Bata India

1.  We have audited the attached Balance Sheet of Bata India Limited
 (the Company) as at December 31, 2008 and also the Profit and Loss
 account and the cash flow statement for the year ended on that date
 annexed thereto.  These financial statements are the responsibility of
 the Companys management. Our responsibility is to express an opinion
 on these financial statements based on our audit.
 
 2.  We conducted our audit in accordance with auditing standards
 generally accepted in India. Those Standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatement. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by management, as well as evaluating the overall financial statement
 presentation. We believe that our audit provides a reasonable basis for
 our opinion.
 
 3.  As required by the Companies (Auditors Report) Order, 2003 (as
 amended) issued by the Central Government of India in terms of
 sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose
 in the Annexure a statement on the matters specified in paragraphs 4
 and 5 of the said Order.
 
 4.  Further to our comments in the Annexure referred to above, we
 report that:
 
 i. We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purposes of our
 audit;
 
 ii. In our opinion, proper books of account as required by law have
 been kept by the Company so far as appears from our examination of
 those books;
 
 iii. The balance sheet, profit and loss account and cash flow statement
 dealt with by this report are in agreement with the books of account;
 
 iv. In our opinion, the balance sheet, profit and loss account and cash
 flow statement dealt with by this report comply with the accounting
 standards referred to in sub-section (3C) of section 211 of the
 Companies Act, 1956.
 
 v. On the basis of the written representations received from the
 directors, as on December 31, 2008, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 December 31, 2008 from being appointed as a director in terms of clause
 (g) of sub-section (1) of section 274 of the Companies Act, 1956.
 
 vi. In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts give the information
 required by the Companies Act, 1956, 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 December 31,2008;
 
 b) in the case of the profit and loss account, of the profit for the
 year ended on that date; and
 
 c) in the case of cash flow statement, of the cash flows for the year
 ended on that date.
 
 Annexure referred to in paragraph 3 of our report of even date
 
 Re: Bata India Limited
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) All fixed assets have not been physically verified by the
 management during the year but there is a regular program of
 verification which, in our opinion, is reasonable having regard to the
 size of the Company and the nature of its assets. As informed, no
 material discrepancies were noticed on such verification.
 
 (c) There was no substantial disposal of fixed assets during the year.
 
 (ii) (a) The management has conducted physical verification of
 inventory at reasonable intervals during the year.
 
 (b) The procedures of physical verification of inventory followed by
 the management are reasonable and adequate in relation to the size of
 the Company and the nature of its business.
 
 (c) The Company is maintaining proper records of inventory and no
 material discrepancies were noticed on physical verification.
 
 (iii) (a) As informed, the Company has not granted any loans, secured
 or unsecured to companies, firms or other parties covered in the
 register maintained under section 301 of the Companies Act, 1956 and as
 such, clauses 4(iii) (a) to 4(iii) (d) of the Companies (Auditors
 Report) Order, 2003 (as amended) are not applicable.
 
 (b) As informed, the Company has not taken any loans, secured or
 unsecured from companies, firms or other parties covered in the
 register maintained under section 301 of the Companies Act, 1956 and as
 such, clauses 4(iii) (e) to 4(iii) (g) of the Companies (Auditors
 Report) Order, 2003 (as amended) are not applicable
 
 (iv) In our opinion and according to the information and explanations
 given to us, there is an adequate internal control system commensurate
 with the size of the Company and the nature of its business, for the
 purchase of inventory and fixed assets and for the sale of goods and
 services. During the course of our audit, no major weakness has been
 noticed in the internal control system in respect of these areas.
 
 (v) (a) According to the information and explanations provided by the
 management, we are of the opinion that there are no transactions that
 need to be entered into the Register maintained under Section 301 of
 the Companies Act, 1956.
 
 (b) In our opinion and according to the information and explanations
 given to us, as there are no transactions that need to be entered into
 Register maintained under Section 301 of the Companies Act, 1956,
 paragraph 4(V)(b) of the order not applicable.
 
 (vi) In respect of deposits accepted, in our opinion and according to
 the information and explanations given to us, directives issued by the
 Reserve Bank of India and the provisions of sections 58A, 58AA or any
 other relevant provisions of the Companies Act, 1956 and the rules
 framed there under, to the extent applicable, have been complied with.
 
 We are informed by the management that no order has been passed by the
 Company Law Board, National Company Law Tribunal or Reserve Bank of
 India or any Court or any other Tribunal.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 (viii) We have broadly reviewed the books of account maintained by the
 Company pursuant to the rules made by the Central Government for the
 maintenance of cost records under section 209(1)(d) of the Companies
 Act, 1956, and are of the opinion that prima facie, the prescribed
 accounts and records have been made and maintained.
 
