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Rashtriya Chemicals & Fertilizers Ltd.

BSE: 524230 Sector: Agri and agri inputs
NSE: RCF ISIN Code: INE027A01015
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VOLUME 547204
52-Week high 112.65
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P/E 8.87
Mkt Cap.(Rs cr) 5,227
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OPEN 96.10
CLOSE 96.10
VOLUME 547204
52-Week high 112.65
52-Week low 66.45
P/E 8.87
Mkt Cap.(Rs cr) 5,227
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Rashtriya Chemicals & Fertilizers Ltd. (RCF) - Auditors Report

Company auditors report

TO THE MEMBERS OF RASHTRIYA CHEMICALS AND FERTILIZERS LIMITED

Report on the Audit of the Standalone Ind AS Financial Statements

opinion

We have audited the accompanying Standalone Ind AS Financial Statements of RASHTRIYACHEMICALS AND FERTILIZERS LIMITED ("the Company") which comprise the BalanceSheet as at March 31 2021 the Statement of Profit and Loss (including OtherComprehensive Income) Statement of Changes in Equity and Statement of Cash Flows for theyear ended March 31 2021 and notes to the financial statements including a summary ofsignificant accounting policies and other explanatory information (hereinafter referred toas "the Standalone Ind AS Financial Statements").

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Standalone Ind AS Financial Statements give the informationrequired by the Companies Act 2013 ("the Act") in the manner so required andgive a true and fair view in conformity with the Indian Accounting Standards prescribedunder section 133 of the Act read with the Companies (Indian Accounting Standards) Rules2015 as amended ("Ind AS") and other accounting principles generally acceptedin India of the state of affairs of the Company as at March 31 2021 and its profit andtotal Comprehensive Income changes in equity and its cash flows for the year ended onthat date.

Basis for Opinion

We conducted our audit of the Standalone Ind AS Financial Statements in accordance withthe Standards on Auditing specified under section 143(10) of the Act (SAs). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Ind AS Financial Statements section ofour report. We are independent of the Company in accordance with the Code of Ethics issuedby the Institute of Chartered Accountants of India (ICAI) together with the independencerequirements that are relevant to our audit of the Standalone Ind AS Financial Statementsunder the provisions of the Act and the Rules made thereunder and we have fulfilled ourother ethical responsibilities in accordance with these requirements and the ICAI's Codeof Ethics. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Standalone Ind AS FinancialStatements.

Emphasis of Matter

We draw attention to the following matters:

a) note no 48 - Gas pooling applicable to Fertilizer

(Urea) sector: In view of the lack of progress in the matter of levy of a differentialprice for use of domestic gas for non-urea operations liability of Rs 211.79 Crorerecognised for the period commencing from June 1 2015 to March 31 2019 continues to becarried forward. The related claim by GAIL for differential levy is pending for resolutionbefore government designated authorities and the balance amount of the claim of Rs 1246.21Crore (net after provision) is reflected as a contingent liability.

b) note no 49 - Gas turbine Generator (GTG) plants at Thal unit: Pursuant to the suddenfailure of both Gas Turbine Generator (GTG) plants at Thal unit in March 2019 the matterfor effecting repairs under the warranty period was taken up with the LSTK contractor.Through the contractor the Original Equipment Manufacturer (OEM) had indicated a totalestimated repair expenditure of about 98 million SEK (Rs 74.51 Crore excluding taxes andduties). The said GTG plants have been sent to the OEM for repairs and they have beenreceived duly repaired. In the interim the Company has initiated arbitration proceedingsfor costs and loss of profits and does not consider a provision necessary as the saidcosts are covered under warranties. In response counter claims have been made by thecontractor.

c) note no. 75 - Impact of coVID-19 Pandemic:

Although no significant impact of Covid 19 pandemic has been noted on the financial andoperational results for the year ended 31st March 2021 the continuing Covid 19 epidemiccould result in consequences on the external economic environment. A definitive assessmentof the said impact on the company is highly uncertain and being dependent on the evolvingsituation can be undertaken only after the situation stabilises.

Our opinion is not modified in respect of the above matters. Key Audit Matters

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 Standalone Ind AS Financial Statementsas a whole and in forming our opinion thereon and we do not provide a separate opinionon these matters.

The key audit matters identified in our audit are:

