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Auditor Report of GAIL (India) Ltd.

Mar 31, 2016

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

Management''s Responsibility for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding 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 standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section143(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. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence, we have obtained, is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion

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

Emphasis of Matter

We draw attention to the following matters in Notes to Financial Statement:-

1. Note No: 42(c) -regarding various provisional transportation tariff orders issued by Petroleum and Natural Gas Regulatory Board (PNGRB), these orders have been contested by the company at Appellate Tribunal for Electricity (APTEL) and adjustment if any will be recognized as and when matter is finally decided.

2. Note No: 47 - in respect of stating the investment in a joint venture entity at book value whereas net worth of the entity has been eroded and management has considered the diminution in value of investment as non- permanent.

3. Note No: - 51-in respect of revenue recognition during the year for ship or pay charges where the customer has disputed the claim of the company and final outcome is uncertain, Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

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

2. As required by C&AG of India through directions/sub-directions dated 11.12.2015 and 29.04.2016 and issued under Section 143(5) of the Companies Act 2013, on the basis of written representation received from the management, we give our report on the matter specified in the Annexure "B" attached.

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

(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

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

(c) The balance sheet, the statement of profit and loss and the cash flow statement dealt with by this Report are in agreement with the books of account;

(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

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

(f) We are enclosing herewith a report in "Annexure C" for our opinion on adequacy of internal financial controls system in place in the company and the operating effectiveness of such controls; and

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

i. the Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 33(1)(a) and 34 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; and

iii. there has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company

Referred to in paragraph 1 to "Report on Other legal and regulatory requirements" of the Independent Auditors'' Report of even date to the members of GAIL (INDIA) LIMITED on the financial statements for the year ended March 31, 2016.

i(a) As informed to us the company has generally maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) According to information and explanation given to us there is a regular programme of physical verification of these fixed assets by the management which in our opinion is reasonable having regard to the size of the company and nature of its assets. As informed to us no material discrepancies were noticed on such verification.

(c) As informed to us and as verified by us during the course of our audit the title deeds of immovable properties are held in name of the company except for the cases as disclosed in Note no 45(b) & (c).

ii. As informed to us physical verification of inventory has been conducted at reasonable intervals by the management except the store and spares lying with Engineers India Limited and other contractors. We have been explained that the stock of gas at the end of the year has been taken with reference to reading of Turbine Flow Meter/Gas Chromatograph installed at Terminals, Stock of LPG/Pentane/SBP Solvent are determined with reference to Tank Level Gauge measurement which are converted into tonnage by measurement of density and applying correction factor for temperature. LPG vapors volume is converted to tonnage by standard formulae. As informed to us no material discrepancies were noticed on physical verification of inventory.

iii. As informed to us the company has granted unsecured loans to companies covered in the register maintained under section189 of the Companies Act 2013. In respect of such loans:

a) As informed to us and as verified by us the terms and conditions of grant of such loans are not prejudicial to the interest of the company,

(b) Repayment of the principal amount and payment of interest on such loans have been stipulated. However repayment of principal and payment of interest has not been regular in one of the loan given to Bhagyanagar Gas Limited. Please refer Note No.50 to the financial statements in this regard.

(c) As informed to us, no amount of loan is overdue as at end of the year for a period more than ninety days.

iv. According to the information and explanations given to us, the company has complied with the provisions of Section 185 and 186 of Companies Act 2013 in respect of loans/investment/guarantee/security granted during the year.

v. The company has not accepted any deposits, in terms of the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act 2013 and the rules framed there under.

vi. In respect of business activities of the company maintenance of cost records has been specified by the Central Government under sub-section (l) of section 148 of the Companies Act 2013 read with rules framed thereunder and in our opinion, prima facie, prescribed accounts and records have been made and maintained by the company,

vii. a) According to records of the company and information and explanation given to us the company has generally been regular in depositing undisputed statutory dues including provident fund, employees'' state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues with the appropriate authorities. According to information and explanation given to us there are no outstanding statutory dues as referred above as at the last day of the financial year under audit for a period of more than six months from the date they became payable.

b) As certified by the management on which we have relied upon the dues of income tax or sale tax or service tax or duty of custom or duty of excise or value added tax or cess which have not been deposited on account of dispute and the forum where the dispute is pending are given below:

List of Cases of Unpaid Disputed Demand under various Statutes as on 31.03.2016

( Rs. in Crores)

Sl. Statute Subject Matter of Dispute Amount Period of Dispute Status - Forum No. (2015-16)

1 Entry Tax (a) Demand of Entry Tax on Natural 203.00 1999-00 to 2009- Allahabad High Court, Trade Tax Tribunal & Gas in U.P 10 Joint Commissioner

(b) Demand of Entry Tax on Natural 2002-03 to 2005- Gas in Rajasthan 5.59 06 Dy. Commissioner (Appeals), Ajmer

(c) Demand of Entry Tax on Natural 2008-09, 2011-12 Gas in Madhya Pradesh 5.38 & 2012-13 Tribunal, Bhopal

2 Sales Tax & (a) Non- acceptance of declaration 0.38 VAT form for concessional sales tax 1995-96 & 1996-97 Tribunal, Bhopal

(b) Demand of VAT on account of 31.88 2005-06, 2006-07 Joint Commissioner (Appeals), Mumbai

disallowance of Credit Note & 2009-10

(c) VAT demand on inter unit 5.52 2011-12 Tribunal, Bhopal

(d) Demand of CST on account of disallowance of LPG absorption 1.39 2011-12 & 2012-13 Tribunal, Bhopal credit notes

List of Cases of Unpaid Disputed Demand under various Statutes as on 31.03.2016

(Rs.in crores)

Sl. Statute Subject Matter of Dispute Amount Period of Dispute Status - Forum No. (2015-16)

2 Sales Tax & Demand of VAT on account of (e) 2.77 2010-11 Joint Commissioner (Appeals), Mumbai VAT disallowance of input tax credit

Demand of VAT on account of (f) 14.92 2005-06 Joint Commissioner (Appeals), Mumbai disallowance of LPG subsidy

Demand of VAT on sale of Natural (g) Gas to Power Companies 129.54 2007-08 Joint Commissioner (Appeals), Mumbai

Demand of VAT on bandwidth (h) 2.71 2008-09 Joint Commissioner (Appeals), Mumbai charges

(i) Demand of VAT on High Sea Sale 28.59 2011-12 Joint Commissioner (Appeals), Mumbai

Demand of VAT on sale of LPG by 2006-07 to

(j) treating it as non domestic 56.59 2011-12 Joint Commissioner (Appeals), Mumbai

(k) Penalty for delay in payment of 0.60 2003-2004 High Court, Mumbai sales tax

Demand of VAT on account of Oct 2011 to Dec (l) 0.54 Joint Commissioner, Trichy rate change 2011

Demand of CST on account of (m) disallowance of LPG subsidy 51.84 2005-06 High Court, Gwalior discount

Demand for treating CST sale as (n) 0.15 2003-2004 High Court, Guwahati local sale

(o) Revised Sales Tax demand as per 2.76 2003-04 Joint Commissioner (Appeals), Vadodara assessment order

3 Customs, Jan 2001 to Feb (a) LPG valuation Dispute 19.64 CESTAT Mumbai Excise and 2005 Service Tax Aug.2005 to Dec

(b) Dispute on Pentane Classification 99.4 2006 & Oct 2007 CESTAT Ahmedabad to July 2009

(c) Dispute on MFO Classification 79.77 July 2004 to CESTAT Ahmedabad March 2011

Demand of duty under Rule 6(3) April 2008 to (d) of CCR, 2004 for credit taken on 14.71 March 2010 CESTAT Kolkata input services

Demand of Service Tax on Oct. 2006 to Mar

(e) 965.85 CESTAT Delhi Marketing Margin 2014

Demand of Service Tax on Oct 2006 (f) deputation of employees to JVs 41.20 2012 to June CESTAT Delhi & Govt. Deptt.

