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Accounting Policies of MMTC Ltd. Company

Mar 31, 2015

1. General Information:

The company is incorporated and domiciled in India, and a Mini- Ratna public sector undertaking under the administrative control of Ministry of Commerce & Industry, Government of India. The registered office of the Company is situated at Core-1, Scope Complex, 7, Institutional Area, Lodi Road, New Delhi-110003, India. The company has 11 regional offices at various places in India and a wholly owned subsidiary MMTC Transnational Pte Ltd. (MTPL), Singapore.

The principal activities of the Company are export of Minerals and import of Precious Metals, Non-ferrous metals, Fertilizers, Agro Products, coal and hydrocarbon etc.

The company's trade activities span across various countries in Asia, Europe, Africa, Middle East, Latin America and North America.

2.1. BASIS OF PREPARATION OF FINANCIAL STATEMENT

The Financial Statements have been prepared as of a going concern on historical cost convention and in accordance with the mandatory Accounting Standards notified by the Companies (Accounting Standards) Rules 2006, transitional provisions with respect to Accounting Standards of Companies (Accounts) Rules 2014 and the provisions of the Companies Act, 2013.

2.2. PURCHASES AND SALES

a. Purchases and sales are booked on performance of the contract/agreement entered into with the sellers/buyers or against allocation letter received from government.

Wherever there is part performance of such contract/agreement/allocation, the part completed is booked as Purchase/Sale.

b. In case of certain commodities import of which is canalized through the company, imported on 'Government Account' against authorization letter issued by Government of India, Purchase/Sale is booked in the name of the Company.

c. Gold/Silver received under deposit:-

i. Purchases include gold/silver withdrawn from Deposit on outright purchase basis for sale to exporters, as per the scheme of Exim Policy being operated by the Company as a nominated agency.

ii. Purchase of Gold during the year for domestic sale is accounted for on withdrawal from the Gold/Silver under deposit and fixation of price with the suppliers. The stock held by the company at year end as Gold/Silver under Deposit is accounted for under current assets as ' stock towards unbilled purchases' and under current liability as amount payable towards unbilled purchases' at the bullion price prevailing as at the close of the year. However, customs duty paid in respect of balance in deposits is shown as prepaid expenses.

iii. Gold/silver withdrawn on loan basis from the Gold/Silver under deposit, are shown as loan given to customers and shown under Loans and Advances. The corresponding liability towards the stocks received from foreign suppliers is shown under Sundry Creditors. Loan/Sundry Creditors are adjusted when purchase and sales are booked.

iv. In the case of replenishment basis, gold/silver booked by exporter by paying margin money, purchase is booked after "fixing" the price with the foreign suppliers. However, sale is booked when quantity is actually delivered after completion of export.

d. Sale during the course of import by transfer of documents of title i.e. high seas sale is booked upon transfer of documents of title to the goods in favor of buyer before the goods cross the custom frontiers of India.

e. Purchase/Sale is booked in respect of trade done through commodity exchange like National Spot Exchange which is backed by physical delivery of goods.

f. In respect of exports of Iron Ore/Manganese Ore where final sale value is ascertained on the basis of destinational weight and analysis results and such results are awaited, provision towards DWArisk is made @ 1 % on the provisional sale value. In case of FOBT supplies where DWA risk on the purchase value is to the account of supplier provision @1 % is made on the difference between sale value and purchase value.

g. Pending settlements, certain expenses/ gain/loss like dispatch earned/ demurrage payable etc. are accounted for on provisional basis.

2.3. REVENUE RECOGNITION

a) Revenue is recognized on accrual basis except in the following items which are accounted for on actual realization since reusability of such items is uncertain in accordance with the provisions of AS-9 issued by ICAI:-

i. Tax credit, duty credit authorization under Target Plus scheme, REP/Advance Licenses, Service Tax refund, etc.

ii. Decrees pending for execution/contested dues and interest thereon, if any:

iii. Interest on overdue recoverables where realisability is uncertain.

iv. Liquidated damages on suppliers/underwriters, refund of custom duty on account of survey shortage, and refund of income-tax/sales-tax/VATand interest thereon.

b) Insurance claims are accounted for upon being accepted by the insurance company.

c) Claims are recognized in the Profit & Loss Account on accrual basis including receivables from Govt, towards subsidy, cash incentives, reimbursement of losses etc. when it is not unreasonable to expect ultimate collection. Claims recognized but subsequently becoming doubtful are provided for through Profit & Loss Account.

2.4. PREPAID EXPENSES

Prepaid expenses up to Rs.10,000/- in each case are charged to revenue. Deposits up to Rs.5,000/- in each case with Government Department, Statutory Corporations, Electricity Boards and Local Bodies are also charged off to revenue.

2.5. FIXEDASSETS

(a) All fixed assets are stated at historical cost less accumulated depreciation and any impairment in value.

(b) The Company's expenditure toward construction/development of assets on land owned by the Government/ Semi Government Authorities is capitalized under heading "Fixed Assets created on Land and neither the Fixed Assets nor the Land belongs to the Company".

2.6. DEPRECIATION

Depreciation is provided on straight line method as per the useful lives approved by the Board of Directors, which are equal to those provided under schedule II of the Companies Act, 2013. Depreciation on assets acquired/disposed during the year is provided from/up to the date acquisition/disposal. Depreciation includes amortization of Intangible Assets and lease-hold Assets. The residual value of all the assets is taken as Re 1/-. The useful lives of the assets are taken as under:

2.7. INVESTMENTS

a. Long term investments are valued at cost less provision for permanent diminution in value.

b. Current investments are valued at lower of cost and fair value.

2.8. FOREIGN CURRENCYTRANSACTIONS

i. Transactions with rupee payment countries in respect of non-convertible Indian currency are being treated as foreign exchange transactions.

ii. Foreign currency monetary items (except overdue recoverable where realisibility is uncertain) are converted using the closing rate as defined in the AS-11 issued by the Institute of Chartered Accountants of India. Non- monetary items are reported using the exchange rate at the date of the transaction. The exchange difference gain/loss is recognized in the Profit and Loss account.

iii. Liability in foreign currency relating to acquisition of fixed assets is converted using the closing rate as defined in AS 11 issued by the Institute of Chartered Accountants of India. The difference in exchange is recognized in the Profits Loss Account.

iv. In respect of forward exchange contracts, the premium /discount and loss/gain will be recognized as under: -

a. In respect of forward exchange contracts against existing underlying transactions, the premium/ discount is recognized proportionately over the life of the contract. The loss/gain due to difference in exchange rate between (i) closing rate or the rate on the date of settlement if the transaction is settled during the year, and (ii) the exchange rate at later of the date of the inception of the forward contract or the last reporting date is recognised in the Profit & Loss Account for the year.

b. In respect of forward contracts relating to firm commitments and highly probable forecast transactions, loss due to exchange difference is recognized in the Profit & Loss Account in the reporting period in which the exchange rate changes. Any profit or loss arising on renewal or cancellation of such contracts is recognized as income orexpense forthe period.

v. Investments in subsidiary company outside India are translated at the rate of exchange prevailing on the date of acquisition.

