Mar 31, 2016
To the Members of Spentex Industries Limited
Report on the Standalone Financial Statements
We have audited the accompanying standalone financial statements of Spentex Industries Limited ("the Company"), which comprises the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.
Management''s Responsibility for the Standalone Financial Statements
The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules,
2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor''s Responsibility
Our responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.
We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the standalone financial statements.
Basis for qualified opinion We draw attention to:
a. Note No. 39 of the standalone financial statements, wherein, we are unable to determine the extent of provision that may be required for diminution in the value of long term investment amounting to Rs.204,469,921/- in Amit Spinning Industries Limited, subsidiary of the company. Significant uncertainties exist in relation to the recoverability of loans amounting to Rs.320,128,019/-, interest accrued thereon Rs.95,950,582/- and other outstanding amounting to Rs.316,160,592/- due from above subsidiary. Further, we are unable to determine the amount of liability that may arise on account of corporate guarantee mentioned in Note No. 29 the standalone financial statements on behalf of above subsidiary.
b. Note No. 40 of the standalone financial statements, wherein, we are unable to determine the extent of provision that may be required for diminution in the value of long term investment amounting to Rs.561,011,339/- and Rs.9,323,779/-in Spentex Netherland B.V. and Spentex Tashkent Toytepa LLC respectively, subsidiary/step down subsidiary of the company. Uncertainties exist in relation to the recoverability of Rs.95, 070,902/- due from above subsidiary. Further, we are unable to determine the amount of liability that may arise on account of corporate guarantee mentioned in Note No. 29 of the standalone financial statements on behalf of above subsidiary.
c. Note No. 40 of the standalone financial statements wherein, the company has not charged to the statement of profit & loss Rs.70,012,404, due from its step down subsidiary, Spentex Tashkant Toyetpa LLC, shown as trade receivable under the head "Other Non Current Assets" in the standalone financial statements.
d. Note No. 42 of the standalone financial statements, wherein, the company has not charged to statement of profit & loss Rs.10,135,376/- and Rs.2,695,093/- shown as claim receivables and export incentive respectively under the head " Other Non Current Assets" in the standalone financial statements.
e. Note No. 43 of the standalone financial statements wherein, we are unable to comment on the recoverability of amounts relating to certain parties aggregating to Rs.44, 489,435/- and Rs.11,493,145/- shown as advance against expenses and advance to trade payable respectively under the head " Long Term Loan & Advances" for which no provision has been made in the books of amounts.
f. Note No. 49 of the standalone financial statements wherein, the company has not charged to statement of profit & loss penal interest and other charges, if any, in respect of delay in repayment of borrowings from banks. Therefore, we are unable to comment on the adequacy of interest and other charges provided for in the statement of profit & loss.
We further report that, without considering the impact of paragraph (a) ,(b) and (f) above the effect of which could not be determined, had the observation made by us in paragraph (c), (d) and (e) above been considered, the loss before tax for the year would have been Rs.947,937,323/- (as against the reported figure of Rs.809,111,870/-), Reserves and Surplus would have been negative Rs.3,126,702,780/- (as against negative reported figure Rs.2,987,877,827/-), Trade Receivable under the head "Other Non Current Assets" would have been Rs. Nil (as against the reported figure of Rs.70,012,404/-), Export Incentive under the head "Other Non Current Assets" would have been Rs. Nil (as against the reported figure of Rs.26,95,093/-), Claim Receivable under the head "Other Non Current Assets" would have been Rs.1,902,810/- (as against the reported figure of Rs.12,038,186/-), Advance against expenses under the head "Long Term Loans and Advances" would have been Rs.53,038,267/- (as against the reported figure of Rs.97,527,702/-) and Advance to trade payable under the head "Long Term Loans and Advances" would have been Rs.23,678,849/- (as against the reported figure of Rs.35,171,994/-).
Qualified Opinion
In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the basis for qualified opinion paragraph, 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, 2016 and its loss and its cash flows for the year ended on that date.
Emphasis of Matter
Without qualifying our opinion, we draw attention to:
a. Note No. 41 of the standalone financial statements which indicates that the Company has accumulated losses and its net worth has been fully eroded, the Company has incurred a net cash loss during the current and previous year(s) and, the Company''s current liabilities exceeded its current assets as at the balance sheet date. Further majority of the banks have categorized borrowing of the company as Non performing Assets (NPA) during the year and have sent recall notices u/s 13(2) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), 2002 to the company. These conditions, along with other matters set forth in Note No. 41, indicate the existence of a material uncertainty that may cast significant doubt about the Company''s ability to continue as a going concern. However, the financial statements of the Company has been prepared on a going concern basis for the reasons stated in the said Note.
b. Note No. 42 of the standalone financial statements regarding balance recoverable of Rs.18,410,722/- shown as advance to trade payable under the head " Long Term Loans & Advances " of the standalone financial statements which has been considered good by the management in view of the reasons stated therein. We have relied upon the assertions given by the management as to the recoverability of the said amounts.
c. Note No. 4 of the standalone financial statement, wherein, the Company has not allotted shares against the share application amount of Rs.110,950,000/- which was brought in by the promoters in more than one installments under restructuring scheme approved by the Bankers. However, the company has not complied with the provisions of Section 42 of the Companies Act, 2013 for the reasons stated in the said Note.
d. Note No. 44 of the standalone financial statements requiring deposit/invest a sum of at least 15% of the amount of its debentures maturing during the financial year 2016-17 in one or more of the prescribed methods vide circular no. 04/2013 dated February 11, 2013 issued by Ministry of Corporate Affairs. However, the company has not complied with the requirement of the said circular.
e. Note No. 45 of the standalone financial statements regarding balances of parties under the head trade receivables, trade payables and loans & advances which are subject to confirmation, reconciliation and consequential adjustments, if any.
Our opinion is not modified in respect of these matters.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor''s Report) Order, 2016 ("the 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 1, a statement on the matters specified in the paragraph 3 and 4 of the Order.
2. As required by Section 143 (3) of the Act, we report that:
a. We have sought and except for the matters described in the Basis for Qualified Opinion paragraph, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;
b. Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph above, 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 in this report are in agreement with the books of account;
d. Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, 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. The matter described in the Basis for Qualified Opinion paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.
f. On the basis of written representations received from the directors as on March 31, 2016 and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2016 from being appointed as a director in terms of section 164(2) of the Act;
g. With respect to the adequacy of the internal financial controls over financial reporting of the company and operating effectiveness of such controls, refer to our separate report in Annexure 2 to this report.
h. 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 litigation on its financial position in its financial statements. Refer Note No. 29 of 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 were no amounts which were required to be transferred to the Investor Education and Protection Fund by the
Annexure 1 to Independent Auditor''s Report of even date of the Standalone Financial Statements of Spentex Industries Limited
Referred to in paragraph 1 of the Independent Auditors'' Report of even date under the heading "Report on Other Legal and Regulatory Requirements" to the members of Spentex Industries Limited on the standalone financial statements as of and for the year ended March 31, 2016.
We report that:
1. (a) The Company has generally maintained proper records showing full particulars including quantitative details and situation of fixed assets.
(b) The fixed assets have been physically verified by the management according to a phased programmed designed to cover all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the company and nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the management during the year and no material discrepancies were noticed on such verification as compare to the book records.
(c) According to the information and explanation given to us and on the basis of examination of title deeds, other relevant records
provided to us evidencing the title, confirmation from the lenders with whom title deeds have been deposited as security in respect of funding facilities availed, we are of the opinion that the title deeds of immovable properties, as disclosed in Note No. 12 on fixed assets to the financial statements, are held in the name of the company as at the balance sheet date except the following:
Particulars of Land & Building |
Gross Block as on 31.03.2016 |
Net Block as on 31.03.2016 |
Remarks |
Leasehold Land & Building thereon |
490,047,029 |
240,278,431 |
The title deeds are in the name of the erstwhile Company that merged with the Company under section 391 to 394 of the Companies Act, 1956 pursuant to Schemes of Amalgamation as approved by the Honorable High Court. |
2. (a) Inventories other than inventory lying with third party have been physically verified by the Management to extent practicable at reasonable intervals during the year. In our opinion the frequency of verification is reasonable. The discrepancies noticed on physical verification as compared to the books records were not material having regard to the size and nature of the operations of the company and have been properly adjusted in the books of account.
3. according to the information and explanation given to us, the Company has not granted any loan, secured or unsecured to companies, firms, limited liability partnership or other parties covered in the register maintained under Section 189 of the Act. Accordingly paragraphs 3(iii)(a) and 3(iii)(b) & 3(iii)(c) of the Companies (Auditor''s Report) Order, 2016 are not applicable to the Company.
4. According to the information and explanations given to us and in our opinion the company has not advanced any loan, investment, guarantee or security to any person as specified under section 185 of the Companies Act, 2013. The company has not advanced any loan, guarantee or security to any person within the meaning of section 186 of the Companies Act, 2013. The company has compiled with provision of section 186 of the Companies Act, 2013 with regards to investment made.
5. according to the information and explanation given to us, the Company has not accepted any deposits from the public under the provisions of Sections 73 to 76 of the Act or other relevant provisions of the Act and rules framed there under during the year.
6. We have broadly reviewed the books of account, maintained by the Company in respect of products where pursuant to the rules made by the Central Government of India, the maintenance of cost records has been prescribed 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. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.
