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Auditor Report of Bihar Sponge Iron Ltd.

Mar 31, 2015

Report on the Financial Statements

We have audited the accompanying financial statements of BIHAR SPONGE IRON LIMITED ("the Company"), which comprise the Balance Sheet as at 31st March, 2015, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information. Management's Responsibility for the 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 of these 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 of 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 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 thereunder.

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 control system over the 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 qualified audit opinion on the financial statements.

Basis for Qualified Opinion

The management has prepared the financial statements on the basis of going concern perhaps based on the facts that the Modified Draft Rehabilitation scheme has been submitted by the company on 03.12.2012 and the same is under the consideration BIFR. In our opinion the going concern concept is likely to be appropriate only if the modified rehabilitation scheme referred to above is approved by the BIFR with or without modifications.

In the mean while following liabilities may or may not materialised depending upon the final outcome of the dispute, have not been provided:-

i. Non recognition of liability on account of currency fluctuations on foreign currency loan and interest thereon (as required under Accounting Standard - 11, Revised) amounting to Rs. 2,32,381 thousand as provided in the BIFR Scheme dt. 29.07.2004 and also confirmed by AAIFR/ Single Bench of Jharkhand High Court, Ranchi since the company against the order of Single Bench of High Court, has filed Letters Patent Appellate Jurisdiction (LPA) before the Divisional Bench of High Court of Jharkhand, Ranchi (refer other note no. 3(II) appearing in Annexure-1)

ii. Non recognition penalty of Rs. 21,528 thousands recovered by South Eastern Coal Fields Ltd. On account of short lifting of coal quantity in terms of Fuel Supply Agreement since the matter has been disputed by the Company under writ petition filed before the Hon'ble High Court of Chhattisgarh (refer other note no 5 of Annexure I)

iii. No provision has been made in the books of accounts in respect of the undernoted items of expense in view of Shutdown of the Plant & Suspension of operations since 10th August, 2013 as well as other reasons contented by the company:-

a. Interest on unsecured loan taken from Promoters and other parties from 10.08.2013 to 31.03.2015( amount unascertained) (refer note 10 (a) of Annexure I).

b. Interest on Soft Loan taken from the Government of Jharkhand under the Industrial Rehabilitation Scheme 2003 amounting to Rs. 81,331 thousands from 10.08.2013 to 31.03.2015 which is subject to representation for waiver(refer note 10(b) of Annexure I) and approval thereof by the lender.

c. Salaries, Wages, Allowances, Contribution to PF including interest on overdue amount as well as employee benefit expenses w.e.f. 10.08.2013 to 31.03.2015, (amount unascertained) (refer note 10(c) of Annexure I)

Taking into consideration non provision of likely liabilities mentioned paragraph I, II and III(b) above.

a) Loss for the year would have been more by Rs. 3,35,240 thousand as compared to the disclosed loss of Rs. 73,614 thousand.

b) Accumulated losses would have been Rs.26,55,564 thousand as compared to disclosed losses of Rs. 23,20,324 thousand.

c) The above losses is however subject to ascertainment of liabilities as mentioned in Para iii (a) and iii(c).

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis of Qualified Opinion paragraph above, the aforesaid 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:

a. in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2015;

b. in the case of the Statement of Profit and Loss, of the loss for the year ended on that date; and.

c. in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order, 2015 ("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 statement on the matters specified in paragraphs 3 and 4 of the Order to the extent applicable to the company.

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

a. We have sought & obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. Except for the effects of the matter described in the Basis for Qualified Opinion Paragraph above, 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 Cash Flow Statement dealt with by this Report are in agreement with the books of account:

d. Except for the effects of the matter described in the Basis of Qualified Opinion paragraph above, in our opinion, the aforesaid 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. The matter described in the basis for Qualified Opinion paragraph above, in our opinion, may have an adverse effect on the functioning of the company.

f. On the basis of written representations received from the Directors as on 31st March, 2015 taken on record by the Board of Directors, we report that none of directors is disqualified as on 31st March, 2015 from being appointed as a director in terms of section 164(2) of the Act.

g. The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above.

h. 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 possible impact of pending litigations on its financial position in its financial statements -Refer other notes III of Annexure I (1) (i) to (ix) to the 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 were no amounts which were required to be transferred to the Investor Education and Protection Fund by the company.

Annexure referred to in paragraph 1 under the heading "Report on Other Legal and Regulatory Requirements" of Independent Auditors' Report of even date on the financial statements for the year ended March 31, 2015

i) Fixed Assets

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

b) The Company has a programme of verifying all of the fixed assets over a period of three years, which in our opinion is reasonable, having regard to the size of the Company and nature of assets. Since the plant is under shut down from the previous year, hence no physical verification of Fixed Asset has been carried out by the management during the year as such we are unable to comment on the discrepancies, if any,between the physical balance and book balance and their adjustment in the books of accounts at the year end.

ii) Inventories

a) The stock of finished goods, stores, spare parts and raw materials have not been physically verified by the management at reasonable intervals during the year since the plant has been under shut down and operations suspended w.e.f. 10.08.2013.

b) The company has the procedures of physical verification of inventories followed by the management which are reasonable and adequate in relation to the size of the Company and nature of its business, however no physical verification has been carried out during the year ended 31.03.2015 in view of the fact stated at (ii) a) above.

c) The company has maintained proper records of inventory showing full details regarding quantity of receipts, issues, balances and dates of transactions. Since no physical verification of inventories were carried out during the year hence the question of discrepancies, if any, observed and their adjustment in the books of account does not arise.

iii) Transactions with parties u/s 189 of the Companies Act, 2013

The company has not granted any loans secured or unsecured to companies, firms or other parties covered in the register maintained under section 189 of the Act as such Para (a) & (b) of clause 3 (iii) are not applicable.

iv) Internal Control

In our opinion and according to the information and explanations given to us, there is an adequate internal control procedure commensurate with the size of the Company and the nature of its business with regard to purchase of inventory, fixed assets, and for sale of goods and services. However, there is a need of strengthening internal control with respect to obtaining of confirmation of balances from major parties.

