Karnataka slaps Rs 133-crore tax demand notice on Pan Parag India

Bengaluru, Sep 5: The Commercial Taxes Department has slapped a tax demand notice for Rs 133 crore on Pan Parag India, manufacturers of pan masala and zarda, stating that the company had suppressed its sales turnover between 2012 and 2015.

The department will initiate the process of recovery if the company fails to pay the dues, which include additional tax, penalty and interest, official sources said. The company had questioned the move of the department before the Karnataka High Court.

The court disposed of the petition recently directing the company to file an appeal with the department under Section 62 of the Karnataka Value Added Tax Act, 2003. Accordingly, the Deputy Commissioner of Commercial?Taxes (Audit) heard the company and after going through the records, upheld an intelligence report of the Additional Commissioner of Commercial Taxes, South?Zone, that there had been suppression of sales turnover.

The additional commissioner, in his report, had stated that the company (with its unit at Dasanapura hobli in Bengaluru North), was engaged in the manufacture and sale of Pan Parag masala and Pan Parag zarda (chewing tobacco)?which are taxable at 14.5% and 17% respectively. On suspicion that there was suppression of sales, the consumption of electricity was adopted as one of the relevant factors to calculate the correctness of production, the report states.

The actual number of pouches produced per minute and the units of electricity consumed were considered. By using this method, it was found that two machines at the unit produced 18,240 pouches of pan masala and zarda by consuming 30 units of electricity per hour, the report states. Extending it to the period from April 2012 to March 2014, it was found that only 33% of the total production had been declared.

The Additional Commissioner of Commercial Taxes (audit), in his order dated July 6, 2016, directed the company to pay Rs 133 crore as tax dues.

When contacted, advocate for the company A?J?Kamath said, “The commercial taxes department is calculating 8+8 as 18, which is illogical. The contents of the intelligence report is factually wrong and based on erroneous assumptions. We will continue to fight it out legally.”