To the members of Scan Steels Limited
Report on the Ind AS Financial Statements
We have audited the accompanying financial statements of Scan Steels Limited (the'Company'') which comprise the Balance Sheet as at March 31 2017 the statement ofProfit and Loss (including other comprehensive income) and the statement of cash flows andthe statement of changes in equity for the year then ended and a summary of significantaccounting policies and other explanatory information.
Management's Responsibility for the Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Companies Act2013 ('the Act'') with respect to the preparation andpresentation of these Ind AS financial statements that give a true and fair view of thefinancial position f i n a n c i a l p e r f o r m a n c e i n c l u d i n g o t h e rcomprehensive income and cash flows and changes in equity of the company in accordancewith the accounting principles generally accepted in India including the IndianAccounting Standards specified under Section 133 of the Act read with rule 7 of theCompanies (Accounts) Rules 2014.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities selection and application ofappropriate accounting policies making judgments and estimates that are reasonable andprudent and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the Ind ASfinancial 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 Ind AS financial statements basedon our audit.
We have taken into account the provisions of the Act the accounting and auditingstandards and matters that 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 Ind AS financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the Ind AS financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of theInd AS financial statements whether due to fraud or error. In making those riskassessments the auditor considers internal financial control relevant to the Company'spreparation of the Ind AS financial statements that give a true and fair view in order todesign audit procedures that are appropriate in the circumstances. An audit also includesevaluating the appropriateness of the accounting policies used and the reasonableness ofthe accounting estimates made by the Company's Directors as well as evaluating theoverall presentation of the Ind AS financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Ind AS financial statements.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Ind AS financial statements give the information required bythe Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at March 31 2017 and its profits and its cash flows for the year ended on that date.
Emphasis of Matter
Without qualifying our opinion we draw attention to
i. Note No-2.5 to the financial statements which describes that the company hasdefaulted on debt payments to consortium lenders due to unprecedented adversedevelopments witnessed by industry as a whole during the financial year.
ii. Note No-2.6 to the financial statements which describes that the company hasadvance from customers for more than 365 days.
iii. Note No-2.7 to the financial statements which describes on steps taken by thecompany for transition to Ind AS compliances.
Our opinion is not qualified in respect of this matter.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016('the Order'')issued by the Central Government of India in terms of subsection (11) of section 143 ofthe Companies Act 2013 we give in the Annexure A'; a statement on the mattersspecified in the paragraph 3 and 4 of the said order to the extent applicable.
2. As required by Section 143 (3) 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 purposes 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 the Statement of Profit and
Loss and the statement of cash flows and the statement of changes in equity dealt withby this report are in agreement with the books of account.
d. In our opinion the aforesaid Ind AS financial statements comply with the accountingstandards specified under section 133 of the Act read with rule 7 of the Companies(Accounts) Rules 2014
e. On the basis of the written representations received from the Directors as on 31stMarch 2017 and taken on record by the Board of Directors none of the Directors aredisqualified as on 31st March 2017 from being appointed as a Director in terms of section164 (2) 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';
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. theCompany has disclosed the impact of pending litigations on its financial position in itsInd AS financial statements. Refer additional Note-2.1to the Ind AS financial statements;
ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses .
iii. there has been no delay in transferring amounts required to be transferred tothe
Investor Education and Protection fund by the company.
iv. the Company has provided requisite disclosures in its Ind AS financial statementsas to holdings as well as dealings in Specified Bank Notes during the period from 8November 2016 to 30 December 2016 and these are in accordance with the books of accountsmaintained by the Company. Refer Note-10 to the Ind AS financial statements.
Annexure-A to the Independent Auditors' Report
(Referred to in paragraph 1 under Report on Other Legal and RegulatoryRequirements' section of our report of even date)
The Annexure referred to in our Independent Auditor's Report to the members of ScanSteels Limited (the Company) on the Ind AS financial statements for the year ended March31 2017 we report that:
(i)(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a regular programme of physical verification of its fixed assetsby which all fixed assets are verified in a phased manner over a period of two years. Inour opinion this periodicity of physical verification is reasonable having regard to thesize of the Company and the nature of its assets. Pursuant to such program a portion offixed asset has been physically verified by the management during the year and no materialdiscrepancies were noticed on such verification.
(c ) The deed of immovable properties are held in the name of the Company in almost allcases excepting for
(i) Freehold land of 7.68 Acres situated in Village Raiberna and Laing Sundergarhwhich is in the name of M/s. Shristi Ispat Limited the company which was merged in tothis company during 2005.
(ii) Land of 14.88 Acres occupied by the company situated in Village-KudithiniBellary Karnataka.
(a) The inventory has been physically verified by the management during the year. Inour opinion the frequency of such verification is reasonable.
(b) The discrepancies noticed on the aforesaid verification between the physical stocksand book records were not material.
