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Chennai Petroleum Corporation Ltd.

BSE: 500110 Sector: Oil & Gas
NSE: CHENNPETRO ISIN Code: INE178A01016
BSE 00:00 | 30 Jul 114.30 -0.75
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OPEN 116.00
PREVIOUS CLOSE 115.05
VOLUME 77928
52-Week high 151.80
52-Week low 63.75
P/E 86.59
Mkt Cap.(Rs cr) 1,702
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 116.00
CLOSE 115.05
VOLUME 77928
52-Week high 151.80
52-Week low 63.75
P/E 86.59
Mkt Cap.(Rs cr) 1,702
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Chennai Petroleum Corporation Ltd. (CHENNPETRO) - Auditors Report

Company auditors report

To

The Members of Chennai Petroleum Corporation Limited

REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS

OPINION

We have audited the accompanying standalone financial statements ofChennai Petroleum Corporation Limited ("the Company") which comprise thebalance sheet as at 31st March 2020 the statement of profit and loss(including Other Comprehensive Income) the statement of changes in equity and thestatement of cash flows for the year then ended and notes to the financial statementsincluding a summary of significant accounting policies and other explanatory information(hereinafter referred to as "the standalone financial statements").

In our opinion and to the best of our information and according to theexplanations given to us the aforesaid standalone financial statements give theinformation required by the Companies Act2013 ("the Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India including the Indian Accounting Standards (Ind AS) prescribedunder Section 133 of the Companies Act 2013 read with Companies (Indian AccountingStandards) Rules 2015 as amended ("Ind AS") and the relevant rules issuedthereunder of the state of affairs (financial position) of the Company as at

March 312020 the loss (financial performance including othercomprehensive income) changes in equity and its cash flows for the year ended on thatdate.

BASIS FOR OPINION

We conducted our audit of the standalone financial statements inaccordance with the Standards on Auditing (SAs) specified under section 143(10) of theCompanies Act 2013. Our responsibilities under those Standards are further described inthe Auditor's Responsibilities for the Audit of the Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India (ICAI) together with the ethicalrequirements that are relevant to our audit of the standalone financial statements underthe provisions of the Act and the Rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion.

KEY AUDIT MATTERS

Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the financial statements of the current period.These matters were addressed in the context of our audit of the financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters.

