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Notes to Accounts of Tata Sponge Iron Ltd.

Mar 31, 2017

a Under previous GAAP, there was no concept of other comprehensive income. Under Ind AS, specified items of income expense, gains, or losses are required to be presented in other comprehensive income, b Under Ind AS, dividend to holders of equity instruments is recognized as a liability in the year in which the obligation to pay is established. Under previous GAAP, dividend payable was recorded as a liability in the year to which it relates. This has resulted in an increase in equity of Rs. 1,853.51 lacs as at 31 March, 2016 and 1 April, 2015. c Under previous GAAP, revenue from sale of products was presented net of excise duty under revenue from operations, whereas, under Ind AS, revenue from sale of products includes excise duty. The corresponding excise duty expense is presented separately on the face of the Statement of Profit and Loss. The change does not affect total equity as at 1 April, 2015and31 March,2016and loss fortheyearended31 March,2016. d Under previous GAAP, actuarial gains and losses were recognized in profit or loss. Under Ind AS, the actuarial gains and losses form part of measurement of the net defined benefit liability / asset which is recognized in other comprehensive income. Consequently, the tax effect of the same has also been recognized in other comprehensive income under Ind AS instead of profit or loss. The actuarial losses for the year ended 31 March, 2016 were Rs. 162.24 lacs and the tax effect thereon was Rs. 56.15 lacs. This change does not affect total equity, but there is an increase in profit before tax of Rs. 106.09 lacs and decrease in other comprehensive income of 106.09 lacs for the year ended 31 March, 2016. e Previous GAAP figures have been reclassified to conform to the Ind AS presentation requirements for the purpose of this note.

The Company holds 800,000 number of equity shares of Rs. 10 each in Jamipol Limited. Since the shares of Jamipol Limited are unquoted, and there is a restriction on disinvestment of shares by the Company as this is a strategic investment, there is a wide range of possible fair value measurements. Consequently, the management of the Company has concluded that cost represents the best estimate of fair value within that range.

a) The Loss on obsolescence relating to stores and spare recognized as an expense for the year ended 31 March, 2017 is Rs.50.63 lacs (for the year ended 31 March, 2016: Rs.57.97 lacs).

b) The cost of inventories relating to iron ore recognized as expenses during the year ended 31 March, 2017 includes Rs. Nil (during the year ended 31 March, 2016 Rs. 1,110.96 lacs) in respect of write-down of inventory to net realizable value.

c) Mode of valuation has been stated in note 2 m.

There are no other customers, other than mentioned above, who represents more than 5% of the total balance of the trade receivables.

b) The Company assesses at each date of balance sheet whether a financial asset ora group of financial assets is impaired. Ind AS 109 "Financial instruments" requires expected credit losses to be measured through a loss allowance. The Company has used a practical expedient and adjusted forforward looking information to compute expected credit losses. Based on historical credit loss experience for the Company and considering forward looking information, there is no expected credit loss allowance on trade receivables.

c) Age of receivables:

1 (iii) Disclosure of specified Bank notes(SBNs)

''The details of Specified Bank Notes (SBNs) or other denomination notes, as defined in the MCA notification G.S.R. 308(E) dated 30 March, 2017, held and transacted during the period from 8 November, 2016 to 30 December, 2016 is provided in the table below:

* For the purposes of this note, the term ‘Specified Bank Notes’ shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.0.3407(E), dated 8 November, 2016.

(f) Rights, preferences and restrictions attached to shares

The Company has one class of equity shares having a par value of Rs.10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

(1) In respect of the year ended 31 March, 2017, the Board of Directors in their meeting dated 26 April, 2017 have proposed a final dividend of Rs. 11 per equity share to be paid on fully paid equity shares. This equity dividend is subject to approval by shareholders at the annual general meeting.

(2) The amount that can be distributed by the Company as dividends to its equity shareholders is determined based on the requirements of the Companies Act, 2013. Thus, the amounts reported above are not distributable in entirety.

Note

1. Deferred tax assets and liabilities are being offset as they relate to taxes on income levied by the same governing taxation laws.

2. There are no deductible temporary differences, unused tax losses and unused tax credits for which no deferred tax assets have been recognized.

Disclosures required under Section 22 of the Micro, Small and Medium Enterprises Development Act, 2006

The amount due to the Micro and Small Enterprise as defined in the "The Micro, Small and Medium Enterprises Development Act, 2006" has been determined to the extent such parties have been identified on the basis of the information available with the Company, which has been relied upon by the auditors. The disclosure relating to the Micro and Small Enterprise are as under:

2 Financial Instruments

The significant accounting policies, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognized, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 2 (j) to the Financial Statements.

(a) Capital management:

The objective of the Company''s capital management is to maximize shareholder value, safeguard business continuity and support the growth of the Company. The Company determines the capital requirement based on annual operating plans and long-term and other strategic investment plans. The funding requirements are met through operating cash flows generated and the Company does not have any borrowings. The Company is not subject to any externally imposed capital requirements.

(b) Liquidity risk management:

Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk management framework for the management of Company''s short-term, medium-term and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves and by continuously monitoring forecast and actual cash flows and by matching the maturing profiles of financial assets and liabilities.

(c) Market risk:

Market risk is the risk that the fair value of financial instrument will fluctuate because of change in market price. Market risk comprises of two types of risks - foreign currency risk (Refer note 29k) and other price risk (Refer note 29 (d)).

The Company''s activities expose it primarily to currency risk and other price risk such as equity price risk. The financial instruments affected by market risk includes: current investments and other current financial liabilities.

(d) Price risk:

The Company is exposed to price risks arising from fair valuation of Company''s investment in mutual funds. These investments are held for short term purposes.

If prices had been 100 basis points higher/lower, profit before tax for the year ended 31 March, 2017 would increase/decrease by Rs. 261.42 lacs (for the year ended 31 March, 2016: Rs. 283.51 lacs) as a result of the changes in fair value of these investments which have been designated as at FVTPL.

(e) Liquidity risk:

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.

The Company''s principal sources of liquidity are cash and cash equivalents, liquid mutual fund investments and the cash flow that is generated from operations.

The Company manages liquidity risk by maintaining adequate reserves and by continuously monitoring forecast and actual cash flows. The Company generates sufficient cash flows from current operations which together with the available cash and cash equivalents and short-term investments provide liquidity both in the short-term as well as in the long-term.

The following tables detail the Company''s remaining contractual maturity for its financial liabilities with agreed repayment and realization periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay and realize.

(i) Credit risk management:

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company''s exposure to credit risk primarily arises from trade receivables, investments in mutual funds and balances with banks. The credit risk on bank balances is limited because the counterparties are banks with good credit ratings. Trade receivables consist of a large number of customers. Ongoing credit evaluation is performed on the financial condition of accounts receivable. The Company''s policies on assessing expected credit losses is detailed in notes to accounting policies [Refer note 2 (j)]. For details of exposure, default grading and expected credit loss as on the reporting year. (Refer note 11)

Apart from the customers as disclosed in note 11a, the Company does not have significant credit risk exposure to any single counterparty.

