Rashtriya Chemicals & Fertilizers Ltd Auditors Report.

TO THE MEMBERS OF RASHTRIYA CHEMICALS AND FERTILIZERS LIMITED.

Report on the Standalone Ind AS Financial Statements

Opinion

We have audited the accompanying standalone Ind AS financial statements of RASTRIYA CHEMICALS AND FERTILISERS LIMITED ("the Company"), which comprises the Balance Sheet as at March 31, 2019, the Statement of Profit and Loss (including other comprehensive income), Statement of Changes in Equity and Statement of cash flows for the year ended March 31, 2019, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including the Ind AS, of the state of affairs of the Company as at March 31, 2019, and its profit and total comprehensive income, changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing specified under section 143(10) of the Act (SAs). Our responsibilities under those Standards are further described in the Auditors Responsibilities for the Audit of the Standalone IND AS Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the independence requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAIs Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone IND AS financial statements.

Emphasis of Matters

a) Note No 47 (b): The matter relating to the issue of unintended benefits accruing to units using domestic gas for manufacture of nutrient "N" has been referred and is pending before an Inter-Ministerial Committee (IMC) of Government of India (GoI). It is expected that a decision on the matter would be taken soon by the IMC. Pending such decision, initially subsidy amounting to Rs 198.94 Crore was withheld. As per DoF approval for release of this subsidy, upon submission of its claims along with bank guarantee for equivalent amount by the Company, an amount of Rs 125.11 Crore has been received upto March 31, 2019. Accordingly, no provision has been made in these accounts towards the balance amount of Rs 73.83 Crore withheld, as Company is of the view that no unintended benefits have accrued to owing to use of domestic gas.

b) Note No 48: Consequent to Gas pooling being made applicable to Fertilizer (Urea) sector w.e.f. June 1, 2015, it is expected that a differential pricing of gas may be made applicable for non-urea usage. Company has represented to DoF for maintaining supply of domestic gas for P&K fertilizers and chemicals. Ministry of Petroleum & Natural Gas (MoPNG) vide its order No. L-13013/3/2012- GP-I, dated: December 16, 2015 has directed GAIL (India) Limited to levy a higher gas price (i.e. the highest rate of RLNG used for production of urea) for gas consumed in non-urea operations. As the matter relating to the same is pending before the IMC for decision, the Company has represented that any decision on the same be taken only upon the issue being settled by the IMC of GoI. However, pending finalization of price payable as per the said letter, Company is recognizing liability based on the difference between domestic gas price and pool / market price of gas for its non-urea operations. The difference is provided considering domestic gas first for urea operations on cumulative basis for the year and the balance if any, for non-urea operations and Accordingly, there is no impact for the year ended March 31, 2019. The Company has recognised a liability of Rs 211.79 Crore for the period commencing from June 1, 2015 to March 31, 2019 (211.79 Crore upto March 31, 2018) on this account.

The Company has entered into a contract for procurement of market priced gas for non-urea operations at Trombay unit, effective from May 16, 2016.

Pursuant to the said order, GAIL has sought a differential levy amounting to Rs 1442.84 Crore for the period commencing from July 1, 2006 till March 31, 2017 and has initiated arbitration proceeding towards non-payment of the same. The Company has represented this matter to Department of Fertilizers for dispute resolution as the matter relating to the same is pending before the IMC of Gol. The said matter has been currently referred to Administrative Mechanism for Resolution of CPSEs Disputes (AMRCD) on May 22, 2018

c) Note No 53.3) a): Inter Corporate Deposit (ICD) advanced to Fertilizers and Chemicals Travancore Ltd (FACT) -50% JV partner in FACT-RCF Building Products Ltd (FRBL) of Rs 25.50 Crore (being their share of contribution paid by RCF towards one- time settlement entered into between FRBL and their bankers resulting in Corporate Guarantee given by Company to FRBL bankers being discharged) outstanding as at March 31, 2019 has not been provided for, despite FACTs adverse financial position, as the Company is confident of settlement of the ICD given. Further the FACT is a Government owned Entity and interest has been settled by them upto March 31, 2019.

d) Note No. 63: Net fair value gain of Rs 23.44 Crore on account of valuation of Development Right Certificate received from Municipal Corporation of Greater Mumbai/ Mumbai Metropolitan Regional

Development Authority towards surrender of land in accordance with IND-AS 38 and Guidance Note on Accounting for Real Estate Transactions issued by the Institute of Chartered Accountants of India. Tax expense includes the Capital Gains Tax impact on the same.