1. Revenue Recognition and measurement in respect of subsidy income.

2. Estimation of Provision & Contingent Liabilities.

3. Information Technology General Control.

Sr. Key Audit matter No. Response to Key audit Matter
1. Revenue recognition and measurement in respect to subsidy income. Our Procedure included:
Recognition of subsidy is generally made on the basis of in principle recognition/approval /settlement of claims from Government of India/Fertilizer Industry Co-ordination Committee while finalizing the financial statements. accounting policies and principles: We have reviewed the Company's Accounting policies for Subsidy on Urea as mentioned under "Note A. Statement of Significant Accounting policies III) D) Revenue Recognition" of the financial statements and the same is compared with the applicable Ind AS. Tests of controls:
During the year Subsidy adjusted on account of the escalations/de-escalations basis for the year amounts to Rs 82.44 Crore refundable to FICC/DOF (PY Rs 247.18 Crore receivable). Such adjustments have been done for escalations/de- escalations in the cost of inputs and other costs as estimated by the management based on the prescribed norms in line with known policy parameters. We have evaluated the design implementation and operating effectiveness of key controls over recognition of subsidy income.
tests of details:
MRP of Urea being fixed by Government of India the company is entitled for subsidy wherein certain inputs costs are a pass through and compensation for production beyond a level of production known as Reassessed capacity is restricted to lower of Import Parity Price (IPP) of Urea plus other incidental charges which the government incurs on imported Urea or its own concession price as determined under extant policies for Urea. Further subsidy income is net of adjustments of recoveries towards sale/transfer for surplus ammonia or non-conversion of entire ammonia into Urea. We have verified the supporting documentation for determining that the subsidy was recognized in the correct accounting period and as per notified rates.
In absence of notified rates we have verified calculation of estimated rates based on information available with the Company for such costs which are a pass through.
In case estimation of income is based on other parameters like IPP of Urea etc. verification of the same based on available information in public domain.
Since there is a time lag between actual expenditure incurred and notification of concession rates for the year Testing reasonability of assumptions based on past trends consistency in application and changes in the same owing to change in Government policies.
Management exercises significant judgement in arriving at the income entitlement on account of same for the year. Performing substantive analytical procedures: -
Therefore there is a risk of revenue being misstated on account of errors in estimation of concession/IPP rates yet to be notified due to absence of notification available and change in methodology/ calculation if any for arriving at price concession. Ascertainment and analysis of variations with respect of amounts estimated and actually entitled upon notification with respect to previous years.
We also assessed as to whether the disclosures in respect of revenue were adequate.
2 Estimation of Provision & contingent Liabilities Internal enquiry:
In the recognition and measurement of provisions there is uncertainty about the timing or amount of the future expenditure required to settle the liability. In respect of contingent liabilities there are estimates and assumptions made to determine the amount to be disclosed. We enquired of the senior management and inspected the minutes of the board and various committees of the board where relevant for claims arising and challenged whether provisions are required.
tests of details:
As a result there is a high degree of judgement required for the recognition and measurement of provisions and disclosure of contingent liabilities. In respect of significant claims we checked the amount of claim nature of issues involved management submissions and corroborated the same with external evidence where available.
Company has reported Provision and Contingencies
amounting to Rs 1797.74 Crore (PY Rs 1697.23 Crore) in the financial statement. Enquiry and confirmation of lawyers:
There is a risk of material misstatement that the estimates are incorrect and that the provisions or contingent liabilities are materially misstated. In respect of matters which are under dispute we have assessed opinion of Company's in-house Legal Department / external lawyers wherever necessary.
3 Information Technology Controls
A significant part of the Company's financial reporting process is heavily reliant on IT systems with automated processes and controls over the capture storage and extraction of information. A fundamental component of these We focused our audit on those IT systems and controls that are significant to the Company's financial reporting process. We assessed the design and tested the operating effectiveness of the Company's IT controls including those over user access and change management as well as data reliability.
processes and controls is ensuring appropriate user access and change management protocols exist and being adhered In a limited number of cases we adjusted our planned audit approach as follows:
to. These protocols are important because they ensure that access and changes to IT systems and related data are made and authorised in an appropriate manner. - We extended our testing to identify whether there had been unauthorized or inappropriate access or changes made to critical IT systems and related data;
As our audit sought to place a high level of reliance on IT systems and application controls related to financial reporting high proportion of the overall audit effort was in Information Technology (IT) Systems and Controls. - Where automated procedures were supported by systems with identified deficiencies we extended our procedures to identify and test alternative controls; and
We focused our audit on those IT systems and controls that are significant to the Company's financial reporting process. - Where required we performed a greater level of testing to validate the integrity and reliability of associated data and reporting.

Other Information

The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Director's Report ManagementDiscussion & Analysis Report Business Responsibility Report and Corporate GovernanceReport but does not include the 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.

When we read the Director's Report Management Discussion & Analysis ReportBusiness Responsibility Report and Corporate Governance Report if we conclude that thereis a material misstatement therein we are required to communicate the matter to thosecharged with governance.

Responsibilities of Management and Those Charged with Governance for the Standalone IndAS Financial Statements

The Company's Board of Directors is responsible for the matters stated in section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese Standalone Ind AS Financial Statements that give a true and fair view of thefinancial position the financial performance total comprehensive income changes inequity and cash flows of the Company in accordance with the accounting principlesgenerally accepted in India including the Indian Accounting Standards (Ind AS) prescribedunder section 133 of the Act.

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 of theaccounting records relevant to the preparation and presentation of the Standalone Ind ASFinancial Statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

In preparing the Standalone Ind AS 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.

The Board of Directors is also responsible for overseeing the Company's financialreporting process. auditor's Responsibilities for the audit of the Standalone Ind ASFinancial Statements

Our objectives are to obtain reasonable assurance about whether the Standalone Ind ASFinancial 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 Standalone Ind AS Financial Statements.

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the Standalone Ind ASFinancial 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 financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls with reference to financial statements inplace and the operating effectiveness of such controls.

