MINISTRY OF LAW, JUSTICE AND COMPANY AFFAIRS

(Department of Company Affairs)

NOTIFICATION

New Delhi, the 28th September, 2001

G.S.R.704(E).^ in exercise of the powers conferred by sub-section (1) of section 642,

read witn clause (d) of sub-section (1) of section 209 of the Companies Act, 1956 (1 of

1956), the Central Government hereby makes the following rules further to merge and

amend the Cost Accounting Records (Infant Milk Foods) Rules, 1974 and Cost

Accounting Records (Milk food) Rules,1986,namely>

(1) These rules may be called the Cost Accounting records (Milk food)

Amendment Rules, 2001.

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

Gazette.

In the Cost Accounting Records (Milk food) Rules, 1986 (hereinafter referred to

as the said rules), -

(a) in rule 2, -

(i) for sub-rule (1), the following shall be substituted, namely : -

" Application - (1) These rules shall apply to every company engaged in the

production, processing or manufacture of any type of milk food including Infant

Milk food such as milk powder, malted milk food, complementary or

supplementary food of infants and children, energy food or food drink under

any brand name,derivatives of milk such as icecream,chocolates,desi ghee

under any brand name excepting those companies falling under the category

of Small Scale Industrial Units" ;

(ii) for sub-rule (3) the following shall be substituted, namely >

" (3) For the purpose of these Rules, 'Milk food' means any food produced by

mixing whole milk, partly skimmed milk or milk powder with any other

ingredients, with or without addition of flavouring agents and spices, vitamins,

sugar or sweetening agents and includes all types of milk food intended for

the routine, complementary or supplementary food of infants and children or

intended for the feeding of infants and children during the treatment of gastro

intestinal disorders".

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[PARTII—SBC.3ffil

(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 31st day of March, 2002 or the close of the

relevant financial year in 2002" shall be inserted;

(ii) after sub-rule (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

insofar as they are related to the production or manufacture or processing of Milk

foods. 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, and D 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 product 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 Milk food 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 Milk food referred to in rule 2,

produced, processed or manufactured for every financial year from the

particulars entered therein. Every such books of account and the Proforma

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 relate.

(2C) The statistical and other records shall be maintained in accordance with the

provisions of the 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";

(iii) in sub-rule 4, for the words, brackets and figures "provisions of sub-rules

(1),(2) and (3)" the words, brackets, figures and letters "provisions of sub-rules

(1), (2), (3), (2A), (2B) and (2C)^H, shall be substituted.

and D shall be inserted, namely: -

"SCHEDULE III

[ See rule3(2A) ]

MATERIALS:

(1) The proper records shall be maintained showing separately all receipts,

issues and balances both in quantity and cost of each item of raw material

(including all direct charges upto the works in respect of major raw material)

required for the production of Milk Food. These records shall contain such details

so as to enable the company to determine the quantity and cost of receipt

(including all direct charges upto the works in respect of major raw material),

issues and balances in quantity as well as value of each item of all such raw

materials. 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 catalysts and additives used in the manufacture of the

product under reference. The cost shall include all direct charges upto works.

Proper records shall be maintained for determining the cost of collection of cocoa

beans, and processing into dry beans. The cost of dry beans delivered at the

factory shall include the costs of processing of wet beans and other incidental

charges incurred thereon and transportation expenses from the processing sites

to the factory.

(3) Where basic raw materials or ingredients are produced or farm products

raised by the company, 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 material produced. The basis on which the quantities

and costs of issues and consumption of such materials produced by the

company are calculated shall be indicated in the cost records and followed

consistently.

(4) The issues, consumption shall be properly identified with the departments,

cost-centres and products manufactured

(5) Proper records shall be maintained showing the quantity and cost of wet milk

procured at the different collection centres. Details showing the premiums paid

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[PARTD—SBC.3(01

for higher Fat Solid/ Non-fat content in the milk and deductions made for lower fat

solid non-fat (SNF) content shall also be kept. The cost records for wet milk shall

contain such details as to enable the company to determine the quantity and cost

of receipts ( including all direct charges incurred upto the works), issues and

balances. The rate charged for wet milk consumed for the manufacture of

product under reference shall be based on the actual fat SNF content of the

relevant quantity of milk consumed for the manufacture of such products. Where

the company operates its own transport for the transportation of wet milk, log

books shall be maintained to furnish the necessary particulars as required.

