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Notes to Accounts of CMI FPE Ltd.

Mar 31, 2016

Income from services

Revenues from maintenance contracts are recognized pro-rata over the period of the contract.

Revenue from construction contracts

When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated with the construction contract are recognized as revenue and expenses respectively by reference to the percentage of completion of the contract activity at the reporting date. The percentage of completion of a contract is determined considering the proportion that contract costs incurred for work performed up to the reporting date bear to the estimated total contract costs.

For the purposes of recognizing revenue, contract revenue comprises the initial amount of revenue agreed in the contract, the variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue and they are capable of being reliably measured.

The percentage of completion method is applied on a cumulative basis in each accounting period to the current estimates of contract revenue and contract costs. The effect of a change in the estimate of contract revenue or contract costs, or the effect of a change in the estimate of the outcome of a contract, is accounted for as a change in accounting estimate and the effect of which are recognized in the Statement of Profit and Loss in the period in which the change is made and in subsequent periods.

When the outcome of a construction contract cannot be estimated reliably, revenue is recognized only to the extent of contract costs incurred of which recovery is probable and the related contract costs are recognized as an expense in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognized as an expense in the Statement of Profit and Loss in the period in which such probability occurs.

At each reporting date, the contracts in progress (Progress work) are valued and carried in the Balance Sheet under Other current assets. Advance and progress payments received from customers during the course to completion are carried under Other long-term liabilities and Other current liabilities.

The Cenvat Credit is accounted by crediting the amount to cost of purchases on receipt of goods and is utilized on clearance of finished goods by debiting Excise duty account.

Income from services is recognized as and when the services are rendered.

Interest Revenue is recognized on time proportion basis taking into account the amount outstanding and the rate applicable.

Dividend income is recognized when the right to receive dividend is established.

Eligible export benefits, if any, are recognized in the Statement of Profit and Loss when the right to receive credit as per the terms of the entitlement and reasonable certainty of collection/utilization is established in respect of exports made/to be made.

1. Fixed Assets:

i Tangible Assets:

Tangible assets are stated at their original cost of acquisition or construction less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and attributable cost if any, of bringing the asset to its working condition for its intended use. Capital work-in-progress is valued at cost.

ii Intangible Assets:

Intangible assets are stated at their cost of acquisition less accumulated amortization and impairment losses, if any. An intangible asset is recognized when it is probable that the future economic benefits attributable to the asset will flow to the enterprise and where its cost can be reliably measured. The cost of an intangible asset is allocated over the best estimate of its useful life on a straight line basis, a basis that reflects the pattern in which the asset''s economic benefits are consumed.

iii Fixed assets retired from active use and held for sale are stated at the lower of their net book value and net realizable value and are disclosed separately.

2. Foreign Currency Transactions:

i Initial recognition:

Foreign currency transactions are recorded in the reporting currency by applying the Monthly/ Weekly average exchange rate.

ii Translation:

Foreign currency monetary assets and liabilities reported at the Balance Sheet date are translated using the prevailing exchange rate on the Balance Sheet date. Non-monetary items which are carried in terms of historical cost denominated in foreign currency are reported using the exchange rate on date of transaction.

iii Exchange differences:

Exchange differences arising on settlement/restatement of short-term foreign currency monetary assets and liabilities of the Company are recognized as income or expense in the Statement of Profit and Loss.

iv Forward exchange contracts are entered into for minimizing risks (not intended for trading and speculative purposes). Any profit and loss arising on cancellation or renewal of forward exchange contract is recognized as income or expense for the year.

v The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to highly probable forecast transactions. The Company designates such forward contracts in a cash flow hedging relationship by applying the hedge accounting principles set out in "Accounting Standard 30 Financial Instruments: Recognition and Measurement" issued by the ICAI. These forward contracts are stated at fair value at each reporting date. Changes in the fair value of these forward contracts that are designated and effective as hedges of future cash flows are recognized directly in "Hedging reserve account" under Reserves and surplus, net of applicable deferred income taxes and the ineffective portion is recognized immediately in the Statement of Profit and Loss. Amounts accumulated in the "Hedging reserve account" are reclassified to the Statement of Profit and Loss in the same periods during which the forecasted transaction affects profit or loss. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecasted transactions, any cumulative gain or loss on the hedging instrument recognized in "Hedging reserve account" is retained until the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, the net cumulative gain or loss recognized in "Hedging reserve account" is immediately transferred to the Statement of Profit and Loss.

3. Investments:

Investments classified as long-term investments are stated at cost of acquisition. However, provision for diminution in value is made to recognize a decline, other than temporary, in its value. Investments classified as current investments are stated at lower of cost and fair value determined either on an individual basis or by category of investment, but not an overall (or global) basis.

4. Employee Benefits:

i Defined Contribution Plan:

The Company''s contribution to provident fund, superannuation fund and employee state insurance scheme are considered as defined contribution plans and are charged as an expense based on the amount of contribution required to be made and when services are rendered by the employees.

ii Defined Benefit Plan/Long-term compensated absences:

The Company’s liabilities towards gratuity and compensated absences are determined as at the end of the reporting date by an independent actuary using the Projected Unit Credit method. Past services are recognized on a straight line basis over the average period until the benefits become vested. Actuarial gain and losses are recognized immediately in the Statement of Profit and Loss as income or expense. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to the market yields at the Balance Sheet date on Government Securities where the currency and terms of the Government Securities are consistent with the currency and estimated terms of the defined benefit obligation.

5. Borrowing costs:

Borrowing costs include interest and ancillary costs incurred. Costs in connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the Statement of Profit and Loss over the tenure of the loan. Borrowing costs, allocated to and utilized for qualifying assets, pertaining to the period from commencement of activities relating to construction of the qualifying asset up to the date of capitalization of such asset is added to the cost of the assets.

6. Segment Reporting:

The accounting policies used in the preparation of the financial statements of the Company are also applied for Segment Reporting. Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the segment. Revenue and expenses, which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis, have been included under "Unallocated income/expenses".

7. Leases: Operating Lease:

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased asset, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of Profit and Loss on a straight line basis over the lease term.

Finance Lease:

Leases that transfer substantially all the risks and rewards incidental to ownership of the assets are classified as Finance Leases. Assets procured under finance lease are recognized as Leased Assets and depreciation charged with the same rate used for charging depreciation on the depreciable assets of same kind owned by the Company.

8. Earnings per Share:

Basic and diluted earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.

For the purpose of calculating the diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

9. Income Taxes:

Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961 and other applicable tax laws.

Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognized as an asset in the Balance Sheet when it is highly probable that future economic benefit associated with it will flow to the Company.

Deferred tax is recognized on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as at the reporting date. Deferred tax liabilities are recognized for all timing differences. Deferred tax assets are recognized for timing differences of items other than unabsorbed depreciation and carry forward losses only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realized. However, if there are unabsorbed depreciation and carry forward of losses and items relating to capital losses, deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that there will be sufficient future taxable income available to realize the assets. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each balance sheet date for their reliability.

