect of industrial personnel of I.N. Establishments located
outside Mumbai pay bills/muster rolls are prepared by the Heads of
Establishments, which after payment from the cash assignment are subjected
to post-audit by PCDA (N).

Unit allowances and miscellaneous personal claims are normally pre-

audited by the Principal Controllers/Controllers. However, in some cases,
administrative authorities have been empowered to pay certain types of
miscellaneous charges and claims from the Imprest subject to post-audit by
the Principal Controllers/Controllers. Lists of such items are given in the
'Pamphlet of Recognized claims'.

18
 Similarly, cash assignments at civil treasuries or the branches of State
Bank and/or its subsidiaries are placed at the disposal of certain
administrative and executive officers (such as Officers Commanding Remount
Depots; Commandant ‘EQUINE’ Breeding Studs and Area Remount Officers;
Deputy Director Military Farms; Recruiting Officers and Assistant Recruiting
Officers for Gorkhas; Garrison Engineers etc) for meeting expenditure on
special purposes vide rules in Financial and other Regulations. All such
payments are subject to post-audit by Principal Controllers/Controllers.
Except where payment of specified items of expenditure is specifically
authorized under rules to be made by officers of the Defence Services subject
to post audit, all payments are made by Principal Controllers/Controllers of
Defence Accounts after pre-audit on submission of bills, claims etc, by the
parties concerned. These payments may be made either to the parties direct
in Bank Account, or credited in the IRLAs or the disbursing officers may be
authorised to disburse the amounts through Cash Accounts, imprests, etc.

Note 1: In urgent cases wherein the opinion of Principal

Controllers/Controllers such a course is necessary to avoid delay in payment,
they may at their discretion authorize the payment without pre audit, of
claims which are normally required to be pre audited. All such payments will
be subjected to post audit subsequently.
Note 2: Establishment bills of the office of all PCDAs/CDAs are audited by
PCDA (P). The bills are paid by the PCDA/CDA to whose establishment they
pertain, after preliminary scrutiny, and post audited by PCDA (P). However,
establishment bills of PCDA (P) are post-audited by CDA, Patna. Other bills
pertaining to Principal Controllers/Controllers offices are also similarly post-
audited.

Main objects of Audit of expenditure

37. The main object of audit of expenditure is to ensure:
(a) That there is a provision of funds for the expenditure duly authorised by
competent authority;
(b) That the expenditure is in accordance with a sanction properly accorded
and is incurred by an officer competent to incur it;
(c) That the claims are made in accordance with rules and in proper form;

19
(d) That all prescribed preliminaries to expenditure are observed, such as
proper estimates framed and approved by competent authority for works
expenditure, a health certificate obtained where necessary before
disbursement of pay to a government servant etc;
(e) That the expenditure sanctioned for a limited period is not admitted in
audit beyond that period without further sanction;
(f) That payment is made to the proper person and that it is so acknowledged
and recorded that a second claim against Government on the same account is
impossible:
(g) That the charge is correctly classified and that if a charge is debitable to
the personal account of a contractor employee or other individual or is
recoverable from him under any rule or order, it is recorded as such in a
prescribed account and the recovery is watched;
(h) In cases of purchase of stores, that they have been accounted for in the
prescribed store accounts and that the rates are the same as contracted for
or are certified as correct by proper authority;
(i) In respect of bills of contractors of the Military Engineer Services, that the
terms of the contract or other agreement have been adhered to;
(j) That rates entered in the bills for transport for the movement of troops
and stores, when such transport is not provided for by the Army Service
Corps, agree with the contract or tariff rates and that the warrants, credit
notes or passage orders have been signed by the officer authorized to sign
them and that they have been properly issued under the rules, and
(k) That the expenditure does not involve a breach of any of the standards of
financial propriety (see paragraph 32 and 33).

38. Recurring charges which are payable on the fulfillment of certain

conditions or until the occurrence of a certain event should be admitted in
audit on receipt of a certificate from the officer concerned to the effect that
the necessary conditions have been duly fulfilled or the event has not yet
occurred, as the case may be.

39. Whilst it is desirable that auditors and others employed on audit duties
should not be at liberty to make any relaxations in audit of their own notion,
it is of considerable importance that the prescribed checks should be
observed in spirit and not in letter as opposed to the spirit.

20
40. It is irregular to continue making payments in contravention of definite
Govt. orders - It should be ensured:
(i) That where Government orders sanctioning pay and allowances definitely
relate to a specific class of personnel, only such personnel should be admitted
the authorized pay and allowances and the concession should on no account
be extended to other classes merely on the basis of an analogy or a view to
avoiding an anomaly;
(ii) That where it is considered that the orders regarding a certain element of
pay are allegedly incorrect or involve contradiction in their application in that
other elements are treated differently, orders should be given effect to as
they stand and on no account should payment be made beyond the scope of
such orders: and
(iii) That if a reference is made to higher authorities for clarification, etc., vide
item (ii) above, the correct course is to act according to the orders as they
stand, pending a decision and not according to the opinion held in the
Principal Controller's/Controller’s office nor to make any payments in
anticipation of a favorable decision on the reference.

Provisional Payments
41. Payments made in exceptional circumstances in anticipation of the
receipt of the sanction of the appropriate authority or of additional allotments
of funds to cover the expenditure are known as 'Provisional Payments'.

42. Cases may arise where sanction of the appropriate authority exists and
funds are available, yet a final payment cannot be made to the parties
concerned whether Government employees or third parties, on account of
lack of documentation or lack of time for verification of the particulars or for
the completion of necessary audit requirements.
In such cases, the amount which is clearly payable may be paid to the
parties after satisfying, that no overpayment or breach of rules would be
involved thereby. The payments so made are also to be treated as
‘provisional payments'.
Note: The finalization of all provisional payments will be watched
through the medium of a register and cases where such payments remain
unadjusted or not finalized for long periods should be brought to notice of

21
higher administrative authorities for immediate action. The register will be
subject to review by PCDA /CDA /Addl. CDA/Jt. CDA, in the same manner as
registers subsidiary to the “Review of Balances".

43. Provisional payments will be made only under the personal order and
discretion of the Principal Controller/Controller of Defence Accounts, who,
before authorizing such payments will satisfy himself with a due sense of his
own responsibility that his authorization is justifiable. The Principal
Controller/Controller of Defence Accounts may at his discretion, delegates the
powers to make provisional payments to Additional Controller/Joint Controller
and/or IDAS Officers functioning as Group Officers, on the clear
understanding that this will not absolve the PCDA /CDA of the ultimate
responsibility for the provisional payment.
Similarly, the Principal Controller of Accounts (Factories) may also at
his discretion, delegate the powers to authorize provisional payments of local
purchase bills, when requested by the General Manager of Ordnance
Factories, Chief Quality Assurance Officer, Chief Quality
Assurance Establishment, Directors of R & D Establishments and Officer
incharge holding independent charge of Branch Accounts Offices.

44. Principal Controllers/Controllers will not authorize any provisional

payments where there is no authority. Cases of lack of powers or lack of
authority should be dealt with in the normal manner by the administrative
authorities. Only when some clear evidence is available, that the necessity for
the expenditure has been accepted and that the sanction, of the appropriate
authority has either actually been accorded or will be forth coming, the
Principal Controllers/Controllers will use their discretion in the timing of the
payment to avoid hardship. In the matter of pay and allowances of persons
who are kept on in service or in a particular establishment beyond the date of
expiry of the sanction, greater latitude may be shown by the Principal
Controllers/Controllers on the merit of each case.

45. In cases of lack of budget provision, if there is evidence that some

action has been taken for obtaining additional allotments the Principal
Controllers/Controllers may use their discretion for the release of amounts to
the parties concerned where third parties are involved e.g. Contractors and
there is a definite legal liability to pay. Payment should not ordinarily be

22
withheld, but each case should be decided on its merits and on the strength
of the legal aspects of the claim; legal advisers being consulted in doubtful
cases.

46. In no circumstances will a provisional payment be made on an

undertaking by the individual concerned, that he will refund the amount if
required to do so, should however, an LPC of an individual transferred from
another establishment not be forthcoming, the Audit Officer may, on being
furnished by the individual concerned with a certificate stating the date up to
which he was last paid the rates of his pay and allowances and the demands
outstanding against him, authorize pay being disbursed and provisionally
admitted, pending the receipt of LPC. Such payments will not be continued
indefinitely.

47. In some isolated cases specific directions are given by the Defence
Ministry (or by branches at Services Headquarters with the concurrence of
Ministry of Defence (Finance), when the Defence Ministry has empowered
them to sanction the expenditure) calling on the Principal
Controllers/Controllers to make a payment which from the direction cannot be
regarded as final. In such cases the ultimate responsibility for watching the
final adjustment and the settlement of payments rests with the Ministry of
Defence or the branches at Services Headquarters. The finalization of these
payments will also be watched through the register mentioned in the note
under para 42 in the manner indicated therein.

48. PROMPT PAYMENT OF THIRD PARTY BILLS

The directives given below intends to do away with casual observations
leading to delay in passing of bills or returning the bills repeatedly-
i. Contracts/Supply Orders are the basis on which procurements
are effected, goods/services are supplied/rendered and payments are made
to the concerned Contractors/Suppliers. It is imperative for the Controller
Offices to understand the contractual/legal obligation towards payments of
contractors and suppliers bills once goods/services have been satisfactorily
received/rendered under the given Contract/Supply Order.
ii. Payments are made by the various PCDA/CDA offices against the
bills raised with respect to the accomplished milestones/delivery terms laid

23
down in various provisions/clauses of the Contract/Supply Order to pass
these bills for payment. PCDA/CDA offices are to ensure that:
a. All the documents specified in the Contract/Supply Order are received
along with the bill.

b. Budget is available against the specified Code Head.

c. There is no violation of the terms and conditions laid down in the

Contract/Supply Order.

d. There is no violation of the terms and conditions laid down in the Rules
and Regulations enshrined in Codes/Manuals/Instructions issued from
time to time by various authorities, Ministry of Finance, CVC etc.

Audit of Bills and Vouchers

49. The detailed audit of bills and vouchers is conducted to see;
(a) That the bills and vouchers are in the prescribed form and original;
(b) That they are duly receipted by payees and a brief abstract is given
in English under the signature of the drawing officer on all purely vernacular
vouchers and that vernacular signatures are transliterated (signature in Hindi
and in case of State Govts signature in other authorized regional languages
need not however be transliterated), also that the sub vouchers contain notes
of dates of payment;
(c) That the details work up to the total and the totals are in words as
well as in figures;
(d) That there are no erasures and that any alterations in the totals are
attested by the officer concerned as many times as they are made;
(e) That no voucher or order has been signed by the subordinate ‘for'
an officer;
(f) That the bills are signed in ink and no bill or voucher signed with a
stamp being accepted;
Note: Bills affixed with facsimile signature of the authorized officer
presented by the posts and telegraphs department for by the
Municipalities & Corporations for water and electricity charges and by the Air
India international on account of their dues against government (for passage
fares, cargo and excess luggage charges forming sub vouchers of the
contingent bills) may be accepted for payment, if otherwise in order.

24
 (g) That copies of sanctions are certified by the sanctioning officer or
by a gazetted officer authorized to sign for him;
Note 1: In case charges for which special sanction is necessary under rule,
no separate sanction need be insisted on if the bill or voucher is
countersigned by the authority competent to sanction the expenditure. This
does not apply to the case of temporary establishments, the sanction of
which should always be called for and noted in the Audit Register.
Note 2: The term ‘voucher’ should be taken to include’ sub voucher’ for all
purposes of audit.
(h) That stamps are affixed to all vouchers for sums in excess of Rs.
5000 if necessary, the stamps being punched or otherwise defaced at the
time of audit;
(i) In all cases in which it is prescribed that agreement should be
effected between two different documents, the fact of the agreement should
be noted on both the documents and initialed by the auditor, who makes the
agreement;
(j) The fund and income tax deductions have been correctly made;
(k) That claims preferred after 24 months are not proceeded with or
without the sanction of the competent authority as prescribed in Financial
Regulations;
(l) Necessary entries should be made in the prescribed. Audit Registers
and in cases where audit is conducted with reference to previous bills, the
bills should be linked together with notes being made in each, under the
auditor’s initials. A suitable entry should prominently be made in the last
charge, regarding the fact of payment of the next charge, indicating also the
No. and date of the voucher (as given by the unit), the amount involved and
the month to which the charge pertains under the initials of the auditor and
the AAO.

50. A register of bills will be maintained in each section to watch the

prompt disposal of all bills received for payment.

51. All bills paid must be stamped 'paid' and the date of payment must be
given, it must be noted on them whether they are paid in cash or cheque, the
date of the cheque in the case of individual cheques and the no. and date of
cheque in the case of, omnibus cheques being quoted. They must further

25
bear the pay order of the disbursing officer and the amount paid must agree
with the amount passed. Ordinarily no payment will be made in excess of the
actual amount claimed in a bill. Arithmetical inaccuracies and obvious
mistakes in a pay bill may, however be corrected, in the case of officers' pay
bills where it is quite clear that excess credits have been afforded in a pay bill
on account of public claims (eg. Income tax fund subscriptions etc.) against
an officer or that an officer has inadvertently under claimed an amount
clearly authorized and due to him. Details of amendment should be
communicated to the claimant. Before any such alterations in a pay bill can
be made, the specific orders by the Officer in Charge of the audit section
concerned must be obtained.
It is not, however, permissible to enhance the amount due to an officer
on his pay bill by addition of any form of pay and allowances to which he is
eligible only in certain specified circumstances and on the fulfillment of
certain definite conditions.

52 . Audit of Bills while claiming payment

While auditing bills for payment, for any supplies made or services
rendered, depending upon the nature of procurement and the terms and
conditions of a particular supply order/contract, the essential documents that are
required for audit and payment are as follows:
(a) Documents to be Submitted to the Audit Authority Along With
Advance Copy of the Supply Order/Contract:

i) Ink singed copy of the Supply Order/Contract Agreement/Accepted

Tender (AT) Note
ii) An ink-signed copy of sanction of the CFA indicating UO Number
and date of IFA’s concurrence, where applicable
iii) A copy of the techno-commercial evaluation and rejection details, if
any, in case of two bid system
iv) A copy of the Comparative Statement of Tenders (CST) with price
bids
v) A copy of TPC/PNC proceedings, if held
vi) PAC certificate/OEM’s Certificate/ any other certificate that may be
peculiar to the procurement
vii) Specimen signatures of sanctioning and countersigning authorities
viii) VAT/CST/Service Tax Registration No./PAN No.

Note:
1. The budget allotment letter(s) conveying allocation of funds under the
concerned code-heads of expenditure are required to be sent as and when
the allocations are made.

26
2. In case documents listed above are not sent in advance to the audit authority,
they may be called for by such authority at the time of payment of bills/post
audit, where applicable.

(b) Documents to be submitted to Paying Authority for payment along with

the Bill

(i) An ink-singed copy of the Contingent Bill/Seller’s Bill

(ii) An ink-signed copy of the Commercial Invoice 70
iii) A copy of the Supply Order with UO No. and date of IFA’s
concurrence, where required under delegation of financial powers
iv) CRVs in duplicate
v) Inspection note
vi) Relevant documents/proof of payment in support of the claim for
statutory and other levies, such as Excise duty challan, Customs
duty clearance certificate, Octroi receipt, proof of payment for EPF /
ESIC contribution with nominal roll of beneficiaries, etc., as
applicable
vii) Exemption certificate for Excise Duty/Customs Duty, if applicable
viii) Bank Guarantee for advance, if any
ix) Guarantee/Warranty Certificate
x) Performance Bank Guarantee/Indemnity Bond, where applicable
xi) DP extension letter with CFA’s sanction, UO No. and date of IFA’s
concurrence, where required, indicating whether extension is with or
without LD
xii) Details for electronic payment as per mandate form given in Form
DPM-11, if these details are not incorporated in the Supply
Order/Contract or in case there is a change in these details
xiii) User acceptance
xiv) Any other document/certificate that may be provided for in the
supply order/contract.

[Note: Depending upon the peculiarities of the procurement being undertaken,

documents may be selected from the list given above and specified in the
RFP and supply order/contract.]

It is pertinent to mention that the provisions of Para 18 of this Code are not in line
with the provisions of Para 7.8.4 of DPM 2009 mentioned above, since it makes a
distinction between audit of sanction and payment of bill as two distinct activities.
However, payment is to be made only when all the documents have been received.
This implies that these two activities need not be carried out in a sequential
manner. Hence, as per Para 4.4.3 (a) of Civil Accounts Manual incorporated under
Para 24 of this Code, under the above circumstances, the Accounts Officer should
avoid delay in payment of third party bills, as mentioned at Para 48 of this Code.
However, he should report the matter to the CFA through his PCDA/CDA for such
action as the CFA may consider necessary.

27
Specimen signature
53. Before admitting a claim, an audit officer must satisfy himself that the
signature it bears is genuine. To enable him to do so he will obtain a
specimen copy of the signature of every officer who is required to prefer his
own pay bill or that of the establishment serving under him; or who is eligible
to render claims to the PCDA/CDA; or who is authorized to sign requisitions
for cash or to hold and render imprest, cash, public fund etc., accounts; or
who is authorized to countersign or certify the various claims, accounts, etc.
The specimen copy of signature will be recorded in the personal file of the
officer or other relevant file/register.

Amendment and interpretation of rules

54. The following procedure should be observed by a Principal
Controller/Controller when he is of opinion that an amendment to a rule in an
authorized code etc, is required or that necessity exists for the authoritative
interpretation of a rule
(1) When any defective rule comes to the notice of a Principal
Controller/Controller in the course of his audit duties he will first see whether
the rule as it stands admits of a definite audit decision being given one way
or another. If so, he will ordinarily decide the audit point according to the rule
as it stands. Then and in all other cases, he should refer the matter to the
Controller General of Defence Accounts.
(2) However, when the expenditure involved is of real material importance
the Principal Controller/Controller may consider it desirable to defer an audit
ruling, until the points of doubt have been settled or again the rule may be so
questionable in itself, or with reference to a discrepant instruction elsewhere
in the codes or regulations, that the Principal Controller/Controller may feel
himself unable to give a satisfactory audit ruling one way or the other on the
regulation as they stand. In all such cases, the question should be referred to
the Controller General of Defence Accounts, if the point in doubt has formed
the subject of correspondence between the Principal Controller/Controller and
a General Officer Commanding in Chief or a General Officer Commanding or
the Head of a Department (or corresponding authorities in the case of Navy
and the Air Force), a copy of the letter containing the views of the letter
should accompany the reference.

28
Note 1: Any recommendation by an administrative authority for exceptional
treatment, outside the rule, should be addressed to the higher administrative
authority concerned, through the Principal Controller/Controller, and not to
the Principal Controller/Controller.
Note 2: In making references to the CGDA the provisions of para7 and 8 et.
Seq should be kept in mind.

Financial Advice
55. In addition to their normal functions of internal audit of Defence
Services receipts and expenditure , the Principal Controllers/Controllers of
Defence Accounts act as agents or representatives of the Secretary
(Defence/Finance)/Financial Adviser, Defence Services on the spot. In this
capacity they have to consider and put forward proposals, on their own
initiative, for reduction of Defence Expenditure whenever such reduction
appears practicable. For instance, if the circumstances under which a
concession or an allowance which has been granted and needs a change
subsequently and warrants modification or withdrawal of the concession or if
the working of a rule or a system leads to abuse or extravagance, the
Principal Controllers/Controllers should report the matter to the CGDA who
will, if deemed fit, bring the matter to the notice of Ministry of Defence
(Finance).

56. The Regional Principal Controllers/Controllers are ex officio financial

advisers to the General Officers Commanding in Chief of Commands as well
as to the area and Independent Sub Area Commanders in their respective
audit areas in respect of the expenditure sanctioned by them. Similarly, the
PCDA (Air Force) acts as Financial Adviser to the Air Officer Commanding
Western/Eastern/Central/South West Air Commands I.A.F. and
Maintenance/Training Command IAF and the PCDA (Navy) to the Flag Officers
Commanding in Chief Western Naval Command, Mumbai; Eastern Naval
Command Vishakhapatnam; Commodore Commanding Southern Naval Area,
Cochin and Admiral Superintendent Naval Dockyard, Bombay. With the
delegation of powers to the Executive authorities at Command and lower
level, the IFAs are responsible for rendering financial advice on procurement
proposals received from the executive authorities.

29
57. Advice rendered to the above authorities in matter of Internal audit can
be divided into the following Categories (i) Advice on Internal Audit matters
referred to Principal Controllers/Controllers (ii) Advice as the result of
investigations into facts which are normally accepted on the statement of
Commanding and Administrative officers (iii) Advice which consists of
advising the Administration on any method by which equal efficiency can be
obtained with less expenditure. Audit will not only see that the authority for
expenditure is quoted but will also on legitimate occasions investigate the
necessity for it. It will examine whether the individual items were in
furtherance of the scheme for which the budget was provided and whether
the same results could have been obtained otherwise with greater economy;
whether the rate and scale were justified in the circumstances, in fact they
will ask every question that might be expected from an intelligent tax payer
bent on getting the best value for his money. For this purpose comparison of
expenditure of cash and certain important kinds of stores selected in each
unit will be necessary in respect of
(1) The same unit at different quarters of the year.
(2) Units of same type during a particular period. Investigations for
rendering advice on audit matters will cover the whole field of Defence
Expenditure, but particular attention will be paid to those items where
extravagance is more likely e.g. hospitals by comparison between the cost of
diets, etc, the railing or back railing of stores, use of Government transport,
the cost of MES maintenance and repairs, working of contracts; both ASC and
MES. (Principal Controllers/Controllers) should keep under constant review,
various fields of Defence Expenditure in order to suggest to the administrative
authorities ways and means of avoiding extravagance and achieving economy
especially in view of the rising Defence Expenditure. The result of Principal
Controller's/Controller's investigation on all individual points of higher audit
and the conclusions derived thereon, will be presented to the Local Military
authorities concerned, if it is so considered that the results justify such a
course. No item of audit advice will, however be pressed without the full
knowledge of the Command or Area staff with whom the proposition should
have been fully discussed. Principal Controllers/Controllers should
prominently bring to the notice of the CGDA, cases in which suggestions
made by them could not be implemented due to the unhelpful attitude of the
local administrative authorities or their disinclination to take up the matter

30
with their administrative authorities at Defence Headquarters. While reporting
such cases it should be ensured, that a self contained report giving full details
of the audit advice rendered by the PCDA/CDA and the views of the
administrative authorities are also submitted to the CGDA.
PCDA/CDA will also watch the manner in which the Executive officers
are undertaking their financial responsibilities, while auditing Sanctions,
Supply Orders and Bills received from the Defence Units /Establishments.
Note 1: Principal Controllers/Controllers should in particular examine whether
the stocks of defence stores, which are being declared surplus to the disposal
organization can be utilised with regard to demands/indents, without
incurring charges on repairs/ lowering of specifications, if necessary. On
completion of the investigations, Principal Controllers/Controllers should send
to the CGDA any suggestions, which they may come across and which, if
implemented, would check extravagance, secure economy and lead to
savings either directly in cash expenditure or indirectly in the utilization of
stores. This will enable the CGDA to take up these matters with the
administrative and financial authorities at Defence Headquarters.
Note 2: Points of higher audit raised during the scrutiny of contracts need to
be included in the report rendered to the CGDA.

58. If Principal Controllers/Controllers feel that the intervention of the

financial or administrative authorities at Defence headquarters on internal
audit matters is necessary in a specific case or when a question of policy is
involved, they may refer such cases to the Controller General of Defence
Accounts. Such references should be made with the personal cognisance and
recommendations of the Principal Controller/Controller.

59. To ensure that advice of the nature mentioned in para 57 above is carried
out systematically, a special section called the "Internal Audit Section" exists
in Principal Controller's/Controller’s Office. IA Section will advise on specific
questions of internal audit referred to Principal Controllers/Controllers by the
administrative authorities. This work will be dealt with by the audit sections
concerned, invoking the assistance of the 'Internal Audit Section' in cases of
special importance. The "Internal Audit Section” will be fed by the audit
sections and by the Local/Regional Audit Officers who will refer to it, such
useful points which have come to notice during regular audit and which

31
merit investigation . Another source of advice on audit matters will be found
in the tour notes of the Principal Controller/Controller and other officers.

60. No objection should ever be issued by the 'Internal Audit' Section nor
should they enter into any correspondence with Officers Commanding and
others. All necessary enquiries must be made in writing from the audit
sections and LAOs/RAOs. Principal Controllers/Controllers will ensure that the
visits paid to units and formations for rendering advice on audit matter are in
addition to the regular audit carried out by LAOs/RAOs.

61. The work conducted in audit sections of a PCDA/CDA’s office, and by

the local audit staff shall be the subject of continuous examination and review
by Principal Controllers/Controllers. They should promptly submit for the
CGDA’s consideration, schemes of audit of cash and store expenditure, which
in their opinion, will result in the reduction in the cost of audit, in further
simplification of work and in greater efficiency.

62. The CGDA should be kept fully informed of the result of and freely
consulted in regard to important investigations, in connection with financial
advice.

63. Methodology of Internal Audit at the level of PCDA/CDA

The Principal Controllers of Defence Accounts/Controllers functioning under
the administrative and functional control of the CGDA are responsible for
internal audit. A PCDA/CDA is responsible for the audit of the portion of
receipts and expenditure accounted for by him in other words, of transactions
originating in the units/formations under his jurisdiction.

64 - The audit activities are carried out on ‘concurrent basis’ at two levels
a0s below:
(i) In the main office of a PCDA/CDA (including at Area Accounts offices) –
audit work related to sanctions issued by the lower formations below MOD
and transactions arising out of such sanctions are carried out and
(ii) At the second level – audit of stores and cash accounts maintained by the
Defence Services are done through LAOs/RAOs including audit of service
books of civilians, check rolls in respect of Industrial Personnel employed in
Depots etc. For this purpose, a number of LAOs or Assistant Local Audit
Officers (ALAOs) have been co-located at stations/areas within the audit
jurisdiction of a PCDA/CDA with clear cut delineation of units and formations
32
to be covered. In addition, dedicated LAOs/ALAOs for major store depots
have also been provided. Similarly for audit of works expenditure, Regional
Audit Officers have been provided.

65. Need to draw Charter for Internal Audit in DAD, which would serve the
purpose of mandate, guidelines and methodology for audit and reporting
standards in the Department.

The Internal Audit process comprises five main phases:

(i) Planning the audit engagement
(ii) Preparing for audit
(iii) Performing the audit engagement
(iv) Reporting upon the audit engagement and
(v) Follow up action

66. The Audit Plan should be finalized and circulated by December month
of the previous financial year. The PCDA /CDA should identify the Risk areas
to be audited for that year in the LAO’s conference which should be scheduled
before the finalization of Annual Audit Plan.

33
 ANNEXURE
(Referred to in para 34)
Extent of Audit of Expenditure

Sl. Account/Document to be Scope of Audit

No. audited
1.Pay (a) Service Personnel
Account
(i) Army officers (i) 10% check on (1)
Entitlements and (2)
disbursements

(ii) Army JCOs, other ranks (ii) 25% of IRLAs and

etc. connected documents

(iii) Naval Personnel (iii) Authorization Ledgers -

cent percent.
Disbursement ledgers
331/3% but in respect of check
of debit entries in the IRLAs
from acquittance rolls etc, the
percentage will be 162/3%
(iv) Air force personnel (iv) 331/3% of IRLAs and
connected documents

(b) Civilian Personnel

(i) Civil (other than non (i) 331/3% of IRLAs and
Industrial Group D staff except of connected documents
Air HQrs)of Air Force

(ii) All other civilians (ii) In Full

(a) Pension bills of U.K. (a) to be audited in full monthly

2. Pension Pensioners
Bills
(b) Pension bills of other
pensioners

(i) Payments to pensioners other (1) 162/3% i.e. month's in

than Indian Military pensioners
every six months, the other five
(1) Monthly payments
month's payments not to be
examined

34
(2) Change statements (2) In full

(ii) Payments to Indian Military

pensioners

(1) Quarterly payments (1) One quarter's payments in

every four quarters or once a
year to be audited in full

(2) Monthly payments (2) One month's payments in

every twelve months or once
year to be audited in full

(3) Change statements (3) In full

(4) Surprise audit (4) In addition to the normal

audited reference to above a
surprise audit of one month's
accounts in respect of certain
post offices and treasuries
(selected arbitrarily) will be
carried out during the year.

Note Payment made at The accounts of the subsequent

treasuries of the states of months should be examined in
Rajasthan, Jammu and Kashmir
and erstwhile State of Hyderabad order to pick out and audit the
are subjected to cent per cent payment for a particular month
audit.
that should have been made in
(a) Post audit of pay bills of the accounts which were
officers (including supplementary
pay bills) selected for audit but appeared
in subsequent accounts.

(b) Post audit of non-gazetted 81/3 % pay (i.e. one month's

establishment pay bills.
bills including supplementary
(c) Post audit of travelling pay bills in a period of 12
allowance bills of officers and
establishment of the Defence months)
Accounts Department. These orders will be effected
from 1.8.77

35
3. Post (1) Bills for less than Rs.100/- (1)1/4 or 25% of the bills
audit of and over
received during each month (to
bills
pertaining be selected by the AAO) should
to Defence
be audited in full, the remaining
Accounts
Department bills will be subjected to a
general scrutiny.

(2) Bills for less than Rs.100/- (2) All the bills received during
each month will be subjected to
a general scrutiny.

(d) Post audit of contingent bills

pertaining to Defence Accounts
Department

(1) Bills for Rs.100/-and over (1) In full

received during each month

(2) Bills for less than Rs. 100/- (2) 1/6th or 162/3% of the total
bills received during each
month should be audited in full,
the remaining bills should be
passed after general scrutiny as
to the correctness e.g.
propriety of the charges
reasonableness of price etc.

(e) Post audit bills on accounts of

cost of medical attendance and
treatment Defence Accounts
Personnel

(1) Bills pertaining to personnel (1) 1/6th of the bills paid each
below SOs(A) (permanent
temporary or officiating) month to be audited in full, and
the rest scrutinised generally to
see that the rules on the
subject have been observed.

(2) 100%
(2) All other bills

36
4. Railway (a) Railway warrants: General scrutiny selected at
vouchers (including flat rated Vouchers)
random by officer - in- charge
Warrants (i) up to Rs. 2000/-
Credit section
notes and
concession
vouchers
30%
(ii) Vouchers of Rs. 2001/- to
5000/-
100%
(iii) Vouchers of Rs. 5001/- and
above

(b) Military credit Notes General scrutiny selected at

random by officer - in- charge
(i) up to - 500
section

(ii) Vouchers of Rs. 501/- to 10%

2000/-

(iii) Vouchers of Rs. 2001/- to 25%

3000/-

(iv) Vouchers above Rs. 3000/- 100%

(c) Concession vouchers:

Form ' D'

(i) up to Rs. 2000/- General scrutiny selected at

random by officer - in- charge
section

(ii) Vouchers of Rs. 2001/- to 30%

5000/-

(iii) Vouchers of Rs. 5001/- and 100%

above

5. Ship “Cost plus profit” basis ship 331/3%

Repair repair claims of M/s Mazagon
Claims Docks Ltd. Mumbai.

Note 1: The selection of railways warrants Military credit notes and

concession vouchers for general scrutiny is not subject to any prescribed
percentage. The vouchers for general scrutiny shall be selected at random by
the officer in charge section concerned.

37
Note 2: The scope and extent of audit of these vouchers will be operative for
a period of three years from 01.04.99 (i.e up to 31.03.02) after which the
same would be reviewed, if necessary (C.S. No. 07/99)

38
 CHAPTER 3
AUDIT AGAINST PROVISION OF FUNDS

Para
General 67
Appropriation audit 73

General
67. The procedure relating to the preparation of the budget estimates,
appropriation and re-appropriation of funds and budget matters generally is
laid down in Financial Regulations, Defence Accounts Code and other financial
rules issued by the Ministry of Defence (Finance)

68. After the 'Demands for Grants' have been voted by the Parliament, a
bill is introduced to provide for the appropriation out of the Consolidated Fund
of India for all moneys required to meet those grants. No money can be
withdrawn from the consolidated fund until this bill is passed. The bill when
passed becomes the Appropriation Act.

69. Each grant authorized in the Appropriation Act is intended to cover all
the charges including the liabilities of past years to be paid during a financial
year or to be adjusted in the accounts of that year. It is operative until the
close of that year. Any unspent balance at the end of the year lapses and is
not available for utilization in the following year.
Note: The financial year closes on 3lst March. After that date all actual
transactions are treated as pertaining to the following year but for bonafide
transfer entries or book adjustments of transactions pertaining to the
accounts of the year closed which are permissible or may be made for some
months after 31st March until the accounts for the year are finally closed. See
also note below para 29, Defence Accounts Code Edn- 2014.

70. No appropriation is needed in respect of recoveries of expenditure which

are treated as receipts, both initially and finally, and are not required by any
rule in an authorized account code to be taken in reduction of charges against
grants for expenditure.

39
71. Separate provision is made in the budget for expenditure in India and in
England. The provisions for expenditure in England being intended to cover
the charges incurred in England by the High Commissioner for India in the
U.K (i) on the supply of such stores the cost of which is finally adjusted in
their accounts, and (ii) for other payment made in England, which are not
chargeable to Debt Heads of account.
Note: All charges paid at ports or elsewhere in India in connection with
stores obtained from England should be treated as expenditure in India.

72. A grant or a supplementary grant may be provided in respect of

expenditure under a Major Head or under one or more sections of a Major
Head. For purposes of financial control, the provision under a Major Head of
account is divided into units of appropriation, each of which may be sub
divided, as may be necessary.

Appropriation Audit
73. The Principal Controllers/Controllers of Defence Accounts are required to
exercise appropriation audit, as described in the succeeding paragraphs only
in respect of the expenditure compliable to locally controlled heads (see
Defence Account Code). No such audit is required to be conducted by the
Defence Accounts Department on the expenditure pertaining to centrally
controlled heads.

74. Appropriation audit is conducted in two stages:

(i) Sanction audit i.e. audit of orders of allotment of funds and re-
appropriations and
(ii) Expenditure Audit i.e. audit of expenditure against allotments

75. The audit of orders of allotment and re-appropriations consists in

seeing:
(a) That the order has no effect on increasing the amount of the
appropriation at the disposal of the controlling authority, without the sanction
of the competent authority;
(b) That the amount appropriated is available under the unit from which it is
allotted;

40
(c) That the order is issued by the competent authority and is a legitimate
charge against the allotment and
(d) That the re-appropriation has been authorized only within the
appropriation of that year. All re-appropriations within the appropriation for a
year can be authorized at anytime before, but not after the expiry of the
financial year.

76. In conducting the audit of expenditure against allotments, the following

points should be carefully observed by Principal Controllers/Controllers:
(a) If any specific appropriation has been made for a particular object of
expenditure, all expenditure on it will be audited against such appropriation;
and
(b) If a lump sum appropriation is made for a group of items of expenditure,
the total expenditure thereon will be audited against the lump sum
appropriation.

77. It is not sufficient to exercise merely a close watch over orders of

allotment and re-appropriation; the progress of expenditure against the grant
or appropriation as a whole and sub divisions thereof should also receive
special attention. The booked expenditure should be scrutinized intelligently
and the case in which the expenditure seems to be abnormally heavy or
unusually low, should be brought to the notice of the disbursing officers and
controlling authorities, for taking prompt action for obtaining additional
allotment, when excesses appear to be likely and when savings can be
foreseen, surrender such portions of the allotment as are not likely to be
required for the rest of the financial year. Provisional payments in excess of
allotment will be made only under the personal orders of the PCDA/CDA (or
the officer to whom the power has been delegated by him. See para 43
Defence Audit Code) who may, at his discretion, authorize such payments
whenever he considers such a course to be in the best interests of the state.
The detailed procedure for watching progress of expenditure against budget
allotment is described in “chapter 13” of Defence Account Code Edition 2014.

78. The authority administering an appropriation (not the Defence Account

Department) is ultimately responsible for keeping the expenditure within the
appropriation.

41
79. The Principal Controllers/Controllers of Defence Accounts are responsible
for watching that the expenditure does not exceed the allotments as modified
by orders of re-appropriation passed by competent authority from time to
time. They are also responsible for watching that re-appropriation of funds to
meet any excess expenditure over allotments are duly sanctioned.

42
 CHAPTER 4

AUDIT OF RECEIPTS AND RECOVERIES

Para
General 80
Investments and loans to public Sector Recoveries of advances made in India
undertaking 84
Recoveries of advances made in India 85
Advances to service personnel by Indian Representatives Abroad 91
Recoveries of income tax 94
Recoveries of value of horses purchased by high officials 103
Contributions towards leave allowances and pensions of officers and others
lent to foreign service' and passage contributions of such officers 104
Liability of leave salary contribution of officers and others on deputation to
another Government or department of the Central Government 106
Recoveries for stores issued on payment and for services rendered 107
Recoveries of hospital stoppages 108
Recoveries of licence fees 109

General
80. The audit of receipts consists in seeing that all sums due to
Government are promptly credited and brought to account. As a general rule
no debt due to Government should be left outstanding on the books without
due and sufficient reason. The audit office should exercise constant and
watchful care over such outstandings and should fully review them at least
once a year. Whenever any item appears to be irrecoverable, orders for its
adjustment should be demanded. Unless permitted by any rule in an
authorized code, no sums may be credited to Government by debt to any
suspense heads; credit must follow, and not precede, actual realization.

81. When any financial rule or order applicable to the case prescribes the
scale or periodicity or recoveries, it will be the duty of Audit to ensure that
there is no deviation without proper authority from such scale or periodicity.

43
82. The amounts due to Government are recoverable (1) through pay
bills/I.R.L.As in the case of Government employees except where recovery is
under rules required to be effected in cash eg.
(1)Barrack damages, (2) recovery of licence fee from Civilian Govt. Servants,
retaining Govt. Accommodation beyond the date of retirement will be made in
cash by the Head of Office and in respect of unauthorized period of
occupation, by the station Commander, (3) through work or supply bills in the
case of contractors, (4) by remittance of cash into a treasury or the bank on
the authority of a Military Receivable Order and (5) by adjustment through
Defence exchange account and the settlement accounts. In dealing with the
credits it will be seen that:
(a) The amounts are correct and properly vouched; and
(b) There has been no delay in crediting the amounts.

83. Where recoveries are effected through the IRLAs, a note of all the
demands outstanding against individuals will be kept in those ledger
accounts.
In other cases, a record of all sums due to Government will be
maintained by means of demand or other appropriate registers (eg. payment
issue, registers, contractor's. ledgers, revenue ledgers, pension audit
registers/cards, registers for watching recovery of leave salary and pension
contributions in respect of Govt. servants lent to foreign service etc). The
action taken from time to time towards the recovery will be shown therein.
When credit has been afforded for a particular item, a brief note to that effect
will be made in the register against the item concerned.
In the case of advances compiled under a debt head e.g. Advances for
the purchase of motor or other conveyances, the payments made and the
recoveries effected will also be recorded in the appropriate advance registers.

Investments and loans to public sector undertakings

84. Expenditure on account of investments (share capital) and loans to public
sector undertakings “are debitable to relevant Service Head/RD&R Head
under Loans and Advances as mentioned in Sector ‘F’ in the Classification
Hand Book Defence Services Receipts & Charges/Pamphlet of RD&R.” The
recoveries on account of dividends due on investments in public sector
undertakings etc. should be watched in the manner prescribed from time to

44
time, and compiled to “relevant receipt heads in the Classification Hand Book,
Defence Services Receipts & Charges/Pamphlet of RD&R.” The realization of
interest as and when it falls due, will be watched and credited to Government
as per the orders issued by the Government from time to time and compiled
to “Major Head 0049-Interest Receipts”.

Recoveries of advances made in India

85. Pay and allowances advanced under proper sanction are audited in the
same way as pay and allowances issued on due date. Such advances will be
adjusted as final charges against the relevant service heads, unless the
parties concerned are proceeding to another circle of audit, in which case
they will be reported to the audit officers concerned through last pay
certificates and adjusted in accordance with the rules in para 51 of Defence
Account Code. In the case of advances made to individuals in his own
payment, the audit officer will have the items entered in the demand etc.,
register or the Individual Running Ledger Account concerned and will watch
their recovery therefrom. When advances are paid by Field Cashiers or
Imprest Holders, the Principal Controller/Controller of Defence Accounts with
whom the Field Cashier or the Imprest Holder is in direct account will, if the
advances are recoverable in his circle of audit, have the advance entered in
the audit or demand register or in the Individual Running Ledger Account for
watching recovery therefrom. If the advances are paid to individuals in
another audit circle, the advances will be debited through the Defence
Exchange Accounts, to the Audit officer concerned for further recovery action.

86. Advances for the purchase of motor or other conveyances and other
interest bearing advances to individuals or units are adjusted under “Major
Head 7610-Loans to Government Servants”. Advances not bearing interest,
e.g. Advances for the purchase of officer’s mess equipment are adjusted
under “Major Head 7615-Miscellaneous Loans”. The detailed rules regarding
Debt Head advances are contained in Section 1 of Chapter 16 of Defence
Accounts Code, Edition 2014.

87. All debt head advances will be noted in the appropriate registers for
watching recovery. If an individual or unit to whom such an advance is
granted is transferred to the payment of another Principal

45
Controller/Controller, a debit will be raised in the Defence exchange account
for the un recovered advance. Full conditions and particulars of the advance
will be stated both in the Last Pay Certificate and the Exchange Accounts.

88. In the case of advances debited through Defence Exchange Account,

the Audit Officer receiving the account will adjust the amounts in his account
for the month in which the advances were made, if that account is open
otherwise in the account for the month then open, debiting the amount to the
appropriate head concerned by credit to the Defence Exchange Account. He
will also note the advance in the demand registers etc; or IRLA as the case
may require.
Note: Advances of pay outstanding against the individual at the time of
his/her death will be dealt with in accordance with the rules governing the
pay and allowances of the individual concerned.

89. Where the advance or any portion of it cannot be recovered because

of the transfer of the individual concerned to an appointment under the State
Govt., the amount of advance outstanding against him is retained in the
books of Defence Accounts Department. The balance of advance will,
however, be communicated to the civil accounts officer concerned (through
the last pay certificate) and he will be requested to pass on the credits on
accounts of recoveries effected to the Defence Accounts Department through
the settlement accounts in respect of P & T, Railways and Department of
Supply in the Ministry of Supplies and Rehabilitation and by payment by
cheque or draft in respect of those serving with or from the
Departments/Officers of other Central Ministries and the Departments/officers
of State Governments and Centrally Controlled Union Territories.

90. The same procedure is to be followed in the case of an individual

transferred from State Govt. to Defence, with an outstanding balance of
advance granted to him. The amount recovered by PCDA/CDA will be passed
on to the State Govt. department through the settlement accounts in respect
of P&T, Railways and Department of Supply in the Ministry of Supplies and
Rehabilitation and by payment by cheque or draft in respect of those serving
with or from the Departments/offices of other Central Ministries and the

46
Departments/offices of the State Govt. and Centrally Controlled Union
Territories.

Advances to service personnel by Indian representatives abroad

payment & recovery of

(i) In the United Kingdom

91. (a) Service personnel attached to or serving on the staff of the
High Commissioner for India in U. K:

(i) The pay accounts of such officers and men are maintained by High
Commissioner. All payments made to such individuals other than those which
are compilable to Debt Heads, are compiled by the High Commissioner finally
under the pay heads in his monthly account of disbursements on behalf of the
Government of India. The expenditure is brought to account in the Indian
books by the PCDA, New Delhi in the manner laid down in Chapter 9 of
Defence Account Code 2014 Edition. The advances of Pay are treated in the
same manner.
(ii) The advances on account of purchase of motor cars and other debt head
advances are debited to India through Inward London Account Current of
Defence Services and the monetary settlement of these transactions is got
effected centrally by the PCDA, New Delhi through the Principal Controller of
Accounts, Ministry of External Affairs, New Delhi. Transactions pertaining to
other Principal Controllers/Controllers are passed on by the PCDA New Delhi
to the PCDA/CDA concerned through Defence Exchange Account for
compilation to the appropriate Debt Heads. The recoveries effected are
similarly passed to India for final adjustment by the Principal
Controllers/Controllers concerned.
(iii) Any portion of advances, whether of pay or of those pertaining to Debt
Heads of accounts, remaining outstanding against the individuals on their
transfer to India will be noted on the last pay certificates. The amounts will be
converted at the official rate of exchange and noted in the appropriate
registers IRLAs. The recoveries, as and when affected in authorized
installments, will be compiled to the appropriate heads of account.

(b) Service officers and men proceeding to the U.K. on courses of

instruction and temporary duty: The pay accounts of such individuals

47
continue to be maintained in India. The payments made to them by the High
Commissioner are accounted for by him as in (a) (i), (ii) above. In order to
enable necessary action being taken in respect of pay and allowances which
have to be adjusted in IRLAs maintained in India, the High Commissioner will
send copies of the acquittance rolls to the PCDA (Officers)/Concerned
PCDA/CDA, the Naval Pay Office and Air Force Central Accounts Office as and
when the advances are made. Copies of intimations regarding payment of
advances to Indian Navy and Air Force officers and men, will also be sent by
the High Commissioner to the PCDA (Navy) and PCDA (Air Force). These
Principal Controllers /Controllers will ensure in audit, that all payments
required to be actioned in IRLAs are duly adjusted therein. The recoveries will
be compiled to the appropriate heads of account.

(ii) In countries other than the United Kingdom

92 (a) The pay accounts of Service officers serving in countries other than the
United Kingdom continue to be maintained in India. The advance made to
them by the Indian High Commissioners/ Ambassador are adjusted by the
latter in their accounts with Controller General of Accounts who passes on
debits to the PCDA/CDA concerned. In all other respects, the procedure in
para 91(b) will generally be followed.

(b) After advances paid outside India have been taken over by Principal
Controllers/Controllers on their books, they will be dealt with in all respects,
in the same manner as the advance paid in India.

93. The IRLAs of JCOs/ORs etc will continue to be maintained by the PAO
but nominally. On their posting to the staff of the Military Attache/Advisors
abroad other than United Kingdom, pay slips will be issued by the PAOs to the
Embassy/ High Commission. The monthly debits for the payments made by
the Embassies/High Commissions to the Military personnel on the authority of
pay slips are received by the PCDA/CDA concerned through Controller
General of Accounts, duly supported by the original salary bills of the
individuals. The debits will be centrally adjusted by charging the amounts to
the relevant Service heads. The particulars contained in the salary bills will be
communicated to the PAOs for audit and incorporation of the details in the

48
nominal accounts of the personnel maintained in the PAOs. As regards air
men and sailors, see chapter 15 and 16 respectively.

Recoveries of Income Tax

94. Recoveries of income tax are made with reference to Act 43 of 1961
and orders issued by the Government of India from time to time. For a
synopsis of such orders see Income Tax Rules 1962 published by the Central
Board of Revenue Govt. of India, New Delhi.

95. In determining the rate at which income tax is to be levied, it is

necessary to ascertain an individual's total income from salary up to date.
The rate at which the tax has been deducted, is probably total income from
salary up to the end of the financial year and the rate of tax appropriate to
such total income. When an individual reverts from a higher rate of salary to
a lower rate or where on account of absence on leave ex India, the rate of tax
applicable to the total salary likely to be drawn in India during the whole year
is lower, than would have been the case had the salary been drawn in India
throughout the year, the tax should be deducted at the rate appropriate to
the probable total annual income in India having regard to the total drawn up
to date and the rate at which salary is likely to be drawn for the rest of the
year. Any excess deduction in previous months due to the fall in rate should
be adjusted in the first pay bill in which tax is deducted at the lowest rate,
provided this is done in the same financial year. Similarly, if an individual is
promoted to a higher salary and the result is that the rate appropriate to his
probable total income is increased, not only will tax at the higher rate be
deducted in subsequent pay bills but any deficiency in previous deductions
due to the rise in rate will also be made good in the first pay bill drawn after
his promotion. Any necessary final adjustments may be made in the last
month of the financial year. No cash refund of income tax excess recovered
during any year, can however be made by the Defence Accounts Department,
without the authority of the income Tax Officer concerned.

96. An annual statement showing figures on account of income tax and

super tax compiled in Defence Services Accounts by end of March (Final) will
be rendered by the CDA (Funds) Meerut to the Central Board of Direct Taxes
before the close of July. Any further figures relating to belated adjustments

49
made after the close of the account for March (Final) will be intimated
separately.

97. An annual statement, showing the names and addresses as known of

individuals under the audit control of a Principal Controller/Controller of
Defence Accounts, the salaries, etc. drawn by them during the year, the
amount of income tax and super tax recovered from them, should also be
rendered to the income tax authority concerned, as well as the assesses,
within thirty days from the 3lst day of March each year.

98. A statement showing the details of payments made to the contractors

and other non officials, will be sent quarterly by Principal
Controllers/Controllers, to the Commissioner of Income Tax concerned as
notified from time to time in the proforma prescribed for the purpose. This
would enable PCDA/CDA to be in possession of information regarding the
amounts received by the contractor and other non officials.

99. A list of disbursing officers with their designations and stations where
their offices are located under the audit jurisdiction of the Principal
Controller/Controller of Defence Accounts should be sent to the Commissioner
of Income Tax concerned, with advice to Government of India, Ministry of
Defence and Ministry of Finance (Revenue Division). Changes in the first list
should be rendered to all concerned at the end of June every year.

100. When deduction of income tax from salaries is made at source, an

annual consolidated receipt will be issued to the person from whose salary
income tax is deducted at source.

101. When officers are transferred from one audit circle to another, the total
salary drawn up to date in that financial year and the total amount of income
tax deducted thereon, should be noted in the Last Pay Certificate. The LPC
should be accompanied by detailed statement of the recoveries made
monthly and the rebates allowed.

102. Rebates of income tax will be allowed on Life Insurance premia paid
and contributions made to any Provident Fund to which the Provident Fund

50
Act 1925 applies, with reference to the orders issued from time to time in the
authority of declaration rendered annually by the individual (assesse)
concerned, and original premium receipts issued by the companies will not
ordinarily be looked for in audit. While finally assessing the income tax, the
income tax officer will call for the premium receipts, if considered necessary,
from the officers directly. Similarly standard deduction as prescribed from
time to time wiil be allowed at source, while calculating income tax payable.

Recoveries of value of horses purchased by high officials

103. Recoveries of the value of horses purchased by the President, Governors
of States, Chief of the Army Staff and other officials referred to in para 958
Regulations, for the Army Revised edition 1962 will be effected by means of
valuation statements at the sale price given in clause (d) thereof. In the case
of horses supplied to the President's stable, a statement showing the value of
the horses together with the rolls received from the remount depots will be
sent to the Military Secretary to the President at the end of each calendar
year and on acceptance of the figures by him, a Military receivable order will
be sent to him to pay the amount into the treasury. In the case of other
officials, similar statements and receivable orders will be sent to them
directly.

Contributions towards leave allowances and pensions of officers and

others lent to Foreign Service and passage contributions of such
officers
104. A register in IAF (CDA) 164 of officers and others who have been lent
to Foreign service from the audit area of a Principal Controller/Controller of
Defence Accounts should be maintained by him/her, to enable a check to be
exercised over the recovery of contributions. This register will be posted on
receipt of the orders of competent authority, sanctioning the transfer and the
entries will be examined as to their correctness and initialed by the Gazetted
Officer in Charge. A certificate of the date of relinquishing charge and of
receiving charge of the new appointment (and in the case of Government
servant for whom service books are maintained), the service books should be
called for, necessary notes in respect of the order sanctioning the transfer,
the effect of transfer in regard to leave admissible during the foreign service
and any other particulars that may be considered necessary, will be made in

51
the service books under the signature of a Gazetted Officer, and the service
book returned. On receipt of the certificates, the fact should be noted in the
register. All orders subsequently received regarding such officers etc., on
foreign service should be recorded in the register, as well as orders issued by
the PCDA/CDA for recovery of interest or of contributions (in arrears) also the
cause of the contributions ceasing to be realized owing to re-transfer, death,
dismissal or any other cause. ln cases of re-transfer to Govt. Service, the fact
will be recorded in the service book which should be called for where service
books are maintained, and the service books, returned to the office to which
the individual has been posted.

105. The following procedure will be observed for the settlement of claims
on account of leave and pension contribution in respect of Defence Services
Officers and others lent to Foreign Service. In such cases the Principal
Controllers/Controllers will make standing arrangements with the foreign
employers to ensure the payments on due dates, of the correct amount of
monthly contributions in each case, without the submission to them by
Principal Controllers/Controllers of monthly or periodical claims. Under this
arrangement, the primary responsibility for communicating to the foreign
employers concerned, the correct rates of contribution payable by them
monthly and for intimating to them the periodical changes in such rates, will
rest entirely with the Principal Controller responsible for watching and
auditing the recoveries. The Principal Controllers/Controllers will also enter in
the register in IAF (CDA) 164, the period for which each standing
arrangement with the foreign employer is intended to last and rate which will
be operative during that period, and check the credit received monthly with
reference to the amounts due, as shown in the register. These credits will be
noted in the register which will be inspected every month by the AAO.