(6) 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 materials. In the case of certain by-products like ghee, husk

etc. 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 the cost incurred thereon shall be maintained in detail. The net realisation, if

any shall be adjusted against the major process relatable 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 realisation of by-

products shall also be maintained.

(7) Proper records shall be maintained to show the receipts, issues and

balances, both in 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.

(8) 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.

(9) The cost of consumption of consumable stores, small tools and machinery

spares shall be charged to the relevant cost centre/department on the basis of

actual issues.

(10) 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 as well as the income

derived from the disposal of rejected and waste materials including spoilage, if

any, in determining the 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.

(11) The 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.

(12) 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 should be

shown after adjusting such credit or benefits.

(13) 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.

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;

(d) earnings of casual labour/ contractual labour;

(e) bonus or gratuity, statutory as well as others;

(f) contribution to superannuation scheme;

(g) any other earning of the similar nature.

(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 and D 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 Milk food. 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 the 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.

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[PARTI^-SBC. 3(1)1

(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 in 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 c^f 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 costs, which are likely to provide benefits in terms of

savings in cost in 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 any 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.

SERVICE DEPARTMENT EXPENSES:

The 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 and reasonable basis and applied consistently. Where

these services are utilised for other products of the company also, the basis of

apportionment of such expenses to Milk food and to the other products shall be

on equitable and reasonable basis and applied consistency.

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

Milk food in different cost centres or departments shall be maintained. The cost

of treated or cooling water, consumed by Milk Food plant and other units of the

company shall be apportioned to 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 Milk

food shall be maintained. The cost of steam consumed by the Milk food 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 Milk food plant, the cost of steam so supplied shall be

charged to the Milk food 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 Milk food 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 Milk food 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 Milk food plant adequate records shall be maintained

to indicate the quantity and cost of power so supplied.

The cost of power

consumed by milkfood 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) Air-Conditioning; - The proper records shall be prepared to enable

determination of the cost of air-conditioning and its distribution cost centre-wise

or department-wise. The cost of air conditioning shall be apportioned to Milk food

on equitable and reasonable basis and applied consistently.

(5) Other Utilities: - The proper records showing quantity and cost shall be

maintained in respect of any other utilities produced or purchased by the

company for the production, processing or manufacture of Milk food .

(6) The Cost Statements for each utility shall be maintained seperately in

Proforma A.

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, tool room or repair

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 utilised for other products also, the manner of charging a

share of the cost of workshop or repairs and maintenance or tool room

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 & 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

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[PART I^-SBC. 3(01

consistently. Such costs shall be shown separately and method of

accounting and the basis of the allocation of such costs shall also be

clearly indicated in cost records.

DEPRECIATION:

Depreciation shall be allocated/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 Act, 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 be, on

the per unit cost of Milk food . 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.

OTHER OVERHEADS:

(1) The proper records shall be maintained for the product under reference

showing the various items of expenses comprising the other overheads. These

expenses shall be analysed, classified and grouped according to functions,

namely, works, administration, selling and distribution.

(2) Where the company is manufacturing products other than the Milk food , 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

Milk food, 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.

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 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.

ROYALTY/TECHNICAL KNOW-HOW FEE

The adequate records shall be maintained showing the royalty and/or technical

know-how fee including other recurring or non-recurring payments of similar

nature, if any, made for the product 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 royalty agreement

and shall be indicated in the cost records.

9.

RESEARCH AND 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 product covered under

these rules according to the nature of development of products, existing and new

products and processes, development of process of manufacture, existing and

new, design and development of new 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 Milk food 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 expenses and charged to the cost of

production of the Milk food and all other products if any, on equitable and

reasonable basis and applied consistently. The following criteria which are only

indicative and notexhaustive may be adopted in such cases:

(i) The product or process is clearly defined and the costs attributable to the

product or process can be separately identified.