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

• Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe Standalone Ind AS Financial Statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However future events or conditions may cause the Companyto cease to continue as a going concern.

• Evaluate the overall presentation structure and content of the Standalone IndAS Financial Statements including the disclosures and whether the Standalone Ind ASFinancial Statements represent the underlying transactions and events in a manner thatachieves fair presentation.

Materiality is the magnitude of misstatements in the Standalone Ind AS FinancialStatements that individually or in aggregate makes it probable that the economicdecisions of a reasonably knowledgeable user of the financial statements may beinfluenced. We consider quantitative materiality and qualitative factors in (i) planningthe scope of our audit work and in evaluating the results of our work; and (ii) toevaluate the effect of any identified misstatements in the financial statements.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with them allrelationships and other matters that may reasonably be thought to bear on our independenceand where applicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the Standalone Ind AS 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 in terms of Section 143(11) of the Act we give in"Annexure A" a statement on the matters specified in paragraphs 3 and 4 of theOrder.

2. As required by Section 143 (5) of the Act we give in "annexure B" thedirections and sub-directions issued by the Comptroller and Auditors General of India theaction taken thereon and its impact on the accounts and financial statements of theCompany.

3. Non - Compliance of the SEBI Listing Obligation and Disclosure Requirements (LODR)Regulations 2015 - as per Regulation 17(1)(b) the chairman being an executive directorat least half of the board of Directors should be comprised of Independent Directorsincluding one Women Independent Director. Currently the Company does not have requirednumber of Independent Directors on its board. (Refer Note 41.1.5 to Financial Statements)

4. 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 including Other ComprehensiveIncome Statement of Changes in Equity and the Statement of Cash Flow dealt with by thisreport are in agreement with the relevant books of account.

d) In our opinion the aforesaid Standalone Ind AS Financial Statements comply with theIndian Accounting Standards prescribed under Section 133 of the Act.

e) The Company being a government company the provision of section 164(2) is notapplicable in accordance with the Notification No. GSR 463 (E) dated June 5 2015 issuedby Ministry of Corporate Affairs. Accordingly no reporting regarding Clause 3(g) ofsection 143 is required.

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 C".

g) With respect to the other matters to be included in the Auditor's Report as persection 143(3)(j):

I. In accordance with requirements of section 197 (16) of the act as amended: As pernotification number G.S.R. 463 (E) dated June 5 2015 issued by Ministry of CorporateAffairs Section 197 of the Act as regards the managerial remuneration is not applicableto the Company since it is a Government Company.

II. In accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 asamended in our opinion and to the best of our information and according to theexplanations given to us:

i. The company has disclosed the impact of pending litigations on its financialposition in its Standalone Ind AS Financial Statements - Refer Note 41 to the StandaloneInd AS financial statements;

ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts;

iii. There is no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Company.

For M M Nissim & Co LLP For Gokhale & Sathe
Chartered Accountants Chartered Accountants
Firm Regn. No.107122W/W100672 Firm Regn. No. 103264W
CA. N. Kashinath CA. Atul Kale
Partner Partner
Membership No. 036490 Membership No. 109947
UDIN: 21036490AAAAFZ1033 UDIN: 21109947AAAAOA1559
Place: Mumbai
Dated: May 27 2021

ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in Para 1 ‘Report on Other Legal & Regulatory Requirements' inour Independent Auditor's Report to the members of the Company on the Standalone Ind ASFinancial Statements for the year ended March 31 2021.)

Statement on Matters specified in paragraphs 3 & 4 of the Companies (Auditor'sReport) Order 2016:

(i) a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets with original cost and depreciationwritten off in respect of identifiable units of assets and where such information foridentifiable units of assets is not available the records show the cost and depreciationwritten off in respect thereof as a group or class. The items of assets in respect ofwhich quantitative details are not linked with the cost or book value are of small valueacquired prior to April 1978 and are fully depreciated particularly in respect of movableitems acquired from Fertilizers Corporation of India Limited.

b) The Company has a regular program for physical verification of its fixed assets bywhich its fixed assets are verified in a phased manner by the management and Company'sInternal Auditors. In our opinion this periodicity of physical verification is reasonablehaving regard to the size of the Company and the nature of its fixed assets. According toinformation and explanations given to us no material discrepancies were noticed on suchverification.

c) According to the information and explanations given to us and on the basis ofexamination of the records of the company the title deeds of immovable properties areheld in the name of the Company except:-

Sr. No. Total No. of Cases Type of assets Gross Block as at March 31 2021 C crore) Net Block as at March 31 2021 C crore) Remarks
1 2 Free Hold Land -Thal (1824903 Sq. Mtr. of land) 1.60 1.60 The Company is in the process of Transferring the title deeds.
2 1 Free Hold Land -Trombay (378321 Sq. Mtr. of land) 0.24 0.24 The Company is in the process of transferring the title deeds.

(ii) Physical verification of finished goods packing materials and raw materialsinside the factory premises has been carried out by the management at reasonable intervalsand verification of stock of stores and spare parts has been conducted by them with thehelp of an independent outside agency (Internal auditors and technical consultants) atreasonable intervals.

Stock of stores and spare parts has been conducted by the management with the help ofan independent outside agency in a phased programme so as to complete the verification ofall items over a period.