(i) Foreign Service in India - The first intimation for or the periodical
changes in contribution towards leave and pension will be sent by PCDA/CDA
concerned directly to the employer concerned, requesting him to remit the
amount due on these accounts either by cheques or demand drafts which
would invariably be crossed. The amount due on account of leave and pension
contribution should not on any account, be credited in cash in the nearest
treasury. On receipt of the cheque or demand draft, the PCDA/CDA concerned

52
will take necessary action to realize the amount and credit the same to
government accounts.
Note: In all cases of transfer to foreign service in which the liability for
making contributions on pension/contributory provident fund and leave salary
rests on the transferee, it shall be necessary to secure a letter from the
transferee addressed to the foreign employer, to pay the Government of
India, from his salary a specific monthly sum which would be based on
foreign service contributions, which the employee himself has to pay. The
issue of such a letter, would enable the foreign employer to lawfully effect the
necessary deductions from the Government servant's salary and remit to the
Government of India, as provided for above.

(ii) Foreign service out of India except in the U.K. - The first statement
of or the periodical changes in contributions will be sent by the PCDA/CDA
concerned direct to the foreign employer. In case the foreign employer has an
account with the Controller General of Accounts he will be requested (1) to
afford credits for the amounts due in his accounts with the Controller General
of Accounts (2) to specify in his accounts the particular PCDA/CDA in whose
books the credits will be adjustable and (3) to state the month’s accounts
with the Controller General of Accounts in which the credits will appear. The
credits appearing in the foreign Govt’s accounts will be passed on by the CGA
to the PCDA/CDA concerned and the latter will watch the concerned credits on
receipt of information called for by him at (3) above. In case the foreign
employer has no account with the CGA, the PCDA/CDA concerned will, while
sending statement of contributions to him, request him to pay the amounts
into the nearest treasury which renders an account to the CGA and state the
name of the treasury and the month in which the amounts have been or will
be paid into that treasury. If this method is not possible, the foreign employer
will be asked to arrange for credits for the amounts being passed to India
through the Indian Embassies/High Commissioners abroad or to remit the
amounts by means of bank drafts, whichever is suitable.

(iii) Foreign Service with the U.K. Government : Statements for pension
contributions recoverable from the U.K. Govt. in respect of all officers and
men lent to that Government will be prepared in return 1842 in IAFZ-2000
and rendered by Principal Controllers/Controllers to the PCDA New Delhi

53
annually for recovering the amounts through the High Commissioner for
India. Statement for leave salary and passage contribution recoverable from
the U.K. Govt. will also be rendered by Controllers to the PCDA New Delhi
annually for similar action.

(iv) The Principal Controller/Controller of Defence Accounts is responsible for

seeing that all contributions due, as shown in the register in IAF (CDA) 164
are paid on due dates and that officers and others in foreign service are given
prompt intimation when their contributions fall into arrears and that they are
informed of the penalties to which they become liable owing to non-payment.
The Principal Controller/Controller will note in the register, the date by which
the credits for contributions in each case are normally expected in his/her
office from the foreign employers.

(v) Interest will be charged on all overdue pension and leave contributions in
accordance with Supplementary Rule 307 as amended vide C.S. No. 921.
When credit for leave and pension contributions is adjusted through the
exchange/settlement accounts, the date from which interest on belated
payments is chargeable should be determined as follows:-
It will be assumed that payment has been made on the due dates, if the
credit due for a month (say for the month of January) is afforded through the
exchange account/settlement account for the third month (i.e. March). If not,
interest will be charged against the borrowing Government from the 16th of
the third month (i.e. from the 16th March in the above instance) to the end of
the month preceding that in which the credit is actually received.

(vi) If a Government servant is transferred to Foreign Service out of India,

the audit officer concerned will be responsible for obtaining from him at the
time of transfer, a declaration showing that he has read and understood the
rules which are to regulate his leave.

The liability of leave salary of officers and others on deputation to

another Government of Department of the central Government
106. The liability for salary will be borne in full by the department from
which the Govt. Servant proceeds on leave, whether it be his parent
department or a borrowing department with whom he is on deputation. In the

54
case of Govt. Servants who avail of leave on termination of their deputation
period, the liability for leave salary will be borne by the department which
sanctions the leave.

Recoveries for stores issued on payment and for services rendered

107. The rules regarding the recoveries for stores issued on payment and
services rendered are contained in Store Accounting Instructions

Recoveries of Hospital stoppages

108. The rules regarding the recoveries of hospital stoppages are laid down
in Financial Regulations, Part II.

Recoveries of Licence Fees

109. The rules for the recoveries of licence fee, furniture, electricity, water,
conservancy, etc. are contained in “Regulations for the MES” and in ''Quarters
and Rents" read with rules for Supply of Water and Electricity".

55
 CHAPTER 5

PAY ACCOUNTS OF ARMY OFFICERS

Para

Maintenance of IRLAs 110

Audit of IRLAS 116
Scale Audit 119
Leave procedure 121
Records of service 122
Audit of Army List 123
Pay accounts of Indian Army Officers serving ex India 124

Maintenance of IRLAs
110. The Pay accounts of Army Officers serving with Army units and
formations and the pay accounts of all Civilian Gazetted Officers serving with
Army units and formations located in field areas are maintained centrally by
the PCDA(O) on the IRLA system. An IRLA exhibits a complete record of
credits and debits relating to his accounts.

111. All events in the service of an officer affecting his promotion, pay and
allowances etc. are notified to PCDA(O) by the administrative authorities
concerned through the following:
(1) Daily Part II Orders published by the OC of the unit/formation on the
strength of which the concerned officer is borne
(2) Gazette notifications
The detailed procedure for drawing the pay and allowances of officers in
IRLAs on the basis of the data furnished in the above mentioned documents
is described in the Office Manual part IX [Principal Controller of Defence
Accounts (Officers)]. Broadly speaking the procedure is as stated in the
succeeding paragraphs.

112. “The IRLAs are maintained by ‘Ledger Wing’ of the office of the PCDA
(Officers). Consequent on merger of erstwhile Ledger Wing I and II, the
IRLAs of officers are maintained by Ledger Wing. Within the Ledger Wing,
there is a Ledger Wing–SS-Audit Group amongst others. Transcription Sheet
for opening of new account is prepared by the Ledger Wing-SS-Audit and

56
then sent to EDP for opening of IRLA in system and ledger along with case file
of the officer are then sent to concerned Ledger Section. EDP carries out the
Pay fixation and generates the first Audit Cage and Authorization slips. The
Authorization Slip is sent to LW-SS-Audit Group for onward transmission to
concerned Ledger Wing.

113. All Part II Orders will be adjusted without any delay. Before adjusting a
part II Order it will be seen:
(a) in the case of acting promotions
(i) that the officer's rank, name and appointment tally with those
shown in the relevant IRLA maintained.
(ii) that the appointment is provided for in the authorized
establishment and
(iii) that the promotions, where made, are in accordance with the
promotion rules;

(b) in the case of leave that the title to leave as appearing in part II Orders
notifying the grant of leave is audited in full.

The changes in entitlements to pay and allowances with reference to the

data, furnished in these orders will be authorized on ‘authorization slips’ CDA
(O) 243. The authorization slips will be duly embossed with the 'Payment
Authority' seal.
Note: Substantive promotions for Select Rank are carried out by system
based on Part II order and for Non-select rank through DGN/MS authority
letter. PCDA (O) may at his discretion; act upon any communications if
he/she considers that otherwise over payment is likely to occur. See also note
under Rule 104 FR part II (1968 edition).

114 . Personal allowances, etc, for which claims are required to, be preferred
by the officers to the PCDA (Officers) will also be credited in the IRLAs after
audit. However traveling allowance, irrespective of the amount will be
credited to the bankers. The recoveries from pay and allowances required to
be effected by the PCDA(Officers) e.g. Income Tax, Surcharge, DSOP fund
subscription, PLI, AGIF, CGFIS, TAGIF, HBA/interest, MC advances/interest,
advance of pay drawn on IAFA 1034 etc, will be debited in the IRLAs. The

57
ledger accounts will be closed monthly. Concurrently with the closing of
IRLAs, the salary bills [IAF (CDA) 653] and statement of accounts (IAFF 1015
revised) will be prepared, giving particulars of each item appearing on the
debit and credit sides of IRLAs.

115. A copy of the statement of accounts will be supplied to each officer and
the excess credits over debits shown on the salary bill remitted to his bankers
as nominated by him. If for any reasons an officer’s IRLA closes with a debit
balance, no further remittance will be made till the Debtor Balance has been
liquidated by credits accruing in the accounts of the subsequent months,
except where the liquidation of Debtor Balance is authorized under rules to be
either deferred or effected in installments.
Note: When deliberate overdraws of advances of officers on IAFF 1034 in the
field or in other areas where such advances are admissible come to the notice
of the PCDA (Officers), action will be taken immediately with administrative
authorities for restricting further drawals of advances by the officers
concerned.

Audit of IRLAs
116. The IRLAs of Army Officers maintained by the PCDA (O) are subject to
an internal post audit to the extent of 10 percent check on a quarterly basis
in respect of
(i) Entitlement and
(ii) Disbursements as mentioned in the succeeding paragraphs.

In addition, a review of certain selected items of pay and allowances in issue

or a check of the application in actual practice of any selected Government
Order etc. will be conducted as and when directed by the PCDA(O) and a
special audit report showing the results of review will be submitted to him.
The intention of such a review is to detect any errors which may have
remained unnoticed.

117. Entitlement audit will be conducted solely with reference to

Authorisation Slip and recorded in Ledger Wing. The entries therein will be
audited with reference to current Rules on the subject and the connected
Peace Establishments/War Establishments, nominal rolls and Part II Orders. It

58
will be verified that the necessary entries made in the IRLAs maintained by
Ledger Wing are as notified in the Authorisation slips and that they have been
duly attested by the Accounts Officer in Charge. It will also be verified, that
the Authorisation Slips are duly enfaced with the payment authority seal and
that the rates of pay and allowances entered therein are expressed in words
also.

118. The following items in IRLAs maintained by Ledger Wing will be

audited:
(a) The arithmetical calculations in IRLAs resulting from Authorization Slips
issued by Ledger Wing and all the credit entries in the IRLA irrespective of the
nature, and amount of credit.
(b) Recovery of advances drawn from the High Commission of India in the
United Kingdom through the medium of a register maintained centrally by
Ledger Wing.
(c) Recovery of licence fee bills, hospital stop page rolls, work orders etc,
through the medium of lists prepared by the Demand Section.
(d) Miscellaneous Disbursement Vouchers.
Note: The remittances reflected in the paid vouchers at item (d) above will
be linked into the IRLAs to the extent of l0%. The selection of vouchers for
this purpose will be made with reference to the voucher numbers allotted in
the D.P. Sheets.
(e) Payment/recovery of authorisation demands issued by 'T' wing with
reference to the original T.A. Bills etc.
Note: Ten percent of the cases where pay adjustment has been done in the
non effective IRLAs by Archive Section is also carried out.

Scale Audit
119. The scale audit is conducted to see that the effective (paid) strength of
Army Officer in a unit formation as shown in the nominal roll is within the
number authorised in the relative peace/war/interim establishment and that
the number of officer paid in different ranks in each unit agrees with the
number shown in the nominal roll. It may be conducted on the basis of the
total number of officers in the ranks of Lieutenant to Major (Lt Col. in the
case of AMC) in each unit/formation, without actual ranks authorised in the
units establishments. This will not however, affect the normal audit of acting

59
promotions where the existence, of a vacancy in the unit in the rank
concerned will be the criterion.
Note: The scale check of units/formations where the appointments are
generally military but some of which are classified as tenable either by
military officers of a certain rank or civilian Gazetted Officer of a
corresponding status, will also be done by the PCDA (O). To facilitate this
check, the Regional PCDAs/CDAs will render monthly numerical returns of
CGOs appointed against vacancies tenable by Military officers or CGOs in the
prescribed proforma.

120. The detailed procedure for conducting scale audit is required to be

carried out as described in para 222 of the OM Part IX. [(Principal Controller
of Defence Accounts (Officers)].

Leave Procedure
121. The instructions regarding the leave procedure are given in Appendix 2
to this code.

Record Of Service
122. Information regarding pension service of officers (including officers of
Nursing services) eligible for pension under the Army Regulations is available
from the gradation pages of the Army List, wherever, the publication
indicates that the entries therein have been audited for purposes of
assessment of pension. Records of service will however, be maintained by the
PCDA (Officers) for such officers on IAF (CDA) 313 in accordance with the
instructions contained in Appendix I to this code. Any additions or corrections
affecting pension service, including cases of overstayal of leave involving
forfeiture of service, should be reported promptly to the Controller General of
Defence Accounts by the PCDA (Officers).

Audit of Armed Forces List

123. The Audit of Armed Forces List is conducted in the office of the PCDA
(O). The PCDA (O) is also responsible for the audit of draft Gazette
Notification relating to appointments, substantive promotions, relinquishment
etc, of Army Officers (including officers of the Nursing Services, Territorial
Army and National Cadet Corps), as also cases regarding assessment of
previous pensionable service of Army Officers.
60
Pay Accounts of Indian Army Officers Serving ex-India
124. The pay accounts of Officers attached to or serving on the
establishment of the High Commissioner for India in the U.K are maintained
by the High Commissioner and Last Pay Certificate in respect of such Officers
will be issued by the PCDA (Officers).

125. ln respect of officers attached to or serving on the establishment of

Indian Embassies, High Commissioners etc, abroad other than in the U.K.,
'Nominal' IRLAs, are maintained by the PCDA (Officers). The pay and
allowances due to those Officers, are paid by the respective Embassies, High
Commissioner etc, with reference to the 'pay Slips.' PCDA (O) F 247 issued by
the PCDA(Officers). The original salary bills received in support of the debits
through the Controller of Accounts, Ministry of External Affairs will be checked
with reference to the entitlements and items of disbursements recorded in the
'Nominal' IRLAs.

126. The pay accounts of Officers proceeding abroad on Courses of

Instructions, study leave and temporary duty are maintained by the PCDA(O).

127. The detailed procedure regarding the maintenance of IRLAs of Indian

Army Officers abroad and the method of payment of their pay and allowances
is contained in the Office Manual part IX Principal Controller of Defence
Accounts (Officers).

61
 CHAPTER 6
PAY ACCOUNTS OF JUNIOR COMMISSIONED OFFICERS, OTHER
RANKS AND NON COMBATANTS (ENROLLED)
Para
Maintenance of IRLAs 128
Special points to be seen in conducting review of IRLAs 129
Scale audit of civilians employed in lieu of combatants in AMC 130

Maintenance of IRLAs
128. The Pay accounts of Junior Commissioned Officers, Other Ranks and Non
Combatants (enrolled) and Non Gazetted Civilians in operational area are
maintained on IRLA system by the Pay Accounts Officers attached to
Regimental or Corps Centers. A concurrent review of all IRLAs is conducted
by the Review group of the PAO to the extent shown in the Annexure to this
Chapter.
Concurrent Review of IRLAs includes:
(i) Scrutiny of IRLAs/MPS
(ii) Checking of allied documents.
(iii) Periodical review, by random selection, of the applications of the new
orders as decided by the head of the PAO and the concerned reviewing
Officer/Main Office.

Special points to be seen in conducting review of IRLAs

129. The following special points should be seen in conducting the review of
IRLAs:
(1) The authority for the opening of IRLAs is quoted therein and IRLAs
(Including continuation sheets) are duly authenticated where they are
manually maintained
(2) Income tax is regularly recovered when the taxable income exceeds the
minimum limit prescribed from time to time.
(3) Family allotment is issued only in the case of personnel authorised to do
so and it is restricted or stopped, as the case may be, in the case of
personnel heavily in debt.
(4) Advances of pay are regularly being debited and they are within the limits
of respective entitlements. If there is any appreciable time lag since the last
advance debited, the matter is promptly investigated so as to ensure that the
individual is really effective and has not drawn advances other than those
62
already debited. If heavy advances, not authorised by rules are drawn, the
matter has been promptly taken up with the paying officer with a view to
restricting future advances or with higher authorities, in case the paying
officer fails to respond promptly. If leave advances are drawn, they are
limited to the extent authorised and shown separately.
(5) Statements of accounts are issued regularly
(6) Recoveries of subscriptions to Armed Forces Personnel Provident Fund
and postal Life Insurance Premia are effected at the rates and agree with the
schedules. Such recoveries are not effected from men whose accounts exhibit
heavy debt or balances.
(7) The pay slips in respect of JCO/ORS etc. on the staff of Military Attaches
to Indian Embassies Abroad are pre-audited in full before transmission to the
authorities abroad.

Scale audit of civilians employed in lieu of combatants in AMC

130. When civilians are employed in lieu of combatants, the scale audit will
be done by the PCDA (CC) Lucknow. For this purpose, paying Principal
Controllers/Controllers will submit returns to the PCDA (CC) Lucknow,
quarterly, for the, quarters ending 3lst March, 30th June, 30th September
and 3lst December showing particulars of the individuals employed in lieu of
combatants in AMC establishments. PCDA (CC) Lucknow, will also ensure that
the number of Civilian Dental Hygienists employed in lieu of combatants is
within the authorised limits

131. As Combatants Sanitary Assistants can be posted against Civilian

Sanitary Assistants/Inspectors, PCDA (CC) Lucknow will submit quarterly
returns to the PCDA/CDA concerned showing the number of Combatants
Sanitary Assistants paid by them during the quarters ending 31st March, 30th
June, 30th Sep and 31st December, indicating the name of the unit/formation
to which the individuals are attached, to ensure that the total strength of
Sanitary Assistants Sanctioned for the Unit/Formation is not exceeded.

63
 ANNEXURE TO CHAPTER 6
(Referred to in para 128)

Extent of review of IRLAs (IAFF-1019) of JCOs/ ORS and NCs(E) and

Non-Gazetted civilians in operational area and other connected
documents.

Note: The review of IRLAs will in general be carried out to the extent
prescribed below:-
The restriction of review will be dependent on the fact that the IRLAs
maintained in the Ledger Groups have been kept reasonably well in the past
and have been free from serious or numerous defects. If the review of certain
items indicates numerous irregularities and deviations from the prescribed
procedure, the head of the PAO should extend the scope of the review using
his judgment and discretions to how best this should be done, and to what
extent, reporting the facts in all such cases specifically to his superior
authorities.

1. Scrutiny of IRLAs- A concurrent review will be carried out over all

the IRLAs maintained by the ledger groups.
The total no of IRLAs maintained in Ledger
groups will be divided equally and review will
be completed within the specific period
prescribed by Head of PAO/ Main Office and
report on the said regard has to be furnished
to the Main office.
Para 212 (2) & (3) (a) of OM-X, Volume- I.
Note: IRLAs, transferred out to other PAOs should (if not already done) be
taken up for review irrespective of whether or not they fall in the ‘lot’
programmed for review in the quarter.

2. Audit cage IRLAs - The entire audit cage viz., Part III of the IRLAs from
the date of last review will be subjected to a
general scrutiny to see that :- (i) All changes have
been checked by the ledger groups AAO (ii) Rates
of pay shown are correct, and corresponding
adjustment are made in the concerned IRLAs.
Para 212 (3) (a) (i) & (ii) of OM-X, Volume- I.
64
3. Part II Orders (a) Entitlement items 5%
(b) Other items 2%

4. Advance of Acquittance
Rolls For pre MPS period review will be conducted
solely from the Acquittance Rolls into the
IRLAs to the extent of 1% of the total
number of Items of Acquittance Rolls
received during each accounting quarter.
Para 212 (8) of OM-X, Vol-I

5. Remittances on account
of final settlement: The totals and postings from the Money
Order list/ bank payment file into Final IRLAs
will be checked to the extent of 2 per cent.
Para 212 (9) of OM-X, Vol-I

6. Miscellaneous vouchers (a) 2% of all initial entries, whether

recoveries are affected or not.
(b) 2% of all changes.
Para 212 (11) of OM-X, Vol-I

7. AFPP fund (a) 2% of all initial entries

(b) 2% of all changes
(c) 2% (subject to a minimum of two items)
of cases where there is no recovery as
observed during the check of summaries to
ensure that such cases do not come under
purview of AI 4/s/60.

Note: This item of check will be conducted immediately after the closing of
accounts, so that any discrepancies may be got verified in succeeding
quarter.

65
The check of these items will be conducted from the vouchers etc. into the
IRLAs and not vice versa, except in the case of item 6(a) where it will be
checked from the IRLA into the vouchers.

8. PLI recoveries Initial recoveries and changes 2%.

9. Family Allotment FAMO- 50/MAMO list will be checked into

IRLA to the extent of 5 percent of the entries
in the lists for the quarter/ month. Check of
totals of FAMO-50 lists and correctness of
M.O. commission will be limited to 5 percent
of the lists received during the month.
Para 212 (12) of OM-X, Vol-I

10. Advances PAOs Periodical reconciliations 100%.

11. Complaints Complaints received in ledger groups 10%.

66
 CHAPTER 7
PAY AND ALLOWANCES OF CIVILIAN GOVERNMENT SERVANTS

Para
General Rules 132
Gazetted Officers
Audit of pay bills 139
Services Books 144
Leave Account 146
Scale Audit 147
Non-gazetted establishments
Preparation and disposal of pay bills 149
Audit of pay bills 150
Leave account 152
Compensatory Allowances and Honoraria 153
Recruitment to Posts and Services 155
Advances for payment to industrial employees 156
Pay bills of civilian personnel of Territorial Army Units 157

General Rules
132. The audit of pay, leave salary and other allowances admissible to the
various classes of Government servants is mainly conducted with reference to
the rules and regulations governing their conditions of service. These rules
and regulations are referred to in this chapter as "service rules".

133. No person may be appointed in India to a post in Government service,

without the production of a medical certificate of health in such form and
signed by such medical or other officers as may be prescribed by
Government. When the service rules require the production of a medical
certificate on appointment of a person to a post in Government Service, Audit
must verify that a certificate to the effect that the requisite medical certificate
in the prescribed form has been obtained in respect of the Government
servant, is attached to the first pay bill of the person concerned submitted
after such appointment. In the case of Gazetted Officers, the above certificate
should be signed by the competent authority to whom the medical certificate
has been submitted and in respect of Non Gazetted staff the same should be
signed by the drawing and disbursing officer concerned. The Govt. may

67
however, dispense with the production of the certificate in individual cases
and may also by general order, exempt any specified class of Government
Servants from operation of this rule.

134. The essential points to be observed in the audit of pay bills beyond the
test of formal completeness of the voucher are:
(i) To check the title of the Government servant to the pay drawn by or for
him i.e. that it is claimed and is admissible in respect of a post to which he
has been duly appointed, and of which he is actually in-charge; and
(ii) In the case of Government servants whose pay is drawn for them, to
verify that they receive the remuneration to which they are entitled.

No claim can be admitted for service in a post not duly sanctioned, or for pay
not assigned or provided for the post held.

135 . As pay bills are ordinarily paid after pre-audit, any pay or allowances
which may be inadmissible will be disallowed in audit and retrenched. In
ordinary circumstances, therefore, it will not be necessary to watch recoveries
of disallowances. In some cases, however, pay and allowances may be
passed provisionally in audit, e.g. for want of last pay certificate or other
causes. In such cases, the officer concerned will be informed of the possibility
of retrenchment, and the amount involved will be entered in provisional
payment register and its final adjustment watched.

136. Sometimes persons are employed on contract which provide for special
terms of service, not consistent with the service rules which would be
applicable to them but for the contract. Such contracts also provide that in
respect of any matter for which no special provision has been made in the
contract, the ordinary rules will apply. In such cases a copy of the contract
should be obtained and recorded in the audit office. Pay and allowances or
leave will be regulated in accordance with the special terms of the contract or
the ordinary rules, as the case may require.

137. Pay bills of civilian Government servant are pre audited by the Principal
Controllers/Controllers. Pay bills of Industrial personnel of Ordnance Depots,
EME Workshops, Farms etc., are post audited by Local/Regional Audit
Officers, except in the case of industrial personnel of Military Farms who are
68
continuously employed and who draw their pay in Level 2 and above in the 7th
CPC Pay structure. In their case, the pay bills are submitted to the Principal
Controllers/Controllers for pre-audit and payments.

138. On a transfer of charge between officers, the relieved officer should

send to the audit office the required number of specimen signatures of the
relieving officer. On receipt it will be seen that the signature of the relieved
officer is correct. The signature of the relieving officer will be recorded in the
personal file of the officer or other relevant file/register.

Gazetted officers
Audit of pay bills
139. The pay bills of officers will be audited by comparison with the previous
month’s bills. In the case of charges which do not arise monthly, the
comparison should be made with reference to the last audited charges. All
orders or particulars relevant to the audit of subsequent bills be noted in the
current bill, and where these do not affect the next bill, will be carried
forward until they are to be applied.

140. The pay and allowances claimed will be compared with those admitted
in the last audited bill. It will be seen that variations are supported by the
necessary authority and where required, by relevant certificates and
vouchers, and they are in order. Entries in the remarks columns will be
closely scrutinized and checked with reference to the supporting orders,
certificates and other vouchers.

141. In the case of new names, the first claim to pay and allowances will be
supported either by a last pay certificate or by a reference to or copy of the
order appointing the officer. In the former case, the rates of pay and
allowances and the date from which drawn will be checked from the details
appearing in the last pay certificate. In the latter case, the rate etc. will be
checked with reference to those authorised in the appointment order,
contract agreement or regulations.
In the case of individuals newly appointed, information regarding the
number and date of gazette notification will be called for and recorded.

69
142. Besides testing the formal accuracy of vouchers, it will be the duty of
the audit officer to see that:
(a) The post for which pay is claimed has been duly sanctioned;
(b) The officer is entitled to the rate of pay, leave salary or subsistence
allowance claimed;
(c) The allowance such as dearness/cost of living/house
rent/conveyance/compensatory allowances have been claimed correctly and
where necessary, are duly supported by the requisite certificates;
(d) The recoveries on account of income tax, fund subscriptions license fees
and other demands have been correctly given in the bills (IAFA35);
(e) The payment made is prominently recorded in the last charge to avoid a
second claim on the same account;
(f) The period of duty, suspension or leave, is correctly recorded as a check
on future claims to leave and pension.

In the case of an officer on leave it is necessary to see that leave has

been granted by competent authority, that it has not been exceeded, and
that the leave allowances claimed are covered by the rules governing the
case.
Note: For the above purposes the following records are provided:-
i. Service Book
ii. Leave account

143. No pay and allowances will be paid to an officer beyond the date of
attaining the age of superannuation, unless his services have been extended
by the Government of India. It will be ensured that final payment is made
only after the clearance of all Government dues.
Note: In the case of an officer whose year or year and month, of birth is
known but not the exact date, the 1st July or the 16th of the month
respectively should be treated as the date of birth for the purpose of
determining the date on which he should be held to have attained the age of
superannuation.

Service Books
144. Service records of all Civilian Gazetted officers of Defence services
shall be maintained in Form MSO (T) 27 (service books) by the Head of

70
offices/formations i.e. the lower formations of all the three services with
effect from 1-6-81. Service records of all group 'A' and 'B' civilian officers of
MES shall be maintained centrally by the Central Record Office (Officers)
Delhi under the supervision and administrative control of E-in-C Branch, Army
Headquarters, New Delhi from February 1989.

145. The service book is intended to include all important facts in the official
career of an officer including officiating appointments. Officiating
appointments should be distinguished from substantive appointments. Leave
of all kinds, absence without leave or in excess of leave or of joining time,
should be noted across the pages, and if any period be allowed to count as
service, which is not ordinarily allowed by the rules, or if any special privilege
or disability affecting pay, pension or leave, attaches to the officer, the fact
should be similarly noted quoting of the Government order.
Note 1: The date of birth should be recorded at the heading in every case.
Note 2: Entries relating to punitive action taken in regard to an officer should
not be made without special orders of Government. If an audit officer
considers any such entry to be indispensable for audit purposes, he should
refer the question to the Government of India through the CGDA, who will
decide what form the entry should take.

Leave Account
146. The leave accounts of all Civilian Gazetted Officers will be maintained
by the executive/administrative authorities with effect from 1-6-81.

Scale Audit
147. The scale audit of units/formations where the appointments are
generally military, but some of which are classified as tenable either by
military officers of a certain rank or Civilian Gazetted officers of a
corresponding status, is done by the PCDA (Officers). To facilitate this check,
the Regional Controllers will render monthly statements to the PCDA
(Officers), showing unit/formation/corps-wise, the number of civilian officers
appointed against such vacancies. The statement will contain a reference to
the peace establishment. The number of sanctioned posts tenable by military
or civilian officers and the number of civilian officers actually paid against
such posted. See also note below para 119.

71
Note: These monthly statements will also include Civilian Nursing sisters
(Non Gazetted status) employed in lieu of Nursing Officers of the MNS.

148. The scale audit check on the substantive cadre in the case of CGOs of
the AMC employed on an all India/corps basis under DGAFMS/DMS (Army)
will be carried out by the PCDA(CC) Lucknow on a half yearly basis. For this
purpose the DGAFMS/DMS (Army) will intimate to the PCDA(CC) Lucknow
the existing permanent strength of CGOs serving under their control and their
distribution.
The Regional Controllers will render quarterly statement by the l0th of
the second month following the quarter to the PCDA(CC) Lucknow
statements showing the paid strength of CGOs month wise and formation
wise (the quarters being reckoned from January to March, April To June, July
to September and October to December). The PCDA(CC) Lucknow. will then
consolidate these statements including those of his own office and will
conduct necessary check to ensure that the paid strength has not exceeded
the authorised/sanctioned strength. In cases of excess over the authorised
sanctioned strength, the PCDA(CC) Lucknow will be responsible for getting
such excess regularised in consultation with DGAFMS/DMS (Army).

Non Gazetted Establishment

Preparation and disposal of pay bills

149. The detailed procedure for the preparation and disposal of the various
copies of pay bills in respect of non-gazetted establishments is laid down in
Office Manual Part II.

Audit of Pay Bills

150. The pay bills will be audited on the lines laid down in Paras 139 to 142
above.
It will be seen that all acting and leave allowances are admissible under
the regulations, that increments in time scales of pay, where drawn, have
been earned by qualifying service and that the establishment for which pay
has been drawn has been sanctioned by the Competent Financial Authority.

72
Where grant of advance increments is sanctioned under special government
letters, for instance, to Defence Civilian employees serving in a non gazetted
technical/scientific grade on passing Telecommunication, Aeronautical
Engineering Degree, such advance increments should be regulated in
accordance with the special Govt. Orders issued for the purpose.

151. PCDA(CC) Lucknow will be the Central Scale Audit Agency for carrying
out the scale audit in respect of civilians of the AMC (serving under
DGAFMS/DMS (Army) sanctioned on an All lndia/Corps basis). The scale audit
will be done on a quarterly basis, the quarters being January to March, April
to June, July to September and October to December. For this purpose, the
PCDA(CC) will receive from the authorities controlling the establishment on
an All India/Corps basis, a monthly return of authorised strength relating to
various categories. The correctness of the figures will be checked with
reference to the orders sanctioning the establishment. The paying Principal
Controllers/Controllers will also render a quarterly statement to the PCDA(CC)
by the 10th of the second month following the quarter, which will show
separately the paid strength month-wise under the various categories of the
establishment sanctioned on an All India corps basis. On receipt of these
statements from the paying Principal Controllers/Controllers including that of
his/her own office, the PCDA(CC) will consolidate the statements and will
conduct the necessary check to ensure that the paid strength has not
exceeded the authorised/sanctioned strength. In cases of excess over the
authorised/ sanctioned strength, the PCDA(CC) will be responsible for-
getting such excesses regularised in consultation with the controlling
authorities at Army Hqrs viz DGAFMS/DMS (Army).

Leave account
152. The instructions regarding leave procedure are contained in APPENDIX 2

Compensatory Allowances and Honoraria

153. In auditing sanctions in respect of grant of any compensatory
allowances, fees of honoraria to Government servants, the following general
conditions shall be kept in view:
(1) Unless in any case it be otherwise distinctly provided, the whole time of a
Government servant is at the disposal of the Government which pays him,

73
and he may be employed any manner required by proper authority, without
claim for additional remuneration, whether the services required of him are
such as would ordinarily be remunerated from the revenues of the Central or
State Government or from a local fund.
(2) The authority granting or permitting a Government servant to receive any
honorarium or fee is required to pay due regard to the principle enumerated
in (1) above and also to record reasons justifying the grant of the extra
remuneration to the Government servant concerned; and
(3) The amount of a compensatory allowance is to be so regulated that on
the whole it should not be a source of profit to the recipient.

154. The detailed rules regarding the grant of fees, honoraria, etc. to
Government servants are given in Chapter XI Financial Regulations Part I,
Vol. I. 1983 Edition.

Recruitment to posts and services

155. (1) Audit Officers are not required to watch the observance of the
provisions of the following nature relating to recruitment or appointment to
posts or services, as these are the concern of the administrative authorities:
(a) Rules relating to the representation of any particular community or, any
backward class of citizens;
(b) Rules relating to the proportion to be observed in recruitment to posts
and service between personnel promoted from subordinate ranks and those
recruited direct; or
(c) Rules relating to educational or other qualifications.

(2) When, however, an Audit Officer is of the opinion that in accordance with
any rule or order a post is reserved for members of a particular service and
an outsider is appointed, he will call for the sanction of the authority which is
competent to remove the reservation. The fact that the pay of a post has
been fixed on the assumption that it will be held by a member of a particular
service tends to show, that it was intended to reserve the post for that
service but this by itself is not conclusive evidence.
Note: This check need not be applied in case of non Gazetted Government
servants.

74
(3) Similarly, when the educational and other qualifications have a direct
relationship to the rate of pay admissible, audit must satisfy itself of the
possession of the necessary qualification before admitting the financial benefit
attached thereto. In such cases, the verification will be made with reference
to the certification of the fact by the administrative authorities concerned,
either in part II Orders notifying appointment /promotion or otherwise.

Advances for payment to industrial employees

156. Advances for payment to industrial employees employed in Ordnance
Depots, etc, are paid on receipt of cash requisitions from the officer
concerned, based on an estimate of the probable amount required for
payment during the month. The amounts so advanced will be noted in the
demand register and their adjustment watched there from. These advances
will be adjusted on receipt of Temporary Labour Bills (IAFA 40) from the
officers concerned duly checked by the Local/Regional Audit Officers.

Pay bills of civilian personnel of Territorial Army units

157. Pay bills of the civilian personnel of Territorial Army units will be
audited in the same way as pay bills of the civilian establishment of Regular
Army units.

158. In addition it will be seen that:

(i) The complement of different categories authorised as permanent staff is
not exceeded, except during periods of annual training/camp or embodiment
when establishment may be employed upto the full strength authorised in the
peace establishment of the regular army unit on which Territorial Army unit is
raised.
(ii) Pay and allowances claimed for each category are according to the
provisions of paras 168, l98 and 199 Regulations for Territorial Army 1948
(Reprint 1958) as amended from time to time.

159. In the case of civilians employed in lieu of combatants and non

combatants (enrolled) authorised in establishment it should be seen that:
(i) A certificate has been furnished by the Officer Commanding of the
Territorial Army unit that the personnel required cannot be supplied from
recruited personnel.

75
(ii) Their pay and allowances are claimed according to the rates admissible
under Govt. Orders issued from time to time.

76
 CHAPTER 8
TRAVELLING ALLOWANCE AND OTHER CONVEYANCE CHARGES
Para
Traveling Allowance 160
Sea Passage Allowance claims 166
Air Passages within Indian limits 167
Air Passages to/from outside Indian 168
Air Freight within Indian limits 171
Air Freight to from outside Indian limits 172
Railway Warrants, Credit Notes and Concession Vouchers 176
Claims for under or over charges between Railways and Defence 177
Sea Passages 181

Traveling allowance
160. The term 'traveling allowance' as used in this chapter includes daily
allowance.

161. Claims for traveling allowance for journeys by rail, road, river, sea or
air must be submitted on the prescribed forms, which are drawn up in such a
way as to give all the information necessary to ensure proper check of the
claims, unless specifically provided otherwise in the regulations in respect of
any particular class of personnel, the claims are required to be countersigned
by Controlling Officers. The countersignature does not however, dispense with
the necessity for audit with reference to rates and general conditions.
Ordinarily, the countersignature by the proper authority or the signature of
the drawing officer when a bill does not require counter signature, should be
accepted as final evidence that the facts of the journey on which the claim is
based are correct and that the controlling or the drawing officer, as the case
may be, has exercised the scrutiny entrusted to him under the rules.

162. Detailed rules for the audit of road warrants are laid down in Chapter
10.

163. In conducting the audit of traveling allowance claims, the following

points will be specially seen, in addition to the checks prescribed in Paras 37
and 49.

77
(1) That the claims have been submitted on the prescribed forms, in
accordance with the instructions printed thereon, and are supported by all the
necessary certificates as prescribed in the Regulation;
(2) That the duty on which the journey was performed was such as to entitle
the individual who performed it to traveling allowance under rules and that
the sanction of the prescribed authority has been accorded where this is
necessary;
(3) That the journey was performed as expeditiously as possible and that no
bill has been submitted for it before;
(4) That the rates of railway, steamer, or air fares charged, agree with the
tariffs of railway, steamship or air company concerned;
(5) That the distance for which mileage has been claimed are correct, where
these can be checked from data available in the audit office, as, for example,
fare or time tables. Any case of journeys by road or by river, the distance for
which mileage is claimed, if not susceptible to check in the audit office will be
accepted on the responsibility of the countersigning officer, who is required to
ensure that correct distances are charged for. In cases of any doubt, as to the
correctness of the distances for which the allowance has been drawn, the
local MES authorities will be consulted;
(6) That no allowances have been claimed which are not covered by
regulations or orders;
(7) That the claims are countersigned by Controlling Officers, where
necessary;
(8) That any advance of traveling allowance taken in respect of the particular
journey for which the claim is preferred has been brought to account in the
claim;
(9) That in the case of witnesses attending a civil court any fees which may
be deposited in the court for the traveling and subsistence allowance of the
witnesses are credited to government;
(10) That in the case of claims for daily allowance for halts at temporary duty
stations necessary deductions are made in respect of State hospital received
and transport facilities enjoyed if any;
(11) That in the case of claims for leave travel concession, the provisions of
Government order issued on the subject are complied with.

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164. All claims for traveling allowances in respect of journeys by rail, road,
river, sea or air will be recorded in the demand cum audit register maintained
for the purpose.

165. All advances of traveling allowance will be entered in a demand cum

audit register maintained for the purpose. This register will be used to watch
the submission and final settlement of adjustment bills required to be
submitted in respect of these advances, or where in the case of transfers the
advances are notified to other Audit officers for action towards final
adjustment, to record details of the transfer of the advances and of their
acknowledgement by those officers.

Sea passage allowance claims

166. Claims for passage allowance and cost of conveyance of baggage in
respect of voyages will be audited with reference to the rules in Travel
Regulations and paid by the Principal Controller/Controller who deals with the
audit of the traveling allowance bills of the claimant.

Air passages within Indian limits

167. The traveling allowance claims for air journeys within Indian limits will
be audited in accordance with the general procedure laid down in Para 163
above. The following points should be seen in addition:
(1) That the claim is supported by a copy of the sanction accorded by the
authority competent to authorise air passage in the particular case where
necessary;
(2) That a return ticket at a reduced rate where available, has been
purchased when the individual concerned expected to perform the return
journey by air within the period during which a return ticket is available and
that the mileage has been claimed accordingly.

Air passages to/from outside Indian limits

168. All air passages ex India, unless otherwise specifically provided for in
authorised regulations or other orders of Government; require the prior
sanction of Government of India.
Claims relating to air passage of Army personnel Defence Civilian ex
India are dealt with centrally by the PCDA New Delhi. Similar claims relating

79
to Navy and Air Force personnel are dealt with by the PCDA (Navy) and PCDA
(Air Force) respectively.

169. In auditing air passage ex India claims, the following main points will
be seen:
(1) That a copy of the exchange order duly supported by a copy of Govt.
Sanction has been received from Quarter Master General’s Branch;
(2) That the authority exists for air passage;
(3) That the bills submitted by the air lines are supported by original copy of
exchange order and that only standard air fares are charged;
(4) That the authority exists for the conveyance of any excess baggage over
and above the normal free allowance permitted by the airlines;
(5) That the original exchange order received with the air line's bill is paired
with the duplicate exchange order received from QMG’s branch, and
(6) That a journey completion certificate is received direct from the Officer. In
case excess baggage voucher issued to an individual for both the outward
and return journey is not fully utilized, the individual should obtain the
difference voucher from the air lines and forward the same to QMG branch for
obtaining necessary refund from the carrier.

170. When return air passages are sanctioned by Government, exchange

orders are issued by the QMG’s branch at Army Headquarters on the
authority of which payment is made to the air line concerned. The amount on
this account should be noted in the demand register as a demand against the
Officer concerned, which will be cleared on receipt of the journey completion
certificate from the Officer.

Air Freight within Indian limits

171. All movements of stores by air within Indian limits (except those the
urgent movement of which by air is essential on medical grounds or for
operational reasons) require the prior sanction of the Government of India.

Cash payment in respect of air freight for Government stores is made

to IAC from the Imprest Account/Permanent Advance of the formation
concerned in the first instance. The amounts paid will subsequently be
claimed from the Regional CDA in accordance with the provisions of rules 223

80
to 226 Regulations for the Unit allowances of the Army. The claims on the
above account will be checked so that they are supported by:
(a) Government sanction, or in the case of stores dispatched by air on
medical grounds or for operational reasons, by a certificate in the prescribed
form signed by an Officer not below the rank of Brigadier, as to the urgency
for dispatch by air; and
(b) Receipt obtained from the IAC for the cash payment made.
Note: The air freight charged should be checked with the tariff of the air lines
concerned.

Air Freight to/from outside Indian limits

I. Dispatch of stores ex-India

172. Dispatch of stores Ex-India requires the prior sanction of the

Government of India.

173. Claims submitted by the airlines concerned on account of air freight in

respect of any stores dispatched ex-India are dealt with centrally by the PCDA
New Delhi. These claims are audited by them, generally on the lines indicated
in Para 169 above. Similar claims in respect of Navy and Air Force are dealt
with by the PCDA (Navy) and PCDA (Air Force) respectively.

II. Imported Stores

174. Transportation of stores from abroad to India by air requires special
sanction of the Government of India and the stores are received at
Mumbai/Kolkata/Chennai on 'freight collect basis'.

175. Payment of bills for freight charges is made by the Embarkation

Commandants Mumbai, Kolkata and Chennai from the permanent advance
Imprest, after verifying that the charges claimed are in accordance with the
prescribed rates. The reimbursement of the charges towards permanent
advance/imprest is subsequently obtained from the PCDAs/CDAs concerned.
Full details, such as the name and address of the consignee, Audit Officer of
the consignee and the no. and date of the Government of India letter
authorising airlift etc., are also intimated to the PCDAs/CDAs concerned to
enable them to raise necessary debit.

81
Railway warrants, credit notes and concession vouchers
176. In auditing railway warrants (including passage orders), credit notes and
concession vouchers, the following special points should be seen in addition
to the general rule for audit of expenditure vide Paras 37 and 49:
I. General
(l) That vouchers are completed in every respect, specially all items in col. 5
of IAFs. T-1707 and T-1707-A and all the columns in IAFT-1711 are correctly
filled in;
(2) That they are duly signed by the officer who is authorised to issue the
same and not by any of his subordinates;
(3) That the sanction of the Competent Financial Authority is always furnished
to regularise the extra freight charges for stores sent by passenger trains
instead of by goods train and for the difference between the longer and
shorter routes and also between the mail and passenger fares unless
specially provided;
(4) That the additional charges in lieu of hire are not passed unless the
vehicle is actually reserved and run over foreign railways even though the
charges are made at vehicle rates;
(5) That in the case of parties travelling or animals conveyed on warrants or
consignments booked on credit notes sufficient to fill vehicle loads, the
vehicle rate or the individual fare or small consignment rate, whichever is
cheaper, is always allowed; and
(6) That the rates and amounts claimed by the railways are checked with
reference to the contract or tarrif rates, as the case may be, and any excess
claim disallowed.

II. Railway warrants

(1) That correct authority is quoted in the warrants for free passage
authorised for families, servants and baggage admissible under Regulations;
(2) That the class of accommodation provided is authorised by Regulations;
(3) That the accommodation provided by the Railway and accepted by the
dispatching officer is necessary with reference to the number traveling on the
warrant and that the vehicles are loaded to the full carrying capacity at the
authorised scale of accommodation;

82
(4) That a single warrant is issued for a party proceeding to the same
destination station on the same day and that the party is not split up into
smaller ones for bringing the warrants within the powers of lower authorities;
(5) That the cost of baggage in excess of the authorised quantity if any,
conveyed in troop trains be ascertained and recovered from the unit
concerned;
(6) That the contract rate is claimed for all journeys on duty performed by
individuals subject to the Army and Air Force Acts and those employed in
Indian Navy, including movements on medical certificate from one military
hospital to another or to a military hospital from a station where there is no
military hospital or when returning therefrom;
(7) That vehicle rate at public carrying capacity is claimed for Non-
Combatants (Unenrolled) proceeding on duty otherwise than on field service
and that the same at the military carrying capacity scale is admitted when
they proceed on field service only, where such accommodation is actually
provided;
(8) That the special train warrants are audited with reference to ‘milrail'
orders authorising the move of the special train and that no charge is claimed
for empty brake-vans and that one loaded brake-van is allowed free when the
number of vehicles of the special train exceeds 16 four-wheelers;
(9) that the haulage of specially constructed reserved carriages or saloons
used by high officials is claimed at the rates specially sanctioned by the
Government of India and that the claims for detention charges are supported
by the written orders signed by the official concerned or by one of his staff
officers ordering such detention or stoppages;
(10) That warrants are only issued in the case of officers who are required to
travel on warrant under Regulations;
(11) That the warrants have been issued by the main route only unless
medical or military reasons render the use of an alternative route desirable;
(12) That whenever split warrants are issued, the issue of such split warrants
is authorized;
(13) That, in the case of leave journey, similar leave travel concessions either
under rule l77-A and l77-B Travel Regulations have not been availed of by the
officer during the same calendar year; and
(14) That extra charges are recovered in the case of erroneous issue of
warrants.

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III. Credit notes
(l) That the stores conveyed on credit notes are bonafide Government
property at the time of dispatch and that such stores are always booked on
credit notes duly presented at the forwarding station, and
(2) That separate credit notes are issued for wharfage or demurrage charges
and that proper sanction exists, for the payment of such charges.

IV. Concession vouchers in respect of concession admissible to

defence services personnel for railway journeys while traveling at
their own expense
(l) That the amount of the fares charged against the Defence Services
estimates is correct;
(2) That the debits against the Defence Services estimates are borne out by
the details recorded on the concession vouchers supporting the debits;
(3) That the individuals and the members of their family in respect of whom
the forms are issued are entitled to the concession and that the number of
the members of family does not exceed the limit authorised under rules;
(4) That the forms are issued and utilised only for journeys performed at
individual's own expense, and that the forms are on no account used for
journeys in respect of moves on permanent and temporary duty for which
free conveyance in any other from is admissible;
(5) That in the case of JCOs and others, the journeys in respect of which the
concession is granted have, prima facie been undertaken from or to the place
of duty of the head of the family; and
(6) From a higher audit point of view that in the case of officers, the
concession is not abused by a lavish availment of it.

Claims for under or over charges between railways and defence

177. The claims for under or over charges between Railway and Defence
Accounts Officers concerned, are required to be preferred within six months.
The period will be computed as follows:
For Railway Accounts Officers:
From the date shown on the original bills to the date shown on the claims for
under charges.

84
For Defence Accounts Officers:
From the date of receipt by them of the original bills from the railways to the
date of dispatch of their claims for over-charges.

178. As the railway authorities do not entertain any objection or

disallowance raised by Principal Controllers/Controllers after the prescribed
six months time limit mentioned above, it is essential that all objections and
disallowances should be issued to them within that period and steps should
be taken to ensure that this is done.
Note: In no circumstances should technical defects in warrants, credit notes
and concession vouchers, e.g. Want of signature of issuing officer, be allowed
to retard the issue within the prescribed period, of objections and
disallowances against the railway authorities. In such cases, check will be
exercised from such information as is available and any objection found will
be included in the objection statement issued to those authorities.

179. Similarly, the Principal Controllers/Controllers will not entertain any

claims for under charges of fares and freight not preferred within the
prescribed limit of six months from the date of original bills.

180). The audit of railway warrants, credit notes and concession vouchers is
conducted by the Principal Controllers/Controllers mentioned below. They also
carry out necessary accounts adjustments as envisaged in Para 112 Defence
Account Code, 2014 edition.

85
The audit of railway warrants, credit notes and
concession vouchers is conducted by the controllers
mentioned below. They also carry out necessary
accounts adjustments as envisaged in Para 112
Defence Account Code, 2014 edition.

PCA(Fys)
1. Warrants:-

1.1 IAFT individual 1752 Warrant (excluding those

issued individually to service officers as well as
officers of the Nursing services referred to at (1.5)
PCA(Fys)
below

1.2 IAFT-1707 Party warrants issued for small troops

including the omnibus warrants issued to officers
PCA(Fys)
moving with bodies of troops

1.3 IAFT-1707 A issued for Military special trains

PCDA (BR)
vehicles, wagons and compartments.

1.4 IAFT-1711 Military credit notes issued for Military

Army Officers - PCDA(O)
stores consigned under Military Tariff Rules.
Navy Officers PCDA(N)
Air force officers
1.5. Warrant issued in respect of Services officers
PCDA(AF)
(including Nursing Officers)

2. Concession vouchers:

2.1 IAFT-1720A Certificate for tickets and return PCA(Fys)

journey vouchers for JCOs and their equivalent rank,
i.e. Army, Navy, Air Force when traveling on leave at
their own expense and for their families.

2.2 IAFT-1738 Railway certificate for military PCA(Fys)

pensioners proceeding to attend Regimental reunions
etc).

2.3 IAFT-1953 used on presentation of Recall letter PCA(Fys)

by the Reservists has been announced over the All
India Radio.

86
2.4 IAFT-1954 Military Certificate for Army, and Non-
PCA(Fys)
Commissioned Officers and men of the Territorial
Force on being called up for training or services.

2.5 IAFT-1736 Certificate for competitions and

PCDA(N)
spectators of Defence Services and Territorial Force PCDA(AF)
PCDA(O)
attending match is, competitions, tournaments etc.
held under Military arrangement.
Navy officers
Air Force officers
Army officers

2.6 IAFT-1733 unaccompanied baggage-certificate

PC of A(Fys)
(Goods train).Other than Officers of the Army, Navy,
Air Force.

2.7 IAFT-1709A Concession voucher 'D' for Military

Army Officers PCDA(O)
Officers when traveling on leave at their own expense Navy Officers PCDA(N)
Air Force Officers -
and their families.
PCDA(AF)

2.8 IAFT-1719 Concession voucher issued to the The Regional CDA who
pays the Army cadets- In
cadets of Army/Air Force/Navy
respect of Flight cadets
and Cadets of Navy- The
PCDA(AF) and PCDA(N)
respectively

2.9 IAFT-1732 leave concession vouchers form 'D' PCDA(O) in respect of

for member of Military Nursing Services/Civilian forms used for members
Sisters of Military Hospitals traveling by Rail. of MNS and Regional CDA
in respect of the forms
used by civilian sisters.

2.10 INF-3 Mily. Certificate form for Fleet Reservists PCDA(Navy)

of Navy on being called up at the time of General
mobilization

2.11 IN-461 Military Certificate Form for Fleet PCDA(Navy)

Reservists of Navy on being called up for training

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Sea Passages
181. The bills for the cost of sea passages provided for service personnel
and civilian paid from the Defence Services Estimates will, with the exception
of those relating to Navy personnel, be audited and finally adjusted by the
Regional CDA in whose audit area the port of Embarkation is situated. Similar
bills in respect of service personnel and civilians in the Navy will be received
and audited by the PCDA (Navy).

182. The Principal Controllers/Controllers paying the claims on account of

sea passages provided to Factory personnel should send to the Factory
concerned, through the PC of A (Factories), a monthly statement showing
particulars of the charges compiled by them against the accounts of the
factories during the month, to enable the latter to include the same in their
trading and production accounts, etc
Similar figures in respect of the personnel belonging to other quasi
commercial concerns, such as Military Farms, etc. should be sent to those
concerns through the PCDA in whose audit area they are situated.

183. In checking the bills received from shipping companies it should be

seen that:
(l) IAFT 1724 (Requisition of passages) have been completed and signed by
the Embarkation Commandant concerned;
(2) Sanction of the QMG exists for all passages;
(3) The individuals are entitled to free passages as authorised by rules or
Government Orders;
(4) The fares charged agree with the schedule of fares on record in the audit
office and rebates are allowed by the Shipping Companies when required to
be given under the terms of their contract with the Government; and
(5) The messing charges for voyage period where due from officers and
others are correctly recovered with reference to rules on the subject in the
Travel Regulations and recorded in the Register of Messing Charges.