(ii)The technical feasibility of the product or process has been demonstrated.

(iii)The management of the enterprise has indicated its intention to produce and

market, or use, the product or process.

(iv)There is a reasonable indication that current and future research and

development costs to be incurred on the project together with expected

production, selling and distribution costs are likely to be more than covered by

related future revenues/benefits; and

(v)Adequate resources exist, or are reasonably expected to be available, to

complete the project and market the product or process.

(3) The 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 Milk food.

The amount recovered for providing

technical know-how to outsiders shall also be indicated separately and excluded

from the income arising from the sale of Milk food.

THE GAZETTE OF INDIA: EXTRAORDINARY

[PARTII—SEC.3(01

10.

QUALITY CONTROL:

The adequate records shall be maintained to indicate the expenses incurred in

respect of quality control department or cost centre for product under reference.

Where these services are also utilised for other products of the company, the

basis of apportionment to Milk food 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 product covered by these rules

and other activities on a equitable and reasonable basis and applied consistently.

The basis of further charging of the share of the interest to the various types of

such products 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 showing the expenses incurred on the export sales, if any, of

the Milk food shall be separately maintained so that the cost of export sales can

be determined correctly. Separate cost statement shall be prepared for Milk food

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 also.

13.

PACKING EXPENSES:

(1) The proper records shall be tYiaintained showing the quantity and cost of

various packing materials and other expenses incurred on packing for marketing

of the Milk food . If such expenses are incurred in common for Milk Foods and

other products, these expenses shall be apportioned to relevant products on

equitable and reasonable basis and applied consistently.

(2) The 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.

14. WORK-IN-PROGRESS AND FINISHED STOCK:

The method followed for determining the cost of work-in-progress and finished

stock of the Milk food 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 be prepared for each process adopted in manufacture or

production of Milk food in Proformae A,B, C and D.

(2) The product emerging from a process which forms raw material or an input

material for a subsequent process shall 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 produced by the company shall be maintained.

17.

RECONCILIATION OF COST AND FINANCIAL ACCOUNTS:

(1) The cost statements shall be reconciled with the financial statements for the

financial year specifically indicating the expenses or incomes not considered in

the cost records or statements so as to ensure accuracy and to adjudge the profit

of the product under reference with the overall profit of the company. The

variations, if any, shall be clearly indicated and explained.

(2) A statement showing the total expenses incurred and income received by the

company under different heads of 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 analysed into material,

labour, overheads and further segregated into quantity, price and efficiency

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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 utilised shall be maintained for

production of Milk food and shortfall suitably analysed. Suitable records for

computation of idle time of machines shall also be maintained and analysed.

(2)The adequate records shall be maintained to enable the company to identify

the capital employed, net fixed assets and working capital separately for the

production or manufacture of product under reference and other products and

other activities. Fresh investments of fixed assets for production of Milk Food

that have not contributed to the 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 existing capacity. Also such

records as will enable identification and/or allocate gross fixed assets,

accumulated depreciation upto the year, net fixed assets under the heads; Land

& Buildings, Plant & Machinery, Furniture & Fixtures etc. employed for the

production of

product under reference,

along with the method and rate of

depreciation shall be maintained. The basis of apportionment of common assets

to the products(s)under reference shall also be indicated. In case of revalution of

assets, the same should be indicated separately. The basis of allocation of

indirect assets to the respective product under reference should be reasonable,

equitable and shall be followed consistently.

(3)Data such as percentage of fat and solid non fat contained in wet milk

purchased and consumed shall be maintained. The overall fat and solid non fat

contents of milk based raw materials consumed in production during the year

shall be reconciled with the solid non fat and fat contents of the total output.

(4) 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 product 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.

