Section 233B of the Companies Act, 1956 – Audit of cost accounts in certain cases – Order under section 233B

Order [F. No. 52/26/CAB-2010], Dated 6-11-2012

Consequent upon notification of the Product or Activity Group classification published vide S.O. 1747(E) dated 7th August, 2012 and in supersession of the earlier Orders issued vide even number dated 2nd May 2011, 3rd May 2011, 30th June 2011 and 24th January 2012, the Central Government hereby makes the following Order.

2. In exercise of the powers conferred by sub-section (1) of section 233B of the Companies Act, 1956 (1 of 1956), the Central Government being of the opinion that it is necessary to do so, hereby directs that all companies to which the following Rules apply,

(a)  Cost Accounting Records (Telecommunication Industry) Rules 2011;

(b)  Cost Accounting Records (Petroleum Industry) Rules 2011;

(c)  Cost Accounting Records (Electricity Industry) Rules; 2011;

(d)  Cost Accounting Records (Sugar Industry) Rules; 2011;

(e)  Cost Accounting Records (Fertilizer Industry) Rules 2011;

(f)  Cost Accounting Records (Pharmaceutical Industry) Rules 2011;

and which are engaged in the production, processing, manufacturing or mining of the products/activities included in the said Rules or covered in the following product or activity groups [Table-I] and wherein the aggregate value of the net worth of the company as on the last date of the immediately preceding financial year exceeds five crore of rupees; or 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 crore of rupees; or 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 India, shall get its cost accounting records, in respect of each of its financial year commencing on or after the 1st day of January, 2013, audited by a cost auditor who shall be, either a cost accountant or a firm of cost accountants, holding valid certificate of practice under the provisions of Cost and Works Accountants Act, 1959 (23 of 1959).

Table-I

S no.

Product or Activity Group Code

Name of the Product or Activity Group

Central Excise Tariff Act (CETA) Chapter Headings covered in the Product or Activity Group

1

1020

Sugar and Sugar Products 1701 to 1702

2

1021

Molasses 1703

3

1027

Ethyl Alcohol and other Spirits 2207

4

2004

Petroleum Oils – Crude 2709

5

2005

Petroleum Oils – Refined 2710

6

2006

Petroleum Gases and other Gaseous Hydrocarbons 2711

7

2007

Other Petroleum Products 2712 to 2715

8

2008

Electrical Energy 2716

9

2012

Bulk Drugs 2901 to 2942

10

2015

Pharmaceutical Products 3001 to 3006

11

2016

Animal or Vegetable Fertilizers 3101

12

2017

Mineral or Chemical Fertilizers – Nitrogenous 3102

13

2018

Mineral or Chemical Fertilizers – Phosphatic 3103

14

2019

Mineral or Chemical Fertilizers – Potassic 3104

15

2020

Mineral or Chemical Fertilizers – Others 3105

16

5101

Basic telephone services – wired and WLL Not Applicable

17

5102

Cellular mobile telephone services – wireless and WLL Not Applicable

18

5103

Internet and broadband services Not Applicable

19

5104

National long distance services Not Applicable

20

5105

International long distance services Not Applicable

21

5106

Public mobile radio trunk services Not Applicable

22

5107

Global mobile personal communication services Not Applicable

23

5108

Passive telecom infrastructure and tower facilities Not Applicable

24

5109

Cable landing stations Not Applicable

25

5121

Broadcasting and related services Not Applicable

26

5141

Other communication services not elsewhere specified Not Applicable

27

5406

Transmission or distribution of electricity Not Applicable

3. In exercise of the powers conferred by sub-section (1) of section 233B of the Companies Act, 1956 (1 of 1956), the Central Government being of the opinion that it is necessary to do so, hereby directs that all companies to which the Companies (Cost Accounting Records) Rules, 2011 apply, and which are engaged in the production, processing, manufacturing or mining of the products/activities included in the following product or activity groups [Table-II], and wherein the aggregate value of the turnover made by the company from sale or supply of all its products or activities during the immediately preceding financial year exceeds hundred crore of rupees; or 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 India, shall get its cost accounting records, in respect of each of its financial year commencing on or after the 1st day of January, 2013, audited by a cost auditor who shall be, either a cost accountant or a firm of cost accountants, holding valid certificate of practice under the provisions of Cost and Works Accountants Act, 1959 (23 of 1959).

Table-II

S no.

