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Auditor Report of Tanfac Industries Ltd.

Mar 31, 2015

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

Management's Responsibility for the Financial Statements

2. The management and Board of Directors of the Company are responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ('the Act') with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with rule 7 of Companies (Accounts) Rules, 2014. This responsibility 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; design, implementation and maintenance of adequate internal financial controls, that are 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

3. Our responsibility is to express an opinion on these financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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

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

Opinion

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

Emphasis of Matter Paragraph

7 In forming our opinion, which is not qualified, we have considered Note No. 27.12 of the financial statements stating that, despite losses and reducing net worth, the financial statements of the company have been prepared under 'Going Concern' assumption basis having regard to the business plans of the company and continued financial support from a promoter

Report on Other Legal and Regulatory Requirements

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

9 As required by section 143(3) of the Act, we further 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 purpose of our audit;

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

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

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

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

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

(i) The impact of pending litigations has been duly disclosed in the financial statements. Refer Note Nos. 27.1.a and 27.3 to the Financial Statements

(ii) The Company did not have any long-term contracts including derivative contracts for which there existed any foreseeable losses

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

Annexure referred to in paragraph 8 Our Report of even date to the members of Tanfac Industries Limited on the Financial Statements for the year ended 31st March, 2015

On the basis of such checks as we considered appropriate and according to the information and explanations given to us during the course of our audit, we report that:

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

(b) As explained to us, fixed assets have been physically verified by the management at regular intervals; as informed to us no material discrepancies were noticed on such verification;

(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the year;

(b) The procedures of physical verification of inventory followed by the managements are reasonable and adequate in relation to the size of the Company and the nature of its business;

(c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification;

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

(iv) Based on our audit procedures, there is adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods. On the basis of examination of the books and records of the Company and according to the information and explanations given, and as per checking carried out in accordance with the auditing standards generally accepted in India, neither we have observed nor have we been reported of any continuing failure to correct major weakness in the internal control system relating to these areas. As regards, the internal controls in the area of sale of services, there is significant improvement as compared to prior years, in our opinion, the same needs to be strengthened further to make it commensurate with the size of the company and nature of its business.

(v) The company has not accepted any deposits from the public, hence requirement of compliance with the provisions of Section 73 to 76 or any other relevant provisions of the Act and the Companies (Acceptance of Deposits) Rules 2014 are not applicable to the company

(vi) We have broadly reviewed the books of account maintained by the company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 148(1) of the Act, in respect of company's products to which said rules are made applicable and are of the opinion that prima facie, the prescribed accounts and records have been maintained.

(vii) (a) According to the information and explanations given to us and based on the records of the company examined by us, the company is regular in depositing the undisputed statutory dues, including Provident Fund, Employees' State Insurance, Income-tax, Sales-tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, cess and other material statutory dues, as applicable, with the appropriate authorities in India ;

(b) According to the information and explanations given to us, and as per the records of the Company, following dues of Sales tax, Custom duty, Excise duty, Service tax and Income Tax have not been deposited on account of some dispute or are partially deposited under protest

Disputed Period to which Name of Nature of the Dues amount the Statute (Rs, in Lacs) amount relates

TNGST Levy of sales tax from Act, sales effected through 52.77 2004-05 1959 Pondicherry

52.77 Custom Duty on fluorspar Act, 10.79 1998-99 shipment shortage 1962

10.79

Central Interest Accrued to be 0.27 2001-02 Excise added Act, 1944 Cenvat credit disallowed (April '03 -

31.02 on steels/pipes August '05

Cenvat credit disallowed September '05 -

4.74 on steels/pipes March '06

Cenvat credit disallowed April '06 -

4.84 on steels/pipes March '07

Cenvat credit disallowed April '07 -

0.47 on steels/pipes March '07

Cenvat credit disallowed October '07 -

1.93 on steels/pipes March '08

Cenvat credit disallowed April '08 -

10.49 on steels/pipes September '08

Cenvat credit disallowed September '08 -

21.55 on steels/pipes March '09)