Our opinion is not modified in respect of these matters.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the standalone IND AS financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

The key audit matters identified in our audit are:

1. Revenue Recognition and measurement in respect of subsidy income

2. Transferable Development Rights (TDR) - Accounting and Valuation

3. Estimation of Provision & Contingent Liabilities

4. Information Technology General Control

Key Audit matter Response to Key Audit Matter
1. Revenue recognition and measurement in respect to subsidy income Our Procedure included:
Recognition of subsidy is generally made on the basis of in principle recognition/approval /settlement of claims from Government of India/Fertilizer Industry Co-ordination Committee while finalizing the financial statements. Accounting policies and principles:
During the year, Company has recognized an amount of Rs 423.49 Crore towards subsidy income on estimated basis as per note 47(a) of the Standalone Ind AS Financial Statement We have reviewed the Companys Accounting policies for Subsidy on Urea as mentioned under "Note A. Statement of Significant Accounting policies III) D) Revenue Recognition" of the financial statements and the same is compared with the applicable Ind AS.
MRP of urea being fixed by Government of India, the company is entitled for subsidy wherein certain inputs costs are a pass through and compensation for production beyond a level of production known as Reassessed capacity is restricted to lower of Import Parity Price(IPP) of Urea plus other incidental charges which the government incurs on imported urea, or its own concession price, as determined under extant policies for Urea. Further subsidy income is net of adjustments of recoveries towards sale/transfer for surplus ammonia or non-conversion of entire ammonia into urea. Tests of controls:
Since there is a time lag between actual expenditure incurred and notification of concession rates for the year, Management exercises significant judgement in arriving at the income entitled on account of same for the year. We have evaluated the design, implementation and operating effectiveness of key controls over recognition of subsidy income.
Therefore, there is a risk of revenue being misstated on account of errors in estimation of concession/IPP rates yet to be notified, due to absence of notification available and change in methodology/ calculation, if any for arriving at price concession. Tests of details:
We have verified the supporting documentation for determining that the subsidy was recognized in the correct accounting period and as per notified rates.
In absence of notified rates, we have verified calculation of estimated rates based on information available with the Company for such costs which are a pass through.
In case estimation of income is based on other parameters like IPP of Urea etc. verification of the same based on available information in public domain.
Testing reasonability of assumptions based on past trends, consistency in application and changes in the same owing to change in Government policies
Performing substantive analytical procedures: -
Ascertainment and analysis of variations with respect of amounts estimated and actually entitled upon notification with respect to previous years.
We also assessed as to whether the disclosures in respect of revenue were adequate.
2. Transferrable Development Rights (TDR) - Accounting and Valuation Internal enquiry:
Company has accounted for an amount of Rs 131.49 Crore as per Note 15 to Standalone Ind AS financial Statement, towards TDR received / receivable from MMRDA/MCGM for surrender of its land which has been reported at fair value. We enquired of the senior management, and inspected the minutes of the board, and various committees of the board in regard with receipt of TDRs wherever TDRs is in dispute.
Further an amount of Rs 75.17 Crore along with interest thereon has not been accounted as per an arbitration award on the said matter as per Note 62 to Standalone Ind AS financial Statement. Accounting policies:
Management judgement has been exercised in accounting and valuation of the same which is based on the representation and explanation given by the management along with confirmation received from a lawyer in respect of matters in dispute and valuation report of an independent valuer. Further, we focused on whether the valuation of TDR has been in accordance as per accounting guidance issued by ICAI and the classification and reporting of then same as per applicable accounting standards.
In the absence of any empirical evidence relating to value of TDRs realized by the Company in the past and determination of probability of receipt of TDRs considering present scenario where TDRs is in dispute, these judgements may result in error in estimation which may impact future financial statements. Enquiry and confirmation of lawyers:
In respect of matters which are under dispute as far as TDR is concerned, we have assessed and received confirmation /opinion of Companys inhouse Legal Department / external lawyers where ever necessary.
Tests of controls
We have evaluated the design, implementation and operating effectiveness of key controls that the management has established for Accounting, classification and valuation of TDRs.
Tests of details:
We have relied on report as prepared by independent valuers and have reviewed the assumptions made by the valuer in it for its acceptability.
We also assessed as to whether the disclosures in respect of TDRs were adequate.
3. Estimation of Provision & Contingent Liabilities Internal enquiry:
In the recognition and measurement of provisions, there is uncertainty about the timing or amount of the future expenditure required to settle the liability. We enquired of the senior management, and inspected the minutes of the board, and various committees of the board where relevant, for claims arising and challenged whether provisions are required.
In respect of contingent liabilities, there are estimates and assumptions made to determine the amount to be disclosed. Tests of details:
As a result, there is a high degree of judgement required for the recognition and measurement of provisions and disclosure of contingent liabilities. In respect of significant claims, we checked the amount of claim, nature of issues involved, management submissions and corroborated the same with external evidence, where available.
Enquiry and confirmation of lawyers:
Company has reported Provision and Contingencies amounting to Rs 1692.59 Crore in the note 41.1 to Standalone Ind AS financial statement In respect of matters which are under dispute, we have assessed opinion of Companys in-house Legal Department / external lawyers where ever necessary.
There is a risk of material misstatement that the estimates are incorrect and that the provisions or contingent liabilities are materially misstated.
4. Information Technology Controls We focused our audit on those IT systems and controls that are significant to the Companys financial reporting process.
A significant part of the Companys financial reporting process is heavily reliant on IT systems with automated processes and controls over the capture, storage and extraction of information. A fundamental component of these processes and controls is ensuring appropriate user access and change management protocols exist and being adhered to. These protocols are important because they ensure that access and changes to IT systems and related data are made and authorised in an appropriate manner. As our audit sought to place a high level of reliance on IT systems and application controls related to financial reporting, high proportion ot the overall audit effort was in Information Technology (IT) Systems and Controls. We focused our audit on those IT systems and controls that are significant to the Companys financial reporting process. As audit procedures over IT Systems and controls require specific expertise, we involved our IT specialist.
We assessed the design and tested the operating effectiveness of the Companys IT controls, including those over user access and change management as well as data reliability.
In a limited number of cases we adjusted our planned audit approach as follows:
- we extended our testing to identify whether there had been unauthorized or inappropriate access or changes made to critical IT systems and related data;
- where automated procedures were supported by systems with identified deficiencies, we extended our procedures to identify and test alternative controls; and
- where required, we performed a greater level of testing to validate the integrity and reliability of associated data and reporting.