Finished goods and other inventory stored outside the factory premises are taken as perwarehousing certificates and third-party confirmation respectively. The discrepanciesnoticed on verification between the physical stocks and book records were not material andhave been properly dealt with in books of account.

(iii) The Company has not granted any loans secured or unsecured to companies firmsand limited liability partnerships or other parties covered in register maintained undersection 189 of the Act during the year. Therefore the provisions of sub-clause (a) (b)and (c) of paragraph 3(iii) of the Order are not applicable.

(iv) The Company has complied with the provisions of section 185 and 186 of the Act asapplicable in respect of investments made in the Joint Venture Company and loans given tobody corporates. The Company has not given any guarantees or provided any security to anyparty covered under section 185 and 186 of the Act.

(v) In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits from the public and hence the directions issued byReserve Bank of India and the provisions of Section 73 to 76 or any other relevantprovisions of the Act and the Rules framed there under are not applicable.

(vi) We have broadly reviewed the books of account and records maintained by theCompany pursuant to the rules made by the Central Government for the maintenance of costrecords under Section 148 (1) of the Act and are of the opinion that prima facie theprescribed accounts and records have been made and maintained.

(vii) a) The Company is regular in depositing undisputed statutory dues includingProvident Fund Employees' State Insurance Income-Tax Sales Tax Service Tax Duty ofCustoms Duty Duty of Excise Value Added Tax Goods and Service Tax Cess and any othermaterial statutory dues with the appropriate authorities. There are no arrears ofoutstanding statutory dues in respect of above as on the last day of the financial yearfor a period of more than six months from the date they became payable.

b) According to the information and explanation given to us and the records examined byus there are no material dues of Income tax Sales tax Service tax Duty of customsDuty of excise Value added tax outstanding on account of any dispute except:

Sr. No. Name of the Statute Nature of dues Amount C in Crore) Period to which the amount relates Forum where dispute is pending
1 Customs Act 1962 Demand of Customs duty and penalty (Trombay Unit) 25.62 FY 2004-05 Central Excise Service Tax Appellate Tribunal
2 Customs Act 1962 Demand of Differential Customs Duty on import of Urea MOP & DAP (Marketing) 80.77 FY 2009-10 Assistant Commissioner of Customs Dharamtar Alibaug
3 Customs Act 1962 Demand of Differential customs duty on import of Potash (Marketing) 0.16 FY 2012-13 Commissioner of Customs Mangalore
4 Income Tax Act 1961 Disallowance of additional depreciation claimed 0.97 AY 2013-14 Commissioner of Income Tax (Appeals)
5 Income Tax Act 1961 Demand of Tax for Short Deduction / non deduction of TDS 1.18 AY 2008-09 to AY 2020-21 Commissioner of Income Tax (Appeals)
6 Central Excise Act 1944 Demand of Central Excise duty Interest & Penalty in respect of Naphtha procured at concessional rates used for products which are not exempted (Thal Unit) 2.67 FY 1996-2001 Supreme Court
3.54 Period from March 2005 to October 2005 Mumbai High Court
18.61 Period from November 1996 to February 2005 (Interest) Supreme Court
17.89 Period from July 2007 to August 2009 Commissioner of Central Excise and Service Tax Mumbai
Demand of excise duty on account of Diversion of Urea for industrial usages (Thal Unit) 8.93 FY 2010-14 Central Excise and Service Tax Appellate Tribunal Ahmedabad
Availment of Service Tax Cenvat Credit on Common Input Services (Thal Unit) 19.32 FY 2011-2017 Central Excise and Service Tax Appellate Tribunal Mumbai
7 Central Excise Act 1944 Demand of Central Excise duty in respect of Low Sulphur High Stock / Furnace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit) 6.97 September 1989 to December 2015 Commissioner of Central Excise (Appeals)
Rapid Wall Plaster cleared with Nil Rate of duty (Trombay Unit) 4.94 July 2010 to March 2016 Central Excise and Service tax Appellate Tribunal Mumbai
Withheld of subsidy on account of Diversion of Urea for industrial usages (Trombay Unit) 1.39 2015-16 Central Excise and Service Tax Appellate Tribunal Ahmedabad
8 Central Excise Act 1944 Demand for wrong availment of cenvat credit MBPT (Trombay Unit) 0.16 2010-2015 Central Excise and Service tax Appellate Tribunal Mumbai
9 Central Excise Act 1944 Wrong availment of MODVAT(Trombay Unit) 0.63 May 2000 to Sept 2000 Dy Commissioner of Central Excise and Service Tax
10 Central Excise Act 1944 Demand of Service Tax on wrong availment of CENVAT credit in respect of input services used in the manufacture of exempted goods (Trombay Unit) 2.35 April 2011 to June 2017 Dy. Commissioner of Central Excise Customs & Service Tax
11 Service Tax Demand of Service Tax on supply of Btal wagons (IPD Dept.) 0.27 Period from April 2008 to December 2012 Central Excise & Service Tax Appellate Tribunal Mumbai
12 Service Tax Demand of Service Tax on Dispatch Money (Mktg. Dept.) 0.24 FY 2012-2015 Asst. Commissioner of CGST & C.X. Division-1 Mumbai
13 Service Tax Demand of Service Tax on LD (Corporate Dept.) 0.78 FY 2012-2015 Central Excise & Service Tax Appellate Tribunal Mumbai
14 Service Tax Demand of Service Tax on wrong availment and distribution of CENVAT (Corporate Dept.) 0.41 Period from April 2014 to March 2016 Commissioner Appeals Mumbai
15 Service Tax Demand of Service Tax on Handling Charges 0.01 Period from April 2006 to March 2008 Superintendent Service Tax Aurangabad
16 Service Tax Demand of Service Tax on supply of wagon to Central Railway (Thal Unit) 3.62 Period from April 2008 to June 2017 Central Excise & Serivce Appellate Tribunal Mumbai
17 Service Tax Non-payment of service Tax on Routine Maintenance Charges of private railway Siding (Thal Unit) 1.93 Period from March 2012 to August 2015 Commissioner Appeals Mumbai
18 Service Tax Demand of Service Tax on Sponsorship (Marketing Unit) 0.43 Period from September 2012 to March 2015 Asst. Commissioner of Central Excise & Service Tax
19 Service Tax Demand on Dispatch Money (Corporate Unit) 0.54 Period from September 2012 to March 2015 Asst. Commissioner of Central Excise & Service Tax
20 Service Tax Demand of Service Tax on Sponsorship (Corporate Unit) 1.07 Period from September 2012 to March 2015 Asst. Commissioner of Central Excise & Service Tax
21 Service Tax Demand on LD(Trombay Unit 3.60 September 2012 to March 2015 Asst. Commissioner of Central Excise & Service Tax.
22 Service Tax Demand on Despatch Money (Trombay Unit) 2.92 September 2012 to March 2015 Asst. Commissioner of Central Excise & Service Tax.
23 Service Tax Service Tax on CS Deputation Manpower 0.10 2008-2014 Asst. Commissioner of Central Excise & Service Tax.
24 Service Tax Service Tax on LD and other Misc. Recoveries (Thal Unit) 0.78 2012-14 Commissioner Appeals of Central Excise & Service Tax.

