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Auditor Report of Steel Authority of India (SAIL) Ltd.

Mar 31, 2016

We have audited the accompanying standalone financial statements of STEEL AUTHORITY OF INDIA LIMITED (''the Company''), which comprise the Balance Sheet as at 31 March 2016, the Statement of Profit and Loss and the Cash Flow Statement and a summary of significant accounting policies and other explanatory information for the year then ended.

Management''s Responsibility for the Standalone Financial Statements

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

Auditors'' Responsibility

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

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

The Company has not provided for:

i. entry tax amounting to Rs.97.22 crore (current year Rs.2.33 crore and last year Rs. 3.34 crore) in the The mentioned cases are sub-judice and pending before the state of Uttar Pradesh, Rs.1091.02 crore (current year Rs. 6.70 crore and last year Rs. 13.04 crore) Hon''ble Supreme Court and other courts for a long time. The in the state of Chhattisgarh and Rs.341.15 crore (current year Rs. 7.20 crore and last year Rs.119.14 disputed demands, contested on valid and bonafide grounds, have crore) in the state of Odisha (refer note no. 29.l(i)(g); been disclosed as contingent liabilities as it is not probable that

ii. amount paid to DVC against bills raised for supply of power and retained as advance by Bokaro present obligations exist on the Balance Sheet date. Therefore, Steel Plant amounting to Rs.491.27 crore (current year- Rs. 97.68 crore and last year- Rs.101.83 there is no adverse impact on loss. There is no change in the crore) (refer note no. 29.l(i)(f)); status of these cases till date.

The total impact of above para (i) and (ii) has resulted in understatement of Loss after Tax for the year by Rs. 1,321.35 crore (Over statement of profit of Previous Year ended 31 st March, 2015 by Rs. 1906.75 crore), overstatement of Reserves & Surplus by Rs. 1321.35 crore (As at 31 st March, 2015 Rs. 1906.75 crore), understatement of Current Liabilities by Rs. 2020.66 crore (As at 31st March, 2015- Rs. 1906.75 crore) and understatement of Total Assets by Rs. 699.31 crore (Previous Year ended 31st March, 2015 Rs. Nil).

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion paragraph above, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March 2016 and its loss and its cash flows for the year ended on that date.

Emphasis of Matter

We draw attention to the net sales include sales to Government agencies which are recognised on provisional contract prices (refer note no. 32.1);

Our opinion is not qualified in respect of this matter.

Other Matter

We did not audit the financial statements/ information of 8 branches included in the standalone financial statements of the Company whose financial statements/financial information reflect total assets of Rs. 44971.85 crore as at 31st March, 2016 and total revenues of Rs. 15,849.68 crore for the year ended on that date, as considered in the standalone financial statements. The financial statements/ information of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these branches, is based solely on the report of such branch auditors.

Our opinion is not qualified in respect of this matter.

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 ''A'' 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 obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b. Except for the effects of the matter described in the Basis for Qualified Opinion paragraph 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 reports on the accounts of the branch offices of the Company audited under Section l43 (8) of the Act by branch auditors have been sent to us and have been properly dealt with by us in preparing this report

d. The balance sheet, the statement of profit and loss and the cash flow statement dealt with by this Report are in agreement with the books of account;

e. Except for the effects of the matter described in the Basis for Qualified Opinion paragraph above,in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section l33 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

f. The matter described in the Basis for Qualified Opinion paragraph above, in our opinion, may not have an adverse effect on the functioning of the Company.

g. As per notification No. GSR 463(E) dated 5th June 2015 issued by the Ministry of Corporate Affairs, Government of India, Section 164(2) of the Companies Act, 2013 is not applicable to the Company;

h. With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in Annexure ''B'', and

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

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer note Note No. 29.1 to 29.4 to the financial statements;

ii. The company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses; and

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

3. As required by section 143(5) of the Act, we give in Annexure ''C'', a statement on the matters specified by the Comptroller and Auditor General of India for the Company.

Annexure ''A'' referred to in paragraph 1 under the heading "Report on other legal and regulatory requirements" of our report of even date

Re: Steel Authority of India Limited (''the Company'')

i. In respect of its fixed assets:

a. The Company has maintained proper records showing in most cases, full particulars including quantitative details and Necessary action is being taken to situation of its fixed assets. However, the location and the extent of area in few in respect of land needs to be updated update the location and extent of area in the fixed assets registers and have to be reconciled with the revenue records as to the extent of holding and location in respective plants in the fixed assets of land. The delay is attributable to procedural matters involved in ascertaining and reconciling with revenue records registers.This is a continuous process. maintained by the revenue departments of state governments involved.

b. The fixed assets of the Company have been physically verified by the management at reasonable intervals in a phased Necessary action is being taken to manner so as to generally cover all the assets once in three years. However, it is observed that certain land and evict the occupants from land and buildings are under encroachment/ unauthorised occupation. As informed to us, no material discrepancies have been buildings under encroachment/ noticed on such verification. unauthorised occupation.

c. According to the information and explanations given to us and on basis of our examination of records of the Company, the title deed of immovable property are held in name of company except in following instances:

Particulars Freehold Land Leasehold Land Building

Not in name of company 40565.76 acres 17297.73 acres 1312 sq. Mtr and l case

Gross block of land not 120.52 146.62 0.69 in name of Company (Rs. in Crore)

Net block of land not in 120.52 126.25 0.44 name of Company (Rs. in Crore)

ii. In respect of physical verification of Inventory:

a. The inventories have been physically verified by the management with reasonable frequency during the year. In certain cases, the stocks have been verified on the basis of visual survey/estimates.

b. In our opinion and according to the information and explanations given to us, discrepancies noticed on physical verification of inventories were not material and have been properly dealt with in the books of account.

iii. In our opinion and according to the information and explanations given to us, the Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the Register maintained under Section l89 of the Companies Act, 2013. Therefore, clauses (iii) (a) and (iii) (b) of Paragraph 3 of the Order are not applicable to the Company

iv. The Company has not granted any loans or made any investments or given any guarantee and security covered under Sections l85 and l86 of the Companies Act, 20l3.

v. According to the information and explanations given to us, the Company has not accepted any deposits from public during the year. Accordingly, paragraph 3(v) of the Order is not applicable to the Company.

vi. The Company has made and maintained cost records pursuant to the Companies (Cost Records and Audit) Rules, 2014 prescribed by the Central Government under Section 148(1) of the Companies Act, 2013.

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

a. The Company has generally been regular in depositing undisputed statutory dues, including Provident Fund, Employees'' State Insurance, Income-tax, Sales Tax, Service Tax, Duty of Customs, Duty of Excise, Value Added Taxes, Cess and other Statutory Dues to the appropriate authorities. According to the information and explanations given to us, there are no undisputed statutory dues outstanding for a period of more than six months from the date they became payable, as per books of accounts as at 31st March, 2016.

b. According to the information and explanations given to us, there are disputed statutory dues, which have not been deposited as on 31st March, 2016 as given herein below:

Statute Nature of Dues Amount Forum where disputes (Rs. crore) are pending

Sales Tax Sales tax and VAT 6.51 Supreme Court & VAT Demands 604.06 High Courts 624.35 Sales Tax Tribunals 121.01 Sales Tax Departments

Entry Tax Entry tax 1091.02 Supreme Court 666.29 High Courts 12.14 Tribunal 20.44 Department

Central Excise Excise Duty 152.02 Supreme Court Act, 1944 140.14 High Courts 990.00 CESTAT 751.55 Department

Service Tax Service Tax 137.96 CESTAT 82.29 Department

Customs Duty Customs Duty 5.09 CESTAT

Income Tax TDS on Perks 46.74 Supreme Court Act, 1961 105.94 High Courts

Other TDS matters 105.79 High Courts 1.67 ITAT 0.89 Department of Income Tax

Income Tax Disputes 194.52 High Courts 522.33 ITAT 350.85 Department of Income Tax

TOTAL 6733.60

viii. The Company has not defaulted in repayment of loans or borrowings to a financial institutions, banks, government or dues to debenture holders during the year. Accordingly, paragraph 3(viii) of the Order is not applicable to the Company.

ix. The Company did not raise any money by way of initial public offer or further public offer (including debt instruments).

