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Auditor Report of Rashtriya Chemicals & Fertilizers Ltd.

Mar 31, 2015

We have audited the accompanying standalone financial statements of RASHTRIYA CHEMICALS AND FERTILIZERS LIMITED("the Company"), which comprise the Balance Sheet as at 31st March, 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.

Management's Responsibility for the Standalone Financial Statements.

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

Auditor's Responsibility

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

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made 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 control system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements.

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

Opinion

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

Emphasis of Matters

We draw attention to the following matter in the Notes to the financial statements:

a. Note No. 50 in the Financial Statements indicate that the company with effect from 1st April, 2014, has charged depreciation based on the revised remaining useful life of the assets, wherever appropriate, as per the requirements of schedule II of the companies Act, 2013. As a result of these changes, the depreciation charge for the year ended 31st March, 2015 is higher by Rs. 34.57 Crore and the assets and reserves & surplus being lower by the said amount. Further, consequent to Notification GSR 627(E) dated 29th August, 2014 of the Companies Act, 2013, Company has during the year charged off transitional depreciation amounting to Rs. 42.56 Crore to Statement of Profit and Loss.

b. Note No. 10(5) in the Financial Statements regarding non-disclosure of cost and depreciation of assets leased to certain Public Sector Undertaking and others.

c. Note No. 32 in the Financial Statements regarding the claim of subsidy accounted on estimated basis, pending final settlement of such claims.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

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 we give in the annexure a statement on the matters specified in paragraphs 3 and 4 of the Order.

As required by Section 143(5) of the Act, we give in the annexure the directions and sub-directions issued by the Comptroller and Auditor-General of India, the action taken thereon and its impact on the accounts and financial statement of the company.

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 31st March, 2015 from being appointed as a director in terms of Section 164 (2) of the Act.

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

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 25 to the financial statements;

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

iii. There is no delay, during the year, in transferring the amount required to be remitted to Investor Education and Protection Fund.

Annexure to the Independent Auditors' Report

(Referred to in our report of even date to the members of Rashtriya Chemicals and Fertilizers Limited as at and for the year ended 31st March, 2015).

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 with original cost and depreciation written off in respect of identifiable units of assets and where such information for identifiable units of assets is not available, the records show the cost and depreciation written off in respect thereof as a group or class. The items of assets in respect of which quantitative details are not linked with the cost or book value are of small value acquired prior to April 1978 and are fully depreciated particularly in respect of movable items acquired from Fertilizers Corporation of India Limited;

b) As explained to us, the Plant & Machineries have been physically verified by the management at reasonable intervals during the year and all other fixed assets have been physically verified during the year by the management with the help of an independent outside agency. We have been informed that discrepancies noticed on physical verification of fixed assets as compared to the book records were not material;

ii) In respect of its inventories:

a) Physical verification of finished goods, packing materials and raw materials inside factory premises has been carried out by the management at reasonable intervals and the stocks of stores and spare parts has been conducted by them with the help of an independent outside agency in a phased programme so as to complete the verification of all items over a period. Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third party confirmation respectively;

b) In our opinion and according to the information and explanations given to us, the procedures for the 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) The Company is maintaining proper records of inventory. In our opinion, discrepancies noticed on physical verification of stocks were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account.

iii) The company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 189 of the Act. Accordingly the clauses 3(iii) (a) & (b) of the Order are not applicable;

iv) In our opinion and according to information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchase of inventories, fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in internal control system, in respect of these areas.

v) The Company has not accepted any deposits during the year from public.

vi) We have broadly reviewed the books of account maintained by the company pursuant to the rules made by the Central Government for the maintenance of cost records under section 148 (1) of the Act, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

vii) a) In our opinion, the procedure followed as per

Note No. 49 to the Financial Statements in respect of deduction and payment of income tax results into delays in certain cases. The exact delays are not ascertained. Except the above, undisputed statutory dues, including Provident Fund, Employees' State Insurance, Income Tax, Sales- Tax, Wealth Tax, Service Tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues with appropriate authorities, where applicable have been regularly deposited with the appropriate authorities.

According to the information and explanations given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding as at 31st March, 2015 for a period of more than six months from the date they became payable.

b) According to the records of the company, the dues of income-tax, sales-tax, wealth-tax, service tax, duty of customs, duty of excise, value added tax and cess which have not been deposited on account of any dispute and the forum where the dispute is pending are as follows:

Name Nature of Amount Years to Forum of the, dues (Rs. which where statute in the dispute is Crore) amount pending relates

Customs Demand of 16.35 2004-05 Central Excise, Act 1962 Customs duty Service Tax and penalty Appellate (Trombay Unit) Tribunal

Customs Demand of 80.77 2009-10 Assistant Act, 1962 Differential Commissioner Customs Duty on of Customs, import of Urea, Dharamtar, MOP & DAP Alibaug (Marketing)

Customs Demand of 0.16 2012-13 Commissioner Act, 1962 differential of Customs, custom duty on Mangalore import of Potash (Marketing)

Income Disallowance 0.53 A.Y. Income Tax Tax Act, of additional 2009-10 Appellate 1961 depreciation Tribunal claimed

Income Disallowance 4.85 A.Y. Income Tax Tax Act, of provision 2007-08 Appellate 1961 towards wage Tribunal revision

Income Disallowance 5.08 A.Y. Income Tax Tax Act, of additional 2010-11 Appellate 1961 depreciation Tribunal claimed

Sales Tax, Disallowance/ 6.58 A. Y. Joint Maha- errors in 2009-10 Commissioner rashtra calculation of of Sales Tax set off etc.,in (Appeals) the Assessment 18.24 A.Y Joint Order Passed 2006-07 Commissioner of Sales Tax (Appeals)