Demand of differential service Oct.2006 to March (g) 0.13 CESTAT Ahmedabad tax based on service tax returns 2007

Demand raised by denying Aug 2005 to Sept (h) Cenvat & service tax credit taken 9.30 CESTAT Ahmedabad at Hazira 2009

Demand raised by denying 2008-09 & Dec (i) Cenvat credit taken on input 0.22 CESTAT Delhi & CESTAT Allahabad 2010 to March 2011 services

Demand raised in respect of 2008-09 to (j) 0.14 Commissioner (Appeals), Delhi service tax on import of service 2011-12

Demand of CVD on purchase of (k) 0.07 March 2006 CESTAT Delhi SAP software

SUB-TOTAL 1774.73

Sl. No Statute Subject Matter of Dispute Amount Period of Dispute Status - Forum

(a) Unpaid demand 6.23 AY- 1999-00 CIT (Appeals)

4 Income Tax AY 2008 09 to AY ITO(TDS) (b) Demand of TDS 3.10 - 2016-17

Notified Area Tax & GIDC Tax on 1998-99 to 2005- 4.16 06 & 1985-86 to Ahmedabad High Court revised value (incl. interest)

5 Other taxes 2009-10

TOTAL 1788.22

viii. Based on our audit procedures and in accordance with the information and explanations given to us by the management the company has not defaulted in repayment of dues to a bank or government or bonds holders.

ix. The company has not raised any money during the year by way of initial public offer or further public offer (including debt instrument). As informed to us the company has not raised any money by way of term loans during the year.

x. According to the information and explanation given to us there has been no fraud noticed or reported during the year on the company or by the company by its officers or employees.

xi. In our opinion the managerial remuneration paid/provided during the year is in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V of Companies Act 2013.

xii. The company is not a nidhi company and therefore clause 3(xii) of the Order related to such companies is not applicable to the Company.

xiii. According to the information and explanation given to us all transactions with the related parties are in compliance with sections 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in the Financial Statements as required by the applicable accounting standards.

xiv The company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review.

xv. As informed to us, during the year the company has not entered into any non-cash transactions with any of its directors or persons connected with the directors.

xvi. The company is not required to get registered under section 45-IA of Reserve Bank of India Act 1934.

For O. P.Bagla & Co. For G.S Mathur & Co.

Chartered Accountants Chartered Accountants

Firm No.: 000018N Firm No.: 08744N



(Rakesh Kumar) (Rajiv Kumar Wadhawan)

(Partner) (Partner)

Membership No.:087537 Membership No.:091007

Place: New Delhi

Dated: 25th May, 2016


Mar 31, 2015

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of GAIL (India) Limited ('the Company'), which comprise the balance sheet as at 31st March 2015, the statement of profit and loss and the cash flow/statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Standalone Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section l43(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March 2015 and its profit and its cash flows for the year ended on that date.

Emphasis of Matter

We draw attention to the following matters in Notes to Financial Statement-

1. Note No; - 43 regarding sharing of under recoveries on sensitive petroleum products up to 30.09.2014.

2. Note No; - 45 regarding various provisional transportation tariff orders issued by Petroleum and Natural Gas Regulatory Board (PNGRB), these orders have been contested by the company at Appellate Tribunal for Electricity (APTEL) and adjustment if any will be recognized as and when matter is finally decided.

3. Note No;- 46 & 47 regarding debit notes raised by ONGC in respect of Non-APM prices for C-Series gas and differential tariff of Uran Tombay pipeline of ONGC and corresponding debit notes raised by GAIL on its customers.

Our opinion is not modified in respect of these matters.

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 (II) of section 143 of the Act, we give in the Annexure "A" statement on the matters specified in the paragraph 3 and 4 of the Order, to the extent applicable.

2. As required by C&AG of India through supplementary directions dated 19.10.2014 issued under Sectionl43(5) of the Companies Act 2013, on the basis of written representation received from the management, we give our report on the matter specified in the Annexure "B" attached.

3. As required by Sectionl43(3) of the Act, we report that:

(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

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

(c) The balance sheet, the statement of profit and loss and the cash flow statement dealt with by this Report are in agreement with the books of account;

(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules,2014;

(e) On the basis of the written representations received from the directors as on 31st March 2015 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2015frombeingappointed as a director in terms of Section 164(2) of the Act; and

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

i. the Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 32(l)(a),33 and 55 to the financial statements;

ii. the Company did not have any long-term contracts including derivative contracts for which there were any material foresee able losses; and

iii. there has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

The Annexure referred to in para 1 to Report on Other legal and Regulatory Requirement of the auditor's report to the shareholders of GAIL (India) Limited for the year ended March 31,2015. We report that:

(i) (a) The company has generally maintained proper records showing full particulars including quantitative details and situation of fixed assets.

(b) According to the information and explanation given to us, there is a regular programme of verification of fixed assets by the management, which in our opinion is reasonable having regard to the size of the company and the nature of its assets. Fixed assets have been physically verified by the management during the year and as per the report, no material discrepancies were noticed on such verification.

(ii) (a) The inventories have been physically verified at reasonable intervals by the Management, except the stores & spares lying with Engineers India Ltd. and other contractors. We have been explained that the stock of gas at the end of the year has been taken with reference to reading of Turbine Flow Meter/Gas Chromatograph installed at Terminals, Stock of LPG/Pentane/SBP Solvent are determined with reference to Tank Level Gauge measurement which are converted into tonnage by measurement of density and applying correction factor for temperature. LPG vapors volume is converted to tonnage by standard formulae.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the Management are reasonable and adequate in relation to the size of the Company and nature of its business.

(c) In our opinion and according to the information given to us the company is maintaining proper records of inventory and no material discrepancy was noticed on physical verification of inventory.

(iii) According to the information given to us the company has not granted any loans, secured or unsecured to the companies, firms or other parties covered in the register maintained under section 189 of the Companies Act.

(iv) According to information and explanations given to us, there are generally adequate internal control systems commensurate with the size of the company and nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services.

(v) The company has not accepted any deposits from the public during the year covered under section 73 or any other relevant provision of the Companies Act,2013.

(vi) We have broadly reviewed the costing records being maintained by the Company pursuant to the order made by the Central Government for the maintenance of Cost records under sub-section (l) of Section 148 of The Companies Act 2013 and we are of the opinion that prima facie the prescribed accounts and records have been maintained.

(vii) (a) According to the records of the company and information and explanation given to us, the company has generally been regular in depositing undisputed statutory dues including Provident fund, Employees' State Insurance, Income tax. Sales tax. Wealth tax, Service Tax, duty of custom, duty of excise, value added tax, cess and any other statutory dues with the appropriate authorities. According to the information and explanation given to us, no undisputed amounts payable in respect of Provident fund, employees' State Insurance, Income tax. Sales tax. Service Tax, duty of custom, duty of excise, value added tax, cess and any other statutory dues were in arrear at the year-end for a period of more than six months from the date they became payable.

(b) As certified by the Management on which we have relied upon, the dues of Income tax or sales tax or wealth tax or service tax or duty of custom or duty of excise or value added tax or cess which have not been deposited on account of disputes and the forum where the dispute is pending, are given below:

List of Cases of Unpaid Disputed Demand under various Statutes as on 31.03.2015

(Rs.in Crore)

SI. Statute Subject Matter of Dispute Amount Period of No. (2014-15) Dispute

1. Entry Tax (a) Demand of Entry Tax on 189.24 1999-00 to Natural Gas in U.P. 2009-10

(b) Demand of Entry Tax on 5.18 2002-03 to Natural Gas in Rajasthan 2005-06

(c) Demand of Entry Tax on 2008-09, 2011-12 & Natural Gas in Madhya Pradesh 6.28 2012-13

2 Sales Tax & (a) Non-acceptance of declaration 0.37 1995-96 & 1996-97 VAT form for concessional sales tax

(b) Sales Tax demand as per assessment order 4.24 2005-06 & 2006-07

(c) VAT demand as per assessment order 35.78 2010-11

(d) CST demand on Transmission charges 1.91 2006-07

(e) VAT demand on transfer of material 6.28 2011-12

(f) Demand of CST on account of 1.44 2011-12 & 2012-13 disallowance of LPG absorption credit notes

(g) Demand of VAT on account of 107.58 2010-11 & 2012-13 disallowance of input tax credit

(h) Demand of VAT on account of 18.2 2005-06 disallowance of LPG subsidy

(i) Demand of VAT on sale of 123.06 2007-08 Natural Gas to Electricity Co.

