1 Industries Development and Regulation

Size: px

Start display at page:

Download "1 Industries Development and Regulation"

Shana Atkins
5 years ago
Views:

1 Star Rating On the basis of Maximum marks from a chapter On the basis of Questions included every year from a chapter On the basis of Compulsory questions from a chapter Nil jj jj 1 Industries Development and Regulation This Chapter Includes: Objects and definitions - an overview of current Industrial Policy; Regulatory Mechanism under IDRA. The Micro, Small and Medium Enterprises Development Act, Marks of Short Notes, Distinguish Between, Descriptive & Practical Questions 5.1

2 5.2 ( Solved Scanner CS Executive Programme M-II Paper - 5 CS Executive Programme (Module II) OBJECTIVE QUESTIONS June [2] State, with reasons in brief, whether the following statements are correct or incorrect. (v) While calculating the value of plant and machinery for the purposes of small scale/ancillary industrial undertaking, the following shall be included (a) the cost of installation of plant and machinery; (b) the cost of research and development equipment and pollution control equipments; (c) the cost of fire fighting equipments; and (d) the charges paid for technical know-how for erection of plant and machinery. (1 mark) Incorrect : While calculating the value of plant and machinery for the purposes of small scale/ancillary industrial undertaking the cost of installation of plant and machinery; the cost of research and development equipment and pollution control equipment; cost of fire fighting equipments and charges paid for technical know-how for erection of plant and machinery are excluded June [3] (b) Re-write the following sentences after filling-in the blank spaces with appropriate word(s)/figures(s): (ii) Environmental clearance is not required from the Central Government, if investment is less than for any item reserved for the small scale sector. (1 mark) Environmental clearance is not required from the Central Government, if investment is less than ` 1 crore for any item reserved for the small scale sector Dec [2] State, with reasons in brief, whether the following statements are true or false. (i) Small scale units are free from locational restrictions. (iii) The manufacture of items reserved for the small scale sector can also be taken up by non-small scale units. (3 marks each) (i) True. Y Small scale units are free from locational restrictions. Y Industrial undertakings other than small scale units need to abide certain locational restrictions.

3 [Chapter # 1] Industries Development and Regulation ( 5.3 (iii) Y For example, such units need to be located at least 25 kilometers away from Standard Urban Area in case the population of the city is greater than 1 million. Y However SSI are outside the scope of such restriction True. Y SSI is defined under the Micro, Small and Medium Enterprises Act, 2006 and provides for the reservation of items exclusively for the small scale sector Y A review of such items is done periodically by the Government in order to promote competitiveness Y Presently around 20 items are reserved for manufacture in small scale sector Y The manufacture of items reserved for small scale sector can also be taken up by non-small scale units. Y However the non-small scale units can do only after applying for industrial licence. Y Y Also they need to undertake an export obligation Undertakings operating under 100% EOUs, EPZ and SEZ need not to comply with the licence requirement Dec [2] State, with reasons in brief, whether the following statements are true or false. (i) Registration of an undertaking belonging to the First Schedule of the Industries (Development and Regulation) Act, 1951 is not necessary in certain cases. (3 marks) True: Registration of an undertaking belonging to the first Schedule of the Industries (Development and Regulation) Act, 1951 is not necessary in case the following conditions are satisfied :- C Undertaking is a small scale industrial undertaking C It is exempted from the licensing or registration under the Act C Undertaking is not covered within the definition of the term factory under the Act June [3] (b) Re-write the following sentences after filling-in the blank spaces with appropriate word(s)/figure(s): (iii) No court inferior to that of a shall try any offence punishable under the Industries (Development and Regulation) Act, (1 mark) Answer : presidency magistrate or a magistrate of first class