7. (a) The Company is not regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees'' state insurance, income tax, sales tax, service tax, customs duty, excise duty, value added tax, cess and there have been serious delays in a large no of cases. According to the information and explanations given to us, undisputed amounts payable in respect of aforesaid dues were in arrears as at March 31, 2016 for a period of more than six months from the date they became payable, are as follows:
Name of the statute |
Nature of dues |
Amount (Rs.) |
Period to which the amount relates (F.Y.) |
Due Date |
Date of Payment |
Provident Fund Act |
Provident Fund |
1,868,650 |
August 2015 |
15th September 2015 |
5th April 2016 |
Income Tax |
TDS&TCS |
1,076,823 |
July 2015 |
7th August 2015 |
Rs.462,000/- on 5th April 2016 and Rs.614,823/- on 21st April 2016 |
Income Tax |
TDS&TCS |
616,622 |
August 2015 |
7th September 2015 |
21st April 2016 |
Finance Act 1994 |
Service Tax |
87,296 |
June 2015 |
6th July 2015 |
Unpaid Till date |
Finance Act 1994 |
Service Tax |
1,870,792 |
July 2015 |
6th August 2015 |
Rs.11,99,271/- paid on 4th May 2016 & Rs.671,521/- still unpaid |
Finance Act 1994 |
Service Tax |
1,628,056 |
August 2015 |
6th September 2015 |
Rs 1,202,790/- paid on 4th May 2016 & Rs.425,266/- still unpaid |
(b) According to the information and explanations given to us and the records of the company examined by us, the particulars of dues of income tax, sales tax, wealth tax, service tax, customs duty, excise duty, value added tax and cess which have not been deposited on account of matters pending before appropriate authorities are as under:
Name of the statute |
Nature of dues |
Amount (Rs.) |
Period to which the amount relates (F.Y.) |
Forum where the dispute is pending |
Income Tax |
|
|
|
|
The Income Tax Act, 1961 |
Disallowance of goodwill amortization & other expenses |
10,875,657 (including amount paid Rs.3,981,354) |
AY 2001-02 AY 2003-04 |
Income Tax Tribunal Delhi Bench - Rs.3,981,354/- |
High Court - Rs.6,894,303/- |
||||
The Income Tax Act, 1961 |
Disallowances of various expenses viz. sales tax subsidy, etc. |
27,095,747 (including amount paid Rs.2,000,000) |
AY 2003-04 AY 2005-06 AY 2006-07 |
High Court, New Delhi |
The Income Tax Act, 1961 |
Addition on account of arm''s length price of compensation for corporate guarantee to Associated Enterprises |
36,403,835 |
AY 2008-09 |
Income Tax Appellate Tribunal Delhi Branch |
Sales Tax |
|
|
|
|
The M.P Commercial Tax Act, 1994 |
Penalty - Purchase Tax demand |
164,195 (including amount paid Rs. 128,195) |
1996-97 |
First Appellate Authority |
The M.P Commercial Tax Act, 1994 |
Sales Tax Demand |
815,157 (including amount paid Rs.815,157) |
2009-10 |
First Appellate Authority |
The M.P Commercial Tax Act, 1994 |
Sales Tax demand on sale of DEPB licenses |
1,970,233 |
2001-03 2009-10 |
Assessing Authority, Indore |
The M.P. Commercial Tax Act, 1994 |
Sales Tax Demand |
455,160 (including amount Paid Rs 45520) |
2013-14 |
First Appellate Authority |
The M.P. Commercial Tax Act, 1994 |
Sales Tax Demand |
375,803 (including amount paid Rs. 105,250) |
2010-11 |
First Appellate Authority |
Entry Tax Act, 1976 |
Entry Tax demand |
1,538,453 (including amount paid Rs.414,844) |
1992-97 |
Assessing Authority, Indore |
Maharashtra Value Added Tax Act, 2002 |
Sales Tax Demand |
532,870 (including amount paid Rs.200,000) |
2004-05 |
Deputy Commissioner, Nagpur |
Central Sales Tax, 1956 |
Sales Tax Demand |
2,999,290 (including amount paid Rs.1,000,000) |
2004-05 |
Deputy Commissioner, Nagpur |
Finance Act |
|
|
|
|
Finance Act, 1994 |
Refund against export services |
4,381,611 |
2006-16 |
Assistant Commissioner of Central Excise, Nagpur |
Finance Act, 1994 |
Service Tax on GTA paid including penalty |
280,282 |
Apr-05 to Sept-06 |
Customs, Excise & Service Tax Appellate Tribunal, New Delhi |
Finance Act, 1994 |
Service Tax on Foreign Commission paid to overseas agents |
1,079,549 (including amount paid Rs. 107,955) |
2009-10 to 2010-11 |
Customs, Excise & Service Tax Appellate Tribunal, New Delhi |
Finance Act, 1994 |
Suo Moto credit taken from Additional Excise Duty |
145,531 (including amount paid Rs. 10,915) |
Aug- 12 |
Commissioner (Appeals), Central Excise, Bhopal |
Finance Act, 1994 |
Service Tax credit taken on invoices not having Serial No. & Registration No. |
3,744,510 (including amount paid Rs. 140,419) |
Apr-09 to Oct- 13 |
Commissioner (Appeals), Central Excise, Bhopal |
Finance Act, 1994 |
Service Tax credit taken on photocopied copies of Bill of Entry and foreign commission |
426,338 (including amount paid Rs 21,317) |
Apr-09 to Oct- 13 |
Customs, Excise & Service Tax Appellate Tribunal, New Delhi |
Finance Act, 1994 |
Service Tax credit taken on tour operator services bill |
490,872 |
Apr-09 to Apr-13 |
Commissioner (Appeals), Central Excise, Bhopal |
Finance Act, 1994 |
Service Tax credit taken on foreign commission |
375,464 (including amount paid Rs. 13,705) |
Apr-11 to Mar-12 |
Commissioner (Appeals), Central Excise, Bhopal |
Central Excise Act |
|
|
|
|
The Central Excise Act, 1944 |
Excise duty demands (Baramati unit) |
10,806,176 |
Jun-99 to Dec-01 |
Customs, Excise & Service Tax Appellate Tribunal, Mumbai |
The Central Excise Act, 1944 |
Excise duty - demand of duty on clearance of goods under notification 30/2004 without payment of duty (Butibori unit) |
75,185,214 (including amount paid Rs.2,314,143) |
Aug-04 to Apr-07 |
Deputy Commissioner of Central Excise, Nagpur - Rs.77,371/- |
Commissioner, Central Excise Nagpur -Rs.72,693,700/- |
||||
Customs, Excise & Service Tax Appellate Tribunal, New Delhi - Rs.2,414,143/- |
||||
The Central Excise Act, 1944 |
Cenvat demand for packing material including penalty (Pithampur unit) |
168,812 |
Apr-00 to Mar-04 |
Commissioner (Appeals), Central Excise, Indore |
The Central Excise Act, 1944 |
Cenvat demand on packing material / scrap (Butibori unit) |
920,697 |
Apr-03 to July 2015 |
Customs, Excise & Service Tax Appellate Tribunal, New Delhi -Rs.81,195/- |
|
|
|
|
Commissioner (Appeals), Rs.786,496/- |
Deputy Commissioner /Assistant Commissioner, Rs 53,006/- |
||||
The Central Excise Act, 1944 |
Cenvat on samples used in quality control (Butibori unit) |
333,101 (including amount paid Rs.67,597) |
Apr-03 to Oct-13 |
Customs, Excise & Service Tax Appellate Tribunal, Nagpur - Rs.117,762/- |
Deputy Commissioner, Central Excise, Nagpur -Rs.215,339/- |
||||
The Central Excise Act, 1944 |
Excise duty - demand of duty on clearance of goods under notification 30/2004 without payment of duty (Pithampur unit) |
53,291,002 (including amount paid Rs.13,322,751) |
Mar-04 to Feb-07 |
High Court , Indore |
The Central Excise Act, 1944 |
Demand under section Rule 6(3)(i) |
121,563,064 |
2012-13 |
Customs, Excise & Service Tax Appellate Tribunal, New Delhi |
The Central Excise Act, 1944 |
Cenvat on Capital Goods |
5,332,642 (including amount paid Rs. 673,329 |
2002-2003 to 2010-11 |
Customs, Excise & Service Tax Appellate Tribunal, Nagpur - Rs. 2,565,854/- |
Additional Commissioner of Central Excise, Nagpur Rs.2,551,564/- |
||||
Commissioner (appeals) central excise Rs 63,026/- |
||||
Deputy Commissioner of Central Excise, Nagpur- Rs.152,198/- |
8. Based on our audit procedures and according to the information and explanations given to us, we are of the opinion that company has defaulted in repayment of dues to the banks or government during the year. The Company has outstanding dues in respect of financial institutions, government or debenture holders are as follows:
S. No. |
Name of Bank |
Type of loan |
Amount of default as at balance sheet (includes Interest) |
Period of Default |
1 |
Axis Bank Ltd |
Non Convertible Debentures |
16,892,900 |
1-90 |
2 |
Axis Bank Ltd |
Term Loan |
8,345,029 |
1-90 |
3 |
Bank of Baroda |
Term Loan |
82,523,860 |
Non Performing asset (NPA) as on 31.03.2016. |
4 |
Canara Bank |
Term Loan |
43,086,793 |
Non Performing asset (NPA) as on 31.03.2016. |
5 |
ICICI Bank Ltd |
Term Loan |
660,796,727 |
Non Performing asset (NPA) as on 31.03.2016. |
6 |
IDBI Bank Ltd |
Term Loan |
41,418,826 |
Non Performing asset (NPA) as on 31.03.2016. |
7 |
Indian Bank |
Term Loan |
193,716,328 |
Non Performing asset (NPA) as on 31.03.2016. |
8 |
IndusInd Bank Ltd |
Term Loan |
5,759,957 |
Non Performing asset (NPA) as on 31.03.2016. |
9 |
ING Vysya Bank Ltd |
Term Loan |
172,479,747 |
Non Performing asset (NPA) as on 31.03.2016. |
10 |
Oriental Bank of Commerce |
Term Loan |
359,295,528 |
Non Performing asset (NPA) as on 31.03.2016. |
11 |
State Bank of India |
Term Loan |
973,995,302 |
Non Performing asset (NPA) as on 31.03.2016. |
12 |
State Bank of India |
Short Term Borrowings |
1,826,424,955 |
Non Performing asset (NPA) as on 31.03.2016. |
13 |
Oriental Bank of Commerce |
Short Term Borrowings |
674,347,445 |
Non Performing asset (NPA) as on 31.03.2016. |
14 |
ING Vysya Bank Ltd |
Short Term Borrowings |
182,106,227 |
Non Performing asset (NPA) as on 31.03.2016. |
15 |
Indian Bank |
Short Term Borrowings |
244,660,096 |
Non Performing asset (NPA) as on 31.03.2016. |
16 |
Axis Bank Ltd |
Short term Borrowings |
128,820,288 |
1-90 |
|
Total |
|
5,614,670,008 |
|
9. In our opinion and according to information and explanation given by the management, the term loans obtained by the company have been applied for the purpose for which they were raised. According to the information and explanation given to us, there was no money raised by the way of initial public offer or further public offer by the company during the year.
10. During the course of our examination of the books of accounts and records carried out in accordance with the generally accepted auditing practices and according to the information and explanations given to us, no fraud by the Company or on the Company by its officers or employees has been noticed or reported during the year.
11. According to the information and explanation given to us, the company has paid/ provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act, 2013.
12. In our opinion and according to the information and explanations given to us, the Company is not a Nidhi company. Accordingly, clause 3(xii) of the Companies (Auditors Report) Order, 2016 is not applicable.
13. According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.
14. The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. Accordingly, clause 3(xiv) of the Companies (Auditors Report) Order, 2016 is not applicable.
15. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, clause 3(xv) of the Companies (Auditors Report) Order, 2016 is not applicable.
16. The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.
Annexure 2 to Independent Auditors'' Report of even date on standalone Financial Statement of Spentex Industries Limited
Referred to in paragraph 2 (g) of the Independent Auditors'' Report of even date under the heading "Report on Other Legal and Regulatory Requirements" to the members of Spentex Industries Limited on the standalone financial statements as of and for the year ended March 31, 2016.
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")
We have audited the internal financial controls over financial reporting of Spentex Industries Limited ("the Company") as of March 31, 2016 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.
Management''s Responsibility for Internal Financial Controls
The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.
Auditors'' Responsibility
Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note") and the Standards on Auditing, issued by The Institute of Chartered Accountants of India and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. 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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the Company''s internal financial controls system over financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
A company''s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''s assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Qualified Opinion
According to the information and explanations given to us and based on our audit, the following material weaknesses have been identified in the operating effectiveness of the Company''s internal financial controls over financial reporting as at March 31, 2016.
The company did not have an appropriate internal control system for obtaining confirmation from certain parties included under the head trade receivables, trade payables, loans & advances and other current liabilities and its reconciliation/consequential adjustments, if any. Further, the company''s internal financial controls over recovery of certain long outstanding trade receivable, claim receivables and advance balances are not adequate.
The company''s internal financial controls were not operating effectively in respect of the above which may potentially impact the results of the company.
A ''material weakness'' is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company''s annual or interim financial statements will not be prevented or detected on a timely basis.
In our opinion, except for the possible effects of the material weaknesses described above on the achievement of the objectives of the control criteria, the Company has maintained, in all material respects, adequate internal financial controls over financial reporting and such internal financial controls over financial reporting were operating effectively as of March 31, 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.
We have considered the material weaknesses identified and reported above in determining the nature, timing, and extent of audit tests applied in our audit of the March 31, 2016 standalone financial statements of the Company, and these material weaknesses have affected our opinion on the standalone financial statements of the Company and we have accordingly issued a qualified opinion on the standalone financial statements.
For J.C. Bhalla & Company
Chartered Accountants
Firm Regn. No. 001111-N
Sd/-
(Akhil Bhalla)
Place : New Delhi Partner
Dated : May 27, 2016 Membership No.505002
Mar 31, 2015
We have audited the accompanying standalone financial statements of
Spentex Industries Limited ("the Company"), which comprises the Balance
Sheet as at March 31,2015, the Statement of Profit and Loss, the Cash
Flow Statement for the year then ended, and a summary of 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 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 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 qualified audit opinion on the
standalone financial statements.
Basis for qualified opinion We draw attention to:
a. Note No. 41 of the standalone financial statements, wherein, we are
unable to determine the extent of provision that may be required for
diminution in the value of long term investment amounting to
Rs.204,469,921/- in Amit Spinning Industries Limited, subsidiary of the
company. Uncertainties exist in relation to the recoverability of loans
amounting to Rs.320,128,019/-, interest accrued thereon Rs.95,950,582/-
and advances amounting to Rs.226,165,468/- due from above subsidiary.
Further, we are unable to determine the amount of liability that may
arise on account of corporate guarantee mentioned in Note No. 30 of the
standalone financial statements on behalf of above subsidiary.
b. Note No. 42 of the standalone financial statements, wherein, we are
unable to determine the extent of provision that may be required for
diminution in the value of long term investment amounting to
Rs.561,011,339/- and Rs.9,323,779/- in Spentex Netherland B.V and
Spentex Tashkent Toytepa LLC respectively, subsidiary/step down
subsidiary of the company. Uncertainties exist in relation to the
recoverability of Rs.95,070,902/- and Rs.70,012,404/- due from above
subsidiary/step down subsidiary respectively. Further, we are unable to
determine the amount of liability that may arise on account of
corporate guarantee mentioned in Note No. 30 of the standalone
financial statements on behalf of above subsidiary.
c. We are unable to comment on the recoverability of advance balance
of Rs.19,040,000/-, included under the head "Advance against expenses"
in Note No. 14 of the standalone financial statements, for which no
provision has been made in the books of account.
d. Note No. 44 of the standalone financial statements, wherein, the
company has not charged to statement of profit & loss Rs.10,135,376/-
and Rs.2,695,093/- shown as claim receivables and export incentive
respectively.
We further report that, without considering the impact of paragraph (a)
and (b) above the effect of which could not be determined, had the
observation made by us in paragraph (c) and (d) above been considered,
the loss before tax for the year would have been Rs.653,781,143/- (as
against the reported figure of Rs.621,910,674/-), Reserves and Surplus
would have been negative Rs.2,210,635,927/- (as against negative
reported figure Rs.2,178,765,458/-), Export Incentive included under
head "Other Non Current Assets" would have been Rs.19,030,969/- (as
against the reported figure of Rs.21,726,062/-), claim receivables
included under the head "Other Non Current Assets" would have been
Rs.2,774,242/- (as against the reported figure of Rs.12,909,618/-) and
advance against expenses included under the head "Long Term Loans and
Advances" would have been Rs.99,655,219/- (as against the reported
figure of Rs.118,695,219/-) .
