Cadbury accused of Rs250-cr tax evasion via ‘dummy’ plant

Indian authorities have accused UK-based Cadbury Plc of evading about $46 million (Rs252.5 crore) in taxes by " producing" confectionery at a 'shell' factory in Himachal Pradesh that doesn't actually exist.

The Wall Street Journal reported today that it has reviewed a 103-page report by the country's tax authorities, which accuses the Indian arm of Cadbury – now owned by Mondelez International Inc – of manipulating invoices and other documents to get a tax exemption available to companies that began production in new plants in Himachal by 31 March 2010.

The directorate general of central excise intelligence, which conducted the investigation, concluded that Cadbury's plant couldn not have existed before the deadline because the company hadn't received the necessary approvals from government agencies.

Company statements indicate that Cadbury possibly generated at least $700 million in sales from its Indian plants last year.

The directorate declined to comment on the WSJ report.

"We are in the process of reviewing the contents of the show-cause notice from the Excise Department and will respond to it under legal advice," Mondelez spokesman Michael Mitchell said by email. He said the company was cooperating fully with authorities in the investigation. "We firmly believe our executives acted in good faith and based on legal advice," he said.

While tax officials refused to comment, the report cites an unnamed Cadbury executive as saying expansion of an existing factory in the state was misrepresented as construction of a new plant eligible for the tax exemption.

The plant also is at the centre of a US Securities and Exchange Commission investigation into whether Cadbury bribed Indian officials. Mondelez said it is cooperating with that investigation as well.