(viii) The Company has not defaulted in repayment of loans or borrowings to banksfinancial institutions and debenture holders. There were no borrowings or loan from thegovernment.

(ix) The Company has not raised money through initial public offer or further publicoffer (including debt instruments). The Company has utilized the monies raised by way ofdebt instruments and term loans for the purpose for which the loans were obtained.

(x) During the course of our examination of the books of account and records of theCompany and according to the information and explanation given to us and representationsmade by the Management no material fraud by or on the Company by its officers oremployees has been noticed or reported during the year.

(xi) As per notification number G.S.R. 463 (E) dated June 5 2015 issued by Ministry ofCorporate Affairs Section 197 of the Act as regards the managerial remuneration is notapplicable to the Company since it is a Government Company.

(xii) The provisions of paragraph 3(xii) of the Order for Nidhi Company are notapplicable to the Company.

(xiii) The Company has complied with sections 177 and 188 of the Act w.r.t.transactions with related parties wherever applicable. Details of the transactions withthe related parties have been disclosed in the Standalone Ind AS Financial Statements asrequired by the applicable Indian Accounting Standards.

(xiv) The company has not made any preferential allotment or private placement ofshares or fully or partly convertible debentures during the year under review.Accordingly provision 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 the directors orpersons connected with him. Hence the provisions of Section 192 of the Act are notapplicable.

(xvi) The company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934 hence the provisions of paragraph 3 (xvi) of the Order are notapplicable.

For M M Nissim & Co LLP For Gokhale & Sathe
Chartered Accountants Chartered Accountants
Firm Regn. No.107122W/W100672 Firm Regn. No. 103264W
CA. N. Kashinath CA. Atul Kale
Partner Partner
Membership No. 036490 Membership No. 109947
UDIN: 21036490AAAAFZ1033 UDIN: 21109947AAAAOA1559
Place: Mumbai
Dated: May 27 2021

ANNEXURE "B" TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in Paragraph 2 ‘Report on Other Legal & Regulatory Requirements'in our Independent Auditor's Report to the members of the company on the Standalone Ind ASFinancial Statements for the year ended March 31 2021.

Report on the Directions and Sub-directions issued by the Comptroller and AuditorsGeneral of India the action taken thereon and its impact on the accounts and financialstatement of the Company under Section 143(5) of the Act:

A. DIRECTIONS

1. Whether the company has system in place to process all the accounting transactionsthrough IT systemRs If yes the implications of processing of accounting transactionsoutside IT system on the integrity of the accounts along with the financial implicationsif any may be stated.

Reply: Yes.

Most of the important functional areas of the organization like Financial AccountingSales Accounting Human Resources Information Payroll Material/Inventory Management etc.have been computerized. The Company has implemented SAP during 2005-06 in order to makeinformation processing fully integrated and centralized. Following modules have beenimplemented in SAP ERP wherein transactions are processed in an integrated manner.

