Pernod Drops Court Fight, To Appeal India's $314 Mn Whisky Tax Order

French spirits company Pernod Ricard has withdrawn its court challenge against India's demand for $314 million in back taxes, according to a court order, adding a fresh turn to a four-year-long investigation, Reuters reported.

Indian authorities had accused Pernod of undervaluing its Scotch whisky imports over several years, which allegedly helped the company pay lower tariffs than it should have. The tax demand was first issued in September last year, and Reuters had reported in May that the company was alleged to have hidden details about the composition of its whisky imports and the age of its blends, cutting down its 150% tariff liability.

Pernod had gone to the Delhi High Court seeking to have the tax demand quashed, arguing that Indian authorities never shared the investigation data that could have helped the company defend itself.

Court Case Withdrawn

The Delhi High Court has now recorded that the case "is dismissed as withdrawn," according to an order released late on Monday. The order noted that Pernod chose to withdraw its court challenge in order to pursue a statutory appeal instead, a route that goes through the tax authority itself rather than the courts.

It was not immediately clear why the company made this shift nine months after first approaching the court. The Indian government told the judges this week that it had no objection to Pernod's decision to withdraw the case, the order showed.

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

What The Investigation Found

According to the investigation, Pernod had "intentionally complicated" its disclosures by using new internal codenames for its malt whisky, which authorities said made it harder to detect the alleged undervaluation.

Pernod has previously said it "rejects any suggestion of wrongdoing" and maintains confidence in its position, according to Reuters.

India is Pernod Ricard's largest market by volume and accounts for roughly 10% of the group's global sales. If the company loses the case, the total payout, including penalties, could exceed $600 million, which would amount to a fifth of its $2.9 billion revenue in India last year and nearly three times its profit in the country.

The tax case adds to Pernod's regulatory troubles in India. The company is also contesting a separate antitrust case, along with a ban imposed by the Delhi government over alleged violations of liquor policy, both of which Pernod denies.