( a ) Valuation of fixed assets :
Fixed
assets are maintained at original cost.
( b ) Depreciation :
Company is charging 100%
depreciation on fixed assets up to the value of Rs. 5000 as prescribed in
Schedule XIV to Companies Act. Depreciation on all assets is calculated on the
basis of written down value method at rates prescribed by the Schedule XIV, as
amended from time to time, on pro-rata
basis. However, depreciation for full month is calculated when any asset is
first put to use on any day during that month.
( c ) Write-off losses on assets :
All assets
dismantled/discarded are written off assuming that scrap value for the same is
Nil. If and when such discarded assets are disposed off partially or fully, the
amounts realized during the year are credited to profit and loss account of
that year.
( d ) Expenditure during construction period :
All expenditure during
construction period of specific projects, identifiable as relating to such
projects, is debited to the said projects up to the date of completion and
commissioning thereof.
( e ) Interest during construction period :
Interest on loans (including
other related financing costs on loans) pertaining to specific assets incurred
during construction period upto completion is capitalized.
2
Valuation of closing stock
Inventories are valued on
following basis.
(a)
Finished goods
(i)
Manganese ore of all grades (except fines, hutch dust and HIMS rejects) :- At cost at mines
including depreciation on mine assets or net realizable value, whichever is
less.
(ii)
Manganese ore fines, hutch dust and HIMS rejects :- At cost per tonne on jigging/processing,
transportation, etc., allocated on technical estimates or net realizable value,
whichever is less.
(iii)
Manganese ore at port :- At landed cost at the port or net realizable
value, whichever is less. Landed cost includes freight, unloading charges,
sampling charges, etc.
Difference between physical
and book stocks are not adjusted, so long as the overall position of stocks at
mines is found to be excess when compared with overall book stocks. As and when
ore is actually dispatched and excess or shortage, after railing/shipment
against each stack is ascertained, the same is accounted for in the books of
the company in that year.
(iv)
Electrolytic Manganese di-oxide (including stock in process on 31st
March at different stages production, ascertained by technical estimation as to
percentage of completed units of EMD) :- At current year’s cost of production including
EMD plant’s depreciation or net realizable value, whichever is less.
(v)
(a) Ferro manganese/silico manganese including stock in cake form on 31st
March, determined by technical assessment :-
At current year’s cost of production including ferro manganese plant’s
depreciation or net realizable value, whichever is less.
(b) Stock in process :- The quantity of ferro manganese/silico manganese
in process cannot be weighed, seen or assessed and hence, no value is assigned.
(c) Stock of slag :- Slag is a molten mass of impurities produced in
manufacture of ferro manganese and is treated as scrap. Due to uncertainties
involved in its sale, it cannot be valued. Hence, it is accounted for in the
year in which sale takes places and shown under other income.
(b)
Stores inventory (Stores, spares, timber, explosives, fuel and
lubricants and raw materials) :- At cost on weighted average method.
(i)
Physical verification of all stores, spares, etc., is conducted at the
end of each year. Difference between physical stock and book stock is
investigated and necessary adjustments are carried out in the books of
accounts.
(ii)
In case of ferro manganese plant, stock of raw materials, except
manganese ore at plant, are valued at cost on weighted average method. The
stock of manganese ore at plant is valued at current year’s cost of production
or net realizable value, whichever is less, plus
cost of transport and other charges, if any.
(c)
Captive consumption of manganese ore
Manganese ore, fines, HIMS
rejects are issued as raw material for production of EMD/ferro manganese. Issue
of manganese ore is valued at current year’s cost of production and fines/HIMS
rejects are valued at per tonne rate, as adopted for valuation of stock.
Consumption of these ores are accounted on average
cost. Value of ore issued is reduced from ore raising/operating expenses and is
considered as raw material consumption in “Manufacturing Expenses”. Opening and
closing stock of such ore at EMD/ ferro manganese plant is grouped under the
head “Stock of raw materials”.