(j) Fair value measurement:

Fair value of the Company''s financial assets and financial liabilities that are measured at fair value on recurring basis:

The Company''s investments in mutual funds and equity instruments are measured at fair value at the end of each reporting period. The following table gives information on determination of its fair value, the valuation techniques and inputs used.

Fair value of the Company''s financial assets and financial liabilities that are not measured at fair value on a recurring basis:

The directors consider that the carrying amounts of financial assets and financial liabilities recognized in the Financial Statements approximate their fair values.

(k) Foreign currency risk:

Foreign exchange risk comprises of risk that may arise to the Company because of fluctuations in foreign currency exchange rates. Fluctuations in foreign currency exchange rates may have an impact on the Statement of Profit and Loss. As at the year end, the Company is not exposed to foreign exchange risk.

The above includes demand received from Commissioner of Customs (Preventive) aggregating to Rs. 4,381.05 lacs pertaining to the financial year 2012-13 on account of levy of additional customs duty on classification of the imported coal as bituminous coal as against Company’s classification as steam coal. During the year, the Company has filed an appeal against the aforesaid order in the Customs, Excise and Service Tax Appellate Tribunal, Kolkata. The Company had paid an amount of Rs. 1,069.86 lacs and recognized the non-cenvatable portion of the duty and applicable interest as expense whereas cenvatable portion had been recognized as an advance in the year2012-13.

3 (a) In the month of November 2012, Ministry of Coal (“MoC”) issued notices to the Company for invocation of bank guarantee of Rs. 3,250.00 lacs submitted towards performance of conditions for allocation of coal block against which the Company had filed a writ petition in the Hon''ble High Court of Delhi, which directed the Company to keep the bank guarantee valid till 30 November, 2015 by which date the MoC was directed to take decision. Meanwhile, the bank guarantee expired and had not been renewed, since no communication had been received from MoC. Subsequently, MoC issued a notice dated 28 December, 2015, stating that the bank guarantee be invoked and the aforesaid amount be deposited. Consequent to MoC''s notice, the Company has moved to the Hon''ble High Court of Delhi, where the matter is pending adjudication. The Company has been advised and has obtained a legal opinion that as the original allocation has been declared illegal and cancelled by the Hon''ble Supreme Court, the bank guarantee pertaining to such allocation (which is non-est and void ab initio) shall consequently be deemed to be invalid and void ab initio. Pending finalization of the matter, the amount continues to be disclosed as a contingent liability.

(b) (i) During pendency of the aforesaid matters in Hon''ble High Court of Delhi, the Hon''ble Supreme Court of India vide its order dated 24 September, 2014 has cancelled allocation of 214 coal blocks including the Radhikapur (East) Coal Block which was allotted to the Company on 07 February, 2006. The expenditure incurred on the Radhikapur (East) Coal Block up to 31 March, 2017 aggregates to Rs. 18,040.96 lacs (31 March, 2016: Rs. 18,040.96 lacs, 1 April, 2015: Rs 18,040.96 lacs).

(ii) Pursuant to the judgment of Hon''ble Supreme Court of India, the Government of India has promulgated Coal Mines (Special Provision) Rules, 2014 (“Rules”) for allocation of the coal mines through auction and matters related thereto. In terms of the said Rules, the successful bidder will be called upon to pay to the prior allocattee the expenses incurred by the prior allocatee towards land and mine infrastructure. Pursuant to MoC''s directive seeking the details of expenses vide letter dated 26 December, 2014, the Company has furnished the required statement of expenses on 5 January, 2015. Based on the Rules and necessary legal opinion obtained by the Company, no provision is considered necessary.

4 Estimated amounts of contracts remaining to be executed on capital account and not provided for: Rs.152.49 lacs (As at 31 March, 2016: Rs. 223.05 lacs, 1 April, 2015: Rs.844.29 lacs) [Net of advances Rs.19.06(Asat31 March, 2016 Rs. 0.25 lacs, 1 April, 2015: Rs.109.09 lacs)].

5 Cross subsidy surcharge payable to power distribution companies

In 2012-13, the Company injected power to State Grid due to denial of permission for open access by Orissa Power Transmission Corporation Limited ("OPTCL") to supply power to the parent company Tata Steel Limited beyond the period of invocation of section 11 of Electricity Act, 2003 by the Government of Odisha i.e., June, 2012. As a result of which the Company could not meet the minimum stipulated criteria of 51% self-consumption of generated power as a captive power plant and the provisions of Cross Subsidy Surcharge under Electricity Act, 2003 became applicable. The Company filed a case before the Odisha Electricity Regulatory Commission ("OERC")for relief which was granted and consequently the Company has filed a case before Appellate Tribunal of Electricity ("ATE"), which is pending for adjudication. As a matter of prudence, an amount of Rs.601.00 lacs had been provided in the year ended 31 March, 2015.

6 (a) The Company had filed a writ petition before the High Court of Orissa for sales tax exemption fora period of two years w.e.f. June 10, 1997 as a Pioneer Unit. The High Court initially ruled that the Company should pay the sales tax under dispute pending disposal of the writ petition. Accordingly, the Company paid sales tax, which had not been collected from customers, and amounts aggregating to Rs. 573.73 lacs had been charged to the Statement of Profit and Loss during the years 1997-98 to 1999-2000.

The High Court directed the Sales Tax Authorities to refund the amount after ascertaining that the said refund shall not unjustly enrich the Company. The Sales Tax Officer passed the overstating that the refund shall unjustly enrich the Company against which the Company has filed a writ petition in the High Court challenging the correctness of the assessment and the same is pending. Pending finalization of the matter no adjustments have been made in the financial statements.

(b) As per Industrial Policy Resolution 1992 of Government of Odisha, the Company has to pay a minimum sales tax of Rs. 252.56 lacs before availing exemption from sales tax on incremental sale of Sponge Iron from Kiln 1 and 2. The Company had paid the above amount until the rate of sales tax was reduced. With reduction in rate of sales tax, the Company considered that the above limit of Rs. 252.56 lacs had to correspondingly reduce and accordingly made reduced payment. The Company however had provided the differential amount of Rs. 513.83 lacs up to the date of availing the benefit i.e., upto 31 March, 2012. The Company had started collecting sales tax on sale of sponge iron produced in those kilns w.e.f. 1 April, 2012 and depositing the same with Sales Tax Authorities after availing set off of applicable input tax credit.

7 Employee Benefits

(a) Defined contribution plans

The Company operates defined contribution retirement benefit plans for all its qualifying employees. Where employees leave the plans prior to full vesting of the contributions, the contributions payable by the Company are reduced by the amount of forfeited contributions.