Excise duty on freight January '14 -

collected on outward 0.74 November '14 freight

Total 76.05

Name of Statute Forum where dispute is pending

TNGST Writ petition before Hon'ble High aCT,1959 Court of Madras

CUSTOM Customs Officer Excise Act,1944

Central SB, CEGAT, Chennai Excise Act,1944 Additional/ ) Joint Commissioner, Pondicherry

Asst. Commissioner, Cuddalore



Disputed Period to which Name of Nature of the Dues amount the Statute (Rs, in Lacs) amount relates

Service Tax on Lease 2001-02 to 12.30 Rent 2004-05

2006-07 to Service tax on GTA 19.64 2007-08

Service Tax Credit

Finance disallowed on 13.16 2011-12 Act, Maintenance/Repairs 1994

Service Tax Credit - (Service Disallowed on Export Tax) (January '14 – Commission paid under 4.13 January '15 the head Business Auxiliary Service

Service tax Credit disallowed courier, January '14 –

3.23 Banking, security, Test, April '14 Inspection etc

Service tax Credit January '14 – disallowed on 4.13 November '14) maintenance/repair

Total 56.82

Replacement of equipment claimed as Income revenue expenditure, Tax reclassified by Dept. as 85.39 2002 – 03 Act, capital expenditure [tax 1961 demanded]( Including Interest)

Disallowance of various expenses (Including 75.79 2007-08

Interest)

Total 161.18

Name of Forum where dispute is pending

The Commissioner/The Asst. Commissioner, Pondicherry

The Commissioner, Pondicherry

Finance The Dy. Commissioner, Pondicherry Act,1994 (Service Tax)

The Assistant - Commissioner, Cuddalore

Income Income Tax Appellate Tribunal Tax Act 1961 The Commissioner of Income Tax [Appeals], Chennai

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

(viii) The Company has accumulated losses (Debit balance in Profit & Loss Account) of Rs, 4889.66 lacs, and also incurred cash loss of Rs, 97.69 lacs in the current financial year but not in the immediately preceding financial year.

(ix) Based on the audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to financial institution or bank.

(x) According to information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions.

(xi) According to the information and explanations given to us by the management, no term loans are raised/ availed during the year by the Company; hence the provision of paragraph 3(xi) of the Order are not applicable to it.

(xii) During the course of our examination of the books and records of the company, carried in accordance with the auditing standards generally accepted in India, we have neither come across any instance of fraud on or by the Company noticed or reported during the course of our audit nor have we been informed of any such instance by the Management of the Company.

For Khimji Kunverji & Co.

Chartered Accountants

Firm Registration No.105146W



Hasmukh B Dehdia Camp : Chennai Partner

Date : 15th May, 2015 Membership No. F-33494


Mar 31, 2014

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

Management''s Responsibility for the Financial Statements

2. Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting principles generally accepted in India, including the Accounting Standards notified under the companies Act, 1956("the Act"), read with general circular 08/2014 dated 4th April 2014 issued by the Ministry of Corporate Affairs. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

3. 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.

4. 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.

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

Opinion

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

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

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

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

Emphasis of Matter Paragraph

7. In forming our opinion, which is not qualified, we have considered note no 26.B.13 of the financial statements stating that, despite losses and reducing net worth, the financial statements of the company have been prepared under ''Going Concern'' assumption basis having regard to the business plans of the company and continued financial support from a promoter.

Report on Other Legal and Regulatory Requirements

8. 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.

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

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

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

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

d. In our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956;

e. On the basis of written representations received from the directors as on March 31, 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

i) a. The Company has maintained proper records showing full particulars, including quantitative details and situation of Fixed Assets.

b. The Company has phased programme for physical verification of all its fixed Assets, Which in opinion, is reasonable having regard to the size of the company and nature of its asset. As informed to us, no material discrepancies were noticed on such verification.

c. There was no substantial disposal of fixed assets during the year.

ii) a. The management has conducted physical verification of inventories at reasonable intervals during the year;

b. The procedures of physical verification of inventory followed by the Management are reasonable and adequate in relation to the size of the Company and nature of its business.

