| Report on the Financial Statements
We have audited the accompanying financial statements of BIHAR SPONGE
IRON LIMITED ("the Company"), which comprise the Balance Sheet as at
31st March, 2015, the Statement of Profit and Loss, the Cash Flow
Statement for the year then ended, and a summary of the significant
accounting policies and other explanatory information. Management's
Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the matters stated
in Section 134(5) of the Companies Act, 2013 ("the Act") with respect
to the preparation of these financial statements that give a true and
fair view of the financial position, financial performance and cash
flows of the Company in accordance with the accounting principles
generally accepted in India, including the Accounting Standards
specified under Section 133 of the Act, read with Rule 7 of the
Companies(Accounts) Rules, 2014.
This responsibility also includes maintenance of adequate accounting
records in accordance with the provisions of the Act for safeguarding
of the assets of the Company and for preventing and detecting frauds
and other irregularities; selection and application of appropriate
accounting policies; making judgments and estimates that are reasonable
and prudent; and design, implementation and maintenance of adequate
internal financial controls, that were operating effectively for
ensuring the accuracy and completeness of the accounting records,
relevant to the preparation and presentation of the financial
statements that give a true and fair view and are free from material
misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit.
We have taken into account the provisions of the Act, the accounting
and auditing standards and matters which are required to be included in
the audit report under the provisions of the Act and the Rules made
thereunder.
We conducted our audit in accordance with the Standards on Auditing
specified under Section 143(10) of the Act. Those Standards require
that we comply with ethical requirements and plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and the disclosures in the financial statements. The
procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal financial control relevant
to the Company's preparation of the financial statements that give a
true and fair view in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing
an opinion on whether the company has in place an adequate internal
financial control system over the financial reporting and the operating
effectiveness of such controls. An audit also includes evaluating the
appropriateness of the accounting policies used and the reasonableness
of the accounting estimates made by the Company's Directors, as well as
evaluating the overall presentation of the financial statements. We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our qualified audit opinion on the
financial statements.
Basis for Qualified Opinion
The management has prepared the financial statements on the basis of
going concern perhaps based on the facts that the Modified Draft
Rehabilitation scheme has been submitted by the company on 03.12.2012
and the same is under the consideration BIFR. In our opinion the going
concern concept is likely to be appropriate only if the modified
rehabilitation scheme referred to above is approved by the BIFR with or
without modifications.
In the mean while following liabilities may or may not materialised
depending upon the final outcome of the dispute, have not been
provided:-
i. Non recognition of liability on account of currency fluctuations on
foreign currency loan and interest thereon (as required under
Accounting Standard - 11, Revised) amounting to Rs. 2,32,381 thousand
as provided in the BIFR Scheme dt. 29.07.2004 and also confirmed by
AAIFR/ Single Bench of Jharkhand High Court, Ranchi since the company
against the order of Single Bench of High Court, has filed Letters
Patent Appellate Jurisdiction (LPA) before the Divisional Bench of High
Court of Jharkhand, Ranchi (refer other note no. 3(II) appearing in
Annexure-1)
ii. Non recognition penalty of Rs. 21,528 thousands recovered by South
Eastern Coal Fields Ltd. On account of short lifting of coal quantity
in terms of Fuel Supply Agreement since the matter has been disputed by
the Company under writ petition filed before the Hon'ble High Court of
Chhattisgarh (refer other note no 5 of Annexure I)
iii. No provision has been made in the books of accounts in respect of
the undernoted items of expense in view of Shutdown of the Plant &
Suspension of operations since 10th August, 2013 as well as other
reasons contented by the company:-
a. Interest on unsecured loan taken from Promoters and other parties
from 10.08.2013 to 31.03.2015( amount unascertained) (refer note 10 (a)
of Annexure I).
b. Interest on Soft Loan taken from the Government of Jharkhand under
the Industrial Rehabilitation Scheme 2003 amounting to Rs. 81,331
thousands from 10.08.2013 to 31.03.2015 which is subject to
representation for waiver(refer note 10(b) of Annexure I) and approval
thereof by the lender.
c. Salaries, Wages, Allowances, Contribution to PF including interest
on overdue amount as well as employee benefit expenses w.e.f.
10.08.2013 to 31.03.2015, (amount unascertained) (refer note 10(c) of
Annexure I)
Taking into consideration non provision of likely liabilities mentioned
paragraph I, II and III(b) above.
a) Loss for the year would have been more by Rs. 3,35,240 thousand as
compared to the disclosed loss of Rs. 73,614 thousand.
b) Accumulated losses would have been Rs.26,55,564 thousand as compared
to disclosed losses of Rs. 23,20,324 thousand.
c) The above losses is however subject to ascertainment of liabilities
as mentioned in Para iii (a) and iii(c).
