Cadbury caught up in £62m Indian tax bill  

India has hit Cadbury confectionery giant with a £62m (Rs 5.7bn )  tax  claim over allegations that the Diary Milk chocolate producer fraudulently claimed excise benefits on  ghost non-existent factory in  Sandoli Village in Baddi , Himachal Pradesh relating to a period even before it came into existence by taking exemption for on it. The Directorate General of Central Excise Intelligence (DGCEI)  in India, had in 2011 initiated a probe against the company for allegedly misusing ‘area-based exemption’ for its new unit in Baddi, Himachal Pradesh even before it came into existence, official sources said.  Cadbury brand expanded the plant in 2009 but authorities claim that work was portrayed as a new facility, and therefore eligible for a tax exemption.  The company contests the bill.

This latest dispute involving multinationals in India, including high profile cases against Cairn Energy oil group, Vodafone mobile Telecoms group, undermining India’s reputation as an investment destination. Multi nationals run into problems with tax office over taxation and tax holidays, as clever tax inspectors find ways to deny a particular benefit. After completion of its investigation, the DGCEI had slapped a show-cause notice to the firm demanding about  £ 27m (Rs 2.5bn) against excise duty evasion, they said. The demand was contested and the central excise office of Chandigarh had late last month issued an assessment-cum-demand notice to Cadbury India Ltd (now Mondelez India Foods Pvt Ltd) upholding the demands raised by the DGCEI.

It has demanded from the firm  £62m Rs 5.74bn towards alleged excise duty evasion — including £ 25m (Rs 2.31bn) for the period from July 28, 2010 to January 31, 2013,  £1.19m (Rs 1.11bn), for the period from February 1, 2013 to December 31, 2013 and a penalty of £2.49m (Rs 2.31bn), according to the demand order. Also, a penalty of  £108,000 (Rs 1 crore) has been imposed against Anand Kripalu, MD, Cadbury India for allegedly violating central excise rules, the order said.

Cadbury India which is owned by global snacks business Mondelez International, provided misleading and inaccurate information when claiming an excise tax exemption linked to a factory in North India as a new facility which can attract excise tax exemption rather than enlargement of an older factory, India’s Directorate General of Central Excise Intelligence is suggesting.

Mondelez India in a statement said: “The company is examining the Commissioner’s order and will challenge the same in appeal, as we firmly believe that we have correctly claimed exemption of excise duty.” The company said, “The issue is one of interpretation and it will be inappropriate on our part to discuss the details externally at this time since the matter is sub-judice and in the legal domain.”

In June 2010, five months after Kraft Foods announced the global acquisition of Cadbury Plc, the Indian subsidiary, represented by Cadbury India, has put in place a top team that will lead the combined interests of Kraft Foods and Cadbury in the country. The development is in sync with the company’s move to change from a single marketing function for all products, including chocolates, gums and candies.