Term loans from banks and financial institutions have been applied for the purpose for which they were obtained.

x. According to the information and explanations given to us, no material fraud by the Company or on the Company by its officers or employees has been noticed or reported during the course of our audit.

xi. As per notification No. GSR 463(E) dated 5th June 2015 issued by the Ministry of Corporate Affairs, Government of India, Section 197 of the Companies Act, 2013 is not applicable to the Company. Accordingly, paragraph 3(xi) of the Order is not applicable.

xii. According to the information and explanations given to us, the company is not a Nidhi Company. Accordingly, paragraph 3(xii) of the Order is not applicable.

xiii. 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 l77 and l88 of the Companies Act, 2013 where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.

xiv. According to the information and explanations give to us and based on our examination of the records, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

xv. 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, paragraph 3(xv) of the Order is not applicable.

xvi. The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

For B.N. Misra & Co For Sharma Goel & Co., LLP For and on behalf of Board of Directors

Chartered Accountants Chartered Accountants

Firm Registration no.32l095E Firm Registration no.000643N

Sd/- Sd/-

[ B.N.Misra ] [ Amar Mittal ]

Partner Partner

(M. No. 083927) (M. No. 017755 ) Sd/-

For Singhi & Co. For Chatterjee & Co. (P.K. Singh)

Chartered Accountants Chartered Accountants Chairman

Firm Registration no.302049E Firm Registration no.0302114E

Sd/- Sd/-

[ Shrenik Mehta ] [ S.K Chatterjee]

Partner Partner

(M. No. 063769) (M. No. 003124)

Place : New Delhi Place : New Delhi

Dated : 30th May, 2016 Date : 11th August, 2016


Mar 31, 2015

Report on the Standalone Financial Statements

We have audited the accompanying Standalone financial statements of Steel Authority of India Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2015, the Statement of Profit and Loss, the Cash Flow Statement and a summary of significant accounting policies and other explanatory information for the year then ended.

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 the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Standalone 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 the internal financial control relevant to the Company preparation of the Standalone financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial control system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the Standalone financial statements.

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

Basis for Qualified Opinion

1. The Company has not provided for;

a) entry tax amounting to Rs.94.89 crore (current year Rs.3.34 crore) in the state of Uttar Pradesh, Rs.1084.32 crore (current year Rs.13.04 crore) in the state of Chhatisgarh and Rs.333.95 crore (current year Rs.119.14 crore) in the state of no.29.2(a));

b) amount paid to DVC against bills raised for supply of power and retained as advance by Bokaro Steel Plant amounting to Rs.393.59 crore ( current year Rs.101.83 crore) (refer note no. 29.2(b));

2. At Salem Steel Plant, inventory includes estimated quantity of 9089 MT of skull extractable from slag valued at Rs.51.80 Crore. Valuation of skull was not justified since there is no separate distinguishable physical existence of 9089 MT of skull and therefore cannot be considered as inventory as on 31-03-2015. Further, this constitutes a departure from Para 9 of the Guidance note on Audit of inventories, which states that all recorded inventories should exist at year end, as there is no identifiable skull as such and hence should not have been considered as inventory to that extent.

The total impact of above para (1) to (2) has resulted in, overstatement of Profit before Tax for the year by 1289.15 crore, overstatement of Reserves & Surplus by 11958.55 crore (Previous Year 11669.40 crore), understatement of Current Liabilities by 11906.75 crore (Previous Year 11669.40 crore) and overstatement of Current Assets by 151.80 crore (Previous Year INil).

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion above, 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:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2015;

(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

We draw attention to;

i. net sales include sales to Government agencies which are recognised on provisional contract prices (refer note no.32.1);

ii. based on technical opinion, the Co. has adopted effective useful life of Plant & Machinery used in the manufacture of steel as a continuous process plant working on three shift basis, which is different from useful life as prescribed in Schedule II of the Companies Act, 2013 (refer note no.32.9);

Our opinion is not qualified in respect of these matters.

Other Matter

We did not audit the financial statements of 9(Nine) Plants/Units included in the standalone financial statements of the Company whose financial statements / financial information reflect total assets of 174,872.72 crore as at 31st March, 2015 and total revenues of Rs.23,883.15 crore for the year ended on that date, as considered in the standalone financial statements. The financial statements/information of these Plants/Units have been audited by the branch auditors, appointed by Comptroller & Auditor General of India, whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these Plants/Units, is based solely on the report of such Plants/Units auditors. Our opinion is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2015 ("the Order") issued by the Central Government in terms of sub section 11 of Section 143 of the Act, we give in the Annexure - A, a statement on the matters specified in paragraphs 3 and 4 of the Order.

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

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

(b) Except for the effect of the matter described in the Basis for Qualified opinion paragraph above, in our opinion, proper books of accounts as required by law have been kept by the Company so far as appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the Plants/ Units not visited by us.

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

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

(e) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph above, in our opinion, the aforesaid Standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

(f) The matter described in the Basis for Qualified Opinion paragraph above, in our opinion, may not have an adverse effect on the functioning of the Company. (g) On the basis of the written representations received from the Directors as on 31 March, 2015 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2015 from being appointed as a director in terms of Section 164(2) of the Companies Act, 2013.

(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 litigations on its financial position in its financial statements – Refer Note 29 to the financial statements;

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

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

3. As required by section 143(5) of the Act, we give in Annexure - B, a statement on the matters specified by the Comptroller and Auditor General of India for the Company.

(Referred to in paragraph 1 of our Report on Other Legal and Regulatory Requirements relevant to paragraph 3 & 4 of "the Order")

(i) In respect of its fixed assets:

(a) The Company has maintained proper records showing in most cases, full particulars including quantitative details and situation of its fixed assets.

However the location and extent of area in few of the plants in respect of land needs to be updated in the fixed assets registers and have to be reconciled with the revenue records as to the extent of holding and location of land. The delay is attributable to procedural matters involved in ascertaining and reconciling with revenue records maintained by the revenue departments of the state governments involved.

b) The fixed assets of the Company have been physically verified by the management at reasonable intervals in a phased manner so as to generally cover all the assets once in three years. However, it is observed that certain land and buildings are under encroachment/unauthorised occupation. As informed to us, no material discrepancies ave been noticed on such verification.

(ii) In respect of physical verification of Inventory:

a) The inventories have been physically verified by the management with reasonable frequency during the year. In certain cases, the stocks have been verified on the basis of visual survey/estimates.

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

c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and discrepancies noticed on physical verification of inventories were not material and have been properly dealt with in the books of account.