4 5.4 ( Solved Scanner CS Executive Programme M-II Paper - 5 SHORT NOTES Dec [1]{C} With reference to the relevant legal enactments, write short notes (i) Delayed payments to micro and macro enterprises (3 marks) (vii) COB licence. (3 marks) (i) Y As per Section 15 of the Micro, Small and Medium Enterprises Development Act, 2006 where any supplier, supplies any goods or services to any buyer, the latter shall be liable to make payment on or before the date so agreed. Y Also, it is stipulated that the period should not exceed 45 days from date of acceptance or from that of deemed acceptance. Y Where, date of acceptance means:- ) date of actual delivery of goods ) date of rendering of services ) date of objection, in case buyer makes so within 15 days. Y As per the provisions of section 16, where the buyer fails to make payment to the supplier, he shall be liable to pay interest monthly compounded at three times of bank rate so notified by the RBI. (vii) Carry on Business (or COB in short) licence is required in case:! Small scale exceeds its prescribed limit of investment in plant and machinery, provided - ) expansion took place due to natural growth and ) such unit continues to manufacture small scale reserved items.! If Exemption granted to industrial undertaking from obtaining industrial licence is withdrawn, then also COB licence is required. ) Application in this respect has to be made to Secretariat of Industrial Assistance (SIA) under the Department of Industrial Policy and Promotion, Government of India. ) Application has to be made in prescribed form along with Demand Draft of ` 2, June [1] {C} With reference to the relevant legal enactments, write short notes (ii) Exempted categories under the importer-exporter code (IEC) number. (3 marks)

5 [Chapter # 1] Industries Development and Regulation ( 5.5 Y IEC No. is short form of Import Export Code number. Y It is a unique 10 digit code issued by DGFT - Director General of Foreign Trade, Ministry of Commerce, Government of India to Indian companies. Y An Application to the competent authority needs to be made in order, seeking of IEC number. Y IEC number is very important without which a person cannot import or export. Y Certain categories of importers and exporters have been exempted from obtaining this code number. Y IEC allotted to an applicant remains valid for all divisions as stated in IEC form. Y Also refer 2009 Dec [2] (i) of chapter - 2 Foreign Trade Policy and Procedures on Page no June [1] {C} With reference to the relevant legal enactments, write short notes (i) Functions of the National Board for micro, small and medium enterprises under the Micro, Small and Medium Enterprises Development Act, (3 marks) Functions of the National Board for Micro small and medium Enterprises. The various functions performed by National Board for Micro, Small and Medium Enterprises are as follows:- 1. To examine the factors affecting the promotion and development of micro, small and medium enterprises. 2. To review the policies and programmes of the government in regard to facilitating the promotion and development of such enterprises. 3. To take necessary steps for enhancing the competitiveness of such enterprises. 4. To advise the government on all the matters stated above. 5. To advise the Central Government on the use of the fund or funds constituted under section Dec [1] {C} With reference to the relevant legal enactments, write short notes (ii) Investigation into the affairs of a company under liquidation (3 marks)

6 5.6 ( Solved Scanner CS Executive Programme M-II Paper - 5 DISTINGUISH BETWEEN Dec [3] (a) Distinguish between the following: (ii) 'Small scale industrial undertaking' and 'ancillary industrial undertaking'. (5 marks) Small scale industrial undertaking:- An industrial undertaking in which the investment in fixed assets in plants and machinery whether held on: C Ownership basis or C C Lease or Hire purchase does not exceed rupees one crore. ) The original price of plant and machinery should be considered whether the machine is first hand or second hand. While ) Ancillary industrial undertaking Y Ancillary industrial undertaking may be defined as: One engaged or proposed to be engaged in manufacturing of C Parts C Components C Sub assemblies C Intermediaries Or Y rendering services and undertaking supplies or proposes to supply and renders not more than 50% of its production/services to one or more undertaking. Y An additional condition which needs to be satisfied by the undertaking to be termed as an ancillary industrial undertaking is that ) Investment in plant and machinery should not exceed one crore. ) Plant & Machinery includes whether held on C Ownership basis or C Lease or C Hire purchase ) Also such ancillary industrial undertaking should not be owned or controlled by any other industrial undertaking June [3] (a) Distinguish between the following: (ii) 'COB licence' and 'industrial licence'. (5 marks) Please refer Dec [1] {C} (vii) on page no. 16