c. The Company is maintaining proper records of inventory and as informed to us, no material discrepancies were noticed on physical verification.

iii) a. As informed, 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. Hence, clauses (iii) (b), (c) and (d) of the Order are not applicable.

b. As informed, the Company has not taken any secured or unsecured loans from companies, firms or other parties listed in the Register maintained under Section 301 of the Act. Hence, clauses (iii) (f) and (g) of the Order are not applicable.

iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets, and for the sale of goods and services. During the course of our audit and on the basis of examination of the books and records of the company as also according to information and explanations given, and as per checking carried out in accordance with the auditing standards generally accepted in India, neither we have observed nor have we been reported of any continuing failure to correct any major weakness in the internal control system of the company

v) (a) According to the information and explanations provided to us, there have been no transactions which need to be entered in the register maintained under Section 301 of the Act. Hence, clause (v) (b) of the Order is not applicable to the Company.

vi) According to the information and explanations given to us, the Company has not accepted any public deposits within the meaning of the directives issued by the Reserve Bank of India and the provisions of Sections 58A, 58AA or any other relevant provisions of the Act and the rules framed there under. We are informed by the management that no order has been passed by the Company Law Board, National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal in this respect.

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

viii) We have broadly reviewed the books of account 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 Act, in respect of the Company''s products to which said rules are made applicable and are of the opinion that prima facie, the prescribed accounts and records have been maintained.

ix) a. The Company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance, income-tax, sales-tax, wealth- tax, service tax, customs duty, excise duty, cess and other material statutory dues applicable to it.

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

Amount Period To which Nature of Statute Nature of Dues
Profession Tax Profession Tax 1.29 2013-2014

Date of Nature of Statue Due Date Payment<#-

Profession Tax 30/09/2013 24/05/2014

# Cheque remitted by the company on January 28, 2014 become stale on April 28, 2014

c. According to the records of the Company, the dues outstanding of income-tax, sales-tax, wealth- tax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows:

Disputed Period to Name of Nature of the Dues amount which the Statute (Rs.in Lacs) amount relates

TNGST Levy of sales tax from sales 52.77 2004-05 Act 1959 affected through Pondicherry

Customs Duty on fluorspar shipment 10.79 1998-99 Act shortage

Interest Accrued to be added 0.27 2001-02

Cenvat credit disallowed on April ''03 - 31.02 steels/pipes August 05

Cenvat credit disallowed on September ''05 4.74 steels/pipes - March 06

Cenvat credit disallowed on April ''06 - 4.84 steels/pipes March 07

Central Excise Cenvat credit disallowed on 0.47 April ''07 - Act steels/pipes. September ''07

Cenvat credit disallowed on 1.93 October ''07 - steels/pipes March 08

Cenvat credit disallowed on April ''08 - 10.49 steels/pipes September 08

Cenvat credit disallowed on September ''08 21.55 steels/pipes March 09

Total 75.31

Name of Statute Forum where dispute is pending

TNGST Act 1959 Written petition before Hon''ble High Court of Madras

Customs Act Customs Officer

SB, CEGAT, Chennai

Central Excise Act Additional/Joint Commissioner, Pondicherry

Disputed Period to Name of Statute Nature of the Dues amount which the (Rs.in Lacs) amount relates

2001-02 to Service Tax on Lease Rent 12.30 2004-05

Service Tax on consulting Finance Engineers/Management 2002-03 to Act, 1994 Consultancy (including 2003-04 (Service penalty) Tax)

2006-07 to Service Tax on GTA 19.64 2007-08

Service Tax Credit disallowed 13.16 2011-12 on Maintenance/Repairs

Service Tax Credit disallowed on housekeeping / medical 0.87 2011-13 centre & subscription

Total 46.20

Replacement of equipment claimed as revenue expenditure, reclassified by 85.39 2002-03 Dept. as capital Income expenditure [tax demanded] Tax Act (Including Interest)

Disallowance of various 75.79 2007-08 expenses (Including Interest)

161.18



Name of Statute Forum where dispute is pending

Finance Act, 1994 (Service Tax) The Commissioner/The Asst. Commissioner, Pondicherry

CESTAT, Chennai

The Commissioner, Pondicherry

The Dy. Commissioner, Pondicherry

The Assistant Commissioner, Cuddalore

Income Tax Act Income Tax Appellate Tribunal

The Commissioner of Income Tax [Appeals], Chennai

x) The Company has accumulated losses (Debit balance of Profit & Loss Account) of Rs. 4360.67 lacs, and also had incurred cash loss of Rs. 492.04 lacs in the immediately preceding financial year but not in the current financial year.

xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of due to a financial institution or bank. The company has not issued any debentures.

xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society.

