CMA Arif Farooqui

Ministry of Corporate Affairs has issued various Cost Audit Orders in Financial year 2011-12, some of which applicable from Financial Year 2011-12 itself and some become applicable in Financial Year 2012-13.

Various industries are being brought under Annual Cost Audit and there is remarkable sift from earlier practice of issuing company wise Cost Audit to industry wise Cost Audit Orders that too on Excise Classification Codes (Chapter of CETA 1985).

The ministry (MCA) issued the following Cost Audit Orders

Applicable on: Every Company including a foreign Company on which any of the following rules applicable—-

Order Date

Industries covered under Rules

Applicable from

2nd May 2011

Cost Accounting Records (Bulk Drugs) Rules, 1974

2011-2012

Cost Accounting Records (Formulation) Rules, 1988
Cost Accounting Records (Fertilizers) Rules, 1993
Cost Accounting Records (Sugar) Rules, 1997
Cost Accounting Records (Industrial Alcohol) Rules, 1997
Cost Accounting Records (Electricity Industry) Rules, 2001
Cost Accounting Records (Petroleum Industry) Rules, 2002
Cost Accounting Records (Telecommunications) Rules, 2002

 And wherein the —-

        i.            The aggregate value of Net Worth as on last date of immediately preceding financial year, exceeds Rs 5 Crores or

      ii.            Aggregate value of turnover of company during immediately preceding financial year, exceeds Rs 20 Crores or

    iii.            Company’s Equity or Debt Securities are listed or in the process of listing on any Stock Exchange, whether in India or Outside India.

Provided further,

All companies on which “The Companies (Cost Accounting Records) Rules, 2011” apply and which are engaged in Production, Processing, Manufacturing or Mining of the following products including intermediate products and articles or allied products there of –

Order Date

Industries Covered

Chapter Heading of CETA – 1985 Applicable from

30th  May 2011

Cement

Chapter 25, 38 and 68

2011-2012

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Tyres & Tubes

Chapter 40

Steel

Chapter 70 and 73

Paper

Chapter 47 and 48

Insecticides

Chapter 38

Glass

Chapter 70

Paints & Varnishes

Chapter 32

Aluminium

Chapter 76

Order Date

Industries Covered

Chapter Heading of CETA – 1985 Applicable from

24th  Jan 2012

Jute, cotton, silk, woollen or blended fibbers/textiles Chapters 50 to 63

2012-2013

Edible oil seeds and Oils (including vanaspati) Chapters 12 and 15
Packaged food products Chapters 2 to 25 (except Chapters 5, 6, 14, 23 & 24)
Organic & Inorganic Chemicals Chapters 28, 29, 32, 38 & 39
Coal & Lignite Chapter 27
Mining & Metallurgy of ferrous & non-ferrous metals Chapters 26 and 74 to 83 (except Chapters 76 and 77)
Tractors & other motor vehicles (including automotive components) Chapters 84, 85 and 87
Plantation Products Chapters 8, 9, 21 and 40,
Engineering machinery (including electrical & electronic products) Chapters 84 and 85

 And wherein the —-

        i.            Aggregate value of turnover of company during immediately preceding financial year, exceeds Rs 100 Crores or

      ii.            Company’s Equity or Debt Securities are listed or in the process of listing on any Stock Exchange, whether in India or Outside India

Companies (satisfying mention conditions) of above said industries shall get its Cost Accounting Records, in respect of each of its Financial Year Commencing on or after 1st April 2011 or 1st April 2012, as the case may be, 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 provision of The Cost & Works Accountants Act 1959

EXCEPTIONS

These Orders not applicable to the following.

a)      Provided that these orders shall not apply to a company which is a Body corporate governed by any Special Act.

b)      Generation of Electricity for Captive Consumption.

c)       Products manufactured for Captive Consumption.

d)      100 % Export Oriented Units.

NOTES

1.      Every company, to which these orders shall apply, shall follow the revised procedure for appointment of Cost Auditor.

2.      The Audit shall be conducted in such a manner as will enable the Cost Auditor to prepare the report in accordance with the Cost Audit (Report) Rules, 2001 as amended from time to time.

3.      The report of Cost Auditor shall be forward to Central Government (Ministry of Companies Affairs) in prescribed format (XBRL) within stipulated time under said Rules which is 30th September i.e. 180 days from end of the Financial Year.

4.      Ministry of Corporate Affairs vide their General Circular No. 18/2012 dated 26th July, 2012 has said that all Cost Auditors and the concerned Companies will be allowed to file their Cost Audit Reports and Compliance Reports for the year 2011-12 [including the overdue reports relating to any previous year(s)] with the Central Government in the XBRL mode, without any penalty, upto 31st December, 2012.

 PENALTIES

If a company contravenes any provisions of these rules, the company and every officer thereof who is in default,  shall be punishable as provided under sub-section (2) of section 642 read with sub-sections (5) and (7) of section 209 of Companies Act, 1956. Punishment includes fine or imprisonment or both.

Sources:  Orders and Circulars issued by Ministry of Corporate Affairs

  1. Order dated 2rd May 2011.
  2. Order dated 3rd May 2011.
  3. Order dated 30th June 2011.
  4. Master Circular No 2/2011, dated 11th November 2011
  5. General Circular No 67/2011, dated 30th November 2011.
  6. General Circular No 68/2011, dated 30th November 2011.

(Author can be reached at arif_cwa@yahoo.co.in)

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