(iii) In our opinion and according to the information and explanations given to us, the Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the Register maintained under Section 189 of the Companies Act, 2013. Therefore, clauses (iii) (a) and (iii) (b) of Paragraph 3 of the Order are not applicable to the Company.

iv) In our opinion and according to the information and explanations given to us, there are internal control systems 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 not observed any major weaknesses in the internal control system.

v) According to the information and explanations given to us, the Company has not accepted any deposits from public during the year within the meaning of sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the Companies Acceptance of deposits) Rules, 2014.

vi) The Company has made and maintained cost records pursuant to the Companies (Cost Records and Audit) Rules, 2014 prescribed by the Central Government under Section 148(1) of the Companies Act, 2013.

vii) According to the information and explanations given to us in respect of statutory dues:

a) The Company has generally been regular in depositing undisputed statutory dues, including Provident Fund, Employees'' State Insurance, Income-tax, Sales Tax, Wealth tax, Service Tax, Duty of Customs, Duty of Excise, Value Added Taxes, Cess and other Statutory Dues with the appropriate authorities. According to the information and explanations given to us, there are no undisputed statutory dues outstanding for aperiod of more than six months from the date they became payable, as per books of accounts as at 31st March, 2015

b) According to the information and explanations given to us, there are disputed statutory dues, which have not been deposited as on 31st March, 2015 as given herein below:

Statute Nature of Dues Amount Forum where (Rs. crore) disputes are pending.

Sales Tax & VAT Demand by 3.04 Supreme Court Appellate 184.55 High Courts Authorities 576.67 Sales Tax Tribunals

124.22 Sales Tax Departments

Central Excise Excise Duty and 19.74 Supreme Court Act, 1944 Service Tax 209.56 High Courts

(including 1265.24 CESTAT service tax) 249.77 Department of Excise

Income Tax TDS on Perks 46.74 High Courts Act, 1961 TDS Refund Claim 124.13 High Courts

Income Tax Disputes 516.40 Department of Income Tax 566.03 ITAT

Other Statutes Other Statutory Dues 3505.64 Supreme Court (including Cess) 498.76 High Courts

21.02 Lower Courts

253.76 Concerned Department

TOTAL 8165.27

c) According to the information and explanations given to us, amounts which were to be transferred to Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made there under has been transferred to such fund.

viii) There are no accumulated losses of the company as at the end of the year. The Company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

ix) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to Financial Institutions or Banks or Debenture holders.

x) 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

xi) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, the term loans availed by the Company were, prima facie, applied by the Company during the year for the purpose for which the loans were obtained other than temporary deployment pending application.

xii) To the best of our knowledge and belief and according to the information and explanations given to us, we report that no fraud on or by the Company has been noticed or reported during the year.

For O.P. Totla & Co. For B.N. Misra & Co. For Sharma Goel & Co. LLP For and on behalf of the Board of Directors

Chartered Accountants Chartered Accountants Chartered Accountants

Firm Registration No. Firm Registra tion No. Firm Registration No. 000734C 321095E 000643N

Sd/- Sd/- Sd/- Sd/-

[ Rajendra P. Totla ] [ B. N. Misra ] [ Amar Mittal ] (Rakesh Singh)

Partner Partner Partner Chairman

(M. No. 400658) (M. No. 083927) (M. No. 017755)

Place : New Delhi Place : New Delhi

Dated : 29th May, 2015 Dated : 3rd July, 2015


Mar 31, 2014

We have audited the accompanying financial statements of Steel Authority of India Limited ("the Company"), which comprise the Balance Sheet as at 31st March 2014, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information, in which are incorporated the Accounts of Plants, Units, Branches and Other Offices audited by the Branch Auditors in accordance with the letter of appointment of Comptroller & Auditor General of India.

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 13th 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.

Auditors'' Responsibility

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

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

Basis for Qualified Opinion

1. The Company has not provided for;

a) entry tax amounting to Rs.91.55 crore( current year Rs.9.91 crore) in the state of Uttar Pradesh, Rs 1071.28 crore (current year Rs.182.82 crore) in the state of Chhatisgarh and Rs.214.81 crore (current year Rs.44.49 crore) in the state of Odisha (refer note no.28.2(a));

b) claims of Rs.291.76 crore (current year Rs.74.36 crore) by DVC for supply of Power (refer note no. 28.2(b));

2. In respect of Rourkela Steel Plant (RSP), depreciation and interest has been short provided by Rs.104.92 crore and Rs.28.74 crore respectively ( refer note no. (30.2 )). resulting in overstatement of profit by Rs.133.66 crore and fixed assets by similar amount.

The total impact of para (1) to (2) has resulted in overstatement of profit for the year by Rs.455.24 crore, cumulative Profit by Rs.1803.06 crore, understatement of Liability by Rs.1669.40 crore, overstatement of fixed assets by Rs.133.66 crore (including interest during construction Rs.28.74 crore).

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion

The mentioned cases are sub-judice and pending before the Hon''ble Supreme Court. The disputed demands, contested on valid and bonafide grounds, have been disclosed as contingent liabilities as it is not probable that present obligations exist on the Balance Sheet date. Therefore, there is no adverse impact on profit. These cases were sub-judice as on 31st March, 2012 also and there is no change in the status of these cases during the Financial Years 2012-13 & 2013-14.

As part of its Modernization and Expansion Plan / other Capital Schemes in Rourkela Steel Plant, the Assets have been capitalized after installation, trial run, removal of all defects, issue of acceptance certificate and having become ready for commercial production during the year. The capitalisation has been done in accordance with applicable Accounting Standards and Generally Accepted Accounting Principles. The position has been adequately explained in Note No. 30.2 forming part of the financial statements. Therefore, there is no over statement of profit. 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 profit for the year ended on that date; and

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

Emphasis of Matter

We draw attention to:

i. Claims/demands against the Company where the Company has lost in the first or subsequent appeals and has made further appeals before higher courts / forums (refer note no. 28 (f));

ii. Sales to Government agencies recognised on provisional contract prices (refer note no. 32.1);

iii. Capitalisation at IISCO Steel Plant (valuing Rs.5457.48 crore) during the financial year (refer note no. 30.1);

iv. Capital work-in-progress includes Rs.115.38 crore in respect of Steel processing Unit at Bettiah not yet capitalised [refer note no.29.4(b)]; v. Balance confirmation, reconciliation and consequential adjustments, if any (refer note no. 31.3);

vi. Reversal of pension component of employee benefit expenses of Rs.201.21 crores and expenditure during construction Rs.9.63 crores [refer note no. (32.8)]; vii. Prior period income includes Rs. 120.94 crores towards write back of depreciation on certain fixed assets, erroneously depreciated earlier at 100% instead of 95% required as per the Company''s policy and Schedule XIV of the Companies Act, 1956 read with section 205 and 350 of the Companies Act, 1956. [refer note no. 32.3(a)] ;

viii. Prior period income includes interest of Rs. 20.67 crore received on short term deposits held in the name of District & Session Judge A/c land, for payment to land oustees [refer note no.(32.3(b)] ;

ix. Net realisable value of assets retired from active use (refer note no.29.3) ;

x. Explosion of Boiler no.3, lying in capital work in progress valuing Rs.37 crore at IISCO Steel Plant. Loss due to damage, if any, is not yet determined (refer note no.30.4); Our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

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

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

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

b. In our opinion proper books of accounts as required by law have been kept by the Company so far as appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the Plants/ Units/ Branches /Other Offices not visited by us. The Branch Auditors'' reports have been forwarded to us and have been appropriately dealt with;

c. Except for 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 sub-section (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

d. Except for 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 sub-section (3C) of Section 211 of the Companies Act, 1956;

e. On the basis of written representations received from the directors as on 31 March, 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.

Annexure to the Auditor''s Report (Referred to in paragraph 1 of our Report on Other Legal and Regulatory Requirements)

1. a) The Company has maintained proper records showing in most cases, full particulars including quantitative details and situation of its fixed assets. However, the location and extent of area in few of the plants in respect of land needs to be updated in the fixed assets registers and have to be reconciled with the revenue records as to the extent of holding and location of land

b) The fixed assets of the Company have been physically verified by the management at reasonable intervals in a phased manner so as to generally cover all the assets once in three years. However, it is observed that certain land and buildings are in unauthorised occupation. As informed to us, no material discrepancies have been noticed on such verification wherever reconciliation has been carried out.

c) In our opinion and according to the information and explanations given to us, there is no substantial disposal of fixed assets during the year.