Therefore, the provisions of clause 4(xiii) of the Order are not applicable to the Company.

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

xv) 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. Accordingly, clause 4(xv) of the order is not applicable to the company.

xvi) Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

xvii) According to information and explanation given to us and overall examination of the balance sheet of the company, we report that the funds raised on short term basis have been used for long term investment to the extent of Rs. 368.72 lacs.

xviii) During the year, the Company has not made any preferential allotment of share, hence clause 4(xviii) of the order is not applicable to it.

xix) The Company has not issued any debentures. hence clause 4(xix) of the order is not applicable to it

xx) The Company has not raised any money by way of public issue, hence clause 4(xx) of the order is not applicable to it.

xxi) During the course of our examination of the books and records of the company, carried out in accordance with the auditing standards generally accepted in India, we have neither come across any instance of fraud on or by the company noticed or reported during the course of our audit nor have we been informed of any such case by the management.



For Khimji Kunverji & Co.

Chartered Accountants

Firm Registration No.105146W

Hasmukh B Dehdia Camp : Chennai Partner

Date : 29th May, 2014 Membership No. F-33494


Mar 31, 2012

1. We have audited the attached Balance Sheet of TANFAC INDUSTRIES LIMITED ('the company') as at March 31, 2012 and also the Statement of Profit and Loss and Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies [Auditor's Report] Order 2003 [as amended] ['the order'] issued by the Central Government in terms of subsection [4A] of Section 227 of The Companies Act, 1956,('the Act') we enclose in the Annexure a statement on the matters specified in paragraph 4 and 5 of the said order.

4. 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, the Company has kept proper books of accounts as required by law so far as appears from our examination of those books;

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

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

v. On the basis of the written representations received from the Directors as on March 31, 2012and taken on record by the Board of Directors, we report that none of the Directors are disqualified as on March 31, 2012 from being appointed as a Director in terms of Section 274(1)(g) of the Act;

vi. In our opinion and to the best of our information and according to the explanations given to us, the said accounts, give the information required by 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 Balance Sheet, of the state of affairs of the Company as at March 31, 2012.

b. In the case of the Statement of Profit and Loss, of the loss of the Company for the year ended on that date, and

c. In the case of Cash Flow Statement of the Cash Flows of the Company for the year ended on that date.

i. a The Company has maintained proper records showing full particulars, including quantitative details and situation of Fixed Assets.

b) The Company has phased programme for physical verification of all its fixed Assets, which in opinion, is reasonable having regard to the size of the company and nature of its asset. As informed to us, no material discrepancies were noticed on such verification.

c There was no substantial disposal of fixed assets during the year.

ii. a) The management has conducted physical verification of inventories at reasonable intervals during the year;

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

c) The Company is maintaining proper records of inventory and as informed to us, no material discrepancies were noticed on physical verification.

iii. a) As informed, 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. Hence, clauses (iii)(b), (c) and (d) of the Order are not applicable.

b) As informed, the Company has not taken any secured or unsecured loans from companies, firms or other parties listed in the Register maintained under Section 301 of the Act. Hence, clauses (iii) (f) and (g) of the Order are not applicable.

iv. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets, and for the sale of goods and services. During the course of our audit and on the basis of examination of the books and records of the company as also according to information and explanations given, and as per checking carried out in accordance with the auditing standards generally accepted in India, neither we have observed nor we have been reported of any continuing failure to correct any major weakness in the internal control system of the company.

v. (a) According to the information and explanations provided to us, there have been no transactions which need to be entered in the register maintained under Section 301 of the Act. Hence, clause (v) (b) of the Order is not applicable to the Company.

vi. According to the information and explanations given to us, the Company has not accepted any public deposits within the meaning of the directives issued by the Reserve Bank of India and the provisions of Sections 58A, 58AA or any other relevant provisions of the Act and the rules framed there under. We are informed by the management that no order has been passed by the Company Law Board, National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal in this respect.