Product or Activity Group Code

Name of the Product or Activity Group

Central Excise Tariff Act (CETA) Chapter Headings covered in the Product or Activity Group

1

1002

Meat and Meat Products 0201 to 0210; 0410; 1601 to 1603

2

1003

Marine Products 0301 to 0307; 1604 to 1605

3

1004

Milk and Milk Products 0401 to 0406

4

1005

Poultry and Related Products 0407 to 0408

5

1006

Bee Products 0409

6

1010

Vegetables 0701 to 0714

7

1011

Fruits and Nuts 0801 to 0814

8

1012

Coffee and Coffee Products (incl. 210111) 0901

9

1013

Tea and Tea Products (incl. 210120) 0902

10

1014

Spices – processed or unprocessed 0903 to 0910

11

1015

Cereals, Flour and Product of Cereals 1001 to 1008; 1101 to 1109

12

1016

Oil Seeds and Products of Oil Seeds 1201 to 1208

13

1017

Other Seeds and Plants 1209 to 1214

14

1018

Vegetable Saps or Products 1301 to 1302; 1401; 1404

15

1019

Animal or Vegetable Fats and Oils 1501 to 1518; 1520 to 1522

16

1022

Sugar Confectionery or Chocolates 1704; 1806

17

1023

Cocoa Products 1801 to 1805

18

1024

Prepared Food Products 1901 to 1905; 2001 to 2009; 2101 to 2106; 2501

19

1025

Mineral Water and Aerated Drinks 2201 to 2202

20

1026

Alcoholic Beverages 2203 to 2206; 2208

21

1028

Vinegar 2209

22

1029

Food Residues or Prepared Animal Feed 2301 to 2309

23

1030

Unmanufactured and Manufactured Tobacco 2401; 2403

24

1031

Tobacco Products 2402

25

2001

Mineral Products 2502 to 2522; 2524 to 2526; 2528 to 2530; 2601 to 2621

26

2002

Cement 2523

27

2003

Mineral Fuels (other than Petroleum) 2701 to 2708

28

2009

Chemical Elements 2801 to 2805

29

2010

Inorganic Chemicals and their Derivatives 2806 to 2837; 2839 to 2850; 2852 to 2853

