The Members of
Raj Rayon Industries Limited
Report on the Financial Statements
We have audited the accompanying financial statements of Raj Rayon Industries Limited("the Company") which comprise the Balance Sheet as at 31st March 2016 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.
Management's Responsibility for the Financial Statements
The Company's Board of Director is responsible for the matters stated in Section 134(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 position andfinancial 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. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial control that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.
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 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 the 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 the internal financial control relevant to the Company's preparation ofthe financial statements that give a true and fair view in order to design auditprocedures that are appropriate in the circumstances. An audit also include evaluating theappropriateness of the accounting policies used and the reasonableness of the accountingestimates made by the Company's Directors as well as evaluating the overall presentationofthe financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the financial statements.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by the Actin the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as at 31stMarch 2016; and its Loss and cash flow for the year ended on that date.
Emphasis of Matter
We draw attention to the following matter in the notes to the Financial Statements forwhich our opinion is not qualified:
a) Contingency related to Compensation payable in lieu of bank sacrifice the outcomeof which is materially uncertain and cannot be determined currently.
b) In view of Continuous heavy losses and uncertainty of Profits the Deferred TaxAssets amounting to Rs. 6259.50 Lacs has been reversed and adjusted with Balance inStatement of Profit & Loss under "Reserve & Surplus".
c) In view of Continuous heavy losses and uncertainty of Profits the MAT CreditEntitlement amounting to Rs. 450.96 Lacs has been reversed and adjusted with Balance inStatement of Profit & Loss under "Reserve & Surplus".
d) In the absence of Confirmation and recovery from the Trade Receivables the Companyhas made Provision for Doubtful Trade Receivables amounting to Rs. 10253.91 Lacs andcharged the same to Statement of Profit & Loss under "Other Expenses -Administrative Expenses".
e) The Net worth of the Company is fully eroded. However the management has preparedthe financial statements on going concern basis.
Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditor's Report) Order 2016 ("the Order") asamended issued by the Central Government of India in terms of sub-section (11) of section143 of the Companies Act 2013 (hereinafter referred to as the "Order") and onthe basis of such checks of the books of accounts and records of the Company as weconsidered appropriate and according to the information and explanation given to us wegive in the "Annexure A" a statement on the matters specified in paragraphs 3and 4 of the Order.
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 Cash Flow Statement dealtwith by this Report are in agreement with the books of account.
(d) In our opinion the aforesaid financial statements comply with the AccountingStandards specified under section 133 of the Act read with Rule 7 ofthe Companies(Accounts) Rules 2014.
(e) On the basis of the written representations received from the directors as on 31stMarch 2016 taken on record by the Board of Directors none of the directors aredisqualified as on 31st March 2016 from being appointed as a director in termsof section 164 (2) ofthe Act.
(f) With reference to the adequacy of the Internal Financial Control 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 explanation given to us :
i. The Company does not have any pending litigation which would impact its financialposition.
ii. The Company did not have any long term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There is no amount outstanding which needed to be transfer to Investor educationand protection fund.
For K. M. Garg & Co.
(FRN - 120712W)
(CA. K K Garg)
Date: 30th May 2016
ANNEXURE "A" TO THE INDEPENDENT AUDITORS' REPORT OF RAJ RAYON INDUSTRIESLIMITED
(Referred to in paragraph under the heading of 'Report on Other Legal and RegulatoryRequirements' section of our report of even date to the financial statements of theCompany for the year ended 31st March 2016)
(I) a. In our opinion the Company has maintained proper records showing fullparticulars including quantitative details and situation of its fixed assets.
b. As explained to us the fixed assets have been physically verified by the managementaccording to a programme of verification which in our opinion is reasonable having regardto the size of the Company and the nature of its assets. No material discrepancies withrespect to book records were noticed on such verification.
c. The title deeds of immovable properties as disclosed in Note - 12 on Fixed Assets tothe financial statements are held in the name of the Company.