Qualified Opinion
In our opinion and to the best of our information and according to the
explanations given to us, except for the possible effects of the matter
described in the basis for qualified opinion paragraph, 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 loss
and its cash flows for the year ended on that date.
Emphasis of Matter
Without qualifying our opinion, we draw attention to:
a. Note No. 4 of the standalone financial statement, wherein, the
Company has not allotted shares against the share application amount of
Rs.110,950,000/- which was brought in by the promoters in more than one
installments under restructuring scheme approved by the Bankers.
However, the company has not complied with the provisions of Section 42
of the Companies Act, 2013 for the reasons stated in the said Note.
b. Note No. 43 of the standalone financial statements which indicates
that the Company has accumulated losses and its net worth has been
fully eroded, the Company has incurred a net cash loss during the
current and previous year(s) and, the Company's current liabilities
exceeded its current assets as at the balance sheet date. These
conditions, along with other matters set forth in Note No. 43, indicate
the existence of a material uncertainty that may cast significant doubt
about the Company's ability to continue as a going concern. However,
the financial statements of the Company have been prepared on a going
concern basis for the reasons stated in the said Note.
c. Note No. 44 of the standalone financial statements regarding
amounts recoverable relating to certain trade receivable, advance
balances and export incentive recoverable Rs.6,371,477/-,
Rs.27,314,712/- and Rs.17,869,256/- respectively which has been
considered good by the management in view of the reasons stated
therein. We have relied upon the assertion given by the management as
to the recoverability of the said amounts.
d. Note No. 45 of the standalone financial statements requiring
deposit/invest a sum of at least 15% of the amount of its debentures
maturing during the financial year 2013-14, 2014-15 and 2015-16 in one
or more of the prescribed methods vide circular no. 04/2013 dated
February 11,2013 issued by Ministry of Corporate Affairs. However, the
company has not complied with the requirement of the said circular.
e. Note No. 46 of the standalone financial statements regarding
balances of parties under the head trade receivables, trade payables
and loans & advances which are subject to confirmation, reconciliation
and consequential adjustments, if any.
Our opinion is not modified in respect of these matters.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order, 2015 ("the
Order") issued by the Central Government of India in terms of
sub-section (11) of section 143 of the Act, we give in the Annexure, a
statement on the matters specified in the paragraph 3 and 4 of the
Order.
2. As required by Section 143 (3) of the Act, we report that:
a. We have sought and, except for the matters described in the Basis
for Qualified Opinion paragraph, obtained all the information and
explanations which to the best of our knowledge and belief were
necessary for the purposes of our audit;
b. Except for the possible effects of the matter described in the Basis
for Qualified Opinion paragraph above, 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 in this report are in agreement with the
books of account;
d. Except for the possible effects of the matter described in the Basis
for Qualified Opinion paragraph, 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. The matter described in the Basis for Qualified Opinion paragraph
above, in our opinion, may have an adverse effect on the functioning of
the Company.
f. On the basis of written representations received from the directors
as on March 31,2015 and taken on record by the Board of Directors, none
of the directors is disqualified as on March 31,2015 from being
appointed as a director in terms of section 164(2) of the Act;
g. The qualification relating to the maintenance of accounts and other
matters connected therewith are as stated in the Basis for Qualified
Opinion paragraph above.
h. 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 litigation on its
financial position in its financial statements. Refer Note No. 30 and
Note No. 40 of 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 were no amounts which were required to be transferred to the
Investor Education and Protection Fund by the Company.
Annexure to Independent Auditor's Report
Referred to in paragraph 1 of the Independent Auditors' Report of even
date under the heading "Report on Other Legal and Regulatory
Requirements" to the members of Spentex Industries Limited on the
standalone financial statements as of and for the year ended March
31,2015.
We report that:
1. (a) The Company is maintaining proper records showing full
particulars including quantitative details and situation of fixed
assets.
(b) The fixed assets have been physically verified by the management
according to a phased programmed designed to cover all the items over a
period of three years, which in our opinion, is reasonable having
regard to the size of the company and nature of its assets. Pursuant to
the programme, a portion of the fixed assets has been physically
verified by the management during the year and no material
discrepancies were noticed on such verification as compared to the book
records.
2. (a) Inventories other than inventory lying with third party have been
physically verified by the Management at reasonable intervals during the
year. In our opinion the frequency of verification is reasonable.
(b) According to information given to us, the procedures for physical
verification of the inventories followed by the management are
reasonable and adequate in relation to the size of the Company and
nature of its business.
(c) The Company is maintaining proper records of inventory. The
discrepancies noticed on physical verification of inventories as
compared to the book records were not material having regard to the
size and nature of the operations of the Company and have been properly
adjusted in the books of account.
3. The Company has not granted any loan, secured or unsecured to
companies, firms or other parties covered in the register maintained
under Section 189 of the Act. Accordingly paragraphs 3(iii)(a) and
3(iii)(b) of the Companies (Auditor's Report) Order, 2015 are not
applicable to the Company.
4. According to the information and explanations given to us, there is
adequate internal control system commensurate with the size of the
Company and the nature of its business for the purchase of inventory
and fixed assets and for the sale of goods and services. During the
course of our audit, we have neither come across nor have been informed
of any continuing failure to correct major weaknesses in internal
control system.
5. The Company has not accepted any deposits from the public under the
provisions of Sections 73 to 76 of the Act or other relevant provisions
of the Act and rules framed there under.
6. We have broadly reviewed the books of account, maintained by the
Company in respect of products where, pursuant to the rules made by the
Central Government of India, the maintenance of cost records has been
prescribed 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. We have not, however, made a detailed examination of the
records with a view to determine whether they are accurate or complete.
7. (a) The Company is regular in depositing with appropriate
authorities undisputed statutory dues including provident fund,
employees' state insurance, sales tax, wealth tax, customs duty, excise
duty, value added tax, cess and other statutory dues and is generally
regular in depositing undisputed statutory dues in respect of income
tax and service tax applicable to it. According to the information and
explanations given to us, no undisputed amounts payable in respect of
aforesaid dues were in arrears as at March 31,2015 for a period of more
than six months from the date they became payable except for Service
Tax of Rs.27,272/-.
(b) According to the information and explanations given to us and the
records of the company examined by us, the particulars of dues of
income tax, sales tax, wealth tax, service tax, customs duty, excise
duty, value added tax and cess at March 31, 2015, which have not been
deposited on account of dispute, are as follows:
Name of the Nature of dues
statute
Income Tax
The Income Tax Disallowance of goodwill
Act, 1961 amortisation & other expenses
The Income Tax Disallowances of various expenses
Act, 1961 viz. sales tax subsidy, etc.
The Income Tax Addition on account of arm's length
Act, 1961 price of compensation for corporate
guarantee to Associated Enterprises
Sales Tax
The MP Commercial Penalty - Purchase
Tax Act, 1994 Tax demand
The MP Commercial Sales Tax Demand
Tax Act, 1994
The MP Commercial Sales Tax demand on
Tax Act, 1994 sale of DEPB licenses
The MP Commercial Sales Tax Demand
Tax Act, 1994
Entry Tax Act, Entry Tax demand
1976
Maharashtra Value Sales Tax Demand
Added Tax Act, 2002
Central Sales Sales Tax Demand
Tax,1956
Finance Act
Finance Act, 1994 Refund against
export services
Finance Act, 1994 Service Tax on GTA
paid including penalty
Finance Act, 1994 Service Tax on Foreign Commission
paid to overseas agents
Finance Act, 1994 Suo Moto credit taken from
Additional Excise Duty
Finance Act, 1994 Service Tax taken on invoices not
having Serial No. & Registration No.
Finance Act, 1994 Service Tax taken on photocopied
copies of Bill of Entry and foreign
commission
Finance Act, 1994 Service Tax taken on tour
operator services bill
Finance Act, 1994 Service Tax taken on
foreign commission
Central Excise Act
The Central Excise Excise duty demands
Act, 1944 (Baramati unit)
The Central Excise Excise duty - demand of
Act, 1944 duty on clearance of goods
under notification 30/2004 without
payment of duty (Butibori unit)
The Central Excise Cenvat demand for packing material
Act, 1944 including penalty (Pithampur unit)
The Central Excise Cenvat demand on packing
Act, 1944 material/scrap (Butibori unit)
The Central Excise Cenvat on samples used in
Act, 1944 quality control (Butibori unit)
The Central Excise Refund of cenvat on inputs
Act, 1944 under Rule 18 (Pithampur unit)
The Central Excise Excise duty-demand of duty on
Act, 1944 clearance of goods under
notification 30/2004 without
payment of duty (Pithampur unit)
The Central Excise Demand under
Act, 1944 section Rule 6(3)(i)
The Central Excise Cenvat on Capital
Act, 1944 Goods
Name of the Amount (Rs.) Period to which
statute the amount
relates (F.Y.)
Income Tax
The Income Tax 10,875,657 (incl. amt. AY 2001-02
Act, 1961 paid Rs.3,981,354) AY 2003-04
The Income Tax 27,095,747 AY 2003-04
Act, 1961 (including amount AY 2005-06
paid Rs.2,000,000) AY 2006-07
The Income Tax 36,403,835 AY 2008-09
Act, 1961
Sales Tax
The MP Commercial 164,195 (incl. amt. 1996-97
Tax Act, 1994 paid Rs. 128,195)
The MP Commercial 815,157 (incl. amt. 2009-10
Tax Act, 1994 paid Rs.815,157)
The MP Commercial 1,970,233 2001-03
Tax Act, 1994
The MP Commercial 375,803 (incl. amt. 2010-11
Tax Act, 1994 paid Rs. 37,600)
Entry Tax Act, 1,538,453 (incl. amt. 1992-1997
1976 paid Rs.414,844)
Maharashtra Value 532,870 (incl. amt. 2004-05
Added Tax Act, 2002 paid Rs.200,000)
Central Sales 2,999,290 (incl. amt. 2004-05
Tax,1956 paid Rs.1,000,000)
Finance Act
Finance Act, 1994 3,439,884 2006-12
Finance Act, 1994 280,282 April 2005 to
Sept 2006
Finance Act, 1994 1,079,549 (incl. amt. 2009-10 to
paid Rs. 107,955) 2010-11
Finance Act, 1994 145,531 (incl. amt. Aug- 12
paid Rs. 10,915)
Finance Act, 1994 3,744,510 (incl. amt. Apr-09 to
paid Rs. 140,419) Oct- 13
Finance Act, 1994 290,599 Apr-09 to
Oct- 13
Finance Act, 1994 490,872 Apr-09 to Apr- 13
Finance Act, 1994 375,464 (incl. amt. Apr-11 to
paid Rs. 13,705) Mar- 12
Central Excise Act
The Central Excise 10,806,176 June 1999 to
Act, 1944 Dec 2001
The Central Excise 75,185,214 Aug, 2004 to
Act, 1944 (including amount Apr, 2007
paid Rs.2,314,143)
The Central Excise 168,812 April, 2000 to
Act, 1944 March, 2004
The Central Excise 794,266 April, 2003 to
Act, 1944 December, 2012
The Central Excise 309,475 (Incl. amt. Apr, 2003 to
Act, 1944 paid Rs.67,597) October, 2013
The Central Excise 60,216,366 Oct, 2004 to
Act, 1944 Jan, 2006
The Central Excise 53,291,002 March, 2004 to
Act, 1944 (including amount Feb, 2007
paid Rs.13,322,751)
The Central Excise 167,747,574 April-12 to
Act, 1944 March, 13
The Central Excise 5,269,616 2002-2003 to
Act, 1944 (including amount 2010-11
paid Rs. 673,329
Name of the Forum where the
statute dispute is pending
Income Tax
The Income Tax Income Tax Tribunal Delhi Bench -
Act, 1961 Rs.3,981,354/- High Court - Rs.6,894,303/-
The Income Tax Commissioner of Income Tax
Act, 1961 (Appeal), New Delhi
The Income Tax High Court, New Delhi
Act, 1961
Sales Tax
The MP Commercial First Appellate Authority
Tax Act, 1994
The MP Commercial First Appellate Authority
Tax Act, 1994
The MP Commercial Assessing Authority, Indore
Tax Act, 1994 2009-10
The MP Commercial First Appellate Authority
Tax Act, 1994
Entry Tax Act, Assessing Authority, Indore
1976
Maharashtra Value Deputy Commissioner, Nagpur
Added Tax Act, 2002
Central Sales Deputy Commissioner, Nagpur
Tax,1956
Finance Act
Finance Act, 1994 Assistant Commissioner of Central
Excise, Nagpur
Finance Act, 1994 Customs, Excise & Service Tax Appellate
Tribunal, New Delhi - Rs.280,282/-
Finance Act, 1994 Customs, Excise & Service Tax
Appellate Tribunal, New Delhi
Finance Act, 1994 Commissioner (Appeals), Central
Excise, Bhopal
Finance Act, 1994 Commissioner (Appeals), Central
Excise, Bhopal
Finance Act, 1994 Commissioner (Appeals), Central
Excise, Bhopal
Finance Act, 1994 Commissioner (Appeals), Central
Excise, Bhopal
Finance Act, 1994 Commissioner (Appeals), Central
Excise, Bhopal
Central Excise Act
The Central Excise Customs, Excise & Service Tax
Act, 1944 Appellate Tribunal, Mumbai
The Central Excise Deputy Commissioner of Central Excise,
Act, 1944 Nagpur - Rs.77,371/-
Commissioner, Central Excise Nagpur
- Rs.72,693,700/-
Customs, Excise & Service Tax Appellate
Tribunal, New Delhi - Rs.2,414,143/-
The Central Excise Commissioner (Appeals), Central
Act, 1944 Excise, Indore
The Central Excise Customs, Excise & Service Tax Appellate
Act, 1944 Tribunal, New Delhi Rs.81,195/-
Deputy Commissioner, Central Excise,
Nagpur - Rs.713,071/-
The Central Excise Customs, Excise & Service Tax Appellate
Act, 1944 Tribunal, Nagpur - Rs.117,762/-
Deputy Commissioner, Central Excise,
Nagpur - Rs.191,713/-
The Central Excise Joint Secretary, Ministry of Finance,
Act, 1944 New Delhi
The Central Excise High Court , Indore
Act, 1944
The Central Excise Customs, Excise & Service Tax Appellate
Act, 1944 Tribunal, New Delhi
The Central Excise Customs, Excise & Service Tax Appellate
Act, 1944 Tribunal, Nagpur - Rs. 2,565,854/-
Additional Commissioner of Central
Excise, Nagpur - Rs.2,551,564/-
Deputy Commissioner of Central
Excise, Nagpur- Rs.152,198/-
(c ) There were no amount which were required to be transferred to the
Investor Education and Protection Fund in accordance with the relevant
provisions of the Companies Act, 1956 (1 of 1956) and rules made
thereunder.
