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Auditor Report of MMTC Ltd.

Mar 31, 2015

We have audited the accompanying standalone financial statements of MMTC LIMITED ("the Company"), which comprise the Balance Sheet as at March 31,2015, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information, in which are incorporated the Returns for the year ended on that date audited by the branch auditors of the Company's branches at Ahmedabad, Bhubaneshwar, Mumbai, Goa, Bangalore, Hyderabad, Chennai, Vizag, Kolkata (including MICA division, Abhraknagar), Jaipurand Delhi Regional Office, Corporate Office, MIC Adivision audited by us.

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.

Auditors' Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10)of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. 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 March 31,2015, and its profit and its cash flows for the year ended on that date.

Emphasis of Matter

(a) We draw attention to Note 9(i)& 21 to the standalone financial statements in-respect of unsecured short term loan facility of INR 8669.90 million (P.Y. 6490.00 million)extended to Neelachal Ispat Nigam Limited (NINL) an associate company. In view of continuous losses for the last three years and in accordance with the analyst's report, NINL requires robust infusion of fund / capital / raising of fresh term loan.

(b) We draw attention to Note 7.5 to the standalone financial statements in-respect of an amount of INR 3732.90 million which is due for recovery from Govt, of India on account of subsidy against import of edible oil imported into India for the State Governments from August 2012 onwards.

(c) We draw attention to Note 41 to the standalone financial statements in-respect of Balances under Sundry Debtors/ Claims Recoverable / Loans & Advances / Sundry Creditors / Other Liabilities which, in many cases have not been confirmed and consequent reconciliation /adjustments if any, required upon such confirmation are not ascertainable.

(d) The RMS software is not reflecting correct inventory of Sanchi items due to the problems in the software.

(e) We draw attention to Note 22 to the standalone financial statements in-respect of non-provision of liability, if any, in case of non-extension of time/waiver/write off of GR-1 forms.

Our opinion is not modified in respect of this matter.

Other Matter

We did not audit the financial statements/information often branches included in the standalone financial statements of the Company whose financial statements / financial information reflect total assets of INR 30922.02 million as at March 31, 2015 and total revenues of INR 105580.13million for the year ended on that date, as considered in the standalone financial statements. The financial statements / information of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these branches, is based solely on the report of such branch auditors.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order, 2015 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of Section 143 of the Act, based on the comments in the auditors' reports of the corporate office &branch auditors of the company, we give in the "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

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

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

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the branches notvisited by us.

(c) The reports on the accounts of the branch offices of the Company audited under Section 143 (8) of the Act by branch auditors have been sent to us and have been properly dealt with by us in preparing this report.

(d) 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 and with the returns received from the branches notvisited by us.

(e) 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.

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

(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 19 to the standalone financial statements

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

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

3. As required by C&AG of India through sub-directions dated March 23, 2015 issued under Section 143(5) of the Act, we give our report in the attached "Annexure B".

(Referred to in paragraph 1 under 'Report on Other Legal and Regulatory Requirements' section of our report of even date)

i. In respect of its fixed assets:

a. The MMTC Ltd. has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

b. The fixed assets were physically verified during the year by the Management in accordance with a regular programme of verification which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals.

ii. In respect of its inventories:

(a) As explained to us, the inventories were physically verified during the year by the Management.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the Management needs to be strengthened in relation to the size of the MMTC Limited and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and material discrepancies were noticed on physical verification.

iii. Company has granted unsecured loan to company covered in the Register maintained under Section 189 of the Companies Act, 2013.

iv. In ouropinion according to the information/explanations given to us, receipt of the principle amount and interest are not regular.

v. In our opinion according to the information/explanations given to us, The overdue amount is more than INR

0.1 million. Company has taken the reasonable steps to recover the amount.

vi. In our opinion and according to the information and explanations given to us, there is an adequate internal control system 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. As regards the purchases and sale of goods, inventories and stocks that are dealt with by the company including domestic bullion transactions it needs further strengthening in such a manner so as to avoid delay in updation in ERP system vis-a-vis actual date of transaction and similarly, manual generation of invoices could be avoided.

Further, the internal control mechanism needs to be strengthened, besides the areas mention hereinbefore, in the following areas:

a. Periodic quantitate reconciliation of goods traded by the company (particularly bullion/retail trade) between the ERP and other standalone inventory system (RMS).

b. Risk assessment and Risk Management requires to be constantly reviewed/strengthened/revamped in the light of changing needs of the business whenever considered necessary as it was noticed that due to certain acts of omissions and commissions, company had to make heavy provisions against debtors/ recoverable/losses.

c. Periodic reconciliation in-respect of sales and purchase, input/output VAT as per financial records vis-a-vis sales, purchases. Input/output VAT as per VATreturns.

vii. According to the information and explanations given to us, Company has not accepted the deposits under directives issued by Reserve Bank of India and the provisions of Section 73 to 76 or any other relevant provisions of the companies act.

viii. The Government of India has not prescribed the maintenance of cost records under Sub section (1) of Section 148 of the Companies Act 2013.

ix. According to the information and explanations given to us, in respect of statutory dues:

(a) The Company has 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, Customs Duty, Excise Duty, Value added Tax, Cess and other material statutory dues applicable to it with the appropriate authorities.

(b) There were no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income-tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues in arrears as at 31 March, 2015 for a period of more than six months from the date they became payable.

(c) In case of 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 have not been deposited on account of any dispute, then the amounts involved and a forum where is pending shall be mentioned:

According to the records of the company dues of Income Tax, Sales Tax, Custom Duty, Excise Duty and Cess which have not been deposited on account of disputes are stated below:

CHENNAI REGIONAL OFFICE

Name of the Statue Nature of the dues Amount Period Forum of Dispute (In Rs.)

TNGSTACT Sales Tax, Penalty & 8,63,114 1998-99 Madras High Court

Interest

TNGSTACT Sales Tax, Penalty & 4,43,416 2000-01 Sales Tax Appeals Interest Tribunal

TNGSTACT Sales Tax, Penalty & 11,52,785 1999- 2000 Madras High Court Interest

TNGSTACT Sales Tax, Penalty & 1,78,566 2001-02 Asst. Commissioner Interest (Comm. Tax),Chennai

TN VAT Act VAT & Penalty 3,55,08,765 2008-09 Joint Commissioner of Comercial Taxes Appeals

MUMBAI REGIONAL OFFICE

Name of the Statue Nature of the dues Amount (In Period Forum of Dispute Rs.)

BST ACT Sales Tax 3,08,644 1986-87 Joint Comm. of Sales Tax

BST ACT Sales Tax 14,96,06,778 1989-90 Joint Comm. of Sales Tax

BST ACT Sales Tax 23,30,46,478 1990-91 Joint Comm. of Sales Tax

BST ACT Sales Tax 28,98,738 1991-92 Joint Comm. of Sales Tax

BST ACT Sales Tax 45,03,961 2001-02 Joint Comm. of Sales Tax

BST ACT Sales Tax 1,42,13,373 2008-09 Joint Comm. of Sales Tax

BST ACT Sales Tax 51,81,978 2008-09 Joint Comm. of Sales Tax

Name of the Statue Nature of the Amount (In Period Forum of Dispute dues Rs.)

APGST Sales Tax 1,49,770 1989-90 STAT

APGST Sales Tax 29,61,551 1990-91 STAT, Vizag

APGST Sales Tax 24,02,576 1991-92 STAT, Vizag

APGST Sales Tax 13,96,269 1992-93 STAT, Vizag

APGST Sales Tax 17,62,687 1992-93 STAT, Vizag

APGST Sales Tax 6,30,615 1993-94 STAT, Vizag

CST Central Sales Tax 4,41,446 1993-94 ADC(CT)

CST Central Sales Tax 2,04,481 1994-95 AC(LTU)

CST Central Sales Tax 5,97,266 1995-96 ADC(CT)

APGST Sales Tax 38,03,875 1995-96 STAT, Vizag

APGST Sales Tax 28,80,309 1995-96 STAT, Vizag

CST Central Sales Tax 21,34,306 1996-97 STAT, Vizag

APGST Sales Tax 58,43,100 1997-98 STAT, Vizag

CST Central Sale Tax 6,35,504 1997-98 ADC(CT)

APGST Sales Tax 55,65,147 1998-99 STAT, Vizag

APGST Sales Tax 39,04,454 1999- 2000 STAT, Vizag

APGST Sales Tax 2,52,926 2000- 2001 STAT, Vizag

APGST Sales Tax 2,12,176 2001-02 AC(LTU)

APGST Sales Tax 68,901 2002-03 AC(LTU)

APGST Sales Tax 34,856 2003-04 AC(LTU)

APGST Sales Tax 1,26,000 2004-05 AC(LTU)

VAT VAT 6,76,058 2006-07 STAT

VAT VAT 71,000 2007-08 AC(LTU)

VAT VAT 5,00,000 2008-09 STAT, Vizag

VAT VAT 11,90,100 2008-09 STAT, Vizag

Central Excise & Customs Custom Duty 24,10,79,065 2008-09 Comm. of Customs & Excise

BHUBANESHWAR REGIONAL OFFICE

Name of the Statue Nature of the dues Amount (In Rs.)