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

viii.We have broadly reviewed the books of account 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 Act, in respect of the Company's products to which said rules are made applicable and are of the opinion that prima facie, the prescribed accounts and records have been maintained.

ix. a) The Company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income-tax, sales-tax, wealth- tax, service tax, customs duty, excise duty, cess and other material statutory dues applicable to it. Further, since the Central Government has till date not prescribed the amount of cess payable under Section 441A of the Act, we are not in a position to comment upon the regularity or otherwise of the Company in depositing the same.

outstanding at the year end, for a period of more than six months from the date they became payable

c) According to the records of the Company, the dues outstanding of income-tax, sales- tax, wealth-tax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows:

Name of Disputed Period to Forum where Statute Nature of the Dues amount which the dispute is (Rs in Lakhs) amount relates pending

Written petition TNGST Levy of sales tax from sales 52.77 2004 05 before Hon'ble Act 1959 affected through Pondicherry High Court of Madras

Custom Duty on fluorspar shipment 10.79 1998-99 Customs Officer Act shortage

SB,CEGAT Interest Accrued to be added 0.27 2001-02 Chennai

Sale of Scrap 0.74 2003-04 SB,CEGAT Chennai

Additional/Joint Cenvat credit disallowed on April 03 31.02 Commissioner, steels/pipes August '05 Pondicherry

Cenvat credit disallowed on September '05 - Additional/Joint 4.74 Commissioner, Central steels/pipes March '06 Pondicherry

Excise Act

Additional/Joint Cenvat credit disallowed on 4.84 April 06 Commissioner, steels/pipes March '07 Pondicherry

Additional/Joint Cenvat credit disallowed on April 07 0.47 Commissioner, steels/pipes March '07 Pondicherry

Additional/Joint Cenvat credit disallowed on October 07 steels/pipes 1.93 March '08 Commissioner Pondicherry

Additional/Joint Cenvat credit disallowed on April 08 - 10.49 Commissioner, steels/pipes September '08 Pondicherry

Cenvat credit disallowed on September '08 - Additional/Joint 21.55 Commissioner, steels/pipes March '09 Pondicherry

Total 76.05

The 2001-02 to Commissioner/ Service Tax on Lease Rent 12.3 The Asst. 2004-05 Commissioner, Finance Pondicherry Act, 1994 Service tax on consulting 2002-03 to (Service Engineers/ Management 0.46 2003 04 CESTAT, Chennai Tax) Consultancy (including penalty)

The Service tax on GTA 19.64 2006-07 to Commissioner, 2007-08 Pondicherry

Service Tax on tangible assets 1.13 2008-09 CESTAT, Chennai

Total 33.53

Replacement of equipment claimed as revenue expenditure, Income Tax reclassified by Dept. as capital 85.39 2003 - 04 Appellate Tribunal expenditure [tax demanded] (Including Interest)

The Commissioner Disallowance of various expenses 71.95 2005-06 of Income Tax (Including Interest) [Appeals],Chennai

Income The Commissioner Disallowance of various expenses Tax Act 71.42 2006-07 of Income Tax (Including Interest) [Appeals],Chennai

The Commissioner Disallowance of various expenses 75.79 2007-08 of Income Tax (Including Interest) [Appeals],Chennai

The Commissioner Disallowance of various expenses 16.89 2008-09 of Income Tax (Including Interest) [Appeals],Chennai

321.44

x. The Company has accumulated losses of Rs 2.922.42 lakhs and has incurred a cash loss of Rs 1,446.63 lakhs in the current financial year but has not incurred cash loss in the immediately preceding financial year.

xi. Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of due to a financial institution or bank. The company has not issued any debenture.