8. The Company has accumulated losses as at March 31,2015 which are
more than fifty percent of its net worth. The company has incurred cash
losses in the financial year covered by our audit and has not incurred
cash losses in the immediately preceding financial year.
9. Based on our audit procedures and according to the information and
explanations given to us, we are of the opinion that the Company has
defaulted in repayment of dues to banks, financial institutions or
debenture holders as follows:
S. Particulars Amount of Default
NO.
1 Non Convertible Debenture 95,781,428
2 Term Loan 683,325,713
3 Funded Interest Term Loan 78,360,643
4 Working Capital Term Loan I 70,882,616
5 Working Capital Term Loan II 112,438,732
6 Working Capital Term Loan IV 150,919,395
7 Corporate Loan 144,772,674
8 Short Term Loans other than cash credit 738,623
Total 1,337,219,824
S. Particulars Period of Default
NO. (In days)
1 Non Convertible Debenture 27 - 89
2 Term Loan 1 - 90
3 Funded Interest Term Loan 1 - 90
4 Working Capital Term Loan I 1 - 90
5 Working Capital Term Loan II 1 - 90
6 Working Capital Term Loan IV 1 - 90
7 Corporate Loan 1 - 90
8 Short Term Loans other than cash credit 1 - 90
Total
Further, as informed to us, the loan facilities availed from ING Bank
as term loan (outstanding balance as on 31.3.2015 amounting to
Rs.155,530,998/- with interest) and cash credit facilities (outstanding
balance as on 31.3.2015 amounting to Rs.164,867,234/-) have become
non-performing asset (NPA) for the lender as the company has not paid
the dues within 90 days of payments being falling due.
In addition to above, Cash Credit Facilities taken from the banks have
remained overdue during the substantial part of the year. The overdue
amounts aggregated to Rs.94,622,613/- as at 31.03.2015.
10. According to the information and explanations given to us, the
Company has not given any guarantee for loans taken by others from
banks or financial institutions during the year.
11. In our opinion, the term loans have been applied for the purpose
for which they were obtained.
12. During the course of our examination of the books of accounts and
records carried out in accordance with the generally accepted auditing
practices and according to the information and explanations given to
us, no fraud on or by the Company has been noticed or reported during
the year nor we have been informed of such case by the management.
For J.C. Bhalla & Company
Chartered Accountants
Firm Regn. No. 001111-N
Sd/-
(Akhil Bhalla)
Place : New Delhi Partner
Dated : May 29, 2015 Membership No.505002
Mar 31, 2014
We have audited the accompanying financial statements of Spentex
Industries 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.
Management''s Responsibility for the Financial Statements
Management is responsible for the preparation of these financial
statements that give a true and fair view of the financial position,
financial performance and cash flows of the Company in accordance with
the Accounting Standards referred to in sub-section (3C) of Section 211
of the Companies Act, 1956 ("the Act") read with the General
Circular 15/2013 dated 13 September 2013 of the Ministry of Corporate
Affairs in respect of Section 133 of the Companies Act, 2013. This
responsibility includes the design, implementation and maintenance of
internal control relevant to the preparation and presentation of the
financial statements that give a true and fair view and are free from
material misstatement, whether due to fraud or error.
Auditor''s Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in accordance
with the Standards on Auditing issued by the Institute of Chartered
Accountants of India. Those Standards require that we comply with
ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor''s judgment, including the
assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
Company''s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances but not for the purpose of expressing an opinion on the
effectiveness of the 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 qualified audit opinion. Basis
for Qualified Opinion We draw attention to:
a. i. Note No. 41 of the financial statements, wherein, we are unable
to determine the extent of provision that may be required
for diminution in the value of long term investment amounting to Rs
20,44,69,921 in Amit Spinning Industries Limited, subsidiary of the
company. Uncertainties exist in relation to the recoverability of loans
amounting to Rs 32,01,28,019, interest accrued thereon Rs 9,59,50,582 and
advances amounting to Rs 13,21,98,605 due from above subsidiary.
Further, we are unable to determine the amount of liability that may
arise on account of corporate guarantee mentioned in Note No. 30 of the
financial statements on behalf of above subsidiary.
ii. Note No. 42 of the financial statements, wherein, we are unable to
determine the extent of provision that may be required for diminution
in the value of long term investment amounting to Rs 56,10,11,339 and Rs
93,23,779 in Spentex Netherland B.V. and Spentex Tashkent Toytepa LLC
respectively, subsidiary/step down subsidiary of the company.
Uncertainties exist in relation to the recoverability of Rs 9,50,70,902
and Rs 7,00,12,404 due from above subsidiary/step down subsidiary
respectively. Further, we are unable to determine the amount of
liability that may arise on account of corporate guarantee mentioned in
Note No. 30 of the financial statements on behalf of above
subsidiary/step down subsidiary.
The aggregate amount of investments and other recoverables referred to
in para (i) and (ii) as above amounts to Rs 77,48,05,039 (Previous Year
Rs 77,48,05,039) and Rs 71,33,60,512 (Previous year Rs 63,61,30,566)
respectively.
b. Note No. 44 of the financial statements, wherein, the Company has
not charged to statement of profit and loss Rs 1,01,35,376 and Rs
26,95,093 shown as claim receivable and export incentive respectively.
We further report that, without considering the impact of paragraph (a)
above the effect of which could not be determined, had the observations
made by us in paragraph (b) above been considered, the loss before tax
for the year would have been Rs 13,14,67,277 (as against the reported
figure of Rs 11,86,36,808), Reserves and Surplus would have been
negative Rs 1,55,14,85,221 (as against the negative reported figure of Rs
1,53,86,54,752), Export Incentive included under the head "Other Non
Current Assets" would have been Rs 1,78,69,256 (as against the
reported figure of Rs 2,05,64,349) and claim receivable included under
the head "Other Non Current assets" would have been Rs 1,83,29,992
(as against the reported figure of Rs 2,84,65,368).
Qualified Opinion
In our opinion and to the best of our information and according to the
explanations given to us, except for the possible effects of the matter
described in the Basis for Qualified Opinion paragraph, the financial
statements give the information required by the Act in the manner so
required and give a true and fair view in conformity with the
accounting principles generally accepted in India:
(a) in the case of the Balance Sheet, of the state of affairs of the
Company as at March 31,2014;
(b) in the case of the Statement of Profit and Loss, of the loss for
the year ended on that date; and
(c) in the case of the Cash Flow Statement, of the cash flows for the
year ended on that date.
Emphasis of Matter
Without qualifying our opinion, we draw attention to:
(a) Note No. 43 of the financial statements regarding preparation of
these accounts on a going concern basis due to reasons indicated
therein.
(b) Note No. 44 of the financial statements regarding amounts
recoverable relating to certain trade recievable, advance balances and
export incentive recoverable Rs 63,71,477, Rs 2,73,14,712 and Rs
1,78,69,256 respectively which has been considered good by the
management in view of the reasons stated therein. We have relied upon
the assertion given by the management as to the recoverability of the
said amounts.
(c) Note No. 45 of the financial statements requiring deposit/invest a
sum of atleast 15% of the amount of its debentures maturing during the
financial year 2013-14 in one or more of the prescribed methods vide
circular no. 04/2013 dated February 11,2013 issued by Ministry of
Corporate Affairs. However the company has not complied with the
requirement of the said circular.
(d) Note No. 46 of the financial statements regarding balances of
parties under the head trade receivables, trade payables and loans &
advances which are subject to confirmation, reconciliation and
consequential adjustments, if any.
Report on Other Legal and Regulatory Requirements
1. 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 Order.
2. As required by section 227(3) of the Act, we report that:
i. we have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purpose of our
audit except for the matter described in the Basis for Qualified
Opinion paragraph;
ii. 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;
iii. 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;
iv. except for the possible effects of the matters described in the
Basis for Qualified Opinion paragraph, in our opinion, the Balance
Sheet, Statement of Profit and Loss, and Cash Flow Statement comply
with the Accounting Standards referred to in subsection (3C) of section
211 of the Companies Act, 1956 read with the General Circular 15/2013
dated 13 September 2013 of the Ministry of Corporate Affairs in respect
of Section 133 of the Companies Act, 2013 and;
v. on the basis of written representations received from the directors
as on March 31,2014, and taken on record by the Board of Directors,
none of the directors is disqualified as on March 31,2014, from being
appointed as a director in terms of clause (g) of sub-section (1) of
section 274 of the Companies Act, 1956;
vi since the Central Government has not issued any notification as to
the rate at which the cess is to be paid under section 441A of the
Companies Act, 1956 nor has it issued any Rules under the said section,
prescribing the manner in which such cess is to be paid, no cess is due
and payable by the Company;
Annexure to Independent Auditor''s Report of Spentex Industries Limited
Referred to in Paragraph 1 under the heading of "report on other
legal and regulatory requirements" of our report of even date
1. (a) The Company is maintaining proper records showing full
particulars including quantitative details and situation of fixed
assets.
(b) The fixed assets are physically verified by the management
according to a phased programmed designed to cover all the items over a
period of three years, which in our opinion, is reasonable having
regard to the size of the Company and the nature of its assets.
Pursuant to the programme, a portion of the fixed assets has been
physically verified by the management during the year and material
discrepancies between the book records and physical inventory have been
noticed.
(c) In our opinion and according to the information and explanations
given to us, a substantial part of fixed assets has not been disposed
off by the Company during the year.
2. (a) The inventory other than inventory lying with third party has
been physically verified by the management during the year. 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 reasonable and adequate in
relation to the size of the Company and the nature of its business.
(c) On the basis of our examination of the inventory records, in our
opinion, the Company is maintaining proper records of inventory. The
discrepancies noticed on physical verification of inventory as compared
to book records were not material.
3. (a) The Company has not granted any loans, secured or unsecured, to
companies, firms or other parties covered in the register maintained
under Section 301 of the Act. Accordingly, paragraphs 4(iii)(b), 4(iii)
(c), 4(iii)(d) of the order are not applicable.
(b) 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 Act. Accordingly, paragraph 4(iii) (f) and
4(iii) (g) of the order are not applicable.
4. In our opinion and according to the information and explanations
given to us, there is an adequate internal control system commensurate
with the size of the Company and the nature of its business for the
purchase of inventory, fixed assets and for the sale of goods. Further,
on the basis of our examination of the books and records of the
company, and according to the information and explanations given to us,
we have neither come across nor have been informed of any continuing
failure to correct major weakness in the aforesaid internal control
system.
5. (a) In our opinion and according to the information and explanations
given to us, the particulars of contracts or arrangements
referred to in Section 301 of the Companies Act 1956 have been entered
in the register required to be maintained under that section.
(b) In our opinion and according to the information and explanations
given to us, there were no transactions made in pursuance of contracts
or arrangements entered in the register maintained under Section 301 of
the Companies Act, 1956 exceeding the value of Rupees Five Lakhs or
more in respect of any party during the year other than those reported
in para 18 below pursuant to paragraph 4 (xviii) of the Companies
(Auditor''s Report) Order, 2003.
6. The Company has not accepted any deposits from the public within the
meaning of Section 58A and Section 58AA of the Act and the rules framed
there under.
7. In our opinion, the Company has an internal audit system
commensurate with its size and nature of its business.
8. We have broadly reviewed the books of account, maintained by the
Company in respect of products where, pursuant to the Rules made by the
Central Government of India, the maintenance of cost records has been
prescribed under clause (d) of sub section (1) of Section 209 of the
Act and are of the opinion that prima facie, the prescribed accounts
and records have been made and maintained. We have not, however, made a
detailed examination of the records with a view to determine whether
they are accurate or complete.