Orissa Sales Tax Interest Penalty 26,50,388

Orissa Sales Tax Odisha Sales Tax 34,00,919

Orissa Sales Tax Odisha Sales Tax 1,70,046

Orissa Sales Tax Interest Penalty 6,53,452

Orissa Sales Tax Central Sales Tax 34,83,020

Orissa Sales Tax Interest 3,57,42,030

Orissa Sales Tax DEPB 14,98,22,308

Orissa Sales Tax DEPB 5,08,43,080

OVAT 2009-10 & 2010-11 14,28,18,841

CST(ODISHA) 2009-10 & 2010-11 58,07,05,822

ET(ODISHA) 2009-10 & 2010-11 52,63,10,091

Central Excise Act Service Tax 4,17,04,374

Central Excise Act Service Tax 15,55,24,520

Central Excise Act Service Tax 3,55,84,190

Central Excise Act Service Tax 7,60,64,279

Central Excise Act Service Tax 3,75,81,878

Central Excise Act Service Tax 3,59,43,529

Central Excise Act Service Tax 28,49,57,172

Central Excise Act Service Tax 65,20,157

Central Excise Act Service Tax 31,27,912

Central Excise Act Service Tax 3,44,69,468

Name of the Statue Period Forum of Dispute

Orissa Sales Act 1978-79 High Court of Orissa

Orissa Sales Act 1978-79 - do -

Orissa Sales Act 1978-79 - do -

Orissa Sales Act 1979-80 - do -

Orissa Sales Act 1982-83 - do -

Orissa Sales Tax 1978-79 - do -

Orissa Sales Tax 2006-09 Addl. Commissioner of Sales Tax, Odisha

Orissa Sales Tax 2010-12 Addl. Commissioner of Sales Tax, Odisha

OVAT 2013-14 Addl. Commissioner of Sales Tax, Odisha

CST(ODISHA) 2013-14 Addl. Commissioner of Sales Tax, Odisha

ET(ODISHA) 2013-14 Addl. Commissioner of Sales Tax, Odisha

Central Excise Act 2003-05 Customs, Excise & Service Tax Appellate Tribunal

Central Excise Act 2003-07 Customs, Excise & Service Tax Appellate Tribunal

Central Excise Act 2007-08 Customs, Excise & Service Tax Appellate Tribunal

Central Excise Act 2008-10 Customs, Excise & Service Tax Appellate Tribunal

Central Excise Act 2010-11 Comm., Customs excise & service tax. Bhubaneswar

Central Excise Act 2011-12 Comm., Customs excise & service tax. Bhubaneswar

Central Excise Act 2009-12 Comm., Customs excise & service tax. Bhubaneswar

Central Excise Act 2009-11 Comm., Customs excise & service tax. Bhubaneswar

Central Excise Act 2012-13 Comm., Customs excise & service tax. Bhubaneswar

Central Excise Act 2012-13 Comm., Customs excise & service tax. Bhubaneswar

JAIPUR REGIONAL OFFICE

Name of the Nature of Amount (In Rs.) Statue the dues

R.S.TACT Sales Tax 1,49,46,540/-

R.S.TACT Sales Tax 26,07,605/-

RAJ VAT ACT VAT 3,26,47,269/-

CST ACT CST 59,92,494/-

R.S.T ACT VAT 18,01,941/-

ST Turnover Tax 5,32,992/-

Name of the Statue Period Forum of Dispute

R.S.T ACT 2003-04 Rajasthan Kar Board, Ajmer Rs. 35,49,446/- has been deposited under protest. Sales Tax Dept has appealed against the order of DC(Appeals) in Kar Board

R.S.T ACT 1999-00 Rajasthan Kar Board, Ajmer Pending with Kar Board against demand on account of 4767 MT DAP u/s 84 of RST Act

RAJ VAT ACT 2010-11 Against the Appeal of Sales Tax Deptt., Rajasthan Kar Board decided in favour of MMTC Limited.

CST ACT 2010-11 Against the Appeal of Sales Tax Deptt., Rajasthan Kar Board decided in favour of MMTC Limited.

R.S.T ACT 2010-11 Required documents have been submitted in Sales Tax Dept. Rectification pending with A.O.

ST 2003-04 High Court Sales Tax Dept has filed an appeal in High Court against Kar Board order.

Total amount deposited under protest- Rs 35,49,446.00

VIZAG REGIONAL OFFICE

Name of the Statue Nature of the dues Amount (In Rs.) Period Forum of Dispute

A.P.G.S.TACT Sales Tax 18,56,325 1968-69 STAT, HYP.

A.P.G.S.TACT Sales Tax 26,39,647 1981-82 ADC, Vizag

A.P.G.S.TACT Sales Tax 6,88,552 1982-83 ADC, Vizag

A.P.G.S.TACT Sales Tax 17,66,784 1983-84 ADC, Vizag

A.P.G.S.TACT Sales Tax 30,00,436 1984-85 ADC, Vizag

A.P.G.S.TACT Sales Tax 25,05,806 1985-86 STAT,Vizag

A.P.G.S.TACT Sales Tax 2,70,83,841 1986-87 STAT, Vizag

A.P.G.S.TACT Sales Tax 36,45,076 1987-88 ADC

A.P.G.S.TACT Sales Tax 19,34,139 1991-92 AC LTU

A.P.G.S.TACT Sales Tax 4,79,000 1989-90 STAT

CST Sales Tax 8,41,695 1994-95 AC LTU

CST Sales Tax 48,62,340 1995-96 STAT, Hyderabad

CST Sales Tax 33,58,889 1996-97 STAT, Hyderabad

A.P.G.S.TACT Sales Tax 25,27,960 1997-98 STAT, Hyderabad

CST Sales Tax 104,614 2007-08 ADC

Central Excise & Customs Service Tax 12,65,26,554 2003 -06 STAT, Bangalore

KOLKATA REGIONAL OFFICE

Name of the Statue Nature of the dues Amount Period Forum of Dispute (In Rs.)

CST ACT 1956 Central Sales Tax 11,30,858 2005-06 Appellate Board

CST ACT 1956 Central Sales Tax 77,60,971 2006-07 D C Appeal

CORPORATE OFFICE

Name of the Nature of the Dues Amount (Rs.) AY Forum of Dispute Statue

Income Tax Act Income Tax 5,61,821 1993-94 AO

Income Tax Act Income Tax 54,81,338 1996-97 CIT(A)/ITAT

Income Tax Act Income Tax 1,02,93,042 1993-94 AO

Income Tax Act Income Tax 2,60,66,476 1999-00 ITAT

Income Tax Act Income Tax 1,84,63,021 2000-01 ITAT

Income Tax Act Income Tax 1,17,65,008 2001-02 CIT(A)/ITAT/ HIGH Court

Income Tax Act Income Tax 73,04,915 2002-03 ITAT

Income Tax Act Income Tax 11,16,907 2003-04 AO

Income Tax Act Income Tax 4,19,85,746 2004-05 ITAT

Income Tax Act Income Tax 6,94,85,393 2005-06 AO

Income Tax Act Income Tax 73,50,191 2007-08 CIT(A)/ITAT

Income Tax Act Income Tax 2,79,66,209 2008-09 AO

Income Tax Act Income Tax 10,64,92,947 2009-10 CIT(A)

Income Tax Act Income Tax 3,93,72,128 2010-11 CIT(A)

Income Tax Act Income Tax 10,17,50,890 2011-12 CIT(A)

Amount Deposited in respect of the Income Tax cases = 37,37,05,142/-

DELHI REGIONAL OFFICE

Name of Statute Nature of Dues Amount (inRs.)

Delhi VAT CST/LST/lnterest/Penalty 3745290 (Gold - Commemorative Medallions)

Delhi VAT LST 1165303

Delhi VAT LST/CST 65732207

Delhi VAT LST/CST 43186549

Delhi VAT LST/CST 40296672

Delhi VAT LST 6187340

Delhi VAT LST 2223198

UP-VAT LST/CST 617588

UP-VAT LST 470578

UP-VAT LST 264037

UP-VAT LST 195000

UP-VAT LST 185100

UP-VAT LST 1635160

UP-VAT VAT 921383

UP-VAT VAT 1223616

UP-VAT VAT lnterestfor Non - 249828 submission of Form-3B (Gold) & Non-submission of Form3Cl (Mentha Oil)

Haryana VAT LST 424587

MP-VAT LST 150004

MP-VAT LST 4730692

Custom & Central Customs Duty & Interest on 27267919 Excise non-export of Gold Jewellery against Gold Loan by Associates

Custom & Central Custom Duty 20000000 Excise

Custom & Central Custom Duty 15050000 Excise

Custom & Central Custom Duty 6180000 Excise

Custom & Central Custom Duty 6180000 Excise

Custom & Central Excise Duty/ 1820878 Excise Interest/Penalty

Custom & Central Excise Duty/ 191353780 Excise Interest/Penalty

Name of Statute Period to which Forum where dispute is the amount pending relates

Delhi VAT 2002-03 Commissioner, DVAT

Delhi VAT 1984-85 D.C. Appeal

Delhi VAT 1986-87 Additional Commissioner

Delhi VAT 1987-88 Additional Commissioner

Delhi VAT 1988-89 Additional Commissioner

Delhi VAT 1989-90 Additional Commissioner

Delhi VAT 1990-91 Additional Commissioner

UP-VAT 1990-91 Moradabad, Allahabad High Court

UP-VAT 1991-92 Moradabad, Allahabad High Court

UP-VAT 1992-93 Moradabad, Allahabad High Court

UP-VAT 1994-95 Sales Tax Authorities, Moradabad

UP-VAT 1993-94 Moradabad, Allahabad High Court

UP-VAT 1987-88 Kanpur, Joint Commissioner

UP-VAT 1993-94 Commissioner, UP-VAT

UP-VAT 1996-97 Commissioner, UP-VAT

UP-VAT 2007-08 Commissioner, UP-VAT

Haryana VAT 1992-93 Faridabad, Punjab & Haryana High Court Chandigarh

MP-VAT 1999-00 Sales Tax Authority, Indore

MP-VAT 1998-99 Assessing Authority, Indore

Custom & Central Excise 1999-2000 Pending before Hon'ble Delhi High Court as per directions of Hon'ble Supreme Court of India

Custom & Central Excise 2006-07 Dy. Commissioner of Customs,

Custom & Central Excise 2007-08 Dy. Commissioner of Customs,

Custom & Central Excise 2008-09 Dy. Commissioner of Customs,

Custom & Central Excise 2009-10 Dy. Commissioner of Customs,

Custom & Central Excise 2010-11 Commissioner of Central Excise,

Custom & Central Excise 2011-12 Commissioner of Central Excise

An amount of INR 84.83 Lacs has been deposited.

