FW: CADBURY'S Excise Woes- THE BITTER TRUTH!!!

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SG Marketkar

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Dec 15, 2015, 1:44:28 AM12/15/15
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FYI.

 

From: Corporate Legal
Sent: Tuesday, December 15, 2015 11:39 AM
Subject: CADBURY'S Excise Woes- THE BITTER TRUTH!!!

 

Dear All,

 

This year, Cadbury India (now re-christened as Mondelez India Foods) was caught with its hand in the proverbial cookie jar by the Central excise department. The scandal broke out in March when the Commissioner of Central Excise passed an order asking it to cough up Rs. 342 crores it owed in excise and an additional Rs. 241 crores as penalty for evading excise for a period of three years starting in May 2010. In addition to this, the parent company Mondelez International is at the centre of an ongoing federal investigation in the US.

 

Why is this relevant? This is being seen by many, as a classic case of breakdown of internal compliances which resulted in the sacking of several employees of Cadbury, including top managers in April 2011. The interesting fact being that several red flags were raised by Cadbury’s Legal department in relation to the “setting up” of Cadbury’s factory in Baddi.

 

Let us make an attempt to understand the How’s and what’s  of this scandal.

 

Why did the Central Excise department hold Cadbury guilty of excise duty invasion?,It was discovered by the Excise department that the factory (in Baddi) in respect of which Cadbury was claiming excise exemption had not received the necessary clearances for commencing commercial production before 31st March 2010. Thus the excise exemption available to units situated in Himachal Pradesh could not be enjoyed by Cadbury.
It was discovered that Cadbury’s unit for which it was claiming exemption had not commenced commercial production on or before 31st March 2010. Back-dated approvals and clearances that were required for commencement of commercial production were allegedly received by engaging a consultant through whom payments of large sums were made to the relevant officials authorized to give such approvals,What is this area based exemption ?,The assesse should have set up its industrial unit (commenced commercial production ) in the areas specified in the Notification after 07th January 2003 but before 31st March 2010. or if the unit existed before 07th January 2003 then it should have undertaken expansion by way of increase in installed capacity by a minimum of 25% after 07th January 2003, provided production has commenced from the expanded capacity before 31st March 2010. ,The assessee should be effecting clearances of manufactured goods from such industrial unit situated in the specified areas.
The order of the Commissioner, Central Excise imposing a demand of Rs. 342 crores and a penalty of Rs. 241 crores has been challenged before the CESTAT (Appellate Tribunal)
KEY TAKEAWAY There is a need for establishing (or reinforcing) an ethical and complaint corporate system which holds adherence to laws and other regulations to be of utmost importance.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


                                                                

 

 

To know more about how the sequence of events unfolded please read the article titled “ Bitter Chocolate” published in Economic Times on 08th December 2015. A copy of the same has been attached herewith for your perusal.

 

Happy reading !!!!

 

Regards,

LegalUnplugged-logo (3)

 

P.S.: Request you to circulate this among your respective teams. If anyone wishes to be added to the mailing list please write to corp...@godrejinds.com .

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



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