9. (a) The company is regular in depositing with appropriate
authorities undisputed statutory dues including provident fund,
investor education and protection fund, employees state insurance,
sales tax, wealth tax, custom duty, excise duty, cess and other
statutory dues and is generally regular in depositing undisputed
statutory dues in respect of income tax and service tax applicable to
it. According to the information and explanation given to us, no
undisputed amounts payable in respect of aforesaid dues were in arrears
as at March 31,2014 for a period of more than six months from the date
they became payable except for State Entry Tax of Rs 26,22,198/-.
(b) According to the information and explanations given to us and the
records of the Company examined by us, the particulars of dues of
income tax, sales tax, entry tax, service tax and excise duty at March
31,2014, which have not been deposited
Name of the Nature of dues Amount (Rs.) Period to which
statute the amount relates (A.Y.)
Sales Tax
The M.P. Penalty - Purchase 1,64,195 1996-97
Commercial Tax tax demand (including amount
Act, 1994 paid Rs 1,28,195)
The M.P. Commercial Sales Tax Demand 8,15,157 2009-10
Tax Act, 1994 (including amount
paid 8,15,157)
The M.P. Commercial Sales tax demand on 19,70,233 2001-03
Tax Act, 1994 sale of DEPB licenses 2009-10
The M.P. Commercial Sales Tax Demand 3,75,803 2010-11
Tax Act, 1994 (including amount
paid 37,600)
Entry Tax Act, 1976 Entry tax demand 15,38,453 1992-1997
(including amount
paid Rs 4,14,844)
Maharashtra Value Sales Tax Demand 12,18,223 2009-10
Added Tax Act, 2002
Maharashtra Value Sales Tax Demand 5,32,870 2004-05
Added Tax Act, 2002 (including amount
paid 2,00,000)
Central Sales Tax, Sales Tax Demand 29,99,290 2004-05
1956 (including amount
paid Rs 10,00,000)
Income tax
Income Tax Act, 1961 Disallowance of 1,08,75,657 AY 2001-02
goodwill amortisation (including amount AY 2003-04
& other expenses
paid
Rs.39,81,354)
The Income Tax Disallowances of 2,70,95,747 AY 2003-04
Act,1961 various expenses viz. (including amount AY 2005-06
sales tax subsidy, etc paid Rs20,00,000) AY 2006-07
Central Excise and Service Tax Act
Central Excise Excise duty demands 1,08,06,176 June 1999
Act, 1944 (Baramati unit) Dec 2001
Central Excise Excise duty demands 2,78,61,240 Apr-00 to
Act, 1944 (Ahmedabad unit) Sept-01
and Feb-01
to Dec-01
Central Excise Excise duty demands 15,65,015 Feb-04
Act, 1944 (Ahmedabad unit) (including amount
paid 15,65,015)
The Central Excise Excise duty-demand 7,51,85,214 Aug 2004
Act, 1944 of duty on clearance (including amount Apr, 2007
of goods under paid Rs 23,14,143)
notification 30/2004
without payment of duty
(Butibori unit)
The Central Excise Cenvat demand for 1,68,812 Apr 2000
Act, 1944 packing material Mar, 2004
including penalty
(Pithampur unit)
The Central Excise Cenvat demand on 7,94,266 Apr 2003 -
Act, 1944 packing material / Dec,2012
scrap (Butibori unit)
The Central Excise Cenvat on samples 3,09,475 Apr, 2003
Act, 1944 used in quality control (including amoun Octr 2013
(Butibori unit) paidRs 67,597)
The Central Excise Demand for Cenvat 1,10,32,499 Apr,2003
Act, 1944 reversal of furnace oil Aug, 2006
used in generation of
electricity on job-work
(Butibori unit)
The Central Excise Refund of cenvat on 6,02,16,366 Oct 2004
Act, 1944 inputs under Rule 18 Jan 2006
(Pithampur unit)
The Central Excise Rejection export 24,50,214 June, 2006
Act, 1944 claims June, 2012
The Central Excise Excise duty-demand 5,32,91,002 Mar 2004
Act, 1944 of duty on clearance (including Feb, 2007
of goods under amount paid
notification 30/2004 Rs 1,33,22,751)
without payment of duty
(Pithampur unit)
The Central Excise Demand under 16,77,47,574 April-12,
Act, 1944 section Rule 6(3)(i) March, 13
The Central Excise Rebate claim 7,18,287 2010-11
Act, 1944 deducted (including amount
paidRs 7,18,287
The Central Excise Cenvat on Capital 52,69,616 2002-2003
Act, 1944 Goods (including amount 2010-11
paidRs 6,73,329
Finance Act, 1994 Refund against 22,59,287 2006-12
export services
Finance Act, 1994 Service Tax on GTA 13,30,248 Apr 2005
paid including penalty (including amount Sep 2006
paidRs 10,49,966
Finance Act, 1994 Service Tax on 5,44,852 2004-05
Garden labour 2008-09
Name of the Statute Forum where the dispute is pending
Sales Tax
The MP Commercial Tax ACt 1994 First Appellate Authority
The MP Commercial Tax ACt 1994 First Appellate Authority
The MP Commercial Tax ACt 1994 Assessing Authority Indore
The MP Commercial Tax ACt 1994 First Appellate Authority
Entry Tax Act 1976 Assessing Authority, Indore
Maharashtra Value Added Tax Act Joint Commissioner of Sales Tax,
2002 Kolhapur
Maharashtra Value Added Tax Act Deputy Commissioner, Nagpur
2002
Central Sales Tax 1956 Deputy Commissioner, Nagpur
Income Tax
Income Tax Act 1961 Income Tax Tribunal Delhi Bench
39,81,354
High Court - Rs 68,94,303
Income Tax Act 1961 Commissioner of Income Tax (Appeal),
New Delhi
Central Excise and Service Tax Act
Central Excise Act 1944 Customs, Excise & Service Tax Appellate
Tribunal, Mumbai
Central Excise Act 1944 Customs, Excise & Service Tax Appellate
Tribunal, Ahmedabad
Central Excise Act 1944 Customs, Excise & Service Tax Appellate
Tribunal, Ahmedabad
Central Excise Act 1944 Deputy Commissioner of Central Excise,
Nagpur - Rs 77,371
Commissioner, Central Excise Nagpur -
Rs 7,26,93,700
The Central Excise Act 1944 Customs, Excise & Service Tax Appellate
Tribunal, New Delhi - Rs 24,14,143
The Central Excise Act 1944 Commissioner (Appeals), Central Excise,
Indore
The Central Excise Act 1944 Customs, Excise & Service Tax Appellate
Tribunal New Delhi Rs 81,195
The Central Excise Act 1944 Deputy Commissioner, Central Excise,
Nagpur - Rs 7,13,071
The Central Excise Act 1944 Customs, Excise & Service Tax Appellate
Tribunal, Nagpur - Rs 1,17,762
The Central Excise Act 1944 Deputy Commissioner, Central Excise,
Nagpur - Rs 1,91,713
The Central Excise Act 1944 Deputy Commissioner of Central Excise,
Nagpur - Rs 6,94,852
The Central Excise Act 1944 Customs, Excise & Service Tax Appellate
Tribunal - Rs 1,03,37,647
The Central Excise Act 1944 Commissioner (Appeals), Central Excise,
Indore
The Central Excise Act 1944 Assistant Commissioner of Central
Excise, Nagpur
The Central Excise Act 1944 High Court, Indore
The Central Excise Act 1944 Commissioner, Central Excise, Indore
The Central Excise Act 1944 Commissioner (Appeals), Central Excise,
Indore
The Central Excise Act 1944 Additional Commissioner of Central
Excise, Nagpur - Rs 51,17,418
Deputy Commissioner of Central
Excise - Rs 1,52,198
Finance Act 1994 Assistant Commissioner of Central
Excise, Nagpur
Finance Act 1994 Customs, Excise & Service Tax Appellate
Tribunal - Rs 2,80,282
Finance Act 1994 Commissioner (Appeals), Central Excise,
Indore- Rs 10,49,966
Finance Act 1994 Customs, Excise & Service Tax Appellate
Tribunal - Rs 5,44,852
10 The Company has accumulated loss as at March 31,2014 which is more
than fifty percent of its net worth. The company has not incurred cash
losses in the financial year ended on that date and in the immediately
preceding financial year.
11 According to the records of the Company examined by us and the
information and explanation given to us, based on our audit procedures,
we are of the opinion that the company has defaulted in repayment of
dues to financial institutions, banks or debenture holders during the
year as follows:
Particulars Amount of Default Period of Default
(In days)
Non Convertible Debenture 8,62,14,712 28 - 90
Term Loan 83,12,78,837 1 - 90
Funded Interest Term Loan 8,04,48,319 1 - 90
Working Capital Term Loan I 6,47,86,062 1 - 90
Working Capital Term Loan II 10,97,81,542 1 - 90
Working Capital Term Loan III 8,92,872 1 - 42
Working Capital Term Loan IV 14,97,51,149 1 - 90
Corporate Loan 21,21,076 1 - 58
Total 1,32,52,74,569
12. The Company has not granted any loans and advances on the basis of
security by way of pledge of shares, debentures and other securities.
13. The provisions of any special statute applicable to chit fund/
Nidhi/ mutual benefit fund/ Societies are not applicable to the
Company.
14. In our opinion, the Company is not a dealer or trader 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 of the guarantees given by the
Company, for loans taken by others from banks or financial institutions
during the year, are not prejudicial to the interest of the Company.
16. In our opinion, and according to the information and explanations
given to us, term loan has been applied for the purpose it was
obtained.
17. According to the information and explanations given to us and on
the overall examination of the balance sheet of the company as at March
31,2014, we report that short term fund of Rs 15,48,51,363 (without
considering the impact of other recoverables as mentioned in para a
under the head "Basis for qualified opinion" of the independent
auditor''s report) have been used for long term investments primarily in
repayment of long term borrowing and funding its losses.
18. According to the information and explanations given to us, the
company has made preferential allotment of shares to a company covered
in the register maintained under Section 301 of the Act. In our
opinion, the price at which shares have been issued is not prejudicial
to the interest of the company.
19. The Company has created security or charge in respect of debentures
issued and outstanding at the year end.
20. The Company has not raised any money by public issue during the
year.
21. During the course of our examination of the books and records of
the Company, carried out in accordance with the generally accepted
auditing practices in India, and according to the information and
explanations given to us, we have neither come across any instance of
fraud on or by the Company, noticed or reported during the year, nor
have we been informed of such case by the management.
For J.C. Bhalla & Company
Chartered Accountants
Firm Regn. No. 001111-N
Sd/-
(Akhil Bhalla)
Place : New Delhi Partner
Dated : May 28, 2014 Membership No.505002
Mar 31, 2013
Report on the Financial Statements
We have audited the accompanying financial statements of Spentex
Industries Limited ("the Company"), which comprise the Balance Sheet as
at March 31, 2013, and the Statement of Profit and Loss and Cash Flow
Statement for the year then ended, and a summary of significant
accounting policies and other explanatory information.
Management''s Responsibility for the Financial Statements
Management is responsible for the preparation of these financial
statements that give a true and fair view of the financial position,
financial performance and cash flows of the Company in accordance with
the Accounting Standards referred to in sub-section (3C) of Section 211
of the Companies Act, 1956 ("the Act"). This responsibility includes
the design, implementation and maintenance of internal control relevant
to the preparation and presentation of the financial statements that
give a true and fair view and are free from material misstatement,
whether due to fraud or error.
Auditor''s Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in accordance
with the Standards on Auditing issued by the Institute of Chartered
Accountants of India. Those Standards require that we comply with
ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor''s judgment, including the
assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
Company''s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of the accounting
estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a
basis for our qualified audit opinion.
Basis for Qualified Opinion
We draw attention to:
Note No. 41 of the financial statements, wherein, we are unable to
determine the extent of provision that may be required for diminuition
in the value of long term investment amounting to Rs.20,44,69,921 in
Amit Spinning Industries Limited subsidiary of the company. Further,
uncertainities exist in relation to the recoverability of loans
amounting to Rs.32,01,28,019, interest accrued thereon Rs.9,59,50,582
and advances amounting to Rs.5,49,68,659 due from above S ubsidiary.
The impact due to above observation on the financial statements could
not be ascertained.
Qualified Opinion
In our opinion and to the best of our information and according to the
explanations given to us, except for the possible effects of the matter
described in the Basis for Qualified Opinion paragraph, the financial
statements give the information required by the Act in the manner so
required and give a true and fair view in conformity with the
accounting principles generally accepted in India:
(a) in the case of the Balance Sheet, of the state of affairs of the
Company as at March 31, 2013;
(b) in the case of the Statement of Profit and Loss, of the profit for
the year ended on that date; and
(c) in the case of the Cash Flow Statement, of the cash flows for the
year ended on that date.
Emphasis of Matter
Without qualifying our opinion, we draw attention to:
(a) Note No. 42 of the financial statements regarding long term
investment amounting to Rs. 56,10,11,339 and Rs. 93,23,779 in Spentex
Netherland B.V. and Spentex Tashkent Toytepa LLC respectively,
subsidiaries of the company, and advance amounting to Rs. 9,50,70,902
from Spentex Netherland B.V. and trade recievable amounting to Rs.
