The Members of
THE STATE TRADING CORPORATION OF INDIA LIMITED
1. Report on Financial Statements
We have audited the accompanying financial statements of THE STATE TRADING
CORPORATION OF INDIA LIMITED ("the Company"), which comprise the Balance
Sheet as at 31st March 2013, the Statement of Profit & Loss and Cash Flow Statement
for the year then ended and a summary of significant accounting policies and other
explanatory information, in which are incorporated the accounts of the corporate office
audited by us and the accounts of 7 independent branches audited by the other Auditors.
These financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on our audit.
2. Managements responsibility for the financial statements
Management is responsible for the preparation of these Financial Statements that give a
true and fair view of the financial position, financial performance and Cash Flow of the
company in accordance with the accounting standards referred to in sub-section (3C) of
section 211 of the Companies Act, 1956. This responsibility includes the design,
implementation and maintenance of internal control relevant to the presentation of the
financial statements that give a true and fair view and are free from material
misstatement, whether due to fraud or error.
3. Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based on our
audit. We conducted our audit in accordance with the Standard on Auditing issued by the
Institute of Chartered Accountants of India. Those Standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the
auditors judgment, including the assessment of the risk of material misstatement of
the financial statements, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the Companys preparation and fair
presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of the accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion.
4. Emphasis of Matters
Without qualifying our opinion, we draw attention to the following:
a) Reference is invited to note no.18.1 relating to contracts of scraps, where
transactions of purchases and sales and recoveries had not taken place in terms of
contracts on behalf of the business associate. The company has alleged fraud by the
business associates and matter was referred to CBI in earlier years. We also understand
that two ex-Directors and a General Manager had been charge sheeted. However, in absence
of details of the charge sheets and pending inquiries, we are unable to opine if there was
a fraud or a suspected management fraud and comment on any misstatements made in these
accounts in respect of the above transactions.
b) Reference is invited to note no.18.2 relating to Wheat transactions undertaken on
behalf of Business associates, disposal of goods and recovery had not taken place as per
contract due to quality problems and there was stock of wheat and unrecovered amounts
outstanding from the business associates and suppliers. Also case of theft and
misappropriation of unlifted stocks exported to Bangladesh were noticed for which legal
action has been initiated, entire dues including recoverable from FCI aggregating to
Rs.58.41 Crores has been provided/ written off in earlier years. Further as the matter is
not yet fully resolved, additional amount of sales tax liability for non-export of
30392.010 MT of wheat procured from FCI is not ascertainable. The financial impact at this
stage cannot be ascertained.
c) Reference is invited to note no.18.3, in respect of over dues of Rs.94.09 Crores
from Business Associate against which there are no stock pledged to the company. However
the company has initiated legal steps for recovery.
As the associate has submitted the payment plan with the initial remittance after the
balance sheet date management is hopeful of realization of entire dues thus no provision
was considered necessary at this stage.
d) Reference is invited to note no.19.1, regarding Rs.568.44 Crores on account of
export of pharma product to foreign buyer on back to back basis. As there is default in
the payment against export bills by the buyers which have ultimately gone in to
liquidation, litigation processes have been initiated by STC as well as by Indian
Associates and their bankers. A claim of Rs.527.86 Crore has been admitted by the
liquidator. There is however corresponding credit balance of Rs.568.60 Crore under trade
payables. Management does not anticipate any liability on this account.
e) Reference is invited to note no.19.2, Long term trade receivable include Rs.788.71
Crore under the Credit Linked Insurance Scheme(CLIS) for export of gold jewellery etc.
against which corresponding credit balance of Rs.348.62 Crores are available leaving net
receivable of Rs.440.09 Crores. Action against the associates has been initiated. An
amount of Rs.1.28 Crores was realized from an associate during 2011-12. The matter is
being pursued and the company is hopeful of the recovery. Yet as a measure of abundant
caution a provision of Rs.69.56 Crores has been made during the year, making the
total provision to Rs.108.01 Crores to the extent the company has already paid to Exim
Bank as there are no commensurate recoveries from the associates.