At each Balance Sheet date, the Company assesses unrecognized deferred tax assets to the extent that it is reasonably certain or virtually certain supported by convincing evidence as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realized.

The carrying amount of deferred tax is reviewed at each Balance Sheet date. The Company writes down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain and supported by convincing evidence, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.

10. Impairment of Assets:

The carrying values of assets/cash generating units at each balance sheet date are reviewed for impairment if any indication of impairment exists.

If the carrying amount of the assets exceed the estimated recoverable amount, an impairment is recognized for such excess amount. The impairment loss is recognized as an expense in the Statement of Profit and Loss, unless the asset is carried at revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation decrease to the extent a revaluation reserve is available for that asset.

The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor.

When there is indication that an impairment loss recognized for an asset (other than a revalued asset) in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognized in the Statement of Profit and Loss, to the extent the amount was previously charged to the Statement of Profit and Loss. In case of revalued assets such reversal is not recognized.

11. Provisions and Contingent Liabilities:

A provision is recognized if, as a result of a past event, the Company has a present obligation that can be estimated reliably, and it is probable (more likely than not) that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by the best estimate of the flow of economic benefits required to settle the obligation at the reporting date. Where no reliable estimate can be made, a disclosure is made as contingent liability. A disclosure for a contingent liability is to be made when there is possible obligation that arises from past events and the existence of which will be confirmed only by occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that may, but probably will not require an outflow of resources or in respect of which the likelihood of outflow of resources is remote.

12. Provision for Doubtful Trade Receivables:

Specific provision for doubtful trade receivables is made where collection of trade receivables is uncertain.

13. Post-Sales Warranties and Liquidated Damages:

The Company provides its clients with a fixed-period warranty on all Contracts as per stipulated terms. Costs associated with such contracts are accrued at the time related revenues are recorded and included in cost of sales. The Company estimates such costs based on historical experience and the estimates are reviewed annually for any material changes in assumption. Liquidated damages are provided as per Management''s estimates on case to case basis.

14. Central Excise Duty:

Excise duty liability is accounted for as and when goods are produced as per consistent practice, in pursuance to the accepted practice of excise authorities.

15. Service tax input credit:

Service tax input credit is accounted for in the books in the period in which the underlying service received is accounted and when there is reasonable certainty in availing / utilizing the credits.

16. Operating Cycle:

Based on the nature of products / activities of the Company and the normal time between acquisition of assets and their realization in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.

17. Technology Fees:

Technology fees is computed under an agreement effective from January 1, 2010 for the tenure of 5 years and revised for another 5 years with effect from January 1, 2015 on value addition basis on the equipment manufactured with the help of new technology provided by CMI SA. Technology fees are being fully charged off at the time of incurrence, and is included under Project related expenses under head Other expenses.

18. Brand Fees:

Brand fees charged by CMI SA, under an agreement effective from January 1, 2010 for the tenure of 5 years and revised for another 5 years with effect from January 1, 2015 is being charged off at the time of incurrence and is included in Other expenses.

(ii) Terms/rights attached to equity shares:

The Company is having only one class of equity shares having par value of '' 10/- each. Each holder of equity share is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend, if proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive remaining assets of the Company, after the distribution of all preferential amounts. The distribution will be in proportion of the paid up share capital held by the shareholders.

Note:

The above borrowings from bank were secured by first pari passu charge over land and building of the Company located at Andheri and plot nos. A-84/2 and A-84/3 at Taloja, plant and machinery at Taloja factory, hypothecation of stock and book debts. The Company continues to avail non-fund based limits and the charge continues.

* Cost of material consumed Closing stock - Opening stock Note:

Since the Company is a project management company and engaged in the business of putting up projects for its clients on turnkey basis, the Company is following percentage of completion method as prescribed under Accounting Standard-7 Construction contracts under which project stock, manufactured items and other direct costs are considered as project cost incurred till date. Inventory procured for a specific project is immediately booked to the project as consumed and is not considered as inventory. In view of the above, item wise break-up for cost of materials consumed is not available in the system.

*Matters relating to:

(i) During the period October 2007 to February 2008, the Company had paid service tax on the Commission charged by their non-resident commission agents for the services rendered in connection with sales of the Company''s finished goods in overseas market and availed Cenvat Credit. The Central Excise department had issue a show cause Notice No. F.No.V(CH84)3-06/Dem./2009-10, dated 29.10.2009 for denial of wrongly availed Cenvat Credit of Rs. 140.41 lacs (excluding interest and penalty, as applicable) of service tax paid as input service during the period October 2007 to February 2008. An appeal has been filed by the Company before CESTAT, Ahmedabad vide appeal No.STS/326/2010. The appeal is allowed by The Honorable CESTAT, Ahmedabad, and the demand with interest and penalty is set aside as time barred. At present, there is no demand and the CESTAT order is in operation.

(ii) During the period April 2009 to July 2014, the Company had paid service tax on the Commission charged by their non-resident commission agents for the services rendered in connection with sales of the Company''s finished goods in overseas market and availed Cenvat Credit. The Central Excise department had issue a show cause Notice No. SCN NO.5/COMMR/GLT-1/CMI/CEN-D/ NON-CERA/2014-15 Dated 26.09.2014 for denial of wrongly availed Cenvat Credit of '' 184.63 lacs (excluding interest, as applicable) of service tax paid as input service. The Company has replied to show cause notice.

** Matters relating to (i) detention of goods dispatched by vendor of the Company at site of customer without valid TIN/ CST mentioned on the invoice on 19.02.2013; (ii) omission of trading purchases and adoption of wrong output tax on lubricants noticed during VAT Audit for the year 2012-13 against which the Company has filed the petition before Joint Commissioner (Vellore) and appeal before Appellate Deputy Commissioner III Chennai respectively.

*** Matter relating to non-reversal of proportionate Cenvat Credit on inventory shortages of Rs. 88.33 lacs (excluding interest, as applicable) identified during the course of EA2000 audit conducted for the period from April 2009 to March 2011 against which the Company has filed the appeal.

Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. This has been relied upon by the auditors.

19. Details on derivatives instruments and unhedged foreign currency exposures

The Company uses Forward Exchange Contracts to hedge its exposure in foreign currency related to firm commitments and highly probable forecast transactions. The information on Derivative Instruments is as follows:

Note: The Company’s records do not distinguish between raw materials, components and stores and spares. Therefore, separate figures for each category of imported items have not been given. The above amounts have been computed based on the purchase bills to the extent identified by the Company, for imported items. The total import purchases of Rs. 1,468.16 lacs (Year ended March 31, 2015: Rs. 4,853.07 lacs) comprise of purchases of goods amounting to Rs. 952.40 lacs (Year ended March 31, 2015: Rs. 1,633.24 lacs) on CFR/CPT/EXW/FCA/FOB/FOT basis.