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 CHAPTER 9
UNIT ALLOWANCES, CONTINGENT AND MISCELLANEOUS
EXPENDITURE

Para
Unit Allowances 184
Contingent and miscellaneous charges 186
Charges for ground rent and land Compensation 191
Conservancy and hot weather establishment charges 192
Petty recurring expenditure sanctioned by the GOs in C Commands,
Area Commanders etc 195
Non recurring payments sanctioned by the Chiefs of the Army,
Naval and Air staffs 196
Contingent and Miscellaneous Expenditure of Military Attaches/
Advisers to Indian Embassies abroad 199

Unit Allowances
184. Claims for miscellaneous unit allowances and grants are normally
preferred by the Officer Commanding units/formations (excepting Air Force
units/formations) and heads of establishments, to the PCDA/CDA concerned
for pre audit and payment. Certain claims such as those on account of
condiment allowance (paid out of imprest) and annual training grant account
(grant obtained on requisition or by allotment) are however subject to post
audit by the Principal Controller/Controller concerned.
The claims for miscellaneous unit allowances and grants in respect of
Air Force units/formations are paid out of units' imprest accounts and sent to
PCDA (AF) along with the monthly cash accounts for post audit. As an
exception, claims on account of local purchase of stationery/rubber stamps
and local printing and those pertaining to the DTD & P (Air) establishment
etc, are sent to PCDA (AF) for pre-audit and payment direct to the parties
concerned. Claims in respect of DSC platoons serving with Air Force units are
sent to the PCDA (AF) for pre-audit and authorisation of payment out of units'
imprest Accounts.
Note: The claims of condiment allowance in respect of patients in hospital
will, however, be pre-audited.

89
 Ordinarily, payment of the above mentioned claims will be made
through e-payment, but in case it is not feasible due to lack of internet facility
or any other hindrance, payment may be made through cheque. However, in
case even the payment through cheque is not feasible to the units etc. in an
operational area or stationed at places where banking/ internet facilities are
not available, units may be authorized payments from the Unit Imprest.
The authorised/audited bill in such cases should be authenticated by
the payment authority seal of the office of issue. The vouchers, etc, in
original in such cases will, on receipt with Imprest Accounts, be transmitted
by the Pay Accounts Officers (ORs), to the PCDA/CDA who authorised the
payment.

185. Unit claims and the audit requirements in connection therewith are
given in Regulations for the Unit allowances of the Army, and pamphlet of
Recognized Claims Part I (Army), Part II (Navy) and Part III (Air Force). In
addition to the general checks required to be exercised over cash
expenditure, the Principal Controllers/Controllers will check that the
requirements referred to above have been complied with.

Contingent and Miscellaneous charges

186. The primary check over contingent expenditure is performed by the
executive authorities. It is their duty to see that the charges drawn in a
contingent bill are of obvious necessity and are at fair and reasonable rates,
that previous sanction for any item requiring such sanction is attached; that
all requisite vouchers are received and are in order; that the calculations are
correct, and that, where applicable the expenditure has not exceeded and is
not likely to exceed, the allotment made for the purpose. If expenditure be
progressing too rapidly, it is their responsibility to regulate the expenditure
and to keep it within the authorised allotment and if necessary, to take steps
to obtain an additional allotment.

187. Contingent and miscellaneous charges will be audited in accordance

with the general rules for the audit of cash expenditure as given in this code.
In the case of contingent charges it will further be seen:

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(l) That the charges are of a kind normally incurred on account of office or
other contingencies and that they are not of an unusual or extraordinary
nature;
(2) That the expenditure has been incurred with due economy; that rates and
prices are reasonable and are apparently not extravagant and that the
standards of financial propriety as laid down in para 32 have been observed;
(3) That the bill is in proper form and that any certificates required under the
financial rules have been furnished;
(4) That the vouchers for charges in excess of Rs. 100 are furnished;
(5) That no charges for pay and allowances are included in the contingent
bills;
(6) That the recurring charges have been sanctioned by the competent
financial authority;
(7) That the expenditure is incurred by a Government servant competent to
incur it, and that it has received such sanction as is necessary;
(8) That charges for non official publications (including' newspapers) conform
to Para 604 Defence Services Regulations 1962;
Note: Charges for railway time table and Indian Postal and Telegraph Guides,
when their purchase is necessary, may be admitted.

(9) That printing, binding and stationery charges do not contravene the rules
contained in the 'Rules for the supply and use of stationery stores and those
for printing and binding. In this connection see AI 44/76 and 41/83 AFI 28/79
and Nl26/78 as amended from time to time for Army, Air Force and Naval
units respectively;
(10) That no charge is preferred for-section writing i.e. for copying
manuscript by piece work, without the previous sanction of the authority
which may sanction the employment of an establishment; and that no such
charge is passed to any person in receipt of a salary from Government;
(11) That charges for liveries and warm clothing for MTS employees are
claimed in accordance with the conditions laid down in Hand book on
uniforms of MTS employees, issued by the Ministry of Home Affairs and other
special Government letters issued for the purpose;
(12) That no charge is passed which contravenes the orders relating to
contingent and miscellaneous expenditure contained in chapter 12, Financial
Regulations Part I, Vol I, Pamphlet of Recognised Claims; and Appx II of FR
Part II;

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(13) That the expenditure in respect of charges, for which a separate
allotment has been sanctioned for the year, is a proper charge against the
allotment and that it is not progressing at a rate likely to exhaust the
allotment before the end of the year. In the latter contingency the Officer
submitting the claims will be warned to keep the expenditure within the
authorised limit and advised, if necessary, to take steps to obtain an
additional allotment. See also in this connection chapter 13 Defence Account
Code;
(14) That charges for which scales have been laid down are passed in
accordance with those scales and that the charges for which sanction of
higher authority is necessary have been so sanctioned;
(15) That there is no tendency to incur expenditure simply because funds are
available, and that if the expenditure in the month of March is unusually large
it does not lead to irregularities; and
(16) That legal charges are claimed in accordance with the provisions
contained in para 421, 537 and 538 of Regulations for the Army and other
Government letters issued for the purpose.

188. A comparison of the relative responsibilities of the executive and

administrative authorities and the Audit Officers in regard to contingencies;
as stated in the preceding paragraph, will show that the duties of the former
are more onerous than those of the latter. It is more difficult to decide
whether expenditure is necessary than whether it is unusual, and whether
rates are reasonable, than whether they are apparently extravagant.

189. To avoid double payments, recurring charges will be linked with the
previous charges and audited. A suitable entry should be prominently made in
the last charge, regarding the fact of payment of the next charge at the time
of audit, thereof indicating also the number and date of the voucher (as given
by the unit), the amount involved and the month to which the charges
pertains under the initials of the auditor and the AAO. Non-recurring charges
will be noted in the non-recurring charges register.

190. For the record of special charges requiring the sanction of the superior
authority, a register will be kept in IAFA-514. Separate pages may be set
apart for unit, formation or Officer; or the pages may be distributed according

92
to classes of expenditure. Immediately on receipt of an order sanctioning any
special expenditure, it will be entered in the register in an appropriate place;
it will be audited against the note in the register and the necessary entries
made.
Note 1: This register will also be used to record the audit of language
rewards and other special nonrecurring charges. In the case of those officers
and men whose pay accounts are maintained on IRLAs, such charges will be
audited through these ledger accounts.
Note 2: In opening a new register, orders of which are still in force, that
have not expired, will be carried forward from the old to the new register.
Note 3: Special sanctions of refunds, advances and traveling allowances will
also be recorded in the register and the claims will be audited against those
sanctions, as and when they come up for payment.
Note 4: When an order sanctioning expenditure contains no indication of the
amount of limit of the sanction, the PCDA/CDA will address the issuing
authority for this information.

Charges for ground rent and land compensation

191. Charges for ground rent and for compensation for land taken up for
military purposes will be audited under the general rules laid down for the
audit of cash expenditure, and payments on this account will be made with
reference to the conditions noted on the lease agreements entered into by
the authorities concerned. The lease agreements will be recorded in a
separate Guard file maintained for the purpose.

Conservancy and hot weather establishment charges

192. The budget provision in respect of conservancy and hot weather
establishment charges is distributed by the authorities at Defence Head
Quarters to Commands/Establishments under them and through them to
Areas and Sub Areas/Heads of Establishments respectively. The Sub
Areas/Heads of establishments distribute it to Officers Commanding Stations,
who in turn may distribute the allotment to units and formations/offices under
them, respectively. The bills in respect of conservancy and hot weather
establishment charges are monthly preferred to the Principal
Controllers/Controllers by the Officers Commanding stations or

93
units/formations/heads of establishments to whom the allotments have been
distributed.

193. In auditing the bills referred to above, the following points should be
seen in addition to the general checks laid down for the audit of cash
expenditure:
(i) That the pay and allowances of regular conservancy establishment are
claimed in IAFA 38 and those of hot weather establishment on a contingent
bill and that the claims in both the cases are countersigned by the Officer
Commanding station and are supported by details of expenditure;
(ii) That the hot weather appliances on which the establishment has been
employed are authorised in Barrack and Hospital Schedules. If not,
Government sanction had been obtained before such appliances were fitted in
the Military buildings;
(iii) That such of the employees paid from contingencies and other allotment
under ‘Incidental and Miscellaneous Expenses’ and ‘Conservancy Grants’ as
are borne on the regular establishment are paid at the appropriate rates of
pay and allowances applicable to them (vide C.D.S. (RP) Rules 2016;)
(iv) That the casual employees paid from contingencies and other allotments
mentioned in clause (iii) are paid as per as nerrick rates prescribed from time
to time by Station Hqrs or such other pay as may be fixed in individual cases
by special orders. In addition it will be ensured that Dearness, Compensatory
and other allowances are admitted only at the same rates and in the same
manner as are prescribed for class IV staff belonging to regular establishment
with effect from 1/7/1959, that leave pension, medical, attendance or
traveling allowance benefits are only admitted to personnel, who are entitled
to the concession(s) as per the orders issued from time to time; and
(v) That funds are available to meet the claims preferred; also see Para 194.

194. When there is a probability of the allotment for a unit or

formation/establishment/ or for the station being exceeded, the PCDA/CDA
will warn the officer Commanding/Head of the establishment concerned in
time to enable them to obtain additional allotment to cover expenditure in
excess of the original allotment. Further, payments will be regulated in
accordance with the principles governing provisional payments laid down in
Defence Account Code.

94
Petty recurring expenditure sanctioned by the General Officer
Commanding-in-Chief Commands, Area Commanders, etc.,
195. To see that the limits prescribed in Appendix II part I Army schedule IV
of Financial Regulations Part II vol II 1983 edition, in regard to the
sanctioning of petty recurring expenditure by General Officers Commanding-
in -Chief, etc, are not exceeded. A register will be maintained in which all
sanctions will be recorded. Command Controllers will watch the sanctions
accorded by the General Officers Commanding-in-Chief of the Commands for
all the Areas and Sub Areas in the Command.

Non recurring payments sanctioned by the Chiefs of Staff

196. A sum of Rs. 60,000 per financial year (or amount as amended from
time to time) is placed at the disposal of the Ministry of Defence to enable
non-recurring payments to be made by the authorities specified below on the
following objects:
(a) Donations when visiting training establishments, boys’ training units etc;
(b) Provision of trophies, flags, etc. for presentation to training
establishments;
(c) Provision of amenity articles when visiting hospitals, welfare centers etc;
(d) Similar grants; and
(e) Miscellaneous expenditure incurred by the Chief of the Army Staff/the
Chief of the Naval Staff/the Chief of the Air Staff, while on tour for which no
specific provision exists in the regulations eg. Gratuities to servants, coolies
hired etc. This expenditure should not exceed 10% of the amount allocated to
the Chief of the Army Staff/the Chief of the Naval Staff/the Chief of the Air
Staff.

197. The various authorities and the maximum limits up to which each of
them may accord sanction are as follows or as amended from time to time:
(i) The Chief of the Army Staff Rs. 100 lakh per Financial Year
(ii) The Chief of the Naval Staff Rs. 50 lakh per Financial Year
(iii) The Chief of the Air Staff Rs. 50 lakh per Financial Year

198. The bills for non-recurring payments sanctioned by the Chief of the
Army Staff will, be paid by the PCDA New Delhi and those for payments
sanctioned by the Chief of the Naval Staff, by the PCDA (Navy) respectively.

95
These officers will be responsible for watching that the sanctions accorded do
not exceed the prescribed limits.
In the case of Air Force, the sum of Rs. 50 lakh will be paid at the
beginning of each year to the Chief of the Air Staff on a contingent bill
received from him. A public Fund Account will be opened and expenditure
incurred, as and when required. The unspent balance at the end of the
financial year will be refunded to Government.

A proper account of all expenditure out of this grant will be maintained

at IHQ of MoD (Air) supported by appropriate vouchers and the accounts will
be subject to audit in the usual manner by the PCDA (AF). For this purpose a
copy of the cash book will be received from the Chief of the Air Staff by the
first week of April each year together with the original receipts and vouchers.

Contingent and Miscellaneous Expenditure of Military Attaches/

Advisers to Indian Embassies Abroad
199. An annual allotment to meet contingent and miscellaneous expenditure
is provided every year by IHQ of MoD (Army) to each of the Military Attaches
to Indian Embassies abroad. A copy of the communication notifying the
allotment is endorsed to the PCDA Central Command, who is the Central
Controller responsible for auditing and adjusting the expenditure on the
above account.

200. On receipt of debits from the Controller General of Accounts, the PCDA
Central Command will in addition to the General Rules regarding the audit of
cash expenditure, see
(1) That the accounts of contingent and miscellaneous expenditure have been
countersigned by the Head of the Embassy in token of their approval to the
expenditure and are duly supported by relevant vouchers;
(2) That the expenditure on contingencies has been incurred only on the
authorised items, such as those mentioned in the Annexure to Government of
India, Ministry of External Affairs letter no. F 25(17) B & a ii/59 (EAI)
62/i/178 dated 31/10/62 etc;
Note: The Military Attache/Adviser being a part and parcel of the Embassy,
Legation etc, where he is posted, the provision of office accommodation,
motor cars and other administrative arrangements such as, provision of
furniture, fans, arrangements for cleaning office, hot and cold weather

96
arrangements, dispatch of mail etc., is made by the Embassy, Legation etc,
and the expenditure is chargeable against the Civil Estimates.
(3) That the allotment of the year is not exceeded.

201. A copy of the account (without vouchers) is sent by the Military

Attaches to IHQ of MoD(Army) in advance to enable those Headquarters to
note the progress of expenditure.

202. All audit observations will be addressed by the PCDA(Central

Command) Lucknow directly to the Military Attaches concerned. Items which
are not satisfactorily settled within a reasonable time will be reported to the
G.S. Branch for further necessary action in the matter.

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 CHAPTER 10

CONTRACTS, EXPENDITURE ON SUPPLIES AND HIRED LAND

TRANSPORT

Para
Contracts
General Rules 203
Comparative Statement of Tenders 210
Audit of Contracts 212
Short term agreements bills 213
Expenditure on Supplies
Audit of bills 214
Payment of Contractors bills 217
Hired Land Transport
Audit of bills 221
Payment of Contractor’s bills for hired transport 225
Adjustment of expenditure on hired land transport 227

Contracts
General Rules
Note: The rules in this chapter do not apply to contracts for the Military
Engineering Services nor to those concluded for the Defence services by the
purchase organisations under the Ministry of Commerce and the Ministry of
Food.

203. Supplies and Services required by Government are generally arranged

by means of Contracts/Agreements, for which tenders are invited. It is an
important function of audit to examine contracts or agreements for services
or supplies entered into by Government officials on behalf of Government.

204. The responsibility for the placing and fulfillment of contracts for
supplies to be made or services to be rendered, rests entirely with the
executive. But this does not preclude audit criticism, when the action or
procedure adopted by the administrative authorities results in loss or waste of

98
public money, or where the terms and conditions of afford reasonable
security against malpractices.

205. The Government of India has laid down the following fundamental
principles for the guidance of authorities authorised to enter into contracts or
agreements involving expenditure from public funds. These are financial
rules, but they state audit principles as well.
(1) The terms of a contract must be precise and definite; and there must be
no room for ambiguity or misconstruction therein.
(2) As far as possible, legal and financial advice should be taken in the
drafting of contracts and before they are finally entered into.
(3) Standard forms of contracts should be adopted wherever possible the
terms of contract to be subject to adequate prior scrutiny.
(4) The terms of a contract once entered into should not vary, without the
previous consent of the Competent Financial Authority to enter into Contract
as so varied.
(5) No contract involving an uncertain or indefinite liability or any condition of
an unusual character should be entered into without the previous consent of
the competent financial authority.
(6) Whenever practicable and advantageous, contracts should be placed only
after tenders have been openly invited, and in cases where the lowest tender
is not accepted, reasons should be recorded.
(7) While selecting the tender to be accepted, the financial status of the
individual and firms tendering must be taken into consideration, in addition to
all other relevant factors.
(8) Even in cases where a formal written contract is not made, no order for
supplies, etc. should be placed without at least a written agreement with
respect to price.
(9) Provision must be made in contracts for safeguarding Government
property entrusted to a contractor.
(10) When a contract is likely to endure for a period of more than 5 years, it
should, wherever feasible, include a provision for an unconditional power of
revocation or cancellation by Government at any time, after the expiry of six
months notice to that effect.

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Note 1: Sanction of the Government of India will be necessary to conclude a
contract for a period beyond 3 years. For exception to this General Rule see
Rule 246 Financial Regulations Part I vol I 1983 edition.
Note 2: Long term contracts (contracts for more than one year) should also
be sent to Director of Audit Defence Services.
Note 3: It may be ensured in audit, that wherever prior concurrence of
respective Regional Controllers on the spot/Min of Defence (Finance) is
required under the rules, the same should be obtained before entering into
contract.

(11) The Principal Controllers/Controllers of Defence Accounts have power to

examine contracts, and to bring to the notice of the appropriate authority,
any cases where high tenders have been accepted, or where other
irregularities in procedure have come to light.
(12) Implementation of Comprehensive end-to-end- e-procurement:-
It is mandatory for all Ministries/ Departments of Central Government, their
attached and subordinate offices, Central Public Sector Enterprises and
autonomous/ statutory bodies to publish all tender enquiries, corrigenda
thereto & details of contracts awarded thereon on Central Public Procurement
Portal (CPP Portal). To promote e-Procurement further and to ensure
maximum participation of tenders through e-Procurement mode, it has been
decided that the tender value limit of Rs 10 lakh ( Ten lakh) set in respect of
e-Procurement is to be brought down to Rs 5 lakh (Five lakh) w.e.f.
01/04/2015 & further to R 2 lakh (Two lakh) w.e.f. 01/04/2016. The tender
above Rs 10 lakh (Ten lakh) are compulsorily processed through
e-procurement.

206. Deviations from contracts require authority not inferior to that required
for the original contract. Audit should also see that contract rates are not
increased without the sanction of the authority next higher to the one which
sanctioned the contract, and that no payments outside the strict terms of the
contract are made without the consent of the competent financial authority.

207. Cases in which there is evidence that a Government servant of the

contracting department has an undue common interest with the other
contracting party, should be brought to the notice of the competent higher
authority for such action as it may consider necessary.
100
208. Standing contracts should be reviewed occasionally and if audit has
reasons to believe that the rates accepted in those contracts are considerably
higher than the rates prevailing at the time of review, such variations should
be brought to the notice of competent authority.

209. The detailed rules and procedure of calling for tenders and conclusion
of contracts relating to the defence services are laid down in chapter X
Financial Regulations Part I Vol. I 1983 edition, ASC Regulations and other
departmental Regulations.

Comparative Statement of Tenders

210. The comparative statements of tenders in respect of ASC Contracts are
required to be submitted to Principal Controllers/Controllers for prior scrutiny,
irrespective of the nature, value or period of the proposed contracts. In other
cases, the comparative statement will be sent to Principal
Controllers/Controllers for pre-scrutiny only where it is so provided in the
relevant regulations. A competent sanctioning authority may, however if he
considers it desirable, obtain the remarks of the Principal Controller/Controller
before giving his sanction.

211. The following points should be observed in dealing with the

comparative statement:
(l) That the statement has been prepared in the prescribed format;
(2) That the entries in the statement are in accordance with the relevant
rules applicable to the proposed contracts;
(3) That no local purchases of the stores are arranged, supplies of which are
required to be made by a central purchasing authority, except with the
concurrence of that authority;
(4) That a uniform fee of Rs.100 for the tenders issued by the ASC in respect
of each contract/short term agreement has been charged from all contractors
and the number and date of treasury receipt under which the fee was
deposited by the contractor has been recorded by the executive officer on the
top of the tender form;
(5) That a certificate to the effect that the tender forms not returned by the
contractors, are identical to those that are forwarded along with the CST is
given on the CST by the executive authorities;

101
(6) That the tender forms and schedules issued to all the contractors are the
same in all respects; and
(7) That if the lowest tender has not been recommended for acceptance, the
reasons put forward are justifiable.

Audit of Contracts
212. As soon as a contract is concluded and the security deposit is received
from the contractor, the original copy of the contract together with a
duplicate copy (complete with all forms), the comparative statement of
tenders, and the security deposit receipt is passed on to the PCDA/CDA
concerned for post scrutiny. On receipt, the Principal Controller/Controller will
see that:
(1) All requirements pointed out at the time of pre-scrutiny (if carried out)
have been complied with or satisfactorily replied, acceptable in audit, has
been furnished;
(2) Where audit advice regarding the acceptance or otherwise of the
recommended tenders has not been accepted, adequate reasons are recorded
in the comparative statement under the signature of the competent
authority;
(3) The lowest tender has been accepted as a rule or where a higher tender
has been accepted, adequate reasons are recorded in the statement;
(4) That the contract has not been made by or on behalf of a minor;
(5) That the contract has been sanctioned by the competent authority and
has been concluded with the firm actually admitted to the register of
approved contractors;
(6) That the security deposit in the appropriate form and of correct amount
has been lodged within the period stipulated in the contract and that in the
event of default penalties leviable under the conditions of the contract have
been enforced;
(7) That all the conditions and requirements printed on the contract form
have been complied with;
(8) If the contract has been entered into with a firm, each one of the
partners has signed all the documents constituting the contract and if any
partner be absent these forms are signed by his duly constituted attorney.
In the latter case, the original power of attorney duly registered in a

102
court of law will be verified and an attested copy retained for audit purposes;
and
(9) The specimen signature of the contractor or his duly constituted attorney
is received and recorded with duplicate copy of the contract.

Short Term Agreement

213. Supplies and services required by Government are generally arranged
for by contracts, but they can also be obtained on short term agreements
ordered by the competent financial authorities in the following circumstances:
(a) In an emergency when conclusion of a regular contract is not feasible;
(b) When uneconomical rates are tendered for regular contracts and there are
prima facie reasons to believe that this is due to formation of a 'ring' by
contractors; and
(c) As an interim arrangement when for some reason, sufficient time is not
available to conclude a regular contract.
This short term agreements are audited on the same principles as
regular contracts and as laid down in Para 204 et. Seq ante, with the
exceptions that they can be concluded with the unregistered contractors and
that tender documents may not be submitted to Principal
Controllers/Controllers for pre-scrutiny.

Expenditure on supplies
Audit of Bills

214. In addition to observing the rules prescribed in Paragraphs 37 and 49,

it will be seen in auditing bills of for supplies that:
(1) The purchase of the stores has been sanctioned by the competent
authority;
(2) All purchases of stores are made in accordance with the instructions laid
down in Rule 128 et. Seq. Financial Regulations Part I Vol I 1983 edition, with
special reference to the rule that no purchase which requires the sanction of a
superior financial authority shall be sanctioned by an inferior authority in
instalments;
(3) The arithmetical calculations are correct;
(4) The bills are supported by receipt vouchers (properly signed) or receipted
inspection notes or supply orders;

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Note: In the case of articles of provision etc, supplied direct to units, IAFS
1520 should be signed both by the officer receiving the stores and the
supplier. The certificate at the bottom of IAFS 1520 will also be signed by the
receiving officer.

(5) Each supply order (IAFS 1520 or IAFZ 2135) has got impressed on it the
Supply Officer’s stamp and the date of issue has been endorsed in the space
provided with the signature of the issuing officer;
(6) Where contracts have been entered into, the rates charged for agree with
those in the contract agreements;
(7) In the case of purchases of stores by units or depots for which no
contract has been entered into, the rates agree with those in the rate lists on
record in the audit office and with those on the supply orders accompanying
the bills and that the rates have been certified as being correct;
Note 1: Produce from Soldiers Gardens when obtained by the ASC will be
paid for, either at the current local contract rate or at the Military Farms
latest audited actual production rate, whichever is cheaper.
Articles which are neither included in the contract nor produced by
Military Farms but correspond to ASC Specifications will be paid for at the
local wholesale civil market rates as fixed/certified by Civil Authorities.
Dairy produce shall be obtained by the ASC, only when the local
Military Farms authorities are unable to meet the requirements.

Note 2: Units are permitted to consume articles (if conformable to ASC

specifications) of ASC Supply produced by units as a result of grow more food
campaign. In such cases the units will under draw the equivalent quantities
from the ASC against their normal requirements and claim the amount from
the PCDA/CDA concerned at the local Government procurement rate as
ascertained from the local Government Supply Officer plus grinding charges,
or at the stock book free issue rate less 2 per cent, whichever is less. In
respect of produce issued as an authorised substitute, the cost to be paid to
the unit should not exceed the contracted cost of the basic article at the
proportionate scales prescribed for substitutes. In cases where contract rate
is not available, the wholesale market rates published in Station Orders
should be taken into consideration.

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(8) In the case of Army Supply Corps, it should be ensured that expenditure
on local purchase is incurred by the competent financial authorities only
under the following circumstances:
(i) When the demand for the article is so spasmodic that neither central nor
local contracts have been or can be made;
(ii) For troops on the line of march, camp etc, where supplies under normal
arrangements are not available or are likely to be delayed;
(iii) When the demand for the articles is so small that it is not economical or
desirable to obtain requirements from the normal source of supply;
(iv) When purchases are made for which no tenders are received or the
tenders are unacceptable; and
(v) In an emergency, when supplies have to be delivered to troops at out of
the way places and cannot be supplied by rail, or road or where procurement
by contract or Short Term Agreement is impractical.

(9) It will be seen that the bills for payment are supported by the under
mentioned documents:

(a) When articles of central supply are authorised by the competent authority
for local purchase by depots, the bills should be supported by the original
receipted supply order (IAFZ 2135), in which will be cited the particular
account in which the credit will be found afforded;
(b) Bills for articles of daily supplies to units should be supported by the
original IAFS 1520 and those for casual supplies by the original IAFZ 2135,
duly receipted by a Commissioned Officer of the unit and bearing a certificate
as to the particular account in which the supplies have been credited;
(c) In the case of Army Ordnance Corps supplies obtained by purchase, the
following points are observed:
(i) The certificate on the supplier's bill (IAFA 68) has been completed by the
ordnance officer;
(ii) In the case of purchases out of contract, the bill has been countersigned
by the ordnance officer within whose financial powers the amount of the bill
falls;
(iii) In the case of purchases made by units under the authority of the
Ordnance officer, the bill has been duly countersigned by the Ordnance
Officer;

105
Note: Original copy of the receipt voucher on which the stores are taken on
ledger charge and authority in original (IAFZ 2123), should be looked for in
support of the bill.

(iv) A certificate to the effect that articles purchased locally are not for stock;
(v) Where the total value of the purchase exceeds the financial powers of the
sanctioning authority, a certificate to the effect that articles are dissimilar;
(vi) In the case of local purchase of EME stores by the Officers Commanding
workshops within their financial powers, original quotations from the firms
accompany the contingent bill. Where there is only one local dealer in the
parts purchased, an explanatory note to that effect has been endorsed on the
bill. The contingent bill should further bear a certificate from the officer
commanding that the articles purchased were not available from the normal
sources of supply, or being available, time did not permit of their being
obtained on emergent indent;
(vii) In the case of direct purchase of stores, a certificate to the effect that
“the items purchased are covered/are not covered by rate running contract
and that the cost of the items purchased does not exceed the monetary limit
fixed for purchase at a time and the aggregate for that year”, is attached;
(viii) In the case of local repair contracts concluded by EME Officers, it should
be ensured that a certificate from the OC unit that all unserviceable parts are
collected by him and taken on charge by means of a certified receipt voucher
and the duplicate CRV is enclosed with the bill;

(10) In respect of bills based on technical committee recommendations, as

no comparative statement of tenders of original quotations is attached with
the bills, it should be ensured that a copy of the supply order stating that it is
based on technical committee's recommendations is received from the
authority who placed the supply order;
(11) Bills for local purchase of stores by Ordnance and Clothing Factories bear
a certificate given by the accounts section of the factories to the effect that
the rates have been checked with the contract rates, or where there is no
contract, with the rates agreed upon in supply orders and that the stores
have been accounted for in the store ledgers. It will also be seen that the
particular month's store accounts in which the stores have been taken on
charge has been noted on the bills;

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Note: In the case of Ordnance and Clothing Factories to which Accounts
Officers (Factories) are attached, local purchase bills will be audited in full by
those Officers instead of by the Principal Controller of Accounts (Fys).

(12) In the case of purchase or remounts, the number purchased agrees with
the number brought on charge in the Animals' Roll received with the cash
account.

Note 1: Rates for purchase of animals will be passed on the strength of a

certificate from the remount purchasing authority.
Note 2: For debits received on account of stores purchased by the India
Supply Mission or other Civil Department, no detailed check over rates is
required.

215. If owing to the default of a contractor, an article which he had

contracted to supply is procured through departmental agency, it should be
ascertained by the audit office how the forfeited earnest money, or the
amount of assessed damages, and the differences, if any, have been or will
be adjusted. This information should be entered in the contractor's demand
register against the name of the defaulting contractor and the recovery
watched.

Release/stoppage of payment of Supplies/Services Bills:

216. While carrying out pre audit of suppliers bills with reference to the
provisions of paragraphs 37, 49 and 214 of this code and other relevant
rules/orders/Codes/Manuals, Audit office should not stop payment in respect
of the suppliers bills based on the observations relating to procedural
infirmities in the procurement process, extraneous to actual terms and
conditions of Contract Agreement/Supply Order/Work Order.
Objections and Observations on shortcomings in procedural aspects,
not pertinent to the actual terms and conditions of Contract/Supply
Order/Work Order viz. provisioning and tendering process etc., as laid down
in Codes/Manuals/Instructions issued from time to time by various authorities
including CVC, should be conveyed to the unit concerned for
necessary/corrective action and such objections/observations should be
watched in Internal Audit separately like post audit objections/observations.

107
 In other words, where the terms and conditions of Contract
Agreement/Supply Order/Job Order/Work order are satisfied and the requisite
documents are submitted in audit, payment should be released and audit
objections/observations (if any) should be pursued through Internal Audit
Mechanism.

Payment of Contractor’s Bills for Local Purchase of Stores

217. To guard against double payments, full particulars of all payments
made to contractors such as the number and date of supply orders, local
purchase vouchers, etc, and the name and station of the unit/formation to
which the articles have been supplied, etc. should be noted in the 'register of
payments to local purchase contractors' (i.e. Income tax register). Before a
contractor's bill is passed for payment, all supply orders, local purchase
vouchers, etc. supporting the bill, even though they may be marked as
‘original', should be verified with the entries in the above register to ensure
that a previous payment therefor has not been made.
This verification by the auditor should be test checked by another
auditor to the extent of cent percent. They will also endorse a certificate to
this effect on the bill, which will be looked for by the AAO/Accounts Officer
before passing the bill finally for payment. The verification made by the
auditors will be subjected to a test check by the AAO/Accounts Officer and
suitable steps taken to prevent recurrence of any errors or omissions that
may come to notice during the test check.

218. All the vouchers for which payment is authorised will be prominently
enfaced 'cancelled'. The local purchase bills with supporting documents, will
after payment, be transmitted to test audit staff and on return from them will
be sent to the Local Audit Officer concerned for verifying credit for the stores
in the consignees' books.
The detailed procedure to be followed for the cancellation of vouchers,
their scheduling to the Local Audit Officers and final recording is laid down in
para 516 et seq of Office Manual Part II Vol. I as amended from time to time.
In the Ordnance and Clothing Factories the local purchase bills, after
payment by Accounts Officers attached to Factories; will be recorded in their
offices and will be produced, when called for, to the Test Audit staff during
their periodical visits for audit.

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219. In the case of a bill preferred by Army Supply Corps contractor or other
supplier, no payment shall be made except when supported by the original
supply order. The contractor who loses his copy shall prefer a claim on the
PCDA/CDA., who will subject the bill to the usual audit acting on the following
certificates and the unit's copy:
(l) A certificate from the unit/formation concerned for the supply made, and
(2) A certificate signed by the contractor to the effect that payment has not
been obtained by him previously and that he shall not again prefer a claim if
the lost voucher is subsequently recovered.
In such cases verification of credit of stores is also necessary by the
Local Audit Officer concerned before payment is made.

220. In cases where payment is made first by the executive and audit
comes later, i.e. in the case of post-audit, verification of credits in consignees'
books, before the final post-audit enfacement will take the place of the
checks laid down in para 217 above for detection of double payments.

Hired Land Transport

Audit of Bills
221. When Government transport is not available to meet demands or
where Government transport cannot be used due to mileage or POL
restrictions, Local Station/Formation Commander will place demands for
transport within the terms of the contract on the hired transport contractor. If
no hired transport contract exists, Local station/Formation Commander will
hire it locally with the prior sanction of the competent financial authority.

222. When transport is hired through contract, bills of transport contractors

for carriage of stores should be preferred on IAFA-68 through the Local
station/Formation Commander concerned. It should be seen in audit that:
(1) The bills of contractors and agents have been prepared and signed in ink
by the person making the claim and submitted in original; duly supported by
the original transport indents (IAFZ-2l50);
(2) The various parts of the supporting indents have been properly completed
by the appropriate authorities;

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(3) The indents relating to services rendered under each contract are
numbered serially and separately (the serial to run for the period of the
currency of the contract);
(4) The bill is supported by a certificate as required by (a) para 63 (2) (ii) of
Pamphlet of Recognised Claims part I Army and (b) para 162(f), Army
Service Corps Regulations.
(5) The bill is a complete claim for all the services rendered during the month
to which it pertains and in case it is not possible to include any indents
pertaining to that period in the bill, the number of such indents is noted on
the bill and brief reasons given for their exclusion;
(6) The number and date of receipt and issue vouchers under which the
stores were received/dispatched have been noted by the units/formations
using hired transport in Part III of the transport indents;
(7) Charges for the hire of transport are only claimed for the transport
actually supplied as indicated in Part III of the indent by the indenting officer,
or their representative; and
(8) The charges claimed are in accordance with the rates and conditions
specified in the contract agreement on record.

223. Bills of transport contractors for carriage of passengers are required to

be preferred by the contractors on IAFA 68 through the Local
station/Formation Commander concerned. It should be seen in audit that:
(1) The bills are supported by road warrants;
(2) The warrants have been issued by the competent authority;
(3) The individuals to whom warrants have been issued are entitled to travel
on them and the warrants have been signed by the officers and other or by
Officers-in-Charge of parties, in token of the accommodation having been
provided.
(4) The number of seats and the class of accommodation asked for and
provided by the contractor is separately shown in the columns provided in the
road warrants; and
(5) The charges claimed are in accordance with the rates and conditions
specified in the contract agreement on record.

224. In cases when transport is hired locally, the bills should be supported
by the sanction of the competent financial authority and the certificate of

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Local station/Formation Commander regarding the reasonableness of the
rates charges.

Payment of Contractor’s Bills for Hired Transport

225. The procedure laid down in paras 217 and 218 will be followed mutatis
mutandis in the case of contractor’s bill for hired transport. Before a
contractor’s bill is passed for payment, all bills, transport indents, road
warrants, etc, supporting the bill will be verified with the entries in the
Income Tax register to ensure that a previous payment on the same account
has not been made.

226. In the event of a hired transport contractor losing their copy of

transport indent (IAFZ-2150) completed for voucher purposes, a fresh form
will be issued by the Local Station/Formation Commander endorsed 'duplicate
original indent No...........Stated to have been lost' and passed by the Station
Transport Officer to the PCDA/CDA who, after verification that no previous
payment has been made, will endorse it as follows:

"I certify that payment for the original of this voucher has not
previously been made". The verification should invariably be done by
consulting the contractor's Income Tax register.

Adjustment of Expenditure on Hired Land Transport

227. The expenditure incurred on hired land transport will be adjusted finally
by the Principal controllers/controllers incurring the same, in their own
compilations against the appropriate service heads. In the case of-quasi
commercial concerns, however, such as Military Farms, etc. the Principal
Controllers/Controllers incurring the expenditure should send to them,
through the PCDA/CDA in whose audit area they are located, monthly
statements showing the particulars of the charges compiled by them against
the accounts of the concerns during the month. In the case of expenditure
pertaining to Factories, similar statements will be sent to them through the
PC of A (Fys).

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 CHAPTER 11

MILITARY ENGINEER SERVICES EXPENDITURE

Para
Scope of Audit 228
Preliminary Audit by MES AO/AAO 229
Audit in Controller’s Office 236
Local Audit by RAOs 239

Scope of Audit
228. The audit of Military Engineer Services expenditure is conducted in three
stages :
(1) Preliminary audit by the AO/AAO attached to each MES formation
(2) Audit in Principal Controller’s/Controller's main office
(3) Local Audit by the Regional Audit Officer at the time of their periodical
visit to the MES formation.
Note: The term ‘Regional Audit Officer’ includes ‘Local Audit Officer’ in area,
where the inspection and review of Local Audit of accounts of MES formations
has been entrusted to them.

Preliminary Audit by MES Unit Accountant(AOGE)

229 . The functions of the AO/AAO of the Defence Accounts Department
attached to Engineer offices are three fold:
(i) As Accountant, i.e. maintenance of certain accounts in accordance with the
prescribed rules and from the data furnished to him.
(ii) As primary Auditor i.e. applying preliminary checks to the initial
accounts and vouchers, etc.
(iii) As Financial Assistant and Adviser i.e. generally assisting and advising
the head of the MES formation in all matters relating to the accounts and
budget estimates and the operation of financial rules.

230. In the discharge of the duties laid down in Para 229, the AO/AAO is
expected to keep themselves fully conversant with all Government and
departmental orders, Army Instructions, etc. connected with his work and
with all sanctions and orders passing through the MES office and other

112
proceedings that may affect the estimates or accounts of actual or anticipated
receipts and charges.

231. The AO/AAO will see that the rules and orders in force are observed in
respect of all transactions which fall within the sphere of their duties. If he
considers that any transaction affecting receipts or expenditure is likely to be
challenged in audit (by the Regional Audit Officer or the Principal
Controller/Controller of Defence Accounts, it is his duty to bring this fact
immediately to the notice of the head of the formation with a statement of
reasons, and to obtain his orders on the case. Should the MES Officer
disagree with him, the AO/AAO shall comply with his orders and concurrently
report the full facts of the case to the Regional Audit Officer or the Principal
Controller/Controller of Defence Accounts, as the case may require. The
Regional Audit Officer, if unable to settle the case himself, will report the facts
to the Principal Controller/Controller of Defence Accounts together with his
view for a final decision.

232. The AO/AAO should bring to the notice of the head of the MES
formation, all instances in which the subordinate officers exceed the financial
limitations placed on their powers. He may also be required by the head of
the formation to undertake on his/her behalf such other scrutiny of the
accounts of subordinate officers as the latter may consider necessary

233. MES officers are required to obtain the advice of their AO/AAO in all
matters connected with the accounts of their formation or the application of
financial rules and orders concerning which there may be some doubts. In all
cases of importance the AO/AAO will give his advice in writing. While the MES
Officers are not precluded from seeking the advice of RAO/CDA/PCDA,
wherever they consider such a course necessary they should first obtain the
advice of their AO/AAO vide Para 8 MES Regulations and should refer matters
to the RAO/CDA/PCDA only when they do not agree with the AO/AAO.

234. The following is the list of the main items of work done in the Accounts
sections of MES formations :
(i) Garrison Engineer’s office:
(a) Scrutiny and check of allotments and appropriations.

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(b) Check of bills and other vouchers including allocation before submission to
the PCDA/CDA for audit.
(c) Check of all bills and vouchers paid by the GE/Imprest holding SDO’s from
their through SBI CMP/Imprest.
(d) Submission of cash book together with the supporting vouchers (which
are required to be sent to the PCDA/CDA) in original to PCDA/CDA and
monthly consolidated punching medium IAF(CDA) 336 to EDP centre on due
dates.
(e) Check of
(i) Priced stock list (i.e. list containing stock book rates)
(ii) Stock Purchase Register
(iii) Register of Securities
(iv) Register of Approvals of works
(v) Works Passing Register
(vi) Road Register (property accounts)
(f) Maintenance of:
(i) Rent assessment ledger
(ii) Register of buildings
(iii) Contractors’ ledger
(iv) Suspense Register
(v) Register of sanctions
(vi) Guard file of specimen signatures
(vii) Register of Measurement books
(viii) Register of receipt books
(ix) Register of Unstamped Acknowledgements receipt books
(x) Register of Requisitions
(xi) Duplicate copies of contract agreements and list of contracts
(xii) Register of losses
(xiii) Register of Muster Rolls
(xiv) Master Note Book
(xv) Register showing names and initials of AO/AAO and
SA/Auditor/Clerk/MTS serving in account section.
(xvi) Register of terminal compensation claims
(g) Verification of annual returns of electric and water, etc. installations.
(h) Check of construction accounts and preparation of abstracts thereof.

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(i) Reconciliation of financial accounts with construction and other
accounts and registers.
(j) Local Audit of all the numerical and quantitative store ledgers,
accounts, etc. maintained in Sub Divisional offices issue of objection
statements thereon and watching their final settlement through an Audit
Progress Register.
(k) Receipt of the contract documents concluded by the Garrison Engineer
and Deviation Orders of all contracts and submission of them to the
PCDA/CDA after ensuring that these are properly made out according to
standard forms and that all routine requirements are complied with by the
executive.
(l) ‘Issue of Quarterly Statement of items held under objection in Form
IAF (CDA) 262 to the executive and their submission in duplicate to the
PCDA/CDA by the 15th of the second month following that to which the
statement relates.

(ii) Barrack/Stores office:

(i) Maintenance of revenue ledgers
(a) An up to date record of rentable buildings
(b) Revenue Ledgers
(ii) Scrutiny and check of occupation returns, returns of recoveries,
statements showing hire charges of furniture and refrigerators etc. and
posting thereof in the revenue ledgers.
(iii) Preparation and issue of rent bills and watching the receipt of
acknowledgements from the PAOs and duplicate copies of the top lists from
the Principal Controllers'/Controllers’ offices.
(iv) Audit of Meter Reader Books and Consumer Ledger of electricity and
water, etc.
(v) Check of:
(a) Water and electric bills issued to consumers billed for directly by BSO.
(b) Quarterly vouchers for supply of water to paying consumers under para
712 Regulations for the MES.
(c) Bills for payment of water and electricity charges to private agencies with
the meter readers books so far as quantities are concerned.
(vi) Watching the recovery of landing and housing charges billed for by the
MES authorities against private companies.

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(iii) Engineer Parks :
(i) Local Audit of all the numerical and quantitative stores ledgers accounts
etc. maintained in the Parks and issue of objection statements thereon and
watching their final settlement through the audit progress register
(ii) Maintenance of –
(a) Register of scheduling of issue vouchers
(b) Register to watch linking of consignors issue vouchers
(c) Demand Register
(d) Payment issue register (or watching recoveries on account of cost of
stores etc., issued to state Govt., PWD, CPWD private bodies, etc).
In addition to these, the items marked in the list of items relating to the GE’s
Office are also normally done in the accounts sections of Engineer Parks.

235. Detailed instructions for the audit by the AO/AAO are laid down in ‘MES
AO/AAO Manual’.

Audit in the Controller’s Office

236. The audit of MES expenditure in the Principal Controller's/Controller’s
office is conducted in accordance with the general principles and rules laid
down in this Code. Due regard should, however, be paid to the financial rules
and orders of the Govt. The main points with reference to which the audit
scrutiny should be exercised are the following:-
(i) The sufficiency of the authority for incurring the expenditure;
(ii) The accuracy of the classification of the charges against the works
persons, services and heads of accounts concerned;
(iii) The proof of payment to the correct individual (i.e. through the
existence of a properly receipted voucher for all payments, where necessary);
and
(iv) The observance of standards of financial propriety.

237. MES work in the Principal Controller”s/Controller’s Office is mainly dealt

with in two section:
(a) Internal Audit Section-The section deals with the work connected
with Local Audit e.g. decisions on references from Regional Audit
Officers/Local Audit Officers on audit and procedural matters, Draft Para of
Audit Report (Defence Services) ,examination of Government letters etc and
their circulation to RAOs/LAOs, Audit of Loss Statements, Local Test Audit
116
reports including important preliminary slips containing a definite and a
formulated objection, tour review notes, RAOs/LAOs inspection reports,
rendition of appropriation accounts questions, relating to recovery of Licence
Fee and allied charges i.e. interpretation of rules in ARI Quarters and Rents
and other connected rules and orders,

(b) Engineer Section-The work relating to audit of MES expenditure

which will mostly consists of scrutiny and vetting of contracts and
amendments and deviation orders thereto and the solution of all disputed
items in a contract, audit and authorization of claims which are undisputable
and present no doubts, will be dealt with in the Engineer Section. In addition,
the following items of work will also be done in the Engineer Section:-

(i) Scrutiny of Administrative Approvals and Technical Sanctions.

(ii) Check of Appropriations and re-appropriations
(iii) Scrutiny of re-appropriation statement of buildings
(iv) Scrutiny of demolition statements
(v) Submission of prescribed Reports and Returns in connection with the
accounting and audit of MES expenditure
(vi) Scrutiny of Sale Accounts relating to MES
(vii) Preparation of Annual Review of Works Expenditure (ARWE) and
Financial Stock-Taking in MES.
(viii) Provision of cash assignment to MES officers
(ix) Scrutiny of Terminal compensation claims forwarded by D L & C
authorities as well as the MES.
(x) Preparation and submission of half yearly SIO.
(xi) Cases of higher audit objections.
(xii) Audit reports to higher authorities etc.
(xiii) Test Audit objections and Draft Paras relating to works.

(Note: This list is not exhaustive. For detailed list see Para 5 of Office Manual
part VIII).

238. Detailed instructions relating to the work done in the above sections of
the Principal Controller's/Controller’s Office are laid down in ‘Office Manual’
part VIII.

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Local Audit By Regional Audit Officers/Local Audit Officers
239. The main objects of inspection of local audit of MES accounts are:-
(i) To subject to audit such accounts, vouchers, etc; as are not audited or
as cannot be satisfactorily or completely audited in the Principal
Controller's/Controller’s main office;
(ii) To see that the initial records from which the accounts or bills, are
prepared or on which they are based, are properly maintained in the
prescribed forms and are checked as laid down in the Rules;
(iii) To see that all moneys relating to public funds have been duly
accounted for and expended only for the purpose for which they are
intended; and
(iv) To see that the AO/AAO posted by the Principal Controller/Controller is
efficient and discharges his/her duties satisfactorily.

240. The Regional Audit Officer/Local Audit Officer and his staff are expected
to audit completely and intelligently all transactions of receipt and
expenditure which fall, within their respective sphere of check. The Regional
Audit Officer/LAO will also test check the store accounts of the Sub-Divisional
Officers locally audited by the AO/AAO and satisfy him-self that the AO/AAO
is carrying out his duties satisfactorily. These test-checks should be in the
nature of ‘sampling’ for inculcating in the subordinate executive a wholesome
fear, in the auditors a better audit sense and also to see that they do not, by
neglect or by collusion defeat the objectives served by the present scope of
audit.

241. Detailed instructions relating to the Local Audit to be carried out by the
Regional Audit Officers/LAOs at the time of their periodical visits to the MES
formations are given in the MES Local Audit Manual.

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 CHAPTER 12
MISCELLANEOUS ACCOUNTS AND PAYMENTS

Para
Fund Accounts:
Audit of Fund Accounts 242
Interpretation of Fund Rules 243
Protection of Fund Deposits 244
Field Cashier’s Accounts:
Functions of Field Cashiers 245
Specimen Signatures 249
Audit of Field Cashier’s Accounts 250
Surprise Check of Cash Balances 253
Change of Field Cashiers 254
Imprest Holder’s Accounts 255
Accounts of Remount Depots 260
Accounts of Remount Purchasing Officers 262
Recruiting Officers Accounts
Accounts of Recruiting Officers other than those for Gorkhas 264
Accounts of Recruiting Officers for Gorkhas 268
Military Treasure Chest Accounts 270
Audit of NPS (National Pension System) Accounts 273

Fund Accounts
Audit of Fund Accounts
242. The audit of transactions pertaining to Provident Funds controlled by
Government mainly consists in seeing that these transactions conform to the
rules and regulations governing the administration of each fund and any
subsidiary instructions issued thereunder. Subscriptions to a Provident Fund
can be received only from such Government servants as are required or
permitted by the rules of the fund to subscribe to it and the amount of
subscription must be within the prescribed minimum and maximum limits as
laid down in relevant Fund Rules. Having satisfied on these points, it should
be seen that :-

119
(i) Subscriptions are duly and regularly recovered from the government
servants concerned and that interest is calculated at the correct rate;
(ii) In the case of Contributory Provident Fund, Government’s share is
properly calculated and brought to accounts;
(iii) The accounts of the fund are correct both in total and in the detailed
accounts of the subscribers;
(iv) A reconciliation between the Fund Accounts of all the subscribers to
each Fund and the compiled actuals thereunder is effected monthly as well as
annually to ensure correctness of postings;
(v) The annual statements of accounts are furnished to the subscribers
concerned and their certificates of acceptances of balances are obtained in
the prescribed manner and properly recorded;
(vi) A nomination form, duly completed in all respects, has been secured in
the appropriate form from each subscriber to the Fund, and the nominations
made are in order;
(vii) The advances are covered by the rules and have been sanctioned by
the competent authority and are recovered in installments fixed by that
authority;
(viii) Where an Insurance Policy is proposed to be financed from a Provident
Fund, the policy has been assigned to the President, that no prior assignment
of the policy assignment of the policy exists and that evidence of payment of
premium is furnished.
(ix) In cases where a subscriber to a Contributory Provident Fund is
permanently transferred to a pensionable service and elects to count towards
pension such part of the period, during which he subscribed to the Fund, as
permitted by Government, the amount of government contribution with
interest thereon standing to the subscriber’s credit in such Contributory
Provident Fund is repaid to Government.
(x) The payment of the claim is made to the proper payee in accordance
with the procedure prescribed for such payments and it is so recorded that a
second claim on that account can be detected in audit; and
(xi) A pensioner (Civil or Military) on re-employment in industrial or non-
industrial posts including a Gazetted post is permitted to join IOFWP Fund
only and is not allowed to continue as subscriber to the GPF during the period
of re-employment as required under Rule 4 of GP Fund (DS) 1960.

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Interpretation of Fund Rules
243. The legal position in regard to the provisions in the Government
Provident Fund Rules has been dealt with in the Memorandum Explanatory of
Government Provident Fund Rules vis-à-vis the law on the subject. All points
of doubt in applying the fund rules should be referred by Principal
Controllers/Controllers to the Controller General of Defence Accounts.

Protection of Fund Deposits

244. The Provident Fund Act, 1925 protects deposits both during the life
time and after the death of the depositor against creditors and also against
Government, save to the extent contemplated in section 6 of the Act in the
case of a Contributory Provident Fund.

Field Cashiers’ Accounts

Function Of Field Cashiers
245. The appointments of Field Cashiers are held by officers of the Defence
Services and the Formation Commanders are responsible for ensuring that
the Field Cashiers carry out their duties in accordance with the regulations
and the accounting instructions issued from time to time by the PCDA
(Officers).

246. The functions of Field Cashiers and the procedure for the preparation of
cash accounts for rendition to the PCDA (Officers) are described in detail in
Appendix 27 of Financial Regulations Part II. Broadly speaking their main
functions in regard to monetary transactions are:
(i) To keep an adequate supply of funds under arrangements made with
the PCDA (Officers);
(ii) To supply funds in bulk to authorized Field Imprest Holders on
presentation by them of requisitions on IAFF 1036.
(iii) To pay advances of pay to individual officers on presentation of
personal cheques, in IAFF 1034 up to a maximum monthly limit endorsed on
the cheque books;
(iv) To make such other payments as may be specifically authorized by the
PCDA (Officers) or as directed by the Division/Formation Commander in
exceptional cases;

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(v) To accept and to bring to account forthwith all sums tendered by any
member of Defence Services (i.e. Officer, PBOR or civilian) in settlement of
public claims for clothing etc., issued on payment or as being due to
Government on any other account; and
(vi) To accept and to bring to account in their Cash Book, sums handed in
by Field Post Offices for credit to the postal department.

247. The funds are required by Field Cashiers, who have been appointed by
competent authority are provided by PCDA (Officers) by means of Cash
Assignments in their favour on the nearest Civil Treasury or branch of the
State Bank of India.

248. The Field Cashiers are required to render daily to PCDA (Officers) a
cash account, in IAFF 987 duly supported by vouchers, in which all receipts
and payments during the day are brought to account, PCDA (Officers) will
watch for the receipt of daily cash accounts from the various Field Cashiers in
whose favour cash assignments have been arranged by his office.

Specimen Signatures
249. A record of specimen signatures of all Field Cashiers will be maintained
by PCDA (Officers). This register will invariably be consulted at the time of
auditing the cash accounts in order to ensure the genuineness of signatures.

