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« Mar 11
Auditor's Report (GAIL India) Year End : Mar '12
1.  We have audited the attached Balance Sheet of GAIL (India) Limited
 as at 31st March, 2012, the Statement of Profit and Loss and Cash Flow
 Statement of the company for the year ended on that date annexed
 thereto. These financial statements are the responsibility of the
 Company''s management. Our responsibility is to express an opinion on
 these financial statements based on our audit.
 
 2.  We have conducted our audit in accordance with auditing standards
 generally accepted in India. These 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 statement on the Companies (Auditor''s Report)
 order, 2003 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:
 
 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 appears from our examination of those
 books;
 
 c) The Balance Sheet and Statement of Profit & 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, 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;
 
 e) Disclosure in terms of clause (g) of sub-section (1) of Section
 274ofthe Companies Act, 1956 is not required as per notification no.
 GSR 829(E) dated October21,2003 issued by the Department of Company
 Affairs.
 
 f) In our opinion and to the best of our information and according to
 the explanations given to us, the said financial statements read
 together with the significant accounting policies and notes thereon
 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:
 
 i.  in the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2012;
 
 ii.  in the case of the Statement of Profit & Loss, of the profit for
 the year ended on that date ;and
 
 iii. in the case of the Cash Flow Statement, of the cash flow of the
 company for the year ended on that date.
 
 The Annexure referred to in the auditor''s report to the shareholders of
 GAIL (India) Limited for the year ended March 31,2012.We report that:
 
 (i) (a) The company has generally maintained proper rords 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 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 no material discrepancies were noticed
 on such verification.
 
 In our opinion, there was no substantial disposal of fixed assets
 during the year.
 
 (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 vapour 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 two subsidiaries
 companies (None of the Directors individually or collectively hold more
 than two per cent the paid-up share capital). The Company has
 maintained the register under section 301 often Companies Act, 1956,
 inter-alia, in which the name of said two subsidiaries is also entered.
 The maximum amount involved during the year for Rs.  336.78 crores and
 year-end balance of loan was Rs. 57.32 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 parties have repaid the principal amounts as stipulated and
 have also been regular in the payment of interest to the company.
 
 (d) There is no over due 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) In our opinion, and according to information and explanations
 given to us, there are adequate internal control procedures to
 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.
 
 (v) On the basis of our examination of the books of accounts, and as
 per information and explanation given to us, the company has not made
 any transactions in respect of any party during the financial year that
 needs to be entered in the register pursuant to the section 301 of the
 Companies Act, 1956.
 
 (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 books of Accounts 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 is
 generally regular in depositing undisputed statutory dues including
 Provident fund, Investor Education and Protection Fund, Employees''
 State Insurance, Sales tax, Wealth tax, Service Tax, Custom duty,
 Excise duty, 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 Sales tax, Service Tax,
 Custom duty, Excise duty and other statutory dues were outstanding at
 the year end for a period of more than six months from the date they
 become 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
 31.03.2012                                           (Rs. in Crores)
 
 SI.                                Amount     Period
 No. Statute   Subject Matter 
               of Dispute           (2011-12)  of Dispute  Status-
                                                           Forum
 
 1   Entry Tax(a) Entry Tax on 
               Market Value of 
               Natural Gas          121.92     1999-OOto   Allahabad 
                                                           High Court,
                                                           Trade tax 
                                                           Tribunal&
               instead of its 
               Purchase Price 
               (Including Interest)            2009-10     Additional/
                                                           Joint 
                                                           Commissioner
                                                           -Appeals
               (b) Rajasthan Entry
               Tax Demand           8.41       2005-06 &   Dy. Commi
                                                           ssioner, 
                                                           Appeals, Kota/
                                               2008-09     Appeallate 
                                                           Authority, 
                                                           Gwalior
 2   Sales Tax (a) Non-acceptance 
               of declaration form  0.63       1995-96 &   Additional
                                                           Commissioner
                                                           -Appeals,
               for concessional
               sales tax                       1996-97     Commercial Tax
                                                           , Gwalior
               (b)  Sales Tax 
               demand as per 
               assessment           3.34       2005-06 &   Additional
                                                           Commissioner-
                                                           Appeal Noida
               order of 2005-06 
               and 2006-07                     2006-07
               (c)  CST demand on 
               Transmission 
               charges and          0.86       2005-06 to  AP High Court
               penalty & interest              2008-09
 
