on Standalone Financial Statements
|Comments ||Management's Replies |
|Report on the Audit of Standalone Indian Accounting Standards (Ind AS) Financial Statements || |
|Qualified Opinion || |
|We have audited the accompanying Standalone Ind AS Financial Statements of STEEL AUTHORITY OF INDIA || |
|LIMITED ("the Company") which comprise the Balance Sheet as at 31st March 2019 the Statement of Profit and Loss (including Other Comprehensive Income) the Cash Flow Statement the Statement of Changes in Equity for the year then ended and notes to the Standalone Ind AS Financial Statements including a summary of significant accounting policies and other explanatory information (hereinafter referred to as "Standalone Ind AS Financial Statements") in which are included the Returns of 8 branches for the year ended on that date audited by the branch auditors of the Company's branches . || |
|In our opinion and to the best of our information and according to the explanations given to us and based on the consideration of reports of the branch auditors on separate Ind AS Financial Statements of the branches referred to in the Other Matters section below except for the effect of the matters described in the Basis for Qualified Opinion section of our report the aforesaid Standalone Ind AS Financial Statements give the information required by the Companies Act 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 (as amended) of the state of affairs of the Company as at 31st March 2019 and its profit (including total comprehensive income) its cash flows and the changes in equity for the year ended on that date. || |
|Basis for Qualified Opinion || |
|The Company has not provided for : (i) Demand for Entry tax in various states amounting to र1637.35 crore as on 31st March 2019 [Refer Note No. 47.2(a)] and ||In respect of item stated at (i) the Company's view is that the Nine Judges Bench of Hon'ble Supreme Court vide its judgment dated 11th November 2016 upheld the constitutional validity of levy of Entry Tax by the States and has laid down principles/ tests on levy of Entry Tax Acts in various States. The respective regular benches of the Apex Court would hear the matters as per laid down principles. Pending decision by the regular benches of the Apex Court on levy of entry tax in the States of Chhattisgarh Odisha Jharkhand and in respect of the case pertaining to West Bengal Taxation Tribunal the Entry Tax demands under dispute have been treated as contingent liabilities. |
|(ii) Amount paid to Damodar Valley Corporation (DVC) in earlier years against bills raised for supply of power and retained as advance to DVC by Bokaro Steel Plant amounting to र587.72 crore as on 31st March 2019 [Refer Note No.47.2(b)]; || |
|Had the impact of all the above qualifications been considered Total Comprehensive Income (net of tax) for the year ended 31st March 2019 would have been र990.36 crore against reported Total Comprehensive || |
|Income (net of tax) of र2437.90 crore overstatement of other equity as on 31st March 2019 by र1447.54 crore understatement of current liability by र2225.07 crore and understatement of asset by र777.53 crore. || |
| ||In respect of item stated at (ii) the Company's view is that the cases are sub-judice and pending for adjudication before the various judicial authorities for a long time. Further the civil appeal filed by DVC pertaining to tariff of 2004-09 against the Order of the Appellate Tribunal for Electricity (APTEL) have been dismissed by the Hon'ble Supreme Court of India vide its Order dated 3rd December 2018. Accordingly State Electricity Regulatory Commission (SERC) will finalise the retail tariff as directed by APTEL the financial implication of which can only be ascertained after the Tariff fixation by SERC. |
| ||The above stated disputed demands stated at (i) and (ii) above contested on valid and bonafide grounds have been treated as contingent liabilities as it is not probable that present obligations exist as on 31st March 2019. Therefore there is no adverse impact on Profit for the year. |
|We conducted our audit in accordance with the Standards on Auditing (SAs) specified under Section 143 (10) of the Act. Our responsibilities under those Standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of the Standalone Ind AS Financial Statements under the provisions of the Companies Act 2013 and the Rules issued there under and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion. || |
|Emphasis of Matter || |
|We draw attention to the following || |
|I Pending negotiations with National Joint Committee for the Steel Industry (NJCS) for wage revision and in terms of DPE office memorandums in view of negative figures of average profit before tax of previous three years and also based on the opinion of Expert Advisory Committee of ICAI Company has not made any provision towards wages revision (pending since 01.01.2017) for non-executive employees (Refer to Note No.47.13); || |
|II Gross sales include sales to Government agencies for र5012.76 crore for the year ended 31st March 2019 (cumulative upto 31st March 2019 र17252.66 crore) which is recognized on provisional contract prices (Refer Note No. 49.2). || |
|Our opinion is not qualified in respect of these matters. || |
|Comments ||Management's Replies |
|Information Other than the Financial Statements and Auditors' Report Thereon || |
|The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Management Discussion and Analysis Board's Report including Annexure to Board's Report Business Responsibility Report and Corporate Governance Report but does not include the Standalone Ind AS Financial Statements and our auditors' report thereon. || |
|Our opinion on the Standalone Ind AS Financial Statements does not cover the other information and we do not express any form of assurance conclusion thereon. || |
|In connection with our audit of the Standalone Ind AS Financial Statements our responsibility is to read the other information and in doing so consider whether the other information is materially inconsistent with the Standalone Ind AS Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. || |
|If based on the work we have performed we conclude that there is a material misstatement of this other information; we are required to report that fact. We have concluded that such material misstatement of the other information exists in respect of matters described in the Basis for Qualified Opinion section above. || |
