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    Reply for show cause notice under section 148 of the companies act 2013 for non-compliance with the Cost Audit Provisions

    Posted By : KAMAL / Published on : 27-Aug-2022 07:15 AM / View : 154 / Comment : 1

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    Show Cause Notices issued by MCA for non-compliance with the Cost Audit Provisions:

    The notices have been served electronically as envisaged in Section 20 of the Companies Act 2013 in section 148.

    Sub-section (8) of Section 148 of the Act states "If any default is made in complying with the provisions of this section, (a) the company and every officer of the company who is in default shall be punishable in the manner as provided in sub-section (1) of section 147; (b) the cost auditor of the company who is in default shall be punishable in the manner as provided in sub-sections (2) to (4) of section 147."

    Section 147. (1) If any of the provisions of sections 139 to 146 (both inclusive) is contravened, the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees, or with both. (2) If an auditor of a company contravenes any of the provisions of section 139, section 143, section 144 or section 145, the auditor shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees:

    SCN :

    Show Cause Notice under Section 148 (8) of the Companies Act, 2013 (Act) XYZ LIMITED

    1.WHEREAS, it has been found from our records that your company falls under the ambit of Cost Audit but has failed to submit the Cost Audit Report for the Financial Year 2014-15 within the statutory time limit prescribed by Sec. 148(6) of the Act and Rule 6 of Companies (Cost Records and Audit) Rules, 2014 (Rules) read with first proviso to Sec. 403(1) of the Act. Accordingly, sub-section (6) of Section 148 of the Act has been contravened.

    2. WHEREAS, as per sub-section (8) of Section 148 of the Act, "If any default is made in complying with the provisions of this section, the company and every officer of the company who is in default shall be punishable in the manner as provided in sub-section (1) of section 147; the cost auditor of the company who is in default shall be punishable in the manner as provided in sub-sections (2) to (4) of section 147."

    3. Now, therefore the addressees, being the Company and its officers, are hereby called upon to show cause as to why action shall not be taken to initiate prosecution under clause (a) of sub-section (8) of Section 148 read with section 147(1) of the Act for contravention of section 148(6) of the Act read with sub-rule (5) and (6) of Rule 6 of the Rules.

    4. Please take notice that if no reply is received or cause shown within 21 days from the date of issue of this notice, necessary prosecution against the company and all its officers who are in default shall be launched in the Court.

    5. Your attention is invited to the provisions of Section 441 of the Act for compounding of the said offence.

    6. In term of the provision of Section 20 of the Act, the notice is hereby being served on the company and all its officers who are in default at the registered office of the company by electronic mode on the email id provided by the company on MCA Portal.

    7. Company is requested to bring this notice in the knowledge of its officers in default, immediately upon its receipt. GST is aligned with the cost audit and only smooth implementation of cost audit provisions and expansion of cost audit regime can help the companies to demand for the due share under GST in the form of reduced rates and the government based on the authentic data can take calls under GST regime with regard to anti-profiteering, valuations etc.

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    Read more on : compliance cost audit provisions companies section show cause notice

    • One Order received in the year 2017 case:

       

       

       

      Roc vs . M/S Mehar Steels Pvt. Ltd. & Ors. on 19 September, 2018

                                                                  1

       

            IN THE COURT OF SH. PAWAN SINGH RAJAWAT:

      ADDL CHIEF METROPOLITAN MAGISTRATE (Spl. Acts):

               CENTRAL:TIS HAZARI COURTS, DELHI

       

                                                        CC No. 14397/17

                                ROC Vs. M/s Mehar Steels Pvt. Ltd. & Ors.

       

       

      JUDGMENT

      (a)Name of complainant : Registrar of Companies through Dr. Afsar Ali Assistant Registrar of Companies.

       

      (b)Name, parentage, residence : 1. M/s Mehar Steels Pvt.

       

       of accused                         Ltd. B-222, Layak Ram

                                          complex,V&PO Badarpur,

                                          New Delhi-110044

       

      1. Ms. Ravinder Kaur Chawla

                                                                 W/o Sh. Amarjeet Singh

                                                                 Chawla R/o. 1A/258,

                                                                 N.I.T., Faridabad,

                                                                 Haryana.

