We have audited the accompanying financial statements of GAIL(India)
Limited, which comprise the Balance Sheet as at March 31, 2014, and the
Statement of Profit and Loss and Cash Flow Statement for the year then
ended, and a summary of significant accounting policies and other
explanatory information.
Management''s Responsibility for the Financial Statements Management is
responsible for 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
Standards referred to in sub-section (3C) of section 211 of the
Companies Act, 1956 (the Act) read with General Circular 15/2013
dated 13th September 2013 of the Ministry of Corporate Affairs in
respect of section 133 of the Companies Act 2013., This responsibility
includes the design, implementation and maintenance of internal control
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 conducted our audit in accordance
with the Standards on Auditing issued by the Institute of Chartered
Accountants of India. 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 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 control relevant to the Company''s preparation and
fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances but not for the
purpose of expressing an opinion on the effectiveness of the Company''s
Internal Control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of the accounting
estimates made by management, 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 audit opinion.
Opinion
In our opinion and to the best of our information and according to the
explanations given to us, the financial statements give the information
required by the Companies Act 1956 to the extent applicable and the
Companies Act 2013 (to the extent notified) 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, 2014;
b) In the case of the Statement of Profit and Loss, of the profit 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.
Emphasis of Matter
Without qualifying our opinion, we draw attention to Note no.41
regarding sharing of under recoveries on sensitive petroleum products
by way of subsidy given to oil marketing companies as decided by
Ministry of Petroleum & Natural Gas (MOPNG).
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor''s Report) Order, 2003(the
Order) issued by the Central Government of India in terms of sub-
section (4A) of section 227 of the Act, we give in the Annexure a
statement on the matters specified in paragraphs 4 and 5 of the Order.
2. As required by section 227(3) of the Act, we report that:
a) 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.
(b) 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 the Cash
Flow Statement dealt with by this Report are in agreement with the
books of account.
(d) In our opinion, the Balance Sheet, the Statement of Profit and Loss
and the 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 read with General Circular 15/2013 dated 13th
September 2013 of the Ministry of Corporate Affairs in respect of
section 133 of the Companies Act 2013.
(e) Being a government Company, pursuant to the Notification No. GSR
829 (E) dated 21st October 2003 issued by Department of Company
Affairs, provisions of clause (g) of sub-section (1) of Section 274 of
the Companies Act, 1956, are not applicable to the company.
(f) Since the Central Government has not issued any notification as to
the rate at which the cess is to be paid under section 441A of the
Companies Act, 1956 nor has it issued any Rules under the said section,
prescribing the manner in which such cess is to be paid, no cess is due
and payable by the Company.
ANNEXURE TO THE AUDITOR''S REPORT The Annexure referred to in the
auditor''s report to the shareholders of GAIL (India) Limited for the
year ended March 31, 2014. We report that:
(i) (a) The company has generally maintained proper records showing
full particulars including quantitative details and situation of fixed
assets.
(b) According to the information and explanation given to us, there is
a regular programme of verification of fixed assets by the management,
which in our opinion is reasonable having regard to the size of the
company and the nature of its assets. Fixed assets have been physically
verified by the management during the year and as per the report, no
material discrepancies were noticed on such verification.
(c) The fixed assets disposed off during the year, in our opinion, do
not constitute a substantial part of the fixed assets of the company
and such disposal has, in our opinion, not affected the going concern
status of the company.
(ii) The inventories have been physically verified at reasonable
intervals by the Management, except the stores & spares lying with
Engineers India Ltd. and other contractors. We have been explained that
the stock of gas at the end of the year has been taken with reference
to reading of Turbine Flow Meter/Gas Chromatograph installed at
Terminals, Stock of LPG/Pentane/SBP Solvent are determined with
reference to Tank Level Gauge measurement which are converted into
tonnage by measurement of density and applying correction factor for
temperature. LPG vapors volume is converted to tonnage by standard
formulae.
In our opinion and according to the information and explanations given
to us, the procedures of physical verification of inventory followed by
the Management are reasonable and adequate in relation to the size of
the Company and nature of its business.
According to the information and explanations given to us, no material
discrepancies have been noticed on physical verification of inventories
as compared to the books and records.
(iii) (a) The Company has granted loans to its one subsidiary company
(None of the Directors individually or collectively hold more than two
per cent of the paid-up share capital). The Company has maintained the
register under section 301 of the Companies Act, 1956, inter-alia, in
which the name of said one subsidiary is also entered. The maximum
amount involved during the year for Rs. 64.17 crores and year-end balance
of loan was Rs. 56.38 crores.