Audit of Field Cashiers’ Accounts

250. On receipt of the daily cash accounts the following points should be
seen:
(i) The account has been rendered in the appropriate form (IAFF 987) and
is complete in all respects;
(ii) The opening cash balance agrees with the closing cash balance in the
previous day’s cash account;
(iii) The funds entrusted to the Field Cashier are not utilized for
unauthorized purposes (e.g. cashing of private cheques, etc.);
(iv) The amounts received and disbursed have been correctly accounted for
and are supported by relevant vouchers;

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(v) The amounts accounted for as receipts, agree with the amounts drawn
from the assignment as intimated by the Treasury/State Bank of India direct,
as and when drawals are made;
(vi) The closing cash balance is correct and does not exceed the maximum
limit fixed by the Divisional Commander; and
(vii) That in the case of final account, the cash balance is paid into the
Treasury and the final account is supported by the Treasury Receipt.

251. After the cash accounts have been audited as above, the items of
receipts appearing therein will be dealt with as follows:
(i) Credits for all amounts received from Treasuries/State Bank of India
will be adjusted under the Defence Proforma Account: Accounting Procedure;
(ii) Credits for postal collections of Field Post Offices deposited with the
Field Cashiers, will be passed on to the DAG P & T Nagpur through
Settlement Account;
(iii) Miscellaneous receipts pertaining to Defence Services will be compiled
finally under the service heads concerned by the PCDA (Officers) in their own
books, intimations of recovery being sent to other Principal
Controllers/Controllers, where necessary; and
(iv) Miscellaneous receipts which are required to be adjusted in the books
of other audit officers will be passed on to the audit officers concerned
through the Settlement Accounts or Defence Exchange Account, as the case
may be.

252. The items of payments appearing in the cash account will be dealt with
as follows:
(i) All advances of pay and travelling allowances etc., paid by Field
Cashiers to officers in the payment of the PCDA (Officers) will be noted by the
PCDA/CDA in demand registers/IRLAs for recovery. Such advances will be
initially compiled to a ‘Suspense’ Head, which will be relieved when the
advances have been noted for recovery. The detailed accounting procedure in
this respect will be found in the Office Manual, Part IX [Principal Controller of
Defence Accounts (Officers);
(ii) Advances recoverable from officers not in the payment of the PCDA
(O), will be debited by him to the audit officer concerned through the Defence
Exchange Account or through the Settlement Account, as the case may be;

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(iii) Lump sum advances paid by Field Cashiers to Field Imprest Holders on
IAFF 1036 will be noted by the PCDA (Officers) in a demand register kept
separately for each Pay Accounts Officer and intimated on IAFA 524 to the
respective Pay Accounts Officers (Other Ranks) to whom the Imprest Holders
render their accounts,. Acknowledgements from the Pay Accounts Officers will
be watched and on receipt will be recorded in the demand register and the
items treated as cleared.
Note : Such advances will not be debited to PCDA/CDA concerned through
Defence Exchange Accounts, but will be compiled by the PCDA (Officers) by
debit to a Suspense Head. The PAOs will credit the same suspense head in
their books, while adjusting the imprest advances. The detailed procedure will
be found in the Office Manuals Part IX and X.

Surprise check of Cash Balances

253. The PCDA (Officers) will watch for reports from Divisional or other
Formation Commanders on the periodical surprise checks carried out by
officers deputed by them of the cash balances held by the Field Cashiers. The
cash balances reported by Divisional or other Formation Commanders, will be
tallied with the balances as shown in the daily cash accounts (IAFF 987) and
any discrepancies found will be reported to the Divisional Commanders for
investigation.
Change of Field Cashiers
254. In the event of a change of Field Cashier, the certificate referred to in
Para 19 of Appx. 27 of Financial Regulations Part II regarding the physical
state of balances on the date of the change as compared with the balance
shown in the cash book on that day, should invariably be looked for in audit
on receipt of the first cash account of the Field Cashier who has assumed
charge.

Imprest Holders’ Accounts

255. Detailed instructions regarding the preparation and rendition of
Imprest Accounts by Imprest Holders are given in Appendix 26 of Financial
Regulations Part II.

256. The following special points will be seen in conducting the audit of
Imprest accounts:
(1) The account has been signed by the official Imprest Holder.
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(2) All demands received from Regional Controllers, etc., for advances paid
to Imprest Holders have been accounted for correctly.
(3) The closing balance (excluding the postal collections if any, if
authorized as per clause 5 below) is within the monetary limit prescribed.
(4) Cash in bank and cash in hand have been exhibited separately.
(5) Sanction of the Force/Formation Commander exists for crediting postal
collections in Imprest and also for the payments of advance of pay to officers
out of Imprest, at stations where banking facilities do not exist.
(6) No Imprest money has been lent to another Fund or Imprest Holder
without the specific authority of the PCDA/CDA concerned, nor are loans
obtained from any unauthorized source in replenishment of Imprest to meet
urgent demands.
(7) Civilians at peace stations are not paid through Imprest.
(8) Whenever there is any change of the Imprest Holder, a certificate of
change of Imprest Holder is received with the Imprest account.
(9) The following items are not met from Imprest :
(a) Advances of travelling allowances less than Rs. 50.
(b) Local purchase of stationery.
(c) Bulk local purchase of stores and supplies unless specifically
authorized.
Note: If this charge is met out of the Imprest, it should be seen that the
Imprest Account is recouped with the amount.
(d) Personal Allowances
(10) A note of the surprise checks (occasional least once in three months) of
cash balances on hand with the Imprest Holder is made in the Imprest
Account by the officer who conducted the check.

257. In the audit of acquittance rolls received from Imprest Holders, the
following special points should be seen:
(1) The totals on each page and the grand total are correct.
(2) Proper acquittances have been obtained on the acquittance rolls for the
amount disbursed.
(3) The officer detailed for payment is not below the Rank of 2nd
Lieutenant.

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Note: JCOs are not authorized to sign acquittance rolls as Paying Officers,
unless they themselves have been appointed as Imprest Holders by the
Competent authority vide Appendix 26 of Financial Regulations Part II.

(4) Alterations in figures have been attested with the full signature of the
paying officer.
(5) In non operational areas, or at places which are not declared as Field
Service payment in excess of Rs. 5000/- to JCOs/WOs are receipted over One
Rupee revenue stamp.

Supply and Services Imprest

258. Detailed instructions regarding the provision of supply and services
Imprest to all units and formations including Supply Depots are given in
Appendix 28 to FR Part II (1968 edn).
Advances towards supply and services Imprest for making payments of
different types as envisaged in Appendix 28 to FR PT II and Govt. of India,
Ministry of Defence, New Delhi corrigendum no. 67784/Q/STS/4349/D (QS)
of 26/8/81 will be drawn from PCDA/CDA concerned by submission of cash
requisition.
On receipt of Cash requisition for drawl of advances the following
special points should be seen:
(1) Request for advance has been made on IAFA 1036.
(2) Imprest account number allotted by the PCDA/CDA is quoted on the
cash requisition.
(3) The requisition has been signed by notified authority whose specimen
signature is on record. In this connection, the provisions contained in Para
6(a) (b) (c) of the Appendix, ibid, refer to in particular.
(4) It should be ensured that the balances of cash in hand and at Bank,
plus the amount of advance does not exceed the ceiling monetary limit of
Imprest sanctioned by the authorities.

259. The Imprest Accounts will be maintained by the Imprest Holder in form
IAFA 821 in duplicate. The account will be a simple chronological record of
cash transactions purely for ‘Supplies and Services’ transactions showing the
actual dates and amounts of all receipts and payments from the first to the
last day of the month inclusive and the opening and closing balances of cash

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and shall be submitted duly supported by relevant payment vouchers by the
due date, complete in all respects.
The following special points will be seen (besides ensuring strict
adherence to the provisions of Appx. 28 ibid in general) in conducting the
audit of supply and services Imprest Accounts:

(1) The account is submitted on IAFA 821 within the stipulated time and
there has been no delay in this regard.
(2) The account has been signed by the authorized Imprest Holder, in full
and the No. of Imprest Account and designation of Imprest Holder has been
entered on the top of each account.
(3) Wherever there is any change of the Imprest Holder, necessary
intimation along with the specimen signature of the relieving officer has been
received.
(4) (a) The opening balance, tallies with the closing balance of the previous
month’s account.
(b) The casting is checked.
(5) The amount drawn as advances has been correctly brought on account
in the Imprest Account and it tallies with the one recorded in the Supply and
Services Imprest Register.
(6) The procedure prescribed for early settlement of contractor’s bills and
prompt submission of documents in this regard (including 90%/100% ASC
bills, casual labour bills and other payments, voucher relating to authorized
payments effected out of S&S Imprest Account) vide Army HQrs. QMG’s
Branch New Delhi letter No. A/66595/Q/STS/Q1(B) of 1/4/77 is being
complied with strictly by the S&S Imprest Holder.
(7) The amounts shown as expended in the accounts are supported by
relevant payment vouchers already received in the PCDA’s/CDA’s office along
with the weekly advance schedules and the expenditure so met out of S&S
Imprest Account are only for the purpose provided for.
(8) All the paid vouchers and supporting documents are received as per the
details shown in the weekly advance schedules and the missing payment
vouchers (pvs) are duly called for.
(9) The amounts shown as paid as per the payment vouchers in fact tally
with the amounts reflected in the IAFA 821.
(10) In case there have been no purchases during the month, a nil account
is rendered showing the cash balance.
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(11) Whenever amounts are debited/credited in the account in settlement of
discrepancy occurring in the previous account, a copy of the authority for the
adjustment has been attached to the account.
(12) All payments have been regulated through cheques and following
certificate has been endorsed by the OC Supply Depot in the IAFA 1520 and
the contractor’s bill after making payment :
“Certified that a sum of Rs. ____________(in words)_____________(in
figures) has been paid by me on_____________ to ___________ out of
Supply and Services Imprest Number_____________ That the amount has
been accounted for in the Imprest documents for the month of
___________”.
(13) Payment of labourers when required to be made from the Imprest has
been made on the muster roll. One contingent bill per month, for muster roll
on which payment has been made during the month has been prepared to
support the Imprest account.
(14) Final closing of Imprest: When the necessity of a sanctioned
Imprest account ceases to exist the Imprest Holder will at once pay the cash
balance of his account into the treasury on a MRO and forward the treasury
receipt along with the final Imprest account clearly marked as such.
(15) Returning of used Cash Requisition Book: Whenever a request for
issue of fresh CR Book (IAFA 1036) is received, it should be seen as to
whether such requests are accompanied by the used CR book. Before issue of
CR book, it should be ensured that all the 25 counterfoils including cancelled
ones (in which case both the portions of requisitions should be enclosed with
the used book duly attested as cancelled by the S&S Imprest Holder) are
received and the same are found correct as per the Supply and Services
Imprest Register.
Note : In case of units/formations whose S&S Imprest Accounts are finally
closed it will be seen that the Cash Requisitions book (of 25 forms) in use,
will be returned duly indicating the fact as to the CR forms used and those
not brought into use.
(16) In case any doubts should arise or difficulties be experienced while
complying with the requirements and provisions of Appx 28, ibid, either by
the audit authorities or by the executive, solutions to such issues of variance
may please be looked into under Appx 26 of FR Part II on the subject ‘Field

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Imprest Payment Instructions’ before referring the matter finally to higher
authorities for clarifications.
(17) All objections/observations relating to post audit of payment vouchers
pertaining to S&S Imprest are issued in the form of objection statement to
S&S Imprest Holder and pursued through APR.

Accounts of Remount Depots

260. Principal Controllers/Controllers of Defence Accounts arrange for cash
assignments at civil treasuries or branches of the State Bank of India and its
subsidiaries in favour of Officers Commanding, Remount Depots for meeting
all ordinary departmental expenditure except pay and allowances of
establishments which are paid by the PCDA/CDA concerned after pre audit. As
an exception, both permanent and temporary class IV establishments of
Remount Depots and breeding area may also, with the concurrence of the
PCDA/CDA concerned be paid from the cash assignment, subject to post
audit. These payments are accounted for by the Officers Commanding Depots
in a cash account which they are required to render to the PCDA/CDA
concerned so as to reach them by the 10th of month, following that to which it
pertains. The PCDAs/CDAs will watch that the accounts are received from the
Officers Commanding, Remount Depots on due date.

261. The cash accounts will be audited in accordance with the general rules
governing the audit of cash expenditure laid down in Chapter 2. The following
points will be seen in addition:
(1) That the cash account has been prepared on the proper form and is duly
supported by all the prescribed schedules and vouchers;
(2) That the cash account and the supporting documents have been correctly
prepared and are complete in all respects;
(3) That the sanctions or orders of the competent financial authority have
been obtained, where necessary;
(4) That bills for the keep of animals are supported by a roll of animals, by
classes, in which the number of syces employed is shown. This number
should be checked against the number of animals shown on the roll;
(5) That the bills for food expenses of animals sent to units and formations
are prepared on IAFA 78 and the charges on this account compiled as
contingent expenditure of the Depot concerned; and

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(6) That the money from cash assignments are expended only on the objects
for which the assignments have been granted.

Accounts of Remount Purchasing Officers

262. Indian Remounts are purchased under arrangements made by
Remount Officers in charge of breeding areas or specially deputed for the
purchase. Instructions regarding the number, class and price of animals to be
purchased are communicated from time to time to Remount Officers
concerned by the Directorate of Remounts and Veterinary Services. Cash
assignments for the purchases are arranged by the Principal
Controller/Controller concerned in favour of the officer on the
treasuries/Branches of the State Bank of India as per the requirement of the
officer. These officers are required to render to the PCDA/CDA concerned a
monthly account of receipts and expenditure in IFA 126 supported by IAFA
126 showing the amounts drawn by cheques during the previous month and
vouchers for the various items of expenditure. The account is required to be
rendered to the PCDA/CDA, not later than the 8th of the month following that
to which it relates.

263. On receipt, the account will be audited in accordance with the general
rules governing the audit of cash expenditure. It should be seen in addition
that:
(1) Separate accounts are prepared in respect of each class of animals, i.e.
horses, mules, camels etc.;
(2) The disposal of each animal is shown on the face of each voucher which
should be supported by a voucher receipted by the receiving depot or unit;
(3) The feeding charges are accounted for in the appropriate form prescribed
in the Remount Regulations; and
(4) An explanation is furnished by the purchasing officer, if unavoidable
delay occurs in the submission of each accounts.

Recruiting Officers’ Accounts

Accounts of Recruiting Officers other than those for Gorkhas

264. Payments for advances of pay, subsistence allowance and railway fares
of recruits and rewards and railway fares of recruiters are made by Recruiting
Officers(except Recruiting Officers Gorkhas, Kunraghat, Laheria Sarai and
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Ghoom)from the permanent advances granted to them for this purpose.
Expenditure incurred against advances will be recouped on submission of
detailed bills of expenditure on IAFA 115 supported by triplicate and
quadruplicate copies of the nominal roll on IAFK 1168.

265. On receipt of these bills they should be checked with reference to the
rules in the Pay and Allowances Regulations and Travel Regulations and with
the monthly returns submitted by Recruiting Officers of recruits passed or
rejected. It will be seen that the number for whom subsistence allowance,
railway fares, advances or rewards are drawn does not exceed the number
shown in the returns. The advances of pay paid to accepted recruits on
Nominal Rolls will be noted by the PCDA/CDA in the demand register and the
demands will be cleared on receipt of the acknowledgements from the Pay
Accounts Offices concerned.

266. The Pay Accounts Offices concerned will open on IRLA for each
accepted recruit on the basis of Part II Orders and debit therein the amount
of advance of pay and ration money, if any, with reference to the duplicate
copy of Nominal Rolls, received from the Regimental/Corps Training Center.
They will then watch the receipt of the triplicate copy of Nominal Roll,
together with the list of R O advances from the PCDAs/CDAs and on their
receipt, acknowledge them and carry out the consequential action.

267. The procedure in Para 264 above will equally apply to recruits who
become non effective for any reason before their arrival at the Regiment
Corps Training Centre and any amount which cannot be adjusted against any
pay due, will be written off under orders of the competent financial authority

Accounts of Recruiting Officers for Gorkhas

268. Monthly cash assignment is placed by the PCDA Central Command at
the disposal of the Indian Army Gorkha Recruiting Depot and Record Office,
Kunraghat, for disbursements to or on behalf of Gorkha personnel. Similarly
assignments are placed by the CDA Patna at the disposal of the Indian Army
Gorkha Recruiting Depot and Record Offices, Laheria Sarai and Ghoom.

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269. The following procedure will be adopted by the PCDA/CDA who
provides the Cash Assignment in respect of the payments to Gorkha
personnel on various counts detailed below :

(a) Acquittance Roll (IAFF 1114) for payments to personnel

proceeding on leave and forms ROG 26 for payment of family
allotment and special family allowance remittances: The original
vouchers received with the general state of accounts will, after a preliminary
check and note of the amount in the demand register, be forwarded to the
Pay Accounts Office concerned supported by a list of advances paid. The
demands will be cleared on receipt of the acknowledgement from the Pay
Accounts Offices.
(b) Acquittance Rolls (IAFF 1114) for payments to
Released/Discharged personnel and forms R O G 21 for payments of
estates: These vouchers are required to be supported by payment
authorities (IAFA 468) issued by the Pay Accounts Offices. Payments will be
debited to PCDA/CDA concerned through Defence Exchange Accounts
supported by acquittance rolls and original payment authorities. PAOs will
debit the IRLA concerned and close it to nil balance.
(c) Vouchers on account of payment of Pending Enquiry Awards, death
gratuities: An intimation of the payments on the above account is sent by the
Recruiting Officer to the Record Offices concerned. The intimations are
supported by the relevant vouchers and IAFA 507(Receivable Order) for
crediting the amounts to Govt to the credit of PCDA (CC), Lucknow or the
CDA Patna, as the case may be. The treasury receipts are sent to these
Controllers for adjustments. At the time of the audit of the Recruiting
Accounts, the payments on the above account appearing therein will be noted
in the Demand Register. When the Treasury receipts are received from the
Record Office concerned, the demands will be removed.

Military Treasure Chest Accounts

270. The rules for the guidance of Officer in Charge, Military Treasure
Chests, are given in Appendix 7 Financial Regulations Part II (Revised edition
1968).

271. On receipt in the audit of the monthly accounts referred to in Para 7 of

that Appendix, it will be seen that all receipts, other than cheques drawn are
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supported by receivable orders or challans or Postal Memo signed by
competent authority, and that list of cheques drawn are furnished. The
payments should be supported by vouchers or discharged cheques. The
receipts and payments appearing in the monthly accounts will then be
compiled in the manner laid down in para 274 of Defence Accounts Code,
Edition 2014.

272. The entries in the monthly accounts should be checked with those in
the daily lists of receipts and payments, and it should be seen that the cash
balance agrees with that shown in the certificate of verification of cash
balance by Military Treasure Chest Board. If the monthly closing balance is in
any month unduly large, the officer in charge, Military Treasury Chest, should
be instructed to reduce the balance immediately either by short drawing or by
a remittance into the Treasury on the bank.

273. Audit of NPS (National Pension System) Accounts:

Govt. of India, Ministry of Finance, Deptt. Of Expenditure vide their OM No.
F.No.1)T)(2)/2003/TA/19 dt. 14.01.2004 & 04.02.2004 have introduced a
New Defined Contribution Pension Scheme replacing the existing system of
Defined benefit Pension System. The National Pension System (erstwhile New
Pension Scheme) came into operation w.e.f. 01.01.2004 and is applicable to
all new entrants to Central Govt. services except to Armed Forces joining
Govt. service on or after 01.01.2004.
The National Pension System works on defined contribution basis and
has two tiers – Tier I and Tier II. Tier-I is mandatory for all Govt. servants
joining Govt. service on or after 01.01.2004. In tier-1, Govt. servant has to
make a contribution of 10% of the total of his Basic pay and DA which is
deducted from his/her salary bill every month by the PAO concerned. A
contribution equal to 14% of the total of his Basic pay and DA is made by the
Govt. Tier II is optional and at the discretion of Govt. servants.
In audit of NPS transactions, the following points are taken into
consideration that:
1. The duly filled CSRF 1 (Common Subscriber Registration Form) has
been submitted by the new entrants within one week of their
appointment to open Tier-I Account.

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2. Recoveries are started from the salary of the month following the
month of joining Govt service. Therefore, no recovery has been
affected for the month of joining.
3. Subscriptions are duly and regularly recovered from the Govt servants
concerned.
4. Govt share (14% of the total of Basic Pay and DA) has been brought to
account properly.
5. No deduction is made towards GPF contribution from the Government
servants covered under NPS.
6. During HPL, the subscription is calculated on the base of leave salary.
7. During EOL, including on medical ground, no contribution either from
Government servants or from Government has been made.
8. The Pay Account Offices have ensured remittance of deductions made
and Govt. contributions thereof to Trustee bank and upload of
corresponding data to Central Record keeping Agency as per timelines
prescribed by PFRDA/CRA has been ensured by the Pay Account
Offices.
9. NPS being a market based mechanism, the Pr. AOs have ensured
monitoring of deduction and their remittance in time by all PAOs under
their command in accordance with the rules prescribed.

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 CHAPTER 13
PENSIONS
Para
Pension Claim 274
Audit of pension claims 276
Payment and audit of pensions 280
Allocation of pension among different Govts. 285
Commutation of pensions 286

Pension Claims
274. The claims for the grant of pension to under mentioned categories are
dealt with by the PCDA (P) Allahabad.
(i) Service Personnel of the Army, Navy and Air Force except AF/Navy
Personnel discharged on or after 1-11-85.
(ii) Civilian personnel (including personnel of the Defence Accounts
Department) paid from Defence Service Estimates and AF and Naval Civilians
(iii) GREF personnel, DRDO and whole time NCC officers.
(iv) Coast Guard personnel paid from Coast Guard organization to be
adjusted in the books of PCDA (Navy)
Note: The Pr. Controller of Defence Accounts (Navy), Mumbai and
Jt. Controller of Defence Accounts (AF), New Delhi are the competent
authorities to sanction the pension claims/ gratuity in respect of Navy and Air
force respectively who retire/die while in service on after 1st November,
1985.

275. With the exceptions of certain categories specifically mentioned in

various Pension Regulations, as amended from time to time, the authority to
sanction pensions to the personnel mentioned in Para 274, is vested in PCDA
(Pensions), except AF & Navy Officers and Personnel discharged on or after
1-11-85. In cases where the authority to sanction pension is not vested with
PCDA (Pensions), he submits an Audit Report, on the admissibility of each
claim, to the prescribed sanctioning authority. In both cases before
sanctioning pension or submitting an audit report to the sanctioning
authority, the PCDA (Pensions) should verify that the qualifying conditions are
fulfilled and that the amount of pension sanctioned or recommended for
sanction is admissible under the relevant rules.

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 In case where a pension is sanctioned by another authority, on receipt of
the order of sanction, the PCDA (Pensions) should before authorizing
payment of pension, check that the sanction conforms to the report made by
them.

Audit of Pension Claims

276. The following main points will be observed in auditing the pension
claims:
(1) That the claim is duly supported by all relevant documents i.e.
Certificates, declarations, Medical board Proceedings as required under rules.
(2) That the qualifying conditions governing the grant of pensions as laid
down in Pension Regulations (Defence Services) or CCS (Pension) Rule 1972
or Civil Service Regulations as applicable, are duly fulfilled.
(3) That in case when a pension is dependent on the length of an individual's
qualifying service, the verification of service is properly carried out by
reference to the Army /Air Force /Navy list and audited sheet rolls, service
books, history of services , etc, as provided under rules and the qualifying
service is correctly determined.
(4) That the report of the Medical Board in support of the Claims for disability
pensions on account of disabilities attributable to or aggravated by Military
Service is complete in all respects and the report has been prepared in
accordance with the rules laid down on the subject and
(5) That, in the case of claims for family pensions, the claimant is correctly
eligible under rules to receive the pension and is not disqualified by reason of
age limit, marriage, remarriage or dependency/income criterion from
employment etc.

277. The essential conditions, subject to which service qualifies for pension
under the Civil Service Regulations or CCS (P) Rules, 1972 are generally that
the service must be under and paid by Government and that Government
servant must hold a substantive post.

278. When sanction has been accorded by the competent authority, the
grant of pensions is notified forthwith in Pension Payment Orders (PPO) by
the PCDA (Pensions).

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279. Detailed audit checks of each type of claim have been laid down in OM
Part IV vol-II, III & IV (2014) which may be referred to.

Payment and Audit of Pensions

280. The payment of pensions is arranged in communication with Pension
Disbursing Authorities by the PCDA (Pensions), for all categories of
pensioners. The reasonability for the audit of pensions also devolves on PCDA
(Pensions) Allahabad.

281. All grants and payments of pensions should be recorded in the Audit
Cards (Audit Registers in the case of Imperial Pensioners) .These audit cards
and registers will contain all particulars affecting the pension. Whenever
pensions are payable for a limited period or depend on the continuance of
some particular condition such as temporary disability pensions, pension of
male orphans, family pensions etc. the conditions on which its continuance is
dependant, will be noted in the pension audit cards and audit registers. The
payments of pensions will be noted therein after audit.

282. The Pension Audit Cards and Audit Registers will invariably be
consulted while auditing pension payments.

283. The audit of payment of pension besides testing the formal accuracy of
the vouchers consists broadly in seeing the following special points:

(1) The pension schedules/journals are prepared on the prescribed forms and
are signed by the Pension Disbursing Officers;
(2) The particulars of the pensioners as shown in the bills, schedules or
journals agree with those entered in the pension Audit Cards or Audit
Registers;
(3) The rules regarding the identification of pensioners are duly observed by
the Pension Disbursing Officers. The identification of the person drawing the
pension with the person to whom the pension was granted is an essential
audit check. For the due performance of this check the Controller has to
necessarily rely on the disbursing authority;

137
(4) The pension has been duly sanctioned and the amount of pension paid is
correct as notified in Pension Payment Orders including corrigendum PPOs
and entered in the pension audit cards or Audit Register;
(5) The various conditions attached to the grant have been fulfilled;
(6) Payments of family pensioners, or disability pensions where sanctioned
for limited period, are not made beyond the period for which they have been
sanctioned;
(7) The prescribed certificates and declarations, regarding non employment
widowhood, etc. wherever necessary, have been duly signed and attested,
where required, by persons authorized to do so;
(8) The demands noted in the pension payment orders or the Govt. dues
otherwise realisable from pensioners are being recovered:
(9) Payments of arrears claimed after more than a year as also payments
to convicted pensioners are supported by the sanction of the competent
authority; and
(10) The prescribed life certificate is furnished by the pensioners if he does
not appear in person to receive the payment. Digital life certificate through
Aadhar card based biometric verification (Jeevan Praman) is an additional
option for pensioners to identify themselves.

284. Detailed audit checks are contained in OM Part IV (2014) which may be
referred to.

Allocation of Pensions among Different Governments

285. Except in regard to the apportionment of liabilities of pensions of
Government servants who retired after serving the undivided India between
India and Pakistan, the following rules regulate the adjustment of pensionary
charges of Government servants who have served one or more than one
Government.
The liability for pension including gratuity will be borne in full by the
Central/State Government to which the Government servant permanently
belongs at the time of retirement.

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Commutation of Pensions
286. The rules regarding the conditions of service of Government servants in
Defence Services provide for a portion of a Government servant's pension
being commuted for a lump sum payment. The procedure for such
commutation is prescribed in the pension Regulations (Defence Services) ,
the CCS (Commutation of Pension) Rules 1981 and other relevant orders
issued from time to time

139
 CHAPTER 14
IMPORTED STORES
Para
Invoices and packing accounts 287
Freight charges 294
Claims procedure 295

Invoices and Packing Accounts

I-Stores procured through the Director General India Supply Mission

London
287. The general rules regarding the receipt and disposal of packing
accounts and invoices are contained in the Regulations for the Army 1987
edition.

288. The calculations in the invoices for which debits are received through
the Inward London Account Current will be checked to the extent of 10 per
cent of the items of each invoice. The selection of the items to be checked in
full arithmetically, will be made personally by the officer-in-charge and
his/her orders recorded in writing. In selecting the items for test check,
preference will be given to those of larger money value. If however, the
number of errors noticed is large, the percentage check should be suitably
increased. Errors and discrepancies of greater value than one shilling in each
invoice, will be reported by the Principal Controllers/ Controllers to the
Director General, India Supply Mission, London, who will remove the
discrepancies in the invoices by forwarding amended invoices, the receipt of
which should be watched.

Note: The arithmetical check prescribed in the above para need not be
exercised over the invoices in respect of the stores procured through DGISM
London for which the expenditure is finally booked in England and which are
also subjected to audit by the Principal Director of Audit in the U.K.

289. Two copies (returnable and landing officer's copy) of the packing
accounts are sent by ISM London, to the Landing Officer and one copy
(retention copy) is sent direct to the consignee. In the case of stores
dispatched by parcel post, two copies of the packing accounts are dispatched

140
to the consignee direct and one copy (landing officer's copy) is dispatched to
the DGS & D, New Delhi.
The 'returnable copy' of the packing account in the ease of stores
dispatched by sea or civil air will be dispatched to the ultimate consignee by
the Landing Officer within 15 days from the date of dispatch of the
consignment. The ultimate consignee must return the 'returnable copy' to the
Landing Officer duly completed through the LAO & PCDA/CDA within 3
months from the date of dispatch of the packing accounts by the Landing
Officer. This period will be prescribed by the Landing Officer in the
memorandum forwarding the packing account. In the case of stores
despatched by parcel post/air, the consignee must return the 'returnable
copy' of the packing account to the DGS & D in the memorandum forwarding
the packing accounts. The audit will be carried out with reference to the
retention copy.
The consignee will check the packing accounts and prepare necessary
CRVs for the stores received and note on both the copies of packing accounts,
the numbers and dates against the items concerned of the CRVs as well as
any damages and deficiencies discovered. The 'retention ' and 'returnable'
copies of the packing accounts will then be forwarded by the consignee
together with the CRVs to their LAO who will
(a) compare the damages and deficiencies noted on the 'Retention' and
Returnable' copies of packing accounts;
(b) check the packing accounts with CRVs;
(c) retain the CRVs for verification of credit in the ledger;
(d) return the 'Retention' Copy of the packing account to the consignee;
and
(e) forward the 'Returnable' copy to the PCDA/CDA.
Note 1. In the case of imported AF Stores, the Retention Copy will be
sent to IHQ of MoD(Air) (Directorate of Equipment), New Delhi and not direct
to the AF Consignee by ISM.
Note 2. The return of packing account (returnable copy) in respect of freight
cases and all civil air consignments of AF will be acted upon as follows:
(a) Those cleared by Embarkation Hqrs, Bombay from Santa Cruz, will be
watched by that Hqrs; and
(b) Those cleared by P & F Unit, AF Palam will be watched by Hqrs
(Direcorate of Equipment).

141
290. On receipt of the 'Returnable' copy of the packing account, the
PCDA/CDA will:
(a) Pair the same with the original invoice received from the PCDA New
Delhi.
(b) Note on the copy of the invoice:

(i) The numbers and dates of the relevant packing accounts and
corresponding CRVs on which the stores have been brought to account by the
consignee; and
(ii) Discrepancies found between the invoices and the packing accounts
and also all damages or deficiencies as shown by the consignee on the
packing accounts;

(c) Complete the invoice register IAF (CDA) 612; and

(d) Forward the packing accounts to the Officer Landing the stores for
transmission to the U.K.

Note 1: All Defence parcels are cleared and distributed to the consignees by
the Embarkation Commandants concerned.
Note 2: Packing accounts for books and publications issued free to units and
formations do not pass through the Principal Controllers/Controllers. These
are returned direct to DGISM London, by consignees concerned.
Note 3: For the adjustment of the price of U.K. Stores received by Military
Farms, see Para 194, Stores Accounting Instructions for Army, 1965 edition.
Note 4: All imported ASC Stores are received by the Food Inspection Unit at
the Port, which accounts for the same and distributes them to different ASC
Consignees. The packing accounts for these stores are received by Food
Inspection Unit at the port and the Invoice by the PCDA/CDA in whose audit
area the port is located.

291. After the invoice have been dealt with as above, duplicate copies of
those pertaining to Ordnance and clothing Factories and Military Farms will be
forwarded to the Accounts Officer Factory/ Officer in Charge of Manager of
the Farm concerned, for use in their office in connection with the
manufacturing accounts of the factories of the production account of the
Farms etc.

142
292. At the end of every quarter, the invoice register should be reviewed
and those invoices in respect of which the returnable copies of packing
accounts have not been received from the LAOs should be sent to the LAOs
for linking with any copy of the packing account that may be available with
the unit and the CRV or in the absence of any copy of the packing account
with the CRV only. On receipt of the invoices from the PCDAs/CDAs, the LAOs
should take prompt action for their linking with packing accounts/CRVs and
return them to the PCDAs/CDAs with CRV Nos. and discrepancies if any,
noted on them without delay. The returnable copies of packing accounts will
be sent to the Principal Controllers/Controllers as and when they are received
duly endorsed with the appropriate CRV Nos. and discrepancies if any. A
quarterly report will also be sent by each LAO to the PCDA/CDA indicating:

(a) Those invoices in respect of which credit for stores could not be verified,
due to non receipt of stores, diversions or other reasons;
(b) Those invoices for which corresponding/returnable copies of packing
accounts have not been received, but credit for stores have been verified and
(c) Cases in which stores have been brought on charge but no corresponding
packing accounts or invoices have been received.
Note 1: Objections regarding non-production of the returnable copy of the
packing accounts in respect of (b) above may be submitted to PCDA/CDA for
waiver. PCDAs/CDAs should watch for return of the invoices from the LAOs
through the invoice register. LAOs will also maintain manuscript registers
showing the details of the invoices received by them from the PCDAs/CDAs
and the action taken thereon.
Note 2: In cases where the LAOs link the invoices sent to them with the
returnable copies of the packing accounts, the pairing between these
documents will be done by them and not by the PCDAs/CDAs. In other cases
the pairing should continue to be done in the Principal
Controller's/Controller's Office.

II- Stores procured through India Supply Mission,

Washington/Canada and other Overseas Agencies.
293. The procedure laid down in Section I above is also equally applicable in
respect of stores imported through ISM Washington/Canada and other
Overseas Agencies with the difference that the two copies of the packing
accounts are substituted by two copies of invoices and the disposal of the
143
invoices by Landing Officer in this case is the same as that of packing
accounts in the case of shipments effected through the High Commissioner
for India in the U.K. (DGISM. The distribution of the shipping documents is as
prescribed in Appendix "Z" to "Regulations for the Army" Volume 2, 1987
edition.
Note: In the case of stores dispatched by post/air parcel, no packing
accounts are issued by ISM Washington, in respect of consignments
dispatched from U.S.A. to India. Hence the procedure laid down in para 289
will not be applicable for watching the return of packing accounts.

Freight Charges
294. Freight charges on imported stores are paid as indicated below:
(i) Stores shipped on commercial vessels - Freight is payable or adjusted in
India.
(ii) Stores shipped on commercial vessels by various Government of India's
sponsored agencies (India Supply Mission) - Freight is normally payable in
the country of shipment.

Claims Procedure
Note: The procedure described below applies to all types of imported stores
intended for all the three services with the exception of the explosives
handled by Naval Armament Stores Officer, Mumbai for which see para 379.

295. The responsibility for handling claims for damages and short landed
items including losses/damages sustained to stores shipped commercially
insured will be that of Embarkation Commandant concerned, who will deal
with them from the time of initiation to the time of their payment or final
rejection.
Note: All claims for short landings or damages involved in respect of Steel
Imports Control indents through the port of Kolkata, will be initiated by Iron &
Steel Controller, Kolkata and not by the consignee.

296. A copy of the claim on account of stores short-landed/damaged will be

forwarded by the Embarkation Commandant to the PCDA/CDA in whose audit
area the port is located for watching the progress of the claim. The amounts
recovered from the Shipping Companies will be credited into the treasury on

144
IAFA-507 (Military Receivable order in Duplicate) and the deposition copies of
Military Receivable Orders (viz. original copies) duly receipted by the
bank/treasury will be forwarded to the PCDA/CDA concerned in whose area
the port is located. In case of credits on account of Naval and Air Force Stores
also, the treasury receipts will be forwarded to the Regional PCDA/CDA in
whose area the port is located. That PCDA/CDA will finally compile the
recoveries to the appropriate receipt head under Major Head 0076 Army,
0077 Navy, 0078 Air and 0079 Ordnance (Fys) according to the nature of
stores.

297. Losses on account of stores short-landed/damaged which are

irrecoverable from the carriers, including the claims dropped by the Director
of Movements and the Embarkation Commandants concerned within their
powers, will be dealt with at the consignees' end as cash losses in accordance
with Rule 411 F.R. Part I Vol I 1983 edition and para 253 Stores Accounting
Instructions for the Army 1965 edition, without holding a Court of Inquiry.

298. A register will be maintained by the Embarkation Commandant showing

the progress made with all claims preferred by him. The register will be open
to inspection at any time by the Local Audit Officer.

299. The detailed 'Claims Procedure' is laid down in 'Stores Accounting'

Instructions for the Army, 1965 edition and Para 1127 et. Seq of edition for
the Army Volume 2, Revised Edition 1987 as amended and orders issued from
time to time.

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 CHAPTER 15

AIR FORCE ACCOUNTS

Para

Section I- Public Fund Accounts-Air Force 300

Section-II- Audit of IRLAs of Air Force Personnel 312
Section-III-Pay Accounting of Air Force Personnel serving abroad and on
courses of Instructions, temporary duty and study leave 322
Section-IV-Audit of claims preferred by HAL on account of work
done for Air Force 325
Section V- Maintenance of Demand Registers in DAD (HAL) Offices 342
Section VI-Audit of claims preferred by HAL on account of work done for
Indian Navy & Indian Coast Guard 343

Section I- Public Fund Accounts- Air Force

300. The organisation of the Air Force provides for the posting of one or more
officers of its Accounts Branch at each Air Force Station. Their duties in
connection with the Public Fund accounts are mainly:
(i) To make payments against entitlements of pay and allowances to service
and civilian personnel of the Air Force whose accounts are maintained on the
IRLA Systems;
(ii) To make payments of monthly pay and allowances to temporary civilian
establishment of non-industrial erstwhile Group ‘D’ status e.g. lascars,
sweeper, coolies, water carriers etc.
(iii) To pay all other authorised charges, such as traveling allowances,
contingent charges, expenditure on local purchase, etc.
Note: If an officer other than of the Accts Branch is posted at a station for
the discharge of the above mentioned functions, he is designated as 'Imprest
Holder'.

301. The payments made by Accountant Officers/ Imprest Holders, if not

already pre-audited and authorised for payments by the PCDA (Air Force) are
subject to post-audit by them.

302. Another distinctive feature of the Air Force accounts is that their public
fund accounts are generally maintained on a station basis and not separately

146
for each unit at a station. The units responsible for maintaining these
accounts are termed as 'Self Accounting Units' such units are approved and
notified by the Government Of India from time to time.

303. The PCDA (AF) supplies funds to Command Headquarters for

distribution to the units under their administrative control on submission of
cash requisitions IAF(A)213(modified). Units under the direct administrative
control of IHQ of MoD (Air) obtain their funds from the PCDA (AF). Cash
requisitions are submitted fortnightly in sufficient time to admit the funds
being made available to them not later than 8th and 22nd of each month.
While providing funds, the PCDA (AF) should see that the amount
demanded is not unduly excessive. If at any time cash is required in excess of
normal requirements, particulars of the additional requirements must be
given in detail on the requisition. Not later than the 3rd day of each month,
every unit sends to the PCDA (AF), a copy of the Cash Book on IAFF(F) 1501,
duly supported by schedule of sub vouchers (IAFF(F) 1505)and the original
copies of vouchers mentioned therein.

304. A register of specimen signatures of all Accounts Officers/Imprest

Holders is maintained by the PCDA (AF) Dehradun, PCDA (AF) New Delhi and
JCDA (AF) Nagpur. This register will invariably be consulted at the time of
payment of cash requisitions and audit of the public fund accounts in order to
ensure the genuineness of the signatures

305. The monthly Public Fund Accounts will, on receipt be checked to see :
(1) That the account is prepared on the prescribed format IAFF(F) 1501 and
is complete in all respects, that the contra entries (e.g. withdrawal of cash
from the bank/treasury appearing as a 'Payment in the bank column and as a
'Receipt' in the cash column) are cross linked and that the grand totals of
receipts and charges, excluding contra items agree with those of the
summary on the last page of the account;
(2) That the opening balance 'agrees' with the closing balance of the previous
month's audited account;
(3) That all the money drawn has been duly brought to account;
(4) That the account is duly supported by all the prescribed vouchers,
acquittance rolls etc;

147
Note I: In the case of payments to the AF Personnel (including civilians)
whose accounts are maintained on IRLAs, the original copies of acquittance
rolls are sent direct to the Air Force Central Accounts Office and the Public
Fund Account is supported by copies of form IAFF(F) 1505, tabulating the
acquittance rolls sent to the Accounts Office.

Note II: In the case of payments to civilians of Air Force units/formations

for whom no IRLAs are maintained, the pay bill cum acquittance rolls
together with the supporting documents are dispatched direct to pay section
of the office of the PCDA (AF) in three batches and the Public Fund account is
supported by copies of IAFF (9F) 1505 tabulating acquittance rolls sent to pay
section.
Note III : Vouchers under series 'D', 'E', 'J' in receipt side, 2A,B,C D and E
in payments side will be handed over/forwarded in case of outstation units on
LAOs/ ALAO(AF) and Public Fund account is supported by copies of IAFF(F)
1505 tabulating the vouchers sent to LAO(AF)/ ALAO(AF).

(5) That the totals of all vouchers acquittance rolls form IAFF(F) 1505 are
correct and have been correctly accounted for in the Public Fund account;
(6) That the bank balance statements and the bank reconciliation statements
have been submitted with the Public Fund account and the details recorded
therein agree with the balances shown on IAFF(F) 1501;
(7) That the closing balance has been correctly worked out and is not unduly
high; and
(8) That the certificate as regards the counting and verification of the
balances, both in hand and at the bank/treasury, has been signed by the
Officer Commanding in the space provided for the purpose on IAFF(F) 1501.

306. The audit of transactions accounted for in the Public Fund accounts will
be carried out in accordance with the general rules for audit of cash
expenditure laid down in Chapter 2 and the special points mentioned in the
following paragraphs.

307. In the case of payments to AF Personnel including civilians, whose

accounts are maintained on the IRLAs, the copy of IAFF (F) 1505 received in
support of the Public Fund accounts will be paired with the copy received from
that Air Force Central Accounts Office containing a certificate to the effect

148
that the amounts shown therein have been debited in the IRLAs of the
personnel concerned.

308. Where payments are to be adjusted by Book Debit (such as payments

made from Air Force sources to the personnel of the Army and Navy) or by
cash recovery, appropriate action will be taken and the recovery watched
through the demand or other registers.

Washing Bills
309. These bills generally relate to washing of airmen's service clothing and
of barrack and sick quarters. In conducting audit over these bills it will be
seen:
(a) That the payments made are in accordance with the rates specified in the
contract agreement;
(b) That the total expenditure on account of washing of airmen's service
clothing does not exceed, what it would have costed to the State had the
cash allowance as prescribed by Govt from time to time been granted;
(c) That the certificate of the Equipment Officer exists to the effect that the
services rendered are satisfactory; and
(d) That the claims are supported by certificates prescribed by IHQ of MoD
(Air).

Tailoring Bills
310. These bills generally relate to:
(i) Repairs and alterations to airmen's clothing articles; and
(ii) Manufacturer of kit (special size).

The bills will be checked to see:

(a) The payments for repairs and manufacturer of clothing are in accordance
with the contract agreement;
(b) That no items of personal clothing except at the time of
initial/replacement issue is repaired at public expense;
(c) That in the case of manufacturer of clothing articles such as Warrant
Officers' coats or special size of clothing, the CRV containing a certificate from
the Equipment Officer that the articles have been brought on charge, is
furnished, and

149
(d) That in the case of bills on account of repairs and alterations at public
expense, the claims are supported by form IAFF(Q) 415 (Old Form 350) in
duplicate, duly completed.

Air Freight bills

311. Air Force stores, the urgent movement of which is essential may be
dispatched by Air by Civil Airlines after obtaining sanction from the
appropriate authority; A.O.G.(Aircraft On Ground) Equipment may be
despatched by Civil Airlines within Indian limits( also to and from abroad)
whenever imperative and if at the time of despatch, service aircraft is not
available. While auditing the claims on account of these air freight bills, it will
be seen:
(a) That the despatch of Air Force stores by civil airlines is restricted to:
(i) Aircraft on Ground (A.O.G.) equipment;
(ii) Those under special instructions issued by Air Headquarters with the prior
sanction of the Government of India; and
(iii) In case of emergency and operational requirement, non A.O.G. Stores
may be despatched by civil aircraft under the sanction of the Chief of Air
Staff/ A.O.C. in C.

(b) That, when freight is not paid in cash at the time of booking the air
passage warrants and a way bill are attached to the bills duly endorsed with
the authority for the despatch of the equipment by air; and

(c) That the rates charged by the companies, for stores despatched within
Indian limits are correct with reference to their freight tables notified from
time to time.

Section II- Audit of IRLAs of Air Forces Personnel

312. The Individual Running Ledger Accounts of Service and Civilian (other
than industrial civilian labour) personnel of the Air Force are maintained by
the Air Force Central Accounts officer- a service organisation under the
administrative control of IHQ of MoD(Air). The audit of these accounts is
carried out by the Principal Controller of Defence Accounts (Air Force) New
Delhi.

313. All documents and information requiring action in the IRLAs are initially
received in the Voucher Registry Section of the Air Force Central Accounts
150
Office, where they are serially numbered and entered in the 'Control
Registers'. After IRLA action by the different Ledger Groups they are recorded
in the Voucher Register. The Audit staff selects arbitrarily from the 'Control
Registers' the prescribed percentage of the documents to be audited. These
documents are collected and after audit returned to the Voucher Registry
Section.

314. The IRLAs are closed monthly by the Air Force Central Accounts Office
and monthly summaries are prepared. The audit of these accounts and the
connected documents will also be carried out on a monthly basis. The
quantum of audit of IRLAs will normally be 331/3% unless a lower percentage
is specifically indicated for any item. The percentage of audit specifically
indicated for any items should be increased, if the state of accounts is found
unsatisfactory. Selection of documents to be audited should be made
arbitrarily but the formula adopted for selection will be recorded and varied
during each audit.

315. The audit of IRLAs will be carried out as follows:

(a) Check the 'Opening Balance'(from the previous month's 'Closing
Balance'), check the castings of all debit and credit entries relating to that
month.
(b) Check every entry (for the month) in the 'Credits' portion into the 'Audit
Register' portion or into intimations of miscellaneous credits.
(c) Check every credit entry in the 'Audit Register' portion, which claims to be
based on a Government Gazette or other orders or Personnel Occurrence
Reports of a date or serial number, subsequent to those subjected to last
audit into the Government Gazette or other orders or Personnel Occurrence
Reports.
(d) Check that pay has been drawn with reference to dates recorded in Last
Pay Certificates or the appointment orders, etc. in cases of officers newly
transferred or newly appointed for whom IRLAs are opened.
(e) Check every debit entry (for the month) in the 'Audit Register' portion,
requiring a Debit against the individual into the 'Debits' portion of IRLA.
(f) Take one third of the entries (of the month) in the 'Debits' portion of the
IRLAs and check into the monthly summary.

151
(g) Income Tax-In the IRLAs selected for audit, it should be seen that Income
tax has been recovered at the appropriate rate from those liable to tax.
(h) All grants of leave are annotated in the 'Audit Register' portion of the
IRLAs quoting the relevant Personnel Occurrence Report entries. It will be
seen in audit that the leave, pay and allowances have been correctly
regulated for the period of leave granted.
(i) Credit entries will invariably be traced from the IRLAs into the relevant
documents and vouchers. Debit entries will be traced from the vrs. such as
Personnel Occurrence Reports Office Orders, etc. into the IRLAs.
(j) Check that each newly opened IRLA and/ or continuation sheet has been
authenticated with AFCAO's stamp and signed by the Accountant
Officer/Officer-in-Charge of the section concerned.
(k) Check that the demands (e.g Advances for the purchase of conveyance
etc), which are recoverable in more than one installment through the IRLA
are annotated in the demand columns of the IRLA.

316. The following checks will be exercised on the other connected

documents:
(i) Forms-1505: Check that all the Acquaintance Rolls relating to Forms-
1505 have been duly entered in the voucher registers maintained by the Air
Force Central Accounts Office and that the amounts indicated in Forms-1505
agree with the acquittance rolls.
(ii) Acquittance Rolls: Trace the entries on the Rolls into the 'Debits' portion
of the IRLAs.
(iii) Personnel Occurrence Reports:
(a) Check all the debit entries from PORs into the IRLAs Recurring Debits
should be traced into the "Audit Registers' portion and non-recurring debits
into the 'Debits’ portion of the IRLAs.

(b) Entries relating to the grant of leave appearing in the PORs will be
checked from the PORs into the 'Audit register’ portions and non-recurring
debits into the 'Debits' portion of the IRLAs, it will be ensured that the period
of leave granted does not exceed the permissible limits.

(iv) Miscellaneous demands e.g loss statements, Hospitals Stoppage

Rolls, Payment Issue Vouchers, LF Bills, etc.: Recoveries will be checked
from the demand notifications into the IRLAs. Recurring demands will be

152
checked from original documents into the 'Audit Register' portion of the
IRLAs, except in the case of family allotments, the debits on account of which
will be checked from the original lists into the 'Debit' portion of the IRLAs. In
the case of recurring recoveries, such as, L.F. Bills, etc., a general scrutiny
will be exercised, in addition to percentage check of the credits that there are
no obvious omissions of such recoveries.

(v) Orders affecting emoluments: Gazette Notifications, Government

Orders and letters issued by other authorities will be checked into the 'Audit
Register' portion of the IRLAs. In case of non recurring debits/credits, the
check will be into the Debit/Credit Portion of the IRLAs.

(vi) Fund Deductions: Recoveries will be checked from the statements into
the 'Debit' portion of the IRLAs.

(vii) Family Allotments: The payments will be checked, to the extent of 10

percent with reference to the proof of payments i.e 'Payees'
acknowledgements. Undelivered family allotments will be verified in the Form
1505 received from the PCDA(Air Force) and linked therefrom and traced into
the respective IRLAs.
(viii) Monthly summaries:
(a) Check the vertical castings of the summaries.
(b) Check all carrying forward totals with those in the IRLAs.
(c) See that aggregate of the 'Opening Balances' agrees with that of the
'Closing Balances' of the previous month.
(d) Check all the 'Closing Balances’ into the IRLAs.
(e) Check 11 percent of the items from the summary into the 'Credits' portion
of the IRLAs.

(ix) Pay Books: The advances entered into the close pay books selected for
the audit will be checked into the 'Debits' portion of the IRLAs, and the pay
books will be annotated accordingly.
1/3
(x) Sheet Rolls: Select 33 percent of the Sheet Rolls at random and see
that :
(i) The entries in the defaulters Sheets affecting pay and allowances are
actioned in the IRLAs;
(ii) Badge pay has been correctly granted with reference to the red ink entries
appearing in the Sheet Rolls;
(iii) The leave granted does not exceed the authorised limits; and

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(iv) The kindered rolls are kept up-to-date and the entries therein have been
verified and attested by an Officer of the Air force Records Office at least once
in a year.
Note : The review of the entries in the IRLAs of airmen with reference to the
entries in the Sheet Rolls at the time of final settlement of accounts will be
restricted to the last stage of audit as indicated by the last audit enfacement
on the Record copy of Sheet Rolls.

317. Suspense Accounts: The items contained in Acquaintance Rolls

and other vouchers, which cannot be identified for IRLAs action, are kept by
the Air Force Central Accounts Office in 'Suspense Accounts'. The units
concerned are addressed by the Air Force Central Accounts Office, for correct
particulars and on their receipts, the suspense account is cleared. It will be
ensured in audit that speedy and appropriate action is taken by the Air Force
Central Accounts Office, for the clearance of such accounts. Any undue delay
in the clearance of outstanding items from whatever cause, should be
brought to the notice of the Officer Commanding Air Force Central Accounts
Office and where necessary to that of the PCDA (Air Force), New Delhi.

318. Final Credit balance: The IRLAs of released, discharged and invalided
officers and men will be audited cent per cent subsequent to their last audit,
before payment of the final credit balance is made. The payments will also be
checked cent per cent with reference to the payees' acknowledgments.

319. General: IRLAs and the connected documents on which audit check is
carried out, will be suitably enfaced under the dated initials of the
Auditor/AAO.

320. Air Force List: The audit of Air Force list is conducted in the office of
the Jt.CDA (AF) New Delhi. The Jt.CDA (AF) New Delhi is responsible for the
audit of draft Gazette Notifications relating to appointments, substantive
promotion, relinquishments, etc of Air Force Officers as also cases regarding
assessment of previous pensionable service of such officers.

