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GAIL India

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« Mar 15
Auditor's Report (GAIL India) Year End : Mar '16
We have audited the accompanying standalone financial statements of
 GAIL (India) Limited (''the Company''), which comprise the balance sheet
 as at 31 March 2016, 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 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 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 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 Section143(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. 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 31 March 2016 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: 42(c) -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.
 
 2.  Note No: 47 - in respect of stating the investment in a joint
 venture entity at book value whereas net worth of the entity has been
 eroded and management has considered the diminution in value of
 investment as non- permanent.
 
 3.  Note No: - 51-in respect of revenue recognition during the year for
 ship or pay charges where the customer has disputed the claim of the
 company and final outcome is uncertain, 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, 2016 (the
 Or der) issued by the Central Government of India in terms of
 sub-section (11) 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 directions/sub-directions
 dated 11.12.2015 and 29.04.2016 and issued under Section 143(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 Section 143 (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 31 March 2016 taken on record by the Board of
 Directors, none of the directors is disqualified as on 31 March 2016
 from being appointed as a director in terms of Section 164 (2) of the
 Act.
 
 (f) We are enclosing herewith a report in Annexure C for our opinion
 on adequacy of internal financial controls system in place in the
 company and the operating effectiveness of such controls; and
 
 (g) 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 33(1)(a)
 and 34 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; and
 
 iii. there has been no delay in transferring amounts, required to be
 transferred, to the Investor Education and Protection Fund by the
 Company
 
 Referred to in paragraph 1 to Report on Other legal and regulatory
 requirements of the Independent Auditors'' Report of even date to the
 members of GAIL (INDIA) LIMITED on the financial statements for the
 year ended March 31, 2016.
 
 i(a) As informed to us the company has generally maintained proper
 records showing full particulars, including quantitative details and
 situation of fixed assets.
 
 (b) According to information and explanation given to us there is a
 regular programme of physical verification of these fixed assets by the
 management which in our opinion is reasonable having regard to the size
 of the company and nature of its assets. As informed to us no material
 discrepancies were noticed on such verification.
 
 (c) As informed to us and as verified by us during the course of our
 audit the title deeds of immovable properties are held in name of the
 company except for the cases as disclosed in Note no 45(b) & (c).
 
 ii.  As informed to us physical verification of inventory has been
 conducted at reasonable intervals by the management except the store
 and spares lying with Engineers India Limited 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. As informed to us no material
 discrepancies were noticed on physical verification of inventory.
 
 iii. As informed to us the company has granted unsecured loans to
 companies covered in the register maintained under section189 of the
 Companies Act 2013. In respect of such loans:
 
 a) As informed to us and as verified by us the terms and conditions of
 grant of such loans are not prejudicial to the interest of the company,
 
 (b) Repayment of the principal amount and payment of interest on such
 loans have been stipulated. However repayment of principal and payment
 of interest has not been regular in one of the loan given to
 Bhagyanagar Gas Limited. Please refer Note No.50 to the financial
 statements in this regard.
 
 (c) As informed to us, no amount of loan is overdue as at end of the
 year for a period more than ninety days.
 
 iv.  According to the information and explanations given to us, the
 company has complied with the provisions of Section 185 and 186 of
 Companies Act 2013 in respect of loans/investment/guarantee/security
 granted during the year.
 
 v.  The company has not accepted any deposits, in terms of the
 directives issued by the Reserve Bank of India and the provisions of
 sections 73 to 76 or any other relevant provisions of the Companies Act
 2013 and the rules framed there under.
 
 vi.  In respect of business activities of the company maintenance of
 cost records has been specified by the Central Government under
 sub-section (l) of section 148 of the Companies Act 2013 read with
 rules framed thereunder and in our opinion, prima facie, prescribed
 accounts and records have been made and maintained by the company,
 
 vii. a) According to 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, service tax, duty of
 customs, duty of excise, value added tax, cess and any other statutory
 dues with the appropriate authorities. According to information and
 explanation given to us there are no outstanding statutory dues as
 referred above as at the last day of the financial year under audit 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 sale 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 dispute and the forum where the dispute is pending are given
 below:
 
 List of Cases of Unpaid Disputed Demand under various Statutes as on
 31.03.2016
 
                                                        ( Rs. in Crores)
 
