CBI files case against Cadbury India for tax fraud in Himachal

The CBI has booked Cadbury India Private Limited (now known as Mondelez Foods Private Limited) for alleged corruption and misrepresentation of facts to fraudulently avail area-based tax benefits in Baddi, Himachal Pradesh, officials said on Wednesday.

After registering the FIR, the Central Bureau of Investigation (CBI) carried out searches at 10 locations in Solan, Baddi, Mohali, Pinjore and Mumbai, they said.

The FIR is an outcome of a preliminary enquiry registered by the agency, which showed that the company allegedly “paid bribes, misrepresented facts and manipulated records to fraudulently avail area-based exemption benefits (central excise and income tax) in Baddi, Himachal Pradesh, knowing fully well that it was not entitled to avail area-based tax exemption benefits”, the officials said.

“For availing the same, some members of the executive board of the company, along with key managers, collectively decided to manipulate records, engage intermediaries to route bribes and cover up all the evidence that had surfaced during the internal investigation,” the CBI has alleged.

Besides the company, the agency has booked a total of 12 individuals, including two the then Central Excise officials, the then Cadbury India Limited (CIL) vice-president (finance and compliance) Vikram Arora and its directors Rajesh Garg and Jailboy Phillips.

CIL had set up a manufacturing unit at Sandholi village for manufacturing malt-based food (Bournvita). The unit started commercial production from May 19, 2005, the CBI has alleged in its FIR.

Two years later, CIL proposed to expand production by setting up another unit for its products “5 Star” and “Gems” as the second unit on the land acquired from Barmalt in 2007 in Baddi to avail an exemption from excise duty and income tax for 10 additional years, it has alleged.

The company decided to expand its capacity and avail tax benefits from May 19, 2005, for which it applied for an amalgamation of the two units, stating that it has decided to have its second unit as a composite in the existing facility, the CBI FIR says.

The approval was granted on March 7, 2008 by the Directorate of Industries, it added.

About 15 months later, the company said its second unit has started production, for which it should be given tax benefits, which was not possible as the company had already stated that it would be a composite unit of an already existing factory, which was getting tax benefits from 2005, the agency has said.

The company again applied for deamalgamation and sought to set up the second unit as a different company — Cadbury India Limited Unit II — on March 29, 2010, two days before the cut-off date to avail the exemption, the CBI has alleged.

The agency has alleged that senior executives of the company conspired with private individuals and made payments to get necessary approvals for setting up the second unit as a separate company to avail tax benefits for which it was not eligible.

The CBI has found details of various payments made to camouflage alleged bribes and commissions to get the work done, the FIR alleges. The agency has alleged that the DGCEI had also probed the matter and slapped a fine of Rs 241 crore on the company.

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