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‘Scale Audit’ : AF Officers and Civilians in the Air Force
321. (a) Air Force Officers:
(i) A chart is maintained in the proforma 'A' to Annexure 'B' Chapter XII
Office Manual Part III separately for each branch showing the strength of AF
Officers sanctioned for each unit and formation according to Ranks
(ii) A card is opened for each officer and is completed with reference to the
rank of the officer shown in their IRLA on the last day of each quarter. The
cards are arranged branch wise and rank wise and in an alphabetical order.
Number of officers in each branch and rank are counted and entered in
column 3 of the proforma 'B' to Annexure "B" Chapter XII, Office Manual Part
III(numerical return) Cards are to be prepared separately for each branch,
and the surpluses, if any, are worked out branch wise and rank wise.
(iii) Objections are raised on any excess over the overall authorised strength
to enable IHQ of MoD (Air) to take regularisation action.
Note 1: On an Officer becoming non effective, his card is removed and kept
separately.
Note 2: As a temporary measure vacancies in GD Branch in a particular rank
can be filled by Officers of the A & S D Branch and vice versa.
Note 3: The promotion up to the rank of Wing Commander (Time scale
except Medical Branch) being time scale/promotions vide AFI 118/50 as
amended, excess if any, up to this rank are not placed under objection.

(b) Civilians: The scale audit over the strength of civilians in the Air Force is
exercised for one month in a quarter. A register is maintained unit wise
showing the strength of civilians sanctioned for each unit and formation
according to each class of civilians.
Strength check statements are received from all AF units/formations
every month, showing the authorised establishment as well as the actual paid
strength. The sanctioned strength shown in the above statement is checked
with reference to the sanctioned strength shown in the register, and the 'paid
strength' is checked with reference to the summaries of IRLAs furnished by
the AFCAO New Delhi. The result of the check will be recorded on the
strength check statements under the dated initials of the auditor and the
AAO. Excess, if any, in the actual paid strength over and above that
sanctioned in the authorised establishment of AF units/formations will be
reported to the units/formations concerned for regularisation action.

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Note: The number of the civilians employed against airmen vacancies as
indicated in the monthly strength check statements are checked with
reference to the summaries of IRLAs and are excluded for exercising scale
audit of civilians.

(c) Audit of substantive promotion of Airmen:

(1) Cent per cent check in respect of substantive promotions of airmen is
carried out before publication with reference to the following documents:
(i) Draft promotion by lists received from the AF Record Office.
(ii) Original letters from IHQ of MoD (Air) dealing with promotions by
selection.
(iii) Sheet Rolls (Record copies).
(iv) IRLAs of Airmen.

(2) It will be verified from the Sheet Rolls and IRLAs of airmen, that the
minimum total service in a particular rank as laid down for promotion has
actually been rendered (after excluding non qualifying service if any). It will
also be seen that:
(a) The fact of passing technical /educational tests where such a pre requisite
is prescribed for advancement is recorded in the sheet rolls;
(b) Promotions required to be made on selection basis by IHQ of MoD(Air)
have actually been approved by Air Headquarters;
(c) With reference to register of authorised establishment and paid strength
of SNCOs, the number of airmen proposed for such promotions are within the
authorised establishment except where otherwise provided;
(d) A certificate regarding the employment of civilians against Senior NCOs
vacancies has been furnished; and
(e) Where substantive promotions of airmen are restricted to the availability
of vacancies in establishments, it will be ensured that on the date or prior to
the date, with effect from which the promotion is authorised and airmen
performed the duties of the rank to which he is promoted.

Note: The condition of performance of duty of higher rank will not, however
be insisted upon in the following cases:
(a) Airmen undergoing courses of instruction from where they cannot assume
duties of higher rank, earlier than the date of completion of the course.
(b) Airmen who are posted abroad in the offices of the Air Advisers and for
whom appointments of suitable ranks are not available in those offices.

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(c) Airmen/air crew who might be engaged in courier flight to U.K or
Indonesia or airmen who are posted to Car Nicobar and whose transfer
cannot be ordered to another station before a specified period or airmen who
are included in international sports contingents or airmen serving with Indian
contingent with UN Force Abroad and for whom appointments of suitable
ranks are available.
(d) Airmen who are absent due to sickness (excluding wounds and
attributable injuries) and retain their acting rank for a maximum period of
two months under para 16(vi) of AFI 12/S/48.

(3) Airmen of the categories mentioned in para 2(a), (b) and (c) above, will
be promoted to the substantive rank with effect from the date it fell due,
provided on completion of the course or on return from posting abroad or on
completion of the courier duty respectively, they directly take over the
appointments, of the appropriate ranks in a unit in India.
In regard to airmen of category referred to in clause (d) of note
above, promotion to the substantive rank with effect from the date it fell due
will be subject to the condition that they are granted the acting paid rank
after becoming effective during the maximum period of 2 months. No acting
promotions will be made in vacancies earmarked for such airmen.
(4) Reclassification of airmen do not fall within the purview of audit, as these
are regulated by the administrative authorities in accordance with the
administrative orders issued from time to time.

(5) Promotions to the rank of Corporal are made without reference to

authorised establishment.

(6) Letters authorising promotion, on receipt from the AFRO are checked with
the audited draft promotion list and the paid strength register completed. A
copy thereof is then passed on to 'Airmen Section' for ensuring during the
audit of IRLAs, that the promotions actioned in IRLA conform to those
contained in the said letter.
(d) Audit of acting promotions of Airmen:
(1) Cent per cent check in respect of acting promotions of airmen will be
carried out before publication with reference to the following documents:
(i) Letters from AFRO (AHQ) proposing acting promotions
(ii) Original letter from Air Hqrs dealing with promotions by selection
(iii) Record copy of sheet roll
(iv) IRLAs
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(2) It will be verified from the sheet rolls and IRLAs of airmen that the
prescribed length of service (after excluding period of non qualifying service,
if any) has been rendered by them. It will also be seen that:
(a) No of airmen proposed for such acting promotions are within the
authorised establishment as verified from Register of authorised
establishment and paid strength of SNCOs, except where otherwise provided;
(b) A certificate regarding employment of civilians against SNCO’s vacancies
has been furnished.
Note: Promotion to the rank of Corporal are made without reference to
authorised establishment. Letter authorising promotions on receipt from the
AFRO are checked with the audited draft promotion list and the paid strength
register completed. Thereafter a copy thereof is passed on to the Airmen
Section, to ensure during the course of audit of IRLA that acting promotions
are converted into paid acting ranks after rendering the requisite period of
continuous service in that rank. Suitable annotation will be made on the
copies of letters held.

Section III-Pay accounting of Air Force Personnel Serving abroad and

on Courses of Instructions, Temporary Duty and Study Leave
322. AF personnel attached to or serving on the establishment of the
Embassies or High Commissions for India abroad, will be treated at par with
civilians borne on the same establishment in the matter of pay accounting. In
accordance with the civil system of pay accounting, pay slips will be issued by
the Air Force Central Accounts Office, New Delhi to disbursing officers
concerned in overseas countries, authorising payments to AF Personnel. In
the case of AF Personnel posted to U.K., however, LPCs will be issued to the
High Commissioner for India in the U.K.

323. Pay accounts AF Personnel proceeding abroad on course of

instructions, temporary duty and study leave will continue to be maintained in
India by Air Force Central Accounts Office, New Delhi. Allowance admissible
by virtue of their deputation abroad will be paid finally ex-India. Daily
Allowance, Halting Allowance, Foreign Allowance and other compensatory
allowances e.g Children's Education Allowance, House Rent Allowance etc.
which are exempted from income tax will not be exhibited in the IRLAs in
India Air Force Officers, except those in the U.K will draw advances on Pay

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book (IAFF(F) 1504) within the permissible limits and be allowed to make a
monthly bankers allotment which will be remitted by Air Force Central
Accounts Office, New Delhi to their banker in India every month. Those
proceeding on courses of instructions, temporary duty, or study leave in the
U.K, will under the special arrangements detailed in the succeeding
paragraph, be paid their pay and allowance like officers serving in India.

324. The accounts of Officers on courses of instructions, temporary duty or

study leave in the U.K. will be closed by Air Force Central Accounts Office,
New Delhi by the 15th of each month. A statement of accounts, will be
prepared after taking into account any advances (issued in the U.K and
intimated to Air Force Central Accounts Office, New Delhi) alongwith standing
deductions and sent to the office of the High Commissioner for India in the
U.K by Air Mail. The latter will pay the amount shown on the statement of
accounts, less any advances drawn and not reported to Air Force Central
Accounts Office, New Delhi to the officers who would thus receive their net
entitlements under the rules each month. No remittance will be made to the
bankers in India unless specially requested for by any officer.

Section IV - Audit of Claims preferred by M/s Hindustan Aeronautics

Ltd. (HAL) towards supplies made & services rendered to Defence
Forces
325. Set up of Hindustan Aeronautics Limited (HAL)
Hindustan Aeronautics Limited (HAL) is a fully owned Government of
India undertaking. It is a Defence Public Sector Undertaking (DPSU) under
the administrative control of Ministry of Defence, Department of Defence
Production. Its Corporate Office is in Bengaluru. It has, at present, 21
Production & repair/overhaul units and 10 R&D centres across India i.e.
Bengaluru, Hyderabad, Nasik, Koraput (Odisha), Lucknow, Kanpur, Korwa
(UP) and Barrackpore. It caters to the needs of the Armed Forces, in addition
to Civil Airlines and foreign customers, in manufacture of Aircraft, Helicopters,
repairs & overhaul of aircraft/helicopters, aero-engines and
rotables/equipment and other allied work which is entrusted to it. The major
customers consist of Indian Air Force, Indian Army, Indian Navy and Indian
Coast Guard Organisation. The procedure for financial and audit checks on

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the invoices submitted by HAL for work carried out for Armed Forces is
described in the following paragraphs.

(326).
(i) HAL undertakes the production, maintenance and overhaul services of the
fleet of Armed Forces to cover the life cycle requirement of all the old and
new products. The following types of work are generally handled by the
Company for the Armed Forces:
(a) Undertaking the Design & Development (D&D) programmes of national
importance: Presently it is involved in R&D activity on Light Combat Aircraft
(LCA), Intermediate Jet Trainer (IJT), Light Combat Helicopters (LCH),
Weapon System Integration on Advanced Light Helicopter (ALH), Multi-role
Transport Aircraft (MTA), Fifth Generation Fighter Aircraft (FGFA), Basic
Turboprop Trainer (BTT), etc.
(b) Production of aircrafts: Current production lines include Aircraft like
Sukhoi-30 MKI, Hawk-Advanced Jet Trainer Mk132, Light Combat Aircraft
(LCA), Dornier-228 and Helicopters like Dhruv-Advanced Light Helicopter and
Cheetal.
(c) Repair & Overhaul of Trainer & Combat aircraft & helicopters: Presently,
repair & overhaul range of the Company includes Aircraft like Jaguar, Kiran-
Mk 1 & Mk II, Mirage-2000, HS-748 (AVRO), AN-32, MIG series of aircrafts,
Su-30MK1, Dornier DO-228 and Helicopters like ALH,
Cheetah/Chetak/Cheetal. HAL is also vested with the task of repair &
overhaul of aero-engines & accessories/avionics/rotables/components forming
part of the above aircrafts & helicopters.
(d) Supply of maintenance spares in the Armed Forces based on the Repair,
Manufacture & Supply Order (RMSO) placed by the Armed Forces for eventual
utilization in overhaul & repair programme at the Base Repair/EDs etc.
(e) Undertaking the task of site repairs/survey/Inspection/maintenance of
aircrafts/equipment at certain Air Force bases by deputing personnel.
(f) Setting up of DRE facilities within HAL for manufacture and repair/overhaul
of aircrafts/helicopters, aero-engines and rotables from the funds provided by
the Government.
(g) Initiating action for dispatching the aero-engines/ avionics/ accessories/
rotables of aircrafts /helicopters, inducted by the Armed Forces, to the
Original Equipment Manufacturer (OEM) including abroad & returning to
Services on completion of requisite repair/overhaul.

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(h) Providing services to the visiting aircrafts of Armed Forces at HAL division
& also carrying out all other such miscellaneous works entrusted to them.

(ii) The procedure for financial and audit checks on all types of claims
preferred by HAL for work carried out for the Armed Forces is described in the
succeeding paragraphs.

(327).
(A) All types of works carried out by HAL, as mentioned in para 326 above,
are authorized under:
(a) The specific sanction accorded by Government of India, Ministry of
Defence in case of D&D projects.
(b) The specific sanction accorded by Government of India, MOD for
establishment of DRE facilities at HAL for manufacture/repair & overhaul of
Aircraft, helicopters and their engines & aggregates.
(c) The specific contracts concluded by Ministry of Defence/Service Hqrs with
HAL for manufacture of aircrafts/helicopters & aero-engines & also upgrading
the existing fleet of helicopters & aircrafts.
(d) The annual firm tasks placed by the Service HQrs for repairs & overhaul of
aircrafts/helicopters/aero-engines and rotables/avionics/accessories of such
aircraft, helicopters & aero-engines.
(e) The Repair, Manufacture & Supply Orders (RMSOs) placed by the Service
HQrs & their lower formations & Units under the delegated financial powers.

(B) Terms & conditions of the orders for work placed on HAL provide for
payment on the basis of:-
(a) Prices fixed in the relevant contracts; or
(b) Prices notified through the Fixed Price Quotations (FPQ) & Spare Price
Catalogues (SPC) approved annually for each type of jobs undertaken & each
item of supplies effected; or
(c) Cost plus profit basis for specified number of quantity, as approved in the
FPQ policy letter or
(d) Verification of proof of incurrence/payment in case of DRE projects etc.

328. Setup of DAD (HAL) Offices

(A) A combined Finance and Audit Section (FAS) under the charge of DCDA
(DAD) is attached to Hindustan Aeronautics Limited, Bengaluru Complex
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under the organization of PCDA, Bengaluru. This office is responsible for the
audit and payment of claims preferred by HAL Divisions located in HAL
(Bengaluru Complex), HAL (Helicopter Complex, Bengaluru) and HAL (Design
& Development Complex, Bengaluru).
HAL (Bengaluru Complex) consists of Aircraft Division, Overhaul Division,
Engine Division, Intermediate Jet Trainer (IJT)-Limited Series Production
(LSP) Division, Industrial & Marine Gas Turbine (IMGT) Division, Light Combat
Aircraft (LCA)-Tejas Division and Foundry & Forge Division.
Similarly HAL (Helicopter Complex) consists of Helicopter Division, Helicopter
– MRO (Maintenance Repair & Overhaul) Division and Composite
Manufacturing Division (CMD).
Also HAL (Design Complex) consists of Aircraft R&D Centre (ARDC), Mission &
Combat System R&D Centre (MCSRDC), Rotary Wing R&D Centre (RWRDC)
and Aero-Engine Test Bed R&D Centre (AETBRDC).

(B) Office of the DCDA(DAD) at HAL (Bangalore Complex) is also responsible

for the audit & payment of claims preferred by Bharat Electronics Limited
(BEL) Bengaluru, a Defence Public Sector Undertaking wholly owned by Govt.
of India against the contracts concluded by MOD & supply orders placed by
Armed Forces.

(C) Office of the DCDA (DAD) HAL (BC) is also responsible for audit &
payment of claims preferred by certain private firms like M/s Southern
Electronics (P) Ltd. Bengaluru, Merlin-Hawk (P) Ltd. Bengaluru, HAL-BIT
Avionics (P) Ltd. Bengaluru.

(D) Similarly the AO (DAD) office is attached to each division of HAL at

Hyderabad, Nasik, Koraput (Odisha) Lucknow, Kanpur, Barrackpore & Korwa
(U.P) for audit & payments of claims preferred by their divisions for supplies
made & services rendered to Armed Forces.

(E) Office of the AO (DAD) co-located with HAL Hyderabad Division is

responsible for audit & payment of claims preferred by M/s Bharat Dynamics
Limited (BDL) Hyderabad, a defence Public Sector Undertaking wholly owned
by Govt. of India. This is in addition to audit & payments of claims preferred
by HAL, Hyderabad Division.

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(F) Offices of the DCDA/AO (DAD), co-located with HAL divisions have the
dual role of exercising audit checks on behalf of the Defence Accounts
Department (DAD) and financial/cost checks on behalf of Ministry of Defence
(Finance). These offices function under the administrative & audit control of
PCDA Bengaluru. These offices are entrusted with the onerous tasks like:
(a) Carrying out audit checks which normally devolve on Defence Accounts
Department;
(b) Audit and payment of claims preferred by HAL for supplies made &
services rendered to the Armed Forces;
(c) Carrying out financial checks/scrutiny of costs as reflected in the cost
ledgers of HAL;
(d) Furnishing necessary data required by MOD/Service HQrs for fixation of
prices or for suggesting economical methods of repair/overhaul based on the
higher audit;
(e) Audit & payment of claims preferred by M/s Bharat Electronics Limited,
Bengaluru & few private firms like Southern Electronics (P) Ltd. Bengaluru,
Merlin-Hawk Ltd. Bengaluru, HAL-BIT Avionics (P) Ltd. Bengaluru (by the
office of DCDA (DAD) HAL, Bengaluru only);
(f) Audit & payment of claims preferred by Bharat Dynamics Limited (BDL),
Hyderabad for various types of missiles supplied to Armed Forces (by the
office of AO (DAD) HAL Hyderabad only).

(G) All the DAD (HAL) offices, mentioned above, are under the functional
control of HAL Cell, Main Office of PCDA, Bengaluru which is responsible for:
(i) Periodical O&M Inspection of all DAD (HAL) offices and pursuing the
Inspection Reports to finality;
(ii) Issuing clarifications on audit & financial matters, sought by the DAD
(HAL) offices;
(iii) Projecting the MFAI & IAR cases to HQrs. office & pursuing the same to
finality;
(iv) Bringing out the infirmities/weaknesses in the contract to the appropriate
authorities for necessary action;
(v) Rendition of consolidated Annual Audit Certificate (AAC-HAL portion)
report to HQrs. Office;
(vi) Rendition of consolidated Audit report to Service HQrs. on claims of HAL
towards Vacation Leave (VL), Performance Related Pay (PRP), Provision for
Gratuity, Arrears of wages/DA/bonus etc., as per Pricing Policy in vogue;
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(vii) Updation of relevant chapters of OM Part III & Defence Audit Code
dealing with HAL portion & submitting the same to CGDA HQrs office for
approval & incorporation;
(viii) Pursuing the cases of LTARs with the Test Audit Authorities for
settlement.
(ix) Furnishing suitable reply to Draft Audit Paragraphs to H.Qrs. office.

(H) As per the revised pricing policy in vogue with effect from 1995-96 for
products & services rendered by HAL, the DAD (HAL) offices are entrusted
with the following additional tasks:
(i) Providing assistance to Air HQ team in preliminary verification of cost
data/details at HAL division level as part of Pricing Policy Review Committee
(PPRC) constituted by the MOD for the purpose of recommending base year
prices;
(ii) Verification and approval of Man Hour Rate (MHR)/ Fixed Price
Quotations/Prices indices, exchange rates etc., provided by Air HQ & base
year prices approved by the Govt. of India, Ministry of Defence as per the
extent FPQ pricing policy in vogue, the Quotations/Catalogues submitted by
HAL divisions for the subsequent five years are verified & approved by DAD
(HAL) offices based on the methodology envisaged in the Govt. approved FPQ
policy letter;
(iii) Verification of data/details relating to supplementary claims of HAL
Divisions towards provision for Gratuity, Vacation Leave (VL), Performance
Related Pay (PRP), arrears of wages/salaries/DA etc., and rendition of a
report to PCDA Bengaluru for further necessary action;

329. The books of account of HAL are subject to audit by a firm of

professional auditors. A supplementary or test check is conducted by the
Director of Commercial Audit under the Comptroller and Auditor General of
India. DAD (HAL) offices conduct requisite checks over the transactions to the
extent authorized under various Govt. orders, issued from time to time.
This being the position, great care should be exercised in carrying out
the financial and audit checks. Further the paid vouchers of DAD (HAL)
offices are subject to periodical Test Check by the Director of Audit (Air Force)
under Comptroller & Auditor General of India (C & AGI).

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330: The audit of claims preferred by HAL, BEL and BDL for supplies
made and services rendered to IAF, Army, Navy & Coast Guard will be
conducted with reference to:
(a) The provisions contained in the sanction accorded by the Government of
India, Ministry of Defence for execution of specific Design & Development
activities of new Aircraft, Helicopters, Aero-engines & rotables forming part of
these aircrafts/aero-engines.
(b) Terms & conditions stipulated in Contract concluded by the Ministry of
Defence/Service HQrs for manufacture/Up-grade etc. of Aircrafts/Helicopters,
Aero-engines, Equipment, associated spares, Missiles etc.
(c) Terms & conditions envisaged in the GOI sanction for establishment of
DRE facilities in HAL/BEL/BDL for manufacture/repair & Overhaul of Aircrafts
etc.
(d) Terms & conditions stipulated in the Task letter for Servicing/Major
Inspection/Rectification/Defect investigation etc. of Aircraft/Aero-
engines/Rotables belonging to Armed Forces and terms of payment stipulated
in Division-specific Fixed Price Quotation (FPQ) policy letter approved by the
Government from time to time.
(e) Terms & conditions of the Repair Manufacture & Supply Order
(RMSO)/Local RMSO issued by the Services HQrs and their lower
Formations/Units. Audit will be conducted with reference to terms of payment
stipulated in the Division-specific Fixed Price Quotation (FPQ) policy letter
approved by the Government from time to time.

331: Audit checks on claims pertaining D&D sanctions &

manufacturing/ upgrade contracts
Audit checks will be conducted with reference to the terms of payment
stipulated in the relevant contract/sanction. However, the broad checks to be
exercised are as follows:
(i) See that the sanction of CFA exists/relevant contract is concluded.
(ii) See that the relevant terms of payment of sanction/contract, are adhered
to.
(iii) See that the specific milestone, as defined in the sanction/contract, is
achieved by the Seller & the requisite certificate to this effect, duly signed by
the authorized inspecting authority of the Buyer, is enclosed in original.

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(iv) See that the year-wise flow of funds, if indicated in the sanction/contract,
for completion of each activity is adhered to.
(v) See that the Time-frame, as specified in the sanction/contract, for
completion of each activity is adhered to.
(vi) See that wherever the sanction/contract value includes Foreign Exchange
component, the claim on account of Exchange Rate Variation (ERV) is
submitted by the Seller on due date for necessary adjustment.
(vii) See that the approved ceilings/contract value is not exceeded unless
otherwise the sanction/contract specially provides for reimbursement of
certain elements like Taxes & Duties, ERV etc. extra at actuals.
(viii) See that the prescribed ceiling for each customer is watched
scrupulously in case of multi-customer project.
(ix) Ensure that Liquidated Damages (LD), as applicable, is invariably worked
out & levied as per stipulations in the LD clause of the Contract/sanction
concerned.

332. Audit checks on claims pertaining to Repair & Overhaul jobs

(i) See that the approved Firm task for the concerned year exists while
releasing 1st stage payment
(ii) See that if the annual firm task is not placed by the task-placing authority
within the prescribed time-limit, the provisional claim is based on approved
forecast quantity & subject to review immediately on receipt of approved firm
task for the year concerned.
(iii) See that the claim is worked out as per the approved FPQ rate for the
job/task concerned, as applicable to the task year.
(iv) See that the claim towards 2nd stage payment is prepared as per
approved FPQ rate and supported with a certificate confirming
commencement of striping/dismantling activity from the production Dept. of
HAL division & also a certificate from the Head of Finance of HAL division that
65% of the total cost of the ROH task has been incurred till this stage.
(v) See that in case of internal rotables (avionics & accessories) sent by one
division of HAL to its sister division for requisite repair/overhaul under the
authority of Inter-Divisional Transfer Order (IDTO), the 1st stage claim is
prepared on approved FPQ rate. Further, a copy of IDTO, duly certified by the
customer’s inspector (DGAQA), is invariably enclosed with the claim.

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(vi) See that 2nd stage claim is supported with a certificate from the sister
division of HAL, confirming receipt of the tasked quantity/items for
undertaking repair/overhaul.
(vii) Check from the work done report of aero-engine, whether any
serviceable parts, rotables, cannibalized (removed) from other similar engine
on overhaul line, have been fitted by HAL. If so, make a proper note of such
transactions in the records & pursue the same to finality with the local AF
agency concerned, to ensure that such cannibalized rotables etc., being the
property of Government are returned to IAF, duly repaired/overhauled to the
satisfaction of IAF, free of charges. If not returned by HAL, ascertain the cost
from IAF for recovery action from any payment due to HAL, as per provisions
of Government approved FPQ policy letter.

333. Audit checks on claims relating to supply of spares to against

Indents/RMSOs/Local RMS orders placed by the Services
(i) See that the 1st & 2nd stage claims are preferred as per approved Price
Catalogue rate/budgetary quote (applicable to ‘cost-plus’ cases) & as per
terms of payment stipulated in the FPQ letter.
(ii) See that the relevant Indent/RMSO/Local RMSO exists.
(iii) See that in case of Bought Out items (both Indian & Foreign) indented by
IAF, stage payment is made to HAL on placement of Purchase Order (PO) by
HAL on its vendor.

334. Audit checks on claims on account of ‘Cost-plus’ jobs/supply

orders.
(i) See that the payment on ‘Cost-plus’ basis is made in the following cases
only:
(a) Cat ‘B’ repairs carried out on Aircrafts & Helicopters belonging to Services.
(b) Additional modifications (MODS) carried out on Aircrafts/Helicopters/Aero-
engines in addition to existing schedule of work for repair/overhaul or fitment
of new MODS, as prescribed by the Local Modification Committee / Air HQ/
any other authorized agency. In such cases payment on ‘cost-plus’ basis
shall be made up to initial quantity of 20 nos. only of each MODS.
(c) Periodical servicing done by HAL on aircraft where the scheduled ROH
work has been completed by them & signaled out, but there is delay on the

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part of IAF etc., in collection of Aircraft beyond 30 days from the date of
signaling out.
(d) In case of repair/overhaul etc., jobs carried out on aircraft, engines,
rotables etc. & not covered under approved FPQ, the payment in such cases
will be made on ‘cost-plus’ basis up to an initial quantity of 10 aircrafts /
helicopters, 20 aero-engines & 25 rotables, under each category.
(e) Fabrication & Supply of new spares indented by IAF which are not covered
under existing Price Catalogues, the payment up to initial quantity of 20 nos.
only will be paid on ‘cost-plus’ basis.

(ii) Ensure that the methodology prescribed in the FAQ policy letter is
adhered to by HAL while working out the claim & the elements of cost
prescribed therein are only allowed, after carrying out requisite verification of
relevant documents.

335. Audit checks on Deferred Revenue Expenditure (DRE) claims

(i) See that the requisite sanction of the Competent Authority exists for
incurrence of DRE (all expenditure incurred on tooling, jigs & fixtures,
training, foreign specialists, design & development for tool design & project
management, echelons and other pre-production expenses directly related to
manufacturing / overhaul projects & license fee, will be classified as DRE).
(ii) Ensure that the requisite verification of documentary proof of incurrence
of expenditure is carried out in audit.
(iii) A separate register is maintained for monitoring the DRE ceiling
prescribed in the projects sanction letter.

336. Audit Checks on Final Claims towards supplies & services

(i) In case of claims relating to D&D projects & Manufacturing & upgrade
contracts, see that the terms of payment for final claims stipulated in the
respective sanctions/contracts are adhered to by the Seller & documents
mandated therein are enclosed with the claim.
(ii) In case of Repair & Overhaul jobs, see that the final claim is supported
with the following documents:
(a) HAL’s Advice & Inspection Note IAFF (Q) 423 (Modified) duly completed &
certified/signed by the customer’s Inspector (rep. of DGAQA). Check that the
Inspection note clearly indicates the nature/category of work/service carried

168
out by HAL for regulating payment at FPQ rate, as applicable. Also ensure
that the inspection note contains the dispatch details of consignment sent to
IAF unit.
(b) In case of delivery of Aircraft/Helicopter, insist for a copy each of the
signaling out certificate & work done report is enclosed
(c) In case of delivery of aero-engine, look for a copy of Defect Investigation
Report/Preliminary Stripping & Survey Report (PSSR) also.
(d) Check the list/summary of items drawn from HAL stores covered in the ‘X’
list duly supported by selective high value Material Requisitions (MRs)/system
generated vouchers of IFS (ERP).
(e) Verify the list/summary of items which are not covered in Bill of Material
(BOM) or ‘X’ list duly supported with selective high value Material Requisitions
(MRs)/system generated vouchers of IFS (ERP)
(f) Check the list/summary of items drawn from HAL-held IAF Stores duly
supported with selective high value Material Requisitions (MRs)/system
generated vouchers of IFS (ERP), duly certified by the in charge of Integrated
Materials Management (IMM) of HAL division.
(g) See that the vendor’s invoice is invariably enclosed with claim where the
engines/external rotables have been repaired/overhauled/serviced etc. by the
outside agencies (indigenous or foreign vendor).
(h) Ensure that in case of internal rotables (i.e. rotables sent from one sister
division to another through Inter-Divisional Transfer Order (IDTO), the claim
is supported with a copy of Despatch Advice & Receiving Report (RR) of the
user’s division, in addition to IAFF (Q) 423 (modified).
(i) Ensure that Liquidated Damages (L.D) as applicable, is invariably levied as
per provisions Para 7.10, Chapter 7 of Defence Procurement Manual (DPM)
2009, as amended, for delay in supplies/services against the
approved/agreed schedule.
(ii) In case of final claims re3lationg to spares supplied against
RMSO/LRMSO:
(a) Ensure that the final payment is regulated based on the rates approved in
the Fixed Price Quotation/Spare Price Catalogue as applicable to the
scheduled year of delivery or actual year of delivery, whichever is earlier.
(b) Ensure that in case of procurement of spares from vendors (indigenous or
foreign), the claim is made based on the vendor’s invoice (price duly
negotiated), duly restricting to actual payment made by HAL as per Bank’s

169
advice. Ensure that LD recovered by HAL from their vendor is passed on to
IAF. Freight & Insurance at approved percentage is only paid.
(c) Ensure that if items are supplied by HAL from their own stores, payment
is restricted to weighted average rate as per HAL’s material ledger.
(d) Ensure that in case of items fabricated by HAL for which rates are not
available in the approved Price Catalogue, payment for initial 20 Nos., is
made on ‘cost-plus’ basis. Beyond 20 Nos., the final payment will be made
only on approval of rates by the Government through FPQ/SPC for the
relevant year.
(e) Check that the claims are not time-barred in terms of Rule 191 of
Financial Regulations (FR) Part I. In case of time-barred claims, insist for
sanction of the Competent Authority in terms of ibid FR provisions.
(f) Ensure that after payment action of final bills, the original copy of IAFF (Q)
423 (modified) is scheduled to the LAO of the consignee unit concerned for
necessary credit verification in consignee’s ledger. Also watch for
acknowledgement from the LAO concerned through Scheduling –out Register.
(g) Ensure that the Liquidated Damages (LD), as applicable, is invariably
levied as per provisions Para 7.10, Chapter of Defence Procurement Manual
(DPM) 2009, as amended, for delay in supplies/services against the
approved/agreed schedule.

337. Audit checks on ‘Cost-plus’ claims

(I) Ensure in audit that the following elements are only reckoned by HAL for
working out the ‘cost-plus’ claims preferred in respect of cases mentioned in
Para 334 above:
(a) Material cost is claimed as per weighted average rate in material ledger
for items drawn from HAL stores. In case of HAL fabricated items used in the
job, the price approved in the Spare Price Catalogue (excluding profit) is
considered. Vendor’s invoice (price duly negotiated) is considered in case of
repair/overhaul/Cat ‘B’ repairs/rectification, etc.
(b) Freight & Insurance at fixed percentage approved for HAL division
concerned is allowed on total material cost claimed.
(c) Actual labour hours booked against the work order is only claimed duly
considering the date of opening & closing of the relevant work order.
(d) The labour cost is worked out by multiplying the labour hours & approved
Man Hour Rate (MHR) for the respective year/s.

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(e) Sundry Direct Charges (Flight & Ground Risk Insurance) is allowed.
(f) Profit at prescribed percentage (excluding profit on HAL fabricated items
for which approved rates are available in the Price Catalogue) is only allowed.
(g) Amortised cost of HAL funded DRE, if any, is admissible. Similarly,
necessary adjustment for amortization cost of IAF-funded DRE, wherever
applicable, is also done by HAL.
(h) Warranty cost at applicable percentage on total cost (excluding amount as
per vendor’s invoice, if claimed) is also allowed.
(i) Taxes and Duties at the applicable rate is claimed.
(ii) Ensure that Liquidated Damages (LD), as applicable, is levied as per
provision Para 7.10, Chapter 7 of Defence Procurement Manual (DPM) 2009,
as amended, for delay in supplies/services against the approved/agreed
schedule.
(iii) Ensure that final claims on ‘cost-plus’ basis are preferred by HAL only up
to the quantity (initial Nos. of aircraft/helicopter, aero-engines & rotables, as
prescribed) as approved in the Government approved FPQ policy letter.

338. Check list for verification of draft FPQs/SPCs by DAD (HAL)

offices
(I) Ensure that the following details/information, for relevant year, are
furnished by the Directorate of Financial Planning, Air HQ (VB) for initiation of
the verification;
(a) Indices for Aviation Turbine Fuel (ATF);
(b) Approved escalation percentage of Material Cost separately for (i)
Indigenous Raw Material (Basic Metal & alloys Index), (ii) Indigenous
Consumables (Basic Metal & alloys Index), (iii) Russian Bought out Items &
(iv) Western Bought out Items;
(c) Price Indices – Consumer Price Index, Wholesale Price Index, Electricity
(Domestic) Index, Electricity (Industry) Index, Basic Metals & Alloys Index;
(d) Approved Rejection percentages for HAL division concerned for Forgings &
Castings, Bought out Items & Standard Parts & Consumables;
(e) Percentage of Material Redundancy;
(f) Percentage of Freight & Insurance;
(g) Foreign Exchange (FE) Rates for Imported Materials (as notified by the
SBI, Parliament Street Branch, New Delhi);
(h) Direct Labour Yield;

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(i) Direct Labour Efficiency.

(II) Ensure that:

(a) The draft quotation/catalogue is prepared strictly in compliance with the
methodology stipulated in the FPQ policy letter.
(b) The requisite parameters on escalation, indices, exchange rate,
yield/efficiency of direct labour, material redundancy, rejection etc., as
prescribed in the FPQ policy letter and as applicable to the relevant year are
duly considered by HAL division.
(c) The element of warranty cost, at the approved rate as applicable to HAL
division, is only considered (profit on warranty is not admissible).
(d) Cost of amortization of DRE, if any, is taken into account for adjustment
as per the laid down procedure.
(e) Percentage of profit, as applicable to FPQ/SPC/Financing cost/DRE, is only
considered (As per FPQ policy in vogue, rate of profit admissible on FPQ/SPC,
Financing cost & DRE is 10%, 5.5% and 7.5% respectively).

339. Audit checks on claims relating to jobs carried out by HAL in

IAF bases
(a) Ensure that the claim is supported with a copy of the specific request of
IAF for deputing personnel for carrying out site repair/survey/calibration of
equipment exists.
(b) See that the claim is made only for direct workers deputed for such
tasks/jobs.
(c) See that the Work Done Report & Attendance Report (in prescribed
format) is certified & signed by the Chief Eng Officer/STO or equivalent of the
IAF Base/Officer Commanding Technical Support Squadron (OCTSS), ASTE
(d) Check that the total No. of days for which each direct worker was
engaged is specified in Attendance Report.
(e) Ensure that HAL has claimed for each direct worker at 7 ½ working hours
per day, including time spent in the journey to and from the IAF Base/Site. In
addition, the extra hours spent on working days and holidays by each direct
worker, is also admissible.
(f) Ensure that the claim is regulated at the approved MHR as applicable to
the year concerned.

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(g) Check whether claim includes the cost of materials used from HAL’s own
stores & if so, ensure that the same is priced as per approved Price Catalogue
(for HAL manufactured spares) or as per weighted average rates of the
material ledger (in case of bought-out items).
(h) Ensure that the requisite certificate from the Chief Eng Officer/STO etc.,
that the items repaired are not covered under warranty, is enclosed with
claim.

340.
(i) HAL’s invoices for the repair/manufacture/supply of IAF equipment
authorized through RMS orders/indents/Contracts/Tasks, raised by
appropriate authorities, will be checked with reference to general principles
for audit of invoices.
(ii) The audit of invoices will be exercised with reference to the terms of
payment indicated in the relevant orders (i.e. RMS orders/ Indents/
Government orders/ Contracts etc.) issued on the subject and the general
principles contained in paragraphs 330 to 337brought out above.

341.
(i) The finance and audit section attached to all divisions of HAL will
endeavour to settle as many observations/objections as possible locally with
the concerned Divisions of HAL/BDL/BEL & local Air Force authorities, as the
case demands.
(ii) Unsettled item of observations/objections, if any, will be taken up with Air
HQrs. & other Service HQrs., directly, if they relate to audit checks, under
intimation to PCDA Bengaluru (HAL Cell).
(iii) However, if the observations/objections relate to financial and cost
checks, DAD (HAL) office will report the same to PCDA Bengaluru (HAL Cell)
for issue of suitable guidelines, if required in consultation with the Service
Hqrs/CGDA HQrs/Ministry.

Section V
342. Maintenance of Demand Registers in DAD (HAL) Offices
It will be ensured:
(a) That the Register is maintained in the format prescribed for this purpose
& as per extant provisions of relevant Manuals.

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(b) That the relevant details of stage/advance/milestones/progressive
payment claims of HAL/BDL/BEL admitted in audit are entered in the Cash
Advances Register (Debit side/left side of the register) maintained separately
for manufacturing/upgrade contracts, D&D projects, Repair & Overhaul Tasks
and RMSOs/LRMSOs.
(c) That the entry for adjustment of proportionate advance is invariably made
in the register in the ‘adjustment/recovery column’ as and when the final
claims are admitted in audit.
(d) That the progressive total is drawn & noted after each entry.
(e) That each entry is invariably authenticated by the AAO/AO/SAO-in-
charge.
(f) That the register is reviewed periodically for necessary follow up action as
per the extant Government order on liquidation of advances & the requisite
certificate in this regard is incorporated therein duly authenticated.
(g) That the registers, duly completed in all respects, are produced to O&M
inspection team of PCDA Bengaluru (HAL Cell) for inspection & also to the
Test Audit Authorities for Test Check.
(h) That the registers are invariably referred while rendering periodical AAC
reports to PCDA Bengaluru (HAL Cell) & other reports.

Section VI-Audit of claims preferred by HAL on Account of work done

for Indian Navy & Indian Coast Guard
343.
(i) HAL also undertakes various types of activities for Indian Army, Indian
Navy & Indian Coast Guard in respect of various fleet of Aircraft/Helicopters &
aero-engines & Rotables forming part of these aircraft/helicopters.
(ii) The Army, the Navy & the Coast Guard have adopted the Fixed Pricing
Quotation (FPQ) pricing policy implemented with effect from 1995-96 by the
Indian Air Force (IAF) with the approval of Government of India, under
separate Government orders.
(iii) In view of the above, the terms of payment stipulated in the FPQ policy
letter of IAF is applicable for all types of payment being made to HAL for
supplies made & services rendered to these Services.
(iv) Accordingly, the audit checks, as brought out in Paragraphs 330 to 337,
339 & 340, are also exercised in respect of claims preferred by HAL against
these Services for supplies made and services rendered.

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344. Liquidation of advances outstanding against HAL
(a) For the purpose of liquidation, advances released to HAL may be classified
into two types, viz., advances released up to 2013 –14 and advances
released during 2014 –15 and onwards.
(b) Advances released up to 2013 –14 are governed under the provisions of
Govt. of India, Ministry of Defence letter no. Air HQ/S.95352/18/Fin
P/1613/D.III/90/D(Air-I) dt. 11.12.1990. The following maximum time limit
has been prescribed in the ibid GOI letter for settlement of various types of
advances released to HAL:
(i) Advances towards supply of spares against RMS (Repair
Manufacture & Supply) orders: HAL is required to submit the final invoice,
complete in all respects, to audit within a period not exceeding one year from
the scheduled date of delivery of the item. In case more than one item is
involved, the period of one year would be counted from the last scheduled
date of delivery of the item included in the Supply Order. In case where the
approved price catalogues/FPQs are not available for the relevant year, the
time limit of one year will be counted from the date of the approval of the
relevant price catalogue/FPQ.
(ii) Advances towards manufacturing projects: HAL is required to submit
the final invoice, complete in all respects, to audit within six months from the
date of signaling out certificate of the aircraft etc., issued by the rep. of
DGAQA stationed in the concerned HAL division.
(iii) Advances towards repair & overhaul jobs: HAL is required to submit
the final invoice, complete in all respects, to audit within 18 months from the
date of the receipt of 2nd stage payment, where approved prices are
available for the relevant year. Where prices for the relevant year are yet to
be approved by the Govt., HAL is required to submit the final invoice,
complete in all respects, to audit within a period of 18 months from the date
of the approval of the prices.
(c) Advances released during 2014 -15 and beyond are governed by the
provisions of Govt. of India, Ministry of Defence letter No. Air
HQ/95352/18/Fin P/1276/US(S)/D(Air-IV)2010 Dt. 29.10.2014, as amended
vide letter Dt. 08.06.2015. The following maximum time limit has been
prescribed in the ibid GOI letter for settlement of various types of advances
released to HAL:

175
(i) Advances towards supply of spares against RMS (Repair
Manufacture & Supply) / Local RMS orders: HAL is required to submit
the final invoice, complete in all respects, to audit within a period not
exceeding one year from the scheduled date of delivery of the item. In case
more than one item is involved, the period of one year would be counted
from scheduled date of delivery of the last item included in the Supply Order.
In case where the approved price catalogues/FPQs are not available for the
relevant year, the time limit of one year will be counted from the date of the
approval of such price catalogue/FPQ.
(ii) Advances towards manufacturing projects/Contracts: HAL is
required to submit the final invoice, complete in all respects, to audit within a
period not exceeding six months from the date of delivery/signing of IAFF
Form (Q) 423 of the aircraft/equipment by the CRI (rep. of DGAQA)
concerned. For GSE/GHE supplied against manufacturing projects/contract,
six month period will be counted from the schedule date of delivery or the
date of Brought On Charge (BOC), whichever is earlier, by the concerned IAF
unit.
(iii) Advances towards repair & overhaul jobs carried out against
approved Firm Tasks: HAL is required to submit the final invoice, complete
in all respects, to audit within a period not exceeding one year from the date
of scheduled date of delivery, where approved FPQs of the items are
available. Where approved FPQs are not available, final invoices, complete in
all respects, shall be submitted to audit within a period of one year from the
date of the approval of such FPQs. In case of items for which facilities for
repair/overhaul are not available within HAL and sent to outside agencies
(including vendors abroad) for repair etc., the final invoices, complete in all
respects, shall be submitted to audit within a period not exceeding one year
from the date of receipt of items at HAL.

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 CHAPTER 16
NAVY ACCOUNTS
Para

Section I: Cash Accounts Navy 345

Section II: Pay Accounts Navy 355
Section III: Check of U.K. Stores Invoices with Packing Accounts and
Maintenance of Invoices Register. 373

Section I – Cash Accounts - Navy

345. The detailed rules relating to the provision of funds to the Navy are laid
down in Financial Regulations. Broadly speaking the funds for shore
establishment are arranged by the PCDA (Navy) Mumbai by means of Cash
Assignments at a civil treasury or a branch of the Reserve Bank of India.
Funds for Navy ships which are self accounting are normally obtained from
Naval authorities at the port stations (or from a Civil Treasury, when owing to
absence from a port, ships are unable to draw funds from the Naval
Authorities, on the authority of Money Warrants issued by the PCDA (Navy)
Mumbai in favor of the Commanding Officers of those ships. Ships which are
not self accounting draw their requirements from the Base Logistics Officers.
The PCDA (Navy) Mumbai is responsible for fixing a monetary limit up to
which moneys can be drawn by the Commanding Officers during a month. In
fixing the monetary limit, the drawings in the previous months and other
circumstances known at the time will be taken as a guide. The account fixed
at the beginning of the year will be reviewed and reduced, where necessary in
the manner laid down in Chapter 14, Defence Account Code, Edition 2014.

346. In the case of Navy Ships visiting foreign ports, the necessary supply
of foreign currency is arranged by IHQ of MoD (Navy) through the Ministry of
Finance. The currency is delivered through the Indian representatives abroad,
where one exists. Where there is no representative, special arrangement is
made by Integrated Headquarters, Ministry of Defence (Navy) (IHQ MOD).

347. Payments of the following types are generally made by the

Commanding Officers out of the funds placed at their disposal.
1. Payments on aquittance rolls;
2. Lumpsum payments to ships and establishments.
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3. Payments of personal claims, grants etc;
4. Contingent and miscellaneous expenditure ;and
5. Payments authorized by the PCDA (Navy) after pre audit for disbursement;
The payments made from Cash Accounts are subject to Post Audit by
the PCDA (Navy), unless the claims have been pre audited by their office and
payments authorized through cash accounts.

348. Payments on account of allotments and remittances in respect of Navy

personnel are made by the supply officer in charge Naval Pay Office, who
renders cash account in respect thereof to the PCDA (Navy) Mumbai.

349. The register of specimen signatures of the Supply Officers and

Commanding Officers prescribed in Para 53 of this code will invariably be
consulted at the time of providing cash assignments, issuing money warrants
and auditing cash accounts, in order to ensure the genuineness of the
signatures.

350. The Commanding Officers of Ships render to the PCDA (Navy), Cash
account monthly in which the amounts drawn and disbursed are brought to
account. The Commanding Officers of establishments render similar accounts
separately for the period from 1 to 20th and from 21st to last day of the
month. The PCDA (Navy) will watch, that the accounts are rendered by the
Commanding Officers concerned on the due dates

351. The following important points will be seen while auditing the cash
accounts:
(1) That the account has been rendered in the appropriate form and is
complete in all respects;
(2) That the opening balance agrees with the closing balance of the previous
month’s audited account;
(3) That all the money drawn have been duly brought to account; (the check
will be exercised in the manner laid down in para 353 below);
(4) That the account is duly supported by all the prescribed vouchers and
documents;
Note: In the case of service personnel of Navy whose accounts are
maintained on IRLAs, the original copies of acquittance rolls are sent direct to

178
the Naval Pay Office and the cash account is supported by copies of top
schedules tabulating the acquittance rolls sent to the pay office.
(5) That the totals of all vouchers, schedules, etc are correct and have been
correctly accounted for in the cash account;
(6) That the prescribed certificates to the effect that transactions appearing in
the accounts are truly and faithfully shown and the officers and men to whom
the payments were made, received the several sums noted as paid against
their names, that the balance of public money in hand at the end of the
month viz Rs ______ (rupees) only, has been verified and agrees with the
book balance; and the amount transferred to the next account has been duly
carried forward is given at the end of the cash account duly signed by the
supply officer and countersigned by the CO;
(7) In case the CO deputes other officers to check the cash balance, a
certificate to the effect "that the balance of cash in hand has been counted
and agrees with the balance shown in the cash account" is endorsed and
signed by the officers so deputed and countersigned by the CO;
(8) A surprise check of cash balance is carried out by the CO once in a
quarter, in addition to verification of cash at the end of each month and a
certificate to the effect that the balance of cash in hand viz Rs ______
(rupees) only has been counted by him and agrees with the balance as shown
in the cash account is endorsed and signed in cash account;
(9) That the instruction for the maintenance of cash books prescribed in
Financial Regulations and other Regulations/Orders have been complied with;
and
(10) That the closing has been correctly worked out and is not unduly high.

352. Intimation from treasures in respect of payments on money warrants,

intimations from commanding officers/base supply officers of lump sum
payments to ships/establishments and the list of cheques issued by the PCDA
(Navy), will be linked with the amounts appearing on the receipt side of the
cash account. Other receipts will be checked with reference to the appropriate
vouchers (e g payment issues of clothing, victualing, hire of navy transport,
etc.) supporting the cash accounts.

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353. The charges appearing in the cash account will be audited in
accordance with the general rules of audit of cash expenditure. The following
points will in particular be observed:
(1) It should be ensured that the charges which are required to be pre-
audited are not paid by the commanding officers without pre-audit and proper
authorization by the PCDA (Navy);
(2) That the lump sum advances to ships are linked with the respective cash
accounts;
(3) That the top schedules in respect of payments on acquittance rolls are
paired with the copies received from the Naval Pay Office containing a
certificate to the effect that the acquittance rolls scheduled thereon, have
been recorded and are noted for recovery in the accounts of the concerned
Officers/Sailors; and
(4) That where payments are adjustable by book debit or by cash recovery,
and that appropriate action is taken and recovery watched through the
demand or other registers.

354. A separate cash book is maintained for all foreign currencies on board
when Navy ship visits foreign countries. A copy of this account is rendered to
the PCDA (Navy) who will audit the same on the lines of other cash accounts.
In addition it should be seen that the cash account is supported by:
(1) A copy of the receipt voucher for the foreign currency received on board
duly signed by the CO or supply officer;
(2) A copy of the voucher for the amount of foreign currency refunded duly
signed by the Indian representative at the foreign port;
(3) A certified true copy of the rate of exchange certificate obtained from the
authorities supplying the foreign currencies; and
(4) Orders in support of the change, if any, in the rate of exchange and the
detailed working showing the resultant loss or gain on exchange.

Section II- Pay Accounts of Service Personnel of the Navy

355. The pay accounts of service personnel of the Indian Navy are centrally
on the IRLA system by the Navel Pay Office. This is a service organization
under the administrative control of IHQ MoD (Navy).In technical and
professional activities, however, the Logistic Officer-in-Charge Naval Pay
Office, Mumbai is subject to control of the Ministry of Defence (Finance)

180
exercised through the Controller General of Defence Accounts and complies
with such instructions as the Controller of Defence Accounts. in consultation
with the Director of Supply and Victualing (IHQ MoD (Navy) may issue in
these matters. The audit of these IRLAs is carried out in the Naval Pay Office
by the staff of the PCDA (Navy) Mumbai the detailed drill for audit is laid
down in Office Manual part VII.

356. The Naval Pay Office has been realigned in two groups, viz., the
authorization group and disbursement groups. All entailments and
subsequent change of the basic pay and allowances of Navy officers and
sailors will be checked by the audit staff before credits thereafter are afforded
in IRLAs maintained by the Disbursement group. For this purpose, orders
affecting basic pay and allowances of a recurring nature will be adjusted in
the Authorization Ledger by the Authorisation group, which will prepare an
authorization slip in duplicate, setting out the revised rates of pay etc. All the
authorization slips will be checked by the audit staff, before they are passed
on to the Disbursement group for credit of the revised rates of pay set out
therein in the IRLAs maintained by that group.

357. All documents and information requiring action in the IRLAs are initially
received in the central Registry section of the Naval Pay Office, where they
are serially numbered and entered in the appropriate registers, before
distribution to different sections for ledger action and filling in the relevant
case files. The officer-in charge, IRLA audit section personally selects
arbitrarily from these registers or case files, as the case may be, the
prescribed percentage of the documents to be audited. These documents are
returned after audit, to the Naval Pay Office.

Audit of Authorisation Slips And Authorization (IPA) i.e Individual

Pay Accounts
358. The authorization slips notifying change in pay, etc., will, on receipt be
audited and passed with reference to the entries in the Authorization (IPA)
i.e Individual Pay Accounts . At the same time the authenticity of change
in the Authorization (IPA) i.e Individual Pay Accounts , will be verified
with the basic orders, etc, that might have necessitated the change. In

181
conducting the audit of Authorization (IPA) i.e Individual Pay Accounts .
It should be seen that:
(a) For all changes in pay and allowances requiring documentary support
such documents are produced;
(b) Promotions requiring Government sanctions are supported by
Government Orders or Gazette of India notification; and
(c) Pay and Allowances are fixed according to regulations and orders.
The audit of authorization ledger is carried out on the system by the audit
staff.

Audit of Disbursement Ledgers

359. The IRLAs of service officers and Sailors are balanced monthly by the
Naval Pay Office. The audit of these accounts will be carried out on a
quarterly basis. The quantum of audit will normally be 331/3% unless a lower
percentage is specifically indicated for any item. The percentage is specifically
indicated for every item. The percentage of audit be increased if the state of
accounts is found unsatisfactory. Selection of document should be made
arbitrarily, but the formula adopted for selection will be recorded and varied
during each audit.
Note The quantum of audit in regard to debit entries in the IRLA's from
acquittance rolls etc will, however, be 162/3per cent.

Final Credit Balances

360. The IRLAs of released, discharged and invalided officers and sailors will
be audited cent percent subsequent to their last audit before payment of the
final credit balance is made. The payments will also be checked cent percent
with reference to the payee’s acknowledgement.

361. The audit drill to be observed in auditing the IRLAs is as follows:

(a) Check the opening balance from the previous month’s closing balance.
Check the casting of all credit and debit entries through the month down to
the closing balance at the end of month.
(b) Check every credit entry for the quarter into Part I of the IRLA or into
intimations of miscellaneous credit and every credit entry in Part I of the IRLA
into the authorization slips passed on by the authorization group.
(c) Check every debit entry for the quarter in Part I into Part II of the IRLA.

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(d) Check every entry notifying the grant of leave (expect casual leave) from
Genforms, Daily lists etc into the annotations made in the IRLAs and see that
period of leave granted does not exceed the prescribed limit and that the
leave pay and allowances have been correctly regulated for the period of
leave.
(e) See that recoveries on account of Income-Tax, fund deductions, Allotment
and remittances, L F Bills etc have been correctly affected through the IRLAs.
It should also be seen that the allotments and remittances have been made in
accordance with the rules on the subject.
(f) See that payees' acknowledgements for payments of family allotments are
on record and that undisbursed amounts have been credited to Government.
(g) Verify debits in IRLAs for forfeitures of pay and mulct, if any, noted in the
closed Pay and Identity Books of ratings and
(h) Check 11% of the items of abstracts of receipts and charges from the
abstracts into the IRLAs.