       

      1. Ms. Gurneet Kaur Chawla,

                                                                      W/o Late Sh. Paramjeet Singh

                                                                      Chawla R/o. 1A/258, N.I.T.,

                                                                      Faridabad, Haryana.

       

      1. Ms. Meena Mendiratta,

                                                                      W/o Late Sh. Dalip Kumar

                                                                      Mendiratta, R/o. 687, Sector-

                                                                      15, Faridabad, Haryana.

       

      (c)Offences complained of                          :            Contravention U/s 148(8)

                                                                      (a) R/w Sec. 147(1) of

                                                                      the Companies Act,2013.

       

      (d)Plea of accused                                 :            Pleaded not guilty

       

      ROC vs. M/s Mehar Steels Pvt. Ltd. & Ors.         CC No. 14397/17                     1 of 7

       

       

       

      (e) Final order                                    :         Convicted

       

       

      Date of institution            :                                    14.11.2017

      Arguments heard/order reserved :                                    19.09.2018

      Date of Judgment               :                                    19.09.2018

       

       

      Brief statement of the reasons for the decision:-

       

      1. The complainant Dr. Afsar Ali, the then Assistant Registrar of Companies, NCT of Delhi & Haryana filed the present complaint against accused no.1 i.e. company and accused no. 2to4 for the offence Under Section 148(8)(a) r/w Sec.147(1) of Companies Act, 2013, for the contravention of Section 148(2) & 148(3) of the Companies Act, 2013 (for short 'Act') for non-filing of cost Audit Report with the Central Government, for the financial year 2015-16.

       

      1. The facts of the case are that M/s Mehar Steels Pvt. Ltd. is a registered company registered with the office of the Registrar of Companies (for short "ROC") and accused no. 2 to 4 are the Directors/officers of the said company and, are responsible for the compliance of the provisions of the Act. It is stated in the complaint that cost audit report has not been filed by the accused persons and a show cause notice dt. 05.12.2016 was issued through e-mail by Cost Audit branch, seeking clarification as to why Cost Audit Report was not filed by the company with the Central Government for the financial year ending on 31.03.2016. But the company or its directors have neither replied nor ROC vs. M/s Mehar Steels Pvt. Ltd. & Ors.         CC No. 14397/17 2 of 7 complied with the provisions of Section 148(8)(a) and rules made for filing of Cost Audit Report in the prescribed form and as such, accused knowingly and willfully are guilty of contravention of Section 148(3) of the Act. It is further stated in the complaint that thereafter, the Cost Audit Branch of Ministry of Corporate Affairs vide its sanction letter dated 20.08.2017 directed the complainant to initiate appropriate penal action against the aforesaid company and hence, the present complaint.

       

      1. Upon service of summons, accused persons appeared and after hearing parties, notice U/s 251 Cr.P.C. was served through their counsel for the contravention U/s 148(2)(3) of the Companies Act to which he pleaded not guilty and claimed trial on behalf of accused persons.

       

      1. In order to substantiate its allegations made in the complaint, the prosecution has examined Dr. Afsar Ali, AROC from the office of the complainant as CW-1.

       

      1. In his evidence, CW-1 has deposed that M/s. Mehar Steels Pvt. Ltd. is a company registered with the office of ROC. He has proved copy of company master data as Ex. CW-1/1, Register of Directors maintained with MCA Portal as Ex. CW-1/2 and certificate U/s 65-B of Indian Evidence Act as Ex. CW-1/3. He further stated that the accused no. 1 and its officers in default have not filed Cost Audit Report for the financial year ending 2015-16 despite issuance of ROC vs. M/s Mehar Steels Pvt. Ltd. & Ors.         CC No. 14397/17 3 of 7 showcause notice Ex. CW-1/4 issued by Cost audit branch. He further stated that office of the complainant has received sanction Ex. CW-1/5 from the Cost Audit Branch of Ministry of Corporate Affairs for launching of prosecution.. He has further deposed that he has filed the present complaint Ex. CW-1/6. During cross examination by Ld. Defence counsel CW-1 denied the suggestion that all electronic documents annexed with the complaint are false and fabricated.

       

      1. The complainant has examined only one witness and thereafter, complainant evidence was closed.

       

      1. The statement of accused persons was recorded separately. They did not lead any defence evidence and therefore final arguments were heard.