There are no continuing failures to correct matters in respect of lack of adequacy of internal controls brought to the notice.

v) Deposits

The Company has not accepted any deposits from the public which are covered under the directives issued by the Reserve Bank of India and the provisions of section 73 to 76 or any other relevant provisions of the Act and the rules framed thereunder.

vi) Cost Records

The maintenance of Cost Records has been specified by the Central Government under sub section (1) of Section 148 of the Companies Act, 2013. Since there have been no operations during the Financial year 2014-15, no records have been made & maintained by the company.

vii) Statutory Dues

a) According to the books and records, examined by us and information and explanations given to us, the company has not been regular in depositing the undisputed Statutory dues with the appropriate authorities including Provident Fund, Income Tax(TDS &TCS), Sales Tax, Service Tax, Excise duty, Value Added Tax, Cess & other applicable statutory dues during the year except that, the amount of excise duty of earlier year has been deposited by the company during the financial year along with interest.

The arrears on account of such statutory dues as at the end of the financial year 31st March 2015 for a period of more than six month from the date they become payable are Service Tax: Rs 2,348 thousand, Provident fund: Rs 5,123 thousand: Family Pension Scheme: Rs. 703 thousand, Income Tax (TDS/TCS)Rs. 4054 thousand, Electricity Duty: 320 thousand and Cess Rs. 100 thousand.

b) The details of dues of sales tax, custom duty, excise duty, trade tax and cess etc. which have not been deposited on account of dispute are given hereunder:

Name of the Statute Forum where Dispute pending 1. The Customs Act, 1962 CESTAT, Kolkata

2. JVAT Act, 2005 Jt. Commissioner of Commercial Taxes (Appeals) Jamshedpur, who has recommended case on 08.10.2013 to DCIT to verify and allow credit for taxes, if any, paid earlier.

3. The Central Sales Tax Act, 1956 Jt. Commissioner of Commercial Taxes (Appeals).

4. JVAT Act, 2005 Disputed demand for JVAT for the F.Y. 2010-11 u/s 70(5)(b) under appeal before the Jt. Comm. of Commercial Taxes (Appeals), Jsr. However stay has been granted on 20.01.2012 (Amount paid on appeal Rs. 5.88 lacs)

Demand raised by DCCT, Jsr for tax due and/penality imposed or interst payable under JVAT Act, 2005 of the F.Y. 2010-11 under dispute before JCCT, Jsr (Amount paid on appeal Rs. 15 lacs on 19.10.2012)

5. Finance Act, 1994 The Commissioner of Appeals Central Excise & Service Tax, Ranchi

6. Income Tax Act, 1961 The Commissioner of Income Tax (Appeals), JSR

Name of the Statute Nature of dues Period of Amount Dispute Rs. Thousand 1. The Customs Act, 1962 Custom Duty & Demurrage 1981-92 10,427

Charges and interest on imported Stores & spare parts 1994-95 5,032

2. JVAT Act, 2005 Tax on non-submission of JVAT Forms 2006-07 2,397 3. The Central Sales Tax Act, 1956 Tax on non-submission of 'C' Forms 2006-07 311 4. JVAT Act, 2005 Tax on JVAT 2010-11 5,879 Tax on JVAT 2010-11 24,786 5. Finance Act, 1994 Recovery of Irregular Cenvat Credit, Cess 2009-10 123 availed and Penalty thereon

6. Income Tax Act, 1961 Short deduction/ 2004-05 to 8,334 collection of Tax at 2008-09 Source with interest and penalty The above does not include the amount of assessed tax & penalty demand for JVAT of Rs. 22,117 thousand, CST Rs. 73,645 thousand and Electricity Duty of Rs.2,281 thousand for which the company is contemplating to file appeals before the appropriate authorities (refer note on contingent liabilities (Annexure I/ para III on the Basis of Qualified Opinion of our report ).

c) The Company is not required to transfer any amount to the Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act 2013 and rules made thereunder.

viii) The accumulated losses of the company at the end of the financial year March 31,2015 substantially exceeds its net worth and the company was declared as Sick industrial undertaking in 1996. Further the Company has incurred cash losses during the current financial year and in the immediately preceding financial year

ix) The company has not defaulted in payment of dues to financial institutions/Banks. There has been no debenture in the company.

x) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions during the year.

xi) The term loans taken by the Company have been applied for the purpose for which they were obtained, however there has been no term loans obtained during the year under audit.

xii) Based upon the audit procedures performed and on the basis of information and explanations provided by the management, we report that no fraud on or by the Company has been noticed or reported during the year under audit.

For Thakur, VaidyanathAiyar& Co. Chartered Accountants [FRNo. 000038N]

M.P. Thakur Place : New Delhi (Partner) Dated :12th May, 2015 Membership No. 052473


Mar 31, 2014

We have audited the accompanying financial statements of BIHAR SPONGE IRON LIMITED ("the Company"), which comprise the Balance Sheet as at March 31, 2014, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these 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 Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control 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 financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing iss*ued by the Institute of Chartered Accountants of India. 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 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 control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, 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.

Basis for Qualified Opinion

The management has prepared the financial statements on the basis of going concern perhaps based on the facts that the Modified Draft Rehabilitation Scheme has been submitted by the company on 03.12.2012 and sill under the consideration BIFR. In our opinion the going concern concept is likely to be appropriate only if the modified rehabilitation scheme referred to above is approved by the BIFR with or without modifications.

