This Gazette may contains Multiple Subjects

REGD. NO. D. L.-33004/99 The Gazette of India

EXTRAORDINARY

PART II—Section 3—Sub-section (i)

PUBLISHED BY AUTHORITY

No. 4911 NEW DELHI, FRIDAY, SEPTEMBER 28, 2001/ASVTNA 6,1923

3029 GI/2001

( I)2 THE GAZETTE OF INDIA: EXTRAORDINARY TPART II—SEC. 3(i)l 3 4 THE GAZETTE OF INDIA: EXTRAORDINARY fPARr II—SEC 3(i)l 5 6 THE GAZETTE OF INDIA: EXTRAORDINARY [PART II—SEC. 3(i)1 7 8 THE GAZETTE OF INDIA; EXTRAORDINARY IPART II—SEC. 3(111 9 3029072001—210 THE GAZETTE OF INDIA: EXTRAORDINARY [PART II—SEC. 3(i)l 1 12 THE GAZETTE OF INDIA: EXTRAORDINARY I P uu II—Si >• M wl 13 14 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—SEC. 3frtl 15 16 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC, 3(i)l 17 3029GI/2001—318 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—SEC. 3 fill 19 20 THE GAZETTE OF INDIA: EXTRAORDINARY [PART II—SEC. 3fi)l 21 22 THE GAZETTE OF INDIA: EXTRAORDINARY [PART II—SEC. 3M1 n24 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)l 25 26 THE GAZETTE OF INDIA; EXTRAORDINARY [PART II—SEC. 3 (i)l 27 ²⁸ THE GAZETTE OF rNDTAF.XTRAnRnfNARV rp.D Tii c™ IHM29 ³⁰ THE GAZETTE OF INDIA: EXTRAORDINARY FPABT TT—sCf> Viu 31 ^ •>

T HE G A Z E T TE OF I N D IA ; E X T R A O R D I N A RY

r P A RT 1 1 —S E C. 3 ( i) | MINISTRY OF LAW, JUSTICE AND COMPANY AFFAIRS

(Department of Company Affairs)

NOTIFICATION

New Delhi, the 28th September, 2001

G.S.R. 703(E).— in exercise of the powers conferred ty sub- section (1) of section 642, read with clause (d) of sub-section (1) of section 2nQ of the Companies Act, 1956 (1 cf 1 9 3 0, the Central Government hereby makes the following rules further to amend the Ccst Accounting Records (Aluminium) Rules, 19 72, namely, - 1 (D Thebe rules may be called the Cost Accounting Records (Aluminium) Amendment Rules, 2001.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Cost Accounting Records (Aluminium) Rules, 1972 (herein after referred to as the sajd rules),-

(a) for rule 2, the following rule shall be substituted, namely:-

" 2. Application.- They shall apply to every company engaged m the production, processing or manufacturing of any of the following products, namely :-

(1) Alumina (2) Aluminium (3) Aluminium ingots in any form or alloy (4) Aluminum rolled products including foil (5) Aluminum extruded products (6) Properzirod or Aluminum wire rod (7) Any other aluminium product or its alloy."

(b) in rule 3,-

(i) in sub-rule(1), after the words "after the commencement of these rules", the words, figures and letters "till the 31"' day of March, 2002 or the close of the relevant financial year in 2002" shall be inserted;

(ii) after suo-ruie(2), the following sub-rules shall be inserted, namely:-

"(2A) Every company to which these rules apply shall, in respect of each of its financial year commencing on or after the 1st day of April, 2002, keep proper books of account relating to utilization of materials, labour and other items of cost in so far as they are related to the production or processing or manufacturing of products under reference. The books of account, so maintained, shall contain, inter alia, the particulars specified in Schedule III annexed to these rules and Proformae A, B,C,D,E,F and G mentioned in the said Schedule : Provided that if the said company is manufacturing any other product(s)or is engaged in other activities in addition to manufacture of products under reference, the particulars relating to utilization of materials, labour and other items of cost in so far as they are related to the manufacture of such other products or activities shall not be included in the determination of cost of aluminium products referred to in rule 2. (2B) The books of account referred to in sub-rule (2A) shall be kept on a regular basis in such a manner as to make it possible to calculate the cost of production and cost of sales of each type of Aluminium products manufactured or produced for every financial year from the particulars entered therein. Every such books of account and the Proformae specified in the said Schedule III shall be completed not later than ninety days from the close of the financial year of the company to which it relates. (2C) The statistical and other records shall be maintained in accordance with the provisions of Schedule III, 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 to achieve optimum economies in cost. These records shall also provide the necessary data required by the Cost Auditor to suitably report on all the points referred to in the Cost Audit (Report) Rules, 1996, as amended from time to time" ;

