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, 495] NEW DELHI. FRIDAY. SEPTEMBER28. 2001/ASVINA6.1923

3033 GI/2001

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MINISTRY OF LAW, JUSTICE AND COMPANY AFFAIRS

(Department of Company Affairs)

NOTIFICATION

New Delhi, the 28th September, 2001

G.s.R707ffi)—In exercise of the powers conferred by sub-section (1) of section 542 -c-".1 with 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 amend the Cost Accounting Records (Bulk Drugs) Rules, 1974, namely:-

1. (1) These rules may be called the Cost Accounting Records (Bulk Drugs) 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 (Bulk Drugs) Rules, 1974 (hereinafter referred to as the said rules), -

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

" 2 Application: They shall apply to every company engaged in the production, processing or manufacturing of bulk drugs under any system of medicine including Ayurvedic, Homeopathic, Siddha and Unani systems of medicine and intermediates thereof excepting those companies falling under the category of Small Scale Industrial Undertaking";

(b) in rule 4,-

(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 1 st day of April, 2002 keep proper books of account relating to utilization of materials, labour and other items of cost insofar as 3°33i34 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3ffil they are related to the production or manufacture or processing of Bulk Drugs. 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 Bulk Drugs 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 Bulk Drugs 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 relates.

(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 (Ftepoit) Rules, 1996 ,'

(in) m sub-rule 3, for the woiJs brackets and figures "provisions of sub-rules (1) and (2)" the words, brackets figures and letters provisions of sub-rules (1), (2), (2A), (2B) and (2C) shall be substituted

(c) in the said rules after Schedule II the following Schedule and Proformae A, B. C and D shall be inserted namely35

"SCHEDULE III

[See rule 4(2A)]

1 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 works in respect of major raw materials) required for the production of Bulk Drugs 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 herbal extracts or powder, caustic soda, activated carbon and benzene used in the manufacture of the products under reference and solvents like acetone, alcohol, methanol used for processing. The cost shall include all direct charges upto works.

(3) Where basic raw materials or ingredients are produced or farm products/ herbs 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 or products produced/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 batch of production, departments, and cost centre.

(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 materials 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 the cost incurred thereon shall be maintained in detail. The net realisation, if any shall be adjusted against the major process relating to such by-product. The cost of by~36 THE GAZETTE OF INDIA: EXTRAORDINARY [PART II—SBC.3(0] 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. Similar procedure shall be followed in the case of joint products/by products obtained in respect of other systems of medicines also.

(6) The 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 and extracts and powders 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.

(b) "i he cost of consumption of consumable stores, small tools and machinery spares shull be charged to the relevant cost centre/department on the basis 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 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.

(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 should 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.

SALARIES AND WAGES

('"<) 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; (d) earnings of casual / contractual labour; (e) bonus or gratuity, statutory as well as others; (f) contribution to superannuation scheme; (g) any other earning of 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 the production of Bulk Drugs. 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 therefore. 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 in the nature of deferred revenue expenditure 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 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 incuired 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 such38 THE GAZETTE OF INDIA : EXTRAORDINARY [PARTII—SBC.3(Q] expenses to any type of Bulk Drugs and to the other products shall be on equitable and reasonable basis and applied consistently.

4. UTILITIES:

(1) Water: -The proper records showing the quantity and cost of treated, or chilled or raw or soft or demineralised water or brine produced and consumed, if any, for the manufacture of any type of Bulk Drugs in different cost centres or departments shall be maintained. The cost of treated or cooling water, consumed by Bulk Drugs 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 Bulk Drugs shall be maintained. The cost of steam consumed by the Bulk Drugs 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 Bulk Drugs plant, the cost of steam so supplied shall be charged to the Bulk Drugs 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 Bulk Drugs 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 Bulk Drugs in different cost centres or departments. Records shall also indicate installed capacity, number of units generated losses and consumption in each cost centres or departments separately. Where power is generated and supplied by any other unit of the company to the Bulk Drugs plant, adequate records shall be maintained to indicate the quantity and cost of power so supplied. The cost of power consumed by the Bulk Drugs units and by 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 Bulk Drugs 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 or manufacture of Bulk Drugs.

