Coal beneficiation and cost audit compliance: court refused threshold quashing of complaint over alleged non-maintenance of cost records.

Coal beneficiation or washing was examined as a mixed question of fact and law under the Companies Act cost-audit framework, and the Court held that it could not be treated per se as outside manufacture, production or processing. Because the company's own disclosures, memorandum and filings suggested mining and mineral-related activities, and the process was said to alter raw coal, remove impurities and yield a commercially distinct product, the allegation of non-compliance with cost records and appointment of a cost auditor could not be quashed at the threshold. The criminal complaint was therefore not liable to be quashed.

---

---

Issues: Whether a company engaged in coal beneficiation or washing is entitled to quashing of a criminal complaint alleging non-compliance with the requirement of appointing a cost auditor and maintaining cost records under the Companies Act, 2013 and the Companies (Cost Records and Audit) Rules, 2014.

Analysis: The company contended that coal washing was only a service and did not amount to production or manufacture, while the respondents relied on the company's own disclosures, product code and turnover particulars to show that the activity fell within the prescribed category of mineral fuels and attracted the cost audit regime. The memorandum of association and statutory filings indicated engagement in mining and working of minerals, and the disclosed activity was not limited to washing alone but also included allied activities. The Court examined the legal meaning of manufacture, production and processing, and noted that beneficiation of coal alters raw coal, removes impurities, improves quality and yields a commercially distinct product. The Court also treated the precise nature of the process undertaken by the company as a mixed question of fact and law, not suitable for quashing at the threshold on the mere assertion that no manufacture was involved.

Conclusion: Coal beneficiation cannot be said per se to fall outside the ambit of manufacture or the cost audit framework, and the complaint was not liable to be quashed.

---