30

2011

Organic Chemicals and their Derivatives (excluding Bulk Drugs) 2901 to 2942

31

2013

Albuminoidal Substances, Starches, Glues and Enzymes 3501 to 3507

32

2014

Miscellaneous Chemical Products 3801 to 3807; 3809 to 3825

33

2021

Tanning Substances 3201 to 3202

34

2022

Colours, Dyes and Pigments 3203 to 3207; 3212

35

2023

Paints and Varnishes 3208 to 3211

36

2024

Inks and Colours 3213; 3215

37

2025

Plasters and Fillers 3214

38

2026

Essential Oils 3301 to 3302

39

2027

Personal Care Products 3303 to 3307; 8212; 9615 to 9616

40

2028

Soaps, Detergents and Cleaning Agents 3401 to 3402

41

2029

Lubricating Preparations 3403

42

2030

Waxes and Wax Products 3404 to 3407

43

2031

Explosives 3601 to 3603

44

2032

Fireworks, Matches and Combustible Materials 3604 to 3606

45

2033

Photographic and Cinematographic Goods 3701 to 3707

46

2034

Insecticides 3808

47

2035

Chemicals – Plastics and Polymers 3901 to 3915

48

2036

Articles of Plastics and Polymers 3916 to 3926

49

2037

Rubber and Rubber Products 4001 to 4010; 4014 to 4017

50

2038

Rubber Tyres and Tubes 4011 to 4013

51

3001

Raw Hides, Skins and Leather 4101 to 4107; 4112 to 4115

52

3002

Leather Products 4201 to 4203; 4205 to 4206

53

3004

Wood and Wood Products 4401 to 4421

54

3007

Pulp of Wood and other substances 4701 to 4707

55

3008

Newsprint 4801

56

3009

Paper and Paperboard 4802 to 4813

57

3010

Articles of Paper and Paperboard 4814; 4816 to 4823

58

3012

Silk 5001 to 5003

59

3013

Silk Yarn 5004 to 5006

60

3014

Silk Fabrics 5007

61

3015

Wool 5101 to 5105

62

3016

Wool Yarn 5106 to 5110

63

3017

Wool Fabrics 5111 to 5113

64

3018

Cotton 5201 to 5203

65

3019

Sewing Thread 5204; 5401

66

3020

Cotton Yarn 5205 to 5207

67

3021

Cotton Fabrics 5208 to 5212

68

3022

Other Textile Yarns or Fibers 5301 to 5303; 5305 to 5308

69

3023

Other Textile Fabrics 5309 to 5311

70

3024

Synthetic Yarns or Fibers 5402 to 5406; 5501 to 5511; 5601 to 5609

71

3025

Synthetic Fabrics 5407 to 5408; 5512 to 5516

72

3026

Carpets and textile floor coverings 5701 to 5705

73

3027

Other Textile Fabrics or Products 5801 to 5811; 5901 to 5911; 6301; 6305 to 6310

74

3028

Knitted or Crocheted Fabrics 6001 to 6006

75

3029

Apparel and Clothing 6101 to 6117; 6201 to 6217

76

3030

Furnishings 6302 to 6304

77

3031

Footwear and Parts thereof 6401 to 6406

78

3032

Headgear and Parts thereof 6501 to 6502; 6504 to 6507

79

3036

Articles of Stones, Plaster, Cement, Asbestos and Mica 6801 to 6815

80

3037

Ceramic Products 6901 to 6914

81

3038

Glass and Glass Products 7001 to 7011; 7013 to 7020

82

3039

Pearls, Diamonds, Stones and Jewellery Articles 7101 to 7118

83

4001

Primary Ferrous Materials 7201 to 7205

84

4002

Iron and Non-Alloy Steel 7206 to 7217

85

4003

Stainless Steel 7218 to 7223

86

4004

Other Alloy or Non-Alloy Steel 7224 to 7229

87

4005

Steel Products 7301 to 7326

88

4006

Copper and Copper Products 7401 to 7413; 7415; 7418 to 7419

89

4007

Nickel and Nickel Products 7501 to 7508

90

4008

Aluminium and Aluminium Products 7601 to 7616

91

4009

Lead and Lead Products 7801 to 7802; 7804; 7806

92

4010

Zinc and Zinc Products 7901 to 7905; 7907

93

4011

Tin and Tin Products 8001 to 8003; 8007

94

4012

Other Base Metals and their Products 8101 to 8113; 8301 to 8311

95

4013

Hand Tools 8201 to 8211; 8213 to 8215

96

4014

Nuclear Reactors and Accessories 8401

97

4015

Boilers and Accessories 8402 to 8404

98

4016

Engines or Motors and parts thereof 8405 to 8412

99

4017

Machinery and Mechanical appliances 8413 to 8484; 8486 to 8487

100

4018

Electric Motors, Generators, Transformers and Parts thereof 8501 to 8505

101

4019

Batteries and Accumulators 8506 to 8507

102

4020

Electrical and Electronic Equipments or Appliances 8508 to 8519; 8521 to 8523; 8525 to 8548

103

4021

Railway Rolling Stock 8601 to 8606

104

4022

Parts of Railway Rolling Stock 8607

105

4023

Railway Track Fixtures and Fittings 8608

106

4024

Containers 8609

107

4025

Commercial Vehicles (3 or more wheels) 8701; 8704 to 8707; 8709; 8716

108

4026

Passenger Vehicles (4 or more wheels) 8702 to 8703

109

4027

Parts and Accessories of Vehicles 8708; 8714

110

4029

Passenger Vehicles (2 and 3 Wheelers) – Motorised 8711; 8713

111

4030

Passenger Vehicles (2 or 3 Wheelers) – Non Motorised 8712; 8713; 8715

112

4031

Non-powered Aircraft and parts thereof 8801; 8803

113

4032

Aircraft, Spacecraft and parts thereof 8802 to 8803; 8805

114

4033

Parachutes and Rotochutes 8804

115

4034

Ships and Boats 8901 to 8904

116

4035

Floating Structures 8905 to 8908

117

4036

Optical Equipments and parts thereof 9001 to 9005; 9012 to 9013; 9033

118

4037

Photographic or Cinematographic Equipment and parts thereof 9006 to 9008; 9010 to 9011; 9033

119

4038

Measuring Instruments and parts thereof 9014 to 9017; 9023 to 9033

120

4039

Surgical or Medical Instrument and parts thereof 9018 to 9022; 9033

121

4040

Clocks or Watches and Parts thereof 9101 to 9114

122

4041

Musical Instruments and Parts thereof 9201 to 9202; 9205 to 9209

123

4043

Medical or Vehicular or other Furniture and Mattress and parts thereof 9401 to 9404

124

4044

Lights and Fittings 9405

125

4045

Prefabricated Buildings 9406

126

4046

Toys, games and sports Equipments 9503 to 9508

127

4047

Stationery Items 9608 to 9612

128

4048

Miscellaneous manufactured articles 9601 to 9607; 9613 to 9614; 9617 to 9618

Notes:

(a)  The Product or Activity Groups referred to in Table-I & II above shall include all products/activities included in the corresponding CETA Chapter Headings mentioned therein irrespective of whether Central Excise Duty is levied or not.

