m) Provisions, Contingent Liabilities and Contingent Assets
The Company recognises a provision when it has a present obligation as a result of a past event that probably requires an outflow of the Company's resources embodying economic benefits at the time of settlement and a reliable estimate can be made of the amount of the obligation. The provisions are measured at the best estimate of the amounts required to settle the present obligation as at the financial statement date and are not discounted to its present value.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only on the occurrence or nonoccurrence of one or more future uncertain events not wholly or substantially within the control of the Company or a present obligation that arises from the past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made.
When demand notices are issued by the Government Authorities and demand is disputed by the company and it is probable that the company will not be required to settle/pay such demands then these are classified as disputed obligations under contingent liabilities.
Contingent Assets, if any, are not recognised in the financial statements. If it becomes certain that inflow of economic benefit will arise then such asset and the relative income are recognised in financial statements.
n) Current/Non-Current Classifications:
The Company presents assets and liabilities in the balance sheet on the basis of their classifications into current and non-current. "
Assets:
An asset is treated as current when it is:
• Expected to be realised or intended to be sold or consumed in normal operating cycle
• Held primarily for the purpose of trading
• Expected to be realised within twelve months after the reporting period
• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
Liabilities:
A liability is treated as current when it is:
• Expected to be settled in normal operating cycle
• Held primarily for the purpose of trading
• Due to be settled within twelve months after the reporting period
• No unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
All other liabilities are classified as non-current.
o) Financial Instruments, Financial Assets, Financial Liabilities and Equity Instruments The financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the relevant instrument and are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities measured at fair value through profit or loss) are added to or deducted from the fair value on initial recognition of financial assets or financial liabilities.
A. Financial Assets:
Initial Recognition:
Financial Assets include Investments, Trade Receivables, Security Deposits, Cash and Cash Equivalents and eligible current and non-current assets. The financial assets are initially recognized at the transaction price when the Company becomes party to contractual obligations. The transaction price includes transaction costs unless the asset is being value at fair value through the Statement of Profit and Loss. Subsequent Measurement:
The subsequent measurement of financial assets depends upon the initial classification of financial assets. For the purpose of subsequent measurement, financial assets are classified as under:
I. Financial Assets At Amortized Cost where the financial assets are held solely for collection of cash flows and contractual terms of the assets give rise on specified dates to cash flows that are solely payments of principal and interest on principal amount outstanding.
ii. Fair value through other comprehensive income (FVTOCI), where the financial assets are held not only for realization of principal and interest but also from the sale of such assets. Such assets are subsequently measured at fair value, with unrealised gains and losses arising from changes in the fair value being recognised in other comprehensive income.
III. Fair value through profit or loss (FVTPL), where the assets are managed in accordance with an approved investment strategy that triggers purchase and sale decisions based on the fair value of such assets. Such assets are subsequently measured at fair value, with unrealised gains and losses arising from changes in the fair value being recognised in the Statement of Profit and Loss in the period in which they arise.
Trade Receivables, Security Deposits, Cash and Cash Equivalents, Investments in Equity where reliable data for fair value is not available and eligible current and noncurrent assets are classified for measurement at amortized cost.
Investments in equity instruments are classified for measurement at FVTPL. Impairment:
If the recoverable amount of an asset (or cash-generating unit/Fixed Assets) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount if any, in which case the impairment loss is treated as a revaluation decrease.
Financial assets, other than those at Fair Value through Profit and Loss (FVTPL), are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
The company recognises impairment loss on trade receivables using expected credit loss model.
