Company : Sol Infotech Pvt. Ltd. Website : www.courtkutchehry.com COST ACCOUNTING RECORDS (INDUSTRIAL ALCOHOL) RULES, 1997 CONTENTS 1. Short title and commencement 2. Application 3. Maintenance of records 4. Penalty SCHEDULE 1 :- . SCHEDULE 2 :- 2 COST ACCOUNTING RECORDS (INDUSTRIAL ALCOHOL) RULES, 1997 11. Published in the Guzette of India, Extraordinary, Part II. Sec. 3(1), dated 17th September, 1997 (w.e.f. 17th September. 1997). In exercise of the powers conferred by sub-section (1) of Section 642. read with cl. (d) of sub- section (1) of. Sec. 209 of the Companies Act, 1956 (1 of 1956) and in supersession of the notification of Government of India, Ministry of Law. Justice and Company Affairs (Department of Company Affairs) bearing G.S.R. 594 (E) dated 30th December, 1975 except as respects things done or omitted to be done before such supersession, the Central Government hereby make the following rules namely:- 1. Short title and commencement :- ( 1 ) These rules may be called the Cost Accounting Records (Industrial Alcohol) Rules 1997. (2) They shall come into force on the date of their publication in lhc Official Gazette. 2. Application :- They shall apply to every company engaged in the production or manufacture of Industrial alcohol which includes any grade or grades in the following categories, namely:- (i) Absolute Alcohol: (ii) Rectified Spirit: (iii) Denatured and special denatured spirit : (iv) Power Alcohol Provided that these rules shall not apply to company : (a) the aggregate value of the machinery and plant installed in the undertaking of the company does not exceed rupees sixty lakh as on the last day of the preceding financial vear, and for this purpose, the value of any machinery or plant shall be: (i) in the case of any machinery or plan! owned by the company, the cost thereof to the company: and (ii) in the case of any machinery or plant held by the company on lease or by hire purchase, the cost thereof as in the case of owner of such machinery or plant: and (b) the aggregate value of the turnover made by the company from the sale or supply of all its products during the preceding financial year does not exceed rupees ten crore. 3. Maintenance of records :- (a) Every company to which these rules apply shall, at regular intervals as well as each of its financial year commencing on or after the commencement of these rules, keep proper books of account containing, infer-alia, the particulars specified in Sch. 1 and 2 including proformas A1, A2, A3, B, C, Cl and D annexed to these rules, relating to the utilisation of materials, labour and other products of cost in so far as they are applicable to Industrial Alcohol referred to in rule 2, Provided that if the said company is manufacturing any other product(s) or is engaged in other activities in addition to products referred to in rule 2, the particulars relating to utilisation of materials, labour and other items of cost in so lar as they are applicable to such other products or activities shall not be included in the cost of the products or activities shall not be included in the cost of the product(s) referred to in rule 2. (b) The books of account referred to in sub-rule (a) shall be kepi on a regular basis in such a manner as to make it possible to calculate the cost of production and cost of sales of all types of Industrial Alcohol referred to in rule 2 at regular intervals as well as tor the financial year as a whole, from the particulars entered therein and every such books of account and the proforma specified in Schedules annexed to these rules shall be completed not later than ninety days from the closing of the financial year of the company to which they relate. (c) It shall be the duly of every person referred to in sub-section (b) and a person having been charged by the persons mentioned in sub-section (6) of Sec. 209 of the Companies Act, 1956 (1 of 1956) to take all reasonable steps to secure comepliance by the company with the provisions of sub-rules (a) and (b) of this rule in the same manner as the person is liable to maintain accounts required under sub-section (1) of Section 209 of the said Act. (d) Statistical and other records shall he maintained in accordance with the provisions of the schedules annexed to these rules, which shall be such as to enable the company to exercise as far as possible, control over the various operations and costs with a view lo achieve optimum economies in cost and provide the necessary data required by the Cost Auditor to suitably report on all the points referred to in Cost Audit (Report) Rules, 1996 , as amended from time to time. 4. Penalty :- If a company contravenes the provisions of rule 3 the company and every person, in default, referred to in sub-rule (c) of rule 3 shall subject to the provisions of Sec. 209 of the Companies Act, 1956(1 of 1956) he punishable with fine which may extend to rupees five hundred and where the contravention is a continuing one with a further Fine which may extend to rupees fifty for every day after the first day during which period such contravention continues. SCHEDULE 1 . (See Rule 3) 1. Materials.