Sunflag Iron and Steel Company Limited
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of SunflagIron and Steel Company Limited ("the Company") which comprise the balancesheet as at 31 March 2021 the statement of profit and loss (including othercomprehensive income) cash flow statement and the statement of changes in equity for theyear then ended and notes to the standalone financial statements including a summary ofsignificant accounting policies and other explanatory information (hereinafter referred toas "the standalone financial statements").
In our opinion and to the best of our information and according to theexplanations given to us the aforesaid standalone financial statements give theinformation required by the Companies Act 2013 ("the Act") in the manner sorequired and give a true and fair view in conformity with the Indian Accounting Standards('Ind AS') prescribed under section 133 of the Act read with the Companies (IndianAccounting Standards) Rules 2015 as amended thereof ("Ind AS") and otheraccounting principles generally accepted in India of the state of affairs of the Companyas at 31 March 2021 and its profit total comprehensive income its cash flows and thechanges in equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements inaccordance with the Standards on Auditing (SAs) specified under Section 143(10) of theAct. Our responsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the standalone financial statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India together with the ethical requirementsthat are relevant to our audit of the standalone financial statements under the provisionsof the Act and the Rules made thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence obtained by us is sufficient and appropriate to provide a basisfor our audit opinion on the standalone financial statements.
Emphasis of Matter
1. We draw attention to Note 47 to the financial statements whichdescribes the uncertainties and the impact of Covid-19 pandemic on the Company'soperations and results as assessed by the management. Further our attendance at thephysical inventory verification done by the management was impracticable under the currentsituation and we have therefore relied on the related alternate audit procedures toobtain comfort over the existence and condition of inventory at year end. Further due tobulk nature of the inventories maintained by the company the company has performedperpetual inventory verification process and no material discrepancies has been observed.
2. We draw attention to note 38 to the financial statements whichdescribes the long term advances given by the Company which is more fully been explainedin the said note.
Our opinion is not modified in respect of these matters.
Key Audit Matters
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the standalone financial statements of thecurrent period. These matters were addressed in the context of our audit of the standalonefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. We have determined the matters described below thekey audit matters to be communicated in our audit report.
|Key Audit Matter ||Auditor's Response |
|1. Recognition of Revenue measurement presentation and disclosure as per Ind AS-115 Customers". ||Our procedures included but were not limited to the "Revenue from Contracts with following: |
|(Refer Sub-note No XVII of Note 2 of Accounting Policy). ||We performed walkthroughs to understand the key processes and identify key controls related Ind AS 115 "Revenue from Contracts with Customers" |
| ||On a sample basis we performed testing to verify physical deliveries of product in the year to ascertain transfer of control. |
| ||We performed revenue cut-off testing by reference to bill dates of sales recorded either side of the financial year end had legally completed; and |
| ||Selected a sample of sales contracts and read analysed and identified the distinct performance obligations in these contracts |
| ||Based on our audit procedures we have concluded that revenue is appropriately recognized and that there was no evidence of management bias. |
|2. Evaluation of uncertain civil and indirect tax positions and recoverability of amount deposited under protest as recoverable ||Our procedures included but were not limited to the following: |
|The Company has material uncertain civil and indirect tax positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes. ||Obtained details of completed tax assessments of earlier years and demands as on 31 March 2021 from management of the |
|The eventual outcome of these litigations is uncertain and the positions taken by the management of the Company are based on the application of significant judgement and estimation. The review of these matters requires application and interpretation of tax laws and reference to applicable judicial pronouncements. ||Company. We have done assessment of the managements underlying assumptions in estimating the tax provision and the possible outcome of the disputes. |
|Based on management judgement and the advice from legal and indirect tax Consultants and considering the merits of the case the Company has recognized provisions wherever required and for the balance matters where the management expects favourable outcome these litigations have been disclosed as contingent liabilities in the standalone financial statements unless the possibility of out ow of resources is considered to be remote. ||Based on management estimates the liability against these matters are not yet certain hence the same has been shown as contingent liability in the current standalone financial statements. |
|Given the uncertainty and application of significant judgment in this area in terms of the eventual outcome of litigations we determined this to be a key audit matter. ||Understanding and evaluating process and controls designed and implemented by the management including testing of relevant controls indirect tax related litigations through discussions with the management including the significant developments additions and settlements during the year and subsequent to 31 March 2021; |
| ||Verifying demand notices received from various indirect tax authorities and evaluating the Company's written responses to those matters; |
| ||Evaluating the management's assessment on the likely outcome and potential magnitude by involving experts on complex or significant matters as considered necessary; and |
| ||Assessing the adequacy of the Company's disclosures. |
| ||We did not identify any significant exceptions to the management's assessment of the ongoing civil and indirect tax litigations as a result of the above procedures. |
Information Other than the Standalone Financial Statements andAuditor's Report Thereon
The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report BusinessResponsibility Report Corporate Governance and Shareholder's Information but does notinclude the standalone financial statements and our auditor's report thereon. The AnnualReport is expected to be made available to us after the date of this Auditors' Report. Ouropinion on the standalone financial statements does not cover the other information and wedo not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained during the course of our audit or otherwise appears to bematerially misstated.