?,ffl^i M h i; • / — 534 THE GAZETTE OF INDIA: EXTRAORDINARY [PART II—SEC. 3(i)| (iii) in s u b - r u le ( -•) , for the w o r d s, bra.-k^t^ r mi figures " p r o v i s i o ns of s u b - r u l es 111 a:,d i 2 ) ", the wor>ib, b r a c k e t s, figuift: and l e t t e r? " p r o v i s i o ns of s u b- rules ( 1 ), (2>, ( 2 A ), (2B) and i 2 C ) ", shall be s u b s t i t u t ed ;

(c) in the said r u l e s, after S c h e d u le I I, the f o l l o w i ng S c h e d u le and P r o f o r m ae A, B, C, D, E, F a nd G shall be i n s e r t e d, n a m e l y :-

"SCHEDULE III

[Sae rule 3(2A) ]

MATERIALS:

(1) The proper records shall be maintained showing separately all receipts, issues and balances both in quantities and cost of each item of raw material (including all direct charges upto the works in respect of major raw material such as Bauxite, Alumina, Carbon Anodes and other materials) required for the production of Aluminium products. Where the company have its own facilities to produce basic raw materials and intermediates such as Bauxite, Alumina, Carbon Anodes, etc., detailed records indicating the break up of raw materials consumed for their production and conversion cost, shall be maintained in such details so as to enable the ascertainment of the cost of these raw materials and intermediates. The basis on which said quantities and costs of issue and consumption have been calculated, shall be indicated in the cost records and followed consistently. In the case of imported raw materials, proper records shall be maintained showing FOB value, overseas freight, insurance, customs duty and inland freight charges. If both indigenous and imported materials are consumed, the records showing details of percentage mix of the same, have to be maintained for each item. In the case of imported raw material, proper records shall be maintained showing license-wise allowed quantities, actual quantities imported, actual quantities consumed, quantities in stock and quantities yet to be imported out of total licensed quantities.

(2) The proper records shall be maintained separately showing the receipts, issues and balances both in quantities and cost of each item of process material or chemicals such as caustic soda, lime, starch, solderberg paste, pot relining mix and other items used in the manufacture of the products under reference. The cost shall include all direct charges upto works.

(J) Where the company produces these process materials, separate records showing the cost of production of each such material indicating the break up of material consumed shall be maintained to determine the cost of process material produced. The basis on which the quantities and cost of issues and consumption of such materials produced or raised by the company are calculated, shall be indicated in the cost records and followed consistently.

(4) The issues, consumption of production materials shall be identified with the departments and cost centres.

(5) The proper records shall be maintained indicating the quantity as well as value of by-products recovered in different processes having significant value in relation to cost of material. In the case of certain by-products recovered, which cannot be reused in the process and are sold or disposed of without further processing, the realisation from such sales shall be recorded and adjusted against the process concerned. In case further processing is necessary to make the by-products usable or saleable, as the case may be, adequate records of the cost involved for such further processing shall be maintained. If such processing is done by any outside agency, proper records to show the quantity sent for processing, quantity received back after processing and cost incurred thereon shall be maintained in detail. The net realization, if any, shall be adjusted against the major process relating to such by-product. The cost of by-products shall be determined on equitable and reasonable basis and applied consistently. The records indicating the actual sales realization of by-products shall also be maintained.

(6) The proper records shall be maintained to show the receipts, issues and balances, both m quantities and cost of each item of consumable stores, other chemicals not covered by sub-rule (2), tools and machinery spares. The cost shall include all direct charges upto works.

(7) In the case of consumable stores and small tools the cost of which are insignificant, the company may, if it so desires, maintain such records for the group of such consumable stores and tools.

(8) The cost of consumption of consumable stores, small tools and machinery spares shall be charged to the relevant cost centre or department on t^ Ka s is of actual issues.

(9) The proper records shall be maintained showing the quantity and value of wastage, spoilage, rejections and losses of raw materials, process materials, consumable stores whether in transit, storage, manufacture or at any other stage. The method followed for adjusting the above losses dt well as the income d en -M from the disposal of rejected and16 THE GAZETTE OF INDIA: EXTRAORDINARY TPART II—SEC. 3(i)l , riH materials including spoilage, if any, in determining th- cost of product, shall be indicated in the cost records. Any abnormal wastage or spoilage or rejection shall be indicated distinctly and separately along with reasons thereof.

(10) The proper records shall also be maintained to indicate the value of raw materials and components, finished and semi- finished, which have not moved for more than twelve months.