• Finance & Costing (FI-CO)

• Asset Management (AM)

• Production Planning (PP)

• Plant Maintenance (PM)

• Materials Management (MM)

• Sales & Distribution (SD)

• Cost Object & Profitability Analysis (CO-PA)

• Business Warehouse (BW)

• Environment Health & Safety (EHS)

• Township Management

• HR & Pay Roll (HCM- Implemented during the year 2006-07)

In 2010 along with an upgrade of the existing SAP business applications following newsolutions were also implemented:

• SAP Enterprise Portal (Employee Self Service/Manager Self Service)

• Governance Risk and Compliance

During the current year Company has upgraded to SAP HANA system.

Attendance recording system is another subsidiary system specifically developed to meetthe requirements of the Company for recording attendance of unionized category employeesof the Company. The attendance data from this system is directly uploaded in SAP forpayroll processing.

The IT system has been also configured to meet the compliance and business requirementsas mandated by applicability of Ind AS and Goods and Services Act.

Thus the IT system enables integrated processing of most of the accountingtransactions. However certain accounting transactions relating to subsidy incomerecording of transactions relating to borrowings payment of interest etc. corporatetaxes valuation of finished goods inventory as per principles of Ind AS and certain yearend provisions are processed directly in the Finance module of the SAP IT system as thesetransactions are standalone to finance. Such transactions and balances are adequatelysupported by relevant documents maintained / calculations maintained in Excel workbooks. Amaker-checker protocol is also followed to check the calculations and the effect of theentries are posted in SAP system.

Further based on the information processed in SAP system such data is extracted forpreparation and presentation of financial statements as per Schedule III of Companies Act.Proper checks and controls are exercised so that the information presented is inconsonance with the base data extracted from the SAP system.

2. Whether there is any restructuring of an existing loan or cases of waiver/write offof debts /loans/interest etc. made by a lender to the company due to the company'sinability to repay the loanRs If yes the financial impact may be stated.

Reply: No.

Based on audit procedure performed by us and as per the information and explanationgiven to us there has been no instance of restructuring of an existing loan or cases ofwaiver/ write-off of debts/ loans/ interest etc./ made by a lender to the Company due tothe Company's inability to repay the loan.

3. Whether funds (grants/subsidy etc.) received/receivable for specific schemes fromCentral/State Government or its agencies were properly accounted for/ utilized as per itsterm and conditionsRs List the cases of deviation.

Reply: No.

As per information and explanations given to us Company has not received any funds forspecific schemes from Central/State agencies during the year.

b. sub-directions

i. State the area of land under encroachment and briefly explain the steps taken by theCompany to remove encroachments.

Reply: To the best of our knowledge and belief and according to the information andexplanations given to us instances of encroachment of land have been observed at Trombayunit which are as under:

a) Approx. 5 acres of land which is in the name of RCF has been encroached since thetime of FCI. The value of the land cannot be determined exactly. RCF has approached theagencies like MMRDA for development of this land.

b) Approx. 15 Acres is under slum/encroached since 1980. Slums from other pockets wereshifted on this land and is without clear title in favor of RCF. The matter is taken upwith appropriate authorities for clear title in favor of RCF.

Both the matters are pending in Mumbai High Court for resolution. As explained to usother than the above there are no cases of encroachment of land at other locations.

ii. Whether subsidy received/recoverable from the Goi has been properly accounted forand reconciled as per claims admittedRs

Reply: Yes.

Based on the audit procedures performed by us and as per the information andexplanations given to us subsidy received/ recoverable from the Government of India hasbeen properly accounted for as per claims admitted. In addition to the same for the ratesyet to be notified due to escalations/ de- escalations in the cost of inputs and othercosts subsidy has been accounted on estimated basis which is in line with its statedaccounting policy of revenue recognition given in notes to the Standalone Ind AS FinancialStatements for the year 2020-21.

Subsidy received during the year amounting to Rs 7595.14 Crore is reconciled withsubsidy disbursed by the Government of India.

iii. Whether subsidy was recognized as per provisions of the Direct Benefit TransferScheme of GOIRs

Reply: Yes.

As per explanation and information given to us summary of the same is as follows:

As per the provisions of Direct Benefit Transfer Scheme of GOI the price subsidy ispayable on the quantity sold to the end user by the retailer as recorded in the POS (Pointof Sales) machines. The Point of Sales is captured through the POS Machines andFingerprint Scanner implemented at retailer's shop wherein such sales captured and linkedto the IFMS software and DBT claims are generated on weekly basis. Based on the samesubsidy receivable from GOI is accounted which is then settled by GOI.

Further in accordance with the Ind AS - 115 and as per company's significantaccounting policy Revenue including subsidy in respect of sale of goods is recognizedwhen control of the goods has been transferred being when the goods are delivered to thebuyer the buyer has full discretion over the goods and there is no unfulfilled obligationthat could affect the buyer's acceptance of the goods.

The subsidy entitled to the Company through generation of claims upon sale to the enduser recorded through the POS machines does not represent the quantity sold by theCompany. There is a time lag between its actual sale to dealers and the quantity soldthrough POS machines by retailers. Thus on such quantity even though subsidy is entitledclaims can be preferred only when such quantity is recorded as "End User Sale"by retailers in POS machines.

