To the Members of Clariant Chemicals (India) Limited Report on the audit of thefinancial statements Opinion
1. We have audited the accompanying financial statements of Clariant Chemicals (India)Limited (the Company) which comprise the balance sheet as at March 31 2020and the statement of Profit and Loss (including Other Comprehensive Income) statement ofchanges in equity and statement of cash flows for the year then ended and notes to thefinancial statements including a summary of significant accounting policies and otherexplanatory information.
2. 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 theCompanies Act 2013 (the Act) in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2020 and total comprehensive income(comprising of profit and other comprehensive income) changes in equity and its cashflows for the year then ended.
Basis for opinion
3. We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the
Act. Our responsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Financial Statements section of our report. We areindependent of the Company in accordance with the Code of Ethics issued by the Instituteof Chartered Accountants of India together with the ethical requirements that are relevantto our audit of the financial statements under the provisions of the Act and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of Matter
4. We draw your attention to the Note 44 to the financial statements which describesthe management's assessment of the impact of the outbreak of Coronavirus (Covid-19) on thebusiness operations of the Company. The management believes that no adjustments arerequired in the financial statements as it does not impact the current financial yearhowever in view of the various preventive measures taken (such as complete lock-downtravel restrictions etc.) and highly uncertain economic environment a definitiveassessment of the impact on the subsequent periods is highly dependent upon circumstancesas they evolve. Our opinion is not modified in respect of this matter.
Key audit matters
5. Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.
|Key audit matter ||How our audit addressed the key audit matter |
|Assessment of contingencies and provision for Income tax and Indirect tax matters ||Our procedures included the following: |
|The Company has various ongoing Income tax and Indirect tax matters under litigation. Given below are the relevant notes to the Financial Statements: ||(i) Understanding and evaluating the design and testing of operating effectiveness of controls in respect of assessment of income tax and indirect tax matters. |
|Note 34 Contingent liabilities and commitments ||(ii) Reading the orders received by the Company from the tax authorities. |
|Note 5 Indirect taxes recoverable includes INR 182.25 lakhs towards amount paid under protest for on-going litigations. ||(iii) Discussing ongoing matters under dispute and developments with the Management and the Audit Committee. |
|Note 21 Provision for Indirect tax matters. ||(iv) Where relevant reading opinions of Management's external consultants on the tax matters. |
|The non-current tax assets (net) includes INR 1445.37 lakhs towards amount paid under protest for on-going Direct tax litigations. ||(v) Independently assessing the management's judgement on contingencies and provision of income tax and indirect tax matters. |
|The assessment of likely outcome of the tax matters and related outflow of resources involves significant judgement on the positions taken by the management which are based on the application and interpretation of law. ||(vi) Involving auditor's tax experts to assist us in the assessment of the possible outcome of certain cases. |
|We have considered these matters to be a key audit matter given the magnitude of potential outflow of economic resources and uncertainty of the possible outcome. ||(vii) Assessing the adequacy of disclosures in the financial statements. |
| ||Based on the above procedures the management's assessment of the contingencies and provisions was considered to be appropriate. |
6. The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual Report but does not includethe financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information weare required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the financialstatements
7. The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these financial statements that givea true and fair view of the financial position financial performance changes in equityand cash flows of the Company in accordance with the accounting principles generallyaccepted in India including the Accounting Standards specified under section 133 of theAct. 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.
8. In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative 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 thefinancial statements
Auditor's responsibilities for the audit of the financial statements
9. Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.
10. As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional scepticism throughout the audit. We also: ? Identify and assess therisks of material misstatement of the financial statements whether due to fraud or errordesign and perform audit procedures responsive to those risks and obtain audit evidencethat is sufficient and appropriate to provide a basis for our opinion. The risk of notdetecting a material misstatement resulting from fraud is higher than for one resultingfrom error as fraud may involve collusion forgery intentional omissionsmisrepresentations or the override of internal control.
? Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under Section 143(3)(i) of theAct we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.
? Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management. ? Conclude on theappropriateness of management's use of the going concern basis of accounting and based onthe audit evidence obtained whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Company's ability to continue as a goingconcern. If we conclude that a material uncertainty exists we are required to drawattention in our auditor's report to the related disclosures in the financial statementsor if such disclosures are inadequate to modify our opinion. Our conclusions are basedon the audit evidence obtained up to the date of our auditor's report. However futureevents or conditions may cause the Company to cease to continue as a going concern.
? Evaluate the overall presentation structure and content of the financial statementsincluding the disclosures and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.