In the meanwhile following liabilities may or may not materialised depending upon the final outcome of the dispute, have not been provided :-

i. Non recognition of liability on account of currency fluctuations on foreign currency loan and interest thereon (as required under Accounting Standard - 11, Revised) amounting to Rs. 2754.09 lacs as provided in the BIFR Scheme dt. 29.07.2004 and also confirmed by AAIFR/ Single Bench of Jharkhand High Court, Ranchi since the company against the order of Single Bench of High court, has filed Letters Patent Appellate Jurisdiction (LPA) before the Divisional Bench of High Court of Jharkhand, Ranchi (Note No. 3(ii) appearing in Annexure I).

ii. Non recognition penalty of Rs. 215.28 lacs recovered by South Eastern Coal Fields Ltd. on account of short lifting of coal quantity in terms of Fuel Supply Agreement since the matter has been disputed by the Company before the Chhattisgarh High Court (refer note no. 5 of Annexure I).

iii. Non recognition of Rs. 171.79 lacs forfeited by CCL for additional price under tapering linkage policy for which company has filed Writ Petition(C) before the Jharkhand High Court (refer note no. 7 of Annexure I)

iv. No provision has been made in the books of accounts in respect of the undernoted items of expense in view of shutdown of the plant S suspension of operations since 10* August 2013 as well as other reasons contended by the company :-

a. Interest on unsecured loan from Promoters and other parties from 10.08.2013 to 31.03.2014 (amount unascertained) (refer note 8 (a) of Annexure I).

b. Interest on Soft Loan taken from the Government of Jharkhand under and Industrial Rehabilitation Scheme 2003 amounting to Rs. 305.26 lacs from 10.08.2013 to 31.03.2014 which is subject to representations for waiver (refer note 8 (b) of Annexure I).

c. Salaries, Wages, Allowances as well as employee benefit expenses w.e.f.10.08.2013 to 31.03.2014, (amount unascertained) (refer note 8 (c) of Annexure I).

Taking into consideration non provision of likely liabilities mentioned paragraph I, II, III and iv (a) above

a. Loss for the year would be more by Rs. 3446.42 lacs as compared to the disclosed loss of Rs.1774.30 lacs.

b. Accumulated losses would be Rs.24644.34 lacs as compared to disclosed losses of Rs. 21197.92.

c. The above losses is however subject to ascertainment of liabilities mentioned in Para iv (a) and iv (c).

Opinion

In our opinion and to the best of our information and according to the explanations given to us, subject to the effects of the matter described in the Basis of Qualified Opinion paragraph, the 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:

a. in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2014;

b. in the case of the Statement of Profit and Loss, of the loss for the year ended on that date; and

c. in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Emphasis of Matter

We draw attention to note no. 9 of Annexure I to the financial statements regarding managerial remuneration aggregating to Rs. 3.25 lakhs paid / provided for a whole time director of the company during the year in respect of which Special Resolution at the General Meeting and Central Government approval are yet to be obtained in accordance with the requirements of Schedule XIII and other applicable provisions of the Companies Act, 1956. 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, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order to the extent applicable to the company.

2. As required by section 227(3) of the Act, 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 purpose of our audit;

b. In our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

c. The Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account;

d. Except for the effects of the matter described in the basis of Qualified Opinion paragraph, in our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards referred to in sub section (3C) of section 211 of the Companies Act, 1956;

e. On the basis of written representations received from the Director (except one Director who is in the service of the Government of Bihar and is the nominee of the BSIDC and on the board of the Company) other than Government Nominee Director, as on March 31, 2014, and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31, 2014, from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956. The said Director of BSIDC, in the opinion of the Board is stated to be covered by the exemption granted for the Director u/s 274(1) (g) of the Companies Act, 1956.

f. Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

Annexure referred to in paragraph 1 under the heading "Report on Other Legal and Regulatory Requirements" of Independent Auditors'' Report of even date in the matters of Bihar Sponge Iron Limited ("the Company") on the Financial Statements for the year ended March 31, 2014

0 Fixed Assets

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

b) The Company has a programme of verifying all of the fixed assets over a period of three years, which in our opinion is reasonable, having regard to the size of the Company and nature of assets. Discrepancies noticed on physical verification of the fixed assets conducted during the year are not material and have been properly dealt with in the books of account.

c) The Company has not disposed off substantial part of its fixed assets during the year, which may have any impact on the going concern nature of the Company.

ii) Inventories

a) The stock of finished goods, stores, spare parts and raw materials have not been physically verified by the management at reasonable intervals during the year /at the yearend since the plant has been under shut down and operations suspended w.e.f. 10.08.2014.

b) The company has the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and nature of its business, however no physical verification has been carried out during the year ended 31.03.2014 in view of the fact stated at (ii) a) above.

c) The company has maintained proper records of inventory showing full details regarding quantity of receipts, issues, balances and dates of transactions. Since no physical verification of inventories were carried out during the year hence the question of discrepancies, if any, observed and their adjustment in the books of account does not arise.

iii) Transactions with parties u/s 301 ofthe Companies Act, 1956

a) The company has not granted any loans secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Act. In view of (a) above, Para (b), (c) & (d) of clause 4 (iii) are not applicable

b) The Company had taken unsecured loan amounting to Rs. 38.03 lakhs during the year from companies, firms or other parties covered in the register maintained under section 301 ofthe Companies Act 1956, however the amount outstanding comes to Rs. 4204.10 lakhs from four parties (including opening balance and net of repayment) as at 31.03.2014 (Rs. 4166.07 lacs from four parties including Opening balance as at 31.03.2013).

c) The rate of interest and other terms and conditions of such loans taken by the company are not prima facie prejudicial to the interest of the company.

d) Since there is no stipulation for the repayment ofthe principal amount and interest due thereon, we are unable to offer any comment.

iv) Internal Control

In our opinion and according to the information and explanations given to us, there is an adequate internal control procedure commensurate with the size of the Company and the nature of its business with regard to purchase of inventory, fixed assets, sale of goods and services. However, there is a need of strengthening internal control with respect to obtaining of confirmation of balances from major parties.