(d) As per information/ explanations given to us no amount required to be transfer to Investor Education & Protection Fund accordance with the relevant provisions of the Companies act 1956.

x. The Financial Statements of the Company as at March 31, 2015 do not show any accumulated losses. The company has not incurred any cash losses during the financial year covered by our audit and in the immediately preceding financial year and company has not incurred any cash losses during the financial year and immediately preceding financial year.

xi. In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of dues to financial institutions, banks and debenture holders.

xii. According to the information and explanations given to us, the Company has not given any guarantees for loans taken by others from banks and financial institutions which is prejudicial to the interest of the company.

xiii. In our opinion and according to the information and explanations given to us, the Company has not taken any term loans during the year.

xiv. During the course of our examination of the books and records of the Company, carried out in accordance with generally accepted auditing practices in India, and according to the information and explanation given to us there are no fraud on/or by the company has been noticed or reported during the year.



For JAIN KAPILA ASSOCIATES

Chartered Accountants

(Firm Registration No. 000287N)

Place: New Delhi

Date: May 21, 2015

D.K. Kapila

Partner

M. No. 016905


Mar 31, 2014

We have audited the accompanying financial statements of MMTC LIMITED ("the Company"), which comprise the Balance Sheet as at 31st March, 2014, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, annexed thereto in which are incorporated the accounts of Corporate Office, MICA division, Delhi Regional Office and Sub-regional Offices which are under Delhi Regional Office audited by us and the other Regional Offices and Sub-regional Offices audited by other Independent Auditors and a summary of the significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

The 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 Section 211(3C) of the Companies Act, 1956 ("the Act") and in accordance with the accounting principles generally accepted in India. 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.

Auditors'' 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 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 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 the accounting policies used and the reasonableness of the accounting estimates made by the 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 qualified audit opinion.

Basis for Qualified Opinion

(a) Company has not followed its policy regarding writing off of debts / advances / claims as there are various debts / advances / claims which are outstanding for a long period and where company itself has made 100% provision against these debts / advances / claims considering the uncertainty of realization / unrealisability of these debts / advances / claims. Consequential effect of the same is not ascertainable.

(b) Our observation in-respect of the inadequacies in the internal control systems, as stated in para (iv) of Annexure to the main audit report, which may have consequential effect on the accounts for the year. (Effect not ascertainable)

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

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

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

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

Emphasis of Matter

(a) Subsequent to the default in payment obligation of National Spot Exchange Limited (NSEL) and consequential filing of legal suit in Mumbai High Court against NSEL and others and filing of criminal complaint with Economic Offences Wing (EOW), Delhi Police which has since been transferred to CBI Mumbai, company has made provision of INR 2104.42 million (P.Y. Nil) against total recoverable amount of INR 2106.38 million as on 31 March, 2014 after adjusting INR 1.96 million realized upto 15 May, 2014. [Refer note no. 17 (Mi)]

(b) The company provides benefit in respect of post retirement medical benefit (PRMB) to its employees. The Actuarial liability for the financial year 2013-14 aggregating to INR 1368.32 million has been provided for [Refer to Note No. 23(g)]. The company has neither earmarked its investment nor has created any corpus for this purpose.

(c) Balances under Sundry Debtors / Claims Recoverable / Loans & Advances / Sundry Creditors / Other Liabilities in many cases have not been confirmed and consequent reconciliation / adjustments, if any, required upon such confirmation are not ascertainable. (Refer note no. 35)

(d) The RMS software is not reflecting correct inventory of Sanchi items due to the problems in the package in some regional offices. Manual record of inventory of Sanchi items is also not maintained.

(e) Non-provision of liability, if any, in case of extension of time / waiver / write off of GR-1 forms. (Refer note no. 21)

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 in terms of Section 227(4A) 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) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph, 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 [and proper returns adequate for the purposes of our audit have been received from the branches not visited by us].

(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) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement comply with the Accounting Standards referred to in Section 211(3C) of the Act.

(e) In terms of Notification No. GSR 829 (E) dated 21.10.2003 issued by the Department of the Company Affairs, Government of India, the provision of Section 274(l)(g) of the Companies Act, 1956, are not applicable to the Company.

ANNEXURE TO THE INDEPENDENT AUDITORS'' REPORT (Referred to in paragraph 1 under ''Report on Other Legal and Regulatory Requirements'' section of our report of even date)

i. In respect of its fixed assets:

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

b. The fixed assets are being physically verified by the Management in accordance with a regular programme at certain locations only whereas in our opinion, it provides for physical verification of all the fixed assets at all locations at reasonable intervals. According to the information and explanation given to us, no material discrepancies were noticed on such verification at locations where physical verification was held.

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. In respect of its inventories:

(a) As explained to us, the inventories were physically verified during the year by the Management.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the Management needs to be strengthened in relation to the size of the Company and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, subject to our observation mentioned in Emphasis of Matter (d) in the audit report, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification.

iii. The Company has neither granted nor taken any loans, secured or unsecured, to/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 the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of fixed assets. As regards the purchases and sales of goods, inventories and stocks that are dealt with by the Company including domestic bullion transactions it needs further strengthening in such a manner so as to avoid delay in updation in ERP system vis-a-vis actual date of transaction and similarly, manual generation of invoices could be avoided.

Further, the internal control mechanism needs to be strengthened, besides the areas mentioned hereinbefore, in the following areas:

(a) Periodic quantitative reconciliation of goods traded by the company (particularly bullion/retail trade) between the ERP and other standalone inventory system (RMS).

(b) Risk assessment and Risk management needs to be strengthened / revamped further as it is noticed that due to certain acts of omission and commission, company had to make heavy provisions against debtors / recoverable / losses.

(c) Periodic reconciliation in-respect of sales and purchases, input / output VAT as per financial records vis-a-vis sales, purchases, input / output VAT as per VAT returns.

v. There were no transactions that needed to be entered into the Register maintained in pursuance of Section 301 of the Companies Act, 1956 during the year under audit.

vi. According to the information and explanations given to us, the Company has not accepted any deposit from the public during the year. In respect of unclaimed deposits, the Company has complied with the provisions of Sections 58A, 58AA or any other relevant provisions of the Companies Act, 1956.

vii. The company has of late brought out a detailed internal audit manual and has initiated steps to strengthen the internal audit system. However, in our opinion, the internal audit functions carried out by external Internal Auditors and Internal Audit Department needs further improvement in terms of quality and scope so as to make it fully commensurate with the size and the nature of its business.

viii. The Government of India has not prescribed the maintenance of cost records under Section 209(l)(d) of the Act for any of the services rendered by the Company.

ix. According to the information and explanations given to us, in respect of statutory dues:

(a) The Company has 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, Customs Duty, Excise Duty, Cess and other material statutory dues applicable to it with the appropriate authorities.

(b) There were no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income-tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues in arrears as at 31 March, 2014 for a period of more than six months from the date they became payable.

(c) Details of dues of Income-tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty and Cess which have not been deposited as on 31 March, 2014 on account of disputes are referred to in Annexure W

x. The Financial Statements of the Company as at 31 March, 2014 do not show any accumulated losses. The Company has not incurred any cash losses during the financial year covered by our audit and in the immediately preceding financial year.

xi. According to the records of the Company examined by us and as per the information and explanations given to us, the Company has not defaulted in the repayment of dues to financial institutions, banks and debenture holders.

xii. According to the information and explanations given to us, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities; except certain loans to employees who have been granted on the basis of security of house and vehicles and in this regard proper documents & records are maintained. In respect of loans to its employees other than those as stated already, are granted without any security.

xiii. In our opinion the Company is not a chit fund / nidhi / mutual benefit fund / society. Therefore, the provision of clause No. 4(xiii) of the Companies (Auditor''s Report) Order 2003 (as amended) is not applicable to the Company.

xiv. In our opinion, the Company is not dealing or trading in shares, securities, debenture and other investments. Accordingly, the provision of clause No. 4(xiv) of the Companies (Auditor''s Report) Order 2003 (as amended) is not applicable to the Company.

xv. In our opinion and according to the information and explanations given to us the terms & conditions of the guarantee given by the Company for loans taken by Neelachal Ispat Nigam limited (an associate company) from banks or financial institutions are not prima facie pre-judicial to the interest of the Company.

xvi. According to the information and explanations given to us, the Company has not taken any term loans during the year. Hence, the provision of clause No. 4(xvi) of the Companies (Auditor''s Report) Order 2003 (as amended) is not applicable to the Company.

xvii. According to the information and explanations given to us and upon overall examination of the Balance Sheet of the Company, we report that funds raised on short-term basis have, prima facie, not been used during the year for long-term investment.

xviii. According to the information and explanation given to us, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956.

xix. According to the information and explanation given to us, during the year covered by our audit report, the Company has not issued any debentures during the year and hence, the provision of clause No. 4(xix) of the Companies (Auditor''s Report) Order 2003 (as amended) is not applicable to the Company.

xx. The Company has not raised any money by way of Public Issue during the year; therefore, the provision of clause No. 4(xx) of the Companies (Auditor''s Report) Order 2003 (as amended) is not applicable to the Company.

xxi. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanation given to us, we have come across following instance of material fraud on the Company during the year, as reported by the Management:-

National Spot Exchange Limited (NSEL) has defaulted in its payment obligations amounting to INR 2104.42 million which were paid by the company for trade done through NSEL against which goods were neither in the custody of NSEL nor available with the seller / borrower. The company has filed legal suit in Mumbai High Court against NSEL and others and has also filed criminal complaint with Economic Offences Wing (EOW), Delhi Police which has since been transferred to CBI Mumbai and the matter is under further investigation.