(ii) According to the information and explanations given to us no loan has beengranted by the Company (secured / unsecured loans) to companies/ firms/ limited liabilitypartnerships or other parties covered in the register maintained under section 189 of theAct. Accordingly reporting on interest and its repayment are not applicable.
(iii) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of section 185 and 186 of the Act in respect ofgrant of loans making investments and providing guarantees and securities as applicable.
(iv) In our opinion and according to the information and explanations given to us theCompany has accepted deposits from the public and complied in accordance with Chapter-VI(section 73 to 76) of the Act.
(v) We have broadly reviewed the books of account maintained by the Company pursuant tothe rules prescribed by the Central Government for maintenance of cost records undersub-section (1) of section 148 of the Act and are of the opinion that prima facie theprescribed accounts and records have been made and maintained. However we have not made adetailed examination of the records.
(vi)(a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/accrued in the books ofaccount in respect of undisputed statutory dues including provident fund employees' stateinsurance income-tax sales tax service tax duty of customs duty of excise valueadded tax cess and other material statutory dues have been generally regularly depositedduring the year by the Company with the appropriate authorities.
(b) According to the information and explanations given to us the following dues ofCustoms Duty Income Tax VAT and Entry Tax have not been deposited by the Company onaccount of disputes:
STATEMENT OF DISPUTED DUES
|SI No. ||Name of the Statute ||Period ||Nature of Dues ||Amount (Rs .) ||Forum where dispute is pending |
|1 ||Orissa Sales Tax Act ||2001-2002 ||OST ||137958 ||Sales Tax TribunalCuttack |
|2 ||Entry Tax Act ||2001-2002 ||ENTRY TAX ||24482 ||Sales Tax TribunalCuttack |
|3 ||Orissa Sales Tax Act ||2002-2003 ||OST ||2296983 ||Assistant Commissioner of Commercial TaxRKL |
|4 ||Orissa Sales Tax Act ||2003-2004 ||OST ||457299 ||Assistant Commissioner of Commercial TaxRKL |
|5 ||Entry Tax Act ||2003-2004 ||ENTRY TAX ||510878 ||Assistant Commissioner of Commercial TaxRKL |
|6 ||Orissa Sales Tax Act ||2004-2005 ||OST ||1004979 ||Assistant Commissioner of Commercial TaxRKL |
|7 ||Entry Tax Act ||2004-2005 ||ENTRY TAX ||462467 ||OST Tribunal Cuttack |
|8 ||Orissa Sales Tax Act ||2004-2005 ||OST ||1715871 ||OST Tribunal Cuttack |
|9 ||Entry Tax Act ||2004-2005 ||ENTRY TAX ||995460 ||OST Tribunal Cuttack |
|10 ||Orissa Sales Tax Act ||2005-2006 ||OST ||10726881 ||High Court of Odishacuttack |
|11 ||Entry Tax Act ||2005-2006 ||ENTRY TAX ||1850937 ||High Court of Odishacuttack |
|12 ||Central Sales Tax Act ||2005-2006 ||CST ||530992 ||High Court of Odishacuttack |
|13 ||OVAT Act ||2006-2007 ||OVAT ||10738853 ||High Court of Odishacuttack |
|14 ||Central Sales Tax Act ||2006-2007 ||CST ||16183731 ||High Court of Odishacuttack |
|15 ||Entry Tax Act ||2006-2007 ||ENTRY TAX ||3351331 ||High Court of Odishacuttack |
| || || || || || |
|16 ||OVAT Act ||2007-08 & 2008-09 ||OVAT ||225331 ||Additional CST Northern Zone |
|17 ||Entry Tax Act ||2007-08 & 2008-09 ||ENTRY TAX ||136613 ||Additional CST Northern Zone |
|18 ||Central Sales Tax Act ||2007-08 & 2008-09 ||CST ||182853 ||Additional CST Northern Zone |
| || || || || || |
| || || || || || |
|19 ||Central Sales Tax Act ||01.08.2008 to 28.02.2011 ||CST ||517563 ||Additional CST Northern Zone |
| || || || || || |
|20 ||OVAT Act ||01.04.2009 to 31.03.2011 ||OVAT ||298363 ||Additional CST Northern Zone |
| || || || || || |
|21 ||Entry Tax Act ||01.04.2009 to 31.03.2011 ||ENTRY TAX ||904748 ||Additional CST Northern Zone |
|22 ||OVAT Act ||01.08.2008 to 28.02.2011 ||OVAT ||169661165 ||OST Tribunal Cuttack / Stay Revision Commissioner |
|23 ||Entry Tax Act ||01.08.2008 to 28.02.2011 ||ENTRY TAX ||40053670 ||OST Tribunal Cuttack / Stay Revision |
|24 ||OVAT Act ||04.04.2012 to 31.03.2014 ||OVAT ||348051 ||Commissioner Commissioner Cuttack Revision |
|25 ||Entry Tax Act ||01.04.2012 to 31.03.2014 ||ENTRY TAX ||2715479 ||Commissioner Cuttack Revision |
|26 ||Central Sales Tax Act ||01.04.2012 to 31.03.2014 ||CST ||652117 ||Commissioner Cuttack Revision |
|27 ||Central Sales Tax Act ||01.04.2014 to 30.09.2015 ||CST ||4501268 ||DCCT Rourkela |
| || || || || || |
|28 ||Custom Act 1962 ||2012 & 2013 ||Custom Duty ||13848914 ||CustomsExcise& Service Tax Appellate Tribunal |
|29 ||Income Tax act ||2009-10 & 2011-12 ||Income Tax ||8893575 ||Bangalore The Commissioner of Income Tax(appeals) |
| || || || || || |
| || ||Total || ||293928812 || |
(vii) In our opinion and according to the information and explanations given to us theCompany has defaulted in repayment of dues to banks who have declared the same asnon-performing in respect of the following amounts:
|Particular ||Nature of Loan ||Period of Default ||Amount outstanding in Books of Account as at 31st March 2017 (Rs .) ||Remarks |
|State Bank of India. ||Cash Credit ||28th November 2015 to 31 st March 2017. ||772831110 || |
| ||Term Loan || ||46780655 ||Refer Note No-2.5 and 13 to Financial Statements. |
|Central Bank of India. ||Cash Credit ||30 April 2016 to 31 March 2017. ||54065102 || |
| ||Term Loan || ||60155978 || |
|Punjab National Bank. ||Cash Credit || ||259109185 || |
(viii) In our opinion and according to the information and explanations given to usthe term loans taken by the Company have been applied for the purpose for which they wereraised. The Company has not raised any money by way of initial public offer or furtherpublic offer (including debt instruments) during the year.
(ix) According to the information and explanations given to us no fraud by the Companyor on by its officers or employees has been noticed or reported during the course of ouraudit.
(x) According to the information and explanations given to us managerial remunerationhas been paid or provided in accordance with the requisite approvals mandated by theprovisions of section 197 read with Schedule V to the Companies Act.
(xi) 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.
(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with section 177 and 188 of the Companies Act 2013 and the details of suchtransactions have been disclosed in theInd AS financial statements of the Company asrequired by the applicable accounting standards.
(xiv) Based upon audit procedures performed and the information and explanations givenby the management the company has allotted on preferential basis 2746665 nos.of equityshares at a premium decided by the Board of Directors out of the conversion of warrnatesallotted earlier. Further the company has also allotted on Preferential basis 8000000Nos of share warrants convertible into equivalent number of equity shares of face value ofRs . 10 each of the company at an exercise price of Rs . 50(Rupees Fifty Only) (includinga premium of Rs 40) per equity share within 18 months from the date of issue of warrantsin its Board Meeting held on 14th October2015 the allottees had exercised such power toconvert 2746665 number of warrants into equity shares at board meeting held on differentdates during the year (Refer note no.2.8)
(xii) The Company has not entered into any non-cash transactions with its directors orpersons connected with him. Accordingly the provisions of clause 3(xv) of the Order arenot applicable to the Company.
(xiii) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934. Accordingly the provisions of clause 3(xvi) of the order are notapplicable to the Company.
Annexure-B to the Independent Auditors' Report
(Referred to in paragraph 2 (f) under Report on Other Legal and RegulatoryRequirements' section of our report of even date)
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 Scan SteelsLimited ("the Company") as of March 31 2017 in conjunction with our audit ofthe Ind AS 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 control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 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 (the Standards')issued by ICAI and deemed to be prescribed under section 143 (10) of the Companies Act2013 to the extent applicable to an audit of internal financial controls both applicableto an audit of Internal Financial Controls and both issued by the Institute of CharteredAccountants of India. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls over financial reporting was established andmaintained and if such controls operated 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 theInd AS 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 Ind AS financial statements for external purposes in accordance withgenerally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that (i) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (ii) provide reasonableassurance that transactions are recorded as necessary to permit preparation of Ind ASfinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (iii) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition use ordisposition of the company's assets that could have a material effect on the Ind ASfinancial 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.
In our opinion the Company has in all material respects an adequate internalfinancial controls over financial reporting and such internal financial controls overfinancial reporting were operating effectively as at March 31 2017 based on the internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
| ||For SRB & Associates |
| ||Chartered Accountants |
| ||F.Regd. No-310009E |
| ||Sd/- |
| ||B. Mohanty |
|Date: 30th May 2017 ||Partner |
|Place: Bhubaneswar ||M. No: 056264 |