362. The fundamental principle to be observed in the test check of the IRLAs
and connected documents is that the credit entries should be traced from the
IRLAs into the relevant documents and vouchers and the debit entries should
be traced from the Vouchers, Genforms, etc., into the IRLAs.

363. IRLAs and connected documents audited will be suitably enfaced under
the dated initials of the auditor/AAO etc. The audited balances will be ringed
round in colored pencil and initialed by the auditor with date.

Scale Audit
364. Scale audit is conducted to check the following:
(a) That the effective (paid) strength of Officers/Sailors in each branch and
Rank/Sailors of the Navy as a whole is within the sanctioned strength;
(b) That promotions of Officers are sanctioned by the competent authority
that the appointment is authorized and is against an existing vacancy; and
(c) That the advancements of Sailors are sanctioned by the competent
authority viz Bureau of Sailors.
The detailed procedure for conducting the scale audit is laid down in
office Manual Part VII.

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Naval Appointment Lists
365. Notification relating to entry, appointments, confirmation in rank,
promotion, adjustment in seniority or rank, discharge, secondments to and
from the service and inter-branch transfers are published in Naval
appointment lists. Pay and allowance will be worked in IRLAs according to
these entries. It will be seen in audit that these entries are subsequently
notified in the Gazette.

Navy List
366. The audit of Navy list is conducted by PCDA (Navy) who is also
responsible for the audit of Draft Gazette notification relating to
appointments, Acting and substantive promotions, Relinquishment etc., of
Naval officers as also cases regarding assessment of previous pensionable
service of such officers.

Pay Accounting Arrangements Applicable to Naval Personnel Serving

Abroad and on Courses of Instruction, Temporary Duty and Study
Leave
367. (a) Naval personnel attached to/appointed on the staff of
Embassies and High Commissions other than U K – These Naval personnel
will be treated at par with civilians borne on the same establishment in the
matter of pay accounting. In accordance with the civil system of pay
accounting, pay slips will be issued by the Logistic Officer–in-Charge Naval
Pay Office, Mumbai, to disbursing officers concerned in overseas countries,
authorizing payments to Naval personnel through PCDA (Navy) Mumbai.
Nominal IRLAs will however be maintained by the Logistic Officer–in-Charge
Naval Pay Office, Mumbai in respect of those officers, pay and allowances due
to officers/sailors will be paid by the respective Embassies or High
Commissions for India with reference to pay slips issued by the Logistic
Officer–in-Charge Naval Pay Office, Mumbai through the PCDA (Navy). The
original salary bills received in support of debit through the Controller of
Accounts, Ministry of External Affairs, New Delhi will be checked with
reference to the entitlements and items of disbursement recorded in nominal
IRLAs while other special allowances will be checked with reference to
Government orders authorising such payments.

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(b) Naval personnel attached to or serving on the establishment of
the High Commissioner for India in the U K –In case of these naval
personnel their pay accounts are maintained by High commissioner for India
and Last Pay Certificate in respect of these officers/sailors will be issued by
the Naval Pay Office, Mumbai, duly countersigned by the PCDA (Navy)
Mumbai.

368. Pay accounts of Naval personnel, proceeding abroad on courses of

instruction, temporary duty and study leave, will continue to be maintained
by the Logistic Officer-in-Charge, Naval Pay Office, Mumbai, in India and
audit thereof will be carried out by the PCDA (Navy) Mumbai in the normal
manner. Allowances admissible by virtue of their deputation abroad will be
paid finally ex-India. Daily Allowance, Halting Allowance, Foreign Allowance
and other compensatory allowances e.g. Children’s Education Allowance,
House Rent Allowance etc, which are exempt from income tax, will not be
exhibited in the IRLAs in India, Naval Officers except those in the UK will
draw advance on advance of pay book (IN (Pay) 230) within the permissible
limit and be allowed to make a monthly bankers allotment which will be
remitted by the Logistic Officer-in-Charge, Naval Pay Office, Mumbai to their
bankers in India every month. Those proceedings on courses of instruction,
temporary duty or study leave in the UK will, under the arrangements
detailed in the succeeding paragraphs be paid their pay and allowances like
officers serving in India.

369. The Accounts of Officers on courses of instruction, temporary duty or

study leave in the UK will be closed by the Logistic Officer-in-Charge, Naval
Pay Office, Mumbai by the 15th of each month and a statement of accounts
will be prepared after taking into account any advance (issued in the UK and
intimated to the Supply Officer-in-Charge, Naval Pay Office, Mumbai) and
standing deductions, and sent to the office of the High Commissioner for
India in the UK by Air Mail. The latter will pay the amount shown in the
statement of account, less any advance drawn and not reported to the
Logistic Officer-in-Charge, Naval Pay Office, Mumbai, to the officers who
would thus receive their net entitlement under the rules each month. No
remittance will be made to the bankers in India unless specially requested by
an Officer.

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370. This procedure will also apply to Medical and Dental Officers proceeding
abroad on study leave.

Records of Service
371. The records of service of Service Officers of Navy are maintained on
IAF (CDA)-313 and those of Civilian Gazetted Officers on IAF (CDA)-358. In
maintaining the records, the instructions contained in appendix I and chapter
VII respectively will be followed.

Pay Accounts of Fleet Reservists

372. The pay accounts of the Sailors of Naval Fleet Reserve are maintained
by the Naval Pay Office on IRLA system. They are pre-audited by the PCDA
(Navy) generally on the lines laid down for the audit of IRLAs of service
personnel. The quantum of audit is cent per cent, both for training pay and
allowances when the reservists are called up for training and for annual
remittances made to class ‘B’ reservists in respect of the years in which
sailors are not called up for training or the training is suspended.
The detailed procedure for audit of IRLAs of fleet reservists is laid down
in Office Manual Part VII.

Section III- Check of UK Stores Invoices with Packing Accounts and

Maintenance of Invoices Register

Invoices and Packing Accounts

373. One copy of the invoice is received by the PCDA (Navy) Mumbai from
the PCDA New Delhi and entered in Invoice Register (NS 052). Rules for the
check of the invoices are laid down in paras 288 and 289.

374. The consignee will receive two copies of packing accounts as described
in para 289 and will forward the following documents to the Naval Local Audit
Officer :-
(i) Supply Notes on which the stores received from the UK have been
brought on charge, if not already sent periodically as per rules.
(ii) Packing Accounts in duplicate (i.e. Returnable copy and Retention
copy) after noting thereon the numbers and dates of the connected supply
notes and damages, if any.

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Note: - In case of stores received by parcel post/air, retention copy of the
packing account duly noting thereon the numbers and dates of the connected
supply notes and damages, if any, will only be forwarded.

(iii) A copy of the communication reporting the damages and deficiencies to

the Director General India Supply Mission, London.

Note: - The Defence Accounts Department is responsible to verify in Local

Audit that the discrepancies are intimated to the DGISM London and the
responsibility in regard to replacements or financial adjustments on account
of discrepancies devolves on the DGISM.

375. The Naval Local Audit Officer will:-

(a) Compare the damages and deficiencies noted in the two copies of the
Packing Accounts and pair them;
(b) Check the packing accounts with Supply Notes;
(c) Retain the supply notes for verification of credit in the ledger, if
received with the packing accounts;
(d) Return the returnable copy of the packing accounts to the consignee;
and forward the retention copy of packing accounts to the PCDA (Navy)
Mumbai

376. The PCDA (Navy) Mumbai will :-

(a) Link the packing accounts with the invoices received by them from
PCDA New Delhi.
(b) Note on the invoices, the numbers and dates of supply notes on which
the stores have been brought to account and particulars of damages and
deficiencies, if any, shown in the packing account;
(c) Complete the Invoice Register;
(d) Forward the Retention copy to the consignee; and
(e) Watch the recovery or settlement of the value of Naval Armament
Stores (explosives) short landed/damaged.

377. At the end of every quarter, the invoices register will be reviewed and
action as indicated in para 292 will be taken in respect of invoices for which
Retention copies of packing accounts have not been received from the NLAOs.
Since under this procedure linking of the invoices with the packing accounts
would be carried out by the NLAOs and particulars of damages and
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deficiencies, if any, shown on the Packing accounts annotated on the invoices,
the Retention copy of the Packing accounts should be sent by the NLAOs to
the consignees direct, instead of through the PCDA (Navy) Mumbai.

Claims on Account of Stores Short-Landed or Damaged

378. The responsibility for handling all claims on account of stores, short-
landed or damaged, rests with the Embarkation Commandant concerned
except in the case of Naval Armament Stores (explosives) for which the Naval
Armament Supply Officer is responsible.

379. A copy of the claim on account of stores (other than Naval Armament
Stores explosives) short-landed/damaged will be forwarded by the
Embarkation Commandant to the Principal Controller/Controller of Defence
Accounts in whose area the port is located, for watching the progress of the
claim. The amount recovered from the shipping companies will be credited
into the treasury on Military Receivable Orders and the Treasury Receipts
forwarded to the PCDA/CDA in whose area the port is located for adjustment
under the appropriate receipt head subordinate to Sub Major Head-Head II
Navy. In the case of Naval Armament Stores (explosives) handled by the
Naval Armament Supply Officer a copy of the claim will be forwarded to PCDA
(Navy) Mumbai who will be responsible for watching the progress thereof.
The Treasury Receipts for the amounts recovered will also be sent to the
PCDA (Navy) Mumbai for adjustment.

380. Losses on account of stores short-landed/damaged which are

irrecoverable from the carriers will be adjusted at the consignee’s end in
accordance with the relevant rules in Financial Regulations with the
concurrence of Army/Naval Headquarters.

381. A register showing the progress made with all claims will be maintained
by the Embarkation Commandant/Naval Armament Supply Officer. The
register will be open for inspection at any time by the Local Audit Officer.

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 CHAPTER 17

RESULTS OF AUDIT AND FINANCIAL IRREGULARITIES

Para

Introductory 382

Treatment of erroneous payments admitted in audit 388

Reports on Defalcation and other Losses 389

Important Financial Irregularities 390

Major Financial and Accounting Irregularities 397

Introductory
382. Audit depends for its effective value in its right and duty to report
results to the proper authority so that appropriate action may be taken to
rectify the irregularity or impropriety, where possible and to prevent a
recurrence of it. This authority may be a departmental authority, Government
itself or in the last resort the legislature through the Public Accounts
Committee.

383. It is in the treatment of results of audit that the audit function

demands the highest qualities of understanding balanced judgment and sense
of proportion. An auditor must develop an instinct for assessing the
importance of an individual irregularity.

384. An audit office must keep before itself its primary functions of securing
the substantial correctness of accounts, and the regularity and propriety of
individual financial transactions. It should be remembered that while financial
rules and orders must be observed, mere rigid and literal enforcement of
such rules and orders may, degenerate into wholly unintelligent audit. As a
general rule, undue insistence on trifling errors and technical irregularities
should be avoided, and more time and attention devoted to the investigation
of really important and substantial irregularities with the object not only of
securing rectification of the particular irregularity, but also of ensuring
regularity and propriety in similar cases for the future. At the same time
failure to appreciate the significance of what appears to be a trifling
irregularity may lead to failure in discovering an important fraud or
defalcation. Moreover, notice may be taken of the cumulative effect of
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numerous petty errors or irregularities, as it indicates carelessness and
inefficiency in the maintenance of accounts or in financial administration
generally.
To save time and trouble over petty sums, officers of the Defence
Accounts Department have been authorized to waive audit objections and to
write off irrecoverable amounts subject to the limits laid down in Financial
Regulations (Rule 177 FR Part I Vol. I 1983 Edn refers). Such powers should
be exercised by those officers freely but with due discretion.

385. All observations and objections must be conveyed in courteous and

impersonal terms and must be brief, legible and intelligible.
It is of utmost importance that any statement of criticism or of
irregularity in an audit report should be accurate, fair, moderately worded
and dispassionate. Innuendo is forbidden, if a charge cannot be
substantiated, there should not be even any hint of it.

386. Objections and observations in relation to any accounts or transactions

subjected to audit should be communicated to the disbursing, stores or
controlling authorities at the earliest opportunity. The detailed procedure to
be followed is given in Office Manual, Part II.

387. Product of Internal Audit: The product of Internal Audit includes:

(a) Audit observations issued to the units by LAOs as a result of verification of
castings, closing book balances and opening book balances. Linking on the
receipt side of transfer inward and of purchases and on the issue side of
transfer outward; Audit of Final Receipts and final issues etc.

(b) MFAI - reveals systemic flaw, grave violation of rules and regulations, loss
of substantial amount due to theft, fraud or neglect. The PCDA/CDA
prepares MFAI report for quarter ending June, September, December
and March each year by 20th of the month following the quarter. It is
addressed to the GOC in C for Army, Command HQrs, Departmental heads
with copies endorsed to CGDA and DGADS.

(c) Internal Audit Report – CGDA’s Internal Audit Report is prepared based on
similar reports rendered by PCDAs/CDAs/PC of A (Fys)/ CIA (OF) Kolkata. The
periodicity of Internal Audit Report is half-yearly. The report is circulated to
Defence Secretary, Secretary (Defence/ Finance)/FA(SD), higher echelons of

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Ministry of Defence, PSO’s in service HQrs, PCDAs/CDAs/P PC of A (Fys)
Kolkata/ CIA (OF) Kolkata.

(d) Annual Audit Certificate – Forms a part of the Annual Appropriation

Accounts, submitted to Secretary (Def/Fin)/FADS.

(e) Assurance and Consultancy reports of internal audit – Service-wise

Internal Audit Team (IAT) constituted by CGDA under Annual Audit Plan to
undertake the examination and evaluation of the adequacy and effectiveness
of governance process, risk management process, internal controls structure,
and the quality of its performance in carrying out assigned responsibilities.
These activities will provide reasonable assurance to the Government and
higher management that these processes are functioning as intended to
enable the organization to achieve its stated goals and objectives.

Treatment of Erroneous Payments Admitted in Audit

388. When erroneous payments have been admitted in audit for a

considerable time owing to a wrong interpretation of financial rules or due to
over-sight, the following procedure should be observed;
(a) When a wrong interpretation of a financial rule has been followed in an
audit office, the new interpretation should, in the absence of special
instructions to the contrary be given effect to from the date of issue by the
Comptroller and Auditor General of India or the CGDA of the orders stating
the correct interpretation.
(b) When erroneous payments have been left unchallenged owing to
oversight, the audit office should not of its own motion, undertake a re-audit
of bills paid more than twelve months previously, but should report the facts
of the case to the competent financial authority for orders, and a re-audit
should be done only if so desired by the competent financial authority.

Report on Defalcation and Other Losses

389. On receipt of a report of defalcation or loss of public money or stores,
the Principal Controller/Controller should call for such further information as
he may require on the subject and will carefully examine the case and
ascertain if the defalcation or loss was rendered possible by any defect in the
rules or if it was due to neglect of rules or want of supervision on the part of
the executive authorities. He will then report the result of such examination

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to the authority competent to write off the loss. In important cases he will
also, when necessary, take further action as set out in para 396 below.

Important Financial Irregularities

390. In dealing with cases of loss due to fraud or negligence, over payments
or other financial irregularities, it is to be borne in mind that promptitude of
action is of paramount importance. Every such case should be pursued
vigorously to finality so that adequate action, both remedial and disciplinary,
could be taken as early as possible and delinquents do not escape
punishment by mere lapse of time.

391. Irregularities detected in audit in the first instance should be brought

immediately to the notice of administrative authority concerned. If, however,
the irregularity is discovered by the administrative authority and if it is one
which should be reported to their Audit Officer/in terms of Rule 37 FR Part I
Vol. I (1983 Edn.), it is incumbent on that authority to make this report
without delay.
In either case, the irregularity, if serious, should be brought to the
notice of the superior authority as soon as possible, i.e. the administrative
authority should report to his superior, subject to the observance of sub para
1 above and the Audit Officer to his superior (See also para 396 ). Very
important irregularities, should also be brought to the notice of the higher
authorities by including them in the report on Major Financial and Accounting
Irregularities, more important of them worth highlighting should be reflected
in the relevant annexures to Annual Audit Certificate vide para 397 and sub
para 2 of para 396 et. Seq.

392. Any vouchers or other documents in possession of the Audit Office,

which the administrative authority concerned considers should be made
available for pre-audit of necessary investigation, should be furnished by the
Audit Officer without undue delay, and further, where the circumstances of an
irregularity are complex and a special audit to investigate them has been
authorized, such audit should be conducted as expeditiously as possible.

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393. Overpayments should be placed under objections as soon as possible
after their detection. The Procedure prescribed in rules 179 and 186 Financial
Regulations Part I Vol. I (1983 Edn.) are to be observed.

394. In all cases, whether they pertain to overpayments or to losses or

other irregularities, it is incumbent on the Audit Officer, besides taking action
as above, to examine the circumstances which led to the irregularity and if
the examination discloses a defect in the relevant rules or a situation which
makes it possible for the irregularity to be occurring in other units or
formations to order an immediate investigation of the accounts of the other
units and formations in his audit area and simultaneously to bring the facts of
the case to the notice of the CGDA, for the issue of orders for investigation of
the accounts of Units and Formations in other audit areas and for action
towards the amendment of the defective rules.

395. It is incumbent on the Audit Officer to scrutinize the disciplinary action

taken by the administrative authority concerned on any case of financial
irregularity, including that of personal overpayment.
If, as a result of this scrutiny, the Principal Controller/Controller of
Defence Accounts concerned, considers that the disciplinary action taken is
inadequate, he should discuss the issues personally with the responsible
administrative authority or if personal discussion is not possible should deal
with the matter by Demi Official correspondence with that authority.
If after such discussion he is still dissatisfied he should bring the case
to the notice of the CGDA at the same time notifying the administrative
authority concerned that he is doing so. Thereafter the CGDA will take all
further action to obtain a decision and will inform the PCDA/CDA of the result.

Note 1: Although there is no objection to the responsible administrative

authority allowing the Principal Controller/Controller of Defence Accounts
access to the relevant papers, it is not incumbent on him to do so nor can an
audit authority insist on such action.
Note 2: A write off of loss of stores or public money due to theft, fraud or
neglect will not be admitted in audit until a decision has been reached on the
question of disciplinary action.

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396. In all individual cases of serious irregularities (vide sub para 2 of para
391) as well as in all cases of losses, overpayments, irregularities, etc. for
which any blame can be attached to the Defence Accounts Department, the
PCDA/CDA will submit a comprehensive report to the CGDA who will take
further action thereon. Such reports will contain, inter alia, full particulars on
the following points :
(a) As complete an explanation as possible of the whole case stating the
period to which the irregularity relates to and the amount involved;
(b) The ‘Modus Operandi’ of the irregularity;
(c) The relevant rules, regulations and orders that were disregarded and
the agency through which and the time at which the irregularity was first
discovered;
(d) The circumstances in which the irregularity could not be detected by
the Defence Accounts Department earlier (where applicable);
(e) Definite views of the PCDA/CDA in regard to the responsibility of the
individual or individuals of the Defence Accounts Department, if any, and the
action taken or proposed to be taken by them against such individual or
individuals;
(f) The action taken or recommended to be taken to avoid a recurrence of
the failure, if any, in audit; and
(g) Remedial measures, if any, that suggest themselves to the PCDA/CDA
to prevent the recurrence of such irregularity.

Major Financial and Accounting Irregularities

397. The Principal Controllers/Controllers will prepare quarterly reports on
the Major Financial & Accounting Irregularities (Short form MFAI Report)
dealing with the matters relating to units and formations for the Command as
a whole for the quarters ending June, September, December. and March each
year, by the 20th of the month following the quarter. The following types of
irregularities will be included in the report:
(a) (i) Cases involving irregular maintenance or non maintenance of
accounts which in the personal opinion of the PCDA/CDA have serious
implications.
(ii) Cases in which the value of financial irregularities or loss
involved is Rs. 5 lakh or more in each case. Besides, Principal
Controllers/Controllers may at their discretion include cases which disclose

194
loopholes for fraud, defalcation etc. regardless of the financial limit referred
to above.
(iii) Cases of serious irregularities which cannot be translated into
financial terms but which in the personal opinion of the Principal
Controller/Controller, should be brought to the notice of Army
Commanders/Air Headquarters/Naval Headquarters, DGOF (in the case of
factories) and Administrative Heads of Departments/Organisations (in other
cases).

(b) Apart from cases of financial irregularities coming to the notice of

Principal Controllers/Controllers through audit processes in the main office
and Local Audit Offices/Sub offices and reports from the administrative
authorities special attention should be paid to the following items;
(i) Utilisation of plant and machinery for the purpose for which it
was purchased and installed.
(ii) Identification of slow moving and non moving items of stores in
Depots/Stores holding formations.
(iii) Deterioration in the condition of stores due to unduly long,
inadequate storage.
(iv) Defective planning and implementation of projects involving
significant investments, highlighting in particular, major deviations from
original time and cost targets.
It is important that every case requiring inclusion in the report should
be included therein promptly and without undue loss of time. Wherever, there
is an abnormal delay either in the detection of an irregularity or in its
inclusion in the MFAI Report after its detection, the reasons thereof should be
reported to the CGDA either through the report itself or simultaneously with
its submission.

398. The MFAI Report will be rendered in two parts viz. Part I and II
specimen proforma I and II reproduced at annexures ‘B’ & ‘C’ to this chapter.
Part I is for indicating Fresh Irregularities and Part II for irregularities
reported previously, but still remaining outstanding. Both the parts have been
divided into two sections each viz. Sections ‘A’ & ‘B’. Section ‘A’ is for
indicating cash irregularities and Section ‘B’ for stores irregularities.
So far as the old items included in Part II are concerned, besides giving
the item nos., and the month of the reports in which the items were originally
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included, a gist of each item in brief should also be given, inter alia, indicating
the latest position, for readily drawing the attention of the authorities
concerned. The separate report for the month of April each year which was
hithertofore rendered to CGDA, need not be furnished, as the quarterly
reports will be endorsed to CGDA.

399. The reports will be addressed and copies endorsed to parties concerned
in the following manner:
(a) In the case of Army units/formations, the reports will be addressed to
GOC-in-C command by name with copies to Area/Sub Area Commander
enclosing items pertaining to their areas.
(b) Principal Controller of Defence Accounts (Air Force) and Principal
Controller of Defence Accounts (Navy) will address the reports to Command
Headquarters.
(c) Reports in respect of DGOF, DGNCC, DGR&D, DGQA & BRDB and Inter
services organization, etc., will be addressed to the departmental heads, with
copies to the concerned Laboratories/Establishments together with items
pertaining to them. The forwarding letters of the reports should invariably be
signed by the PCDA/CDA or by the Addl. CDA/Jt. CDA in the absence of the
PCDA/CDA.
(d) Copies of all reports will be endorsed to the CGDA, Director
General/Director/Joint Director/Deputy Director/Assistant Director of Audit
Defence Services.

400. The reports should be drawn up and edited with the greatest care so as
to achieve the object for which they have been introduced. The narration of
each item in the report should be brief, self contained and lucid and should
clearly bring forth the nature of irregularity, the extent of its seriousness, the
amount involved, the precise point at which failure is revealed and reference
to the relevant rules and orders etc. The narration should also indicate inter
alia all the action taken till the time of reporting (both at command level and
at the PCDA's/CDA’s level), so that wherever necessary, instructions could be
issued by Government straight away to the Service Headquarters etc. when
such cases are reported to them. The following points should also be explicitly
mentioned in the narration of each case of irregularity wherever necessary:

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(i) Whether the irregularity has come to light during percentage audit
and/or during process of check over selected items, or whether it is a case of
erroneous certification by the executive; and
(ii) The precise point at which and the extent to which failure on the part
of the executive is revealed.

401. Cases which in the personal opinion of the Principal

Controller/Controller are so important or significant as to be reported to the
Ministry of Defence/Service HQrs/Ministry of Defence (Finance) will be
included in Part II separately for cash and stores [reproduced at annexure (c)
to chapter 17]. Nil report will also be indicated. All other cases will be
included in Part I of proforma I.
The narration in part I of the report should be concise and to the point,
highlighting the specific nature of the irregularity in order to effectively draw
the attention of the concerned authorities. The narration should not normally
exceed 2 pages.
Note: Items in the MFAI Reports which are subsequently included in the
CGDA’s Certificate appended to the printed Appropriation Accounts will be
formally taken out of the MFAI Reports but pursued to a finality in the normal
course.

402. In order to enable action being initiated by the CGDA and by

authorities at Armed Forces Headquarters/Administrative Authorities
concerned in cases referred to in the preceding paragraph, full particulars of
the action already taken at Headquarters Commands or by the PCDA/CDA
and the nature of action suggested for consideration at CGDA’s level will also
invariably be indicated. Copies of relevant correspondence that has passed on
at Command level etc. will also be enclosed for information.

403. In addition, a half yearly report containing the unsatisfactory features,

financial irregularities, (having financial value of Rs. 7 lakh or more in each
case), cases of fraud, defective planning and implementation of projects
involving significant investment, wrong interpretation of financial
rule/authority/order, erroneous payments/over-payments, defalcation or loss
of public money or stores, non-utilisation of stores/P&M, major deviations
from original time and cost targets and other procedural irregularities etc.

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notices in audit should be forwarded by PCDAs/CDAs/PC of A(Fys.)/CIA(OF)
Kolkata, to office of the CGDA.
The cases received from PCDAs/CDAs will then be consolidated in the
form of CGDA’s Internal Audit Report, after obtaining approval of the
competent authority. The report is circulated to Defence Secretary,
Secretary(Defence Finance)/FA(DS), higher echelons of Ministry of Defence,
PSO’s in Services HQrs for their information and taking necessary
corrective/regularization action and further taking necessary action in order
to avoid recurrence of irregularities in future.

404. Preparation of Internal Audit Report

1. Internal Audit Report is required to be prepared by
PCDAs/CDAs/P.C. of A.(Fys.) Kolkata issue-wise/theme-wise i.e. the
cases proposed by PCDAs/CDAs are to be classified under three
broad headings/themes viz. (i) Pay, Pension & Personal
entitlements; (ii) Stores/Procurement; and (iii) Works with financial
value/implication of each case of atleast Rs. 7 lakh.
2. The CGDA’s Internal Audit Report in turn be consolidated/prepared
for (i) Services (Army, Navy, Air Force), R&D, CSD, Military Farm,
Border Roads, Pension etc, and (ii) Ordnance Factories.
3. The narration/write-up of the draft IAR case(s) submitted by
PCDAs/CDAs/P.C. of A(Fys.)/CIA(OF) Kolkata, should be self
explanatory, lucid, bringing out the irregularity in clear/precise
terms supported by the relevant rules/authority/orders which have
been violated/overlooked. The reference(s) made to the executive
authorities and the reply received along with comments, should
invariably be provided with the narration.
4. The narration/write-up of the draft IAR cases ought to be prepared
under the headings/titles such as (i) subject title of the case; (ii)
highlight of the case; (iii) name of the unit/formation; (iv) financial
value/implication; (v) audit facts; (vi) audit observation/description
of the irregularity in length (including reference to relevant/precise
rule/authority/orders which have been overlooked/violated and
precise point at which failure/irregularity is revealed) ; (vii) follow-
up action; (viii) audit conclusion; (ix) audit risk rating; (x) action
proposed. (Annexure “E” to the chapter may please be referred)

198
5. The covering/forwarding letter of the Internal Audit Report should
contain information viz., (i) subject title of the case; (ii) highlight of
the case; (iii) category of the case; (iv) name of the
unit/formation; (v) financial value/implication; (vi) time of detection
of the irregularity viz., during Local audit/performance audit/special
audit/Super review; (vii) violation of specific rule/order/authority;
and (viii) audit risk rating in a table. (Annexure “F” refers).

199
 ANNEXURE ‘A’ to CHAPTER 17
No…………….
Office of the PCDA/CDA .........
Dated…………
To
The GOC IN C (by name)
Sub: Quarterly report on Major Financial and Accounting irregularities.

The report on the above subject for the quarter ending………………..is enclosed
for the favour of information and necessary action.
Part I Section (A): Cash irregularities fresh items (nos………………………..)
Part I Section (B): Stores irregularities fresh items (nos………………………)
Part II Section (A): Cash irregularities, items already reported but still
outstanding.
Part II Section (B): Stores irregularities items already reported but still
outstanding. (nos……..)

Cases of other irregularities noticed in audit have been reported to

concerned authorities as necessary.

Principal Controller/Controller of Defence Accounts

Copy to:
(1) the CGDA, Ulan Batar Road, Delhi Cantt - 110010
(2) The Director of Audit ( Defence Services)
(3) Headquarters……………………………………..together with details of items shown
in the margin
Dy CDA

200
 ANNEXURE ‘B’ TO CHAPTER 17 PROFORMA I ( FRESH CASES)

Office of the PCDA/CDA………………………………………………………………….

Report on Major Financial and Accounting Irregularities for Q.E.
….....................
Part I section ‘A’ – Cash Irregularities
S.N Name of Particula Financi Period When Latest Remar
o. the rs of al s of was the position ks
unit/format irregulari effect accoun irregulari of the
ion ty ts ty first case
affecte noticed indicatin
d in audit, g action
and to taken so
whom it far by
was the
reported lower
authoriti
es
1 2 3 4 5 6 7 8

201
 Part I Section ‘B’—Stores Irregularities

S.No Name of Particulars Financial Periods When was the Latest Re

the of effect of irregularity first position of ma
unit/for irregularity account noticed in the case rks
mation s audit, and to indicating
affecte whom it was action
d reported taken so
far by the
lower
authorities
1 2 3 4 5 6 7 8

202
 ANNEXURE ‘C’ to CHAPTER 17- PROFORMA II

Office of the PCDA/CDA……………………………………………………………………………

Report on Major Financial and Accounting Irregularities part II --- Section A
— Cash irregularity
List of cases already reported but still outstanding
S.No Name of the Item no. Brief gist of Latest Remarks
unit/Formation and the the position
Quarter of irregularity
reporting

1 2 3 4 5 6

Part II Section ‘B” Stores irregularities

List of cases already reported but still outstanding
S.No. Name of the Item no. Brief gist of Latest Remarks
unit/formation and the the position
Quarter of irregularity
reporting

1 2 3 4 5 6

Dy Controller of Defence Accounts

203
 Annexure ‘D’ to Chapter 17 (Referred to in para 387)

Format for Internal Audit Report (IAR)

IA objection Report Number : Number and Quarter
Name of the Establishment/Command/Factories/Labs
involved
A Number of major objections and minor observations
B Financial value/Loss etc. (If any):
C Audit team members and Duration of audit
D Executive Summary
E Details of previous outstanding objections
F Each objection in the report to reflect the following
a) Objective: Scope, Approach, Data
b) Background
c) Irregularities involved
i)
ii)
Relevant Rules/Orders on the subject
Audit suggestions for rectifying the irregularity and
for improved in the systems and procedures:
(i)
(ii)
Letter number and date under which objection
referred to Executive Authority concerned.
Signature:
Date:
Other paragraphs are not proposed for inclusion in Defence Audit Code,
as most of them are suggestive in nature.
Paragraphs related to Local Audit will have to be incorporated in the
Army Local Audit Manual and that are related to PAOs in the respective OMs
please.
Coming to the bills and vouchers, it is proposed to add a new
paragraph i.e. No. 216 on passing/rejecting the supplier bills as stated in the
next page please.

204
 Annexure “E” to Chapter 17
Subject headings/format for preparation/submission of draft Internal Audit
Report cases by PCDAs/CDAs/P.C. of A.(Fys.)/CIA (OF) Kolkata
1 Subject title of the case:

2 Highlight of the case

3 Name of the Unit/formation

4 Financial value/implication

5 Audit facts

6 Audit observation/description of the irregularity in length (including

reference to relevant/precise rule/authority/orders which have been
overlooked and precise point at which failure/irregularity is revealed)

7 Audit follow-up action

8 Audit conclusion

9 Audit Risk Rating

Audit Risk Likelihood – Certain; Consequences: Major;

Rating
high probable; Medium/significant;
moderately probable; minor; and
low probable; insignificant

remote/rare

Risk: High, medium,

low

10 Action Proposed

205
 Annexure “F” to Chapter 17
Format for the forwarding letter of Internal Audit Report submitted by
PCDAs/CDAs/P.C. or A.(Fys.)/CIA (OF) Kolkata
Speed-post
No…………………………………..
O/o the PCDA/CDA/P.C. of A.(Fys)/CIA (OF) Kolkata
Dated:……………………..
To,
Office of the CGDA
Ulan Batar Raod, Palam
Delhi Cantt-110010

Subject: Submission of Internal Audit Report.

The report on the above cited subject for the half-year ending………… is enclosed for
information and further consideration. The information viz. (i) subject title of the case; (ii)
highlight of the case; (iii) Category of the case (viz., Pay, pension & Personal entitlement;
Stores/Procurement; Works); (iv) name of the unit/formation/Establishment; (v) financial
value/implication; (vi) time of detection of the irregularity viz., during Local
audit/performance audit/special audit/Super review; (vii) violation of specific
rule/order/authority and (viii) audit risk rating, is submitted in following table for kind
consideration.

SI Subj Highl Category Name of Financial Time of Violati Audit Risk rating
. ect ight of the case the value/ detection on of
No title of (viz., Pay, unit/ implicati of the specifi
. of the pension & formatio on irregularit c
the case personal n y rule/o
case entitlement /establis rder/a
; hment uthori
stores/Proc ty
urement;
works)

1 2 3 4 5 6 7 8 9

1 Abc Pqr Pp & pe Lmn 910000/- During Rule Likelihood – Certain;

local para high probable;
audit/perf order moderately probable;
ormance low probable; and
audit/spec remote/rare
ial
audit/sup Consequences: Major;
er review Medium/ significant;
minor; and insignificant

Risk: High, medium, low

2. The soft copy of the proposed cases/Internal Audit Report is also forwarded
through zimbra mail/CGDA W.A.N.
3. This issues with the approval of the PCDA/CDA/P.C. of A. (Fys.)/CIA (OF)
Kolkata.

Sd/-
Dy.CDA/GO (IA)

206
 CHAPTER 18

APPROPRIATION ACCOUNTS OF THE DEFENCE SERVICES

Para
Preparation and submission of the Appropriation Accounts 405

Annual Review of Works Expenditure 409

CGDA’s certificate on the accounts of the Defence Services 411

Exhibition of losses in the Appropriation Accounts:

I- Losses of cash, over payments, etc. 422
II- Losses of stores, over issues of stores. etc. 427

Exhibition of Infructuous Expenditure in the Appropriation Accounts 430

Statement showing variations between the year’s Original grant and

expenditure in respect of works carried out during the year 431

Statement showing variations between the Original estimates and actual final
costs in respect of works completed during the year 432

Financial stock taking of big Works Projects 433

Statement showing details of gifts and cases of transfer of Government

property of the book value exceeding Rs.1 lakh each free or at concessional
rate to Non- Government Organisations 435

Commercial appendix to the Appropriation Accounts 436

Appropriation Accounts for certain revenue and Debt heads 441

Preparation and Submission of the Appropriation Accounts

405. Secretary (Defence Finance)/Financial Adviser Min. of Defence (Finance)
is responsible for the preparation of the Appropriation Accounts of the
Defence Services and for their submission to the Comptroller and Auditor
General of India and the Director General of Audit, Defence Services, on the
15th January of the year following that to which they relate. A proof copy of
the accounts will be sent to those officers on the 15th December.

207
 While the Appropriation Accounts of Defence Services are prepared by the
Secretary (Defence Finance)/Financial Adviser (Defence Services) and signed
by Defence Secretary, the Appropriation Accounts of the Defence (Civil) and
Defence Pensions are prepared by the CGDA office and signed by the CGDA.

406. The object of the Appropriation Accounts is to present the audited

accounts of expenditure from the appropriations for the year with full
explanations of all important variations between the final appropriations and
the actual expenditure.

407. The Appropriation Accounts deal with:

(i) A general review of expenditure on Defence Services.
(ii) Changes in form and classification in the accounts.
(iii) Miscellaneous observations.
(iv) Appropriation Accounts with explanations for variations between the
final appropriations and actual expenditure.
(v) Review of Works Expenditure

408. The Appropriation Accounts include the following statements as

appendices :
Appendix ‘A’
Statement of losses of cash, overpayments etc. finally dealt with during the
year.
Appendix ‘B’
Statement showing by various categories, the total amount of store losses
dealt with finally during the year.
Appendix ‘C’
Statement of infructuous expenditure exceeding Rs. 1 Lakh in each case with
complete details and aggregate value of all items of infructuous expenditure
exceeding Rs. 10,000 but not exceeding Rs. 1 Lakh in each case, finally dealt
with during the year.
Appendix ‘G’
Statement showing variations between the year’s original allotment and
expenditure in respect of works carried out during the year.
Appendix ‘H’
Statement showing variations between the original estimates and the actual
final costs in respect of works completed during the year.

208
 Appendix ‘J’
Statement showing details of gifts and cases of transfer of government
property of the book value exceeding Rs. 1 Lakh each free or at concessional
rate to non government organizations.

Annual Review of Works Expenditure

409. The annual review of Works Expenditure is prepared by the Secretary

(Defence/Finance) / Financial Adviser Ministry of Defence (Finance) with
reference to various statements, required to be submitted to them by the
Principal Controllers/Controllers of Defence Accounts concerned. The
statements in question and the instructions for their preparation are given in
appendix IV to this code.

410. A statement showing cases of remission of departmental charges on

deposit works undertaken by the MES for Municipalities, Cantonment Boards,
Local Governments etc. is also prepared by the Ministry of Defence (Finance)
and is included as an Annexure to the Review of Works expenditure on the
Appropriation Accounts.

CGDA’s Certificate on the Accounts of the Defence Services

411. The CGDA furnishes annually a Draft Certificate to the Secretary
(Defence/Finance) / Financial Adviser Ministry of Defence (Finance) by the
due date intimated by MOD (Finance) each year, that to the best of his
knowledge and belief, no part of the expenditure contained in the
Appropriation Accounts for the year has been incurred without the sanction of
the Competent Financial Authority, where such is required by regulations or
other orders, with the exception of items where necessary sanction is
awaited. Particulars of such items exceeding Rs. 5,00,000 in each case are
furnished in the statement attached to the certificate in the proforma at
Annexure ‘A’ to this Chapter, vide para 413 below.
Principal Controllers/Controllers should however, continue to cite in the
Annual Audit Certificate reservations and specific instances thereof in regard
to the items considered important enough to be brought to the notice of the
Public Accounts Committee viz., Serious irregularities in respect of store
accounts, stock verification, use of transport, etc. irrespective of whether the
authority competent to regularize them is Government or not.

209
 The above certificate is based by the CGDA on a similar certificate
furnished by each PCDA/CDA, so as to reach him by the due date intimated by
CGDA each year.
It is countersigned by the Secretary (Defence/Finance)/Financial
Adviser (Defence Services).

412. The Principal Controller's/Controller’s certificate for a year should

embrace all the expenditure contained in the accounts of that year and should
also depict as a whole the correct results of internal audit conducted by the
Defence Accounts Department vis a vis the entire field of defence
expenditure. Cases in which ex-post-facto sanction of the Government of
India is awaited for any item or items of expenditure already incurred and
any special features or major changes introduced during the period covered
by the certificate will also be included in the body of the certificate. The
certificate, which should be signed by the Principal Controller/ Controller
(Additional/Joint Controller of Defence Accounts if holding independent
charge.) and only in his/her absence by the next senior officer “for the
PCDA/CDA/ Addl. CDA/ Jt. CDA.” subject to the post approval by the
“PCDA/CDA/ Addl. CDA/ Jt. CDA”, should be self-contained, comprehensive
and precisely worded. In cases of reservations or qualifications made in the
certificates, a few specific and glaring instances in support of each such
reservation or qualification should be furnished separately as an Appendix.
The relative position (i.e. extent of improvement, or deterioration noticed) as
compared to the immediately preceding years in regard to certain important
feature of accounting such as, state of accounts, position of stock verification,
outstanding on account of payment issue, arrears in linking of invoices with
accounts, etc. should, as well, be brought out in the certificate proper, duly
supported by necessary details which should be furnished separately.
Note 1: In cases of Non-maintenance/Improper maintenance/Non-production
of accounts, the statements enclosed with the Annual Audit Certificate, should
contain full details of the irregularity such as the name of the unit, nature of
the account, the period involved, the precise nature of the irregularity (in the
case of improper maintenance of accounts) and the information as to whether
the irregularity has since been set right at the time of submission of the
certificates.

210
Note 2 : The figures given by the Principal Controller's/Controller’s of
outstandings on account of payment issue of stores, license fee etc. should be
based on the following data :-
(a) Outstandings on account of payment issue of stores
The amount outstanding for stores issued upto 31st March of the Financial
Year as on 30th June.
(b) Outstandings on account of licence fees
Amount on account of L.F. Bills issued for the period upto the end of February
outstanding as on 30th June of the following Financial Year.
(c) Number of outstanding audit objections
The figures of outstanding audit objections issued upto 31st March of the
financial year remaining unsettled as on 30th June of the following Financial
Year
(d) Outstanding number of CRVs which could not be linked with consignors
issue vouchers/ Packing Accounts/ Invoices
The number of CRVs relating to the period ending March of the Financial Year
and remaining outstanding as on the following 30th June.
(e) Outstanding vouchers in respect of which credit could not be verified in
the ledger of the consignees
The number of vouchers relating to the period ending March of the Financial
Year and remaining outstanding on the following 30th June.
(f) Outstanding number of vouchers to the period ending March which could
not be produced for audit
The no. of vouchers relating to the period ending March of the Financial Year
and not produced as on the following 30th June.
(g) Outstanding dues on account of rent for Defence Lands
Outstanding dues upto 31st March of the Financial Year as on the following
30th June
Outstanding on account of payment issues of stores and licence fee
and allied charges should indicate in separate statements, the partywise and
yearwise breakup, giving brief reasons for the outstandings under each
category and the steps taken to liquidate the same.
The following additional information should also be furnished for
incorporation in the reservation of the CGDA’s certificate :-
(i) The number of cases where the amount of outstandings on account of
stores supplies/services rendered exceeds Rs. 50,000 in each case of private

211
individuals/institutions and Rs. One Lakh in other cases and is remaining
outstanding for more than one year in the proforma at Annexure ‘E’ to this
chapter.
(ii) The number of cases where the amount of outstanding on account of
license fee charges exceed Rs. 50,000 in each case of private
individuals/institutions & Rs. 1 Lakh in other cases and is remaining
outstanding for more than one year in the proforma at Annexure ‘F’ to this
chapter.
(iii) The important cases of expenditure under objection exceeding Rs.
5,00,000 in each case, where sanction of Government of India is required and
which were included in Annexure ‘H’ to previous year’s Appropriation
Accounts but are still awaiting regularization, in the proforma at Annexure ‘G’
to this chapter.
(iv) Cases of losses (both cash as well as stores) awaiting regularization for
more than one year and where the amounts involved are substantial enough
to require sanction of the Government of India in the proforma at Annexure
‘H’ to this chapter.

Note 3: As regards cases of non-linking of issue vouchers, vouchers not

produced for audit, etc. the total number should be indicated in the body of
the certificate. Details of the more important cases only, under these heads
need be given in the statements attached to the Annual Audit Certificate. The
reasons for the non-linking of CRVs with issue vouchers, non-production of
vouchers to audit, etc. should also be furnished.
Note 4: Cases of serious irregularities which are to be highlighted and which
cannot be fitted in properly in any of the other Annexures should be lucidly
brought out in a separate Annexure.
Note 5 : In the printed Appropriation Accounts the position of the various
outstandings relating to the particular Financial Year will, however, be
reflected as on 30th June of the following year.

413. In respect of items of unauthorized expenditure or irregular issue of

stores, etc. if any, for which Government sanction is awaited and the audit
certificate in respect thereof cannot consequently be given vide para 411, a
statement should be appended to the certificate giving full particulars of all
such items, the amount involved, the Head of Account in which they are
included, the precise circumstances in which the expenditure was incurred or
212
the stores were issued prior to the receipt of Government sanction etc.
Information regarding the relevant authority under which or the reasons for
which Government sanction is necessary and the action taken to regularize
the expenditure in each case will invariably be included in the statement.
Only those transactions whose monetary value exceed Rs. 50,000 (in each
case) and which normally require the sanction of the Government of India
prior to their occurrence e.g. Items involving extra irregular expenditure,
transactions like unauthorized provision of free conveyance, extra issue of
rations, stores, etc., need be included in the above mentioned statement.
Cases of actual losses of stores, buildings, etc. for which sanction of
Government, were required, has inevitably to be accorded ex-post-facto will
not be included therein, as these will find a place in the statement of losses of
stores or cash as the case may be. Similarly, cases where ex-post-facto
sanction of the Government of India is awaited, will not be included in the
statement, as they are to be included in the body of the audit certificate, vide
para 412 ante.
Principal Controllers/Controllers should, however, continue to cite in
the Annual Audit Certificate reservation and specific instances thereof in
regard to the items considered important enough to be brought to the notice
of the PAC viz. Serious irregularities in respect of store accounts, stock
verification, use of transport etc., irrespective of whether the authority
competent to regularize them is Government or not.
The following points should be carefully observed in the preparation of
the statement referred to above:-
(i) The narration of each item should be self contained and complete giving
full particulars of the expenditure indicating clearly the circumstances, so far
known to the Principal Controller/Controller at the time of rendition of the
certificate, in which the payment was made or the expenditure incurred in the
absence of the necessary Government Orders.
(ii) In cases, where full particulars are not available at the time of rendition of
the audit certificate, it should be indicated in the remarks column against the
items that they are being obtained or will be furnished later when the case is
routed through them for furnishing an audit report while applying for the
requisite Government sanction for the expenditure.
(iii) In cases, however, where there is a delay on the part of the executive in
answering the objection and or/in furnishing the reasons for incurring the

213
expenditure in the absence of or prior to the receipt of the Government
sanction thereof, the item should be so annotated in the statement; And such
items should also invariably be exhibited in the quarterly MFAI Report. In
case the item has already found a place in the MFAI Report a reference to the
item no. in the report of the MFAI should be cited.
Note: Items of Works Expenditure placed under objection for want of
administrative approval of Government of India, fresh or revised as the case
may be, which normally finds place in the Annual Review of Works
Expenditure, needs be included in the Annual audit Certificate. However,
cases of serious irregularities involving expenditure incurred on works which
are not covered by the existing regulations/scales (e.g Provision of
accommodation/furniture in excess of scales, adoption of richer specifications
than normally allowed etc.) will, in addition, be exhibited in the Annual Audit
Certificate.

414. Where it has not been possible to include any items of unauthorized
expenditure actually incurred in or relating to a year in that year’s certificate
already rendered to the CGDA, owing to delay in their detection or due to
other causes, the items effected should be dealt with as follows:
(a) If the unauthorized expenditure continued even in subsequent year/years
for which an audit certificate has not yet been rendered, the entire period to
which the expenditure relates and the total amount involved (including that
for the previous year/years) will be shown in the statement appended to the
certificate to be rendered for that year.
(b) In cases where the entire expenditure relates only to previous years, the
period and the amount involved, etc., will be shown separately in the
certificate of the year in which the unauthorized expenditure was first actually
brought to light, in the form of an Annexure to the regular statement of the
year.

415. Items of expenditure awaiting regularization under orders, of, and/or

which may be regularized by competent financial authorities lower than the
Government of India, are not required to be exhibited in the statements
appended to the audit certificate.

214
416. In respect of stock verification carried out by the administrative
authorities, a self contained explanatory note giving the general position and
result of stock verification during the year should be appended to the audit
certificate for that year. This note should inter alia, contain information
regarding the number of units/formations in which stock verification was
either not conducted at all or was incomplete, and whether or not it was
subsequently conducted or completed, whether the results of stock taking
revealed a satisfactory state of affairs, the particulars of units in which the
position was unsatisfactory and whether the discrepancies between ground
and book balances were considerable and, if so, their extent and their value,
and such other information as will enable a complete appreciation of the stock
taking carried out during the year as a whole.
Note : Only clear cases of non verification of stock should be listed in the
note referred to in the above para. Purely technical objections of a few days
delay in the completion of stock verification for the financial year need not be
included. As regards cases of partial verification of stock, the number of items
not verified and the proportion they bear to the total number of items
required to be verified should be additionally indicated.

417. In order to enable the CGDA to render an audit certificate in respect of

the ‘Special Grants-in-Aid’ made to Cantonment Boards, the account of which
are not susceptible to test audit by the DGADS, the Principal
Controllers/Controllers concerned should include in their certificate a separate
para on the following lines:- "I also certify that the expenditure met from
Special Grants-in-Aid granted to Cantonment Boards from Defence Service
Estimates have been audited under my directions and that the condition on
which the grants have been made, have been or are being fulfilled/have not
been or are not being fulfilled in the following respects’.

(to be mentioned in the certificate)

418. In respect of items of expenditure, which are not audited by the

Defence Accounts Department i.e. expenditure on QMG’s installations (like
Flour Mills), expenditure incurred by the High commissioner for India in the
U.K., expenditure incurred by the Director General of Supplies and Disposals
on the purchase of stores for the Defence Services (including purchase by

215
India Supply Mission Washington), a suitable note should be inserted at the
foot of the audit certificate to the effect that the certificate does not cover
such items.
The certificate should also be qualified suitably to indicate that losses
of stores (as distinct from cash losses which are to be regularized under the
normal rules in F.R. Part I Vol I 1983 Edn), due to enemy action and
destruction by our own forces owing to operational necessity, as also losses
of stores due to the abortive air drops, and those occurring in units and
formations on war system of accounting, etc, in respect of which no formal
regularisation is necessary under existing rules, have not been included
therein.

419. After dispatch of the certificate to the CGDA a copy of the Certificate
and its Appendix will be shown by Principal Controllers/Controllers to the
Senior Deputy/Deputy/Assistant Director of Audit/Audit Officer, Defence
Services, concerned, to enable the test audit authorities to ensure that all
cases of expenditure held under objection for want of Government sanction
have in fact been included in the CGDA’s Certificate.
In addition, an annual report on the lines of the MFAI Report containing
the unsatisfactory features which are included in the “Annual Audit
Certificate” should simultaneously be forwarded to Command Headquarters to
whom the MFAI Reports are rendered. The report while being on general lines
should cite specific and typical cases of each irregularity and mention the
units, the period of accounts during which they occurred etc.

420. The Annual Audit Certificate and the various statements, etc. will be
prepared by Principal Controllers/Controllers, after examining all objection
statements (including those issued by the Local Audit Officer), and other
documents containing a record of the charges compiled in the accounts of the
year to which the certificate pertains, which have been placed under objection
for want of fresh sanction or revised as the case may be, of the Government
of India. To facilitate the preparation of the certificate, a register will be
maintained in each audit section of Principal Controllers/Controllers Office and
by each Local Audit Officer, showing items of the nature, referred to above,
placed under objection and subsequent progress of objections with notes or
the final orders issued.

216
Note: The register mentioned above will be maintained in the proforma given
in Annexure ‘A’ to this chapter.

421. Principal Controllers/Controllers will keep a close watch over the

progress made in respect of each of the various reservations made in the
Annual Audit Certificate and its various Annexures. A systematic record of the
progress made in respect of the outstanding items will be maintained. A
quarterly progress report will be rendered showing the position of each of the
reservations and the outstanding items, on the following dates :

Sl. No. Nature of Report Date on which to reach

CGDA
1. Position of cases included in the AAC 7th November
as on 30th September.
2. Further progress in respect of the 20th January
same as on 31st December.
3. Subsequent progress showing the 15th May of the following
position as on 31st March year.

In respect of the items of expenditure requiring Government sanction

reported through the AAC, they should be progressed vigorously and
reviewed immediately on receipt of necessary sanction and their settlement
intimated to the CGDA separately in each case.

Exhibition of Losses in the Appropriation Accounts

I- Losses of Cash, Overpayments, etc.

422. Losses of cash, overpayments, etc. written off by the Government of
India and other competent financial authorities, and claims abandoned as
irrecoverable and finally dealt with during the year are shown under the
following two main categories in Appendix ‘A’ to Section V of Appropriation
Accounts of the Defence Services :
(i) Cash losses, overpayment, irrecoverable claims, etc. due to
theft, fraud, and neglect:
(a) Details of losses, etc. exceeding Rs. 25,000 in each case.
(b) Aggregate of all losses, etc. exceeding Rs. 50 but not exceeding Rs.
25,000 in each case.
217
(ii) Cash losses, overpayment, irrecoverable claims, etc. due to
other causes :
(a) Details of losses, etc., exceeding Rs. 50,000 in each case.
(b) Aggregate of all losses, etc. exceeding Rs. 50 but not exceeding Rs.
50,000 in each case.
Note: In regard to irregularities the monetary value of which cannot be
assessed, only those cases which are considered important enough to merit
the notice of the Public Accounts Committee should be included in the
Appropriation Accounts.
The narration of each case of loss, etc., to be included in categories I
(A) and II (A) above should be brief, self contained and give information as to
the exact period to which the loss pertains; amount involved; name of unit or
formation; the competent financial authority by whom that loss was written
off and the date of write off, action, if any taken towards its investigation, the
exact circumstances of the loss, the recommendations of the Court of Enquiry
held, if any, particulars of disciplinary action taken and the remedial
measures instituted. The number and date of the letter in which the loss was
written off should be mentioned against each item.

