To the Members of Sumitomo Chemical India Limited
Report on the Audit of the Standalone Ind AS Financial Statements Opinion
We have audited the accompanying standalone Ind AS financial statements of SumitomoChemical India Limited ("the Company") which comprise the Balance sheet as atMarch 31 2020 the Statement of Profit and Loss including Other Comprehensive Incomethe Cash Flow Statement and the Statement of Changes in Equity for the year then endedand notes to the financial statements including a summary of significant accountingpolicies and other explanatory information. In our opinion and to the best of ourinformation and according to the explanations given to us the aforesaid standalone Ind ASfinancial statements give the information required by the Companies Act 2013 as amended("the Act") in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at March 31 2020 its profit including other comprehensiveincome its cash flows and the changes in equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone Ind AS financial statements in accordance withthe Standards on Auditing (SAs) as specified under section 143(10) of the Act. 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'issued by the Institute of Chartered Accountants of India together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion on the standalone Ind AS financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone Ind AS financial statements for the financialyear ended March 31 2020. These matters were addressed in the context of our audit of thestandalone Ind AS financial statements as a whole and in forming our opinion thereon andwe do not provide a separate opinion on these matters. For each matter below ourdescription of how our audit addressed the matter is provided in that context. We havedetermined the matters described below to be the key audit matters to be communicated inour report. We have fulfilled the responsibilities described in the Auditor'sresponsibilities for the audit of the standalone Ind AS financial statements section ofour report including in relation to these matters. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the standalone Ind AS financial statements. The results of our auditprocedures including the procedures performed to address the matters below provide thebasis for our audit opinion on the accompanying standalone Ind AS financial statements.
|Key audit matters ||How our audit addressed the key audit matter |
|Revenue Recognition Estimation of discounts incentives rebates and sales return (as described in Note 2.3(m) of the standalone Ind AS financial statements) ||We performed following audit procedures: |
|Revenue is measured net of discounts incentives rebates and sales return. ||a) Obtained and reviewed schemes and policies relating to discounts incentives rebates and sales return; |
|Due to the Company's presence across different marketing regions and the competitive business environment the estimation of various types of discounts incentives and rebate schemes which are recognised based on sales made is considered to be complex and judgmental. Further there is a possibility of sales return of expired products from customers which requires estimation. ||b) Evaluated the design and tested the operating effectiveness of Company's internal controls over discounts incentives and rebates and sales return; |
|Given the significant judgement required and complexity involved in estimating discounts incentives rebates and sales return this is considered as a key audit matter. ||under applicable schemes. Verified on a sample basis and compared the accruals made with the approved schemes; |
| ||d) Obtained and inspected on a sample basis supporting documentation for payment towards discounts incentives and rebates during the year as well as credit notes issued during and after the year end; |
| ||e) Analysed the historical trend of payments made towards discounts incentives rebates and that of sales return and compared actuals with accruals; and |
| ||f) Assessed the adequacy of the disclosures as per the applicable accounting standards. |
|Estimation of allowances for inventory valuation (as described in Note 2.3 (e) of the standalone Ind AS financial statements) |
|Inventories represent significant portion of total assets as at March 31 2020 with carrying value of Rs. 5870.06 million (net of allowances). ||We performed the following audit procedures: |
|Inventories are valued at lower of cost and net realization value. The Company writes down inventories to net realisable value on account of obsolescence expiry and non-moving inventory based on the management's assessment. ||a) Understood and evaluated the process relating to determination of net realizable value of inventories and identification of slow-moving expired or obsolete inventories; |
|Assessing net realizable value and identification of slow-moving expired and obsolete inventory are areas which require use of significant judgements and owing to the inherent complexities this is considered to be a key audit matter. ||b) Evaluated the design and tested operating effectiveness of internal controls over inventory valuation; |
| ||c) T ested the valuation of inventories on sample basis by comparing value of Raw Materials and Traded Goods with the underlying supporting documents. For Work in Process and Manufactured Finished Goods verified the Bill of Materials and tested computation for labour and manufacturing overhead absorption. |
| ||d) Obtained age wise analysis of inventories made specific inquiries with the management with regards to expiry slow moving and obsolete inventories and evaluated the computation for write-down of inventories provided by the management; and |
| ||e) Assessed the appropriateness of disclosures in the financial statements in accordance with the applicable accounting standards. |
Information Other than the Financial Statements and Auditor's Report Thereon
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 standalone Ind AS financial statements and our auditor's report thereon. The Annualreport is expected to be made available to us after the date of this auditor's report.