There are no continuing failures to correct matters in respect of lack of adequacy of internal controls brought to the notice.

v) (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Act have been entered in the register required to be maintained under that section.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rs. five lacs in respect of any party during the year have been made at prices which are reasonable having regard to the prevailinq market price at the relevant time.

vi) Fixed Deposits

The Company has not accepted any deposits from the public which are covered under the directives issued by the Reserve Bank of India and the provisions of sections 58A and section 58AA or any other relevant provisions ofthe Act and the rules framed thereunder.

vii) Internal Audit System

The Company has an adequate internal audit system commensurate with its size and nature of its business.

viii) Cost Records

We have broadly reviewed the Cost Records maintained by the Company pursuant to the Companies (Cost Accounting records) Rule 2011 prescribed by the Central Government under 209(1 )(d) of the Companies Act 1956 and are of the opinion that prima facie the prescribed cost records have been maintained We have, however, not made a detailed examination ofthe cost records with a view to determine whether they are accurate or complete. ix) Statutory Dues

a) According to the books and records, examined by us and information and explanations given to us, except the Sales tax, VAT Electricity duty and Cess etc company has not been regular in depositing the undisputed statutory dues with the appropriate authorities including Provident Fund Income Tax (TDS & TCSl'' Service Tax, Excise Duty and other applicable statutory dues during the year under audit.

The arrears on account of such dues outstanding at the end ofthe financial yearfor a period more than six months from the date they become payable are Excise duty rs 84.48 lakhs service tax rs 14.85 lakhs provident fund rs 50.46 lakhs family pension fund rs 4.49 lakhs income tax tds /tcs rs 23.08 lakhs electricity duty rs 3.20 lakhs cess rs .01 lakhs.

b) The details of dues of sales tax, custom duty, excise duty, trade tax and cess etc. which have not been deposited on account of dispute are given hereunder:

Name of the Statute Forum where Dispute pending

1. The Customs Act, 1962 CESTAT, Kolkata

2. The Customs Act, 1962 CESTAT, Kolkata

3. JVAT Act, 2005 Jt. Commissioner of Commercial Taxes (Appeals) Jamshedpur, who has recommended case on 08.10.2013 to DCIT to verify and allow credit for taxes, if any, paid earlier.

4. The Central Sales Tax Act Jt. Commissioner of Commercial 1956 Taxes (Appeals).

5. JVAT Act, 2005 Disputed demand for JVAT for the F.Y. 2010-11 u/s 70(5)(b) under appeal before the Jt. Comm. of Commercial Taxes (Appeals), Jsr. However stay has been granted on 20.01.2012 (Amount paid on appeal Rs. 5.88 lacs) Demand raised by DCCT, Jsr for tax due and/penality imposed or interst payable under JVAT Act, 2005 of the F.Y. 2010-11 under dispute before JCCT, Jsr (Amount paid on appeal Rs. 15 lacs on 19.10.2012)

6. Finance Act, 1994 The Commissioner of Appeals Central Excise & Service Tax, Ranchi

7. Income Tax Act, 1961 The Commissioner of Income Tax (Appeals), JSR

Name of the Statute Nature of dues Period of Amount Dispute Rs. lacs

1. The Customs Act, 1962 Custom Duty on rate diff 1987-89 106.92 on account of classification of items on imported plant & machinery

2. The Customs Act, 1962 Custom Duty & Demurrage 1991-92 104.27 Charges and interest on 1994-95 50.32 imported Stores & spare parts

3. JVAT Act, 2005 Tax on non-submission of 2006-07 23.97 JAVT Forms

4. The Central Sales Tax Tax on non-submission of 2006-07 3.11 act 1956 C forms

5. JVAT Act, 2005 Tax on JVAT 2010-11 58.79

Tax on JVAT 2010-11 247.86

6. Finance Act, 1994 Recovery of Irregular Cenvat Credit, Cess 2009-10 1.23 availed and Penalty thereon

7. Income Tax Act, 1961 Short Deduction/ Collection of Tax at Source 2004-05 83.34 with interest and penalty to 2008-09

x) The accumulated losses of the company at the end of the financial year March 31,2014 substantially exceeds its net worth and the company was declared as Sick industrial undertaking in 1996. Furtherthe Company has incurred cash losses during the current financial year and in the immediately preceding financial year.

xi) The company has not defaulted in payment of dues to financial institutions/Banks. There has been no debenture in the company.

xii) The Company has not granted loans and advances, on the basis of security by way of pledge of shares, debentures and other securities.

xiii) The company is not a chit fund, nidhi or mutual benefit fund/society. Therefore, the provision of clause 4 (xiii) (a) to (d) for the Companies (Auditor''s Report) Order 2003 are not applicable to the Company.

xiv) The Company has not dealt or traded in shares, securities, debentures, and other investments during the year and accordingly the provisions of Companies (Auditor''s Report) order 2003 are not applicable.

xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks orfinancial institutions during the year.

xvi) The term loans taken by the Company have been applied for the purpose for which they were obtained, however there has been no term loans obtained durinq the year under audit.

xvii) According to the information and explanation given to us and on an overall examination of the balance sheet of the company as at the end of the year, funds raised on short term basis has not been used for long term investment.

xviii) The company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act during the year.

xix) The Company has not issued debentures hence the question of pending creation of security does not arise.

xx) The company has not raised any money by public issue during the year and hence disclosure for end use does not arise.

xxi) Based upon the audit procedures performed and on the basis of information and explanations provided by the management, we report that no fraud on or by the Company has been noticed or reported during the year under audit.

For Thakur, Vaidyanath Aiyar & Co. Chartered Accountants FRN: 000038N (M.P. Thakur) Place: New Delhi Partner Date : 29.05.2014 M No . 052473


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of Bihar Sponge Iron Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory

information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these 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 Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act").

This responsibility includes the design, implementation and maintenance of internal control 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 financial statements based on our audit.

We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain easonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and 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 control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances.

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have abtained is sufficient and appropriate to provide a basis for our audit opinion.

