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Auditor Report of Oil And Natural Gas Corporation Ltd.

Mar 31, 2015

We have audited the accompanying standalone financial statements of Oil and Natural Gas Corporation Limited ("the Company"), which comprise the Balance Sheet as at March 31st 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.

2. 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.

3. Auditor's Responsibility

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

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

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

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

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

4. 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.

5. Emphasis of Matter

we draw attention to Note No. 44.1.1.b to the financial statements with regard to the dispute between the company and the Government of Gujarat in respect of payment of Royalty on the crude oil produced in the State. The accrual of the additional liability of Rs. 117,242.00 million, (reduced to the extent Rs. 16,440.00 million paid to Gujarat Government- refer note no. 31.2 to the financial statements), against which an amount of Rs. 21,067.60 million has been paid with effect from February 1, 2014 and considered as deposit, would depend on the decision of the Hon'ble Supreme Court of India. The amount of Rs. 117,242.00 million has been disclosed as contingent liability.

Our opinion is not modified in respect of this matter.

6. Other Matters

I. The financial statements include the Company's share in the total value of assets, liabilities, expenditure and income of 134 blocks under New Exploration Licensing Policy (NELPs)AJoint Venture (JVs) accounts for exploration and production out of which 6 NELPs/JVs accounts have been certified by other Chartered Accountants and 17 NELP/JVs have been certified by the management in respect of NELPs/JVs operated by other operators. Our opinion is based solely on the certificate of the other Chartered Accountants and management certified accounts.

II. We have placed reliance on technical/commercial evaluation by the management in respect of categorization of wells as exploratory, development, producing and dry well, allocation of cost incurred on them, proved developed hydrocarbon reserves and depletion thereof on producing properties, impairment, liability for abandonment costs, liability for NELP and nominated blocks for under performance against agreed Minimum Work Programme and allocation of depreciation on process platforms to transportation and facilities.

Our opinion is not modified in respect of these matters.

7. Report on the Other Legal and Regulatory Requirements

I. As required by the Companies (Auditors Report) Order, 2015 ("the Order"), issued by the Central Government of India in terms of the section 143(11) of the Act, we give in Annexure 1 a statement on the matters specified in the paragraphs 3 and 4 of the said Order, to the extent applicable.

II. Based on the verification of books of account of the Company and according to information and explanations given to us, we give below a report on the directions issued by the Comptroller and Auditors General of India in terms of section 143 (5) of the Act:

a. According to information and explanations given to us, the company has not been selected for disinvestment.

b. According to information and explanations given to us, the cases of waiver/write off of debts/loans/ interest wherever applicable during the year along with the reasons and amounts involved are stated in Annexure 2.

c. According to information and explanations given to us, the company has maintained adequate records in respect of inventories lying with third parties and assets received by the company as a gift from Government or other authorities.

d. we have carried out a review of age wise analysis of significant pending legal/arbitration cases based on the information and explanations made available to us and report that the reasons for the pendency are mainly on account of adjournment and other matters related to legal procedures. we also report that the company has in place a monitoring mechanism for expenditure incurred on such cases.

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

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

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

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

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

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

f. The matter described under "Emphasis of Matters" para above in the event of being decided unfavourably, in our opinion, may have an adverse impact on the functioning of the company.

g. with respect to the other matters to be included in 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 the pending litigations on its financial position in its financial statements- Refer Note 44.1.1 to the financial statements.

ii. According to information and explanations given to us, the company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses- Refer Note 51 to the financial statements.

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

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

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

b. As per the information and explanations given to us, the fixed assets having substantial value, other than those which are underground/submerged/under joint venture have been physically verified by the management in a phased manner, which in our opinion is reasonable, having regard to the size of company and nature of its business. The reconciliation of physically verified assets with the book records is in progress. Discrepancies noticed on the physical verification and consequential adjustments are carried out on completion of reconciliation. According to information and explanations given by the management and in our opinion, the same is not material.

ii. a. According to the information and explanations

given by the management, the inventory has been physically verified in the phased manner (excluding inventory lying with third parties, at some of the site-locations, inventory with joint ventures and intra site material in transit) during the year by the management. In our opinion, the frequency of verification is reasonable.

b. In our opinion, considering the size of the company and nature of its business, the procedure of physical verification of inventory followed by the management needs to be strengthened further.

c. The Company has generally maintained proper records of inventory. During the year, the management has identified certain discrepancies in the physical stock of crude oil which has been written off as stated on Note No. 50 to the financial Statements. According to the information and explanations given by the management and in our opinion, other than as stated above the discrepancies noticed on physical verification between the physical stock and book records were not material having regard to the size of the Company and nature of its business. In case where discrepancies noticed on physical verification have been identified with inventory records, necessary adjustments have been carried out in the books of account. In respect of cases where the reconciliation is not complete, the management has stated that the effect of the same on the accounts would be adjusted on completion of reconciliation.

iii. The Company has granted secured loans to five parties covered in the register maintained under section 189 of the Act.

a. According to information and explanations given to us and based on our verification of books of account, the receipt of principal amount and interest are regular.

b. According to information and explanations given to us and based on our verification of books of account we report that, there was no overdue amount in respect of such loans granted.

iv. In our opinion, and according to the information and explanations given to us, the internal control procedures are generally adequate and commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and fixed assets and for the sale of goods and services. During the course of our audit we have not observed any continuing failure to correct major weaknesses in internal controls.

v. In our opinion and according to information and explanations given to us, the Company has not accepted any deposits as per the provision of the Act.

vi. We have broadly reviewed the costs records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014, as amended and prescribed by the Central Government under sub section (1) of section 148 of the Companies Act, 2013 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the cost records with the view to determine whether they are accurate or complete.

vii. a. According to records of the Company, undisputed

statutory dues including Provident Fund, Employees' State Insurance, Income Tax, Sales Tax, Service Tax, Wealth Tax, Duty of Customs, Duty of Excise, Value Added Tax, Cess and other statutory dues have been generally regularly deposited with the appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at March 31,2015 for a period more than six months from the date of becoming payable.