Our opinion on the standalone Ind AS financial statements does not cover the otherinformation and we will not express any form of assurance conclusion thereon.
In connection with our audit of the standalone Ind AS financial statements ourresponsibility is to read the other information identified above when it becomes availableand in doing so consider whether such other information is materially inconsistent withthe standalone Ind AS financial statements or our knowledge obtained in the audit orotherwise appears to be materially misstated.
When we read the Annual report if we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance.
Responsibilities of Management for the Standalone Ind AS Financial Statements
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 standalone Ind AS financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and the designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone Ind AS financialstatements that give a true and fair view and are free from material misstatement whetherdue 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.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial 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:
Identif y and assess the risks of material misstatement of the standalone Ind ASfinancial statements whether due to fraud or error design and perform proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls system in place and the operating effectiveness ofsuch 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 financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa 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.
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 themall relationships and other matters that may reasonably be thought to bear on ourindependence and 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 for the financial year ended March 31 2020 and are therefore the key auditmatters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.
The comparative financial information of the Company included in these standalone IndAS financial statements have been extracted from the audited standalone Ind AS financialstatements of the Company for the year ended 31st March 2019 which were audited by thepredecessor auditor who expressed an unmodified opinion on those financial statements on14th October 2019.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section section 143 of the Actwe give in the "Annexure 1" a statement on the matters specified in paragraphs 3and 4 of the Order.
2. As r equired 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 the Cash Flow Statement and Statement of Changes in Equity dealt with by thisReport are in agreement with the books of account;
(d) In our opinion the aforesaid standalone Ind AS financial statements comply withthe Accounting Standards specified under Section 133 of the Act read with Companies(Indian Accounting Standards) Rules 2015 as amended;
(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 adequacy of the internal financial controls over financialreporting of the Company with reference to these standalone Ind AS financial statementsand the operating effectiveness of such controls refer to our separate Report in"Annexure 2" to this report;
(g) In our opinion the managerial remuneration for the year ended March 31 2020 hasbeen paid / provided by the Company to its directors in accordance with the provisions ofsection 197 read with Schedule V to the Act;
(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 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 43 to thestandalone Ind 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 Refer Note 15 and 24 to the standalone Ind AS financialstatements;
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
For SRBC & CO LLP
ICAI Firm Registration Number: 324982E/E300003
per Jayesh Gandhi
Membership Number: 037924 UDIN: 20037924AAAADG9446
Mumbai 5th June 2020
ANNEXURE 1 REFERRED TO IN PARAGRAPH 1 UNDER THE HEADING REPORT ON OTHER LEGAL ANDREGULATORY REQUIREMENTS' OF OUR REPORT OF EVEN DATE
(i) In r espect of its Property plant and equipment:
(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of Property plant and equipment. (b) All fixed assetshave not been physically verified by the management during the year but there is a regularprogramme of verification which in our opinion is reasonable having regard to the sizeof the Company and the nature of its assets. As informed no material discrepancies werenoticed on verification during the year.
(c) According to the information and explanations given by the management the titledeeds of immovable properties included in property plant and equipment are held in thename of the company.
(ii) The management has conducted physical verification of inventory at reasonableintervals during the year and no material discrepancies were noticed on such physicalverification.
(iii) Accor ding to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Liability Partnerships orother parties covered in the register maintained under section 189 of the Companies Act2013. Accordingly the provisions of clause 3(iii)(a) (b) and (c) of the Order are notapplicable to the Company and hence not commented upon.