Income Demand of 0.21 A. Y. Commissioner Tax Act, Tax for Short 2009-10 to of Income Tax 1961 Deduction/non 2010-11 (Appeals) deduction of TDS

Central Demand of 2.67 1996-2001 Supreme Court Excise Central Excise Act, 1944 duty, Interest & Penalty 3.54 March, Central Excise, in respect 2005 to Service Tax of Naphtha October, Appellate procured at 2005 Tribunal concessional rates used for 18.61 November, Supreme Court products which 1996 to are not exempted February, (Thal Unit) 2005 (Interest)

Central Demand of 19.67 Prior to Central Excise, Excise Central Excise 1997 to Service Tax Act,1944 duty in respect March Appellate of Low Sulphur 2006 Tribunal High Stock/ Furnace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit)

Demand of 2.90 August Commissioner Central Excise 1986 to of Central duty in respect February Excise of Low Sulphur 2000 (Appeals) High Stock/ Furnace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit)

1.54 April, Commissioner 2008 to of Central December, Excise, 2011 Customs, Demand of &Service Tax Service Tax Service on supply of 0.18 January, Assistant Tax wagons to 2012 to Commissioner , Central Railway December, Central Excise, 2014 Customs & Service Tax Appellate Tribunal

Service Demand of 0.01 2006-07 & Superintendent, Tax Service Tax 2007-08 (S. T. on Handling Special Cell), by Transporter Aurangabad Service

Demand of 8.01 October, Additional Service Tax on 2006 to Commissioner, Service fees received December, Central Excise Tax for Operation & 2014 & Service Tax, maintenance of Mumbai HWP (Thal Unit)

Service Service Tax on 0.14 2008-09 Additional Tax rent on BTAL to June, Commissioner, Wagons 2011 Central Excise & Service Tax, Mumbai

Service Deputation of 0.08 2008-09 to Additional Tax officials to joint 2013-14 Commissioner, Venture Central Excise & Service Tax, Mumbai

Service Renting of 0.31 2008-09 Commissioner Tax immovable of Central property (Office Excise premises) (Appeals)

c) Based on the records examined by us, there is no delay, during the year, in transferring the amount required to be transferred to Investor Education and Protection Fund in accordance with the relevant provisions of the Companied Act, 1956 (1 of 1956) and rules made thereunder.

viii) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current financial year and in the immediately preceding financial year.

ix) The company has not defaulted in repayment of its dues to banks. The company does not have any borrowings from Financial Institutions or by way of debentures.

x) According to the information and explanations given to us, the company has given a corporate guarantee for loan from Bank taken by its Joint Venture Company viz. FACT RCF Building Products Ltd., the terms and conditions whereof in our opinion, are not prima-facie prejudicial to the interest of the Company.

xi) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, term loans availed by the Company were, applied by the Company during the year for the purposes for which the loans were obtained other than funds temporarily invested pending utilization for the intended use.

xii) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

Annexure to the Independent Auditors' Report under Section 143(5) of the Act:

(Referred to in our report of even date to the members of Rashtriya Chemicals and Fertilizers Limited as at and for the year ended 31st March, 2015).

A. Directions

1. If the Company has been selected for disinvestment, a complete status report in terms of valuation of Assets (including intangible assets and land) and Liabilities (including Committed & General Reserves) may be examined including the mode and present stage of disinvestment process

To the best of our knowledge and belief and according to the information and explanations given to us, the Company has not been slated for disinvestment in 2014-15.

2. Please report whether there are any cases of waiver/ write off of debts/loans/interest etc., if yes, the reasons there for and the amount involved

Based on the records examined by us, during the year an amount of Rs. 1.92 Crore has been written off towards bad debts. This is in line with the Company's accounting policy on provision for bad and doubtful debts and write off of the same.

3. Whether proper records are maintained for inventories lying with third parties & assets received as gift from Govt, or other authorities

Based on the audit procedures performed by us and as per the information and explanations given to us, proper records are maintained for inventories lying with third parties and are confirmed on the basis of warehousing certificates and confirmations.

Based on the records examined by us, during the year, the Company has not received any assets as gift from Government or other authorities.

4. A report on age-wise analysis of pending legal/ arbitration cases including the reasons of pendency and existence/ effectiveness of a monitoring mechanism for expenditure on all legal cases(foreign and local) may be given.

Based on the audit procedures performed by us and as per the information and explanations given to us, out of total 146 legal cases outstanding as on 31st March, 2015, 141 cases are pending for more than 3 years.

To the best of our knowledge and belief and according to the information and explanations given to us, Services of legal counsels are availed by the Company depending upon the nature of disputes and considering that a favourable outcome would emerge based on the legal stand taken and merits of the case. Appointment of legal counsels is governed Company's Delegation of Power's and thus the monitoring mechanism of expenditure on legal cases is effective.

B. Sub Directions

1. Whether Company has clear title / lease deeds for freehold and leasehold land respectively? If not, please state the area of freehold and leasehold land for which title/lease deeds are not available.

Based on the audit procedures performed by us and as per the information and explanations given to us, the details of freehold land and title deeds available/not available with the company are as under:-

A) Information of Freehold Land

i. TROMBAY Area in Total the name Location Particulars Area(in of RCF Remarks Sq. Mt.) (in Sq. Mt.)

As informed to us, matter is being Freehold taken up Trombay Land 30,97,278 27,04,080 with concerned authorities for reconciliation of area

ii. THAL

Area in Total the name Location Parti Area(in of RCF Remarks* culars Sq. Ft./ (in Sq. Sq meter feet/ sq Acrehect meter/ Ac area) rehect)

RCF Free- 313-52.12 241-49.52 As per 7/12 extract the Factory hold hectares hectares area in the name of the & Roads Land Company is 253-73.70 Hectares.