       

      1. I have given my thoughtful consideration to the submissions advanced on behalf of both the parties and gone through the relevant records. I have also considered the relevant provisions of law.

       

      1. According to Section 148(6) of the Act, the company shall within thirty (30) days from the date of receipt of a copy of the cost audit report prepared in pursuance of a direction under sub-section (2) furnish the Central Government with such report alongwith full information and explanation on every reservation or qualification contained therein. Complainant has to prove that accused no. 2to4 ROC vs. M/s Mehar Steels Pvt. Ltd. & Ors.         CC No. 14397/17 4 of 7 have failed to comply with the abovesaid provisions being the Directors of the company.

       

      1. It is an admitted position of facts that there has been no statutory compliances on behalf of the company.

       

      1. Whether accused no. 2,3&4 are the officers in default of accused no.1: There is no denial on the part of accused persons that they are not the Directors of accused no. 1. Moreover as per Ex. CW-1/2, the name of accused persons is proved as Directors of accused no.1. Hence, it is proved that accused no. 2 to 4 are officers in default of accused no.1.

       

      1. Whether the complainant has proved the documents filed with the complaint: Ld. Company Prosecutor had argued that in terms of Section 610, 610A & 610B of Companies Act, the documents have been duly proved. Section 610(3) of Companies Act 1956 provides that a copy of, or extract from, any document kept and registered at any of the offices of companies under the Act, certified to be true copy under the hand of Registrar shall in all legal proceedings be admissible in evidence as of equal validity with the original document. As far as electronic record is concerned, the provision of Section 610A are applicable which provides that notwithstanding any contained in any other law for the time being in force, the computer printout shall deem to be document and admissible in any ROC vs. M/s Mehar Steels Pvt. Ltd. & Ors.         CC No. 14397/17 5 of 7 proceedings without further proof or production of original, if the conditions in sub section 2 of section 610A are satisfied. Section 2 provides that the information contained in or derived from documents filed by the company on paper or on any computer readable media is admissible.

       

      1. The complainant has filed Ex. CW-1/1 which is computer printout dt. 05.10.2017 downloaded from the MCA portal showing the details of balance sheet. This document bears stamp of the ROC alongwith signatures of Dy./AROC. This document satisfied the requirement of admissibility of document as evidence U/s 610 & 610A of the Act.

       

      1. However, Ex. CW-1/2, CW-1/4 and CW-1/5 are the documents which are computer printouts and are kept on computer media and therefore, they fall under the category of admissible evidence in terms of Section 610 A. These documents from Ex. CW-1/2, CW-1/4 & CW-1/5 bears stamp of certification of the Registrar of Companies as provided under sub section 3 of Section 610 of the Act. There is compliance of section 610(3) of the Act to prove the evidence of documents kept by Registrar. Hence, I am satisfied that complainant has proved the documents as admissible evidence for the present prosecution.

       

      1. CW-1 has specifically deposed that company has not filed the cost audit report for the financial year 2015-16 despite the issuance of showcause notice by the cost audit ROC vs. M/s Mehar Steels Pvt. Ltd. & Ors.         CC No. 14397/17 6 of 7 branch. CW-1 has specifically deposed that company as well as its Directors are guilty of contravention of Section 148(6) of the Act. Showcause notice was also proved by CW-1. CW-1 has also deposed that company had failed to get the cost audit report filed with the Central Government. No questions were put on the abovesaid facts. Accused no. 2 to 4 has nowhere disputed that they were not responsible person for compliance of the provisions of the Companies Act. Thus, it is held that the accused has contravened the provisions of Section 148(2)& (3) of the Act.

       

      1. In view of the aforesaid discussions and evidence on record, it is held that the prosecution has proved its case beyond reasonable doubt against the accused persons. Accordingly, all accused are held guilty and convicted for offence Under Section 148(8)(a) of the Companies Act, 2013.

       

      1. Copy of the judgment be given free of cost to the convicts.

       

      1. Copy of the judgment be also uploaded with digital signature.

       

      (PAWAN SINGH RAJAWAT) ACMM(Special Acts) CENTRAL Announced in open

       

      TIS HAZARI COURTS DELHI Court on 19.09.2018 ROC vs. M/s Mehar Steels Pvt. Ltd. & Ors.         CC No. 14397/17 7 of 7

      27-08-2022 / 07:31:06 AM
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