Tata Sponge Iron

1.  Contingent Liabilities
 
                     31.03.2009                     31.03.2008
                    Rs. in lacs                      Rs. in lacs
 Contingent Liabilities not provided for
 
 a) Income tax                87.92
 b) Bills Discounted             -                       568.31
 c) Bank Guarantee         5,214.23                    4,046.82
 d) Letter of credit          57.44                       25.00
 
 2.  Estimated amounts of contracts remaining to be executed on capital
 account and not provided : Rs.482.50 lacs (As at 31.3.2008 Rs. 527.51
 lacs ) [Net of advances Rs.Nil (As at 31.03.2008 Rs. 34.76 lacs)].
 
 3.  The Company had been allotted a Coal block along with two other
 companies in 2006-07. The investment and the operation
 
 of the mine would be done by the company as the leader of the group.
 The company has not made any financial commitment till date, except
 arranging for bank guarantee of Rs 3250.00 lacs as at 31.03.2009 (As at
 31.03.2008 Rs.3,250.00 lacs ).
 
 4.  Sales Tax
 
 a) The Company had filed a writ petition before the High Court of
 Orissa for sales tax exemption for a period of two years w.e.f. 10th
 June 1997 as a Pioneer Unit. The High Court initially ruled that the
 Company should pay the sales tax under dispute pending disposal of the
 writ petition. Accordingly, the Company paid Sales tax, which had not
 been collected from customers, and amounts aggregating to Rs 573.73
 lacs had been charged to the Profit & Loss Account during the years
 1997-98 to 1999-2000.
 
 The High,Court directed the Sales Tax Authorities to refund the amount
 after ascertaining that the said refund shall not unjustly enrich the
 Company. The Sales Tax Officer passed the order stating that the refund
 shall unjustly enrich the Company against which the Company has filed a
 writ petition in the High Court challenging the correctness of the
 assessment and the same is pending. No credit has been taken in the
 accounts, as the matter has not reached finality.
 
 b) As per Industry Policy Resolution 1992 of Government of Orissa, the
 company has to pay a minimum sales tax of Rs.  252.56 lacs before
 availing exemption from sales tax on incremental sale of Sponge Iron
 from Kiln 1 and 2. The company was paying the above amount untill the
 rate of sales tax was reduced. With reduction in rate of sales tax, the
 company contends that the above limit of Rs. 252.56 lacs has to
 correspondingly reduce and accordingly is making reduced payment.  The
 company however has provided for the unpaid amount of Rs. 145.36 lacs
 as on 31st March, 2009.
 
 c) As per certificate no. 6948/lnd dated 26 May, 1999 issued by the
 Director of Industries, Orissa, the Company is eligible for exemption
 from payment of sales tax for a period of five years commencing
 September 7,1998 on incremental sales tax arising on the sale of
 products manufactured after installation of the 2nd Kiln subject to a
 ceiling of 75 percent of additional capital investment in plant and
 machinery.
 
 The Companys appeal against restriction of the five year ceiling
 period for sales tax exemption in respect of the expanded capacity has
 since been decided in favour of the Company by the Supreme Court
 upholding the judgement of High Court of Orissa . As per the judgement
 the time period of five years mentioned in theeligibility
 certificatewas ultra vires the Orissa States Industrial Policy
 Resolution, 1992 and shall have no effect. Necessary amended
 Eligibility Certificate is to be issued by the Director of Industries,
 Orissa on reconsideration of the Companys application for
 re-evaluation of its investment for expansion and determine afresh the
 extent to which the Company is entitled to the sales tax incentive.
 
 As the receipt of the revised Eligibility Certificate is procedural and
 consequential the Company has written back a sum of Rs.450.64 lacs, of
 sales tax provided up to 31.03.2007 during the previous year.
 
 Accountants of India (ICAI), the opening liability was re estimated
 bifurcating into short term and long term liability. While short term
 liability was estimated at actual, the valuation for long term
 liability was made on actuarial basis. Consequently, the excess
 liability as on 1 st April, 2006 of Rs.217.44 lacs (net of deferred tax
 Rs. 110.33 lacs) which had been adjusted with the General Reserve
 during 2006-07 was reversed and an amount of Rs. 36.86 lacs being the
 excess amount charged to profit and loss account during 2006-07 was
 written back to the profit and loss account during 2007-08.
 
 5.  Based on and to the extent of information obtained from suppliers
 regarding their status as Micro, Small or Medium enterprises under
 Micro, Small and Medium Enterprises Development Act, 2006, there are no
 amounts due to them as at the end of the year.
 
 6.  Disclosure as required under AS 29.
 
 Provisions for Sales tax and Entry tax have been recognised in the
 financial statements considering the following:
 
 i) The company has a present obligation as a result of past event
 
 ii) It is probable that an outflow of resources embodying economic
 benefits will be required to settle the obligation; and
 
 iii) A reliable estimate can be made of the amount of the obligation.