Further the claims generated through POS machines are at rates notified and updated inIFMS system and has no reference to the subsidy which the Company is eligible as perextant policies for Urea as the notified rates are required to be adjusted for escalationsand de-escalations in cost of inputs. Thus necessary entries are passed which impactincome and subsidy receivables.

Accordingly the accounting of subsidy is in order and we confirm as under: -

a) Subsidy claims are preferred on GOI as per provisions of the Direct BenefitTransfer Scheme of GOI.

b) Further Subsidy income on quantity sold to dealers as per subsidy eligible inaccordance with rates notified under the New Pricing Scheme is recognized with adjustmentsfor escalation/de-escalation in the prices of inputs and other adjustments as estimated bythe management in accordance with the known policy parameters in this regard as notifiedby Government of India.

c) Subsidy accounted on quantity sold but to be confirmed in POS - As per DBT schemeCompany is entitled for generation of claims on the basis of actual sale by the retailerson weekly basis through POS machines. Accordingly as on 31st March 2021quantity of 6.08 LMT of Urea and P&K having subsidy amounting Rs 716.21 Crore has beenrecognized in the current period. Such quantity has been sold to dealers but the paymentof the same will become due under DBT on actual sale by the retailers through POSmachines. (P.Y quantity 4.63 LMT and subsidy Rs 667.94 Crore)

iv. State the impact of revision of subsidies for fertilizers products in valuation offertilizers product closing stock. Reply: Yes

As per explanation and information given to us the summary of impact is stated asfollows:

As per Company's accounting policy finished goods inventories are valued at lower ofcost and net realizable value. In respect of Urea and other fertilizers which aresubsidized/are sold at prices lower than cost subsidy being a component of revenue isincluded while arriving at the net realizable value.

While arriving at the net realizable for valuation of stock the lowest selling pricesand the applicable subsidy realizable on such stocks is considered. Accordingly suchrevisions are factored while arriving at the Net realization of fertilizer stocks.

In case of Urea the realizations of Urea are different as per extant policies forproduction upto reassessed capacity (RAC) and beyond reassessed capacity (BRAC). While therealization from the market is constant the applicable rate of subsidy differs for stockquantities which are from production upto RAC and for production beyond RAC. Further suchrealizations are adjusted for escalations/de-escalations in cost of inputs on estimatedbasis in accordance with known policy parameters.

As on 31st March 2021 closing stock of fertilizers are valued as under:-

Product Quantity (in MT)i Cost Per MT NRV Per MT

Rate of subsidy per MT considered in NRV (D)

Stock valuation Rate total closing Stock Valuation (a) * (E)
(A) (B) (c) (B) or (c) whichever is lower (E) Rs Crore (F)
Trom Urea- BRAC- SILO 3111.071 21855.60 20697.42 15988.15 20697.42 6.44
Trom Urea- BRAC- Bagged in factory 726.530 22506.75 21344.13 16369.00 21344.13 1.55
Trom Urea- BRAC- Marketing godowns 45.150 24201.06 22881.57 17588.91 22881.57 0.10
Trom Urea -up to RAC Marketing godowns 5502.991 24201.06 24426.51 19133.91 24201.06 13.32
Thal Urea- BRAC- SILO 12041.965 17672.12 17609.66 13146.16 17609.66 21.21
Thal Urea- BRAC- Bagged in factory 3090.140 18454.10 18422.21 13471.00 18422.21 5.69
Thal Urea- BRAC- Marketing godowns 3799.767 20332.73 20236.15 14944.16 20236.15 7.69
Thal Urea -up to RAC Marketing godowns 34076.378 20332.73 21028.82 15736.16 20332.73 69.29
Suphala - SILO 17636.078 19726.44 23991.58 6569.00 19726.44 34.79
Suphala - S Bagged 2772.96 20521.54 24785.38 6569.00 20521.54 5.69
Suphala - Bagged Marketing godowns 11441.80 22243.80 26443.26 7752.26 22243.80 25.45
MOP 53536.15 16206.61 21385.54 6070.00 16206.61 86.76
DAP 17.80 27680.61 31317.54 10231.00 27680.61 0.05
NPK 20.20.0.13 13000.20 21027.80 24421.61 7044.00 21027.80 27.34

Impact of revision of subsidies during the year on closing stock of such fertilizers isRs 0.57 Crore resulting in reduction in inventory values as compared to Net realizablevalue of previous year which is at previous year subsidy rates. As finished goods arevalued at lower of cost and Net realizable value revision in subsidies impact only suchstocks which are valued at Net realizable value.

The said impact been computed only for the purpose for response to this additional subdirection and has got no reference to the financial statements.

There is no impact on financial statements of the company from the above 4 subdirections.