2. a) The inventories have been physically verified by the management with reasonable frequency during the year. In certain cases, the stocks have been verified on the basis of visual survey/estimates.

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

c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventory. The discrepancies between physical stocks and book records arising out of physical verification, which were not material, have been dealt with in the books of account.

3. According to information and explanations given to us, the Company has not granted or taken any secured or unsecured loans, to or from companies, firms, or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Consequently, clauses (iii)(a) to (iii)(g) of paragraph 4 are not applicable.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services.

5. a) According to the information and explanations given to us, we are of the opinion that there are no contract or arrangement of the Company, referred to in Section 301 of the Companies Act, 1956, which requires to be entered in the register required to be maintained under that section. b) According to the information and explanations given to us, there are no transactions of purchase of goods and materials and sale of goods, materials and services made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act 1956, and aggregating during the year to Rs.5,00,000 or more with any party.

6. The Company has not accepted any public deposits during the year. In respect of public deposits accepted in earlier years, there are no unmatured outstanding deposits.

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

8. We have broadly reviewed the records maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209(1)(d) of the Companies Act 1956, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained in respect of the applicable products. We have not, however, made a detailed examination of the records with a view to determine whether these are accurate and complete.

9. According to the information and explanations given to us in respect of statutory and other dues:

a) The Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Investors Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs duty, Excise duty, Cess and other statutory dues, with appropriate authorities.

b) According to the information and explanations given to us, there are no undisputed statutory dues outstanding for a period of more than six months from the date they became payable, as per books of accounts as at 31st March, 2013.

a) According to the information and explanations given to us, there are disputed statutory dues, which have not been deposited as on 31st March, 2014 as given herein below:

Statute Nature of Dues Amount Forum where (Rs.in crore) disputes are pending.

Sales Tax & VAT Demand by 3.05 Supreme Court Appellate Authorities 158.47 High Courts

548.35 Sales Tax Tribunals

90.73 Sales Tax Departments

800.60

Central Excise Excise Duty 19.59 Supreme Court Act, 1944 185.13 High Courts

598.74 CESTAT

351.40 Department of Excise

1154.86

Income Tax TDS on Perks 132.67 High Courts Act, 1961 TDS Refund Claim 8.11 High Courts

Income Tax Disputes 155.77 Department of Income Tax 194.52 ITAT

491.07

Other Statutes Other Statutory Dues 960.78 Supreme Court (including Cess) 1930.86 High Courts

57.48 Lower Courts

302.16 Concerned Department

3251.28 TOTAL 5697.81

10. There are no accumulated losses of the Company as at the end of the year. The Company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution or bank or bond holder.

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

13. The Company is not a chit fund or a Nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4 (xiii) of the Order, are not applicable to the Company.

14. The Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Order, are not applicable to the Company.

15. 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 are not prima-facie prejudicial to the interest of the Company.

16. To the best of our knowledge and belief, and according to the information and explanations given to us, in our opinion, the term loans availed by the Company were, prima facie, applied by the Company during the year for the purpose for which the loans were obtained other than temporary deployment pending application.

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

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

19. According to the information and explanations given to us and records examined by us, charges have been created in respect of secured bonds issued.

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

21. To the best of our knowledge and belief and according to the information and explanations given to us, we report that no fraud on or by the Company has been noticed or reported during the year except in Visvesvaraya Iron & Steel Plant Bhadravati, an employee of the company was involved in delivery material without following the specified procedures of collection of advances for sale of products. An amount of Rs.2.68 crore remains unrecoverable on this account.

The procedures have been strengthened to avoid the recurrence of such case. A complaint has been filed with the Police and the matter is under investigation. Also, efforts are being made to recover the balance amount of Rs.2.68 crore.

For S.K. Mittal & Co. For O.P. Totla & Co. For B.N. Misra & Co. For and on behalf of the Board of Directors

Chartered Accountants Chartered Accountants Chartered Accountants

Firm Registr -ation No. Firm Regist -ration No. Firm Registration No. 001135N 000734C 321095E

Sd/- Sd/- Sd/- Sd/- [S.K.Mittal] [ S.K Acharya] [S.C.Dash] (C. S. Verma) Partner Partner Partner Chairman (M.No. 8506) (M. No. 78371) (M. No. 050020) Place : New Delhi Place: New Delhi Dated : 28th May, 2014 Dated: 11th August, 2014


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of Steel Authority of India (SAIL) 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, in which are incorporated the Accounts of Plants, Units, Branches and Other Offices audited by the Branch Auditors in accordance with the letter of appointment of Comptroller & Auditor General of India.

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.

Auditors'' Responsibility

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

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

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

Basis for Qualified Opinion

The Company has not provided for;

a) entry tax amounting to Rs.81.64 crore (current year Rs. 17.62 crore) in the state of Uttar Pradesh, (refer note no.28.2(a));

b) entry tax of Rs.888.46 crore (current year Rs. 163.83 crore) in the state of Chhatisgarh and Rs. 170.32 crore (current year Rs.39.20 crore ) in the state of Odisha (refer note no. 28.2(b));

c) income tax demand of Rs.87.62 crore (refer note no. 28.2(c));

d) claims of Rs.217.40 crore ( current year Rs.88.80 crore) by DVC for supply of Power (refer note no. 28.2(d));

The impact of para (a) to (d) has resulted in overstatement of profit for the current year by Rs.397.07 crore, cumulative Profit by Rs.1445.44 crore and understatement of Liability by Rs.1445.44 crore.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the 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 & Loss, of the profit for the year ended on that date; and

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

Emphasis of Matter

We draw attention to:

i. Pending finalisation of fresh agreement with non-executives in respect of wage revision due from 1st January, 2012, we are unable to comment on the adequacy of provision of Rs.611.03 crore (including Rs.549.95 crore provided during the year) (refer note no.32.6);

ii. In view of the assumptions provided by the Company relating to the salary escalation rates, we are unable to comment on the adequacy of provision for retirement employee benefits based on actuarial valuation as per Accounting Standard -15 : ''Employee Benefits'' issued by the Ministry of Corporate Affairs (refer note no. 33.1.2(f));

iii. Regarding treatment of mining as a separate segment, as per Accounting Standard-17 "Segment Reporting", issued by the Ministry of Corporate Affairs (refer note no. 33.2 (iii) );

iv. Charging off consultancy fee in respect of deferred capital schemes, amounting to Rs.107.17 crore (refer note no. 30.4 (a) and non-capitalisation of assets valued at Rs.981.83 crore (refer note no. 30.4 (b));

v. Claims / demands against the Company Rs.85.34 crore where the Company has lost in the first or subsequent appeals and has made further appeals before higher courts / forums (refer note no.28.2 (f));

vi. Water Tax in the State of Odisha amount indeterminable. (refer note no.28.2 (e));

vii. Net realisable value (NRV) of assets retired from active use (refer note no.30.3 );

viii. Sales to Government agencies recognised on provisional contract prices (refer note no.32.1);

ix. Change in basis of accounting of Mining Rights, resulting in higher profit of Rs.214.14 crore for the year (refer note no.32.8);

x. Balance confirmation, reconciliation and consequential adjustments, if any (refer note no. 31.3);

Our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

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

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

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

b. in our opinion proper books of accounts as required by law have been kept by the Company so far as appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the Plants/ Units/ Branches /Other Offices not visited by us. The Branch Auditors'' reports have been forwarded to us and have been appropriately dealt with;

c. the Balance Sheet, Statement of Profit & Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account and with the audited returns received from Plants/ Units/Branches/ Other Offices not visited by us;

d. except for the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the Balance Sheet, Statement of Profit & Loss, and Cash Flow Statement comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

e. 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.