7,00,12,404 from Spentex Tashkent Toytepa LLC which has been considered
good by the management in view of the reasons stated therein. We have
relied upon the assertion given by the management as to the
recoverability of the investments and amounts due stated above.
(b) Note No. 43 of the financial statements regarding amounts
recoverable relating to certain trade recievable and advance balances
Rs.63,71,477 and Rs.2,73,14,712 respectively which has been considered
good by the management in view of the reasons stated therein. We have
relied upon the assertion given by the management as to the
recoverability of the said amounts.
(c) Note No. 47 of the financial statements regarding preparation of
these accounts on a going concern basis due to reasons indicated
therein.
Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditor''s Report) Order, 2003 ("the
Order") issued by the Central Government of India in terms of
sub-section (4A) of section 227 of the Act, we give in the Annexure a
statement on the matters specified in paragraphs 4 and 5 of the Order.
a. As required by section 227(3) of the Act, we report that:
i. we have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purpose of our
audit except for the matter described in the Basis for Qualified
Opinion paragraph;
ii. 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;
iii. 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;
iv. except for the possible effects of the matter described in the
Basis for Qualified Opinion paragraph, in our opinion, the Balance
Sheet, Statement of Profit and Loss, and Cash Flow Statement comply
with the Accounting Standards referred to in subsection (3C) of section
211 of the Companies Act, 1956;
v. on the basis of written representations received from the directors
as on March 31, 2013, and taken on record by the Board of Directors,
none of the directors is disqualified as on March 31, 2013, from being
appointed as a director in terms of clause
(g) of sub-section (1) of section 274 of the Companies Act, 1956;
vi since the Central Government has not issued any notification as to
the rate at which the cess is to be paid under section 441A of the
Companies Act, 1956 nor has it issued any Rules under the said section,
prescribing the manner in which such cess is to be paid, no cess is due
and payable by the Company;
Annexure to Independent Auditors'' Report
Referred to in Paragraph 1 under the heading of "report on other legal
and regulatory requirements" of our report of even date
1. (a) The Company is maintaining proper records showing full
particulars including quantitative details and situation of fixed
assets.
(b) The fixed assets are physically verified by the management
according to a phased programmed designed to cover all the items over a
period of three years, which in our opinion, is reasonable having
regard to the size of the Company and the nature of its assets.
However, the fixed assets have not been physically verified by the
management during the year.
(c) In our opinion and according to the information and explanations
given to us, a substantial part of fixed assets has not been disposed
off by the Company during the year.
2. (a) The inventory other than inventory lying with third party has
been physically verified by the management during the year. 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 reasonable and adequate in
relation to the size of the Company and the nature of its business.
(c) On the basis of our examination of the inventory records, in our
opinion, the Company is maintaining proper records of inventory. The
discrepancies noticed on physical verification of inventory as compared
to book records were not material.
3. (a) The Company has not granted any loans, secured or unsecured, to
companies, firms or other parties covered in the register maintained
under Section 301 of the Act. Accordingly, paragraph 4(iii)(b),
4(iii)(c), 4(iii)(d) of the order are not applicable.
(b) 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 Act. Accordingly, paragraph 4(iii) (f) and
4(iii) (g) of the order are not applicable.
4. In our opinion and according to the information and explanations
given to us, there is an adequate internal control system commensurate
with the size of the Company and the nature of its business for the
purchase of inventory, fixed assets and for the sale of goods. Further,
on the basis of our examination of the books and records of the
company, and according to the information and explanations given to us,
we have neither come across nor have been informed of any continuing
failure to correct major weakness in the aforesaid internal control
system.
5 a) In our opinion and according to the information and explanations
given to us, the particulars of contracts or arrangements referred to
in Section 301 of the Companies Act 1956 have been entered in the
register required to be maintained under that section.
b) In our opinion and according to the information and explanations
given to us, there were no transactions made in pursuance of contracts
or arrangements entered in the register maintained under Section 301 of
the Companies Act, 1956 exceeding the value of Rupees Five Lakhs or
more in respect of any party during the year other than those reported
in para 18 below pursuant to paragraph 4 (xviii) of the Companies
(Auditor''s Report) Order, 2003.
6 The Company has not accepted any deposits from the public within the
meaning of Section 58A and Section 58AA of the Act and the rules framed
there under.
7 In our opinion, the Company has an internal audit system commensurate
with its size and nature of its business.
8 We have broadly reviewed the books of account, maintained by the
Company in respect of products where, pursuant to the Rules made by the
Central Government of India, the maintenance of cost records has been
prescribed under clause (d) of sub section (1) of Section 209 of the
Act and are of the opinion that prima facie, the prescribed accounts
and records have been made and maintained. We have not, however, made a
detailed examination of the records with a view to determine whether
they are accurate or complete.
9 a) The company is regular in depositing with appropriate authorities
undisputed statutory dues including provident fund, investor education
and protection fund, employees state insurance, sales tax, wealth tax,
custom duty, excise duty, cess and other statutory dues and is
generally regular in depositing undisputed statutory dues in respect of
income tax and service tax applicable to it. According to the
information and explanation given to us, no undisputed amounts payable
in respect of aforesaid dues were in arrears as at March 31, 2013 for a
period of more than six months from the date they became payable except
for State Entry Tax of Rs. 26,22,198/-.
b) According to the information and explanations given to us and the
records of the Company examined by us, the particulars of dues of
income tax, sales tax, entry tax, service tax and excise duty at March
31, 2013, which have not been deposited on account of dispute, are as
follows:
Name of the Nature of dues Amount (Rs.) Year to
which Forum where the
statute the
amount dispute is
pending
relates
Sales Tax
The M.P. Penalty -
Purchase 1,64,195 1996-97 First
Appellate
Authority
Commercial
Tax tax demand (including
amount
Act, 1994 paid
Rs.1,28,195)
The M.P.
Commercial Sales Tax
Demand 8,15,157
(including 2009-10 First
Appellate
Authority
Tax Act, 1994 amount paid
Rs.8,15,157)
The M.P.
Commercial Sales tax
demand on 19,70,233 2001-03 Assessing
Authority
Indore
Tax Act, 1994 sale of DEPB
licenses 2009-10
Entry Tax
Act, 1976 Entry tax demand 15,38,453
(including 1992-1997
Assessing
Authority
Indore
amount
paid Rs.
4,14,844)
Maharashtra
Value Sales Tax Demand 12,18,223 2009-10 Joint
Commissioner
of Sales Tax,
Added Tax
Act, 2002 Kolhapur
Maharashtra
Value Sales Tax Demand 5,32,870
(including 2004-05 Deputy
Commissioner,
Nagpur
Added Tax
Act, 2002 amount paid
Rs. 2,00,000)
10 The Company has accumulated loss as at March 31, 2013 which is more
than fifty percent of its net worth. The company has not incurred cash
losses in the financial year ended on that date but has incurred cash
losses in the immediately preceding financial year.
11 According to the records of the Company examined by us and the
information and explanation given to us, based on our audit procedures,
we are of the opinion that the company has defaulted in repayment of
dues to financial institutions, banks or debenture holders during the
year as follows:
12 The Company has not granted any loans and advances on the basis of
security by way of pledge of shares, debentures and other securities.
13 The provisions of any special statute applicable to chit fund/
Nidhi/ mutual benefit fund/ Societies are not applicable to the
Company.
14 In our opinion, the Company is not a dealer or trader 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 of the guarantees given by the
Company, for loans taken by others from banks or financial institutions
during the year, are not prejudicial to the interest of the Company.
16 In our opinion, and according to the information and explanations
given to us, term loan has been applied for the purpose it was
obtained.
17 On the basis of an overall examination of the balance sheet of the
company, in our opinion and according to the information and
explanations given to us, there are no funds raised on short term basis
which have been used for long-term investment.
18 According to the information and explanations given to us, the
company has made preferential allotment of shares to a company covered
in the register maintained under section 301 of the Act. In our
opinion, the price at which shares have been issued is not prejudicial
to the interest of the company.
19 The Company has created security or charge in respect of debentures
issued and outstanding at the year end.
20 The Company has not raised any money by public issue during the
year.
21 During the course of our examination of the books and records of the
Company, carried out in accordance with the generally accepted auditing
practices in India, and according to the information and explanations
given to us, we have neither come across any instance of fraud on or by
the Company, noticed or reported during the year, nor have we been
informed of such case by the management.
For J.C. Bhalla & Company
Chartered Accountants
Firm Regn. No. 001111-N
(Akhil Bhalla)
Place : New Delhi Partner
Dated : May 29, 2013 Membership No.505002
Mar 31, 2011
1. We have audited the attached Balance Sheet of Spentex Industries
Limited, as at March 31, 2011 and the related profit and Loss Account
and 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 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 the auditing standards
generally accepted in India. Those standards required 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 (Auditors Report) Order, 2003 as
amended by the Companies(Auditors Report) (Amendment) Order, 2004,
issued by the Central government of India in terms of sub-section(4A)
of Section 227 of The Companies Act, 1956 of India(the Act) and on the
basis of such checks of the books and records of the Company as we
considered appropriate and according to the information and
explanations given to us, we further report that:
3.1 (a) The Company is maintaining proper records showing full
particulars including quantitative details and situation of fixed
assets.
(b) The fixed assets are physically verified by the management
according to a phased programmed designed to cover all the items over a
period of three years, which in our opinion, is reasonable having
regard to the size of the Company and the nature of its assets.
Pursuant to the programme, a portion of the fixed assets has been
physically verified by the management during the year and no material
discrepancies between the books records and physical inventory have
been noticed.
(c) In our opinion and according to the information and explanations
given to us, a substantial part of fixed assets has not been disposed
of by the Company during the year.
3.2 (a) The inventory has been physically verified by the management
during the year. 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 reasonable and adequate in
relation to the size of the Company and the nature of its business.
(c) On the basis of our examination of the inventory records, in our
opinion, the Company is maintaining proper records of inventory. The
discrepancies noticed on physical verification of inventory as compared
to book records were not material.
3.3 (a) The Company has not granted any loans, secured or unsecured, to
companies, firms or other parties covered in the register maintained
under Section 301 of the Act. Accordingly, paragraph 4(iii)(b),
4(iii)(c), 4(iii)(d) of the order are not applicable.
(b) 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 Act. Accordingly, paragraph 4(iii) (f) and
4(iii) (g) of the order are not applicable.
3.4 In our opinion and according to the information and explanations
given to us, there is an adequate internal control system commensurate
with the size of the Company and the nature of its business for the
purchase of inventory, fixed assets and for the sale of goods. Further,
on the basis of our examination of the books and records of the
company, and according to the information and explanations given to us,
we have neither come across nor have been informed of any continuing
failure to correct major weakness in the aforesaid internal control
system.
3.5 (a) In our opinion and according to the information and
explanations given to us, the particulars of contracts or arrangements
referred to in Section 301 of the Companies Act 1956 have been entered
in the register required to be maintained under that section.
(b) In our opinion and according to the information and explanations
given to us, there were no transactions made in pursuance of contracts
or arrangements entered in the register maintained under Section 301 of
the Companies Act, 1956 exceeding the value of Rupees Five Lakhs or
more in respect of any party during the year other than those reported
in para 3.18 below pursuant to paragraph 4 (xviii) of the Companies
(Auditors Report) Order, 2003.
3.6 The Company has not accepted any deposits from the public within
the meaning of Section 58A and Section 58AA of the Act and the rules
framed there under.
3.7 In our opinion, the Company has an internal audit system
commensurate with its size and nature of its business.
3.8 We have broadly reviewed the books of account, maintained by the
Company in respect of products where, pursuant to the Rules made by the
Central Government of India, the maintenance of cost records has been
prescribed under clause (d) of sub section (1) of Section 209 of the
Act and are of the opinion that prima facie, the prescribed accounts
and records have been made and maintained. We have not, however, made a
detailed examination of the records with a view to determine whether
they are accurate or complete.
3.9 (a) The company is regular in depositing with appropriate
authorities undisputed statutory dues including provident fund,
investor education and protection fund, employees state insurance,
sales tax, income tax, service tax, wealth tax, custom duty, excise
duty, cess and other statutory dues applicable to it. According to the
information and explanation given to us, no undisputed amounts payable
in respect of aforesaid dues were in arrears as at March 31, 2011 for a
period of more than six months from the date they became payable.
