Assam Petrochemicals Ltd.
|BSE: 506267||Sector: Industrials|
|NSE: N.A.||ISIN Code: INE277D01010|
|BSE 05:30 | 01 Jan||Assam Petrochemicals Ltd|
|NSE 05:30 | 01 Jan||Assam Petrochemicals Ltd|
|BSE: 506267||Sector: Industrials|
|NSE: N.A.||ISIN Code: INE277D01010|
|BSE 05:30 | 01 Jan||Assam Petrochemicals Ltd|
|NSE 05:30 | 01 Jan||Assam Petrochemicals Ltd|
The Members of
ASSAM PETROCHEMICALS LIMITED
Report on the Financial Statements
We have audited the accompanying standalone financial statements of ASSSAMPETROCHEMICALS LIMITED ("The Company") which comprise the Balance Sheet asat March 31 2017 and the Statement of Profit and Loss and the Cash Flow Statement for theyear then ended on that date and a summary of the significant accounting policies andother explanatory information.
Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance with theAccounting Principles Generally Accepted in India including the Accounting Standardsspecified under section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules2014 ("the Rules"). This responsibility also includes the maintenance ofadequate accounting records in accordance with the provision of the Act for safeguardingof the assets of the Company and for preventing and detecting the frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free
from material misstatement whether due to fraud or error.
Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.
We have conducted the audit for the year ending on 31.03.2017 as per our appointmentvide Letter No./CA.V/COY/ASSAM APETRO (1)/106 dated 11.07.2016 by the C&AG of India.
We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made there under.
We conducted our audit in accordance with the Standards on Auditing specified undersection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor'sjudgment including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error. In making those risk assessments the auditorconsiders internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances.
An audit also includes evaluating the appropriateness ofthe accounting policies usedand the reasonableness of the accounting estimates made by the Company's Directors aswell as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone financial statements.
Basis for Qualified Opinion
1. Amortization of ROC fees Expenses: Expenses related to ROC fees for enhancement ofauthorised share capital total amounting to Rs 16650510/- had been amortized as perdecision of the management from Financial Year 2012-13 @ Rs 3330102/- per year has beencharged under Depreciation and Amortization expenses. On the basis of Accounting Standard(AS)-10 on Fixed Assets Para 9.2 under The Companies Accounting Standards Rules 2006the whole expenses relatedtoROCfeesforenhancementofauthorised share capital of Rs16650510/- should have been charged to Capital Work in Progress as the amount isspecifically incurred with a view for expansion of new project. As such the company hadunderstated its profit for FY 2016-17 201314 2012-13 by Rs 33 30102/- and overstatedits loss for FY 2014-15 & 2015-16 by Rs 33 30102/- each year This matter was alsoqualified by us on the financial statements for the year ended 31stMarchRs2016.
2. Provision for Pay revision of arrear salaries for employees for the year 2009-10& 2010-11 : As mentioned in CAG comments on the accounts for the year 2012-13 and asper qualified opinion of previous auditor Rs62754977/- being the arrear payable againstpay revision of salaries of employees for the years 2009-10 & 201011 should have beenprovided for and shown under "Current Liabilities" instead of disclosing itunder "Contingent Liabilities" as the same was approved by the Board ofDirectors of the Company and Government of Assam.
But no provision has been made by the Company charging to Statement of Profit and LossRs 6 27 54977/- (Previous year ended 31st MarchRs2016
Rs 6 27 54977/-) as "Prior period Items" and shown under "Short termprovisions". This has resulted in understatement of loss by Rs 62754977/- andunderstatement of short term provisions by Rs 62754977/- (Previous year ended 31stMarchRs2016 Rs 62754977/- Rs 62754977/- respectively). This matter was alsoqualified by us on the financial statements for the year ended 31stMarchRs2016.
3. Inventories of Rs 10.26 crore for FY 2015-16 includes 32 lakhs being the cost of nonmoving items which had been suggested for writing off by the technical Committee andBoard of Directors of the Company. Non provisioning against above non moving items hasresulted in overstatement of loss for FY 2015-16 by Rs 32 lakhs each.
4. Provision for deficit in PF Trust: As per the EmployeesRs Provident Funds &Miscellaneous Provisions Act 1952 PF Trust is liable to be audited and if there is anydeficit in PF Trust Account it is the responsibility of the Company to compensate for thedeficit every year. According to the Audit report for FY 2015-16 balance of accumulateddeficit as on 31st MarchRs2016 is Rs 20133149/- out of which deficit for FY2015-16 was Rs 1613613/-. However no such provision was made by the Company during theprevious year FY 2015-16. As a result the "Profit and Loss Account" &"Short term provisions" had been misstated for the previous year by Rs1613613/-.
