Cadbury’s Tax Evasion case

ABOUT THE COMPANY

origin

Cadbury was established in Birmingham, England in 1824, by John Cadbury who sold tea, coffee and drinking chocolate. Cadbury developed the business with his brother Benjamin, followed by his sons Richard and George. George developed the Bournville estate, a model village designed to give the company’s workers improved living conditions.

PRODUCTS

1866: Cocoa Essence
1875: Easter Eggs
1897: Milk Chocolate and Fingers
1905: Dairy Milk
1908: Bourrnville
1914: Fry’s Turkish Delight
1915: Milk Tray
1920: Flake

This image has an empty alt attribute; its file name is screenshot_20190801_100330.jpg

1923: Creme Egg (launched as Fry’s)
1926: Cadbury Dairy Milk Fruit & Nut
1929: Crunchie (launched as Fry’s)
1938: Roses
1948: Fudge
1958:Picnic
1960: Dairy Milk Buttons
1965: Cadbury Eclairs
1968: Aztec
1970: Curly Wurly
1974: Snack
1976: Double Decker
1976: Starbar
1981: Wispa (relaunched 2007)
1985:Boost
1987: Twirl
1992: Time Out
1995: Wispa Gold (relaunched 2009 and 2011)
1996: Fuse (promotional relaunched 2015)
1999:Heroes

This image has an empty alt attribute; its file name is screenshot_20190801_101710.jpg

2001: Brunch Bar, Dream and Flake
2009: Dairy Milk Silk
2010: Dairy Milk Bliss
2011: Big Race oreo
2012: Marvellous Creations and Crispello
2014: Pebbles
2014: Bubbly
2016: Cadbury Silk Oreo
2018: Cadbury Silk Oreo Red Velvet

CADBURY AND INDIA

In 1948, Cadbury India began its operations in India by importing chocolates. On 19 July 1948, Cadbury was incorporated in India. It now has manufacturing facilities in Thane, Induri (Pune) and Malanpur (Gwalior), Hyderabad, Bangalore and Baddi (Himachal Pradesh) and sales offices in New Delhi, Mumbai, Kolkata and Chennai. The corporate head office is in Mumbai. The head office is presently situated at Pedder Road, Mumbai, under the name of “Cadbury House”. This monumental structure at Pedder Road has been a landmark for the citizens of Mumbai since its creation. Since 1965 Cadbury has also pioneered the development of cocoa cultivation in India. For over two decades, Cadbury has worked with the Kerala Agricultural University to undertake cocoa research. Cadbury was taken over by Kraft Foods in 2010. Later Mondelez acquired Kraft Foods in 2012 but retained the name “CADBURY”.

TAX EVASION

Tax evasion is the illegal evasion of taxes by individuals, corporations, and trusts. Tax evasion often entails taxpayers deliberately misrepresenting the true state of their affairs to the tax authorities to reduce their tax liability and includes dishonest tax reporting, such as declaring less income, profits or gains than the amounts actually earned, or overstating deductions.

DIFFERENT WAYS OF TAX EVASION IN INDIA

Smuggling
Submitting false tax return
Failing to pay the due
Bribery
Inaccurate Financial Statements

FUNCTIONING OF CADBURY IN INDIA

CADBURY TAX EVASION CASES

1.SERVICE TAX (2009-10) 2. EXCISE DUTY (2011-2013)

SERVICE TAX

This image has an empty alt attribute; its file name is img_20190731_204821.jpg

The case is related to evasion of service tax of ₹ 13.43 crore by Cadbury India, Mumbai, has been adjudicated and a demand of ₹ 11.75 crore was confirmed along with a penalty of equal amount.
Finally, ₹ 12.08 crore tax with ₹ 0.53 crore interest was realised during investigation.

EXCISE DUTY

In 2011 the DGCEI initiated a probe against the company for allegedly misusing area-based exemption for its new unit in Baddi, Himachal Pradesh, even before the industrial unit came into existence.

This image has an empty alt attribute; its file name is iuhimachal-map.jpg

According to norms, new industrial units in Himachal Pradesh can get full exemption from excise duty for production of specified goods for a period of 10 years. However, the unit should have been established before March 2010 for availing the exemption.
During investigation, DGCEI officials allegedly found that Cadbury claimed excise duty exemption for its new unit in Sandoli village in Baddi relating to a period even before it came into existence.
The demand of about ₹ 580 crore was raised against Mondelez India Foods Pvt Ltd, the erstwhile Cadbury India Ltd, for allegedly evading excise duty by fraudulently taking exemption for a ‘ghost’ production unit in Baddi.
This case was initiated by CVC (Central Vigilance Commission) which had the upper hand , later it was handed over to CBI .

CONCLUSION

Cadbury India has been accused for tax evasion on excise duty for about ₹ 580 crore. In 2017, the case has been handed over to CBI for further investigation.