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« Mar 13
Auditor's Report (GAIL India) Year End : Mar '14
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
 
Source : Dion Global Solutions Limited
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