(j) Demand of VAT on bandwidth charges 2.58 2008-09

Statute Status - Forum

Entry Tax Allahabad High Court, Trade tax Tribunal & Additional Commissioner (Appeals)

Dy. Commissioner (Appeals), Ajmer

Tribunal, Bhopal & Additional Commissioner (Appeals), Gwalior

Sales Tax & VAT Tribunal, Bhopal

Additional Commissioner (Appeals), Noida

Additional Commissioner (Appeals), Noida

Commercial Tax Officer, Nagapattinam

Additional Commissioner (Appeals), Gwalior

Additional Commissioner (Appeals), Gwalior

Additional Commissioner (Appeals), Gwalior & Joint Commissioner (Appeals), Mumbai

Joint Commissioner (Appeals), Mumbai

Joint Commissioner (Appeals), Mumbai

Joint Commissioner (Appeals), Mumbai

SI. Statute Subject Matter of Dispute Amount Period of No. (2014-15) Dispute

(k) Demand of VAT on sale of LPG for 38.6 2007-08,2008-09 domestic use & 2010-11

(l) Demand of VAT on spurline charges 4.23 2011-12

(m) Demand of GVAT & CST on account 37.72 2006-2007 of disallowance of LPG subsidy discount

(n) Penalty for delay in payment of sales tax 0.6 2003-2004

(o) Demand of VAT on account of rate change 0.49 Oct 2011 to Dec 2011

(p) Demand of C5T on account of disallowance of LPG subsidy discount 49.38 2005-06

(q) Demand for treating CST sale as local sale 0.15 2003-2004

(r) Sales Tax demand 0.2 1998-1999

(s) Revised Sales Tax demand as per 2.59 2003-04 assessment order

3 Customs, (a) LPG valuation Dispute 18.72 Jan 2001 to Feb 2005 Excise and Service Tax (b) Dispute on Pentane Classification 106.7 Aug.2005 to Jul2009

(c) Dispute on MFO Classification 75.33 July 2004 to Mar 2011

(d) Demand of duty under Rule 6(3) of CCR, 13.8 2008-2009 2004 for credit taken on input services & 2009-2010

(e) Demand of Service Tax on 733.28 Oct. 2006 to Marketing Margin Mar 2013

(f) Demand of Service Tax on deputation 37.17 Oct. 2006 to of employees to JVs & Govt. Deptt. June 2012

(g) Demand of differential service 0.11 Oct.2006 to tax based on service tax returns March 2007

(h) Demand raised by denying Cenvat 9.01 Aug.2005 to & service tax credit taken at Hazira March 2012

(i) Demand raised by denying Cenvat 0.20 2008-09 & Dec. 2010 credit taken on input services to March 2011

(j) Demand of CVD on purchase of 0.07 March 2006 SAP software

SUB-TOTAL 1630.49

4 Income Tax (a) Unpaid demand 76.75 AY-2012-13

(b) Demand of TDS 3.1 AY-2008-09 to AY-2015-16

5 Other taxes Notified Area tax & GIDC tax on 3.98 1998-99 to Aug 2005 revised value (incl. interest) & 1998-99 to Dec 2009

TOTAL 1714.32

Statute Status - Forum

Joint Commissioner (Appeals), Mumbai

Additional Commissioner (Appeals), Etawah

Tribunal, Gujarat

Joint Commissioner (Appeals), Mumbai

Joint Commissioner, Trichy

High Court, Gwalior

Assam Revenue board

Mumbai Tribunal

Joint Commissioner (Appeals), Vadodara

Customs Excise and Service Tax CESTAT Mumbai

CESTAT Ahmedabad

CESTAT Ahmedabad

CESTAT Kolkata

CESTAT Delhi

CESTAT Delhi

Commissioner (Appeals), Vadodara

CESTAT Ahmedabad &CESTAT Delhi

CESTAT Delhi & Commissioner (Appeals), Kanpur

CESTAT Delhi

Income Tax CIT (Appeals)

ITO (TDS)

Other Taxes Ahmedabad High Court

(b) According to the information and explanation given to us there is no amount which was required to be transferred to the investor education and protection fund in accordance with relevant provisions of The Companies Act 1956 (l of 1956) and rules made thereunder.

(viii) The company does not have accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

(ix) Based on our audit procedure and according to the information and explanations given to us by the management, we are of the opinion that the company has not defaulted in repayment of dues to a financial institution, bank and debenture holders.

(x) In our opinion and according to information and explanation given to us, company has given guarantees for loans taken by its subsidiaries from bank and financial institutions. The terms and other conditions, in our opinion, are not prima facie prejudicial to the interest of the company.

(xi) On the basis of review of utilization of funds pertaining to term loans on overall basis and related information as made available to us, the term loans taken by the company have been utilized for the purposes for which these are obtained.

(xii) According the information and explanation given to us no fraud on or by the company has been noticed or reported during the year under review.

For S.K.Mittal & Co. For G.S Mathur & Co.

Chartered Accountants Chartered Accountants

Firm No.:001135N Firm No.:08744N

(M.K.Juneja) (Rajiv Kumar Wadhawan)

(Partner) (Partner)

Membership No.:013117 Membership No.:091007

Place: New Delhi

Dated: 27th May, 2015


Mar 31, 2014

We have audited the accompanying financial statements of GAIL(India) Limited, 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") read with General Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act 2013., 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 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 Company''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.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Companies Act 1956 to the extent applicable and the Companies Act 2013 (to the extent notified) 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 profit 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

Without qualifying our opinion, we draw attention to Note no.41 regarding sharing of under recoveries on sensitive petroleum products by way of subsidy given to oil marketing companies as decided by Ministry of Petroleum & Natural Gas (MOPNG).

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 purposes of our audit.

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

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

(d) In our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this Report comply with the Accounting Standards referred to in sub- section (3C) of section 211 of the Companies Act 1956 read with General Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act 2013.

(e) Being a government Company, pursuant to the Notification No. GSR 829 (E) dated 21st October 2003 issued by Department of Company Affairs, provisions of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956, are not applicable to the company.

(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 TO THE AUDITOR''S REPORT The Annexure referred to in the auditor''s report to the shareholders of GAIL (India) Limited for the year ended March 31, 2014. We report that:

(i) (a) The company has generally maintained proper records showing full particulars including quantitative details and situation of fixed assets.

(b) According to the information and explanation given to us, there is a regular programme of verification of fixed assets by the management, which in our opinion is reasonable having regard to the size of the company and the nature of its assets. Fixed assets have been physically verified by the management during the year and as per the report, no material discrepancies were noticed on such verification.

(c) The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of the company and such disposal has, in our opinion, not affected the going concern status of the company.

(ii) The inventories have been physically verified at reasonable intervals by the Management, except the stores & spares lying with Engineers India Ltd. and other contractors. We have been explained that the stock of gas at the end of the year has been taken with reference to reading of Turbine Flow Meter/Gas Chromatograph installed at Terminals, Stock of LPG/Pentane/SBP Solvent are determined with reference to Tank Level Gauge measurement which are converted into tonnage by measurement of density and applying correction factor for temperature. LPG vapors volume is converted to tonnage by standard formulae.

In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the Management are reasonable and adequate in relation to the size of the Company and nature of its business.

According to the information and explanations given to us, no material discrepancies have been noticed on physical verification of inventories as compared to the books and records.

(iii) (a) The Company has granted loans to its one subsidiary company (None of the Directors individually or collectively hold more than two per cent of the paid-up share capital). The Company has maintained the register under section 301 of the Companies Act, 1956, inter-alia, in which the name of said one subsidiary is also entered. The maximum amount involved during the year for Rs. 64.17 crores and year-end balance of loan was Rs. 56.38 crores.

(b) In our opinion, the rate of interest and other terms and conditions of such loans are not, prima facie, prejudicial to the interest of the company.

(c) The party has repaid the principal amounts as stipulated and has also been regular in the payment of interest to the company.

(d) There is no overdue amount in excess of Rs. 1 lakh in respect of loans granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

(e) The company had not taken loan from companies covered in the register maintained under section 301 of the Companies Act, 1956.

