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GAIL India

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« Mar 14
Auditor's Report (GAIL India) Year End : Mar '15
Report on the Standalone Financial Statements
 
 We have audited the accompanying standalone financial statements of
 GAIL (India) Limited (''the Company''), which comprise the balance sheet
 as at 31st March 2015, the statement of profit and loss and the cash
 flow/statement for the year then ended, and a summary of significant
 accounting policies and other explanatory information.
 
 Management''s Responsibility for the Standalone 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 and presentation of these standalone 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 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 standalone
 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 there under.
 
 We conducted our audit in accordance with the Standards on Auditing
 specified under Section l43(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 controls system over 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 audit opinion on the standalone
 financial statements.
 
 Opinion
 
 In our opinion and to the best of our information and according to the
 explanations given to us, the aforesaid standalone 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, of the state of affairs of the Company as
 at 31st March 2015 and its profit and its cash flows for the year ended
 on that date.
 
 Emphasis of Matter
 
 We draw attention to the following matters in Notes to Financial
 Statement-
 
 1.  Note No; - 43 regarding sharing of under recoveries on sensitive
 petroleum products up to 30.09.2014.
 
 2.  Note No; - 45 regarding various provisional transportation tariff
 orders issued by Petroleum and Natural Gas Regulatory Board (PNGRB),
 these orders have been contested by the company at Appellate Tribunal
 for Electricity (APTEL) and adjustment if any will be recognized as and
 when matter is finally decided.
 
 3.  Note No;- 46 & 47 regarding debit notes raised by ONGC in respect
 of Non-APM prices for C-Series gas and differential tariff of Uran
 Tombay pipeline of ONGC and corresponding debit notes raised by GAIL on
 its customers.
 
 Our opinion is not modified in respect of these matters.
 
 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 (II) of section 143 of the Act, we give in the Annexure A
 statement on the matters specified in the paragraph 3 and 4 of the
 Order, to the extent applicable.
 
 2.  As required by C&AG of India through supplementary directions dated
 19.10.2014 issued under Sectionl43(5) of the Companies Act 2013, on the
 basis of written representation received from the management, we give
 our report on the matter specified in the Annexure B attached.
 
 3.  As required by Sectionl43(3) of the Act, we report that:
 
 (a) We have sought and 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 aforesaid standalone 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) On the basis of the written representations received from the
 directors as on 31st March 2015 taken on record by the Board of
 Directors, none of the directors is disqualified as on 31st March
 2015frombeingappointed as a director in terms of Section 164(2) of the
 Act; and
 
 (f) 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 impact of pending litigations on its
 financial position in its financial statements - Refer Note
 32(l)(a),33 and 55 to the financial statements;
 
 ii. the Company did not have any long-term contracts including
 derivative contracts for which there were any material foresee able
 losses; and
 
 iii. there has been no delay in transferring amounts, required to be
 transferred, to the Investor Education and Protection Fund by the
 Company.
 
 
 The Annexure referred to in para 1 to Report on Other legal and
 Regulatory Requirement of the auditor''s report to the shareholders of
 GAIL (India) Limited for the year ended March 31,2015. 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.
 
 (ii) (a) 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.
 
 (b) 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.
 
 (c) In our opinion and according to the information given to us the
 company is maintaining proper records of inventory and no material
 discrepancy was noticed on physical verification of inventory.
 
 (iii) According to the information given to us the company has not
 granted any loans, secured or unsecured to the companies, firms or
 other parties covered in the register maintained under section 189 of
 the Companies Act.
 
 (iv) According to information and explanations given to us, there are
 generally adequate internal control systems commensurate with the size
 of the company and nature of its business for the purchase of inventory
 and fixed assets and for the sale of goods and services.
 
 (v) The company has not accepted any deposits from the public during
 the year covered under section 73 or any other relevant provision of
 the Companies Act,2013.
 
 (vi) 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 sub-section (l) of Section 148 of
 The Companies Act 2013 and we are of the opinion that prima facie the
 prescribed accounts and records have been maintained.
 