CAPTIVE CONSUMPTION

If Milk food is used for captive consumption, proper records s£iaU-fc>£

maintained showing the quantity and cost of each item of Milk food transferredio

other departments or units of the company for self-consumption. 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 TRANSACTIONS:

(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 party 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 subsidiaries);

(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

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FPARTH-SEC 36)1

(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, the following shall not be deemed 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 dealings);

(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 may

circumscribe the freedom of action of the enterprise or participate in its

decision-making process);

providers of finance;

(iij

trade unions;

On)

public utilities;

(ivj

government departments and government agencies including

government sponsored bodies.

€xplanation:-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; or

(iii)a substantial interest in voting power and the power to direct, by statute

or agreement, the financial and/or operating policies of the enterprise

(d)

"Significant influence" means participation in the financial or operating

policy decisions of an enterprise, but not control of those policies;

(e)

"Associate" means an enterprise in which an investing reporting party

has significant influence and which is neither a Subsidiary nor a joint

venture of that party;

(f)

"Joint venture" means a contractual arrangement whereby two or more

parties undertake an economic activity, which is subject to joint control;

(g)

"Joint control" means the contractually agreed sharing of power to

govern the'financial and operating policies of an economic activity so as to

obtain benefits from it;

(h)

"Key management personnel" means those persons who have the

authority and responsibility for planning, directing and controlling the

activities of the reporting enterprise;

(i)

"Relative" - in relation to an individual, means the spouse, son, daughter,

brother, sister, father and mother who may connected by blood

relationship;

(j)

"Holding company" means a holding company within the meaning of

Section 4 of the Companies Act, 1956(1 of 1956);

(k)

"Subsidiary" means a subsidiary company within the meaning of Section

4 of the Companies Act, 1956(1 of 1956);

(I)

"Fellow subsidiary" means a company is said to be a fellow subsidiary of

another company if both are subsidiaries of the same holding company;

(m)

"State-controlled enterprise" means an enterprise which is under the

control of the Central Government or a State Government.

PROFORMAA

Name of the company

Name and address of the factory

Statement showing the cost of Utility like Power, Steam, Water, Effluent treatment

etc., produced and consumed during the year/period

Quantitative Information;

Serial

Number

Particulars

Installed capacity

Quantity produced

Capacity utilisation

Quantity re-circulated

Quantity purchased

Consumption in power house

including other losses

Net quantity consumed

Current Year (unit)

Previous Year

(unit)

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART B—SEC. 3(ffl

Cost Information:

Serial

Number

A 1 .

10.

particulars

Materials(specify)

(a)

(b)

(c)

Utilities(specify)

(a)

(b)

(c)

Consumable stores

Salaries and wages

Repairs and maintenance

Other overheads

Depreciation

Total

Less:Credit,if any

Net Total

Quan

tity

Rate

(Rupees)

per unit

Amount

(Rupees)

(In lacs)

Cost

per

Unit

(Rupees)

Current

Year

Apportioned to

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, separate cost

sheet shall be prepared in proforma-C in respect of such sale or transfer, which shall be

effected at cost of sales of respective utility.

PROFORMA B

Name of the company

Name and address of factory:

Statement showing the cost of wet milk/dry cocoa beans/cocoa powder.malted

product/malt extract/flow malt mix/intermediate of Milk food etc. produced during the

year ended^

Quantitative Information:

Serial

Number

10.

11.

Particulars

Installed capacity

Gross Inputs

Output

Yield %

Standard yield %

Quantity captively consumed

Opening stock

Closing stock

Total quantity of wet milk

received

Average fat content of wet milk

received

Average solid non-fat content of

the wet milk received

in Metric I onnes

Current Year

Previous Year

Cost Information:

Serial

Number

Particulars

Material cost(item

wise covering 80% of

value)

(a)

(i)lmported

(ii)lndigenous

(iii)Own produced

(iv)Own manufactured

(b)

((i)lmported

(li)lndigenous

(lii)Own produced

(iv)Own manufactured

Quanti

Rate

(Rs)

Amount

(Rupees)

(In lacs)

Quantity per

unit

Current

Year

Previo

Year

Cost per

unit

(Rupees)

Current

Year

Prevlou

s Year

THE GAZETTE OF INDIA: EXTRAORDINARY

[PAKTII—SBc3(ffl

10.