B. Financial Liabilities:
Financial liabilities, which include long and short-term loans and borrowings, trade payables, eligible current and non-current liabilities. The borrowings, trade payables and other financial liabilities are initially recognised at the value of the respective
contractual obligations. They are subsequently measured at amortised cost. Financial liabilities are derecognised when the liability is extinguished, that is, when the contractual obligation is discharged, cancelled and on expiry of the terms.
p) Fair Value Measurement:
The Company measures financial instruments, such as, derivatives at fair value at each financial statement date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
• In the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability
• The principal or the most advantageous market must be accessible by the
Company. _
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a nonfinancial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
q) Cash and Cash Equivalents-For the Purpose of Cash Flow Statements:
Cash and cash equivalent in the balance sheet comprise cash at banks and in hand and short-term deposits with an original maturity of three months or less or deposits with bank held as margin money against the import of goods or as security against the supply of goods, which are subject to an insignificant risk of changes in value.
r) Operating Cycle:
Based on the activities of the company and normal time between incurring of liabilities and their settlement in cash or cash equivalents and acquisition/right to assets and their realization in cash or cash equivalents, the company has considered its operating cycle as 12 months for the purpose of classification of its liabilities and assets as current and non-current.
s) Prior Period Errors:
Prior period errors are in the form of omission of certain items in the financial statements of prior periods which were not available when the financial statements were approved for issue and which could reasonably be expected to have been obtained and taken into account in the preparation and presentation of financial statement of prior period.
The Prior period errors have been corrected retrospectively by restating the respective amounts of the prior period presented in which the error occurred. If the errors have occurred before the earliest prior period presented, the errors have been corrected by restating the opening balances of assets, liabilities and equity of the earliest prior period presented.
t) Events Subsequent to Financial Statements Period:
Events after the reporting period are those events, both favourable and unfavourable that have occurred between the end of the reported financial statements year and the date when financial statements are approved for issue by the Board of Directors of the company.
Events after the reporting period can be identified as those that provide evidence of conditions that existed as at the end of the financial year i.e. adjusting events after the financial year end and those are indicative of conditions that arose after the financial year end i.e. non-adjusting events after the financial year end.
The company adjusts the amounts of assets, liabilities, incomes and expenses recognised in the financial statements of the reporting period to reflect the effects of adjusting events to the respective assets, liabilities, incomes and expenses of the reporting period.
The non-adjusting events are not recognised in the financial statement of the reporting period but the nature of event and an estimate of its financial effect are disclosed in the notes of accounts.
u) Government Grants:
Government grants are recognised in the period where it is determined that there is reasonable assurance that the grant will be received and all attached conditions relating to grant will be complied with.
The revenue grant relating to or arising from business operations is recognised as operating income in the Statement of Profit and Loss of the period in which is determined that it is reasonably certain that grant will be received and all attached conditions relating to grant will be complied with.
v) Earnings Per Share:
The Company presents basic and diluted earnings per share details for its ordinary shares. Basic earning per share is calculated by dividing the net profit after tax for the year attributable to the ordinary shareholders of the company by weighted number of ordinary shares outstanding for applicable period during the year.
Diluted earning per share is calculated considering the effect of dilution if any to ordinary share during the year.
w) Expected Credit Loss:
The measurement of expected credit loss on financial assets is based on the evaluation of collectability and the management’s judgement regarding recoverability.
A considerable amount of judgement is required in assessing the ultimate realization of the trade receivables having regard to the past collection history of each party, ongoing dealings with the parties, and assessment of their ability to pay the debts.
x) Materiality
The Management of the company uses judgement in deciding whether individual items or groups of items are material in the financial statements. Materiality is judged by reference to the nature or magnitude or both of the items. The deciding factor is whether omitting or misstating or obscuring an information could individually or in combination with other related information influence decisions that primary users make on the basis of the financial statements. Management also uses judgement of materiality for determining the compliance requirement of the Ind AS. Further, the company may also be required to present separately immaterial items when required by law.
• Nature of Security
A Primary Security & Collateral
• Secured by Exclusive Charge on Plant & Machinery situated at Plot No. 64/1, Village: Chubadak, Taluka: Bhuj, Dist: Kutchh.