|Key Audit Matters || |
|Key audit matters are those matters that in our professional judgment were of most significance in our audit of the Standalone Ind AS Financial Statements of the current period. These matters were addressed in the context of our audit of the Standalone Ind AS Financial Statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters. In addition to the matters described in the Basis for Qualified Opinion and Emphasis of Matter sections we have determined the matters described below to be the key audit matters to be communicated in our report: || |
|S.No. Key Audit Matter ||Auditors' Response to Key Audit Matters |
|1. Provisions and Contingent Liabilities || |
|The Company is subject to a number of legal regulatory and tax cases for which final outcome cannot be easily predicted and which could potentially result in significant liabilities. ||In order to get a sufficient understanding of litigations and contingent liabilities we have discussed the process of identification implemented by the Management for such provisions through various discussions with Company's legal and finance departments. |
|Management's disclosures with regards to contingent liabilities are presented in Note Nos. 47 and 48.5 read with Note No. 3.17 to the Standalone Ind AS Financial Statements. ||We read the summary of litigation matters provided by the Company's/ Unit's Legal and Finance Team. |
|The assessment of the risks associated with the litigations is based on complex assumptions. || |
|This requires use of judgment to establish the level of provisioning increases the risk that provisions and contingent liabilities may not be appropriately provided against or adequately disclosed. Accordingly this matter is considered to be a key audit matter. ||We read where applicable external legal or regulatory advice sought by the Company. |
| ||We discussed with the Company's/ Unit's Legal and Finance Team certain material cases noted in the report to determine the Company's assessment of the likelihood magnitude and accounting of any liability that may arise. |
| ||In light of the above we reviewed the amount of provisions recorded and exercised our professional judgment to assess the adequacy of disclosures in the Standalone Ind AS financial statements. |
|2. Tax Expenses || |
|Provision for current tax (including Minimum Alternate Tax on Book Profits) is dependent upon availability of brought forward losses depreciation as per income tax/ books of accounts statement of profit and loss balance sheet etc. ||Considered the taxable profits of the Company and taxes paid obtained details of carry forward losses and details of estimate of taxable incomes for future periods. |
|Deferred Tax Assets on unabsorbed depreciation and carry forward losses are to be recognized to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. ||Tested period over which deferred tax assets on such unabsorbed losses would be recovered against future taxable income including Management's underlying assumptions. |
|Refer Note No. 12 and 48.6 to the standalone Ind AS Financial Statements. ||Reviewed on overall basis internally as well as the opinions given by legal/ tax experts on various issues along with various judicial/ jurisdictional pronouncements available on certain issues. |
|3. Property Plant & Equipment and Intangible || |
|Assets || |
|There are areas where Management judgements impact the carrying value of property plant and equipment intangible assets and their respective depreciation and amortization amounts. These include the decision to capitalize or expense costs; the annual asset life review; the timeliness of the capitalization of assets and the use of Management assumptions and estimates for the determination or the measurement and recognition criteria for assets retired from active use. Due to the materiality in the context of the balance sheet of the Company and the level of judgements and estimates required we consider this to be a key audit matter. ||We assessed the controls in place evaluated the appropriateness of capitalization process performed tests of details on costs capitalized the timeliness of the capitalization of assets and the de- recognition criteria for assets retired from active use. |
|S.No. Key Audit Matter ||Auditors' Response to Key Audit Matters |
| ||In performing these procedures we reviewed the judgments made by management including the nature of underlying costs capitalized; determination of realizable value of the assets retired from active use; the appropriateness of asset live applied in the calculation of depreciation; useful lives of assets as per the technical assessment of the management and external technical experts. We have observed that there are no material changes. |
|4. Capital Work-in- Progress ||We per formed an understanding and evaluation of system of internal control over the capital work-in-progress with reference to identification and testing of key controls. |
|The Company is in the process of executing various projects like installation and expansion of mills facilities etc. These projects take a substantial period of time to get ready for intended use. Due to the materiality in the context of the balance sheet of the Company and the level of judgements and estimates required we consider this to be a key audit matter. ||We assessed the progress of the projects and the intention of the management to carry forward and bring the asset to its state of intended use. |
Management's Responsibility for the Standalone Ind AS FinancialStatements
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 Ind AS Financial Statements that give a true and fair viewof the financial position financial performance (including other comprehensive income)cash flows and changes in equity of the Company in accordance with the accountingprinciples generally accepted in India including the Indian Accounting Standards (Ind AS)specified under Section 133 of the Act read with of the Companies (Indian AccountingStandards) Rules 2015 (as amended). This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the Standalone Ind AS Financial Statements that give atrue and fair view and are free from material misstatement whether due to fraud or error.