20. The Company which had earlier relocated operations of Silvassa unit, has disposed of the related assets including land and buildings on January 19, 2016. On this sale, the Company has earned profit of Rs. 1,433.93 Lacs (net of expenses directly attributable Rs.15.08 Lacs) which has been shown as an ''Exceptional items'' in the Statement of Profit and Loss.

Note 21 Additional information to the financial statements (contd.)

22. The Company had revisited and changed the method of depreciation of fixed assets in 2014-15 from written down value (WDV) method to straight line method (SLM) as on 1 April, 2014, because the Management believed that change would result in a more appropriate presentation of the financial statements of the enterprise. Accordingly, all assets are now being depreciated under SLM. Pursuant to the notification of Schedule II to the Act, the Company also revised the estimated useful life of some of its assets to align the useful life with those specified in Schedule II. The details of previously applied depreciation method, rates/useful life are as follows:

Pursuant to the transition provisions prescribed in Schedule II to the Companies Act, 2013, the Company had fully depreciated the carrying value of assets (determined after considering the change in the method of depreciation from WDV to SLM), net of residual value, where the remaining useful life of the asset was determined to be nil as on April 1, 2014. As a result of these changes, the depreciation charge for the year ended March 31, 2015 was lower by Rs. 107.39 lacs and the effect relating to the period prior to April 1, 2014 was net credit of Rs.556.48 lacs (excluding deferred tax of Rs. 286.54 lacs) which had been shown as an ‘Exceptional items'' in the Statement of Profit and Loss for the year ended March 31, 2015.

The discount rate is based on the prevailing market yields of Government of India securities as at the Balance Sheet date for the estimated term of the obligations.

The estimate of future salary increases considered, takes into account the inflation, seniority, promotion, increments and other relevant factors.

*Due to absence of data provided by Life Insurance Corporation of India, break-up of plan assets (asset allocation) in insurer managed funds have not been furnished.

The above information has been certified by the actuary and relied upon by the auditors.

23. Segment information

Geographical Segments:

The Company has considered geographical segments as the primary segment for disclosure. For the purpose of Segment reporting, the Company has identified two geographical segments which comprises of Overseas and India. The segments have been identified taking into account the differing risks and returns relating to these geographical areas.

Secondary Segments:

As the Company''s business activity falls within a single business segment i.e. Original Equipments Manufacturer and Project Management, the disclosure requirement of Accounting Standard (AS-17) for secondary segment reporting is not applicable.

24. Operating Lease:

The Company has entered into operating lease or leave and license arrangements for residential premises/ godowns (including furniture and fittings therein as applicable). These leasing arrangements which are not non-cancellable range between 11 months to 36 months.

25. The Company has also entered into an agreement with CMI SA for providing knowhow, access to various industrial processes, development and implementation of strategy, access to best practices for business operations, exploitation of knowledge for new business initiatives, access to new global business opportunities, etc.

The Company has entered into an agreement with CMI SA for rights to use the CMI Brand name. The Company pays 0.6% of net sales. The agreement is originally effective from January 1, 2010 for the tenure of 5 years and revised for another 5 years with effect from January 1, 2015.

26. Previous year''s figures have been regrouped/reclassified wherever necessary to correspond with the current year''s classification/disclosure.


Mar 31, 2015

Corporate Information:

The principal activities of the Company comprise manufacturing and installation of cold rolling mills, galvanizing lines, colour coating lines, tension levelling lines, skin pass mills, acid regeneration plants, wet flux line and pickling lines for ferrous and non-ferrous industries world wide.

1. Terms/rights attached to equity shares:

The Company is having only one class of equity shares having par value of Rs. 10/- each. Each holder of equity share is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend, if proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive remaining assets of the Company, after the distribution of all preferential amounts. The distribution will be in proportion of the paid up share capital held by the shareholders.

2. Since the Company is a project management company and engaged in the business of putting up projects for its clients on turnkey basis, the Company is following percentage of completion method as prescribed under Accounting Standard-7 Construction contracts under which project stock, manufactured items and other direct cost are considered as project cost incurred till date. Inventory procured for a specific project is immediately booked to the project as consumed and is not considered as inventory. In view of the above, itemwise break-up for cost of materials consumed is not available in the system.

(Rs. in lacs) Note Particulars As at As at March 31,2015 March 31,2014

3. Contingent liabilities and commitments (to the extent not provided for)

(i) Contingent liabilities

(a) Claims against the Company not acknowledged as debt

Service tax* 733.83 413.08

Sales tax** 16.33 16.33

Excise duty*** 180.93 88.33

Labour matter - 5.00

Taxation matters:

against the Company not acknowledged as debt and not provided for, relating to issues of deductibility and taxability in respect of which the Company is in appeal and exclusive of effect of similar matters in respect of assessments remaining to be completed:

- Income Tax 448.37 437.19

2) Items in respect of which the company has succeeded in appeal, but the Income-tax Department is pursuing appeal and exclusive of effect of similar matters in respect of assessments remaining to be completed:

- Income Tax 30.67 30.67

(b) Other matters for which the Company is contingently liable

Advance licence - custom duty elements 38.31 1,087.12

(ii) Commitments

(a) Estimated amount of contracts remaining to be executed on capital account and not provided for

Tangible assets 110.66 113.58

4. Additional information to the financial statements (contd.)

* Matters relating to:

(i) During the period October 2007 to February 2008, the Company had paid service tax on the Commission charged by their non-resident commission agents for the services rendered in connection with sales of the Company's finished goods in overseas market and availed Cenvat Credit. The Central Excise department had issue a show cause Notice No. F.No.V(CH84)3-06/Dem./2009-10, dated 29.10.2009 for denial of wrongly availed Cenvat Credit of Rs. 140.41 lacs of service tax paid as input service during the period October 2007 to February 2008. The Commissioner of Central Excise, Customs and Service tax vide their order No.14/ Dem./Vapi/2010, dated 12.04.2010 upheld the service tax liability of Rs. 300.51 lacs (As at March 31,2014: Rs. 272.67 lacs) including interest of Rs. 160.08 lacs (As at March 31,2014: Rs. 132.24 lacs) with additional penalty of Rs. 140.43 lacs (As at March 31, 2014: Rs. 140.43 lacs). An appeal has been filed by the Company before CESTAT, Ahmedabad vide appeal No.STS/326/2010. The Honorable CESTAT, Ahmedabad, has passed a stay order in favour of the Company and dispensed with the condition of pre-deposit of the duty and penalty amount to the tune of Rs. 440.92 lacs (As at March 31, 2014: Rs. 413.08 lacs) vide order No. 5/570/WZB/ AHD/2011, dated 05.04.2011;

(ii) During the period April 2009 to July 2014, tthe Company had paid service tax on the Commission charged by their non-resident commission agents for the services rendered in connection with sales of the Company's finished goods in overseas market and availed Cenvat Credit. The Central Excise department had issue a show cause Notice No. SCN NO.05/COMMR/GLT-1/CMI/CEN-D/NON-CERA/2014-15 Dated 26.09.2014 for denial of wrongly availed Cenvat credit of Rs. 184.64 lacs of service tax paid as input service. The Commissioner of Central Excise and Service tax LTU upheld the service tax liability of Rs. 292.91 lacs (As at March 31,2014: Rs. Nil) including interest of Rs. 108.27 lacs (As at March 31,2014: Rs. Nil). The Company has replied to show cause notice.