For JAIN KAPILA ASSOCIATES

Chartered Accountants

(ICAI Registration No. 000287N)

Place: New Delhi D.K. Kapila

Partner Date : 29.05.2014 (Membership No. 16905)


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of MMTC LIMITED ("the Company"), which comprise the Balance Sheet as at 31 March, 2013, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, annexed thereto in which are incorporated the accounts of Corporate Office, MICA division, Jhandewalan Regional Office and Sub-regional Offices which are under Jhandewalan Regional Office audited by us and the other Regional Offices and Sub-regional Offices audited by other Independent Auditors and a summary of the significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

The 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 Section 211(3C) of the Companies Act, 1956 ("the Act") and in accordance with the accounting principles generally accepted in India. 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.

Auditors'' 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 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 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 the accounting policies used and the reasonableness of the accounting estimates made by the 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 qualified audit opinion.

Basis for Qualified Opinion

Our observation in-respect of the inadequacies in the internal control systems, as stated in para (iv) of Annexure to the main audit report, which may have consequential effect on the accounts for the year. (Effect not ascertainable)

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

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

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

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

Emphasis of Matter

(a) It is observed that due to recording of many incorrect / unexplained accounting entries deliberately recorded in the books at Regional Office Hyderabad with a view to suppress the actual sundry debtors recoverable from party / group the Management has directed a special audit to ascertain the amount actually recoverable. Based on itsreport a provision of INR 2288.20 million (P.Y.INRNILmillion) has been made on account of un-recoverability of the amount from the said sundry debtor. [Refer note no. 17(ii)]

(b) Subsequent to the submission of the final report of special audit a further provision of INR 155.44 million (P.Y. INR1002.50 million) is made on account of certain acts of commission & omission pertaining to recoverable from debtors at Regional Office Chennai. [Refer note no. 17(i)]

(c) Balances under Sundry Debtors / Claims Recoverable / Loans & Advances / Sundry Creditors / Other Liabilities in many cases have not been confirmed and consequentreconciliation / adjustments if any, required upon such confirmation are not ascertainable. (Refer note no. 39)

(d) The RMS software is not reflecting correct inventory of Sanchi items due to the problems in the package. Manual record of inventory of Sanchi items is also not maintained.

(e) Non-provision of liability, if any, in case of extension of time / waiver / write off of GR-1 forms. (Refer note no. 23)

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 in terms of Section 227(4A) 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) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph, 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 [and proper returns adequate for the purposes of our audit have been received from the branches not visited by us].

(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) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement comply with the Accounting Standards referred to in Section 211(3C) of the Act.

(e) On the basis of the written representations received from the directors as on 31March, 2013 taken on record by the Board of Directors, none of the directors is disqualified as on 31March, 2013 from being appointed as a director in terms of Section 274(1)(g) of the Act.

ANNEXURE TO THE INDEPENDENT AUDITORS'' REPORT

(Referred to in paragraph 1 under ''Report on Other Legal and Regulatory Requirements'' section of our report of even date)

i. In respect of its fixed assets:

a. The Company has maintained proper records showing full particulars, including quantitative details and situationof fixed assets.

b. The fixed assets were physically verified during the previous year by the Management in accordance with a regular programme of verification which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals. According to the information and explanation given to us, 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. In respect of its inventories:

(a) As explained to us, the inventories were physically verified during the year by the Management.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the Management needs to be strengthen in relation to the size of the Company and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, subject to our observation mentioned in Emphasis of Matter(d)in the audit report,the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification.

iii. The Company has neither granted nor taken any loans, secured or unsecured, to/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 the information and explanations given to us, there is an adequate internal control system commensurate with the size of the the Company and the nature of its business for the purchase of fixed assets. As regards the purchases and sales of goods and stocks that are dealt with by the Company needs to be strengthened further as it is noticed that due to delay/absence in price fixing with the foreign supplier, the purchases and the further stock transferred remains unrecorded in the books.

Further, the internal control mechanism needs to be strengthened, besides the areas mentioned hereinbefore, in the following areas:

(a) Periodic quantitative reconciliation of goods traded by the company (particularly bullion/retail trade) between the ERP and other standalone inventory system (RMS).

(b) Risk management particularly at foreign exchange exposure and its subsequent documentation / record keeping and also time-to- time monitoring of the risk to the Company.

(c) The books of accounts at Regional Office Hyderabad contain many incorrect / unexplained accounting entries deliberately recorded to suppress sundry debtors recoverable from a particular party / group during the financial years 2011-12 & 2012-13.

(d) Wherever claims / recoveries on account of subsidy allowable / allowed by the Central / State Government in-respect of agro products imported at its behest and follow-up of old debts,advances, claims, court cases by respective commodity division.

(e) As the prevalent/existing ERP system being quite old and obsolete and the same being not audit and Internal control friendly needs to be revamped in the light of the complexities in the bullion business, changing reporting requirements and concept of maker / checker to be rigorously enforced. However the Company has initiated steps to replace the existing ERP system.

(f) Entries are not passed in the accounts / stock records signifying the obtaining of jewelry against the bullion given & vice-versa for the purpose of exhibition / normal trade.

(g) Differences and lack of reconciliation in-respect of sales and purchases, input / output VAT as per financial records vis-a-vis sales, purchases, input / output VAT.

(h) Accounting entries in-respect of High Sea Sale should be as per the respective sale agreement with the respective customers.

v. There were no transactions that needed to be entered into the Register maintained in pursuance of Section 301 of the Companies Act, 1956 during the year under audit.

vi. According to the information and explanations given to us, the Company has not accepted any deposit from the public during the year. In respect of unclaimed deposits, the Company has complied with the provisions of Sections 58A, 58AA or any other relevant provisions of the Companies Act, 1956.

vii. In our opinion, the internal audit functions carried out by the management needs to be well structured, more exhaustive & extensive both in terms of scope & periodicity; the exercise carried out by external Internal Auditor''s/ Internal Audit Departmentis not commensurate with the existing programme of the Company and the nature of its business. The same is noted to be very inadequate at Regional Office Hyderabad & Regional Office Chennai in particular. However, management has initiated the steps to strengthen internal audit system.

viii. The Government of India has not prescribed the maintenance of cost records under Section 209(1)(d) of the Act for any of the services rendered by the Company.

ix. According to the information and explanations given to us, in respect of statutory dues:

(a) The Company has 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,Customs Duty, Excise Duty, Cess and other material statutory dues applicable to it with the appropriate authorities.

(b) There were no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income-tax, Sales Tax, Wealth Tax, Service Tax,Customs Duty, Excise Duty, Cess and other material statutory dues in arrears as at 31 March, 2013 for a period of more than six months from the date they became payable.

(c) Details of dues of Income-tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty and Cess which have not been deposited as on 31 March, 2013 on account of disputes are referred to in Annexure ''A''

x. The Financial Statements of the Company as at 31 March, 2013 do not show any accumulated losses. Though the Company has reported an overall loss for INR 706.24 million which is on account of fraud perpetrated against the Company; the Company has not incurred any cash losses during the financial year covered by our audit and in the immediately preceding financial year.

xi. According to the records of the Company examined by us and as per the information and explanations given to us,the Company has not defaulted in the repayment of dues to financial institutions, banks and debenture holders.

xii. According to the information and explanations given to us,the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities; except certain loans to employees who have been granted on the basis of security of house and vehicles and in this regard proper documents & records are maintained. In respect of loans to its employees other than those as stated already, are granted without any security.

xiii. In our opinion the Company is not a chit fund/nidhi/mutual benefit fund/society. Therefore, the provision of clause No. 4(xiii) of the Companies (Auditor''s Report) Order 2003 (as amended) is not applicable to the Company.

xiv. In our opinion, the Company is not dealing or trading in shares, securities, debenture and other investments. Accordingly, the provision of clause No. 4(xiv) of the Companies (Auditor''s Report) Order 2003 (as amended) is not applicable to the Company.

xv. In our opinion and according to the information and explanations given to us the terms & conditions of the guarantee given by the Company for loans taken by NeelanchalIspat Nigam limited (an associate company) from banks or financial institutions are not prima facie pre-judicial to the interest of the Company.

xvi. According to the information and explanations given to us,the Company has not taken any term loans during the year. Hence, the provision of clause No. 4(xvi) of the Companies (Auditor''s Report) Order 2003 (as amended) is not applicable to the Company.

xvii. According to the information and explanations given to us and upon overall examination of the Balance Sheet of the Company, we report that funds raised on short-term basis have, prima facie, not been used during the year for long-term investment.

xviii. According to the information and explanation given to us, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956.

xix. According to the information and explanation given to us, during the year covered by our audit report, the Company has not issued any debentures during the year and hence, the provision of clause No. 4(xix) of the Companies (Auditor''s Report) Order 2003 (as amended) is not applicable to the Company.

xx. The Company has not raised any money by way of Public Issue during the year; therefore, the provision of clause No. 4(xx) of the Companies (Auditor''s Report) Order 2003 (as amended) is not applicable to the Company.

xxi. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanation given to us,we have come across following instances of material fraud on the Company during the year, as reported by the Management:-

(a) Regional Office, Hyderabad

The books of accounts at Regional Office Hyderabad contain many incorrect / unexplained accounting entries deliberately recorded to suppress sundry debtors recoverable from a particular party / group during the financial years 2011-12 & 2012-13.