If based on the work we have performed we conclude that there is amaterial misstatement of this other information we are required to report that fact. Wehave nothing to report in this regard.
Management's Responsibility for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters statedin Section 134(5) of the Act with respect to the preparation of these standalone 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 Ind AS and other accounting principles generally accepted in Indiaincluding the Indian Accounting Standards (Ind AS) specified under Section 133 of the Actread with the Companies (Indian Accounting Standards) Rules 2015 as amended thereof.
This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding the assets of theCompany and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe standalone financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.
In preparing the standalone 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 are responsible for overseeing the Company'sfinancial reporting process.
Auditor's Responsibility for the Audit of the Standalone FinancialStatements
Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue 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 financial statements.
As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional scepticism throughout the audit. We also: Identify andassess the risks of material misstatement of the standalone financial statements whetherdue to fraud or error design and perform audit procedures responsive to those risks andobtain audit evidence that is sufficient and appropriate to provide a basis for ouropinion. The risk of not detecting a material misstatement resulting from fraud is higherthan for one resulting from error as fraud may involve collusion forgery intentionalomissions misrepresentations or the override of internal control. Obtain anunderstanding of internal financial control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances. Under section 143(3)(i) of the Actwe are also responsible for expressing our opinion on whether the Company has adequateinternal financial controls system in place and the operating effectiveness of suchcontrols.
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by the 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 financial statements or if such disclosures areinadequate 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 overallpresentation structure and content of the standalone financial statements including thedisclosures and whether the standalone financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the standalonefinancial statements that individually or in aggregate makes it probable that theeconomic decisions of a reasonably knowledgeable user of the standalone financialstatements may be influenced. We consider quantitative materiality and qualitative factorsin
(i) planning the scope of our audit work and in evaluating the resultsof our work; and
(ii) to evaluate the effect of any identified misstatements in thestandalone financial statements.
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 matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the standalonefinancial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.
The figures for the year ended 31 March 2020 are based on thepreviously issued standalone financial statements prepared in accordance with theCompanies (Accounting Standards) Rules 2006 audited and reported by S.S. Kothari Mehta& Company having firm registration number 000756N who have issued an unmodified auditreport dated June 26 2020 have been furnished to us by the management and which havebeen relied upon by us for the purpose of issuing the report on the standalone financialstatements.
Our report is not modified in respect of above matter. Report on otherLegal 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 Section143(11) of the Act we give in Annexure A a statement on the matters specified inparagraph 3 and 4 of the Order.
2. As required by Section 143(3) of the Act we report that:
a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of our auditof the aforesaid standalone financial statements;
b) In our opinion proper books of account as required by law have beenkept by the Company so far as it appears from our examination of those books;
c) The balance sheet the statement of profit and loss including othercomprehensive income the statement of cash flow and the statement of changes in equitydealt with by this Report are in agreement with the books of account;
d) In our opinion the aforesaid standalone financial statements complywith the Indian Accounting Standards specified under Section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended thereof;
e) On the basis of the written representations received from thedirectors as on 31 March 2021 and taken on record by the Board of Directors none of thedirectors is disqualified as on 31 March 2021 from being appointed as a director in termsof Section 164 (2) of the Act;
f) With respect to the adequacy of the internal financial controls overfinancial reporting of the Company and the operating effectiveness of such controls referto our separate Report in "Annexure B". Our report expresses an unmodifiedopinion on the adequacy and operating effectiveness of the Company's internal financialcontrols over financial reporting;
g) With respect to the other matters to be included in the Auditor'sReport in accordance with the requirements of section 197(16) of the Act as amended: Inour opinion and to the best of our information and according to the explanations given tous the remuneration paid by the Company to its directors during the year is in accordancewith the provisions of section 197 of the Act; and
h) With respect to the other matters to be included in the Auditor'sReport in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 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 as at 31March 2021 on its financial position in its standalone Ind AS financial statement referNote 33 to the standalone financials statements;
ii. The Company has made provisions as required under the applicablelaw or accounting standards for material foreseeable losses if any on long termcontracts including derivative contracts; and
iii. There has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company during the yearended 31 March 2021.