Basis for Qualified Opinion

Attention is drawn to Note No. 3(a) appearing in Annexure I to the financial statements regarding non recognition of liability on account of currency fluctuations on foreign currency loan and interest thereon (as required under Accounting Standard- 11, Revised) amounting to Rs. 2251.93 lacs as provided in the BIFR Scheme dt. 29.07.2004 and also confirmed by AAIFR/ Single Bench of Jharkhand High Court, Ranch! since the company against the order of Single Bench of High court, has filed Letters Patent

Appellate Jurisdiction (LPA) before the Divisional Bench of High Court of Jharkhand, Ranchi. Accordingly the net loss for the year and current liabilities at the year end would have been increased and the shareholder''s funds have been further reduced by Rs. 2251.93 lacs.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effect of the matter described in the Basis of Qualified Opinion paragraph, the 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:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2013;

b) in the case of the Statement of Profit and Loss, of the loss for the year ended on that date; and

c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. Emphasis of Matter

We draw attention to note no. 7 of Annexure I to the financial statements regarding managerial remuneration aggregating to Rs. 4.81 lakhs paid to a whole time director of the company during the year in respect of which Special Resolution at the general meeting and Central Government approval are yet to be obtained in accordance with the requirements of Schedule XIII and other applicable provisions of the Companies Act, 1956. 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, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by section 227(3) of the Act, 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 purpose of our audit;

b) In our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

c) The Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account;

d) Except for the effects of the matter described in the basis of Qualified Opinion paragraph, in our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards referred to in sub section (3C) of section 211 of the Companies Act, 1956;

e) On the basis of written representations received from the Director (except one Director who is in the service of the Government of Bihar and is the nominee of the BSIDC and on the board of the Company) other than Government Nominee Director, as on March 31, 2013, and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31, 2013, from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956. The said Director of BSIDC, in the opinion of the Board is stated to be covered by the exemption granted for the Director u/s 274(1) (g) of the Companies Act, 1956.

f) Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

Annexure referred to in paragraph 1 under the heading "Report on Other Legal and Regulatory Requirements" of even date

i) Fixed Assets

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

b) The Company has a programme of verifying all of the fixed assets over a period of three years, which in our opinion is reasonable, having regard to the size of the Company and nature of assets. Discrepancies noticed on physical verification of the fixed assets conducted during the year are not material and have been properly dealt with in the books of account.

c) The Company has not disposed off any substantial part of its fixed assets during the year, which may have any impact on the going concern nature of the Company.

ii) Inventories

a) The stock of finished goods, stores, spare parts and raw materials have been physically verified by the management at reasonable intervals during the year.

b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and nature of its business.

c) The Company has maintained proper records of inventory showing full details regarding quantity of receipts, issues, balances and dates of transactions. The discrepancies, noticed on the aforesaid verification, between the physical stocks and stocks as per the books have been properly dealt with in the books of accounts.

iii) Transactions with parties u/s 301 of the Companies Act, 1956

a) The Company has not granted any loans secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Act.

b),c)&d) In view of (a) above, Para (b), (c) & (d) of clause 4 (iii) are not applicable.

e) The Company had taken unsecured loan amounting to Rs. 343.35 lacs from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act 1956, however the amount outstanding comes to Rs. 4166.08 lacs (including opening balance and net of repayment) as at 31.03.2013.

f) The rate of interest and other terms and conditions of such loans taken by the Company are not prima facie prejudicial to the interest of the Company.

g) The payment of principal amount and interest of such loan are regular wherever specified.

iv) Internal Control

In our opinion and according to the information and explanations given to us, there is an adequate internal control procedure commensurate with the size of the Company and the nature of its business with regard to purchase of inventory, fixed assets, sale of goods and services. However, there is a need of strengthening internal control with respect to obtaining of confirmation of balances from major parties.

There are no continuing failures to correct matters in respect of lack of adequacy of internal controls brought to the notice.

v) (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Act have been entered in the register required to be maintained under that section.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rs. Five Lacs in respect of any party during the year have been made at prices which are reasonable having regard to the prevailing market price at the relevant time.

vi) Fixed Deposits

The Company has not accepted any deposits from the public which are covered under the directives issued by the Reserve Bank of India and the provision of sections 58A and section 58AA or any other relevant provisions of the Act and the rules framed there under.

vii) Internal Audit System

The Company has an adequate internal audit system commensurate with its size and nature of its business.

viii) Cost Records

We have broadly reviewed the Cost Records maintained by the Company pursuant to the Companies (Cost Accounting records) Rule 2011 prescribed by the Central Government under 209(1)(d) of the Companies Act 1956 and are of the opinion that prima facie the prescribed cost records have been maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

ix) Statutory Dues

a) According to the books and records, examined by us and information and explanations given to us, except the SalesTax, VAT, Electricity Duty and Cess etc., Company has not been regular in depositing the undisputed statutory dues with the appropriate authorities including Provident Fund, Income Tax, Service tax, Excise Duty and other applicable statutory dues during the year under audit.

The arrears on account of such dues outstanding at the end of the financial year for a period more than six months from the date they become payable are '' Rs. 2.72 lacs for Service Tax and Rs. 0.25 lacs for Income Tax(TCS).

b) The details of dues of Sales Tax, Custom Duty, Excise Duty, Trade Tax and Cess etc. which have not been deposited on account of dispute are given hereunder:

Name of the Statute Forum where Dispute pending

1. The Customs Act, 1962 CESTAT, Kolkata

2. The Customs Act, 1962 CESTAT, Kolkata

3. JVAT Act, 2005 Jt. Commissioner of Commercial Taxes (Appeals) Jamshedpur

4. The Central Sales Tax Act, 1956 Jt. Commissioner of Commercial Taxes (Appeals). JSR

5. JVAT Act, 2005 Disputed demand for JVAT for the FY. 2010-11 u/s 70(5)(b) under appeal before the Jt. Comm. of Commercial Taxes (Appeals), Js has been granted on 20.01.2012 ( Amount paid on appeal Rs. 5.88 lacs)

Demand raised by DCCT, Jsr for tax due and/penality imposed or interst payable under JVAT Act, 2005 of the F.Y. 2010-11 under disputer before (Amount paid on appeal Rs. 15 lacs on 19.10.2012)

6. Finance Act, 1994 The Commissioner of Appeals Central Excise & Service Tax, Ranchr

7. Income Tax Act, 1961 The Commissioner of Income Tax (Appeals), JSR

Name Nature of dues Period of Amount Dispute Rs. lacs

The Customs Act, 1962 Custom Duty on rate diff. on 1987-89 106.92 account of classification of items on imported plant & machinery