- (1) Proper records shall be maintained showing separately all receipts, issues and balances both in quantities and cost of each item of direct materials required and actually used in the production, processing or manufacture of different types of products referred to in rule 2 in any form or any type. These records for direct materials shall contain such details as to enable the company to determine the quantity, cost of receipt (including all direct charges upto the works in respect of all major direct materials), issues and balances of each item of direct material separately for imported and indigenous supplies for Industrial Alcohol produced. In case of imported materials including those canalised through government agencies, details of cost, freight, insurance charges (CIF value) custom duly, port charges, inland freight and handling and clearance charges paid shall be recorded separately. The basis on which the said quantities and costs of issue and consumption have been calculated shall be indicated in the cost records and followed consistently. (2) In case. where the Process material/Chemicals etc. required in the production of items referred to in rule 2 are manufactured by the company, separate records showing the cost of manufacture of each such item indicating the break up of raw materials consumed for the production and conversion cost shall be maintained to enable the company to determine the cost of such process materials/chemicals produced. The cost of molasses shall be worked out as per proforma 'Cl ' only. (3) In case any raw material/process chemicals covered under any Cost Accounting (Record) Rules prescribed under the Companies Act, 1956(1 of 1956) is manufactured by the company, proper cost accounting records shall also be maintained as per the relevant rules so as to arrive at the cost of such items. (4) Proper records shall be maintained to show the receipts, issues and balances, both in quantities and cost of each item of process material/chemicals, consumable stores, small tools and machinery spares. The cost shall include all direct charges upto works. (5) In the case of consumable stores and small components or tools the cost of which are insignificant, the company may. if it so desires, maintain records for such items as a group together. The cost of consumption of consumable stores, tools, and machinery spares shall be charged to the relevant cost centres on the basis of actual issues. (6) Proper records shall be maintained showing the quantity and value of wastages, spoilages, rejections and losses of raw materials, process materials, consumable stores, tools and machinery spares, whether in transit, storage, manufacture or at any other stage. The method followed for adjusting the above losses as well as the income derived from the disposal of rejected and waste materials including spoilages if any, in determining the cost of product shall he indicated in the cost records. Any abnormal wastages or spoilages etc. shall be indicated distinctly and separately along with reasons thereof. (7) Where Modified Value Added Tax (Modvat) is available on any item of material, the cost thereof shall he shown at net of MODVAT. 2. Salaries and Wages.- (1) Proper records shall be maintained to show the attendance and earnings of all employees of the cost centres/departments and the work on which they are employed. The records shall also indicate the following separately for each cost centre/department: (a) Piece rate wages (wherever applicable) : (b) Incentive wages individually or collectively as production bonus or under any other scheme based on output : (c) Overtime Wages: (d) Earnings of casual labour. (2) The records shall he maintained in such a manner so as to enable the company to furnish necessary particulars under this head in the various Annexure and Proforma of the Schedules 1 and 2 annexed to these rules. Where the employees work in such a manner that it is not possible to identify them with any cost centre/department, the labour charges shall be apportioned to the cost centres on equitable basis and applied consistently. (3) Idle time shall be separately recorded under classified headings indicating the reasons therefor. The method followed for accounting of idle lime payments in determining the cost of product shall be disclosed in the cost records. (4) Any wages and salaries allocable, to capital works such as additions to plant and machinery, buildings, or other fixed assets shall he accounted for under the relevant capital heads. 3. Service department expenses.- Detailed records shall be maintained to indicate expenses incurred in respect of each service department or cost centre like laboratory, welfare, transport etc. These expenses shall be apportioned to other services and production departments on equitable basis and applied consistently. Where these services are utilised for other products of the company, the basis of apportionment to the Industrial Alcohol referred to in rule 2 and to the other products shall be equitable and clearly indicated in the records and applied consistently. 4. Utilities.- (1) Water.