B Collateral Security
a Secured by Equitable Mortgage of Factory Land & Building situated at R.S. No. 52/1-2, 53/1-2, Village Sukhpar, Tal: Halvad, Dist.:Su b Secured by Equitable Mortgage of Office Premises at D-702, Ganesh Meridian, S.G. Road, Ahmedabad. c Secured by Equitable Mortgage of Plot of Land at Survey No. 55, Village Sukhpar, Taluka Halvad, District: Su rend ran agar, d! Secured by Equitable Mortgage of Plot of Land at Survey No. 54, Village Sukhpar, Taluka Halvad, District: Surendranagar. e Factory Land Situated at Survey No. 49/1 & 50 Village Sukhpar, Tah.: Halvad, Dist.: Morbi. f Plant & Machineries (Unit III, Village Sukhpar, TaL Halvad, Dist: Surendranagar. g Secured by Equitable Mortgage of Office Premises at D-704, Ganesh Meridian, S.G. Road, Ahmedabad. h Secured by Factory Land situated at Survey No. 51-1,51-2 & 51-3,49-2 Village Sukhpar, Tal.: Halvad, Dist.:Surendranagar. i Secured by Land & Building situtated at Survey No. 64/1, Village: Chubdak, Bhuj.
Common Collateral Security for all of the Credit Facilities Including Working Capital Facilities ** Entire Term Loans secured by personal guarantees of the following persons/parties.
- Directors
Mr. Kintbhai G. Patel Mr. Ramakant K. Patel Mr. Karshanbhai H. Patel
• ••
Term Loan from UBl of Rs. 9.00 Crores (For Bhuj Plant) to be repaid by 20 Quarterly Instalment of Rs. 45 Lacs and Instalment to Commence from 31/10/2018.
Note: Changes in Liabilities have been disclosed in the statement of cash flow as financing activities.
d) Disputed Government Liabilities:
1. Disputed Income Tax Liabilities for A.Y. 2021-22: (Refer Note No. 32(IV)
In pursuance of various notices, the assessment proceedings for A.Y. 2021-22 relevant to financial year 2020-21 were completed by the office of Deputy Commissioner of Income Tax, Central Circle 1(1), Ahmedabad on 30/12/2022 by passing an assessment order under section 143(3) of the Income Tax Act, 1961. Vide assessment order dated 30/12/2022 under section 143(3), the Deputy Commissioner of Income Tax, Central Circle 1(1), Ahmedabad made an addition of Rs. 84.40/- Lakh to taxable income for A.Y. 2021-22 on account of demurrage, detention and other related charges incurred by the company in respect of import of raw materials treating the same as being penal in nature as per section 37(1) of the Income Tax Act, 1961 and raised demand of Rs. 36.15/- Lakh.
The charges were in the nature of storage/container facilities availed by the company beyond the time allowed to lift the materials from the port pending clearance of documents/compliance of procedure on account of various factors like late receipt of documents from the suppliers, late release of shipment etc. and were paid to various shipping line companies/agencies for availing their facilities. The charges incurred not being in the nature of penalty within the meaning of section 37(1) and hence the additions of Rs. 84.40/- Lakh have been considered by the company as inappropriate based on legal advice and has preferred an appeal before Commissioner of Income Tax-(Appeal), National Faceless Appellate Centre. The matter was pending for adjudication before Commissioner
of Income Tax-(Appeal) as on the date of approval of financial statements by the Board of Directors.
Considering the nature of expenses incurred, provisions of section 37(1) of the Income Tax Act, 1961 and the legal advice, it is more likely that the addition so made by the Deputy Commissioner of Income Tax, Central Circle 1(1), Ahmedabad will be reversed and hence no provision has been made for such liability in the books of account for the financial year 2022-23. However, such the same has been disclosed as contingent liabilities in notes to the accounts (Refer Note No. 32(IV).
2. Disputed Income Tax Liabilities for A.Y. 2022-23: (Refer Note No. 32(V)
The Income Tax Authorities had carried out search operations from 26th May, 2022 to 29th May, 2022 at the registered office of the company and had seized certain documents relating to the company during the course of search. The post-search proceedings were carried out during the current financial year and the company has complied with notices and instructions from the Income Tax Department as issued from time to time. In pursuance of various notices, the assessment proceedings for A.Y. 2022-23 relevant to financial year 2021-22 were completed by the office of Deputy Commissioner of Income Tax, Central Circle 1(1), Ahmedabad on 31/03/2024 by passing an assessment order under section 143(3) of the Income Tax Act, 1961. Vide assessment order dated 31/03/2024 under section 143(3), the Deputy Commissioner of Income Tax, Central Circle 1(1), Ahmedabad made an addition of Rs. 5,321.92/- Lakh to taxable income for A.Y. 2022-23 on account of various grounds and raised demand of Rs. 5,177.21/- Lakh vide notice issued under section 156 of the Income Tax Act, 1961.