In preparing the Standalone Ind AS Financial Statements management isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
The Board of Directors is also responsible for overseeing the Company'sfinancial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether theStandalone Ind AS Financial Statements as a whole are free from material misstatementwhether due to fraud or error and to issue an auditor's report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these Standalone Ind AS FinancialStatements.
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 theStandalone Ind AS Financial Statements whether due to fraud or error design and performaudit procedures responsive to those risks and obtain audit evidence that is sufficientand appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.
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 expressing ouropinion on whether the company has adequate internal financial controls system in placeand 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 exists we are required to draw attention in our auditor's report to therelated disclosures in the Standalone Ind AS Financial Statements or if such disclosuresare inadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of theStandalone Ind AS Financial Statements including the disclosures and whether theStandalone Ind AS Financial Statements represent the underlying transactions and events ina manner that achieves fair presentation.
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 safeguards. From the matterscommunicated with those charged with governance we determine those matters that were ofmost significance in the audit of the Standalone Ind AS Financial Statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen 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.
We did not audit the financial statements of 8 branches included in theStandalone Ind AS Financial Statements of the Company whose financial statements reflecttotal assets of र46594.92 crore as at 31st March 2019 and total revenue from operationsof र24376.35 crore for the year ended on that date. The financial statements of thesebranches have been audited by the branch auditors whose reports have been furnished to usand our opinion in so far as it relates to the amounts and disclosures included in respectof these branches is based solely on the report of such branch auditors.
Our opinion is not modified in respect of this matter.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of sub section 11 of Section 143 of the Act wegive in the Annexure 1 a statement on the matters specified in paragraphs 3 and 4 of theOrder to the extent applicable.
2. As required by Section 143 (3) of the Act based on our audit and on theconsideration of the reports of the branch auditors on the separate financial statement ofthe branches referred to in other matters above we report to the extent applicablethat:
(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) Except for the effects of the matter described in the Basis for Qualified Opinionsection above in our opinion proper books of accounts as required by law have been keptby the Company so far as appears from our examination of those books.
(c) The reports on the accounts of the branch offices of the Company audited underSection 143(8) of the Act by the branch auditors have been sent to us and have beenproperly dealt with by us in preparing this report.
(d) The Balance Sheet and the Statement of Profit and Loss including OtherComprehensive Income the Cash Flow Statement and the Statement of Changes in Equity dealtwith by this Report are in agreement with the relevant books of account.
(e) Except for the effects of the matters described in the Basis for Qualified Opinionsection above in our opinion the aforesaid Standalone Ind AS Financial Statements complywith the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Actread with relevant rules issued there under.
(f) The matters described in the Basis for Qualified Opinion section above in ouropinion may not have an adverse effect on the functioning of the Company.
(g) As per notification No. GSR 463(E) dated 5th June 2015 issued by the Ministry ofCorporate Affairs Government of India Section 164(2) of the Companies Act 2013 is notapplicable to the Company.
(h) 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 - 2.
(i) 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 (as amended) inour opinion and to the best of our information and according to the explanations given tous:
i. The Company has disclosed the impact of pending litigations on its financialposition in its
Standalone Ind AS Financial Statements (Refer Note No. 47 and 48.5);
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses and
|Comments ||Management's Replies |
|iii. The Company has not transferred to the Investor Education and Protection Fund an amount of र12075460/-being Unclaimed Matured Deposits which the Company was required to transfer to the said Fund since the financial year 2017-18. ||The Matured Deposits have already been claimed by the successors/ relatives of the individuals but are pending for submission of document of proof of legal heir by the claimants. Appropriate procedure is being followed for refunding the Matured Deposits to the legal heirs. |
|3. As required by section 143(5) of the Act we give in Annexure - 3 a statement on the matters specified in the Directions issued by the Comptroller and Auditor General of India in respect of the Company. || |
|4. As per notification no. GSR 463(E) dated 5th June 2015 issued by the Ministry of Corporate Affairs Government of India Section 197 of the Act is not applicable to the Government Companies. || |
|For Singhi & Co. ||For Chatterjee & Co. ||For and on behalf of Board of Directors |
|Chartered Accountants ||Chartered Accountants || |
|Firm Registration No. 302049E ||Firm Registration No. 302114E || |
|Sd/- ||Sd/- ||Sd/- |
|(Shrenik Mehta) ||(Bedanta Bhattacharya) ||(Anil Kumar Chaudhary) |
|Partner ||Partner ||Chairman |
|M.No. 063769 ||M.No. 060855 || |
|For A.K.Sabat & Co. ||For V.K. Dhingra & Co. || |
|Chartered Accountants ||Chartered Accountants || |
|Firm Registration No. 321012E ||Firm Registration No. 000250N || |
|Sd/- ||Sd/- || |
|(A.K. Sabat) ||(Vipul Girotra) || |
|Partner ||Partner || |
|M.No.030310 ||M.No. 084312 || |
|Place : New Delhi || ||Place : New Delhi |
|Dated : 30th May 2019 || ||Date : 28th June 2019 |