5. Non availment of Service Tax Credit: Service Tax Credit amounting to Rs 283409/- hadnot been claimed on the following payments:
i) Rs868166/- on 17.08.2016 to Engineers India Ltd.
ii) Rs229493/- on 28.09.2016 to Engineers India Ltd.
iii) Rs1116375/- on 01.02.2017 to Tata Consulting Engineers Ltd.
This had resulted in overstatement of Capital WIP & excess outflow for payment oftaxes.
6. Treatment of MAT Credit: The Company had MAT Credit Balance in FY 2012-13 of Rs4919700/- which the company failed to recognize in the books of account nor claimed in theincome tax return for the said financial year which it had written back to the balance ofProfit & Loss Account in the previous year. This has resulted in understatement ofLoss for FY 201516 by Rs4919700/-
7. Treatment of Income Tax Expense: The Company had made excess Provision for IncomeTax for FY 2014-15 by Rs 36 74 395/- which it had written back to the balance of Profit& Loss Account in the previous year. This has resulted in understatement of Loss forFY 2015-16 by Rs 3674395/-.
8. Capital Work in Progress :
a) Administrative Building (Project): The Company had debited to AdministrativeBuilding Account (FY 2014-15 to Repairs & Maintenance) Rs 1259195/- & creditedto Prior Period Items by same amount during the FY 2015-16.
b) Administrative & Other Expenses(Project) :The Company had debited the relatedexpenses to Capital Work-in Progress during the FY 2015-16 Rs 15040679/- (DepreciationRs 2215175/- + Salary & Other Allowances Rs 11695195/- + Project TravellingExpenses Rs 1066203/- + Other Expenses Rs 63386/-) & whereas The Company haddebited the related expenses to Profit & Loss Account during the FY 2014-15 Rs7676204/- (Salary & Other Allowances Rs 7149318/- + Project Travelling Expenses Rs526886/-). From the above we are of the view that the Company has changed itsAccounting Policies & Practices during FY 2015-16.
9. The CAG for F.Y. 15-16 had stated that the Other Current Liabilities amounting to Rs3.35 crores does not include penalty of Rs 4.40 lakh payable to the Securities &Exchange Board of India for failure to appoint a Woman Director in the Board of Directorsof the Company as required under Section 149 of the Companies Act 2013 and Clause 49 ofthe Listing Agreement (Company listed in Bombay Stock Exchange). This resulted inunderstatement of current liabilities by Rs 4.40 lakh as on 31.03.2017 & Rs 4.40 lakhas on 31.03.2016 (previous year).
10. Applicability of The Insolvency and Bankruptcy Code 2016 (IBC): The provisions ofthe relevant Law is applicable to the Company. As reported by the management an amount ofRs 119716/- is pending to be paid to Zean Lithos Co. which had been claimed but notyet paid by the Company.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in the Basis for QualifiedOpinion paragraph above the aforesaid standalone financial statements give theinformation required by the Act in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India:
a. the case of the Statement of Profit and Loss of the loss for the year ended on thatdate.
b. in the case of the Balance Sheet of the state of affairs of the Company as at March31 2017;
c. in the case of the Statement of Cash Flow of the cash flow for the year ended onthat date.
Emphasis of Matter
1. We draw attention to Note 5(b)(ii) and Note 24.1 to the financial statements relatedto Equity capital money received from Government of Assam amounting
Rs 3702 lakhs shown under other long term liabilities for which legal formalitiesrelating to issue of share capital will be taken by the Board in due course as mentionedin above notes. Our opinion is not qualified in respect of this matter
2. We draw attention to Note 2 5.10 to the financial statements :
The Consolidated Financial Statements under section 129(3) of the Companies ActRs2013of the company and its subsidiary M/s. Pragjyotish Fertilizer and Chemicals Limited hasnot been prepared due to absence of Audited Financial Statements of the subsidiarycompany. Our opinion is not qualified in respect of this matter
3. We draw attention to Note 2 5.11 to the financial statements related to basis forcalculation of depreciation:
In absence of proper fixed assets register rate of depreciation under straight linemethod and written down value method on remaining useful life of respective assets iscalculated on the basis of audited financial statements of previous years and otherfinancial records. Our opinion is not qualified in respect of this matter
4. Under utilisation of resources: It has been observed that Natural Gas transmissioncharges of Rs 24173668/- has been incurred during the month of AugustRs2017 whereaspayment of Rs 10000000/- had only been made against the same. The management hadreported that this had occurred due to lack of consistent supply of Natural Gas by OilIndia Ltd. which led to under production of Methanol in August by 339 MT & Septemberby 248 MT based on average production for the months of July & OctoberRs 2017. Thishad also resulted in loss of revenue to the Company by Rs 11434760/- based on
average basic Selling Price per MT for the months of August & SeptemberRs 2016.