(iv) According to information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services.

(v) In respect of contract or arrangement entered in the register maintained in pursuance of section 301 of the Act, to the best of our knowledge and belief and according to the information and explanation given to us:

(a) The particulars of contracts or arrangement referred to in section 301, that needed to be entered in the Register maintained under the said section have been so entered.

(b) In our opinion and as per the information & explanation given to us and on the basis of our examination of books of accounts, the transactions made in pursuance of contract or arrangement referred to in (a) above and exceeding the value of Rs. 5 Lacs have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) The company has not accepted any deposits from the public during the year covered under section 58A and 58AA or any other relevant provision of the Companies Act, 1956.

(vii) In our opinion, the company''s internal audit system is commensurate with its size and nature of its activities.

(viii) We have broadly reviewed the costing records being maintained by the Company pursuant to the order made by the Central Government for the maintenance of Cost records under Section 209(1)(d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been maintained.

(ix) (a) According to the records of the company, the company has generally been regular in depositing undisputed statutory dues including Provident fund, Investor Education and Protection Fund, Employees'' State Insurance, Income tax Sales tax, Wealth tax, Service Tax, Custom duty, Excise duty, cess and any other material statutory dues with the appropriate authorities. According to the information and explanation given to us, no undisputed amounts payable in respect of Provident fund, Investor Education and Protection Fund, Employees'' State Insurance, Income tax Sales tax, Service Tax, Custom duty, Excise duty and other statutory dues were in arrear at the year- end for a period of more than six months from the date they became payable.

(b) As certified by the Management on which we have relied upon, the dues of Excise Duty, Custom Duty, Entry Tax, Sales Tax and other Taxes which have not been deposited on account of disputes and the forum where the dispute is pending, are given below:

List of Cases of Unpaid Disputed Demand under various Statutes as on 31.03.2014

(Rs. In Crores)

Sl. Statute Subject Matter of Dispute Amount Period of Dispute Status- Forum No. (2013-14)

1 Entry Tax (a) Demand of Entry Tax on Natural Gas in U.P. 173.88 1999-00 to 2009-10 Allahabad High Court, Trade tax Tribunal & Additional Commissioner (Appeals)

(b) Demand of Entry Tax on Natural Gas 0.86 2005-06 Dy.Commissioner (Appeals), Ajmer in Rajasthan

(c) Demand of Entry Tax on Natural Gas in 2.60 2008-09 Tribunal, Bhopal Madhya Pradesh

2 Sales Tax (a) Non-acceptance of declaration form for 0.37 1995-96 & 1996-97 Tribunal, Bhopal & VAT concessional sales tax

(b) Sales Tax demand as per assessment order 3.90 2005-06 & 2006-07 Additional Commissioner (Appeals) Noida

(c) VAT demand as per assessment order 32.58 2010-11 Additional Commissioner (Appeals) Noida

(d) CST demand on Transmission charges 0.71 2005-06 to 2006 -07 High Court, AP

(e) Demand of GVAT & CST on account of 29.78 2006-2007 Tribunal, Gujarat disallowance of LPG subsidy discount

(f) Penalty for delay in payment of sales tax 0.90 2003-2004 Mumbai Tribunal

(g) Demand of VAT on account of rate change 0.43 Oct 2011 to Dec 2011 Joint Commiss -ioner, Trichy

(h) Demand of CST on account of disallowance 46.93 2005-06 High Court, Gwalior of LPG subsidy discount

(i) Demand for treating CST sale as local sale 0.15 2003-2004 Assam Revenue board

(j) Sales Tax demand 0.20 1998-1999 Mumbai Tribunal

(k) Revised Sales Tax demand as per 2.42 2003-04 Joint Commissioner (Appeals), assessment order Baroda

3 Custom, (a) LPG valuation Dispute 17.81 Jan 2001 to Feb 2005 CESTAT Mumbai Excise & Service Tax (b) Dispute on Pentane Classification 99.50 Aug. 2005 to Jul 2009 CESTAT Ahmedabad

(c) Dispute on MFO Classification 70.89 July 2004 to March 2011 CESTAT Ahmedabad

(d) Demand of duty under Rule 6(3) of CCR, 12.89 2008-2009 & CESTAT Kolkata 2004 for credit taken on input services 2009-2010

(e) Demand of Service Tax on Marketing Margin 147.32 Oct. 2006 to Mar.2012 CESTAT Delhi

(f) Demand of Service Tax on deputation of 2.61 Oct. 2006 to Mar. 2011 CESTAT Delhi employees to JVs & Govt. Deptt.

(g) Demand of differential service tax based 0.22 Oct. 2006 to Mar. 2007 CESTAT Ahmedabad on service tax returns.

(h) Demand raised by denying Cenvat & 8.30 Aug. 2005 to Sep. 2009 CESTAT Ahmedabad service tax credit taken at Hazira

(i) Demand raised by denying Cenvat credit 0.09 Dec. 2010 to March 2011 CESTAT Delhi taken on input services

(j) Demand of CVD on purchase of SAP software0.07 March 2006 CESTAT Delhi taken on input services

SUB-TOTAL 655.41

4 Income Unpaid demands including interest 39.01 AY- 2006-07, 2007-08, CIT (Appeals) Tax 2009-10, 2011-12

5 Other Notified Area tax & GIDC tax on revised 3.81 1998-99 to Aug 2005 & Ahmedabad High Court taxes value (incl. interest) 1998-99 to Dec 2009

TOTAL 698.23

(x) The company does not have accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

(xi) Based on our audit procedure and according to the information and explanations given to us by the management, we are of the opinion that the company has not defaulted in repayment of dues to a financial institution, bank and debenture holders.

(xii) In our opinion and according to information and explanation given to us, the company has granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. In our opinion, the company has maintained adequate documents and records in respect of such loans.

(xiii) The company is not a chit fund, nidhi, mutual benefit fund or a society. Accordingly, clause 4(xiii) of the order not applicable.

(xiv) In our opinion and according to the information and explanation given to us, the company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, clause 4 (xiv) of the order is not applicable.

(xv) In our opinion and according to information and explanation given to us , company has given guarantees for loans taken by its subsidiaries from bank and financial institutions. The terms and other conditions, in our opinion, are not prima facie prejudicial to the interest of the company.

(xvi) On the basis of review of utilization of funds pertaining to term loans on overall basis and related information as made to us, the term loans taken by the company have been utilized for the purposes for which they are obtained.

(xvii) According to the information and explanation given to us, company has not utilized short-term loan for long-term investment during the year.

(xviii)The company has not made any preferential allotment of shares to parties or companies covered in the register maintained under section 301 of the Companies Act, 1956.

(xix) The Company has not issued any debentures during the year.

(xx) During the year no money has been raised by public issues.

(xxi) According to the information and explanations given to us, a legal notice has been sent to an original equipment manufacturer (OEM) of the company regarding recovery of USD 4.34 million plus GBP 3,48,549 along with interest thereon on account of payments of commission to its agent over and above the declared amount in violation of instructions to bidders (ITB) & terms and condition of Integrity Pact (IP) (Refer Note No. 56).

For M/s M.L. Puri & Co. For M/s G.S Mathur & Co.

Chartered Accountants Chartered Accountants

Firm No.: 002312N Firm No.: 08744N

(Navin Bansal) (Rajiv Kumar Wadhawan)

(Partner) (Partner)

Membership No.:91922 Membership No.: 091007

Place : New Delhi Dated : May 26, 2014


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of GAIL(India) Limited, 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 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. 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.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, 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 profit 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.

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) In our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in subsection(3C) of section 211 of the Companies Act, 1956;

e) Being a government Company, pursuant to the Notification No. GSR 829 (E) dated 21st October 2003 issued by Department of Company Affairs, provisions of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956, are not applicable to the company.

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

The Annexure referred to in the auditor''s report to the shareholders of GAIL (India) Limited for the year ended March 31, 2013. We report that:

(i) (a) The company has generally maintained proper records showing full particulars including quantitative details and situation of fixed assets.

(b) According to the information and explanation given to us, there is a regular programme of verification of fixed assets which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. Fixed assets have been physically verified by the management during the year and no material discrepancies were noticed on such verification.

