THE MEMBERS OF
BIHAR SPONGE IRON LIMITED
Report on the Financial Statements
We have audited the accompanying financial statements of BIHAR SPONGE IRON LIMITED("the Company") which comprise the Balance Sheet as at 31st March 2015 theStatement of Profit and Loss the Cash Flow Statement for the year then ended and asummary of the significant accounting policies and other explanatory information.Managements 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 financial statements that give a true and fair view of the financial positionfinancial performance and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the Accounting Standards specified underSection 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
Our responsibility is to express an opinion on these financial statements based on ouraudit.
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 thereunder.
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 andthe disclosures in the financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers 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 but not for the purpose of expressing anopinion on whether the company has in place an adequate internal financial control systemover the financial reporting and the operating effectiveness of such controls. An auditalso includes evaluating the appropriateness of the accounting policies used and thereasonableness of the accounting estimates made by the Company's Directors as well asevaluating the overall presentation of the financial statements. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for ourqualified audit opinion on the financial statements.
Basis for Qualified Opinion
The management has prepared the financial statements on the basis of going concernperhaps based on the facts that the Modified Draft Rehabilitation scheme has beensubmitted by the company on 03.12.2012 and the same is under the consideration BIFR. Inour opinion the going concern concept is likely to be appropriate only if the modifiedrehabilitation scheme referred to above is approved by the BIFR with or withoutmodifications.
In the meanwhile following liabilities may or may not materialised depending upon thefinal outcome of the dispute have not been provided:-
i. Non recognition of liability on account of currency fluctuations on foreign currencyloan and interest thereon (as required under Accounting Standard - 11 Revised) amountingto Rs. 232381 thousand as provided in the BIFR Scheme dt. 29.07.2004 and also confirmedby AAIFR/ Single Bench of Jharkhand High Court Ranchi since the company against the orderof Single Bench of High Court has filed Letters Patent Appellate Jurisdiction (LPA)before the Divisional Bench of High Court of Jharkhand Ranchi (refer other note no. 3(II)appearing in Annexure-1)
ii. Non recognition penalty of Rs. 21528 thousands recovered by South Eastern CoalFields Ltd. On account of short lifting of coal quantity in terms of Fuel Supply Agreementsince the matter has been disputed by the Company under writ petition filed before theHonble High Court of Chhattisgarh (refer other note no 5 of Annexure I)
iii. No provision has been made in the books of accounts in respect of the undernoteditems of expense in view of Shutdown of the Plant & Suspension of operations since 10thAugust 2013 as well as other reasons contented by the company:-
a. Interest on unsecured loan taken from Promoters and other parties from 10.08.2013 to31.03.2015(amount unascertained) (refer note 10 (a) of Annexure I).
b. Interest on Soft Loan taken from the Government of Jharkhand under the IndustrialRehabilitation Scheme 2003 amounting to Rs. 81331 thousands from 10.08.2013 to 31.03.2015which is subject to representation for waiver(refer note 10(b) of Annexure I) and approvalthereof by the lender.
c. Salaries Wages Allowances Contribution to PF including interest on overdue amountas well as employee benefit expenses w.e.f. 10.08.2013 to 31.03.2015 (amountunascertained) (refer note 10(c) of Annexure I)
Taking into consideration non provision of likely liabilities mentioned paragraph I IIand III(b) above.
a) Loss for the year would have been more by Rs. 335240 thousand as compared to thedisclosed loss of Rs. 73614 thousand.
b) Accumulated losses would have been Rs.2655564 thousand as compared to disclosedlosses of Rs. 2320324 thousand.
c) The above losses is however subject to ascertainment of liabilities as mentioned inPara iii (a) and iii(c).
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 of QualifiedOpinion paragraph above the aforesaid financial statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India:
a. in the case of the Balance Sheet of the state of affairs of the Company as at March31 2015;
b. in the case of the Statement of Profit and Loss of the loss for the year ended onthat date; and.
c. in the case of the Cash Flow Statement of the cash flows for the year ended on thatdate.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2015 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Companies Act 2013 we give in the Annexure a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable to the company.