Report on Other Legal and Regulatory
1. As required by the Companies (Auditor's Report) Order2016 issued by the CentralGovernment of India in exercise of powers conferred by subsection 11 of section 143 of theAct we enclose in Annexure "A" a statement on the matters specified inparagraphs 3 & 4 of the Order
2. As required by sub-section 3 of section 143 of the Act we report that :
(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit.
(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
(c) The Balance Sheet Statement of Profit and Loss and the Cash Flow Statement dealtwith by this Report are in agreement with the books of account.
(d) In our opinion the aforesaid standalone financial statements comply with theaccounting standards specified under section 133 of the Act read with Rule 7 of theRules.
(e) On the basis of the written representations received from the Directors as on 31stMarch2017 and taken on record by the Board of Directors none of the Directors aredisqualified as on 31st March2017 from being appointed as a Director in termsof sub section 2 of section 164 of the Act.
(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report
in Annexure "B" and.
(g) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us :
i) The Company has disclosed the impact of pending litigations on its financialposition in its financial statements- Refer Note No. 24.2 to the financial statements;
ii) Provision has been made in the financial statements as required under theapplicable law or accounting standards for material foreseeable losses if any onlong-term contracts-Refer Note No. 8 to the financial statements;
iii) There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
Annexure"A" to the Independent Auditor's Report-31st March 2017
Referred to in our report of even date
1. (a) The company has not maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) According to the information given to us physical verification of fixed assets hasnot been done by the management during the year and as such material discrepancies withfinancial records if any could not be noticed and have not been dealt with in the booksof account.
(c) According to the information and explanations given to us the title deeds of theimmoveable properties as disclosed in note 9 to the financial statements are held in thename of the company.
2. The inventories of Stores except goods-in- transit has been physically verified atreasonable intervals during the year by the management.
In our opinion the frequency of verification is reasonable. The discrepancies noticedon verification between the physical stocks and the book records were not material.
3. The company had granted loan to two body corporate listed in the register maintainedunder section 189 of the Act.
(a) The Company has granted loan to its subsidiary M/s. Pragjyotish Fertilizers &Chemicals Limited which is Rs4184185/- and advance for Share Application Money to theSubsidiary Company is Rs480000/- as on 31st March 2016. The Company has madeprovision for the full amount i.e. Rs4184185/- and Rs480000/- respectively consideringthem doubtful.
(b) The balance amount of principal for the loan given to Assam Tea Corporation Ltd. ofRs2500000/- is still overdue and total interest accrued and due Rs 5162209 /- has notbeen
received so far. Though the Company is pursuing through Govt. of Assam for the recoveryof the balance amount of principal and the amount of interest overdue however the stepsare not reasonable in view of long overdue.
4. The company had not granted any loans or provided any guarantees or security to theparties covered under section 185 of the Act. The Company has complied with the provisionsof Section 185 &186 of the Act in respect of investments made or loans or guarantee orsecurity provided to the parties covered under section 185 & 186.
5. In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits in contravention of Directives issued by ReserveBank of India and the provisions of section 73 to 76 or any other relevant provisions ofthe Act and the rules framed there under where applicable . No order has been passed bythe Company Law Board or National Company Law Tribunal or Reserve Bank of India or anycourt or any other tribunal.
6. Wehavebroadlyreviewedtherecordsmaintained by the company pursuant to the rulesprescribed by the Central Government for maintenance of cost records under sub-section (1)of section 148 of the Act and we are of the opinion that prima facie the prescribedaccounts and records have been made and maintained. However we have not made a detailedexamination of the records.
7. (a) According to the information and explanations given to us and records of thecompany examined by us in our opinion the Company is generally regular in depositing theundisputed statutory dues including provident fund investor education protection fundemployeesRs state insurance income tax sales tax wealth tax service tax custom dutyexcise duty Cess and other material statutory dues applicable to it with appropriateauthorities.
According to the information and explanations given to us no undisputed amountspayable in respect of income tax wealth tax service Tax sales tax custom duty exciseduty and cess were in arrears as at 31-March-2017 for a period of more than six monthsfrom the date they became payable.
(b)Accordingtotheinformationandexplanations given to us there are no dues of salestax value added tax income tax service tax custom duty wealth tax excise duty andcess which have not been deposited with the appropriate authorities on account of anydispute other than those mentioned below to this report.
8. As the Company does not have any loans or borrowings from any financial institutionor bank or Government nor has it issued any debentures as at balance sheet date theprovisions of clause 3(viii) of the Order are not applicable to the Company.
1. The company has not raised money by way of initial public offer or further publicoffer (including debt instrument) and term loans during the year. Accordingly theprovisions of
Clause 3(ix) of the Order are not applicable to the Company.
2. Based upon the audit procedures performed and according to the information andexplanations given to us no fraud by the company or any fraud on the company by itsofficers or employees has been noticed or reported during the course of our audit thatcauses the financial statements to be materially misstated.