** Matters relating to (i) detention of goods despatched by vendor of the Company at site of customer without valid TIN/CST mentioned on the invoice on 19.02.2013; (ii) omission of trading purchases and adoption of wrong output tax on lubricants noticed during VAT Audit for the year 2012-13 against which the Company has filed the petition before Joint Commissioner (Vellore) and appeal before Appellate Deputy Commissioner III Chennai respectively.

*** Matter relating to non-reversal of proportionate Cenvat Credit on inventory shortages identified during the course of EA2000 audit conducted for the period from April 2009 to March 2011 against which the Company has filed the appeal. The Commissioner of Central Excise LTU, upheld the excise duty liability of Rs. 180.93 lacs (As at March 31,2014: Rs. 88.33 lacs) including interest of Rs. 92.60 lacs (As at March 31,2014: Rs. Nil).

5. Additional information to the financial statements (contd.)

Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. This has been relied upon by the auditors.

6. Disclosures under Accounting Standards (Contd.)

Segment information

Geographical Segments:

The Company has considered geographical segments as the primary segment for disclosure. For the purpose of Segment reporting, the Company has identified two geographical segments which comprises of Overseas and India. The segments have been identified taking into account the differing risks and returns relating to these geographical areas.

7. Related party transactions

a Details of related parties:

Description of relationship Names of related parties

Holding Company Cockerill Maintenance & Ingenierie SA

Fellow Subsidiaries (with whomCMI Industry Automation Private Company has Limited made transactions during the year) CMI UVK GmbH CMI M W Engineering GmbH CMI Tech5i Pastor SAS

Key Management Personnel (KMP) Mr. Raman Madhok - Managing Director (w.e.f. October 9, 2013) Mr. Sanjoy Kumar Das - Managing Director (from April 15, 2013 upto October 8, 2013) Mr. Jean Gourp - Managing Director (upto April 15, 2013 and thereafter Executive Director till April 30, 2013)

Note: Related parties have been identified by the Management.

8. Operating Lease:

The Company has entered into operating lease or leave and licence arrangements for residential premises/ godowns (including furniture and fittings therein as applicable). These leasing arrangements which are not non-cancellable range between 11 months to 36 months.

9. The Company has also entered into an agreement with CMI SA for providing knowhow, access to various industrial processes, development and implementation of strategy, access to best practices for business operations, exploitation of knowledge for new business initiatives, access to new global business opportunities, etc.

10. Due to stress in the steel industry, one of the major customers to whom the net exposure of the Company is Rs. 1,943.76 lacs has been experiencing cash flow problems during the year. However, the management is confident of receiving the amount and believes that no provision is necessary.

11. Previous year's figures have been regrouped/reclassified wherever necessary to correspond with the current year's classification /disclosure.


Mar 31, 2014

(Rs in lacs) Note Particulars As at As at March March 31-2014 31-2013 1.1 Contingent liabilities and commitments (to the extent not provided for)

(i) Contingent liabilities

(a) Claims against the Company not acknowledged as debt Service tax* 413.08 387.81

Sales tax** 16.33 -

Excise duty*** 88.33 -

Labour matter 5.00 5.00

Taxation matters:

1) Demands against the Company not acknowledged as debt and not provided for, relating to issues of deductibil- liy and taxability in respect of which the Company is in appeal and exclusive of the effect of similar matters in respect of assessments remaining to be completed:

- Income Tax 437.19 57.95

2) Items in respect of which the company has succeeded in appeal, but the Income-tax Department is pursuing appeal and exclusive of effect of similar matters in respect of assessments remaining to be completed:

- Income Tax 30.67 30.67

(b) Other matters for which the Company is conting- ently liable Advance licence - custom duty elements 1,087.12 1,346.13

(ii) Commitments

(a) Estimated amount of contracts remaining to be executed on capital account and not provided for

Tangible assets 113.58 229.40

Notes forming part of the financial statements

Note 2 Additional information to the financial statements (contd.)

* During the period October 2007 to February 2008, the Company had paid service tax on the Commission charged by their non-resident commission agents for the services rendered in connection with sales of the Company''s fnished goods in overseas market and availed Cenvat Credit. The Central Excise department had issued a show cause Notice No. F.No.V(CH84)3-06/Dem./2009-10, dated 29.10.2009 for denial of wrongly availed Cenvat Credit of Rs. 140.41 lacs of service tax paid as input service during the period October 2007 to February 2008. The Commissioner of Central Excise, Customs and Service tax vide their order No.14/Dem./Vapi/2010, dated 12.04.2010 upheld the service tax liability of Rs. 272.67 lacs (As at March 31, 2013: Rs. 247.40 lacs) including interest of Rs. 132.24 lacs (As at March 31, 2013: Rs. 106.97 lacs) with additional penalty of Rs. 140.43 lacs (As at March 31, 2013: Rs. 140.43 lacs). An appeal has been fled by the Company before CESTAT, Ahmedabad vide appeal No.STS/326/2010. The Honorable CESTAT, Ahmedabad, has passed a stay order in favour of the Company and dispensed with the condition of pre-deposit of the duty and penalty amount to the tune of Rs. 413.08 lacs (As at March 31, 2013: Rs. 387.81 lacs) vide order No. 5/570/WZB/AHD/2011, dated 05.04.2011.

** Matters relating to (i) detention of goods despatched by vendor of the Company at site of customer without valid TIN/CST mentioned on the invoice on 19.02.2013; (ii) omission of trading purchases and adoption of wrong output tax on lubricants noticed during VAT Audit for the year 2012-13 against which the Company has fled the appeal/is in process of fling of appeal respectively.

*** Matter relating to non-reversal of proportionate Cenvat Credit on inventory shortages identified during the course of EA2000 audit conducted for the period from April 2009 to March 2011 against which the Company has fled the appeal.

Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. This has been relied upon by the auditors.

Notes forming part of the financial statements

Note 3 Additional information to the financial statements (contd.)

