1.  a) ACCOUNTING CONCEPTS
 
 (i) The Company follows the Mercantile System of Accounting and
 recognizes Income and Expenditure on Accrual basis except (ii) below.
 The accounts are prepared on historical cost basis, as a going concern,
 and are consistent with generally accepted accounting principles.
 
 (ii) Interest on National Saving Certificates and Unpaid allotment
 money in arrears, amount not being material and certain are accounted
 for on cash basis.
 
 b) USE OF ESTIMATES
 
 The presentation of financial statements is in conformity with the
 generally accepted accounting principles, which requires estimates and
 assumptions to be made that affect reportable amount of assets and
 liabilities on the date of financial statements and the reportable
 amount of revenues and expenses during the reporting period.
 Differences between the actual results and estimates are recognised in
 the year in which the results are known / materialised.
 
 2.  FIXED ASSETS, DEPRECIATION & AMORTIZATION
 
 i) Fixed Assets are carried at cost less depreciation and adjustment
 for impairment loss, if any, as per the requirements of AS-28,
 Impairment of Assets issued by ICAI. The cost of fixed assets includes
 interest on specific borrowings obtained for the purpose of acquiring
 fixed assets upto the date of commissioning of the assets and other
 incidental expenses incurred upto that date.
 
 ii) The carrying amounts of fixed assets are reviewed at each balance
 sheet date, if there is any indication of impairment based on internal
 / external factors, an impairment loss is recognized wherever the
 carrying amount of an assets exceeds its recoverable amount and the
 same is recognized as an expense in the statement of Profit & Loss and
 Carrying amount of the asset is reduced to recoverable amount.
 
 The recoverable amount is the greater of the assets net selling price
 and value in use. In assessing value in use, the estimate future cash
 flows are discounted to their present value at the average cost of
 capital.
 
 Reversal of Impairment losses recognized in prior years when there is
 an indication that the impairment losses recognized for the assets no
 longer exists or have decreased.
 
 iii) Depreciation is calculated on Straight Line Method at the rates
 specified under Schedule XIV, as amended, of the Companies Act, 1956.
 Depreciation on assets costing Rs. 5000/- is provided in full in the
 year of acquisition.
 
 iv) Leasehold land is amortized over the balance period of lease from
 the date of commercial production
 
 3.  INVESTMENT
 
 Long Term Investments are state at cost. Provision for diminution in
 the value of long-term investments is made only if such a decline is
 other than temporary. Current investments are valued at lower of cost
 or market rate on individual investment basis.
 
 4.  INVENTORIES
 
 a) Basis of Valuation
 
 Raw Materials : At Cost or Net realizable value whichever is lower
 
 Stores & Spare Parts : At yearly weighted average Cost or net
 realizable value whichever is lower.
 
 Finished Goods : At Cost or net realizable value whichever is lower
 
 b) Cost in respect of Raw Material and Finished goods has been
 determined on the basis of FIFO method.
 
 c) CENVAT amount has been carried forward to the extent it will be
 available on the closing stock of finished goods, WIP & Raw Material.
 The balance has been charged to profit & loss account as unrealized
 CENVAT. However, if there is a change in tariff structure in the
 subsequent years, the same is accounted for in the year of actual sale.
 
 5.  FOREIGN CURRENCY TRANSACTIONS
 
 Foreign currency transactions during the year are accounted for at the
 exchange rates prevailing on the dates of the transactions. In
 accordance with the Revised Accounting Standard 11 for the Effects of
 the Changes in Foreign Exchange Rates and related notification issued
 by the Institute of Chartered Accountant of India:
 
 (i) All the monetary assets and liabilities remaining unsettled at the
 year-end translated at the closing exchange rates. Any income or
 expenses on account of exchange difference either on settlement or on
 translation is recognized and is reflected separately in the Profit &
 loss account except those relating to acquisition of Fixed Assets.
 
 ii) In case of Fixed Assets, it is adjusted to the carrying cost of
 such assets and the relevant loan account.
 
 iii) Non-monetary items are carried at cost.
 
 6.  REVENUE RECOGNITION
 
 Revenue from sale of goods is recognised upon the passage of title to
 the customers, which generally coincides with delivery. Sales include
 excise duty but net of sales return and trade discounts.
 
 7.  RETIREMENT BENEFITS AND LEAVE ENCASHMENT
 
 Gratuity and leave encashment are accounted for on accrual basis on the
 assumption that all employees will retire at the year-end.
 
 8.  BORROWING COST
 
 Borrowing Cost is charged to Profit and Loss Account except cost of
 borrowing for acquisition of qualifying assets, which is capitalized
 till the date of Commercial use of the assets.
 
 9. TAXATION
 
 Income tax expense is accounted for in accordance with AS-22
 Accounting for Taxes on Income as below:
 
 Current Income Tax - is ascertained on the basis of assessable profits
 computed in accordance with the provisions of the Income Tax Act, 1961.
 
 Deferred Income Tax - is recognized as the Tax effect of current year
 timing differences between taxable income and accounting income for the
 year and the reversal of timing differences of earlier years.
 
 Deferred Tax assets in respect of unabsorbed depreciation and tax
 losses are recognized to the extent there is virtual certainty and in
 case of other items, it is recognized on the basis of reasonable
 certainty.
 
 10.  PROVISIONS, CONTINGENT LIABILITY & CONTINGENT ASSETS
 
 Provisions involving substantial degree of estimation in measurement
 are recognized when there is a present obligation as a result of past
 events and it is probable that there will be an outflow of resources.
 Contingent liabilities are not recognized and are disclosed in notes.
 Contingent Assets are neither recognized nor disclosed in the financial
 statements.