1. a) The Company has maintained proper records showing in most cases, full particulars including quantitative details and situation of its fixed assets.

b) The fixed assets of the Company have been physically verified by the management at reasonable intervals in a phased manner so as to generally cover all the assets once in three years. However, it is observed that certain land and buildings are in unauthorised occupation. As informed to us, no material discrepancies have been noticed on such verification wherever reconciliation has been carried out.

c) In our opinion and according to the information and explanations given to us, there is no substantial disposal of fixed assets during the year.

2. a) The inventories have been physically verified by the management with reasonable frequency during the year. In certain cases, the stocks have been verified on the basis of visual survey/ estimates.

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

c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventory. The discrepancies between physical stocks and book records arising out of physical verification, which were not material, have been dealt with in the books of account.

3. According to information and explanations given to us, the Company has not granted or taken any secured or unsecured loans, to or from companies, firms, or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Consequently, clauses (iii)(a) to (iii)(g) of paragraph 4 are not applicable.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, certain weaknesses in internal control system are observed in accounting transactions, interface of transactions amongst the sub systems and SAP-ERP. Further, no system audit is carried out for interface of the data from functional sub systems to SAP-ERP and other critical business processes, to establish checks to complete and proper recording of the transactions.

5. a) According to the information and explanations given to us, we are of the opinion that there are no contract or arrangement of the Company, referred to in Section 30l of the Companies Act, l956, which requires to be entered in the register required to be maintained under that section.

b) According to the information and explanations given to us, there are no transactions of purchase of goods and materials and sale of goods, materials and services made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act l956, and aggregating during the year to Rs.5,00,000 or more with any party.

6. The Company has not accepted any public deposits during the year. In respect of public deposits accepted in earlier years, there are no unmatured outstanding deposits.

7. The Company has an internal audit system, which is generally commensurate with the size and nature of its business. However it needs improvement in scope and coverage. In view of implementation of SAP-ERP and other functional packages, it requires further strengthening.

8. We have broadly reviewed the records maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209(l)(d) of the Companies Act l956, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained in respect of the applicable products.We have not, however, made a detailed examination of the records with a view to determine whether these are accurate and complete.

9. According to the information and explanations given to us in respect of statutory and other dues:

a) The Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Investors Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service tax, Customs duty, Excise duty, Cess and other statutory dues, with appropriate authorities.

b) According to the information and explanations given to us, there are no undisputed statutory dues outstanding for a period of more than six months from the date they became payable, as per books of accounts as at 31st March, 2013.

c) According to the information and explanations given to us, there are disputed statutory dues, which have not been deposited as on 31st March, 2013, as given herein below:

Statute Nature of Dues Amount Forum where disputes (Rs. crore) are pending

Sales Tax Demand by Appellate 3.05 Supreme Court & VAT Authorities 158.47 High Courts

548.35 Sales tax tribunals

90.73 Sales tax departments

800.60

Central Excise Excise Duty 19.59 Supreme Court Act, 1944 185.13 High Courts

598.74 CESTAT

351.40 Department of Excise

1154.86

Income Tax Act, TDS on Perks 132.67 High Courts 1961 TDS Refund Claim 8.11 High Courts

Income Tax Disputes 155.77 Department of Income Tax

194.52 ITAT

491.07

Other Statutes Other Statutory dues 960.78 Supreme Court (including Cess) 1930.86 High Courts

57.48 Lower Courts

302.16 Concerned department

3251.28

TOTAL 5697.81

10. There are no accumulated losses of the Company as at the end of the year. The Company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution or bank or bond holder.

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

13. The Company is not a chit fund or a Nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4 (xiii) of the Order, are not applicable to the Company.

14. The Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Order, are not applicable to the Company.

15. 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 are not prima-facie prejudicial to the interest of the Company.

16. To the best of our knowledge and belief, and according to the information and explanations given to us, in our opinion, the term loans availed by the Company were, prima facie, applied by the Company during the year for the purpose for which the loans were obtained other than temporary deployment pending application.

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

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

19. According to the information and explanations given to us and records examined by us, charges have been created in respect of secured bonds issued.

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

21. To the best of our knowledge and belief and according to the information and explanations given to us, we report that no fraud on or by the Company has been noticed or reported during the year.

For S.K. Mittal & Co. For O.P. Totla & Co. For B.N. Misra & Co.

Chartered Accountants Chartered Accountants Chartered Accountants

Firm Registration No. Firm Registration No. Firm Registration No.

00II35N 000734C 321095E

Sd/- Sd/- Sd/-

[S. K. Mittal] [S.R. Totla] [S.C. Dash]

Partner Partner Partner

(M. No. 8506) (M. No. 71774) (M. No. 050020)

Place : New Delhi

Date :30th May, 2013


Mar 31, 2012

We have audited the attached Balance Sheet of STEEL AUTHORITY OF INDIA LIMITED, as on 31st March 2012, the Statement of Profit & Loss Account and the Cash Flow Statement of the company for the year ended on that date annexed thereto, in which are incorporated the accounts of Plants, Units, Branches and other Offices audited by the Branch Auditors in accordance with the letter of appointment of Comptroller & Auditor General of India. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies (Auditors' Report) Order, 2003 as amended by the Companies (Auditors' Report) (Amendment) Order, 2004 (hereinafter referred to as "the Order") issued by the Government of India in terms of Section 227(4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 & 5 of the said Order.

4. Since the matter regarding provision of pension under superannuation benefits for non executives remains undecided and the amount also not ascertained, we are therefore unable to express our opinion on the same and the effect on the accounts, if any (Refer Note No.32.7).

5. Without qualifying our opinion, we draw attention to Note Numbers 32.1 & 32.11 of notes to financial statements.

6. Further to our comments in the Annexure referred to above, 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.

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 the books, and proper returns adequate for the purpose of our audit have been received from the plants/ units/ branches/other units not visited by us. The branch auditors' reports have been forwarded to us and have been appropriately dealt with.

iii). The Balance Sheet, the Statement of Profit & Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account and with the audited returns from the branches.

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

v). In terms of Government of India, Department of Company Affairs Notification No. GSR 829(E) dated 21st October, 2003, Government companies are exempt from the applicability of provisions of Section 274(1)(g) of the Companies Act, 1956.

In our opinion and to the best of our information and according to the explanations given to us, the said accounts subject to our observation given in point no.4 above and read with significant accounting policies and notes on accounts appearing in Note 28-41, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

i) in case of Balance Sheet, of the state of affairs of the Company as on 31st March 2012;

ii) in case of Statement of Profit & Loss Account, of the Profit of the Company for the year ended on that date; and

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

1. a) The Company has maintained proper records showing in most cases, full particulars including quantitative details and situation of its fixed assets.

b) The fixed assets of the Company have been physically verified by the management at reasonable intervals in a phased manner so as to generally cover all the assets once in three years. As informed to us, no material discrepancies have been noticed on such verification wherever reconciliation has been carried out.

c) In our opinion and according to the information and explanations given to us, there is no substantial disposal of fixed assets during the year.

2. a) The inventories have been physically verified by the management with reasonable frequency during the year. In certain cases, the stocks have been verified on the basis of visual survey/estimates.

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

c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventory. The discrepancies between physical stocks and book records arising out of physical verification, which were not material, have been dealt with in the books of account.

3. According to information and explanations given to us, the Company has not granted or taken any secured or unsecured loans, to or from companies, firms, or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Consequently, clauses (iii) (a) to (iii)(g) of paragraph 4 are not applicable.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any major failures in the internal control system.