f) Reference is invited to Note no.19.3, pending Long Term Trade Receivable of Rs.4.94
Crores towards reimbursement of loss in supply of Edible Oil under PDS scheme of Govt. of
India. As the claim is under process with Govt. of India no provision was considered
necessary by the management.
g) Reference is invited to note no.22.1, relating to trade receivable of Rs.121.99
Crores due from an associate, the Company is under liquidation and in the process of
reconstruction by Asset Reconstruction Company (India) Limited. The dues are fully secured
by pledge of stock. Financial impact of the same cannot be ascertained at this stage.
h) Reference is invited to note no.22.2, Trade Receivable includes Rs.1353.25 Crores
recoverable from one of the associates for stock sold to them in earlier years who have
stopped operation of their plant due to extreme volatility of prices. Consequent upon
Conciliation Award dated 15.11.2011 and further settlement agreement dated 17.05.2012 the
entire dues were payable to STC by 10.11.2012. However, the associate did not pay the
entire dues and has sought more time for payment. The same was not agreed by the company
and legal action against the associate has been initiated. As the associate has affirmed
its commitment to repay entire dues with interest and had paid Rs.185.13 Crores during
2012-13. Management is hopeful of full recovery and no provision considered necessary.
i) Reference is invited to note no.25.1, regarding claims recoverable amounting to
Rs.158.93 Crores towards the imports of pulses under Government account since the year
2006-07 onwards. The claim for the same has been lodged on Government which is under
active consideration of Government for re-imbursement of actual loss as informed by
Ministry of Consumer Affairs. An amount of Rs.11.70 Crores has been received from the
Government after the balance sheet date towards the part payment against the claims.
Management is hopeful of full recoveries.
j) Reference is invited to note no.25.2, regarding claim recoverable of Rs.49.18 Crores
on account of edible oil import-PDS, which is under process by Ministry of Food and Public
Distribution, Government of India and company is hopeful of full recovery.
k) Reference is invited to note no.25.3, regarding pending balance claim of Rs.5.28
Crores towards imports of pulses on behalf of UP Government for sales under PDS being
pursued by the company with the Ministry of Consumer Affairs and management is hopeful of
full recovery thus no provision was considered necessary.
l) Reference is invited to note no.46, the company has written off overdue receivable
amounting to Rs.96.15 Crore pertaining to previous year export import transactions, where
recovery is uncertain and withdrawn Rs.95.96 Crores from the Export/Import
Contingency Reserve created out of appropriatations of earlier years profit with an
objective to setoff such losses. There would have been loss of Rs.81.54 Crores instead of
profit of Rs.14.42 Crores (before Tax) and EPS would have been (-) Rs.13 instead of
Rs.2.99 for the year ended on 31st March, 2013, if the company had not utilized
m) Note no.48 and 49 relating to pending reconciliation/ confirmation of balances in
parties accounts and current liabilities and consequential adjustment that may arise on
In our opinion and to the best of our information and according to the explanations
given to us, the said financial statements subject to our observations in Paragraph 4 (a)
to (m) above provisions and write offs in respect of which made in the financial
statements based on the existing and known circumstances as reported in the said
paragraphs and read together with Significant Accounting Policies and Notes to the
Financial Statements and Other Notes, give the information required by the Companies Act,
1956, in the manner so required and also give a true and fair view in conformity with
accounting principles generally accepted in India:
a. In the case of the Balance Sheet, of the state of affairs of the Company as at March
b. In the case of the Statement of Profit and Loss, of the profit for the year ended on
that date; and
c. In the case of the Cash Flow Statement, of the cash flows for the year ended on that
6. Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors Report) Order, 2003 ("the
Order") issued by the Central Government of India in terms of Section 227(4A) of the
Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of
2. As required by Section 227 (3) of the Act, we report that:
a. We have obtained all the information and explanation which to the best of our
knowledge and belief were necessary for the purpose of our audit except for information
pertaining to charges levied on two ex- Directors and a General Manager and details of
inquires in respect of transaction referred to in Para 4(a) above, and further except as
otherwise stated in the report, and the record of the cases being handled by the vigilance
department of the company and the accounting of the consequential financial effect thereof
on the matters under its scrutiny in such cases;
b. In our opinion, proper books of account as required by law have been kept by the
Company so far as appears from our examination of such books and proper returns adequate
for the purpose of our audit have been received from the branches not audited by us.