For JAIN KAPILA ASSOCIATES Chartered Accountants

(ICAI Registration No. 000287N)

Place: New Delhi D.K. Kapila Partner

Date: 30 May 2013 (Membership No. 16905)


Mar 31, 2012

1. We have audited the attached Balance Sheet of MMTC Limited as at March 31, 2012, the Statement of Profit and Loss and the Cash Flow Statement for the year ended on that date, both annexed thereto in which are incorporated the accounts of Corporate Office, Mica Division, Jhandewalan Regional Office and Sub-Regional Offices which are under Jhandewalan Regional Office audited by us and the other Regional Offices and Sub-Regional Offices audited by the other Auditors. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. 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 the Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 (as amended) and read together with the Companies (Auditor's Report) Order, 2004 (hereinafter referred to as the order) issued by the Central Government of India in terms of Section 227(4A) of the Companies Act, 1956 and on the basis of such checks of the records of the Company as we considered appropriate and according to the information and explanations given to us, we give 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 in paragraph (3) above, we report as follows: -

(i) Non-provision of liability, if any, in case of extension of time / waiver / write off of GR-1 forms. (Refer note no. 23)

(ii) Balances under Sundry Debtors/claims Recoverable / Loans & Advances / Sundry Creditors / Other Liabilities have not been confirmed in some cases by the parties. Adjustments, if any, required upon such confirmation are not ascertainable. (Refer note no. 39)

(iii) Our observations in respect of the inadequacies in the internal control systems, as stated in para (iv) of Annexure to main audit report, which may have consequential effect on the accounts for the year. (Effect not ascertainable).

(iv) Attention is invited to an ad-hoc provision of Rs. 1002.05 million made on account of certain acts of commission & omission pertaining to recoverable from debtors at Regional Office Chennai. (Refer note no. 17)

5. We further 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 except as otherwise stated in report;

(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 the books;

(c) Proper returns, adequate for the purpose of our audit have been received from Regional Offices, Sub Regional Offices and Branches not audited by us. Reports of Regional Auditors have been considered while preparing our report;

(d) The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of accounts and with the audited returns from the Regional Offices;

(e) In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in compliance with the Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956;

(f) Being a Government Company, pursuant to the gazette notification No.GSR 829 (E) dated 21-10-2003 issued by Government of India, provisions of clause (g) of sub-section (1) of section 274 of the companies Act 1956 are not applicable to the company.

6. We further report that, the impact of paragraphs 4(i) to 4(iii) above on the profit of the year and the assets and liabilities appearing in the Balance Sheet, could not be ascertained. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the Significant Accounting Policies and notes thereon, give the information required by the Companies Act, 1956 in the manner so required, other than as stated above, 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 March 31, 2012;

(ii) In the case of the Statement of Profit and Loss, of the Profit of the Company for the year ended on that date; and

(iii) In the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

Annexure to the Auditors' Report

Referred to in paragraph 3 of the Auditor's Report of even date to the members of MMTC Limited on the financial statements for the year ended March 31, 2012.

(i) In respect of fixed assets:

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

(b) As explained to us, all the fixed assets have been physically verified by the Management during the year; which, in our opinion is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) In our opinion and according to the information and explanations given to us, no substantial part of the fixed assets has been disposed off by the Company during the year and therefore the going concern assumption is not affected.

(ii) In respect of its inventories:

(a) As explained to us, the inventories excepting in case of goods in transit, stocks lying in Central / State Warehouses (where confirmation were obtained from the parties and relied upon) were physically verified during the year by the Management at reasonable intervals.

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

(c) On the basis of our examination of records of the inventory, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stock and the books of account were not material except in the case of inventory of pulses at Regional Office Mumbai which has been properly dealt with in the books of account.

(iii) In respect of loans:

(a) As informed to us, the Company has not granted any loans, secured or unsecured to Companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.In view of this, sub clauses (b),(c) and (d) of clause (iii) are not applicable.

(b) As informed to us, the Company has not taken any loans, secured or unsecured from Companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. In view of this, sub clauses (e), (f) and (g) of clause (iii) are not applicable.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control systems 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 & services. However, there is inadequate internal control systems in-regard to obtaining confirmation / reconciliation of outstanding balances, accounting of tax deducted at source on payments made by other parties. Further, on the basis of our examination and according to the information and explanations given to us, we have come across instances where there is total lack of internal control system particularly at Regional Office Chennai, Regional Office Hyderabad and Jhandewalan Regional Office in areas of obtaining bank balance confirmation, confirmations of FDR / BG, procedure / system for obtaining buyer's credit, forward cover.

Further, the internal control mechanism needs to be strengthened, besides the areas mentioned hereinbefore, in the following areas:

(a) Risk management particularly of foreign exchange exposure and its subsequent documentation / record keeping and also time-to-time monitoring of the risk to the company.

(b) Periodic quantitative reconciliation of goods traded by the company (particularly bullion) between the ERP and other standalone inventory system.

(c) Active and prompt follow-up of old debts, advances, claims, court cases and recoveries etc arising out of execution of decrees/awards in favor of the company, by respective Commodity Division.

(v) (a) In our opinion and according to the information and explanations given to us, there are no contracts and arrangements referred to in Section 301 of the Companies Act 1956, particulars of which need to be entered into a register maintained under Section 301 of the Act.

(b) Accordingly the provisions of the clause V (b) of paragraph 4 of the order (as amended) are not applicable to the company

(vi) The directives issued by the Reserve Bank of India and the provisions of Section 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there-under have been complied with, in respect of deposits accepted from the Public. We have been informed that, no order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any other Court or Tribunal in this regard.

(vii) The Company has an internal audit system, which in our opinion is commensurate with the size of the Company and nature of its business. However, keeping in view our observations regarding inadequacies in internal control systems, the internal audit system needs to be revamped, strengthened and its effectiveness be enhanced.

(viii) As informed to us, the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 has not been prescribed by the Central Government.

(ix) (a) According to the information and explanations given to us and the records as produced and examined by us, in our opinion, the Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income-tax, sales-tax, wealth tax, service tax, customs duty, Excise Duty, Cess and other material statutory dues as applicable with the appropriate authorities and that no undisputed amounts payable in respect of the same were in arrears as at 31-03-2012 for a period of more than six months from the date they became payable.

(b) According to the information and explanation given to us and the records of the Company examined by us, the particulars of dues of income tax / sales tax / wealth tax / service tax / custom duty / excise duty / cess (as applicable) as at March 31, 2012 which have not been deposited on account of any dispute, are referred to in Annexure 'A'

(x) The Company does not have any accumulated losses and has not incurred cash losses in the current financial year and in the immediately preceding financial year.

(xi) According to the records of the Company examined by us and as per the information

and explanations given to us, the Company has not defaulted in repayment of dues to any financial institution or bank or debenture holders during the year.

(xii) According to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities; except certain loans to employees who have been granted on the basis of security of house and vehicles and in this regard proper documents & records are maintained. In respect of loans to its employees other than those as stated already, are granted without any security.

(xiii) In our opinion, the company is not chit fund or a Nidhi / Mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to us the terms & conditions of the guarantee given by the company for loans taken by Neelachal Ispat Nigam Limited (an associate Company) from banks or financial institutions are not prima- facie prejudicial to the interest of the Company.

(xvi) According to the information and explanation given to us, the Company has not taken any term loans during the year. Hence, the provisions of clause 4(xvi) of the Companies (Auditor's Report) Order 2003 (as amended) are not applicable to the Company.

(xvii) According to the information and explanations given to us and overall examination of the Balance Sheet of the company, we report that no funds raised on short-term basis have been used for long-term investment.

(xviii) According to the information and explanations given to us, the Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) According to the information and explanations given to us, during the year covered by our audit report, the Company has not issued any debentures during the year and hence, the provision of clause No. 4(xix) of the Companies (Auditor's Report) Order 2003 (as amended) is not applicable to the Company.

(xx) The Company has not raised any money by way of Public Issue during the year; therefore the provision of clause 4(xx) of the Companies (Auditor's Report) Order 2003 (as amended) is not applicable to the Company.