3. The Managerial remuneration has been paid or provided in accordance with therequisite approvals mandated by the provisions of section 197 read with Schedule V to theAct.
4. In our Opinion and according to the information and explanations given to us thecompany is not a Nidhi Company. Accordingly paragraph 3(xii) of the Order is notapplicable.
5. According to the information and explanations given to us and based on ourexaminations of the records of the Company transactions with related parties are incompliance with sections 177 and 188 of the Act where applicable. The details of suchrelated party transactions have been disclosed in note no. 25.4.b of the financialstatements as required under AS-18 Related Party Disclosures specified under section 133
of the Act read with Rule 7 of the Companies (Accounts) Rules 2014.
6. According to the information and explanations given to us and based on ourexaminations of the records the Company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review.
7. According to the information and explanations given to us and based on ourexaminations of the records the Company has not entered into non cash transactions withdirectors or persons connected with him. Accordingly paragraph 3(xv) of the Order is notapplicable.
8. The company is not required to be registered under section 45-IA of the Reserve Bankof India Act 1934. Accordingly the provisions of clause 3(xvi) of the Order is notapplicable to the Company.
Annexure "B" to the Independent Auditor's Report-31st MarchRs 2017of Even Date on the Standalone Financial Statements of Assam Petrochemicals Limted
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of AssamPetrochemicals Limited as of 31stMarch 2017 in conjunction with our audit ofthe standalone financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal controls over financial reporting criteriaestablished by the Company considering the essential components of internal controlsstated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting issued by ICAI. These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of its business including adherence tocompany's policies the safeguarding of its assets the prevention and detection of fraudsand errors the accuracy and completeness of the accounting records and the timelypreparation of reliable standalone financial information as required under the CompaniesAct 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under
section 143(10) of the Companies Act 2013 to the extent applicable to an audit ofinternal financial controls both applicable to an audit of Internal Financial Controlsand both issued by the Institute of Chartered Accountants of India. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting was established and maintained and if such controlsoperated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
Basis for Qualified Opinion
According to the information and explanations given to us and based on our audit thefollowing material weaknesses have been identified as at March 31 2017:
The Company did not have an appropriate internal financial control system as explicatedin the following material instances:
i) Lack of proper management of Creditors/Trade Payables like lagging of liabilityrecognition
for more than reasonable period even after receipt of materials due to inefficientinternal accounting cycle non-payment/adjustment of security deduction of the creditorsbeyond reasonable period.
ii) Fringe Benefit Tax refundable: Long Term Loans & Advances contains FBTRefundable for A.Y. 07-08 08-09 & 09-10 of Rs 9986/- 314080/- & 183205/-respectively. These advances are long pending. The steps taken by the management forrecovery are not sufficient & satisfactory.
iii) The Company had overstated the Other Short Terms Loans of Loans & Advances aswell as duties & taxes of Current Liabilities by Rs 104277/- as on 31.03.2017 &Rs 132627/- as on 31.03.2016 by not claiming the VAT TDS.
iv) Quantity Discount & Turnover Discount: The Company has been following thepolicy of debiting quantity & turnover discount to Turnover Account. During the yearthe Company had charged quantity & turnover discounts to the Turnover Accountresulting in understatement of Sales by Rs 16563648/- (Previous year Rs 19603592/-).
v) Forest Royalty: It has been observed that Forest Royalty had not been deducted whilemaking payment to the Contractors for various kinds of civil construction undertakenduring the year. This had led to loss to the State Government exchequer.
vi) As per provisions of Companies ActRs2013 a separate register of Fixed Depositsshould be kept for all investments made by company in fixed deposits with bank. SimilarlyAccount wise ledger should be maintained in tally for every fixed deposit with bankinstead of one single ledger for all fixed deposits.
vii) Weakness in Debtors/ Trade Receivables management like lack of practice of timelyreconciliation of account statements long credit balance outstanding unsystematicrealisation
and credit period allowed to the parties and non adherence to the credit policy of thecompany non release/ adjustment of CST Security Deposit collected from customers beyondreasonable period.
A Rsmaterial weaknessRs is a deficiency or a combination of deficiencies in internalfinancial control over financial reporting such that there is a reasonable possibilitythat a material misstatement of the company's annual or interim financial statements willnot be prevented or detected on a timely basis.
In our opinion except for the effects/possible effects of the material weaknessesdescribed above on the achievement of the objectives of the control criteria the Companyhas maintained in all material respects adequate internal financial controls overfinancial reporting and such internal financial controls over financial reporting wereoperating effectively as of March 31 2017 based on the internal control
over financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.
We have considered the material weaknesses identified and reported above in determiningthe nature timing and extent of audit tests applied in our audit of the March 31 2017financial statements of the Company and these material weaknesses do not affect ouropinion on the financial statements of the Company.