b. According to the information and explanations given to us, there were no dues in respect of Income Tax, Duty of Excise, Duty of Customs, Cess, Sales Tax, Service Tax, Value Added Tax and Wealth Tax which have not been deposited on account of any dispute except the following:

(Rs. in million)

Name of the Nature of Forum where dispute statute Dues is pending





Central Excise Central excise Commissioner (Appeals) of Act, 1944 duty/Interest/ Central Excise, Custom and

Penalty Service Tax

Custom, Excise and Service

Tax Appellate Tribunal

Hon. High Court

Hon. Supreme Court

Total (A)

Oil Industries Cess/ Interest Custom, Excise and Service (Development) Tax Appellate Tribunal Act, 1974

Total (B)

A.P Mineral Cess/ Interest Hon. High Court Bearing Ordinance (infrastructure) Cess Rules, 2005

Total (C)

The Custom Custom duty/ Custom, Excise and Service Act, 1962 Penalty/ Tax Appellate Tribunal Interest

Total (D)

Income Tax Income Tax/ Commissioner (Appeals) Act, 1961 Penalty/ Hon. High Court Interest Hon. Supreme Court Income Tax Appellate Tribunal

Total (E)

Central Sales Sales Tax/ Appellate Tribunal Tax Act, 1956 Turnover Tax/ Hon. High Court and respective Penalty/

Joint Commissioner/ Commissioner CT-Appeals

Total (F)

Finance Act, Service Tax/ Commissioner/Joint/Deputy 1994 Interest/ Commissioner of Central Penalties Excise, Custom and Service Tax

Custom, Excise and Service Tax Appellate Tribunal

Directorate General of Central Excise, Custom and Service Tax

Hon. High Court

Name of the Period to Gross Amount statute which the Involved amount relates (financial year)

Central Excise 2002-2007 109.20 Act, 1944



2001-2013 4,116.17



1996-2015 351.33

1980-2005 1,283.30

5,860.00

Oil Industries 2004-2009 6.57 (Development) Act, 1974

657

A.P Mineral 2005-2014 2,371.75 Bearing Ordinance (infrastructure) Cess Rules, 2005

2,371.75

The Custom 2007-08 5.00 Act, 1962

5.00

Income Tax 2006-2012 74,701.19 Act, 1961 2003-2010 1,002.78 1983-1986 740.22 1995-2011 3,556.25

80,000.44

Central Sales 1993-2000 146.95 Tax Act, 1956 1978-2013 24,439.03 and respective

2000-2010 3,227.65

27,813.63

Finance Act, 2004-2015 2.09 1994



2005-2012 93.46

2006-2008 637.40

2004-2007 32.48

Total (G) 765.43

Grand Total (A B C D E F G) 116,822.82

Name of the Amount Amount statute Paid under Unpaid Protest

Central Excise 108.54 0.66 Act, 1944



109.37 4,006.80



- 351.33

- 1,283.30

217.91 5,642.09

Oil Industries - 6.57 (Development) Act, 1974

- 6.57

A.P Mineral - 2,371.75 Bearing Ordinance (infrastructure) Cess Rules, 2005

- 2,371.75

The Custom 1.00 4.00 Act, 1962

1.00 4.00

Income Tax 44,819.55 29,881.64 Act, 1961 14.86 987.92 - 740.22 566.45 2,989.80

45,400.86 34,599.58

Central Sales 20.92 126.03 Tax Act, 1956 655.16 23,783.87 and respective

39.38 3,188.27

715.46 27,098.17

Finance Act, 1.98 0.11 1994



93.42 0.04

- 637.40

- 32.48

Total (G) 95.40 670.03

Grand Total (A B C D E F G) 46,430.63 70,392.19

c. The amount required to be transferred to investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made thereunder has been transferred to such fund within time.

viii. The Company does not have accumulated losses at the end of the current financial year and has not incurred cash losses either during the year or during the immediately preceding financial year.

ix. The Company has not issued any debentures and has not borrowed any fund from financial institutions. The company has not defaulted in repayment of dues to the bank.

x. In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given guarantees for loans taken by others from banks or financial institutions are not prima facie prejudicial to the interest of the Company.

xi. The company has not availed any term loan during the year.

xii. According to the information and explanations given to us, except for over reporting of crude oil production and inventory which is under investigation as stated in note no. 50 to the financial statements, no fraud on or by the Company has been noticed or reported during the year.

For G. D. Apte & Co. For Khandelwal Jain & Co. Chartered Accountants Chartered Accountants Firm Reg. No: 100515W Firm Reg. No: 105049W

(C.M. Dixit) (Narendra Jain) Partner (M.No. 017532) Partner (M.No. 048725)

For Lodha & Co. For Mehra Goel& Co. Chartered Accountants Chartered Accountants Firm Reg. No: 301051E Firm Reg. No:000517N

(R. P Singh) (R. K. Mehra) Partner (M.No. 052438) Partner (M.No. 006102)

For Varma & Varma Chartered Accountants Firm Reg. No:004532S

(P. R. Prasanna Varma) Partner (M.No.025854)

Date : May 28, 2015 Place : New Delhi


Mar 31, 2014

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

2. Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards notified under the Companies Act, 1956 (''the Act'') read with the General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

3. 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 disclosures in the financial statements. The procedures selected depend on the auditor''s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

4. Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

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

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.

5. Emphasis of Matter

We draw attention to Note No. 42.3.2 with regard to the dispute between the company and the Government of Gujarat in respect of payment of Royalty on the crude oil produced in the State. The accrual of the additional liability of Rs. 1,16,326.96 millions, which also includes an amount of Rs. 2,092.23 millions paid with effect from February 1, 2014 and considered as deposit, would depend on the decision of the Hon''ble Supreme Court of India. The amount of Rs. 1,16,326.96 millions has been disclosed as contingent liability.

Our opinion is not qualified in respect of this matter.