3.1 Details on derivatives instruments and unhedged foreign currency exposures

The Company uses Forward Exchange Contracts to hedge its exposure in foreign currency related to firm commitments and highly probable forecast transactions. The information on Derivative Instruments is as follows:

Details of Forward contracts outstanding in respect of recognised assets, firm commitments and highly probable forecast transactions are as below:

Note: The Company''s records do not distinguish between raw materials, components and stores and spares. Therefore, separate figures for each category of imported items have not been given. The above amounts have been computed based on the purchase bills to the extent identified by the Company, for imported items. The total import purchases of Rs. 6,666.86 lacs (Year ended March 31, 2013: Rs. 8,228.55 lacs) comprise of purchases of goods amounting to Rs. 1,926.42 lacs (Year ended March 31, 2013: Rs. 1,540.73 lacs) on CFR/CPT/ EXW/FCA/FOB/FOT basis.

Note: The total export sales (made under long-term contracts) of Rs. 20,135.92 lacs (Year ended March 31, 2013: Rs. 20,067.83 lacs) comprise of sale of goods amounting to Rs. 9,900.26 lacs (Year ended March 31, 2013: Rs. 7,052.19 lacs) on FOB basis, to the extent identified from the records maintained in the ordinary course of business as above and balance sales on CFR/CIF/DAP/DDP basis.

The discount rate is based on the prevailing market yields of Government of India securities as at the Balance Sheet date for the estimated term of the obligations.

The estimate of future salary increases considered, takes into account the infation, seniority, promotion, increments and other relevant factors.

*Due to absence of data provided by Life Insurance Corporation of India, break-up of plan assets (asset allocation) in insurer managed funds have not been furnished.

The above information has been certifed by the actuary and relied upon by the auditors.

3.4 Segment information

Geographical Segments:

The Company has considered geographical segments as the primary segment for disclosure. For the purpose of Segment reporting, the Company has identified two geographical segments which comprises of Overseas and India. The segments have been identified taking into account the differing risks and returns relating to these geographical areas.

Secondary Segments:

As the Company''s business activity falls within a single business segment i.e. Original Equipments Manufacturer and Project Management, the disclosure requirement of Accounting Standard (AS-17) for secondary segment reporting is not applicable.

3.5 a Details of related parties:

Description of relationship Names of related parties

Holding Company : Cockerill Maintenance & Ingenierie SA Fellow Subsidiaries (with whom Company has : CMI Industry Automation Private Limited made transactions during CMI UVK GmbH the year) CMI M W Engineering GmbH

Key Management Personnel : Mr. Raman Madhok - Managing Director (KMP) (w.e.f. October 9, 2013) Mr. Sanjoy Kumar Das - Managing Director (from April 15, 2013 upto October 8, 2013) Mr. Jean Gourp - Managing Director (upto April 15, 2013 and thereafter Executive Director till April 30, 2013)

Note: Related parties have been identified by the Management.

3.6 Operating Lease:

The Company has entered into operating lease or leave and licence arrangements for residential premises/ godowns (including furniture and fttings therein as applicable). These leasing arrangements which are not non-cancellable range between 11 months to 36 months.

With regard to other non-cancellable operating lease for residential premises/godown, the future minimum rentals are as follows: (Rs. in lacs)

3.7 Details of provisions

The Company has made provision for various contractual obligations based on its assessment of the amount it estimates to incur to meet such obligations, details of which are given below:

3.8 The Company has also entered into an agreement with CMI SA for providing knowhow, access to various industrial processes, development and implementation of strategy, access to best practices for business operations, exploitation of knowledge for new business initiatives, access to new global business opportunities, etc. The agreement is effective from January 1, 2010.

The Company has entered into an agreement with CMI SA for rights to use the CMI Brand name. The Company pays 0.6% of net sales. The agreement is effective from January 1, 2010 and the tenure of the agreement is 5 years.

Notes forming part of the financial statements

Note 4 Disclosures under Accounting Standards (Contd.)

4.1 The expenses disclosed under the Statement of profit and Loss are net of the following amounts as stated below which have been capitalised under fixed assets:

4.2 In view of the uncertainty resulting from the protracted negotiation that are ongoing, the Company has made an additional provision of Rs. 1,950.94 lacs during the year in respect of the receivable from a foreign customer that has remained outstanding for over three years. With this, the receivable is fully provided for.

4.3 Previous year''s figures have been regrouped/reclassified wherever necessary to correspond with the current year''s classifcation/disclosure.


Mar 31, 2013

1 Corporate Information:

The principal activities of the Company comprise manufacturing and installation of cold rolling mills, galvanizing lines, colour coating lines, tension levelling lines, skin pass mills, acid regeneration plants, wet flux line and pickling lines for ferrous and non-ferrous industries world wide.

2.1 Details on derivatives instruments and unhedged foreign currency exposures

The Company uses Forward Exchange Contracts to hedge its exposure in foreign currency related to firm commitments and highly probable forecasted transactions. The information on Derivative Instruments is as follows:

Details of Forward contracts outstanding in respect of recognised assets, firm commitments and highly probable forecasted transactions are as below:

(i) Outstanding forward exchange contracts entered into by the Company as on March 31, 2013:

2.2 Segment information

Geographical Segments:

The Company has considered geographical segments as the primary segment for disclosure. For the purpose of Segment reporting, the Company has identified two geographical segments which comprises of Overseas and India. The segments have been identified taking into account the differing risks and returns relating to these geographical areas.

Secondary Segments:

As the Company''s business activity falls within a single business segment i.e. Original Equipments Manufacturer and project management, the disclosure requirement of Accounting Standard (AS-17) for secondary segment reporting is not applicable.

2.3 Operating Lease:

The Company has entered into operating lease or leave and licence arrangements for residential premises/ godowns (including furniture and fittings therein as applicable). These leasing arrangements which are not non-cancellable range between 11 months to 36 months.

2.4 The Company has also entered into an agreement with CMI SA for providing knowhow, access to various industrial processes, development and implementation of strategy, access to best practices for business operations, exploitation of knowledge for new business initiatives, access to new global business opportunities, etc. The agreement is effective from January 1, 2010.

The Company has entered into an agreement with CMI SA for rights to use the CMI Brand name. The Company pays 0.6% of net sales. The agreement is effective from January 1, 2010 and the tenure of the agreement is 5 years.

2.5 The expenses disclosed under the Statement of Profit and Loss are net of the following amounts as stated below which have been capitalised under fixed assets:

2.6 The Company has been taking active steps and is hopeful of recovery of an amount of Rs. 2,788.61 lacs (As at March 31, 2012: Rs. 2,447.01 lacs) receivable from a foreign customer which has remained outstanding for over three years for several reasons. By way of abundant caution, it has also made adequate provision therefor in the books of account.

2.7 Previous year''s figures have been regrouped/reclassified wherever necessary to correspond with the current year''s classification/disclosure.


Mar 31, 2012

1 Corporate Information:

The principal activities of the Company comprise manufacturing and installation of cold rolling mills, galvanizing lines, colour coating lines, tension levelling lines, skin pass mills, acid regeneration plants, wet flux line and pickling lines for ferrous and non-ferrous industries world wide.