Township Free- 7-10.10 - The land is in pos- Kihim hold hectares session of RCF. As Land informed, Transfer of title deeds is in process.

Township Free- 83-23.71 78-85.91 Balance 4-37.8 Hect- - Kurul hold hectares hectares ares of land, is not in - Veshvi Land name of RCF. As in- - Chend- formed, steps are being hare taken for the transfer of title deeds.

Railway Free- 101-38.83 - As informed, request Land hold Hectares letter has been sent to Land concerned authorities for providing 7/12 extract for the said area.

Total Thai 505-24.76 320-35.43 Freehold Land Hectares Hectares

* The matter is being taken up with the concerned authorities for reconciliation of area.

iii. MARKETING / AREA OFFICES / CORPORATE

Area Whether Partic- (in Sq. company Location ulars feet/ Sq has clear meter/ title deed Acre to the land

AHMEDNAGAR Survey No.20 II Lines Freehold 840 Sq Karachi wala Nagar, Near Land meters YES Mahesh Talkies Ahmed- nagar, Maharashtra-414001.

LUCKNOW Freehold TC/10 V ,Vibutikhand Land 1000 Sq YES Gomtinagar, Lucknow, U.P. meters

DELHI OFFICE H-9 Green Park Extension Freehold 387.06 Sq YES New Delhi -110016 Land meters

B) Information on Leasehold land

Details of Leased land are separately available with the Company and are separately disclosed in the asset register.

(Rs. in Crore)

Accumulated Gross Gross Depreciation Carrying Block Addi- Dele- Block (Netofdele- Amount as on tions tions as on tions) As on 01.4.2014 31.3.2015 As on 31.3.2015 31.03.2015

14.11 - 8.97 5.14 (3.49-2.24)- 3.89 * 1.25 *

*Deductions / Adjustments includes an amount of Rs. 6.73 Crore (Rs. 8.97 Crore - Rs. 2.24 Crore ) towards leasehold land proposed to be surrendered to Vizag Port Trust authorities in view of non-usage of said allotted land for specific purpose. (Refer Note no. 10to financial statements).

2. State the area of land under encroachment and briefly explain the steps taken by the Company to remove encroachments.

To the best of our knowledge and belief and according to the information and explanations given to us, instances of encroachment of land have been observed at Trombay unit which are as under:-

i. Approx. 5 acres of land which is in the name of RCF has been encroached since the time of FCI. The value of the land cannot be determined exactly. RCF has approached the agencies like MMRDA for development of this land.

ii. Approx. 15 Acres is under slum/encroached since 1980.Slums from other pockets were shifted on this land and is without clear title in favour of RCF. The matter is taken up with appropriate authorities for clear title in favour of RCF.

Both the matters are pending in Mumbai High Court for resolution.

As explained to us, other than the above there are no cases of encroachment of land at other locations.

3. Whether subsidy received/recoverable from Government of India has been properly accounted for as per claims admitted.

Based on the audit procedures performed by us and as per the information and explanations given to us, subsidy received/recoverable from Government of India has been properly accounted for as per claims admitted. In addition to the same, for the rates yet to be notified due to escalations/ de-escalations in the cost of inputs and other costs, subsidy has been accounted on estimated basis which is in line with its stated accounting policy of revenue recognition given in Note no.32 to the financial statements for the year 2014-15.

4. (i) Whether amount of (a) bank balance (b) trade receivable (c) trade payables (d) loans and advances for which third party confirmation was not made available has been reported.

(ii) Where such balance has been confirmed by respective parties, whether it varies widely from the amounts reflected under respective heads in the financial.

The balance confirmation letters were available in case of the balances with the banks and bank loans and the same are reconciled.

In respect of Trade Receivables, as informed to us, during the year 2014-15, the statement of balances was taken from SAP system and sent to the parties for confirmation and about 83% confirmation of balances from debtors has been received and no material differences were noticed.

As regards balance confirmation relating to trade payables despite the Company sending balance confirmation letters, receipt of confirmation of balances is very insignificant despite repeated follow-up. To facilitate reconciliation and review of balances by customers and vendors on a periodic basis, Company has also installed Customer and Vendor Portal in its website which would enable them to view their account online. Further disclosure of amounts in dispute with vendors is included under claims not acknowledged as debts in the notes forming part of financial statements.

Balances of subsidy claim receivables and tax refunds from Government authorities are subject to confirmation which has also been disclosed in note no. 31 of financial statements.

5. Independent verification may be made, of information/inputs furnished to Actuary, viz. number of employees, average salary, retirement age etc. and assumptions made by the Actuary regarding the discount rate, future cost increase, mortality rate, etc. for arriving at the provision for liability of retirement benefits, viz. gratuity, leave encashment, post-retirement medical benefit etc.

Based on the audit procedures performed on test check basis for the purpose of verification of information/inputs furnished by the company to Actuary, viz. number of employees, average salary, retirement age etc. and no material discrepancies were noticed.

Following are the assumptions used by the Actuary:-

Sr No. Particulars Rate

1 Discount Rate 7.95%

2 Attrition Rate 2.00%

3 Salary Escalation Rate 8.00%

4 Mortality Rate IALM (2006-08) Ultimate

Assumptions made by Actuary regarding Salary Escalation Rate & Attrition Rate is as advised by the Company. Based on the audit procedure performed on test check basis on the data given by the management and according to information and explanation given by the management, the said assumptions appear to be reasonable.

For M. M. NISSIM & Co. For NBS & Co. Chartered Accountants Chartered Accountants Firm Regn. No. 107122W Firm Regn. No. 110100W

(Dhiren Mehta) (Devdas Bhat) Partner Partner Mem. No.: 109883 Mem. No. 048094

Mumbai, May 21, 2015


Mar 31, 2014

We have audited the accompanying Financial Statements of Rashtriya Chemical and Fertilizer Limited-(''the."company'') which comprise the Balance Sheet as .at''March, 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 the Explanatory Information.