Other Information

The Companys Board of Directors is responsible for the other information. The other information comprises the information included in the Directors Report, Management Discussion & Analysis Report, Business Responsibility Report and Corporate Governance Report but does not include the financial statements and our auditors report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

When we read the Directors Report, Management Discussion & Analysis Report, Business Responsibility Report and Corporate Governance Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance

Responsibilities of Management and Those Charged with Governance for the Standalone IND AS Financial Statements

The Companys Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, the financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed under section 133 of the Act.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone IND AS financial statements, management is responsible for assessing the Companys ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Companys financial reporting process.

Auditors Responsibilities for the Audit of the standalone IND AS Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone IND AS financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone IND AS financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalone IND AS financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Companys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the standalone IND AS financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the standalone IND AS financial statements, including the disclosures, and whether the standalone IND AS financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the standalone IND AS financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone IND AS financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors Report) Order, 2016 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by Section 143 (5) of the Act, we give in "Annexure B" the directions and sub-directions issued by the Comptroller and Auditors General of India, the action taken thereon and its impact on the accounts and financial statements of the Company.

3. Non- Compliance of the SEBI Listing Obligation and Disclosure Requirements (LODR) Regulations, 2015 :- as per Regulation 17(1)(b), the chairman being an executive director, at least half of the board of Directors should be comprised of Independent Directors. Currently, the Company does not have required number of Independent Directors on its board.

4. As required by Section 143(3) of the Act, we report that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, Statement of Changes in Equity and the Statement of Cash Flow dealt with by this Report are in agreement with the relevant books of account

d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Indian Accounting Standards prescribed under section 133 of the Act.

e) On the basis of the written representations received from the directors as on March 31, 2019 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2019 from being appointed as a director in terms of Section 164(2) of the Act.

f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure C".

g) With respect to the other matters to be included in the Auditors Report as per Section 143(3)(j):

I. in accordance with the requirements of section 197(16) of the Act, as amended:

As per notification number G.S.R. 463 (E) dated June 5, 2015 issued by Ministry of Corporate Affairs, Section 197 of the Act as regards the managerial remuneration is not applicable to the Company, since it is a Government Company.

