The Comptroller and Auditor General (CAG) of India has detected excise duty evasion of ₹1,078.09 crore by leading liquor manufacturing company Radico Khaitan Ltd over a period of seven years beginning 2013-14.

The auditors have also cast aspersion on the Assistant Excise Commissioner, Rampur, for allegedly overlooking Radico’s attempt to avoid paying excise duty to the State. “Failure of the Assistant Excise Commissioner, Radico Khaitan Limited, Rampur, failed to monitor consumption of input excise material shown in excise records vis-a-vis returns filed in Income Tax Department (ITD) resulted in not detecting understatement of consumption of input excise material involving excise revenue of ₹1,078.09 crore (including interest of ₹482.34 crore) during the period 2013-14 to 2019-20,” read the CAG’s Compliance Audit Report on Revenue Sector of UP government.

Clarifying on the CAG observations, Radico Khaitan stated that the company has complied with all legal requirements, including revenue laws of the country. Radico Khaitan said it has not received any notice of any irregularity in the matter.

The CAG has recommended to UP government to recover excise revenue from Radico Khaitan after analysing its records and take “appropriate action” against assessing officers who failed to discharge their duty in detecting duty diversion.

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According to the CAG findings listed out in Chapter V, titled ‘Other Tax Receipts (B) State Excise,’ the auditors examined records available with the excise department of Rampur in March of 2022, related to ingredients such as molasses, grain and barley malt used for the manufacture of liquor.

The CAG also noticed variation in the data Radico Khaitan declared for the same period to excise department as well to the Income Tax department. This the auditors arrived on comparing the excise data with the consumption figures of molasses, grain and barley malt the liquor firm submitted through statutory returns to the Income Tax department with the respective quantities depicted in the records of the Assistant Excise Commissioner (AEC), Radico Khaitan Limited, Rampur, said the report.

“The variations found in the consumed material indicate that the assessee (company) had understated the consumption of inputs items in excise records, involving excise revenue of ₹595.75 crore on which interest of ₹482.34 crore was leviable,” the CAG said. Section 28 of United Provinces Excise Act, 1910 provides that excise duty at the such rate fixed by state government shall be imposed on article manufactured in any distillery.

“This resulted in understatement of consumption of input excise material involving excise revenue amounting to Rs 1,078.09 crore to the government of,” said the report. The UP government, pointed out the CAG, did not respond to their audit findings till June of 2022 though it was submitted to them two months before that.

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