6. Other Matters

I. The financial statements include the Company''s share

in the total value of assets, liabilities, expenditure and income of 135 blocks under New Exploration Licensing Policy (NELPs) / Joint Venture (JVs) accounts for exploration and production out of which 8 NELPs / JVs accounts have been certified by other firms of Chartered Accountants and 11 NELP / JVs have been certified by the management in respect of NELPs / JVs operated by other operators. Our opinion is based solely on the reports of the other auditors and management certified accounts.

ii. We have placed reliance on technical / commercial evaluation by the management in respect of categorization of wells as exploratory, development, producing and dry well, allocation of cost incurred on them, depletion of producing properties on the basis of proved developed hydrocarbon reserves, impairment, liability for abandonment costs, liability under NELP and nominated blocks for under-performance against agreed Minimum Work Programme and allocation of depreciation on process platforms to transportation and facilities.

Our opinion is not qualified in respect of these matters.

7. Report on Other Legal and Regulatory Requirements

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

ii. As required by section 227(3) of the Act, we report that:

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

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

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

d. In our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this report, comply with the Accounting Standards notified under the Act read with the General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013;

e. Disclosure in terms of clause (g) of sub-section (1) of section 274 of the Act is not required as per notification number GSR 829(E) dated October 21, 2003 issued by the Department of Company Affairs, Government of India.

Annexure to the Auditors'' Report (Referred to in paragraph 7 (i) of our report of even date)

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

b) As per information and explanations given to us, the fixed assets having substantial value, other than those which are underground / submerged / under joint venture have been physically verified by the management in a phased manner, which in our opinion is reasonable, having regard to the size of the Company and nature of its business. The reconciliation of physically verified assets with the book records is in progress. Discrepancies noticed on physical verification and consequential adjustments are carried out on completion of reconciliation. According to the information and explanation given by the management and in our opinion, the same is not material.

c) The Company has not disposed off a substantial part of fixed assets during the year.

ii. a) According to the information and explanations given by the management, the inventory has been physically verified in a phased manner (excluding inventory lying with third parties, at some of the site- locations, inventory with joint ventures and intra site material in transit) during the year by the management. In our opinion, the frequency of verification is reasonable.

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

c) The Company has generally maintained proper records of inventory. According to the information and explanations given by the management and in our opinion, the discrepancies noticed on physical verification between the physical stock and book records were not material having regard to the size of the Company and nature of its business. In case where discrepancies noticed on physical verification have been identified with inventory records, necessary adjustments have been carried out in the books. In respect of cases where the reconciliation is not complete, the management has stated that the effect of the same on the accounts would be adjusted on completion of reconciliation.

iii. a) The Company has granted secured loans to three parties covered in the register maintained under section 301 of the Companies Act, 1956. The amount outstanding at the year-end is Rs. 0.50 million and the maximum amount outstanding at any time during the year was Rs. 0.90 million. b) The rate of interest and other terms and conditions of the loans granted are not prima facie prejudicial to the interest of the Company.

c) The receipt of principal amount and interest are regular.

d) There is no overdue amount in respect of loans granted to the above parties.

e) 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 and consequently, the reporting requirements of clause (iii) (f) and (iii) (g) of paragraph 4 of the Companies (AuditorRs.s Report) Order, 2003 are not applicable.

iv. In our opinion, and according to the information and explanations given to us, the internal control procedures are generally adequate and commensurate with the size of the Company and the nature of its business with regard to purchases of inventory, fixed assets and sale of goods and services. During the course of our audit we have not observed any continuing failure to correct major weaknesses in internal controls.

v. a) In our opinion and according to the information and explanations given to us, there is no contract or arrangement that needs to be entered in the register required to be maintained in pursuance of section 301 of the Companies Act, 1956. b) Accordingly, the reporting requirement of clause (v) (b) of paragraph 4 of the Companies (Auditor''s Report) Order, 2003 is not applicable.

vi. The Company has not accepted any deposits from the public.

vii. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

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

ix. a) According to records of the Company, undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income Tax, Sales Tax, Service Tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other statutory dues have been generally regularly deposited with the appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at March 31, 2014 for a period more than six months from the date of becoming payable.

b) According to the information and explanations given to us, the disputed statutory dues in respect of Income Tax, Excise Duty, Customs Duty, Cess, Sales Tax, Service Tax, and ealth Tax are as under:

Nature of the statute Nature of the dues Amount Amount Paid Involved under Protest (Rs. in million) (Rs.in million)

Income Tax Act, 1961 Income tax/ Penalty/ 50,644.75 32,528.47 Interest

2,748.61 556.50

947.18 51.27

723.61 -

Total 55,064.15 33,136.24

Central Excise Act, 1944 Central excise duty / 494.16 108.54 Interest / Penalty

4,838.14 109.37

1.317.46 -

1,773.30 490.00

Total 8,423.06 707.91

The Customs Act, 1962 Customs duty / Penalty / 2,324.87 - Interest

1.437.47 -

5.00 1.00

Total 3,767.34 1.00

Oil Industries Cess / Interest 6.75 - (Development) Act, 1974

Total 6.75 -

Central Sales Tax Act, Sales tax / Turnover Tax / 3,108.59 34.48 1956 and respective Penalty / Interest States Sales Tax Act

7,880.43 220.92

37,639.98 596.77

Total 48,629.00 852.17

Finance Act, 1994 Service Tax /Interest/ 2,550.06 4.10 Penalties

0.11 -

637.40 -

32.48 -

Total 3,220.05 4.10



Nature of the statue Period to Forum where which the dispute is amount relates pending (financial year)

Income Tax Act, 1961 2006-2013 Commissioner (Appeals)

1995-2011 Income Tax Appellate Tribunal

1991-2012 Hon. High Court

1983-1987 Hon. Supreme Court

Central Excise Act, 1944 2001-2010 Commissioner (Appeals) of Central Excise, Customs and Service Tax

2003-2013 Custom, Excise and Service Tax Appellate Tribunal

1996-2014 Hon. High Court

1980-2005 Hon. Supreme Court

The Customs Act, 1962 1996-2003 Central Board of Excise and Customs

1995-1997 Commissioner of Central Excise, Customs & Service Tax

2007-2008 Custom, Excise and Service Tax Appellate Tribunal

Oil Industries (Development) Act, 1974 2004-2010 Custom, Excise and Service Tax Appellate Tribunal

Central Sales Tax Act, 1956 and respective States Sales Tax Act 2000-2010 Joint Commissioner/ Commissioner CT - Appeals 1993-2009 Appellate Tribunal