II. in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone Ind AS financial statements - Refer Note 41 to the standalone Ind AS financial statements.

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts.

iii. There is no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

For KALYANIWALLA & MISTRY LLP For CHHAJED & DOSHI
Chartered Accountants Chartered Accountants
Firm Registration No. 104607W / W100166 Firm Registration No 101794W
Sai Venkata Ramana Damarla Nitesh Jain
Partner Partner
Membership. No. 107017 Membership. No. 136169
Place: Mumbai
Dated: May 7, 2019

Referred to in in Para 1 ‘Report on Other Legal and Regulatory Requirements in our Independent Auditors Report to the members of the Company on the standalone Ind AS financial statements for the year ended March 31,2019.

ANNEXURE A TO THE INDEPENDENT AUDITORS REPORT

Statement on Matters specified in paragraphs 3 & 4 of the Companies (Auditors Report) Order, 2016:

i. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets with original cost and depreciation written off in respect of identifiable units of assets and where such information for identifiable units of assets is not available, the records show the cost and depreciation written off in respect thereof as a group or class. The items of assets in respect of which quantitative details are not linked with the cost or book value are of small value acquired prior to April 1978 and are fully depreciated particularly in respect of movable items acquired from Fertilizers Corporation of India Limited.

(b) As explained to us, the Plant & Machinery have been physical verified by the management at reasonable intervals during the year and all other fixed assets have been physical verified by the management with the help of an independent outside agency. The discrepancies reported on such verification were not material and have been properly dealt with in the books of account.

(c) According to the information and explanations given to us and on the basis of examination of the records of the company, the title deeds of immovable properties are held in the name of the Company except:

Total No. of Cases Type of Assets Gross Block as at March 31, 2019 (Rs Crore) Net Block as at March 31, 2019 (Rs Crore) Remarks
2 Free Hold Land -Thal (1,824,903 Sq. Mtr. of land) 1.60 1.60 The Company is in the process of Transferring the title deeds.
1 Free Hold Land - Trombay (378,321 Sq. Mtr. of land) 0.24 0.24 The Company is in the process of transferring the title deeds.

ii. In our opinion and according to the information and explanations given to us, physical verification of finished goods, packing materials and raw materials inside the factory premises has been carried out by the management at reasonable intervals and stock of stores and spare parts has been conducted by them with the help of an independent outside agency in a phased Programme so as to complete the verification of all items over a period. Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third-party confirmation respectively. No material discrepancies were noticed on physical verification and the same have been properly dealt with in the books of account.

iii. The Company has not granted any loans, secured or unsecured, to companies, firms, and limited liability partnerships or other parties covered in the register maintained under section 189 of the Act. Therefore, the provisions of subclause (a), (b) and (c) of paragraph 3(iii) of the Order are not applicable.

iv. In our opinion and according to the information and explanations given to us, the Company has not advanced any loans or made any investments or provided any guarantees or security to the parties covered under section 185 of the Act. The Company has given loans, made investments in the securities of other body corporate and given guarantees within the limit specified by section 186 of the Act and details of such transactions have been disclosed in the standalone Ind AS financial statements.

v. In our opinion and according to the information and explanations given to us, the Company has not accepted any Deposits from the public and hence the directives issued by the Reserve Bank of India and the provisions of Sections 73 to 76 or any other relevant provisions of the Act and the Rules framed there under are not applicable.

vi. We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 148 (1) of the Act, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

vii. (a) According to the information and explanations given to us and the records examined by us, the Company is generally regular in depositing undisputed statutory dues including Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Service Tax, Duty of Customs, Duty of Excise, Value Added Tax, Goods and Service Tax, Cess and other material statutory dues with the appropriate authorities. According to the information and explanations given to us, there are no arrears of outstanding statutory dues in respect of above as on the last day of the financial year for a period of more than six months from the date they became payable.