Reports of the Branch Auditors and management replies to the observation of the Branch
Auditors have been considered while preparing our report;
c. The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement
dealt with the books of accounts;
d. In our opinion, the Balance Sheet, the Statement of Profit and Loss, and the Cash
Flow Statement comply with the Accounting Standards referred to in section 211(3C) of the
Companies Act, 1956;
e. In terms of Notification No. GSR 829 (E) dated 21.10.2003 issued by the Department
of the Company Affairs, Government of India, the provision of Section 274(1)(g) of the
Companies Act, 1956, are not applicable to the Company.
||For Chandiok & Guliani
|Place: New Delhi
|Date: 30th May, 2013
||Membership No. 080847
ANNEXURE TO INDEPENDENT AUDITORS REPORT
(Annexure referred to in paragraph 6 of our report of even date on the financial
statements for the financial year ended 31st March, 2013 of the State Trading Corporation
of India Limited)
(i) In respect of its Fixed Asset:
a) The Company has maintained proper records showing full particulars including
quantitative details and situation of fixed assets.
b) The fixed assets were physically verified by the management during the year. We have
been informed that no material discrepancies were noticed on such physical verification.
c) In our opinion, substantial part of the fixed assets has not been disposed of during
the year and going concern status of the company is not affected.
(ii) In respect of its Inventories:
a) As explained to us, verification of inventories undertaken by the company through
surveyor from time to time. In respect of the goods in the custody of third parties,
certificate is obtained from the Clearing & Handling Agents or the warehousing
corporation or from the related parties. In our opinion, the verification of goods like
coal, wheat, etc is not by actual weighment, but by actual receipt and dispatch without
accounting for handling losses. In respect of stock of Wheat 1925.78 MTs at Kandla Port
lying since the year 2004-05 as there was no confirmation of the Quality and quantity
available the value of the same is being taken as NIL.
b) In our Opinion, though the procedures for physical verification is in place and
instructions & guidelines are issued from time to time for verification of stock/
inventories but the same is not being followed strictly for all materials which are
handled by and are in custody of third parties.
c) The company is not maintaining any separate stock register. However,
transactions-wise stock details are compiled for control over the stock and necessary
details are obtained from the custodian of stock viz., Port Authorities, warehouse or
Business Associates. Discrepancies, wherever noticed on verification have been properly
dealt with, except in case of stock of wheat at Kandla as mentioned in Para 2 (a) above in
(iii) In respect of Loans availed/granted:
(a) As informed, the Company has not granted any loans, secured or unsecured, to
Companies, firms and other parties, covered in the register maintained under section 301
of the Companies Act, 1956. Accordingly, clauses (iii) (b), (iii) (c) and (iii) (d) of
paragraph 4 of the order are not applicable to the company.
(b) As informed, the Company has not taken any loans, secured or unsecured from
companies, firms or other Parties covered in register maintained under section 301 of the
Companies Act, 1956. Accordingly, clauses (iii) (f), and (iii) (g) of paragraph 4 of the
order are not applicable to the company.
(iv) In our opinion and according to the information and explanations given to us,
there are adequate internal control procedures commensurate with the size of the Company
and the nature of its business with regard to purchases of inventory, fixed assets and
also the sale of goods. Further on the basis of our examination and according to the
information and explanation given to us, we have not observed any instance of continuous
failure to correct major weaknesses in internal control procedures. However, internal
control procedure regarding review, realization of advances and other claims and
reconciliation of balance of sundry debtors and creditors require strengthening.
(v) In respect of contracts / arrangements under section 301 of the Companies Act,
(a) According to the information and explanations provided by the management, we are of
the opinion that there are no particulars of contracts or arrangements that need to be
entered in the register maintained under section 301 of the Companies Act, 1956.
(b) There was no transaction hence clause 5 (b) of paragraph 4 of the order is not
(vi) In our opinion and as per the explanation provided to us, the provisions of
Section 58A & 58AA of the Companies Act, 1956 and the rules framed there under are not
applicable, as the Company has not accepted any deposit from the public.