 (ix) (a) Undisputed statutory dues including provident fund, investor
 education and protection fund, or employees state insurance,
 income-tax, sales-tax, wealth-tax, service tax, customs duty, excise
 duty, cess and other material statutory dues applicable to if have
 generally been regularly deposited with the appropriate authorities
 though there has been a slight delay in a few cases.
 
 (b) According to the information and explanations given to us, no
 undisputed dues payable in respect of provident fund, investor
 education and protection fund, employees state insurance, income-tax,
 wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and
 other statutory dues were outstanding, at the year end, for a period of
 more than six months from the date they became payable.
 
 (c) According to the information and explanation given to us and
 records of the Company, there are no dues of income-tax, sales-tax,
 wealth-tax, service tax, customs duty, excise duty and cess which have
 not been deposited on account of any dispute, other than following:
 
 Name of the          Nature of dues                  Amount (Rs
 statute                                             In thousand)
 
 Various State       Demand against                     4,500
 Sales Tax Acts      contract sale
 Various State       Goods Seizure Case                   730
 Sales Tax Acts
 Various State       MRP-Tax on tax case               16,480
 Sales Tax Acts
 Various State       Purchase Tax Dispute               5,100
 Sales Tax Acts      at Faridabad
 Various State       Revenue recovery against           6,700
 Sales Tax Acts      non payment of demand
                     in assessment
 Various State       Tax in dispute u/s 92 of           2,780
 Sales Tax Acts      Central Sales tax Act
                     regarding non-submission
                     of forms
 Various State       Penalty for non payment            1,200
 Sales Tax Acts      of tax and non collection
                     on C forms
 Various State       Demand raised in Assessment        2,800
 Sales Tax Acts      order for non submission of
                     declaration form.
 Various State       Appeal Against                     1,400
 Sales Tax Acts      Assessment Order
 Central Excise      Excise Duty demand on              1,500
 Act, 1944           closing balance of
                     exempted footwear.
 Central Excise      Excise duty on                    18,970
 Act, 1944           double textured
                     fabric(rubberized textile)
 
 Period to                Forum where
 which the                dispute is
 amount relates           pending
 
 2001                     DC, Kolkata
 1997-98                  High Court Jaipur
 1987-88 to               Sales. Tax Tribunal
 2001-02                  Appellate
                          Authority, Tamilnadu
 1984-85                  Supreme Court
 1994-95                  CESTAT, Kerala
 1998-99
 1999-00
 2000-01
 1991-92                  High Court, UP
 2002                     CESTAT, Kolkata
 2003                     Assisstant
                          Commssioner, Sales
                          Tax ,West Bengal
 1985-87                  High Court
 1987-88                  CCE(Appeals)
                          Kolkata
 1990-1994                Supreme Court
 
 Name of the          Nature of dues                        Amount (Rs
 statute                                                   in thousand)
 
 Central Excise       Duty demanded for sale of                7,030
 Act, 1944            footwear at domestic Tariff area
                      of which final hearing before
                      commissioner concluded
                      and order is pending.
 Central Excise       Central Excise duty demanded               320
 Act,1944             on clearance of microsheet
                      from the factory without payment
                      of duty and observance
                      of Central Excise
                      procedure/formalities
 Central Excise       For refund of Modvat                       670
 Act, 1944            Credit erroneously
                      refunded.
 Central Excise       Duty demanded on various                   870
 Act, 1944            chemicals used for
                      processing of leather and
                      subsequent clearance of said
                      processed leather for
                      manufacture of footwear
                      (Exempted)
 Central Excise       Disallowance for trade                   2,750
 Act, 1944            discount for sale of
                      footwear to retail outlet
 Central Excise       Demand of duty on Parts                 51,420
 Act, 1944            ot footwear, which were received
                      from job worker after processing
                      and used in manufacture
                      of exempted footwear
                      by the company
 Central Excise       Reversal of MODVAT/                     12,360
 Act, 1944            CENVAT credit wrongly
                      availed by the Company
 Central Excise       Excise duty demanded on                  5,040
 Act, 1944            parts of footwear used
                      captively in manufacture
                      of exempted footwear
 Central Excise       Central Excise Duty Demanded             6,730
 Act, 1944            for clearance of Defective
                      Footwear without payment of
                      Central Excise Duty, after
                      necessary re-processing of
                      said footwear. The process
                      treated as MANUFACTURE
 
