NOTE 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES A. BASIS OF brPARATION OF FINANCIAL STATEMENTS The financial statements are brpared under historical cost convention on accrual basis as a going concern and in accordance with the Generally Accepted Accounting Principles (GAAP), the Companies Act, 2013 and in compliance with Companies (Accounting Standard) Rules, 2006, (as amended) as notified u/s 129 of Companies Act, 2013 except those with significant uncertainty. Accounting policies not stated explicitly otherwise are consistent with Generally Accepted Accounting Principles. As required by Schedule III, the Company has classified assets and liabilities into current and non- current based on the operating cycle. An operating cycle is the time between the acquisition of assets for processing and their realization in cash or cash equivalents. The operating cycle has been considered as 12 months. B. USE OF ESTIMATES The brparation of financial statements in conformity with Indian GAAP requires management to make estimates and assumptions that affect the balances of assets and liabilities and disclosures relating to contingent liabilities as at the balance sheet date and amounts of income and expenses during the year. Examples of such estimates include income taxes and future obligation under employee retirement benefit plans. Actual results could differ from those estimated. The effects of adjustment arising from revisions made to the estimates are included in the statement of profit and loss of the year in which such revisions are made. C. REVENUE RECOGNITION a) Revenue from sale of goods is recognised on transfer of all significant risks and rewards of ownership to the buyer. Sales rebrsent invoice value of finished goods sold inclusive of excise duty and VAT/CST but exclude sales returns, claims, rate difference etc. b) Revenue from services are recognised on rendering of services to customers except otherwise stated. c) Rental income (exclusive of Service Tax) from assets given on operating lease is recognised using straight line method. Contingent rent is recognised as income to reflect systematic allocation of earnings over the lease period. This policy is not applicable for variable rental income based on turnover of the tenant. Other Income: d) Interest income is recognised on time proportion basis taking into account the amount outstanding and the rate applicable. e) Dividend income is recognised when the right to receive is established. D. FIXED ASSETS i) Tangible assets, including those given on operating lease, are stated at cost of acquisition inclusive of freight incurred, duties and taxes (net of CENVAT/VAT) and incidental expenses less accumulated debrciation. ii) Capital work in progress, cost incurred on construction of fixed assets consists of all directly attributable expenditure. iii) Software is capitalised, where it is expected to provide future enduring economic benefits. E. DEbrCIATION AND AMORTISATION Debrciation is provided on debrciable value (cost minus residual value) using straight line method in the manner that the assets is debrciated over the useful life stated in "Schedule - II" of Companies Act, 2013. F. IMPAIRMENT OF ASSETS An asset is treated as impaired when the carrying cost of the same exceeds its recoverable amount. Impairment is charged to statement of profit and loss in the year in which an asset is identified as impaired. The impairment losses recognised in prior accounting period are reversed if there has been a change in the estimate of the recoverable amount. G. INVESTMENTS Investments are bifurcated into noncurrent and current on the basis of intention of holding. Investments that are readily realisable and intended to be held for not more than a year from the date of balance sheet are classified as current investments. All other investments are classified as noncurrent. Current investments are carried at lower of cost or fair market value, determined on an individual investment basis. Noncurrent investments are carried at cost. Provision for diminution in the value of noncurrent investments is made, only if such a diminution is other than temporary. H. INVENTORIES a) Raw materials: At lower of weighted average cost or net realisable value. b) Work in progress: At lower of cost or net realisable value. c) Finished goods and Stock in trade: At lower of cost or net realisable value. d) Stores and spares, packing: At lower of weighted average cost or net realisable value. I. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand, demand deposits with banks, other short-term highly liquid investments without significant risk and with original maturities of three months or less as per the AS - 3 "CASH FLOW STATEMENT". J. FOREIGN CURRENCY TRANSACTIONS Transactions denominated in foreign currencies are recorded at the exchange rate brvailing at the date of the transactions or that approximates the actual rate at the date of transactions. Exchange differences arising on foreign exchange transactions settled during the year are recognised in the statement of profit and loss for the year. K. EXCISE DUTY Excise duty has been accounted for at the time of manufacture of goods, accordingly excise duty on only marketable finished goods lying as stock in factory has been considered for valuation. L. EMPLOYEE BENEFITS a) Short term employee benefits: All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and short term compensated absences, the expected cost of ex-gratia, etc are recognised in the period in which the employee renders the related service. b) Post-employment benefits i) Defined Contribution Plan: Employee benefits in the form of Provident fund, employees state insurance etc. are considered as defined contribution plan and the contributions are charged to the statement of profit and loss for the year when the contributions to the respective funds are due. ii) Defined Benefit Plan: Employee benefits in the form of gratuity and leave encashment are considered as defined benefit plan and are provided for on the basis of an independent actuarial valuation, using the projected unit credit method, as at the balance sheet date as per requirements of Accounting Standard- 15 (Revised 2005) on "Employee Benefits". Actuarial gains/losses, if any, are immediately recognised in the statement of profit and loss. M. TAXATION a) Current Tax: Current tax is determined as the amount of tax payable in respect of taxable income for the year in accordance with the provisions of the Income Tax Act, 1961. Minimum Alternative Tax credit available under section 115JB of the Income Tax Act, 1961 are accounted in the year in which the benefits are claimed. b) Deferred Tax: Deferred tax is recognised subject to consideration of prudence on the basis of timing differences being the difference between taxable income and accounting income that originate in one period and is capable of reversal in one or more subsequent periods using the tax rates and laws that have been enacted or substantially enacted as at the balance sheet date. Deferred tax asset is recognised and carried forward only to the extent there is reasonable certainty that the asset will be realised in future. N. PROVISIONS/CONTINGENCIES i. The Company creates a provision when there is a brsent obligation as a result of past events and it is probable that there will be outflow of resources and a reliable estimate of the obligation can be made of the amount of the obligation. When there is a possible obligation or a brsent obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. ii. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed. O. CONTINGENT LIABILITY Liabilities which are contingent in nature are not provided for in the accounts and the same are separately disclosed by way of notes to account. P. EARNINGS PER SHARE Earnings per Share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares. Q. PRIOR PERIOD ADJUSTMENTS Adjustment of identifiable items of income and expenditure pertaining to prior period are accounted for as prior period adjustments. 2.24. In the opinion of the Board the current assets, loans and advances are not less than the stated value if realised in ordinary course of business. The provisions for all known liabilities are adequate. There are no contingent liabilities except stated, as informed by the management. 2.25. The Business of the company falls under a single segment i.e. Manufacturing of Cigarette and Smoking Mixture. In view of the general classification notified by Central Government in exercise of powers conferred u/s 129 of Companies Act, 2013 for companies operating in single segment, the disclosure requirement as per Accounting Standard - 17 on “Segment Reporting” are not applicable to the company. The company's business is mainly concentrated in similar geographical, political and economical conditions; hence disclosure for geographical segment is also not required. 2.30. In terms of confirmation of sale of assets of New Tobacco Co. Ltd. (In Liquidation) in favour of the Company vide order dated 19th April, 2006 of Calcutta High Court, the Joint Special Officers executed the deed and / or deeds of conveyance in respect of all the immovable properties except property at siliguri in favour of Company or its nominee and issued necessary sale certificates for plant & machineries and all assets and properties in favour of the Company. Conveyance deed of Siliguri Property is yet to be executed for transfer of title in favour of the Company. 2.31. During the year under review company has formed four wholly owned subsidiaries. In terms of strategic decision to unlock the land bank of the company some surplus land and buildings were got registered in the name of the two wholly owned subsidiaries. These surplus land and buildings are being used for construction of warehouses and godown to generate rental income. 