The Company has recognized, in the Statement of Profit and Loss for the year ended 31 March, 2017, an amount of Rs. 303.01 lacs (for the year ended 31 March, 2016: Rs. 286.07 lacs) as expenses under the following defined contribution plans. As at 31 March, 2017, contribution of Rs. 37.25 lacs (as at 31 March, 2016 Rs. 34.93 lacs) representing amount payable to the Employee Provident Fund and Rs. 8.58 lacs (as at 31 March, 2016 Rs. 8.50 lacs) representing amount payable to the superannuation fund in respect of the year ended 31 March 2017 (year ended 31 March, 2016) reporting period had not been paid to the plans. The amounts were paid subsequent to the end of respective reporting periods.

(b) Defined benefits plans and other long term employee benefits

The Company operates post retirement defined benefit plans as follows:

Post retirement defined benefit plans

(i) Post retirement gratuity [Funded]

(ii) Post Retirement Medical Benefits of Past Managing Directors (PRMB) [Unfunded]

(iii) Pension to Past Managing Directors [Unfunded]

Description of Plan Characteristics and Associated Risks

Gratuity liability arises on retirement, resignation, and death of an employee. The aforesaid liability is calculated on the basis of 15 days salary (i.e. last drawn salary plus dearness allowance) upto 30 years of service and beyond 30 years of service, the liability is calculated on the basis of one month salary for each completed year of service or part thereof in excess of 6 months. Vesting occurs upon completion of 5 years of service.

The present value of the defined benefit obligation and the related current service cost are measured using the Projected Unit Credit method with actuarial valuations being carried out at each balance sheet date.

The gratuity plan typically exposes the Company to actuarial risks such as: interest rate risk, longevity risk and salary risk.

1 Interest rate risk: A decrease in the Indian government bond yield rate (discount rate) will increase the plan liability.

2 Salary risk: The present value of the defined benefit plan liability is calculated with the assumption of salary increase rate of plan participants in future. Deviation in the rate of increase of salary in future for plan participants from the rate of increase in salary used to determine the present value of obligation will have a bearing on the plan''s liability.

3 Mortality risk : The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after the employment. Indian Assured Lives Mortality (2006-08) ultimate table has been used in respect of the above. A change in mortality rate will have a bearing on the plan''s liability.

4 Investment risk : The present value of the defined benefit plan liability is calculated using a discount rate determined by reference to Government Bonds Yield. If plan liability is funded and return on plan assets is below this rate, it will create a plan deficit.

In respect of the plans in India, the most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation was carried outasat31 March, 2017 by Mr. Ritobrata Sarkar, Fellow, Institute of Actuaries of India. The present value of defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit credit method.

The current service cost, past service cost and the net interest expense for the year are included in the ''Employee benefits expense'' in the Statement of Profit and Loss.

The remeasurement of the net defined benefit liability is included in other comprehensive income.

5 The plan assets of the Company managed through a trust are managed by Life Insurance Corporation (LIC). The details of investments relating to these assets are not shown by LIC. Hence, the composition of each major category of plan assets, the percentage or amount that each major category constitutes to the fair value of the total plan assets has not been disclosed.

8 Sensitivity analysis

Significant actuarial assumptions for the determination ofthe defined obligation are discount rate, expected salary increase and mortality. The sensitivity analyses below have been determined based on reasonably possible changes of the respective assumptions occurring at the end ofthe reporting period, while holding all other assumptions constant.

a) On post retirement gratuity plan

i) If the discount rate is 100 basis points higher/(lower), the defined benefit obligation would decrease by Rs. 96.08 lacs (increase by Rs. 108.21 lacs) [as at 31 March, 2016: decrease by Rs. 86.99 lacs (increase by Rs. 92.04 lacs)] [as at 1 April, 2015: decrease by Rs. 76.95 lacs (increase by Rs. 81.42 lacs)].

ii) If the expected salary growth increases (decreases) by 100 basis points, the defined benefit obligation would increase by Rs. 106.16 lacs (decrease by Rs. 96.13 lacs) [as at 31 March, 2016: increase by Rs. 91.45 lacs (decrease by Rs. 87.24 lacs)] [as at 1 April, 2015: increase by Rs. 80.90 lacs (decrease by Rs. 77.17 lacs)].

b) On post retirement pension plan

i) If the discount rate is 100 basis points higher/(lower), the defined benefit obligation would decrease by Rs. 69.98 lacs (increase by Rs. 77.01 lacs) [as at 31 March, 2016: decrease by Rs. 63.36 lacs (increase by Rs. 68.86 lacs)] [as at 1 April, 2015: decrease by Rs. 47.88 lacs (increase by Rs. 52.04 lacs)].

ii) If the expected salary growth increases (decreases) by 100 basis points, the defined benefit obligation would increase by Rs. 77.39 lacs (decrease by Rs. 70.92 lacs) [as at 31 March, 2016: increase by Rs. 69.70 lacs (decrease by Rs. 64.66 lacs)] [as at 1 April, 2015: increase by Rs. 52.67 lacs (decrease by Rs. 48.86 lacs)].

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognized in the balance sheet.

9 The average duration of the defined benefit plan obligation representing average duration for active members is 6 years (As at 31 March, 2016:10years;Asat 1 April, 2015:10years)

10 Sensitivity analysis

Significant actuarial assumptions for the determination of the defined obligation are discount rate, expected salary increase and mortality. The sensitivity analyses below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

On PRMB

i) If the discount rate is 100 basis points higher/(lower), the defined benefit obligation would decrease by Rs. 3.21 lacs (increase by Rs. 3.46 lacs) [as at 31 March, 2016: decrease by Rs. 3.76 lacs (increase by Rs. 4.02 lacs)] [as at 1 April, 2015: decrease by Rs. 3.83 lacs (increase by Rs. 4.10 lacs)].

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognized in the balance sheet.

Additional information relating to employee benefits obligation:

1. The estimate of future salary increases take into account inflation, seniority, promotion and other relevant factors.

2. Discount rate is based on the prevailing market yields of Indian Government securities as at the Balance Sheet date for the estimated term of the obligations.

3. Expected rate of return on plan assets is based on the average long term rate of return expected on investments of the Fund during the estimated term of the obligations.

4. Net liabilities for pension, gratuities and post retirement medical benefits is disclosed in note 15 under the heading "Postemployment defined benefits", whereas net assets relating to pension, gratuities and post retirement medical benefits are disclosed undernote9underthe heading "Employee benefits assets"

5. Expenses relating to pension and post retirement medical benefits are included in Employee benefits expense under the heading Salaries and Wages including Bonus in note 25 whereas expenses for retiring gratuities are included under the Contribution to Provident and Other Funds in note 25.

Notes :

1. The discount rate is based on the prevailing market yields of India Government securities as at the balance sheet date for the estimated term of obligations.

2. The compensated absences plan is unfunded.

3. The estimates of future salary increases considered take into account the inflation, seniority, promotion and other relevant factors.

11 Segment reporting

(a) The Company has identified business segment as the primary segment. The Company is engaged in production of sponge iron and generation of power from waste heat. Information reported to the chief operating decision maker (CODM) for the purposes of resource allocation and assessment of segment performance focuses on manufacture of sponge iron and generation of power, reportable segments for financial statements in accordance with Ind AS 108 "Operating Segment". The Company''s activities/operations are primarily within India.