 Sl. Statute     Subject Matter
                 of Dispute        Amount   Period of
                                            Dispute   Status - Forum
 No.                              (2015-16)
 
 1   Entry Tax   (a) Demand of 
                 Entry Tax on 
                 Natural           203.00   1999-00 to
                                            2009-     Allahabad High
                                                      Court, Trade Tax
                                                      Tribunal &
                 Gas in U.P        10                 Joint Commissioner
 
                 (b) Demand of
                 Entry Tax on 
                 Natural                    2002-03 
                                            to 2005-
                 Gas in 
                 Rajasthan         5.59     06        Dy. Commissioner
                                                     (Appeals), Ajmer
 
                (c) Demand of 
                 Entry Tax on
                 Natural                    2008-09, 
                                            2011-12   
                 Gas in Madhya
                 Pradesh           5.38     & 
                                            2012-13   Tribunal, Bhopal
 
 2  Sales Tax &  (a) Non-
                 acceptance of
                 declaration       0.38
    VAT          form for
                 concessional 
                 sales tax                  1995-96 
                                            & 
                                            1996-97   Tribunal, Bhopal
 
                 (b) Demand of
                 VAT on account
                 of               31.88     2005-06,
                                            2006-07   Joint
                                                      Commissioner
                                                     (Appeals), Mumbai
 
                 disallowance 
                 of Credit Note             & 2009-10 
 
                (c) VAT demand
                 on inter unit     5.52     2011-12   Tribunal, Bhopal
 
                (d) Demand of
                CST on account 
                of
                disallowance of 
                LPG absorption     1.39     2011-12
                                            &
                                            2012-13   Tribunal, Bhopal
                credit notes
 
 List of Cases of Unpaid Disputed Demand under various Statutes as on
 31.03.2016 
 
 
                                                         (Rs.in crores)
 
 Sl. Statute    Subject Matter 
                of Dispute        Amount    Period of
                                            Dispute   Status - Forum
 No.                            (2015-16)
 
 2   Sales
     Tax &      Demand of VAT
                on account of      
               (e)                 2.77     2010-11   Joint Commissioner
                                                     (Appeals), Mumbai 
     VAT        disallowance 
                of input tax 
                credit 
 
                Demand of VAT 
                on account of
               (f)                 14.92    2005-06   Joint Commissioner
                                                     (Appeals), Mumbai 
                disallowance 
                of LPG subsidy 
 
                Demand of VAT
                on sale of
                Natural
               (g) Gas to Power 
                Companies         129.54    2007-08   Joint Commissioner
                                                     (Appeals), Mumbai
 
                Demand of VAT 
                on bandwidth        
               (h)                  2.71    2008-09   Joint Commissioner
                                                     (Appeals), Mumbai
                charges
 
               (i) Demand of 
                VAT on High 
                Sea Sale           28.59    2011-12   Joint Commissioner
                                                     (Appeals), Mumbai
 
                Demand of VAT 
                on sale of LPG 
                by                          2006-07 to
 
               (j) treating it 
               as non domestic     56.59    2011-12   Joint Commissioner
                                                     (Appeals), Mumbai
 
               (k) Penalty for
               delay in payment
               of                   0.60    2003-2004 High Court, Mumbai
               sales tax
 
               Demand of VAT 
               on account of                Oct 2011
                                            to Dec
              (l)                   0.54              Joint 
                                                      Commissioner, 
                                                      Trichy
               rate change                  2011 
 
               Demand of CST 
               on account of
              (m) disallowance 
               of LPG subsidy       51.84   2005-06   High Court,
                                                      Gwalior
               discount
 
               Demand for
               treating CST 
               sale as
               (n)                   0.15   2003-2004 High Court,
                                                      Guwahati
               local sale
 
              (o) Revised 
               Sales Tax demand
               as per                2.76   2003-04   Joint
                                                      Commissioner
                                                     (Appeals), 
                                                      Vadodara
               assessment 
               order
 
 3   Customs,                               Jan 2001
                                            to Feb
               (a) LPG 
               valuation Dispute    19.64             CESTAT Mumbai
     Excise
     and                                    2005
     Service
     Tax                                    Aug.2005
                                            to Dec
 
               (b) Dispute on
               Pentane 
               Classification         99.4   2006 & 
                                            Oct 2007  CESTAT Ahmedabad
                                            to July
                                            2009
 