"ANNEXURE - A" TO INDEPENDENT AUDITOR'S REPORT
Annexure A to the Independent Auditor's Report to the members ofSunflag Iron and Steel Company Limited on its standalone financial statements dated 29 May 2021.
Report on the matters specified in paragraph 3 of the Companies(Auditor's Report) Order 2016 ("the Order') issued by the Central Government ofIndia in terms of section 143(11) of the Companies Act 2013 ("the Act") asreferred to in paragraph 1 of 'Report on Other Legal and Regulatory Requirements' section.
i) a) The Company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets.
b) Due to Covid-19 pandemic during the year the management of theCompany was unable to conduct physical verification of fixed assets. However the Companyhas the procedure to cover the physical verification of the fixed assets on a periodicalbasis management of the Company understand that the assets not verified during the yearwill be covered in the subsequent year and in our opinion the frequency of which isreasonable having regard to the size of the Company and the nature of its assets.
c) In our opinion and according to the information and explanationsgiven to us the title deeds of immovable properties are held in the name of the Company.
ii) In our opinion and according to the information and explanationsgiven to us the procedures of physical verification of inventories followed by themanagement are reasonable and adequate in relation to the size of the Company and thenature of its business except for goods-in-transit and stocks lying with third parties.For stocks lying with third parties at the year-end written confirmations have beenobtained and in respect of goods in-transit subsequent goods receipts have been verifiedor confirmations have been obtained from the parties. Due to bulk nature of theinventories maintained by the company the company has performed perpetual inventoryverification process. The discrepancies noticed on verification between the physicalstocks and the book records were not material and have been properly dealt with in thebooks of account. In view of the current situation due to Covid-19 pandemic ourattendance at the physical inventory verification done by the management wasimpracticable. Related alternate audit procedures were therefore relied upon to obtainassurance over the existence and condition of inventory at the year end.
iii) The Company has granted unsecured loans to companies covered inthe register maintained under section 189 of the Act.
a) The Company has granted unsecured loan to two of its subsidiaries.In our opinion and according to the information and explanations given to us the termsand conditions of the loans are not prejudicial to the interest of the Company.
b) The aforesaid loan is repayable on demand as agreed. In respect ofthis loan we are informed that the Company has not demanded repayment of such loan thusthere is no default on repayment of such loan. In respect of interest on such loan fromthese subsidiaries the Company has charged interest for the period 01 April 2020 to 31March 2021 and waived off as approved in its board meeting.
c) Since there is no overdue amount of loan granted to Company listedin the register maintained under Section 189 of the Act hence reporting under thisclause is not applicable to the Company.
iv) In our opinion and according to the information and explanationsgiven to us the Company has complied with the provisions of section 185 and 186 of theAct as applicable in respect of loans to directors including entities in which they areinterested and in respect of loans and advances given investments made and guaranteesand securities given. Refer clause (iii) above for loans granted to subsidiaries.
v) In our opinion and according to the information and explanationsgiven to us the Company has not accepted any deposits from the public within the meaningof directives issued by the Reserve Bank of India and provisions of sections 73 to 76 orany other relevant provisions of the Act and the Rules framed thereunder.
vi) We have broadly reviewed the Cost Accounting records maintained bythe Company pursuant to the Rules prescribed by the Central Government for the maintenanceof cost records under sub-section (1) of section 148 of the Act and are of the opinionthat prima facie the prescribed accounts and records have been made and maintained. Weare however not required to make a detailed examination of such books and records.
vii. a) According to the records of the Company examined by us and theinformation and explanations given to us the Company is generally regular in depositingundisputed statutory dues including Employees' Provident Fund Employees' State InsuranceInvestor Education and Protection Fund Income Tax Goods & Service Tax Custom DutyCess and any other material statutory dues as applicable with the appropriateauthorities during the year and there are no such undisputed amounts payable which haveremained outstanding as at 31 March 2021 for a period of more than six months from thedate they became payable except payment to Gram Panchayat Tax of Rs. 501 lakhs and royaltyon coal of Rs. 15 Lakhs.