1978-2013 Hon. High Court

Finance Act, 1994 2003-2014 Custom, Excise and Service Tax Appellate Tribunal

2004-2005 Deputy Commissioner of Central Excise, Customs and Service Tax

2006-2008 Directorate General of Central Excise Intelligence

2006-2008 Hon. High Court

x. The Company does not have accumulated losses at the end of the current financial year and has not incurred cash losses either during the year or during the immediately preceding financial year.

xi. The Company has not issued any debentures and has not defaulted in repayment of dues to financial institutions or banks.

xii. In our opinion and according to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii. The Company is not a chit fund or a nidhi/mutual enefit fund/ society. Accordingly, the reporting requirements of clause (xiii) of paragraph 4 of the Companies (Auditor''s Report) Order, 2003 are not applicable to the Company.

xiv. In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments.

xv. In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given guarantees for loans taken by others from banks or financial institutions are not prima facie prejudicial to the interest of the Company.

xvi. The company has not availed any term loan during the year.

xvii. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short terms basis have been used for long term investment.

xviii. The Company has not made any preferential allotment of shares during the year.

xix. The Company has not issued any debentures.

xx. The Company has not raised any money by way of public issue during the year.

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

For M/s S Bhandari & Co. For M/s G. D. Apte & Co. For M/s Mehra Goel & Co.

Chartered Accountants Chartered Accountants Chartered Accountants

Firm Reg No. 000560C Firm Reg No. 100515W Firm Reg No. 000517N

( P. D. Baid) (C. M. Dixit) (R. K. Mehra)

Partner (Mem. No. 072625) Partner (Mem. No. 017532) Partner (Mem. No. 006102)

For M/s Varma & Varma For M/s Ray & Ray

Chartered Accountants Chartered Accountants

Firm Reg No. 004532S Firm Reg No. 301072E

(K. M. Sukumaran) (B. K. Ghosh)

Partner (Mem. No. 015707) Partner (Mem. No. 051028)

Date : May 29, 2014 Place : New Delhi


Mar 31, 2013

1. Report on the Financial Statements

We have audited the accompanying financial statements of OIL AND NATURAL GAS CORPORATION LIMITED (the "Company") which comprise the Balance Sheet as at March 31, 2013, the Statement of Profit and Loss, ,and Cash Flow Statement for the year then ended, with the summary of significant accounting policies andother explanatory information.

2. Management''s Responsibility forthe Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India including Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

3. 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 disclosures in the financial statements. The procedures selected depend on the auditor''s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

4. Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a. In the case of the Balance Sheet, of the state of affairs of the Company as at 3151 March, 2013;

b. In the case of the Statement of Prof it 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.

5. Other Matters

a. The financial statements include the Company''s share in the total value of assets, liabilities, expenditure and income of 140 blocks under New Exploration Licensing Policy (NELPs) I Joint Venture (JVs) accounts for exploration and production out of which 8 N ELPs /JVs accounts have been certified by other firms of Chartered Accountants and 11 NELP/JVs have been certified by the management in respect of N ELPs/ JVs operated by other operators.

b. We have placed reliance on technical/ commercial evaluation by the management in respect of categorization of wells as exploratory, development, producing and dry well, allocation of cost incurred on them, depletion of producing properties on the basis of proved developed hydrocarbon reserves, impairment, liability for abandonment costs, liability under NELP and nominated blocks for under-performance against agreed Minimum Work Programme and allocation of depreciation on process platforms to transportation and facilities.

Our opinion is not qualified in respect of other matters.

6. Report on Other Legal and Regulatory Requirements

6.1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure (read with paragraph 1 above) a statement on the matters specified in paragraphs 4 and 5 of the said Order.

6.2. As required by section 227(3) of the Act, we report that:

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

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

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

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

e. Disclosure in terms of clause (g) of sub-section (1) of section 274 of theAct is not required as per notification number GSR 829(E) dated October 21,2003 issued by the Department of Company Affairs, Government of India.

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

b) As per information and explanations given to us, the fixed assets having substantial value, other than those which are underground I submerged I under joint venture have been physically verified by the management in a phased manner, which in our opinion is reasonable, having regard to the size of the Company and nature of its business. The reconciliation of physically verified assets with the book records is in progress. Discrepancies noticed on physical verification and consequential adjustments are carried out on completion of reconciliation. According to the information and explanation given by the management and in our opinion, the same is not material.

c) The Company has not disposed off a substantial part of fixed assets during the year.

2. a) According to the information and explanations given by the management, the inventory has been physically verified in a phased manner (excluding inventory lying with third parties, at some of the site- locations, inventory with joint ventures and intra site material in transit) during the year by the management. In ouropinion, the frequency of verification is reasonable.

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

c) The Company has generally maintained proper records of inventory. According to the information and explanations given by the management and in our opinion, the discrepancies noticed on physical verification between the physical stock and book records were not material having regard to the size of the Company and nature of its business. In case where discrepancies noticed on physical verification have been identified with inventory records, necessary adjustments have been carried out in the books. In respect of cases where the reconciliation is not complete, the management has stated that the effect of the same on the accounts would be adjusted on completion of reconciliation.

3. a) The Company has granted secured loans to three parties covered in the register maintained under section 301 of the Companies Act, 1956. The amount outstanding at the year end isRs. 0.89 million and the maximum amount outstanding at any time during the year wasRs. 1.60 million.

b) The rate of interest and other terms and conditions of the loans granted are not prima facie prejudicial to the interest of the Company.

c) The payment of principal amount and interest are regular.

d) There is no overdue amount in respect of loans granted to the above parties.

e) 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. And consequently, the reporting requirements of clause (iii) (f) and (iii) (g) of paragraph 4 of the Companies (Auditor''s Report) Order, 2003 are not applicable.

4. In our opinion, and according to the information and explanations given to us, the internal control procedures are generally adequate and commensurate with the size of the Company and the nature of its business with regard to purchases of inventory, fixed assets and sale of goods and services. During the course of our audit we have not observed any continuing failure to correct major weaknesses in internal controls.