KEY AUDIT MATTER 1 Valuation of Finished Goods and Intermediary Products
CRITERIA FOR DISCLOSURE AS KEY AUDIT MATTER Complexities in Valuation
DESCRIPTION AUDIT APPROACH
Stock of Finished Goods and intermediates form a significant portion of the inventory. Any material misstatement in valuation of inventories will have a significant impact on the profits and also vitiate the value of security given to creditors. Audit risk assessment and sampling were designed to gain assurance on the "Completeness" "Accuracy & Valuation" of financial statement at the assertion level and compliance with Ind-AS 2.
During the course of audit considering the large volumes of data and complexity in the calculations involved audit procedures were designed to ensure that
As per Ind-AS 2 inventory is to be valued at lower of cost or net realisable value. Typically for Joint Products Ind-AS 2 lays down a method of aggregation of costs and allocation to the respective products on the sales values to arrive at the cost of finished products.
• the figure collected for valuation were from the correct sources and accurate.
However the company follows an indirect method of arriving at the cost by reducing a uniform margin (Gross Refinery margin or GRM) from all its product selling prices to arrive at the cost of each product. GRM is the difference between the sale value of the products produced in a month and the cost of crude with its associated cost of conversion. • Sales price adjustments were in order
• excise workings were correct
• The GRM which was derived was accurate
• The resultant calculation of cost based on GRM was correct
• The final valuation was error free and correct
Collating several pieces of data from diverse sources and arriving at GRM is a demanding and complex task. While the Realisable values have to adjusted for recoveries assessment of cost involves collecting correct values of crude consumed its related direct costs and other conversion costs assessment of intermediates quantity of finished products produced and its selling prices. Further adjustments of excise duty for select products have to be done. The valuation as per direct method detailed in Ind - AS 2 was independently worked out by audit to ensure there was no variance between the method adopted by the company vis-a-vis Ind-AS 2.
In respect of intermediate stocks the technical evaluation was examined and explanations were sought on the methods used by the company in identifying the products in process.
We have examined the product cycle and yield and cross checked with the products produced in the next accounting period. No material differences were found.
Similarly the production of intermediates is based on technical evaluation of the goods lying incomplete at different stages of processing.
KEY AUDIT MATTER 1 Valuation of Finished Goods and Intermediary Products
Further since the crude prices were volatile and falling it had to be examined whether the stock was overvalued and if the Replacement cost method specified in Ind-AS 2 was adopted. Further the valuation of crude was examined to ensure the valuation was in line with the method prescribed in Ind-AS 2.
To mitigate the risk of material misstatement in stock taking and consequent valuation the following procedures were adopted to ensure
That these processes are manually performed adds to the risk of error and material misstatement.
1. Assessing the program of stock taking undertaken by the company for adequacy
Stock taking at the end of the year is usually done in the presence of auditors on selective basis. Due to the unprecedent situation prevailing at that time caused by pandemic stock taking was done entirely by the company without the presence of auditors.
2. Cross-checking physical verification report of the company and stock records for material variations
3. Testing high value items
KEY AUDIT MATTER 2 Accounting for Crude Oil Purchases & Valuation
CRITERIA FOR DISCLOSURE AS KEY AUDIT MATTER Uncertainty in assessing the level of error and misstatement
DESCRIPTION AUDIT APPROACH
Measurement of crude at the time of intake issue or cut-off is not 100% accurate considering the nature of the material and changes in density and temperature which affects the volume each time a measurement is taken. Any error/aberration in measurement affects crude valuation consumption and ocean loss. Lack of system driven accounting of consumption and reliance on manual controls add to the risk of material misstatement. The audit risk assessment and sampling were designed to gain assurance on the "Completeness" "Cut-off" & "Accuracy" of financial statement at the assertion level.
The company has fixed a maximum permissible level of difference in receipt of invoiced quantity. On our verification the overall differences were within this level.
These factors involve detailed audit coverage & professional judgment and were significant in the audit of the financial statements The company has a system of cross-verification of consumption and the carrying cost of crude by manual methods. On our verification the differences were not material and adjusted to consumption or the carrying cost of crude.
Also on our verification no material errors were noticed in manual or system controls.
KEY AUDIT MATTER 3 Revenue Accounting
CRITERIA FOR DISCLOSURE AS KEY AUDIT MATTER Impact on Profitability taxes & profit availability for distribution
DESCRIPTION AUDIT APPROACH
Revenue from sale of finished products is recognized once the control over the goods is transferred to the buyer. Control is transferred when the goods are dispatched from the factory. Our audit procedure included the following: -
1. Assessing whether the revenue recognition policies were appropriate
Revenue recognition is based on the consideration expected to be received for goods sold excluding discounts recoveries and any taxes or duties collected. 2. Testing the design and implementation of system driven controls
