According to India, Pernod is delaying an investigation into a $244 million tax demand.
MUMBAI – Pernod Ricard’s (EPA:PERP) request to stop proceedings related to a $244 million tax demand has been rejected by a court. They say the French spirits giant is a “habitual litigant” and is trying to “defraud” the government.
The Oct. 3 filing by India’s customs authorities in a court in Mumbai, which had not been made public before, shows that the dispute between Prime Minister Narendra Modi’s government and Pernod’s local unit over how the company has valued some of its imports for over a decade is getting worse.
The customs office says that Pernod did this so it wouldn’t have to pay all of the import taxes.
Pernod Ricard is having trouble with business and rules in India, where it has a 17% share and is one of its most important growth markets. This fight is happening at the same time. It has told Modi before that long-running disagreements over how much liquor imports are worth have “stopped new investments” in India.
India asked the company that makes Chivas Regal and Absolut vodka to pay back taxes in June. The company, Pernod, fought back in court, saying that the investigation should be stopped because it was based on wrong data from the industry and the process was “neither fair nor reasonable.”
In a 43-page filing in October, India’s customs authorities said that the French company was using “delay tactics” by going to court for help instead of responding to the government’s notice of a tax demand.
It said that the company was part of a plot “to cheat the government of India out of its rightful money.”
Pernod has been “a frequent litigant and always tries to abuse the due process of law,” the filing said, referring to the tax demands that Pernod has fought in India in the past.
When asked for a comment, Pernod pointed Reuters to a statement it had already released, which said that the company was working hard to show Indian authorities its position and has “always tried to act with full transparency and in accordance with customs and regulatory requirements.”
It didn’t say anything else because a lawsuit was still going on and the customs authority’s filing wasn’t public. The next time the case will be heard in court is on October 20 in Mumbai.
The Indian investigation looked at Pernod India’s bills for importing liquor concentrates from Chivas Brothers, a group subsidiary in the UK, and found that they had been undervalued for years.
The investigation found that Pernod paid “hefty” dividends to the group’s holding company in France, Pernod Ricard, to make up for the undervalued imports. Pernod Ricard also owns Chivas Brothers. The taxes on importing liquor concentrates are 150%, but the taxes on dividends are lower.
Pernod’s long-running tax disputes in India have caused business uncertainty. In July, the company wrote a letter to a federal tax authority saying it was “facing significant business continuity challenges” and asking for a solution.
Thibault Cuny, the CEO of Pernod India, resigned last week because of health problems.