(II) a. As explained to us Physical verification of inventory excluding stock withthird party has been conducted by the management at reasonable intervals. In respect ofInventory lying with third party these have substantially been confirmed by them. In ouropinion the frequency of verification is reasonable.
b. The Discrepancies noticed on verification of Inventory as compared to books recordswere not material and these have been properly dealt with in the books of accounts.
(III) The Company has not granted any Unsecured Loan to Companies as covered in theregister maintained under section 189 of the Companies Act 2013.
(IV) In our opinion and according to the information and explanation given to us thecompany has complied with provisions of Section 185 and 186 of the Companies Act 2013 inrespect of Loans Investments guarantees and security.
(V) In our opinion and according to the information and explanations given to us theCompany has not accepted any deposit within the meaning of section 73 to 76 of theCompanies Act 2013 and the rules framed there under.
(VI) Pursuant to the rules made by the Central Government of India the Company isrequired to maintain cost records as specified under section 148 (1) of the Act in respectof its Products. We have broadly reviewed the same and are of the opinion that primafacie the prescribed accounts and records have been made and maintained. We have nothowever made a detailed examination of the records with a view to determine whether theyare accurate or complete.
(VII) a) According to the records of the Company and the information and explanationsgiven to us the company is regular in depositing with appropriate authorities undisputedstatutory dues including Provident Fund Employee's State Insurance Income tax salestax Wealth Tax Service Tax Custom Duty Excise duty Value Added Tax Cess and otherstatutory dues to the extent applicable to it. There are no undisputed statutory dues asreferred to above as at 31st March 2016 outstanding for a period of more than six monthsfrom the date they become payable.
b) According to the information and explanations give to us and the records of theCompany examined by us there are no dues of Income
Tax or sales tax or service tax or duty of custom or duty of excise or value added taxor cess except below-
|Name of the Statute ||Nature of the Dues ||Amount in Rs. (Excluding penalties and interest if any) ||Period to which the amount relate ||Forum where dispute is pending |
|Central Excise Duty ||Excise Duty ||23.89 ||1995-1996 || |
| || ||32.09 ||1996-1997 || |
| || ||38.30 ||1997-1998 ||Additional ^^necloiale of ^Anti |
| || ||25.82 ||1998-1999 || |
| || ||7.40 ||1999-2000 || |
| || ||127.50 || || |
| || ||0.09# ||1999-2000 ||The Company is in the process of refund |
| || ||2.95 ||2003-2004 ||Appellate Tribunal of Central Excise |
| || ||3.35 ||2003- 2004 & 2004- 2005 ||The Company has filed reply to show Cause Notice received from Superintendent of Central Excise |
| || ||2.84# ||2003-2004 ||The Company has filed the Appeal in the Customs Excise & Service Tax Appellate Tribunal Ahmedabad |
| || ||70.87 ||2005- 2006 & 2006- 2007 ||The Company has filed the reply to Show cause notice received from the Commissioner of Central Excise & Custom Vapi |
| || ||190.07 ||2006- 2007 & 2007- 2008 ||The Company has filed the reply to Show cause notice received from the office of the Commissioner of Central Excise & Custom Vapi |
| || ||187.08 ||2007-2008 ||The Company has filed the reply to Show cause notice received from the Commissioner of Central Excise & Custom Vapi |
| || ||332.04 ||2009-2010 ||The Company has filed Appeal & Stay application with Custom Excise & Service Tax Appellate Tribunal Ahmedabad |
| || ||174.57 ||2012-2013 ||The Company has filed an Appeal before the Custom Excise & Service tax Appellate Tribunal Ahmedabad |
|Textile Committee Act ||Cess ||0.35 ||1997-1998 || |
| || ||0.88 ||1998-1999 || |
| || ||2.13 ||1999-2000 ||Textile Cess ^Appellate Tribunal |
| || ||3.10 ||2000-2001 || |
| || ||1.37 ||2001-2002 || |
| || ||7.82 || || |
|Income Tax Act ||Income Tax ||25.47 || |
|Application for giving effect to the order of CIT (A) is pending before the Assessing Officer. The Appeal was decided in favour of the Company |
|Gujarat Tax on Entry of Specified Goods into Local Area Act 2001 (Including Penalties & Interest) ||Entry tax ||308.83 (Net of Rs. 250.00 lacs being amount Recovered by the Department) || |
01.04.2012 to 31.01.2014
|The Company has filed an appeal before the Deputy Commissioner of Commercial Tax Surat (Gujarat). |
# Payment made under protest
* Assessment year
(viii) Based on our audit procedures and according to the information and explanationgiven by the management the company has defaulted in repayment of dues to bank /financial institution as detailed in Annexure "C" to this report. The Companyhas not issued any debentures.