Management''s Responsibility for the Financial Statements

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

Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit.. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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

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

Opinion

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

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

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

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

Emphasis of Matter

We draw attention to:

a) Note No. 10(5) to the accounts regarding non-disclosure of cost and depreciation of assets leased to certain Public Sector Undertaking and others.

b) Note No. 30 to the accounts which states that some of the Balances of Trade Receivables, Trade Payables, Current Liabilities and Loans and Advances are subject to confirmation, reconciliation and consequential adjustments, if any.

c) Note No. 32 to the accounts regarding the claim of subsidy accounted on estimated basis, pending final settlement of such claims.

d) Note No. 40 to the accounts regarding non provision for diminution in the value of investment and loans in respect of the Joint Venture Company, FACT - RCF Building Products Limited.

Our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956 (the ''Act'') we give in the annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

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

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

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

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

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

e. Central Government has directed vide notification number G.S.R. 829(E) dated 21st October, 2003 of Clause (g); of sub section (1) of Section 274 of the Act is not applicable to a Government Company.

Annexure referred to in our report of even date Re: Rashtriya Chemicals & Fertilizers Limited (''the Company'').

i) a) The Company has maintained proper records

showing particulars including quantitative details and situation of fixed assets with original cost and depreciation written off in respect of identifiable units of assets and where such information for identifiable units of assets is not available, the records show the cost and depreciation written off in respect thereof as a group or class. The items of assets in respect of which quantitative details are not linked with the cost or book value are of small value acquired prior to April 1978 and are fully depreciated particularly in respect of movable items acquired from Fertilizers Corporation of India Limited.

b) As informed to us, the fixed assets have been physically verified by the management with the help of an independent outside agency at reasonable intervals. We have been informed that discrepancies noticed on physical verification of fixed assets as compared to the book records were not material.

c) During the year, the Company has not disposed of a substantial part of its fixed assets.

ii) a) Physical verification of finished goods, packing materials and raw materials inside factory premises has been carried out by the management at reasonable intervals and the stocks of stores and spare parts has been conducted by them with the help of an independent outside agency in a phased programme so as to complete the verification of all items over a period. Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third party confirmation respectively.

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

c) The Company is maintaining proper records of inventory. In our opinion, discrepancies noticed on physical verification of stocks were not material in relation to the operations of the - Company, and the same .have been properly dealt with in the books of-account.

iii) As per the information furnished, the Company has not granted or 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. Hence reporting under clause

iii- (a) to (f) of the Order is not applicable to the Company.

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 purchase of inventories and fixed assets and for the sale of goods. In our opinion and according to the information and explanations given to us during the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

v) According to the information and explanations given to us, there are no transactions that need to be entered in the register maintained in pursuance of Section 301 of the Companies Act, 1956 by the Company. Accordingly clause 4 (v) b of the Order is not applicable.

vi) According to the information and explanations given to us, the Company has not accepted any deposit during the year from public within the meaning of the provisions of Section 58A and Section 58AA of the Companies Act, 1956 and the rules framed there under. Hence, clause 4(vi) of the Order is not applicable.

vii) The Company has its own internal audit department which conducts the internal audit and in our opinion, the present internal audit system is commensurate with the size and the nature of its business.

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

ix) a) In our opinion, the procedure followed as per Note No 50 to the accounts in respect of deduction and payment of income tax results into ^ delays int certain cases. The exact delays are ¦ not. ascertained. Except the above, the undisputed -statutory *dues including provident fund, ''investor,'' education and protection fund, employees'' state-insurance, income-tax, sales- tax, wealth-tax,, service. .ta''x, customs duty, excise duty, cess and other undisputed statutory dues have been regularly deposited with the appropriate authorities.

According to the information and explanations given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding, at the year end, for a period of more than six months from the "date - they became payable.

b) According to the information and explanations given to us, the dues of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise'' duty and cess which have not been deposited on account of any dispute and the forum where the dispute is pending are as follows:

Years to Amount Forum where Name of Nature of dues rs in which the dispute is the statute amount pending Crore) relates

Customs Demand of 16.35 2004-05 Central Excise Act 1962 Customs duty , Service Tax and penalty Appellate (Trombay Unit) Tribunal

Customs Demand of 80.77 2009-10 Assistant Act, 1962 Differential Commissioner Customs Duty on of Customs, import of Urea, Dharamtar, MOP & DAP Alibaug (Marketing)

Customs Demand of 0.16 2012-13 Commissioner Act, 1962 differential of Customs, custom duty on Manglore import of Potash (Marketing)

Income Disallowance 0.49 A.Y. 2009- Income Tax Tax Act, of additional 10 Appellate 1961 depreciation Tribunal claimed

Sales Tax, Disallowance/ 6.58 A. Y. Joint Maha- errors in 2009-10 Commissioner rashtra calculation of of Sales Tax set off etc., in the Assessment Order Passed

18.24 A. Y. Joint 2006-07 Commissioner of Sales Tax (Appeals)

Income Demand of 2.47 A. Y Commissioner Tax Act, Tax for Short 2008-09 to of Income Tax 1961 Deduction/non 2011-12 (Appeals) deduction of TDS

Central Demand of 2.67 1996-2001 Supreme Court Excise Act, Central Excise 1944 duty, Interest & 354 March, Central Excise Penalty in respect 2005 to , Service Tax of Naphtha October, Appellate procured at 2005 Tribunal concessional 18.61 November, Supreme Court rates used for 1996 to products which February, are not exempted 2005 (Thal Unit) (Interest)