(b)  In respect of those Product or Activity Groups mentioned in Table-I above corresponding to which no CETA Chapter Headings are applicable, the product/activity groups shall include all such activities that fall under the meaning of the respective product/activity group and are covered by the related Cost Accounting Records Rules mentioned in para 2 above.

(c)  In case of all such activities that are covered under the Cost Accounting Records Rules mentioned in para 2 above that are also covered under cost audit but for which no Product or Activity Group has been indicated in Table-I above, companies would use the appropriate Product or Activity Group code as given in the notification issued vide S.O. 1747(E) dated 7th August, 2012.

(d)  Any company engaged in the production, processing or manufacturing of such inorganic or organic chemicals or any other substances that are primarily meant for pharmaceutical applications/use and are covered under the Cost Accounting Records (Pharmaceutical Industry) Rules 2011 shall be subject to cost audit as per the terms mentioned in para 2 above, irrespective of whether these are covered in the Product or Activity Groups mentioned in Table-II above.

(e)  Any company engaged in the storage, transportation or distribution of crude oil or gases or biogas or any or all types of petroleum products, and is covered by the Cost Accounting Records (Petroleum Industry) Rules, 2011 shall be subject to cost audit as per the terms mentioned in para 2 above.

(f)  Product Group No. 2008 – Electrical Energy mentioned in Table-I above would mean and be understood as generation of electrical energy or generation of electricity.

(g)  Product Group No. 1026 – Alcoholic Beverages mentioned in Table-II above would mean and include all products/activities covered in the Chapter Headings 2203 to 2208 of the Customs Tariff Act, 1975 (51 of 1975), excluding products of CETA Chapter Heading 2207 to the extent these are covered in the Cost Accounting Records (Sugar Industry) Rules, 2011.

(h)  In case of any Product or Activity Group where multiple units of measurement are in use for the products or activities covered therein, then the relevant Product or Activity Group shall be repeated against each unit of measurement separately.

 (i)  Wherever same CETA Chapter Headings have been shown against two or more Product or Activity Groups, the actual details shall be shown against the most appropriate Product or Activity Group.

4. Every company to which these orders apply shall get its cost accounting records audited in respect of each of its financial year commencing on or after the 1st day of January 2013, irrespective of whether the same was covered or not, either under the company specific cost audit orders issued prior to 31st March 2011 or under the industry specific cost audit orders issued after 1st April 2011 till date.

5. All companies that were earlier covered under industry specific orders dated 2nd May 2011 or 30th June 2011 or 24th January 2012 [subject to their meeting with the qualifying criteria mentioned therein] shall continue to comply with the earlier orders upto the financial year commencing prior to the 1st day of January 2013 and in continuum, with these orders in respect of each of its financial year commencing on or after the 1st day of January 2013.

6. Every company to which these orders apply shall follow the revised procedure for appointment of cost auditor as laid down vide Ministry of Corporate Affairs’ General Circular No. 15/2011 dated 11th April 2011 [as amended vide General Circular No. 36/2012 dated 6th November 2012].

7. The audit shall be conducted in such manner as will enable the cost auditor to prepare the report in accordance with the Companies (Cost Audit Report) Rules, 2011 read with the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2011, both as amended. The report of the cost auditor shall be forwarded to the Central Government, either by himself or by the lead cost auditor, in the prescribed XBRL format within the time stipulated under the Companies (Cost Audit Report) Rules, 2011.

8. If a company contravenes any provisions of these orders, the company and every officer thereof who is found to be in default, including the persons referred to in sub-section (6) of section 209 of the Companies Act, 1956, shall be punishable as per provisions under sub-section (2) of section 642 read with sub-section (11) of section 233B of the Companies Act, 1956 (1 of 1956).

9. These orders are subject to various clarifications issued by the Ministry of Corporate Affairs on the subject of cost audit; to the extent these are relevant and applicable. Any specific exemptions granted earlier to certain class of activities shall remain in force till further orders.

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