(xxi) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have come across following instances of material fraud on the Company during the year, as reported by the Management:-

(a) Regional Office, Chennai Certain acts of commission & omission relating to bullion transactions pertaining to previous years were reported resulting into amounts recoverable from Debtors of Rs. 1002.05 million which were lying in the vendors account as at March 31, 2011 against which full provision has been created in the current year. The company has ordered a special audit into these transactions which is yet to be completed. In this connection, upon a complaint filed by the Company, CBI has registered two separate FIRs and has started detailed investigation also, Directorate of Enforcement have registered an offence under Prevention of Money Laundering Act 2002. (Refer Note no. 17)

(b) Regional Office, Mumbai

A foreign supplier has submitted forged shipping documents, through banking channels, to obtain payment of Rs. 28.30 million without making delivery. However, the company has obtained an interim stay from the Court restraining the bank from making the payment under the letter of credit. The same supplier is also fraudulently holding on to the master bill of lading which would enable the RO to take delivery and possession of goods valued at Rs. 64.57 million, already paid for and received at the Indian port. (Refer to note no. 40)

(c) Regional Office, Hyderabad

The company has received fake bills of lading covering two shipments of copper valued at Rs. 37.50 million against which no material was received. The foreign supplier has been paid in full through letter of credit after the company had received full payment from the customer. The company is in the process of initiating legal action against the foreign supplier. (Refer note no. 41)

(d) Regional Office, Jhandewalan

One of the customer who was given gold on loan has committed fraud on the company by providing fake bank guarantees amounting to Rs. 18.0 million against which full provision has been made. The case is under investigation upon filing of an FIR by the company with the Delhi Police. (Refer note no. 42)

ANNEXURE 'A' TO AUDITORS' REPORT

Referred to in paragraph 9(b) of Annexure, a statement on the matters specified in the Companies (Auditors Report) Order, 2003 (as amended) of MMTC Limited for the year ended on 31st March 2012.

According to the records of the company dues of Income Tax, Sales Tax, Custom Duty, Excise Duty and Cess which have not been deposited on account of disputes are stated below:

CHENNAI REGIONAL OFFICE

Name of the Statue Nature of the dues Amount (In Rs.) Period Forum of Dispute

TNGST ACT Sales Tax, Penalty 8,63,114 1998-99 High Court & Interest

TNGST ACT Sales Tax, Penalty 4,43,416 2000-01 Sales Tax Appeals & Interest Tribunal

TNGST ACT Sales Tax, Penalty 11,52,785 1999-2000 High Court & Interest

TNGST ACT Sales Tax, Penalty 1,78,536 2001-02 Asst. Commissioner & Interest (Comm. Tax), Chennai

MUMBAI REGIONAL OFFICE

Name of the Statue Nature of the dues Amount (In Rs.) Period Forum of Dispute

BST ACT Sales Tax 3,08,644 1986-87 Joint Comm. of Sales Tax

BST ACT Sales Tax 5,19,887 1987-88 Joint Comm. of Sales Tax

BST ACT Sales Tax 1,33,907 1988-89 Joint Comm. of Sales Tax

BST ACT Sales Tax 14,96,06,778 1989-90 MST Tribunal

BST ACT Sales Tax 23,30,46,478 1990-91 Dy. Comm., Sales Tax

BST ACT Sales Tax 28,98,738 1991-92 Dy. Comm., Sales Tax

BST ACT Sales Tax 11,14,933 1992-93 MST Tribunal

BST ACT Sales Tax 45,03,961 2001-02 Dy. Comm., Sales Tax

Central Excise Act Service Tax 1,14,38,000 2008-09 Comm. Central Excise & Customs

DELHI REGIONAL OFFICE

Name of the Statue Nature of the dues Amount (In Rs.) Period Forum of Dispute

Delhi Sales Tax Sales Tax 11,65,303 1984-85 D.C. appeal

Delhi Sales Tax Sales Tax 6,18,17,683 1986-87 Addl. Commissioner

Central Sales Tax Sales Tax 39,14,524 1986-87 Addl. Commissioner

Delhi Sales Tax Sales Tax 4,03,31,557 1987-88 Addl. Commissioner

Central Sales Tax Sales Tax 28,54,992 1987-88 Addl. Commissioner

Delhi Sales Tax Sales Tax 369,45,148 1988-89 Addl. Commissioner

Central Sales Tax Sales Tax 33,51,524 1988-89 Addl. Commissioner

Delhi Sales Tax Sales Tax 16,35,160 1987-88 Joint Commissioner

HYDERABAD REGIONAL OFFICE

Name of the Statue Nature of the Amount (In Period Forum of Dispute dues Rs.)

APGST Sales Tax 1,49,770 1989-90 STAT

APGST Sales Tax 29,61,551 1990-91 STAT, Vizag

APGST Sales Tax 24,02,576 1991-92 STAT, Vizag

APGST Sales Tax 13,96,269 1992-93 STAT, Vizag

APGST Sales Tax 17,62,687 1992-93 STAT, Vizag

APGST Sales Tax 6,30,615 1993-94 STAT, Vizag

CST Central Sales 4,41,34476 1993-94 ADC (CT) Tax

CST Central Sales 2,04,481 1994-95 AC(LTU) Tax

CST Central Sales 5,97,266 1995-96 ADC (CT) Tax

APGST Sales Tax 38,03,875 1995-96 STAT, Vizag

APGST Sales Tax 28,80,309 1995-96 STAT, Vizag

CST Central Sales 21,34,306 1996-97 STAT, Vizag Tax

APGST Sales Tax 58,43,100 1997-98 STAT, Vizag

CST Central Sales 6,35,504 1997-98 ADC (CT) Tax

APGST Sales Tax 55,65,147 1998-99 STAT, Vizag

APGST Sales Tax 39,04,454 1999-2000 STAT, Vizag

APGST Sales Tax 2,52,926 2000-2001 STAT, Vizag

APGST Sales Tax 2,12,176 2001-02 AC(LTU)

APGST Sales Tax 68,901 2002-03 AC(LTU)

APGST Sales Tax 34,856 2003-04 AC(LTU)

APGST Sales Tax 1,26,000 2004-05 AC(LTU )

VAT VAT 6,76,058 2006-07 STAT

VAT VAT 71,000 2007-08 AC(LTU)

VAT VAT 5,00,000 2008-09 STAT, Vizag

VAT VAT 11,90,100 2008-09 STAT, Vizag

Central Excise & Custom Duty 24,11,17,719 2008-09 Commissioner of Customs Customs & Central Excise

BHUBANESHWAR REGIONAL OFFICE

Name of the Statue Nature of the dues Amount (In Period Forum of Dispute Rs.)

Orissa Sales Tax Interest Penalty 9,58,035 1966-67 High Court of Orissa

Orissa Sales Tax Interest Penalty 26,50,388 1978-79 High Court of Orissa

Orissa Sales Tax Interest Penalty 6,53,452 1979-80 High Court Of Orissa

Orissa Sales Tax CST 33,04,073 1981-82 High Court Of Orissa

Orissa Sales Tax Orissa Sales Tax 78,46,464 1982-83 High Court Of Orissa

Orissa Sales Tax Orissa Sales Tax 3,16,921 1982-83 High Court Of Orissa

Orissa Sales Tax Central Sales Tax 34,83,020 1982-83 -- do ---

Orissa Sales Tax Interest 2,62,819 1982-83 -- do ---

Orissa Sales Tax Orissa Sales Tax 79,13,807 1983-84 -- do ---

Orissa Sales Tax Orissa Sales Tax 3,29,926 1983-84 -- do ---

Orissa Sales Tax Orissa Sales Tax 35,42,822 1983-84 -- do ---

Orissa Sales Tax Orissa Sales Tax 86,48,326 1984-85 -- do ---

Orissa Sales Tax Orissa Sales Tax 3,69,294 1984-85 -- do ---

Orissa Sales Tax Central Sales Tax 57,96,808 1984-85 -- do ---

Orissa Sales Tax Interest 3,57,42,030 1978-79 -- do ---

Orissa Sales Tax Orissa Sales Tax 21,17,92,315 2010-11 Appeal before Commissioner of Sales Tax, Cuttack

Central Excise Act Service Tax 7,27,02,132 2003-06 Customs, Excise & Service Tax Appellate Tribunal

Central Excise Act Service Tax 13,08,31,221 2003-07 Customs, Excise & Service Tax Appellate Tribunal

Central Excise Act Service Tax 2,539,812,711 2007-08 Customs, Excise & Service Tax Appellate Tribunal

Central Excise Act Service Tax 5,80,77,352 2008-10 Customs, Excise & Service Tax Appellate Tribunal

Central Excise Act Service Tax 4,48,93,394 2010-11 Customs, Excise & Service Tax Appellate Tribunal

JAIPUR REGIONAL OFFICE

Name of the Statue Nature of the dues Amount (In Rs.) Period Forum of Dispute

R.S.T ACT Sales Tax 1,28,87,058/- 2003-04 Rajasthan Tax Board (Rs 298 7058 deposited under protest)

R.S.T ACT Sales Tax 5,32,992/- 2003-04 Rajasthan Tax Board (Rs 53300 deposited under protest)

R.S.T ACT Sales Tax 26,07,605/- 1999-00 Rajasthan Tax Board

RAJ VAT ACT VAT ACT 326,47,269/- 2010-11 DC(Appeals)

CST ACT CST Act 59,92,494/- 2010-11 DC(Appeals)

