Hindustan Organic Chemicals
BSE: 500449|NSE: HOCL|ISIN: INE048A01011|SECTOR: Chemicals
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| Auditor's Report (Hindustan Organic Chemicals) | Year End : Mar '11 |
We have audited the attached Balance Sheet of Hindustan Organic
Chemicals Limited. (HOCL) as at 31st March, 2011, the Profit and Loss
Account and also the Cash flow Statement for the year ended on that
date annexed thereto, in which is incorporated the Balance Sheet,
Profit & Loss Accounts and the Cash Flow Statement of the branch
audited by other auditors appointed by the Central Government. In
preparing this report, we have considered the report on the accounts of
the branch audited by the branch auditors together with the particulars
and information relating thereto, furnished to us by the management.
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.
We have conducted our audit in accordance with auditing standards
generally accepted in India. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. 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 the management as well as evaluating the over all financial
statement presentation. We believe that our audit provides a reasonable
basis for our opinion. As required by the Companies ( Auditor''s Report
) Order 2003, issued by the Central Government of India in terms of
Section 227 (4A) of the Companies Act, 1956 we annex hereto a statement
on the matters specified in paragraphs 4 and 5 of the said Order.
Further to our comments in the annexure referred 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, the Company has kept proper books of account as
required by law so far as appears from our examination of the books and
proper returns adequate for the purpose of our audit have been received
from the units except stated specially in report elsewhere.
c) The Balance sheet, Profit & Loss Account and Cash Flow Statement
dealt with by this report are in agreement with the books of account.
d) In our opinion and to the best of our information and according to
the explanations given to us, the Balance Sheet, Profit & Loss Account
and Cash Flow Statement read with the Schedule 22 Part B, notes thereon
forming part of the accounts comply with the Accounting Standards
referred to in Section 211 (3C) of the Companies Act, 1956.
e) The conditions specified in Section 274(l)(g) of the Companies Act,
1956 in respect of qualifications of directors is not applicable to the
company being government company.
f) Reference is invited to the following Notes on Accounts in Part B of
Schedule 22 with regard to non-provision/pending charge to the Profit
and Loss Account:
i) Note No 4 (b) regarding penal interest of Rs.519.01 lacs on overdue
loan from Government of India,
ii) Note No.8 (c) regarding non provision on account of
misappropriation of Company''s fund to the tune of Rs64.81 lacs, pending
final report from CBI and outcome of the civil suit.
iii) Note No. 10 (a) regarding liabilities of wages revision for the
period 1.01.1997 to 31.12.2000 Rs.2308.08 lacs at Rasayani Unit.
Note No. 10 (b) regarding liabilities of wages revision for the period
1.01.2007 to 31.3.2008 Rs. 278.96 lacs to Officers and Rs. 246.31 lacs
to Staff at Rasayani Unit. Note No. 10 regarding liabilities of wages
revision for the balance amount of arrears of pay and allowances
amounting to Rs.98.60 lacs payable to Officers at Kochi Unit. g) In
respect of the following items, no provision/charge to Profit and Loss
Accountshas been done for claims of JNPT of Rs.2007.99 lacs as under:
i. regarding claims of JNPT of minimum guaranteed throughput charges
of Rs.1256.25 lacs.
ii. Regarding short provision of Rs.453.99 lacs on account of lease
rentals and escalation on leased land payable to JNPT
iii regarding claims of of JNPT of water charges of Rs 0.65 lacs and
iv regarding claims of JNPT of way leave charges of Rs 297.10 lacs.
h) Reference is also invited to the following notes on accounts in Part
B precise impact of which on the balance sheet and the Profit and Loss
Accounts could not be ascertained for the reasons stated therein.
i) Note No. 5(b)(1) regarding amount of Rs.2976.65 lacs incurred on
JNPT tank terminal project as expenditure towards construction
continues to appear under Capital work in progress, the construction
has been suspended for more than three years and the lease has been
called off by the lessor JNPT after the expiry of the lease in June
2010. The status of the project is stagnant incomplete and of no
utility since long. No provision is made for the depreciation of the
asset value if any pending ascertainment of recoverable amount which is
the higher of an asset''s net selling price and value in use.
ii) Note No.5 (d) of Part 8 - Others, ERP Implementation at Kochi. It
is observed that ERP was implemented w.e.f. 16.09.2010. Data upto
31.08.2010 was transferred to SAP. Further entries upto 31st March 2011
were made in SAP. Since in-depth training to staff for the operation of
SAP was not extended and that an EDP audit of SAP was not implemented
it is recommended that a Migration Audit and EDP Audit be conducted for
ensuring that adequate internal control and data security are in place.