(i) Terms/rights attached to equity shares:

The Company is having only one class of equity shares having par value of Rs 10/- each. Each holder of equity share is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

During the year ended March 31, 2012, the amount of per share dividend recognised as distribution to equity shareholders was Rs 5/- (March 31, 2011: Rs 20/-)

In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive remaining assets of the Company, after the distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

(ii) Long term borrowings from banks towards cash credit are secured by hypothecation of stocks and book debts and by first pari passu charge on the fixed assets of the Company and equitable mortgage of land at Taloja, Silvassa and Andheri. The Company continues to avail non-fund based limits and the charge continues.

Note:

Since the Company is a project management company and engaged in the business of putting up projects for its clients on turnkey basis, the Company is following percentage of completion method as prescribed under Accounting Standard-7 Construction contracts under which project stock, manufactured items and other direct cost are considered as project cost incurred till date. Purchases figure is derived figure. Inventory procured for a specific project is immediately booked to the project as consumed and is not considered as inventory. In view of the above, itemwise break-up for cost of materials consumed is not available in the system.

Note 1 Additional information to the financial statements

(Rs in lacs)

Note Particulars As at As at March 31, 2012 March 31, 2011

1.1 Contingent liabilities and commitments (to the extent not provided for)

(i) Contingent liabilities

(a) Claims against the Company not acknowledged as debt Service tax* 362.53 337.19

Labour matter 5.00 5.00

Income tax 88.62 -

(b) Other money for which the Company is contingently liable

Advance licence - custom duty elements 432.95 246.67

(ii) Commitments

(a) Estimated amount of contracts remaining to be executed on capital account and not provided for Tangible assets 349.18 76.40

*During the period October 2007 to February 2008, the Company has paid service tax on the Commission charged by their non-resident commission agents for the services rendered in connection with sales of the assessee's finished goods in overseas market and availed Cenvat Credit. The Central Excise department has issued a show cause Notice No. F.No.V(CH84)3-06/Dem./2009-10, dated 29.10.2009 for denial of wrongly availed Cenvat Credit of Rs 140.41 lacs of service tax paid as input service during the period October 2007 to February 2008. The Commissioner of Central Excise, Customs and Service tax vide their order No.14/ Dem./Vapi/2010, dated 12.04.2010 upheld the service tax liability of Rs 222.12 lacs (As at March 31, 2011: Rs 196.78 lacs) including interest of Rs 81.69 lacs (As at March 31, 2011: Rs 56.35 lacs) with additional penalty of Rs 140.43 lacs (As at March 31, 2011: Rs 140.43 lacs). An appeal has been filed by the Company before CESTAT, Ahmedabad vide appeal No.STS/326/2010. The Honorable CESTAT, Ahmedabad, has passed a stay order in favour of the Company and dispensed with the condition of pre-deposit of the duty and penalty amount to the tune of Rs 362.53 lacs (As at March 31, 2011: Rs 337.19 lacs) vide order No. 5/570/ WZB/AHD/2011, dated 05-04-2011.

1.2 Details on derivatives instruments and unhedged foreign currency exposures

The Company uses Forward Exchange Contracts to hedge its exposure in foreign currency related to firm commitments and highly probable forecasted transactions. The information on Derivative Instruments is as follows:

Details of Forward contracts outstanding in respect of recognised assets, firm commitments and highly probable forecasted transactions are as below:

Note: The Company's records do not distinguish between raw materials, components and stores and spares. Therefore, separate figures for each category of imported items have not been given. The above amounts have been computed based on the purchase bills to the extent identified by the Company, for imported items.

Note: The total export sales (made under long-term contracts) of Rs 9,490.38 lacs (Year ended March 31, 2011: Rs 11,779.94 lacs) comprises of sale of goods amounting to Rs 7,524.45 lacs (Year ended March 31, 2011: Rs 3,920.10 lacs) on FOB basis, to the extent identified from the records maintained in the ordinary course of business as above and balance sales on CFR/CIF basis.

2.1 Segment information

Geographical Segments:

The Company has considered geographical segments as the primary segment for disclosure. For the purpose of Segment reporting, the Company has identified two geographical segments which comprises of Overseas and India. The segments have been identified taking into account the differing risks and returns relating to these geographical areas.

Secondary Segments:

As the Company's business activity falls within a single business segment i.e. Original Equipments Manufacturer and project management company, the disclosure requirement of Accounting Standard (AS-17) for secondary segment reporting is not applicable.

2.2 Operating Lease:

The Company has entered into operating lease or leave and licence arrangements for residential premises/godowns (including furniture and fittings therein as applicable). The leases are generally non-cancellable and are for a period of 11 months to 2 years under leave and licence.

2.3 The Company has also entered into an agreement with CMI S.A. for providing knowhow, access to various industrial processes, development and implementation of strategy, access to best practices for business operations, exploitation of knowledge for new business initiatives, access to new global business opportunities, etc. The agreement is effective from January 1, 2010.

The Company has entered into an agreement with CMI S.A. for rights to use the CMI Brand name. The Company pays 0.6% of net sales. The agreement is effective from January 1, 2010 and the tenure of the agreement is 5 years.

2.4 The Revised Schedule VI has become effective from April 1, 2011 for the preparation of financial statements. This has significantly impacted the disclosure and presentation made in the financial statements. Previous year's figures have been regrouped/reclassified wherever necessary to correspond with the current year's classification/disclosure.


Mar 31, 2011

1. nature of operations:

The principal activities of the Company comprise manufacturing and installation of cold rolling mills, galvanizing lines, colour coating lines, tension levelling lines, skin pass mills, acid regeneration plants, wet fux line and pickling lines for ferrous and non- ferrous industries world wide.

2. Contingent liabilities:

(Rs in lacs) sr. no. Particulars 2010-2011 2009-2010

1. Bank Guarantees 3,803.39 10,035.85

2. Letter of Credit to suppliers 1,870.45 1,115.38

3. Advance Licence – customs duty element 246.67 49.16

4. Claims against the Company not acknowledged as debts

(a) Excise duty (including interest and penalty) - 193.17

(b) Service Tax* 337.19 280.84

(c) Income Tax - 33.67

(d) Labour Matter 5.00 5.00

* During the period October 2007 to February 2008, the Company has paid service tax on the Commission charged by their non-resident commission agents for the services rendered in connection with sales of the assessees fnished goods in overseas market and availed Cenvat Credit. The Central Excise department has issued a show cause Notice No. F.No.V(CH84)3-06/ Dem./2009-10,dated 29.10.2009 for denial of wrongly availed Cenvat Credit of Rs140.41 lacs of service tax paid as input service during the period October 2007 to February 2008. The Commissioner of Central Excise, Customs and Service tax vide their order No.14/Dem./Vapi/2010 dated 12.04.2010 upheld the service tax liability of Rs196.76 lacs including interest of Rs56.35 lacs with additional penalty of Rs140.43 lacs. An appeal has been fled by the company before CESTAT, Ahmedabad vide appeal No.STS/326/2010. The Honorable CESTAT, Ahmedabad, has passed a stay order in favour of the company and dispensed with the condition of pre-deposit of the duty and penalty amount to the tune of Rs337.19 lacs vide order No. 5/570/WZB/AHD/2011 dated 05-04-2011.