3
Sales
All sales are booked in the
books of accounts only after dispatch of goods based on railway receipt/lorry
receipt/delivery challan.
(a)
(i) All sales of ore are taken into account after final bills are raised on receipt of chemical analysis reports. Sales during the year, for which the reports are not received, are taken into account on the basis of provisional bills at 100% value. Adjustment in respect of final bills based on the reports is made in the year in which final bills are raised.
(ii) Sales include royalty.
(b) EMD/ferro manganese/silico manganese sales :-
Sales bills are raised at
100% value and are accounted for accordingly. Sales include excise duty and
education cess thereon, wherever applicable.
4 Other
income
(a) Interest income from sundry debtors
Interest income from sundry
debtors is recognized in line with AS-9 of the Institute of Chartered
Accountants of India as under –
(i)
In as far as the realization is supported by letter of credit through
bank from the debtors, where there is certainty of its realization, the
provision is made on accrual basis.
(ii)
In as far as the realization is not supported by letter of credit
through bank and directly billed by the company where its realization is
uncertain, based on management’s experience, as and when actual realization
made is recognized as income.
(b) Interest income of deposits and advances is recognized on
accrual basis.
(c) Memorandum records have been kept in
respect of replaced/worn-out parts/scrap capital items. When they are disposed
off, proceeds are taken as miscellaneous receipt of that year.
5
Sales tax, income tax, etc.
(a) In respect of sales tax,
income tax, etc., the amounts payable or receivable as per assessment order is
accounted for in the year in which the said order is received and accepted by
the company, irrespective of the year to which the order relates.
(b) Set off is claimed on sales
tax on purchases. Difference between set off claimed and actual set off allowed
is accounted for in the year in which the assessment order is received and
accounted for by the company.
6
Payments concerning
employees
(a) Contribution to provident
fund
Contribution to the
Employees’ Provident Fund in respect of employees covered by the Provident Fund
Act, is made to the Regional Provident Fund Commissioners alongwith requisite
administrative charges and to the Senior Staff Provident Fund Trust, recognized
by the concerned authorities, in respect of employees not covered by the said
Act.
(b) Gratuity
The company has created a
Trust for gratuity payable to its employees and has taken a group
gratuity-cum-life assurance policy from L.I.C. covering all employees. Annual
premiums, as determined by the L.I.C., are accordingly charged to profit and
loss account.
(c) Expenditure on V.R.S.
The company charges 1/5th
of the expenditure in profit and loss account to fall in line with provisions
of section 35DDA of the Income Tax Act.
(d) Liability on encashment of
leave
The company provides leave
encashment liability on actuarial basis.
(e) Provision for bonus
Provision for bonus is made
in accordance of provisions of Payment of Bonus Act, 1965.
7
Accounting for subsidies
from Welfare Commissioner
(a) Labour quarters
The company has
constructed/under construction some labour quarters for which the company is
receiving subsidy from the Welfare Commissioner. Since the land on which such
quarters are constructed is surrendered to the Welfare Commissioner and the
property (quarters constructed) vests with the Welfare Commissioner, the entire
expenditure incurred by the company is charged to and the subsidy received is
also credited to revenue in the year in which the expenditure is
incurred/subsidy is received.
(b) Welfare assets
Entire expenditure for
acquisition of assets like school bus, ambulance, water supply scheme, etc.,
under welfare schemes is debited to relevant asset account in the year in which
expenditure is incurred. Amount of subsidy received is credited to the same asset
head in the year of receipt and depreciation is then charged on such reduced
value of the asset from that year.
8
Claims by the company
Amount of claims lodged with
insurance company/railways are accounted for on the basis of amount claimed
during the year and the difference, if any, is adjusted on settlement of the
claims.
9
Provision for doubtful debts
Provision for bad and
doubtful debts is made based on a case-to-case review of sundry debtors for
more than two years. Debts outstanding from private parties for more than three
years are invariably provided.