Qualified Opinion
In our opinion and to the best of our information and according to the
explanations given to us, except for the effects of the matter
described in the Basis of Qualified Opinion paragraph above, the
aforesaid financial statements give the information required by the Act
in the manner so required and give a true and fair view in conformity
with the accounting principles generally accepted in India:
a. in the case of the Balance Sheet, of the state of affairs of the
Company as at March 31, 2015;
b. in the case of the Statement of Profit and Loss, of the loss for
the year ended on that date; and.
c. in the case of the Cash Flow Statement, of the cash flows for the
year ended on that date.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order, 2015 ("the
Order") issued by the Central Government of India in terms of
sub-section (11) of section 143 of the Companies Act 2013, we give in
the Annexure a statement on the matters specified in paragraphs 3 and 4
of the Order to the extent applicable to the company.
2. As required by section 143(3) of the Act, we report that:
a. We have sought & obtained all the information and explanations
which to the best of our knowledge and belief were necessary for the
purpose of our audit;
b. Except for the effects of the matter described in the Basis for
Qualified Opinion Paragraph above, in our opinion, proper books of
account as required by law have been kept by the Company so far as it
appears from our examination of those books;
c. The Balance Sheet, the Statement of Profit and Loss, and Cash Flow
Statement dealt with by this Report are in agreement with the books of
account:
d. Except for the effects of the matter described in the Basis of
Qualified Opinion paragraph above, in our opinion, the aforesaid
financial statements comply with the Accounting Standards specified
under section 133 of the Act read with rule 7 of the Companies
(Accounts) Rules, 2014.
e. The matter described in the basis for Qualified Opinion paragraph
above, in our opinion, may have an adverse effect on the functioning of
the company.
f. On the basis of written representations received from the Directors
as on 31st March, 2015 taken on record by the Board of Directors, we
report that none of directors is disqualified as on 31st March, 2015
from being appointed as a director in terms of section 164(2) of the
Act.
g. The qualification relating to the maintenance of accounts and other
matters connected therewith are as stated in the Basis for Qualified
Opinion paragraph above.
h. With respect to the other matters to be included in the Auditor's
Report in accordance with rule 11 of the Companies(Audit and Auditors)
Rules, 2014, in our opinion and to the best of our information and
according to the explanations given to us:
i. The company has disclosed the possible impact of pending
litigations on its financial position in its financial statements
-Refer other notes III of Annexure I (1) (i) to (ix) to the financial
statements;
ii. The company did not have any long term contracts including
derivative contracts for which there were any material foreseeable
losses.
iii. There were no amounts which were required to be transferred to the
Investor Education and Protection Fund by the company.
Annexure referred to in paragraph 1 under the heading "Report on Other
Legal and Regulatory Requirements" of Independent Auditors' Report of
even date on the financial statements for the year ended March 31, 2015
i) Fixed Assets
a) The Company has maintained proper records showing full particulars
including quantitative details and situation of its fixed assets.
b) The Company has a programme of verifying all of the fixed assets
over a period of three years, which in our opinion is reasonable,
having regard to the size of the Company and nature of assets. Since
the plant is under shut down from the previous year, hence no physical
verification of Fixed Asset has been carried out by the management
during the year as such we are unable to comment on the discrepancies,
if any,between the physical balance and book balance and their
adjustment in the books of accounts at the year end.
ii) Inventories
a) The stock of finished goods, stores, spare parts and raw materials
have not been physically verified by the management at reasonable
intervals during the year since the plant has been under shut down and
operations suspended w.e.f. 10.08.2013.
b) The company has the procedures of physical verification of
inventories followed by the management which are reasonable and
adequate in relation to the size of the Company and nature of its
business, however no physical verification has been carried out during
the year ended 31.03.2015 in view of the fact stated at (ii) a) above.
c) The company has maintained proper records of inventory showing full
details regarding quantity of receipts, issues, balances and dates of
transactions. Since no physical verification of inventories were
carried out during the year hence the question of discrepancies, if
any, observed and their adjustment in the books of account does not
arise.
iii) Transactions with parties u/s 189 of the Companies Act, 2013
The company has not granted any loans secured or unsecured to
companies, firms or other parties covered in the register maintained
under section 189 of the Act as such Para (a) & (b) of clause 3 (iii)
are not applicable.
iv) Internal Control
In our opinion and according to the information and explanations given
to us, there is an adequate internal control procedure commensurate
with the size of the Company and the nature of its business with regard
to purchase of inventory, fixed assets, and for sale of goods and
services. However, there is a need of strengthening internal control
with respect to obtaining of confirmation of balances from major
parties.