2.9. SEGMENT REPORTING

Primary Segment: The management evaluates the company's performance and allocates the resources based on analysis of various performance indicators by the following business segments /Product segments i.e.

i. Precious Metals

ii. Metals

iii. Minerals

iv. Coal & Hydrocarbon

v. Agro Products

vi. Fertilizer

vii. General Trade/others.

Above Business Segments have been identified in line with AS-17 "Segment Reporting" taking into account the company's organizational structure as well as different risks and returns of these segments.

Secondary Segment: Secondary Segments have been identified based on the geographical location of the customer of the company i.e.

i. Outside India

ii. Within India (including high sea sales to customers in India)

2.10. EMPLOYEE BENEFITS

i. Provision for gratuity, leave encashment / availment and long service benefits i.e. service award, compassionate gratuity and employees' family benefit scheme is made on the basis of actuarial valuation as per AS-15(Revised) issued by The Institute of Chartered Accountants of India.

ii. Provision for post retirement medical benefit is made on defined contribution basis.

iii. Provident fund contribution is made to Provident Fund Trust on accrual basis.

iv. Payment of Ex-gratia and Notice pay on Voluntary Retirement are charged to revenue in the year incurred.

2.11. PHYSICAL VERIFICATION OF STOCKS

i. Physical verification of stocks is undertaken once in a year and balances are arrived at after necessary adjustments till the end of the year. The stocks as physically verified are adopted as closing stocks and shortages/excesses suitably dealt with.

ii. In some of the cases where stocks are lying with Handling Agent/SWC/CWC/Private Parties the stocks have been adopted on the basis of certificate given by the respective agencies.

2.12. VALUATION OF STOCKS

Inventories including Goods-in-Transit are valued at lower of the cost or realisable value as on 31 st March. In case of back to back transactions, net realizable value is ascertained on the basis of cost plus profit margin. The method of valuation is as under:

a) EXPORTS:

i) Cost of export stocks is arrived at after including direct expenses incurred up to the point at which the stocks are lying. Similarly the realisable value is derived by deducting from the market price the expenses to be incurred from that point to the stage where they are sold.

ii) In respect of mineral ores the realisable value of ores is worked out at the minimum of the Fe/Mn contents of the grade of the ore as per export contract and is compared with the weighted average cost at weighted average Fe/Mn contents/weighted average moisture contents of the ore. The embedded stocks of Iron ore are excluded from inventory and hence not valued.

b) IMPORTS:

i) The cost of imported stocks is arrived at by working out the yearly regional weighted average cost except for Non-ferrous Metals where weighted average cost of remaining stock after including all expenses incurred upto the point at which they are lying is considered. However, where stocks are specifically identifiable, actual cost of the material including all expenses incurred up to the point at which they are lying is considered.

ii) Gold/Silver purchased from foreign suppliers against booking by exporters under replenishment option and not delivered at the year end are shown as stocks of company and valued at cost.

c) DOMESTIC:

i. The cost of gold/silver medallions and silver articles is arrived at by working out the yearly location-wise weighted average cost of material and cost of opening stock. Costs include manufacturing/fabrication charges, wastages and other direct cost.

ii. In case of cut & polished stones and Jewellery (finished/semi finished) where stocks are specifically identifiable, actual cost of the material including all expenses incurred up to the point at which they are lying is considered. Costs include wastage and other direct manufacturing costs.

iii. Packing material is valued at lower of the cost or realisable value as on 31st March.

iv. STOCK ON LOAN/FABRICATION: Stocks with fabricators are taken as the stocks of the company, till adjustments.

2.13. PRIOR PERIOD ADJUSTMENTS

Expenditure/income relating to previous year is shown in the accounts under the head "Prior Period Adjustment Account" as per the provisions of AS-5 (Net Profit or Loss for the period, Prior Period Items and Changes in Accounting Policies) issued by Institute of Chartered Accountants of India.

2.14. BORROWING COSTS

(i) Borrowing cost in ordinary course of business are recognized as an expense in the period in which these are incurred.

(ii) Borrowing costs that are attributable to the acquisition, construction of qualifying assets are capitalised as part of cost of such asset up to the date the assets are ready for their intended use. All other borrowing costs are recognised as an expense in the year in which they have been incurred.

2.15. DEFERREDTAX

Deferred tax is recognized, subject to consideration of prudence on timing differences representing the difference between the Taxable income and Accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets and liabilities are measured using tax rates and the tax laws that have been enacted or substantively enacted by the Balance Sheet date.

2.16. IMPAIRMENT OF ASSETS

An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value and impairment loss is charged to Profit and Loss account in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

2.17. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

(I) Provisions

(a) Provisions for Doubtful Debts/Advances/Claims:

Provision for doubtful debts/advances/claims is made where there is uncertainty of realization irrespective of the period of its dues. For outstanding over three years (except Government dues) full provision is made unless the amount is considered recoverable. Debts/advances/claims are written off when un realisability is almost established.

(b) Others

(i) Provision is recognized when

a. the Company has a present obligation as a result of the past event.

b. a probable outflow of resources is expected to settle the obligation and

c. a reliable estimate of the amount of the obligation can be made.

(ii) Reimbursement of the expenditure required to settle a provision is recognised as per contract provision or when it is virtually certain that reimbursement will be received.

(iii) Provisions are reviewed at each Balance Sheet date.

(II) Contingent liabilities and contingent assets

i. Contingent liabilities are not recognized but are disclosed in the Notes to the Accounts. Interest, if any on contingent liabilities are generally not disclosed in the Notes to the Accounts being indeterminable.

ii. Contingent assets are neither recognized nor disclosed in the financial statements.

2.18. TREATMENT OF EXPENDITURE DURING PROJECT IMPLEMENTATION/CONSTRUCTION PERIOD

Expenditure during construction period is included under Pre-operative expenses and the same is being allocated to the respective fixed assets on the completion of erection/installation.

2.19. OPERATING LEASES

Leases of assets in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are taken to the income statement on a straight line basis over the period of lease.