 (vii) (a) According to the records of the company and information and
 explanation given to us, the company has generally been regular in
 depositing undisputed statutory dues including Provident fund,
 Employees'' State Insurance, Income tax. Sales tax. Wealth tax, Service
 Tax, duty of custom, duty of excise, value added tax, cess and any
 other statutory dues with the appropriate authorities.  According to
 the information and explanation given to us, no undisputed amounts
 payable in respect of Provident fund, employees'' State Insurance,
 Income tax. Sales tax. Service Tax, duty of custom, duty of excise,
 value added tax, cess and any 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 Income tax or sales tax or wealth tax or service tax or duty of
 custom or duty of excise or value added tax or cess 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
 31.03.2015 
 
                                                       (Rs.in Crore)
 
 SI.  Statute     Subject Matter of Dispute     Amount    Period of
 No.                                           (2014-15)  Dispute
 
 1.   Entry Tax  (a) Demand of Entry Tax on      189.24   1999-00 to
                     Natural Gas in U.P.                  2009-10
 
                 (b) Demand of Entry Tax on        5.18   2002-03 to
                     Natural Gas in Rajasthan             2005-06
 
                 (c) Demand of Entry Tax on               2008-09,
                                                          2011-12 & 
                     Natural Gas in Madhya
                     Pradesh                       6.28   2012-13
 
 2    Sales 
      Tax &      (a) Non-acceptance of 
                     declaration                   0.37   1995-96 &
                                                          1996-97
      VAT            form for concessional 
                     sales tax
 
                 (b) Sales Tax demand as per
                     assessment order              4.24   2005-06 &
                                                          2006-07
 
                 (c) VAT demand as per 
                     assessment order             35.78   2010-11
 
                 (d) CST demand on Transmission 
                     charges                       1.91   2006-07
 
                 (e) VAT demand on transfer 
                     of material                   6.28   2011-12
 
                 (f) Demand of CST on account of   1.44   2011-12 &
                                                          2012-13 
                     disallowance of LPG
                     absorption credit notes
 
                 (g) Demand of VAT on account of 107.58   2010-11 &
                                                          2012-13 
                     disallowance of input 
                     tax credit
 
                 (h) Demand of VAT on account of   18.2   2005-06 
                     disallowance of LPG subsidy
 
                 (i) Demand of VAT on sale of    123.06   2007-08
                     Natural Gas to 
                     Electricity Co.
 
                 (j) Demand of VAT on 
                     bandwidth charges             2.58   2008-09
 
 
 Statute              Status - Forum
 
 Entry Tax            Allahabad High Court, Trade tax Tribunal & 
                      Additional Commissioner (Appeals)
 
                      Dy. Commissioner (Appeals), Ajmer
 
                      Tribunal, Bhopal & Additional Commissioner 
                     (Appeals), Gwalior
 
 Sales Tax & VAT      Tribunal, Bhopal
 
                      Additional Commissioner (Appeals), Noida
 
                      Additional Commissioner (Appeals), Noida
 
                      Commercial Tax Officer, Nagapattinam
 
                      Additional Commissioner (Appeals), Gwalior
 
                      Additional Commissioner (Appeals), Gwalior
 
                      Additional Commissioner (Appeals), Gwalior & 
                      Joint Commissioner (Appeals), Mumbai
 
                      Joint Commissioner (Appeals), Mumbai
 
                      Joint Commissioner (Appeals), Mumbai
 
                      Joint Commissioner (Appeals), Mumbai
 
 
 SI.  Statute     Subject Matter of Dispute     Amount    Period of
 No.                                           (2014-15)  Dispute
 
                 (k) Demand of VAT on sale 
                     of LPG for                    38.6   2007-08,2008-09
                     domestic use                         & 2010-11
 
                 (l) Demand of VAT on spurline 
                     charges                       4.23   2011-12
 
                 (m) Demand of GVAT & CST 
                     on account                   37.72   2006-2007
                     of disallowance of LPG
                     subsidy discount
 
                 (n) Penalty for delay in 
                     payment of sales tax           0.6   2003-2004
 
                 (o) Demand of VAT on account
                     of rate change                0.49   Oct 2011 to
                                                          Dec 2011
 
                 (p) Demand of C5T on account 
                     of disallowance of LPG 
                     subsidy discount             49.38   2005-06
 
                 (q) Demand for treating CST 
                     sale as local sale            0.15   2003-2004
 