(b) According to the information and explanations given to us and the
records of the Company examined by us, the particulars of dues of
income tax, sales tax, entry tax, service tax and excise duty at March
31, 2011, which have not been deposited on account of dispute, are as
follows :
Name of the Nature of dues Amount(Rs.)
statute
Sales Tax
The M.P. Penalty - Purchase 164,195
Commercial Tax tax demand (including amount
Act, 1994 paid Rs.128,195)
The M.P. Commercial Sales tax demand on 3,154,447
Tax Act, 1994 sale of DEPB licenses (including amount
paid Rs.2,855,900)
Entry Tax Act, 1976 Entry tax demand 1,420,991
(including amount
paid Rs.414,844)
Maharashtra Sales BST Sales Tax dues 192,160
Tax Act, 1975 (including amount
paid Rs.17,040)
Income tax
Income Tax Act, 1961 Disallowance u/s 80 31,061,929
HHC on export (including amount
incentives paid Rs.5,541,674)
Income Tax Act, 1961 Disallowance of 10,875,657
goodwill amortisation (including amount
& other expenses paid Rs.3,981,354)
The Income Tax Disallowances of 27,095,747
Act,1961 various expenses viz. (including amount
sales tax subsidy, etc. paid Rs.2,000,000)
Central Excise and Service Tax Act
Central Excise Excise duty demands 10,806,176
Act, 1944 (Baramati unit)
Central Excise Excise duty demands 27,861,240
Act, 1944 (Ahmedabad unit)
Central Excise Excise duty demands 1,565,015
Act, 1944 (Ahemdabad unit) (including amount
paid Rs.1,565,015)
The Central Excise Excise duty- demand 75,085,214
Act, 1944 of duty on clearance (including amount
of goods under paid Rs.2,314,143)
notification 30/2004
without payment of
duty (Butibori unit)
The Central Excise Cenvat demand for 168,012
Act, 1944 packing material
including penalty
(Pithampur unit)
Name of the Period to which Forum where the
Statue the amount dispute is pending
relates
Sales Tax
The M.P.
Commercial Tax
Act, 1994 2004-05 First Appellate Authority
The M.P. Commercial
Tax Act, 1994 2001-03 Deputy Commissioner (Appeals),
2009-10 Indore - Rs.369,057
Assessing Authority
Rs.2,785,390
Entry Tax Act, 1976 1992-2008 The M.P. High Court à Rs.567,816
Deputy Commissioner
(Appeals), Indore - Rs.371,076
Assessing Authority à Rs.799,246
Maharashtra Sales
Tax Act, 1975 2004-05 Joint Commissioner of Sales Tax
(Appeal), Pune
Income tax
Income Tax Act, 1961 A.Y. 2000-01 Income Tax Tribunal Delhi Bench-
to Rs.11,207,472
A.Y. 2004-05 Commissioner of Income Tax
(Appeal), New Delhi Ã
Rs.19,854,457
Income Tax Act, 1961 A.Y. 2001-02 Income Tax Tribunal Delhi Bench-
A.Y. 2003-04 Rs. 3,981,354
High Court - Rs. 6,894,303
The Income Tax
Act,1961 A.Y. 2003-04 Commissioner of Income Tax
A.Y. 2005-06 (Appeal), New Delhi
A.Y. 2006-07
Central Excise and Service Tax Act
Central Excise
Act, 1944 June 1999 to Customs, Excise & Service Tax
Dec 2001 Appellate Tribunal, Mumbai
Central Excise
Act, 1944 Apr-00 Customs, Excise & Service Tax
to Sept-01 and Appellate Tribunal, Ahmedabad
Feb-01 to Dec-01
Central Excise
Act, 1944 Feb-04 Customs, Excise & Service Tax
Appellate Tribunal, Ahmadabad
The Central Excise
Act, 1944 Aug, 2004 to Deputy Commissioner of Central
Apr, 2007 Excise, Nagpur à Rs. 77,371
Commissioner, Central Excise Nagpur
à Rs.72,187,903
Additional Commissioner of Central
Excise, Nagpur à Rs.505,797
Customs, Excise & Service Tax
Appellate Tribunal, New Delhi Ã
Rs. 2,314,143
The Central Excise
Act, 1944 April, 2000 Ã Commissioner (Appeals), Central
March, 2004 Excise, Indore
Name of the Nature of dues Amount(Rs.)
statute
The Central Excise Cenvat demand on 1,545,165
Act, 1944 packing material / (including amount
scrap (Butibori unit) paid Rs.35,536)
The Central Excise Cenvat on samples 203,489
Act, 1944 used in quality control (including amount
(Butibori unit) paid Rs.67,597)
The Central Excise Demand for Cenvat 31,855,017
Act, 1944 reversal of furnace
oil used in generation
of electricity on job-
work (Butibori unit)
The Central Excise Refund of cenvat on 60,216,366
Act, 1944 inputs under Rule 18
(Pithampur unit)
The Central Excise Rejection export 1,793,732
Act, 1944 claims
Finance Act, 1994 Refund against 1,515,368
export services
The Central Excise Excise dutyÃdemand 53,291,002
Act, 1944 of duty on clearance (including amount
of goods under paid Rs.13,322,751)
notification 30/2004
without payment of
duty (Pithampur unit)
The Central Excise Duty on Yarn 41,871
Act, 1944
The Central Excise Cenvat on Capital 2,570,898
Act, 1944 Goods
Professional Tax
Professional Tax Act Interest on 36,433 (including
Professional Tax amount Paid
Rs. 36,433)
Name of the Period to which Forum where the
Statue the amount dispute is pending
relates
The Central Excise
Act, 1944 April, 2003 Ã Customs, Excise & Service Tax
November, 2009 Appellate Tribunal, New Delhi
Rs.94,860
Commissioner(Appeals), NagpurÃ
Assistant Commissioner à Rs. 8,012
Deputy Commissioner, Central Excise,
Nagpur à Rs. 2,02,845
Deputy Commissioner, Central Excise,
Nagpur à Rs. 12,39,448
The Central Excise
Act, 1944 Apr, 2003 to Customs, Excise & Service Tax
Aug, 2009 Appellate Tribunal, Nagpur Ã
Rs. 67,597
Deputy Commissioner, Central Excise,
Nagpur à Rs. 74,130
Assistant Commissioner, Central
Excise, Nagpur à Rs. 61,762
The Central Excise
Act, 1944 Apr, 2003 to Deputy Commissioner of Central
Aug, 2006 Excise, Nagpur à Rs. 694,852
Customs, Excise & Service Tax
Appellate Tribunal à Rs.20,822,518
Additional Commissioner of Central
Excise, Nagpur à Rs.10,337,647
The Central Excise
Act, 1944 Oct, 2004 to Commissioner (Appeals), Central
Jan, 2006 Excise, Indore
The Central Excise
Act, 1944 Jun, 2006 to Assistant Commissioner of Central
Jan,2007 Excise, Nagpur
Finance Act, 1994 2006-09 Assistant Commissioner of Central
Excise, Nagpur
The Central Excise
Act, 1944 March, 2004 to High Court , Indore
Feb, 2007
The Central Excise
Act, 1944 2006 Commissioner (Appeals), Central
Excise, Indore
The Central Excise
Act, 1944 2002-2003 Additional Commissioner of Central
Excise, Nagpur
Professional Tax
Professional Tax Act 2006-07 Deputy Commissioner
(Professional Tax)
3.10 The Company has accumulated loss as at March 31, 2011 which, read
with comments in para 4 of our report, are more than fifty percent of
its net worth. The company has not incurred cash losses in the
financial year ended on that date but has incurred cash losses in the
immediately preceding financial year.
3.11 According to the records of the Company examined by us and the
information and explanation given to us, based on our audit procedures,
we are of the opinion that the company has not defaulted in repayment
of dues to financial institutions, banks or debenture holders during
the year.
3.12 The Company has not granted any loans and advances on the basis of
security by way of pledge of shares, debentures and other securities.
3.13 The provisions of any special statute applicable to chit fund/
Nidhi/ mutual benefit fund/ Societies are not applicable to the
Company.
3.14 In our opinion, the Company is not a dealer or trader in shares,
securities, debentures and other investments.
3.15 In our opinion and according to the information and explanations
given to us, the terms and conditions of the guarantees given by the
Company, for loans taken by others from banks or financial institutions
during the year, are not prejudicial to the interest of the Company.
3.16 In our opinion, and according to the information and explanations
given to us, no new term loan has been obtained during the year.
3.17 On the basis of an overall examination of the balance sheet of the
company, in our opinion and according to the information and
explanations given to us, there are no funds raised on short term basis
which have been used for long-term investment.
3.18 According to the information and explanations given to us, the
company has made preferential allotment of shares to a company covered
in the register maintained under section 301 of the Act. In our
opinion, the price at which shares have been issued is not prejudicial
to the interest of the company.
3.19 The Company has created security or charge in respect of
debentures issued and outstanding at the year end.
3.20 The Company has not raised any money by public issue during the
year.
3.21 During the course of our examination of the books and records of
the Company, carried out in accordance with the generally accepted
auditing practices in India, and according to the information and
explanations given to us, we have neither come across any instance of
fraud on or by the Company, noticed or reported during the year, nor
have we been informed of such case by the management.
4. We draw attention to:
Note 8(b) of Schedule XXI, wherein the Company has not charged to
Profit and Loss Account a sum of Rs. 210,341,055 due from Schoeller
Litvinov k.s. (SLKS), the Czech step down subsidiary of the Company
pursuant to reorganization plan approved by the court. Accordingly
profit for the year is higher by Rs. 210,341,055 with consequent impact
on net assets for the year then ended.
We further report that had the observations made by us above been
considered, the profit before tax for the year would have been Rs.
164,612,197 (as against the reported figure of Rs 374,953,252 ),
Accumulated loss would have been Rs. 1,168,073,547 (as against the
reported figure of Rs. 957,732,492 ), Sundry Debtors and Loans and
Advances to subsidiary would have been Rs. 849,870,951 & Rs.
458,844,868 respectively (as against the reported figure of Rs.
1,045,722,558 & Rs. 47,334,316 respectively) .
5. Further to our comments in paragraphs 4 above, we report that:
(a) We have obtained all the information and explanations, which to the
best of our knowledge and belief were necessary for the purposes of our
audit;
(b) In our opinion, proper books of account as required by law have
been kept by the Company so far as appears from our examination of
those books;
(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement
dealt with by this report are in agreement with the books of account;
(d) In our opinion, the Balance Sheet, Profit and Loss Account and 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) On the basis of written representations received from the
directors, as on March 31, 2011 and taken on record by the Board of
directors, none of the directors is disqualified as on March 31, 2011
from being appointed as a director in terms of clause (g) of
sub-section (1) of Section 274 of the Act;
(f) In our opinion and to the best of our information and according to
the explanations given to us, the said financial statements together
with the notes thereon and attached thereto give in the prescribed
manner the information required by the Act and subject to our remarks
in paragraph 4 above, 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 the Cash Flow Statement, of the cash flows for the
year ended on that date.
For J.C. Bhalla & Company
Chartered Accountants
Firm Regn. No. 001111-N
(Akhil Bhalla)
Place : New Delhi Partner
Dated : May 12, 2011 Membership No.505002
Mar 31, 2010
1. We have audited the attached Balance Sheet of Spentex Industries
Limited, as at March 31, 2010 and the related profit and Loss Account
and 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 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 the auditing standards
generally accepted in India. Those standards required 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(Auditors Report) Order, 2003 as
amended by the Companies(Auditors Report) (Amendment) Order, 2004,
issued by the Central government of India in terms of sub-section(4A)
of Section 227 of The Companies Act, 1956 of India(the Act) and on the
basis of such checks of the books and records of the Company as we
considered appropriate and according to the information and
explanations given to us, we further report that:
3.1 (a) The Company is maintaining proper records showing full
particulars including quantitative details and situation of fixed
assets.
(b) The fixed assets are physically verified by the management
according to a phased programmed designed to cover all the items over a
period of three years, which in our opinion, is reasonable having
regard to the size of the Company and the nature of its assets.
Pursuant to the programme, a portion of the fixed assets has been
physically verified by the management during the year and no material
discrepancies between the books records and physical inventory have
been noticed.
(c) In our opinion and according to the information and explanations
given to us, a substantial part of fixed assets has not been disposed
of by the Company during the year.
3.2 (a) The inventory (excluding stocks with third parties) has been
physically verified by the management during the year. In
respect of inventory lying with third parties, these have substantially
been confirmed by them. 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 reasonable and adequate in
relation to the size of the Company and the nature of its business.
(c) On the basis of our examination of the inventory records, in our
opinion, the Company is maintaining proper records of inventory. The
discrepancies noticed on physical verification of inventory as compared
to book records were not material.
3.3 (a) The Company has not granted any loans, secured or unsecured, to
companies, firms or other parties covered in the register
maintained under Section 301 of the Act. Accordingly, paragraph
4(iii)(b), 4(iii)(c), 4(iii)(d) of the order are not applicable.
(b) 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 Act. Accordingly, paragraph 4(iii) (f) and
4(iii) (g) of the order are not applicable.
3.4 In our opinion and according to the information and explanations
given to us, there is an adequate internal control system commensurate
with the size of the Company and the nature of its business for the
purchase of inventory, fixed assets and for the sale of goods. Further,
on the basis of our examination of the books and records of the
company, and according to the information and explanations given to us,
we have neither come across nor have been informed of any continuing
failure to correct major weakness in the aforesaid internal control
system.
3.5 (a) In our opinion and according to the information and
explanations given to us, the particulars of contracts or arrangements
referred to in Section 301 of the Companies Act 1956 have been entered
in the register required to be maintained under that section.