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

xiii. In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable to the Company.

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

xv. According to the information and explanations given to us, the Company has not given guarantee for loans taken by others from banks or financial institutions, the terms and conditions whereof in our opinion are not prima facie prejudicial to the interest of the Company.

xvi. Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

xvii. According to information and explanation given to us and overall examination of the balance sheet of the company, we report that the funds raised on short term basis have been used for long term investment to the extent of Rs 299.32 lakhs

xviii.During the year, the Company has not made any preferential allotment of share, hence clause 4(xviii) of the order is not applicable to it

xix. The Company has not issued any debentures. Hence, clause 4(xix) of the order is not applicable to it

xx. The Company has not raised any money by way of public issue. Hence, clause 4(xx) of the order is not applicable to it

xx. During the course of our examination of the books and records of the company, carried out in accordance with the auditing standards generally accepted in India, we have neither come across any instance of fraud on or by the company noticed or reported during the course of our audit nor have we been informed of any such case by the management M/s. Khimji Kunverji & Co. Chartered Accountants

Firm Registration No.105146W

Hashmukh B Dehdia

Camp: Chennai Partner

Date: 29th May, 2012 Membership No. 33494


Mar 31, 2010

We have audited the attached Balance Sheet of TANFAC INDUSTRIES LIMITED as at 31st March, 2010 and 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 responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by 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] issued by the Central Government in terms of sub section [4A] of Section 227 of The Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraph 4 and 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 purposes of our audit.

2. In our opinion, the Company has kept proper books of accounts as required by law so far as appears from our examination of those books.

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

4. In our opinion, the Balance Sheet, Profit & 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.

5. On the basis of the written representations received from the Directors as on 31st March, 2010 and taken on record by the Board of Directors, we report that none of the Directors are disqualified as on 31st March, 2010 from being appointed as a Director in terms of Clause [g] of Subsection (1) of Section 274 of The Companies Act, 1956.

6. In our opinion and to the best of our information and according to the explanations given to us, the said accounts, read together with the "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 :

i) In the case of Balance Sheet, of the state of affairs of the Company as at 31st March, 2010.

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

iii) In the case of Cash Flow Statement of the Cash Flows of the Company for the year ended on that date.

ANNEXURE TO AUDITORS REPORT Referred to in our Report of even date on the Accounts of TANFAC INDUSTRIES LIMITED as at and for le year ended 31st March, 2010]

i) a) The Company has maintained proper records to show 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, wherever possible, at the close of the year as confirmed by the management. No material discrepancy has come to notice on such physical verification.

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

ii) a) The management has conducted physical verification of inventories at all its locations at reasonable intervals during the year;

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

c) The Company is maintaining proper records of inventory. As far as we can ascertain and according to the information and the explanations given to us, the discrepancies noticed between the physical stocks and book stocks were not material and the same have been properly dealt with in the books of account.

iii) a) As per the information and explanations provided to us, the Company has not granted any secured or unsecured loans to Companies, firms or other parties listed in the register maintained under Section 301 of The Companies Act, 1956.

b) As per the information and explanations provided to us, the Company has not taken any secured or unsecured loans from companies, firms or other parties listed in the Register maintained under Section 301 of The Companies Act, 1956.

iv) On the basis of checks carried out during the course of audit and as per explanations given to us, in our opinion, there are adequate internal control procedures 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, no major weakness has been noticed in the internal controls in these respects.

v) a). As per the information and explanations given to us, no transactions have been undertaken during the year in pursuance of contracts or arrangements that need to be entered into the register maintained under Section 301 of The Companies Act, 1956.

b) As per the information and explanations given to us, there are no transactions of purchase 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.

vi) The Company has not accepted any deposits from the public during the year, to which the provisions of Section 58-A, 58-AA or any other relevant provisions of The Companies Act, 1956 and the rules framed there under apply;

vii) In our opinion, the company has an Internal Audit System, which is commensurate With the size and nature of its business;

viii) The company has maintained proper Cost records as prescribed by the Central Government under Section 209 (1)(d) of the Companies Act 1956 for the manufacture of Sulphuric Acid, but no detailed examination of such records have been carried out by us.