5. a) In our opinion and according to the information and explanations given to us, there is no contract or arrangement that needs to be entered in the register required to be maintained in pursuance of section 301 of the Companies Act, 1956.

b) Accordingly, the reporting requirement of clause (v) (b) of paragraph 4 of the Companies (Auditor''s Report) Order, 2003 is notapplicable.

6. The Company has not accepted any deposits from the public.

7. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

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

9. a) According to records of the Company, undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income Tax, Sales Tax, Service Tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other statutory dues have been generally regularly deposited with the appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at March 31,2013 for a period more than six months from the date of becoming payable.

b) According to the information and explanations given to us, the disputed statutory dues in respect of Income Tax, Excise Duty, Customs Duty, Cess, Sales Tax, Service Tax, and Wealth Tax are as under: Amount Amount Nature of the statute Nature of the dues Involved Paid under (Rs. In million) Protest (Rs. In million)

Income tax Act, 1961 Income tax/ 25,152.24 16,567.54 Penalty/ Interest

3,090.62 809.49

1,374.35 -

707.01 -

Total 30,324.22 17,377.03

Central Central 3.72 - Excise Act, 1944 excise duty/ Interest/ Penalty

6,926.67 490.00

83,720.00 -

21.68 -

1,192.97 -

Total 91,865.04 490.00

The Customs Customs 1,437.47 - Act, 1962 duty/ Penalty / Interest

94.57 1.00

Total 1,532.04 1.00

Oil Industries Cess / Interest 6.57 - (Development) Act, 1974

Central Sales Sales tax/ 13,806.48 28.86 Tax Act, 1956 and Turnover Tax / respective States Sales Penalty / Interest Tax Act

31,776.62 393.30

3,49170 13.42

Total 49,074.80 435.58

Finance Act, 1994 Service Tax/ 174.14 - Interest/Penalties

2,381.28 4.30

637.40 -

62.54 -

35.50 -

Total 3,290.86 4.30

Nature of the Statute Period to Forum where which the dispute Is pending amount relates (financial year)

Income tax Act, 1961 1995-2012 Commissioner (Appeals)

2000-2011 Income Tax Appellate Tribunal

1991-2012 Hon. High Court

1982-2004 Hon. Supreme Court

Central Excise Act 1944 2005-2009 Commissioner of Central Excise, Customs & Service Tax

1984-2013 Custom, Excise and Service Tax Appellate Tribunal

2008-2013 Hon. High Court

2007-2013 Joint Secretary (Revenue Authority) MOF

2000-2006 Hon. Supreme Court

The Customs Act 1962 1995-1997 Commissioner of Central Excise, Customs & Service Tax

2007-2011 Custom, Excise and Service Tax Appellate Tribunal

Oil Industires Act 1974 2005-2012 Commissioner of Central Excise, Customs & Service Tax

Central Sales Tax Act 1999-2011 Deputy Commissioner/ Joint Commissioner/Commissioner CT-Appeals

1993-2009 Appellate Tribunal

1978-2013 High Court

Finance Act 1994 2007-2013 Commissioner of Central Excise, Customs & Service Tax

2007-2013 Custom, Excise and Service Tax Appellate Tribunal

2006-2008 Directorate general of central excise intelligence

2004-2007 High Court

1997-1998 Supreme Court

10. The Company does not have accumulated losses at the end of the current financial year and has not incurred cash losses either during the year or during the immediately preceding financial year.

11. The Company has not issued any debentures and has not defaulted in repayment of dues to financial institutions or banks.

12. In our opinion and according to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. The Company is not a chit fund or a nidhi, mutual benefit fund/society. Accordingly, the reporting requirements of clause (xiii) of paragraph 4 of the Companies (Auditor''s Report) Order, 2003 are not applicable to the Company.

14. In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments.

15. In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given guarantees for loans taken by others from banks or financial institutions are not prima facie prejudicial to the interest of the Company.

16. The company has not availed any term loan during the year.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short terms basis have been used for long term investment.

18. The Company has not made any preferential allotment of shares during the year.

19. The Company has not issued any debentures.

20. The Company has not raised any money by way of public issue during the year.

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

For G D Apte & Co. For Varma & Varma For S. Bhandari & Co.

Chartered Accountants Chartered Accountants Chartered Accountants

Firm Reg. No. 100515W Firm Reg. No. 004532S Firm Reg. No. 000560C

(C. M. Dixit) (K.M. Sukumaran) (P.P.Pareek)

Partner (M.No. 017532) Partner (M. No.015707) Partner (M. No. 071213)

For Ray & Ray For Mehra Goel & Co.

Chartered Accountants Chartered Accountants

Firm Reg. No. 301072E Firm Reg. No. 000517N

(B.K.Ghosh) (R.K.Mehra)

Partner (M. No. 051028) Partner (M.No. 006102)

New Delhi

May 29,2013


Mar 31, 2012

1. We have audited the attached Balance Sheet of OIL AND NATURAL GAS CORPORATION LIMITED (the "Company") as at 31st March, 2012, the Statement of Profit and Loss and the Cash Flow Statement for the year ended on that date, annexed thereto in which incorporated the Company's share in the total value of assets, liabilities, expenditure and income of 139 blocks under New Exploration Licensing Policy (NELPs) / Joint Venture (JVs) accounts for exploration and production out of which 9 NELPs / JVs accounts have been certified by other firms of Chartered Accounts and 11 NELP / JVs have been certified by the management in respect of NELps / JVs operated by other operators (Refer note no.41.3.1 and 41.3.2 of the financial statements). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements bases 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 misstatement. An audit includes examining, on a test basis, evidence supporting the amount 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. We have placed reliance on technical / commercial evaluation by the management in respect of categorization of well as exploratory, development and producing, allocation of cost incurred on them, depletion of producing properties / impairment on the basis of the proved developed hydrocarbon reserves, liabily for abondonment costs, liability under NELP and nominated blocks for under-performances against agreed Minimum Work Programme and allocation of depreciation on process platforms to transportation and facilities.

4. As required by the Companies (Auditor's Report) Order, 2003 (as amended) issued by the Central Government of India in terms of Section 227(4A) of the Companies Act, 1956, we enclose in the Annexure (read with paragrph 1 above) a statement on the matters specified in paragraphs 4 and 5 of the said order.