 Period to              Forum where
 which the              dispute is
 amount relates         pending
 
 1997-1999              Commissioner of
                        Central Excise,
                        Chennai
 1994-95                Commissioner of
                        Central Excise,
                        Kolkata
 2004                   Additional
                        Commissioner,
                        Bangalore
 2005                   Commissioner,
                        CCE Kolkata
 1995-97                CESTAT-Chennai
 2004                   CESTAT-Kolkata
 2004                   CESTAT-Kolkata
 2004-05                Additional
                        Commissioner of
                        Central Excise
                        Kolkata
 2004                   CESTAT-Kolkata
 
 Name of the       Nature of dues                        Amount (Rs
 statute                                                in thousand)
 
 Central Excise    Excise duty demanded                     18,790
 Act,1944          for movement of raw
                   material to job worker
                   without payment of duty
 Central Excise    Disallowing of abatement                  4,250
 Act,1944          @ 40% on MRP for
                   Institutional Sales. Sale of
                   Industrial Boots & Mines
                   Safety Boots.
 Central Excise    Demand tor alleged non reversal           2,770
 Act, 1944         of CENVAT credit on ceveted
                   inputs and non payment of CE
                   duty on finished goods
                   on written off stock as
                   per Balance sheet
 Customs           Duty demand on account of                10,340
 Act, 1942         short levy of customs duty
                   (anti dumping duty) for
                   which hearing before
                   commissioner concluded
                   and the order received.
 Customs           Wrong availment of                       83,760
 Act, 1942         concessional rate of
                   customs duty etc. against
                   which the hearing has not
                   finalized as yet
 Customs           Adv. License No. P/W/3497630                100
 Act, 1942         dt. 7.2.94
 
 
 Period to            Forum where
 which the            dispute is
 amount relates       pending
 
 2004-05              Commissioner
                      (Appeal) Kolkata.
 2006                 CESTAT, Kolkata
 2007                 Commissioner,
                      Kolkata.
 2001                 Deputy
                      Commissioner of
                      Customs
 1998-2003            CESTAT-Kolkata
 2002                 DGFT, Kolkata
 
 (x) The Company has no accumulated losses at the end of the financial
 year and it has not incurred cash losses in the current and immediately
 preceding financial year.
 
 (xi) Based on our audit procedures and as per the information and
 explanations given by the management, we are of the opinion that the
 Company has not defaulted in repayment of dues to a financial
 institution, bank. The Company have no outstanding dues in respect of
 debenture holders.
 
 (xii) According to the information and explanations given to us and
 based on the documents and records produced to us, the Company has not
 granted loans and advances on the basis of security by way of pledge of
 shares, debentures and other securities.
 
 (xiii) In our opinion, the Company is not a chit fund or a nidhi /
 mutual benefit fund / society. Therefore, the provisions of clause
 4(xiii) of the Companies (Auditors Report) Order, 2003 (as amended)
 are not applicable to the Company.
 
 (xiv) In our opinion, the Company is not dealing in or trading in
 shares, securities, debentures and other investments.  Accordingly, the
 provisions of clause 4(xiv) of the Companies (Auditors Report) Order,
 2003 (as amended) are not applicable to the Company.
 
 (xv) According to the information and explanations given to us, the
 Company has not given any guarantee for loans taken by others from bank
 or financial institutions.
 
 (xvi) Based on information and explanations given to us by the
 management, the Company did not obtain any term loan during the year.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the balance sheet of the Company, we report
 that no funds raised on short-term basis have been used for long-term
 investment.
 
 (xviii) The Company has not made any preferential allotment of shares
 to parties or companies covered in the register maintained under
 section 301 of the Companies Act, 1956.
 
 (xix) The Company did not have any outstanding debentures during the
 year.
 
 (xx) In previous years, the Company has raised money from issue of
 equity shares offered on right basis to existing shareholders. We have
 verified that the end use of balance money is as disclosed in the Note
 No. 21 of schedule 22 to financial statements.
 
 (xxi) Based upon the audit procedures performed for the purpose of
 reporting the true and fair view of the financial statements and as per
 the information and explanations given by the management, we report
 that no fraud on or by the Company has been noticed or reported during
 the course of our audit except as mentioned below:
 
 Nature                               Rs. In Thousands
 
 Cash and Stock Shortage at various   Rs.3,952 suitable action taken and
 locations                            appropriately accounted for
 
                                             For S.R. BATLIBOI & CO.
                                               Chartered Accountants
 
                                                     per Rajiv Goyal
 Place : Gurgaon                                             Partner
 Date  : 27th February, 2009                   Membership No.: 94549