423. The consolidated statement of cash losses, etc. will be prepared by the
CGDA with reference to the statistics and data mentioned in the following
paras and forwarded to the Secretary (Defence/Finance) / Financial Adviser
Ministry of Defence (Finance) by the due date intimated by MoD
(Finance).

424. In respect of losses of cash, overpayments etc., written off by the

Govt. of India, statistics are maintained centrally by the Min. of Defence
(Finance). These statistics together with the statistics furnished annually by
the High Commissioner for India in the U.K. of losses, etc. pertaining to their
accounts will be utilized by the CGDA in compiling the consolidated statement
of losses.

425. In respect of all losses of cash, etc., written off by Govt. of India or
lower authorities, statistics will be maintained by Principal
Controller's/Controller’s Offices in a register in IAF(CDA)-182 which will be
examined by a Gazetted Officer monthly. Similar statistics in respect of cases

218
coming within their purview of audit will also be maintained by the LAOs in a
register in IAF (CDA) 182. (The detailed procedure for the maintenance of
such statistics and the submission of the statements of cash losses by the
LAOs is laid down in Army Local Audit Manual Part I). From the register
maintained in their offices and from the statements received from the LAOs
the Principal Controllers/Controllers will prepare annually, a Statement of
losses in the proforma at Annexure ‘E’ to this Chapter confirming to the
provisions of para 422 and submit it to the CGDA through the local
representative of the DGDAS so as to reach the former by 31st May of the
year, following that to which the statement relates.
Principal Controllers/Controllers will also prepare quarterly for the
quarter ending June/Sept/Dec/Mar the details of important losses referred to
in para 422 (I A) and (II A) in the proforma at Annexure ‘D’ to this chapter
and submit them to the CGDA through the local representative of the DGADS,
so as to reach the former not later than the 15th August, 15th November, 15th
February, and 31st May respectively. As far as possible all important losses
referred to in para 422 (I A) and (II A) written off during the quarter should
be included in the statement for that quarter itself, but any item which could
not be included due to late receipt of sanctions, etc., or for other unavoidable
reasons should be incorporated separately in the statement for the
immediately succeeding quarter with suitable remarks. Three copies of the
finalized statements of cases in respect of each item included, should be
obtained from the CFA and with an endorsement of acceptance by the
PCDA/CDA/LAO, should accompany the detailed statements.
Note 1: For the purpose of the above statement each sanction by a
competent financial authority should be viewed as an individual transaction
irrespective of the number of transactions and the period covered by it and
should be annotated at one place only in the statement of important losses.
Note 2 : The annotation of important losses, viz., those mentioned at I A
and II A above should conform, as far as possible, to the form in which it is
printed in the Appropriation Accounts and a self contained and complete
history of each case should be furnished separately along with the statement
of losses.
Note 3: Objections waived and irrecoverable, accounts etc., written off
by Officers of the Defence Accounts Department and the Audit Department
Defence Services, under Rule 177 Financial Regulation Part I (Vol. I 1983

219
Edn.) and Article 248 of Audit Code respectively, need not be exhibited in the
statement.
Figures of “unidentified advances” and Debtor balances written off by
the PCDA (Officers) and the PCDA/CDA concerned in respect of PAO (ORs)
and their subordinate officers will, however, be shown in the statement of
cash losses under the appropriate headings.

Note 4 : Losses of cash due to enemy action are to be regularized under

normal rules in Financial Regulation Part I and such losses when regularized
will be included in the main body of statement of cash losses.
Cash losses due to enemy action awaiting regularization by
Govt. of India will be included in the proforma at Annexure I to this chapter
for incorporation in the reservation of the CGDA’s certificate.
Note 5: Cases involving the provision of Govt. or Hired Transport to non
entitled personnel regularized under the orders of the competent financial
authority, should be treated as a cash loss and shown in the statement of
cash losses under the proper heading.
Note 6: Losses written off in respect of stores short landed at ports by
shipping agents, the claim against whom are repudiated by or are not
realizable from them in part or in full, should be classified as losses of cash
and exhibited in the statement under the appropriate heading.
Note 7: Details of losses, etc. to which no precise monetary value can be
assigned should also be included at the bottom of the statement.
Note 8 : The general criterion for determining whether items of
unauthorized expenditure which have subsequently been regularized by a
competent sanction should be included in the statement or not will be as
follows :-
“If the sanction, besides regularizing past expenditure originally
incurred without adequate or proper sanction, has the effect of making the
item of expenditure an authorized charge subsequent to the date of sanction,
the item should not be included in the statement, as in such cases
Government recognizes the need for the expenditure but failed to provide for
it earlier. Cases of ex post facto sanctions to expenditure and regularization
of irregularities in accounts and of expenditure involving no actual loss to the
Government are also not to be included in the statement”.

220
Note 9: Losses pertaining to issues of stores in which cash recoveries are
required to be made i.e. Irrecoverable payment issues or free issues where
issues are authorized on payment only, are to be classified as cash losses.
Note 10: Payment of pending enquiry awards under proper authority is
not an irregular payment even though the claim for pensions may ultimately
be rejected. Accordingly, such payments are not required to be written off
and included in the statement.
Note 11 : Losses arising in connection with purchases effected through the
Purchasing Organizations in India and abroad, where the fault lies entirely
with them are not required to be included in the statement, as these losses
will be included in the report of the Comptroller and Auditor General of India,
Union Government (Civil)/Appropriation Accounts (Civil).
Note 12: Losses pertaining to Cantonment Funds will not be included in
the statement as these are not required to be incorporated in the
Appropriation Accounts.

426. “Cases of pre partition losses/irregularities finally dealt with/regularized

during the year will be intimated to CGDA by the Principal
Controllers/Controllers as and when such cases arise, to enable CGDA to
report the same to Min. of Defence (Finance). When no such cases are dealt
with during a financial year, a Nil report should be sent by Principal
Controllers/Controllers so as to reach CGDA by 15th October, each year”.

II- Losses of Stores, Over Issues of Stores, etc.

427. Losses of stores, over issues of stores, etc. written off during the year
by Govt. of India and other competent financial authorities are shown (in the
proforma at Annexure ‘C’ to this Chapter) in Appendix ‘B’ to the Appropriation
Accounts of the Defence Services. Stores losses below Rs. 500/- in consuming
units will not be included in the statement.
Details of important losses etc. will be furnished in respect of following
losses in an Annexure to this statement on the lines provided for cash losses;
(i) Losses exceeding Rs. 75,000 in each case due to theft, fraud or neglect.
(ii) Losses exceeding Rs. 2 Lakhs in each case due to other causes.
Note: In regard to irregularities the monetary value of which cannot be
assessed, only those cases which are considered important enough to merit

221
the notice of the Public Accounts Committee should be included in the
Appropriation Accounts.

428. Statistics in respect of losses of stores will be maintained by the Local

Audit Officers in a register in IAF (CDA) 341 and by the AO/AAOs. (MES) in a
register as provided for the purpose. The detailed procedure for the
maintenance of such statistics and submission of statements of losses by the
Local Audit Officers is laid down in Army Local Audit Manual Part I. Similar
instructions for AO/AAOs. (MES) are laid down in the MES Unit Accountants
Manual. From the statements furnished by the LAOs and AO/AAOs (MES), the
Principal Controller/Controller will prepare an annual statement in the
proforma at Annexure ‘C’ to this Chapter and submit the same to the CGDA
through the local representative of the DGADS, so as to reach the former by
the 31st May of the year following that to which the statement relates.
The Principal Controllers/Controllers will also prepare quarterly for the
Quarter ending June/Sep/Dec and March, detailed statement of important
losses referred to in sub para 2 of para 427 in the proforma at Annexure ‘D’
to this chapter and submit to the CGDA through the local representative of
the DGDAS, so as to reach the former not later than the 15th August, 7th Nov,
15th Feb and 31st May respectively. As far as possible all important losses
referred to in sub para 2 of para 427 written off during the quarter should be
included in the statement for that quarter, but any important items which
could not be included due to late receipt of sanctions etc., should be
incorporated separately in the statement for the next quarter with suitable
remarks.
Note 1: The provisions of Notes 1, 2, 7 and 8 below para 425 apply to
the cases of store losses also.
Note 2: Even in respect of losses of buildings and furniture on charge of
Air Force Units and Indian Navy, the Regional PCDAs/CDAs, in whose area
such losses occur will be responsible for inclusion of the items in their
statements of losses. In the case of special works the transactions in respect
of which are brought to account finally by the PCDA/CDA Navy and PCDA Air
Force, the responsibility for the exhibition of losses in the Appropriation
Accounts should rest with PCDA/CDA concerned.
Note 3: All irregular or over issue of stores should be treated as “store
losses”. However, loss of stores resulting from overdrawal of rations which

222
remains unadjusted as per para 888(b) of Defence Services Regulations for
the Army (revised edition 1962), will be categorized as cash losses.
Note 4: Each item figuring in the statement of important losses should
contain a reference to the particular heading and category in which it will be
included in the main statement (viz Head I Food, Head II (a) POL etc.)
Note 5: All avoidable manufacturing losses which are written off by the
Govt. or lower authorities shall be exhibited in the Appropriation Accounts.
The consolidated figures of such losses formally written off shall be included
in Appendix ‘B’ in the proforma at Annexure ‘C’ under the heading ‘Ordnance
and Clothing Stores’ against Category I or II as the case may be and linked
with a foot note to indicate the amount of loss due to rejection.
Note 6 : In the case of loss due to accident to MT Vehicles, the net loss
should be exhibited in the Appropriation Accounts even though the gross
amount of the loss is required to be written off by the CFA as per para 247 of
Stores Accounting Instruction for the Army (1965 edn.)
Note 7: Losses discovered at the time of stock taking which are not due
to theft, fraud or neglect and whose value falls within the powers of the
COOs/Commandants/OOs Ordnance Depots and which are, therefore,
adjusted on stock taking sheets duly approved by them will also be exhibited
in the statement of losses of stores in the Appropriation Accounts.
Note 8 : Unavoidable losses and those within the permissible limits vide
para 254 Store Accounting Instructions for the Army 1965 (Edn.) and losses
due to adjustment to trivial discrepancies in transit in respect of Ordnance
Stores upto Rs. 15 need not be included in the Appropriation Accounts.

429. The CGDA will prepare a consolidated statement of losses of stores with
reference to the statement of losses of stores and with reference to the
statement received from the Principal Controllers/Controllers. The figures on
account of losses of animals for inclusion in the Appropriation Accounts will be
obtained by him/her from the administrative authorities at IHQ of MoD(Army)
and included in the All India consolidated statement. The consolidated
statement in the final forms will be submitted by the CGDA to the Secretary
(Defence/Finance) / Financial Adviser, Ministry of Defence (Finance) by the
due date intimated by MoD (Finance).

223
Exhibition of Infructuous Expenditure in the Appropriation Accounts

430. Principal Controllers/Controllers will submit half yearly to the CGDA

through the local representatives of the DGADS, a statement of Infructuous
Expenditure (other than MES) in two parts viz (a) Individual item of
infructuous expenditure exceeding Rs. 1 Lakh in each case with complete
details as indicated in para 422 ante, and (b) Aggregate value of all items of
infructuous expenditure exceeding Rs. 10,000/- but not exceeding Rs. 1 Lakh
in each case showing interalia the number of cases involved for exhibition in
lump sum. The reports for the half year ending September and March will be
submitted so as to reach CGDA not later than the 7th Nov and 31st May each
year respectively. As far as possible all items dealt with finally during a half
year will be included in the statement for that half year, but any items which
could not be included therein should be incorporated in the statement for the
next half year with suitable remarks (showing interalia the number of cases
involved). In addition and annual statement showing the aggregate value of
all items of infructuous expenditure, exceeding Rs. 10,000/- but not
exceeding Rs. 1 Lakh in each case showing interalia the number of cases
involved will be rendered to the CGDA through the local representative of the
DGADS so as to reach the former by 31st May of the year following that to
which the statement relates. From these statements, the Controller General
of Defence Accounts will prepare and forward a consolidated statement to the
Secretary (Defence/ Finance) / Financial Advisor (Ministry of Defence
(Finance) by the due date intimated by MoD (Finance) for inclusion in the
Appropriation Accounts as Appendix ‘C’ to Section V.
To facilitate the submission of these statements each audit section of
the main office will maintain a register for the purpose.
Note 1: This statement will accompany the statement of cash losses.
Note 2: A statement of infructuous expenditure for Works will also be
submitted by Principal Controllers/Controllers to the DFA (Works) on similar
lines through the local representative of the Director General of Audit,
Defence Services.

224
Statement Showing variations Between the Year’s Original Allotment
and Expenditure in respect of Works Carried out during the Year
431. The above statement is prepared by the Ministry of Defence (Finance)
centrally from Statement ‘A’ attached to the Annual Review of Works
Expenditure submitted by Principal Controllers/Controllers to DFA (W) by 1st
September and included in the Appropriation Accounts as Appendix ‘G’
This statement will include all Major Works (for which provision has
been made in the budget) in respect of which the original allotment or the
actual expenditure during the year is Rs. 25 Lakhs or more, provided the
variation is 50% thereof or more. In addition, a supplementary statement ‘A’
in respect of non budget Major Works estimated to cost over Rs. 10 Lakhs is
also submitted.

Statement showing variations between the original estimated and

actual final costs in respect of works completed during the year
432. The above statement is prepared by the Ministry of Defence (Finance)
centrally from statement ‘B’ attached to the Annual Review of Works
Expenditure submitted by Principal Controllers/Controllers to DFA (W) by 1st
September and included in the Appropriation Accounts as Appendix ‘H’.
This Appendix will show original estimates and expenditure etc. and
explanations of variations in respect of all Major Works finally completed
during the year, the original estimate or actual expenditure on which is Rs. 25
Lakhs or more, provided the variation is 10% of original estimates, or more.

Financial Stocktaking of Big M.E.S. Projects

433. This statement shows the financial position as on the 31st March, of big
project, expected to take more than one year to complete in the proforma
laid down in para 138 of Office Manual Part VIII. This is prepared by the
Ministry of Defence (Finance) from the reports submitted by Principal
Controllers/Controllers to DFA (W) by the 1st September in connection with
the Annual Review of Works Expenditure.
Note: As a temporary measure, this statement is not being rendered.

225
434 Statement showing R&R Fund
The above statement would reflect the impact of annual budgetary provisions
on the Repairs and Renewal Fund, detailing the objective of the creation of
the fund, opening balance, receipt, payment and closing balance.

Statement showing details of Gifts and Cases of Transfer of

Government Property of the Book Value exceeding Rs. 1 Lakh each
free or at concessional rate to Non Govt. Organisations.
435. The details of properties, exceeding Rs. 1 Lakh in book value in each
case transferred free or at concessional rate to Non Government
Organisations (e.g. Public corporations, Companies, Autonomous bodies,
Private Institutions etc.) during the year are furnished by Ministry of Defence
in triplicate (in the proforma shown in Annexure ‘J’ to this chapter) to the
Ministry of Defence (Finance/Budget) for inclusion in the Appropriation
Accounts as Appendix ‘J’.

Commercial Appendix to the Appropriation Accounts

436. A Commercial Appendix to the Appropriation Accounts of the Defence
Services is prepared and published along with the Appropriation Accounts of
the Defence Services in one volume. It details with the trading, profit and loss
and other accounts of the manufacturing and trading concerns of the Defence
Services. The Appendix includes the Review of the Financial Adviser and the
Accounts of the Manufacturing and Trading concerns referred to in Para 437.

Note : The Annual Accounts and the Financial Adviser’s Review thereon
of Ordnance, Ordnance Equipments Factories will not be included in the above
mentioned Appendix. The accounts in respect of these Factories will be
compiled and rendered by the Principal Controller of Accounts (Factories) to
the Local Test Audit Officer for certification and transmission to DADS for
finalization of audit report thereon and to the Controller General of Defence
Accounts, Director General of Ordnance Factories, Department of Defence
Production, MOD and Ministry of Defence (Finance) as soon as possible after
the accounts of the year to which the accounts relate are closed but not later
than 15th November. The Principal Controller of Accounts (Factories) is
responsible for issuing detailed instructions for compiling the Annual Accounts
in the prescribed form and also for the submission of such statistics as are
required for the preparation of the Financial Adviser’s Review. PCA (Fys.)

226
Kolkata is also required to render Annual Accounts in Commercial Format as
approved by C&AG as Ordnance Factories are in the process of being declared
Departmental Commercial Undertaking.

437. Military Farms: - The Annual Accounts of the Military Farm will not be
reflected in the commercial appendix to the Appropriation Accounts. However,
the same shall henceforth be put up for information of RM by MOD (Fin/Q)
after getting the same vetted by DGADS.

438. The Trading and Production Accounts of Military Farms will be compiled
by the Director of Military Farms and Command-wise accounts sent to Deputy
Director General of Military Farms (DDGMF) by 20th July. After consolidation
of final Annual Accounts by DDGMF, the same would be rendered to the CGDA
by 20th October of the year following that to which the accounts relate.
(1) The Principal Controllers/Controllers of Defence Accounts would render
their comments alongwith Accounts so as to reach the CGDA by the 15th July
of the year following that to which the accounts relate
(2) By the Director of Military Farms in the case of Military Farms by the
15th October of the year following that to which the accounts relate.

439. The detailed instructions for the preparation and submission of the
various accounts by the Defence Accounts Department are contained in the
Stores Accounting Instructions for the Army 1965 edition. These accounts will
be checked on receipt in the office of the Controller General of Defence
Accounts, consolidated, where necessary and sent to the administrative
authorities in the final form in which they are to be published, for acceptance
and for furnishing the necessary administrative review on working of the
concerns to Ministry of Defence (Finance). Advance copies of the accounts
etc. will be sent simultaneously to the DGADS for audit and scrutiny. The
original copies duly signed by the administrative authorities will be passed on
to the DGADS for certification, the copies duly audited by DGADS will be sent
to the Deputy Financial Adviser (Budget) by the 15th December of the year
following that to which they relate for publication.

227
440. Accounts of Canteen Stores Department (India) and a review thereon
are furnished by CSD to Ministry of Defence (Finance) through CGDA who
sends them to DGADS for audit and scrutiny.
Audited accounts of Hindustan Aeronautics Ltd., will be obtained from
the company by the Ministry of Defence (Finance) through the Ministry of
Defence.

Appropriation Accounts for Certain Revenue and Debt Heads

441. The Secretary (Defence/Finance) / Financial Adviser Min. of Defence
(Finance) furnishes the Controller General of Accounts with Appropriation
Accounts for the following heads in such form and manner as may be
prescribed for the purpose from time to time, so as to reach him by 30th
September each year.
Sector F Loans and Advances by the Central Govt.
2049 Interest on Debt and other obligations
2071 Payments of Commuted value of Pensions.
In order to enable the Ministry of Defence (Finance) to prepare the above
accounts the PCDA/CDA will prepare Appropriation Accounts for the above
named heads so far as they are concerned and submit them to the DFA (B)
as laid down in paragraphs 209 to 210 and 229 Defence Account Code.

442. The following instructions will be observed in the preparation of the

Appropriation Accounts referred to above :-
(i) The actual for the year under Loans and Advances should represent
only cash transactions and not book keeping adjustment. The debits raised by
the High Commissioner for India in the U.K. should be included in the actuals,
but the amounts shown separately in the remarks column.
(ii) The authority for the original and supplementary allotments should be
quoted.
(iii) The figures shown in the column ‘actuals for the year’ should represent
the final figures for the year as shown in the March Supplementary
compilation. Any variation between the compiled figures and those shown in
the column ‘actuals for the year’ should be fully explained.

443. The balances under ‘F’ ‘loans and Advances’ outstanding on the 31st
March should be analysed and reviewed by sub heads, special attention being
directed to write off delays in repayments, acknowledgement of balances,
228
suspensions, doubtful assets in balances, etc. Any peculiar features, viz
irregular recovery of interest, remission of interest, grant of loans without
necessary safeguard for recovery, unusually large loans to an individual or
corporate body etc. should be commented upon. The statement of the review
should be submitted by Principal Controllers/Controllers to the Deputy
financial Adviser (Budget) Ministry of Defence (Finance) by 1st September
each year as laid down in para 190 Defence Account Code, 2014 edition.

444. A certificate in the following form will be furnished by the Controller

General of Defence Accounts to the Secretary (Defence/Finance) / Financial
Adviser Ministry of Defence (Finance) by the 20th November on receipt of
similar certificates from the Principal Controllers/Controllers of Defence
Accounts (signed by them personally) by 15th October. “The Principal
Controllers/Controllers will endorse a copy of their certificate to the local
statutory audit representative”.
“I declare to the best of my knowledge and belief that no part of the
expenditure.................................... under advances under Debt
2049 - Interest Payment
............................................................
2071 - Pension and other Retirement Benefits.
.............................................................
Sector F Loans and Advances
-------------------------------------------------
has been incurred and adjusted in the accounts for the year, have made
without authority superior to that of the Department or the office in cases
“where such authority is required by the Regulations”.
Note: This certificate does not cover the expenditure incurred by High
Commissioner for India in the U.K. and booked in the accounts for the year,
which is audited by the Director of Audit, Indian Accounts, in the United
Kingdom on behalf of the Comptroller and Auditor general of India.

229
 ANNEXURE ‘A’
(Referred to in paras 411 and 420)
Statement showing items of expenditure exceeding Rs. 5,00,000 in
each case awaiting the sanction of the Govt. of India

Sl. Brief Amount Head of Circumstances The The date The date The Remarks
No. particulars Account in which the exact on which on which latest
of items expenditure date on the case the case position
was incurred which was first was first of the
and/or the referred referred case as
admitted objection to to known to
without the was first Command Service the
necessary raised etc HQrs HQrs Controller
authority wherever
known

1 2 3 4 5 6 7 8 9 10

230
 ANNEXURE ‘B’
(Referred to in paras 427 and 428)
Statement showing by various categories, the total amount of stores
losses pertaining to the Defence Services finally dealt with the during
year __________
Categories Food POL & Othe MT Other Medic MES MISC Aviati Nava
of losses & Aviati r Vehicles Ordnan al Stores Stor on l Tot
Forag on ASC & ce & Store & es Stores Stor al
e spirit Stor connect Clothin s buildin es
es ed g gs
stores stores
1 2 3 4 5 6 7 8 9 10 11 12
I- Losses
due to
theft fraud
or neglect
II- Actual
losses due
to other
causes
a) Fire
b)
Deficiencie
s in actual
balances
c)
Deteriorati
on
d)
Defective
storage
e) In
transit
f) Misc
causes
Total II
Grand
total I &
II
(The figures in the statements should be rounded to the nearest rupee)

231
 ANNEXURE ‘C’
(Referred to in Paras 426 and 428)
S Name Parti Peri Am Circum Details Partic Rem No. & Oth
l. of cular od oun stance of the ulars edial date er
N unit/fo s of to t s recomm of meas of rem
o rmatio the whi under endatio discip ures the ark
. n in loss ch which n of the linary instit loss s if
which loss the court of actio uted state any
the pert loss Inquiry n or ment
loss ains occurr if held taken prop of
occurr ed osed Govt.
ed to be letter
instit unde
uted r
for whic
the h
prev regul
entio arise
n of d
losse
s in
futur
e
1 2 3 4 5 6 7 8 9 10 11

232
 ANNEXURE ‘D’
(Referred to in Para 425)
Statement showing by various categories, the total amount of cash
losses pertaining to the Defence Services relating to post/pre-
partition period finally dealt with during the year
Categories Losses Overpayments Fraudulent Demurrage Unauthorised Other Total
of losses of cash and use of charges use of Govt. categories
proper irrecoverable Railway or hired
claims warrants transport

1 2 3 4 5 6 7 8
I. Losses
due to
theft,
fraud or
neglect
Total I
II.
Losses
due to
other
causes
Total II
Grand
Total I &
II

233
 ANNEXURE ‘E’
(Referred to in Note 2 to Para 412)
Statement showing details of outstanding on account of payment
issues/services rendered for the period ending 31st March ______as
on _________
(Individual items of over Rs. 50,000 in each case of private
individuals/Institutions and Rs. 1 Lakh in other cases outstanding for more
than one year)
Sl. No. Name of Name of Period to Amount Remarks
the the party which the
consignor from amount
or the whom due relates
authority
which
rendered
service
1 2 3 4 5 6

Total Amount

234
 ANNEXURE ‘F’
(Referred to in Note 2 to Para 412)
Statement showing details of outstanding dues in account of Licence
Fee charges for the period ending 31st March _______________as on
____________
(Individual items of over Rs. 50,000 in each case of private
individuals/Institutions and Rs. 1 Lakh in other cases outstanding for more
than one year)
Sl. No. Name of the Name of Period to Amount Remarks
unit/formation the Party which the
from amount
whom due relates
1 2 3 4 5 6

Total Amount

235
 ANNEXURE ‘G’
(Referred to in Note 2 to Para 412)
Statement showing items of expenditure exceeding Rs. 5,00,000 in
each case which were included in Annex ‘I’ to CGDA’s certificate in
Appropriation Accounts (Defence Services) for previous years and
which are still awaiting regularization
Sl. No. Year to which Serial No. Present Amount Remarks
the of position of the
Appropriation Annexure case and
Accounts ‘I’ action taken
pertain to expedite
regularization
1 2 3 4 5 6

Total Amount

236
 ANNEXURE ‘H’
(Referred to in Note 2 to Para 412)
Statement showing details of losses awaiting regularization by Govt.
of India and Ministry of Defence under delegated powers are
outstanding for more than a year
Sl. No. Name of No. & date Amount Particulars Present Remarks
the Unit of Loss of loss position
statement
1 2 3 4 5 6 7

Total Amount

237
 ANNEXURE ‘I’
(Referred to in Para 435)
Statement of properties exceeding Rs. 1 Lakh in value transferred to
Non-Government Organisation during the year
Details of Book To whom Purpose of Authority Remarks
property value transfer transfer covering
transferred the
transfer
1 2 3 4 5 6

238
 CHAPTER 19

REPORT OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA,

UNION GOVERNMENT (DEFENCE SERVICES)
Para
Report of the Comptroller and Auditor General of India, Union 454
Government (Defence Services) Draft paragraphs 449
Action on the report of the Public Accounts Committee 454

Report of the Comptroller and Auditor General of India, Union

Government (Defence Services)
445. The results of test audit conducted by the Director General of Audit
Defence Services and their staff as also the result of internal audit conducted
by the Defence Accounts Department, where he so thinks necessary, are
included by the DGADS in an Annual Audit Report entitled “Report of the
Comptroller and Auditor General of India for the year 20____to 20____ Union
Government (Defence Services)”. This report contains such comments on the
regularity and propriety of expenditure as are deemed necessary and proper
to make as a result of audit investigations, including the examination of audit
of accounts of receipts and of stores and stocks maintained by units and
formations of Defence Services. The report, in addition contains general
remarks regarding financial administration, topics of special interest,
important or typical financial irregularities, losses, etc., and general defect in
administration of discipline, of which the case of irregularity seem to afford
substantial evidence, any neglect of recommendations of the Public Accounts
Committee which have been accepted by the Government and any new
remedy, general or particular, which the DGADS considers it desirable to
suggest.
Comments which the DGADS desires to make upon the results of the
audit of Trading and Profit and Loss Accounts, Balance Sheet etc., of
Commercial or quasi-commercial concerns of the Defence Services are also
included in the aforesaid report of the Comptroller and Auditor General of
India Union Government (Defence Services).

446. The report of the Comptroller and Auditor General of India is designed
to serve a double purpose. To the Government of India, the report will show
the extent to which the Defence Services are complying with its rules and

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orders and will often suggest direction, in which these rules and orders can
with advantage be amplified or modified or improved. To the Parliament
through its Public Accounts Committee, it will reveal in general how far the
Government has complied with its expressed views in matters of importance,
and in particular how far money placed at the disposal of Government were
regularly and properly spent. In order to fulfill the latter function adequately,
the report, in addition to the points arising out of audit against provision of
funds, brings to the notice of the parliament (i) important financial
irregularities, such as deficiencies of sanction, failure to enforce or respect
prescribed rules and procedure, offences against universally accepted
standards of official conduct or financial administration or any other class of
irregularity, and (ii) cases of losses written off or nugatory expenditure.

447. The report of the Comptroller and Auditor General of India, Union
Government (Defence Services) contains not only the cases of financial
irregularities discovered during test audit by the audit department Defence
Services, but also cases which come to notice from other sources as well such
as (a) sanctions of the Government of India (b) reports of important cases of
irregularities detected in internal audit by the Defence Accounts Department
and (c) the comments of the Principal Director of Audit, Indian Accounts in
the United Kingdom.

448. The action to be taken by Principal Controllers/Controllers of Defence

Accounts on Draft Paragraphs proposed for inclusion in the report of the
Comptroller and Auditor General of India is indicated below:

Draft Paragraph
449. The draft paragraphs proposed for inclusion in the Report of the
comptroller and Auditor General of India are sent by the Principal Director
/Director /Joint/Deputy /Assistant Director, AO Defence Services to the
Principal Controllers/Controllers concerned for verification of facts. The
Principal Controller/Controller should return the draft para within six weeks of
its receipt as far as possible. On receipt of the remarks of the Principal
Controller/Controller, the former will amend the draft paragraph, if necessary,
and send it to the DGADS for further action. After the Director General of
Audit, Defence Services has accepted the draft paragraph, he/she will send

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three copies thereof (six copies in case of paragraphs pertaining to the
Department of Defence Production) to the Ministry of Defence and one copy
of the draft paragraph to the branch concerned of the Services Headquarters
for advance information and to enable the branch concerned to collect
material to ensure quick examination and disposal of the Draft Paragraph.
The Ministry of Defence will before according their final concurrence, refer the
file to the branch concerned who will after recording its remarks, return the
file to that Ministry through the DFA concerned. The CGDA will also be
consulted in cases involving accounting matters of Defence Accounts
Department. The DGADS will be informed of the acceptance of the Para by
Ministry of Defence through a self contained note and the file passed to DFA
(B) for record.
Principal Controllers/Controllers will invariably bring to the notice of the
local administrative authorities and discuss with them all Draft Paras
proposed by the audit authorities. A copy of each of the Draft Paras as finally
concurred in by the Principal Controller/Controller will also be furnished to the
administrative authorities concerned.

450. As the Draft Paragraphs, by inclusion in the report of the Comptroller

and Auditor General of India, Union Government (Defence Services) will
ultimately come before the Public Accounts Committee, they should receive in
Principal Controllers'/Controllers' Office the most careful attention at the
highest level possible. The draft paragraphs received from the local
representative of the DGADS will invariably be brought to the notice of the
Command Headquarter simultaneously endorsing a copy thereof to the local
administrative authorities concerned. The lower formation will however,
furnish their replies/necessary details to Command Headquarters/LAO
concerned who in turn will forward the same to PCDAs/CDAs with their
comments. Principal Controllers/Controllers may allow the Command
Headquarters a period of 30 days for furnishing the final replies thereto. In
important cases, the matter should be discussed by the Principal
Controller/Controller with the administrative authorities before the draft
paragraphs are concurred in. Normally no Draft Para should be concurred in
without the personal knowledge of the Principal Controller/Controller.

241
451. In order to ensure that the office of the CGDA gets all the necessary
information in time and is fully posted with complete details of the case to
deal with the Draft Paras when subsequently referred to them, the Principal
Controllers/Controllers should endorse to the CGDA a copy of each draft para
after it has been concurred in by them and returned to the PDA/DA/Jt. DA/
DDA/ADA/AODS concerned. The advance copy of the draft para should be
accompanied by a brief and self contained explanatory note on the
circumstances of the case indicating, inter alia:-
(a) Whether the irregularity was discovered in internal audit or by the test
audit staff. If not detected by the Defence Accounts Department, brief
reasons thereof should be furnished;
(b) If the items was discovered in internal audit, whether it was reported
to the administrative authorities, and if so, with what result; and
(c) Whether the draft paragraphs were brought to the notice of the
administrative authorities; where the draft paras were discussed with those
authorities a gist of the discussion should be supplied.

452. The Principal Controllers/Controllers should examine the Draft Paras

with a view to ascertaining whether any failure to detect the irregularity, or to
take proper and prompt action after detection, can be attributed to the
Defence Accounts Department. The Principal Controller's/Controller’s opinion
on this point should be expressed in the explanatory note to the CGDA.
Information regarding the period to which the irregularity pertains, when it
was detected in internal audit, when it was reported to the higher authorities
and the result of this reference, the extent and nature of failure on the part of
the executive , details of disciplinary and remedial measures taken if any etc.,
which will be helpful in assessing the extent to which the Defence Accounts
Department could be held responsible for failure, should invariably be
furnished to the CGDA in the explanatory note. In cases where failure can be
attributed to the Defence Accounts Department, the Principal
Controllers/Controllers should indicate clearly the responsibility of the
individuals concerned and the disciplinary action taken or proposed to be
taken against them.

453. After taking into consideration the facts communicated by Principal

Controller/Controller and other factors known to them, the CGDA will suitably

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endorse the file containing the draft paragraphs proposed by the DGADS for
inclusion in the report of the Comptroller and Auditor General of India. Union
Government (Defence Services) when such cases are referred to him.

Action on the Report of Public Accounts Committee

454. The report of the Public Accounts Committee is submitted to the
Government of India, who consider its recommendations arising out of the
report of the Comptroller and Auditor General of India. The orders passed by
the government on the recommendations of the Public Accounts committee
affecting the Defence Services, will be communicated to Principal
Controllers/Controllers, in due course, by the CGDA with any supplementary
instructions considered necessary.

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 CHAPTER 20

GOVERNMENT e- MARKET PLACE

Para
a) Objectives 455
b) Rule Position as per GFR 2017 456
c) GeM Portal 457
i) Buyer
ii) Seller
d) Offer of Goods / Services on GeM by Seller 458
e) Contract (s) 459
f) Prices 460
g) Performance Security and Performance 461
h) Octroi Duty and / or other local taxes. 462
i) Integrity Pact. 463
j) Guarantee / Warranty 464
k) Purchaser’s / Consignee’s Right of Inspection for 465
Acceptance / Rejection (Return Policy)
l) Payment Terms 466
m) Resolution of Disputes 467
n) Extension of Delivery Period. 468
o) Liquidated Damages. 469
p) Closure of Transaction 470
q) Mandatory Minimum discount on MRP 471
r) Reverse Auction / e-bidding. 472

Objectives :

455. i) Government e-Market place (GeM) is the national public

procurement portal for providing procurement of goods and services required
by Central and State Government organisations. GeM provides online, end to
end solution for procurement of commonly used goods and services for all
Central Government and State Government Ministries, Departments, Public
Sector Units (PSUs) and affiliated bodies. It provides a complete end-to-end
contactless, cashless and paperless procurement system and covers the
entire procurement process right from vendor registration to order fulfillment
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and payment. The platform reduces manual process inefficiency and human
interventions in the procurement and enables increased coverage, access and
efficiency of faceless standardized public procurement.

ii) GeM aims to enhance transparency, efficiency and speed in public

procurement. It provides the tools of e-bidding, reverse e-auction and
demand aggregation to facilitate the government users, achieve the best
value for their money.

Rule Position As Per GFR 2017 :

456. Rule 149 Government E-Marketplace (GeM): Government of India has
established the Government e-Marketplace (GeM) for common use Goods And
Services. GeM SPV will ensure adequate publicity including periodic
advertisement of the items to be procured through GeM for the prospective
Suppliers. The procurement of Goods and Services by Ministries or
Departments will be mandatory for Goods or Services available on GeM. The
credentials of Suppliers on GeM shall be certified by GeM SPV. The procuring
authorities will certify the reasonability of rates. The GeM portal shall be
utilized by the Government buyers for direct online purchases as under:

I. Up to Rs.25.000 through any of the available Suppliers on the

GeM, meeting the requisite quality, specification and delivery
period.
II. Above Rs.25,000 and up to Rs.5,00,000 through the GeM seller
having lowest price amongst the available sellers (excluding
automobiles where current limit of Rs.30 lakh will continue), of at
least three different manufacturers, on GeM, meeting the requisite
quality, specification and delivery period. The tools for online
bidding and online reverse auction available on GeM can be used by
the Buyers even for procurements less than Rs 5,00,000.
III. Above Rs, 5,00,000 through the Supplier having lowest price
meeting the requisite quality, specification and delivery period after
mandatorily obtaining bids, using online bidding or reverse auction
tool provided on GeM (excluding Automobiles where current limit of
Rs.30 lakh will continue).

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IV. The invitation for the online e-bidding/reverse auction will be
available to all the existing Sellers or other Sellers registered on the
portal and who have offered their goods/services under the
particular product/service category, as per terms and conditions of
GeM.
V. The above mentioned monetary ceiling is applicable only for
purchases made through GeM. For purchases, if any, outside GeM,
relevant GFR Rules shall apply.
VI The Ministries/Departments shall work out their procurement
requirements of Goods and Services on either “OPEX” model or
“CAPEX” model as per their requirement/ suitability at the time of
preparation of Budget Estimates (BE) and shall project their Annual
Procurement Plan of goods and services on GeM portal within 30
days of Budget approval.
VI. The Government Buyers may ascertain the reasonableness of
prices before placement of order using the Business Analytics (BA)
tools available on GeM including the Last Purchase Price on GeM,
Department’s own Last Purchase Price etc.
VII. A demand for goods shall not be divided into small quantities to
make piecemeal purchases to avoid procurement through L-1
Buying / bidding / reverse auction on GeM or the necessity of
obtaining the sanction of higher authorities required with reference
to the estimated value of the total demand.

GeM Portal
457. The ‘GeM’ i.e. Government-e-Marketplace is for the government users
to cater to their demand of commonly required Goods and Services.

BUYER(S) : Buyer is the Contract placing authority, which includes

Central / State Government Ministries / Departments including its attached /
subordinate offices, Central / State Public Sector Units (PSUs) and
Autonomous Bodies acting through its authorized Officers for and on behalf of
President of India / Governor of the State / PSU / Autonomous Bodies as the
case may be, for purchase of Goods / Services offered by “Seller(s)”.

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SELLER(S) : “Seller(s)“ is the firm(s) a proprietorship/partnership
firm/Limited Liability Partnership/Private Limited/Limited company/Society
registered under Society ’s Act that offers its Good(s)/Service(s) on GeM and
agree to accept the contract placed by “Buyer(s)“ for supply of the
Good(s)/Service(s) as per the terms and conditions of GeM.

The “Seller(s)“ on GeM will be the OEMs (Original Equipment Manufacturers)

and/or their authorized channel partner(s)/ resellers (having any general
authorization / dealership of the OEM to sell their product in open market)
and e- Marketplaces. At the time of offering products/already offered
products under various product categories on GeM portal, if required the
Seller would be liable for strict administrative actions such as
suspension/debarment/removal from GeM in addition to the grounds already
stipulated under Clause 22 of the General Terms and Conditions of Sale /
Purchase of Goods and Services in Government e-Marketplace (GeM), if

 Listing of the products is done on GeM portal without having genuine

authorization with specific validity date from OEM,
 Listing of the products is done in irrelevant/inappropriate categories
and/or with vague/conflicting product specifications/details/irrelevant
product photographs, etc.
 Refurbished or counterfeited products are supplied
 The individual(s) registering on GeM and/or offering or buying
Goods/Services and/or participating in e-bidding/reverse auction on
GeM, must ensure that they have the requisite authorization to enter
into contract with Buyer(s)/Seller(s) in GeM for and on behalf of the
concerned legal entity, failing which such individual(s) shall be
individually liable for its actions and also for any liability arising out of
such actions. If any firm has been de-registered or debarred from
business dealings with GeM SPV then such firm or their agent/partner
shall not be permitted to register and offer/sell their products on GeM
in terms of GeM SPV Circular No.112 dated 19-09-2016.

Offer of Goods / Services on GeM by Seller :

458. (a) The seller shall offer their Goods/Services indicating
specifications, prices in Indian Rupees, and quantity which can be
supplied over the specified time period, Warranty/Guaranty, validity etc
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 as per template prescribed in GeM. Seller would ensure that the
Goods/Services offered are latest, new and complete in all respects.
The same can be modified at any point of time until it has been
accepted by the Buyer by awarding the Contract. Buyer is required to
come to GeM for ordering the Goods/Services with prior sanction and
approval of competent authorities required for award of Contract to the
seller(s). Seller can offer any number of products. However, it will be
the sole responsibility of the seller to satisfy themselves regarding
possessing the requisites for doing business for the offered product(s).
The authorized channel partner(s)/ resellers can offer products of only
one OEM in a particular product category.
(b) By offering any product on GeM, indicating particular
specifications, Seller guarantees that the offered product/model is
compliant with the specifications and any deviation in the supplied
product from the offered product shall make them liable for removal of
their registration with GeM as deemed fit.
(c) It is the seller’s responsibility to keep all their information
furnished at the time of their registration on GeM updated with the
latest change(s), if any within 7 days of such occurrence. Any change
regarding the offered products and their parameters must be updated
by Seller on GeM immediately i.e. not later than 24 Hours of such
change. Any non compliance of the aforesaid time line for updating
information on GeM shall be treated as concealment of facts and such
act shall make the Seller liable for administrative action such as
removal/debarment/suspension of their registration with GeM, as
considered appropriate.

Contract (s)
459. (a) Buyer shall award the on-line Contract(s) in the GeM after due
diligence to meet their requirements including the requisite
specification and delivery period. The Buyer shall satisfy himself that
the price of the selected offer is reasonable. In case of Services, the
agreed SLA (Service Level Agreement) would also constitute the
integral part of the Contract(s). For award of Contract(s), Buyer is at
liberty to utilize all the data/information and tools made available in
the GeM including e-bidding and reverse e-auction. On award of the

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 Contract(s), it would be construed that the Buyer has obtained all
necessary Administrative & Financial sanctions of the competent
authority and adequate funds are available indicating the relevant Head
of accounts in the awarded Contract(s). These Contract(s) in the GeM
shall be governed as per terms and conditions specified in this
document.
(b) Contracts placed on GeM through e-bidding and Reverse Auction
shall also be governed by the special terms and conditions as given in
Annexure 1 and Annexure 2 respectively in addition to these General
Terms and Conditions of Sale / Purchase of Goods and Services in
Government e-Marketplace (GeM) .

Prices :
460. (a) The prices of the offered Goods/Services shall be firm and fixed
at any point of time and shall be indicated in INR for each accounting
unit. The Seller can choose to offer Goods/Services on all India basis or
for specified locations at District level across India. The Seller may
choose to offer Good(s) with uniform all inclusive unit price for
deliveries at locations across India, or he may choose to quote one unit
price inclusive of all taxes and duties with additional delivery charge(s)
payable extra for delivery at the specified district(s). Accordingly, the
price of Goods/Services ordered shall be inclusive of all taxes and
duties and the location specific delivery charges (if applicable) and the
same shall be indicated in the contract. As such, for supply of Goods
contract, no additional charges such as local
levies/transportation/loading unloading charges etc., shall be payable
over and above the contract price. The offered prices in the GeM shall
in no case exceed Maximum Retail Price (MRP) and/or those
concurrently offered by the Seller elsewhere including any e-commerce
sites. In case any such infringement by Seller is noticed, the Seller
shall be liable to be removed/debarred or suspended from the GeM.
(b) The Seller agrees for sharing of the offered Product/Service price
details as well as the Maximum Retail Price (MRP) by GeM authorities
with Department of Excise & Customs, Income tax, GST etc.

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Performance Security and Performance :
461. (a) There shall be no Performance Security /Performance Bank
Guarantee (PBG) requirement for contracts placed under Direct
Purchase Option on GeM.
(b) For procurement through reverse Auction/e-bidding, Security
Deposit / Performance Bank Guarantee (PBG) @2% of contract value,
shall be applicable in respect of contracts valuing above Rs. 25 Lakh,
as per special terms and conditions applicable for e-bidding /Reverse
Auction (RA).
(c) Such Performance Bank Guarantee from a scheduled commercial
bank must be submitted by seller to the Buyer within 15 days of award
of contract and shall be in the format provided on GeM. Payments
against such contract shall not be released till acceptable Performance
Bank Guarantee is furnished by the seller.
(d) There shall be no Performance security / PBG requirement for
contracts placed against the seller Energy Efficiency Services Limited
(EESL) under Direct Purchase/e-bidding/Reverse Auction option on
GeM, since such contracts shall be governed by MoU/ Agreement
signed between EESL and GeM SPV (Special Purpose Vehicle).

Octroi Duty and/or other local taxes:

462. The Seller shall have discretion to offer Goods/Services for the select
consignee location(s) in the country and they are expected to account for all
local taxes (such as levy of town duty, Octroi Duty, Terminal Tax and other
levies of local bodies etc.) also while quoting the price for the listed
Goods/Services and as such no reimbursement over and above the contract
price(s) shall be allowed to Seller towards payment of such taxes.

Integrity Pact:
463. All the users in GeM i.e. Seller as well as Buyer agree not to exercise
any corrupt influence on any aspect of contract and commit to take all
measures necessary to prevent corruption maintaining complete transparency
and fairness in all activities related to GeM.

Guarantee / Warranty :
464. All Products supplied under the Contract(s) shall have
Guarantee/Warranty for ONE year period from the date of receipt. Seller at

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the time of listing /offering their products may choose to provide longer
guarantee period (i.e. more than 1 year)

Purchaser’s / Consignee’s Right of Inspection for Acceptance /

Rejection (Return Policy)

465. (a) The Goods delivered shall bear the self certified
Manufacturers/Sellers Warranty/Guaranty (applicable for Goods).
Buyer / Consignee shall have the right to inspect the supplied Goods
themselves and/or through its appointed agency at consignees own
cost, at Consignees site(s) on receipt and accept or reject on proper
justification any consignment of the Goods received within a period of
10 days of receipt.
(b) In case of Services contract, the Buyer reserves right to reject
the same in conformance with the terms and conditions of the agreed
Service Level Agreement (SLA). However, such right to reject services
offered by the Seller under the contract shall be exercised by the Buyer
within 10 days of the date of receipt of the Service as defined below.
(c) Consignee will accordingly issue on line Consignees Receipt
cum Acceptance Certificate, which will form the basis of Payments
to the Seller.
(d) The date of receipt for the aforesaid purpose shall be reckoned
from the date of receipt of the Goods as notified in the Provisional
Receipt Certificate (PRC) which will be issued online by consignee
immediately after receipt of Goods. However, in case of GeM contracts
for Services, the date & time of start and completion of the Service,
shall be indicated by the Seller while raising online invoice for a
specified period of Service as per Service Level Agreement (SLA). The
date of such invoice or the date of completion of the service whichever
is later shall be reckoned as date of receipt of the Service and thereby
the period of 10 days for issuance of CRAC shall be counted from the
aforesaid date. In case such Certificates are not issued within 10 days
of receipt, the concerned Goods/ Services will be considered as
deemed accepted and the concerned Consignee shall forfeit their right
to reject the same.
(e) No payment shall be made for rejected goods / services, if any,
and the Seller would be liable to remove/lift back such rejected Goods
within 10 days without any extra charge/cost to the Buyer / Consignee
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Payment Terms :

466. Payment shall be made in INR as per following terms by the Pay &
Accounts Officer of the Buyer to be stipulated in the Contract against the on-
line bills to be submitted by the Seller:
For Goods :In case of goods, 100% payment will be released within ten (10)
days of issue of consignee receipt-cum-acceptance certificate and submission
of bills.
For Services: In case of services, 100% payments on the basis of monthly
bills will be paid within 10 days of submission of bills with prescribed
documents.

Resolution of disputes :

467. In the event of any question, dispute or difference arising under the
terms and conditions of the contract placed through GeM, the jurisdiction of
the same shall be at the place from where contract has been placed by the
Buyer and may be referred to the arbitration for which the arbitrator(s) for
adjudication of the matter shall be nominated by the Buyer. The arbitration in
the matters related to GeM shall be governed as per prevailing Indian
Arbitration and Conciliation Act 1996 and would be binding upon the Seller
and Buyer. In all such cases in the GeM, the dispute would not be referred or
entertained by Facilitation Council, Consumer Forum or any other
adjudication forum and GeM SPV would not be a party to any such
dispute/matter.

Extension of Delivery Period:

468. Buyer may, on the request of the Seller or otherwise, extend the
delivery date suitably subject to the following conditions:
a) The original Delivery Period may be re-fixed by the Buyer without any
Liquidated damages subject to Force Majeure conditions mentioned
below and also on the ground/reasons attributable to the Buyer.
b) For other cases, provided the price trend is not lower, the Delivery
Period may be suitably extended for which an amount equal to the
Liquidated Damages for the extended period(s) for delay in the supply
of the Goods/Services after the expiry of Contract delivery/re-fixed
period, shall be recovered from the Seller as mentioned hereinafter for
the extended period. No increase in price on any ground after the

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 original/re-fixed delivery date shall be admissible during such extended
period(s).

Liquidated Damages:
469. If the Seller fails to deliver any or all of the Goods/Services within the
original/re-fixed Delivery/Time period(s) specified in the Contract, the Buyer
will be also entitled to deduct/recover the Liquidated Damages for the delay,
unless covered under Force Majeure conditions aforesaid, @ 0.5% per week
or part of the week of delayed period as pre-estimated damages not
exceeding 5% of the contract value without any controversy/dispute of any
sort whatsoever.

Closure of Transaction:
470. After satisfactory completion of all the obligations under the Contract,
and after release of payments for the goods / services, the transaction shall
be treated as closed.
Mandatory Minimum Discount on MRP :

471. Sellers shall offer minimum discount of 10% over MRP mandatorily
unless otherwise specified for offering their products on GeM portal. The
discount of 10% over MRP is the Minimum discount and sellers are free to
offer higher discount on GeM. In case offered discount is less than 10% , GeM
Portal will not allow the seller to list the products.

Reverse Auction / e-bidding.

472. A reverse auction is a type of auction in which sellers bid for the prices
at which they are willing to sell their goods and services. In a regular auction,
a seller puts up an item and buyers place bids until the close of the auction,
at which time the item goes to the highest bidder. In a reverse auction, the
buyer puts up a request for a required good or service. Sellers then place bids
for the amount they are willing to be paid for the good or service, and at the
end of the auction the seller with the lowest amount wins.
It is important to note that the reverse auction does not work for every good
or service. Goods and services that can be provided by only a few sellers are
not necessarily ideal for reverse auctions. In other words, a reverse auction

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works only when there are many sellers who offer similar goods and services
to ensure the integrity of a competitive process.

254
 CHAPTER 21
GOODS AND SERVICE TAX
Para
a) Objectives 473
b) GST Primary objectives 474
c) Meaning of Goods 475
d) Definition of GST 476
e) Salient Features of GST 477
f) Subsuming of Taxes / Existing Taxes 477 A
g) Types of GST 478
h) Why the split into CGST, SGST, and IGST? 479
i) Opening of Category prefix code in CHB 480
j) TDS under GST 481
(i) What is TDS? 481
(ii) Concept 482
(iii) Effective Date 483
(iv) Who could be liable to deduct TDS under GST Law? 484
(v) When will the liability to deduct TDS be attracted?
What is the rate of TDS? 485
(vi) Conditions for & amount of deduction: 486
(vii) When tax deduction is not required to be made under GST 487
(viii) Rate of deduction of tax 488

k) What are the registration requirements for TDS deductors? 489

l) When and to whom should the TDS be paid? 490
m) TDS return 491
n) TDS return submission procedure 492
o) What is the benefit of TDS to the deductee (Supplier)? 493
p) Late fee, interest and penalty. 494
q) How will the Value of supply on which TDS shall be
deducted be considered? 495
r) How is Refund of TDS possible under GST? 496
s) Applicability of GSTR 7 and GSTR 7A in DAD 497
t) Guidelines for Deductions and Deposit of TDS by the 498
DDO under GST
u) Procedure 499

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Objectives of GST :
473. The Goods and Services Tax which is being implemented from
1st July, 2017 is proposed to be a unified tax for the entire nation. The
intended objective of GST 2017 is to replace a lot of other indirect and
direct taxes like the VAT, service tax, luxury tax etc. GST is aimed at
being comprehensive with most of the goods and services included in
the GST bill. Alcohol and petrol are exempted from GST.
The goods and services tax (GST) is a value-added tax levied
on most goods and services sold for domestic consumption. The GST
is paid by consumers, but it is remitted to the government by the
businesses selling the goods and services.

474. GST Primary objectives:

1. Ensuring that the cascading effect of tax on tax will be
eliminated.
2. Improving the competitiveness of the original goods and
services, thereby improving the GDP rate too.
3. Ensuring the availability of input credit across the value chain.
4. Reducing the complications in tax administration and compliance.
5. Making a unified law involving all the tax bases, laws and
administration procedures across the country.
6. Decreasing the unhealthy competition among the states due to
taxes and revenues.
7. Reducing the tax slab rates to avoid further clarification issues.
8. One Nation, One Market, One Tax
9. Uniform prices of Goods & Services
10. Increase Tax Collection
11. Simplifying Indirect Tax Compliance
12. Fast movement of goods

India has launched the GST on July 1, 2017, implemented in five different
tax rates.

