Pernod Ricard, the maker of Absolut Vodka, is confronting a potential ban on sales in Delhi following the rejection of its plea to resume operations by the Delhi High Court. This decision comes as a significant hurdle for the French beverage giant, coinciding with an escalating tax dispute regarding a demand reportedly amounting to Rs 3,000 crore. The brand has been unavailable in Delhi since the start of 2023 due to ongoing investigations related to the 2021 excise policy.

The Delhi High Court’s ruling has implications for several of the company’s well-known products, which include Absolut Vodka and Chivas Regal. As a result, these items are unlikely to appear on liquor store shelves in the national capital for the foreseeable future.

Pernod Ricard has faced challenges from the Delhi authorities, who previously denied the company a licence to sell liquor based on serious allegations from the Directorate of Enforcement (ED). The allegations involve claims that the company colluded with retailers to improperly enhance its market penetration in 2021.

Tax Dispute Compounds Legal Challenges

The company’s current difficulties are exacerbated by a significant dispute concerning customs duties related to Scotch whisky imports. Reports indicate that Indian investigators have determined that Pernod Ricard allegedly obscured the age and composition of certain whisky imports, which may have enabled the company to undervalue its products and evade appropriate tariffs.

This tax dispute has escalated into a complex legal battle, with estimates suggesting that Pernod Ricard may be liable for around $314 million, or approximately Rs 3,000 crore, in back taxes. Documentation cited by news agencies indicates that this figure could grow substantially if penalties are imposed, potentially surpassing $600 million, equivalent to roughly Rs 5,725 crore. Such an amount would represent about one-fifth of the company’s Indian revenue from the previous year.

Furthermore, investigators have scrutinised the company’s import practices concerning bulk Scotch concentrate, which is essential in whisky production. Allegations include manipulating disclosures by introducing internal malt codenames, thereby complicating comparisons with competitor imports.

Pernod Ricard’s Response and Future Implications

Pernod Ricard has publicly denied any allegations of misconduct. In an official statement, the company declared its commitment to adhering to all regulatory requirements and expressed confidence in its legal position as it navigates the ongoing disputes.

This dual challenge—the sales ban in Delhi and the tax dispute—poses significant operational concerns for Pernod Ricard in one of its key growth markets. The company’s products remain unavailable in an area that historically accounted for approximately 5% of its national sales in India.

Pernod Ricard faces a protracted legal struggle that is set to impact its business strategy and operations in the Indian market. As investigations continue and legal proceedings unfold, the outcomes could significantly shape the landscape for one of the world’s leading liquor companies, particularly in a region critical to its global growth ambitions.

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