The Compliance/Action taken by management on last year's management letter is asfollows:

^ Para No. Compliance/ Action Taken
1 The Significant accounting policy of the Company on subsidy and revenue recognition in relation to DBTScheme is in contravention of the Government of India policy on fertilizer subsidy. This needs to be reviewed and suitably disclosed in the Notes to the financial statement. The company has complied with the para and the note is disclosed in Note no:47 of Financial statements.
2 The discount on issue of commercial paper (CP) ofRs 8.31 crore was included under Current Assets - Prepaid Expenses as prepaid interest. As this is not an advance payment for procurement of goods/services the same needs to be shown as separate line item instead of including it under prepaid expenses. The company has complied with the para and the note is disclosed in Note no:24 of Financial statements.
3 As per the note the Company has property cards of 3044530 sq meters. On scrutiny of records it was noticed that the company had handed over the possession of48849.74 sq meters to MMRDA for the purpose of construction of the Anik Panjarapole Link Road (Eastern Freeway) and a possession certificate issued by MMRDA was received in 2013. The Company only deducted 46427sq meters from its property card whereas it transferred the area of48849.74 sq meters to MMRDA. A disclosure to the effect that transfer of the title deed is still pending in respect of2422.74 sq meters (48849.7446427.00) handed over to MMRDA needs to be given in the financial statements of2020-21 as per applicable status at that time. The company has complied with the para and the note is disclosed in Note no:44 of Financial statements.
4 Sr No. (U) of significant Accounting Policies for the recognition of individual expenses as prepaid expenses asset in Financial Statements states that ‘Individual expenses upto Rs 100000 is not considered in classifying prepaid expenses. Due care needs to be taken to ensure that such expenses are charged off while preparing quarterly/annual financial statement in future. The Company has not recognized prepaid expenses below 100000 during the year and have complied with the para raised.
5 As per Educational material on Ind AS 7 deposit and withdrawal from cash credit Account need to be reported on net basis under cash flow from financing activities. However the Company has been disclosing the net impact in cash credit Account as cash and cash equivalent instead of reporting it as the net inflow/outflow as cash flow from financing activities this needs to be reviewed. The company has complied with the para. Note no 24 & Cash flow Statement to the financial statements discloses cash credit as a borrowing and its movement is captured in cash flow under financing activity.
For M M Nissim & Co LLP For Gokhale & Sathe
Chartered Accountants Chartered Accountants
Firm Regn. No.107122W/W100672 Firm Regn. No. 103264W
CA. N. Kashinath CA. Atul Kale
Partner Partner
Membership No. 036490 Membership No. 109947
UDIN: 21036490AAAAFZ1033 UDIN: 21109947AAAAOA1559
Place: Mumbai
Dated: May 27 2021

ANNEXURE "C" TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in Paragraph 4(f) of the section ‘Report on Other Legal &Regulatory Requirements' in our Independent Auditor's Report to the members of the companyon the Standalone Ind AS Financial Statements for the year ended March 31 2021.)

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 with reference to the Standalone Ind ASFinancial Statements of RASHTRIYA cHEMIcALS And FERTILIZERS Limited ("theCompany") as of March 31 2021 in conjunction with our audit of the Standalone Ind ASFinancial 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 over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the ‘GuidanceNote' issued 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 Act.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to the Standalone Ind AS Financial Statement based on our audit.We conducted our audit in accordance with the ‘Guidance Note' and the Standards onAuditing issued by ICAI and deemed to be prescribed under section 143(10) of the Act tothe extent applicable to an audit of internal financial controls both applicable to anaudit of Internal Financial Controls and both issued by the ICAI. 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 controlswith reference to the Standalone Ind AS financial statement was established and maintainedand 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 with reference to the Standalone Ind AS FinancialStatement and their operating effectiveness.

Our audit of internal financial controls with reference to the Standalone Ind ASFinancial Statement included obtaining an understanding of internal financial controlswith reference to the Standalone Ind AS Financial Statement assessing the risk that amaterial weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement of the Standalone Ind 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 systemwith reference to the Standalone Ind AS Financial Statement.

Meaning of Internal Financial Controls with reference to Financial Statements

A company's internal financial controls with reference to the Standalone Ind ASFinancial Statement is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of Standalone Ind AS financialstatements for external purposes in accordance with generally accepted accountingprinciples. A Company's internal financial controls with reference to the Standalone IndAS Financial Statement include those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) 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 (3) 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 StandaloneInd AS financial statements.

Inherent Limitations of Internal Financial Controls With reference to the StandaloneInd AS Financial Statements

Because of the inherent limitations of internal financial controls with reference tothe Standalone Ind AS Financial Statements including the possibility of collusion orimproper management override of controls material misstatements due to error or fraud mayoccur and not be detected. Also projections of any evaluation of the internal financialcontrols with reference to the Standalone Ind AS Financial Statements to future periodsare subject to the risk that the internal financial controls with reference to theStandalone Ind AS Financial Statements may become inadequate because of changes inconditions or that the degree of compliance with the policies or procedures maydeteriorate.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls with respect to financial statement system and such internal financialcontrols with respect to financial reporting were operating effectively as at March 312021 based on the internal control with respect to 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 Reporting (the"Guidance Note") issued by the Institute of Chartered Accountants of India.

For M M Nissim & Co LLP For Gokhale & Sathe
Chartered Accountants Chartered Accountants
Firm Regn. No.107122W/W100672 Firm Regn. No. 103264W
CA. N. Kashinath CA. Atul Kale
Partner Partner
Membership No. 036490 Membership No. 109947
UDIN: 21036490AAAAFZ1033 UDIN: 21109947AAAAOA1559
Place: Mumbai
Dated: May 27 2021

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