Contingent rents are recognized as an expense in the income statement in the financial year in which termination takes place. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognized as an expense in the financial year in which termination takes place.

2.20. The financial statements are reported in Indian Rupee and all values are rounded to the nearest million unless otherwise stated.


Mar 31, 2014

These notes form an integral part of and should be read in conjunction with the accompanying financial statements.

1. General Information:

The company is incorporated and domiciled in India, and a Mini- Ratna public sector undertaking under the administrative control of Ministry of Commerce & Industry, Government of India. The registered office of the Company is situated at Core-1, Scope Complex, 7, Institutional Area, Lodi Road, New Delhi-110003, India. The company has 11 regional offices at various places in India and a wholly owned subsidiary MMTC Transnational Pte Ltd. (MTPL), Singapore.

The principal activities of the Company are export of Minerals and import of Precious Metals, Non-ferrous metals, Fertilizers, Agro Products, coal and hydrocarbon etc.

The company''s trade activities span across various countries in Asia, Europe, Africa, Middle East, Latin America and North America.

2. SIGNIFICANT ACCOUNTING POLICIES:

2.1. BASIS OF PREPARATION OF FINANCIAL STATEMENT

The Financial Statements have been prepared as of a going concern on historical cost convention and in accordance with the mandatory Accounting Standards notified by the Companies (Accounting Standards) Rules, 2006 and the provisions of the Companies Act, 1956.

2.2. PURCHASES AND SALES

a. Purchases and sales are booked on performance of the contract/agreement entered into with the sellers/buyers or against allocation letter received from government.

Wherever there is part performance of such contract/agreement/allocation, the part completed is booked as Purchase/Sale.

b. In case of certain commodities import of which is canalized through the company, imported on ''Government Account'' against authorization letter issued by Government of India, Purchase/Sale is booked in the name of the Company.

c. Gold/Silver received under deposit:- i. Purchases include gold/silver withdrawn from Deposit on outright purchase basis for sale to exporters, as per the scheme of Exim Policy being operated by the Company as a nominated agency.

ii. Purchase of Gold during the year for domestic sale is accounted for on withdrawal from the Gold/Silver under deposit and fixation of price with the suppliers. The stock held by the company at year end as Gold/Silver under Deposit is accounted for under current assets as '' stock towards unbilled purchases'' and under current liability as amount payable towards unbilled purchases'' at the bullion price prevailing as at the close of the year. However, customs duty paid in respect of balance in deposits is shown as prepaid expenses.

iii. Gold/silver withdrawn on loan basis from the Gold/Silver under deposit, are shown as loan given to customers and shown under Loans and Advances. The corresponding liability towards the stocks received from foreign suppliers is shown under Sundry Creditors. Loan/Sundry Creditors are adjusted when purchase and sales are booked.

iv. In the case of replenishment basis, gold/silver booked by exporter by paying margin money, purchase is booked after "fixing" the price with the foreign suppliers. However, sale is booked when quantity is actually delivered after completion of export.

d. Sale during the course of import by transfer of documents of title i.e. high seas sale is booked upon transfer of documents of title to the goods in favor of buyer before the goods cross the custom frontiers of India.

e. Purchase/Sale is booked in respect of trade done through commodity exchange like National Spot Exchange which is backed by physical delivery of goods.

f. In respect of exports of Iron Ore/Manganese Ore where final sale value is ascertained on the basis of destinational weight and analysis results and such results are awaited, provision towards DWA risk is made @ 1% on the provisional sale value. In case of FOBT supplies where DWA risk on the purchase value is to the account of supplier provision @1% is made on the difference between sale value and purchase value.

g. Pending settlements, certain expenses/ gain/loss like dispatch earned/ demurrage payable etc. are accounted for on provisional basis.

2.3. REVENUE RECOGNITION

a) Revenue is recognized on accrual basis except in the following items which are accounted for on actual realization since relisability of such items is uncertain in accordance with the provisions of AS – 9 issued by ICAI:- i. Tax credit, duty credit authorization under Target Plus scheme, REP/Advance Licenses, Service Tax refund, etc.

ii. Decrees pending for execution/contested dues and interest thereon, if any:

iii. Interest on overdue recoverables where realisability is uncertain.

iv. Liquidated damages on suppliers/underwriters, refund of custom duty on account of survey shortage, and refund of income-tax/sales-tax/VAT and interest thereon.

b) Insurance claims are accounted for upon being accepted by the insurance company.

c) Claims are recognized in the Profit & Loss Account on accrual basis including receivables from Govt. towards subsidy, cash incentives, reimbursement of losses etc. when it is not unreasonable to expect ultimate collection. Claims recognized but subsequently becoming doubtful are provided for through Profit & Loss Account.

2.4. PREPAID EXPENSES

Prepaid expenses upto Rs.10,000/- in each case are charged to revenue. Deposits upto Rs.5,000/- in each case with Government Department, Statutory Corporations, Electricity Boards and Local Bodies are also charged off to revenue.

2.5. FIXED ASSETS

(a) All fixed assets are stated at historical cost less accumulated depreciation and any impairment in value.

(b)The Company''s expenditure toward construction/development of assets on land owned by the Government/Semi Government Authorities, is capitalized under heading "Fixed Assets created on Land and neither the Fixed Assets nor the Land belongs to the Company".

2.6. DEPRECIATION

Depreciation is provided on straight line method at the rates approved by the Board of Directors, which are equal to or higher than those provided under schedule XIV of the Companies Act, 1956. Depreciation on assets acquired/disposed during the year is provided from/upto the month the asset is acquired/disposed. Depreciation includes amortisation of lease-hold land and Railway Wagon Rakes under WIS. Wooden partitions and temporary structures are fully depreciated in the year of purchase/erection. Moveable assets whose written down value at the beginning of the year and / or value in respect of purchases made during the year are Rs 20,000/- or less in each case, 100% depreciation is provided except retaining a nominal value of Re 1/-. The depreciation rates are as under:

2.7. INVESTMENTS

a. Long term investments are valued at cost less provision for permanent diminution in value.

b. Current investments are valued at lower of cost and fair value.

