Annual Report - 2005-06 - GAIL (India)

3. Estimated amount of Contracts
remaining to be executed on
Capital Account and not provided
for is amounting to Rs.1057.30
Crores (Previous Year : Rs.357.68
Crores) which includes an amount
of Rs.183.77 Crores (Previous Year
Rs.92.08 Crores) related to joint
ventures.
4. Contingent Liabilities :-
I. Claims against the Company
not acknowledged as debts:
Rs.9933.68 Crores (Previous
Year: Rs.9225.29 Crores), which
mainly include:
(a) Claims of ONGCL for Rs.401.48
Crores (Previous Year: Rs.248.46
Crores) on account of interest
for delayed payment and MGO,
etc. Out of these MGO claims of
Rs.53.78 Crores (Previous Year:
Rs.49.23 Crores) are recoverable
on back-to-back basis.
(b) Income Tax demand of
Rs.1289.74 Crores (Previous
Year: Rs.1026.81 Crores relating
to the assessment years
1996-97 to 2002-03) relating
to assessment years 1996-
97 to 2003-04. This includes
penalty demand of Rs.234.12
Crores (Previous Year Rs.NIL)
under section 271 (1) (C) of
the Income Tax Act, 1961 for
which stay application has
been filed with CIT (A) and
Delhi High Court. The Income
tax assessment of the Company
has been completed up to
the assessment year 2003-04.
Against the total demand, the
Company has paid/adjusted
Rs.1105.34 Crores (Previous Year: Rs.1024.52
Crores) under protest. Based upon the
decision of the appellate authorities and
the interpretation of the provisions of the
Income Tax Act, the Company has been
legally advised that the demand is likely to
be either deleted or it may be substantially
reduced. The Company has filed appeals
against the demand for the assessment
years 1996-97 to 2002-03 with ITAT and for
assessment year 2003-04 with CIT (A).
(c) Sales Tax demand of Rs.3449.18 Crores
(Previous Year: Rs.3449.18 Crores) and
interest thereon Rs.1513.04 Crores (Previous
Year: Rs.1513.04 Crores) for Hazira unit
in Gujarat State: Sales Tax Authorities,
Ahmedabad have treated the transfer of
Natural Gas by the Company from the
state of Gujarat to other states during
the period April, 1994 to March, 2001 as
inter-state sales under Section 3(a) of the
Central Sales Tax Act. The Company has
been paying sales tax under section 12
of the Gujarat Sales Tax Act against Form
17 since inception (1987) and accordingly
the sales tax assessments have been
completed. Based on the interpretation
of the provisions of the Sales Tax Act and
legal advice from the experts, the Company
had filed writ petition and special leave
petition in the Supreme Court of India. In
February, 2005 the case was transferred by
Hon’ble Supreme Court to Gujarat Sales Tax
Tribunal for decision. The Tribunal has given
its judgment on 16.05.2005 accepting the
contention of the Company for interstate
transportation of Natural Gas as branch
transfer and not the interstate sale and
set aside the demand under section 41-B
of the Gujarat Sales Tax Act. The Hon’ble
Tribunal has given further instruction to the
Assessing Authority to assess Company and
decide tax liability in accordance with the
law for the period 1998-99 to 2000-2001
considering interstate transfer of natural
gas as branch transfer.
(d) Commissioner of Customs,
Ahmedabad has issued show cause
notices where in a sum of Rs.581.22
Crores (Previous year: Rs.581.22
Crores) for the period 22.06.97 to
10.02.2002 has been demanded,
by treating GAIL as importer under
Section 2(26) of the Customs Act,
1962 on account of purchase of
gas from Tapti and Panna-Mukta
fields from Joint Venture of British
Gas Exploration and Production
(I) Limited, RIL and ONGCL (JVCs).
The Company is of the view that
as it is purchasing gas from JVCs at
Hazira at the downstream flange
of ONGCL’s gas processing facilities
along with other natural gas
coming from South Basin, it is not
liable to Customs Duty. The replies
to Show cause notice have already
been sent to the Commissioner
of Customs in consultation with
the Consultants on 14.06.2002. No
further response has been received.
