[Submitted by CMA. Arif Farooqui,
Practicing Cost Accountant]
March 12, 2013
W.e.f from Financial Year 2011-12, Professional (CA, CMA, CS) signing MCA Annual Return have to certify whether Cost Accounting Record Rules -2011 (CARR) or Cost Audit Orders (CAO) are applicable on company or not and mention Product or Service Category Code (ITC/ NPCS 4 Digit Code). They have to certify it on Form 23 AC and Form 23 ACA on the following page:
Form 23 AC – On Page no 11, point VII,
Form 23ACA – On Page no 5, point IV.
Through this mechanism, Government will easily trace cases where CARR or CAO is applicable and company contravenes provisions of these rules.
Apart from this, now MCA Return will be filled in XBRL Format for below mention companies:
- Listed Companies and their Indian subsidiaries; or
- Companies having paid up capital of Rs 5 Crore and above; or
- Companies having turnover of Rs 100 Crore and above;
Cost Audit or Maintenance of Cost Records (as the case may be) are applicable on all companies whose return required to filled in XBRL format. XBRL makes data analysis much easier than earlier formats, so tracing of cases of contravenes of these rules will be easier.
Even before applicability of CARO & CARR, maintenance of Cost Records was mandatory for numbers of industries but submission was not. So except from listed companies, we rarely found any company maintaining Cost Records earlier although it was mandatory on thousands of companies. In Audit Report, Chartered Accountants have to mention about applicability of Section 209 (1) (d) of Companies Act 1956 but on going through earlier years Audit Report, you will surely come through numbers of audit report in which it mentioned that Section 209 (1) (d) of Companies Act 1956 not applicable although as per Companies Act, it is. Rarely in any case, disciplinary action been taken on such professionals because tracing of cases of contravenes of these rules was tough in earlier formats.
But now time has been changed, all thanks to Information Technology revolution (XBRL) which makes data analysis much easier than earlier formats and tracing of cases of contravenes of these rules easier.
So Professionals (CA, CMA and CS) has to be very sure about applicability of CARR or CAO before signing MCA Annual Return Forms. Incase default is made by them, disciplinary action will be taken, from their respective institute as well as from Ministry of Corporate Affairs (MCA)
With the help of my earlier articles I tried to clarify doubts about applicability of Cost Audit & Maintenance of Cost Records. Nowadays I receive quarries from professionals that Cost Audit / Cost Records are applicable on company but Annual Return filled without Cost Audit / Cost Records - Compliance Certificate, or they mentioned in Annual Return, that it is not applicable because they were unaware about its applicability.
What to do now????
In this case there are two situations
- Return has not approved as yet
- Return has been approved
Return has not approved as yet
Here you don’t need to lose sleep on your mistake. Follow the below mention steps for correction of your mistake.
- Inform respective Registrar of Companies about this mistake.
- Last date of filling of Cost Audit Report and Compliance Certificate of Cost Records has been extended till 28th February 2013. Now you should fulfil provisions of Cost Audit or Cost Records Compliances, as the case may be.
Return has been approved
If notice has not issued then, don’t worry. Follow the below mention steps for correction of your mistake.
- Filled a Corrigendum to respective Registrar of Companies.
- Last date of filling of Cost Audit Report and Compliance Certificate of Cost Records has been extended till 28th February 2013. Now you should fulfil provisions of Cost Audit or Cost Records as the case may be.
In case Ministry of Corporate Affairs has issued Notice, then you have to act/follow as per Notice.
Note: Remember that there is no such facility called “Revised Return” under Annual MCA Return.
Penalties for non compliance of Cost Audit Orders or Cost Records
Company and Officers
If a company contravenes any provisions of Cost Audit Orders (CAO) or Cost Accounting Record Rules – 2011 (CARR), the company and every officer thereof who is in default, including the persons referred to in sub-section (6) of section 209 of the Companies Act, 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 (1 of 1956).
That means Imprisonment up to Three Years or fine up to Rs. 10,000 or with both to Directors of company and every officer thereof who is in default.
If a Cost Accountant contravenes any provisions of these rules or default is made by him while in complying with the procedure, he will be punishable with fine up to Rs. 5000 and his Digital Signature may be barred from Ministry of Corporate Affairs (MCA) Portal.
That means apart from financial penalty, he will not be entitled to sign any MCA form. Apart from this institute too take disciplinary action against him.