(11) Where any credit under Central Value Added Tax (CENVAT) or any other benefits of the nature of CENVAT credit under the Central Excise Act, 1944 (1 of 1944), are available on any item of material, the cost of such material shall be shown after adjusting such credit or benefits.

(12) If any of the materials purchased is processed by an outside party, proper records shall be maintained for the quantity sent for processing, quantity received after processing, by-products received, if any, and the cost involved in processing.

2. SALARIES AND WAGES:

(1) The proper records shall be maintained to show the attendance and earnings of all employees of the cost centres or departments and the work on which they are employed. The records shall also indicate the following separately for each cost centre or department:

(a) piece rate wages (wherever applicable); (b) incentive wages, either individually or collectively as production bonus or under any other scheme based on output; (c) overtime wages; (

*(e) bonus or gratuity, statutory as well as other;

(f) contribution to superannuation scheme; (g) any other earning of similar nature.

s t (2) The records shall be maintained in such a manner as to enable the company to furnish necessary particulars under this head in Proformae A, B,C,D,E,F and G of Schedule III annexed'* to these rules. The records may be maintained to book these expenses cost centrewise or departmentwise with reference to activities related to production of Aluminium products. Where the employees work in such a manner that it is not possible to identify them with any cost centre or department, the labour charges shall be apportioned to the37 cost centres or departments on equitable and reasonable basis and applied consistently.

(3) The idle labour cost shall be separately recorded under classified headings indicating the reasons therefor. The method of accounting followed for accounting of idle time payments 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 be accounted for under the relevant capital heads. Similarly, payments m the nature of deferred revenue expenditure shall be separately recorded under separate classified headings indicating the reasons therefor. The method followed for accounting of such payments in determining the cost of the product shall be on equitable and reasonable basis and applied consistently. The said method shall be disclosed in the cost records also.

(5) Only such retirement cost, which are likely to provide benefits in terms of savings in cost m future shall be treated as deferred revenue expenditure. This amount shall be treated as extraordinary item. Therefore these expenses shall not form part of salary and wages and shall be shown separately as an abnormal item of expense. Similarly, excess of termination benefits for the past period payable over and above the provision made in this regard shall also be treated as abnormal item of expense. The expenses on account of only voluntary retirement scheme shall be excluded from valuation of inventories also for that period as these expenses do not result in putting the inventories to their present location and condition.

3. SERVICE DEPARTMENT EXPENSES:

The detailed records shall be maintained to indicate expenses incurred m respect of each service department or cost centre like laboratory, welfare, transport etc. These expenses shdll be apportioned to other services and production departments on equitable and reasonable basis and applied consistently. Where these services are utilized for other products of the company also, the basis of apportionment of such expenses 'to any type of Aluminium products and to the other products shall be on equitable and reasonable basis and applied consistently.

UTILITIES:

\1) Water:- The proper records showing the quantity and cost of treated or cooling water produced and consumed, if any, for the manufacture of any type of Aluminium products m different cost centres or departments, shall be maintained. The cost of treated or cooling water consumed by aluminium units and other units of the company shall be apportioned to the respective units on equitable and reasonable basis and applied consistently.

(2) Steam:- Where steam is raised by the company, proper records showing the quantity and cost of steam raised and consumed for the manufacture of the Aluminium products shall be maintained. The cost of steam consumed by the aluminium units and by other units of the company shall be apportioned on equitable and reasonable basis and applied consistently. Where steam is raised and supplied by any other unit of the company to the Aluminium plant, the cost of steam so supplied shall be charged to the Aluminium plant on actual cost basis.

(3) Power: - Where power is purchased, proper records shall be maintained for the units and cost of power consumed for the production of Aluminium products in different cost centres or departments. Where power is generated by the company itself, adequate records, showing all elements of cost shall be maintained to show the cost of power generated and consumed for the production of the Aluminium products in different cost centres or departments. Records shall also indicate installed capacity, number of units generated, losses and consumption in each cost-centre or department separately. Where power is generated and supplied by any other unit of the company to the Aluminium plant, adequate records shall be maintained to indicate the quantity and cost of power so supplied. The cost of power consumed by the aluminium units and other units of the company shall be apportioned on equitable and reasonable basis and applied consistently. The records shall state clearly the measures taken on conservation of energy and its corresponding impact on per unit cost of production.

(4) Other Utilities: - The proper records showing quantity and cost shall be maintained m respect of any other utilities produced or purchased by the company for the production or manufacture of Aluminium products.

(5) The cost statements for each utility shall be maintained separately m Proforma "A'.