Central Demand of 18.76 Prior to Central Excise Excise Act, Central Excise 1997 to Service Tax 1944 duty in respect March Appellate of Low Sulphur 2006 Tribunal High Stock/ Furnace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit)

Demand of 2.90 August Commissioner Central Excise 1986 to of Central duty in respect February Excise of Low Sulphur 2000 (Appeals) High Stock/ Furnace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit)

1.54 April, Commisioner 2008 to of Central December, Excise, Demand of 2011 Customs, Service Tax on &Service lax Service supply of wagons Tax 0.18 January, Assistant Com- to Central 2012 to missioner Railway December, Central Excise, 2014 . Customs & Service Tax

Service Demand of 0.01 2006-07 & Superin- Tax Service Tax 2007-08 tendent, (S. T. on Handling Special Cell), by Transporter Aurangabad Service

Service Demand of 15.21 October, Tax Service Tax on 2006 to fees received December, for Operation & 2014 maintenance of HWP (Thal Unit)

Service Service Tax on 0.14 2008-09 Additional Tax rent on BTAL to June, Commissioner, Wagons 2011 Central Excise & Service Tax, Mumbai

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

xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a bank. The company has not issued any debentures and has not obtained any loan from Financial Institution.

xii) Based on our examination of documents and records and as per information and explanations given, 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 benefit fund / society. Therefore, the provisions of clause 4

(xiii) of the Order are not applicable to the Company.

xiv) According to the information and explanations given to us, the company is not dealing or trading in shares, securities, debentures and other investments. Therefore, the provisions of clause 4(xiv) of the Order are not applicable to the Company.

xv) According to the information and explanations given to us, the Company has given a corporate guarantee for loan from bank taken by its joint venture company viz. FACT RCF Building Products Ltd., the terms and conditions whereof in our opinion, are not prima-facie prejudicial to the interests of the "Company.

xvi) To the best - of" our. .knowledge and belief and according to''.the information -and explanations given to us in our opinion term loans availed by the Company''were,'' applied''by the Company during the year for,the purposes for which the loans were obtained other than funds temporarily invested pending utilization for the intended use.

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-term basis have been used for long-term investment.

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

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

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

xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For NBS & Co. For M M NISSIM AND CO. Chartered Accountants Chartered Accountants Firm Regn. No. 110100W Firm Regn. No. 107122W

Devdas Bhat Dhiren Mehta Partner Partner Mem. No. 048094 Mem. No.: 109883

Mumbai, May 14, 2014


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying Financial Statements of Rashtriya Chemicals and Fertilizers Limited (''the company'') which comprise the Balance Sheet as at March, 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and the Explanatory Information.

Management''s Responsibility for the Financial Statements

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

Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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

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

Opinion

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

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

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

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

Emphasis of Matter

We draw attention to:

a) Note No. 10(5) to the accounts regarding non-disclosure of cost and depreciation of assets leased to certain Public Sector Undertaking and others.

b) Note No. 30 to the accounts which states that some of the Balances of Trade Receivables, Trade Payables, Current Liabilities and Loans and Advances are subject to confirmation, reconciliation and consequential adjustments, if any.

c) Note No. 32 to the accounts regarding the claim of subsidy accounted on estimated basis, pending final settlement of such claims.

d) Note No. 51 to the accounts regarding adjustment to sales made on the stocks held by dealers/retailers expected to be sold at reduced MRP to farmers consequent to Department of Fertilizer''s notification No. 23011/5/2013-MRP dated 3rd May, 2013 and further directives received from Government of India

Our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956 (the ''Act'') we give in the annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

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

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

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

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

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

e. Central Government has directed vide notification number G.S.R. 829(E) dated 21st October, 2003 of Clause (g); of sub section (1) of Section 274 of the Act is not applicable to a Government Company.

i) a) The Company has maintained proper records showing particulars including quantitative details and situation of fixed assets with original cost and depreciation written off in respect of identifiable units of assets and where such information for identifiable units of assets is not available, the records show the cost and depreciation written off in respect thereof as a group or class. The items of assets in respect of which quantitative details are not linked with the cost or book value are of small value acquired prior to April 1978 and are fully depreciated particularly in respect of movable items acquired from Fertilizers Corporation of India Limited.

b) As informed to us, the fixed assets have been physically verified by the management with the help of an independent outside agency at reasonable intervals. We have been informed that discrepancies noticed on physical verification of fixed assets as compared to the book records were not material.

c) During the year, the Company has not disposed of a substantial part of its fixed assets.

ii) a) Physical verification of finished goods, packing materials and raw materials inside factory premises has been carried out by the management at reasonable intervals and the stocks of stores and spare parts has been conducted by them with the help of an independent outside agency in a phased programme so as to complete the verification of all items over a period. Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third party confirmation respectively.

b) In our opinion and according to the information and explanations given to us, the procedures for the 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) The Company is maintaining proper records of inventory. In our opinion, discrepancies noticed on physical verification of stocks were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account.

iii) As per the information furnished, the Company has not granted or 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. Hence reporting under clause iii (a) to (f) of the Order is not applicable to the Company.

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 purchase of inventories and fixed assets and for the sale of goods. In our opinion and according to the information and explanations given to us during the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

v) According to the information and explanations given to us, there are no transactions that need to be entered in the register maintained in pursuance of Section 301 of the Companies Act, 1956 by the Company. Accordingly clause 4 (v) b of the Order is not applicable.

vi) According to the information and explanations given to us, the Company has not accepted any deposit during the year from public within the meaning of the provisions of Section 58A and Section 58AA of the Companies Act, 1956 and the rules framed there under. Hence, clause 4(vi) of the Order is not applicable.

vii) The Company has its own internal audit department which conducts the internal audit and in our opinion, the present internal audit system is commensurate with the size and the nature of its business.