Tax relating to earlier years (net credit) Rs101.21 lacs [2009-2010: (net debit) Rs38.66 lacs] as disclosed in the Profit and Loss Account, is afiter adjusting Rs9.34 lacs - debit (2009-2010: Rs7.05 lacs - credit) based on assessment orders / judgments received by the Company during the year in respect of earlier years for matters relating to Income tax and Fringe Benefit tax, as the case may be.

Note: Previous years fgures have been given in brackets above.

Disclosures pursuant to AS-29 on Provisions, Contingent Liabilities and Contingent Assets – Recognition Criteria:

(a) Expected timing of any resulting outfow of economic benefits – over the next 2-3 years.

(b) Indication of uncertainty of these outfows – due to estimates and depending on the actual claims for warranties that may be received in future or circumstances that may arise in future concerning provisioning for estimated loss on contracts.

(c) There is no amount of any expected reimbursement in respect of these provisions.

The Company expects to contribute Rs50.00 lacs (2009-2010: Rs50.00 lacs) to its Gratuity plan.

The estimates of future salary increases considered takes into account the infation, seniority, promotion and other relevant factors.

In assessing the Companys employees benefits Liabilities the actuary monitors mortality assumptions and uses up-to-date mortality tables, the base being the LIC 1994-96 ultimate tables.

* Due to absence of data provided by LIC, break-up of plan assets (asset allocation) in insurer managed funds have not been furnished.

The above information has been certified by the actuary and relied upon by the auditors.

*Includes revenue from services rendered in the form of supervision and erection and sale of spares on composite long–term contracts. See break-up of income from services rendered below.

note:

Since the Company is a Project Management Company and engaged in the business of putting up Projects for its clients on turnkey basis, the Company is following Percentage of Completion Method as prescribed under Accounting Standard-7 - Construction Contracts under which project stock, manufactured items, bought out items and other direct costs are considered as Project Costs incurred till date. In view of the above, it is not possible to give the details of manufactured items in terms of its quantity and corresponding values. The same is the case with trading items as well. The nature of these items is totally dissimilar. Therefore, it is not possible to split and disclose the quantitative information as required by Schedule VI to the Companies Act, 1956.

notes:

(a) The appointments of the current Managing Director and Deputy Managing Director were approved in the Annual General Meeting held on July 31, 2010.

(b) The excess managerial remuneration amounting to Rs406.26 lacs paid to two former whole-time directors (one of whom has since deceased) in an earlier year was in excess over the limit, specifed under the relevant provisions of the Companies Act, 1956.

(c) The Companys three cars have been retained by the two former directors, namely, Late Mr.T.R.Mehta and Mrs. Nishi T. Mehta when they ceased to be the whole time directors of the Company on June 25, 2008.The book written down value of the cars was Rs16.02 lacs, whilst this is not an allowable item for managerial remuneration under the Companies Act, 1956.

(d) The approvals for waiver from the Central Government have been received on May 16, 2011.

3. segment information:

(1) Geographical segments:

The Company has considered geographical segments as the primary segment for disclosure. For the purpose of Segment reporting, the Company has identifed two geographical segments which comprises of Overseas and India. The segments have been identifed taking into account the differing risks and returns relating to these geographical areas.

(2) secondary segments:

As the Companys business activity falls within a single business segment i.e. OEM manufacturer and project management company in the steel sector, the disclosure requirement of Accounting Standard (AS-17) for secondary segment reporting is not applicable.

During the previous year, the Company has entered into agreement with CMI SA for providing knowhow, access to various industrial processes, development and implementation of strategy, access to best practices for business operations, exploitation of knowledge for new business initiatives, access to new global business opportunities etc. The agreement is effective from January 1, 2010.

The Company has also entered into an agreement with CMI SA for rights to use the CMI Brand name. The Company will pay 0.6% of net sales. The agreement is effective from January 1, 2010 and the tenure of the agreement is 5 years.

operating leases:

The Company has taken residential premises/godowns (including furniture and fittings therein as applicable) under operating lease or leave and license agreements. These are generally non-cancellable and range between 11 months and 3 years under leave and license. Amount debited to rent account under "Manufacturing and Other Expenses" amount to Rs109.60 lacs (2009-10: Rs Rs. 118.41 lacs). Future minimum lease obligations for aforesaid leave and license covenants are detailed below:

The figures for the previous year have been regrouped wherever necessary to conform to the current years classification.


Mar 31, 2010

1. Nature of Operations:

The principal activities of the Company comprise manufacturing and installation of cold rolling mills, galvanizing lines, colour coating lines, tension levelling lines, skin pass mills, acid regeneration plants and pickling lines for ferrous and non-ferrous industries world wide.

2. Contingent liabilities: (Rs. in lacs)

Sr. Particulars 2009-2010 2008-2009 No. 1. Bank Guarantees 10,035.85 8,956.82 2. Letter of Credit to suppliers 1,115.38 125.81 3. Claims against the Company not acknowledged as debts (a) Excise duty (including interest and penalty)* 193.17 183.94 (b) Provident Fund - 15.45 (c) Service Tax** 280.84 - (d) Income Tax - 32.17 (e) Income Tax*** 33.67 - (f) Labour Matter 5.00 -

* During the year 2007-2008, Central Excise Department had rejected the Company’s rebate claim and Cenvat credit aggregating

Rs.141.74 lacs (2008-2009: Rs.141.74 lacs). On appeal, rebate claim of Rs.70.87 lacs was allowed. However, on receipt of fi rst appellate order, the Central Excise department has issued during 2008-2009 a demand notice for Rs.141.74 lacs (2008- 2009: Rs.141.74 lacs) comprising Cenvat Credit disallowance of Rs.70.87 lacs and penalty of Rs.70.87 lacs. The penal interest approximating Rs. 51.43 lacs (2008-2009:Rs.42.20 lacs) is contingent in nature. The demand notice has been appealed before CESTAT against order.

** During the period October 2007 to February 2008, the Company has paid service tax on the Commission charged by their non-resident commission Agents for the services rendered in connection with sales of the assessee’s fi nished goods in overseas market and availed Cenvat Credit. The Central Excise department has issued a show cause Notice No.F.No.V(CH84)3-06/ Dem./2009-10, dated 29.10.2009 for denial of wrongly availed Cenvat Credit of Rs.140.41 lacs of service tax paid as input service during the period October 2007 to February 2008.The Commissioner of Central Excise, Customs and Service tax vide their order No.14/Dem./Vapi/2010 dated 12.04.2010 uphold the service tax liability of Rs. 140.41 lacs with additional penalty of Rs 140.43 lacs.The Company has decided to appeal before the CESTAT against order.