11.

12.

13.

(c)Other

materials(specify)

(d)Total Raw-

Materials(a to c)

(e)Less:By-Products and

Recoveries

(f)Net cost of raw-

materials (d-e)

Process Chemicals

(a)Sodium Bicarbonate

(b) Sugar

(c)Others(specify)

Direct Wages and

Salaries

Utilities

(a)Power

(b)Steam

(c)Water

(d)air-conditioning

(e)brine

(f)Chilled water

(g)Effluent treatment

plant

(h)Others

(i)Total (a to h)

Consumable Stores and

spares

Other expenses

(to be

specified)

Depreciation

Repairs and

maintenance

Royalty

Research and

development

Quality control

Other Factory overheads

Administrative

overhead

(a)Salaries

and wages

(b)Others

(Please specify)

14.

15.

16.

17.

18.

19.

20.

Total(1 to 12)

Less: Credits (from

wastages

and by-

products)

Stock adjustment (work

in progress)

Cost of Production

Stock adjustment

(finished products)

Net cost of

Production

Apportioned to:

2. ( specify)

Note 1.- Separate proforma shall be prepared in respect of each type of

intermediate for the product under reference.

2.- Separate Proforma shall be prepared in format C in respect of

inter-company transfers referred to in para 23 of the Schedule III.

3.- Reasons for variations between standards and actuals shall be

clearly recorded. Circumstances leading to revision of standards, if

any, shall also be indicated in the form of a foot note.

4.- If any of the intermediates produced or manufactured by the

company is transferred to any other unit of the company or is sold to

outside parties, separate cost sheet shall be prepared in Proforma -

C in respect of such sale or transfer, which shall be effected at cost

of sales of the respective product.

5.- The rate charged for wet milk consumed for manufacture of any Milk food

shall be based on the actual fat contents of the relevant quantity of milk

consumed for the said purpose.

6.- Other expenses shall specify and feature expenses such as expenses at

chilling centres, transportation cost, hire charges paid for transportation

etc.

7.- The administration 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

administration overheads, if any, shall be included in the cost of

goods sold. The Proformae may be amended accordingly, if

required.

3030 Gl/2001—7

5 0

THE GAZETTE OF INDIA: EXTRAORDINARY

PART II—SEC. 3ffil

Proforma C

Name of the company

Name and address of the factory

Statement showing the summary cost of sales, sales realisation and margin in

respect of each type of Milk food produced/manufactured and sold during the

year/period

Quantitative Information.

Serial

Number

Particulars

Installed capacity

Quantity produced

Capacity utilization

Quantity sold

(a)Domestic

(b)Export

Quantity, captively consumed

Waste percentage

Closing stock(fin.goods)

Opening stock(fin.goods)

Current Year

Metric Tonnes

Previous Year

Cost Information:

Serial

Number

Particulars

Material cost(itemwise

covering 80% of value)

(a)

(i)lmported

(ii)lndigenous

(iii)Own manufactured

(b)

((i)lmported

(ii)lndigenous

(iii) Own manufactured

(c)Other materials(specify)

(d)Total Raw- Materials(a

toe)

Quan

tity

Rate

(Rupees)

Amount

(Rupees)

(In lacs)

Per

Metric

Tonne

(Rupees)

Current

Year

10.

11.

12.

13.

14.

15.

16.

17.

18.

(e)Less:By-Products and

Recoveries

(f)Net cost of raw-

materials (d-e)

Process Chemicals

(a)Catalysts

(b)Additives

Direct Wages and

Salaries

Utilities

(a)Power

(b)Steam

(c)Water

(d)air-conditioning

(e)Effluent treatment plant

(f)Others

(g)Total (a to f)

Consumable Stores and

spares

Depreciation

Repairs and

maintenance

Royalty

Research and

development

Quality control

Other Factory overheads

Administrative

overhead

(a)Salahes

and wages

(b)Others

(Please

specify)

Total(1 to 12)

Stock adjustment

(Work in Progress)

Less: Credits (from

wastages

and by-

products)

Cost of Production

Stock adjustment

(finished products)

Net cost of

THE GAZETTE OF INDIA : EXTRAORDINARY

[PARTD—SBC.3(01

19.