2. As required by section 143(3) of the Act we report that:
a. We have sought & obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit;
b. Except for the effects of the matter described in the Basis for Qualified OpinionParagraph above in our opinion proper books of account as required by law have been keptby the Company so far as it appears from our examination of those books;
c. The Balance Sheet the Statement of Profit and Loss and Cash Flow Statement dealtwith by this Report are in agreement with the books of account:
d. Except for the effects of the matter described in the Basis of Qualified Opinionparagraph above in our opinion the aforesaid financial statements comply with theAccounting Standards specified under section 133 of the Act read with rule 7 of theCompanies (Accounts) Rules 2014.
e. The matter described in the basis for Qualified Opinion paragraph above in ouropinion may have an adverse effect on the functioning of the company.
f. On the basis of written representations received from the Directors as on 31stMarch 2015 taken on record by the Board of Directors we report that none of directors isdisqualified as on 31st March 2015 from being appointed as a director in termsof section 164(2) of the Act.
g. The qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Qualified Opinion paragraph above.
h. With respect to the other matters to be included in the Auditors 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 possible impact of pending litigations on itsfinancial position in its financial statements -Refer other notes III of Annexure I (1)(i) to (ix) to the financial statements;
ii. The company did not have any long term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the company.
For Thakur VaidyanathAiyar& Co.
Membership No. 052473
Place : New Delhi
Dated :12th May 2015
Annexure referred to in paragraph 1 under the heading "Report on Other Legal andRegulatory Requirements" of Independent Auditors Report of even date on thefinancial statements for the year ended March 31 2015
i) Fixed Assets
a) The Company has maintained proper records showing full particulars includingquantitative details and situation of its fixed assets.
b) The Company has a programme of verifying all of the fixed assets over a period ofthree years which in our opinion is reasonable having regard to the size of the Companyand nature of assets. Since the plant is under shut down from the previous year hence nophysical verification of Fixed Asset has been carried out by the management during theyear as such we are unable to comment on the discrepancies if anybetween the physicalbalance and book balance and their adjustment in the books of accounts at the year end.
a) The stock of finished goods stores spare parts and raw materials have not beenphysically verified by the management at reasonable intervals during the year since theplant has been under shut down and operations suspended w.e.f. 10.08.2013.
b) The company has the procedures of physical verification of inventories followed bythe management which are reasonable and adequate in relation to the size of the Companyand nature of its business however no physical verification has been carried out duringthe year ended 31.03.2015 in view of the fact stated at (ii) a) above.
c) The company has maintained proper records of inventory showing full detailsregarding quantity of receipts issues balances and dates of transactions. Since nophysical verification of inventories were carried out during the year hence the questionof discrepancies if any observed and their adjustment in the books of account does notarise.
iii) Transactions with parties u/s 189 of the Companies Act 2013
The company has not granted any loans secured or unsecured to companies firms or otherparties covered in the register maintained under section 189 of the Act as such Para (a)& (b) of clause 3 (iii) are not applicable.
iv) Internal Control
In our opinion and according to the information and explanations given to us there isan adequate internal control procedure commensurate with the size of the Company and thenature of its business with regard to purchase of inventory fixed assets and for sale ofgoods and services. However there is a need of strengthening internal control withrespect to obtaining of confirmation of balances from major parties.
There are no continuing failures to correct matters in respect of lack of adequacy ofinternal controls brought to the notice.
The Company has not accepted any deposits from the public which are covered under thedirectives issued by the Reserve Bank of India and the provisions of section 73 to 76 orany other relevant provisions of the Act and the rules framed thereunder.
vi) Cost Records
The maintenance of Cost Records has been specified by the Central Government under subsection (1) of Section 148 of the Companies Act 2013. Since there have been no operationsduring the Financial year 2014-15 no records have been made & maintained by thecompany.
vii) Statutory Dues
a) According to the books and records examined by us and information and explanationsgiven to us the company has not been regular in depositing the undisputed Statutory dueswith the appropriate authorities including Provident Fund Income Tax(TDS &TCS) SalesTax Service Tax Excise duty Value Added Tax Cess & other applicable statutory duesduring the year except that the amount of excise duty of earlier year has been depositedby the company during the financial year along with interest.
