Cadbury India, a unit of global snack giant Mondelez International, has been accused of avoiding excise taxes totalling more than INR2bn (US$36.5m) in the market.
India’s Directorate General of Central Excise Intelligence has served the group with a show-cause notice that seeks to recover INR2.52bn in back taxes.
The Indian excise authority alleges that the company fraudulently avoided paying taxes during the years 2009-10 to 2012-13, up to 31 October 2012.
“We are in the process of reviewing the contents of the show-cause notice from the Excise Department and will respond to it in consultation with our legal adviser,” a spokesperson for Mondelez told just-food.
The spokesperson added that the show-cause is “a matter of form in any such inquiry”. The Indian government has been investigating Cadbury over alleged tax avoidance matters since 2011.
“A compliant and ethical corporate culture, which includes adhering to laws and regulations in the countries in which we operate, is integral to our success. To that end, we have been fully cooperating with the authorities on this enquiry,” Mondelez concluded.
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According to the show-cause notice, Cadbury wrongfully claimed an “area-based exemption” for its facility in Baddi, Himachal Pradesh. The area-based tax deduction for new industrial units in this region offers full exemption for excise duties for a period of ten years. However, to qualify the factory would need to have been established before March 2010, a financial services source told just-food.
The DGCE suggested the group was claiming the benefit before this factory was established. Mondelez did not comment on when the site was constructed, insisting that it would be “inappropriate” to discuss details of the ongoing process. It is not clear if the DGCE is alleging that the company failed to meet the deadline of March 2010 to qualify for the area-based exemption entitlement.