3. Testing of manual controls
Revenue recognition varies with the mode of transport adopted for transferring control over the goods. Authentic measurement of goods dispatched recovery of charges built into prices dispatches from storage units outside the premises discounts require strong process controls to ensure accuracy of revenue recognized. 4. Effectiveness of controls at cut off
5. Client confirmation and Reconciliation procedures followed to eliminate any differences.
Reliable accounting of Revenue is of high importance as any misstatement will impact all other key performance indicators of the Company.
KEY AUDIT MATTER 4 Payroll Processing & Retirement Benefits
CRITERIA FOR DISCLOSURE AS KEY AUDIT MATTER Inherent risk in estimating retirement benefits & Complexities in payroll process
DESCRIPTION AUDIT APPROACH
1. Payroll contains several components which derive the data from other software and manual entries. Payroll sub-processes were assessed for the level of audit risk and samples were selected & verified to ensure "Completeness" "Accuracy & Valuation" of financial statement at the assertion level and compliance with Ind-AS 19.
The amount and type of employee benefits vary with the grade of the employee. Some of these benefits are system driven while some critical data are manually recorded.
Considering the nature of sub-processes involved audit procedures were designed to ensure that
Since the software processing the payroll and its associated software are not fully integrated manual methods are used to collate and process data.
• the estimates by the management were reliable and conservative
• Actuarial reports considered all inputs required for valuation
Further lack of direct interface between applications manual subprocesses without dual control diverse payroll items affecting different classes of employees pose risk of error or material misstatement in calculation of employee benefits. • Attendance & leave data were correctly captured
• Overtime & allowances were properly approved and captured
• Loan recoveries and statutory deductions were accurate
• The final payroll and accounting were correct.
2. Provision for salary increments to non-supervisory employees are based on the management's best estimate of the possible settlement which may be ultimately agreed. Actuarial valuation of post retirement benefits also get impacted by these estimates. • The guidelines of the Government and the basis of the management in estimating the provision for salary increment for non-supervisory employees were evaluated.
Based on our verification no material lapses or inaccuracies were observed.
3. Accounting for post-retirement benefits require significant level of estimation and judgement on the part of the management. Major actuarial assumptions are given in Note no.32. Due to the inherent risks of inaccuracy posed by estimates post-retirement benefits are significant in audit verification.
KEY AUDIT MATTER 5 Evaluation of Adequacy of Provision For Impairment of Property plant & Equipment under Ind AS 36
CRITERIA FOR DISCLOSURE AS KEY AUDIT MATTER As it requires significant management judgments and assumptions in measuring the value in use of Property Plant and Equipment.
PRESENT STATUS AUDIT APPROACH
Evaluation of Adequacy of Provision For Impairment of Property plant & Equipment under Ind AS 36 Our audit procedures performed included the following:
1. We have assessed the reasonableness of the key assumptions in respect the sales volume and the profitability in terms of Gross Refinery margins basis of the number of years considered for the cash flows discount factor discount rate computation of the terminal value and the models to determine whether they are reasonable given the current macroeconomic climate and expected future performance of the CGU.
The carrying amount of Property Plant & Equipment and Capital work in progress reported in Note No. 2 & 2.1 for the year ended 31-03-2020 is Rs. 7012.51 Cr (2019: Rs. 6954.28 Cr) and Rs. 1375.51 Cr (2019: Rs. 1121.49 Cr) respectively after providing cumulative impairment loss of Rs. 118.85 Cr (2019: Rs. 65.58 cr) and Rs. 2.33 Cr (2019: Rs. 1.18 cr) respectively
In line with Ind AS 36: 'Impairment of Assets' the company is required to assess indicators of impairment both external and internal in relation to tangible assets at the end of the reporting period.
2. We have verified the mathematical accuracy of the calculations.
3. We have subjected the key assumptions to sensitivity analyses; and
Accordingly the company identified the presence of the impairment indicators as at the reporting date and consequently carried out an impairment assessment. The computation of recoverable amount of tangible assets in accordance with the Standard involves significant estimation of several factors. The impairment assessment is subject to significant management's judgements and estimation of projections in the following areas: 4. We have verified the appropriateness of the disclosure requirements in the audited financial statements and compliance with the accounting policy of the company.
i. The selection of an appropriate impairment model. The company has selected the Discounted cash flow model for the impairment assessment;
ii. Estimation and assessments of the expected cash flows from the operations based on the projected estimated gross margin assumptions.
KEY AUDIT MATTER 5 Evaluation of Adequacy of Provision For Impairment of Property plant & Equipment under Ind AS 36
iii. Selection of the appropriate discount rate to arrive at the value in use.
We have considered the adequacy of the provision For Impairment of Property Plant & Equipment as a key audit matter as it requires significant management judgments and assumptions in measuring the value in use of Property Plant and Equipment.
(Please Refer Note No. 2 2.1 and 43.1 and the significant accounting policy No. 4)