2.8. FOREIGN CURRENCY TRANSACTIONS

i. Transactions with rupee payment countries in respect of non-convertible Indian currency are being treated as foreign exchange transactions.

ii. Foreign currency monetary items (except overdue recoverable where realisibility is uncertain) are converted using the closing rate as defined in the AS-11 issued by the Institute of Chartered Accountants of India. Non-monetary items are reported using the exchange rate at the date of the transaction. The exchange difference gain/loss is recognized in the Profit and Loss account.

iii. Liability in foreign currency relating to acquisition of fixed assets is converted using the closing rate as defined in AS 11 issued by the Institute of Chartered Accountants of India. The difference in exchange is recognized in the Profit & Loss Account.

iv. In respect of forward exchange contracts, the premium / discount and loss/gain will be recognized as under:- a. In respect of forward exchange contracts against existing underlying transactions, the premium / discount is recognized proportionately over the life of the contract. The loss/gain due to difference in exchange rate between (i) closing rate or the rate on the date of settlement if the transaction is settled during the year, and (ii) the exchange rate at later of the date of the inception of the forward contract or the last reporting date is recognised in the Profit & Loss Account for the year.

b. In respect of forward contracts relating to firm commitments and highly probable forecast transactions, loss due to exchange difference is recognized in the Profit & Loss Account in the reporting period in which the exchange rate changes. Any profit or loss arising on renewal or cancellation of such contracts is recognized as income or expense for the period.

v Investments in subsidiary company outside India are translated at the rate of exchange prevailing on the date of acquisition.

2.9. SEGMENT REPORTING

Primary Segment: The management evaluates the company''s performance and allocates the resources based on analysis of various performance indicators by the following business segments / Product segments i.e.

i. Precious Metals

ii. Metals

iii. Minerals

iv. Coal & Hydrocarbon

v. Agro Products

vi. Fertilizer

vii. General Trade/others.

Above Business Segments have been identified in line with AS-17 "Segment Reporting" taking into account the company''s organizational structure as well as different risks and returns of these segments.

Secondary Segment: Secondary Segments have been identified based on the geographical location of the customer of the company i.e.

i. Outside India

ii. Within India (including high sea sales to customers in India)

2.10. EMPLOYEE BENEFITS

i. Provision for gratuity, leave encashment/availment, post retirement medical benefit and long service benefits i.e. service award, compassionate gratuity and employees'' family benefit scheme is made on the basis of actuarial valuation as per AS-15(Revised) issued by The Institute of Chartered Accountants of India.

ii. Provident fund contribution is made to Provident Fund Trust on accrual basis.

iii. Payment of Ex-gratia and Notice pay on Voluntary Retirement are charged to revenue in the year incurred.

2.11. PHYSICAL VERIFICATION OF STOCKS

i. Physical verification of stocks is undertaken once in a year and balances are arrived at after necessary adjustments till the end of the year. The stocks as physically verified are adopted as closing stocks and shortages/excesses suitably dealt with.

ii. In some of the cases where stocks are lying with Handling Agent/SWC/CWC/Private Parties the stocks have been adopted on the basis of certificate given by the respective agencies.

2.12. VALUATION OF STOCKS

Inventories including Goods-in-Transit are valued at lower of the cost or realisable value as on 31st March. In case of back to back transactions, net realizable value is ascertained on the basis of cost plus profit margin.The method of valuation is as under:

a) EXPORTS:

i) Cost of export stocks is arrived at after including direct expenses incurred upto the point at which the stocks are lying. Similarly the realisable value is derived by deducting from the market price the expenses to be incurred from that point to the stage where they are sold.

ii) In respect of mineral ores the realisable value of ores is worked out at the minimum of the Fe/Mn contents of the grade of the ore as per export contract and is compared with the weighted average cost at weighted average Fe/Mn contents/weighted average moisture contents of the ore. The embedded stocks of Iron ore are excluded from inventory and hence not valued.

b) IMPORTS:

i) The cost of imported stocks is arrived at by working out the yearly regional weighted average cost except for Non-ferrous Metals where weighted average cost of remaining stock after including all expenses incurred upto the point at which they are lying is considered. However, where stocks are specifically identifiable, actual cost of the material including all expenses incurred upto the point at which they are lying is considered.

ii) Gold/Silver purchased from foreign suppliers against booking by exporters under replenishment option and not delivered at the year end are shown as stocks of company and valued at cost .

c) DOMESTIC:

i. The cost of gold/silver medallions and silver articles is arrived at by working out the yearly location- wise weighted average cost of material and cost of opening stock. Costs include manufacturing/fabrication charges, wastages and other direct cost.

ii. In case of cut & polished stones and jewellery (finished/semi finished) where stocks are specifically identifiable, actual cost of the material including all expenses incurred upto the point at which they are lying is considered. Costs include wastage and other direct manufacturing costs.

iii. Packing material is valued at lower of the cost or realisable value as on 31st March.

iv. STOCK ON LOAN/FABRICATION: Stocks with fabricators are taken as the stocks of the company, till adjustments.

2.13. PRIOR PERIOD ADJUSTMENTS

Expenditure/income relating to previous year is shown in the accounts under the head "Prior Period Adjustment Account" as per the provisions of AS-5 (Net Profit or Loss for the period, Prior Period Items and Changes in Accounting Policies) issued by Institute of Chartered Accountants of India.

2.14. BORROWING COSTS

(i) Borrowing cost in ordinary course of business are recognized as an expense in the period in which these are incurred.

(ii) Borrowing costs that are attributable to the acquisition, construction of qualifying assets are capitalised as part of cost of such asset upto the date the assets are ready for their intended use. All other borrowing costs are recognised as an expense in the year in which they have been incurred.

2.15. DEFERRED TAX

Deferred tax is recognized, subject to consideration of prudence on timing differences representing the difference between the Taxable income and Accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets and liabilities are measured using tax rates and the tax laws that have been enacted or substantively enacted by the Balance Sheet date.

2.16. IMPAIRMENT OF ASSETS

An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value and impairment loss is charged to Profit and Loss account in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

2.17. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

(I) Provisions

(a) Provisions for Doubtful Debts/Advances/Claims:

Provision for doubtful debts/advances/claims is made where there is uncertainty of realization irrespective of the period of its dues. For outstanding over three years (except Government dues) full provision is made unless the amount is considered recoverable. Debts/advances/claims are written off when unrealisability is almost established.

(b) Others

(i) Provision is recognized when

a. the Company has a present obligation as a result of the past event.

b. a probable outflow of resources is expected to settle the obligation and

c. a reliable estimate of the amount of the obligation can be made.

(ii) Reimbursement of the expenditure required to settle a provision is recognised as per contract provision or when it is virtually certain that reimbursement will be received.

(iii) Provisions are reviewed at each Balance Sheet date.

(II) Contingent liabilities and contingent assets

i. Contingent liabilities are not recognized but are disclosed in the Notes to the Accounts. Interest, if any on contingent liabilities are generally not disclosed in the Notes to the Accounts being indeterminable.

ii. Contingent assets are neither recognized nor disclosed in the financial statements.


