The Directorate General of Central Excise Intelligence (DGCEI) recently issued show cause-cum-demand notices to liquor giants United Breweries Limited (UBL) and United Spirits Limited (USL) for alleged service tax evasion of Rs 90.57 crore.
According to DGCEI officials, the two companies allegedly evaded service tax while sponsoring fashion weeks and sports events. Officials allege tax evasion by UBL is Rs21.17 crore while for USL, it is Rs69.4 crore.
After receiving the notices, UBL and USL have paid Rs10.3 crore and Rs1.13 crore respectively. “Around Rs79 crore is still to be paid,” said an official, requesting anonymity.
Officials said if the companies fail to pay the remaining tax before the deadline, which ends in the last week of May, they would be charged a penalty of 25% on the pending amount.
“DGCEI Mumbai asked for the ledger extract of advertisement and sales promotion expenses for the period 2007–2008 to 2011-2012 and, without verifying the nature of the expenses, have considered the entire amount as ‘sponsorship services’,” said Prakash Mirpuri, vice president, corporate communications, UB Group, in an email. “We are in the process of replying to the show cause notices. We have been paying service tax on applicable services regularly,” he added.