(6) The cost statements for each utility shall be maintained seperately in 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 repairs and maintenance or tool rooms expenses to different cost centers 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 expense, to such products shall be on equitable and reasonable basis and applied consistently.

(2)ln 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 method of accounting and the basis of the allocation of such costs shall also be clearly indicated in cost records.

6. 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 Bulk Drugs. The cumulative depreciation charged in the cost records, against any individual item of asset shall not. however, exceed the original cost of the respective asset.

7. 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 Bulk Drugs, the records shall clearly indicate the basis followed for apportionment of the common40 THE GAZETTE OF INDIA: EXTRAORDINARY [PARTII—Sw^mi overheads including head office expenses of the company to such products and Bulk Drugs, including capital works. V." ,^re 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,

8. 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 the 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 Bulk Drugs 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 Bulk Drugs and other products if any, on equitable and reasonable basis and applied consistently. The following criteria which are only indicative and not exhaustive 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 and41 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 Bulk Drugs. 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 Bulk Drugs.

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 Bulk Drugs 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 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 product under reference shall be separately maintained so that the cost of export sales can be determined correctly. Separate cost statement shall be prepared for Bulk Drugs 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 maintained showing the quantity and cost of various packing materials and other expenses incurred on packing for marketing of the Bulk Drugs. If such expenses are incurred in common for Bulk Drugs and other products, these expenses shall be apportioned to relevant products on equitable and reasonable basis and applied consistently.

.?o2542 THE GAZETTE OF INDIA: EXTRAORDINARY FPAKTI^-SBC. 3(01 (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 Bulk Drugs 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 Bulk Drugs 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 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 product under reference 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 Bulk Drugs 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 & Fixture etc. employed for the production of Bulk Drugs, 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 bulk drugs should be reasonable, equitable and shall be followed 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 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.

20 CAPTIVE CONSUMPTION:

If Bulk Drugs are used for captive consumption by the formulation division, proper records shall be maintained showing the quantity and cost of each item of Bulk Drugs 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. A similar procedure shall be followed in respect of intermediates consumed for the manufacture of Bulk Drugs. However, in the case of allopathic system of medicines, the selling price as well as the notional price notified by the Central Government under the Drugs (Prices Control) order, 1995 shall be shown by way of footnotes in the relevant cost statements indicating the basis on which the notional price has been arrived at.

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 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 (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);

(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; 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.

24 MULTI-PURPOSE VESSELS:

When more than one manufacturing process is carried out in a particular or series of vessels, adequate records about the usage of such vessels for different products shall be kept. The cost of using such vessels shall be charged to the different products on an equitable basis such as equipment occupancy hours. Where composite machine hour rates are applied for absorption of wages, overheads and equipment usage, proper records relating to the utilization of labour and multi-purpose vessels for different processes connected with the manufacture of different products shall be kept to enable determination of total machine hours and the amounts chargeable to the respective Bulk Drugs and intermediates. The variances between the actuals and the amounts charged at pre-determined rates shall be adjusted for arriving at the actual cost of production at the end of the year.

25. Technical information :

The proper records shall be maintained to provide technical details relating to chemical process, fermentation process and manufacturing process, as indicated below.

(A)For chemical process:

(i)ln the case of dedicated facilities, details such as name of the equipment and designed capacity, number of equipments available, position/code number of the equipment, reaction/operation carried out in the equipment, batch size (input/batch and output/batch), occupancy time hour, yield and W/W with respect to main input at each stage and the cumulative yield, by-product/recoveries of solvents etc. (Kg./Ltr.) shall be maintained.

(ii)ln case any other product is manufactured in the above set of equipment similar data shall be maintained for such item and allocation of time at each equipment alongwith basis of allocation

(iii)ln both the above situations, the company need to maintain the record of actual capacity utilization against the installed capacity along with the details of scheduled maintenance programme and the number of days spent on unscheduled maintenance of the plant during the year. Reasons for operating at lower capacity, if any, may also be recorded.

(B)For Fermentation process- If the drug is manufactured by fermentation process the following information shall be maintained on annual average basis.