11. We communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
12. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.
13. From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor's report unless law or regulation precludes public disclosure about the matteror when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
14. As required by the Companies (Auditor's Report) Order 2016 (theOrder) issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the Annexure B a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.
15. 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 except that the back upof books of accounts and other books and papers maintained in electronic mode has not beenmaintained over servers physically located in India.
(c) The Balance Sheet the Statement of Profit and Loss (including other comprehensiveincome) the Statement of Changes in Equity and Cash Flow Statement dealt with by thisReport 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.
(e) On the basis of the written representations received from the directors as on March31 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 from being appointed as a director in terms of Section 164 (2) of theAct.
(f) With respect to the maintenance of accounts and other matters connected therewithreference is made to our comment in Paragraph 15 (b) above.
(g) With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in Annexure A.
(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements Refer Note 34 to the financial statements.
ii. The Company has long-term contracts as at March 31 2020 for which there were nomaterial foreseeable losses. The Company did not have any derivative contracts as at March31 2020.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
iv. The reporting on disclosures relating to Specified Bank Notes is not applicable tothe Company for the year ended March 31 2020.
16. The Company has paid/provided for managerial remuneration in accordance with therequisite approvals mandated by the provisions of Section 197 read with Schedule V to theAct.
For Price Waterhouse Chartered Accountants LLP
Firm Registration Number: 012754N/ N500016
Place: Mumbai Date: June 17 2020
Partner Membership Number: 108290 UDIN: 20108290AAAAAO8118 annexure a to IndependentaudItors' report
Referred to in paragraph 15(g) of the Independent Auditors' Report of even date to themembers of Clariant Chemicals (India) Limited on the financial statements for the yearended March 31 2020.
Report on the Internal Financial Controls with reference to financial statements underClause (i) of Sub-section 3 of Section 143 of the Act
1. We have audited the internal financial controls with reference to financialstatements of Clariant Chemicals (India) Limited (the Company) as of March 312020 in conjunction with our audit of the financial statements of the Company for the yearended on that date.
Management's Responsibility for Internal Financial
2. 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). 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 Act.
3. Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the Guidance Note) and the Standards on Auditing deemedto be prescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of internal financial controlsand both issued by the ICAI. Those Standards and the Guidance Note require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether adequate internal financial controls with reference to financial statementswas established and maintained and if such controls operated effectively in all materialrespects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the internal financial controls system with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of internal financial controlswith reference to financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditor'sjudgement including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error.
5. 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 systemwith reference to financial statements.
Meaning of Internal Financial Controls with reference to financial statements
6. A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial controlswith reference to financial statements includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the financialstatements.
Inherent Limitations of Internal Financial Controls with reference to financialstatements
7. Because of the inherent limitations of internal financial controls with reference tofinancial statements 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 withreference to financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
8. In our opinion the Company has in all material respects an adequate internalfinancial controls system with reference to financial statements and such internalfinancial controls with reference to financial statements were operating effectively as atMarch 31 2020 based on the internal control over financial reporting criteriaestablished by the
Company considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by theInstitute of Chartered Accountants of India. Also refer paragraph 4 of the main auditreport.
For Price Waterhouse Chartered Accountants LLP
Firm Registration Number: 012754N/ N500016
Place: Mumbai Date: June 17 2020
Partner Membership Number: 108290 UDIN: 20108290AAAAAO8118 annexure B to IndependentaudItors' report
Referred to in paragraph 14 of the Independent Auditors' Report of even date to themembers of Clariant Chemicals (India) Limited on the financial statements as of and forthe year ended March 31 2020
i. (a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The fixed assets are physically verified by the Management according to a phasedprogramme designed to cover all the items over a period of 3 years which in our opinionis reasonable having regard to the size of the Company and the nature of its assets.Pursuant to the programme a portion of the fixed assets has been physically verified bythe Management during the year and no material discrepancies have been noticed on suchverification.
(c) The title deeds of immovable properties as disclosed in Note 3 on fixed assets tothe financial statements are held in the name of the Company.
ii. The physical verification of inventory (excluding stocks with third parties) havebeen conducted at reasonable intervals by the Management during the year. In respect ofinventory lying with third parties these have substantially been confirmed by them. Thediscrepancies noticed on physical verification of inventory as compared to book recordswere not material.
iii. The Company has not granted any loans secured or unsecured to companies firmsLimited Liability Partnerships or other parties covered in the register maintained underSection 189 of the Act. Therefore the provisions of Clause 3(iii) (iii)(a) (iii)(b) and(iii)(c) of the said Order are not applicable to the Company.
iv. The Company has not granted any loans or made any investments or provided anyguarantees or security to the parties covered under Section 185 and 186. Therefore theprovisions of Clause 3(iv) of the said Order are not applicable to the Company.
v. The Company has not accepted any deposits from the public within the meaning ofSections 73 74 75 and 76 of the Act and the Rules framed there under to the extentnotified.