(b) In our opinion, the rate of interest and other terms and conditions
of such loans are not, prima facie, prejudicial to the interest of the
company.
(c) The party has repaid the principal amounts as stipulated and has
also been regular in the payment of interest to the company.
(d) There is no overdue amount in excess of Rs. 1 lakh in respect of
loans granted to companies, firms or other parties listed in the
register maintained under section 301 of the Companies Act, 1956.
(e) The company had not taken loan from companies covered in the
register maintained under section 301 of the Companies Act, 1956.
(iv) According to information and explanations given to us, there are
adequate internal control procedures commensurate with the size of the
company and nature of its business for the purchase of inventory, fixed
assets and for the sale of goods and services.
(v) In respect of contract or arrangement entered in the register
maintained in pursuance of section 301 of the Act, to the best of our
knowledge and belief and according to the information and explanation
given to us:
(a) The particulars of contracts or arrangement referred to in section
301, that needed to be entered in the Register maintained under the
said section have been so entered.
(b) In our opinion and as per the information & explanation given to us
and on the basis of our examination of books of accounts, the
transactions made in pursuance of contract or arrangement referred to
in (a) above and exceeding the value of Rs. 5 Lacs have been made at
prices which are reasonable having regard to the prevailing market
prices at the relevant time.
(vi) The company has not accepted any deposits from the public during
the year covered under section 58A and 58AA or any other relevant
provision of the Companies Act, 1956.
(vii) In our opinion, the company''s internal audit system is
commensurate with its size and nature of its activities.
(viii) We have broadly reviewed the costing records being maintained by
the Company pursuant to the order made by the Central Government for
the maintenance of Cost records under Section 209(1)(d) of the
Companies Act, 1956 and we are of the opinion that prima facie the
prescribed accounts and records have been maintained.
(ix) (a) According to the records of the company, the company has
generally been regular in depositing undisputed statutory dues
including Provident fund, Investor Education and Protection Fund,
Employees'' State Insurance, Income tax Sales tax, Wealth tax, Service
Tax, Custom duty, Excise duty, cess and any other material statutory
dues with the appropriate authorities. According to the information
and explanation given to us, no undisputed amounts payable in respect
of Provident fund, Investor Education and Protection Fund, Employees''
State Insurance, Income tax Sales tax, Service Tax, Custom duty, Excise
duty and other statutory dues were in arrear at the year- end for a
period of more than six months from the date they became payable.
(b) As certified by the Management on which we have relied upon, the
dues of Excise Duty, Custom Duty, Entry Tax, Sales Tax and other Taxes
which have not been deposited on account of disputes and the forum
where the dispute is pending, are given below:
List of Cases of Unpaid Disputed Demand under various Statutes as on
31.03.2014
(Rs. In Crores)
Sl. Statute Subject Matter
of Dispute Amount Period of
Dispute Status- Forum
No. (2013-14)
1 Entry Tax (a) Demand of
Entry Tax on
Natural Gas
in U.P. 173.88 1999-00 to
2009-10 Allahabad High
Court, Trade tax
Tribunal &
Additional
Commissioner
(Appeals)
(b) Demand of
Entry Tax on
Natural Gas 0.86 2005-06 Dy.Commissioner
(Appeals), Ajmer
in Rajasthan
(c) Demand of
Entry Tax on
Natural Gas in 2.60 2008-09 Tribunal, Bhopal
Madhya Pradesh
2 Sales Tax (a) Non-acceptance
of declaration
form for 0.37 1995-96 &
1996-97 Tribunal, Bhopal
& VAT concessional sales
tax
(b) Sales Tax
demand as per
assessment order 3.90 2005-06 &
2006-07 Additional
Commissioner
(Appeals)
Noida
(c) VAT demand as
per assessment order 32.58 2010-11 Additional
Commissioner
(Appeals)
Noida
(d) CST demand on
Transmission charges 0.71 2005-06 to
2006 -07 High Court, AP
(e) Demand of GVAT &
CST on account of 29.78 2006-2007 Tribunal,
Gujarat
disallowance
of LPG subsidy discount
(f) Penalty for delay
in payment of
sales tax 0.90 2003-2004 Mumbai