5. WORKSHOP OR REPAIRS AND MAINTENANCE OR TOOL ROOMS:

(1) The proper records showing the expenditure incurred by the workshop or tool room under different heads and on repairs and maintenance in the various cost centres or departments shall be maintained. The records shall also indicate the basis of charging the workshop or tool room or repairs and maintenance expenses to different cost centres or departments. Where maintenance work is done by direct workers of any production cost centre or department, the wages and salaries of such workers shall be treated as direct expenses of the respective cost centre or department. If the services are utilized for other products also, the manner of charging a share of the cost of workshop or tool room or repairs and maintenance expenses to such products shall be on equitable and reasonable basis and applied consistently.

(2) In addition to the above, records shall indicate the amount and also the proportion of closing inventory of stores and spare parts representing items which have not moved for over twenty four months.

(3) The expenditure on major repair works from which benefit is likely to accrue for more than one financial year shall be allocated over the period expected to benefit, on equitable and reasonable basis and applied consistently. Such costs shall be shown separately and the method of accounting alongwith the basis of allocation of such costs shall also be clearly indicated in cost records.

6. DEPRECIATION:

Depreciation shall be allocated or apportioned to various cost centres or departments and absorbed on all products on equitable and reasonable basis and applied consistently which shall be clearly indicated in the cost records. If depreciation charged or chargeable to the cost centres or departments is in excess or lower than the depreciation calculated by applying the rates of depreciation prescribed under the provisions of sub-section (2) of Section 205 of the Companies A c t, 1956 (1 of 1956), such amount of excess or lower depreciation shall be indicated clearly in the cost records. The cost records shall also show the effect of such excess or lower depreciation as the case may b e, on the per unit cost of Aluminium product. The cumulative depreciation charged in the cost records, against any individual item of40 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC 3(i)| asset shall not, however, exceed the original cost of the respective asset.

7. OTHER OVERHEADS:

(1) The proper records shall be maintained for the products under reference showing the various items of expenses comprising the other overheads. These expenses shall be analyzed, classified and grouped according to functions, namely, works, administration, selling and distribution.

(2) Where the company is manufacturing products other than the Aluminium products, the records shall clearly indicate the basis followed for apportionment of the common overheads including head office expenses of the company to such products and Aluminium products, including capital works. Where certain expenses forming part of overheads can be identified with a particular activity or a product, such expenses shall be first segregated and charged to the relevant activity or product and thereafter the residual expenses under the above categories of overheads shall be apportioned on equitable and reasonable basis and applied consistently. The overheads chargeable to capital works shall be indicated separately in the cost records. The basis of apportionment or absorption of overheads to the cost centres or departments and the products shall be indicated in the cost records. The records shall be maintained in such a manner as to indicate the details of works, administration, selling and distribution overheads.

8. ROYALTY OR TECHNICAL KNOW-HOW FEE:

The adequate records shall be maintained showing royalty and/or technical know-how fee including other recurring or non-recurring payments of similar nature, if any, made for the products under reference to collaborators or technology suppliers in terms of agreements entered into with them. Such records shall be kept separately in respect of each such collaborator or supplier. The basis of charging such royalty amount, including lump sum payment, to the products, shall be at the point of incidence in accordance with the royalty agreement and shall be indicated in the cost records.

9. RESEARCH A ND DEVELOPMENT EXPENSES:

(1) The 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 of development of products, existing and new41 products and processes, development of process of manufacture, existing and new, design and development of now plant facilities and market research for the existing and new products, shall be maintained separately.

(2) The method of charging these expenses to the cost of Aluminium products and other 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 revenue expenses and charged to the cost of production of the Aluminium products and all other products if any, on equitable and reasonable basis and applied consistently. The detailed criteria on which it has been decided to extend the utility period of these expenses to more than one financial year shall be disclosed m the cost records. The following criteria, which are only indicative and not exhaustive, mdj- be adopted m such cases :

(1) the product or process is clearly defined and tne costs attributable to the product or process c be separately identified;

( n) the technical feasibility of the product _r process has been demonstrated;

( m) the management of the enterprise has indicated its intension to produce and market or use the product or process;

d v) there is a reasonable indication that current an 1 future research and development costs t_, b^ incurred on the project together witn expected production, selling and administrative cobts art likely to be more than covered bv related tjture revenues or benefits; and

(v) adequate resources exist or are reabcndbly expected to be available to complete the prcjec and market the product or process

(3) The expenses incurred by the Research ctnd Develot.me it Department for providing technical know-how to Dutsiaer- shall be recorded separately and excluded from the r<~st - Aluminium products. The amount recovered r^r p^o- i du technical know-how to outsiders shall also be no "d*.? , separately and excluded from the income arising from tr- -il of Aluminium products.