iii) Note No 17 regarding pending confirmation and reconciliation of
balances of sundry debtors, sundry creditors, loans and advances, other
current assets and other debit/credit balances. Further Bank balances
are subject to direct confirmation from the Banks, even though
confirmations are received by the Company.
i) We further report that had the effect of items mentioned at (f) and
(g) above considered, profit for the year would have been decreased by
Rs.5523.76 lacs resulting into a loss of Rs. 2952.17 lacs and the
accumulated loss as at the year end would be higher by the same amount
i.e. Rs. 5523.76 Lacs. Further, the current liabilities/provisions
would have been higher by Rs.''5523.76 lacs and the balance of profit
and loss account in the asset side of the balance sheet would have been
higher by Rs. 5523.76 Lacs.
j) We also report that the effect of items mentioned at (h) above is
not ascertainable.
k) Subject to our comments in para (i) and Q) above, in our opinion and
to the best of our information and according to the explanation given
to us, the said accounts read together with the Significant accounting
policies and Notes on accounts appearing in the Schedule 22, give the
information required by the Companies Act 1956, in the manner so
required and gives the true and fair view in conformity with the
Accounting Principles generally accepted in India:
a. In the case of Balance Sheet, of the state of affairs of the
company as at 31st March 2011
b. In the case of Profit & Loss Account, of the Profit for the year
ended on that date and
c. In the case of the Cash Row Statement, of the cash flows for the
year ended on that date.
COMPANIES (AUDITOR''S REPORT) ORDER, 2003.
Annexure referred to in Paragraph 3 of our Report of even date
(i) (a) The Company has maintained proper records showing full
particulars including quantitative details and situation of fixed
assets.
(i) (b) As explained and informed to us, the Management has conducted
physical verification of major items of fixed assets during the year
and we are informed that no material discrepancies were noticed on such
verification.
(i) (c) No substantial part of the Fixed Asset has been disposed off
during the year so as to affect the going concern.
(ii) (a) As per information and explanation given to us the management
has carried out physical verification of inventories at reasonable
intervals during the year. In our opinion the frequency of such
verifications is reasonable.
(ii) (b) In our opinion the procedure of physical verification of
inventories followed by the management are reasonable and adequate in
relation to the size of the Company and the nature of its business.
However in respect of inventory in storage tanks, Kochi unit does not
have the system of taking dip measurements. Instead, reliance is placed
on the electronic reading reported by the Distribution Control System.
(ii) (c) The company is maintaining proper records of inventories. It
is explained to us that no material discrepancies on such physical
verification were noticed.
(iii) a) Based on information, the company has not granted any loans,
secured or unsecured, to companies, firms, or other parties listed in
the register maintained under Section 301 of the Companies Act, 1956
and as such clauses (Hi)(b), (c)and (d) are not applicable. e) Based
on information, the company has not taken any loans, secured or
unsecured, from companies, firms, or other parties listed in the
register maintained under section 301 of the Companies Act, 1956 and as
such clauses (iii)(f) and (g) are not applicable.
(iv) In our opinion and according to the information and explanation
given to us, there is an adequate internal control system for the
purchase of inventories and fixed assets and for the sale of goods and
services commensurate with the size of the Company and the nature of
its business. During the course of our audit, we have not observed any
major weakness in internal control system.
(v) According to the information and explanation given to us there were
no transactions that need to be entered into the register maintained
under section 301 of the Companies Act, 1956. Sub Clause (b) of clause
(v) is hence not applicable.
(vi) In our opinion and according to the information and explanations
given to us, Company has not accepted deposits from the public. Hence
the provisions of section 58A and 58AA of the Companies Act, 1956 with
regard to acceptance of deposits from public and the rules framed
thereunder, to the extent applicable, except Rule 3A of the Companies
(Acceptance of deposits) Rules, 1975 regarding investment in liquid
assets, are not applicable. We have been informed by the management
that no order has been received by the company, from Company Law Board,
National Company Law Tribunal, or Reserve Bank of India or any court or
any other tribunal under Section 58A and 58AA.
(vii) In our opinion the company has an internal audit system
commensurate with its size and nature of its business.