 A 0% tax rate applied to certain foods, books, newspapers,

homespun cotton cloth and hotel services under Rs. 1000.
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  A rate of 0.25% applied to rough industrial diamonds.
 A 5% tax rate applied to apparel below Rs. 1000, packaged food
items, footwear under Rs. 500, etc.
 A 12% tax rate applied to apparel over Rs. 1000, frozen meats,
cutlery, sugar, bio-diesel, etc.
 An 18% tax rate applied to certain luxury items including
makeup, pastries, swimming pools, footwear costing more than
Rs. 500, etc.
 The final bracket, taxing goods at 28%, applied to 50 luxury
products including sunscreen, ceramic tiles, bidis (Indian
cigarettes), cars, motorcycles, etc.

MEANING OF GOODS
475. Section 2(52) of GST Act. “Goods'' means every kind of
movable property other than money and securities but includes
actionable claims ,growing crops, grass and things attached to or
forming part of the land which are agreed to be severed before supply
or under a contract of supply.

DEFINITION OF GST
476. Goods and services tax (GST) is a tax on goods and services with
value addition at each stage having comprehensive and continuous
chain of set of benefits from the producer’s/ service provider’s point up
to three tiers level where only the final consumers should bear the tax.

SALIENT FEATURES OF GST

477. 1.Dual GST Model
2. Destination based consumption tax
3. Taxes to be subsumed
Central tax-Central Excise Duty
Service tax
Surcharges and cess
State tax
VAT
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 Entertainment Tax
Luxury tax
Taxes on lottery, betting
Octroi
Entry tax
4. GST on Export and Import
5. Computation of GST on the basis of invoice credit method
6. Payment of GST-CGST/ SGST/UTGST are paid through GST

SUBSUMING OF TAXES / EXISTING TAXES.

477 A.
GST
CENTRAL GST STATE GST
It will be subsume the following It will be subsume the following
tax. tax.
Central Excise Duty VAT / Sales Tax
Additional Excise Duty Purchase Tax
Service Tax Entertainment Tax
Additional Duty of Customs Luxury Tax
(ADC)
Surcharge Education and Lottery Tax
Secondary / Higher Secondary
Cess
State Surcharge & cesses leviable
on the above as of now.

Types of GST :
478. GST stands for Goods and Services Tax. It is classified into three
types:
1. CGST : Central Goods and Service Tax.
Under GST, CGST is a tax levied on Intra State supplies of both
goods and services by the Central Government and will be governed by

258
the CGST Act. SGST/UTGST will also be levied on the same Intra State
supply but will be governed by the State Government/UT Goverment.
This implies that both the Central and the State governments will
agree on combining their levies with an appropriate proportion for
revenue sharing between them. However, it is clearly mentioned in
Section 8 of the GST Act that the taxes be levied on all Intra-State
supplies of goods and/or services but the rate of tax shall not be
exceeding 14%, each.
2. SGST/UTGST: State Goods and Service Tax.
Under GST, SGST/UTGST is a tax levied on Intra State supplies
of both goods and services by the State Government/UT Government
and will be governed by the SGST/UTGST Act. As explained above,
CGST will also be levied on the same Intra State supply but will be governed
by the Central Government.
 Intra-State supply of goods or services is when the location of the
supplier and the place of supply i.e., location of the buyer are in the
same state. In Intra-State transactions, a seller has to collect both
CGST and SGST/UTGST from the buyer. The CGST gets deposited with
Central Government and SGST/UTGST gets deposited with State
Government.
3. IGST : Integrated Goods and Service Tax.
Inter-State supply of goods or services is when the location of the
supplier and the place of supply are in different states. Also, in cases of
export or import of goods or services or when the supply of goods or services
is made to or by a Special Economic Zone (SEZ) unit, the transaction is
assumed to be Inter-State. In an Inter-State transaction, a seller has to
collect IGST from the buyer.
Under GST, IGST is a tax levied on all Inter-State supplies of goods
and/or services and will be governed by the IGST Act. IGST will be applicable
on any supply of goods and/or services in both cases of import into India and
export from India.

Why the split into SGST/UTGST, CGST, and IGST?

479. India is a federal country where both the Centre and the States have
been assigned the powers to levy and collect taxes. Both the Governments

259
have distinct responsibilities to perform, as per the Constitution, for which
they need to raise tax revenue.
The Centre and States are simultaneously levying GST.
The three types tax structure is implemented to help taxpayers take
the credit against each other, thus ensuring “One Nation, One Tax”.

Opening of Category prefix code in CHB for implementation of GST in

respect of all the services :
480. Consequent upon implementation of GST wef 01/07/2017, following
four categories prefix against the relevant code heads mentioned in CHB-
2014 to identify the expenditure compiled on account of payment of different
elements of GST for all the services are to be used :

25 = IGST
26 = IGST (Import)
27 = CGST
28 = SGST / UTGST
These categories have been implemented wef 01/07/2017.

TDS UNDER GST :

481. What is TDS?
Tax Deducted at Source (TDS) is one of the ways to collect tax based on
certain percentages on the amount payable by the receiver on
goods/services. The collected tax is a revenue for the government.

Concept :
482. The concept of Tax Deduction at Source (TDS) was there in the
erstwhile VAT Laws. GST Law also mandates Tax Deduction at Source
(TDS)vide Section 51 of the CGST/SGST Act 2017,Section 20 of the IGST Act,
2017and Section 21 of the UTGST Act,2017. GST Council in its 28th meeting
held on 21.07.2018 recommended the introduction of TDS from 01.10.2018.

Effective Date:
483. TDS provision has been made operative with effect from 01.10.2018
vide CBIC Notification No.50/2018-Central Tax dated 13.09.2018. Similar
notifications have been issued by respective State Governments.

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Who could be liable to deduct TDS under GST law?
484. Following would be the deductors of tax in GST under section 51of the
CGST Act, 2017 read with notification No. 33/2017-Central Tax dated
15.09.2017.
A department or an establishment of the Central Government or State
Government; or
 Local authority; or
 Governmental agencies; or
 Such persons or category of persons as may be notified by the
Government.
As per the latest Notification dated 13th September 2018, the following
entities also need to deduct TDS-
 An authority or a board or any other body which has been set up by
Parliament or a State Legislature or by a government, with 51% equity
( control) owned by the government.
 A society established by the Central or any State Government or a
Local Authority and the society is registered under the Societies
Registration Act, 1860.
 Public sector undertakings.

When will the liability to deduct TDS be attracted? What is the rate of
TDS?
485. Tax is required to be deducted from the payment made / credited to a
supplier, if the total value of supply under a contract in respect of supply of
taxable goods or services or both, exceeds Rs. 2,50,000/-(Rupees two lakh
and fifty thousand).This value shall exclude the taxes leviable under GST (i.e.
‘Central tax’, ‘State tax’, ‘UT tax’, ‘Integrated tax’ & Cess).

Conditions for & amount of deduction:

486. Tax deduction is required if all the following conditions are satisfied
a. Total value of taxable supply > Rs.2.5 Lakh under a single
contract. This value shall exclude taxes & cess leviable under GST.
b. If the contract is made for both taxable supply and exempted
supply, deduction will be made if the total value of taxable supply in
the contract > Rs.2.5Lakh.This value shall exclude taxes & cess
leviable under GST.

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 c. Where the location of the supplier and the place of supply are in
the same State/UT, it is an intra-State supply and TDS @ 1% each
under CGST Act and SGST/UTGST Act is to be deducted if the deductor
is registered in that State or Union territory without legislature.
d. Where the location of the supplier is in State A and the place of
supply is in State or Union territory without legislature-B, it is an inter-
State supply and TDS @ 2% under IGST Act is to be deducted if the
deductor is registered in State or Union territory without legislature -B.
e. Where the location of the supplier is in State A and the place of
supply is in State or Union territory without legislature B, it is an inter-
State supply and TDS @ 2% under IGST Act is to be deducted if the
deductor is registered in State A.
f. When advance is paid to a supplier on or after 01.10.2018 for
supply of taxable goods or services or both.

When tax deduction is not required to be made under GST:

487. Tax deduction is not required in following situations:
a) Total value of taxable supply ≤ Rs.2.5 Lakh under a contract.
b) Contract value > Rs.2.5 Lakh for both taxable supply and
exempted supply, but the value of taxable supply under the said
contract ≤ Rs.2.5 Lakh.
c) Receipt of services which are exempted. For example services
exempted under notification No.12/2017 –Central Tax (Rate)
dated 28.06.2017 as amended from time to time.
d) Receipt of goods which are exempted. For example goods
exempted under notification No.2/2017 –Central Tax (Rate)
dated 28.06.2017 as amended from time to time.
e) Goods on which GST is not leviable. For example petrol, diesel,
petroleum crude, natural gas, aviation turbine fuel (ATF) and
alcohol for human consumption.
f) Where a supplier had issued an invoice for any sale of goods in
respect of which tax was required to be deducted at source
under the VAT Law before 01.07.2017, but where payment for
such sale is made on or after 01.07.2017 [Section 142(13
refers].

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 g) Where the location of the supplier and place of supply is in a
State(s)/UT(s) which is different from the State / UT where the
deductor is registered.
h) All activities or transactions specified in Schedule III of the
CGST/SGST/UTGST Acts 2017, irrespective of the value.
i) Where the payment relates to a tax invoice that has been issued
before 01.10.2018.
j) Where any amount was paid in advance prior to 01.10.2018 and
the tax invoice has been issued on or after 01.10.18, to the
extent of advance payment made before 01.10.2018.
k) Where the tax is to be paid on reverse charge by the recipient
i.e. the deductee.
l) Where the payment is made to an unregistered supplier.
m) Where the payment relates to “Cess” component.
n) No deduction of Tax is required when the location of supplier and
place of supply is different from the State of the registration of
the recipient.

Rate of deduction of tax:

488. There are 4 types of taxes in GST –
Integrated Tax(IGST), Central Tax(CGST) and State Tax(SGST)/ Union
territory Tax (UTGST).
The deduction in case of intra-State supply (supply within a State) will
be CGST & SGST (in case of Union territory without legislature, it will
be CGST & UTGST), and the deduction in case of inter-State supply
(supply from one State to another) will be IGST. Rate of such
deduction is @ 2% [i.e. 1% each on CGST & SGST/UTGST component]
on the amount paid/credited in respect of intra-State supply &@ 2%
[as IGST] on the amount paid/credited in respect of inter-State supply

What are the registration requirements for TDS deductors?

489. A person who is liable to deduct TDS has to compulsorily register and
there is no threshold limit for this. The registration under GST can be
obtained without PAN and by using the existing Tax Deduction and Collection
Account Number (TAN) issued under the Income Tax Act. Thus it can be said
having TAN is mandatory.

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When and to whom should the TDS be paid?
490. TDS shall be paid within 10 days from the end of the month in which
tax is deducted. The payment shall be made to the appropriate government
which means:
 The Central Government in case of the IGST and the CGST.
 The State government in case of the SGST.

TDS return:
491. The filing the TDS Return in FORM GSTR-7can be done both through
the online mode in the GST portal as well as by using the offline tool.

TDS return submission procedure :

492. In the offline method, the deductor would be required to fill up the
designated .xls file and upload the said file with signature validation.
Every registered TDS deductor is required to file a Return in
FORMGSTR 7 electronically within 10th of the month succeeding the month in
which deductions have been made to avoid payment of any late fee,
interest.[Section 39(3) of the CGST Act, 2017 read with Rule 66 of the CGST
Rules, 2017refers]
Tax deposited by challan would get credited in the electronic cash
ledger of the deductor. The liability of a deductor in FORMGSTR 7 has to be
paid by him by debiting his electronic cash ledger.
The deductor shall furnish to the deductee a system generated
certificate in FORMGSTR 7A mentioning therein the contract value, rate of
deduction, amount deducted, amount paid to the Government and other
related particulars. The said certificate is to be furnished within five days of
crediting the amount so deducted to the Government i.e. within five days of
furnishing return in FORMGSTR-7.
The entire exercise has to be completed through www.gst.gov.in.
The deductee (i.e. the supplier) shall claim the credit of such deduction
in his electronic cash ledger.

What is the benefit of TDS to the deductee (Supplier)?

493. As stated above, there will an automatic reflection in the electronic
ledger of the deductee (supplier) once the deductor files his/her returns. The

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deductee can claim credit in his electronic cash ledger of this tax deducted
and use it for payments of other taxes.

Late fee, interest and penalty:

494. Provision for late fees for late filing of TDS Returns in GST
The provision of late Fees in respect of TDS in the GST is a two-layered
provision.
If the deductor fails to furnish the return in FORM GSTR-7(under
Section39 (3)) by the due date (i.e. within 10 days of the month succeeding
the month in which deduction was made) he shall pay a late fee of Rs. 100/-
per day under CGST Act & SGST/UTGST Act separately during which such
failure continues subject to a maximum amount of Rs. 5000/-each under
CGST Act & SGST/UTGST Act.
If any deductor fails to furnish the certificate of TDS deduction to the
deductee [i.e. the supplier] within 5 days of crediting the amount so deducted
to the Government(i.e. furnishing return in FORM GSTR-7), the deductor shall
pay a late fee of Rs. 100/-per day under CGST Act & SGST/UTGST Act
separately from the day after the expiry of five day period until the failure is
rectified, subject to a maximum amount of Rs.5000/-each under CGST Act &
SGST/UTGST Act.

How will the Value of supply on which TDS shall be deducted be

considered?
495. For purpose of deduction of TDS, the value of supply is to be taken as
the amount excluding the tax as indicated on the invoice. This means TDS
shall not be deducted on the CGST, SGST/UTGST or IGST component of
invoice.
For Example Supplier A makes a supply worth Rs. 5000 to B. The rate
of GST is 18%. When B pays A, He / She will pay Rs. 5000 (worth of Supply)
+ Rs 900 (GST) to A and Rs. 100 (RS. 5000*2%) as TDS to the government.
So it can be said that TDS is not deducted on the tax element (GST) of a
transaction.

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How is Refund of TDS possible under GST?
496. If any excess amount is deducted and paid to the government, a
refund can be claimed as this is not the tax amount that the government has
a right on.
However, if the deducted amount is already added to the electronic cash
ledger of the supplier, the amount so added cannot be got back as a refund
by the deductor. Deductee can claim a refund of tax subject to refund
provisions of the act. ( Proviso to Section 51(8)

APPLICABILITY OF GSTR-7 AND GSTR-7A IN THE DEFENCE ACCOUNTS

DEPARTMENT:
497. GSTR 7:
GSTR 7 is a Return needed to be filed by the persons who are required to
deduct Tax deducted at source (TDS) under GST. GSTR 7 Return contains
the details of TDS deducted, TDS liability payable and TDS refund claimed.
Deductor or GST practitioners can prepare their GSTR 7 details offline by
generating JSON file on GST Portal. The GSTR-7 form is a monthly return
form required to be furnished by all taxable persons who are required to
deduct TDS (Tax Deducted at Source) under GST.

GSTR 7-A:
The Form GSTR-7A is a system generated TDS Certificate that is generated
once the deductor furnishes a return in Form GSTR-7 on the GST Portal and
the deductee accepts the details that are uploaded on GST Portal. GST TDS
Certificate is available for both the Deductor and the Deductee.

Guidelines for Deductions and Deposit of TDS by the DDO under GST :
498.
1. Section 51 of the CGST Act 2017 provides for deduction of tax by the
Government Agencies (Deductor) or any other person to be notified in this
regard, from the payment made or credited to the supplier (Deductee) of
taxable goods or services or both, where the total value of such supply, under
a contract, exceeds two lakh and fifty thousand rupees. The amount deducted
as tax under this section shall be paid to the Government by deductor within
ten days after the end of the month in which such deduction is made

266
alongwith a return in FORM GSTR-7 giving the details of deductions and
deductees. Further, the deductor has to issue a certificate to the deductee
mentioning therein the contract value, rate of deduction, amount deducted
etc.
2. As per the Act, every deductor shall deduct the tax amount from the
payment made to the supplier of goods or services or both and deposit the
tax amount so deducted with the Government account through NEFT to RBI
or a cheque to be deposited in one of the authorized banks, using challan on
the common portal. In addition, the deductors are entrusted the responsibility
of filing return in FORM GSTR-7 on the common portal for every month in
which deduction has been made based on which the benefit of deduction shall
be made available to the deductee. All the DDOs in the Government, who are
performing the role as deductor have to register with the common portal and
get the GST Identification Number (GSTIN).
3. The subject section which provides for tax deduction at source was not
notified to come into force with effect from 1stJuly, 2017, the date from
which GST was introduced. Government has recently notified that these
provisions shall come into force with effect from 1stOctober, 2018, vide
Notification No. 50/2018 –Central Tax dated 13th September, 2018.
4. For processing of Tax Deduction at Source under GST two options can
be followed, which are as under:
Option I: Generation of challan for every payment made during the
month
Option II: Bunching of TDS deducted from the bills on weekly, monthly
or any periodic manner.
5. In order to give effect to the above options from 01.10.2018, a process
flow of deduction and deposit of TDS by the DDOs has been finalized in
consultation with CGA for guidance and implementation by Central and State
Government Authorities. The process flow for Option I and Option II are
described as under:
Option I-Individual Bill-wise Deduction and its Deposit by the DDO
6. In this option, the DDO will have to deduct as well as deposit the GST
TDS for each bill individually by generating a CPIN (Challan) and mentioning
it in the Bill itself.

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7. Following process shall be followed by the DDO in this regard:
(i) The DDO shall prepare the Bill based on the Expenditure
Sanction. The Expenditure Sanction shall contain the (a) Total amount,
(b) net amount payable to the Contractor/Supplier/Vendor and (c) the
2% TDS amount of GST.
(ii) The DDO shall login into the GSTN Portal (using his GSTIN) and
generate the CPIN (Challan). In the CPIN he shall have to fill in the
desired amount of payment against one/many Major Head(s)
(CGST/SGST/UTGST/IGST) and the relevant component (e.g. Tax)
under each of the Major Head.
(iii) While generating the CPIN, the DDO will have to select mode of
payment as either
(a) NEFT/RTGS or
(b) OTC. In the OTC mode, the DDO will have to select the
Bank where the payment
will be deposited through OTC mode.
(iv) The DDO shall prepare the bill on PFMS (in case of Central Civil
Ministries of GoI), similar payment portals of other
Ministries/Departments of GoI or of State Governments for submission
to the respective payment authorities.
(v) In the Bill,
(a) the net amount payable to the Contractor; and
(b) 2% as TDS will be specified
(vi) In case of NEFT/RTGS mode, the DDO will have to mention the
CPIN Number (as beneficiary’s account number), RBI (as beneficiary)
and the IFSC Code of RBI with the request to payment authority to
make payment in favour of RBI with these credentials.
(vii) In case of the OTC mode, the DDO will have to request the
payment authority to issue ‘A’ Category Government Cheque in favour
of one of the 25 authorized Banks. The Cheque may then be deposited
along with the CPIN with any of branch of the authorized Bank so
selected by the DDO.
(viii) Upon successful payment, a CIN will be generated by the
RBI/Authorized Bank and will be shared electronically with the GSTN
Portal. This will get credited in the electronic Cash Ledger of the
concerned DDO in the GSTN Portal. This can be viewed and the details

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 of CIN can be noted by the DDO anytime on GSTN portal using his
Login credentials.
(ix) The DDO should maintain a Register as per proforma given in
Annexure ‘A’ to keep record of all TDS deductions made by him during
the month. This Record will be helpful at the time of filing Monthly
Return (FORM GSTR-7) by the DDO. The DDO may also make use of
the offline utility available on the GSTN Portal for this purpose.
(x) The DDO shall generate TDS Certificate through the GST Portal
in FORM GSTR-7A after filing of Monthly Return.

Option II -Bunching of deductions and its deposit by the DDO

8. Option-I may not be suitable for DDOs who make large number of
payments in a month as it would require them to make large number of
challans during the month. Such DDOs may exercise this option wherein the
DDO will have to deduct the TDS from each bill, for keeping it under the
Suspense Head. However, deposit of this bunched amount from the Suspense
Head can be made on a weekly, monthly or any other periodic basis.
9. Following process shall be followed by the DDO in this regard:
(i) The DDO shall prepare the Bill based on the Expenditure
Sanction. The Expenditure Sanction shall contain the
(a) Total amount,
(b) net amount payable to the Contractor/Supplier/Vendor and (c) the
2% TDS amount of GST.
(ii) The DDO shall prepare the bill on PFMS (in case of Central Civil
Ministries of GoI), similar payment portals of other
Ministries/Departments of GoI or of State Governments for submission
to the respective payment authorities.
(iii) In the Bill, it will be specified (a) the net amount payable to the
Contractor; and (b) 2% as TDS
(iv) The TDS amount shall be mentioned in the Bill for booking in the
Suspense Head (8658 -Suspense; 00.101 -PAO Suspense; xx –GST
TDS)
(v) The DDO will require to maintain the Record of the TDS so being
booked under the Suspense Head so that at the time of preparing the
CPIN for making payment on weekly/monthly or any other periodic
basis, the total amount could be easily worked out.

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(vi) At any periodic interval, when DDO needs to deposit the TDS
amount, he will prepare the CPIN on the GSTN Portal for the amount
(already booked under the Suspense Head).
(vii) While generating the CPIN, the DDO will have to select mode of
payment as either
(a) NEFT/RTGS or
(b) OTC. In the OTC mode, the DDO will have to select the Bank
where the payment will be deposited through OTC mode.
(viii) The DDO shall prepare the bill for the bunched TDS amount for
payment through the concerned payment authority. In the Bill, the
DDO will give reference of all the earlier paid bills from which 2% TDS
was deducted and kept in the suspense head. The DDO may also
attach a certified copy of the record maintained by him in this regard.
(ix) The payment authority will pass the bill by clearing the Suspense
Head operated against that particular DDO after exercising necessary
checks.
(x) In case of NEFT/RTGS mode, the DDO will have to mention the
CPIN Number (as beneficiary’s account number), RBI (as beneficiary)
and the IFSC Code of RBI with the request to payment authority to
make payment in favour of RBI with these credentials.
(xi) In case of the OTC mode, the DDO will have to request the
payment authority to issue ‘A’ Category Government Cheque in favour
of one of the 25 authorized Banks. The Cheque may then be deposited
along with the CPIN with any of branch of the authorized Bank so
selected by the DDO.
(xii) Upon successful payment, a CIN will be generated by the
RBI/Authorized Bank and will be shared electronically with the GSTN
Portal. This will get credited in the electronic Cash Ledger of the
concerned DDO in the GSTN Portal. This can be viewed and the details
of CIN can be noted by the DDO anytime on GSTN portal using his
Login credentials.
(xiii) The DDO should maintain a Register as per proforma given in
Annexure ‘A’ to keep record of all TDS deductions made by him during
the month. This Record will be helpful at the time of filing Monthly
Return (FORM GSTR-7) by the DDO. The DDO may also make use of
the offline utility available on the GSTN Portal for this purpose.

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 (xiv) The DDO shall file the Return in FORM GSTR-7 by 10th of the
following month
(xv) The DDO shall generate TDS Certificate through the GSTN Portal
in FORM GSTR-7A
10. Departments in Central Government should instruct all its DDOs under
them to follow the above procedure for payment of GST TDS amount
deducted from payments to be made to suppliers.
11. Difficulty, if any, in implementation of this circular may please be
brought to the notice of Department of Revenue.

PROCEDURE:
499. As per Section 51 of GST Act, every Govt. organization is liable to
recover GST TDS on every third party payment of Rs. 2.50 lakhs and more
and they have to deposit the GST TDS recovery to GST Portal by means of
challan in form GSTR-7 w.e.f the implementation of Section 51 of GST Act
2017 i.e. w.e.f 1st October 2018. Accordingly, every Pr.CDA/ CDA should
invariably obtain GSTIN number through GST portal through which, GST TDS
can be deposited to GST authorities.
It is to state that, for the purpose of Section 51 of GST Act, 2017,
registration is needed to be taken in each such state, in which supplies has
been received, for which contract value is more than 2.5 lakhs. The states
where PCDA authorities under Ministry of Defence are not present, cannot get
registered.
Recovery of GST TDS is to be carried out by all the Pr.CDA / CDA as
they are liable to recover GST TDS for the pre audit bills. Post Audit
Authorities under MOD have been exempted for the purpose of TDS under
GST vide notification number 57/2018-Central Tax 2018 dated 23rd October
2018, hence for the amount which are disbursed by the units, TDS deduction
is exempted. However, if the contract value is more than 2.5 lakhs, in that
case Pr.CDA / CDA needs to deduct TDS for the amount for which Pr.CDA
office is disbursing. Hence, TDS needs to be deducted for 5% amount only in
all such cases where the contract value is more than 2.5 lakhs, even if
amount disbursed by Pr.CDA / CDA is less than 2.5 lakhs.
GST Return needs to be furnished GSTIN wise for a month in which
TDS has been deducted. Therefore, return in form GSTR-7 need to be
furnished for a month in which deduction has been made in any particular

271
month. If no TDS in any month has been recovered, in that case there is no
need to file return in Form GSTR-7 for that particular month. There is no
concept for furnishing return centrally from any State / UT for multiple State
GSTIN under GST.
Recovery of GST TDS supplier wise is required to be furnished by the
deductor to the duductee through GSTR-7A. On the basis of the return,
furnished by the deductor the certificate will be available on common portal,
which supplier can download from the common folder for further tax benefit
from GST Authorities.

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 APPENDIX I
(Referred to in Para 121)

Instructions for The Maintenance of Records of Service of Regular

Officers of the Indian Army (Including Nursing Officers ) by PCDA(O)
and Civil Accounts Officers Paying Military Officers in Civil
Employment

1. In addition to the records of service maintained by the administrative

authorities on IAFZ 2041 and other prescribed forms, records of service will
be maintained on cards (IAF (CDA) 313) by PCDA (Officers) for all regular
officers (including Nursing Officers) of the Indian Army in Military employ and
by Civil Accounts Officers in respect of Army Officers (including Nursing
Officers) in Civil employ.
2. Following items will be entered in the service cards :-
(a) Unauthorised absence and leave without pay and allowances.
(b) Service forfeited for purpose of pension by special orders.
(c) In the case of officers deputed to foreign service: Full particulars of the
period of deputation citing reference to the Ministry of Defence letter and the
allocation of pensionary liability.
(d) In the case of officers who were holding non-regular commission before
the grant of permanent regular commission :
Details of any gratuity other than war gratuity paid for non-regular service.
3. When an Army Officer (or a Nursing Officer) passes from the payment
jurisdiction of the PCDA (Officers) to that of another Accounts Officer, or vice
versa (permanently or temporarily), the Accounts Officer concerned issuing
the Last Pay Certificate will forward the service card, duly completed up to
the date of transfer of the officer concerned, along with the Last Pay
Certificate, and the further maintenance of the service card will then devolve
on the Accounts Officer responsible for maintaining the pay accounts of the
officers.
Note: The service card received with the Last Pay Certificate should be
checked to see that the entries, made therein date back to the Officer’s (or
Nursing Officers) date of regular Commission and that it is complete and up
to-date in all respects.
4. When an Army Officer (or a Nursing Officer) proceeds on deputation to
the U.K. and passes into the payment jurisdiction of the High Commissioner

273
for India in the U.K., the Accounts Officer in India who issues the Last Pay
Certificate will continue to maintain the service card for the period of
deputation. The necessary particulars for the completion of the card will be
obtained from the Last Pay Certificate, received from the above authority
when the officer (or the Nursing Officer) returns to India.
5. When an Army Officer (or a Nursing Officer) is lent for Foreign Service
in or out of India, the service card will be maintained by the Accounts Officer
who is responsible for the recovery of Foreign Service contributions. The
foreign employer under whom the officer is serving, should be asked in a
letter to be sent with the officer’s Last Pay Certificate, to communicate any
change in the officer’s service and any leave granted to him.
6.(a) When an Army Officer (or a Nursing Officer) retires or when a
grant of pension is made to his or her family if he or she dies while on the
active list, the PCDA (Officers) will complete the original service card
(including the summary) and forward it, along with the Last Pay Certificate to
the PCDA (PENSIONS), Allahabad to enable the latter to allocate the pension
charges of the officer (or the Nursing Officer) among the different
Departments/Governments under which the officer served.
(b) In the case of an officer in Civil employ, whether permanently or
temporarily, who retires/dies on the active list, the card duly completed will
be forwarded by the Civil Accounts Officer to the PCDA (Officers). The PCDA
(Officers) will complete the summary on the reverse of the card and take
action as at (a) above.

274
 APPENDIX 2

LEAVE PROCEDURE
Referred to in para 121

Certificate of Admissibility

1. JCOs, ORs and Civilian non-gazetted establishment-In the case of

these categories of personnel, no certificate of admissibility from the Principal
Controller/Controller of Defence Accounts concerned is necessary, but the
authority sanctioning the leave should satisfy themselves that the leave is
admissible.
2. Army Officers - PCDA (O) is not required to certify to the admissibility
of the leave but the authority sanctioning the leave should satisfy
himself/herself that the leave is admissible. On receipt of Part II orders
notifying the grant of leave; the PCDA (O) should audit the title to leave in
full.
3. Army Officers in Civil employment
(a) When an Army Officer becomes subject to the Civil Leave Rules, the
Principal Controller of Defence Accounts (Officers), will on application and on
being furnished with the date to commencement of active service in civil
employ, furnish to the Accountant General to whose audit he becomes
subject, a memorandum showing the furlough earned, the different kinds of
leave taken (distinguishing those which should be deducted from the
maximum furlough admissible) and the balance of furlough due under the
Leave Rules for the Service Vol I Army.
(b) When an Army Officer in Civil employ, but subject to Leave Rules for
the Services Vol I Army, applies for leave, the Principal Controller of Defence
Accounts (Officer) will on application furnished the Civil Accounts General
concerned, with information regarding the amount of leave to which the
officer is entitled under Leave Rules for the Services Vol, I Army and the rate
of leave pay and allowances admissible during such leave period.
4. Government servants in foreign service
In the case of officers and others on foreign service, the Principal
Controller/Controller of Defence Accounts from whose payment the individual
went on foreign service should report on the admissibility of any leave applied
for.

275
5. In case where Audit Officers are required to certify to the admissibility
of the leave, no leave should be sanctioned until such certificates have been
granted.
6. If in dealing with applications for leave from an Army Officer in civil
employ, whether subject to Army or Civil Leave Rules the Civil Account
General considers it necessary to consult the Principal Controller of Defence
Accounts (Officers), the latter will render all help and advice required in the
matter.

Payment of Leave Salary in India

7. No officer can draw his leave allowance in India except from the Audit
Officer who audited their pay before they proceeded on leave.

Civilian Gazetted Officers

8. An officer proceeding on leave within Indian limits may draw pay and
allowances due to them on their personal account, through any banker or
agent who has executed a general bond of indemnity to the President for
payments relating to or for persons whose salaries or pensions are debitable
to the Central Government or whose bond of indemnity was executed prior to
1st April 1937, continues to be valid under the Treasury Rules. A list of such
banks and agents is given in Appendix 9 to Financial Regulations part II.

Civilian non-gazetted establishment

9. The leave salary of a non-gazetted civilian government servant on
leave in India or on leave out of India cannot be drawn in India, except over
the signature of the Head of his office, and the latter is responsible for any
overcharge.

Leave Salary Advance

10. An officer/a non-gazetted Government servant can draw leave salary
advance from the Principal Controller/Controller of Defence Accounts
concerned if he proceeds on leave for a period of not less than a month/30
days. The amount of leave salary advance is restricted to the net amount of
leave salary for the first month of leave that is clearly admissible to him after
deductions on account of Income Tax, Provident Fund, Licence Fee,
repayment of advances etc., so that no financial risk is involved. The advance
so drawn is adjusted in full in the leave salary bills pertaining to the period of

276
leave availed of. In case where the advances cannot be so adjusted in full,
the balance will be recovered from the next payment of pay or/and leave
salary.

JCOs and Other Ranks

11. When proceeding on leave, JCOs and Other Ranks are granted
advances of pay as laid down in “pay and allowances regulations (for JCOs,
ORs, and NCs(E) of the Army) (ORs)”.

Army Officers
12. Leave allowance will be drawn in the IRLAs, in the normal manner and
the amounts disbursed to their authorized bankers who have executed a
general bond of indemnity with the President of India under Rule 247(2)
compilation of the Treasury Rules Vol , I or in special cases, to the officer
themselves direct, if so requested by them.

Payment of Leave Salary to Officers on Leave Ex-India

13.Unless the President by general or special order otherwise directs, leave
salary shall be drawn in Rupees in India. Officers on study leave outside India
shall, however, draw their leave salary abroad.
If leave is spent outside India the Government servant must make his
own arrangement to draw his leave salary in Rupees in India and to remit
such portion of it to the foreign countries as is permissible under the foreign
exchange regulation for pleasure travel abroad.

277
 APPENDIX 3

POWERS OF THE CONTROLLER GENERAL OF DEFENCE ACCOUNTS

Powers of Sanctioning Expenditure
1. The CGDA may sanction expenditure or advances of public money in those
case only in which he is authorized to do so by:
(a) Any Codes or Regulations issued by or with the approval of the
Government of India; or
(b) Any order of the Government; laying down a scale or maximum scale of
expenditure; or
(c) Any other delegation approved by Govt. of India.

2. The CGDA is empowered to sanction expenditure on contingent and

miscellaneous expenditure, as head of Department under Rule 10(3) of the
Delegation of Financial Powers Rules 1978, subject to the provisions
contained in Schedule V (and Annexure thereunder) and Schedule VI thereof
as amended from time to time.
Note: The financial powers in respect of certain items of contingent
expenditure liberalized and given to Heads of Departments vide Government
of India, Ministry of Finance (Department of Expenditure) No. F. 10(3)E
(Coord)/67 dated 18.10.68 are indicated in the Annexure to this Appendix.

Appropriation and Re-appropriation

3. The CGDA is responsible on behalf of the Secretary (Defence/Finance)/
Financial Adviser, Defence Services for the control of expenditure under the
grants made in the sanctioned Budgets Estimates for the civil services under
the following heads pertaining to the Defence Accounts Department (including
his own office).

PART I
Consolidated Fund of India
Revenue Receipts/Expenditure met from Revenue
A. Administrative Services
B. General Administration.
C. Secretariat and attached offices-Civil Secretariat (Department of
Expenditure) Defence Accounts Offices.
(1) Establishment charges
278
 (i) Salary of Officers
(ii) Salary of Establishment
(iii) Dearness Pay and Allowances
(i) Other Allowances

(2) Interim Relief

(3) Travelling Expenses
(4) Other charges (including miscellaneous and Contingent (Expenditure)

4. The CGDA is responsible for obtaining additional funds, if the total

provision under the respective heads, mentioned above is likely to be
exceeded. The grants made under the above heads may be allotted or
re-allotted by him between the several Defence Accounts Officers including
his own office as required. He may also re-appropriate funds from one
detailed head to meet authorized expenditure under another detailed head
within the same sub head.

Powers for Write Off

5(a) The CGDA may sanction the write off of losses of cash due to Robbery,
Accident, Embezzlement and similar other causes upto a limit of Rs. 500 in
each case.
(b) The CGDA may as Head of the Department sanction the write off of
irrecoverable losses of Defence Accounts Department stores and or of Public
Money (including loss of stamps), subject to the limits and conditions laid
down in, Schedule VII to the Delegation of Financial Powers Rules, 1978 as
amended from time to time.
(c) The CGDA is empowered to sanction condemnation of Typewriters upto
Rs. 10,000 in each case.

Powers as Head of the Department

6. The CGDA is the Head of the Defence Accounts Department and
exercises certain powers of Head of the Department, in respect of the
personnel of his department as laid down in the various Rules, Regulations,
codes and Government Orders delegating to him such powers.
7. The Sr.Dy.CGDA/Dy.CGDA and PCDAs/CDAs exercise the powers under
FR 56 of FR & SR Part I as amended from time to time, regarding continuance

279
in service or otherwise beyond the age of 55 years in respect of Group C and
D establishments under their respective control.

Fees and Honoraria

8. The CGDA is the competent authority in respect of the personnel of the
Defence Accounts Department for the purpose of the rules regulating the
grant of fees and honoraria, laid down in Financial Regulations, Defence
Services.

Telephones
9. The CGDA is given full powers to sanction installation of telephones in
Defence Accounts Offices and to sanction residential telephones in respect of
(a) Officers in the Junior Administrative grade and above (b) Deputy
Controllers of Defence Accounts in charge of Administration and (c) All
officers in over all charge of independent offices. CGDA may also sanction
residential telephones in other cases upto a ceiling of 5 telephones for the
Defence Accounts Department as a whole.
(Authority: item 26 of Annexure to Sch. V of Delegation of Financial Powers
Rules 1978 and Government of India, Ministry of Finance, Department of
Expenditure Defence Division No. C/J/I/16 of 10-3-66) and as amended by
their OM No. F.I. (21) E. II (A) 84 dt. 14-12-84.

PART II
Audit Powers

Note: The word “audit” as used in the rules in this part refers to the internal
audit functions exercised by the CGDA and his staff as distinct from statutory
audit functions exercised by the DGADS on behalf of the Comptroller and
Auditor General of India.
10. The Secretary (Defence/Finance) / Financial Adviser, Ministry of Defence
(Finance) is responsible for the maintenance of the accounts of Defence
Services. The following rules define the duties and powers of the CGDA as
regards internal audit, and he is vested with these powers by the Secretary
(Defence/Finance) / Financial Adviser, Ministry of Defence (Finance) on whose
behalf he will exercise them.
11. The CGDA will is so, required by the Ministry of Defence (Finance):

280
(i) arrange for the audit of the accounts of receipts and expenditure of any
public or quasi-public department under the Min. of Def. although they may
not relate directly to the receipt and expenditure of Government moneys; and
(ii) arrange for the audit of stores or stock in the possession of an officer
or a department under the Ministry of Defence.
12. If the CGDA considers it desirable that the whole or any part of the
audit applied to Government accounts or to any other accounts, which he is
required to audit under rule, shall be conducted in the offices in which those
accounts originate. During audit PCDA/CDA may require that these accounts
together with all books, papers and writings having relation thereto shall at
all convenient times, be made available in those offices for inspection by
his/her Audit Officers.
13. When an objection taken in the course of audit cannot be settled by the
Principal Controller/Controller of Defence Accounts in consultation with the
authorities concerned, the CGDA may either instruct the Principal
Controller/Controller to withdraw the objection, or require the administrative
authorities concerned to obtain the requisite sanction or, in default to recover
the amount under objection, subject to the proviso that the CGDA will
withdraw the objection if so, decided by the Secretary (Defence/Finance) /
Financial Adviser, Ministry of Defence (Finance).
14. The CGDA cannot be over-ruled by the Ministry of Defence on a
question of rules or procedure in relation to Defence expenditure without the
concurrence of the Comptroller and Auditor General of India and the
Secretary (Defence/Finance) / Financial Adviser, Ministry of Defence
(Finance).
15. Similarly the DGDAS has no power to overrule the decisions given by
the CGDA, such power lies only with the Secretary (Defence/Finance) /
Financial Adviser, Ministry of Defence (Finance) and the Comptroller and
Auditor General of India.
The DGADS can be overruled only by the Comptroller and Auditor
General of India and where there is a final disagreement between the CGDA
and the DGADS, the point at issue will be referred by the Secretary
(Defence/Finance) /Financial Adviser, Ministry of Defence (Finance) to the
Comptroller and Auditor General of India through the DGADS.
16. The CGDA may on his own motion and shall on reference being made
to him by the Ministry of Defence or Services Headquarters review the

281
decision of any Defence Accounts Officer serving under his administrative
control and if he thinks fit, over-rule it.
17. The CGDA shall have power to require that any books, papers or
writings relating to the accounts audited by the Defence Accounts
Department should be sent for inspection by him or by any other officer of
the Defence Accounts Department provided that:
(i) if the Ministry of Defence certifies that the documents in question are
secret, the CGDA or other Defence Accounts Officer, as the case may be,
shall accept in lieu of all such documents and as a correct account of the facts
stated therein, the statement certified by the Ministry of Defence; and
(ii) if the documents are confidential, the officer to whom they are made
over, shall be made responsible for the preventing disclosure of their
contents.

18. The CGDA shall, with the approval of the Secretary (Defence/Finance)/
Financial Adviser, Ministry of Defence (Finance), prescribe the forms in which
accounts shall be kept in Defence Accounts Offices, provided that no change
which will affect the form the Finance and Revenue Accounts shall be made
without the previous sanction of the Comptroller and Auditor General of India.

282
 Annexure to Appendix 3 of Defence Audit Code
Sr. Item of Expenditure Sr. No. of item Liberalized powers
No. in Schedule V of
DFPR 1978
1. Fixtures and furniture purchase 5 Full powers
and repairs
2. Hire of office furniture, Electric 7 Full powers
fans, Heaters, Coolers, Clocks
and Call Bells
3. Printing and Binding 14 (i) Where work is
executed through Chief
Controller of Printing
and Stationery-Full
Powers
(ii) Other cases
Rs.20,000/-P.A.
4. Local purchase of petty 21(b) To the extent as may
stationery stores be delegated by
Ministry of Defence in
consultation with Sec
(Def/Fin)/ FADS.
(Authority: GoI, MoF
OM No.
1/(11)/E./II(A)/2003
dated 01.02.2005 and
No.1/7/E./II(A)/2008
dated 30.05.2008.
Note: The existing
financial powers are
Rs. 25,000 P.A. (for all
the offices including his
own office) only with
the concurrence of
controller of Stationery
(Authority: Govt. of
India, Ministry of
Finance Department of
Expenditure OM No. F-
1(21)-E.II(A)/84 dated
14-12-1984.
5. Local purchase of rubber 21(c) Full powers
stamps and office seals.

283
 APPENDIX 4
ANNUAL REVIEW OF WORKS EXPENDITURE
(Referred to in Para 409)

1. The Review is prepared by the Secretary (Defence/Finance) and Ministry of

Financial Advisor Defence (Finance). It covers Army, Factory, Air force and
Naval Works expenditure. For its preparation, the Regional Controllers of
Defence Accounts are to submit the following statements to the Deputy
Financial Advisor (Works), Ministry of Defence (Finance), so as to reach them
not later than the dates shown below every year.

Sl. Name of the statement Date on which due

No. to reach DFA(W)
1 Statement A(i) : Showing all Major Works in 16th August
respect of which the original estimates,
appropriation or the actual expenditure
incurred during the year is Rs. 25 lakhs or
more provided, the variation is 50% thereof
or more.
(ii) Showing all non budget Major Works 16th August
estimated to cost over Rs. 10 lakhs on which
expenditure was incurred during the year.
2 Statement ‘B’ : Showing Major Works 16th August
financially completed during the year the
original estimates or actual expenditure on
which is Rs. 25 lakhs or more, provided the
variation is 10% of the original estimates or
more with explanations for variation
between original estimates or more and
expenditure.
3 Statement C: Showing expenditure placed 10th August
under objection.
4 Statement D: Showing irregularities in 15th July
connection with contracts, the acceptance of
tenders etc and excess expenditure owing to
rates for works not having been kept to the
minimum.

284
5 Statement E: Showing rush of expenditure in 15th July
March with reasons thereof.
6 Statement E Supplementary: 15th July
(i) Showing rush of expenditure in respect of
works consisting over Rs. 25 lakhs.
(ii) Cases in which the expenditure during
March is two times or more than two times
the average of the preceding eleven months.
7 Statement F: Showing the miscellaneous 15th July
irregularities of important nature such as
losses, non recovery of licence fee,etc.
8 Statement G: Showing the actual working of 15th July
the standard schedule of rates, in respect of
contracts of Rs. 1 lakh and above based on
S.S.R.
9 Statement H: Showing working of 15th July
quantitative system of stores accounting and
stock verification.
10 Statement I: Showing expenditure incurred 16th August
on operational works.
11 Statement J: List of cases of 1st September
remission/reduction of Department charges.
12 Statement K (i): Statement showing 3rd August
comparison of the actual expenditure with
the original grant and final grant. (Revenue
Portion- Major Head 2076, 2077, 2078 MES)
Statement K (ii): Statement showing
comparison of the actual expenditure with
the original grant and final grant (capital
head - MES portion major head 4076).

2. Detailed instructions regarding the preparation of the above mentioned

statement and the information to be included therein are given in Chapter IX
of Office Manual part VIII. It is of considerable importance that the statistics
required for the above mentioned statements should be collected throughout
the year as audit progresses and cases are brought to the notice. This work

285
should not be left over, till the time for the rendition of the statements
approaches. The statements should be fully informative, in addition to the
notes in the columns of each statement. Principal Controllers/Controllers may
give a covering note to any statement emphasizing the points which they
consider important.
3. It is essential that the various points brought out should be discussed
by the Principal Controllers/Controllers with the local MES Authorities and
Chief Engineers of Commands, particularly those which are debatable. The
views of Command HQrs should also be obtained on the points on which the
local engineering authorities and the PCDA/CDA disagree. The report should
be furnished, after full consultations with such authorities and any points of
difference brought out after attempts have been made by personal discussion
to reconcile the different points of view. Specific mention should be made of
cases in which the administrative authorities concerned have by their policy
or procedure, protected or advanced the financial interests of government.
It is desirable that instances of improvement and all tendencies
towards improvement should be brought to light along with the reverse type
of cases.

4. The review should not however, contain controversial suggestions

relating to the alteration of the existing procedure or system. On the other
hand, actual cases brought to light, even though controversial, should be
included after discussion with the administrative authorities, and an agreed
opinion on each such case should be recorded or the differences of opinion
clearly stated.

286
 APPENDIX 5

POWERS OF PRINCIPAL CONTROLLER/CONTROLLER OF DEFENCE

ACCOUNTS
(Note: This Appendix does not deal with the administrative powers of
the PCDAs/CDAs which will be found in Office Manual Part I).

PART I
Powers of sanctioning expenditure1
1 The PCDA/CDA may sanction expenditure or advances of public money
in those cases only in which he/she is authorized to do so by (a) any codes or
regulations issued by or with the approval of Government of India or (b) any
order of the Government laying down a scale or maximum scale of
expenditure or (c) any other delegation approved by Govt. of India.
2. The PCDA/CDA is empowered to sanction expenditure on contingent
charges and miscellaneous expenditure as Head of Department under rule
10(3) of the Delegation of Financial Powers Rules, 1978, subject to the
provisions contained in Schedule V (and Annexure thereunder) and schedule
VI thereof as amended from time to time.
3. Powers of write off – The PCDA/CDA may sanction write off of the
following losses:
(i) Irrecoverable losses of stores or public money (including loss of
stamps)….. Rs.10,000/-
(ii) Deficiencies and appreciation in the value of stores including the stock and
other accounts Rs.10,000/-

A record of such sanctions will be kept and made available for inspection.

1. Likewise PCDAs/CDAs, IFAs also empowered to exercise financial powers in

respect of Contingent/Miscellaneous expenditure.

PART II
Audit powers
4. In order to avoid unnecessary time and labour on cases of simple and
unimportant character, the Principal Controllers/Controllers have been
delegated powers by the Government of India in the Ministry of Defence
(Finance), to write off amounts not exceeding Rs. 2002 in each case in
287
respect of DAD personnel whose pay bills are audited by them in cases where
expenditure under objection has, for any reason, become irrecoverable

5. The Principal Controllers/Controllers of Defence Accounts have been

delegated powers by the Government of India in the Ministry of Finance
(Defence) vide their letter no. 13074/AT Coord dated 13-11-59 read with
their no. 13074/AT Coord dt. 18-7-72 and corrigendum of even no. dt. 25-
11-72 (reproduced below) to waive procedural/non-financial objection which
do not involve any monetary value or loss to the Government without
reference to local administrative authorities subject to the conditions laid
down in the Government letter.

“Government of India in the Ministry of Finance (Defence) letter no.

13074/AT Coord dated 13-11-59 addressed to the CGDA on the
subject of speedy settlement of audit objections”

1. I am directed to refer to your U.O.No. 13074/AT Coord dated 22-10-59

and to convey the sanction of the President to the delegation to the
Controllers of Defence Accounts of Powers to waive procedural/non-financial
objections i.e those which do not allow any monetary value of loss to
Government, without reference to the local administrative authorities
provided the Controllers are satisfied that the objections are petty and do not
disclose any inherent defect of procedure or persistent irregularity.

2. However for waiving Audit objections

2. Any subsidiary instructions considered necessary may be issued by

you.
3. These orders will have affect from the 26th July 2006.

Powers of Audit Officers to write off/waive audit objections.

“Copy of Govt. of India Min. of Def. (Finance Division) New Delhi Corrs
No.F.15 (1)/C/2006 dated 26th July, 2006 addressed to The C.G.D.A, New
Delhi.
I am directed to convey the sanction of the President to the
enhancement of powers delegated to officers of the Defence Accounts
Department under rule 177 of Financial Regulations (Part.I) Vol,. I, 1983

288
Edition for write off/waiver of Audit Objections to the extent indicated below:
-

Rule Authority Existing Revised Powers

Powers Rs.
Rs.
Rule 177(I) FR.Pt.I JCDA 500 2000
Vol.I
a) Waiver of audit
objections to save time
and trouble over petty
sums
DCDA/ACDA 300 1500
SAO/AO 200 500
AAO 75 200
SO(A) 50 100
b) Waiver of audit PCDA/CDA 2000 5000
objections on
unimportant items in the
best interest of the State
Rule 177(ii) FR Pt.I PCDA/CDA 3000 10000
Vol.I
Waver of Audit objections
where the expenditure is
not exactly covered by
rules or authority is
insufficient or full proof of
expenditure is not
provided
JCDA 1500 5000
DCDA/ACDA 1000 3000
SAO/AO NIL 1000
AAO NIL 500
SO(A) NIL 100
Rule 177(III) FR Pt.I PCDA/CDA 2000 10000
Vol.I Write off of
irrecoverable amounts
due to any cause
JCDA 1000 5000
DCDA/ACDA 500 3000
SAO/AO 200 1000
AAO 50 500
SO(A) 25 100

289
 The powers as mentioned above will also be exercised by the
Controllers and their officers dealing with Fund accounts for waiving of
objections pertaining to no recovery/overpayments of Fund balances provided
such non-recoveries, overpayments are not due to any mistake in accounting
but represent over payments established irrecoverable for any other reasons.

FR Part.I (Vol.I) is to be amended by the prescribed authority.

290
 CONCORDANCE TABLE
Sl. No. Para No. in 1992 Edition Para No. in 2020 Edition
1 1 1
2 2 2
3 3 3
4 4 ( blank) (--)
5 5 4
6 6 5
7 7 6
8 8 (Blank) (--)
9 9 7
10 10 8
11 11 (Blank) (--)
12 12 (Blank) (--)
13 13 (Blank) (--)
14 14 (Blank) 9
15 15 10
16 16 11
17 17 12
18 18 13
19 19 14
20 20 (Blank) (--)
21 21 15
22 22 (Blank) (--)
23 23 16
24 24 17
25 25 18
26 26 19
27 27 20
28 28 21
29 29 22
30 30 23
31 31 (Blank) (--)
32 32 (Blank) (--)
33 33 24
34 New Addition 25
35 New Addition 26
36 34 27
37 35 28
38 36 29
39 37 (Blank) 30
40 38 31
41 39 32
42 40 33
291
Sl. No. Para No. in 1992 Edition Para No. in 2020 Edition
43 41 (Blank) (--)
44 42 34
45 43 35
46 44 36
47 45 (Blank) (--)
48 46 (Blank) (--)
49 47 37
50 48 38
51 49 39
52 50 40
53 51 (Blank) (--)
54 52 (Blank) (--)
55 53 41
56 54 42
57 55 43
58 56 44
59 57 45
60 58 46
61 59 47
62 60 (Blank) 48
63 61 (Blank) (--)
64 62 49
65 63 50
66 64 51
67 65 (Blank) 52
68 66 53
69 67 (Blank) (--)
70 68 54
71 69 (Blank) (--)
72 70 (Blank) (--)
73 71 (Blank) (--)
74 72 55
75 73 56
76 74 57
77 75 58
78 76 59
79 77 60
80 78 61
81 79 62
82 80 (Blank) 63
83 New Addition 64
84 81 (Blank) 65
85 82 (Blank) 66
86 83 67
87 84 68
88 85 69
292
Sl. No. Para No. in 1992 Edition Para No. in 2020 Edition
89 86 70
90 87 71
91 88 72
92 89 (Blank) (--)
93 90 73
94 91 74
95 92 75
96 93 76
97 94 77
98 95 78
99 96 79
100 97 (Blank) (--)
101 98(Blank) (--)
102 99 80
103 100 81
104 101 82
105 102 83
106 103 84
107 104 (Blank) (--)
108 105 85
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457 New Addition 332
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608 New Addition 460
609 New Addition 461
610 New Addition 462
611 New Addition 463
612 New Addition 464
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615 New Addition 467
616 New Addition 468
617 New Addition 469
618 New Addition 470
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620 New Addition 472
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622 New Addition 474
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624 New Addition 476
625 New Addition 477
626 New Addition 478
627 New Addition 479
628 New Addition 480
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630 New Addition 482
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632 New Addition 484
633 New Addition 485
634 New Addition 486
635 New Addition 487
636 New Addition 488
637 New Addition 489
638 New Addition 490
639 New Addition 491
640 New Addition 492
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641 New Addition 493
642 New Addition 494
643 New Addition 495
644 New Addition 496
645 New Addition 497
646 New Addition 498
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