(b) According to the information and explanation given to us and the records examined by us, there were no disputes in respect of Income Tax, Duty of Excise, Duty of Customs, Sales Tax, Service Tax, Duty of Customs, Value added tax, Goods and Service tax which have not been deposited on account of any dispute except the following:

Name of the Statute Nature of Dues Amount (Rs in Crore) Period to which the amount relates Forum where dispute is pending
1 Customs Act, 1962 Demand of Customs duty and penalty (Trombay Unit) 25.62 2004-05 Central Excise, Service Tax Appellate Tribunal
2 Customs Act, 1962 Demand of Differential Customs Duty on import of Urea, MOP & DAP (Marketing) 80.77 2009-10 Assistant Commissioner of Customs, Dharamtar, Alibaug
3 Customs Act, 1962 Demand of Differential customs duty on import of Potash (Marketing) 0.16 2012-13 Commissioner of Customs, Mangalore
4 Income Tax Act, 1961 Disallowance of additional depreciation claimed 6.55 A.Y 2014-15 Income Tax Appellate Tribunal
5 Income Tax Act, 1961 Disallowance of additional depreciation claimed 5.43 A.Y2015-16 Commissioner of Income Tax (Appeals)
6 Income Tax Act, 1961 Disallowance of additional depreciation and prior period expenses 1.78 A.Y 2016-17 Commissioner of Income Tax (Appeals)
7 Income Tax Act, 1961 Demand of Tax for Short Deduction / non deduction of TDS 1.16 A.Y 2008-09 to 2017-18 Commissioner of Income Tax (Appeals)
8 Sales Tax, Maharashtra Disallowance / errors in calculation of set off etc., in the Assessment Order Passed 2.77 2010-11 Joint Commissioner of Sales Tax (Appeals)
1.07 2011-12
0.81 2013- 14
0.81 2014- 15
9 Central Excise Act, 1944 Demand of Central Excise duty, Interest & Penalty in respect of Naphtha procured at concessional rats used for products which are not exempted (Thal Unit) 2.67 1996-2001 Supreme Court
3.54 March 2005 to October 2005 Central Excise and Service Tax Appellate Tribunal
18.61 November 1996 to February 2005 Supreme Court Commissioner of Central Excise.
17.88 (Interest) July 2007 to August 2009
Demand of excise duty on account of Diversion of urea for industrial usages (Thal Unit) 4.12 2015-16 Commissioner of Central Excise
10 Central Excise Act, 1944 Demand of Central Excise duty in respect of Low Sulphur High Stock / Furnace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit) 7.15 September 1989 to December 2015 Commissioner of Central Excise (Appeals)
Rapid Wall Plaster cleared with Nil Rate of duty (Trombay Unit) 3.19 July 2010 to March 2016 Dy. Commissioner / Commissioner of Central Excise (Appeals)
11 Central Excise Act, 1944 Wrong availment of CENVAT Credit on Angles, Channels, TMT Bars. Etc. (Trombay Unit) 0.10 April 2007 to August 2011 Dy. Commissioner Central Excise (Appeals)
12 Central Excise Act, 1944 Demand of excise duty on account of Diversion of urea for industrial usages (Trombay Unit) 0.72 2015-16 Commissioner of Central Excise
13 Central Excise Act, 1944 Demand on Valuation of Ammonia 0.26 Prior to 1977 Commissioner of Central Excise (Appeals).
14 Service Tax Demand of Service Tax on supply of Btal wagons (IPD Dept.) 0.14 April 2008 to December 2012 Appellate Authority , Mumbai
15 Service Tax Demand of Service Tax on Dispatch Money (Mktg. Dept.) 0.24 April 2015 to March 2017 Asst. Commissioner of CGST & C.X. Division-1 , Mumbai
16 Service Tax Demand of Service Tax on LD (Corporate Dept.) 0.03 April 2012 to March 2015 Dy. Commissioner of Central Excise, Customs & Service Tax
17 Service Tax Demand of Service Tax on wrong availment and distribution of CENVAT (Corporate Dept.) 0.31 April 2014 to March 2015 Dy. Commissioner of Central Excise, Customs & Service Tax
18 Service Tax Demand of Service Tax on Handling Charges 0.01 April 2006 to March 2008 Superintendent Service Tax, Aurangabad
19 Service Tax Demand of Service Tax on supply of wagon to Central Railway (Thal Unit) 2.05 April 2008 to December 2015 Commissioner of Central Excise, Customs & Service Tax
20 Service Tax Demand of Service Tax on fees received for Operation and maintenance of HWP (Thal Unit) 14.36 October 2006 to June 2017 Addl. Commissioner of Central Excise, Customs & Service Tax
21 Service Tax Demand of Service Tax on wrong availment of CENVAT credit in respect of input services used in the manufacture of exempted goods (Thal Unit) 11.57 April 2011 to June 2017 Commissioner of Central Excise, Customs & Service Tax
22 Service Tax Penalty on account of non-deduction of service tax on gross assessable value (Thal Unit) 0.16 October 2011 to May 2012 Addl. Commissioner of Central Excise, Customs & Service Tax
23 Service Tax Non-payment of service Tax on Routine Maintenance Charges of private railway Siding (Thal Unit) 1.93 March 2012 to August 2015 Commissioner of Central Excise, Customs & Service Tax
24 Service Tax Demand of Service Tax on wrong availment of CENVAT credit in respect of imported goods (Thal Unit) 0.08 March 2012 to September 2013 Addl. Commissioner of Central Excise, Customs & Service Tax
25 Service Tax Demand of Service Tax on ALF charges(Thal unit) 0.14 April-2011 to March 2015 Commissioner (Appeals)
26 Service Tax Demand of Service Tax on LD (Thal Unit) 0.40 September 2012 to March 2015 Commissioner (Appeals)
27 Service Tax Demand of Service Tax on EMD Forfeiture(Thal Unit) 0.09 September 2012 to March 2015 Commissioner (Appeals)
28 Service Tax Demand of Service Tax on Sponsorship (Thal Unit) 0.04 September 2012 to March 2015 Commissioner (Appeals)
29 Service Tax Demand on LD(Trombay Unit) 1.95 September 2012 to March 2015 Asst. Commissioner of Central Excise & Service Tax.
30 Service Tax Demand on Despatch Money (Trombay Unit) 1.53 September 2012 to March 2015 Asst. Commissioner of Central Excise & Service Tax.
31 Service Tax Demand of Service Tax on Sponsorship (Trombay Unit) 0.04 September 2012 to March 2015 Asst. Commissioner of Central Excise & Service Tax.
32 Service Tax Demand of Service Tax on wrong availment of CENVAT credit in respect of input services used in the manufacture of exempted goods (Trombay Unit) 1.21 April 2011 to June 2017 Dy. Commissioner of Central Excise, Customs & Service Tax.
33 Service Tax Demand of Service Tax on Sponsorship (Marketing Unit) 0.42 September 2012 to March 2015 Asst. Commissioner of Central Excise & Service Tax.
34 Service Tax Demand on Dispatch Money (Corporate Unit) 0.54 September 2012 to March 2015 Asst. Commissioner of Central Excise & Service Tax.
35 Service Tax Demand of Service Tax on Sponsorship (Corporate Unit) 1.07 September 2012 to March 2015 Asst. Commissioner of Central Excise & Service Tax.
36 Service Tax Wrong Availment and distribution of Cenvat credit 0.14 April-2011 to March 2015 Asst. Commissioner of Central Excise & Service Tax.

