Pernod withdraws court challenge against $314 million India tax demand

By Aditya Kalra

NEW DELHI, July 21 (Reuters) - Pernod Ricard has withdrawn a court challenge against India's demand of $314 million in back taxes for allegedly undervaluing Scotch whisky imports for years, an order shows, marking a new twist in a four-year investigation.

The tax case is a major challenge for the French spirits maker in India, which contributes roughly 10% of the group's worldwide sales‌ and is its biggest market by volume. The dispute comes on top of an antitrust case and a separate ban in New Delhi city that Pernod is contesting over ​allegations of liquor policy violations, which it denies.

Pernod had challenged the tax demand issued last September, which alleged the company withheld the composition of its whisky imports and the age of the blends, significantly reducing its 150% tariff charges, Reuters reported in May.

Seeking to quash the demand, Pernod argued in a New Delhi court that India had not provided it with investigation data during the probe, which could have helped it defend itself.

Pernod, the maker of Chivas Regal whisky and Absolut vodka, has now decided to take the case via the tax authority appeal route, although it was not clear why, nine months after starting a court challenge.

The case "is dismissed as withdrawn," the Delhi High Court judges wrote in their order released late on Monday, as Pernod had now decided to withdraw the court challenge to "avail statutory alternative remedy of appeal" - which rests with the tax authority itself.

Reuters is first to report on their order.

Pernod and Indian tax authorities did not respond to Reuters queries.

GOVERNMENT HAS NO OBJECTION

With penalties, the total tax payout in the investigation could be more than $600 million if Pernod loses - which is a fifth of its Indian revenue of $2.9 billion last year - and three times its profit.

The government told the judges this week it had no objections with Pernod's decision to withdraw, the order said.

Pernod is now likely to file an appeal with a commissioner in the tax authority, Anurag Ojha, the government counsel in the case, told Reuters.

The Indian investigation had concluded Pernod "intentionally complicated" its disclosures with new internal malt codenames ​to make detection by authorities difficult.

The company has previously said it "rejects any suggestion of wrongdoing" and remains confident in its position.

(Reporting by Aditya Kalra; Editing by Louise Heavens and Susan Fenton)