(i)Number of fermenters with their operating capacity/volume, average fermentation hours and turnaround time.

(ii) Average whole broth volume, whole broth potency and filtered broth potency per batch.

(a) Stage-wise and overall percentage recovery efficiency of both drug and intermediate from the fermented broth.

(b) Average batch output and number of batches processed and drained. (c) Average potency/purity uf the finished drug. (d) Stage-wise annual average quantity consumption of all major raw materials including solvents usage shall be maintained along with quantity produced at each stage. Similarly details of consumption of primary utilities of in respect of the drug shall be maintained.

(C)Manufacturing Process- The manufacturing process adopted by the company along with the flow chart shall be kept. Appropriate chemical equation of reaction with molecular weight and recovery levels of solvents and by-product at each stage shall also be kept. Further, in case of any change in the process of technology and the consequential benefit there from during the year or in the recent past shall be maintained.

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

3o33|^rtoi-750 THE GAZETTE OF INDIA • EXTRAORDINARY fRAHi-IT—Sir._ViYl 8. 9. ~~^ 10. B.

Total Less: Credit, if any Net Total Apportioned to 1. 2. 3. 4.

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-B 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 the factory

Statement showing the summary cost of production in respect of ( specify name of each type of ingredients/intermediates produced/processed/manufactured during the year/period

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

2- Separate cost sheet shall be prepared in proforma C in respect of inter- - jo3 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.- 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.

5- 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 Profomna - C in respect of such sale or transfer, which shall be effected at cost of sales of the respective product.

Name of the company Name and address of the factory

Statement showing the summary cost of sales, sales realisation and margin in respect of (specify name of each type of ingredients/intermediates/Bulk Drugs) produced/processed/manufactured and sold during the year/period

A Quantitative Information:

Particulars

In Metric Tonnes Current Year Previous Year SerialN umber 1. 2.

3. 4. 5 6. 7. 8.

9. ~\ 10.

11.

12. 13. "

14.

15.

Installed capacity Batch size Number of batches produced Gross Inputs Output Yield % Standard yield % IEM/SSI Registration No. alongwith the date. Date of Commissioning. Date of Commencement of commercial production. No. of shifts : one/Two/Three per day No. of operating days per week Dedicated/multipurpose equipment plant. Quantity sold (a)Domestic (b)Exports Quantity captively consumed Opening stock (fin. Goods)

P T 6- "

! Closing stock (fin. Goods)

17-

1e.s-z\ 56 THE GAZETTE OF INDIA: EXTRAORDINARY IPARTTT—SPT. ICftl

B Cost Information.

Particulars

Amount

Serial Number

Quan tity

Rate Rs)

Lost per unit (Rupees)

Rupees) (in lacs)

Quantity per unit ( Current year/ previous year)

Actual Current Year

Stand ard

Previo us Year 1.

Material cost(item wise covering 80% of value) (a)(Specify name of raw material) (i)lmported (ii)lndigenous (iii)Recovered (iv)Own manufactured (b)(Spedfy name of raw material) ((i)lmported (ii)lndigenous (iii)Recovered (iv)Own manufactured

(c)Other materials(specify)

(d)Total Raw- Materials(a to c)

(e)Less:By-Products and Recoveries

2.

3.

4.

(f)Net cost of raw- materials (d-e) Process Chemicals (a)Solvents (b)Others(specify) Direct Wages and Salaries Utilities (a)Power (b)Steam (c)Water (d)air-conditioning (e)brine (f)Chilled water57

	(g)E.T.P. (h)Others (i)Total (a to i)
5.	Consumable Stores and spares
6.	Depreciation
7.	Repairs and maintenance
8.	Royalty
9.	Research and development
10.	Quality control
11.	Other Factory overheads
12.	Administrative overhead (a)Salaries and wages (b)Others (Please specify) (c) Total(a+b)
13.	Total(1 to 12)
14.	Less; Credits (from wastages and by- Products)
15.	Stock adjustment ( work in progress)
16.	Cost of Production
17.	Stock adjustment (finished products)
18. 19. 20. 21. 22.	Net cost of Production of unpacked finished goods Less: captive consumption(product- wise details of finished output be given) Packing Cost (a) materials (b) others Less: Captive Consumption in packed condition ( Details be given) Net ex-works cost of packed products

58 THE GAZETTE OF INDIA: EXTRAORDINARY [PARTII—SBC.3(0] 23

Selling and Distribution Expenses: (a)Salaries

and Wages (b)Freight and

Transport Charges

(c)Commission

-

to selling agents

24. 25. 26.