1029GI/2001—642 THE GAZETTE OF INDIA : EXTRAORDINARY [ P A R T I I ^ S E C. 3(iYI

10. QUALITY CONTROL:

The adequate records shall be maintained to indicate the expenses incurred in respect of quality control department or cost centre for products under reference. Where these services are also utilized for other products of the company, the basis of apportionment to Aluminium products and to other products shall be on equitable and reasonable basis and applied consistently.

11. INTEREST:

The proper records shall be maintained for interest charges paid. The amount of interest shall be allocated or apportioned to the products covered by these rules and other activities on equitable and reasonable basis and applied consistently. The basis of further charging of the share of interest to the various types of such pro'ducts shall also be equitable and reasonable and applied consistently. The basis of such allocation or apportionment shall be spelt out clearly in the cost records or statements.

12. EXPENSES OR INCENTIVES ON EXPORTS:

The proper records shewing the expenses incurred on the export sales, if any, of the products under reference shall be separately maintained so that the cost of export sales can be determined correctly. Separate cost statements shall be prepared for Aluminium products exported giving details of export expenses incurred or incentive earned. In case, duty free imports are made, the cost statements should reflect this fact. If the duty free imports have been made after actual production, the statement should reflect this fact 13. PACKING EXPENSES:

(i! The proper records shall be maintained showing the quantity and cost of various packing materials and other expenses incurred on packing for marketing of the Aluminium products. If such expenses are incurred in common for aluminium products and other products, these expenses shall be apportioned to relevant products on equitable and it-as enable basis and applied consistently.

(2) The detailed records of expenses incurred on export packing, if any, shall also be kept separately and exhibited in the relevant cost statements for exports.

1 4. WORK-IN-PROGRESS AND FINISHED STOCK:

The method followed for determining the cost of work-in- progress, wherever relevant, and finished stock of the Aluminium products shall be appropriate and shall be indicated in the cost records so as to reveal the cost element that have been taken into account in such computation. All conversion costs incurred in bringing the inventories to their present location and* condition, 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.

15. COST STATEMENTS:

(1) The cost statement showing details of installed capacity, production, wastage, issues and sales and all elements of cost of the current financial year and previous year shall re prepared for each process adopted in the production of Aluminium products in Proformae A,B,C,D,E,F and G.

\2> The product emerging from a process, which forms rav" material or an input material for a subsequent process, shaJ + be valued at the cost-of production up to the previous stage.

(3) If the company is operating more than one plant or factory, separate cost statements as specified above shall be prepared in respect of each plant or factory.

16. PRODUCTION RECORDS:

Quantitative records of all finished goods, whether packed or unpacked, showing production, issues for sales and balances of different type of the products under reference snail be maintained.

17. RECONCILIATION OF COST AND FINANCIAL ACCOUNTS:

(1, The cost statements shall be reconciled with tne financial statements for the financial year specifically indicating the expenses or incomes not considered in the o: st records or statements so as to ensure accuracy and to adiuoue the profit of the product under reference with the overall profit of the company. The variations, if any, shall K^ ^ iearly indicated and explained.

'2 A statement showing the total expenses incurred ami J n T>me received by the company under different heads ^f accounts and the share applicable to other products and the products under reference shall be prepared and reconciled with the financial statement.

18. ADJUSTMENT OF COST VARIANCES:

Where the company maintains cost records on any basis other than actual such as standard costing, the records shall indicate the procedure followed by the company in working out the cost of the product under such system. The cost variances shall be shown against the separate heads and analyzed into material, labour, overheads and further segregated into quantity, price and efficiency variances. 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 reasons for the variances shall be duly explained in the cost records or statements.

19 STATISTICAL RECORDS:

1) The records regarding available machine hours or direct labour hours in different production departments and actually atinized shall be maintained for production of Aluminium products under reference and shortfall suitably analyzed. Suitable records for computation of idle time of machines shall also be maintained and analyzed.

(?) The adequate records shall be maintained to enable the company to identify the capital employed, net fixed assets •ni working capital separately for the production or manufacture of products under reference and other products ^uiri other activities. Fresh investments on fixed assets for prodi. .'tion of aluminium products that have not contributed to rhe production during the year shall be disclosed separately in the cost records. The records shall, in addition, show assets added as replacement and those added for increasing e"noting capacity. Also such records as will enable to identify and/ur allocate gross fixed assets, accumulated depreciation upto the year and net fixed assets under the headr; land and building, plant and machinery, j_urniture and fi.xi.ares etc. employed for the production of products under reference alongwith the method and rate of depreciation shall b . maintained. The basis of 'apportionment of common assets t , the product(s) under reference shall also be indicated. In case of revaluation of assets, the same shall be m^^catf45 separately. The basis of allocation of indirect assets to the products under reference shall be on equitable and reasonable basis and applied consistently.