10
Research and development
expenditure
Research and development
expenditure is charged to profit and loss account in the year of incurrence.
However, expenditure on fixed assets relating to research and development is
treated in the same way as other fixed assets.
11
Mine closure expenditure
Financial implications
towards final mine closure plans under relevant Acts and Rules are technically
estimated based on total available ore reserves. The same is provided in
accounts on year to year basis after taking into consideration the annual
production.
12 Net present value for
diversion of forest land for non-forest purposes
The liability is recognised
on receipt of necessary permission from the concerned authorities and this
amount is amortised over the lease period of the respective leases.
13
Prior period expenses
Corrections of fundamental
errors of commission or omission in earlier year(s) are done by
debiting/crediting prior period adjustment account.
14
Significant events occurring
after balance sheet date
Impact of significant events
after the date of balance sheet and approval thereof is given effect to either
by moderation of the balance sheet and profit and loss account or by specific
mention in the Directors’ Report.
NOTES ON ACCOUNTS FOR THE
YEAR ENDED 31ST MARCH, 2005
Claims against the company
not acknowledged as debts –
(a)
For wages and other benefits to employees – Rs. 56.73 (Rs. 46.79)
lakhs.
(b)
Two of the company’s customers have lodged claims for supply of ore
which, according to them, are not as per specifications. The claim for Rs.
454.00 (Rs. 454.00) lakhs on account of quality has been repudiated as the
supplies to these customers are governed by regular sales contracts, which do
not provide for such liability.
(c)
Income tax assessments are completed upto assessment year 2002-03.
Income tax payments made/refunds adjusted by the department against the
disputed demands are shown under loans and advances. Adjustment of these
advances against disputed demand is made only after final settlement of
appeals, pending at various levels.
Demands made by the
department, which are disputed by the company, and payments made/refunds adjusted
against these demands are as under -
|
Assess-ment year |
Disputed Demand Rs. |
Adjusted by the
department/ paid under protest Rs. |
Balance as
on 31.03.05 Rs. |
Pending with |
|
1997-98 |
35231400 |
35231400 |
Nil |
Tribunal |
|
1998-99 |
35033790 |
35033790 |
Nil |
Tribunal |
|
1999-00 |
22081642 |
22081642 |
Nil |
Tribunal |
|
2000-01 |
1694434 |
1694434 |
Nil |
CIT |
|
2001-02 |
19481151 |
19481151 |
Nil |
CIT(A) |
|
2002-03 |
10094395 |
Nil |
10094395 |
CIT(A) |
As regards assessment year
2002-03, the demand of Rs. 100.94 lakhs is not paid as an application for stay
of demand is made with the assessing officer, which is pending.
Disputed tax demands are not
provided for in the books because as per company’s assessment, there will not
be any additional financial implications over and above the provisions already
made.
(d) Company has given financial assurance of
Rs. 87.49 lakh by way of bank guarantees towards progressive mine closure to
IBM in respect of progressive mine closure plans.
2 (a) Estimated amount of
contracts remaining to be executed
on capital
account and not provided for is Rs.
648.69 lakhs (Rs. 756.18 lakhs). Advance paid for such contracts is Rs. 0.68
lakhs (Rs. 6.94 lakhs).
(b)
Land measuring 761.60 Sq. Mtrs. belonging to the company is acquired by
Nagpur Improvement Trust for its Integrated Road Development Plan. Writ
petition filed by the company seeking compensation is admitted by the High
Court,
6 (a) Difference of 19 tonnes of manganese ore
included in closing stock as on 31.03.04 has been reconciled with
mines’ records during 2004-05.
(b)
Difference of
234 tonnes of manganese ore between quantities dispatched and
billed during the year 2004-05 has not been adjusted which shall be dealt with
appropriately in 2005-06, when reconciled.