7 [Chapter # 1] Industries Development and Regulation ( 5.7 INDUSTRIAL LICENCE An industrial licence is a written permission to an industrial undertaking to manufacture/produce specified articles mentioned under first schedule granted by the Central Government. ) Licence consists of the following particulars - C Location of undertaking C Articles to be manufactured C Maximum capacity C Other Details ) Industrial licence is subject to a prescribed validity period. While LETTER OF INTENT ) Letter of intent (LOI) is issued on a provisional basis ) Validility period of letter of intent: 3 years from production ) Extension in validity period: extension by 3 years more can be given by competent authority ) Extension beyond six years can be granted only on exceptional grounds. ) The conditions contained in LOI usually relate to setting up pollution control equipment, site clearance from the State Government and sector specific conditions. ) On fulfilment of prescribed conditions, the holder of LOI can get it converted into Industrial Licence Dec [3] (a) Distinguish between the following: (ii) Carry on business licence and industrial licence. (5 marks) Carry on Business Licence: C This licence is required in following situations. C When a small scale unit exceeds the prescribed limit of investment in plant and machinery such increase in investment should be by way of natural growth. C C Withdraw of exemption from industrial licencing for a particular item. For having carry on business licence, an application is required to be given to concerned department. Industrial Licence: C Industrial licence is different from carry on business licence C It is a licence to an industrial undertaking to manufacture the specified articles, listed in first Schedule to the Act C This licence is given by the Government C It is given for a particular period.

8 5.8 ( Solved Scanner CS Executive Programme M-II Paper Dec [3] (a) Distinguish between the following: (i) Micro enterprise, small enterprise and medium enterprise under the Micro, Small and Medium Enterprises Development Act, (5 marks) CS Inter Gr. II SHORT NOTES Dec [1] {C} With reference to the relevant legal enactments, write short notes (ii) Scheduled industry. (3 marks) C The term Scheduled Industry is defined under Section 3 (i) of Industries (Development and Regulation) Act, 1951 to include any of the industries specified in the First Schedule of the Act. C As per the preamble of the Industries (Development and Regulation) Act 1951 the Act is enacted to provide for development of certain industries. These industries are specified in the First Schedule of the Act and are termed as Scheduled Industries. Schedule I includes -: 6 electrical equipments 6 fuels 6 boilers 6 telecommunication 6 fertilizer 6 soaps 6 cosmetics etc June [1] {C} With reference to the relevant legal enactments, write short notes (ii) Industrial undertaking (3 marks) (vi) Deemed exports. (3 marks) (ii) ) The term industrial undertaking as defined under Section 3 (d) of the Industries (Development and Regulation) Act, 1951 includes any undertaking pertaining to a scheduled industry carried in one or more factories by any person or authority including Government.

9 [Chapter # 1] Industries Development and Regulation ( 5.9 (vi) ) Where the term factory finds its place under Section 3 (c) to mean any premises including the precincts thereof in any part of which manufacturing process is carried or ordinarily carried on: C Where power is used, by more than 50 workers C Where power is not used, by more than 100 workers Y Deemed exports refer to those transactions in which goods supplied, do not leave country and payment for such supplies is received either in Indian rupees or in free foreign exchange. Y In simple, deemed export means that the goods are considered to have been exported even if they have not moved out of the country. Y Deemed exports are transactions entered into with a view to avail benefits/ advantage in relation to production including licence for intermediate supply. These are not actually exports yet are deemed as exports and benefits accrue to the seller as in case of export. Y For instance deemed export drawback and advance license for intermediaries June [1] {C} With reference to the relevant legal enactments, write short notes (i) Industrial Entrepreneur Memorandum. (3 marks) C Those industrial undertaking which are exempted from obtaining licence, need to file Industrial Entrepreneur Memorandum or IEM in short C IEM comes in two parts-part A and part B, while the former is to be filed by exempted undertakings before, the latter is filed immediately after commencement of commercial production. C C The format of both Part A and Part B of IEM is prescribed. It is to be filed with Secretariat of Industrial Assistance (SIA) under the Department of Industrial Policy and Promotion. DISTINGUISH BETWEEN June [3] (a) Distinguish between the following: (i) Letter of intent and industrial licence. (5 marks) INDUSTRIAL LICENCE An industrial licence is a written permission to an industrial undertaking to manufacture/produce specified articles mentioned under first schedule granted by the Central Government.

10 5.10 ( Solved Scanner CS Executive Programme M-II Paper - 5 ) Licence consists of the following particulars - C Location of undertaking C Articles to be manufactured C Maximum capacity C Other Details ) Industrial licence is subject to a prescribed validity period. While LETTER OF INTENT ) Letter of intent (LOI) is issued on a provisional basis ) Validility period of letter of intent: 3 years from production ) Extension in validity period: extension by 3 years more can be given by competent authority ) Extension beyond six years can be granted only on exceptional grounds. ) The conditions contained in LOI usually relate to setting up pollution control equipment, site clearance from the State Government and sector specific conditions. ) On fulfilment of prescribed conditions, the holder of LOI can get it converted into Industrial Licence Dec [3] (a) Distinguish between the following: (i) Small scale undertaking and ancillary industrial undertaking. (5 marks) Small scale undertaking:- An industrial undertaking in which the investment in fixed assets in plants and machinery whether held on C Ownership basis or C Lease or C Hire purchase does not exceed rupees one crore. While Ancillary industrial undertaking Please refer Dec [3] (a) (ii) on page no. 18