(3) Whenever WTO provisions are attracted, proper records shall be maintained to identify the competitiveness of the product in the domestic as well as global market and the expenses, if any, incurred to combat the competition arising out of WTO provisions. Adequate statistical records shall also be maintained to identify the market share of the oroduct manufactured and the likely impact thereon on account of competitive goods imported in to the country. These records shall indicate, inter alia,, the total volume of imports, names of importers, countries of origin and contain such empirical evidence as to show whether such imports can be construed as dumping and affecting the market share of the product. Proper records shall also be maintained, containing such details as may be necessary to show that the export price of the product is not such as to be construed as dumping in the importing country, by applying the provisions of WTO regarding anti dumping measures under Article VI of GATT 94.

20. CAPTIVE CONSUMPTION:

If any of the Aluminium product is used for captive consumption, proper records shall be maintained showing the quantity and cost of each item of Aluminium product transferred to other departments or units of the company for self-consumption and sold to outside parties. The rates at which the transfers are effected shall be at cost only.

21. POLLUTION CONTROL:

Expenditure incurred by the company on various measures to protect the environment like effluent treatment, control of pollution of air, water, etc., should be properly recorded.

22. HUMAN RESOURCES DEVELOPMENT:

Expenditure incurred by the company on the human resources development activity shall be recorded separately,

23. INTER COMPANY TRANSFER:

(1) In respect of related party transactions or supplies made or services rendered by a company to its holding company or subsidiary or a company termed * related party46 THE GAZETTE OF INDIA: EXTRAORDINARY TPART II—SEC. 3 (1)1 relationship" as defined below and vice-a-versa, records shall be maintained showing contracts entered into, agreements or understanding reached in respect of:

(a) purchase and sale of raw materials, finished products, process materials, chemicals and rejected goods including scraps, etc;

(b) utilisation of plant facilities and technical know-how; (c) supply of utilities and any other services; (d) administrative, technical, managerial or any other consultancy services;

(e) purchase and sale of capital goods including plant and machinery;

(f) any other payment related to production, processing or manufacturing of product under reference.

These records shall also indicate the basis followed for arriving at the rates charged or paid for such products or services so as to enable determination of the reasonableness of such rates in so far as they are in any way related to product under reference.

(2) The transactions by the following ^related party relationships" shall be covered under sub-rule(1) :~ (a) enterprises that directly, or indirectly through one or more intermediaries, control, or are controlled by, or are under common control with, the reporting enterprise (this includes holding companies, subsidiaries and fellow s u b s i d i a r i e s );

(b) associates and joint ventures of the reporting enterprise and the investing party or venturer in respect of which the reporting enterprise is an associate or a joint venture;

(c) individuals owning, directly or indirectly, an interest in the voting power of the reporting enterprise that gives them control or significant influence over the enterprise, and relatives of any such individual;

(d) key management personnel and relatives of such personnel; and

(e) enterprises over which any person described in (c) or (d) is able to exercise significant influence. This includes enterprises owned by directors or major shareholders of the reporting enterprise and enterprises that have a member of key management in common with the reporting enterprise.

However, tne r o l i o w mg snail not be aeemea as related party relationships":-

(a) two companies simply because they have a Director in common, notwithstanding paragraph (d) or (e) above (unless the Director is able to affect the policies of both companies in their mutual d e a l i n g s );

(b) a single customer, supplier, franchiser, distributor, or general agent with whom an enterprise transacts a significant volume of business merely by virtue of the resulting economic dependence; and

(c) the parties listed below, in the course of their normal dealings with an enterprise by virtue only of those dealings (although they m ay circumscribe the freedom of action of the enterprise or participate in its decision- making p r o c e s s );

(i) providers of finance; (ii) trade unions; (iii) public utilities; (iv) government departments and government agencies including government sponsored bodies.