- Proper records showing the quantity and cost of treated/ cooling water produced and consumed for the manufacture of Industrial Alcohol in different cost centres or departments shall be maintained in such detail as may enable the company to furnish the particulars as required in the prescribed proformae of Schedule - 2. The cost of treated water apportioned to the departments concerned shall he on a reasonable basis and applied consistently. (2) Steam- Where steam is raised by the company, proper records showing the quantity and cost of sleam raised and consumed in the production of Industrial Alcohol as referred to in rule 2 in different cost centres or departments shall be maintained in such detail as may enable the company to furnish the particulars as required in the prescribed proformae of Sch. II. The cost of sleam consumed by the Industrial Alcohol, plant and other units of ihe company shall be calculated on a reasonable basis and applied consistently. Where steam is raised and supplied by any other unit of the company to the Industrial Alcohol plant, the cost of steam so supplied shall be charged to Industrial Alcohol plant on a reasonable basis and applied consistently. (3) In case steam is generated in waste heat boiler of the captive Power Plant, proper records of value of heat so used shall be maintained so that its cost is debited to the steam cost and appropriate credit given to the cost of generated power. Where it is not possible to exactly quantify this heal, this should he done on reasonable technical estimates or other methods like heat per unit of sleam consumed in package boiler (main boiler) etc. (4) Power.- Proper records shall he maintained for the quantity and cost of power purchased in such detail as may enable the company to furnish the particulars as required in the prescribed proformae of Sch. II. Where power is generated by the company itself, adequate records shall he maintained to show the cost of power generated and consumed for the production of Industrial Alcohol in diferent cost centres and departments etc. Where power is generated and supplied by any other unit of the company to the Industrial Alcohol Plant, adequate records shall be maintained to indicate Ihe quantity and cost of power so supplied. The cost of power allocated to production of Industrial Alcohol referred to in rule 2 shall be on a reasonable basis and applied consistently. (5) Utilities other than water, steam and power.- Proper records shall also be maintained in respect of any other utilities other than water, steam and power produced or purchased by the company. If an utility is purchased, proper records showing the delivered cost upto the works including all direct charges shall be maintained for the quantity and value of each utility purchased. The cost of an utility allocated/apportioned to the cost centres and further to the individual products shall be on a reasonable basis and applied consistently. 5. Workshop/repairs and maintenance/tool rooms.- (1) Proper records showing the expenditure incurred by the workshop under different heads and on repairs and maintenance by the various cost centres and departments shall be maintained. The records shall also indicate the basis of charging workshop/tool room expenses to different cost centres/departments and units. Where maintenance work is done by direct workers of any production cost centre, the wages and salaries of such workers shall be treated as direct expenses of the respective cost centre. If the services are utilised for other products also, the manner ol charging a share to Industrial Alcohol, referred to in rule 2 shall be equitable and clearly indicated in records and applied consistently. (2) Expenditure on major repair works from which benefit is likely to accrue for more than one Financial year. shall be shown separately in the cost records indicating the method of accounting in determining the cost with reference to the period for which the benefit of such expenditure is likely to last. (3) The jobs carried out by workshops of Industrial Alcohol unit for other units of the company shall be charged on a reasonable basis and applied consistently. 6. Depreciation.- The basis on which depreciation is calculated and allocated/ apportioned to the various cost centres/departments and absorbed on the products shall be clearly indicated in the cost records. Depreciation chargeable to the different cost centres and departments shall be not less than the amount of depreciation chargeable in accordance with provisions of sub-section (2) of. Sec. 205 of the Companies Act, 1956(1 of 1956) and shall relate to plant, machinery and other fixed assets utilised in such cost centres/ departments. In case the amount of depreciation charged in the cost accounts in a financial year is higher than the amount of depreciation chargeable under the aforesaid provisions of the Companies Act, 1956 (1 of 1956). the amount so charged in excess shall be indicated clearly in the cost records. The cost records shall also show the effect of the said excess on the per unit cost of Industrial Alcohol referred to in rule 2. The cumulative depreciation charged in the cost records, against any individual item of asset shall not. however, exceed the original cost of the respective asset. 7. Royalty/technical know-how fee.- Adequate records shall be maintained showing the royalty or other recurring or non-recurring payments if any. made to collaborators or technology suppliers in terms of agreements entered into with them. Such records shall be kept separately in respect of each such supplier. The basis of charging such amounts including one time payments to the products shall be indicated in the cost records. 