viii. According to information and explanation given to us and based on examination of the records, the Company has not defaulted in repayment of loans or borrowings to bank. The Company does not have any dues to financial institution, government or debenture holders.

ix. The Company has not raised money through initial public offer or further public offer (including debt instruments). In our opinion and according to the information and explanations given to us and based on the documents and records examined by us on an overall basis, the term loans obtained by the Company were applied for the purpose for which the loans were obtained.

x. During the course of our examination of the books of account and records of the Company, and according to the information and explanation given to us and representations made by the Management, no material fraud by or on the Company by its officers or employees, has been noticed or reported during the year.

xi. As per notification number G.S.R. 463(E) dated June 5, 2015 issued by Ministry of Corporate Affairs, Section 197 of the Act as regards the managerial remuneration is not applicable to the Company, since it is a Government Company.

xii. In our opinion and according to the information and explanation given to us, the Company is not a Nidhi Company. Accordingly, provisions of paragraph 3(xii) of the Order are not applicable

xiii. According to the information and explanation given to us and based on our examination of the records of the Company, transactions with related parties are in compliance with sections 177 and 188 of the Act, where applicable, and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.

xiv. According to the information and explanation given to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

xv. According to the information and explanation given to us and based on our examination of the records of the Company, the Company has not entered into non- cash transactions with the directors or persons connected with him. Hence the provisions of Section 192 of the Act are not applicable.

xvi. The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934, hence the provisions of paragraph 3 (xvi) of the Order are not applicable.