Explanation:-For the purpose of these Rules, -

(a) "Related party relationships" means parties who are considered to be related if at any time during the reporting period one party has the ability to control the other party or exercise significant influence over the other party in making financial and/or operating decisions;

(b) "Related party transaction" means a transfer of resources or obligations between related parties, whether or not a price is charged;

(c) "Control" means

(i) ownership, directly or indirectly, of more than one-half of the voting power of an enterprise; or (ii) control of the composition of the Board of Directors in the case of a company or of the composition of the corresponding governing body in case of any other enterprise; or48 THE GAZETTE OF INDIA . EXTRAORDINARY [PART II—SEC. 3(i)l (iii)a s u b s t a n t i al interest in v o t i ng p o w er and the p o w er to d i r e c t, by statute or a g r e e m e n t, the financial and/or o p e r a t i ng p o l i c i es of the e n t e r p r i s e.

(d) " S i g n i f i c a nt i n f l u e n c e" m e a ns p a r t i c i p a t i on in the financial or o p e r a t i ng p o l i cy d e c i s i o ns of an e n t e r p r i s e, b ut n ot c o n t r ol of those p o l i c i e s;

(e) " A s s o c i a t e" m e a ns an e n t e r p r i se in w h i ch an investing r e p o r t i ng p a r ty h as s i g n i f i c a nt influence and w h i ch is n e i t h er a s u b s i d i a ry n or a joint v e n t u re of that p a r t y; (f) "Joint v e n t u r e" m e a ns a c o n t r a c t u al a r r a n g e m e nt w h e r e by two or m o re p a r t i es u n d e r t a ke an e c o n o m ic activity, w h i ch is subject to joint c o n t r o l;

KJ¹ "Joint c o n t r o l" m e a ns the c o n t r a c t u a l ly a g r e ed s h a r i ng of p o w er to govern the financial and o p e r a t i ng p o l i c i es of an e c o n o m ic a c t i v i ty so as to o b t a in b e n e f i ts from it;

(h) "Key m a n a g e m e nt p e r s o n n e l" m e a ns those p e r s o ns w ho have the a u t h o r i ty a nd r e s p o n s i b i l i ty for p l a n n i n g, d i r e c t i ng and c o n t r o l l i ng the a c t i v i t i es of the r e p o r t i ng e n t e r p r i s e;

(1) " R e l a t i v e" - in r e l a t i on to an i n d i v i d u a l, m e a ns the spouse, son, d a u g h t e r, b r o t h e r, sister, father and m o t h er w ho m ay c o n n e c t ed by b l o od r e l a t i o n s h i p; (3) "Holding c o m p a n y" m e a ns a h o l d i ng c o m p a ny w i t h in the m e a n i ng of S e c t i on 4 of the C o m p a n i es A c t, 1956(1 of ] 9f.f.) ;

(k) " S u b s i d i a r y" m e a ns a s u b s i d i a ry c o m p a ny w i t h in the m e a n i ng of Section 4 of the C o m p a n i es A c t, 1956(1 of 1 9 5 6 );

;1) "Fellow s u b s i d i a r y" m e a ns a c o m p a ny is said to be a fellow s u b s i d i a ry of a n o t h er c o m p a ny if b o th are s u b s i d i a r i es of the same h o l d i ng c o m p a n y;

(m) "State-controlled enterprise" means an enterprise which is under the control of the Central Government or a State Government.

24. RELINING OF POTS:

The proper records shall be maintained showing the expenditure incurred in the relining or patching up of pots. The records shall indicate the cost of pot relining mix, pot lining coke, side and bottom lining blocks, collector bars, insulating bricks, wages, sundry supplies and outside services, if any. The records shall also indicate the number of pots relined during the relevant period. Such expenses shall be charged to the cost of aluminium on equitable and reasonable basis and applied consistently which shall be clearly indicated in the cost records. The details of cost incurred for initial pot lining and starting at the time of commissioning a new smelter or a new set of pots shall be maintained. The cost incurred for re-starting of pots shall also be maintained separately. The treatment of such expenses in costs shall be clearly indicated in the cost records.

25. SCRAP LOSS AND MELTING LOSS

The proper records showing the quantify of scrap generated in the cast house while making ingot, billet, etc. and materials scrapped on account of sales returns, deterioration due to storage and handling or for any other reasons shall be maintained. The basis of ascertaining the loss on account of such materials and method of treat.ng the same in determining the cost of products shall be indicated in the cost records and applied consistently. Adequate records shall also be maintained showing the melting loss in the remelting furnace. Adjustment for realisation from dross shall also be clearly indicated in the cost records.

3029GI/2001—750 THE GAZETTE OF INDIA: EXTRAORDINARY FPABT TT—.W. VIM

PROFORMA. A'

Name of the company : Name and address of the factory :

Statement showing the cost of Utilities like Power, Steam, Water, etc., produced and consumed during the year/period :

A. Quantitative Information:

B. Cost Information :

Note 1.- Separate cost sheet is to be prepared for each utility as well as effluent treatment.