INFORMATION OTHER THAN THE STANDALONE FINANCIAL STATEMENTS ANDAUDITOR'S REPORT THEREON

The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Director's Report including Annexures to Director's ReportBusiness Responsibility Report Corporate Governance and Shareholder's Information butdoes not include the standalone financial statements and our auditor's report thereon. TheAnnual report is expected to be made available to us after the date of this auditor'sreport.

Our opinion on the standalone financial statements does not cover theother information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements ourresponsibility is to read the other information identified above when it becomes availableand in doing so consider whether the other information is materially inconsistent withthe financial statements or our knowledge obtained in the audit or otherwise appears tobe materially misstated

When we read the annual report if we conclude that there is a materialmisstatement therein we are required to communicate the matter to those charged withgovernance.

MANAGEMENT'S RESPONSIBILITY FOR THE STANDALONE FINANCIAL STATEMENTS

The Company's Board of Directors is responsible for the matters statedin Section 134(5) of the Companies Act 2013 ("the Act") with respect to thepreparation of these standalone financial statements that give a true and fair view of thefinancial position financial performance total comprehensive income changes in equityand cash flows of the Company in accordance with the accounting principles generallyaccepted in India including the Indian Accounting Standards specified under section 133of the Act.

This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding of the assets of theCompany and 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 internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatement that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.

Those Board of Directors are also responsible for overseeing theCompany's financial reporting process.

AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE STANDALONE FINANCIALSTATEMENTS

Our objectives are to obtain reasonable assurance about whether thefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these financial statements.

As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of thefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

• Obtain an understanding of internal control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3)

(i) of the Companies Act 2013 we are also responsible for expressingour opinion on whether the company has adequate internal financial controls system inplace and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty 2 exists we are required to draw attention in our auditor's reportto the related disclosures in the financial statements or if such disclosures areinadequate to modify our opinion.

Our conclusions are based on the audit evidence obtained up to the dateof our auditor's report. However future events or conditions may cause the Company tocease to continue as a going concern.

• Evaluate the overall presentation structure and content of thefinancial statements including the disclosures and whether the financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.

We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.

We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related 3 safeguards.

From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.

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 sub-section(11) of section 143 of the Companies Act 2013 we give in the "Annexure A"statement on the

matters specified in paragraphs 3 and 4 of the Order to the extentapplicable.

a) The current audit report corrects typographical errors contained inclause (vii) (b) of Annexure-A to our earlier Report dated 20th May 2020 on the standalonefinancial statements to comply with the observations of Comptroller and Auditor General ofIndia. There are no changes in the financial statements and the audit report except forthe correction stated above. Hence we have not performed any further audit procedure onthe standalone financial statements or on the other reporting requirements since ourearlier report.

 

1. Based on the verification of records of the Company and

based on information and explanations given to us we give here below areport on the Directions issued by the Comptroller and Auditor General of India in termsof Section 143(5) of the Act:

a) The company has an ERP system in place to process all thetransactions through IT system. However consumption of crude computation of per unitcrude cost and valuation of work in progress and finished goods are done manually andaccounting entries for the same are processed through ERP. This does not have any impacton the integrity of the account nor has any financial implications.

b) There is no restructuring of an existing loan or cases of waiver /write off of debts / loans / interest etc. made by a lender to the company due to thecompany's inability to repay the loan.

c) The company has properly accounted for and utilized the fundsreceived for specific schemes from central/ state agencies as per its terms andconditions.

5. As required by section 143(3) of the Act 2013 we report that:

a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit.

b) In our opinion proper books of account as required by law have beenkept by the Company so far as it appears from our examination of those books.

c) The Balance Sheet the Statement of Profit and Loss (including OtherComprehensive Income) the Statement of Changes in Equity and the Statement of cash flowdealt with by this report are in agreement with the books of account maintained for thepurpose of preparation of the financial statements;

d) In our opinion the aforesaid standalone financial statements complywith the Indian Accounting Standards specified under section 133 of the Act read withRule 7 of the Companies (Accounts) Rules 2014.

e) Disqualification of directors stated under Section 164(2) of the Actis not applicable to a Government Company as per notification no. GSR 463(E) of theMinistry of Corporate Affairs dated 05/06/2015;

f) With respect to the adequacy of internal financial controls overfinancial reporting of the Company and the operating effectiveness of such controls referto our separate report in "Annexure B".

g) Being a Government Company the provisions of section 197 are notapplicable to the Company as per the notification of MCA in G.S.R. 463(E) dated 5thJune 2015 and therefore the reporting requirement under section 197(16) does not arise

h) With respect to the other matters to be included in the Auditor'sReport in accordance with Rule 11 of

the Companies (Audit and Auditors) Rules 2014 in our opinion and tothe best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on itsfinancial position in its financial statements (Refer Note 33 to the financialstatements).

ii. The Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses.

iii. There has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company.