5. Further to our comments referred to in paragraph 4 above we report as follows:

5.1 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.

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

5.3 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.

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

5.5 Disclosure in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956 is not required as per notification number GSR 829 (E) dated October 21,2003 issued by the Department of Company Affairs, Government of India.

5.6 In our opinion and to the best of our information and according to the explanations given to us, the said accounts read with notes to account, give the information required by the Companies Act, 1956 in the manner so required and give a true and fairview 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 31st March, 2012;

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.

Annexure to The Auditors' Report

(Referred to in Paragraph 4 of our report of even date)

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

b) As per information and explanations given to us, the fixed assets having substantaial value, other than those which are underground / submerged / under joint venture have been physically verified by the management in a phased manner, which in our opinion is reasonable, having regard to the size of the Company and nature of its business. The reconcilliation of physically verified assets with the book records is in progress. Discrepancies noticed on physical verification and consequential adjustments are carried out on completion of reconcillation. According to the information and explanations given by the management and in our opinion, the same is not material.

c) The Company has not disposed off a substantial part of fixed assets during the year.

2.a) According to the information and explanations given by the management, the inventory has been physically verified in a phased manner (excluding inventory lying with third parties, at some of the site-locations, inventory with joint ventures and intra site material in transit) during the year by the management. In our opinion, the frequency of verification is reasonable.

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

c) The Company has generally maintained proper records of inventory. According to the information and explanations given by the management and in our opinion, the discrepancies noticed on physical verification between the physical stock and book records were not material having regard to the size of the Company and nature of its business. In case where discrepancies noticed on physical verification have been identified with inventory records, necessary adjustments have been carried out in the books. In respect of cases where the reconcilliation is not complete, the management has stated that the effect of the same on the accounts would be adjusted on completion of reconcilliation.

3.a) The company has granted secured loans to three parties covered in the register maintained under section 301 of the Companies Act, 1956. The amount outstanding at the year end is Rs.0.35 million and the maximum amount outstanding at any time during the year was Rs.0.92 million.

b) The rate of interest and other terms and conditions of the loans granted are not prima facie prejudicial to the interest of the Company.

c) The payment of principal amount and interest are regular.

d) There is no overdue amount in respect of loans granted to the parties listed in the register maintained under Section 301 of the Companies Act, 1956.

e) 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. And consequently, the reporting requirements of clause (iii) (f) and (iii) (g) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable.

4. In our opinion, and according to the information and explanations given to us, the internal control procedures are generally adequate and commensurate with the size of the Company and the nature of its business with regard to purchases of inventory, fixed assets and sale of goods and services. During the course of our audit we have not observed any continuing failure to correct major weaknesses in internal controls.

5.a) In our opinion and according to the information and explanations given to us, there is no contract or arrangement that needs to be entered in the register required to be maintained in pursuance of section 301 of the Companies Act, 1956.

b) Accordingly, the reporting requirement of clause (v) (b) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 is not applicable.

6. The Company has not accepted any deposits from the public.

7. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

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

9.a) According to records of the Company, undisputed statutory dues including provident Fund, Investor Education and Protection Fund, Employee's State Insurance, Income Tax, Sales Tax, Service Tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other statutory dues have been generally regularly deposited with the appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at March 31,2012 for a period more than six months from the date of becoming payable.

b) According to the information and explanations given to us, the disputed statutory dues are as under:

Name of the Statute Nature of the dues Amount (Rs. In Million)

Income tax Act,1961 Income Tax/ 7,321.80

Penalty/ 3,689.80

Interest 2,213.24

4,481.99

Total 17,706.83

Central Excise Act,1944 Central Excise duty/ 1,195.96 Service Tax/ Interest / Penalty 1,338.41

1,892.98

696.57

1,283.30

Total 6,407.22

The Customs Act,1962 Customs Duty/ 5,067.88 Penalty / Interest

5.00

Total 5,072.88

Oilfields (Regulation & Royalty/ 66,123.54 Development Act, 1948)/ Surface rent/ AP Mines and Geology Act Interest / Penaity

AP Mineral Bearing Lands Cess 1,694.82 (infrastructure) Cell

Oil Industries Cess / Interest 6.57 (Development) Act,1974

Central Sales Tax Act,1956 Sales tax/ 2,960.23 and respective States' Turnover Tax / 1,900.53 Sales Tax Act Penalty / Interest 16,391.55

19,594.44

291.40

Total 41,138.16

Municipal Corporation Octroi Duty 66.89 Greater Mumbai Act (Octroi Rules, 1965)

Assam Specified Land Tax on Crude oil and 2,860.57 Taxation Act Natural Gas Service Tax Service Tax / Cess 3,513.00

1,014.16

Total 4,527.16

Name of the Statute Period to which Forum where dispute the amount relates is pending (financial year)

Income tax Act,1961 1991-2012 Revisionary Authority

2004-2012 Appellate Authority

1995-2012 High Court

1984-2012 Supreme Court

Central Excise Act,1944 2002-2012 Commissioner of Central Excise, Customs & Service Tax

2005-2012 Central Board of Excise & Customs

2007-2012 Custom, Excise and service Tax Appelate Tribunal

2011-2012 Directorate General of Central Excise Intelligent

1984-2012 Supreme Court

The Customs Act,1962 1995-2012 Commissioner of Central Excise, Customs & Service Tax

2007-2012 Custom Excise and Service Tax Appellate Tribunal

Oilfields (Regulation & 1992-2012 Dept.of Geology and Development Act, 1948)/ Mining.AP High Court AP Mines and Geology Act

AP Mineral Bearing Lands (infrastructure) Cell 2005-2012 Deot. of Geology and Mining.AP High Court

Oil Industries (Development) Act,1974 2005-2012 Commissioner of Central Excise, Customs & Service Tax

Central Sales Tax Act, 2002-2012 Demand Notice 1956 and respective 2001-2012 Deputy Commissioner States' Sales Tax Act 1999-2012 Joint Commissioner/ Commissioner CT-Appeals

1994-2012 Appellate Tribunal Commissioner

1977-2012 High Cout

Municipal Corporation 1978-2012 Supreme Court Greater Mumbai Act (Octroi Rules, 1965)

Assam Specified Land 2004-2012 High Court Taxation Act Service Tax 2004-2012 Commissioner of Central Excise, Customs & Service Tax

2004-2012 Commissioner of Central Excise & Customs

10. The Company does not have accumulated losses at the end of the Curent Financial year and has not incurred cash losses either during the year or during the immediately preceding financial year.

