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) 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

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°33i<y/<^ji-5

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[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 namely

"SCHEDULE III

[See rule 4(2A)]

MATERIALS:

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

balances both in quantities and cost of each item of raw material (including all direct

charges upto 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

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~

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[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;

(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 such

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[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.

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.

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.

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 common

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,

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 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 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.

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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.

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[PARTII—SEC. 30)1

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

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;

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[PARTII—SBC.3(J)]

(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.

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.

THE GAZETTE OF INDIA : EXTRAORDINARY

[PART II—SEC. 3(Q]

(b) Average batch output and number of batches processed and drained.

(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

Quantitative Information:

Serial N

umber

Particular's

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)

Cost Information:

SenalN

umber

A 1 .

Particulars

Materials(specify)

(a)

(b)

(c)

Utilities(specify)

(a)

(b)

(c)

Consumable stores

Salaries and wages

Repairs and maintenance

Other overheads

Depreciation

Quan

tity

Rate

(Rupe

es)

per

unit

Amount

(Rupees )

(in lacs)

Cost

per

unit

(RupeesA

Current

Year

3revious

Year

3o33|^rtoi-7

THE GAZETTE OF INDIA • EXTRAORDINARY

fRAHi-IT—Sir._ViYl

9. ~~^

10.

Total

Less: Credit, if any

Net Total

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-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

each

type

ingredients/intermediates

produced/processed/manufactured during the year/period

Quantitative Information:

SeriaIN

umber

10.

11.

12.

13.

14.

15.

16.

Particulars

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 captively consumed

Opening stock

Closing stock

In Metric Tonnes

Current Year

Previous Year

THE GAZETTE OF INDIA: EXTRAORDINARY

fPAirrTl^nr vffl

SeriaIN

umber

Cost Information:

Particulars

Material cost(item

wise covering 80% of

value)

(a)(Specify name of raw

material)

(i)lmported

(ii)lndigenous

(iii)Own produced

(b)(Specify name of raw

material)

(i)lmported

(ii)lndigenous

(iii)Own produced

(c)Other

materials(spedfy)

(d)Total Raw-

Materials^ to c)

(e)Less By-Products and

Recoveries

(f)Net cost of raw-

materials (d-e)

Process Chemicals

(a)Solvents

(b) Extracts/oils

(c)Others(specify)

Direct Wages and

Salaries

Utilities

(a)Power

(b)Steam

(c)Water

(d)air-conditioning

(e)brine

Quan

tity

Rate

(Rs)

Amount

(Rupees)

in lacs)

Quantity per

unit (Current

year and

previous year)

Stand

ard

Actual

Cost per

unit

(Rupees)

Current

Year

Previo

Year

10.

11.

12.

13.

14.

15.

16.

17.;

18.

19.

(f)Chilled water

(g)Effluent water

treatment plant

(h)Others

(i)Total (a to h)

Consumable Stores and

spares

Depredation

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 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 under reference.

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

- j o 3

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

THE GAZETTE OF INDIA : EXTRAORDINARY

[PARTI^-SBC.3(01

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.

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

(specify name of each type of ingredients/intermediates/Bulk Drugs)

produced/processed/manufactured

and

sold

during

the

year/period

Quantitative Information:

SerialN

umber

10.

11.

12.

13.

14.

15.

P T 6 - "

17-

Particulars

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)

! Closing stock (fin. Goods)

In Metric Tonnes

Current Year

Previous Year

1e.s-z\<?tS-/crj^

THE GAZETTE OF INDIA: EXTRAORDINARY

IPARTTT—SPT. ICftl

Cost Information.

Serial

Number

Particulars

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

(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 water

Quan

tity

Rate

Rs)

Amount

Rupees)

(in

lacs)

Quantity per

unit ( Current

year/ previous

year)

Stand

ard

Actual

Lost per

unit

(Rupees)

Current

Year

Previo

Year

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

(g)E.T.P.

(h)Others

(i)Total (a to i)

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 12)

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

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

THE GAZETTE OF INDIA: EXTRAORDINARY

[PARTII—SBC.3(0]

24.

25.

26.

27.

28.

29.

Selling and Distribution

Expenses:

(a)Salaries

and Wages

(b)Freight and

Transport Charges

(c)Commission

to selling

agents

(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.

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

Serial

Numbe

•7

u,b—

111

Particulars

Total

actual

expenses

As per

Audited

Annual

Accounts

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)Salanes

and wages

applicable to

Bulk Drugs

Basis

applicable to applicable

Formulation, if to other

Allocation

any

activities

(b)Others

(Please

specify)

15.

19.

.27 _

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

..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)Salanes 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

" f"

THE GAZETTE OF INDIA : EXTRAORDINARY

PART II—SEC. 3(i)]

excise duty)

28.

Total sales realization

excluding excise duty

Add: Export benefits and

incentives, if any

Margin(28-27)

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

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 -

GSR 789,

dated 3.6.1977.

GSR 1275, dated 10.10.1979.

3. GSR28(E), dated 5 1.1983.

GSR 505(E), dated 26.5.1984.

GSR 551

dated 22.7.1989.

GSR 311(E), dated 24.3.1993

7. GSR 437(E), dated 3.8.1998.

Printed by the Manager, Govt of India Press, Ring Road, Mayapuri, Now Dolhi-110064

and Published by the Controller of Publications, Delhi-110054.