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MCA has started issuing notices for non-compliance with cost audit provisions

It is natural for the corporates to go soft on the compliance provisions with regard to any of the new compliances imposed by Ministry of Corporate Affairs. Applicability of Cost Audit to various industries is one of such provisions where many companies have taken it very lightly.

Though the Cost Audit became applicable on most of the companies with effect from 2011-12 yet the compliance rate seems to be average. However the Ministry of  Corporate Affairs had started the process of bringing more and more companies into cost audit net with the issue of Industry wise Cost Audit Orders for the first time on 2nd May 2011 and thereafter on 3rd May 2011, 30th June 2011, 24th Jan 2012. The last Cost Audit order was issued on 6th Nov 2012 after  suppressing all the earlier cost Audit Orders.

With issue of Cost Audit order on 6th Nov 2012, too much clarity was provided by MCA regarding the applicability clause and industries/product groups covered under cost audit.

MCA seems to be pretty serious on the issue of Applicability of Cost Audits.. Firstly, it allowed the corporate enough time beyond the stipulated time for filing of form 23C with MCA regarding appointment of Cost Auditor. The form 23 C for the year 2011-12 was allowed to be filed without any penalty for few months beyond the stipulated time period of 90 days. Then MCA invoked the provision related to charging of additional/late payment fees for late filing of Form 23C and the defaulting companies had to pay additional fees at the maximum rates.

After some time MCA issued notices to Cost Auditors who did not file the form 23D regarding acceptance of Cost Audit for the year 2011-12 within the 30 days of receiving of appointment letters. Various Cost Auditors had to provide written explanations to MCA in this regard.

India is a country where rules and regulations are not complied with willingly. Always some driving force is required to make the organisations comply with various regulations. This time MCA is driving the compliance with regard to the Cost Audits. It needs mention that now MCA has started issuing notices to the companies who had filed form 23C but did not file the Cost Audit Report for the year 2011-12.

The extract of the notices issued by MCA are as follows:

“ It has been noted that your company has not filed any cost audit report against the form 23C filed with MCA. Therefore you are requested to explain reasons of not complying with the laid down provisions for timely filing of Cost Audit Report. In case you have already filed, kindly provide necessary details along with SRN number and Date of filing.

Please ensure that your reply must reach this office by 31.08.2013”

Through this forum, many a times it has been intimated that companies must comply with the statutory provisions with regard to the Cost Audit or Cost Compliance at the earliest failing which the proceedings may be initiated against the officers-in-default.

It needs mention that the letters issued by MCA are being addressed to “The Managing Director” of the companies.

The companies which carry on the activities like manufacturing, mining, processing and production and having turnover exceeding 20 crores in the previous year or networth exceeding Rs 5 Crores in the previous year must recheck the applicability clause of Cost Compliance and Cost Audit once again and ensure that either the company has:

1. filed the cost compliance report for the year 2011-12 & 2012-13 or,

2. filed the cost audit report for 2011-12 and 2012-13, if applicable or filed both CCR and CAR

3. filed the form 23C for the years 2012-13 and 2013-14

4. got the form 23D for the years 2012-13 and 2013-14 filed by Cost Auditor.

Going by the steps undertaken by MCA with regard to the compliance of regulatory provisions for Cost Audit Or Cost Compliance Report, the companies must act on its own and initiate the process of fiing of Cost Compliance Reports or Cost Audit Reports.

Attention is drawn to the some of the various new industries which have been brought under cost audit/ cost compliance are:

1. Broadcasting

2. Real Estate

3.Jewellery

4. Food Processing

5. Furniture

6. Glass & others.

Navneet Kumar Jain

Partner

Jitender, Navneet & Co.

Cost Accountants

Delhi:Mumbai:Kolkata:Faridabad

Email: navneetic@yahoo.com

www.costaudit.org

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Category Audit, Other Articles by - CMA Navneet Kr Jain 



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