a. Since 2nd May 2011 to 6th November 2012, Costing Profession of CMA passes through Sea Level changes; desired destination of the Central Government, Ministry of Company Affairs to cover all production, processing, manufacturing and mining companies (meeting specific criteria) under Cost Accounting Records ;Cost Compliance as per Section (d) of 1 of 209 and Cost Audit as per Sec 233B of Companies Act 1956.
b. Let us travel through following paragraphs to understand the recent history and final status as of now
c. Order issued on 6th Nov, 2012 by MCA supersedes all the previous orders dated; (applicable to Specific Industries (Rules))
i. 2nd May 2011,
| 1. | Bulk Drugs | 1974 |
| 2. | Formulations | 1988 |
| 3. | Fertilizers | 1993 |
| 4. | Sugar | 1997 |
| 5. | Industrial Alcohol | 1997 |
| 6. | Electricity Industries | 2001 |
| 7. | Petroleum Industries | 2002 |
| 8. | Telecommunications | 2002 |
ii. 3rd May 2011,
| 1 | Cement | 1997 |
| 2 | Tyres & Tubes | 1967 |
| 3 | Steel Plant | 1990 |
| 4 | Steel Tubes and Pipes | 1984 |
| 5 | Paper | 1975 |
| 6 | Insecticides | 1993 |
iii. Vide G.S.R No 429(E) dated 3rd June 2011
1. MCA had supersession all Industry specified 36 Cost Accounting Record Rules
2. Before the supersession, MCA had made The Companies (Cost Accounting Records ) Rules by which, Ministry of Company Affairs had covered all production, processing, manufacturing and mining companies (meeting specific criteria) under maintenance of Cost Accounting Records.
3. The rules also specified all units and branches of the company to maintain Cost Accounting Records
4. The rules also specified the Company to submit the Compliance Report in the specified format duly authenticated by Audit Committee (Wherever applicable ) and Board of Directors and dully certified by Cost Accountant as defined in the Rules
iv. 30th June 2011 – Consequent upon the notification of The Companies (Cost Accounting Records ) Rules and to widen the scope earlier order dated 3rd May was modified to ;
a. Combined Steel Plant and Steel Tubes and Pipes in to one industry as Steel
b. Include 3 more Industries in to preview of Industry specified Mandatory Cost Audit
i. Glass
ii. Paints and Varnishes
iii. Aluminum
c. Include Intermediate Products or articles or all allied Products of all notified 8 Industry in to preview of Industry specified Mandatory Cost Audit
d. Cover the activities of all 8 notified Industry referring to their respective relevant chapter heading of the Central Excise Tariff Act , 1985
e. The note of the Order had also mentioned that Intermediate Products and articles or allied Products of notified 8 Industries are subject to cost audit irrespective of its specified as any chapter heading of the Central Excise Tariff Act.
v. 7th December , 2011 – Vide Notification 869(E), 870(E), 871(E), 872(E), 873(E), 874(E) ;
a. MCA had supersession 6 Specified Cost Accounting Record ( Industry) Rules
b. Before the supersession, MCA had made;
i. The Cost Accounting Records (Telecommunication Industry) Rules 2011
ii. The Cost Accounting Records (Petroleum Industry) Rules 2011
iii. The Cost Accounting Records (Electricity Industry) Rules 2011
iv. The Cost Accounting Records (Sugar Industry) Rules 2011
v. The Cost Accounting Records (Fertilizers Industry) Rules 2011
vi. The Cost Accounting Records (Pharmaceutical Industry) Rules 2011
c. The objective was ;
i. Make Rules at Par with The Companies Cost Accounting Record Rules (2011) which is applicable to all most all manufacturing sector. These covered uniform definition as per Rule 2 Definitions and Interpretations
ii. To specify the Industry Base production, processing, manufacturing and mining activities at Rule 2 of the respective Records ( ) Rules as to
1. Electricity Activities
2. Fertilizer Activities
3. Petroleum Activities
4. Bulk Drugs, Formulations, Pharmaceutical Activities
5. Sugar Activities
6. Telecommunication Activities
7. To include the word Intermediate Products and articles or allied Products or Activities
iii. To include & specify the word
1. including all units and branches,
2. the relevant and Respective Proformae A to …..at Rule 4(1) Maintenance of Records
iv. The above could give better understanding to classify the products or activities to specified industry. These are utmost necessary as cost audit criteria for these industries is 20 crores otherwise 100 crores.
vi. 24th Jan 2012 – The Cost Audit order specified ;
a. To include 9 more industry.
b. Preview Industry specified Mandatory Cost Audit to
i. Jute, Cotton, Silk, Woolen or blended fibers / textiles
ii. Edible Oil Seeds and Oils (including Vanaspati)
iii. Packaged Food Products
iv. Organic & In Organic Chemicals
v. Coal & Lignite
vi. Mining & Metallurgy of Ferrous & Non Ferrous Metals
vii. Tractor and other Motor Vehicles (including automotive components)
viii. Plantation Products
ix. Engineering Machinery (including Electrical and Electronics Products)
c. Include Intermediate Products or articles or all allied Products of all notified 9 Industry in to preview of Industry specified Mandatory Cost Audit
d. Cover the activities of all 9 notified Industry referring to their respective relevant chapter heading of the Central Excise Tariff Act , 1985
e. The note of the Order had also mentioned that Intermediate Products and articles or allied Products of notified 9 Industries are subject to cost audit irrespective of its specified as any chapter heading of the Central Excise Tariff Act.