Mar 31, 2013

1.1. BASIS OF PREPARATION OF FINANCIAL STATEMENT

The Financial Statements have been prepared as of a going concern on historical cost convention and in accordance with the mandatory Accounting Standards notified by the Companies (Accounting Standards) Rules, 2006 and the provisions of the Companies Act, 1956.

1.2. PURCHASES AND SALES

a. Purchases and sales are booked on performance of the contract/agreement entered into with the sellers/buyers or against allocation letter received from government.

Wherever there is part performance of such contract/agreement/allocation, the part completed is booked as Purchase/Sale.

b. In case of certain commodities import of which is canalized through the company, imported on ''Government Account'' against authorization letter issued by Government of India, Purchase/Sale is booked in the name of the Company.

c. Gold/Silver received under deposit:-

i. Purchases include gold/silver withdrawn from Deposit on outright purchase basis for sale to exporters, as per the scheme of Exim Policy being operated by the Company as a nominated agency.

ii. Purchase of Gold during the year for domestic sale is accounted for on withdrawal from the Gold/Silver under deposit and fixation of price with the suppliers. The stock held by the company at year end as Gold/Silver under Deposit is accounted for under current assets as '' stock towards unbilled purchases'' and under current liability as amount payable towards unbilled purchases'' at the bullion price prevailing as at the close of the year. However, customs duty paid in respect of balance in deposits is shown as prepaid expenses.

iii. Gold/silver withdrawn on loan basis from the Gold/Silver under deposit, are shown as loan given to customers and shown under Loans and Advances. The corresponding liability towards the stocks received from foreign suppliers is shown under Sundry Creditors. Loan/Sundry Creditors are adjusted when purchase and sales are booked.

iv. In the case of replenishment basis, gold/silver booked by exporter by paying margin money, purchase is booked after "fixing" the price with the foreign suppliers. However, sale is booked when quantity is actually delivered after completion of export.

d. Sale during the course of import by transfer of documents of title i.e. high seas sale is booked upon transfer of documents of title to the goods in favor of buyer before the goods cross the custom frontiers of India.

e. Purchase/Sale is booked in respect of trade done through commodity exchange like National Spot Exchange which is backed by physical delivery of goods.

f. In respect of exports of Iron Ore/Manganese Ore where final sale value is ascertained on the basis of destinational weight and analysis results and such results are awaited, provision towards DWA risk is made @ 1% on the provisional sale value. In case of FOBT supplies where DWA risk on the purchase value is to the account of supplier provision @1% is made on the difference between sale value and purchase value.

g. Pending settlements, certain expenses/ gain/loss like dispatch earned/ demurrage payable etc. are accounted for on provisional basis.

1.3. REVENUE RECOGNITION

a) Revenue is recognized on accrual basis except in the following items which are accounted for on actual realization since relisability of such items is uncertain in accordance with the provisions of AS - 9 issued by ICAI:-

i. Tax credit, duty credit authorization under Target Plus scheme, REP/Advance Licenses, Service Tax refund, etc.

ii. Decrees pending for execution/contested dues and interest thereon, if any:

iii. Interest on overdue recoverables where realisability is uncertain.

iv. Liquidated damages on suppliers/underwriters, refund of custom duty on account of survey shortage, and refund of income-tax/sales-tax/VAT and interest thereon.

b) Insurance claims are accounted for upon being accepted by the insurance company.

c) Claims are recognized in the Profit & Loss Account on accrual basis including receivables from Govt. towards subsidy, cash incentives, reimbursement of losses etc. when it is not unreasonable to expect ultimate collection. Claims recognized but subsequently becoming doubtful are provided for through Profit & Loss Account.

1.4. PREPAID EXPENSES

Prepaid expenses upto Rs.10,000/- in each case are charged to revenue. Deposits upto Rs.5,000/- in each case with Government Department, Statutory Corporations, Electricity Boards and Local Bodies are also charged off to revenue.

1.5. FIXED ASSETS

(a) All fixed assets are stated at historical cost less accumulated depreciation and any impairment in value.

(b)The Company''s expenditure toward construction/development of assets on land owned by the Government/Semi Government Authorities, is capitalized under heading "Fixed Assets created on Land and neither the Fixed Assets nor the Land belongs to the Company".

1.6. DEPRECIATION

Depreciation is provided on straight line method at the rates approved by the Board of Directors, which are equal to or higher than those provided under schedule XIV of the Companies Act, 1956. Depreciation on assets acquired/disposed during the year is provided from/upto the month the asset is acquired/disposed. Depreciation includes amortisation of lease-hold land and Railway Wagon Rakes under WIS. Wooden partitions and temporary structures are fully depreciated in the year of purchase/erection. Moveable assets whose written down value at the beginning of the year and / or value in respect of purchases made during the year are Rs 20,000/- or less in each case, 100% depreciation is provided except retaining a nominal value of Re 1/-. The depreciation rates are as under:

1.7. INVESTMENTS

a. Long term investments are valued at cost less provision for permanent diminution in value.

b. Current investments are valued at lower of cost and fair value.

1.8. FOREIGN CURRENCY TRANSACTIONS

i. Transactions with rupee payment countries in respect of non-convertible Indian currency are being treated as foreign exchange transactions.

ii. Foreign currency monetary items (except overdue recoverable where realisibility is uncertain) are converted using the closing rate as defined in the AS-11 issued by the Institute of Chartered Accountants of India. Non-monetary items are reported using the exchange rate at the date of the transaction. The exchange difference gain/loss is recognized in the Profit and Loss account.

iii. Liability in foreign currency relating to acquisition of fixed assets is converted using the closing rate as defined in AS 11 issued by the Institute of Chartered Accountants of India. The difference in exchange is recognized in the Profit & Loss Account.

iv. In respect of forward exchange contracts, the premium / discount and loss/gain will be recognized as under:-

a. In respect of forward exchange contracts against existing underlying transactions, the premium / discount is recognized proportionately over the life of the contract. The loss/gain due to difference in exchange rate between (i) closing rate or the rate on the date of settlement if the transaction is settled during the year, and (ii) the exchange rate at later of the date of the inception of the forward contract or the last reporting date is recognised in the Profit & Loss Account for the year.

b. In respect of forward contracts relating to firm commitments and highly probable forecast transactions, loss due to exchange difference is recognized in the Profit & Loss Account in the reporting period in which the exchange rate changes. Any profit or loss arising on renewal or cancellation of such contracts is recognized as income or expense for the period.

v Investments in subsidiary company outside India are translated at the rate of exchange prevailing on the date of acquisition.