27.

28.

29.

(d)Advt. 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 1.- Separate proforma shall be prepared in respect of each type of product under reference.

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.

3.- Sales realisations shall be seperately indicated for the quantities of product under reference sold (i) at the notified prices under Drug ( Prices Control) Order, 1995 and/or (ii) at prices fixed by the company.

4.- Separate proforma shall be prepared in this format in respect of inter- company transfers referred to in para 23 of Schedule III.

so 5.- 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.

6,- The quantitative basis of apportionment of common overheads should be enclosed separately.

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.

60 THE GAZETTE OF INDIA F.XTRAOPr.rxMpy [PARTI^-SEC 3fftl

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 Bulk Drugs and other activities for the year ending

Allocation of total exDenses and income for the vear endina

Share Share Basis

Share

applicable to

Bulk Drugs

applicable to applicable of Formulation, if to other Allocation Serial Numbe r

any activities

j

Particulars Total actual expenses As per Audited Annual Accounts 3

5 6 7 1

1 2

3 4

2 Raw-Material consumed Process materials/Chemicals consumed Salaries and wages Utilities

•7

8 9

u,b—

111 12

Consumable stores and spares Depreciation Repairs and maintenance Royalty Research and Development Quality control Other Factory overheads Administrative Overhead (a)Salanes

and wages61 (b)Others (Please specify)

13 14

15.

16 17

18

(c) Total(a+b) Total(1 to 13) Less Credits (from wastages and by- Products) Stock adjustment ( work in progress) Cost of Production Stock adjustment (finished products) Net cost of Production of unpacked finished goods

19.

21

22

..Less captive consumption Packing Cost (c) Materials (d) Others Less captive consumption in packed condition Net ex-works cost of packed products

23

Selling and distribution expenses (a)Salanes and Wages (b)Freight and

Transport Charges

(c)Commission to selling agents (d)Advertisement

Expenses

|

1

24 25 26

(e)Royalty (f)Others (g)Total(a to f) Cost of Sales Interest Other expenses/incomes

" f"

i i

not included in costs(details to be given)

Total cost (excluding

.27 _62 THE GAZETTE OF INDIA : EXTRAORDINARY PART II—SEC. 3(i)] 28.

excise duty) Total sales realization excluding excise duty Add: Export benefits and incentives, if any Margin(28-27)

29

Note.- 1. If, in addition to Bulk Drugs of one system of medicine, Bulk Drugs of other systems of medicine like allopathic, ayurvedic, Homeopathic etc., are produced/manufactured, additional columns similar to column 4 of the proforma shall be opened in respect of each such system of medicine.

2. All items of income and expenditure in this Proforma shall be reconciled with the financial accounts for the relevant period.

3. Bonus in excess of statutory minimum, bad debts and provisions, Donations and Charities. Loss/Gain,on sale of assets, brokerage and commission, expenses not recognized by Income Tax -Authorities (salary.perquisites.advertisements,entertainment etc.)adjustments relating to previous years etc. to be excluded from costs."

4.The quantitative basis of apportionment of common overheads should be enclosed separately."

[F.No.52/18/CAB-2000] A. RAMASWAMY, Jt Secy.

FootNote.— "he principal Rules were published vide G.S R. number 130(E), dated the 14?3.1974 and subsequently amended vide -

1. GSR 789, dated 3.6.1977. 2. GSR 1275, dated 10.10.1979. 3. GSR28(E), dated 5 1.1983. 4. GSR 505(E), dated 26.5.1984. 5. GSR 551 dated 22.7.1989. 6. GSR 311(E), dated 24.3.1993 7. GSR 437(E), dated 3.8.1998.

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