5. a) According to the information and explanations given to us, we are of the opinion that there are no contract or arrangement of the Company, referred to in section 301 of the Companies Act, 1956, which requires to be entered in the register required to be maintained under that section. b) According to the information and explanations given to us, there are no transactions of purchase of goods and materials and sale of goods, materials and services made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act 1956, exceeding the value of Rs.5,00,000 in respect of any party.

6. The Company has not accepted any public deposits during the year. In respect of public deposits accepted in earlier years, there are no unmatured outstanding deposits.

7. In our opinion, the Company's internal audit system is generally commensurate with the size and nature of its business.

8. We have broadly reviewed the records maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained in respect of the applicable products. We have not, however, made a detailed examination of the records with a view to determine whether these are accurate and complete.

9. According to the information and explanations given to us in respect of statutory and other dues:

a) The Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Investors Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom duty, Excise duty, Cess and other statutory dues, with appropriate authorities.

b) According to the information and explanations given to us, there are no undisputed statutory dues outstanding for a period of more than six months from the date they became payable, as per books of accounts as at 31st March, 2012.

c) According to the information and explanations given to us, there are disputed statutory dues, which have not been deposited as on 31st March, 2012, as given herein below:

Statutes Nature of Dues Amount Forum where disputes are (Rs.in crore) pending.

Sales Tax Demand by Appellate 149.00 High Courts Authorities 509.40 Sales tax tribunals

138.64 Sales tax departments

797.04

Central Excise Excise duty 1055.09 Supreme Court Act, 1944 69.44 High Courts

607.52 CESTAT

224.00 Department of Excise

0.32 Settlement Commission

1956.37

Income Tax Act, TDS on perks Income 175.37 High Courts 1961 Tax 200.13 Department of Income Tax 375.50

Other Statutes Other statutory dues 646.63 Supreme Court (including cess) 464.24 High Courts

48.98 Lower Courts

177.59 Concerned Department

1337.44

TOTAL 4466.35

10. There are no accumulated losses of the company as at the end of the year. The Company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution or bank or bond holder.

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

13. The Company is not a chit fund or a Nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4 (xiii) of the Order, are not applicable to the Company.

14. The Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Order, are not applicable to the Company.

15. 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 are not prima-facie prejudicial to the interest of the Company.

16. To the best of our knowledge and belief, and according to the information and explanations given to us, in our opinion, the term loans availed by the Company were, prima facie, applied by the Company during the year for the purpose for which the loans were obtained other than temporary deployment pending application.

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

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

19. According to the information and explanations given to us and records examined by us, charges have been created in respect of secured bonds issued.

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

21. To the best of our knowledge and belief and according to the information and explanations given to us, we report that no fraud on or by the Company has been noticed or reported during the year except for frauds on the Company for an amount of Rs.0.77 crore by employees of the Company, out of which Rs.0.52 crore have been recovered and for the balance amount of Rs.0.25 crore, as informed, necessary action has been taken for recovery.

For Tej Raj & Pal For S.K. Mittal & Co. For O.P. Totla & Co.

Chartered Accountants Chartered Accountants Chartered Accountants

Firm Registration Firm Registration Firm Registration

No.304124E No.001 135N No.000734C

Sd/- Sd/- Sd/-

[Dinakar Mohanty] [S. K. Mittal] [S.R. Totla]

Partner Partner Partner

(M. No. 059390) (M. No. 8506) (M. No. 071774)

Place : New Delhi

Dated : 29th May, 2012


Mar 31, 2011

We have audited the attached Balance Sheet of STEEL AUTHORITY OF INDIA LIMITED, as on 31st March 2011, the Profit & Loss Account and the Cash Flow Statement of the company for the year ended on that date annexed thereto, in which are incorporated the accounts of Plants, Units, Branches and other Offices audited by the Branch Auditors in accordance with the letter of appointment of Comptroller & Auditor General of India. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies (Auditors' Report) Order, 2003 as amended by the Companies (Auditors' Report) (Amendment) Order, 2004 (hereinafter referred to as "the Order") issued by the Government of India in terms of Section 227(4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 & 5 of the said Order.

4. Since the matter regarding provision of pension under superannuation benefits for non executives remains undecided and the amount also not ascertained, we are therefore unable to express our opinion on the same and the effect on the accounts, if any (Refer Note No. 5.8).

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

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 the books, and proper returns adequate for the purpose of our audit have been received from the plants/ units/ branches/other units not visited by us. The branch auditors' reports have been forwarded to us and have been appropriately dealt with.

iii). The Balance Sheet, the Profit & Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account and with the audited returns from the branches.

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

The position has been adequately explained in Note No. 5.8 of the Rs.Schedule 3: Accounting policies and notes to accounts' forming part of the accounts.

v). In terms of Government of India, Department of Company Affairs Notification No. GSR 829(E) dated 21st October, 2003, Government companies are exempt from the applicability of provisions of Section 274(1)(g) of the Companies Act, 1956.

In our opinion and to the best of our information and according to the explanations given to us, the said accounts subject to our observation given in point no.4 above and read with significant accounting policies and notes on accounts appearing in Schedule 3, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

i) in case of Balance Sheet, of the state of affairs of the Company as on 31st March 2011;

ii) in case of Profit & Loss Account, of the Profit of the Company for the year ended on that date; and

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

1. a) The Company has maintained proper records showing in most cases, full particulars including quantitative details and situation of its fixed assets.

b) The fixed assets of the Company have been physically verified by the management at reasonable intervals in a phased manner so as to generally cover all the assets once in three years. As informed to us, no material discrepancies have been noticed on such verification wherever reconciliation has been carried out. In few cases of fixed assets, verified but not reconciled, the discrepancies are yet to be ascertained.

c) In our opinion and according to the information and explanations given to us, there is no substantial disposal of fixed assets during the year.

Physical verification of fixed assets and its reconciliation with the books is a continuous process.

2. a) The inventories have been physically verified by the management with reasonable frequency during the year. In certain cases, the stocks have been verified on the basis of visual survey/estimates.

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

c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventory. The discrepancies between physical stocks and book records arising out of physical verification, which were not material, have been dealt with in the books of account.

3. According to information and explanations given to us, the Company has not granted or taken any secured or unsecured loans, to or from companies, firms, or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Consequently, clauses (iii)(a) to (iii)(g) of paragraph 4 are not applicable.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any major failures in the internal control system.

5. a) According to the information and explanations given to us, we are of the opinion that there are no contract or arrangement of the Company, referred to in Section 301 of the Companies Act, 1956, which requires to be entered in the register required to be maintained under that section. b) According to the information and explanations given to us, there are no transactions of purchase of goods and materials and sale of goods, materials and services made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act 1956, exceeding the value of Rs.5,00,000 in respect of any party.

6. The Company has not accepted any public deposits during the year. In respect of public deposits accepted in earlier years, there are no unmatured outstanding deposits.

7. In our opinion, the Company's internal audit system is generally commensurate with the size and nature of its business.

8. We have broadly reviewed the records maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained in respect of the applicable products. We have not, however, made a detailed examination of the records with a view to determine whether these are accurate and complete.

9. According to the information and explanations given to us in respect of statutory and other dues:

a) The Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Investors Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service tax, Custom duty, Excise duty, Cess and other statutory dues, with appropriate authorities.

b) According to the information and explanations given to us, there are no undisputed statutory dues outstanding for a period of more than six months from the date they became payable, as per books of accounts as at 31st March, 2011.

c) According to the information and explanations given to us, there are disputed statutory dues, which have not been deposited as on 31st March, 2011, as given herein below:

Statute Nature of Dues Amount Forum where (Rs. in crore) disputes are pending

Sales Tax Demand by 113.81 High Courts Appellate 531.56 Sales Tax Tribunals

Authorities 195.07 Sales Tax Depar -tments

840.44

Central Excise Excise duty 1016.58 Supreme Court Act, 1944 17.54 High Courts

675.61 CESTAT

274.04 Department of Excise

0.32 Settlement Commission

1984.09

Income Tax Act, 1961 TDS on perks 161.74 High Courts

Income Tax 256.56 Department of Income

418.30

Other Statutes Other statutory dues 1272.74 Supreme Court (including cess) 434.68 High Courts

42.25 Lower Courts

42.04 Concerned Department

1791.71 TOTAL 5034.54

10. There are no accumulated losses of the Company as at the end of the year. The Company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution or bank or bond holder.

