CVC widens probe in Rs 580 crore excise duty evasion by Cadbury

Expanding its probe, the Central Vigilance Commission (CVC) has sought relevant information from the US authorities in connection with its investigation into alleged Rs 580 crore excise duty evasion by confectionery giant Mondelez, maker of Cadbury chocolates. A request in this regard has been routed via Personnel Ministry, which acts as administrative authority for the CVC, to the US authorities as the firm is headquartered there.

“We have sought some information from the authorities in the US in connection with the case,” Central Vigilance Commissioner K V Chowdary said. Official sources said the request has been made under the Mutual Legal Assistance Treaty (MLAT) that generally allows for the exchange of evidence and information in criminal matters. They said the authorities here also plan to get some information regarding the company and its activities from the US markets regulator, the Securities and Exchange Commission (SEC). The CVC is looking into the role of central and state government officials who might have facilitated the alleged evasion. It has also sought some documents from the company representatives here, the sources said. A Mondelez India spokesperson had earlier said they will cooperate with the authorities concerned and that its executives acted “in good faith and within the law” in the decision to claim excise benefit.

The demand of about Rs 580 crore was raised last year against Mondelez India Foods Pvt Ltd, erstwhile Cadbury India Ltd, for allegedly evading excise duty by fraudulently taking exemption for one of its “ghost” production units in Himachal Pradesh’s Baddi area. The Directorate General of Central Excise Intelligence (DGCEI) here had in 2011 initiated a probe against the company for allegedly misusing “area-based exemption” for its new unit in Baddi, even before it came into existence.

As per norms, the area-based exemption for new industrial units of firms in Himachal Pradesh entails full exemption from excise duty 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 investigation, the DGCEI 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, they said.

The US-based multinational, in a filing to the SEC, had said it is contesting showcause notices issued by the excise department here which has demanded from it unpaid taxes and penalties. In the filing made in February this year, Mondelez International had disclosed that it was facing investigation under the Foreign Corrupt Practices Act (FCPA) of the US in connection with a facility in India which it had acquired as part of the Cadbury takeover.