(viii) We have broadly reviewed the books of account maintained by the
company in pursuance to the rules made by the Central Government for
the maintenance of the cost records under section 209 (1) (d) of the
Companies Act, 1956 for certain products of the company and are of the
opinion that prima facie the prescribed accounts and records have been
made and maintained. We have not, however made a detailed examination
of records with a view to determine whether they are accurate or
complete.Cost Audit has been prescribed by the Governmnent of India for
the year 2010-11 for both the units of the Company.
(ix) (a) The company is generally regular in depositing undisputed
statutory dues including investor education and protection fund,
employees state insurance, income tax, sales tax, wealth tax, service
tax, custom duty, excise duty, cess and other statutory dues wherever
applicable with appropriate authorities.
(ix) (b) According to the information and explanations given to us no
undisputed amount payable in respect of sales tax, income tax, wealth
tax, excise duties, custom duties, cess and other statutory dues were
in arrears as at 31st March 2011 for a period of more than six months
from the date they become payable.
(ix) (c) According to the records of the company, details of
outstanding dues of income tax, sales tax, wealth fix, service tax,
custom duty, excise duty and cess which are not been deposited on
account of any dispute are given below:
Sr. Name of Statute Nature of Dues Period to
which Amount of Forum where
dispute is
pending
No. the
disputes disputes
relates (Rs. in
lace)
1. Resayani Unit
1. Customs Act Custom duty NA 10.80 Customs, Excise
and Service Tax
Appellate
Tribunal
Total 10.80
1. Central Excise
Act Molten Sulphur 1994-95 15.53 Customs, Excise
and Service Tax
Appellate
Tribunal
Classification
2. Central Excise
Act Molten Sulphur 1999-2000 7.62 Commisslonerate
Classification
3. Central Excise
Act Shortage of
inputs 13.64 Commissionerate
4. Central Excise
Act Shortage of
inputs 18.66 High Court
5. Central Excise
Act Shortage of
inputs 5.84 High Court
6. Central Excise
Act ARO Case 19.28 Customs, Excise
and Service Tax
Appellate
Tribunal
7. Central Excise
Act Clearance of
SSA to 112.78 Commissionerate
fertilizer
manufacturing
units
8. Central Excise
Act Reversal of
CENVAT Credit 2006-2007 18.66 Commissionerate
availed on
inputs lost in
flood.
Total 212.01
1. Income Tax Act
1961 Penalty under
Section AY
1999-2000 91.08 Commissioner of
Income Tax
Appeals, Mumbai
271(1)(c)
2. Income Tax Act
1961 Penalty under
Section AY
2003-04 607.27 Commissioner of
Income Tax
Appeals, Mumbai
271(1)(c)
3. Income Tax Act
1961 Penalty under
Section AY
2004-05 63.23 Commissioner of
Income Tax
Appeals, Mumbai
271(1)(c)
4. Income Tax Act
1961 Disallowance
of Expenses AY
2007-08 20.78 Income Tax
Appellate
Tribunal,Mumbai
5. Income Tax Act
1961 Disallowance
of Expenses AY
2008-09 1376.95 Commissioner of
Income Tax
Appeals, Mumbai
Total 2159.31
2. Kochi Unit
1. Employees Family Damage for
default
payment 11/95 to
12/97 18.05 High Court of
Kerala.
Pension Scheme
2. ESI Corporation ESI
Contribution
of 1/04/1992 to 2.17 Employees
Insurance Court
(Industrial)
employees 31/10/1992
3. Central Excise
Act,1944 Disallowance
of CENVAT 2004-05 11.09 Appeal with
Customs, Excise
and Service Tax
Appellate
Credit availed
on the ground Tribunal,
Bangalore.
Remanded to
J.C.Ex
Ernakulam
that duty is
paid by
debiting DEPB
license
4. Central Excise
Act,1944 Disallowance
of CENVAT 10/04 to
05/05 0.59 Customs, Excise
and Service Tax
Appellate
Tribunal,
Credit availed
on the ground Bangalore
that duty is
paid by
debiting DEPB
license
5. Finance Act, 1994 Non payment of
Service Tax 4/06 to
3/08 7.93 Commissioner of
Central Excise
Appeals,
Ernakulam
on commercial
coaching /
training
(1.92 6.01)
6. Finance Act,1994 Non payment of
Service Tax 04/08to
03/09 1.86 Asst.
