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Scan Steels Ltd.

BSE: 511672 | NSE: | Series: NA | ISIN: INE099G01011 | SECTOR: Steel - Sponge Iron

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Annual Report

For Year :
2018 2016 2015 2014 2013 2012 2011 2010 2009

Auditor's Report

To the Members of Scan Steels Limited

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of SCAN STEELS LIMITED(''the Company''), which comprise the balance sheet as at 31 March 2016, the statement of profit and loss and the cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (the Act) with respect to the preparation and presentation of these standalone 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 principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, 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 standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. 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 the 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 financial control relevant to the Company''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, 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 on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the company as at 31st March, 2016, and its loss and its cash flows for the year ended on that date.

Emphasis of Matter

Without qualifying our opinion, we draw attention to

i. Note No-2(vi) to the financial statements that describes that the company has defaulted on debt payments to consortium lenders, due to unprecedented adverse developments witnessed by industry as a whole during financial year.

ii. Note No-2(xi) to the financial statements that describes that the company has calculated reduction in value of inventory amounting to Rs. 78,42,86,306 due to sharp decline in finished goods price.

Our opinion is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2016 (the Order) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act 2013, we give in the Annexure-A a statement on the matters specified in paragraph 3 and 4 of the Order.

2. As required by Section 143 (3) of the Act, we report that:

(a) We have sought and 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 aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

(e) On the basis of written representations received from the directors as on 31 March 2016 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2016 from being appointed as a director in terms of Section 164 (2) of the Act; and

(f) With respect to the adequacy of the internal financial control over financial reporting of the company and the operating effectiveness of such controls, refer to our separate report in Annexure-B and

(g) With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

I. The Company has disclosed the impact of pending litigations on its financial position in its financial statements.

ii. The Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses.

iii. There are no amounts which are required to be transferred to the Investor Education and Protection Fund by the Company.

“Annexure A” to the Independent Auditors’ Report

The Annexure referred to in our Independent Auditors''

Report to the members of the Company on the standalone financial statements for the year ended 31 March 2016, we report that:

1.(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) As explained to us, fixed assets have been physically verified by the Management in phased periodic manner, which in our opinion is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies have been noticed on such verification.

(c) The deed of immovable properties are held in the name of the Company in almost all cases excepting for

(I.) Freehold land of 7.68 Acres situated in Village Raiberna and Laing, Sundergarh which is in the name of M/s. Shristi Ispat Limited, the company which was merged in to this company during 2005.

(ii.) Land of 14.88 Acres occupied by the company situated in Village-Kudithini, Bellary, Karnataka.

2. In respect of its Inventories:

(a) As explained to us, Stocks have been physically verified by the management at regular intervals during the year. The frequency of verification is reasonable.

(b) In our opinion and according to the information and explanation 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 the nature of its business.

(c) The company has maintained proper records of inventories. As explained to us, there was no material discrepancies noticed on physical verification of inventories as compared to book records.

3. The Company has not granted any loan during the year, secured or unsecured to companies, firms or other parties covered in the register maintained under section 189 of the Companies Act, 2013.

4. In our opinion and as per explanations given to us, the company has complied with the provisions of section 185 and186 of the Companies'' Act 2013 in respect of loans, investment, guarantees and security.

5. The Company has accepted deposits from public and in our opinion and according to the information and explanation given to us, the directives issued by Reserve Bank of India with respect to relevant provisions of section 73 to 76 or any other relevant provisions of Act and Companies Rules 2015 with regard to deposits from public are complied with. We are informed that no order has been passed by the Company Law Board of National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal, in this context.

6. According to information and explanations given to us, the company is maintaining cost records as prescribed by central government under section 148(1) of the Act, in respect of the activities carried on by the company.

7. a)According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/ accrued in the books of account in respect of undisputed statutory dues including provident fund, income tax, sales tax, wealth tax, service tax, duty of customs, value added tax, cess and other material statutory dues have been regularly deposited during the year by the Company with the appropriate authorities.

(b) According to the information and explanations given to us, there are no material dues of wealth tax, duty of customs and cess which have not been deposited with the appropriate authorities on account of any dispute excepting for following which have not been deposited by the Company on account of disputes:

STATEMENT OF DISPUTED DUES

SI No.

Name of the Statute

Period

Nature of Dues

Amount (Rs.)

