MCA Notice- Non appointment of cost auditor for FY 16-17

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Aditi Gupta (Querist)
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15 December 2021 Has anyone else received notice from MCA stating that company was required to and have not appointed Cost auditor for FY 16-17 ?
In our case, the products are not specified products and moreover the company is into trading and hence Cost record and audit wa never applicable.
Can anybody suggest the way forward and what is the practice that is being followed for replying to the notice

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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09 July 2024 If your company has received a notice from MCA stating that it was required to appoint a Cost Auditor for FY 16-17 but did not do so, and you believe that cost audit was not applicable due to the nature of your business (trading and not dealing with specified products), here are the steps you can consider to respond to the notice:

### 1. Review the Notice Thoroughly

Carefully review the notice from MCA to understand the specific requirements and reasons cited for non-compliance.

### 2. Verify Applicability of Cost Audit

- **Nature of Business**: Confirm that your business activities align with the criteria exempting you from mandatory cost audit. Typically, cost audit is required for companies engaged in manufacturing or processing specified products as per the Companies (Cost Records and Audit) Rules.

- **Trading Activity**: If your business primarily involves trading and does not manufacture or process specified products, you may not fall under the mandatory cost audit requirement.

### 3. Gather Supporting Documents

- **Business Activities**: Gather documents that clearly demonstrate the nature of your business activities, such as business licenses, GST filings, financial statements, and any other relevant records that substantiate that your company is primarily engaged in trading.

- **Previous Communications**: If there have been previous communications with MCA or submissions explaining why cost audit is not applicable, gather these documents for reference.

### 4. Draft a Response

- **Explanation**: Prepare a detailed response explaining why your company believes it is not required to appoint a Cost Auditor for FY 16-17 based on the exemption criteria related to the nature of your business (trading).

- **Supporting Evidence**: Attach supporting documents that substantiate your explanation, such as copies of relevant sections from the Companies Act, rules exempting trading companies from cost audit, and any other relevant legal provisions.

### 5. Submit Response to MCA

- **Format**: Ensure your response is in the format requested by MCA, which may include physical submission or online submission through the MCA portal.

- **Timeline**: Adhere to the timeline provided in the notice for submitting your response. If additional time is needed, consider requesting an extension with valid reasons.

### Follow Up

- **Acknowledgement**: Monitor for acknowledgment of your response from MCA. If no acknowledgment is received within a reasonable period, follow up with MCA for confirmation of receipt.

- **Further Instructions**: If MCA requires additional information or documents, be prepared to provide them promptly to avoid delays in resolving the matter.

### Seek Professional Advice (if necessary)

- **Legal Counsel**: If the issue becomes complex or if you are unsure about the legal interpretations, consider seeking advice from a corporate lawyer or a consultant specializing in compliance matters.

By following these steps, you can effectively respond to the notice from MCA regarding the requirement to appoint a Cost Auditor for FY 16-17. Ensure that your response is comprehensive, well-supported with evidence, and addresses all aspects raised in the notice to facilitate a favorable resolution of the matter.

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