India accuses Cadbury of using unfinished factory to avoid tax

Wed Mar 6, 2013 8:05am EST
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NEW DELHI/MUMBAI (Reuters) - Indian tax authorities have accused Cadbury Plc of misleading them about production from a new factory to avoid about $46 million in taxes, a government official said, adding to the chocolate maker's tax woes in the country.

The case comes as India is aggressively pursuing tax claims against multinationals as it seeks to rein in its budget deficit, with Royal Dutch Shell (RDSa.L: Quote), Vodafone Plc (VOD.L: Quote) and LG Electronics Inc (066570.KS: Quote) among numerous firms involved in disputes.

Cadbury set up a factory in 2005 in the northern Indian state of Himachal Pradesh to take advantage of a 10-year "tax holiday" scheme for companies that started production by March 31, 2010, said a senior official at the tax department.

The company, now part of U.S. snacks firm Mondelez International Inc (MDLZ.O: Quote), in 2009 told authorities it had set up another plant next to the existing one that should be also be exempted from tax until 2019, said the official at the Directorate General of Central Excise Intelligence.

However, the second plant was not operational as of March 31, 2010, when the tax holiday scheme ended, said the official, who declined to be named as he was not authorized to speak to the media. It begin commercial production a couple of months later.

A report on the Wall Street Journal quoted a former Cadbury executive as saying an expansion of the existing factory had been misrepresented as the construction of a second plant for the tax exemption. The tax official did not comment on the Journal's report.

Cadbury did not comment on the detail of the allegations, but said it was co-operating with the authorities.

"We are in the process of reviewing the contents of the show-cause notice from the Excise Department and will respond to it in consultation with our legal advisors," a Cadbury statement said.


People walk on a pathway in front of the Cadbury India headquarters in Mumbai March 6, 2013. REUTERS/Danish Siddiqui