For Padmanabhan Ramani & Ramanujam For Sreedhar Suresh & Rajagopalan LLP
Chartered Accountants Chartered Accountants
FRN: 002510S FRN: 003957S/S200145
P. Ranga Ramanujam V. Suresh
Partner Partner
Membership No: 022201 Membership No: 026525
UDIN: 20022201AAAABK2210 UDIN: 20026525AAAAAJ4953
Place : Chennai
Date : 7 July 2020

Annexure A to the Independent Auditors' Report

The Annexure referred to in paragraph 1 under 'Report on Other Legaland Regulatory Requirement' of our report of even date to the members of Chennai PetroleumCorporation Limited on the standalone financial statements of the Company for the yearended March 31 2020.

(i) On the basis of such checks as we considered appropriate andaccording to the information and explanations given to us during

the course of our audit we report that:

(a) The Company has maintained proper records showing full particularsincluding quantitative details and situation of fixed assets.

(b) These Fixed Assets have been physically verified by the managementat reasonable intervals. According to the information and explanations given to us nomaterial discrepancies were observed by the management on such verification.

(c) According to the information and explanation given to us and on thebasis of our examination of records of the Company the title deeds of immovableproperties are held in the name of the Company except in case of certain freehold landgiven below:

Particulars Number of cases Gross Block / Net Block (Rs. in Crore) Remarks
Freehold Land 2 Nil Lands allotted by the Government of Tamilnadu for which price is not fixed and assignment deed is yet to be executed.

1

0.18

Amount deposited with the Government Of Tamilnadu for which assignment deed is yet to be executed.

(ii) According to the information and explanations given to usphysical verification of inventory except goods in transit and goods held by outsider onbehalf of the company has been conducted at reasonable intervals by the management and nomaterial discrepancies were noticed.

(iii) According to the information and explanations given to us and onthe basis of our examination of the books of account the Company has not granted anyloans secured or unsecured to companies firms or other parties covered in the registermaintained under section 189 of the Act. Consequently the provisions of clause 3(iii) ofthe order are not applicable.

(iv) The Company has not granted any loans nor made any investments norextended any guarantees nor provided any securities covered under provisions of section185 or section 186 of the Act except the loans granted to Key Management Personnel underservice agreement which are not prejudicial to the interest of the company.

(v) According to the information and explanations given to us theCompany has not accepted deposits from the public and hence the provisions of clause 3(v)of the order are not applicable.

(vi) Maintenance of cost records has been specified by the CentralGovernment under section 148(1) of the Act. We have broadly reviewed the records and areof the opinion that prima facie the prescribed accounts and records have been made andmaintained.

(vii) (a) According to the information and explanations given to usand in our opinion the Company has been regular in depositing with

the appropriate authorities the undisputed statutory dues in the caseof Provident Fund Employees'State Insurance Income-Tax Goods & Services TaxCustoms Duty Sales Tax and Value Added Tax Cess and any other material statutory duesapplicable to it. To the best of our knowledge and according to the information andexplanations given to us there are no arrears of outstanding statutory dues as at March312020 for a period of more than six months from the date they became payable.

(b) The details of disputed dues of Income-Tax Sales Tax Excise DutyGST Customs Duty and Value Added Tax which have not been deposited as on March 31 2020are given below:

. Name of the Statute Nature of Dues Forum Where Dispute is pending Gross Amount (Rs. in Crore) Amount Paid under Protest (Rs. in Crore) Period to which the Amount relates (Financial Years)
1 Central Excise Act 1944 Central Excise CESTAT 0.47 - 2012-13 to 2014-15
Assistant commissioner of Central Tax (GST) & Central Excise 0.99 January 2005 to June 2005
2 Sales Tax/VAT Sales Tax / VAT High court 187.87 2.76 2007-08 to 2009-10
Legislations 2012-13 to 2013-14 2016-17 (January to March) 2017-18 (April to June)
Sales tax Appellate Tribunal 251.45 118.10 2007 to 2016
Joint Commissioner (Appeals) 5.34 2.67 2014-15 2015-16
Additional 29.31 16.69 2014 (April to October)
Commissioner 2016 (April to September)
Joint Commissioner (CT) 7.53 - 2016(October to December)
Deputy Commissioner 2.17 - 1991-92 2007-08 to 2008-09
3 Finance Act Service Tax Appellate Tribunal 21.68 0.51 2009-10 to 2016-17
1994 (upto June 2017)

(viii) In our opinion and according to the information and explanationsgiven to us the Company has not defaulted in repayment of any dues to financialinstitutions banks governments or debenture holders.

