INDIA – French beverage giant, Pernod Ricard, is facing a push from Indian authorities to pay US$244 million for reportedly undervaluing concentrate imports for over a decade, according to Reuters.
The demand is a setback for Pernod in India, where it has long been lobbying Prime Minister Narendra Modi and his tax officials to settle disputes related to the valuation of liquor imports.
The notice, dated 27 June, relates to liquor concentrates imported from a Pernod subsidiary, UK-based Chivas Brothers.
According to the notice from India’s customs authority reported by Reuters, the French drinks giant has been undervaluing concentrate imports for the past 10 years.
Indian authorities inspected import bills for 2009-10 to 2020-21, and found Pernod Ricard India had undervalued liquor concentrates in its declarations, said the notice, which resulted in lower import duty payments.
Officials said the company owed an additional duty of 20.1 billion rupees (US$244 million), plus interest, for imports up to 2020.
The 27-page notice revealed that to compensate for the undervalued imports, Pernod Ricard’s India arm had instead paid “hefty” dividends to Pernod Ricard in France. However, import duties on liquor concentrates are 150% while dividends attract lower taxes.
The notice said: “There are ample reasons to doubt the truth or accuracy of the value declared about the imported goods.”
It appears that the import price has been decided in such a manner as to maximize profits accruable to holding companies. The aspect of undervaluation has been taken care of by way of payment of hefty amounts as dividends to the ultimate holding company.”
The notice also included the suggestion that Pernod Ricard needs to increase the invoice values of different malt concentrates that it imports by 67.49%, for bills from 2021.
Pernod Ricard has reportedly since challenged the US$244m tax demand in an Indian court, which has started the hearing of the case.
In a statement, Pernod Ricard India said was working on “asserting and demonstrating its position to the Indian authorities” and that it had “always endeavored to act with full transparency and in compliance with customs and regulatory requirements”.
Pernod Ricard Joins Casa Lumbre and Renowned Partner to Bring Sotol Spirits Category to the World
Meanwhile, Pernod has joined forces with Casa Lumbre, the founders behind Ojo de Tigre Mezcal and Abasolo Ancestral Corn Whisky, and renowned musician, actor, and designer Lenny Kravitz, to develop Nocheluna Sotol, an exciting offer in the newly emerging and highly promising Sotol spirits category.
Distinct from tequila and mezcal, this spirit has a smooth and sophisticated balance of wild herbs, dried stone fruit, caramel, honey, deep minerality, and oak firewood – a blend made possible by the distinctive desert soil, and the craftsmanship of an expert team.
Nocheluna aims to become the ultra-premium reference of the category. It will be launched globally over the coming months, starting with the US market.
Nocheluna is the third collaboration between Pernod Ricard and Casa Lumbre after successful partnerships around Mexican spirits Abasolo Ancestral Corn Whisky and Ojo De Tigre mezcal.
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