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EATON FLUID POWER LIMITED
ANNUAL REPORT 2010-2011
AUDITORS' REPORT
To
The Members of
Eaton Fluid Power Limited
1. We have audited the attached Balance Sheet of Eaton Fluid Power Limited
('the Company') as at March 31, 2011 and also the Profit and Loss account
and the cash flow statement for the year ended on that date annexed
thereto. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally
accepted in India. Those Standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
3. We draw attention to note 11 of Schedule 22, relating to Intercompany
payables aggregating to Rs. 215,215,579 which are in the process of being
reconciled and wherein the reconciliation differences aggregating to Rs
45,810,458, in the absence of relevant information relating to subsequent
receipts, have been accounted for as goods in transit. With regards to the
aforesaid matters, we are unable to comment on the adjustments to the
financial statements, if any, that may arise subsequent to completion of
reconciliation by the management.
4. As required by the Companies (Auditor's Report) Order, 2003 (as amended)
issued by the Central Government of India in terms of sub-section (4A) of
Section 227 of the Companies Act, 1956, we enclose in the Annexure a
statement on the matters specified in paragraphs 4 and 5 of the said Order.
5. Further to our comments in the Annexure referred to above, we report
that:
i. We have obtained all the information and explanations, which to the best
of our knowledge and belief were necessary for the purposes of our audit
subject to the matters stated in paragraph 3 above read with note 11 of
Schedule 22.
ii. In our opinion, proper books of account as required by law have been
kept by the Company so far as appears from our examination of those books.
iii. The balance sheet, profit and loss account and cash flow statement
dealt with by this report are in agreement with the books of account;
iv. In our opinion, subject to consequential impact arising from matters
stated in paragraph 3 above, the balance sheet, profit and loss account and
cash flow statement dealt with by this report comply with the accounting
standards referred to in sub-section (3C) of section 211 of the Companies
Act, 1956.
v. On the basis of the written representations received from the directors,
as on March 31,2011, and taken on record by the Board of Directors, we
report that none of the directors is disqualified as on March 31, 2011 from
being appointed as a director in terms of clause (g) of sub-section (1) of
section 274 of the Companies Act, 1956.
vi. Subject to Para 3 stated above, where consequential effect, if any, is
not ascertainable presently, in our opinion and to the best of our
information and according to the explanations given to us, the said
accounts give the information required by the Companies Act, 1956, in the
manner so required and give a true and fair view in conformity with the
accounting principles generally accepted in India;
a) in the case of the balance sheet, of the state of affairs of the Company
as at March 31,2011;
b) in the case of the profit and loss account, of the profit for the year
ended on that date; and
c) in the case of cash flow statement, of the cash flows for the year ended
on that date.
For S.R. Batliboi & Associates
Firm Registration No: 101049W
Chartered Accountants
per Shyamsundar
Pachisia
Partner
Membership No. 49237
Place: Mumbai
Date : September 2, 2011
Annexure referred to in paragraph 4 of our report of even date Re: Eaton
Fluid Power Limited ('the Company'):
(i) (a) The Company has maintained proper records showing full
particulars, including quantitative details and situation of fixed assets
except for additions during the year.
(b) Fixed assets have been physically verified by the management during the
year and material discrepancies were identified on such verification. These
have been properly dealt with in the books of accounts.
(c) There was no disposal of a substantial part of fixed assets during the
year.
(ii) (a) The inventory has been physically verified by the management
during the year. In our opinion, the frequency of verification is
reasonable. Inventories lying with outside parties have been confirmed by
them as at year end.
(b) The procedures of physical verification of inventory followed by the
management are reasonable and adequate in relation to the size of the
Company and the nature of its business.
(c) The Company is maintaining proper records of inventory. Discrepancies
noted on physical verification of inventories were not material, and have
been properly dealt with in the books of account.
(iii) (a) According to the information and explanations given to us, the
Company has not granted any loans, secured or unsecured to companies, firms
or other parties covered in the register maintained under section 301 of
the Companies Act, 1956. Accordingly, the provisions of clause 4(iii)(a) to
(d) of the Companies (Auditors Report) Order, 2003 (as amended) are not
applicable to the Company and hence not commented upon.
(e) The Company has taken loans from two companies covered in the register
maintained under Section 301 of the Companies Act, 1956. The maximum amount
involved during the year was Rs. 225,000,000 and the year-end balance of
loans taken from such parties was Rs. 199,536,986.
(f) In our opinion and according to the information and explanations given
to us, the rate of interest and other terms and conditions for such loans
are not prima facie prejudicial to the interest of the Company.
(g) In respect of loans taken, repayment of the principal amount is as
stipulated and payment of interest has not been very regular.
(iv) The Company has significant purchases of inventory items from the
holding company and fellow subsidiaries. According to the information and
explanation given to us these items are of specialized nature, and hence,
in such cases, it is not possible to make comparison of prices with the
market rates or with purchases from other parties. However, the internal
control system for purchases of inventory and fixed assets is inadequate
since a few purchases are made without purchase orders and inviting
quotations. In our opinion, this is a continuing failure to correct a major
weakness in the internal control system. Read with above, in our opinion
and according to the information and explanations given to us, there are
adequate internal control system commensurate with the size of the Company
and the nature of its business for the sale of goods and services.