In our opinion, there was no substantial disposal of fixed assets during the year.

(ii) The inventories have been physically verified at reasonable intervals by the Management, except the stores & spares lying with Engineers India Ltd. and other contractors. We have been explained that the stock of gas at the end of the year has been taken with reference to reading of Turbine Flow Meter/Gas Chromatograph installed at Terminals, Stock of LPG/Pentane/SBP Solvent are determined with reference to Tank Level Gauge measurement which are converted into tonnage by measurement of density and applying correction factor for temperature. LPG vap our volume is converted to tonnage by standard formulae.

In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the Management are reasonable and adequate in relation to the size of the Company and nature of its business.

According to the information and explanations given to us, no material discrepancies have been noticed on physical verification of inventories as compared to the books and records.

(iii) (a) The Company has granted loans to its one subsidiary company (None of the Directors individually or collectively hold more than two per cent of the paid-up share capital). The Company has maintained the register under section 301 of the Companies Act, 1956, inter-alia, in which the name of said one subsidiary is also entered. The maximum amount involved during the year for Rs. 57.32crores and year-end balance of loan was Rs.55.60crores.

(b) In our opinion, the rate of interest and other terms and conditions of such loans are not, prima facie, prejudicial to the interest of the company.

(c) The party has repaid the principal amounts as stipulated and has also been regular in the payment of interest to the company.

(d) There is no overdue amount in excess of Rs. 1 lakh in respect of loans granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

(e) The company had not taken loan from companies covered in the register maintained under section 301 of the Companies Act, 1956.

(iv) In our opinion, and according to information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services.

(v) On the basis of our examination of books of accounts, and as per information and explanation given to us, the company has not made any transactions in respect of any party during the financial year that needs to be entered in the register pursuant to the section 301 of the Companies Act, 1956.

(vi) The company has not accepted any deposits from the public during the year covered under section 58A and 58AA or any other relevant provision of the Companies Act, 1956.

(vii) In our opinion, the company''s internal audit system is commensurate with its size and nature of its activities.

(viii) We have broadly reviewed the books of Accounts maintained by the Company pursuant to the order made by the Central Government for the maintenance of Cost records under Section 209(1)(d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been maintained.

(ix) (a) According to the records of the company, the company is generally regular in depositing undisputed statutory dues including Provident fund, Investor Education and Protection Fund, Employees'' State Insurance, Sales tax, Wealth tax, Service Tax, Custom duty, Excise duty, cess and any other statutory dues with the appropriate authorities. According to the information and explanation given to us, no undisputed amounts payable in respect of Sales tax, Service Tax, Custom duty, Excise duty and other statutory dues were outstanding at the year-end for a period of more than six months from the date they become payable.

(b) As certified by the Management on which we have relied upon, the dues of Excise Duty, Custom Duty, Entry Tax, Sales Tax and other Taxes which have not been deposited on account of disputes and the forum where the dispute is pending, are given below:

List of Cases of Unpaid Disputed Demand under various Statutes as on 31.03.2013

(Rs. In Crores)

SI. Statute Subject Matter of Dispute Amount No. (2012-13)

1 Entry Tax (a) Demand of Entry Tax on Natural Gas in U.P. 159.17

(b) Demand of Entry Tax on Natural Gas 0.82 in Rajasthan

(c) Demand of Entry Tax on Natural Gas in 26.00 Madhya Pradesh

2 Sales Tax (a) Non-acceptance of declaration form for 0.61 concessional sales tax

(b) Sales Tax demand as per assessment order 3.66 of 2005-06 and 2006-07

(c) CST demand on Transmission charges 0.70

(d) Demand of GVAT & CST on account of 81.18 disallowance of LPG subsidy discount and treating LPG as non-domestic

(e) Interest for delay for sales tax assessment 0.51

(f) Demand of VAT on account of rate change 0.29 (g) Demand of MP VAT & CST Disallowance of credit note for LPG subsidy discount 207.97

(h) Demand for treating CST sale as local sale 0.15

(i) Sales Tax demand 0.20

(j) Revised Sales Tax demand as per assessment order of 2003-04 1.05

3 Excise & (a) LPG valuation Dispute 16.88 Service Tax

(b) Dispute on Pentane Classification 99.63

(c) Dispute on MFO Classification 66.45

(d) Demand of duty under Rule 6(3) of CCR, 11.97 2004 for credit taken on input services (e) Demand of differential service tax based on 0.19 returns for the period from Oct 06 to Mar 07

(f) Demand raised denying refund claim 0.47 allowed to GAIL for service tax on compression charges

(g) Demand raised by denying Cenvat & 10.29 service tax credit taken at Hazira

(h) Demand raised by denying Cenvat credit 0.22 taken on input services

SUB-TOTAL 688.41

4 Income Unpaid demands including interest 68.58 Tax

5 Other Notified Area tax & GIDC tax on revised 3.63 taxes value (incl. interest)

TOTAL 760.62 Statute Period of Dispute Status - Forum

Entry Tax 1999-00 to 2009-10 Allahabad High Court, Trade tax Tribunal & Additional / Joint Commissioner (Appeals)

2005-06 Dy. Commissioner (Appeals), Ajmer

2008-09, High Court, Gwalior & Tribunal, 2009-10 & 2010-11 Bhopal

Sales Tax 1995-96 & 1996-97 Additional Commissioner (Appeals), Commerical Tax, Gwalior

2005-06 & 2006-07 Additional Commissioner (Appeals) Noida

2005-06 to 2009-10 AP High Court

2006-2007 Joint Commissioner (Appeals)

2003-2004 Dy. Commissioner, Sales Tax, Mumbai

Oct 2011 to Dec 2011 Joint Commissioner, Trichy

2008-09 to 2010-11 High Court, Gwalior

2003-2004 High Court, Guwahati

1998-1999 Mumbai Tribunal

2003-04 Joint Commissioner (Appeals), Baroda

Excise & Service Tax Jan 2001 to Feb 2005 CESTAT Mumbai

Mar. 2000 to CESTAT New Delhi & CESTAT Feb 2002 & Aug.2005 Ahmedabad to Jul 2009

July 2004 to March 2011 CESTAT Ahmedabad

2008-2009 & CESTAT Kolkata 2009-2010

Oct.2006 to March 2007 CESTAT Ahmedabad

Sep.2007 CESTAT Ahmedabad

May 2005 to March 2011 CESTAT Ahmedabad

Jan. 2006 to Oct. 2009 & Commissioner (Appeals), Guwahati & Dec. 2010 to March 2011 CESTAT Delhi

Income Tax AY-2003-04, 2004-05, CIT (Appeals) 2006-07, 2007-08 & 2010-11

Other taxes 1985-86 to 2008-09 Ahmedabad High Court

(x) The company has no accumulated losses at the end of the financial year and it has not incurred any cash losses in the current and immediately preceding financial year.

(xi) Based on our audit procedure and on the information and explanations given by the management, we are of the opinion that the company has not defaulted in repayment of dues to a financial institution, bank and debenture holders.

(xii) In our opinion, the company has granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. In our opinion, the company has maintained adequate documents and records in respect of such loans.

(xiii) The company is not a chit fund, nidhi, mutual benefit fund or a society. Accordingly, clause 4(xiii) of the order not applicable.

(xiv) According to the information and explanation given to us, the company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, clause 4 (xiv) of the order is not applicable.

(xv) The company has given guarantees for loans taken by its subsidiaries from bank and financial institutions. The terms and other conditions, in our opinion, are not prima facie prejudicial to the interest of the company.

(xvi) On the basis of review of utilization of funds pertaining to term loans on overall basis and related information as made to us, the term loans taken by the company have been utilized for the purposes for which they are obtained.

(xvii) According to the information and explanation given to us, company has not utilized short-term loan for long-term investment during the year.

(xviii)The company has not made any preferential allotment of shares to parties or companies covered in the register maintained under section 301 of the Companies Act, 1956.

(xix) The Company has not issued any debentures during the year.

(xx) During the year no money has been raised by public issues.

(xxi) According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the year.

For M.L.Puri& Co. For Rasool Singhal & Co.