1.9. SEGMENT REPORTING

Primary Segment: The management evaluates the company''s performance and allocates the resources based on analysis of various performance indicators by the following business segments / Product segments i.e.

i. Minerals

ii. Precious Metals

iii. Metals

iv. Agro Products

v. Coal & Hydrocarbon

vi. Fertilizer

vii. General Trade/others.

Above Business Segments have been identified in line with AS-17 "Segment Reporting" taking into account the company''s organizational structure as well as different risks and returns of these segments.

Secondary Segment: Secondary Segments have been identified based on the geographical location of the customer of the company i.e.

i. Outside India

ii. Within India (including high sea sales to customers in India)

1.10. EMPLOYEE BENEFITS

i. Provision for gratuity, leave encashment/availment, post retirement medical benefit and long service benefits i.e. service award, compassionate gratuity and employees'' family benefit scheme is made on the basis of actuarial valuation as per AS-15(Revised) issued by The Institute of Chartered Accountants of India.

ii. Provident fund contribution is made to Provident Fund Trust on accrual basis.

iii. Payment of Ex-gratia and Notice pay on Voluntary Retirement are charged to revenue in the year incurred.

1.11. PHYSICAL VERIFICATION OF STOCKS

i. Physical verification of stocks is undertaken once in a year and balances are arrived at after necessary adjustments till the end of the year. The stocks as physically verified are adopted as closing stocks and shortages/excesses suitably dealt with.

ii. In some of the cases where stocks are lying with Handling Agent/SWC/CWC/Private Parties the stocks have been adopted on the basis of certificate given by the respective agencies.

1.12. VALUATION OF STOCKS

Inventories including Goods-in-Transit are valued at lower of the cost or realisable value as on 31st March. In case of back to back transactions, net realizable value is ascertained on the basis of cost plus profit margin.The method of valuation is as under:

a) EXPORTS:

i) Cost of export stocks is arrived at after including direct expenses incurred upto the point at which the stocks are lying. Similarly the realisable value is derived by deducting from the market price the expenses to be incurred from that point to the stage where they are sold.

ii) In respect of mineral ores the realisable value of ores is worked out at the minimum of the Fe/Mn contents of the grade of the ore as per export contract and is compared with the weighted average cost at weighted average Fe/Mn contents/weighted average moisture contents of the ore. The embedded stocks of Iron ore are excluded from inventory and hence not valued.

b) IMPORTS:

i) The cost of imported stocks is arrived at by working out the yearly regional weighted average cost except for Non-ferrous Metals where weighted average cost of remaining stock after including all expenses incurred upto the point at which they are lying is considered. However, where stocks are specifically identifiable, actual cost of the material including all expenses incurred upto the point at which they are lying is considered.

ii) Gold/Silver purchased from foreign suppliers against booking by exporters under replenishment option and not delivered at the year end are shown as stocks of company and valued at cost .

c) DOMESTIC:

i. The cost of gold/silver medallions and silver articles is arrived at by working out the yearly location-wise weighted average cost of material and cost of opening stock. Costs include manufacturing/fabrication charges, wastages and other direct cost.

ii. In case of cut & polished stones and jewellery (finished/semi finished) where stocks are specifically identifiable, actual cost of the material including all expenses incurred upto the point at which they are lying is considered. Costs include wastage and other direct manufacturing costs.

iii. Packing material is valued at lower of the cost or realisable value as on 31st March.

iv. STOCK ON LOAN/FABRICATION: Stocks with fabricators are taken as the stocks of the company, till adjustments.

1.13. PRIOR PERIOD ADJUSTMENTS

Expenditure/income relating to previous year is shown in the accounts under the head "Prior Period Adjustment Account" as per the provisions of AS-5 (Net Profit or Loss for the period, Prior Period Items and Changes in Accounting Policies) issued by Institute of Chartered Accountants of India.

1.14. BORROWING COSTS

(i) Borrowing cost in ordinary course of business are recognized as an expense in the period in which these are incurred.

(ii) Borrowing costs that are attributable to the acquisition, construction of qualifying assets are capitalised as part of cost of such asset upto the date the assets are ready for their intended use. All other borrowing costs are recognised as an expense in the year in which they have been incurred.

1.15. DEFERRED TAX

Deferred tax is recognized, subject to consideration of prudence on timing differences representing the difference between the Taxable income and Accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets and liabilities are measured using tax rates and the tax laws that have been enacted or substantively enacted by the Balance Sheet date.

1.16. IMPAIRMENT OF ASSETS

An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value and impairment loss is charged to Profit and Loss account in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

1.17. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

(I) Provisions

(a) Provisions for Doubtful Debts/Advances/Claims:

Provision for doubtful debts/advances/claims is made where there is uncertainty of realization irrespective of the period of its dues. For outstanding over three years (except Government dues) full provision is made unless the amount is considered recoverable. Debts/advances/claims are written off when unrealisability is almost established.

(b) Others

(i) Provision is recognized when

a. the Company has a present obligation as a result of the past event.

b. a probable outflow of resources is expected to settle the obligation and

c. a reliable estimate of the amount of the obligation can be made.

(ii) Reimbursement of the expenditure required to settle a provision is recognised as per contract provision or when it is virtually certain that reimbursement will be received.

(iii) Provisions are reviewed at each Balance Sheet date.

(II) Contingent liabilities and contingent assets

i. Contingent liabilities are not recognized but are disclosed in the Notes to the Accounts.

ii. Contingent assets are neither recognized nor disclosed in the financial statements.

1.18. TREATEMENT OF EXPENDITURE DURING PROJECT IMPLEMENTATION /CONSTRUCTION PERIOD

Expenditure during construction period is included under Pre-operative expenses and the same is being allocated to the respective fixed assets on the completion of erection/installation.

1.19. OPERATING LEASES

Leases of assets in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are taken to the income statement on a straight line basis over the period of lease.

Contingent rents are recognized as an expense in the income statement in the financial year in which termination takes place. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognized as an expense in the financial year in which termination takes place.

1.20. The financial statements are reported in Indian Rupee and all values are rounded to the nearest million unless otherwise stated.


Mar 31, 2010

1. BASIS OF PREPARATION OF FINANCIAL STATEMENT

(a) The financial statements are prepared according to the historical cost convention on accrual basis and in line with the fundamental accounting principles of prudence, consistency and materiality.

(b) The financial statements are reported in Indian Rupee and all values are rounded to the nearest million unless otherwise stated.