(iv) In our opinion and according to the information and explanations given to usthere are no loans investments guarantees and securities given in respect of whichprovisions of section 185 and 186 of the Companies Act 2013 are applicable and hence notcommented upon.
(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended).Accordingly the provisions of clause 3(v) of the Order are not applicable.
(vi) W e have broadly reviewed the books of account maintained by the Company pursuantto the rules made by the Central Government for the maintenance cost records under section148(1) of the Companies Act 2013 and are of the opinion that prima facie the specifiedaccounts and records have been made and maintained. We have not however made a detailedexamination of the same.
(vii) (a) Undisputed statutory dues including provident fund employees stateinsurance income tax duty of custom goods and service tax cess and other statutorydues have generally been regularly deposited with the appropriate authorities though therehas been a slight delay in few cases.
(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax duty ofcustom goods and service tax cess and other statutory dues were outstanding at the yearend for a period of more than six months from the date they became payable.
(c) According to the records of the Company the dues of income-tax sales-tax servicetax duty of custom duty of excise value added tax and cess on account of any disputeare as follows:
|Nature of the Statute ||Nature of the dues ||Amount ||Period to which amount related ||Forum at which dispute is pending |
| ||Disallowance of capital subsidy and expenses ||411220 ||AY 2004-05 ||ITAT Mumbai |
| ||Disallowance of royalty expenses ||926382 ||AY 2004-05 ||Mumbai High Court |
|Income Tax Act 1961 ||Transfer Pricing and disallowance of certain expenses ||13867594 ||AY 2011-12 ||ITAT Mumbai |
| ||Transfer Pricing and disallowance of certain expenses ||31105690 ||AY 2012-13 ||ITAT Mumbai |
| ||Disallowance of certain expenses ||17556929 ||AY 2017-18 ||CIT (Appeal) Mumbai |
|Central Sales Tax Act 1956 ||Non submission of F Form ||192806 ||FY 1998-99 ||Sales Tax Officer Thane |
|Sales Tax (VAT) ||Non submission of F Form ||304794 ||FY 2002-03 ||Deputy Commissioner Ahmedabad |
|The Finance Act 1994 ||Service tax on Royalty ||1257000 ||April 2002 to March 2004 ||Superintendent of Central Excise Mumbai |
| ||Disallowance of availment of Service Tax Credit ||4375989 ||March 2015 to Sept 2015 ||Commissioner Central Excise Thane |
| ||Disallowance of availment of ||1730852 ||October 2015 to Sept 2016 ||Commissioner Central Excise Thane |
|The Central excise Act 1944 ||Service Tax Credit Disallowance of availment of ||3037651 ||October 2016 to June 2017 ||Assistant Commissioner Division-IV CGST and |
| ||Service Tax Credit Denial of Cenvat Credit taken ||734238 ||August 2007 to July 2008 ||Central Excise Palghar Commissionerate Order in Original passed by Additional Commisioner of Central Excise |
|Central Goods & Service Tax Act 2017 ||Eway Bill with wrong vehicle No ||714096 ||July 2019 ||Appeal to Appellate Authority Haryana against Order of ETO Fatehabad |
|Service Tax Rules ||Service tax demand ||5269750 ||FY 2005-06 & FY 2012-13 to 2015-16 ||Addittional / Joint Commissioner (Bhavnagar) Assisstance Commissioner (Silvassa) Joint Commissioner (Gandhidham) |
|Custom Act Bihar Vat Act 2005 ||Custom duty demand VAT liability ||6513849 2091706 ||FY 2012-13 FY 2007-08 2011-12 & 2012-13 ||Joint Commissioner of Customs Deputy Commissioner of Commercial Taxes Patna |
(viii) The Company did not have any outstanding loans or borrowing dues in respect of afinancial institution or bank or to government or dues to debenture holders during theyear.