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

13. The Company is not a chit fund or a Nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4 (xiii) of the Order, are not applicable to the Company.

14. The Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Order, are not applicable to the Company.

15. 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 are not prima-facie prejudicial to the interest of the Company.

16. To the best of our knowledge and belief, and according to the information and explanations given to us, in our opinion, the term loans availed by the Company were, prima facie, applied by the Company during the year for the purpose for which the loans were obtained other than temporary deployment pending application.

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

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

19. According to the information and explanations given to us and records examined by us, charges have been created in respect of secured bonds issued.

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

21. To the best of our knowledge and belief and according to the information and explanations given to us, we report that no fraud on or by the Company has been noticed or reported during the year except for misappropriation of Rs. 1 crore by an employee of the Company. We have been informed that the amount has been subsequently recovered in May, 2011 and employee has been placed under suspension.

The matter has been reported to Central Bureau of nvestigation and the investigation is going on. First nformation Report also has been lodged with Police Proceedings by the management in the case are also in progress. As the Company has recovered the entire amount in May, 2011, there is no effect on the financial results of the Company for the year.

For T.R. Chadha & Co. For Tej Raj & Pal For S.K. Mittal & Co.

Chartered Accountants Chartered Accountants Chartered Accountants

Firm Registration No.: Firm Registration No.: Firm Registration No.:

006711N 304124E 001135N

Sd/- Sd/- Sd/-

(Ajesh Tuli) (B. Gangaraju) (S.K. Mittal)

Partner Partner Partner

(M. No. 86424) (M. No. 7605) (M. No. 8506)

Place : New Delhi Dated : 24th June, 2011

For and on behalf of the Board of Directors

Sd/-

(C. S. Verma)

Chairman

Place: New Delhi Dated: 29th July, 2011


Mar 31, 2010

We have audited the attached Balance Sheet of STEEL AUTHORITY OF INDIA LIMITED, as on 31st March 2010, the Profit & Loss Account and the Cash Flow Statement of the company for the year ended on that date annexed thereto, in which are incorporated the accounts of Plants, Units, Branches and other Offices audited by the Branch Auditors in accordance with the letter of appointment of Comptroller & Auditor General of India. These financial statements are the responsibility of the companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

As required by the Companies (Auditors Report) Order, 2003 as amended by the Companies (Auditors Report) (Amendment) Order, 2004 (hereinafter referred to as "the Order") issued by the Government of India in terms of Section 227(4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 & 5 of the said Order.

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

1. 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.

2. In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of the books, and proper returns adequate for the purpose of our audit have been received from the plants/ units/ branches/other units not visited by us. The branch auditors reports have been forwarded to us and have been appropriately dealt with.

3. The Balance Sheet, the Profit & Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account and the audited returns from the branches.

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

5. In terms of Government of India, Department of Company Affairs Notification No. GSR 829(E) dated 21st October, 2003, Government companies are exempt from the applicability of provisions of section 274(1)(g) of the Companies Act, 1956.

In our opinion and to the best of our information and according to the explanations given to us, the said accounts read with significant accounting policies and notes on accounts appearing in Schedule 3, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

i) in case of Balance Sheet, of the state of affairs of the Company as on 31st March 2010;

ii) in case of Profit & Loss Account, of the Profit of the Company for the year ended on that date; and

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

Annexure to the Auditors Report (Referred to our Report of even date)

1. a) The Company has maintained proper records showing in most cases, full particulars including quantitative details and situation of its fixed assets.

b) The fixed assets of the Company have been physically verified by the management at Physical verification of fixed assets and its reasonable intervals in a phased manner so as to generally cover all the assets once reconciliation with the books is a continuous in three years. As informed to us, no material discrepancies have been noticed on process. such verification wherever reconciliation has been carried out. In few cases of fixed assets, verified but not reconciled, the discrepancies are yet to be ascertained.

c) In our opinion and according to the information and explanations given to us, there is no substantial disposal of fixed assets during the year.

2. a) The inventories have been physically verified by the management with reasonable frequency during the year. In certain cases, the stocks have been verified on the basis of visual survey/estimates.

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

c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventory. The discrepancies between physical stocks and book records arising out of physical verification, which were not material, have been dealt with in the books of account.

3. According to information and explanations given to us, the Company has not granted or taken any secured or unsecured loans, to or from companies, firms, or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Consequently, clauses (iii)(a) to (iii)(g) of paragraph 4 are not applicable.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any major failures in the internal control system.

5. a) According to the information and explanations given to us, we are of the opinion that there are no contract or arrangement of the Company, referred to in Section 301 of the Companies Act, 1956, which requires to be entered in the register required to be maintained under that section. b) According to the information and explanations given to us, there are no transactions of purchase of goods and materials and sale of goods, materials and services made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act 1956, and aggregating during the year to Rs.5,00,000 or more with any party.

6. The Company has not accepted any public deposits during the year. In respect of public deposits accepted in earlier years, there are no unmatured outstanding deposits.

7. In our opinion, the Companys internal audit system is generally commensurate with the size and nature of its business.

8. We have broadly reviewed the records maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209(1)(d) of the Companies Act 1956, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained in respect of the applicable products. We have not, however, made a detailed examination of the records with a view to determine whether these are accurate and complete.

9. According to the information and explanations given to us in respect of statutory and other dues:

a) The Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Investors Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service tax, Custom duty, Excise duty, Cess and other statutory dues, with appropriate authorities.

b) According to the information and explanations given to us, there are no undisputed statutory dues outstanding for a period of more than six months from the date they became payable, as per books of accounts as at 31st March, 2010.

c) According to the information and explanations given to us, there are disputed statutory dues, which have not been deposited as on 31st March, 2010, as given herein below:

Statute Nature of Dues Amount Forum where (Rs. in crore) disputes are pending

Sales Tax Demand by 107.91 High Courts

Appellate 322.37 Sales Tax Tribunals

Authorities 435.62 Sales Tax Departments

865.90

Central Excise Excise duty 891.34 Supreme Court Act, 1944 17.53 High Courts

742.78 CESTAT

161.65 Department of Excise

0.32 Settlement Commission

1813.62

Income Tax Act, 1961 TDS on perks 153.34 High Courts

Income Tax 134.99 Department of Income Tax

288.33

Customs Act Custom Duty 0.66 Tribunal

Other Statutes Other statutory dues 795.36 Supreme Court (including cess) 280.04 High Courts

37.47 Lower Courts

94.79 Concerned Department

1207.66

TOTAL 4176.17

10. There are no accumulated losses of the Company as at the end of the year. The Company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution or bank or bond holder.

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

13. The Company is not a chit fund or a Nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4 (xiii) of the Order, are not applicable to the Company.

14. The Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Order, are not applicable to the Company.

15. 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 are not prima-facie prejudicial to the interest of the Company.

16. To the best of our knowledge and belief, and according to the information and explanations given to us, in our opinion, the term loans availed by the Company were, prima facie, applied by the Company during the year for the purpose for which the loans were obtained other than temporary deployment pending application.

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

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

19. According to the information and explanations given to us and records examined by us, securities have been created in respect of secured bonds issued.