*** Favorable decision received in favour of the Company from the Income Tax Appellate Tribunal in respect of which the department has gone in appeal before the Honorable Bombay High Court on November 12, 2009 for Assessment Year 2003- 2004 concerning the matter relating to computing of deduction under Section 80HHC and under Section 80IB of Income Tax Act, 1961 and establishing nexus between interest received and interest paid. Amount involved is Rs.33.67 lacs (2008-2009: Rs. Nil). This matter is pending in the High Court.

Based upon the legal opinion obtained by the Company and further discussions with the Solicitors, the Company believes that there is a fair chance of decision in its favour in respect of details listed in items 3(a), (c), (e) and (f) above and accordingly no provision has been considered necessary.

3. (a) The Income Tax Department had conducted a survey u/s 133A of the Income Tax Act, 1961 at the Company’s premises on January 16, 2009 for matters relating to accounting year 2006-2007 and 2007-2008 (Assessment years 2007-2008 and 2008- 2009). As a result, the Company had revised its income tax returns for those two years and had paid additional Income tax of Rs.631 lacs during 2008-2009 owing to disallowable expense and the same amount had been expensed in 2008-2009 in the Profit and Loss Account on prudence. However, during the year 2009-2010, the Income Tax Department has issued notice of demand aggregating Rs.16.41 lacs (2008-2009:Rs. Nil) under Sectsion 156 of the Income Tax Act, 1961 and the said amount has also been paid during the year by charging it off fully to the Profit and Loss Account and is included in Tax relating to earlier years.

(b) Further, provision for tax relating to earlier years includes Rs. 22.25 lacs (2008-2009: Rs.122.95 lacs) based on assessment orders / judgments received by the Company during the year in respect of earlier years for matters relating to Income tax and Fringe Benefit tax.

4. Provision for commission on Sales aggregating Rs. 91.41 lacs (2008-2009: Rs.949.68 lacs) on certain contracts [including Rs. Nil (2008-2009: Rs.443.21 lacs) provided during the current year] has been reversed during the year in the Profit and Loss Account [Rs. 91.41 lacs (2008-2009: Rs.71.32 lacs) reversal included in Other Income and Rs. Nil (2008-2009: Rs.435.15 lacs) reversal set- off against receivable balance outstanding on certain contracts], on the basis of mutual agreement between the Company and the agents. Accordingly, profit before tax for the year is higher by Rs. 91.41 lacs (2008-2009: Rs.949.68 lacs) than what those would have been had the provision for commission not been reversed.

5. Information in respect of Related Parties:

1. Enterprises controlling the Company:

Cockerill Maintenance & Ingenierie S.A. (Holding Company)

2. Other Related Parties with whom transactions have taken place: a) Fellow Subsidiaries:

1. CMI Industry Automation Private Limited (formerly NT Strips and Automation Private Limited) (w.e.f. June 26, 2008)

2. CMI EFCO Inc.

3. CMI Thermline SAS.

4. CMI UVK GmbH

5. CMI Engineering (Beijing) Co.

6. CMI India Engineering Private Limited

(b) Key Managerial Personnel:

1. Mr. Rob Johnson – Managing Director (w.e.f. June 26, 2008)

2. Late Mr. Tilak Raj Mehta – Chairman and Managing Director (upto June 25, 2008 and ceased to be Director from November 10, 2008)

3. Mrs. Nishi T. Mehta – Whole time Director (upto June 25, 2008 and ceased to be director thereafter)

(c) Enterprises over which Key Managerial personnel are able to exercise significant influence:

1. CMI Industry Automation Private Limited (up to June 25, 2008) (formerly NT Strips and Automation Private Limited)

2. Niraj Metals and Alloys Private Limited (up to November 10, 2008)

3. R. S. Global Shipping (I) Limited (up to November 10, 2008)

Disclosures pursuant to AS-29 on Provisions, Contingent Liabilities and Contingent Assets – Recognition Criteria:

a) Expected timing of any resulting outflow of economic benefits – over the next 2-3 years.

b) Indication of uncertainty of these outflows – due to estimates and depending on the actual claims for warranties that may be received in future or circumstances that may arise in future concerning provisioning for estimated loss on contracts.

c) There is no amount of any expected reimbursement in respect of these provisions.

Note:

Since the Company is a Project Management Company and engaged in the business of putting up Projects for its clients on turnkey basis, the Company is following Percentage of Completion Method as prescribed under Accounting Standard-7 – Construction Contracts under which project stock, manufactured items, bought out items and other direct costs are considered as Project Costs incurred till date. In view of the above, it is not possible to give the details of manufactured items in terms of its quantity and corresponding values. The same is the case with trading items as well. The nature of these items is totally dissimilar. Therefore, it is not possible to split and disclose the quantitative information as required by Schedule VI to the Companies Act, 1956.

Notes:

(a) The appointment of the current Managing Director was approved in the Annual General Meeting held on September 19, 2008. An application has been made to the Central Government pursuant to the provisions of sections 198, 269, 309 read with Schedule XIII to the Companies Act, 1956, for which approval is awaited.

(b) The excess managerial remuneration amounting to Rs. 406.26 lacs paid to two former whole-time directors (one of whom has since deceased) in the previous year was in excess over the limit, specified under the relevant provisions of the Companies Act, 1956 and subject to approval of the Central Government, for waiver of recovery. The required documents have been submitted during the year to the Central Government for the waiver of recovery.

(c) The Company’s three cars have been retained by the two former directors, namely, Late Mr.T.R. Mehta and Mrs. Nishi T. Mehta when they ceased to be the whole-time directors of the Company on June 25, 2008.The book written down value of the cars was Rs.16.02 lacs, whilst this is not an allowable item for managerial remuneration under the Companies Act, 1956, this is subject to approval of the Central Government, for waiver. The required documents have been submitted during the year to the Central Government for the waiver of recovery.

6. Segment Information:

(1) Geographical Segments:

The Company has considered geographical segments as the primary segment for disclosure. For the purpose of Segment reporting, the Company has identifi ed two geographical segments which comprises of Overseas and India. The segments have been identifi ed taking into account the differing risks and returns relating to these geographical areas.

(2) Secondary Segments:

As the Company’s business activity falls within a single business segment, i.e., OEM manufacturer and project management company in the steel sector, the disclosure requirement of Accounting Standard (AS-17) for secondary segment reporting is not applicable.

7. The Sales tax department conducted a survey u/s 64 of Maharashtra Value Added Tax Act, 2002 on January 4, 2010 for the matter relating to accounting years 2006-2007 and 2007-2008. As a result, the Company has revised its Sales Tax returns for these two years and paid interest and penal interest amounting to Rs. 13.13 lacs and 48.13 lacs respectively for these two years and the same has been charged to the Profi t and Loss Account for the year.

8. The figures for the previous year have been regrouped wherever necessary to conform to the current year’s classifi cation.

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