                 (r) Sales Tax demand               0.2   1998-1999
 
                 (s) Revised Sales Tax demand 
                     as per                        2.59   2003-04 
                     assessment order
 
 3    Customs,   (a) LPG valuation Dispute        18.72   Jan 2001 to
                                                          Feb 2005 
      Excise
      and
      Service
      Tax        (b) Dispute on Pentane
                     Classification               106.7   Aug.2005 to
                                                          Jul2009
 
                 (c) Dispute on MFO 
                     Classification               75.33   July 2004 to 
                                                          Mar 2011
 
                 (d) Demand of duty under 
                     Rule 6(3) of CCR,             13.8   2008-2009 
                     2004 for credit taken 
                     on input services                    & 2009-2010
 
                 (e) Demand of Service Tax on    733.28   Oct. 2006 to
                     Marketing Margin                     Mar 2013
 
                 (f) Demand of Service Tax on
                     deputation                   37.17   Oct. 2006 to 
                     of employees to JVs & 
                     Govt. Deptt.                         June 2012
 
                 (g) Demand of differential 
                     service                       0.11   Oct.2006 to 
                     tax based on service
                     tax returns                          March 2007
 
                 (h) Demand raised by
                     denying Cenvat                9.01   Aug.2005 to
                     & service tax credit
                     taken at Hazira                      March 2012
 
                 (i) Demand raised by denying 
                     Cenvat                        0.20   2008-09 & 
                                                          Dec. 2010
                     credit taken on input 
                     services                             to March 2011
 
                 (j) Demand of CVD on 
                     purchase of                   0.07   March 2006 
                     SAP software
 
                     SUB-TOTAL                  1630.49
 
 4    Income Tax (a) Unpaid demand                76.75   AY-2012-13
 
                 (b) Demand of TDS                  3.1   AY-2008-09 to
                                                          AY-2015-16
 
 5    Other taxes    Notified Area tax &
                     GIDC tax on                   3.98   1998-99 to 
                                                          Aug 2005
                     revised value (incl.
                     interest)                            & 1998-99 to 
                                                          Dec 2009
 
                     TOTAL                      1714.32
 
 Statute                Status - Forum
 
                        Joint Commissioner (Appeals), Mumbai
 
                        Additional Commissioner (Appeals), Etawah
 
                        Tribunal, Gujarat
 
                        Joint Commissioner (Appeals), Mumbai 
 
                        Joint Commissioner, Trichy
 
                        High Court, Gwalior
 
                        Assam Revenue board
 
                        Mumbai Tribunal
 
                        Joint Commissioner (Appeals), Vadodara
 
 Customs Excise and
 Service Tax            CESTAT Mumbai
 
                        CESTAT Ahmedabad
 
                        CESTAT Ahmedabad
 
                        CESTAT Kolkata
 
                        CESTAT Delhi
 
                        CESTAT Delhi
 
                        Commissioner (Appeals), Vadodara
 
                        CESTAT Ahmedabad &CESTAT Delhi
 
                        CESTAT Delhi & Commissioner (Appeals), Kanpur
 
                        CESTAT Delhi
 
 Income Tax             CIT (Appeals) 
 
                        ITO (TDS)
 
 Other Taxes            Ahmedabad High Court
 
 (b) According to the information and explanation given to us there is
 no amount which was required to be transferred to the investor
 education and protection fund in accordance with relevant provisions of
 The Companies Act 1956 (l of 1956) and rules made thereunder.
 
 (viii) 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.
 
 (ix) 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.
 
 (x) 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.
 
 (xi) On the basis of review of utilization of funds pertaining to term
 loans on overall basis and related information as made available to us,
 the term loans taken by the company have been utilized for the purposes
 for which these are obtained.
 
 (xii) According the information and explanation given to us no fraud on
 or by the company has been noticed or reported during the year under
 review.
 
 For S.K.Mittal & Co.               For G.S Mathur & Co.
 
 Chartered Accountants              Chartered Accountants
 
 Firm No.:001135N                   Firm No.:08744N
 
 (M.K.Juneja)                      (Rajiv Kumar Wadhawan)
 
 (Partner)                         (Partner)
 
 Membership No.:013117              Membership No.:091007
 
 Place: New Delhi 
 
 Dated: 27th May, 2015
Source : Dion Global Solutions Limited
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