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

ix) (a) In our opinion, the procedure followed as per Note No 49 to the accounts in respect of deduction and payment of income tax results into delays in certain cases. The exact delays are not ascertained. Except the above, the 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 undisputed statutory dues have been regularly deposited with the appropriate authorities.

According to the information and explanations given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding, at the year end, for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, the dues of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess which have not been deposited on account of any dispute and the forum where the dispute is pending are as follows:

Name Nature of dues Amount of the (Rs. in statute Crore)

Customs Demand of 16.35 Act 1962 Customs duty and penalty (Trombay Unit)

Customs Demand of 80.77 Act, 1962 Differential Customs Duty on import of Urea, MOP & DAP (Marketing)

Customs Demand of 1.56 Act, 1962 differential custom duty on import of Potash (Marketing)

Income Disallowance 17.43 Tax Act, of Provision for 1961 revised salary and wages

Income Demand of 0.09 Tax Act, Tax for Short 1961 Deduction/non deduction of TDS

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

Customs Act 1962 2004-05 Central Excise, Service Tax Appellate Tribunal

Customs Act 1962 2009-10 Assistant Commissioner of Customs, Dharamtar, Alibaug

Customs Act 1962 2012-13 Commissioner of Customs, Manglore

Income Tax Act 1961 A.Y. 2007- Commissioner 08 of Income Tax (LTU), Mumbai

Income Tax Act 1961 A. Y. Commissioner 2008-09 & of Income Tax 2009-10 (Appeals)

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

xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a bank. The company has not issued any debentures and has not obtained any loan from Financial Institution.

xii) Based on our examination of documents and records and as per information and explanations given, 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 benefit fund / society. Therefore, the provisions of clause 4 (xiii) of the Order are not applicable to the Company.

xiv) According to the information and explanations given to us, the company is not dealing or trading in shares, securities, debentures and other investments. Therefore, the provisions of clause 4(xiv) of the Order are not applicable to the Company.

xv) According to the information and explanations given to us, the Company has given a corporate guarantee for loan from bank taken by its joint venture company viz. FACT RCF Building Products Ltd., the terms and conditions whereof in our opinion, are not prima-facie prejudicial to the interests of the Company.

xvi) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, term loans availed by the Company were, applied by the Company during the year for the purposes for which the loans were obtained other than funds temporarily invested pending utilization for the intended use.

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-term basis have been used for long-term investment.

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

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

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

xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For M. M. NISSIM AND CO. For NBS & Co.

Chartered Accountants Chartered Accountants

Firm Regn. No. 107122W Firm Regn. No. 110100W

Dhiren Mehta Devdas Bhat

Partner Partner

Mem. No.: 109883 Mem. No. 048094

Mumbai, May 13th, 2013


Mar 31, 2012

1. We have audited the attached Balance Sheet of Rashtriya Chemicals & Fertilizers Limited ('the Company'), as at 31st March 2012, and also the Statement of Profit & Loss and the Cash Flow Statement for the year ended on that date annexed thereto which we have signed under reference to this report. 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 the 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.

3. 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 Companies Act, 1956 (the 'Act') we give in the annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

4. Without qualifying our report, we draw attention to:

a. Note No. 10 (6) regarding non disclosure of cost and depreciation of assets leased to certain Public Sector Undertakings and others.

b. Note No. 31 to the accounts which states that some of the Sundry Debtors, Sundry Creditors Other Current Liabilities and Loans and Advances are subject to confirmation, reconciliation and consequential adjustments, if any.

c. Note No. 33 to the accounts regarding the claim of subsidy accounted on estimated basis, pending final settlement of such claims.

d. Note No. 49 regarding change in accounting policy relating to exchange differences on long term foreign currency monetary items for acquisition of fixed assets.

5. Further to our comments in the Annexure referred to above.

we report that:

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

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

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

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

e. Central government has directed vide notification number G.S.R. 829(E) dated 21st October, 2003 of clause (g) of sub-section (1) of section 274 of the Act is not applicable to a government company.

f. 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 the notes forming part of accounts 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 31,2012;

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

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

i) a) The Company has maintained proper records showing

particulars including quantitative details and situation of fixed assets with original cost and depreciation written off in respect of identifiable units of assets and where such information for identifiable units of assets is not available, the records show the cost and depreciation written off in respect thereof as a group or class. The items of assets in respect of which quantitative details are not linked with the cost or book value are of small value acquired prior to April 1978 and are fully depreciated particularly in respect of movable items acquired from Fertilizers Corporation of India Limited.

b) As informed to us, the fixed assets have been physically verified by the management with the help of an independent outside agency at reasonable intervals. We have been informed that discrepancies noticed on physical verification of fixed assets as compared to the book records were not material, ,

c) During the year, the Company has not disposed of a substantial part of its fixed assets.

ii) a) Physical verification of finished goods, packing materials and raw materials inside factory premises has been carried out by the management at reasonable intervals and the stocks of stores and spare parts has been conducted by them with the help of an independent outside agency in a phased programme so as to complete the verification of all items over a period. - Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third party confirmation respectively.

b) In our opinion and according to the information and explanations given to us, the procedures for the 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) The Company is maintaining proper records of inventory. In our opinion, discrepancies noticed on physical verification of stocks were not material in relation to the operations of the Company and the same have beer properly dealt with in the books of account.

iii) As per the information furnished, the Company has not granted or 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. Hence reporting under clause iii (a) to (f) of the Order is not applicable to the Company.

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 purchase of inventories and fixed assets and for the sale of goods. In our opinion and according to the information and explanations given to us during the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

v) According to the information and explanations given to us, there are no transactions that need to be entered in the register maintained in pursuance of Section 301 of the Companies Act, 1956 by the Company. Accordingly clause 4' (v) b of the Order is not applicable.

vi) According to the information and explanations given to us, the Company has not accepted any deposit during the year from public within the meaning of the provisions of Section 58A and Section 58AA of the Companies Act, 1956 and the rules framed there under. Hence, clause 4(vi) of the Order is not applicable.

vii) The Company has its own internal audit department which conducts the internal audit and in our opinion, the present internal audit system is commensurate with the size and the nature of its business.