2.32 A suit has been filed against the company in the year 1999 for recovery of Rs. 20,000,000/- along with interest which is still pending before the Hon'ble High Court, Kolkata. The company disputes the claim of the party and as the matter is sub-judice no provision for interest has been made. 2.33 In view of the amendment made in the Union Budget 2003 with retrospective effect, the Company is liable to refund excise duty amounting to Rs. 49,238,160/- received/ receivable in terms of notification no.32/99 dated 8th July, 1999 issued by the Central Government, on account of Badarpur unit in Assam and interest thereon amounting to Rs. 12,56,93,128 (PY Rs. 11,62,20,283/-) upto 31st March, 2015. The Company had challenged the amendment in Hon'ble High Court at Guwahati and subsequently the matter was transferred to Hon'ble Subrme Court of India. The Hon'ble Subrme Court vide its order dated 19th September, 2005 has confirmed such retrospective amendment made by the Central Government through its Budget Notification. However, the company was of the view that the amendment was not applicable to it and a clarification / modification petition to that effect was filed and admitted by the Hon'ble Subrme Court. On 31st October, 2007, the Central Excise Department had passed a fresh adjudication order confirming the demand and the company has appealed before the Appellate Tribunal which was brought to the notice of the Hon'ble Subrme Court. The Hon'ble Subrme Court disposed off the petition on 25th March, 2008 with a direction that appeal shall be decided by appellate authority on merits and in accordance with law. The appeal filed before the Tribunal was disposed off without relief. The Company moved to Hon'ble High court at Guwahati but failed to get any relief against the order dated 19.04.2012, the company has again filled the appeal before the Hon'ble Subrme Court of India. The Hon'ble Subrme Court of India vide order dated 07.02.2014 set aside the order of the Hon'ble High court at Guwahati and requested to deal with the questions of law set aside in its brvious order. In terms of this the hon'ble High Court at Guwahati vide its order dated 19.11.2014 remanded the matter to CESTAT at Kolkata for consideration of the matter in accordance of law. The company is confident to get the full relief as the entire benefit was passed on to the consumer and as such the company does not accept any further liability and no provision is considered necessary based on the expert legal advice. Further to this the company has accounted for during financial year 2000-01 a sum of Rs. 40,493,280/- as excise duty refund receivable (Badarpur) and Rs. 21,548,160/- towards excise duty payable (Badarpur) in terms of the above mentioned notification. 2.34 During the year it is decided to appeal before the Calcutta High court against the entry tax imposed by state government on the import of input from other states and accordingly not paid the entry tax to the tune of Rs. 24,757/-till 31st March 2015. 2.35 During the year under review, company has disposed a portion of surplus and vacant land and building appurtenant thereto with the purpose to unlock idle land bank of the company, for which approval from shareholders was obtained by way of Postal Ballot notice dated 14.11.2014. A group of shareholders have filed a suit against the company and its officers and have obtained an interim injunction which challenges the disposal contending the disposal at a value below the fair market value. The matter is sub-judice and the management states that the disposal is at fair market value and at terms and conditions with an aim to draw future benefit. The management further states that the transaction has not caused any financial loss to either the company or its shareholders and does not foresee any provision to be made for any future liability arising due to the above transaction. 2.39 During the year under review, the company has changed the method of providing debrciation on Fixed Assets from WDV to SLM. Pursuant to such change, Debrciation for current year is short by Rs. 31.73/- lacs. Further debrciation upto 31.03.14 has been charged in excess by Rs. 515.55 lacs. 2.40 During the year under review, Unpaid & Unclaimed Dividend for the financial year 2006-07 was due to be transferred to the credit of Investor Education & Protection Fund (IEPF). However, due to some technical errors the same was delayed and transferred before the signing of financial statements. 2.41 The figures of brvious year have been reclassified and regrouped wherever considered necessary. Signatories to Note No. 1 & 2 forms part of the financial statement For and on behalf of the Board For S. M. Daga & Co. Chartered Accountants Firm Registration No. 303119E Partner Membership No. Nilotpal Deb Managing Director Ravi Prakash Pincha Director Sunil Kumar Varma Company Secretary Prem Chand Khator Chief Financial Officer Place: Kolkata Date: The 30th day of May, 2015 |