Forum where dispute is pending

1

Orissa Sales Tax Act

2001-2002

OST

1,37,958

Sales Tax Tribunal,Cuttack

2

Entry Tax Act

2001-2002

ENTRY TAX

24,482

Sales Tax Tribunal,Cuttack

3

Orissa Sales Tax Act

2002-2003

OST

22,96,983

Assistant Commissioner of Commercial Tax,RKL

4

Orissa Sales Tax Act

2004-2005

OST

17,15,871

Assistant Commissioner of Commercial Tax,RKL

5

Entry Tax Act

2004-2005

ENTRY TAX

9,95,460

OST Tribunal, Cuttack

6

Orissa Sales Tax Act

2005-2006

OST

1,07,26,881

High Court of Odisha,Cuttack

7

Entry Tax Act

2005-2006

ENTRY TAX

18,50,937

High Court of Odisha,Cuttack

8

Central Sales Tax Act

2005-2006

CST

5,30,992

High Court of Odisha,Cuttack

9

OVAT, Act

2006-2007

OVAT

1,07,38,853

High Court of Odisha,Cuttack

10

Central Sales Tax Act

2006-2007

CST

1,61,83,731

High Court of Odisha,Cuttack

11

Entry Tax Act

2006-2007

ENTRY TAX

33,51,331

High Court of Odisha,Cuttack

12

OVAT, Act

2007-08 & 2008-09

OVAT

2,25,331

Additional CST Northern Zone

13

Entry Tax Act

2007-08 & 2008-09

ENTRY TAX

1,36,613

Additional CST Northern Zone

14

Central Sales Tax Act

2007-08 & 2008-09

CST

1,82,853

Additional CST Northern Zone

15

Central Sales Tax Act

01.04.2009 to 30.06.2010

CST

64,03,136

Additional CST Northern Zone

16

Central Sales Tax Act

01.08.2008 to 28.02.2011

CST

5,17,563

Additional CST Northern Zone

17

OVAT, Act

01.04.2009 to 31.03.2011

OVAT

2,98,363

Additional CST Northern Zone

18

Entry Tax Act

01.04.2009 to 31.03.2011

ENTRY TAX

9,04,748

Additional CST Northern Zone

19

OVAT, Act

01.08.2008 to 28.02.2011

OVAT

16,96,61,165

Commissioner of Commercial Tax,Cuttack

20

Entry Tax Act

01.08.2008 to 28.02.2011

ENTRY TAX

4,00,53,670

Commissioner of Commercial Tax,Cuttack

21

Custom Act 1962

2012 & 2013

Custom

Duty

1,38,48,914

Customs,Excise& Service Tax Appellate Tribunal, Bangalore

22

Income Tax act

2009-10 & 2011-12

Income Tax

88,93,575

The Commissioner of Income Tax(appeals)

Total

28,96,79,410

8 In our opinion and according to the information and explanation given to us, the company has defaulted in repayment of dues to banks who have declared the same as non-performing in respect of following amounts:

Particular

Nature of Loan

Period of Default

Amount outstanding in Books of Account as at 31st March 2016 (Rs.)

Remarks

State Bank of India

Cash Credit

28th November,2015 to 31st March, 2016.

88,29,08,085

Refer Note No-2(vi) to Financial Statements

Term Loan

5,57,30,655

Central Bank of India

Cash Credit

5,72,67,850

Term Loan

6,99,59,128

9 Based upon the audit procedures performed and the information and explanations given by management, the company has not raised moneys by way of initial public offer or further public offer including debt instrument.

10 Based upon audit procedures performed and the information and explanations given by management, we report that no fraud by the company has been noticed.

11 Based upon audit procedures performed and the information and explanations given by management, the managerial remuneration has been paid or provided in accordance with the requisite approvals mandate by the provisions of section197 read with schedule V to the companies Act.

12 In our opinion, the company is not a nidhi company.

13 In our opinion, all transactions with related parties are in compliance with section 177 and 188 of companies Act2013 and the details have been disclosed in the financial statements as required by the applicable accounting standards.

14 Based upon audit procedures performed and the information and explanations given by the management, the company has allotted on Preferential basis 1,10,05,330 no of equity shares and 1,28,49,605 no. of preference shares at a premium as decided by the Board of Directors. Further, the company has also allotted on Preferential basis 80,00,000 No’s of share warrants convertible into equivalent number of equity shares of face value of Rs.10 each of the company at an exercise price of Rs. 50(Rupees Fifty Only) (including a premium ofRs.40) per equity shares within 18 months from the date of issue of warrants, in its Board Meeting held on 14th October,2015, the allottees had exercised such power to convert 44,53,330 number of warrants into equity shares at board meeting held on different dates during the year ( Refer noteno.2(v)&5).

15 Based upon audit procedures performed and the information and explanations given by the management, the company has not entered into any non cash transaction with directors or persons connected with them.

16 In our opinion, the company is not required to be registered under section 45 1A of the Reserve Bank of India Act,1934.

Annexure B to the Independent Auditor''s report of even date on the Standalone Financial Statements as at and for the year ended 31st March 2016 of Scan Steels Limited

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (the Act)

We have audited the internal financial controls over financial reporting of Scan Steels Limited (the Company) as of March 31, 2016 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

Management''s Responsibility for Internal Financial Controls

The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors'' Responsibility

Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the Guidance Note) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require generally expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''s assets that could have a material effect on the standalone financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

For SRB & Associates

Chartered Accountants

Firm Regn. No: 310009E

B.Mohanty

Place : Rajgangpur Partner

Date : 24th May, 2016 M.N-056264