Tribunal
(g) Demand of VAT on
account of rate
change 0.43 Oct 2011 to
Dec 2011 Joint Commiss
-ioner, Trichy
(h) Demand of CST on
account of
disallowance 46.93 2005-06 High Court,
Gwalior
of LPG subsidy
discount
(i) Demand for treating
CST sale as local sale 0.15 2003-2004 Assam Revenue
board
(j) Sales Tax demand 0.20 1998-1999 Mumbai
Tribunal
(k) Revised Sales Tax
demand as per 2.42 2003-04 Joint Commissioner
(Appeals),
assessment order Baroda
3 Custom, (a) LPG valuation
Dispute 17.81 Jan 2001 to
Feb 2005 CESTAT
Mumbai
Excise &
Service
Tax
(b) Dispute on
Pentane Classification 99.50 Aug. 2005 to
Jul 2009 CESTAT
Ahmedabad
(c) Dispute on MFO
Classification 70.89 July 2004 to
March 2011 CESTAT
Ahmedabad
(d) Demand of duty
under Rule 6(3)
of CCR, 12.89 2008-2009 & CESTAT
Kolkata
2004 for
credit taken on input
services 2009-2010
(e) Demand of Service
Tax on Marketing
Margin 147.32 Oct. 2006 to
Mar.2012 CESTAT Delhi
(f) Demand of Service
Tax on deputation of 2.61 Oct. 2006 to
Mar. 2011 CESTAT Delhi
employees to JVs &
Govt. Deptt.
(g) Demand of
differential service
tax based 0.22 Oct. 2006 to
Mar. 2007 CESTAT
Ahmedabad
on service tax returns.
(h) Demand raised by
denying Cenvat & 8.30 Aug. 2005 to
Sep. 2009 CESTAT
Ahmedabad
service tax credit
taken at Hazira
(i) Demand raised by
denying Cenvat credit 0.09 Dec. 2010 to
March 2011 CESTAT Delhi
taken on input services
(j) Demand of CVD on
purchase of SAP software0.07 March 2006 CESTAT Delhi
taken on input services
SUB-TOTAL 655.41
4 Income Unpaid demands
including interest 39.01 AY- 2006-07,
2007-08, CIT (Appeals)
Tax 2009-10,
2011-12
5 Other Notified Area tax &
GIDC tax on revised 3.81 1998-99 to
Aug 2005 & Ahmedabad High
Court
taxes value (incl.
interest) 1998-99 to Dec
2009
TOTAL 698.23
(x) The company does not have 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 procedure and according to the information and
explanations given to us by the management, we are of the opinion that
the company has not defaulted in repayment of dues to a financial
institution, bank and debenture holders.
(xii) In our opinion and according to information and explanation given
to us, the company has granted loans and advances on the basis of
security by way of pledge of shares, debentures and other securities.
In our opinion, the company has maintained adequate documents and
records in respect of such loans.
(xiii) The company is not a chit fund, nidhi, mutual benefit fund or a
society. Accordingly, clause 4(xiii) of the order not applicable.
(xiv) In our opinion and according to the information and explanation
given to us, the company is not dealing or trading in shares,
securities, debentures and other investments. Accordingly, clause 4
(xiv) of the order is not applicable.
(xv) In our opinion and according to information and explanation given
to us , company has given guarantees for loans taken by its
subsidiaries from bank and financial institutions. The terms and other
conditions, in our opinion, are not prima facie prejudicial to the
interest of the company.
(xvi) On the basis of review of utilization of funds pertaining to term
loans on overall basis and related information as made to us, the term
loans taken by the company have been utilized for the purposes for
which they are obtained.
(xvii) According to the information and explanation given to us,
company has not utilized short-term loan for long-term investment
during the year.
(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 has not issued any debentures during the year.
(xx) During the year no money has been raised by public issues.
(xxi) According to the information and explanations given to us, a
legal notice has been sent to an original equipment manufacturer (OEM)
of the company regarding recovery of USD 4.34 million plus GBP 3,48,549
along with interest thereon on account of payments of commission to its
agent over and above the declared amount in violation of instructions
to bidders (ITB) & terms and condition of Integrity Pact (IP) (Refer
Note No. 56).
For M/s M.L. Puri & Co. For M/s G.S Mathur & Co.
Chartered Accountants Chartered Accountants
Firm No.: 002312N Firm No.: 08744N
(Navin Bansal) (Rajiv Kumar Wadhawan)
(Partner) (Partner)
Membership No.:91922 Membership No.: 091007
Place : New Delhi
Dated : May 26, 2014
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