The Customs Act, 1962 Custom Duty & Demurrage 1991-92 104.27

Charges and interest on 1994-95 50.32 imported Stores & spare parts

The Customs Act, 1962 Tax on non-submission of JVAT Forms 2006-07 23.97

The Customs Act, 1962 Tax on non-submission of ''C Forms 2006-07 3.11

The Customs Act, 1962 Tax on JVAT 2010-11 58.79

The Customs Act, 1962 Tax on JVAT 2010-11 247.86

Income Tax Act, 1961 Recovery of Irregular Cenvat Credit, Cess 2009-10 1.23 availed and Penalty thereon

Short Deduction/ Collection of Tax at Source 2004-05 to 2008-09 83.34 with interest and penalty

x) The Company has accumulated losses at the end of the financial year 31s" March 2013 that are more than the net worth of the company. Further the Company has incurred cash losses during the current financial year and in the immediately preceding financial year.

xi) The Company has not defaulted in payment of dues to financial institutions/banks. There has been no debenture in the Company.

xii) The Company has not granted loans and advances, on the basis of security by way of pledge of shares, debentures and other securities.

xiii) The Company is not a chit fund, nidhi or mutual benefit fund/society. Therefore, the provision of clause 4 (xiii) (a) to (d) for the Companies (Auditor''s Report) Order 2003 are not applicable to the Company.

xiv) The Company has not dealt or traded in shares, securities, debentures, and other investments during the year.

xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions during the year.

xvi) The term loans taken by the Company have been applied for the purpose for which they were obtained, however there has been no term loans obtained during the year under audit.

xvii) According to the information and explanation given to us and on an overall examination of the balance sheet of the Company as at the end of the year, funds raised on short term basis has not been used for long term investment.

xviii) The Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under section 301 of the Companies Act during the year.

xix) The Company has not issued debentures hence the question of pending creation of security does not arise.

xx) The Company has not raised any money by public issue during the year and hence disclosure for end use does not arise.

xxi) Based upon the audit procedures performed and on the basis of information and explanations provided by the management, we report that no fraud on or by the Company has been noticed or reported during the year under audit.

For Thakur, Vaidyanath Aryar & Co.

Chartered Accountants

[FRNO.000038N]

Place : New Delhi M.P. Thakur

Dated : 28.05.2013 (Partner)

Membership No. : 052473


Mar 31, 2012

1. We have audited the attached Balance Sheet of BIHAR SPONGE IRON LTD. as at 31st March, 2012 and the Statement of Profit and Loss and the Cash Flow Statement of the Company for the year ended on that date, annexed thereto. 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

2. We 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 mis-statement. 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 management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order.

4. Attention is drawn to the Note no.3(a) appearing in the Annexure to the financial statements regarding non recognition of liability on account of currency fluctuations on foreign currency loan and interest thereon amounting to Rs. 2142.17 lacs as provided in the BIFR scheme dt. 29.07.2004 and also confirmed by AAIFR/Single Bench of Jharkhand High Court, Ranchi since the company against the order of Single bench of High court., has filed Letters Patent Appellate Jurisdiction (LPA) before the higher bench of High Court of Jharkhand, Ranchi.

5. Further to our comments in Paragraph 3 &4 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 proper books of accounts as required by law have been kept by the Company so far as appears from our examination of those books;

(c) The Balance Sheet, Statement of Profit & Loss and the Cash Flow Statement dealt with by this report are in agreement with the books of account;

(d) In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with this report comply with Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

(e) On the basis of written representations received from the Director (except one Director who is in the service of the Government of Bihar and is the nominee of the BSIDC and on the board of the company) other than Government Nominee Director, as on 31st March, 2012 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March, 2012 from being appointed as a Director in terms of clause (g) of sub - section (1) of Section 274 of the Companies Act, 1956. The said director of BSIDC, in the opinion of the Board is stated to be covered by the exemption granted for the Directors u/s274 (1) (g) of the Companies Act, 1956.

(f) In our opinion and to the best of our information and according to explanations given to us, the said financial statements together with notes thereon attached thereto give, in the prescribed manner, the information required by the Act, and except the financial effect of the matters referred to in paragraph 4 above on the understatement of Loss for the year and the understatement of liabilities as at the year end by Rs. 2142.17 lacs, give a true and fair view in the conformity with the accounting principles generally accepted in India;

i.) in the case of Balance Sheet of the State of affairs of the Company as at 31s1 March, 2012;

ii.) in the case of the Statement of Profit & Loss of the Loss for the year ended on that date; and

iii.) in the case of the Cash Flow Statement of the Cash flow for the year ended on that date.

The Annexure referred to in the main Auditor's Report of Bihar Sponge Iron Limited for the Financial Year 2011-2012 of even date: i) Fixed Assets

a) The Company has maintained proper records showing full particulars including quantitative details and situation of its fixed as sets.

b) The Company has a programme of verifying all of the fixed assets over a period of three years, which in our opinion is reasonable, having regard to the size of the Company and nature of assets. Discrepancies noticed on physical verification of the fixed assets conducted during the year are not material and have been properly dealt with in the books of account.

c) The Company has not disposed off any substantial part of its fixed assets during the year, which may have any impact on the going concern nature of the Company.

ii) Inventories

a) The stock of finished goods, stores, spare parts and raw materials have been physically verified by the management at reasonable intervals during the year.

b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and nature of its business.

c) The company has maintained proper records of inventory showing full details regarding quantity of receipts, issues, balances an d dates of transactions. The discrepancies, noticed on the aforesaid verification, between the physical stocks and stocks as per the books have been properly dealt with in the books of accounts.

iii) Transactions with parties u/s 301 of the Companies Act, 1956

a) The company has not granted any loans secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Act.

b),c)&d) In view of (a) above, Para (b), (c) & (d) of clause 4 (iii) are not applicable.

e) The company has taken unsecured loans from companies, firm & other parties covered in the register maintained under section 301 of the Act from four parties amounting Rs. 4081.08 lacs (including opening balance & net of repayment) as at 31.03.2012.

f) The rate of interest and other terms and conditions of such loans taken by the company are not prima facie prejudicial to the interest ofthe company.

g) The payment of principal amount and interest of such loan are regular.

iv) Internal Control

In our opinion and according to the information and explanations given to us, there is an adequate internal control procedure commensurate with the size of the Company and the nature of its business with regard to purchase of inventory, fixed assets, sale of goods and services.