The additions to income have been made without consideration of facts and submissions made and hence the additions of Rs. 5,321.92/- Lakh have been considered by the company as inappropriate based on legal advice and has preferred an appeal before Commissioner of Income Tax-(Appeal), National Faceless Appellate Centre. The matter was pending for adjudication before Commissioner of Income Tax-(Appeal) as on the date of approval of financial statements by the Board of Directors.
Considering the nature of additions made and the legal advice, it is more likely that the addition so made by the Deputy Commissioner of Income Tax, Central Circle 1(1), Ahmedabad will be reversed and hence no provision has been made for such liability in the books of account for the financial year 2023-24. However, such the same has been disclosed as contingent liabilities in notes to the accounts (Refer Note No. 32(V).
3. RCM Liability on Ocean Freight: (Refer Note No. 32(MI)
In the course of audit by the Office of the Commissioner of Central Goods and Service Tax, Audit Commissionerate, Rajkot dated 30th January, 2019, it had raised audit objections regarding non-payment of RCM on Ocean Freight amounting to Rs. 30.59/- Lakh and requested the company to provide suitable explanations/clarifications in case of disagreement by the company. The company did not concur with the audit objections raised by the office of Commissioner of Central Goods and Service Tax, Audit Commissionerate, Rajkot since the similar matter in cases of other parties were going on for adjudication at the jurisdictional Hon’ble High Court of Gujarat. However, upto the date of authorization of Financial Statements for issue by the Board of Directors i.e. 29th May, 2024, the company has paid Rs. 30.59/- Lakh under protest. There has been no further proceeding in the matter subsequent to the date of initial report upto the date of
authorization of Financial Statements for issue by the Board of Directors i e 29th May 2024
f) Financial Instruments and Related Disclosures: (Refer to Note No. 33,34 & 35) Financial Risk Management:
The company activities are exposed various financial risks: credit risk, liquidity risk and foreign exchange fluctuation risk. The Company’s primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance.
I. Credit Risk:
Trade Receivables:
Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss to the Company. The maximum exposure to the credit risk as at the reporting date is primarily from trade receivables. Trade receivables are unsecured and are derived from revenue earned from customers from sale of goods. Trade receivables generally are impaired after three years when recoverability is considered doubtful based on general trend. The Company considers that trade receivables stated in the financial statements are not impaired and past due for each reporting dates under review are of good credit quality subject to outcome of the litigations where the company has initiated legal proceedings for recovery.
Other Financial Assets:
Credit risk relating to cash and cash equivalents is considered negligible since the counterparties are banks which are majorly owned by Government of India and have
oversight of Reserve Bank of India. The Company considers the credit quality of term deposits with banks to be good and the company reviews these banking relationships on an ongoing basis.
The Company considers all other financial assets as at the financial statement dates to be of good credit quality.
II. Liquidity Risk:
The company’s principal sources of liquidity are from Short Term Bank Borrowings, Cash and Cash Equivalents and Cash generated from operations.
The Short- term liquidity requirements consist mainly of Trade Payables, Expense Payables, Employee Dues, Servicing of Interest on Short -Term and Long -Term Borrowings and payment of instalments of term loans and vehicle loans and other payments arising during the normal course of business.
III. Foreign Exchange Rate Risk:
The Company undertakes transactions denominated in foreign currency mainly for purchase of raw materials and sale of goods which are subject to the risk of exchange rate fluctuations. Financial assets and liabilities denominated in foreign currency are also subject to reinstatement risks. Hedging is regularly carried out to mitigate the risks of exchange rate fluctuations to the extent considered feasible.
! Better net working capital management in the form of inventory holding, realization from trade receivables and proper utilization of short-term borrowings, trade payables and other current liabilities have positive impact on net capital turnover ratio compared to the last year.