There are no continuing failures to correct matters in respect of lack
of adequacy of internal controls brought to the notice.
v) Deposits
The Company has not accepted any deposits from the public which are
covered under the directives issued by the Reserve Bank of India and
the provisions of section 73 to 76 or any other relevant provisions of
the Act and the rules framed thereunder.
vi) Cost Records
The maintenance of Cost Records has been specified by the Central
Government under sub section (1) of Section 148 of the Companies Act,
2013. Since there have been no operations during the Financial year
2014-15, no records have been made & maintained by the company.
vii) Statutory Dues
a) According to the books and records, examined by us and information
and explanations given to us, the company has not been regular in
depositing the undisputed Statutory dues with the appropriate
authorities including Provident Fund, Income Tax(TDS &TCS), Sales Tax,
Service Tax, Excise duty, Value Added Tax, Cess & other applicable
statutory dues during the year except that, the amount of excise duty
of earlier year has been deposited by the company during the financial
year along with interest.
The arrears on account of such statutory dues as at the end of the
financial year 31st March 2015 for a period of more than six month from
the date they become payable are Service Tax: Rs 2,348 thousand,
Provident fund: Rs 5,123 thousand: Family Pension Scheme: Rs. 703
thousand, Income Tax (TDS/TCS)Rs. 4054 thousand, Electricity Duty: 320
thousand and Cess Rs. 100 thousand.
b) The details of dues of sales tax, custom duty, excise duty, trade
tax and cess etc. which have not been deposited on account of dispute
are given hereunder:
Name of the Statute Forum where
Dispute pending
1. The Customs Act, 1962 CESTAT, Kolkata
2. JVAT Act, 2005 Jt. Commissioner of Commercial
Taxes (Appeals) Jamshedpur, who
has recommended case on 08.10.2013
to DCIT to verify and allow credit
for taxes, if any, paid earlier.
3. The Central Sales Tax
Act, 1956 Jt. Commissioner of Commercial
Taxes (Appeals).
4. JVAT Act, 2005 Disputed demand for JVAT for the
F.Y. 2010-11 u/s 70(5)(b) under appeal
before the Jt. Comm. of Commercial
Taxes (Appeals), Jsr. However stay
has been granted on 20.01.2012
(Amount paid on appeal Rs. 5.88 lacs)
Demand raised by DCCT, Jsr for tax
due and/penality imposed or interst
payable under JVAT Act, 2005 of the
F.Y. 2010-11 under dispute before
JCCT, Jsr (Amount paid on appeal
Rs. 15 lacs on 19.10.2012)
5. Finance Act, 1994 The Commissioner of Appeals
Central Excise & Service Tax, Ranchi
6. Income Tax Act, 1961 The Commissioner of Income Tax
(Appeals), JSR
Name of the Statute Nature of dues Period of Amount
Dispute Rs.
Thousand
1. The Customs Act, 1962 Custom Duty &
Demurrage 1981-92 10,427
Charges and interest
on imported Stores &
spare parts 1994-95 5,032
2. JVAT Act, 2005 Tax on non-submission
of JVAT Forms 2006-07 2,397
3. The Central Sales Tax
Act, 1956 Tax on non-submission
of 'C' Forms 2006-07 311
4. JVAT Act, 2005 Tax on JVAT 2010-11 5,879
Tax on JVAT 2010-11 24,786
5. Finance Act, 1994 Recovery of Irregular
Cenvat Credit, Cess 2009-10 123
availed and Penalty
thereon
6. Income Tax Act, 1961 Short deduction/ 2004-05 to 8,334
collection of Tax at 2008-09
Source with interest
and penalty
The above does not include the amount of assessed tax & penalty demand
for JVAT of Rs. 22,117 thousand, CST Rs. 73,645 thousand and
Electricity Duty of Rs.2,281 thousand for which the company is
contemplating to file appeals before the appropriate authorities (refer
note on contingent liabilities (Annexure I/ para III on the Basis of
Qualified Opinion of our report ).
c) The Company is not required to transfer any amount to the Investor
Education and Protection Fund in accordance with the relevant
provisions of the Companies Act 2013 and rules made thereunder.
viii) The accumulated losses of the company at the end of the financial
year March 31,2015 substantially exceeds its net worth and the company
was declared as Sick industrial undertaking in 1996. Further the
Company has incurred cash losses during the current financial year and
in the immediately preceding financial year
ix) The company has not defaulted in payment of dues to financial
institutions/Banks. There has been no debenture in the company.
x) According to the information and explanations given to us, the
Company has not given any guarantee for loans taken by others from
banks or financial institutions during the year.
xi) The term loans taken by the Company have been applied for the
purpose for which they were obtained, however there has been no term
loans obtained during the year under audit.
xii) Based upon the audit procedures performed and on the basis of
information and explanations provided by the management, we report that
no fraud on or by the Company has been noticed or reported during the
year under audit.
For Thakur, VaidyanathAiyar& Co.
Chartered Accountants
[FRNo. 000038N]
M.P. Thakur
Place : New Delhi (Partner)
Dated :12th May, 2015 Membership No. 052473 |