VIZAG REGIONAL OFFICE

Name of the Statue Nature of the dues Amount (In Rs.) Period Forum of Dispute

A.P.G.S.T ACT Sales Tax 18,56,325 1968-69 A.P. High Court

A.P.G.S.T ACT Sales Tax 26,39,647 1981-82 ADC, Vizag

A.P.G.S.T ACT Sales Tax 6,88,552 1982-83 ADC, Vizag

A.P.G.S.T ACT Sales Tax 17,66,784 1983-84 ADC

A.P.G.S.T ACT Sales Tax 30,00,436 1984-85 ADC

A.P.G.S.T ACT Sales Tax 25,05,806 1985-86 STAT,HYD

A.P.G.S.T ACT Sales Tax 2,70,83,841 1986-87 STAT, Hyderabad A.P.G.S.T ACT Sales Tax 36,45,076 1987-88 ADC

A.P.G.S.T ACT Sales Tax 19,34,139 1991-92 STAT,HYD

A.P.G.S.T ACT Sales Tax 4,79,000 1989-90 A.P. High Court

CST Sales Tax 8,41,695 1994-95 STAT, Hyderabad

CST Sales Tax 48,62,340 1995-96 STAT, Hyderabad

CST Sales Tax 33,58,889 1996-97 STAT, Hyderabad

A.P.G.S.T ACT Sales Tax 25,27,960 1997-98 STAT, Hyderabad

CST Sales Tax 28,07,578 1997-98 STAT, Hyderabad

CST Sales Tax 104,614 2007-08 STAT, Hyderabad

Central Excise & Service Tax 12,65,26,554 2003 -2006 Customs, Excise & Customs Service Tax Appellate Tribunal, Bangalore

KOLKATA REGIONAL OFFICE

Name of the Statue Nature of the dues Amount (In Rs.) Period Forum of Dispute

WBST ACT 1994 --do-- 86,88,778 1996-97 Sales Tax Tribunal

WBST ACT 1994 --do-- 33,74,028 1997-98 Appellate Board

WBST ACT 1994 --do-- 37,11,769 1998-99 Sales Tax Tribunal

CST ACT 1956 Sales Tax 11,30,858 2005-06 Appellate Board

CST ACT 1956 Sales Tax 77,60,971 2006-07 DC Appeal

WB VAT ACT VAT 8,28,126 2008-09 DC Appeal

CST ACT 1956 Sales Tax 2,05,9794 2008-09 DC Appeal

JHANDEWALAN REGIONAL OFFICE

Name of the Statue Nature of the dues Amount (In Period Forum of Dispute Rs.)

Delhi VAT CST/LST/ Interest/ Penalty 4,90,85,551 1997-98 Appellate Tribunal (Gold commemorative VAT, Delhi Medallions)

37,45,290 2002-03 Commissioner, DVAT

UP-VAT VAT Interest for non- 2,88,866 1995-96 Allahabad High Court submission of Form - 3B 6,11,808 1996-97 Allahabad High Court (Gold) &

Non-submission of Form 2,49,828 2007-08 Commissioner, UP-VAT 3C1 (Mentha Oil)

Customs Customs Duty & Interest 2,72,67,919 1999-2000 Delhi High Court Department, Delhi on non- export of Gold Jewellery against gold loan taken by associates



Date: 28th August, 2012 For JAIN KAPILA ASSOCIATES

CHARTERED ACCOUNTANTS

Place: New Delhi Firm Registration No. 000287N

D.K. Kapila

Sr. Partner

M. No. 016905


Mar 31, 2011

1. We have audited the attached Balance Sheet of MMTC Limited as at 31st March, 20 HT the Profit and Loss Account and the Cash Flow Statement of the Company far the year ended on that date, both annexed thereto in which are incorporated the accounts of Corporate Office, Mica Division, Jhandewalan Regional Office and Sub-Regional Offices which are under Jhandewalan Regional Office audited by us and the other Regional Offices and Sub-Regional Offices audited by the other Auditors; and

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

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test blasts, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 (as amended) and read together with the Companies (Auditor's Report) Order, 2004 (hereinafter referred to as the order) issued by the Central Government of India in terms of Section 227{4A) of the Companies Act, 1956 and on the basis of such checks of the records of the Company as we considered appropriate and according to the information and explanations given to us we give in the Annexure 'A' 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 in paragraph (3) above, we report as follows: -

(i) Non-provision of liability, if any, in case of extension of time / waiver / write off of GR-1 forms. (Refer Note No. 5)

(ii) Balances under Sundry Debtors/claims Recoverable / Loans & Advances / Sundry Creditors / Other Liabilities have not been confirmed in some cases by the parties- Adjustments, if any, required upon such confirmation are not ascertainable, (Refer Note No. 31)

(iii) Certain observations in respect of the internal control procedures, as stated in para (iv) ofannexure A ' to main audit report, which may have consequential effect on the accounts for the year, (effect not ascertainable).

5. We further 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 except as otherwise stated in report;

(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 the books;

(c) Proper returns, adequate for the purpose of our audit have been received from Regional Offices, Sub Regional Offices and Branches not audited by us Reports of Regional Auditors have been considered while preparing our report;

(d) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of accounts and with the audited returns from the Regional Offices;

(e) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956;

(f) Being a Government Company, pursuant to the gazette notification No. GSR 829 (E) dated 21-10-2003 issued by Government of India, provisions of clause (g) of section 274 of the companies Act 1956 are not applicable to the company.

We further report that, the impact of paragraphs 4(i) to 4(iii) above on the profit of the year and the assets and liabilities appearing in the Balance Sheet, could not be ascertained. In our opinion and to the best of our information and according to the explanations given to us7 the said accounts read together with the Significant Accounting Policies and notes thereon, give the information required by the Companies Act, 1956 in the manner so required, other than as stated above, 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 and Loss Account, of the Profit of the Company for the year ended on that date, and

(iii) In the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

ANNEXURE 'A' TO AUDITOR'S REPORT Referred to in paragraph 3 of the Auditor's Report of even date to the members of MMTC Limited on the financial statements for the year ended 31 st March 2011

(I) In respect of fixed assets:

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

(b) As explained to us, all the fixed assets have been physically verified by the Management during the year except Corporate Office, Regional Office Eellary and Jhandewalan which, in our opinion is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) In our opinion and according to the information and explanations given to usT no substantial part of the fixed assets has been disposed off by the Company during the year and therefore the going concern assumption is not affected.

(ii) In respect of its inventories:

(a) As explained to us, the inventories excepting in case of goods in transit, stocks lying in Central / State Warehouses (where confirmation were obtained from the parties and relied upon) were physically verified during the year by the Management at reasonable intervals.

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

(c) On the basis of our examination of records of the inventory, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stock and the books of account were not material except in the case of inventory of coal at regional office Mumbai which has been properly dealt with in the hooks of account.

(iii) In respect of loans:

(a) As informed to us, the Company has not granted any loans, secured or unsecured to Companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.In view of this, sub clauses (b),(c) and (d) of clause (iii) are not applicable.

(b) As informed to us, the Company has not taken any loam, secured or unsecured from Companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. In view of this, sub clauses (e), (f) and (g) of clause (iii) are not applicable,

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control systems 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. Further, on the basis of our examination and according to the information and explanations given to us, we have neither come across nor have we been informed of any instance of major weaknesses in the aforesaid internal control systems

However, the internal control mechanism needs to be strengthened in the following areas:

(a) Active and prompt follow-up of old debts, advances, claims, court cases and recoveries etc arising out of execution of decrees/awards in favour of ike company, by respective Commodity Division.

(b) Confirmation of outstanding balances and its periodic reconciliations.

(c) Expeditious follow up of old Sales Tax cases / Appeals pending with Ctrurts /Appellate Authorities of CO, ROs andSROs including closed SROs to save on legal costs and interest payable on disputed additional demands-

(v) (a) In our opinion and according to the information and explanations given to us, there are no contracts and arrangements referred to in Section 301 of the Companies Act 1956, particulars of which need to be entered into a register maintained under Section 301 of the Act. (b) Accordingly the provisions of the clause V(b) of paragraph 4 of the order (as amended) are not applicable to the company

(vi) The directives issued by the Reserve Bank of India and the provisions of Section 58 A and 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there-under have been complied with, in respect of deposits accepted from the Public. We have been informed that, no order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any other Court or Tribunal in this regard.

(vii)The Company has an internal audit system, which in our opinion is commensurate with the size of the Company and nature of its business. However efforts should be made for further improvement.

(viii) As informed to us, the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 has not been prescribed by the Central Government.

(ix) (a) According to the information and explanations given to us and the records as produced and examined by us, in our opinion, the Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income-tax, sales-tax, wealth tax, service tax, customs duty, Excise Duty, Cess and other material statutory dues as applicable with the appropriate authorities and that no undisputed amounts payable in respect of the same were in arrears as at 31-03-2011 for a period of more than six months from the date they became payable.

(b) According to the information and explanation given to us and the records of the Company examined by us, the particulars of dues of income tax / sales tax / wealth tax / service tax / custom duty / excise duty / cess (as applicable) as at March 31, 2011 which have not been deposited on account of any dispute, are referred to in Annexure-'f'

(ix) The Company does not have any accumulated losses and has not incurred cash losses in the current financial year and in the immediately preceding financial year.

(xi) According to the records of the Company examined by us and as per the information and explanations given to US, the Company has not defaulted in repayment of dues to any financial institution or bank or debenture holders during the year.