For KALYANIWALLA & MISTRY LLP For CHHAJED & DOSHI
Chartered Accountants Chartered Accountants
Firm Registration No. 104607W / W100166 Firm Registration No 101794W
Sai Venkata Ramana Damarla Nitesh Jain
Partner Partner
Membership. No. 107017 Membership. No. 136169
Place: Mumbai
Dated: May 7, 2019

ANNEXURE B TO THE INDEPENDENT AUDITORS REPORT

Referred to in Para 2 ‘Report on Other Legal and Regulatory Requirements in our Independent Auditors Report to the members of the Company on the standalone Ind AS financial statements for the year ended March 31, 2019.

Report on the Directions and Sub-directions issued by the Comptroller and Auditors General of India, the action taken thereon and its impact on the accounts and financial statement of the Company under Section 143(5) of the Act:

A. Directions

1. Whether the company has system in place to process all the accounting transactions through IT system? If no, the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications, if any, may be stated.

As per information and explanations given to us, the major important functional areas of organization like Financial Accounting, Sales Accounting, Human Resources Information, Payroll, Material/Inventory Management etc. have been computerized and date is processed through the IT systems. The Company has implemented SAP during 2005-06 in order to make information processing fully integrated and centralized. Following modules have been implemented in SAP ERP wherein transactions are processed in an integrated manner.

• Finance & Costing (FI-CO)

• Asset Management (AM)

• Production Planning (PP)

• Plant Maintenance (PM)

• Materials Management (MM)

• Sales & Distribution (SD)

• Cost Object & Profitability Analysis (CO-PA)

• Business Warehouse (BW)

• Environment Health & Safety (EHS)

• Township Management

• HR & Pay Roll (HCM- Implemented during the year 2006-07)

In 2010, along with an upgrade of the existing SAP business applications, following new solutions were also implemented

• SAP Enterprise portal (Employee Self Service/ Manager Self Service)

• Governance, Risk and Compliance

Attendance recording system is another subsidiary system specifically developed to meet the requirements of the Company for recording attendance of unionized category employees of the Company. The attendance data from this system is directly uploaded in SAP for payroll processing.

The IT system has been also configured to meet the compliance and business requirements as mandated by applicability of Ind AS and Goods and Services Tax.

Thus, the IT system enables integrated processing of most of the accounting transactions. However, there are certain accounting transactions like subsidy income, relating to borrowings, payment of interest etc., corporate taxes, valuation of finished goods inventory as per principles of Ind AS and certain year end provisions etc. which are standalone to Finance and thus are not/ cannot be integrated. Such transactions and balances are adequately supported by relevant documents maintained / calculations maintained in Excel work books. A maker checker protocol is also followed to check the calculations, the accounting implications and the effect of the entries posted in SAP system. As these transactions are standalone to Finance they are processed directly in the Finance module of the SAP IT system.

Further based on the information processed in SAP system, such data is extracted to excel for preparation and presentation of financial statements as per Schedule III of Companies Act. Proper checks and controls are exercised so that the information presented is in consonance with the base data extracted from the SAP System.

2. Whether there is any restructuring of an existing loan or cases of waiver/write off of debts /loans/ interest etc. made by a lender to the company due to the companys inability to repay the loan? If yes, the financial impact may be stated.

Based on audit procedure performed by us and as per the information and explanation given to us, there is no restructuring of an existing loan or cases of waiver/ write off of debts /loans/interest etc. made by a lender to the company due to the companys inability to repay the loan

3. Whether funds received/receivable for specific schemes from central/ state agencies were properly accounted for/ utilized as per its term and conditions? List the cases of deviation.

As per information and explanations given to us, Company has not received any funds for specific schemes from central/state agencies during the year.

B. Sub-directions

1. State the area of land under encroachment and briefly explain the steps taken by the Company to remove encroachments.

To the best of our knowledge and belief and according to the information and explanations given to us, instances of encroachment of land have been observed at Trombay unit which are as under:-

1. Approx. 5 acres of land which is in the name of RCF has been encroached since the time of FCI. The value of the land cannot be determined exactly. RCF has approached the agencies like MMRDA for development of this land.XX

ii. Approx. 15 Acres is under slum/encroached since 1980. Slums from other pockets were shifted on this land and is without clear title in favor of RCF. The matter is taken up with appropriate authorities for obtaining clear title in favor of RCF.

Both the matters are pending in Mumbai High Court for resolution. As explained to us, other than the above there are no cases of encroachment of land at other locations.

2. (i) Whether subsidy received/recoverable from Government of India has been properly accounted for as per claims admitted?