8. Other Overheads.- (1) Proper records shall be maintained showing the various items of expenses comprising the other overheads. These expenses shall be analysed, classified and grouped according to functions, viz. works, administration and selling and distribution. (2) Where the company is manufacturing any product(s) other than Industrial Alcohol referred to in rule 2, the records shall clearly indicate the basis followed for apportionment of the common overheads including head office expenses of the company to the Industrial Alcohol and other activities including capital works. Where certain expenses forming part of overheads can be identified with a particular activity or product, such expenses shall be segregated and charged to the relevant activity or product in the First instance and thereafter the residue common expenses under the above categories of overheads shall be apportioned on a reasonable and equitable basis and applied consistently. Overheads chargeable to capital works shall be indicated separately in the cost records. Basis of apportionment or absorption of overheads to the cost centres and products shall be indicated in the cost records. (3) The details of works, administration and selling and distribution overheads shall be maintained in such a manner as to enable the company to fill up the necessary particulars for filling the relevant annexures and Proforma of Schedule 1 and Schedule 2 annexed to these rules. 9. Conversion cost.-When more than one manufacturing process is carried out in a particular machine(s) or series of machines, adequate records about the usage of such machine(s) for different products shall be kept. The cost of using such machine(s) shall be charged to the different products on an equitable basis e.g. equipment usage hours. Where composite machine hour rates are applied for absorption of wages, overheads and equipment usage, proper records relating to the utilisation of labour and multi-purpose machine for different processes connected with the manufacture of different products shall be kept to enable determination of total machine hours and the amounts chargeable to the respective Industrial Alcohol referred to in rule 2. The variance between the actuals and the amount charged at pre-determined rates shall be adjusted for arriving at the actual cost of production at the end of the financial year. 10. Research and Development expenses.-(1) Proper records showing the details of expenses, if any, incurred by the company for the research and development work on the products covered under these rules according to the nature viz. development of products, existing and new: processes of manufacture, existing and new, design and development of new plant facilities and market research for the existing and new products etc. shall be maintained separately. (2) The method of charging these expenses to the cost of the products shall be indicated in the cost records. Where the utility of such research and development work extends over more than one financial year. such expenses shall be treated as deferred expenses and charged to cost of production of Industrial Alcohol referred to in rule 2 and to other products, if any, on a reasonable basis and applied consistently. (3) Expenses incurred by the Research and Development department for providing technical know-how to outsiders shall be recorded separately and excluded from the cost of Industrial Alcohol referred to in rule 2. The amount recovered for providing technical know-how to outsiders shall also be indicated separately. 11. Interest.- The amount of interest shall be allocated/apportioned to the products covered by these rules and other activities on a reasonable and equitable basis which shall be followed consistently. The basis of such apportionment shall be spell out clearly in the cost statements. Basis of further charging of the share of the interest to the various types of such products shall also he reasonable and the same shall be followed consistently. 12. Expenses/incentives on exports.- Proper records showing the expenses incurred on the export sales of the products covered by rule 2, if any, shall be separately maintained. so that the cost of export sales can be determined correctly. Separate Cost Statement shall he prepared lor products exported giving details of export expenses incurred/incentives earned. If the duty free imports have been made after actual production, the statements should reflect this fact. 13. Joint products.- Where more than one product which is of equal economic importance arises from processes, the cost upto the point of separation of products shall be apportioned to joint products on reasonable and equitable basis and shall be applied consistently. The basis on which such joint costs are apportioned to different products arising from the process/processes shall be indicated in the cost records. 14. Captive consumption.- Proper records shall bemaintained showing the quantity and cost of items referred to under rule 2 transferred to other department(s)/unit(s) of the company for captive consumption. Such transfers shall be effected at cost and shall be disclosed in the cost records. 15. Packing.