(c) Statement of Compliance

The financial statements are prepared on the basis of generally accepted accounting principles in India, accounting standards issued by the Institute of Chartered Accountants of India and the provisions of the Companies Act, 1956 as amended from time to time.

2. PURCHASES AND SALES

a) Purchases and sales are booked where the company has entered into purchase/sale contract/agreement with the sellers/buyers or received allocation letter from Government, on performance of the contract/agreement/allocation either wholly or partly.

b) Gold/Silver sent by foreign suppliers on consignment basis

i) Purchases include gold/silver withdrawn from consignment stock on outright purchase basis for sale to exporters, as perthe scheme of Exim Policy being operated by the Company as a nominated agency.

ii) Purchase of Gold for domestic sale is accounted for on withdrawal from the consignment stock and fixation of price with the suppliers.

iii) Gold/silver withdrawn on loan basis where from consignment stock, are shown as loan given to parties and shown under Loans and Advances. The corresponding liability towards the stocks received from foreign suppliers is shown under Sundry Creditors. Loan/Sundry Creditors are adjusted when purchase and sales are booked.

iv) In the case of replenishment basis, gold/silver booked by exporter by paying margin money, purchase is booked after "fixing" the price with the foreign suppliers. However, sale is booked when quantity is actually delivered after completion of exports.

v) Consignment stocks held on behalf of foreign suppliers at the year end is suitably disclosed in the accounts. However, customs duty paid in respect of balance consignment stock is shown as prepaid expenses.

c) In respect of exports of Iron Ore/Manganese Ore where final sale value is ascertained on the basis of destinational weight and analysis results and such results are awaited, provision towards DWA risk is made @ 1 % on the provisional sale value. In case of FOBT supplies where DWA risk on the purchase value is to the account of supplier provision @1 % is made on the difference between sale value and purchase value.

d) Pending settlements, certain expenses/ gain/loss like dispatch earned/ demurrage payable etc. are accounted foron provisional basis.

3. REVENUE RECOGNITION

i) Revenue is recognized on accrual basis except in the following items which are accounted for on actual realization since reusability of such items is uncertain in accordance with the provisions of AS-9 issued by ICAI:-

a) Tax credit, duty credit authorization under Target Plus scheme, REP/Advance Licenses, Service Tax refund, etc.

b) Decrees pending for execution/contested dues and interest thereon, if any:

c) Interest on overdue recoverables where readability is uncertain.

d) Liquidated damages on suppliers/underwriters, refund of custom duty on account of survey shortage, and refund of income-tax/sales-taxA/ATand interest thereon.

Insurance claims are accounted for upon being accepted by the insurance company.

ii) Claims are recognized in the Profit & Loss Account on accrual basis including receivables from Govt, towards subsidy, cash incentives, reimbursement of losses etc. when it is not unreasonable to expect ultimate collection. Claims recognized but subsequently becoming doubtful are provided for through Profit & Loss Account.

4. PREPAID EXPENSES

Prepaid expenses upto Rs.10,000/- in each case are charged to revenue. Deposits upto Rs.5,000/- in each case with Government Department, Statutory Corporations, Electricity Boards and Local Bodies are also charged off to revenue.

5. FIXED ASSETS

(a) All fixed assets are stated at historical cost less accumulated depreciation and any impairment in value.

(b) The Companys expenditure toward construction/development of assets on land owned by the Government/Semi Government Authorities, is capitalized under heading "Fixed Assets created on Land and neither the Fixed Assets nor the Land belongs to the Company".

E. Mobile handsets are directly charged to revenue in the year of purchase.

7. INVESTMENTS

(i) Long term investments are valued at cost less provision for permanent diminution in value. (ii) Current investments are valued at lower of cost and fair value.

8. FOREIGN CURRENCY TRANSACTIONS

a) Transactions with rupee payment countries in respect of non-convertible Indian currency are being treated as foreign exchange transactions.

b) Foreign currency monetary items (except overdue recoverable where realisibility is uncertain) are converted using the closing rate as defined in theAS-11 issued by the Institute of Chartered Accountants of India. Non- monetary items are reported using the exchange rate at the date of the transaction. The exchange difference gain/loss is recognized in the Profit and Loss account.

c) Liability in foreign currency relating to acquisition of fixed assets is converted using the closing rate as defined in AS 11 issued by the Institute of Chartered Accountants of India. The difference in exchange is recognized in the Profit & Loss Account.

d) In respect of forward exchange contracts, the premium /discount and loss/gain will be recognized as under:-

In respect of forward exchange contracts against existing underlying transactions, the premium / discount is recognized proportionately over the life of the contract. The loss/gain due to difference in exchange rate between (i) closing rate or the rate on the date of settlement if the transaction is settled during the year, and (ii) the exchange rate at later of the date of the inception of the forward contract or the last reporting date is recognised in the Profit & Loss Account for the year.

In respect of forward contracts relating to firm commitments and highly probable forecast transactions, loss due to exchange difference is recognized in the Profit & Loss Account in the reporting period in which the exchange rate changes. Any profit or loss arising on renewal or cancellation of such contracts is recognized as income or expense for the period.

e) Investments in subsidiary company outside India are translated at the rate of exchange prevailing on the date of acquisition.

9. SEGMENT REPORTING

Primary Segment: The management evaluates the companys performance and allocates the resources based on analysis of various performance indicators by the following business segments/ Product segments i.e.

1. Minerals

2. Precious Metals

3. Metals

4. Agro Products

5. Coal & Hydrocarbon

6. Fertilizer

7. General Trade/others.

Above Business Segments have been identified in line with AS-17 "Segment Reporting" taking into account the companys organizational structure as well as different risks and returns of these segments. Secondary Segment: Secondary Segments have been identified based on the geographical location of the customer of the company i.e.

1. Outside India

2. Within India

10. EMPLOYEE BENEFITS

(i) Provision for gratuity, leave encashment/availment, post retirement medical benefit and ALTC/LTC liability is made on the basis of actuarial valuation as per AS-15(Revised) issued by The Institute of Chartered Accountants of India.

(ii) Provident fund contribution is made to Provident Fund Trust on accrual basis.

(iii) Payment of Ex-gratia and Notice pay on Voluntary Retirement are charged to revenue in the year incurred.

11. PHYSICAL VERIFICATION OF STOCKS

Physical verification of stocks is undertaken once in a year and balances are arrived at after necessary adjustments till the end of the year. The stocks as physically verified are adopted as closing stocks and shortages/excesses suitably dealt with.

In some of the cases where stocks are lying with Handling Agent/SWC/CWC/Private Parties the stocks have been adopted on the basis of certificate given by the respective agencies.