ix) a) The Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax,

Customs Duty, Excise Duty, Cess and other material statutory dues with the appropriate authorities;

b) According to the information and explanations given to us and the books and records examined by us, there was no undisputed amount outstanding as on 31st March, 2010 in respect of Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Value Added Tax, Wealth Tax, Service Tax, Custome Duty, Excise Duty, Cess and other statutory dues for a period of more than six months from the date they became payable;

c) According to the records of the Company and as per the information and explanations provided to us, the dues outstanding [net of advances] in respect of Sales Tax, Value Added Tax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty, Cess etc.,on account of any dispute are given below :

Name of the Nature of the Disputed Statute Dues Amount (Rs in Lacs)

TNGST Act 1959 Classification of scrap sales 1.68

Customs Act, 1961 Duty on fluorspar shipment 10.79

Central Excise a) Interest Accrued to be added 0.27 Act 1944 in value

b) Sale of Scrap 0.74

c) Cenvat credit disallowed 32.04 on steels/pipes

d) Interest on Excise Duty 0.85 levied on sale to Govt.

Institution 33.90

Service Tax a) Service Tax on Lease Rent 13.43 Act, 1994

b) Service tax on consulting 3.00 Engineers/Management Consultancy

c) Service tax on GTA 20.39

36.82





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

TNGST Act 1959 2002-03 Appellate Asst. Commissioner

Customs Act, 1961 1998-99 Customs Officer

Central Excise Act 1944 2001-02 SB, CEGAT, Chennai

2003-04 SB, CEGAT, Chennai

2005-06 to Additional/Point 2009-10 Commissioner, Pondicherry

2006-07 to The Commissioner 2007-08 (appeals),

Service Tax Act, 1994 2001-02 to The Commissioner/ 2008-09 Asst. Commissioner, Cuddalore

2002-03 to The Deputy 2004-05 Commissioner, Cuddalore

2006-07 to The Commissioner, 2007-08 Pondicherry

Name of the Nature of the Disputed Statute Dues Amount (Rs in Lacs)

Income Tax Act, a) Replacement of 85.39 1961 Equipment claimed as revenue expenditure, reclassified by Dept. as capital expenditure

b) Disallowance of benefit 16.10 u/s 80IA relating to 28.93 Sulphuric Acid Plant 0.54

c) Disallowance of various 8.14 expenses

139.10



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

Income Tax Act, 1961 2003-2004 Income Tax Appellate Tribunal

1990-00 Appeal pending at

2001-02 various forums

2004-05

2006-07 The Commissioner of Income Tax (Appeals), Chennai

x) The Company has no accumulated losses and has incurred cash losses of Rs.621.98 lacs during the year and has not incurred cash losses in the immediatly preceding financial year.

xi) Based on our audit procedures, and as per the information and explanations given to us, by the management, the Company has not defaulted in repayment of dues to financial institutions and banks;

xii) According to the information and explanations given to us, the Company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures and other securities;

xiii) The provisions of any special statute applicable to chit fund, nidhi or mutual benefit fund/societies are not applicable to the Company.

xiv) In our opinion, the Company is not dealing or trading in shares, securities, debentures and other investments and hence, the requirements of Para 4 (xiv) of the above order are not applicable to the Company.

xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions;

xvi) The term loans raised has been applied for the purpose for which it was obtained.

xvii) On the basis of our examination of the cash flow statement, it appears that the funds raised on short term basis have been used for long term purposes to the tune of Rs. 1418 lacs.

xviii) During the year, the Company has not made any preferential allotment of share.

xix) The Company does not have any outstanding debentures during the year.

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

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

For BHASKARAN & KRISHNAN For SINGHI & CO

Chartered Accountants Chartered Accountants

(B.GOPALAKRISHNAN) (SUDESH CHORARIA)

Partner Partner

Membership No.1 8702 Membership No. 204936

Firm Regn. No. 00426S Firm Regn. No. 302049E

Chennai,

Dated: 14th May, 2010.

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