11. The Company has not issued any debentures and has not defaulted in repayment of dues to financial institutions or banks.

12. In our opinion and according to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. The Company is not a chit fund or a nidhi, mutual benefit fund / society. Accordingly, the reporting requirements of clause (xiii) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

14. In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in Shares, securities, debentures and other investments.

15. In our opinion and according to the information and explanations given to us, the terms and conditions on which the company has given guarantees for loans taken by others from banks or financial institutions are not prima facie prejudicial to the interest of the company.

16. In our opinion, the term loans have been applied for the purpose for which they were raised.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company. We report that no funds raised on short terms basis have been used for long term investment.

18. The Company has not made any preferential allotment of shares during the year.

19. The Company has not issued any debentures.

20. The Company has not raised any money by way of public issue during the year.

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

For Kalyanlwalla & Mistry For Varma & Varma For S Bhandari & Co.

Charterd Accountants Chartered Accountants Charterd Accountants

Firm Reg No.104607W Firm Reg No.004532S Firm Reg No.000560C

(Emin K Irani) (K M Submarni) (P P pareet)

Parter (Mem No.035646) Partner (Mem No.015707) Partner (Mem.No.071213)

For Ray & Ray For Mehra Goel & Co.,

Chartered Accountants Chartered Accounts

Firm Reg No.301072E Firm Reg No.000517N

(B K Ghosh) (R K Mehra)

Partner (Mem No.051028) Partner (Mem No. 006102)

New Delhi

May 29,2012


Mar 31, 2010

1. We have audited the attached Balance Sheet of OIL AND NATURAL GAS CORPORATION LIMITED (the Company) as at 31st March, 2010, the Profit and Loss Account and the Cash Flow Statement for the year ended on that date, annexed thereto in which are incorporated the Companys share in the total value of assets, liabilities, expenditure and income of 124 blocks under New Exploration Licensing Policy (NELPs)/ Joint Venture (JVs) accounts for exploration and production out of which 70 NELP/ JV accounts have been audited by one of the firms of statutory auditors, 47 NELPs /JVs accounts have been certified by other firms of Chartered Accountants and 7 NELP/JVs are as certified by the management (Refer Note 24.3.1 and 24.3.2 of Schedule 27 of the financial statements). 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.

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 misstatement. An audit includes examining, on a test basis, evidence supporting the amount 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. We have placed reliance on technical/ commercial evaluation by the management in respect of categorization of wells as exploratory, development and producing, allocation of cost incurred on them, depletion of producing properties / impairment on the basis of the proved developed hydrocarbons reserves, liability for abandonment costs, liability under NELP and nominated blocks for under performance against agreed Minimum Work Programme and allocation of depreciation on process platforms to transportation and facilities.

4. As required by the Companies (Auditors Report) Order, 2003 (as amended) issued by the Central Government of India in terms of Section 227(4A) of the Companies Act, 1956, we enclose in the Annexure (read with paragraph 1 above) a statement on the matters specified in paragraph 4 and 5 of the said Order.

5. Furtherto our comments referred to in paragraph 4 above we report as follows:

5.1. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of ouraudit;

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

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

5.4. In our opinion, the Profit and Loss Account, the Balance Sheet and the Cash Flow Statement comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

5.5. Disclosure in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956 is not required as per notification number GSR 829(E) dated October 21,2003 issued by the Department of Company Affairs.

5.6. Without qualifying our opinion we invite attention to Note no. 2.1 to 2.3 of Schedule 27 in respect of recognition of sales revenue of crude oil and natural gas and Note no. 13 of Schedule 27 regarding certain observations made by auditors of a Jointly Controlled assets- Panna Mukta & Tapti, impact of which is not ascertainable, in our opinion and to the best of our information and according to the explanations given to us, the said accounts read with notes to account, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) In the case of the Balance Sheet, of the state of affairs of the Company as at 31sl March, 2010;

b) In the case of the Profit & 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 THE AUDITORS REPORT

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

b) As per information and explanations given to us, the fixed assets, other than those which are underground/ submerged/ under joint venture / assets held by employees, having substantial value have been physically verified by the management in phased manner, which in our opinion is reasonable, having regard to the size of the company and nature of its assets. The reconciliation of physically verified assets with the book records is in progress. Discrepancies noticed on physical verification and consequential adjustments are carried out on completion of reconciliation. According to the information and explanations given by the management and in our opinion, the same is not material.

c) The Company has not disposed off a substantial part of fixed assets during the year.

2. a) The inventory has been physically verified in a phased manner (excluding inventory lying with third parties, at some of the site-

locations, inventory with joint ventures and material in transit) during the year by the management. In our opinion, the frequency of verification is reasonable.

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

c) The Company has generally maintained proper records of inventory except for recording of consumption at a few of its site- locations. In our opinion the discrepancies noticed on physical verification between the physical stock and book records were not material having regard to the size of the Company and nature of its business. In cases where discrepancies noticed on physical verification have been identified with inventory records, necessary adjustments have been carried out in the books. In respect of cases where the reconciliation is not complete, the management has stated that the same would be adjusted in due course.

3. a) The Company has granted secured loans to seven parties covered in the register maintained under section 301 of the Companies Act, 1956. The amount outstanding at the year end is Rs. 0.56 million and the maximum amount outstanding at any time during the year was Rs. 3.58 million.

b) The rate of interest and other terms and conditions of the loans granted are not prejudicial to the interest of the Company.

c) The payment of principal amount and interest are regular.

d) There is no overdue amount in respect of loans granted to the parties listed in the register maintained under section 301 of the Companies Act, 1956.

e) 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 and consequently, the requirements of clause (iii)(f) and (iii)(g) of paragraph 4 of the Companies (Auditors Report) Order, 2003 are not applicable.