Commissioner of
Central Excise
Muvattupuzha
on commercial
coaching/
training and
renting of
immovable
property to
Sterling Gas
7. Finance Act 1994 Availing of
CEVAT credit on 04/06 to
11/08 49.48 Commissioner of
Central Excise
Appeals,
Erankulam
outdoor
catering
services
(16.59 32.89)
8. Finance Act, 1994 Availing of
CEVAT credit on 12/08 to
09/09 24.21 Commissioner of
Central Excise
Appeals,
Erankulam
outdoor
catering
services
9. Finance Act, 1994 Availing of
CEVAT credit on 01/05 to
08/06 4.55 Commissioner of
Central Excise
Appeals,
Erankulam
service tax on
transportation
of final
products to
customers
premises
10. Finance Act,
1994 Availing of
CEVAT credit on 04/03 to
12/06 32.01 Commissioner of
Central Excise
Appeals,
Erankulam
service tax on
transportation
of final
products to
Rasayani Depot
11. Finance Act 1994 Security
services and
repair 02/06 to
12/06 0.97 Commissioner of
Central Excise
Appeals,
Erankulam
works at HOC
township
12. Central Excise
Act, 1944 Duty on sale
of waste/scrap upto 01/02
and 9.10 CESTAT,
Bangalore appeal
filed by the
department
05/02 to
03/03
13. Customs Act,
1962 Demand to remit
duty for Nov.08 0.79 Commissioner of
Central Excise
Appeals,
Erankulam
excess quantity
of imported
Benzene
14. Finance Act,
1994 Availing of
CENVAT credit 01/09 to
12/09 3.01 Commissioner of
Central Excise
Appeals,
Erankulam
on Hiring of
Bus, Car and on
Capital Goods
15. Finance Act,
1994 Service Tax on
commercial 04/09 to
03/10 1.75 Deputy
Commissioner of
Central Excise
coaching,
renting of
immovable
property
16. Finance Act,
1994 Availing of
CENVAT credit 10/09 to
09/10 14.81 Commissioner of
Central Excise
Appeals,
Erankulam
on outdoor
catering,
insurance, etc
17. Finance Act,
1994 Availing of
CENVAT credit 01/10 to
11/10 2.05 Deputy
Commissioner of
Central Excise
on Hiring of
Bus, Car, etc
18. Central Excise
Act, 1944 Excess amount
collected 03/10 0.24 Deputy
Commissioner of
Central Excise
from Rasayni
Sales
19. Finance Act,
1994 Utilisation of
CENVAT credit 05/09 to
12/09 1.52 Deputy
Commissioner of
Central Excise
for 100%
payment when
only 90% paid
20. Income Tax Act,
1961 Demand for short
collection/ AY 2008-09
and 3.55 Commissioner of
Income Tax
Appeals,
Erankulam
Non payment of
TDS for 2009-10
Assessment Year
2008-09
and 2009-10
Total 189.73
(x) During the year, Company has not incurred cash losses. It has
incurred cash losses during the immediately preceding financial year.
However after giving effect to the qualifications in the auditors
report, there will be cash loss during the year.
(xi) The Company has not defaulted in repayment of dues to the bond
holders during the current year.
(xii) According to the information and explanations given to us,
adequate documents and records are maintained for loans granted to
subsidiary Company on the basis of security given by them.
(xiii) The Company is not a chit fund/nidhi/mutual benefit fund/
society as such clauses (xiii)(a) to (d) are not applicable.
(xiv) The Company is not a trader or dealer in any shares, securities
or debentures of other companies.
(xv) According to the information and explanation given to us, the
Company has given guarantee of Rs.12.53 crores for loan taken by M/s
Hindustan Flurocarbons Ltd. from State Bank of Hyderabad, the terms and
conditions thereof are not prejudicial to the interest of the Company.
(xvi) In our opinion and according to the information and explanation
given to us, the Company has taken term loans during the year and same
were applied for the purpose for which the loans were obtained.
(xvii) Based on our examination of the books of account and Balance
Sheet of the units, we are of the opinion that funds raised oh short
term basis have not been used for long term investments.
(xviii) Company has not made any preferential allotment of shares to
parties/companies covered in the register maintained u/s 301 of the
Companies Act, 1956.
(xix) The Company has raised Rs.100 crores by way of issuing bonds
during the year, which is guaranteed by GOI by way of registered bond
trust deed.
(xx) The Company has not raised any money through public issues during
the year.
(xxi) Based upon the audit procedure performed for the purpose of
reporting the true arid fair view of the financial statements and as
per the information and explanation furnished by the management we
report that no fraud is noticed or reported during the year by the
Company.
For NBS & Co.(FRN 110100W)
Chartered Accountants
Sd/-
Devdas Bhat
Date : 30/05/2011 M.No. 48094
Partner.
Place: DELHI
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