(ix) Accor ding to the information and explanations given by the management theCompany has not raised any money by way of initial public offer / further offer / debtinstruments and term loans hence reporting under clause (ix) is not applicable to theCompany and hence not commented upon.
(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no fraud by the company or no fraud on the companyby the officers and employees of the Company has been noticed or reported during the year.
(xi) Accor ding to the information and explanations given by the management themanagerial remuneration has been paid / provided in accordance with requisite approvalsmandated by the provisions of section 197 read with Schedule V to the Companies Act 2013.
(xii) In our opinion the Company is not a Nidhi Company. Therefore the provisions ofclause 3(xii) of the Order are not applicable to the company and hence not commented upon.
(xiii) Accor ding to the information and explanations given by the managementtransactions with the related parties are in compliance with section 177 and 188 CompaniesAct 2013 where applicable and the details have been disclosed in the notes to thestandalone financial statements as required by the applicable Indian AccountingStandards.
(xiv) Accor ding to the information and explanations given to us and on an overallexamination of the balance sheet the company has not made allotment or private placementof shares or fully or partly convertible debentures during the year under review andhence reporting requirements under clause 3(xiv) are not applicable to the company andnot commented upon.
(xv) Accor ding to the information and explanations given by the management theCompany has not entered into any non-cash transactions with directors persons connectedwith him as referred to in section 192 of Companies Act 2013.
(xvi) Accor ding to the information and explanations given to us the provisions ofsection 45-IA of the Reserve Bank of India Act 1934 are not applicable to Company.
For SRBC & CO LLP
Firm Registration No. 324982E/E300003
per Jayesh Gandhi
Membership No.: 037924 UDIN: 20037924AAAADG9446
Mumbai 5th June 2020
ANNEXURE 2 TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE STANDALONE FINANCIALSTATEMENTS OF SUMITOMO CHEMICAL INDIA LIMTED
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 over financial reporting of SumitomoChemical India Limited ("the Company") as of March 31 2020 in conjunction withour audit of the standalone financial statements of the Company for the year ended on thatdate.
Management's Responsibility for Internal Financial Controls
The Company's Management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to the Company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting with reference to these standalone financial statementsbased on our audit. We conducted our audit in accordance with the Guidance Note on Auditof Internal Financial Controls Over Financial Reporting (the "Guidance Note")and the Standards on Auditing as specified under section 143(10) of the Companies Act2013 to the extent applicable to an audit of internal financial controls and both issuedby the Institute of Chartered Accountants of India. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls over financialreporting with reference to these standalone financial statements was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls over financial reporting with reference to thesestandalone financial statements and their operating effectiveness. Our audit of internalfinancial controls over financial reporting included obtaining an understanding ofinternal financial controls over financial reporting with reference to these standalonefinancial statements assessing the risk that a material weakness exists and testing andevaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the internal financial controlsover financial reporting with reference to these standalone financial statements.
Meaning of Internal Financial Controls Over Financial Reporting With Reference to theseFinancial Statements
A company's internal financial control over financial reporting with reference to thesestandalone financial statements is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accountingprinciples. A company's internal financial control over financial reporting with referenceto these standalone financial statements includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting WithReference to these Standalone Financial Statements
Because of the inherent limitations of internal financial controls over financialreporting with reference to these standalone financial statements including thepossibility of collusion or improper management override of controls materialmisstatements due to error or fraud may occur and not be detected. Also projections ofany evaluation of the internal financial controls over financial reporting with referenceto these standalone financial statements to future periods are subject to the risk thatthe internal financial control over financial reporting with reference to these standalonefinancial statements may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects adequate internal financialcontrols over financial reporting with reference to these standalone financial statementsand such internal financial controls over financial reporting with reference to thesestandalone financial statements were operating effectively as at March 31 2020 based onthe internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India.
For SRBC & CO LLP
ICAI Firm Registration Number: 324982E/E300003
per Jayesh Gandhi
Membership Number: 037924 UDIN: 20037924AAAADG9446
Mumbai 5th June 2020