4. In our opinion, and according to the information and explanations given to us, the internal control procedures are generally adequate and commensurate with the size of the Company and the nature of its business with regard to purchases of inventory, fixed assets and sale of goods and services. During the course of our audit we have not observed any continuing failure to correct majorweaknesses in internal controls.

5. a) In our opinion and according to the information and explanations given to us, there is no contract or arrangement that needs to be entered in the register required to be maintained pursuance of section 301 of the Companies Act, 1956.

b) Accordingly, the provisions of clause 4 (v) (b) of the Companies (Auditors Report) Order, 2003 is not applicable to the company.

6. The Company has not accepted any deposits from the public.

7. The Company has an internal audit system, which in our opinion is commensurate with the size and nature of its business.

8. We have broadly reviewed the books of account relating to materials, labour and other items of costs maintained by the Company pursuant to the Rule made by the Central Government for the maintenance of cost records under section 209 (1)(d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained.

9. a) The Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund,

Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Service Tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other material statutory dues applicable to it. There are no such material outstanding statutory dues accrued in accounts as of the last date of the financial year concerned for a period of more than six months from the date they became payable.

Further, since the Central Government has till date not prescribed the amount of cess payable under section 441 A of the Companies Act, 1956, we are not in a position to comment upon the regularity or otherwise of the Company in depositing the same.

b) Accordinq to the information and explanations qiven to us, the disputed statutory dues are as under:

Name of the Nature of Amount Statute the dues (Rs. In Million)

Income taxAct, 1961 Income Tax 5,280.79

1,386.69 65.78

8,997.01

Total 15,730.27

Central Excise Act 1944 Central Excise duty/ 4.54

Interest/Penalty 15.18

1185.89

147.32

Total 1,352.93

The Customs Act, 1962 CustomsDuty/ 1,133.02

Penalty/ 10.00

Interest 1,437.47

Total 2580.49

Oilfields (Regulations Royalty/ 18,849.79 Development Act, 1948)/ Surfacerent/ AP Mines and Geology Act Interest/ Penalty

AP Mineral Bearing Lands Cess 1,171.84 (Infrastructure) Cess

Oil Industries Cess/Interest 7.72

(Development)Act,1974 7.07

8.61

Total 23.40

Central Sales Tax Act 1956 Sales tax/ 13,257.25

and respective States Turnover Tax/ 5.69

Sales TaxAct Penalty/ 1,092.02

Interest 6.99

8,732.35

0.35

Total 23,094.65

Municipal Corporation Octroi Duty 66.89 of MumbaiAct (Octroi Rules, 1965)

Assam Specified Land Tax on Crude oil and 2,274.50

Taxation Act Natural Gas



Name of the Period to which Forum where Statue the amount relates dispute (financial year) is pending

Income taxAct, 1961 1994-95 to 2009-10 Revisionary Authority

2005-06 to 2009-10 Appellate Authority

2000-01 to 2009-10 High Court

1991-92 to 2009-10 Supreme Court

Central Excise Act 1944 2005-06to2009-10 Commissioner

2006-07 to 2007-08 CBE&C

2002-03 to 2009-10 CESTAT

1980-81 to 2006-07 High Court

The Customs Act, 1962 1998-99 to 2009-10 Asst. Commissioner

2007-08 CESTAT

1995-96 to 1996-97 Ministry of Finance

Oilfields (Regulation & Development Act, 1948)/ AP Mines and Geology Act 1992-93 to 2009-10 Dept. of Geology and Mining, A.P. High Court

AP Mineral Bearing Lands (Infrastructure) Cess 2004-05 to 2009-10 Dept. of Geology and Mining, A.P. High Court

Oil Industries (Development) Act, 1974 2004-05 to 2009-10 Commissioner

2002-03 to 2004-05 CESTAT

2001-02 to 2003-04 High Court

Central Sales Tax Act 1956 and respective States Sales TaxAct 1978-79 to 2009-10 Demand Notice

Deputy Commissioner

2001-02 to 2006-07 Joint Commissioner

1992-93 to 2002-03 CT-Appeals

2004-05 to 2005-06 Tribunal

2006-07 High Court

Municipal Corporation of MumbaiAct (Octroi Rules, 1965) 1978-79 to 2009-10 Supreme Court

Assam Specified Land Taxation Act 2004-05 to 2009-10 Guwahati High Court

10. The Company does not have accumulated losses at the end of the current financial year and has not incurred cash losses either during the year or during the immediately preceding financial year.

11. The Company has not issued any debentures and has not defaulted in repayment of dues to financial institutions or banks.

12. In our opinion and according to the information and explanation given to us, the Company has not granted loans and advance so on the basis of security by way of pledge of shares, debentures and other securities.

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

14. In our opinion and according to the information and explanation given to us, the Company is not dealing or trading in shares, securities, debentures and other investments.

15. In our opinion and according to the information and explanation given to us, the terms and conditions on which the Company has given guarantees for loans taken by others from banks or financial institutions are not prima facie prejudicial to the interest of the Company, since these guarantees are given for the subsidiary companies promoted by the Company.

16. In ouropinion, the term loans have been applied for the purpose for which they were raised.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short terms basis have been used for long term investment.

18. The Company has not made any preferential allotment of shares during the year.

19. The Company has not issued any debentures.

20. The Company has not raised any money byway of public issue during the year.

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

For ArunK.Agarwal& Associates For Singhi & Co. For P.S.D.& Associates

Chartered Accountants Chartered Accountants Chartered Accountants

(Firm Regn. No: 003917N) (Firm Regn. No: 302049E) (Firm Regn. No: 004501C)

(Rajesh Surolia) (B. K. Sipani) (Prakash Sharma)

Partner (Mem. No.88008) Partner (Mem. No. 88926) Partner (Mem. No. 72332)

For Kalyaniwalla & Mistry For Padmanabhan Ramani & Ramanujam

Chartered Accountants Chartered Accountants

(Firm Regn. No: 104607W) (Firm Regn. No: 00251 OS)

(Ermin K.Irani) (K.R.Ganesh)

Partner (Mem.No.35646) Partner (Mem. No 22439)

New Delhi 28,th May, 2010



 
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