Cost Auditor’s Appointment: Penalties for Non Compliance with respect to Appointment of Cost Auditor Notified

29th June, 2012 was the Last date of filing Form 23C relating to appointment of Cost Auditor (for the financial year 2012-13)  with MCA, GOI

The period of August and September is normally very busy for the accounting as the finalisation of accounts is done by maximum companies in this period only. As the Finance heads are busy with the finalisations of the books of accounts, they may skip some of the important notifications which may have an implication on the finances and regulatory compliances.

Recently Ministry of Corporate Affairs issued the following notification on 7th August, 2012.

GSR 617(E)   – Amendment to the Companies (Fees on Applications) Rules, 1999

By way of issuing the above notification, the MCA has imposed penalties on delay in the filing of requisite documents/forms with Ministry. Through this website, awareness was created by way of publishing many articles relating to the applicability of Cost Audits and last date of filing of Form 23C.

Now MCA has issued Notification GSR 617(E) dtd 07/08/2012 paving the way for imposition of penalties for not filing Forms in time. As the filing of form 23C (From for Appointment of Cost Auditor) needs to be done for the first time by many companies, they were taking a relaxed approach but with the issue of penal notification, the Form 23C with regard to the appointment of Cost Auditor should be filed immediately for the year 2011-12 and 2012-13 immediately.

Please note that normally Form 23C for appointment of cost auditor has to be e-filed on MCA portal within 90 days of the commencement of the financial year not after the close of the financial year.

The details of the the companies/Industries covered under Cost Audit during 2011-12 are given below:

MCA had introduced new Cost Audit Report Rules in June 2011 and had brought various companies under Cost Audit by way of various Cost Audit orders  as given below :

Date of orderIndustries Covered BroadlyApplicability -ConditionsYear for which applicable
2nd May 20111) Cost Accounting Records (Bulk Drugs) Rules, 19742) Cost Accounting Records (Formulations) Rules, 19883)  Cost Accounting Records (Fertilizers) Rules, 19934) Cost Accounting Records (Sugar) Rules, 19975) Cost Accounting Records (Industrial Alchohal) Rules, 19976)  Cost Accounting Records (Electricity Industry) Rules, 20017) Cost Accounting Records (Petroleum Industry) Rules, 20028) Cost Accounting Records (Telecommunications) Rules, 2002a)     Aggregate Value of networth as on the last day of immediately preceding financial year year exceeds Rs. 5 Crores, orb)     wherein the aggregate value of the turnover made by the company from sale or supply of all products or activities during the immediately preceding financial year exceeds twenty croresof rupees;orc)      wherein the company’s equity or debt securities are listed or are in the process of listing on any stock exchange, whether in India or outside India2011-12
3rd May 2011The order was modified vide order dated 30/06/2011
30th June 2011
Product/Industry under Cost AuditHSN Classification/Central Excise Tariff Act
CementChapter 25, 38 and 68
Tyres and TubesChapter 40
SteelChapter 72 and 73
PaperChapter 47 and 48
Insecticides*Chapter 38
GlassChapter 70
Paints and varnishesChapter 32
AluminumChapter 25


a)      Companies having turnover exceeding Rs 100 crores in the immediately preceding financial yearb)      Companies whose equity or debt securities are listed or are in the process of listing2011-12
24th Jan 2012
Name of IndustryRelevant Chapter Heading of the Central Excise Tariff Act 1985
Jute, Cotton,silk,woolen,or blended fibres/textilesChapter 50 to 63
Edible Oil seeds and Oils (incl. Vanaspati)Chapter 12 and 15
Packaged Food ProductsChapter 2 to 25 (except chapters 5,6,14,23 and24)
Organic and Inorganic ChemicalsChapter 28, 29, 32, 38 and 39
Coal & ligniteChapter 27
Mining & metallurgy of ferrous and no ferrous metalsChapters 26 and 74 to 83 (except Chapters 76 and 77)
Tractors & other motor vehicles (incl. automotive components)Chapter 84, 85 and 87
Plantation ProductsChapter 8, 9, 21 and 40
Engineering machinery (incl. electrical & electronic products)Chapters 84 and 85


a)      Companies having turnover exceeding Rs 100 crores in the immediately preceding financial yearb)      Companies whose equity or debt securities are listed or are in the process of listing2012-13

The company coming under cost audit purview should have  within ninety days of the commencement of every financial year, filed an application with the Central Government seeking prior approval for appointment of the cost auditor, through electronic mode, in the prescribed form, along with the prescribed fee as per the Companies (Fees on Applications) Rules, 1999, and requisite enclosures. However, where a company is covered under cost audit for the first time vide cost audit order dated 30th June 2011, the period of 90 days shall be counted from the date of this order. Every company is required to follow the procedure prescribed vide Ministry of Corporate Affairs’ General Circular No. 15/2011 [File No. 52/5/CAB-2011] dated April 11, 2011.

Till 6th aug 2012, there were no penal provisions in the Companies (Fees on Applications) Rules, 1999 for delay in filing of Forms but from 07 Aug 2012, the penal provisions have been made applicable which are given below:

Period of DelayFee Payable with the Application
Upto 30 daysTwo times of normal fee
More than 30 days and upto 60 daysFour times of normal fee
More than 60 days and upto 90 daysSix times of normal fee
More than 90 daysNine times of normal fee

 Normal fee as per the Companies (Fees on Applications) Rules, 1999 is given below:

 Fees. –

(1)   Every application made to the Central Government in respect of a company proposed to be registered pursuant to a licence under section 25 of the Companies Act, 1956, or by a company (including a foreign company as defined in section 591 of the said Act), under any provision (other than sub-section (1-D) of section 108 or clause (b) of sub-section (7) of section 555) of the said Act, shall be accompanied by appropriate fee specified in the Table below :

For Applications madeAmount of fees to be paid (Rs.)
(i)By a company having an authorised share capital of :-
(a)Less than Rs. 25,00,000500
(b)Rs. 25,00,000 or more but less than Rs. 5 crores1,000
(c)Rs. 5 crores or more2,000
(ii)By a company limited by guarantee but not having a share capital500
(iii)By an Association or proposed company for issue of licence under section 25 of the Act500
(iv)By a company having a valid licence issued under section 25 of the Act500
(v)By a foreign company1,000

 It means that if the company which was covered under Cost Audit for the year 2011-12, but did not file Form 23C in time will now have to pay Rs 20000 (18000 as penalty and 2000 Fee) because delay for the 2nd May order and 30th June Cost Audit order would have exceeded 90 days limit.

However the companies covered under Cost Audit order dated 24 Jan 2012 may still save some penalty by filing the Form 23C immediately as 90 days have not passed after 29th June 2012 (Due date of filing Form 23C)

(Author Navneet Kumar Jain is a Practising Cost Accountant and can be reached at Mobile- 9810175020, Email –navneetic@yahoo.com.)

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