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

ix) (a) In our opinion, the procedure followed as per Note No 51 to the accounts in respect of deduction and payment of income tax results into delays in certain cases. The exact delays are not ascertained. Except the above, the 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 undisputed statutory dues have been regularly deposited with the appropriate authorities.

According to the information and explanations given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding, at the year end, for a period of more than six months from the date they became payable.

b) According to the information and explanations given to us, the dues of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess which have not been deposited on account of any dispute and the forum where the dispute is pending are as follows:

Name of the Nature of dues Amount Years to Forum where statute (Rs in which the dispute is Crore) amount pending relates

CustomsAct Demand of Customs 16.35 2004-05 Central Excise, 1962 duty and penalty Service Tax (Trombay Unit) Appellate Tribunal

CustomsAct, Demand of Differential 80.77 2009-10 Assistant 1962 Customs Duty on Commissioner of import of Urea,MOP & Customs, DAP Dharamtar. Alibaug

Income Tax Disallowance of certain 0.52 A.Y. 2009-10 Commissioner of Act, 1961 expenditure & certain Income Tax additions at the time of (Appeals) assessment

Central Excise Demand of Central 14.33 1996-2001 Appealto Act, 1944 Excise duty & Penalty Supreme Court in respect of Naphtha being filed procured at 3.54 2005-2006 Appeal to Central concessional rates used Excise, Service for products which are Tax Appellate not exempted (Thal Tribunal Unit) 17.88 July 2007 to Disputed by the August 2009 company before Commissioner of Central Excise

Central Excise Demand of Central 18.00 Prior to 1997 to Central Excise, Act, 1944 Excise duty in respect March 2006 Service Tax of Low Sulphur High Appellate Stock/Fumace Oil Tribunal procured at concessional rates used for other than fertilizer products (Trombay Unit) Demand of Central 2.90 August 1986 to Commissioner of Excise duty in respect February 2000 Central Excise of Low Sulphur High (Appeals) Stock/Fumace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit)

Name of the Nature of dues Amount Years to Forum where statute (Rs in Which the dispute is Crore) amount pending relates Uttarkhand Additional duty 0.32 2006-07 Asst Value Added imposed due to wrong Commissioner Tax, 2005 identification of Commercial Tax - product ingredient Uttarakhand

Service Tax Demand of Service Tax 0.01 2006-07 Superintendent, on Handling by & 2007-08 (S. T. Special Cell), Transporter Service Aurangabad

Service Tax Service Tax on rent on 0.14 2008-09 to June, Additional BTAL Wagons 2011 Commissioner, Central Excise & Service Tax, Mumbai

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

xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a bank. The company has not issued any debentures and has not obtained any loan from Financial - Institution.

xii) Based on our examination of documents and records and as per information and explanations given, 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 benefit fund / society. Therefore, the provisions of clause 4 (xiii) of the Order are not applicable to the Company.

xiv) According to the information and explanations given to us, the company is not dealing or trading in shares, securities, debentures and other investments. Therefore, the provisions of clause 4(xiv) of the Order are not applicable to the Company.

xv) According to the information and explanations given to us, the Company has given a corporate guarantee for loan from bank taken by its joint venture company viz. FACT RCF Building Products Ltd., the terms and conditions whereof in our opinion, are not prima-facie prejudicial to the interests of the Company.

xvi) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, term loans availed by the Company were, applied by the Company during the year for the purposes for which the loans were obtained other than funds temporarily invested pending utilization for the intended use.

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-term basis have been used for long-term investment.

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

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

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

xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For JCR & Co. For M. M. NISSIM AND CO.

Chartered Accountants . Chartered Accountants

Firm Regn. No. 105270W Firm Regn. No. 107122W

Saiprabha. R Dhiren Mehta

Partner Partner

Mem. No. 034716 Mem. No.: 109883

Mumbai, May 30, 2012


Mar 31, 2011

1. We have audited the attached Balance Sheet of Rashtriya Chemicals & Fertilizers Limited ('the Company') as at March 31, 2011 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We 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.

3. As required by the Companies (Auditor's Report) Order, 2003 (as amended) issued by the Central Government of India irr terms of sub-section (4A) of Section 227 of the Companies Act, 1956 ('the Act'), we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. .

4. Without qualifying our report, we draw attention to:

a. Note No. 8 of Schedule XVI to the accounts regarding the claim of subsidy accounted on estimated basis, pending final settlement of such claims.

b. Note No. 19 of Schedule XVI to the accounts regarding the classification of Fertilizer Bonds with the carrying amount of Rs. 305.94 Crores as current assets instead of Investments as per schedule VI of the Companies Act, 1956.

c. Note No. 6 of Schedule XVI to the accounts which states that some of the Sundry Debtors, Sundry Creditors, Other Current Liabilities and Loans and Advances are subject to confirmation, reconciliation and consequential adjustments, if any.

5. Further to our comments in the Annexure referred' to above, we report that:

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;

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;

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

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

c. Central government has directed vide notification number G.S.R. 829(E) dated 21st October, 2003 of clause (g) of sub- section (1) of Section 274 of the Act is not applicable to a government company;

d. 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 the notes forming part of accounts 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, 2011;

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

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

Annexure to the Auditors' Report

Annexure referred to in paragraph 3 of our report of even date RE: Rashtriya Chemicals and Fertilizers Limited (The Company')

(i) (a) The Company has maintained proper records showing particulars including quantitative details and situation of fixed assets with original cost and depreciation written off in respect of identifiable units of assets and where such information for identifiable units of assets is not available, the records show the cost and depreciation written off in respect thereof as a group or class. The items of assets in respect of which quantitative details are not linked with the cost or book value are of small value acquired prior to April 1978 and are fully depreciated particularly in respect of movable items acquired from Fertilizers Corporation of India Limited.