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 information and explanations given to us and the records ofthe Company examined by us in our opinion the Company is generally regular in depositingundisputed statutory dues in respect of income tax though there has been a slight delay ina few cases and is regular in depositing undisputed statutory dues including providentfund employees' state insurance sales tax service tax duty of customs duty of excisegoods and service tax and other material statutory dues as applicable with theappropriate authorities. Also refer note 39 to the financial statements regardingmanagement's assessment on certain matters relating to provident fund.
(b) According to the information and explanations given to us and the records of theCompany examined by us there are no dues of duty of customs and goods and service taxwhich have not been deposited on account of any dispute. The particulars of dues of incometax sales tax service tax duty of excise and value added tax as at March 31 2020 whichhave not been deposited on account of a dispute are as follows:
|Name of the statute ||Nature of dues ||Amount (Rs. in lakhs)# ||Period to which the amount relates ||Forum where the dispute is pending |
|Central Sales Tax and Local ||Sales Tax and value added tax liability ||2.27 ||1996-97 to 1998-99 ||High Court of Tamil Nadu |
|Sales Tax Acts ||including interest and penalty as applicable ||146.14 ||2004-05 2008-09 to 2009-10 ||Sales Tax Appellate Tribunals of Maharashtra |
| || ||205.88 ||1992-93 1998-99 2002-03 to 2003- ||Appellate Authority - up to |
| || || ||04 2006-07 2012-13 to 2016-17 ||Commissioner's level |
|The Central ||Excise duty including ||73.74 ||2000-01 to 2006-07 ||Tribunals of various states |
|Excise Act 1944 ||interest and penalty as applicable ||281.44 ||1994-95 to 1997-98 ||Appellate Authority - up to Commissioner's level |
|Service Tax under Finance Act 1994 ||Service Tax including interest and penalty as applicable ||1.64 0.75 ||2006-07 to 2009-10 1996-97 2002-03 to 2004-05 ||Tribunals of various states Appellate Authority - up to Commissioner's level |
|Income Tax Act ||Income Tax ||1772.22 ||1982-83 to 1986-87 1989-90 1991- ||Income Tax |
|1961 ||including interest || ||92 1993-94 1995-96 1997-98 to ||Appellate |
| ||and penalty as applicable || ||2001-02 2011-12 ||Tribunal |
| || ||679.44 ||2001-02 to 2002-03 2013-14 ||Appellate Authority - up to |
| || || ||2015-16 ||Commissioner's level |
# net of amounts paid under protest.
viii. As the Company does not have any loans or borrowings from any financialinstitution or bank or Government nor has it issued any debentures as at the balancesheet date the provisions of Clause 3(viii) of the Order are not applicable to theCompany.
ix. The Company has not raised any moneys by way of initial public offer furtherpublic offer (including debt instruments) and term loans. Accordingly the provisions ofClause 3(ix) of the Order are not applicable to the
x. During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of material fraud by the Company or on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such case by theManagement.
xi. The Company has paid/ provided for managerial remuneration in accordance with therequisite approvals mandated by the provisions of Section 197 read with Schedule V to theAct. Also refer paragraph 16 of our main audit report.
xii. As the Company is not a Nidhi Company and the Nidhi Rules 2014 are not applicableto it the provisions of Clause 3(xii) of the Order are not applicable to the Company.
xiii. The Company has entered into transactions with related parties in compliance withthe provisions of Sections
177 and 188 of the Act. The details of such related party transactions have beendisclosed in the financial statements as required under Indian Accounting Standard (IndAS) 24 Related Party Disclosures specified under Section 133 of the Act.
xiv. The Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review. Accordingly theprovisions of Clause 3(xiv) of the Order are not applicable to the Company.
xv. 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.
xvi. 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.
For Price Waterhouse Chartered Accountants LLP
Firm Registration Number: 012754N/ N500016
Place: Mumbai Date: June 17 2020
Partner Membership Number: 108290 UDIN: 20108290AAAAAO8118