(b) Segment Revenue, Segment Results, Segment Assets and Segment Liabilities include the respective amounts identifiable to each of the segments and also amounts allocated on a reasonable basis. The expenses, which are not directly relatable to the business segment, are shown as unallocable. Assets and liabilities that cannot be allocated between the segments are shown as unallocable assets and liabilities respectively.

12 DISCLOSURE RELATING TO PROVISIONS AS PER IND AS 37- PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

Provisions for interest on income tax and others have been recognized in the financial statements considering the following:

(i) The Company has a present obligation as a result of past event;

(ii) It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

(iii) Areliable estimate can be made of the amount of the obligation.

43 OPERATING LEASES

The Company has cancellable operating lease agreements for office spaces and residential accommodations, the tenure of which generally vary from less than a year to 3 years. Terms of such lease include option for renewal on mutually agreed terms. Operating lease rental expenses aggregating Rs. 76.49 lacs (Previous Year: Rs. 80.85 lacs) have been debited to the Statement of Profit and Loss.

13 EXPENDITURE ON CORPORATE SOCIAL RESPONSIBILITY:

a. Gross amount required to be spent by the Company during the year31 March, 2017 :Rs. 218.70 lacs (year ended 31 March, 2016 Rs. 274.35 lacs)

b. Amount spent during the year ended 31 March, 2017 (figures in brackets represents amount for the previous year)

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

15 There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company, except a sum of Rs. 4.08 lacs, which is held in abeyance due to pending legal cases.

16 The financial statements were approved for issue by the Board of Directors on 26 April, 2017.


Mar 31, 2016

(f) Rights, preferences and restrictions attached to shares

The Company has one class of equity shares having a par value of Rs.10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

1. (a) In the month of November 2012, Ministry of Coal (“MoC”) issued notices to the Company for invocation of bank guarantee of Rs. 3,250

lakh submitted towards performance of conditions for allocation of coal block against which the Company had filed a writ petition in the Hon’ble High Court of Delhi, which directed the Company to keep the bank guarantee valid till 30 November, 2015 by which date the MoC was directed to take decision. Meanwhile, the bank guarantee expired and had not been renewed, since no communication had been received from MoC. Subsequently, MoC issued a notice dated 28 December, 2015, stating that the bank guarantee be invoked and the aforesaid amount be deposited. Consequent to MoC’s notice, the Company has moved to the Hon''ble High Court of Delhi, where the matter is pending adjudication. The Company has been advised and has obtained a legal opinion that as the original allocation has been declared illegal and cancelled by the Hon’ble Supreme Court, the bank guarantee pertaining to such allocation (which is non-est and void ab initio) shall consequently be deemed to be invalid and void ab initio. Pending finalization of the matter, the amount continues to be disclosed as a contingent liability.

(b) (i) During pendency of the aforesaid matters in Hon’ble High Court of Delhi, the Hon’ble Supreme Court of India vide its order dated 24 September, 2014 has cancelled allocation of 214 coal blocks including the Radhikapur (East) Coal Block which was allotted to the Company on 7 February, 2006. The carrying value of investments made in Radhikapur (East) Coal Block as on 31 March, 2016 aggregates to Rs. 18,040.96 lakh (March 31, 2015: 18,074.18 lakh).

(ii) Pursuant to the judgment of Hon''ble Supreme Court of India, the Government of India has promulgated Coal Mines (Special Provision) Rules, 2014 (“Rules”) for allocation of the coal mines through auction and matters related thereto. In terms of the said Rules, the successful bidder will be called upon to pay to the prior allocattee the expenses incurred by the prior allocatee towards land and mine infrastructure. Pursuant to MoC''s directive seeking the details of expenses vide letter dated 26 December, 2014, the Company has furnished the required statement of expenses on 5 January, 2015. Based on the Rules and necessary legal opinion obtained by the Company, no provision is considered necessary.

2. Estimated amounts of contracts remaining to be executed on capital account and not provided for : Rs. 223.05 lakh (As at March 31, 2015: Rs. 844.29 lakh) [Net of advances Rs. 0.25 lakh (As at March 31, 2015 Rs.109.09 lakh)].

3. Cross Subsidy Surcharge payable to power distribution companies

In 2012-13, the Company injected power to State Grid due to denial of permission for open access by OPTCL to supply power to the parent company Tata Steel Limited beyond the period of invocation of section 11 of Electricity Act, 2003 by the Government of Odisha i.e., June, 2012. As a result of which the Company could not meet the minimum stipulated criteria of 51% self-consumption of generated power as a captive power plant and the provisions of Cross Subsidy Surcharge under Electricity Act, 2003 became applicable. The Company filed a case before the Odisha Electricity Regulatory Commission ("OERC") for relief which was granted and consequently the Company has filed a case before Appellate Tribunal of Electricity ("ATE"), which is pending for adjudication. As a matter of prudence, an amount of Rs. 601 lacs has been provided in the year 2014-15.

4. (a) The Company had filed a writ petition before the High Court of Orissa for sales tax exemption for a period of two years w.e.f. June 10,

1997 as a Pioneer Unit. The High Court initially ruled that the Company should pay the sales tax under dispute pending disposal of the writ petition. Accordingly, the Company paid sales tax, which had not been collected from customers, and amounts aggregating to Rs. 573.73 lakh had been charged to the Statement of Profit and Loss during the years 1997-98 to 1999-2000.

The High Court directed the Sales Tax Authorities to refund the amount after ascertaining that the said refund shall not unjustly enrich the Company. The Sales Tax Officer passed the order stating that the refund shall unjustly enrich the Company against which the Company has filed a writ petition in the High Court challenging the correctness of the assessment and the same is pending. Pending finalization of the matter no adjustments have been made in the financial statements.

(b) As per Industrial Policy Resolution 1992 of Government of Orissa, the Company has to pay a minimum sales tax of Rs. 252.56 lakh before availing exemption from sales tax on incremental sale of Sponge Iron from Kiln 1 and 2. The Company had paid the above amount until the rate of sales tax was reduced. With reduction in rate of sales tax, the Company considered that the above limit of Rs. 252.56 lakh had to correspondingly reduce and accordingly made reduced payment. The Company however had provided the differential amount of Rs. 513.83 lakh up to the date of availing the benefit i.e., up to March 31, 2012. The Company had started collecting sales tax on sale of sponge iron produced in those kilns w.e.f. April 1, 2012 and depositing the same with Sales Tax Authorities after availing set off of applicable input tax credit.

5. RELATED PARTY TRANSACTION

(a) List of Related Parties and relationship

Name of the Related Party Relationship

(i) Tata Steel Limited Holding Company

(ii) TSIL Energy Limited Wholly owned Subsidiary

(iii) TM International Logistics Limited

(iv) Jamshedpur Utilities & Services Company Limited

(v) Tayo Rolls Limited

(vi) Tata Steel Global Procurement Co. Pte. Ltd. Fellow Subsidiary

(vii) Tata Pigments Limited

(viii) Tata Metaliks Limited

(ix) The Indian Steel and Wire Products Limited

(x) The Tinplate Company of India Limited

(xi) Mr. D P Deshpande, Managing Director Key Managerial Personnel

(xii) Mr. Sanjay Kumar Pattnaik, Executive Director Key Managerial Personnel

(e) Additional information relating to employee benefits obligation

1. The estimate of future salary increases take into account inflation, seniority, promotion and other relevant factors.

2. Discount rate is based on the prevailing market yields of Indian Government securities as at the Balance Sheet date for the estimated term of the obligations.