(b) As informed to us, the fixed assets have been physically verified by the management with the help of an independent outside agency at reasonable intervals. We have been informed that discrepancies noticed On physical verification of fixed assets as compared to the book records were not material.

(c) During the year, the Company has not disposed of a substantial part of its fixed assets.

(ii) (a) Physical verification of finished goods, packing materials and raw materials inside factory premises has been carried out by the management at reasonable intervals and the stocks of stores and spare parts has been conducted by them with the help of an independent outside agency in a phased programme so as to complete the verification of all items over a period. Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third party confirmation respectively.

(b) In our opinion and according to the information and explanations given to us, the procedures for the 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) The Company is maintaining proper records of inventory. In our opinion, discrepancies noticed on physical verification of stocks were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account.

(iii) As per the information furnished, the Company has not granted or 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. Hence reporting under clause iii (a) to (f) of the Order is not applicable to the Company.

(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 purchase of inventories arid fixed assets and for the sale of goods. In our opinion and according to the information and explanations given to us during the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

(v) According to the information and explanations given to us, we are of the opinion that there are no transactions that need to be entered into register in pursuance of Section 301 of the Companies Act, 1956.

(vi) According to the information and explanations given to us, the Company has not accepted any deposit during the year from public within the meaning of the provisions of Section 58A and Section 58AA of the Companies Act, 1956 and the rules framed thereunder. Hence, clause 4(vi) of the Order is not applicable.

(vii) The Company has its own internal audit department which conducts the internal audit and in our opinion, the present internal audit system is commensurate with the size and the nature of its business.

(viii) We have broadly reviewed the books of account maintained by the Company in respect of its product i.e. Methanol, Sulphuric Acid and Fertilizers pursuant to the order of Central Government for maintenance of cost records prescribed under Section 209 (1) (d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. To the best of our knowledge and according to the information and explanations given to us, the Central Government has not prescribed maintenance of cost records under Section 209(1) (d) of the Companies Act, 1956 for other products of the Company.

(ix) (a) In our opinion, the procedure followed as per Note No 24 of Schedule XVI to the accounts in respect of deduction and payment of income tax results into delays in some cases. The exact delays are not ascertained. Delays have also been observed in depositing the tax with local authorities in case of Thai unit. Except this, the 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 undisputed statutory dues have generally been regularly deposited with the appropriate authorities.

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

According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, the dues of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess which have not been deposited on account of any dispute and the forum where the dispute is pending are as follows:

Name of the Nature of dues Amount Years to Forum where Statute (Rs in which the dispute is lacs) amount pending relates

Customs Act Demand of 1,635.00 2004-05 Central Excise, 1962 Custpms duty and Service Tax penalty Appellate Tribunal (Trombay Unit)

Income Tax Disallowance of 49.05 A.Y. 2008-09 Commissioner Act, 1961 certain expenditure of Income Tax & certain additions (Appeals) at the time of assessment

Income Tax Tax Deducted at 77.94 A.Y. 2006-07 Commissioner

Act, 1961 Source on Salaries 0.44 A.Y. 2008-09 of Income Tax

10.96 A.Y. 2009-10 (Appeals)

Central Demand of Central 1,298.36 November Central Excise,

Excise Act, Excise duty in 1996 to March Service Tax 1944 respect of Naphtha 2001 and Appellate Tribunal procured at March 2005 to concessional rates October 2005 used for products 998.72 April 2001 to Appeal to Central which are not February 2005 Excise, Service Tax exempted Thai Appellate Tribunal Unit is being filed

1,788.55 July 2007 to Disputed by the August 2009 company before Commissioner of Central Excise

Central Demand of Central 1,744.66 Prior to 1997 to Central Excise, Excise Act, Excise duty in March 2006 Service Tax 1944 respect of Low Appellate Tribunal Sulphur High Stock/Furnace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit)

Demand of Central 290.34 August 1986 to Commissioner of Excise duty in February 2000 Central Excise respect of Low (Appeals) Sulphur High Stock/Furnace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit)

Uttarakhand Additional 32.16 2006-07 Asst Commissioner Value Added duty imposed Commercial Tax- Tax, 2005 due to wrong Uttarakhand identification of product ingredient

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

(xi) Based on our audit procedures and as p,er the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a bank. The company has not issued any debentures and has not obtained any loan from Financial Institution.

(xii) Based on our examination of documents and records and as per fnformation and explanations given, 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 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) According to the information and explanations given to us, the company is not dealing or trading in shares, securities, debentures and other investments. Therefore, the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.

(xv) According to the information and explanations given to us, the Company has given a corporate guarantee for loan from bank taken by its joint venture company 'viz. FACT RCF Building Products Ltd., the terms and conditions whereof in our opinion, are not prima-facie prejudicial to the interests of the Company.

(xvi) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, term loans availed by the Company were, applied by the Company during the year for the purposes for which the loans were obtained other than funds temporarily invested pending utilization for the intended use.

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

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

(xix) The Company has not issued any debentures.

(xx) The Company has not raised any money by public issue during the year.

(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For JCR & Co. For G. D. Apte & Co.

Firm Registration Number 105 270W Firm Registration Number 100 515W

Chartered Accountants Chartered Accountants

Saiprabha. R U. S. Abhyankar

Partner Partner

Membership No. 34716 Membership No. 113053

Mumbai Mumbai

Date : May 10, 2011 Date : May 10, 2011

 
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