7 (a) Production and inventory of manganese ore
are arrived on weight-volume ratio basis.
(b)
Inventories of bulk raw materials and finished goods in respect of
ferro manganese plant are determined as per weight-volume ratio by the
production/technical department and the same are accounted for accordingly.
(c)
Inventory of raw materials includes stock of manganese ore of 962
(1581) tonnes valuing Rs. 13.72 (Rs. 24.80) lakhs lying in ferro manganese
plant site as on 31.03.05.
8 During the year, an amount of Rs. 0.07 (Rs. 45.21) lakhs
towards doubtful debts provided for has been written off from the provision.
9 Documentation in respect of secured loans to employees is
pending in some cases.
10 All credit balances of Rs. 5000/- and below and more than five
years lying in sundry creditors’ account have been transferred to miscellaneous
income. Accordingly, an amount of Rs. 0.32 (Rs. 0.54) lakh has been transferred
to miscellaneous income.
11 Value
of imports for capital goods, stores/spares and raw materials is Rs. Nil (Rs. Nil).
12 Exports
during the year at FOB is Rs. Nil (Rs. 1062.82) lakhs.
13 (a) Earning in
foreign exchange for export of manganese ore is US$ Nil (US$
23.49)
lakhs, i.e., Rs. Nil (Rs. 1062.82 lakhs) during the year.
(b) Expenditure
in foreign currency for traveling is Rs. 4.09 (Rs. Nil) lakh.
14 As per AS-15 framed by the Institute of Chartered Accountants
of India, provision for leave encashment benefit has been calculated on the
basis of actuary’s valuation for the year 2004-05, which amounts to Rs.
901.49 (Rs. 760.12) lakhs as on
31.03.05.
15 Unclaimed salaries/wages of more than three years are
transferred to Lapsed Unclaimed Account.
Accordingly, an amount of Rs. 1.96 (Rs. 2.21) lakhs towards unclaimed wages,
etc., has been transferred to Lapsed Unclaimed Account during the year 2004-05.
16 As per AS-18 framed by the Institute of Chartered Accountants
of India, disclosures of transactions with related parties, as defined in the
accounting standard, are given below -
(i)
List of related parties with whom transactions have taken place and
relationship
1)
Shri P.M.Reddy Key
management personnel
2)
Shri B.B.Choudhary Key
management personnel
3)
Shri S.M.Bothra Key
management personnel
4)
Shri M.A.V. Goutham Key
management personnel
(ii)
Transactions during the year with related parties
1 Remuneration paid Rs. 2342486 (Rs.1304695) 2 Reimbursement of traveling expenses Rs. 2470362
(Rs. 997982)
3 Sitting fees to part-time Directors Rs.
53000 (Rs.
28000)
17 Deferred
tax liability as on 31.03.05 is as detailed below
|
Sr No |
Particulars |
2004-05 |
2003-04 |
|
1 |
Deferred tax liability – Opening balance as on 1st April Depreciation and forest land net present value
differential |
47078425 2670691 |
51212157 1248780 |
|
2 |
Deferred tax assets – Provision for doubtful debts/advances/ Claims, leave encashment, etc. |
1966219 |
5382512 |
|
3 |
For the year |
704472 |
(4133732) |
|
4 |
Closing balance as on 31st March |
47782897 |
47078425 |
18 As per AS –29 framed by The Institute of Chartered Accountants
of India, the disclosures of provisions made are given below
:
Rs./Lakhs
|
Particulars |
Opening balance as on 01.04.04 |
Additional
provisions during the year |
Amount used during the year |
Closing balance as on 31.03.05 |
Remarks |
|
Provision
for final mine closure expenses |
- (-) |
51.78 (-) |
- (-) |
51.78 (-) |
Cash outflow is expected at the time of closure of
mines |
19 An amount of Rs. 84.05 (Rs. 65.23) lakhs is deducted towards
income tax at source during the year from interest/rent received by the
company.