(e) Excise duty demand of Rs.137.84
Crores (Previous year: Rs.123.63
Crores): Excise Authorities have
raised demands at Vijaipur, by
treating lean gas as gaseous
hydrocarbon and denying
exemption available to lean gas,
which has all along been treated
as an exempted product. The
Company has obtained favourable
orders against past and subsequent
demands. This demand also has
been set aside and pronounced in
the open court by the CESTAT on
19.04.2006. Written Order is yet to
be received.
II. Bonds executed, Letters of Credit :
Rs.27.58 Crores (Previous Year: Rs.13.40
Crores).
III. An amount of Rs.90.35 Crores (Previous
Year : Rs.83.03 Crores) relate to joint
ventures and an amount of Rs.NIL
(Previous Year : Rs.2.44 Crores) relate to
associates.
5 (a) Liability under Gas Pool Account
includes gas pool money for
January-March 2006 quarter
amounting to Rs.37.50 Crores
(Previous Year: Rs.61.64 Crores)
which shall become due for
deposit in succeeding quarter.
(b) Liabilities on account of Gas Pool
Money amounting to Rs.726.67
Crores (Previous year: Rs.723.18
Crores) and 10% retention from
JV consortium amounting to
Rs.386.06 Crores (Previous year:
Rs.359.63 Crores) includes interest
(net of TDS) amounting to Rs.47.38
Crores (Previous year: Rs.32.30
Crores) on Short term deposits
for the year. The TDS amounting
to Rs.9.56 Crores (Previous
Year: Rs.7.09 Crores) have been
deducted by the bankers on the
interest earned on Short term
deposits. This interest income
and TDS does not belong to the
Company hence not accounted for.
6. MoP&NG had issued scheme for mechanism of
sharing the under recoveries of Oil marketing
Companies on account of non-revision in
selling price of PDS Kerosene and domestic
LPG. During the year, the Company has
given discounts to Oil marketing Companies
amounting to Rs.1063.60 Crores (Previous Year:
Rs.1136.90 Crores) on dispatches to them for
sharing subsidies. Corresponding adjustment
on account of CST amounting to Rs.21.32
Croers (Previous Year Rs.20.54 Crores) has been
made.
7 a) The Company is raising provisional invoices
for sale of R-LNG as the supplier PLL is also
raising provisional invoices on the Company
since customs duty on import of LNG by PLL
has been assessed on provisional basis.
b) With effect from April 1, 2002, Liquefied
Petroleum Gas prices has been deregulated
and is now based on the import parity
prices fixed by the Oil Companies. However,
the pricing mechanism is provisional and
is pending finalisation. Additional asset/
liability or impact on profits, if any, arising
due to such change, will be recognized on
finalization of pricing mechanism.
8. a) The price of Gas purchased from Joint
Venture Consortium (JVC) (Indian and
Foreign Partners) from Ravva / Ravva
Satellite, Tapti and Panna Mukta fields are
denominated in USD per MMBTU. The
liability in USD has been converted at Bills
Buying rate, TT selling rate and TT buying
rate, prevailing as on 31.03.2006 or on the
date of payment, as the case may be.
b) Imports have been accounted for at the
exchange rate prevalent as on the date of
retirement of documents being the date of
transaction.
9. Following Government of India’s
approval, the shareholders of the
Company in the Annual General
Meeting held on 15th September,
1997 approved the transfer of
all the assets including Plant
and Machinery, accessories and
other related assets which are
part of Lakwa Project valued at
Rs.245.97 Crores as on 31.03.2006
(Previous Year: Rs.246.91 Crores)
to Assam Gas Cracker Complex
at a price to be determined by an
independent Agency and on terms
and stipulations as the Board may
in its discretion deem fit. However,
Assam Gas Cracker Complex has
not come up as per plan and
LPG Lakwa Project has not been
transferred to it. Therefore, a fresh
proposal has been put up to
Govt of India to establish Assam
Gas Cracker project by GAIL and
LPG Lakwa Project will be part of
that Assam Gas Cracker project.
Government of India is in advance
stage in establishing the Assam Gas
Cracker project.
10. Pending issue of suitable
notification by the Government
of India specifying the period and
applicable rate at which cess on
turnover is payable under section
441A of Companies Act, 1956 the
Company has not provided for the
same.
11. Balances grouped under Material
with Contractors, Sundry Debtors,
Loans and Advances, Deposits and
Sundry Creditors, etc. are subject to
confirmation.
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