1. Notwithstanding anything contained in this Chapter, the Central Government may, by order, in respect of such class of companies engaged in the production of such goods or providing such services as may be prescribed, direct that particulars relating to the utilisation of material or labour or to other items of cost as may be prescribed shall also be included in the books of account kept by that class of companies:
Provided that: the Central Government shall, before issuing such order in respect of any class of companies regulated under a special Act, consult the regulatory body constituted or established under such special Act.
2. If the Central Government is of the opinion, that it is necessary to do so, it may, by order, direct that the audit of cost records of class of companies, which are covered under sub-section (1 ) and which have a net worth of such amount as may be prescribed or a turnover of such amount as may be prescribed, shall be conducted in the manner specified in the order.
3. The audit under sub-section (2 ) shall be conducted by a Cost Accountant in practice who shall be appointed by the Board on such remuneration as may be determined by the members in such manner as may be prescribed:
Provided that: no person appointed under section 139 as an auditor of the company shall be appointed for conducting the audit of cost records:
Provided further that: the auditor conducting the cost audit shall comply with the cost auditing standards.
Explanation.- —For the purposes of this sub-section, the expression "cost auditing standards" mean such standards as are issued by the Institute of Cost and Works Accountants of India, constituted under the Cost and Works Accountants Act, 1959, with the approval of the Central Government.
4. An audit conducted under this section shall be in addition to the audit conducted under section 143.
5. The qualifications, disqualifications, rights, duties and obligations applicable to auditors under this Chapter shall, so far as may be applicable, apply to a cost auditor appointed under this section and it shall be the duty of the company to give all assistance and facilities to the cost auditor appointed under this section for auditing the cost records of the company:
Provided that: the report on the audit of cost records shall be submitted by the cost accountant in practice to the Board of Directors of the company.
6. A company shall within thirty 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 along with full information and explanation on every reservation or qualification contained therein.
7. If, after considering the cost audit report referred to under this section and the information and explanation furnished by the company under sub-section (6 ), the Central Government is of the opinion that any further information or explanation is necessary, it may call for such further information and explanation and the company shall furnish the same within such time as may be specified by that Government.
8. 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.
Legal Commentary & Landmark Judgments: Section 148
Section 148 empowers the Central Government to mandate the maintenance of cost accounting records and order cost audits for prescribed manufacturing and service industries.
The cost auditor submits his report in Form CRA-3 to the Board, and the company files Form CRA-4 with the Central Government within thirty days.
Cost audit under Section 148 provides the Central Government and competition regulators with microscopic visibility into raw material consumption, processing margins, and capacity utilization. For capital-intensive industries, cost audits ensure that inter-company transfer pricing and cost apportionments between related parties reflect economic reality rather than artificial tax mitigation.