(ix) In our opinion and according to the information and explanationsgiven to us the Company has not raised any money by way of initial public offer orfurther public offer (including debt instruments). The money raised on privately placeddebentures and term loans have been used for the purpose for which they have been availed

(x) To the best of our knowledge and according to the information andexplanations given to us by the Company no material fraud by the company or any fraud onthe company by its officers and employees has been noticed or reported during the year.

(xi) The provisions of section 197 read with schedule V of the Actrelating to managerial remuneration are not applicable to the company being a GovernmentCompany in terms of Ministry of Corporate Affairs Notification no.G.S.R.463 (E) dated 5thJune 2015.

(xii) The Company is not a Nidhi Company. Hence provisions of clause3(xii) of the Order are not applicable.

(xiii) In our opinion and according to the information and explanationsgiven to us the transactions with related parties are in compliance with section 177 andsection 188 of the Companies Act 2013 where applicable and the details have beendisclosed in the standalone financial statements as required by the applicable IndianAccounting Standard.

(xiv) The Company has not made any preferential allotment or privateplacement of shares or fully or partially convertible debentures during the year underreview. Accordingly provisions of clause 3(xiv) of the Order are not applicable.

(xv) The Company has not entered into any non-cash transactions withthe Directors or any persons connected with him. Accordingly provisions of clause 3(xv)of the Order are not applicable.

(xvi) The Company is not required to be registered under Section 45-IAof Reserve Bank of India Act 1934. Hence provisions of clause 3(xvi) of the Order arenot applicable.

For Padmanabhan Ramani & Ramanujam For Sreedhar Suresh & Rajagopalan LLP
Chartered Accountants Chartered Accountants
FRN: 002510S FRN: 003957S/S200145
P. Ranga Ramanujam V. Suresh
Partner Partner
Membership No: 022201 Membership No: 026525
UDIN: 20022201AAAABK2210 UDIN: 20026525AAAAAJ4953
Place : Chennai
Date : 7 July 2020

Annexure B to the Independent Auditors' Report

(Referred to in paragraph 3(f) under Report on Other Legal andRegulatory Requirements' of our report of even date to the members of Chennai PetroleumCorporation Limited on the standalone financial statements of the Company for the yearended March 31 2020)

Report on the Internal Financial Controls over financial reportingunder Clause (i) of Section 143(3) of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financialreporting with reference to financial statements of Chennai Petroleum Corporation Limited("the Company") as of March31 2020 in conjunction with our audit of thestandalone 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 andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting issued by the Institute of Chartered Accountants of India ('ICAI').These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to respective company's policiesthe safeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internalfinancial controls over financial reporting based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls over FinancialReporting (the "Guidance Note") and the Standards on Auditing both issued byICAI and deemed to be prescribed under section 143(10) of the Companies Act 2013 to theextent applicable to an audit of internal financial controls. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsover financial reporting was established and maintained and if such controls operatedeffectively in all material respects.

Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reporting

included obtaining an understanding of internal financial controls overfinancial reporting assessing the risk that a material weakness exists and testing andevaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgment including theassessment of the risks of material misstatement of the Standalone Financial Statementswhether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internal financialcontrols system over financial reporting with reference to these standalone financialstatements of the Company

Meaning of Internal Financial Controls over Financial Reporting

A company's internal financial control over financial reporting is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of Standalone Financial Statements for external purposes inaccordance with generally accepted accounting principles. A company's internal financialcontrol over financial reporting includes those policies and procedures that:

1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of theCompany;

2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of Standalone Financial Statements in accordance withgenerally accepted accounting principles and that receipts and expenditures of theCompany are being made only in accordance with authorizations of management and directorsof the Company; and

3) provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition use or disposition of the Company's assets thatcould have a material effect on the Standalone Financial Statements.

Inherent Limitations of Internal Financial Controls over FinancialReporting

Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at March 31 2020 basedon 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 Padmanabhan Ramani & Ramanujam For Sreedhar Suresh & Rajagopalan LLP
Chartered Accountants Chartered Accountants
FRN: 002510S FRN: 003957S/S200145
P. Ranga Ramanujam V. Suresh
Partner Partner
Membership No: 022201 Membership No: 026525
UDIN: 20022201AAAABK2210 UDIN: 20026525AAAAAJ4953
Place : Chennai
Date : 7 July 2020