Chartered Accountants Chartered Accountants

Firm No.: 002312N Firm No.: 500015N

(Navin Bansal) (Sandeep Gupta)

(Partner) (Partner)

Membership No.:91922 Membership No.:413890

Place : New Delhi

Dated : May 28, 2013


Mar 31, 2012

1. We have audited the attached Balance Sheet of GAIL (India) Limited as at 31st March, 2012, the Statement of Profit and Loss and 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 have conducted our audit in accordance with auditing standards generally accepted in India. These Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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 statement on 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. Further to our comments in the Annexure referred to 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 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 and 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 the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

e) Disclosure in terms of clause (g) of sub-section (1) of Section 274ofthe Companies Act, 1956 is not required as per notification no. GSR 829(E) dated October21,2003 issued by the Department of Company Affairs.

f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements read together with the significant accounting policies and notes thereon give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

i. in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2012;

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

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

The Annexure referred to in the auditor's report to the shareholders of GAIL (India) Limited for the year ended March 31,2012.We report that:

(i) (a) The company has generally maintained proper rords showing full particulars including quantitative details and situation of fixed assets.

(b) According to the information and explanation given to us, there is a regular programme of verification of fixed assets which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. Fixed assets have been physically verified by the management during the year and no material discrepancies were noticed on such verification.

In our opinion, there was no substantial disposal of fixed assets during the year.

(ii) The inventories have been physically verified at reasonable intervals by the Management, except the stores & spares lying with Engineers India Ltd. and other contractors. We have been explained that the stock of gas at the end of the year has been taken with reference to reading of Turbine Flow Meter/Gas Chromatograph installed at Terminals, Stock of LPG/Pentane/SBP Solvent are determined with reference to Tank Level Gauge measurement which are converted into tonnage by measurement of density and applying correction factor for temperature. LPG vapour volume is converted to tonnage by standard formulae.

In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the Management are reasonable and adequate in relation to the size of the Company and nature of its business.

According to the information and explanations given to us, no material discrepancies have been noticed on physical verification of inventories as compared to the books and records.

(iii) (a) The Company has granted loans to its two subsidiaries companies (None of the Directors individually or collectively hold more than two per cent the paid-up share capital). The Company has maintained the register under section 301 often Companies Act, 1956, inter-alia, in which the name of said two subsidiaries is also entered. The maximum amount involved during the year for Rs. 336.78 crores and year-end balance of loan was Rs. 57.32 crores.

(b) In our opinion, the rate of interest and other terms and conditions of such loans are not, prima facie, prejudicial to the interest of the company.

(c) The parties have repaid the principal amounts as stipulated and have also been regular in the payment of interest to the company.

(d) There is no over due amount in excess of Rs. 1 lakh in respect of loans granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

(e) The company had not taken loan from companies covered in the register maintained under section 301 of the Companies Act, 1956.

(iv) In our opinion, and according to information and explanations given to us, there are adequate internal control procedures to commensurate with the size of the company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services.

(v) On the basis of our examination of the books of accounts, and as per information and explanation given to us, the company has not made any transactions in respect of any party during the financial year that needs to be entered in the register pursuant to the section 301 of the Companies Act, 1956.

(vi) The company has not accepted any deposits from the public during the year covered under section 58A and 58AA or any other relevant provision of the Companies Act, 1956.

(vii) In our opinion, the company's internal audit system is commensurate with its size and nature of its activities.

(viii) We have broadly reviewed the books of Accounts maintained by the Company pursuant to the order made by the Central Government for the maintenance of Cost records under Section 209(1)(d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been maintained.

(ix) (a) According to the records of the company, the company is generally regular in depositing undisputed statutory dues including Provident fund, Investor Education and Protection Fund, Employees' State Insurance, Sales tax, Wealth tax, Service Tax, Custom duty, Excise duty, cess and any other statutory dues with the appropriate authorities. According to the information and explanation given to us, no undisputed amounts payable in respect of Sales tax, Service Tax, Custom duty, Excise duty and other statutory dues were outstanding at the year end for a period of more than six months from the date they become payable.

(b) As certified by the Management on which we have relied upon, the dues of Excise Duty, Custom Duty, Entry Tax, Sales Tax and other Taxes which have not been deposited on account of disputes and the forum where the dispute is pending, are given below:

List of Cases of Unpaid Disputed Demand under various Statutes as on 31.03.2012 (Rs. in Crores)

SI. Amount Period No. Statute Subject Matter of Dispute (2011-12) of Dispute Status- Forum

1 Entry Tax(a) Entry Tax on Market Value of Natural Gas 121.92 1999-OOto Allahabad High Court, Trade tax Tribunal& instead of its Purchase Price (Including Interest) 2009-10 Additional/ Joint Commissioner -Appeals (b) Rajasthan Entry Tax Demand 8.41 2005-06 & Dy. Commi ssioner, Appeals, Kota/ 2008-09 Appeallate Authority, Gwalior 2 Sales Tax (a) Non-acceptance of declaration form 0.63 1995-96 & Additional Commissioner -Appeals, for concessional sales tax 1996-97 Commercial Tax , Gwalior (b) Sales Tax demand as per assessment 3.34 2005-06 & Additional Commissioner- Appeal Noida order of 2005-06 and 2006-07 2006-07 (c) CST demand on Transmission charges and 0.86 2005-06 to AP High Court penalty & interest 2008-09

(d)Demand on account of LPG subsidy discount 75.37 2006-2007 Joint Commissioner -Appeals and treating domestic LPG as non-domestic

(e)Interest for delay for sales tax assessment 0.54 2003-2004 Dy.Commi ssioner, Sales Tax, Mumbai

(f)Demand of VAT on account of rate change 0.29 0ct 2011 to Joint Commissioner, Trichy Dec 2011

(g)Disallowance of credit note for LPG 117.91 2008-2009 High Court, Gwalior subsidy discount

(h)Demand for treating CST sale as local sale 0.15 2003-2004 High Court, Guwahati (i)Sales Tax demand 0.20 1998-1999 Mumbai Tribunal

3 Excise& (a) LPG valuation Dispute 15.96 Jan 2001 to CESTAT Mumbai Service Tax Feb 2005

(b)Dispute on Pentane Classification 92.14 Mar.2000 to CESTAT New Delhi & CESTAT Ahmedabad Feb 2002 & Aug.2005 to Jul 2009

(c)Dispute on MFO Classification 62.01 July 2004 to CESTAT Ahemdabad & Commissioner March 2011 (Appeals) Vadodara

(d)Demand of duty under Rule 6(1) of CCR,2004 11.07 2008-2009 & CESTAT Kolkata for credit taken on input services 2009-2010 (e)Demand of Differential service tax based on 0.17 0ct.2006 to CESTAT Ahemdabad returns for the period from Oct 06 to Mar 07 March 2007 (f)Demand raised denying refund claim allowed 0.43 Sep.2007 CESTAT Ahemdabad to GAIL for service tax on compression charges

(g)Demand raised by denying Cenvat & service tax 7.28 May 2005 to CESTAT Ahemdabad credit taken at Hazira March 2010 (h)Demand raised by denying Cenvat 0.26 Jan.2006 to Commissioner (Appeals), credit taken on input services Oct. 2009 & Guwahati / Kanpur Dec. 2010 to March 2011

SUB-TOTAL 518.94

4 Income Tax Demand of Penalty u/s 271(1)(c) 168.59 AY-2007-08 CIT Appeals 5 Other taxes Notified Area tax & GIDC tax on revised value 3.46 1985-86 to Ahmedabad High Court (incl. interest) 2008-09

TOTAL 690.99

(x) The company has no accumulated losses at the end of the financial year and it has not incurred any cash losses in the current and immediately preceding financial year.

(xi) Based on our audit procedure and on the information and explanations given by the management, we are of the opinion that the company has not defaulted in repayment of dues to a financial institution, bank and debenture holders.

(xii) In our opinion, the company has granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. In our opinion, the company has maintained adequate documents and records in respect of such loans.

(xiii) The company is not a chit fund, nidhi, mutual benefit fund or a society. Accordingly,clause4(xiii) of the order not applicable.

(xiv) According to the information and explanation given to us, the company is not dealing or trading in shares, securities, debentures and other investments. Accordingly,clause4(xiv) of the order is not applicable.