Based on the audit procedures performed by us and as per the information and explanations given to us, subsidy received/recoverable from Government of India has been properly accounted for as per claims admitted. In addition to the same, for the rates yet to be notified due to escalations/de-escalations in the cost of inputs and other costs, subsidy has been accounted on estimated basis which is in line with its stated accounting policy of revenue recognition given in notes to the standalone Ind AS financial statements for the year 2018-19.

(ii) Whether subsidy received during the year has been reconciled with subsidy disbursed by the Government of India ?

Subsidy received during the year amounting to 3752.39 Crore is in agreement with the amount disbursed by the Government of India.

3. Whether the Transferable Development Rights (TDR) from Maharashtra Government are properly valued and accounted for

In our opinion and as per explanation and information given to us, Transferable Development Rights (TDRs) have been properly valued and accounted for, summary of the same is as follows:

Particulars

2018-19

2017-18

Change

Land TDR TDR Value Land TDR TDR Value
Sq. Mt. Sq. Mt. Rs Crore Sq. Mt. Sq. Mt. Rs Crore Rs Crore
TDR Recieved: MMRDA 8,265 16,530 55.50 8,265 16,530 63.04 (7.54)
TDR Accrued:
MMRDA 40,585 11,799 30.97 40,585 11,799 44.99 (14.02)
MCGM 7,000 15,400 45.01 NA NA 45.01
TDR Dispute 22,173 Refer Note Refer Note 22,173 Refer Note Refer Note
Total 78,023 43,729 131.49 71,023 28,329 108.03 23.45

Note: As per Note no. 62 to the Standalone Ind AS Financial Statements," the Company had received an arbitration award in its favor in respect of compensation claimed in respect of transfer of land to Mumbai Metropolitan Regional Development Authority (MMRDA) on May 23, 2018. As per the Award, the Company is eligible for additional compensation either in the form of cash or TDRs amounting to Rs 75.17 Crore along with interest @9% thereon from March 31, 2015 till the date of realization of award. As the award is being appealed against by MMMRDA, pending final outcome of the same, the Company has not recognised any income accruing on account of the same.

For KALYANIWALLA & MISTRY LLP For CHHAJED & DOSHI
Chartered Accountants Chartered Accountants
Firm Registration No. 104607W / W100166 Firm Registration No 101794W
Sai Venkata Ramana Damarla Nitesh Jain
Partner Partner
Membership. No. 107017 Membership. No. 136169
Place: Mumbai
Dated: May 7, 2019

ANNEXURE C TO THE INDEPENDENT AUDITORS REPORT

Referred to in Para 3 (f) ‘Report on Other Legal and Regulatory Requirements in our Independent Auditors Report to the members of the Company on the standalone Ind AS financial statements for the year ended March 31, 2019.

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")

We have audited the internal financial controls with respect to financial statements of RASHTRIYA CHEMICALS AND FERTILIZERS LIMITED ("the Company") as of March 31, 2019 in conjunction with our audit of the Ind AS financial statements of the Company for the year ended on that date.

Managements Responsibility for Internal Financial Controls

The Companys management is responsible for establishing and maintaining internal financial controls based on the internal control with respect to financial statements criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the "Guidance Note") issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys internal financial controls with respect to Financial Statement based on our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Act, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls with respect to financial Statement was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system with respect to financial Statement and their operating effectiveness.

Our audit of internal financial controls with respect to financial Statement included obtaining an understanding of internal financial controls with respect to financial statement, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Companys internal financial controls system with respect to financial statement.

Meaning of Internal Financial Controls with respect to Financial Statement

A Companys internal financial control with respect to financial statement is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Ind AS financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal financial control with respect to financial statement includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of Ind AS financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the Ind AS financial statements.

Inherent Limitations of Internal Financial Controls with respect to Financial Statement

Because of the inherent limitations of internal financial controls with respect to financial statement, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls with respect to financial Statement to future periods are subject to the risk that the internal financial control with respect to financial statement may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial control with respect to financial statement system and such internal financial controls with respect to financial statement were operating effectively as at March 31, 2019, based on the internal control with respect to financial statement criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India"

For KALYANIWALLA & MISTRY LLP For CHHAJED & DOSHI
Chartered Accountants Chartered Accountants
Firm Regn. No. 104607W / W100166 Firm Regn. No 101794W
Sai Venkata Ramana Damarla Nitesh Jain
Partner Partner
Membership. No. 107017 Membership. No. 136169
Place: Mumbai
Dated: May 7, 2019