Note 2.- If any of the utilities or services, which are manufactured by the company and transferred to any other unit of the company or is sold to outside parties, the cost of sales and sales of realisation shall be worked out in detail showing all expenses as illustrated against serial number 27 to 32 in Proforma * C.

Proforma "B'

Name of the company : Name and address of the factory :

Statement showing the cost of Bauxite raised and transported to Alumina plant during the year/period :

Note 1.- Quantity of rejected Bauxite sold and the amount realized shall be indicated separately and be deducted from the cost of raising.

Proforma VC

Name of the company : Name and address of the factory :

Statement showing the cost of Alumina produced and sold during the year/period :

Note 1.- Separate proforma shall be prepared for the quantity used for captive consumption, quantity sold within the country and the quantity exported. Expenses incurred on export and the incentive earned thereon shall be indicated in the proforma applicable for the quantity produced and exported.

Note 2.- Separate proforma shall be prepared in respect of inter- company transfer referred to in para 23 of Schedule III.

Note 3.- The administrative overheads shall be included in the cost of production only to the extent they contribute in putting the goods produced to their present location and condition. The balance of administrative overheads, if any, shall be included in the cost of goods sold. The proforma may be amended accordingly, if required.

Proforma VD'

Name of the company : Name and address of the factory :

Statement showing the cost of Carbon Anod"s produced during the year/period :

Note 1.- If anodes are also sold, the cost of sales and sales realisation shall be worked out in detail showing all expenses as illustrated against serial number 27 to 32 in Proforma "C

3029G1/2001—858 THE GAZETTE OF INDIA: EXTRAORDINARY IPART H—SEC. 3(i)l

Proforma *E'

Name of the company : Name and address of the factory :

Statement showing the cost of Aluminum (Primary Metal) produced during the year/period :

M

Note 1.- If aluminium in pig form is made out of hot metal in the smelter, the pig making charges and the total cost of cold metal shall also be indicated in the above Proforma. If aluminium is sold in pig form/ the cost of sales and sales realisation shall also be shown in detail as illustrated against serial number 19 to 25 in Proforma "F'

Note 2.- The administrative overheads shall be included in the cost of production only to the extent they contribute in putting the goods produced to their present location and condition. The balance of administrative overheads, if any, shall be included in the cost of goods sold. The proforma may be amended accordingly, if required.

Proforma T'

Name of the company : Name and address of the factory :

Statement showing the cost of production, cost of sales, sales realisation and margin in respect of each of the Aluminum products such as Ingots, Billets, Rolled products, Extruded products, Wire rods and Foils, etc. produced during the year/period :

Note 1.- Seperate proforma shall be prepared for each type of Aluminium product.

Note 2,- Separate proforma shall be prepared for the quantity used for captive consumption, quantity sold within the country and the quantity exported. Expenses incurred on export and the incentive earned thereon shall be indicated in the proforma applicable for the quantity produced and exported.

Note 3.- Separate proforma shall be prepared in respect of inter- company transfer referred to in para 23 of Schedule III.

Note 4.- The administrative overheads shall be included in the cost of production only to the extent they contribute in putting the goods produced to their present location and condition. The balance of administrative overheads, if any, shall be included in the cost of goods sold. The proforma may be amended accordingly, if required.

Proforma "G'

Name of the company : Name and address of the factory :

Statement showing the total production and allocation of total actual expenses and income of the company among various Aluminium products and other activities for the year ending :

A. Production Data:

4.

5.

P e r c e n t a ge of ( 3) t o ( l) P e r c e n t a ge of ( 3) to (2)

B.Allocation of total expenses and income for the year ending :

64 THF. GA7PTTF nFTNDTA FYTPAnpnTMABV FD^^IT <:„„ i/;\i

Note.- All items of income and expenditure in this proforma shall be reconciled with the financial accounts for the relevant period."

[F.NO.52/16/CAB-2000]

A. RAMASWAMY, Jt. Secy.

Foot Note:—The principal Rules were published vide O.S.R. number 334, dated the 25th February, 1972 and subsequently amended vide:—

GSR 777,

GSR 26, GSR 549,

dated the 3 ' June, 1977 dated the 5'' January, 1983 dated the 22 d July, 1989 dated the 24 March, 1993 dated the 3¹ ' Aucmst, 1998

1. 2. 3. 4. 5.

GSR 3 0 9 ( E ), G SR 4 35 (E) .

Printed by the Manager, Qovt ol India Press, Ring Road, Mayapurl, New Delhi-110064 uriri Publlshsd bv th" Conlroller ol Publications, Delhl-110054 — 2001