3. Expected rate of return on plan assets is based on the average long term rate of return expected on investments of the Fund during the estimated term of the obligations.

4. In the absence of detailed information regarding plan assets which is funded with Life Insurance Corporation of India, the composition of each major category of plan assets, the percentage or amount for each category to the fair value of plan assets has not been disclosed.

5. Net liabilities for pension and post retirement medical benefits is disclosed in Note 6 under the heading "Postemployment defined benefits", whereas net assets relating to retiring gratuities are disclosed under Note 12 under the heading "Employee benefits assets"

6. Expenses relating to pension and post retirement medical benefits are included in Employee benefits expense under the heading Salaries and Wages including Bonus in Note 23(a) whereas expenses for retiring gratuities are included under the Contribution to Provident and Other Funds in Note 23(b).

39 SEGMENT REPORTING

(a) The Company has identified business segment as the primary segment which has been identified taking into account the nature of the products, the differing risks and returns, the organizational structure and internal reporting system. The Company''s operations predominantly relate to manufacture of sponge iron and generation of power. Further, as the Company''s products are sold primarily in India there is no reportable secondary segment i.e. Geographical Segment.

(b) Segment Revenue, Segment Results, Segment Assets and Segment Liabilities include the respective amounts identifiable to each of the segments as also amounts allocated on a reasonable basis. The expenses, which are not directly relatable to the business segment, are shown as unallowable. Assets and liabilities that cannot be allocated between the segments are shown as unallowable assets and liabilities respectively.

6. ''DISCLOSURE RELATING TO PROVISIONS AS PER ACCOUNTING STANDARD 29 - PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

Provisions for interest on income tax and others have been recognized in the financial statements considering the following:

(i) The Company has a present obligation as a result of past event

(ii) It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

(iii) A reliable estimate can be made of the amount of the obligation

7. OPERATING LEASES

The Company has cancellable operating lease agreements for office spaces and residential accommodations, the tenure of which generally vary from less than a year to 3 years. Terms of such lease include option for renewal on mutually agreed terms. Operating lease rental expenses aggregating Rs. 80.85 lakh (Previous Year: Rs. 77.90 lakh) have been debited to the Statement of Profit and Loss.

8. EXPENDITURE ON CORPORATE SOCIAL RESPONSIBILITY:

a. Gross amount required to be spent by the Company during the year March 31, 2016 :Rs. 274.35 lakh

b. Amount spent during the year ended March 31, 2016 (figures in brackets represents amount for the previous year)

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

10. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company, except a sum of Rs. 7.99 lacs, which is held in abeyance due to pending legal cases.

11. Previous year / period figures have been regrouped / reclassified wherever necessary to correspond with the current period classification / disclosure.


Mar 31, 2015

1. CORPORATE INFORMATION

Tata Sponge Iron Limited which has its manufacturing facility at Bileipada Odisha is engaged in production of sponge iron by direct reduction method of iron ore and generation of power from waste heat.

2. SHARE CAPITAL

(a) Rights, preferences and restrictions attached to shares

The company has one class of equity shares having a par value of Rs.10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

3. CONTINGENT LIABILITIES

Claims against the company not acknowledged as debt;

(a) Income tax 346.15 507.05

(b) Sales Tax/Odisha Value Added Tax - 1,001.96

(c) Central excise duty - 684.40

(d) Odisha Entry tax 2,579.93 2,579.93

(e) Demand from SECL 152.13 152.13

(f) Demand from Ministry of Coal against 3,250.00 3,250.00 Radhikapur coal block

(g) Others 549.26 -

4. (a) In the month of November 2012, Ministry of Coal ("MoC") issued notices to the Company for invocation of bank guarantee ("BG") of Rs. 3,250 lac submitted towards performance of conditions for allocation of coal block.The Hon'ble High Court of Delhi vide its order dated October 30, 2014 has granted a stay on invocation of bank guarantee. The High Court also directed the Company to keep the bank guarantee valid till 28th May 2015 by which the Union of India has been directed to take a decision. Pending finalisation of the matter,the BG amount continues to be disclosed as a contingent liability.

(b) During pendency of the aforesaid matters in Delhi High Court, the Hon'ble Supreme Court of India vide its order dated September 24, 2014 has cancelled allocation of 214 coal blocks including the Radhikapur (East) Coal Block which was allotted to the Company on February 07, 2006. The carrying value of investments made in Radhikapur East Coal Block as on March 31st, 2015 is ' 18,074.18 lacs.

(c) Pursuant to the judgment of Hon'ble Supreme Court of India, the Government of India has promulgated Coal Mines (Special Provision) Rules, 2014 ("Rules") for allocation of the coal mines through auction and matters related thereto. In terms of the said Rules, the successful bidder will be called upon to pay to the prior allocattee the expenses incurred by the prior allocatee towards land and mine infrastructure. Pursuant to MoC's directive seeking the details of expenses vide letter dated December 26, 2014, the Company has furnished the required statement of expenses on January 5, 2015. Based on the Rules and necessary legal opinion obtained by the company, no provision is considered necessary.

5. Cross Subsidy Surcharge payable to power distribution companies

In 2012-13, the Company injected power to State Grid beyond the period of invocation of section 11 i.e. June, 2012 by the Government of Odisha. Subsequently the Company continued injecting power to State Grid due to refusal of open access for supply of power to the parent Company, Tata Steel Limited. Consequently, the Company could not qualify to be CGP in the said year and it has filed a case before Appellate Tribunal against the order of OERC to consider the period of injection to State Grid as self consumption and the matter is pending for adjudication. As a matter of prudence, the amount of Rs. 601 lacs has been recognized as provision in the books during the year.

5. Estimated amounts of contracts remaining to be executed on capital account and not provided for : Rs. 844.29 lacs (As at March 31,2014: Rs. 894.85 lacs) [Net of advances Rs. 109.09 lacs (As at March 31,2014: Rs.7.26 lacs)].

6. SALES TAX

(a) The Company had filed a writ petition before the High Court of Orissa for sales tax exemption for a period of two years w.e.f. 10 June 1997 as a Pioneer Unit. The High Court initially ruled that the Company should pay the sales tax under dispute pending disposal of the writ petition. Accordingly, the Company paid Sales tax, which had not been collected from customers, and amounts aggregating to Rs. 573.73 lacs had been charged to the Statement of Profit and Loss during the years 1997-98 to 1999-2000.

