Obtain Certificate from Cost Auditor regarding compliance of section 224 (1- B) of the Companies Act, 1956.
Pass Board Resolution proposing appointment of cost auditor
The Company shall e-file its application with the Central Government on www.mca.gov.in portal, in the prescribed Form 23C within ninety (90) days from the date of commencement of each financial year, along with the prescribed fee as per the Companies (Fees on Application) Rules, 1999 as amended from time to time and other documents as per existing practice i.e.
(i) certified copy of the Board Resolution proposing appointment of cost auditor;
(ii) copy of the certificate obtained from the cost auditor regarding compliance of section 224 (1- B) of the Companies Act, 1956
However where a company is covered under cost audit for the first time vide cost audit order dated 2nd may 2011 , 3rd may 2011 , 30th june 2011 or 24th jan 2012 , the period of 90 days shall be counted from the date of concerned order. Every company has to follow the procedure prescribed vide MCA Circular No.15/2011 dated April 11 , 2011.
Prior approval would be deemed to have been granted if the Central Government does not raise any query within 30 days of filing of Form 23C.
In case the Central Government raises any query within the said period of 30 days, the company would be required to clarify the issues and re-submit the Form 23C. The period of 30 days, in this case, would run from the date of resubmission of Form 23C.
After obtaining approval of the Central Government (deemed or otherwise),the Company will be required to issue a formal letter of appointment to the cost auditor.
The Cost Auditor is required to inform the Central Government within thrity days of receipt of formal letter of appointment from the Company. Such intimation is required to be done in prescribed e-Form 23 D along with a copy of such appointment.
( a) Competent Authority :
As per provisions of section 233B(2), the Board of Directors of a Company can appoint a cost auditor after obtaining prior approval of the Central Government. Under the revised procedure, the first point of reference will be the Audit Committee to ensure that the cost auditor is free from any disqualification as specified under section 233B (5) read with section 224 and sub-section (3) or sub-section (4) of section 226 of the Companies Act, 1956. The Audit Committee should also ensure that the cost auditor is independent and is at arm's length relationship with the company. After ascertaining the eligibility, the Audit Committee will recommend to the Board of Directors for appointment of the Cost Auditor.
In those companies where constitution of an Audit Committee is not required by law, the functions of the "Audit Committee" as per the procedure will be discharged by the "Board of Directors".
( b) Disclosure to be made by Company in Annual Report:
The Company is required to disclose full particulars of the cost auditor along with the due date and actual date of filing of the Cost Audit Report by the cost auditor, in its Annual Report for each relevant financial year. Since the notification has made effective from April 1, 2011, companies under cost audit are required to furnish the details in its Annual Report from the financial year 2010-11.
Since the cost audit report of a particular financial year may not have been submitted before publication of the Annual Report, relevant details of due and actual date of filing for the last financial year and the due date of filing for the current year may be published in the Annual Report.
© Additional Fee for Late filing of Form 23C
Till 6th August 2012 , there were no penal provisions in the companies ( Fees on Applications) Rules, 1999 for delay in filing of Forms but as per MCA notification dated 7th August 2012 , the penal provisions have been made applicable which are given below.
Period of Delay Fee Payable with the Application
Up to 30 days
Two times of normal fee
More than 30 days and up to 60 days
Four times of normal fee
More than 60 days and up to 90 days
Six times of normal fee
More than 90 days
Nine times of normal fee
(d) Normal Fee as per the Companies (Fees on applications ) Rules , 1999 :
Application made by : Amount of Fees to be paid(Rs.)
1 A Company having an Authorised Share Capital of
(a) Less than Rs.25 Lakh 500.00
(b) Rs.25 Lakh or more but less than Rs.5 Cr 1000.00
(c) Rs. 5 Cr or More 2000.00
2. A company limited by Guarantee but not having a share capital 500.00
3. By an Association or proposed company for issue of licence
under section 25 of the Act 500.00
4. By a company having a valid licence issued under section 25 of the Act 500.00
5. By a Foreign Company 1000.00
PENAL PROVISIONS FOR NON-COMPLIANCE:
NON-COMPLIANCE BY COMPANY
If a Company contravenes any provision of this circular, the company and every officer thereof who is in default, including the persons referred to in sub-section (6) of Section 209 of the Act shall be punishable as provided under sub-section (2) of Section642 read with sub-section (5) and (7) of Section 209 and sub-section (11) of Section 233B of Companies Act, 1956.
Relevant provisions of Section 209 of the Companies Act, 1956 are as follows:
Sub-section (5) of Section 209 provides that if any of the persons referred to in sub-section (6) fails to take all reasonable steps to secure compliance by the company with the requirements of this section, or has by his own wilful act been the cause of any default by the company there under, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to ten thousand rupees, or with both:
Provided that in any proceedings against a person in respect of an offence under this section consisting of a failure to take reasonable steps to secure compliance by the company with the requirements of this section, it shall be a defence to prove that a competent and reliable person was charged with the duty of seeking that those requirements werecomplied with and was in a position to discharge that duty:
Provided further that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully.
Sub-section (6) of Section 209 provides that the persons referred to in sub-section (5) are the following, namely:—
(a) where the company has a managing director or manager, such managing director or manager and all officers and other employees of the company; and
(d) where the company has neither a managing director nor manager, every director of the company;
Sub-section (7) of Section 209 provides that if any person, not being a person referred to in sub-section (6), having been charged by the managing director, manager or Board of directors, as the case may be, with the duty of seeing that the requirements of this section are complied with makes default in doing so, he shall, in respect of each offence, be punishable with imprisonment for a term which my extend to six months, or with fine which may extend to ten thousand rupees, or with both.
Relevant provision of Section 642 of the Companies Act 1956 is as under:
Sub-section (2) of Section 642 provides that any rule made under sub-section (1) may provide that a contravention thereof shall be punishable with fine which may extend to five thousand rupees and where the contravention is a continuing one, with a further fine which may extend to five hundred rupees for every day after the first during which such contravention continues.
Non compliance by Cost Auditor:
DRAFT BOARD RESOLUTION - FOR APPOINTMENT OF COST AUDITOR
M/s ........................................................ held at the office of the Company on -------------------.
Secretary tabled the MCA order F.No.52/26/CAB -2010 Dt. 24-01-2012 ordering the Cost Audit of .................................................................................. for the year 2012-13.
The Chairman informed the Board that A.Krishna Dasan & Co , Cost Accountants have given their consent to act as cost auditor(s) and certificate for their independence and Arm’s Length relationship with the company and laid on the table the certificates received from A.Krishna Dasan & Co , Cost Accountants .
It was accordingly
RESOLVED that, pursuant to section 233B of The Companies Act, 1956 and subject to the approval of the Central Government A.Krishna Dasan & Co , Cost Accountants be and hereby appointed as the cost auditor(s) of the company to conduct audit of cost accounting records maintained by the Company for product(s)/Services covered under MCA Cost Audit Order(s) for the year ending on 31-03-2013 at a remuneration of Rs. ------------------ plus service tax and out-of pocket expenses.
FURTHER RESOLVED that the Secretary/Director of the company be and is hereby directed to submit the necessary application in Form 23 C to the Central Government and to do all such acts as may be necessary.
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