(ix) Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not raised moneys by way of initial public offeror further public offer including debt instruments and term Loans. Accordingly theprovisions of clause 3 (ix) of the Order are not applicable to the Company and hence notcommented upon.
(x) Based on the audit procedure performed and information and explanations given to usby the management we report that no fraud on or by the Company has been noticed orreported during the course of our audit.
(xi) Based upon the audit procedures performed and the information and explanationsgiven by the management the managerial remuneration has been paid or provided inaccordance with the requisite approvals mandated by the provisions of section 197 readwith Schedule V to the Companies Act;
(xii) As the Company is not a Nidhi Company and the Nidhi Rules 2014 are notapplicable to it the provisions of clause 4 (xii) of the Order are not applicable to theCompany.
(xiii) In our opinion all transactions with the related parties are in compliance withsection 177 and 188 of Companies Act 2013 and the details have been disclosed in theFinancial Statements as required by the applicable accounting standards.
(xiv) Based upon the audit procedures performed and the information and explanationsgiven by the management the company has made preferential allotment of 80000000 EquityShares of Rs. 1/- each during the year under review. The funds were utilized for thepurposes for which they were raised. The Company has not made any private placement ofshares or fully or partly convertible debentures.
(xv) Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not entered into any non-cash transactions withdirectors or persons connected with him. Accordingly the provisions of clause 3 (xv) ofthe Order are not applicable to the Company and hence not commented upon.
(xvi) In our opinion the company is not required to be registered under section 45 IAof the Reserve Bank of India Act 1934 and accordingly the provisions of clause 3 (xvi)of the Order are not applicable to the Company and hence not commented upon.
For K. M. Garg & Co.
(FRN - 120712W)
(CA. K K Garg)
Partner M No. 033940
Date: 30th May 2016
"Annexure B" to the Independent Auditor's Report of even date on theStandalone Financial Statements of Raj Rayon Industries Limited
Report on the Internal Financial Controls under Clause (i) of Subsection 3 of Section143 ofthe Companies Act 2013 ("the Act").
We have audited the internal financial controls over financial reporting of Raj RayonIndustries Limited ("the Company") as of March 31 2016 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate.
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". These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired 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 issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate 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 judgement 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 generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorizations ofmanagement and directors ofthe company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial 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 ofthe 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 system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2016 based on"the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India".
For K. M. Garg & Co.
(FRN - 120712W)
(CA. K K Garg)
Date: 30th May 2016
Annexure "C" to Independent Auditors' Report of Raj Rayon Industries Limited
Default in Repayment of dues to Banks
| || |
(Rs. in Lacs)
|Particulars || |
As at 31.03.2016
| ||Principal ||Interest |
|State Bank of India ||2064.17 ||1478.79 |
|State Bank of Hyderabad ||1201.02 ||1297.69 |
|State Bank of Mysore ||466.81 ||439.57 |
|State Bank of Travancore ||369.80 ||406.14 |
|State Bank of Bikaner & Jaipur ||100.59 ||144.31 |
|State Bank of Patiala ||253.02 ||261.88 |
|South Indian Bank ||366.37 ||367.47 |
For K. M. Garg & Co.
(FRN - 120712W)
(CA. K K Garg)
M No. 033940
Date: 30th May 2016