11 [Chapter # 1] Industries Development and Regulation ( 5.11 DESCRIPTIVE QUESTIONS June [2] (a) What is meant by 'effective steps' under the Registration and Licensing of Industrial Undertakings Rules, 1952? (2 marks) (b) A contract entered into by an industrial undertaking prior to taking over its management and control by the Central Government with a third party is found detrimental to the interests of the undertaking. What is the remedy against such a contract? (5 marks) (a) According to Rule 2 of the Registration and Licensing of Industrial Undertaking Rules, 1952, the term ' effective steps' means one or more of the following: (a) 60% of the issued capital of industrial undertaking has been paid up. (b) Substantial part of the factory has been constructed. (c) Order for substantial portion of plant and machinery has been placed. (b) According to provisions of Section 18C of the Industries (Development and Regulation Act 1951 person authorised to takeover the management may apply to the Central Government to - C Cancel or C Vary an agreement or contract entered before issue of order under Section 18 A entered between the industrial undertaking and other person. ) Authorised person is required to take the approval of Central Government before applying to the court. ) The court may vary the term or cancel the agreement (conditionally or unconditionally) if it is of the opinion that contract is entered in bad faith and is detrimental to the industrial undertaking s interest Dec [2] (b) (i) What do you understand by 'industrial entrepreneurs memorandum'? (2 marks) Please refer June [1] {C} (i) on page no June [2] (a) "The Industries (Development and Regulation) Act, 1951 has lost its sting as the Licence Raj was given a decent burial by the liberalisation policy of the Government:." Discuss. (5 marks)

12 5.12 ( Solved Scanner CS Executive Programme M-II Paper - 5 The object of the Industries (Development and Regulation) Act, 1951 was to provide for- C Development and C Regulation of certain industries specified in first schedule. ) With passage of time, drastic changes were made in the licensing norms. ) As the policy of privatisation globalization and liberalisation was adopted by the government, even our industrial licensing policy and procedures were liberalised. ) Business houses were motivated to counteract global business threats and grab the opportunities. ) With the advent of New Industrial Policy in 1991 licencing requirement has been reduced to merely six industries ) Presently only 3 industries are reserved for public sector ) Even other provisions like C Investigation C Takeover etc. have lost their relevance Thus it can be safely concluded that - Industries (Development and Regulation) Act, 1951 has lost its sting as Licencing Raj was given a decent burial by the liberalisation policy of the Government Dec [2] (c) How is the value of plant and machinery calculated for the purposes of small-scale and ancillary industrial undertakings under the Industries (Development and Regulation) Act, 1951? (3 marks) In calculating the value of plant and machinery certain points are to be included while some are to be excluded in relation to small scale and ancillary industrial undertaking. ) Following items are to be included (in case of imported machinery) C Import duty C Shipping charges C Customs clearance charges C Sales tax ) Following are to be excluded:- C Cost of procuring cables, wires C Cost of research and development C Installation cost C Equipment/component cost like that of tools, jigs, dies etc. ) transportation cost ) technical know how related cost ) fire fighting equipment related cost.

13 [Chapter # 1] Industries Development and Regulation ( 5.13 Repeatedly Asked Questions No. Question Frequency 1 Write short notes on Industrial Entrepreneur Memorandum. 04-Dec [2] (b) (i), 07 - June [1] {C} (i) 2 Times Table Showing Marks of Compulsory Questions Year 09 J 09 D 10 J 10 D 11 J 11 D 12 J 12 D 13 J 13 D Short Notes Total 3 3 3

MSMED Act, Overview. CS Shilpa Dixit, Partner, MRM Associates, Practising Company Secretaries

MSMED Act, Overview. CS Shilpa Dixit, Partner, MRM Associates, Practising Company Secretaries Background: MSMED Act, 2006 - Overview CS Shilpa Dixit, Partner, MRM Associates, Practising Company Secretaries The concept of Small Scale Industrial Undertakings/ Ancillary Industrial Undertakings was