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

21. To the best of our knowledge and belief and according to the information and explanations given to us, we report that no fraud on or by the Company has been noticed or reported during the year.

For Chaturvedi & Co. For T.R. Chadha & Co. For Tej Raj & Pal

Chartered Accountants Chartered Accountants Chartered Accountants

Firm Registration No.: Firm Registration No.: Firm Registration No.:

302137E 006711N 304124E

Sd/- Sd/- Sd/-

(S.C.Chaturvedi) [Ajesh Tuli) (P. Venugopala Rao)

Partner Partner Partner

(M. No. 12705) (M. No. 86424) (M. No. 10905)

Place :New Delhi Dated : 28th May, 2010

For and on behalf of the Board of Directors

Sd/-

(C. S. Verma)

Chairman

Place: New Delhi Dated: 21st August, 2010


Mar 31, 2010

We have audited the attached Balance Sheet of Maharashtra Elektrosmelt Limited as at 31st March, 2010, the Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsi- bility is to express an opinion on these financial statements based on our audit.

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

As required by The Companies (Auditors Report) Order 2003 (as amended) issued by the Central Government of India in terms of section 227 (4A) of the Companies Act 1956, 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 enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order.

Further to our comments in the Annexure referred to above, 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 purposes of our audit.

(ii) 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;

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

(iv) 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 Companies Act, 1956 to the extent applicable.

(v) The provisions of Section 274(1 )(g) of the Companies Act, 1956 are not applicable to the Government Company in terms of Notification No. GSR 829(E) dated 21st October, 2003 issued by the Department of Company Affairs, Ministry of Finance, Government of India.

(vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read with the notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India :

(a) in the case of the Balance Sheet, of the state of Affairs of the Company as at 31s1 March, 2010; and

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

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



Annexure to the Auditors Report (Referred to in our report of even date)

1) a) As per the information and explanations given to us, the Fixed Assets register showing full particulars including quantitative details and situation of Fixed Assets is compiled by the Company.

b) As per information and explanations given to us the Fixed Assets, except those held by the employees under Furniture hire scheme have been physically verified by the management at reasonable intervals. In our opinion, the frequency of verification is reasonable having regard to the size of the operations of the Company and on the basis of explanations received no material discrepancies were noticed during the verification.

c) In our opinion, fixed assets disposed off during the year were not substantial and therefore do not affect the going concern assumption.

2) a) As per information and explanations given to us the inventory has been physically verified by the management at reasonable intervals. The inventories in transit as at 31.03.2010 have been verified by the management with reference to subsequent receipt of materials.

b) In our opinion and according to the information and explanation given to us, the procedures for physical verification of inventories followed by the management are reasonable and adequate in relation tot he size of the Company and nature of its business.

c) In our opinion, and according to the information and explanations given to us, the Company has maintained proper records of its inventories. The discrepancies noticed on verfication between the physical stocks and the book records have been adequately dealt with in the books of account.

3 (a) According to the information and explanation given to us, the company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Act. Accordingly clause 4(iii) (b) to (d) of the order is not applicable to the Company.

(b) According to the information and explanations given to us, the Company has not taken any loans, secured or unsecured, from Companies, firms and other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly clause 4(iii) (f) to (g) of the order is not applicable to the Company.

4. In our opinion and according to the information and explanations given to us, the company has adequate internal control system commensurate with the size of the company and the nature of its business with regard to purchase of inventories and fixed assets and for the sale of goods and services. Further, on the basis of our examination and according to the information and explanations given to us, we have neither come across nor have we been informed of any instance of continuing failure to correct major weaknesses in internal control.

5. According to the information and explanations given to us, there are no contracts and arrangements referred to in Section 301 of the Companies Act, 1956, particulars of which need to be entered into a register maintained under Section 301 of the Act. Accordingly clause 4(v)(b) of the order is not applicable to the Company.

6. The Company has not accepted any deposits during the year from the public within the meaning of the directives issued by the Reserve Bank of India and the provisions of sections 58A and 58AA or any other relevant provisions of the Act and the rules framed there under, other than the amount retained under Employees Family Benefit Scheme for which exemption under Section 58Aof the Companies Act, 1956 has been obtained by the Company.

7. In our opinion, the Companys internal audit system, generally commensurate with the size and nature of its business, is required to be strengthened further with regard to enlarging the scope and frequency of the coverage.

8. According to information and explanations given to us the Central Government has not prescribed maintenance of cost records under clause (d) of sub-section (1) of section 209 of the Act.

9. a) According to the information and explanations given to us, the Comapny is generally regular in depositing with appropriate regulatory authorities undisputed statutory dues including. Provident Fund, Investor Education and Protection Fund, Income-Tax, Sales-Tax, Service Tax, Custom Duty, Excise Duty /Cess and Profession Tax.

b) According to the information and explanations given to us, no undisputed dues payable in respect of Provident Fund, Income Tax, Sales Tax, Excise Duty, Service Tax, Profession Tax and Cess were outstanding as at 31st March, 2010 for a period of more than six months from the date they became payable.

c) According to the information and explanations given to us, there are no dues of Sales Tax/Income Tax/ Custom Duty/Wealth Tax / Service Tax / Excise Duty / Cess that have not been deposited on account of any dispute, other than those mentioned below:

Period Amount Forum where dispute is Pending

(Rs.)

A] EXCISE DUTY

Financial Year:

1995 - 96 9,81,200 Commissioner, Central Excise (Appeals) - Nagpur

1996 - 97 2,91,410 Commissioner, Central Excise (Appeals) - Nagpur

1997 - 98 74,89,466 Commissioner, Central Excise (Appeals) - Nagpur

For the period :

Apr. 2001 to

Mar. 2002 6,20,452 Commissioner, Central Excise - Nagpur



July 2000 to

Sept. 2001 68,92,496 Commissioner, Central Excise - Nagpur



Apr. 2001 to

Feb. 2004 155,79,066 Asstt. Commissioner, Central Excise - Chandrapur

P1MVNCIPAITA*

Financial Year

1983-84 to

2002-03 1,29,98,650 High Court, Nagpur

C) GRAM PAN CHAYAT/ZILA PARISH AD CESS

1973-1974 TO

1982-83 5,32,000 Government of Maharashtra



P) INCOME TAX

2005-2006 1,27,45,359 Commissioner Appeals

2006-2007 11,62,102 Commissioner Appeals

10. The company has neither accumulated losses as at March 31, 2010 nor it has incurred any cash loss during the financial year ended on that date and the immediately preceding financial year.

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

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

13. The Company is not a chit or a nidhi/mutual benefit fund/society, therefore, the clause 4(x Hi) of the Companies (Auditors Report) Order, 2003 is not applicable to the Company.

14. The Company has not dealt or traded in shares, securities, debentures and other investments. Hence the question of maintenance of proper records of the transactions and contracts and making timely entries in the same does not arise.

15. According to information and explanation given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions and hence the question of terms and conditions being prejudicial to the interests of the Company does not arise.

16. According to information and explanations given to us and the records examined by us, the Company has not availed Term Loans from Banks during the year.

17. According to information and explanation given to us, in our opinion funds raised on short-term basis have not been used for long-term purposes.

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

19. The Company has not issued any debentures in the current year. Hence the issue of creation of charge does not arise.

20. The Company has not raised money by public issue and hence the question of disclosure by management on the end use of money raised by public issue and its verification does not arise.

21. In our opinion and according to the information and explanation given to us, no fraud on or by the Company has been noticed or reported during the year.



For Ghalla & Bhansali

Firm Registration Number: 103142W

Chartered Accountants

Sd/-

Yogesh Ravji Amal

Partner

M. No. 111636

Place: New Delhi

Date :26th May, 2010

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