               (d)Demand on account 
               of LPG subsidy 
               discount             75.37      2006-2007   Joint 
                                                           Commissioner
                                                           -Appeals
               and treating 
               domestic LPG as 
               non-domestic
 
               (e)Interest for 
               delay for sales 
               tax assessment       0.54       2003-2004   Dy.Commi
                                                           ssioner, 
                                                           Sales Tax,
                                                           Mumbai
 
               (f)Demand of VAT 
               on account of rate 
               change               0.29       0ct 2011 to Joint 
                                                           Commissioner,
                                                           Trichy
                                               Dec 2011
 
               (g)Disallowance of 
               credit note for LPG  117.91     2008-2009   High Court, 
                                                           Gwalior
               subsidy discount
 
               (h)Demand for 
               treating CST sale 
               as local sale        0.15       2003-2004   High Court,
                                                           Guwahati
               (i)Sales Tax demand  0.20       1998-1999   Mumbai Tribunal
 
 3   Excise&   (a) LPG valuation 
               Dispute              15.96      Jan 2001 to CESTAT Mumbai
     Service 
     Tax                                       Feb 2005
 
               (b)Dispute on 
               Pentane 
               Classification       92.14      Mar.2000 to CESTAT New 
                                                           Delhi & 
                                                           CESTAT
                                                           Ahmedabad
                                               Feb 2002 &
                                               Aug.2005 to
                                               Jul 2009
 
               (c)Dispute on MFO 
               Classification       62.01      July 2004 to CESTAT 
                                                            Ahemdabad &
                                                            Commissioner
                                               March 2011   (Appeals) 
                                                            Vadodara
 
               (d)Demand of duty 
               under Rule 6(1) 
               of CCR,2004          11.07      2008-2009 &  CESTAT
                                                            Kolkata
               for credit taken on 
               input services                  2009-2010
               (e)Demand of 
               Differential service 
               tax based on         0.17       0ct.2006 to  CESTAT 
                                                            Ahemdabad
               returns for the 
               period from Oct 06 
               to Mar 07                       March 2007
               (f)Demand raised 
               denying refund 
               claim allowed        0.43       Sep.2007     CESTAT 
                                                            Ahemdabad
               to GAIL for service 
               tax on compression 
               charges
 
               (g)Demand raised by 
               denying Cenvat & 
               service tax          7.28       May 2005 to  CESTAT 
                                                            Ahemdabad
               credit taken at 
               Hazira                          March 2010
               (h)Demand raised by 
               denying Cenvat       0.26       Jan.2006 to  Commissioner
                                                            (Appeals),
               credit taken on 
               input services                  Oct. 2009 &  Guwahati / 
                                                            Kanpur
                                               Dec. 2010 to
                                               March 2011
 
               SUB-TOTAL            518.94
 
 4   Income 
     Tax       Demand of Penalty 
               u/s 271(1)(c)        168.59     AY-2007-08   CIT Appeals
 5   Other 
     taxes     Notified Area tax 
               & GIDC tax on 
               revised value        3.46       1985-86 to   Ahmedabad 
                                                            High Court
               (incl. interest)                2008-09
 
               TOTAL                690.99
 
 (x) The company has no accumulated losses at the end of the financial
 year and it has not incurred any cash losses in the current and
 immediately preceding financial year.
 
 (xi) Based on our audit procedure and on 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 and debenture holders.
 
 (xii) In our opinion, 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,clause4(xiii) of the order not applicable.
 
 (xiv) According to the information and explanation given to us, the
 company is not dealing or trading in shares, securities, debentures and
 other investments. Accordingly,clause4(xiv) of the order is not
 applicable.
 
 (xv) The 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 (bonds) 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, no
 fraud on or by the company has been noticed or reported during the
 year.
 
 For M/s M.L.Puri & Co.                  For M/s Rasool Singhal & Co
 
 Chartered Accountants                   Chartered Accountants
 
 Firm No:002312 N                        Firm No :500015N
 
 NavinBansal                             G. S. Haldia
 
 Partner                                 Partner
 
 Membership No. 91922                    Membership No.007012
 
 New Delhi                               New Delhi
 
 Dated: 30th May 2012                    Dated: 30th May 2012
Source : Dion Global Solutions Limited
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