Absolut Vodka maker battles Delhi ban as Rs 3,000 crore tax dispute deepens

Absolut Vodka maker faces Delhi ban, Rs 3,000 crore tax battle in India Absolut Vodka may remain unavailable in Delhi for the foreseeable future after the Delhi High Court rejected Pernod Ricard's plea to restart sales in the city. The setback comes at a difficult time for the French liquor company, which is also battling a tax dispute involving a demand of nearly Rs 3,000 crore, reported news agency Reuters.

The latest setback came on Friday when the Delhi High Court rejected Pernod Ricard's plea seeking permission to resume sales in the national capital.

The ruling means the company's brands, including Absolut Vodka and Chivas Regal, are unlikely to return to liquor store shelves in Delhi anytime soon.

Pernod Ricard's products have been unavailable in Delhi since 2023 as the company remains caught in the investigation linked to Delhi's 2021 excise policy.

The dispute centres on whether a company named as an accused in the case can continue to receive a licence to sell liquor in the city.

Delhi authorities had earlier rejected Pernod Ricard's licence application, citing what they described as serious allegations made by the Directorate of Enforcement (ED).

According to authorities, the company allegedly colluded with retailers to illegally increase its market share in 2021. Pernod Ricard did not immediately comment on the High Court verdict.

The Delhi market is particularly important for the liquor giant.

India is Pernod Ricard's largest market globally by volume, and before sales were halted, Delhi accounted for roughly 5% of the company's nationwide sales.

The legal setback in Delhi comes at a time when the company is already facing another major challenge involving customs duties on Scotch whisky imports.

According to a report by news agency Reuters, Indian investigators have concluded that Pernod Ricard concealed the age and composition of some Scotch whisky imports, allegedly allowing it to understate the value of imported products and pay lower tariffs.

The dispute has now grown into a legal battle that could have significant financial consequences for the company.

Reuters reported that Pernod Ricard has been asked to pay around $314 million, or roughly Rs 3,000 crore, in back taxes.

Court records cited by Reuters show that the company's tax liability currently stands at nearly Rs 3,000 crore.

However, the potential bill could become much larger if penalties are added and authorities ultimately prevail in the case.

According to Reuters, the total payout could exceed $600 million, or around Rs 5,725 crore, if Pernod Ricard loses the dispute.

That amount would be equal to roughly one-fifth of the company's Indian revenue last year and around three times its profit.

The allegations stem from an investigation into the company's imports of bulk Scotch concentrate used in whisky production.

Such concentrates are blended with ingredients including water and caramel before being sold under brands such as Royal Stag.

According to documents reviewed by Reuters, investigators concluded in September that Pernod Ricard had "intentionally complicated" its disclosures by introducing new internal malt codenames.

Officials alleged that this made it harder for customs authorities to compare imports with those made by competitors.

An investigation report included in a government filing dated January 24 also alleged that the company failed to disclose the "true description" of imported malts, including their exact composition and age.

According to investigators, this was done with the intention of hiding the actual value of imported goods and avoiding comparisons that could have affected tariff calculations.

The report further alleged that Pernod Ricard undervalued its imported Scotch concentrates by 67.49%, significantly reducing the impact of India's 150% tariff on such imports.

Pernod Ricard has strongly denied any wrongdoing.

In a statement cited by Reuters, Pernod India said it "rejects any suggestion of wrongdoing" and maintained that it had fully complied with all applicable requirements.

The company said it is addressing the matter through the appropriate legal channels and remains confident in its position.

The dispute has been running for several years.

While Reuters first reported concerns regarding the tax demand in 2022, newly reviewed documents have revealed additional details about the investigation and the conclusions reached by authorities.

The twin challenges highlight the difficulties facing one of the world's largest liquor companies in one of its most important growth markets.

With its brands still locked out of Delhi and a tax dispute carrying the risk of a payout running into thousands of crores, Pernod Ricard faces a prolonged legal battle that could have a significant impact on its operations in India.