The High Court directed the Sales Tax Authorities to refund the amount after ascertaining that the said refund shall not unjustly enrich the Company. The Sales Tax Officer passed the order stating that the refund shall unjustly enrich the Company against which the Company has filed a writ petition in the High Court challenging the correctness of the assessment and the same is pending. No credit has been taken in the accounts, as the matter has not reached finality.

(b) As per Industrial Policy Resolution 1992 of Government of Orissa, the Company has to pay a minimum sales tax of Rs. 252.56 lacs before availing exemption from sales tax on incremental sale of Sponge Iron from Kiln 1 and 2. The Company was paying the above amount until the rate of sales tax was reduced. With reduction in rate of sales tax, the Company contends that the above limit of Rs. 252.56 lacs has to correspondingly reduce and accordingly made reduced payment.The Company however has provided for the differential amount upto the date of availing the benefit and total provision till March 31,2012 amounts to Rs. 513.83 lacs. Pending assessments for the years 2008-09 to 2011-12, The Company has started collecting sales tax on sale of sponge iron produced in those kilns w.e.f. April 01, 2012 and depositing the same with Sales Tax authorities after availing set off of applicable input tax credit.

7. RELATED PARTY TRANSACTION

(a) List of Related Parties and relationship

Name of the Related Party Relationship

(i). Tata Steel Limited Holding Company

(ii). TSIL Energy Limited Wholly owned Subsidiary

(iii). TM International Logistics Limited

(iv). Tata Metaliks Limited

(v). Kalimati Investments Company Limited

(vi). Jamshedpur Utilities & Services Fellow Subsidiary Company Limited

(vii) Tayo Rolls Limited

(viii) Tata Steel Global Procurement Co. Pte. Ltd.

(ix). The Tinplate Company of India Limited

(x) Mr.D P Deshpande, Managing Director Key Managerial Personnel

(xi) Mr.Sanjay Kumar Pattnaik,Executive Key Managerial Personnel Director

(xii) Mr.S K Mishra , Chief Financial Key Management Personnel Officer

(xiii) Mr.S S Dhanjal , Company Secretary Key Management Personnel

* Kalimati Investments Company Limited (KICL) ), pursuant to a scheme of amalgamation whereby KICL has been amalgamated with Tata Steel Limited.

8. EMPLOYEE BENEFITS

(a) Defined Benefits Plans and other long term employee benefits

The Company operates post retirement defined benefit plans as follows:

Post retirement defined benefit plans

(i) Post Retirement Gratuity [Funded]

(ii) Post Retirement Medical Benefits of Past Managing Directors (PRMB) [Unfunded]

(iii) Pension to Past Managing Directors [Unfunded]

9. SEGMENT REPORTING

(a) The Company has identified sale of power as separate business segment other than sale of sponge iron considering the requirements under Accounting Standard - 17 on "Segment Reporting". Further, as the Company's products are sold primarily in India there is no reportable secondary segment i.e. Geographical Segment.

(b) Segment Revenue, Segment Results, Segment Assets and Segment Liabilities include the respective amounts identifiable to each of the segments as also amounts allocated on a reasonable basis. The expenses, which are not directly relatable to the business segment, are shown as unallocable. Assets and liabilities that cannot be allocated between the segments are shown as unallocable assets and liabilities respectively.

10. Based on and to the extent of information obtained from suppliers regarding their status as Micro, Small or Medium enterprises under Micro, Small and Medium Enterprises Development Act, 2006, there are no amounts due to them as at the end of the year.

11. OPERATING LEASES

The Company has cancellable operating lease agreements for office spaces and residential accommodations. Tenure of leases generally vary from less than a year to 3 years. Terms of such lease include option for renewal on mutually agreed terms. Operating lease rental expenses aggregating Rs. 77.90 lacs (2013-14: Rs. 73.04 lacs) have been debited to the Statement of Profit and Loss.

12. Disclosure as required under AS 29

Provisions for interest on income tax and others have been recognised in the financial statements considering the following:

(i) The company has a present obligation as a result of past event

(ii) It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

(iii) A reliable estimate can be made of the amount of the obligation

13. Previous year figures have been regrouped / reclassified wherever necessary to correspond with the current period classification / disclosure.


Mar 31, 2014

1 CONTINGENT LIABILITIES

Contingent liabilities not provided for

(a) Income tax 169.00 230.44

(b) Sales Tax/Odisha Value Added Tax 1,001.96 1,001.96

(c) Central excise duty 684.40 703.17

(d) Odisha Entry tax 2,579.93 -

(e) Demand from SECL 152.13 162.61

(f) Demand from Ministry of Coal against Radhikapur coal block 3,250.00 3,250.00

2 (a) The Company has received a notice dated November 23, 2012 from the Ministry of Coal ("MoC") for encashment of bank guarantee ("BG") of Rs. 3,250 lacs on the ground that there was a delay in mining at the Radhikapur East coal block allotted to the Company along with two other companies. The Company contends that the delay is mainly attributable to both Central and State Government in granting permissions/ approvals for various critical milestones. The Company has moved to the Hon''ble High Court of Delhi against invocation and encashment of Bank Guarantee by the MoC and the hearing is in process. Pending disposal by the Hon''ble High Court of Delhi and based on legal opinion obtained by the Company, the amount has been disclosed as contingent liability in the financial statements for the year ended March 31, 2014.

(b) The Company earlier applied to the MoC for revision of the zero/normative date of production vide its application dated April 30, 2012. The MoC has rejected the application vide its letter dated February 11, 2014. The Company will initiate legal proceedings against the MoC''s decision.

(c) The Company has received another notice dated February 17, 2014 citing deallocation of the Coal Block on the ground that the Company could not obtain environmental clearance , stage I forest clearance and there has been delay in coal mining. However MoC has further stated that action is put on hold in view of the interim order of the Hon''ble Delhi High Court dated February 12, 2014. The Company contends that the grounds for de-allocation stated by the MoC are also part of notice dated November 23, 2012 which is challenged by the Company and the matter is pending disposal by the Hon''ble High Court. The Company has again moved to the Hon''ble High Court of Delhi against de-allocation of the block and obtained a status quo order from the Court. Pending disposal of the Company''s case before the Hon''ble High Court of Delhi and based on legal opinion obtained by the Company, no provisions have been considered necessary for its exposure in the Coal Block.

The Company''s carrying value in the Radhikapur East coal block as at March 31, 2014, is Rs. 18,150 lacs.

3 Estimated amounts of contracts remaining to be executed on capital account and not provided for : Rs. 894.85 lacs (As at

March 31, 2013: Rs. 752.32 lacs) [Net of advances Rs. 7.26 lacs (As at March 31, 2013 Rs.1.07 lacs)].

4 SALES TAX

(a) The Company had filed a writ petition before the High Court of Orissa for sales tax exemption for a period of two years w.e.f. June 10, 1997 as a Pioneer Unit. The High Court initially ruled that the Company should pay the sales tax under dispute pending disposal of the writ petition. Accordingly, the Company paid Sales tax, which had not been collected from customers, and amounts aggregating to Rs. 573.73 lacs had been charged to the Statement of Profit and Loss during the years 1997-98 to 1999-2000.

