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Mondelez India settles tax dispute under Sabka Vishwas Scheme; pays Rs 439 crore

The Sabka Vishwas (Legacy Dispute Resolution) Scheme, was a one-time measure for liquidation of past disputes of Central Excise and Service Tax as well as to ensure disclosure of unpaid taxes by a person eligible to make a declaration.

Written by Khushboo Narayan | Mumbai |
Updated: January 24, 2020 5:45:34 am
Mondelez India settles tax dispute under Sabka Vishwas Scheme; pays Rs 439 crore The firm, which was accused of evading taxes of about Rs 580 crore, excluding taxes and penalties, paid Rs 439 crore on January 20, under the amnesty scheme, said sources.  (Source: File photo)

Mondelez India Foods Pvt Ltd (earlier Cadbury India) has settled one of its most controversial tax disputes, pertaining to its alleged plant in Baddi, Himachal Pradesh, with the government under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, which was introduced by the Finance Ministry in September 2019.

The firm, which was accused of evading taxes of about Rs 580 crore, excluding taxes and penalties, paid Rs 439 crore on January 20, under the amnesty scheme, said sources. The total tax dues of the company with interest and penalties stood at over Rs 820 crore. The company had made an application under the amnesty scheme in December 2019.

EXPLAINED | Cadbury tax settlement: What amnesty did the chocolate maker get, why it isn’t out of the woods yet

Mondelez is also being probed by the CBI after the Central Vigilance Commission referred the tax evasion case to the agency, as it found allegations that certain state and central government officials were allegedly bribed by the company to facilitate the tax evasion. In 2017, the CBI registered a case against Mondelez under the Prevention of Corruption Act, but it is not clear if the agency has filed a charge sheet in the case.

“We continue to believe that the decision to claim an excise tax benefit in respect of our plant in Baddi was valid. However, the matter relates back to 2010, and it could take several more years to be resolved through the legal process. The Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, introduced by the government in 2019, was an opportunity to settle a potentially protracted litigation. Like other tax payers, Mondelez India chose to take advantage of the amnesty, and we settled several legacy disputes including the Baddi matter,” the official spokesperson of the company told The Indian Express.

“The decision to take advantage of the tax amnesty was made in the interest of putting an end to this issue so that we can focus on what we do best, our purpose of empowering people to snack right. India is a key market for Mondelez International and we will continue to prioritize growing our business her,” the spokesperson added.

The tax evasion case pertains to an investigation done by the Directorate General of Central Excise Intelligence (now DG GSTI) in 2011 for allegedly misusing ‘area-based exemption’ for its new unit in Baddi, even before it came into existence, to avail excise duty benefits. A tax demand of about Rs 580 crore was raised in 2015 against Mondelez, for allegedly evading excise duty by fraudulently taking exemption for one of its ‘ghost’ production units in Himachal Pradesh’s Baddi area.

Under the norms, the area-based exemption for new industrial units of firms in Himachal Pradesh provided full exemption from excise duties for production of specified goods for a period of 10 years. However, for availing such exemption the unit should have been established before March 2010. During the investigation, the DGGSTI officials allegedly found that Mondelez claimed excise duty exemption for its new unit in Sandoli village in Baddi relating to a period even before it came into existence.

In 2017, Mondelez International agreed to pay $13 million to settle US Securities and Exchange Commission charges that its Cadbury unit violated the provisions of the Foreign Corrupt Practices Act through efforts to expand the chocolate plant in Baddi. The SEC said that Cadbury India paid a local businessman $90,666 in 2010 to work with government officials in Himachal Pradesh and obtain licenses and approvals for the expansion of the Baddi unit.

The Sabka Vishwas (Legacy Dispute Resolution) Scheme, was a one-time measure for liquidation of past disputes of Central Excise and Service Tax as well as to ensure disclosure of unpaid taxes by a person eligible to make a declaration.

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