- (1) Proper records shall be maintained showing the quantity and cost of various packing materials and other expenses incurred for packing the finished products for the marketing of Industrial Alcohol referred to under rule 2. Where such expenses are incurred in common for other products including those stated under rule 2, the basis of apportioning the expenses between the relevant products shall be clearly indicated in the cost records and applied consistently. If such packing materials are manufactured by the company, proper records showing the cost of production of such items shall be maintained. (2) Detailed records of the expenses incurred on export packing, if any, shall also be kept separately and exhibited in the relevant cost statements for exports. 16. Work in progress and finished goods stock.- The method followed for determining the cost of work in progress and Finished goods of Industrial Alcohol referred to in rule 2, shall be indicated in the cost records so as to reveal the cost elements that have been taken into account in such computation. The appropriate share of conversion cost upto the stage of completion shall be taken into account while computing the cost of work in progress. The method adopted for determining the cost of work in progress and finished goods shall be followed consistently. 17. Cost statements.- (1) Separate cost of sales statement in respect of different type of Industrial Alcohols produced and sold, if any. shall be maintained. (2) If the company is operating more than one plant/factory, separate cost statements as specified above shall be maintained in respect of each plant/factory. 18. Production records.- Quantitative records of all finished/packed production, issues for sales and balances of different types of products referred to in rule 2 produced by the company shall be maintained. The cost of all finished/ packed production shall be kept in detail for each type of product or in the form of control accounts provided the value of the balances according to such control accounts are reconciled periodically atleast once in a year with the value of the quantities shown in the quantitative account maintained for each type of products referred to in rule 2. 19. Reconciliation of cost and financial accounts. - (1) Cost records shall be reconciled with the financial hooks of account for the financial year as to ensure accuracy. Variations, if any, shall he clearly indicated and explained. The reconciliation shall be done in such a manner that profit of the product under reference can he correctly arrived at and reconciled with the over all profit of the company. (2) A statement showing the total expenses incurred and income received by the company under different heads of accounts and the share applicable to the products under rule 2 shall be maintained and reconciled with the financial accounts for the period. 20. Adjustment of cost variances.- Where the company maintains cost records on any basis other than actuals such as standard costing, the records shall indicate the procedure followed by the company in working out the cost of product under such system. The method followed for adjusting the cost variances in determining the actual cost of the product shall be indicated clearly in the cost records. The cost variances shall be shown against the relevant heads in the respective proforma of Sch. 2 annexed to these rules and analysed into material, labour, overheads and broken up into quantity, price, capacity utilisation etc. and shall be made regularly during the financial year. The reason for the variances shall be duly explained in the cost records. 21. Statistical records.- (1) Data regarding available machine hours/direct labour hours in different production departments and actually utilised shall also be maintained and shortfall suitably analysed. Suitable records for computation of idle time of machines shall be maintained. (2) Adequate records shall be maintained to enable the company to identify the capital employed, net fixed assets and working capital separately for each type of product or group of products as listed under rule 2 and other activities. Fresh investments on fixed assets that have not contributed to the production during the relevant period, shall be indicated in the cost record. The records shall, in addition show assets added as replacement and that added for increasing existing capacity. 22. Pollution Control.- Expenditure incurred by (he company on various measures to protect the environment like effluent treatment, control of pollution of air, waste etc. should be properly recorded. SCHEDULE 2 2 (See Rule 3) Proforma - A 1 Name of the Company ........................................................................................................ Name and address of the Factory ........................................................................................ Statement showing the cost of Treated/Cooling Water/Effluent Treatment during the year ending......................................................................................................................... Unit Current Year Previous Year 1. Installed Capacity 2. Production 3. Purchases 4. Total produced and purchased 5. Cosumption 6. Transit Losses 7. Production at 2 as a percentage of Installed capacity menioned at 1 above 5. Transit loss at 6 as a percentage of total production at 4 above