20.

21.

22.

23.

24.

25.

26.

27.

Production of unpacked

finished goods

Less captive consumption

Packing Cost

(a)

materials

(b)

others

Less Captive

Consumption in packed

condition

Net cost of materials

available in for sales

Selling and Distribution

Expenses

(a)Salanes

and Wages

(b)Freight and

Transport Charges

(c)Commission

to selling

agents

(d)Advt. Expenses

(e)Royalty

(f)Others

(g)Total(atof)

Interest

Total cost excluding

excise duty

Total sales realization

excluding excise duty

Add. Export benefits and

incentives, if any

Margin(26-25)

Note 1 - Separate proforma shall be prepared for each type of description of product.

Note 2 -Separate proforma shall be prepared for the quantity sold with in 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,-The administration 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

administration overheads, if any, shall be included in the cost of

goods sold The Proformae may be amended accordingly, if required.

Proforma D

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 between Milk food and other activities for the year

ending

Allocation of total exoenses and income for the vear endina...

senai

Particulars

Number

10.

11.

12.

13.

Raw-Material consumed

Process

materials/Chemicals

consumed

Salaries and wages

Utilities

Consumable stores and

spares

Depreciation

Repairs and

maintenance

Royalty

Research and

Development

Quality control

Other Factory

overheads

Administrative

Overhead

(a)Salaries

and wages

(b)Others

(Please

specify)

Total(1 to 13)

Less: Credits (from

wastages

and by-

rotal

actual

expenses

As per

Audited

Annual

Accounts

snare

bnare

applicable to applicable to

Milk food

other

activity

activities

basis

Allocation

THE GAZETTE OF INDIA: EXTRAORDINARY

IPARTI^-SBC. 3(D1

15.

16.

17.

18.

19.

20.

21.

22.

23.

24.

25.

26.

27.

28.

Products)

Stock adjustment

(

work in progress)

Cost of Production

Stock adjustment

(finished products)

Net cost of

Production of unpacked

finished goods

Less: captive

consumption

Packing Cost

(c)

Materials

(d)

Others

Less: captive

consumption in packed

condition

Net ex-works cost of

packed products

Selling and distribution

expenses

(a)Salaries and Wages

(b)Freight and

Transport

Charges

(c)Commission to

selling agents

(d)Advertisement

Expenses

(e)Royalty

(f)Others

(g)Total(a to f)

Cost of Sales

Interest

Other expenses/incomes

not included in

costs(details to be given)

Total cost (excluding

excise duty)

Total sales realization

excluding excise duty

Add: Export benefits

and incentives, if any

Margin(28-27)

Note.- All items of income and expenditure in this Proforma shall be reconciled

with the financial accounts for the relevant period."

[F.NO.52/21/CAB-20O0]

A. RAMASWAMY, Jt. Secy.

FootNote. ty

ThQ prinCjpai cost Accounting Records (Infant Milk food) rules,1974

were published vide Notification No.G.S.R.701(E), dated 27-12-1974 ,and

subsequently amended by-

GSR 794 .dated 3-6-1977

GSR 30 , dated 5-1-1983

GSR 553 .dated 22-7-1989

GSR 313(E), dated 24-3-1993

GSR 438(E), dated 3-8-1998

( 2)- The principal Cost Accounting Records (Milk Food) rules, 1986 were

published vide Notification No.G.S.R.866 dated 25-9-1986, and subsequently

amended by-

1. GSR 569, dated 22-7-1989

2. GSR 329(E)dated 24-3-1993

3. GSR 453(E) dated 3-8-1998

Printed by Ihe Manager, Qovt. of India Pros*. Ring Road, Mayapurl, N«w Deihi-110064

and Published by ths Controller ol Publications. Delhi-110054 — 2001