12. VALUATION OF STOCKS

Inventories including Goods-in-Transit are valued at lower of the cost or realisable value as on 31st March. The method of valuation is as under:

a) EXPORTS

Cost of export stocks is arrived at after including direct expenses incurred upto the point at which the stocks are lying. Similarly the realisable value is derived by deducting from the market price the expenses to be incurred from that point to the stage where they are sold.

MINERAL ORES

The realisable value of ores is worked out at the minimum of the Fe/Mn contents of the grade of the ore as per export contract and is compared with the weighted average cost at weighted average Fe/Mn contents/weighted average moisture contents of the ore. The embedded stocks of Iron ore are excluded from inventoryand hencenotvalued.

(b) IMPORTS

The cost of imported stocks is arrived at by working out the yearly regional weighted average cost except for Non-ferrous Metals where weighted average cost of remaining stock after including all expenses incurred upto the point at which they are lying is considered.

In case of cut & polished stones, medallions and jewellery (finished/semi finished) cost includes wastages and other direct manufacturing cost.

Gold/Silver purchased from foreign suppliers against booking by exporters under replenishment option and not delivered at the year end are shown as stocks of company and valued at cost.

(c) DOMESTIC

Packing material is valued at lower of the cost or realisable value as on 31 st March.

(d) STOCK ON LOAN/FABRICATION

Stocks with fabricators are taken as the stocks of the company, till adjustments.

13. PRIOR PERIOD ADJUSTMENTS

Expenditure/income relating to previous year is shown in the accounts under the head "Prior Period Adjustment Account" as per the provisions of AS-5 (Net Profit or Loss for the period, Prior Period Items and Changes in Accounting Policies) issued by Institute of Chartered Accountants of India.

14. BORROWING COSTS

(i) Borrowing cost in ordinary course of business are recognized as an expense in the period in which these are incurred.

(ii) Borrowing costs that are attributable to the acquisition, construction of qualifying assets are capitalised as part of cost of such asset upto the date the assets are ready for their intended use. All other borrowing costs are recognised as an expense in the year in which they have been incurred.

15. DEFERRED TAX

Deferred tax is recognized, subject to consideration of prudence on timing differences representing the difference between the Taxable income and Accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets and liabilities are measured using tax rates and the tax laws that have been enacted or substantively enacted by the Balance Sheet date.

16. IMPAIRMENT OF ASSETS

An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value and impairment loss is charged to Profit and Loss account in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

17. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

(I) Provisions

(a) Provisions for Doubtful Debts/Advances/Claims:

Provision for doubtful debts/advances/claims is made where there is uncertainty of realization irrespective of the period of its dues. For outstanding over three years (except Government dues) full provision is made unless the amount is considered recoverable. Debts/advances/claims are written off when unrealisability is almost established.

(b) Others

Provision is recognized when

(i) the Company has a present obligation as a result of the past event.

(ii) a probable outflow of resources is expected to settle the obligation and a reliable estimate of the amount of the obligation can be made.

Reimbursement of the expenditure required to settle a provision is recognised as per contract provision or when it is virtually certain that reimbursement will be received.

Provisions are reviewed at each Balance Sheet date.

(ii) Contingent liabilities and contingent assets

(i) Contingent liabilities are not recognized but are disclosed in the Notes to the Accounts.

(li) Contingent assets are neither recognized nor disclosed in the financial statements.

18. TREATMENT OF EXPENDITURE DURING PROJECT IMPLEMENTATION /CONSTRUCTION PERIOD

Expenditure during construction period is included under Pre-operative expenses and the same is being allocated to the respective fixed assets on the completion of erection/installation.

19. CONTINGENT LIABILITIES* NOTES

1. Contingent Liabilities:

a) Guarantees issued by Banks on behalf of the Company Rs. 845.80 million (P. Y. Rs. 758.63 million).

b) Corporate Guarantees of Rs. 14409.10 million (RY. Rs. 14696.00 million) given by the company in favour of financial institutions/banks on behalf of Neelachal Ispat Nigam Limited (NINL) for securing principal and interest in respect of loans to NINL. As per the decision of Committee of Secretaries concerned, NINL may be merged with Steel Authority of India Limited subject to Governments approval for which process has been initiated.

c) Claims against the Company not acknowledged as debts Rs. 1961.07 million (P.Y. Rs. 1300.10 million).

d) Letters of Credit opened by the Company remaining outstanding Rs. 15919.74 million (RY. Rs. 10586.75 million).

e) Bills discounted with banks Rs. Nil million (P.Y.Rs. 30.51 million).

f) Sales Tax Demand of Rs. 851.97 million (P.Y. Rs. 960.41 million) in dispute against which Rs. 84.25 million (P.Y. Rs. 84.71 million) has been deposited and Rs. 2.30 million (P.Y. Rs. 2.30 million) covered by bank guarantees.

g) Service Tax demand in respect of business auxiliary service amounting to Rs 341.50 million (L.Y. Rs 257.61 million) pending before Customs, Excise & Service Tax Department.

h) Bonds have been furnished to Customs Authorities for performance, submission of original documents, etc, some of which are still outstanding. The amount of un-expired Bonds is Rs. 1118.87 million as on 31.03.2010 (PY Rs. 827.48 million).

i) A party has served a legal notice for non lifting of part quantity of coking coal in respect of supplies to M/s NINL, relating to delivery period 2008-09, claiming an amount of Rs 3535.00 million ( PY Rs Nil million) which has been refuted since the same is not tenable. MMTC has also put the party on notice to lodge counter claim for non supply of coking coal for the year 2009-10. The matter has been taken up issue at Govt, level as the supplier is also one of the major supplier of oking coal to other PSUs and all terms, conditions and prices are determined by an empowered joint committee consisting of senior level nominees of Govt, and PSUs.

j) In one of the RO, auditors have observed for making liability towards CST transit sales of Rs 1947.58 million on which in their view liability of CST amounting to Rs 38.95 million may arise. On the basis of expert opinion and past experience, the company is of the view that no liability is likely to arise on this account. Accordingly no provision has been made. However, this will be suitably dealt with in the accounts after completion of assessment.

k) Additional liability, if any, on account of sales tax demands on completion of assessments, disputed claims of some employees, non-deduction of Provident Fund by Handling Agents/Contractors, disputed rent and interest/penalty/legal costs etc., in respect of amounts indicated as contingent liabilities being indeterminable, not considered.

l) In some of the cases amounts included under contingent liabilities relate to commodities handled on Govt. of Indias account and hence the same would be recoverable from the Govt, of India.

 
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