(xii) According to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities; except certain loans to employees which have been granted on the basis of security of house and vehicles and in this regard proper documents &. records are maintained. In respect of loans to its employees other than those as stated already, are granted without any security.

(xiii) In our opinion, the company is not chit fund or a Nidhi / Mutual benefit fund I society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor's Report) Older, 2003 (as amended) are not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to US the terms & conditions of the guarantee given by the company for loans taken by NINL from banks or financial institutions during the year are not prima-facie prejudicial to the interest of the Company.

(xvi) According to the information and explanation given to usr the Company has not taken any term loans during the year. Hence, the provisions of clause 4(xvi) of the Companies (Auditor's Report) Order 2003 (as amended) are not applicable to the Company.

(xvii) According to the information and explanations given to us and overall examination of the Balance Sheet of the company, we report that no funds raised on short-term basis have been used for long-term investment.

(xviii) According to the information and explanations given to us, the Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) According to the information and explanations given to us, during the year covered by our audit report, the Company has not issued any debentures during the year and hence, the provision of clause No. 4(xix) of the Companies (Auditor's Report) Order 2003 (as amended) is not applicable to the Company.

(xx) The Company has not Taised any money by way of Public Issue during the year, therefore the provision of clause 4(xx) of the Companies (Auditor's Report) Order 2003 (as amended) is not applicable to the Company.

(xxi) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of materia! fraud on/or by the Company, noticed or reported during the year, nor we have been informed for such case by the Management except at regional office Kolkata where an incidence of unauthorized lifting of hypothecated stock of 86,542 MT yellow peas covering value of f 1285 million by two associates were reported,However the entire amount has been fully recovered towards full and final settlement of the total quantity sold to them on high seas basis,

For N. K. Bhargava & Co.

Chartered Accountants

F. R. No. 000429N

(CA N. K. BHARGAVA>

Partner M. No. 080624

Place: New Delhi Dated: 02.08.2011


Mar 31, 2010

We have audited the attached Balance Sheet of MMTC Limited as at 31st March, 2010, Profit & Loss Account and the Cash Flow Statement of the Company for the year ended on that date, annexed thereto in which are incorporated the accounts of Corporate Office, Mica Division and Jhandewalan Regional Office audited by us and the other Regional Offices and Sub-Regional Offices audited by the other Auditors; and

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

We conducted our audit in accordance with Auditing Standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material 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.

1. As required by the Companies (Auditors Report) Order, 2003 (as amended) issued by the Central Government of India in terms of sub section (4A) of Section 227 of the Companies Act, 1956 and on the basis of such checks of the records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure A a statement on the matters specified in paragraphs (4) and (5) of the said Order.

2. Further to our comments in the Annexure referred to in paragraph (1) above, we report as follows: -

(i) Non-provision of liability, if any, in case of extension of time I waiver / write offofGR-1 forms. (ReferNote No. 5)

(ii) Balances under Sundry Debtors I Claims Recoverable I Loans & Advances I Sundry Creditors / Other Liabilities have not been confirmed in some cases by the parties. Adjustments, if any, required upon such confirmation are not ascertainable. (Refer Notes No. 33)

(iii) Certain observations in respect of the internal control procedures, as stated in para (iv) of annexure A to main audit report, which may have consequential effect on the accounts for the year, (effect not ascertainable).

We further 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 except as otherwise stated in report.

(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 the books.

(c) Proper returns, adequate for the purpose of our audit have been received from Regional Offices, Sub Regional Offices and Branches not audited by us. Reports of Regional Auditors have been considered while preparing our report.

(d) The Balance Sheet, Profit and Loss Account and Cash Flow Statement deall with by this report are in agreement with the books of accounts and with the audited returns from the Regional Offices.

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

(f) Being a Government Company, pursuant to the gazette notification No.GSR 829 (F) dated 21-10-2003 issued by Government of India, provisions of clause (g) of section 274 of the companies Act 1956 are not applicable to the company.

We further report that, the impact of paragraphs 2(i) to 2(iii) above on the profit of the year and the assets and liabilities appearing in the Balance Sheet, could not be ascertained. In our opinion and to the best of our information and according to the explanations given to us the said accounts read together with the Significant Accounting Policies and notes thereon, give the information required by the Companies Act, 1956 in the manner so required, other than as stated above, 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 31 st March, 2010; and

(B) In the case of the Profit and Loss Account, of the Profit of the Company for the year ended on that date; and

(C) In the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

ANNEXURE TO AUDITORS REPORT Referred to in paragraph 1 of the Auditors Report of even date to the members of MMTC Limited on the financial statements for the year ended 31 st March 2010.

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

(b) As explained to us, all the assets have been physically verified by the management during the year which, in our opinion is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) In our opinion and according to the information and explanations given to us, no substantial part of the fixed assets have been disposed off by the Company during the year and therefore the going concern assumption is not affected.

(ii) (a) The inventory has been physically verified by the management during the year, except in case of goods in transit, stocks lying in Central / State Warehouses where confirmation were obtained from the parties and relied upon.

In our opinion, the frequency of verification is reasonable.

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

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stock and the books of account were not material.

(iii) (a) As informed to us, the Company has not granted any loans, secured or unsecured to Companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

(b) Not applicable in view of para (iii) (a) above.

(c) Not applicable in view of para (iii) (a) above.

(d) Not applicable in view of para (iii) (a) above.

(e) As informed to us, the Company has not taken any loans, secured or unsecured from Companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956.

(f) Not applicable in view of para (iii) (e) above.

(g) Not applicable in view of para (iii) (e) above.

(iv) In our opinion and according to the 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 with regard to the purchase of inventory, fixed assets and with regard to the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control system However, the internal control mechanism needs to be strengthened in the following areas:

(a) Active and prompt follow-up of old debts, advances (including staff advances) and claims by respective Commodity Division.

(b) Confirmation of outstanding balances and its periodic reconciliations.

(c) Follow-up of court cases and recoveries arising out of execution ofdecrees /awards announced in favour of the company.

(d) Rotation of jobs on the operations being carried out where the magnitude of the transactions is very high. However such rotations are not affected in any structured manner or under any laid down policy.

(e) Expeditious follow up of old Sales Tax cases I Appeals pending with Courts/Appellate Authorities of CO, ROs and SROs including closed SROs to save on legal costs and interest payable on disputed additional demands.

(v) (a) In our opinion and according to the information and explanations given to us, there are no contracts and arrangements referred to in Section 301 of the Companies Act 1956, particulars of which need to be entered into a register maintained under Section 301 of the Act.

(b) Not applicable in view of para (v) (a) above.

(vi) The directives issued by the Reserve Bank of India and the provisions of Section 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there-under have been complied with, in respect of deposits accepted from the Public. We have been informed that, no order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any other Court or Tribunal in this regard.

(vii) The Company has an internal audit system, which in our opinion is commensurate with the size of the Company and nature of its business however, in our opinion internal audit needs to be further strengthened.

(viii) As informed to us, the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 has not been prescribed by the Central Government.

(ix) (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income-Tax, Sales-tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues as applicable with the appropriate authorities and that no undisputed amounts payable in respect of the same were in arrears as at 31 -03-2010 for a period of more than six months from the date they became payable.

(b) According to the information and explanation given to us and the records of the Company examined by us, the particulars of dues of Income Tax / Sales Tax / Wealth Tax / Service Tax / Custom Duty / Excise Duty / Cess (as applicable) as at March 31, 2010 which have not been deposited on account of any dispute, are referred to in Annexure-B

(x) The Company does not have any accumulated losses and has not incurred cash losses in the current financial year and in the immediately preceding financial year.

(xi) According to the records of the Company examined by us and as per the information and explanations given to us, the Company has not defaulted in repayment of dues to any financial institution or bank or debenture holders.

(xii) According to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities; except certain loans to employees which have been granted on the basis of security of house and vehicles and in this regard proper documents & records are maintained. In respect of loans to its employees other than those as stated already, are granted without any security.

(xiii) In our opinion, the company is not chit fund or a Nidhi / Mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditors Report) Order, 2003 (as amended) are not applicable to the Company.

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditors Report) Order, 2003 (as amended) are not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to us the terms & conditions of the guarantee given by the company for loans taken by NINL from banks or financial institutions during the year are not prima-facie prejudicial to the interest of the Company.

(xvi) According to the information and explanation given to us, the Company has not taken any term loans during the year. Hence, the provisions of clause 4(xvi) of the Companies (Auditors Report) Order 2003 (as amended) are not applicable to the Company.

(xvii) According to the information and explanations given to us and overall examination of the Balance Sheet of the company, we report that no funds raised on short-term basis have been used for long-term investment.

(xviii) According to the information and explanations given to us, the Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) According to the information and explanations given to us, during the year covered by our audit report, the Company has not issued any debentures during the year and hence, the provision of clause No. 4(xix) of the Companies (Auditors Report) Order 2003 (as amended) is not applicable to the Company.

(xx) The Company has not raised any money by way of Public Issue during the year, therefore the provision of clause 4(xx) of the Companies (Auditors Report) Order 2003 (as amended) is not applicable to the Company.

(xxi) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on/or by the Company, noticed or reported during the year, nor we have been informed for such case by the management.

For N. K. Bhargava & Co. Chartered Accountants

Sd/- (CA N. K. Bhargava)

Place: New Delhi Partner

Dated: 29.06.2010 M. No. 080624

F. R.NO.000429N



 
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