The High Court directed the Sales Tax Authorities to refund the amount after ascertaining that the said refund shall not unjustly enrich the Company. The Sales Tax Officer passed the order stating that the refund shall unjustly enrich the Company against which the Company has filed a writ petition in the High Court challenging the correctness of the assessment and the same is pending. No credit has been taken in the accounts, as the matter has not reached finality.

(b) As per Industrial Policy Resolution 1992 of Government of Orissa, the Company has to pay a minimum sales tax of Rs. 252.56 lacs before availing exemption from sales tax on incremental sale of Sponge Iron from Kiln 1 and 2. The Company was paying the above amount until the rate of sales tax was reduced. With reduction in rate of sales tax, the Company contends that the above limit of Rs. 252.56 lacs has to correspondingly reduce and accordingly is making reduced payment. The Company however has provided for the differential amount upto the date of exhausting the benefit of exemption and the total provision till March 31, 2012 amounts to Rs. 513.83 lacs. Pending assessments for the years 2008-09 to 2011-12, the Company has started collecting sales tax on sale of sponge iron produced in those kilns w.e.f. April 1, 2012 and depositing the same with Sales Tax authorities after availing set off of applicable input tax credit.

5 Segment Reporting

(a) The Company has identified sale of power as separate business segment other than sale of sponge iron from the current year considering the requirements under Accounting Standard - 17 on "Segment Reporting" as notified under Companies (Accounting Standards) Rules, 2006 and accordingly the disclosures have been made. Further, as the Company''s products are sold primarily in India there is no reportable secondary segment i.e. Geographical Segment. As sale of power has become reportable from the current year comparatives are not applicable.

(b) Segment Revenue, Segment Results, Segment Assets and Segment Liabilities include the respective amounts identifiable to each of the segments as also amounts allocated on a reasonable basis. The expenses, which are not directly relatable to the business segment, are shown as unallocable. Assets and liabilities that cannot be allocated between the segments are shown as unallocable assets and liabilities respectively.

6 Based on and to the extent of information obtained from suppliers regarding their status as Micro, Small or Medium enterprises under Micro, Small and Medium Enterprises Development Act, 2006, there are no amounts due to them as at the end of the year.

7 Disclosure as required under AS 29

Provision for interest on Income tax has been recognised in the financial statements considering the following:

(i) The company has a present obligation as a result of past event

(ii) It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation;

and

(iii) A reliable estimate can be made of the amount of the obligation

8 Previous year figures have been regrouped / reclassified wherever necessary to correspond with the current period classification / disclosure.


Mar 31, 2013

01 CORPORATE INFORMATION

Tata Sponge Iron Limited which has its manufacturing facility at Bileipada Odisha is engaged in production of sponge iron by direct reduction method of iron ore and generation of power from waste heat.

02 During the financial year 2012-13, Tata Steel Limited has acquired 1,734,040 equity shares, representing 11.26% of outstanding equity share, through a voluntary open offer from the shareholders of the Company at Rs.375/- per share, consequently the holding of Tata Steel Limited increased to 51% with effect from August 28,2012 and accordingly the Company became subsidiary of Tata Steel Limited.

03 The Company has incorporated a wholly owned subsidiary on November 20, 2012 named "TSIL Energy Limited (TSIL Energy)". An amount of Rs. 6.01 lacs has been invested in the fully paid-up equity shares of TSIL Energy having a face value of Rs. 10 each.

4 CONTIGENT LIABILITIES

Contingent liabilities not provided for

a). Income tax 230.44 484.47

b). Sales Tax/Orissa Value Added Tax 1,001.96 1,001.96

c). Central excise duty 703.17 702.04

d). Demand from SECL 162.61 -

e). Demand from Ministry of Coal against Radhikapur coal block 3,250.00 -

5 The Company had received a notice on November 23, 2012 from the Ministry of Coal (MoC) for encashment of bank guarantee (BG) of Rs. 3250 lacs on the ground that there was a delay in commissioning the Radhikapur coal block allotted to the Company along with M/s Scaw Industries Limited and SPS Sponge Iron Limited. The Company contends that the delay in commissioning of the project is mainly attributable to both Central and State Governments in granting permissions/ approvals for various critical milestones. Further, the Company has also applied to the MoC for extension of the normative date of production on account of the above delays which is still pending. The Company had moved to Hon''ble High Court of Delhi against the revocation of BG by the MoC and the hearing is in process. Pending disposal by the MoC of the Company''s application seeking extension of the normative date of production and the disposal of the Company''s case before the Hon''ble High Court of Delhi, the amount has been disclosed as a contingent liability in the financial statements for the year ended March 31, 2013.

6 Estimated amounts of contracts remaining to be executed on capital account and not provided for : Rs. 752.32 lacs (As at March 31,2012: Rs. 918.99 lacs ) [Net of advances Rs. 1.07 lacs (As at March 31,2012 Rs.6.10 lacs)].

7 SALESTAX

a). The Company had filed a writ petition before the High Court of Orissa for sales tax exemption for a period of two years w.e.f. June 10, 1997 as a Pioneer Unit. The High Court initially ruled that the Company should pay the sales tax under dispute pending disposal of the writ petition. Accordingly, the Company paid Sales tax, which had not been collected from customers, and amounts aggregating to Rs. 573.73 lacs had been charged to the Statement of Profit and Loss during the years 1997-98 to 1999-2000.

The High Court directed the Sales Tax Authorities to refund the amount after ascertaining that the said refund shall not unjustly enrich the Company. The Sales Tax Officer passed the order stating that the refund shall unjustly enrich the Company against which the Company has filed a writ petition in the High Court challenging the correctness of the assessment and the same is pending. No credit has been taken in the accounts, as the matter has not reached finality.

b). As per Industrial Policy Resolution 1992 of Government of Orissa, the Company has to pay a minimum sales tax of Rs. 252.56 lacs before availing exemption from sales tax on incremental sale of Sponge Iron from Kiln 1 and 2. The Company was paying the above amount until the rate of sales tax was reduced. With reduction in rate of sales tax, the Company contends that the above limit of Rs. 252.56 lacs has to correspondingly reduce and accordingly is making reduced payment. The Company however has provided for the differential amount upto the date of exhausting the benefit of exemption and the total provision till March 31, 2012 amounts to Rs. 513.83 lacs. Pending assessments for the years 2008-09 to 2011-12, the Company has started collecting sales tax on sale of sponge iron produced in those kilns w.e.f. April 1, 2012 and depositing the same with Sales Tax authorities after availing set off of applicable input tax credit.

8 The Company is engaged in production and sale of Sponge Iron in India and hence Sponge Iron is the only reportable segment in accordance with Accounting Standard 17 - Segment Reporting.

9 Based on and to the extent of information obtained from suppliers regarding their status as Micro, Small or Medium enterprises under Micro, Small and Medium Enterprises Development Act, 2006, there are no amounts due to them as at the end of the year.