(vii) The internal audit is conducted by outside firms of Chartered Accountants and in
our opinion is commensurate with the size and nature of its business except Mumbai Branch
Auditor has suggested for strengthening of internal audit at the branch.
(viii) As informed by the management, the Central Government has not prescribed
maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 for any
of its product of the company.
(ix) In respect of statutory dues:
(a) According to the records of the Company, undisputed statutory dues including
provident fund, investor education and protection fund, Employee State Insurance, Income
Tax, Sales Tax, Wealth Tax, Service Tax, Custom duty, Excise duty, Cess and other
statutory dues have generally been regularly deposited with the appropriate authorities.
There were no undisputed amounts payables in respect of the aforesaid dues which were
outstandingas at March 31, 2013 for a period of over 6 Months from the date they became
(b) Disputed Statutory dues are aggregating to Rs.64.55 Crores on account of Income
Tax, Rs.439.09 Crores on account of Sales Tax and 7.29 Crores on account of Service Tax.
The details are as under: -
|Name of the Statute
||Nature of the Dues
||Amount (Rs. in Crores)
||Period to which the amount relates
||Nature of the Dues
||Amount (Rs. in Crores)
||Period to which the amount relates
|MADRAS HIGH COURT
||1974-75 to 1989-90
|SALES TAX APPELLATE TRIBUNAL (Chennai Branch)
|PENDING IN TRIBUNAL(BST) (Kolkata)
|ODISHA HIGH COURT
||Central Sales Tax
|PENDING WITH SOD & BOARD (Kolkata)
|WEST BENGAL COMMERCIAL TAXES APPELLATE
|BST ORDER NOT YET RECEIVED (Kolkata)
|PENDING IN APPEAL 88-89 (Kolkata)
|PENDING WITH HIGH COURT
||Central Sales Tax (Assam)
||1993-94 to 1995-96
|JOINT COMMISIONER (PENDING IN APPEAL TILL 27/06/2011)
||Central Sales Tax (West Bengal)
|STO, consequent to set aside order
|PENDING WITH FIRST APPELATE AUTHORITY, DELHI
|Joint Commissioner of sales Tax (Maharashtra)
||1990-91 to 2004-05
|Maharashtra Sales Tax Tribunal
||1992-93 to 2000-01
||Nature of Dues
||Amount (Rs.in Crore)
||2005-06 & 2006-08
(x) The Company does not have accumulated losses at the end of the financial year. The
Company has not incurred any cash losses in the current financial year and in the
immediately preceding financial year.
(xi) Based on our audit procedure and the information and explanations given by the
management, the company has not defaulted in repayment of dues to any Financial
Institution or Banks or Debenture holders.
(xii) According to the information and explanations given to us, the Company has not
granted any loans and advances on the basis of security by way of pledge of shares,
debentures and other securities.
(xiii) In our Opinion, the Company is not a Chit Fund company or a Nidhi/Mutual benefit
fund/society. Therefore, the provisions of clause(xiii) of paragraph 4 of the order are
not applicable to the Company.
(xiv) The Company is not dealing in or trading in securities, debentures and other
investments and therefore clause regarding maintaining of proper records of transactions
in respect of trading and timely entries is not applicable. All shares have been held by
the company in its own name.
(xv) In our opinion and according to the information and explanations given to us, the
Company has not given any guarantees for loans taken by others from banks or Financial
(xvi) The Company has not raised any term loans during the year. Hence clause (xvi) of
paragraph 4 of the order not applicable.
(xvii) According to information and explanations given to us and on an overall
examination of the Balance Sheet of the company, we report that no funds raised on short
term basis have been used for long term investment.
(xviii)The Company has not made preferential allotment of shares during the year, to
parties and companies covered in the register maintained under section 301 of the
Companies Act, 1956.
(xix) The Company has not issued any debentures during the year. Hence clause (xix) of
paragraph 4 of the order not applicable.
(xx) The Company has not raised any money by way of public issue during the Year.
(xxi) Based upon the audit procedures performed and the information and explanations
given by the management, we report that no material fraud on or by the company has been
noticed or reported during the course of our audit.
||For Chandiok & Guliani
|Place : New Delhi
|Date : 30th May, 2013
||Membership No. 080847