$ Though the company continued to incur losses in the current year but due to continuous efforts to better manage resources and reduction in cost of raw materials and some of the cost of production resulted into losses being substantially lower than previous year having positive impact on Net Profit Ratio and Return on Capital
Employed Ratio.
*
Investments includes Investment in Securities, Balance in Fixed Deposit Accounts with Bank, Investment Properties only.
Income On Investment includes Interest on Bank Fixed Deposits, Rental Income on Investment Property and Gain/(Loss) on Investment Held or Sold.
o) Subsidy Income:
The company had made an application for grant of subsidy to Industrial Commissionerate, Gandhinagar for grant of subsidy under the Scheme for Incentive to Industries in the form of reimbursement of Net VAT-Gujarat/Net GST-Gujarat based on gross investments in property, plant & equipment (referred to as Fixed Assets) and subject of compliance of the conditions as specified for eligibility of the grant of subsidy in the financial year 2021-22. The company had been issued Provisional Eligibility Certificates under Scheme for Incentive to Industries by the Industrial Commissionerate, Gandhinagar during the financial year 2021-22. Based on the consideration of such Provisional Eligibility Certificates and on the basis of consideration of compliance of terms and conditions of grant of subsidy and possibility of further compliance as may be required, the company had accounted an amount of Rs. 825.25/- Lakh as subsidy income for the financial year 2021-22 as an operational income and had classified the same as income from operations in the financial statements.
The company has not realized any amount out of the subsidy income of Rs. 825.25/-Lakh during the current financial year on account of ongoing procedural compliances. Based on the legal consultation it is expected that the company may realize stage-wise or in instalments or period-wise subsidy amount in the coming year(s) and hence the
balance of subsidy of Rs. 825.25/-Lakh has been carried as Current Financial Assets as Claims Receivable in the Financial Statements.
p) Impairment Losses:
On periodical basis and as and when required, the Company reviews the carrying amount of its assets vis-a-vis net realisable value of respective asset or group of assets. In the Financial Year 2023-24, the Company has reviewed the carrying amount of its assets and observed that there is no indication that those assets or group of assets have expected net realisable value below the carrying amount resulting into any impairment loss. On account of expected realisable value of asset or group of assets not being lower than their respective carrying values as at the end of the financial year no such impairment loss has been provided.
Though the wholly owned subsidiary of the company i.e. Balaram Papers Private Limited has incurred losses over the years and has not carried out any operational activities during the financial year 2023-24, the management of the company has assessed the carrying value of its investment in subsidiary and estimated that in all likely possibilities it is expected that realizable value of its investment either through operations by subsidiary and in case if required to be disposed off will not be lower than the realizable value and hence the investment in subsidiary has been carried at cost of acquisition without any provision for impairment if any. The management will continue to assess the realizable value of its investment in the subsidiary if any event occurs which indicates that the realizable value of investment in the subsidiary will not higher than the carrying value then the company will provide for impairment losses.
q) Relationship with Struck off Companies:
The company did not have any transaction with companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956, during the current year and in the previous year. "
r) The Financial Statements were authorised for issue by the Board of Directors on 29th May, 2024.
s) The previous year’s figures have been reworked, regrouped and reclassified wherever necessary so as to make them comparable with those of the current year.
The Financial Statements have been presented in Indian Rupee (') in Lakhs rounded off to two decimal points as per amendment to Schedule III to the Companies Act, 2013. The figures wherever shown in bracket represent deductions.
SIGNATURES TO NOTES T TO '36'
FOR, M/S. ASTRON PAPER & BOARD MILL LIMITED FOR, SNDK & ASSOCIATES,
CHARTERED ACCOUNTANTS, FIRM REG. NO.: W100060
KIRIT PATEL RAMAKANT PATEL
(CHAIRMAN & MANAGING (DIRECTOR)
DIRECTOR)
KISHAN R. KANANI PARTNER M. NO. 192347
ROHIT PATEL H I N A R. PATEL PLACE: AHMEDABAD
(C F O ) ( CO M PANY SECRETARY) DATE: 29th MAY, 2024
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