There are no continuing failures to correct matters in respect of lack of adequacy of internal controls brought to the notice.

v) (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Act have been entered in the register required to be maintained under that section.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rs. five lacs in respect of any party during the year have been made at prices which are reasonable having regard to the prevailing market price at the relevant time.

vi) Fixed Deposits

The Company has not accepted any deposits from the public which are covered under the directives issued by the Reserve Bank of India and

the provision of sections 58A and section 58AA or any other relevant provisions of the Act and the rules framed there under.

vii) Internal Audit System

The Company has an adequate internal audit system commensurate with its size and nature of its business.

viii) Cost Records

We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting records) Rule 2011 prescribed by the Central Government under 209(1 )(d) of the Companies Act 1956 and are of the opinion that prima facie the prescribed cost records have been maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

ix) Statutory Dues

a) According to the records, the Company has been regular in depositing with appropriate authorities undisputed statutory dues including provident fund, income tax, wealth tax, service tax, sales tax, VAT, Entry tax, excise duty, cess and other applicable statutory dues except that there has been some delay in payment of excise duty/service tax /VAT/Sales Tax.

b) The details of dues of sales tax, custom duty, excise duty, trade tax and cess etc. which have not been deposited on account of dispute are given hereunder:

Name of the Forum where Nature of dues Period Amount Statute Dispute pending of Rs./ Dispute lacs

1. The Customs CESTAT, Kolkata Custom Duty on rate 1987-89 106.92 Act, 1962 diff. on account of classification of items on imported plant & Machinery

2. The Customs CESTAT, Kolkata Custom Duty & 1991-92 104.27 Demurrage Charges and interest on 1994-95 50.32 imported Stores & spare parts

3. JVAT Act, Jt. Commissioner Tax on Non-Submiss- 2006-07 23.97 2005 of Commercial of ion JVAT Forms Taxes (Appeals) Jamshedpur



Name of the Forum where Nature of dues Period Amount Statute Dispute pending of Rs./ Dispute lacs

4. The Central Jt. Commissioner Tax on Non-Submiss- 2006-07 3.11 Sales Tax of Commercial ion 'C' Forms Act, 1956 Taxes (Appeals)

5. JVAT Disputed demand Tax on JVAT 2010-11 78.71 for JVAT for the 11u/s 70(5)(b) under appeal before the Jt. Comm, of Commer- cial Taxes (Appeals), Jsr. However stay has been granted on 20.01.2012

6. Finance Act, The Commissioner Recovery of 2009-10 123.00 1994 of Appeals Irregular Cenvat Central Excise & Credit, Cess Service Tax, availed and RAnchi Penalty thereon 2010-11 199.00

7. Income Tax The Commissioner Short Deduction Act, 1961 of Income Tax Collection of Tax 2004-05 (Appleals), JSR at Source with to 2008-09 83.34 Interest and Penalty

Grand Total 772.64

x) The company has accumulated losses at the end of the financial year that are not less than fifty per cent of its net worth and the company has incurred cash loss during the current financial year and in the immediately preceding financial year.

xi) There are no continued defaults in repayment of dues to Financial Institutions or Banks but for certain delays in repayment of principal and interest due thereon on which compound interest has been paid.

xii) The Company has not granted loans and advances, on the basis of security by way of pledge of shares, debentures and other securities.

xiii) The Company is not a chit fund, nidhi or mutual benefit fund/society. Therefore, the provisions of clause 4 (xiii) (a) to (d) of the Companies (Auditor's Report)

Order 2003 are not applicable to the Company.

xiv) The Company has not dealt or traded in shares, securities, debentures, and other investments during the year.

xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions during the year.

xvi) The term loans taken by the Company have been applied for the purpose for which they were obtained, however there has been no term loans obtained during the year under audit.

xvii) According to the information and explanation given to us and on an overall examination of the balance sheet of the company as at the end of the year, funds raised on short term basis has not been used for long term investment.

xviii) The company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under section 301 of the Companies Act during the year.

xix) The Company has not issued debentures hence the question of pending creation of security does not arise.

xx) The company has not raised any money by public issue during the year and hence disclosure for end use does not arise.

xxi) Based upon the audit procedures performed and on the basis of information and explanations provided by the management, we report that no fraud on or by the Company has been noticed or reported during the year under audit.

For Thakur, Vaidyanath Aiyar & Co.

Chartered Accountants

[FR NO.000038N]

Place : New Delhi M.P. Thakur

Dated : 22nd August, 2012 (Partner)

Membership No. : 052473


Mar 31, 2010

We have audited the attached Balance Sheet of BIHAR SPONGE IRON LTD as at 31 st March, 2010 and also the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date, annexed thereto.

These financial statements are the responsibility of the Companys Management. Our responsibility is to express an opinion on these financial statements based on our audit.

We 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 mis-statement. 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 management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

1. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order.

2. Further to our comments in the said annexure referred in Paragraph 1 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 proper books of accounts as required by Law have been kept by the Company so far as appear from our examination of the books;

(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, the Balance Sheet, Profit and Loss Account and Cash Flow statement dealt with this reports comply with Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

(e) On the basis of written representations received from the Director (except one Director who is in the service of the Government of Bihar and is the nominee of the BSIDC and on the board of the Company) other than Government Nominee Director, as on 31sl March, 2010 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March, 2010 from being appointed as a Director in terms of clause (g) of sub - section (1) of Section 274 of the Companies Act, 1956. The said Director of BSIDC, in the opinion of the Board is stated to be covered by the exemption granted for the Directors u/s 274 (1) (g) of the Companies Act, 1956.