               (c) Dispute on MFO 
               Classification       79.77   July 
                                            2004 to   CESTAT Ahmedabad
                                            March
                                            2011
 
               Demand of duty 
               under Rule 6(3)              April 
                                            2008 to
              (d) of CCR, 2004 
               for credit taken on  14.71   March 
                                            2010      CESTAT Kolkata
               input services
 
               Demand of Service
               Tax on                       Oct. 2006
                                            to Mar 
 
               (e)                 965.85             CESTAT Delhi 
               Marketing Margin             2014
 
               Demand of Service
               Tax on                       Oct 2006 
              (f) deputation of
               employees to JVs     41.20   2012 to 
                                            June      CESTAT Delhi
               & Govt. Deptt.
 
               Demand of
               differential 
               service                      Oct.2006 
                                            to March 
              (g)                    0.13             CESTAT Ahmedabad
               tax based on
               service tax
               returns                      2007
 
               Demand raised
               by denying                   Aug 2005
                                            to Sept
               (h) Cenvat & 
               service tax
               credit taken          9.30             CESTAT Ahmedabad 
               at Hazira                    2009
 
               Demand raised
               by denying                   2008-09
                                            & Dec
              (i) Cenvat credit 
               taken on input        0.22             CESTAT Delhi &  
                                                      CESTAT Allahabad  
                                            2010 to 
                                            March 2011
               services
 
               Demand raised in 
               respect of                   2008-09 to 
              (j)                    0.14             Commissioner
                                                     (Appeals), Delhi
               service tax on
               import of service            2011-12
 
               Demand of CVD on
               purchase of
              (k)                    0.07   March
                                            2006      CESTAT Delhi
               SAP software
 
               SUB-TOTAL          1774.73
 
 Sl.
 No   Statute  Subject Matter
               of Dispute          Amount   Period of
                                            Dispute   Status - Forum
 
              (a) Unpaid demand      6.23   AY- 
                                            1999-00   CIT (Appeals)
 
 4    Income
      Tax                                   AY
                                            2008 09 
                                            to AY     ITO(TDS) 
              (b) Demand of TDS      3.10   - 2016-17 
 
                  Notified Area 
                  Tax & GIDC 
                  Tax on                    1998-99
                                            to 2005-
                                     4.16   06 &
                                            1985-86 
                                            to        Ahmedabad High 
                                                      Court
                  revised value
                 (incl. interest)
 
 5    Other
      taxes                                 2009-10
 
                  TOTAL           1788.22
 
 viii.  Based on our audit procedures and in accordance with the
 information and explanations given to us by the management the company
 has not defaulted in repayment of dues to a bank or government or bonds
 holders.
 
 ix.  The company has not raised any money during the year by way of
 initial public offer or further public offer (including debt
 instrument). As informed to us the company has not raised any money by
 way of term loans during the year.
 
 x.  According to the information and explanation given to us there has
 been no fraud noticed or reported during the year on the company or by
 the company by its officers or employees.
 
 xi.  In our opinion the managerial remuneration paid/provided during
 the year is in accordance with the requisite approvals mandated by the
 provisions of Section 197 read with Schedule V of Companies Act 2013.
 
 xii. The company is not a nidhi company and therefore clause 3(xii) of
 the Order related to such companies is not applicable to the Company.
 
 xiii.  According to the information and explanation given to us all
 transactions with the related parties are in compliance with sections
 177 and 188 of Companies Act, 2013 where applicable and the details
 have been disclosed in the Financial Statements as required by the
 applicable accounting standards.
 
 xiv The company has not made any preferential allotment or private
 placement of shares or fully or partly convertible debentures during
 the year under review.
 
 xv.  As informed to us, during the year the company has not entered
 into any non-cash transactions with any of its directors or persons
 connected with the directors.
 
 xvi. The company is not required to get registered under section 45-IA
 of Reserve Bank of India Act 1934.
 
 For O. P.Bagla & Co.                 For G.S Mathur & Co.
 
 Chartered Accountants                Chartered Accountants
 
 Firm No.: 000018N                    Firm No.: 08744N
 
 
 
 (Rakesh Kumar)                      (Rajiv Kumar Wadhawan)
 
 (Partner)                           (Partner)
 
 Membership No.:087537                Membership No.:091007
 
 Place: New Delhi 
 
 Dated: 25th May, 2016
Source : Dion Global Solutions Limited
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