f. The note had also clarified that the list exclude the items which were covered under earlier Order dated 30th June, 2011. This was required as the applicability of earlier order is to 11-12. While the order dated 24th January is applicable for the year 12-13.
vii. 7th August, 2012.- MCA had announced and notified vide S.O. 1747(E) dated 7th August 2012,
a. Product or Activity Group Code
b. Name of Product and Activity Group
c. Central Excise Tariff Act (CETA) Chapter heading under which (a) & (b) are classified
viii. 6th November, 2012
1. MCA had supersession all earlier Cost Audit Orders of even number dated 2nd May, 2011, 3rd May,2011, 30th June,2011, 24th Jan, 2012
2. Due to Supersession MCA made New Order in order to ;
a. Instead of having confusion of many Order to have simplicity of having One Cost Audit Order.
b. To widen the scope and coverage of Cost Audit
c. To meet the major requirement for Excise Department and Act as the base of Order is Product or Activity Group which is based on Central Excise Tariff Act (CETA) Chapter Headings
d. Besides (meeting specific criteria), to Classify as Table I for Cost Audit Order for aggregate value of Turn Over made by the company from sale or supply of all products or activities during the immediate preceding financial year ending exceeds Twenty Crores.
e. Besides (meeting specific criteria), to Classify as Table II for Cost Audit Order for aggregate value of Turn Over made by the company from sale or supply of all products or activities during the immediate preceding financial year ending exceeds One Hundred Crores.
3. The notes annexed Table II to specify that
a. Cost Audit is applicable irrespective of whether Central Excise Duty is levied or not
b. For Product or Activity Group for which No CETA Chapter of Table I is applicable even otherwise Cost Audit is also applicable as long as Products or Activities are covered by related Cost Accounting Record (Industry) Rules.
c. We know that Rule 2 of the respective Records ( ) Rules do specify
i. Electricity Activities
ii. Fertilizer Activities
iii. Petroleum Activities
iv. Bulk Drugs, Formulations, Pharmaceutical Activities
v. Sugar Activities
vi. Telecommunication Activities
vii. To include the word Intermediate Products and articles or allied Products or Activities
viii. It is also possible that there may not be specific CETA Chapter Heading as Per Table 1
ix. Yet Note C says that Cost Audit is also applicable for those activities and the Company should use appropriate Product or Activity Code as given in the Notification No 1747 (E) dated 7th August, 2011
d. Organic or Inorganic chemicals or substances that are primarily meant for pharmaceutical applications and use are covered under Pharmaceutical Rules irrespective of its entry listed at Table-II AND are subject to Cost Audit as Per Table I
e. Activities of storage or transportation or distribution of crude oil or gases or biogases or any or all types of Petroleum Products are covered under Petroleum Rules irrespective of its entry listed at Table-II AND are subject to Cost Audit as Per Table I
4. Company to which these Order applies will get its costing records audited The order is applicable from the FY commencing on or after 1st Jan, 2013 and shall be followed every year thereafter.
5. All the companies that were covered under the earlier orders dated 2nd May 2011, 3rd May 2011, 30th June 2011 and/ or 24th Jan 2012 shall continue to comply with the earlier orders up to the FY commencing on or after 1st Jan 2013 and in continuum, with this order in respect of each of its financial year commencing on or after 1st January, 2013.
6. Every company to which this order apply shall follow the revised procedure for appointment of cost auditor as laid down by MCA’s circular no 15/2011 dated 11th April 2011 ( as amended vide circular no 36/2012 dated 6th Nov 2012)
7. The Cost Audit Report shall be submitted to the central government either by himself or by the lead cost auditor in the prescribed XBRL format within the stipulated time of 180 days from the end on the FY
ix. (meeting specific criteria)
1. In preceding Paragraph we come across (meeting specific criteria)
2. This appears at both
a. Cost Compliance; Cost Accounting Records Rules
b. Cost Audit; Cost Accounting Report
3. Criteria’s are
a. Where in the company’s equity or debt are listed or are in process of listing on any stock exchange whether in India or outside India
b. Where in aggregate value of Net Worth as on last date of immediate preceding financial year exceeds five crores of rupees
c. Where in the aggregate value of turnover made by the company from sale or supply of all products or activities during the immediate preceding financial year exceeds Twenty Crores of rupees (Cost Compliance ,Cost Accounting Records Rules, Table I of Cost Audit Order dated 6th November 2012)
d. Where in the aggregate value of turnover made by the company from sale or supply of all products or activities during the immediate preceding financial year exceeds Twenty Crores of rupees (Table II of Cost Audit Order dated 6th November 2012)
x. Conclusion: The companies meeting above mentioned criteria are covered for Mandatory Cost Compliance and Cost Audit
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Author
CMA ROHIT J VORA
Controlling Partner
Rohit & Associates
Cost Accountants
Hello sir
does bio fertilizer, organic fertilizer covered under cost audit under the chapter head 31??