b) According to the records of the Company there are no dues inrespect of Income-tax Sales-tax Service-tax Customs Duty Excise Duty and Value addedtax which have not been deposited with the appropriate authorities on account of disputeand the forum where the dispute is pending are given below:
(Rs. in Lakh)
|Name of Statute ||Nature of dues ||Forum where the dispute is pending ||Period to which the amount relates ||Amount of Dispute ||Amount Deposited |
|Central Excise Act1944 ||Excise duty ||CESTAT Mumbai ||2012 - 2013 & 2013 - 2014 ||485 (Note 1) ||18 |
|Customs Act 1962 ||Reversal of Duty drawback ||Commissioner (Appeal) Customs Nhavaseva ||2004-2014 ||251 ||19 |
|Income Tax Act1961 ||Income tax ||Commissioner of Income Tax (Appeal) before National Faceless Appeal Center New Delhi ||Assessment year 2015 - 2016 ||132 ||132 |
Note 1: interest on demand not consider for the purpose of abovedisclosures.
viii) In our opinion and according to the information and explanationsgiven to us we are of the opinion that the Company has not defaulted in repayment of duesto banks and Government. The Company has not taken any loan from the financial institutionnor has any dues to debenture holders.
ix) According to the information and explanations given by themanagement the Company has not raised any monies by way of initial public offer orfurther public offer during the financial year and the terms loans raised by the Companyhave been applied for the purpose for which they are were obtained. Where such end use hasbeen stipulated by the lender(s).
x) In our opinion and according to the information and explanationsgiven to us we report that no fraud by the Company or on the Company by the officers andemployees of the Company has been noticed or reported during the year.
xi) In our opinion and according to the information and explanationsgiven to us the managerial remuneration has been paid / provided in accordance with theprovisions of section 197 of the Act.
xii) The Company is not a Nidhi company. Therefore the provisions ofclause 3(xii) of the Order are not applicable to the Company.
xiii) According to the information and explanations given by themanagement transactions with the related parties are in compliance with Section 177 and188 of Act and the details have been disclosed in the notes to the standalone financialstatements as required by the applicable Indian accounting standards.
xiv) According to the information and explanations given to us and onan overall examination of the books of account the Company has not made any preferentialallotment and private placement of shares or fully & partly convertible debenturesduring the year under audit. Accordingly the provisions of clause 3(xiv) of the Order arenot applicable to the Company.
xv) In our opinion and according to the information and explanationsgiven to us the Company has not entered into any non-cash transactions with directors orpersons connected with him as referred in section 192 of the Act.
xvi) According to the information and explanations given to us theprovisions of section 45-IA of the Reserve Bank of India Act 1934 are not applicable tothe Company.
Annexure B to the Independent Auditor's Report to the members ofSunflag Iron and Steel Company Limited (the "Company") on its standalonefinancial statements dated 29 May 2021.
Report on the Internal Financial Controls Over Financial Reportingunder Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 ("theAct") as referred to in paragraph 1(f) of 'Report on Other Legal and RegulatoryRequirements' section
We have audited the internal financial controls over financialreporting of the Sunflag Iron and Steel Company Limited ('the Company') as of 31March 2021 in conjunction with our audit of the standalone Ind AS financial statements ofthe Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing andmaintaining internal financial controls based on "the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India (the"ICAI"). These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of its business including adherence toCompany's policies the safeguarding of its assets the prevention and detection of fraudsand errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.
Our responsibility is to express an opinion on the Company's internalfinancial controls over financial reporting of the Company based on our audit.
We conducted our audit in accordance with the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting (the "Guidance Note") andthe Standards on Auditing prescribed under section 143(10) of the Act to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness.
Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgement including the assessment of therisks of material misstatement of the standalone financial statements whether due tofraud or error.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internal financialcontrols system over financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A Company's internal financial control over financial reporting is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A Company's internal financial control overfinancial reporting includes those policies and procedures that:
a) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany;
b) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorisations of management and directors of thecompany; and
c) provide reasonable assurance regarding prevention or timelydetection of unauthorised acquisition use or disposition of the company's assets thatcould have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over FinancialReporting
Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.
In our opinion to the best of our information and according to theexplanations given to us the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2021 based on thecriteria for internal financial control over financial reporting established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by the ICAI.
| ||For NSBP & Co. |
| ||Chartered Accountants |
| ||Firm Registration No. 001075N |
| ||Deepak K. Aggarwal |
|New Delhi || |
|29 May 2021 ||Membership No: 095541 |
| ||UDIN: - 21095541AAAAFH7842 |