(b) In our opinion and according to the information and explanations
given to us, there were no transactions made in pursuance of contracts
or arrangements entered in the register maintained under Section 301 of
the Companies Act, 1956 exceeding the value of Rupees Five Lakhs or
more in respect of any party during the year other than those reported
in para 3.18 below pursuant to paragraph 4 (xviii) of the Companies
(Auditors Report) Order, 2003.
3.6 The Company has not accepted any deposits from the public within
the meaning of Section 58A and Section 58AA of the Act and the rules
framed there under.
3.7 In our opinion, the Company has an internal audit system
commensurate with its size and nature of its business.
3.8 We have broadly reviewed the books of account, maintained by the
Company in respect of products where, pursuant to the Rules made by the
Central Government of India, the maintenance of cost records has been
prescribed under clause (d) of sub section (1) of Section 209 of the
Act and are of the opinion that prima facie, the prescribed accounts
and records have been made and maintained. We have not, however, made a
detailed examination of the records with a view to determine whether
they are accurate or complete.
3.9 (a) The company is regular in depositing with appropriate
authorities undisputed statutory dues including provident fund,
investor education and protection fund, employees state insurance,
sales tax, wealth tax, custom duty, excise duty, cess and other
statutory dues and is generally regular in depositing undisputed
statutory dues in respect of income tax and service tax applicable to
it. According to the information and explanation given to us, no
undisputed amounts payable in respect of aforesaid dues were in
arrears as at March 31, 2010 for a period of more than six months
from the date they became payable.
(b) According to the information and explanations given to us and the
records of the Company examined by us, the particulars of dues of
income tax, sales tax, entry tax, service tax and excise duty at March
31, 2010, which have not been deposited on account of dispute, are as
follows:
Name of the Nature of dues Amount(C)
statute
Sales Tax
The MP. Penalty - Purchase 164,195
Commercial Tax tax demand (including amount
Act, 1994 paid Rs 128,195)
The M.P Commercial Sales tax demand on 3,154,447
Tax Act, 1994 sale of DEPB licenses (including amount
paid Rs.2,855,900)
Entry Tax Act, 1976 Entry tax demand 1,738,138
(including amount
paid Rs.414,844)
Maharashtra Sales BST Sales Tax dues 178,493
Tax Act, 1975 (including amount
paid Rs 17,040)
Name of the Period to which Forum where the
Statute the amount dispute is pending
relates
Sales Tax
The M.P. Commercial 2004-05 First Appellate Authority
Tax Act, 1994
The M.P. Commercial 2001-03 Deputy Commissioner
Tax Act, 1994 (Appeals),
2009-10 Indore - Rs.369,057
Assessing Authority
Rs.2,785,390
Entry Tax Act, 1976 1992-2008 The M.P. High Court -
Rs.567,816
Deputy Commissioner
(Appeals), Indore -
Rs.371,076 Assessing
Authority - Rs.799,246
Maharashtra Sales 2003-04 Joint Commissioner of
Sales Tax
Tax Act, 1975 (Appeal), Pune
Income tax
Income Tax Act, 1961 Disallowance u/s 80 31,061,929
HHC on export (including amount
incentives paid Rs.5,541,674)
Income Tax Act, 1961 Disallowance of 10,875,657
goodwill amortisation (including amount
& other expenses paid Rs.3,981,354)
The Income Tax Disallowances of 27,095,747
Act,1961 various expenses viz. (including amount
sales tax subsidy, etc. paid Rs.2,000,000)
Income Tax Act, 1961 A.Y. 2000-01 Income Tax Tribunal Delhi
Bench-
to Rs.11,207,472
A.Y. 2004-05 Commissioner of Income Tax
(Appeal), New Delhi
- Rs.19,854,457
Income Tax Act, 1961 A.Y. 2001-02 Income Tax Tribunal Delhi
Bench -
A.Y. 2003-04 Rs. 3,981,354
High Court - Rs. 6,894,303
The Income Tax A.Y. 2003-04 Income Tax Tribunal Delhi
Bench -
Act, 1961 A.Y. 2005-06 Rs.8,315,813
A.Y. 2006-07 Commissioner of Income Tax
(Appeal), New Delhi -
Rs.18,779,934
Central Excise and Service Tax Act
Central Excise Excise duty demands 10,806,176
Act, 1944 (Baramati unit)
Central Excise Excise duty demands 27,861,240
Act, 1944 (Ahmedabad unit)
Central Excise Excise duty demands 1,565,015
Act, 1944 (Ahemdabad unit) (including amount
paid Rs.1,565,015)
The Central Excise Excise duty-demand 75,185,214
Act, 1944 of duty on clearance (including amount
of goods under paid Rs.2,314,143)
notification 30/2004
without payment of
duty (Butibori unit)
The Central Excise Cenvat demand for 168,012
Act, 1944 packing material
including penalty
(Pithampur unit)
Central Excise June 1999 to Customs, Excise & Service Tax
Act, 1944 Dec 2001 Appellate Tribunal, Mumbai
Central Excise Apr-00 Customs, Excise & Service Tax
Act, 1944 to Sept-01 and Appellate Tribunal, Ahmedabad
Feb-01 to Dec-01
Central Excise Feb-04 Joint Commissioner -Central
Act, 1944 Excise
The Central Excise Aug, 2004 to Deputy Commissioner of
Central
Act, 1944 Apr, 2007 Excise, Nagpur - Rs. 77,371
Commissioner, Central Excise
Nagpur * Rs.72,187,903
Additional Commissioner of
Central Excise, Nagpur -
Rs.505,797
Customs, Excise & Service
Tax Appellate Tribunal, New
Delhi - Rs. 2,414,143
The Central Excise April, 2000 - Customs, Excise & Service Tax
Act, 1944 March, 2004 Appellate Tribunal, New Delhi
The Central Excise Cenvat demand on 1,103,017
Act, 1944 packing material / (including amount
scrap (Butibori unit) paid Rs.35,536)
The Central Excise Cenvat on samples 213,846
Act, 1944 used in quality control (including amount
(Butibori unit) paid Rs.67,597)
The Central Excise Demand for Cenvat 31,855,017
Act, 1944 reversal of furnace
oil used in generation
of electricity on job-
work (Butibori unit)
The Central Excise Refund of cenvat on 60,216,366
Act, 1944 inputs under Rule 18
(Pithampur unit)
The Central Excise Rejection export 1,793,732
Act, 1944 claims
Finance Act, 1994 Refund against 1,262,396
export services
The Central Excise Excise duty-demand 53,291,002
Act, 1944 of duty on clearance (including amount
of goods under paid Rs.13,322,751)
notification 30/2004
without payment of
duty (Pithampur unit)
The Central Excise Duty on Yarn 41,871
Act, 1944
The Central Excise Cenvat on Capital 2,570,898
Act, 1944 Goods
The Central Excise April, 2003 - Customs, Excise & Service Tax
Act, 1944 November, 2009 Appellate Tribunal, New
Delhi Rs.94,860
Commissioner(Appeals), Nagpur
- Assistant Commissioner -
Rs.4,006
Deputy Commissioner, Central
Excise, Nagpur -
Rs. 1,004,151
The Central Excise Apr, 2003 to Customs, Excise & Service Tax
Act, 1944 Aug, 2009 Appellate Tribunal, Nagpur -
Rs.117,762
Deputy Commissioner, Central
Excise, Nagpur - Rs. 74,130
Assistant Commissioner,
Central Excise, Nagpur -
Rs. 21,954
The Central Excise Apr, 2003 to Deputy Commissioner of
Act, 1944 Central
Aug, 2006 Excise, Nagpur - Rs. 694,852
Customs, Excise & Service
Tax Appellate Tribunal -
Rs.20,822,518
Additional Commissioner of
Central Excise, Nagpur -
Rs.10,337,647
The Central Excise Oct, 2004 to Commissioner (Appeals),
Act, 1944 Central
Jan, 2006 Excise, Indore
The Central Excise Jun, 2006 to Additional Commissioner of
Act, 1944 Central
Jan,2007 Excise, Nagpur
Finance Act, 1994 2006-09 Additional Commissioner of
Central
Excise, Nagpur
The Central Excise March, 2004 to Customs, Excise & Service Tax
Act, 1944 Feb, 2007 Appellate Tribunal
The Central Excise 2006 Commissioner (Appeals),
Act, 1944 Central
Excise, Indore
The Central Excise 2002-2003 Additional Commissioner of
Act, 1944 Central
Excise, Nagpur
3.10 The Company has accumulated loss as at March 31, 2010 which is
more than fifty percent of its net worth and read with comments in para
4(b) of our report, the company has incurred cash losses in the
financial year ended on that date and in the immediately preceding
financial year.
3.11 According to the records of the Company examined by us and the
information and explanation given to us, based on our audit procedures,
we are of the opinion that the company has not defaulted in repayment
of dues to financial institutions, banks or debenture holders during
the year.
3.12 The Company has not granted any loans and advances on the basis of
security by way of pledge of shares, debentures and other securities.
3.13 The provisions of any special statute applicable to chit fund/
Nidhi/ mutual benefit fund/ Societies are not applicable to the
Company.
3.14 In our opinion, the Company is not a dealer or trader in shares,
securities, debentures and other investments.
3.15 In our opinion and according to the information and explanations
given to us, the terms and conditions of the guarantees given by the
Company, for loans taken by others from banks or financial institutions
during the year, are not prejudicial to the interest of the Company.
3.16 In our opinion, and according to the information and explanations
given to us, no new term loan has been obtained during the year.
3.17 On the basis of an overall examination of the balance sheet of the
company, in our opinion and according to the information and
explanations given to us, there are no funds raised on a short term
basis which have been used for long-term investment.
3.18 According to the information and explanations given to us, the
company has made preferential allotment of shares to a
company covered in the register maintained under section 301 of the
Act. In our opinion, the price at which shares have been issued is not
prejudicial to the interest of the company.
3.19 The Company has created security or charge in respect of
debentures issued and outstanding at the year end.
3.20 The Company has not raised any money by public issue during the
year.
3.21 During the course of our examination of the books and records of
the Company, carried out in accordance with the generally accepted
auditing practices in India, and according to the information and
explanations given to us, we have neither come across any instance of
fraud on or by the Company, noticed or reported during the year, nor
have we been informed of such case by the management.
4. We draw attention to:
(a) Note 9(a) on Schedule XXI, wherein we are unable to determine the
extent of provision that may be required for diminution in the value of
long term investment amounting to Rs. 20,44,69,921 in Amit Spinning
Industries Limited subsidiary of the company. Further, uncertainties
exist in relation to the recoverability of loans amounting to
Rs.270,128,019 ( net of Amount received subsequently Rs. 170,400,000,)
interest accrued thereon amounting to Rs.60,414,121 and advances
amounting to Rs.17,726,208 due from the above subsidiary.
(b) Note 9(b) on Schedule XXI, wherein the Company has not charged to
Profit and Loss Account a sum of Rs.329,563,767 due from Schoeller
Litvinov k.s. (SLKS), the Czech step down subsidiary of the Company
pursuant to reorganization plan approved by the court. Accordingly loss
for the year is lower by Rs.329,563,767 with consequent impact on net
assets for the year then ended.
(c) Note 10 on Schedule XXI, wherein we are unable to comment on the
amounts recoverable relating to certain debtor and advance balances
aggregating to Rs.17,408,913 and Rs.22,473,335, respectively, for which
no provision has been made in the books of account.
We further report that, without considering the impact of paragraphs
4(a) and 4(c) above the effect of which could not be determined, had
the observations made by us in paragraph 4(b) above been considered,
the loss before tax for the year would have been Rs. 55,30,08,482 (as
against the reported figure of Rs 22,34,44,715), Accumulated loss would
have been Rs. 1,53,38,78,558 (as against the reported figure of
Rs.1,20,43,14,791), Sundry Debtors and Loans and Advances to subsidiary
would have been Rs.77,91,36,218 & Rs. 59,79,62,210 respectively (as
against the reported figure of Rs. 1,09,42,10,537 & Rs. 61,24,51,658
respectively) .
5. Further to our comments in paragraphs 4 above, we report that:
(a) We have obtained all the information and explanations, which to the
best of our knowledge and belief were necessary for the purposes of our
audit;
(b) In our opinion, proper books of account as required by law have
been kept by the Company so far as appears from our examination of
those books;
(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement
dealt with by this report are in agreement with the books of account;
(d) In our opinion, subject to our remarks in paragraph 4(b) above, 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;
(e) On the basis of written representations received from the
directors, as on March 31, 2010 and taken on record by the Board of
directors, none of the directors is disqualified as on March 31, 2010
from being appointed as a director in terms of clause (g) of
sub-section (1) of Section 274 of the Act;
(f) In our opinion and to the best of our information and according to
the explanations given to us, the said financial statements together
with the notes thereon and attached thereto give in the prescribed
manner the information required by the Act and subject to our remarks
in paragraph 4 above, 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, 2010;
(ii) in the case of the Profit and LossAccount, of the loss for the
year ended on that date; and
(iii) in the case of the Cash FlowStatement, of the cash flows for the
year ended on that date.
For J.C. Bhalla & Company
Chartered Accountants
Firm Regn. No. 001111-N
(Akhil Bhalla)
Place : New Delhi Partner
Dated : August 13, 2010 Membership No.505002