20 Interest billed on customers amounting to Rs. 45.61 (Rs. 20.57)
lakhs relating to next financial year has not been included in sundry debtors.
21 Closing
stock value of ferro manganese, E.M.D. and H.I.M.S. includes excise duty and education cess liability of Rs.
190.08 (Rs. 36.90) lakhs.
22 Earlier wage agreement with unionized workers and staff has
expired on 31.07.02. Negotiations for revision of wages/salaries between
Management and
23 Sundry
creditors include a sum of Rs. 4.23 (Rs. 1.75) lakhs payable to S.S.I. units of Rs.
1.00 lakh or more for more than thirty days. Details are as under -
(a) Elemec Mining and Engineers Rs. 2.33 (Rs. 1.75) lakhs
(b) Hemendra Metal Industries Rs. 1.90 (Nil) lakhs
24 During the year, the company has received demand of Rs. 310.19
lakhs towards compensation for diversion of forest land for non-forest
purposes. In line with the accounting policy, an amount of Rs. 56.15 lakhs has
been amortised during the year.
25 Additional
information to profit and loss account
a) Major raw materials consumed
|
|
Year ended 31-03-2005 |
Year ended 31-03-2004 |
||
|
|
Qty (MT) |
Rs.in lakhs |
Qty (MT) |
Rs.in lakhs |
|
Ferro manganese plant – (i) Manganese ore (ii) Coke (iii) Carbon paste |
25263.00 5452.72 191.47 |
386.35 501.96 27.28 |
26429.00 5839.98 138.23 |
418.97 415.89 20.28 |
|
E.M.D. plant – (i) Manganese ore (ii) Sulphuric acid (iii)
Sodium carbonate |
3236.00 411.07 40.54 |
9.99 16.75 4.41 |
3176.00 472.28 40.30 |
4.25 16.79 3.76 |
b) Production,
sales, opening and closing stocks -
|
|
Year ended 31-03-2005 |
Year ended 31-03-2004 |
||
|
|
Qty (MT) |
Rs.in lakhs |
Qty (MT) |
Rs.in lakhs |
|
a) Production - Manganese ore E.M.D. Ferro manganese |
943169 1123 10325 |
-- -- -- |
799096 975 10899 |
-- -- -- |
|
b) Sales - Manganese ore E.M.D. Ferro manganese |
846056 1356 6151 |
34121.79 765.25 2990.54 |
852947 669 10668 |
19300.54 424.94 3148.77 |
|
c) Opening stock – Manganese ore E.M.D. Ferro manganese |
120759 374 524 |
1754.29 201.12 120.91 |
206303 68 293 |
2954.15 44.77 71.10 |
|
d) Closing stock – Manganese ore E.M.D. Ferro manganese |
189833 141 4698 |
3069.44 77.19 1277.21 |
120759 374 524 |
1754.29 201.12 120.91 |
(c ) Sales value of
E.M.D. and ferro manganese includes excise duty and education cess.
(d)
Closing stock of manganese ore is arrived after adjustment of issue of
3236 (3176) tonnes for production of EMD and 24644 (27535) tones for production
of ferro manganese.
(e)
Licensed and installed capacity
E.M.D. plant 1000 MT per annum
Ferro manganese plant 10000 MT per
annum
(f) Actual production
E.M.D. plant 1123 (975) MT
Ferro manganese plant 10325 (10899) MT
26 Corresponding figures for previous year have been regrouped to
make them comparable with those of the year under review. Figures in brackets
in the schedules indicate corresponding figures of the previous year.
Schedule No. 1 to 21 form an integral part of
financial statements.
For Rodi Dabir & Co.,
Chartered Accountants
Sudhir Dabir B.Dasgupta I.M.K.S.Raju
Partner Company
Secretary Dy. General Manager(Finance)
Place :
Date : 26.5.05 Director (Finance) Chairman-cum-Managing Director