(xv) The company has given guarantees for loans taken by its subsidiaries from bank and financial institutions. The terms and other conditions, in our opinion, are not prima facie prejudicial to the interest of the company.

(xvi) On the basis of review of utilization of funds pertaining to term loans on overall basis and related information as made to us, the term loans taken by the company have been utilized for the purposes for which they are obtained.

(xvii) According to the information and explanation given to us, company has not utilized short-term loan for long term investment during the year.

(xviii)The company has not made any preferential allotment of shares to parties or companies covered in the register maintained under section 301 of the Companies Act, 1956.

(xix) The Company has not issued any debentures (bonds) during the year.

(xx) During the year no money has been raised by public issues.

(xxi) According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the year.

For M/s M.L.Puri & Co. For M/s Rasool Singhal & Co

Chartered Accountants Chartered Accountants

Firm No:002312 N Firm No :500015N

NavinBansal G. S. Haldia

Partner Partner

Membership No. 91922 Membership No.007012

New Delhi New Delhi

Dated: 30th May 2012 Dated: 30th May 2012


Mar 31, 2011

1. We have audited the attached Balance Sheet of GAIL (India) Limited as at 31st March, 2011, the Profit and Loss Account and 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 have conducted our audit in accordance with auditing standards generally accepted in India. These Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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 statement on 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, 1 956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to 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 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 and Profit & Loss Account 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, Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

e) Disclosure in terms of clause (g) of sub-section (1) of Section 274of the Companies Act, 1 956 is not required as per notification no. GSR 829(E) dated October 21,2003 issued by the Department of Company Affairs.

f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements read together with the significant accounting policies and notes thereon give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

i. in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2011;

ii. in the case of the Profit & Loss Account, of the profit for the year ended on that date; and

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

The Annexure referred to in the auditor's report to the shareholders of GAIL (India) Limited for the year ended March 31,2011. We report that:

(i) (a) The company has generally maintained proper records showing full particulars including quantitative details and situation of fixed assets.

(b) According to the information and explanation given to us, there is a regular programme of verification of fixed assets which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. Fixed assets have been physically verified by the management during the year and no material discrepancies were noticed on such verification.

In our opinion, there was no substantial disposal of fixed assets during the year.

(ii) The inventories have been physically verified at reasonable intervals by the Management, except the stores & spares lying with Engineers ndia Ltd. and other contractors. We have been explained that the stock of gas at the end of the year has been taken with reference to reading of Turbine Flow Meter/Gas Chromatograph installed at Terminals, Stock of LPG/Pentane/SBP Solvent are determined with reference to Tank Level Gauge measurement which are converted into tonnage by measurement of density and applying correction factor for temperature. LPG vapour volume is converted to tonnage by standard formulae.

In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the Management are reasonable and adequate in relation to the size of the Company and nature of its business.

According to the information and explanations given to us, no material discrepancies have been noticed on physical verification of inventories as compared to the books and records.

(iii) The Company has neither granted nor taken any loans secured or unsecured, to or from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956.

(iv) In our opinion, and according to information and explanations given to us, there are adequate internal control procedures to commensurate with the size of the company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services.

(v) On the basis of our examination of the books of accounts, and as per information and explanation given to us, the company has not made any transactions in respect of any party during the financial year that needs to be entered in the register pursuant to the section 301 of the Companies Act, 1956.

(vi) The company has not accepted any deposits from the public during the year covered under section 58A and 58AA or any other relevant provision of the Companies Act, 1 956.

(vii) In our opinion, the company's internal audit system is commensurate with its size and nature of its activities.

(viii) We have broadly reviewed the books of Accounts maintained by the Company pursuant to the order made by the Central Government for the maintenance of Cost records under Section 209(1 )(d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been maintained. We have not, however, made a detailed examination of these records.

(ix) (a) According to the records of the company, the company is generally regular in depositing undisputed statutory dues including Provident fund, Investor Education and Protection Fund, Employees' State Insurance, Sales tax, Wealth tax, Service Tax, Custom duty, Excise duty, cess and any other statutory dues with the appropriate authorities. According to the information and explanation given to us, no undisputed amounts payable in respect of Sales tax, Service Tax, Custom duty, Excise duty and other statutory dues were outstanding at the year end for a period of more than six months from the date they become payable.

(b) As certified by the Management on which we have relied upon, the dues of Excise Duty, Custom Duty, Entry Tax, Sales Tax and Other taxes which have not been deposited on account of disputes and the forum where the dispute is pending, are given below:

(Rs in Crores)

SI. Statute Subject Matter of Amount Period of Dispute No. Dispute

1 Entry Tax (a) Entry Tax on Market Value 300.58 1999-2008 of Natural Gas instead of its Purchase Price (Including Interest)

(b) Rajasthan Entry Tax Demand 0.65 2005-06

2 Sales Tax (a) Non-acceptance of declaration form 0.16 1995-96 & 1996-97 for concessional sales tax

(b) Sales Tax demand as per assessment 3.00 2005-06 & 2006-07 order of 2005-06 and 2006-07

(c) CST demand on Transmission charges 0.48 2005-06 and 2006-07 with penalty & interest thereon

(d) Demand on account of LPG subsidy 69.57 2006-2007 discount and treating domestic LPG as non-domestic

(e) Interest for delay for sales tax assessment 0.54 2003-2004

(f) Demand for non submission of C Forms and rejection of HPL swap in transit sale 0.94 Apr. 2004 to June 2004

3 Excise (a) LPG valuation Dispute 15.04 Jan 2001 to Feb 2005

(b) Dispute on Pentane Classi -fication 83.57 Mar. 2000 to Feb 2002 & Aug.2005 to Jul 2009

(c) Dispute on MFO Classification 42.94 July 2004 to May 2009

4 Service Tax (a) Demand of differential service tax based 0.12 Oct.2006 to Mar.2007 on returns for the period from Oct 06 to Mar 07

(b) Demand raised denying refund claim 0.26 Sep.2007 allowed to GAIL for service tax on compression charges

(c) Demand raised by denying Cenvat & 6.94 May 2005 to Mar.2010 service tax credit taken at Hazira

5 Other taxes Notified Area tax & GIDC tax on revised 3.28 1985-86 to 2008-09 value, (incl. interest)



Statute Status - Forum

Entry Tax Allahabad High Court, Trade tax Tribunal & Additional /Joint Commissioner-Appeals

Dy. Commissioner, Appeals, Kota

Sales Tax Additional Commissioner Appeals, Commercial Tax, Gwalior

Additional Commissioner-Appeal Noida

Andhra Pradesh High Court

Joint Commissioner-Appeals, Vadodara

Dy. Commissioner, Sales Tax, Mumbai

Appellate & Revisional Bench, West Bengal

Excise CESTAT Mumbai

CESTAT New Delhi & CESTAT Ahmedabad

CESTAT Ahemda bad CESTAT Ahemda bad

CESTAT Ahemdabad

CESTAT Ahemda bad

Other Taxes Ahmedabad High Court

(x) The company has no accumulated losses at the end of the financial year and it has not incurred any cash losses in the current and immediately preceding financial year.

(xi) Based on our audit procedure and on the information and explanations given by the management, we are of the opinion that the company has not defaulted in repayment of dues to a financial institution, bank and debenture holders.

(xii) In our opinion, the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities other than to its employees. In our opinion, the company has maintained adequate documents and records in respect of such loans.

(xiii) The company is not a chit fund, nidhi, mutual benefit fund or a society. Accordingly, clause 4(xiii) of the order not applicable.

(xiv) According to the information and explanation given to us, the company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, clause 4 (xiv) of the order is not applicable.

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

(xvi) On the basis of review of utilization of funds pertaining to term loans on overall basis and related information as made to us, the term loans taken by the company have been utilized for the purposes for which they are obtained.

(xvii) According to the information and explanation given to us, company has not raised any short term loan during the year.

(xviii) The company has not made any preferential allotment of shares to parties or companies covered in the register maintained under section 301 of the Companies Act, 1956.

(xix) The Company has issued debentures(bonds) during the year. According to information and explanations given to us, the Company has created necessary charges as per debenture (bond) trust deed in respect of debentures(bonds) issued during the year.