(v) (a) According to the information and explanations provided by the
management, we are of the opinion that the particulars of contracts or
arrangements referred to in Section 301 of the Companies Act, 1956 that
need to be entered into the register maintained under Section 301 have been
so entered.
(b) In respect of transactions made in pursuance of such contracts or
arrangements exceeding value of Rupees five lakhs entered into during the
financial year, because of the unique and specialized nature of the items
involved and absence of any comparable prices, we are unable to comment
whether the transactions were made at prevailing market prices at the
relevant time.
(vi) The Company has not accepted any deposits from the public.
(vii) The Company is covered as part of the internal audit function
operated by its ultimate parent company, which is commensurate with the
size of the Company and the nature of its business.
(viii) To the best of our knowledge and as explained, the Central
Government has not prescribed maintenance of cost records under clause (d)
of sub-section (1) of Section 209 of the Companies Act, 1956 for the
products of the Company.
(ix) (a) Undisputed statutory dues including provident fund, income-tax,
service tax, employees' state insurance, sales-tax, wealth-tax, service
tax, customs duty, excise duty, cess have generally been regularly
deposited with the appropriate authorities though there has been slight
delay in few cases. There are no statutory dues towards investor education
and protection fund.
Further, since the Central Government has till date not prescribed the
amount of cess payable under section 441A of the Companies Act, 1956, we
are not in a position to comment upon the regularity or otherwise of the
company in depositing the same.
(b) According to the information and explanations given to us, no
undisputed amounts payable in respect of provident fund, employees' state
insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty,
excise duty, cess and other material statutory dues were outstanding, at
the year end, for a period of more than six months from the date they
became payable There are no statutory dues towards investor education and
protection fund.
(c) According to the information and explanation given to us, there are no
dues to custom duty, service tax, wealth tax and cess which have not been
deposited on account of any dispute. The dues of excise, income taxand
sales tax on account of any dispute are as follows:
Name of the Statute A B C
& Nature of Dues
The Central Excise Act, 1944
Cenvat Credit not 5,002,935 2001-02 Appellate Tribunal
reversed on write off
value of Spares & Tools
including interest
and penalty.
The Central Excise Act, 1944
Tools & Dies Scrapped 3,347,865 2001-02 Appellate Tribunal
and cleared on payment
of Duty including interest
and penalty.
The Central Excise 1944
Material transfer from 482,664 2002-03 Appellate Tribunal
Mumbai to Pune Act, Office
on discount. Valuation
including interest and
penalty.
The Central Excise Act,
1944
Penalty for Cenvat credit 200,926 2003-04 Appellate Tribunal
availed on Inputs were
rejected in process and
which were not further
re-processed nor used in
the manufacture of final
products.
The Central Excise Act,
1944
Penalty on Cenvat credit 623,717 2004-05 Joint Commissioner
availed on input used for
manufacture of gear Pune,
Maharashtra pumps and test
stand which have been
consumed captively.
Central Sales Tax Act, 1956
Bombay Sales Tax Act, 1959
Liability for non submission 84,957,232 Various Assistant
of various forms and various years Commissioner/
other matters Appeals
including interest and
penalty. (Amount paid under
protest Rs 6,380,000)
Income Tax Act, 1961
Disallowance of 149,931 1979-80 Bombay High Court
Bonus/Ex-gratia.
Income Tax
Act, 1961
Disallowance of 148,805 1983-84 Bombay High Court
contribution to
Superannuation Fund.
Income Tax Act, 1961
Disallowance of 94,876 1984-85 Bombay High Court
contribution to
Superannuation Fund.
A = Amount (Rs.)
B = Period to which the amount relates
C = Forum where dispute is pending
(x) The Company has no accumulated losses at the end of the financial year
and it has not incurred cash losses in the current and immediately
preceding financial year.
(xi) The Company did not have any borrowings from financial institutional,
banks and has not issued any debentures. Accordingly, the provision of
clause (xi) of the Companies (Auditors Report) Order, 2003 (as amended) are
not applicable to the Company.
(xii) According to the information and explanations given to us and based
on the documents and records produced to us, the Company has not granted
loans and advances on the basis of security by way of pledge of shares,
debentures and other securities.
(xiii) In our opinion, the Company is not a chit fund or a nidhi / mutual
benefit fund / society. Therefore, the provisions of clause (xiii) of the
Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to
the Company.
(xiv) In our opinion, the Company is not dealing in or trading in shares,
securities, debentures and other investments. Accordingly, the provisions
of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 (as
amended) are not applicable to the Company.
(xv) According to the information and explanations given to us, the Company
has not given any guarantee for loans taken by others from bank or
financial institutions.
(xvi) The Company did not have any term loans outstanding during the year.
(xvii) According to the 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 any preferential allotment of shares to
parties or companies covered in the register maintained under Section 301
of the Companies Act, 1956.
(xix) The Company did not have any outstanding debentures during the year.
(xx) The Company has not raised any money through a public issue during the
year.
(xxi) Based upon the audit procedures performed for the purpose of
reporting the true and fair view of the financial statements and as per the
information and explanations given by the management, we report that no
fraud on or by the Company has been noticed or reported during the year.
For S.R. Batliboi & Associates
Firm Registration No: 101049W
Chartered Accountants
per Shyamsundar
Pachisia
Partner
Membership No. 49237
Place: Mumbai
Date : September 2, 2011
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