1.1 BASIS OF PREPARATION OF FINANCIAL STATEMENTS
 
 These accounts are prepared on the historical cost basis and on the
 accounting principles of a going concern. Accounting policies not
 specifically referred to otherwise are consistent and in consonance
 with the generally accepted accounting principles. The company has
 adopted mercantile system of accounting and all income and expenditure
 are treated on accrual basis unless otherwise stated herein below. All
 Accounting standards issued by the Govt. of India are followed.
 
 All assets and liabilities have been classified as current or
 non-current as per the Company’s normal operating cycle and other
 criteria set out in the revised Schedule VI to the Companies Act, 1956.
 Based on the nature of products and the time between the acquisition of
 assets for processing and their realization in cash and cash
 equivalents, the Company has ascertained its operating cycle as 12
 months for the purpose of current-noncurrent classification of assets
 and liabilities.
 
 1.2 FIXED ASSETS
 
 Fixed Assets are stated at cost inclusive of all incidental expenses
 and net of taxes recoverable less accumulated depreciation.
 
 1.3 DEPRECIATION
 
 Depreciation (on assets in use) has been provided for on straight line
 method (for proportionate period of use) in accordance with the rates
 of Schedule XIV of the Companies Act,1956.
 
 1.4 VALUATION OF INVENTORIES
 
 Inventories of Raw Materials, Work-in-Progress and Stores and Spare
 Parts are at or below cost. Finished goods, if any are valued at cost
 or net estimated realizable value whichever is lower. Valuation of
 Inventory is in line with Accounting Standard (AS-2) issued by the
 Institute of Chartered Accountants of India. For valuation purpose,
 FIFO basis has been adopted. Cost has been calculated with reference to
 cost incurred by the company to bring the inventory to its present
 condition and locations.
 
 1.5 TAXATION
 
 The Company has adopted Accounting Standard-22 (AS-22) as to
 ‘Accounting for Taxation on Income’ issued by the Institute of
 Chartered Accountants of India. Deferred Tax Assets are recognized only
 if there is virtual certainty as to its realization.
 
 1.6 BORROWING COST
 
 Borrowing costs attributable to acquisition and construction of assets
 are capitalized as a part of the cost of such assets up to the date of
 commissioning of qualifying asset. Other borrowing costs are charged to
 Statement of Profit & Loss.
 
 1.7 RECOGNITION OF INCOME AND EXPENDITURE
 
 Items of Income and Expenditure are accounted for on the accrual basis
 except otherwise stated in the notes to accounts in Part (B) of this
 Schedule.
 
 1.8 SALES & OTHER REVENUE
 
 (a) Gross sales are inclusive of Excise Duty and net of rebates and
 discounts etc.
 
 (b) Income in respect of renting of immovable property/ warehousing
 services is recognized in terms of the respective agreements on accrued
 basis.
 
 1.9 EMPLOYEE BENEFITS
 
 (a) Liability is computed on the basis of actuarial valuation of the
 gratuity and earned leave as on the Balance Sheet date, as per
 Accounting Standard- 15 (Revised).
 
 (b) Employer’s contribution to Provident Fund and ESI is charged to
 revenue on accrual basis.
 
 1.10 IMPAIRMENT OF ASSETS
 
 The Company in accordance with the Accounting Standard 28 (AS-28) in
 respect of impairment of Assets issued by the Institute of Chartered
 Accountants of India has adopted the practice of assessing at each
 Balance Sheet date whether there is any indication that an asset may be
 impaired and if any impairment exists, then the Company provides for
 the loss for impairment of Assets after estimating the recoverable
 amount of the assets.
 
 1.11 PROVISIONS, CONTINGENT LIABILITY AND CONTINGENT ASSETS
 
 The Company recognizes a provision when there is a present obligation
 as a result of past event that probably requires an outflow of
 resources and a reliable estimate can be made of the amount of the
 obligation. Contingent liabilities are not recognised but are disclosed
 in the notes on accounts. Contingent Assets are neither recognised nor
 disclosed in the financial statements.