(xx) During the year no money has been raised by public issues.

(xxi) According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the year.

For M.L Puri & Co. For Rasool Singhal & Co.

Chartered Accountants Chartered Accountants

Firm No:002312N Firm No.: 500015 N

Navin Bansal Anil Gupta

Partner Partner

Membership No. 91922 Membership No. 072767

Place : New Delhi Place: New Delhi

Dated : May 23,2011 Dated : May 23,2011


Mar 31, 2010

We have audited the attached Balance Sheet of GAIL (India) Limited as at 31st Match. 2010. the Profit and Loss Account and 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 have conducted our audit in accordance with auditing standards generally accepted in India. These Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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.

As required by the statement on the Companies (Auditors Report) order.2003 issued by the Central Government of India in terms of sub-sectton (4A) of Section 221 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.

Further to our comments in the Annexure referred to 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 account as required t^ law have been kept by the Company so far as appears from our examination of those books;

c. The Balance Sheet and Profit & Loss Account and the Cash Flow Statement dealt with by this report are m agreement with the books of account;

d. in our opinion, the Balance Sheet, Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 19S6;

e. Disclosure in terms of clause (g) of sub-section (l) of Section 274 of the Companies Act, 1956 is not requited as per notification no. GSR 829(E) dated October 21.2003 issued by the Department of Company Affairs.

f. in our opinion and to the best of our information and according to the explanations given to us, the said financial statements read together with the significant accounting policies and notes thereon give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) m thecaseof the Balance Sheet, of the state of affairs of the Company as at 31st March, 2010;

b) m the case of the Profit & Loss Account, of the profit for the year ended on that date;and

c) in the case of the Cash Flow Statement, of the cash flow of the company for the yeat ended on that date.

Annexure to the Auditors Report

The Annexure referred to in the auditors report to the shareholders of GAIL (lnd(a) Limited for the year ended March 31.2010. We report that:

(i) (a)The company has generally maintained proper records showing full particulars including quantitative details and situation of fixed assets.

(b) According to the information and explanation given to us, there is a regular programme of verification of fixed assets which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. Fixed assets have been physically verified by the management during the year and no material discrepancies were noticed on such verification.

In our opinion, there was no substantial disposal of fixed assets during the year.

(ii) The inventories have been physically verified at reasonable intervals by the Management, except the stores & spares lying with Engineers India Ltd. and other contractors. We have been explained that the stock of gas at the end of the year has been taken with reference to reading of Turbine Flow Meter/Gas Chromatograph installed at Terminals, Stock of LPG/Pentane/SBP Solvent are determined with reference to Tank Level Gauge measurement which are converted into tonnage by measurement of density and applying correction factor for temperature. LPG vapour volume is converted to tonnage by standard formulae.

In our opinion and according to the information and explanations given to us. the procedures of physical verification of inventory followed by the Management are reasonable and adequate in relation to the size of the Company and nature of its business.

According to the information and explanations given to us. no material discrepancies have been noticed on physical verification of inventories as compared to the books and records.

(III) The Company has neither granted nor taken any loans secured or unsecured, to or from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956.

IV) in our opinion, and according to information and explanations given to us, there are adequate internal control procedures to commensurate with the size of the company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services.

(v) On the basis of our examination of the books of accounts, and as per information and explanation given to us, the company has not made any transactions in respect of any party during the financial year that needs to be entered in the register pursuant to the section 301 of the Companies Act. 1956.

(vi) The company has not accepted any deposits from the public during the year covered under section 58A and 58AA or any other relevant provision of the Companies Act. 19S6.


(viii) We have broadly reviewed the books of Accounts maintained by the Company pursuant to the order made by the Central Government for the maintenance of Cost records under Section 209(l)(d) of the Companies Act. 19S6 and we are of the opinion that prima facie the prescribed accounts and records have been maintained. We have not, however, made a detailed examination of these records.

(ix) (a) According to the records of the company, the company is generally regular in depositing undisputed statutory dues including Provident fund, investor Education and Protection Fund, Employees State insurance. Sales tax, Wealth tax. Service Tax, Custom duty. Excise duty, cess and any other statutory dues with the appropriate authorities. According to the information and explanation given to us, no undisputed amounts payable in respect of Sales tax, Service Tax, Custom duty, Excise duty and other statutory dues were outstanding at the year end for a period of more than six months from the date they become payable.

(x) As certified by the Management on which we have relied upon, the dues of Excise Duty. Custom Duly. Entry Tax. Sales Tax and other Taxes which have not been deposited on account of disputes and the forum where the dispute is pending, are given below:

(Rs. In Crores)

Sl. Statute Subject Matter of Dispute Amount No.

1. Entry Tax (a) Entry Tax on Market Value of 234.90 Natural Gas instead of its Purchase Price (Including Interest)


2. SalesTax (a) Non-acceptance of declaration 0.16 form for concessional sales tax

(b) Surcharge on Turnover tax Rajasthan 0.44

(c) Sales Tax demand as per assessment 2.61 order of 2005-06and 2006-07

(d) CST demand on Transmission 0.48 charges with penalty & interest thereon

3. Excise (a) LPG valuation Dispute 14.39

(b) Dispute on Pentane Classification 78.16

(c) Dispute on MFO Classification 40.69 as Motor spirit

4. Service Tax (a) Demand of differential service tax 0.10 based on returns for the period from Oct 06 to Mar 07

(b) Demand raised denying refund 0.26 claim allowed to GAIL for service tax on compression charges

(c) Credit denied on input services 0.81 Township security (Feb.08- Mar.09) and Maintenence of land/lawns (Nov.08)

5. Income Tax Liability of Tax on disallowance of 1.76 deductions claimed & Penalty

6. Other taxes Notified Area tax on revised value. 3.06


Subject Mateer of Dispute Period of Dispute Status - Forum

Entry Tax 1999-2007 Allahabad High Court & Trade tax Tribunal

2002-O3, onwards Dy. Commissioner, Appeals. Kota

SalesTax 1995-96& 1996-97 Dy.Commissioner, Commerical Tax.Gwalior

2002-03.2003-04 & 2004-05 State tax Tribunal, Ajmer

2005-06& 2006-07 Additional Commissioner - Appeal Noida

2005-06 and 2006-07 A P High Court

Excise Jan 2001 to Feb 2005 CESTAT Mumbai

Mar. 2000 TO Feb 2002 & CESTAT New Delhi & CESTAT Ahmedabad Aug-2005to Jul 2009

July 2004 to May 2009 CESTAT Ahemdabad

ServiceTax Oct.2006 to Mar.2007 Commissioner (Appeals) Vadodara

Sep.2007 CESTAT Ahemdabad

Feb-2008 to Mar.2009 Commissioner (Appeals) Kanpur

Income Tax AY-1996-97 to 2007-08. ITAT Delhi

Other taxes 1985-86 to 2008-09 Ahmedabad High Court

x.The company has no accumulated losses ai ihe end of the financial year and has not incurred any cash losses in the current and immediately preceding financial year.

(xi) Based on our audit procedure and on the information and explanations given by the management, we are of the opinion that the company has not defaulted in repayment of dues to a financial institution, bank and debenture holders.


(xiii) The company is not a chit fund, nidhi, mutual benefit fund or a society. Accordingly, clause 4{xiii) of the order not applicable.

(xiv) According to the information and explanation given to us, the company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, clause 4 (xiv) of the order is not applicable.

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

xvi) On the basis of review of utilization of funds pertaining to term loans on overall basis and related information as made to us, the term loans taken by the company have been utilized for the purposes for which they are obtained.

xvii) According to the information and explanation given to us. company has not raised any short term loan during the year

xviil) The company has not made any preferential allotment of shares to parlies or companies covered In the register maintained under section 301 of the Companies Act. 1956.

(xix) The company has not issued any debentures during the year.

xx) During the year no money has been raised by public issues.

xxi) According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the year.

For Mehra Goel &Co. For Rasool & Singhal &Co.

Chartered Accountants Chartered Accountants

Firm N00517N Firm No:S00015N

PJC Mehra Praveen Gupta

Partner Partner

Membership No. 6102 Membership No. 073489

New Delhi New Delhi

Dated: May 17,2010 Dated: May 17,2010



 
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