10 The foreign currency exposures at the year end that have not been hedged by a derivative instrument or otherwise are given below:

11 Disclosure as required under AS 29

Provisions for Sales tax and Entry tax have been recognised in the financial statements considering the following:

(i) The company has a present obligation as a result of past event

(ii) It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

(iii) A reliable estimate can be made of the amount of the obligation

12 Previous year figures have been regrouped / reclassified wherever necessary to correspond with the current period classification / disclosure.


Mar 31, 2012

01 CORPORATE INFORMATION

Tata Sponge Iron Limited which has its manufacturing facility at Bileipada Odisha is engaged in production of sponge iron by direct reduction method of iron ore and generation of power from waste heat.

Rights, preferences and restrictions attached to shares

The company has one class of equity shares having a par value of Rs.10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

02 Estimated amounts of contracts remaining to be executed on capital account and not provided for : Rs.918.99 lacs (As at 31.3.2011: Rs. 658.98 lacs) [Net of advances Rs. 6.10 lacs (Asat31.03.2011 Rs.10.90lacs)].

03 The Company had been allotted a Coal block along with two other companies in 2006-07. The investment and the operation of the mine would be done by the company as the leader of the group. The company has paid advance payments for acquisition of land. The Company has arranged for bank guarantee of Rs. 3250.00 lacs as at 31.03.2012 (As at 31.03.2011 Rs.3250.00 lacs ).

04 SALES TAX

a). The Company had filed a writ petition before the High Court of Orissa for sales tax exemption for a period of two years w.e.f. 10th June 1997 as a Pioneer Unit. The High Court initially ruled that the Company should pay the sales tax under dispute pending disposal of the writ petition. Accordingly, the Company paid Sales tax, which had not been collected from customers, and amounts aggregating to Rs 573.73 lacs had been charged to the Profit & Loss Account during the years 1997-98 to 1999-2000.

The High Court directed the Sales Tax Authorities to refund the amount after ascertaining that the said refund shall not unjustly enrich the Company. The Sales Tax Officer passed the order stating that the refund shall unjustly enrich the Company against which the Company has filed a writ petition in the High Court challenging the correctness of the assessment and the same is pending. No credit has been taken in the accounts, as the matter has not reached finality.

b). As per Industrial Policy Resolution 1992 of Government of Orissa, the company has to pay a minimum sales tax of Rs. 252.56 lacs before availing exemption from sales tax on incremental sale of Sponge Iron from Kiln 1 and 2. The company was paying the above amount until the rate of sales tax was reduced. With reduction in rate of sales tax, the company contends that the above limit of Rs. 252.56 lacs has to correspondingly reduce and accordingly is making reduced payment. The company however has provided for the differential amount of Rs. 513.83 lacs as at 31st March 2012 (Asat31.03.2011 Rs. 397.92lacs).

05. The Company is engaged in production and sale of Sponge Iron and hence Sponge Iron is the only reportable segment in accordance with Accounting Standard 17 - Segment Reporting.

06. Based on and to the extent of information obtained from suppliers regarding their status as Micro, Small or Medium enterprises under Micro, Small and Medium Enterprises Development Act, 2006, there are no amounts due to them as at the end of the year.

07. DERIVATIVE INSTRUMENTS

The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations. The use of foreign currency forward contracts is governed by the Company's strategy approved by the Board of Directors, which provide principles on the use of such forward contracts consistent with the Company's Risk Management Policy. The Company does not use forward contracts for speculative purposes.

08. DISCLOSURE AS REQUIRED UNDER AS 29

Provisions for Sales tax and Entry tax have been recognised in the financial statements considering the following:

i). The company has a present obligation as a result of past event

ii). It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

iii). A reliable estimate can be made of the amount of the obligation

09. The Revised Schedule VI has become effective from 1 April, 2011 for the preparation of financial statements. This has significantly impacted the disclosure and presentation made in the financial statements. Previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current year's classification / disclosure.


Mar 31, 2010

1. Contingent Liabilities

31.03.2010 31.03.2009 Rs. In lacs Rs. In lacs

Contingent Liabilities not provided for

a) Income tax 92.46 87.92

b) Bank Guarantee 5,360.79 5,214.23

c) Letter of credit 101.31 57.44

2. Estimated amounts of contracts remaining to be executed on capital account and not provided: Rs,444.48 lacs (As at 31.3.2009 Rs. 482.50 lacs) [Net of advances Rs. Nil (As at 31.03.2009 Rs. Nil)].

3. The Company had been allotted a Coal block along with two other companies in 2006-07. The investment and the operation of the mine would be done by the company as the leader of the group. The company has paid advance payments for acquisition of land. The Company has arranged for bank guarantee of Rs. 3250.00 lacs as at 31.03.2010 (As at 31.03.2009 Rs. 3250.00lacs).

4. Sales Tax

a) The Company had filed a writ petition before the High Court of Orissa for sales tax exemption for a period of two years w.e.f. 10th June 1997 as a Pioneer Unit. The High Court initially ruled that the Company should pay the sales tax under dispute pending disposal of the writ petition. Accordingly, the Company paid Sales tax, which had not been collected from customers, and amounts aggregating to Rs 573.73 lacs had been charged to the Profit & Loss Account during the years 1997-98 to 1999-2000.

The High Court directed the Sales Tax Authorities to refund the amount after ascertaining that the said refund shall not unjustly enrich the Company. The Sales Tax Officer passed the order stating that the refund shall unjustly enrich the Company against which the Company has filed a writ petition in the High Court challenging the correctness of the assessment and the same is pending. No credit has been taken in the accounts, as the matter has not reached finality.

b) As per Industry Policy Resolution 1992 of Government of Orissa, the company has to pay a minimum sales tax of Rs. 252.56 lacs before availing exemption from sales tax on incremental sale of Sponge Iron from Kiln 1 and 2. The company was paying the above amount until the rate of sales tax was reduced. With reduction in rate of sales tax, the company contends that the above limit of Rs. 252.56 lacs has to correspondingly reduce and accordingly is making reduced payment. The company however has- provided for the unpaid amount of Rs. 271.64lacsasat31stMarch2010(Asaf37.03.2009Rs. 145.36lacs).

5. Related party transaction

a) List of Related Parties and Relationship Name of the Related Party

i) Tata Steel Limited Promoter Company holding more than 20%

ii) Key Management Personnel

Mr. Suresh Thawani Managing Director

6. The Company is engaged in production and sale of Sponge Iron and hence Sponge Iron is the only reportable segment in accordance with Accounting Standard 17- Segment Reporting.

7. Based on and to the extent of information obtained from suppliers regarding their status as Micro, Small or Medium enterprises under Micro, Small and Medium Enterprises Development Act, 2006, there are no amounts due to them as at the end of the year.

8. Disclosure as required under AS 29

Provisions for Sales tax and Entry tax have been recognised in the financial statements considering the following:

I). The company has a present obligation as a result of past event

ii). It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

iii). A reliable estimate can be made of the amount of the obligation

9. Figures for the previous year have been restated/regrouped where necessary to conform with figures for the current year

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