(f) In our opinion and to the best of our information and according to explanations given to us, the said accounts and read with significant Accounting Policies and Notes thereon as referred to in Schedule -18, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with accounting principles generally accepted in India.

i.) in the case of Balance Sheet of the State of affairs of the Company as at 31st March, 2010; ii.) in the case of the Profit & Loss Account of the Loss for the year ended on that date; and iii.) in the case of the Cash Flow Statement of the Cash flow for the year ended on that date.



The Annexure referred to in the main Auditors Report of Bihar Sponge Iron Limited of even date:

i) Fixed Assets

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

b) The Company has a programme of verifying all of the fixed assets over a period of three years, which in our opinion is reasonable, having regard to the size of the Company and nature of assets. Discrepancies noticed on physical verification of the fixed assets conducted during the year are not material and have been properly dealt with in the books of account.

c) The Company has not disposed off any substantial part of its fixed assets during the year, which may have any impact on the going concern nature of the Company.

ii) Inventories

a) The stock of finished goods, stores, spare parts and raw materials have been physically verified by the management at reasonable intervals during the year.

b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and nature of its business.

c) The Company has maintained proper records of inventory showing full details regarding quantity of receipts, issues, balances and dates of transactions. The discrepancies, noticed on the aforesaid verification, between the physical stocks and stocks as per the books have been properly dealt with in the books of accounts.

iii) Transactions with parties u/s 301 of the Companies Act, 1956

a) The Company has not granted any loans secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Act.

b),c) & d) In view of (a) above, Para (b), (c) & (d) of clause 4 (iii) are not applicable.

e) The Company has not taken any loan secured or unsecured from companies, firm or other parties except from a body corporate covered in the register maintained under Section 301 of the Act.

f) The rate of interest and other terms and conditions of such loans taken by the Company are not prima facie prejudicial to the interest of the Company.

g) The payment of interest of such loan are regular, however the terms of repayment of principal has not been specified.

iv) (a) & (b) According to the information and explanations given to us, there have been no contracts or arrangements referred to in Section 301 of the Act during the year to be entered in the register required to be maintained under that section. Accordingly commenting on transactions made in pursuance of such contracts or arrangements does not arise. v) Internal Control

In our opinion and according to the information and explanations given to us, there is an adequate internal control procedure commensurate with the size of the

Company and the nature of its business with regard to purchase of inventory, fixed assets, sale of goods and services. However, the internal control systems

need to be strengthened for obtaining of confirmation of balances from suppliers and other parties.

There are no continuing failures to correct matters in respect of lack of adequacy of internal controls brought to the notice. vi) Fixed Deposits

The Company has not accepted any deposits from the public which are covered under the directives issued by the Reserve Bank of India and the

provision of sections 58A and section 58AA or any other relevant provisions of the Act and the rules framed there under. vii) Internal Audit System

The Company has an adequate internal audit system commensurate with its size and nature of its business. viii) Cost Records

We are informed that the Central Government has not prescribed the maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956. ix) Statutory Dues

a) According to the records, the Company has been regular in depositing with appropriate authorities undisputed statutory dues including provident fund, income tax, wealth tax, service tax, sales tax, VAT, Entry tax, excise duty, cess and other applicable statutory dues except that there has been delay in payment of excise duty/service tax and in some cases for payment VAT/Sales Tax liabilities.

b) The details of dues of sales tax, custom duty, excise duty, trade tax and cess etc. which have not been deposited on account of dispute are given hereunder:

Name of the Statute Forum where Nature of dues

Dispute pending

1. The Central Excise Act, 1944 Jharkhand High Court, Ranchi Excise Duty on Freight on

Goods Transportation

2. The Customs Act, 1962 CESTAT, Kolkata Custom Duty on rate diff. on account of classification of items on imported plant & Machinery

3. The Customs Act, 1962 CESTAT, Kolkata Custom Duty & Demurrage Charges and interest on imported Stores & spare parts

4. JVAT Act, 2005 Jt. Commissioner of Commercial Tax on Non-Submission of JVAT Forms Taxes (Appeals) Jamshedpur

5. The Central Sales Tax Act, 1956 Jt. Commissioner of Commercial Tax on Non-Submission of C Forms Taxes (Appeals)

Name of the Statute Period of Amount

Dispute Rs./lacs

1. The Central Excise Act, 1 944 16.12.97 373.06 to 31.03.98

2.The Customs Act, 1 962 1987-89 106.92

3.The Customs Act, 1962 1991-92 104.27 1994-95 50.32

4.JVAT Act, 2005 2006-07 23.97

5.The Central Sales Tax Act, 1956 2006-07 3.11

Grand Total 661.65

x) The Company has accumulated losses at the end of the financial year that are not less than fifty per cent of its net worth and the Company has incurred cash loss during the current financial year and in the immediately preceding financial year.

xi) There are no continued defaults in repayments of dues to Financial Institutions or Banks but for certain delays in repayments of Principal &Interest due thereon on which compound interest has been paid.

xii) The Company has not granted loans and advances, on the basis of security by way of pledge of shares, debentures and other securities.

xiii) The Company is not a chit fund, nidhi or mutual benefit fund/ society. Therefore, the provisions of clause 4 (xiii) (a) to (d) of the Companies (Auditors Report) Order 2003 are not applicable to the Company.

xiv) The Company has not dealt or traded in shares, securities, debentures, and other investments during the year.

xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions during the year.

xvi) The term loans taken by the Company have been applied for the purpose for which they were obtained, however there has been no term loans obtained during the year under audit.

xvii) According to the information and explanation given to us and on an overall examination of the balance sheet of the company as at the end of the year, funds raised on short term basis has not been used for long term investment.

xviii) The Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956 during the year.

xix) The Company has not issued debentures hence the question of pending creation of security does not arise.

xx) The Company has not raised any money by public issue during the year and hence disclosure for end use does not arise.

xxi) Based upon the audit procedures performed and on the basis of information and explanations provided by the management, we report that no fraud on or by the Company has been noticed or reported during the year under audit.

For Thakur, Vaidyanath Aiyar & Co.

Chartered Accountants

[FRNO.000038N]

Place : New Delhi [M.P. Thakur]

Dated : 13th August, 2010 Partner

Membership No. : 052473

 
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