The arrears on account of such statutory dues as at the end of the financial year 31stMarch 2015 for a period of more than six month from the date they become payable areService Tax: Rs 2348 thousand Provident fund: Rs 5123 thousand: Family Pension Scheme:Rs. 703 thousand Income Tax (TDS/TCS)Rs. 4054 thousand Electricity Duty: 320 thousandand Cess Rs. 100 thousand.
b) The details of dues of sales tax custom duty excise duty trade tax and cess etc.which have not been deposited on account of dispute are given hereunder:
|Name of the Statute ||Forum where Dispute pending ||Nature of dues ||Period of Dispute ||Amount Rs. Thousand |
|1. The Customs Act 1962 ||CESTAT Kolkata ||Custom Duty & Demurrage ||1981-92 ||10427 |
| || ||Charges and interest on imported Stores & spare parts ||1994-95 ||5032 |
|2. JVAT Act 2005 ||Jt. Commissioner of Commercial Taxes (Appeals) Jamshedpur who has recommended case on 08.10.2013 to DCIT to verify and allow credit for taxes if any paid earlier. ||Tax on non-submission of JVAT Forms ||2006-07 ||2397 |
|3. The Central Sales Tax Act 1956 ||Jt. Commissioner of Commercial Taxes (Appeals). ||Tax on non-submission of 'C' Forms ||2006-07 ||311 |
|4. JVAT Act 2005 ||Disputed demand for JVAT for the F.Y. 2010-11 u/s 70(5)(b) under appeal before the Jt. Comm. of Commercial Taxes (Appeals) Jsr. However stay has been granted on 20.01.2012 (Amount paid on appeal Rs. 5.88 lacs) ||Tax on JVAT ||2010-11 ||5879 |
| ||Demand raised by DCCT Jsr for tax due and/penality imposed or interst payable under JVAT Act 2005 of the F.Y. 2010-11 under dispute before JCCT Jsr (Amount paid on appeal Rs. 15 lacs on 19.10.2012) ||Tax on JVAT ||2010-11 ||24786 |
|5. Finance Act 1994 ||The Commissioner of Appeals Central Excise & Service Tax Ranchi ||Recovery of Irregular Cenvat Credit Cess availed and Penalty thereon ||2009-10 ||123 |
|6. Income Tax Act 1961 ||The Commissioner of Income Tax (Appeals) JSR ||Short deduction/ collection of Tax at Source with interest and penalty ||2004-05 to 2008-09 ||8334 |
The above does not include the amount of assessed tax & penalty demand for JVAT ofRs. 22117 thousand CST Rs. 73645 thousand and Electricity Duty of Rs.2281 thousand forwhich the company is contemplating to file appeals before the appropriate authorities(refer note on contingent liabilities (Annexure I/ para III on the Basis of QualifiedOpinion of our report).
c) The Company is not required to transfer any amount to the Investor Education andProtection Fund in accordance with the relevant provisions of the Companies Act 2013 andrules made thereunder.
viii) The accumulated losses of the company at the end of the financial year March312015 substantially exceeds its net worth and the company was declared as Sickindustrial undertaking in 1996. Further the Company has incurred cash losses during thecurrent financial year and in the immediately preceding financial year
ix) The company has not defaulted in payment of dues to financial institutions/Banks.There has been no debenture in the company.
x) According to the information and explanations given to us the Company has not givenany guarantee for loans taken by others from banks or financial institutions during theyear.
xi) The term loans taken by the Company have been applied for the purpose for whichthey were obtained however there has been no term loans obtained during the year underaudit.
xii) Based upon the audit procedures performed and on the basis of information andexplanations provided by the management we report that no fraud on or by the Company hasbeen noticed or reported during the year under audit.
For Thakur VaidyanathAiyar& Co.
Membership No. 052473
Place : New Delhi
Dated :12th May 2015